Exhibit 10.11
United Financial Corp.
November 17, 2002
Page 1
CORRESPONDENT BANKING
Norwest Bank Minnesota, N.A.
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0015
612/667-8834
Fax. 612/▇▇▇-▇▇▇▇
November 17, 1999
United Financial Corp.
▇▇▇▇ ▇. ▇▇▇▇▇, President
c\o Central Financial Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear ▇▇. ▇▇▇▇▇:
This Letter Agreement ("Agreement") sets forth the terms and conditions
governing that certain revolving line of credit by Norwest Bank Minnesota,
National Association ("Norwest") to United Financial Corp. ("Borrower") in the
original principal amount of THREE MILLION AND 00/100 DOLLARS ($3,000,000.00)
for the purpose set forth below (the "Line").
1. The Line. From time to time until October 30, 2000 (the "Termination Date")
the Borrower may request advances under the Line in an aggregate principal
amount not exceeding $3,000,000.00, at any one time outstanding. Each request
for an advance under the Line must be received by Norwest no later than 2:30
P.M. on the day of funding. Within the limit of the Line, the Borrower may
borrow, prepay and reborrow under the Line. Borrowings under the Line shall be
evidenced by a promissory note (the "Note"), in form and substance satisfactory
to Norwest, in the face amount of $3,000,000.00. The Note shall be executed and
delivered by the Borrower to Norwest concurrently with this Agreement.
2. Purpose. The proceeds of the advances under the Line shall be used to acquire
issued and outstanding shares in the Valley Bank of Arizona, a state chartered
commercial bank located in Phoenix, Arizona (the "Phoenix Bank"; "Acquisition"),
the effect of which Acquisition will provide Borrower with an ownership interest
in Phoenix Bank approximating fifty per cent.
3. Interest Rate. The principal balance outstanding under the Note shall bear
interest at an annual rate of interest equal to one hundred seventy-five (175)
basis points (1.75%) in excess of the Federal Funds Rate in effect from time to
time. Each change in the interest rate shall become effective on the day the
corresponding change in the Federal Funds Rate becomes effective. As used
herein, "Federal Funds Rate" shall mean the daily market rate quoted to Norwest
at 12:00 p.m. each day by dealers in the Federal Funds Market for the offering
of dollars to Norwest for deposit as such rate may increase or decrease from the
date of the Note. Interest on the Note shall be calculated on the basis of
actual number of days elapsed in a 360-day year.
4. Interest Payments. Interest on the Note shall be payable quarterly,
commencing February 29, 2000, and on the last of each subsequent fiscal
quarter-end and upon the Termination Date.
5. Principal Payments. On the Termination Date, all outstanding principal of the
Note shall be due and payable in full.
6. Prepayment. The Borrower may at any time prepay the Note in whole or from
time to time in part without premium or penalty. If at any time the principal
outstanding under the Note exceeds $3,000,000.00, the Borrower must immediately
prepay the Note in an amount sufficient to eliminate the excess.
United Financial Corp.
November 17, 2002
Page 2
7. Collateral. The payment and performance of ▇▇▇▇▇▇▇▇'s obligations under the
Note shall be secured by a collateral pledge agreement (the "Borrower's
Collateral Pledge") duly executed by Borrower for the benefit of Norwest.
Pursuant to the provisions of the Borrower's Collateral Pledge, the Borrower
shall grant Norwest a first security interest in all issued and outstanding
capital stock now or hereafter owned by Borrower in Heritage Bank fsb, a
federally chartered stock savings bank located in Great Falls, Montana (the
"Bank"). At the closing of the Line, Borrower shall deliver to Norwest 200,000
shares (100%) of the Bank, which shares shall secure the Note.
8. Conditions Precedent. The Borrower shall deliver the following to Norwest, in
form and content acceptable to Norwest, prior to the initial advance under the
Line:
A. A copy of the Borrower's Articles of Incorporation, and all amendments
thereto, certified as of the most recent date practicable by the
Secretary of State of the State of Minnesota;
B. A copy of the Borrower's By-laws and all amendments thereto, certified
as true and complete by an appropriate officer of the Borrower;
▇. ▇▇▇▇▇▇▇▇▇▇▇ of Good Standing relative to the Borrower, issued as of
the most recent date practicable by the Secretary of State of the
State of Minnesota;
D. A photocopy of the resolutions of the Borrower's Board of Directors,
authorizing the execution, delivery and performance of this Agreement,
▇▇▇▇▇▇▇▇'s Collateral Pledge, the Note and the other documents
contemplated herein, certified by the corporate secretary of the
Borrower;
▇. ▇ ▇▇▇▇▇▇▇ Certificate of Authority, duly executed by the corporate
secretary of the Borrower;
F. The Note, duly executed by the Borrower;
G. The Borrower's Collateral Pledge, duly executed by ▇▇▇▇▇▇▇▇;
H. Stock certificates and stock powers relative to the shares of stock in
the Bank, which shares are being pledged pursuant to Borrower's
Collateral Pledge; said stock certificates evidencing shares of
unrestricted, unlettered common voting stock of the Bank, free of all
liens and encumbrances; and
I. An arbitration agreement, duly executed by the Borrower.
9. Representations and Warranties. The Borrower hereby represents and warrants
to Norwest as follows:
A. The Borrower and the Bank are corporations duly organized, existing
and in good standing under the laws of the States of Minnesota and
Arizona, respectively.
C. The Acquisition and the execution and delivery by the Borrower of this
Agreement, the Note, ▇▇▇▇▇▇▇▇'s Collateral Pledge and the other
documents referenced herein will not conflict with the terms of the
Borrower's Articles of Incorporation or By-laws, or with any order,
rule or regulation of any court or of any federal or state regulatory
body or administrative agency or other governmental agency having
jurisdiction over the Borrower or the Bank.
D. The Acquisition and the execution and delivery by the Borrower of this
Agreement, the Note, Borrower's Collateral Pledge and the other
documents referenced herein have been duly authorized by the
Borrower's Board of Directors, and will not result in any breach of,
or constitute a default under, any outstanding indenture, mortgage,
deed of trust, bank loan or credit agreement or other instrument to
which the Borrower or the Bank is a party or by which such entity or
its property is bound.
E. There is no litigation or governmental proceeding pending or
threatened in any way against the Borrower and the Bank (collectively,
the "Bank Group"), to the best of its knowledge, which could have a
materially adverse effect on such entity.
F. All authorizations of governmental agencies, bodies or authorities
which are necessary to permit the Acquisition and the execution and
delivery of this Agreement and the other documents referred to
United Financial Corp.
November 17, 2002
Page 3
herein by the Borrower have been obtained and are in full force and
effect, and no further approval, consent, order or authorization of or
designation, registration, declaration or filing with any governmental
authority is required in connection therewith.
G. As of the date of this Agreement, there are 200,000 shares of common
voting stock in the Bank issued and outstanding, of which the Borrower
owns 200,000 shares (100%).
10. Covenants. Without Norwest's prior written consent, for so long as any
indebtedness remains outstanding under the Note, the Borrower:
▇. ▇▇▇▇▇ use the proceeds of advances under the Line exclusively for the
purposes set forth in Section 2 of this Agreement.
B. Shall not permit the ratio of its total liabilities to stockholder
equity accounts as reported in its financial statements delivered to
Norwest under this Agreement to exceed thirty percent (30%).
▇. ▇▇▇▇▇, and shall cause each member of the Bank Group to:
(i) Keep accurate books of record and account, in which true and
complete entries will be made in accordance with generally
accepted accounting principles, consistently applied, and upon
request by ▇▇▇▇▇▇▇, will give the Norwest account officer or
representative access to and permit such representative to
examine, copy or make extracts from, any and all books, records
and documents of such entity, to inspect any of their respective
properties and to discuss their respective affairs, finances and
accounts with any of their respective principal officers, all at
such times during normal business hours and as often as Norwest
may reasonably request.
(ii) Except for the Acquisition, refrain from purchasing any stock or
other securities of, or make any loans or advances of credit to,
or make any investments or acquire any controlling interest
whatsoever in, any other corporation, bank or non-bank
institution.
(iii)Refrain from declaring or paying any dividends on any class of
stock or make any payment on account of the purchase, redemption
or other retirement of any share of stock or make any
distribution in respect thereof, either directly or indirectly,
specifically excluding payment of dividends to allow payment of
the Borrower's indebtedness to Norwest and payment of shareholder
dividends provided that no Event of Default has occurred under
this Agreement.
(iv) Refrain from issuing any additional capital stock, notes or
debentures of any type or class.
(v) Refrain from incurring or creating any indebtedness or liability
for borrowed money, except (a) indebtedness owed to Norwest, (b)
indebtedness disclosed in writing to Norwest prior to the date of
this Agreement, (c) indebtedness incurred in the Borrower's
ordinary course of business where such occurrence, assumption,
creation of indebtedness or liability is specifically authorized
by any federal or state regulatory agency having jurisdiction or
control over the Borrower or the Bank, and (d) indebtedness owed
by the Borrower to any of its shareholder(s) if such indebtedness
is subordinated to the Note on written terms acceptable to
Norwest.
(vi) Refrain from assuming, guaranteeing, endorsing or otherwise
becoming directly or indirectly liable in connection with the
obligations of any other person or entity, except for the
endorsement of instruments in the ordinary course of business.
(vii)Maintain blanket bond coverage, property and casualty coverage,
and errors and omissions coverage from insurance agencies as
customary for such businesses and provide prompt notice to
Norwest of any action taken by insurance providers that will
seriously alter, amend or terminate the above-referenced
insurance coverage.
United Financial Corp.
November 17, 2002
Page 4
(viii)Provide Norwest with prompt written notice of any executive
management changes in the Bank.
(ix) Provide Norwest with prompt written notice of any negotiations to
sell any capital stock of the Bank, together with copies of any
proposed buy/sell agreements; provided, however, that this
subparagraph shall not be deemed approval by Norwest of any such
negotiation, and, provided further that this subparagraph shall
not apply to information which under applicable law or regulation
is prohibited from disclosure to Norwest.
(x) (a) Conduct a detailed inventory and assessment of all of its
computer hardware and software systems and imbedded chip
technology ("Information Systems ") and of its business and
operations that could be adversely affected by its failure to be
Year 2000 Compliant on a timely basis; (b) develop, fund and
implement and test a project plan to make its Information Systems
Year 2000 Compliant; and (c) initiate a process to determine
whether its material suppliers, vendors and customers have taken
meaningful steps to become Year 2000 Compliant on a timely basis,
and complete the development and implementation of a feasible
contingency plan to ensure the uninterrupted and unimpaired
operation of its business in the event of the failure of the
systems of such third parties or its own Information Systems. For
purposes of this covenant, "Year 2000 Compliant" means that the
Information Systems of each member of the Bank Group that are
material to its operation and financial condition will be able to
process properly date sensitive functions before, on and after
December 31, 1999.
▇. ▇▇▇▇▇ cause the Bank:
(i) To maintain a Return on Assets ("ROA") not less than 0.75% as of
the end of each fiscal quarter calculated on a four quarter
moving average including the current quarter reported plus the
three immediately preceding quarters.
(ii) To maintain the ratio of its Tangible Primary Capital to its
Total Assets at a level equal to or greater than eight percent
(8%) as of the end of each fiscal quarter, or the minimum ratio
required by any regulatory agency having authority over the Bank.
As used herein, "Tangible Primary Capital" shall mean the
difference of (i) the sum of perpetual preferred stock, common
stock, surplus, undivided profits, capital reserves and allowance
for loan and lease losses, less (ii) the sum of the net
unrealized gains (and losses) on Available-for-Sale securities,
goodwill and other intangible assets as disclosed in the Bank's
Call Reports (as defined in Section 11B below)
(iii) Not to allow the total of its non-performing loans (those
classified 90 days past due or non-accrued, as reported in the
Bank's quarterly Call Reports) to exceed fifteen percent (15%) of
its Equity Capital, as of the end of each fiscal quarter. "Equity
Capital" shall mean the sum of perpetual preferred stock, common
stock, surplus, undivided profits and capital reserves less the
net unrealized gains (and losses) on Available-for-Sale
securities, as disclosed in the Bank's Call Reports.
(iv) To maintain an allowance for loan and lease losses at a minimum
of one hundred percent (100%) of the total amount of
non-performing loans (those classified 90 days past due or
non-accrued as reported in quarterly Call Reports).
11. Reporting Requirements. For so long as any indebtedness remains outstanding
under the Note, the Borrower shall furnish to Norwest, in form and content
acceptable to Norwest:
A. Within 90 days after the end of each fiscal year of each member of the
Bank Group, the annual audited financial statement of the Borrower,
and the annual unaudited financial statement of the Bank, all of
United Financial Corp.
November 17, 2002
Page 5
which shall be prepared on a basis consistent with the accounting
practices reflected in the most recent financial reports delivered by
the Borrower to Norwest prior to the date of this Agreement.
B. As soon as available, and in any event within 45 days after the end of
each fiscal quarter, the complete Consolidated Report of Condition and
Reported Income (FFIEC 034) (the "Call Report") prepared by the Bank
at the end of such fiscal quarter in compliance with the requirements
of any federal or state regulatory agency which has authority to
examine the Bank, all prepared in accordance with the requirements
imposed by the applicable regulatory authorities and applied on a
basis consistent with the accounting practices reflected in any
previous Call Report and similar statements.
C. As soon as available, an in any event within 60 days after the end of
each quarter of each fiscal year of the Borrower, the complete
Consolidated Report for Bank Holding Comnpanies (FRY-9C) required to
be filed with the Federal Reserve Bank (the "Fed") in the Federal
Reserve District where the Borrower is located.
D. As soon as available, an in any event within 60 days after the end of
each quarter of each fiscal year of the Borrower, the complete Parent
Company Only Financial Statements For Bank Holding Companies (FRY-9LP)
required by the Fed.
E. As soon as available, and in any event within 90 days after each
fiscal year end of the Borrower, the Annual Report of Domestic Holding
Companies (FRY-6) required by the Fed.
F. As soon as available (but without duplication of any other requirement
set forth in this Section 11) a photocopy of all reports which are
required by law to be furnished to any regulatory authority having
jurisdiction over any member of the Bank Group (including without
limitation Call Reports, but excluding any report which applicable law
or regulation prohibits a member of the Bank Group from furnishing to
Norwest).
G. As soon as available, and in any event within 45 days after each
fiscal quarter end of the Borrower, a compliance certificate, in form
and content acceptable to Norwest, that has been signed by an officer
of each member of the Bank Group which (i) certifies that the officer
has no knowledge of any event of default under this Agreement or the
documents described herein, or of any event which would, after the
lapse of time or the giving of notice, or both, constitute an Event of
Default under this Agreement or the documents described herein; and
(ii) demonstrates that the Borrower and the Banks remain in compliance
with all financial covenants that must be complied with as of the date
thereof.
H. Immediately upon knowledge thereof, notice in writing to Norwest upon
the occurrence of any Event of Default (hereinafter defined).
▇. ▇▇▇▇ other information respecting the financial condition and results
of operations of any member of the Bank Group as Norwest may from time
to time reasonably request, except information which, under applicable
law or regulation, is prohibited from disclosure.
12. Default. The occurrence of any one or more of the following shall constitute
an Event of Default under this Agreement:
A. Default in the payment of interest or principal on the Note when due,
and continuance of such default for 10 calendar days.
B. The Borrower shall breach any other agreement or covenant contained in
this Agreement or in any other agreement between the Borrower and
Norwest, and such breach is not cured within 30 calendar days of
receipt of written notice from Norwest.
C. Any event of default shall occur under Borrower's Collateral Pledge
and such default is not cured within 30 days of receipt of written
notice from Norwest.
United Financial Corp.
November 17, 2002
Page 6
D. Any representation or warranty made by the Borrower in this Agreement
or in any statement or certificate furnished to Norwest by or on
behalf of the Borrower is untrue or misleading in any material
respect.
E. The issuance or proposed issuance upon any member of the Bank Group of
any informal or formal administrative action, temporary or permanent,
issued by any federal or state regulatory agency having jurisdiction
or control over any member of the Bank Group, against any member of
the Bank Group, such action taking the form of, but not limited to:
(i) any informal or formal directive citing conditions or activities
deemed to be unsafe or unsound or breaches of fiduciary duty or law or
regulation; (ii) a memorandum of understanding; (iii) a cease and
desist order; (iv) the termination of insurance coverage of customer
deposits by the Federal Deposit Insurance Corporation; (v) the
suspension or removal of a bank officer or director, or the
prohibition of participation by any others in the business affairs of
any member of the Bank Group; (vi) capital maintenance agreement; or
(vii) other regulatory action, agreement or understanding with respect
to any member of the Bank Group.
F. Proceedings in bankruptcy or for the reorganization of any member of
the Bank Group, or for the readjustment of any of its debts under the
United States Bankruptcy Code or under any other law (whether state or
federal) for the relief of debtors shall be commenced by any member of
the Bank Group, or shall be commenced against any member of the Bank
Group, or any member of the Bank Group makes an assignment for the
benefit of creditors, or with or without consent, a custodian, trustee
or receiver is appointed for any member of the Bank Group or any of
such member's property or any member of the Bank Group is dissolved,
liquidated or winds up its business.
G. A Material Adverse Change occurs in the financial condition of any
member of the Bank Group or such member's ability to repay said
party's obligations to Norwest. As used herein, "Material Adverse
Change" means a material adverse change in the (i) the business,
property, condition (financial or otherwise), results of operations,
or prospects of such person or entity; (ii) the ability of such entity
to perform its obligations in favor of Norwest; or (iii) the
enforceability of any of Norwest's rights or remedies under this
Agreement and the documents referenced herein.
Upon the occurrence of one or more of the foregoing Events of Default, Norwest
may, by notice in writing to the Borrower, declare all indebtedness under the
Note to be due and payable, whereupon all such indebtedness shall immediately
become due and payable. Upon the occurrence of any Event of Default under
paragraph (E) and (F) above, all indebtedness under the Note shall immediately
become due and payable, without notice or demand. The remedies described herein
are not intended to be exclusive and shall be read cumulatively with all other
rights and remedies available to Norwest under this Agreement, by other
contract, at law or in equity.
13. Documentation. All documentation and financial reporting to be delivered to
Norwest in connection with this Agreement shall be in form and content
acceptable to Norwest.
14. Collection Expenses. In the event the Borrower fails to pay Norwest any
amounts due under this Agreement or the Note, the Borrower shall pay all costs
of collection, including reasonable attorneys' fees and legal expenses incurred
by Norwest.
15. Entire Agreement. This Agreement and the documents referred to herein
constitute the entire agreement between the parties, and may be amended only by
a writing signed on behalf of each party.
16. Rights of Setoff. The Borrower, by signing below, agrees that if all or any
part of the Line (or any extension or renewal thereof) is not paid when due,
Norwest may, without notice to the Borrower or without further action, offset
any and all unrestricted deposits (including unmatured time deposits) of the
Borrower maintained at Norwest against the unpaid principal balance and accrued
and unpaid interest due and owing on the Line (or any extension or renewal
thereof).
17. Reliance. This Agreement is addressed to the Borrower only and is not to be
relied upon in any manner by other persons or entities.
United Financial Corp.
November 17, 2002
Page 7
18. Applicable Law. This Agreement and the documents executed in connection
herewith shall be governed by the substantive laws of the State of Minnesota.
This Agreement is subject to no Material Adverse Change having occurred in the
financial condition of any member of the Bank Group and to no restrictive
changes in governmental, regulatory or monetary policies having occurred.
If the terms and conditions set forth in this Agreement are acceptable to you,
please sign in the space indicated below and return this Agreement, plus
executed originals of the accompanying documents, to the undersigned on or
before November 30, 1999.
Very truly yours,
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
ACCEPTANCE:
The undersigned hereby accepts and agrees to be bound by the terms and
conditions of this Agreement.
UNITED FINANCIAL CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
Its: President
Dated: November 18, 1999
