Exhibit 99.1
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MEMORANDUM
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To: Dale Hensel, Dan Barnett, Michael Caolo and Mark Herndon
From: Bill Payne, Rod Jones and Angie Carlson
Date: July 27, 2006
Subject: Term Sheet
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Below is a term sheet that is intended to lay out the basic tenets of a bridge
loan and subsequent preferred equity investments in the Company. There are two
securities to be considered - the Bridge Loan and the Series A Preferred.
We think the Company has an incredible future and would enjoy being a part of
your growth. If you agree to these terms please sign the last page and return to
Rod Jones at FAX LP's office.
Bridge Loan:
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Issuer: Mortgage Assistance Center Corporation (the "Company")
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Purchasers: TBD (the "Purchasers")
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Issue: Two $100,000 Senior Subordinated Notes (the "Notes")
with 100,000 warrants (40,000 warrants with the first
Note and 60,000 warrants with the second Note) at $0.39
per share.
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Issue Date: The Company may, at its option, cause the issuance
of each Note as soon as practical after written request
from the Company and upon acceptance of term sheets and
execution of documents.
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Maturity: Six months from the Issue Date.
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Coupon: The Notes shall accrue and pay interest of 12% per annum
to be paid in cash at maturity or conversion.
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Conversion: The Notes shall convert into Series A Preferred, as
herein defined, at the face amount upon closing of the
Series A Preferred, and the Warrants attached to the
Note shall be in addition to, and not be part of the
Warrants being issued pursuant to the Series A Preferred
stock.
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Ranking: The Notes and accrued interest thereon will be junior in
right of payment to all senior obligations of the
Company and senior in right of payment to all junior
obligations of the Company.
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Series A Preferred:
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Issuer: Mortgage Assistance Center Corporation (the
"Company")
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Purchasers: TBD (the "Purchasers").
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Issue: $3,000,000 Series A Preferred Stock (non-voting) (the
"Series A Preferred") and warrants to buy common
stock of the Company (the "Warrants", and together
the "Securities").
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Issue Date: $1.5 million of the Series A Preferred Stock shall be
issued and funded at Closing of the transaction,
provided that all but $500,000 of the Company's
existing indebtedness on the balance sheet is
restructured with no less than a two-year maturity;
and the balance of the $1.5 million, at the Company's
option, shall be issued and funded in increments of
$500,000, as individually requested by the Company,
and based on the achievement of various benchmarks to
be mutually agreed to by the Company and the
Purchasers (the "Issue Date").
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Maturity: 7 years from the initial Issue Date
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Coupon: The Series A Preferred shall pay dividends at the
rate of 10% per annum on a compounding quarterly
basis. It is the intention of the Purchasers that the
dividend be paid on a current basis but it can be
accrued until the 12-month anniversary of the initial
Issue Date.
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Liquidation Preference: In the event of any liquidation or
dissolution of the Company, the holders of the Series
A Preferred shall be entitled to receive the face
amount of the Series A Preferred outstanding plus any
accrued but unpaid dividends.
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Ranking: The Series A Preferred will be junior in right of
payment to any senior credit facilities and senior in
right of payment to the common equity.
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Warrants: The Company will issue to the Purchasers Warrants to
purchase 37.5% of the fully diluted common equity of
the Company at $0.01 per share. The Company will
register the shares underlying the Warrants no later
than 12 months after the Closing.
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Transferability: The Securities shall be transferable by the
Purchasers upon the consent of the Board of Directors
of the Company, which such consent shall not be
unreasonably withheld.
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Board Composition and The Purchasers shall be entitled to two of five Board
Compensation: seats (or three of seven Board seats). It is the
Purchasers intention and agreement that Bill Payne
and Rod Jones will fill two Board seats representing
the Purchasers' interests and Dale Hensel and Dan
Barnett will fill two Board seats representing their
respective interests. Bill Payne and Rod Jones will
receive compensation of $1,000 each per quarter
during the first year after Closing, $2,500 each per
quarter during the second year after Closing and then
$5,000 per quarter thereafter. Bill Payne and Rod
Jones shall each receive a one time grant of 75,000
warrants at $0.39 per share for their service to the
Company.
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Board Powers: A majority vote of the Board of Directors will be
required on the following actions: any material
change in the business of the Company; approval of
the annual operating and capital budget of the
Company; hiring or firing any of the top three
employees of the Company; approval of the
compensation of the top three employees of the
Company; any material change to the Option Plan of
the Company; a bankruptcy filing; selecting or
replacing the Independent Auditor; issuance of any
stock equity or stock equity linked securities;
filing or settling of any material litigation;
incurrence of any indebtedness on the Company's
balance sheet in excess of $50,000; consummation of a
significant acquisition or investment in excess of
$50,000 not in the ordinary course of business of
buying and selling individual or small groups of
mortgages or single family properties; opening of new
locations; or consummation of a liquidity event not
in the ordinary course of business of the Company.
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Approval Rights: Usual and customary, including that a majority of the
Series A Preferred holders must approve any of the
following: any amendments to the organizational
documents of the Company; a bankruptcy filing; any
changes to the rights, preferences or powers of, or
restriction provided for the benefit of, the Series A
Preferred holders; any material change in the
capitalization of the Company; any redemption or
repurchase of equity or the payment of any dividends
to the equity; and any change in the size of the
Board of Directors.
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Pre-payment None
Penalty:
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Covenants: Usual and customary, including: delivery of monthly,
quarterly and annual financial statements; annual
independent audit, delivery of notices of default,
material litigation, and material governmental
proceedings; compliance with laws and material
contractual obligations.
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Other Provisions: Usual and customary, including: anti-dilution
protection; piggyback/co-sale rights; demand and
piggyback registration rights, subject to approval of
the Company's then lead underwriter; pre-emptive
rights to purchase a pro-rata share of any future
stock equity or stock equity linked securities
(exclusive of stock equity for any outstanding
"finder's fee agreements" as of the date of Closing);
pro-rata co-sale/tag along rights on any sale or
transfer by the Company or Dale Hensel and/or Dan
Barnett, collectively, to any independent third
party.
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Representations and Normal and customary
Warranties:
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Conditions Existence of qualifying Residual Interests and
Precedent to Execution of documentation acceptable to the
Closing: Purchasers
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Legal and Accounting The Company will reimburse the Purchasers for all
Expenses: reasonable legal and accounting expenses up to a
maximum of $50,000, directly incurred pursuant to
this proposed transaction.
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Exclusivity: It is the Purchasers intention to close as quickly as
possible and we expect the Company to stand-still for
45 days in any conversations it is having with other
potential stock equity investors. The Company will
pay for all of the Purchaser's out of pocket expense
incurred up to a maximum of $50,000 if it violates
this clause.
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If you agree to the terms outlined herein please sign and return:
MORTGAGE ASSISTANCE CENTER CORP.
/s/ Dale Hensel
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DALE HENSEL, PRESIDENT
CHIEF EXECUTIVE OFFICER
AGREED TO:
/s/ William G. Payne
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William G. Payne, FAX LP