-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HN55Slo1Qbg8Pif+UAiNYqUx9keYKhWN2A5Afe1Ki2uK7VImtI3P987Wvme3Gv9w wxffvgDcwTDGcEr0vizaRA== 0000950144-00-004750.txt : 20000410 0000950144-00-004750.hdr.sgml : 20000410 ACCESSION NUMBER: 0000950144-00-004750 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000407 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST CAPITAL RESOURCES COM INC CENTRAL INDEX KEY: 0000894538 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 870438641 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 033-55254-28 FILM NUMBER: 596538 BUSINESS ADDRESS: STREET 1: 1400 EAST OAKLAND PARK BLVD STREET 2: SUITE 100 CITY: FORT LAUDERDALE STATE: FL ZIP: 33342 BUSINESS PHONE: 9545683989 MAIL ADDRESS: STREET 1: 1400 EAST OAKLAND PARK BLVD STREET 2: SUITE 100 CITY: FORT LAUDERDALE STATE: FL ZIP: 33342 FORMER COMPANY: FORMER CONFORMED NAME: JACKAL INDUSTRIES INC /NV/ DATE OF NAME CHANGE: 19980622 FORMER COMPANY: FORMER CONFORMED NAME: JACKAL INDUSTRIES INC DATE OF NAME CHANGE: 19940706 FORMER COMPANY: FORMER CONFORMED NAME: JACKAL INC DATE OF NAME CHANGE: 19940420 10-K405 1 FIRST CAPITAL RESOURCES.COM, INC. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission File No. 33-55254-28 FIRST CAPITAL RESOURCES.COM, INC. (Exact name of Registrant as specified in its charter) NEVADA 87-0438641 (State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification Number) 2650 McCormick Drive, Suite 185 Clearwater, Florida 33759 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (727) 791-6510 Securities registered pursuant to Section 12 (b) of the Act: NONE Securities registered pursuant to Section 12 (g) of the Act: NONE 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 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. [X] Yes [ ] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant as of February 28, 2000, was $650,000 based on the bid price of $.50 as reported by the OTC electronic bulletin board on that date. As of December 31, 1999, there were 11,300,000 shares of Common Stock, $.001 par value, issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE There is no annual report, proxy statement or prospectus to incorporate by reference. 2 PART I ITEM 1. DESCRIPTION OF BUSINESS. First Capital Resources.com, Inc. (the "Company" or the "Registrant") is a Nevada corporation, having first been incorporated as a Utah corporation in April, 1986, under the name Jackal Industries, Inc., and subsequently reorganized under the laws of Nevada on December 30, 1993. On April 1, 1999, FACT South, LLC, a Florida limited liability company ("FACT South"), sold 100% of the capital stock in its three subsidiaries, Carnet, Inc. ("Carnet"), Southeast Dealer Acceptance, Inc. ("SEDA"), and Affordable Dealer Services, Inc. ("Affordable"), to Jackal Industries in exchange for 10,000,000 shares of the Company's common stock, resulting in FACT South owning approximately 88.5% of the outstanding shares of the Company. First American Capital Trust, a Florida business trust ("FACT") owns approximately 92% of FACT South, making FACT the ultimate parent entity of the Company. The Company's name was changed to First Capital Resources.com, Inc., on April 13, 1999. The Company, through its wholly owned subsidiaries, Carnet, SEDA and Affordable, is involved in the automobile finance and lending business, specializing in the origination, carrying, and servicing of sub-prime (high-risk) pre-owned automobile loans and providing inventory-based "floor plan" lending services to pre-owned auto dealers in southeast Florida. Affordable, formed in October, 1998, is a commercial finance company providing floor plan lending to pre-owned car dealerships in southeast Florida. During 1999, Affordable had floor plan lending arrangements with as many as seventeen (17) pre-owned auto dealers. At December 31, 1999, such arrangements were in place with twelve (12) dealers. SEDA, formed in January 1999, engages in the business of originating, carrying, and servicing sub-prime automobile finance loans primarily in southeastern Florida. The loans are made primarily for the purchase of used vehicles by borrowers that would not be expected to qualify for traditional financing provided by commercial banks or automobile manufacturer finance companies. The loans are typically high-risk loans that carry interest rates substantially higher than auto loans to borrowers having better credit ratings. Carnet, Inc., owned a used car dealer operating in southeast Florida and received its floor plan financing through Affordable. In July of 1999, the bulk of the operations of Carnet were sold to a third party and the remaining cars and loans were purchased by Affordable and SEDA. Carnet ceased all operations in August 1999. The Company funds its operations primarily through collections of principal and interest from finance receivables. The sub-prime consumer finance business and pre-owned automobile floor planning business are intensely competitive. The Company competes with other consumer and dealer finance companies, banks, credits unions, credit card issuers and companies that finance the sale of their own goods and products. Over the last two to three years, a number of lenders have announced that they have discontinued or intend to discontinue their operations in the sub-prime lending business, are reducing or otherwise have no additional funding resources to fund sub-prime lending operations or have tightened credit standards. While this may indicate that competitive pressures are lessening, there appears to be no shortage of alternatives for auto dealers attempting to obtain floor plan financing or sales financing contracts. On June 30, 1999, the Company acquired all of the assets of American Marketing Corporation of South Florida, Inc. ("American Marketing"), a telemarketing company based in Delray Beach, Florida. American Marketing was never able to perform as expected and due to continued losses operations were closed down in December 1999. American Marketing has not been dissolved and is still in existence, but has no assets. 3 In September, 1999, FACT, the ultimate majority shareholder of the Company, filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Middle District of Florida, Tampa Division (case number 99-15934-8C1). An official committee of unsecured creditors (the "Committee") has been appointed and, together with FACT representatives, is currently constructing a Plan of Reorganization (the "Plan") for FACT. The Company may participate in the proceeding as a "proponent" of the Plan, depending on the details of the Plan approved by the Committee. The effect on the Company of being a proponent will depend on the final terms of the Plan as approved by the Bankruptcy Court. The Company received substantial funding from FACT in 1999 in the form of advances and the Bankruptcy proceeding and Plan will likely have a material affect on the Company and its operations, including requiring the Company to enter different business operations or discontinue business operations and liquidate. The Plan will be subject to approval by the creditors of FACT and the Bankruptcy Court. Because of the significance of the bankruptcy proceeding and its effects on the Company, and FACT's current inability to continue advances to fund operations of the Company, during the pendency of the bankruptcy proceedings, the Company plans to continue its collection and servicing operations but has suspended lending operations subject to the outcome of such proceedings. As discussed, the Company has discontinued its pre-owned auto sales operations. It is currently anticipated that the Company also will permanently discontinue the origination and servicing of sub-prime commercial loans and concentrate its operations in the near-term on its floor planning business. Although this is the Company's current intention, its future operations and direction will be significantly effected by the conduct and outcome of the current FACT bankruptcy proceedings. Following the filing of the bankruptcy case by FACT, all the officers and directors of the Company resigned or were removed. On October 28, 1999, Derri L. Davisson and J. Stephen Miller were elected by written consent of the majority stockholder as the board of directors of the Company and were appointed by the newly-elected board of directors as President and Secretary/Treasurer, respectively. All consumer finance operations are subject to federal and state regulations. Personal loan lending laws and laws regulating the acquisition of retail installment contracts generally require licensing of the lender, limitations on amounts, duration and charges for various categories of loans, adequate disclosure of certain contract terms and limitations on certain collection policies and creditor's remedies. Federal consumer credit statutes and regulations primarily require disclosure of credit terms in consumer finance transactions. The Company believes that its current operations comply in all material respects with all applicable laws. The Company is not otherwise aware of any existing or probable governmental regulation which will have a material effect on its business. The Company, including its wholly-owned subsidiaries, had seven employees throughout most of fiscal 1999. During the fourth quarter all seven employees either resigned or were terminated and replaced with the existing two employees who are also the officers and directors of the Company, as well as employees and Co-Trustees of FACT. Currently, certain employees of FACT provide services to the Company on an as needed basis. No employee/officer/director of the Company is being compensated as such by the Company. Subsequent to December 31, 1999, FACT began charging the Company a $6,000 per month management fee, plus a servicing fee of $30 for each retail contract serviced by FACT for the Company. This fee covers the use of FACT's offices and related office costs, as well as the use of its employees whose duties include administration, collections and accounting. There currently is no written agreement governing the management arrangement. This arrangement is expected to continue until the confirmation by the Bankruptcy Court of the FACT's Plan of Reorganization, which is not 4 anticipated to occur before August 2000. At that time, the arrangement will be reviewed for either extension or termination. The Company incurred no material costs or effects due to compliance with any environmental laws. ITEM 2. PROPERTIES. The Company owns and leases the following properties, as indicated.
Location Description - -------- ----------- 1. 1400 Oakland Park Blvd., Suite 100 4,110 sq. feet of office space previously used by the Oakland Park, Florida 33334 Company's wholly owned subsidiaries, Affordable Dealer Services and Southeast Dealer Acceptance. Lease payments are $4,357 per month and the lease expires January 2001. 2. 3031 N.E. 12th Terrace 4,800 sq. feet of warehouse space previously used by Oakland Park, Florida 33334 the Company's wholly-owned subsidiary, Carnet, Inc. The lease rate is $2,120 per month and expires March 2000, with two one-year renewal options. 3. 1819 North Dixie Highway Building and land located in Lake Worth, Palm County, Florida, County, Lake Worth, Florida 33460 formerly used by the Company's wholly-owned subsidiary, Carnet, Inc. The property was acquired from a company controlled by a former officer and director of the Company through a quit claim deed. The property is subject to a mortgage that may be currently callable by the mortgagee due to an assignment to and assumption by the Company of the mortgage without the mortgagee's consent. The mortgagee is aware of such assumption and continues to accept payments on the mortgage note from the Company.
ITEM 3. LEGAL PROCEEDINGS. On December 30, 1999, AMARK Enterprises, Inc. ("AMARK"), and South Equity Mortgage Corporation ("South Equity"), both Florida corporations, filed in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, a Verified Complaint for Damages and Other Relief against the Company and its wholly-owned subsidiary, FC Holding Corporation, a Florida corporation ("FC Holding"). The complaint alleges that the Company and its subsidiary have breached agreements with the plaintiff corporations in connection with the acquisition of assets from American Marketing Corporation of South Florida, Inc. ("American Marketing") by FC Holding. The plaintiffs seek monetary damages, indemnification for certain third party claims, and specific performance of a covenant whereby the Company allegedly agreed to issue 82,500 shares of its authorized capital stock to 5 plaintiff AMARK. The plaintiffs have verbally agreed to temporarily suspend prosecution of the case pending developments in the FACT bankruptcy matter and the Company has not yet filed an answer to the complaint. The Company believes it has counterclaims and defenses to the plaintiffs' claims. The Company is not a party to any other material legal proceeding or litigation which would impact the operations of the Company. The Company's ultimate majority shareholder, First American Capital Trust ("FACT"), filed a voluntary petition for relief from creditors under Chapter 11 of the United States Bankruptcy Code in September 1999. Although the Company has not filed for bankruptcy protection, it is possible that the Plan ultimately confirmed by the Creditor's Committee and the Bankruptcy Court will have a material adverse affect on the Company, including a curtailment or discontinuation of the Company's operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matter was submitted to the Company's security holders for a vote during the fiscal year ending December 31, 1999. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS. a) The following table shows the high and low bid prices for the Company's common stock as reported by the NASD electronic bulletin board (Bulletin Board - symbol "FCRS"), for the period commencing April 1, 1999, to December 31, 1999. Such prices reflect inter-dealer prices, may not represent actual transactions and do not include retail markup, markdown or commissions. Prior to April 1, 1999, there was not a trading market for the common stock nor had there been a trading market for all the Company's stock since its inception.
Year Quarter $ High $ Low ---- ------- ------ ----- 1999 4th 0.50 0.50 3rd 0.50 0.50 2nd 1.83 1.83 1st - -
As of February 28, 2000, there were 734 record holders of the Company's common stock. The Company has not previously declared or paid any dividends on its common stock and does not anticipate declaring any dividends in the foreseeable future. ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected historical financial data of the Company and its predecessors as of the date(s) and for the period(s) indicated. The selected consolidated financial data presented below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and related notes 6 thereof of the Company contained elsewhere in this report. Since the Company has only one complete year of operations, the data set forth above necessarily only includes the year ended December 31, 1999 and is, therefore, not of a comparative nature. Accordingly, there are no factors that may be cited as having any material affect on the comparability of such information presented. ITEM 6. SELECTED FINANCIAL DATA
Period from Year ended Inception through December 31, December 31, 1999 1998 ------------ ----------------- SUMMARY INCOME STATEMENT Interest, fees and discount accretion income 1,215,290 22,000 Interest expense (329,459) (195) ---------- ----------- Net interest income before provision for credit losses on finance receivables 885,831 21,805 Provision for credit losses on finance receivables (1,682,566) -- ---------- ----------- Net interest income (loss) after provision for credit losses (796,735) 21,805 Other income 786,332 -- Other expenses 3,948,042 30,687 ---------- ----------- Loss from continuing operations, before income tax benefit (3,958,445) (8,882) Income tax benefit -- 1,332 ---------- ----------- Loss from continuing operations (3,958,445) (7,550) Loss from discontinued operations (218,417) -- ---------- ----------- Net loss (4,176,892) (7,550) Weighted average shares outstanding 10,975,000 10,000,000 Net loss per share from continuing operations (0.36) (0.00) Net loss per share from discontinued operations (0.02) -- ---------- ----------- Net loss per share (0.38) (0.00) SELECTED BALANCES AT YEAR END Total assets 3,424,133 1,237,802 Total gross finance receivables 3,542,940 475,095 Total finance receivables (net of unearned charges) 2,591,240 475,095 Allowance for credit losses (550,675) -- Due to Parent Company 5,288,832 1,047,752 Note payable 188,880 196,600 Total stockholders' equity (deficit) (2,222,234) (6,550) SELECTED RATIOS Net loss to average total assets -179.19% -1.22% Net loss to average deficiency in assets 374.95% 264.36% Total deficiency in assets to total assets 64.9% -0.46%
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. FORWARD LOOKING STATEMENTS Except for the historical information contained herein, the matters discussed in this section, as well as in other sections of this Report on Form 10-K, include forward-looking information within the meaning of Section 27A of the Securities Act of 1933, as amended (the "1933 Act") and the Securities Exchange Act of 1934, as amended (the "1934 Act"). All statements other than statements of historical fact, including, without limitation, those with respect to the Company's objectives, plans and strategies set forth herein and those preceded by or that include the words "believes," "intends," "expects," "will," "plans," "anticipates," "projects," "estimates" or similar expressions are forward looking statements. Although the Company believes that such forward looking statements are reasonable, such statements are inherently subject to risk and uncertainties, some of which cannot be predicted or quantified. The Company can give no assurance that its expectations are correct and the Company's future results of operations could differ materially from those anticipated, underlying or contemplated by such statements. Such risks and uncertainties include: availability and terms of appropriate working capital and/or other financing, short-term interest rate fluctuations, the results of the FACT bankruptcy proceedings (including delays in proceedings and the requirement to enter into one or more new lines of operation), customers' acceptance and usage of the Company's services, actions of competitors, dependence on key personnel and general business conditions in the economy. The Company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events, or otherwise. The following disclosure, as well as all other statements in this Report on Form 10-K, and in the notes to the Company's consolidated financial statements, describe factors, among others, that could contribute to or cause such differences, or that could affect the Company's stock price. RESULTS OF OPERATIONS: REVENUES, CREDIT LOSSES, EXPENSES, AND CHARGES The Company's Net Loss for the year ended December 31, 1999 was $4,176,892. Net Loss from Continuing Operations was $3,958,445 and Loss from Discontinued Operations was $218,447. The Company had no significant business operations prior to April, 1999. Net interest revenues for the year ended December 31, 1999, were $885,831. As the Company did not have significant operations prior to January 1, 1999, it had no material revenues for the prior year. Interest revenues were derived from sub-prime auto loans to retail customers and floor plan financing loans made to pre-owned auto (used car) dealers. The Company also derived revenues of $367,067 from the sale of automobiles through its Carnet subsidiary, other fees relating to floor plan financing of $313,828 and other income of $105,437. 7 Due to the high risk of the sub-prime auto lending business and the used car dealer floor plan financing business, the Company suffered credit losses during the fiscal year ended December 31, 1999, of $1,682,566, a significant amount relative to the Company's assets and revenues. The Company currently anticipates that it will be discontinuing its sub-prime lending business and focus on floor plan financing. The Company has also recently implemented a stricter set of lending criteria. Because of these two factors, the Company believes that credit losses in the fiscal year ending December 31, 2000 will be lower than the previous fiscal year. The Company also suffered losses from discontinued operations during fiscal 1999 in the amount of $218,447 as compared to no such losses in the previous fiscal year. These losses arose from the discontinuance of the operations of American Marketing, which was purchased by the Company in July 1999 and closed in December 1999, and the discontinuation of the operations of Carnet, Inc. in the fourth quarter of 1999. All charges relating to the termination of American Marketing and Carnet operations were made in 1999. It is the Company's current plan to discontinue its sub-prime consumer financing operations and to not reenter the pre-owned automotive sales business. The Company believes this will significantly reduce credit losses in fiscal year 2000. The telemarketing operations acquired by the Company from American Marketing in 1999 have been terminated and the Company has no plans to revive those operations or reenter the telemarketing business. The Company currently anticipates that during fiscal year 2000 it will concentrate its efforts in and derive the bulk of its revenues from its floor plan financing operations. The Company will also investigate other financing opportunities not necessarily in the automobile sector. However, due to the weak financial condition of FACT, the Company's ultimate parent shareholder (and sole significant funding source), the Company does not anticipate having any source of significant capital funding in fiscal year 2000. Whether or not the Company does receive any funding from FACT will be primarily dependent on the final terms of the Plan and the ultimate outcome of the bankruptcy case. With limited capital resources and a constricted business operation, the Company expects its revenues will be significantly lower in fiscal year 2000 as compared to 1999. Operating and Other Expenses ("operating expenses") for the year ended December 31, 1999, were $3,948,042. The Company had no operating expenses during the previous fiscal year. The Company provided for $1,632,341 in credit losses relating to loans that had been made in 1999 and to prepaid compensation that had been paid to former officers prior to their termination. The Company also recorded a loss on the write down of equipment and property. Operating expenses also consisted of the cost of automobile sales by its Carnet subsidiary of $337,960, the cost of repossessions by its SEDA subsidiary in the amount of $219,626, salaries and consulting services of $721,201, loss on disposals and impairment of property and equipment of $494,705, and other operating expenses of $542,209. Included in the $1,632,341 of credit losses for the year was $292,096 for one year of prepaid salaries and management fees paid to former officers of the Company in September 1999. The Company is currently trying to recover these amounts. Since the Company is not currently paying any officers or employees, salaries and management fees should be significantly less in fiscal year 2000, although this reduction will be offset somewhat by the management fees being paid to FACT at least through August of 2000. The Company is in the process of closing its office in Oakland Park Florida. The Company's operations are currently being managed from the Clearwater, Florida, offices of FACT. The Company is not currently paying any officers or directors and it has no paid employees. However, FACT currently charges the Company approximately $13,000 per month to service all of its operations, which includes a $6,000 general management fee and $30 per loan servicing fee. This arrangement will continue at least through August 2000 and could be extended for 8 an indefinite period. The Company believes that this arrangement will significantly reduce the Company's operating expenses for the Company's fiscal year 2000 as compared to the previous year. FINANCIAL CONDITION: LIQUIDITY AND CAPITAL RESOURCES The Company's ultimate parent shareholder, FACT, has filed for relief from creditors under Chapter 11 of the United States Bankruptcy Code. FACT was the Company's primary financing source in fiscal 1999 through intercompany advances. As a result of the bankruptcy proceedings, FACT may not be financially able or willing to provide any financing in fiscal 2000 or at any other future time. Additionally, loans and advances are currently outstanding from the Company and certain of its subsidiaries to FACT in the aggregate amount of $5,288,832. The loans are secured by the assets of the companies and are currently accruing no interest. FACT may seek to collect all amounts outstanding at any time. As a result of the current financial condition of FACT and the pending Bankruptcy proceedings, the Company believes that it will receive no further funding from FACT and that the advances and other loans currently outstanding to FACT will be called in the near future, creating further liquidity problems for the Company. The Company currently has finance receivables of $2,040,565. These receivables consist of floor plan receivables in the amount of $1,378,975 and sub-prime auto loan receivables in the amount of $661,590. The sub-prime retail loans are net of a credit reserve of $550,675. The Company also has assets consisting of $522,329 in various loans receivable after reserving for non-collection of $1,402,700. These loans are at varying rates of interest and are due from both arm's length and non- arm's length parties. The Company has a deficiency in assets of $2,222,234 consisting of paid-in capital and common stock of $1,962,208 and a deficit of $4,184,442. The Company believes that shareholder equity should remain stable in the first six months of fiscal 2000 as a result of expected break-even operations as the Company decides on a course of actions in relation to the Bankruptcy proceeding of FACT. Shareholder equity could be effected in a material adverse manner depending on the progress and outcome of the FACT Bankruptcy proceedings. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK NONE ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 9 =============================================================================== FIRST CAPITAL RESOURCES.COM, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1999 AND FOR THE PERIOD FROM INCEPTION (OCTOBER 21, 1998) TO DECEMBER 31, 1998 =============================================================================== 10 C O N T E N T S Page - ------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT 1 CONSOLIDATED FINANCIAL STATEMENTS Balance Sheets 2 Statements of Operations 3 - 4 Statements of Changes in Deficiency in Assets 5 Statements of Cash Flows 6 Notes to Financial Statements 7 - 19 SUPPLEMENTARY SCHEDULE Schedule II - Valuation and Qualifying Accounts S-1 11 INDEPENDENT AUDITORS' REPORT =============================================================================== Board of Directors and Stockholders First Capital Resources.Com, Inc. Clearwater, Florida We have audited the accompanying consolidated balance sheets of First Capital Resources.Com, Inc. and Subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of operations, changes in deficiency in assets and cash flows for the year ended December 31, 1999 and for the period from inception (October 21, 1998) to December 31, 1998. Our audits also included the financial statement schedule listed in the Table of Contents as Schedule II for the year ended December 31, 1999. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First Capital Resources.Com, Inc. and Subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for the year ended December 31, 1999 and for the period from inception (October 21, 1998) to December 31, 1998, in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects, the information set forth therein. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3, the Company has sustained substantial operating losses and negative cash flows from operations since inception and the Company's 81.42% Parent has filed for bankruptcy. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company can not continue in existence. KAUFMAN, ROSSIN & CO. /s/ Kaufman, Rossin & Co. Miami, Florida February 18, 2000 12 FIRST CAPITAL RESOURCES.COM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1999 AND 1998
=========================================================================================== ASSETS 1999 1998 =========================================================================================== FINANCE RECEIVABLES (NOTE 5) $ 2,040,565 $ 475,095 CASH 596,515 121,709 LOANS RECEIVABLE (NOTE 6) 522,329 -- PROPERTY AND EQUIPMENT (NOTE 7) 20,450 274,964 REAL ESTATE HELD FOR SALE (NOTE 7) 171,000 300,000 OTHER ASSETS 73,274 66,034 - ------------------------------------------------------------------------------------------- TOTAL ASSETS $ 3,424,133 $ 1,237,802 =========================================================================================== LIABILITIES AND DEFICIENCY IN ASSETS =========================================================================================== LIABILITIES Accounts payable and other liabilities $ 168,655 $ -- Due to Parent (Note 8) 5,288,832 1,047,752 Note payable (Note 9) 188,880 196,600 - ------------------------------------------------------------------------------------------- Total liabilities $5,646,367 1,244,352 - ------------------------------------------------------------------------------------------- COMMITMENTS (NOTE 11) DEFICIENCY IN ASSETS Common stock, $0.001 par value; 100,000,000 shares authorized, 11,300,000 and 10,000,000 issued and outstanding, respectively 11,300 10,000 Additional paid-in capital 1,950,908 (9,000) Deficit (4,184,442) (7,550) - ------------------------------------------------------------------------------------------- Total deficiency in assets (2,222,234) (6,550) - ------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND DEFICIENCY IN ASSETS $ 3,424,133 $ 1,237,802 ===========================================================================================
See accompanying notes. 2 13 FIRST CAPITAL RESOURCES.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1999 AND FOR THE PERIOD FROM INCEPTION (OCTOBER 21, 1998) TO DECEMBER 31, 1998
=========================================================================================== 1999 1998 =========================================================================================== INTEREST Interest, fees and discount accretion income $ 1,215,290 $ 22,000 Interest expense (329,459) (195) - ------------------------------------------------------------------------------------------- Net interest income 885,831 21,805 PROVISION FOR CREDIT LOSSES ON FINANCE RECEIVABLES (1,682,566) -- - ------------------------------------------------------------------------------------------- NET INTEREST INCOME (LOSS) AFTER PROVISION FOR CREDIT LOSSES (796,735) 21,805 - ------------------------------------------------------------------------------------------- OTHER INCOME Sales of automobiles 367,067 -- Fee income 181,136 -- Inventory control services income 132,692 -- Other interest income 43,862 -- Other income 61,575 -- - ------------------------------------------------------------------------------------------- Total other income 786,332 -- - ------------------------------------------------------------------------------------------- OPERATING AND OTHER EXPENSES Provision for credit losses on loans receivable and prepaid compensation (Notes 6 and 8) 1,632,341 -- Loss on disposals and impairment of property and equipment 494,705 -- Consulting services 434,341 5,315 Cost of automobiles sold 337,960 -- Salaries and wages 286,860 -- Cost of repossessions 219,626 -- Professional fees 168,516 2,000 Other operating expenses 373,693 23,372 - ------------------------------------------------------------------------------------------- Total operating and other expenses 3,948,042 30,687 - ------------------------------------------------------------------------------------------- LOSS FROM CONTINUING OPERATIONS, BEFORE INCOME TAX BENEFIT (3,958,445) (8,882) INCOME TAX BENEFIT -- 1,332 - ------------------------------------------------------------------------------------------- LOSS FROM CONTINUING OPERATIONS (3,958,445) (7,550) - ------------------------------------------------------------------------------------------- DISCONTINUED OPERATIONS (NOTE 4) Loss from operations of discontinued retail car lot and telemarketing division, net of income tax benefit of $0 (27,057) -- Loss on disposal of retail car lot and telemarketing division, net of income tax benefit of $0 (191,390) -- - ------------------------------------------------------------------------------------------- Loss from discontinued operations (218,447) -- - ------------------------------------------------------------------------------------------- NET LOSS $(4,176,892) $ (7,550) ===========================================================================================
See accompanying notes. 3 14 FIRST CAPITAL RESOURCES.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Continued) YEAR ENDED DECEMBER 31, 1999 AND FOR THE PERIOD FROM INCEPTION (OCTOBER 21, 1998) TO DECEMBER 31, 1998
============================================================================================ 1999 1998 ============================================================================================ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 10,975,000 10,000,000 ============================================================================================ NET LOSS PER SHARE: From continuing operations $(0.36) $(0.00) From discontinued operations (0.02) - - --------------------------------------------------------------------------------------------- Total loss per share $(0.38) $(0.00) ============================================================================================
See accompanying notes. 4 15 FIRST CAPITAL RESOURCES.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIENCY IN ASSETS YEAR ENDED DECEMBER 31, 1999 AND FOR THE PERIOD FROM INCEPTION (OCTOBER 21, 1998) TO DECEMBER 31, 1998
================================================================================================================================= Additional Number Common Paid-in of shares Stock Capital Deficit Total ================================================================================================================================= Issuance of common stock 10,000,000 $10,000 $ (9,000) $ -- $ 1,000 Net loss -- -- -- (7,550) (7,550) - --------------------------------------------------------------------------------------------------------------------------------- Balance at January 1, 1999 10,000,000 10,000 (9,000) (7,550) (6,550) Acquisition of net assets of First Capital Resources.Com (Note 2) 1,300,000 1,300 -- -- 1,300 Contributed capital -- -- 1,651,000 -- 1,651,000 Imputed interest on advances from Parent (Note 8) -- -- 308,908 -- 308,908 Net loss -- -- -- (4,176,892) (4,176,892) - --------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 11,300,000 $11,300 $ 1,950,908 $(4,184,442) $ 2,222,234 =================================================================================================================================
See accompanying notes. 5 16 FIRST CAPITAL RESOURCES.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31, 1999
=================================================================================================================================== 1999 1998 =================================================================================================================================== CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(4,176,892) $( 7,550) - ----------------------------------------------------------------------------------------------------------------------------------- Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation 5,425 15,472 Imputed interest on advances from Parent 308,908 -- Provision for credit losses on finance receivables 550,675 -- Provision for credit losses on loans receivables and prepaid compensation 1,402,700 -- Loss on impairment 129,000 -- Loss on disposal of property and equipment 559,844 -- Increase in other assets (72,780) (1,332) Increase in accounts payable 168,655 -- - ----------------------------------------------------------------------------------------------------------------------------------- Total adjustments 3,052,427 14,140 - ----------------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) operating activities (1,124,465) 6,590 - ----------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Cash paid for purchase of assets of American Marketing of South Florida (100,000) -- Capital expenditures (62,899) (290,436) Purchase of finance contracts (2,611,849) (44,702) Proceeds from the repayment of finance contracts 564,180 -- Increase in floor plan receivables (1,860,327) (475,095) - ----------------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (4,070,895) (810,233) - ----------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net amounts advanced by Parent 5,288,832 924,352 Principal paydowns on note payable (7,720) -- Proceeds from the issuance of common stock -- 1,000 Capital contributed by shareholders 389,054 -- - ----------------------------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 5,670,166 925,352 - ----------------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN CASH 474,806 121,709 CASH - BEGINNING OF YEAR 121,709 -- - ----------------------------------------------------------------------------------------------------------------------------------- CASH - END OF YEAR $ 596,515 $ 121,709 =================================================================================================================================== Supplemental Disclosures of Non-Cash Transactions: - ----------------------------------------------------------------------------------------------------------------------------------- Land and building acquired from Parent Company, net of related mortgage of $196,600 in exchange for debt $ -- $ 103,400 =================================================================================================================================== Note receivable assigned by Parent Company, in exchange for debt $ -- $ 20,000 =================================================================================================================================== Conversion of debt owed to Parent $ 1,047,752 $ -- =================================================================================================================================== Finance contracts contributed to capital $ 79,292 $ -- =================================================================================================================================== Property and equipment contributed to capital $ 134,902 $ -- =================================================================================================================================== Interest paid $ 20,551 $ -- =================================================================================================================================== Note receivable obtained in exchange for assets of Carnet $ 80,000 $ -- ===================================================================================================================================
6 17 FIRST CAPITAL RESOURCES.COM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS =============================================================================== NOTE 1. SIGNIFICANT ACCOUNTING POLICIES =============================================================================== CONSOLIDATION The consolidated financial statements include the accounts of First Capital Resources.Com, Inc. and its Subsidiaries (the Company). All significant intercompany balances and transactions have been eliminated in consolidation. BUSINESS ACTIVITY The Company operates as a consumer finance company specializing in the purchase and servicing of sub-prime automobile loans and as a commercial finance company providing fee based floor plan lending to pre-owned automobile dealerships throughout South Florida. Consumers comprising the automobile loan finance receivables generally would not be expected to qualify for traditional financing such as that provided by commercial banks or automobile manufacturer's captive finance companies. During 1999, the Company also owned and operated a pre-owned automobile dealership which was discontinued in 1999 (see Note 4). Automobile loans and floor plan lending activities represented approximately 60% and 40% of interest and discount accretion income respectively for the period ended December 31, 1999, and floor plan lending activities resulted in all of the fee income. For the period from inception (October 21, 1998) to December 31, 1998, all interest and fee income is related to floor plan lending activities. Although not its principal business activity, the Company has provided inventory control services and other non-traditional funding services, principally unsecured lending to a certain yacht brokerage company and unsecured lending to certain of its dealership customers. CONCENTRATIONS Seven customers comprised the total balance in floor plan receivables and two customers accounted for approximately 67% of floor plan receivables at December 31, 1999. The Company provides floor plan financing to, and acquires finance contracts from a network of automobile dealers located primarily in South Florida. Substantially all underlying borrowers are also located in this geographic area. Exposure to losses on contracts varies by borrower. The Company monitors exposure to credit losses and maintains allowances for anticipated losses, which management considers to be appropriate under the circumstances. The Company, from time to time, maintains deposits with financial institutions in excess of federally insured limits. 7 18 =============================================================================== NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued) =============================================================================== USE OF ESTIMATES The accounting and reporting policies of the Company are in conformity with generally accepted accounting principles and general practices within the finance industry. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the balance sheet date and the reported amounts of revenues and expenses for the periods presented. Actual results could differ from those estimates. The allowance for credit losses is an estimate which is established through charges to earnings. Loans which are determined to be uncollectible are charged against the allowance and any subsequent recoveries are credited to the allowance. The allowance for credit losses is maintained at an amount considered by management to be adequate to absorb potential credit losses based upon an evaluation of known and inherent risks in the portfolios. Management's periodic evaluation takes into consideration both the timing and severity of losses experienced by both the Company and the industry. Future adjustments to the reserve may be necessary if conditions differ substantially from the assumptions used in making the evaluation. Given the nature of lending activities, it is reasonably possible the Company's estimate of the allowance for credit losses could materially change in the near future. The reserve for uncollectible loans receivable is an estimate which was established through charges to earnings upon evaluation of the outstanding loans receivable at December 31, 1999. Management's judgement in determining the adequacy of this reserve was based upon several factors which include, but are not limited to, the nature of the loans receivable, the availability of collateral, the financial strength of each respective debtor, and the ability of the Company to effectuate collection of the loans receivable. It is reasonably possible the Company's estimate of the reserve for non-collectible loans receivable could materially change in the near future. The Company has recorded a deferred tax asset of approximately $1,572,600 resulting from the benefit of approximately $2,224,000 in net operating loss carryforwards and $1,950,000 of other temporary differences related to allowances for credit losses. Realization of this asset is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Management believes, based upon the short operating period of the Company and the bankruptcy of the 81.42% Parent of the Company (see Note 3), among other things, the uncertainty of generating taxable income is such that it is more likely than not that none of the deferred tax asset will be realized, and accordingly has established a valuation allowance of 1,572,600 fully offsetting this asset. It is reasonably possible the Company's estimate of realizability of the deferred tax asset could materially change in the near term. 8 19 =============================================================================== NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued) =============================================================================== REVENUE RECOGNITION Interest income on automobile loans consists of both contractual interest and purchase discount accretion and is recognized over the contractual term of the finance contracts using the interest method. Purchase discount represents the differential, if any, between the amount financed on a loan contract and the price paid by the Company to acquire the loan contract, net of any acquisition costs. Accrual of interest income ceases at the earlier of when a contract becomes delinquent by 60 days or the underlying collateral is repossessed. At December 31, 1999, the Company had approximately $175,000 in non-accrual finance contracts. Interest income that would have been recorded if such loans were performing in accordance with their terms was approximately $73,000 for the period ended December 31,1999. Interest income on fee based floor plan lending consists principally of administration and floor fee income earned on short duration (less than 30 day) advances to dealerships. Typically, these fees are received in advance, are non-refundable and are recognized upon receipt. AUTOMOBILE FINANCE RECEIVABLES The Company purchases finance contracts from pre-owned automobile dealerships at discounts based on, among other things, the credit risk of the borrower. Principally all automobile finance receivables are collateralized by motor vehicles. The purchase discount is amortized as an adjustment to the yield of the related finance contracts over the contractual life of the related loans. As part of the Company's financing program with dealers, agreements are entered into whereby holdbacks are established to protect the Company from potential losses. Pursuant to the agreements, when the Company acquires contracts, it withholds a portion of the proceeds from the dealers to absorb credit losses. Holdback amounts are refunded to the dealers if the contract performs throughout its term. In cases where the dealers holdbacks are not adequate to cover potential losses, the Company establishes an allowance for losses by charging a provision against earnings. FLOOR PLAN RECEIVABLES According to floor plan financing agreements, amounts advanced to dealerships on floor plan receivables are collateralized by each dealerships' automobile inventory and dealer bonds; however, in substantially all cases where dealerships have defaulted on repayment, the Company has not been successful in effectuating collection through repossession or execution on bonds. 9 20 =============================================================================== NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued) =============================================================================== IMPAIRMENT OF LOANS The Company has adopted Financial Accounting Standards Board Statement of Financial Accounting Standards ("SFAS") No. 114, Accounting by Creditors for Impairment of a Loan. This standard addresses the accounting for the impairment of certain loans when it is probable that all amounts due pursuant to the contractual terms of the loan will not be collected. Under the provisions of this standard a loan is impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Individually identified impaired loans are measured based on the present value of payments expected to be received, using the historical effective loan rate as the discount rate. Alternatively, measurement may also be based on observable market prices, or for loans that are solely dependent on the collateral for repayment, measurement may be based on the fair value of the collateral. Loans that are to be foreclosed are measured based on the fair value of the collateral. If the recorded investment in the impaired loan exceeds the measure of fair value, a valuation allowance is required as a component of the allowance for loan losses. Changes to the valuation allowance are recorded as a component of the provision for loan losses. PROPERTY AND EQUIPMENT Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed principally on the straight-line method over the estimated useful lives of the assets as follows: Equipment 3 - 5 years Expenditures for major betterments and additions are charged to the asset accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets are charged to expense currently. IMPAIRMENT OF LONG-LIVED ASSETS Statement of Financial Accounting Standards No. 121 "Impairment of Long-Lived Assets and Assets to be Disposed of", requires that long-lived assets and certain identifiable intangibles that are used in operations be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets might not be recoverable. At December 31, 1999, the Company committed to a plan to sell a building and land located in Lake Worth, Florida which is included in the identifiable assets of the finance company segment (Note 3). This property is encumbered by a note payable (see Note 9). The Company has recorded an impairment loss of approximately $129,000 as a result of the carrying amount exceeding the fair value (as determined by a recent appraisal) of the land and building adjusted for estimated selling costs. The impairment loss is included as a component of loss on disposal of property and equipment, in the accompanying statements of operations. 10 21 =============================================================================== NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued) =============================================================================== INCOME TAXES Deferred income taxes are provided for the estimated tax effect of temporary differences between financial and taxable income. These differences result primarily due to depreciation and net operating loss carryforwards. The effective tax rate differed from maximum statutory rates due primarily to the change in the valuation allowance. NET LOSS PER SHARE The Company applies Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (FAS 128). Net loss per share excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding during the reported periods. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying values of cash, accounts payable and other liabilities and notes payable approximate their fair values due to the short maturity of these instruments. The fair value of loans receivable is determined by calculating the present value of each loan by a current market rate of interest for a similar loan as compared to the stated rate of interest. The difference between fair value and carrying value is not deemed to be significant. Due to parent is due upon demand and its fair value approximates its carrying value. YEAR 2000 UNCERTAINTIES Although the Company has not identified any computer system or program problems, there is still a possibility that at some time during the Year 2000 their computer systems and programs, as well as equipment that uses embedded computer chips, may be unable to distinguish between the years 1900 and 2000. This may create system errors and failures resulting in the disruption of normal business operations. Although it is unlikely, there may be some third parties, such as governmental agencies, utilities, telecommunication companies, vendors and customers that at times may not be able to continue business with the Company due to their own Year 2000 problems. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes new accounting and reporting standards for derivative financial instruments and for hedging activities. SFAS No. 133 requires Companies to measure all derivatives at fair value and to recognize them in the balance sheet as an asset or liability, depending on the rights and obligations under the applicable derivative contract. The adoption of this pronouncement did not materially affect the Company's results of operations, financial position or cash flows. 11 22 =============================================================================== NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued) =============================================================================== RECLASSIFICATIONS Certain amounts in the 1998 financial statements have been reclassified to conform to 1999 presentation. =============================================================================== NOTE 2. RECAPITALIZATION =============================================================================== Prior to April 1, 1999, the Company acted as a public shell company, with no significant operations, assets or liabilities. On April 1, 1999, pursuant to a Stock Purchase Agreement, Fact South, LLC, a Florida limited liability corporation ("FACT South"), acquired 10,000,000 shares (82.50%) of the Company's common stock in exchange for all of the issued and outstanding shares of capital stock of Affordable Dealer Services, Inc. (Affordable), Southeast Acceptance, Inc. (Southeast) and Carnet, Inc. (Carnet). First American Capital Trust (FACT), a Florida business trust is a 92% member in Fact South. Subsequent to this reverse merger transaction, FACT held effective beneficial ownership of 81.42% of the common stock of the Company and is considered to be the Parent. This merger was treated for accounting purposes as a capital transaction equivalent to the issuance of stock by the Company for the net monetary assets of the public shell, accompanied by a recapitalization. =============================================================================== NOTE 3. GOING CONCERN =============================================================================== The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplates continuation of the Company as a going concern. The Company has sustained substantial operating losses and negative cash flows from operations since inception and in September 1999, FACT filed for relief from creditors under Chapter 11 of the United States Bankruptcy Code. Although the Company has not filed for bankruptcy protection, it is reasonably possible that FACT, the principal source of liquidity for the Company, may not provide additional capital to the Company and/or may demand repayment of amounts due to it by the Company. Further, the creditors of FACT or the United States Bankruptcy Court could opt to liquidate FACT's assets, including the Company and cause the Company to cease its operations. The management of the Company, along with the management and advisers of FACT and the creditors of FACT are currently attempting to develop and submit a joint plan of reorganization to the bankruptcy court (the Plan). If an agreement is reached by the parties, it is anticipated that the Plan will address the future organization and business of the Company. The Plan is currently in the formative stages and whether an agreement can be reached and its ultimate effect on the Company can not be predicted at this time. 12 23 =============================================================================== NOTE 4. DISCONTINUED OPERATIONS =============================================================================== During 1999, the Company discontinued the operations of two separate segments of its business. One, operating under the name American Marketing of South Florida (American), was a telemarketing business, the other, operating under the name Carnet, was a used car dealership. AMERICAN On July 1, 1999, the Company agreed to acquire the operations and substantially all of the operating assets of American in exchange for $100,000 cash and 82,500 shares of the Company's common stock. For several months, the Company funded losses of American while trying to restructure the management and operations of American. The Company was not successful in achieving profits and on December 30, 1999 (Measurement Date) American's operations were discontinued. At December 31, 1999, American has no significant assets remaining and approximately $56,000 in liabilities which does not include any amounts sought from the Company in a litigation with the seller (see Note 12). For the period from July 1, 1999 through the measurement date, American's operations were as follows: Revenues $ 155,957 Operating expenses (274,379) ------------------------------------------------------------------- Net loss $(118,422) =================================================================== In connection with the acquisition of American, the Company did not issue 82,500 shares of its common stock due under the asset purchase agreement, citing breach of that agreement by the seller. This matter is currently in litigation (See Note 12). CARNET Effective July 5, 1999, the Company sold the operations and certain assets of Carnet to an unrelated third party (the Acquirer) in exchange for an $80,000 note receivable. The assets were sold at the Company's book value and, accordingly, no gain or loss was recognized on the transaction. The $80,000 note receivable was to bear interest at 10% and called for monthly interest only payments of $2,029 for the first year and monthly principal and interest payments of $2,029 over the next 48 months. Shortly after this sale, the Acquirer defaulted on the note and the Company has recovered automobile inventory with a value of $36,547. Accordingly, the Company has established a reserve of $43,453 against this note and charged off that amount to the provision for credit losses on loans receivable and prepaid compensation in the accompanying statement of operations. For the period from January 1, 1999 to July 5, 1999 Carnet's operations resulted in the following: Revenues $ 368,543 Operating expenses (485,030) -------------------------------------------------------------------- Net loss $(116,487) ==================================================================== 13 24 =============================================================================== NOTE 4. DISCONTINUED OPERATIONS (Continued) =============================================================================== At December 31, 1999, the $36,547 in recovered automobile inventory is included in other assets. There are no other significant assets or liabilities related to Carnet. =============================================================================== NOTE 5. FINANCE RECEIVABLES =============================================================================== Finance receivables at December 31 consisted of the following: 1999 1998 ====================================================================== Automobile finance receivables $ 2,163,965 $ -- Less: unearned interest (514,211) -- ---------------------------------------------------------------------- Principal balance 1,649,754 -- Less: purchase discounts (437,489) -- ---------------------------------------------------------------------- Total automobile finance receivables 1,212,265 -- Floor plan finance receivables 1,378,975 475,095 ---------------------------------------------------------------------- Total finance receivables 2,591,240 475,095 Allowance for credit losses (550,675) -- ---------------------------------------------------------------------- Finance receivables, net $ 2,040,565 $ 475,095 ====================================================================== Changes in the allowance for credit losses were as follows: Balance - January 1, 1999 $ -- Provisions charged to operations 1,682,566 Finance contracts charged off (1,131,891) ---------------------------------------------------------------------- Balance - December 31, 1999 $ 550,675 ====================================================================== At December 31, 1999, contractual maturities of automobile finance receivables were as follows: 2000 $ 817,468 2001 763,024 2002 471,643 2003 87,958 2004 14,273 Thereafter 9,599 ---------------------------------------------------------------------- $ 2,163,965 ====================================================================== The contractual maturities of the finance contracts generally range from one to four years from the balance sheet date. It is the Company's experience that a portion of the finance contracts generally will be repaid or charged off before the contractual maturity date. Accordingly, the above is not to be regarded as a forecast of the timing of future cash collections. 14 25
================================================================================================= NOTE 6. LOANS RECEIVABLE ================================================================================================= Loans receivable at December 31, 1999 consisted of the following: Loan receivable under a one-year participation agreement with a pre-owned automobile dealership; which bears interest at 17% per annum; is payable June 7, 2000 and is collateralized by the underlying installment loan contracts $ 500,000 8.25% advances receivable from a pre-owned automobile dealership, and is collateralized by a second mortgage 22,329 ---------------------------------------------------------------------------------------- Loans receivable 522,329 ---------------------------------------------------------------------------------------- 10% unsecured note receivable due from a yacht brokerage company, interest due monthly, principal due September 2002 1,000,000 Non-interest bearing advance receivable due from a former officer and director, unsecured 135,000 Non-interest bearing loans receivable from a former officer, unsecured, due on demand 67,572 Non-interest bearing loan receivable due from a former director, unsecured 70,000 10% loan receivable from a former officer's wife, unsecured, due on demand 58,000 10% receivable due from the acquirer of Carnet, unsecured 43,453 12% non-interest bearing loans receivable from a former officer, unsecured 16,950 18% advances receivable from a pre-owned automobile dealership, unsecured 11,725 ---------------------------------------------------------------------------------------- Loans receivable, fully reserved 1,402,700 Less allowance for losses on loans receivable (1,402,700) ---------------------------------------------------------------------------------------- $ 522,329 ========================================================================================
================================================================================================= NOTE 7. PROPERTY AND EQUIPMENT AND REAL ESTATE HELD FOR SALE ================================================================================================= Property and equipment at December 31 consisted of the following: 1999 1998 ================================================================================================= Equipment $ 25,059 $ 43,436 Software - 247,000 Less accumulated depreciation (4,609) (15,472) ================================================================================================= $ 20,450 $ 274,964 =================================================================================================
Depreciation expense amounted to $5,425 and $15,472 for the periods ended December 31, 1999 and 1998, respectively. 15 26 =============================================================================== NOTE 6. LOANS RECEIVABLE (Continued) =============================================================================== REAL ESTATE HELD FOR SALE Effective December 31, 1998, without prior written consent from the mortgagee, land and a building were transferred to the Company from an entity related by virtue of common control via a Quitclaim Deed. Additionally, the related mortgage has been assumed by the Company (see Note 9). Because consent for the transfer was not obtained from the mortgagee, the debt may be callable by the mortgagee. This land and building are not used in the operations of the Company, and are included in real estate held for sale in the accompanying consolidated balance sheet. =============================================================================== NOTE 8. RELATED PARTY TRANSACTIONS =============================================================================== FUNDING Since the inception of the Company's operating subsidiaries, the Company has received substantial funding from FACT. As of December 31, 1999, approximately $9,148,000 has been infused by FACT into the Company, either through advances or capital contributions. Of this amount, the Company has recorded cash disbursements of approximately $2,715,000 as repayments of advances to FACT. However, these amounts were not returned to FACT, but were actually paid to an individual who is the former CEO and President of the Company and a former Trustee of FACT, at the direction of this individual. FACT is currently seeking repayments of these amounts from this individual. Effective January 1, 1999, advances due to FACT of $1,047,752 were contributed to capital. At December 31, 1999 advances due to FACT aggregated $5,288,832 and are reflected as Due to Parent. These advances are non-interest bearing and are due on demand. The Company has imputed an interest rate of 9.75% per annum on these advances resulting in interest expense and additional paid-in capital of $308,908. SOFTWARE During 1998, the Company paid approximately $247,000 to its former CEO and President for software developed by this individual. The Company discontinued use of this software in 1999 and charged off the remaining unamortized balance. PREPAID COMPENSATION During 1999, the Company paid $292,096 of compensation to former officers in advance of services rendered. As all these individuals are no longer employed by the Company, the Company intends to pursue collection of all unearned amounts. To date no prepaid compensation has been returned to the Company and the Company has therefore established a reserve for non-collectibility of these advances in the same amount. 16 27 =============================================================================== NOTE 9. NOTE PAYABLE =============================================================================== Note payable at December 31, 1999 and 1998 consists of a mortgage note payable to an individual with an original balance of $210,000. The note bears interest at 10% per annum and requires monthly principal and interest payments of $2,257 until December 2001, whereupon the note is due with a balloon payment of $170,765. This mortgage is collateralized by the Company's real estate held for sale and is personally guaranteed by the former CEO and President of the Company. Aggregate maturities of this note are scheduled as follows: 2000 $ 8,583 2001 180,297 --------------------------------------------------------------------- $ 188,880 ===================================================================== =============================================================================== NOTE 10. INCOME TAXES =============================================================================== The components of the income tax benefit for the year ended December 31, 1999 are as follows: Deferred tax assets $ 1,572,000 Change in valuation allowance (1,572,000) ---------------------------------------------------------------------- Income taxes $ - ====================================================================== The differences between the income tax benefit and the amount computed by applying the federal statutory income tax rate of 34% to loss from continuing operations and loss from discontinued operations are as follows: Tax benefit at U.S. statutory rates $(1,342,000) State Tax Benefit (230,000) Change in valuation allowance 1,572,000 ---------------------------------------------------------------------- Income tax benefit $ - ====================================================================== At December 31, 1999, the Company had deferred tax assets of approximately $1,572,000, principally from net operating loss carryforwards and allowances for credits losses. The deferred tax assets are offset by a valuation allowance in the same amount. Deferred tax assets, net of a valuation allowance, are recorded when management believes it is more likely than not that tax benefits will be realized. The change in the valuation allowance was based upon the consistent application of management's valuation procedures and current circumstances surrounding its future realization. The Company and its subsidiaries file consolidated income tax returns. As of December 31, 1999, the Company had consolidated net operating loss carryforwards of approximately $2,224,000 that will expire in 2019. 17 28 =============================================================================== NOTE 11. COMMITMENTS =============================================================================== The Company leased its office and warehouse facilities under two separate non-cancelable operating leases. The Company is currently negotiating with its landlord to cancel the remaining terms of these leases, as it is no longer operating at any of these facilities. The future minimum payments under these leases are as follows: 2000 $ 55,458 2001 4,110 --------------------------------------------------------------------- $ 59,568 ====================================================================== Total rent expense amounted to $48,356 and $3,180 in 1999 and 1998, respectively. =============================================================================== NOTE 12. LITIGATION =============================================================================== In connection with the acquisition of certain assets and operations of American (see Note 4), the sellers of American have filed a complaint against the Company citing that the Company breached its agreement with the sellers by failing to issue 82,500 shares of the Company's common stock to the sellers. The parties involved are currently negotiating a settlement of the matter, and although the ultimate outcome can not be predicted at this time, this litigation is not expected to have a material impact to the Company. =============================================================================== NOTE 13. SEGMENT INFORMATION =============================================================================== The Company principally operates as a finance company and a used car dealership. The finance segment purchases automobile finance contracts from pre-owned automobile dealerships and finances dealership floor plans loans, while the used car dealership segment sells used automobiles, vans and light trucks to consumers. Additionally, the Company operated a telemarketing business during 1999. The used car segment was sold on July 5, 1999 (see Note 4). The Company's telemarketing segment primarily telemarketed mortgage and other types of loans. The telemarketing segment was disposed on December 30, 1999 (see Note 4). Revenues, operating losses, net losses and identifiable assets for 1999 were as follows. Net Interest Income Finance $ 885,831 Used car - Telemarketing - -------------------------------------------------------------------- 885,831 -------------------------------------------------------------------- 18 29 =============================================================================== NOTE 13. SEGMENT INFORMATION (Continued) =============================================================================== Other Revenues Finance 261,832 Used car 368,543 Telemarketing 155,957 ---------------------------------------------------------------------- 786,332 ---------------------------------------------------------------------- Loss from continuing operations Finance (3,723,536) Used car ( 116,487) Telemarketing ( 118,422) ---------------------------------------------------------------------- (3,958,445) ---------------------------------------------------------------------- Net loss Finance (3,723,536) Used car ( 174,982) Telemarketing ( 278,374) ---------------------------------------------------------------------- (4,176,892) ---------------------------------------------------------------------- Identifiable assets Finance 3,386,976 Used car 36,548 Telemarketing 609 ---------------------------------------------------------------------- 3,424,133 ---------------------------------------------------------------------- For the period from inception (October 21, 1998) through December 31, 1998, the Company operated only in one segment, as a finance company. =============================================================================== NOTE 14. SIGNIFICANT FOURTH QUARTER ADJUSTMENTS =============================================================================== At December 31, 1999, the Company considered all available evidence, both positive and negative, and determined an additional reserve for doubtful accounts relating to finance receivables and loans receivables was needed. Accordingly, the Company increased their allowance for doubtful accounts resulting in additional provision for doubtful accounts of approximately $2,932,000. The Company accrued approximately $76,000 in additional professional fees and the Company also recorded approximately $652,000 related to losses incurred as a result of disposal of certain assets. The Company imputed interest of $308,908 on advances from its ultimate parent company. The effect of the above adjustments increased the net loss by approximately $3,969,000. 19 30 =============================================================================== SUPPLEMENTARY SCHEDULE =============================================================================== 31 SUPPLEMENTAL SCHEDULE FIRST CAPITAL RESOURCES.COM, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS YEAR ENDED DECEMBER 31, 1999
=================================================================================================================================== Column A Column B Column C Column D Column E - -------- -------- -------- -------- -------- Balance at Additions Balance at Description beginning of year charged to expense Deductions end of year =================================================================================================================================== Allowance for credit losses on finance receivables $ - $ 1,682,566 $ 1,131,891 $ 550,675 Allowance for losses on loans receivable $ - $ 1,402,700 $ - $ 1,402,700 Allowance for losses on prepaid compensation $ - $ 292,096 $ - $ 292,096
Notes: (1) Schedule I is not required as the Company does not have restricted net assets in consolidated subsidiaries that exceed 25% of consolidated net assets. (2) Schedules III and IV are not required as the acquiring and holding of real estate for investment purposes does not constitute a substantial portion of the Company's business. (3) Schedule V is not required as the Company does not have reserves for unpaid property-casualty claims. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. During the year ended December 31, 1999, there were no disagreements with the Company's accountants on accounting and financial disclosure practices. S-1 32 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The following table shows the positions held by the Company's officers and directors. The directors were appointed and will serve until the next annual meeting of the Company's stockholders, and until their successors have been elected and have qualified. The officers were appointed to their positions, and continue in such positions, at the discretion of the directors.
Name Age Position Director Since - ---- --- -------- -------------- Derri L. Davisson 42 President and Director October 27, 1999 J. Stephen Miller 49 Secretary/Treasurer and Director October 27, 1999
Derri L. Davisson has been President and a Director of the Company since October 27, 1999. She has also been Vice President, Operations, of First American Capital Trust ("FACT"), the Company's ultimate majority stockholder, since December 1998, and Co-Trustee of the FACT since September 1999. Ms. Davisson was the Corporate Paralegal and Systems Manager for FACT for several years prior to becoming Vice President at the end of 1998. J. Stephen Miller has been Secretary/Treasurer and a Director of the Company since October 27, 1999, and Co-Trustee of FACT since September 1999 . He has also served as Chief Financial Officer of FACT since December 1998. Prior to becoming CFO, Mr. Miller was a staff accountant with FACT from 1996 through 1998. ITEM 11. EXECUTIVE COMPENSATION. The Company has made no arrangements for the remuneration of its existing officers and directors, except that they will be entitled to receive reimbursement for actual, demonstrable out-of-pocket expenses, including travel expenses, if any, made on the Company's behalf. There are no agreements or understandings with respect to the amount or remuneration that officers and directors are expected to receive in the future. Management takes no salaries from the Company and does not anticipate receiving any salaries in the foreseeable future.
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER --------------------------- ---- ------ ----- ----- Derri Davisson (President-Director since Oct. 1999 -- -- -- 27, 1999) J. Stephen Miller (Secretary/Treasurer and Director since Oct. 27, 1999) 1999 1999 -- -- George Chandras (Former President of Carnet) 1999 $125,000 $ 120,000(1)
33 1998 $ 17,500 $ 25,000 Enrique Martinez (President of Carnet and 1999 $ 97,367 $ 110,384(1) Affordable Dealer Services, Inc. until Dec. 15, 1998 1999) Anthony Messuri (Chief Financial Officer until Dec 1999 $ 46,154 $ 61,712(1) 15, 1999)
(1) Represents one-year salary paid in advance on September 27, 1999. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth, as of December 31, 1999, information regarding the beneficial ownership of shares by each person known by the Company to own five percent or more of the outstanding shares, by each of the directors and by the officers and directors as a group.
Name and address Number of Shares Title of class of beneficial owner (1) Beneficially Owned % Ownership - -------------- ------------------- ------------------ ----------- Common Stock Derri Davisson (2) 10,000,000 88.5% Common Stock J. Stephen Miller (2) 10,000,000 88.5% Common Stock FACT South, LLC (3) 10,000,000 88.5% Common Stock All Officers and 10,000,000 88.5% Directors as a Group (4)
(1) Unless otherwise indicated, the address of each person is that of the Registrant at Two Prestige Place, 2650 McCormick Drive, Suite 185, Clearwater, Florida 33759. (2) Ms. Davisson and Mr. Miller are Directors and President and Secretary/Treasurer, respectively, of the Registrant. First American Capital Trust ("FACT"), for which both Ms. Davisson and Mr. Miller are Co-Trustees, is the beneficial holder of a majority interest in FACT South, LLC which, in turn, owns directly 10,000,000 shares (approximately 88.5%) of the Company. (3) FACT, for which Ms. Davisson and Mr. Miller are Co-Trustees, is the beneficial owner of a majority interest in FACT South, LLC. (4) See notes (1) to (3). ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The Company is indebted to its ultimate majority shareholder, FACT, in the amount of $5,288,832. Derri L. Davisson and J. Stephen Miller, Co-Trustees of FACT, are directors and officers of the 34 Company. FACT also provides management services to the Company at a cost to the Company of approximately $13,000 per month. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a)(1) Financial Statements and Financial Statement Schedules. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Kaufman, Rossin & Co Consolidated Financial Statements for Year Ended December 31, 1999 and for Period from Inception (October 21, 1998) to December 31, 1998 (a)(2) Financial Statement Schedules - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Exhibit 27.1 provided pursuant to Item 601(c) and Table item (27) of Regulation S-K (a)(3) Exhibits required by Item 601 of Regulation S-K - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (10.1) Asset Purchase Agreement regarding American Marketing Corporation of South Florida, Inc. (10.2) Promissory Note regarding loan from MidLantic Marine, Inc. (10.3) Participation Agreement regarding financing transaction with Mr. C's Auto Sales, Inc. (10.4) Form of Loan and Security Agreement in current use by Company for floor plan financing relationships (21) Subsidiaries of Registrant (27) Financial Data Schedule Reports on Form 8-K. - - - - - - - - - - - - - - - - The Company filed a Report on Form 8-K on November 4, 1999. The report disclosed the resignation of one board member and that the majority stockholder of the Company had removed the remaining sole director and elected a new board of directors for the Company. The report also disclosed that the newly elected board had removed all Company officers and appointed new officers. 35 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIRST CAPITAL RESOURCES.COM, INC. Date: March 30, 2000 By: /s/ Derri Davisson ---------------------------------------------------- Derri Davisson, President Date: March 30, 2000 By: /s/ J. Stephen Miller ---------------------------------------------------- J. Stephen Miller, Secretary/Treasurer (Chief Financial Officer and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: March 30, 2000 By: /s/ Derri Davisson ---------------------------------------------------- Derri Davisson, Director Date: March 30, 2000 By: /s/ J. Stephen Miller ---------------------------------------------------- J. Stephen Miller, Director
EX-10.1 2 ASSET PURCHASE AGREEMENT 1 Exhibit 10.1 ASSET PURCHASE AGREEMENT This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into as of the Effective Date (as hereinafter defined) by and among NEWCO, INC., a Florida corporation ("Purchaser"), and AMERICAN MARKETING CORPORATION OF SOUTH FLORIDA, a Florida corporation ("Seller"), and FIRST CAPITAL RESOURCES.com, INC., a Nevada corporation (the "Parent"). RECITALS: WHEREAS, Seller owns and conducts a marketing business (the "Business") located at 1400 Military Trail, Delray Beach, Florida; and WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to purchase from Seller, certain of the assets of the Business, including, but not limited to furniture, fixtures, equipment, leases, licenses, contracts, records, documents, customer lists, other proprietary and intellectual property, including without limitation, telephone numbers, trademarks, and trade names, leases and other contracts that may be owned jointly by Seller and South Equity Mortgage Corporation, and other property relating to the Business, all more specifically identified on Schedule "A" attached hereto; and WHEREAS, in connection with the Business, Seller has accrued various liabilities, including, but not limited to certain federal payroll tax liability of Seller, accounts payable to MCI WorldCom, payroll for American for the period ending June 30, 1999, and other trade payables specifically listed on Schedule "B" attached hereto (the "Liabilities"); WHEREAS, in connection with the purchase of the Assets, Purchaser desires to assume the Liabilities of the Seller to a limited extent. TERMS AND CONDITIONS: In consideration of the foregoing premises and the representations, warranties, covenants, and agreements contained herein, the parties, intending to be legally bound, agree as follows: 1. Agreement to Purchase and Sell. Seller hereby agrees to sell, convey, transfer, assign, and deliver to Purchaser, and Purchaser agrees to purchase and take, at the Closing (as such term is defined in Section 3 hereof), the assets and properties of the Business as more specifically described in Schedule "A" attached hereto and incorporated herein by reference, including, but not limited to furniture, fixtures, equipment, leases, licenses, contracts, records, documents, customer lists, other proprietary and intellectual property, and other property relating to the Business (the "Assets"), pursuant to the terms and conditions of this Agreement. In connection with the purchase and sale, Purchaser shall not assume any liabilities or obligations of Seller whatsoever. 2. Purchase Price. 2.1 Purchase Price. As consideration for the agreements and covenants of Seller hereunder, Purchaser agrees to pay the following: 2 (a) At the Closing, Purchaser shall cause to be issued to Seller 82,500 shares of the common stock of the Parent; and (b) At the Closing, Purchaser shall pay the sum of One Hundred Thousand and No/100 Dollars ($100,000.00) into escrow (the "Escrowed Funds") with Jeffrey Wasserman, Esquire (the "Escrow Agent"). 2.2 Payment of Purchase Price. (a) Delivery of Certificates. At the closing, Purchaser shall cause to be delivered to Seller a certificate representing the shares issued as the Purchase Price and issued in the name of Seller as the owner. (b) Cash Payment to Escrow Agent. At the closing, Purchaser shall pay the amount stated in Section 2.1(b) hereof to the Escrow Agent in cash or other readily available funds. 2.3 Escrowed Funds. As soon as practicable after the closing of the transactions contemplated herein, the Escrow Agent shall break escrow and shall pay the Escrowed Funds in satisfaction of the Liabilities. 2.4 Allocation of Purchase Price. The parties agree that the Purchase Price shall be allocated among the Assets as set forth on Schedule "C" attached hereto and incorporated herein by reference. Seller and Purchaser each covenant to the other that it shall report such allocations as set forth on Schedule "C" on all federal income tax returns on which such allocations are required to be reported. 2.5 Ad Valorem Taxes. Any ad valorem tangible personal property taxes with respect to the Assets shall be prorated as of the Closing date based on the 1999 tax bills using the maximum discount set forth on such tax bills. 3. Closing. 3.1 Time and Place. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place on or before the 30th day of June, 1999 (unless extended by mutual agreement of the parties) at the offices of the Purchaser, or at such other time and place as Purchaser and Seller may mutually agree. 3.2 Closing Documents. (a) At or before the Closing, Seller shall tender to Purchaser the following duly executed documents (the "Seller's Documents"): (i) a complete list of the Assets and Liabilities acceptable to Purchaser and Purchaser's counsel; 2 3 (ii) a Bill of Sale and Assignment (in form reasonably satisfactory to counsel for Purchaser) to transfer title of the Assets from Seller to Purchaser; (iii) one or more assignments as required for the transfer of Seller's rights under any and all leases, licenses, or other contracts included in the Assets; (iv) one or more assignments as required for the transfer of the rights of South Equity Mortgage Corporation under any and all leases, licenses, or other contracts included in the Assets; (v) a Registration Rights Agreement, in form and substance as set forth in Exhibit "A" hereto; (vi) An Employment Agreement between Purchaser and Albert Gabriele, in form and substance as set forth in Exhibit "B" hereto; (vii) An Agreement among Malcolm Gulden, Edward Triefler, South Equity Mortgage Corp., Robert S. Geiger, Trustee, Parent, and Purchaser, in form and substance as set forth in Exhibit "C" hereto; and (viii) A certificate executed by a duly authorized officer of Seller regarding certain representations, warranties, and covenants made herein by Seller and such other certificates and documentation as Purchaser may reasonably request to effect the transactions contemplated herein. (b) At or before the Closing, Purchaser shall tender to Seller the following duly executed documents (the "Purchaser's Documents"): (i) Certificates representing the shares of common stock in the Purchaser that constitute the Purchase Price, with the appropriate legends and endorsements; (ii) The Registration Rights Agreement between Purchaser and Seller; (iii) The Employment Agreement between Purchaser and Albert Gabriele; (iv) The Agreement described in Section 3.2(a)(vii) above; and (v) Such other certificates and documentation as Seller may reasonably request to effect the transactions contemplated herein. 3.3 Further Assurances. At and after the Closing, and without further consideration, Seller shall execute and deliver to Purchaser such further agreements, documents, and instruments as Purchaser may request that are reasonably necessary to fully transfer and assign to Purchaser any and all of the Assets and otherwise fully realize the benefit of the transaction contemplated herein, and for aiding, assisting, collecting, and reducing to possession any and all of the Assets and exercising all rights with respect to the Assets. 3 4 3.4 Proration of Certain Expenses at Closing. The parties agree that, to the extent applicable, all items traditionally prorated in transactions similar to those contemplated herein are to be adjusted and allowed for on the date of Closing, with Seller responsible for items on or before the date of Closing and Purchaser responsible for items after the date of Closing. To the extent of such property being transferred hereunder, personal and intangible property taxes and assessments are to be prorated on a basis of calendar year 1999, unless any tax or assessment for that year is unascertainable on the date of Closing, in which case that prospective tax or assessment is to be prorated based on the amount paid for calendar year 1998. 4. Representations, Warranties and Covenants of Seller. Seller hereby represents, warrants, and covenants to Purchaser as follows: 4.1 Organization. Seller is a corporation duly organized, validly existing, and in good standing under the laws of the State of Florida and is duly qualified to conduct its business and affairs in every jurisdiction where the nature of its operations and/or its ownership of property and assets requires such qualifications. Seller has full power and authority to own its properties and to conduct its business as presently conducted in all such jurisdictions. 4.2 Authority. Seller has all requisite power and authority to execute and deliver this Agreement and all other Seller's Documents and to perform its obligations hereunder and thereunder. The execution, delivery, and performance by Seller of this Agreement and the other Seller's Documents has been duly authorized by all necessary action, corporate and otherwise, and this Agreement has been duly executed and delivered and is, and the other Seller's Documents will be, when executed and delivered by Seller, the legal, valid, and binding obligations of Seller enforceable against it in accordance with their respective terms, except to the extent that the same may be limited by insolvency, bankruptcy, reorganization, moratorium, or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity, and such Seller's Documents are sufficient to transfer to and vest in Purchaser good and marketable title to the Assets, free and clear of all liabilities, obligations, liens, claims, security interests, charges, encumbrances, contingencies, equities, and other adverse claims of any kind. 4.3 Title. The Assets are owned solely by Seller, and Seller has, and is assigning and transferring to Purchaser as of the date of Closing, good and marketable title to the Assets, free and clear of any and all liabilities, obligations, liens, claims, security interests, charges, encumbrances, contingencies, equities and other adverse claims of any kind. 4.4 Condition of Assets. The Assets being transferred hereunder are in good working condition (normal wear and tear excepted). Seller hereby expressly disclaims all other warranties (express or implied) and makes no other warranties of any nature whatsoever regarding the Assets. 4.5 No Violation. The execution or delivery of this Agreement or any of the other Seller's Documents, and the consummation of the transactions contemplated hereby and thereby, including, without limitation, the transfer of the Assets to Purchaser, shall not conflict with, or result in the breach of, any term or provision of, or constitute a default under, or result in the creation of, any liability, obligation, lien, claim, security interest, charge, encumbrance, contingency, equity, or other 4 5 adverse claim upon any or all of the Assets pursuant to, or give any third party the right to accelerate any obligation under, any article provision, bylaw, agreement, indenture, deed of trust, contract, instrument, order, law, or regulation to which Seller is a party or by which Seller or any of the Assets is in any way bound or obligated. 4.6 Governmental Consents. There are no consents, approvals, orders, or authorizations of, or registrations, qualifications, designations, declarations, or filings with, any governmental authority required on the part of Seller in connection with the transactions contemplated by this Agreement. 4.7 Litigation; Investigations. There are not currently any pending or, to the knowledge of the Seller, threatened claims, lawsuits, administrative proceedings or reviews, or investigations by any person or governmental authority, against Seller or against or relating to any of the Assets, or to which any of the Assets is subject. Seller is not subject to any currently existing judgment, finding, ruling, order, writ, injunction, or decree relating to any of the Assets or the Business or operations of Seller. 4.8 Tax Matters. All federal, state and local taxes (and all deficiencies, assessments, additions to tax, penalties, and interest) that have become due and payable by Seller, or which have accrued, or for which Seller would or will otherwise be liable, for any period on or before the date of Closing, or as to which a claim is known by Seller to have been threatened against it, have been paid. 4.9 Employee Benefits. Except as otherwise described on Schedule "D", there are no employee benefit agreements, plans or other arrangements, covering any employee, which are presently in effect or will have been in effect at any time prior to the Closing Date. 4.10 No Other Agreements. Seller has not entered into any agreement, commitment, or understanding with any other person with respect to the sale, transfer, lease, or other disposition of all or any portion of the Assets, except for sales, transfers, or leases in the ordinary course of Seller's Business and consistent with past practices. 4.11 Seller's Business in Compliance with Law. All operations of Seller conform to the requirements of all Federal, state and local laws, rules, regulations, orders, ordinances, and decrees (whether judicial, administrative, or otherwise) applicable to Seller's Business, and no claims have been made nor notices (constructive or actual) given, nor does Seller in good faith believe or have knowledge of facts which may reasonably indicate that any such claims may be made or investigations instituted, by any governmental regulatory agency whether Federal, state, or local, that such operations are not in conformity with any applicable law, rule, order, decree, or ordinance regulation. 4.12 Permits and Licenses. Seller shall deliver to Purchaser prior to the date of Closing a list of all licenses, permits, and other authorizations of governmental authorities used and required by Seller in the conduct of its Business with the Assets. Seller has not received notice, nor does it have any reason to believe, that revocation is being considered with respect to any such permit, license, or authorization. Seller shall transfer to Purchaser interests in and to all such permits, licenses, and authorizations as are transferable to Purchaser, and to Seller's knowledge the consummation of the transactions contemplated by this Agreement will not terminate or adversely affect any such licenses, permits or authorizations. Except for such licenses, permits, or authorizations, neither the conduct of 5 6 Seller's Business nor the ownership or use of the Assets requires any license, permit, or other authorization, written or oral. 4.13 Financial Statements. Seller has provided Purchaser with Seller's relevant financial statements and information for the six (6) month period ending as of June 30, 1999, copies of which are set forth on Schedule "E" attached hereto and incorporated herein by reference (collectively, the "Financial Statements"). The Financial Statements have been prepared in accordance and consistent with past practices and procedures of Seller, and, notwithstanding the fact that such Financial Statements may contain certain estimates by Seller and may not necessarily be prepared in accordance with generally accepted accounting or audit principles, Seller represents and warrants that such estimates are based on actual, historical data of Seller and thus are not materially different from such actual, historical data, and that such Financial Statements fairly and accurately represent the financial condition and operations of the Business as of the dates thereof. From the date of the Financial Statements up to the date of Closing, there shall have been no material adverse changes in the operations or financial condition of the Business. 4.14 Undisclosed Liabilities. Seller neither has nor is subject to any liability or obligation, including without limitation any leases, either accrued, absolutely contingent, or otherwise, other than those appearing on the Financial Statements or otherwise provided to Purchaser in writing, to which Purchaser might be subjected subsequent to the consummation of the transactions contemplated by this Agreement, or that might result in the imposition of a lien on any of the Assets after the date of Closing. 4.15 Conveyance Not Fraudulent. Seller is not insolvent, and Seller is not engaged, nor is it about to engage, in a business or transaction for which the property remaining in its hands after the consummation of the transactions contemplated by this Agreement will be an unreasonably small amount of capital in relation to its obligations; Seller does not intend to incur, nor does it believe that it will incur, debts beyond its ability to pay them as they mature; and Seller is not making the transactions contemplated by this Agreement with intent to hinder, delay, or defraud either present or future creditors. The parties hereto recognize that, although the location of the Assets may not change, upon consummation of the transactions contemplated by this Agreement possession and control of the Assets will be transferred and delivered to Purchaser. 4.16 Material Information. All material facts known to Seller concerning Seller and the Business have been disclosed to Purchaser, and no representation or warranty made herein by Seller and no statement contained in any document, schedule, certificate, or other instrument furnished or to be furnished to Purchaser in connection with the transactions contemplated by this Agreement, contains or will at any time contain any untrue statement of material fact or omits or will omit to state a material fact necessary in order to make any statement or fact contained therein not misleading. 4.17 Complete and Accurate as of Closing. All representatives and warranties of Seller herein shall be true and correct as of the date of Closing. No due diligence or other investigation or knowledge of Purchaser shall effect or mitigate any representations made under this Section 4 or any remedies available to Purchaser under this Agreement. 6 7 5. Representations and Warranties of Purchaser. Purchaser represents and warrants to Seller as follows: 5.1 Organization. Purchaser is a corporation duly organized, validly existing, and in good standing under the laws of the State of Florida. 5.2 Authority. Purchaser has all requisite power and authority to execute and deliver this Agreement and all other Purchaser's Documents and to perform its obligations hereunder and thereunder. The execution, delivery, and performance of this Agreement and the other Purchaser Documents have been duly authorized by all necessary action (corporate or otherwise) by Purchaser, and this Agreement has been duly executed and delivered and is, and each of the other Purchaser Documents will be, when executed and delivered by Purchaser, a legal, valid, and binding agreement of Purchaser, enforceable against Purchaser in accordance with its respective terms, except to the extent that the same may be limited by insolvency, bankruptcy, reorganization, moratorium, or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity. 5.3 No Violation. Neither the execution nor the delivery of this Agreement or any of the other Purchaser's Documents, nor the consummation of the transactions contemplated hereby or thereby will conflict with, or result in the breach of any term or provision of, or constitute a default under, any charter provision, bylaw, agreement, indenture, deed of trust, instrument, order, law, or regulation to which Purchaser is a party or by which Purchaser or any of its assets or properties is in any way bound or obligated. 6. Representations and Warranties of Parent. 6.1 Organization. Parent is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada. 6.2 Authority. Parent has all requisite power and authority to perform its obligations hereunder. The performance of such obligations has been duly authorized by all necessary action (corporate or otherwise) by Parent, and any obligations incurred by Parent shall be enforceable against Parent in accordance with their respective terms, except to the extent that the same may be limited by insolvency, bankruptcy, reorganization, moratorium, or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity. 6.3 No Violation. Neither the fulfillment by Parent of its obligations hereunder nor the consummation of the transactions contemplated hereby will conflict with, or result in the breach of any term or provision of, or constitute a default under, any charter provision, bylaw, agreement, indenture, deed of trust, instrument, order, law, or regulation to which Parent is a party or by which Parent or any of its assets or properties is in any way bound or obligated. 7. Further Agreements of the Parties. After the date of Closing, Seller shall, upon the reasonable request of Purchaser, take such actions, including the execution and delivery of documents, as may be necessary or convenient to accomplish the transactions contemplated by this Agreement; and, if Purchaser is required to defend or prosecute a claim by or against a third party with respect to the Assets or any of Purchaser's rights or obligations under this Agreement, cooperate in such defense 7 8 or prosecution at Purchaser's request, and furnish such records, information, and testimony and attend such conferences, trials, and appeals as Purchaser may reasonably request. 8. Conditions Precedent to Purchaser's Obligations. The following conditions shall have been fulfilled on or before the date of Closing as conditions precedent to Purchaser's obligation to consummate the transactions contemplated by this Agreement: 8.1 Continued Accuracy of Representations and Warranties. The statements, representations, and warranties of Seller contained in this Agreement and in any certificate or other Seller's Documents delivered by or on behalf of Seller pursuant to this Agreement shall continue to be materially true and correct through the date of Closing as if made on that date. 8.2 Fulfillment of Covenants. Seller shall have materially performed and satisfied every agreement and condition required by this Agreement to be performed or satisfied by it on or before the date of Closing. 8.3 Execution and Delivery of Documents. Every agreement, document, and other instrument identified in Section 3.2(a) of this Agreement, and every other agreement, document, or instrument necessary to accomplish the transactions contemplated by this Agreement and to be executed and delivered by Seller shall have been so executed and delivered; provided, however, that the list of Assets, prescribed for delivery by Section 3.2(a)(1) hereof, shall be deemed delivered if Purchaser prepares and provides a list of the Assets that is acceptable to Seller within its reasonable discretion. 8.4 No Adverse Changes. From the date hereof to the date of Closing there shall have been no material adverse changes in, or development or event that materially adversely affects or that may in the foreseeable future materially adversely affect, the Assets or the Business. 8.5 Pending Litigation. Neither Seller nor Purchaser shall be subject to any injunction against the consummation of the transactions contemplated by this Agreement, and there shall not be pending or have been threatened any litigation or proceeding by any person, to restrain or prohibit the consummation of the transactions contemplated by this Agreement, or the ownership or operation of the Assets by Purchaser. 9. Conditions Precedent to Seller's Obligations. The following conditions shall have been fulfilled on or before the date of Closing as conditions precedent to Seller's obligations to consummate the transactions contemplated by this Agreement: 9.1 Continued Accuracy of Representations and Warranties. The statements, representations, and warranties of Purchaser contained in this Agreement and in any certificate or other Purchaser's Documents delivered by or on behalf of Purchaser pursuant to this Agreement shall continue to be materially true and correct through the Closing as if made on that date. 9.2 Fulfillment of Covenants. Purchaser shall have materially performed and satisfied every agreement and condition required by this Agreement to be performed or satisfied by it on or before the Closing. 8 9 9.3 Execution and Delivery of Documents. Every agreement, document, and other instrument identified in Section 3.2(b) of this Agreement, and every other agreement, document, or instrument necessary to accomplish the transactions contemplated by this Agreement and to be executed and delivered by Purchaser shall have been so executed and delivered. 10. Restrictive Covenants. The prohibitions of this Section 10 shall apply to all activities of Seller and the shareholders of Seller, whether as individuals acting on their own behalf, or as independent contractors, partners or joint venturers, consultants or as officers, directors, stockholders, agents, employees or salesmen for any person, firm, partnership, corporation or other entity; provided, however, that for purposes of this Section 10, Edward Triefler shall not be considered a shareholder of Seller and shall not be restricted pursuant to the provisions of this Section 10. 10.1 Non-competition. During the five-year period immediately following the effective date of this Agreement, Seller and the shareholders of Seller agree that they shall not directly or indirectly enter into, engage in, be employed by, or consult with any marketing or telemarketing business or other activity in competition with Purchaser, or otherwise engage in the operation of a marketing or telemarketing business. 10.2 Non-solicitation. During the five-year period immediately following the effective date of this Agreement, Seller and the shareholders of Seller agree that they shall not, either directly or indirectly solicit or otherwise communicate with any customers or clients of Purchaser with the purpose of causing such persons to terminate their business or professional relationship with Purchaser, nor shall Seller solicit any contracts to which Purchaser is a party, or otherwise interfere with any professional or business relationships in which Purchaser is involved during such five-year period. 10.3 Extension. The period of time during which the prohibitions upon Seller specified in Sections 10.1 and 10.2 of this Agreement are in effect shall be extended by any length of time during which Seller is in breach of said Sections. 10.4 Enforcement. It is agreed by the parties hereto that if any portion of the restrictive covenants set forth in Sections 10.1 and 10.2 of this Agreement is held to be unreasonable, arbitrary, or against public policy, then each such covenant shall be considered divisible both as to time and geographical area, with each month of a specified period being deemed a separate period of time and each county within each state being deemed a separate geographical area, it being the intention of the parties that a lesser period of time or geographical area shall be enforced so long as the same is not unreasonable, arbitrary or against public policy. The parties to this Agreement agree that, in the event any court of competent jurisdiction determines that a specified time period or a specified geographical area is unreasonable, arbitrary or against public policy, a lesser time period or geographical area which is determined to be reasonable, non-arbitrary and not against public policy may be enforced against Seller. The parties hereto agree that damages at law will be an insufficient remedy to Buyer in the event that the restrictive covenants of Sections 10.1 and 10.2 of this Agreement are violated and that, in addition to any remedies or rights that may be available to Buyer, Buyer also shall be entitled, upon application to a court of competent jurisdiction, to obtain injunctive relief to enforce the provisions of this Section 10. 9 10 11. Termination. 11.1 Events of Termination. This Agreement may be terminated, and the transactions contemplated by it abandoned as to all parties, as follows: (a) at any time prior to Closing by written agreement between the parties; (b) unilaterally by Purchaser if any condition set forth in Section 8 of this Agreement has not been satisfied on the date of Closing; (c) unilaterally by Seller if any condition set forth in Section 9 of this Agreement has not been satisfied on the date of Closing. 11.2 Effect of Termination. Termination of this Agreement pursuant to Section 11.1 terminates all duties of the parties hereunder and, in and of itself, creates no liability between the parties. However, this Section 10.2 does not bar the liability of a party for a breach of its duties hereunder. 12. Indemnification. 12.1 Purchaser's Right to Indemnification. Seller hereby agrees to indemnify and hold Purchaser harmless from and against any and all liabilities, obligations, claims, contingencies, damages, costs, charges, payments, actions and expenses (including, without limitation, all court costs and reasonable attorneys' fees) that Purchaser may suffer or incur as a result of, arising from, or relating to, directly or indirectly, (i) the breach or inaccuracy of any of the representations, warranties, covenants, or agreements made by Seller herein or pursuant hereto, (ii) any lawsuit, claim, or proceeding of any nature relating to Seller or the Assets or Business, and arising out of any act or transaction occurring prior to the Closing or arising out of any facts or circumstances that existed at or prior to the Closing, and (iii) any other liabilities or obligations not being expressly assumed by Purchaser pursuant to this Agreement. If Seller shall be obligated to indemnify Purchaser in accordance with the foregoing, Purchaser shall have all legal and equitable rights to enforce the provisions of this Section 12. 12.2 Seller's Right to Indemnification. Purchaser agrees to indemnify and hold Seller harmless from any and all liabilities, obligations, claims, contingencies, damages, costs, charges, payments, actions and expenses (including, without limitation, all court costs and reasonable attorneys' fees) that Seller may suffer or incur as a result of, arising from, or relating to, directly or indirectly, (i) the breach or inaccuracy of any of the representations, warranties, covenants, or agreements made by Purchaser herein or pursuant hereto, (ii) any lawsuit, claim, or proceeding of any nature relating to Purchaser or the Assets or Business, and arising out of any act or transaction occurring from and after the date of Closing or arising out of any facts or circumstances that arise or occur on or after the date of Closing, and (iii) any liabilities or obligations being expressly assumed by Purchaser pursuant to this Agreement. If Purchaser shall be obligated to indemnify Seller in accordance with the foregoing, Seller shall have all legal and equitable rights to enforce the provisions of this Section 12. 12.3 Notice. The party seeking indemnification hereunder ("Indemnitee") shall, promptly after notice to it of any claim (notice to Indemnitee being the filing of any legal action, receipt in writing of any claim or statement of a potential, contingent or otherwise unasserted claim, or similar 10 11 form of actual notice) as to which it asserts a right to indemnification, notify the party from whom indemnification is sought ("Indemnitor") of such claim. The failure of Indemnitee to give such notification shall not relieve Indemnitor from any liability that it may have pursuant to this Agreement unless the failure to give such notice within such time shall have been prejudicial to it, and in no event shall the failure to give such notification relieve the Indemnitor from any liability it may have other than pursuant to this Agreement. 12.4 Third-Party Claims. If any claim for indemnification by Indemnitee arises out of a claim for monetary damages by a person other than Indemnitee in which Indemnitor acknowledges its absolute liability to indemnify Indemnitee under this Section 12, Indemnitor may, by written notice to Indemnitee, undertake to conduct any proceedings or negotiations in connection therewith as necessary to defend Indemnitee and take all other steps or proceedings to settle or defeat any such claims or to employ counsel to contest any such claims; provided, however, that Indemnitor shall reasonably consider the advice of Indemnitee as to the defense of such claims, and Indemnitee shall have the right to participate, at its own expense, in such defense, but control of such litigation and settlement shall remain exclusively with Indemnitor. Indemnitee shall provide all reasonable cooperation in connection with any such defense by Indemnitor. Counsel and auditor fees, filing fees, and court costs in all proceedings, contests, or lawsuits with respect to any such claim or asserted liability shall be borne by Indemnitor. If any such claim is made hereunder and Indemnitor does not elect to undertake the defense thereof by written notice to Indemnitee, or does not acknowledge in such written notice its absolute liability to indemnify Indemnitee under this Section 12, Indemnitee shall be entitled to control such litigation and settlement and shall be entitled to indemnity with respect thereto pursuant to the terms of this Section 12, including, without limitation, reasonable attorneys' fees and costs. To the extent that Indemnitor undertakes the defense of such claim by written notice to Indemnitee and diligently pursues such defense at its expense, Indemnitee shall be entitled to indemnification hereunder only to the extent that such defense is unsuccessful as determined by a final judgment of a court of competent jurisdiction, or by written acknowledgment of the parties. 13. Miscellaneous. 13.1 Notices. Any notice or election required or permitted to be given or served by any party hereto upon any other party shall be in writing and shall be deemed to have been given or served when (i) personally delivered, or (ii) one (1) day after being deposited with Federal Express or another nationally recognized overnight delivery service for next day delivery, or (iii) three (3) days after being deposited in the United States mail, registered or certified mail, return receipt requested, postage prepaid, properly addressed to the appropriate address, or (iv) when sent by telecopier transmission before 5:00 p.m. of the time zone where the recipient is located and evidenced by a telecopier generated confirmation that the transmission was received, provided that such notice is followed by notice delivered in the manner described in (i), (ii) or (iii) above, such notices to be delivered as follows: To Purchaser: ------------------------------------ ------------------------------------ ------------------------------------ ------------------------------------ 11 12 with copy to: William Kalish, Esquire Kalish & Ward, P.A. 101 East Kennedy Boulevard, Suite 4100 Tampa, Florida 33602 Fax: (813) 222-8701 To Seller: ------------------------------------ ------------------------------------ ------------------------------------ ------------------------------------ To Parent: First Capital Resources.com, Inc. 1400 East Oakland Park Boulevard Suite 100 Ft. Lauderdale, Florida 33334 Attention: Spiro Lazarou, President 13.2 Waiver. No course of dealing or any delay or failure on the part of any party hereto in exercising any right, power, privilege or remedy hereunder or under any other instrument given in connection with or pursuant to this Agreement shall impair any such right, power, privilege or remedy or be construed as a waiver of any breach, default or acquiescence relating thereto. No single or partial exercise of any such right, power, privilege or remedy shall be construed as a waiver, or preclude the further exercise, of any such right, power, privilege or remedy or the exercise of any other right, power, privilege or remedy. No waiver shall be valid against any party hereto unless made in writing and signed by the party against whom enforcement of such waiver is sought and then only to the extent expressly specified therein. 13.3 Attorneys' Fees and Costs. In the event that attorneys' fees or other costs are incurred to secure performance of any of the obligations herein provided for, or to establish damages for the breach thereof or to obtain any other appropriate relief, whether by way of prosecution or defense, the prevailing party, whether at trial, on appeal, or in bankruptcy proceedings, shall be entitled to recover reasonable attorneys' fees and costs incurred therein, including paralegal costs. 13.4 Survival. The representations, warranties, covenants, and agreements made by the parties pursuant to this Agreement (including, without limitation, obligations for indemnification) shall survive the Closing for a period of three years. 13.5 Expenses. Except as otherwise stated herein, each of the parties hereto shall, whether or not the transactions contemplated hereby are consummated, bear its own attorneys', accountants', auditors', or other fees, costs, and expenses incurred in connection with the negotiation, execution, and performance of this Agreement or any of the transactions contemplated hereunder. 13.6 No Brokers. Each party to this Agreement represents to the other parties that it has not incurred and will not incur any liability for brokerage fees or agents' commissions in connection with this Agreement and the transactions contemplated hereby, and agrees that it will indemnify and hold harmless the other party against any claim for brokerage and finders' fees or 12 13 agents' commissions in connection with the negotiation or consummation of the transactions contemplated by this Agreement. 13.7 Counterparts. This Agreement may be executed in one or more counterparts for the convenience of the parties hereto, all of which together shall constitute one and the same instrument. 13.8 Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned or delegated by any of the parties hereto without the prior written consent of the other parties. 13.9 Entire Agreement. This Agreement contains the entire understanding of the parties relating to the subject matter contained herein and supersedes all prior written or oral and all contemporaneous oral agreements and understandings relating to the subject matter hereof. This Agreement cannot be modified, amended, or terminated except in writing signed by the party against whom enforcement is sought. 13.10 Schedules and Exhibits. All schedules and exhibits to this Agreement are incorporated herein by reference and made a part hereof for all purposes. All references herein to this Agreement shall be deemed to include all schedules and exhibits hereto or contemplated hereby. The parties agree that, to the extent any schedules or exhibits specifically referenced or otherwise provided for or intended under this Agreement are not attached hereto at the time of execution and delivery by the parties, such schedules or exhibits shall be prepared and agreed to by the parties and shall be attached hereto in final form on or before the date of Closing. 13.11 Construction. Any ambiguity in this Agreement shall not be construed against the drafter but shall be construed in a neutral manner. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 13.12 Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the substantive laws of the State of Florida, without giving effect to any conflict of laws rule or principle that might require the application of the laws of another jurisdiction. 13.13 Time. The Effective Date of this Agreement shall be the date the later of Purchaser or Seller executes this Agreement as evidenced by the date below their respective signatures. Time is hereby made of the essence of this Agreement and each and every provision hereof. Any reference herein to time periods of less than six (6) days shall in the computation thereof exclude Saturdays, Sundays and legal holidays, and any time period provided for herein which shall end on a Saturday, Sunday or legal holiday shall extend to 5:00 PM of the next full business day. In computing periods of time, the date of this Contract shall not be counted. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date. 13 14 FC HOLDING CORPORATION By: ------------------------------------- Its: ------------------------------------- Date: ----------------------------- "Purchaser" AMERICAN MARKETING CORPORATION OF SOUTH FLORIDA By: ------------------------------------- Its: ------------------------------------- Date: ----------------------------- "Seller" FIRST CAPITAL RESOURCES.com, INC. By: ------------------------------------- Spiro Lazarou, President Date: ----------------------------- "Parent" 14 15 SCHEDULE "A" List of Assets 1. AMCAT Dialing Engine (Leased from Rockford Ind.) 2. VGA Monitor for Engine 3. Siemens 150 E Office Point Channel Bank (Leased from _________________) 4. 2 Network Hubs 5. 1 - 6' Lunch Table 6. 1 - 5' Lunch Table 7. 1 - Kitchen Refrigerator 8. 1 - Microwave oven 9. Assorted Dinning room utensils 10. 1 - Electric punch Time Clock 11. 1 - Computer Time Clock System 12. 50 - Office Chairs 13. 39 - Sound Absorbing TSR Booth w/37" desk tops all wired for Audio and Video and additional Telephone line 14. 18 - TSR Pentium 133 to 166 Computers w/monitors (Leased from Rockford Ind.) 15. 15 - Sherwood TSR Terminals w/monitors 16. 1 - Pentium II 233 Server w/monitor (Leased from Rockford Ind.) 17. 1 - 70" Executive Desk w/return 18. 1 - High back Executive Chair 19. 2 - Side Chairs 20. 1 - 60" Executive Desk w/return 21. 1 - Black cloth swivel chair 22. 1 - 60" Executive Desk 23. 1 - 50" Metal Supervisor Computer Desk 24. 1 - 48" Wood Computer Desk 25. 1 - Brother MFC Fax 26. 183 Calling Lists approximately value at cost $500.00 ea. = $91,500.00
15 16 SCHEDULE "B" List of Liabilities
Payroll Liabilities to 6/24/99: - ------------------------------- Advance American Marketing $ 203.00 Federal Unemployment IRS $ 631.68 Federal Withholding IRS $ 4,606.92 Medicare Company IRS $ 3,030.92 Medicare Employee IRS $ 3,030.92 Social Security Company IRS $ 7,408.92 Social Security Employee IRS $ 6,608.92 ---------- Sub-total $25,521.28 ========== Lists Paid for by MicroSmart: Paramount List Co. (See Attachment) $ 6,369.54 Accrued Billed Expenses: MCI WorldCom $_________ Others (see Attachments) $35,838.99 Leases: To be attached $_________ Accrued but Unbilled Expenses: To be determined $_________
16 17 SCHEDULE "C" Allocation of Purchase Price [INTENTIONALLY LEFT BLANK] 17 18 SCHEDULE "D" List of Employee Benefit Plans Humana Health Plan (HMO) Family Coverage: Includes Dental and Prescription coverage $15.00 coinsurance payment for physician office visits $5.00 coinsurance payment for prescriptions Cost to company: $774.00 per month. 18 19 SCHEDULE "E" Financial Statements 19 20 EXHIBIT "A" Registration Rights Agreement 20 21 EXHIBIT "B" Employment Agreement 21 22 EXHIBIT "C" Agreement 22 EX-10.2 3 PROMISSORY NOTE 1 Exhibit 10.2 PROMISSORY NOTE $1,000,000 Dated: September 13, 1999 Principal Amount State of Florida FOR VALUE RECEIVED, the undersigned hereby jointly and severally promise to pay to the order of Affordable Dealer Services, Inc., the sum of One Million and 00/100 Dollars ($1,000,000), together with interest thereon at the rate of 10% per annum on the unpaid balance. Said sum shall be paid in the manner following: This note shall be paid within (3) Three Years, in (36) Thirty-six consecutive and equal interest only payments of $8447.50 each, with a first payment (45) Forty-Five days from hereof, and the same amount on the same day of each month thereafter, provided the entire principal balance and any accrued but unpaid interest shall be fully paid on or before September 13, 2002. All payments shall be first applied to interest and the balance to principal. This note may be prepaid, at any time, in whole or in part, without penalty. All prepayments shall be applied in reverse order of maturity. This note shall at the option of any holder hereof be immediately due and payable upon the failure to make any payment due hereunder within (90) Ninety days of its due date. In the event this note shall be in default, and placed with an attorney for collection, then the undersigned agree to pay all reasonable attorney fees and costs of collection. Payments not made within five (5) days of due date shall be subject to a late charge of (5) Five % of said payment. All payments hereunder shall be made to such address as may from time to time be designated by any holder hereof. The undersigned and all other parties to this note, whether as endorsers, guarantors or sureties, agree to remain fully bound hereunder until this note shall be fully paid and waive demand, presentment and protest and all notices thereto and further agree to remain bound, notwithstanding any extension, renewal, modification, waiver, or other indulgence by any holder or upon the discharge or release of any obligor hereunder or to this note or upon the exchange, substitution, or release of any collateral granted as security for this note. No modification or indulgence by any holder hereof shall be binding unless in writing; and any indulgence on any one occasion shall not be an indulgence for any other or future occasion. Any modification or change of terms, hereunder granted by any holder hereof, shall be valid and binding upon each of the undersigned, notwithstanding the acknowledgment of any of the undersigned, and each of the undersigned does hereby irrevocably grant to each of the others a power of attorney to enter into any such modification on their behalf. The rights of any holder hereof shall be cumulative and not necessarily successive. This note shall take effect as a sealed instrument and shall be construed, governed and enforced in accordance with the laws of the State first appearing at the head of this note. The undersigned hereby execute this note as principals and not as sureties. Signed in the presence of: - -------------------------------- -------------------------------- Witness Borrower Mid Lantic Marine, Inc. /s/ [Illegible] /s/ [Illegible] - -------------------------------- -------------------------------- Witness Borrower EX-10.3 4 PARTICIPATION AGREEMENT 1 Exhibit 10.3 PARTICIPATION AGREEMENT THIS Participation Agreement is entered this 7 day of June , 1999, by and between SOUTHEAST DEALER ACCEPTANCE, INC., a Florida corporation ("SDAI") and Mr. C's AUTO SALES, INC., a Florida corporation ("Mr. C's"). WHEREAS, Mr. C's generates automobile loans from the sale of automobiles to customers and desires to sell SDAI, and desires to purchase from Mr. C's, a senior participation interest in certain of such loans, upon the terms and conditions set forth below: NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants hereinafter set forth, and other consideration , the receipt and sufficiency of which are hereby acknowledged, SDAI and Mr. C's, intending to be legally bound, agree as follows: ARTICLE 1 DEFINITIONS 1.1 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Applicable Rate" means, as to each Loan, a fixed interest rate equal to seventeen percent (17%) per annum. "Business Day" means a day on which banks are not required or authorized to be closed in the city of New York, New York. "Closing Participation Amount" means, with respect to any month, the Participation Amount calculated as of the close of business on the last day of such month. "Delinquent Loan" means any Loan with respect to which (i) the Obligor thereunder is more than 30 days delinquent as to scheduled monthly payments due under the Loan, or (ii) a repossession proceeding has commenced. A Loan payment shall not be considered delinquent if at least 95% of the proper payment amount has been received. "GAAP" means those generally accepted accounting principles used on a basis consistent with those principles used in connection with the preparation of the financial statements of Mr. C's attached hereto as Exhibit "C". "Government Entity" means any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign. "Lien" means any pledge, lien, judgement, security interest, claim charge, assessment, restriction or encumbrance, whether consensual or by operation of law. "Loan Documents" means, with respect to any Loan, the Note and Security Agreement relating thereto, and any amendments thereto. "Loan File" means the credit and closing package, custodial documents, servicing documents, Loan Documents and all other documents relating to a Loan or necessary for prudent servicing. 2 "Loans" means the indebtedness of an Obligor as evidenced by a Note and Security Agreement for the loans is which SDAI has purchased a Senior Participation pursuant to this Agreement. "SDAI Return" means, with respect to any month, an amount equal to (i) the Participation Amount on the last day of the preceding month multiplied by the Applicable Rate plus (ii) the difference between the Opening Participation Amount and the Closing Participation Amount. "Note" means the original executed note or installment sales contract evidencing the indebtedness of an Obligor under a Loan. "Obligor" means each person who is now or hereafter liable for the full or partial payment of any Loan, whether such obligation is direct, indirect, primary, secondary, joint or several. "Opening Participation Amount" means, with respect to any month, the Participation Amount calculated as of the close of business on the last day of the preceding month. "Participation Amount" means, as of any given date, the total of the Participation Amounts for each Loan. The Participation Amount for each Loan means the product of the outstanding principal amount of the Loan on that date, times the Participation Percentage applicable to that Loan. "Participation Percentage" initially means sixty percent (60%). The Participation Percentage may be changed from time to time by mutual consent of SDAI and Mr. C's as to any Loans in which a Senior Participation is subsequently sold pursuant to this Agreement. "Person" means any individual, partnership, joint venture, corporation, trust or unincorporated organization or a government or agency or political subdivision thereof. "Security Agreement" means the security agreement, retail installment contract, UCC Financing Statement, certificate of title or other instrument securing a Note and creating a lien and security interest in the Vehicle described therein. "Servicing Agreement" means that certain Servicing Agreement of even date herewith between Mr. C's and SDAI for the servicing of the Loans. "Tax" or "Taxes" means all income, gross receipts, sales, use, employment, franchise, profits, personal property or other taxes, fees, stamp taxes and duties, assessments or charges of any kind whatsoever (whether payable directly or by withholding), together with any interest and any penalties, additions to tax or additional amounts imposed by any taxing authority with respect thereto. "Vehicles" means those motor vehicles or other items of collateral which secure a Loan pursuant to a Security Agreement. 2 3 1.2. Terms Defined in Other Sections. The following terms are defined in the following sections: "Mr. C's Agreements" -- 6.2(a) "Operating Account" -- 4.1 "Senior Participation" -- 2.1 ARTICLE II PURCHASE AND SALE OF SENIOR PARTICIPATIONS 2.1. Purchase of Senior Participations. During the one-year period beginning upon execution of this Agreement, Mr. C's will sell and SDAI will purchase up to $500,000 of undivided preferred senior participation interests equal to the Participation Percentage (a "Senior Participation") in Loans submitted by Mr. C's to SDAI in accordance with this Agreement and subject to the terms and conditions set forth in this Agreement. From time to time thereafter, Mr. C's will sell and SDAI will purchase additional Senior Participations in Loans submitted by Mr. C's to SDAI in accordance with this Agreement and subject to the terms and conditions set forth in this Agreement. This Agreement shall not obligate Mr. C's to offer a participation in any specific Loans to SDAI, nor shall it obligate SDAI to purchase a Senior Participation in any specific Loan offered by Mr. C's and it is understood and agreed that SDAI's decision to accept or reject any offer by Mr. C's is in SDAI's sole discretion. However, the terms of this Agreement shall govern the purchase of Senior Participation in Loans when offered by Mr. C's and accepted by SDAI. 2.2. Loan Requirements. In order to be eligible for purchase of a Senior Participation by SDAI, each Loan shall be (a) in compliance with the Underwriting Criteria approved from time to time by SDAI and set forth in a written schedule, and (b) written on a retail installment contract form customarily used in the industry and subject to the reasonable approval of SDAI. The initial Underwriting Criteria shall be as set forth in Exhibit "A" attached hereto. 2.3 Documents to be Delivered. Upon acceptance by SDAI of an offer by Mr. C's for purchase of a Senior Participation, Mr. C's shall endorse each Loan Document to SDAI and deliver to SDAI (a) Senior Participation Certificate, in form and content reasonably satisfactory to SDAI, conveying to SDAI the Senior Participation, free and clear of all Liens or defects in title of any kind, (b) each of the Loan Documents and (c) each of the documents set forth in Exhibit "B" attached hereto. 2.4 Purchase Price and Payment. As consideration for each Senior Participation, SDAI shall, subject to and upon the terms and conditions set forth herein, pay to Mr. C's, by wire transfer, an amount equal to the outstanding principal amount of the Loan, multiplied by the Participation Percentage, less a purchase fee in the amount of $50.00 per Loan. The purchase price shall be paid in accordance with a written funding schedule mutually agreed upon and after (a) SDAI has received and approved the documents specified in Section 2.3, above, and (b) Mr. C's has complied with the covenants set forth in Section 11.2 hereof. 2.5. Repurchase. Mr. C's may, at its sole and absolute discretion, repurchase the Loans by tendering to SDAI an amount equal to the total Participation Amount for all Loans plus any accrued and unpaid interest thereon. 3 4 2.6 Satisfaction. At such time as Mr. C's shall repurchase the Loans, or otherwise pay and satisfy the full Participation Amount in any given Loan, SDAI, shall execute and deliver such documents as shall be legally required to release its lien upon Vehicles encumbered by such Loan or Loans. ARTICLE III SERVICING AND DELINQUENCIES 3.1 Servicing of Loans by Mr. C's. Subject to the terms of Section 3.3 hereof, Mr. C's shall be solely responsible for servicing the Loans in accordance with the terms of the Servicing Agreement, including repossession and disposition of a Vehicle when appropriate. 3.2 Repurchase of Delinquent Loans. Mr. C's agrees to repurchase SDAI's Senior Participation in any Loan within seven (7) days of the date the Loan becomes a Delinquent Loan for a repurchase price equal to the Participation Amount for that Loan, plus interest at the Applicable Rate from the last day of the preceding month through the date of repurchase. 3.3 Right to Perform Obligations of Mr. C's. If Mr. C's (i) dissolves, liquidates, merges, consolidates or otherwise reorganizes without the prior written consent of SDAI, (ii) has rendered against it any judgment which is not discharged within 90 days of filing, or (iii) upon written notice from SDAI and a failure to cure within 5 Business Days of the date of such notice, (A) fails to comply with or perform any of its representations, warranties or covenants under this Agreement or the Servicing Agreement, (B) has a receiver appointed for it or any of its assets, (C) has filed by or against it a petition in bankruptcy or for reorganization, (D) is generally unable to pay its debts as they come due, or (E) is in default on any contract which obligates Mr. C's to make aggregate payments in excess of $100,000, then SDAI may, but shall not be obligated to, perform Mr. C's 's obligations under this Agreement and terminate the Servicing Agreement. SDAI shall be reimbursed on demand from the Operating Account for its reasonable costs and expenses incurred in performing Mr. C's 's obligations under this Agreement (including its reasonable costs and expenses in enforcing its rights hereunder) and Mr. C's shall have no further rights under this Agreement other than the right to receive distributions for any remaining cash balance as referenced in Section 4.2(c). If the Operating Account is insufficient to pay such costs and expenses, Mr. C's shall pay such amounts to SDAI on demand. ARTICLE IV DISTRIBUTIONS 4.1 Operating Account. Mr. C's has established a segregated account at SunTrust Bank, Account # ____________ (the "Operating Account") into which will be deposited, promptly upon receipt, all cash processed by Mr. C's pertaining to the Loans. The Operating Account shall be maintained for the benefit, and in the name, of both Mr. C's and SDAI but shall be under the sole control of Mr. C's. The Operating Account shall be collaterally pledged to SDAI pursuant to Section 11.2. All distributions shall be made in accordance with Section 4.2. If SDAI terminates the Servicing Agreement in accordance with Section 3.3, then (i) an accounting of the Operating Account and all funds on deposit in that Account shall be prepared by Mr. C's and delivered to SDAI, and SDAI shall have the right to have the Operating Account audited, and (ii) the Operating Account shall be closed and replaced with an Operating Account at a bank of SDAI's choice, maintained by SDAI for the benefit, and in the name, of both Mr. C's and SDAI, but under the sole control of SDAI. 4 5 4.2 Distributions from Operating Account. At the earlier of the date of each settlement or the end of each week, all cash in the Operating Account shall be distributed or paid as follows: (a) first, to SDAI, the SDAI Return for the immediately preceding month: (b) second, to SDAI, any amounts payable, directly or indirectly, by or on behalf of SDAI in connection with any assumption and performance of Mr. C's obligations pursuant to Section 3.3; (c) third, to Mr. C's, the remaining cash balance, if any, in the Operating Account, including all payments and reimbursements due under the Servicing Agreement. ARTICLE V STATEMENTS 5.1 Statements Prepared by Mr. C's. Within 15 days after the end of each month, Mr. C's shall prepare and deliver to SDAI a report consisting of the following statements (the "Statements") with respect to the immediately preceding month: (i) Opening Participation Amount; (ii) Closing Participation Amount; and (iii) identity of and aggregate payments due under each Loan which is more than 30 days past due. In addition, Mr. C's shall provide to SDAI such other information as SDAI may reasonably request from time to time. 5.2 Disputes. No error in any statements shall serve to the benefit of either party. If a dispute occurs with respect to any statement, Mr. C's and SDAI shall attempt to reconcile their differences and any resolution by them as to any disputed Statement shall be final, binding and conclusive on Mr. C's and SDAI and shall have the legal effect of a binding arbitration award. If Mr. C's and SDAI are unable to reach a resolution with such effect within ten Business Days after delivery of the notice of dispute, Mr. C's and SDAI shall submit the items remaining in dispute to arbitration in accordance with Section 11.1 of this Agreement. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF Mr. C's Mr. C's represents, warrants and agrees as follows: 6.1 Organization, Power and Authority. Mr. C's is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida and has all necessary corporate power and authority to enter into and perform all of its obligations under this Agreement and to consummate the transactions contemplated hereby and thereby. Mr. C's is legally qualified to transact business as a foreign corporation in each of the jurisdictions in which its business or property is such as to require that it be thus qualified, and it is in good standing in each of the jurisdictions in which it is so qualified. Mr. C's principal place of business is in Coral Springs, Florida. 6.2 Power, Authority and Capacity; Enforceability; No Conflicts. (a) Mr. C's has full power, authority and capacity to enter into this Agreement, the Servicing Agreement and all documents contemplated or requested by any of these agreements (collectively the "Mr. C's Agreement") and to carry out its obligations hereunder and thereunder, and will provide evidence of the same to SDAI on demand. The Mr. C's Agreements have been duly executed and 5 6 delivered by Mr. C's and are the valid and binding obligations of Mr. C's, enforceable against it in accordance with their respective terms. The execution, delivery and performance of the Mr. C's Agreements and the consummation of the transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of Mr. C's. (b) To the best of its knowledge, neither the execution and delivery of the Mr. C's Agreements, nor the performance of Mr. C's of its obligations under the Mr. C's Agreements, nor the consummation of the transactions contemplated thereby, will (i) conflict with any provision of the certificate of incorporation of by-laws of Mr. C's: (ii) conflict with, result in a breach of or constitute a default (or an event in which would, with the passage of time or the giving of notice or both, constitute a default) under, or give rise to a right to terminate, amend, modify, abandon or accelerate, any contract, agreement, promissory note, lease, indenture, instrument or license to which Mr. C's is a party or by which Mr. C's assets or properties may be bound or affected; (iii) violate or conflict with any federal, state or local law, statute, ordinance, rule, regulation, order, judgment, decree or arbitration award which is either applicable to, binding upon or enforceable against Mr. C's; (iv) result in or require the creation or imposition of any Liens upon or with respect to any assets of Mr. C's or the Loans, other than Liens in favor of SDAI; (v) violate any legally protected right arising in the operation of Mr. C's business of any individual or entity or give to any individual or entity a right or claim against SDAI or the Loans; or (vi) require the consent, approval, order or authorization of, or the registration, declaration or filing with any Government Entity. 6.3 Financial Statements. The financial statements attached hereto as Exhibit "C" present fairly the financial condition of Mr. C's at the date indicated therein and the results of operations for Mr. C's for the periods indicated therein, all of which are in conformity with GAAP and are accurate and complete in all material respects. The books and records of Mr. C's properly and accurately reflect all of its transactions, properties, assets and liabilities. Mr. C's shall provide financial statements to SDAI annually. 6.4 Taxes. Mr. C's has duly filed, or has received an extension of time for such filing in accordance with applicable law, all federal, state, local and foreign Tax returns and reports required to be filed by it, all such returns and reports were true and correct in all material respects as of the date on which they were filed, none of such returns and reports has been amended, and all Taxes arising under such returns and reports have been fully paid or are fully accrued as liabilities on Mr. C's books and records and will be timely paid. There have been no audits of federal, state, local and foreign Tax returns of Mr. C's performed by federal, state, local or foreign taxing authorities within the last 10 years or otherwise with respect to any Tax year for which assessment is not barred by the applicable statute of limitations. No waivers of any applicable statutes of limitations are outstanding. There is no pending, or to the knowledge of Mr. C's, threatened federal, state, local or foreign tax audit of Mr. C's and no agreement with any federal, state, local or foreign tax authority that may affect Mr. C's respective subsequent Tax liabilities. 6.5 Contracts. Mr. C's is not in default or breach under any contract, agreement or commitment to which Mr. C's is a party or is bound and, to Mr. C's knowledge, there is no breach or anticipated breach of any such contract, agreement or commitment by any other party to such contract, agreement or commitment. All of such contracts, agreements and commitments are valid, binding and enforceable and in full force and effect in accordance with their respective terms. 6 7 6.6. Litigation. Except as set forth in Exhibit "D", to the best of Mr. C's knowledge, there are no actions, suits, claims, governmental investigations or arbitration proceedings pending or, to Mr. C's knowledge, threatened against or substantially affecting the Loans or substantially affecting the assets or liabilities of Mr. C's, or which question the validity or enforceability of the Mr. C's Agreements or the Loans or any action contemplated herein. For purposes of this provision, the term "substantially affecting" shall mean any claim seeking damages of $10,000 or more or any circuit court lawsuit filed against Mr. C's or any guarantor hereunder. There are no outstanding orders, decrees, or stipulations issued by any Government Entity in any proceeding to which Mr. C's is or was a party or, to Mr. C's knowledge, which affect the Loans or the Mr. C's Agreements. 6.7. Compliance with Laws; Permits. To the best of its knowledge, after diligent inquiry, Mr. C's is not in violation of any statutes, laws, ordinances, rules or regulations, or any judgment, order or decree (federal, state or local) of any Government Entity and posses all approvals, licenses, permits, franchises or other authorizations of any Government Entity (collectively, "Permits") necessary to the performance of its obligations under the Mr. C's Agreements, the ownership, operation or disposition of its properties or the conduct of its business. All such Permits are valid and in full force and effect, Mr. C's is in compliance with their respective requirements and no proceeding is pending or, to Mr. C's knowledge, threatened to revoke or amend any of them. None of such Permits is or will be impaired or in any way affected by the execution and delivery of the Mr. C's Agreements and the transactions contemplated thereby. 6.8. Brokers. No broker, finder or investment banker will be entitled to any brokerage, finder's or other fee or commission from Mr. C's in connection with the transactions contemplated by this Agreement. Mr. C's shall indemnify, defend and hold SDAI harmless from any claim of any broker based upon any alleged arrangement with Mr. C's. 6.9. Title. (a) There are no gaps in the chain of title for the Notes and Security Agreements. (b) Upon endorsement and delivery of the Notes to SDAI, the assignment of the Security Agreements to SDAI, and the assignment to SDAI of the related liens on the Vehicles, SDAI will hold legal title to the Notes and Security Agreements free and clear of all liens or defects in title of any kind, which will be sufficient to permit SDAI and its successors and assigns to avail itself of all protection available under applicable law against the claim of any present or future creditors of Mr. C's, and will be sufficient to prevent any other sale, transfer, assignment, pledge or hypothecation of the Notes by Mr. C's from being enforceable. (c) Upon the sale of the Senior Participation to SDAI pursuant to this Agreement, SDAI will own good and marketable title to the Senior Participation, free and clear of all Liens or defects in title of any kind. (d) Upon purchase of each Senior Participation, Mr. C's will provide to SDAI a lien guarantee as to the related Vehicle. Within 20 days of the date of purchase, Mr. C's will provide to SDAI a copy of the Vehicle registration showing a first lien in favor of SDAI or its designee. Within 40 days of the date of purchase, Mr. C's will provide to SDAI the original Certificate of Title to the vehicle. 7 8 6.10. Security Interest. Each purchase of a Senior Participation pursuant to this Agreement and the documents executed in connection therewith (i) creates a valid first priority ownership and first priority security interest for the benefit of SDAI in all of the Loans, Loan Files and Loan Documents, (ii) effects the assignment to SDAI of a first priority security interest in each Vehicle, and (iii) creates and ownership and security interest in the Vehicles and Operating Account securing SDAI's rights and benefits hereunder and under the MR. C's Agreements. All instruments and documents necessary or desirable to perfect and protect such ownership and security interest in the Loans, Loan Files, Loan Documents, Vehicles and Operating Accounting have been duly executed and delivered by Mr. C's. All filings and other actions necessary or desirable to perfect and protect such ownership and security interests in the Loans, Loan Files, Loan Documents, Vehicles, and Operating Account shall be taken by Mr. C's immediately following purchase of the Senior Participation by SDAI. 6.11. Loans. (a) Mr. C's has generated the Notes and Security Agreements through the sale of vehicles and holds legal title thereto free and clear of all liens or defects of any kind. Except as otherwise provided in this Agreement, Mr. C's has not sold, assigned, transferred, pledged or hypothecated any interest in any Loan, Loan File or Loan Document to any person. None of the loans is a Delinquent Loan. (b) Mr. C's represents and warrants that (i) each Note and Security Agreement is a genuine, legally valid, binding and enforceable document according to its terms, and conforms to all applicable laws and regulations, (ii) each Security Agreement grants to the holder thereof and its successors and assigns a valid, binding, enforceable and perfected first priority lien and security interest on the Vehicle purported to be covered thereby, recorded among the appropriate records of the appropriate jurisdiction, and no portion of such security has been released (iii) the terms of each Note and Security Agreement have not been modified or canceled and no party thereto has been released in whole or in part and not part of the property subject to the Security Agreement has been released, (iv) no Note or Security Agreement has been subordinated in whole or in part, (v) there is in force for each Loan a liability insurance policy issued by reputable, financially solvent insurer providing adequate coverage with respect to each Vehicle that is the subject of a Loan, in an amount equal to the required by the Note and/or Security Agreement relating to such Loan, or otherwise by applicable law, (vi) each Loan meets or is exempt from applicable federal and state laws, regulations and other requirements pertaining to usury and each Loan is not usurious, (vii) each Loan has been originated, underwritten and serviced in compliance with all applicable laws and regulations and (viii) there is no material defect in the title to any Vehicle security any Note or to which any Security Agreement relates. 6.12. Limitation on Warranties. If any of the representations and warranties contained in Sections 6.9, 6.10 or 6.11 shall prove to be materially incorrect with regard to any Loan, SDAI may give notice to Mr. C's identifying the defective Loan, along with appropriate documentation or other proof of the defect in the Loan. For purposes of this provision, the term "materially incorrect" is defined as any circumstance with Mr. C's is unable to cure within thirty (30) days. If the Loan is in fact defective and if Mr. C's is unable to cure or correct the defect in the Loan with reasonable time (not to exceed 30 days) and to SDAI's reasonable satisfaction, Mr. C's shall immediately repurchase SDAI's Senior Participation in the defective Loan for the then Participation Amount for that Loan, plus interest at the Applicable Rate for the last day of the preceding month through the date of repurchase. SDAI shall not be entitled to any other remedy due to any inaccuracy of any one or more of the representations and warranties. 8 9 ARTICLE VII REPRESENTATION AND WARRANTIES OF SDAI SDAI represents, warrants and agrees as follows: 7.1 Organization and Authority of SDAI. SDAI is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida and has all necessary corporate power and authority to enter into and perform all of its obligations under this Agreement and to consummate the transactions contemplated hereby and thereby. 7.2 Power, Authority and Capacity of SDAI; Enforceability; No Conflicts. (a) SDAI has full power and capacity to enter into this Agreement and to carry out its obligations hereunder. This Agreement has been duly executed and delivered by SDAI and is a valid and binding obligation of SDAI, enforceable against it in accordance with its terms. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of SDAI. (b) To the best of its knowledge neither the execution nor delivery of this Agreement nor the performance by SDAI of its other obligations under this Agreement, nor the consummation of the transactions contemplated hereby will, (i) conflict with any provision of the certificate of incorporation or bylaws of SDAI, (ii) result in a breach of, or constitute a default (or an event, which would, with the passage of time or the giving of notice or both, constitute a default) under, or give rise to a right to terminate, amend, modify, abandon, accelerate, any material contract, agreement, lease, indenture, instrument or license to which SDAI is a party or by which SDAI's assets or properties may be bound or affected; (iii) violate or conflict with any federal, state, or local law, statute, ordinance, rule, regulation, order, judgement, decree, or arbitration award which is either applicable to, binding upon or enforceable against SDAI; (iv) result in or require the creation or imposition of Liens upon or with respect to any assets of SDAI or the Loans; (v) violate any legally protected right arising in the operation of SDAI's business of any individual or entity or give to any individual or entity a right or claim against Mr. C's or the Loans; or (vi) require the consent, approval or other authorization of, or the registration, declaration or filing with any Government Entity. 7.3 Brokers. No broker, finder or investment banker will be entitled to any brokerage, finder's or other fee or commission from SDAI in connection with the transactions contemplated by this Agreement. SDAI shall indemnify, defend and hold Mr. C's harmless from any claims of any broker based upon any alleged arrangement with SDAI. ARTICLE VIII FURTHER COVENANTS OF Mr. C's 8.1 Books and Records. Mr. C's shall maintain proper records and books of accounts in which full, true and correct entries in conformity with GAAP shall be made of all dealings and transactions related to the Loans. During the period of this Agreement, Mr. C's shall give SDAI and its authorized representatives reasonable access to all books and records of Mr. C's relative to the loans upon reasonable advance notice, and permit SDAI to make such inspection and copies thereof as SDAI may reasonably request during normal business hours, provided, however, that such investigation or inspection shall be conducted in such a manner as to not interfere unreasonably with Mr. C's business. 9 10 8.2 Maintenance of Ownership and Security Interests. Mr. C's shall at all times maintain the ownership and security interest provided for SDAI in this Agreement as a valid and perfected ownership and security interest in all of the Loans, Loan Files, Loan Departments, Vehicles and Operating Account. 8.3 Notices. Mr. C's shall promptly notify SDAI of any of the following: (a) any change in Mr. C's name, principal place of business, or senior management; (b) the termination or modification of insurance coverage on any Vehicle; and (c) any condition, event or act which comes to Mr. C's attention that would or might materially affect repayment of any Loan or prejudice SDAI's rights under this Agreement. ARTICLE IX CONDITIONS TO OBLIGATIONS 9.1 Conditions to Obligation of SDAI. The obligation of SDAI to close any purchase of a Senior Participation as to which it has accepted an offer hereunder shall be subject to the fulfillment of each of the following conditions: (a) The representations and warranties of Mr. C's contained in this Agreement shall be true, complete and correct, and all the covenants and other obligations contained in this Agreement to be performed or complied with by Mr. C's prior to any such purchase shall have been complied with in all material aspects. (b) No temporary, preliminary or permanent injunction or other order, stay, judgment, decree or ruling of any Government entity shall be in effect which would make the purchase of a Senior Participation illegal or would otherwise prevent the closing of such a purchase. ARTICLE X INDEMNIFICATION 10.1 Indemnification by Mr. C's. Mr. C's shall indemnify SDAI and its directors, stockholders, officers, employees and agents (an "Indemnified Party") against and defend and hold them harmless from any expenses, losses, costs, deficiencies, liabilities, claims, damages, awards or judgments (including legal fees and expenses) ("Indemnification Damages") suffered or incurred by any such Indemnified Party to the extent arising from the ownership of the Loans or any interest therein, including, without limitation (i) any breach of any representation, warranty, covenant or agreement of Mr. C's contained in the Mr. C's Agreements, (ii) suits by an Obligor claiming incorrect calculations of payments by Mr. C's due under the Notes, (iii) claims for breach of warranty in connection with a sale or transfer of any Vehicles by or on behalf of Mr. C's, (iv) any obligation or liability arising from an ownership interest in the Vehicles, (v) any acts of negligence, gross negligence, theft or fraud or other willful misconduct by Mr. C's, or employees or subsidiaries thereof, and (vi) any liability arising from a repossession of a Vehicle, including any litigation, cross claims or defenses by an Obligor under a loan that has been terminated or otherwise accelerated. 10 11 10.2 Right of Setoff. SDAI may immediately set off against the Operating Account any Indemnifiable damages which it is entitled to recover under this Article. SDAI shall give notice to Mr. C's of SDAI claim for Indemnifiable Damages. If, prior to the expiration of 10 Business Days from the date of such notice, Mr. C's shall notify SDAI of an intention to dispute the claim and if such dispute is not resolved within 30 days after expiration of such period, then such dispute shall be resolved by arbitration in accordance with Section 11.1 of this Agreement. If Mr. C's prevails in arbitration, SDAI shall immediately reimburse the Operating Account to the extent of the previous setoff. 10.3 Third Party Claims (a) For an Indemnified Party to be entitled to indemnification under this Article in respect of, arising out of or involving a claim or demand made by, any Person against the Indemnified Party (a "Third Party Claim"), such Indemnified Party must notify Mr. C's in writing of the Third Party claim within 10 Business Days after receipt by such indemnified Party of notice of the Third Party Claim; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except (i) to the extent Mr. C's shall have been actually prejudiced as a result of such failure and (ii) that Mr. C's shall not be liable for any out of pocket expenses incurred by the Indemnified Party during the period in which the Indemnified Party failed to give such notice. Thereafter, the Indemnified Party shall deliver to Mr. C's, within 5 Business Days after the Indemnified Party's receipt thereof, copies of all notices and documents (including court papers) received by the Indemnified Party relating to the Third Party Claim. (b) If a Third Party Claim is made against any Indemnified Party, Mr. C's shall assume the defense thereof with counsel selected by Mr. C's and reasonably acceptable to SDAI. If Mr. C's assumes such defense, the Indemnified Party shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by Mr. C's. Notwithstanding the foregoing, SDAI shall have the right to employ counsel at Mr. C's expense if the interest of Mr. C's and SDAI conflict in any material respect as to such Third Party Claim. If Mr. C's fails to assume the defense of any Third Party Claim, the Indemnified Party may, if it so chooses, assume the defense thereof with counsel selected by the Indemnified Party. If the Indemnified Party elects to assume the defense of the Third Party Claim, Mr. C's (i) shall be liable for the reasonable fees and expenses of counsel employed by the Indemnified Party and (ii) shall be entitled to participate in (but not control) the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnified Party. Regardless of which party defends or prosecutes any Third Party Claim, all the parties hereto shall retain and provide to the other, as required, records and information which are reasonably relevant to such Third Party Claim, and make employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. (c) Whether or not the Indemnified Party shall have assumed the defense of a Third Party Claim, the Indemnified Party shall not admit any liability with respect to, or settle, compromise or discharge, such Third Party Claims without Mr. C's prior written consent, which consent shall not be unreasonably withheld. 11 12 ARTICLE XI MISCELLANEOUS 11.1 Arbitration. Any controversy or claim between SDAI and Mr. C's arising out of or relating to this Agreement, this acquisition or ownership of the loans, or the parties' dealing with each other shall be settled by binding arbitration in Broward County, Florida, in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitration may be entered in any court having jurisdiction thereof. The arbitration shall be conducted before and by a single arbitrator selected by the parties. If the parties have not selected an arbitrator within 10 days of written demand for arbitration by either party, the arbitrator shall be selected by the American Arbitration Association pursuant to the then current rules of that Association. The expenses shall be divided equally between the parties but shall ultimately be subject to award to the prevailing party. The duty to arbitrate shall survive the cancellation or termination of this Agreement. 11.2 Security Interest of SDAI (a) In order to secure SDAI's right under this agreement, including the SDAI Return and SDAI's right to indemnification hereunder, Mr. C's hereby grants to SDAI a security interest in all of the Loans, Loan Files, Loan Documents, Operating Account and products and proceeds of the above including the Vehicles. (b) At or prior to funding of a purchase price, Mr. C's shall execute and deliver to SDAI all instruments and documents necessary to perfect a first priority security interest in the Loans, Loan Files, Loan Documents, Operation Account and products and proceed of the above in favor of SDAI. Mr. C's shall endorse each Note "payable to the order of SDAI" and deliver the Loan documents to SDAI with the Senior Participation Certificate. Such Loan Documents will maintain in the possession of SDAI for the benefit of Mr. C's and SDAI, subject to SDAI's security interest therein. (c) Simultaneously with funding of a purchase price, Mr. C's shall assign to SDAI its lien and security interest in each vehicle, such assignment to be in form suitable for recordation in the jurisdiction in which the Vehicle is titled. Mr. C's shall bear all expenses in connection with the preparation and recording of the assignment. (d) Immediately following the purchase of a Senior Participation, Mr. C's shall take all actions necessary to continue a perfected lien and security interest in the Vehicles in favor of SDAI, including the assignment of the Security Agreement relating to each vehicle, and otherwise take all actions necessary to maintain such Security Agreement as a lien and security interest upon such vehicle. (e) Mr. C's shall deliver to SDAI evidence, in form reasonably satisfactory to SDAI, of its compliance with Sections 11.2 (c) and (d), including file-stamped copies of all statements and notices referred to in Section 11.2(d). (f) Mr. C's shall pay the costs and expenses relating to the actions described in Sections 11.2(b), (c), (d), (e) and (f) including the costs of filing any financing or security interest filing statements as well as any recordation or transfer fees or taxes required by law to be paid in connection with the filing or recording of any such statement. Such costs and expenses shall not be chargeable to the Operating Account. 12 13 11.3. Cooperation. At any time and from time to time after the date of this Agreement, either party shall, at the request of the other party, execute and deliver any instruments or documents, including Uniform Commercial Code financing statements in favor of SDAI, assignments of sale and other documents reflecting SDAI's ownership interest in the Loans, and take all such further actions as required by the state of Florida Department of Banking and Finance and as such party reasonably may request in order to consummate and make effective the transactions contemplated hereby. The Senior Participation shall be evidenced by such instruments and filings as SDAI shall reasonably require in its sole discretion. 11.4. Expenses. Except as otherwise provided in this Agreement, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses. 11.5. Relationship of Parties. This Agreement constitutes a sale of Senior Participations and the grant of an ownership and security interest in the Loans, Loan Files, Loan Documents and Security Agreements, and shall in no way be construed as creating a partnership, joint venture or any other relationship. 11.6. Notices. All notices, consents, approvals and other communications given or made hereunder shall be in writing and shall be delivered (i) personally, (ii) by overnight courier, (iii) by telecopier or (iv) by registered or certified mail, as follows (or at such other address as shall be specified by like notice): If to SDAI: SOUTHEAST DEALER ACCEPTANCE CORPORATION 1400 East Oakland Park Boulevard, Suite 100 Ft. Lauderdale, FL 33334 Attention: Spiro Lazarou Telephone.: (954) 568-3989 Facsimile: (954) 568-6013 If to Mr. C's: MR. C'S AUTO SALES, INC. Attention: Dana Ross-Cohen 1890 University Dr. #105 Coral Springs, FL 33071 All such notices, consents, approvals and other communication shall be deemed to have been given of (i) the date of receipt if delivered personally or by overnight courier, (ii) the date of transmission if with continuation answer back if transmitted by telecopier or (iii) the third day following posting if transmitted by mail. 11.7. Interpretation. The terms defined in this Agreement include the plural as well as the singular. When a reference is made in this Agreement to an Article, Section, Schedule of Exhibit, such reference shall be to an Article, Section, Schedule of Exhibit of this agreement unless otherwise indicated. The headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this agreement, they shall be deemed to be followed by the word "without limitation." Time shall be of the essence in this Agreement. 13 14 11.8. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the greatest extent possible. 11.9. Entire Agreement. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof. This Agreement may not be amended, changed, waived or modified except by a writing executed by both parties. 11.10. Assignment. Neither this Agreement nor any of the rights, interests or obligations of Mr. C's hereunder shall be assigned by Mr. C's without the prior written consent of SDAI. 11.11. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida. 11.12. No Third Party Beneficiaries. This Agreement shall inure to the benefit of, and be enforceable by, SDAI and Mr. C's and their respective successors and permitted assigns, and nothing herein expressed or implied shall be construed to give any other Person any legal or equitable rights hereunder. 11.13. Indemnifications. All of the indemnifications given or agreed to from or by one party to the other in this Agreement shall survive the termination of this Agreement as to any indemnifiable action committed by an indemnifying party prior to such termination. 11.14. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart. 11.15. Facsimile Signature. This Agreement may be executed and accepted by facsimile signature and any such signature shall be of the same force and effect as an original signature. 11.16. Prevailing Party. In the event of any litigation or arbitration arising from or related to this Agreement, the prevailing party shall be entitled to recover legal fees and costs of such proceeding. 14 15 11.17. Right to Receiver/Injunction Relief. The rights of SDAI to assume servicing upon the occurrence of the events set forth in Article III are unique and fundamental to preservation and protection of the collateral. Mr. C's agrees shall that its failure to comply with the transfer requirements is likely to create irreparable harm to SDAI for which it has no remedy at law. To that end, SDAI has the right to seek and obtain mandatory injunctive relief and for the appointment of a receiver from a court of competent jurisdiction to enforce the transfer of the servicing and operating account and the arbitration provisions shall not be applicable to such action. IN WITNESS WHEREOF, SDAI and Mr. C's have caused this Agreement to be signed, as of the date first written above, by their respective officers thereunto duly authorized. Mr. C's AUTO SALES, INC. By: /s/ MARK COHEN --------------------- Name: Mark Cohen ------------------- Title: President ------------------ SOUTHEAST DEALER ACCEPTANCE, INC. By: /s/ ENRIQUE MARTINEZ --------------------- Name: Enrique Martinez ------------------- Title: President ------------------ Exhibit "A" - Underwriting Criteria Exhibit "B" - Documents to be Delivered Exhibit "C" - Financial Statements of Mr. C's 15 EX-10.4 5 LOAN AND SECURITY AGREEMENT 1 Exhibit 10.4 LOAN AND SECURITY AGREEMENT THIS AGREEMENT ("Agreement") made this _____ day of March, 2000, between , a Florida corporation, with its chief executive office and principal place of business at , (hereinafter "Dealer"), and AFFORDABLE DEALER SERVICES, INC., a Florida corporation, with an office and place of business at 2650 McCormick Drive, Suite 185, Clearwater, Florida 33759 (hereinafter "Lender"). Lender and Dealer have entered into certain financial transactions, pursuant to which Lender has made loans and advances to Dealer. As of March 3, 2000, Dealer is indebted to Lender as follows: Balance owing on current floor plan debt: Balance owing on out-of-trust transactions: Dealer hereby acknowledges that the above sums are due and owing to Lender without any defenses, setoffs or counterclaims of any kind whatsoever. Dealer and Lender agree that this Loan and Security Agreement is a redocumentation of the existing loans between them, and does not in any way extinguish the amounts due and owing from Dealer to Lender. Whereas, Dealer engages in the business of purchasing used cars, trucks, trailers and other motor vehicles (hereinafter called "Vehicles") for the purpose of resale, and Dealer wants Lender to finance Dealer's purchase of such Vehicles. Now, therefore, it is agreed as follows: 1. Advances. Lender may from time to time advance, in its sole and absolute discretion, sums of money on behalf of Dealer to sellers and wholesalers (including sellers at auction) of Vehicles for the purpose of enabling Dealer to purchase Vehicles, provided, however, that Lender may, with or without cause, refuse to advance any such sum of money; and provided further, that any such advance for Vehicles shall not exceed the lesser of black book rough value or purchase price paid by the Dealer. Lender may also make advances directly to Dealer. Lender shall make advances only against passenger cars and light passenger trucks. No advances will be made against commercial vehicles. In each case when Lender advances funds, prior to such advance Dealer shall sign a statement of the transaction (all hereinafter called "Statement") and immediately return the same to Lender. In the event the Statement is returned via facsimile, the original statement shall be sent to Lender via first class mail within one (1) business day. Unless Lender designates another form of document, Dealer will execute in favor of Lender trust receipts in such form and substance as Lender may require for the amount of credit extended with respect to each Vehicle, and Dealer will execute such additional documents as Lender may request to confirm or perfect Lender's title or security interest in the Vehicles, including, without limitation, completing and executing all such documents necessary to record Lender's lien on Vehicles with appropriate state authorities. Dealer hereby irrevocably appoints Lender its attorney-in-fact, coupled with an interest, to execute Dealer's name on all such documents necessary to record Lender's lien on Vehicles with appropriate state authorities, and on any UCC Financing Statements. In addition, Dealer shall execute and deliver the Power of Attorney set forth on Schedule "B" hereof. Execution of any instrument for the 1 2 amount of credit extended shall be deemed evidence of Dealer's obligation and not payment therefor. Dealer authorizes Lender or any of its officers or employees to execute such documents on behalf of Dealer and to supply any omitted information and correct patent errors in any documents executed by or on behalf of Dealer. Dealer agrees to hold all Vehicles and proceeds thereof in trust until complete payment of the indebtedness to Lender respecting such Vehicles, and Lender's title, lien or security interest shall not be impaired by any payment to the seller or anyone else, in whole or in part, by Dealer, either of the invoice price or of the amount of Dealer's obligation to Lender, or Dealer's failure or refusal to account to Lender for proceeds. It is agreed that upon purchase of a Vehicle by Dealer, Dealer shall deliver the original certificate of title and all other title documents to the Lender, and Lender will release such documents to the Dealer upon payment in full of the advance made by the Lender to the Dealer for the Vehicle which is described in such certificate of title. The Dealer covenants and agrees that during the term of this Agreement it will not, without the Lender's prior written consent, apply for a replacement certificate of title for any Vehicle. Dealer shall provide Lender with a set of keys for each Vehicle. Dealer is authorized to use five percent (5%) of the Vehicles on its sales floor for use as demonstration vehicles (the "Demos"). A curtailment against such Demos in the amount of not less than ten percent (10%) will be established by the Lender upon the Dealer designating, in writing to the Lender, that a vehicle has been designated as a Demo, and such curtailment amount may be increased based upon the mileage used on such Demos. 2. Repayment Terms. Dealer shall pay to the order of Lender the aggregate amount of advances by Lender on behalf of Dealer, together with interest thereon, as follows: (a) Dealer shall pay interest on all amounts outstanding for the period during which they are outstanding, computed upon the average daily balance. Interest will be charged at the fixed rate of eighteen percent (18%) per annum. If Dealer has not repaid in full the original amount advanced with respect to any Vehicle prior to the expiration of the following periods of time, then Dealer shall pay a curtailment of ten percent (10%) of the original amount of each advance for each period of thirty (30) days, or portion thereof, from the date of the advance. Lender shall submit a statement to Dealer once each month setting forth the interest due for the previous month, and payment shall be due within ten (10) days after receipt thereof. Lender has the right to waive any particular curtailment due, but no such waiver shall be interpreted as a waiver of any other curtailments. Notwithstanding anything contained in this Agreement to the contrary, the unpaid balance of each advance shall be paid in full UPON DEMAND and if not sooner demanded, within thirty (30) days from the date of advance. In the event that any payment is not made within ten (10) days of the due date of such payment, the Lender shall charge Dealer a fee equal to five percent (5%) of the amount of such payment to reimburse Lender for the additional expense involved in handling such late payment. Upon and after the occurrence of an Event of Default and during the continuation thereof, all obligations owed by Dealer to Lender shall, at the election of Lender, without constituting a waiver of any such Event of Default, bear interest at the maximum rate of interest allowable under applicable law. All interest chargeable under this Agreement shall be computed on the basis of a three hundred sixty (360) day year for actual days elapsed. 2 3 For the purpose of this Agreement, the term "Obligations" means any and all loans, advances, debts, liabilities (including, without limitation, any and all amounts charged to Dealer's account pursuant to any agreement authorizing Lender to charge Dealer's account), obligations, lease payments, guarantees, covenants and duties owing by Dealer to Lender of any kind and description (whether advanced pursuant to or evidenced by this Agreement, any of the other loan documents between Dealer and Lender (collectively, the "Loan Documents"), or any other instrument, or by any other agreement between Lender and Dealer and whether or not for the payment of money), whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including, without limitation, any debt, liability or obligation owing from Dealer to others which Lender may have obtained by assignment or otherwise, and further including, without limitation, all interest not paid when due and all fees and expenses of Lender which Dealer is required to pay or reimburse by this Agreement, by law, or otherwise. In no event shall the amount of interest due or payment in the nature of interest payable hereunder exceed the maximum rate of interest allowed by applicable law, as amended from time to time, and in the event any such payment is paid by Dealer or received by Lender, then such excess sum shall be credited as a payment of principal, unless Dealer shall notify Lender, in writing, that Dealer elects to have such excess sum returned to it forthwith. 3. Fees. Dealer shall pay Lender such fees and expenses set forth on Schedule "A" hereof. Lender shall submit a statement to Dealer once each month setting forth the fees due for the previous month, and payment shall be due within ten (10) days after receipt thereof. All such fees shall constitute Obligations hereunder. 4. Grant of Security Interest. To secure prompt payment and the performance of all Obligations, now or hereafter due from Dealer to Lender, Dealer grants to Lender a first priority security interest in the following property now owned or hereafter acquired by the Dealer, wherever located (herein referred to as "Collateral"): (a) All inventory of new and used cars, trucks, trailers, motor vehicles and all other vehicles, and all parts, accessories and furnishings used in connection therewith, including all goods hereafter added to or acquired in replacement of the foregoing goods; and (b) All goods, including all machinery, equipment, tools, parts, and appliances; cars, trucks, trailers, and other vehicles; and office furniture and fixtures; and (c) All accounts receivable, chattel paper, security agreements, instruments, contract rights, policies and certificates of insurance, documents and general intangibles, including all monies and credits now due or to become due to Dealer from, and all claims against, manufacturers or distributors of inventory or other lending institutions; and (d) The proceeds and products of the foregoing, including, without limitation, all insurance proceeds. 5. Dealer's Covenants. (a) Dealer shall keep the Collateral at , , or at such other place as Lender may approve in writing. All locations for the storage, maintenance or repair of Collateral, and all dealership locations of the Dealer are to be approved in advance in writing by the Lender. (b) Dealer shall not, except as permitted under Paragraph 8, sell, transfer, lease, mortgage or otherwise dispose of the Collateral, or any part thereof, or any interest therein, or remove the Collateral 3 4 from such premises or attempt any such sale, transfer, lease, mortgage, removal or other disposition of the Collateral without the prior written consent of Lender. (c) Dealer shall comply with and not permit any violation of all applicable laws, ordinances, regulations and orders of all public authorities relating to the Collateral. (d) Dealer shall keep and maintain the Collateral in good repair, and safe condition, not alter or substantially modify the Collateral, nor conceal the Collateral, nor permit any lien or encumbrance at any time to accrue thereon. (e) Dealer shall at all times maintain in good standing all licenses and permits required in connection with the conduct of its business. (f) Dealer will deliver within ten (10) days of the end of each month, management prepared financial statements. Within sixty (60) days of the end of each of Dealer's fiscal years, and more frequently if requested by Lender, Dealer will deliver to Lender a financial statement, including a profit and loss statement and a balance sheet, prepared and audited by an independent certified public accountant acceptable to Lender. All such financial statements shall demonstrate the Dealer's financial soundness and profitability. (g) Dealer shall give no less than thirty (30) days prior written notice of any change in its name, capital structure or ownership. (h) Lender shall have the right, from time to time, to review, inspect and examine the Dealer's books and records, business locations and Collateral, and Dealer shall provide full access to its books and records and facilities to the Lender and its representatives and agents. The cost of all such examinations and inspections shall be borne by the Dealer, and shall constitute Obligations hereunder, and shall be payable as provided in Section 3. (i) Dealer shall at all times be in full compliance with all applicable federal, state and local laws and regulations regarding the resale of automobiles. (j) Dealer is, and shall at all times during the term of this Agreement be, a motor vehicle dealer licensed by the State of Florida, in compliance with all requirements of Federal and Florida Law, including, without limitation, the provisions of Florida Statutes Chapter 320, et seq. Attached hereto as Schedule "C" is a copy of Dealer's motor vehicle dealer license. Upon renewal of the license, Dealer shall immediately forward a copy of the new license to Lender. In the event that Dealer's license is not renewed, Dealer will immediately notify Lender. 6. Representations and Warranties. Dealer represents and warrants at the present time and, at the time of each advance by Lender to Dealer, that: (a) Dealer has full title to the Collateral. (b) Dealer has full right and power to grant the security interest granted herein to Lender. (c) The Collateral is and shall remain free and clear of all liens, claims and encumbrances whatsoever, except for the security interest granted herein. (d) No financing statement executed by Dealer covering the Collateral, other than a financing statement relating hereto, is on file in any public office. 4 5 7. Taxes; Insurance. Dealer shall pay all taxes (other than income taxes) and assessments at any time levied on the Collateral as and when the same become due and payable and shall keep the Collateral insured against such risks and in such amounts as Lender may from time to time require and with such insurers as Lender may from time to time approve. Such policies shall show Lender as a loss payee as its interest may appear, and policies will be delivered to Lender together with appropriate evidence that the premium therefor has been paid. If Dealer fails to pay such premiums, Lender may pay them, and the amounts so advanced shall be Obligations secured hereunder. Attached hereto as Schedule "D" is a certificate of insurance showing the current coverages in effect and naming Lender as loss payee and additional insured. Upon renewal of the insurance, Dealer shall immediately forward a copy of the new certificate of Insurance to Lender. In the event that Dealer's insurance is not renewed, Dealer will immediately notify Lender. In addition, Dealer shall pay all documentary stamp taxes in connection with the execution of this Agreement and any advances made hereunder. 8. Sales of Inventory. Unless and until an Event of Default shall have occurred, Dealer may sell its inventory (as described in Paragraph 4) to buyers in the regular course of Dealer's business, but nothing herein shall be deemed to waive or release any interest Lender may have hereunder or under any other agreement in any proceeds of such inventory, including any accounts receivable, chattel paper, security agreements, instruments, contract rights, documents and general intangibles. Upon any sale of such inventory, Dealer shall forthwith pay over to Lender an amount equal to the unpaid balance of the amount advanced with respect to the item of inventory sold; provided however, that if Dealer is in default, Dealer shall pay over forthwith the entire proceeds of such sale, in kind, but a Dealer in default shall not be authorized to sell such inventory without prior separate consent of Lender. Lender shall have the right to inspect any or all Collateral at all times. 9. Events of Default. The following are events of default (collectively, "Events of Default") hereunder: (a) Default in the payment of the indebtedness or in the performance of any obligations of Dealer hereunder or otherwise; (b) Any warranty, representation or statement made by Dealer in connection with this Agreement or otherwise is false or has been breached in any material respect; (c) Loss, theft, damage, destruction, sale (except as permitted in Paragraph 8) or encumbrance of the Collateral, or the making of any levy, seizure or attachment thereon; (d) Inability of Dealer to pay debts as they mature, insolvency, appointment of a receiver for Dealer, assignment for the benefit of creditors by Dealer, commencement of any proceeding under any bankruptcy or insolvency law by or against Dealer, or any order of attachment, execution, sequestration or other order in the nature of a writ is levied on the Collateral; (e) Death of the Dealer, if the Dealer be a natural person, or of any partner of the Dealer which is a partnership; or (f) Dissolution, merger or consolidation, or transfer of any substantial part of the property of any Dealer which is a corporation or a partnership; or (g) If any guarantor of the Obligations of Dealer to Lender terminates its guaranty, defaults in the payment or performance of any obligations of guarantor owing to Lender, or becomes the subject of an insolvency proceeding. 5 6 10. Remedies. Whenever a default shall occur, or at any time thereafter (such a default not having previously been cured), Lender at its option and without demand or notice of any kind, may declare the indebtedness to be immediately due and payable, and may cease making advances hereunder. Upon default, Lender shall have the remedies of a secured party under the Uniform Commercial Code with respect to the Collateral and all other security pursuant to any other agreements between Lender and Dealer. In addition, Lender may take possession of the Collateral and such other security by any means not involving a breach of the peace and to sell the same, and for such purpose, Lender may enter upon the premises on which the Collateral or other security shall be situated and remove the same to such other place as Lender shall determine. Dealer shall, upon Lender's demand, make the Collateral or other security available to Lender at a place to be designated by Lender which is reasonably convenient to both parties. If any notice is required by law, such notice shall be deemed reasonably and properly given if mailed, postage prepaid, to the address of Dealer at least five (5) days before the event with respect to which notice is required. In the event of any default, Dealer shall pay all costs incurred in enforcing its rights hereunder, including those incurred in bankruptcy proceedings, expense of locating the goods, expenses of any repairs to any realty or other property to which any of the goods may be affixed or be a part, and reasonable attorneys' fees and legal expenses. The security interest granted herein shall be deemed to secure, in addition to all other sums of money, the repayment of all such costs of collection and enforcement, all amounts expended by Lender on behalf of Dealer, and all other amounts owing by Dealer to Lender. 11. Termination. This Agreement shall have an initial term (the "Initial Term") commencing on the date hereof through August 31, 2000, and shall thereafter be automatically renewed (a "Renewal Term") for successive periods of one hundred eighty (180) days unless terminated by either party as set forth below. Notice of such termination shall be effectuated by the mailing of a certified letter, return receipt requested, not less than thirty (30) days immediately prior to the effective date of such termination, addressed to the other party at the address set forth above. Notwithstanding such term, upon the occurrence of an Event of Default, Lender may terminate this Agreement without notice. In addition, should either Dealer or Lender become insolvent or be unable to meet its debts as they mature, then the other party shall have the right to terminate this Agreement at any time without notice. On the date of a termination by Dealer or Lender, all obligations hereunder shall become immediately due and payable without notice or demand and shall be paid to Lender in cash or by a wire transfer of immediately available funds. No termination shall relieve Dealer from any obligation to Lender arising out of Lender's advances or commitments made prior to the effective date of termination. 12. General. This Agreement supersedes all previous security agreements and loan agreements between Dealer and Lender covering the same subject, and shall govern Dealer's indebtedness to Lender now outstanding under such prior agreement or hereafter incurred under this Agreement. Time shall be of the essence hereof. Any delay on the part of Lender in the exercise of any right or remedy shall not operate as a waiver thereof. The covenants and conditions of this Agreement shall apply to and be binding upon the heirs, executors, administrators, successors and assigns of Dealer and shall inure to the benefit of Lender and its successors and assigns. This Agreement has been delivered in the State of Florida and shall be construed in accordance with the laws thereof. Effective on even date, Dealer hereby releases, acquits and forever discharges Lender and its parents, subsidiaries, affiliates, directors, officers, employees, attorneys, agents, servants and representatives, as well as the respective heirs, personal representatives, successors and assigns or any and 6 7 all of them (collectively, "the Released Lender Parties"), from any and all claims, counterclaims, demands, debts, actions, causes of action, suits, contracts, indebtedness, agreements, obligations, accounts, defenses, offsets against the indebtedness and liabilities of any kind or character whatsoever, known or unknown, suspected or unsuspected, in contract or in tort, in law or in equity, including without limitation, such claims and defenses as fraud, mistake, duress, misrepresentation, breach of contract, negligence, breach of duty, tortious interference with advantageous relationships and usury which the Dealer ever had, now has or hereafter might have against the Released Lender Parties, jointly or severally, for or by reason of any matter, cause or thing whatsoever occurring up to the date of execution hereof, including, without limitation: (a) any loan or other business transactions between the Dealer and the Lender, (b) any agreements or other documents between the Dealer and the Lender, (c) any course of dealing between the Dealer and the Lender, and (d) any matters that may arise which relate to, in whole or in part, directly or indirectly: (i) the loan described in this Agreement (the "Loan"); (ii) the Loan Documents; (iii) the Obligations; (iv) the Collateral; (v) or the administration of the Loan. In addition, the Dealer agrees not to commence, join in, prosecute or participate in any suit or other proceeding in a position which is adverse to any of the Released Lender Parties arising directly or indirectly from any of the foregoing matters. In the event that the Dealer has commenced a suit or other proceeding against any of the Released Lender Parties, the Dealer agrees to immediately withdraw such suit or other proceeding with prejudice. 13. JURY TRIAL. LENDER AND DEALER ACKNOWLEDGE THAT THE TRANSACTIONS AND MATTERS SET FORTH IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE COMPLEX IN NATURE AND THAT ANY LITIGATION ARISING THEREFROM WOULD BE MOST APPROPRIATELY, ECONOMICALLY AND SPEEDILY RESOLVED BY A NON-JURY TRIAL. THE LENDER AND DEALER THEREFOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT THAT THEY MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION, DIRECTLY OR INDIRECTLY, BASED ON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS OR THE LOANS AND FACILITIES CONTEMPLATED HEREBY, OR IN ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER WRITTEN OR ORAL), OR ACTIONS OR OMISSIONS OF ANY PARTY TO THIS AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER'S ENTERING INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. LENDER AND DEALER EACH WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS. 14. AUTOMATIC RELIEF FROM STAY. THE DEALER AGREES THAT IF ANY PROCEEDING IS COMMENCED UNDER TITLE 11 OF THE UNITED STATES CODE RELATIVE TO IT, LENDER SHALL BE AUTOMATICALLY ENTITLED TO IMMEDIATE RELIEF FROM STAY UNDER 11 U.S.C. 362 WITHOUT ESTABLISHING EQUITY OR NEED OR LACK OF NEED FOR THE PROPERTY SECURING THE LOANS OR CAUSE OR LACK OF CAUSE, AND THE DEALER HEREBY CONSENTS TO SUCH RELIEF, IT BEING EXPRESSLY ACKNOWLEDGED THAT THIS PROVISION WAS SPECIFICALLY NEGOTIATED AND CONSTITUTES A MATERIAL INDUCEMENT TO LENDER ENTERING INTO THIS AGREEMENT AND MAKING FINANCIAL AND OTHER ACCOMMODATIONS AND ADDITIONAL ADVANCES CONTEMPLATED HEREIN. 7 8 IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be effective on the date first set forth above. Witnesses: AFFORDABLE DEALER SERVICES, INC., a Florida corporation By: /s/ - -------------------------------- ----------------------------- - -------------------------------- , a Florida corporation By: /s/ - -------------------------------- ----------------------------- President - -------------------------------- 8 9 SCHEDULE "A" Schedule of Fees: Inspection/Auditing Fee: $54.00 per hour (Estimate) These fees cover the expenses incurred by the Lender from third parties in connection with the monitoring and verification required in connection with the Vehicles. These amounts are reimbursements for actual expenses that Lender pays to third parties for providing the above services. In the event that Lender is required to expense additional sums in excess of the amounts set forth above, or in the event that the cost of such services to the Lender are increased, all such sums shall be repaid by the Dealer, and shall constitute Obligations hereunder. Audits will be conducted at a minimum of once a month. In the event of the occurrence of an Event of Default, the frequency of audits will increase. 9 10 PERSONAL GUARANTY For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned, , does hereby personally guaranty the full and timely performance by, , a Florida Corporation, of all obligations under the forgoing LOAN AND SECURITY AGREEMENT, by and between First American Capital Trust and , dated this ______ day of ____________, 2000, including but not necessarily limited to the full payment of principal together with all interest to accrue on. /s/ /s/ ----------------------------------- ------------------------------- WITNESS: ------------------------------ TYPE OR PRINT NAME ----------------------------------- TYPE OR PRINT NAME /s/ ----------------------------------- WITNESS: ------------------------------ TYPE OR PRINT NAME STATE OF ------------------------------ COUNTY OF ----------------------------- BEFORE me personally appeared , who [ ] is personally known to me, or [ ] has produced his/her driver's license as identification, to be the person described in and who has executed the foregoing instrument for the purpose therein expressed and who did take an oath. WITNESS my hand and official seal, this ____ day of __________________, 2000. --------------------------------- Notary Public My Commission Expires: __________________ 10 11 SCHEDULE "B" POWER OF ATTORNEY KNOW EVERYONE BY THESE PRESENTS THAT , a Florida corporation, with its chief executive office and principal place of business at , (hereinafter "Dealer"), does hereby irrevocably make, constitute and appoint AFFORDABLE DEALER SERVICES, INC., a Florida corporation, with an office and place of business at 2650 McCormick Drive, Suite 185, Clearwater, Florida 33759 (hereinafter "Lender"), and any of Lender's officers, employees or agents designated by Lender, as Dealer's true and lawful attorney with power: A. To sign Dealer's name on all title documents necessary to transfer motor vehicle ownership to Lender, and to sign Dealer's name on all title documents necessary to record Lender's lien on motor vehicles with appropriate state authorities; B. To endorse Dealer's name on any checks, notes, acceptances, money orders, drafts or other forms of payment or security that may come into Lender's possession;B. To endorse Dealer's name on any checks, notes, acceptances, money orders, drafts or other forms of payment or security that may come into Lender's possession; C. To notify the Post Office authorities to change the address for delivery of Dealer's mail to an address designated by Lender, to receive and open all mail addressed to Dealer, and to retain all mail relating to the Collateral and forward, within two (2) business days of Lender's receipt thereof, all other mail to Dealer; D. To sign the name of Dealer on any UCC financing statements, including, without limitation, UCC-1 and UCC-3 financing statements or on any other similar documents which need to be executed, recorded and/or filed in order to perfect or continue perfected Lender's security interest in the Collateral; E. To sign Dealer's name on all documents described in the Loan and Security Agreement between Dealer and Lender (the "Agreement") and to supply any omitted information and correct patent errors in any documents executed by or on behalf of Dealer; F. To do all things necessary to carry out the terms of the Agreement. The appointment of Lender as Dealer's attorney, and each and every one of Lender's rights and powers, being coupled with an interest, are irrevocable so long as there are any amounts or obligations owing from Dealer to Lender. The Dealer ratifies and approves all acts of the attorney. Neither Lender nor its employees, officers or agents shall be liable for any acts or omissions or for any error in judgment or mistake of fact or law made in good faith, except for gross negligence or willful misconduct. Lender may file one or more financing statements disclosing Lender's security interest without the Dealer's signature appearing thereon. 11 12 IN WITNESS WHEREOF, , a Florida corporation, has executed this Power of Attorney this _____ day of __________, 2000. , a Florida corporation By: /s/ - ---------------------------------- ------------------------------- President STATE OF FLORIDA ) ) SS COUNTY OF _______________ ) The foregoing instrument was acknowledged before me on the ____ day of __________, 2000, by ____________________, the ________________ of , a Florida corporation. He / She is personally known to me, or who produced the following type of identification:___________________________. /s/ ------------------------------- Print Name: Notary Public My commission expires on: 12 13 SCHEDULE "C" COPY OF DEALER LICENSE 13 14 SCHEDULE "D" COPY OF CERTIFICATE OF INSURANCE 14 15 SCHEDULE "A" TO FINANCING STATEMENT DEBTOR: SECURED PARTY: Affordable Dealer Services, Inc. 2650 McCormick Drive Suite 185 Clearwater, Florida 33759 This Financing Statement covers the following types (or items) of PROPERTY: a) All inventory of new and used cars, trucks, trailers, motor vehicles and all other vehicles, and all parts, accessories and furnishings used in connection therewith, including all goods hereafter added to or acquired in replacement of the foregoing goods; and b) All goods, including all machinery, equipment, tools, parts and appliances; cars, trucks trailers, and other vehicles; and office furniture and fixtures; and c) All accounts receivable, chattel paper, security agreements, instruments, contract rights, policies and certificates of insurance, documents and general intangibles, including all monies and credits now due or to become due to Debtor from, and all claims against, manufacturers or distributors of inventory or other lending institutions; and d) The proceeds of the foregoing, including, without limitation, insurance proceeds. All of the foregoing shall be defined as "Collateral." The security interest described herein continues in all Collateral as described in this Financing Statement (except goods sold as provided in Section 9 307, UCC) notwithstanding sale, exchange or other disposition thereof by Debtor; sale, exchange or other disposition of said [illegible] is NOT otherwise authorized by Secured Party in the security agreement or otherwise. All terms used herein and not otherwise defined herein are used as defined in the Uniform Commercial Code. NOTICE-PURSUANT TO AN AGREEMENT BETWEEN [ILLEGIBLE] AND SECURED PARTY, DEBTOR HAS AGREED NOT TO FURTHER [ILLEGIBLE] COLLATERAL DESCRIBED HEREIN, THE FURTHER ENCUMBERING [ILLEGIBLE] CONSTITUTE THE TORTIOUS INTERFERENCE WITH SECURED PARTY'S [ILLEGIBLE] SUCH ENCUMBRANCER. IN THE EVENT THAT ANY ENTITY IS GRANTED A SECURITY INTEREST IN DEBTOR'S ACCOUNTS, CHATTEL PAPER OR GENERAL [ILLEGIBLE] CONTRARY TO THE ABOVE, THE SECURED PARTY ASSERTS A CLAIM [ILLEGIBLE] THEREOF RECEIVED BY SUCH ENTITY. 15 EX-21 6 SUBSIDIARIES OF REGISTRANT 1 Exhibit 21 ITEM 14. (A)(3) EXHIBITS Subsidiaries of the Registrant Affordable Dealer Services, Inc. Carnet, Inc. FC Holding Corporation Southeast Dealer Acceptance, Inc. EX-27.1 7 FINANCIAL DATA SCHEDULE
5 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 596,515 0 3,993,940 1,953,375 0 0 25,059 4,609 3,424,133 0 188,880 0 0 11,300 5,387,297 3,424,133 0 1,848,374 0 0 3,948,042 3,314,907 153,248 (3,782,234) 0 (3,782,234) (218,447) 0 0 (4,000,681) (0.36) (0.36)
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