EXHIBIT 10.3.4
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STATES RESOURCES CORP. LOAN PARTICIPATION
AND SERVICING AGREEMENT
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THIS AGREEMENT is effective as of this 5th day of February 1999, between
States Resources Corp., an Iowa Corporation (SRC) and Mahaska Investment
Company, an Iowa Corporation ("MIC" and/or "Participants").
WITNESSETH:
WHEREAS, SRC is engaged in the business of purchasing assets from banks,
savings associations or other entities (collectively referred to as the
"Seller(s)");
WHEREAS, the Participant may from time to time approve and agree to fund
SRC's bids to purchase such assets:
WHEREAS, SRC and the Participant wish to formalize their Agreement
providing for the liquidation of the assets purchased from Seller (Assets) and
division of the revenue from the liquidation of the Assets.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, it is agreed:
SECTION 1: DEFINITIONS
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1.1 The term "Agreement" shall mean this States Resources Corp. Loan
Participation and Servicing Agreement.
1.2 The term "Allocated Costs" shall have the meaning given to it in
Section 6.2 of this Agreement.
1.3 The term "Assets" shall mean the Assets purchased by SRC from Seller
and described in the Loan Sale Agreements between SRC and Seller(s).
1.4 The term "Participants' Return on Investment (ROI)" shall have the
meaning given to it in Section 7 of this Agreement.
1.5 The term "Budget" shall have the meaning given to it in Section 6.4 of
this Agreement.
1.6 The term "Certificates of Participation" shall have that meaning given
to it in Section 3.3 of this Agreement.
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1.7 The term "Costs" shall have that meaning given to it in Section 6.2 of
this Agreement.
1.8 The term "Costs Reimbursement" shall have that meaning given to it in
Section 2.3 of this Agreement.
1.9 The term "CSRC/MRC/ARC Loans" shall have the meaning given to it in
Section 6.2 of this Agreement.
1.10 The term "Interest Income" shall mean that portion of the Receipts
attributable to interest paid on the unpaid principal balances of the Assets.
1.11 The term "Net Interest Income" shall mean the Interest Income less
that portion of the Costs which bears the same relationship to total Costs as
the Interest Income bears to the Receipts.
In the event of a Termination With Cause, the term "Net Interest Income"
shall include the meaning given to it in Section 9.4(c) of this Agreement.
1.12 The term "Net Basis Recoveries" shall mean the Basis Recoveries less
that portion of the Costs which bears the same relationship to the total Costs
as the Basis Recoveries bears to the Receipts.
1.13 The term "Net Receipts" shall mean the Receipts less items set forth
in Section 7.3.
1.14 The term "New Servicing Corporations" shall have the meaning given to
it in Section 6.2 of this Agreement.
1.15 The term "New Servicing Corporations' Loans"shall have the meaning
given to it in Section 6.2 of this Agreement.
1.16 The term "Other SRC Loans" shall have the meaning given to it in
Section 6.2 of this Agreement.
1.17 The term "Participants" shall mean the participants identified in
the first paragraph of this Agreement.
1.18 The term "Participants' Account" shall have that meaning given to
it in Section 6.1 of this Agreement.
1.19 The term "Parties" shall mean the parties to this Agreement.
1.20 The term "Basis Recoveries" shall mean that portion of the Receipts
attributable to reductions of the Purchase Price. The Basis Recoveries portion
of Receipts shall be equal to the same ratio as the principal recoveries on the
Assets bears to the total principal of the Assets.
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1.21 The term "Purchase Price" shall have that meaning given to it in
Section 3.2 of this Agreement.
1.22 The term "Receipts" shall have that meaning given to it in Sections
6.1.
1.23 The term "Seller" shall have that meaning given to it in the first
recital paragraph of this Agreement.
1.24 The term "Servicing Fee" shall have the meaning given to it in Section
7.1 of this Agreement.
1.25 The term "Termination Date" shall have the meaning given to it in
Section 9.1 of this Agreement.
1.26 The term "Termination With Cause" shall have the meaning given to it
in Section 9.1 of this Agreement.
SECTION 2: REVIEW, EVALUATION AND PURCHASE OF THE ASSETS
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2.1 SRC purchased the Assets with the prior approval of the Participants.
This Agreement shall not be construed as creating an exclusive right of any
Participant to participate in funding the purchase of any particular assets in
the future if the Parties fail to agree on the terms of a bid to purchase such
assets or the terms of a servicing agreement with respect thereto; provided,
however, that SRC does commit to sell participations to Mahaska Investment
Company ("MIC"), or its related or affiliated entities to the extent they have
funds available for such purchases if this same Servicing Agreement is
implemented and the terms of the bid are agreed to by SRC and MIC or such
related or affiliated entity. In order to provide SRC with the ability to plan
purchases of assets, MIC and its related and affiliated entities shall provide
SRC with a statement each month of the funds they will have available for the
purchase of participation interests in assets purchased by SRC during the
following sixty (60) day period.
SRC shall periodically provide to Participants relevant information about
prospective Asset acquisitions to permit Participants the opportunity to
anticipate and plan for future capital needs.
2.2 The Participants acknowledge and agree that SRC's assessment of the
value of the Assets was a matter of judgment and that SRC shall not be liable to
the Participants for any errors in judgment in valuing the Assets.
2.3 The costs actually incurred by SRC in evaluating the Assets including
any fee charged by Seller for reviewing the Assets (Costs Reimbursement) shall
be expensed by SRC as part of SRC's costs to be reimbursed as provided by
Section 6.2.
2.4 SRC will not receive any compensation for the evaluation of the Assets
separate from the
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compensation set out in this Agreement.
2.5 MIC has already approved the bids submitted by SRC to Sellers for the
purchase of certain Assets as evidenced by copies of the Agreements and
Certificates of Participation attached hereto as Exhibits 1 through 7. The MIC
has funded the purchase of the Assets by paying the purchase price (bid amount)
to Seller required by the terms of the Loan Sale Agreement between SRC and
Sellers. MIC has purchased a participation representing a 100% participation
interest in the Assets.
2.6 SRC shall not purchase a specific group of Assets without the prior
approval of the Participants who are going to participate in funding the
purchase of such specific group of Assets. Such prior approval may be oral, but
shall subsequently be memorialized by a Purchase Addenda. This Agreement shall
not be construed as creating an exclusive right of the Participants to
participate in funding the purchase of any particular assets. If the parties
fail to agree on the terms of a bid to purchase assets or the terms of a
Purchase Addenda with respect thereto SRC may seek funding from a different
participant but shall notify MIC in writing prior to using any other participant
for the funding of a particular asset.
2.7 Upon SRC being the successful bidder for the purchase of each specific
group of Assets, the Participants shall fund the purchase of such specific group
of Assets.
SECTION 3: OWNERSHIP OF THE ASSETS
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3.1 The Assets shall be owned by SRC and shall be subject to the interests
of the Participants.
3.2 The money transferred by Participants to SRC to fund the bid to
purchase the Assets shall equal the Purchase Price of the Participants for their
participation interests in the Assets. Money advanced by Participants to SRC to
fund escrows or purchased interest related to a bid to purchase Assets shall not
be included in the Purchase Price, but shall be deemed an advance to be returned
to the Participants by SRC as soon as the escrows or purchased interest is
returned.
3.3 Subject to SRC's fees to be paid by the Participants to SRC and SRC's
Costs, the Participants shall hold participations representing 100% of the
interests in the Assets. The Participants' interests shall be represented by
Certificates of Participation, a sample copy of which is attached hereto and
labeled Exhibit "A". Each Participant shall own an undivided participation
interest in the Assets equal to that percentage calculated by dividing the
amount of the Purchase Price funded by each of them by the total Purchase Price.
3.4 The Purchase Price advanced by the Participants for their
participation interests in the Assets is not a loan by the Participants to SRC.
Nothing contained in this Agreement shall be construed to create a debtor-
creditor relationship between SRC and the Participants.
SECTION 4: ASSET DOCUMENTATION
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4.1 SRC shall cooperate with any regulators having authority over any
Participant in their
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examination of the Assets or the documentation related to the Assets.
4.2 If required by regulators having authority over any Participant, SRC
will obtain such lien searches and current collateral inspections and appraisals
with respect to the Assets as may be necessary. In all other cases, SRC shall
not be required to obtain formal collateral appraisals or inspections from third
party contractors when SRC determines that the cost is prohibitive or that
inspections and appraisals by SRC's employees will sufficiently demonstrate the
value of the Assets.
SECTION 5:
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SRC REPORTING REQUIREMENTS AND AUDITS OF SRC'S RECORDS
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5.1 SRC shall provide the Participants with such reports, in an agreed
upon format, showing all Receipts and Costs and SRC's activities with respect to
the Assets as shall be mutually agreed upon by SRC and the Participants.
5.2 The Participants shall have an unlimited right, at the sole expense of
the Participant exercising such right, to audit SRC's records.
SECTION 6: SRC'S OPERATIONS AND COSTS OF LIQUIDATION
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6.1 The Participants shall open a bank account into which all funds
received by SRC from the collection of the Assets, including without limitation
principal repayment, interest, loan fees and other charges (Receipts) shall be
deposited (Participants' Account). Subject to the obligations of the
Participants to fund SRC's Costs of operation as provided in Paragraph 6.2
below, the Participants shall have the right to withdraw the interests of the
Participants in the Receipts and the Receipts shall be deemed to have been paid
to the Participants on the day the Receipts are deposited in the Participants'
Account. MIC or such other Participant as may be designated in writing by the
Parties shall be responsible for distributing the interests of the Participants
in the Receipts to the other Participants.
SRC shall not be responsible for the distribution of Receipts to the
Participants after deposits are made by SRC in the Participants' Account.
MIC or such other Participant as may be designated in writing by the
Parties shall give SRC written advices of all funds withdrawn by it from the
Participants' Account, showing the amounts and dates of each withdrawal.
6.2 The funds necessary to meet SRC's actual costs of operation, including
expenses for protective advances and similar costs with respect to the Assets
(Costs), shall be funded from the Receipts by the Participants issuing checks
drawn on the Participants' Account payable to SRC. Such funds paid to SRC shall
be sufficient to continue the operation of SRC with respect to the Assets for
the ensuing thirty (30) day period and on a month to month basis thereafter.
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The funds paid by the Participants to SRC to meet the Costs shall not be
deemed to be an advance under Paragraph 3.2 above and shall not be included in
the Purchase Price of the Participants for their participation interests in the
Assets.
The Parties acknowledge and agree that (i) Central States Resources, Corp.
(CSRC), a corporation wholly owned by Randal Vardaman; All States Resources
Corp. (ARC), a corporation wholly owned by Randal Vardaman and Nyle Johnson, and
Midstates Resources Corp. (MRC), a corporation wholly owned by Randal Vardaman
and Nyle Johnson have purchased loans from FDIC, RTC and other entities and may
in the future purchase additional loans or other assets from other sellers
(collectively referred to herein as the "CSRC/MRC/ARC Loans"), (ii) Randal
Vardaman may form additional corporations (collectively referred to herein as
the "New Servicing Corporations") for the purchase of loans or other assets from
sellers (collectively referred to herein as the "New Servicing Corporations'
Loans"), (iii) SRC has purchased and may in the future purchase additional
assets from sellers (collectively referred to herein as the "Other SRC Loans")
and (iv) CSRC, ARC, SRC and the New Servicing Corporations now employ and may in
the future employ common facilities and employees.
Certain costs and expenses incurred by SRC (with respect to the Assets and
Other SRC Loans), CSRC, MRC and ARC (with respect to the CSRC/MRC/ARC Loans)
and/or the New Servicing Corporations (with respect to the New Servicing
Corporations' Loans), such as rent, heat, light, wages (excluding contractors'
fees), FICA, federal and state unemployment, health insurance, pension or
retirement plan contributions, employee benefits, equipment repairs and
maintenance, casualty insurance, office supplies, telephone and postage, are
not, or will not be, readily allocable to the service and collection of the
Assets, Other SRC Loans, the CSRC/MRC/ARC Loans or New Servicing Corporations'
Loans ("Allocated Costs"). The Parties therefore agree with SRC that for
purposes of calculating SRC's Costs (as defined in Section 6.2 of this
Agreement), and for the purpose of preparing SRC's Budget (as defined in Section
6.4 of this Agreement) all Allocated Costs shall be allocated between the Assets
and Other SRC Loans, CSRC, MRC, ARC and the New Servicing Corporations at the
end of each month in the same ratio, calculated as of the first business day of
the same month, that (i) the book value on the date of calculation (unpaid
principal amount, excluding charge offs) of the Assets bears to (ii) the book
value on the date of calculation (unpaid principal amount excluding charge offs)
of the sum of the Assets, Other SRC Loans, CSRC/MRC/ARC Loans and New Servicing
Corporations' Loans. Costs which are directly attributable to the servicing and
collection of the Assets, the Other SRC Loans, the CSRC/MRC/ARC Loans or the New
Servicing Corporations' Loans (such as contractor's fees, attorney's fees, owned
real estate expenses plus other expenses as the parties agree, protective
advances and other asset or other real estate expenses) shall not be allocated,
but shall be charged directly to the Assets, Other SRC Loans, CSRC/MRC/ARC Loans
or New Servicing Corporations' Loans as such costs are incurred. The Allocated
Costs shall further be attributed to the each Pool that comprises the Assets and
as is separately identified on SRC's books by ledger number.
6.4 As soon as practicable, SRC shall prepare and forward to the
Participants a budget showing anticipated Receipts and anticipated Costs for a
period of twelve (12) months (Budget). The Budget shall be revised and forwarded
by SRC to the Participants after the first six months of operations and every
six months thereafter. SRC shall include in its Budget projected expenses for
protective advances and similar costs. SRC shall submit a revised Budget in the
event there is a material change in its operations or a material change in the
book value of the Assets and Other SRC Loans, the CSRC/MRC/ARC Loans or the New
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Servicing Corporations' Loans that would materially effect the budget
projection.
The Budget shall not be strictly binding on SRC. In the event of increases
in Costs of 15% or more over the Costs reflected in the Budget (unless Receipts
have also increased a proportionate amount), SRC shall report such deviations
from the Budget to the Participants.
6.5 The cost of any equipment purchased by SRC shall be an Allocated Cost.
SRC shall not make any significant purchases of equipment which shall be
Allocated Costs without the Participants' prior consent.
6.6 The Loan Sale Agreement with Seller may provide that a portion of cash
collected by Seller following submission of the bid will be transferred to SRC.
All such cash shall be deposited by SRC in the Participants' Account and shall
be included in the meaning of the term "Receipts" as that term is used in this
Agreement. Proceeds of the return of advances for escrows and purchased
interest as defined in Section 3.2 shall be deposited in the Participant's
Account but shall not be included in the meaning of the term "Receipts."
6.7 In the event the cash transferred by Seller to SRC is not sufficient
to fund the initial Costs, the Participants shall, upon SRC's written request,
advance to SRC additional funds to enable SRC to initiate its operations. Any
such funds advanced by the Participants to SRC shall be deemed to be an
operating cost under Paragraph 6.2 above.
6.8 Nothing contained herein shall be construed as creating a liability of
SRC to pay money to the Participants except to the extent of Receipts to be
distributed to the Participants under the terms of this Agreement. The sales or
conveyances by SRC to the Participants of their participation interests in the
Assets are made without recourse to SRC.
SECTION 7: DISTRIBUTION OF RECEIPTS
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7. 1 The Receipts shall be distributed in the following order:
(1) to SRC's Costs until paid in full;
(2) to fund the Costs budgeted by SRC as provided by Secton 6.2;
(3) to the Participants and to SRC for its Servicing Fee (as
defined in Section 7.2) and to SRC for its share of the Net
Receipts (as defined in Section 7.3).
7.2 SRC shall be paid a Servicing Fee in the amount of 1.0 percent of
the Gross Receipts (Less operating/miscellaneous costs) which shall be credited
to SRC at the end of each month.
7.3 SRC shall receive a share of the "Net Receipts" as determined in the
following manner for each pool of assets which are separately identified on the
books of SRC by ledger number ("Pool"). For each six (6) month period of time
ending on June 20th and December 20th of each calendar year, for each Pool the
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Net Receipts shall be determined for each such six (6) month period equal to
the total Receipts for such period for such Pool less
a) the Basis Recoveries,
b) SRC's 1.0 percent servicing fee,
c) the operating Costs as allocated to that Pool.
Next, the Participants' Return on Investment (ROI) percentage shall be determine
for each Pool on a annualized basis by obtaining a fraction the numerator of
which shall be Net Receipts (as determined above) for the Pool multiplied by two
(2) over the denominator which shall be the Pool Purchase Price less the Pool
Basis Recoveries. The fraction shall be expressed as a decimal number rounded to
four (4) places. Said decimal shall be expressed as the Participants' ROI
percentage by moving the decimal point two places to the right.
On the date of confirmation of the purchase bid for said Pool an Index of
ROI Rates ("Index") shall be determined from the sum of: (1) the 2-year Treasury
Note Yield (note rate) ("Treasury Note Rate") as of the date of confirmation of
the purchase bid (included on the face of the Participation Certificate labeled
Exhibit "A") and (2) the following chart of basis points, (Column A), which
shall create the Index divided into ten (10) Tiers (Column B):
COLUMN A COLUMN B
MINIMUM MARGINS INDEX
4.00 ............................. ROI FIRST TIER
4.01 - 5.01 .......................... ROI SECOND TIER
5.02 - 6.01 .......................... ROI THIRD TIER
6.02 - 7.01 .......................... ROI FOURTH TIER
7.02 - 8.01........................... ROI FIFTH TIER
8.02 - 9.01 .......................... ROI SIXTH TIER
9.02 - 10.01........................... ROI SEVENTH TIER
10.02 - 11.01 .......................... ROI EIGHTH TIER
11.02 - 12.01........................... ROI NINTH TIER
*12.01................................... ROI TENTH TIER
* Greater than
The above Index shall be determined for each pool in a form equivalent to
Schedule "1." SRC shall receive a portion of the Pool Net Receipts according to
the following Table of Share Rates:
TABLE OF SRC'S PERCENTAGE SHARE RATES
To the extent Pool Net Receipts exceed the ROI Ninth Tier, then 27% of such
amount;
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To the extent Pool Net Receipts exceed the ROI Eighth Tier, but within the
Ninth Tier, then 25% of such amount;
To the extent Pool Net Receipts exceed the ROI Seventh Tier, but within the
Eighth Tier, then 23% of such amount;
To the extent Pool Net Receipts exceed the ROI Sixth Tier, but within the
Seventh Tier, then 20% of such amount;
To the extent Pool Net Receipts exceed the ROI Fifth Tier, but within the
Sixth Tier, then 17% of such amount;
To the extent Pool Net Receipts exceed the ROI Fourth Tier, but within the
Fifth Tier, then 15% of such amount;
To the extent Pool Net Receipts exceed the ROI Third Tier, but within the
Fourth Tier, then 12% of such amount;
To the extent Pool Net Receipts exceed the ROI Second Tier, but within the
Third Tier, then 7.5% of such amount;
To the extent Pool Net Receipts exceed the ROI First Tier, but within the
Second Tier, then 5% of such amount;
To the extent Pool Net Receipts do not exceed the First Tier, then 0% of
the amount.
The Participants shall pay from the Participants' Account to SRC its portion of
the Pool Net Receipts as soon as practical after the share amount is determined
on June 20th and December 20th of each calendar year.
7.4 The Participants shall pay to SRC the Servicing Fee from the
Participants' Account contemporaneous with deposits of the Receipts in the
Participants' Account.
7.5 SRC shall not be liable to the Participants for the repayment of the
Purchase Price except to the extent there are Receipts available in accordance
with the terms of this Agreement. The sales or conveyances by SRC to the
Participants of their participations are made without recourse to SRC.
SECTION 8: SRC'S STANDARD OF CARE
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8.1 SRC shall not be liable to the Participants for ordinary errors in
judgment or errors in receipting the Assets transferred by Seller. SRC shall
work to obtain the highest and best value for the Assets.
8.2 The Participants acknowledge and agree that SRC's standard of care is
not that standard of care governing a banker. Rather, SRC's standard of care is
that which a reasonable person would employ in the management and disposition of
distressed assets.
8.3 SRC shall be liable to the Participants for active misconduct, i.e.,
dishonesty, gross negligence or willful and wanton disregard of SRC's
obligations in managing the Assets.
8.4 SRC shall make the decisions regarding the appropriate dispositions of
the Assets to obtain their highest value. SRC has no obligation to sell Assets
to the Participants unless SRC first makes a determination that a sale of an
Asset at a particular time will obtain the highest value for that Asset and that
the Participant is willing to pay the same or a higher price than SRC could
obtain from some other source.
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In the event that more than one Participant is interested in purchasing a
particular Asset held by SRC and SRC has determined that a sale of that Asset at
that time will obtain the highest value for that Asset, the Participants shall
determine the procedure which shall govern which Participant is first entitled
to purchase the Asset. SRC shall not be liable to any Participant for the
failure of the Participant to purchase any particular Asset.
8.5 SRC shall meet with the Participants on a regular basis to review
SRC's progress in liquidating the Assets. The Participants may make
recommendations on liquidating the Assets and the Parties shall make every
effort to form a consensus on such matters.
SECTION 8A: SALE OF ASSETS
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The Parties agree that the highest value for the Assets, or a portion of
the Assets, may be realized by SRC bulk selling the Assets. SRC agrees that it
will obtain the Participants' consent prior to concluding any bulk sale of the
Assets. The Participants acknowledge that SRC may give certain representations
and warranties to the purchaser of the Assets and may agree to repurchase
certain Assets as a part of such sales. In the event SRC is obligated to
repurchase any such Assets sold or to make payments based upon a breach of such
representations or warranties or sale agreement, such obligations shall be paid
from the current Receipts and shall be a Cost. If the Receipts are not
sufficient to fund such obligations, then to the extent the Participants and SRC
have been paid Receipts, they shall repay such Receipts to SRC in such amount as
may be necessary to fund such obligation. The amount paid by each Participant
and SRC shall be the amount of the obligation times a fraction, the numerator of
which shall be the Net Receipts paid to such Party and the denominator of which
shall be the sum of all Net Receipts. Thereafter, Net Receipts shall be
distributed to each Party in the same proportion until such repaid amounts are
returned to the Parties. This Section 8A shall survive the termination of this
Agreement.
SECTION 9: TERMINATION OF AGREEMENT
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9.1 Subject to the provisions of this Paragraph 9.1 or unless the Parties
otherwise mutually agree in writing, this Agreement shall continue with respect
to the Assets until all of the Assets have been liquidated and the proceeds
thereof have been distributed to the Parties hereto. The Participants shall not
have the right to terminate this Agreement prior to the date 10 years following
the date of the purchase of the first Pool of Assets, unless SRC has
substantially failed to meet its obligations to the Participants (Termination
With Cause). On or after the ten (10) year anniversary following the date of the
purchase of the first Pool of Assets, any Party to this Agreement may terminate
this Agreement without cause upon six months prior written notice to the other
Parties to this Agreement. Any such notice of termination shall specify the date
of termination of this Agreement (Termination Date) which shall not be less than
six months after the date of such notice.
9.2 SRC shall have no obligation to continue servicing the Assets
following the Termination Date.
9.3 In the event this Agreement is terminated other than a Termination
With Cause, SRC shall determine the final disposition to be made of the
remaining Assets. SRC may offer such remaining Assets
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for sale in bulk unless the Participants request SRC to distribute such
remaining Assets in kind, if permitted by law with respect to each Participant,
or to distribute such remaining Assets in kind with respect to each
Participant's share to a liquidating agent designated by such Participant.
SRC is not obligated to make any such distribution in kind unless all of
the Participants have agreed to the proposed distribution in kind and SRC
consents to the proposed distribution as to those Assets to be conveyed to it or
the cash equivalent to be paid to SRC. The value of all such property
distributed in kind shall be included in the meaning of the term "Receipts" as
that term is used in this Agreement.
9.4 In the event there is a rightful Termination With Cause of SRC, SRC
shall nevertheless be entitled to (1) its Servicing Fee accrued as of the date
of Termination and (2) that part of SRC's share of the Net Receipts as of the
date of termination. In such event the formula set forth in Section 7 for
determining SRC's share of Net Receipts shall be modified so that the Receipts
acquired as of the Termination date will be include projected Receipts (based on
experience of performance) for the remainder of the six (6) month period which
would have been used in the absence of such Termination.
9.5 In the event there is a rightful Termination With Cause of SRC, as
soon as practical after the termination date Participants shall direct SRC to
transfer the Assets in kind to the Participants or to a successor servicing
agent or liquidating agent, PROVIDED, HOWEVER, before any such TERMINATION WITH
CAUSE, Participants shall give SRC a written notice specifying in detail each
such default(s) related to the TERMINATION WITH CAUSE, and stating that this
Agreement will be terminated for cause one hundred and twenty (120) days after
the giving of such notice, ("termination date") unless such default, or
defaults, are remedied within such grace period.
SECTION 10: EMPLOYMENT AND OTHER AGREEMENTS OF SRC
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10.1 The Participants' willingness to enter into this Agreement is premised
on the expertise and experience of Randal Vardaman in collecting loans. SRC
agrees that Randal Vardaman or another person of comparable skill and experience
will devote a sufficient amount of his time to the performance of the services
described in this Agreement. SRC shall consult with Participants prior to
appointing any successor to Randy Vardaman or otherwise making any significant
change in company leadership that could adversely affect the interests of the
Participants.
10.2 SRC may enter into agreements with its employees or other persons or
entities whose services are desired by SRC in performing this Agreement and may
contract to pay them a portion of SRC's share of the Receipts. Any such
agreements shall be liabilities of SRC.
SECTION 11: MISCELLANEOUS
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11.1 Any disputes between SRC and the Participants or claims by any of
them arising out of this Agreement shall be settled by arbitration in accordance
with the rules then existing of the American Arbitration Association. Such
arbitration shall be conducted in Omaha, Nebraska. Any arbitration award
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may be entered as a judgment in any court of competent jurisdiction.
11.2 In the event of Randal Vardaman's death, upon written demand by
Randal Vardaman's heirs or estate, MIC agrees to purchase his Participation
interest in the Assets, if any, at par, meaning basis plus accrued interest to
date of payment.
11.3 Nothing contained in this Agreement shall be construed as limiting
the right of any Participant to sell subparticipations in their Participation
interests, provided that no such subparticipation shall give the subparticipant
the rights of a Participant under this Agreement. Rather, any subparticipation
shall be an agreement separate and distinct from this Agreement.
11.4 Each Party warrants it has been authorized by its Board of
Directors to to execute this Agreement.
11.5 Nothing contained in this Agreement shall be construed as requiring
any act by SRC which would be contrary to SRC's obligations under the Loan Sale
Agreement between the Seller and SRC.
11.6 The Parties agree that this Agreement will not be disclosed in
any way to any person or persons, except to an attorney, accountant or similar
professional working on behalf of any of the Parties, without the consent of the
others. The Parties further agree to advise any such professional that this
Agreement is not to be disclosed by that professional. Notwithstanding the
foregoing, the Parties hereto may disclose this Agreement pursuant to a lawful
subpoena or an order requiring such disclosure of a court having jurisdiction
over any of the Parties hereto, or as may be required by authorized government
security regulators, such as the Security and Exchange Commission.
11.7 This Agreement, and the Participation Certificates shall be
construed whenever possible as being consistent. In the event of a conflict
between the construction of such documents, this Agreement shall control and be
deemed a modification of the Participation Certificates to the extent of such
conflict.
11.8 The Parties have entered into this Agreement solely for the
purposes set forth herein. Nothing contained herein shall be construed as
creating (1) an employer/employee relationship between SRC and any of its
employees on the one hand and the Participants on the other, (2) any partnership
or (3) any joint venture.
11.9 All terms not defined herein shall have the meaning set forth in
the Iowa Code unless the context in which such words appear requires otherwise.
11.10 The Parties shall execute such documents and do such acts as are
necessary to make this Agreement effective.
11.11 Acceptance of or acquiescence in a course of performance rendered
under this Agreement shall neither modify its terms nor be relevant to its
interpretation, even though the accepting or acquiescing party had knowledge of
the nature of the performance and opportunity for objection.
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11.12 The covenants and agreement of the Parties shall be binding upon
them, their legal representatives and successors. This Agreement may not be
assigned by the Parties without the written consent of all the other Parties.
11.13 All notices provided for in this Agreement shall be given by mail,
which shall be addressed as set forth below, until any party gives written
notice of a change of mailing address to all other Parties.
11.14 The words and phrases contained in this Agreement shall be
construed as singular or plural in number, and in the masculine, feminine or
neuter gender according to the context in which such words and phrases appear.
11.15 This Agreement shall be construed under the laws of the State of
Iowa.
11.16 If for any reason any provision of this Agreement shall be
inoperative, the validity and effect of the other provisions shall not be
affected thereby.
11.17 This Agreement may be executed in one or more identical
counterparts, which, when executed by all Parties, shall constitute one and the
same Agreement.
11.18 The Parties hereto may accept this Agreement by sending an executed
copy of the signature page by telefax to the other parties and by
forwarding on the same date to the other Parties the originally executed
signature page.
11.19 The Participants acknowledge that neither this Agreement, the
Participation Certificates, or any other document executed in connection
herewith is intended to constitute a "Security" within the meaning of the
Securities Act of 1933 as amended (the "Securities Act"), or any applicable
state securities laws or regulations. The Participants hereby represent and
warrant to, and agree with, SRC that they are acquiring such participations with
the intent of holding the same for investment for their own account and without
the intent to sell or otherwise transfer all or any part thereof or interest
therein, and without the intent to participate directly or indirectly in any
distribution thereof within the meaning of the Securities Act or any applicable
state securities laws or regulations. The Participants further represent and
warrant that they will not sell or transfer their participations or their other
interests in this Agreement or any part thereof except in a transaction which is
in compliance with the Securities Act and all applicable state securities laws
and regulations (or in exemption therefrom).
11.20 This writing contains the entire agreement of the Parties,
integrates all the terms and conditions mentioned in or incidental to this
Agreement and supersedes all prior negotiations and writings. No modification or
waiver of any provision of this Agreement shall be valid unless in writing and
signed by all the Parties hereto.
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STATES RESOURCES CORP.
14803 Frontier Road
Omaha, NE 68138 By /s/ Randal Vardaman
------------------------------------
Randal Vardaman, CEO
By /s/ Douglas Bartzatt
------------------------------------
Douglas Bartzatt, President
MAHASKA INVESTMENT COMPANY,
Participant
Box 1104
222 First Avenue, East
Oskaloosa, Iowa 52577 By /s/ David A. Meinert
---------------------------------------
David A. Meinert, Executive Vice President
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EXHIBIT "A"
Certificate No. _______________
AGREEMENT AND CERTIFICATE OF PARTICIPATION
(Not Negotiable)
TO: Date: ____________, 19____
(Herein called "Participant") Maturity Date:__________________
or such maturity date as may be
established under the Loan
Participation and Servicing
2-year Treasury Note Yield (note rate) Agreement
as of the date of the settlement
of the purchase bid:_________________%
Percentage of
Participation:_______________%
Participation
Share $_______________
States Resources Corp. (herein called "SRC") hereby acknowledges that SRC has
sold to Participant an undivided participation in loans and other assets (herein
collectively called "Assets") purchased by SRC from ___________________________
_________________________, pursuant to a Loan Sale Agreement, dated __________
________________, a copy of which is attached hereto and marked Exhibit "A" and
incorporated herein by reference. The Assets are evidenced by notes, security
agreements, deeds of trust, real estate contracts and other documents of title
and evidences of loans made by banks or savings associations or other lenders
described in the Loan Sale Agreement, the total purchase price for said Assets
being in the amount of$__________________________. The interest of the
Participant herein represents __________% of all Assets purchased .
Participant shall share in the Assets pursuant to the terms and conditions of
the States Resources Corp. Loan Participation and Servicing Agreement dated
__________________________, 19____ between SRC and the Participant, and attached
hereto, marked Exhibit "B" and incorporated herein by reference. The Assets
purchased pursuant to the Loan Sale Agreement are described in the list of
assets and balances attached hereto, marked Exhibit "C", and incorporated herein
by reference. Said list of Assets shall be revised on a monthly basis, pursuant
to the terms and conditions of the States Resources Corp. Loan Participation and
Servicing Agreement, to reflect the current status of Assets and their balances
on a monthly basis.
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In consideration of said purchase, SRC agrees to hold and distribute
Participant's pro rata interest in the Assets including the unpaid principal
thereof, any and all interest thereon, and any and all collateral securing same
in accordance with the States Resources Corp. Loan Participation and Servicing
Agreement.
The maturity date of this Agreement and Certificate of Participation shall be
automatically extended as provided in the States Resources Corp. Loan
Participation and Servicing Agreement.
Dated at __________________________this _____ day of __________________________,
19____.
STATES RESOURCES CORP.
By ____________________________________
Randal D. Vardaman, CEO
Accepted this _____ day of __________________________, 19____.
_______________________________________
Participant
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Schedule "1"
SCHEDULE OF INDEX ROI FOR USE WITH SECTION 7.3
OF STATES RESOURCES CORP. LOAN PARTICIPATION
AND SERVICING AGREEMENT
-----------------------
LEDGER NO.
----------
COLUMN A COLUMN B
MINIMUM MARGINS INDEX ROI
2 yr. Treasury Note Yield + 4.00 ...................FIRST TIER.....---------
%
- ---
- %
2 yr. Treasury Note Yield + 4.01 - 5.01 ............SECOND TIER....---------
- %
2 yr. Treasury Note Yield + 5.02 - 6.01 ............THIRD TIER.....---------
- %
2 yr. Treasury Note Yield + 6.02 - 7.01 ....... ....FOURTH TIER....---------
-
2 yr. Treasury Note Yield + 7.02 - 8.01.............FIFTH TIER....._________
%
- ---
- %
2 yr. Treasury Note Yield + 8.02 - 9.01 ............SIXTH TIER ...._________
- %
2 yr. Treasury Note Yield + 9.02 -10.01.............SEVENTH TIER..._________
- %
2 yr. Treasury Note Yield + 10.02 - 11.01 ..........EIGHTH TIER...._________
- %
2 yr. Treasury Note Yield + 11.02 - 12.01...........NINTH TIER ...._________
-
2 yr. Treasury Note Yield + *12.01..............TENTH TIER.... _________
%
---
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* Greater than