1
EXHIBIT 10.7
LOAN AGREEMENT
This Loan Agreement ("Agreement") dated as of April __, 1996,
is made by and between SOUTHERN ARIZONA BANCORP, INC., an Arizona corporation
("Borrower"), and ZIONS BANCORPORATION, a Utah corporation ("Lender").
WHEREAS, Borrower and PHS Mortgage, Inc. ("Agent") entered into
that Note and Agency Agreement dated as of July 15, 1993 (the "Note and Agency
Agreement") pursuant to which Borrower agreed to issue Senior Notes in a
principal amount not less than $1,500,000 but not exceeding $2,500,000 to
certain investors pursuant to the terms thereof (the "Senior Notes"); and
WHEREAS, as of the date hereof Borrower has issued and
outstanding Senior Notes in the aggregate principal amount of $2,500,000, due on
July 1, 2000, with interest payable at 8.75 percent; and
WHEREAS, Borrower and its subsidiary, Southern Arizona Bank
("Bank"), and Lender and its subsidiary, National Bank of Arizona, have entered
into that Agreement and Plan of Reorganization dated as of January 17, 1996 (the
"Agreement and Plan of Reorganization") pursuant to which Borrower will be
merged with and into Lender, and Bank will be merged with and into National Bank
of Arizona, with Lender and National Bank of Arizona to be the entities
resulting from their respective mergers, and with consideration to be paid to
shareholders of Borrower as set forth in Section 1.2 of the Agreement and Plan
of Reorganization; and
2
WHEREAS, Borrower and Lender agree that effectuation of the
transactions contemplated in the Agreement and Plan of Reorganization will be
facilitated by the prepayment of the issued and outstanding Senior Notes of the
Borrower in accordance with Section 4.2 of the Note and Agency Agreement prior
to the Effective Date as defined in Article 2 of the Agreement and Plan of
Reorganization; and
WHEREAS, Borrower and Lender agree that the prepayment by
Borrower of the issued and outstanding Senior Notes should be funded through the
extension of a loan by Lender to Borrower in an amount sufficient to enable
Borrower to satisfy its obligations to each holder of its Senior Notes for
interest, principal, premium and any other amount due and owing thereunder as
well as under the Note and Agency Agreement; and
WHEREAS, Borrower and Lender desire to memorialize the terms
and conditions pursuant to which Lender will extend funds to Borrower to prepay
the Senior Notes;
NOW, THEREFORE, in consideration of these premises and the
mutual agreements hereinafter set forth, the parties agree as follows:
1. DEFINITIONS; INTERPRETATION
1.1 Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
Agreement means this Loan Agreement, as amended and in
force from time to time.
- 2 -
3
Authorized Denominations means minimum principal amounts of
$5,000 and integral multiples of $1,000 in excess of $5,000.
Bank Combination means the combination described in
Section 1.1(b) of the Agreement and Plan of Reorganization.
Business Day means any day other than (i) a Saturday or
Sunday, or (ii) a day on which banking institutions in Arizona or Utah are
authorized or obligated by law or executive order to be closed.
Calculation Date means May 23, 1996.
Capitalized Lease means any lease the obligation for
Rentals (as defined herein) with respect to which is required to be capitalized
on a balance sheet of the lessee in accordance with generally accepted
accounting principles.
Capitalized Rentals means as of the date of any
determination, the amount at which the aggregate Rentals due and to become due
under all Capitalized Leases under which Borrower or Bank is a lessee would be
reflected as a liability on a consolidated balance sheet of Borrower and Bank.
Change of Control means the occurrence of any one or
more of the following: (i) the date a person or group of affiliated or
associated persons ("acquiring person") acquires 50 percent or more of the
outstanding shares of the voting capital stock of Borrower or Bank, (ii) the
date an acquiring person acquires all or substantially all of the assets of
Borrower or Bank, or (iii) the date Borrower or Bank is merged with or into
another person, and, is either not the surviving entity, or, if it is the
surviving
- 3 -
4
entity, the holders of its capital stock immediately prior to such merger do not
own 50 percent or more of the voting capital stock of the surviving entity.
Closing Certificate means the certificate to be completed and
executed by Borrower in the manner described in Section 4.1 hereof.
Closing Date means May 27, 1996.
Consolidated Current Assets and Consolidated Current
Liabilities means such assets and liabilities of Borrower and Bank on a
consolidated basis, as shall be determined in accordance with generally accepted
accounting principles to constitute current assets and current liabilities,
respectively.
Consolidated Funded Debt means all Funded Debt (as defined
herein) of Borrower and Bank determined on a consolidated basis eliminating
intercompany items.
Consolidated Net Income for any period shall mean the gross
revenues of Borrower and Bank for such period less all expenses and other proper
charges (including taxes on income), determined on a consolidated basis in
accordance with generally accepted accounting principles consistently applied,
but excluding in any event:
(a) any gains or losses on the sale or other disposition
of investments other than in the ordinary course of business in securities
transactions or fixed or capital assets, and any taxes on such excluded gains
and any tax deductions or credits on account of any such excluded losses;
- 4 -
5
(b) the proceeds of any life insurance policy;
(c) net earnings and losses of Bank accrued prior to the
date Borrower acquired Bank;
(d) net earnings and losses of any corporation (other than
Bank), substantially all the assets of which have been acquired in any manner,
realized by such other corporation prior to the date of such acquisition;
(e) net earnings and losses of any corporation (other than
Bank) with which Borrower or Bank shall have consolidated or which shall have
merged into or with Borrower or Bank prior to the date of such consolidation or
merger;
(f) net earnings of any business entity (other than Bank)
in which Borrower or Bank has an ownership interest unless such net earnings
shall have actually been received by Borrower or Bank in the form of cash
distributions;
(g) any portion of the net earnings of Bank that for any
reason is unavailable for payment of dividends to Borrower or Bank;
(h) earnings resulting from any reappraisal, revaluation
or write-up of assets;
(i) any deferred or other credit representing any excess
of the equity in Bank at the date of acquisition thereof over the amount
invested in Bank;
(j) any gain arising from the acquisition of any
securities of Borrower or Bank; and
- 5 -
6
(k) any reversal of any contingency reserve, except to the
extent that provision for such contingency reserve shall have been made from
income arising during such period.
Consolidated Net Income Available for Fixed Charges means for
any period the sum of (i) Consolidated Net Income during such period plus (to
the extent deducted in determining Consolidated Net Income), (ii) all provisions
for any federal, state or other income taxes made by Borrower and Bank during
such period and (iii) Fixed Charges (as defined herein) during such period.
Consolidated Net Tangible Assets means as of the date of any
determination thereof, the total amount of all Tangible Assets (as defined
herein) of Borrower and Bank, after deducting therefrom all items, which, in
accordance with generally accepted accounting principles, would be included on
the liability and equity side of a consolidated balance sheet, except deferred
income taxes, deferred investment tax credits, capital stock of any class,
surplus and Consolidated Funded Debt.
Consolidated Tangible Net Worth means as of the date of any
determination thereof, Consolidated Net Tangible Assets, less all outstanding
Funded Debt, deferred income taxes, deferred investment tax credits of Borrower
and Bank.
Discharge Certification means the statement to be completed and
executed by Borrower and Agent in the manner described in Article 6 hereof.
Effective Date shall have the meaning assigned to it in Article
2 of the Agreement and Plan of Reorganization.
- 6 -
7
Event of Default means any event or condition, the occurrence
of which would, with the passage of time or the giving of notice, or both,
constitute an Event of Default as defined in Article 10 hereof.
Fixed Charges means for any period on a consolidated basis the
sum of (i) one-third (1/3) of all Rentals (including all Rentals on Capitalized
Leases) payable during such period by Borrower and Bank and (ii) all Interest
Charges (as defined herein) on all Indebtedness (as defined herein, except that
Capitalized Rentals shall be excluded therefrom) of Borrower and Bank.
Funded Debt means (i) all indebtedness for borrowed money or
indebtedness that has been incurred in connection with the acquisition of assets
in each case having a final maturity of one or more than one year from the date
of origin thereof (or that is renewable or extendable at the option of the
obligor for a period or periods more than one year from the date of origin),
including all payments in respect thereof that are required to be made within
one year from the date of any determination of Funded Debt, whether or not
included in Consolidated Current Liabilities, (ii) all Capitalized Rentals and
(iii) all Guaranties (as defined herein) of Funded Debt of others.
Guaranties means, by any person, all obligations (other than
endorsements in the ordinary course of business of negotiable instruments, for
deposit or collection) of such person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other person ("primary
obligor") in any
- 7 -
8
manner, whether directly or indirectly, including, without limitation, all
obligations incurred through an agreement, contingent or otherwise, by such
person: (i) to purchase such Indebtedness or obligation or any property or
assets constituting security therefor, (ii) to advance or supply funds (1) for
the purchase or payment of such Indebtedness or obligation, or (2) to maintain
working capital or any other balance sheet condition, or otherwise to advance or
make available funds for the purchase or payment of such Indebtedness or
obligation, or (iii) to lease property or to purchase securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of the Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guarantee in respect of any Indebtedness for borrowed money shall be deemed to
be Indebtedness equal to the principal amount of such Indebtedness for borrowed
money which has been guaranteed, and a guarantee in respect of any other
obligation or liability or any dividend shall be deemed to be indebtedness equal
to the maximum aggregate amount of such obligation, liability, or dividend.
Holding Company Combination means the combination described in
Section 1.1(a) of the Agreement and Plan of Reorganization.
- 8 -
9
Indebtedness of any person means and includes all obligations
of such person that, in accordance with generally accepted accounting
principles, shall be classified upon a balance sheet of such person as
liabilities of such person, and in any event shall include all (i) obligations
of such person for borrowed money or obligations that have been incurred in
connection with the acquisition of property or assets, (ii) obligations secured
by any lien or other charge upon property or assets owned by such person even
though such person has not assumed or become liable for the payment of such
obligations, (iii) obligations created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
person, notwithstanding the fact that the rights and remedies of the seller,
lender or lessor under such agreement, in the event of default, are limited to
repossession or sale of property, (iv) Capitalized Rentals and (v) Guaranties of
obligations of others of the character referred to in this definition.
Interest means an interest rate of 8.75 percent per annum on
the unpaid principal balance of the Promissory Note.
Interest Charges means for any period all interest and all
amortization of debt discount and expense on any particular Indebtedness for
which such calculations are being made. Computations of Interest Charges for
Indebtedness having a variable interest rate shall be calculated at the rate in
effect on the date of any such determination.
- 9 -
10
Interest Payment Dates means January 1 and July 1 of each
calendar year during the term of the Promissory Note, commencing July 1, 1996;
provided, however, if such date is not a Business Day, the Interest Payment Date
shall be the immediately preceding Business Day.
Loan Amount means the aggregate interest, principal, premium
and any other amounts due and owing pursuant to the Senior Notes and the Note
and Agency Agreement as of the Closing Date.
Maturity Date means July 1, 2000, or any earlier date on which
the Promissory Note becomes due and payable in full pursuant to the terms of
this Agreement.
Notification Date means April 26, 1996.
Prepayment Notification means the notice to Senior Note Holders
described in Article 2 hereof.
Prepayment Statement means the statement to be prepared by
Borrower and delivered to Lender in the manner described in Article 3 hereof.
Proxy Statement Mailing Date means the date on which Borrower
mails proxy statements to its shareholders as contemplated in Section 4.1(a) of
the Agreement and Plan of Reorganization.
Rentals means and includes, as of the date of any determination
thereof, all fixed rents (including as such, all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of the
property) payable by Borrower or Bank as lessee or sub-lessee under a lease of
real or personal property, which shall be exclusive of any amounts required
- 10 -
11
to be paid by Borrower or Bank (whether or not designated as rents or additional
rents) on account of maintenance, repairs, insurance, taxes and similar charges.
Senior Note Holder means person to whom issued Senior Notes are
registered pursuant to the Note and Agency Agreement.
Tangible Assets means as of the date of any determination
thereof, the total amount of all assets of Borrower and Bank (less depreciation,
depletion and other properly deductible valuation reserves), after deducting
goodwill, patents, tradenames, trademarks, copyrights, franchises, experimental
expense, organizational expense, unamortized debt discount and expense, deferred
assets, other than prepaid insurance and prepaid taxes, the excess of cost of
shares acquired over book value of related assets, and such other assets as are
properly classified as "intangible assets" in accordance with generally accepted
accounting principles.
1.2 Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined, or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with generally
accepted accounting principles, to the extent applicable, except where such
principles are inconsistent with the requirements of this Agreement.
1.3 Directly or Indirectly. Where any provision in this Agreement
refers to action to be taken by any person or which such person is prohibited
from taking, such provision shall be
- 11 -
12
applicable whether the action in question is taken directly or indirectly by
such person.
2. PROVISION OF PREPAYMENT NOTIFICATION.
Not later than the Notification Date, Borrower shall complete
and provide to each Senior Note Holder and to Agent the Prepayment Notification
set forth in Exhibit A hereto in the manner prescribed in Section 4.4 of the
Note and Agency Agreement and shall promptly supply to Lender copies of all such
Prepayment Notifications together with proof of mailing thereof. The Prepayment
Statement shall be dated as of the Notification Date.
3. PROVISION OF PREPAYMENT STATEMENT.
Not later than the Calculation Date, Borrower shall complete
and furnish to Lender the Prepayment Statement, certified by its President and
Chief Executive Officer, in the form set forth as Exhibit B hereto. The
Prepayment Statement shall be dated as of the Calculation Date.
4. EXECUTION AND DELIVERY OF CLOSING CERTIFICATE AND PROMISSORY
NOTE; DISBURSEMENT OF LOAN AMOUNT.
4.1 Execution and Delivery of Closing Certificate and Promissory
Note. Not later than the Closing Date, Borrower shall complete, execute and
deliver to Lender the Closing Certificate in the form set forth as Exhibit C and
the Promissory Note in the form set forth as Exhibit D hereto. The principal
amount of the Promissory Note shall consist of: (i) the aggregate principal
- 12 -
13
amount of the Senior Notes as of the Closing Date; (ii) any accrued but unpaid
interest on the Senior Notes as of the Closing Date; and (iii) any additional
amount due and owing from Borrower as of the Closing Date pursuant to the Senior
Notes and the Loan and Agency Agreement but shall not include any amount paid by
Borrower to Senior Note Holders pursuant to Section 4.2 of the Note and Agency
Agreement. The Closing Certificate and the Promissory Note shall be dated as of
the Closing Date.
4.2 Disbursement of Loan Amount. Not later than the Closing Date,
following completion by Borrower of the actions described in Section 4.1 hereof,
Lender shall disburse the Loan Amount to Borrower or to the order of Borrower.
4.3 Replacement of Lost, Stolen, Destroyed, or Mutilated Promissory
Note. Upon receipt by Borrower of Lender's written notice of the loss, theft,
destruction or mutilation of the Promissory Note and, in the case of any such
loss, theft, or destruction, upon receipt of an indemnity agreement in form
reasonably satisfactory to Borrower, or, in the case of any such mutilation,
upon surrender of the mutilated Promissory Note for cancellation by Borrower,
Borrower will (at Lender's expense), within ten (10) Business Days therefore,
issue and deliver to Lender, in lieu of or in exchange for such lost, stolen,
destroyed, or mutilated Promissory Note, a new Promissory Note in the unpaid
principal amount of such lost, stolen, destroyed or mutilated Promissory Note,
dated so that there will be no loss of interest on such Promissory Note, and
otherwise of like tenor. Every new
- 13 -
14
Promissory Note issued by Borrower pursuant to the provisions of this Section
4.3 shall be the legal, valid and binding obligation of Borrower and shall
evidence the same debt as the Promissory Note in substitution of which it is
issued.
4.4 Negotiability and Assignability. The Promissory Note is not
negotiable and may not be assigned except by operation of law.
5. PREPAYMENT OF SENIOR NOTES AND DISCHARGE OF NOTE AND AGENCY
AGREEMENT.
On the Closing Date, following completion by Lender of the
actions described in Section 4.2 hereof, Borrower shall take all actions
required to be taken by it pursuant to Section 12.1 of the Note and Agency
Agreement to (i) prepay and satisfy its obligations under the Senior Notes and
Note and Agency Agreement for interest, principal, premiums and all other
amounts due and owing as of the Closing Date and (ii) release Borrower from any
continuing obligation under the Note and Agency Agreement. Upon the completion
by Borrower of the actions contemplated in clauses (i) and (ii) above, Borrower
shall promptly furnish to Lender the Discharge Statement, certified by its
President and Chief Executive Officer and by an appropriate official of Agent,
in the form set forth in Exhibit E hereto.
6. TERMINATION.
The termination of the Agreement and Plan of Reorganization
pursuant to Article 10 thereof prior to the provision by Borrower of the
Prepayment Notification to Senior Note
- 14 -
15
Holders in the manner set forth in Article 2 hereof shall cause this Agreement
to terminate without further action by, and liability or obligation to, either
party.
7. PAYMENT OF PRINCIPAL AND INTEREST.
7.1 Date for Payment of Principal and Interest. Interest shall be
payable on the Interest Payment Dates and on the Maturity Date; and principal
shall be payable on the Maturity Date.
7.2 Interest Rate on the Promissory Note. Borrower shall pay the
Interest on the unpaid principal balance of the Promissory Note as provided
herein.
7.3 Application of Payment. All payments received shall be applied
to the payment of the Promissory Note in the following order of priority: (i)
first, to the payment of accrued Interest and (ii) second, to the payment of
principal then due.
7.4 Prepayment. Borrower may, at any time and from time to time
prior to the Maturity Date, by provision of not less than five (5) Business
Days' notice to Lender, prepay all or part of the Promissory Note (but if
prepayment be made in part, then in units of $1,000 or integral multiples of
$1,000 in excess thereof) without premium or penalty, together with accrued
Interest to the date such prepayment on the amount being prepaid.
7.5 Manner of Payment. The payment of principal and Interest due
and payable hereunder to Lender shall be made by wire transfer in immediately
available funds in accordance with the wiring instructions set forth below:
- 15 -
16
Bank: Zions First National Bank
ABA No.: 1240-00054
Beneficiary: Zions Bancorporation
Acct No.: 0211003-9
Attn: Jay Facer
Phone No.: (801) 524-2392
8. REPRESENTATIONS AND WARRANTIES OF BORROWER.
Borrower represents and warrants to Lender as follows:
8.1 Execution and Performance of Agreement. Borrower has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder.
8.2 Binding Obligations; Due Authorization. Upon the authorization
of this Agreement by the Board of Directors of Borrower, this Agreement will
constitute the valid, legal, and binding obligation of Borrower, enforceable
against it in accordance with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, moratorium or similar law, or by general
principles of equity. The execution, delivery, and performance of this Agreement
and the transactions contemplated hereby will have been duly and validly
authorized by the Board of Directors of Borrower prior to the Closing Date. No
other corporate proceedings on the part of Borrower are necessary to authorize
the execution and delivery of this Agreement or the carrying out of the
transactions contemplated hereby.
8.3 Absence of Default. None of the execution or the delivery of
this Agreement, the consummation of the transactions contemplated hereby, or the
compliance with or fulfillment of the
- 16 -
17
terms hereof will conflict with, or result in a breach of any of the terms,
conditions, or provisions of, or constitute a default under the organizational
documents or bylaws of Borrower. None of such execution, consummation, or
fulfillment will (a) conflict with, or result in a material breach of the terms,
conditions, or provisions of, or constitute a material violation, conflict, or
default under, or give rise to any right of termination, cancellation, or
acceleration with respect to, or result in the creation of any lien, charge, or
encumbrance upon, any property or assets of Borrower pursuant to any material
agreement or instrument under which Borrower is obligated or by which any of its
properties or assets may be bound, including without limitation any material
lease, contract, mortgage, promissory note, deed of trust, loan, credit
arrangement or other commitment or arrangement of Borrower in respect of which
it is an obligor; (b) violate any law, statute, rule, or regulation of any
government or agency to which Borrower is subject and which is material to its
operations; or (c) violate any judgment, order, writ, injunction, decree, or
ruling to which Borrower or any of its properties or assets is subject or bound.
None of the execution or delivery of this Agreement, the consummation of the
transactions contemplated hereby, or the compliance with or fulfillment of the
terms hereof will require any authorization, consent, approval, or exemption by
any person which has not been obtained, or any notice or filing which has not
been given or done.
- 17 -
18
9. PARTICULAR COVENANTS OF BORROWER.
9.1 Maintenance of Office; Operation of Business. Borrower
covenants and agrees that from and after the Closing Date and continuing so long
as any amount remains unpaid on the Promissory Note or hereunder, it will:
(a) Maintain in Yuma, Arizona, an office or agency where the
Promissory Note may be presented for exchange and payment as in this Agreement
provided, and an office or agency where notices and demands to or upon Borrower
in respect of the Promissory Note and this Agreement may be served. The
principal office of Borrower shall be such office or agency, unless Borrower
shall maintain some other office or agency for such purpose and shall give
Lender written notice of the location thereof.
(b) Promptly pay and discharge, or cause to be paid and
discharged, all lawful taxes, assessments and governmental charges or levies
imposed upon the income and profits of Borrower, or upon any of its assets, or
upon any part thereof; provided, however, that Borrower shall not be required to
pay such tax, assessment or charge so long as the validity thereof shall be
contested in good faith by appropriate proceedings, nor shall Borrower be
obligated hereunder to pay any such tax, assessment, or charge if such property
shall, in the opinion of Borrower, be no longer advantageous to Borrower in the
conduct of its business, or if in the opinion of Borrower, any such tax
assessment or charge exceeds the value of such property on which it is levied.
- 18 -
19
(c) Pay or cause to be paid the principal of, premium, if any,
and interest on all indebtedness heretofore or hereafter incurred or assumed by
Borrower, when and as the same shall become due and payable, unless such
indebtedness shall be renewed or extended, or unless such payment is not
permitted under provisions subordinating such indebtedness to the Promissory
Note, and faithfully observe, perform and discharge all the covenants,
conditions and obligations which are imposed on it by any and all indentures and
other agreements securing or evidencing such indebtedness or pursuant to which
such indebtedness is issued, and not permit the occurrence of any act or
omission which is or may be declared to be a default thereunder; provided,
however, that Borrower shall not be required to make any payment or to take any
action by reason of the provisions of this subsection at any time while it shall
be contesting in good faith its obligation to make such payment or to take such
action, provided it shall have set aside on its books adequate reserves (to the
extent, and segregated if and to the extent, required by sound accounting
practice in accordance with generally accepted accounting principles) with
respect thereto.
(d) At all times keep proper books of record and account in
which full, true and accurate entries will be made of its transactions in
accordance with sound accounting practice.
(e) At its own cost and expense, do or cause to be done all
things necessary to preserve and keep in full force and effect Borrower's and
Bank's existence as an Arizona corporation;
- 19 -
20
provided, however, that this Section 10.1(e) shall not be construed as
prohibiting the taking by Borrower or Bank of any action in furtherance of the
consummation of the transactions contemplated in the Agreement and Plan of
Reorganization.
(f) Deliver or cause to be delivered to Lender, not later than
one hundred and twenty (120) days after the close of each fiscal year of
Borrower, a copy of Borrower's audited annual financial statements consisting of
a balance sheet and an income statement fairly presenting Borrower's financial
condition and a copy of each and every filing made by Borrower with the
Securities and Exchange Commission (the "Commission") pursuant to the periodic
reporting requirements of the Securities Exchange Act of 1934, as amended, and
the regulations of the Commission adopted pursuant thereto.
9.2 Negative Covenants. Borrower covenants and agrees that from and
after the Closing Date and continuing so long as any amount remains unpaid on
the Promissory Note or hereunder, it will not:
(a) Issuance of Additional Securities. Authorize or
issue any debt senior to the Promissory Note; provided, however, that the
Promissory Note shall rank pari passu with the Senior Notes while the
Senior Notes remain outstanding. Borrower shall cause Bank not to authorize or
issue any securities senior in any respect to its voting common stock authorized
as of the date of this Agreement.
- 20 -
21
(b) Funded Debt Ratio. Assume or incur or in any manner
be or become liable in respect of any Consolidated Funded Debt, if Consolidated
Funded Debt of Borrower shall exceed 125 percent of Borrower's Consolidated
Tangible Net Worth.
(c) Dividends. Declare or pay cash dividends on any
shares of its capital stock if its Consolidated Net Income Available for Fixed
Charges on Consolidated Funded Debt is less than 150 percent of the amount of
interest payable on Borrower's Consolidated Funded Debt.
9.3 Further Instruments and Acts. Borrower will execute and deliver
such further instruments and do such further acts as may reasonably be necessary
or proper to carry out more effectually the purposes of this Agreement.
10. REMEDIES OF LENDER IN EVENT OF DEFAULT.
10.1 Events of Default. In case one or more of the following Events
of Default shall have occurred and be continuing:
(a) Borrower shall fail to pay any installment of principal or
Interest on the Promissory Note when due and payable, whether upon the Maturity
Date or otherwise pursuant to this Agreement or the Promissory Note;
(b) Borrower shall fail to comply with any other covenant or
agreement on the part of Borrower set forth in the Promissory Note or in this
Agreement for a period of thirty (30) days after the date on which written
notice of such failure,
- 21 -
22
requiring the same to be remedied, shall have been given to Borrower by Lender;
(c) final judgment for the payment of money in excess of
$250,000 shall be rendered against Borrower or Bank and the same shall remain
undischarged for a period of thirty (30) days during which execution shall not
be effectively stayed;
(d) (i) Borrower or Bank shall commence or consent to any
case, proceeding or other action (1) under any existing or future law of any
jurisdiction relating to bankruptcy, insolvency, reorganization or relief of
debtors seeking to have an order for relief entered with respect to it or
seeking to adjudicate it as bankrupt or insolvent or seeking reorganization,
arrangement, adjustment, liquidation, dissolution, composition or other relief
with respect to it or its debts or (2) seeking appointment of a receiver,
trustee, custodian, conservator or other similar official for it or for all or
any substantial part of its assets or Borrower or Bank shall make a general
assignment for the benefit of creditors or admit in writing that it is unable to
pay its debts as they become due; or
(ii) there shall be commenced against Borrower or Bank any
such case, proceeding or other action referred to in clause (i) of this
subsection (d) that (1) results in the entry of an order for relief or any such
adjudication or appointment or (2) is not dismissed, discharged or stayed for a
period of thirty (30) days from the entry thereof; or
- 22 -
23
(iii) there shall be commenced against Borrower or Bank any
case, proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any part of its assets
that results in the entry of any order for any such relief which shall not have
been vacated, discharged or stayed within thirty (30) days from the entry
thereof; or
(iv) Borrower or Bank shall have been dissolved or terminated;
or
(v) Borrower or Bank shall take any action authorizing or in
furtherance of or indicating its consent to approval or acquiescence in any of
the acts set forth above in this subsection (d);
then, and in each and every such case, unless the principal of the Promissory
Note shall have already become due and payable, Lender, by notice in writing to
Borrower, may declare the principal of and all accrued Note Interest on the
Promissory Note to be due and payable immediately, and upon any such declaration
the same shall become and shall be immediately due and payable, anything in this
Agreement or in the said Promissory Note contained to the contrary
notwithstanding. This provision, however, is subject to the condition that if,
at any time after the principal of the Promissory Note shall have been so
declared due and payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained or entered as hereinafter provided,
Borrower shall pay a sum sufficient to pay all Interest or principal that shall
have become due otherwise than by acceleration
- 23 -
24
and the reasonable expenses of Lender, and any and all defaults under this
Agreement, other than the nonpayment of principal of and accrued Interest on the
Promissory Note that has become due by acceleration, shall have been remedied,
then and in every such case Lender, by written notice to Borrower, may waive all
defaults and rescind and annul such declaration and its consequences; but no
such waiver or rescission or annulment shall extend to or shall affect any
subsequent default or shall impair any right consequent thereon.
In case Lender shall have proceeded to enforce any right under this
Agreement and such proceeding shall have been discontinued or abandoned because
of such rescission or annulment or for any other reason, or shall have been
determined adversely to Lender, then and in every such case Borrower and Lender
shall be restored respectively to their several positions and rights hereunder,
and all rights, remedies and powers of Borrower and Lender shall continue as
though no such proceeding had been taken.
10.2 Payment of Promissory Note on Default; Suit Therefor.
(a) Borrower covenants that (i) in case default shall be made
in the payment of any installment of Interest upon the Promissory Note as and
when the same shall become due and payable, and such default shall have
continued for a period of thirty (30) days, or (ii) in case default shall be
made in the payment of the principal of the Promissory Note as and when the same
shall have become due and payable, whether at the Maturity Date or by
declaration or otherwise, then Borrower will pay to Lender the
- 24 -
25
whole amount that then shall have become due and payable on such Promissory Note
for principal or Interest, or both, as the case may be, with Interest upon the
overdue principal; and, in addition thereto, upon demand of Lender, such further
amount as shall be sufficient to cover the reasonable costs and expenses of
collection of Lender, its agents, attorneys and counsel, and any reasonable
expenses or liability incurred by Lender hereunder other than through its
negligence or bad faith.
(b) In case Borrower shall fail forthwith to pay such amounts
upon such demand, Lender may institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against Borrower and collect in the manner provided by
law out of the property of Borrower, wherever situated, the moneys adjudged or
decreed to be payable.
(c) In case there shall be pending proceedings for the
bankruptcy or for the reorganization of Borrower or any other obligor on the
Promissory Note under the Bankruptcy Code or any other applicable law relative
to Borrower or such other obligor, its or their creditors or its or their
property, or in case a receiver or trustee shall have been appointed for its or
their property, Lender, irrespective of whether the principal of the Promissory
Note shall then be due and payable as therein expressed or by declaration or
otherwise, and irrespective of whether Lender shall have made any demand
pursuant to the provisions of this
- 25 -
26
Section 10.2, shall be entitled and empowered, by intervention in such
proceedings or otherwise, to file and prove a claim or claims for the whole
amount of principal and Interest owing and unpaid in respect of the Promissory
Note, and, in case of any judicial proceedings, to file such proofs as may be
advisable in order to have the claims of Lender allowed in such judicial
proceedings relative to Borrower or any obligor on the Promissory Note, its or
their creditors, or its or their property, and to collect and receive any moneys
or other property payable or deliverable on any such claims.
(d) All rights of action and claims asserted under this
Agreement or under the Promissory Note may be enforced by Lender without the
possession of the Promissory Note or the production thereof at any trial or
other proceeding relative thereto.
10.3 Application of Moneys Collected by Lender. Any moneys
collected by Lender pursuant to Section 10.2 shall be applied in the following
order of priority at the date fixed by Lender and stamping thereon the payment
if only partially paid and upon surrender thereof if fully paid:
First, to the payment of reasonable costs and expenses of
collection of Lender (including, without limitation reasonable
compensation to its agents, attorneys and counsel), and of all
other reasonable expenses and liability incurred, and all advances
made, by Lender except as a result of its gross negligence or bad
faith;
- 26 -
27
Second, in case the principal of the outstanding Promissory
Note shall not have become due and be unpaid, to the payment of
Interest on the Promissory Note;
Third, in case the principal of the outstanding Promissory
Note shall have become due, by declaration or otherwise, to the
payment of the whole amount then owing and unpaid upon the
Promissory Note for principal and Interest, with interest on the
overdue principal; such payment is to be first applied to the
payment of unpaid Interest and then to payment of principal; and
Fourth, to the payment of the remainder, if any, to Borrower,
its successors or assigns, or to whosoever may be lawfully entitled
to receive the same, or as a court of competent jurisdiction may
direct.
10.4 Remedies Cumulative and Continuing. All powers and remedies
given by this Article 10 to Lender shall, to the extent permitted by law, be
deemed cumulative and not exclusive of any other power or remedy or of any other
power, or shall be construed to be a waiver of any such default or an
acquiescence therein; and every power and remedy given by this Article 10 or by
law to Lender may be exercised from time to time and as often as shall be deemed
expedient by Lender.
11. SATISFACTION AND DISCHARGE OF AGREEMENT.
Upon the earlier to occur of (i) the consummation of the
Holding Company Combination and Bank Combination as of the
- 27 -
28
Effective Date or (ii) the payment in full of the Interest and principal due and
owing under the Promissory Note, together with all other sums payable hereunder
and thereunder by Borrower, Borrower shall be released from all liabilities and
obligations hereunder and thereunder. In the event of the occurrence of the even
described in clause (ii), above, Lender, on demand of Borrower, shall execute
such documents as may reasonably be required to evidence the aforesaid release
of Borrower from liability and obligations hereunder and shall turn over to
Borrower all balances, if any, held by it, not required for the satisfaction of
amounts due and owing under the Promissory Note or this Agreement.
12. MISCELLANEOUS PROVISIONS.
12.1 Costs and Expenses. Each of Borrower and Lender agrees to pay
all costs and expense which it has incurred in connection with or incidental to
the matters contained in this Agreement and the Promissory Note, including any
fees and disbursements to accountants, counsel and investment banking
consultants.
12.2 Provisions Binding on Borrower's Successors. All the
covenants, stipulations, promises and agreements in this Agreement contained by
or on behalf of Borrower shall bind its successors and assigns, whether so
expressed or not.
12.3 Reliance Upon Representations, Warranties and Covenants.
Lender shall be deemed to have relied upon each and every representation and
warranty of Borrower regardless of any
- 28 -
29
investigation heretofore or hereafter made by or on behalf of Lender.
12.4 Section Headings. The section and subsection headings herein
have been inserted for convenience of reference only and shall in no way modify
or restrict any of the terms or provisions hereof. Any reference to a "person"
herein shall include an individual, firm, corporation, partnership, trust,
government or political subdivision or agency or instrumentality thereof,
association, unincorporated organization, or any other entity.
12.5 Notices. All notices, consents, waivers, or other
communications which are required or permitted hereunder shall be in writing and
deemed to have been duly given if delivered personally or by messenger,
transmitted by telex or telegram, by express courier, or sent by registered or
certified mail, return receipt requested, postage prepaid. All communications
shall be addressed to the appropriate address of each party as follows:
If to Lender:
Zions Bancorporation
1380 Kennecott Building
Salt Lake City, Utah 84133
Attention: Mr. Harris H. Simmons
President and Chief Executive Officer
With a required copy to:
Brian D. Alprin, Esq.
Metzger, Hollis, Gordon & Alprin
1275 K Street, N.W., Suite 1000
Washington, D. C. 20005
- 29 -
30
If to Borrower:
Southern Arizona Bancorp, Inc.
1800 Fourth Avenue
Post Office Box 5148
Yuma, Arizona 85364
Attention: Mr. John E. Byrd
President and Chief Executive Officer
With a required copy to:
Robert S. Kant, Esq.
O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, P.A.
One East Camelback Road, Suite 1100
Phoenix, Arizona 85012-1656
All such notices shall be deemed to have been given on the date delivered,
transmitted, or mailed in the manner provided above.
12.6 Choice of Law and Venue. This Agreement and the Promissory
Note shall be governed by, construed, and enforced in accordance with the laws
of the State of Utah, without giving effect to the principles of conflict of law
thereof. The parties hereby designate Salt Lake County, Utah, and Yuma County,
Arizona, to be the proper jurisdictions and venue for any suit or action arising
out of this Agreement or the Promissory Note. Each of the parties consents to
personal jurisdiction in each of such venues for any suit or action with respect
to this Agreement and agrees that it may be served with process in any action
with respect to this Agreement or the Promissory Note or the transactions
contemplated hereby or thereby by certified or registered mail, return receipt
requested, or to its registered agent for service of process in the State of
Utah or Arizona. Each of the parties irrevocably and unconditionally waives and
agrees, to the fullest
- 30 -
31
extent permitted by law, not to plead any objection that it may now or hereafter
have to the laying of venue or the convenience of the forum of any action or
claim with respect to this Agreement or Promissory Note or the transactions
contemplated hereby or thereby brought in the courts aforesaid.
12.7 Counterparts. This Agreement may be executed in two or more
counterparts each of which shall be deemed to constitute an original, but such
counterparts together shall be deemed to be one and the same instrument and to
become effective when one or more counterparts have been signed by each of the
parties hereto. It shall not be necessary in making proof of this Agreement or
any counterpart hereof to produce or account for the other counterpart.
12.8 Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to their commitments to each
other and their undertakings vis-a-vis each other on the subject matter hereof.
Any previous agreements or understandings between the parties regarding the
subject matter hereof are merged into and superseded by this Agreement. Nothing
in this Agreement express or implied is intended or shall be construed to confer
upon or to give any person, other than Lender and Borrower and their respective
shareholders, any rights or remedies under or by reason of this Agreement.
12.9 Effect of Invalidity of Provisions. In case any one or more of
the provisions contained in this Agreement or in the Promissory Note shall for
any reason be held to be invalid, illegal, or unenforceable in any respect, such
invalidity,
- 31 -
32
illegality or unenforceability shall not affect any other provisions of this
Agreement or of the Promissory Note, and this Agreement and the Promissory Note
shall be construed as if such invalid or illegal or unenforceable provision had
never been contained herein or therein.
12.10 Benefits of Provisions of this Agreement. Nothing in this
Agreement or in the Promissory Note, expressed or implied, shall give or be
construed to give any person, firm or corporation, other than the parties
hereto, any legal or equitable right, remedy or claim under or in respect of
this Agreement, or under any covenant, condition or provision herein contained,
all the covenants, conditions and provisions contained in this Agreement or in
the Promissory Note being for the sole benefit of the parties hereto.
ZIONS BANCORPORATION
By:
--------------------------------
Harris H. Simmons
President and Chief Executive
Officer
(LENDER)
SOUTHERN ARIZONA BANCORP, INC.
By:
--------------------------------
John E. Byrd
President and Chief Executive
Officer
(BORROWER)
- 32 -
33
EXHIBIT B
PREPAYMENT NOTIFICATION
April 25, 1996
___________________________
___________________________
___________________________
Re: Prepayment of 8.75 Percent Senior Notes Due July 1, 2000
Dear ___________:
We write pursuant to Section 4.4 of the Note and Agency Agreement dated July 15,
1993, by and between Southern Arizona Bancorp, Inc. (the "Company") and PHS
Mortgage, Inc. (the "Agreement"), to inform you that the Company intends to
exercise its option under Section 4.2 of the Agreement to prepay its 8.75
percent Senior Notes due July 1, 2000, of which you are a holder.
Set forth below is a table containing certain information regarding the date the
Senior Note(s) which you hold will be prepaid, as well as the amounts that will
be paid to you as of that date:
Date of Prepayment May 27, 1996
Principal Amount __________________________
Accrued Interest __________________________
Premium(1)/ __________________________
Total Prepayment Proceeds __________________________
You will be entitled to receive a check in payment of the Total Prepayment
Proceeds with respect to the Senior Note(s) which you hold upon presentation and
surrender thereof on May 27, 1996 or thereafter, by hand at, or by regular or
overnight mail to, the following address:
PHS Mortgage, Inc.
c/o Peacock, Hislop, Staley & Given, Inc.
2999 North 44th Street, Suite 100
Phoenix, Arizona 85018
Attention: Tom Thomas
___________________
(1)/ Pursuant to Section 4.2 of the Agreement, a premium is payable to
you of 2.0 percent above the principal amount due.
34
____________________________
____________________________
Page 2
If you present your Senior Note(s) in person at the above address on or after
May 27, 1996, you will receive a check at that time for the Total Prepayment
Proceeds to which you are entitled. Alternatively, if you send your Senior
Note(s) by regular or overnight mail, your check will be mailed to you by first
class mail on or after May 27, 1996 upon receipt of your Senior Note(s).
Interest on the principal amount of the Senior Notes shall cease to accrue on
and as of May 27, 1996.
We sincerely thank you for your support during these past three years.
Should you have any questions regarding this matter, please do not hesitate to
call Mary Pool or me at (520) 782-7505.
Cordially yours,
SOUTHERN ARIZONA BANCORP, INC.
By: ___________________________
John E. Byrd
President and
Chief Executive Officer
cc: PHS Mortgage, Inc.
35
EXHIBIT B
COVER LETTER TO PREPAYMENT STATEMENT
[Borrower's Letterhead]
May 23, 1996
ZIONS BANCORPORATION
1380 Kennecott Building
Salt Lake City, Utah 84133
Re: Prepayment Statement Pursuant to Article 4 of the Loan
Agreement dated as of April__, 1996, by and between Southern
Arizona Bancorp, Inc. and Zions Bancorporation
Gentlemen:
In accordance with Article 3 of the Loan Agreement dated
April__, 1996 by and between Southern Arizona Bancorp, Inc. ("Company") and
Zions Bancorporation, we transmit herewith the Prepayment Statement, attached
hereto, which we acknowledge will constitute the basis for the loan to be
extended to Company pursuant to Article 4 thereof.
We hereby certify the information set forth in the Prepayment
Statement to be true and accurate as of this date.
SOUTHERN ARIZONA BANCORP, INC.
By: ____________________________
John E. Byrd
President and
Chief Executive Officer
36
PREPAYMENT STATEMENT
I. Closing Date , 1996
----------------
II. Aggregate Principal
Amount of 8.75 Percent
Senior Notes due
July 1, 2000 (the "Notes")
as of the Closing Date $
----------------------
III. Aggregate Interest Accrued
and Unpaid on the Notes as
of the Closing Date $
----------------------
IV. Aggregate Premium Payable
on the Notes as of the
Closing Date pursuant to
Section 4.2 of the Note
and Agency Agreement
dated July 15, 1993
between Southern Arizona
Bancorp, Inc. and PHS
Mortgage, Inc. (the "Note
and Agency Agreement") $
----------------------
V. All Amounts Due and Owing
under the Note and Agency
Agreement Exclusive of the
Amount set forth in
Paragraph "IV", above,
as of the Closing Date $
----------------------
Total $
======================
37
EXHIBIT C
CLOSING CERTIFICATE
The undersigned, John E. Byrd, President and Chief Executive
Officer of Southern Arizona Bancorp, Inc. (the "Company"), pursuant to Section
4.1 of the Loan Agreement dated as of April __, 1996, between Zions
Bancorporation and the Company, does hereby certify that as of the date hereof:
(a) All representations and warranties of the Company contained in the
Loan Agreement are true and correct in all material respects as though made or
given at or as of the date hereof; and
(b) All covenants and obligations to be performed or satisfied by the
Company on or prior to the date hereof have been performed or satisfied.
IN WITNESS WHEREOF, the undersigned officer of the Company has
hereunto set his hand this 27th day of May, 1996.
SOUTHERN ARIZONA BANCORP, INC.
By:
---------------------------
John E. Byrd
President and
Chief Executive Officer
38
EXHIBIT D
SOUTHERN ARIZONA BANCORP, INC.
8.75 PERCENT NON-NEGOTIABLE
SENIOR NOTE DUE JULY 1, 2000
$______________________ May 27, 1996
SOUTHERN ARIZONA BANCORP, INC., an Arizona corporation ("Company")
promises to pay to ZIONS BANCORPORATION, a Utah corporation ("Holder"), the
principal sum of ___________________ Dollars ($_________) and to pay interest
(computed on the basis of a 360-day year of twelve 30-day months) on the
principal amount from time to time remaining unpaid hereon, at the rate of 8.75
percent per annum from the date hereof until the Maturity Date, payable
semiannually on the first of each January and July in each year commencing July
1, 1996 and at the Maturity Date at the office or agency of Company in Yuma,
Arizona, in such currency of the United States of America as at the time of
payment shall be legal tender for payment of public and private debt. Company
shall pay interest on overdue principal (including any overdue required
prepayment of principal) and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest at the rate of 12 percent
per annum after maturity whether by acceleration or otherwise, until paid. If
any amount of principal or interest on or in respect of this Note becomes due
and payable on any date which is not a Business Day, such amount shall be
payable on the next preceding Business Day.
All capitalized terms used herein shall have the meaning set forth
in the Loan Agreement dated as of April__, 1996, entered into by Company and
Holder ("Loan Agreement") therein referred to and this Note and the Holder
hereof is subject to the terms and conditions of the Loan Agreement and is
entitled to all the benefits provided for thereby or referred to therein.
This Note may be declared due prior to its expressed Maturity Date
and certain prepayments are required to be made thereon, all in the events, on
the terms and in the manner and amounts as provided in the Loan Agreement.
39
This Note may be prepaid or redeemed at the option of Company prior
to the expressed Maturity Date on the terms and conditions and in the amounts
set forth in the Loan Agreement.
Date: , 1996
---------------
SOUTHERN ARIZONA BANCORP, INC.
By:
---------------------------
John E. Byrd
President and
Chief Executive Officer
40
EXHIBIT C
DISCHARGE CERTIFICATION
[DATE]
ZIONS BANCORPORATION
1380 Kennecott Building
Salt Lake City, Utah 84133
Re: Discharge Statement Pursuant to Article 5 of the Loan Agreement
dated as of April__, 1996, by and between Southern
Arizona Bancorp, Inc. and Zions Bancorporation
Gentlemen:
In accordance with Article 5 of the Loan Agreement dated as of
April __, 1996, by and between Southern Arizona Bancorp, Inc. ("Company") and
Zions Bancorporation, we hereby certify that Company is, as of this date,
released of all liabilities and obligations to which it was subject pursuant to
the Loan and Agency Agreement dated as of July 15, 1993, by and between Company
and PHS Mortgage, Inc. and the 8.75 percent Senior Notes due July 1, 2000 issued
pursuant thereto.
SOUTHERN ARIZONA BANCORP, INC.
By:
----------------------------
John E. Byrd
President and
Chief Executive Officer
PHS MORTGAGE, INC.
By:
----------------------------
[Authorized Official]