Exhibit 10.6(a)
[LETTERHEAD OF CS FIRST BOSTON APPEARS HERE]
August 19, 1996
Xx. Xxxxx X. Xxxxx
Franchise Mortgage Acceptance Company LLC
Five Greenwich Office Park
Greenwich, CT 06830
RE: $200 Million Repurchase Facility
Ladies and Gentlemen:
This letter of intent ("Letter") will confirm our agreement to enter into good
faith negotiations for a repurchase facility (the "Repurchase Facility") for
Franchise Mortgage Acceptance Company LLC ("FMAC") to be provided by CS First
Boston Mortgage Capital Corp. ("MCC") upon the terms and conditions described
herein. Prior to the documentation of the Repurchase Facility, MCC and/or its
agents will review the financial and operational characteristics of FMAC's
business and will give notice to FMAC in the event that such review causes MCC
to cease to work toward definitive documentation pursuant to this Letter. FMAC
will exclusively work with MCC on the subject matter hereof, and will not
commence discussions with any other broker or other entity prior to the closing
of the Repurchase Facility.
Originator and Seller: Franchise Mortgage Acceptance Company LLC ("FMAC"). The
obligations of FMAC under the Repurchase Agreement
shall be at the discretion of CS First Boston's Credit
Department and shall include standard representations
and warrants relating to Eligible Assets which would
appear in a rated franchise securitization.
Purchaser: CS First Boston Mortgage Capital Corp. ("MCC"), a
wholly-owned subsidiary of CS First Boston.
Repurchase Facility: The reverse repurchase facility ("Repurchase Facility")
by and between FMAC and MCC that shall be used by FMAC
to finance FMAC'S purchase of Eligible Assets.
Page 2
Franchise Mortgage Acceptance Company LLC
August 19, 1996
Eligible Assets: Franchise loans (the "Loans") to owners or lessees of
restaurant properties who are authorized franchisees.
Eligibility criteria may include, but are not limited
to the following:
1) The Loan was originated or purchased by FMAC in
the normal course of its business;
2) The Loans will be underwritten in accordance with
FMAC's documented and stated underwriting
standards. FMAC will furnish a copy of its
underwriting standards to MCC (i) prior to the
initial Repurchase Transaction and (ii) prior to
any changes made to such underwriting standards;
3) The Loan was not delinquent on the date that FMAC
sold the Loan to MCC.
4) The Loan was secured by either by a mortgage of
the fee interests or leasehold interests in the
real property, as well as a security interest in
the borrower's equipment and other restaurant
related personal property.
FMAC shall be required to repurchase any Loans that
cease to meet the eligibility criteria for Eligible
Asset or, that violate a representation and/or warranty
made by FMAC to MCC in respect of said Loan.
In addition, MCC may in its reasonable discretion
exclude any Loan from any Repurchase Transaction if in
MCC's sole and reasonable opinion the Loan does not
meet FMAC's underwriting guidelines.
Term of Transactions: The term of this arrangement shall extend to December
31, 1996 and commence on the date of the initial
Repurchase Transaction. Notwithstanding the previous
sentence, the Agreements shall provide that the
commitment of MCC evidenced thereby will be subject to
termination by MCC if, in its sole discretion, it is
reasonable to do so under the circumstances, taking
into consideration, among other things, the volatility
or illiquidity of the market for the Loans or
securities backed thereby, the extent and nature of any
event which is, or with notice or passage of time would
become, a Termination Event (as define below), or the
availability of financing to MCC. In the event of a
change in FMAC's ownership, MCC has the right to
immediately terminate the line, if in its sole
judgement it deems the change to be detrimental to
FMAC's
Page 3
Franchise Mortgage Acceptance Company LLC
August 19, 1996
ongoing business.
The Repurchase Facility can be extended on December 31,
1996 for an additional 12 months if mutually acceptable
to MCC and FMAC and will be subject to a new spread.
Maximum Amounts It is anticipated that no more than $200,000,000 in
of Loans: aggregate unpaid principal balance will be outstanding
under the Repurchase Agreement at any time.
Parent Guarantee: FMAC's parent Imperial Credit Industries, Inc. shall
guarantee the obligations of FMAC.
Structuring Advisory The Structuring Fee shall be paid by FMAC and shall be
Fee: 0.625% of the Maximum Amount of the Facility. The
Structuring Advisory Fee shall be earned on the date
the Repurchase Facility documents are completed. A fee
of $812,500 relating to the initial $130,000,000
financed under the Repurchase Facility shall be paid
upon completion of the Repurchase Facility
documentation. The remaining fee shall be paid in
conjunction with further transactions under the
Repurchase Facility. As FMAC makes additional draws on
the Repurchase Facility, FMAC shall pay MCC 0.625% on
the amount of the additional transactions. In any
event, FMAC shall pay MCC a total Structuring Advisory
Fee of 0.625% on the Maximum Amount of Contracts before
the termination of this Repurchase Facility. The
Structuring Advisory Fee shall be non-refundable.
Minimum Amount of It is anticipated that each purchase or resale
Loans: transaction by MCC under the Repurchase Agreement will
be at least $1,000,000 in aggregate unpaid balance.
Base Rate: U.S. one-month LIBOR reset monthly (the "Base Rate");
Interest Rate: The Interest Rate shall be computed as the sum of (i)
the Base Rate and (ii) a fixed spread for each year
during the term of the Repurchase Facility, the spread
is 1.25%.
Page 4
Franchise Mortgage Acceptance Company LLC
August 19, 1996
Paid-Off, Delinquent At the end of each calendar month any Loan that
and Ineligible Loans: has missed two payments and is still owned by MCC
under the Repurchase Agreement, FMAC immediately
shall repurchase such loan plus any accrued
interest due to MCC. Those Loans that have been
paid in full shall be deducted from the unpaid
principal balance of the Loans. In addition, any
Loan which is ineligible for securitization shall
be repurchased by FMAC. If a Loan is excluded from
securitization due to concentration of the
collateral, MCC will retain the Loan in the
Repurchase Facility until termination, and upon
termination, if the Repurchase Facility is
extended per the Term of the Transaction paragraph
above, the Loan would be placed in the new
facility.
Securitization FMAC will combine its collateral with franchise
Matters: loans originated or purchased by MCC to complete a
securitization. CS First Boston will be the
underwriter for the securitization. FMAC will pay
CS First Boston 0.50% on the principal balance of
the FMAC Loans in the securitization as an
underwriting fee. FMAC will retain all of the
economics associated with the Loans originated by
FMAC including the first loss piece of the
securitization. If for any reason FMAC does not
use CS First Boston in a securitization or other
disposition of the Loans financed under this
Repurchase Facility, FMAC will pay a 1% exit fee
(the "Exit Fee") on the outstanding principal
balance of the Loans. The Exit Fee discussed
herein only applies to the transaction terminating
December 31, 1996 and will be renegotiated for a
new facility.
Back-Up Servicer: Imperial Credit Industries, Inc.
Margin Maintenance: Subject to final determination by CS First
Boston's Credit Department, it is anticipated that
FMAC will at all times cause the Custodian to hold
Eligible Assets having a market value determined
by MCC in good faith sufficient to create an
advance rate of funds advanced to FMAC equal to
the acquisition price FMAC has paid. However each
weekly funding will have an advance not greater
than 95%. The difference between par and the
advance rate will be comprised of the discount
which FMAC reserve against the Loans held by the
Custodian. If on any business day the Margin
Requirement is not met (e.g., due to a decline in
the value of the Loans or otherwise) FMAC will
prior to 4:00 p.m. New York time on such business
day, post cash or addition Loan collateral as
needed to satisfy the Margin Requirement. The
criteria for setting the
Page 5
Franchise Mortgage Acceptance Company LLC
August 19, 1996
Margin requirements will include the following (without
limitation):
1. the term of the Repurchase Transaction
2. prevailing market conditions
3. the financial condition of FMAC
The market value of the Loans will be determined on a
monthly basis by MCC (unless at MCC's sole discretion, a
daily mark-to-market is required) based on collateral
performance, the interest rate environment and the
alternative exit strategies for the collateral.
Custodian: First Trust, (the "Custodian") will serve as custodian of
the Loans under the Repurchase Facility and cash collateral
on behalf of FMAC, MCC, and other parties (including MCC's
repurchase counterparties) pursuant to the Custody Agreement
described below. Custodial fees will be responsibility of
FMAC. Custodian and Back-Up servicer could be the same
party.
Master Repurchase A PSA Master Repurchase Agreement with supplemental terms
Agreement: attached, as modified in accordance herewith, including an
expansion of the definition of assets to include the Loans
described above under Eligible Assets.
Custody Agreement: The Custodian, FMAC and MCC shall execute a custody
agreement (the "Custody Agreement") which shall specify the
timing and nature of original loan legal documents to be
delivered by nature of original loan legal documents to be
delivered by FMAC to the Custodian.
Pursuant to the Custody Agreement, the Custodian shall
deliver a form of certification and trust receipt (to be
defined in the Custody Agreement) to MCC evidencing that
loan legal documents have been received and reviewed by the
Custodian. The Custodian shall prepare and deliver the
original certification and trust receipt to MCC on the date
of purchase of the Eligible Assets under a Reverse
Repurchase Transaction.
Page 6
Franchise Mortgage Acceptance Company LLC
August 19, 1996
Security Interest: FMAC will execute all filings giving MCC a first
priority perfected security interest in the Loans
purchase.
Policies and As a condition to executing the Repurchase Facility,
Procedures FMAC shall develop, implement, and actively monitor the
following policies and procedures (i) Loan Underwriting
Guidelines, (ii) Servicing and Collections, (iii)
Quality Control, (iv) Accounting and Financial
Reporting, (v) Risk Management and Insurance, (vi)
Licensing, (vii) Employee, (viii) Management
Information Systems, (ix) Disaster Recovery, and (x)
such other policies and procedures as may be reasonably
requested by MCC from time to time (the "Policies and
Procedures").
Reporting FMAC shall be subject to the following reporting
Requirements: requirements including, but not limited to, the
following (i) annual consolidated financial statements
audited by a big-six firm, (ii) quarterly consolidated
financial statements prepared and certified by
management, (iii) monthly consolidated financial
statements and operations reporting package prepared by
management, (iv) Eligible Asset performance data, (v)
Eligible Assets stratification reports, (vi) litigation
summary, (vii) annual budgets and monthly actual vs.
budget comparisons, (viii) three-years projections and
strategic business plan, (ix) licensing summary, and
(x) monthly servicing diskettes of all Eligible Assets,
and (xi) such other reports as may be reasonably
requested by MCC from time to time (the "Reporting
Requirements").
Repurchase Facility Such events will include, but are not limited to, the
Termination Events: following (the "Repurchase Facility Termination
Events"):
1) FMAC shall fail to observe in any material respect
any covenant, representation, term or condition
contained in the Repurchase Facility and related
transaction documents;
2) An FMAC payment default remains uncured following
a mutually agreed upon cure period;
3) A Breach of FMAC of any of their covenants or
agreements with CFBMCC;
4) A Default by FMAC on any of its material debt
instruments;
Page 7
Franchise Mortgage Acceptance Company LLC
August 19, 1996
5) A Bankruptcy of FMAC or a material adverse change in
FMAC's financial condition or operations;
6) A Representation or warrant of FMAC shall prove to be
materially incorrect;
7) FMAC's report of independent accountants' include a
"going concern" reference;
8) Either (i) a change in control and/or ownership of FMAC
other than as result of an initial public offering or
private placement of common stock or (ii) any member of
FMAC's executive management team terminates their
employment with FMAC and a suitable replacement is not
found;
9) FMAC amends its underwriting guidelines or buying
practices without obtaining the prior written consent
and approval of MCC, such approval not be unreasonably
withheld; and
10) Other items as provided for in the Repurchase Facility,
any related transaction documents, or "market"
securitization transactions of franchise loans.
Certain Termination Events shall be subject to a thirty-day
cure period during which time such event may be remedied in
order to avoid the occurrence of such Termination Event.
Upon a Termination Event, the Repurchase Facility will
terminate and no further purchases will be made by MCC and
MCC shall be entitled to all remedies set forth in the
Repurchase Facility and related transaction documents.
Covenants: Usual and customary non-financial covenants similar to those
contained in "market" securitization transaction of
franchise loans, including periodic financial reporting,
preservation of corporate existence, etc. Certain financial
covenants may be required with respect to the Servicer and
FMAC, including minimum net worth requirements (the
"Covenants").
Representations Usual and customary representations and warranties similar
and Warranties: to those contained in "market" securitization transactions
of franchise loans, including organization in good standing,
validity of agreements, valid ownership of Eligible Assets,
tax status,
Page 8
Franchise Mortgage Acceptance Company LLC
August 19, 1996
compliance with laws, litigation and underwriting
guidelines, and representations and warranties with respect
to Eligible Assets will result in the repurchase of the
Eligible Assets (the "Representations and Warranties").
Delivery Notice: Twenty-four (24) hours (or before 11:00 AM New York City
time in the event that MCC has received confirmation of
receipt by the Custodian of the delivered documents) prior
to the purchase of Eligible Assets by MCC, FMAC shall
deliver (1) the appropriate Eligible Assets document to the
Custodian as specified in the Custody Agreement and (2) a
notice of borrowing to MCC containing the following
information with respect to each Loan (the "Delivery
Notice"):
a) Loan Number
b) Borrower name
c) Borrower address
d) Franchise Concept
e) Valuation, Loan-to-Value
f) Loan APR
g) Remaining term of Loan
h) Current principal amount
i) Due date
Servicing of the FMAC and its agents shall service and administer the Loans
Eligible Assets: in a manner that is necessary and consistent with the terms
of the Repurchase Agreement and shall exercise the same care
customarily employed by FMAC and its agents in servicing
Loans for FMAC's own account in accordance with accepted
Loan servicing practices of prudent lending institutions and
giving due consideration to MCC's reliance of FMAC and its
agents. FMAC or its agents shall collect all principal and
interest payments including partial prepayments, and
prepayment in full less servicing fees and shall hold such
amounts in trust for the benefit of MCC unless otherwise
directed by MCC. FMAC or its agents shall remit such amounts
to MCC upon the request of MCC.
Either (i) FMAC shall represent and warrant that the Loans
are
Page 9
Franchise Mortgage Acceptance Company LLC
August 19, 1996
assigned to MCC on the Purchase Date free and clear of
servicing rights or agreements with third parties or (ii)
FMAC shall assign all such agreements in a manner
satisfactory to MCC. If Clause (i) of the proceeding
sentence applies, FMAC shall service the Loans for MCC as
provided in the Master Repurchase Agreement such servicing
to be terminable by MCC, without the payment of any
termination fee to FMAC, at any time subject to MCC's
obligation to re-deliver the Loans and such servicing to
FMAC on the Repurchase Date against the transfer of funds.
Power of Attorney: FMAC or its agents shall grant MCC an irrevocable power of
attorney, with full power of substitution with respect to
the Loans to (i) endorse any checks or instruments
representing payment of the Loans; (ii) prepare, complete,
execute, deliver and record any assignment of auto; (iii)
endorse and deliver any auto note; (iv) take all necessary
and appropriate action to direct the receipt of payment on
the Loans from the servicer and master servicer thereof to
MCC or its designee; (v) handle any claim relating to the
Loan; and (vi) take any action and execute any instruments
that MCC may deem necessary.
Due Diligence: MCC and its advisors shall have the right to perform
financial and operations due diligence with regard to FMAC,
and an agreed-upon sample of loans
Non-Binding This Letter does not represent a legally binding commitment
Commitment: for MCC to proceed with any portion of the transaction
contemplated herein, and is subject to the internal approval
of both MCC and FMAC and to the execution of definitive
documentation containing mutually satisfactory terms and
conditions consistent with the terms hereof.
Fees and Expenses: Upon the execution of this letter, FMAC shall be responsible
up to $75,000 for any and all legal fees, due diligence and
other out of pocket costs incurred by MCC in setting up and
administering the Reverse Repurchase Facility.
Page 10
Franchise Mortgage Acceptance Company LLC
August 19, 1996
Kindly acknowledge below your agreement to the foregoing by signing and
returning to the undersigned the enclosed extra copy of this Letter.
Sincerely,
CS First Boston Mortgage Capital CORP.
By:___________________________
Name:_________________________
Agreed:
Franchise Mortgage Acceptance Company LLC
By:___________________________
Name:_________________________
Title:________________________
Date:_________________________
