<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES PURSUANT TO
SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
SOUTHERN ARIZONA BANCORP, INC.
(Exact Name of Registrant Specified in Its Charter)
Arizona 86-0528454
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1800 South Fourth Avenue, Yuma, Arizona 85364
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (520) 782-7505
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no par value
(Title of Class)
<PAGE> 2
ITEM 1. BUSINESS
Southern Arizona Bancorp, Inc. (the "Company") is an Arizona
corporation incorporated in 1985 and is registered as a bank holding company
under the Bank Holding Company Act of 1956. Its sole subsidiary is Southern
Arizona Bank (the "Bank"). The Bank provides a wide variety of general
commercial and retail banking services, which include lending, depository, and
related financial services to individuals, businesses, governmental units, and
financial institutions in Arizona. The Bank is a state banking association
chartered under the laws of the State of Arizona. It commenced operations in
Yuma, Arizona on August 2, 1982. At December 31, 1995, the Bank had assets of
$127 million, net loans of $85 million, and deposits of $115 million. The Bank
operates five banking facilities in Yuma County, Arizona and currently has 87
employees.
Commercial Banking and Related Services. The Bank is engaged in the
financing of commerce and industry by providing credit facilities and related
services for business of all sizes. The Bank offers all forms of commercial
lending, including lines of credit, revolving credits, term loans, accounts
receivable financing, residential mortgage lending, and commercial real estate
and other forms of secured financing.
Personal Banking Services. A wide range of personal banking services
is provided to individuals at each of the Bank's branch offices. Among the
services provided are interest-bearing and non-interest-bearing checking
accounts, savings and time accounts, installment and other personal loans, home
equity loans, automobile and other consumer financing, safe deposit services,
and residential mortgage loans. The Bank is a member of regional, national, and
international automated teller machine ("ATM") networks, which permit customers
to access their accounts at thousands of electronic terminals in the Southwest
region, as well as nationally and internationally.
Competition. The Company and the Bank operate in a competitive
environment in Arizona that has intensified in the past few years. Profit
margins in the traditional banking business of lending and deposit gathering
have declined as deregulation, both in the United States and foreign countries,
has allowed foreign banks and non-banking institutions to offer alternative
services to many of the Bank's customers.
The principal competitive factors among financial institutions can
be classified into two categories: pricing and services. Interest rates on
deposits, especially in the area of time deposits, and interest rates and fees
charged to customers on loans are very competitive. From a service standpoint,
financial institutions compete against each other in convenience of location,
types of services, service costs, and banking hours. The Bank is generally
competitive with competing financial institutions in its primary service areas
with respect to interest rates paid on time and savings deposits, charges on
deposit accounts, and interest rates and fees charged on loans.
The Company and the Bank compete with other major commercial banks
based or conducting business in Arizona. In addition, the Company and the Bank
encounter competition from diversified financial institutions, offices of
foreign banks offering domestic services, savings banks, savings and loan
associations, credit unions, money market and other mutual funds, mortgage
companies, leasing companies, finance companies, investment banking companies,
merchant banks, and a variety of other financial services and advisory
companies.
The Company and the Bank consider all banks in its market area to be
competitors; however, of the seven (7) banks (including the Bank) in Yuma,
management considers the large banks to be the major competitors such as The
Bank of America, Banc One, Wells Fargo, and Norwest (Arizona).
In January 1996, the Company entered into an Agreement and Plan of
Reorganization with Zions Bancorporation, a Utah corporation ("Zions"), the
Bank, and National Bank of Arizona, a national banking association ("NBA"),
which provided for the Company to merge with and into Zions with Zions being the
surviving corporation and immediately thereafter for the Bank to merge with and
into NBA with NBA being the surviving corporation (the "Reorganization"). See
"Security Ownership of Certain Beneficial Owners and Management Changes in
Control" for additional information concerning the Reorganization.
See "Financial Information" and "Consolidated Financial Statements"
for additional information concerning the business of the Company and the Bank.
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ITEM 2. FINANCIAL INFORMATION
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction
with the Company's consolidated financial statements and the related notes and
with the Company's management's discussion and analysis of financial condition
and results of operations, provided elsewhere herein. See "Index to Financial
Statements" for the historical financial statements of, and other financial
information regarding, the Company.
<TABLE>
<CAPTION>
AS OF, AND FOR THE
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(Dollars and outstanding shares in thousands,
except per share and ratio data)
<S> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Net interest income $ 7,042 $ 6,049 $ 5,162 $ 4,474 $ 3,652
Provision for loan losses 401 429 756 753 422
Other operating income 1,281 1,221 1,394 733 438
Other operating expense 4,700 4,289 3,828 3,136 2,714
Net income 1,999 1,632 1,291 950 719
COMMON STOCK DATA
Earnings per common share $ 1.58 $ 1.29 $ 1.02 $ 0.75 $ 0.57
Book value per share at period end 7.00 5.75 4.76 3.98 3.40
Weighted average common and common
equivalent shares outstanding during
the period 1,266 1,266 1,266 1,266 1,266
Common shares outstanding at period end 1,266 1,266 1,266 1,266 1,266
AVERAGE BALANCE SHEET DATA
Securities $ 10,637 $ 12,650 $ 14,990 $ 14,830 $ 10,737
Loans and leases, net 82,615 71,365 57,553 48,198 40,987
Total interest-earning assets 105,018 91,575 79,442 66,579 54,746
Total assets 112,240 97,323 84,742 71,245 59,314
Interest-bearing deposits 73,063 63,464 57,390 50,882 43,290
Total deposits 100,619 87,532 77,596 66,336 54,790
Long-term debt 2,980 2,500 1,143 -- --
Shareholders' equity 8,071 6,654 5,530 4,669 4,025
END OF PERIOD BALANCE SHEET
DATA
Securities $ 1,887 $ 7,672 $ 13,552 $ 13,477 $ 10,665
Loans and leases, net 85,585 80,689 65,147 54,388 43,515
Allowance for loan losses 2,467 2,393 1,990 1,332 873
Total assets 127,418 101,254 91,225 81,938 71,600
Total deposits 114,762 91,205 82,316 76,435 66,981
Long-term debt 2,980 2,500 2,500 -- --
Shareholders' equity 8,858 7,284 6,024 5,036 4,302
Nonperforming assets:
Nonaccrual loans 11 202 18 82 --
Other real estate owned -- 15 18 -- 59
Total nonperforming assets 11 217 36 82 59
SELECTED RATIOS
Net interest margin 69.08% 74.53% 73.67% 68.97% 59.86%
Return on average assets 1.78% 1.68% 1.52% 1.33% 1.21%
Ratio of average common equity to
average assets 7.19% 6.84% 6.53% 6.55% 6.79%
Ratio of nonperforming assets to total
assets .01% .22% .04% .12% .10%
Ratio of allowance for loan losses to
net loans and leases outstanding at
period end 2.88% 2.97% 3.05% 2.45% 2.01%
Ratio of allowance for loan losses to
nonperforming loans 22,427.27% 1,184.65% 11,055.56% 1,624.39% infinite
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 1995
The following analysis of the Company's financial condition and
results of operations as of and for the three year period ended December 31,
1995, should be read in conjunction with the Consolidated Financial Statements
of the Company.
OVERVIEW
The Company does not engage in any substantial business activity
other than as a bank holding company that holds all of the issued and
outstanding stock of the Bank, its principal asset. Unless otherwise noted, the
following discussion relates to the Company and the Bank on a consolidated
basis.
RESULTS OF OPERATIONS
Net Income
Net income for 1995 was $1,999,007, increasing $366,793, or 22.5%,
from 1994. This increase was primarily attributable to growth in the Company's
assets, which resulted in an increase in net interest income of $992,387.
Net income for 1994 was $1,632,214 compared to $1,291,151 in 1993.
The 1994 increase of $341,063, or 26.4%, was primarily attributable to growth in
the Company's assets as well as a decrease in the Company's provision for loan
losses, which resulted from improvement in the quality of the Company's loan
portfolio.
Net-Interest Income
Net interest income, the difference between interest earned on loans
and investments and interest paid on deposits and debt, is the principal
component of the Company's earnings.
During 1995, net interest income was $7,041,643, increasing
$992,387, or 16.4%, from 1994. This increase was primarily attributable to
growth in the Company's earning assets as well as the utilization of pricing
strategies aimed at maintaining an appropriate net interest spread. Average
interest-earning assets of the Company were $105,018,000 during 1995, an
increase of 14.7% or $13,443,000 from $91,575,000 in 1994.
During 1994, net interest income was $6,049,256 compared to
$5,162,110 in 1993. The 1994 increase of $887,146, or 17.2%, was primarily
attributable to growth in the Company's earning assets. Average interest-earning
assets of the Company were $91,575,000 during 1994, an increase of $12,133,000,
or 15.3%, from $79,442,000 in 1993.
Non-Interest Income
During 1995, non-interest income was $1,280,584, an increase of 4.9%
from $1,220,741 in 1994. This increase was primarily attributable to an increase
in customer service fees of $136,564 resulting from increased volume, pricing of
the Bank's services, and fee income from additional checking accounts opened and
maintained at the Bank.
Non-interest income for 1994 had decreased $172,790, or 12.4%, from
the non-interest income of $1,393,531 in 1993. This decrease was primarily
attributable to exceptional gains on the sale of loans and investments realized
in 1993. In 1993, due to favorable interest rates and the Company's focus on
optimum asset allocation, the Company realized gains on the sale of mortgage
loans and investment securities of $882,406 as compared to $513,741 in 1994.
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Non-Interest Expense
Non-interest expense was $4,699,650 for the year ended December 31,
1995 compared to $4,288,619 and $3,827,811 for the years ended December 31, 1994
and December 31, 1993, respectively. Historically, the Company's non-interest
expense has increased relatively proportionately to the growth of the Company's
assets. The increases in non-interest expense for the years 1995 and 1994 have
resulted from the Company's expansion of staff, premises, and other resources to
support the economic progress of the Company.
FINANCIAL CONDITION
Assets
At December 31, 1995, total assets were $127,417,893 as compared to
$101,254,421 on December 31, 1994, representing an increase of 26%. This
increase was primarily attributable to the Bank's implementation of an
aggressive strategy to acquire large, commercial deposits.
Total assets for 1994 had increased 11% from total assets of
$91,225,493 in 1993. This increase was primarily attributable to an increase in
net loans of $16,013,363 and branch remodelings that facilitated customer
service.
Investment
Investment securities held by the Company were $1,886,870 at
December 31, 1995 compared to $7,672,189 at December 31, 1994. This decrease was
primarily attributable to a reallocation of investment securities to Fed Funds.
In addition, the Company had short term investments in time deposits with other
banks and Fed Funds sold of $25,788,000. The Company's portfolio mix is
structured to meet the liquidity needs of the Bank brought about by loan demand
and seasonal swings in the deposit base.
Investment securities held by the Company as of December 31, 1994
decreased 43.4% from investment securities held by the Company of $13,551,719 as
of December 31, 1993. This decrease was primarily attributable to strong loan
demand for the year 1994, which was partially funded by matured securities.
Loans
Loan growth has been somewhat lower than asset growth in order to
maintain acceptable liquidity and to reduce the Company's loan/deposit ratio to
between 75 and 80%.
The Company's loan portfolio grew in 1995 to $85,584,967, increasing
$4,895,982, or 6.1%, from 1994. The Company's loan portfolio also grew in 1994
to $80,688,985, increasing $15,541,589, or 23.9%, from 1993. This growth in the
Company's loan portfolio in both 1995 and 1994 was primarily attributable to the
Company's emphasis on competitive pricing, favorable interest rates, and
strength in the local economy.
The Company's loan portfolio mix has not varied significantly over
the last three years. Commercial loans comprised 73.7% of the Company's loan
portfolio in 1995, decreasing from 78.2% and 77.0% of the Company's loan
portfolio in 1994 and 1993, respectively. Real Estate loans comprised 11.6% of
the Company's loan portfolio in 1995, compared to 10.2% and 11.5% of the
Company's loan portfolio in 1994 and 1993, respectively. Installment and other
loans comprised primarily of automobile loans and home improvement loans, made
up 14.7% of the Company's loan portfolio in 1995, compared to 11.6% and 10.3% of
the Company's loan portfolio in 1994 and 1993, respectively. The 1995 increase
in installment loans was primarily attributable to the Company's emphasis on
mobile home lending and the Company's management's desire for greater liquidity.
The Bank does not have foreign or energy loans.
Loans that were 90-days or more past due or nonaccrual constituted
.01% of the Company's net loan portfolio as of December 31, 1995, compared to
.24% and .02% of the Company's loan portfolio at December 31,
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<PAGE> 6
1994 and December 31, 1993, respectively. The 1995 decrease was primarily
attributable to the Company's management's desire to reduce the delinquency
ratio of the Company loan portfolio.
Allowance for Loan Losses
The Company's allowance for loan losses at December 31, 1995, was
$2,466,513 compared to $2,393,242 and $1,990,428 at December 31, 1994 and
December 31, 1993, respectively. The allowance for loan losses as a percent of
gross loans was 2.78%, 2.86%, and 2.94% for the years 1995, 1994, and 1993,
respectively.
Amounts charged-off to the allowance for loan losses in 1995 were
$349,214, compared to $45,294 and $109,455 in 1994 and 1993, respectively.
Factors such as economic conditions and problems with individual borrowers has
affected amounts charged-off to the allowance for loan losses over the last
three years. However, as a result of prudent lending policies and periodic
review, the Company has experienced minimal loan losses.
DEPOSITS
Typically, the Company experiences a large increase in deposits at
year end due to the seasonal local economy, which is not accompanied by a large
increase in loan demand.
The Company's deposits at December 31, 1995 were $114,761,830,
increasing $23,556,446, or 25.8%, from 1994. This increase was primarily
attributable to the Company's focus on acquiring larger, commercial depositors.
Additionally, the merger and closing of several competitors contributed to the
growth in the Company's deposits.
The Company's deposits at December 31, 1994 were $91,205,384,
increasing $8,889,090, or 10.8%, from 1993. This increase was primarily
attributable to the growing local economy and the expansion of two branch
facilities.
LIQUIDITY
The Company has maintained liquidity and continues to maintain
adequate liquidity. Although the Company's loan/deposit ratio was 85.10% in
1995, the Company has reduced its loan growth to lower its loan/deposit ratio to
between 75-80% and, as a result, has adequately maintained its liquidity.
Additionally, the Company had $25,194,000 in Fed Funds as of December 31, 1995
and currently has substantial unused borrowing lines available through
correspondent banks. These borrowing lines are available to the Company in the
event that the seasonal swing in deposits is greater than anticipated.
One source of funds for the Company is dividends received from the
Bank. The amount of dividends that a bank may pay in any year is subject to
certain regulatory restrictions. Generally, dividends paid in a given year by a
bank are limited to its net profit, as defined by regulatory agencies, for the
year combined with its retained net income for the preceding two-years. However,
a bank may not pay dividends if such payments would leave the bank inadequately
capitalized. Hence, the ability of the Bank to pay dividends will depend on its
future net income and capital requirements.
CAPITAL RESOURCES
In 1993, the Company issued $2,500,000 principal amount of 8.75%
Senior Notes (the "Notes"). The proceeds of such issuance were used as capital
for the continued expansion of the Bank. The Company intends to prepay the
Senior Notes on or about May 27, 1996 with the proceeds of a loan from Zions.
Such loan provides for the Company to borrow from Zions that amount which will
enable the company to prepay the Notes, including the premium payable resulting
from the prepayment of the Notes. Quantitative measures established by
regulation to ensure capital adequacy require the Bank to maintain certain
minimum amounts and ratios of total and Tier I capital (as defined by the
Federal Deposit Insurance Corporation) to risk-weighted assets, and of Tier I
capital to
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average assets. As of December 31, 1995, management believes that the Bank has
met all capital adequacy requirements to which it is subject.
EFFECTS OF INFLATION
The net income of the Company depends to a great extent upon its net
interest margin. Net interest margin is the difference between the income the
Company receives from its loans, securities, and other interest earning assets
and the interest it pays on its deposits and other interest paying liabilities.
Inflation and interest rates are highly sensitive to many factors beyond the
control of the Company, including general economic conditions and policies of
various governmental and regulatory authorities. The Company attempts to limit
adverse exposure to inflation and interest rate changes by properly matching
rate sensitive assets and liabilities.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THREE MONTHS ENDED MARCH 31, 1996
The Company has not experienced material changes in its financial
condition or results of operations from December 31, 1995 to the three months
ended March 31, 1996. Additionally, there has been no material changes in the
Company's financial condition or results of operations from the three months
ended March 13, 1995 to the three months ended March 31, 1996 other than those
addressed in the Management's Discussion and Analysis of Financial Condition and
Results of Operations for the Three-Year Period Ended December 31, 1995 as set
forth herein.
Pursuant to an Agreement and Plan of Reorganization dated January
17, 1996, the Company has incurred $116,400 since December 31, 1995 in costs in
preparing for the Company to be merged with and into Zions Bancorporation and
the Bank to be merged with and into National Bank of Arizona.
ITEM 3. PROPERTIES
The principal executive offices of the Company are located at 1800
South Fourth Avenue, Yuma, Arizona 85364, telephone (520) 782-7505. The Bank
owns the land and building at this location. Along with its principal executive
offices, the Company maintains the following branch offices:
<TABLE>
<S> <C> <C> <C>
South Mesa Branch North-End Branch Foothills Branch San Luis Branch
3218 South Fourth Ave. 1150 W. 8th Street 11242 Foothills Blvd. 23359 South First Street
Yuma, Arizona 85365 Suite 1 Yuma, Arizona 85365 San Luis, Arizona 85349
(520) 344-3900 Yuma, Arizona 85364 (520) 342-2895 (520) 627-1100
(520) 783-0117
</TABLE>
The Bank owns the property upon which the South Mesa and the San
Luis branches are located and leases the property upon which the North-End and
Foothills branches are located. The lease terms for the North- End and Foothills
branches end on August 31, 2000 and May 1, 2001, respectively. The Bank made
lease payments on the North-End and Foothills branches during 1995 of $7,752.98
and $19,248.78, respectively.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Persons who were beneficial owners of 5% or more of the issued and
outstanding Common Stock of the Company as of the record date are shown in the
following table:
<TABLE>
<CAPTION>
AMOUNT AND
NAME OF NATURE OF PERCENT OF
BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) COMMON STOCK
- ------------------- ----------------------- -------------
<S> <C> <C>
Forrest C. Braden 71,511(3) 5.65%
Stephen P. Shadle 75,325(4) 5.95%
Southern Arizona Bank 69,111 5.46%
Employee Stock Ownership Plan
</TABLE>
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(1) The address of each named individual is that of the Company.
(2) The table includes, when applicable, any shares owned of record by
such person's minor children and spouse, and by other individuals
and entities over whose shares such person has custody, voting
control, or power of disposition. The number of shares shown
includes shares owned by trusts of which the beneficial owner is
trustee, with sole voting and investment power.
(3) Includes 21,300 shares of Common Stock as to which Mr. Braden has
sole voting power as the trustee of the Braden Trust, 1,800 shares
of Common Stock as to which Mr. Braden has sole voting power as the
trustee of a trust for his grandson, Charles Arthur Braden, and
2,500 shares of Common Stock as to which Mr. Braden has sole voting
power as trustee of a trust for his granddaughter, Meghann Braden.
(4) Includes 2,000 shares of Common Stock as to which Mr. Shadle has
sole voting power as the general partner of the Shadle Family
Limited Partnership, 3,150 shares of Common Stock as to which Mr.
Shadle has sole voting power as the personal representative of the
Francis T. Shadle Estate, 600 shares of Common Stock as to which Mr.
Shadle has sole voting power as the trustee of the Robert E. Harman
Children's Trust, 56,857 shares of Common Stock as to which Mr.
Shadle has shared voting power as the co-trustee of the Stephen P.
Shadle and Roberta G. Shadle Trust, and 12,718 shares of Common
Stock as to which Mr. Shadle has sole voting power as the trustee of
the Westover, Choules & Shadle 401(k) Profit Sharing Trust.
SECURITY OWNERSHIP OF MANAGEMENT
As of the record date, the Company's directors and officers as a
group were beneficial owners of that number of shares of Common Stock shown
below.
<TABLE>
<CAPTION>
AMOUNT OF
NAME OF AND NATURE OF PERCENT OF
BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) COMMON STOCK
- ------------------- ----------------------- ------------
<S> <C> <C>
Forrest C. Braden 71,511 (3) 5.65%
John E. Byrd 40,523 3.20%
Thomas M. Howell 50,238 (4) 3.97%
Robert W. Kennerly 4,274 *
Jimmy J. Naquin 37,598 (5) 2.97%
Colleen J. Newman 11,000 (6) *
</TABLE>
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<TABLE>
<CAPTION>
AMOUNT OF
NAME OF AND NATURE OF PERCENT OF
BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) COMMON STOCK
- ------------------- ----------------------- ------------
<S> <C> <C>
Donald S. Olsen 10,000 *
Stephen P. Shadle 75,325 (7) 5.95%
Charles N. Urtuzuastegui 9,443 (8) *
All directors and officers as a group 310,150 (3)(4)(5)(6)(7)(8) 24.49%
(12 persons)
</TABLE>
- -----------------------
* Less than 1.0% of the outstanding securities or voting power.
(1) The address of each named individual is that of the Company.
(2) The table includes, when applicable, shares owned of record by such
person's minor children and spouse, and by other related individuals
and entities over whose shares such person has custody, voting
control, or power of disposition. The number of shares shown
includes shares owned by trusts of which the beneficial owner is
trustee, with sole voting and investment power.
(3) Includes 21,300 shares of Common Stock as to which Mr. Braden has
sole voting power as the trustee of the Braden Trust, 1,800 shares
of Common Stock as to which Mr. Braden has sole voting power as the
trustee of a trust for his grandson, Charles Arthur Braden, and
2,500 shares of Common Stock as to which Mr. Braden has sole voting
power as trustee of a trust for his granddaughter, Meghann Braden.
(4) Includes 100 shares of Common Stock as to which Mr. Howell has
shared voting power as a one-half owner of Quail Trail Corporation
and 50,138 shares of Common Stock as to which Mr. Howell has shared
voting power as a co-trustee of the Thomas M. Howell & Lea Rae
Howell Trust.
(5) Includes 3,098 shares of Common Stock as to which Mr. Naquin has
sole voting power as the manager of the Naquin Farms Inc. Profit
Sharing Plan.
(6) Includes 2,306 shares held by the Colleen Newman Realty, Inc.
Employees Defined Contribution Plan & Trust-Money Purchase Plan and
4,449 shares held by Colleen Newman Realty, Inc. Employees Defined
Contribution Plan & Trust-Profit Sharing.
(7) Includes 2,000 shares of Common Stock as to which Mr. Shadle has
sole voting power as the general partner of the Shadle Family
Limited Partnership, 3,150 shares of Common Stock as to which Mr.
Shadle has sole voting power as the personal representative of the
Francis T. Shadle Estate, 600 shares of Common Stock as to which Mr.
Shadle has sole voting power as the trustee of the Robert E. Harman
Children's Trust, 56,857 shares of Common Stock as to which Mr.
Shadle has shared voting power as the co-trustee of the Stephen P.
Shadle and Roberta G. Shadle Trust, and 12,718 shares of Common
Stock as to which Mr. Shadle has sole voting power as the trustee of
the Westover, Choules & Shadle 401(k) Profit Sharing Trust.
(8) Includes 630 shares of Common Stock as to which Mr. Urtuzuastegui
has sole voting power as the trustee of a trust for his
granddaughter, Erica Urtuzuastegui, and 630 shares of Common Stock
as to which Mr. Urtuzuastegui has sole voting power as the trustee
of a trust for his granddaughter, Melisa Urtuzuastegui.
CHANGES IN CONTROL
At a Special Meeting on May 22, 1996, the Company's shareholders
voted to approve and adopt the Agreement and Plan of Reorganization dated as of
January 17, 1996 (the "Plan of Reorganization"), between the Company, Zions
Bancorporation, a Utah corporation ("Zions"), the Bank, and National Bank of
Arizona ("NBA"), a wholly-owned subsidiary of Zions. The Plan of Reorganization
provides for the merger of the Company with and into Zions with Zions being the
surviving corporation and immediately thereafter for the merger of the Bank
with and into NBA with NBA being the surviving corporation (the
"Reorganization"). The Plan of Reorganization provides that upon consummation
of the latter merger, NBA will
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<PAGE> 10
continue as a direct wholly-owned subsidiary of Zions (except for directors'
qualifying shares). Shareholder approval for the Reorganization requires the
affirmative vote of at least two-thirds of the holders of the Company's Common
Stock and the affirmative vote of the holders of at least two-thirds of the
outstanding shares of the Company's Common Stock. Each of the Company's
directors has agreed to vote the shares owned by such director in favor or the
Reorganization. Zions is a bank holding company incorporated in Utah. The
principal subsidiaries of Zions are Zions First National Bank with 94 offices
located throughout the state of Utah and one foreign office, Nevada State Bank
with 25 offices in Nevada, and NBA with eleven offices in Arizona.
In the event the Reorganization is consummated, the shareholders of
Southern Arizona (except dissenting shareholders) will become shareholders of
Zions. The Plan of Reorganization provides that the approximately 1,266,362
outstanding shares of Southern Arizona Common Stock (other than shares subject
to dissenters' rights) will be converted into the right to receive that number
of shares of Zions Common Stock calculated by dividing the Benchmark Price of
$25,330,000 plus certain accretions determined on the Effective Date of the
Reorganization by the Average Closing Price of Zions Common Stock (as defined in
the Plan of Reorganization). If the Unadjusted Average Price (as defined in the
Plan of Reorganization) is less than $59.00, the shareholders of Southern
Arizona will also be entitled to a cash payment.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Position(s) and Offices Presently
Name Age Held with the Company
------------------------ --- ----------------------------------
<S> <C> <C>
Stephen P. Shadle 59 Chairman of the Board of Directors
and Director
John E. Byrd 57 President, Chief Executive Officer
and Director
Donald S. Olsen 59 Secretary and Director
Forrest C. Braden 87 Director
Thomas M. Howell 63 Director
Robert W. Kennerly 65 Director
Jimmy J. Naquin 67 Director
Colleen J. Newman 61 Director
Charles N. Urtuzuastegui 74 Director
</TABLE>
None of the directors of the Company hold other directorships in a
company, or have been nominated or chosen to become a director in a company,
with a class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the
requirements of Section 15(d) of the Exchange Act, or any company registered as
an investment company under the Investment Company Act of 1940.
Stephen P. Shadle has been a Director and the Chairman of the Board
of Directors of the Company since 1985 and a Director and the Chairman of the
Board of Directors of the Bank since 1982. Mr. Shadle, an attorney at law and a
graduate of the University of Iowa Law School, has practiced law with Westover
Law Offices from 1964 to present.
John E. Byrd has been President and Chief Executive Officer of the
Company since 1987 and a Director of the Company since inception of the Company
in 1985. Mr. Byrd has been President and Chief Executive Officer of the Bank
since 1987 and a Director of the Bank since 1982. Prior to joining the Bank, Mr.
Byrd was Vice President and Regional Manager in Yuma, Arizona for First
Interstate Bank, where he had been employed in various capacities since 1962.
Mr. Byrd received a Liberal Arts Degree from the University of Arizona and
graduated from the University of Washington Pacific Coast Banking School.
10
<PAGE> 11
Forrest C. Braden has been a Director of the Company since 1986 and
a Director of the Bank since 1986. Mr. Braden is self-employed in investments,
ranching, and seed distribution.
Thomas M. Howell has been a Director of the Company and of the Bank
since 1987. Mr. Howell has been a self-employed farmer since 1955.
Robert W. Kennerly has been a Director of the Company since 1985 and
a Director of the Bank since 1982. From 1989 until his retirement in 1995, Mr.
Kennerly was the land planning and economic development director for the Cocopah
Indian Tribe.
Jimmy J. Naquin has been a Director of the Company since 1985 and a
Director of the Bank since 1982. Mr. Naquin has been a self-employed farmer
since 1954 and currently is President of Naquin Farms, Inc.
Colleen J. Newman has been a Director of the Company and of the Bank
since 1987. Ms. Newman has been the owner and President of Colleen Newman
Realty, Inc., a real estate brokerage company since October, 1981.
Donald S. Olsen has been a Director and the Secretary of the Company
since 1985 and a Director of the Bank since 1982. Mr. Olsen has owned and
operated Olsen's Market Place Stores since 1975.
Charles N. Urtuzuastegui has been a Director of the Company and of
the Bank since 1994. Mr. Urtuzuastegui has been in the retail business since
1940.
11
<PAGE> 12
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth the compensation received by the
Company's Chief Executive Officer for the last three fiscal years ending
December 31, 1995. No other executive officers of the Company received
compensation in excess of $100,000 during the Company's last three fiscal years,
however, the following table includes an executive officer of the Bank who
received compensation in excess of $100,000 during the Bank's last three fiscal
years. The Company believes that it is appropriate to include such executive
officer because he has performed policy making functions for the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND Annual Compensation All Other
PRINCIPAL POSITION Year Salary($)(1) Bonus($) Compensation($)(2)
- ------------------ ------------------------------------------------------
<S> <C> <C> <C> <C>
John E. Byrd 1995 144,108.66 46,217.00 26,951.06
CEO and President 1994 136,980.00 28,766.00 24,440.09
of the Company 1993 126,740.14 15,294.00 24,973.36
and the Bank
Benny J. Bennight 1995 90,433.92 20,075.00 12,254.82
Executive Vice 1994 87,943.60 15,097.00 16,591.18
President and Chief
Financial Officer of the Bank
</TABLE>
- --------------------
(1) Messrs. Byrd and Bennight also received certain perquisites, the value
of which did not exceed 10% of their cash compensation.
(2) Amounts shown include contributions made by the Company to the Bank's
401(k) Plan (as described herein) and the Bank's Employee Stock
Ownership Plan (as described herein) earned during the year shown. In
addition, amounts shown for Mr. Byrd include directors fees and term
life insurance premiums paid by the Company for the benefit of Mr. Byrd.
The amounts shown for Mr. Byrd do not include a one-time premium of
$384,471.55 paid for a retirement policy for Mr. Byrd, which will be
payable to Mr. Byrd in annual installments upon his retirement from the
Company and the Bank. Such policy was established and the one-time
premium was paid in 1987.
401(K) PROFIT SHARING PLAN
In 1986, the Bank adopted a profit sharing plan pursuant to Section
401(k) (the "401(k) Plan") of the Internal Revenue Code of 1986, as amended (the
"Code"). All full-time and part-time employees of the Bank who have reached 21
years of age and have completed one Year of Service (as defined in the 401(k)
Plan) to the Bank are eligible to participate in the 401(k) Plan.
Pursuant to the 401(k) Plan, all eligible employees may make
elective pre-tax contributions through payroll deductions, which may not exceed
those limitations imposed by law. The 401(k) Plan provides that such
contributions shall vest immediately. The 401(k) Plan further provides that the
Bank shall make an annual contribution equal to one-fourth of one percent of a
participant's compensation if such participant completes a Year of Service in
each Plan Year. In addition, the Bank may make discretionary contributions to
the 401(k) Plan in such amounts as may be determined by the Company. The 401(k)
Plan's Trustees, which consist of four members of the Board of Directors of the
Company, have been designated to hold and invest the Plan's assets for the
benefit of the 401(k) Plan's participants. Contributions to the 401(k) Plan
totalled approximately $89,000, $83,000, and $71,000 for the years ended
December 31, 1995, 1994, and 1993, respectively.
12
<PAGE> 13
EMPLOYEE STOCK OWNERSHIP PLAN
The Bank has sponsored an Employee Stock Ownership Plan (the "Plan")
since 1986. All full-time and part-time employees of the Bank who have reached
21 years of age and have completed one Year of Service (as defined in the Plan)
for the Bank are eligible to participate in the Plan.
The Bank makes voluntary, discretionary contributions to the Plan
each year. The Plan's participants are 100% vested after five Years of Service
to the Bank. Common Stock of the Company held by the Plan is voted by the Plan's
Trustees, which consist of three members of the Board of Directors of the
Company. Contributions to the Plan totaled approximately $54,000, $123,000, and
$128,000 for the years ended December 31, 1995, 1994, and 1993, respectively.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Directors and officers of the Company, members of their immediate
families, and certain affiliates were customers of, and have had transactions
with, the Bank in the ordinary course of business. Similar transactions in the
ordinary course of business may be expected to take place in the future.
All loans to executive officers and directors and members of their
immediate families and certain affiliates were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons and do not involve more than
nominal risk of collectibility or present other unfavorable features. Of the
loans outstanding at December 31, 1995, none were contractually past due 90 days
or more as to principal or interest and none were classified as nonaccrual,
restructured, or potential problem loans.
All ongoing and future transactions with affiliates of the Company
will be on terms no less favorable than could be obtained from unaffiliated
parties. All future loans from the Bank to Company officials, affiliates, and/or
shareholders will be approved by a majority of the disinterested directors of
the Company.
In connection with the Bank's purchase of the land and building at
which the San Luis branch currently operates, the Bank entered into a promissory
note for the sum of $480,000 (the "Promissory Note") in which Charles N.
Urtuzuastegui, as Trustee of the Charles N. Urtuzuastegui and Josephine O.
Urtuzuastegui Trust dated February 22, 1972, has a one-third interest. Mr.
Urtuzuastegui is currently a Director of the Company and the Bank. The principal
of the Promissory Note is payable in annual installments of $120,000 or more.
The interest on the Promissory Note is payable annually and is calculated on the
National Prime Rate on each anniversary date of the Promissory Note.
In connection with the Plan of Reorganization, all of the Company's
shareholder-directors, whose common shareholdings aggregate 24.5% of the
outstanding Common Stock of the Company and who represent approximately 2.4% of
the Company's shareholders of record, have entered into agreements with Zions
under which they have agreed, in their capacity as shareholders, to vote their
shares in favor of the Plan of Reorganization and to support the Plan of
Reorganization and to recommend its adoption by the other shareholders of the
Company. The shareholder-directors have also agreed in their capacity as
directors, until the earlier of the consummation of the Reorganization or the
termination of the Plan of Reorganization, to refrain from soliciting or,
subject to their fiduciary duties to shareholders and to Section 7.8 of the Plan
of Reorganization, negotiating or accepting any offer of merger, consolidation,
or acquisition of any of the shares or substantially all of the assets of the
Company or the Bank. See "Security Ownership of Certain Beneficial Owners and
Management-Changes in Control" for additional information concerning the Plan of
Reorganization.
The Plan of Reorganization provides that after the Reorganization
becomes effective, NBA will employ John E. Byrd, currently president and chief
executive officer of the Company and the Bank, pursuant to a three-year
agreement as an executive vice president of NBA. The agreement provides that Mr.
Byrd will receive an initial annual salary substantially the same as his current
annual salary with the Company, will be considered annually for a discretionary
bonus, based upon the financial performance of NBA and upon individual
performance factors (the
13
<PAGE> 14
target level for the bonus being 25% - 35% of his then current salary), and will
be entitled to other benefits normally afforded executive employees, including
participation in employee benefit and stock option plans, an automobile
allowance, country club membership, retirement and life insurance policies, and
consideration for periodic raises or bonuses, based upon performance and
responsibility. NBA will also continue to maintain a term life insurance policy
on the life of Mr. Byrd and will pay all the premiums therefor. The policy will
be owned by Mr. Byrd and will provide for the payment of death benefits to his
estate.
The employment agreement provides for severance benefits for Mr.
Byrd upon the termination of his employment agreement for reasons other than his
death or disability or "for cause" (as defined in his employment agreement). In
the event of termination for reasons other than set forth in the preceding
sentence, Mr. Byrd shall receive (i) salary payable (as defined in the
employment agreement) for a period commencing on the date immediately following
the termination date and ending upon the third anniversary of the effective date
of the employment agreement and (ii) such benefits as Mr. Byrd has accrued under
NBA's Value Sharing Plan, Incentive Stock Option Plan and employee benefit
plans, reimbursement for expenses accrued as of the date of termination of his
employment, and the right to receive the cash equivalent of paid annual leave
and sick leave accrued as of the date of termination of his employment.
Under his employment agreement, Mr. Byrd has agreed that he will not
for a period of five years from the effective date of the employment agreement
(i) engage in the banking business within Yuma County, Arizona other than on
behalf of NBA or affiliated companies, (ii) own or operate any entity engaged in
the banking business within Yuma County, Arizona other than NBA or affiliated
companies, or (iii) solicit or intentionally cause an officer, director or
employee of NBA to engage in the banking business or own or operate an entity
engaged in the banking business in Yuma County, Arizona. In consideration of
such five-year covenant not to compete, Mr. Byrd will receive a one-time cash
payment of $250,000.
ITEM 8. LEGAL PROCEEDINGS
None.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's Common Stock is not listed with a national securities
exchange or quoted on any automated quotation system. No established public
trading market for the Company's Common Stock presently exists and the private
market that has existed is thin and not necessarily indicative of the value of
the Company's Common Stock. There were no trades in the Company's Common Stock
in the fourth quarter of 1995 and the first quarter of 1996 and one trade since
the date of the public announcement of the Plan of Reorganization on January 17,
1996. The following table sets forth the high and low prices for the Company's
Common Stock during the calendar quarters shown below, through May 8, 1996, of
which the Company is aware, and the cash dividends per share declared on the
Company's Common Stock for such periods.
14
<PAGE> 15
<TABLE>
<CAPTION>
Sales Prices Cash
------------ Dividends
High Low Declared
---- --- ---------
<C> <C> <C> <C>
1994 First Quarter.................. $ 9.00 $ 7.62 $ --
Second Quarter................. 9.00 9.00 --
Third Quarter.................. 9.50 9.00 --
Fourth Quarter................. 10.50 10.00 .30
-----
$ .30
=====
1995 First Quarter.................. $15.00 $11.00 $ --
Second Quarter................. 12.50 12.50 --
Third Quarter.................. 15.00 14.00 --
Fourth Quarter................. NO SALES NO SALES .36
-----
$ .36
=====
1996 First Quarter.................. 20.00 20.00 --
Second Quarter
(through May 8, 1996)....... NO SALES NO SALES --
</TABLE>
Based upon information available to the management of the Company,
it appears that during the years ended December 31, 1994 and 1995, a total of
159,869 shares and 169,424 shares, respectively, of the Company's Common Stock
were traded (some of which may not have effected changes in the beneficial
ownership of the shares transferred). Additionally, a total of 105 shares of the
Company's Common Stock were traded since January 1, 1996. The foregoing table
may not accurately reflect the full trading range of the Company's Common Stock
during the periods indicated because other transactions may have occurred during
such periods, the terms of which were not conveyed to management. Additionally,
the Company's books and records do not reflect trading prices. Other than with
respect to trades involving officers and directors and trades for which
management may have received information relating to prices, the Company has no
mechanism by which to reconstruct information relating to the per share market
price at which its shares have historically traded.
None of the Company's Common Stock (i) is subject to outstanding
options or warrants to purchase nor are there any securities convertible into
the Company's Common Stock, (ii) is subject to sale pursuant to Rule 144 under
the Securities Act nor has the Company agreed to register any shares of its
Common Stock under the Securities Act for sale by its security-holders, (iii) is
being or is proposed to be publicly offered by the Company. The holders of the
Company's Common Stock are entitled to receive dividends when, as, and if
declared by the Board of Directors of the Company out of funds legally available
therefor. The Company's ability to pay dividends is governed by Arizona law.
Generally, Arizona law prohibits corporations from paying dividends when after
giving the dividend effect, the corporation would not be able to pay its debts
as they become due in the usual course of business or the corporation's total
assets would be less than the sum of its total liabilities plus the amount that
would be needed if the corporation were to be dissolved at the time of the
distribution to satisfy the preferential rights on dissolution of shareholders
whose preferential rights are superior to those receiving the distribution. The
Company's articles provide that the Company's Board of Directors may, from time
to time, distribute dividends out of the capital surplus of the Company.
The Bank is subject to certain limitations on the amount of cash
dividends that it can pay. Arizona law allows the board of directors of a bank
to declare dividends as permitted by the laws governing Arizona corporations,
except that dividends payable other than in the bank's own stock may be paid out
of capital surplus only with the approval of the Arizona Superintendent of
Banks. Additionally, the prior approval of the Board of Governors of the Federal
Reserve System (herein, the "Board") is required if the total of all cash
dividends declared by a state-chartered member bank, such as the Bank, in any
calendar year will exceed the total of such bank's net profits (as defined by
statute) for that year combined with its retained net profits for the preceding
two calendar
15
<PAGE> 16
years less any required transfers to surplus. In addition, the Board is
authorized to determine under certain circumstances relating to the financial
condition of a state-chartered member bank that the payment of dividends would
be an unsafe and unsound practice and to prohibit payment thereof.
Under FDICIA, all insured banks are generally prohibited from making
any capital distributions and from paying management fees to persons having
control of the bank where such payments would cause the bank to be
undercapitalized. Holding companies of undercapitalized banks may be required to
obtain the approval of the Federal Reserve Board before making capital
distributions to their shareholders.
On May 17, 1996, the Company had approximately 500 shareholders,
based upon the number of shareholders of record. At such date, 1,266,362 shares
of the Company's Common Stock were outstanding.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
On June 11, 1993, the Company offered for sale $2,500,000 principal
amount of 8.75% Senior Notes (the "Notes") payable on July 1, 2000. The Company
sold the Notes for cash through its registered broker, Peacock, Hislop, Staley &
Given, Inc., who solicited the Notes on a "best efforts" basis. The Notes were
offered for sale by the Company in reliance upon an exemption from registration
provided by Section 3(a)(11) of the Securities Act of 1933, as amended, and
pursuant to registration in the State of Arizona only. Sales of the Notes were
made only to qualified prospective investors residing in the State of Arizona.
The Company intends to prepay the Notes on or about May 27, 1996 with the
proceeds of a loan from Zions Bancorporation.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The Company's authorized capital stock consists of 2,000,000 shares
of Common Stock, no par value ("Common Stock"). Prior to the filing of this Form
10, there were outstanding 1,266,362 shares of Common Stock. All of the
currently outstanding shares of Common Stock are validly issued, fully paid, and
nonassessable. At April 17, 1996, there were approximately 500 shareholders of
record of the Company's Common Stock.
The holders of Common Stock are generally entitled to one vote for
each share on all matters submitted to a vote of shareholders. In elections of
directors, Arizona law requires cumulative voting, which means that each
shareholder may cast the number of votes as is equal to the number of shares
held of record, multiplied by the number of directors to be elected. Each
shareholder may cast the whole number of votes for one candidate or distribute
such votes among two or more candidates. The Company's Articles of Incorporation
require the affirmative vote of at least two-thirds of the holders of Common
Stock and the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Common Stock for shareholder approval of a merger,
consolidation or sale of substantially all of the assets of the Company. In
addition, the Company's Articles of Incorporation provide that shareholder
approval for an amendment to the Company's Articles of Incorporation requires
the affirmative vote of three-fourths of the holders of Common Stock and
shareholder approval for an increase in the maximum number of directors requires
a vote of four-fifths of the holders of Common Stock.
The holders of Common Stock are entitled to receive dividends, if
any, as may be declared by the Company's Board of Directors from time to time
out of legally available funds. See "Market Price of and Dividends on the
Registrant's Common Equity and Related Stockholder Matters" for additional
information concerning dividends of the Company.
Upon liquidation, dissolution, or winding up of the Company, the
holders of Common Stock will be entitled to share ratably in all assets of the
Company that are legally available for distribution, after payment of all debts
and other liabilities of the Company. The holders of Common Stock have no
preemptive, subscription, redemption, or conversion rights.
Although the Company currently does not have any restrictions on the
alienability of Common Stock, the Company's Articles of Incorporation provide
that the Company has the right to impose restrictions on the
16
<PAGE> 17
transfer of Common Stock provided that such restrictions, or notice of such
restrictions, shall be set forth on the Common Stock certificates representing
such shares of stock.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Arizona Business Corporation Act (the "Business Corporation Act")
provides that the Company's Articles of Incorporation may eliminate or limit the
liability of directors to the company or its shareholders for money damages for
any action taken or any failure to take any action as a director, except
liability for (a) the amount of a financial benefit received by the director to
which the director is not entitled; (b) an intentional infliction of harm on the
Company or its shareholders; (c) certain unlawful distributions to shareholders;
and (d) an intentional violation of criminal law. The effect of this provision
is to limit or eliminate the rights of the Company and its shareholders (through
shareholders' derivative suits on behalf of the Company) to recover money
damages from a director for all actions or omissions as a director (including
breaches resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (a) through (d) above. This provision does not
limit or eliminate the rights of the Company or any shareholder to seek
non-monetary relief, such as an injunction or rescission, in the event of a
breach of a director's duty of care. The Company's Articles of Incorporation do
not set forth such a provision eliminating or limiting director liability.
Under the Business Corporation Act, indemnification is mandatory with
respect to directors in all circumstances in which indemnification is permitted
by the Business Corporation Act, subject to the requirements of the Business
Corporation Act. In addition, the Company may, in its sole discretion, indemnify
and advance expenses, to the fullest extent allowed by the Business Corporation
Act, to any person who incurs liability or expense by reason of such person
acting as an officer, employee, or agent of the Company, except where
indemnification is mandatory pursuant to the Business Corporation Act, in which
case the Company is required to indemnify to the fullest extent required by the
Business Corporation Act.
The Company's Bylaws provide indemnification for any director or
officer of the Company for expenses actually incurred in connection with any
action, suit or proceeding to which such director, officer or employee of the
Company is a party or is threatened to be a party as a result of his or her
being a director, officer or employee of the Company or of any firm,
corporation, or organization which he or she served in any such capacity at the
request of the Company. Such indemnification shall be against expenses,
judgments, fines and amounts paid in settlement actually and reasonably
believed to be in the best interests of the Company, and, with respect to A
criminal action or proceeding for which the director of officer has no
reasonable cause to believe his or her conduct was unlawful. In addition, the
Company's officers and directors shall be indemnified for expenses actually
and reasonably incurred by him or her in connection with an action or suit by
or in the right of the Company to procure a judgement in its favor by reason of
the fact that such director or officer is or was an authorized representative
of the Company.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the financial statements, the report thereon,
the notes thereto and the supplementary data commencing at page F-1 of this
report, which financial statements, report, notes and data are incorporated by
reference.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On September 28, 1994, Deloitte & Touche LLP ("Deloitte & Touche")
resigned as auditors of the Company and the Bank. Deloitte & Touche's
resignation was not a result of disagreement between Deloitte & Touche and
either the Company or the Bank. Additionally, such resignation did not reflect
upon the integrity of the Company's or the Bank's management or directors, their
financial condition or their accounting policies or practices.
17
<PAGE> 18
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORTS F-3
AUDITED FINANCIAL STATEMENTS
Consolidated Balance Sheets F-5
Consolidated Statements of Income F-6
Consolidated Statements of Stockholders' Equity F-7
Consolidated Statements of Cash Flows F-8
Notes to Consolidated Financial Statements F-10
UNAUDITED FINANCIAL STATEMENTS FOR
THE THREE MONTHS ENDED MARCH 31, 1996
Consolidated Balance Sheets F-31
Consolidated Statements of Income F-32
Consolidated Statements of Cash Flows F-33
Notes to Consolidated Financial Statements F-34
EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
2.1 Agreement and Plan of Reorganization dated January 17, 1996
3.1 Articles of Incorporation of the Company
3.2 Bylaws of the Company
10.1 Form of 401(k) Profit Sharing Plan
10.2 Form of Employee Stock Ownership Plan
10.3 $480,000 Promissory Note dated October 24, 1994 in favor of Joe
Urtuzuastegui, Frank L. Urtuzuastegui, Connie V. Urtuzuastegui and
Charles N. Urtuzuastegui
10.4 Lease agreement between the Bank and Two Yuma Partners
10.5 Lease agreement and addendums between the Bank and Henry Schechert,
Trustee of the Schechert Trust
10.6 Note and Agency Agreement between the Company and PHS Mortgage, Inc.
dated July 15, 1993
10.7 Loan Agreement, between the Company and Zions dated April 23, 1996
10.8 First Amendment to Loan Agreement between the Company and Zions
dated May 7, 1996
10.9 Agreement to Merge dated as of May 21, 1996 by and between Southern
Arizona Bank and National Bank of Arizona
10.10 Agreement to Merge dated as of May 21, 1996 by and between Zions
Bancorporation and Southern Arizona Bancorp
16 Letter regarding change in certifying accountants
21 Subsidiary of the Company
</TABLE>
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized.
Southern Arizona Bancorp, Inc.
-------------------------------------
Registrant
Date:May 23, 1996 By: /s/John E. Byrd
------------- --------------------------------
John E. Byrd
President, Chief Executive Officer and Director
<PAGE> 20
SOUTHERN ARIZONA BANCORP, INC.
FINANCIAL REPORT
DECEMBER 31, 1995
F-1
<PAGE> 21
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT F-3
FINANCIAL STATEMENTS
Consolidated balance sheets F-5
Consolidated statements of income F-6
Consolidated statements of stockholders' equity F-7
Consolidated statements of cash flows F-8
Notes to consolidated financial statements F-10
</TABLE>
F-2
<PAGE> 22
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Southern Arizona Bancorp, Inc.
and Subsidiary
Yuma, Arizona
We have audited the accompanying consolidated balance sheet of Southern
Arizona Bancorp, Inc. and Subsidiary as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity and cash flows
for the years then ended. These financial statements are the responsibility of
the Bancorp's management. Our responsibility is to express an opinion on these
financial statements based on our audits. The statements of income,
stockholders' equity and cash flows of Southern Arizona Bancorp, Inc. for the
year ended December 31, 1993 were audited by other auditors whose report, dated
January 21, 1994, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 1995 and 1994 consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Southern Arizona Bancorp, Inc. and Subsidiary as of December 31,
1995 and 1994 and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen LLP
Phoenix, Arizona
January 24, 1996
F-3
<PAGE> 23
INDEPENDENT AUDITORS' REPORT
Stockholders and Board of Directors
Southern Arizona Bancorp, Inc.
Yuma, Arizona
We have audited the accompanying consolidated statement of income,
stockholders' equity and cash flows of Southern Arizona Bancorp, Inc. and
Subsidiary for the year ended December 31, 1993. These financial statements are
the responsibility of the Bancorp's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the results of operations and cash flows of Southern
Arizona Bancorp, Inc. and Subsidiary for the year ended December 31, 1993 in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
January 21, 1996
F-4
<PAGE> 24
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks (Note 2) $ 7,701,102 $ 6,459,750
Interest bearing deposits in financial institutions 594,000 297,000
Federal funds sold 25,194,000 1,536,000
Securities (Note 3)
Held to maturity (fair value 1995 $499,400; 1994 $250,850) 498,687 251,283
Available for sale securities 1,388,183 7,420,906
Loans, net of allowance for credit losses 1995 $2,466,513;
1994 $2,393,242 (Notes 4 and 10) 84,532,153 79,646,615
Loans held for sale (Note 4) 1,052,814 1,042,370
Bank premises and equipment, net (Notes 5 and 8) 4,129,523 2,398,755
Accrued interest receivable 537,524 557,000
Deferred income taxes (Note 7) 973,755 871,544
Other assets 816,152 773,198
-------------------------------
$127,417,893 $101,254,421
===============================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest bearing demand $ 34,453,718 $ 26,290,478
Interest bearing:
NOW accounts 24,362,291 21,412,280
Savings 8,158,478 7,666,686
Time certificates $100,000 and over (Note 6) 13,140,246 8,501,417
Time certificates under $100,000 34,647,097 27,334,523
-------------------------------
114,761,830 91,205,384
Accrued interest payable and other liabilities 817,687 265,338
Senior notes payable (Note 8) 2,500,000 2,500,000
Other note payable (Note 8) 480,000 ---
-------------------------------
118,559,517 93,970,722
-------------------------------
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY (Notes 9 and 12)
Common stock, no par value, authorized 2,000,000 shares;
issued and outstanding, 1,266,362 shares 2,483,013 2,483,013
Retained earnings 6,336,125 4,793,010
Unrealized gain on securities available for sale, net 39,238 7,676
-------------------------------
8,858,376 7,283,699
-------------------------------
$127,417,893 $101,254,421
===============================
</TABLE>
See Accompanying Notes to Consolidated Statements
F-5
<PAGE> 25
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
- --------------------------------------------------------------------------------------------------------------------
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
Interest income:
Loans $ 9,045,120 7,344,146 $ 6,165,863
Securities:
U.S. Government agencies 447,475 368,123 375,069
Other investments 207,524 215,795 333,811
Federal funds sold 492,948 188,978 132,770
-----------------------------------------------
10,193,067 8,117,042 7,007,513
Interest expense (Note 11) 3,151,424 2,067,786 1,845,403
-----------------------------------------------
NET INTEREST INCOME 7,041,643 6,049,256 5,162,110
Provision for loan losses (Note 4) 401,000 429,000 755,500
-----------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 6,640,643 5,620,256 4,406,610
-----------------------------------------------
Other income:
Customer service fees 728,028 591,464 487,990
Gain on sale of loans and investments 446,715 513,741 882,406
Other income 105,841 115,536 23,135
-----------------------------------------------
1,280,584 1,220,741 1,393,531
-----------------------------------------------
Other expenses:
Salaries and employee benefits 2,453,244 2,203,215 1,859,691
Occupancy (Note 9) 294,023 271,317 216,013
Equipment expenses 361,207 308,707 228,098
Supplies and services 773,413 723,570 653,548
Other 817,763 781,810 870,461
-----------------------------------------------
4,699,650 4,288,619 3,827,811
-----------------------------------------------
INCOME BEFORE INCOME TAXES 3,221,577 2,552,378 1,972,330
Income taxes (Note 7) 1,222,570 920,164 681,179
-----------------------------------------------
NET INCOME $ 1,999,007 $ 1,632,214 $ 1,291,151
===============================================
Net earnings per share $ 1.58 $ 1.29 $ 1.02
===============================================
Common shares outstanding 1,266,362 1,266,362 1,266,362
===============================================
</TABLE>
See Accompanying Notes to Consolidated Statements
F-6
<PAGE> 26
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
- -----------------------------------------------------------------------------------------------------------
Unrealized gain on
Retained securities available
Common stock earnings for sale, net Total
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1992 $2,483,013 $2,553,477 $ - $5,036,490
Cash dividend - (303,927) - (303,927)
Net income - 1,291,151 - 1,291,151
----------------------------------------------------------------
Balance, December 31, 1993 2,483,013 3,540,701 - 6,023,714
Cash dividend - (379,905) - (379,905)
Net income - 1,632,214 - 1,632,214
Net change in unrealized gain on
securities available for sale - - 7,676 7,676
----------------------------------------------------------------
Balance, December 31, 1994 2,483,013 4,793,010 7,676 7,283,699
Cash dividend - (455,892) - (455,892)
Net income - 1,999,007 - 1,999,007
Net change in unrealized gain on
securities available for sale - - 31,562 31,562
----------------------------------------------------------------
Balance, December 31, 1995 $2,483,013 $6,336,125 $39,238 $8,858,376
================================================================
</TABLE>
See Accompanying Notes to Consolidated Statements
F-7
<PAGE> 27
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
- -------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
----------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,999,007 $ 1,632,214 $ 1,291,151
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 344,893 295,399 207,372
Provision for loan losses 401,000 429,000 755,500
Amortization of premium (259,859) (59,937) (174,007)
Origination of loans available for sale (21,786,419) (19,737,152) (27,089,894)
Proceeds from sale of loans available for sale 21,775,975 20,208,926 27,305,470
Deferred income tax benefit (102,211) (155,030) (286,167)
Gain on sale of securities available for sale (90,014) (156,474) (387,612)
Change in assets and liabilities:
Accrued income receivable and other assets (23,478) 14,789 66,318
Accrued interest payable and other liabilities 552,349 (120,147) (126,693)
----------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,811,243 2,351,588 1,561,438
----------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Maturities of securities held to maturity 250,000 - -
Purchase of securities held to maturity (489,639) (260,938) -
Purchase of interest bearing deposit in financial institutions (1,980,000) (2,082,000) -
Maturities of interest bearing deposit in financial institutions 1,683,000 2,869,000 -
Purchase of securities available for sale (11,341,297) (14,351,783) (21,312,774)
Proceeds from maturities of securities available for sale 15,500,000 19,250,000 14,000,000
Proceeds from sale of securities available for sale 2,247,690 1,466,338 8,085,700
(Increase) decrease in federal funds sold (23,658,000) 886,000 896,000
Loans made to customers, net (5,286,538) (16,442,363) (11,730,805)
Purchase of bank premises and equipment (2,075,661) (705,645) (402,492)
----------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (25,150,445) (9,371,391) (10,464,371)
----------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 23,556,446 8,889,090 5,880,880
Dividends paid (455,892) (379,905) (303,927)
Proceeds from issuance of other notes payable 480,000 - 2,500,000
Cost of issuing senior notes payable - - (153,515)
----------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 23,580,554 8,509,185 7,923,438
----------------------------------------------------
INCREASE (DECREASE) IN CASH AN DUE FROM BANKS 1,241,352 1,489,382 (979,495)
Cash and due from banks:
Beginning 6,459,750 4,970,368 5,949,863
----------------------------------------------------
Ending $ 7,701,102 $ 6,459,750 $ 4,970,368
====================================================
</TABLE>
F-8
<PAGE> 28
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- ---------------------------------------------------------------------------------------------------------------
1995 1994 1993
--------------------------------------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash payments for:
Interest paid to depositors $2,756,010 $1,789,401 $1,758,500
============================================
Interest paid on senior notes payable $ 218,750 $ 210,243 $ -
============================================
Income taxes paid $1,337,145 $1,198,800 $1,234,500
============================================
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING ACTIVITIES
Unrealized gain on securities available for sale, net $ 31,562 $ 7,676 $ -
============================================
Land acquired in exchange for other note payable $ 480,000 $ - $ -
============================================
</TABLE>
See Accompanying Notes to Consolidated Statements
F-9
<PAGE> 29
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 1. NATURE OF BANKING ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BANKING ACTIVITIES:
Southern Arizona Bancorp, Inc. (the Bancorp) is a holding company which owns
100% of the stock of Southern Arizona Bank (the Bank). The Bank provides a full
range of banking service to its commercial, SBA, residential, agricultural and
consumer customers through its facilities located in Yuma, Arizona.
The Bank grants commercial, residential and consumer loans to customers located
primarily in southern Arizona. The loan portfolio includes a significant credit
exposure to the real estate industry of this area. As of December 31, 1995,
loans with real estate as collateral accounted for approximately 54.9% of total
loans. Substantially all of these loans are secured by first liens with an
initial loan to value ratio of generally not more than 60%.
The loans are expected to be repaid from cash flows or proceeds from the sale of
selected assets of the borrowers. The Bank's policy requires that collateral be
obtained on substantially all loans. Such collateral is primarily first trust
deeds on property.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent asset and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
BASIS OF CONSOLIDATION:
The consolidated financial statements include all the accounts of the Bancorp
and the Bank. All material intercompany accounts and transactions have been
eliminated.
EARNINGS PER SHARE:
Earnings per share are computed using the weighted average method. The effect of
stock options on earnings per share was not material.
CASH AND CASH EQUIVALENTS:
For purposes of reporting cash flows, cash and cash equivalents includes cash on
hand, amounts due from banks (including cash items in process of clearing). Cash
flows from loans originated by the Bank, deposits, and federal funds purchased
are reported net.
The Bank maintains amounts due from banks which, at times, may exceed federally
insured limits. The bank has not experienced any losses in such accounts.
F-10
<PAGE> 30
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 1. NATURE OF BANKING ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
HELD TO MATURITY SECURITIES:
Securities classified as held to maturity are those debt securities the Bank has
both the intent and ability to hold to maturity regardless of changes in market
conditions, liquidity needs or changes in general economic conditions. These
securities are carried at cost adjusted for amortization of premium and
accretion of discount, computed by the interest method over their contractual
lives.
The sale of a security within three months of maturity date or after at least 85
percent of the principal outstanding has been collected is considered a maturity
for purposes of classification and disclosure.
AVAILABLE FOR SALE SECURITIES:
Securities classified as available for sale are those debt securities that the
Bank intends to hold for an indefinite period of time, but not necessarily to
maturity. Any decision to sell a security classified as available for sale would
be based on various factors, including significant movements in interest rates,
changes in the maturity mix of the Bank's assets and liabilities, liquidity
needs, regulatory capital considerations, and other similar factors. Securities
available for sale are carried at fair value. Unrealized gains or losses are
reported as increases or decreases in stockholders' equity, net of the related
deferred tax effect. Realized gains or losses, determined on the basis of the
cost of specific securities sold, are included in earnings.
TRANSFERS:
Transfers of debt securities into the held-to-maturity classification from the
available-for-sale classification are made at fair value on the date of
transfer. The unrealized holding gains or losses on the date of transfer are
retained as a separate component of stockholders' equity and in the carrying
value of the held-to-maturity securities. Such amounts are amortized over the
remaining contractual lives of the securities by the interest method.
LOANS:
Loans are stated at the amount of unpaid principal, reduced by net deferred loan
costs and an allowance for possible loan losses.
The allowance for credit losses is established through a provision for credit
losses charged to expense. Loans are charged against the allowance for credit
losses when management believes that collectibility of the principal is
unlikely. The allowance is an amount that management believes will be adequate
to absorb estimated losses on existing loans that may become uncollectible,
based on evaluation of the collectibility of loans and prior loan loss
experience. This evaluation also takes into consideration such factors as
changes in the nature and volume of the loan portfolio, overall portfolio
quality, review of specific problem loans, and current economic conditions that
may affect the borrower's ability to pay. While management uses the best
information available to make its evaluation, future adjustments to the
allowance may be necessary if there are significant changes in economic or other
conditions. In addition, the Federal Deposit Insurance Corporation (FDIC), as an
integral part of their examination process, periodically reviews the Bank's
allowance for credit losses, and may require the Bank to make additions to the
allowance based on their judgment about information available for them at the
time of their examinations.
F-11
<PAGE> 31
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 1. NATURE OF BANKING ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Impaired loans are measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. A loan is impaired when it is
probable the creditor will be unable to collect all contractual principal and
interest payments due in accordance with the terms of the loan agreement.
INTEREST AND FEES ON LOANS:
Interest on loans is recognized over the terms of the loans and is calculated on
principal amounts outstanding. The accrual of interest on impaired loans is
discontinued when, in management's opinion, the borrower may be unable to meet
payments as they become due. When interest accrual is discontinued, all unpaid
accrued interest is reversed. Interest income is subsequently recognized only to
the extent cash payments are received.
Loan origination and commitment fees and certain direct loan origination costs
are deferred and the net amount amortized as an adjustment of the related loan's
yield. The Bank is generally amortizing these amounts over the contractual life.
SALES OF LOANS:
The Bank sells loans to provide funds for additional lending and to generate
servicing income. Under such agreement, the Bank may continue to service the
loans with the buyer receiving the principal collected together with interest.
Loans held for sale are valued at the lower of cost or market value.
Gains and losses on sales are recognized at the time of sale are calculated
based on the difference between the selling price and the book value of loans
sold. Any inherent risk of loss on loans sold is transferred to the buyer at the
date of sale.
OTHER REAL ESTATE OWNED:
Other real estate owned (OREO) represents properties acquired through
foreclosure or other proceedings. OREO is held for sale and is recorded at the
lower of the recorded amount of the loan or fair value of the properties less
estimated costs of disposal. Any write-down to fair value at the time of
transfer to OREO is charged to the allowance for loan losses. Property is
evaluated regularly to ensure the recorded amount is supported by its current
fair value and valuation allowances to reduce the carrying amounts to fair value
less estimated costs to dispose. Depreciation is recorded based on the recorded
amount of depreciable assets after they have been owned for one year.
Depreciation and additions to or reductions from valuation allowances are
recorded in income.
F-12
<PAGE> 32
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 1. NATURE OF BANKING ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
BANK PREMISES AND EQUIPMENT:
Bank premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally by the straight-line method over the
following estimated useful lives:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Furniture, fixtures, and equipment 3 - 25
Building and improvements 30
</TABLE>
INCOME TAXES:
The Bank files its income tax return on a consolidated basis. Deferred taxes are
provided on a liability method whereby deferred tax assets are recognized for
deductible temporary differences and operating loss and tax credit carryforwards
and deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets
and liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
Effective January 1, 1995, the Bank adopted FASB Statement No. 107, Disclosures
About Fair Value of Financial Instruments, which requires disclosure of fair
value information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value.
Management uses its best judgment in estimating the fair value of the Bank's
financial instruments; however, there are inherent weaknesses in any estimation
technique. Therefore, for substantially all financial instruments, the fair
value estimates presented herein are not necessarily indicative of the amounts
the Bank could have realized in a sales transaction at December 31, 1995. The
estimated fair value amounts for 1995 have been measured as of year end, and
have not been reevaluated or updated for purposes of these financial statements
subsequent to that date. As such, the estimated fair values of these financial
instruments subsequent to the reporting date may be different than the amounts
reported at each year end.
This disclosure of fair value amounts does not include the fair values of any
intangibles, including core deposit intangibles.
Due to the wide range of valuation techniques and the degree of subjectivity
used in making the estimate, comparisons between the Bank's disclosures and
those of the banks may not be meaningful.
F-13
<PAGE> 33
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 1. NATURE OF BANKING ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
The following methods and assumptions were used by the Bank in estimating the
fair value of its financial instruments:
Cash and short-term instruments: The carrying amounts reported in the
balance sheet for cash and due from banks, interest bearing deposits and
federal funds sold approximate their fair values.
Securities: Carrying amounts approximate fair values for securities
available for sale. Fair values for securities held to maturity are based on
quoted market prices.
Loans: For variable-rate loans that reprice frequently and that have
experienced no significant change in credit risk, fair values are based on
carrying values. At December 31, 1995, variable rate loans comprised
approximately 71% of the loan portfolio. Fair values for all other loans are
estimated based on discounted cash flows, using interest rates currently
being offered for loans with similar terms to borrowers with similar credit
quality. Prepayments prior to the repricing date are not expected to be
significant. Loans are expected to be held to maturity and any unrealized
gains or losses are not expected to be realized.
Loans held for sale: Fair value of loans held for sale are estimated based
upon the subsequent selling price.
Off-balance sheet instruments: Fair values of off-balance sheet instruments
are not considered material.
Deposit liabilities: Fair values disclosed for demand deposits equal their
carrying amounts, which represent the amount payable on demand. The carrying
amounts for variable-rate money market accounts and certificates of deposit
approximate their fair values at the reporting date. Fair values for
fixed-rate certificates of deposit are estimated using a discounted cash
flow calculation that applies interest rates currently being offered on
certificates to a schedule of aggregate expected monthly maturities on time
deposits. Early withdrawals of fixed-rate certificates of deposit are not
expected to be significant.
Accrued interest receivable and payable: The fair values of both accrued
interest receivable and payable approximate their carrying amounts.
ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN:
On January 1, 1995, the Bank adopted Financial Accounting Standards Board (FASB)
Statement No. 114, Accounting by Creditors for Impairment of a Loan, as amended
by FASB Statement No. 118, Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures. There was no effect on the Bank's financial
statements for this change, which generally requires impaired loans to be
measured on the present value of expected future cash flows discounted at the
loan's effective interest rate, or as an expedient at the loan's observable
market price or the fair value of the collateral if the loan is collateral
dependent. A loan is impaired when it is probable the creditor will be unable to
collect all contractual principal and interest payments due in accordance with
the terms of the loan agreement. At January 1, 1995, the Bank has classified
$1,313,529 of its loans as impaired with a specific loss reserve of $387,000.
F-14
<PAGE> 34
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 1. NATURE OF BANKING ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE
DISPOSED OF:
In March 1995, the FASB issued Statement No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of. Statement No.
121 establishes accounting standard for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles to
be disposed of. Statement No. 121 will first be required for the Bank's year
ending December 31, 1996. Based on its preliminary analysis, the Bank does not
anticipate that the adoption of Statement No. 121 will have a material impact on
the financial statements as of the date of adoption.
ACCOUNTING FOR MORTGAGE SERVICING RIGHTS:
In May 1995, the FASB issued Statement No. 122, Accounting for Mortgage
Servicing Rights an Amendment of Financial Accounting Standards Board Statement
No. 65. Statement No. 122 requires a mortgage banking enterprise to recognize as
separate assets, rights to service mortgage loans for others, whenever those
servicing rights are acquired. Statement No. 122 will first be required for the
Bank's year ending December 31, 1996. The Bank has not addressed the potential
future impact of the application of this Statement.
ACCOUNTING FOR STOCK-BASED COMPENSATION:
In October 1995, the FASB issued Statement No. 123, Accounting for Stock-Based
Compensation. Statement No. 123 establishes financial accounting and reporting
standards for stock-based employee compensation plans such as a stock purchase
plan. The statement generally suggests, but does not require, stock-based
compensation transactions be accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. An enterprise may continue to follow the
requirements of Accounting Principles Board (APB) Opinion No. 25, which does not
require compensation to be reported if the consideration to be received is at
least equal to its fair value at the measurement date. If an enterprise elects
to follow APB Opinion No. 25, it must disclose the proforma effects on net
income as if the compensation were measured in accordance with the guidelines of
Statement No. 123. The Bank has not determined if it will continue to follow APB
Opinion No. 25 or follow the guidance of Statement No. 123. However, if adopted
in 1996, this pronouncement is not expected to have a material impact on the
financial statements.
NOTE 2. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Bank is required to maintain reserve balances with Federal Reserve Banks.
The total of those reserve balances were approximately $51,000 and $63,000 at
December 31, 1995 and 1994, respectively.
F-15
<PAGE> 35
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 3. SECURITIES
Carrying amounts and approximate fair values of securities held to maturity as
of December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1995
-------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Approximate
Cost gains losses fair value
-------------------------------------------------------
<S> <C> <C> <C> <C>
United States Treasury Security $498,687 $ 713 $ - $499,400
=====================================================
<CAPTION>
1994
-------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Approximate
Cost gains losses fair value
------------------------------------------------------
<S> <C> <C> <C> <C>
United States Treasury Security $251,283 $ - $ 433 $250,850
=====================================================
</TABLE>
The amortized cost and fair value of securities being held to maturity as of
December 31, 1995 by contractual maturity are shown below.
<TABLE>
<CAPTION>
Amortized Approximate
Cost fair value
---------------------------
<S> <C> <C>
Due in one year or less $498,687 $499,400
==========================
</TABLE>
Carrying amounts and approximate fair values of investment securities available
for sale as of December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1995
---------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Approximate
Cost gains losses fair value
---------------------------------------------------------
<S> <C> <C> <C> <C>
United States Treasury Securities $ 798,204 $17,166 $ - $ 815,370
Obligations of states and political
subdivisions $ 524,583 $48,230 $ - 572,813
-------------------------------------------------------
$1,322,787 $65,396 $ - $1,388,183
=======================================================
</TABLE>
F-16
<PAGE> 36
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 3. SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
1994
--------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Approximate
Cost gains losses fair value
--------------------------------------------------------
<S> <C> <C> <C> <C>
United States Treasury Securities $4,723,062 $ 7,886 $(22,818) $4,708,130
Obligations of states and political
subdivisions 2,685,050 66,091 (38,365) 2,712,776
-------------------------------------------------------
$7,408,112 $73,977 $(61,183) 7,420,906
=======================================================
</TABLE>
The amortized cost and approximate fair value of investment securities available
for sale as of December 31, 1995 by contractual maturity are shown below.
<TABLE>
<CAPTION>
Amortized Approximate
Cost fair value
--------------------------
<S> <C> <C>
Due in one year or less $ 300,110 $ 301,770
Due after one year through five years 498,094 513,600
Due after five years through ten years 524,583 572,813
-------------------------
$1,322,787 $1,388,183
=========================
</TABLE>
Realized gains on the sale of investment securities available for sale amounted
to $90,014, $156,474, and $387,612 for the years ended December 31, 1995, 1994,
and 1993, respectively.
Securities available for sale with an amortized cost of $1,821,484 and $733,980
as of December 31, 1995 and 1994, respectively, were pledged as collateral in
public deposits and for other purposes as required or permitted by law.
F-17
<PAGE> 37
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 4. LOANS
Loans consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
--------------------------
<S> <C> <C>
Commercial $63,062,496 $62,336,364
Real estate - mortgage 9,503,874 7,273,963
Real estate - construction 435,006 939,898
Installment - mobile home 5,604,752 4,757,365
Installment - other 9,466,726 7,894,146
Personal credit line 338,779 362,196
Other 164,498 38,497
--------------------------
88,576,131 83,602,429
Deduct:
Unearned net loan fees and costs (524,651) (520,202)
Allowance for loan losses (2,466,513) (2,393,242)
--------------------------
$85,584,967 $80,688,985
==========================
Classified as:
Loans, net $84,532,153 $79,646,615
Loans held for sale 1,052,814 1,042,370
</TABLE>
At December 31, 1995 and 1994, the total of Small Business Administration (SBA)
loans serviced for others amounted to approximately $793,000 and $17,500,
respectively. Loans totaling approximately $850,000 and $862,000 were secured by
Bank time certificates of deposit at December 31, 1995 and 1994.
Changes in the allowance for loan losses are as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------
<S> <C> <C> <C>
Balance, beginning $ 2,393,242 $ 1,990,428 $ 1,332,068
Provision charged to operating expense 401,000 429,000 755,500
Recoveries of amounts charged off 21,485 19,108 12,315
-----------------------------------------
2,815,727 2,438,536 2,099,833
Amounts charged off (349,214) (45,294) (109,455)
-----------------------------------------
Balance, ending $ 2,466,513 2,393,242 $ 1,990,428
=========================================
</TABLE>
F-18
<PAGE> 38
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 4. LOANS (CONTINUED)
Impaired loans: Impairment of loans, having recorded investments of $4,466,859
at December 31, 1995, has been recognized in conformity with FASB Statement No.
114 as amended by FASB Statement No. 118. The total allowance for credit losses
related to these loans was $1,066,483 on December 31, 1995 and are fully or
partially allowed for.
Management believes commercial real estate loans have a greater risk of
uncollectibility because repayment depends on income production from the
property or future development of the real estate. Commercial loans summarized
by type of collateral are as follows at December 31, 1995: real estate
non-residential, $36,408,913; multi-family residential, $2,265,642; accounts
receivable, inventory and contract rights, $9,170,308; agriculture, $8,142,940;
unsecured, $4,141,161; and other, $2,933,532.
During the years ended December 31, 1995, 1994, and 1993, residential mortgage
loans totaling $21,775,975, $20,208,296, and $27,305,470, respectively, were
sold. Total income from such loan sales was $558,577, $357,267, and $494,794 for
the years ended December 31, 1995, 1994, and 1993, respectively.
NOTE 5. BANK PREMISES AND EQUIPMENT
The major classes of bank premises and equipment and the total accumulated
depreciation are as follows at December 31:
<TABLE>
<CAPTION>
1995 1994
--------------------------------
<S> <C> <C>
Land $ 1,067,453 $ 477,000
Building improvements 2,652,944 1,701,815
Furniture and Equipment 2,313,943 1,779,864
--------------------------------
6,034,340 3,958,679
Less accumulated depreciation (1,904,817) (1,559,924)
--------------------------------
$ 4,129,523 $ 2,398,755
================================
</TABLE>
F-19
<PAGE> 39
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 6. TIME CERTIFICATES OF DEPOSIT
Aggregate maturities of time certificates $100,000 and over are as follows at
December 31:
<TABLE>
<CAPTION>
1995 1994
---------------------------------
<S> <C> <C>
Three months or less $ 4,168,319 $ 4,258,472
Three through six months 6,123,001 1,000,000
Six through twelve months 1,116,361 1,526,000
Over twelve months 1,732,565 1,716,945
---------------------------------
$13,140,246 $ 8,501,417
=================================
</TABLE>
NOTE 7. INCOME TAX MATTERS
The following table shows the cumulative tax effects of the primary temporary
differences as of December 31:
<TABLE>
<CAPTION>
1995 1994
------------------------------
<S> <C> <C>
Deferred tax assets:
Loan loss allowances $ 834,755 $ 731,544
Deferred loan fees 226,000 224,000
------------------------------
Total deferred tax assets 1,060,755 955,544
------------------------------
Deferred tax liabilities:
Property and equipment (70,000) (81,000)
Unrealized gain on available-for-sale securities (17,000) (3,000)
------------------------------
Total deferred tax liabilities (87,000) (84,000)
------------------------------
Net deferred tax asset $ 973,755 $ 871,544
==============================
</TABLE>
F-20
<PAGE> 40
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 7. INCOME TAX MATTERS (CONTINUED)
The provision for income taxes charged to operations consists of the following
for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------------------------------
<S> <C> <C> <C>
Current tax expense $ 1,324,781 $ 1,075,194 $ 967,346
Deferred tax expense (benefit) (102,211) (155,030) (286,167)
-------------------------------------------------
$ 1,222,570 $ 920,164 $ 681,179
=================================================
</TABLE>
The income tax provision differs from the amount of income tax determined by
applying the U.S. federal income tax rate to pretax income for the years ended
December 31, 1995 and 1994 as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------------------------
<S> <C> <C> <C>
Computed "expected" tax expense $ 1,127,000 $ 893,000 $ 690,000
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal tax benefit 258,000 204,000 158,000
Tax-exempt interest income (net of disallowed expenses) (59,000) (64,000) -
Other (103,430) (112,836) (166,821)
-------------------------------------------
$ 1,222,570 $ 920,164 $ 681,179
===========================================
</TABLE>
NOTE 8. NOTES PAYABLE SENIOR NOTES PAYABLE:
Bancorp has issued $2,500,000 of 8.75% Senior Notes payable which require that
interest be paid semi-annually. These notes are due July 1, 2000. The net
proceeds from the issuance were contributed to be capital of the Bank. The terms
of the Senior Notes include certain restrictions on the issuance of additional
debt and payment of dividends. The costs, totaling approximately $154,000, of
issuing the Senior Notes have been deferred and are being amortized over the
contract terms of such notes.
OTHER NOTES PAYABLE:
Other notes payable consists of a 8.5% note payable to a director arising from
the purchase of the land for the Bank's San Luis branch. Principal in the amount
of $120,000 per year, plus interest, is due commencing January 1996. Final
payment is due January 1999. The note is secured by real estate.
F-21
<PAGE> 41
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 9. COMMITMENTS AND CONTINGENCIES
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK:
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments consist of commitments to extend credit. These instruments
involve, to varying degrees, elements of credit risk in excess of the amount
recognized in the balance sheets.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit is
represented by the contractual amount of those instruments. The Bank uses the
same credit policies in making conditional obligations as they do for
on-balance-sheet instruments. A summary of the Bank's commitments at December
31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------------
<S> <C> <C>
Commitments to extend credit $ 16,384,611 $ 12,604,126
============================
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Since many
of the commitments are expected to expire without being drawn upon, the total
commitment amount does not necessarily represent future cash requirements. The
Bank evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Bank upon extension of
credit, is based on management's credit evaluation of the party. Collateral held
varies, but may include accounts receivable, inventory, property and equipment,
residential real estate and income-producing commercial properties.
CONCENTRATIONS OF CREDIT RISK:
All of the Bank's loans and commitments to extend credit have been granted to
customers in the Bank's market area. The concentrations of credit by type of
loan are set forth in Note 4. The distribution of commitments to extend credit
approximates the distribution of commercial and real estate loans outstanding.
The Bank, as a matter of policy, does not extend credit to any single borrower
or group of related borrowers in excess of the Bank's legal lending limit.
F-22
<PAGE> 42
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LEASE COMMITMENTS:
The Bank leases two of its branches under terms of noncancellable operating
leases.
At December 31, 1995, approximate future minimum lease payments under this
agreement is as follows:
<TABLE>
<CAPTION>
Year
----
<S> <C>
1996 $ 43,624
1997 38,850
1998 38,850
1999 38,850
2000 22,663
--------
$182,837
========
</TABLE>
Rent expense totaled approximately $52,063, $33,768, and $32,436 for the years
ended December 31, 1995, 1994, and 1993, respectively, and is included in
occupancy expense.
CONTINGENCIES:
In the normal course of business, the Bank is involved in various legal
proceedings. In the opinion of management, any liability resulting from such
proceedings would not have a material adverse effect on the Bank's financial
statements.
STOCK OPTIONS:
At December 31, 1995 and 1994, there were 57,000 shares of stock available for
grant under a company stock option plan. No options were outstanding. The option
price of the shares may not be less than the fair market value of common shares
as of the date of grant.
SALES OF LOANS:
The Bank has issued various representations and warranties associated with the
sale of loans. These representations and warranties may require the Bank to
repurchase loans with underwriting deficiencies as defined per the applicable
sales agreements. The Bank experienced no losses during the years ended December
31, 1995 and 1994, regarding these representations and warranties.
F-23
<PAGE> 43
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 10. TRANSACTIONS WITH RELATED PARTIES
The Bank has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with directors, principal
officers, their immediate families and affiliated companies in which they are
principal stockholders (commonly referred to as related parties), all of which
have been, in the opinion of management, on the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with others.
Aggregate loan transactions with related parties were as follows for the years
ended December 31:
<TABLE>
<CAPTION>
1995 1994
-----------------------------------
<S> <C> <C>
Balance, beginning $ 2,351,175 $ 1,735,788
New loans 64,350 944,647
Repayments (1,008,468) (329,260)
-----------------------------------
Balance, ending $ 1,407,057 $ 2,351,175
===================================
</TABLE>
NOTE 11. INTEREST EXPENSE
The components of interest are as follows for the year ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
--------------------------------------------
<S> <C> <C> <C>
NOW accounts $ 486,186 $ 559,383 $ 495,015
Savings accounts 147,428 151,504 141,982
Time certificates of deposit $100,000 and over 502,455 292,005 258,002
Certificates under $100,000 1,755,415 842,341 848,932
Senior notes payable 218,750 218,750 100,128
Other 41,190 3,803 1,344
--------------------------------------------
$3,151,424 2,067,786 $1,845,403
============================================
</TABLE>
F-24
<PAGE> 44
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 12. EMPLOYEE BENEFIT PLAN
The Bank has adopted a 401(k) plan (the Plan) and sponsored an employee stock
ownership plan (ESOP) to which the Bank makes contributions. All full-time and
part-time employees of the Bank who have completed 1,000 hours per year and have
reached 21 years of age are eligible to participate.
Under the 401(k) plan, the Bank matches 100% of employee contributions.
Contributions to the Plan totalled approximately $89,000, $83,000, and $71,000
for the years ended December 31, 1995, 1994, and 1993, respectively.
The Bank makes voluntary contributions to the ESOP each year. Participants vest
in the contributions over a five year period. Common stock of the Bancorp held
by the ESOP is voted by the ESOP's administrative committee, consisting of three
members of the Board of Directors. For the years ended December 31, 1995, 1994,
and 1993, contributions were approximately $54,000, $123,000, and $128,000,
respectively.
In the event a terminated ESOP participant desires to sell his or her shares of
the Company's stock, the Company may be required to purchase the shares from the
participant. At December 31, 1995, the ESOP held 66,851 shares of Bancorp stock.
NOTE 13. REGULATORY CAPITAL REQUIREMENTS
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory -and possibly additional discretionary - actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve qualitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to risk-
weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1995, that the Bank
meets all capital adequacy requirements to which it is subject.
As of December 31, 1995, the most recent notification from the FDIC categorized
the Bank as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized the Bank must maintain
minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set
forth in the table. There are no conditions or events since that management
believes have changed the institution's category.
F-25
<PAGE> 45
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 13. REGULATORY CAPITAL REQUIREMENTS (CONTINUED)
The Bank's actual capital amounts and ratios are presented in the following
table:
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
--------------------------------------------
<S> <C> <C> <C>
As of December 31, 1995:
Total Capital (to Risk Weighted Assets) 12.8% 8% 10%
Tier I Capital (to Risk Weighted Assets) 11.7% 4% 6%
Tier I Capital (to Average Assets) 8.4% 4% 5%
As of December 31, 1994:
Total Capital (to Risk Weighted Assets) 9.9% 8% 10%
Tier I Capital (to Risk Weighted Assets) 8.7% 4% 6%
Tier I Capital (to Average Assets) 9.4% 4% 5%
</TABLE>
NOTE 14. MERGER
During January, 1996 Southern Arizona Bancorp, Inc. entered into an Agreement
and Plan of Reorganization with Zions Bancorporation. Under the terms of this
agreement, the stockholders of the Bancorp will exchange their shares for shares
of Zions Bancorporation. The exchange rate will be set at the time of closing so
that the Bancorp shareholders collectively receive Zions Bancorporation stock
valued at $25,330,000, plus earnings of the Bancorp for the period October 1,
1995 through the closing date. This merger is contingent upon and awaiting
governmental regulatory approval.
NOTE 15. FAIR VALUES OF FINANCIAL INSTRUMENTS
The fair values of the Bank's financial instruments are as follows:
<TABLE>
<CAPTION>
Carrying Fair
---------------------------
Financial assets:
<S> <C> <C>
Cash and due from banks $ 7,701,102 $ 7,701,102
Interest bearing deposits in financial institutions 594,000 594,000
Federal funds sold 25,194,000 25,194,000
Securities 1,886,870 1,888,000
Loans, net 84,532,153 84,815,000
Loans available for sale 1,052,814 1,053,000
Accrued interest receivable 537,524 537,000
Financial liabilities:
Deposits 114,761,830 113,787,000
Senior notes payable 2,500,000 2,500,000
Other note payable 480,000 480,000
</TABLE>
Fair value of commitments: The estimated fair value of off-balance-sheet loan
commitments are not considered to be significant.
F-26
<PAGE> 46
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 16. PARENT ONLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
BALANCE SHEETS
1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 115,322 $ 118,838
Investment in Southern Arizona Bank 11,004,815 9,506,650
Prepaid senior note costs and other assets 104,758 126,941
Deferred taxes 250,049 147,838
$11,474,944 $ 9,900,267
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest payable and other accrued liabilities $ 116,568 $ 116,568
Note payable 2,500,000 2,500,000
-------------------------------
2,616,568 2,616,568
-------------------------------
Stockholders' Equity
Common Stock 2,483,013 2,483,013
Retained earnings 6,336,125 4,793,010
Net unrealized gain 39,238 7,676
-------------------------------
8,858,376 7,283,699
-------------------------------
$11,474,944 $ 9,900,267
=============================
</TABLE>
F-27
<PAGE> 47
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 16. PARENT ONLY FINANCIAL INFORMATION (CONTINUED)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------------------------------
<S> <C> <C> <C>
REVENUES
Equity in earnings of Southern Arizona Bank $ 2,151,244 $ 1,784,665 $ 1,360,461
Other income 1,475 2,500 5,912
-------------------------------------------------
2,152,719 1,787,165 1,366,373
-------------------------------------------------
EXPENSES
Interest expense on senior notes $ 218,750 $ 218,750 $ 110,080
Amortization of senior note cost 22,183 22,183 -
Other expense 14,990 15,649 11,348
-------------------------------------------------
255,923 256,582 121,428
-------------------------------------------------
Income tax benefit 102,211 101,631 46,206
-------------------------------------------------
Net income $ 1,999,007 $ 1,632,214 $ 1,291,151
=================================================
STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net income 1,999,007 1,632,214 1,291,151
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Undistributed equity in income of subsidiary (1,466,603) (1,186,004) (884,666)
Amortization expense 22,183 22,183 8,402
Deferred taxes (102,211) (101,632) (46,206)
Changes in assets and liabilities:
Accrued interest payable and other liabilities - 6,955 102,418
-------------------------------------------------
Net cash provided by operating activities 452,376 373,716 471,099
-------------------------------------------------
Cash flows used in investing activities,
capital contribution to Southern Arizona Bank - - (2,390,000)
-------------------------------------------------
</TABLE>
F-28
<PAGE> 48
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 16. PARENT ONLY FINANCIAL INFORMATION (CONTINUED)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------------------------------
<S> <C> <C> <C>
Cash flows used in financing activities:
Payment of dividends $ (455,892) $ (379,905) $ (303,927)
Proceeds from issuance of senior notes payable - - 2,500,000
Cost of issuing senior notes payable - - (153,515)
-------------------------------------------------
Net cash (used in) provided by financing activities (455,892) (379,905) 2,042,558
=================================================
Net (decrease) increase in cash (3,516) (6,189) 123,657
Cash and due from banks
Beginning of year 118,838 125,027 1,370
-------------------------------------------------
End of year $ 115,322 $ 118,838 $ 125,027
=================================================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash payments for interest $ 218,750 $ 210,243 $ 9,212
=================================================
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Unrealized gain on available for sale securities $ 31,562 $ 7,676 $ -
=================================================
</TABLE>
F-29
<PAGE> 49
SOUTHERN ARIZONA BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
CONTENTS
<TABLE>
<CAPTION>
Page
----
Consolidated financial statements:
<S> <C>
Balance sheet F-31
Statement of income F-32
Statement of cash flows F-33
Notes to consolidated financial statements F-34
</TABLE>
F-30
<PAGE> 50
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996
(UNAUDITED)
03/31/96
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Cash and due from banks $ 8,164,756
Interest bearing deposits in financial institutions 396,000
Federal funds sold 33,279,000
Securities
Held to maturity 0
Available for sale securities 1,079,414
Loans, net of allowance for credit losses 1996 $2,542,068;
1995 $2,447,728 85,037,001
Loans held for sale 1,257,228
Bank premises and equipment, net 4,076,153
Accrued interest receivable 541,363
Deferred income taxes 999,961
Other assets 813,772
------------
$135,634,648
============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest bearing demand $ 38,376,971
Interest bearing:
NOW accounts 26,330,921
Savings 8,917,371
Time certificates $100,000 and over 13,102,774
Time certificates under $100,000 35,903,374
------------
122,631,411
Accrued interest payable and other liabilities 842,901
Senior notes payable 2,500,000
Other note payable 360,000
------------
126,334,312
------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, no par value, authorized 2,000,000 shares;
issued and outstanding, 1,266,362 shares 2,483,013
Retained earnings 6,783,711
Unrealized gain on securities available for sale, net 33,612
------------
9,300,336
------------
$135,634,648
============
</TABLE>
F-31
<PAGE> 51
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDING
- -----------------------------------------------------------------------------------------
03/31/96 03/31/95
---------------------------
<S> <C> <C>
Interest Income:
Loans $2,354,818 $2,132,163
Securities:
U.S. Government agencies 20,175 122,950
Other investments 24,629 54,192
Federal funds sold 371,565 91,589
---------------------------
2,771,187 2,400,694
Interest expense 884,469 668,288
---------------------------
Net Interest Income 1,886,718 1,732,606
Provision for loan losses 72,000 53,000
---------------------------
Net Interest Income after provision for loan losses 1,614,718 1,679,606
---------------------------
Other Income:
Customer service fees 216,182 179,175
Gain on sale of loans and investments 106,757 78,623
Other income 26,724 39,411
---------------------------
349,663 297,209
---------------------------
Other expenses:
Salaries and employee benefits 626,387 604,352
Occupancy 88,376 76,372
Equipment expenses 120,937 90,746
Supplies and service 265,380 191,047
Other 212,913 234,915
Costs of Merger 116,400 0
---------------------------
1,430,403 1,196,432
---------------------------
Income before income taxes 733,978 780,363
Income taxes 286,392 293,070
---------------------------
Net Income $ 447,586 $ 487,313
===========================
Net earnings per share $ 0.35 $ 0.38
===========================
Common shares outstanding 1,266,362 1,266,362
===========================
</TABLE>
F-32
<PAGE> 52
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE FIRST QUARTER PERIOD ENDED
- -------------------------------------------------------------------------------------------------------
03/31/96 03/31/95
------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 447,586 $ 487,313
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 103,553 84,972
Provision of loan losses 72,000 53,000
Accretion of discount (1,650) (115,672)
Origination of loans available for sale (5,692,222) (5,098,037)
Proceeds from sale of loans available for sale 5,487,808 4,604,519
Deferred income tax benefit (26,206) (24,504)
Gain on sale of securities available for sale _ _
Change in assets and liabilities:
Accrued income receivable and other assets (1,459) (67,269)
Accrued interest payable and other liabilities 25,214 528,016
------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 414,624 452,438
------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Maturities of securities held to maturity 500,000 250,000
Purchase of securities held to maturity - (489,639)
Purchase of interest bearing deposit in financial institutions (99,000) 297,000
Maturities of interest bearing deposit in financial institutions 297,000 (297,000)
Purchase of securities available for sale - (7,395,273)
Proceeds from maturities of securities available for sale 300,000 2,000,000
Proceeds from sale of securities available for sale - -
(increase) decrease in federal funds sold (8,085,000) (5,084,000)
Loans made to customers, net (576,848) 1,842,886
Purchase of bank premises and equipment (46,703) (206,526)
------------------------------
NET CASH USED IN INVESTING ACTIVITIES (7,710,551) (9,082,552)
------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 7,869,581 8,464,160
Dividends paid - -
Cost of issuing senior notes payable - -
Note payment (120,000) -
------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,749,581 8,484,160
------------------------------
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 453,654 (165,954)
Cash and due from banks:
Beginning 7,701,102 6,459,750
------------------------------
Ending $ 8,154,756 $ 6,293,796
==============================
</TABLE>
F-32
<PAGE> 53
SOUTHERN ARIZONA BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Interim financing reporting:
The accompanying unaudited Consolidated Financial Statements for
Southern Arizona Bancorp, Inc. (the "Company") have been prepared in accordance
with the generally accepted accounting principles for interim financial
information and the instructions to Form 10. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations, and cash flows for
the periods presented have been made. The results of operations for the three
month period ended March 31, 1996 is not necessarily indicative of the operating
results that may be expected for the entire fiscal year ending December 31,
1996. These financial statements should be read in conjunction with the
Company's annual audited financial statements attached to the Company's
Registration Statement on Form 10 filed with the Securities and Exchange
Commission on May 22, 1996.
F-34
<PAGE> 54
STATISTICAL INFORMATION AND ANALYSIS
The following tables present certain statistical information regarding
Southern Arizona and should be read in connection with Southern Arizona
Consolidated Financial Statements and Notes set forth elsewhere in this
Registration Statement.
SOUTHERN ARIZONA BANCORP, INC.
Allocation of the Allowance for Loan Losses
As of December 31, 1995
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------------------- -------------------- --------------------- --------------------- --------------------
% of Loans % of Loans % of Loans % of Loans % of Loans
Per Category Per Category Per Category Per Category Per Category
(000's) Amount To Total Ln Amount To Total Ln Amount To Total Ln Amount To Total Ln Amount To Total Lns
------ ------------ ------ ------------ ------ ------------ ------ ------------ ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial 2,237 71.20 2,083 74.56 1,772 74.20 1,077 71.03 758 71.34
Real Estate 36 11.22 49 9.83 38 11.06 61 11.16 22 12.85
Consumer
Loans 194 17.58 261 15.61 180 14.74 194 17.81 93 15.81
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total 2,467 100% 2,393 100% 1,990 100% 1,332 100% 873 100%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
ST-1
<PAGE> 55
SOUTHERN ARIZONA BANCORP, INC.
Analysis of the Allowance for Loan Losses
Years Ended December 31, 1991 - 1995
<TABLE>
<CAPTION>
----------------------------------------------------------------------
(000's) 1995 1994 1993 1992 1991
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period 2,393 1,990 1,332 873 679
Charge-offs:
Commercial 291 37 65 143 131
Real Estate 48 0 3 149 74
Installment 10 8 41 23 97
----------------------------------------------------------------------
Total 349 45 109 315 302
Recoveries:
Commercial 14 14 7 18 35
Real Estate 6 0 0 0 0
Installment 2 5 4 3 39
----------------------------------------------------------------------
Total 22 19 11 21 74
Net (charge-offs) / recoveries (327) (26) (98) (294) (228)
Additions charged to operation 401 429 756 753 422
----------------------------------------------------------------------
Balance at end of period 2,467 2,393 1,990 1,332 873
----------------------------------------------------------------------
Ratio of net charge-offs during
the period to average loans
outstanding during the period 0.40 0.04 0.16 0.60 0.55
----------------------------------------------------------------------
</TABLE>
ST-2
<PAGE> 56
SOUTHERN ARIZONA BANCORP, INC.
Deposit Analysis
Based on Averages
Years Ended December 31, 1993 - 1995
<TABLE>
<CAPTION>
1995 1994 1993
---------------------- ------------------- ----------------------
Average Average Average Average Average Average
(000's) Amount Rate Paid Amount Rate Paid Amount Rate Paid
------- --------- ------- --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing demand deposits 27,556 0 24,068 0 20,206 0
Interest bearing demand deposits 22,819 2.13 27,045 2.07 22,523 2.20
Savings deposits 9,632 1.53 8,538 1.78 7,704 1.84
Certificates of deposit 40,612 5.56 27,881 4.07 27,163 4.08
--------------------- ------------------- ----------------------
Total 100,619 87,532 77,596
======= ====== =======
</TABLE>
Time Deposit Maturity Schedule
$100,000 and over
As of December 31, 1995
<TABLE>
<CAPTION>
--------------------------------------------
3 Months 3 - 6 6 - 12 Over
or Less Months Months One Year
--------------------------------------------
<C> <C> <C> <C> <C>
$100,000 and over 4,168 6,123 1,116 1,733
======== ======= ======= ========
</TABLE>
ST-3
<PAGE> 57
SOUTHERN ARIZONA BANCORP, INC
Return on Equity and Assets
Years Ended December 31, 1993 - 1995
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ -----
<S> <C> <C> <C>
Return on average assets 1.78 1.68 1.52
Return on average equity 24.77 24.53 23.35
Dividend payout ratio 22.78 23.26 23.53
Average equity to average assets 7.19 6.84 6.53
</TABLE>
ST-4
<PAGE> 58
SOUTHERN ARIZONA BANCORP, INC.
Balance Sheets
Based on Average Balances
<TABLE>
<CAPTION>
Years Ended December 31
(000) 1995 1994 1993
----------------------------------------------
<S> <C> <C> <C>
Assets
Cash and due from banks 5,673 4,913 4,509
Federal funds sold 8,757 4,878 4,766
US Treasury obligations 7,202 8,769 9,180
Municipal obligations 2,302 2,485 3,742
Other investments 1,133 1,396 2,068
Loans
Commercial loans 54,465 49,275 38,751
Agriculture loans 6,926 5,599 4,509
Real estate loans 9,605 7,410 6,401
Installment loans 14,628 11,763 10,025
Less - Deferred loan fees (571) (509) (422)
Allowance for loan losses (2,438) (2,173) (1,711)
----------------------------------------------
Total loans 82,615 71,365 57,553
Fixed and other assets 4,558 3,517 2,924
----------------------------------------------
Total Assets 112,240 97,323 84,742
==============================================
Liabilities and Stockholders' Equity
Deposits
Non-interest bearing demand 27,556 24,068 20,206
Interest bearing 22,819 27,045 22,523
Money market and savings 9,632 8,538 7,704
Certificates of deposit 40,612 27,881 27,163
----------------------------------------------
Total deposits 100,619 87,532 77,596
Other Liabilities 570 637 473
Senior Notes Payable 2,980 2,500 1,143
----------------------------------------------
Total Liabilities 104,169 90,669 79,212
Stockholders' equity 8,071 6,654 5,530
----------------------------------------------
Total Liabilities and
Stockholders' equity 112,240 97,323 84,742
==============================================
</TABLE>
ST-5
<PAGE> 59
SOUTHERN ARIZONA BANCORP, INC.
Analysis of Net Interest Earnings
Years Ended December 31, 1993-1995
RESULTS OF OPERATIONS
Average Balance, Interest Rates and Yields. The following table presents for the
periods indicated the total dollar amount of interest income from average
interest-earning assets and the resultant yields, as well as the interest
expense on average interest-bearing liabilities, expressed both in dollar
amounts and rates, and the net interest margin. The table does not reflect any
effect of income taxes. All average balances are monthly average balances and
include the balances of non-accruing loans. The yields and costs for the periods
indicated include fees which are considered adjustments to yield.
<TABLE>
<CAPTION>
Avg. Amt Interest Average
1995 (000) Outstanding Earned Yield
- ---------------------------------------------- --------------------------------------
<S> <C> <C> <C>
Assets
Federal funds sold 8,757 493 5.63%
US Treasury obligations 7,202 447 6.21%
Other investments 3,435 208 6.06%
Loans 85,624 9,045 10.56%
-------------------------------------
Total 105,018 10,193 9.71%
=====================================
Liabilities
Deposits
Interest bearing demand 22,819 486 2.13%
Money market and savings 9,632 147 1.53%
Certificates of deposit 40,612 2,258 5.56%
Long-Term Debt 2,980 261 8,76%
-------------------------------------
Total 76,043 3,152 4.15%
=====================================
Avg. Yield Int Earning Assets 9.71%
Avg. Rate Pd Int Earning Liabilities 4.15%
Net Yield on Assets 6.70%
</TABLE>
<TABLE>
<CAPTION>
Avg. Amt Interest Average
1994 (000) Outstanding Earned Yield
- ---------------------------------------------- --------------------------------------
<S> <C> <C> <C>
Assets
Federal funds sold 4,878 189 3.87%
US Treasury obligations 8,769 368 4.20%
Other investments 3,881 216 5.57%
Loans 74,047 7,344 9.92%
-------------------------------------
Total 91,575 8,117 8.86%
=====================================
Liabilities
Deposits
Interest bearing demand 27,045 559 2.07%
Money market and savings 8,538 152 1.78%
Certificates of deposit 27,881 1,134 4.07%
Other 90 4 4.44%
Long-Term Debt 2,500 219 8.76%
-------------------------------------
Total 66,054 2,068 3.13%
=====================================
Avg. Yield Int Earning Assets 8.86%
Avg. Rate Pd Int Earning Liabilities 3.13%
Net Yield on Assets 6.61%
</TABLE>
<TABLE>
<CAPTION>
Avg. Amt Interest Average
1993 (000) Outstanding Earned Yield
- ---------------------------------------------- --------------------------------------
<S> <C> <C> <C>
Assets
Federal funds sold 4,766 133 2.79%
US Treasury obligations 9,180 375 4.08%
Other investments 5,810 334 5.75%
Loans 59,686 6,166 10.33%
-------------------------------------
Total 79,442 7,008 8.82%
=====================================
Liabilities
Deposits
Interest bearing demand 22,523 495 2.20%
Money market and savings 7,704 142 1.84%
Certificates of deposit 27,163 1,107 4.08%
Other 42 1 2.38%
Long-Term Debt 1,143 100 8.75%
-------------------------------------
Total 58,575 1,845 3.15%
======================================
Avg. Yield Int Earning Assets 8.82%
Avg. Rate Pd Int Earning Liabilities 3.15%
Net Yield on Assets 6.50%
</TABLE>
ST-6
<PAGE> 60
SOUTHERN ARIZONA BANCORP, INC.
Analysis of Change in Interest
Years Ended December 31, 1994 - 1995
RATE/VOLUME OF NET INTEREST INCOME
The following schedule presents the dollar amount of changes in interest income
and interest expense for major components of interest-earning assets and
interest-bearing liabilities. It distinguishes between the increase related to
higher outstanding balances and that due to interest rates. For each category of
interest-earning assets and interest-bearing liabilities, information is
provided on changes attributable to (i) changes in volume (i.e., changes in
volume multiplied by old rate) and (ii) changes in rate multiplied by old
volume. Changes attributable to both rate and volume which cannot be segregated
have been allocated proportionately to the change due to volume and the change
due to rate.
<TABLE>
<CAPTION>
Interest Int Change Int Change
Change Due To Due To
1995 1994-1995 Volume Rates
- ---------------------------------------------- ----------------------------------------
<S> <C> <C> <C>
Assets
Federal funds sold 304 193 111
US Treasury obligations 79 (74) 153
Other investments (8) (26) 18
Loans 1,701 1,201 500
--------------------------------------
Total 2,076 1,294 782
======================================
Liabilities
Deposits
Interest bearing demand (73) (90) 17
Money market and savings (5) 18 (23)
Certificates of deposit 1,124 623 501
Senior Notes 42 42 0
Short term borrowings (4) (2) (2)
--------------------------------------
Total 1,084 591 493
======================================
</TABLE>
<TABLE>
<CAPTION>
Interest Int Change Int Change
Change Due To Due To
1994 1993-1994 Volume Rates
- ---------------------------------------------- ----------------------------------------
<S> <C> <C> <C>
Assets
Federal funds 56 3 53
US Treasury obligations (7) (17) 10
Other investments (118) (107) (11)
Loans 1,178 1,433 (255)
--------------------------------------
Total 1,109 1,312 (203)
======================================
Liabilities
Deposits
Interest bearing demand 64 94 (30)
Money market and savings 10 15 (5)
Certificates of deposit 27 29 (2)
Senior Notes 119 119 0
Short term borrowing 3 1 2
--------------------------------------
Total 223 258 (35)
======================================
</TABLE>
ST-7
<PAGE> 61
SOUTHERN ARIZONA BANCORP, INC.
Loan Portfolio
As of December 31,
<TABLE>
<CAPTION>
-----------------------------------------------------
(000) 1995 1994 1993 1992 1991
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial 63,062 62,336 50,155 39,820 31,893
Real Estate - Mortgage 9,504 7,274 6,946 5,976 4,184
Real Estate - Construction 435 940 531 277 254
Installment - Mobile Home 5,605 4,757 3,501 1,363 1,307
Installment - Other 9,467 7,894 5,972 8,044 6,504
Personal Credit Line 339 362 428 522 527
Other 164 39 63 57 37
-----------------------------------------------------
Total 88,576 83,602 67,596 56,059 44,706
-----------------------------------------------------
</TABLE>
Loan Portfolio Maturity Schedule
As of December 31, 1995
<TABLE>
<CAPTION>
------------------------------------------
Within 1 - 5 After 5
(000) 1 year years years Total
------------------------------------------
<S> <C> <C> <C> <C>
Loans at fixed interest rates 4,421 9,437 12,328 26,186
Loans at variable interest rates 24,889 26,108 11,393 62,390
------------------------------------------
Total 29,310 35,545 23,721 88,576
------------------------------------------
</TABLE>
ST-8
<PAGE> 62
SOUTHERN ARIZONA BANCORP, INC.
Investment Portfolio
As of December 31,
<TABLE>
<CAPTION>
1995 Book 1994 Book 1993 Book
(000) Value Value Value
----------------------------------------
<S> <C> <C> <C>
U.S. Treasury Obligations 1,314 4,959 10,296
Municipal Obligations 573 2,713 3,256
---------------------------------------
Total 1,887 7,672 13,552
---------------------------------------
</TABLE>
Investment Portfolio Maturity Schedule
As of December 31, 1995
<TABLE>
<CAPTION>
-------------------------------------------------------
Within 1 - 5 6 - 10 After 10
(000) 1 year years years Years Total
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Treasury Obligations
Carrying amount 800 514 0 0 1,314
Weighted average yield 7.10% 8.39% 7.59%
Municipal obligations
Carrying amount 0 0 573 573
Weighted yield 7.00% 7.00%
-------------------------------------------------------
Total 800 514 573 0 1,887
-------------------------------------------------------
</TABLE>
ST-9
<PAGE> 63
SOUTHERN ARIZONA BANCORP, INC.
Past Due and Nonaccrual Loans
As of December 31,
<TABLE>
<CAPTION>
-------------------------------------------------
(000) 1995 1994 1993 1992 1991
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual Loans 0 15 18 0 59
Other Real Estate Owned 11 202 18 82 0
-------------------------------------------------
Total 11 217 36 82 59
-------------------------------------------------
</TABLE>
ST-10
<PAGE> 64
SOUTHERN ARIZONA BANCORP, INC.
AVERAGE BALANCE SHEET DATA
<TABLE>
<CAPTION>
Years Ended December 31,
(000) 1995 1994 1993 1992 1991
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Securities 10,637 12,650 14,990 14,830 10,737
Loans and Leases, net 82,615 71,365 57,553 48,198 40,987
Total interest earning assets 105,018 91,575 79,442 66,579 54,746
Total assets 112,240 97,323 84,742 71,245 59,314
Total deposits 100,619 87,532 77,596 66,336 54,790
Interest bearing deposits 73,063 63,464 57,390 50,882 43,290
Long-term debt 2,980 2,500 1,143 0 0
Shareholders' Equity 8,071 6,654 5,530 4,669 4,025
</TABLE>
ST-11
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION made as of the seventeenth
day of January, 1996, between ZIONS BANCORPORATION ("Zions Bancorp"), a Utah
corporation having its principal office in Salt Lake City, Utah, NATIONAL BANK
OF ARIZONA ("NBA"), a national banking association having its head office in
Tucson, Arizona, SOUTHERN ARIZONA BANCORP, INC. (the "Company"), an Arizona
corporation having its principal office in Yuma, Arizona, and SOUTHERN ARIZONA
BANK, an Arizona banking corporation having its head office in Yuma, Arizona
(the "Bank")
W I T N E S S E T H T H A T :
WHEREAS, Zions Bancorp is a bank holding company and NBA is a national
banking association and each of them desires to affiliate with the Company and
its subsidiary, the Bank; and
WHEREAS, the Board of Directors of the Company has determined that it
would be in the best interests of the Company, its shareholders, its customers,
and the areas served by it to become affiliated with Zions Bancorp and NBA;
WHEREAS, the Board of Directors of the Bank has determined that it
would be in the best interests of the Bank, its customers, and the areas served
by it to become affiliated with Zions Bancorp and NBA;
WHEREAS, the respective Boards of Directors of the Company and
Zions Bancorp have agreed to the merger (the "Holding Company
Merger") of the Company with and into Zions Bancorp pursuant to the
provisions of section 10-071 et seq. of the Arizona General
Corporation Law and section 16-10a-1101 et seq. of the Utah
Business Corporation Act;
WHEREAS, the respective Boards of Directors of the Bank and NBA have
agreed to the merger (the "Bank Merger") of the Bank with and into NBA pursuant
to the provisions of section 215a of the National Bank Act (12 U.S.C. Section
215a) and section 6-212 of the Arizona Revised Statutes; and
WHEREAS, the parties intend that the transactions contemplated by the
Holding Company Merger and the Bank Merger (collectively, the "Mergers") qualify
as one or more tax-free reorganizations under section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of these premises and the mutual
agreements hereinafter set forth, the parties agree as follows:
<PAGE> 2
1. COMBINATIONS.
1.1. Form of Combinations.
(a) Holding Company Combination. Zions Bancorp and the Company
will execute a merger agreement (the "Holding Company Merger Agreement")
substantially in the form of Exhibit I annexed hereto. Subject to the provisions
of the Holding Company Merger Agreement, the Company will be merged with and
into Zions Bancorp, and Zions Bancorp shall be the surviving corporation. The
shares of common stock of the Company shall be immediately converted into the
right to receive, subject to the terms, conditions, and limitations set forth
herein, such consideration as is provided in section 1.2(b) hereof.
(b) Bank Combination. NBA and the Bank will execute a merger
agreement (the "Bank Merger Agreement") substantially in the form of Exhibit II
annexed hereto. Immediately following the effectiveness of the Holding Company
Merger, and subject to the provisions of the Bank Merger Agreement, the Bank
will be merged with and into NBA, under the charter and title of NBA, and NBA
shall be the surviving association. The shares of common stock of the Bank shall
be canceled.
1.2. Consideration for Holding Company Merger.
(a) Definitions. For the purposes of this Agreement, the
following terms shall have the meanings set forth in this Subparagraph (a).
Additional terms may be defined elsewhere herein.
(i) Average Closing Price. The average (rounded to the
nearest penny) of each Daily Sales Price of Zions Bancorp Stock for the twenty
consecutive trading days ending on and including the fifth trading day preceding
the effective date of the Holding Company Merger (the "Effective Date").
Notwithstanding the foregoing, (A) if the result of the calculation described in
the previous sentence is less than $59.00, then the Average Closing Price shall
be $59.00, and (B) if the result of the calculation described in the previous
sentence is more than $72.00, then the Average Closing Price shall be $72.00.
(ii) Benchmark Price. The sum of:
(A) $25,330,000.00;
(B) the consolidated net undistributed income of
the Company during the period beginning on October 1, 1995 and ending on the
close of business on the last day of the calendar month preceding the Effective
Date, calculated in accordance with
<PAGE> 3
generally accepted accounting principles in a manner consistent with the Company
Financial Statements (as defined in section 6.13 of this Agreement). For the
purpose of calculating net undistributed income of the Company, any
undistributed gain, net of taxes, derived from activities or transactions which
are not in the ordinary course of its banking operations (such as, without
limitation, the sale of securities or loans, of capital assets, or of lines of
business), all of which shall be determined in accordance with generally
accepted accounting principles, shall be excluded except as mutually agreed by
the parties hereto. It is understood that the amount calculated under this
section 1.2(a)(ii)(B) may be a negative number and that the effect of summing
such a negative number would be a reduction in the Benchmark Price as otherwise
would be calculated under this section 1.2(a)(ii); and
(C) if the Effective Date does not occur on the
first day of a calendar month, an amount calculated by computing the daily
average of the net undistributed income of the Company for the period and in the
manner prescribed in section 1.2(a)(ii)(B) hereof and multiplying the result of
such computation by the number of days elapsing during the period beginning on
the first day of the month in which the Effective Date occurs and ending on the
day immediately preceding the Effective Date. It is understood that the amount
calculated under this section 1.2(a)- (ii)(C) may be a negative number and that
the effect of summing such a negative number would be a reduction in the
Benchmark Price as otherwise would be calculated under this section 1.2(a)(ii).
(iii) Daily Sales Price. For any trading day, the last
reported sale price or, if no such reported sale takes place, the mean
(unrounded) of the closing bid and asked prices of Zions Bancorp Stock in the
over-the-counter market as such prices are reported by the automated quotation
system of the National Association of Securities Dealers, Inc., or in the
absence thereof by such other source upon which Zions Bancorp and the Company
shall mutually agree.
(iv) Dissenting Shares. The shares of Company Common
Stock held by those shareholders of the Company who have timely and properly
exercised their dissenters' rights in accordance with all applicable laws (the
"Appraisal Laws").
(v) Zions Bancorp Stock. The common stock of Zions
Bancorp, no par value.
(b) Form of Consideration. Subject to the terms, conditions
and limitations set forth herein, upon surrender of his or her certificate or
certificates in accordance with Section 1.1
- 3 -
<PAGE> 4
hereof, each holder of shares of Company Common Stock shall be entitled to
receive in the Holding Company Merger, in exchange for each share of Company
Common Stock held of record by such stockholder as of the Effective Date:
(i) that number of shares of Zions Bancorp Stock
calculated by dividing the Benchmark Price by the Average Closing Price, and by
further dividing the number so reached by the number of shares of Company Common
Stock that shall be issued and outstanding at the Effective Date, and
(ii) in the event that the average (rounded to the
nearest penny) of each Daily Sales Price of Zions Bancorp Stock for the twenty
consecutive trading days ending on and including the fifth trading day preceding
the Effective Date (the "Unadjusted Average Price") shall be less than $59.00,
that amount of cash (the "Cash Component") calculated by dividing the amount by
which the Benchmark Price exceeds the product of the Unadjusted Average Price
and the number of shares of Zions Bancorp Stock issuable under subsection (b)(i)
of this section 1.2 by the number of shares of Company Common Stock that shall
be issued and outstanding at the Effective Date.
1.3. No Fractional Shares. Zions Bancorp will not issue fractional
shares of Zions Bancorp Stock. In lieu of fractional shares of Zions Bancorp
Stock, if any, each shareholder of the Company who is entitled to a fractional
share of Zions Bancorp Stock shall receive an amount of cash equal to the
product of such fraction times the Average Closing Price. Such fractional share
interest shall not include the right to vote or to receive dividends or any
interest thereon.
1.4. Dissenting Shares. Notwithstanding anything to the contrary
herein, each Dissenting Share whose holder, as of the Effective Date, has not
effectively withdrawn or lost his or her dissenters' rights under the Appraisal
Laws, shall not be converted into or represent a right to receive Zions Bancorp
Stock or Cash Component, but the holder thereof shall be entitled only to such
rights as are granted by the Appraisal Laws. Each holder of Dissenting Shares
who becomes entitled to payment for his or her Company Common Stock pursuant to
the provisions of the Appraisal Laws shall receive payment therefor from Zions
Bancorp (but only after the amount thereof shall have been agreed upon or
finally determined pursuant to such provisions).
1.5. Dividends; Interest. No shareholder of the Company will be
entitled to receive dividends on his or her Zions Bancorp Stock until he or she
exchanges his or her certificates representing
- 4 -
<PAGE> 5
Company Common Stock for Zions Bancorp Stock and, if applicable, Cash Component.
Any dividends declared on Zions Bancorp Stock (which stock is to be delivered
pursuant to this Agreement) to holders of record on or after the Effective Date
shall be paid to the Exchange Agent (as designated in Section 1.6 of this
Agreement) and, upon receipt of the certificates representing shares of Company
Common Stock, the Exchange Agent shall forward to the former shareholders
entitled to receive Zions Bancorp Stock (i) certificates representing their
shares of Zions Bancorp Stock, (ii) dividends declared thereon subsequent to the
Effective Date (without interest), (iii) the cash value of any fractional shares
determined in accordance with Section 1.3 hereof (without interest), and (iv)
any Cash Component (without interest).
1.6. Designation of Exchange Agent. The parties to this Agreement
hereby designate Zions First National Bank, Salt Lake City, Utah ("Zions Bank")
as Exchange Agent to effect the exchange contemplated hereby. Zions Bancorp
will, promptly after the Effective Date, issue and deliver to Zions Bank the
share certificates representing shares of Zions Bancorp Stock and the cash in
lieu of fractional shares and any Cash Component to be paid to holders of
Company Common Stock in accordance with this Agreement.
1.7. Notice of Exchange. Promptly after the Effective Date, Zions
Bancorp shall cause Zions Bank to mail to each holder of one or more
certificates formerly representing Company Common Stock, except to such holders
as shall have waived the notice required by this Section 1.7, a notice
specifying the Effective Date and notifying such holder to surrender his or her
certificate or certificates to Zions Bank for exchange for a certificate
representing the appropriate number of shares of Zions Bancorp Stock and cash in
lieu of any fractional share and any Cash Component. Such notice shall be mailed
to holders by regular mail at their addresses on the records of the Company.
Zions Bancorp shall cause Zions Bank to deliver certificates representing Zions
Bancorp Stock and cash to such holders who comply with the terms and conditions
of the notice of exchange.
1.8. Employee Benefits. If any employee of the Company or the Bank
becomes a participant in any employment benefit plan, practice, or policy of
Zions Bancorp or NBA, such employee shall be given credit under such plan,
practice, or policy for all service prior to the Effective Date with the Company
and the Bank for purposes of eligibility and vesting, but not for benefit
accrual purposes, for which such service is taken into account or recognized,
provided that there be no duplication of such benefits as are provided under any
employee benefit plans, practices, or
- 5 -
<PAGE> 6
policies of the Company or the Bank that continue in effect following the
Effective Date.
2. EFFECTIVE DATE.
The Effective Date shall be the date to be specified in the Articles of
Merger to be filed with the Secretary of State of the State of Utah pursuant to
section 16-10a-1105 of the Utah Business Corporation Act and the Secretary of
State of the State of Arizona pursuant to section 10-074 of the Arizona General
Corporation Law, which date shall be the latest of:
2.1. Company Shareholder Approval. The date following the day upon
which the shareholders of the Company approve, ratify, and confirm the
transactions contemplated by this Agreement; or
2.2. Bank Shareholder Approval. The date following the day upon
which the shareholder of the Bank approves, ratifies, and confirms the
transactions contemplated by this Agreement; or
2.3. Federal Reserve Approval. The first to occur of (a) the date
thirty days following the date of the order of the Board of Governors of the
Federal Reserve System or the Federal Reserve Bank of San Francisco acting
pursuant to authority delegated to it by the Board of Governors of the Federal
Reserve System (collectively, the "Board of Governors") approving the Holding
Company Merger, or (b) if, pursuant to section 321(a) of the Riegle Community
Development and Regulatory Improvement Act of 1994 (the "Riegle Act"), the Board
of Governors shall have prescribed a shorter period of time with the concurrence
of the Attorney General of the United States, the date on which such shorter
period of time shall elapse, or (c) the date ten days following the date on
which the Board of Governors indicates its waiver of jurisdiction over the
Holding Company Merger; or
2.4. Comptroller Approval. The first to occur of (a) the date thirty
days following the date of the order of the Comptroller of the Currency (the
"Comptroller") approving the Bank Merger, or (b) if, pursuant to section 321(b)
of the Riegle Act, the Comptroller shall have prescribed a shorter period of
time with the concurrence of the Attorney General of the United States, the date
on which such shorter period of time shall elapse; or
2.5. State Regulatory Approvals.
(a) If such an order shall be required by law, the date ten
days following the date of the order of the Commissioner of
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<PAGE> 7
Financial Institutions of the State of Utah (the "Commissioner") approving the
transactions contemplated by this Agreement; or
(b) If such an order shall be required by law, the date ten
days following the date of the order of the Superintendent of Banks of the State
of Arizona (the "Superintendent") approving the transactions contemplated by
this Agreement; or
2.6. Other Regulatory Approvals. The date upon which any other
material order, approval, or consent of a federal or state regulator of
financial institutions or financial institution holding companies authorizing
consummation of the transactions contemplated by this Agreement is obtained or
any waiting period mandated by such order, approval or consent has run; or
2.7. Expiration of Stays. Ten days after any stay of the approvals
of any of the Comptroller, the Board of Governors, the Commissioner, or the
Superintendent of the transactions contemplated by this Agreement or any
injunction against closing of said transactions is lifted, discharged, or
dismissed; or
2.8. Mutual Agreement. Such other date as shall be mutually agreed
to by Zions Bancorp and the Company.
3. CONDITIONS PRECEDENT TO PERFORMANCE OF OBLIGATIONS OF THE PARTIES.
The obligations of Zions Bancorp and the Company to consummate the
Holding Company Merger and the obligations of NBA and the Bank to consummate the
Bank Merger shall be subject to the conditions that on or before the Effective
Date:
3.1. Regulatory Approvals. Orders, consents, and approvals, in form
and substance reasonably satisfactory to Zions Bancorp and the Company, shall
have been entered by the requisite governmental authorities, granting the
authority necessary for consummation of the transactions contemplated by this
Agreement and the operation by Zions Bancorp of the business of the Company and
by NBA of the business of the Bank and each of the branches of the Bank as
branches of NBA, pursuant to the provisions of applicable law; and all other
requirements prescribed by law or by the rules and regulations of any other
regulatory authority having jurisdiction over such transactions shall have been
satisfied.
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<PAGE> 8
3.2. Registration Statement.
(a) Effectiveness. The registration statement to be filed by
Zions Bancorp with the Securities and Exchange Commission (the "SEC") pursuant
to the Securities Act of 1933 (the "Securities Act") in connection with the
registration of the shares of Zions Bancorp Stock to be used as consideration in
connection with the Holding Company Merger (the "Registration Statement") shall
have become effective under that Act, and Zions Bancorp shall have received all
required state securities laws or "blue sky" permits and other required
authorizations or confirmations of the availability of exemptions from
registration requirements necessary to issue Zions Bancorp Stock in the Holding
Company Merger.
(b) Absence of Stop-Order. Neither the Registration
Statement nor any such required permit, authorization or confirmation shall be
subject to a stop-order or threatened stop-order by the SEC or any state
securities authority.
3.3. Federal Income Taxation. The Company and the Bank shall have
received, and Zions Bancorp shall have been furnished a copy of, a written
opinion of O'Connor, Cavanagh, Anderson, Westover, Killingsworth & Beshears,
P.A. or of McGladrey & Pullen, LLP or of another firm mutually agreeable to
Zions Bancorp and the Company, applying existing law, that the reorganization
contemplated by this Agreement shall qualify as one or more tax-free
reorganizations under the Code and the regulations and rulings promulgated
thereunder. Each of the Company and the Bank agrees to use its best efforts to
solicit such opinion in good faith and in a timely manner.
3.4. Absence of Litigation. No action, suit, or proceeding shall
have been instituted or shall have been threatened before any court or other
governmental body or by any public authority to restrain, enjoin, or prohibit
the Mergers, or which might restrict the operation of the business of the
Company or that of the Bank or the exercise of any rights with respect thereto
or to subject any of the parties hereto or any of their directors or officers to
any liability, fine, forfeiture, divestiture, or penalty on the ground that the
transactions contemplated hereby, the parties hereto, or their directors or
officers have breached or will breach any applicable law or regulation or have
otherwise acted improperly in connection with the transactions contemplated
hereby and with respect to which the parties hereto have been advised by counsel
that, in the opinion of such counsel, such action, suit, or proceeding raises
substantial questions of law or fact which could reasonably be decided adversely
to any party hereto or its directors or officers.
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<PAGE> 9
3.5. Adverse Legislation. No legislation shall have been enacted and
no regulation or other governmental requirement shall have been adopted or
imposed that has rendered or will render consummation of any of the material
transactions contemplated by this Agreement impossible, or that would materially
and adversely affect the economic assumptions of the material transactions
contemplated hereby or the business, operations, financial condition, properties
or assets of the combined enterprise of Zions Bancorp and the Company or
otherwise materially impair the value of the Company to Zions Bancorp.
3.6. Employment and Competition Agreement. NBA and John E. Byrd
shall have executed an employment and non-competition agreement substantially in
form and substance as that set forth as Exhibit III attached hereto.
4. CONDITIONS PRECEDENT TO PERFORMANCE OF THE OBLIGATIONS OF
ZIONS BANCORP AND NBA.
The obligations of Zions Bancorp and NBA hereunder are subject to the
satisfaction, on or prior to the Effective Date, of all the following
conditions, compliance with which or the occurrence of which may be waived in
whole or in part by Zions Bancorp in writing:
4.1. Approval by Shareholders of the Company and the Bank.
(a) The shareholders of the Company, acting at a meeting duly
and properly called for such purpose pursuant to a proxy statement in form and
substance reasonably satisfactory to Zions Bancorp and its counsel, shall have
approved, ratified, and confirmed the Holding Company Merger by not less than
the requisite percentage of the outstanding voting stock of each class of the
Company, in accordance with the applicable laws of the State of Arizona, and
dissenters' rights of appraisal under the Appraisal Laws shall have been
effectively preserved as of the Effective Date by owners of not more than 6
percent of the outstanding shares of Company Common Stock.
(b) The shareholders of the Bank shall have approved,
ratified, and confirmed the Bank Merger by not less than the requisite
percentage of the outstanding voting stock of each class of the Bank, in
accordance with the applicable laws of the State of Arizona.
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<PAGE> 10
4.2. Representations and Warranties; Performance of Obligations.
All representations and warranties of the Company and the Bank
contained in this Agreement shall be true and correct in all material respects
as of the Effective Date with the same effect as if such representations and
warranties had been made or given at and as of such date, except that
representations and warranties of the Company and the Bank contained in this
Agreement which specifically relate to an earlier date shall be true and correct
in all material respects as of such earlier date. All covenants and obligations
to be performed or met by the Company or the Bank on or prior to the Effective
Date shall have been so performed or met. On the Effective Date, each of the
Company and the Bank shall deliver to Zions Bancorp its certificate signed by
its chairman, its president, and its chief financial officer to that effect. The
delivery of such certificate shall in no way diminish the warranties,
representations, covenants, and obligations of the Company or the Bank made in
this Agreement.
4.3. Opinion of Company Counsel. Zions Bancorp and NBA shall have
received a favorable opinion from O'Connor, Cavanagh, Anderson, Westover,
Killingsworth & Beshears, P.A., dated the Effective Date, substantially in form
and substance as that set forth as Exhibit IV attached hereto.
4.4. Opinion of Company Litigation Counsel. Zions Bancorp and NBA
shall have received a favorable opinion dated the Effective Date, in form and
substance reasonably satisfactory to its counsel, from litigation counsel to the
Company and the Bank, whose identity shall be acceptable to Zions Bancorp. Such
opinion shall state that except with respect to matters set forth in Schedule
4.4 to this Agreement or in a schedule to the opinion, the contents of the
latter of which schedules shall be acceptable to Zions Bancorp in its sole
discretion, (a) to the best of the knowledge of counsel, there is no action,
suit, or proceeding before or by any court or governmental agency or body,
domestic or foreign, now pending or threatened against the Company or the Bank
which might result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs, or business prospects of the
Company or the Bank considered as one enterprise, or which might materially and
adversely affect the properties or assets of the Company or the Bank considered
as one enterprise or which might prevent, hinder, or delay the consummation of
the transactions contemplated by this Agreement; and (b) to the best of the
knowledge of counsel, all pending legal or governmental proceedings to which the
Company or the Bank is a party or of which any of their respective properties or
assets is the subject,
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<PAGE> 11
including ordinary routine litigation incidental to its business are, considered
in the aggregate, not material. If any matters are set forth in a schedule to
the opinion, the opinion shall also state that the statements in that schedule
regarding such matters fairly summarize the matters therein described.
4.5. Delivery of Branch Authorizations. The Bank shall have delivered
to Zions Bancorp originals or certified copies of all of its regulatory
authorizations entitling the Bank to operate each of its branch offices,
together with a certification by the Bank dated the Effective Date, signed by
its chairman, its president, and its chief financial officer, certifying that
such branch certificates have not been revoked or threatened to be revoked and
that such certificates are in full force and effect.
4.6. No Adverse Developments.
(a) During the period from September 30, 1995 to the Effective
Date, (i) there shall not have been any material adverse change in the financial
position or results of operations of the Company or the Bank taken as a whole,
nor in the financial position or results of operations of the Bank, nor shall
the Company or the Bank have sustained any material loss or damage to its
properties, whether or not insured, which materially affects its ability to
conduct its business; (ii) neither the Company nor the Bank shall have become a
party to any litigation or been threatened to be made a party to any litigation
which, in the judgment of Zions Bancorp, makes or would make either of the
Mergers inadvisable or impracticable to Zions Bancorp or NBA; and (iii) none of
the events described in clauses (a) through (f) of Section 6.16 of this
Agreement shall have occurred, and each of the practices and conditions
described in clauses (x) through (z) of that section shall have been maintained.
(b) As of the Effective Date, the authorized capital stock and
the status and characteristics of subscriptions, warrants, options, rights,
convertible securities, similar arrangements and commitments in respect of
capital stock, transfer restrictions, and stock reservations of the Company and
the Bank and the status of shareholder agreements and other agreements,
understandings, and commitments relating to the voting or disposition of capital
stock of the Company and the Bank shall be as stated in section 6.9. As of the
Effective Date, the Company shall hold of record and beneficially all of the
capital stock of the Bank.
(c) As of the Effective Date, other than liabilities incurred
subsequent to September 30, 1995 either in the ordinary
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<PAGE> 12
course of business or with the consent of Zions Bancorp, there shall be no
liabilities of the Company or the Bank which were not reflected on the September
30, 1995 statement of condition of the Company.
(d) Zions Bancorp shall have received a certificate of each
of the Company and the Bank dated the Effective Date, signed by its chairman,
its president, and its chief financial officer, certifying to the matters set
forth in paragraphs (a), (b), and (c) of this section 4.6. The delivery of such
certificate shall in no way diminish the warranties and representations of the
Company or the Bank made in this Agreement.
4.7. Consolidated Net Worth. On and as of the Effective Date, the
consolidated net worth of the Company as determined in accordance with generally
accepted accounting principles shall not be less than the consolidated net worth
of the Company as of September 30, 1995 as determined in accordance with
generally accepted accounting principles.
4.8. Loan Loss Reserve Method. During the period from September 30,
1995 to the Effective Date, the Bank shall have continued to employ the loan
loss reserve methodology which it employed at September 30, 1995 and shall have
maintained an aggregate reserve for loan losses not less than that which it
maintained at September 30, 1995.
5. CONDITIONS PRECEDENT TO PERFORMANCE OF OBLIGATIONS OF THE COMPANY AND
THE BANK.
The obligations of the Company and the Bank hereunder are subject to
the satisfaction, on or prior to the Effective Date, of all the following
conditions, compliance with which or the occurrence of which may be waived in
whole or in part by the Company in writing:
5.1. Representations and Warranties; Performance of Obligations. All
representations and warranties of Zions Bancorp and NBA contained in this
Agreement shall be true and correct in all material respects as of the Effective
Date with the same effect as if such representations and warranties had been
made or given at and as of such date, except that representations and warranties
of Zions Bancorp and NBA contained in this Agreement which specifically relate
to an earlier date shall be true and correct in all material respects as of such
earlier date. All covenants and obligations to be performed or met by Zions
Bancorp and NBA on or prior to the Effective Date shall have been so performed
or met.
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<PAGE> 13
On the Effective Date, each of Zions Bancorp and NBA shall deliver to the
Company its certificate signed by either its Chairman of the Board or its
President to that effect. The delivery of such certificate shall in no way
diminish the warranties, representations, covenants, and obligations of Zions
Bancorp or NBA made in this Agreement.
5.2. Opinion of Zions Bancorp Counsel. The Company and the Bank shall
have received a favorable opinion of Metzger, Hollis, Gordon & Mortimer, dated
the Effective Date, substantially in form and substance as that set forth as
Exhibit V attached hereto.
5.3. No Adverse Developments. During the period from September 30,
1995 to the Effective Date, there shall not have been any material adverse
change in the financial position or results of operations of Zions Bancorp nor
shall Zions Bancorp have sustained any material loss or damage to its
properties, whether or not insured, which materially affects its ability to
conduct its business; and the Company shall have received a certificate of Zions
Bancorp dated the Effective Date, signed by either its Chairman of the Board or
its President, to the foregoing effect. The delivery of such certificate shall
in no way diminish the warranties and representations of Zions Bancorp or those
of NBA made in this Agreement.
5.4. Status of Zions Bancorp Stock. Zions Bancorp Stock, including
the Zions Bancorp Stock to be issued in the Holding Company Merger, shall be
quoted on the National Market System of the National Association of Securities
Dealers' Automated Quotation System (or else shall become listed on the New York
Stock Exchange or the American Stock Exchange).
5.5. Receipt of Fairness Opinion. The Company shall have received a
favorable opinion from M-One, Inc. with respect to the fairness of the terms of
the Holding Company Merger to the shareholders of the Company from a financial
point of view (the "Fairness Opinion").
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE BANK.
The Company and the Bank (collectively the "Warrantors" and each
individually a "Warrantor") jointly and severally represent and warrant to Zions
Bancorp and NBA as follows:
6.1. Organization, Powers, and Qualification. The Warrantor is a
corporation which is duly organized, validly existing, and in good standing
under the laws of its jurisdiction of incorporation
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<PAGE> 14
and has all requisite corporate power and authority to own and operate its
properties and assets, to lease the properties used in its business, and to
carry on its business as now conducted. The Warrantor owns or possesses in the
operation of its business all franchises, licenses, permits, branch
certificates, consents, approvals, waivers, and other authorizations,
governmental or otherwise, which are necessary for it to conduct its business as
now conducted, except for those where the failure of such ownership or
possession would not adversely affect the operation and properties of the
Warrantor in any material respect. The Warrantor is duly qualified and licensed
to do business and is in good standing in every jurisdiction with respect to
which the failure to be so qualified or licensed could result in liability
exceeding $25,000 or adversely affect the operation and properties of the
Warrantor in an amount exceeding $25,000.
6.2. Execution and Performance of Agreement. The Warrantor has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder.
6.3. Absence of Violations.
(a) The Warrantor is not in violation of its charter documents
or bylaws, or of any applicable federal, state, or local law or ordinance or any
order, rule, or regulation of any federal, state, local, or other governmental
agency or body, in any material respect, or in default with respect to any
order, writ, injunction, or decree of any court, or in default under any order,
license, regulation, or demand of any governmental agency, any of which
violations or defaults might have a materially adverse effect on the business,
properties, liabilities, financial position, results of operations, or prospects
of the Warrantor; and the Warrantor has not received any claim or notice of
violation with respect thereto.
(b) Neither the Warrantor nor any member of its management is
a party to any assistance agreement, supervisory agreement, memorandum of
understanding, consent order, cease and desist order or condition of any
regulatory order or decree with or by the Board of Governors, the Federal
Deposit Insurance Corporation (the "FDIC"), any other banking or securities
authority of the United States or the State of Utah or the State of Arizona, or
any other regulatory agency that relates to the conduct of the business of the
Warrantor or its assets. Except as previously disclosed to Zions Bancorp in
writing, no such agreement, memorandum, order, condition, or decree is pending
or threatened.
(c) The Warrantor has established policies and procedures to
provide reasonable assurance of compliance in a safe and
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<PAGE> 15
sound manner with the federal banking, credit, housing, consumer protection, and
civil rights laws and with all other laws applicable to the operations of the
Warrantor and the regulations adopted under each of those laws, so that
transactions are executed and assets are maintained in accordance with such laws
and regulations. The policies and practices of the Warrantor with respect to all
such laws and regulations reasonably limit noncompliance and detect and report
noncompliance to management of the Warrantor.
6.4. Compliance with Agreements. The Warrantor is not in violation of
any material term of any material security agreement, mortgage, indenture, or
any other contract, agreement, instrument, lease, or certificate. The capital
ratios of the Warrantor comply fully with all terms of all currently outstanding
supervisory and regulatory requirements and with the conditions of all
regulatory orders and decrees.
6.5. Binding Obligations; Due Authorization. Subject to the approval
of its shareholders, this Agreement constitutes valid, legal, and binding
obligations of the Warrantor, 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 thereby have been duly and validly authorized by the board of
directors of the Warrantor. Subject to approval by the shareholders of the
Warrantor of this Agreement, no other corporate proceedings on the part of the
Warrantor are necessary to authorize the execution and delivery of this
Agreement or the carrying out of the transactions contemplated hereby.
6.6. 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 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 the Warrantor. 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 the
Warrantor pursuant to any material agreement or instrument under which the
Warrantor 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
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<PAGE> 16
arrangement of the Warrantor in respect of which it is an obligor; (b) if the
Holding Company Merger is approved by the Board of Governors under the Bank
Holding Company Act of 1956, as amended (the "BHC Act") or if the Board of
Governors waives jurisdiction under that act, and if the Bank Merger is approved
by the Comptroller, and if the transactions contemplated by this Agreement are
approved by the Commissioner and the Superintendent, violate any law, statute,
rule, or regulation of any government or agency to which the Warrantor is
subject and which is material to its operations; or (c) violate any judgment,
order, writ, injunction, decree, or ruling to which the Warrantor 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, other than
approval of or waiver of jurisdiction over the transactions contemplated by this
Agreement by the Board of Governors, the Comptroller, the Commissioner, and the
Superintendent.
6.7. Compliance with BHC Act.
(a) The Company is registered as a bank holding company under
the BHC Act. All of the activities and investments of the Company conform to the
requirements applicable generally to bank holding companies under the BHC Act
and the regulations of the Board of Governors adopted thereunder.
(b) No corporation or other entity, other than the Company, is
registered or is required to be registered as a bank holding company under the
BHC Act by virtue of its control over the Bank or over any company that directly
or indirectly has control over the Bank.
6.8. Subsidiaries.
(a) Other than (with respect to the Company) the Bank, which
is a direct, wholly owned subsidiary of the Company, neither of the Warrantors
has any subsidiaries or directly or indirectly owns, controls, or holds with the
power to vote any shares of the capital stock of any company (except shares held
by the Bank for the account of others in a fiduciary or custodial capacity in
the ordinary course of its business and shares lawfully acquired by the Bank in
satisfaction of a debt previously contracted in good faith). There are no
outstanding subscriptions, options, warrants, convertible securities, calls,
commitments, or agreements calling for or requiring the issuance, transfer,
sale, or other disposition
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<PAGE> 17
of any shares of the capital stock of the Bank, or calling for or requiring the
issuance of any securities or rights convertible into or exchangeable for shares
of capital stock of the Bank. Other than entities whose shares were lawfully
acquired by the Bank in satisfaction of a debt previously contracted in good
faith, there are no other direct or indirect subsidiaries of the Company or the
Bank which are required to be consolidated or accounted for on the equity method
in the consolidated financial statements of the Company or the financial
statements of the Bank prepared in accordance with generally accepted accounting
principles.
(b) Neither the Bank nor the Company has a direct or indirect
equity or ownership interest which represents 5 percent or more of the aggregate
equity or ownership interest of any entity (including, without limitation,
corporations, partnerships, and joint ventures).
6.9. Capital Structure.
(a) The authorized capital stock of the Company consists of
2,000,000 shares of Company Common Stock, no par value, of which, as of the date
of this Agreement, 1,266,362 shares have been duly issued and are validly
outstanding, fully paid, and held by approximately 514 shareholders of record;
no shares of Company Common Stock are held by the Company as treasury shares.
The aforementioned shares of Company Common Stock are the only voting securities
of the Company authorized, issued, or outstanding as of such date; and no
subscriptions, warrants, options, rights, convertible securities, or similar
arrangements or commitments in respect of securities of the Company are
authorized, issued, or outstanding which would enable the holder thereof to
purchase or otherwise acquire shares of any class of capital stock of the
Company. None of the Company Common Stock is subject to any restrictions upon
the transfer thereof under the terms of the corporate charter or bylaws of the
Company.
(b) The authorized capital stock of the Bank consists of
1,149,898 shares of Bank Common Stock, no par value, of which, as of the date of
this Agreement, 1,149,898 shares have been duly issued and are validly
outstanding, fully paid, and all of which are held of record and beneficially by
the Company. The aforementioned shares of Bank Common Stock are the only voting
securities of the Bank authorized, issued, or outstanding as of such date; and
no subscriptions, warrants, options, rights, convertible securities, or similar
arrangements or commitments in respect of securities of the Bank are authorized,
issued, or outstanding which would enable the holder thereof to purchase or
otherwise acquire shares of any class of capital stock of the Bank. None of the
Bank
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<PAGE> 18
Common Stock is subject to any restrictions upon the transfer thereof under the
terms of the corporate charter or bylaws of the Bank.
(c) None of the shares of Company Common Stock or Bank Common
Stock has been issued in violation of the preemptive rights of any shareholder.
(d) As of the date hereof, to the best of the knowledge of the
Warrantor, and except for this Agreement, there are no shareholder agreements,
or other agreements, understandings, or commitments relating to the right of any
holder or beneficial owner of more than 1 percent of the issued and outstanding
shares of any class of the capital stock of either Warrantor to vote or to
dispose of his, her or its shares of capital stock of that Warrantor.
(e) The Company has issued $2,500,000 principal amount of
8.75% Senior Notes Due July 1, 2000 (the "Notes"), all of which as of the date
of this Agreement are outstanding and held by approximately 62 holders of
record. The Notes are the only nonvoting securities of the Company authorized,
issued, or outstanding as of such date. The Notes may be prepaid at the election
of the Company as of the date of this Agreement at 102 percent of principal
amount, and after July 1, 1996 at no more than 101 percent of principal amount,
provided that accrued interest must also be paid at time of prepayment. The
Company is not and has never been in violation of any material affirmative or
negative covenant contained in the Note and Agency Agreement governing the
Notes, and no Event of Default under the Note and Agency Agreement has occurred
or is continuing.
6.10. Articles of Incorporation, Bylaws, and Minute Books. The copies
of the articles of incorporation and all amendments thereto and of the bylaws,
as amended, of the Warrantor that have been made available for inspection by
Zions Bancorp are true, correct, and complete copies thereof. The minute books
of the Warrantor which have been made or will, no later than ten business days
after the date hereof, be made available for inspection by Zions Bancorp until
the Effective Date contain accurate minutes of all meetings and accurate
consents in lieu of meetings of the board of directors (and any committee
thereof) and of the shareholders of the Warrantor since its inception. These
minute books accurately reflect all transactions referred to in such minutes and
consents in lieu of meetings and disclose all material corporate actions of the
shareholders and boards of directors of the Warrantor and all committees
thereof. Except as reflected in such minute books, there are no minutes of
meetings or consents in lieu of meetings of
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<PAGE> 19
the board of directors (or any committee thereof) or of shareholders of the
Warrantor.
6.11. Books and Records. The books and records of the Warrantor
fairly reflect the transactions to which it is a party or by which its
properties are subject or bound. Such books and records have been properly kept
and maintained and are in compliance in all material respects with all
applicable legal and accounting requirements. The Warrantor follows generally
accepted accounting principles applied on a consistent basis in the preparation
and maintenance of its books of account and financial statements, including but
not limited to the application of the accrual method of accounting for interest
income on loans, leases, discounts, and investments, interest expense on
deposits and all other liabilities, and all other items of income and expense.
The Warrantor has made all accruals in amounts which accurately report income
and expense in the proper periods in accordance with generally accepted
accounting principles. The Warrantor has filed all material reports and returns
required by any law or regulation to be filed by it.
6.12. Regulatory Approvals and Filings, Contracts, Commitments, etc.
The Company has made or will, no later than ten business days after the date
hereof, make available for inspection by Zions Bancorp until the Effective Date
originals or copies of the following documents relating to the Company and the
Bank:
(a) All regulatory approvals received since January 1, 1989,
of the Company and the Bank relating to all bank and nonbank acquisitions or the
establishment of de novo operations;
(b) All employment contracts, deferred compensation,
non-competition, bonus, stock option, profit-sharing, pension, retirement,
consultation after retirement, incentive, insurance arrangements or plans
(including medical, disability, group life or other insurance plans), and any
other remuneration or fringe benefit arrangements applicable to employees,
officers, or directors of the Company or the Bank, accompanied by any
agreements, including trust agreements, embodying such contracts, plans, or
arrangements, and all employee manuals and memoranda relating to employment and
benefit policies and practices of any nature whatsoever (whether or not
distributed to employees or any of them), and any actuarial reports and audits
relating to such plans;
(c) All material contracts, agreements, leases, mortgages,
and commitments, except those entered into in the ordinary course of business,
to which the Company or the Bank is a party or may be bound; or, if any of the
same be oral, written
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<PAGE> 20
summaries of all such oral contracts, agreements, leases, mortgages, and
commitments;
(d) All material contracts, agreements, leases, mortgages, and
commitments, whether or not entered into in the ordinary course of business, to
which the Company or the Bank is a party or may be bound and which require the
consent or approval of third parties to the execution and delivery of this
Agreement or to the consummation or performance of any of the transactions
contemplated thereby, or, if any of the same be oral, written summaries of all
such oral contracts, agreements, leases, mortgages, and commitments;
(e) All deeds, leases, contracts, agreements, mortgages, and
commitments, whether or not entered into in the ordinary course of business, to
which the Company or the Bank is a party or may be bound and which relate to
land, buildings, fixtures, or other real property upon or within which the
Company or the Bank operates its businesses or is authorized to operate its
businesses, or with respect to which the Company or the Bank has any application
pending for authorization to operate its businesses;
(f) Any pending application, including any documents or
materials related thereto, which has been filed by the Company or the Bank with
any federal or state regulatory agency with respect to the establishment of a
new office or the acquisition or establishment of any additional banking or
nonbanking subsidiary; and
(g) All federal and state tax returns filed by the Company or
the Bank for the years 1988 through 1994, a copy of the most recent audit
examination of each of the Company and the Bank by the Internal Revenue Service
("IRS"), if any, a copy of the most recent state revenue agency examination, if
any, of each of the Company and the Bank, and all tax rulings with respect to
the Company or the Bank received from the IRS since January 1, 1987.
6.13. Financial Statements. The Company has furnished to Zions Bancorp
its consolidated statement of condition as of each of December 31, 1992,
December 31, 1993, December 31, 1994, and September 30, 1995, and its related
consolidated statement of income, consolidated statement of changes in financial
position, and consolidated statement of changes in stockholders' equity for each
of the periods then ended, and the notes thereto (collectively, the "Company
Financial Statements"). All of the Company Financial Statements, including the
related notes, (a) were prepared in accordance with generally accepted
accounting principles applied in all material respects and as to each category
of
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<PAGE> 21
assets and liabilities and each category of income and expense on a consistent
basis throughout the periods involved, and (b) are in accordance with the books
and records of the Company which have been maintained in accordance with
generally accepted accounting principles or the requirements of financial
institution regulatory authorities, as the case may be, and (c) fairly and
accurately reflect the consolidated financial position of the Company as of such
dates, and the consolidated results of operations of the Company for the periods
ended on such dates, and do not fail to disclose any material extraordinary or
out-of-period items, and (d) reflect, in accordance with generally accepted
accounting principles applied in all material respects and as to each category
of assets and liabilities and each category of income and expense on a
consistent basis throughout the periods involved, adequate provision for, or
reserves against, the possible loan losses of the Company as of such dates.
6.14. Call Reports; Bank Holding Company Reports.
(a) The Bank has furnished to Zions Bancorp its Consolidated
Reports of Condition and Consolidated Reports of Income for the calendar
quarters dated March 31, 1994 and thereafter. All of such Consolidated Reports
of Condition and Consolidated Reports of Income, including the related schedules
and memorandum items, were prepared in accordance with generally accepted
accounting principles applied in all material respects and as to each category
of assets and liabilities and each category of income and expense on a
consistent basis throughout the periods involved.
(b) No adjustments are required to be made to the equity
capital account of the Bank as reported on any of the Consolidated Reports of
Condition referred to in Subsection 6.14(a) hereof, in any material amount, in
order to conform such equity capital account to equity capital as would be
determined in accordance with generally accepted accounting principles.
(c) The Company has furnished to Zions Bancorp the annual
report on Form FR Y-6 as filed with the Board of Governors as of December 31,
1994 on behalf of the Company.
6.15. Absence of Undisclosed Liabilities. At September 30, 1995, the
Company had no obligation or liability of any nature (whether absolute, accrued,
contingent, or otherwise, and whether due or to become due) which was material,
or that when combined with all similar obligations or liabilities would have
been material, to the Company, except (a) as disclosed in the Company Financial
Statements, or (b) as set forth on Schedule 6.15 hereof,
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<PAGE> 22
or (c) for unfunded loan commitments made by the Company or the Bank in the
ordinary course of its business consistent with past practice; nor does there
exist a set of circumstances resulting from transactions effected or events
occurring on or prior to September 30, 1995 or from any action omitted to be
taken during such period that could reasonably be expected to result in any such
material obligation or liability, except as disclosed or provided for in the
Company Financial Statements. The amounts set up as current liabilities for
taxes in the Company Financial Statements are sufficient for the payment of all
taxes (including, without limitation, federal, state, local, and foreign excise,
franchise, property, payroll, income, capital stock, and sales and use taxes)
accrued in accordance with generally accepted accounting principles and unpaid
at September 30, 1995. Since September 30, 1995, neither the Company nor the
Bank has incurred or paid any obligation or liability that would be material (on
a consolidated basis) to the Company, except (x) for obligations incurred or
paid in connection with transactions by it in the ordinary course of its
business consistent with past practices, or (y) as set forth on Schedule 6.15
hereof, or (z) as expressly contemplated herein.
6.16. Absence of Certain Developments. Since September 30, 1995, there
has been (a) no material adverse change in the condition, financial or
otherwise, or, taken as a whole, to the assets, properties, liabilities, or
businesses of the Company or the Bank; (b) no material deterioration in the
quality of the loan portfolio of the Bank or of any major component thereof, and
no material increase in the level of nonperforming assets or non-accrual loans
at the Bank or in the level of its provision for credit losses or its reserve
for possible credit losses; (c) no declaration, setting aside, or payment by the
Company or the Bank of any regular dividend, special dividend, or other
distribution with respect to any class of capital stock of the Company or the
Bank, other than customary cash dividends paid by the Bank whose amounts have
not exceeded past practice and the intervals between which dividends have not
been more frequent than past practice; (d) no repurchase by the Company of any
of its capital stock; (e) no material loss, destruction, or damage to any
material property of the Company or the Bank, which loss, destruction, or damage
is not covered by insurance; and (f) no material acquisition or disposition of
any asset, nor any material contract outside the ordinary course of business
entered into by the Company or the Bank nor any substantial amendment or
termination of any material contract outside the ordinary course of business to
which the Company or the Bank is a party, nor any other transaction by the
Company or the Bank involving an amount in excess of $50,000 other than for fair
value in the ordinary course of its business. Since September 30, 1995, (x) the
Warrantor has conducted its business only in the
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<PAGE> 23
ordinary course of such business and consistent with past practice; (y) the
Company, on a consolidated basis, has maintained the quality of its loan
portfolio and that of each of its major components at approximately the same
level as existed at September 30, 1995; and (z) the Company, on a consolidated
basis, has administered its investment portfolio pursuant to essentially the
same policies and procedures as existed during 1993 and 1994 and the first nine
months of 1995, and has taken no action to lengthen the average maturity of the
investment portfolio, or of any significant category thereof, to any material
extent.
6.17. Reserve for Possible Credit Losses. The Company's consolidated
reserve for possible credit losses as of September 30, 1995 was adequate to
absorb reasonably anticipated losses in the consolidated loan and lease
portfolios of the Company, in view of the size and character of such portfolios,
current economic conditions, and other pertinent factors. Management
periodically reevaluates the adequacy of such reserve based on portfolio
performance, current economic conditions, and other factors.
6.18. Tax Matters.
(a) All federal, state, local, and foreign tax returns and
reports (including, without limitation, all income tax, unemployment
compensation, social security, payroll, sales and use, excise, privilege,
property, ad valorem, franchise, license, school, and any other tax under laws
of the United States or any state or municipal or political subdivision thereof)
required to be filed by or on behalf of the Warrantor have been timely filed
with the appropriate governmental agencies in all jurisdictions in which such
returns and reports are required to be filed, or requests for extensions have
been timely filed, granted, and have not expired for periods ending on or before
December 31, 1994, and all returns filed are complete and accurate to the best
of the knowledge of the Warrantor and properly reflect the taxes of the
Warrantor for the periods covered thereby. All taxes shown on filed returns have
been paid. As of the date hereof, there is no audit examination, deficiency, or
refund litigation or tax claim or any notice of assessment or proposed
assessment by the IRS or any other taxing authority, or any other matter in
controversy with respect to any taxes that might result in a determination
adverse to the Warrantor, except as reserved against in the Company Financial
Statements. All federal, state, and local taxes, assessments, interest,
additions, deficiencies, fees, penalties, and other governmental charges or
impositions due with respect to completed and settled examinations or concluded
litigation have been properly accrued or paid.
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<PAGE> 24
(b) The Warrantor has not executed an extension or waiver of
any statute of limitations on the assessment or collection of any tax due that
is currently in effect.
(c) To the extent any federal, state, local, or foreign taxes
are due from the Warrantor for the period or periods beginning January 1, 1995
or thereafter through and including the Effective Date, adequate provision on an
estimated basis has been or will be made for the payment of such taxes by
establishment of appropriate tax liability accounts on the last monthly
financial statements of the Company prepared before the Effective Date.
(d) Deferred taxes of the Warrantor have been provided for in
accordance with generally accepted accounting principles as in effect on the
date of this Agreement.
(e) The Bank's deduction for bad debts taken and the reserve
for loan losses for federal income tax purposes at September 30, 1995, were not
greater than the maximum amount permitted under the provisions of section 585 of
the Code.
(f) Other than liens arising under the laws of the State of
Arizona with respect to taxes assessed and not yet due and payable, there are no
tax liens on any of the properties or assets of the Company or any of its
subsidiaries.
(g) The Company and the Bank have timely filed all information
returns required by sections 6041, 6041A, 6042, 6045, 6049, 6050H, and 6050J of
the Code and have exercised due diligence in obtaining certified taxpayer
identification numbers as required pursuant to Treasury Regulations Section
35a.9999.
(h) The taxable year end of the Company for federal income tax
purposes is, and since the inception of the Company has continuously been,
December 31.
6.19. Consolidated Net Worth. The consolidated net worth of the
Company on the date of this Agreement, as determined in accordance with
generally accepted accounting principles, is not less than the consolidated net
worth of the Company as of September 30, 1995 as determined in accordance with
generally accepted accounting principles.
6.20. Examinations. To the extent consistent with law, each of the
Company and the Bank has heretofore disclosed to Zions Bancorp relevant
information contained in its most recent Report of Examination issued by the
Board of Governors or the FDIC, as the case may be. Such information so
disclosed consists of all
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<PAGE> 25
material information with respect to the financial condition of the Warrantor
included in such reports, and does not omit or will not omit any information
necessary to make the information disclosed not misleading.
6.21. Reports. Since January 1, 1991, the Warrantor has effected all
registrations and filed all reports and statements, together with any amendments
required to be made with respect thereto, which the Warrantor was required to
effect or file with (a) the Board of Governors, (b) the FDIC, (c) the United
States Department of the Treasury, (d) the Superintendent, and (e) any other
governmental or regulatory authority or agency having jurisdiction over the
operations of the Warrantor. None of such registrations, reports, and documents,
including the financial statements, exhibits, and schedules thereto, contains
any statement which, at the time and in the light of the circumstances under
which it was made, is false or misleading with respect to any material fact or
which omits to state any material fact necessary in order to make the statements
contained therein not false or misleading.
6.22. FIRA Compliance and Other Transactions with Affiliates.
To the best of the knowledge of the Warrantor:
(a) none of the officers, directors, or beneficial holders of
5 percent or more of the common stock of the Warrantor and no person
"controlled" (as that term is defined in the Financial Institutions Regulatory
and Interest Rate Control Act of 1978) by the Warrantor, has any ongoing
material transaction with the Warrantor or any other Warrantor on the date of
this Agreement;
(b) none of such officers, directors, holders, or other
persons has any ownership interest in any business, corporate or otherwise,
which is a party to, or in any property which is the subject of, business
arrangements or relationships of any kind with the Warrantor or any other
Warrantor not in the ordinary course of business; and
(c) any other extensions of credit by the Warrantor to such
officers, directors, and other persons have heretofore been disclosed in writing
by the Warrantor to Zions Bancorp.
6.23. SEC Registered Securities. No equity or debt securities of the
Company or the Bank are registered or required to be registered under the
Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
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<PAGE> 26
6.24. Legal Proceedings. Except as disclosed in the Company Financial
Statements, there is no claim, action, suit, arbitration, investigation, or
other proceeding pending before any court, governmental agency, authority or
commission, arbitrator, or "impartial mediator" (of which the Company or any of
its subsidiaries has been served with process or otherwise been given notice)
or, to the best of the knowledge of the Warrantor, threatened or contemplated
against or affecting it or its property, assets, interests, or rights, or any
basis therefor of which notice has been given, which, if adversely determined,
would have a material adverse effect (financial or otherwise) on the business,
operating results, or financial condition of the Company or which otherwise
could prevent, hinder, or delay consummation of the transactions contemplated by
this Agreement.
6.25. Absence of Governmental Proceedings. The Warrantor is not a
party defendant or respondent to any pending legal, equitable, or other
proceeding commenced by any governmental agency and, to the best of its
knowledge, no such proceeding is threatened.
6.26. Federal Deposit Insurance. The deposits held by the Bank are
insured within statutory limits by the Bank Insurance Fund of the FDIC pursuant
to the provisions of the Federal Deposit Insurance Act, as amended (12 U.S.C.
Section 1811 et seq.), and the Bank has paid all assessments and filed all
related reports and statements required under the Federal Deposit Insurance Act.
None of the deposits of the Bank are insured by the Savings Association
Insurance Fund of the FDIC.
6.27. Other Insurance. The Warrantor carries insurance with reputable
insurers, including blanket bond coverage, in such amounts as are reasonable to
cover such risks as are customary in relation to the character and location of
its properties and the nature of its businesses. All such policies of insurance
are in full force and effect, and no notice of cancellation has been received.
All premiums to date have been paid in full. The Warrantor is not in default
with respect to any such policy which is material to the Company.
6.28. Flood Hazards. The financial statements of the Bank reflect
adequate provision for, or reserves against, contingencies relating to the risk
of flooding within its lending area. The Bank is in material compliance with
Part 339 of the rules and regulations of the FDIC ("Loans in Areas Having
Special Flood Hazards").
6.29. Labor Matters. The Warrantor is not a party to or bound by any
collective bargaining contracts with respect to any employees of the Warrantor.
Since January 1, 1985, there has not
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<PAGE> 27
been, nor to the best of the knowledge of the Warrantor was there or is there
threatened, any strike, slowdown, picketing, or work stoppage by any union or
other group of employees against the Warrantor or any of its premises, or any
other labor trouble or other occurrence, event, or condition of a similar
character. As of the date hereof, the Warrantor is not aware of any attempts to
organize a collective bargaining unit to represent any of its employee groups.
6.30. Employee Benefit Plans.
(a) Schedule 6.30 hereto contains a list and brief
descriptions of all pension, retirement, stock purchase, stock bonus, stock
ownership, stock option, performance share, stock appreciation right, phantom
stock, savings, or profit-sharing plans, any employment, deferred compensation,
consultant, bonus, or collective bargaining agreement, or group insurance
contract or any other incentive, welfare, life insurance, death or survivor's
benefit, health insurance, sickness, disability, medical, surgical, hospital,
severance, layoff or vacation plans, contracts, and arrangements or employee
benefit plans or agreements sponsored, maintained, or contributed to by the
Warrantor for the employees or former employees of the Warrantor. The Company
has previously made available and will continue to make available to Zions
Bancorp for its inspection until the Effective Date true, complete, and accurate
copies of all plans and arrangements listed on Schedule 6.30, together with (i)
the most recent actuarial and financial report prepared with respect to any such
plans which constitute "qualified plans" under section 401(a) of the Code, and
(ii) the most recent annual reports, if any, filed with any government agency
and all IRS rulings and determination letters and any open requests for such
rulings and letters that pertain to any such plan.
(b) Except for liabilities to the Pension Benefit Guaranty
Corporation ("PBGC") pursuant to section 4007 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), all of which have been fully paid,
and except for liabilities to the IRS under section 4971 of the Code, all of
which have been fully paid, the Warrantor has no liability with respect to any
pension plan qualified under section 401 of the Code. The Warrantor does not
sponsor or maintain any defined benefit plan and has never sponsored or
maintained any defined benefit plan.
(c) All "employee benefit plans," as defined in section 3(3)
of ERISA, that cover one or more employees employed by the Warrantor (each
individually a "Plan" and collectively the "Plans"), comply in all material
respects with ERISA and, where
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<PAGE> 28
applicable for tax-qualified or tax-favored treatment, with the Code. As of
September 30, 1995, the Warrantor had no material liability under any Plan which
is not reflected on the Company Financial Statements as of such date (other than
such normally unrecorded liabilities under the Plans for sick leave, holiday,
education, bonus, vacation, incentive compensation, and anniversary awards,
provided that such liabilities are not in any event material). Neither the
Plans, the Warrantor nor any trustee or administrator of the Plans has ever
engaged in a "prohibited transaction" with respect to the Plans within the
meaning of section 406 of ERISA or, where applicable, section 4975 of the Code
for which no exemption is applicable, nor have there been any "reportable
events" within section 4043 of ERISA for which the thirty-day notice therefor
has not been waived. The Warrantor has not incurred any liability under section
4201 of ERISA for a complete or partial withdrawal from a multi-employer plan.
(d) No action, claim, or demand of any kind has been brought
or threatened by any potential claimant or representative of such a claimant
under any plan, contract, or arrangement referred to in Subsection (a) of this
section, where the Warrantor may be either (i) liable directly on such action,
claim, or demand; or (ii) obligated to indemnify any person or group of persons
with respect to such action, claim, or demand which is not fully covered by
insurance maintained with reputable, responsible financial insurers or by a
self-insured plan.
6.31. Employee Relations. As of the date hereof, the Warrantor is, to
the best of its knowledge, in compliance in all material respects with all
federal and state laws, regulations, and orders respecting employment and
employment practices (including Title VII of the Civil Rights Act of 1964),
terms and conditions of employment, and wages and hours; and the Warrantor is
not engaged in any unfair labor practice. As of the date hereof, no dispute
exists between the Warrantor, and any of its employee groups regarding any
employee organization, wages, hours, or conditions of employment which would
materially interfere with the business or operations of the Warrantor.
6.32. Fiduciary Activities. The Bank is duly qualified and registered
and in good standing in accordance with the laws of each jurisdiction in which
it is required to so qualify or register as a result of or in connection with
its fiduciary or custodial activities as conducted as of the date hereof. The
Bank is duly registered under and in compliance with all requirements of the
federal Investment Advisers Act of 1940 as amended, or is exempt from
registration thereunder and from compliance with the requirements thereof. Since
January 1, 1992, the Bank has conducted, and
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<PAGE> 29
currently is conducting, all fiduciary and custodial activities in all material
respects in accordance with all applicable law.
6.33. Environmental Liability.
(a) The Warrantor is not in violation of any judgment, decree,
order, law, license, rule or regulation pertaining to environmental matters,
including those arising under the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, the
Federal Water Pollution Control Act, the Federal Clean Air Act, the Toxic
Substances Control Act, or any state or local statute, regulation, ordinance,
order or decree pertaining to environmental matters ("Environmental Laws").
(b) Neither the Warrantor nor, with respect to any real
property at any time held as collateral for any outstanding loan by the
Warrantor (collectively, the "Collateral Real Estate") and to the knowledge of
the Warrantor, any borrower of the Warrantor has received notice that it has
been identified by the United States Environmental Protection Agency as a
potentially responsible party under CERCLA with respect to a site listed on the
National Priorities List, 40 C.F.R. Part 300 Appendix B, nor has the Warrantor
or, with respect to any Collateral Real Estate and to the knowledge of the
Warrantor, any borrower of the Warrantor received any notification that any
hazardous waste, as defined by 42 U.S.C. Section 6903(5), any hazardous
substances, as defined by 42 U.S.C. Section 9601(14), any "pollutant or
contaminant," as defined by 42 U.S.C. Section 9601(33), or any toxic substance,
hazardous materials, oil, or other chemicals or substances regulated by any
Environmental Laws ("Hazardous Substances") that it has disposed of has been
found at any site at which a federal or state agency is conducting a remedial
investigation or other action pursuant to any Environmental Law.
(c) No portion of any real property at any time owned or
leased by the Warrantor (collectively, the "Warrantor Real Estate") has been
used by the Warrantor for the handling, processing, storage or disposal of
Hazardous Substances in a manner which violates any Environmental Laws and, to
the best of the knowledge of the Warrantor, no underground tank or other
underground storage receptacle for Hazardous Substances is located on any of the
Warrantor Real Estate. In the course of its activities, the Warrantor has not
generated and is not generating any hazardous waste on any of the Warrantor Real
Estate in a manner which violates any Environmental Laws. There has been no past
or present releasing, spilling, leaking, pumping, pouring, emitting, emptying,
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<PAGE> 30
discharging, injecting, escaping, leaching, disposing or dumping (collectively,
a "Release") of Hazardous Substances by the Warrantor on, upon, or into any of
the Warrantor Real Estate. In addition, to the best of the knowledge of the
Warrantor, there have been no such Releases on, upon, or into any real property
in the vicinity of any of the Warrantor Real Estate that, through soil or
groundwater contamination, may be located on any of such Warrantor Real Estate.
(d) With respect to any Collateral Real Estate, the Warrantor
has not at any time received notice from any borrower thereof or third party and
has no knowledge that such borrower has generated or is generating any hazardous
waste on any of the Collateral Real Estate in a manner which violates any
Environmental Laws or that there has been any Release of Hazardous Substances by
such borrower on, upon, or into any of the Collateral Real Estate, or that there
has been any Release on, upon, or into any real property in the vicinity of any
of the Collateral Real Estate that, through soil or groundwater contamination,
may be located on any of such Collateral Real Estate.
(e) As used in this Section 6.33, the term "Warrantor"
includes the applicable Warrantor and any partnership or joint venture in which
it has an interest, except that neither the "knowledge" nor the "best of the
knowledge" of a Warrantor shall be deemed by virtue of this section 6.33(e) to
include the knowledge of any partner or joint venturer of a Warrantor.
6.34. Intangible Property. To the best of its knowledge, the Warrantor
owns or possesses the right, free of the claims of any third party, to use all
material trademarks, service marks, trade names, copyrights, patents, and
licenses currently used by it in the conduct of its business. To the best of the
knowledge of the Warrantor, no material product or service offered and no
material trademark, service mark, or similar right used by the Warrantor (a)
invades the interest of any person in reputation (such as by libel or slander)
or privacy; (b) interferes with the contractual relations or prospective
business advantages of any person; (c) adversely affects the interest of any
person in freedom from unjustifiable litigation (such as by malicious
prosecution, abuse of process or other wrongful civil proceeding); or (d)
infringes the trademark, trade name, fictitious name, service mark, patent or
copyright rights of any person; and, as of the date hereof, the Warrantor has
not received any written or oral notice of any claim of such invasion,
interference, adverse effect, or infringement.
6.35. Real and Personal Property. Except for property and assets
disposed of in the ordinary course of business, the
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<PAGE> 31
Warrantor possesses good and marketable title to and owns, free and clear of any
mortgage, pledge, lien, charge, or other encumbrance which would materially
interfere with the business or operations of the Warrantor, its real and
personal property and other assets, including without limitation those
properties and assets reflected in the Company Financial Statements as of
September 30, 1995, or acquired by the Warrantor subsequent to the date thereof.
The leases pursuant to which the Warrantor leases real or personal property are
valid and effective in accordance with their respective terms; and there is not,
under any such lease, any material existing default or any event which, with the
giving of notice or lapse of time or otherwise, would constitute a default. The
real and personal property leased by the Warrantor is free from any adverse
claim which would materially interfere with the business or operation of the
Company taken as a whole. The material properties and equipment owned or leased
by the Warrantor are in normal operating condition, free from any known defects,
except such minor defects as do not materially interfere with the continued use
thereof in the conduct of the normal operations of the Warrantor.
6.36. Loans, Leases, and Discounts. To the best of the knowledge of
the Warrantor, each loan, lease, and discount reflected as an asset of the
Company in the Company Financial Statements as of September 30, 1995, or
acquired since that date, is the legal, valid, and binding obligation of the
obligor named therein, enforceable in accordance with its terms; and no loan,
lease, or discount having an unpaid balance (principal and accrued interest) in
excess of $50,000 is subject to any asserted defense, offset, or counterclaim
known to the Warrantor.
6.37. Material Contracts. Neither the Warrantor nor any of the assets,
businesses, or operations of the Warrantor is as of the date hereof a party to,
or is bound or affected by, or receives benefits under any material agreement,
arrangement, or commitment not cancelable by it without penalty, other than (a)
the agreements set forth on Schedule 6.37 hereof, and (b) agreements,
arrangements, or commitments entered into in the ordinary course of its business
consistent with past practice, or, if there has been no past practice,
consistent with prudent banking practices.
6.38. Employment and Severance Arrangements.
(a) Except as set forth on Schedule 6.30 with respect to John
E. Byrd, it is not the policy and has never been the practice of the Warrantor
to grant any of its officers, directors, consultants, or other management
officials or any officer, director, consultant, or management official of any
other Warrantor employment contracts providing for increased or accelerated
compensation
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<PAGE> 32
in the event of a change of control with respect to the Warrantor or any other
event affecting the ownership, control, or management of the Warrantor.
(b) Except as set forth on Schedule 6.30 with respect to John
E. Byrd and William R. Esmeier, there are no employment or severance contracts,
agreements, or arrangements between the Warrantor or any other Warrantor and any
officer, director, consultant, or other management official.
6.39. Material Contract Defaults. All contracts, agreements, leases,
mortgages, or commitments referred to in Section 6.12(c) hereof are valid and in
full force and effect on the date hereof. The Warrantor is not in default in any
material respect under any material contract, agreement, commitment,
arrangement, lease, insurance policy, or other instrument to which it is a party
or by which its assets, business, or operations may be bound or under which it
or its assets, business, or operations receive benefits; and there has not
occurred any event that with the lapse of time or the giving of notice or both
would constitute such a default.
6.40. Capital Expenditures. The Warrantor has no outstanding
commitments in the nature of capital expenditures which in the aggregate exceed
$25,000 except as set forth in the Company Financial Statements as of September
30, 1995 and the period then ended or as set forth on Schedule 6.40.
6.41. Repurchase Agreements. With respect to all agreements pursuant
to which the Warrantor has purchased securities subject to an agreement to
resell, the Warrantor has a valid, perfected first lien or security interest in
the securities securing the agreement, and the value of the collateral securing
each such agreement equals or exceeds the amount of the debt secured by such
collateral under such agreement.
6.42. Dividends. The Warrantor has not paid any dividend to its
shareholders which caused the regulatory capital of the Warrantor to be less
than the amount then required by applicable law, or which exceeded any other
limitation on the payment of dividends imposed by law, agreement, or regulatory
policy.
6.43. Interest Rate Risk Management Instruments.
(a) Schedule 6.43 contains a true, correct, and complete list
of all interest-rate swaps, caps, floors, and options agreements and other
interest-rate risk management arrangements to which the Warrantor is a party or
by which any of its properties or assets may be bound.
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(b) All interest rate swaps, caps, floors, and option
agreements and other interest rate risk management arrangements to which the
Warrantor is a party or by which any of its properties or assets may be bound
were entered into in the ordinary course of its business and, to the best of its
knowledge, in accordance with prudent banking practice and applicable rules,
regulations, and regulatory policies and with counterparties believed to be
financially responsible at the time and are legal, valid, and binding
obligations enforceable in accordance with their terms (except as may be limited
by bankruptcy, insolvency, moratorium, reorganization, or similar laws affecting
the rights of creditors generally and the availability of equitable remedies),
and are in full force and effect. The Warrantor has duly performed in all
material respects all of its obligations thereunder to the extent that such
obligations to perform have accrued; and to the best of its knowledge, there are
no breaches, violations or defaults or allegations or assertions of such by any
party thereunder.
6.44. Brokers and Advisers. Except as set forth on Schedule 6.44,
(a) there are no claims for brokerage commissions, finder's
fees, or similar compensation arising out of or due to any act of the Warrantor
in connection with the transactions contemplated by this Agreement or, except as
entered into in the ordinary course of business, based upon any agreement or
arrangement made by or on behalf of the Warrantor or any other Warrantor; and
(b) except with respect to the receipt of the Fairness
Opinion, the Warrantor has not entered into any agreement or understanding with
any party relating to financial advisory services provided or to be provided
with respect to the transactions contemplated by this Agreement.
6.45. Disclosure. No representation or warranty hereunder and no
certificate, statement, or other document delivered by the Warrantor hereunder
or in connection with this Agreement or any of the transactions contemplated
hereunder contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading. There is no fact known to the Warrantor (except facts common to
financial institutions in the United States which are known generally within the
U.S. banking community) which reasonably might materially adversely affect the
business, assets, liabilities, financial condition, results of operations, or
prospects of the Warrantor which has not been disclosed in the Company Financial
Statements, Schedule 6.45, or a certificate
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<PAGE> 34
delivered to Zions Bancorp by the Warrantor. Copies of all documents referred to
in this Agreement, unless prepared solely by Zions Bancorp or NBA or solely by
Zions Bancorp and NBA and third parties hereto, are true, correct, and complete
copies thereof and include all amendments, supplements, and modifications
thereto and all waivers thereunder.
6.46. Regulatory and Other Approvals. As of the date hereof, the
Warrantor is not aware of any reason why all material consents and approvals
shall not be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement, as shall be necessary for (a)
consummation of the transactions contemplated by this Agreement, and (b) the
continuation by the Warrantor after the Effective Date of the business of the
Warrantor as such business is carried on immediately prior to the Effective
Date, free of any conditions or requirements which, in the reasonable opinion of
the Warrantor, could have a material adverse effect upon the business,
operations, activities, earnings, or prospects of the Company. As of the date
hereof, the Warrantor is not aware of any reason why all material consents and
approvals shall not be procured from all other persons whose consent or approval
shall be necessary for (y) consummation of the transactions contemplated by this
Agreement, or (z) the continuation by the Warrantor after the Effective Date of
the business of the Warrantor as such business is carried on immediately prior
to the Effective Date.
7. COVENANTS OF THE COMPANY AND THE BANK.
The Company and the Bank hereby jointly and severally covenant and
agree as follows:
7.1. Rights of Access. In addition to and not in limitation of any
other rights of access provided to Zions Bancorp and NBA herein, until the
Effective Date the Company and the Bank will give to Zions Bancorp and to its
representatives, including its certified public accountants, KPMG Peat Marwick,
full access during normal business hours to all of the property, documents,
contracts, books, and records of the Company and the Bank, and such information
with respect to their business affairs and properties as Zions Bancorp from time
to time may reasonably request.
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7.2. Corporate Records, Contracts, etc.
(a) The Company and the Bank will make available for
inspection by Zions Bancorp copies of the articles of incorporation and bylaws
of the Company and the Bank, and will make available for inspection by Zions
Bancorp minute books of the Company and the Bank, all of which shall be
certified to be complete and true copies.
(b) The Company and the Bank will make available for
inspection by Zions Bancorp copies of all contracts or agreements involving
amounts in excess of $25,000 to which the Company or the Bank is a party,
including but not limited to data processing contracts, service contracts,
contracts to purchase or lease real property or equipment, guaranties,
employment contracts, and insurance contracts pertaining to fire, accident,
indemnity, fidelity, health, life, hospitalization, or other employee benefits.
(c) The Company and the Bank will furnish to Zions Bancorp the
following information with respect to properties owned by the Company and the
Bank: (i) a brief description and location of each parcel of real property owned
by the Company or the Bank and (ii) a brief description of personal property
covered by lease or other rental arrangements to which the Company or the Bank
is a party, if the applicable personal property has a fair value of $10,000 or
more or if the term of the lease or other rental arrangement exceeds one year,
including a copy of the relevant leases.
7.3. Monthly and Quarterly Financial Statements; Minutes of
Meetings and Other Materials.
(a) Each of the Company and the Bank shall continue to prepare
all of the monthly and quarterly financial statements and financial reports to
regulatory authorities for the months and quarterly periods ending between
October 1, 1995 and the Effective Date which it customarily prepared during the
period between January 1, 1993 and September 30, 1995 and shall promptly provide
Zions Bancorp with copies of all such financial statements and reports. Such
financial statements and reports shall be verified by the chief financial
officer of the reporting entity. All of such financial statements and reports,
including the related notes, schedules, and memorandum items, will have been
prepared in accordance with generally accepted accounting principles applied in
all material respects and as to each category of assets and liabilities and each
category of income and expense on a consistent basis throughout the periods
involved (except that Consolidated
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Reports of Condition and Consolidated Reports of Income required to be filed by
the Bank under federal law may be prepared in accordance with the official
instructions applicable thereto at the time of filing).
(b) Each of the Company and the Bank shall promptly provide
Zions Bancorp with (i) copies of all of its periodic reports to directors and to
shareholders, whether or not such reports were prepared or distributed in
connection with a meeting of the board of directors or a meeting of the
shareholders, prepared or distributed between the date of this Agreement and the
Effective Date, and (ii) complete copies of all minutes of meetings of its board
of directors and its shareholders which meetings take place between the date of
this Agreement and the Effective Date, certified by the secretary or cashier or
an assistant secretary or assistant cashier of the Company or the Bank, as the
case may be. Notwithstanding the previous sentence, the Company and the Bank may
withhold from Zions Bancorp copies of internal studies, surveys, analyses, and
reports that were prepared by or for any officers or directors for the purpose
of evaluating or analyzing the transactions contemplated by this Agreement.
7.4. Extraordinary Transactions. Without the prior written consent of
Zions Bancorp, neither the Company nor the Bank shall, on or after the date of
this Agreement: (a) declare or pay any cash dividends or property dividends with
respect to any class of its capital stock, with the exception of customary
periodic cash dividends paid by the Bank to holders of its common stock at such
intervals and in such amounts as are in every case consistent with the amounts
and intervals characteristic of the Bank; (b) declare or distribute any stock
dividend, authorize a stock split, or authorize, issue, or make any distribution
of its capital stock or any other securities, or grant any options to acquire
such additional securities; (c) merge into, consolidate with, or sell its assets
to any other person, or enter into any other transaction or agree to effect any
other transaction not in the ordinary course of its business except as
explicitly contemplated herein, or engage in any discussions concerning such a
possible transaction except as explicitly contemplated herein; (d) convert the
charter or form of entity of the Bank from that of an Arizona banking
corporation to any other charter or form of entity; (e) make any direct or
indirect redemption, purchase, or other acquisition of any of its capital stock;
(f) incur any liability or obligation, make any commitment or disbursement,
acquire or dispose of any property or asset, make any contract or agreement, or
engage in any transaction, except in the ordinary course of its business; (g)
other than in the ordinary course of business, subject any of its properties
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<PAGE> 37
or assets to any lien, claim, charge, option, or encumbrance; (h) except for
increases in the ordinary course of business in accordance with past practices
which together with all other compensation rate increases do not exceed 4
percent per annum of the aggregate payroll as of October 1, 1995, increase the
rate of compensation of any employee or enter into any agreement to increase the
rate of compensation of any employee; (i) create or modify any pension or profit
sharing plan, bonus, deferred compensation, death benefit, or retirement plan,
or the level of benefits under any such plan, nor increase or decrease any
severance or termination pay benefit or any other fringe benefit; nor (j) enter
into any employment or personal services contract with any person, including
without limitation any contract, agreement, or arrangement described in Section
6.38(a) hereof, except directly to facilitate the transactions contemplated by
this Agreement.
7.5. Preservation of Business. Each of the Company and the Bank (a)
will carry on its business and manage its assets and properties diligently and
substantially in the same manner as heretofore; (b) will maintain the ratio of
its loans to its deposits at approximately the same level as existed at
September 30, 1995, as adjusted to allow for seasonal fluctuations of loans and
deposits of a kind and amount experienced traditionally by the Company and the
Bank; (c) will manage its investment portfolio in substantially the same manner
and pursuant to substantially the same investment policies as in 1993 and 1994
and the first nine months of 1995, and will take no action to change the
percentage which the aggregate investment portfolio of the Company or the Bank
bears to the total assets of the Company or the Bank, as the case may be, or to
lengthen the average maturity of the investment portfolio, or of any significant
category thereof, to any material extent; (d) will continue in effect its
present insurance coverage on all properties, assets, business, and personnel;
(e) will use its best efforts to preserve its business organization intact;
except as otherwise consented to by Zions Bancorp, will use its best efforts to
keep available its present employees; and will use its best efforts to preserve
its present relationships with customers and others having business dealings
with it; (f) in accordance with the ordinary course of business and consistent
with good banking and business practices, will not do anything nor will it fail
to do anything which will cause a breach of or default in any contract,
agreement, commitment, or obligation to which it is a party or by which it may
be bound; and (g) will not amend its articles of incorporation or bylaws or
permit any of its subsidiaries to amend its articles of incorporation or bylaws.
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<PAGE> 38
7.6. Comfort Letter. At the time of the effectiveness of the
Registration Statement, but prior to the mailing of the proxy materials, and at
the Effective Date, the Company shall furnish Zions Bancorp with a letter from
McGladrey & Pullen, LLP, in form and substance reasonably acceptable to Zions
Bancorp, stating that (a) they are independent accountants with respect to the
Company and the Bank within the meaning of the 1933 Act and the published rules
and regulations thereunder, (b) in their opinion the consolidated financial
statements of the Company included in the Registration Statement and examined by
them comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the published rules and regulations thereunder,
and (c) a reading of the Company's compiled consolidated financial statements
and the Bank's audited financial statements and the latest available unaudited
consolidated financial statements of the Company and financial statements of the
Bank and inquiries of certain officials of the Company and the Bank responsible
for financial and accounting matters as to transactions and events since
December 31, 1994 did not cause them to believe that (i) the Company's compiled
consolidated financial statements and such latest available consolidated
financial statements are not stated on a basis consistent with that followed in
the Company's compiled consolidated financial statements; (ii) the Bank's
audited consolidated financial statements and such latest available unaudited
consolidated financial statements are not stated on a basis consistent with that
followed in the Bank's audited consolidated financial statements; (iii) except
as disclosed in the letter, at a specified date not more than five business days
prior to the date of such letter, there was any change in the Company's capital
stock or any change in consolidated long-term debt or any decrease in the
consolidated net assets of the Company as compared with the respective amounts
shown in the most recent Company compiled consolidated financial statements; or
(iv) except as disclosed in the letter, at a specified date not more than five
business days prior to the date of such letter, there was any change in the
Bank's capital stock or any change in consolidated long-term debt or any
decrease in the consolidated net assets of the Bank as compared with the
respective amounts shown in the most recent Bank audited consolidated financial
statements. The letter shall also cover such other matters pertaining to the
Company's and the Bank's financial data and statistical information included in
the Registration Statement as may reasonably be requested by Zions Bancorp.
7.7. Affiliates' Agreements. The Company will furnish to Zions
Bancorp a list of all persons known to the Company who at the date of the
Company's special meeting of shareholders to vote upon the transactions
contemplated by this Agreement may be deemed to be
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<PAGE> 39
"affiliates" of the Company within the meaning of Rule 145 under the 1933 Act.
The Company will use its best efforts to cause each such "affiliate" of the
Company to deliver to Zions Bancorp not later than thirty days prior to the
Effective Date a written agreement providing that such person will not sell,
pledge, transfer, or otherwise dispose of the shares of Company Common Stock or
Bank Common Stock beneficially owned by such person, or the shares of Zions
Bancorp Stock to be received by such person in the Holding Company Merger or the
Bank Merger, or any other shares of Zions Bancorp Stock held by such person,
except in compliance with the applicable provisions of the 1933 Act and the
rules and regulations thereunder.
7.8. Inconsistent Activities.
(a) Subject to subsection (b) of this section 7.8, unless and
until the Mergers have been consummated or this Agreement has been terminated in
accordance with its terms, the Company and the Bank will not (i) solicit or
encourage, directly or indirectly, any inquiries or proposals (each an
"Alternative Proposal") to acquire more than 1 percent of the Company Common
Stock or any capital stock of the Bank or any significant portion of its or the
Bank's assets (whether by tender offer, merger, purchase of assets or other
transactions of any type) (each an "Alternative Transaction"); (ii) afford any
third party which may be considering any Alternative Proposal or Alternative
Transaction access to its or the Bank's properties, books or records except as
required by mandatory provisions of law; (iii) enter into any discussions or
negotiations for, or enter into any agreement or understanding which provides
for, any Alternative Transaction; or (iv) authorize or permit any of its
directors, officers, employees or agents to do or permit any of the foregoing.
If the Company or the Bank becomes aware of any Alternative Proposal or of any
other matter which could adversely affect this Agreement or the Mergers or
either of them, the Company and the Bank shall immediately give notice thereof
to Zions Bancorp.
(b) Nothing contained in subsection (a) of this section 7.8
shall prohibit the board of directors of the Company from furnishing information
to or entering into discussions or negotiations with any person that makes an
unsolicited bona fide Alternative Proposal if, and only to the extent that, (i)
the board of directors of the Company, based upon the advice of outside counsel,
determines in good faith that such action is required for the board of directors
to comply with its fiduciary duties to stockholders imposed by law, (ii) prior
to furnishing such information to, or entering into discussions or negotiations
with, such person, the Company provides written notice to Zions Bancorp to the
effect that
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<PAGE> 40
it is furnishing information to, or entering into discussions or negotiations
with, such person, and (iii) the Company keeps Zions Bancorp informed of the
status and all material information with respect to any such discussions or
negotiations.
(c) Nothing in subsection (b) of this section 7.8 shall (i)
permit the Company or the Bank to terminate this Agreement (except as
specifically provided in section 10.1 or 10.2 of this Agreement), (ii) permit
the Company of the Bank to enter into any agreement with respect to an
Alternative Transaction for as long as this Agreement remains in effect (it
being agreed that for as long as this Agreement remains in effect, the Company
and the Bank shall not enter into any agreement with any person that provides
for, or in any way facilitates, an Alternative Transaction (other than a
confidentiality agreement in customary form)), or (iii) affect any other
obligation of the Company or the Bank under this Agreement.
8. REPRESENTATIONS AND WARRANTIES OF ZIONS BANCORP AND NBA.
Zions Bancorp (with respect to itself and NBA) and NBA (with respect to
itself) represent and warrant to the Company and the Bank as follows:
8.1. Organization, Powers, and Qualification. It is a corporation
which is duly organized, validly existing, and in good standing under the laws
of its jurisdiction of incorporation and has all requisite corporate power and
authority to own and operate its properties and assets, to lease the properties
used in its business, and to carry on its business as now conducted. It owns or
possesses in the operation of its business all franchises, licenses, permits,
branch certificates, consents, approvals, waivers, and other authorizations,
governmental or otherwise, which are necessary for it to conduct its business as
now conducted, except for those where the failure of such ownership or
possession would not adversely affect its operation and properties in any
material respect. It is duly qualified and licensed to do business and is in
good standing in every jurisdiction in which such qualification or license is
required or with respect to which the failure to be so qualified or licensed
could result in material liability or adversely affect its operation and
properties in any material respect.
8.2. Execution and Performance of Agreement. It has all requisite
corporate power and authority to execute and deliver this Agreement and to
perform its terms.
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<PAGE> 41
8.3. Binding Obligations; Due Authorization. This Agreement
constitutes its valid, legal, and binding obligations 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 have been duly and validly authorized by its
board of directors. Subject to approval by the shareholders of NBA of this
Agreement, no other corporate proceedings on its part are necessary to authorize
the execution and delivery of this Agreement or the carrying out of the
transactions contemplated hereby.
8.4. 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 terms hereof will conflict with, or result
in a breach of any of the terms, conditions, or provisions of, or constitute a
default under its organizational documents or bylaws. 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 of its property or assets pursuant to any
material agreement or instrument under which it 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 it in respect of which it is
an obligor, or (b) if the Holding Company Merger is approved by the Board of
Governors under the BHC Act or if the Board of Governors waives jurisdiction
under that Act, and if the Bank Merger is approved by the Comptroller, and if
the transactions contemplated by this Agreement are approved by the Commissioner
and the Superintendent, violate any law, statute, rule, or regulation of any
government or agency to which it is subject and which is material to its
operations, or (c) violate any judgment, order, writ, injunction, decree, or
ruling to which it 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, other than approval of or waiver of jurisdiction over the
transactions contemplated by this Agreement by the Board of Governors, the
Comptroller, the Commissioner, and the Superintendent.
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<PAGE> 42
8.5. Brokers and Advisers.
(a) There are no claims for brokerage commissions, finder's
fees, or similar compensation arising out of or due to any act of its in
connection with the transactions contemplated by this Agreement or based upon
any agreement or arrangement made by or on behalf of it.
(b) It has not entered into any agreement or understanding
with any party relating to financial advisory services provided or to be
provided with respect to the transactions contemplated by this Agreement.
8.6. Books and Records. Its books and records fairly reflect the
transactions to which it is a party or by which its properties are subject or
bound. Such books and records have been properly kept and maintained and are in
compliance in all material respects with all applicable legal and accounting
requirements. It follows generally accepted accounting principles applied on a
consistent basis in the preparation and maintenance of its books of account and
financial statements, including but not limited to the application of the
accrual method of accounting for interest income on loans, leases, discounts,
and investments, interest expense on deposits and all other liabilities, and all
other items of income and expense. It has made all accruals in amounts which
accurately report income and expense in the proper periods in accordance with
generally accepted accounting principles. It has filed all material reports and
returns required by any law or regulation to be filed by it.
8.7. Financial Statements. Zions Bancorp has furnished to the Company
its consolidated statement of condition as of each of December 31, 1993,
December 31, 1994, and September 30, 1995, and its related consolidated
statement of income, consolidated statement of changes in financial position,
and consolidated statement of changes in stockholders' equity for each of the
periods then ended, and the notes thereto (collectively, the "Zions Bancorp
Financial Statements"). All of the Zions Bancorp Financial Statements, including
the related notes, (a) were prepared in accordance with generally accepted
accounting principles applied in all material respects and as to each category
of assets and liabilities and each category of income and expense on a
consistent basis throughout the periods involved, and (b) are in accordance with
the books and records of Zions Bancorp which have been maintained in accordance
with generally accepted accounting principles, and (c) fairly and accurately
reflect the consolidated financial position of Zions Bancorp as of such dates,
and the consolidated results of operations of Zions Bancorp for the periods
ended on
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<PAGE> 43
such dates, and do not fail to disclose any material extraordinary or
out-of-period items, and (d) reflect, in accordance with generally accepted
accounting principles applied in all material respects and as to each category
of assets and liabilities and each category of income and expense on a
consistent basis throughout the periods involved, adequate provision for, or
reserves against, the possible loan losses of Zions Bancorp as of such dates.
8.8. Absence of Certain Developments. Since September 30, 1995, there
has been (a) no material adverse change in the condition, financial or
otherwise, assets, properties, liabilities, or businesses of Zions Bancorp, and
(b) no material deterioration in the quality of the loan portfolio of Zions
Bancorp or of any major component thereof, and no material increase in the level
of nonperforming assets or nonaccrual loans at Zions Bancorp or in the level of
its provision for credit losses or its reserve for possible credit losses.
8.9. Disclosure. No representation or warranty hereunder and no
certificate, statement, or other document delivered by it hereunder or in
connection with this Agreement or any of the transactions contemplated hereunder
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading. There is
no fact known to it which might materially adversely affect its business,
assets, liabilities, financial condition, results of operations, or prospects
which has not been disclosed in the Zions Bancorp Financial Statements or a
certificate delivered by it to the Company or the Bank. Copies of all documents
referred to in this Agreement, unless prepared solely by the Company or the Bank
or solely by the Company and the Bank and third parties hereto, are true,
correct, and complete copies thereof and include all amendments, supplements,
and modifications thereto and all waivers thereunder.
8.10. Zions Bancorp Stock. The shares of Zions Bancorp Stock to be
issued by Zions Bancorp pursuant to this Agreement, when issued pursuant to and
in accordance with this Agreement, will be duly authorized and legally issued,
fully paid, and non-assessable.
9. CLOSING.
9.1. Place and Time of Closing. Closing shall take place at the
offices of Zions Bancorp, 1380 Kennecott Building, Salt Lake City, Utah, or such
other place as the parties choose, commencing at 10:00 a.m., local time, on the
Effective Date, provided that all
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<PAGE> 44
conditions precedent to the obligations of the parties hereto to close have then
been met or waived.
9.2. Events To Take Place at Closing. At the Closing, the following
actions will be taken:
(a) Such certificates and other documents as are required by
this Agreement to be executed and delivered on or prior to the Effective Date
and have not been so executed and delivered, and such other certificates and
documents as are mutually deemed by the parties to be otherwise desirable for
the effectuation of the Closing, will be so executed and delivered; and then
(b) The Holding Company Merger and the issuance of shares and
of the right to receive cash incident to the Holding Company Merger shall be
effected; provided, however, that the administrative and ministerial aspects of
the issuance of stock certificates and cash incident to the Holding Company
Merger will be settled as soon thereafter as shall be reasonable under the
circumstances; and then
(c) The Bank Merger shall be effected.
10. TERMINATION, DAMAGES FOR BREACH, WAIVER, AND AMENDMENT.
10.1. Termination by Reason of Lapse of Time. This Agreement may be
terminated by Zions Bancorp or the Company on or after August 31, 1996, by
instrument duly authorized and executed and delivered to the other such party,
unless the Effective Date shall have occurred on or before such date.
10.2. Grounds for Termination. This Agreement may be terminated by
written notice of termination at any time before the Effective Date (whether
before or after action by shareholders of the Company or shareholders of the
Bank):
(a) by mutual consent of the parties hereto;
(b) by Zions Bancorp, upon written notice to the Company given
at any time (i) if any of the representations and warranties of the Company or
the Bank contained in Section 6 hereof was materially incorrect when made, or
(ii) in the event of a material breach or material failure by the Company or the
Bank of any covenant or agreement of the Company or the Bank contained in this
Agreement which has not been, or cannot be, cured within thirty days after
written notice of such breach or failure is given to the Company;
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<PAGE> 45
(c) by the Company, upon written notice to Zions Bancorp given
at any time (i) if any of the representations and warranties of Zions Bancorp or
NBA contained in Section 8 hereof was materially incorrect when made, or (ii) in
the event of a material breach or material failure by Zions Bancorp or NBA of
any covenant or agreement of Zions Bancorp or NBA contained in this Agreement
which has not been, or cannot be, cured within thirty days after written notice
of such breach or failure is given to Zions Bancorp, or (iii) if the board of
directors of the Company, based upon the advice of outside counsel, determines
in good faith that such termination is required for the board of directors to
comply with its fiduciary duties to stockholders imposed by law by reason of an
Alternative Proposal being made; provided that the Company shall notify Zions
Bancorp promptly of its intention to terminate this Agreement or enter into a
definitive agreement with respect to any Alternative Proposal, but in no event
shall such notice be given less than 48 hours prior to the public announcement
of the Company's termination of this Agreement; or
(d) by either Zions Bancorp or the Company upon written notice
given to the other if the board of directors of either Zions Bancorp or the
Company shall have determined in its sole judgment made in good faith, after due
consideration and consultation with counsel, that the Mergers have become
inadvisable or impracticable by reason of the institution of litigation by the
federal government, the government of the State of Utah, or the government of
the State of Arizona to restrain or invalidate the transactions contemplated by
this Agreement.
10.3. Effect of Termination. In the event of the termination and
abandonment hereof pursuant to the provisions of Section 10.1 or Section 10.2,
this Agreement shall become void and have no force or effect, without any
liability on the part of Zions Bancorp, NBA, the Company, or the Bank or their
respective directors or officers or shareholders in respect of this Agreement.
Notwithstanding the foregoing:
(a) as provided in Section 11.4 of this Agreement, the
confidentiality agreement contained in that section shall survive
such termination;
(b) except as subsection (c) of this section 10.3 shall apply,
if such termination is a result of any of the representations and warranties of
a party being materially incorrect when made or a result of the material breach
or material failure by a party of a covenant or agreement hereunder, such party
whose representations and warranties were materially incorrect or who materially
breached or failed to perform its covenant or agreement
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<PAGE> 46
shall be liable to the other party or parties hereto solely to the extent of the
actual, reasonable out-of-pocket expenses, not to exceed $250,000, incurred by
the other party in connection with the negotiation and preparation of this
Agreement and the carrying out of the transactions contemplated hereby; and
(c) if
(i) such termination is pursuant to section 10.2(c)(iii)
of this Agreement, or if
(ii) this Agreement is terminated for any reason
specified in section 10.2(b)(i) or 10.2(b)(ii) of this Agreement and a
definitive agreement with respect to an Alternative Proposal is executed by the
Company or the Bank within one year after such termination,
then in either case, the Company shall be liable to Zions Bancorp in the amount
of $750,000, which amount will be payable to Zions Bancorp in immediately
available funds within two business days after such amount becomes due. The
Company acknowledges that the agreements contained in subsection (c) of this
section 10.3 are an integral part of the transactions contemplated in this
Agreement and that, without these agreements, Zions Bancorp would not enter into
this Agreement.
10.4. Waiver of Terms or Conditions. Any of the terms or conditions
of this Agreement may be waived at any time prior to the Effective Date by the
party which is, or whose shareholders are, entitled to the benefit thereof, by
action taken by the board of directors of such party, or by its president;
provided, however, that such waiver shall be in writing and shall be taken only
if, in the judgment of the board of directors or officer taking such action,
such waiver will not have a materially adverse effect on the benefits intended
hereunder to the shareholders of its or his corporation; and the other parties
hereto may rely on the delivery of such a waiver as conclusive evidence of such
judgment and the validity of the waiver.
10.5. Amendment.
(a) Anything herein or elsewhere to the contrary
notwithstanding, to the extent permitted by law, this Agreement and the exhibits
hereto may be amended, supplemented, or interpreted at any time prior to the
Effective Date by written instrument duly authorized and executed by each of the
parties hereto; provided, however, that this Agreement may not be amended after
the action by shareholders of the Company in any respect that would prejudice
the
- 46 -
<PAGE> 47
economic interests of such Company shareholders, or any of them, except as
specifically provided herein or by like action of such shareholders.
(b) If Zions Bancorp and the Company should mutually determine
(following receipt of advice of legal or other counsel) that it has become
inadvisable or inexpedient to effectuate the transactions contemplated by this
Agreement through means of a sequence of mergers such as is contemplated herein,
then subject to compliance with applicable laws, the parties hereto agree to
effect such change in the form of transaction as described especially in
Sections 1.1 and 9.2 of this Agreement by written instrument in amendment of
this Agreement.
11. GENERAL PROVISIONS.
11.1. Allocation of Costs and Expenses. Except as provided in Section
10.3 and this Section, each party hereto shall pay its own fees and expenses,
including without limitation the fees and expenses of its own counsel and its
own accountants, tax and financial advisers, and investment bankers incurred in
connection with this Agreement and the transactions contemplated hereby. For
purposes of this Section, (i) the cost of printing and delivering the proxy
statement and other material to be transmitted to shareholders of the Company
shall be deemed to be incurred on behalf of the Company and Zions Bancorp in
equal shares and, accordingly, will be paid one-half by the Company and one-half
by Zions Bancorp, and (ii) the cost of registering under federal and state
securities laws the stock of Zions Bancorp to be received by the shareholders of
the Company and the shareholders of the Bank shall be deemed to be incurred on
behalf of Zions Bancorp. The costs to be apportioned by operation of the
previous sentence shall not include any professional fees paid to counsel,
accountants, tax or financial advisers, or investment bankers. The cost of the
Fairness Opinion and any other oral or written opinion rendered by a financial
adviser or investment banker to the Company or its board of directors or
shareholders with respect to the fairness of the terms of the Holding Company
Merger from a financial point of view shall be deemed to be incurred on behalf
of the Company. All costs described in this section to be incurred or paid by
the Company or the Bank shall be expensed or fairly reserved against by the
Company or the Bank, as the case may be, not later than the close of business on
the last day of the calendar month preceding the Effective Date.
- 47 -
<PAGE> 48
11.2. Mutual Cooperation; Access.
(a) Subject to the terms and conditions herein provided, each
party shall use its best efforts, and shall cooperate fully with the other
party, in carrying out the provisions of this Agreement and in making all
filings and obtaining all necessary governmental approvals, and shall execute
and deliver, or cause to be executed and delivered, such governmental
notifications and additional documents and instruments and do or cause to be
done all additional things necessary, proper, or advisable under applicable law
to consummate and make effective the transactions contemplated hereby. The
Company shall take timely action in its capacity as shareholder of the Bank to
cause its shares of Bank Common Stock to be voted in favor of the Bank Merger.
Zions Bancorp shall take timely action in its capacity as shareholder of NBA to
cause its shares of the common stock of NBA to be voted in favor of the Bank
Merger.
(b) Each party acknowledges to the other its understanding
that further investigation of it by the other party may be necessary that such
other party may more fully evaluate the merits of the transactions contemplated
by this Agreement. To permit such investigation, and not in lieu or prejudice of
any other right conferred hereunder, each of the parties shall afford to the
other, and to the accountants, counsel, and other representatives of the other,
full access during normal business hours, during the period prior to the
Effective Date, to all of its properties, books, contracts, commitments and
records and, during such period, each shall furnish promptly, or make available
for inspection, to the other all information concerning its business, properties
and personnel as the other party may reasonably request.
11.3. Form of Public Disclosures. Zions Bancorp and the Company shall
mutually agree in advance upon the form and substance of all public disclosures
concerning this Agreement and the transactions contemplated hereby.
11.4. Confidentiality. Zions Bancorp and its subsidiaries (including
NBA) and the Company and the Bank shall use all information that each obtains
from the other pursuant to this Agreement (except Public Information, as defined
below) solely for the effectuation of the transactions contemplated by this
Agreement or for other purposes consistent with the intent of this Agreement.
Neither Zions Bancorp, nor its subsidiaries (including NBA), nor the Company nor
the Bank shall use any of such information (except Public Information) for any
other purpose, including, without limitation, the competitive detriment of any
party. Each of Zions Bancorp and its subsidiaries (including NBA) and the
Company and
- 48 -
<PAGE> 49
the Bank shall maintain as strictly confidential all information (except Public
Information) it learns from the other and shall, at any time, upon the request
of the other, return promptly to it all documentation provided by it or made
available to third parties. Each of the parties may disclose such information to
its respective affiliates, counsel, accountants, tax advisers, and consultants.
The confidentiality agreement contained in this Section 11.4 shall remain
operative and in full force and effect, and shall survive the termination of
this Agreement. As used in this section 11.4, the term "Public Information"
means (a) information obtained from a party or one of its affiliates that is or
has become available to the public other than as a result of a disclosure by the
party obtaining the information or one of its affiliates; and (b) information
obtained from a party or one of its affiliates that was known to the party
obtaining the information or one of its affiliates outside of and apart from the
restrictions against use and disclosure described herein, or had been previously
possessed by the party obtaining the information or one of its affiliates at the
time of receipt thereof (in circumstances not giving rise to obligations of
confidentiality).
11.5. Claims of Brokers.
(a) The Company and the Bank shall indemnify, defend, and hold
Zions Bancorp and NBA harmless for, from, and against any claim, suit,
liability, fees or expenses (including, without limitation, attorneys' fees and
costs of court) arising out of any claim for brokerage commissions, finder's
fees, or similar compensation arising out of or due to any act of the Company or
the Bank in connection with the transactions contemplated by this Agreement or
based upon any agreement or arrangement made by or on behalf of the Company or
the Bank with respect to Zions Bancorp or NBA.
(b) Zions Bancorp and NBA shall indemnify, defend, and hold
the Company and the Bank harmless for, from, and against any claim, suit,
liability, fees or expenses (including, without limitation, attorneys' fees and
costs of court) arising out of any claim for brokerage commissions, finder's
fees, or similar compensation arising out of or due to any act of Zions Bancorp
or NBA in connection with any of the transactions contemplated by this Agreement
or based upon any agreement or arrangement made by or on behalf of Zions Bancorp
or NBA with respect to the Company or the Bank.
- 49 -
<PAGE> 50
11.6. Information for Applications and Registration Statement.
(a) Each party represents and warrants that all information
concerning it which is included in any statement and application (including the
Registration Statement) made to any governmental agency in connection with the
transactions contemplated by this Agreement shall not, with respect to such
party, omit any material fact required to be stated therein or necessary to make
the statements made, in light of the circumstances under which they were made,
not misleading. The party so representing and warranting will indemnify, defend,
and hold harmless the other, each of its directors and officers, each
underwriter and each person, if any, who controls the other within the meaning
of the Securities Act, for, from and against any and all losses, claims, suits,
damages, expenses, or liabilities to which any of them may become subject under
applicable laws (including, but not limited to, the Securities Act and the
Exchange Act) and rules and regulations thereunder and will reimburse them for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any actions whether or not resulting in liability,
insofar as such losses, claims, damages, expenses, liabilities, or actions arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in any such application or statement or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary in order to make the statements
therein not misleading, but only insofar as any such statement or omission was
made in reliance upon and in conformity with information furnished in writing by
the representing and warranting party expressly for use therein. Each party
agrees at any time upon the request of the other to furnish to the other a
written letter or statement confirming the accuracy of the information contained
in any proxy statement, registration statement, report, or other application or
statement, and confirming that the information contained in such document was
furnished expressly for use therein or, if such is not the case, indicating the
inaccuracies contained in such document or draft or indicating the information
not furnished expressly for use therein. The indemnity agreement contained in
this Section 11.6(a) shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of the other party, and
shall survive the termination of this Agreement or the consummation of the
transactions contemplated thereby.
(b) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement contained in Section 11.6(a) of
this Agreement is for any reason held by a
- 50 -
<PAGE> 51
court of competent jurisdiction to be unenforceable as to any or all parties,
then the parties in such circumstances shall contribute to the aggregate losses,
claims, damages and liabilities (including any investigation, legal and other
expenses incurred in connection with, and any amounts paid in settlement of, any
action, suit or proceeding or any claims asserted) to which any party may be
subject in such proportion as the court of law determines based on the relative
fault of the parties.
11.7. Standard of Materiality.
(a) For purposes of Sections 4, 6, and 7 of this Agreement,
the terms "material" and "materially," when used with reference to items
normally expressed in dollars, shall be deemed to refer to amounts individually
and in the aggregate in excess of 3 percent of the shareholders' equity of the
Company as of September 30, 1995, as determined in accordance with generally
accepted accounting principles.
(b) For purposes of Sections 5 and 8 of this Agreement, the
terms "material" and "materially," when used with reference to items normally
expressed in dollars, shall be deemed to refer to amounts individually and in
the aggregate in excess of 3 percent of the shareholders' equity of Zions
Bancorp as of September 30, 1995, as determined in accordance with generally
accepted accounting principles.
(c) For other purposes and, notwithstanding subsections (a)
and (b) of this section 11.7, when used anywhere in this Agreement with explicit
reference to any of the federal securities laws or to the Registration
Statement, the terms "material" and "materially" shall be construed and
understood in accordance with standards of materiality as judicially determined
under the federal securities laws.
11.8. Covenants of Zions Bancorp.
(a) From the date hereof to the Effective Date, Zions Bancorp
shall, contemporaneously with the filing with the SEC of any current report on
Form 8-K pursuant to section 13 of the Securities Exchange Act of 1934, or the
public dissemination of any news release, in either case describing or relating
to any material adverse change in Zions Bancorp, deliver a copy of such report
or release to the Company.
(b) During the twenty consecutive trading days ending on and
including the fifth trading day preceding the Effective Date,
- 51 -
<PAGE> 52
Zions Bancorp shall not repurchase Zions Common Stock in the open market unless
done both (a) in connection with, and consistently with established patterns of
stock repurchases with regard to, a dividend reinvestment plan, employee stock
savings plan, employee investment savings plan, 401(k) plan, or similar plan, or
to satisfy the exercise of outstanding options on Zions Common Stock, or for
similar corporate purposes, and (b) following the receipt of favorable advice
from independent securities counsel for Zions Bancorp.
11.9. Adjustments for Certain Events. Anything in this agreement to
the contrary notwithstanding, all prices per share and exchange ratios referred
to in this Agreement shall be appropriately adjusted to account for stock
dividends, split-ups, mergers, recapitalizations, combinations, conversions,
exchanges of shares or the like, but not for normal and recurring cash dividends
declared or paid in a manner consistent with the established practice of the
payer.
11.10. Stock Repurchases. The Company and the Bank acknowledge that
from time to time Zions Bancorp repurchases shares of its common stock in the
open market in accordance with market conditions. Nothing in this Agreement
except section 11.8(b) hereof shall be construed to abridge the right of Zions
Bancorp to continue to do so in compliance with Exchange Act rules and
regulations and pursuant to advice of independent securities counsel for Zions
Bancorp.
11.11. 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.
11.12. 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 Zions Bancorp and NBA and the Company and
the Bank and their respective shareholders, any rights or remedies under or by
reason of this Agreement.
- 52 -
<PAGE> 53
11.13. Reliance Upon Representations, Warranties, and Covenants. Each
party shall be deemed to have relied upon each and every representation and
warranty of the other parties regardless of any investigation heretofore or
hereafter made by or on behalf of such party.
11.14. 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.
11.15. 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 Zions Bancorp or NBA:
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 & Mortimer
1275 K Street, N.W., Suite 1000
Washington, D. C. 20005
If to the Company or the Bank:
Southern Arizona Bancorp, Inc.
1800 Fourth Avenue
Post Office Box 5148
Yuma, Arizona 85364
Attention: Mr. John E. Byrd
President and Chief Executive Officer
- 53 -
<PAGE> 54
With a required copy to:
Robert S. Kant, Esq.
O'Connor, Cavanagh, Anderson,
Westover, 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.
11.16. Choice of Law and Venue. This Agreement 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 proper
jurisdictions and venues for any suit or action arising out of this Agreement.
Each of the parties consents to personal jurisdiction in each of such venues for
such a proceeding and agrees that it may be served with process in any action
with respect to this Agreement or the transactions contemplated 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 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 the transactions contemplated thereby brought
in the courts aforesaid.
11.17. Knowledge of a Party. References in this Agreement to the
knowledge of a party shall mean the knowledge possessed by any of such parties
or the present executive officers of such party including, without limitation,
information which is or has been in the books and records of such party.
11.18. Binding Agreement. This Agreement shall be binding upon the
parties and their respective successors and assigns.
- 54 -
<PAGE> 55
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
ZIONS BANCORPORATION
Attest: /s/ John J. Gisi By: /s/ Harris H. Simmons
---------------------- -----------------------------
John J. Gisi Harris H. Simmons
Sr. V.P. President and Chief Executive
Officer
NATIONAL BANK OF ARIZONA
Attest: /s/ Harris H. Simmons By: /s/ John J. Gisi
---------------------- -----------------------------
SOUTHERN ARIZONA BANCORP, INC.
Attest: /s/ Mary L. Pool By: /s/ John E. Byrd
---------------------- -----------------------------
John E. Byrd
President and Chief Executive
Officer
SOUTHERN ARIZONA BANK
Attest: /s/ Mary L. Pool By: /s/ John E. Byrd
---------------------- -----------------------------
John E. Byrd
President and Chief Executive
Officer
- 55 -
<PAGE> 56
- --------------------------------)
State of Arizona )
) ss.
County of Yuma )
)
- --------------------------------
On this seventeenth day of January, 1996, before me personally appeared
Harris H. Simmons, to me known to be the President and Chief Executive Officer
of Zions Bancorporation, and John J. Gisi, to me known to be the Chairman +
President of National Bank of Arizona, and acknowledged said instrument to be
the free and voluntary act and deed of each of said corporations, for the uses
and purposes therein mentioned, and each on oath stated that he was authorized
to execute said instrument.
In Witness Whereof I have hereunto set my hand and affixed my official seal
the day and year first above written.
/s/ Mary L. Pool
----------------------------
Notary Public
"OFFICIAL SEAL"
Mary L. Pool
Notary Public-Arizona
Yuma County
My Commission Expires 9/7/97
- 56 -
<PAGE> 57
- --------------------------------)
State of Arizona )
) ss.
County of Yuma )
)
- --------------------------------
On this seventeenth day of January, 1996, before me personally appeared
John E. Byrd, to me known to be the President and Chief Executive Officer of
Southern Arizona Bancorp, Inc., and to be the President and Chief Executive
Officer of Southern Arizona Bank, and acknowledged said instrument to be the
free and voluntary act and deed of each of said corporations, for the uses and
purposes therein mentioned, and on oath stated that he was authorized to execute
said instrument.
In Witness Whereof I have hereunto set my hand and affixed my official seal
the day and year first above written.
/s/ Mary L. Pool
----------------------------
Notary Public
"OFFICIAL SEAL"
Mary L. Pool
Notary Public-Arizona
Yuma County
My Commission Expires 9/7/97
- 57 -
<PAGE> 58
SCHEDULE 4.4
<PAGE> 59
SCHEDULE 6.15
UNDISCLOSED LIABILITIES
- -----------------------
NONE.
<PAGE> 60
SCHEDULE 6.30
EMPLOYEE BENEFIT PLANS
- ----------------------
Employee Stock Ownership Plan*
401-k Plan*
Medical*
Dental
Life Insurance - $25,000 per covered employee
Sick Lease - 8 days per year (regular full time employees)
Vacation - Executive Vice Presidents - 23 days
Senior Vice Presidents & Vice Presidents - 4 weeks
All other officers and exempt employees - 3 weeks
Non-exempt regular full time employees - 2 weeks
Deferred Compensation - Temple T. Moore, Executive Vice President & Chief
Financial Officer, has a self funded tax deferred
annuity in his name which will end 12/31/95. No bank
funds are involved.
Consultants - Nel Younce is retained as an outside auditor on a month to
month basis at a cost of approximately $3,000 per month.
* Copies of such documents are on file at the Company's Headquarters.
<PAGE> 61
SCHEDULE 6.37
MATERIAL CONTRACTS
NONE.
<PAGE> 62
SCHEDULE 6.40
CAPITAL EXPENDITURES
The on-going construction costs for the new office in San Luis, Arizona. List
of outstanding payments attached.
<PAGE> 63
SCHEDULE 6.40 -- CAPITAL EXPENDITURES
Outstanding payments due for San Luis Office as of December 26, 1995
<TABLE>
<CAPTION>
<S> <C>
Hoppstetters Office Supplies
(Desks, chairs, conference Table) $ 44,553.00
ATT
(Phone system & installation) 9,500.00
Yuma Office Supply
(computers for platform, gateway
Novel system and processor & training) 57,362.00
Gilpins
(finish of construction) 183,824.00
CFI
(Deposit Pro for New Accounts) 5,100.00
Interior Design
(Refrig., micro-wave, TV-VCR - Table & chairs
small refrig. for conference room) & painting 9,500.00
Southwest Financial (Teller-vision) 22,143.34
Fax Machine Yuma Copiers 2,221.00
(Maintenance of Copier) 965.00
Yuma Office Supply
(typewriters) 1,955.00
Beth & Howell 2,520.00
Block (rate board & Frame) 1,220.00
Diebold (Balance due) 12,000.00
Brandt (currency Counter) 1,300.00
CFI (Laser Pro-Loan Department) 5,500.00
-----------
$359,643.34
</TABLE>
<PAGE> 64
SCHEDULE 6.43
-------------
INTEREST RATE RISK MANAGEMENT INSTRUMENTS
- -----------------------------------------
NONE
<PAGE> 65
SCHEDULE 6.44
-------------
BROKERS & ADVISORS
- ------------------
NONE
<PAGE> 66
SCHEDULE 6.45
-------------
DISCLOSURE
- ----------
NONE
<PAGE> 67
EXHIBIT I
HOLDING COMPANY MERGER AGREEMENT
<PAGE> 68
AGREEMENT OF MERGER
This Agreement of Merger is made and entered into as of
[_______________], 1996, between ZIONS BANCORPORATION ("Zions Bancorp"), a
corporation organized under the laws of the State of Utah, and SOUTHERN ARIZONA
BANCORP, INC. (the "Company"), a corporation organized under the laws of the
State of Arizona. Zions Bancorp and the Company are hereinafter sometimes
individually called a "Constituent Corporation" and collectively called the
"Constituent Corporations."
RECITALS
Zions Bancorp is a corporation duly organized, validly existing
and in good standing under the laws of the State of Utah. As of
[_______________], 1996, the authorized capital stock of Zions Bancorp consisted
of [_________] shares of Common Stock, no par value, of which [_______] shares
were issued and outstanding; no shares of capital stock were held in its
treasury on such date.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Arizona. As of
[_______________], 1996, the authorized capital stock of the Company consisted
of [___________] shares of Common Stock, $[____] par value (the "Company Common
Stock"), of which [___________] shares were issued and outstanding; no shares of
capital stock were held in its treasury on such date.
Zions Bancorp and its affiliate, NATIONAL BANK OF ARIZONA
("NBA"), and the Company and its affiliate, SOUTHERN ARIZONA BANK (the "Bank"),
have entered into an Agreement and Plan of Reorganization, dated January 17,
1996 (the "Plan of Reorganization"), setting forth certain representations,
warranties, and agreements in connection with the transactions therein and
herein contemplated, which contemplates the merger of the Company with and into
Zions Bancorp (the "Merger") in accordance with this Agreement of Merger (the
"Agreement"). NBA and the Bank are hereinafter sometimes collectively called the
"Affiliated Corporations."
The Boards of Directors of each of Zions Bancorp, the Company,
and the Affiliated Corporations deem the Merger advisable and in the best
interests of each corporation and its stockholders. The Boards of Directors of
each of Zions Bancorp, the Company, and the Affiliated Corporations, by
resolutions duly adopted, have approved the Plan of Reorganization. The Boards
of Directors of each of Zions Bancorp and the Company, by resolutions duly
adopted,
<PAGE> 69
have approved this Agreement. The Board of Directors of the Company has directed
that this Agreement, and authorization for the transactions contemplated hereby,
be submitted to stockholders of the Company for approval. Pursuant to section
16-10a-1103 of the Utah Business Corporation Act, approval by the shareholders
of Zions Bancorp is not required.
At the Effective Date (as defined in Section 1.1 below) shares
of Company Common Stock shall be converted into the right to receive shares of
the common stock of Zions Bancorp, no par value (the "Zions Bancorp Stock"), and
cash, as provided herein.
In consideration of the premises and the mutual covenants and
agreements herein contained and subject to the terms and conditions of the
Agreement, the parties hereto hereby covenant and agree as follows:
ARTICLE I
1.1. Merger of the Company into Zions Bancorp. The Company
shall be merged with and into Zions Bancorp on the date and at the time to be
specified in the Articles of Merger to be filed with the Secretary of State of
the State of Utah pursuant to section 16-10a-1105 of the Utah Business
Corporation Act and the Secretary of State of the State of Arizona pursuant to
section 10-074 of the Arizona General Corporation Law (such date and time being
referred to herein as the "Effective Date").
1.2. Effect of the Merger. At the Effective Date:
(a) The Company and Zions Bancorp shall be a single
corporation, which shall be Zions Bancorp. Zions Bancorp is hereby designated as
the surviving corporation in the Merger and is hereinafter sometimes called the
"Surviving Corporation."
(b) The separate existence of the Company shall cease.
(c) The Surviving Corporation shall have all the rights,
privileges, immunities and powers and shall assume and be subject to all the
duties and liabilities of a corporation organized under the Utah Business
Corporation Act.
(d) The Surviving Corporation shall thereupon and thereafter
possess all of the rights, privileges, immunities, and franchises, of a public
as well as of a private nature, of each of the Constituent Corporations; and all
property, real, personal and
- 2 -
<PAGE> 70
mixed, and all debts due on whatever account, including subscriptions to shares
and all other choses in action, and all and every other interest of and
belonging to or due to each of the Constituent Corporations shall be taken and
deemed to be transferred to and vested in the Surviving Corporation without
further act or deed; and the title to any real estate, or any interest therein,
vested in either of the Constituent Corporations shall not revert or be in any
way impaired by reason of the Merger.
(e) The Surviving Corporation shall thenceforth be responsible
and liable for all the liabilities and obligations of each of the Constituent
Corporations; and any claim existing or action or proceeding pending by or
against either of the Constituent Corporations may be prosecuted as if the
Merger had not taken place, or the Surviving Corporation may be substituted in
its place. The Surviving Corporation expressly assumes and agrees to perform all
of the Company's liabilities and obligations. Neither the rights of creditors
nor any liens upon the property of either Constituent Corporation shall be
impaired by the Merger.
(f) The Articles of Incorporation of Zions Bancorp as they
exist immediately prior to the Effective Date shall be the Articles of
Incorporation of the Surviving Corporation until later amended pursuant to Utah
law.
(g) At the Effective Date and until surrendered for exchange
and payment, each outstanding stock certificate which, prior to the Effective
Date, represents shares of Company Common Stock shall, without further action,
cease to be an issued and existing share and, subject to the rights any holder
may have under Section 10-080 et seq. of the Arizona General Corporation Law,
shall be converted into a right to receive from Zions Bancorp and shall, for all
purposes represent the right to receive, upon surrender of the certificate
representing such shares, the number of shares of Zions Bancorp Stock and the
amount of cash specified in Article III; provided that, with respect to any
matters relating to stock certificates representing Company Stock, Zions Bancorp
may rely conclusively upon the record of stockholders maintained by the Company
containing the names and addresses of the holders of record of the Company's
Common Stock at the Effective Date.
1.3. Acts to Carry Out This Merger Plan.
(a) The Company and its proper officers and directors shall
and will do all such acts and things as may be necessary or proper to vest,
perfect or confirm title to such property or rights in Zions Bancorp and
otherwise to carry out the purposes of this Agreement.
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<PAGE> 71
(b) If, at any time after the Effective Date, Zions Bancorp
shall consider or be advised that any further assignments or assurances in law
or any other acts are necessary or desirable to (i) vest, perfect or confirm, of
record or otherwise, in Zions Bancorp its right, title, or interest in or under
any of the rights, properties or assets of the Company acquired or to be
acquired by Zions Bancorp as a result of, or in connection with, the Merger, or
(ii) otherwise carry out the purposes of this Agreement, the Company and its
proper officers and directors shall be deemed to have granted to Zions Bancorp
an irrevocable power of attorney to execute and deliver all such proper deeds,
assignments and assurances in law and to do all acts necessary or proper to
vest, perfect or confirm title to and possession of such rights, properties or
assets in Zions Bancorp and otherwise to carry out the purposes of this
Agreement; and the proper officers and directors of Zions Bancorp are fully
authorized in the name of the Company or otherwise to take any and all such
action.
ARTICLE II
2.1. Capitalization. The authorized shares of capital stock of
Zions Bancorp as of the Effective Date shall be [_______] shares of Common
Stock, no par value.
2.2. By-Laws. The By-Laws of Zions Bancorp as they exist
immediately prior to the Effective Date shall be the By-Laws of Zions Bancorp
until later amended pursuant to Utah law.
ARTICLE III
3.1. Manner of Converting Shares.
(a) Definitions. For the purposes of this Agreement, the
following terms shall have the meanings set forth in this Subparagraph (a).
Additional terms may be defined elsewhere herein.
(i) Average Closing Price. The average (rounded to the
nearest penny) of each Daily Sales Price of Zions Bancorp Stock for the twenty
consecutive trading days ending on and including the fifth trading day preceding
the Effective Date. Notwithstanding the foregoing, (A) if the result of the
calculation described in the previous sentence is less than $59.00, then the
Average Closing Price shall be $59.00, and (B) if the result of the calculation
described in the previous sentence is more than $72.00, then the Average Closing
Price shall be $72.00.
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<PAGE> 72
(ii) Benchmark Price. The sum of:
(A) $25,330,000.00;
(B) the consolidated net undistributed income of the
Company during the period beginning on October 1, 1995 and ending on the close
of business on the last day of the calendar month preceding the Effective Date,
calculated in accordance with generally accepted accounting principles in a
manner consistent with the Company Financial Statements (as defined in section
6.13 of the Plan of Reorganization). For the purpose of calculating net
undistributed income of the Company, any undistributed gain, net of taxes,
derived from activities or transactions which are not in the ordinary course of
its banking operations (such as, without limitation, the sale of securities or
loans, of capital assets, or of lines of business), all of which shall be
determined in accordance with generally accepted accounting principles, shall be
excluded except as mutually agreed by the parties hereto. It is understood that
the amount calculated under this section 3.1(a)(ii)(B) may be a negative number
and that the effect of summing such a negative number would be a reduction in
the Benchmark Price as otherwise would be calculated under this section
3.1(a)(ii); and
(C) if the Effective Date does not occur on the
first day of a calendar month, an amount calculated by computing the daily
average of the net undistributed income of the Company for the period and in the
manner prescribed in section 3.1(a)(ii)(B) hereof and multiplying the result
of such computation by the number of days elapsing during the period beginning
on the first day of the month in which the Effective Date occurs and ending on
the day immediately preceding the Effective Date. It is understood that the
amount calculated under this section 3.1(a)(ii)(C) may be a negative number
and that the effect of summing such a negative number would be a reduction in
the Benchmark Price as otherwise would be calculated under this section
3.1(a)(ii).
(iii) Daily Sales Price. For any trading day, the last
reported sale price or, if no such reported sale takes place, the mean
(unrounded) of the closing bid and asked prices of Zions Bancorp Stock in the
over-the-counter market as such prices are reported by the automated quotation
system of the National Association of Securities Dealers, Inc., or in the
absence thereof by such other source upon which Zions Bancorp and the Company
shall mutually agree.
(iv) Dissenting Shares. The shares of Company Common
Stock held by those shareholders of the Company who have timely and
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<PAGE> 73
properly exercised their dissenters' rights in accordance with all applicable
laws (the "Appraisal Laws").
(v) Zions Bancorp Stock. The common stock of Zions
Bancorp, no par value.
(b) Form of Consideration. Subject to the terms, conditions
and limitations set forth herein, upon surrender of his or her certificate or
certificates, each holder of shares of Company Common Stock shall be entitled to
receive in the Merger, in exchange for each share of Company Common Stock held
of record by such stockholder as of the Effective Date:
(i) that number of shares of Zions Bancorp Stock
calculated by dividing the Benchmark Price by the Average Closing Price, and by
further dividing the number so reached by the number of shares of Company Common
Stock that shall be issued and outstanding at the Effective Date, and
(ii) in the event that the average (rounded to the
nearest penny) of each Daily Sales Price of Zions Bancorp Stock for the twenty
consecutive trading days ending on and including the fifth trading day preceding
the Effective Date (the "Unadjusted Average Price") shall be less than $59.00,
that amount of cash (the "Cash Component") calculated by dividing the amount by
which the Benchmark Price exceeds the product of the Unadjusted Average Price
and the number of shares of Zions Bancorp Stock issuable under subsection (b)(i)
of this section 3.1 by the number of shares of Company Common Stock that shall
be issued and outstanding at the Effective Date.
3.2. No Fractional Shares. Zions Bancorp will not issue fractional
shares of Zions Bancorp Stock. In lieu of fractional shares of Zions Bancorp
Stock, if any, each shareholder of the Company who is entitled to a fractional
share of Zions Bancorp Stock shall receive an amount of cash equal to the
product of such fraction times the Average Closing Price. Such fractional share
interest shall not include the right to vote or to receive dividends or any
interest thereon.
3.3. Dissenting Shares. Notwithstanding anything to the contrary herein,
each Dissenting Share whose holder, as of the Effective Date, has not
effectively withdrawn or lost his or her dissenters' rights under the Appraisal
Laws, shall not be converted into or represent a right to receive Zions Bancorp
Stock or Cash Component, but the holder thereof shall be entitled only to such
rights as are granted by the Appraisal Laws. Each holder of Dissenting Shares
who becomes entitled to payment for his or her
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<PAGE> 74
Company Common Stock pursuant to the provisions of the Appraisal Laws shall
receive payment therefor from Zions Bancorp (but only after the amount thereof
shall have been agreed upon or finally determined pursuant to such provisions).
3.4. Dividends; Interest. No shareholder of the Company will be
entitled to receive dividends on his or her Zions Bancorp Stock until he or she
exchanges his or her certificates representing Company Common Stock for Zions
Bancorp Stock and, if applicable, Cash Component. Any dividends declared on
Zions Bancorp Stock (which stock is to be delivered pursuant to this Agreement)
to holders of record on or after the Effective Date shall be paid to the
Exchange Agent (as designated in Section 3.5) and, upon receipt of the
certificates representing shares of Company Common Stock, the Exchange Agent
shall forward to the former shareholders entitled to receive Zions Bancorp Stock
(i) certificates representing their shares of Zions Bancorp Stock, (ii)
dividends declared thereon subsequent to the Effective Date (without interest),
(iii) the cash value of any fractional shares determined in accordance with
Section 3.2 hereof (without interest), and (iv) any Cash Component (without
interest).
3.5. Designation of Exchange Agent. The Company and Zions
Bancorp hereby designate Zions First National Bank, Salt Lake City, Utah ("Zions
Bank") as Exchange Agent to effect the exchange contemplated hereby. Zions
Bancorp will, promptly after the Effective Date, issue and deliver to Zions Bank
the share certificates representing shares of Zions Bancorp Stock and the cash
in lieu of fractional shares and any Cash Component to be paid to holders of
Company Common Stock in accordance with this Agreement.
3.6. Notice of Exchange. Promptly after the Effective Date,
Zions Bancorp shall cause Zions Bank to mail to each holder of one or more
certificates formerly representing Company Common Stock, except to such holders
as shall have waived the notice required by this Section 3.6, a notice
specifying the Effective Date and notifying such holder to surrender his or her
certificate or certificates to Zions Bank for exchange. Such notice shall be
mailed to holders by regular mail at their addresses on the records of the
Company. Zions Bancorp shall cause Zions Bank to deliver shares and cash to such
holders who comply with the terms and conditions of the notice of exchange.
ARTICLE IV
4.1. Counterparts. This Agreement may be executed in two or
more counterparts each of which shall be deemed to constitute an
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<PAGE> 75
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.
4.2. 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.
4.3. Choice of Law and Venue. This Agreement 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 proper
jurisdictions and venues for any suit or action arising out of this Agreement.
Each of the parties consents to personal jurisdiction in each of such venues for
such a proceeding and agrees that it may be served with process in any action
with respect to this Agreement or the transactions contemplated 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 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 the transactions contemplated thereby brought
in the courts aforesaid.
4.4. Binding Agreement. This Agreement shall be binding
upon the parties and their respective successors and assigns.
4.5. Amendment. Anything herein or elsewhere to the contrary
notwithstanding, to the extent permitted by law, this Agreement may be amended,
supplemented, or interpreted at any time prior to the Effective Date by written
instrument duly authorized and executed by each of the parties hereto; provided,
however, that this Agreement may not be amended after the action by shareholders
of the Company in any respect that would prejudice the economic interests of
such Company shareholders, or any of them, except as specifically provided
herein or by like action of such shareholders.
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<PAGE> 76
4.6. Termination. This Agreement shall terminate and be
abandoned upon (i) termination of the Plan of Reorganization or (ii) the mutual
consent of Zions Bancorp and the Company at any time prior to the Effective
Date, and there shall be no liability on the part of either of the parties
hereto (or any of their respective officers or directors) except to the extent
provided in the Plan of Reorganization.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ZIONS BANCORPORATION
Attest: By:
--------------------------- --------------------------------
Gary L. Anderson Harris H. Simmons
Secretary President and Chief Executive
Officer
SOUTHERN ARIZONA BANCORP, INC.
Attest: By:
--------------------------- --------------------------------
John E. Byrd
President and Chief Executive
Officer
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<PAGE> 77
- --------------------------------)
State of Utah )
) ss.
)
County of Salt Lake )
- --------------------------------
On this [________] day of [_______], 1996, before me personally appeared
Harris H. Simmons, to me known to be the President and Chief Executive Officer
of Zions Bancorporation, and acknowledged said instrument to be the free and
voluntary act and deed of said corporation, for the uses and purposes therein
mentioned, and on oath stated that he was authorized to execute said instrument.
In Witness Whereof I have hereunto set my hand and affixed my official seal
the day and year first above written.
------------------------------
Notary Public
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<PAGE> 78
- --------------------------------)
State of Arizona )
) ss.
)
County of Yuma )
- --------------------------------
On this [________] day of [_______], 1996, before me personally appeared
John E. Byrd, to me known to be the President and Chief Executive Officer of
Southern Arizona Bancorp, Inc., and acknowledged said instrument to be the free
and voluntary act and deed of said corporation, for the uses and purposes
therein mentioned, and on oath stated that he was authorized to execute said
instrument.
In Witness Whereof I have hereunto set my hand and affixed my official seal
the day and year first above written.
---------------------------------
Notary Public
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<PAGE> 79
EXHIBIT II
BANK MERGER AGREEMENT
<PAGE> 80
AGREEMENT TO MERGE
SOUTHERN ARIZONA BANK
WITH AND INTO
NATIONAL BANK OF ARIZONA
UNDER THE CHARTER AND TITLE OF
NATIONAL BANK OF ARIZONA
THIS AGREEMENT made between Southern Arizona Bank (hereinafter referred
to as the "Bank"), an Arizona banking corporation organized under the laws of
the State of Arizona, being located in the County of Yuma, in the State of
Arizona, with a Capital of $[_________], divided into [_______] shares of common
stock, each of $[_____] par value, Surplus of $[_________], and Undivided
Profits of $[_________], as of [______________], 1996, and National Bank of
Arizona (herein referred to as "NBA"), a national banking association organized
under the laws of the United States of America, being located in the County of
Pima, in the State of Arizona, with a Capital of $[_______], divided into
[_______] shares of common stock, each of $[____] par value, Surplus of
$[_________], and Undivided Profits of $[_________], as of [___________],
1996, each acting pursuant to a resolution of its Board of Directors, adopted by
the vote of a majority of its directors, pursuant to the authority given by and
in accordance with the provisions of the Act of November 7, 1918, as amended (12
U.S.C. Section 215a) witnesseth as follows:
SECTION 1
The Bank shall be merged into NBA under the charter of the latter (the
"Merger").
SECTION 2
The name of the resulting association (hereinafter referred to as the
"Association") shall be National Bank of Arizona.
SECTION 3
The business of the Association shall be that of a national
banking association. This business shall be conducted by the
<PAGE> 81
Association at its main office which shall be located at 335 North Wilmot Road,
Tucson, Arizona and at its legally established branches.
SECTION 4
The amount of capital stock of the Association shall be $[_________],
divided into [_________] shares of common stock, each of $[____] par value, and
at the time the Merger shall become effective (the "Effective Date"), the
Association shall have [_______] shares issued and outstanding for capital of
$[_________]. Surplus of the Association will be $[_________], and undivided
profits, including capital reserves, when combined with the capital and surplus,
will be equal to the combined capital structures of the merging banks as stated
in the preamble to this Agreement, adjusted, however, for normal earnings and
expenses between [___________], 1996, and the Effective Date.
SECTION 5
(a) At the Effective Date, the corporate existence of the Bank and NBA
shall be merged into and continued in the Association as provided in 12 U.S.C.
Section 215a; and the Association shall be deemed to be the same corporation as
the Bank and NBA. All assets, rights, franchises and interests of the Bank and
NBA respectively, in and to every type of property (real, personal and mixed)
and choses in action, as they exist at the Effective Date, shall be transferred
to and vested in the Association by virtue of the Merger without any deed or
other transfer. At the Effective Date and without any order or other action on
the part of any court or otherwise, the Association shall hold and enjoy all
rights of property, franchises and interests, including appointments, powers,
designations and nominations, and all other rights and interests as trustee,
executor, administrator, agent, transfer agent, and registrar of stocks and
bonds, guardian of estates, assignee, receiver and conservator, and in every
other fiduciary capacity, and every agency capacity, in the same manner and to
the same extent as such rights, franchises and interests were held or enjoyed by
the Bank and NBA, respectively, immediately prior to the Effective Date.
(b) At the Effective Date, the Association shall be liable for all
liabilities of the Bank and NBA, including liabilities arising out of the
operation of a Trust Department, and (except as so provided) all deposits,
debts, liabilities, obligations and contracts of the Bank and NBA, respectively,
matured or unmatured,
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<PAGE> 82
whether accrued, absolute, contingent or otherwise, and whether or not reflected
or reserved against on balance sheets, books of account or records of the Bank
or NBA, as the case may be, shall be those of and are hereby expressly assumed
by the Association and shall not be released or impaired by the Merger; and all
rights of creditors and other obligees and all liens on property of either the
Bank or NBA shall be preserved unimpaired. At the Effective Date, the
Association shall be liable for all then existing indemnification obligations of
the Bank and NBA under their respective Articles of Association or By-Laws or
under any other agreement. At the Effective Date, the Association shall have all
rights, and shall be liable for all obligations of the Bank and NBA under all
employee compensation and benefit plans and arrangements of the Bank and NBA,
and such plans and related trusts, if any, shall continue in effect without any
interruption or termination.
SECTION 6
(a) At the Effective Date, the currently outstanding [_______]
shares of common stock of NBA, each of $[____] par value, will remain
outstanding as shares of the $[____] par value common stock of the Association,
and the holders of such stock shall retain their present rights.
(b) No other capital stock of NBA will be issued in the Merger.
(c) At the Effective Date, the shares of common stock of the Bank
shall be canceled.
SECTION 7
Between the date of this Merger Agreement and the Effective Date,
without the written consent of NBA, the Bank will not declare or distribute any
stock dividend, authorize a stock split or issue or authorize or make any
distribution of its capital stock, or merge with, consolidate with or sell its
assets to any other corporation or person, or permit any other corporation to be
merged or consolidated with it, to acquire all the assets of any other
corporation or person, or to enter into any other transaction not in the
ordinary course of the business of banking, or to dispose of any of its assets
in any other manner except in the ordinary course of business and for adequate
value.
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<PAGE> 83
SECTION 8
At and after the Effective Date, the Board of Directors of the
Association will be composed of the following persons:
The Board of Directors of the Association as so constituted shall serve
until the next annual meeting or until such time as their successors have been
elected and have qualified.
SECTION 9
The Effective Date shall be the date upon which the last of the
following events shall occur:
(a) The first to occur of (a) the date thirty days following the date
of the order of the Comptroller of the Currency (the "Comptroller") approving
the Merger, or (b) if, pursuant to section 321(b) of the Riegle Community
Development and Regulatory Improvement Act of 1994, the Comptroller shall have
prescribed a shorter period of time with the concurrence of the Attorney General
of the United States, the date on which such shorter period of time shall
elapse;
(b) The date as of which this Agreement shall have been ratified and
confirmed by the affirmative vote of the owners of at least two-thirds of the
outstanding shares of each of the Bank and NBA; or
(c) Such later date as mutually agreed upon by the Presidents
of the Bank and NBA.
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<PAGE> 84
SECTION 10
This Agreement may be terminated by the unilateral action of the Board
of Directors of any participant prior to the approval of the shareholders of
said participant or by the mutual consent of the Boards of Directors of both
participants after any shareholder group has taken affirmative action.
SECTION 11
This Agreement shall be ratified and confirmed by the affirmative vote
of the shareholders of each of the banks owning at least two-thirds of its
capital stock outstanding, at a meeting held on the call of the Directors, or by
a consent in lieu of such a meeting; and the merger shall become effective at
the time specified in a certificate to be issued by the Comptroller, under the
seal of his office, approving the Merger.
[the remainder of this page is intentionally left blank]
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<PAGE> 85
WITNESS the signatures and seals of said merging banks this [_____] day
of [__________], 1996, each hereunto set by its President and attested by its
Cashier or Secretary or Assistant Secretary, pursuant to a resolution of the
Board of Directors, acting by a majority thereof, and witness the signatures
hereto of a majority of each of said Boards of Directors.
SOUTHERN ARIZONA BANK
Attest: By:
---------------------------- ---------------------------------
- ----------------------------------- ---------------------------------
- ----------------------------------- ---------------------------------
- ----------------------------------- ---------------------------------
- ----------------------------------- ---------------------------------
------------------------------
Directors of Southern Arizona Bank
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<PAGE> 86
STATE OF ARIZONA )
) ss.
COUNTY OF YUMA )
On this [_____] day of [__________], 1996, before me, a Notary Public
for the State and County aforesaid, personally came John E. Byrd, as President
and Chief Executive Officer, and [____________], as [Secretary] [Cashier], of
Southern Arizona Bank, and each in his or her said capacity acknowledged the
foregoing instrument to be the act and deed of said bank and the seal affixed
thereto to be its seal; and came also:
being a majority of the Board of Directors of said bank, and each of them
acknowledged said instrument to be the act and deed of said bank and of himself
or herself as director thereof.
WITNESS my official seal and signature this day and year aforesaid.
(SEAL OF NOTARY)
------------------------------------
Notary Public, Grand County
My commission expires:
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<PAGE> 87
NATIONAL BANK OF ARIZONA
Attest: By:
---------------------------- ---------------------------------
- ----------------------------------- ---------------------------------
- ----------------------------------- ---------------------------------
- ----------------------------------- ---------------------------------
--------------------------------
Directors of National Bank of Arizona
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<PAGE> 88
STATE OF ARIZONA )
) ss:
COUNTY OF MARICOPA )
On this [_____] day of [_____], 1996, before me, a Notary Public for
the State and County aforesaid, personally came [____________] as
[____________], and [____________], as [Cashier] [Secretary], of National Bank
of Arizona, and each in his said capacity acknowledged the foregoing instrument
to be the act and deed of said association and the seal affixed thereto to be
its seal; and came also:
being a majority of the Board of Directors of said association, and each of them
acknowledged said instrument to be the act and deed of said association and of
himself or herself as director thereof.
WITNESS my official seal and signature this day and year aforesaid.
(SEAL OF NOTARY)
------------------------------------
Notary Public, Maricopa
County My commission expires:
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<PAGE> 89
EXHIBIT III
EMPLOYMENT AGREEMENT
BY AND BETWEEN JOHN E. BYRD
AND NATIONAL BANK OF ARIZONA
<PAGE> 90
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") made and entered
into this [___] day of [______________], 1996, by and among JOHN E. BYRD
("Executive") and NATIONAL BANK OF ARIZONA, a national banking association
organized under the laws of the United States, having its head office in Tucson,
Arizona ("NBA")
WITNESSETH THAT:
WHEREAS, the Agreement and Plan of Reorganization (the "Plan")
dated as of January 17, 1996, by and among Zions Bancorporation ("Zions
Bancorp"), NBA, Southern Arizona Bancorp, Inc. (the "Company"), and Southern
Arizona Bank (the "Bank") provides that the Company will be merged with and into
Zions Bancorp and that the Bank will be merged with and into NBA;
WHEREAS, Executive is the President and Chief Executive
Officer of each of the Company and the Bank;
WHEREAS, NBA desires to secure the employment of
Executive upon consummation of the transactions contemplated in the
Plan;
WHEREAS, Executive is desirous of entering into the Agreement
for such periods and upon the terms and conditions set forth herein; and
WHEREAS, to assist in achieving the objectives of the
transactions described in the Plan, section 3.6 of the Plan contemplates that
Executive will enter into an employment and non-competition agreement as a
condition to the consummation of the transactions described therein.
NOW, THEREFORE, in consideration of the premises and mutual
covenants and agreements hereinafter set forth, the parties agree as follows:
1. Employment; Responsibilities and Duties.
(a) NBA hereby agrees to employ Executive, and Executive
hereby agrees to serve, at the locations specified in section 4, as an executive
vice president of NBA during the Term of Employment, reporting directly to the
chief executive officer of NBA. Executive shall be responsible for the general
banking operations of NBA in Yuma County, Arizona, and shall have such other
duties, responsibilities, and authority of an executive nature as shall be set
forth in the by-laws of NBA on the date of this Agreement or as
<PAGE> 91
may otherwise from time to time reasonably be assigned to Executive by the board
of directors or the chief executive officer of NBA.
(b) Executive shall devote his full working time and best
efforts to the performance of his responsibilities and duties hereunder. During
the Term of Employment, Executive shall not, without the prior written consent
of the Board of Directors of NBA, render services as an employee, independent
contractor, or otherwise, whether or not compensated, to any person or entity
other than NBA or a company affiliated with NBA; provided, however, that
Executive may, where involvement in such activities does not individually or in
the aggregate significantly interfere with the performance by Executive of his
duties or violate the provisions of section 5 hereof, (i) render services to
charitable organizations, (ii) manage his personal investments, and (iii) with
the prior permission of the Board of Directors of NBA, hold such other
directorships or part-time academic appointments or have such other business
affiliations as would otherwise be prohibited under this section 1.
2. Term of Employment.
(a) The term of this Agreement ("Term of Employment") shall
be the period commencing on the date hereof (the "Commencement Date") and
continuing until the Termination Date, which shall mean the earliest to occur
of:
(i) the third anniversary of the Commencement Date,
unless the Term of Employment shall be extended by mutual written agreement of
Executive and NBA;
(ii) the death of Executive;
(iii) Executive's inability to perform his duties
hereunder, as a result of physical or mental disability as reasonably determined
by the personal physician of Executive, for a period of at least 180 consecutive
days or for at least 180 days during any period of twelve consecutive months
during the Term of Employment; or
(iv) the discharge of Executive by NBA "for cause,"
which shall mean one or more of the following:
(A) any willful or gross misconduct by
Executive with respect to the business and affairs of NBA;
(B) the conviction of Executive of a felony
(after the earlier of the expiration of any applicable appeal
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<PAGE> 92
period without perfection of an appeal by Executive or the denial of any appeal
as to which no further appeal or review is available to Executive) whether or
not committed in the course of his employment by NBA;
(C) Executive's willful neglect, failure,
or refusal to carry out his duties hereunder in a reasonable manner; or
(D) the breach by Executive of any
representation or warranty in section 7(a) hereof or of any agreement contained
in section 1, 5, 6, or 7(b) hereof, which breach is material and adverse to NBA;
or
(v) Executive's resignation from his position as a
senior officer of NBA; or
(vi) the termination of Executive's employment by
NBA, for any reason other than those set forth in subsections (i), (ii), (iii),
or (iv) of this section 2(a), at any time, upon the thirtieth day following
notice to Executive.
(b) In the event that the Term of Employment shall be
terminated for any reason other than that set forth in section 2(a)(vi) hereof,
Executive shall be entitled to receive, upon the occurrence of any such event:
(i) any salary (as hereinafter defined) payable
pursuant to section 3(a)(i) hereof which shall have accrued as of
the Termination Date; and
(ii) such rights as Executive shall have accrued as
of the Termination Date under the terms of any plans or arrangements in which he
participates pursuant to sections 3(b) or (c) hereof, any right to reimbursement
for expenses accrued as of the Termination Date payable pursuant to section 3(b)
hereof, and the right to receive the cash equivalent of paid annual leave and
sick leave accrued as of the Termination Date pursuant to section 3(e) hereof.
(c) In the event that the Term of Employment shall be
terminated for the reason set forth in section 2(a)(vi) hereof, Executive shall
be entitled to receive:
(i) for the period commencing on the date
immediately following the Termination Date and ending upon and including the
third anniversary of the Commencement Date, salary payable at the rate
established pursuant to Section 3(a)(i) hereof for the
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year in which the Termination Date occurs, in a manner consistent with the
normal payroll practices of NBA with respect to executive personnel as in effect
from time to time; and
(ii) such rights as Executive may have accrued as of
the Termination Date under the terms of any plans or arrangements in which he
participates pursuant to sections 3(b) or (c) hereof, any right to reimbursement
for expenses accrued as of the Termination Date payable pursuant to section 3(b)
hereof, and the right to receive the cash equivalent of paid annual leave and
sick leave accrued as of the Termination Date pursuant to section 3(e) hereof.
(d) At or about six months before the third anniversary of
the Commencement Date, NBA and Executive will each review the employment
relationship between NBA and Executive in order to evaluate the desirability of
maintaining that relationship for an additional term beyond that provided for in
section 2(a)(i) of this Agreement, or of modifying such relationship for such
additional term, and NBA and Executive will engage in discussions with respect
to mutually agreeable terms and conditions for such employment; provided,
however, that nothing in this section 2(d) shall constitute an offer or
guarantee of employment.
3. Compensation. For the services to be performed by
Executive for NBA under this Agreement, Executive shall be compensated in the
following manner:
(a) Salary and Bonus.
(i) Salary. During the Term of Employment, NBA
shall pay Executive an initial base salary of $158,291 per annum. The amount of
the salary hereunder shall be reviewed at least annually in accordance with the
procedures and standards established for review of executive compensation for
other senior officers of NBA, and changes thereto may be made in accordance with
the compensation policies of NBA. Salary shall be payable in accordance with the
normal payroll practices of NBA with respect to executive personnel as in effect
from time to time.
(ii) Covenant Bonus. On the Commencement Date,
Executive shall receive a one-time cash bonus of $250,000, which is in payment
for and allocable to the noncompetition agreement contained in section 5(b) of
this Agreement.
(iii) Discretionary Bonuses. During the Term of
Employment and beginning with respect to the calendar year ending as of December
31, 1996, Executive shall be considered annually for a discretionary bonus
payment by NBA. The payment of this bonus
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<PAGE> 94
and its amount shall be based upon the financial performance of NBA and upon
individual performance factors. The target level for this bonus will be 25
percent to 35 percent of the salary of Executive, provided that this target
level shall not bind NBA in any way with regard to the amount of bonus to be
awarded to Executive or to whether any bonus will be awarded to Executive. Any
bonus awarded by NBA under this subsection with respect to any calendar year
shall be paid to Executive during the first calendar quarter of the succeeding
calendar year. The award and amount of this bonus shall be reviewed at least
annually in accordance with the procedures and standards established for review
of executive compensation for other senior officers of NBA, and changes thereto
may be made in accordance with the compensation policies of Zions Bancorp.
(b) Value-Sharing Plan and Incentive Stock Option Plan.
During the Term of Employment, Executive shall be entitled to receive units of
participation under the Value-Sharing Plan and stock options under the Incentive
Stock Option Plan of Zions Bancorp, as each is in effect as of the Commencement
Date or as may be modified by Zions Bancorp from time to time, in such amounts
and upon such terms as may be prescribed by the Executive Compensation Committee
of the Board of Directors of Zions Bancorp at its sole discretion.
(c) Employee Benefit Plans or Arrangements. During the
Term of Employment, subject to the following sentence Executive shall be
entitled to participate in all employee benefit plans of NBA, as presently in
effect or as they may be modified or added to by Zions Bancorp or NBA from time
to time, under such terms as may be applicable to officers of NBA of Executive's
rank, including, without limitation, plans providing retirement benefits,
medical insurance, life insurance, disability insurance, and accidental death or
dismemberment insurance. During the Term of Employment the coverages and
benefits to which Executive is entitled with respect to disability insurance and
dental insurance will not be less than those afforded to Executive by the Bank
as of September 30, 1995, and the cost to Executive of these disability and
dental insurance coverages will not be greater than that assessed against
Executive by the Bank for such insurance as of September 30, 1995.
(d) Automobile Allowance. During the Term of Employment,
in lieu of providing Executive with the use, maintenance, insurance, or garaging
of an automobile, NBA will pay to Executive an automobile allowance of $375 per
month.
(e) Vacation and Sick Leave. During the Term of
Employment, Executive shall be entitled to paid annual vacation periods and sick
leave in accordance with the policies of NBA as in
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<PAGE> 95
effect as of the Commencement Date or as may be modified by NBA from time to
time as may be applicable to officers of NBA of Executive's rank, provided that
during the Term of Employment the number of Executive's paid annual vacation
days shall not be fewer than 33 per twelve-month period.
(f) Country Club. During the Term of Employment, NBA shall
pay for Executive's continued membership in such country clubs whose membership
fees are paid by the Company or the Bank as of September 30, 1995.
(g) Retirement Life Insurance Policy. During the Term of
Employment, NBA will honor the New York Life Insurance Company retirement policy
which is currently in place with respect to Executive.
(h) Life Insurance. During the Term of Employment, NBA will
pay the premiums (currently approximately $1,550 annually) with respect to the
life insurance policy currently in place with respect to Executive, provided
that in lieu of maintaining this policy NBA may make arrangements for such
equivalent life insurance benefits with respect to Executive, the cost of which
arrangements shall be borne by NBA, as shall be acceptable to Executive.
(i) Withholding. All compensation to be paid to Executive
hereunder shall be subject to required withholding and other taxes.
(j) Expenses. During the Term of Employment, Executive
shall be reimbursed for reasonable travel and other expenses incurred or paid by
Executive in connection with the performance of his services under this
Agreement, upon presentation of expense statements or vouchers or such other
supporting information as may from time to time be requested, in accordance with
such policies of NBA as are in effect as of the Commencement Date and as may be
modified by NBA, under such terms as may be applicable to officers of NBA of
Executive's rank.
(k) Medical Examinations. NBA shall reimburse Executive for
the reasonable cost of one medical examination undergone by Executive in each
twelve-month period following the Commencement Date, provided that any such
examination shall have occurred during the Term of Employment.
(l) Carry-Over of Sick Leave. NBA shall credit Executive
with the number of hours of unused and unforfeited sick leave with which
Executive was credited by the Bank as of the day before the Commencement Date,
provided that such sick leave may be
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<PAGE> 96
taken only with respect to actual illnesses, injuries, appointments with medical
practitioners, or other legitimate medical conditions or occurrences which
prevent Executive from reporting to work.
4. Place of Employment. The place of employment of
Executive, during the Term of Employment, shall be in Yuma County, Arizona, or
such other locations as may be agreed upon by NBA and Executive, with such
business travel outside Yuma County, Arizona or such other locations as shall be
reasonably necessary to the performance of his duties.
5. Confidential Business Information; Non-Competition.
(a) Executive acknowledges that certain business methods,
creative techniques, and technical data of NBA and the like are deemed by NBA to
be and are in fact confidential business information either of NBA or are
entrusted to NBA by third parties. Such confidential information includes but is
not limited to procedures, methods, sales relationships developed while in NBA's
service, knowledge of customers and their requirements, marketing plans,
marketing information, studies, forecasts, and surveys, competitive analyses,
mailing and marketing lists, new business proposals, lists of vendors,
consultants, and other persons who render service or provide material to NBA,
and compositions, ideas, plans, and methods belonging to or related to the
affairs of NBA. In this regard, NBA asserts proprietary rights in all of its
business information except for such information as is clearly in the public
domain. Notwithstanding the foregoing, information which would be generally
known or available to persons skilled in Executive's fields shall be considered
to be "clearly in the public domain" for the purposes of the preceding sentence.
Executive agrees that he will not disclose or divulge to any third party, except
as may be required by his duties hereunder, by law, regulation, or order of a
court or government authority, or as directed by NBA, nor shall he use to the
detriment of NBA or use in any business or on behalf of any business competitive
with or substantially similar to any business of NBA, any confidential business
information obtained during the course of his employment by NBA. The foregoing
shall not be construed as restricting Executive from disclosing such information
to the employees of NBA.
(b) Executive hereby agrees that during the Term of
Employment and, following the termination of Executive's employment pursuant to
sections 2(a)(i), (iv), (v) or (vi) hereof, for the additional period from the
Termination Date until the fifth anniversary of the Commencement Date, Executive
will not (i) engage in the banking business other than on behalf of NBA or any
company that is affiliated with NBA, within the Market Area (as hereinafter
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<PAGE> 97
defined), (ii) directly or indirectly own, manage, operate, control, be employed
by, or provide management or consulting services in any capacity to any firm,
corporation, or other entity (other than NBA or any company that is affiliated
with NBA) engaged in the banking business in the Market Area, or (iii) directly
or indirectly solicit or otherwise intentionally cause any employee, officer, or
member of the Board of Directors of NBA to engage in any action prohibited under
(i) or (ii) of this section 5(b); provided that the ownership by Executive as an
investor of not more than five percent of the outstanding shares of stock of any
corporation whose stock is listed for trading on any securities exchange or is
quoted on the automated quotation system of the National Association of
Securities Dealers, Inc. (or the shares of any investment company as defined in
section 3 of the Investment Company Act of 1940, as amended), shall not in
itself constitute a violation of Executive's obligations under this section
5(b). As used herein, "Market Area" shall mean Yuma County in the state of
Arizona.
(c) Executive acknowledges and agrees that irreparable
injury will result to NBA in the event of a breach of any of the provisions of
this section 5 (the "Designated Provisions") and that NBA will have no adequate
remedy at law with respect thereto. Accordingly, in the event of a material
breach of any Designated Provision, and in addition to any other legal or
equitable remedy NBA may have, NBA shall be entitled to the entry of a
preliminary and permanent injunction (including, without limitation, specific
performance) by a court of competent jurisdiction in Yuma County, Arizona or
elsewhere, to restrain the violation or breach thereof by Executive or any
affiliates, agents, or any other persons acting for or with Executive in any
capacity whatsoever, and Executive submits to the jurisdiction of such court in
any such action.
(d) It is the desire and intent of the parties that the
provisions of this section 5 shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of this section
5 shall be adjudicated to be invalid or unenforceable, such provision shall be
deemed amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of such
provision in the particular jurisdiction in which such adjudication is made. In
addition, should any court determine that the provisions of this section 5 shall
be unenforceable with respect to scope, duration, or geographic area, such court
shall be empowered to substitute, to the extent enforceable, provisions similar
hereto or other provisions so as to provide to NBA, to the
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<PAGE> 98
fullest extent permitted by applicable law, the benefits intended by this
section 5.
6. Life Insurance. In light of the unusual abilities and
experience of Executive, NBA in its discretion may apply for and procure as
owner and for its own benefit insurance on the life of Executive, in such amount
and in such form as NBA may choose. NBA shall make all payments for such
insurance and shall receive all benefits from it. Executive shall have no
interest whatsoever in any such policy or policies but, at the request of NBA,
shall submit to medical examinations and supply such information and execute
such documents as may reasonably be required by the insurance company or
companies to which NBA has applied for insurance.
7. Representations and Warranties.
(a) Executive represents and warrants to NBA that (i) his
execution, delivery, and performance of this Agreement will not result in or
constitute a breach of or conflict with any term, covenant, condition, or
provision of any commitment, contract, or other agreement or instrument,
including, without limitation, any other employment agreement, to which
Executive is or has been a party, and (ii) the retirement arrangement that
relates to the subject matter of section 3(g) of this Agreement is fully funded
by a fully-paid New York Life Insurance Company life insurance policy.
(b) Executive shall indemnify, defend, and hold harmless
NBA for, from, and against any and all losses, claims, suits, damages, expenses,
or liabilities, including court costs and counsel fees, which NBA has incurred
or to which NBA may become subject, insofar as such losses, claims, suits,
damages, expenses, liabilities, costs, or fees arise out of or are based upon
any failure of any representation or warranty of Executive in section 7(a)
hereof to be true and correct when made.
8. 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:
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<PAGE> 99
If to NBA:
National Bank of Arizona
3101 North Central Avenue
Phoenix, Arizona 85012
Attention: Mr. John J. Gisi
Chairman, President and
Chief Executive Officer
With a required copy to:
Brian D. Alprin, Esq.
Metzger, Hollis, Gordon & Mortimer
1275 K Street, N.W., Suite 1000
Washington, D. C. 20005
If to Executive:
Mr. John E. Byrd
1373 Gateway
Yuma, Arizona 85364
All such notices shall be deemed to have been given on the date delivered,
transmitted, or mailed in the manner provided above.
9. Assignment. Neither party may assign this Agreement
or any rights or obligations hereunder without the consent of the other party.
10. Governing Law. This Agreement shall be construed and
governed in all respects by the law applicable to contracts made and to be
performed in the State of Arizona.
11. Entire Agreement. This Agreement constitutes the entire
understanding between NBA and Executive relating to the subject matter hereof.
Any previous agreements or understandings between the parties hereto or between
Executive and Southern Arizona Bank regarding the subject matter hereof,
including without limitation the terms and conditions of employment,
compensation, benefits, retirement, competition following employment, and the
like, are merged into and superseded by this Agreement. Neither this Agreement
nor any provisions hereof can be modified, changed, discharged, or terminated
except by an instrument in writing signed by the party against whom any waiver,
change, discharge, or termination is sought.
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<PAGE> 100
12. Severability. If any provision or provisions of this
Agreement shall be held to be invalid, illegal, or unenforceable for any reason
whatsoever:
(a) the validity, legality, and enforceability of the
remaining provisions of this Agreement (including, without limitation, each
portion of any section of this Agreement containing any such provision held to
be invalid, illegal, or unenforceable) shall not in any way be affected or
impaired thereby; and
(b) to the fullest extent possible, the provisions of this
Agreement (including, without limitation, each portion of any section of this
Agreement containing any such provisions held to be invalid, illegal, or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal, or unenforceable.
13. Costs of Litigation. In the event litigation is
commenced to enforce any of the provisions hereof, or to obtain declaratory
relief in connection with any of the provisions hereof, the prevailing party
shall be entitled to recover reasonable attorney's fees. In the event this
Agreement is asserted in any litigation as a defense to any liability, claim,
demand, action, cause of action, or right asserted in such litigation, the party
prevailing on the issue of that defense shall be entitled to recovery of
reasonable attorney's fees.
14. Affiliation. A company will be deemed to be
"affiliated" with NBA according to the definition of "Affiliate" set forth in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934.
15. Headings. All headings and captions are for
convenience only and shall not limit or define the text hereof.
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<PAGE> 101
IN WITNESS WHEREOF, the parties hereto executed or caused this
Agreement to be executed as of the day and year first above written.
ATTEST: NATIONAL BANK OF ARIZONA
By:
- ----------------------------------- --------------------------------
WITNESS:
- ----------------------------------- ------------------------------------
John E. Byrd
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<PAGE> 102
EXHIBIT IV
OPINION OF O'CONNOR, CAVANAGH, ANDERSON,
WESTOVER, KILLINGSWORTH & BESHEARS, P.A.
<PAGE> 103
[_______________], 1996
Zions Bancorporation
1380 Kennecott Building
Salt Lake City, Utah 84133
National Bank of Arizona
3101 North Central Avenue
Phoenix, Arizona 85012
Re: MERGER OF SOUTHERN ARIZONA BANCORP, INC. WITH AND INTO ZIONS
BANCORPORATION, AND OF SOUTHERN ARIZONA BANK WITH AND INTO
NATIONAL BANK OF ARIZONA, IN EXCHANGE FOR STOCK OF ZIONS
BANCORPORATION
Ladies and Gentlemen:
We are special counsel to Southern Arizona Bancorp, Inc., an
Arizona corporation (the "Company"), and its subsidiary, Southern Arizona Bank,
an Arizona banking corporation organized under the laws of the state of Arizona
with its head office located at Yuma, County of Yuma, State of Arizona (the
"Bank"), in connection with the merger (the "Holding Company Merger") of the
Company with and into Zions Bancorporation, a Utah corporation ("Zions
Bancorp"), pursuant to the provisions of section 10-071 et seq. of the Arizona
General Corporation Law and section 16-10a-1101 et seq. of the Utah Business
Corporation Act, and the merger (the "Bank Merger") of the Bank with and into
National Bank of Arizona, a national banking association organized under the
laws of the United States with its head office located at Tucson, County of
Pima, State of Arizona ("NBA"), pursuant to the provisions of section 215a of
the National Bank Act (12 U.S.C. Section 215a), in exchange for which
shareholders of the Company will receive shares
<PAGE> 104
Zions Bancorporation
National Bank of Arizona
, 1996
Page 2
of the common stock of Zions Bancorp pursuant to an Agreement and Plan of
Reorganization dated January 17, 1996 (the "Agreement") and certain additional
agreements whose execution is contemplated in the Agreement, including the
Agreement of Merger by and between Zions Bancorp and the Company (the "Holding
Company Merger Agreement"), and the Agreement of Merger by and between NBA and
the Bank (the "Bank Merger Agreement") (the Agreement, the Holding Company
Merger Agreement, and the Bank Merger Agreement to be referred to collectively
as the "Agreements").
This opinion is provided to you pursuant to Section 4.3 of the
Agreement.
In our capacity as special counsel, we have participated in the
preparation of a Prospectus/Proxy Statement for the shareholders of the Company
(the "Prospectus/Proxy Statement"). In addition, in rendering the opinions that
follow, we have examined the Agreements and the exhibits and schedules appended
thereto; the articles of incorporation and by-laws of the Company and the
articles of incorporation and by-laws of the Bank; the minutes of certain
meetings of the respective boards of directors of the Company and the Bank, and
such other corporate documents and corporate records of the Company and the Bank
as we have deemed necessary or appropriate for the purpose of rendering the
following opinions. In addition, we have interviewed officers of the Company and
the Bank and undertaken and performed such other procedures as we have deemed
necessary or appropriate for the purpose of rendering the following opinions. In
these regards, we have examined and relied upon representations of Zions Bancorp
and NBA contained in the Agreements, and, where we have deemed appropriate,
representations or certifications of officers or public officials.
We have assumed the authenticity of all documents submitted to us as
originals, the genuineness of all signatures, the legal capacity of natural
persons, and the conformity to the originals of all documents submitted to us as
copies. In making our examination of any documents, we have assumed that all
parties other than the Company and the Bank had the corporate power and
authority to enter into and perform all obligations thereunder and, as to such
parties other than the Company and the Bank, we have also assumed the execution
and delivery of such documents and the validity and binding effect and
enforceability thereof. We have also assumed that the Agreements have not been
otherwise amended by oral or written agreement or by conduct of the parties
thereto. We have assumed that the certifications and representations dated
earlier than the date hereof on which we have expressed reliance
<PAGE> 105
Zions Bancorporation
National Bank of Arizona
, 1996
Page 3
herein continue to remain accurate, insofar as material to our opinions, from
such earlier date through the date hereof.
On the foregoing basis, and as otherwise described herein, we are of
the opinion that:
(a) Organization, Powers and Qualifications.
(i) The Company is a corporation which is duly organized,
validly existing and in good standing under the laws of the State of Arizona and
has the corporate power and authority to own and operate its properties and
assets, to lease properties used in its business and to carry on its business as
now conducted. The Company is duly registered as a bank holding company under
the Bank Holding Company Act of 1956, as amended. All outstanding shares of
capital stock of the Company have been duly and validly authorized and issued,
and are fully paid and non-assessable.
(ii) The Bank is a national banking association which is duly
organized, validly existing and in good standing under the laws of the United
States, and has the corporate power and authority to own and operate its
properties and assets, to lease properties used in its business and to carry on
its business as now conducted. The deposit accounts of the Bank are insured by
the Bank Insurance Fund of the Federal Deposit Insurance Corporation and, to the
best of our knowledge, no proceedings for the termination of such insurance are
pending or threatened. All outstanding shares of capital stock of the Bank have
been duly and validly authorized and issued and are fully paid and non-assess-
able. All shares of the Bank held of record by the Company are owned directly by
the Company free and clear of any adverse claims.
(b) Execution and Performance of Agreements. Each of the Company and
the Bank has the corporate power and authority to execute, deliver and perform
each of the Agreements to which it is a party and to carry out the terms thereof
and the transactions contemplated thereby.
(c) Absence of Violations. To the best of our knowledge, neither the
Company nor the Bank is in violation of its articles of incorporation or its
bylaws, or any law, regulation, ordinance, order or restriction imposed by the
United States, any state, municipality, or other political subdivision or agency
thereof, or any order of any court or other competent tribunal having
jurisdiction over the Company in respect of the conduct of its business or the
ownership of its properties, or over the Bank in respect of the conduct of its
business or the ownership of its
<PAGE> 106
Zions Bancorporation
National Bank of Arizona
, 1996
Page 4
properties, which, either individually or in the aggregate with all such other
violations, would materially and adversely affect the business, operations, or
condition (financial or otherwise) of the Company or the Bank or its observance
or performance of the terms of any of the Agreements to which it is a party.
(d) Compliance with Corporate Documents and Agreements. Neither the
execution, delivery, or performance by the Company or the Bank of the Agreements
to which it is a party nor the consummation of the transactions contemplated
therein will violate, conflict with, constitute a breach of or default under the
articles of incorporation or by-laws of the Company, or the articles of
incorporation or by-laws of the Bank, or any agreement or instrument of which we
have knowledge to which the Company or the Bank is a party (or which is binding
on them or their assets) or by which the Company or the Bank is bound, and will
not result in the creation of any lien on, or security interest in, any of their
respective assets.
(e) Binding Obligations; Due Authorization. Each of the Agreements
to which the Company or the Bank is a party has been duly authorized by all
necessary corporate action on the part of the Company or the Bank, as the case
may be, has been duly executed and delivered by the Company or the Bank, as the
case may be, and constitutes a valid, legal and binding obligation of the
Company or the Bank, as the case may be, enforceable against it in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, receivership, conservatorship or other similar laws
or judicial decisions relating to or affecting creditors' rights and remedies
generally or the rights of creditors, or of the FDIC as insurer, regulator,
conservator or receiver, of banks the accounts of which are insured by the FDIC
in particular, or by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law) as to whose
availability we express no opinion. No other corporate proceedings on the part
of the Company or the Bank are necessary to authorize each of the Agreements to
which either is a party or the carrying out of the transactions contemplated
hereby.
(f) Absence of Default. Except for those consents (including, but
not limited to, approvals, licenses, registrations or declarations) that have
been obtained, the execution and delivery by each of the Company and the Bank of
each of the Agreements to which it is a party and consummation by each of them
of the transactions contemplated thereby do not require the approval or consent
of any governmental authority or third party. The execution and delivery by each
of the Company and the Bank of
<PAGE> 107
Zions Bancorporation
National Bank of Arizona
, 1996
Page 5
each of the Agreements to which it is a party, the consummation by it of the
transactions contemplated thereby and the compliance with and fulfillment by it
of the terms thereof by each of the Company and the Bank, respectively, will not
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.
(g) Compliance with Securities Laws.
(i) No equity or debt securities of the Company or the Bank
are registered or required to be registered under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended.
(ii) In connection with our participation in the preparation of
the Prospectus/Proxy Statement, we have not independently verified the accuracy,
completeness or fairness of the statements contained therein or of documents
incorporated by reference therein, and we cannot make any representation to you
as to the accuracy or completeness of statements of fact contained or
incorporated by reference in the Prospectus/Proxy Statement. Nothing, however,
has come to our attention that would lead us to believe that the
Prospectus/Proxy Statement as of its issue date or the date hereof, insofar as
it relates to the Company or the Bank, contained or contains an untrue statement
of a material fact or omitted or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading (other than the financial statements and schedules and
other financial and statistical data included or incorporated by reference
therein, as to which we make no statement) and that no event has occurred which
should have been set forth in an amendment or supplement to the Prospectus/Proxy
Statement which has not been set forth in such amendment or supplement.
This opinion is given solely for your benefit in connection with the
transactions contemplated by the Agreements, and no other person or entity is
entitled to rely thereon, nor may copies be delivered or furnished to any other
party, nor may all or portions of this opinion be quoted, circulated, or
referred to in any other document without our prior consent.
Respectfully submitted,
<PAGE> 108
EXHIBIT V
OPINION OF METZGER, HOLLIS, GORDON & MORTIMER
<PAGE> 109
[ ], 1996
Southern Arizona Bancorp, Inc.
1800 Fourth Avenue
Post Office Box 5148
Yuma, Arizona 85364
Southern Arizona Bank
1800 Fourth Avenue
Post Office Box 5148
Yuma, Arizona 85364
Re: MERGER OF SOUTHERN ARIZONA BANCORP, INC. WITH AND INTO ZIONS
BANCORPORATION, AND OF SOUTHERN ARIZONA BANK WITH AND INTO
NATIONAL BANK OF ARIZONA, IN EXCHANGE FOR STOCK OF ZIONS
BANCORPORATION
Ladies and Gentlemen:
We are special counsel to Zions Bancorporation, a Utah corporation
("Zions Bancorp"), and its wholly owned subsidiary (except for directors'
qualifying shares), National Bank of Arizona, a national banking association
organized under the laws of the United States with its head office located at
Tucson, County of Pima, State of Arizona ("NBA"), in connection with the merger
(the "Holding Company Merger") of Southern Arizona Bancorp, Inc., an Arizona
corporation (the "Company"), with and into Zions Bancorp, pursuant to the
provisions of section 10-071 et seq. of the Arizona General Corporation Law and
section 16-10a-1101 et seq. of the Utah Business Corporation Act, and the merger
(the "Bank Merger") of Southern Arizona Bank, an Arizona banking corporation
organized under the laws of the state of Arizona with its head office located
<PAGE> 110
Southern Arizona Bancorp, Inc.
Southern Arizona Bank
, 1996
Page 2
at Yuma, County of Yuma, State of Arizona (the "Bank"), with and into NBA,
pursuant to the provisions of section 215a of the National Bank Act (12 U.S.C.
Section 215a) and section 6-212 of the Arizona Revised Statutes, in exchange for
which shareholders of the Company will receive shares of the common stock of
Zions Bancorp pursuant to an Agreement and Plan of Reorganization dated January
17, 1996 (the "Agreement") and certain additional agreements whose execution is
contemplated in the Agreement, including the Agreement of Merger by and between
Zions Bancorp and the Company (the "Holding Company Merger Agreement"), and the
Agreement of Merger by and between NBA and the Bank (the "Bank Merger
Agreement") (the Agreement, the Holding Company Merger Agreement, and the Bank
Merger Agreement to be referred to collectively as the "Agreements").
This opinion is provided to you pursuant to Section 5.2 of the
Agreement.
In our capacity as special counsel, we have participated in the
preparation of a Registration Statement filed with the Securities and Exchange
Commission on Form S-4 covering the shares of Zions Bancorp stock to be issued
in connection with the Holding Company Merger (the "Registration Statement"). In
addition, in rendering the opinions that follow, we have examined the Agreements
and the exhibits and schedules appended thereto; the articles of incorporation
and by-laws of Zions Bancorp and the Articles of Association and by-laws of NBA;
the minutes of certain meetings of the respective boards of directors of Zions
Bancorp and NBA, and such other corporate documents and corporate records of
Zions Bancorp and NBA as we have deemed necessary or appropriate for the purpose
of rendering the following opinions. We have also examined a document dated
[_______________], 1996 of the Comptroller of the Currency (the "Comptroller")
approving the application of NBA and the Bank to merge pursuant to Section 18(c)
of the Federal Deposit Insurance Act, as amended, the document dated
[_______________], 1996 of the Federal Reserve Bank of San Francisco waiving the
requirement to submit an application under the Bank Holding Company Act of 1956,
as amended, and documents respectively dated [________________], 1996 and
[________________], 1996 of the Commissioner of Financial Institutions of the
State of Utah (the "Commissioner") and the Superintendent of Banks of the State
of Arizona (the "Superintendent") approving the transactions contemplated by the
Agreements. In addition, we have interviewed officers of Zions Bancorp and NBA
and undertaken and performed such other procedures as we have deemed necessary
or appropriate for the purpose of rendering the following opinions. In these
regards, we have examined and relied upon representations of the Company and the
<PAGE> 111
Southern Arizona Bancorp, Inc.
Southern Arizona Bank
, 1996
Page 3
Bank contained in the Agreements, and, where we have deemed appropriate,
representations or certifications of officers or public officials.
We have assumed the authenticity of all documents submitted to us as
originals, the genuineness of all signatures, the legal capacity of natural
persons, and the conformity to the originals of all documents submitted to us as
copies. In making our examination of any documents, we have assumed that all
parties other than Zions Bancorp and NBA had the corporate power and authority
to enter into and perform all obligations thereunder and, as to such parties
other than Zions Bancorp and NBA, we have also assumed the execution and
delivery of such documents and the validity and binding effect and
enforceability thereof. We have also assumed that the Agreements have not been
otherwise amended by oral or written agreement or by conduct of the parties
thereto. We have assumed that the certifications and representations dated
earlier than the date hereof on which we have expressed reliance herein continue
to remain accurate, insofar as material to our opinions, from such earlier date
through the date hereof.
Based on the foregoing, and as otherwise described herein, we are of
the opinion that:
(a) Organization, Powers and Qualifications.
(i) Zions Bancorp is a corporation which is duly organized,
validly existing and in good standing under the laws of the State of Utah and
has all the corporate power and authority to own and operate its properties and
assets, to lease properties used in its business, and to carry on its business
as now conducted.
(ii) NBA is a national banking association which is duly
organized, validly existing, and in good standing under the laws of the United
States and has the corporate power and authority to own and operate its
properties and assets, to lease properties used in its business and to carry on
its business as now conducted. The deposit accounts of NBA are insured by the
Bank Insurance Fund of the Federal Deposit Insurance Corporation and, to the
best of our knowledge, no proceedings for the termination of such insurance are
pending or threatened.
(b) Execution and Performance of Agreements. Each of Zions Bancorp
and NBA has the corporate power and authority to execute, deliver, and perform
each of the Agreements to which it is a party and to carry out the terms thereof
and the transactions contemplated thereby.
<PAGE> 112
Southern Arizona Bancorp, Inc.
Southern Arizona Bank
, 1996
Page 4
(c) Compliance with Corporate Documents. Neither the execution,
delivery, or performance by Zions Bancorp or NBA of the Agreements to which it
is a party nor the consummation of the transactions contemplated therein will
violate, conflict with, or constitute a breach of or default under the articles
of incorporation or by-laws of Zions Bancorp or the articles of association or
by-laws of NBA.
(d) Binding Obligations; Due Authorization. Each of the Agreements
to which Zions Bancorp and NBA is a party has been duly authorized by all
necessary corporate action on the part of each of Zions Bancorp and NBA, has
been duly executed and delivered by each of Zions Bancorp and NBA, and
constitutes a valid, legal and binding obligation of each of Zions Bancorp and
NBA, as appropriate, enforceable against each in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, receivership, conservatorship or similar laws or judicial decisions
relating to or affecting creditors' rights generally or the rights of creditors,
or of the FDIC as insurer, regulator, conservator or receiver, of banks the
accounts of which are insured by the FDIC in particular, or by general equitable
principles (regardless of whether enforceability is considered in a proceeding
in equity or at law) as to whose availability we express no opinion. No other
corporate proceedings on the part of Zions Bancorp and NBA are necessary to
authorize each of the Agreements to which either is a party or the carrying out
of the transactions contemplated hereby.
(e) Regulatory Approvals. All approvals required to be obtained from
the Comptroller, the Board of Governors of the Federal Reserve System, the
Commissioner, and the Superintendent to consummate the transactions contemplated
by the Agreement and Plan of Reorganization have been obtained. Except for those
approvals, the execution and delivery by each of Zions Bancorp and NBA of each
of the Agreements to which it is a party and consummation of the transactions
contemplated thereby do not require the approval or consent of any bank
regulatory authority.
(f) Issuance of Zions Bancorp Common Stock. The shares of the common
stock of Zions Bancorp, no par value per share, to be issued by Zions Bancorp
pursuant to the Agreement and the Holding Company Merger Agreement, when issued
pursuant to and in accordance with the Agreement and the Holding Company Merger
Agreement, will be, when issued in exchange for the assets of the Company, duly
authorized and legally issued, fully paid, and non-assessable.
<PAGE> 113
Southern Arizona Bancorp, Inc.
Southern Arizona Bank
, 1996
Page 5
(g) Compliance with Securities Laws.
(i) The Registration Statement has become effective under the
Securities Act of 1933 (the "Act") and, to the best of our knowledge, no stop
order proceedings with respect thereto have been instituted or are pending or
threatened under the Act with respect to the Registration Statement.
(ii) In connection with our participation in the preparation
of the Registration Statement, we have not independently verified the accuracy,
completeness or fairness of the statements contained therein or of documents
incorporated by reference therein, and we cannot make any representation to you
as to the accuracy or completeness of statements of fact contained or
incorporated by reference in the Registration Statement. Nothing, however, has
come to our attention that would lead us to believe that the Registration
Statement as of the effective date or the date hereof, insofar as it relates to
Zions Bancorp or NBA, contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (other than the financial statements and schedules and
other financial and statistical data included or incorporated by reference
therein, as to which we make no statement) or that any event has occurred which
should have been set forth in an amendment or supplement to the Registration
Statement and which has not been set forth in such amendment or supplement.
This opinion is given to you for your sole benefit in connection with
the transactions contemplated in the Agreements, and no other person or entity
is entitled to rely thereon, nor may copies be delivered or furnished to any
other party, nor may all or portions of this opinion be quoted, circulated, or
referred to in any other document without our prior written consent.
Very truly yours,
METZGER, HOLLIS, GORDON & MORTIMER
By:
---------------------------------
Brian D. Alprin
<PAGE> 114
EXHIBIT VI
<PAGE> 115
<TABLE>
<CAPTION>
Average Number Product of ACP Sum of Third
Closing of Shares and Number of Cash and Fourth
Price ("ACP") Issued Shares Issued Component Columns
- ------------- ------ ------------- --------- -------
<S> <C> <C> <C> <C>
$49.00 429,322 $21,036,780 $4,293,220 $25,330,000
50.00 429,322 21,466,102 3,863,898 25,330,000
51.00 429,322 21,895,424 3,434,576 25,330,000
52.00 429,322 22,324,746 3,005,254 25,330,000
53.00 429,322 22,754,068 2,575,932 25,330,000
54.00 429,322 23,183,390 2,146,610 25,330,000
55.00 429,322 23,612,712 1,717,288 25,330,000
56.00 429,322 24,042,034 1,287,966 25,330,000
57.00 429,322 24,471,356 858,644 25,330,000
58.00 429,322 24,900,678 429,322 25,330,000
59.00 429,322 25,330,000 0 25,330,000
60.00 422,167 25,330,000 0 25,330,000
61.00 415,246 25,330,000 0 25,330,000
62.00 408,548 25,330,000 0 25,330,000
63.00 402,063 25,330,000 0 25,330,000
64.00 395,781 25,330,000 0 25,330,000
65.00 389,692 25,330,000 0 25,330,000
66.00 383,788 25,330,000 0 25,330,000
67.00 378,060 25,330,000 0 25,330,000
68.00 372,500 25,330,000 0 25,330,000
69.00 367,101 25,330,000 0 25,330,000
70.00 361,857 25,330,000 0 25,330,000
71.00 356,761 25,330,000 0 25,330,000
72.00 351,806 25,330,000 0 25,330,000
73.00 351,806 25,681,806 0 25,681,806
74.00 351,806 26,033,611 0 26,033,611
75.00 351,806 26,385,417 0 26,385,417
76.00 351,806 26,737,222 0 26,737,222
77.00 351,806 27,089,028 0 27,089,028
78.00 351,806 27,440,833 0 27,440,833
79.00 351,806 27,792,639 0 27,792,639
80.00 351,806 28,144,444 0 28,144,444
81.00 351,806 28,496,250 0 28,496,250
</TABLE>
Note. -- This exhibit assumes that the Benchmark Price, as defined in the
Agreement and Plan of Reorganization, will equal $25,330,000.
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
SOUTHERN ARIZONA BANCORP, INC.
We, the undersigned, having associated ourselves together for the
purpose of forming a Corporation under and by virtue of the laws of the State of
Arizona, do hereby adopt the following Articles of Incorporation.
ARTICLE I - NAME
The name of the Corporation is SOUTHERN ARIZONA BANCORP, INC.
ARTICLE II - PURPOSE
The Corporation shall have the power to transact any and all lawful
business for which Corporations may be incorporated under the laws of the State
of Arizona, as such laws may be amended from time to time, except as prohibited
by law, to act as a bank holding company pursuant to all applicable state and
federal laws, to exercise any power and engage in any activity which it could
exercise or engage in if it were a national banking association with its
principal place of business in the State of Arizona, except as prohibited by
law, to directly or through a bank subsidiary engage in any lawful activity
which is reasonably related or incidental to bank holding companies or banks, to
do the acts necessary to obtain and maintain insurance of its deposits by the
Federal Deposit Insurance Corporation.
<PAGE> 2
ARTICLE III - INITIAL BUSINESS
The Corporation initially intends to qualify and act as a bank holding
company investing in and holding banks and other financial institutions of every
kind, and in connection therewith to engage in any lawful activity which is
reasonably related or incidental to a banking holding company.
ARTICLE IV - AUTHORIZED CAPITAL
The Corporation shall have authority to issue a total of 2,000,000
shares of common stock without par value.
ARTICLE V - REPURCHASE OF SHARES
The Corporation may, from time to time, buy, repurchase or otherwise
reacquire any of its own shares to the extent of the unreserved and unrestricted
earned and capital surplus of the Corporation. Any such shares shall not reduce
the number of authorized capital shares of the Corporation.
ARTICLE VI - DISTRIBUTIONS
The Board of Directors of this Corporation may, from time to time,
distribute on a prorata basis to its shareholders out of the capital surplus of
this Corporation, a portion of its assets, in cash, stock or property to the
extent permitted by law.
ARTICLE VII - ISSUANCE OF RIGHTS OR OPTIONS
This Corporation may create and issue, whether or not in connection
with the issuance and sale of any of its shares or other securities, rights or
options entitling the holders thereof to purchase from this Corporation shares
of any class or classes and such rights or options may be issued to directors,
officers or
2
<PAGE> 3
employees of this corporation or any affiliate thereof, whether or not such
rights or options are issued to shareholders generally, by resolution of the
Board of Directors of this corporation and without the approval or ratification
of shareholders.
ARTICLE VII - TRANSFER RESTRICTIONS
The Corporation shall have the right, by appropriate action of the
Board of Directors, to impose restrictions upon the transfer of any shares of
its common stock, or any interest therein, from time to time issued, provided
that such restrictions as may from time to time be so imposed or notice of the
substance thereof shall be set forth upon the face or back of the certificates
representing such shares of stock.
ARTICLE IX - STATUTORY AGENT
The name and address of the Statutory Agent is:
Stephen P. Shadle
2260 S. 4th Ave., Suite 2000
Yuma, Arizona 85364
ARTICLE X - BOARD OF DIRECTORS
The initial Board of Directors shall consist of ten (10) directors. The
names and addresses of the persons who are to serve as directors until the first
Annual Meeting of shareholders, or until their successors are elected and
qualified, are:
NAME ADDRESS
JOHN E. BYRD P.O. Box 5148
Yuma, AZ 85364
TOM CHOULES 2260 4th Ave., Ste. 2000
Yuma, AZ 85364
3
<PAGE> 4
RONALD L. CHRIST 1230 W. 24th St.
Yuma, AZ 85364
GORDON J. CRANNY P.O. Box 5148
Yuma, AZ 85364
ROBERT W. KENNERLY 608 2nd Ave.
Yuma, AZ 85364
JIMMY J. NAQUIN Route 1, Box 71E
Roll, AZ 85347
DONALD S. OLSEN 1290 W. 8th Place
Yuma, AZ 85364
HENRY SCHECHERT 12486 S. Foothills Blvd.
Yuma, AZ 85365
STEPHEN P. SHADLE 2260 4th Ave., Ste. 2000
Yuma, AZ 85364
ROY R. YOUNG 845 W. 32nd St.
Yuma, AZ 85364
ARTICLE XI - NUMBER OF DIRECTORS
The maximum number of persons to serve on the Board of Directors shall
be fifteen (15) persons. The maximum number of directors may be increased only
by a vote of eighty (80%) percent of the shareholders of this corporation.
ARTICLE XII - INCORPORATORS
The names and addresses of the incorporators of the Corporation are:
NAME ADDRESSES
JOHN E. BYRD P.O. Box 5148
Yuma, AZ 85364
TOM CHOULES 2260 4th Ave., Ste. 2000
Yuma, AZ 85364
RONALD L. CHRIST 1230 W. 24th St.
Yuma, AZ 85364
4
<PAGE> 5
GORDON J. CRANNY P.O. Box 5148
Yuma, AZ 85364
ROBERT W. KENNERLY 608 2nd Ave.
Yuma, AZ 85364
JIMMY J. NAQUIN Route 1, Box 71E
Roll, AZ 85347
DONALD S. OLSEN 1290 W. 8th Place
Yuma, AZ 85364
HENRY SCHECHERT 12486 S. Foothills Blvd.
Yuma, AZ 85365
STEPHEN P. SHADLE 2260 4th Ave., Ste. 2000
Yuma, AZ 85364
ROY R. YOUNG 845 W. 32nd St.
Yuma, AZ 85364
All powers, duties and responsibilities of the incorporators shall cease at the
time of the filing of these Articles of Incorporation by the Arizona Corporation
Commission.
ARTICLE XIII - MERGER, CONSOLIDATION OR SALE
In the event that the Board of Directors has approved a merger,
consolidation or sale, then a vote of two-thirds (2/3) of the stockholders shall
be required to approve such action. In the event the Board of Directors has not
approved such merger, consolidation or sale, then a vote of three-fourths (3/4)
of the stockholders shall be required to approve such action.
ARTICLE XIV - EXEMPTION OF PRIVATE PROPERTY
The private property of the incorporators, directors, officers and
shareholders of this Corporation shall be forever exempt from its corporate
debts and liabilities whatsoever.
5
<PAGE> 6
ARTICLE XV - AMENDMENT
These Articles of Incorporation can be amended only by the affirmative
vote of three-fourths (3/4) of the Stockholders of the corporation.
DATED this 19th day of June, 1985.
- -------------------------------- --------------------------------
John E. Byrd Jimmy J. Naquin
- -------------------------------- --------------------------------
Tom Choules Donald S. Olsen
- -------------------------------- --------------------------------
Ronald L. Christ Henry Schechert
- -------------------------------- --------------------------------
Gordon J. Cranny Stephen P. Shadle
- -------------------------------- --------------------------------
Robert W. Kennerly Roy R. Young
6
<PAGE> 7
STATE OF ARIZONA )
)
County of Yuma )
The foregoing was acknowledged before me this 19th day of
June, 1985, by JOHN E. BYRD, TOM CHOULES, RONALD L. CHRIST, GORDON J. CRANNY,
ROBERT W. KENNERLY, JIMMY J. NAQUIN, DONALD S. OLSEN, HENRY SCHECHERT, STEPHEN
P. SHADLE and ROY R. YOUNG.
- ------------------------------ -------------------------------
Notary Public
7
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
SOUTHERN ARIZONA BANCORP
ARTICLE I
Offices
1.1 Principal office. The principle office of the Corporation in the
State of Arizona shall be located Yuma County until otherwise established by a
vote of a majority of the Board of Directors in office.
1.2 Other offices. The Corporation also may have offices at such
other places within or without the State of Arizona as the Board of Directors
from time to time may appoint or the business of the Corporation may require.
ARTICLE II
Meetings of Shareholders
2.1 Place of Shareholders meetings. All meetings of the Shareholders
of the Corporation shall be held at the principal office of the Corporation
unless another place, within or outside Arizona, is designated in the notice of
such meeting.
2.2 Annual meeting. The Board of Directors may fix the date and time
of the annual meeting of the Shareholders, but if no such date and time is fixed
by the Board, the meeting for any calendar year shall be held at 7:30 P.M., on
the second Thursday in February in such year. If that day is a legal holiday,
the meeting shall be held on the next succeeding day which is not a legal
holiday. At that meeting, the Shareholders entitled to vote shall elect
Directors and shall transact such other business as properly may be brought
before the meeting.
2.3 Special meetings.
(a) Special meetings of the Shareholders of the Corporation
for any purpose or purposes may be called at any time by the President, the
Board of Directors, or Shareholders entitled to cast at least one-half (1/2) of
the votes which all Shareholders are entitled to cast at the particular meeting.
(b) Upon written direction to the secretary by any of the
foregoing persons who have called a special meeting, which written request shall
state the purpose of the meeting, it shall be the duty of the secretary to fix
the date and time of the meeting,
<PAGE> 2
not fewer than ten (10) nor more than fifty (50) days after the receipt of the
direction, and to give due notice thereof. If the secretary shall neglect or
refuse to fix the date and time of such meeting and give due notice thereof, the
person or persons calling the meeting may do so.
2.4 Notice and purpose of meetings; waiver.
(a) Written notice stating the place, day and hour of the
meeting and, in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered to each Shareholder of record entitled to
vote at the meeting, at his address of record, at least ten (10) and not more
than fifty (50) days prior to the date of the meeting.
(b) Every notice of a special meeting shall state briefly the
purpose or purposes thereof but no action taken at the meeting shall be void or
ultra vires because such action was not specified as one of the purposes of the
meeting in the notice.
(c) A Shareholder may waive the notice of meeting by
attendance, either in person or by proxy, at the meeting, or by so stating in
writing, either before or after such meeting. Attendance at a meeting for the
express purpose of objecting that the meeting was not lawfully called or
convened shall not, however, constitute a waiver of notice.
2.5 Quorum, manner of acting and adjournment.
(a) Except as otherwise provided by law or the Articles of
Incorporation, a quorum at all meetings of Shareholders shall consist of the
holders of record of a majority of the shares entitled to vote thereat,
represented in person or by proxy. Treasury shares shall not be voted and shall
not be counted in determining the total number of outstanding shares for voting
purposes. The Shareholders present in person or by proxy at a duly organized
meeting may continue to do business until adjournment, notwithstanding the
withdrawal or temporary absence of sufficient shares to reduce the number
present to less than a quorum.
(b) If a meeting cannot be duly organized because a quorum has
not attended, the Shareholders entitled to vote and present in person or
represented by proxy may adjourn the meeting to such time and place as they may
determine. At any such adjourned meeting at which a quorum may be present, such
business may be transacted as might have been transacted at the meeting as
originally called. No notice of any adjourned meeting of the Shareholders of the
Corporation shall be required to be given, except by announcement at the
meeting, unless the adjournment is for more than thirty (30) days or after the
adjournment of a new record date is fixed for the adjourned meeting. Any meeting
at which Directors are to be elected shall be adjourned only from day to day, as
may be directed by Shareholders who are present in person or by proxy and who
are entitled to cast at least a majority
2
<PAGE> 3
of the votes which all such Shareholders would be entitled to cast at an
election of Directors, until such Directors are elected.
(c) Except as otherwise specified in the Articles, these
Bylaws or as provided by statute, the acts, at a duly organized meeting, of the
Shareholders present, in person or by proxy, entitled to cast at least a
majority of the votes which all Shareholders present in person or by proxy are
entitled to cast shall be the acts of the Shareholders.
2.6 Closing of transfer books; record date.
(a) In order to determine the holders of record of the
Corporation's shares who are entitled to notice of meetings, to vote at any
meeting of Shareholders or any adjournment thereof, and to receive payment of
any dividend, or to make a determination of the Shareholders of record for any
other proper purpose, the Board of Directors of the Corporation may order that
the share transfer books be closed for a period not to exceed sixty (60) days.
(b) In lieu of closing the share transfer books, the Board of
Directors may fix a date as the record date for such determination of
Shareholders. Such date shall be no less than ten (10) days prior to the date of
the action which requires such determination, nor more than sixty (60) days in
advance of such meeting.
(c) When a determination of Shareholders entitled to vote at
any meeting has been made as provided in this section, such determination shall
apply to any adjournment of such meeting, except when the determination has been
made by the closing of the share transfer books and the stated period of closing
has expired.
2.7 Presiding officer; order of business.
(a) Meetings of the Shareholders shall be presided over by the
Chairman of the Board, if there be one, or if he is not present, by the Vice
Chairman of the Board, if there be one, or if he is not present, by the
president, or if he is not present, by a vice president, or if he is not
present, by a chairman to be chosen by a majority of the Shareholders entitled
to vote at the meeting, but if neither the secretary nor an assistant secretary
is present, the presiding officer shall choose any person present to act as
secretary of the meeting.
(b) The order of business shall be as follows:
(1) Call of meeting to order;
(2) Proof of notice or waiver of notice of meeting;
(3) Reading or waiver of reading of minutes of last
previous annual meeting of Shareholders;
3
<PAGE> 4
(4) Reports of officers;
(5) Reports of committees;
(6) Election of Directors (if appropriate);
(7) Miscellaneous business.
Notwithstanding the foregoing, a contrary order may be established in the notice
of the meeting or by motion having precedence after the call of the meeting to
order.
2.8 Voting.
(a) Except with respect to the election of Directors, each
Shareholder of record except the holder of shares which have been called for
redemption and with respect to which an irrevocable deposit of funds has been
made, shall have the right, at every Shareholders' meeting, to one (1) vote for
every share, and to a fraction of a vote with respect to every fractional share,
of stock of the Corporation standing in his name on the books of the Corporation
as may be provided in the Articles, and to one (1) vote for every share, if no
express provision for voting rights is made in the Articles. Treasury shares
shall not be voted, directly or indirectly, at any meeting of Shareholders or be
counted in connection with the expression of consent or dissent to corporate
action in writing without a meeting.
(b) Every Shareholder entitled to vote at a meeting of
Shareholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy. Every proxy shall be executed in writing by the Shareholder or by his
duly authorized attorney-in-fact and shall be filed with the secretary of the
Corporation before the taking of any vote on the issue as to which the proxy
intends to act. A proxy, unless coupled with an interest, shall be revocable at
will, notwithstanding any other agreement or any provision in the proxy to the
contrary, but the revocation of a proxy shall not be effective until notice
thereof has been given to the secretary of the Corporation. No unrevoked proxy
shall be valid after eleven (11) months from the date of its execution, unless a
longer time is expressly provided therein, but in no event shall any proxy,
unless coupled with an interest, be voted after three (3) years from the date of
its execution. A proxy shall not be revoked by the death or incapacity of the
maker unless, before the vote is counted or quorum is determined, written notice
of such death or incapacity is given to the Corporation. A proxy coupled with an
interest shall include an unrevoked proxy in favor of a creditor of a
Shareholder and such a proxy shall be valid as long as the debt owed by such
Shareholder to the creditor remains unpaid and is not barred.
4
<PAGE> 5
2.9 Voting Lists.
(a) A complete list of the Shareholders of the Corporation
entitled to vote at the ensuing meeting, arranged in alphabetical order, and
showing the address of, and number of shares owned by, each Shareholder, shall
be prepared by the secretary, or other officer of the Corporation having charge
of the share transfer books. This list shall be kept on file for a period of at
least five (5) days prior to the meeting at the registered office of the
Corporation in the State of Arizona and shall be subject to inspection during
the usual business hours of such period by any Shareholder. This list also shall
be produced and kept open at the time and place of the meeting and shall be
subject to inspection by any Shareholder at any time during the meeting.
(b) The original hare transfer books shall be prima facie
evidence as to who are the Shareholders entitled to examine such list or to vote
at any meeting of the Shareholders.
(c) Failure to comply with the requirements of this section
shall not affect the validity of any action taken at such meeting of the
Shareholders.
ARTICLE III
Board of Directors
3.1 Powers. The Board of Directors shall have full power to conduct,
manage and direct the business and affairs of the Corporation; and all powers of
the corporation, except those specifically reserved or granted to the
Shareholders by statute, by the Articles of Incorporation or these Bylaws, are
hereby granted to and vested in the Board of Directors.
3.2 Number and term of office. The Board of Directors shall consist
of such number of Directors, not fewer than five (5) nor more than fifteen (15)
as may be determined from time to time by resolution of the Board of Directors.
One-third (1/3) of the initial board of directors shall be elected to three (3)
year terms, one-third (1/3) to two (2) year terms, and one-third (1/3) to one
(1) year terms. Thereafter one-third (1/3) of the board shall be elected each
year in order to provide for a staggered board of directors. One-third (1/3) of
the Directors shall be elected annually by the Shareholders and shall serve a
three (3) year term of office.
3.3 Qualification and election.
(a) All Directors of the Corporation shall be natural persons
of at least eighteen (18) years of age, and need not be residents of Arizona or
Shareholders in the Corporation. Except in the case of vacancies, Directors
shall be elected by the Shareholders. Upon the Demand of any Shareholder or his
proxy at any meeting of Shareholders for the election of Directors, the Chairman
of the meeting shall call for and shall afford a reasonable opportunity for the
making of nominations for the office
5
<PAGE> 6
of Director. Any Shareholder or his proxy may nominate as many persons for the
office of Director as there are positions to be filled. If nominations for the
office of Director have been called for as herein provided, only candidates who
have been nominated in accordance herewith shall be eligible for election.
(b) In all elections for Directors, every Shareholder entitled
to vote shall have the right to multiply the number of votes to which he may be
entitled by the total number of Directors to be elected in the same election,
and he may cast the whole number of such votes for one candidate or he may
distribute them among any two (2) or more candidates. The candidates receiving
the highest number of votes shall be elected.
3.4 Presiding officer. Meeting of the Board of Directors shall be
presided over by the Chairman of the Board, if there be one, or if he is not
present, by the Vice Chairman of the Board, if there be one, or if he is not
present, by the president, or if he is not present, by a vice president, or if
he is not present, by a Chairman to be chosen by a majority of the Board of
Directors at the meeting. The secretary of the Corporation, or in his absence,
an assistant secretary, shall act as secretary of every meeting, but if neither
the secretary nor an assistant secretary is present, the Chairman shall choose
any person present to act as secretary of the meeting.
3.5 Resignations. Any Director of the Corporation may resign at any
time by giving written notice to the president or the secretary of the
corporation. Such resignation shall take effect at the date of the receipt of
such notice or at any later time specified therein and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
3.6 Vacancies.
(a) The Board of Directors may declare vacant the office of a
Director if he is declared of unsound mind by an order of court, or if he has
been convicted of a felony, or for any other proper cause, or if within sixty
(60) days after notice of his election, he does not accept such office either in
writing or by attending a meeting of the Board of Directors.
(b) Any vacancy or vacancies in the Board of Directors because
of death, resignation, removal in any manner other than under the provisions of
Section 3.07 of this Article, disqualification, an increase in the number of
Directors, or any other cause, may be filled by a vote of the majority of the
remaining members of the Board of Directors though less than a quorum, at any
regular or special meting; and the Director or Directors so elected shall
continue in office until the next annual election of the Directors of the
Corporation and until their successors shall have been elected and qualified, or
until their death, resignation or removal.
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3.7 Removal.
(a) At any special meeting called for the purpose of removing
or electing Directors, the entire Board of Directors, or any individual
Director, may be removed from office without assigning any cause, by a vote of
the holders of a majority of the shares then entitled to vote at an election of
Directors. Despite the foregoing sentence, if less than the entire board is to
be removed, no one of the Directors may be removed if the votes cast against his
removal would be sufficient to elect him if then cumulatively voted at an
election of the entire Board of Directors.
(b) In case the Board, or any one or more Directors is so
removed, new Directors may be elected at the same meeting. If the Shareholders
fail to elect persons to fill the unexpired term or terms of the Director or
Directors removed, such unexpired terms shall be considered vacancies on the
Board to be filled by the remaining Directors.
3.8 Place of meeting. The Board of Directors may hold its meetings at
such place or places within Arizona, or elsewhere as the Board of Directors may
from time to time appoint, or as may be designed in the notice calling the
meeting.
3.9 Organization meeting. Within thirty (30) days after each annual
election of Directors or other meeting at which the entire Board of Directors is
elected, the newly elected Board of Directors shall meet for the purpose of
organization, for the election of such officers as they wish to consider at the
time, and for the transaction of any other business, at the place where such
election of Directors was held. Notice of such meeting need not be given. Such
organization meeting may be held at any other time or place which shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors.
3.10 Regular meetings. Regular meetings of the Board of Directors
shall be held at such time and place as shall be designated from time to time by
resolution of the Board of Directors. If the date fixed for any such regular
meeting is a legal holiday under the laws of the state where such meeting is to
be held, then the meeting shall be held on the next succeeding business day, not
a Saturday, or at such other time as may be determined by resolution of the
Board of Directors. At such meetings, the Directors shall transact such business
as may properly be brought before the meeting. Notice of regular meetings need
not be given.
3.11 Special meetings. Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board, the president or by
two (2) or more of the Directors. Notice of each such meeting shall be given to
each Director by telephone or in writing at least two (2) hours (in the case of
notice by telephone) or twenty-four (24) hours (in case of notice by mail)
before the time at which the meeting is to be held. Every
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such notice shall state the time and place of the meeting, but need not state
the purpose of, nor the business to be transacted at, such meeting.
3.12 Quorum, manner of acting and adjournment. A majority of the
Directors in office shall be present at each meeting in order to constitute a
quorum for the transaction of business. Except as otherwise specified in the
Articles or these Bylaws, or provided by statute, the acts of the majority of
the Directors present at the meeting at which a quorum is present shall be the
acts of the Board of Directors. In the absence of a quorum, a majority of the
Directors present may adjourn the meeting from time to time until a quorum be
present, and no notice of any adjourned meeting need be given, other than by
announcement at the meeting. The Directors shall act only as a Board and the
individual Directors shall have no power as such; provided, however, that any
action which may be taken at a meeting of the Board may be taken without a
meeting if a consent or consents in writing setting forth the action so taken is
signed by all of the Directors in office and is filed with the secretary of the
Corporation.
3.13 Executive and other committees.
(a) The Board of Directors, by resolution adopted by a
majority of the whole Board, may designate from among its members an Executive
Committee and one (1) or more other committees, each committee to consist of two
(2) or more Directors. The Board may designate one (1) or more Directors as
alternate members of any committee, who may replace any absent or disqualified
member of any meeting of the committee. In the absence or disqualification of a
member, and the alternate or alternates, if any, designated for such member, of
any committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another Director to act at the meeting in the place of any
such absent or disqualified member.
(b) Except as otherwise provided in this section, the
Executive Committee shall have and exercise all of the authority of the Board in
the management of the business and affairs of the Corporation and any other
committee shall have and exercise the authority of the Board to the extent
provided in the resolution designating the committee.
(c) No such committee of the Board shall have the authority of
the Board in reference to:
(1) Amending the Bylaws of the Corporation;
(2) Declaring any dividend;
(3) Issuing any authorized but unissued share;
(4) Establishing and designating any class or
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series of shares and fixing and determining the relative rights and preferences
thereof, changing the registered office of the Corporation, or otherwise
effecting any amendment of the Articles of Incorporation of the Corporation; or
(5) Recommending to the Shareholders any plan for the
sale, lease or exchange of all or substantially all of the property and assets
of the Corporation, any amendment of the Articles of Incorporation, any plan of
merger or consolidation, any voluntary dissolution of the Corporation or any
revocation of any election of the Corporation to dissolve voluntarily.
(d) A majority of the Directors in office designated to a
committee, or Directors designated to replace them as provided in this section,
shall be present at each meeting to constitute a quorum for the transaction of
business and the acts of a majority of the Directors in office designated to a
committee or their replacements shall be the acts of the committee.
(e) Each committee shall keep regular minutes of its
proceedings and report such proceedings periodically to the Board of Directors.
(f) Sections 3.10, 3.11 and 3.12 shall be applicable to
committees of the Board of Directors.
3.14 Interested Directors or Officers; quorum.
(a) No contract or transaction between the Corporation and one
or more of its Directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one (1) or
more of its Directors or officers are Directors or officers, or have a financial
interest, shall be either void or voidable solely for such reason, or solely
because the Director of officer is present at or participates in the meeting of
the Board which authorized the contract or transaction, or solely because his or
their votes are counted for such purpose, if:
(1) The material facts as to his interest and as to the
contract or transaction are disclosed or are known to the Board of Directors and
the Board in good faith authorizes the contract or transaction by a vote
sufficient for such purpose without counting the vote of the interested Director
or Directors; or
(2) The material facts as to his interest and as to the
contract or transaction are disclosed or are known to the Shareholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the Shareholders; or
(3) The contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified by the Board
of Directors or the Shareholders.
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(b) Common or interested Directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors
which authorizes, approves or ratifies a contract or transaction specified in
this section.
3.15 Compensation. Directors, and members of any committee of the
Board of Directors, shall be entitled to such reasonable compensation for their
services as Directors and members of any such committee as shall be fixed from
time to time by resolution of the Board of Directors, and also shall be entitled
to reimbursement for any reasonable expenses incurred in attending such
meetings. Any Director receiving compensation under these provisions shall not
be barred from serving the Corporation in any other capacity and receiving
reasonable compensation for such other services. Directors' compensation may
also be made upon a deferred basis if approved by the Board of Directors.
3.16 Dividends. Subject always to the provisions of law and the
Articles of Incorporation, the Board of Directors shall have full power to
determine whether any, and, if so, what part, of the funds legally available for
payment of dividends shall be declared in dividends and paid to the Shareholders
of the Corporation. The Board of Directors may fix a sum which may be set aside
or reserved over and above the paid-in capital of the Corporation for working
capital or as a reserve for any proper purpose, and from time to time may
increase, diminish and vary such fund in the Board's absolute judgment and
discretion.
3.17 Sale, mortgage or lease of assets.
(a) The sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the Corporation in the usual and
regular course of its business and the mortgage or pledge of any or all property
and assets of the Corporation, whether or not in the usual and regular course of
business, may be made upon such terms and conditions and for such consideration,
which may consist in whole or in part of cash or other property, including
shares, obligations, or other securities of any other corporation, domestic or
foreign, as are authorized by its Board of Directors; and in any such case no
authorization or consent of the Shareholders shall be required.
(b) A sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the Corporation, with or without
its goodwill, if not in the usual and regular course of its business, may be
made upon such terms and conditions and for such consideration, which may
consist in whole or in part of cash or other property, including shares,
obligations, or other securities of any other corporation, domestic or foreign,
as may be authorized in the following manner:
(1) The Board of Directors shall adopt a resolution
recommending the sale, lease, exchange or other disposition and
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directing the submission thereof to a vote at a meeting of Shareholders, which
may be either an annual or special meeting.
(2) Not less than ten (10) nor more than fifty (50)
days before such meeting, written notice shall be given to each Shareholder of
record, whether or not entitled to vote at such meeting, in the manner provided
in these Bylaws for the giving of notice of meetings of Shareholders. Whether
the meeting is an annual or a special meeting, said notice shall state that the
purpose or one of the purposes of said meeting is to consider the proposed sale,
lease, exchange or other disposition.
(3) At such meeting the Shareholders may authorize the
sale, lease, exchange, or other disposition and may fix, or authorize the Board
of Directors to fix, any or all of the terms and conditions thereof and the
consideration to be received by the Corporation therefor. Such authorization
shall require the affirmative vote of two-thirds of the shares of the
Corporation entitled to vote thereon, unless any class of shares is entitled to
vote therein as a class, in which event the authorization shall require the
affirmative vote of the holders of two-thirds of the shares of each class of
shares entitled to vote as a class thereon and of the total shares entitled to
vote therein.
(4) After such authorization by a vote of
Shareholders, the Board of Directors nevertheless, in its discretion, may
abandon the sale, lease, exchange, or other disposition of assets, subject to
the rights of third parties under any contracts relating thereto, without
further action or approval by Shareholders.
3.18 Certain board actions.
(a) The Board of Directors, when evaluating any offer of
another party to (i) make a tender or exchange offer for the equity securities
of the Corporation or any subsidiary, (ii) merge or consolidate the Corporation
or any subsidiary with another corporation, or (iii) purchase or otherwise
acquire all or substantially all of the properties and assets of the
Corporation, or of any subsidiary, shall, in connection with the exercise of its
judgment in determining what is in the best interests of the Corporation and its
Shareholders, give due consideration to all relative factors, including by way
of illustration, but not of limitation, any or all of the following:
(1) Whether the offer is acceptable based on
historical operating results, the financial condition of the Corporation and its
subsidiaries, and its future prospects;
(2) Whether a more favorable offer could be obtained
for the Corporation's or its subsidiaries' securities or assets in the
foreseeable future;
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(3) The social, economic or any other material impact
which an acquisition of the equity securities of the Corporation or
substantially all of its assets would have upon the employees and customers of
the Corporation and its subsidiaries and the community which they serve;
(4) The reputation and business practices of the
offeror and its management and affiliates as they would affect the employees and
customers of the Corporation and its subsidiaries and the future value of the
Corporation's stock;
(5) The value of the securities, if any, which the
offeror is offering in exchange for the Corporation's or its subsidiaries'
securities or assets based on an analysis of the worth of the Corporation or of
its subsidiaries as compared to the offeror corporation or other entity whose
securities are being offered; and
(6) Any antitrust or other legal or regulatory issues
that are raised by the offer.
(b) If the Board of Directors determines that an offer should
be rejected, it may take any lawful action to accomplish its purpose including,
but not limited to, any and all of the following:
(1) Advising Shareholders not to accept the offer;
(2) Litigation against the offeror;
(3) Filing complaints with any governmental and
regulatory authorities;
(4) Acquiring the Corporation's securities;
(5) Selling or otherwise issuing authorized but
unissued securities or treasury stock or granting options with respect thereto;
(6) Acquiring a company to create an antitrust or
other regulatory problem for the offeror;
(7) Obtaining a more favorable offer from another
individual or entity.
(c) Notwithstanding the fact that by law or by agreement with
a national securities exchange or otherwise, no vote, or a lesser vote, of
Shareholders may be specified or permitted, the affirmative vote of the holders
of two-thirds of the outstanding shares of Common Stock of the Corporation shall
be required to approve any offer described in Section 3.18(a).
3.19 Stock options. The Board of Directors, by resolution, may
adopt such stock option plans and/or ESOP plans for its
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officers, directors and employees as may from time to time be deemed to be in
the best interest of the Corporation.
ARTICLE IV
Notice; Waivers; Meetings
4.1 Notice - what constitutes. Whenever written notice is required to
be given to any person under the provisions of the Articles, these Bylaws, or
the statutes, it may be given to such person, either personally or by sending a
copy thereof through the mail, or by telegraph, charges prepaid, to his address
appearing on the books of the Corporation, or supplied by him to the Corporation
for the purpose of notice. If the notice is sent by mail or by telegraph, it
shall be deemed to have been given to the person entitled thereto when deposited
in the United States mail or with a telegraph office for transmission to such
person. A notice of a meeting shall specify the place, day and hour of the
meeting.
4.2 Waiver of notice.
(a) Whenever any written notice is required to be given under
the provisions of the Articles, these Bylaws, or the statutes, a waiver thereof
in writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at nor the purpose
of the meeting need be specified in the waiver of notice of such meeting.
(b) Attendance of a person, either in person or by proxy, at
any meeting shall constitute a waiver of notice of such meeting, except when a
person attends a meeting for the express purpose of objecting to the transaction
of any business because the meeting is not lawfully called or convened.
4.3 Conference by telephone meetings. One (1) or more Directors or
Shareholders may participate in a meeting of the Board, of a committee of the
Board or of the Shareholders by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this section
shall constitute presence in person at such meeting.
ARTICLE V
Officers
5.1 Number, qualifications and designation. The officers of the
Corporation shall be a president, one (1) or more vice presidents, a secretary,
a treasurer, and such other officers as may be elected in accordance with the
provisions of section 5.03 of this Article. Any two (2) or more offices may be
held by the same person, except the offices of president and secretary. Officers
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may, but need not be, Directors or Shareholders of the Corporation. The Board of
Directors may elect from among the members of the Board a Chairman of the Board
and a Vice Chairman of the Board who shall be officers of the Corporation.
5.2 Election and term of office. The officers of the Corporation,
except those elected by delegated authority pursuant to Section 5.03 of this
Article, shall be elected by the Board of Directors, and each such officer shall
hold his office during the pleasure of the Board and until his successor shall
have been duly elected and qualified, or until his death, resignation or
removal.
5.3 Subordinate officers, committees and agents. The Board of
Directors from time to time may elect such other officers and appoint such
committees, employees or other agents as the business of the Corporation may
require, including one (1) or more assistant secretaries, and one or more
assistant treasurers, each of whom shall hold office for such period, have such
authority, and perform such duties as are provided in these Bylaws, or as the
Board of Directors from time to time may determine. The Directors may delegate
to any officer or committee the power to elect subordinate officers and to
retain or appoint employees or other agents.
5.4 Resignations. Any officer or agent may resign at any time by
giving written notice to the Board of Directors, or to the president or the
secretary of the Corporation. Any such resignation shall take effect at the date
of the receipt of such notice or at any later time specified therein and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
5.5 Removal. Any officer, committee, employee or other agent of the
Corporation may be removed, with or without cause, by the Board of Directors or
other authority which elected or appointed such officer, committee or other
agent whenever in the judgment of such authority the best interests of the
Corporation will be served thereby. Such removal shall not prejudice the
contract rights, if any, of the person so removed.
5.6 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled by the Board of
Directors or by the officer or committee to which the power to fill such office
has been delegated pursuant to Section 5.03 of this Article, as the case may be,
and if the office is one for which these Bylaws prescribe a term, shall be
filled for the unexpired portion of the term.
5.7 General powers. All officers of the Corporation, as between
themselves and the Corporation, shall, respectively, have such authority and
perform such duties in the management of the property and affairs of the
Corporation as may be determined by resolution of the Board of Directors, or in
the absence of
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controlling provisions in a resolution of the Board of Directors, as may be
provided in these Bylaws.
5.8 The Chairman and Vice Chairman of the Board. The Chairman of the
Board, or in his absence the Vice Chairman of the Board, shall preside at all
meetings of the Shareholders and the Board of Directors, and shall perform such
other duties as may from time to time be requested of him by the Board of
Directors.
5.9 The Chief Executive Officer. The Chief Executive Officer of the
Corporation shall be such person as designated by the Board of Directors to
serve in such capacity and shall perform such duties as from time to time may be
requested of him by the Board of Directors.
5.10 The President. The president shall have general supervision over
the business and operation of the Corporation, subject, however, to the control
of the Board of Directors. He shall sign, execute and acknowledge, in the name
of the Corporation, deeds, mortgages, bonds, contracts or other instruments,
authorized by the Board of Directors, except in cases where the signing and
execution thereof shall be expressly delegated by the Board of Directors, or by
these Bylaws, to some other officer or agent of the Corporation, and, in
general, shall perform all duties incident to the office of president, and such
other duties as from time to time may be assigned to him by the Board of
Directors.
5.11 The Vice Presidents. The vice presidents, in the order designated
by the Board of Directors, shall perform the duties of the president in his
absence or disability. Each vice president shall have such other duties as from
time to time may be assigned to him by the Board of Directors or by the
president.
5.12 The Secretary. The secretary or an assistant secretary shall
attend all meetings of the Shareholders and the Board of Directors and shall
record all the votes of the Shareholders and the Directors and the minutes of
the meetings of the Shareholders and Board of Directors and committees of the
Board in a book or books to be kept for that purpose; shall see that notices are
given and records and reports properly kept and filed by the Corporation as
required by law; shall be the custodian of the seal of the Corporation; and, in
general, shall perform all duties incident to the office of secretary, and such
other duties as from time to time may be assigned to him by the Board of
Directors or the president.
5.13 The Treasurer. The treasurer or an assistant treasurer shall have
or provide for the custody of the funds or other property of the Corporation and
shall keep a separate book account of the same to his credit as treasurer; shall
collect and receive or provide for the collection and receipts of monies earned
by or in any manner due to or received by the Corporation; shall deposit all
funds in his custody as treasurer in such banks or other places of deposit as
the Board of Directors from time to time may
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designate; shall, whenever so required by the Board of Directors, render an
account showing his transactions as treasurer and the financial condition of the
Corporation; and, in general, shall discharge such other duties as from time to
time may be assigned to him by the Board of Directors or the president.
5.14 Officers' bonds. Any officer shall give a bond for the faithful
discharge of his duties in such sum, if any, and with such surety or sureties,
as the Board of Directors shall require.
5.15 Salaries. The salaries of the officers elected by the Board o
Directors shall be fixed from time to time by the Board of Directors or by such
officer as may be designated by resolution of the Board. The salaries or other
compensation of any other officers, employees and other agents shall be fixed
from time to time by the officer or committee to which the power to elect such
officers or to retain or appoint such employees or other agents has been
delegated pursuant to section 5.03 of this Article. No officer shall be
prevented from receiving such salary or other compensation by reason of the fact
that he also is a Director of the Corporation.
ARTICLE VI
Certificates of Stock
6.1 Issuance. The interest of each Shareholder of the Corporation
shall be evidenced by certificates for shares of stock. The share certificates
of the Corporation shall be numbered and registered in the share ledger and
transfer books of the Corporation as they are issued. They shall be signed by
the president or a vice president and by the secretary or an assistant
secretary, and may bear the corporate seal, which may be a facsimile, engraved
or printed; but where such certificate is signed by a transfer agent or a
registrar the signature of any Corporate officer upon such certificate may be a
facsimile, engraved or printed. In case any officer who has signed or whose
facsimile signature has been placed upon any share certificate shall have ceased
to be such officer because of death, resignation or otherwise before the
certificate is issued, it may be issued by the Corporation with the same effect
as if the officer has not ceased to be such as the date of its issue.
6.2 Subscriptions for shares. Unless the subscription agreement
provides otherwise, subscriptions for shares, regardless of the time when they
are made, shall be paid in full at such time, or in such installments and at
such periods, as shall be specified by the Board of Directors. All calls for
payments on subscriptions shall carry the same terms with regard to all shares
of the same class.
6.3 Transfers. Transfers of shares of the capital stock of the
Corporation shall be made on the books of the Corporation by the registered
owner thereof, or by his duly authorized attorney,
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with a transfer clerk or transfer agent appointed as provided in section 6.07 of
this Article, and on surrender of the certificate or certificates for such
shares properly endorsed and with all taxes thereon paid. No transfer shall be
made which is inconsistent with the provisions of Arizona Revised Statutes,
Sections 2201, et seq., and its amendments and supplements.
6.4 Share certificates. Certificates for shares of the Corporation
shall be in such form as provided by statute and approved by the Board of
Directors. The share record books and the blank share certificate books shall be
kept by the secretary or by any agency designated by the Board of Directors for
that purpose. Every certificate exchanged or returned to the Corporation shall
be marked "Cancelled", with the date of cancellation.
6.5 Record holder of shares. The Corporation shall be entitled to
treat the person in whose name any share or shares of the Corporation stand on
the books of the Corporation as the absolute owner thereof, and shall not be
bound to recognize any equitable or other claim to, or interest in, such shares
or shares on the part of an other person. However, if any transfer of shares is
made only for that purpose of furnishing collateral security, and such fact is
made known to the secretary of the Corporation, or to the Corporation's transfer
clerk or transfer agent, the entry of the transfer shall record such fact.
6.6 Lost, destroyed, mutilated or stolen certificates. The holder of
any shares of the Corporation shall immediately notify the Corporation of any
loss, destruction, mutilation or theft of the certificate therefor, and the
Board of Directors may, in its discretion, cause a new certificate or
certificates to be issued to him, in case of mutilation of the certificates to
be issued to him, in case of mutilation of the certificate, upon the surrender
of the mutilated certificate, or, in the case of loss, destruction or theft of
the certificate, upon satisfactory proof of such loss, destruction or theft,
and, if the Board of Directors shall so determine, the deposit of a bond in such
form and in such sum, and with such surety or sureties, as it may direct.
6.7 Transfer agent and registrar. The Board of Directors may appoint
one or more transfer agents or transfer clerks and one or more registrars, and
may require all certificates for shares to bear the signature or signatures of
any of them.
6.8 FIRA notice. As a condition to transferring shares on the stock
transfer books of the Corporation, the Corporation shall have the right to
demand from any Shareholder requesting a transfer evidence sufficient to the
Corporation to assure itself that the Shareholder requesting the transfer has
complied with all prior notice requirements, if any, unposed by regulatory
agencies which supervise the Corporation. In particular, but without limitation,
the Corporation can as a condition of transfer require sufficient evidence to
indicate to its satisfaction Shareholder compliance, if applicable, with the
prior notification requirements of the Change
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in Bank Control Act of 1978 (12 U.S.C. Section 1817(j)), Title VI of FIRA (as
set forth in Regulation Y at 12 Code of Federal Regulations Section 115.7.)
6.9 Redemption or purchase of its own shares. Before the Corporation
purchases or redeems any shares of its common stock, the president of the
Corporation shall, if applicable, have the Corporation comply with the prior
notice requirements upon certain purchases or redemptions as set forth in
Regulation Y at 12 Code of Federal Regulations Section 225.6, which requires the
Corporation to provide a 45-day prior notice if, generally, any purchase or
redemption of its equity securities equals or exceeds 10% of the Corporation's
consolidated net worth.
ARTICLE VII
Indemnification
7.1 Directors and Officers; Third party actions. The Corporation
shall indemnify any Director or officer of the Corporation who was or is a party
or is threatened to be made a party to any threatened, pending or completed
actions, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was an authorized representative of the
Corporation (which, for the purposes of this Article, shall mean a Director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise) against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably believed
to be in, or not opposed to, the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendre or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in, or not
opposed to, the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
7.2 Directors and Officers, derivative actions. The Corporation shall
indemnify any Director or officer of the Corporation who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was an authorized representative of the
Corporation, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the Corporation and except
that no indemnification shall be made in respect to any
18
<PAGE> 19
claim, issue or matter as to which such person shall have been adjudged to be
liable for gross negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the Superior Court of the county
in which the principal office of the Corporation is located or the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnify for such
expenses which the Superior Court or such other court shall deem proper.
7.3 Employees and agents. To the extent that an authorized
representative of the Corporation who neither was nor is a Director or officer
of the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in section 7.01 or 7.02 of this
Article or in defense of any claim, issue or matter therein, he shall be
indemnified by the Corporation against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith. Such an
authorized representative may, at the discretion of the Corporation, be
indemnified by the Corporation in any other circumstances to any extent if the
Corporation would be required by sections 7.01 or 7.02 of this Article to
indemnify such person in such circumstances to such extent if he were or had
been a Director or officer of the Corporation.
7.4 Procedure for effecting indemnification. Indemnification under
sections 7.01, 7.02 or 7.03 of this Articles shall be made when ordered by court
(in which case the expense, including attorneys' fees, of the authorized
representative in enforcing the right of indemnification shall be added to and
be included in the final judgment against the Corporation) and may be made in a
specific case upon a determination that indemnification or the authorized
representative is required or proper in the circumstances because he has met the
applicable standard of conduct set forth in Sections 7.01 and 7.02 of this
Article. Such determination shall be made:
(1) By the Board of Directors by a majority vote of a quorum
consisting of Directors who were not parties to such action, suit or proceeding;
or
(2) If such a quorum is not obtainable, or, even if
obtainable, a majority vote of a quorum of disinterested Directors so direct, by
independent legal counsel in a written opinion; or
(3) By the Shareholders.
7.5 Advancing expenses. Expenses (including attorneys' fees) incurred
in defending a civil or criminal action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding, upon receipt of an undertaking by or on behalf of a Director or
officer to repay such amount unless it ultimately shall be determined that he is
entitled
19
<PAGE> 20
to be indemnified by the Corporation as required in this Article or authorized
by law and may be paid by the Corporation in advance on behalf or any other
authorized representative when authorized by the Board of Directors upon receipt
of a similar undertaking.
7.6 Scope of Article.
(a) Each person who shall act as an authorized representative
of the Corporation, shall be deemed to be doing so in reliance upon such rights
of indemnification as are provided in this Article.
(b) The indemnification provided by this Article shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under any agreement, vote of Shareholders or disinterested
Directors, statute or otherwise, both as to action in his official capacity and
as to action in another capacity while holding such office or position, and
shall continue as to a person who has ceased to be an authorized representative
of the Corporation and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE VIII
Miscellaneous
8.1 Corporate seal. The Corporation may have a corporate seal in the
form of a circle containing the name of the Corporation, the year of
incorporation and such other details as may be approved by the Board of
Directors. Nothing in these Bylaws shall require the impression of a corporate
seal to establish the validity of any document executed on behalf of the
Corporation.
8.2 Checks. All checks, notes, bills or exchange or other orders in
writing shall be signed by such person or persons as the Board of Directors from
time to time may designate.
8.3 Contracts. Except as otherwise provided in these Bylaws, the
Board of Directors may authorize any officer or officers, agent or agents to
enter into any contract or to execute or deliver any instrument on behalf of the
Corporation, and such authority may be general or confined to specific
instances.
8.4 Deposits. All funds of the Corporation shall be deposited from
time to time to the credit of the Corporation in such banks, trust companies, or
other depositories as the Board of Directors may approve or designate, and all
such funds shall be withdrawn only upon checks signed by such one or more
officers or employees as the Board of Directors from time to time shall
determine.
8.5 Reports. The Board of Directors shall present at the annual
meeting of Shareholders a report of the financial condition of the Corporation
as of the closing date of the preceding fiscal
20
<PAGE> 21
year. Such report shall be in such form as shall be approved by the Board of
Directors and shall be available for the inspection of Shareholders at the
annual meeting, but the Board of Directors shall not be required to cause such
report to be sent to the Shareholders. The Board of Directors may, but shall not
be required to, have such report prepared and verified by an independent
certified public accountant or by a firm of practicing accountants.
8.6 Corporate records.
(a) There shall be kept at the principal office of the
Corporation an original or duplicate record of the proceedings of the
Shareholders and of the Directors, and the original or a copy of the Bylaws,
including all amendments or alterations to date, certified by the secretary of
the Corporation. An original or duplicate share register also shall be kept at
the registered office or principal place of business of the Corporation, or at
the office of a transfer agent or registrar, giving the names of the
Shareholders, their respective addresses and the number and class of shares held
by each. The Corporation also shall keep appropriate, complete and accurate
books or records of account, which may be kept at its registered office or at
its principal place of business.
(b) Every Shareholder shall, upon written demand under oath
stating the purpose thereof, have a right to examine, in person or by agent or
attorney, during the usual hours for business, for any proper purpose, the share
register, books or records of account, and records of the proceedings of the
Shareholders and Directors, and make copies of extracts therefrom. A proper
purpose shall mean a purpose reasonably related to such person's interest as a
Shareholder. In every instance where any attorney or other agent shall be the
person who seeks the right to inspection, the demand under oath shall be
accompanied by a power of attorney or such writing which authorizes the attorney
or other agent to so act on behalf of the Shareholder. The demand under oath
shall be directed to the Corporation at its registered office in Arizona or at
its principal place of business. Where the Shareholder seeks to inspect the
books and records of the Corporation, other than its share register or list of
Shareholders, he shall first establish (i) that he has complied with the
provisions of this section respecting the form and manner of making demand for
inspection of property document; and (ii) that the inspection he seeks is for a
proper purpose. Where the Shareholder seeks to inspect the share register or
list of Shareholders of the Corporation and he has complied with the provisions
of this Section respecting the form and manner of making demand for inspection
of such documents, the burden of proof shall be upon the Corporation to
establish that the inspection he seeks is for an improper purpose.
8.7 Voting securities held by the Corporation. Unless otherwise
ordered by the Board of Directors, the president shall
21
<PAGE> 22
have full power and authority on behalf of the Corporation to attend and to act
and to vote at any meeting of security holders of other corporations in which
the Corporation may hold securities. At such meeting the president shall possess
and may exercise any and all rights and powers incident to the ownership of such
securities which the Corporation might have possessed and exercised if it had
been present. The Board of Directors from time to time may confer similar powers
upon any other person or persons.
8.8 Amendment of Bylaws. These bylaws may be amended or replaced, or
new Bylaws may be adopted, either (i) by an affirmative vote of the Shareholders
entitled to cast at least a majority of the votes which all Shareholders are
entitled to cast thereon at any duly organized annual or special meeting of
Shareholders, or (ii) with respect to those matters which are not by statute
reserved exclusively to the Shareholders, by an affirmative vote of a majority
of the Board of Directors of the Corporation in office at any regular or special
meeting of Directors. It shall not be necessary to set forth such proposed
amendment, repeal or new Bylaws, or a summary thereof, in any notice of such
meeting, whether annual, regular or special.
8.9 Fiscal year. The fiscal year of the Corporation shall be the
calendar year.
22
<PAGE> 23
CERTIFICATE
The undersigned, the duly elected and acting Secretary of SOUTHERN
ARIZONA BANCORP, an Arizona corporation, does hereby certify that the foregoing
Bylaws constitute the Bylaws of the Corporation as duly adopted pursuant to a
meeting called for that purpose by the Board of Directors thereof on the 19th
day of June, 1985.
DATED: June 19, 1985.
------------------------------------
Secretary
23
<PAGE> 1
EXHIBIT 10.1
SOUTHERN ARIZONA BANK
401(K) PROFIT SHARING PLAN
Eligibility
Service - 1 year of service (12 consecutive months with at least 1000 hours.)
Age - Minimum age 21
Exclusions - none
Contribution Formula
1. EMPLOYEE DEFERRALS - Voluntary pre-tax up to max by law, no after-tax
contributions allowed.
2. EMPLOYER MATCHING - Discretionary. Will be declared at the beginning
of each year; (?) on the dollar up to (?%) of compensation for 1992.
3. DISCRETIONARY PROFIT SHARING - Employer has the option to make an
additional contribution at its discretion. You must be employed on the last day
of the plan year and have a year of service (1000 hours) in order to receive an
allocation.
4. QUALIFIED ROLLOVERS - allowed for any employee.
Plan Entry
First day of the current plan year (1/1) if eligibility requirement are met in
first 6 months; first day of subsequent year of eligibility requirements are met
in last 6 months.
Vesting
100% immediate on Employee Deferrals. The following vesting schedule will apply
to the Employer Matching and Profit Sharing contribution:
<TABLE>
<CAPTION>
# of Yrs. % Vested
- --------- --------
<C> <C>
0-1 0
2 20
3 40
4 60
5 80
6 100
</TABLE>
<PAGE> 2
PAGE TWO OF TWO
SOUTHERN ARIZONA BANK
Forfeitures
Reallocated to active participants.
In-Service Distributions
Hardship withdrawals - limited elective deferrals only.
Loans
Yes - the greater of 50% of the vested balance or $10,000 with a maximum loan of
$50,000.
Other Plans
Yes ESOP.
Miscellaneous
Salary reduction agreements for modifying contributions or investment
allocations will only be accepted
.
Compensation is defined as total compensation less contributions made to a
Section 125 plan.
<PAGE> 3
SOUTHERN ARIZONA BANK
401(K) PROFIT SHARING PLAN
SUMMARY PLAN DESCRIPTION
<PAGE> 4
TABLE OF CONTENTS
Page
I - INTRODUCTION TO YOUR PLAN.............................................. 1
II - GENERAL INFORMATION ABOUT YOUR PLAN................................... 2
1. General Plan Information............................... 2
2. Employer Information................................... 2
3. Plan Administrator Information......................... 2
4. Plan Trustee Information............................... 3
5. Service of Legal Process............................... 3
III - PARTICIPATION IN YOUR PLAN........................................... 3
1. Eligibility Requirements............................... 4
2. Participation Requirements............................. 4
IV - CONTRIBUTIONS TO YOUR PLAN............................................ 4
1. Employer Contributions to the Plan..................... 4
2. Employee Salary Reduction Election..................... 4
3. Your Share of Employer Contributions................... 6
4. Compensation........................................... 7
5. Forfeitures............................................ 7
6. Your Voluntary Contributions to the Plan............... 8
7. Transfers From Qualified Plans (Rollovers)............. 8
V - BENEFITS UNDER YOUR PLAN............................................... 9
1. Distribution of Benefits Upon Normal
Retirement............................................. 9
2. Distribution of Benefits Upon Late Retirement.......... 9
3. Distribution of Benefits Upon Death.................... 9
4. Distribution of Benefits Upon Disability............... 11
5. Distribution of Benefits Upon Termination of
Employment............................................. 11
6. Vesting in Your Plan................................... 11
7. Benefit Payment Options................................ 12
8. Treatment of Distributions From Your Plan.............. 13
9. Domestic Relations Order............................... 14
10. Pension Benefit Guaranty Corporation................... 14
VI - YEAR OF SERVICE RULES................................................. 14
1. Year of Service and Hour of Service.................... 15
2. 1-Year Break in Service................................ 15
VII - YOUR PLAN'S "TOP HEAVY RULES"........................................ 17
1. Explanation of "Top Heavy Rules"....................... 17
VIII - LOANS .............................................................. 17
1. Loan Requirements...................................... 18
i
<PAGE> 5
Page
IX - CLAIMS BY PARTICIPANTS AND BENEFICIARIES............................. 18
1. The Claims Review Procedure........................... 19
X - STATEMENT OF ERISA RIGHTS............................................. 20
1. Explanation of Your ERISA Rights...................... 20
XI - AMENDMENT AND TERMINATION OF YOUR PLAN............................... 22
1. Amendment............................................. 22
2. Termination........................................... 22
ii
<PAGE> 6
Page 1
SOUTHERN ARIZONA BANK
401(K) PROFIT SHARING PLAN
SUMMARY PLAN DESCRIPTION
I
INTRODUCTION TO YOUR PLAN
Southern Arizona Bank wishes to recognize the efforts its employees
have made to its success and to reward them by adopting a 401(k) Profit Sharing
Plan and Trust. This 401(k) Profit Sharing Plan will be for the exclusive
benefit of eligible employees and their beneficiaries.
Your Plan is a "salary reduction plan." It is also called a "401(k)
plan." Under this type of plan, you may choose to reduce your compensation and
have these amounts contributed to this Plan on your behalf.
The purpose of this Plan is to reward eligible employees for long
and loyal service by providing them with retirement benefits.
Between now and your retirement, your Employer intends to make
contributions for you and other eligible employees. When you retire, you will be
eligible to receive the value of the amounts which have accumulated in your
account.
Your Employer has the right to submit this Plan to the Internal
Revenue Service for approval. The Internal Revenue Service will issue a
"determination letter" to your Employer approving this Plan as a "qualified"
retirement plan, if this Plan meets specific legal requirements.
This Summary Plan Description is a brief description of your Plan
and your rights, obligations, and benefits under that Plan. Some of the
statements made in this Summary Plan Description are dependent upon this Plan
being "qualified" under the provisions of the Internal Revenue Code. This
Summary Plan Description is not meant to interpret, extend, or change the
provisions of your Plan in any way. The provisions of your Plan may only be
determined accurately by reading the actual Plan document.
A copy of your Plan is on file at your Employer's office and may be
read by you, your beneficiaries, or your legal representatives at any reasonable
time. If you have any questions regarding either your Plan or this Summary Plan
Description, you should ask your Plan's Administrator. In the event of any
discrepancy between,this Summary Plan Description and the actual provisions of
the Plan, the Plan shall govern.
<PAGE> 7
Page 2
II
GENERAL INFORMATION ABOUT YOUR PLAN
There is certain general information which you may need to know
about your Plan. This information has been summarized for you in this section.
1. General Plan Information
Southern Arizona Bank 401(k) Profit Sharing Plan is the name of
your Plan.
Your Employer has assigned Plan Number 002 to your Plan.
The provisions of your Plan become effective on January 1, 1987,
which is called the Effective Date of the Plan.
Your Plan's records are maintained on a twelve-month period of
time. This is known as the Plan Year. The Plan Year begins on January 1st and
ends on December 31st.
Certain valuations and distributions are made on the Anniversary
Date of your Plan. This date is December 31.
The contributions made to your Plan by your Employer shall be held
and invested by the Trustee of your Plan.
Your Plan and Trust shall be governed by the laws of the State of
Arizona.
2. Employer Information
Your Employer's name, address and identification number are:
Southern Arizona Bank
1800 South Fourth Avenue
Yuma, Arizona 85364
86-0412154
3. Plan Administrator Information
The name, address and business telephone number of your Plan's
Administrator are:
Southern Arizona Bank
<PAGE> 8
Page 3
1800 South Fourth Avenue
Yuma, Arizona 85364
(602) 782-750
Your Plan's Administrator keeps the records for the Plan and is
responsible for the administration of the Plan. Your Plan's Administrator will
also answer any questions you may have about your Plan.
4. Plan Trustee Information
The names of your Plan's Trustees are:
Stephen P. Shadle
John E. Byrd
F.C. Braden
Robert W. Kennerly
The Trustees shall collectively be referred to as Trustee
throughout this Summary Plan Description.
The principal place of business of your Plan's Trustee is:
1800 South Fourth Avenue
Yuma, Arizona 85364
Your Plan's Trustee has been designated to hold and invest Plan
assets for the benefit of you and other Plan participants.
5. Service of Legal Process
The name and address of your Plan's agent for service of legal
process are:
Southern Arizona Bank
1800 South Fourth Avenue
Yuma, Arizona 85364
Service of legal process may also be made upon the Trustee or
Administrator.
<PAGE> 9
Page 4
III
PARTICIPATION IN YOUR PLAN
Before you become a member or a "participant" in the Plan, there
are certain eligibility and participation rules which you must meet. These rules
are explained in this section.
1. Eligibility Requirements
You will be eligible to participate in the Plan if you have
completed one (1) Year of Service and have reached your 21st birthday.
You should review the Article in this Summary entitled "YEAR OF
SERVICE RULES" for a further explanation of these eligibility requirements.
2. Participation Requirements
Once you have satisfied your Plan's eligibility requirements, your
next step will be to actually become a member or a "participant" in the Plan.
You will become a participant on a specified day of the Plan Year. This day is
called the Effective Date of Participation.
You will become a participant on the first day of the Plan Year
during which you satisfy the eligibility requirements if you meet the
requirement during the first six months of the Plan Year. If you satisfy the
requirements in the last six months of the Plan Year, you will become a
participant on the first day of the Plan Year following the date you satisfy
eligibility requirements.
IV
CONTRIBUTIONS TO YOUR PLAN
1. Employer Contributions to the Plan
Each year, your Employer will contribute to your Plan the following
amounts:
(a) The total amount of the salary reduction you elected
to defer. (See the Section in this Article entitled
"Employee Salary Reduction Election.")
<PAGE> 10
Page 5
(b) A contribution equal to 1/4 of 1% of your
compensation.
(c) A discretionary amount determined each year by your
Employer.
2. Employee Salary Reduction Election
As a participant, you may elect to defer a percentage of your
compensation each year instead of receiving that amount in cash. This
percentage, however, may not exceed the limitations prescribed by law.
Additionally, your total deferrals in any calendar year may not exceed $7,000.
This $7,000 limit will be increased in the future for cost of living changes.
Your Employer's contribution will be added to the amount you defer
to provide additional benefits when you retire.
The amount you elect to defer will be deducted from your pay in
accordance with the written procedure established by your Employer.
The amount you elect to defer, and any earnings on that amount,
will not be subject to income tax until it is actually distributed to you. This
money will, however, be subject to Social Security taxes at all times.
You should also be aware that the $7,000 limit is an aggregate
limit which applies to all deferrals you may make under this plan or other cash
or deferred arrangements (including tax-sheltered 403(b) annuity contracts,
simplified employee pensions or other 401(k) plans in which you may be
participating). Generally, if your total deferrals under all cash or deferred
arrangements for a calendar year exceed the $7,000 limit, the excess must be
included in your income for the year. If you participate in another cash or
deferred arrangement and your total deferrals exceed the $7,000 limit, it is
desirable to request in writing that these excess deferrals be returned to you.
Failure to request such a return may result in your being taxed a second time
when the excess deferral is ultimately distributed from the Plan. You must
decide which plan or arrangement you would like to have return the excess. If
you decide that the excess should be distributed from this Plan, you should
communicate this in writing to the Administrator no later than the March 1st
following the close of the calendar year in which such excess deferrals were
made. The Administrator will then return the excess deferral and any earnings to
you by April 15th.
<PAGE> 11
Page 6
You will always be 100% vested in the amount you deferred. This
means that you will always be entitled to all of the deferred amount. This money
will, however, be affected by any investment gains or losses. If the Trustee
invested this money and there was a gain, the balance in your account would
increase. Of course, if there were a loss, the balance in your account would
decrease. Your interest in this account cannot be forfeited for any reason.
Distributions from your deferred account are not permitted before
age 59 1/2 EXCEPT in the event of:
(a) death;
(b) disability;
(c) termination of employment; or
(d) reasons of proven financial hardship resulting from
accident to or sickness of you or your dependents; or financial
hardship resulting from the establishing or preserving of your home
in which you reside, provided funds are not available to you from
any other financial resources. Any withdrawals for proven financial
hardship after December 31, 1988, will be limited to the amount you
have deferred under the Plan. Income or earnings on your deferrals
is not eligible for hardship distribution.
3. Your Share of Employer Contributions
Your Employer will allocate the amount you elect to defer to an
account maintained by the Trustee on your behalf.
Your Employer will also allocate to your account the 1/4 of 1% of
compensation contribution made to the Plan on your behalf. (See the Section in
this Article entitled "Employer Contributions to the Plan.")
You must complete a Year of Service in each Plan Year to share in
this contribution.
Your Employer's discretionary contribution will be "allocated" or
divided among participants eligible to share in the contribution for the Plan
Year.
Your share of your Employer's discretionary contribution is
determined by the following fraction:
Your Compensation
Employer's X
--------------------------------
<PAGE> 12
Page 7
Discretionary Contribution Total Compensation of All
Participants Eligible to
Share
For example:
Suppose the Employer's discretionary contribution for the Plan
Year is $20,000.
Employee A's compensation for the Plan Year is $25,000.
The total compensation of all participants eligible to
share, including Employee A, is $250,000.
Employee A's share will be:
$25,000
$20,000 X -------- or $2,000
$250,000
As a participant, you will share in your Employer's discretionary
contribution for any Plan Year if you:
(a) retire during the Plan Year;
(b) die during the Plan Year;
(c) become disabled during the Plan Year;
(d) are employed on the last day of the Plan Year, which
is December 31st and have completed a Year of Service during the Plan
Year.
In addition to the Employer's contributions made to your account, your
account will be credited annually with a share of the investment earnings or
losses of the trust fund.
4. Compensation
For the purposes of your Plan, compensation has a special meaning.
Compensation is defined as your total salary and wages paid during a Plan Year.
For the first year of your participation in the Plan, your compensation
will be recognized for benefit purposes for the entire Plan Year.
For Plan Years starting in 1989, the Plan by law cannot recognize
compensation in excess of $200,000.
5. Forfeitures
<PAGE> 13
Page 8
Forfeitures are created when participants terminate employment before
becoming entitled to their full benefits under the Plan. Your account may grow
from the forfeitures of other participants. Forfeitures will be "allocated" or
divided among participants eligible to share for a Plan Year.
6. Your Voluntary Contributions to the Plan
You may, at the discretion of the Administrator, make voluntary
contributions to your Plan for each year you are a participant. These
contributions may not exceed 10% of your compensation while a participant. There
are also other limitations imposed by law, but these will change from year to
year depending upon the level of voluntary contributions made by other
participants during the year. If your voluntary contributions exceed this limit,
the Administrator will return the excess contributions to you.
You will always be "100% vested" in your voluntary contributions. This
means that you will always be entitled to all of your voluntary contributions.
Your voluntary contributions will, however, be affected by any investment gains
or losses. If the Trustee invested this money and there was a gain, the balance
in your account would increase. Of course, if there were a loss from an
investment, the balance in your account would decrease.
There is no requirement that you make voluntary contributions to your
Plan. Voluntary contributions are not tax deductible. Any investment income
earned on these contributions, however, is not currently taxable to you. You
will be taxed on investment income and gains when you withdraw them from your
account.
Your voluntary contributions may be invested by the Trustee in
segregated, interest-bearing accounts or as part of the general trust fund.
You may withdraw the balance of your voluntary contributions and any
gains from your voluntary contribution account. If you make this withdrawal,
however, you will not be allowed to make additional voluntary contributions for
one Plan Year. Your spouse, however, must consent to any withdrawal you make.
When you retire or otherwise become eligible for Plan benefits, the
value of your voluntary contribution account will be used to provide additional
benefits for you or your beneficiaries.
7. Transfers From Qualified Plans (Rollovers)
<PAGE> 14
Page 9
At the discretion of the Administrator, you may be permitted to deposit
into your Plan distributions you have received from other plans. Such a deposit
is called a "rollover" and may result in tax savings to you. You should consult
qualified counsel to determine if a rollover is in your best interest.
Your rollover will be placed in a separate account called a
"participant's rollover account." The Administrator may establish rules for
investment.
You will always be 100% vested in your "rollover account." This means
that you will always be entitled to all of your rollover contributions. Rollover
contributions will be affected by any investment gains or losses. If the Trustee
invested this money and there was a gain, the balance in your account would
increase. of course, if there were a loss from an investment, the balance in
your account would decrease.
V
BENEFITS UNDER YOUR PLAN
1. Distribution of Benefits Upon Normal Retirement
Your Normal Retirement Date is the first day of the month coinciding
with or next following your 60th birthday (Normal Retirement Age).
At your Normal Retirement Age, you will be entitled to 100% of your
account balance. Payment of your benefits will begin as soon as practicable
following your Normal Retirement Date.
2. Distribution of Benefits Upon Late Retirement
Your Late Retirement Date is the first day of the month coinciding with
or next following your actual retirement date after reaching your Normal
Retirement Date.
On your Late Retirement Date, you will be entitled to 100% of your
account balance. Payments of your Late Retirement benefits will begin as soon as
practicable following your Late Retirement Date.
3. Distribution of Benefits Upon Death
<PAGE> 15
Page 10
Your beneficiary will be entitled to 100% of your account balance upon
your death.
The Administrator may elect to purchase life insurance on your behalf
with a portion of your Employer's contribution. Any life insurance purchased
shall be used to provide a death benefit for your beneficiaries.
If a life insurance policy is purchased on your behalf with a portion
of your Employer's contribution made to your account, your account will be
reduced by the amount of the premiums and credited with any policy dividends.
If you are married at the time of your death, your spouse will be the
beneficiary of the death benefit, unless you otherwise elect in writing on a
form to be furnished to you by the Administrator. IF YOU WISH TO DESIGNATE A
BENEFICIARY OTHER THAN YOUR SPOUSE, HOWEVER, YOUR SPOUSE MUST IRREVOCABLY
CONSENT TO WAIVE ANY RIGHT TO THE DEATH BENEFIT. YOUR SPOUSE'S CONSENT MUST BE
IN WRITING, BE WITNESSED BY A NOTARY OR A PLAN REPRESENTATIVE AND ACKNOWLEDGE
THE SPECIFIC NONSPOUSE BENEFICIARY.
If no valid waiver is in effect, the death benefit payable to your
spouse shall be in the form of a survivor annuity, that is, periodic payments
over the life of your spouse. Your spouse may direct that payments begin within
a reasonable period of time after your death. The size of the monthly payments
will depend on the value of your account at the time of your death. The death
benefit may be distributed in an alternative method, such as a single lump sum
or in installments, provided your spouse consents in writing to an alternative
form.
The period during which you and your spouse may waive this survivor
annuity begins as of the first day of the Plan Year in which you reach age 35
and ends when you die. The Administrator must provide you with a detailed
explanation of the survivor annuity. This explanation must be given to you
during the following period of time: beginning on the first day of the Plan Year
in which you will reach age 32 and ending on the first day of the Plan Year in
which you reach age 35.
It is, therefore, important that you inform the Administrator when you
turn age 32 so that you may receive this information.
If, however,
(a) your spouse has validly waived any right to the death
benefit in the manner outlined above,
<PAGE> 16
Page 11
(b) your spouse cannot be located; or
(c) you are not married at the time of your death,
then your death benefit will be paid to the beneficiary of your own choosing in
installments or as a single lump sum, as you or your beneficiary may elect. You
may designate the beneficiary on a form to be supplied to you by the
Administrator. If you change your designation, your spouse must again consent to
the change.
Since your spouse participates in these elections and has certain
rights in the death benefit, you should immediately report any change in your
marital status to the Administrator.
4. Distribution of Benefits Upon Disability
Under your Plan, disability is defined as a physical or mental
condition resulting from bodily injury, disease, or mental disorder which
renders you incapable of continuing your usual and customary employment with
your Employer. Your disability shall be determined by a licensed physician
chosen by the Administrator.
If you become disabled while a participant, you will be entitled to
100% of your account balance. Payment of your disability benefits will begin on
or before the Anniversary Date following the date you become disable. (See the
Section in this Article entitled "Benefit Payment Options.")
5. Distribution of Benefits Upon Termination of Employment
Your Plan is designed to encourage you to stay with your Employer until
retirement. Payment of your account balance under your Plan is only available
upon your death, disability or retirement.
If your employment terminates for reasons other than those listed
above, you will be entitled to receive only your "vested percentage" of your
account balance and the remainder of your account will be forfeited. Only
contributions made by your Employer are subject to forfeiture. (See the Section
in this Article entitled "Vesting in Your Plan.")
If you so elect, the Administrator will direct the Trustee to
distribute your vested benefit to you before the date it would normally be
distributed (upon your death, disability or retirement). Your spouse's written
consent to this distribution must be given for amounts in excess of $3,500.
Amounts of $3,500 or less will be distributed early without the need for
consent.
<PAGE> 17
Page 12
6. Vesting in Your Plan
Your "vested percentage" in your account is determined under the
following schedule and is based on vesting Years of Service. You will always,
however, be 100% vested upon your Normal Retirement Age. (See the Section in
this Article entitled "Distribution of Benefits Upon Normal Retirement.")
Vesting Schedule
<TABLE>
<CAPTION>
Years of Service Percentage
<S> <C> <C>
3 20 %
4 40 %
5 60 %
6 80 %
7 100 %
</TABLE>
Regardless of this vesting schedule, you are always 100% vested in your
salary reduction amounts contributed to the Plan.
Your vested benefit will normally be distributed to you or your
beneficiary upon your death, disability or retirement. If you terminate
employment before any of these events, however, your unpaid vested benefit may
be segregated in a special account.
7. Benefit Payment Options
There are various methods that benefits may be distributed to you from
your Plan. The method depends on your marital status, as well as the elections
you and your spouse make. All methods of distribution, however, have equivalent
values.
If you are married on the date your benefits are to begin, however, you
will automatically receive a 50% joint and survivor annuity, unless you
otherwise elect. This means that if you die and are survived by a spouse, your
spouse will receive a monthly benefit for the remainder of his life equal to 50%
of the benefit you were receiving at the time of your death. You may elect a 75%
or 100% joint and survivor annuity instead of the standard 50% joint and
survivor annuity. It should be noted that a joint and survivor annuity may
provide a lower monthly benefit than other forms of payment. You should consult
qualified tax counsel before making such election.
If you are not married on the date your benefits are to begin, you will
automatically receive a life annuity, which means you will receive payments for
as long as you live.
<PAGE> 18
Page 13
You may, however, elect to waive these forms of payment, subject to the
following rules.
When you are about to retire, the Administrator will explain the joint
and survivor annuity or the life annuity to you in greater detail. You will be
given the option of waiving the joint and survivor annuity or the life annuity
form of payment during the 90 day period before the annuity is to begin. IF YOU
ARE MARRIED, YOUR SPOUSE MUST IRREVOCABLY CONSENT IN WRITING TO THE WAIVER IN
THE PRESENCE OF A NOTARY OR A PLAN REPRESENTATIVE. You may revoke any waiver.
The Administrator will provide you with forms to make these elections. Since
your spouse participates in these elections, you must immediately inform the
Administrator of any change in your marital status.
If you and your spouse elect not to take a joint and survivor annuity
or if you are not married when your benefits are scheduled to begin, and have
elected not to take a life annuity, you may elect an alternative form of
payment. This payment may be made in one of the following methods:
(a) a single lump-sum payment;
(b) the purchase of a different form of annuity;
(c) equal installments over a period of not more than your
assumed life expectancy (or you and your beneficiary's assumed life
expectancies) at the time of distribution.
Regardless of the form of payment you receive, its value to you will be the same
value as each alternative form of payment.
GENERALLY, WHENEVER A DISTRIBUTION OF PAYMENTS IS TO BE MADE TO YOU ON
OR BEFORE AN ANNIVERSARY DATE, IT MAY BE POSTPONED FOR A PERIOD UP TO 180 DAYS,
FOR ADMINISTRATIVE CONVENIENCE. HOWEVER, UNLESS YOU ELECT IN WRITING TO DEFER
THE RECEIPT OF BENEFITS, NO DISTRIBUTION MAY BEGIN LATER THAN THE 60TH DAY AFTER
THE CLOSE OF THE PLAN YEAR IN WHICH THE LATEST OF THE FOLLOWING EVENTS OCCURS:
(a) the date on which you reach the age of 65 or your
Normal Retirement Age;
(b) the 10th anniversary of the year in which you became a
participant in the Plan;
(c) the date you terminated employment with your Employer.
8. Treatment of Distributions From Your Plan
<PAGE> 19
Page 14
Whenever you receive a distribution from your Plan, it will normally be
subject to income taxes. You may, however, reduce, or defer entirely, the tax
due on your distribution through use of one of the following methods:
(a) The rollover of all or a portion of the distribution to an
Individual Retirement Account (IRA) or another qualified employer plan.
This will result in no tax being due until you begin withdrawing funds
from the IRA or other qualified employer plan. The rollover of the
distribution, however, MUST be made within strict time frames
(normally, within 60 days after you receive your distribution). In
addition, under certain circumstances all or a portion of a
distribution may not qualify for this rollover treatment.
(b) The election of favorable income tax treatment under
"10-year forward averaging", "5-year forward averaging" or, if you
qualify, "capital gains" method of taxation.
WHENEVER YOU RECEIVE A DISTRIBUTION, THE ADMINISTRATOR WILL DELIVER TO
YOU A MORE DETAILED EXPLANATION OF THESE OPTIONS. HOWEVER, THE RULES WHICH
DETERMINE WHETHER YOU QUALIFY FOR FAVORABLE TAX TREATMENT ARE VERY COMPLEX AND
HAVE BEEN GREATLY AFFECTED BY THE TAX REFORM ACT OF 1986. YOU SHOULD CONSULT
WITH QUALIFIED TAX COUNSEL BEFORE MAKING A CHOICE.
9. Domestic Relations Order
As a general rule, your interest in your account, including your
"vested interest," may not be alienated. This means that your interest may not
be sold, used as collateral for a loan, given away or otherwise transferred. In
addition, your creditors may not attach, garnish or otherwise interfere with
your account.
There is an exception, however, to this general rule. The Administrator
may be required by law to recognize obligations you incur as a result of court
ordered child support or alimony payments. The Administrator must honor a
"qualified domestic relations order." A "qualified domestic relations order" is
defined as a decree or order issued by a court that obligates you to pay child
support or alimony, or otherwise allocates a portion of your assets in the Plan
to your spouse, former spouse, child or other dependent. If a qualified domestic
relations order is received by the Administrator, all or a portion of your
benefits may be used to satisfy the obligation. The Administrator will determine
the validity of any domestic relations order received.
10. Pension Benefit Guaranty Corporation
<PAGE> 20
Page 15
Benefits provided by your Plan are NOT insured by the Pension Benefit
Guaranty Corporation (PBGC) under Title IV of the Employee Retirement Income
Security Act of 1974 because the insurance provisions under ERISA are not
applicable to your Plan.
VI
YEAR OF SERVICE RULES
1. Year of Service and Hour of Service
The term "Year of Service" is used throughout this Summary Plan
Description and throughout your Plan. A Year of Service for eligibility purposes
is defined as follows:
You will have completed a Year of Service if, at the end of your first
twelve consecutive months of employment with your Employer, you have
been credited with 1000 Hours of Service.
If you have not been credited with 1000 Hours of Service by the end of
your first twelve consecutive months of employment, you will have
completed a Year of Service at the end of any following Plan Year
during which you were credited with 1000 Hours of Service.
You will have completed a Year of Service for vesting purposes if you
are credited with 1000 Hours of Service during a Plan Year, even if you were not
employed on the first or last day of the Plan Year.
An "Hour of Service" has a special meaning for Plan purposes. You will
be credited with an Hour of Service for:
(a) each hour for which you are directly or indirectly
compensated by your Employer for the performance of duties
during the Plan Year;
(b) each hour for which you are directly or indirectly
compensated by your Employer for reasons other than performance of
duties (such as vacation, holidays, sickness, disability, lay-off,
military duty, jury duty or leave of absence during the Plan Year); and
(c) each hour for back pay awarded or agreed to by your
Employer.
2. 1-Year Break in Service
<PAGE> 21
Page 16
A 1-Year Break in Service is a computation period during which you have
not completed more than 500 Hours of Service with your Employer.
A 1-Year Break in Service does NOT occur, however, in the computation
period in which you enter or leave the Plan for reasons of:
(a) an authorized leave of absence;
(b) certain maternity or paternity absences.
For Plan Years beginning after December 31, 1984, the Administrator
will be required to credit you with Hours of Service for a maternity or
paternity absence. These are absences taken on account of pregnancy, birth, or
adoption of your child. No more than 501 Hours of Service shall be credited for
this purpose and these Hours of Service shall be credited solely to avoid your
incurring a 1-Year Break in Service. The Administrator may require you to
furnish him with proof that your absence qualifies as a maternity or paternity
absence.
These break in service rules may be illustrated by the following
examples:
Employee A works 300 hours in a Plan Year. At the end of the Plan Year,
Employee A will have a 1-Year Break in Service because he has worked
less than 501 hours in a Plan Year. Employee B works 300 hours in a
Plan Year and takes an authorized leave of absence for which he is
credited with an additional 250 hours. Employee B will NOT have a
1-Year Break in Service because he is credited with more than 500 hours
in a Plan Year.
If you are reemployed after a 1-Year Break in Service and were vested
in any portion of your account derived from Employer contributions, you will
receive credit for all Years of Service credited to you before your 1-Year Break
in service when you have completed another Year of Service. For example:
Suppose Employee A terminated employment with 4 Years of Service and
was vested in a portion of his account. Employee A was then reemployed
after a 1-Year Break in Service on January 1, 2002. On January 1, 2003
when Employee A completes 1 Year of Service, he will be credited with
his 4 years of pre-break service.
If you do not have a "vested interest" in the Employer contributions
allocated to your account when you terminate your employment, you will lose
credit for your pre-break Years of
<PAGE> 22
Page 17
Service when your consecutive 1-Year Breaks in Service equal or exceed the
greater of 5 years, or your pre-break Years of Service.
For example:
Employee A terminated employment on January 1, 2000 with 2 Years of
Service. Employee A was not vested at the time of his termination of
employment. Employee A returns to work on January 1, 2003. Employee A
will be credited with his 2 pre- break Years of Service because his
period of termination (3 years) did not exceed 5 years.
VII
YOUR PLAN'S "TOP HEAVY RULES"
1. Explanation of "Top Heavy Rules"
A 401(k) Profit Sharing Plan that primarily benefits "key employees" is
called a "top heavy plan." Key employees are certain owners or officers of your
Employer. A Plan is a "top heavy plan" when more than 60% of the contributions
or benefits have been allocated to key employees.
Each year, the Administrator is responsible for determining
whether your Plan is a "top heavy plan."
If your Plan becomes top heavy in any Plan Year, then non-key employees
shall be entitled to certain "top heavy minimum benefits," and other special
rules will apply. Among these top heavy rules are the following:
(a) Your Employer may be required to make a contribution
equal to 3% of your compensation to your account;
(b) In determining benefits or contributions you are
entitled to under your Plan, compensation, for Plan Years beginning
prior to January 1, 1989, vill be limited to $200,000. Thereafter,
compensation will be limited to $200,000 in all Plan Years;
(c) If you are a participant in more than one Plan, you
may not be entitled to minimum benefits under both Plans.
<PAGE> 23
Page 18
VIII
LOANS
You may apply to the Trustee for a loan. Your application must be in
writing. The Trustee may grant this loan if he believes it has merit.
1. Loan Requirements
All loans must:
(a) be made on a uniform and nondiscriminatory basis;
(b) be adequately secured;
(c) bear a reasonable rate of interest;
(d) have a definite repayment schedule which provides for
payments to be made not less frequently than quarterly and for the loan
to be amortized on a level basis over a reasonable period of time not
to extend beyond the earlier of five years or your Normal Retirement
Date;
(e) be consented to by your spouse if you use your Vested
interest in the plan as collateral for the loan;
(f) when added to the outstanding balance of all other
loans from the plan be limited to the lesser of:
(1) $50,000 reduced by the excess, if any, of your
highest outstanding balance of loans from the plan during the
one year period prior to the date of the loan over your
current outstanding balance of loans; or
(2) the greater of:
(i) 1/2 of your vested interest in your
account; or
(ii) $10,000.
The $50,000 limit stated in (1) above shall not be reduced for
loans made on or before December 31, 1986.
If you use the loan to acquire your principal residence you may repay
the loan over a reasonable period of time that may be longer than five years.
If the repayment period of your loan is five years and an amount
remains payable at the end of five years, that amount will be treated as a
distribution of money from the Plan to you and will be taxable income to you.
<PAGE> 24
Page 19
IX
CLAIMS BY PARTICIPANTS AND BENEFICIARIES
Benefits will be paid to participants and their beneficiaries without
the necessity of formal claims. You or your beneficiaries, however, may make a
request for any Plan benefits to which you may be entitled. Any such request
must be made in writing, and it should be made to the Administrator. (See the
Article in this Summary entitled "GENERAL INFORMATION ABOUT YOUR PLAN.")
Your request for Plan benefits shall be considered a claim for Plan
benefits, and it will be subject to a full and fair review. If your claim is
wholly or partially denied, the Administrator shall furnish you with a written
notice of this denial. This written notice must be provided to you within a
reasonable period of time (generally 90 days) after the receipt of your claim by
the Administrator. The written notice must contain the following information:
(a) the specific reason or reasons for the denial;
(b) specific reference to those Plan provisions on which
the denial is based;
(c) a description of any additional information or
material necessary to correct your claim and an explanation of
why such material or information is necessary; and
(d) appropriate information as to the steps to be taken
if you or your beneficiary wishes to submit your claim for review.
If notice of the denial of a claim is not furnished to you in
accordance with the above within a reasonable period of time, your
claim shall be deemed denied. You will then be permitted to proceed to
the review stage described in the following paragraphs.
If your claim has been denied, and you wish to submit your claim for
review, you must follow the Claims Review Procedure.
1. The Claims Review Procedure
(a) Upon the denial of your claim for benefits, you may
file your claim for review, in writing, with the Administrator. The
form for this claim for review is available from the Employer or
Administrator.
<PAGE> 25
Page 20
(b) YOU MUST FILE THE CLAIM FOR REVIEW NO LATER THAN 60
DAYS AFTER YOU HAVE RECEIVED WRITTEN NOTIFICATION OF THE DENIAL OF YOUR
CLAIM FOR BENEFITS.
(c) You may review all pertinent documents relating to
the denial of your claim and submit any issues and comments, in
writing, to the Administrator.
(d) Your claim for review must be given a full and fair
review. If your claim is denied, the Administrator must provide you
with written notice of this denial within 60 days after the
Administrator's receipt of your written claim for review. There may be
times when this 60 day period may be extended. This extension may only
be made, however, where there are special circumstances which are
communicated to you in writing within the 60 day period. If there is an
extension, a decision shall be made as soon as possible, but not later
than 120 days after receipt by the Administrator of your claim for
review.
(e) The Administrator's decision on your claim for review
shall be communicated to you in writing and shall include specific
references to the pertinent Plan provisions on which the decision was
based.
(f) If the Administrator's decision on review is not
furnished to you within the time limitations described above, your
claim shall be deemed denied on review.
(g) If benefits are provided or administered by an
insurance company, insurance service, or other similar organization
which is subject to regulation under the insurance laws, the claims
procedure relating to these benefits may provide for review. If so,
that company, service, or organization shall be the entity to which
claims are addressed. If you have any questions regarding the proper
person or entity to address claims, you should ask the Administrator.
X
STATEMENT OF ERISA RIGHTS
1. Explanation of Your ERISA Rights
As a participant in this Plan you are entitled to certain rights and
protections under the Employee Retirement Income
<PAGE> 26
Page 21
Security Act of 1974, also called ERISA. ERISA provides that all Plan
participants shall be entitled to:
(a) examine, without charge, all Plan documents,
including:
(i) insurance contracts;
(ii) collective bargaining agreements; and
(iii) copies of all documents filed by the
Plan with the U.S. Department of Labor, such as
detailed annual reports and Plan descriptions.
This examination may take place at the Administrator's office and at
other specified employment locations such as worksites and union halls.
(See the Article in this Summary entitled "GENERAL INFORMATION ABOUT
YOUR PLAN");
(b) obtain copies of all Plan documents and other Plan
information upon written request to the Plan Administrator.
The Administrator may make a reasonable charge for the copies;
(c) receive a summary of the Plan's annual financial
report. The Administrator is required by law to furnish each
participant with a copy of this summary annual report;
(d) obtain a statement telling you whether you have a
right to receive a retirement benefit at Normal Retirement Age and, if
so, what your benefits would be at Normal Retirement Age if you stop
working under the Plan now. If you do not have a right to a pension,
the statement will tell you how many years you have to work to get a
right to a pension. THIS STATEMENT MUST BE REQUESTED IN WRITING AND IS
NOT REQUIRED TO BE GIVEN MORE THAN ONCE A YEAR. The Plan must provide
the statement free of charge.
In addition to creating rights for Plan participants, ERISA imposes
duties upon the people who are responsible for the operation of the
Plan. The people who operate your Plan, called "fiduciaries" of the
Plan, have a duty to do so prudently and in the interest of you and
other Plan participants and beneficiaries. No one, including your
employer or any other person, may fire you or otherwise discriminate
against you in any way to prevent you from obtaining a pension benefit
or exercising your rights under ERISA.
If your claim for a pension benefit is denied in whole or in part, you
must receive a written explanation of the reason for
<PAGE> 27
Page 22
the denial. You have the right to have the Administrator review and
reconsider your claim. (See the Article in this Summary entitled
"CLAIMS BY PARTICIPANTS AND BENEFICIARIES.")
Under ERISA, there are steps you can take to enforce the above rights.
For instance, if you request materials from the Plan and do not receive
them within 30 days, you may file suit in a federal court. In such a
case, the court may require the Administrator to provide the materials
and pay you up to $100.00 a day until you receive the materials, unless
the materials were not sent because of reasons beyond the control of
the Administrator.
If you have a claim for benefits which is denied or ignored, in whole
or in part, you may file suit in a state or federal court.
If the Plan's fiduciaries misuse the Plan's money, or if you are
discriminated against for asserting your rights, you may seek
assistance from the U.S. Department of Labor, or you may file suit in a
federal court. The court will decide who should pay court costs and
legal fees. If you are successful, the court may order the person you
have sued to pay these costs and fees. If you lose, the court may order
you to pay these costs and fees if, for example, it finds your claim is
frivolous.
If you have any questions about this statement, or about your rights
under ERISA, you should contact the nearest Area Office of the U.S.
Labor-Management Services Administration, Department of Labor.
XI
AMENDMENT AND TERMINATION OF YOUR PLAN
1. Amendment
Your Employer has the right to amend your Plan at any time. In no
event, however, shall any amendment:
(a) authorize or permit any part of the Plan assets to
be used for purposes other than the exclusive benefit of
participants or their beneficiaries;
(b) cause any reduction in the amount credited to your
account; or
<PAGE> 28
Page 23
(c) cause any part of your Plan assets to revert to the
Employer.
2. Termination
Your Employer has the right to terminate the Plan at any time. Upon
termination, all amounts credited to your accounts will become 100% vested. Your
Employer may direct that either:
(a) benefits be distributed to you in any manner
permitted by the Plan as soon as practicable; or
(b) the Trust created by the Plan be continued and
benefits be distributed to you or your beneficiaries as if the
Plan had not terminated. (See the Article in this Summary
entitled "BENEFITS UNDER YOUR PLAN.")
A complete discontinuance of contributions by your Employer shall
constitute a termination.
<PAGE> 1
EXHIBIT 10.2
SOUTHERN ARIZONA BANK
EMPLOYEES' STOCK OWNERSHIP PLAN
SUMMARY PLAN DESCRIPTION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
I - INTRODUCTION TO YOUR PLAN . . . . . . . . . . . . . . . . . . . . . . . . . 1
II - GENERAL INFORMATION ABOUT YOUR PLAN . . . . . . . . . . . . . . . . . . . 2
1. General Plan Information . . . . . . . . . . . . . . . . . . 2
2. Employer Information . . . . . . . . . . . . . . . . . . . . 2
3. Plan Administrator Information . . . . . . . . . . . . . . . 3
4. Plan Trustee Information . . . . . . . . . . . . . . . . . . 3
5. Service of Legal Process . . . . . . . . . . . . . . . . . . 3
III - PARTICIPATION IN YOUR PLAN . . . . . . . . . . . . . . . . . . . . . . . 4
1. Eligibility Requirements . . . . . . . . . . . . . . . . . . 4
2. Participation Requirements . . . . . . . . . . . . . . . . . 4
IV - CONTRIBUTIONS TO YOUR PLAN . . . . . . . . . . . . . . . . . . . . . . . . 4
1. Employer Contributions to the Plan . . . . . . . . . . . . . 4
2. Your Share of Employer Contributions . . . . . . . . . . . . 5
3. Compensation . . . . . . . . . . . . . . . . . . . . . . . . 6
4. Forfeitures . . . . . . . . . . . . . . . . . . . . . . . . 6
5. Transfers From Qualified Plans (Rollovers) . . . . . . . . . 7
6. Directed Investments . . . . . . . . . . . . . . . . . . . . 7
V - BENEFITS UNDER YOUR PLAN . . . . . . . . . . . . . . . . . . . . . . . . . 7
1. Distribution of Benefits Upon Normal Retirement . . . . . . 7
2. Distribution of Benefits Upon Late Retirement . . . . . . . 8
3. Distribution of Benefits Upon Death . . . . . . . . . . . . 8
4. Distribution of Benefits Upon Disability . . . . . . . . . . 9
5. Distribution of Benefits Upon Termination of Employment . . 9
6. Vesting in Your Plan . . . . . . . . . . . . . . . . . . . . 10
7. Benefit Payment Options . . . . . . . . . . . . . . . . . . 10
8. Treatment of Distributions From Your Plan . . . . . . . . . 11
9. Domestic Relations Order . . . . . . . . . . . . . . . . . . 12
10. Pension Benefit Guaranty Corporation . . . . . . . . . . . . 12
VI - INFORMATION REGARDING COMPANY STOCK . . . . . . . . . . . . . . . . . . . 12
1. Voting of Company Stock . . . . . . . . . . . . . . . . . . 12
2. Right of First Refusal . . . . . . . . . . . . . . . . . . . 13
3. Put Option . . . . . . . . . . . . . . . . . . . . . . . . . 13
VII - YEAR OF SERVICE RULES . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1. Year of Service and Hour of Service . . . . . . . . . . . . 13
2. 1-Year Break in Service . . . . . . . . . . . . . . . . . . 14
VIII - YOUR PLAN'S "TOP HEAVY RULES" . . . . . . . . . . . . . . . . . . . . . 15
1. Explanation of "Top Heavy Rules" . . . . . . . . . . . . . . 15
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
IX - LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1. Loan Requirements . . . . . . . . . . . . . . . . . . . . . 16
X - CLAIMS BY PARTICIPANTS AND BENEFICIARIES . . . . . . . . . . . . . . . . . 17
1. The Claims Review Procedure . . . . . . . . . . . . . . . . 18
XI - STATEMENT OF ERISA RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . 19
1. Explanation of Your ERISA Rights . . . . . . . . . . . . . . 19
XII - AMENDMENT AND TERMINATION OF YOUR PLAN . . . . . . . . . . . . . . . . . 21
1. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 21
2. Termination . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
ii
<PAGE> 4
SOUTHERN ARIZONA BANK
EMPLOYEES' STOCK OWNERSHIP PLAN
SUMMARY PLAN DESCRIPTION
I
INTRODUCTION TO YOUR PLAN
Southern Arizona Bank has amended your Employee Stock Ownership Plan
as of January 1, 1989. Southern Arizona Bank continues to recognize the efforts
you have made to its success. This amended Employee Stock Ownership Plan is for
the exclusive benefit of eligible employees and their beneficiaries.
The purpose of this Plan is to reward eligible employees for long
and loyal service by providing them with retirement benefits.
Between now and your retirement, your Employer intends to make
contributions for you and other eligible employees. Contributions to the Plan
will be invested primarily in Company Stock. Your efforts added to the efforts
of all other employees contribute to the profitability and growth of the
Employer and thereby increase the value of Company Stock and your benefits in
the Plan. When you retire, you will be entitled to receive the value of the
amounts which have accumulated in your account in the form of Company Stock.
Your Employer has the right to submit this Plan to the Internal
Revenue Service for approval. The Internal Revenue Service will issue a
"determination letter" to your Employer approving this Plan as a "qualified"
retirement plan, if this Plan meets specific legal requirements.
This Summary Plan Description is a brief description of your Plan
and your rights, obligations, and benefits under that Plan. Some of the
statements made in this Summary Plan Description are dependent upon this Plan
being "qualified" under the provisions of the Internal Revenue Code. This
Summary Plan Description is not meant to interpret, extend, or change the
provisions of your Plan in any way. The provisions of your Plan may only be
determined accurately by reading the actual Plan document.
A copy of your Plan is on file at your Employer's office and may be
read by you, your beneficiaries, or your legal representatives at any reasonable
time. If you have any questions regarding either your Plan or this Summary Plan
Description, you should ask your Plan's Administrator. In the event of any
discrepancy between,this Summary Plan Description and the actual provisions of
the Plan, the Plan shall govern.
1
<PAGE> 5
II
GENERAL INFORMATION ABOUT YOUR PLAN
There is certain general information which you may need to know
about your Plan. This information has been summarized for you in this section.
1. General Plan Information
Southern Arizona Bank Employees' Stock Ownership Plan is the name of
your Plan.
Your Employer has assigned Plan Number 001 to your Plan.
The amended and restated provisions of your Plan become effective on
January 1, 1989.
Your Plan's records are maintained on a twelve-month period of time.
This is known as the Plan Year. The Plan Year begins on January 1st and ends on
December 31st.
Certain valuations and distributions are made on the Anniversary
Date of your Plan. This date is December 31.
The contributions made to your Plan by your Employer shall be held
and invested by the Trustee of your Plan.
Your Plan and Trust shall be governed by the laws of the State of
Arizona.
2. Employer Information
Your Employer's name, address and identification number are:
Southern Arizona Bank
1800 4th Avenue
Yuma, Arizona 85364
86-0412154
Your Plan allows other employers to adopt its provisions. You or
your beneficiaries may examine or obtain a complete list of employers, if any,
who have adopted your Plan by making a written request to the Administrator.
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<PAGE> 6
3. Plan Administrator Information
The name, address and business telephone number of your Plan's
Administrator are:
Temple T. Moore
1800 4th Avenue
Yuma, Arizona 85364
(602) 782-750
Your Plan's Administrator keeps the records for the Plan and is
responsible for the administration of the Plan. Your Plan's Administrator will
also answer any questions you may have about your Plan.
4. Plan Trustee Information
The names of your Plan's Trustees are:
Stephen P. Shadle
John E. Byrd
Donald S. Olsen
The Trustees shall collectively be referred to as Trustee throughout
this Summary Plan Description.
The principal place of business of your Plan's Trustee is:
1800 4th Avenue
Yuma, Arizona 85364
Your Plan's Trustee has been designated to hold and invest Plan
assets for the benefit of you and other Plan participants. The trust fund
established by the Plan's Trustee will be the funding medium used for the
accumulation of assets through which benefits will be distributed.
5. Service of Legal Process
The name and address of your Plan's agent for service of legal
process are:
Plan Administrator of Southern Arizona Bank
Employees' Stock Option Plan
1800 4th Avenue
Yuma, Arizona 85364
Service of legal process may also be made upon the Trustee.
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<PAGE> 7
III
PARTICIPATION IN YOUR PLAN
Before you become a member or a "participant" in the Plan, there are
certain eligibility and participation rules which you must meet. These rules are
explained in this section.
1. Eligibility Requirements
You will be eligible to participate in the Plan if you have
completed one (1) Year of Service and have attained age 21.
You should review the Article in this Summary entitled "YEAR OF
SERVICE RULES" for a further explanation of these eligibility requirements.
2. Participation Requirements
Once you have satisfied your Plan's eligibility requirements, your
next step will be to actually become a member or a "participant" in the Plan.
You will become a participant on a specified day of the Plan Year. This day is
called the Effective Date of Participation.
You will become a participant on the first day of the Plan Year
during which you satisfy the eligibility requirements.
IV
CONTRIBUTIONS TO YOUR PLAN
1. Employer Contributions to the Plan
As a participant, you may be eligible to share in and benefit from
the contributions made by your Employer. Each year, your Employer's
contribution, if any, will be placed into a trust fund for the benefit of Plan
participants. The Administrator of your Plan will then establish and maintain a
separate account for you and all other participants, into which the
contributions will be placed.
Each year, your Employer will determine the amount to contribute to
your Plan. This contribution is discretionary.
As a participant, you will share in your Employer's contribution for
any Plan Year if you:
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<PAGE> 8
(a) are employed on the last day of the Plan Year, which is
December 31st and have completed a Year of Service during the Plan
Year.
(b) retire during the Plan Year, provided you complete a Year
of Service.
(c) become disabled during the Plan Year, provided you
complete a Year of Service.
(d) die during the Plan Year, provided you complete a Year of
Service.
2. Your Share of Employer Contributions
Your Employer's contribution will be "allocated" or divided among
participants eligible to share in the contribution for the Plan Year. Your share
of the contribution will depend upon how much compensation you received during
the year and the compensation received by other eligible participants.
Your share of your Employer's discretionary contribution is
determined by the following fraction:
Your Compensation
Employer's X -------------------------
Discretionary Contribution Total Compensation of All
Participants Eligible to
Share
For example:
Suppose the Employer's discretionary contribution for the Plan Year is $20,000.
Employee A's compensation for the Plan Year is $25,000. The total compensation
of all participants eligible to share, including Employee A, is $250,000.
Employee A's share will be:
$25,000
$20,000 X -------- or $2,000
$250,000
If, however, your Plan has a loan outstanding, the proceeds of which
were used to acquire Company Stock, instead of allocating your Employer's
contributions directly to your account as provided above, such amounts may be
applied to repay the current installment due on the loan.
All Company Stock acquired by the Plan with the proceeds of a loan are
maintained in a suspense account and are withdrawn and allocated to
participants' accounts as the loan is paid.
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<PAGE> 9
Company Stock withdrawn from the suspense account will be allocated
among participants eligible to share in the Employer contribution for the year.
Your share of the Company Stock withdrawn is determined by the following
fraction:
Your Compensation
Number of Shares of X -------------------------
Company Stock Withdrawn Total Compensation of All
Participants Eligible to
Share
In addition, cash dividends on Company Stock in your account may be
used to repay a loan to the Plan. Company Stock withdrawn from the suspense
account having a fair market value equal to or greater than the amount of cash
dividends which would have been allocated to your account will be allocated to
you in the same proportion that the number of your shares of Company Stock
sharing in cash dividends bears to the total number of shares of all
participants' Company Stock sharing in cash dividends.
In addition to the Employer's contributions made to your account, your
account will be credited annually with a share of the investment earnings or
losses of the fund.
3. Compensation
For the purposes of your Plan, compensation has a special meaning.
Compensation is defined as your total salary and wages paid during a Plan Year.
Compensation will not include your salary reduction contributions to a
cafeteria plan and to a cash or deferred arrangement maintained by your
Employer.
For the first year of your participation in the Plan, your compensation
will be recognized for benefit purposes for the entire Plan Year.
The Plan, by law, cannot recognize compensation in excess of $200,000.
This amount will be adjusted for cost of living increases. It will also be
applied to certain highly compensated employees and their family members as if
they were a single participant. If you or a member of your family may be
affected by this rule, ask your Administrator for further details.
4. Forfeitures
Forfeitures are created when participants terminate employment before
becoming entitled to their full benefits under the Plan. Your account may grow
from the forfeitures of other participants.
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<PAGE> 10
Forfeitures will be "allocated" or divided among participants eligible to share
for a Plan Year.
5. Transfers From Qualified Plans (Rollovers)
At the discretion of the Administrator, you may be permitted to deposit
into your Plan distributions you have received from other plans. Such a deposit
is called a "rollover" and may result in tax savings to you. You should consult
qualified counsel to determine if a rollover is in your best interest.
Your rollover will be placed in a separate account called a
"participant's rollover account." The Administrator may establish rules for
investment.
You will always be 100% vested in your "rollover account." This means
that you will always be entitled to all of your rollover contributions. Rollover
contributions will be affected by any investment gains or losses. If the Trustee
invested this money and there was a gain, the balance in your account would
increase. of course, if there were a loss from an investment, the balance in
your account would decrease.
6. Directed Investments
When you have completed ten (10) Plan Years of Service as a participant
and have attained age fifty-five (55), you will have the right to direct the
investment of a portion of your account attributable to Company Stock. The
Administrator will advise you of any such rights.
V
BENEFITS UNDER YOUR PLAN
1. Distribution of Benefits Upon Normal Retirement
Your Normal Retirement Date is the first day of the month coinciding
with or next following your 65 birthday (Normal Retirement Age).
At your Normal Retirement Age, you will be entitled to 100% of your
account balance. Payment of your benefits will begin as soon as practicable
following your Normal Retirement Date.
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<PAGE> 11
2. Distribution of Benefits Upon Late Retirement
You may remain employed past your Plan's Normal Retirement Date and
retire instead on your Late Retirement Date. Your Late Retirement Date is the
first day of the month coinciding with or next following the date you choose to
retire, after first having reached your Normal Retirement Date. On your Late
Retirement Date, you will be entitled to 100% of your account balance. Actual
benefit payments will begin as soon as practicable following your Late
Retirement Date.
3. Distribution of Benefits Upon Death
Your beneficiary will be entitled to 100% of your account balance upon
your death.
If you are married at the time of your death, your spouse will be the
beneficiary of the death benefit, unless you otherwise elect in writing on a
form to be furnished to you by the Administrator. IF YOU WISH TO DESIGNATE A
BENEFICIARY OTHER THAN YOUR SPOUSE, HOWEVER, YOUR SPOUSE MUST IRREVOCABLY
CONSENT TO WAIVE ANY RIGHT TO THE DEATH BENEFIT. YOUR SPOUSE'S CONSENT MUST BE
IN WRITING, BE WITNESSED BY A NOTARY OR A PLAN REPRESENTATIVE AND ACKNOWLEDGE
THE SPECIFIC NONSPOUSE BENEFICIARY.
If, however,
(a) your spouse has validly waived any right to the death
benefit in the manner outlined above,
(b) your spouse cannot be located; or
(c) you are not married at the time of your death,
then your death benefit will be paid to the beneficiary of your own choosing in
installments or as a single lump sum, as you or your beneficiary may elect. You
may designate the beneficiary on a form to be supplied to you by the
Administrator. If you change your designation, your spouse must again consent to
the change.
Regardless of the method of distribution selected, your entire death
benefit must generally be paid to your beneficiaries within five years after
your death (the "5-year rule"). However, if your designated beneficiary is a
person (instead of your estate or most trusts), then you or your beneficiary may
elect to have minimum distributions begin within one year of your death and it
may be paid over the designated beneficiary's life expectancy (the "1-year
rule") . If your spouse is the beneficiary, then under the "1-year rule", the
start of payments may be delayed until the year in which you would have attained
age 70 1/2. The election to have death benefits distributed under the "1-year
rule" instead of the "5-year
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<PAGE> 12
rule" must be made no later than the time at which minimum distributions must
commence under the "1-year rule" (or, in the case of a surviving spouse, the
"5-year rule", if earlier).
Since your spouse participates in these elections and has certain
rights in the death benefit, you should immediately report any change in your
marital status to the Administrator.
4. Distribution of Benefits Upon Disability
Under your Plan, disability is defined as a physical or mental
condition resulting from bodily injury, disease, or mental disorder which
renders you incapable of continuing your usual and customary employment with
your Employer. Your disability shall be determined by a licensed physician
chosen by the Administrator.
If you become disabled while a participant, you will be entitled to
100% of your account balance. Payment of your disability benefits will be made
to you as if you had retired. (See the Section in this Article entitled "Benefit
Payment Options.")
5. Distribution of Benefits Upon Termination of Employment
Your Plan is designed to encourage you to stay with your Employer until
retirement. Payment of your account balance under your Plan is only available
upon your death, disability or retirement.
If your employment terminates for reasons other than those listed
above, you will be entitled to receive only your "vested percentage" of your
account balance and the remainder of your account will be forfeited. only
contributions made by your Employer are subject to forfeiture. (See the Section
in this Article entitled "Vesting in Your Plan.")
If you so elect, the Administrator will direct the Trustee to
distribute your vested benefit to you before the date it would normally be
distributed (upon your death, disability or retirement), but not until after you
incur a 1-Year Break in Service. Your written consent to this distribution must
be given for amounts in excess of $3,500. Amounts of $3,500 or less will be
distributed early without the need for consent.
However, unless you elect in writing a later date, distribution of your
account balance attributable to Company Stock will commence no later than one
year after the close of the Plan Year which is the fifth Plan Year following the
Plan Year in which you terminate employment. If you are reemployed within such
five year period, or such distribution includes Company Stock acquired
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<PAGE> 13
with the proceeds of a loan which has not been repaid in full, the commencement
of your distribution will be postponed.
Under the Plan's administrative procedures, if the value of your vested
account is zero, any non-vested account balance will be forfeited immediately.
6. Vesting in Your Plan
Your "vested percentage" in your account is determined under the
following schedule and is based on vesting Years of Service. You will always,
however, be 100% vested upon your Normal Retirement Age. (See the Section in
this Article entitled "Distribution of Benefits Upon Normal Retirement.")
<TABLE>
<CAPTION>
Vesting Schedule
Years of Service Percentage
<S> <C>
2 40 %
3 60 %
4 80 %
5 100 %
</TABLE>
Your vested percentage shall not be less than your vested percentage
under the Plan before this amendment and restatement.
Your vested benefit will normally be distributed to you or your
beneficiary upon your death, disability or retirement. If you terminate
employment before any of these events, however, your unpaid vested benefit may
be segregated in a special account.
7. Benefit Payment Options
The Administrator, in accordance with your election, will direct the
Trustee to pay your benefits to you under one or more of the following options:
(a) a single lump-sum payment;
(b) installments over a period not extending beyond the earlier
of your assumed life expectancy (or you and your beneficiary's assumed
life expectancies) determined at the time of distribution or, unless
you elect in writing a longer distribution period, a period not longer
than five years, or in certain cases, not longer than ten years. You
may also elect to have your life expectancy and the life expectancy of
a designated beneficiary who is your spouse recalculated each year. You
must make this election before the time that
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<PAGE> 14
distributions are to begin. Failure to make this election will result
in life expectancies not being recalculated.
Distribution of your account at retirement will be in the form of cash
or Company Stock or both. However, you or your beneficiary may demand
distribution of your entire account in the form of Company Stock. Cash may be
paid (1) in lieu of partial shares of Company Stock, or (2) in certain
circumstances where it may not be possible for the Plan to purchase Company
Stock for distribution.
GENERALLY, WHENEVER A DISTRIBUTION IS TO BE MADE TO YOU ON OR BEFORE AN
ANNIVERSARY DATE, IT MAY BE POSTPONED BY THE PLAN FOR A PERIOD OF UP TO 180
DAYS, FOR ADMINISTRATIVE CONVENIENCE. HOWEVER, UNLESS YOU ELECT IN WRITING TO
DEFER THE RECEIPT OF BENEFITS, NO DISTRIBUTION MAY BEGIN LATER THAN THE 60TH DAY
AFTER THE CLOSE OF THE PLAN YEAR IN WHICH THE LATEST OF THE FOLLOWING EVENTS
OCCURS:
(a) the date on which you reach the age of 65 or your Normal
Retirement Age;
(b) the 10th anniversary of the year in which you became a
participant in the Plan;
(c) the date you terminated employment with your Employer.
Regardless of whether you elect to delay the receipt of benefits, there
are other rules which generally require minimum payments to begin no later than
the April 1st following the year in which you reach age 70 1/2. You should see
the Administrator if you feel you may be affected by this rule.
8. Treatment of Distributions From Your Plan
Whenever you receive a distribution from your Plan, it will normally be
subject to income taxes. You may, however, reduce, or defer entirely, the tax
due on your distribution through use of one of the following methods:
(a) The rollover of all or a portion of the distribution to
an Individual Retirement Account (IRA) or another qualified employer
plan. This will result in no tax being due until you begin withdrawing
funds from the IRA or other qualified employer plan. The rollover of
the distribution, however, MUST be made within strict time frames
(normally, within 60 days after you receive your distribution). In
addition, under certain circumstances all or a portion of a
distribution may not qualify for this rollover treatment.
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<PAGE> 15
(b) The election of favorable income tax treatment under
"10-year forward averaging", "5-year forward averaging" or, if you
qualify, "capital gains" method of taxation.
WHENEVER YOU RECEIVE A DISTRIBUTION, THE ADMINISTRATOR WILL DELIVER TO
YOU A MORE DETAILED EXPLANATION OF THESE OPTIONS. HOWEVER, THE RULES WHICH
DETERMINE WHETHER YOU QUALIFY FOR FAVORABLE TAX TREATMENT ARE VERY COMPLEX AND
HAVE BEEN GREATLY AFFECTED BY THE TAX REFORM ACT OF 1986. YOU SHOULD CONSULT
WITH QUALIFIED TAX COUNSEL BEFORE MAKING A CHOICE.
9. Domestic Relations Order
As a general rule, your interest in your account, including your
"vested interest," may not be alienated. This means that your interest may not
be sold, used as collateral for a loan, given away or otherwise transferred. In
addition, your creditors may not attach, garnish or otherwise interfere with
your account.
There is an exception, however, to this general rule. The Administrator
may be required by law to recognize obligations you incur as a result of court
ordered child support or alimony payments. The Administrator must honor a
"qualified domestic relations order." A "qualified domestic relations order" is
defined as a decree or order issued by a court that obligates you to pay child
support or alimony, or otherwise allocates a portion of your assets in the Plan
to your spouse, former spouse, child or other dependent. If a qualified domestic
relations order is received by the Administrator, all or a portion of your
benefits may be used to satisfy the obligation. The Administrator will determine
the validity of any domestic relations order received.
10. Pension Benefit Guaranty Corporation
Benefits provided by your Plan are NOT insured by the Pension Benefit
Guaranty Corporation (PBGC) under Title IV of the Employee Retirement Income
Security Act of 1974 because the insurance provisions under ERISA are not
applicable to your Plan.
VI
INFORMATION REGARDING COMPANY STOCK
1. Voting of Company Stock
The Trustee of the Plan will vote all Company Stock held by it as a
part of the Plan assets, provided that you or your beneficiary will be entitled
to direct the Trustee as to the manner in which
12
<PAGE> 16
voting rights on shares of Company Stock which are allocated to your account are
to be exercised (i) with respect to any corporate matter which involves the
voting of such shares with respect to the approval or disapproval of any
corporate merger or consolidation, recapitalization, reclassification,
liquidation, dissolution, sale of substantially all assets of a trade or
business, or such similar transaction, and (ii) with respect to all corporate
matters if, at the time of the vote thereon, the Company Stock is a
"registration-type" class of securities.
2. Right of First Refusal
Company Stock distributed by the Plan to you or your beneficiary may be
subject to a right of first refusal in favor of the Employer. In other words the
Employer must be given an opportunity to purchase at the same price and same
terms as you or your beneficiary may offer to sell to a third party.
3. Put Option
If the Company Stock distributed to you or your beneficiary cannot be
readily sold, then you or your beneficiary will have two put options to the
Employer. In other words you may require the Employer to purchase the stock at a
price equal to its value, and to pay you for the stock in cash or in
installments over a period of time (not in excess of five (5) years and in
certain cases not in excess of ten (10) years). The first 60 day put option
period will begin on the day following the date your Company Stock is
distributed, and if not exercised, the second 60 day option period will begin as
of the first day of the fifth month of the Plan Year next following the date
your Company Stock was distributed.
VII
YEAR OF SERVICE RULES
1. Year of Service and Hour of Service
The term "Year of Service" is used throughout this Summary Plan
Description and throughout your Plan. A Year of Service for eligibility purposes
is defined as follows:
You will have completed a Year of Service if, at the end of your first
twelve consecutive months of employment with your Employer, you have
been credited with 1000 Hours of Service.
If you have not been credited with 1000 Hours of Service by the end of
your first twelve consecutive months of employment, you will have
completed a Year of Service at the end of any
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<PAGE> 17
following Plan Year during which you were credited with 1000 Hours of
Service.
You will have completed a Year of Service for vesting purposes if you
are credited with 1000 Hours of Service during a Plan Year, even if you were not
employed on the first or last day of the Plan Year.
You will have completed a Year of Service for purposes of sharing in
Employer contributions if you are credited with 1000 Hours of Service during a
Plan Year.
An "Hour of Service" has a special meaning for Plan purposes. You will
be credited with an Hour of Service for:
(a) each hour for which you are directly or indirectly
compensated by your Employer for the performance of duties during the
Plan Year;
(b) each hour for which you are directly or indirectly
compensated by your Employer for reasons other than performance of
duties (such as vacation, holidays, sickness, disability, lay-off,
military duty, jury duty or leave of absence during the Plan Year); and
(c) each hour for back pay awarded or agreed to by your
Employer.
You will not be credited for the same Hours of Service both under (a)
or (b), as the case may be, and under (c).
2. 1-Year Break in Service
A 1-Year Break in Service is a computation period during which you have
not completed more than 500 Hours of Service with your Employer.
A 1-Year Break in Service does NOT occur, however, in the computation
period in which you enter or leave the Plan for reasons of:
(a) an authorized leave of absence;
(b) certain maternity or paternity absences.
The Administrator will be required to credit you with Hours of Service
for a maternity or paternity absence. These are absences taken on account of
pregnancy, birth, or adoption of your child. No more than 501 Hours of Service
shall be credited for this purpose and these Hours of Service shall be credited
solely to avoid your incurring a 1-Year Break in Service. The Administrator
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<PAGE> 18
may require you to furnish him with proof that your absence qualifies as a
maternity or paternity absence.
These break in service rules may be illustrated by the following
examples:
Employee A works 300 hours in a Plan Year. At the end of the Plan Year,
Employee A will have a 1-Year Break in Service because he has worked
less than 501 hours in a Plan Year. Employee B works 300 hours in a
Plan Year and takes an authorized leave of absence for which he is
credited with an additional 250 hours. Employee B will NOT have a
1-Year Break in Service because he is credited with more than 500 hours
in a Plan Year.
If you are reemployed after a 1-Year Break in Service and were vested
in any portion of your account derived from Employer contributions, you will
receive credit for all Years of Service credited to you before your 1-Year Break
in service when you have completed another Year of Service. For example:
Suppose Employee A terminated employment with 4 Years of Service and
was vested in a portion of his account. Employee A was then reemployed
after a 1-Year Break in Service on January 1, 2002. On January 1, 2003
when Employee A completes 1 Year of Service, he will be credited with
his 4 years of pre-break service.
If you do not have a "vested interest" in the Employer contributions
allocated to your account when you terminate your employment, you will lose
credit for your pre-break Years of Service when your consecutive 1-Year Breaks
in Service equal or exceed the greater of 5 years, or your pre-break Years of
Service. For example:
Employee A terminated employment on January 1, 2000 with 2 Years of
Service. Employee A was not vested at the time of his termination of
employment. Employee A returns to work on January 1, 2003. Employee A
will be credited with his 2 pre-break Years of Service because his
period of termination (3 years) did not exceed 5 years.
VIII
YOUR PLAN'S "TOP HEAVY RULES"
1. Explanation of "Top Heavy Rules"
A Plan that primarily benefits "key employees" is called a "top heavy
plan." Key employees are certain owners or officers of
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<PAGE> 19
your Employer. A Plan is a "top heavy plan" when more than 60% of the
contributions or benefits have been allocated to key employees.
Each year, the Administrator is responsible for determining whether
your Plan is a "top heavy plan."
If your Plan becomes top heavy in any Plan Year, then non-key employees
shall be entitled to certain "top heavy minimum benefits," and other special
rules will apply. Among these top heavy rules are the following:
(a) Your Employer may be required to make a contribution equal
to 3% of your compensation to your account;
(b) In determining benefits or contributions you are entitled
to under your Plan, compensation will be limited to $200,000. This
amount will be increased each year for cost of living adjustments.
However, for Plan Years beginning prior to January 1, 1989, the
$200,000 limit shall apply only for Top Heavy Plan Years and shall not
be adjusted.
(c) If you are a participant in more than one Plan, you may
not be entitled to minimum benefits under both Plans.
IX
LOANS
You may apply to the Trustee for a loan. Your application must be in
writing. The Trustee may grant this loan if he believes it has merit.
1. Loan Requirements
All loans must:
(a) be made on a uniform and nondiscriminatory basis;
(b) be adequately secured;
(c) bear a reasonable rate of interest;
(d) have a definite repayment schedule which provides for
payments to be made not less frequently than quarterly and for the loan
to be amortized on a level basis over a reasonable period of time not
to extend beyond the earlier of five years or your Normal Retirement
Date;
(e) when added to the outstanding balance of all other loans
from the plan be limited to the lesser of:
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<PAGE> 20
(1) $50,000 reduced by the excess, if any, of your highest
outstanding balance of loans from the plan during the one year
period prior to the date of the loan over your current
outstanding balance of loans; or
(2) the greater of:
(i) 1/2 of your vested interest in your account; or
(ii) $10,000.
The $50,000 limit stated in (1) above shall not be reduced for
loans made on or before December 31, 1986.
If you use the loan to acquire your principal residence you may repay
the loan over a reasonable period of time that may be longer than five years.
If the repayment period of your loan is five years and an amount
remains payable at the end of five years, that amount will be treated as a
distribution of money from the Plan to you and will be taxable income to you.
X
CLAIMS BY PARTICIPANTS AND BENEFICIARIES
Benefits will be paid to participants and their beneficiaries without
the necessity of formal claims. You or your beneficiaries, however, may make a
request for any Plan benefits to which you may be entitled. Any such request
must be made in writing, and it should be made to the Administrator. (See the
Article in this Summary entitled "GENERAL INFORMATION ABOUT YOUR PLAN.")
Your request for Plan benefits shall be considered a claim for Plan
benefits, and it will be subject to a full and fair review. If your claim is
wholly or partially denied, the Administrator shall furnish you with a written
notice of this denial. This written notice must be provided to you within a
reasonable period of time (generally 90 days) after the receipt of your claim by
the Administrator. The written notice must contain the following information:
(a) the specific reason or reasons for the denial;
(b) specific reference to those Plan provisions on which the
denial is based;
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<PAGE> 21
(c) a description of any additional information or material
necessary to correct your claim and an explanation of why such material
or information is necessary; and
(d) appropriate information as to the steps to be taken if you
or your beneficiary wishes to submit your claim for review.
If notice of the denial of a claim is not furnished to you in
accordance with the above within a reasonable period of time, your claim shall
be deemed denied. You will then be permitted to proceed to the review stage
described in the following paragraphs.
If your claim has been denied, and you wish to submit your claim for
review, you must follow the Claims Review Procedure.
1. The Claims Review Procedure
(a) Upon the denial of your claim for benefits, you may file
your claim for review, in writing, with the Administrator. The form for
this claim for review is available from the Employer or Administrator.
(b) YOU MUST FILE THE CLAIM FOR REVIEW NO LATER THAN 60 DAYS
AFTER YOU HAVE RECEIVED WRITTEN NOTIFICATION OF THE DENIAL OF YOUR
CLAIM FOR BENEFITS.
(c) You may review all pertinent documents relating to the
denial of your claim and submit any issues and comments, in writing, to
the Administrator.
(d) Your claim for review must be given a full and fair
review. If your claim is denied, the Administrator must provide you
with written notice of this denial within 60 days after the
Administrator's receipt of your written claim for review. There may be
times when this 60 day period may be extended. This extension may only
be made, however, where there are special circumstances which are
communicated to you in writing within the 60 day period. If there is an
extension, a decision shall be made as soon as possible, but not later
than 120 days after receipt by the Administrator of your claim for
review.
(e) The Administrator's decision on your claim for review
shall be communicated to you in writing and shall include specific
references to the pertinent Plan provisions on which the decision was
based.
(f) If the Administrator's decision on review is not furnished
to you within the time limitations described above, your claim shall be
deemed denied on review.
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(g) If benefits are provided or administered by an insurance
company, insurance service, or other similar organization which is
subject to regulation under the insurance laws, the claims procedure
relating to these benefits may provide for review. If so, that company,
service, or organization shall be the entity to which claims are
addressed. If you have any questions regarding the proper person or
entity to address claims, you should ask the Administrator.
XI
STATEMENT OF ERISA RIGHTS
1. Explanation of Your ERISA Rights
As a participant in this Plan you are entitled to certain rights and
protections under the Employee Retirement Income Security Act of 1974, also
called ERISA. ERISA provides that all Plan participants shall be entitled to:
(a) examine, without charge, all Plan documents, including:
(1) insurance contracts;
(2) collective bargaining agreements; and
(3) copies of all documents filed by the Plan with the U.S.
Department of Labor, such as detailed annual reports and Plan
descriptions.
This examination may take place at the Administrator's office and at
other specified employment locations of the Employer. (See the Article
in this Summary entitled "GENERAL INFORMATION ABOUT YOUR PLAN");
(b) obtain copies of all Plan documents and other Plan
information upon written request to the Plan Administrator. The
Administrator may make a reasonable charge for the copies;
(c) receive a summary of the Plan's annual financial report.
The Administrator is required by law to furnish each participant with a
copy of this summary annual report;
(d) obtain a statement telling you whether you have a right to
receive a retirement benefit at Normal Retirement Age and, if so, what
your benefits would be at Normal Retirement Age if you stop working
under the Plan now. If you do not have a right to a retirement benefit,
the statement will tell
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you how many years you have to work to get a right to a retirement
benefit. THIS STATEMENT MUST BE REQUESTED IN WRITING AND IS NOT
REQUIRED TO BE GIVEN MORE THAN ONCE A YEAR. The Plan must provide the
statement free of charge.
In addition to creating rights for Plan participants, ERISA imposes
duties upon the people who are responsible for the operation of the Plan. The
people who operate your Plan, called "fiduciaries" of the Plan, have a duty to
do so prudently and in the interest of you and other Plan participants and
beneficiaries. No one, including your employer or any other person, may fire you
or otherwise discriminate against you in any way to prevent you from obtaining a
pension benefit or exercising your rights under ERISA.
If your claim for a retirement benefit is denied in whole or in part,
you must receive a written explanation of the reason for the denial. You have
the right to have the Administrator review and reconsider your claim. (See the
Article in this Summary entitled "CLAIMS BY PARTICIPANTS AND BENEFICIARIES.")
Under ERISA, there are steps you can take to enforce the above rights.
For instance, if you request materials from the Plan and do not receive them
within 30 days, you may file suit in a federal court. In such a case, the court
may require the Administrator to provide the materials and pay you up to $100.00
a day until you receive the materials, unless the materials were not sent
because of reasons beyond the control of the Administrator.
If you have a claim for benefits which is denied or ignored, in whole
or in part, you may file suit in a state or federal court.
If the Plan's fiduciaries misuse the Plan's money, or if you are
discriminated against for asserting your rights, you may seek assistance from
the U.S. Department of Labor, or you may file suit in a federal court. The court
will decide who should pay court costs and legal fees. If you are successful,
the court may order the person you have sued to pay these costs and fees. If you
lose, the court may order you to pay these costs and fees if, for example, it
finds your claim is frivolous.
If you have any questions about this statement, or about your rights
under ERISA, you should contact the nearest Area Office of the U.S.
Labor-Management Services Administration, Department of Labor.
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XII
AMENDMENT AND TERMINATION OF YOUR PLAN
1. Amendment
Your Employer has the right to amend your Plan at any time. In no
event, however, shall any amendment:
(a) authorize or permit any part of the Plan assets to be used
for purposes other than the exclusive benefit of participants or their
beneficiaries;
(b) cause any reduction in the amount credited to your
account; or
(c) cause any part of your Plan assets to revert to the
Employer.
2. Termination
Your Employer has the right to terminate the Plan at any time. Upon
termination, all amounts credited to your accounts will become 100% vested. A
complete discontinuance of contributions by your Employer shall constitute a
termination.
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<PAGE> 1
EXHIBIT 10.3
PROMISSORY NOTE
$480,000.00 Yuma, Arizona October 24, 1994
For value received, SOUTHERN ARIZONA BANK, an Arizona corporation promise(s) to
pay to JOE URTUZUASTEGUI, husband of Rosa Maria Urtuzuastegui, dealing with his
sole and separate property, as to an undivided 1/3rd interest; FRANK L.
URTUZUASTEGUI and CONNIE V. URTUZUASTEGUI, as Trustees of the Frank L.
Urtuzuastegui and Connie V. Urtuzuastegui Trust dated August 1, 1980, as to an
undivided 1/3rd interest; and CHARLES N. URTUZUASTEGUI, as Trustee of the
Charles N. Urtuzuastegui and Josephine O. Urtuzuastegui Trust dated February 22,
1972, as to an undivided 1/3rd interest or order, at Yuma, Arizona the sum of
FOUR HUNDRED EIGHTY THOUSAND AND 00/100 DOLLARS, as follows: In annual
installments of $120,000.00 or more, on or before the 4th day of January of
every year, beginning January 4, 1996, with interest on all unpaid principal at
the rate of (SEE BELOW) per annum from January 4, 1995, payable annually, at the
same time and in addition to the principal payments.
The interest rate shall be computed based on the National Prime Rate according
to Wall Street Journal on each anniversary date. Date being January 4th.
Interest rate cannot exceed, nor be less than, Three Percentage Points of the
initial interest rate established on January 4, 1995.
Should default be made in the payment of any installment when due, then the
whole sum of principal and interest shall become immediately due and payable at
the option of the holder of this note, with interest on the entire unpaid
principal and accrued interest at a rate equal to _________ percent over the
rate of interest set forth above from the date of such default until paid. If no
interest rate is specified in this paragraph, the default interest rate shall be
Ten percent over the rate of interest set forth above.
Should any installment due hereunder not be paid as it matures, the amount of
such installment which has matured shall, at the option of the holder of this
note, bear interest at a rate equal to ______ percent over the rate of interest
set forth above from its maturity date until paid. If no interest rate is
specified in this paragraph, the default interest rate shall be Ten percent over
the rate of interest set forth above.
Principal and interest payable in lawful money of the United States of America.
Should suit be brought to recover on this note, the undersigned, jointly, and
severally, promise(s) to pay, in addition to the amount found due hereunder, all
reasonable costs and expenses of suit, including, but not limited to, reasonable
attorneys' fees.
This note is secured by a Deed of Trust upon real property.
This note shall be binding upon and shall be the joint and several obligation of
all makers, sureties, guarantors, endorsers and their successors and assigns,
all of whom waive presentment, notice of dishonor and protest.
SOUTHERN ARIZONA BANK, an Arizona
corporation
BY:
------------------------------
<PAGE> 1
EXHIBIT 10.4
LEASE
THIS LEASE is made and entered into this ___ day of _____________,
1993, by and between TWO YUMA PARTNERS, an Arizona general partnership
("Landlord"), and SOUTHERN ARIZONA BANK, an Arizona corporation ("Tenant").
1. PREMISES
1.1 Demise. Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord those certain premises located at 8th Street and Avenue
"A", Yuma Arizona, containing approximately 2,100 square feet, together with two
(2) drive through lanes crosshatched on Exhibit "A" attached hereto and
made part hereof (the "Premises"). The Premises are part of a shopping center
constructed or to be constructed by Landlord at the northwest corner of Eighth
Street and Avenue "A", Yuma, Arizona, known as Megafoods Plaza (the "Shopping
Center").
1.2 Common Areas. Tenant shall have the right to use in common
with others entitled thereto such common additional areas of the Shopping Center
(e.g., parking areas, service roads, loading facilities, sidewalks, and other
facilities) as may be designated from time to time by Landlord (the "Common
Areas"), subject to the terms and conditions of this Lease.
1.3 Reserved Rights. Landlord reserves the right to change the
Shopping Center, including, without limitation, the size, location and number of
buildings, the location, dimension and extent of the Common Areas (including,
without limitation, the entrances, exits, parking configuration, traffic lanes
and boundaries thereof), the identity and type of other tenants, and to add land
to or withdraw land from the Shopping Center so long as none of these changes
unreasonably interfere with Tenant's business.
2. TERM
2.1 Lease Term. The term of this Lease shall be for a period of
eighty-four (84) full calendar months, plus the remainder of any partial
calendar month, in which the term of this Lease commences, unless sooner
terminated as herein provided (the "Lease Term"), together with Options to
Extend as set out in Addendum 1 hereto paragraph B.
2.2 Commencement. The Lease Term, and Tenant's obligation to
pay Minimum Monthly Rent and Additional Rent, shall commence on the earlier of
the following dates: (a) twenty (20) days following Landlord's written notice
that all work required to be performed by Landlord has been substantially
completed; or (b) the date on which Tenant shall first open the Premises for
business. A written memorandum of the commencement date shall be executed by
both parties and attached to this Lease.
3. RENTAL
3.1 Minimum Monthly Rent.
Tenant covenants to pay to Landlord, without deduction or
offset and prior to notice or demand, for the use and occupancy of the Premises
a minimum monthly rental of Two Thousand Nine Hundred Sixteen Dollars and
Sixty-six Cents ($2,916.66) payable in advance on the first day of the Lease
term and on the first day of each and every twenty-three calendar months
thereafter and Three Thousand Two Hundred Thirty Seven Dollars and Fifty Cents
($3,237.50) for every remaining calendar month during the Lease Term (the
"Minimum Monthly Rent"). Upon execution of this Lease, Tenant agrees to pay
Landlord the Minimum Monthly Rent for the first full calendar month of the Lease
Term. (See Addendum 1)
<PAGE> 2
3.2 Cost of Living Adjustment. Deleted prior to execution.
3.3 Percentage Rent. Deleted prior to execution.
3.4 Payment of Rental/Late Charges. Tenant shall pay the
rentals herein specified and all other charges to Landlord at the notice address
of Landlord set forth in Article 32 hereof or to such other person or persons
and at such other address or addresses as Landlord shall from time to time
designate in writing. A five percent (5%) late charge shall be assessed to any
payment required to be made by Tenant to Landlord under the terms of this Lease
not received within five (5) days after the due date thereof.
4. SECURITY DEPOSIT
4.1 Deposit. Tenant has deposited with Landlord
contemporaneously with the execution of this lease the sum of No Dollars ($-0-),
receipt of which is hereby acknowledged by Landlord, as security for the full
and faithful performance of each and every term and provision of this Lease.
Landlord shall not be required to maintain such funds in a segregated account,
and no interest shall be payable by Landlord thereon.
4.2 Application. If Tenant defaults in any respect hereunder,
Landlord may use, apply, or retain the whole or any part of the security deposit
for the payment of any rent in default or for any other sum which Landlord may
be required to spend by reason of Tenant's default. If any portion of said
deposit is so used or applied, Tenant shall deposit cash with Landlord in an
amount sufficient to restore the security deposit to its original amount within
five (5) days after written demand therefor. Landlord's rights with reference to
the security deposit shall be in addition to and shall no preclude any other
rights, remedies, or recoveries available to Landlord by law or under the terms
of this Lease.
4.3 Return of Deposit. Should Tenant fully and faithfully
comply with all of the terms and conditions of this Lease, the security deposit
or any balance thereof shall be returned to Tenant or, at the option of
Landlord, to the last assignee of Tenant's interest in this Lease, at the
expiration of the Lease Term.
5. TAXES
5.1 Real Estate Taxes and Assessments.
(a) Tenant covenants to pay to Landlord Tenant's Proportionate
Share (as hereinafter defined) of all real estate taxes and assessments levied
upon the Shopping Center during the Lease Term. Tenant shall pay to Landlord on
the first day of each month of the Lease Term, in advance, such amount as
Landlord shall estimate from time to time to equal one-twelfth (1/12) of
Tenant's annual obligation hereunder. Landlord shall provide Tenant an annual
reconciliation of Tenant's impound account, based upon the actual tax bills
received by Landlord, and if such reconciliation discloses a deficiency in the
amount due from Tenant, the same shall be paid by Tenant within ten (10) days
following Tenant's receipt of such reconciliation. Any excess shall be credited
to amounts next coming due.
(b) The term "real estate taxes and assessments" as used herein
shall be deemed to mean all taxes and assessments of whatsoever nature imposed
upon or levied against the real property and permanent improvements constituting
the Shopping Center, and any taxes hereafter levied or imposed in addition to or
in lieu of real estate taxes and assessments.
5.2 Rental Taxes. Tenant shall pay to Landlord, monthly in addition to
and along with the rentals otherwise Payable hereunder, a sum equal to the
aggregate of any excise, sales, use, transaction privilege or other taxes
legally levied or imposed during the Lease Term against or on account of amounts
payable hereunder by Tenant or the receipt thereof by Landlord (excluding
Landlord's income taxes).
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<PAGE> 3
5.3 Personal Property Taxes. Tenant shall pay, prior to delinquency,
all taxes levied upon fixtures, furnishings, equipment and all other personal
property belonging to Tenant and placed on the Premises by Tenant. Tenant shall
cause all of such personal property of Tenant to be taxed separately from
Landlord's property.
5.4 Tenant's Proportionate Share. For purposes hereof, "Tenant's
Proportionate Share" of any tax, expense or charge shall be determined by
multiplying the same by a fraction the numerator of which is the gross floor
area of the Premises and the denominator of which is the total gross floor area
of all space leased or available for lease from Landlord in the Shopping Center
from time to time, as determined by Landlord ("Shopping Center Floor Area").
Measurements of floor area shall be calculated from the center of demising walls
and from the outside of exterior walls. Tenant's Proportionate Share shall be
11.2% at the commencement of this Lease but may increase or decrease in
accordance with this paragraph.
6. CONDITION OF THE PREMISES
The respective obligations, covenants and agreements of Landlord and
Tenant with respect to the initial construction or renovation of the Premises,
including the division of responsibilities and procedures for design and
construction and for payment of costs and expenses, are more specifically set
forth in Exhibit "B" attached hereto and incorporated herein by this
reference.
7. COMMON AREAS
7.1 Tenant's Parking. Tenant acknowledges that the Common Areas shall
remain exclusively under Landlord's control. Tenant and Tenant's employees shall
park their automobiles only in those areas designated by Landlord for employee
parking. Tenant, its employees, customers and invitee shall refrain from parking
in areas, if any, designated by Landlord for the exclusive use of a particular
tenant.
7.2 Operating Costs.
(a) Tenant covenants to pay to Landlord Tenant's Proportionate
Share of Operating Costs (as hereinafter defined) incurred by Landlord during
the Lease Term. Landlord at its discretion, shall either bill Operating Costs on
an actual expense basis per month in arrears, or by annual estimate. If billed
on actual basis, Tenant shall pay such amount monthly upon receipt of monthly
invoice. If Landlord bills by annual estimate, Tenant shall pay to Landlord on
the first day of each month of the Lease Term, in advance, such amount as
Landlord shall estimate from time to time to equal one-twelfth (1/12) of
Tenant's annual obligation hereunder. Landlord shall provide Tenant an annual
reconciliation of Tenant's impound account, based upon the actual Operating
Costs incurred by Landlord, and if such reconciliation discloses a deficiency in
the amount due from Tenant, the same shall be paid by Tenant within ten (10)
days following Tenant's receipt of such reconciliation. Any excess shall be
credited to amounts next coming due.
(b) For purposes hereof, the term "Operating Costs" shall mean the
total cost and expense paid or incurred by Landlord in operating, managing,
equipping, lighting, repairing, replacing and maintaining the Common Areas,
including, without limitation, all sums expended by Landlord for cleaning,
sweeping, restriping, seal coating, line painting, planting and landscaping,
pest control, preventive and routine maintenance, lighting, directional signs
and other markers and bumpers, sanitary control, including, without limitation,
all costs of maintaining and operating any sewer, septic, or waste disposal
installation which services the Shopping Center, trash removal, snow removal,
depreciation on machinery and equipment used in such maintenance, cost of all
utilities and services consumed or performed on the Common Areas, security
systems or guards, the cost of Personnel to implement such services, required
fees or charges levied pursuant to any governmental authority, and a management
fee to Landlord for Landlord's supervision of such expenditures equal to 10% of
the common area expenses including property taxes and insurance. Landlord shall
also have the right to include all or any portion of the cost of insurance
maintained by Landlord under paragraph 9.3 hereof as part of Operating Costs or
separate such cost and bill Tenant separately. Common area maintenance expenses,
not including property taxes or insurance, shall
3
<PAGE> 4
not exceed Three Hundred and No Dollars ($300.00) per month during the first
year of the Lease. Thereafter, annual increase in CAM expenses shall be based on
actual expenditures but shall not exceed five percent (5%) per year.
8. USE OF THE PREMISES
8.1 Use and Tradename. Tenant shall occupy and use the Premises
for the purposes of its banking operation under the tradename Southern Arizona
Bank and for no other purpose or purposes and under no other tradename
whatsoever.
8.2 Continuous Operation. Tenant shall continuously, during the
entire term hereof, conduct and carry on Tenant's business in the Premises and
shall keep the Premises open for business and cause Tenant's business to be
conducted therein during the usual business hours of each and every business day
as is customary for businesses of like character in the city in which the
Premises are located. Tenant's failure at any time during the Lease Term to
conduct its business in the premises for a period in excess of ten (10)
consecutive days shall, at Landlord's option, be deemed to constitute an
abandonment of the Premises.
8.3 Prohibited Activities.
(a) Tenant shall not engage in any activity which will increase the
existing premium rate of insurance on the Premises or cause a cancellation of
any insurance policy covering the Premises or any part thereof. Tenant shall not
sell, or permit to remain in or about the Premises any article that may be
prohibited by standard form fire insurance policies.
(b) Tenant shall not use the Premises for any purpose not permitted
by zoning or other local, state, or federal laws, including, but not limited to,
such laws regulating the use or disposal of hazardous material or supplies.
Tenant shall not use the Premises for or carry on or permit any offensive,
noisy, or dangerous trade, business, manufacture or occupation, or any waste or
nuisance or anything against public policy, nor interfere with the business of
any other tenant in the Shopping Center.
(c) Tenant shall not conduct or permit any auction sale to be held
on or about the Premises, whether such auction be voluntary or involuntary.
Tenant shall not display merchandise, nor permit merchandise to remain, outside
the exterior walls and permanent doorway of the Premises.
(d) Tenant shall not employ any type of sound emitting device in or
about the Premises that is audible outside the Premises, except for fire and
burglar alarms.
8.4 Compliance with Laws. Tenant shall, at Tenant's expense, promptly
comply with all laws, statutes, ordinances, rules, regulations, requirements,
covenants, conditions and restrictions now in force or which may hereafter be in
force pertaining to the use or occupancy of the Premises, including without
limitation, any federal, state or local law, statute, code, rule, regulation,
order, decree or ordinance pertaining to environmental matters.
9. INSURANCE
9.1 Waiver and Indemnification. Tenant hereby waives all claims against
Landlord for damage to goods, wares, merchandise, and equipment, in, upon or
about the Premises and for injuries to persons in or about the Premises, from
any cause whatsoever arising at any time. Tenant agrees to indemnify, defend and
hold Landlord harmless for, from and against any damage or injury to any person,
or the property of any person, arising from the possession, use, maintenance and
repair of the Premises by Tenant, any act or omission of Tenant or Tenant's
agents and employees, any default of Tenant under this Lease, or any other act
or omission which results in personal injury, loss of life or Property damage
sustained in or about the Premises.
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<PAGE> 5
9.2 Tenant's Insurance.
(a) Throughout the Lease Term, Tenant shall, at Tenant's expense,
maintain comprehensive public liability insurance (including, without
limitation, products liability and contractual liability coverage for the
performance by Tenant of the indemnity agreements set forth in paragraph 9.1
above) against claims for personal injury, death, or property damage occurring
in, on, or about the Premises and on any sidewalks directly adjacent to the
Premises. The limits of liability of such insurance shall not be less than One
Million Dollars ($1,000,000.00) combined single limit or in such higher amounts
as Landlord may reasonably require.
(b) Throughout the Lease Term, Tenant shall, at Tenant's expense,
maintain fire and extended coverage (all risk) insurance upon all of Tenant's
trade fixtures, furniture, equipment, merchandise and personal property from
time to time in or upon the Premises, and upon any alterations, additional or
improvements made by Tenant pursuant to Article 10, in an amount equal to the
replacement cost thereof. Any policy proceeds shall be used for the repair or
replacement of the property damaged or destroyed. All merchandise, furniture,
floor and wall coverings and all personal property and fixtures belonging to
Tenant and all persons claiming by or through Tenant which may be on the
Premises shall be at Tenant's sole risk.
(c) Tenant shall be responsible for the maintenance of all glass
and plate glass in or a part of the Premises, but shall have the option either
to insure the risk or to self insure, provided Landlord's written consent to
self insure is previously obtained.
(d) All such policies of insurance shall be issued by such
companies as Landlord shall approve, and shall name Landlord and/or such other
party or parties as Landlord may require as additional insured. Evidence of the
issuance of such policies shall be delivered to Landlord at least ten (10) days
prior to the commencement of the term of this Lease and Tenant shall obtain a
written commitment on the part of each insurance underwriter to notify Landlord
in writing at least thirty (30) days prior to any cancellation, expiration or
modification thereof.
9.3 Landlord's Insurance. Landlord shall maintain comprehensive general
public liability insurance against claims for personal injury, death, or
property damage occurring on the Common Areas, fire and extended coverage (all
risk) insurance on the buildings and improvements constituting the Shopping
Center, and such other insurance as Landlord deems reasonably necessary for the
operation of the Shopping Center, including without limitation loss of rents
insurance. The limits of liability of such insurance shall be in such amounts as
Landlord shall determine. Landlord shall have the option to include such
insurance in so-called "blanket policies." Tenant shall pay to Landlord Tenant's
Proportionate Share of the cost of all such insurance maintained by Landlord
within ten (10) days after written demand is sent by Landlord to Tenant
accompanied by the insurance premium notice and evidence of the amount due.
Notwithstanding the foregoing, Landlord shall have the right at its option to
include the cost of such insurance as part of Operating Costs pursuant to
paragraph 7.2 hereof.
9.4 Waiver of Subrogation. Tenant hereby waives any right of recovery
from Landlord, Landlord's officers or employees, and Landlord hereby waives any
right of recovery from Tenant, Tenant's officers or employees, for any loss or
damage (including consequential loss) resulting from any of the perils insured
against by either's fire and extended coverage insurance policy to the extent of
all proceeds thereof. The parties shall give their respective insurance carriers
notice of this waiver and secure a subrogation waiver endorsement from each
carrier.
10. ALTERATIONS
After the construction of the initial improvements to the Premises,
Tenant shall not make any alterations, additions or improvements to the
Premises, or any part thereof, including, without limitation, penetrations of
the roof, without the prior written consent of Landlord, and subject to such
conditions as Landlord
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<PAGE> 6
shall impose in connection with such consent. Any such alterations, additional
or improvements to the Premises, except movable furniture and trade fixtures,
shall become at once a part of the realty and belong to Landlord.
11. MAINTENANCE AND SANITATION
11.1 Landlord Maintenance. Landlord shall maintain the off-premises
plumbing, off-premises electrical and other off-premises facilities serving the
Premises. Landlord shall maintain the roof and structural portions of the
Premises and Tenant agrees to reimburse Landlord for repairs to roof caused by
Tenant's roof penetrations and for structural repairs caused by Tenant's
construction, maintenance or repair activity. Tenant hereby waives all right to
make repairs at the expense of Landlord.
11.2 Maintenance of Premises. Tenant shall, at its sole cost and
expense, keep the Premises clean, sanitary, safe and in a good state of repair,
including, without limitation, windows, glass, plate glass, store front, doors,
door closures, demising walls, ceiling, floor covering, plumbing pipes and
fixtures, electrical panels, wiring, switches and conduits and all mechanical
equipment, including, without limitation, all heating, ventilation and air
conditioning equipment and other fixtures or equipment whether inside or outside
the Premises. Landlord shall have the right to contract for periodic servicing
and maintenance of the heating, ventilation and air conditioning equipment and
Tenant agrees to reimburse Landlord for the cost thereof upon receipt of a
statement. Prior to beginning any repair or replacement of heating, ventilation
and air conditioning equipment, or exterior portions of the Premises, Tenant
shall notify Landlord and obtain Landlord's approval thereof. Tenant may not
paid, change or modify in any manner the exterior of the Premises without first
securing the written consent of Landlord.
11.3 Landlord's Right to Repair. If Landlord reasonably considers that
some item of maintenance or repair is needed, Landlord shall so notify Tenant in
writing, and Tenant shall promptly effect such maintenance or repair. If Tenant
should fail to effect such maintenance or repair within a reasonable time,
Landlord shall have the right to effect such maintenance or repair, and Tenant
shall reimburse Landlord the cost thereof plus a reasonable administrative
charge for Landlord' supervision thereof promptly upon receipt of a billing from
Landlord.
11.4 Sanitation. If required by the Health Department or requested by
Landlord, Tenant shall provide and maintain sanitary receptacles approved by
Landlord in and about the interior and exterior of the Premises in which to
place any refuse or trash, and Tenant shall cause such refuse or trash to be
removed from the area as often as required to maintain a sanitary condition, but
in no event less often than twice weekly. Tenant shall sweep as needed and keep
free of refuse the sidewalks and areas immediately adjacent to the Premises.
12. DAMAGE AND DESTRUCTION OF PREMISES
12.1 Obligation to Repair. In the event of damage or destruction of the
Premises during the Lease Term, subject to paragraph 12.2 below, Landlord shall
commence to make said repairs within thirty (30) days of written notice from
Tenant of the necessity therefor. No such damage or destruction shall annul or
void this Lease except that Tenant shall be entitled to a proportionate
reduction of Minimum Monthly Rent while such repairs are being made, based upon
the extent to which the making of such repairs shall interfere with the business
carried on by Tenant in the Premises.
12.2 Election to Terminate. If (a) the Premises are damaged or
destroyed to an extent of more than twenty-five percent (25%) of their then
replacement cost; (b) the Premises are damaged during the last two (2) years of
the Lease Term; (c) the Premises are damaged or destroyed as a result of a
casualty not insured against; or (d) fifty percent (50%) or more of the gross
floor area of the buildings in the Shopping Center are damaged, whether or not
the Premises are affected thereby, then, in any such event, Landlord may, within
ninety (90) days following the date of any such occurrence, cancel and terminate
this Lease by written notice to Tenant, whereupon all rents shall be prorated as
of the date of damage, Tenant shall vacate the Premises and surrender the same
to Landlord and Landlord shall without further action, be released from any
further obligations or liabilities to Tenant. If Landlord does not so elect to
terminate this Lease, Landlord shall rebuild and repair the Premises with due
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diligence, this Lease shall continue in full force and effect, and the Minimum
Monthly Rent shall be proportionately reduced as hereinabove provided.
12.3 Repair Obligations. Landlord's obligation to repair or rebuild
under this Article 12 shall extend only to those portions of the Premises that
were originally provided at Landlord's expense and Tenant shall, at its expense,
promptly repair and/or restore Tenant's personal property and those portions of
the Premises not originally provided at Landlord's expense. Landlord shall not
be obligated to make repairs to the extent that the cost thereof exceeds the
insurance proceeds available to the Landlord therefor.
12.4 Waiver. With respect to any damage which Landlord is obligated or
may elect to repair under the terms of this Article 12, Tenant waives any
statutory or other right Tenant may have to cancel this Lease as a result of
such damage, unless Landlord elects not to repair any such damage and then in
such event Tenant may terminate this lease and be released from any further
liabilities or obligations hereunder.
13. EMINENT DOMAIN
13.1 Condemnation of Premises.
(a) If the whole of the Premises shall be acquired or condemned by
eminent domain for any public or quasi-public use or purpose, or in the event of
sale in lieu thereof, or if any part of the Premises shall be so taken which
taking renders the Premises unsuitable for the business of Tenant, then the term
of this Lease shall cease and terminate as of the date of title vesting in such
proceeding or sale and all rentals shall be paid up to that date.
(b) In the event of a partial taking or condemnation which is not
extensive enough to render the Premises unsuitable for the business of the
Tenant, Landlord, to the extent proceeds of condemnation are available therefor,
shall promptly restore the Premises to a condition comparable to its condition
at the time of such condemnation less the portion lost in the taking, this lease
shall continue in full force and effect, and the Minimum Monthly Rent shall be
reduced in the proportion that the rental value of the Premises after such
taking bears to the rental value before such taking.
13.2 Condemnation of Shopping Center. In the event more than
twenty-five percent (25%) of the gross floor area of the entire Shopping Center
is acquired under said power of eminent domain or by sale in lieu thereof,
whether or not any portion of the Premises is taken, or in the event all or any
portion of the parking area of the Shopping Center is so taken which reduces the
ration of parking area to building area below the minimum requirement of the
governmental authority having jurisdiction, Landlord shall have the right to
terminate this Lease as of the date of title vesting in such proceeding or sale
by giving Tenant written notice within thirty (30) days after Landlord has been
notified of such appropriation.
13.3 Condemnation Award. In the event of any condemnation or taking as
hereinbefore provided, whether whole or partial, Landlord is to receive the full
amount of such award, Tenant hereby expressly waiving any right or claim to any
part thereof; provided, however, Tenant shall have the right to assert a claim
against the condemning authority in a separate action and so long as Landlord's
award is not reduced by such claim, for fixtures and improvements installed by
Tenant at its expense, interruption of or damage to Tenant's business, or
Tenant's moving expenses.
14. FIXTURES
Tenant shall provide, install and maintain, at Tenant's expense,
fixtures of a special nature that may be required for Tenant's business. All
such fixtures that are not permanently affixed to the Premises shall remain the
property of Tenant and may be removed by Tenant not later than the end of the
Lease Term, provided that Tenant is not then in default hereunder and that
Tenant shall promptly repair, at its expense, any damage occasioned by
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such removal. All other fixtures, equipment and other property (including,
without limitation, air conditioning units, heating equipment, plumbing
fixtures, hot water heaters, wall coverings, carpeting or other floor coverings
cemented or otherwise affixed to the floor, and window coverings) that may be
installed in the Premises by Tenant shall, at the end of the lease Term, become
the property of Landlord and remain upon and be surrendered with the Premises,
without disturbance, molestation or injury. Except Landlord agrees that Tenant
may remove vault, automatic teller machines, night depository and any security
equipment which has been installed by Tenant. Any structural damage caused by
the removal of these items shall be repaired by Tenant.
15. FREE FROM LIENS
Tenant shall keep the Premises and the Shopping Center free from any
liens arising out of work performed, material furnished or incurred due to
Tenant's actions and shall indemnify and hold Landlord harmless from all such
liens or claims of liens and all attorneys' fees and other costs and expenses
incurred by reason thereof. Notice is hereby given that neither Landlord nor
Landlord's interest in the Premises shall be liable or responsible to persons
who furnish material or labor for or in connection with such work.
16. MERCHANTS' ASSOCIATION Deleted prior to execution.
17. SIGNS
Tenant shall not erect or place any sign, lettering, design, banner,
decoration, exterior lighting or other advertising devise or material either
outside the Premises or inside the Premises if visible from outside the
Premises, without the prior written approval of Landlord. Notwithstanding the
foregoing, Tenant agrees to install not later than thirty (30) days following
commencement of the Lease Term, at Tenant's expense, an identification sign for
the Premises complying with all applicable governmental ordinances, approved in
advance by Landlord and conforming in all respects to the sign criteria
established for the Shopping Center. (Tenant's initials herein shall acknowledge
receipt of such sign criteria. _____) All expenses in connection with the
operation and maintenance of such sign shall be paid by Tenant. Any signs of
Tenant not in conformity with this Lease, and any signs remaining at the end of
the Lease Term, shall upon Landlord's demand forthwith be removed by Tenant at
its expense, and Tenant shall promptly repair any damage to the Premises
resulting from such removal.
18. COMPETITION Deleted prior to execution.
19. UTILITIES
Tenant shall pay before delinquency all charges for water, gas, heat,
electricity, power, telephone service, trash removal, and all other services or
utilities used in, upon, or about the premises by Tenant or any of Tenant's
subtenants, licensees, or concessionaires during the Lease Term. Landlord shall
not be liable in damages or otherwise nor shall Tenant be entitled to terminate
this Lease in the event of any failure or interruption of any utility supplied
to the Premises or Shopping Center.
20. ENTRY AND INSPECTION
Tenant shall permit Landlord and Landlord's agents to enter into and
upon the premises at all reasonable times for the purposes of inspecting the
same, making repairs, alterations or additions, posting notices of
non-liability, exhibiting the Premises to prospective lenders, purchasers or
tenants, or for any other lawful purpose. Landlord shall be permitted to do any
of the above without any abatement of rent and without any liability to Tenant
for any loss of occupation or quiet enjoyment of the Premises thereby
occasioned. If Tenant shall not be personally present to open and permit an
entry into the Premises, at any time, when for any reason an entry therein shall
be necessary or permissible, Landlord or Landlord's agents may forcibly enter
the same, without rendering Landlord or such agents liable therefor, and without
in any manner affecting the obligations and covenants of Tenant contained in
this Lease.
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21. ASSIGNMENT AND SUBLETTING
21.1 Consent Required. Tenant shall not assign this Lease, or any
interest therein, and shall not sublet the Premises or any part thereof, without
the prior written consent of Landlord, which consent may be withheld in
Landlord's reasonably exercised discretion. Consent by Landlord to one
assignment or subletting shall be deemed to be a consent to any subsequent
assignment or subletting. Consent to an assignment shall release the original
named Tenant from liability under this Lease. Any assignment or subletting
without the prior written consent of Landlord shall be void, and shall, at the
option of Landlord, constitute a default hereunder.
21.2 Corporate and Other Transfers. If Tenant is a corporation, an
unincorporated association or a partnership, the transfer, assignment or
hypothecation of any stock or interest therein aggregating in excess of
seventy-five (75%) shall be deemed an assignment of this Lease for purposes
hereof.
21.3 No Merger. The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation thereof, shall not work a merger, and shall, at
the option of Landlord, terminate all or any existing subleases, or may, at the
option of Landlord, operate as an assignment to Landlord of any or all of such
subleases.
22. SALE OF PREMISES BY LANDLORD
In the event of any sale of the Premises or the Shopping Center by
Landlord, or assignment of this Lease, Landlord shall be and is hereby entirely
freed and relieved of all liability under any and all of the Landlord's
covenants and obligations contained in this Lease arising thereafter, and the
purchaser or assignee at such sale of the premises or the Shopping Center or
assignment of this Lease, shall be deemed, without any further agreement between
the parties and any such purchaser or assignee, to have assumed and agreed to
carry out any and all of the covenants and obligations of the Landlord under
this Lease
23. SURRENDER OF PREMISES
At the expiration or earlier termination of this Lease, Tenant shall
surrender the Premises in good order and condition, clean and free of refuse,
reasonable wear and tear excepted, and shall deliver all keys to Landlord.
Before surrendering the Premises, Tenant shall remove all of its signs, personal
property and trade fixtures and such alterations or additions to the Premises
made by Tenant as may be specified by Lender for removal thereof. If Tenant
fails to remove its personal property and fixtures at the end of the Lease Term,
such property shall, at Landlord's option, be deemed abandoned and shall become
the property of Landlord. Should Tenant not promptly surrender the Premises as
required above, Landlord shall have the option, in addition to any other rights
and remedies it may have, to apply the security deposit as provided herein
toward the expense of removal of signs, personal property and trade fixtures,
cleaning and repairs.
24. HOLDING OVER
If Tenant shall hold over after the term of this Lease, or any
extension thereof, Tenant shall become a tenant on a month-to-month basis at a
minimum rental equal to one and one-half times the amount of Minimum Monthly
Rent payable hereunder for the last full calendar month of the lease Term, and
upon all the terms, covenants and conditions herein specified, including the
provisions relative to percentage rental, but exclusive of any renewal options.
Nothing contained herein shall be deemed the consent of Landlord to any such
holding over.
25. DEFAULT
25.1 Events of Default. The occurrence of any of the following shall
constitute a default of Tenant under this Lease
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(a) the failure of Tenant to pay any installment of Minimum
Monthly Rent, percentage rent or any other sum or charge or any part thereof,
required by this Lease to be paid to Landlord, within ten (10) days after the
date of notice of delinquency.
(b) the failure of Tenant to perform any nonmonetary obligation
contained in this Lease which failure shall continue for twenty (20) days after
notice thereof from Landlord to Tenant;
(c) the filing of a petition or the commencement of proceedings
under any federal or state bankruptcy law by or against Tenant or any guarantor
of this Lease, and if against Tenant or any guarantor, said proceedings shall
not be dismissed within thirty (30) days following commencement thereof;
(d) the adjudication of insolvency, the making of a general
assignment for the benefit of creditors or the entering into of an arrangement
with creditors by Tenant or any guarantor of this Lease;
(e) the levy of a writ of attachment or execution on the leasehold
estate hereby created which is not related or satisfied within thirty (30) days
thereafter;
(f) the appointment of a receiver in any proceeding or action to
which Tenant is a party with authority to take possession or control of the
Premises or the business conducted thereon by Tenant or the property of any
guarantor of this Lease, which appointment is not discharged within thirty (30)
days thereafter.
(g) the failure of Tenant upon notice from Landlord to promptly
commence and diligently complete the fixturization of the Premises or to perform
any other obligation to be performed prior to the commencement of the lease
Term; and/or
(h) the abandonment of the Premises.
25.2 Remedies Upon Default. Upon a default of Tenant as defined in
paragraph 25.1 above, Landlord, in addition to any other rights or remedies it
may have hereunder or at law or in equity, shall have the immediate right
without any further demand or notice, to pursue any one or more of the following
remedies:
(a) re-enter the Premises and remove all persons and Property
therefrom, using all reasonable force necessary so to do without liability to
any person for damages sustained by reason of such removal;
(b) lock the doors to the Premises and exclude Tenant therefrom;
(c) retain or take possession of any property belonging to Tenant
upon the Premises pursuant to Landlord's statutory landlord lien. Such property
may be removed and stored in a Public warehouse or elsewhere at the cost of and
for the account of Tenant, without liability to any person for damages sustained
by reason of such removal or storage;
(d) render such performance required of Tenant, other than the
payment of rent, and charge all costs and expenses incurred in connection
therewith to Tenant, which amounts so charged shall be due and payable
immediately from Tenant to Landlord upon demand;
(e) terminate this Lease by written notice to Tenant. In the event
of such termination, Tenant agrees to immediately surrender possession of the
Premises. Should Landlord terminate this Lease, Tenant shall have no further
interest in this Lease or in the Premises, and Landlord may recover from Tenant
all damages Landlord may incur by reason of Tenant's breach, including the cost
of recovering the Premises, reasonable attorneys' fees, and the value at the
time of such termination of the excess, if any, of the amount of rent and
charges equivalent to rent reserved in this Lease for the remainder of the Lease
Term over the then reasonable rental value
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of the Premises for the remainder of the Lease Term, all of which amounts shall
be immediately due and payable from Tenant to Landlord upon demand;
(f) without termination of this Lease, bring an action or actions
to recover from Tenant all rent and other sums and charges reserved hereunder as
the same become due and payable from time to time; and/or
(g) without termination of this Lease, attempt to relet the
Premises or any part thereof (but without any obligation so to do on the part of
Landlord), as agent and for the account of Tenant, for such term (which may be
for a term extending beyond the Lease Term) and at such rental and upon such
other terms and conditions as Landlord, in its sole discretion, may deem
advisable, with the right to make alterations and repairs to the Premises the
expenses of which shall constitute an indebtedness from Tenant to Landlord,
immediately payable. In the event of such reletting, the rents received by
Landlord from such reletting shall be applied first, to the payment of any costs
and expenses of such reletting and of such alterations and repairs; second, to
the payment of rent due and unpaid hereunder; and the residue, if any, shall be
held by Landlord and applied in payment of future rent as the same may become
due and payable hereunder. If the rents received from such reletting during any
month be less than that to be paid during that month by Tenant hereunder, Tenant
shall pay any such deficiency to Landlord. Such deficiency shall be calculated
and paid monthly and Landlord may bring an action therefor as such monthly
deficiencies may arise. Notwithstanding any such reletting without termination,
Landlord may at any time thereafter, elect to terminate this Lease for such
previous breach.
(h) without termination of this Lease, terminate Tenant's right to
possession only and Landlord may, at Landlord's option, enter into the premises,
remove Tenant's signs and other evidences of tenancy, and take and hold
possession thereof as provided in subparagraph (c) above without such entry and
possession terminating the lease or releasing Tenant, in whole or in part, from
any obligation, including Tenant's obligation to pay the rent and such other
charges as shall become due hereunder for the full Lease Term. In any such case
Tenant shall pay forthwith to Landlord, if Landlord so elects, a sum equal to
the entire amount of the Rent and other sums and charges reserved hereunder, for
the remainder of the Lease Term. In the event Landlord relets the Premises or
any part thereof as provided in subparagraph (g) above after being paid rent and
other charges for the full Lease Term by Tenant, Landlord shall, upon written
request by Tenant at the end of the Lease Term, refund to Tenant a sum equal to
the rent and other charges received from the new Tenant, less any costs and
expenses of reletting and the costs of alterations and repairs to the premises.
25.3 No Acceptance of Surrender. No act or conduct of Landlord shall be
deemed to be or constitute an acceptance of the surrender of the Premises by
Landlord or an election to terminate this Lease except a written acknowledgment
of acceptance of surrender or notice of election to terminate signed by
Landlord.
25.4 Limitation of Remedies. Tenant agrees that it shall look solely to
the estate and property of Landlord in the land and buildings constituting the
Shopping Center, and subject to prior rights of any mortgagee of the Shopping
Center or any part thereof, for the collection of any judgment (or other
judicial process) requiring the payment of money by Landlord in the event of any
default or breach by Landlord with respect to any of the provisions of this
Lease, and no other assets of Landlord shall be subject to levy, execution or
other procedures for the satisfaction of Tenant's remedies.
25.5 Landlord Default, Notice. Landlord shall in no event be charged
with default in any of its obligations hereunder unless and until Landlord shall
have failed to perform such obligations within thirty (30) days (or such
additional time as is reasonably required to correct any such default) after
written notice to Landlord by Tenant, specifically describing such failure.
25.6 Notice to Lender. In the event of a default by Landlord under this
Lease, Tenant, prior to exercising any remedies with respect thereto, shall give
the holder of the mortgage ("lender") written notice of the alleged default and
shall not take any action with respect to such alleged default if lender cures
such default within
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thirty (30) days after receipt of written notice from Tenant of Landlord's
failure so to do; provided, however, that such thirty (30) day period shall be
extended so long as:
(a) within such thirty (30) day period lender has commenced to
cure and is proceeding with due diligence to cure said default, or
(b) lender is proceeding with a foreclosure action against
Landlord and agrees to commence to cure and will proceed with due diligence to
cure such default upon the resolution of such foreclosure action.
25.7 Tenant's Remedies. In the event Landlord defaults in any of its
obligations hereunder, Tenant shall have the right (after due notice to
Landlord) to fulfill Landlord's obligation on its behalf and further to withhold
and offset an equal amount from the Minimum Rent next due.
26. ESTOPPEL CERTIFICATES
Tenant agrees at any time within five (5) days following Landlord's
written request, to execute, acknowledge and deliver to Landlord an estoppel
certificate certifying as to such matters relating to this Lease as Landlord or
any prospective purchaser or lender shall reasonably require. It is intended
that any such statement delivered pursuant to this Article may be relied upon by
any prospective purchaser, mortgagee or assignee of any mortgagee of the
Premises or the Shopping Center.
27. SUBORDINATION/ATTORNMENT
Tenant's interest under this Lease is and shall be subordinate to the
lien of any ground lease, deed of trust, mortgage or other security device
(hereinafter collectively referred to as "mortgage") now or hereafter placed on
the Landlord's interest in the Premises or on all or any portion of the Shopping
Center, unless Landlord, in its sole discretion, shall require that this Lease
be superior to any such mortgage. The subordination provided for in this Article
shall be self-operative; provided, however, Tenant agrees to execute and deliver
such further instrument(s) to subordinate this Lease to the lien of any such
mortgage as Landlord shall require, within five (5) days following Landlord's
written demand. If the Premises or the Shopping Center shall be sold pursuant to
default under the mortgage, Tenant shall not disaffirm this Lease but shall
attorn to the mortgagee or purchaser.
28. LENDER LIABILITY
Tenant agrees that lender shall not be:
(a) liable for any act or omission of Landlord or any other prior
landlord; or
(b) subject to any offsets or defenses which Tenant might have
against Landlord or any other prior landlord; or
(c) bound by any rent or additional rent which Tenant might have
paid for more than the current month to Landlord or any other prior landlord; or
(d) liable for the return of any security deposit except to the
extent such deposit is actually received by lender from Landlord.
29. RULES AND REGULATIONS
Tenant agrees to observe and comply with all Rules and Regulations of
the Shopping Center reasonably imposed by Landlord from time to time for the
proper enjoyment, cleanliness, appearance, maintenance and reasonable use of the
Premises and the Shopping Center. Such Rules and Regulations, and any
modifications
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thereof, shall be effective upon notice thereof to Tenant, and a breach thereof
shall constitute a default by Tenant under this Lease. Landlord shall not be
responsible to Tenant for any violation of such Rules and Regulations by other
tenants or occupants of the Shopping Center, and Landlord may waive any of such
Rules and Regulations for the benefit of any particular tenant.
30. BROKER'S COMMISSIONS
Tenant represents and warrants that there are no claims for brokerage
commissions or finder's fees in connection with this Lease (excepting
commissions or fees approved or authorized in writing by Landlord) and agrees to
indemnify Landlord against and hold it harmless from all liabilities arising
from any such claim, including any attorneys' fees connected therewith.
31. QUIET ENJOYMENT
Landlord covenants that upon Tenant's paying the rentals and keeping
and performing all of the terms, covenants and conditions of this Lease,
Landlord will do nothing that will prevent Tenant from peaceably and quietly
enjoying, holding and occupying the Premises during the Lease Term. This
covenant shall not extend to any disturbance, act or condition brought about by
any other tenant in the Shopping Center and shall be subject to the rights of
Landlord set forth in this Lease. This Lease is subject to any covenants,
conditions, restrictions or easements now or hereafter of record affecting all
or any portion of the Shopping Center.
32. NOTICES
Notices or demands under this Lease shall not be deemed to have been
duly given or served unless in writing and served per forwarded by certified
mail, return receipt requested, postage prepaid, addressed as follows:
TO LANDLORD: TWO YUMA PARTNERS
5112 North 40th Street, Suite 203
Phoenix, Arizona 85018
With a copy to: Mr. Jamie Brody, Esq.
ANDERSON, BRODY, LEVINSON, WEISER & HORWITZ
1112 W. Camelback Rd.
Phoenix, AZ 85013-2190
TO TENANT: SOUTHERN ARIZONA BANK
3218 S. 4th Avenue
Yuma, AZ 85365
Attention: Temple Moore
; or
At the Premises from and after the commencement of the Lease Term.
Either party may change such address by written notice to the other. Service of
any notice or demand shall be deemed completed forty-eight (48) hours after
deposit thereof in the United States Postal Service or, if delivered in person,
upon receipt thereof.
33. GENERAL PROVISIONS
33.1 Governing Law. This Lease shall be construed in accordance with
the laws of the State of Arizona.
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33.2 Joint and Several Liability. If Tenant shall be more than one
party, then the obligations of such parties shall be joint and several, and
notice to any one such party shall be deemed notice to Tenant for purposes of
this Lease.
33.3 Invalidity. If any term, covenant, condition or provision of this
Lease is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the provisions hereof shall remain in full force
and effect and shall in no way be affected, impaired or invalidated.
33.4 Time. Time is of the essence of this Lease.
33.5 No Recording of Lease. In no event shall Tenant record this Lease,
and the breach of this covenant shall be deemed a noncurable default hereunder.
33.6 Attorneys' Fees. In the event either party initiates legal
proceedings to enforce any right or obligation under this Lease or to obtain
relief for the breach of any covenant hereof, the Party prevailing in such
proceedings shall be entitled to recover from the defaulting party the costs of
such proceedings, including reasonable attorneys' fees as determined by the
court and not by a jury.
33.7 Entire Agreement. This Lease sets forth all the covenants,
promises, agreements, conditions or undertakings, either oral or written,
between Landlord and Tenant, and there are no warranties or representations
between the parties, express or implied, except as are expressly set forth in
this Lease.
33.8 Amendment. Except as herein otherwise provided, no modification or
amendment to this Lease shall be binding upon Landlord or Tenant unless reduced
to writing and signed by both parties.
33.9 Successors and Assigns. The covenants herein contained shall,
subject to the provisions as to assignment and subletting, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.
33.10 No Accord and Satisfaction. The acceptance or endorsement by
Landlord of any payment or check from Tenant shall not be deemed an accord and
satisfaction and shall not prejudice Landlord's right to recover the balance of
any amounts due under the terms of this Lease, unless otherwise expressly agreed
by Landlord in writing.
33.11 No Waiver. No delay or omission of Landlord to exercise any right
or power arising from any default shall impair any such right or power, or shall
be construed to be a waiver of any such default or an acquiescence therein. No
waiver by either party of the breach of any covenant of this Lease by the other
party shall be deemed effective unless in writing signed by the waiving party.
33.12 Mutual Cancellation Date. In the event the Premises are not
completed and possession tendered to Tenant on or before two (2) years from the
date of this Lease, either Landlord or Tenant shall have the right to terminate
this Lease by written notice to the other given at any time thereafter but prior
to such tender of possession, whereupon this Lease shall be deemed null and
void, and the parties shall have no further obligations to one another
hereunder.
33.13 Net Rent. The minimum Monthly Rent is a "net" rent to Landlord,
and all percentage rent and additional rents, taxes and assessments, maintenance
costs, insurance and other sums payable by Tenant hereunder (which amounts shall
be deemed rent whether or not expressly designated as such), shall be paid in
addition to the Minimum Monthly Rent at the times and in the manner provided
herein.
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IN WITNESS WHEREOF, the parties have executed this Lease as of the day
and year first above written.
TENANT: LANDLORD:
SOUTHERN ARIZONA BANK, an Arizona TWO YUMA PARTNERS an Arizona general
corporation partnership
By: By:
----------------------------- --------------------------------
Its: Its:
----------------------------- --------------------------------
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ADDENDUM 1
1. FREE RENT. Notwithstanding the provision of Paragraph 3.1 Tenant shall
enjoy the use of the premises free of the minimum monthly rent during
the first sixty (60) days from the commencement date of the Lease.
2. OPTIONS. At the expiration of the term herein demised, and at the
expiration of each option period, if immediately prior thereto this
Lease shall be in force and effect and the Tenant shall not be in
default at the time, then, subject to the provisions of this paragraph,
the Tenant shall have and hereby is given the option to renew and
extend this Lease for three (3) additional terms of five (5) years each
to commence on the expiration of the original lease term or option
period, as the case may be, or until said renewal terms shall sooner
cease and expire under the provisions of this Lease, upon the same
terms, covenants, and conditions, as those herein contained, insofar as
then in force and applicable to such renewal term (including all
provisions as to the items of the payment of additional rent) except as
to the amount of the fixed rent and except that the third renewal shall
not contain a provision for a further renewal. The said renewal shall
be exercised by the Tenant in the manner following:
By not later than the one hundred eighty (180) days prior to
the date of the option being exercised, the Tenant shall notify
the Landlord in writing that the Tenant desires arbitration,
pursuant to the provision of this paragraph, to determine fix
and the minimum rent for the renewal term, if the Tenant shall
elect to renew, as hereinafter provided. Landlord shall provide
Tenant with the proposed minimum rental rate to be paid during
the option period within ten (10) days of Landlord's receipt of
Tenant's notice. If within thirty (30) days after such notice
the parties are unable to agree the rent, the proceedings in
such arbitration to determine such rent shall be commenced and
the arbitration proceedings shall be completed and the
determination of such rent made not later than the thirty (30)
days prior to the date the option term is to commence. After
the determination of such rent in such arbitration proceedings,
and the giving of notice thereof to the Tenant, the Tenant
shall, not later than ten (10) days thereafter have the option,
right and privilege to notify the Landlord in writing that the
Tenant elects to renew this Lease upon the rent fixed in such
arbitration proceedings. Upon the Tenant's so notifying the
Landlord, then this Lease, without further action shall be
deemed and hereby is declared to be renewed for an additional
term of five (5) years.
In such arbitration, the fixed annual rent shall not be less
than the rent paid in the previous twelve (12) months or such
lesser amount as may have been determined by reason of a pro
rata reduction in the fixed annual rental resulting from a
partial taking of the demised premises in condemnation
proceedings.
In the event that the Tenant exercises its option to renew this
Lease, the costs of the arbitration shall be shared equally
between the parties. In the event, however, that after the
arbitration the Tenant does not exercise its right to renew
this Lease, the entire cost of the arbitration shall be borne
by the Tenant. Prior to the commencement of the arbitration and
at the time of the service by the Tenant of notice of its
desire to arbitrate, the Tenant shall deposit with the Landlord
an amount equal to seventy-five percent (75%) of the estimated
cost of the arbitration, including reasonable counsel fees for
the Landlord's attorney.
If this Lease be renewed as herein provided, all rights of the
Tenant in its personal property and trade fixtures shall
survive.
3. ARBITRATION. NOTICE: BY INITIALLING IN THE SPACE BELOW YOU ARE AGREEING
TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE
"ARBITRATION OF
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DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY STATE
LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE
DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALLING IN THE SPACE
BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL,
UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF
DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER
AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE. YOUR
AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.
Any dispute, controversy or claim regarding the terms and
conditions of this Lease shall be submitted to and settled by binding
arbitration in the City in which the premises are located pursuant to
the commercial rules of the American Arbitration Association then in
effect (or at any other place or under any other form of arbitration
mutually acceptable to the parties). Notwithstanding the foregoing, and
notwithstanding any rules of the American Arbitration Association to
the contrary, the parties agree that following shall apply and govern
in connection with any arbitration proceeding pursuant to this
paragraph.
a. A panel of three (3) arbitrators ("Arbitrators") shall
render the arbitration decision. Each at their own cost, Landlord and
Tenant each shall select one Arbitrator and pay such Arbitrator's fee
and shall immediately notify the other of the Arbitrator so selected.
Such selections shall be made within ten (10) days after the date on
which an arbitration proceeding is initiated under this Paragraph 63.
The two Arbitrators so selected shall select a third Arbitrator.
Landlord and Tenant each shall bear one-half (1/2) of the cost of
selecting the third Arbitrator and of paying the third Arbitrator's
fee. No Arbitrator, however selected, shall be a person who is or who
has been a principal or owner or an agent or employee of either
Landlord or Tenant. In the event the two Arbitrators are unable to
agree upon the selection of a third Arbitrator, the two Arbitrators
shall, within five (5) days after the date on which they agree they are
unable to agree on a third Arbitrator, request the Superior Court
having jurisdiction to appoint the third Arbitrator.
b. The Arizona Evidence Code, Code of Civil Procedures and
Rules of Court shall apply, including any and all provisions of such
Codes and Rules with respect to discovery.
c. Any arbitration decision shall be in writing, with the
basis of such decision specified in reasonable detail.
d. Each party shall submit to the other party, not less than
five (5) business days (or such longer period as the Arbitrators may
specify) prior to the commencement of the arbitration hearing, (i) a
list of the persons whose testimony the other party intends to elicit
at the arbitration hearing and a summary description of the substance
of their expected testimony, (ii) copies of any and all documents to be
offered into evidence, and (iii) a description in reasonable detail of
any other evidence such party intends to offer into evidence. The
foregoing shall not limit the parties' rights to such other discovery
as may be permitted pursuant to state laws.
Any award rendered shall be final, binding, and non-appealable
and conclusive upon the parties and a judgment thereon may be entered
in the highest court of the state forum having jurisdiction over the
subject matter of such arbitration. Except as set forth above with
respect to the Arbitrators' fees, the expenses of the arbitration shall
be borne equally by the parties to the arbitration, provided that each
party shall pay for and bear the cost of its own experts, evidence and
counsel's fees; and
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES"
PROVISION TO NEUTRAL ARBITRATION.
Landlord's Initials Tenant's Initials
------------------- -------------------
17
<PAGE> 18
4. CONTINGENCY. This Lease is conditional upon the Landlord obtaining a
conditional use permit from the City of Yuma permitting the operation
of two (2) drive through lanes. Tenant shall use its best endeavors to
support Landlord's application. In the event such use permit has not
been obtained within one hundred twenty (120) days after the date of
this Lease, either party may thereafter terminate this Lease by notice
in writing given to the other, whereupon this Lease shall be deemed
void ab initio.
5. TENANT IMPROVEMENT ALLOWANCE. In addition to Landlord's work as
identified in Exhibit B, Landlord will provide Tenant with an
Improvement Allowance of Ten Thousand and No ($10,000.00) Dollars. Said
allowance to be paid to Tenant within ten (10) days of Tenant opening
for business. Tenant's obligations under Paragraph 15, FREE FROM LIENS
shall extend to this Improvement Allowance.
18
<PAGE> 19
EXHIBIT "B"
PROVISIONS RELATING TO CONSTRUCTION
1. When Tenant's Architect has completed Tenant Improvement drawings, Tenant and
Landlord shall approve said drawings within seven (7) days.
2. The fact that Tenant may enter into possession prior to the substantial
completion of Landlord's Work for the purpose of performing Tenant's Work shall
not be deemed an acceptance by Tenant of substantial completion of the Premises,
but in such event Tenant shall indemnify and hold Landlord harmless for any loss
or damage to Tenant's property, fixtures, equipment and merchandise and for
injury to any persons, unless same be caused by the active negligence of
Landlord or its agents.
3. The cost of obtaining any building permit for the Premises shall be paid by
Landlord. The cost of obtaining any building permit for Tenant's tenant
improvement work shall be paid by Tenant.
DESCRIPTION OF LANDLORD'S WORK
The following is a description of the construction, and limitations of same,
which will be provided by Landlord and herein referred to as "Landlord's Work"
which shall be performed in substantial completion with the plans approved by
both Tenant and Landlord.
LANDLORD SHALL PROVIDE THE FOLLOWING IMPROVEMENTS:
1. Electrical service panel: 200 amp service, 120/208 V.
2. Restroom: Two, located at rear wall in an area designated by
Landlord provided with one toilet, one lavatory, exhaust fan, and one standard
light fixture.
3. Ceiling: Suspended T-bar, acoustical; over 100% of the gross floor
area; sheetrock ceiling in restroom.
4. Floor Coverings: Restrooms only. Color selection by Tenant.
5. Walls: Drywall over metal stud, or exposed masonry wall, as
designated by Landlord per plan.
6. Electrical: Per plan.
7. Lighting: 2 x 4 drop in - panel switched, per plan.
8. Sign Outlet: One, location designated by Landlord.
9. Telephone Outlets: One. Per plan.
10. Air Conditioning and Heating: Refrigerated air-conditioning and
heating with distribution and thermostats per plan.
11. Interior Painting: Restroom only.
PROCEDURE FOR TENANT'S WORK
Upon notification by Landlord that Landlord's construction obligations
are substantially complete, Tenant shall perform Tenant's Work with all due
diligence. Tenant's Work shall be performed in a good and workmanlike manner,
free and clear of any liens or encumbrances, and in strict accordance with all
applicable statutes, ordinances, rules, regulations and building codes of any
governmental authority having jurisdiction over the Premises.
Tenant shall have no right to enter the Premises and to perform
Tenant's Work prior to Landlord's notice that the Premises are substantially
completed, without Landlord's prior written consent. If Landlord does not
consent, Tenant shall comply with the directions of Landlord and shall not
interfere with any of the Landlord's construction activities.
At the time Tenant enters the Premises to perform the work required of
Tenant:
(a) All of Tenant's obligations under this Lease, except the
obligation to pay rent shall be in full force and effect.
(b) Tenant agrees to pay for the utilities (heat, gas, water,
electricity), which shall be furnished to the Premises from
that time.
19
<PAGE> 20
(c) Tenant shall maintain liability insurance in accordance with
Article 9 of the Lease.
On or about the delivery of the possession of the Premises by Landlord
to Tenant, Tenant will participate in a walk-through inspection of the Premises
with Landlord to jointly prepare a punch-list of incomplete items for which
Landlord is responsible. Other than the items specified on such punch-list, by
taking possession of the Premises, Tenant will be deemed to have accepted the
Premises in their condition on the date of delivery of possession and to have
acknowledged that Landlord has installed all improvements for which Landlord is
responsible under this Exhibit "B" and that there are no items needing
additional work or repair. Landlord shall not be liable for any latent or patent
defects therein. Such punch-list will not include any damage to the Premises
caused by Tenant's move-in or early entry, if permitted.
Landlord's contractor will complete all items specified on such
punch-list within thirty (30) days after the walk-through inspection or as soon
as possible thereafter. Tenant acknowledges that neither Landlord nor its agents
or employees have made any representations or warranties as to the suitability
or fitness of the Premises for the conduct of Tenant's business or for any other
purpose, nor has Landlord or its agents or employees agreed to undertake any
alterations or construct any tenant improvements to the Premises except as
expressly provided in this Exhibit "B".
Notwithstanding any time period established herein for the construction
of improvements by Tenant, the Lease Term and Tenant's obligation to pay rent
shall commence as set forth in Article 2 of the Lease.
20
<PAGE> 1
EXHIBIT 10.5
SOUTHERN ARIZONA BANK OF YUMA
LEASE AGREEMENT
THIS lease is made this _____ day of June, 1984, by and between HENRY
SCHECHERT, TRUSTEE of the SCHECHERT TRUST DATED MARCH 24, 1982, hereinafter
referred to as "Lessor", and SOUTHERN ARIZONA BANK OF YUMA, a State Banking
Corporation, hereinafter referred to as "Lessee".
RECITALS
1. Lessor is the sole owner of the premises described in Exhibit A
attached hereto and made a part hereof.
2. Lessee desires to lease said premises for conducting a banking
business.
3. The parties hereto desire to enter into a lease agreement defining
their rights, duties and liabilities relating to the premises.
IN CONSIDERATION of the mutual covenants contained herein, the parties
agree as follows:
SECTION ONE
SUBJECT AND PURPOSE
Lessee leases the building and the land located in Yuma County,
Arizona, and more specifically located at 11242 Foothill Boulevard, Yuma,
Arizona, containing approximately 1536 square feet. All of said property is more
fully identified and described in Exhibit A attached hereto. Said lease is to
the Lessee for the Lessee's use as a bank building.
<PAGE> 2
SECTION TWO
COMMENCEMENT OF THE LEASE
The Lessee has requested approval from the Arizona Superintendent of
Banks to open a branch and conduct a banking business upon the leased premises.
This lease shall commence not later than sixty (60) days after such approval has
been received by the Lessee. The Lessee shall have the option to commence the
lease sooner than 60 days after receiving approval if all equipment and banking
fixtures can be obtained at an earlier date. In the event Lessee does not secure
approval of this lease from the regulatory authorities, this agreement shall be
of no further force and effect.
SECTION THREE
TERM AND RENT
Lessor demises and leases the above premises for a term of five (5)
years commencing on the commencement date as set forth above in SECTION TWO and
terminating five (5) years from date of commencement at the following rates:
<TABLE>
<S> <C>
(1) First year of lease: First six (6) months
at $487.50 = $ 2,925.00
Next three (3) months
at $975.00 = $ 2,925.00
Last three (3) months
at $487.50 = $ 1,462.50
----------
Total: $ 7,312.50
(2) Second through Fifth year of lease:
First nine (9) months
at $975.00 = $ 8,775.00
Last three (3) months
at $487.50 = 1,462.50
----------
Total: $10,237.50
</TABLE>
2
<PAGE> 3
Lessor reserves the right to annually increase the base rent commencing
during the second year of the lease in accordance with the increase in the
Consumer Price Index, Department of Labor; provided, however, the Lessor may not
increase the base rent more then eight (8%) percent per annum.
SECTION FOUR
ALTERATIONS; ADDITIONS AND IMPROVEMENTS
A. Subject to the limitation that no portion of the building on the
leased premises shall be demolished or removed by the Lessee without the prior
written consent of the Lessor, Lessee may at any time during the lease term and
subject to the conditions hereinafter set forth, and at its own expense, make
alterations, additions and improvements in and on the lease premises and
buildings. Alterations shall be performed in a workmanlike manner and shall not
weaken or impair the structural strength or lessen the value of the building on
the premises or change the purposes for which the building or any part thereof
may be used.
B. Conditions with respect to alterations, additions or improvements
are as follows:
1. Before the commencement of any work, all plans and specifications
shall be filed with and approved by all governmental departments and authorities
having jurisdiction, and all work shall be done in accordance with the
requirements of local regulations. The plans and specifications of any
alterations estimated to cost
3
<PAGE> 4
$5,000.00 or more shall be submitted to the Lessor for prior written approval
prior to commencing work.
C. All alterations, additions and improvements on or in the leased
premises at the commencement of the term, and any that may be erected or
installed during the term, shall become a part of the leased premises and the
sole property of the Lessor.
SECTION FIVE
REPAIRS
The Lessee shall at all times during the lease, at its own cost and
expense, repair, replace and maintain in good, safe and substantial condition
all of the building and any improvements, additions or alterations thereto upon
the leased premises, and shall use all reasonable precaution to prevent waste,
damage or injury to the lease property.
SECTION SIX
TAXES
Lessor shall pay before the last day on which payment may be made
without penalty or interest, all real property taxes, assessments or other
governmental charges that shall or may during the lease term be imposed on or
arise in connection the leased premises or any part thereof.
SECTION SEVEN
UTILITIES
All applications and connections for necessary utility services upon
the leased premises shall be made in the name of the Lessee only and the Lessee
shall be solely liable for utility
4
<PAGE> 5
charges as they become due, including those for water, gas, electricity and
telephone services. Lessor shall provide separate utility meters for Lessee's
building.
SECTION EIGHT
INSURANCE
A. During the term of the lease, and for any further time that the
Lessee shall hold the leased premises, the Lessee shall obtain and maintain at
its expense the following types and amounts of insurance.
Personal injury and property damage insurance. Insurance against
liability for bodily injury and property damage and machinery insurance all to
be in amounts and in forms of insurance policies as may from time to time be
required by the Lessor shall be provided by the Lessee.
B. All insurance provided by the Lessee as required by this section
shall be carried in favor of the Lessor and the Lessee as their respective
interests appear. All insurance shall be written with responsible companies that
the Lessor or mortgage holder shall approve and the policies shall be held by
the Lessor or, when appropriate, by the holder of any mortgage in which case
copies of the policies or certificates of insurance shall be delivered by the
Lessee to the Lessor. All policies shall require 20 days notice by registered
mail to the Lessor of any cancellation or change affecting any interest of the
Lessor.
5
<PAGE> 6
SECTION NINE
The Lessee shall indemnify the Lessor against all expenses, liabilities
and claims of every kind, including reasonable attorneys fees by or on behalf of
any person or entity arising out of either:
1. A failure by the Lessee to perform any of the terms or conditions
of this lease.
2. Any injury or damage happening on or about the leased premises
occupied by Lessee.
3. Failure to comply with any law or governmental authority.
4. Any mechanic's lien or security interest filed against the leased
premises or equipment or materials for alterations of buildings or improvements
thereon arising by reason of Lessee's acts.
SECTION TEN
DEFAULT OR BREACH
Each of the following events shall constitute a default or breach of
this lease by the Lessee:
1. If the Lessee or any successor or assignee of the Lessee while in
possession shall file a petition in bankruptcy or insolvency or for
reorganization under any Bankruptcy Act or shall voluntarily take advantage of
any such Act by answer or otherwise, or shall make an assignment for the benefit
of creditors.
6
<PAGE> 7
2. If the Lessee shall fail to pay Lessor any rent or additional rent
when the same shall become due and shall not make payment within ten days after
notice thereof by the Lessor.
3. If the Lessee shall fail to perform or comply with any of the
conditions of this lease and if the nonperformance shall continue for a period
of 30 days after notice thereof by the Lessor to the Lessee or if the
performance cannot be reasonably had within the 30-day period, the Lessee shall
not have in good faith commenced with performance within the 30-day period and
shall not diligently proceed to the completion of the performance.
4. If the Lessee shall vacate or abandon the leased premises.
5. If the Lessee fails to take possession of the leased premises on the
term commencement date or as provided for in SECTION THREE.
SECTION ELEVEN
EFFECT OF DEFAULT
In the event of any default hereunder as set forth in SECTION TEN the
rights of the Lessor shall be as follows:
1. The Lessor shall have the right to cancel and terminate this lease
as well as all of the right, title and interest of the Lessee hereunder by
giving to the Lessee not less than 30 days notice of the cancellation or
termination. On expiration of the time fixed in the notices, this lease, and the
right, title and interest of the Lessee hereunder, shall terminate in the same
manner and with the same force and effect, except as to Lessee's
7
<PAGE> 8
liability, as if the date fixed in the notice of cancellation and termination
were the end of the term herein originally determined.
2. The Lessor may elect, but shall not be obligated, to make any
payment required of the Lessee herein or to comply with any agreement, term or
condition required hereby to be performed by the Lessee, and Lessor shall have
the right to enter the leased premises for the purpose of correcting or
remedying any such default, and to remain until the default has been corrected
or remedied, but any expenditure for the correction by the Lessor shall not be
deemed to waive or release the default of the Lessee or the right of the Lessor
to take any action as may be otherwise permissible hereunder in case of any
default.
3. Subject only to paragraph 5 hereunder, on termination the Lessor may
recover from the Lessee all damages approximately resulting from the breach,
including the cost of the recovery of the premises and the worth of the balance
of this lease over the reasonable rental value of the premises for the remainder
of the lease term, which sum shall be immediately due Lessor from Lessee.
4. In addition to Lessee's liability to the Lessor for breach of the
lease, the Lessee shall be responsible for, all expenses for reletting, for the
alterations and repairs made, and for the difference between the rent received
by the Lessor under the new lease agreement and the rent installments that were
due for the same period of this lease.
5. Notwithstanding any other provisions of this Lease Agreement, in the
event that said Lessee is closed or taken over by
8
<PAGE> 9
the banking authority of the State of Arizona, at the option of the receiver or
other legal representative of the Lessee, the maximum claim of the Lessor for
damages or indemnity for injury resulting from the rejection or abandonment of
the unexpired lease shall in no event be in an amount exceeding the rent
reserved by the lease, without acceleration, for the six (6) months next
succeeding the date of the surrender of the premises to the Lessor, or the date
of reentry of the Lessor, whichever first occurs, whether before or after the
closing of the Lessee, plus an amount equal to the unpaid rent accrued, without
acceleration, up to such date. The provisions of this clause may not be
modified, amended or rescinded by said Lessor or said Lessee without the prior
written approval of the Superintendent of Banks of the State of Arizona, and the
Federal Deposit Insurance Corporation.
SECTION TWELVE
DESTRUCTION OF PREMISES
In the event that the premises shall be damaged or destroyed by fire or
other casualty not occasioned by act or default of the Lessee, the Lessor shall
have 90 days in which to repair or replace the premises with an equitable
abatement of the rents in proportion to the use and benefits to which the Lessee
is deprived until the repairs or replacements are completed. In the event
repairs are not performed to the Lessee's satisfaction within 90 days, the
Lessee may contract for the necessary repairs and adjust the rent on the basis
of the cost of the repairs to the Lessee. If the premises are destroyed or
damaged to such an extent so as to be rendered
9
<PAGE> 10
untenable, or the Lessor's failure to repair or replace such as provided for
above, the Lessee shall have the option to terminate this lease by giving 30
days written notice thereof to the Lessor.
SECTION THIRTEEN
NOTICES
All notices to be given with respect to this lease shall be in writing.
Each notice shall be sent by registered or certified mail, postage prepaid, and
return receipt requested, to the party to be notified at the address set forth
herein or at such other address as either party may from time to time designate
in writing.
Each notice shall be deemed to have been given at the time it shall be
deposited in the United States mails in the manner prescribed herein. Nothing
contained herein shall be construed to preclude personal service of any notice
in the manner prescribed for personal service of a summons or other legal
process.
SECTION FOURTEEN
OPTION TO RENEW
Lessor grants to the Lessee an option to renew this lease for an
additional five (5) year term commencing at the expiration of this lease. To
exercise this option, the Lessee must give the Lessor written notice of
intention to do so at least 90 days before the initial lease expires. All terms
and conditions of said lessee shall continue during the extended 5-year term
except this paragraph.
10
<PAGE> 11
SECTION FIFTEEN
APPLICABLE LAW
This lease contains the entire agreement between the parties and cannot
be changed or terminated except by written instrument subsequently executed by
the parties hereto. The lease and the terms and conditions hereof apply to and
are binding upon the heirs, legal representatives, successors and assigns of
both parties.
This agreement shall be governed by and construed in accordance with
the laws of the State of Arizona.
SECTION SIXTEEN
TIME
TIME IS OF THE ESSENCE in all provisions of this lease.
IN WITNESS WHEREOF, the parties have executed this lease at Yuma,
Arizona, on the day and year first above written.
LESSOR: LESSEE:
SCHECHERT TRUST U/D 3/24/82 SOUTHERN ARIZONA BANK OF YUMA
By By
------------------------ ----------------------------
Henry Schechert, Trustee Chairman, Board of Directors
ATTEST:
By
----------------------------
Secretary
11
<PAGE> 12
STATE OF ARIZONA )
) ss.
County of Yuma )
The foregoing instrument was acknowledged before me this 27th
day of June, 1984, by HENRY SCHECHERT, TRUSTEE of the SCHECHERT TRUST
DATED MARCH 24, 1982.
My Commission Expires:
- ----------------------------- ----------------------------
Notary Public
STATE OF ARIZONA )
) ss.
County of Yuma )
The foregoing instrument was acknowledged before me this 27th day of
June, 1984, by STEPHEN P. SHADLE and Chairman of the Board of Directors and
Secretary respectively of SOUTHERN ARIZONA BANK OF YUMA.
My Commission Expires:
- ----------------------------- ----------------------------
Notary Public
12
<PAGE> 13
EXHIBIT A
Lots C1, C2 and C3, FOOTHILLS SUBDIVISION #10, according to the records
of the Yuma County Recorder, Yuma County, Arizona, in Book 6 of Plats,
page 42. More specifically described as Suites 23, 24 and 25 of the
building known as Foothill Plaza.
13
<PAGE> 14
THE FOOTHILLS PLAZA
11242 S FOOTHILLS BLVD
YUMA AZ 85367
RENT SCHEDULE
1996
UNIT 21-25 TENANT Southern Arizona Bank of Yuma
<TABLE>
<CAPTION>
RENT TAX 2.4% TRASH TOTAL DUE
<S> <C> <C> <C> <C>
JANUARY 1,895.00 45.48 25.00 $1,965.48
FEBRUARY 1,895.00 45.48 25.00 $1,965.48
MARCH 1,895.00 45.48 25.00 $1,965.48
APRIL 1,895.00 45.48 25.00 $1,965.48
MARCH 1,895.00 45.48 25.00 $1,965.48
APRIL 1,895.00 45.48 25.00 $1,965.48
MAY 1,895.00 45.48 25.00 $1,965.48
JUNE 1,895.00 45.48 25.00 $1,965.48
JULY 947.50 22.74 25.00 $ 995.24
AUGUST 947.50 22.74 25.00 $ 995.24
SEPTEMBER 947.50 22.74 25.00 $ 995.24
OCTOBER 1,895.00 45.48 25.00 $1,965.48
NOVEMBER 1,895.00 45.48 25.00 $1,965.48
DECEMBER 1,895.00 45.48 25.00 $1,965.48
</TABLE>
NOTE: *Any rent increase is 8%.
*Sales tax is increased due to County tax approved by voters for the
new jail.
*Please contact Diann with any questions at 342-1238.
14
<PAGE> 15
ADDENDUM TO LEASE AGREEMENT
THIS AGREEMENT, made and entered into this 1st day of May, 1996, by and
between HENRY SCHECHERT, TRUSTEE of the SCHECHERT TRUST dated March 24, 1982,
hereinafter referred to as "LESSOR", and SOUTHERN ARIZONA BANK OF YUMA, an
Arizona Banking Corporation, its successors and assigns, hereinafter referred to
as "LESSEE".
RECITALS.
1. The parties hereto have entered into a Lease Agreement dated June
26, 1984, and amended in an Addendum to Lease Agreement dated May, 1991, copies
of which are attached hereto as Exhibit "1", collectively referred to as the
"Lease".
2. The parties desire to enter into a new agreement modifying and
supplementing the provisions of the Lease.
3. The demised premises are located at 11242 Foothills Blvd., Suites
21, 22, 23, 24 and 25, Yuma, Arizona.
In consideration of the mutual covenants contained herein, the parties
agree as follows:
1. The Lease shall be for a term of five years commencing on May 1,
1996 and terminating on May 1, 2001.
2. LESSEE agrees to pay rent for the demised premises as follows:
October through June - $1,895.00 per month
July through September - $947.50 per month
LESSOR reserves the right to annually increase the base rent commencing
during the second year of this Lease term in accordance
15
<PAGE> 16
with the increase in the Consumer Price Index, Department of Labor; provided,
however, that the LESSOR may not increase the base rent more than eight percent
(8%) per annum. A 1996 rent schedule is attached hereto as Exhibit "2".
3. LESSOR grants to the LESSEE an option to renew this Lease for an
additional five (5) year term commencing at the expiration of this Addendum to
Lease. To exercise this option, the LESSEE must give the LESSOR written notice
of intention to do so at least ninety (90) days before the initial five year
term expires. All terms and conditions of said Lease shall continue during the
extended five year term, except this paragraph.
4. LESSEE shall have the right at its own expense, from time to time
during the lease term, to improve or alter the demised premises upon LESSOR's
written consent. LESSOR shall not unreasonably withhold its consent.
5. During the term and/or any extension of the term of this lease,
LESSOR agrees that it will not permit any other lessee, tenant or occupant to
engage in a business of the same type as the LESSEE'S business at 11242
Foothills Blvd., Yuma, Arizona, whether or not later sold or transferred.
6. All provisions of the Lease are incorporated herein and are hereby
modified or supplemented to conform herewith, but in all other respects are to
be and shall continue in full force.
16
<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Addendum to Lease at
Yuma, Arizona on the day and year first above written.
SCHECHERT TRUST U/D 3/24/82
By
---------------------------
Henry Schechert, Trustee
LESSOR
SOUTHERN ARIZONA BANK OF YUMA
By
---------------------------
Its
--------------------------
LESSEE
ATTEST:
- --------------------------
Secretary
STATE OF ARIZONA )
) ss.
County of Yuma )
The foregoing instrument was acknowledged before me this _____________
day of _________________, 1996, by HENRY SCHECHERT, Trustee of the SCHECHERT
TRUST dated March 24, 1982.
-----------------------------
Notary Public
My Commission Expires:
- --------------------------
17
<PAGE> 18
STATE OF ARIZONA )
) ss.
County of Yuma )
The foregoing instrument was acknowledged before me this __________ day
of __________________, 1996, by JOHN E. BYRD and DONALD S. OLSEN, respectively,
of SOUTHERN ARIZONA BANK OF YUMA.
------------------------------
Notary Public
My Commission Expires:
- --------------------------
18
<PAGE> 19
ADDENDUM TO LEASE AGREEMENT
This Agreement, made and entered into this ____________ day of May,
1991, by and between HENRY SCHECHERT, TRUSTEE of the SCHECHERT TRUST dated March
24, 1982, hereinafter referred to as "LESSOR", and SOUTHERN ARIZONA BANK OF
YUMA, an Arizona Banking Corporation, hereinafter referred to as "LESSEE".
RECITALS
1. The parties hereto have entered into a Lease dated June 26, 1984, a
copy of which is attached hereto as Exhibit "1".
2. The parties desire to enter into a new agreement modifying and
supplementing the provisions of the Lease.
3. In consideration of the mutual covenants contained herein, the
parties agree as follows:
The Lease dated June 27, 1984, between LESSOR and LESSEE for the
premises located at 11242 Foothill Blvd., Yuma, Arizona, shall be modified
effective May 1, 1991, as follows:
1. The description of the demised premises contained in
Exhibit "A" of the Lease shall be amended to include two additional
units, Suites 21 and 22. An amended description of the premises is
described in Exhibit "2" attached hereto.
2. In addition to the amount of rent agreed to in the Lease,
the LESSEE agrees to pay rent for the additional two units, Suites 21
and 22, as follows:
October through June - $325.00 per unit
July through September - $162.50 per unit
19
<PAGE> 20
The LESSOR reserves the right to annually increase the base rent
commencing during the second year of the Lease in accordance with the increase
in the Consumer Price Index, Department of Labor; provided, however, that the
LESSOR may not increase the base rent more than eight (8%) percent per annum.
3. The LESSOR demises and leases the entire premises as described in
Exhibit "2", including both the original units and the additional two units, for
a term of five (5) years commencing on the 1st day of May, 1991 and terminating
five (5) years from the date of the commencement.
4. LESSOR grants to the LESSEE an option to renew this Lease for an
additional five (5) year term commencing at the expiration of this Addendum to
Lease. To exercise this option, the LESSEE must give the LESSOR written notice
of intention to do so at least ninety (90) days before the initial five (5) year
term expires. All terms and conditions of said Lease shall continue during the
extended five (5) year term, except this paragraph.
5. LESSEE shall have the right at its own expense, from time to time
during the lease term, to improve or alter the demised premises in the following
manner:
1. Installation of safe deposit boxes;
2. Installation of a drive-in teller facility;
3. Installation of an automatic teller machine.
LESSEE covenants that any such improvements and alterations shall be
made in a workman like manner and in compliance with all applicable
federal, state, and municipal laws and regulations. LESSEE shall be
permitted, upon termination of
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<PAGE> 21
this Lease, to remove any building or other improvement erected or made
by it, which improvement is banking equipment or an improvement
uniquely related to a banking facility, provided, however, that it
repair any damage to the premises caused by such removal; provided that
any such building or improvement that shall not have been removed by
LESSEE, upon expiration or sooner termination of this lease, shall be
deemed abandoned by LESSEE and shall thereupon become the absolute
property of the LESSOR without compensation to LESSEE. The LESSOR
hereby gives its consent and approval for the above listed improvements
to the demised premises described in Exhibit "2".
4. All provisions of the Lease are incorporated herein and are hereby
modified or supplemented to conform herewith, but in all other respects are to
be and shall continue in full force.
IN WITNESS WHEREOF, the parties have executed this Addendum to Lease at
Yuma, Arizona, on the day and year first above written.
LESSOR: LESSEE:
SCHECHERT TRUST U/D 3/24/82 SOUTHERN ARIZONA BANK OF YUMA
By By
------------------------- ---------------------------
Henry Schechert, Trustee Chairman,
Board of Directors
ATTEST:
-----------------------------
Secretary
21
<PAGE> 22
STATE OF ARIZONA )
) ss.
County of Yuma )
The foregoing instrument was acknowledged before me this __________ day
of _______________, 1991, by HENRY SCHECHERT, Trustee of the SCHECHERT TRUST
dated March 24, 1982.
-----------------------------
Notary Public
My Commission Expires:
- ----------------------
STATE OF ARIZONA )
) ss.
County of Yuma )
The foregoing instrument was acknowledged before me this __________ day
of _______________, 1991, by ___________________, and _________________________,
Chairman of the Board of Directors and Secretary respectively of SOUTHERN
ARIZONA BANK OF YUMA.
----------------------------
Notary Public
My Commission Expires:
- ----------------------
22
<PAGE> 23
EXHIBIT A
Lots C1, C2 and C3, FOOTHILLS SUBDIVISION #10, according to the records
of the Yuma County Recorder, Yuma County, Arizona, in Book of Plats, page 42.
More specifically described as Suites 21, 22, 23, 24, and 25 of the building
known as Foothill Plaza.
23
<PAGE> 1
EXHIBIT 10.6
- --------------------------------------------------------------------------------
NOTE AND AGENCY AGREEMENT
BETWEEN
SOUTHERN ARIZONA BANCORP, INC.
AND
PHS MORTGAGE, INC.
Dated as of July 15, 1993
8.75% Senior Notes Due July 1, 2000
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
------- ----
<S> <C> <C>
1. RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND
EXCHANGE OF NOTES . . . . . . . . . . . . . . . . . . . . . . 7
4. PREPAYMENT OF NOTES . . . . . . . . . . . . . . . . . . . . . 10
5. PAYMENT OF PRINCIPAL AND INTEREST . . . . . . . . . . . . . . 12
6. PARTICULAR COVENANTS OF THE COMPANY . . . . . . . . . . . . . 12
7. NOTE HOLDERS' LISTS . . . . . . . . . . . . . . . . . . . . . 14
8. REMEDIES OF THE AGENT AND THE NOTE HOLDERS IN
EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . 15
9. AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10. ACTS OF NOTE HOLDERS; EVIDENCE OF OWNERSHIP
OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11. AMENDMENTS AND SUPPLEMENTS . . . . . . . . . . . . . . . . . . 27
12. SATISFACTION AND DISCHARGE OF AGREEMENT;
UNCLAIMED MONEYS . . . . . . . . . . . . . . . . . . . . . . . 28
13. NO REGISTRATION OF NOTES; RESTRICTIONS ON
TRANSFERABILITY . . . . . . . . . . . . . . . . . . . . . . . 28
14. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . 29
</TABLE>
<PAGE> 3
NOTE AND AGENCY AGREEMENT
This Note and Agency Agreement ("Agreement") dated as of July 15, 1993,
is made by and between SOUTHERN ARIZONA BANCORP, INC., an Arizona corporation
(the "Company:), and PHS MORTGAGE, INC., an Arizona corporation (the "Agent"),
acting for and on behalf of certain Note Holders identified in Schedule 1
attached hereto.
1. RECITALS
1.1 Issuance of Notes. Company shall issue not less than $1,500,000,
nor more than $2,500,000, in principal amount of Senior Notes ("Notes") to
certain investors ("Note Holders") pursuant to the terms of this Agreement.
1.2 Agency Duties. This Agreement shall provide the terms and
conditions upon which the Notes are to be authenticated, issued, delivered,
registered, and transferred and the terms upon which the Company will act as
Note Registrar and Paying Agent with respect to the Notes, and Agent will act as
the Agent of the Note Holders in the collection of amounts due under the Notes
if an Event of Default occurs and the enforcement of the rights of the Note
Holders hereunder and under the Notes.
2. DEFINITIONS; INTERPRETATION
2.1 Definitions. As used in this Agreement, the following terms shall
have the following respective meanings:
Agent means PHS Mortgage, Inc. and any successor appointed pursuant to
this Agreement.
Agreement means this Note and Agency Agreement, as amended and in force
from time to time.
Authorized Denominations means minimum principal amounts of $5,000 and
integral multiples of $1,000 in excess of $5,000.
Bank means Southern Arizona Bank, the wholly owned subsidiary of the
Company.
Business Day means any day other than (i) a Saturday, or Sunday, or
(ii) a day on which banking institutions in Arizona are authorized or obligated
by law or executive order to be closed.
Capitalized Lease means any lease the obligation for Rentals with
respect to which is required to be capitalized on a balance sheet of the lessee
in accordance with generally accepted accounting principles.
<PAGE> 4
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 the Company or the Bank is a lessee would be
reflected as a liability on a consolidated balance sheet of the Company and the
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% or more of the outstanding shares of the
voting capital stock of the Company or the Bank, (ii) the date an acquiring
person acquires all or substantially all of the assets of the Company or the
Bank, or (iii) the date the Company or the Bank is merged with or into another
person, and, is either not the surviving entity, or, if it is the surviving
entity, the holders of its capital stock immediately prior to such merger do not
own 50% or more of the voting capital stock of the surviving entity.
Company means Southern Arizona Bancorp, Inc., an Arizona corporation.
Consolidated Current Assets and Consolidated Current Liabilities means
such assets and liabilities of the Company the 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 of the Company and the
Bank determined on a consolidated basis eliminating intercompany items.
Consolidated Net Income for any period shall mean the gross revenues of
the Company and the 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;
(b) the proceeds of any life insurance policy;
(c) net earnings and losses of the Bank accrued prior to the date
Company acquired the Bank;
(d) net earnings and losses of any corporation (other than the Bank)
substantially all the assets of which have
2
<PAGE> 5
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 the Bank)
with which the Company or the Bank shall have consolidated or which shall have
merged into or with the Company or the Bank prior to the date of such
consolidation or merger;
(f) net earnings of any business entity (other than the Bank) in
which the Company or the Bank has an ownership interest unless such net earnings
shall have actually been received by the Company or the Bank in the form of cash
distribution;
(g) any portion of the net earnings of the Bank that for any reason
is unavailable for payment of dividends to the Company or the 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 the Bank at the date of acquisition thereof over the amount invested
in the Bank;
(j) any gain arising from the acquisition of any securities of the
Company or Bank; and
(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 the Company and the Bank during
such period and (iii) Fixed Charges during such period.
Consolidated Net Tangible Assets means as of the date of any
determination thereof, the total amount of all Tangible Assets of the Company
and the 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 the
Company and the Bank.
3
<PAGE> 6
Closing means the Closing of the issuance and sale of the Notes.
Closing Date is defined in Section 3.1(b).
Disclosure Document means that certain Form U-7 Disclosure Document
dated as of June 11, 1993, filed by the Company with the Arizona Corporation
Commission Securities Division as it may be amended or supplemented from time to
time.
Escrow Agent means The Valley National Bank of Arizona, acting as
Escrow Agent on behalf of the Company to receive subscription proceeds for the
Notes purchased in the Offering.
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 Section 8.1.
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 the Company and the Bank and (ii) all Interest
Charges on all Indebtedness (other than Capitalized Rentals) of the Company and
the 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 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 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
4
<PAGE> 7
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 and 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.
Holder(s) means a Note Holder.
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% per annum on the unpaid
principal balance of the Notes.
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 determination.
Interest Payment Dates means January 1 and July 1 of each calendar year
during the term of the Notes, commencing July 15, 1993; provided, however, if
such date is not a Business Day, the Interest Payment Date shall be the
immediately preceding Business Day.
5
<PAGE> 8
Maturity Date means July 1, 2000, or any earlier date on which the
Notes become due and payable in full pursuant to the terms of this Agreement.
Minimum Offering means the sale of not less than $1,500,000 of the
Notes and the receipt of the proceeds therefor by the Escrow Agent not later
than the Termination Date (as defined in the Disclosure Document) or, if
extended, the Extended Termination Date (as defined in the Disclosure Document).
Note Amount means the aggregate amount of the Notes issued to the Note
Holders, such aggregate amount not to be less than $1,500,000 or to exceed
$2,500,000.
Note Holder(s) means persons to whom issued Notes are registered.
Note Interest means Interest.
Offering means the offering of Senior Notes to be issued hereunder
pursuant to the Disclosure Document.
Record Date means with respect to any Interest payment, the last
Business Day of the calendar month preceding each Interest Payment Date.
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 the Company or the Bank as lessee or sub-lessee under a
lease of real or personal property, which shall be exclusive of any amounts
required to be paid by the Company or the Bank (whether or not designated as
rents or additional rents) on account of maintenance, repairs, insurance, taxes
and similar charges.
Senior Notes means the 8.75% Senior Notes due July 1, 2000, issued
pursuant to this Agreement.
Tangible Assets means as of the date of any determination thereof, the
total amount of all assets of the Company and the Bank (less depreciation,
depletion and other properly deductible valuation reserves), after deducting
good will, patents, trade names, trademarks, copyrights, franchises,
experimental expense, organization 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.
6
<PAGE> 9
2.2 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.
2.3 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 applicable whether the action in question
is taken directly or indirectly by such person.
3. ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES.
3.1 Amount and Issue of Notes.
(a) Notes in the aggregate principal amount of not less than
$1,500,000 shall be executed by the Company, and delivered to the Agent at the
Closing. The Agent shall authenticate and deliver such Notes to the Note
Holders. Except as provided in Section 3.6, the maximum aggregate principal
amount of Notes authorized by this Agreement to be outstanding at any time is
limited to $2,500,000. The Notes shall bear interest from their date of issue at
the rate of 8.75% per annum, payable as provided in Article 5.
(b) Delivery of the Notes will be made through the Agent upon
completion of the Minimum Offering, against payment therefor, in federal or
other funds, current and immediately available in the amount of 100% of the
principal amount thereof, plus interest if any, accrued from the date of issue,
on the Business Day specified by the Company, by not less than five Business
Days prior written notice to Agent, but not later than twenty Business Days
following the successful completion of the Minimum Offering ("Closing Date").
After completion of the Minimum Offering, the Notes shall be issued and
delivered by the Company as the proceeds therefor are paid by the Escrow Agent
to the Company in federal or other funds, current and immediately available in
the amount of 100% of the principal amount thereof plus interest, if any,
accrued from the date of issue.
3.2 Form of Notes. The Notes and the Agent's Certificate of
Authentication to be borne by the Notes shall be in the form of Exhibit 3.2 to
this Agreement. Any of the Notes may have printed thereon such legends or
endorsements as the Company may deem appropriate and as are not inconsistent
with the
7
<PAGE> 10
provisions of this Agreement, or as may be required to comply with any law or
with any rule or regulation made pursuant to such law.
3.3 Denominations and Date of Notes. The Notes shall be issued in
Authorized Denominations, and shall be numbered, lettered or otherwise
distinguished in such manner or in accordance with such plan as the Company may
determine with the approval of the Agent. The Notes shall be dated as of the
date of their issue, except that any Note issued upon the transfer, exchange or
substitution of another Note shall be dated the date of its authentication.
3.4 Execution of Notes. The Notes shall be signed (manually or in
facsimile) in the name of or on behalf of the Company by an authorized officer.
3.5 Registration, Exchange and Registration of Transfer of Notes.
(a) The Company will keep at the office or agency to be maintained
by the Company as provided in Section 6.1, a register or registers in which,
subject to such reasonable regulations as it may prescribe, it will register all
Notes, and serve as its own registrar for the Notes.
(b) Subject to the restrictions on transferability of the Notes
pursuant to Section 13, upon surrender for registration of transfer of any Note
at such office or agency, the Company shall execute and the Agent shall deliver,
in the name of the transferee or transferees, a new Note or Notes for a like
aggregate principal amount of Authorized Denominations.
(c) Notes to be exchanged shall be surrendered at the office of the
Company, which shall execute and shall deliver in exchange therefor the Note or
Notes that the Note Holder making the exchange shall be entitled to receive,
bearing serial numbers not contemporaneously outstanding.
(d) All Notes presented for registration of transfer, exchange or
payment shall, if so required by the Company, be duly endorsed by or be
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company, duly executed by the registered Note Holder or by
his, her or its duly authorized attorney.
(e) Any exchange or registration of transfer shall be without
charge, except that the Company may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto.
8
<PAGE> 11
3.6 Mutilated, Destroyed, Lost or Stolen Notes.
(a) In case any Note shall become mutilated or be destroyed, lost
or stolen, the Company in its discretion may execute and deliver a new Note,
bearing a serial number not contemporaneously outstanding, in exchange and
substitution for the mutilated Note or in lieu of and substitution for the Note
so destroyed, lost or stolen. In every case, the applicant for a substituted
Note shall furnish to the Company such security or indemnity as may be required
by it to save it harmless, and in every case of destruction, loss or theft, the
applicant shall also furnish to the Company evidence to its satisfaction of the
destruction, loss or theft of such Note and of the ownership thereof.
(b) Upon the issuance of any substituted Note, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith, including, without limitation, counsel fees of the Company and the
Agent, and in addition a further sum not exceeding $100 for each Note so issued
in substitution. In case any Note that has matured or is about to mature shall
have become mutilated or be destroyed, lost or stolen, the Company may, with the
consent of the applicant, instead of issuing a substitute Note, pay or authorize
the payment of the same (without surrender thereof, except in the case of a
mutilated Note), if the applicant for such payment shall furnish the Company
with such security or indemnity as it may require to save it harmless and, in
case of destruction, loss or theft, evidence to the satisfaction of the Company
and the Agent of the destruction, loss or theft of such Note and of the
ownership thereof. Every substituted Note issued pursuant to the provisions of
this Section 3.6 by virtue of the fact that any Note is destroyed, lost or
stolen, shall constitute an additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Note shall be found at any time,
and shall be entitled to all of the benefits of this Agreement equally and
proportionately with any and all other Notes duly issued hereunder. All Notes
shall be held and owned upon the express condition that the foregoing provisions
are exclusive with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Notes and shall preclude any and all other rights and
remedies, notwithstanding any law or statute existing or hereafter enacted to
the contrary with respect to the replacement or payment of negotiable
instruments or other securities without their surrender.
3.7 Cancellation of Notes. All Notes surrendered for the purpose of
payment, redemption, exchange or registration of transfer shall be delivered to
the Company for cancellation and the Company shall cancel such Notes and all
Notes that have been
9
<PAGE> 12
surrendered directly to the Company for cancellation, and no Notes shall be
issued in lieu thereof except as expressly permitted by any of the provisions of
this Agreement. The Company shall indicate clearly on the face and on each and
every page of such cancelled Notes the fact that such Notes are cancelled. If
the Company shall acquire any of the Notes, such acquisition shall not operate
as a redemption or satisfaction of the indebtedness represented by such Notes,
unless and until the same is cancelled.
3.8 Persons Entitled to Note interest Payments. The person in whose
name a Note is registered at the close of business on any Record Date with
respect to any Interest Payment Date shall be entitled to receive any Note
Interest payable with respect to that Note on the Interest Payment Date next
following such Record Date, notwithstanding the cancellation of such Note upon
any registration of transfer or exchange thereof subsequent to such Record Date
and prior to such Interest Payment Date. The Holder of any Note issued upon the
transfer, exchange or substitution of another Note shall only be entitled to
receive Interest payable with respect to that Note from and after the Interest
Payment Date next following the first Record Date occurring after the issuance
of that Note.
3.9 Benefits of Provisions of This Agreement. Nothing in this Agreement
or in the Notes, expressed or implied, shall give or be construed to give any
person, firm or corporation, other than the parties thereto and the Note
Holders, 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 Notes being for the sole benefit of the parties hereto and the Note Holders.
4. PREPAYMENT.
4.1 Prepayment. No prepayment of the Notes shall be made, except to the
extent and in the manner provided in this Agreement.
4.2 Optional Prepayment. The Company shall have the privilege at any
time, on or after July 1, 1994, of prepaying the outstanding Notes, either in
whole or in part (but if in part, then in units of $1,000 or integral multiples
of $1,000 in excess thereof), by payment of the multiple set forth in the
following table of the principal amount of the Notes or portion thereof to be
prepaid, and accrued interest thereon to the date of such prepayment (the amount
by which such multiple exceeds 100% of the principal amount prepaid to be the
agreed premium for such prepayment):
10
<PAGE> 13
<TABLE>
<CAPTION>
Year of Prepayment
- ------------------
<S> <C>
July 1, 1994 - June 30, 1995 103%
July 1, 1995 - June 30, 1996 102%
July 1, 1996 - June 30, 1997 101%
July 1, 1997 - thereafter 100%
</TABLE>
4.3 Mandatory Prepayment:
(a) In the event that a Change of Control shall occur, the Company
will give written notice ("Company Notice") in the manner provided in Section
14.2 of this Agreement of such fact to the Note Holders. The Company Notice
shall be delivered no later than three Business Days following the occurrence of
any Change of Control. The Company Note shall (i) describe the facts and
circumstances of such Change of Control in reasonable detail, (ii) make
reference to this Section 4.3 and the right of the Note Holders to require
payment on the terms and conditions provided for in this Section 4.3, and (iii)
offer in writing to prepay the outstanding Notes, together with accrued interest
to the date of prepayment. Each Note Holder shall have the right to accept such
offer and require prepayment of the Notes held by such Note Holder by written
notice to the Company ("Note Holder Notice"), given in the manner provided in
Section 14.2 of this Agreement within thirty days following receipt of the
Company Notice specifying a date for payment ("Prepayment Date"), which
prepayment date shall be not later than three Business Days after the date of
the Note Holder Notice. The Company shall, on each Prepayment Date, make
prepayments with accrued interest.
(b) Without limiting the foregoing, notwithstanding the failure on
the part of the Company to give the Company Notice herein required as a result
of the occurrence of a Change of Control, each Note Holder shall have the right
to require the Company to prepay such Note Holder's Notes in full, together with
accrued interest thereon to the date of prepayment at any time within ninety
days after such Holder has actual knowledge of any Change in Control. The
Company shall make such prepayment on the date designated in the Note Holder's
Notice delivered by such Note Holder.
4.4 Notice of Prepayments. The Company will give notice of any
prepayment of the Notes to each Holder thereof, not less than thirty (30) days
nor more than sixty (60) days before the date fixed for such optional prepayment
specifying (i) the date of prepayment, (ii) the principal amount of the Holder's
Notes to be prepaid on such date, and (iii) the estimated accrued interest
applicable to the prepayment. Notice of prepayment having been so given, the
aggregate principal amount of the Notes specified in such notice, together with
the premium, if any, and accrued
11
<PAGE> 14
interest thereon shall become due and payable on the prepayment date.
4.5 Allocation of Prepayments. All partial prepayments shall be applied
on all outstanding Notes ratably, in accordance with the unpaid principal
amounts thereof, but only in units of $1,000, and to the extent that such
ratable application shall not result in an even multiple of $1,000, adjustment
may be made by the Company to the end that successive applications shall result
in substantially ratable payments.
4.6 Direct Payment. Notwithstanding anything to the contrary in this
Agreement or the Notes, in the case of any Note owned by a Note Holder who has
given written notice to the Company requesting that the provisions of this
Section shall apply, the Company will promptly and punctually pay when due, the
principal thereof, and premium, if any, and interest thereon, without any
presentment thereof, directly to such Note Holder at the address of such Note
Holder, or such other address as such Note Holder may from time to time
designate in writing to the Company.
5. PAYMENT OF PRINCIPAL AND INTEREST.
5.1 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.
5.2 Interest Rate on Notes. The Company shall pay the Interest on the
unpaid principal balance of the Notes as provided herein.
5.3 Paying Agent. The Company shall serve as its own paying agent for
the Notes and shall make all payments pursuant to the Notes to the Holders
thereof when due.
5.4 Application of Payment. All payments received shall be applied to
the payment of the Notes in the following order of priority: (i) first, to the
payment of accrued interest, (ii) second, to the payment of principal then due,
and (iii) third, to the payment of premium, if any.
6. PARTICULAR COVENANTS OF THE COMPANY.
6.1 Maintenance of Office; Operation of Business. The Company covenants
and agrees that, so long as any of the Notes remain outstanding, it will:
(a) Maintain in Yuma, Arizona, an office or agency where Notes may
be presented for registration, registration of transfer, exchange and payment as
in this Agreement provided, and an office or agency where notices and demands to
or upon the
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Company in respect of the Notes and this Agreement may be served. The principal
office of the Company shall be such office or agency, unless the Company shall
maintain some other office or agency for such purpose and shall give the Agent
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 the Company, or upon any of its assets, or upon any
part thereof; provided, however, that the Company 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 the Company be
obligated hereunder to pay any such tax, assessment, or charge if such property
shall, in the opinion of the Company, be no longer advantageous to the Company
in the conduct of its business, or if in the opinion of the Company, any such
tax assessment or charge exceeds the value of such property on which it is
levied.
(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 the
Company, 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 Notes, 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
the Company 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 in 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 the Company's and the
Bank's existence as an Arizona corporation.
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(f) Deliver or cause to be delivered to Agent and upon request to
each Note Holder of record, not later than one hundred twenty (120) days after
the close of each fiscal year of the Company, a copy of the Company's audited
annual financial statements consisting of a balance sheet and an income
statement fairly presenting the Company's financial condition and a copy of each
and every filing made by the Company with the Securities and Exchange Commission
("SEC") pursuant to the periodic reporting requirements of the Securities and
Exchange Act of 1934 and the related SEC regulations.
6.2 Negative Covenants. From and after the Closing Date and continuing
so long as any amount remains unpaid on any Note:
(a) Issuance of Additional Securities. Company shall not authorize
or issue any debt senior to the Notes. Company 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.
(b) Funded Debt Ratio. The Company will not assume or incur or in
any manner be or become liable in respect of any Consolidated Funded Debt, if
Consolidated Funded Debt of the Company shall exceed 125% of the Company's
Consolidated Tangible Net Worth.
(c) Dividends. The Company will not 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% of the amount of
interest payable on Company's Consolidated Funded Debt.
6.3 Appointment to Fill a Vacancy in Office of Agent. The Company,
whenever necessary to fill a vacancy in the office of the Agent, will appoint,
in the manner provided in Section 9.7, a new Agent, so that there shall at times
be an Agent hereunder.
6.4 Further Instruments and Acts. The Company will, upon receipt
thereof from the Agent, 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.
7. NOTE HOLDERS' LISTS.
7.1 Note Holders' List. The Company covenants and agrees that it and
every obligor upon the Notes will furnish or cause to be furnished to the Agent
at such times as the Agent may request in writing within thirty (30) days after
receipt by the Company of any such request, a list in such form as the Agent may
reasonably require containing all information in the possession or
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<PAGE> 17
control of the Company as to the name and addresses of the Note Holders obtained
(in the case of each list other than the first list) since the date as of which
the next previous list was furnished. Any such list may be dated as of the date
not more than fifteen (15) days prior to the time any information is furnished
or caused to be furnished and need not include information received after such
date.
7.2 Preservation and Disclosure of List.
(a) The Agent shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the Note Holders
(i) contained in the most recent list furnished to it as provided in Section 7.1
and (ii) received by it hereunder.
(b) The Agent may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list as furnished.
8. REMEDIES OF THE AGENT AND THE NOTE HOLDERS IN EVENT OF DEFAULT.
8.1 Events of Default. In case one or more of the following Events of
Default shall have occurred and be continuing:
(a) the Company shall fail to pay any installment of principal or
Interest on any of the Notes when due and payable, whether upon the Maturity
Date or otherwise pursuant to this Agreement or the Notes;
(b) the Company shall fail to comply with any other covenant or
agreement on the part of the Company in the Notes or in this Agreement for a
period of thirty (30) days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the Company
by the Agent, or to the Company and the Agent by Note Holders holding more than
50% in aggregate principal amount of the Notes then outstanding;
(c) final judgment for the payment of money in excess of $250,000
shall be rendered against the Company or Bank and the same shall remain
undischarged for a period of 30 days during which execution shall not be
effectively stayed;
(d) (i) the Company 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 or 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
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<PAGE> 18
receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its assets or the Company 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 the Company or the 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
(iii) there shall be commenced against the Company 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) the Company or Bank shall have been dissolved or
terminated; or
(v) the company 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 all of the Notes
shall have already become due and payable, the Agent shall notify all of the
Note Holders of the occurrence of an Event of Default, and upon the direction of
the holders of more than 50% in aggregate principal amount of the Notes then
outstanding, by notice in writing to the Company, the Agent shall declare the
principal of and all accrued Note Interest on all the Notes 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
Notes contained to the contrary notwithstanding. This provision, however, is
subject to the condition that if, at any time after the principal of the Notes
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 the Company shall pay or shall deposit with the Agent a sum
sufficient to pay all Interest or principal that shall have become due otherwise
than by acceleration and the reasonable expenses of the Agent, and any and all
defaults under this Agreement, other than the nonpayment of principal of and
accrued Interest on Notes that shall have become due by acceleration, shall have
been remedied, then and in every such case the Holders of more than 50% in
aggregate principal
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<PAGE> 19
amount of the Notes then outstanding, by written notice to the Company and to
the Agent, 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 the Agent 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 the Note Holders, then and in every such case the
Company and the Note Holders shall be restored respectively to their several
positions and rights hereunder, and all rights, remedies and powers of the
Company and the Note Holders shall continue as through no such proceeding had
been taken.
8.2 Payment of Notes on Default; Suit Therefor.
(a) The Company covenants that (i) in case default shall be made in
the payment of any installment of Interest upon any of the Notes as and when the
same shall become due and payable, and such default shall have continued for a
period of thirty days, or (ii) in case default shall be made in the payment of
the principal of any of the Notes as and when the same shall have become due and
payable, whether at the Maturity Date or by declaration or otherwise, then the
Company will pay to the Agent, for the benefit of the Note Holders, the whole
amount that then shall have become due and payable on all such Notes for
principal or Interest, or both, as the case may be, with Interest upon the
overdue principal; and, in addition thereto, upon demand of the Agent, such
further amount as shall be sufficient to cover the reasonable costs and expenses
of collection, including reasonable compensation to the Agent, its agents,
attorneys and counsel, and any reasonable expenses or liability incurred by the
Agent hereunder other than through its negligence or bad faith.
(b) In case the Company shall fail forthwith to pay such amounts
upon such demand, the Agent, for itself as principal with respect to amounts due
to it, and as Agent of the Holders of the Notes then outstanding, shall notify
the Note Holders of such failure, and upon the request of the Holders of more
than 50% in aggregate principal amount of the Notes then outstanding, shall
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 the Company and collect in the manner provided by law out of the
property of the Company, wherever situated, the moneys adjudged or decreed to be
payable.
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(c) In case there shall be pending proceedings for the bankruptcy
or for the reorganization of the Company or any other obligor on the Notes under
the Bankruptcy Code or any other applicable law relative to the Company 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, the
Agent, irrespective of whether the principal of the Notes shall then be due and
payable as therein expressed or by declaration or otherwise, and irrespective of
whether the Agent shall have made any demand pursuant to the provisions of this
Section 8.2, 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 Notes, and,
in case of any judicial proceedings, to file such proofs or advisable in order
to have the claims of the Agent and of the Note Holders allowed in such judicial
proceedings relative to the Company or any obligor on the Notes, 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, and to distribute the
same after the deduction of its charges and expenses except as a result of its
negligence or a bad faith; and any receiver, assignee or trustee in bankruptcy
or reorganization is hereby authorized by each of the Note Holders to make such
payments to the Agent, and, in the event that the Agent shall consent to the
making of such payments directly to the Note Holders, to pay to the Agent any
amount due it for reasonable compensation and expenses, including reasonable
counsel fees incurred by it up to the date of such distribution except as a
result of its negligence or bad faith.
(d) All rights of action and of asserting claims under this
Agreement or under any of the Notes, may be enforced by the Agent without the
possession of any of the Notes, or the production thereof on any trial or other
proceeding relative thereto, and any such suit or proceeding instituted by the
Agent shall be brought by it as Agent of the Holders of the Notes then
outstanding, and any recovery of judgment shall be for the ratable benefit of
the Note Holders.
8.3 Application of Moneys Collected by Agent. Any moneys collected by
the Agent pursuant to Section 8.2 shall be applied in the following order of
priority at the date or dates fixed by the Agent for the distribution of such
moneys, upon presentation of the several Notes, 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 and reasonable compensation to the Agent, its agents,
attorneys and counsel, and of all other reasonable expenses and
liability incurred, and all
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advances made, by the Agent except as a result of its gross negligence
or bad faith;
Second, in case the principal of the outstanding Notes shall
not have become due and be unpaid, to the payment of Interest on the
Notes, such payments to be made ratably to the persons entitled
thereto, without discrimination or preference;
Third, in case the principal of the outstanding Notes shall
have become due, by declaration or otherwise, to the payment of the
whole amount then owing and unpaid upon the Notes 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 without preference or priority of any Note over any other
Note; and
Fourth, to the payment of the remainder, if any, to the
Company, its successors or assigns, or to whomsoever may be lawfully
entitled to receive the same, or as a court of competent jurisdiction
may direct.
8.4 Proceedings by Note Holders.
(a) No Note Holders shall have any right by virtue of or by
availing of any provision of this Agreement to institute any suit, action or
proceedings in equity or at law upon or under or with respect to this Agreement,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless such Note Holders previously shall have given to the Agent
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless also the holders of more than 50% in aggregate principal
amount of the Notes then outstanding shall have made written request upon the
Agent to institute such action, suit or proceedings as Agent and on behalf of
the Holders of the Notes then outstanding and shall have offered to the Agent
such reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Agent for sixty days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding and no
direction inconsistent with such action, suit or proceeding and no direction
inconsistent with such written request shall have been given to the Agent
pursuant to Section 8.7; it being understood and intended, and being expressly
covenanted by the taker and Holder of every Note with every other taker and
Holder and the Agent, that no one or more Note Holders shall have any right in
any manner whatever by virtue of or by availing of any provision of this
Agreement to affect, disrupt or prejudice the rights of any other Note Holders,
or to obtain or seek to obtain priority over or preference to any other such
Note
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Holder, or to enforce any right under this Agreement, except in the manner
herein provided and for the equal, ratable and common benefit of all Note
Holders.
(b) Notwithstanding any other provisions in this Agreement, the
right of any Note Holder to receive payment of the principal of and Interest on
such Note on or after the respective Interest Payment Dates or Maturity Date, or
to institute suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Note Holders.
8.5 Proceedings by Agent. In case of any Event of Default hereunder the
Agent may, upon the direction of the holders of more than 50% in aggregate
principal amount of the Notes then outstanding, proceed to protect and enforce
the rights vested in it by this Agreement by such appropriate judicial
proceedings as the Agent shall deem most effectual to protect and enforce any of
such rights, either by suit in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Agreement, or to enforce any other legal or
equitable right vested in the Agent by this Agreement or by law.
8.6 Remedies Cumulative and Continuing. All powers and remedies given
by this Article 8 to the Agent or to the Note Holders 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, subject to the provisions of Section
8.4, every power and remedy given by this Article 8 or by law to the Agent or to
the Note Holders may be exercised from time to time and as often as shall be
deemed expedient by the Agent or by the Note Holders.
8.7 Direction of Proceedings and Waiver of Defaults by Majority of Note
Holders. The holders of more than 50% in aggregate principal amount of the Notes
then outstanding shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Agent or exercising
any power conferred on the Agent; provided, however that such direction shall
not be otherwise than in accordance with law and the provisions of this
Agreement, and the Agent, subject to the provisions of Section 9.1, shall have
the right to decline to follow any such direction if the Agent in good faith
shall, by an officer of the Agent if the Agent is a corporation, determine that
the proceeding so directed would be unjustly prejudicial to the Note Holders not
taking part in such direction or would involve it in personal liability; and,
provided further, that, subject to the provisions of Section 9.1, nothing
contained in this Agreement shall impair the right of the Agent in its
discretion to take any
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action deemed proper by the Agent and that is not inconsistent with such
direction by Note Holders. Prior to any declaration accelerating the maturity of
the Notes, the holders of more than 50% in aggregate principal amount of the
Notes then outstanding may on behalf of all of the Note Holders waive any past
default or Event of Default hereunder and its consequences except a default in
the payment of Interest on, or the principal of, the Notes. Upon any such waiver
the Company, the Agent and the Note Holders shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any subsequent or other default or Event of Default or impair any right
consequent thereon. Whenever any default or Event of Default hereunder shall
have been waived as permitted by this Section 8.7, such default or event of
Default shall for all purposes of the Notes and this Agreement be deemed to have
been cured and to be not continuing.
8.8 Notice of Defaults. The Agent shall, within ninety days after the
occurrence of a default, mail to all Note Holders, as the names and addresses of
such Holders appear upon the registration books of the Company, notice of all
defaults known to the Agent, unless such defaults shall have bene cured before
the giving of such notice (the term "defaults" for the purposes of this Section
8.8 being hereby defined to be the events specified in Section 8.1, not
including any periods of grace provided for therein and irrespective of the
giving of written notice provided for therein; provided that, except in the case
of default in the payment of the principal of or Interest on any of the Notes,
the Agent shall be protected in withholding such notice if Agent determines in
good faith that the withholding of such notice is in the interest of the Note
Holders.
8.9 Undertaking to Pay Costs. All parties to this Agreement agree, and
each Holder of a Note by his, her or its acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Agreement, or in any suit against
the Agent for any action taken or omitted by it as Agent, the filing by any
party litigant in such suit of any undertaking to pay the costs of such suit,
and that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section 8.9 shall not apply to any suit
instituted by the Agent, to any suit instituted by the Agent, to any suit
instituted by any Note Holder or group of Note Holders holding n the aggregate
more than 10% in aggregate principal amount of the Notes then outstanding, or to
any suit instituted by any Note Holder for the enforcement of the payment of the
principal of or interest on any Note against the Company on or after the due
date expressed in such Note.
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9. AGENT.
9.1 Duties and Liabilities of Agent.
(a) The Agent, prior to the occurrence of an Event of Default and
after the curing of all Events of Default that may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. In case an Event of Default has occurred (which has not been cured),
the Agent shall exercise such of the rights and powers vested in it by this
Agreement and use the same degree of care and skill in its exercise as a prudent
man would exercise or use under the circumstances in the conduct of his own
affairs.
(b) No provision of this Agreement shall be construed to relieve
the Agent from liability for its own gross negligence in acting or omitting to
act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default which may
have occurred:
(A) the duties and obligations of the Agent shall be
determined solely by the express provisions of this Agreement, and the Agent
shall not be liable except for the performance of such duties and obligations as
are specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Agent; and
(B) in the absence of bad faith on the part of the Agent,
the Agent may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or opinions
furnished to the Agent and conforming to the requirements of this Agreement; but
in the case of any such certificates or opinions that by any provision hereof
are specifically required to be furnished to the Agent, the Agent shall be under
a duty to examine the same to determine whether or not they conform to the
requirements of this Agreement.
(ii) the agent shall not be liable for any error of judgment
made in good faith, unless it shall be proved that the Agent was grossly
negligent in ascertaining the pertinent facts;
(iii) the Agent shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of more than 50% in aggregate principal amount of the
Notes then outstanding relating to the time, method and place of conducting any
proceeding for any remedy available to the Note Holders, or exercising any power
conferred upon the Agent, under this Agreement; and
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(iv) none of the provisions of this Agreement shall require the
Agent to expend or risk its own funds or otherwise incur any personal financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
(c) Whether or not herein expressly so provided, every provision of
this Agreement relating to the conduct or affecting the liability of or
affording protection to the Agent shall be subject to the provisions of this
Section.
9.2 Reliance on Documents, Opinions, Etc. Except as otherwise provided
in Section 9.1:
(a) the Agent may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, note, bond, debenture, or other paper or documents
reasonably believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by a certificate of the Company
(unless other evidence in respect thereof be herein specifically prescribed);
(c) the Agent may consult with legal counsel and any opinion of
legal counsel shall be full and complete authorization and protection in respect
of any action taken or omitted by it hereunder in good faith and in accordance
with such opinion of legal counsel;
(d) the Agent shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement at the request, order or
direction of any of the Note Holders, pursuant to the provisions of this
Agreement, unless such Note Holders shall have offered to the Agent reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby; nothing herein contained shall, however, relieve
the Agent of the obligations, upon the occurrence of any Event of Default (which
has not been cured), to exercise such of the rights and powers vested in it by
this Agreement and to use the same degree of care and skill in their exercise as
a prudent man would exercise or use under the circumstances in the conduct of
his own affairs;
(e) the Agent shall not be liable for any action taken or omitted
by it in good faith and reasonably believed by it
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<PAGE> 26
to be authorized or within the discretion or rights or powers conferred upon it
by this Agreement;
(f) prior to the occurrence of an Event of Default hereunder and
after the curing of all Events of Default, the Agent shall not be bound to make
any investigation into the facts or matters stated in the resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, note, bond debenture, or other paper or document, unless requested in
writing so to do by the Holders of more than 50% in aggregate principal amount
of the Notes then outstanding; provided that if the payment within a reasonable
time to the Agent of the costs, expenses or liabilities likely to be incurred by
it in the making of such investigation is not, in the opinion of the Agent,
reasonably assured to the Agent by the security afforded to it by the terms of
this Agreement, the Agent may require reasonable indemnity against such expense
or liability as a condition to so proceeding, the reasonable expense of every
such examination shall be paid by the Company, or, if paid by the Agent, shall
be repaid by the Company upon demand; and
(g) the Agent may execute any of the rights or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys.
9.3 No Responsibility for Recitals, etc. The recitals contained herein
and in the Notes (except in the Agent's Certificate of Authentication) shall be
taken as the statements of the Company and the Agent assumes no responsibility
for the correctness of the same. The Agent makes no representations as to the
validity or sufficiency of this Agreement or of the Notes. The Agent shall not
be accountable for the use or application by the Company of any Notes or the
proceeds of any Notes authenticated and delivered by the Agent in conformity
with the provisions of this Agreement.
9.4 Moneys to be Held in Trust. Subject to the provisions of Section
12.3, all moneys received by the Agent shall, until used or applied as herein
provided, be held in trust for the purposes for which they are received.
9.5 Expenses of Agent. The Company covenants and agrees to pay or
reimburse the Agent upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Agent in accordance with any of the
provisions of this Agreement (including the reasonable compensation and expenses
and disbursements of its counsel and of all persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its gross
negligence, willful misconduct or bad faith. The Company also covenants to
indemnify the agent for, and to hold it harmless against, any loss, liability or
expense incurred
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without negligence or bad faith on the part of the Agent and arising out of or
in connection with the acceptance or administration of this agency, including
the reasonable costs and expenses of defending itself against any claim of
liability in the premises.
9.6 Company's Certificate as Evidence. Except as otherwise provided in
Section 9.1, whenever in the administration of the provisions of this Agreement
the Agent shall deem it necessary or desirable that a matter be proved or
established prior to taking or omitting any action hereunder, such matter
(unless other evidence in respect thereof be herein specifically prescribed)
may, in the absence of gross negligence or bad faith on the part of the Agent,
be deemed to be conclusively proved and established by a certificate signed by
the Company and delivered to the Agent, and such certificate, in the absence of
gross negligence or bad faith on the part of the Agent, shall be full warrant to
Agent for any action taken or omitted by it under the provisions of this
agreement upon the faith thereof.
9.7 Resignation of Agent.
(a) The Agent may at any time resign by giving written notice of
such resignation to the Company and by mailing notice thereof to the Note
Holders at their addresses as they shall appear on the registry books of the
Company. Upon receiving such notice of resignation, the Company shall promptly
appoint a successor agent by written instrument, in duplicate, executed by the
Company, one copy of which instrument shall be delivered to the resigning Agent
and one copy to the successor Agent. If no successor Agent shall have been so
appointed and have accepted appointment within sixty days after the publication
of such notice of resignation, the resigning Agent may petition any court of
competent jurisdiction for the appointment of a successor Agent, or any Note
Holder who has been a bona fide holder of a Note or Notes for at least six
months may, subject to the provisions of Section 8.9, on behalf of himself and
all others similarly situation, petition any such court for the appointment of a
successor Agent. Such court may thereupon, after such notice, if any, as it may
deem proper and prescribe, appoint a successor Agent.
(b) In case at any time the Agent shall become incapable of acting;
or in connection with the performance of its obligations hereunder shall have
acted in bad faith, shall have been grossly negligent or shall have willfully
breached this Agreement; or shall be adjudged a bankrupt or insolvent, or a
receiver of the Agent or of its property shall be appointed, or any public
officer shall take charge or control of the Agent or of its property or affairs
for the purpose of rehabilitation, conservation or liquidation, then in any such
case, the Company may remove the
25
<PAGE> 28
Agent and appoint a successor Agent by written instrument, in duplicate,
executed by order of the Company, one copy of which instrument shall be
delivered to the Agent so removed and one copy to the successor Agent, or,
subject to the provisions of Section 8.9, any Note Holder who has been a bona
fide holder of a Note or Notes for at least six months may, on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the removal of the Agent and the appointment of a successor Agent. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, remove the Agent and appoint a successor Agent.
(c) Except as expressly provided in Section 9.7(b), Company shall
have no right or power to remove Agent.
(d) Any resignation of the Agent and appointment of a successor
Agent pursuant to any of the provisions of this Section 9.7 shall become
effective upon acceptance of appointment by the successor Agent as provided in
Section 9.8.
9.8 Acceptance by Successor Agent.
(a) Any successor Agent appointed as provided in Section 9.7 shall
execute, acknowledge and deliver to the Company and to its predecessor Agent an
instrument accepting such appointment hereunder, and thereupon the resignation
or removal of the predecessor Agent shall become effective and such successor
Agent, without any further act, deed or conveyance, shall become vested with all
the rights, powers, duties and obligations of its predecessor hereunder, with
like effect as if originally named as agent herein; but, nevertheless, on the
written request of the Company or of the successor Agent, the Agent ceasing to
act shall, upon payment of any amounts then due it pursuant to the provisions of
Section 9.5, execute and deliver an instrument transferring to such successor
Agent all the rights and powers of the Agent so ceasing to act. Upon request of
any such successor Agent, the Company shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor
all such rights and powers.
(b) Upon acceptance of appointment by a successor Agent as provided
in this Section 9.8, the company shall mail notice of the succession of such
agent hereunder to the Note Holders at their addresses as they shall appear on
the registry books of the Company. If the Company fails to mail such notice
within ten days after acceptance of appointment by the successor Agent, the
successor Agent shall cause such notice to be mailed at the expense of the
Company.
26
<PAGE> 29
10. ACTS OF NOTE HOLDERS; EVIDENCE OF OWNERSHIP OF NOTES.
10.1 Acts of Note Holders. Any action to be taken by Note Holders may
be evidenced by one or more concurrent written instruments of similar tenor
signed or executed by such Note Holders in person or by Agent appointed in
writing. The fact and date of the execution by any person or any such instrument
may be proved by acknowledgement before a Notary Public or other officer
empowered to take acknowledgements, or by an affidavit of a witness to such
execution.
10.2 Ownership of Notes. Prior to due presentment of any Note for
registration of transfer, the Company and the Agent may deem the person in whose
name the Note shall be registered upon the books of the Company as the absolute
owner of such Note (whether or not such Note shall be overdue and
notwithstanding any notation of ownership or writing thereon by anyone other
than the Agent), for the purpose of receiving payment of or on account of the
principal of, and Interest on, such Note and for all other purposes; and neither
the Company nor the Agent shall be affected by any notice to the contrary.
Payment of or on account of the principal of, and Interest on, such Note shall
be made only to or upon the order in writing of the registered owner thereof.
All such payment shall be valid and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for moneys payable upon any
such Note.
10.3 Action Taken by the Note Holders. Any action taken by the holders
of more than 50% in aggregate principal amount of the Notes specified in this
Agreement in connection with such action shall be conclusively binding upon the
Company, the Agent and the Note Holders. Any action by of any Note Holder shall
bind all future Holders of the same Note in respect of anything done or suffered
by the Company or the Agent in pursuance thereof.
11. AMENDMENTS AND SUPPLEMENTS.
11.1 Amendments and Supplements Without Note Holders' Consent. This
Agreement may be amended or supplemented at any time and from time to time,
without the consent of the Note Holders, by the agreement of the Company and
Agent for the purpose of curing any ambiguity or curing, correcting or
supplementing any defective provision of this Agreement in such manner as shall
not be inconsistent with this Agreement and shall not materially adversely
affect Note Holders.
11.2 Amendments With Note Holders' Consent. This Agreement may be
amended from time to time, except with respect to the principal or interest
payable upon any Notes and this Article 11, by an amendment approved by the
holders of more than 50% in aggregate principal amount of the Notes then
outstanding; provided,
27
<PAGE> 30
however, that no amendment shall be made that affects the rights of some but
less than all of the Holders of the outstanding Notes.
11.3 Agent Authorized to Join Amendments; Reliance on Counsel. The
Agent is authorized to join in the execution and delivery of any amendment to
this Agreement permitted by this Section 11 and in so doing shall be fully
protected by an opinion of counsel that such amendment is so permitted and that
all things necessary to make it a valid and binding Agreement have been done.
12. SATISFACTION AND DISCHARGE OF AGREEMENT; UNCLAIMED MONEYS.
12.1 Discharge of Agreement. When the principal and Interest on all
Notes issued hereunder have been paid, or provisions has been made for payment
of the same, together with all other sums payable hereunder by the Company, the
right, title and interest of the Agent shall thereupon cease, and the Agent, on
demand of the Company shall release this Agreement and shall execute such
documents to evidence such releases as may be reasonably required by the Company
and shall turn over the Company for and on account of the company or such other
person, body or authority as may be entitled to receive the same, all balances,
if any, held by it, not required for the payment of the Notes and such other
sums. Provision for the payment of the Notes shall be deemed to have been made
upon the delivery to the Agent of cash and in amounts sufficient to make all
payments specified above.
12.2 Deposited Moneys to be Held in Trust by the Agent. All moneys
deposited with the Agent pursuant to Section 12.1 shall be held in trust and,
subject to the provisions of Section 12.3, applied by it to the payment to the
holders of the particular Notes for the payment or redemption of which such
moneys have been deposited with the Agent, of all sums due thereon for principal
and Interest.
12.3 Unclaimed Moneys. Any moneys deposited with the Agent not applied
but remaining unclaimed by the Note Holders for six years after the date upon
which the principal of or Interest on such Notes shall have become due and
payable shall be repaid to the Company by the Agent on demand, or if held in
trust by the Company may at the Company's option be released from such trust,
and the Note Holder entitled to receive such payment shall thereafter look only
to the Company, as the holder of a general claim, for the payment thereof.
13. NO REGISTRATION OF NOTES; RESTRICTIONS ON TRANSFERABILITY.
The Notes issued pursuant hereto have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"), and
28
<PAGE> 31
this Agreement has not been qualified under the Trust Indenture Act of 1939, as
amended ("1939 Act"), in reliance on the exemption provided by Section 3(a)(11)
of the 1933 Act and Section 304(b) of the 1939 Act. No Note Holder may sell,
transfer, pledge or hypothecate all or any portion of his Note prior to July 1,
1994, other than to a person resident within the State of Arizona or at any time
without an opinion of Counsel acceptable to the Company (obtained at the expense
of the Note Holder) to the effect that such sale, transfer, pledge or
hypothecation is exempt from registration under the Securities Act and all
applicable state securities laws. The Notes shall bear a legend to the foregoing
effect. The Company has no intention of registering the Notes under the 1933 Act
or of qualifying this Agreement under the 1939 Act. In addition, none of the
Notes may be transferred unless the Assignment Form attached to the Note (or
such other form prescribed by the Company) is executed by the transferring Note
Holder and the transferee and is duly notarized and delivered to the Company.
14. MISCELLANEOUS PROVISIONS.
14.1 Provisions Binding on the Company's Successors. All the covenants,
stipulations, promises and agreements in this Agreement contained by or on
behalf of the Company shall bind its successors and assigns, whether so
expressed or not.
14.2 Addresses for Notice, etc. Any notice or demand that by any
provision of this Agreement is required or permitted to be given or served by
the Agent or by the Note Holders on the Company may be given or served by
delivery or by being deposited in the U.S. mail, registered or certified mail,
return receipt requested, postage prepaid, addressed (until another address is
filed by the company with the Agent) to SOUTHERN ARIZONA BANCORP, INC., 1800
Fourth Avenue, Yuma Arizona 85364. Any notice, direction request or demand by
any Note Holder or by the Company to or upon the Agent shall be deemed to have
been sufficiently given or made, for all purposes if given or made in writing to
the Agent, addressed to:
PHS Mortgage, Inc.
c/o Peacock, Hislop, Staley & Given, Inc.
2999 North 44th Street, Suite 100
Phoenix, Arizona 85018
Attention: Tom Thomas
with copy to:
Norman C. Storey
Squire, Sanders & Dempsey
40 North Central, Suite 2700
Phoenix, Arizona 85004
29
<PAGE> 32
14.3 Governing Law. This Agreement and each Note shall be deemed to be
a contract made under the laws of the State of Arizona and for all purposes
shall be construed in accordance with and governed by the laws of such state.
14.4 Effect of Invalidity of Provisions. In case any one or more of the
provisions contained in this Agreement or in the Notes shall for any reason be
held to be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Agreement or of such Notes, and this Agreement and such Notes shall be construed
as if such invalid or illegal or unenforceable provision had never been
contained herein or therein.
14.5 Table of Contents and Headings. The table of contents, titles and
headings of the articles and sections of this Agreement have been inserted for
convenience of reference only, are not to be considered to be a part hereof, and
shall in no way modify or restrict any of the terms or provisions hereof.
14.6 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original; but such
counterparts shall never constitute but one and the same instrument.
EXECUTED to be effective as of the date first set forth above.
SOUTHERN ARIZONA BANCORP, INC.,
an Arizona corporation
By
-----------------------------
John E. Byrd, President
(COMPANY)
PHS MORTGAGE, INC.
an Arizona corporation
By
-----------------------------
Its
--------------------------
(AGENT)
30
<PAGE> 33
EXHIBIT 3.2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"), AND THIS NOTE HAS NOT BEEN ISSUED PURSUANT TO AN INDENTURE
QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED. THIS NOTE MAY NOT
BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN WHOLE OR IN PART PRIOR TO JULY
1, 1994 OTHER THAN TO A RESIDENT OF THE STATE OF ARIZONA.
THIS NOT EIS NOT A DEPOSIT, IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, AND IS NOT IN ANY WAY GUARANTEED BY THE UNITED STATES GOVERNMENT OR
ANY AGENCY THEREOF.
8.75% SENIOR NOTE DUE JULY 1, 2000
$____________________________ ___________________________, 1993
SOUTHERN ARIZONA BANCORP, INC. an Arizona corporation promises to pay
to _______________________, ____________________________________________________
or registered assigns, the principal sum of __________________ Dollars
($__________) 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% 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, 1993 and at the Maturity Date at the office or agency of the
Company in Yuma, Arizona, in such currency of the United State of America as at
the time of payment shall be legal tender for payment of public and private
debts. The 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 % per annum after maturity whether by acceleration or otherwise, until paid.
If any amount of principal, premium, if any, 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 Note Agreement (as defined in the next paragraph).
This Note is one of the 8.75% Senior Notes due July 1, 2000 of the
Company in the aggregate principal amount of $_________ issued or to be issued
under and pursuant to the terms and provisions of the Note and Agency Agreement
dated as of ____________, 1993 ("Note Agreement") entered into by the company
and the Agent therein referred to and this Note and the Holder hereof is subject
to the terms and conditions of the Note Agreement and is entitled equally and
ratably with the Holders of all other Notes outstanding under the Note Agreement
to all the benefits provided for thereby or referred to therein.
This Note and the other Notes outstanding under the Note Agreement may
be declared due prior to their expressed Maturity
31
<PAGE> 34
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 Note Agreement.
The Notes are not subject to prepayment or a redemption at the option
of the Company prior to their expressed Maturity Date except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Agreement.
The Notes are issuable as registered Notes as set forth in the Note
Agreement. In the manner and subject to the limitations provided in the Note
Agreement, Notes are exchangeable for other Notes of any other Authorized
Denomination or Denominations of an equal aggregate principal amount at the
office of the Company maintained in Yuma, Arizona at 1800 Fourth Avenue, Yuma,
Arizona 85364.
The transfer of this Note is registerable by the registered Holder
hereof or by his attorney duly authorized in writing at the office of the
Company int he manner and subject to the limitations provided in the Note
Agreement and upon surrender of this Note. Upon any such registration of
transfer, a new Note or Notes of Authorized Denominations for a like aggregate
principal amount will be issued in exchange for this Note.
Prior to due presentment of this Note for registration of transfer, the
Company and the Agent may deem the registered Holder hereof as the absolute
owner hereof (whether or not this Note shall be overdue and notwithstanding any
notation of ownership or other writing hereon by anyone other than the Company
or the Agent), for the purpose of receiving payment of or on account of the
principal hereof and Interest hereon, and for all other purposes, and neither
the Company nor the Agent shall be affected by any notice to the contrary. All
such payments shall be valid and effectual to satisfy and discharge the
liability upon this Note to the extent of the sum or sums so paid.
The Note shall not be valid or become obligatory for any purpose until
the Certificate of Authentication hereon shall have been signed by the Agent.
Date: ___________________, 1993
SOUTHERN ARIZONA BANCORP, INC.,
an Arizona corporation
By:
----------------------------
President
32
<PAGE> 35
AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within mentioned Note
Agreement.
Dated: __________________________, 1993
________________________________
Agent
33
<PAGE> 36
ACCEPTANCE OF ASSIGNMENT
(This form must be completed by each transferee of the attached
8.75% Senior Note due July 1, 2000 and must be acknowledged before
a notary public)
The undersigned hereby accepts the foregoing assignment of the attached
Note subject to the Company's registration of the transfer of said Note.
To induce the Company to register the transfer of the attached Note to
the undersigned, the undersigned:
(i) hereby represents and warrants to the Company that the
undersigned has been provided with and has carefully reviewed a copy of the Note
and Agency Agreement, as currently amended in force between the Company and
___________________________ ("Agent"), and the undersigned is fully aware of the
restrictions on the transferability of the Note set forth therein; and
(ii) hereby specifically accepts, adopts and agrees to each and
every provision of the Note Agreement.
--------------------------------
Signature
--------------------------------
Name
--------------------------------
Address
--------------------------------
Please print name and address of
transferee
34
<PAGE> 37
ASSIGNMENT
(This form must be completed by the registered Holder desiring to
transfer all or part of the attached 8.75% Senior Note due July 1,
2000.)
A. FOR VALUE RECEIVED, the undersigned holder of the attached 8.75% Senior Note
due July 1, 2000 ("Note) hereby sells, assigns, and transfers the attached Note
(or so much of the principal amount thereof as is specified below) together with
premium, if any, allocable thereto and Interest accrued thereon to the person or
persons named below and does hereby irrevocably constitute and appoint
as the undersigned's attorney to transfer the Note on the books of the
Partnership, with full power of substitution in the premises.
Dated:
-------------------------------
-----------------------------
Signature
Fill in for new registrant(s) of Note:
- ------------------------------------ -----------------------------------
Name Name
- ------------------------------------ -----------------------------------
Address Address
- ------------------------------------ -----------------------------------
Please print name and address Please print name and address
of transferee (including of transferee (including
zip code) zip code)
- ------------------------------------ -----------------------------------
Principal amount of Note Principal amount of Note
assigned (if less than all) assigned (if less than all)
35
<PAGE> 38
NOTICE
The signature to the foregoing Assignment form must correspond to the
name as written upon the face of the attached Note in every particular, without
alteration, enlargement or any change whatsoever.
36
<PAGE> 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
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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.
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<PAGE> 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.
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<PAGE> 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
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<PAGE> 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
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<PAGE> 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
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<PAGE> 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
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<PAGE> 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
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<PAGE> 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:
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<PAGE> 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
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<PAGE> 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.
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<PAGE> 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.
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<PAGE> 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;
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<PAGE> 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.
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<PAGE> 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,
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<PAGE> 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
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<PAGE> 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
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<PAGE> 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
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<PAGE> 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
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<PAGE> 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;
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<PAGE> 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
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<PAGE> 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
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<PAGE> 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
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<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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.
<PAGE> 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.
<PAGE> 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
<PAGE> 36
PREPAYMENT STATEMENT
<TABLE>
<S> <C>
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 $
======================
</TABLE>
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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]
<PAGE> 1
EXHIBIT 10.8
FIRST AMENDMENT TO LOAN AGREEMENT
This FIRST AMENDMENT TO LOAN AGREEMENT ("First Amendment")
made as of the ___ day of May, 1996, between SOUTHERN ARIZONA BANCORP, INC., an
Arizona corporation ("Borrower") and ZIONS BANCORPORATION, a Utah corporation
("Lender").
WHEREAS, Borrower and Lender (collectively, the "Parties")
entered into a Loan Agreement dated as of April 23, 1996 (the "Loan Agreement")
pursuant to which the Parties agreed that, upon satisfaction of certain
conditions established therein, Lender will advance to Borrower or its order the
Loan Amount (as defined therein) on the Closing Date (as defined therein);
WHEREAS, the Parties have determined that it would be
advantageous to effect the disbursement of the Loan Amount on a date preceding
the Closing Date (subject to the satisfaction of the conditions thereto set
forth in the Loan Agreement).
NOW, THEREFORE, in consideration of these premises and the
mutual agreements hereinafter set forth and those set forth in the Loan
Agreement, the Parties agree to amend the Loan Agreement in the manner set forth
below.
A. Page 3 of the Loan Agreement is amended by replacing the
definition of "Calculation Date" set forth therein with that set forth below:
Calculation Date means May 21, 1996.
B. Page 6 of the Loan Agreement is amended by inserting
between the definitions of "Consolidated Tangible Net Worth" and "Discharge
Certification," the following definition:
- 1 -
<PAGE> 2
Disbursement Date means May 24, 1996.
C. Section 4.1 of the Loan Agreement, "Execution and
Delivery of the Closing Certificate and Promissory Note," is amended to read as
follows:
4.1. Execution and Delivery of Closing Certificate
and Promissory Note. On the Disbursement 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 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 Disbursement Date.
D. Section 4.2 of the Loan Agreement, "Disbursement of Loan
Amount," is amended to read as follows:
4.2 Disbursement of Loan Amount. On the Disbursement
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.
- 2 -
<PAGE> 3
E. Article 5 of the Loan Agreement, "Prepayment of Senior
Notes and Discharge of Note and Agency Agreement," is amended to read as
follows:
5. PREPAYMENT OF SENIOR NOTES AND DISCHARGE OF
NOTE AND AGENCY AGREEMENT.
On the Disbursement 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 that will be due and
owing as of the Closing Date and (ii) release Borrower from
any continuing obligation under the Note and Agency Agreement
from and after the Closing Date. 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.
F. Section 8.2 of the Loan Agreement, "Binding Obligations;
Due Authorization," shall be amended to read as follows:
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,
- 3 -
<PAGE> 4
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 Disbursement 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.
G. Section 9.1 of the Loan Agreement, "Maintenance of Office;
Operation of Business," shall be amended so that the first four lines thereof
shall read as follows:
9.1 Maintenance of Office; Operation of
Business. Borrower covenants and agrees that from and after
the Disbursement Date and continuing so long as any amount
remains unpaid on the Promissory Note or hereunder, it
will:....
H. Section 9.2 of the Loan Agreement, "Negative Covenants," shall
be amended so that the first four lines thereof shall read as follows:
9.2 Negative Covenants. Borrower covenants and
agrees that from and after the Disbursement Date and
continuing so long as any amount remains unpaid on the
Promissory Note or hereunder, it will not:....
- 4 -
<PAGE> 5
I. Exhibit B to the Loan Agreement, "Cover Letter to
Prepayment Statement," is amended so that it shall be dated as of
May 21, 1996, instead of May 23, 1996.
J. Exhibit C to the Loan Agreement, "Closing Certificate,"
is amended so that the last paragraph thereof shall read as follows:
IN WITNESS WHEREOF the undersigned officer of the
Company has hereunto set his hand this 24th day of May, 1996.
K. Exhibit D to the Loan Agreement, "Southern Arizona Bancorp,
Inc. 8.75 Percent Non-Negotiable Senior Note Due July 1, 2000," is amended so
that:
(i) it shall be dated as of May 24, 1996, instead of May 27, 1996;
and
(ii) the first full paragraph thereof shall read as follows:
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 May
27, 1996 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
- 5 -
<PAGE> 6
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.
L. This First Amendment 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. It shall not be necessary in making proof of this First Amendment or
any counterpart hereof to produce or account for the other counterpart.
M. This First Amendment 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 First Amendment. Each of the
parties consents to personal jurisdiction in each of such venues for any suit or
action with respect to this First Amendment and agrees that
- 6 -
<PAGE> 7
it may be served with process in any action with respect to this First Amendment
or the transactions contemplated hereby 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 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 First
Amendment or the transactions contemplated hereby brought in the courts
aforesaid.
N. This First Amendment shall be binding upon the parties and
their respective successors and assigns.
IN WITNESS WHEREOF, the parties have executed this First
Amendment as of the date first above written.
ZIONS BANCORPORATION
By:
--------------------------------
Harris H. Simmons
President and Chief Executive
Officer
SOUTHERN ARIZONA BANCORP, INC.
By:
--------------------------------
John E. Byrd
President and
Chief Executive Officer
- 7 -
<PAGE> 1
EXHIBIT 10.9
AGREEMENT TO MERGE
SOUTHERN ARIZONA BANK
WITH AND INTO
NATIONAL BANK OF ARIZONA
UNDER THE CHARTER AND TITLE OF
NATIONAL BANK OF ARIZONA
THIS AGREEMENT made between Southern Arizona Bank (hereinafter referred
to as the "Bank"), an Arizona banking corporation organized under the laws of
the State of Arizona, being located in the County of Yuma, in the State of
Arizona, with a capital of $11,486,000, divided into 1,149,898 shares of common
stock, each of no par value, surplus of $3,600,000, undivided profits of
$6,894,000, and net unrealized holding gains (losses) on available-for-sale
securities, of $34,000, as of March 31, 1996, and National Bank of Arizona
(herein referred to as "NBA"), a national banking association organized under
the laws of the United States of America, being located in the County of Pima,
in the State of Arizona, with a capital of $72,887,000, divided into 150,000
shares of common stock, each of $10 par value, surplus of $30,781,000, undivided
profits of $40,306,000 and net unrealized holding gains (losses) on
available-for-sale securities, of $300,000, as of March 31, 1996, each acting
pursuant to a resolution of its Board of Directors, adopted by the vote of a
majority of its directors, pursuant to the authority given by and in accordance
with the provisions of the Act of November 7, 1918, as amended (12 U.S.C.
Section 215a) witnesseth as follows:
SECTION 1
The Bank shall be merged into NBA under the charter of the latter (the
"Merger").
SECTION 2
The name of the resulting association (hereinafter referred to as the
"Association") shall be National Bank of Arizona.
SECTION 3
The business of the Association shall be that of a national banking
association. This business shall be conducted by the Association at its main
office which shall be located at 335 North Wilmot Road, Tucson, Arizona and at
its legally established branches.
<PAGE> 2
SECTION 4
The amount of capital stock of the Association shall be $1,500,000,
divided into 150,000 shares of common stock, each of $10 par value, and at the
time the Merger shall become effective (the "Effective Date"), the Association
shall have 150,000 shares issued and outstanding for capital of $1,500,000.
Surplus of the Association will be $42,267,000, and undivided profits, including
capital reserves, when combined with the capital and surplus, will be equal to
the combined capital structures of the merging banks as stated in the preamble
to this Agreement, adjusted, however, for normal earnings and expenses between
March 31, 1996, and the Effective Date.
SECTION 5
(a) At the Effective Date, the corporate existence of the Bank and NBA
shall be merged into and continued in the Association as provided in 12 U.S.C.
Section 215a; and the Association shall be deemed to be the same corporation as
the Bank and NBA. All assets, rights, franchises and interests of the Bank and
NBA respectively, in and to every type of property (real, personal and mixed)
and choses in action, as they exist at the Effective Date, shall be transferred
to and vested in the Association by virtue of the Merger without any deed or
other transfer. At the Effective Date and without any order or other action on
the part of any court or otherwise, the Association shall hold and enjoy all
rights of property, franchises and interests, including appointments, powers,
designations and nominations, and all other rights and interests as trustee,
executor, administrator, agent, transfer agent, and registrar of stocks and
bonds, guardian of estates, assignee, receiver and conservator, and in every
other fiduciary capacity, and every agency capacity, in the same manner and to
the same extent as such rights, franchises and interests were held or enjoyed by
the Bank and NBA, respectively, immediately prior to the Effective Date.
(b) At the Effective Date, the Association shall be liable for all
liabilities of the Bank and NBA, including liabilities arising out of the
operation of a Trust Department, and (except as so provided) all deposits,
debts, liabilities, obligations and contracts of the Bank and NBA, respectively,
matured or unmatured, whether accrued, absolute, contingent or otherwise, and
whether or not reflected or reserved against on balance sheets, books of account
or records of the Bank or NBA, as the case may be, shall be those of and are
hereby expressly assumed by the Association and shall not be released or
impaired by the Merger; and all rights of creditors and other obligees and all
liens on property of either the Bank or NBA shall be preserved unimpaired. At
the Effective Date, the Association shall be liable for all then existing
indemnification obligations of the Bank and NBA under their respective Articles
of Association or By-Laws or under any other
- 2 -
<PAGE> 3
agreement. At the Effective Date, the Association shall have all rights, and
shall be liable for all obligations of the Bank and NBA under all employee
compensation and benefit plans and arrangements of the Bank and NBA, and such
plans and related trusts, if any, shall continue in effect without any
interruption or termination.
SECTION 6
(a) At the Effective Date, the currently outstanding 150,000 shares of
common stock of NBA, each of $10 par value, will remain outstanding as shares of
the $10 par value common stock of the Association, and the holders of such stock
shall retain their present rights.
(b) No other capital stock of NBA will be issued in the
Merger.
(c) At the Effective Date, the shares of common stock of the
Bank shall be canceled.
SECTION 7
Between the date of this Merger Agreement and the Effective Date,
without the written consent of NBA, the Bank will not declare or distribute any
stock dividend, authorize a stock split or issue or authorize or make any
distribution of its capital stock, or merge with, consolidate with or sell its
assets to any other corporation or person, or permit any other corporation to be
merged or consolidated with it, to acquire all the assets of any other
corporation or person, or to enter into any other transaction not in the
ordinary course of the business of banking, or to dispose of any of its assets
in any other manner except in the ordinary course of business and for adequate
value.
SECTION 8
At and after the Effective Date, the Board of Directors of the
Association will be composed of the following persons:
Hugh M. Caldwell, Jr. James S. Lee
Gerald J. Dent James H. Lundy
John J. Gisi Harris H. Simmons
Richard W. Krivel Roy W. Simmons
The Board of Directors of the Association as so constituted shall serve
until the next annual meeting or until such time as their successors have been
elected and have qualified.
- 3 -
<PAGE> 4
SECTION 9
The Effective Date shall be the date upon which the last of the
following events shall occur:
(a) The first to occur of (a) the date thirty days following the date
of the order of the Comptroller of the Currency (the "Comptroller") approving
the Merger, or (b) if, pursuant to section 321(b) of the Riegle Community
Development and Regulatory Improvement Act of 1994, the Comptroller shall have
prescribed a shorter period of time with the concurrence of the Attorney General
of the United States, the date on which such shorter period of time shall
elapse;
(b) The date as of which this Agreement shall have been ratified and
confirmed by the affirmative vote of the owners of at least two-thirds of the
outstanding shares of each of the Bank and NBA; or
(c) Such later date as mutually agreed upon by the Presidents
of the Bank and NBA.
SECTION 10
This Agreement may be terminated by the unilateral action of the Board
of Directors of any participant prior to the approval of the shareholders of
said participant or by the mutual consent of the Boards of Directors of both
participants after any shareholder group has taken affirmative action.
SECTION 11
This Agreement shall be ratified and confirmed by the affirmative vote
of the shareholders of each of the banks owning at least two-thirds of its
capital stock outstanding, at a meeting held on the call of the Directors, or by
a consent in lieu of such a meeting; and the merger shall become effective at
the time specified in a certificate to be issued by the Comptroller, under the
seal of his office, approving the Merger.
- 4 -
<PAGE> 5
WITNESS the signatures and seals of said merging banks this 21st day of
May, 1996, each hereunto set by its President and attested by its Cashier or
Secretary or Assistant Secretary, pursuant to a resolution of the Board of
Directors, acting by a majority thereof, and witness the signatures hereto of a
majority of each of said Boards of Directors.
SOUTHERN ARIZONA BANK
Attest: By:
----------------------- ----------------------------
John E. Byrd
President and
Chief Executive Officer
- ------------------------------- --------------------------------
Forrest C. Braden Jimmy J. Naquin
- ------------------------------- --------------------------------
John E. Byrd Colleen J. Newman
- ------------------------------- --------------------------------
Thomas M. Howell Donald S. Olsen
- ------------------------------- --------------------------------
Robert W. Kennerly Stephen Shadle
--------------------------
Charles Urtuzuastegui
Directors of Southern Arizona Bank
- 5 -
<PAGE> 6
STATE OF ARIZONA )
) ss.
COUNTY OF YUMA )
On this _____ day of May, 1996, before me, a Notary Public for the
State and County aforesaid, personally came John E. Byrd, as President and Chief
Executive Officer, and Donald S. Olsen, as Secretary, of Southern Arizona Bank,
and each in his or her said capacity acknowledged the foregoing instrument to be
the act and deed of said bank and the seal affixed thereto to be its seal; and
came also:
Forrest C. Braden Colleen J. Newman
Thomas M. Howell Stephen P. Shadle
Robert W. Kennerly Charles Urtuzuastegui
Jimmy J. Naquin
being a majority of the Board of Directors of said bank, and each of them
acknowledged said instrument to be the act and deed of said bank and of himself
or herself as a director thereof.
WITNESS my official seal and signature this day and year aforesaid.
(SEAL OF NOTARY)
-----------------------------------
Notary Public, Yuma County
My commission expires:
- 6 -
<PAGE> 7
NATIONAL BANK OF ARIZONA
Attest:
----------------------- By:
----------------------------
John J. Gisi
President and
Chief Executive Officer
- ----------------------------- -------------------------------
Hugh M. Caldwell, Jr. James S. Lee
- ----------------------------- -------------------------------
Gerald J. Dent James H. Lundy
- ----------------------------- -------------------------------
John J. Gisi Harris H. Simmons
- ----------------------------- -------------------------------
Richard W. Krivel Roy W. Simmons
Directors of National Bank of Arizona
- 7 -
<PAGE> 8
STATE OF ARIZONA )
) ss:
COUNTY OF MARICOPA )
On this _____ day of May, 1996, before me, a Notary Public for the
State and County aforesaid, personally came John J. Gisi as Chairman, President
and Chief Executive Officer of National Bank of Arizona, and in his said
capacity acknowledged the foregoing instrument to be the act and deed of said
association and the seal affixed thereto to be its seal; and came also:
James S. Lee
James H. Lundy
each a member of the Board of Directors of said association, and each of them
acknowledged said instrument to be the act and deed of said association and of
himself or herself as a director thereof.
WITNESS my official seal and signature this day and year aforesaid.
(SEAL OF NOTARY)
--------------------------------------
Notary Public, Maricopa County
My commission expires:
- 8 -
<PAGE> 9
STATE OF ARIZONA )
) ss:
COUNTY OF PIMA )
On this _____ day of May, 1996, before me, a Notary Public for the
State and County aforesaid, personally came Hugh M. Caldwell, Jr., as Secretary
of National Bank of Arizona and a member of its Board of Directors, and in his
said capacities acknowledged the foregoing instrument to be the act and deed of
said association and the seal affixed thereto to be its seal and acknowledged
said instrument to be the act of himself as a director thereof.
WITNESS my official seal and signature this day and year aforesaid.
(SEAL OF NOTARY)
-----------------------------------
Notary Public, Pima County
My commission expires:
- 9 -
<PAGE> 10
STATE OF ARIZONA )
) ss:
COUNTY OF PIMA )
On this _____ day of May, 1996, before me, a Notary Public for the
State and County aforesaid, personally came Richard W. Krivel, as a member of
the Board of Directors of National Bank of Arizona, and in his said capacity
acknowledged the foregoing instrument to be the act and deed of said association
and the seal affixed thereto to be its seal and acknowledged said instrument to
be the act of himself as a director thereof.
WITNESS my official seal and signature this day and year aforesaid.
(SEAL OF NOTARY)
-----------------------------------
Notary Public, Pima County
My commission expires:
- 10 -
<PAGE> 11
STATE OF UTAH )
) ss:
COUNTY OF SALT LAKE )
On this _____ day of May, 1996, before me, a Notary Public for the
State and County aforesaid, personally came Gerald J. Dent, Harris H. Simmons
and Roy W. Simmons, each as a member of the Board of Directors of National Bank
of Arizona, and each in his said capacity acknowledged the foregoing instrument
to be the act and deed of said association and the seal affixed thereto to be
its seal and each of them acknowledged said instrument to be the act and deed of
himself as a director thereof.
WITNESS my official seal and signature this day and year aforesaid.
(SEAL OF NOTARY)
-----------------------------------
Notary Public, Salt Lake County
My commission expires:
- 11 -
<PAGE> 1
EXHIBIT 10.10
AGREEMENT OF MERGER
This Agreement of Merger is made and entered into as of May
21, 1996, between ZIONS BANCORPORATION ("Zions Bancorp"), a corporation
organized under the laws of the State of Utah, and SOUTHERN ARIZONA BANCORP,
INC. (the "Company"), a corporation organized under the laws of the State of
Arizona. Zions Bancorp and the Company are hereinafter sometimes individually
called a "Constituent Corporation" and collectively called the "Constituent
Corporations."
RECITALS
Zions Bancorp is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah. As of May 1,
1996, the authorized capital stock of Zions Bancorp consisted of 30,000,000
shares of Common Stock, no par value, of which 14,483,997 shares were issued and
outstanding; no shares of capital stock were held in its treasury on such date.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Arizona. As of May 1, 1996,
the authorized capital stock of the Company consisted of 2,000,000 shares of
Common Stock, no par value (the "Company Common Stock"), of which 1,266,362
shares were issued and outstanding; no shares of capital stock were held in its
treasury on such date.
Zions Bancorp and its affiliate, NATIONAL BANK OF ARIZONA
("NBA"), and the Company and its affiliate, SOUTHERN ARIZONA BANK (the "Bank"),
have entered into an Agreement and Plan of Reorganization, dated January 17,
1996 (the "Plan of Reorganization"), setting forth certain representations,
warranties, and agreements in connection with the transactions therein and
herein contemplated, which contemplates the merger of the Company with and into
Zions Bancorp (the "Merger") in accordance with this Agreement of Merger (the
"Agreement"). NBA and the Bank are hereinafter sometimes collectively called the
"Affiliated Corporations."
The Boards of Directors of each of Zions Bancorp, the Company,
and the Affiliated Corporations deem the Merger advisable and in the best
interests of each corporation and its stockholders. The Boards of Directors of
each of Zions Bancorp, the Company, and the Affiliated Corporations, by
resolutions duly adopted, have approved the Plan of Reorganization. The Boards
of Directors of each of Zions Bancorp and the Company, by resolutions duly
adopted, have approved this Agreement. The Board of Directors of the Company has
directed that this Agreement, and authorization for the transactions
contemplated hereby, be submitted to stockholders of the Company for approval.
Pursuant to Utah Code Ann. Section 16-10a- 1103, approval by the shareholders of
Zions Bancorp is not required.
<PAGE> 2
At the Effective Date (as defined in Section 1.1 below) shares
of Company Common Stock shall be converted into the right to receive shares of
the common stock of Zions Bancorp, no par value (the "Zions Bancorp Stock"), and
cash, as provided herein.
In consideration of the premises and the mutual covenants and
agreements herein contained and subject to the terms and conditions of the
Agreement, the parties hereto hereby covenant and agree as follows:
ARTICLE I
1.1. Merger of the Company into Zions Bancorp. The Company
shall be merged with and into Zions Bancorp on the date and at the time to be
specified in the Articles of Merger to be filed with the Division of
Corporations and Commercial Code of the State of Utah pursuant to Utah Code Ann.
Section 16-10a-1105 and the Corporation Commission of the State of Arizona
pursuant to Ariz. Rev. Stat. Section 10-1101 (such date and time being referred
to herein as the "Effective Date").
1.2. Effect of the Merger. At the Effective Date:
(a) The Company and Zions Bancorp shall be a single
corporation, which shall be Zions Bancorp. Zions Bancorp is hereby designated as
the surviving corporation in the Merger and is hereinafter sometimes called the
"Surviving Corporation."
(b) The separate existence of the Company shall cease.
(c) The Surviving Corporation shall have all the rights,
privileges, immunities and powers and shall assume and be subject to all the
duties and liabilities of a corporation organized under the Utah Business
Corporation Act.
(d) The Surviving Corporation shall thereupon and thereafter
possess all of the rights, privileges, immunities, and franchises, of a public
as well as of a private nature, of each of the Constituent Corporations; and all
property, real, personal and mixed, and all debts due on whatever account,
including subscriptions to shares and all other choses in action, and all and
every other interest of and belonging to or due to each of the Constituent
Corporations shall be taken and deemed to be transferred to and vested in the
Surviving Corporation without further act or deed; and the title to any real
estate, or any interest therein, vested in either of the Constituent
Corporations shall not revert or be in any way impaired by reason of the Merger.
(e) The Surviving Corporation shall thenceforth be responsible
and liable for all the liabilities and obligations of each of the Constituent
Corporations; and any claim existing or
- 2 -
<PAGE> 3
action or proceeding pending by or against either of the Constituent
Corporations may be prosecuted as if the Merger had not taken place, or the
Surviving Corporation may be substituted in its place. The Surviving Corporation
expressly assumes and agrees to perform all of the Company's liabilities and
obligations. Neither the rights of creditors nor any liens upon the property of
either Constituent Corporation shall be impaired by the Merger.
(f) The Articles of Incorporation of Zions Bancorp as they
exist immediately prior to the Effective Date shall be the Articles of
Incorporation of the Surviving Corporation until later amended pursuant to Utah
law.
(g) At the Effective Date and until surrendered for exchange
and payment, each outstanding stock certificate which, prior to the Effective
Date, represents shares of Company Common Stock shall, without further action,
cease to be an issued and existing share and, subject to the rights any holder
may have under Ariz. Rev. Stat. Sections 10-1301 through 10-1331 shall be
converted into a right to receive from Zions Bancorp and shall, for all purposes
represent the right to receive, upon surrender of the certificate representing
such shares, the number of shares of Zions Bancorp Stock and the amount of cash
specified in Article III; provided that, with respect to any matters relating to
stock certificates representing Company Common Stock, Zions Bancorp may rely
conclusively upon the record of stockholders maintained by the Company
containing the names and addresses of the holders of record of the Company's
Common Stock at the Effective Date.
1.3. Acts to Carry Out This Merger Plan.
(a) The Company and its proper officers and directors shall
and will do all such acts and things as may be necessary or proper to vest,
perfect or confirm title to such property or rights in Zions Bancorp and
otherwise to carry out the purposes of this Agreement.
(b) If, at any time after the Effective Date, Zions Bancorp
shall consider or be advised that any further assignments or assurances in law
or any other acts are necessary or desirable to (i) vest, perfect or confirm, of
record or otherwise, in Zions Bancorp its right, title, or interest in or under
any of the rights, properties or assets of the Company acquired or to be
acquired by Zions Bancorp as a result of, or in connection with, the Merger, or
(ii) otherwise carry out the purposes of this Agreement, the Company and its
proper officers and directors shall be deemed to have granted to Zions Bancorp
an irrevocable power of attorney to execute and deliver all such proper deeds,
assignments and assurances in law and to do all acts necessary or proper to
vest, perfect or confirm title to and possession of such rights, properties or
assets in Zions Bancorp and otherwise to carry out the purposes of this
Agreement; and the proper officers and
- 3 -
<PAGE> 4
directors of Zions Bancorp are fully authorized in the name of the Company or
otherwise to take any and all such action.
ARTICLE II
2.1. Capitalization. The authorized shares of capital stock of
Zions Bancorp as of the Effective Date shall be 30,000,000 shares of common
stock, no par value.
2.2. By-Laws. The By-Laws of Zions Bancorp as they exist
immediately prior to the Effective Date shall be the By-Laws of Zions Bancorp
until later amended pursuant to Utah law.
ARTICLE III
3.1. Manner of Converting Shares.
(a) Definitions. For the purposes of this Agreement, the
following terms shall have the meanings set forth in this Subparagraph (a).
Additional terms may be defined elsewhere herein. Terms not defined herein shall
have the meanings assigned to them in the Plan of Reorganization.
(i) Average Closing Price. The average (rounded to the
nearest penny) of each Daily Sales Price of Zions Bancorp Stock for the twenty
consecutive trading days ending on and including the fifth trading day preceding
the Effective Date. Notwithstanding the foregoing, (A) if the result of the
calculation described in the previous sentence is less than $59.00, then the
Average Closing Price shall be $59.00, and (B) if the result of the calculation
described in the previous sentence is more than $72.00, then the Average Closing
Price shall be $72.00.
(ii) Benchmark Price. The sum of:
(A) $25,330,000.00;
(B) the consolidated net undistributed income of the
Company during the period beginning on October 1, 1995 and ending on the close
of business on the last day of the calendar month preceding the Effective Date,
calculated in accordance with generally accepted accounting principles in a
manner consistent with the Company Financial Statements (as defined in section
6.13 of the Plan of Reorganization). For the purpose of calculating net
undistributed income of the Company, any undistributed gain, net of taxes,
derived from activities or transactions which are not in the ordinary course of
its banking operations (such as, without limitation, the sale of securities or
loans, of capital assets, or of lines of business), all of which shall be
determined in accordance with generally accepted accounting principles, shall be
excluded
- 4 -
<PAGE> 5
except as mutually agreed by the parties hereto. It is understood that the
amount calculated under this section 3.1(a)(ii)(B) may be a negative number and
that the effect of summing such a negative number would be a reduction in the
Benchmark Price as otherwise would be calculated under this section 3.1(a)(ii);
and
(C) if the Effective Date does not occur on the first
day of a calendar month, an amount calculated by computing the daily average of
the net undistributed income of the Company for the period and in the manner
prescribed in section 3.1(a)(ii)(B) hereof and multiplying the result of such
computation by the number of days elapsing during the period beginning on the
first day of the month in which the Effective Date occurs and ending on the day
immediately preceding the Effective Date. It is understood that the amount
calculated under this section 3.1(a)- (ii)(C) may be a negative number and that
the effect of summing such a negative number would be a reduction in the
Benchmark Price as otherwise would be calculated under this section 3.1(a)(ii).
(iii) Daily Sales Price. For any trading day, the last
reported sale price or, if no such reported sale takes place, the mean
(unrounded) of the closing bid and asked prices of Zions Bancorp Stock in the
over-the-counter market as such prices are reported by the automated quotation
system of the National Association of Securities Dealers, Inc., or in the
absence thereof by such other source upon which Zions Bancorp and the Company
shall mutually agree.
(iv) Dissenting Shares. The shares of Company Common Stock
held by those shareholders of the Company who have timely and properly exercised
their dissenters' rights in accordance with all applicable laws (the "Appraisal
Laws").
(v) Zions Bancorp Stock. The common stock of Zions
Bancorp, no par value.
(b) Form of Consideration. Subject to the terms, conditions
and limitations set forth herein, upon surrender of his or her certificate or
certificates, each holder of shares of Company Common Stock shall be entitled to
receive in the Merger, in exchange for each share of Company Common Stock held
of record by such stockholder as of the Effective Date:
(i) that number of shares of Zions Bancorp Stock
calculated by dividing the Benchmark Price by the Average Closing Price, and by
further dividing the number so reached by the number of shares of Company Common
Stock that shall be issued and outstanding at the Effective Date, and
(ii) in the event that the average (rounded to the nearest
penny) of each Daily Sales Price of Zions Bancorp Stock for the twenty
consecutive trading days ending on and including the
- 5 -
<PAGE> 6
fifth trading day preceding the Effective Date (the "Unadjusted Average Price")
shall be less than $59.00, that amount of cash (the "Cash Component") calculated
by dividing the amount by which the Benchmark Price exceeds the product of the
Unadjusted Average Price and the number of shares of Zions Bancorp Stock
issuable under subsection (b)(i) of this section 3.1 by the number of shares of
Company Common Stock that shall be issued and outstanding at the Effective Date.
3.2. No Fractional Shares. Zions Bancorp will not issue fractional
shares of Zions Bancorp Stock. In lieu of fractional shares of Zions Bancorp
Stock, if any, each shareholder of the Company who is entitled to a fractional
share of Zions Bancorp Stock shall receive an amount of cash equal to the
product of such fraction times the Average Closing Price. Such fractional share
interest shall not include the right to vote or to receive dividends or any
interest thereon.
3.3. Dissenting Shares. Notwithstanding anything to the contrary
herein, each Dissenting Share whose holder, as of the Effective Date, has not
effectively withdrawn or lost his or her dissenters' rights under the Appraisal
Laws, shall not be converted into or represent a right to receive Zions Bancorp
Stock or Cash Component, but the holder thereof shall be entitled only to such
rights as are granted by the Appraisal Laws. Each holder of Dissenting Shares
who becomes entitled to payment for his or her Company Common Stock pursuant to
the provisions of the Appraisal Laws shall receive payment therefor from Zions
Bancorp (but only after the amount thereof shall have been agreed upon or
finally determined pursuant to such provisions).
3.4. Dividends; Interest. No shareholder of the Company will be
entitled to receive dividends on his or her Zions Bancorp Stock until he or she
exchanges his or her certificates representing Company Common Stock for Zions
Bancorp Stock and, if applicable, Cash Component. Any dividends declared on
Zions Bancorp Stock (which stock is to be delivered pursuant to this Agreement)
to holders of record on or after the Effective Date shall be paid to the
Exchange Agent (as designated in Section 3.5) and, upon receipt of the
certificates representing shares of Company Common Stock, the Exchange Agent
shall forward to the former shareholders entitled to receive Zions Bancorp Stock
(i) certificates representing their shares of Zions Bancorp Stock, (ii)
dividends declared thereon subsequent to the Effective Date (without interest),
(iii) the cash value of any fractional shares determined in accordance with
Section 3.2 hereof (without interest), and (iv) any Cash Component (without
interest).
3.5. Designation of Exchange Agent. The Company and Zions Bancorp
hereby designate Zions First National Bank, Salt Lake City, Utah ("Zions Bank")
as Exchange Agent to effect the exchange contemplated hereby. Zions Bancorp
will, promptly after the
- 6 -
<PAGE> 7
Effective Date, issue and deliver to Zions Bank the share certificates
representing shares of Zions Bancorp Stock and the cash in lieu of fractional
shares and any Cash Component to be paid to holders of Company Common Stock in
accordance with this Agreement.
3.6. Notice of Exchange. Promptly after the Effective Date,
Zions Bancorp shall cause Zions Bank to mail to each holder of one or more
certificates formerly representing Company Common Stock, except to such holders
as shall have waived the notice required by this Section 3.6, a notice
specifying the Effective Date and notifying such holder to surrender his or her
certificate or certificates to Zions Bank for exchange. Such notice shall be
mailed to holders by regular mail at their addresses on the records of the
Company. Zions Bancorp shall cause Zions Bank to deliver shares and cash to such
holders who comply with the terms and conditions of the notice of exchange.
ARTICLE IV
4.1. 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.
4.2. 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.
4.3. Choice of Law and Venue. This Agreement 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 proper
jurisdictions and venues for any suit or action arising out of this Agreement.
Each of the parties consents to personal jurisdiction in each of such venues for
such a proceeding and agrees that it may be served with process in any action
with respect to this Agreement or the transactions contemplated 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 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
- 7 -
<PAGE> 8
forum of any action or claim with respect to this Agreement or the transactions
contemplated thereby brought in the courts aforesaid.
4.4. Binding Agreement. This Agreement shall be binding upon
the parties and their respective successors and assigns.
4.5. Amendment. Anything herein or elsewhere to the contrary
notwithstanding, to the extent permitted by law, this Agreement may be amended,
supplemented, or interpreted at any time prior to the Effective Date by written
instrument duly authorized and executed by each of the parties hereto; provided,
however, that this Agreement may not be amended after the action by shareholders
of the Company in any respect that would prejudice the economic interests of
such Company shareholders, or any of them, except as specifically provided
herein or by like action of such shareholders.
4.6. Termination. This Agreement shall terminate and be
abandoned upon (i) termination of the Plan of Reorganization or (ii) the mutual
consent of Zions Bancorp and the Company at any time prior to the Effective
Date, and there shall be no liability on the part of either of the parties
hereto (or any of their respective officers or directors) except to the extent
provided in the Plan of Reorganization.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
[The remainder of this page intentionally left blank.]
- 8 -
<PAGE> 9
ZIONS BANCORPORATION
Attest: By:
---------------------------------- ----------------------------------
Gary L. Anderson Harris H. Simmons
Secretary President and Chief Executive
Officer
- --------------------------------
)
State of Utah )
) ss.
)
County of Salt Lake )
)
- --------------------------------
On this _____ day of May, 1996, before me personally appeared Harris H.
Simmons, to me known to be the President and Chief Executive Officer of Zions
Bancorporation, and acknowledged said instrument to be the free and voluntary
act and deed of said corporation, for the uses and purposes therein mentioned,
and on oath stated that he was authorized to execute said instrument.
In Witness Whereof I have hereunto set my hand and affixed my official seal
the day and year first above written.
--------------------------
Notary Public
- 9 -
<PAGE> 10
SOUTHERN ARIZONA BANCORP, INC.
Attest: By:
---------------------------- ----------------------------------------
John E. Byrd
President and Chief Executive
Officer
- --------------------------------
)
State of Arizona )
) ss.
)
County of Yuma )
)
- --------------------------------
On this ______ day of May, 1996, before me personally appeared John E.
Byrd, to me known to be the President and Chief Executive Officer of Southern
Arizona Bancorp, Inc., and acknowledged said instrument to be the free and
voluntary act and deed of said corporation, for the uses and purposes therein
mentioned, and on oath stated that he was authorized to execute said instrument.
In Witness Whereof I have hereunto set my hand and affixed my official seal
the day and year first above written.
--------------------------
Notary Public
- 10 -
<PAGE> 1
Exhibit 16
[DELOITTE & TOUCHE LLP LETTERHEAD]
May 28, 1996
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, NW
Washington, DC 20549
Dear Sirs/Madams:
We have read and agree with the comments in Item 14 of Form 10 of Southern
Arizona Bancorp, Inc. dated May 24, 1996.
Yours truly,
/s/ Deloitte & Touche LLP
- --------------------------
DELOITTE & TOUCHE LLP
<PAGE> 1
EXHIBIT 21
SUBSIDIARY OF THE COMPANY
Southern Arizona Bank, an Arizona banking corporation incorporated
under the laws of the State of Arizona.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SOUTHERN
ARIZONA BANCORP, INC. AND SUBSIDIARY 1995 AUDITED FINANCIAL STATEMENTS,
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY STATISTICAL INFORMATION AND
ANALYSIS, AND SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY UNAUDITED FINANCIAL
STATEMENTS FOR THREE MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1996 DEC-31-1995
<CASH> 8,165 7,701
<INT-BEARING-DEPOSITS> 396 594
<FED-FUNDS-SOLD> 33,279 25,194
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 1,079 1,388
<INVESTMENTS-CARRYING> 0 499
<INVESTMENTS-MARKET> 0 499
<LOANS> 85,037 84,532
<ALLOWANCE> 2,542 2,467
<TOTAL-ASSETS> 135,635 127,418
<DEPOSITS> 122,631 114,762
<SHORT-TERM> 2,500 2,500
<LIABILITIES-OTHER> 843 818
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 2,483 2,483
<OTHER-SE> 6,817 3,375
<TOTAL-LIABILITIES-AND-EQUITY> 135,635 127,418
<INTEREST-LOAN> 2,355 9,045
<INTEREST-INVEST> 45 655
<INTEREST-OTHER> 372 493
<INTEREST-TOTAL> 2,771 10,193
<INTEREST-DEPOSIT> 884 3,151
<INTEREST-EXPENSE> 884 3,151
<INTEREST-INCOME-NET> 1,887 7,042
<LOAN-LOSSES> 72 401
<SECURITIES-GAINS> 107 447
<EXPENSE-OTHER> 1,430 4,700
<INCOME-PRETAX> 734 3,222
<INCOME-PRE-EXTRAORDINARY> 448 1,999
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 448 1,999
<EPS-PRIMARY> .35 1.58
<EPS-DILUTED> 0 0
<YIELD-ACTUAL> 0 6.70
<LOANS-NON> 0 0
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 0 2,393
<CHARGE-OFFS> 0 349
<RECOVERIES> 0 22
<ALLOWANCE-CLOSE> 0 2,467
<ALLOWANCE-DOMESTIC> 0 0
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
