CAPITAL FACTORS HOLDINGS INC, S-1/A, 1996-07-05

CAPITAL FACTORS HOLDINGS INC
S-1/A, 1996-07-05
SHORT-TERM BUSINESS CREDIT INSTITUTIONS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 5, 1996
REGISTRATION STATEMENT NO. 333-3419

================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------

AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

------------------

CAPITAL FACTORS HOLDING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
FLORIDA 6153 65-0500757
<S> <C> <C>
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

------------------

1799 WEST OAKLAND PARK BOULEVARD
FORT LAUDERDALE, FLORIDA 33311
(954) 730-2900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

------------------

JOHN W. KIEFER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CAPITAL FACTORS HOLDING, INC.
1799 WEST OAKLAND PARK BOULEVARD
FORT LAUDERDALE, FLORIDA 33311
(954) 730-2900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

------------------

WITH COPIES TO:
ROBERT L. GROSSMAN, ESQ. LEE MEYERSON, ESQ.
GREENBERG, TRAURIG, HOFFMAN, SIMPSON THACHER & BARTLETT
LIPOFF, ROSEN & QUENTEL, P.A. 425 LEXINGTON AVENUE
1221 BRICKELL AVENUE NEW YORK, NEW YORK 10017
MIAMI, FLORIDA 33131 (212) 425-2000
(305) 579-0500

------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
<TABLE>
<CAPTION>
CAPITAL FACTORS HOLDING, INC.

CROSS REFERENCE SHEET
Furnished Pursuant to Item 501(b) of Regulation S-K

ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
- ----------------------- ----------------------
<S> <C>
1. Forepart of the Registration Statement and Outside Front
Cover Page of Prospectus.............................. Facing Page of the Registration Statement; Cross
Reference Sheet; Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus......................................... Inside Front Cover Page; Outside Back Cover Page
3. Summary Information, Risk Factors and Ratio of Earnings
to Fixed Charges...................................... Prospectus Summary; Risk Factors
4. Use of Proceeds......................................... Use of Proceeds
5. Determination of Offering Price......................... Underwriting
6. Dilution................................................ Dilution
7. Selling Security Holders................................ *
8. Plan of Distribution.................................... Underwriting
9. Description of Securities to be Registered.............. Description of Capital Stock; Dividend Policy
10. Interests of Named Experts and Counsel.................. *
11. Information with Respect to the Registrant.............. Prospectus Summary; Risk Factors; Management's
Discussion and Analysis
of Financial Condition and Results of Operations;
(a) Description of Business................................. Business
(b) Description of Property................................. Business
(c) Legal Proceedings....................................... Business
(d) Market Price of and Dividends on the Registrant's Common Prospectus Summary; Description of Capital Stock;
Equity and Related Stockholder Matters................ Prospectus Summary; Description of Capital Stock;
Dividend Policy; Shares Eligible for Future Sale
(e) Financial Statements.................................... Financial Statements
(f) Selected Consolidated Financial Data.................... Selected Consolidated Financial Data
(g) Supplementary Financial Information..................... *
Management's Discussion and Analysis
(h) Management's Discussion and Analysis of Financial of Financial Condition and Results
Condition and Results of Operations................... Management's Discussion and Analysis of Financial Condition
and Results of Operations
(i) Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................... *
(j) Directors and Executive Officers........................ Management; Principal Shareholders
(k) Executive Compensation.................................. Management
(l) Security Ownership of Certain Beneficial Owners and
Management............................................ Principal Shareholders
(m) Certain Relationships and Related Transactions.......... Management; Certain Transactions
12. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities............................ *
<FN>
- -----------
* Not applicable or answer thereto is negative.
</FN>
</TABLE>

<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.

SUBJECT TO COMPLETION, DATED JULY 5, 1996

2,000,000 SHARES

CAPITAL FACTORS HOLDING, INC.

COMMON STOCK
-----------------
All of the 2,000,000 shares of Common Stock offered hereby are being sold
by Capital Factors Holding, Inc., a Florida corporation (the "Company"). All
of the Common Stock of the Company is presently owned by Capital Bank, a
Florida bank. Following this offering, Capital Bank will continue to
beneficially own approximately 83% of the outstanding Common Stock
(approximately 81% if the over-allotment option granted to the Underwriters
is exercised in full).

Prior to this offering, there has been no public trading market for the
Common Stock and there can be no assurance that any active trading market
will develop. It is currently anticipated that the public offering price will
be between $10.00 and $12.00 per share. See "Underwriting" for information
relating to the factors to be considered in determining the initial public
offering price.

The Company's Common Stock has been approved for listing on The Nasdaq
National Market System ("Nasdaq") under the symbol "CAPF."

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 7 HEREOF FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF SHARES OF COMMON STOCK.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

=========================================================
PRICE UNDERWRITING PROCEEDS TO
TO PUBLIC DISCOUNT(1) COMPANY(2)
- ------------ ------------ --------------- --------------
Per Share . $ $ $
Total(3) .. $ $ $
============ ============ =============== ==============
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other information.
(2) Before deducting expenses of the offering payable by the Company
estimated at $ .
(3) The Company has granted the Underwriters an option, exercisable from time to
time within 30 days from the date hereof, to purchase up to 300,000
additional shares of Common Stock at the Price to Public per share, less
the Underwriting Discount, solely for the purpose of covering
over-allotments, if any. If the Underwriters exercise such option in full,
the total Price to Public, Underwriting Discount and Proceeds to Company
will be $ , $ and $ , respectively. See "Underwriting."
-----------------
The shares of Common Stock are offered by the Underwriters when, as and if
delivered to and accepted by them, subject to their right to withdraw, cancel
or reject orders in whole or in part and subject to certain other conditions.
It is expected that delivery of certificates representing the shares of
Common Stock will be made against payment on or about , 1996 at the
offices of Oppenheimer & Co., Inc., Oppenheimer Tower, World Financial
Center, New York, New York 10281.
- -----------------------------------------------------------------------------

OPPENHEIMER & CO., INC.

The date of this Prospectus is , 1996.

<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

-----------------

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, exhibits and schedules thereto, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Act"), with respect to the
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement. For further information
with respect to the Company and the Common Stock offered hereby, reference is
hereby made to such Registration Statement. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete and, in each instance, reference is made to the copy of
such contract or document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. Copies
of the Registration Statement may be obtained from the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the
fees prescribed by the Commission, or may be examined without charge at the
offices of the Commission. In addition, copies of the Registration Statement
and related documents may be obtained through the Commission's Internet
address at http://www.sec.gov.

-----------------

The Company intends to furnish its shareholders with annual reports
containing audited financial statements which have been certified by its
independent public accountants, and quarterly reports containing unaudited
summary financial information for each of the first three quarters of each
fiscal year.

<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.
UNLESS OTHERWISE INDICATED, ALL INFORMATION SET FORTH HEREIN (I) ASSUMES THAT
THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED, AND (II) GIVES EFFECT
TO A 10,000-FOR-1 STOCK SPLIT EFFECTED ON JULY 1, 1996. REFERENCES IN THIS
PROSPECTUS TO THE "COMPANY" INCLUDE CAPITAL FACTORS HOLDING, INC. ("HOLDING"),
AND ITS DIRECT AND INDIRECT SUBSIDIARIES, INCLUDING CAPITAL FACTORS, INC.
("FACTORS"), THE PRIMARY OPERATING COMPANY.

THE COMPANY

The Company generally provides financing to its clients through the
purchase of accounts receivable owed to the Company's clients by the clients'
customers, usually on a non-recourse basis, as well as by guaranteeing
amounts due under letters of credit issued to the Company's clients which are
collateralized by such accounts receivable and other assets. The purchase of
accounts receivable is known as "factoring" and results in the payment by the
client of a factoring fee, generally equal to 0.5% to 2% of the factored
sales volume. No money is paid to the client at the time the Company
purchases the client's receivables. Payment for receivables which are
credit-approved by the Company is made to the client after collection from
the client's customer or, if the receivable was not paid based solely on the
customer's financial inability to pay, payment is made to the client within
120 days after the due date of the receivable. In some cases, the Company
does not guarantee payment of the receivable, in which case payment is made
to the client only upon collection of the receivable. Frequently, the Company
also advances funds to its clients prior to collection of receivables,
charges interest on such advances (in addition to any factoring fees) and
satisfies such advances from receivables collections. In late 1994, the
Company began to expand its asset-based lending business.

Factoring has been a method of working capital financing in the United
States for over 200 years. The factoring industry has undergone considerable
consolidation over the past several years; as a result the industry is
characterized by a small number of very large factors operating nationally,
with a multitude of small companies generally operating on a local or
regional basis. In a recent survey, the largest fourteen factoring companies
reported factoring volume in 1995 of $60.9 billion, an increase of 48% over
reported volume in 1988. The Company had a 3.3% share of this reported volume
for 1995.

The Company has grown significantly in size and profitability, with
compounded annual growth rates in operating revenues and net income of 23.6%
and 50.0%, respectively, during the period 1991 through 1995, and a
compounded annual growth rate in factored sales volume of 24.8% for the same
period. For 1995, the Company's operating revenues, net income and factored
sales volume increased by 28.5%, 42.7% and 30.2%, respectively, over 1994 and
increased by 24.7%, 1.1% and 27.8%, respectively, in the three month period
ended March 31, 1996 as compared to the same period in 1995. The Company's
operating strategy includes (i) managing credit risk to ensure consistent and
stable growth, (ii) increasing market penetration through offices in key
factoring centers, (iii) recruiting and retaining experienced personnel who
use a team approach to provide quality service, and (iv) diversifying by
product and industry, especially in healthcare financing, which management
believes has significant growth potential.

3
<PAGE>
In 1994, the Company became the first company to effect a securitization
of factored advances (the "Securitized Financings"). The advances
("Advances") are collateralized by accounts receivable from customers of the
Company's clients and, in certain cases, by cash, letters of credit,
inventory or other collateral. The Company has not employed gain-on-sale
accounting in its Securitized Financings. The Company has completed two
additional securitizations of factored advances since 1994. See "Business--
Background of the Company."

Holding is a wholly owned subsidiary of Capital Bank, a Florida commercial
bank ("Capital Bank"), which is a wholly owned subsidiary of Capital Bancorp
("Bancorp"). The Company's principal executive offices are located at 1799
West Oakland Park Boulevard, Fort Lauderdale, Florida 33311, and its
telephone number is (954) 730-2900.

RECENT DEVELOPMENTS

The Company's operating revenues and net income for the two months ended
May 31, 1996 were approximately $7.3 million and approximately $1.7 million,
respectively, as compared to approximately $5.5 million and approximately
$1.3 million, respectively, for the same two month period ended May 31, 1995,
a 32.2% and 30.8% increase, respectively.

The Company's operating revenues and net income for the five month period
ended May 31, 1996 were approximately $16.9 million and approximately $3.6
million, respectively, as compared to approximately $13.2 million and
approximately $3.2 million, respectively, for the same period ended May 31,
1995, a 27.8% and 13.4% increase, respectively. Factored sales increased from
approximately $745.3 million for the five months ended May 31, 1995 to
approximately $983.1 million for the five months ended May 31, 1996, an
increase of 31.9%, with factoring fees increasing 27.6% from approximately
$7.6 million to approximately $9.8 million, respectively, for the same five
month periods. The provision for credit losses increased from approximately
$800,000 for the 5 month period ended May 31, 1995 to approximately $1.8
million for the same period ended May 31, 1996. The provision as a percentage
of factored sales increased from 0.11% to 0.18%, respectively, for the same
five month periods, compared to 0.20% for the three months ended March 31,
1996.

In May 1996, the Company's direct wholly-owned subsidiary CF One, Inc. ("CF
One"), sold $10 million of subordinated notes (the "CF One Notes") which are
collateralized by subordinated certificates that were issued in connection with
the Company's Securitized Financings. The CF One Notes, which are due and
payable in July 2001, bear interest at an annual fixed rate of 7.95% and are
rated "BBB" by both Duff & Phelps Credit Rating Company and Fitch Investors
Services, Inc. The principal purpose for the issuance of the CF One Notes was to
allow CF One to obtain additional financing by taking advantage of the favorable
financing terms resulting from an increase in the value of the subordinated
certificates held by CF One which are collateralized by assets held by a trust
established in connection with the Securitized Financings.

The Company has executed a letter of intent in connection with a proposed
acquisition of the assets of a specialized financial services company
principally engaged in providing receivables-based commercial financing and
related fee-based credit, collection and management information services to
temporary employment and home healthcare agencies. Pursuant to the letter of
intent, the purchase price would be $900,000 over the book value of the
assets acquired (estimated by the seller to be between $7 and $10 million),
plus an additional amount up to $900,000 payable over 3 years if certain
contingencies are met. The Company expects that the purchase price will be
funded by the Company's revolving line of credit from its sole shareholder,
Capital Bank. The proposed seller provides certain services not presently
provided by the Company, including billing, payroll processing, payroll tax,
payroll reporting and other payroll services and insurance reporting, some of
which may require regulatory approval prior to being engaged in by the
Company. No assurances can be given that the Company will consummate this
proposed acquisition.

4
<PAGE>
THE OFFERING

Common Stock Offered by the Company.... 2,000,000 SHARES

Common Stock outstanding
after this offering ................... 12,000,000 shares(1)

Use of proceeds ........................ To reduce indebtedness(2)

Nasdaq symbol ................. "CAPF"
- ------------
(1) Does not include 800,000 shares of Common Stock reserved for issuance
upon exercise of stock options granted under the Company's stock option
plan. See "Management--Company Stock Option Plan."

(2) The proceeds from the offering will be used to reduce the Company's
indebtedness to its sole shareholder, Capital Bank.

5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------------ ----------------------
1991 1992 1993 1994 1995 1995 1996
-------- ---------- ---------- ---------- ---------- --------- --------
INCOME STATEMENT DATA: (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Factoring fees .......................... $ 9,870 $ 12,482 $ 15,376 $ 17,371 $ 19,519 $ 4,565 $ 5,524
Interest income ......................... 11,482 11,450 13,511 17,628 28,211 6,004 7,574
Interest expense ........................ (7,720) (7,005) (7,842) (10,329) (16,361) (3,553) (4,556)
Net interest income ................... 3,762 4,445 5,669 7,299 11,850 2,451 3,018
Letter of credit and other fees ......... 378 665 1,128 1,238 2,040 351 754
Other income ............................ 1,092 905 1,303 1,541 1,849 324 291
-------- ---------- ---------- ---------- ---------- --------- --------
Operating revenues .................... 15,l02 18,497 23,476 27,449 35,258 7,691 9,587
Provision for credit losses ............. 2,550 3,150 2,645 2,235 2,235 450 1,100
Operating expenses ...................... 9,594 11,316 13,072 14,137 18,457 4,102 5,289
-------- ---------- ---------- ---------- ---------- --------- --------
Total expenses ........................ 12,144 14,466 15,717 16,372 20,692 4,552 6,389
Income before income taxes(1) ........... 2,958 4,031 7,759 11,077 14,566 3,139 3,198
Net income .............................. 1,716 2,304 4,305 6,092 8,693 1,883 1,903
Net income per share .................... $ 0.17 $ 0.23 $ 0.43 $ 0.61 $ 0.87 $ 0.19 $ 0.19
PRO FORMA INCOME STATEMENT DATA(2):
Pro forma interest income ............... $ 28,211 $ 7,574
Pro forma interest expense .............. (14,590) (4,137)
---------- --------
Pro forma net interest income ......... $ 13,621 $ 3,437
---------- --------
Pro forma net income .................... 9,750 2,152
Pro forma net income per share .......... 0.81 0.18
OPERATING RATIOS AND OTHER DATA(3):
Factored sales .......................... $825,116 $1,057,846 $1,326,802 $1,536,960 $2,001,364 $441,211 $563,989
Factoring fees to factored sales ........ 1.20% 1.18% 1.16% 1.13% 0.98% 1.03% 0.98%
Net interest income to factored sales ... 0.46% 0.42% 0.43% 0.47% 0.59% 0.56% 0.54%
Letter of credit and other fees to
factored sales ......................... 0.05% 0.06% 0.09% 0.08% 0.10% 0.08% 0.13%
Other income to factored sales .......... 0.13% 0.09% 0.09% 0.10% 0.09% 0.07% 0.05%
-------- ---------- ---------- ---------- ---------- --------- --------
1.84% 1.75% 1.77% 1.79% 1.76% 1.74% 1.70%
Provision for credit losses to
factored sales ........................ 0.31% 0.30% 0.20% 0.15% 0.11% 0.10% 0.20%
Operating expenses to factored sales .... 1.16% 1.07% 0.99% 0.92% 0.92% 0.93% 0.94%
-------- ---------- ---------- ---------- ---------- --------- --------
Total expenses to factored sales ........ 1.47% 1.37% 1.18% 1.07% 1.03% 1.03% 1.13%
Income before income taxes to
factored sales ........................ 0.36% 0.38% 0.58% 0.72% 0.73% 0.71% 0.57%
Return on equity(4) ..................... 15.63% 17.78% 26.57% 28.80% 30.20% 29.58%(6) 22.27%(6)
Return on assets(4) ..................... 1.23% 1.32% 1.99% 2.35% 2.51% 2.57%(6) 1.86%(6)
Average funds employed(5) ............... $ 89,700 $ 108,300 $ 131,800 $ 153,600 $ 210,900 $188,800 $243,000
Net interest income to average
funds employed ........................ 4.19% 4.10% 4.30% 4.75% 5.62% 5.26%(6) 5.04%(6)
Net charge-offs to factored
sales volume .......................... 0.16% 0.30% 0.20% 0.17% 0.05% 0.05% 0.25%
Accounts receivable turnover
in days(7) ............................ 53 54 52 53 53 50 51
Average number of employees ............. 118 140 153 162 193 177 222
Average factored sales per employee ..... $ 6,158 $ 7,246 $ 8,672 $ 9,487 $ 10,370 $ 9,971(6) 10,162(6)
</TABLE>

6
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995 MARCH 31, 1996
------------------ ---------------------------
AS
ACTUAL ACTUAL ADJUSTED(8)
------------------ ----------- --------------
BALANCE SHEET DATA: (UNAUDITED)
<S> <C> <C> <C>
Receivables, net ........................ $354,821 $394,780 $394,780
Total assets ............................ 399,471 425,160 425,160
Due to factoring clients ................ 128,578 141,578 141,578
Borrowings .............................. 227,260 244,754 224,794
Due to Affiliates and other liabilities 10,293 3,585 3,585
Shareholders' equity .................... 33,340 35,243 55,203
</TABLE>
(1) The results of operations of the Company are included in the consolidated
Federal income tax returns filed by Capital Bancorp, the parent of
Capital Bank. Capital Bank, the Company's sole shareholder, allocates
income taxes to the Company calculated on a separate return basis. See
"Certain Transactions."
(2) Pro forma income statement data reflects (i) the issuance of 2,000,000
shares of Common Stock offered hereby as if such issuance had occurred on
January 1, 1995 or January 1, 1996, at an assumed initial public offering
price of $11.00 per share, net of issuance costs, and the use of the net
proceeds therefrom to repay indebtedness as described in "Use of Proceeds,"
and (ii) reduction of interest expense related to such indebtedness, net of
income taxes, as if the repayment occurred on January 1, 1995 or January 1,
1996.
(3) For purposes of the ratios and data below for 1994 and 1995, factored sales
include certain receivables which are pledged as collateral for those
asset-based loans for which the Company provides factoring-type services.
(4) Computed using average monthly balances.
(5) Computed using average monthly balances of funds employed (receivables
less amounts due to factoring clients).
(6) Computed on an annualized basis.
(7) Computed by dividing 365 by the quotient of (i) factored sales volume for
the periods indicated and (ii) the average monthly accounts receivable
balance for the periods indicated.
(8) Adjusted to give effect to the sale of the Common Stock offered hereby
(at an assumed initial public offering price of $11.00 per share) and the
application of the estimated net proceeds therefrom. See "Use of Proceeds."

7
<PAGE>
RISK FACTORS

INVESTMENT IN THE COMPANY'S COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING
RISK FACTORS, TOGETHER WITH THE OTHER INFORMATION INCLUDED IN THIS
PROSPECTUS, BEFORE PURCHASING THE SHARES OF COMMON STOCK OFFERED HEREBY. THE
CAUTIONARY STATEMENTS SET FORTH BELOW AND ELSEWHERE IN THIS PROSPECTUS SHOULD
BE READ AS ACCOMPANYING FORWARD-LOOKING STATEMENTS INCLUDED UNDER
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," "BUSINESS" AND ELSEWHERE HEREIN. THE RISKS DESCRIBED IN SUCH
STATEMENTS COULD CAUSE THE COMPANY'S RESULTS TO DIFFER MATERIALLY FROM THOSE
EXPRESSED IN OR INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.

CREDIT LOSSES; RECESSIONARY ENVIRONMENT. The financial failure of clients
or their customers may adversely affect the Company's ability to fully
recover amounts due under either the accounts receivable purchased by the
Company or advances made to clients under the Company's factoring
arrangements. Accordingly, the Company makes provisions for credit losses.
The allowance for credit losses is determined after evaluating the
outstanding receivables and advances, current economic conditions, changes in
the nature and the volume of the outstanding receivables and advances, past
loss experience and other pertinent considerations. Many of these
considerations involve significant estimation and are subject to rapid
changes which may be unforeseen by management and could result in immediate
increased losses and material adjustments to the allowance. As a result,
ultimate losses could be significant and may vary from current estimates and
the amount of provisions for credit losses may be either greater or less than
actual future charge-offs of receivables or advances relating to these
provisions. Additionally, the Company's results of operations could be
materially and adversely affected if the Company were to experience a loss as
a result of the purchase of fraudulent receivables. The Company also
guarantees payment of letters of credit issued for the benefit of its
clients, which pose similar risks as discussed above. See "Business--Credit
Loss Policy and Experience." Moreover, the risks to which the Company's
business is subject become more acute in an economic slowdown or recession
because less accounts receivable may be generated by clients, resulting in
decreased factoring fees, and financial ability of customers to pay
outstanding accounts receivable and clients to pay outstanding advances may
be impaired, resulting in increased credit losses. Some of the Company's
clients are startup or less mature ventures that may be more susceptible to
economic slowdowns or recessions.

DEPENDENCE ON AVAILABILITY OF FUNDING SOURCES. The Company obtains
substantially all of its funds for its factoring activities from (i) the
Securitized Financings (presently $175 million) which expire between December
1999 and January 2001 and (ii) a $125 million revolving line of credit (the
"Capital Facility") funded by its sole shareholder, Capital Bank, a Florida
commercial bank, which facility is subject to annual review by Capital Bank
each June and is due on demand. The Company also has a $40 million revolving
line of credit with an unaffiliated commercial bank which was closed in April
1996, the initial term of which expires on March 4, 1999, subject to
automatic one-year renewals unless sooner terminated by either party thereto
(the "Other Bank Facility"). While the Company expects to have continued
access to credit after expiration of these facilities, there is no assurance
that such financing will be available, or if available, that it will be on
terms as favorable. In the event the Company is not able to renew the
Securitized Financings, the Capital Facility or the Other Bank Facility or
find alternative financing for its activities, the Company would be forced to
curtail or cease its factoring and financing business, which action would
have a material adverse effect on the Company's operations and financial
condition. Pursuant to the Securitized Financings, an event of default causing
an early amortization event would occur if Capital Bank were to enter into a
written agreement with the FDIC under the Financial Institutions Supervisory Act
which would have a material adverse effect on the Company's ability to perform
its obligations under the Securitized Financings. Capital Bank could be required
to enter into an agreement with the FDIC under the Financial Institutions
Supervisory Act if it was found that Capital Bank engaged or was about to engage
in unsafe or unsound business practices or had violated or was about to violate
any law, rule, or regulation or any condition imposed in writing by the FDIC in
connection with the granting of any application or request by Capital Bank.
Capital Bank has advised the Company that it does not believe that it has
engaged in or is engaging in any unsafe or unsound business practices or has
violated or is violating any material rule, regulation or any condition
8
<PAGE>
and that it does not anticipate having to enter into an agreement with the FDIC
under the Financial Institutions Supervisory Act. In addition, as a subsidiary
of a regulated entity, bank regulatory actions taken against Capital Bank, which
cannot be predicted and are not anticipated, could affect the Company. The
Company would also be unable to access the Securitized Financings for future
funding in the event Capital Bank became a party to any proceeding provided for
by any debtor relief law, other than as creditor or claimant.

DILUTION OF RECEIVABLES. Dilution of factored receivables occurs when such
receivables are not fully collectable for reasons other than the client's
customer's financial inability to pay (such as disagreements as to the
quality of goods shipped). The Company generally advances funds to borrowing
clients up to a specified percentage of factored sales purchased. Should
dilution occur in excess of the amount of the receivables not advanced upon,
the Company will in practice typically need to look to newer receivables of
the client for the collection of the outstanding obligation to the Company.
Significant dilution may be an indication of problems in a client's business
which could result in a decreased volume of new receivables available for
payment of outstanding obligations to the Company. Some dilution occurs with
respect to most, if not all, clients. Increased dilution with respect to any
client's receivables puts the Company's collection of the client's obligation
to the Company at risk. The Company monitors dilution on a daily basis.
Notwithstanding the foregoing, the Company may not be able to react quickly
enough to dilution to avoid losses and to ensure collection of receivables.

CONCENTRATION OF CLIENT BASE AND CLIENT CUSTOMER BASE. A large percentage
of the Company's clients are in the textile and apparel industry and the
furniture manufacturing industry, as well as certain other industries. At
March 31, 1996, textile and apparel factored receivables accounted for 78% of
the Company's total factored receivables, while furniture manufacturing and
healthcare factored receivables accounted for 6% and 4%, respectively. The
remaining factored receivables are represented by the home furnishing, floor
covering, service, food, toy and other miscellaneous industries. These
industries are segmented by product, price, style and other items. Many of
the customers of the Company's clients are in various retail or wholesale
industry segments. Adverse conditions in any of these industries or industry
segments could have a material adverse effect on the Company and on the
Company's ability to collect receivables from certain of its clients'
customers.

DEPENDENCE ON MANAGEMENT AND KEY PERSONNEL. The Company's success depends
to a significant degree upon the continued contributions of members of its
senior management, particularly John W. Kiefer, the Company's President and
Chief Executive Officer, Stephen J. Donohue, the Company's Executive Vice
President--New York Regional Manager, and James L. Morrison, the Company's
Executive Vice President--California Regional Manager, as well as other
officers and key personnel, many of whom would be difficult to replace. The
future success of the Company also depends on its ability to identify,
attract and retain additional qualified technical and managerial personnel,
particularly in the healthcare financing industry. In light of the fact that
following this offering Capital Bank will continue to own 83% of the
Company's outstanding Common Stock (approximately 81% if the overallotment
option granted to the Underwriters is executed in full), Capital Bank will
have significant influence over decisions regarding the continued employment
of executive officers and key employees of the Company, including Mr. Kiefer.
Although the Company has employment agreements with Messrs. Kiefer, Donohue
and Morrison, and is negotiating new agreements with Messrs. Donohue and
Morrison, the loss of Messrs. Kiefer, Donohue and Morrison or other officers
and key personnel could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management."

SEASONALITY AND VARIABILITY OF QUARTERLY RESULTS. The Company, as well as
the factoring industry, has historically experienced and expects to continue
to experience seasonal fluctuations in its factored sales volume and
factoring fees, which generally have been highest during the period from
August through November. A principal reason for the fluctuation in the
Company's factored sales volume and factoring fees is the seasonality in the
sales of certain of the Company's clients, especially those in the apparel
industry, which typically ship more goods during such 4-month period in order
to fill increased customer orders in anticipation of "back to school" and the
ensuing holiday season. The Company realized approximately 40.0% of its
annual factored sales volume in each of 1994 (approximately $605
9
<PAGE>
million of $1.5 billion annual factored sales) and 1995 (approximately $757
million of $2 billion annual factored sales) during this 4-month period.
Historical experience indicates that the Company's factored sales volume is at
its lowest during the period from December through February. Although the
Company's healthcare financing services should help to mitigate the effect of
seasonal fluctuations in the Company's operating results, the Company does
expect to see fluctuations in its quarter-to-quarter results. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."

ABILITY OF THE COMPANY TO CONTINUE ITS GROWTH STRATEGY. The Company's
growth strategy is principally dependent upon its ability to increase its
factored sales volume by purchasing good quality accounts receivable meeting its
underwriting standards. In 1995, the Company's factored sales volume increased
approximately 30.2% to approximately $2 billion and operating revenue increased
by approximately 28.5% to $35.3 million, as compared to that of 1994. During the
first three months of 1996, the Company's factored sales volume increased by
approximately 27.8% to approximately $564.0 million and operating revenues
increased approximately 24.7% to approximately $9.6 million, as compared to the
three month period ended March 31, 1995. The Company experiences a certain
amount of turnover in its client base annually due primarily to credit issues.
Therefore, the Company's ability to further implement its strategy for continued
growth of factored sales volume is largely dependent upon the Company's ability
to attract and retain quality clients for the Company's services in a
competitive market and on the business growth of those clients, which may be
affected by a number of factors not within the Company's control. Historical
growth rates are not necessarily indicative of future results.

COMPETITION. The Company competes with numerous banks, financial
institutions, commercial finance companies and other factoring companies with
greater financial and other resources than the Company. The four largest
factors in the United States had approximately $37.9 billion of reported
volume in factored sales in 1995, compared to approximately $2 billion in
factored sales volume for the Company in 1995. The Company also competes with
other regional factoring companies. The Company's competitors target similar
clients to the Company and generally have operated in the markets serviced by
the Company for a longer period of time than the Company. See "Business--
Competition."

INABILITY TO DIRECTLY COLLECT HEALTHCARE RECEIVABLES FROM MEDICARE AND
MEDICAID; DILUTION OF HEALTHCARE RECEIVABLES. The Company's healthcare
division provides healthcare financing and factoring services to hospitals,
nursing homes, doctor groups, home treatment centers, home healthcare
provider services, temporary nursing or staffing services and providers of
durable medical equipment. A significant portion of the Company's healthcare
receivables are payable by Medicare and Medicaid, federal government
sponsored programs. Pursuant to Federal law, a healthcare provider is
prohibited from granting a third party a direct assignment of Medicare and/or
Medicaid proceeds. Accordingly, all Medicare and Medicaid proceeds are paid
directly to the provider of the medical services. As a result, the Company is
unable to perform certain traditional factoring services with respect to such
receivables, such as collection, and, instead, the Company must closely
monitor the client's collection of such receivables on a daily basis.
Although to date the Company has been successful in monitoring and collecting
its Medicare and Medicaid-based receivables directly from its clients, there
can be no assurance that the Company will continue to be successful in its
monitoring and collection activities in the future. In addition, healthcare
receivables have historically been subject to significant dilution. While the
Company has been successful in managing dilution and has not realized any
losses to date, there can be no assurance that the Company will continue to
be successful in managing dilution or that the Company will not realize
losses in the future as a result of dilution of its healthcare receivables.
See "Business--Healthcare Financing" and "Dilution of Receivables."

CONTROL BY MAJORITY SHAREHOLDER. Upon completion of this offering, the
Company's current sole shareholder, Capital Bank, which is a wholly-owned
subsidiary of Bancorp, will beneficially own approximately 83% of the
outstanding shares of Common Stock (approximately 81% if the Underwriters'
over-allotment option is exercised in full) and will therefore be able to
elect the entire Board of Directors and control all matters submitted to
shareholders for a vote, all fundamental
10
<PAGE>
corporate matters, including the selection of management and key personnel,
whether the Company engages in any mergers, acquisitions or other business
combinations or whether Capital Bank, at some time in the future, divests all or
any portion of its interest in Holding by means of a distribution to its
shareholders or otherwise. Four of the ten anticipated directors of Holding also
serve as officers or directors of Capital Bank or its affiliates.

The ownership interest of Capital Bank in Holding has been structured so
as not to violate one of the requirements necessary for the Company to
qualify for a subsequent tax free distribution of all or a portion of Capital
Bank's shares in Holding, should Capital Bank or Bancorp decide to make such
a distribution in the future. The Company has been advised by Capital Bank
and Bancorp that no decision has been made to make such a distribution and that
even if a decision is made to proceed with such a distribution, no assurances
can be given that all conditions precedent could be satisfied. As a part of such
corporate structure, no additional shares of Common Stock may be issued that
would reduce Capital Bank's interest below 80% without Capital Bank's written
approval, for the period that Capital Bank owns at least 80% of the issued and
outstanding Common Stock of the Company (the "Eighty Percent Period"). Such
restriction is reflected in the Amended and Restated Articles of Incorporation
of the Company (the "Articles") and in an agreement being entered into among
Capital Bank, the Company and the Company's subsidiaries. In addition, although
the Articles provide for the issuance by the Company of one or more series of
preferred stock from time to time, during the Eighty Percent Period no shares of
any other class of capital stock may be issued without Capital Bank's written
approval during such period, nor may the Company invest in or form any
corporation without such approval. Amendments to its bylaws and changes to the
Board are also subject to such approval during the Eighty Percent Period.
Similar restrictions apply to the Company's direct and indirect subsidiaries,
except that such subsidiaries are restricted from issuing any shares without
Capital Bank's approval. Any decision as to whether any transactions of the type
mentioned above ultimately occur will be solely within the discretion of Bancorp
and Capital Bank. See "Management," "Certain Transactions," "Principal
Shareholders" and "Description of Capital Stock."

REGULATORY RESTRICTIONS RELATING TO POTENTIAL NEW ACTIVITIES. The
Company's immediate parent, Capital Bank, is a Florida-chartered,
FDIC-insured bank. Accordingly, the business activities of the Company are
generally limited under applicable FDIC regulations to those activities that
are permissible for national banks. Although factoring and the other
businesses in which the Company currently engages are authorized activities
for national banks, there can be no assurance that business opportunities the
Company might wish to pursue in the future will be authorized activities for
Capital Bank and therefore such activities might be unavailable to the
Company because of its regulated status as a subsidiary of Capital Bank. See
"Business--Regulation" and "Principal Shareholders."

BANCORP AND CAPITAL BANK LITIGATION. At times over the past several years,
Bancorp, Capital Bank and certain of their former and existing officers and
directors, including Daniel M. Holtz, the Chairman of the Board, Chief
Executive Officer and President of Bancorp and Capital Bank and a director of
the Company, Fana Holtz, Vice-Chairman of the Bancorp Board, Javier J. Holtz,
Chairman of the Board and Executive Vice President of the Company, a Senior
Vice President of Bancorp and an Executive Vice President and a director of
Capital Bank, and Abel Holtz, the former Chairman of the Board, Chief
Executive Officer and President of Bancorp and Capital Bank and the former
Chairman of the Board of the Company, and presently a shareholder of Bancorp,
have been parties to litigation brought either by certain shareholders of
Bancorp or its Audit Committee. Although an initial action brought in 1992 by
the Audit Committee was voluntarily dismissed by the plaintiffs, a derivative
action and an individual action were brought by certain shareholders of
Bancorp in February 1995. See "Business--Legal and Administrative
Proceedings" for a description of the action brought by the Audit Committee.

Pursuant to the derivative action, the plaintiffs have alleged, among
other things, that certain defendants engaged in a series of illegal
activities causing harm to Bancorp and Capital Bank. In addition, the
plaintiffs have alleged that certain of such officers and directors engaged
in a series of activities designed to improperly increase or maintain their
interest in, and control of, Bancorp. In the individual action, the
plaintiffs have alleged, among other things, that the defendants breached
fiduciary
11
<PAGE>
duties by, among other things, improperly using proxies to vote shares of
Bancorp owned by one plaintiff, that certain of the defendants unlawfully
solicited proxies for a shareholders' meeting and that actions taken at this
meeting were invalid. The plaintiffs are seeking, on behalf of Bancorp in the
derivative action, and on behalf of themselves in the individual action,
unspecified monetary damages, including treble damages, reasonable costs and
attorneys' fees, and certain injunctive and declaratory relief. The plaintiffs
have not indicated that they are seeking any monetary relief from Bancorp and
Capital Bank other than costs in the individual action. The defendants have
denied the allegations and are defending against both actions. The Company is
not a party to these proceedings and no relief is sought from the Company,
although Daniel Holtz, a director of the Company, and Javier Holtz, Chairman of
the Board and an Executive Vice President of the Company, are defendants in the
litigation. Although the Company does not believe that the outcome of the
foregoing litigations will have a material adverse effect on its financial
condition, results of operations or liquidity, the Company cannot predict what
effect, if any, such litigation will have on the Company. For more information
regarding these matters, see "Business--Legal and Administrative Proceedings"
and "Principal Shareholders."

PENDING BANCORP AND CAPITAL BANK CHANGE IN CONTROL APPLICATIONS. Daniel
Holtz, Fana Holtz and Javier Holtz have advised Bancorp that they had
discussions with the Florida Department of Banking and Finance ("FDBF") as to
whether one or more of them was required under Florida law to file an
application to acquire and/or maintain a controlling interest in Capital Bank
through their ownership and control of Bancorp. As a result of those
discussions, Daniel Holtz, Fana Holtz and Javier Holtz have advised Bancorp
that they, both individually and as a group, have voluntarily filed an
application to acquire and/or maintain a controlling interest in Bancorp,
although they do not believe such an application is legally required. Daniel
Holtz, Fana Holtz and Javier Holtz are also having discussions with the Board
of Governors of the Federal Reserve System ("FRB") as to whether a change of
control notice is required under federal law. It presently cannot be
determined what effect, if any, the discussions with the FRB or the FDBF's
action on the application will have on Bancorp, Capital Bank and the Company,
although if the control applications are denied, regulatory authorities could
take various actions, including requiring that one or more members of the
Holtz family divest sufficient shares of Bancorp so as not to have legal
control of Bancorp as defined by regulatory authorities. As Bancorp and
Capital Bank will continue to control the Company after this offering, any
such actions could have an effect on the Company which cannot presently be
predicted, although the Company does not believe that the outcome of the
foregoing will have a material adverse effect on its financial condition,
results of operations or liquidity. For more information regarding the change
in control application, see "Business--Legal and Administrative Proceedings"
and "Principal Shareholders."

INVESTIGATIONS BY FEDERAL BANKING AUTHORITIES. Pursuant to Section 19 of the
Federal Deposit Insurance Act, without the consent of the FDIC, no person who
has been convicted of a crime involving dishonesty or breach of trust, may own,
control, or otherwise participate in the affairs of a banking institution. As a
result of entering a guilty plea to one count of giving misleading testimony
in 1991 to a Federal Grand Jury in violation of a federal statute, with
respect to the purpose of certain payments made by Capital Bank, the Company
and certain related parties to a public official, Abel Holtz is subject to the
restrictions of Section 19 of the Federal Deposit Insurance Act. Accordingly,
Abel Holtz is precluded from owning or controlling, or otherwise participating
in, the affairs of Bancorp and Capital Bank without regulatory approval. Abel
Holtz has advised Bancorp that he has orally agreed with the FDIC not to vote
his shares in Bancorp at the present time. Federal bank regulatory authorities
are also examining and investigating whether Abel Holtz and some or all of
the persons discussed in this section, including Bancorp and its
subsidiaries, as well as possibly other persons, are in compliance with
applicable change in control laws and Section 19. The Company cannot
presently determine when these investigations by the federal bank regulatory
authorities will be completed or what the results of such investigations will
be. The resolution of certain of these examinations and investigations could
have an effect on Bancorp and Capital Bank, and as a result of their control
of the Company, the Company, which effect cannot presently be determined.
However, the Company does not believe that the outcome of the foregoing will
have a material adverse effect on its financial condition, results of
operations or liquidity.

12
<PAGE>
NO DIVIDENDS. The Company has not paid any cash dividends to date and does
not intend to pay cash dividends in the foreseeable future. The Company
intends to retain earnings to finance the development and expansion of its
business. Under the Securitized Financings, the Company is prohibited from
paying dividends if immediately after giving effect to such dividend payment the
consolidated net worth of the Company will be less than that of the Company as
of December 31, 1993. In addition, the Other Bank Facility prohibits the Company
from paying dividends if immediately after giving effect to such dividend
payments the Company fails to meet certain financial covenants and ratios, such
as those relating to debt to net worth (no less than 1 to 1), profitability
($5.2 million consolidated net income per year) and positive net cash flows
(more than $1 for each quarter). In addition, because Holding conducts
substantially all of its business through subsidiaries, its ability to pay
dividends in the future is dependent upon its receipt of dividends paid to it by
its subsidiaries. See "Dividend Policy."

ABSENCE OF PUBLIC MARKET; POSSIBLE FLUCTUATIONS OF STOCK PRICE. Prior to
this offering, there has been no public market for the Company's Common
Stock. There can be no assurance that an active trading market for the Common
Stock will develop or that, if developed, it will be sustained after this
offering or that it will be possible to resell the shares of Common Stock at
or above the initial public offering price. The market price of the Common
Stock could be subject to significant fluctuations in response to the
Company's operating results and other factors. In addition, the stock market
in recent years has experienced extreme price and volume fluctuations that
often have been unrelated or disproportionate to the operating performance of
companies. Such fluctuations, and general economic and market conditions, may
adversely affect the market price of the Common Stock. See "Selected
Consolidated Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Underwriting."

SHARES ELIGIBLE FOR FUTURE SALE. Upon consummation of this offering, the
Company will have 12,000,000 shares of Common Stock outstanding. Of these
shares, 2,000,000 shares (2,300,000 if the over-allotment option granted to
the Underwriters is exercised in full) will be freely tradeable without
restriction or registration under the Securities Act of 1933, as amended (the
"Act"). All of the remaining 10,000,000 shares of Common Stock held by
Capital Bank, the current sole shareholder of the Company, will be
"restricted securities" as that term is defined in Rule 144 promulgated under
the Act. The current sole shareholder has agreed not to sell any such shares
of Common Stock for 180 days from the date of this Prospectus without the
prior written consent of Oppenheimer & Co., Inc., as representative of the
Underwriters. See "Underwriting." Additionally, upon consummation of this
offering, 800,000 shares of Common Stock will be reserved for issuance under
the Company's Stock Option Plan. The Company intends to register under the
Act all shares reserved for issuance under its Stock Option Plan. Shares
covered by such registration will be eligible for resale in the public
market, subject to Rule 144 limitations applicable to affiliates. See
"Management--Stock Option Plan." Future sales of substantial amounts of
Common Stock in the public market, or the availability of such shares for
future sale, could impair the Company's ability to raise capital through an
offering of securities and may adversely affect the then-prevailing market
prices. See "Shares Eligible for Future Sale."

FACTORS INHIBITING TAKEOVER. As the Company's sole shareholder, Capital
Bank, will continue to own in excess of 80% of the Company's Common Stock
after this offering, no takeover would be successful without its consent.
Changes in the management or ownership of Capital Bank or Bancorp or a
reduction in the number of shares owned by Capital Bank, however, could have
an effect on the likelihood of a takeover. See "Business--Regulation."
However, the Articles provide that no additional shares of Common Stock may
be issued that would reduce Capital Bank's interest below 80% without Capital
Bank's written approval during the Eighty Percent Period. In addition,
although the Articles provide for the issuance of one or more series of
Preferred Stock from time to time, during the Eighty Percent Period no shares
of any other class of capital stock or other equity security may be issued
without Capital Bank's written approval. Even in the event that at some later
date Capital Bank's percentage ownership in the Company is significantly
reduced, certain provisions of the Company's Articles and Amended and
Restated Bylaws (the "Bylaws") may be deemed to have anti-takeover effects
and may delay, defer or prevent a takeover attempt that a shareholder might
consider in its best interest. The Company's Articles authorize the Board to
determine the rights, preferences, privileges
13
<PAGE>
and restrictions of unissued series of Preferred Stock and to fix the number of
shares of any series of Preferred Stock and the designation of any such series,
without any vote or action by the Company's shareholders. Thus, the Board can
authorize and issue shares of Preferred Stock with voting or conversion rights
that could adversely affect the voting or other rights of holders of the
Company's Common Stock. In addition, the issuance of Preferred Stock may have
the effect of delaying, deferring or preventing a change of control of the
Company, since the terms of the Preferred Stock that might be issued could
potentially prohibit the Company's consummation of any merger, reorganization,
sale of substantially all of its assets, liquidation or other extraordinary
corporate transaction without the approval of the holders of the outstanding
shares of the Common Stock. Other provisions of the Company's Articles and
Bylaws provide that special meetings of the shareholders may be called only by
the Board of Directors or upon the written demand of the holders of not less
than 30% of the votes entitled to be cast at a special meeting. Capital Bank
could also vote to amend the Articles or Bylaws without the vote of any other
shareholders. Such amendments could include other anti-takeover provisions. In
addition, certain provisions of the Florida Business Corporation Act may have
the effect of delaying, deferring or preventing a change in control of the
Company. See "Description of Capital Stock--Anti-takeover Effects of Certain
Provisions of Florida Law and the Company's Articles of Incorporation and
Bylaws."

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of shares of
Common Stock offered hereby, based upon an assumed initial public offering
price of $11.00 per share and after deducting the underwriting discount and
estimated offering expenses, are estimated to be approximately $20.0 million
($23.1 million if the over-allotment option granted to the Underwriters is
exercised in full).

The Company intends to use all of the net proceeds to reduce the Company's
indebtedness to its sole shareholder, Capital Bank, under the Capital
Facility, which bears interest at the prime rate, as published in THE WALL
STREET JOURNAL (8.25% at March 31, 1996), is subject to annual review each
June by Capital Bank and is due on demand. The outstanding borrowings under
the Capital Facility were approximately $69.8 million at March 31, 1996. See
Note 6 of Notes to the Company's Financial Statements and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

DIVIDEND POLICY

The Company intends to retain all future earnings for the operation and
expansion of its business, and does not anticipate paying cash dividends in
the foreseeable future. Any future determination as to the payment of cash
dividends will depend upon the Company's results of operations, financial
condition and capital requirements and any regulatory restrictions or
restrictions under credit agreements or other funding sources of the Company
existing from time to time, as well as other matters which the Company's
Board of Directors may consider. See "Risk Factors."

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<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 31, 1996, giving effect to the 10,000-for-1 stock split effected July 1,
1996, and as adjusted for the sale of the 2,000,000 shares of Common Stock
offered hereby (at an assumed public offering price of $11.00 per share) and the
application of the estimated net proceeds therefrom. See "Use of Proceeds."

<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------
ACTUAL AS ADJUSTED
----------- --------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
BORROWINGS:
Notes Payable ........................................... $ 69,754 $ 49,794
Variable Rate Asset-Backed Certificates ................. 175,000 175,000
SHAREHOLDERS' EQUITY:
Preferred Stock, $.01 par value; 1,000,000 shares
authorized; no shares outstanding ..................... 0 0
Common Stock, $.01 par value; 25,000,000 shares
authorized; 10,000,000 shares issued and outstanding;
12,000,000 shares issued and outstanding, as
adjusted(1) ........................................... 100 120
Additional paid-in capital ............................... 9,542 29,482
Retained earnings ....................................... 25,601 25,601
----------- --------------
Total shareholders' equity ............................ 35,243 55,203
----------- --------------
TOTAL CAPITALIZATION .................................. $279,997 $279,997
=========== ==============
</TABLE>
- ------------

(1) Does not include shares of Common Stock reserved for issuance upon
exercise of stock options to be granted under the Company's Stock Option
Plan effective upon the consummation of this offering or shares issuable
pursuant to the Underwriters' over-allotment option. See
"Management--Company Stock Option Plan" and "Underwriting."

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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share data)

The consolidated selected financial data set forth below for income
statement and balance sheet data has been derived from the consolidated
financial statements of the Company contained elsewhere herein. The
consolidated financial statements as of and for the years ended December 31,
1991, 1992, 1993, 1994 and 1995 have been audited by Deloitte & Touche LLP,
independent auditors. The income statement data for the three months ended
March 31, 1995 and 1996, and the balance sheet data as of March 31, 1996,
have been derived from unaudited interim consolidated financial statements
contained elsewhere herein, which, in the opinion of management, include all
adjustments (consisting of only normal recurring adjustments) necessary for a
fair presentation of the information set forth therein. The data set forth
below should be read in conjunction with the financial statements and related
notes, and Management's Discussion and Analysis of Financial Condition and
Results of Operations included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
-------- ----------- ----------- ---------- ---------- -------- --------
INCOME STATEMENT DATA: (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Factoring fees .......................... $ 9,870 $ 12,482 $ 15,376 $ 17,371 $ 19,519 $ 4,565 $ 5,524
Interest income ......................... 11,482 11,450 13,511 17,628 28,211 6,004 7,574
Interest expense ........................ (7,720) (7,005) (7,842) (10,329) (16,361) (3,553) (4,556)
Net interest income ................... 3,762 4,445 5,669 7,299 11,850 2,451 3,018
Letter of credit and other fees ......... 378 665 1,128 1,238 2,040 351 754
Other income ............................ 1,092 905 1,303 1,541 1,849 324 291
-------- ----------- ----------- ---------- ---------- -------- --------
Operating revenues .................... 15,102 18,497 23,476 27,449 35,258 7,691 9,587
Provision for credit losses ............. 2,550 3,150 2,645 2,235 2,235 450 1,100
Operating expenses ...................... 9,594 11,316 13,072 14,137 18,457 4,102 5,289
-------- ----------- ----------- ---------- ---------- -------- --------
Total expenses ........................ 12,144 14,466 15,717 16,372 20,692 4,552 6,389
Income before income taxes(1) ........... 2,958 4,031 7,759 11,077 14,566 3,139 3,198
Net income .............................. 1,716 2,304 4,305 6,092 8,693 1,883 1,903
Net income per share .................... $ 0.17 $ 0.23 $ 0.43 $ 0.61 $ 0.87 $ 0.19 $ 0.19
PRO FORMA INCOME STATEMENT DATA(2):
Pro forma interest income ............... $ 28,211 $ 7,574
Pro forma interest expense .............. (14,590) (4,137)
---------- --------
Pro forma net interest income ......... $ 13,621 $ 3,437
---------- --------
Pro forma net income .................... 9,750 2,152
Pro forma net income per share .......... 0.81 0.18
OPERATING RATIOS AND OTHER DATA(3):
Factored sales .......................... $825,116 $1,057,846 $1,326,802 $1,536,960 $2,001,364 $441,211 $563,989
Factoring fees to factored sales ........ 1.20% 1.18% 1.16% 1.13% 0.98% 1.03% 0.98%
Net interest income to factored sales ... 0.46% 0.42% 0.43% 0.47% 0.59% 0.56% 0.54%
Letter of credit and other fees to
factored sales ........................ 0.05% 0.06% 0.09% 0.08% 0.10% 0.08% 0.13%
Other income to factored sales .......... 0.13% 0.09% 0.09% 0.10% 0.09% 0.07% 0.05%
-------- ----------- ----------- ---------- ---------- -------- --------
1.84% 1.75% 1.77% 1.79% 1.76% 1.74% 1.70%
Provision for credit losses to
factored sales ........................ 0.31% 0.30% 0.20% 0.15% 0.11% 0.10% 0.20%
Operating expenses to factored sales .... 1.16% 1.07% 0.99% 0.92% 0.92% 0.93% 0.94%
-------- ----------- ----------- ---------- ---------- -------- --------
Total expenses to factored sales ........ 1.47% 1.37% 1.18% 1.07% 1.03% 1.03% 1.13%
Income before income taxes to
factored sales......................... 0.36% 0.38% 0.58% 0.72% 0.73% 0.71% 0.57%
Return on equity(4) ..................... 15.63% 17.78% 26.57% 28.80% 30.20% 29.58%(6) 22.27%(6)
Return on assets(4) ..................... 1.23% 1.32% 1.99% 2.35% 2.51% 2.57%(6) 1.86%(6)
Average funds employed(5) ............... $ 89,700 $ 108,300 $ 131,800 $ 153,600 $ 210,900 $188,800 $243,000
Net interest income to average
funds employed ........................ 4.19% 4.10% 4.30% 4.75% 5.62% 5.26%(6) 5.04%(6)
Net charge-offs to factored
sales volume........................... 0.16% 0.30% 0.20% 0.17% 0.05% 0.05% 0.25%
Accounts receivable turnover
in days(7)............................. 53 54 52 53 53 50 51
Average number of employees ............. 118 140 153 162 193 177 222
Average factored sales per employee ..... $ 6,158 $ 7,246 $ 8,672 $ 9,487 $ 10,370 $ 9,971(6) $10,162(6)
</TABLE>

16
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995 MARCH 31, 1996
------------------ ---------------------------
AS
ACTUAL ACTUAL ADJUSTED(8)
------------------ ----------- --------------
BALANCE SHEET DATA: (UNAUDITED)
<S> <C> <C> <C>
Receivables, net ........................ $354,821 $394,780 $394,780
Total assets ............................ 399,471 425,160 425,160
Due to factoring clients ................ 128,578 141,578 141,578
Borrowings .............................. 227,260 244,754 224,794
Due to Affiliates and other liabilities 10,293 3,585 3,585
Shareholders' equity .................... 33,340 35,243 55,203
</TABLE>
- ------------
(1) The results of operations of the Company are included in the consolidated
Federal income tax returns filed by Capital Bancorp, the parent of
Capital Bank. Capital Bank, the Company's sole shareholder, allocates
income taxes to the Company calculated on a separate return basis. See
"Certain Transactions."
(2) Pro forma income statement data reflects (i) the issuance of 2,000,000
shares of Common Stock offered hereby as if such issuance had occurred on
January 1, 1995 or January 1, 1996, at an assumed initial public offering
price of $11.00 per share, net of issuance costs, and the use of the net
proceeds therefrom to repay indebtedness as described in "Use of Proceeds,"
and (ii) reduction of interest expense related to such indebtedness, net of
income taxes, as if the repayment occurred on January 1, 1995 or January 1,
1996.
(3) For purposes of the ratios and data below for 1994 and 1995, factored
sales include certain receivables which are pledged as collateral for those
asset-based loans for which the Company provides factoring-type services.
(4) Computed using average monthly balances.
(5) Computed using average monthly balances of funds employed (receivables
less amounts due to factoring clients).
(6) Computed on an annualized basis.
(7) Computed by dividing 365 by the quotient of (i) factored sales volume for
the periods indicated and (ii) the average monthly accounts receivable
balance for the periods indicated.
(8) Adjusted to give effect to the sale of the Common Stock offered hereby
(at an assumed initial public offering price of $11.00 per share) and the
application of the estimated net proceeds therefrom. See "Use of Proceeds."

17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

INTRODUCTION

The Company provides fee-based services to its clients, including credit
protection, collection and management information services, and also makes
advances to many of its clients. Clients are generally manufacturers of goods
or providers of services in various industries. At the time the Company
purchases the factored receivables, the Company records a receivable and an
offsetting liability "due to factoring client." Advances, which are interest
earning and secured by the client's factored receivables, are recorded by the
Company as reductions to the amounts due to the factoring client for factored
receivables. Cash collections from the client's customers are used to repay
the client's loans. If, as a result of financial inability to pay, a client's
customer fails to pay a receivable that was credit-approved by the Company,
the Company will ultimately bear any loss with respect to such receivable. In
the event of dilution in excess of the unfinanced portion of receivables,
where factored receivables are not fully collected for a reason other than
the customer's financial inability to pay, such as breach of warranty, the
Company will in practice typically need to look to newer receivables of the
client for the collection of the outstanding obligation to the Company and
may not be repaid.

In contrast to the Company's purchase of factored receivables, when the
Company makes an asset-based loan, a client assigns its collateral (usually
accounts receivable and inventory) to the Company. Upon request of the
client, the Company may advance funds to the client as a loan in an amount
based upon the eligible collateral. When funds are advanced to a client, a
loan receivable balance is created, and cash is disbursed. Although the
Company loans funds to the client based on eligible collateral, the Company
provides no credit protection and, accordingly, does not assume the risk of
loss from a client's customers' inability to pay, although the Company may
actually suffer a loss if all sources of repayment fail, including other
collateral and guarantees, if any. In connection with asset-based loans,
instead of a factoring fee, the Company earns a facility fee. Both factored
advances and asset-based loans bear interest at a rate tied to the prime
rate.

The Company was acquired by Capital Bank in May 1985, at which time the
Company had one office in South Florida. The Company acquired its Los Angeles
regional office in August 1989, opened its New York regional office in April
1990 and the North Carolina regional office in May 1995. In September, 1994
the Company also established a healthcare division which provides financing
to various types of healthcare providers and companies involved in the
healthcare industry. The Company has experienced a compounded annual growth
rate in factored sales volume and operating revenues of 24.8% and 23.6%,
respectively, during the period 1991 through 1995, primarily as a result of
the growth in the California and New York regional offices and the opening of
the North Carolina regional office. In addition, the Company's factored sales
volume and operating revenues increased by 27.8% and 24.7%, respectively, in
the three month period ended March 31, 1996 as compared to the same period in
1995.

The Company operates through four regional offices (including the Florida
office) and currently has over 400 clients who generate annual sales from
$500,000 to over $100 million, and services over 100,000 customers of those
clients. The majority of the Company's customers are large national or
regional department store chains or specialty retailers. At March 31, 1996,
the largest amount due from any one customer, a national department store
chain, was approximately $18.8 million.

The Company's factored sales volume can be affected in several ways,
including new clients, client retention or losses, inflation and other
economic conditions. Additionally, fluctuations in the sales dollar volume of
the Company's clients, both positive and negative, have a direct impact on
the Company's factored sales volume and factoring fees. In this regard, the
Company has historically experienced seasonal fluctuations in its factored
sales volume and factoring fees as a result of the seasonality of the sales
of certain of the Company's clients, especially those in the apparel
industry, who typically ship more goods during the four-month period of
August through November in order to fill increased

18
<PAGE>
customer orders in anticipation of "back to school" and the ensuing holiday
season. The Company realized approximately 40% of its annual factored sales
volume during this 4-month period in each of 1994 (approximately $605 million
of $1.5 billion annual factored sales) and 1995 (approximately $757 million
of $2 billion annual factored sales).

Management believes that one of the essential tools in maintaining and
managing growth of the Company is the monitoring of certain key financial
ratios. The Company monitors the key components of its income statement data,
such as factoring fees, net interest income, other income, provision for
credit losses and operating expenses, as a percentage of its factored sales
volume. These key ratios allow the Company to monitor its performance in
achieving its goals of (i) obtaining higher gross margins on factoring fee
income, (ii) increasing fee income as a percentage of cash employed, (iii)
reducing credit losses, (iv) controlling costs, and (v) maximizing return to
its investors. Management also monitors both accounts receivable turnover and
the aging of customers' accounts receivable, with particular emphasis on
amounts greater than 60 days past due.

MONITORING ASSET QUALITY AND CREDIT LOSSES

The monitoring of asset quality is a routine function performed by
management to control credit losses. Monitoring asset quality involves the
periodic review, sometimes daily, of such pertinent financial statistics as
the aging of the accounts receivable portfolio, accounts receivable turnover,
dilution and charge-offs. The Company's allowance for credit losses is
determined after evaluating the receivables portfolio, current market
conditions, changes in the nature and volume of the portfolio, past loss
experience and other pertinent factors.
19
<PAGE>
Set forth below are those ratios and statistics utilized by management in
monitoring asset quality for the five years ended December 31, 1995 and the
three month periods ended March 31, 1995 and 1996:

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- ------------ --------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Provision for credit losses .......... $2,550 $3,150 $2,645 $2,235 $2,235 $ 450 $1,100
Charge-offs net of recoveries ....... $1,348 $3,164 $2,663 $2,618 $1,028 $ 206 $1,397

Allowance for credit losses--specific $1,398 $ 967 $ 600 $ 160 $1,203 $ 244 $ 736
Allowance for credit losses--general . $ 791 $1,208 $1,557 $1,614 $1,778 $1,774 $1,948
------ ------ ------ ------ ------ ------ ------
Total allowance for credit losses .. $2,189 $2,175 $2,157 $1,774 $2,981 $2,018 $2,684

Accounts receivable turnover in days 53 54 52 53 53 50 51
Accounts receivable past due more
than 60 days as a percentage of
factored receivables ............... 6.72% 6.08% 4.85% 5.17% 3.49% 4.40% 4.86%
Accounts receivable past due more
than 90 days as a percentage of
factored receivables ............... 4.31% 2.66% 1.95% 2.35% 2.37% 2.81% 3.04%
Provision for credit losses as a
percentage of factored sales ....... 0.31% 0.30% 0.20% 0.15% 0.11% 0.10% 0.20%
Net charge-offs to factored sales ... 0.16% 0.30% 0.20% 0.17% 0.05% 0.05% 0.25%
Average receivables .................. $126,487 $166,506 $204,664 $241,815 $312,124 $269,675 $365,918
Provision for credit losses as a
percentage of average receivables .. 2.02% 1.89% 1.29% 0.92% 0.72% 0.68%(5) 1.20%(5)
Net charge-offs as a percentage of
average receivables ................ 1.07% 1.90% 1.30% 1.08% 0.33% 0.32%(5) 1.52%(5)
Non-accruing advances ................ $ 965 $1,083 $ 385 $ 739 $2,184 $ 293 $2,436
Non-accruing advances as a percentage
of receivables ..................... 0.66% 0.60% 0.17% 0.28% 0.60% 0.10% 0.61%(5)
Provision for credit losses as a
percentage of average funds
employed(1)(2) ..................... 2.84% 2.91% 2.01% 1.46% 1.08% 0.96%(5) 1.80%(5)
Net charge-offs as a percentage of
average funds employed(1)(3) ....... 1.50% 2.92% 2.02% 1.70% 0.49% 0.44%(5) 2.28%(5)
Non-accruing advances as a
percentage of funds employed(1)(4) . 0.98% 1.01% 0.28% 0.44% 0.94% 0.14% 0.94%
<FN>
- ----------
(1) Funds employed are receivables less amounts due to factoring clients.
(2) Computed by dividing provision for credit losses by average funds employed
for each period presented. The provision for credit losses as a percentage
of average advances for each of the periods presented was lower than the
provision for credit losses as a percentage of average funds employed.
(3) Computed by dividing net charge-offs by average funds employed for each
period presented. Net charge-offs as a percentage of average advances for
each of the periods presented was lower than net charge-offs as a percentage
of average funds employed.
(4) Computed by dividing non-accruing advances by funds employed at the end of
each respective period indicated. Non-accruing advances as a percentage of
advances during each period presented was lower than non-accruing advances
as a percentage of funds employed.
(5) Computed on an annualized basis.
</FN>
</TABLE>

The Company regularly reviews its outstanding accounts receivable and
other extensions of credit, such as advances to clients, to determine the
adequacy of its allowance for credit losses. Factors such as the level of
related credit balances of clients and the impact of economic conditions on the
creditworthiness of the Company's clients and the client's customers are given
significant consideration in determining the adequacy of the Company's allowance
for credit losses. The Company's methodology for calculating its reserve for
doubtful accounts has remained consistent for the periods shown above, and
includes a specific and general component. Specific reserves are established for
receivables and
20
<PAGE>
client advances which the Company's management deems to be wholly or partially
uncollectible. The general reserve represents 0.75% of those receivables (other
than healthcare receivables which have a lower general reserve) that are not
specifically reserved for but for which the Company has provided credit
guarantees.

The provision for credit losses as a percentage of factored sales
decreased from 0.31% in 1991 to 0.11% in 1995, reflecting the Company's
improved loss experience over that period and positive economic trends that
benefited the Company's clients and their customers. The provision as a
percentage of factored sales increased to 0.20% in the first quarter of 1996,
reflecting a higher net charge-off rate. The provision for credit losses as a
percentage of average receivables decreased from 2.02% in 1991 to 0.72% in 1995,
and the provision for credit losses as a percentage of average funds employed
decreased from 2.84% in 1991 to 1.06% in 1995, also reflecting the Company's
improved loss experience over that period. The provision for credit losses as a
percentage of average receivables and the provision for credit losses as a
percentage of average funds employed increased to 1.20% and 1.80%, respectively,
in the first quarter of 1996 from 0.68% and 0.96%, respectively, in the first
quarter of 1995, reflecting a higher net charge-off rate. Management anticipates
that the provision for credit losses during the remainder of 1996 will be higher
than during 1995 and more consistent with the Company's historical experience.

Net charge-offs as a percentage of factored sales ranged from 0.16% to
0.30% in the 1991-1994 period, reflecting normal credit losses consistent
with historical experience. Net charge-offs as a percentage of factored sales
declined to 0.05% in 1995 as a result of higher recoveries and fewer
bankruptcies that affected the Company. The net charge-off percentage
increased to 0.25% in the first quarter of 1996 as a result of the charge-off
of several large items, including $600,000 related to the bankruptcy of a
large Northeastern regional chain store and $200,000 related to a single
client loan, $74,000 of which was recovered subsequent to March 31, 1996.
Consistent with net charge-offs as a percentage of factored sales, during the
period 1991 to 1994, net charge-offs as a percentage of average receivables and
net charge-offs as a percentage of average funds employed reflected normal
credit losses consistent with historical experience, ranging from 1.07% to 1.90%
and 1.50% to 1.70%, respectively. Net charge-offs as a percentage of average
receivables and net charge-offs as a percentage of average funds employed
decreased to 0.33% and 0.49%, respectively, in 1995, primarily as a result of
higher receivable recoveries and fewer bankruptcies affecting the Company in
that year. Net charge-offs as a percentage of average receivables and net
charge-offs as a percentage of average funds employed increased to 1.52% and
2.28%, respectively, in the first quarter of 1996, as a result of the charge-off
of several large items as described above. Management anticipates that net
charge-offs during the remainder of 1996 will be higher than during 1995 and
more consistent with the Company's historical experience.

Non-accruing advances as a percentage of funds employed have remained
below 1.00% from January 1, 1993 to March 31, 1996, ranging from 0.14% to 0.94%
during such period. Non-accruing advances as a percentage of receivables ranged
from 0.10% to 0.66% during the same period. Management believes that
fluctuations in non-accruing advances within this range are a normal part of the
Company's ongoing business and are not significant. Non-accruing advances
increased by $200,000 from December 31, 1995 to March 31, 1996, as a result of
the Company's placement of a single loan of approximately $1.5 million on
non-accrual during such period, which was subsequently paid-off with no loss of
principal, partially offset by the repayment of the largest non-accrual advance
at December 31, 1995. This advance was approximately $1.4 million at December
31, 1995, and the subsequent repayments resulted in a net charge-off of
approximately $126,000.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31,
1995

Net income increased from approximately $1.88 million for the three month
period ended March 31, 1995 to approximately $1.90 million for the comparable
period in 1996, a 1.1% increase,
21
<PAGE>
primarily as a result of an increase in the Company's provision for credit
losses which offset the increase in revenues. Operating revenues increased from
approximately $7.7 million for the three month period ended March 31, 1995 to
approximately $9.6 million for the comparable period in 1996, a 24.7% increase,
primarily attributable to the increase in the Company's factored sales volume,
and the resulting increase in interest income and factoring fees. Factored sales
increased from approximately $441.2 million for the three month period ended
March 31, 1995 to approximately $564.0 million for the three month period ended
March 31, 1996, an increase of 27.8%, with factoring fees increasing by 21.0%
from approximately $4.6 million for the three month period ended March 31, 1995
to approximately $5.5 million for the comparable period in 1996. These increases
were attributable to continued growth of the Company's New York and California
offices and the opening of the Charlotte, North Carolina office in May 1995, as
well as the business generated by the Company's healthcare division.

Although the Company experienced increased factoring fee income as a
result of increased factored sales, factoring fee income as a percentage of
factored sales declined from 1.03% for the three months ended March 31, 1995
to 0.98% for the three months ended March 31, 1996. This decline was
primarily the result of lower factoring fees charged to high volume clients
in the New York market and a lower fee structure, partly because of high
volume clients, in the Charlotte market. The Company typically receives lower
factoring fees from high volume clients because, among other reasons, high
volume clients do not have the same servicing needs as smaller clients,
requiring less labor intensive services to be performed by the Company, and
because there is increased competition for such clients' business. The New
York office accounted for 53.0% of the Company's factored sales volume for
the quarters ended March 31, 1995 and March 31, 1996.

Net interest income increased from approximately $2.5 million for the
three months ended March 31, 1995 to approximately $3.0 million for the
comparable period in 1996, a 23.1% increase, principally as a result of an
increase of $54.2 million in average outstanding client advances for the
three months ended March 31, 1996 as compared to the same period in the prior
year. Net interest income was also favorably impacted by continued interest
expense reductions achieved through the issuance of additional Certificates
under the Securitized Financings initiated by the Company in June 1994. In
particular, as a result of the Company's issuance of an additional $50
million in Certificates in July 1995, the proceeds of which were used to pay
down the Capital Facility, the Company was able to reduce the higher interest
debt (approximately 8.25% at March 31, 1996) outstanding under the Capital
Facility. At March 31, 1996, there were $175 million of Certificates
outstanding bearing interest at LIBOR plus 1.25% (approximately 6.63% at
March 31, 1996, excluding annualized transaction costs of 0.37%). The Company
intends to continue to use the Securitized Financings as a principal funding
source for its traditional factoring activities, to the extent available.

Letter of credit and other fee income increased from approximately
$350,700 for the three months ended March 31, 1995 to $753,800 for the three
months ended March 31, 1996, an 115.0% increase, primarily due to an increase
in letter of credit fees of approximately $101,200 or 67.8% for the three
month period ended March 31, 1996 as compared to the comparable period in
1995. In addition, other fee income increased by $301,933 for the quarter
ended March 31, 1996 as compared to the quarter ended March 31, 1995.

Operating expenses as a percentage of operating revenues increased from
53.3% to 55.2% for the three month period ended March 31, 1996 as compared to
the three month period ended March 31, 1995. This increase was primarily the
result of the increase in salaries and office expenses related to the opening
of the Company's North Carolina office in May 1995.

The provision for credit losses increased from $450,000 for the three
months ended March 31, 1996 to approximately $1.1 million for the three
months ended March 31, 1996. This increase is primarily attributable to an
increase in outstanding accounts receivable, and a $200,000 charge-off on a
single client, $74,000 of which was recovered subsequent to March 31, 1996.
In addition, recoveries during the three month period ended March 31, 1995
were approximately $110,000 greater than recoveries during the comparable
period in 1996. Provisions for credit losses as a percentage of factored
sales increased to 0.20% at March 31, 1996 as compared to 0.10% for the
comparable period in 1995.

22
<PAGE>

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

Net income increased from approximately $6.1 million during 1994 to
approximately $8.7 million for 1995, a 42.6% increase, primarily as a result
of increased operating revenues generated from increased factored sales.
Operating revenues increased from approximately $27.4 million for 1994 to
approximately $35.3 million for 1995, a 28.5% increase, primarily
attributable to the increase in the Company's factored sales volume, and the
resulting increase in interest income and factoring fees. Factored sales
increased from approximately $1.5 billion for 1994 to approximately $2
billion for 1995, an increase of 30.2%, with factoring fees increasing by
12.4% from approximately $17.4 million for 1994 to approximately $19.5
million for 1995. A significant portion of these increases were attributable to
continued growth of the Company's New York and California offices and the
opening of the Charlotte, North Carolina office, as well as the business
generated by the Company's healthcare division.

Although the Company experienced increased factoring fee income as a
result of increased factored sales, factoring fee income as a percentage of
factored sales has declined from 1.13% for 1994 to 0.98% (1.03% excluding
asset-based lending activities) for 1995. This decline was primarily the result
of lower factoring fees charged to high volume clients in the New York market
and a lower fee structure, partly because of high volume clients, in the
Charlotte market. The Company typically receives lower factoring fees from high
volume clients because, among other reasons, high volume clients do not have the
same servicing needs as smaller clients, requiring less labor intensive services
to be performed by the Company, and because there is increased competition for
such clients' business. The New York office accounted for 48.0% of the Company's
factored sales volume for 1995, compared to 53.0% for 1994.

Net interest income increased from approximately $7.3 million for 1994 to
approximately $11.8 million for 1995, a 62.3% increase, principally as a
result of a $57.3 million increase in average outstanding client advances for
1995 compared to 1994. Net interest income was also favorably impacted by
continued interest expense reductions achieved through the issuance of
additional Certificates under the Securitized Financing initiated by the
Company in June 1994. The Company issued an additional $25 million of such
certificates in December 1994, and an additional $50 million in July 1995.
This allowed the Company to reduce the higher interest debt outstanding under
the Capital Facility (approximately 8.75% at December 31, 1995). At December
31, 1995, there were $175 million of Certificates outstanding bearing
interest at LIBOR plus 1.25% (approximately 7.19% at December 31, 1995,
excluding annualized transaction costs of 0.37%).

Letter of credit and other fee income increased from approximately $1.2
million in 1994 to approximately $2.0 million in 1995, a 66.7% increase,
primarily as a result of an increase in letter of credit fees of
approximately $305,000 in 1995 as compared to 1994, and an increase in
overadvance fees of approximately $332,000 in 1995 as compared to 1994. In
addition, fees related to field examinations increased by approximately
$91,000 in 1995 as compared to 1994. Overadvances represent loans to clients
in excess of the factored accounts receivable, substantially all of which are
collateralized by assets other than receivables. All of the foregoing
increases were principally the result of increased factoring volume in 1995.

Operating expenses increased as a percentage of operating revenues,
increasing from approximately 51.5% in 1994 to approximately 52.3% in 1995.
The increase was the result of the opening of the North Carolina office in
May 1995, and increases in salaries and benefits related principally to
increased staff levels in the healthcare division and the hiring of personnel
for the North Carolina office.

The provision for credit losses was approximately $2.2 million in both
1994 and 1995. The provision for credit losses as a percentage of factored
sales declined from 0.15% in 1994 to 0.11% in 1995. The Company's allowance
for credit losses is determined after evaluating the receivables portfolio,
current market conditions, changes in the nature and the volume of the
receivables portfolio and past loss experience. Management believes that the
decline in net charge-offs over such period reflects the Company's policies
and practices of (i) generally refraining from providing factoring services
to certain
23
<PAGE>
industries, (ii) carefully screening and selecting new clients, (iii)
maintaining stringent underwriting criteria and using good credit judgment, (iv)
using diligent monitoring procedures and (v) avoiding a significant
concentration in any one client or clients. Although management attributes this
positive trend primarily to the procedures it employs in monitoring asset
quality, which procedures have kept losses on client advances at negligible
levels and customer credit losses at their lowest level in the past three years,
there can be no assurances that such levels will be sustained by the Company in
the future. Non-accruing advances at December 31, 1995 were approximately $2.2
million compared to approximately $739,000 at December 31, 1994. This increase
was primarily attributable to advances to a single client, most of which were
collected in 1996.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

Net income increased from approximately $4.3 million in 1993 to
approximately $6.1 million in 1994, a 41.5% increase, primarily as a result
of increased operating revenues generated from increased factored sales.
Operating revenues increased from approximately $23.5 million in 1993 to
approximately $27.4 million in 1994, a 16.9% increase, and was primarily
attributable to a significant increase in the Company's factored sales, and the
resulting increase in factoring fees. Factored sales increased from
approximately $1.3 billion in 1993 to approximately $1.5 billion in 1994, an
increase of 15.8%, with factoring fees increasing by 13% from approximately
$15.4 million in 1993 to approximately $17.4 million in 1994. A significant
portion of these increases was attributable to continued growth of the Company's
New York office.

Although the Company experienced increased factoring fee income as a
result of increased factored sales, factoring fee income as a percentage of
factored sales declined slightly, from 1.16% in 1993 to 1.13% in 1994. This
decline was primarily the result of lower rates for factoring fees
experienced on several large client relationships where expenses as a
percentage of factored sales are also lower.

Net interest income increased from approximately $5.7 million in 1993 to
approximately $7.3 million in 1994, a 28.8% increase, primarily as a result
of a $21.8 million increase in average client advances outstanding in 1994
compared to 1993, and interest expense reductions achieved as a result of the
issuance in June 1994 of $100 million in certificates under the Securitized
Financings. These certificates bear interest at LIBOR plus 1.25% and were
used to (i) repay in full the outstanding balance under a $15 million loan
from an unaffiliated bank, where the Company paid LIBOR plus 1.75%, and (ii)
reduce the amount outstanding under the Capital Facility which bears interest
at the prime rate.

Letter of credit and other fee income increased from approximately $1.1
million in 1993 to approximately $1.2 million in 1994 representing a 10%
increase.

The Company's total expenses increased from approximately $15.7 million in
1993 to approximately $16.4 million in 1994, a 4.2% increase, primarily as a
result of increases in salaries and benefits associated with the growth in
New York and California, as well as operations in the Florida office.

The provision for credit losses decreased from approximately $2.6 million
in 1993 to approximately $2.2 million in 1994, a 15.5% decrease. As a
percentage of factored sales, the provision for credit losses declined from
.20% in 1993 to .15% in 1994. The Company's allowance for credit losses is
determined after evaluating the receivables portfolio, current market
conditions, changes in the nature and volume of the receivables portfolio and
past loss experience.

LIQUIDITY AND CAPITAL RESOURCES

Since June 1994, the Company has relied upon an asset securitization
program, the Securitized Financings, as its principal source of funding. This
funding is supplemented by the Capital Facility and, more recently, the Other
Bank Facility.

Through March 31, 1996, the trust created in connection with the
Securitized Financings had issued three series of asset-backed certificates
(each, a "Certificate") aggregating $175 million under the
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<PAGE>
Securitized Financings, including $100 million in June 1994, $25 million in
December 1994 and $50 million in July 1995. All of the Certificates were issued
to life insurance companies. Initially, the Certificates were rated "AA" by Duff
& Phelps Credit Rating Company and "A" by Fitch Investors Services, Inc.
Approximately one year after its initial rating, Fitch Investors Services, Inc.
upgraded its rating of the Certificates to "AA". The scheduled maturity date of
the Certificates corresponding to each series is December 1999 ($100 million),
June 2000 ($25 million), and January 2001 ($50 million), respectively. The
Certificates issued under each series bear interest at LIBOR plus 1.25% before
transaction costs (approximately 7.19% at December 31, 1995 and 6.63% at March
31, 1996, excluding annualized transaction costs of 0.37% during such periods).
Interest is payable monthly. However, an early amortization event will occur if
the Company fails to satisfy certain financial covenants. The principal
financial covenants contained in the Securitized Financing agreements that the
Company must satisfy include, (i) consolidated net worth in excess of $18.5
million, (ii) tangible equity ratio of at least 6%, (iii) accounts receivable
non-payment percentage of no more than 18%, (iv) 60-day accounts receivable
percentage of no more than 10% of total accounts receivable, (vi) weighted
average factoring fee of at least 0.75%, and (vii) weighted average accounts
receivable turnover of less than 70 days, (viii) accounts receivable dilution of
no more than 11%, (ix) accounts receivable payment ratio for three consecutive
periods of more than 40%, (x) aggregate amount of subordinated certificates of
no more than 25% of senior certificates, (xi) subordinated certificates equal to
or greater than 7% of total certificates and (xii) value of accounts receivable
transferred to the Trust (as defined below) of no less than 135% of aggregate
certificates. In addition, there are other covenants relating to the collateral,
including required capital levels, maximum dilution and delinquency ratios and
minimum subordination levels. The Company is in material compliance with these
and all other covenants contained in the Securitized Financing agreements. The
Company may continue to use the Securitized Financings for funding, provided
eligible Advances are available for transfer to the trust created to accommodate
the Securitized Financings (the "Trust") for future funding through new series.
Generally, all of the Advances made by the Company, with the exception of those
made by its healthcare division, as well as certain asset-based loans, are
eligible for transfer to the Trust. As of March 31, 1996, the Company had
transferred to the Trust Advances aggregating nearly $224 million. Additionally,
in connection with any additional secured indebtedness to be incurred by the
Company, the Securitized Financings require that all additional secured lenders
enter into an intercreditor agreement with the holders of the Certificates and
the trustee of the Trust. The Securitized Financings permit future purchases to
the extent that the Company generates eligible Advances. The Company used all of
the funding it has obtained through the Securitized Financings to (i) repay in
full the outstanding balance under a $15 million loan from an unaffiliated bank,
where the Company paid interest of LIBOR plus 1.75%, and (ii) pay down the
indebtedness under the Capital Facility.

In May 1996, CF One sold the CF One Notes which notes are collateralized by
subordinated certificates that were issued in connection with the Company's
Securitized Financings. The CF One Notes, which are due and payable in July
2001, bear interest at an annual fixed rate of 7.95% and are rated "BBB" by both
Duff & Phelps Credit Rating Company and Fitch Investors Services, Inc. The
principal purpose for the issuance of the CF One Notes was to allow CF One to
obtain additional financing by taking advantage of the favorable financing terms
resulting from an increase in the value of the subordinated certificates held by
CF One which are collateralized by assets held by the Trust. The increase in the
value of the subordinated certificates held by CF One was the result of the
favorable performance of the receivables and other assets held in the Trust's
portfolio.

Under the Capital Facility, the Company also has a $125 million unsecured
revolving line of credit with Capital Bank, the Company's sole shareholder,
pursuant to which the Company had outstanding borrowings of approximately
$69.8 million at March 31, 1996. The indebtedness under the Capital Facility
bears interest at the prime rate, as published in The Wall Street Journal
(8.25% at March 31, 1996), is subject to annual review by Capital Bank each
June and is due on demand. The Facility has been in place since 1985 and
historically has been renewed for one-year periods in June of each year.
Interest under the Capital Facility is payable monthly. The Company generally
has used the Capital
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<PAGE>
Facility to make Advances to its clients. The net proceeds of this offering will
be used to reduce the Company's indebtedness under the Capital Facility.

In March 1996, the Company entered into the Other Bank Facility, a
revolving credit facility with an unaffiliated bank in the amount of $40
million which was closed in April 1996. Indebtedness under the Other Bank
Facility will be secured by Advances not transferred to the Trust or eligible
for transfer to the Trust, most of which were made by the Company's
healthcare division or were asset-based loans, as well as all of the
equipment used by the Company in its operations. In order for the Other Bank
Facility to be fully funded, the Company would have to pledge an amount in
excess of $57 million in Advances. The indebtedness under the Other Bank
Facility may not exceed 70% of the value of the Advances pledged by the
Company as collateral for such indebtedness. The Company currently has
borrowings of approximately $22 million outstanding under the Other Bank
Facility. The indebtedness under the Other Bank Facility bears interest at a
rate of LIBOR plus 2.15%, payable monthly. The indebtedness under the Other
Bank Facility matures upon termination in March 1999, although it will be
automatically renewed for additional one year periods unless the Company or
the lender terminate it. The Other Bank Facility contains certain financial
covenants and ratios, including those relating to the Company's debt to net
worth (no less than 1 to 1), profitability ($5.2 million of annual consolidated
net income) and positive net cash flows (more than $1 per quarter). Funds
borrowed under the Other Bank Facility were used by the Company to pay down
indebtedness under the Capital Facility, and to fund certain of the Company's
healthcare financing activities and asset-based lending activities.

In addition to the continued availability of the above financing, the
Company's future liquidity will continue to be dependent upon its ability to
collect the accounts receivables purchased from its clients. Of the Company's
approximately $401.5 million of accounts receivable outstanding at March 31,
1996, approximately $169.5 million have balances exceeding $1 million. These
customers are primarily large national or regional department store chains or
specialty retailers. At March 31, 1996, the largest amount due from any one
customer, a national chain store, was approximately $18.8 million. In addition,
the Company's accounts receivable turned over in an average of 53 days during
1995 and 51 days during the three months ended March 31, 1996.

The Company had no material commitments for capital expenditures as of
March 31, 1996. The Company has signed a letter of intent to purchase
substantially all of the assets of a specialized financial services company,
subject to negotiation of a definitive agreement containing, among other things,
representations and warranties thata there have been no material adverse changes
in the seller's operations, financial condition or business prospects and
several other conditions, including the Company's satisfactory completion of due
diligence and the receipt of all required regulatory and other approvals, if
any. Pursuant to the letter of intent, the purchase price would be $900,000 over
the book value of the assets acquired (estimated by the seller to be between $7
million and $10 million), plus an additional amount up to $900,000 payable over
3 years if certain contingencies are met. If the acquisition is consummated, the
Company would use the Capital Facility to fund the acquisition. Although the
Company has no present plans for other acquisitions, the Company would consider
appropriate potential acquisitions as and if they arise. The Company would need
to utilize the above financings and potentially other financings to fund any
such acquisitions.

Management believes that it has the corporate infrastructure in place to
support its earnings growth for the foreseeable future. Management also
believes that funds available under the Company's current credit facilities
(assuming such facilities are renewed or replaced with similar facilities)
and cash flow from operations will be sufficient to satisfy the Company's
working capital requirements for at least 12 months after this offering.

EFFECTS OF INFLATION

The Company believes that inflation has not had a material impact on its
results of operations.

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<PAGE>
BUSINESS

GENERAL

The Company is a specialized financial services company principally
engaged in providing receivables-based commercial financing and related
fee-based credit, collection and management information services. The
Company's clients are primarily small to medium size companies in various
industries, including textile and apparel and furniture manufacturing, and,
recently, entities involved in the healthcare industry. The Company operates
through four offices located in New York City, Los Angeles, Charlotte and its
headquarters in South Florida. In late 1994, the Company began to expand its
asset-based lending business. Management expects healthcare financing and
asset-based lending to contribute significantly to the growth of the Company,
although there can be no assurance that this will be the case. The Company
currently has over 400 clients who generate annual sales of $500,000 to over
$100 million, and services over 100,000 customers of those clients.

The Company generally provides financing to its clients through the
purchase of accounts receivable owed to the Company's clients by the clients'
customers, usually on a non-recourse basis, as well as by guaranteeing
amounts due under letters of credit issued to the Company's clients which are
collateralized by accounts receivable and other assets. The purchase of
accounts receivable is usually known as "factoring" and results in the
payment by the client of a factoring fee, generally equal to 0.5% to 2% of
the factored sales volume. No money is paid to the client at the time the
Company purchases the client's receivables. Instead, the Company records a
liability to the client on its books for the purchase price of the
receivable. Generally, the Company and the client notify the client's
customer to make all payments on the receivable directly to the Company. In
most cases, a client's customers are other commercial entities and the client
does not deal directly with individuals. In healthcare financing, the
client's customers are individuals, but the client's receivables are mostly
from third-party obligors. See "--Healthcare Financing."

The Company guarantees the collection of each client's pre-approved
receivables or receivables from each client's customers with pre-approved
credit lines. Payment for receivables which are credit-approved by the
Company is made to the client after collection from the client's customer or,
if the receivable is not paid based solely on the customer's financial
inability to pay, payment is made to the client within 120 days after the due
date of the receivable. Frequently, the Company also advances funds to its
clients prior to collection of receivables, charges interest on such advances
(in addition to any factoring fees) and satisfies such advances from
receivables collections. All payments to clients are reduced by amounts
outstanding to the Company, such as the factoring fee charged to the client
or any outstanding advances to the client. Interest charged on such advances
is generally equal to 1% to 4% over prime. Management believes that the
generally short-term and floating rate characteristics of its advances and
the floating rate of its financings result in minimal interest rate exposure.
Approximately 30% of the Company's clients use only the credit protection and
management information services offered by the Company in connection with the
purchase of their accounts receivable, and do not obtain advances against the
purchased receivables from the Company.

The Company has grown significantly in size and profitability, with a
compounded annual growth rates in operating revenues and net income of 23.6%
and 50.0%, respectively, during the period 1991 through 1995, and a
compounded annual growth rate in factored sales volume of 24.8% for the same
period. For 1995, the Company's operating revenues, net income and factored
sales volume increased by 28.5%, 42.7% and 30.2%, respectively, over 1994 and
increased by 24.7%, 1.1% and 27.8%, respectively, in the three month period
ended March 31, 1996 as compared to the same period in 1995. The Company's
operating strategy includes (i) managing credit risk to ensure consistent and
stable growth, (ii) increasing market penetration through offices in key
factoring centers, (iii) recruiting and retaining experienced personnel who
use a team approach to provide quality service and (iv) diversifying by
product and industry, especially in healthcare financing, which management
believes has significant growth potential.

27
<PAGE>
BACKGROUND OF THE COMPANY

Factors was acquired by Capital Bank in May 1985, at which time Factors
had one office in South Florida and total assets of less than $6 million,
compared to total assets of $399.5 million as of December 31, 1995. Factors
grew rapidly during 1985 and the first six months of 1986, but sustained
losses during these periods. In 1986, Factors hired a new management team,
including the current President and Chief Executive Officer of Holding and
Factors and two members of the current senior management team located in
Florida. Factors, under this management, acquired the Los Angeles regional
office in August 1989, which was initially staffed with former officers of
NatWest Commercial Services, Inc., and opened the New York regional office in
April 1990, which was initially staffed with former officers of Bankers Trust
Factors. Factors experienced substantial growth in the early 1990s, and added
several key executive officers. In September 1994, the Company established a
healthcare division and, in late 1994, the Company also began asset-based
lending. The Company opened its Charlotte regional office in May 1995,
initially staffed with former executives of Barclays Commercial Corporation.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" for a discussion of increases in factored sales volume in the
newer offices.

Holding is a wholly-owned subsidiary of Capital Bank, a Florida commercial
bank, which is a wholly-owned subsidiary of Bancorp. Holding was formed in June
1994 in order to serve as the holding company for Factors and to accommodate the
issuance of asset-backed certificates in connection with the Securitized
Financings which have been issued pursuant to several private placements .
Additionally, in 1994, Holding formed another subsidiary, CF One, and Factors
formed a subsidiary, CF Funding Corp. Both CF One and CF Funding Corp. were
created to accommodate the issuance of the asset-backed certificates. CF One
holds subordinated certificates issued by the Trust, created in connection with
the Securitized Financings, which it purchased with funds contributed to it by
Holding. Pursuant to the Securitized Financings, Advances made by Factors that
were collateralized by third party accounts receivable and, in certain cases, by
cash, letters of credit, inventory or other collateral provided to Factors were
sold to CF Funding Corp., which subsequently transferred the Advances to the
Trust. The Trust issued Certificates, which were sold to institutional buyers
through several private placements. The aggregate amount of Certificates
presently outstanding is $175 million, of which $100 million was issued in June
1994, $25 million was issued in December 1994 and $50 million was issued in July
1995. Each Certificate evidences an interest in the Trust's assets and the right
to receive the payment of principal in the face amount of the certificate and
interest from the Trust. The Trust's assets consist principally of the Advances,
as well as funds collected or to be collected in respect of the Advances and the
collateral therefor. Factors is responsible for servicing the Advances owned by
the Trust. Subordinated certificates were also issued by the Trust to CF One in
connection with each of the Securitized Financings ($15 million in June 1994,
$3.75 million in December 1994 and $7.50 million in July 1995). The Company
utilized the Securitized Financings because, among other reasons, it offered the
Company a less costly financing alternative and, under applicable regulatory
restrictions, the Company was unable to increase its borrowings under the
Capital Facility. Although the Company has no present plans to complete any
additional Securitized Financings during the next 12 months, if an opportunity
arises which would allow for any additional Securitized Financings, the Company
would likely seek to issue additional Certificates thereunder.

MARKET FOR COMPANY SERVICES

Traditionally, the factoring client base has consisted of members of the
textile and apparel industries, furniture manufacturers, electronics and home
furnishings organizations, wholesalers, distributors and service
organizations. Approximately 76.0% of the Company's clients are in the
textile and apparel industry and 10.8% are manufacturers of furniture and
home furnishings. Clients who, for various reasons, have insufficient or less
effective in-house staff, equipment or procedures to monitor customers,
manage accounts receivable or protect against credit loss, also use factors
to provide such services. These include both mature and younger companies.
For example, as the retail industry becomes more fragmented due to an
increased number of specialty stores challenging department stores, mass
merchants and discounters, suppliers are faced with a larger universe of
buyers and may

28
<PAGE>
experience higher costs to maintain their credit and receivables department
and increasing paper flow, requiring more sophisticated systems. As clients
experience these rising costs, credit, collection and management information
services such as those provided by the Company become economically and
operationally more attractive. In addition, manufacturers benefit from
factoring because it allows them to turn inventory more quickly, particularly
if they receive cash advances, which may be used to produce more inventory
that could not have been produced if the manufacturer had waited to be paid
by its customer.

The Company, as well as the factoring industry, has historically
experienced and expects to continue to experience seasonal fluctuations in
its factored sales volume and factoring fees, which generally have been
highest during the period from August through November. A principal reason
for the fluctuation in the Company's factored sales volume and factoring fees
is the seasonality in the sales of certain of the Company's clients,
especially those in the textile and apparel industry, who typically ship more
goods during such 4-month period in order to fill increased customer orders
in anticipation of "back to school" and the ensuing holiday season. The
Company realized approximately 40.0% of its annual factored sales volume in
each of 1994 (approximately $605 million of $1.5 billion annual factored
sales) and 1995 (approximately $757 million of $2 billion annual factored
sales) during this 4-month period. Historical experience also indicates that
the Company's factored sales volume and factoring fees are at their lowest
during the period from December through February. Such seasonal fluctuations
can be seen by a review of the Company's quarterly factored sales volume and
net income for the 3-year period ended December 31, 1995, as set forth below:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH FULL
QUARTER QUARTER QUARTER QUARTER YEAR
----------- ----------- ----------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1993 Factored Sales Volume $296,710 $319,767 $341,953 $368,372 $1,326,802
Net Income ............ $824 $991 $1,154 $1,336 $4,305
1994 Factored Sales Volume $328,855 $365,176 $423,884 $419,045 $1,536,960
Net Income ............ $1,128 $1,110 $1,769 $2,085 $6,092
1995 Factored Sales Volume $441,211 $460,407 $561,222 $538,523 $2,001,364
Net Income ............ $1,883 $2,069 $2,524 $2,217 $8,693
</TABLE>

One fast-growing market is healthcare financing, which the Company has
recently entered. Typical clients include hospitals, nursing homes, doctor
groups, home treatment centers, home healthcare service providers, temporary
nursing or staffing services and providers of durable medical equipment.
These entities often have long waits for receivables to be paid, but steady
needs for cash, and, accordingly, are less subject to seasonal changes. See
"--Healthcare Financing."

INDUSTRY OVERVIEW

Financial service companies which compete with the Company are widely
known as factors and typically service retail trade clients with a large
number of customers, requiring intensive customer credit and operational
support. Factoring companies service industries such as apparel, textiles,
shoe, carpeting and furniture, frozen foods, housewares, electronics, toys
and other service-related industries, including hospitals, medical companies
and employment services. Such industries benefit from the use of credit,
collection and management information services such as those provided by the
Company because factoring companies can (i) achieve economies of scale in
evaluating the credit quality of various customers and processing receivables
and (ii) help clients to achieve more stable cash flows and additional credit
facilities.

Factoring has been a method of working capital financing in the United
States for over 200 years. Traditionally, the industry has focused on the
purchase of receivables in the apparel and furniture

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<PAGE>
industries, but recently, new industries, including healthcare providers,
have begun factoring. The factoring industry has undergone considerable
consolidation over the past several years; as a result, the industry is
characterized by a small number of very large factors operating nationally,
with a multitude of small companies generally operating on a local or
regional basis.

In a recent survey, the largest fourteen factoring companies reported
volume in 1995 of $60.9 billion, an increase of 48% over reported volume in
1988. The Company had a 3.3% share of this reported volume for 1995.

STRATEGY

The Company provides fee-based services to its clients, including credit,
collection and management information services, and also makes advances to
its clients. Each of the Company's regional offices is staffed with a
business development manager, who has the primary responsibility for
generating new business. Potential new clients are often identified from (i)
referrals by previous and existing clients, accountants and lawyers, (ii)
direct mail efforts and (iii) direct telemarketing efforts. The Company also
attempts to expand its network through (i) mailings and magazine and trade
journal advertisements to increase its name recognition, (ii) cultivating its
existing referral relationships and (iii) soliciting additional referral
relationships. Since the Company opened its Charlotte office in 1995,
management believes that it has a network in place to meet the needs of its
target client base in the key markets for factoring services. Additional
expansion and growth is contemplated through product diversification, such as
through healthcare financing, as well as asset-based lending.

Management believes that the Company's growth has been primarily
attributable to the following operating strategies:

/bullet/ MANAGEMENT OF CREDIT RISKS. The Company manages credit risks
associated with collection of accounts receivable and advances to
clients primarily by (i) conducting extensive financial and business
due diligence on both clients and their customers before entering
into a factoring arrangement with a client or establishing credit
limits for customers, (ii) adhering to written guidelines set forth
in a Loan and Credit Policy Manual distributed to all credit and
collection employees, and (iii) monitoring outstanding accounts
receivable and advances on a daily basis in order to alert the
Company to potential problems in a timely manner.

/bullet/ INCREASED MARKET PENETRATION. The Company believes that it has
been able to increase market penetration by servicing a wide range
of clients nationally through its regional offices located in key
factoring centers. In addition, by providing its clients with
personalized, flexible cost-efficient and effective service, the
Company allows clients to be more responsive to their customers and
to devote more time to the management of other aspects of their
business.

/bullet/ EXPERIENCED PERSONNEL WHO USE A TEAM APPROACH. Management
believes that the quality of service provided to its clients is a
critical factor to the Company's growth. In order to provide quality
services, the Company strives to recruit and retain management and
other personnel with significant industry experience, as well as a
commitment to client service. The Company's account executives,
credit officers and operations officers work together under the
supervision of management to service the Company's clients. As a
result of this strategy, the Company's clients and the customers of
such clients interact with experienced personnel working as a team.

/bullet/ DIVERSIFICATION BY PRODUCT AND INDUSTRY. As part of its operating
and growth strategy, the Company offers different variations and
combinations of its traditional products and services to clients
and has recently expanded into healthcare financing and
asset-based lending. Asset-based lending, in particular, provides
the Company a vehicle to finance clients who may not need its
other services and who have different financial needs than
general factoring clients. Although the Company has a high
concentration of clients in the textile and apparel industry and
furniture manufacturing industry, the Company provides services
to companies in various industries. In

30
<PAGE>
addition to traditional factoring clients, the Company now
provides accounts-receivable financing to various clients in the
healthcare industry. Diversification provides the Company with a
potential client base that has significant growth potential,
which may be serviced from its existing offices.

FACTORING ARRANGEMENTS

FACTORING AGREEMENT

After the Company has completed a financial and business analysis on a
potential client and its customers, the Company will enter into a factoring
agreement with approved clients. Many of these factoring agreements provide
for advances to be made by the Company based on a client's receivables. The
factoring agreement typically appoints the Company as the client's sole
factor for all accounts receivable, generally for a term of one year. The
Company can usually terminate the agreement at any time upon 30 days' prior
written notice to the client.

Once the factoring agreement has been executed, the Company will purchase
the client's accounts receivables for the face amount of the receivables,
less certain specified discounts, including the Company's factoring fee, and
other deductions. No money is paid to the client upon the purchase of the
receivables. Instead, the Company records a liability on its books for the
purchase price of the receivable. Generally, the Company and the client
notify the customer to make all payments for the receivable directly to the
Company. In most areas, a client's customers are other commercial entities
and the client does not deal directly with individuals. In healthcare
financing, the client's customers are individuals, but the client's
receivables are mostly from third-party obligors.

The Company guarantees the collection of each client's pre-approved
receivables or receivables from each client's customers with pre-approved
credit lines. Payment for the receivable is made to the client after
collection from the customer or, in the event the collection of the
receivable was guaranteed by the Company and the receivable was not paid
based solely on the customer's financial inability to pay, payment is made to
the client within 120 days after the due date of the receivable. If the
customer fails to pay the receivable for any reason other than financial
inability to pay, such as a dispute regarding defective merchandise, the
Company has no obligation to pay the client for the receivable,
notwithstanding guarantee of the receivable by the Company. All payments to
clients are reduced by amounts outstanding to the Company, such as the
factoring fee charged to the client or any outstanding advances to the
client.

At the time the Company purchases the client's accounts receivable, the
client becomes obligated to pay the Company a fee, generally equal to 0.5% to
2.0% of the gross amount of the receivable (not reduced by any discounts that
may have been provided to the customer for early payment). Typically, the fee
is paid from the proceeds of the accounts receivable collections. The
factoring fee paid by the client is not related to the collectibility or
non-collectibility of the purchased accounts receivable. Accordingly, even if
the Company is not obligated to pay for a guaranteed receivable because of a
dispute between the client and its customer, or if payment of the receivable
was not guaranteed by the Company, the factoring fee is due from the client
on such receivable. The factoring fee charged by the Company depends on
various considerations, such as the length of time the receivables are
expected to be outstanding, the monthly volume of receivables generated by
the client, the anticipated administrative costs and the perceived level of
risk. Management believes that its factoring fees remain competitive with
other factoring companies, primarily because of the type of client serviced
by the Company (generally, clients generating less than $50 million in sales)
and the type and quality of services provided to its clients.

SERVICES

The Company offers an interrelated package of financial services which
meets a variety of the business and financing needs of its clients. The
Company's services are designed to allow clients to be

31
<PAGE>
more responsive to their customers and to devote more time to the management
of other aspects of their business. The Company's clients and the range of
products and services offered distinguish it from certain other commercial
finance companies and asset-based lenders because the Company's main focus is
to provide fee-based services, as well as act as a lending source for many of
its clients. Management believes that it generally can provide these
fee-based services in a more cost-efficient manner than its clients because
of economies of scale.

CREDIT, COLLECTION AND MANAGEMENT INFORMATION SERVICES. The Company
provides its clients with access to credit management, collection and
information services, including certain computerized accounting services, as
well as the equivalent of credit insurance. Each of the Company's regional
offices is staffed with a credit department of between 10 to 30 people. The
credit department, at the direction of the credit officer, conducts the
credit checks on client's customers, analyzes the information and makes a
recommendation as to the amount of credit to be extended, if any. If the
Company approves the credit of the customer, in accordance with written
guidelines established by the Company, then the Company will purchase the
receivable for a fee and guarantee the collection of the receivable based
solely on the customer's financial ability to pay the receivable. If the
Company did not approve the credit of the customer, the Company purchases the
receivable for a fee, but will not guarantee collection of the receivable.

Except with respect to much of the Company's healthcare financing, upon
purchase of the receivable by the Company, the client notifies the customer
that all payments on the receivable should be sent to the Company. The
Company also notifies the customer that it has purchased the receivable and
provides payment instructions to the customer. All payments are sent to the
Company's operations department in Florida. The regional collection
departments monitor the collection of the accounts receivable and make
necessary follow-up calls if payment is not received on a timely basis. Where
necessary, the Company will press for collections. Company staff is trained
to seek collections in a courteous and professional manner so as not to
adversely affect a client's relationship with its customers. In certain
circumstances, the Company will use the services of independent collection
agencies. See "--Monitoring and Oversight Policies--Receivables Portfolio."

In addition, the Company provides various management information services
to its clients, including (i) a monthly analysis that includes an aging
schedule of all open receivables by customer and (ii) information as to the
creditworthiness of its customers.

ADVANCES. The Company may also make advances to its clients, with interest
charged on such advances, generally equal to 1% to 4% over prime. These fees
are generally higher than the fees charged by banks because a factor provides
startup and expanding businesses more financial flexibility, in addition to
credit and other services. This flexibility is primarily due to the fact that
a bank, in making a determination as to the amount that it would advance a
borrower, will customarily be more inclined to review the borrower's net
worth, capital and general financial condition, while a factor will place
greater emphasis on the borrower's collateral, particularly its receivables,
and, correspondingly, the credit-worthiness of its customers. Interest
accrues on the advance from the date the advance is made until the date the
Company would otherwise be obligated to pay the client for purchased
receivables. Advances are made on receivables before they are due or collected
by the Company based upon a stipulated percentage of the net face value of
aggregate outstanding receivables, usually ranging from 75% to 90%. Advances are
payable upon demand. All advances must be approved in accordance with the
written guidelines established by the Company. Such guidelines provide that
advances shall be under a duly authorized line approved at the time an
arrangement is established, taking into account the funding needs and financial
strength of the client and other credit factors, the anticipated performance of
the collateral and within an advance formula applied to eligible accounts
receivable taking into account anticipated dilution. Approximately 70% of the
Company's clients obtain advances from the Company. A number of these clients
might not otherwise qualify for financing of a comparable level from traditional
sources. From time to time, the Company makes advances in excess of a client's
receivables to the extent needed by such client because of the seasonality of
its business or otherwise. These overadvances may be secured by one or more of a
client's inventory, other assets or personal guarantees or may be unsecured.

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<PAGE>
OTHER FINANCING SERVICES. The Company also provides other fee-based
financial services to its clients, including guarantees of commercial letters
of credit and standby letters of credits. Most, if not all of such letters of
credit are issued by Capital Bank. See "Certain Transactions." The Company
may also provide financial guarantees for its clients. Commercial letters of
credit are issued to facilitate certain trade transactions for the clients of
the Company, principally the purchase of goods. Standby letters of credit and
financial guarantees are conditional commitments issued to guarantee the
performance of a client to a third party. The Company guarantees letters of
credit and issues financial guarantees only for clients with which the
Company has factoring or other financing arrangements. Generally, the Company
requires collateral to support these commitments and the collateral held
varies, but may include cash, inventory, real estate and the client's reserve
balance.

MONITORING AND OVERSIGHT POLICIES

RECEIVABLES PORTFOLIO

The quality of purchased receivables is the Company's primary security
against credit losses. Accordingly, the Company conducts an extensive
financial and business analysis on a client prior to entering into a
factoring arrangement with the client, and on the client's customers, prior
to the establishment of credit lines for a customer. The Company focuses on
such items as the age of receivables, the quality of management and the
ethical character of a prospective client's owners, as well as the diversity
of its customer base. The Company generally seeks to avoid situations where a
significant percentage of a prospective client's receivables are from one
customer. Pursuant to Company policy, all factoring arrangements must conform
to the guidelines set forth in the Company's Loan and Credit Policy Manual, a
written manual provided to all credit and collection employees of the
Company. The manual establishes guidelines governing credit criteria, lending
limits and required approvals, as well as documentation requirements related
to such matters as UCC filings, guarantees, subordinations, shipping
documents and financial reporting. There can be no assurance, however, that
adherence to the Company's written guidelines will result in full collection
of the purchased receivables or that such guidelines will be complied with in
every instance. See "--Credit Loss Policy and Experience."

Each of the Company's regional offices is staffed with one or more field
examiners who visit the office of each potential client for diligence
purposes. In certain situations, the Company will also use the services of
independent certified public accountants to assist the field examiners. In
addition to on-site visits, the Company's field examiners will review current
financial statements and business references of the client and personal
financial statements of the principals of the client and its major
shareholders. The Company's field examiners also conduct periodic field
examinations of and visits with clients to continue to learn about the
client's operation. The Company generally requires business plans for
start-up ventures. Additionally, each of the Company's regional credit
departments makes routine random telephone calls and mails written requests
to customers to verify the existence and the terms of receivables purchased
from clients and obtains shipping evidence for all invoices purchased, as
well as remaining in communication with the client.

After the necessary financial and business information has been collected
and reviewed, if the Company intends to enter into a factoring arrangement
with the proposed client, a written proposal of the terms of the proposed
factoring arrangement is prepared. The proposal includes, among other things,
(i) the amount of the factoring fee to be charged, (ii) anticipated accounts
receivable purchases to be generated by the client and (iii) the interest
rate to be charged on advances, if applicable. All new factoring arrangements
are approved by the Company's President and the respective regional manager.
If the factoring arrangement provides for advances to the client against
purchased receivables, additional approvals are required. See "--Client
Advances" below.

Each of the Company's clients is serviced by a team of Company personnel.
Clients are assigned to an account executive and credit officer in one of the
Company's four regional offices, and an operations officer in the Florida
executive office. The account executive is the client's primary contact with
the Company. The account executive is responsible for managing the assigned
client relationship, including

33
<PAGE>
approval of client advances, and obtaining necessary documentation prior to
any advances to the client. Requests for customer credit approvals or
increases in customer credit lines are directed to the credit officer. The
operations officer is responsible for the processing of all receivables,
including application of payments and invoice handling. In addition, the
Company's senior management team will often meet with clients to discuss
problems, if any, and monitor client satisfaction.

Pursuant to the Company's Loan and Credit Policy Manual, the Company
follows certain credit guidelines. Prior to the establishment of a credit
line for a client's customer, the Company conducts a credit check on the
customer and obtains a credit rating for the customer. The Company takes into
consideration the amount of the requested credit line, the customer's credit
rating and satisfaction of internal written guidelines in determining whether
to establish a credit line for the customer. The Company's internal written
guidelines contain certain formulas used by the Company in determining
whether to establish a credit line and which take into account ratings scales
utilized by various credit rating agencies, as well as the length of time a
customer has been in business. If these formulas are not satisfied,
additional information is obtained and reviewed by the Company, including
bank references, trade surveys and financial statements of the customer. The
Company may also conduct on-site visits of the customer's business and
interview the customer's management team. All credit lines over $250,000
require either executive officer or combined executive officer and director
approval, depending on the amount of the credit line. The Company may also
assume the credit risk of a single credit transaction for a client's
customer. Generally, the same credit check procedures are followed in such
transactions.

The Company assumes the credit risk only on receivables for which written
approval has been provided by the Company. The Company also reserves the
right to withdraw a credit approval if the Company believes a customer's
credit standing has become impaired before actual delivery of merchandise or
rendering of services by the Company's client. Credit approvals are limited
to the specific terms provided by the client to the Company and can be
withdrawn if the terms of the sale are changed. If a dispute relating to
goods or services rendered by the client to its customer arises, the credit
approval on the receivable is negated. If sales are made by the client to a
customer without credit approval or in excess of any credit approval, any
payments made by such customer on outstanding receivables will be applied
first to outstanding credit-approved receivables on the books of the Company.

The Company monitors whether receivables are paid according to their
terms. Daily aging reports are generated by the Company and reviewed by the
regional credit department staff and the account executive responsible for
the account. If payment is not received on its due date, follow-up contact is
made with the client's customer in accordance with written procedures
established by the Company. During this follow-up contact, the Company seeks
to determine the cause of the delay in order to take appropriate action at an
early stage. The status of overdue accounts and other relevant information is
reported to each client monthly, or sooner, if appropriate. The Company's
average accounts receivables turnover rate was 53 days for 1994 and 1995 and
51 days during the three months ended March 31, 1996. The Company may receive
payments, from time to time, that it is unable to match against specific
outstanding invoices. The Company generally notifies the payor when
unidentifiable payments or portions thereof are received. If the payor does
not respond within 90 days, the Company generally records the unallocated
credits as income. The Company maintains an allowance for unallocated credits
recorded as income which may be subsequently repaid based upon its historical
experience. This allowance is also available for amounts that may be payable
to governmental authorities for property that is abandoned. There can be no
assurance that the allowance will be sufficient to meet all such future
claims.

The Company periodically uses the services of independent collection
agencies to assist it in the collection of accounts receivable more than 90
days past due. The Company's policy is to charge-off accounts receivable once
they have been placed with a collection agency. Collection agencies charge,
on the average, a 20% fee of the delinquent account collected. On occasion,
the Company initiates litigation to recover payment of the receivable.

34
<PAGE>
As security for the accounts receivable purchased, the Company obtains
blanket first liens on a client's receivables, and may also obtain personal
guarantees and liens (which may be subordinate to other liens) on other
assets of the client, including cash, tax refunds, inventory, real estate and
equipment. In addition, the Company arranges for periodic reviews of public
records in order to monitor the filing of any subsequent liens which could
impair the value of receivables in which the Company has an interest.

CLIENT ADVANCES

Prior to making any advances to a client on accounts receivable, the
Company will conduct additional business and financial analysis on the
client. The typical written credit analysis sets forth (i) the purpose for
the advance, (ii) security to be provided for the advance, such as personal
guarantees from principals of the client and subordination arrangements,
(iii) the rate structure to be charged and projected income to be earned by
the Company, (iv) prior experience with the client if the client has
previously had a relationship with the Company or Capital Bank, (v) the
client's history, organization and operations, (vi) bank and trade
information on the client, (vi) financial information of the client and
(viii) future plans and projections of the client. In addition to the written
credit analysis, the account executive assigned to the account reviews a
factoring status report on the client, which sets forth the client's monthly
sales and accounts receivable volume, along with collection information on
the receivables.

Based upon a review of the credit analysis and factoring status report,
the account executive will make a recommendation as to whether or not the
advance is reasonable in relation to the value of the client's outstanding
receivables. All advances against purchased receivables must be approved by
no less than four officers of the Company, two of whom are generally the
account executive and head of client administration from the originating
office and two in the Company's executive offices in Florida, providing
another level of control in the advance process.

Outstanding advances to clients are reviewed on a daily basis and on a
monthly basis at monthly portfolio meetings attended by the President, or his
designee, and the regional managers (or their designees). At the monthly
portfolio meetings, senior management evaluates the Company's outstanding
advances and receivables in order to identify potential problems. The
meetings also allow senior management to evaluate the performance of their
account executives, who have the responsibility of managing their client's
outstanding advances and receivables.

CREDIT LOSS POLICY AND EXPERIENCE

The Company regularly reviews its outstanding accounts receivable and
other extensions of credit, such as advances to clients, to determine the
adequacy of its allowance for credit losses. Factors such as the level of
related credit balances of clients and the impact of economic conditions on
the creditworthiness of the Company's clients and the client's customers are
given significant consideration in determining the adequacy of the Company's
allowance for credit losses. The Company's methodology for calculating its
reserve for doubtful accounts has remained consistent for the period
commencing in 1991 and continuing through March 1996, and includes a specific
and general component. Specific reserves are established for receivables and
client advances which the Company's management deems to be wholly or
partially uncollectible. The general reserve represents 0.75% of those
receivables (other than healthcare receivables which have a lower general
reserve) that are not specifically reserved for but for which the Company has
provided credit guarantees.

The provision for credit losses as a percentage of factored sales
decreased from 0.31% in 1991 to 0.11% in 1995, reflecting the Company's
improved loss experience over that period and positive economic trends that
benefited the Company's clients and their customers. The provision as a
percentage of factored sales increased to 0.20% in the first quarter of 1996,
reflecting a higher net charge-off rate. The provision for credit losses as a
percentage of average receivables decreased from 2.02% in 1991 to 0.72% in 1995,
and the provision for credit losses as a percentage of average funds
35
<PAGE>
employed decreased from 2.84% in 1991 to 1.06% in 1995, also reflecting the
Company's improved loss experience over that period. The provision for credit
losses as a percentage of average receivables and the provision for credit
losses as a percentage of average funds employed increased to 1.20% and 1.80%,
respectively, in the first quarter of 1996 from 0.68% and 0.96%, respectively,
in the first quarter of 1995, reflecting a higher net charge-off rate.
Management anticipates that the provision for credit losses during the remainder
of 1996 will be higher than during 1995 and more consistent with the Company's
historical experience.

Net charge-offs as a percentage of factored sales ranged from 0.16% to
0.30% in the 1991-1994 period, reflecting normal credit losses consistent
with historical experience. Net charge-offs as a percentage of factored sales
declined to 0.05% in 1995 as a result of higher recoveries and fewer
bankruptcies that affected the Company. The net charge-off percentage increased
to 0.25% in the first quarter of 1996 as a result of the charge-off of several
large items, including $600,000 related to the bankruptcy of a large
Northeastern regional chain store and $200,000 related to a single client loan,
$74,000 of which was recovered subsequent to March 31, 1996. Consistent with net
charge-offs as a percentage of factored sales, during the period 1991 to 1994,
net charge-offs as a percentage of average receivables and net charge-offs as a
percentage of average funds employed reflected normal credit losses consistent
with historical experience, ranging from 1.07% to 1.90% and 1.50% to 1.70%,
respectively. Net charge-offs as a percentage of average receivables and net
charge-offs as a percentage of average funds employed decreased to 0.33% and
0.49%, respectively, in 1995, primarily as a result of higher receivable
recoveries and fewer bankruptcies affecting the Company in that year. Net
charge-offs as a percentage of average receivables and net charge-offs as a
percentage of average funds employed increased to 1.52% and 2.28%, respectively,
in the first quarter of 1996, as a result of the charge-off of several large
items as described above. Management anticipates that net charge-offs during the
remainder of 1996 will be higher than during 1995 and more consistent with the
Company's historical experience.

At the time a receivable is purchased an anticipated payment date is
recorded and is subsequently used to identify past due receivables.
Receivables which have been identified as past due will not be written-off
if, in the opinion of management, collection from the customer, client or
realization on the collateral held, if any, is likely. As of December 31,
1995 and March 31, 1996, approximately $7.0 million and $10.7 million,
respectively, of receivables, representing 2.2% and 2.9%, respectively, of
outstanding receivables as of such date, were 90 days or more past the
payment date anticipated at the time of purchase and had not been
written-off.

Accrual of interest income is discontinued on advances to clients when the
loan balance, including interest, is considered impaired and exceeds the
estimated value of the collateral securing the advance. At December 31, 1994
and 1995 and March 31, 1996, the Company had discontinued its accrual of
interest income on approximately $739,000, $2.2 million and $2.4 million,
respectively, of client advances. In addition, at December 31, 1994 and 1995
and March 31, 1996, approximately $48,000, $134,000 and $105,000,
respectively, of such client advances were deemed to be uncollectible by the
Company.

The credit and market risks associated with guaranteeing commercial
letters of credit and standby letters of credit and issuing financial
guarantees are generally managed in conjunction with the Company's accounts
receivable collection activities and are subject to normal credit policies,
financial controls and risk limiting and monitoring procedures. Commercial
letters of credit are generally for a short commitment period. The risk
involved in guaranteeing standby letters of credit and issuing financial
guarantees is similar to the risk involved in advancing funds to clients. At
December 31, 1995 and March 31, 1996, the Company had approximately $22.6
million and $30.2 million, respectively, of letters of credit and financial
guarantees outstanding.

HEALTHCARE FINANCING

The Company provides healthcare financing and factoring services to
hospitals, nursing homes, doctor groups, home treatment centers, home
healthcare provider services, temporary nursing or
36
<PAGE>
staffing services and providers of durable medical equipment through its Capital
Healthcare Financing division. Healthcare businesses financed by the Company
generally have annual net sales of at least $1 million or are anticipated to
grow to that size shortly. Financing is provided as to bona fide and medically
necessary goods or services that have been provided to a patient for which a
receivable is due with no contingencies. For transactions to be financeable,
fees claimed by the client are to be reasonable and customary and the patient
must be covered by a third party obligor, although, in limited circumstances,
the Company will consider financing private pay receivables if they represent a
small percentage of overall receivables. The Company does not generally finance
workers' compensation claims or, medical/legal (personal injury), dental and
chiropractic claims. At December 31, 1995 and March 31, 1996, the Company had
approximately $16.3 million and $25.6 million, respectively, in healthcare
factored receivables outstanding, in addition to approximately $11.0 million and
$17.4 million of healthcare asset-based loans outstanding at December 31, 1995
and March 31, 1996, respectively. Approved third party payors include Medicare,
Medicaid, preferred provider organizations, private insurance carriers, Blue
Cross/ Blue Shield and corporate employee coverage for self-administered
healthcare plans.

The minimum term for a healthcare financing contract is one year. Fees
include origination and due diligence fees of between 1% and 5% of the
initial line and a monthly monitoring fee of .35% to 2%, with the possibility of
a guaranteed minimum monitoring fee. The annual interest rate on advances ranges
from 2% over prime to 4% over prime. Advances may be up to 85% of the net
receivable amount from the financed receivables. The client usually pays for
periodic audits and legal expenses to close the transaction.

In order to obtain healthcare financing from the Company, generally the
same steps must be followed as with the Company's factoring clients. A
business plan, current financial statements, receivables aging, resumes of
the principals and references are generally required. Once accepted, clients
must file claims with third party payors on the appropriate forms and assign
such claims to the Company. The Company posts the claim to its monitoring
system and, thereafter, closely monitors the collection by the client on a
daily basis. In the case of Medicare and Medicaid claims that must be paid
directly to the provider of the service, the Company, the client and the
client's bank enter into an agreement pursuant to which payments on account
of such claims are made directly to a lockbox account to which the Company
and the client have access and thereafter, are immediately swept out of such
account into the Company's account. In either case, the Company provides
credit monitoring services as well as periodic accountings to the client.
Advances are based upon claims assigned to the Company by the client.

The benefits of healthcare financing to the Company's clients are similar
to the benefits obtained by the Company's factoring clients. Healthcare
clients maximize their ability to monitor patient accounts. In addition, they
receive immediate cash for accounts receivable which can be injected into the
business to, among other things, increase purchasing power, improve and
increase patient services or reduce expenses and increase patient revenues.

ASSET-BASED LENDING

The Company began to expand its asset-based lending activities in late
1994. The Company's asset-based loans range from $300,000 to $6 million and
are primarily secured by accounts receivable and, to some extent, inventory.
Such loans bear interest at annual rates ranging from 1% over prime to 6%
over prime. Most of such loans originate from the Company's California and
Florida offices. At December 31, 1995 and March 31, 1996, the Company had
asset-based loans outstanding aggregating approximately $38 million and $33.3
million, respectively, including loans to healthcare clients of approximately
$11.0 million and $17.4 million at the end of such periods.

The Company makes asset-based loans to companies who may not need its
other services and who have different financial circumstances than factored
clients. In underwriting such loans, the Company pays more attention to the
borrower's financial stability and creditworthiness, rather than that of the
37
<PAGE>
borrower's customers. In making such loans the Company competes primarily
with financial institutions and other asset-based lenders, such as commercial
finance companies. See "--Competition."

MANAGEMENT INFORMATION SYSTEMS

Factoring is a systems intensive business because of the high volume of
transactions required to be entered and the matching with such transactions
of cash payments, chargebacks and other adjustments. In 1990, the Company
purchased an IBM AS400 computer and developed software tailored to the
requirements of the Company's accounting, receivables collection, monitoring and
oversight functions. The system permits the Company to generate payment
histories and analyses with respect to its clients' customers, to generate daily
aging of accounts receivable reports, to accumulate accounting information and
other data useful for credit analysis, to produce information used in marketing
and to respond to account and management inquires. The Company continues to add
enhancements and updates to its management information systems. In 1995, the
Company acquired and installed a software package to administer and process
transactions of the clients of its healthcare division. In March 1996, the
Company installed the latest IBM AS400 model. The Company expects that this new
hardware will provide the Company with additional capacity to handle the
Company's increased transaction volume.

COMPETITION

The Company competes with numerous banks, financial institutions,
commercial finance companies and other factoring companies with greater
financial and other resources than the Company. The four largest factors in
the United States, CIT Group, BNY Financial Corp., NationsBanc Commercial and
Heller Financial, control approximately 62% of the factored sales volume in
the United States, as compared to 3.3% of United States factored sales volume
for the Company in 1995, according to a recent survey. The Company competes
with the largest national factors, as well as other national factors and also
competes with other regional factoring companies, all of whom target similar
clients as the Company and most of whom have operated in the markets serviced
by the Company for a longer period of time than the Company. Certain factors
compete with the Company for certain types of accounts. For example, one
factor may provide services only to textile mills, while another may provide
services only to furniture manufacturers. The Company competes primarily on
the basis of service, not price, even with respect to higher volume clients
to whom the Company may provide lower fee structures than to the Company's
typical clients. The Company generally does not seek to compete when price is
the sole or primary criterion for potential clients' selection of a factor.
Future competition is expected to be based primarily on the quality and level
of service provided and the ability to respond to the changing credit
environment and demands of many factoring clients. The Company believes that
it is well-positioned to respond to these needs.

REGULATION

As a result of the Company's ownership by Capital Bank, a Florida
commercial bank, which in turn is owned by Bancorp, a bank holding company,
the Company is affected by certain regulations normally applicable only to
banking institutions. The Company is subject to periodic examination by
representatives of the Florida Department of Banking and Finance, the FDIC
and the FRB. Additionally, because the Company's immediate parent, Capital
Bank, is a Florida-chartered, FDIC-insured bank, the business activities of
the Company are generally limited under applicable FDIC regulations to those
activities that are permissible for national banks. Although factoring and
the other businesses in which the Company currently engages are authorized
activities for national banks, there can be no assurance that business
opportunities the Company might wish to pursue in the future will be
authorized activities for Capital Bank and therefore might be unavailable to
the Company because of its regulated status as a subsidiary of Capital Bank.

Federal bank regulations require the Company's parent, Capital Bank, and
its parent, Bancorp, to meet two capital-to-assets ratios. The first such
ratio, referred to as the "risk-based" capital test, assigns a weight (or
percentage) to assets by categories of risk established by the federal
regulators. Under this
38
<PAGE>
test, Capital Bank's and Bancorp's "tier one capital" (consisting essentially of
their common stockholders' equity and minority interests, if applicable) is
required to equal at least 4% of their risk-weighted assets. Also as part of the
"risk-based" capital test, all of Capital Bank's and Bancorp's capital (tier one
or otherwise) must equal or exceed 8% of aggregate risk-weighted assets.

The second ratio is referred to as the "leverage" test. Under this test,
each of Capital Bank and Bancorp must maintain tier one capital equal to or
exceeding 3% of total assets, or such higher level as may be imposed by federal
regulators. The regulators have publicly indicated that a bank should, in
practice, maintain a leveraged capital-to-assets ratio of at least 1% to 2%
above the 3% minimum. In 1993, in order to address comments made by the State of
Florida banking examiners, Capital Bank adopted a resolution to maintain a
leveraged capital-to-assets ratio of not less than 6% and not to pay dividends
in excess of 75% of earnings on a quarterly basis.

The following table sets forth Capital Bank's and Bancorp's regulatory
capital ratios as of December 31, 1995 and March 31, 1996 and after giving
effect to the sale of the 2,000,000 shares of Common Stock offered hereby at
an assumed offering price per share of $11.00 and the use of the net proceeds
therefrom as set forth in "Use of Proceeds" (using March 31, 1996
information).

<TABLE>
<CAPTION>
BANCORP CAPITAL BANK
-------------------------------------- --------------------------------------
3/31/96 3/31/96
-------------------------------------- --------------------------------------
12/31/95 ACTUAL AS ADJUSTED 12/31/95 ACTUAL AS ADJUSTED
----------- --------- -------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Tier One Capital Ratio 9.99% 10.13% 11.31% 9.58% 9.65% 10.84%
Total Capital Ratio .. 11.24% 11.36% 12.53% 10.83% 10.88% 12.05%
Leverage Ratio ........ 7.25% 7.64% 8.57% 6.97% 7.29% 8.23%
</TABLE>

PROPERTIES

The Company provides services to its clients through offices located in
Fort Lauderdale, Florida; Los Angeles, California; New York City, New York;
and Charlotte, North Carolina. The Company acquired the office building
located in Fort Lauderdale, Florida from an affiliate in December 1990. The
Company leases approximately 14,000 square feet of office space in Los
Angeles pursuant to a ten-year lease that terminates in September, 2005, and
provides for annual base rental payments of approximately $218,600 through
August 2000 and $257,500 during the remaining term of the lease. The Company
leases approximately 12,300 square feet of office space in New York pursuant
to a five-year sublease that terminates in December 1999 and provides for
annual base rental payments of approximately $337,700 through December 1996
and $368,400 during the remaining term of the lease. The Company leases
approximately 9,800 square feet of office space in North Carolina pursuant to
a five year lease that terminates in April 2000 and provides for annual base
rental payments of approximately $196,430.

TRADEMARKS, SERVICE MARKS AND LICENSES

In 1991, Bancorp registered the name "Capital Factors" with the United
States Patent and Trademark Office. Since the registration of such service
mark, Bancorp has authorized the Company's uninterrupted and unrestricted use
of the name "Capital Factors." No agreement regarding the Company's use of
such service mark exists between Bancorp and the Company and no fee is paid
by the Company in connection with such use. The service mark is effective
until December 2001, unless sooner terminated as provided by law. In
addition, the Company has recently applied for certain other service marks to
be used by it in connection with its business operations. The Company's
management does not believe that its business is dependent upon the use of
any particular service mark, trademark, license or similar property.

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<PAGE>
LEGAL AND ADMINISTRATIVE PROCEEDINGS

THE COMPANY

From time to time, the Company has been a party to lawsuits and claims,
including lender liability claims, which management considers incidental to
normal operations. The Company is currently a party to one lawsuit that was
dismissed after trial. The plaintiff is currently appealing the dismissal.
Management, after review, including consultation with counsel, believes that
any ultimate liability which could arise from this current lawsuit would not
materially affect the financial position of the Company.

BANCORP AND CAPITAL BANK LEGAL PROCEEDINGS

Beginning in approximately August 1992, the Audit Committee of Capital
Bank began to investigate certain allegations made by a then-officer and
director of Capital Bank (who is currently the beneficial owner of
approximately 10% of Bancorp common stock) against Abel Holtz, Capital Bank
and possibly other family members of Abel Holtz. At the time, Abel Holtz was
the Chairman of the Board, Chief Executive Officer and President of Bancorp
and Capital Bank and the Chairman of the Board of the Company, as well as a
principal shareholder of Bancorp. He currently owns slightly less than 10% of
Bancorp's outstanding shares. See "Principal Shareholders." The allegations
related primarily to alleged wrongful conduct by Abel Holtz with respect to
(i) the settlement of two sexual harassment claims brought against Capital
Bank and Abel Holtz, (ii) the reimbursement of certain travel and
entertainment expenses by Capital Bank and (iii) certain charitable donations
made by Capital Bank.

In connection with this investigation, the Audit Committee filed a Report
of Apparent Crime with certain governmental authorities. Thereafter, members
of the Audit Committee, together with three other directors of Capital Bank,
attempted to call a special meeting of the Board of Capital Bank to, among
other things, remove Abel Holtz as the Chief Executive Officer and as
Chairman of the Board of Capital Bank. Prior to such meeting, the holders of
a majority of Bancorp stock, either in person or by proxy, took certain
action by written consent in lieu of a meeting pursuant to which Bancorp's
Board of Directors was expanded from seven to ten directors, three new
directors were elected and certain sections of Bancorp's bylaws were amended.
Holders of a majority of Bancorp stock voted in favor of the foregoing,
including the outstanding shares of Bancorp that were subject to irrevocable
proxies in favor of Abel Holtz. Holders of certain of the shares covered by
these proxies notified Abel Holtz that, in their view, the irrevocable
proxies previously given to Abel Holtz were invalid and purported to revoke
them. Abel Holtz advised the Company that he believed that the irrevocable
proxies continued to be valid. Subsequent to the Bancorp meeting, Bancorp, as
the sole shareholder of Capital Bank, by written consent removed four
directors of Capital Bank, including a member of the Audit Committee. This
corporate action occurred prior to the special meeting called by certain
directors of Capital Bank, including those directors removed by such action.
Thereafter, the Audit Committee (including the removed director) instituted
Case No. 92-2520-Civ-Graham in the United States District Court, Southern
District of Florida against Abel Holtz, Capital Bank, Bancorp and certain
directors of Bancorp (the "Audit Committee Action"). The Audit Committee
Action sought, among other things, to (i) obtain declaratory and injunctive
relief to prevent alleged interference with the Audit Committee and to
invalidate the corporate actions undertaken by the shareholders of the
Company and Capital Bank on October 19, 1992, (ii) declare that Abel Holtz
and Daniel Holtz unlawfully interfered with the investigative work of the
Audit Committee and that Abel Holtz was unlawfully in de facto control of
Capital Bank, its assets and its business, and (iii) declare invalid the
actions allegedly taken in the self interest of Abel Holtz.

Certain of the governmental authorities having regulatory oversight for
Capital Bank and Bancorp, as well as a Federal Grand Jury, investigated these
matters among others. Bancorp was advised that neither it nor Capital Bank
were targets of the Federal Grand Jury investigation, although Bancorp
ultimately learned that Abel Holtz was a target. The independent accounting
firm of Arthur Andersen & Co. was engaged to conduct an independent
investigation of the matters investigated by the Audit Committee.

40
<PAGE>
The Audit Committee Action was voluntarily dismissed by the Audit
Committee on November 24, 1992. On January 28, 1993, after conducting an
investigation and reviewing the report from Arthur Anderson & Co., both the
Audit Committee and Capital Bank's Board of Directors adopted resolutions
which ratified the settlement of the sexual harassment claims, determined
that there was no basis for requiring Abel Holtz to contribute to such
settlement and concluded that certain travel and entertainment expenses and
charitable contributions reviewed by the Audit Committee were ordinary
business expenses of Capital Bank.

On October 25, 1994, Bancorp was advised that the above-described Federal
Grand Jury investigation terminated when Mr. Holtz entered a guilty plea to
one count of giving misleading testimony in 1991 to a Federal Grand Jury in
violation of 18 United States Code Section 1503, with respect to the purpose of
certain payments made by Capital Bank, the Company and certain related parties
to a public official. Bancorp was advised that this plea resolved all pending
criminal investigations against Mr. Holtz being conducted or supervised by the
United States Attorney's Office for the Southern District of Florida and that no
charges would be filed against either Bancorp or Capital Bank with respect to
the matters that were the subject of the Grand Jury investigation. On January
20, 1995, Abel Holtz was sentenced to a term of confinement of 45 days, to be
followed by two years of supervised release, including 4 1/2 months of house
confinement, to be followed by community service during the supervised release.
Abel Holtz was also fined $20,000 and assessed certain costs.

In approximately April 1994, Abel Holtz, pursuant to the terms of the
irrevocable proxies, designated Fana Holtz, his wife, as successor
proxyholder with respect to most of the irrevocable proxies within his control
and transferred the remainder of such proxies in January 1995. Fana Holtz has
designated her son, the current Chairman of the Board, President and Chief
Executive Officer of Bancorp and Capital Bank, Daniel Holtz, as her successor
proxyholder in the event of her death. On October 7, 1994, Abel Holtz resigned
from all positions with Bancorp and it subsidiaries.

On February 8, 1995, certain shareholders, including the removed member of
the Audit Committee, commenced a derivative action against Bancorp, Daniel M.
Holtz, the Chairman of the Board, President and Chief Executive Officer of
Bancorp, Fana Holtz, the Vice Chairman of the Board, Javier Holtz, a director
of Capital Bank, and Abel Holtz (the "Derivative Action"). The Derivative
Action is entitled NATHAN J. ESFORMES, STANLEY I. WORTON, M.D., AND LEONARD
WIEN, AS INDIVIDUAL SHAREHOLDERS AND ON BEHALF OF ALL OTHER SHAREHOLDERS OF
CAPITAL BANCORP V. ABEL HOLTZ, FANA HOLTZ, DANIEL M. HOLTZ, JAVIER J. HOLTZ,
CAPITAL BANK AND CAPITAL BANCORP., Circuit Court for the 11th Judicial
District in and for Dade County, Florida, Case No. 95-02515. The Derivative
Action was subsequently amended to add, among other things, the remaining
members of the Board of Directors as defendants. Through the Derivative
Action, the plaintiffs have alleged that certain defendants engaged in a
series of illegal activities causing harm to Bancorp and Capital Bank,
including (i) the settlement of the sexual harassment claims, (ii) the
payment of excessive compensation and separation payments, (iii) the
appointment of unqualified family members as officers, (iv) the withholding
of information and (v) the misappropriation of Capital Bank funds for
personal uses. The plaintiffs also alleged that such individuals engaged in a
series of activities designed to improperly increase or maintain their
interest in, and control of, Bancorp, including (i) the unlawful use of
proxies, (ii) the prevention of investigations and shareholder meetings,
(iii) the unlawful alteration of the composition of Bancorp's Board of
Directors and (iv) the failure to obtain approval for a change in control.

The Board of Directors of Bancorp established an independent committee to
investigate the allegations contained in the Derivative Action and to retain
independent legal counsel. Thereafter, the plaintiffs challenged the
independence of the committee. Upon motion of the defendants, the complaint
was dismissed without prejudice in November 1995 for containing legal
argument, which the court ruled to be improper. The Court allowed for the
filing of an amended complaint, but stayed the proceedings and any required
response to an amended complaint until the independent committee has a
reasonable period of time to complete its review. The plaintiffs appeal of
the Court's decision to stay the proceedings was denied. In May 1996, the
plaintiffs moved for a rehearing or, alternatively, for clarification of the
Court's denial of such appeal. In June 1996, the plaintiff's motion for
rehearing was denied.

41
<PAGE>
An amended complaint was filed in December 1995 containing substantially
the same allegations. A new director and former director of Bancorp were
added as defendants, while another former director of Bancorp was removed as
a defendant. The plaintiffs are seeking, on behalf of Bancorp, unspecified
monetary damages, including treble damages, reasonable costs and attorneys'
fees, and injunctive relief (i) precluding Fana Holtz from voting shares for
which she has proxies, (ii) setting aside the February 27, 1995 annual
shareholders' meeting, (iii) reinstating two former directors, (iv)
precluding the current Board from taking any action and (v) returning certain
shares to Bancorp. No monetary relief is sought from Bancorp and no count
specifically seeks relief from Bancorp.

The Committee recently issued a report dated May 29, 1996, concluding, based
on its investigation and the investigation of its counsel and accounting firm,
that no legal basis for pursuing the Derivative Action exists and that the
Derivative Action is not in the best interests of Bancorp or Capital Bank and,
as such, should be dismissed. Bancorp is filing a motion to lift the stay
entered by the court with respect to the Derivative Action and intends to move
to dismiss the Derivative Action. Bancorp has advised the Company that it
expects the plaintiffs in the Derivative Action to strongly oppose this motion.

The Chairman of the Committee, who is a director of Bancorp and Capital Bank,
and two companies in which he is a principal (neither of which are affiliates of
Bancorp, Capital Bank or the Company) were recently named as defandants in a
complaint filed in the United States District Court for the Southern District of
Florida by a former female employee of such companies, alleging sex
discrimination, sexual harassment and exposure to a sexually hostile work
environment through the actions of such director as the managing director of the
defendant companies. The complaint also alleges intentional infliction of
emotional distress and violation of the Florida Whistleblower Statute. In
connection with the latter claim, the employee alleges, among other things, that
in 1995, the director requested that she provide perjured testimony in
connection with "private civil litigation and an investigation by the Federal
Deposit Insurance Corporation involving Capital Bancorp," which testimony would
have included, but not been limited to, "the fact that certain shares of stock
of Bancorp were being fraudulently held in trust for [the director] under the
names of certain other third parties." The employee also alleges that the
director requested that she assist the law firm hired by Bancorp to conduct a
purportedly "independent investigation." The plaintiff alleges that the director
made this request even though he was named as a defendant in the lawsuit and
that he promised here a large bonus if she became involved and provided him with
details of any findings of wrongdoing before officially reported. Although no
answer is yet due or has been filed, the director has advised the Company that
in his judgment, there is no substance to any of the allegations. No other
allegations in this complaint relate to Bancorp, the Bank or the Company.

Also on February 8, 1995, a shareholder of Bancorp, who was one of the
members of the 1992 Audit Committee who was removed from Capital Bank's Board
of Directors, commenced an individual action against Bancorp, Daniel Holtz,
Fana Holtz, Javier Holtz and Abel Holtz (the "Individual Action"). Such
action alleged that the defendants, other than Bancorp, breached fiduciary
duties owed to the plaintiff by, among other things, improperly using proxies to
vote shares of Bancorp owned by the plaintiff and another shareholder to engage
in improper activity and to promote their personal interest to the detriment of
the plaintiff. The Individual Action is entitled STANLEY I. WORTON, M.D. AND
NATHAN ESFORMES V. ABEL HOLTZ, FANA HOLTZ, DANIEL HOLTZ, ALEX HALBERSTEIN AND
CAPITAL BANCORP, Circuit Court for the 11th Judicial District in and for Dade
County, Florida, Case No. 95-02520-CA-09. In support of the complaint, the
plaintiff asserted many of the same allegations contained in the Derivative
Action. Thereafter, the plaintiff filed an amended complaint pursuant to which
an additional plaintiff was added (both plaintiffs are named plaintiffs in the
Derivative Action) and all the existing and certain former directors of Bancorp
were added as defendants. The amended complaint alleged that certain of the
defendants unlawfully solicited proxies for the February 27, 1995 annual
shareholders' meeting and that the actions taken at this meeting, including the
reduction in the size of the Board, were invalid. The amended complaint also
sought a court order directing Bancorp to hold a shareholders' meeting on or
before May 28, 1995 to elect a board of directors (although the required papers
to have a hearing on the matter have not been filed).

Upon motion of the defendants in the Individual Action, the amended
complaint was dismissed without prejudice for containing legal argument,
which the court ruled to be improper. The Court
42
<PAGE>
dismissed with prejudice the plaintiff's request to terminate the proxies
granted by the non-plaintiff shareholder. The Court allowed for the filing of an
amended complaint, but stayed the proceedings as to certain claims until the
independent committee has a reasonable period of time to complete its review.
The Court also indicated that certain counts of the complaint did not properly
plead the elements for injunctive relief. An amended complaint was filed in
December 1995 containing substantially the same allegations. The plaintiffs seek
unspecified monetary damages and costs and, in addition to the injunctive relief
requested in the Derivative Action, plaintiffs seek relief regarding, among
other things, the voting and/or termination of certain proxies, the
establishment of a constructive trust for certain shares and options, the
holding of a shareholders meeting, the return to one of the plaintiffs of his
percentage of any shares obtained by members of the Holtz family because of the
control group created by the proxies and the reinstatement of one of the
plaintiffs to the Board of Directors and invalidation of the actions of the
current Board. Plaintiffs also seek declaratory relief invalidating the proxies
and former actions with respect to which the proxies were voted. The plaintiffs
have not indicated that they are seeking any monetary relief from Bancorp other
than costs. Bancorp has filed a motion to dismiss the two counts of the
complaint in the individual action in which it is named and has moved to stay
certain other counts of the complaint on the grounds that those claims are
derivative.

Bancorp has advised the Company that it has not determined whether, if
asked, it would indemnify directors and former directors named in these
actions if the plaintiffs are successful, although it is currently advancing the
legal expenses of the outside directors who were named as defendants. Such
defendants have agreed to repay Bancorp for all or any portion of such advances
which they are ultimately found not to be entitled to pursuant to applicable
law.

The Company is not a party to either of the current actions and management
does not believe that the outcome of such actions will have a material
adverse effect on the Company's financial condition, results of operations or
liquidity.

ADMINISTRATIVE PROCEEDINGS

As of February 14, 1996, Daniel Holtz, Chairman of the Board, President
and Chief Executive Officer of Bancorp, Fana Holtz, the Vice-Chairman of the
Board, and Javier Holtz, a director of Capital Bank, owned and/or had the
power to vote, approximately 7%, 40% and 4% (51% in the aggregate),
respectively, of Bancorp's Common Stock (including shares of Common Stock
subject to options exercisable by such individuals within 60 days). Fana
Holtz, Daniel Holtz, and Javier Holtz have advised Bancorp that they had
discussions with the Florida Department of Banking and Finance (the "FDBF")
as to whether one or more of them was required under Florida law to file an
application to acquire and/or maintain a controlling interest in Capital Bank
through their ownership and control of Bancorp. Fana Holtz, Daniel Holtz and
Javier Holtz have advised Bancorp that, as a result of those discussions, they
both individually and as a group, have voluntarily filed an application to
acquire and/or maintain a controlling interest in Bancorp, although they do not
believe such an application is legally required. Fana Holtz, Daniel Holtz and
Javier Holtz are also having discussions with the FRB as to whether a change of
control notice is required under federal law. The plaintiffs and another
shareholder in the pending litigations described in "Legal and Administrative
Proceedings--Bancorp and Capital Bank Legal Proceedings" have filed a Notice of
Intent to Appear and Petition for a Formal Administrative Hearing with the FDBF
in connection with the disposition of the Florida application opposing the
change in control notice and application and raising many of the same issues
raised in the court proceedings. A hearing date has been set for August 1996. It
cannot presently be determined what effect, if any, the FDBF's action on the
application and the discussions with the FRB will have on the Company although
if the control applications are denied, regulatory authorities could take
various actions, including requiring that one or more members of the Holtz
family divest sufficient shares of Bancorp so as not to have legal control of
Bancorp as defined by regulatory authorities.

Abel Holtz is subject to the restrictions of Section 19 of the Federal
Deposit Insurance Act as a result of entering a guilty plea to one count of
giving misleading testimony in 1991 to a Federal Grand Jury in violation of a
federal statute, with respect to the purpose of certain payments made by
Capital Bank, the Company and certain related parties to a public official.
As a result, he is precluded from owning or controlling, or otherwise
participating in, the affairs of Bancorp and Capital Bank without
43
<PAGE>
regulatory approval. Abel Holtz has advised Bancorp that he has orally agreed
with the FDIC not to vote his shares in Bancorp at the present time. Federal
bank regulatory authorities are also examining and investigating whether Abel
Holtz and some or all of the persons discussed in this section, including
Bancorp and its subsidiaries, as well as possibly other persons, are in
compliance with applicable change in control laws and Section 19. To date, the
Company is unaware of any conclusions which may have resulted from these
inquiries.

EMPLOYEES

At March 31, 1996, the Company had 228 employees, of which 111 were
employed in the Florida office, including 29 professional staff and 82
clerical staff, 45 were employed in the California office, including 22
professional staff and 23 clerical staff, 44 were employed in the New York
office, including 23 professional staff and 21 clerical staff, and 28 were
employed in the North Carolina Office, including 10 professional staff and 18
clerical staff. None of the Company's employees are covered by a collective
bargaining agreement and the Company considers its employee relations to be
good.

44
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers, directors and nominees for director of the Company
are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ----- --- -------------------------
<S> <C> <C>
John W. Kiefer ...... 49 President, Chief Executive Officer and Director
Stephen J. Donohue . 51 Executive Vice President--New York Regional Manager
James L. Morrison .. 52 Executive Vice President--California Regional Manager
Michael J. Sullivan 47 Senior Vice President--North Carolina Regional Manager
Dennis A. McDermott 45 Senior Vice President--Chief Financial Officer
John B. Apgar ....... 42 Senior Vice President--Healthcare
Javier J. Holtz .... 35 Executive Vice President and Chairman of the Board
Daniel M. Holtz .... 36 Director
Stephen N. Ashman .. 47 Director
Ronald S. Chase .... 51 Director
Harold L. Oshry .... 73 Director
Bruce Raiffe ........ 38 Director
Jack Listanowsky ... 48 Director
Cynthia Cohen Turk . 43 Director Nominee
Norman G. Einspruch 63 Director Nominee
</TABLE>

Mr. Kiefer has served as the Company's President and Chief Executive
Officer and as a director since April 1987. Mr. Kiefer has also served as a
Senior Vice President of Bancorp since January 1987 and as a director of
Capital Bank since October 1992. From 1984 to 1986, Mr. Kiefer served as
Senior Vice President--Regional Manager of Barclays American/Commercial Inc.
and served as Vice President from 1981 to 1984.

Mr. Donohue has served as the Company's New York Regional Manager since
April 1990, and was promoted from a Senior Vice President to an Executive
Vice President in January 1992. From 1970 to April 1990, Mr. Donohue was
employed by Bankers Trust Factors in various positions, including Manager of
Client Portfolio.

Mr. Morrison has served as the Company's California Regional Manager since
August 1989, and was promoted from a Senior Vice President to an Executive
Vice President in January 1992. From 1984 to August 1989, Mr. Morrison served
as Vice President--Regional Manager of the Los Angeles office of NatWest
Commercial Services, Inc.

Mr. McDermott has served as the Company's Senior Vice President--Chief
Financial Officer since July 1991. Prior to joining the Company, Mr.
McDermott served as Chief Accounting Officer from April 1990 to June 1991 at
the request of the Resolution Trust Company with several troubled financial
institutions, including AmeriFirst Bank, American Pioneer Savings Bank, and
Centrust Bank. Mr. McDermott served as Vice President--Chief Financial
Officer of Ambassador Financial Group, Inc., a savings and loan holding
company, from July 1988 to March 1990, and as Executive Vice President--Chief
Financial Officer of Crossland Savings from September 1983 to June 1988.

Mr. Sullivan has served as the Company's Senior Vice President--North
Carolina Regional Manager since March 1995. From August 1994 to February
1995, Mr. Sullivan served as the Head of Business Development for the CIT
Group, the successor to Barclays Commercial Corporation. From November 1981
to February 1994, Mr. Sullivan served as Senior Vice President--Regional
Executive of Barclays Commercial Corporation and, from March 1994 to August
1994, Mr. Sullivan served in the same capacity with the CIT Group. Prior to
that and from June 1975 to December 1980, Mr. Sullivan was International
Credit Director of the B.F. Goodrich Company. Mr. Sullivan performed
independent consulting services from December 1980 to November 1981.

45
<PAGE>
Mr. Apgar has served as the Company's Senior Vice President--Healthcare
since June 1994. From April 1992 to April 1993, Mr. Apgar was the head of the
new business segment of Tower Financial Corporation. In April 1993, Tower
Financial Corporation filed a petition seeking relief under the United States
Bankruptcy Code. In May 1993, Mr. Apgar was appointed Senior Vice
President--Client Relations--Healthcare Division of Tower Financial
Corporation by the trustee appointed to administer Tower Financial's
bankruptcy estate and served in such position until April 1994. From July
1990 to March 1992, Mr. Apgar was Vice President--New Business of BancBoston
Financial Company, a Trust of Bank of Boston.

Mr. Javier Holtz has served as a director of the Company since August 1987
and as Executive Vice President since November 1994. Mr. Holtz was appointed
Chairman of the Board of the Company in October 1994. In addition, Mr. Holtz
has been employed by Capital Bank since 1983, most recently as an Executive
Vice President. Mr. Holtz has been a director of Capital Bank since 1988. Mr.
Holtz has also served as Senior Vice President of Bancorp since January 1990.
Mr. Holtz is Chairman of the Board of Capital Bank, N.A., Rockville,
Maryland. Mr. Holtz is the brother of Daniel Holtz, a director of the Company
and the Chairman of the Board, President and Chief Executive Officer of each
of Bancorp and Capital Bank, and the son of Fana Holtz, the Vice Chairman of
Bancorp's Board of Directors and the beneficial owner of approximately 40% of
Bancorp common stock, and Abel Holtz, the beneficial owner of approximately
9.1% of Bancorp common stock. See "Principal Shareholders."

Mr. Daniel Holtz has served as a director of the Company from 1985 to 1987
and from 1993 to the present. Mr. Holtz has been a director of Bancorp since
June 1988 and also served as President of Bancorp since February 1994 and as
Chairman of the Board and Chief Executive Officer since October 1994. In
addition, Mr. Holtz has served as President of Capital Bank since October
1991 and as Chairman of the Board and Chief Executive Officer since October
1994. Mr. Holtz was President and Chief Executive Officer of Capital Bank of
California from September 1987 to November 1991 and director from July 1985
until June 1993, when the bank was declared insolvent and closed by the
California Superintendent of Banks. Mr. Holtz is the brother of Javier Holtz
and the son of Fana Holtz and Abel Holtz. See "Principal Shareholders."

Mr. Ashman has been a director of the Company since May 1985. Mr. Ashman
has served as President and Chief Executive Officer of Capital Bank, N.A.,
Rockville, Maryland since November 1991. Mr. Ashman served as Treasurer and
Chief Financial Officer of Bancorp from February 1985 to November 1991, and
as Executive Vice President and Chief Financial Officer of Capital Bank from
February 1985 to November 1991.

Mr. Chase has served as a director of the Company since September 1992.
Mr. Chase has also served as a director of Capital Bank since July 1993. Mr.
Chase has been the President and owner of Chase Holdings & Advisory Services,
Inc., which provides financial advisory services to corporations and
litigation attorneys, since June 1991. In addition, Mr. Chase is the owner
and has served as President of each of RSC Development, Inc., a residential
developer, and CFAT H20, Inc., a water treatment facility, both of which are
located in Ocala, Florida, since approximately November 1993. Mr. Chase is a
certified public accountant who served as Managing Partner for several
offices of Deloitte & Touche, LLP for 14 of his 25 years with the firm. Mr.
Chase also serves as a director of the Greater Miami Neighborhood, Inc., a
not-for-profit affordable housing developer.

Mr. Oshry has served as a director of the Company since September 1992.
Mr. Oshry served as Chairman, President and Chief Executive Officer of
Sandgate Corp., a New York real estate developer, from 1955 until his
retirement in 1985.

Mr. Raiffe has served as a director of the Company since 1993. Mr. Raiffe
has served as the President of Gund, Inc., a toy manufacturer, since March
1993. From 1980 to 1993, Mr. Raiffe served as an Executive Vice President of
Gund, Inc. Mr. Raiffe also serves as a director of the United Cerebral Palsy
Association.

Mr. Listanowsky has served as a director of the Company since 1993. Mr.
Listanowsky has served as the Vice President--Sourcing and Production of The
Limited, Inc. since April 1995. From December

46
<PAGE>
1989 to May 1995, Mr. Listanowsky served as the Executive Vice President of
Manufacturing and Operations of Liz Claiborne, Inc. Prior to joining Liz
Claiborne, Inc. in 1981, Mr. Listanowsky was the Vice President of
Manufacturing and Operations of SKYR Sportswear from 1974 to 1981.

Ms. Cohen Turk, the President of MARKETPLACE 2000, a marketing and strategy
consulting firm has been nominated to become a director of the Company
immediately upon the consummation of this offering. Prior to founding
MARKETPLACE 2000 in 1990, Ms. Turk was a partner with the public accounting firm
of Deloitte & Touche LLP. Ms. Turk is currently a director of Loehmann's
Holdings, Inc., One Price Clothing, Inc., and Spec's Music Stores, Inc., all
publicly-traded companies.

Norman G. Einspruch, Ph.D., Professor and Chairman of the Department of
Industrial Engineering at the University of Miami, has been nominated to
become a director of the Company immediately upon the consummation of this
offering. From 1977 to 1990, Dr. Einspruch served as Dean of the College of
Engineering at the University of Miami and beginning in 1990, has
served as Senior Fellow in Science and Technology at that university. From
1959 to 1977, Dr. Einspruch served in various capacities with Texas
Instruments Incorporated, including Assistant Vice President, Corporate
Development Manager and Strategic Planning Manager from 1975 to 1977. Dr.
Einspruch is currently a director of Ogden Corporation and Penril DataComm
Networks, Inc, publicly traded corporations. Dr. Einspruch has published
various articles in technical journals and is a Fellow of the Institute of
Electrical and Electronics Engineers.

All directors hold office until the next annual meeting of shareholders of
the Company and until their successors have been duly elected and qualified.
Each officer serves at the discretion of the Board of Directors (and in the
case of Messrs. Kiefer, Donohue and Morrison pursuant to employment
agreements).

DIRECTORS' COMPENSATION

The Company pays all directors a monthly retainer of $1,000 and $250 for
each meeting attended by the director. The Company also reimburses all
directors for all travel-related expenses incurred in connection with their
activities as directors. The Company also paid $94,000 in salary and bonus to
Javier Holtz for his services as Executive Vice President of the Company
during 1995.

In addition, non-officer directors of the Company also have in the past
received options to acquire Bancorp Common Stock for their service on the
Company's Board of Directors. For the 1995 fiscal year, each outside director
of the Company received options to acquire 5,000 shares of Bancorp common
stock. Certain directors who are also officers and/or directors of Bancorp,
Capital Bank and/or the Company received options to purchase shares of
Bancorp common stock. John Kiefer, Javier Holtz and Daniel Holtz received
options to purchase a total of 12,500, 6,000 and 18,000 shares of Bancorp
common stock, respectively, in 1996 for 1995. The grants of such options,
however, reflect compensation for such persons' service with Bancorp and
Capital Bank, as well as with the Company.

COMMITTEES OF THE BOARD OF DIRECTORS

Messrs. Chase, Oshry, Listanowsky and Raiffe serve on the Company's Audit
Committee. The Audit Committee's functions include recommending to the Board
of Directors the engagement of the Company's independent certified public
accountants, reviewing with such accountants the plan and results of their
audit of the financial statements and determining the independence of such
accountants. In addition, Messrs. Chase, Oshry, Listanowsky and Raiffe serve
on the Company's Compensation and Benefits Committee, which reviews and makes
recommendations with respect to compensation of officers and key employees,
including the grant of options under the Company's Stock Option Plan, and the
Company's Conflict of Interest Committee, which, among other things, reviews
and makes recommendations with respect to transactions between the Company
and any of its affiliates, including those with Bancorp and Capital Bank.

47
<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth the compensation paid by the Company, for
services rendered during the past year to the five most highly compensated
officers (the "Named Officers") of the Company.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------------ ---------------
NUMBER OF
SECURITIES
FISCAL SALARY BONUS OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) COMPENSATION($) OPTIONS(1) COMPENSATION($)
- --------------------------- ------ -------- ---------- --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
John W. Kiefer 1995 275,000 600,000(2) --(3) 12,500 25,084(4)
Chief Executive Officer

Stephen J. Donohue 1995 210,000 262,171 --(3) 3,500 28,142(4)(5)
Executive Vice President,
New York--Regional Manager

James L. Morrison 1995 171,000 162,490 --(3) 3,475 26,294(4)
Executive Vice President,
California--Regional Manager

Michael J. Sullivan 1995 125,577 70,000 --(3) 700 --
Senior Vice President,
North Carolina --
Regional Manager(6)

Dennis A. McDermott 1995 100,000 60,000 --(3) 2,500 1,000(5)
Senior Vice President and
Chief Financial Officer
</TABLE>
- ------------
(1) Represents options to purchase shares of Bancorp common stock granted
under the Bancorp 1992 Stock Option Plan which options were granted in
1996. No options were granted to the Named Officers to purchase Common
Stock of the Company during the year ended December 31, 1995.
(2) Represents a one-time cash bonus of $300,000 which was paid to Mr.
Kiefer at the conclusion of his employment agreement, which agreement
terminated on December 31, 1995, for continuing to be employed until such
termination, as well as a $300,000 bonus based upon the Company's earnings
for the year ended December 31, 1995.
(3) The aggregate amount of perquisites and other personal benefits
provided to such Named Officer is less than 10% of the total annual salary
and bonus of such officer.
(4) Represents the cost of life insurance coverage for Mr. Kiefer and Morrison
and includes the cost of life insurance coverage for Mr. Donohue pursuant to
a split-dollar life insurance policy on the life of the executive. The
Company will be reimbursed for its premium payments at such time as benefits
are paid under the policies or the policies are terminated and the cash
proceeds distributed.
(5) Includes matching contributions to Bancorp's 401(k) plan of $1,500 for
Mr. Donohue and $1,000 for Mr. McDermott.
(6) Mr. Sullivan was not employed by the Company for the full fiscal year.
Represents the period commencing on February 28, 1995 and continuing through
December 31, 1995.

EMPLOYMENT AGREEMENTS

The Company has entered into an employment agreement with John W. Kiefer,
the President and Chief Executive Officer of the Company. The employment
agreement with Mr. Kiefer expires in December 2000. Upon execution of the
agreement, Mr. Kiefer received a signing bonus of $250,000 and a $100,000 loan
payable in five equal installments of principal plus all accrued interest
through the date of payment during the term, but due in full upon earlier
termination of the employment agreement. The agreement provides for an annual
base salary to Mr. Kiefer of $300,000 in the first year, subject to adjustment
in the discretion of the Company's Board of Directors or Compensation and
Benefits Committee. Mr. Kiefer will receive a bonus on December 31 of each year
during the term of the agreement if he is then still employed thereon, in an
amount equal to the amount of principal and interest then due under his loan
from the Company. The employment agreement also provides for an annual bonus
based on the Company's success in reaching certain targets for net revenues and
income before income taxes. In the event the targets are reached, the portion of
the bonus relating to net
48
<PAGE>
revenues would equal 20% of Mr. Kiefer's salary and the portion of the bonus
relating to income before income taxes would equal 80% of his salary. Each
portion of the bonus could be a smaller or larger percentage of his salary
depending upon whether the targets are either not met or exceeded, with the
aggregate maximum in any year being 185% of salary if both targets are doubled.
Mr. Kiefer shall also receive deferred compensation equal to 67% of his salary
for each year that (i) net revenues and income before income taxes exceed
projected net revenues and income before income taxes as set forth in the
Company's 5-year plan, (ii) net revenues increase by 13.5% over net revenues for
the prior year and (iii) income before income taxes increases by 22.5% over
income before income taxes for the prior year. The deferred compensation shall
vest 50% after three years and 25% after each of the fourth and fifth years,
provided that Mr. Kiefer is still employed by the Company, although the
employment condition for vesting will lapse after the 5-year term of the
employment agreement if Mr. Kiefer is employed at that time. If at the end of
the 5-year term, Mr. Kiefer agrees to be employed by the Company for another
five years, then all deferred compensation that has not yet vested shall
immediately vest. In addition, on the effective date of this offering, Mr.
Kiefer will receive options to purchase one (1%) percent of the Company's Common
Stock outstanding after giving effect to such offering at the initial public
offering price, subject to the terms and conditions of the Company's Stock
Option Plan then in effect. Upon the Company's termination of Mr. Kiefer's
employment agreement without cause, Mr. Kiefer shall be entitled to receive,
among other things, (i) base salary through the date of such termination and
(ii) all previous bonuses and a pro-rata portion of the bonus payable, if any,
for the year in which termination occurs, (iii) an acceleration of the vesting
of all deferred compensation and (iv) subject to mitigation if he obtains
subsequent employment, his base salary through the expiration date of his
employment agreement. In the event of a change in control, Mr. Kiefer shall
receive the same compensation as if terminated without cause except that in lieu
of the compensation payable in (iv) above, Mr. Kiefer shall be entitled to
receive a lump sum payment equal to two times his salary and prior year's bonus
if he terminates his employment because of changes in his employment situation
and an additional amount equal to two times his prior year's deferred
compensation, if any, if he is terminated by the Company without cause within
one year after a change in control. Upon termination for "cause" or upon
voluntary resignation, Mr. Kiefer shall be entitled to receive his base salary
through the date of such termination. Payment of the bonus and deferred
compensation in certain years during the term that would not otherwise be
deductible by reason of Section 162(m) of the Internal Revenue Code of 1986, as
amended, is subject to certain approvals, including shareholder approval. The
Company's Compensation and Benefits Committee may, at its option, defer payment
of amounts that would not otherwise be deductible under Section 162(m) until a
time when it would be deductible. The stock option grant will also be
conditioned upon approval of the Compensation and Benefits Committee and
approval of the Company's Stock Option Plan by the Company's shareholder. The
agreement also contains certain non-competition covenants and covenants against
solicitation of clients and employees for a competitive business.

Factors is a party to an employment agreement with Stephen J. Donohue, the
Company's Executive Vice President and Regional Manager of the Company's New
York office. The Company is negotiating a new agreement with Mr. Donohue,
subject to approval of the Compensation and Benefits Committee. The terms of the
new agreement proposed by Mr. Donohue and being negotiated with the Company are
set forth below. Final terms may differ. The new agreement would expire on
December 31, 2000. The existing agreement, which expires in December 1997,
provides for an annual base salary to Mr. Donohue of $170,000, subject to a 6%
increase from the base salary paid in the previous year as well as an annual
bonus based upon the Company's earnings before income taxes ("EBT") attributable
to the Company's New York office. The new agreement would provide for a base
salary of $232,000 in 1996 and $255,000 in 1997, with minimum annual increases
thereafter of 8%. Mr. Donohue would receive a bonus on December 31 of each year
during the term of the agreement if he is then still employed thereon in an
amount equal to the amount of principal and interest then due under his loan
from the Company described below. Pursuant to the Board's discretion, during the
previous two years, Mr. Donohue received 3.0% of EBT attributable to the New
York office. The new agreement would provide for an annual bonus equal to 3.0%
of EBT attributable to the New York office, but not to exceed twice his base
salary. Mr. Donohue was to receive an additional cash bonus of
49
<PAGE>
$250,000 if he was employed by the Company through the expiration date of the
existing employment agreement. Pursuant to the new agreement he would receive
$150,000 of this compensation upon the execution of the new agreements for his
three years of service under the existing agreement. He would also receive a
signing bonus of $125,000 and a $75,000 loan payable in five equal installments
of principal plus all accrued interest through the date of payment during the
term, but due in full upon earlier termination of the employment agreement.
Under the new agreement, Mr. Donohue would also receive deferred compensation
equal to 50% of his salary for each year that (i) net revenues for the region
increases by 13.5% over net revenues for the prior year and (ii) income before
income taxes for the New York region increases by 22.5% over income before
income taxes for the prior year. The deferred compensation shall vest 50% after
three years and 25% after each of the fourth and fifth year, provided that Mr.
Donohue is still employed by the Company, although the employment condition for
vesting will lapse after the 5-year term of the employment agreement if Mr.
Donohue is employed at that time. If at the end of the each calendar year during
the term of the employment agreement, provided that Mr. Donohue is still
employed by the Company. Under the new agreement, Mr. Donohue would also receive
deferred compensation equal to 50% of his salary for each year that (i) net
revenues for the region increases by 13.5% over net revenues for the prior year
and (ii) income before income taxes for the New York region increases by 22.5%
over income before income taxes for the prior year. The deferred compensation
shall vest 50% after three years and 25% after each of the fourth and fifth
year, provided that Mr. Donohue is still employed by the Company, although the
employment condition for vesting will lapse after the 5-year term of the
employment agreement if Mr. Donohue is employed at that time. If at the end of
the five-year term, Mr. Donohue agrees to be employed by the Company for another
five years, then all deferred compensation that has not yet vested shall
immediately vest. In addition, upon consummation of this offering, Mr. Donohue
will receive options to purchase 0.5% of the Company's Common Stock outstanding
after giving effect to such offering at the initial public offering price. Upon
the Company's termination of Mr. Donohue's employment agreement without cause,
Mr. Donohue is entitled to receive (i) his base salary through the date of such
termination, (ii) all previous unpaid bonuses and a pro-rata portion of the
bonus payable, if any, for the year in which termination occurs and (iii)
subject to the obligation to seek subsequent employment, his base salary for one
year following termination, but in no event beyond the expiration date of his
employment agreement. Under the new agreement, Mr. Donohue would receive the
compensation set forth in (i) and (ii) above, but his base salary would be paid
through the expiration date of the agreement, subject to mitigation if he
obtains subsequent employment. In the event of a change in control, Mr. Donohue
shall be entitled to terminate his employment agreement in the event of certain
changes in his employment situation. Under the existing agreement, upon Mr.
Donohue's termination of the existing employment agreement as a result of a
change in control, Mr. Donohue is entitled to receive (i) his base salary
through the date of such termination, (ii) all previous unpaid bonuses and a
pro-rata portion of the bonus payable, if any, for the year in which termination
occurs, (iii) his base salary for one year following termination but in no event
beyond the expiration date of his employment agreement and (iv) a portion of his
additional cash bonus. Under the new agreement, Mr. Donohue would be entitled to
the same compensation as in (i) and (ii) above, an acceleration of the vesting
of all deferred compensation, and a lump sum payment equal to two times his base
salary and prior year bonus if he terminates his employment because of changes
in his employment situation and an additional amount equal to two times his
prior year's deferred compensation, if any, if he is terminated by the Company
without cause, within one year of a change in control. Upon termination for
"cause" or upon voluntary resignation, Mr. Donohue shall be entitled to receive
his base salary through the date of such termination. Payment of the bonus and
deferred compensation in certain years during the term that would not otherwise
be deductible by reason of Section 162(m) of the Internal Revenue Code of 1986,
as amended, is subject to certain approvals, including shareholder approval. The
Company's Compensation and Benefits Committee may, at its option, defer payment
of amounts that would not otherwise be deductible under Section 162(m) until a
time when it would be deductible. The stock option grant will also be
conditioned upon approval of the Compensation and Benefits Committee and
approval of the Company's Stock Option Plan by the Company's shareholder. The
agreement would also contain certain non-competition covenants and covenants
against solicitation of clients and employees for a competitive business.

In addition, Factors is a party to an employment agreement with James L.
Morrison, the Company's Executive Vice President and Regional Manager of the
Company's California office. The Company is negotiating a new agreement with Mr.
Morrison, subject to final approval of the Compensation and Benefits Committee.
The terms of the new agreement proposed by Mr. Morrison and being negotiated
with the Company are set forth below. Final terms may differ.The new agreement
would expire on December 31, 2000. The existing agreement, which expires in
December 1997, provides for an annual base salary to Mr. Morrison of $140,000,
subject to a 6% increase from the base salary paid in the previous year as well
as an annual bonus based upon the Company's EBT attributable to the
50
<PAGE>
Company's California office. The new agreement would provide for a base salary
of $189,000 in 1996 and $210,000 in 1997, with minimum annual increases of 8%
thereafter. Mr. Morrison would receive a bonus on December 31 of each year
during the term of the agreement if he is still then employed thereon in an
amount equal to the amount of principal and interest then due under his loan
from the Company described below. Pursuant to the Board's discretion, during the
previous two years, Mr. Morrison received 3.0% of EBT attributable to the
California office. The new agreement would provide for an annual bonus equal to
3.0% of EBT attributable to the California office, but not to exceed twice his
base salary. Under the existing agreement, Mr. Morrison was to receive an
additional cash bonus of $150,000 if he is employed by the Company through the
expiration date of the employment agreement. Pursuant to the new agreement, he
would receive $90,000 of this compensation upon the execution of the new
agreement for his three years of service under the existing agreement. He would
also receive a signing bonus of $125,000 and a $75,000 loan payable in five
equal installments of principal plus all accrued interest through the date of
payment during the term, but due in full upon earlier termination of the
employment agreement. Under the new agreement, Mr. Morrison would also receive
deferred compensation equal to 50% of his salary for each year that (i) net
revenues for the California region increases by 13.5% over net revenues for the
prior year and (ii) income before income taxes for the California region
increases by 22.5% over income before income taxes for the prior year. The
deferred compensation shall vest 50% after three years and 25% after each of the
fourth and fifth years, provided that Mr. Morrison is still employed by the
Company although the employment condition for vesting will lapse after the
5-year term of the employment agreement if Mr. Morrison is employed at that
time. If at the end of the five-year term, Mr. Morrison agrees to be employed by
the Company for another five years, then all deferred compensation that has not
yet vested shall immediately vest. In addition, upon consummation of this
offering, Mr. Morrison will receive options to purchase 0.5% of the Common Stock
outstanding after giving effect to such offering at the initial public offering
price. Upon the Company's termination of Mr. Morrison's existing employment
agreement without cause, Mr. Morrison is entitled to receive (i) base salary
through the date of such termination, (ii) all previous unpaid bonuses and a
pro-rata portion of the bonus payable, if any, for the year in which termination
occurs and (iii) subject to the obligation to seek subsequent employment, his
base salary for one year following termination, but in no event beyond the
expiration date of his employment agreement. Under the new agreement, Mr.
Morrison would receive the compensation set forth in (i) and (ii) above, but his
base salary would be paid through the expiration date of the agreement, subject
to mitigation if he obtains subsequent employment. In the event of a change in
control, Mr. Morrison shall be entitled to terminate his employment agreement in
the event of certain changes in his employment situation. Under the existing
agreement, upon Mr. Morrison's termination of the existing employment agreement
as a result of a change in control, Mr. Morrison is entitled to receive (i) base
salary through the date of such termination, (ii) all previous unpaid bonuses
and a pro-rata portion of the bonus payable, if any, for the year in which
termination occurs, (iii) his base salary for one year following termination but
in no event beyond the expiration date of his employment agreement and (iv) a
portion of his additional cash bonus. Under the new agreement, Mr. Morrison
would be entitled to the same compensation as in (i) and (ii) above, an
acceleration of the vesting of all deferred compensation, and a lump sum payment
equal to two times his salary and prior year bonus if he terminates his
employment because of changes in his employment situation and an additional
amount equal to two times his prior year's deferred compensation, if any, if he
is terminated by the Company without cause, within one year after a change in
control. Upon termination for "cause" or upon voluntary resignation, Mr.
Morrison shall be entitled to receive his base salary through the date of such
termination. Payment of the bonus and deferred compensation in certain years
during the term that would not otherwise be deductible by reason of Section
162(m) of the Internal Revenue Code of 1986, as amended, is subject to certain
approvals, including shareholder approval. The Company's Compensation and
Benefits Committee may, at its option, defer payment of amounts that would not
otherwise be deductible under Section 162(m) until a time when it would be
deductible. The stock option grant will also be conditioned upon approval of the
Compensation and Benefits Committee and approval of the Company's Stock Option
Plan by the Company's shareholder. The agreement would also contain certain
non-competition covenants and covenants against solicitation of clients and
employees for a competitive business.

51
<PAGE>
The Company may enter into employment agreements with other executive
officers in the future.

COMPANY STOCK OPTION PLAN

Under the Company's Stock Option Plan (the "Plan"), which will be effective
upon the consummation of this offering, 800,000 shares of Common Stock will be
reserved for issuance upon exercise of stock options. During the Eighty Percent
Period, no more than 200,000 of such options may be granted without the
restrictions set forth below. See "Description of Capital Stock--Anti-takeover
Effects of Certain Provisions of Florida Law and the Company's Articles of
Incorporation and Bylaws." The remaining options, even if vested, may not be
exercised without the written approval of Capital Bank during the Eighty Percent
Period. Such shares will be accompanied by stock appreciation rights which will
become exercisable as determined by the Committee, but in no event prior to
April 15, 2001, and only if Capital Bank does not give approval to the exercise
of the option. The Plan is designed as a means to retain and motivate key
employees and directors. The Compensation and Benefits Committee of the Board of
Directors will administer and interpret the Plan and be authorized to grant
options thereunder to all eligible employees and directors of the Company,
except that no incentive stock options (as defined in Section 422 of the
Internal Revenue Code) may be granted to a director who is not also an employee
of the Company or a subsidiary.

The Plan will provide for the granting of both incentive stock options and
nonqualified stock options. Options will be granted under the Plan on such
terms and at such prices as determined by the Compensation and Benefits
Committee, except that the per share exercise price of incentive stock
options cannot be less than the fair market value of the Common Stock on the
date of grant. The aggregate number of options granted to any one director,
officer or employee may not exceed 35% of the total options available under
the Plan. Each option is exercisable after the period or periods specified in
the option agreement, but no option may be exercisable after the expiration
of ten years from the date of grant. Options granted to an individual who
owns (or is deemed to own) at least 10% of the total combined voting power of
all classes of stock of the Company or its subsidiary must have an exercise
price of at least 110% of the fair market value of the Common Stock on the
date of grant and a term of no more than five years. Options granted under
the Plan are not transferable other than by will or by the laws of descent
and distribution. The Plan also authorizes the Company to make or guarantee
loans to optionees to enable them to exercise their options. Such loans must
(i) provide for recourse to the optionee, (ii) bear interest at a rate no
less than the prime rate of interest, and (iii) be secured by the shares of
Common Stock purchased. The Board of Directors has the authority to amend or
terminate the Plan, provided that no such action may impair the rights of the
holder of any outstanding option without the written consent of such holder,
and provided further that certain amendments of the Plan are subject to
shareholder approval. Unless terminated sooner, the Plan will continue in
effect until all options granted thereunder have expired or been exercised,
provided that no options may be granted ten years after commencement of the
Plan.

The Plan will provide that (i) each director who is not an employee of the
Company and who may be required to meet certain other criteria (a
"Non-Employee Director") will receive, on the date of his or her appointment
as a director or the date of this offering, whichever is earlier (but in no
event earlier than the date of this offering), options to purchase 10,000
shares of Common Stock and, at the annual meeting each year commencing in
1997 (if such person continues to serve as a director of the Company on such
date), an option to purchase an additional 2,000 shares of Common Stock, (ii)
each option granted to Non-Employee Directors will become exercisable as to
be provided in the Plan, although such options granted on the date of this
offering shall be restricted as provided above on a pro-rata basis with all
other options granted on such date, and, thereafter, during the Eighty
Percent Period, all options shall be restricted as provided above, (iii) the
unexercised portion of any option granted to Non-Employee Directors shall
terminate a specified period of time after such director no longer serves on
the Company's Board (or one year in the event of physical or mental
disability or death), except that such period shall not begin until the
restrictions listed above cease, or if the stock appreciation right
accompanying such option becomes exercisable, until such exercisability, and
(iv) the per share exercise price of all options granted to Non-Employee
Directors will be equal to the fair market value of the Common Stock on the
date of grant.

52
<PAGE>
The following table sets forth information with respect to options to be
granted under the Plan upon consummation of this offering to (i) each Named
Officer, (ii) each director and nominee for director, (iii) all executive
officers as a group, and (iv) all other employees of the Company as a group.
All of the options are nonstatutory, are being granted with an exercise price
equal to the offering price, are subject to the consummation of this offering
and are being granted in 1996.

<TABLE>
<CAPTION>
NAME OF GRANTEE OR GROUP NUMBER OF SHARES
- ------------------------- ----------------
<S> <C>
John W. Kiefer ............................... 120,000
Stephen J. Donohue ........................... 60,000
James L. Morrison ............................ 60,000
Michael J. Sullivan .......................... 20,000
Dennis A. McDermott .......................... 40,000
John B. Apgar ................................ 25,000
Javier J. Holtz .............................. 25,000
Daniel M. Holtz .............................. 10,000
Stephen N. Ashman ............................ 10,000
Ronald S. Chase .............................. 10,000
Harold L. Oshry .............................. 10,000
Bruce Raiffe ................................. 10,000
Jack Listanowsky ............................. 10,000
Cynthia Cohen Turk ........................... 10,000
Norman Einspruch ............................. 10,000
All executive officers as a group (7 persons) 350,000
All other employees as a group (80 persons) . 142,500
</TABLE>

BANCORP PENSION PLAN

Currently, all eligible officers of the Company participate in the Bancorp
Employees Pension Plan which was established in 1983 (the "Bancorp Pension
Plan"). The normal retirement age under the Bancorp Pension Plan is the later
of age 65 or the age of the participant on the 5th anniversary of plan
participation. The monthly pension benefit for normal retirement in 1.2% of
average monthly compensation for the 5 consecutive years during the last 10
years of service that produce the highest average salary, plus an additional
0.6% of the portion of the average monthly compensation during these same 5
years in excess of the monthly social security integration level. The entire
monthly pension benefit for normal retirement will be multiplied by each year
of service at normal retirement age, not to exceed 25 years. The Bancorp
Pension Plan provides for early retirement at age 55 with 10 years continuous
employment as well as full vesting of benefits upon termination of employment
before retirement age and after completion of 7 years continuous employment.
In the event of the death of an active participant, the total value of the
decedent's accrued pension benefit will be paid to the designated beneficiary
by the method selected by the beneficiary and approved by the Bancorp Pension
Plan administrator. The benefit will be based upon the years of service and
number of years before normal retirement age. The Bancorp Pension Plan does
not provide for disability benefits. The Company funds the Bancorp Pension
Plan for its proportionate share of the costs of such plan, based on the
number of its employee participants. During 1995, the Company paid $172,090
for its share of the Bancorp Pension Plan's costs. See "Certain
Transactions."

53
<PAGE>
Annual amounts of normal retirement pension payable under the Bancorp
Pension Plan are illustrated in the following table. The illustration assumes
retirement as of December 31, 1995 at the normal retirement age of 65.

FIVE YEAR YEARS OF SERVICE
AVERAGE ---------------------------------------------
COMPENSATION 10 15 20 25
- --------------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C>
$125,000 $21,060 $31,590 $42,120 $52,650
150,000 25,560 38,340 51,120 63,900
175,000 25,560 38,340 51,120 63,900
200,000 25,560 38,340 51,120 63,900
225,000 25,560 38,340 51,120 63,900
250,000 25,560 38,340 51,120 63,900
275,000 25,560 38,340 51,120 63,900
300,000 25,560 38,340 51,120 63,900
</TABLE>

As of December 31, 1995, each of the Named Officers and certain directors
of the Company had credited service (to the nearest whole year) under the
Bancorp Pension Plan as follows:

<TABLE>
<CAPTION>
CREDITED SERVICE
NAME IN YEARS
- ---- -----------------
<S> <C>
John W. Kiefer .......... 9
Stephen J. Donohue ...... 6
James L. Morrison ....... 6
Michael J. Sullivan .... 0
Dennis A. McDermott .... 4
Javier J. Holtz ......... 13
Daniel M. Holtz ......... 13
</TABLE>

In the event that Capital Bank's percentage ownership of the Common Stock
of the Company drops below 80%, it is anticipated that the Company would
adopt its own pension plan. At such time, the officers of the Company with
years of credited service in the Bancorp Pension Plan would transfer such
credit to the Company's pension plan.

BANCORP STOCK OPTION PLANS

Certain of the Company's executive officers and all of the directors also
participate in the Bancorp 1982 Employee Stock Option Plan and/or 1992
Employee Stock Option Plan (collectively, the "Bancorp Plans"). All of the
directors and executive officers of the Company have participated in one or
both of the Bancorp Plans. Messrs. John W. Kiefer, Daniel M. Holtz, Javier J.
Holtz and Ronald S. Chase participate in the Bancorp Plans as a result of
their relationship with Bancorp and Capital Bank and will continue to
participate in such plans after the consummation of this offering. Mr.
Kiefer's participation also relates to his employment by the Company. The
participation of the officers of the Company in the 1992 Employee Stock
Option Plan may continue after the consummation of this offering so long as
the Company remains a subsidiary of Bancorp or Capital Bank.

54
<PAGE>
The following table sets forth certain information with respect to options
to purchase shares of common stock of Bancorp granted under the Bancorp Plans
to the Named Officers for the 1995 fiscal year and represents all options
granted by Bancorp to such Named Officers for the period. In accordance with
rules of the Securities and Exchange Commission, the table also describes the
hypothetical gains that would exist for the respective options based on
assumed rates of annual compounded stock appreciation of 5% and 10% from the
date of grant to the end of the option term. These hypothetical gains are
based on assumed rates of appreciation and, therefore, the actual gains, if
any, on stock option exercises are dependent on the future performance of
Bancorp common stock, overall stock market conditions, and the Named
Officer's continued employment with the Company. As a result, the amounts
reflected in this table may not necessarily be achieved.

OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(4)
---------------------------------------------------------------- -----------------------
% OF TOTAL
NUMBER OF OPTIONS/SARS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OR
OPTIONS/SARS IN FISCAL BASE PRICE
NAME GRANTED(#) YEAR(2) ($/SH)(3) EXPIRATION DATE 5% 10%
- ---- ------------ ------------- -------------- --------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
John W. Kiefer....... 12,500 16.9% $31.00 February 2001 $107,000 $236,625
Stephen J. Donohue... 3,500 4.7% $31.00 February 2001 $ 29,960 $ 66,255
James L. Morrison.... 3,475 4.7% $31.00 February 2001 $ 29,746 $ 65,782
Michael J. Sullivan . 700 0.9% $31.00 February 2001 $ 5,992 $ 13,251
Dennis A. McDermott.. 2,500 3.4% $31.00 February 2001 $ 21,400 $ 47,325
</TABLE>
- ------------
(1) Bancorp did not grant any SARs during the 1995 fiscal year. All options
were granted in February 1996 for services rendered during the 1995
fiscal year. In addition, all of such options are exercisable immediately
and are granted for a term of five years.

(2) This information is as a percentage of total Company employees only.

(3) Exercise price is based on the Nasdaq National Market closing price of
Bancorp's common stock on the day immediately prior to the date of grant.

(4) Potential realizable value assumes that any shares that are acquired by
the exercise of options are held until the end of the five-year option
term.

OPTIONS EXERCISES UNDER BANCORP PLANS. The following table sets forth
stock options exercised during 1995 by the Named Officers, including the
value realized upon such exercises. In addition, this table describes the
number of unexercised options and the value of unexercised in-the-money
options at the end of the 1995 fiscal year.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND DECEMBER 31, 1995 OPTION/SAR VALUES(1)

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
DECEMBER 31, DECEMBER 31,
1995(#) 1995($)(2)

SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($)(2) UNEXERCISABLE(3) UNEXERCISABLE(3)
- --------------------- ---------------- ----------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
John W. Kiefer ...... 4,500 $124,125 59,001 / 0 $1,010,597 / 0
Stephen J. Donohue . 1,500 $ 41,375 15,500 / 0 $ 272,651 / 0
James L. Morrison .. 1,500 $ 41,375 15,100 / 0 $ 265,119 / 0
Michael J. Sullivan 0 $ 0 700 / 0 $ 0 / 0
Dennis A. McDermott 0 $ 0 11,500 / 0 $ 196,250 / 0
</TABLE>

55
<PAGE>
- ------------
(1) Bancorp has not granted any SARs under the Bancorp Plans.

(2) These values are based on the Nasdaq National Market closing price of
Bancorp's common stock on December 29, 1995.

(3) Includes options acquired pursuant to a 3-for-2 stock split effected in
the form of a 50% stock dividend in 1995. Also includes options which
were granted in February 1996 for services rendered during the 1995
fiscal year, which as of June 13, 1996 were out of the money options.

CERTAIN TRANSACTIONS

LOANS FROM AFFILIATES

The Company has a $125 million revolving line of credit facility with
Capital Bank, the Company's sole shareholder prior to the Offering, pursuant
to which the Company had outstanding borrowings of approximately $52 million
as of December 31, 1995. The Capital Facility bears interest at the prime
rate as published in the Wall Street Journal (8.75% at December 31, 1995).
The Facility is subject to annual review by Capital Bank and is due on
demand. The net proceeds from this offering will be used to reduce
indebtedness under the Capital Facility. The following table sets forth
certain information with respect to amounts owed by the Company to Capital
Bank since December 31, 1993:

<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Maximum amount outstanding at any month-end $122,200 $118,000 $ 64,840
Average borrowings .......................... $103,929 $ 84,095 $ 52,701
Interest expense for the period ............. $ 6,845 $ 6,090 $ 4,732
Average interest rate ....................... 6.6% 7.2% 9.0%
</TABLE>

PENSION PLAN

Eligible employees of the Company participate in the Bancorp Pension Plan.
The Company's share of the required contributions to the Bancorp Pension Plan
are based on a fixed percentage of the Company's payroll and is remitted
monthly to Capital Bank. Capital Bank is responsible for the actual
contributions to the Bancorp Pension Plan. The Company remitted $113,420,
$134,390 and $172,090 for the years ending 1993, 1994 and 1995, respectively,
for its share of the Bancorp Pension Plan's costs.

GROUP MEDICAL AND LIFE PLANS

Capital Bank obtains group medical, dental and life insurance coverage on
behalf of the Company. Premiums are charged to the Company at the same amount
as they are assessed by the insurance companies to Capital Bank with respect
to the Company. During the years ended December 31, 1993, 1994 and 1995 and
the three months ended March 31, 1996, the Company paid insurance premiums of
$114,846, $533,843, $527,669 and $139,099, respectively, for its actual
portion of such insurance premiums.

ALLOCATED EXPENSES WITH AFFILIATES

Capital Bank charges the Company for services rendered by Capital Bank's
legal department. Charges are based upon internal time estimates prepared by
Capital Bank for personnel costs and related overhead costs associated with
such services. Legal costs paid by the Company to Capital Bank for 1993, 1994
and 1995 were $190,662, $102,543 and $80,048 respectively. The Company also
reimburses Capital Bank for its portion of insurance expenses. Payments to
Capital Bank for insurance expenses during the years ended December 31, 1993,
1994 and 1995 and the three months ended March 31, 1996, aggregated
approximately $126,219, $97,384, $149,302 and $25,548, respectively.

LETTERS OF CREDIT

56
<PAGE>
clients of the Company. For a fee, the Company guarantees the payment by its
clients under these letters of credit. Fees charged for issuance of the
letters of credit are paid directly to Capital Bank and amounted to $445,090,
$389,571, $462,013 and $94,353, for the years ended December 31, 1993, 1994
and 1995 and the three months ended March 31, 1996, respectively.

INCOME TAX PAYMENTS TO AFFILIATES

The results of operations of the Company are included in the consolidated
federal income tax returns filed by Bancorp. Capital Bank allocates income
taxes to the Company calculated on a separate return basis, except that tax
benefits are allocated to the Company to the extent such benefits are useable
by the consolidated group. The Company pays to (or receives from) Capital
Bank the amount of its estimated annual current tax provisions (benefits).
The Company paid approximately $3.0 million and $4.9 million for income taxes
related to its fiscal years ended December 31, 1993 and December 31, 1994,
respectively. As of December 31, 1995, the Company had not paid Capital Bank
the amounts due for taxes for the 1995 fiscal year.

TAX SHARING AND INDEMNITY AGREEMENT

After this offering, the results of operations of the Company will
continue to be included in the tax returns filed by Bancorp's affiliated,
combined or unitary groups for federal, state and local income and franchise
tax purposes. The members of those groups, including the Company, currently
are parties to a tax allocation agreement that allocates the liability for
those taxes among them. Effective on consummation of this offering, the
Company, Bancorp and the other members of those tax reporting groups will
enter into a new tax allocation and indemnity agreement. Under the new
agreement, for periods ending after the offering, the tax liabilities of the
group will be allocated between, on the one hand, the Parent Group (the
"Parent Group"), consisting of Bancorp and its direct and indirect
wholly-owned subsidiaries other than the Company and its direct and indirect
wholly-owned subsidiaries ("the Factors Group") and, on the other hand, the
Factors Group, pursuant to a method specified in regulations of the Treasury
Department that would impose on Parent Group and Factors Group liability for
an amount that corresponds (with various modifications) to the liability that
Parent Group and Factors Group each would incur if Parent Group and Factors
Group filed tax returns as separate affiliated, combined or unitary groups.
In addition, the new agreement provides that Factors Group will indemnify
Parent Group for any increase in the tax liability of the group that is
attributable (under the prior agreement or the new agreement, as applicable)
to Factors Group, and Factors Group will be entitled to receive any tax
refund that is attributable to Factors Group. The new agreement similarly
provides that Parent Group will indemnify Factors Group for any increase in
the tax liability of the group that is attributable to Parent Group.

TRANSACTIONS WITH OPPENHEIMER & CO., INC.

Craig L. Platt, a director of Bancorp since May 1993 and of Capital Bank
since April 1993, has been a Senior Vice President with Oppenheimer & Co.,
Inc., the managing underwriter of this offering, since December 1994. In
addition to Oppenheimer & Co., Inc.'s involvement with this offering, in July
1995, Oppenheimer & Co., was engaged by Capital Bank to provide advisory
services, for which Oppenheimer & Co., Inc. received a fee of $30,000. In
addition, Oppenheimer & Co., Inc. provided certain brokerage services to
Capital Bank in connection with its sale of 120,000 shares of Bancorp common
stock, for which it received its customary brokerage commission.

LOANS TO OFFICERS OF THE COMPANY

From time to time, Capital Bank makes loans and extends credit to certain
of the Company's officers and directors, including John W. Kiefer, the
President, Chief Executive Officer and a director of the Company. In the
opinion of Capital Bank, all of such loans and extensions of credit were made
in ordinary course of business, on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other third parties.

57
<PAGE>
AGREEMENT BETWEEN CAPITAL BANK, HOLDING AND FACTORS

Holding has agreed with Capital Bank not to issue any shares of Common Stock
that would reduce Capital Bank's interest below 80% or any shares of any other
class of capital stock without Capital Bank's written approval, during the
Eighty Percent Period. Holding may also not acquire certain assets, amend its
bylaws, change the size of its Board or fill vacancies in the Board without such
approval during the Eighty Percent Period. Similar restrictions apply to Factors
pursuant to this Agreement, except that Factors is restricted from issuing any
shares of capital stock without approval by Capital Bank.

APPROVAL OF RELATED PARTY TRANSACTIONS

The Company has adopted a policy whereby all transactions between the
Company and one or more of its affiliates must be approved in advance by a
majority of the Company's Conflict of Interest Committee.

58
<PAGE>
PRINCIPAL SHAREHOLDERS

Capital Bank, whose principal address is 1221 Brickell Avenue, Miami,
Florida 33131, currently owns 10,000,000 shares of Common Stock (after giving
effect to the 10,000-for-1 stock split), representing 100% of all the issued
and outstanding Common Stock of the Company. After giving effect to issuance
of the Common Stock pursuant to this offering, Capital Bank will own
approximately 83% of the issued and outstanding Common Stock of the Company
(approximately 81% if the Underwriters' over-allotment option is exercised in
full).

Bancorp is the sole shareholder of Capital Bank. The following table sets
forth information, as of June 1, 1996, with respect to the beneficial ownership
of the common stock of Bancorp by (i) each director and nominee for director of
the Company, (ii) each person known to the Company to be the beneficial owner of
more than 5% of the outstanding common stock of Bancorp, and (iii) all
directors, nominees for director and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
PERCENTAGE OWNERSHIP
ATTRIBUTABLE TO THE
COMPANY
----------------------
NAME OF INDIVIDUAL OR AMOUNT AND NATURE BEFORE AFTER
IDENTITY OF GROUP OF BENEFICIAL OWNERSHIP OFFERING OFFERING
- --------------------- ----------------------- -------- --------
<S> <C> <C> <C>
Fana Holtz ............................ 2,935,680(1) 39.2% 32.5%
Daniel M. Holtz ....................... 546,166(2) 7.2% 6.0%
Javier J. Holtz ....................... 285,778(3) 3.8% 3.2%
John W. Kiefer ........................ 68,001(4) * *
Stephen N. Ashman ..................... 60,866(5) * *
Harold L. Oshry ....................... 42,500(6) * *
Ronald S. Chase ....................... 23,750(7) * *
Bruce Raiffe .......................... 107,834(8) 1.4% 1.2%
Jack Listanowsky ...................... 12,500(9) * *
Leon Simkins .......................... 712,399(10) 9.5% 7.9%
Cynthia Cohen Turk .................... -- -- --
Norman G. Einspruch ................... -- -- --
Abel Holtz ............................ 677,077(11) 9.1% 7.6%
Alex Halberstein ...................... 734,692(12) 10.0% 8.3%
All directors and executive officers
of the Company as a group, including
those listed above (15 persons) ..... 1,195,295 15.1% 12.5%
</TABLE>
- ------------
* Less than 1%
(1) Includes 1,527,565 shares held individually, 1,385,115 shares over
which Mrs. Holtz claims voting power pursuant to various shareholder
agreements and irrevocable proxies and 23,000 shares that Mrs. Holtz has
the right to acquire upon exercise of presently exercisable options. Does
not include an aggregate of 325,838 shares, nor presently exercisable
options to purchase a total of 264,002 shares, owned by the adult sons of
Mrs. Holtz, as to which shares Mrs. Holtz disclaims beneficial ownership
and voting power. Also does not include 665,893 shares, nor presently
exercisable options to purchase a total of 11,184 shares, owned by Mr. Abel
Holtz, Mrs. Holtz's husband, as to which shares Mrs. Holtz disclaims
beneficial ownership and voting power. Mrs. Holtz, individually, and
together with her sons Daniel Holtz and Javier Holtz, filed an application
with the FDBF to acquire and/or maintain control of Bancorp, although they
do not believe that such an application is required. See "Business--Legal
and Administrative Proceedings--Administrative Proceedings" and "Business--
Regulation."
(2) Includes 211,500 shares held individually, 166,665 shares held
by DH Associates, Ltd., a partnership of which Daniel Holtz is general
partner, and 168,001 shares that Mr. Holtz has the right to acquire upon
exercise of currently exercisable options. Mr. Holtz, individually and
together with Fana Holtz and Javier Holtz, filed an application with the
FDBF to acquire and/or maintain control of Bancorp, although they do not
believe such an application is required. See "Business--Legal and
Administrative Proceedings--Administrative Proceedings" and
"Business--Regulation."
(3) Includes 162,919 shares held individually, 3,937 shares held jointly by
Javier Holtz and his wife, 22,500 shares held by his wife individually and
421 shares over which Mr. Holtz claims voting power pursuant to various
shareholder agreements and irrevocable proxies. Also includes 96,001 shares
that Mr. Holtz has the right to acquire upon exercise of currently
exercisable options. Mr. Holtz, individually and together with Fana Holtz
and Daniel Holtz, filed an application with the FDBF to acquire and/or
maintain control of Bancorp, although they do not believe such an
application is required. See "Business--Legal and Administrative
Proceedings--Administrative Proceedings" and "Business--Regulation."

59
<PAGE>
(4) Includes 9,000 shares held individually and 59,001 shares that Mr. Kiefer
has the right to acquire upon exercise of currently exercisable options.
(5) Includes 24,466 shares held jointly by Stephen Ashman and his wife,
7,000 shares held by his wife individually, 5,400 shares held by a trust of
which Mr. Ashman is a co-trustee and presently exercisable options held by
Mr. Ashman to purchase an aggregate of 20,000 shares.
(6) Includes 20,000 shares that Mr. Oshry has the right to acquire upon
exercise of currently exercisable options.
(7) Represents presently exercisable options held by Mr. Chase to purchase
23,750 shares.
(8) Includes 20,000 shares that Mr. Raiffe has the right to acquire upon
exercise of presently exercisable options.
(9) Represents 12,500 shares that Mr. Listanowsky has the right to acquire
upon exercise of presently exercisable options.
(10) Includes 516,277 shares held by Mr. Simkins individually, 13 shares
held as custodian for Mr. Simkins' son under the Florida Gifts to Minors
Act, 170,109 shares held by a trust for the benefit of Mr. Simkins and
26,000 shares that Mr. Simkins has the right to acquire upon exercise of
presently exercisable options.
(11) Based upon the Schedule 13G filed by Mr. Holtz on February 14, 1996
pursuant to Rule 13d-1 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), includes presently exercisable options held by Abel
Holtz to purchase an aggregate of 11,184 shares. Abel Holtz has advised
Bancorp that he has orally agreed with the FDIC not to vote his shares in
Bancorp at the present time.
(12) Based upon the Schedule 13G filed by Mr. Halberstein on February 14,
1996 pursuant to Rule 13d-1 of the Exchange Act, includes 527,814 shares
held individually by Mr. Halberstein and 90,000 shares held jointly with
his wife. Also includes 116,878 shares held by Mr. Halberstein as trustee
for various trusts established for the benefit of Mr. Halberstein's family
members.

60
<PAGE>
DESCRIPTION OF CAPITAL STOCK

Holding's authorized capital stock consists of 25,000,000 shares of Common
Stock, $.01 par value, and 1,000,000 shares of Preferred Stock, par value
$.01 per share. After giving effect to 10,000 for-1 stock split to be
effected by Holding prior to the effective date of this offering, an
aggregate of 10,000,000 shares of Common Stock will be outstanding. See
"Principal Shareholders." No shares of Preferred Stock have been issued to
date. The following brief description of Holding's capital stock does not
purport to be complete and is subject in all respects to applicable Florida
law and the provisions of Holding's Articles of Incorporation (the
"Articles") and Bylaws, copies of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.

COMMON STOCK

Holders of Common Stock are entitled to one vote per share on all matters
submitted to a vote of shareholders, including the election of directors. The
Common Stock does not have cumulative voting rights, which means that the
holders of a majority of the shares voting for election of directors can
elect all members of the Board of Directors. A majority vote is also
sufficient for other actions that require the vote of shareholders. Dividends
may be paid to holders of Common Stock when and if declared by the Board of
Directors out of funds legally available therefor. See "Dividend Policy."
Upon liquidation or dissolution of Holding, holders of Common Stock will be
entitled to share ratably in the assets of Holding legally available for
distribution to shareholders.

Upon completion of this offering, Holding's existing shareholder will
beneficially own approximately 83% of the outstanding shares of Common Stock
(approximately 81% if the Underwriters' over-allotment option is exercised in
full) and will therefore be able to elect the entire Board of Directors and
control all matters submitted to shareholders for a vote.

The holders of Common Stock have no preemptive or conversion rights and
are not subject to further calls or assessments by Holding, although Capital
Bank will have preemptive rights (the "Preemptive Rights") with respect to
the issuance of any shares of Holding's capital stock or other equity
securities, including shares issuable pursuant to outstanding options, other
than options issued pursuant to the Plan which are exercisable without
Capital Bank's approval, pursuant to an agreement entered into among Capital
Bank, Holding and Holding's direct and indirect subsidiaries. The Preemptive
Rights shall be exercisable at the same price per share as the shares
proposed to be issued. Such rights shall remain in effect during the Eighty
Percent Period. During this period, pursuant to the Articles, no additional
shares of Common Stock may be issued that would reduce Capital Bank's
ownership interest in the Common Stock below 80% of the issued and
outstanding shares of Common Stock without Capital Bank's written approval,
and no shares of any other class of capital stock or other equity security
may be issued without Capital Bank's written approval. The shares of Common
Stock offered hereby will be, when issued and paid for, fully paid and
non-assessable.

PREFERRED STOCK

Although Holding has no present plans to issue shares of Preferred Stock,
Preferred Stock may be issued from time to time in one or more classes or
series with such designations, powers, preferences, rights, qualifications,
limitations and restrictions as may be fixed by the Company's Board of
Directors. The Board of Directors, without obtaining shareholder approval
other than written approval from Capital Bank during the Eighty Percent
Period, could issue the Preferred Stock with voting and/or conversion rights
and thereby dilute the voting power and equity of the holders of Common Stock
and adversely effect the market price of such stock. The issuance of
Preferred Stock could also be used as an antitakeover measure by Holding
without any further action by the shareholders.

ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF FLORIDA LAW AND THE COMPANY'S
ARTICLES OF INCORPORATION AND BYLAWS

Holding is subject to (i) the Florida Control Share Act, which generally
provides that shares acquired in excess of certain specified thresholds will
not possess any voting rights unless such voting

61
<PAGE>
rights are approved by a majority vote of the corporation's disinterested
shareholders and (ii) the Florida Fair Price Act, which generally requires
supermajority approval by disinterested directors or shareholders of certain
specified transactions between a corporation and holders of more than 10% of
the outstanding shares of the corporation (or their affiliates).

In addition, certain provisions of Holding's Articles summarized in the
following paragraphs may be deemed to have an anti-takeover effect and may
delay, defer or prevent a tender offer or takeover attempt that a shareholder
might consider in its best interest, including those attempts that might
result in a premium over the market price for the shares held by
shareholders.

BOARD OF DIRECTORS. The Articles authorize the Board of Directors to fill
vacant directorships or increase the size of the Board, subject to the
approval of Capital Bank or its designee during the Eighty Percent Period.
This provision will prevent a shareholder from removing incumbent directors
and simultaneously gaining control of the Board of Directors by filling the
vacancies created by such removal with its own nominees and will deter the
Board from changing the Board without Capital Bank's approval.

BYLAWS. The Articles authorize the Board of Directors to amend the bylaws,
subject to the approval of Capital Bank or its designee during the Eighty
Percent Period. This provision will prevent a shareholder or the Board from
amending the bylaws without Capital Bank's approval during the Eighty Percent
Period.

SPECIAL MEETING OF SHAREHOLDERS. The Articles provide that special
meetings of shareholders of Holding be called only by the Board of Directors
or holders of not less than 30% of the votes entitled to be cast at the
special meeting.

AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of
Common Stock and Preferred Stock are available for future issuance without
shareholder approval, except that during the Eighty Percent Period, written
approval of Capital Bank is required for the issuance of shares of Common
Stock that would reduce Capital Bank's ownership of Common Stock below 80% of
the issued and outstanding shares of Common Stock or for the issuance of
shares of any other class of capital stock. If issued, these additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued and
unreserved Common Stock and Preferred Stock may enable the Board of
Directors, with Capital Bank's approval during the Eighty Percent Period and
without such approval thereafter, to issue shares to persons friendly to
current management or Capital Bank which could render more difficult or
discourage an attempt to obtain control of Holding by means of a proxy
contest, tender offer, merger or otherwise, and thereby protect the
continuity of Holding's management.

The articles of incorporation of Factors prohibit the issuance of additional
shares of capital stock during the Eighty Percent Period, without the prior
approval of Capital Bank. In addition, such articles require Capital Bank's
approval during the Eighty Percent Period for the Board to change the size of
the Board, fill vacancies in the Board or amend the bylaws. The articles of
incorporation of Holding and Factors also require approval of Capital Bank
during the Eighty Percent Period for certain acquisitions of assets and for
Holding or Factors to take any action that would cause their subsidiaries to
issue additional shares of capital stock or to make certain acquisitions or to
alter the Board of Directors of Factors or any subsidiary. The foregoing
provisions applicable to Factors and the provisions applicable to Holding are
also contained in an agreement among Capital Bank, Holding and Factors. This
agreement also gives Capital Bank preemptive rights during the Eighty Percent
Period.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar of the Common Stock will be American
Stock Transfer and Trust Company.

62
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of this offering, the Company will have 12,000,000
shares of Common Stock outstanding (12,300,000 shares if the Over-Allotment
Option is exercised in full). Of those shares, the 2,000,000 shares sold in
this offering (2,300,000 shares if the Over-Allotment Option is exercised in
full) will be freely transferable without restriction or registration under
the Act, unless purchased by persons deemed to be "affiliates" of the Company
(as that term is defined under the Act). The remaining 10,000,000 shares of
Common Stock to be outstanding immediately following the offering
("restricted shares") may only be sold in the public market if such shares
are registered under the Act or sold in accordance with Rule 144 promulgated
under the Act.

In general, under Rule 144 a person (or persons whose shares are
aggregated) including an affiliate, who has beneficially owned his shares for
two years, may sell in the open market within any three-month period a number
of shares that does not exceed the greater of (i) 1% of the then outstanding
shares of the Company's Common Stock (approximately 120,000 shares
immediately after this offering, 123,000 if the over-allotment option is
exercised in full) or (ii) the average weekly trading volume in the Common
Stock in the over-the-counter market during the four calendar weeks preceding
such sale. Sales under Rule 144 are also subject to certain limitations on
the manner of sale, notice requirements and availability of current public
information about the Company. A person (or persons whose shares are
aggregated) who is deemed not to have been an "affiliate" of the Company at
any time during the 90 days preceding a sale by such person and who has
beneficially owned his shares for at least three years, may sell such shares
in the public market under Rule 144(k) without regard to the volume
limitations, manner of sale provisions, notice requirements or availability
of current information referred to above. Restricted shares properly sold in
reliance upon Rule 144 are thereafter freely tradeable without restrictions
or registration under the Act, unless thereafter held by an "affiliate" of
the Company.

The Commission has recently proposed reducing the initial Rule 144 holding
period to one year and the Rule 144(k) holding period to two years. There can
be no assurance as to when or whether such rule changes will be enacted. If
enacted, such modifications will have a material effect on the times when
shares of the Company's Common Stock become eligible for resale.

The Company has reserved an aggregate of 800,000 shares of Common Stock
for issuance pursuant to the Plan and the Company intends to register such
shares on Form S-8 following this offering. Subject to restrictions imposed
pursuant to the Plans, shares of Common Stock issued pursuant to the Plans
after the effective date of any Registration Statement on Form S-8 will be
available for sale in the public market without restriction to the extent
they are held by persons who are not affiliates of the Company, and by
affiliates pursuant to Rule 144. See "Management--Stock Option Plan."

Prior to this offering, there has been no trading market for the Common
Stock. No prediction can be made as to the effect, if any, that future sales
of shares pursuant to Rule 144 or otherwise will have on the market price
prevailing from time to time. Sales of substantial amounts of the Common
Stock in the public market following this offering could adversely affect the
then prevailing market price. The Company's existing sole shareholder,
Capital Bank, has agreed that it will not sell or otherwise transfer any
shares of Common Stock to the public for 180 days after this offering. See
"Underwriting."

63
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement between
the Company and the Underwriters named below (the "Underwriting Agreement"),
for whom Oppenheimer & Co., Inc. is acting as representative (the
"Representative"), the Underwriters have severally agreed to purchase from
the Company, and the Company has agreed to sell to the Underwriters, the
number of shares of Common Stock set forth opposite their respective names:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ---------------------------- --------------
<S> <C>
Oppenheimer & Co., Inc. ...

--------------
Total ................... 2,000,000
==============
</TABLE>

The Underwriters will be obligated to purchase all of the shares of Common
Stock offered (other than the shares covered by the over-allotment option
described below) if any are purchased.

The Underwriters propose to offer the shares of Common Stock directly to
the public at the public offering price set forth on the cover page of this
Prospectus, and at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may reallow, concessions
not in excess of $ per share on sales to other brokers or dealers. After
the initial public offering, the public offering price, concession and
reallowance to brokers or dealers may be changed by the Representative.

The Underwriters have been granted a 30-day over-allotment option to
purchase from the Company up to an aggregate of 300,000 additional shares of
Common Stock exercisable from time to time at the public offering price less
the underwriting discount. If the Underwriters exercise such over-allotment
option, then each of the Underwriters will be obligated, subject to certain
conditions, to purchase the same proportion thereof as the number of shares
of Common Stock to be purchased by it as shown in the above table bears to
the shares of Common Stock offered hereby. The Underwriters may exercise such
option only to cover over-allotments made in connection with the sale of
Common Stock offered hereby.

The Company has agreed to indemnify the Underwriters against certain
liabilities, losses and expenses, including liabilities under the Act, and to
contribute to payments that the Underwriters may be required to make in
respect thereof.

The Company, Capital Bank, the sole shareholder of the Company prior to
the offering, and their respective officers and directors have agreed that
they will not sell, offer to sell, contract to sell, distribute, transfer,
grant any option for the sale of or otherwise dispose of, directly or
indirectly, any shares of Common Stock, any securities convertible into,
exercisable for or exchangeable for Common Stock or any rights to purchase or
acquire Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of the Representative, except
for the shares offered hereby and the issuance of shares upon exercise of
options granted under the Company's stock option plans. See "Shares Eligible
for Future Sale."

64
<PAGE>
Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price of the Common Stock offered hereby
has been determined by negotiation between the Company and the
Representative. The matters considered in determining the initial public
offering price include the history of and prospects for the industry in which
the Company competes, the ability of the Company's management, the past and
present operations of the Company, the historical results of operations of
the Company, the prospects for further earnings of the Company, the general
condition of the securities markets at the time of the offering and the
prices of similar securities of generally comparable companies. There can be
no assurance that an active or orderly trading market will develop for Common
Stock or that the Common Stock will trade in the public market subsequent to
the offering at or above the initial public trading price. The Company's Common
Stock has been approved for listing on the Nasdaq National Market System under
the symbol "CAPF."

Craig L. Platt, a director of Bancorp since May 1993 and Capital Bank
since April 1993, has been a Senior Vice President with Oppenheimer & Co.,
Inc., the managing underwriter of this offering, since December 1994. Mr. Platt
is a 40% limited partner in a partnership which owns 166,665 shares of Bancorp
common stock; however, he has no voting or investment control of such shares.
In addition, Mr. Platt has presently exercisable options to acquire 23,750
shares of Bancorp common stock, which he received in his capacity as a director
of Bancorp and Capital Bank. Additionally, Oppenheimer & Co., Inc. has from
time to time provided investment banking and brokerage services to affiliates
of the Company. See "Certain Transactions."

LEGAL MATTERS

The legality of the shares of Common Stock offered hereby will be passed
upon for the Company by Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel,
P.A., Miami, Florida. Certain legal matters for the Underwriters will be
passed upon by Simpson Thacher & Bartlett (a partnership which includes
professional corporations), New York, New York.

EXPERTS

The consolidated financial statements as of December 31, 1994 and 1995 and
for each of the three years in the period ended December 31, 1995 included in
this Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports thereon appearing herein and elsewhere
in the Registration Statement, and have been so included in reliance upon
such reports given upon the authority of that firm as experts in accounting
and auditing.

<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
THE COMPANY'S FINANCIAL STATEMENTS

Report of Independent Auditors ........................................................... F-2

Consolidated Balance Sheets as of December 31, 1994 and 1995
and March 31, 1996 (unaudited).......................................................... F-3

Consolidated Statements of Income for the Years Ended December 31, 1993, 1994 and 1995
and for the three month periods ended March 31, 1995 and 1996 (unaudited)............... F-4

Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1993,
1994 and 1995 and for the three month periods ended March 31, and 1996 (unaudited)...... F-5

Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and
1995 and for the three month periods ended March 31, 1995 and 1996 (unaudited).......... F-6

Notes to Consolidated Financial Statements ............................................... F-7
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors of Capital Factors Holding, Inc.:

We have audited the accompanying consolidated balance sheets of Capital
Factors Holding, Inc. (a wholly owned subsidiary of Capital Bank) and
subsidiaries as of December 31, 1995 and 1994 and the related consolidated
statements of income, stockholder's equity and cash flows for each of the
three years in the period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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, such financial statements present fairly, in all material
respects, the financial position of Capital Factors Holding, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles.

Deloitte & Touche LLP

Miami, Florida

February 28, 1996 (March 4, 1996 as to the second paragraph of Note 13, May 16,
1996 as to the third paragraph of Note 13 and July 1, 1996 as to the first
paragraph of Note 13)

F-2
<PAGE>
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------- MARCH 31,
1994 1995 1996
--------------- --------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash (Note 12) ........................................ $ 15,446,835 $ 20,326,814 $ 16,718,006
Restricted Cash (Notes 5,12) .......................... 4,687,500 16,187,500 6,562,500
Receivables (Notes 3,5,12) ............................ 260,390,337 361,205,965 401,515,700
Unearned discounts ................................... (2,781,219) (3,404,016) (4,051,473)
Allowance for credit losses .......................... (1,774,101) (2,980,778) (2,683,733)
--------------- --------------- ---------------
Receivables, net ...................................... 255,835,017 354,821,171 394,780,494
Property and equipment, net (Note 4) .................. 3,026,155 3,285,049 3,282,592
Other Assets (Notes 5,7) .............................. 3,884,422 4,850,831 5,042,554
--------------- --------------- ---------------
TOTAL .................................................. $282,879,929 $399,471,365 $426,386,146
=============== =============== ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Due to affiliates (Note 9) ............................ $ 4,835,698 $ 6,452,964 $ 1,250,458
Capital Factors variable rate asset backed
certificates (Notes 5,12) ........................... 125,000,000 175,000,000 175,000,000
Notes payable to affiliates (Notes 6,12) .............. 34,540,000 52,260,000 69,754,000
Due to factoring clients (Note 12) .................... 90,706,683 128,577,577 141,578,108
Other liabilities ..................................... 3,150,246 3,840,425 3,560,137
--------------- --------------- ---------------
Total liabilities .................................... 258,232,627 366,130,966 391,142,703
--------------- --------------- ---------------
COMMITMENTS AND CONTINGENCIES (Notes 8,10,11,12)

STOCKHOLDER'S EQUITY (Note 1,13):
Common stock, $0.01 par value, 10,000,000 shares
authorized, issued and outstanding ................ 100,000 100,000 100,000
Additional paid-in capital ............................ 9,542,096 9,542,096 9,542,096
Retained earnings ..................................... 15,005,206 23,698,303 25,601,347
--------------- --------------- ---------------
Total stockholder's equity ........................... 24,647,302 33,340,399 35,243,443
--------------- --------------- ---------------
TOTAL .................................................. $282,879,929 $399,471,365 $426,386,146
=============== =============== ===============
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------- ------------------------------
1993 1994 1995 1995 1996
-------------- -------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Factoring fees ........................... $15,375,900 $17,370,626 $19,518,541 $ 4,565,143 $ 5,524,449
Interest income .......................... 13,511,324 17,628,230 28,210,599 6,003,949 7,574,087
Letter of Credit and other fees .......... 1,127,513 1,237,611 2,040,383 350,693 753,821
Other .................................... 1,302,685 1,540,712 1,849,466 324,461 291,043
-------------- -------------- -------------- -------------- --------------
Total revenues .......................... 31,317,422 37,777,179 51,618,989 11,244,246 14,143,400
-------------- -------------- -------------- -------------- --------------
EXPENSES (Note 9) .........................
Interest expense (Note 5, 6) ............. 997,446 4,238,942 11,629,391 2,500,796 3,141,111
Interest expense to affiliates (Note 6,9). 6,844,512 6,090,174 4,731,668 1,052,634 1,415,197
Salaries and benefits .................... 7,773,626 8,698,858 11,240,046 2,620,828 3,250,837
Provision for credit losses (Note 3) .... 2,645,000 2,235,000 2,234,721 450,000 1,100,000
Occupancy and other office expenses ..... 1,861,862 2,135,319 2,588,459 544,543 880,876
Depreciation ............................. 565,311 591,554 632,739 163,042 153,640
Professional fees ........................ 1,286,929 1,180,861 991,535 242,162 179,039
Other .................................... 1,584,017 1,529,925 3,004,570 531,600 824,218
-------------- -------------- -------------- -------------- --------------
Total expenses .......................... 23,558,703 26,700,633 37,053,129 8,105,605 10,944,918
-------------- -------------- -------------- -------------- --------------
INCOME BEFORE INCOME TAXES ................ 7,758,719 11,076,546 14,565,860 3,138,641 3,198,482
-------------- -------------- -------------- -------------- --------------
PROVISION FOR INCOME TAXES (Note 7) ...... 3,453,428 4,984,450 5,872,763 1,255,636 1,295,438
-------------- -------------- -------------- -------------- --------------
NET INCOME ................................ $ 4,305,291 $ 6,092,096 $ 8,693,097 $ 1,883,005 $ 1,903,044
============== ============== ============== ============== ==============
NET INCOME PER SHARE (Note 2) ............. $ 0.43 $ 0.61 $ 0.87 $ 0.19 $ 0.19
============== ============== ============== ============== ==============
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------------
ADDITIONAL
PAID-IN RETAINED
COMMON STOCK CAPITAL EARNINGS
--------------- -------------- --------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 ......... $100,000 $ 9,542,096 $ 4,607,819
Net Income ........................ 0 0 4,305,291
--------------- -------------- --------------
BALANCE, DECEMBER 31, 1993 ......... 100,000 9,542,096 8,913,110
--------------- -------------- --------------
Net Income ........................ 0 0 6,092,096
--------------- -------------- --------------
BALANCE, DECEMBER 31, 1994 ......... 100,000 9,542,096 15,005,206
--------------- -------------- --------------
Net Income ........................ 0 0 8,693,097
--------------- -------------- --------------
BALANCE, DECEMBER 31, 1995 ......... 100,000 9,542,096 23,698,303
--------------- -------------- --------------
Net Income (unaudited)............. 0 0 1,903,044
--------------- -------------- --------------
BALANCE, MARCH 31, 1996 (unaudited) $100,000 $9,542,096 $25,601,347
=============== ============== ==============
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------- --------------------------------
1993 1994 1995 1995 1996
--------------- ---------------- --------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income ........................ $ 4,305,291 $ 6,092,096 $ 8,693,097 $ 1,883,005 $ 1,903,044
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation ................... 565,311 591,554 632,739 163,042 153,640
Deferred income taxes .......... (259,664) 209,383 (399,986) (125,982) 106,869
Provision for credit losses ... 2,645,000 2,235,000 2,234,721 450,000 1,100,000
Increase in restricted cash ... 0 (4,687,500) (1,500,000) -- (375,000)
Loss on sale of assets ......... 0 12,399 3,873 -- 884
Due to affiliates .............. 456,869 3,936,578 1,617,266 (2,808,222) (5,202,506)
Other assets ................... (104,338) 343,208 (430,465) (275,655) (403,554)
Other liabilities .............. 688,899 1,052,788 690,179 4,484,197 (280,288)
--------------- ---------------- --------------- --------------- ---------------
Net cash provided by operating
activities ................. 8,297,368 9,785,506 11,541,424 3,770,385 (2,996,911)
--------------- ---------------- --------------- --------------- ---------------
INVESTING ACTIVITIES:
Loan to clients, net .............. (6,202,118) (7,448,868) (3,053,589) 7,271,274 10,882,604
Increase in asset backed loans ... 0 (10,473,533) (27,841,907) (4,384,703) 4,980,164
Net increase in factoring accounts
receivable, net of due to
factoring clients ............... (34,761,943) (5,230,704) (32,940,825) (35,551,618) (44,588,233)
Sales of participations ........... 11,545,936 334,570 1,238,287 -- 1,228,458
Payments on participations ....... (2,000,000) (12,180,506) (751,947) (409,421) (561,784)
Purchase of property and equipment (313,839) (621,391) (914,342) (153,023) (152,068)
Disposal of property and equipment 0 2,821 18,836 17,466 0
--------------- ---------------- --------------- --------------- ---------------
Net cash used in investing
activities ................. (31,731,964) (35,617,611) (64,245,487) (33,210,025) (28,210,859)
--------------- ---------------- --------------- --------------- ---------------
FINANCING ACTIVITIES:
Issuance of senior certificates .. 0 125,000,000 50,000,000 -- --
Restricted proceeds from senior
certificates .................... 0 0 (10,000,000) -- 10,000,000
Proceeds from borrowings .......... 50,700,000 51,900,000 53,522,033 30,990,000 24,042,000
Payments on borrowings ............ (27,200,000) (140,360,000) (35,802,033) (690,000) (6,548,000)
Payments of deferred financing
costs ........................... 0 (2,700,761) (744,802) 0 (66,523)
Amortization of deferred costs ... 0 228,189 608,844 137,592 171,485
--------------- ---------------- --------------- --------------- ---------------
Net cash provided by financing
activities ................. 23,500,000 34,067,428 57,584,042 30,437,592 27,598,962
--------------- ---------------- --------------- --------------- ---------------
NET INCREASE IN CASH ............... 65,404 8,235,323 4,879,979 997,952 (3,608,808)
CASH, BEGINNING OF PERIOD .......... 7,146,108 7,211,512 15,446,835 15,446,835 20,326,814
--------------- ---------------- --------------- --------------- ---------------
CASH, END OF PERIOD ................ $ 7,211,512 $ 15,446,835 $ 20,326,814 $ 16,444,787 $ 16,718,006
=============== ================ =============== =============== ===============
SUPPLEMENTAL CASH FLOW INFORMATION

Cash payments for interest ...... $ 8,064,714 $ 9,375,978 $ 14,784,541 $ 3,331,280 $ 4,381,897
=============== ================ =============== =============== ===============
</TABLE>

See notes to consolidated financial statements.

F-6

<PAGE>
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND DESCRIPTION OF OPERATIONS

Capital Factors Holding, Inc. ("the Parent Company") is a wholly-owned
subsidiary of Capital Bank (the "Bank"). The Bank is a wholly-owned
subsidiary of Capital Bancorp ("Bancorp"). The Parent Company was
incorporated in June 1994, in order to accommodate the issuance of Variable
Rate Asset Backed Certificates (as further discussed in Note 5 to the
financial statements), and issued 1,000 shares (100%) of its stock to Capital
Bank in exchange for 60 shares (100%) of the outstanding shares of Capital
Factors, Inc. ("Factors"). Since the stock transaction has been between
related parties, the results of operations have been presented as though the
companies had been combined as of the earliest year presented. The Parent
Company has two wholly-owned subsidiaries, Factors and CF One, Inc. ("CF
One"). Factors has one wholly-owned subsidiary, CF Funding Corp. ("Funding").

Factors provides factoring and other services primarily to commercial
businesses and generally purchases trade accounts receivables from clients
and assumes all risks of collectibility for credit approved receivables,
except as such risks result from fraud or invalid receivables, and dilution.
Factors generally enters into advance factoring arrangements which allow
clients to obtain cash advances against a stipulated percentage of the
receivables before they are due or collected.

The Company provides services to its clients through four offices located
in Fort Lauderdale, Florida; Los Angeles, California; New York, New York and
Charlotte, North Carolina. The Company's clients primarily include
manufacturers, importers, wholesalers and distributors in apparel and textile
related industries and, to a lesser extent, clients in consumer goods related
industries such as plastics, video game cartridges, paper and healthcare
services.

The Company's factored accounts receivable are due from clients' customers
geographically located throughout the United States, principally retailers,
manufacturers and distributors. The majority of the Company's customers are
large national or regional department store chains or specialty retailers. As
of December 31, 1994, 1995 and March 31, 1996, the Company had factored
accounts receivable aggregating approximately $114.1 million, $130.0 million
and $169.5 million, respectively, due from 34, 37 and 44 customers,
respectively, each with balances exceeding $1 million. These customers are
primarily large national or regional department store chains or specialty
retailers. The largest amount due from any one customer, a national
department store chain, at March 31, 1996 was approximately $18.8 million.

The Company's asset backed loans represent loans provided to clients
principally collateralized by accounts receivables. The Company does not
service the accounts receivables nor does it provide credit protection of the
receivables.

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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INTERIM FINANCIAL INFORMATION--The unaudited financial statements as of
March 31, 1996 and for the three months ended March 31, 1996 and 1995 have
been prepared on the same basis as the audited financial statements included
herein. In the opinion of management, such unaudited financial statements

F-7
<PAGE>

CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

1. ORGANIZATION AND DESCRIPTION OF OPERATIONS--(CONTINUED)

include all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the results for such periods. The operating
results for the three months ended March 31, 1996 are not necessarily
indicative of the operating results to be expected for the full fiscal year
or for any future period.

PRINCIPLES OF CONSOLIDATION--The consolidated financial statements of
Capital Factors Holding, Inc. and Subsidiaries (the "Company") include the
accounts of the Parent Company, Factors and Funding, and CF One. All
significant intercompany transactions and balances have been eliminated in
consolidation.

INCOME RECOGNITION--Interest income on all loans and advances is
calculated using the simple interest method on the daily balances of
principal outstanding and is recorded as earned in accordance with the terms
of the related factoring agreements with clients. Accrual of interest income
is discontinued on troubled loans and advances to factoring clients when the
loan balance and interest receivable exceeds the estimated value of the
collateral securing the loan or advance. Factoring fees are recognized
generally at the time of purchase of factored receivables due to the nature
of the relationship with the factoring client and the relatively short term
nature of the factored receivables. Commitment/closing fees related to asset
based loans are amortized over the life of the loan as an adjustment of
yield. The difference between the Company's income recognition policy and
amortization of such fee over the service period is immaterial.

ALLOWANCE FOR CREDIT LOSSES--The allowance for credit losses is maintained
at a level deemed adequate by management to absorb losses in the portfolio
after evaluating the portfolio, current economic conditions, changes in the
nature and the volume of the portfolio, past loss experience and other
pertinent factors. Many of these factors involve a significant degree of
estimation and are subject to rapid change which may be unforeseen by
management. It is reasonably possible that changes in these factors could
result in material adjustments to the allowance in the near term. The charge off
of a past due receivable takes place when management determines that the
receivable is uncollectible and, in most cases, when the receivable becomes 120
days past due.

PROPERTY AND EQUIPMENT--Property and equipment are carried at cost less
accumulated depreciation. Depreciation is provided over the estimated useful
lives, primarily on the straight-line method. Estimated depreciable lives
range from 3--8 years for furniture, equipment, software and leasehold
improvements and 39 years for buildings.

UNEARNED AND EARNED DISCOUNTS--The Company deducts trade and cash
discounts on all factoring invoices purchased. Discounts not taken by
customers are recognized as income principally at the time of payment of the
invoice.

UNALLOCATED CREDITS--The Company generally notifies the payor when
unidentifiable payments or portions thereof are received. If the payor does
not respond within 90 days, the Company generally records the unallocated
credits as income. The Company maintains an allowance for unallocated credits
recorded as income which may be subsequently repaid based upon its historical
experience.

NET INCOME PER SHARE--Net income per share amounts are based on the
average number of common shares outstanding for each period, after giving
effect to the stock split discussed in Note 13.

F-8
<PAGE>

CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

3. RECEIVABLES

Receivables consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------- MARCH 31,
1994 1995 1996
---------------- ---------------- ----------------
(UNAUDITED)
<S> <C> <C> <C>
Nonrecourse ................... $188,698,818 $ 226,916,598 $ 243,422,912
Recourse ...................... 37,786,588 69,558,913 109,554,707
---------------- ---------------- ----------------
Factored accounts receivables 226,485,406 296,475,511 352,977,619
Loans to factoring client .... 23,431,398 26,415,014 15,202,805
Asset based loans ............. 10,473,533 38,315,440 33,335,276
---------------- ---------------- ----------------
$260,390,337 $361,205,965 $401,515,700
================ ================ ================
</TABLE>

The Company also makes advances to factoring clients. Such advance
payments, which are interest earning, are recorded as reductions to the
amounts due to the factoring clients for the purchase of receivables.

Changes in the Company's allowance for credit losses were as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------- MARCH 31,
1994 1995 1995 1996
------------- -------------- ------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Beginning balance ........... $ 2,174,844 $ 2,157,333 $ 1,774,101 $ 2,980,778
Provision for credit losses 2,645,000 2,235,000 2,234,721 1,100,000
Charge-offs ................. (3,384,956) (3,148,281) (1,625,148) (1,487,831)
Recoveries .................. 722,445 530,049 597,104 90,786
-------------- ------------- ------------- ------------
Ending balance .............. $ 2,157,333 $ 1,774,101 $ 2,980,778 $ 2,683,733
============== ============= ============= ============
</TABLE>

The Company specifically considered $739,332, $2,184,046 and $2,436,486 of
its client advances impaired at December 31, 1994 and 1995 and March 31,
1996, respectively and has discontinued the accrual of interest income. The
allowance for credit losses related to these impaired loans for the same
periods was $48,051, $133,847 and $105,422, respectively.

F-9
<PAGE>

CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------- MARCH 31,
1994 1995 1996
-------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Land .......................... $ 479,581 $ 479,581 $ 479,581
Building ...................... 1,518,538 1,518,538 1,518,538
Building improvements ......... 744,909 744,909 749,568
Furniture and equipment ...... 2,311,602 3,007,122 3,141,843
Computer software ............. 191,486 267,666 279,175
Leasehold improvements ........ 53,447 59,140 59,140
-------------- -------------- --------------
5,299,563 6,076,956 6,227,845
Less accumulated depreciation (2,273,408) (2,791,907) (2,945,253)
-------------- -------------- --------------
$ 3,026,155 $ 3,285,049 $ 3,282,592
============== ============== ==============
</TABLE>

5. VARIABLE RATE ASSET-BACKED CERTIFICATES

On June 29, 1994, December 15, 1994 and July 28, 1995. Capital Factors,
Inc., through its wholly owned subsidiary CF Funding Corp., issued
$100,000,000, $25,000,000 and $50,000,000, respectively, of Variable Rate
Asset Backed Certificates ("senior certificates") with maturity dates of
December 1999, June 2000 and January 2001. The senior certificates bear an
interest rate of LIBOR plus 1.25%. The interest rate on December 31, 1995 and
March 31, 1996 was 7.1875% and 6.625%, respectively. Interest is payable
monthly. The senior certificates are collateralized by interest-earning
advances to factoring clients which totaled $198,992,000 and $224,086,000 at
December 31, 1995 and March 31, 1996, respectively. Such advances are made on
receivables before they are due or collected by the Company. Capital Factors,
Inc., services and administers these advances and related receivables under
an agreement entered into by Bankers Trust Company as Trustee, CF Funding
Corp. and Capital Factors, Inc. The senior certificates may not be redeemed
prior to their stated maturity and are subject to acceleration if certain
collateral requirements are not maintained. Deferred issuance costs of $2.6
million are being amortized over the terms of the related series. Such costs
are included in other assets on the balance sheets.

Restricted Cash--CF Funding Corporation is required to maintain a cash
collateral account at Bankers Trust Company, pursuant to the terms of the
aforementioned agreement. Such restricted cash collateral amounted to
$6,187,500 and $6,562,500 at December 31, 1995 and March 31, 1996,
respectively.

Of the $50,000,000 of senior certificates issued on July 28, 1995, CF
Funding Corp. initially utilized $15,000,000, and a Pre-Funding account was
created at Bankers Trust Company for the remaining $35,000,000. During 1995
CF Funding Corp. drewdown these funds as supported by interest earning
advances to clients. At December 31, 1995, $10,000,000 remained in the
Pre-Funding account. This remaining amount is also included in restricted
cash. No cash remained in the Pre-Funding account at March 31, 1996.

F-10
<PAGE>

CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6. BORROWINGS

Notes payable are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------ MARCH 31,
1994 1995 1996
-------------- -------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Affiliates
A $125 million revolving line-of-credit payable to
the Bank at prime (8.25%, 8.75% and 8.25% at
December 31, 1994, December 31, 1995 and March
31, 1996 with interest payable monthly. The loan
matures on demand ............................... $34,540,000 $52,260,000 $69,754,000
============== ============== =============
</TABLE>

Supplemental information for the Company's borrowings including the
Variable Rate Asset Backed Certificates (Note 5), follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------- --------------------------------
1993 1994 1995 1995 1996
--------------- --------------- --------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Maximum amount outstanding
at any month-end ........ $137,200,000 $171,000,000 $221,871,000 $189,840,000 $284,754,000
Average borrowings ........ $118,929,000 $142,959,000 $191,264,000 $172,887,000 $223,984,000
Interest expense for
the period .............. $ 7,662,569 $ 9,990,305 $ 15,140,324 $ 3,323,055 $ 4,183,079
Average interest rate .... 6.44% 6.99% 7.92% 7.69% 7.47%
Average interest rate, end
of period ............... 6.35% 7.67% 7.57% 7.93% 7.11%
</TABLE>

7. INCOME TAXES

The results of operations of the Company are included in the consolidated
Federal income tax return filed by Bancorp. Bancorp allocates income taxes to
the Company principally calculated on a separate return basis. The Company
pays to (or receives from) the Bank the amount of its estimated annual
current tax provisions (benefits). The Company paid approximately $3,042,000,
$0, and $4,929,000, for income taxes in the years ended December 31, 1993,
1994 and 1995, respectively, and $0 and $6,000,000 in the three month periods
ended March 31, 1995 and 1996, respectively, for income taxes related to its
fiscal years ended December 31, 1993 and 1994 respectively. As of December
31, 1995, the Company had not paid the Bank the amounts due for taxes for the
1995 fiscal year. The amounts are included in the balance sheet as due to
affiliates.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.

F-11
<PAGE>

CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. INCOME TAXES --(CONTINUED)

The tax effects of significant items comprising the Company's net deferred
tax asset, which is included in other assets in the balance sheet, as of
December 31, 1994, 1995 and March 31, 1996 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- MARCH 31,
1994 1995 1996
------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Bad debts ........................................ $ 684,359 $ 1,149,834 $ 1,035,250
Difference between book and tax basis of property 145,592 126,393 126,393
Deferred compensation ............................. 138,870 92,580 100,295
------------ -------------- --------------
Deferred asset .................................... 968,821 1,368,807 1,261,938
------------ -------------- --------------
Deferred tax liability:
Pension costs .................................... (29,750) (29,750) (29,750)
Difference between book and tax basis of assets .. (6,099) (6,099) (6,099)
------------ -------------- --------------
Deferred liability ................................ (35,849) (35,849) (35,849)
------------ -------------- --------------
Net deferred asset ............................... $ 932,972 $ 1,332,958 $ 1,226,089
============ ============== ==============
</TABLE>

The components of the provision for income taxes are as follows:

F-12
<PAGE>

CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. INCOME TAXES--(CONTINUED)

The following is a reconciliation between the provision for income taxes
included in the accompanying statements of income and the provision computed
using the statutory federal tax rate:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
----------------------------------------------------------------- -------------------------------------------
1993 1994 1995 1995 1996
--------------------- -------------------- --------------------- -------------------- ---------------------
% OF % OF % OF % OF % OF
PRETAX PRETAX PRETAX PRETAX PRETAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
----------- ------ ---------- ------ ---------- ------ ---------- ------ ---------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Computed provision at
statutory rate .... $ 2,715,552 35.0% $3,876,791 35.0% $5,098,051 35.0% $1,098,524 35.0% $1,119,469 35.0%
Benefit of graduated
tax rate .......... (77,587) (1.0%) (110,765) (1.0%)
State taxes, net of
federal benefit ... 640,307 8.3% 889,379 8.0% 774,712 5.3% 157,112 5.0% 175,969 5.5%
Other ............... 175,156 2.3% 329,045 3.0%
----------- ------ ---------- ------ ---------- ------ ---------- ------ ---------- ------
$ 3,453,428 44.6% $4,984,450 45.0% $5,872,763 40.3% 1,255,636 40.0% $1,295,438 40.5%
=========== ====== ========== ====== ========== ====== ========== ====== ========== ======

</TABLE>

8. COMMITMENTS AND OFF-BALANCE SHEET RISK

The Company is a lessee under operating leases for real estate and
equipment. The real estate leases contain clauses which require additional
rent for increases in operating expenses or a proportionate share of taxes
and operating expenses. There are no options to renew the leases of the
leased regional offices. The approximate future minimum rental payments under
noncancellable leases (exclusive of additional amounts for taxes and
operating expenses) as of December 31, 1995 are as follows:

<TABLE>
<CAPTION>
Years ending december 31,
<S> <C>
1996 ................... $ 702,277
1997 ................... 817,049
1998 ................... 817,049
1999 ................... 817,049
2000 and thereafter ... $1,534,424
-------------
$4,687,848
=============
</TABLE>

Rental expense for the years ended December 31, 1993, 1994 and 1995 and
for the three months ended March 31, 1995 and 1996 was approximately
$428,000, $487,000, $624,000, $122,000 and $185,000, respectively.

In the normal course of business, the Company utilizes certain financial
instruments with off-balance sheet risk to meet the financing needs of its
clients. These off-balance sheet activities include amounts available under
the unused portion of approved customer and client credit limits, commercial
letters of credit and standby letters of credit and financial guarantees.
Letters of credit are issued by the Bank for the Company's clients and the
Company guarantees the payment by its clients under these letters of credit.
The credit and market risks associated with these financial instruments are
generally managed in conjunction with the Company's balance sheet activities
and are subject to normal credit policies, financial controls and risk
limiting and monitoring procedures.

F-13
<PAGE>

CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

8. COMMITMENTS AND OFF-BALANCE SHEET RISK--(CONTINUED)

Credit losses may be incurred when one of the parties fails to perform in
accordance with the terms of the contract. The Company's exposure to credit
loss is represented by the contractual amount of the commitments to extend
credit, commercial letters of credit and standby letters of credit and
financial guarantees. This is the maximum potential loss of principal in the
event the commitment is drawn upon and the counterpart defaults. In addition,
the measurements of the risks associated with these financial instruments is
meaningful only when all related and offsetting transactions are considered.

Amounts available under the unused portion of approved customer and client
credit limits do not necessarily represent legally binding arrangements to
factored sales or otherwise advance funds to clients. Generally, credit
approvals and limits are modified or withdrawn based upon the Company's
evaluation of the customer or client's credit or if the client violates the
terms of the factoring agreement. Credit limits for clients and customers
continually vary and do not necessarily represent future cash requirements to
fund the factored sales or otherwise advance funds to clients.

Commercial letters of credit are issued to facilitate certain trade
transactions, principally the purchase of goods. The risks associated with
these transactions are somewhat reduced since the contracts are generally for
a short commitment period. Standby letters of credit and financial guarantees
are conditional commitments issued to guarantee the performance of a customer
to a third party. The Company issues standby letters of credit and financial
guarantees to ensure contract performance or assure payment by its clients.
The risk involved in issuing standby letters of credit to clients and
financial guarantees is similar to the risk involved in extending credit to
clients and they are subject to the same credit approvals and monitoring
procedures. At December 31, 1994, 1995 and March 31, 1996, the Company had
approximately $19,677,000, $22,645,000 and $30,203,000, respectively, of
letters of credit and financial guarantees outstanding. The Company usually
guarantees letters of credit and financial guarantees only for clients with
which the Company has factoring arrangements. Generally, the Company requires
collateral to support these commitments and the collateral held varies but
may include cash, merchandise, inventory, real estate and the client's
reserve balance.

9. RELATED PARTY TRANSACTIONS

The Company expensed interest payments to the Bank of $6,845,000,
$6,090,000, $4,732,000, $1,053,000 and $1,415,000 on its $125 million
revolving line of credit facility with the Bank during the years ended
December 31, 1993, 1994 and 1995 and the three months ended March 31, 1995
and March 31, 1996, respectively.

The Bank obtained group medical, dental and life insurance coverage on
behalf of the Company. Premiums are charged to the Company at the same amount
as they are assessed by the insurance companies to the Bank with respect to
the Company. During 1993, 1994 and 1995, the Company paid insurance premiums
of $114,846, $533,843 and $527,669, respectively, and $122,350 and $139,099
for the three months ended March 31, 1995 and March 31, 1996, for its actual
portion of such insurance premiums.

Capital Bank provided approximately $66.6 million, $79.5 million, $130.1
million and $30.7 million during 1993, 1994, 1995 and the three months ended
March 31, 1996, respectively, of letters of credit for clients of the
Company. For a fee, the Company guarantees the payment by its clients under
these letters of credit. Fees charged for issuance of the letters of credit
are paid directly to Capital Bank and

F-14
<PAGE>
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9. RELATED PARTY TRANSACTIONS--(CONTINUED)

amounted to $445,090, $389,571 and $462,013, during 1993, 1994 and 1995, and
$94,353 for the three months ended March 31, 1996, respectively.

The Bank charged the Company for services rendered by the Bank's legal
department. Charges are based upon estimates prepared by the Bank. Payments
to the Bank for these items during the periods ended December 31, 1993, 1994
and 1995 and the three months ended March 31, 1995 and 1996 aggregated
approximately, $190,663, $102,543, $80,048, $36,804 and $0, respectively. The
Company also reimburses the Bank for its portion of commercial insurance
expenses. Payments to the Bank for insurance expenses during 1993, 1994 and
1995 and the three months ended March 31, 1995 and 1996 equaled $126,219,
$97,384, $149,302, $0 and $25,548, respectively. In addition, the Company
paid the Bank $136,100, $17,700, $148,900, $27,952 and $16,128 during the
periods ended December 31, 1993, 1994 and 1995 and the three months ended
March 31, 1995 and 1996, respectively, for bank service charges.

Due to affiliate represents balances owed to the Bank at the end of the
fiscal year, principally the unremitted portion of the Company's current tax
liability.

10. CONTINGENCIES

From time to time, the Company has been a party to lawsuits and claims,
including lender liability claims, which management considers incidental to
normal operations. The Company is currently a party to one lawsuit that was
dismissed after trial. The Plaintiff is currently appealing the dismissal.
Management, after review, including consultation with counsel, believes that
any ultimate liability which could arise from this current lawsuit would not
materially affect the financial position or results of operations of the
Company.

11. RETIREMENT PLAN

Bancorp sponsors a noncontributory defined benefit pension plan (the
"Plan") covering employees meeting certain eligibility requirements. The
Company's employees are included in the Plan. The benefits are based on years
of service and the employee's compensation for the five consecutive years
during the last ten years of service that produce the highest average salary.
The Plan provides for accumulation of full benefits equal to 30% of eligible
compensation over a 25-year period. Full vesting will occur after completion
of seven years of service. Bancorp's funding policy is to contribute annually
the maximum amount that can be deducted for Federal income tax purposes. The
Bank charged the Company pension costs of approximately $113,420, $134,390,
$172,090, $48,644 and $56,489 for the years ended December 31, 1993, 1994 and
1995 and the three months ended March 31, 1995 and 1996, respectively.

F-15
<PAGE>
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

11. RETIREMENT PLAN--(CONTINUED)

The following items are components of the net periodic pension cost of the
Plan:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------
1993 1994 1995
------------ ------------ --------------
<S> <C> <C> <C>
Service cost-benefits earned during the year $ 554,156 $ 704,851 $ 700,348
Interest cost-projected benefits obligation 307,955 370,261 525,785
Actual return on plan assets ................ (390,959) (102,875) (1,403,127)
Net amortization and deferral ............... 91 (300,215) 1,384,221
------------ ------------ --------------
Net periodic pension cost ................... $ 471,243 $ 672,022 $ 1,207,227
============ ============ ==============
</TABLE>

The funded status of the Plan is shown in the table below:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1994 1995
-------------- --------------
<S> <C> <C>
Plan assets at fair value .......................... $ 5,464,072 $ 7,176,298
Projected benefit obligation for services rendered (6,271,120) (8,635,263)
-------------- --------------
Plan assets less than projected benefit obligation (807,048) (1,458,965)
Unrecognized prior service cost .................... 112,193 407,424
Unrecognized net loss .............................. 642,231 336,923
Adjustment to recognize minimum required liability (522,530)
-------------- --------------
Accrued pension cost (Bancorp) ..................... $ (575,154) $ (714,618)
============== ==============
</TABLE>

At December 31, 1994 and 1995, the Plan's assets consisted of approximately
55% and 60%, respectively, of corporate equities. The remainder of such assets
include U.S. government securities, corporate bonds, cash and cash equivalents
and accrued interest and dividends.

The accumulated benefits obligation at December 31, 1994 and 1995 was
approximately $6,039,000 and $7,097,000, respectively. Included in these
amounts were vested benefits of approximately $5,422,000 and $6,454,000 at
December 31, 1994 and 1995, respectively.

The assumed weighted average discount rate used in determining the
actuarial present value of the projected benefit obligation was 7.00% in 1994
and 1995. The assumed expected long-term rate of return on assets was 8.50%
in 1994 and 1995. The assumed rate of salary progression was 5.50% in 1994
and 1995.

12. FAIR VALUE OF FINANCIAL INSTRUMENTS

In cases where quoted market prices are not available, fair value
estimates are based on the quoted market price of a financial instrument with
similar characteristics, the present value of expected future cash flows or
other valuation techniques. Fair value estimates determined using other
valuation techniques are significantly affected by the assumptions used and
consequently may not reflect the proceeds that may be realizable from the
sale of such financial instruments.

The estimated fair value disclosures related to the Company's financial
instruments are as follows:

Cash: Since the Company's cash is maintained in demand deposit accounts,
the carrying amount is equal to the fair value.

F-16
<PAGE>
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

12. FAIR VALUE OF FINANCIAL INSTRUMENTS--(CONTINUED)

Accounts Receivable, Due to/from Factoring Clients: The Company's
receivables turn over quickly and interest earning advances made to clients
against such receivables and loans to factoring clients carry variable
interest rates based upon the prime rate and reprice as the prime rate
changes. Therefore, the Company believes the carrying amounts are reasonable
estimates of fair value.

Notes and Certificates Payable: The Company's notes payable are short-term
in nature and carry variable interest rates which reprice at least every 30
days. The Company believes the interest rates on the notes and certificates
payable approximate rates currently available to the Company and consequently
the carrying amount is a reasonable estimate of fair value.

Letters of Credit: As indicated in Note 8, the Company utilizes certain
financial instruments with off-balance sheet risk to meet the financing needs
of its clients. At December 31, 1994 and 1995 and March 31, 1996, the Company
had approximately $19,677,000, $22,645,000 and $30,203,000, respectively, of
letters of credit and financial guarantees for clients outstanding. The
estimated fair value of these off-balance sheet instruments, based on
discounting the fees to be charged on the unused portion of such facilities
until their respective expiration dates is considered insignificant.

13. SUBSEQUENT EVENTS

Effective July 1, 1996, the Parent Company executed a 10,000-for-1 stock
split resulting in 10,000,000 common shares issued and outstanding. The stock
split is retroactively reflected in the consolidated financial statements.

On March 4, 1996, Factors entered into a loan and security agreement with
Fleet Capital Corporation ("Fleet"), under which Fleet agrees to make a total
credit facility of up to $40,000,000, available upon Factors' request. The
revolver loans bear an interest rate of LIBOR plus 2.15% (7.525% at March 31,
1996). Interest is payable monthly. The revolver loans are collateralized by
interest-bearing advances to borrowers. Factors services and administers
these advances under the agreement with Fleet. This agreement shall be in
effect for a period of 3 years through March 4, 1999 and shall automatically
renew itself for 1-year periods thereafter unless terminated by lender or
borrower upon at least 90 days prior written notice. The revolver loans are
subject to termination if certain events of default occur.

In May 1996, the Company, through its direct wholly-owned subsidiary, CF
One, Inc. raised $10,000,000 in financing through the issuance of $10,000,000
in subordinated notes. The notes bear interest at a fixed annual rate of
7.95% and mature in July 2001.

F-17

<PAGE>
=============================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE INFORMATION
OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
- -----------------------------------------------------------------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary ............................... 3
Risk Factors ..................................... 8
Use of Proceeds .................................. 14
Dividend Policy .................................. 14
Capitalization ................................... 15
Selected Consolidated Financial Data ............. 16
Management's Discussion and Analysis of
Financial Condition and Results of Operations .. 18
Business ......................................... 27
Management ....................................... 45
Certain Transactions ............................. 56
Principal Shareholders ........................... 59
Description of Capital Stock ..................... 61
Shares Eligible for Future Sale .................. 63
Underwriting ..................................... 64
Legal Matters .................................... 65
Experts .......................................... 65
Index to Financial Statements .................... F-1
</TABLE>

- -----------------------------------------------------------------------------

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
================================================================================
================================================================================
2,000,000 SHARES

CAPITAL FACTORS HOLDING, INC.

Common Stock

----------------
PROSPECTUS
----------------

OPPENHEIMER & CO., INC.

, 1996
================================================================================
<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The Registrant estimates that expenses payable by the Registrant in
connection with the offering described in this registration statement (other
than underwriting discounts and commissions) will be as follows:

Securities And Exchange Commission registration fee ....... $ 11,103.45
NASD filing fee .......................................... 3,720.00
Nasdaq National Market listing fee ....................... 47,500.00
Printing and engraving expenses .......................... 80,000.00*
Accounting fees and expenses ............................. 75,000.00*
Legal fees and expenses .................................. 200,000.00*
Fees and expenses (including legal fees) for
qualifications under state securities laws ............. 25,000.00*
Registrar and Transfer Agent's fees and expenses ......... 5,000.00*
Miscellaneous ............................................ 52,676.55*
--------------
Total .................................................. $500,000.00*
==============
- ------------
* Estimated.

All amounts except the Securities and Exchange Commission registration fee,
the NASD filing fee and the Nasdaq listing fee are estimated.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant has authority under the Florida Business Corporation Act to
indemnify its directors and officers to the extent provided in such statute.
The Registrant's Articles of Incorporation provide that the Registrant shall
indemnify its executive officers and directors to the fullest extent
permitted by law either now or hereafter. The Registrant is also entering
into an agreement with each of its directors and certain of its officers
wherein it is agreeing to indemnify each of them to the fullest extent
permitted by law. In general, Florida law permits a Florida corporation to
indemnify its directors, officers, employees and agents, and persons serving
at the corporation's request in such capacities for another enterprise
against liabilities arising from conduct that such persons reasonably
believed to be in, or not opposed to, the best interests of the corporation
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe their conduct was unlawful.

The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director and, in
appropriate circumstances, equitable remedies such as injunctive or other
forms of nonmonetary relief will remain available under Florida law. In
addition, each director will continue to be subject to liability for (a)
violations of the criminal law, unless the director had reasonable cause to
believe his conduct was lawful or had no reasonable cause to believe his
conduct was unlawful, (b) deriving an improper personal benefit from a
transaction, (c) voting for or assenting to an unlawful distribution, and (d)
willful misconduct or a conscious disregard for the best interests of the
Registrant in a proceeding by or in the right of the Registrant to procure a
judgment in its favor or in a proceeding by or in the right of a shareholder.
The statute does not affect a director's responsibilities under any other
law, such as the Federal securities laws or state or Federal environmental
laws.

At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought from the Registrant, nor is the Registrant aware of any threatened
litigation that may result in claims for indemnification from the Registrant
by any

II-1
<PAGE>
officer or director. See "Business--Legal and Administrative Proceedings" for
information regarding claims for indemnification asserted against Capital
Bancorp.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

In May 1985, Capital Bank acquired 100% of the issued and outstanding
common stock of Capital Factors, Inc. ("Factors"). In June 1994, Factors
completed a reorganization in which Capital Factors Holding, Inc. ("Holding")
was formed. In connection with this reorganization, Holding issued 1,000
shares (100%) of its common stock, representing all of the then-issued and
outstanding shares of such capital stock to Capital Bank in exchange for 60
shares (100%) of Factors common stock. As a result of a 10,000-for-1 stock split
effected as of July 1, 1996, the 1,000 shares of Holding Common Stock owned by
Capital Bank were converted into 10,000,000 shares of Common Stock. The original
issuances of Factors and Holding Common Stock were exempt from the registration
requirements of the Act pursuant to the exemption set forth in Section 4(2)
thereof.

A primary reason why Holding was formed was to accommodate the issuance of
asset-backed certificates in connection with the Securitized Financings which
have been issued pursuant to several private placements. Additionally, in
1994, Holding formed another subsidiary, CF One, Inc. ("CF One"), and Factors
formed a subsidiary, CF Funding Corp. Both CF One and CF Funding Corp. were
created to accommodate the issuance of the asset-backed certificates. CF One
holds subordinated certificates issued by the Trust, created in connection with
the Securitized Financings, which it purchased with funds contributed to it by
Holding. Pursuant to the Securitized Financings, Advances made by Factors that
were collateralized by third party accounts receivable and, in certain cases, by
cash, letters of credit, inventory or other collateral provided to Factors were
sold to CF Funding Corp., which subsequently transferred the Advances of the
Trust. The Trust issued investment grade senior certificates, which were sold to
institutional buyers through several private placements. The aggregate amount of
certificates presently outstanding is $175 million of which $100 million of
certificates were issued in June 1994 (placed by Oppenheimer & Co., Inc.), $25
million of certificates were issued in December 1994 (placed by Westwood
Associates) and $50 million of certificates were issued in July 1995 (placed by
Westwood Associates). Each certificate evidences an interest in the Trust's
assets and the right to receive the payment of principal in the face amount of
the certificate and interest from the Trust. The Trust's assets consist
principally of the Advances, as well as funds collected or to be collected in
respect of the Advances and the collateral therefor. Factors is responsible for
servicing the Advances owned by the Trust. Subordinated certificates were also
issued by the Trust to CF One in connection with each of the Securitized
Financings ($15 million in June 1994, $3.75 million in December 1994, $7.50
million in July 1995) through the same placement agents. The original issuances
of the asset-backed certificates and subordinated certificates were exempt from
the registration requirements of the Act pursuant to the exemption set forth in
Section 4(2) thereof.

In May 1996, CF One sold $10 million of subordinated notes (the "CF One
Notes") which are collateralized by subordinated certificates that were issued
in connection with the Company's Securitized Financings. The CF One Notes, which
are due and payable in July 2001, bear interest at an annual fixed rate of 7.95%
and are rated "BBB" by both Duff & Phelps Credit Rating Company and Fitch
Investors Services, Inc. The principal purpose for the issuance of the notes was
to allow CF One to obtain additional financing by taking advantage of the
favorable financing terms resulting from an increase in the value of
subordinated certificates held by CF One which are collateralized by assets held
by a trust established in connection with the Securitized Financings. The
purchaser of the CF One Notes was Connecticut General Life Insurance Company.
The sale of the CF One Notes was exempt from the registration requirements of
the Act pursuant to the exemption set forth in Section 4(2) thereof.

II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement*
3.1 Registrant's Amended and Restated Articles of Incorporation*
3.2 Registrant's Amended and Restated Bylaws*
4.1 Form of Common Stock Certificate(1)
5.1 Opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. as to the validity of
the Common Stock being registered*
10.1 Form of Registrant's Stock Option Plan(1)
10.2 Capital Bancorp Employees Pension Plan(1)
10.3 Form of Indemnification Agreement between the Registrant and each of its directors and certain executive
officers(1)
10.4 Capital Factors Financing Trust Pooling and Servicing Agreement, dated as of June 1, 1994, among CF
Funding Corp., the Registrant and Bankers Trust Company(1)
10.5 Contribution and Sale Agreement related to the Capital Factors Financing Trust Pooling and Services
Agreement(1)
10.6 Series 1994-1 Supplement, dated as of June 1, 1994, to Capital Factors Financing Trust Pooling and
Servicing Agreement(1)
10.7 Series 1994-2 Supplement, dated as of December 1, 1994, to Capital Factors Financing Trust Pooling
and Servicing Agreement(1)
10.8 Series 1995-1 Supplement, dated as of July 1, 1995, to Capital Factors Financing Trust Pooling and
Servicing Agreement(1)
10.9 Promissory Note evidencing Credit Facility with Capital Bank(1)
10.10 Credit Facility with Fleet Capital Corporation(1)
10.11 Lease Agreement dated as of April 30, 1990, between Hachette Filipacchi Magazines, Inc. (formerly Diamandis
Communications, Inc.) and Factors, as amended(1)
10.12 Lease Agreement dated April 19, 1995, between Factors and H-C REIT, Inc.(1)
10.13 Lease Agreement dated as of March 1, 1995, between Hope & Flowers B.P. Partnership and Factors(1)
10.14 Tax Sharing and Indemnity Agreement(1)
10.15 Employment Agreement among John W. Kiefer, the Registrant and Capital Factors, Inc.(1)
10.16 Employment Agreement, dated January 1, 1993, between Stephen J. Donohue and the Registrant(1)
10.17 Employment Agreement, dated January 1, 1993, between James L. Morrison and the Registrant(1)
10.18 Note Purchase Agreement, dated as of May 15, 1996, between CF One, Inc. and Connecticut General Life
Insurance Company(1)
10.19 Collateral Pledge and Account Agreement, dated as of May 15, 1996, among CF One, Inc., Bankers Trust
Company and Connecticut General Life Insurance Company(1)
10.20 Form of Agreement Among Capital Bank, the Registrant and Capital Factors, Inc.(1)
10.21 Intercreditor Agreement by and among Capital Factors, Inc., Fleet Capital Corporation, CF Funding Corp.
and Bankers Trust Company*
10.22 Form of Amendment No. 1 to Employment Agreement among John W. Kiefer, the Registrant, and Capital
Factors, Inc.*
21.1 Subsidiaries of the Registrant(1)
23.1 Consent of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. (to be included in its
opinion to be filed as Exhibit 5.1)*
23.2 Consent of Deloitte & Touche LLP*
24.1 Reference is made to the Signatures section of this Registration Statement for the Power of Attorney
contained therein(1)
99.1 Consent of Cynthia Cohen Turk(1)
</TABLE>

II-3

<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------------------------------------------------------------------------------------------------------------
<S> <C>
99.2 Consent of Norman G. Einspruch, Ph.D.(1)
</TABLE>
- ------------
(1) Previously filed.
* Filed herewith.

(b) Financial Statement Schedules:

All schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions
or are not applicable, and therefore have been omitted.

ITEM 17. UNDERTAKINGS

(a) The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required
by the underwriter to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registration of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
a registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 2 to Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Fort Lauderdale, State of Florida, on July 3, 1996.

CAPITAL FACTORS HOLDING, INC.

By: /s/ JOHN W. KIEFER
John W. Kiefer
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 has been signed by the following persons in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----

<S> <C> <C>
/s/ JOHN W. KIEFER President, Chief Executive July 3, 1996
John W. Kiefer Officer and Director
(principal executive officer)

/s/ DENNIS A. McDERMOTT* Senior Vice President--Finance July 3, 1996
Dennis A. McDermott and Chief Financial Officer
(principal financial officer and
principal accounting officer)

/s/ JAVIER J. HOLTZ* Chairman of the Board July 3, 1996
Javier J. Holtz

/s/ DANIEL M. HOLTZ* Director July 3, 1996
Daniel M. Holtz

/s/ STEPHEN N. ASHMAN* Director July 3, 1996
Stephen N. Ashman

/s/ RONALD S. CHASE* Director July 3, 1996
Ronald S. Chase

/s/ HAROLD L. OSHRY* Director July 3, 1996
Harold L. Oshry

/s/ BRUCE RAIFFE* Director July 3, 1996
Bruce Raiffe

/s/ JACK LISTANOWSKY* Director July 3, 1996
Jack Listanowsky

*By: /s/ JOHN W. KIEFER July 3, 1996
John W. Kiefer,
Attorney-in-fact
</TABLE>

II-5

2,000,000 Shares

Capital Factors Holding, Inc.

Common Stock

UNDERWRITING AGREEMENT

July ___, 1996

OPPENHEIMER & CO., INC.
Oppenheimer Tower
World Financial Center
New York, New York 10281

As Representative of the Underwriters named on Schedule I attached hereto.

Ladies and Gentlemen:

Capital Factors Holding, Inc., a Florida corporation (the
"Company") proposes to sell to you and the other underwriters named on Schedule
I to this Agreement (the "Underwriters"), for whom you are acting as
Representative, an aggregate of 2,000,000 shares (the "Firm Shares") of the
Company's Common Stock, $0.01 par value (the "Common Stock").
In addition, the Company proposes to grant to the Underwriters an option to
purchase up to an additional 300,000 shares (the "Option Shares") of Common
Stock from it for the purpose of covering over-allotments in connection with the
sale of the Firm Shares. The Firm Shares and the Option Shares are together
called the "Shares."

1. SALE AND PURCHASE OF THE SHARES. On the basis of the
representations, warranties and agreements contained in, and subject to the
terms and conditions of, this Agreement:

(a) The Company agrees to sell to each of the Underwriters, and
each of the Underwriters agrees, severally and not jointly, to purchase
from the Company, at $ per share (the "Initial Price"), the number of
Firm Shares set forth opposite the name of such Underwriter on Schedule
I to this Agreement.

<PAGE>

(b) The Company grants to the several Underwriters an option to
purchase, severally and not jointly, all or any part of the Option
Shares at the Initial Price. The number of Option Shares to be purchased
by each Underwriter shall be the same percentage (adjusted by the
Representative to eliminate fractions) of the total number of Option
Shares to be purchased by the Underwriters as such Underwriter is
purchasing of the Firm Shares. Such option may be exercised only to
cover over-allotments in the sales of the Firm Shares by the
Underwriters and may be exercised in whole or in part at any time and
from time to time on or before 12:00 noon, New York City time, on the
business day before the Firm Shares Closing Date (as defined below), and
from time to time thereafter within 30 days after the date of this
Agreement, in each case upon written or telegraphic notice, or oral or
telephonic notice confirmed by written or telegraphic notice, by the
Representative to the Company no later than 12:00 noon, New York City
time, on the business day before the Firm Shares Closing Date or at
least two business days before each Option Shares Closing Date (as
defined below), as the case may be, setting forth the number of Option
Shares to be purchased and the time and date (if other than the Firm
Shares Closing Date) of such purchase.

2. DELIVERY AND PAYMENT. Delivery by the Company of the Firm
Shares to the Representative for the respective accounts of the Underwriters,
and payment of the purchase price by certified or official bank check or checks
payable in New York Clearing House (next day) funds to the Company, shall take
place at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New
York, New York 10017, at 10:00 a.m., New York City time, on the third (fourth,
if pricing occurs after 4:30 p.m., New York City time) business day following
the date of this Agreement, or at such time on such other date, not later than
10 business days after the date of this Agreement, as shall be agreed upon by
the Company and the Representative (such time and date of delivery and payment
are called the "Firm Shares Closing Date").

In the event the option with respect to the Option Shares is
exercised, delivery by the Company of the Option Shares to the Representative
for the respective accounts of the Underwriters and payment of the purchase
price by certified or official bank check or checks payable in New York Clearing
House (next day) funds to the Company shall take place at the offices of Simpson
Thacher & Bartlett specified above at the time and on the date (which may be the
same date as, but in no event shall be earlier than, the Firm Shares Closing
Date) specified in the notice referred to in Section l(b) (such time and date of
delivery and payment are called an "Option Shares Closing Date"). The Firm
Shares Closing Date and each Option Shares Closing Date are called,
individually, a "Closing Date" and, together, the "Closing Dates."

Certificates evidencing the Shares shall be registered in such
names and shall be in such denominations as the Representative shall request at
least two full business days before the Firm Shares Closing Date or, in the case
of Option Shares, on the day of notice of exercise of the option as described in
Section l(b) and shall be made available to the Representative for checking and
packaging, at such place as is designated by the Representative, one full
business day before the Firm Shares Closing Date (or the Option Shares Closing
Date in the case of the Option Shares).

2
<PAGE>

3. REGISTRATION STATEMENT AND PROSPECTUS, PUBLIC OFFERING. The
Company has prepared in conformity with the requirements of the Securities Act
of 1933, as amended (the "Securities Act"), and the published rules and
regulations thereunder (the "Rules") adopted by the Securities and Exchange
Commission (the "Commission"), a registration statement on Form S-1 (No.
333-3419), including a preliminary prospectus relating to the Shares, and has
filed with the Commission the Registration Statement (as hereinafter defined)
and such amendments thereof as may have been required to the date of this
Agreement and the Registration Statement has become effective under the
Securities Act. Copies of such Registration Statement (including all amendments
thereof) and of the related preliminary prospectus have heretofore been
delivered by the Company to you. The term "preliminary prospectus" means any
preliminary prospectus (as described in Rule 430 of the Rules) included at any
time as a part of the Registration Statement. The Registration Statement as
amended at the time and on the date it became effective (the "Effective Date"),
including all exhibits and information, if any, deemed to be part of the
Registration Statement pursuant to Rule 424(b) and Rule 430A of the Rules, is
called the "Registration Statement." The term "Prospectus" means the prospectus
in the form first used to confirm sales of the Shares (whether such prospectus
was included in the Registration Statement at the time of effectiveness or was
subsequently filed with the Commission pursuant to Rule 424(b) of the Rules).

The Company understands that the Underwriters propose to make a
public offering of the Shares, as set forth in and pursuant to the Prospectus,
as soon after the Effective Date and the date of this Agreement as the
Representative deems advisable. The Company hereby confirms that the
Underwriters and dealers have been authorized to distribute or cause to be
distributed each preliminary prospectus (except for the preliminary prospectus
included in the initial filing of the Registration Statement on May 9, 1996) and
are authorized to distribute the Prospectus (as from time to time amended or
supplemented if the Company furnishes amendments or supplements thereto to the
Underwriters).

4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND EACH PARENT.
The Company, Capital Bank, a Florida-chartered bank, and Capital Bancorp, a
Florida corporation (Capital Bank and Capital Bancorp each, a "Parent"), hereby,
jointly and severally, represent and warrant to each Underwriter as follows:

(a) On the Effective Date the Registration Statement complied,
and on the date of the Prospectus, on the date any post-effective
amendment to the Registration Statement shall become effective, on the
date any supplement or amendment to the Prospectus is filed with the
Commission and on each Closing Date, the Registration Statement and the
Prospectus (and any amendment thereof or supplement thereto) will
comply, in all material respects, with the applicable provisions of the
Securities Act and the Rules and the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder (the
"Exchange Act"); the Registration Statement did not, as of the Effective
Date, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein not misleading; and on the other dates
referred to above neither the Registration Statement nor the Prospectus,
nor any amendment thereof or supplement thereto, will contain any untrue
statement of a material fact or will omit to state any material fact
3
<PAGE>

required to be stated therein or necessary in order to make the
statements therein not misleading. When any related preliminary
prospectus was first filed with the Commission (whether filed as part of
the Registration Statement or any amendment thereto or pursuant to Rule
424(a) of the Rules) and when any amendment thereof or supplement
thereto was first filed with the Commission, such preliminary prospectus
as amended or supplemented complied in all material respects with the
applicable provisions of the Securities Act and the Rules and did not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein not misleading. Notwithstanding the
foregoing, the Company and each Parent make no representation or
warranty as to the paragraph with respect to stabilization on the inside
front cover page of the Prospectus and the statements contained under
the caption "Underwriting" in the Prospectus. The Company and each
Parent acknowledge that the statements referred to in the previous
sentence constitute the only information furnished in writing by the
Representative on behalf of the several Underwriters specifically for
inclusion in the Registration Statement, any preliminary prospectus or
the Prospectus.

(b) The financial statements of the Company (including the notes
thereto) included in the Registration Statement and Prospectus present
fairly the consolidated financial position, the results of operations
and cash flows and the stockholders' equity purported to be shown
therein of the Company and its subsidiaries at the respective dates and
for the respective periods to which they apply; and such financial
statements have been prepared in conformity with generally accepted
accounting principles, consistently applied throughout the periods
involved, except as otherwise stated therein and except for the
unaudited financial statements to the extent such unaudited financial
statements omit certain footnote disclosures and may be subject to
year-end audit adjustment which would not, individually or in the
aggregate, be material.

(c) Deloitte & Touche LLP, whose report is filed with the
Commission as a part of the Registration Statement, are and, during the
periods covered by their report, were independent public accountants as
required by the Securities Act and the Rules.

(d) The Company and each Parent have each been duly incorporated
and are validly existing as corporations (or, in the case of Capital
Bank, as a Florida-chartered bank) in good standing under the laws of
the State of Florida. Capital Factors, Inc., CF One, Inc. and CF Funding
Corp. are the only subsidiaries, direct or indirect, of the Company.
Each such subsidiary has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Florida. The Company does not control, directly or indirectly, any
corporation (other than its direct and indirect subsidiaries),
partnership, joint venture, association or other business organization.
The Company services the advances which represent all the assets of the
trust created to accommodate the securitization of factored advances
which is described in the Registration Statement and Prospectus and the
receivables collateralizing these advances. The Company and each of its
subsidiaries are duly qualified and in good standing as foreign
corporations in each jurisdiction in which the character or location of
its assets or properties (owned, leased or licensed) or the nature of
its business makes such
4
<PAGE>

qualification necessary except for such jurisdictions where the failure
to so qualify would not have a material adverse effect on the assets or
properties, business, results of operations, prospects or financial
condition of the Company and its subsidiaries, taken as a whole. Neither
the Company nor any of its subsidiaries owns, leases or licenses any
asset or property or conducts any business outside the United States of
America. Each of the Company and its subsidiaries has all requisite
corporate power and authority, and all necessary authorizations,
approvals, consents, orders, licenses, certificates and permits
(collectively, the "Authorizations") and has made all requisite
declarations, registrations and filings (collectively, the "Filings"),
of, from and with all governmental or regulatory bodies or any other
person or entity, to own, lease and license its assets and properties
and conduct its businesses as now being conducted and as described in
the Registration Statement and the Prospectus except for such
Authorizations and Filings, the failure to so obtain or make would not
have a material adverse effect upon the assets or properties, business,
results of operations, prospects or financial condition of the Company
and its subsidiaries, taken as a whole; no such authorization, approval,
consent, order, license, certificate or permit contains a materially
burdensome restriction other than as disclosed in the Registration
Statement and the Prospectus; and the Company has all such corporate
power and authority, and such authorizations, approvals, consents,
orders, licenses, certificates and permits to enter into, deliver and
perform this Agreement and to issue and sell the Shares (except as may
be required under applicable state and foreign Blue Sky laws and as may
have been obtained under the Securities Act).

(e) Each of the Company, its subsidiaries, Capital Bank and
Capital Bancorp are in compliance in all material respects with all laws
administered by and regulations of the Board of Governors of the Federal
Reserve System (the "Board"), the Federal Deposit Insurance Corporation
(the "FDIC") and any state bank regulatory authority with jurisdiction
over any of the Company, its subsidiaries, Capital Bank or Capital
Bancorp ("Bank Regulatory Authorities"), the failure to comply with
which would have a material adverse effect upon the assets or
properties, business, results of operations, prospects or financial
condition of the Company and its subsidiaries, taken as a whole. None of
the Company, its subsidiaries, Capital Bank or Capital Bancorp is a
party to any written agreement or memorandum of understanding with, or a
party to any commitment letter or similar undertaking to, or is subject
to any order or directive by, or is a recipient of any extraordinary
supervisory letter from, or has adopted any board resolutions (other
than certain resolutions adopted by the Board of Directors of Capital
Bank in 1993 which are referred to in the Registration Statement and
Prospectus) at the request of, any Bank Regulatory Authority which
restricts materially the conduct of its business, or in any manner
relates to its capital adequacy, its credit policies or its management,
nor have any of them been advised by any Bank Regulatory Authority that
it is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree,
agreement, memorandum of understanding, extraordinary supervisory
letter, commitment letter or similar submission, or any such board
resolutions.

(f) Except as disclosed in the Registration Statement and
Prospectus, the Company and each of its subsidiaries owns or possesses
adequate and enforceable rights, either as owner or licensee, to use all
trademarks, trademark applications, trade names,
5
<PAGE>

service marks, copyrights, copyright applications, licenses, know-how
and other similar rights and proprietary knowledge (collectively,
"Intangibles") necessary for the conduct of its business in all material
respects as described in the Registration Statement and the Prospectus.
The Company has not received any notice of, or to its best knowledge is
not aware of, any infringement of or conflict with asserted rights of
others with respect to any Intangibles which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a material adverse effect upon the assets or properties,
business, results of operations, prospects or financial condition of the
Company and its subsidiaries, taken as a whole.

(g) The Company or its subsidiaries has good title to each of the
items of personal property which are reflected in the financial
statements referred to in Section 4(c) or are referred to in the
Registration Statement and the Prospectus as being owned by them and
valid and enforceable leasehold interests in each of the items of real
and personal property which are referred to in the Registration
Statement and the Prospectus as being leased by them, in each case free
and clear of all liens, encumbrances, claims, security interests and
defects, other than those described in the Registration Statement and
the Prospectus and those which do not and will not have a material
adverse effect upon the assets or properties, business, results of
operations, prospects or financial condition of the Company and its
subsidiaries, taken as a whole.

(h) There is no litigation or governmental or other proceeding or
investigation before any court or before or by any public body or board
pending or, to the Company's and each Parent's best knowledge,
threatened against, or involving the assets, properties or business of,
the Company or either Parent or any of their respective directors or
officers which, to the best of the Company's present knowledge and
belief, would materially adversely affect any such assets or properties
or the business, results of operations, prospects or financial condition
of the Company and its subsidiaries, taken as a whole, or which is
otherwise material in the context of the offering of the Shares
contemplated hereby.

(i) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
described therein, (i) there has not been any material adverse change in
the assets or properties, business, results of operations, prospects or
financial condition of the Company, whether or not arising from
transactions in the ordinary course of business; (ii) the Company has
not sustained any material loss or interference with its assets,
businesses or properties (whether owned or leased) from fire, explosion,
earthquake, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or any court or legislative or
other governmental action, order or decree; and (iii) and since the date
of the latest balance sheet included in the Registration Statement and
the Prospectus, except as reflected therein, the Company has not (a)
issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, except such liabilities or obligations
as may be incurred in the ordinary course of business consistent with
past practice, (b) entered into any transaction not in the ordinary
course of business consistent with past practice or (c) declared or paid
any dividend or made any distribution on any shares of its stock or
6
<PAGE>

redeemed, purchased or otherwise acquired or agreed to redeem, purchase
or otherwise acquire any shares of its stock.

(j) There is no document or contract of a character required
to be described in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement which is not described
or filed as so required by the Securities Act or the Rules. Neither the
Company, its subsidiaries, nor to the best of the Company's knowledge,
any other party is in default in the observance or performance of any
term or obligation to be performed by it under any agreement filed as an
Exhibit to the Registration Statement, and no event has occurred which
with notice or lapse of time or both would constitute such a default, in
any such case which default or event would have a material adverse
effect on the assets or properties, business, results of operations,
prospects or financial condition of the Company and its subsidiaries,
taken as a whole. No default exists, and no event has occurred which
with notice or lapse of time or both would constitute a default, in the
due performance and observance of any term, covenant or condition, by
the Company or its subsidiaries of any other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which it
or its properties or business may be bound or affected which default or
event would have a material adverse effect on the assets or properties,
business, results of operations, prospects or financial condition of the
Company and its subsidiaries, taken as a whole.

(k) Neither the Company nor any of its subsidiaries is in
violation of any term or provision of its Amended and Restated Articles
of Incorporation (as amended, the "Articles") or its Bylaws or of any
franchise, license, permit, judgment, ruling, decree, order, statute,
rule or regulation, where the consequences of such violation would have
a material adverse effect on the assets or properties, business, results
of operations, prospects or financial condition of the Company and its
subsidiaries, taken as a whole.

(l) Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation of any of the transactions
contemplated hereby (including, without limitation, the issuance and
sale by the Company of the Shares) will give rise to a right to
terminate or accelerate the due date of any payment due under, or
conflict with or result in the breach of any term or provision of, or
constitute a default (or an event which with notice or lapse of time or
both would constitute a default) under, or require any consent or waiver
under, or result in the execution or imposition of any lien, charge or
encumbrance upon any properties or assets of the Company pursuant to the
terms of, any indenture, mortgage, deed of trust or other agreement or
instrument to which the Company is a party or by which it or any of its
properties or businesses is bound, or any franchise, license, permit,
judgment, ruling, decree, order, statute, rule or regulation applicable
to the Company, except for such termination, acceleration, conflict,
breach, default, lien, charge or encumbrance which would not,
individually or in the aggregate, have a material adverse affect on the
assets or properties, business, results of operations, prospects or
financial condition of the Company and its subsidiaries, taken as a
whole, or violate any provision of the Articles or Bylaws of the
Company, except for such consents or waivers which have already been
obtained and are in full force and effect.
7

<PAGE>

(m) The Company has an authorized and outstanding capital stock
as set forth under the caption "Description of Capital Stock" in the
Prospectus as of the date indicated therein. All of the outstanding
shares of Common Stock have been duly and validly issued and are fully
paid and nonassessable and none of them were issued in violation of any
preemptive or other similar right. The Shares have been duly authorized
and, when issued and sold pursuant to this Agreement, will be duly and
validly issued, fully paid and nonassessable and none of them will be
issued in violation of any preemptive or other similar right. Except as
disclosed in the Registration Statement and the Prospectus, there is no
outstanding option, warrant or other right (including, without
limitation, preemptive rights) calling for the issuance of, and there is
no commitment, plan or arrangement to issue, any share of stock of the
Company or any security convertible into, or exercisable or exchangeable
for, such stock or other equity interest in the Company. The Common
Stock and the Shares conform in all material respects to all statements
in relation thereto contained in the Registration Statement and the
Prospectus.

(n) No holder of any security of the Company has the right to
have any security owned by such holder included in the Registration
Statement or to demand registration of any security owned by such holder
during the period ending 180 days after the date of this Agreement.

(o) All necessary corporate action has been duly and validly
taken by the Company and each Parent to authorize the execution,
delivery and performance of this Agreement and the issuance and sale of
the Shares by the Company. This Agreement has been duly and validly
authorized, executed and delivered by the Company and each Parent and
constitutes a legal, valid and binding obligation of the Company and
each Parent enforceable against the Company and each Parent in
accordance with its terms, except (A) as the enforceability thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles and (B) to the extent that
rights to indemnity or contribution under this Agreement may be limited
by Federal and state securities laws or the public policy underlying
such laws.

(p) The Company is not involved in any labor dispute nor, to the
knowledge of the Company, is any such dispute threatened, which dispute
would have a material adverse effect on the assets or properties,
business, results of operations, prospects or financial condition of the
Company and its subsidiaries, taken as a whole.

(q) No transaction has occurred between or among the Company and
any of its affiliates, officers or directors or any affiliate or
affiliates of any such officer or director that is required to be
described in and is not described in the Registration Statement and the
Prospectus.

(r) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or which might reasonably be expected
to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or
8

<PAGE>

manipulation of the price of the Common Stock to facilitate the sale or
resale of any of the Shares.

(s) The Company and each Parent have filed all Federal, state,
local and foreign tax returns which are required to be filed by them
through the date hereof, or has received extensions thereof; all taxes
shown on such returns and all assessments received by them, have been
paid, to the extent that the same have become due, except where the
failure to so file or pay could not have a material adverse effect on
the assets or properties, business, results of operations, prospects or
financial condition of the Company and its subsidiaries, taken as a
whole.

(t) The Shares have been duly authorized for quotation on the
National Association of Securities Dealers Automated Quotation
("NASDAQ") National Market System, subject to official notice of
issuance, and a registration statement has been filed on Form 8-A
pursuant to Section 12 of the Exchange Act for the Shares, which
registration statement complies in all material respects with the
Exchange Act.

(u) The Company has complied with all of the requirements and
filed the required forms as specified in Florida Statutes Section
517.075.

(v) The Company is not an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.

5. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations
of the Underwriters under this Agreement are several and not joint. The
respective obligations of the Underwriters to purchase the Shares are subject to
each of the following terms and conditions:

(a) The Prospectus shall have been timely filed with the
Commission in accordance with Section 6(A)(a) of this Agreement.

(b) No order preventing or suspending the use of any preliminary
prospectus or the Prospectus shall have been or shall be in effect and
no order suspending the effectiveness of the Registration Statement
shall be in effect and no proceedings for such purpose shall be pending
before or threatened by the Commission, and any requests for additional
information on the part of the Commission (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been
complied with to the satisfaction of the Representative.

(c) The representations and warranties of the Company and each
Parent contained in this Agreement and in the certificates delivered
pursuant to Section 5(d) shall be true and correct when made and on and
as of each Closing Date as if made on such date and the Company shall
have performed all covenants and agreements and satisfied all the
conditions contained in this Agreement required to be performed or
satisfied by it at or before such Closing Date.

9
<PAGE>

(d) The Representative shall have received on each Closing Date a
certificate, addressed to the Representative and dated such Closing
Date, of (i) the chief executive or chief operating officer and the
chief financial officer or chief accounting officer of the Company,
acting solely in their capacities as executive officers of the Company,
to the effect that the signers of such certificate have carefully
examined the Registration Statement, the Prospectus and this Agreement
and that the representations and warranties of the Company in this
Agreement are true and correct on and as of such Closing Date with the
same effect as if made on such Closing Date and the Company has
performed all covenants and agreements and satisfied all conditions
contained in this Agreement required to be performed or satisfied by it
at or prior to such Closing Date and (ii) the chief executive officer or
chief operating officer of each Parent, acting solely in his capacity as
an executive officer of each Parent, to the effect that the signers of
such certificate have carefully examined the Registration Statement, the
Prospectus and this Agreement and that the representations and
warranties of such Parent in this Agreement are true and correct on and
as of such Closing Date with the same effect as if made on such Closing
Date.

(e) The Representative shall have received at the time this
Agreement is executed and on each Closing Date a signed letter from
Deloitte & Touche LLP addressed to the Representative and dated,
respectively, the date of this Agreement and each such Closing Date, in
form and substance reasonably satisfactory to the Representative,
confirming that they are independent accountants within the meaning of
the Securities Act and the Rules, that the response to Item 10 of the
Registration Statement is correct insofar as it relates to them and
stating in effect that:

(i) in their opinion the audited financial statements
included in the Registration Statement and the Prospectus and
reported on by them comply as to form in all material respects
with the applicable accounting requirements of the Securities Act
and the Rules;

(ii) on the basis of a reading of the amounts included in
the Registration Statement and the Prospectus under the headings
"Summary Consolidated Financial Data" and "Selected Consolidated
Financial Data," carrying out certain procedures (but not an
examination in accordance with generally accepted auditing
standards) which would not necessarily reveal matters of
significance with respect to the comments set forth in such
letter, a reading of the minutes of the meetings of the
stockholder and directors of the Company, and inquiries of
certain officials of the Company who have responsibility for
financial and accounting matters of the Company as to
transactions and events subsequent to the date of the latest
audited financial statements, except as disclosed in the
Registration Statement and the Prospectus, nothing came to their
attention which caused them to believe that:

(A) the amounts in "Summary Consolidated Financial
Data," and "Selected Consolidated Financial Data" included
in the Registration Statement and the Prospectus do not
agree with the corresponding amounts
10
<PAGE>

in the audited or unaudited financial statements from
which such amounts were derived; or

(B) with respect to the Company, there were, at a
specified date not more than five business days prior to
the date of the letter, any increases in the long-term
liabilities of the Company or any decreases in net income
or the stockholders' equity in the Company, as compared
with the amounts shown on the Company's audited balance
sheet for the fiscal year ended December 31, 1995 or for
the comparable period in the prior year, as the case may
be; and

(iii) they have performed certain other procedures as a
result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company) set forth in the
Registration Statement and the Prospectus and reasonably
specified by the Representative agrees with the accounting
records of the Company.

References to the Registration Statement and the Prospectus in
this paragraph (e) are to such documents as amended and
supplemented at the date of the letter.

(f) The Representative shall have received on each Closing Date
from Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., counsel
for the Company, an opinion, addressed to the Representative and dated
such Closing Date, and stating in effect that:

(i) The Company and each Parent have each been duly
organized and are validly existing as corporations (or in the
case of Capital Bank, as a Florida- chartered bank) in good
standing under the laws of the State of Florida. Each of Capital
Factors, Inc., CF One, Inc. and CF Funding Corp. has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its state of incorporation. The
Company and each of its subsidiaries are duly qualified and in
good standing as foreign corporations in each jurisdiction in
which the character or location of their respective assets or
properties (owned, leased or licensed) or the nature of their
respective businesses makes such qualification necessary, except
for such jurisdictions where the failure to so qualify would not
have a material adverse effect on the assets or properties,
business, results of operations or financial condition of the
Company and its subsidiaries, taken as a whole.

(ii) The Company has all requisite corporate power and
authority to own, lease and license its assets and properties and
conduct its business as now being conducted and as described in
the Registration Statement and the Prospectus; and the Company
has all requisite corporate power and authority and all necessary
authorizations, approvals, consents, orders, licenses,
certificates and permits to enter into, deliver and perform this
Agreement and to issue and sell the
11

<PAGE>

Shares (other than those required under the Securities Act, which
have been obtained, and state or foreign Blue Sky laws or as may
be required by the NASD in connection with the offering of the
Shares by the Underwriters, as to which no opinion need be
expressed).

(iii) The Company has an authorized and issued capital
stock as set forth under the caption "Capitalization" in the
Registration Statement and the Prospectus as of the date
indicated therein; the certificates evidencing the Shares are in
due and proper legal form and have been duly authorized for
issuance by the Company; all of the outstanding shares of Common
Stock of the Company have been duly and validly authorized and
issued and are fully paid and nonassessable and, to such
counsel's knowledge, none of them was issued in violation of any
preemptive or other similar right. The Shares have been duly
authorized and, when issued and sold pursuant to this Agreement,
will be duly and validly issued, fully paid and nonassessable
and, to such counsel's knowledge, none of them will have been
issued in violation of any preemptive or other similar right
contained in the Company's Articles or Bylaws or in any other
agreement or instrument known to such counsel. To such counsel's
knowledge, except as disclosed in the Registration Statement and
the Prospectus, there is no outstanding option, warrant or other
right calling for the issuance of, and no commitment, plan or
arrangement to issue, any share of stock of the Company or any
security convertible into, exercisable for, or exchangeable for
stock of the Company. The Common Stock and the Shares conform in
all material respects to the descriptions thereof contained in
the Registration Statement and the Prospectus.

(iv) All necessary corporate action has been duly and
validly taken by the Company and each Parent to authorize the
execution, delivery and performance of this Agreement and the
issuance and sale of the Shares. This Agreement has been duly and
validly authorized, executed and delivered by the Company and
each Parent.

(v) Neither the execution, delivery and performance of
this Agreement by the Company nor the consummation of any of the
transactions contemplated hereby (including, without limitation,
the issuance and sale by the Company of the Shares) will give
rise to a right to terminate or accelerate the due date of any
payment due under, or conflict with or result in the breach of
any term or provision of, or constitute a default (or any event
which with notice or lapse of time, or both, would constitute a
default) under, or require consent or waiver under, or result in
the execution or imposition of any lien, charge or encumbrance
upon any properties or assets of the Company or any of its
subsidiaries pursuant to the terms of any indenture, mortgage,
deed of trust, note or other agreement or instrument of which
such counsel is aware and to which the Company or any of its
subsidiaries is a party or by which it or any of its properties
or businesses is bound, or any statute, rule or regulation or, to
such counsel's knowledge, any franchise, license, permit,
judgment, ruling, decree or order applicable to the Company,
except for such termination, acceleration, conflict, breach,
default, lien,
12

<PAGE>

charge or encumbrance which would not, individually or in the
aggregate, have a material adverse effect on the assets or
properties, business, results of operations or financial
condition of the Company and its subsidiaries, taken as a whole,
or violate any provision of the Articles or Bylaws of the
Company, except for such consents or waivers which have already
been obtained and are in full force and effect.

(vi) To such counsel's knowledge, no default exists, and
no event has occurred which with notice or lapse of time, or
both, would constitute a default, in the due performance and
observance of any term, covenant or condition by the Company or
any of its subsidiaries of any indenture, mortgage, deed of
trust, note or any other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which it or
any of its assets or properties or businesses may be bound or
affected, where the consequences of such default would have a
material and adverse effect on the assets, properties,
businesses, results of operations or financial condition of the
Company and its subsidiaries, taken as a whole.

(vii) To such counsel's knowledge, the Company is not in
violation of any term or provision of its Articles or Bylaws or
any franchise, license, permit, judgment, ruling, decree, order,
statute, rule or regulation, where the consequences of such
violation would have a material and adverse effect on the assets,
properties, businesses, results of operations or financial
condition of the Company and its subsidiaries, taken as a whole.

(viii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
performance of this Agreement by the Company or either Parent or
the consummation of the transactions contemplated hereby, except
such as have been obtained under the Securities Act and such as
may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by
the several Underwriters and the clearance of the offering with
the NASD.

(ix) Except as disclosed in the Registration Statement,
to such counsel's knowledge, there is no litigation or
governmental or other proceeding or investigation, before any
court or before or by any public body or board pending or which
is required to be disclosed in the Registration Statement or
Prospectus by the Act and the Rules, other than those described
therein.

(x) To such counsel's knowledge, the Company, each of its
subsidiaries and each Parent are in compliance in all material
respects with all laws administered by and regulations of each
Bank Regulatory Authority with jurisdiction over the Company, its
subsidiaries or either Parent, the failure to comply with which
would have a material adverse effect upon the assets or
properties, business, results of operations or financial
condition of the Company and its subsidiaries, taken as a whole.

13
<PAGE>

(xi) The statements in the Prospectus under the captions
"Description of Capital Stock" and "Business -- Regulation," to
the extent that such statements constitute a summary of documents
referred to therein or matters of law or legal conclusions, are
fair summaries in all material respects and accurately present
the information called for with respect to such documents and
matters. To such counsel's knowledge, there are no contracts or
other documents required to be filed as exhibits to, or described
or referred to in, the Registration Statement which have not been
so filed with the Commission or which are not fairly described or
referred to in the Registration Statement.

(xii) The Registration Statement and the Prospectus and
each amendment or supplement thereto (except for the financial
statements and other financial and statistical data included
therein, as to which such counsel expresses no opinion) comply as
to form in all material respects with the requirements of the
Securities Act and the Rules.

(xiii) The Registration Statement has become effective
under the Securities Act, and to the best knowledge of such
counsel no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for
that purpose have been instituted or are threatened, pending or
contemplated.

(xiv) The Company is not an "investment company" or an
entity "controlled" by an "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended.

To the extent deemed advisable by such counsel, they may rely as
to matters of fact on certificates of responsible officers of the
Company and public officials and on the opinions of other counsel
satisfactory to the Representative as to matters which are governed by
laws other than the laws of the State of Florida and the Federal laws of
the United States; PROVIDED that such counsel shall state that in their
opinion the Underwriters and they are justified in relying on such other
opinions. Copies of such certificates and other opinions shall be
furnished to the Representative and counsel for the Underwriters.

In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of
the Company, representatives of the Representative, including
Underwriters' counsel, and representatives of the independent certified
public accountants of the Company, at which conferences the contents of
the Registration Statement and the Prospectus and related matters were
discussed and, although such counsel is not passing upon and does not
assume any responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement and the
Prospectus (relying as to materiality to a large extent upon the
opinions and representations of officers and other representatives of
the Company), on the basis of the foregoing, no facts have come to the
attention of such counsel which lead such counsel to believe that the
Registration Statement at the time the Registration Statement became
effective (except with respect to the financial statements and notes
thereto and
14

<PAGE>

other financial and statistical data contained therein, as to which such
counsel need express no opinion or belief) contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus as amended or
supplemented (except with respect to the financial statements and notes
thereto and other financial and statistical data contained therein, as
to which such counsel need make no statement or express any opinion or
belief) on the date thereof and on such Closing Date contained any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Notwithstanding the preceding sentence, the opinions expressed in (iii)
and (xi) above remain in effect and shall in no way be limited by the
foregoing.

(g) All proceedings taken in connection with the sale of the Firm
Shares and the Option Shares as herein contemplated shall be reasonably
satisfactory in form and substance to the Representative and its counsel
and the Underwriters shall have received from Simpson Thacher & Bartlett
a favorable opinion, addressed to the Underwriters and dated such
Closing Date, with respect to the Shares, the Registration Statement and
the Prospectus, and such other related matters as the Representative may
reasonably request, and the Company shall have furnished to Simpson
Thacher & Bartlett such documents as they may reasonably request for the
purpose of enabling them to pass upon such matters.

(h) The Representative shall have received on each Closing Date a
certificate, addressed to the Representative, and dated such Closing
Date, of an executive officer of the Company, acting solely in his
capacity as an executive officer of the Company, to the effect that the
signer of such certificate has reviewed and understands the provisions
of Section 517.075 of the Florida Statutes, and represents that the
Company has complied, and at all times will comply, with all provisions
of Section 517.075 and further, that as of such Closing Date, neither
the Company nor any of its affiliates does business with the government
of Cuba or with any person or affiliate located in Cuba.

6. COVENANTS OF THE COMPANY. (A) The Company covenants and
agrees as follows:

(a) The Company shall prepare the Prospectus in a form approved
by the Representative and file such Prospectus pursuant to Rule 424(b)
under the Securities Act not later than the Commission's close of
business on the second business day following the execution and delivery
of this Agreement and shall promptly advise the Representative (i) when
the Registration Statement and any amendment thereto shall have become
effective, (ii) of any request by the Commission for any amendment of
the Registration Statement or the Prospectus or for any additional
information, (iii) of the prevention or suspension of the use of any
preliminary prospectus or the Prospectus or of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any
proceeding for that purpose and (iv) of the receipt by the Company of
any notification with respect to the suspension of the qualification of
the Shares for sale in any jurisdiction or the initiation or threatening
of
15

<PAGE>

any proceeding for such purpose. The Company shall not file any
amendment of the Registration Statement or supplement to the Prospectus
unless the Company has furnished the Representative a copy for its
review prior to filing and shall not file any such proposed amendment or
supplement to which the Representative reasonably objects. The Company
shall use its best efforts to prevent the issuance of any such stop
order and, if issued, to obtain as soon as possible the withdrawal
thereof.

(b) If, at any time when a prospectus relating to the Shares is
required to be delivered under the Securities Act and the Rules, any
event occurs as a result of which the Prospectus as then amended or
supplemented would include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein
in the light of the circumstances under which they were made not
misleading, or if it shall be necessary to amend or supplement the
Prospectus to comply with the Securities Act or the Rules, the Company
promptly shall prepare and file with the Commission, subject to the
second sentence of paragraph (a) of this Section 6(A), an amendment or
supplement which shall correct such statement or omission or an
amendment which shall effect such compliance.

(c) The Company shall make generally available to its security
holders and to the Representative as soon as practicable, but not later
than 45 days after the end of the 12-month period beginning at the end
of the fiscal quarter of the Company during which the Effective Date
occurs (or 90 days if such 12-month period coincides with the Company's
fiscal year), an earnings statement (which need not be audited) of the
Company, covering such 12-month period, which shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 of the
Rules.

(d) The Company shall furnish to the Representative and counsel
for the Underwriters, without charge, signed copies of the Registration
Statement (including all exhibits thereto and amendments thereof) as
originally filed and to each other Underwriter a conformed copy of the
Registration Statement (without exhibits thereto) and all amendments
thereof and, so long as delivery of a prospectus by an Underwriter or
dealer may be required by the Securities Act or the Rules, as many
copies of any preliminary prospectus and the Prospectus and any
amendments thereof and supplements thereto as the Representative may
reasonably request.

(e) The Company shall cooperate with the Representative and its
counsel in endeavoring to qualify the Shares for offer and sale under
the laws of such jurisdictions as the Representative may designate and
shall maintain such qualifications in effect so long as required for the
distribution of the Shares; PROVIDED, HOWEVER, that the Company shall
not be required in connection therewith, as a condition thereof, to
qualify as a foreign corporation or to execute a general consent to
service of process in any jurisdiction or subject itself to taxation as
doing business in any jurisdiction in which it is not now so qualified
or subject.

(f) For a period of five years after the date of this Agreement,
the Company shall supply to the Representative, and to each other
Underwriter who may so request in
16

<PAGE>

writing, copies of such financial statements and other periodic and
special reports as the Company may from time to time distribute
generally to the holders of any class of its capital stock and to
furnish to the Representative a copy of each annual or other report it
shall be required to file with the Commission (including the Report on
Form SR required by Rule 463 of the Rules).

(g) Without the prior written consent of the Representative, for
a period of 180 days after the date of this Agreement, the Company and
each of its individual directors and officers shall not offer for sale,
sell, contract to sell, distribute, transfer, grant any option for the
sale of, or otherwise dispose of, directly or indirectly (other than on
Form S-8 or on any successor form), or exercise any registration rights
with respect to, any equity securities of the Company (or any securities
convertible into, exercisable for or exchangeable for equity securities
of the Company), except for the issuance of the Shares pursuant to the
Registration Statement and the issuance of options pursuant to the
Company's Stock Option Plan as described in the Registration Statement
and the Prospectus. In the event that during this period, (i) any
options are issued pursuant to the Company's Stock Option Plan that are
exercisable during such 180-day period or (ii) any registration is
effected on Form S-8 or on any successor form relating to options that
are exercisable during such 180-day period, the Company shall obtain the
written agreement of such grantee or holder of such registered
securities that, for a period of 180 days after the date of this
Agreement, such person will not, without the prior written consent of
the Representative, offer for sale, sell, distribute, grant any option
for the sale of, or otherwise dispose of, directly or indirectly, or
exercise any registration rights with respect to, any shares of Common
Stock (or any securities convertible into, exercisable for, or
exchangeable for any shares of Common Stock) owned by such person.

(h) On or before completion of this offering, the Company shall
make all filings required under applicable securities laws and by the
National Association of Securities Dealers Automated Quotation System
(the "NASDAQ") National Market System (including any required
registration under the Exchange Act).

(B) The Company agrees to pay, or reimburse if paid by the
Representative, whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, all costs and expenses incident to
the public offering of the Shares and the performance of the obligations of the
Company under this Agreement including those relating to: (i) the preparation,
printing, filing and distribution of the Registration Statement including all
exhibits thereto, each preliminary prospectus, the Prospectus, all amendments
and supplements to the Registration Statement and the Prospectus, and the filing
and distribution of this Agreement; (ii) the preparation and delivery of
certificates for the Shares to the Underwriters; (iii) the registration or
qualification of the Shares for offer and sale under the securities or Blue Sky
laws of the various jurisdictions referred to in Section 6(A)(e), including the
reasonable fees and disbursements of counsel for the Underwriters in connection
with such registration and qualification and the preparation, printing,
distribution and shipment of preliminary and supplementary Blue Sky memoranda;
(iv) the furnishing (including costs of shipping and mailing) to the
Representative and to the Underwriters of copies of each preliminary prospectus,
the Prospectus and all amendments or supplements to the Prospectus, and of the
several documents
17

<PAGE>

required by this Section to be so furnished, as may be reasonably requested for
use in connection with the offering and sale of the Shares by the Underwriters
or by dealers to whom Shares may be sold; (v) the filing fees of the National
Association of Securities Dealers, Inc. in connection with its review of the
terms of the public offering; (vi) the furnishing (including costs of shipping
and mailing) to the Representative and to the Underwriters of copies of all
reports and information 6 required by Section 6(A)(f); (vii) inclusion of the
Shares for quotation on the NASDAQ National Market System; and (viii) all
transfer taxes, if any, with respect to the sale and delivery of the Shares by
the Company to the Underwriters. Subject to the provisions of Section 10, the
Underwriters agree to pay, whether or not the transactions contemplated hereby
are consummated or this Agreement is terminated, all costs and expenses incident
to the performance of the obligations of the Underwriters under this Agreement
not payable by the Company pursuant to the preceding sentence, including,
without limitation, the fees and disbursements of counsel for the Underwriters.

7. COVENANTS OF CAPITAL BANK. Capital Bank covenants and agrees
with the several Underwriters that for a period of 180 days after the date of
the Prospectus, it will not offer for sale, sell, contract to sell, distribute,
transfer, grant any option for the sale of, or otherwise dispose of, directly or
indirectly, or exercise any registration rights with respect to, any equity
securities of the Company or any securities convertible into, exercisable for or
exchangeable for any equity securities of the Company without the prior written
consent of the Representative.

8. INDEMNIFICATION.

(a) The Company and each Parent agree, jointly and severally, to
indemnify and hold harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act against any and all
losses, claims, damages and liabilities, joint or several (including any
reasonable investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit
or proceeding or any claim asserted), to which they, or any of them, may
become subject under the Securities Act, the Exchange Act or other
Federal or state law or regulation, at common law or otherwise, insofar
as such losses, claims, damages or liabilities arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus, the Registration Statement or
the Prospectus or any amendment thereof or supplement thereto, or arise
out of or are based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; PROVIDED, HOWEVER, that such
indemnity shall not inure to the benefit of any Underwriter (or any
person controlling such Underwriter) on account of any losses, claims,
damages or liabilities arising from the sale of the Shares to any person
by such Underwriter if such untrue statement or omission or alleged
untrue statement or omission was made in such preliminary prospectus,
the Registration Statement or the Prospectus, or such amendment or
supplement, in reliance upon and in conformity with information
furnished in writing to the Company by the Representative on behalf of
any Underwriter specifically for use therein; and PROVIDED FURTHER that
as to any preliminary prospectus this indemnity agreement shall not
inure to the benefit of any
18

<PAGE>

Underwriter on account of any loss, claim, damage or liability arising
from the sale of Shares to any person by that Underwriter if that
Underwriter failed to send or give a copy of the Prospectus (as the same
may be amended a supplemented) to that person within the time required
by the Securities Act, and the untrue statement or alleged untrue
statement of any material fact or omission or alleged omission to state
a material fact in such preliminary prospectus was corrected in the
Prospectus, unless such failure resulted from non-compliance by the
Company with Section 6(d) of this Agreement. This indemnity agreement
will be in addition to any liability which the Company and each Parent
may otherwise have.

(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, each Parent, each person, if
any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, each director of the
Company, and each officer of the Company who signs the Registration
Statement, to the same extent as the foregoing indemnity from the
Company and each Parent to each Underwriter, but only insofar as such
losses, claims, damages or liabilities arise out of or are based upon
any untrue statement or omission or alleged untrue statement or omission
which was made in any preliminary prospectus, the Registration Statement
or the Prospectus, or any amendment thereof or supplement thereto with
respect to information furnished in writing by or on behalf of such
Underwriter expressly for use in the Registration Statement or
Prospectus or any amendment or supplement thereto. The Company
acknowledges that the statements contained in the paragraph relating to
stabilization on the inside front cover page of the Prospectus and under
the caption "Underwriting" in the Prospectus constitute the only
information furnished in writing by or on behalf of any Underwriter
expressly for use in the Registration Statement or Prospectus or any
amendment or supplement thereto.

(c) Any party that proposes to assert the right to be indemnified
under this Section will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in
respect of which a claim is to be made against an indemnifying party or
parties under this Section, notify each such indemnifying party of the
commencement of such action, suit or proceeding, enclosing a copy of all
papers served. No indemnification provided for in Section 8(a) or 8(b)
shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given
was unaware of the proceeding to which such notice would have related
and was prejudiced by the failure to give such notice but the omission
so to notify such indemnifying party of any such action, suit or
proceeding shall not relieve it from any liability that it may have to
any indemnified party for contribution or otherwise than under this
Section. In case any such action, suit or proceeding shall be brought
against any indemnified party and it shall notify the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof and the approval by the
indemnified party of such counsel, the indemnifying party shall not be
liable to such indemnified party for any legal or other
19

<PAGE>

expenses, except as provided below and except for the reasonable costs
of investigation subsequently incurred by such indemnified party in
connection with the defense thereof. The indemnified party shall have
the right to employ its counsel in any such action, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (i) the employment of counsel by such indemnified party has
been authorized in writing by the indemnifying parties, (ii) the
indemnified party shall have reasonably concluded that there may be a
conflict of interest between the indemnifying parties and the
indemnified party in the conduct of the defense of such action (in which
case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party) or (iii) the
indemnifying parties shall not have employed counsel to assume the
defense of such action within a reasonable tune after notice of the
commencement thereof, in each of which cases the fees and expenses of
counsel shall be at the expense of the indemnifying parties. An
indemnifying party shall not be liable for any settlement of any action,
suit, proceeding or claim effected without its written consent which
shall not be unreasonably withheld.

9. CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 8(a) or 8(b) is due in accordance with its terms but for any reason is
held to be unavailable from the Company or a Parent, the Company, each Parent,
and the Underwriters shall contribute to the aggregate losses, claims, damages
and liabilities (including any investigation, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement of,
any action, suit or proceeding or any claims asserted, but after deducting any
contribution received by any person entitled hereunder to contribution from any
persons who may be liable for contribution) to which the Company, each Parent
and one or more of the Underwriters may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Company and each
Parent on the one hand and the Underwriters on the other from the offering of
the Shares or, if such allocation is not permitted by applicable law or
indemnification is not available as a result of the indemnifying party not
having received notice as provided in Section 8 hereof, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Company and each Parent on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Company and the Underwriters shall be deemed to be in the same proportion as
(x) the total proceeds from the offering (net of underwriting discounts but
before deducting expenses) received by the Company, as set forth in the table on
the cover page of the Prospectus, bear to (y) the underwriting discounts
received by the Underwriters, as set forth in the table on the cover page of the
Prospectus. The relative fault of the Company and each Parent or the
Underwriters shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact related to information
supplied by the Company or the Parents or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, each Parent and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 9 were determined by PRO RATA allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this
20

<PAGE>

Section 9, in no case shall any Underwriter (except as may be provided in the
agreement among underwriters) be liable or responsible for any amount in excess
of the underwriting discount applicable to the Shares purchased by such
Underwriter hereunder; PROVIDED, HOWEVER, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 9, each person, if
any, who controls an Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such Underwriter, and each person, if any, who controls the
Company within the meaning of the Section 15 of the Securities Act or Section 20
of the Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to the immediately
preceding sentence of this Section 9. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section, notify such party
or parties from whom contribution may be sought, but the omission so to notify
such party or parties from whom contribution may be sought shall not relieve the
party or parties from whom contribution may be sought from any other obligation
it or they may have hereunder or otherwise than under this Section. No party
shall be liable for contribution with respect to any action, suit, proceeding or
claim settled without its written consent. The Underwriter's obligations to
contribute pursuant to this Section 9 are several in proportion to their
respective underwriting commitments and not joint.

10. TERMINATION. This Agreement may be terminated with respect
to the Shares to be purchased on a Closing Date by the Representative by
notifying the Company at any time:

(a) in the absolute discretion of the Representative at or before
any Closing Date: (i) if on or prior to such date, any domestic or
international event or act or occurrence has materially disrupted, or in
the opinion of the Representative will in the future materially disrupt,
the securities markets; (ii) if there has occurred any new outbreak or
material escalation of hostilities or other calamity or crisis the
effect of which on the financial markets of the United States is such as
to make it, in the judgment of the Representative, inadvisable to
proceed with the offering; (iii) if there shall be such a material
adverse change in general financial, political or economic conditions or
the effect of international conditions on the financial markets in the
United States is such as to make it, in the judgment of the
Representative, inadvisable or impracticable to market the Shares; (iv)
if trading in the Shares has been suspended by the Commission or trading
generally on the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. or the NASDAQ National Market System has been suspended
or limited, or minimum or maximum ranges for prices for securities shall
have been fixed, or maximum ranges for prices for securities have been
required, by said exchanges or by order of the Commission, the National
Association of Securities Dealers, Inc., or any other governmental or
regulatory authority; or (v) if a banking moratorium has been declared
by any state or Federal authority, or

21
<PAGE>

(b) at or before any Closing Date, that any of the conditions
specified in Section 5 shall not have been fulfilled when and as
required by this Agreement.

If this Agreement is terminated pursuant to any of its
provisions, the Company and each Parent shall not be under any liability to any
Underwriter, and no Underwriter shall be under any liability to the Company or
either Parent, except that (x) if this Agreement is terminated by the
Representative or the Underwriters because of any failure, refusal or inability
on the part of the Company or one of the Parents to comply with the terms or to
fulfill any of the conditions of this Agreement or is terminated in accordance
with the provisions of this Section 10, the Company will reimburse the
Underwriters for all out-of-pocket expenses (including the reasonable fees and
disbursements of their counsel) incurred by them in connection with the proposed
purchase and sale of the Shares or in contemplation of performing their
obligations hereunder, (y) no Underwriter who shall have failed or refused to
purchase the Shares agreed to be purchased by it under this Agreement, without
some reason sufficient hereunder to justify cancellation or termination of its
obligations under this Agreement, shall be relieved of liability to the Company
or to the other Underwriters for damages occasioned by its failure or refusal
and (z) the obligations of the parties pursuant to Sections 6(B), 8 and 9 of
this Agreement shall not be affected by the foregoing.

11. SUBSTITUTION OF UNDERWRITERS. If one or more of the
Underwriters shall fail (other than for a reason sufficient to justify the
cancellation or termination of this Agreement under Section 10) to purchase on
any Closing Date the Shares agreed to be purchased on such Closing Date by such
Underwriter or Underwriters, the Representative may find one or more substitute
underwriters to purchase such Shares or make such other arrangements as the
Representative may deem advisable or one or more of the remaining Underwriters
may agree to purchase such Shares in such proportions as may be approved by the
Representative, in each case upon the terms set forth in this Agreement. If no
such arrangements have been made by the close of business on the business day
following such Closing Date,

(a) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall not exceed 10% of the Shares
that all the Underwriters are obligated to purchase on such Closing
Date, then each of the nondefaulting Underwriters shall be obligated to
purchase such Shares on the terms herein set forth in proportion to
their respective obligations hereunder; PROVIDED, that in no event shall
the maximum number of Shares that any Underwriter has agreed to purchase
pursuant to Section 1 be increased pursuant to this Section 11 by more
than one-ninth of such number of Shares without the written consent of
such Underwriter, or

(b) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall exceed 10% of the Shares that
all the Underwriters are obligated to purchase on such Closing Date,
then the Company shall be entitled to an additional business day within
which it may, but is not obligated to, find one or more substitute
underwriters reasonably satisfactory to the Representative to purchase
such Shares upon the terms set forth in this Agreement.

22
<PAGE>

In any such case, either the Representative or the Company shall
have the right to postpone the applicable Closing Date for a period of not more
than five business days in order that necessary changes and arrangements
(including any necessary amendments or supplements to the Registration Statement
or Prospectus) may be effected by the Representative and the Company. If the
number of Shares to be purchased on such Closing Date by such defaulting
Underwriter or Underwriters shall exceed 10% of the Shares that all the
Underwriters are obligated to purchase on such Closing Date, and none of the
nondefaulting Underwriters or the Company shall make arrangements pursuant to
this Section within the period stated for the purchase of the Shares that the
defaulting Underwriters agreed to purchase, this Agreement shall terminate with
respect to the Shares to be purchased on such Closing Date without liability on
the part of any nondefaulting Underwriter to the Company and without liability
on the part of the Company, except in both cases as provided in Sections 6(B),
8, 9 and 10. The provisions of this Section shall not in any way affect the
liability of any defaulting Underwriter to the Company or the nondefaulting
Underwriters arising out of such default. A substitute underwriter hereunder
shall become an Underwriter for all purposes of this Agreement.

12. MISCELLANEOUS. The respective agreements, representations,
warranties, indemnities and other statements of the Company, each Parent or
their officers and of the Underwriters set forth in or made pursuant to this
Agreement shall remain in full force and effect, regardless of any investigation
made by or on behalf of any Underwriter or the Company or any of the officers,
directors or controlling persons referred to in Sections 8 and 9 hereof, and
shall survive delivery of and payment for the Shares. The provisions of Sections
6(B), 8, 9 and 10 shall survive the termination or cancellation of this
Agreement.

This Agreement has been and is made for the benefit of the
Underwriters and the Company and their respective successors and assigns, and,
to the extent expressed herein, for the benefit of persons controlling any of
the Underwriters, or the Company, and directors and officers of the Company, and
their respective successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include any purchaser of Shares from any Underwriter merely
because of such purchase.

All notices and communications hereunder shall be in writing and
mailed or delivered or by telephone or telegraph if subsequently confirmed in
writing, (a) if to the Representative, c/o Oppenheimer & Co., Inc., Oppenheimer
Tower, World Financial Center, New York, New York 10281 Attention: Richard D.
White, and (b) if to the Company, to its agent for service as such agent's
address appears on the cover page of the Registration Statement.

This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without regard to principles of conflict
of laws.

This Agreement may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.

23
<PAGE>

Please confirm that the foregoing correctly sets forth the
agreement among us.

Very truly yours,

CAPITAL FACTORS HOLDING, INC.

By:
------------------------------
Name:
Title:

CAPITAL BANK

By:
------------------------------
Name:
Title:

CAPITAL BANCORP

By:
------------------------------
Name:
Title:

Confirmed:

OPPENHEIMER & CO., INC.

Acting severally on behalf of itself and
as representative of the several Underwriters
named in Schedule I annexed hereto.

OPPENHEIMER & CO., INC.

By:
------------------------------
Name:
Title:

24
<PAGE>

SCHEDULE I

NUMBER OF
FIRM SHARES TO
UNDERWRITER BE PURCHASED
----------- --------------

Oppenheimer & Co., Inc.

--------------

Total 2,000,000
==============

AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CAPITAL FACTORS HOLDING, INC.

Pursuant to Sections 607.1003, 607.1006 and 607.1007 of the Florida
Business Corporation Act, the undersigned Corporation adopts the following
Amended and Restated Articles of Incorporation.

The original Articles of Incorporation were filed with the Secretary of
State on April 29, 1994, under the name "Capital Factors Holding, Inc."

ARTICLE I

The name of the corporation is CAPITAL FACTORS HOLDING, INC.
(hereinafter called the "Corporation).

ARTICLE II

The address of the principal office and the mailing address of the
Corporation at the time of filing of these Amended and Restated Articles of
Incorporation is 1799 West Oakland Park Boulevard, Fort Lauderdale, Florida
33311.

ARTICLE III

The aggregate number of shares of all classes of capital stock which
this Corporation shall have authority to issue is Twenty-Six Million
(26,000,000), consisting of (i) Twenty-Five Million (25,000,000) shares of
common stock, par value $0.01 per share (the "Common Stock"), and (ii) One
Million (1,000,000) shares of preferred stock, par value $0.01 per share (the
Preferred Stock").

The designations and the preferences, limitations and relative rights
of the Preferred Stock and the Common Stock of the Corporation are as follows:

A. PROVISIONS RELATING TO THE PREFERRED STOCK.

1. Except as set forth in subsection D of this Article III,
the Preferred Stock may be issued from time to time in one or more classes or
series, the shares of each class or series to have such designations and powers,
preferences and rights, and qualifications, limitations and restrictions thereof
as are stated and expressed herein and in the resolution or resolutions
providing for the issue of such class or series adopted by the Board of
Directors as hereinafter prescribed.

<PAGE>

2. Except as set forth in subsection D of this Article III,
authority is hereby expressly granted to and vested in the Board of Directors to
authorize the issuance of the Preferred Stock from time to time in one or more
classes or series, to determine and take necessary proceedings fully to effect
the issuance and redemption of any such Preferred Stock and, with respect to
each class or series of the Preferred Stock, to fix and state by the resolution
or resolutions from time to time adopted providing for the issuance thereof the
following:

(i) whether or not the class or series is to
have voting rights, full or limited, or is to be without voting rights;

(ii) the number of shares to constitute the class
or series and the designations thereof;

(iii) the preferences and relative, participating,
optional or other special rights, if any, and the qualifications, limitations or
restrictions thereof, if any, with respect to any class or series;

(iv) whether or not the shares of any class or
series shall be redeemable and if redeemable the redemption price or prices, and
the time or times at which and the terms and conditions upon which, such shares
shall be redeemable and the manner of redemption;

(v) whether or not the shares of a class or
series shall be subject to the operation of retirement or sinking funds to be
applied to the purchase or redemption of such shares for retirement, and if such
retirement or sinking fund or funds be established, the annual amount thereof
and the terms and provisions relative to the operation thereof;

(vi) the dividend rate, whether dividends are
payable in cash, stock of the Corporation, or other property, the conditions
upon which and the times when such dividends are payable, the preference to or
the relation to the payment of the dividends payable on any other class or
classes or series of stock whether or not such dividend shall be cumulative or
noncumulative, and if cumulative, the date or dates from which such dividends
shall accumulate;

(vii) the preferences, if any, and the amounts
thereof which the holders of any class or series thereof shall be entitled to
receive upon the voluntary or involuntary dissolution of, or upon any
distribution of the assets of, the Corporation;

(viii) whether or not the shares of any class or
series shall be convertible into, or exchangeable for, the shares of any other
class or classes or of any other series of the same or any other class or
classes of stock of the Corporation and the conversion price or prices or ratio
or ratios or the rate or rates at which such conversion or exchange may be made,
with such adjustments, if any, as shall be stated and expressed or provided for
in such resolution or resolutions; and

(ix) such other special rights and protective
provisions with respect to any class or series as the Board of Directors may
deem advisable.

<PAGE>

The shares of each class or series of the Preferred Stock may vary from
the shares of any other series thereof in any or all of the foregoing respects.
The Board of Directors may increase the number of shares of the Preferred Stock
designated for any existing class or series by a resolution adding to such class
or series authorized and unissued shares of the Preferred Stock not designated
for any other class or series. The Board of Directors may decrease the number of
shares of the Preferred Stock designated for any existing class or series by a
resolution, subtracting from such series unissued shares of the Preferred Stock
designated for such class or series, and the shares so subtracted shall become
authorized, unissued and undesignated shares of the Preferred Stock.

B. PROVISIONS RELATING TO THE COMMON STOCK.

1. Except as otherwise required by law or as may be provided
by the resolutions of the Board of Directors authorizing the issuance of any
class or series of Preferred Stock, as herein above provided, all rights to vote
and all voting power shall be vested exclusively in the holders of the Common
Stock.

2. Subject to the rights of the holders of the Preferred Stock
the holders of the Common Stock shall be entitled to receive when, as and if
declared by the Board of Directors, out of funds legally available therefor,
dividends payable in cash, stock or otherwise.

3. Upon any liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, and after the holders of the
Preferred Stock shall have been paid in full the amounts to which they shall be
entitled (if any) or a sum sufficient for such payment in full shall have been
set aside, the remaining net assets of the Corporation shall be distributed pro
rata to the holders of the Common Stock in accordance with their respective
rights and interests to the exclusion of the holders of the Preferred Stock.

C. GENERAL PROVISIONS.

1. Except as may be provided by the resolutions of the Board
of Directors authorizing the issuance of any class or series of Preferred Stock
as hereinabove provided, cumulative voting by any shareholder is hereby
expressly denied.

2. Except as set forth in the remaining sentences of this
subsection C.2 of this Article III, no shareholder of this Corporation shall
have, by reason of its holding shares of any class or series of stock of this
Corporation, any preemptive or preferential rights to purchase or subscribe for
any other shares of any class or series of this Corporation now or hereafter to
be authorized, and any other equity securities, or any notes, debentures,
warrants, bonds, or other securities convertible into or carrying options or
warrants to purchase shares of any class, now or hereafter to be authorized,
whether or not the issuance of any such shares, or such notes, debentures, bonds
or other securities, would adversely affect the dividend or voting rights of
such shareholder. Notwithstanding the foregoing, the Corporation may contract
with a shareholder to grant such preemptive or preferential rights during the
period that and so long as Capital Bank, a Florida corporation and presently the
sole shareholder of the Corporation, or such other entity or person designated
in writing by Capital Bank or by a previous designee of Capital Bank and

<PAGE>

to which or whom Capital Bank or such previous designee transfers shares in the
Corporation constituting control of the Corporation within the meaning of
Section 368(c) of the Internal Revenue Code of 1986, as amended (the "Code"),
that is, shares having at least 80 percent of the total combined voting power of
all classes of stock entitled to vote for directors of the Corporation and
constituting at least 80 percent of the total number of shares of each other
class of stock of the Corporation, all as defined in Section 368(c) of the Code
(all such stock in the aggregate constituting "Eighty Percent Control" and
Capital Bank or any such designee being hereinafter referred to as an "Eighty
Percent Holder"), holds Eighty Percent Control (such period being hereinafter
referred to as the "Eighty Percent Period").

D. PROHIBITIONS AGAINST FUTURE ISSUANCES AND INVESTMENTS.

Notwithstanding any other provision of these Articles, during the
Eighty Percent Period, and although a vote of shareholders is not and shall not
be required under applicable law or these Articles for the issuance of shares of
capital stock or equity securities or any debt or other instrument that is
convertible or exchangeable into stock or any other equity security of the
Corporation or any subsidiary, including options or any other rights to purchase
capital stock, pursuant to any employee benefit plan or stock option plan
(collectively, "Plan") or otherwise, that are authorized under these Articles,
but unissued, or, in many circumstances, to acquire an ownership interest in
certain assets, the advance written approval of the Eighty Percent Holder shall
be required (unless waived in writing by the Eighty Percent Holder) prior to (i)
the Corporation taking any action, including without limitation, the issuance of
any capital stock or other equity security or any debt or other instrument that
is convertible or exchangeable into stock or any other equity security of the
Corporation, including options or any other rights to purchase capital stock,
pursuant to any Plan or otherwise, that would reduce the percentage of ownership
of the Eighty Percent Holder in the capital stock of the Corporation so that the
Eighty Percent Holder thereafter would not own stock constituting Eighty Percent
Control (treating options or any other rights to purchase capital stock as
exercised immediately upon issuance for purposes of making this determination)
or that otherwise would reduce (or, with the taking of any action contemplated
by the instrument in question, could reduce) the Eighty Percent Holder's
ownership of Corporation stock below "control" of the Corporation within the
meaning of Section 368(c) of the Code; (ii) the Corporation acquiring or taking
any action to cause any subsidiary to acquire any direct or indirect ownership
interest in any asset that does not constitute part of an active trade or
business within the meaning of Section 355(b) of the Code, provided, however,
that the Corporation or any subsidiary may acquire any asset that is similar in
nature to the assets it holds on July 1, 1996, so long as that acquisition would
not cause the Corporation or any subsidiary not to be engaged in an active trade
or business within the meaning of Section 355(b) of the Code; or (iii) the
Corporation taking any action to cause the issuance of capital stock or equity
security, any debt or other instrument that is convertible or exchangeable into
stock or any other equity security by or of any subsidiary, and the Corporation
shall not take any such action above without the prior written approval of the
Eighty Percent Holder. Any attempt to take such action without the prior written
approval of the Eighty Percent Holder during the Eighty Percent Period shall be
null and void and any purported issuance of capital stock or an equity security
or any convertible or exchangeable debt or other instrument or any right to
purchase the same in the Corporation or any subsidiary or any acquisition in
violation of this provision shall not terminate

<PAGE>

the Eighty Percent Period. The Corporation may enter into an agreement with,
among others, any Eighty Percent Holder reflecting the terms of this Article
III D.

E. SHARE RECLASSIFICATION

On the date of filing of the Amended and Restated Articles of
Incorporation with the Secretary of State of the State of Florida, the 1,000
issued and outstanding shares of the Corporation's previously authorized common
stock, par value $1.00 per share (the "Old Common Stock"), shall thereby and
thereupon be classified and converted into 10,000,000 validly issued, fully paid
and nonassessable shares of Common Stock reflecting a conversion ratio of 10,000
shares of Common Stock for each one share of Old Common Stock. Each certificate
that heretofore represented shares of Old Common Stock shall thereafter
represent the number of whole shares of Common Stock into which the shares of
Old Common Stock represented by such certificate were reclassified and
converted; provided, however, that each person holding of record a stock
certificate or certificates that represented shares of Old Common Stock shall
receive, upon surrender of each such certificate or certificates, a new
certificate or certificates evidencing and representing the number of shares of
Common Stock to which such person is entitled.

ARTICLE IV

CALL OF SPECIAL SHAREHOLDERS MEETING. Except as otherwise required by
law, the Corporation shall not be required to hold a special meeting of
shareholders of the Corporation unless (in addition to any other requirements of
law) (i) the holders of not less than thirty (30) percent of all the votes
entitled to be cast on any issue proposed to be considered at the proposed
special meeting sign, date and deliver to the Corporation's secretary one or
more written demands for the meeting describing the purpose or purposes for
which it is to be held or (ii) the meeting is called by the Board pursuant to a
resolution approved by a majority of the entire Board. Only business within the
purpose or purposes described in the special meeting notice required by Section
607.0705 of the Florida Business Corporation Act may be conducted at a special
shareholders' meeting.

ARTICLE V

The Board of Directors of the Corporation shall consist of at least one
director, with the exact number to be fixed from time to time by the affirmative
vote of a majority of directors in office, subject to the advance written
approval of the Eighty Percent Holder during the Eighty Percent Period (unless
such requirement is waived in writing by the Eighty Percent Holder and although
a vote of shareholders is not required under applicable law or these Articles to
fix the number of directors), or the affirmative vote of holders of a majority
of the shares entitled to vote on the matter. During the Eighty Percent Period,
the Corporation shall not take any action to alter the composition of the board
of directors of any subsidiary or to remove or replace any director then serving
on the board of directors of any subsidiary without the advance written approval
of the Eighty Percent Holder (unless such requirement is waived in writing by
the

<PAGE>

Eighty Percent Holder). The Corporation may enter into an agreement with any
Eighty Percent Holder reflecting the terms of this Article V, as they relate to
the Eighty Percent Holder.

ARTICLE VI

Whenever any vacancy on the Board shall occur due to death,
resignation, retirement, disqualification, removal, increase in the number of
directors, or otherwise, a majority of directors in office, although less than a
quorum of the entire Board, subject to the advance written approval of the
Eighty Percent Holder during the Eighty Percent Period (unless such requirement
is waived in writing by the Eighty Percent Holder and although a vote of
shareholders is not required under applicable law or these Articles to fill
vacancies in the Board), or holders of a majority of the shares entitled to vote
on the matter may fill the vacancy or vacancies for the balance of the unexpired
term or terms, at which time a successor or successors shall be duly elected by
the shareholders and qualified. The Corporation may enter into an agreement with
any Eighty Percent Holder reflecting the terms of this Article VI, as they
relate to the Eighty Percent Holder.

ARTICLE VII

Unless otherwise provided by law, the Bylaws of the Corporation may be
altered, amended or repealed, in whole or in part, or new Bylaws may be adopted,
by the affirmative vote of a majority of the directors in office, subject to the
advance written approval of the Eighty Percent Holder during the Eighty Percent
Period (unless such requirement is waived in writing by the Eighty Percent
Holder and although a vote of shareholders is not required under applicable law
or these Articles to alter, amend or repeal, in whole or in part, the Bylaws, or
to adopt new Bylaws), or the affirmative vote of holders of a majority of the
shares entitled to vote on the matter. The Corporation may enter into an
agreement with any Eighty Percent Holder reflecting the terms of this Article
VII, as they relate to the Eighty Percent Holder.

ARTICLE VIII

This Corporation shall indemnify and shall advance expenses on behalf
of its officers and directors to the fullest extent not prohibited by any law in
existence either now or hereafter.

<PAGE>

IN WITNESS WHEREOF, the Corporation has caused these Amended and
Restated Articles of Incorporation to be executed by an officer of this
Corporation this 28th day of June, 1996.

CAPITAL FACTORS HOLDING, INC

By: /s/ JAVIER J. HOLTZ
-----------------------------------
Name: Javier J. Holtz
Title: Chairman of the Board and
Executive Vice President

AMENDED AND RESTATED

BYLAWS

CAPITAL FACTORS HOLDING, INC.

(A FLORIDA CORPORATION)

<PAGE>

INDEX

ARTICLE ONE - OFFICES........................................................ 1
1. Registered Office............................................... 1
2. Other Offices................................................... 1

ARTICLE TWO - MEETINGS OF SHAREHOLDERS....................................... 1
1. Place........................................................... 1
2. Time of Annual Meeting.......................................... 1
3. Call of Special Meetings........................................ 1
4. Conduct of Meetings............................................. 1
5. Notice and Waiver of Notice..................................... 2
6. Business and Nominations for Annual and Special Meetings........ 2
7. Quorum.......................................................... 2
8. Voting Per Share................................................ 3
9. Voting of Shares................................................ 3
10. Proxies......................................................... 4
11. Shareholder List................................................ 4
12. Action Without Meeting.......................................... 4
13. Fixing Record Date.............................................. 5
14. Inspectors and Judges........................................... 5
15. Voting for Directors............................................ 5

ARTICLE THREE - DIRECTORS.................................................... 6
1. Number; Election and Term; Removal.............................. 6
2. Vacancies....................................................... 6
3. Powers.......................................................... 6
4. Place of Meetings............................................... 6
5. Annual Meeting.................................................. 6
6. Regular Meetings................................................ 6
7. Special Meetings and Notice..................................... 6
8. Quorum; Required Vote; Presumption of Assent.................... 7
9. Action Without Meeting.......................................... 7
10. Conference Telephone or Similar Communications Equipment
Meetings........................................................ 7
11. Committees...................................................... 8
12. Compensation of Directors....................................... 8
13. Chairman of the Board........................................... 8

ARTICLE FOUR - OFFICERS...................................................... 8
1. Positions....................................................... 8
2. Election of Specified Officers by Board......................... 9
3. Election or Appointment of Other Officers....................... 9
4. Salaries........................................................ 9

-i-

<PAGE>

5. Term; Resignation............................................... 9
6. President....................................................... 9
7. Vice Presidents................................................. 9
8. Secretary....................................................... 10
9. Treasurer....................................................... 10
10. Other Officers; Employees and Agents............................ 10

ARTICLE FIVE - CERTIFICATES FOR SHARES....................................... 10
1. Issue of Certificates........................................... 10
2. Legends for Preferences and Restrictions on Transfer............ 10
3. Facsimile Signatures............................................ 11
4. Lost Certificates............................................... 11
5. Transfer of Shares.............................................. 12
6. Registered Shareholders......................................... 12
7. Redemption of Control Shares.................................... 12

ARTICLE SIX - GENERAL PROVISIONS............................................. 12
1. Dividends....................................................... 12
2. Reserves........................................................ 12
3. Checks.......................................................... 12
4. Fiscal Year..................................................... 12
5. Seal............................................................ 12
6. Gender...........................................................13

ARTICLE SEVEN - AMENDMENT OF BYLAWS.......................................... 13

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CAPITAL FACTORS HOLDING, INC.

AMENDED AND RESTATED BYLAWS

ARTICLE ONE

OFFICES

Section 1. REGISTERED OFFICE. The registered office of CAPITAL FACTORS
HOLDING, INC., a Florida corporation (the "Corporation"), shall be located in
the City of Fort Lauderdale, State of Florida, unless otherwise designated by
the Board of Directors.

Section 2. OTHER OFFICES. The Corporation may also have offices at such
other places, either within or without the State of Florida, as the Board of
Directors of the Corporation (the "Board of Directors") may from time to time
determine or as the business of the Corporation may require.

ARTICLE TWO

MEETINGS OF SHAREHOLDERS

Section 1. PLACE. All annual meetings of shareholders shall be held at
such place, within or without the State of Florida, as may be designated by the
Board of Directors and stated in the notice of the meeting or in a duly executed
waiver of notice thereof. Special meetings of shareholders may be held at such
place, within or without the State of Florida, and at such time as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.

Section 2. TIME OF ANNUAL MEETING. Annual meetings of shareholders
shall be held on such date and at such time fixed, from time to time, by the
Board of Directors, provided that there shall be an annual meeting held every
year at which the shareholders shall elect a Board of Directors (or the
appropriate class of the Board of Directors if the Board of Directors is divided
into two or more classes) and transact such other business as may properly be
brought before the meeting.

Section 3. CALL OF SPECIAL MEETINGS. Special meetings of the
shareholders shall be held if called in accordance with the procedures set forth
in the Corporation's Articles of Incorporation (the "Articles of Incorporation")
for the call of a special meeting of shareholders.

Section 4. CONDUCT OF MEETINGS. The Chairman of the Board (or in his
absence, the President or such other designee of the Chairman of the Board)
shall preside at the annual and special meetings of shareholders and shall be
given full discretion in establishing the rules and procedures to be followed in
conducting the meetings, except as otherwise provided by law, the Articles of
Incorporation or in these Bylaws.

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Section 5. NOTICE AND WAIVER OF NOTICE. Except as otherwise provided by
law, written or printed notice stating the place, day and hour of the meeting
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) nor more than sixty
(60) days before the day of the meeting, either personally or by first-class
mail, by or at the direction of the President, the Secretary, or the officer or
person calling the meeting, to each shareholder of record entitled to vote at
such meeting. If the notice is mailed at least thirty (30) days before the date
of the meeting, it may be done by a class of United States mail other than first
class. If mailed, such notice shall be deemed to be delivered when deposited in
the United States mail addressed to the shareholder at his address as it appears
on the stock transfer books of the Corporation, with postage thereon prepaid. If
a meeting is adjourned to another time and/or place, and if an announcement of
the adjourned time and/or place is made at the meeting, it shall not be
necessary to give notice of the adjourned meeting unless the Board of Directors,
after adjournment, fixes a new record date for the adjourned meeting. Whenever
any notice is required to be given to any shareholder, a waiver thereof in
writing signed by the person or persons entitled to such notice, whether signed
before, during or after the time of the meeting stated therein, and delivered to
the Corporation for inclusion in the minutes or filing with the corporate
records, shall be equivalent to the giving of such notice. Neither the business
to be transacted at, nor the purpose of, any regular or special meeting of the
shareholders need be specified in any written waiver of notice. Attendance of a
person at a meeting shall constitute a waiver of (a) lack of or defective notice
of such meeting, unless the person objects at the beginning to the holding of
the meeting or the transacting of any business at the meeting, or (b) lack of
defective notice of a particular matter at a meeting that is not within the
purpose or purposes described in the meeting notice, unless the person objects
to considering such matter when it is presented.

Section 6. BUSINESS AND NOMINATIONS FOR ANNUAL AND SPECIAL MEETINGS.
Business transacted at any special meeting shall be confined to the purposes
stated in the notice thereof. At any annual meeting of shareholders, only such
business shall be conducted as shall have been properly brought before the
meeting in accordance with the requirements and procedures set forth in the
Articles of Incorporation and these Bylaws, if any. Only such persons who are
nominated for election as directors of the Corporation in accordance with the
requirements and procedures set forth in the Articles of Incorporation and these
Bylaws, if any, shall be eligible for election as directors of the Corporation.

Section 7. QUORUM. Shares entitled to vote as a separate voting group
may take action on a matter at a meeting only if a quorum of these shares exists
with respect to that matter. Except as otherwise provided in the Articles of
Incorporation or by law, a majority of the shares entitled to vote on the matter
by each voting group, represented in person or by proxy, shall constitute a
quorum at any meeting of shareholders, but in no event shall a quorum consist of
less than one-third (1/3) of the shares of each voting group entitled to vote.
If less than a majority of outstanding shares entitled to vote are represented
at a meeting, a majority of the shares so represented may adjourn the meeting
from time to time without further notice. After a quorum has been established at
any shareholders' meeting, the subsequent withdrawal of shareholders, so as to
reduce the number of shares entitled to vote at the meeting below the number
required for

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a quorum, shall not affect the validity of any action taken at the meeting or
any adjournment thereof. Once a share is represented for any purpose at a
meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is or
must be set for that adjourned meeting.

Section 8. VOTING PER SHARE. Except as otherwise provided in the
Articles of Incorporation or by law, each shareholder is entitled to one (1)
vote for each outstanding share held by him on each matter voted at a
shareholders' meeting.

Section 9. VOTING OF SHARES. A shareholder may vote at any meeting of
shareholders of the Corporation, either in person or by proxy. Shares standing
in the name of another corporation, domestic or foreign, may be voted by the
officer, agent or proxy designated by the bylaws of such corporate shareholder
or, in the absence of any applicable bylaw, by such person or persons as the
board of directors of the corporate shareholder may designate. In the absence of
any such designation, or, in case of conflicting designation by the corporate
shareholder, the chairman of the board, the president, any vice president, the
secretary and the treasurer of the corporate shareholder, in that order, shall
be presumed to be fully authorized to vote such shares. Shares held by an
administrator, executor, guardian, personal representative, or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name or the name of his
nominee. Shares held by or under the control of a receiver, a trustee in
bankruptcy proceedings, or an assignee for the benefit of creditors may be voted
by such person without the transfer thereof into his name. If shares stand of
record in the names of two or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the entirety or
otherwise, or if two or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary of the Corporation is given
notice to the contrary and is furnished with a copy of the instrument or order
appointing them or creating the relationship wherein it is so provided, then
acts with respect to voting shall have the following effect: (a) if only one
votes, in person or by proxy, his act binds all; (b) if more than one vote, in
person or by proxy, the act of the majority so voting binds all; (c) if more
than one vote, in person or by proxy, but the vote is evenly split on any
particular matter, each faction is entitled to vote the share or shares in
question proportionally; or (d) if the instrument or order so filed shows that
any such tenancy is held in unequal interest, a majority or a vote evenly split
for purposes hereof shall be a majority or a vote evenly split in interest. The
principles of this paragraph shall apply, insofar as possible, to execution of
proxies, waivers, consents, or objections and for the purpose of ascertaining
the presence of a quorum.

Section 10. PROXIES. Any shareholder of the Corporation, other person
entitled to vote on behalf of a shareholder pursuant to law, or attorney-in-fact
for such persons may vote the shareholder's shares in person or by proxy. Any
shareholder of the Corporation may appoint a proxy to vote or otherwise act for
him by signing an appointment form, either personally or by his
attorney-in-fact. An executed telegram or cablegram appearing to have been
transmitted by such person, or a photographic, photostatic, or equivalent
reproduction of an appointment form,

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shall be deemed a sufficient appointment form. An appointment of a proxy is
effective when received by the Secretary of the Corporation or such other
officer or agent which is authorized to tabulate votes, and shall be valid for
up to 11 months, unless a longer period is expressly provided in the appointment
form. The death or incapacity of the shareholder appointing a proxy does not
affect the right of the Corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment. An appointment of a proxy is revocable by the shareholder
unless the appointment is coupled with an interest.

Section 11. SHAREHOLDER LIST. After fixing a record date for a meeting
of shareholders, the Corporation shall prepare an alphabetical list of the names
of all its shareholders who are entitled to notice of the meeting, arranged by
voting group with the address of, and the number and class and series, if any,
of shares held by each. The shareholders' list must be available for inspection
by any shareholder for a period of ten (10) days prior to the meeting or such
shorter time as exists between the record date and the meeting and continuing
through the meeting at the Corporation's principal office, at a place identified
in the meeting notice in the city where the meeting will be held, or at the
office of the Corporation's transfer agent or registrar. Any shareholder of the
Corporation or his agent or attorney is entitled on written demand to inspect
the shareholders' list (subject to the requirements of law), during regular
business hours and at his expense, during the period it is available for
inspection. The Corporation shall make the shareholders' list available at the
meeting of shareholders, and any shareholder or his agent or attorney is
entitled to inspect the list at any time during the meeting or any adjournment.

Section 12. ACTION WITHOUT MEETING. Any action required by law to be
taken at a meeting of shareholders, or any action that may be taken at a meeting
of shareholders, may be taken without a meeting or notice if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize to take such action at a meeting at which all shares
entitled to vote thereon were present and voted with respect to the subject
matter thereof, and such consent shall have the same force and effect as a vote
of shareholders taken at such a meeting.

Section 13. FIXING RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other proper purposes, the
Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than seventy
(70) days, and, in case of a meeting of shareholders, not less than ten (10)
days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which the notice of the meeting is mailed or the date on which the
resolutions of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section 13, such determination
shall

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apply to any adjournment thereof, except where the Board of Directors fixes a
new record date for the adjourned meeting or as required by law.

Section 14. INSPECTORS AND JUDGES. The Board of Directors in advance of
any meeting may, but need not, appoint one or more inspectors of election or
judges of the vote, as the case may be, to act at the meeting or any
adjournment(s) thereof. If any inspector or inspectors, or judge or judges, are
not appointed, the person presiding at the meeting may, but need not, appoint
one or more inspectors or judges. In case any person who may be appointed as an
inspector or judge fails to appear or act, the vacancy may be filled by the
Board of Directors in advance of the meeting, or at the meeting by the person
presiding thereat. The inspectors or judges, if any, shall determine the number
of shares of stock outstanding and the voting power of each, the shares of stock
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots and consents, hear and determine
all challenges and questions arising in connection with the right to vote, count
and tabulate votes, ballots and consents, determine the result, and do such acts
as are proper to conduct the election or vote with fairness to all shareholders.
On request of the person presiding at the meeting, the inspector or inspectors
or judge or judges, if any, shall make a report in writing of any challenge,
question or matter determined by him or them, and execute a certificate of any
fact found by him or them.

Section 15. VOTING FOR DIRECTORS. Unless otherwise provided in the
Articles of Incorporation, directors shall be elected by a plurality of the
votes cast by the shares entitled to vote in the election at a meeting at which
a quorum is present.

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ARTICLE THREE

DIRECTORS

Section 1. NUMBER; ELECTION AND TERM; REMOVAL. The number of directors
of the Corporation shall be fixed from time to time, within the limits specified
by and as provided in the Articles of Incorporation; provided, however, that no
director's term shall be shortened by reason of a resolution reducing the number
of directors. The directors shall be elected at the annual meeting of the
shareholders, except as provided in Section 2 of this Article, and each director
elected shall hold office for the term for which he is elected and until his
successor is elected and qualified or until his earlier resignation, removal
from office or death. Directors must be natural persons who are 18 years of age
or older but need not be residents of the State of Florida, shareholders of the
Corporation or citizens of the United States. Any director may be removed at any
time, with or without cause, at a special meeting of the shareholders called for
that purpose.

Section 2. VACANCIES. A director may resign at any time by giving
written notice to the Corporation, the Board of Directors or the Chairman of the
Board. Such resignation shall take effect when the notice is delivered unless
the notice specifies a later effective date, in which event the pending vacancy
may be filled before the effective date if the successor does not take office
until the effective date. Any vacancy occurring in the Board of Directors and
any directorship to be filled by reason of an increase in the size of the Board
of Directors shall be filled as provided in the Articles of Incorporation. A
director elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in office, or until the next election of one or more directors
by shareholders if the vacancy is caused by an increase in the number of
directors.

Section 3. POWERS. Except as provided in the Articles of Incorporation
and by law, all corporate powers shall be exercised by or under the authority
of, and the business and affairs of the Corporation shall be managed under the
direction of, its Board of Directors.

Section 4. PLACE OF MEETINGS. Meetings of the Board of Directors,
regular or special, may be held either within or without the State of Florida.

Section 5. ANNUAL MEETING. The first meeting of each newly elected
Board of Directors shall be held, without call or notice, immediately following
each annual meeting of shareholders.

Section 6. REGULAR MEETINGS. Regular meetings of the Board of Directors
may also be held without notice at such time and at such place as shall from
time to time be determined by the Board of Directors.

Section 7. SPECIAL MEETINGS AND NOTICE. Special meetings of the Board
of Directors may be called by the Chairman of the Board or by the President and
shall be called by the Secretary on the written request of any two directors.
Written notice of special meetings of the

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Board of Directors shall be given to each director at least forty-eight (48)
hours before the meeting. Except as required by statute, neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting. Notices to directors shall be in writing and delivered personally or
mailed to the directors at their addresses appearing on the books of the
Corporation. Notice by mail shall be deemed to be given at the time when the
same shall be received. Notice to directors may also be given by telegram,
teletype or other form of electronic communication. Notice of a meeting of the
Board of Directors need not be given to any director who signs a written waiver
of notice before, during or after the meeting. Attendance of a director at a
meeting shall constitute a waiver of notice of such meeting and a waiver of any
and all objections to the place of the meeting, the time of the meeting and the
manner in which it has been called or convened, except when a director states,
at the beginning of the meeting or promptly upon arrival at the meeting, any
objection to the transaction of business because the meeting is not lawfully
called or convened.

Section 8. QUORUM; REQUIRED VOTE; PRESUMPTION OF ASSENT. A majority of
the number of directors fixed by, or in the manner provided in, these bylaws
shall constitute a quorum for the transaction of business; provided, however,
that whenever, for any reason, a vacancy occurs in the Board of Directors, a
quorum shall consist of a majority of the remaining directors until the vacancy
has been filled. The act of a majority of the directors present at a meeting at
which a quorum is present when the vote is taken shall be the act of the Board
of Directors. A director of the Corporation who is present at a meeting of the
Board of Directors or a committee of the Board of Directors when corporate
action is taken shall be presumed to have assented to the action taken, unless
he objects at the beginning of the meeting, or promptly upon his arrival, to
holding the meeting or transacting specific business at the meeting, or he votes
against or abstains from the action taken.

Section 9. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at a meeting of the Board of Directors or a committee thereof may be
taken without a meeting if a consent in writing, setting forth the action taken,
is signed by all of the members of the Board of Directors or the committee, as
the case may be, and such consent shall have the same force and effect as a
unanimous vote at a meeting. Action taken under this section is effective when
the last director signs the consent, unless the consent specifies a different
effective date. A consent signed under this Section 9 shall have the effect of a
meeting vote and may be described as such in any document.

Section 10. CONFERENCE TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT
MEETINGS. Members of the Board of Directors may participate in a meeting of the
Board by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation in such a meeting shall constitute presence in
person at the meeting, except where a person participates in the meeting for the
express purpose of objecting to the transaction of any business on the ground
the meeting is not lawfully called or convened.

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Section 11. COMMITTEES. The Board of Directors, by resolution adopted
by a majority of the full Board of Directors, may designate from among its
members one or more other committees, each of which, to the extent provided in
such resolution, shall have and may exercise all of the authority of the Board
of Directors in the business and affairs of the Corporation except where the
action of the full Board of Directors is required by statute. Each committee
must have two or more members who serve at the pleasure of the Board of
Directors. The Board of Directors, by resolution adopted in accordance with this
Article Three, may designate one or more directors as alternate members of any
committee, who may act in the place and stead of any absent member or members at
any meeting of such committee. Vacancies in the membership of a committee shall
be filled by the Board of Directors at a regular or special meeting of the Board
of Directors. Each committee shall keep minutes and other appropriate records of
its proceedings and report the same to the Board of Directors when required. The
designation of any such committee and the delegation thereto of authority shall
not operate to relieve the Board of Directors, or any member thereof, of any
responsibility imposed upon it or him by law.

Section 12. COMPENSATION OF DIRECTORS. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings. Directors may receive such other
compensation as may be approved by the Board of Directors.

Section 13. CHAIRMAN OF THE BOARD. The Board of Directors may, in its
discretion, choose a Chairman of the Board who shall preside at meetings of the
shareholders and of the directors. The Chairman of the Board shall have such
other powers and shall perform such other duties as shall be designated by the
Board of Directors. The Chairman of the Board shall be a member of the Board of
Directors but no other officers of the Corporation need be a director. The
Chairman of the Board shall serve until his successor is chosen and qualified,
but he may be removed at any time by the affirmative vote of a majority of the
Board of Directors.

ARTICLE FOUR

OFFICERS

Section 1. POSITIONS. The officers of the Corporation shall consist of
a President, one or more Vice Presidents, a Secretary and a Treasurer, and, if
elected by the Board of Directors by resolution, a Chairman of the Board. Any
two or more offices may be held by the same person.

Section 2. ELECTION OF SPECIFIED OFFICERS BY BOARD. The Board of
Directors at its first meeting after each annual meeting of shareholders shall
elect a President, one or more Vice Presidents, a Secretary and a Treasurer.

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Section 3. ELECTION OR APPOINTMENT OF OTHER OFFICERS. Such other
officers and assistant officers and agents as may be deemed necessary may be
elected or appointed by the Board of Directors, or, unless otherwise specified
herein, appointed by the President of the Corporation. The Board of Directors
shall be advised of appointments by the President at or before the next
scheduled Board of Directors meeting.

Section 4. SALARIES. The salaries of all officers of the Corporation to
be elected by the Board of Directors pursuant to Article Four, Section 2 hereof
shall be fixed from time to time by the Board of Directors or pursuant to its
discretion. The salaries of all other elected or appointed officers of the
Corporation shall be fixed from time to time by the President of the Corporation
or pursuant to his direction.

Section 5. TERM; RESIGNATION. The officers of the Corporation shall
hold office until their successors are chosen and qualified. Any officer or
agent elected or appointed by the Board of Directors or the President of the
Corporation may be removed, with or without cause, by the Board of Directors.
Any officers or agents appointed by the President of the Corporation pursuant to
Section 3 of this Article Four may also be removed from such officer positions
by the President, with or without cause. Any vacancy occurring in any office of
the Corporation by death, resignation, removal or otherwise shall be filled by
the Board of Directors, or, in the case of an officer appointed by the President
of the Corporation, by the President or the Board of Directors. Any officer of
the Corporation may resign from his respective office or position by delivering
notice to the Corporation. Such resignation is effective when delivered unless
the notice specifies a later effective date. If a resignation is made effective
at a later date and the Corporation accepts the future effective date, the Board
of Directors may fill the pending vacancy before the effective date if the Board
provides that the successor does not take office until the effective date.

Section 6. PRESIDENT. The President shall be the Chief Executive
Officer of the Corporation, shall have general and active management of the
business of the Corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect. In the absence of the Chairman of
the Board or in the event the Board of Directors shall not have designated a
Chairman of the Board, the President shall preside at meetings of the
shareholders and the Board of Directors.

Section 7. VICE PRESIDENTS. The Vice Presidents in the order of their
seniority, unless otherwise determined by the Board of Directors, shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President. They shall perform such other duties and have such
other powers as the Board of Directors shall prescribe or as the President may
from time to time delegate.

Section 8. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the shareholders and record all the
proceedings of the meetings of the shareholders and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be

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given, notice of all meetings of the shareholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or President, under whose supervision he shall be. He
shall keep in safe custody the seal of the Corporation and, when authorized by
the Board of Directors, affix the same to any instrument requiring it.

Section 9. TREASURER. The Treasurer shall have the custody of corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors at its regular meetings or when the
Board of Directors so requires an account of all his transactions as treasurer
and of the financial condition of the Corporation. Unless otherwise specified by
the Board of Directors, the Treasurer shall be the Corporation's Chief Financial
Officer.

Section 10. OTHER OFFICERS; EMPLOYEES AND AGENTS. Each and every other
officer, employee and agent of the Corporation shall possess, and may exercise,
such power and authority, and shall perform such duties, as may from time to
time be assigned to him by the Board of Directors, the officer so appointing him
and such officer or officers who may from time to time be designated by the
Board of Directors to exercise such supervisory authority.

ARTICLE FIVE

CERTIFICATES FOR SHARES

Section 1. ISSUE OF CERTIFICATES. The Corporation shall deliver
certificates representing all shares to which shareholders are entitled; and
such certificates shall be signed by the Chairman of the Board, President or a
Vice President, and by the Secretary or an Assistant Secretary of the
Corporation, and may be sealed with the seal of the Corporation or a facsimile
thereof.

Section 2. LEGENDS FOR PREFERENCES AND RESTRICTIONS ON TRANSFER. The
designations, relative rights, preferences and limitations applicable to each
class of shares and the variations in rights, preferences and limitations
determined for each series within a class (and the authority of the Board of
Directors to determine variations for future series) shall be summarized on the
front or back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the Corporation will furnish the
shareholder a full statement of this information on request and without charge.
Every certificate representing shares that are restricted as to the sale,
disposition, or transfer of such shares shall also indicate that such shares are
restricted as to transfer and there shall be set forth or fairly summarized upon
the certificate, or the certificate shall indicate that the Corporation will
furnish to any shareholder upon request and without charge, a full statement of
such restrictions. If the Corporation issues any shares that are not registered
under the Securities Act of 1933, as amended, or registered or qualified under

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applicable state securities laws, the transfer of any such shares shall be
restricted substantially in accordance with the following legend:

"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1)
REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY
APPLICABLE STATE LAW, OR (2) AT HOLDER'S EXPENSE, AN OPINION
(SATISFACTORY TO THE CORPORATION) OF COUNSEL (SATISFACTORY TO
THE CORPORATION) THAT REGISTRATION IS NOT REQUIRED."

Section 3. FACSIMILE SIGNATURES. The signatures of the Chairman of the
Board, the President or a Vice President and the Secretary or Assistant
Secretary upon a certificate may be facsimiles, if the certificate is manually
signed by a transfer agent, or registered by a registrar, other than the
Corporation itself or an employee of the Corporation. In case any officer who
has signed or whose facsimile signature has been placed upon such certificate
shall have ceased to be such officer before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer at
the date of the issuance.

Section 4. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost or destroyed.

Section 5. TRANSFER OF SHARES. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.

Section 6. REGISTERED SHAREHOLDERS. The Corporation shall be entitled
to recognize the exclusive rights of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of the State
of Florida.

-11-

<PAGE>

Section 7. REDEMPTION OF CONTROL SHARES. As provided by the Florida
Business Corporation Act, if a person acquiring control shares of the
Corporation does not file an acquiring person statement with the Corporation,
the Corporation may, at the discretion of the Board of Directors, redeem the
control shares at the fair value thereof at any time during the 60-day period
after the last acquisition of such control shares. If a person acquiring control
shares of the Corporation files an acquiring person statement with the
Corporation, the control shares may be redeemed by the Corporation, at the
discretion of the Board of Directors, only if such shares are not accorded full
voting rights by the shareholders as provided by law.

ARTICLE SIX

GENERAL PROVISIONS

Section 1. DIVIDENDS. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in
cash, property, or its own shares pursuant to law and subject to the provisions
of the Articles of Incorporation.

Section 2. RESERVES. The Board of Directors may by resolution create a
reserve or reserves out of earned surplus for any proper purpose or purposes,
and may abolish any such reserve in the same manner.

Section 3. CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.

Section 4. FISCAL YEAR. The fiscal year of the Corporation shall end on
December 31st of each year, unless otherwise fixed by resolution of the Board of
Directors.

Section 5. SEAL. The corporate seal shall have inscribed thereon the
name and state of incorporation of the Corporation. The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.

Section 6. GENDER. All words used in these Bylaws in the masculine
gender shall extend to and shall include the feminine and neuter genders.

ARTICLE SEVEN

AMENDMENT OF BYLAWS

Unless otherwise provided by law, these Bylaws may be altered, amended
or repealed in whole or in part, or new Bylaws may be adopted, as provided in
the Articles of Incorporation.

-12-

GREENBERG TRAURIG

LETTERHEAD

July 3, 1996

Capital Factors Holding, Inc.
1799 West Oakland Park Boulevard
Fort Lauderdale, Florida 33311

Re: Capital Factors Holding, Inc.

Gentlemen:

On May 9, 1996, Capital Factors Holding, Inc., a Florida corporation
(the "Company"), filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 (No. 333-3419) (the "Registration Statement")
under the Securities Act of 1933, as amended (the "Act"). Such Registration
Statement relates to the sale by the Company of up to 2,300,000 shares (the
"Shares") of the Company's Common Stock, par value $0.01 per share (the "Common
Stock"). We have acted as counsel to the Company in connection with the
preparation and filing of the Registration Statement.

In connection therewith, we have examined and relied upon copies of (i)
the Company's Amended and Restated Articles of Incorporation and Amended and
Restated Bylaws; (ii) resolutions of the Board of Directors of Capital Bank, the
current sole shareholder of the Company, and of the Company's Board of Directors
and sole shareholder, authorizing the

<PAGE>

Capital Factors Holding, Inc.
July 3, 1996
Page 2

offering and the issuance of the Shares to be sold by the Company and related
matters; (iii) the Registration Statement and all amendments and exhibits
thereto; and (iv) such other documents and instruments as we have deemed
necessary for the expression of opinions herein contained. In making the
foregoing examinations, we have assumed the genuineness of all signatures and
the authenticity of all documents submitted to us as originals, and the
conformity to original documents of all documents submitted to us as certified
or photostatic copies. As to various questions of fact material to this opinion,
we have relied, to the extent we deemed reasonably appropriate, upon
representations or certificates of officers or directors of the Company, without
independently verifying the accuracy of such documents, records and instruments.

Based upon the foregoing examination, we are of the opinion that the
Shares have been duly and validly authorized and, when issued and delivered in
accordance with the terms of the Underwriting Agreement filed as Exhibit 1.1 to
the Registration Statement, will be validly issued, fully paid and
nonassessable.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption "Legal
Matters" in the prospectus comprising a part of the Registration Statement. In
giving such consent, we do not thereby admit that we are included within the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations promulgated thereunder.

Sincerely,

GREENBERG, TRAURIG, HOFFMAN,
LIPOFF, ROSEN & QUENTEL, P.A.

INTERCREDITOR AGREEMENT

THIS INTERCREDITOR AGREEMENT (the "AGREEMENT"), dated as of March 21,
1996, is made by and among:

CAPITAL FACTORS, INC., a Florida corporation (the "COMPANY");

FLEET CAPITAL CORPORATION, a Connecticut corporation ("FLEET");

CF FUNDING CORP., a Delaware corporation ("CF FUNDING"); and

BANKERS TRUST COMPANY, as Trustee for the benefit of the
Certificateholders from time to time (the "TRUSTEE").

RECITALS

WHEREAS, CF Funding, as buyer, and the Company, as seller, have entered
into a Contribution and Sale Agreement dated as of June 1, 1994 (as modified,
supplemented and in effect from time to time, (the "CONTRIBUTION AND SALE
AGREEMENT");

WHEREAS, CF Funding, as transferor, the Company, as servicer, and the
Trustee have entered into a POOLING AND SERVICING AGREEMENT dated as of June 1,
1994 (as modified, "Servicing Agreement"), a Series 1994-1 Supplement dated as
of June 1, 1994 (as modified, supplemented and in effect from time to time, (the
"SERIES 1994-1 SUPPLEMENT"), a Series 1994-2 Supplement dated as of December 1,
1994 (as modified, supplemented and in effect from time to time, (the "SERIES
1994-2 SUPPLEMENT"), and a Series 1995-1 Supplement dated as of June 1, 1995 (as
modified, supplemented and in effect from time to time, (the "SERIES 1995-1
SUPPLEMENT"), and together with the Series 1994-2 Supplement, Series 1994-1
Supplement, any other Series Supplement hereafter entered into, Pooling and
Servicing Agreement and Contribution and Sale Agreement, (the "SECURITIZATION
DOCUMENTS");

WHEREAS, pursuant to and in accordance with the Securitization
Documents, the Company has sold, assigned, transferred and conveyed to CF
Funding, and granted to CF Funding security interests in (and does so from time
to time), and CF Funding has assigned, transferred and conveyed to the Trustee,
and granted to the Trustee security interests in (and does so from time to
time), all of the Company's right, title and interest in, to and under the Trust
Advances existing from time to time together with the related Trust Receivables,
Trust Related Property, Trust Collections and other Proceeds with respect
thereto (each such term is as hereinafter defined);

WHEREAS, the Company desires to enter into a Loan and Security
Agreement dated as of March 4, 1996 with Fleet (as modified, supplemented and in
effect from time to time, the "LOAN AND SECURITY AGREEMENT");

<PAGE>

WHEREAS, pursuant to and in accordance with the Loan and Security
Agreement, the Company will grant to Fleet security interests in the Fleet
Collateral (as defined in the Loan and Security Agreement);

WHEREAS, pursuant to Section 3.01(i)(F) of the Pooling and Servicing
Agreement, the Company has requested that the Trustee enter into this Agreement,
and the Trustee has been directed and authorized by the required number of
Certificateholders to enter into an agreement in the form and substance of this
Agreement;

WHEREAS, the Company, Fleet, CF Funding and the Trustee have agreed to
join as parties to this Agreement to confirm the respective interests of the
foregoing in certain of the Company's assets; and

WHEREAS, all requirements and conditions prescribed by law for the
validity of this Agreement as a binding and legal instrument have been satisfied
and fulfilled and the execution and delivery of this Agreement have been duly
authorized by the parties hereto;

NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1 CERTAIN DEFINITIONS. Unless otherwise defined herein, the
following terms shall have the following meanings (all terms defined in this
Section 1.1 or in other provisions of this Agreement in the singular to have the
same meanings when used in the plural and VICE VERSA):

"BANKRUPTCY CODE" shall mean title 11, United States Code, as
amended from time to time, and any successor statute thereto.

"BUSINESS DAY" shall have the meaning ascribed to such term in
the Securitization Documents.

"CERTIFICATEHOLDERS" shall have the meaning ascribed to such
term in the Securitization Documents.

"CONFIRMATION LETTER" shall mean a letter from Deloitte
substantially in the form of Exhibit E hereto.

"CONTRIBUTION AND SALE AGREEMENT" is defined in the recitals
of this Agreement.

- 2 -

<PAGE>

"DELOITTE" shall mean Deloitte & Touche, LLP or any successor
thereto or any other Independent Public Accountant selected by the Company.

"FLEET COLLATERAL" shall have the meaning ascribed to the term
"Collateral" in the Loan and Security Agreement, except that the term "Fleet
Collateral" as used herein does not include any Trust Property.

"FLEET DEPOSIT ACCOUNTS" shall mean any of the Company's
demand, time, savings, passbook, money market or other depository accounts, and
any certificates of deposits, maintained by the Company with any bank, savings
and loan association, credit union or other depository institution, but
excluding all Trust Deposit Accounts and Trust Lock-Box Accounts.

"FLEET DOCUMENTS" shall mean the Loan and Security Agreement,
the Fleet Financing Statements, the Fleet Security Documents, and any other
document or instrument entered into or executed in connection with the
transactions contemplated with any of the foregoing.

"FLEET DOMINION ACCOUNT" shall mean a special account of Fleet
established by the Company pursuant to Section 6.2.5 of the Loan and Security
Agreement that is not a Trust Deposit Account or Trust Lock-Box Account.

"FLEET FINANCING STATEMENTS" shall mean the UCC-1 financing
statements naming the Company as debtor and Fleet as secured party filed to
perfect the security interests granted by the Company to Fleet under the Loan
and Security Agreement.

"FLEET LOCK-BOX" shall mean any lockbox arrangement
established pursuant to Section 6.2.5 of the Loan and Security Agreement, except
that in no event shall "Fleet Lock-Box" include any Trust Post Office Box or
Trust Lock-Box Account.

"FLEET SECURITY DOCUMENTS" shall have the meaning ascribed to
the term "Security Documents" in the Loan and Security Agreement.

"GOVERNMENTAL AUTHORITY" shall mean the United States of
America, any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

"INDEPENDENT PUBLIC ACCOUNTANTS" shall have the meaning
ascribed to such term in the Securitization Documents.

"LIEN" shall mean, in respect of the property of any Person,
any ownership interest of any other Person, any mortgage, filing of any
financing statement, charge or other encumbrance or security arrangement of any
nature whatsoever, and any assignment, deposit arrangement, consignment or lease
intended as, or having the effect of, security.

- 3 -

<PAGE>

"PERSON" shall mean an individual, corporation, partnership
(general or limited), trust, business trust, unincorporated association, joint
venture, joint-stock company, Governmental Authority or any other entity of
whatever nature.

"POOLING AND SERVICING AGREEMENT" is defined in the recitals
of this Agreement.

"PROCEEDS" shall mean "proceeds" as defined in the UCC.

"PROPERTY" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.

"RATING AGENCIES" shall have the meaning ascribed to such term
in the Securitization Documents.

"RELEASE" shall mean a release substantially in the form of
Exhibit D hereto.

"REVOLVER LOAN" shall have the meaning ascribed to such term
in the Loan and Security Agreement.

"SECURITIZATION DOCUMENTS" is defined in the recitals of this
Agreement.

"SERIES ACCOUNT" shall have the meaning ascribed to such term
in the Securitization Documents.

"SERVICER" shall mean the Company, or any Person other than
the Company which upon the termination of the Company as the Servicer succeeds
to the functions performed by the Company as the Servicer of the Trust Advances
and related Trust Receivables pursuant to the Pooling and Servicing Agreement.

"TRUST ADDITIONAL ACCOUNT" shall have the meaning ascribed to
the term "Additional Account" in the Securitization Documents.

"TRUST ADVANCE" shall have the meaning ascribed to the term
"Advance" in the Securitization Documents.

"TRUST ASSETS" shall have the meaning ascribed to such term in
the Securitization Documents.

"TRUST COLLECTIONS" shall have the meaning ascribed to the
term "Collections" in the Securitization Documents, whether received by the
Servicer, the Company or any other Person.

- 4 -

<PAGE>

"TRUST DEPOSIT ACCOUNTS" shall mean (i) the bank accounts
identified on Exhibit C hereto, including all sub-accounts thereof and (ii) each
other Series Account that may be established from time to time pursuant to the
Pooling and Servicing Agreement.

"TRUST DESIGNATED ACCOUNTS" shall have the meaning ascribed to
the term "Designated Accounts" in the Securitization Documents.

"TRUST FINANCING STATEMENT" shall mean the UCC financing
statement filed at any time and from time to time to perfect the ownership
interest or security interest transferred or granted pursuant to the
Contribution and Sale Agreement and Pooling and Servicing Agreement.

"TRUST LOCK-BOX ACCOUNT" shall mean each lock-box account
established pursuant to Section 3.01 (i) (A) of the Pooling and Servicing
Agreement, including without limitation the account identified on Exhibit C
hereto.

"TRUST POST OFFICE BOX" shall mean each post office box
established pursuant to Section 3.01 (i) (A) of the Pooling and Servicing
Agreement, including without limitation the post office box identified on
Exhibit C hereto.

"TRUST PROPERTY" shall mean all Trust Assets, Trust Post
Office Boxes (and all Property therein), Trust Lock-Box Accounts (and all
Property therein) and in each case all balances and investments therein and
Proceeds thereof, whether now existing or hereafter arising and wherever
located.

"TRUST RECEIVABLE" shall have the meaning ascribed to the term
"Receivable" in the Securitization Documents.

"TRUST RELATED PROPERTY" shall have the meaning ascribed to
the term "Related Property" in the Securitization Documents.

"TRUST REMOVED ACCOUNTS" shall have the meaning ascribed to
the term "Removed Accounts" in the Securitization Documents.

"UCC" shall mean the Uniform Commercial Code, as amended from
time to time, as in effect in any specified or applicable jurisdiction.

The Trustee is not a party to certain of the documents defined
herein. The rights, duties and obligations of the Trustee hereunder shall not be
affected by any amendments to such documents unless the Trustee shall have been
specifically advised of such amendment and no such amendment shall adversely
affect the Trustee's rights, duties or obligations without the consent of the
Trustee thereto.

- 5 -

<PAGE>

ARTICLE II
INTERCREDITOR ARRANGEMENTS

Section 2.1 MUTUAL STIPULATIONS.

(a) CF Funding represents and warrants to Fleet, and
stipulates with Fleet, that Exhibit A hereto is a true and complete copy of the
amended, supplemented and modified SCHEDULE 1 to the Pooling and Servicing
Agreement listing all Trust Designated Accounts as of the date hereto, as such
SCHEDULE 1 is in effect on the date hereof. The Trustee represents and warrants
to Fleet, and stipulates with Fleet, that Exhibit A hereto is a true and
complete copy of the amended, supplemented and modified SCHEDULE 1 to the
Pooling and Servicing Agreement, as such SCHEDULE 1 is on deposit with the
Trustee on the date hereof. Notwithstanding anything to the contrary in the
Fleet Document, Fleet shall have no interest in or Lien upon any Trust Property
derived from or relating to any of the Trust Designated Accounts identified on
Exhibit A hereto.

(b) Fleet hereby represents and warrants to each of the
Company, CF Funding and Trustee, and stipulates with the Company, CF Funding and
the Trustee, that the Fleet Collateral in existence on the date hereto consists
exclusively of rights to the payment of money owing to the Company by the Fleet
Designated Obligors identified on Exhibit B hereto, rights, remedies and certain
other Property of the Company related thereto, equipment of the Company other
than equipment of the Company used to service Trust Property, the Fleet Deposit
Accounts, and Proceeds and products of all of the foregoing. Notwithstanding
anything to the contrary in the Trust Financing Statements or the Securitization
Documents, the Trustee shall have no interest in or Lien upon any rights to the
payment of money owing to the Company by the Fleet Designated Obligors
identified on Exhibit B hereto or any Proceeds thereof. Without limiting the
applicable covenants, representations and warranties of the Company and its
affiliates in the Fleet Documents, CF Funding shall not cause any Fleet
Designated Obligor identified as such on Exhibit B hereto to become a Trust
Designated Account at any time, regardless of whether such Fleet Designated
Obligor ceases to be a "Designated Obligor" under the Loan Security Agreement,
unless CF Funding shall first deliver to the Trustee a Release with respect
thereto executed by Fleet; such requirement that CF Funding deliver a Release
shall not apply any Fleet Designated Obligor not so identified on Exhibit B as
of the date hereof.

Section 2.2 SCHEDULE 1.

(a) Upon request of Fleet or CF Funding, the Trustee shall
deliver to Fleet and Deloitte, but to Fleet only after receipt by the Trustee of
a Confirmation Letter with respect thereto pursuant to Section 2.2 (b), in
accordance with Section 4.10 hereof, a true and complete copy of the amended,
supplemented and modified SCHEDULE 1 to the Pooling and Servicing Agreement than
in the Trustee's possession, provided that Fleet shall not so request more often
than once per calendar month and provided further that CF Funding shall not so
request other than in connection with an amendment, supplement or modification
of such SCHEDULE 1. CF

- 6 -

<PAGE>

Funding shall make such a request each time such SCHEDULE 1 is amended,
supplemented or modified under the Securitization Documents.

(b) CF Funding shall deliver or cause to be delivered to
Deloitte and Fleet in accordance with Section 4.10 hereof a true and complete
copy of the amended, supplemented and modified SCHEDULE 1 to the Pooling and
Servicing Agreement simultaneously with or promptly after delivering to the
Trustee any amendment, supplement or modification thereof. CF Funding shall
cause Deloitte to agree the copies of SCHEDULE 1 received by Deloitte from the
Trustee and CF Funding; reconcile such copies to Exhibit A hereto or the most
recent prior SCHEDULE 1 received by Deloitte from the Trustee (whichever is
dated later); and deliver a Confirmation Letter in connection therewith to CF
Funding and the Trustee within five Business Days after CF Funding shall have
delivered such amendment, supplement or modification to the Trustee. CF Funding
and the Trustee shall promptly give notice to Fleet, the Certificateholders and
the Rating Agencies of any disagreement noted in a Confirmation Letter and CF
Funding shall promptly give notice to Fleet, the Trustee and the Rating Agencies
of any disagreement between Deloitte's reconciliation and information in the
possession of CF Funding relating to Trust Additional Accounts that have been
designated and Trust Removed Accounts that have been removed under the
Securitization Documents. CF Funding shall promptly reconcile any such
disagreement with the Trustee and the Trustee shall cooperate with CF Funding
and Deloitte in such reconciliation.

Section 2.3 INTEREST IN NON-TRUST PROPERTY. Each of CF Funding and the
Trustee hereby acknowledges and agrees that, notwithstanding anything to the
contrary in the Trust Financing Statements or the Securitization Documents, it
shall have no interest in or Lien upon any Property of the Company that is not
Trust Property. Nothing herein shall be deemed to preclude the Trustee from
obtaining a judgment or other judicial lien upon any Property of the Company,
provided that if any Property upon which any such lien is obtained constitutes
Fleet Collateral, then such lien (notwithstanding any priority that might
otherwise govern under applicable law) shall be subordinate and inferior to the
security interest of Fleet in such Fleet Collateral, and such lien shall not be
enforced against any Fleet Collateral until all Obligations (as defined in the
Fleet Documents) have been paid in full and all commitments to lend under the
Fleet Documents have terminated. Fleet shall promptly inform the Trustee upon
its written request as to whether or not any particular Property of the Company
constitutes Fleet Collateral and whether or not such Obligations have been paid
in full and such commitments have terminated. Each of CF Funding and the Trustee
hereby further acknowledges and agrees that it shall have no Lien on or any
interest in any Fleet Lock-Box or Fleet Dominion Account, nor any Lien on any
monies or other Property therein constituting Fleet Collateral or Proceeds of
Fleet Collateral, whether contained in any Fleet Lock-Box, Fleet Dominion
Account or Fleet Deposit Account.

Section 2.4 INTEREST IN TRUST PROPERTY. Fleet hereby acknowledges and
agrees that, notwithstanding anything to the contrary in the Fleet Documents, it
shall have no interest in or Lien upon any Property that is Trust Property or
any equipment of the Company so long as such equipment is used to service any
such Trust Property. Fleet hereby further acknowledges and

- 7 -

<PAGE>

agrees that it shall have no lien upon or any interest in any Trust Post Office
Box, Trust Lock-Box Account or Trust Deposit Account, nor any Lien on any monies
or other Property therein constituting Trust Collections or Proceeds of any
Trust Advance, related Trust Receivable, Trust Related Property or other Trust
Asset, whether contained in any Trust Post Office Box, Trust Lock-Box Account,
Trust Deposit Account or otherwise.

Section 2.5 BANKRUPTCY ISSUES. This Agreement shall be applicable both
before and after the commencement, whether voluntary or involuntary, of any case
of the Company under the Bankruptcy Code and all references herein to the
Company shall be deemed to apply to the Company as a debtor-in-possession and to
any trustee in bankruptcy for the estate of the Company.

ARTICLE III
REPRESENTATIONS

Section 3.1 REPRESENTATIONS BY THE COMPANY. The Company represents and
warrants, and acknowledges, that the other parties hereto have relied on the
truth and accuracy on and as of the date hereof the following representations
and warranties.

(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida and has all
power, corporate or otherwise, to execute and deliver, and to perform all of its
obligations under, this Agreement;

(b) There are no judicial or administrative actions, suits or
proceedings pending or, to the best of the Company's knowledge, threatened
against or involving the validity or enforceability of this Agreement; and

(c) No consent of any other Person (including, without
limitation, stockholders or creditors of the Company), and no approval, consent
or withholding of objection on the part of any Governmental Authority, is
necessary in connection with the execution, delivery and performance by the
Company of this Agreement.

Section 3.2 REPRESENTATION BY THE TRUSTEE. The Trustee represents and
warrants to the other parties hereto that the Trustee has been directed and
authorized by the required number of Certificateholder to enter into an
agreement in the form and substance of this Agreement.

Section 3.3 REPRESENTATIONS BY ALL PARTIES. Each party to this
Agreement hereby represents that (a) it has been authorized by all necessary
corporate action to enter into and perform this Agreement, and (b) this
Agreement has been duly executed and delivered by appropriate officers of such
party and constitutes the legal, valid and binding agreement of such party
enforceable in accordance with its terms, subject to bankruptcy, insolvency or
similar laws affecting creditors' rights generally, and general principles of
equity (regardless of whether the application of such principles is considered
in a proceeding in equity or at law).

- 8 -

<PAGE>

ARTICLE IV
MISCELLANEOUS

Section 4.1 SUCCESSORS AND ASSIGNS. All of the terms of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective parties hereto and their respective successors, transferees and
assigns, whether so expressed or not.

Section 4.2 SURVIVAL OF COVENANTS AND REPRESENTATIONS. All covenants,
representations and warranties made by each of the parties hereto shall survive
the execution and delivery of this Agreement.

Section 4.3 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.

Section 4.4 FURTHER ASSURANCES. Each of the Company, CF Funding, the
Trustee and Fleet agrees promptly to execute and deliver such further documents
and do such other acts and things as any party hereto may reasonably request
from time to time in order to more fully effect the purposes of this Agreement;
provided, however, that the Trustee shall not be obligated to do any such act or
thing not expressly set forth herein which may not be effectuated without the
consent of Certificateholders unless such consent shall have been obtained.

Section 4.5 HEADINGS. Section headings used in this Agreement are for
convenience of reference only and are not part of this instrument for any other
purpose.

Section 4.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.

Section 4.7 SEVERABILITY. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any remaining portion of this Agreement.

Section 4.8 AMENDMENTS AND MODIFICATIONS. Neither this Agreement nor
any term hereof may be amended, modified, discharged or revoked except by a
writing signed by the Company, CF Funding, Fleet, the Trustee and the Majority
Certificateholders under, and as defined in, the Securitization Documents.

Section 4.9 NO ADDITIONAL RIGHTS. Nothing in this Agreement shall
authorize the Company to convey any Trust Property to Fleet or any other Person
in violation of the provisions of the Securitization Documents or to convey any
Fleet Collateral to CF Funding, the Trustee or any other Person in violation of
the provisions of the Loan and Security Agreement or be construed to confer
additional rights upon the Company.

- 9 -

<PAGE>

Section 4.10 DELIVERY OF SCHEDULE 1. The material required to be
delivered to Fleet or Deloitte by the Trustee or CF Funding pursuant to Section
2.2. hereof shall be deemed to have been duly given (i) if personally delivered,
(ii) if sent by facsimile transmission, or (iii) the next day after dispatch by
overnight courier to Fleet at: Fleet Capital Corporation, 300 Galleria Parkway,
N.W., Suite 800, Atlanta, Georgia 30339, Attention: Loan Administration Manager,
Facsimile No.: (404) 859-2483, or to Deloitte at: Deloitte & Touche LLP, 100
Southeast 2nd Street, Miami, Florida 33131-2135, Attention: Mr. Marvin Lando,
Facsimile No.: 305-372- 3165, or at such other address as shall be designated by
the applicable party in a written notice to the Trustee.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.

CAPITAL FACTORS, INC.

By: /s/ JOHN W. KIEFER
----------------------------------------
Name: John W. Kiefer
Title: President

FLEET CAPITAL CORPORATION

By: /s/ JERRY L. JANSON
----------------------------------------
Name: Jerry L. Janson
Title: Vice President

CF FUNDING CORP.

By: /s/ JOHN W. KIEFER
----------------------------------------
Name: John W. Kiefer
Title: President

BANKERS TRUST COMPANY, as Trustee

By: /s/ LINDA A. RAKOTTA
----------------------------------------
Name: Linda A. Rakotta
Title: Vice President

- 10 -

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
DATED AS OF JANUARY 1, 1996 BY AND BETWEEN
CAPITAL FACTORS HOLDING, INC., A FLORIDA CORPORATION
CAPITAL FACTORS, INC., A FLORIDA CORPORATION,
AND JOHN W. KIEFER (HEREINAFTER THE "EXECUTIVE")

This Amendment No. 1 to the Employment Agreement dated as of January 1,
1996, by and between CAPITAL FACTORS HOLDING, INC., a Florida corporation (the
"Company"), CAPITAL FACTORS, INC., a Florida corporation ("Factors"), and JOHN
W. KIEFER (hereinafter called the "Executive") (the "Agreement"), a copy of
which is attached hereto as Exhibit "A", is entered into as of this ____ day of
June, 1996, by and between the Company, Factors and the Executive.

WHEREAS, the parties hereto desire to amend Section 3.2 hereof in the
manner set forth below.

NOW, THEREFORE, in consideration of the mutual covenants, agreements,
undertakings, representations and warranties herein contained, the parties
hereto hereby agree and covenant with each other as follows:

1. AMENDMENT OF SECTION 3.2. Section 3.2 of this Agreement is amended
to read in its entirety as follows:

3.2 SIGNING BONUS AND COMPANY LOAN. Upon execution of
this Agreement, the Company shall: (i) pay the Executive $250,000 in
cash as a signing bonus, subject to applicable withholding and other
taxes; and (ii) loan the Executive $100,000 (the "Company Loan"). The
Company Loan shall bear interest at the WALL STREET JOURNAL prime rate
(as defined in the Capital Bank line of credit agreements) plus 1 1/2%
. On each December 31 during the Term, twenty percent of the entire
remaining principal amount of the Company Loan together with all
interest accrued through such date shall become immediately due and
payable. The entire principal balance together with all accrued
interest thereon shall be due and payable in full in the event of and
upon the earlier termination of this Agreement. Notwithstanding the

<PAGE>

foregoing, the Company shall, for each December 31 during the Term that
Executive continues to be employed by the Company at such time, pay to
the Executive a bonus equal to the amount of principal and accrued
interest due and payable to the Company under the Company Loan at such
December 31.

2. TERMS OF AGREEMENT. Except as provided above, the terms and
provisions of the Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.

CAPITAL FACTORS HOLDING, INC.

By:________________________________

CAPITAL FACTORS, INC.

By:________________________________

___________________________________
JOHN W. KIEFER

- 2 -

Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of Capital Factors Holding,
Inc. on Form S-1 of our report dated February 28, 1996 (March 4, 1996 as to the
second paragraph of Note 13, May 16, 1996 as to the third paragraph of Note 13
and July 1, 1996 as to the first paragraph of Note 13) appearing in the
Prospectus, which is part of this Registration Statement.

We also consent to the reference to us under the headings "Selected Consolidated
Financial Data" and "Experts" in such Prospectus.

/s/ DELOITTE & TOUCHE LLP

Miami, Florida
July 1, 1996