UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
1-13116
Commission file number
FRANCHISE FINANCE CORPORATION OF AMERICA
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 86-0736091
- ------------------------ ----------------------
(State of Incorporation) (I.R.S. Employer
Identification Number)
The Perimeter Center
17207 North Perimeter Drive
Scottsdale, Arizona 85255
(Address of principal executive offices)
(Zip code)
Registrants' telephone number including area code (480) 585-4500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Number of shares outstanding of each of the issuer's classes of common stock as
of October 29, 1999:
Common Stock, $0.01 par value 56,034,300
----------------------------- ----------------
Class Number of Shares
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item l. Financial Statements.
FRANCHISE FINANCE CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS - SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(Amounts in thousands except share data)
(Unaudited)
September 30, December 31,
1999 1998
----------- -----------
ASSETS
Investments:
Investments in Real Estate, at cost:
Land $ 565,363 $ 496,286
Buildings and Improvements 872,587 759,444
Equipment 20,183 18,870
----------- -----------
1,458,133 1,274,600
Less-Accumulated Depreciation 199,732 185,580
----------- -----------
Net Real Estate Investments 1,258,401 1,089,020
Mortgage Loans Held for Sale 133,282 163,172
Mortgage Loans Receivable, net of allowances
of $3,570 in 1999 and $3,600 in 1998 69,456 43,343
Real Estate Investment Securities 258,300 113,692
Other Investments 15,973 14,231
----------- -----------
Total Investments 1,735,412 1,423,458
Cash and Cash Equivalents 24,653 3,881
Accrued Interest and Accounts Receivable, net of
allowances of $1,015 in 1999 and $720 in 1998 15,899 9,491
Other Assets 24,563 23,599
----------- -----------
Total Assets $ 1,800,527 $ 1,460,429
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Dividends Payable $ 27,457 $ 24,041
Notes Payable 501,436 500,168
Borrowings Under Line of Credit 339,000 188,000
Mortgage Payable to Affiliate 8,500 8,500
Accrued Expenses and Other 33,238 23,286
----------- -----------
Total Liabilities 909,631 743,995
----------- -----------
Shareholders' Equity:
Preferred Stock, par value $.01 per share,
10 million shares authorized, none issued
or outstanding -- --
Common Stock, par value $.01 per share,
authorized 200 million shares, issued and
outstanding 56,032,228 shares in 1999 and
49,063,133 shares in 1998 560 491
Capital in Excess of Par Value 925,392 773,708
Cumulative Net Income 406,068 297,823
Cumulative Dividends (441,124) (355,588)
----------- -----------
Total Shareholders' Equity 890,896 716,434
----------- -----------
Total Liabilities and Shareholders' Equity $ 1,800,527 $ 1,460,429
=========== ===========
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FRANCHISE FINANCE CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Amounts in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
9/30/99 9/30/98 9/30/99 9/30/98
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Rental $ 38,093 $ 31,569 $111,102 $ 87,350
Mortgage Loan Interest 9,132 5,696 22,074 21,287
Real Estate Investment Securities
Income 10,301 4,003 22,993 9,335
Investment Income and Other 1,946 1,715 5,034 4,767
-------- -------- -------- --------
59,472 42,983 161,203 122,739
-------- -------- -------- --------
EXPENSES:
Depreciation and Amortization 7,718 6,439 22,601 17,808
Operating, General and
Administrative 6,273 3,529 12,875 9,958
Property Costs 1,089 733 2,036 1,513
Interest 15,295 10,413 42,016 31,221
Interest (Related Party) 253 250 761 750
-------- -------- -------- --------
30,628 21,364 80,289 61,250
-------- -------- -------- --------
Income Before Realized/Unrealized Gains 28,844 21,619 80,914 61,489
Unrealized Gain on Real Estate
Investment Securities 9,200 -- 9,200 --
Gain on Sale of Assets 8,284 2,218 18,131 9,306
-------- -------- -------- --------
Net Income $ 46,328 $ 23,837 $108,245 $ 70,795
======== ======== ======== ========
Basic Net Income Per Share $ .83 $ .49 $ 1.96 $ 1.50
======== ======== ======== ========
Diluted Net Income Per Share $ .83 $ .48 $ 1.96 $ 1.49
======== ======== ======== ========
Number of Common Shares Used in
Basic Net Income Per Share 55,990 48,920 55,102 47,062
Incremental Shares from Assumed
Conversion of Options 145 316 166 387
-------- -------- -------- --------
Number of Common Shares Used in
Diluted Net Income Per Share 56,135 49,236 55,268 47,449
======== ======== ======== ========
</TABLE>
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FRANCHISE FINANCE CORPORATION OF AMERICA
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Amounts in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Issued Capital in
--------------------- Excess of Cumulative Cumulative
Shares Amount Par Value Net Income Dividends Total
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1998 49,063 $ 491 $ 773,708 $ 297,823 $(355,588) $ 716,434
Capital contributions -
Issuance of common stock 6,714 67 146,001 -- -- 146,068
Dividend reinvestment plan 246 2 5,497 -- -- 5,499
Exercise of stock options 9 -- 186 -- -- 186
Net income -- -- -- 108,245 -- 108,245
Dividends declared -
$1.47 per share -- -- -- -- (85,536) (85,536)
--------- --------- --------- --------- --------- ---------
BALANCE, September 30, 1999 56,032 $ 560 $ 925,392 $ 406,068 $(441,124) $ 890,896
========= ========= ========= ========= ========= =========
</TABLE>
4
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FRANCHISE FINANCE CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Amounts in thousands)
(Unaudited)
1999 1998
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 108,245 $ 70,795
Adjustments to net income:
Depreciation and amortization 22,601 17,808
Gain on sale of assets (18,131) (9,306)
Unrealized gain on real estate
investment securities (9,200) --
Other 6,701 7,027
--------- ---------
Net cash provided by operating activities 110,216 86,324
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property (222,328) (248,504)
Investment in mortgage loans (976,582) (391,782)
Investment in notes receivable (5,525) (25,533)
Proceeds from securitization transactions 835,980 415,858
Proceeds from sale of property 39,124 22,184
Receipt of mortgage loan and note payoffs 7,788 24,108
Collection of mortgage loan and note principal 7,246 8,454
Collection of investment security principal 4,218 2,242
--------- ---------
Net cash used in investing activities (310,079) (192,973)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (82,120) (65,573)
Proceeds from issuance of common stock 151,755 188,293
Proceeds from bank borrowings 832,000 490,000
Payment of bank borrowings (681,000) (546,000)
Proceeds from issuance of notes -- 47,500
--------- ---------
Net cash provided by financing activities 220,635 114,220
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 20,772 7,571
CASH AND CASH EQUIVALENTS, beginning of period 3,881 7,130
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 24,653 $ 14,701
========= =========
Supplemental Disclosure of Noncash Activities:
Investment in securities resulting from
securitization transactions $ 135,410 $ 41,408
Conversion of mortgage loans to property and
equipment subject to operating lease $ 3,034 $ --
Mortgage loan obtained as part of property
sale proceeds, net of deferred gain $ -- $ 1,447
5
<PAGE>
FRANCHISE FINANCE CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(1) SHAREHOLDER RIGHTS AGREEMENT:
In April 1999, the Board of Directors of FFCA adopted a shareholder rights
plan. This plan is intended to protect FFCA's shareholders in the event of
unfair takeover tactics, or an unsolicited attempt to acquire control of FFCA in
a transaction the Board of Directors believes is not in the best interests of
the shareholders. Under the plan, FFCA declared a dividend of one preferred
share purchase right (a "Right") for each outstanding share of FFCA's common
stock, payable to the stockholders of record at the close of business on April
19, 1999. Each Right entitles the registered holder to purchase from FFCA one
one-thousandth of a share of FFCA's Series A Junior Participating Preferred
Stock (the "Preferred Stock") at a price of $90, subject to adjustment.
The Rights are not exercisable except under circumstances of the
announcement of an acquisition, tender offer or exchange offer, the consummation
of which would result in the ownership by a person or group of 15% or more of
the outstanding shares of FFCA common stock. (The Rights beneficially owned by
the acquiring person or group will become void.) The Rights will expire on April
7, 2009, unless this date is advanced or extended, or unless the Rights are
earlier redeemed or exchanged by FFCA. The Board of Directors in its sole
discretion may establish the terms and conditions for the redemption of the
Rights. Until exercised or exchanged, the Rights have no vote and are not
entitled to receive dividends; however, in the event of a merger or certain
other transactions, an unexercised Right may be exchanged for certain
preferential consideration.
Each share of Preferred Stock will be entitled, when, as and if declared,
to a minimum preferential quarterly dividend payment, a minimum preferential
payment in the event of liquidation, dissolution or winding up of FFCA, and
other preferential payments or assets in the event of any merger, consolidation
or similar transaction. Each share of Preferred Stock will have one vote, voting
together with the common stock.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Franchise Finance Corporation of America ("FFCA") provides real estate financing
to multi-unit operators of chain restaurants, convenience stores and automotive
services and parts outlets. FFCA offers financing through various products,
including long-term real estate leases, mortgage loans, equipment loans and
construction financing. At September 30, 1999, FFCA had interests in 5,174
properties representing approximately $1.9 billion in gross investments in chain
store properties located throughout the United States and in Canada (although
investments in Canada are not significant). In addition to this geographic
diversification, the portfolio is also represented by more than 450 different
operators in approximately 100 retail chains. No single operator represented
over 6% of FFCA's total portfolio revenues during the quarter ended September
30, 1999. FFCA's portfolio included 2,417 chain store properties consisting of
investments in real estate mortgage loans and properties subject to leases and
2,757 properties consisting of securitized mortgage loans in which FFCA holds a
residual interest.
LIQUIDITY AND CAPITAL RESOURCES
During the third quarter of 1999, FFCA originated $525 million in new
sale-leaseback and mortgage loan investments ($1.2 billion year to date).
Approximately $224 million was invested in chain restaurant properties, $252
million in convenience stores and $49 million in automotive services and parts
outlets during the third quarter. Originations in the third quarter are
represented by $411 million in mortgage loans, $110 million in property subject
to operating leases and $4 million in notes receivable. Mortgage loans comprise
81% of FFCA's origination activity year to date in 1999 as compared to 59%
during the same period in 1998. The relative increase in mortgage loan
originations (and subsequent securitizations) is a trend that is expected to
continue in the near term because these activities are a more efficient use of
capital, providing high relative rates of return for FFCA.
FFCA's investment activities are funded initially by draws on its revolving
credit facilities and cash generated from operations. FFCA's $425 million
unsecured revolving loan facilities are used as a warehousing line until a
sufficiently large pool of portfolio investments is accumulated to warrant the
sale of loans through a securitization transaction or the issuance of additional
debt or equity securities of FFCA. As of October 29, 1999, FFCA had $180 million
available on $425 million of bank revolving loan facilities.
FFCA has available a loan sale facility with a third party, under which the
third party is currently committed to advance FFCA up to $900 million (increased
during the quarter from $600 million). This facility permits FFCA to sell loans
on a regular basis to a trust at an agreed upon advance rate. FFCA acts as
servicer for such loans following the sale to the trust. As of October 29, 1999,
FFCA had $796 million available on this $900 million loan sale facility. The
loan sale facility is scheduled to expire on December 31, 1999; consequently,
FFCA has commenced negotiations for the renewal of this facility. During the
quarter ended September 30, 1999, FFCA sold 1,025 loans with an aggregate
principal balance of $538 million through the loan sale facility, resulting in a
net gain of $5.6 million. Cash proceeds from the sales amounted to approximately
$435 million, representing approximately 80% of the mortgage loan balance, with
the remaining sale proceeds represented by trust certificates. These trust
certificates, totaling $165 million at September 30, 1999, are accounted for as
the sale of mortgage loans and the purchase of retained subordinated investment
securities. FFCA recognized unrealized gains on its trust certificates totaling
$9.2 million for the quarter.
Several factors affect FFCA's ability to complete securitizations of its loans,
including conditions in the securities markets generally, conditions in the
asset-backed securities market specifically, the credit quality of FFCA's loans,
compliance of FFCA's loans with the eligibility requirements established by the
securitization documents and the absence of any material downgrading or
withdrawal of ratings given to certificates issued in FFCA's previous
securitizations. Adverse changes in any of these factors could impair FFCA's
ability to originate and sell loans on a favorable or timely basis. FFCA's
7
<PAGE>
inability to sell or securitize loans may adversely affect FFCA's financial
performance and growth prospects. The credit markets have in recent times
experienced volatility. Continued volatility may impair FFCA's ability to
successfully securitize its loans in the future. In addition, unpredictability
in the capital and equity markets may impact FFCA's cost of borrowings and
ability to efficiently raise equity capital. Accordingly, the cost of raising
debt or equity capital may be higher in the future, which could adversely impact
FFCA's results of operations.
On October 12, 1999, certain mortgage loans originated and sold through FFCA's
loan sale facility during 1999, aggregating approximately $674 million, were
securitized and Secured Franchise Loan Trust Certificates were sold to investors
through a trust. This transaction represents FFCA's fifth and largest
securitization transaction to date, backed by 929 chain store mortgages, 61
chain store equipment loans and six commercial loans secured by real estate,
equipment or other property related to the operation of chain store facilities.
Asset-backed securities aggregating $607 million were priced in thirteen
classes, all of which were rated investment grade. The majority of the
securitized loan pool was sold to third parties, while FFCA retained
subordinated investment securities approximating 10% of the total mortgage loan
pool balance. FFCA also retained the servicing rights on the mortgage loans it
sold. The net cash proceeds resulting from the securitization transaction were
used to paydown FFCA's loan sale facility and its revolving credit facility.
The subordinated investment securities held by FFCA are the last of the
securities to be repaid from the loan pool, so that if any of the underlying
mortgage loans default, these securities take the first loss. Real estate
investment securities at September 30, 1999 totaling $258 million include these
subordinated investment securities and the trust certificates related to the
loan sale facility. As a result of the October 12, 1999 securitization
transaction, real estate investment securities were reduced to approximately
$164 million. Any future credit losses in the securitized loan pool would be
concentrated in the subordinated investment securities retained by FFCA;
however, FFCA originates and services mortgage loans and has the infrastructure
and resources to deal with potential defaults on the securitized portfolio (as
it does with the mortgage loans it holds for investment). As of September 30,
1999, delinquent mortgage loans represent less than 1% of the total securitized
loan pool balance.
Operations during the nine months ended September 30, 1999 provided net cash of
$110 million as compared to $86 million for the comparable nine-month period of
1998. The increase in cash provided by operations is primarily due to increased
revenues from the growth in the size of the portfolio. Cash generated from
operations provides distributions to the shareholders in the form of quarterly
dividends.
FFCA has a dividend reinvestment plan that allows shareholders to acquire
additional shares of FFCA stock by automatically reinvesting their quarterly
dividends. As of September 30, 1999, shareholders owning approximately 6% of the
outstanding shares of FFCA common stock participate in the dividend reinvestment
plan and dividends reinvested during the quarter ended September 30, 1999
totaled approximately $1.7 million ($5.5 million year to date). FFCA declared a
third quarter 1999 dividend of $0.49 per share, or $1.96 per share on an
annualized basis, payable on November 19, 1999 to shareholders of record on
November 10, 1999. Management anticipates that cash generated from operations
will be sufficient to meet operating requirements and provide the level of
shareholder dividends required to maintain FFCA's status as a REIT.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FFCA invests in certain financial instruments that are subject to various forms
of market risk such as interest rate fluctuations, credit risk and prepayment
risk. FFCA's primary exposure is the risk of loss that may result from the
potential change in the value of its mortgage loans and investments held for
sale as a result of changes in interest rates.
Generally, from the time the fixed-rate mortgage loans are originated until the
time they are sold through a securitization transaction, FFCA hedges against
fluctuations in interest rates through the use of derivative financial
instruments (primarily interest rate swap contracts). FFCA terminates these
contracts upon securitization of the related fixed-rate mortgage loans and, at
that time, both the gain or loss on the sale of the loans and the gain or loss
on the termination of the interest rate swap contracts will be measured and
8
<PAGE>
recognized in the statement of operations. At September 30, 1999, FFCA had
outstanding interest rate swap contracts aggregating $40 million in notional
amount. Based on the level of interest rates prevailing, FFCA would have paid
approximately $266,000 if it had terminated the swap contracts at September 30,
1999.
FFCA estimates that a hypothetical one percentage point increase or decrease in
long-term interest rates at September 30, 1999 would impact the financial
instruments described above and result in a change to net income of less than $1
million. This sensitivity analysis contains certain simplifying assumptions (for
example, it does not consider the impact of changes in prepayment risk or credit
spread risk). Therefore, although it gives an indication of FFCA's exposure to
interest rate changes at September 30, 1999, it is not intended to predict
future results and FFCA's actual results will likely vary.
RESULTS OF OPERATIONS
FFCA's operations for the third quarter of 1999 resulted in net income of $46.3
million ($.83 per share diluted) as compared to net income of $23.8 million
($.48 per share diluted) in 1998. The 94% increase in quarterly net income
between 1998 and 1999 resulted from increased revenues due to the continued
growth in FFCA's real estate investment portfolio and to unrealized gains on
investment securities and realized gains on the sale of assets. FFCA's
operations showed similar growth for the nine month period ended September 30,
1999 as compared to the same period in 1998.
Total revenues rose 38% to $59.5 million during the quarter from $43 million in
the comparable quarter of 1998 primarily due to the growth of FFCA's investment
portfolio. FFCA's primary source of revenue growth is rental revenues generated
by new investments in chain store properties. Since the third quarter of 1998,
FFCA made new investments in property subject to operating leases of
approximately $340 million, including $110 million in the third quarter of 1999.
The average base lease rate on new investments in the third quarter of 1999 was
higher than the average rate for the comparable period in 1998. Partially
offsetting the rental revenue increases generated by new investments were
decreases in rent related to properties sold.
Mortgage interest income generated by FFCA's loan portfolio totaled $9 million
for the quarter ended September 30, 1999 as compared to $5.7 million for the
comparable quarter of 1998. The majority of the mortgage interest income is
generated by mortgage loans that are held for sale. The average rate achieved on
the loans originated during the third quarter of 1999 was higher than the
average rate achieved during the third quarter of 1998. Increases and decreases
in mortgage interest income between quarters has been, and will continue to be,
impacted by the amount of loans held for sale and the timing of the sale of
these loans through securitization transactions. Although FFCA no longer
receives mortgage interest income from the mortgages it has sold, it retains
certain interests through the purchase of subordinated investment securities.
These securities generate revenues that are included in "Real Estate Investment
Securities Income" in the accompanying financial statements. Real estate
investment securities income increased to $10 million for the third quarter of
1999 as compared to $4 million for the third quarter of 1998 due to the addition
of $164 million in subordinated investment securities related to the
securitization transaction that closed in April 1999 and to the loan sale
facility transactions that occurred since September 1998.
Expenses increased to $30.6 million during the quarter from $21.4 million in the
comparable quarter of 1998. This increase was primarily due to higher interest
expense and higher operating, general and administrative expenses. For the
quarter, interest expense rose $4.9 million due to an increase in the average
borrowings outstanding during the quarter and due to increased borrowing rates.
FFCA's outstanding borrowings rose to an average of $808 million in the third
quarter of 1999 (with an average rate of 7.2%) from $567 million in 1998 (with
an average rate of 6.9%) due to an increase in investment originations.
Operating, general and administrative expenses in the third quarter of 1999
increased by $2.7 million as compared to the same quarter in 1998 primarily due
to an increase of $2 million in loss reserves in 1999.
During the quarter, FFCA sold 42 properties (as compared to 35 properties sold
in the third quarter of 1998) and recorded net gains totaling $2.7 million on
these sales, as compared to net gains of $2.2 million recorded in the third
quarter of 1998. Cash proceeds from the sale of property and from mortgage loan
and note payoffs during the quarter totaled $25.2 million ($46.9 million year to
date) and were used to fund new investments.
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YEAR 2000 READINESS
FFCA'S STATE OF READINESS. FFCA successfully implemented its new accounting and
servicing information system in January 1998 and its new property management
system was deployed in July 1998. The design and implementation of these new
systems, including related upgrades in computer hardware, was necessary to
develop a more efficient portfolio servicing system that would permit a high
level of growth in the FFCA portfolio while containing operating costs. The new
systems are also "Year 2000" compliant which means that the systems will
appropriately address any dates that refer to the 21st century. FFCA has taken a
proactive approach in dealing with the issues associated with the Year 2000 and
a five-phase process to address this challenge was approved by FFCA's computer
steering committee. This plan includes: (1) an inventory and assessment of the
systems and electronic devices that may be at risk; (2) the identification of
potential solutions; (3) the implementation of upgrades or replacements to
affected systems or devices; (4) the verification of compliance and testing of
the revised systems; and (5) the training of users on the new systems. To date,
FFCA has completed a review of its software and hardware and determined, through
a combination of internal testing and vendor representations that their products
have been tested and are compliant, that all mission-critical systems (those
systems that are necessary to conduct FFCA's business activities) are Year 2000
compliant. Non-mission critical software and hardware have also been reviewed
and FFCA has upgraded or replaced a few third-party products as part of its
ongoing maintenance of information system technology throughout 1999.
THE COSTS TO ADDRESS FFCA'S YEAR 2000 ISSUES. Costs incurred to date in
addressing Year 2000 issues have not been material. Based on current estimates
and plans, FFCA believes any additional costs of addressing Year 2000 issues
will not be material.
THE RISKS OF FFCA'S YEAR 2000 ISSUES. FFCA believes the most reasonably likely
worst-case scenario will be indirect in nature involving third parties such as
clients, vendors and suppliers that may not have successfully dealt with their
Year 2000 issues. FFCA continues to assess the key third parties that it relies
upon; however, FFCA has not yet been assured that all of the computer systems of
its clients, vendors and suppliers will be Year 2000 compliant. For example, if
suppliers of FFCA's energy or telecommunications fail to become Year 2000
compliant, such failure possibly could have an adverse effect on FFCA's ability
to conduct daily operations or to communicate with its clients and vendors.
While FFCA continues to analyze these risks, it is possible that information
relevant to such analysis will not be made available to FFCA, or that potential
solutions will not be within FFCA's control. In addition, there can be no
guarantee that FFCA's efforts will prevent a material adverse impact on its
results of operations, financial condition and cash flows. FFCA believes that
its readiness program, including the contingency plans discussed below, should
significantly reduce the adverse effect any disruptions may have.
FFCA'S CONTINGENCY PLANS. FFCA continues to monitor and evaluate its key
clients, vendors and suppliers to determine the extent that FFCA is vulnerable
to those third parties' possible failure to become Year 2000 compliant. FFCA
continues to develop contingency plans throughout 1999, on an as needed basis to
address these concerns, where reasonable to do so. These plans may include
identifying and securing alternate suppliers of services and other measures
considered appropriate by management. The contingency plans will be continually
refined as additional information becomes available.
In the opinion of management, the financial information included in this report
reflects all adjustments necessary for fair presentation. All adjustments are of
a normal recurring nature.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
This item is incorporated by reference from Item 2. "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Quantitative and
Qualitative Disclosures About Market Risk".
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PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
On October 29, 1999, Director and Chairman Emeritus of the Board of FFCA, Robert
W. Halliday, age 80, tendered his resignation, which was accepted by the Board
of Directors. In connection with his resignation, Mr. Halliday stated that he
has decided to spend additional time with his family and on family matters.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following is a complete list of exhibits filed as part of this
Form 10-Q. For electronic filing purposes only, this report contains
Exhibit 27, Financial Data Schedule. Exhibit numbers correspond to the
numbers in the Exhibit Table of Item 601 of Regulation S-K.
99.01 Third Amended and Restated Indenture Supplement, dated as of
August 27, 1999, between FFCA Franchise Loan Owner Trust 1998-1
and LaSalle Bank National Association f/k/a LaSalle National
Bank.
99.02 Amendment No. 1, dated as of August 27, 1999, to the Amended
and Restated Sale and Servicing Agreement, among FFCA Franchise
Loan Owner Trust 1998-1, FFCA Loan Warehouse Corporation, FFCA
Acquisition Corporation, Franchise Finance Corporation of
America and LaSalle Bank National Association f/k/a LaSalle
National Bank.
99.03 Amendment No. 3, dated as of August 27, 1999, to the Note
Purchase Agreement among FFCA Franchise Loan Owner Trust
1998-1, FFCA Acquisition Corporation, FFCA Loan Warehouse
Corporation, and Morgan Stanley Securitization Funding Inc.
(b) FFCA did not file any reports on Form 8-K during the quarter ended
September 30, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FRANCHISE FINANCE CORPORATION OF AMERICA
Date: November 3, 1999 By /s/ John Barravecchia
-------------------------------------
John Barravecchia, Executive Vice
President, Chief Financial Officer
and Treasurer
Date: November 3, 1999 By /s/ Catherine F. Long
-------------------------------------
Catherine F. Long, Senior Vice
President Finance and Principal
Accounting Officer
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EXHIBIT INDEX
The following is a complete list of exhibits filed as part of this Form
10-Q. For electronic filing purposes only, this report contains Exhibit 27,
Financial Data Schedule. Exhibit numbers correspond to the numbers in the
Exhibit Table of Item 601 of Regulation S-K.
Exhibit No. Description
- ----------- -----------
99.01 Third Amended and Restated Indenture Supplement,
dated as of August 27, 1999, between FFCA
Franchise Loan Owner Trust 1998-1 and LaSalle
Bank National Association f/k/a LaSalle National
Bank.
99.02 Amendment No. 1, dated as of August 27, 1999, to
the Amended and Restated Sale and Servicing
Agreement, among FFCA Franchise Loan Owner Trust
1998-1, FFCA Loan Warehouse Corporation, FFCA
Acquisition Corporation, Franchise Finance
Corporation of America and LaSalle Bank National
Association f/k/a LaSalle National Bank.
99.03 Amendment No. 3, dated as of August 27, 1999, to
the Note Purchase Agreement among FFCA Franchise
Loan Owner Trust 1998-1, FFCA Acquisition
Corporation, FFCA Loan Warehouse Corporation, and
Morgan Stanley Securitization Funding Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999 AND THE CONSOLIDATED
STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 24,653
<SECURITIES> 0
<RECEIVABLES> 16,914
<ALLOWANCES> 1,015
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,458,133
<DEPRECIATION> 199,732
<TOTAL-ASSETS> 1,800,527
<CURRENT-LIABILITIES> 0
<BONDS> 848,936
0
0
<COMMON> 560
<OTHER-SE> 890,336
<TOTAL-LIABILITY-AND-EQUITY> 1,800,527
<SALES> 0
<TOTAL-REVENUES> 161,203
<CGS> 0
<TOTAL-COSTS> 2,036
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,777
<INCOME-PRETAX> 108,245
<INCOME-TAX> 0
<INCOME-CONTINUING> 108,245
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 108,245
<EPS-BASIC> 1.96
<EPS-DILUTED> 1.96
</TABLE>
------------------------------------------------------------------------------
THIRD AMENDED AND RESTATED INDENTURE SUPPLEMENT
dated as of August 27, 1999
between
FFCA FRANCHISE LOAN OWNER TRUST 1998-1,
as Issuer
and
LASALLE BANK NATIONAL ASSOCIATION f/k/a LASALLE NATIONAL BANK,
as Indenture Trustee
FFCA FRANCHISE LOAN OWNER TRUST 1998-1
FRANCHISE LOAN BACKED NOTES SERIES 1998-1
------------------------------------------------------------------------------
<PAGE>
This Third Amended and Restated Indenture Supplement ("INDENTURE SUPPLEMENT
NO. 3") is entered into effect as of August 27, 1999, between FFCA FRANCHISE
LOAN OWNER TRUST 1998-1, a Delaware business trust, as Issuer (the "ISSUER"),
and LASALLE BANK NATIONAL ASSOCIATION f/k/a LASALLE NATIONAL BANK, as Indenture
Trustee (the "INDENTURE TRUSTEE"), which amends and restates in its entirety the
Second Amended and Restated Indenture Supplement ("INDENTURE SUPPLEMENT NO. 2"),
as entered into effect on March 18, 1999, between Issuer and Indenture Trustee,
which amends and restates in its entirety the Amended and Restated Indenture
Supplement ("INDENTURE SUPPLEMENT NO. 1"), as entered into effect on October 30,
1998, between Issuer and Indenture Trustee, which amends and restates in its
entirety the Series 1998-1 Indenture Supplement (the "ORIGINAL INDENTURE
SUPPLEMENT"), as entered into effect on August 14, 1998, between Issuer and
Indenture Trustee, which supplements and amends that certain Indenture (the
"INDENTURE") dated as of August 14, 1998 between the Issuer and the Indenture
Trustee.
PRELIMINARY STATEMENT
The Issuer was created by a trust agreement dated as of August 14, 1998
(the "TRUST Agreement"), among FFCA Loan Warehouse Corporation, as Depositor,
Franchise Finance Corporation of America, as the Company and as Paying Agent,
and Wilmington Trust Company, as Owner Trustee. The Issuer duly authorized the
execution and delivery of the Original Indenture Supplement, Indenture
Supplement No. 1, Indenture Supplement No. 2 and this Indenture Supplement No. 3
to provide for the issuance of its Franchise Loan Backed Notes, Series 1998-1
(the "NOTES"). The Notes are issuable as provided in this Indenture Supplement
No. 3 and in the Indenture.
Section 2.01 of the Indenture provides, among other things, that the Issuer
may enter into an Indenture Supplement for the purposes of authorizing a Series
of Notes and to specify certain terms of such Series of Notes. This Indenture
Supplement No. 3 is an Indenture Supplement as described in the Indenture. All
terms used in this Indenture Supplement No. 3 which are defined in the
Indenture, either directly or by reference therein, have the meanings assigned
to them therein, except to the extent that such terms are defined in this
Indenture Supplement No. 3 or unless the context clearly requires.
The parties hereto wish to amend and restate Indenture Supplement No. 2 in
its entirety in accordance with the terms of this Indenture Supplement No. 3.
NOW, THEREFORE, in consideration of the promises and the mutual agreements
hereinafter set forth, Issuer and the Indenture Trustee, intending to be legally
bound, hereby agree as follows:
Section 1. CERTAIN DEFINED TERMS. Section 2.01 of the Indenture provides
that the meaning of certain defined terms used in the Indenture shall, when
applied to a particular Series, be as defined in the Indenture Supplement with
<PAGE>
respect to such Series. Accordingly, the following definitions shall apply with
respect to the Notes:
(a) SERIES DESIGNATION. The Notes shall be designated as the Issuer's
Franchise Loan Backed Notes, Series 1998-1.
(b) CLOSING DATE. The Closing Date with respect to the Notes shall be
August 14, 1998.
(c) MATURITY DATE. The Maturity Date with respect to the Notes shall be
December 31, 1999.
(d) MAXIMUM NOTE PRINCIPAL BALANCE. The Maximum Note Principal Balance with
respect to the Notes shall be $900,000,000.
Section 2. TERMINATION OF THE REVOLVING PERIOD. The Revolving Period shall
terminate on such date as provided in Section 2.07 of the Sale and Servicing
Agreement.
Section 3. RATIFICATION OF THE INDENTURE. As supplemented and amended by
this Indenture Supplement No. 3, the Indenture is in all respects ratified and
confirmed and the Indenture as so supplemented and amended by this Indenture
Supplement No. 3 shall be read, taken and construed as one and the same
document.
Section 4. SUPPLEMENT TO GOVERN. Notwithstanding anything to the contrary
in this Indenture Supplement No. 3, to the extent that the terms of this
Indenture Supplement No. 2 conflict with the terms of the Indenture, the terms
of this Indenture Supplement No. 3 shall govern.
Section 5. ALL REQUISITE ACTION TAKEN. All things necessary to make this
Indenture Supplement No. 3 a valid agreement of the Issuer and the Indenture
Trustee in accordance with its terms have been done.
Section 6. GOVERNING LAW. THIS INDENTURE SUPPLEMENT NO. 3 SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
Section 7. COUNTERPARTS. This Indenture Supplement No. 3 may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
2
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this
Indenture Supplement No. 3 to be duly executed by their respective officers,
thereunto duly authorized and duly attested, all as of the day and year first
above written.
FFCA FRANCHISE LOAN OWNER
TRUST 1998-1
By: Wilmington Trust Company
not in its individual capacity but
solely as Owner Trustee
By: /s/ Rosemary Pantano
---------------------------------------
Name: Rosemary Pantano
Title: Financial Services Officer
LASALLE BANK NATIONAL ASSOCIATION
f/k/a
LASALLE NATIONAL BANK,
as Indenture Trustee
By: /s/ Michael B. Evans
---------------------------------------
Name: Michael B. Evans
Title: Senior Vice President
<PAGE>
STATE OF Deleware
COUNTY OF New Castle
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared Rosemary Pantano, known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said
WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual
capacity, but solely as Owner Trustee on behalf of FFCA FRANCHISE LOAN OWNER
TRUST 1998-1, a Delaware business trust, and that such person executed the same
as the act of said business trust for the purpose and consideration therein
expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 28th day of July, 1999.
/s/ Deborah L. George
----------------------------------------------
Notary Public in and for the State of New York
My commission expires:
Deborah L. George
- ----------------------------
Notary Public
My Commission Expires November 21, 1999
<PAGE>
STATE OF Illinois
COUNTY OF Cook
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared Michael B. Evans, known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of LASALLE BANK
NATIONAL ASSOCIATION f/k/a LASALLE NATIONAL BANK, a national banking
association, and that such person executed the same as the act of said
corporation for the purpose and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 28th day of July, 1999.
/s/ Michael C. Dombai
----------------------------------------------
Notary Public in and for the State of Illinois
(Seal)
My commission expires:
12-1-2001
- ----------------------------
- --------------------------------------------------------------------------------
AMENDMENT NO. 1
dated as of August 27, 1999
to the
AMENDED AND RESTATED
SALE AND SERVICING AGREEMENT,
among
FFCA FRANCHISE LOAN OWNER TRUST 1998-1
(Issuer)
FFCA LOAN WAREHOUSE CORPORATION
(Depositor)
FFCA ACQUISITION CORPORATION
(Loan Originator)
FRANCHISE FINANCE CORPORATION OF AMERICA
(Servicer)
and
LASALLE BANK NATIONAL ASSOCIATION f/k/a LASALLE NATIONAL BANK
(Indenture Trustee)
FFCA FRANCHISE LOAN OWNER TRUST 1998-1
FRANCHISE LOAN BACKED NOTES ISSUABLE IN SERIES
Dated as of March 18, 1999
- --------------------------------------------------------------------------------
<PAGE>
AMENDMENT NO. 1 TO THE
AMENDED AND RESTATED SALE AND SERVICING AGREEMENT
AMENDMENT NO. 1 TO THE SALE AND SERVICING AGREEMENT, dated as of August 27,
1999 ("AMENDMENT NO. 1") to that certain Amended and Restated Sale and Servicing
Agreement, dated as of March 18, 1999 (the "SALE AND SERVICING AGREEMENT"),
among FFCA FRANCHISE LOAN OWNER TRUST 1998-1, a Delaware business trust (the
"ISSUER" or the "TRUST"), FFCA LOAN WAREHOUSE CORPORATION, a Delaware
corporation, as Depositor (the "DEPOSITOR"), FFCA ACQUISITION CORPORATION, a
Delaware corporation, as Loan Originator (the "LOAN ORIGINATOR"), FRANCHISE
FINANCE CORPORATION OF AMERICA, a Delaware corporation ("FFCA"), as Servicer
(the "SERVICER"), and LASALLE BANK NATIONAL ASSOCIATION f/k/a LASALLE NATIONAL
BANK, a national banking association, as Indenture Trustee on behalf of the
Noteholders (in such capacity, the "INDENTURE TRUSTEE").
PRELIMINARY STATEMENTS
WHEREAS, the parties hereto have entered into the Sale and Servicing
Agreement, whereby the Trust Estate was conveyed to the Issuer;
WHEREAS, Section 12.02 provides the Sale and Servicing Agreement may be
amended in writing by the parties thereto; and
WHEREAS the parties hereto wish to make certain amendments to the Sale and
Servicing Agreement;
NOW, THEREFORE, in consideration of the promises and the mutual agreements
hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, all capitalized terms
shall have the meaning set forth in the Sale and Servicing Agreement.
2. AMENDMENT TO SALE AND SERVICING AGREEMENT.
(a) Section 1.01 is hereby amended by deleting the definition of
"LIBOR MARGIN" and by replacing such definition with the following:
LIBOR MARGIN: With respect to each day, a percentage equal to the sum of:
(a) in the case of Other Mortgage Loans: (I) the sum for all Other Mortgage
Loans of the product for each Other Mortgage Loan of (A) the applicable Loan
Margin and (B) the applicable Other Margin Balance as of such day, divided by
(II) the Note Principal Balance as of such day,
(b) in the case of Mortgage Loans (exclusive of Other Mortgage Loans) up to
$300,000,000 of related Note Principal Balance: 0.70% multiplied by a fraction,
(I) the numerator of which is the positive difference, if any, of (A) the lesser
of (i) $300,000,000 and (ii) the Note Principal Balance as of such day minus (B)
the sum of all Other Margin Balances as of such day and (II) the denominator of
which is the Note Principal Balance as of such day, and
<PAGE>
(c) in the case of Mortgage Loans (exclusive of Other Mortgage Loans) in
excess of $300,000,000 of related Note Principal Balance: 1.00% multiplied by a
fraction, (I) the numerator of which is the positive difference, if any, of (A)
the Note Principal Balance as of such day minus (B) the sum of (i) the sum of
all Other Margin Balances as of such day and (ii) the amount stated in clause
(b)(I) above, as of such day, and (II) the denominator of which is the Note
Principal Balance as of such day.
The intent of the foregoing LIBOR Margin formula is to calculate the LIBOR
Margin attributable to Other Mortgage Loans solely in clause (a) and to
calculate the LIBOR Margin attributable to Mortgage Loans in clauses (b) and (c)
based on the relative portion of Note Principal Balance attributable to such
Mortgage Loans under and in excess of $300,000,000, calculated, in the case of
(b) and (c), without counting Other Mortgage Loans.
(b) Section 1.01 is hereby amended by deleting the definition of
"PAYMENT DATE" and by replacing such definition with the following:
PAYMENT DATE: The second Business Day following each Determination Date.
From time to time, the Majority Noteholders and the Issuer may agree, upon
written notice to the Indenture Trustee, to additional Payment Dates in
accordance with SECTION 5.01(C)(3).
3. FULL FORCE AND EFFECT. Except as modified by this Amendment No. 1, the
Sale and Servicing Agreement shall otherwise remain in full force and effect
against any and all of the parties thereunder.
4. GOVERNING LAW. This Amendment No. 1 shall be governed by, and construed
in accordance with, the laws of the State of New York, without reference to its
conflicts of laws provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance therewith.
5. COUNTERPARTS. This Amendment No. 1 may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but one and the
same instrument.
<PAGE>
IN WITNESS WHEREOF the parties have executed this Amendment No. 1 as of the
date first above written.
FFCA FRANCHISE LOAN OWNER TRUST 1998-1,
as Issuer
By: Wilmington Trust Company, not in its
individual capacity but solely as
Owner Trustee
By: /s/ Rosemary Pantano
-------------------------------------------
Name: Rosemary Pantano
Title: Financial Services Officer
FFCA LOAN WAREHOUSE CORPORATION,
as Depositor
By: /s/ Dennis L. Ruben
-------------------------------------------
Name: Dennis L. Ruben
Title: Executive Vice President
FFCA ACQUISITION CORPORATION
as Loan Originator
By: /s/ Dennis L. Ruben
-------------------------------------------
Name: Dennis L. Ruben
Title: Executive Vice President
FRANCHISE FINANCE CORPORATION OF AMERICA,
as Servicer
By: /s/ Dennis L. Ruben
-------------------------------------------
Name: Dennis L. Ruben
Title: Executive Vice President
LASALLE BANK NATIONAL ASSOCIATION f/k/a
LASALLE NATIONAL BANK,
as Indenture Trustee
By: /s/ Michael B. Evans
-------------------------------------------
Name: Michael B. Evans
Title: Senior Vice President
- --------------------------------------------------------------------------------
AMENDMENT NO. 3
dated as of August 27, 1999
to the
NOTE PURCHASE AGREEMENT,
among
FFCA FRANCHISE LOAN OWNER TRUST 1998-1,
as Issuer,
FFCA ACQUISITION CORPORATION,
and
FFCA LOAN WAREHOUSE CORPORATION,
as Depositor
and
MORGAN STANLEY SECURITIZATION FUNDING INC.
as Purchaser
Dated as of August 14, 1998
- --------------------------------------------------------------------------------
<PAGE>
AMENDMENT NO. 3
TO THE
NOTE PURCHASE AGREEMENT
dated as of August 27, 1999
AMENDMENT NO. 3 TO THE NOTE PURCHASE AGREEMENT, dated as of August 27, 1999
("AMENDMENT NO. 3") to that certain Note Purchase Agreement, dated as of August
14, 1998 (the "NOTE PURCHASE AGREEMENT") among FFCA Loan Trust 1998-1 (the
"ISSUER"), FFCA Acquisition Corporation, FFCA Loan Warehouse Corporation (the
"DEPOSITOR"), and Morgan Stanley Securitization Funding Inc. ("MSSFI," and in
its capacity as Purchaser hereunder, the "Purchaser").
PRELIMINARY STATEMENTS
WHEREAS, the parties hereto have entered into that certain Note Purchase
Agreement, whereby the Purchaser agrees to purchase certain Notes;
WHEREAS Purchaser wishes to amend the Note Purchase Agreement; and
WHEREAS, Section 10.01 provides the Note Purchase Agreement may be amended
in writing by the parties thereto;
NOW, THEREFORE, in consideration of the promises and the mutual agreements
hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, all capitalized terms
shall have the meanings set forth in the Note Purchase Agreement.
2. AMENDMENT TO NOTE PURCHASE AGREEMENT.
(a) Section 1.01 is hereby amended by deleting the definition of
"COMMITMENT AMOUNT" and by replacing such definition with the following:
"COMMITMENT AMOUNT" means an amount equal to $900,000,000.
(b) Section 2.02 is hereby amended by adding at the end thereof the
following sentence:
On or prior to the date of the execution of Amendment No. 3, FFCA
Acquisition Corp. shall pay or cause to be paid to the Purchaser an additional
commitment fee equal to 0.125% multiplied by $300,000,000, multiplied by the
number of days from and excluding the date hereof to and including the Maturity
Date divided by 360 (the "Additional Commitment Fee"), to be payable by wire
transfer in immediately available funds, to the account of the Purchaser in
accordance with the instructions set forth on Schedule I hereto.
<PAGE>
3. COVENANT TO PAY. The Issuer, FFCA Acquisition Corp. and the Depositor
jointly and severally covenant to pay as and when billed by the Purchaser the
reasonable fees, disbursements and expenses of counsel to the Purchaser in
connection with the amendments to the Basic Documents effected on the date
hereof.
4. FULL FORCE AND EFFECT. Except as modified by this Amendment No. 3, the
Note Purchase Agreement shall otherwise remain in full force and effect against
any and all of the parties thereunder.
5. GOVERNING LAW. This Amendment No. 3 shall be governed by, and construed
in accordance with, the laws of the State of New York, without reference to its
conflicts of laws provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance therewith.
6. COUNTERPARTS. This Amendment No. 3 may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but one and the
same instrument.
<PAGE>
IN WITNESS WHEREOF the parties have executed this Amendment No. 3 as of the
date first above written.
FFCA FRANCHISE LOAN OWNER TRUST
1998-1, as Issuer
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee
By: /s/ Rosemary Pantano
----------------------------------------
Name: Rosemary Pantano
Title: Financial Services Officer
FFCA ACQUISITION CORPORATION
By: /s/ Dennis L. Ruben
----------------------------------------
Name: Dennis L. Ruben
Title: Executive Vice President
MORGAN STANLEY SECURITIZATION FUNDING INC.,
as Purchaser
By: /s/ Andrew B. Neuberger
----------------------------------------
Name: Andrew B. Neuberger
Title: Vice President
FFCA LOAN WAREHOUSE CORPORATION,
as Depositor
By: /s/ Dennis L. Ruben
----------------------------------------
Name: Dennis L. Ruben
Title: Vice President
<PAGE>
ACCEPTED AND AGREED
LASALLE BANK NATIONAL ASSOCIATION f/k/a LASALLE NATIONAL BANK,
as Indenture Trustee
By: /s/ Michael B. Evans
---------------------------------
Name: Michael B. Evans
Title: Senior Vice President
<PAGE>
SCHEDULE I
PURCHASER ACCOUNT INFORMATION
Bank: Citibank
ABA Routing number: 021000089 (For the Account of MSSFI)
Account number: 40739088
