M B A HOLDINGS INC, 10-12G, 1999-11-19

M B A HOLDINGS INC
10-12G, 1999-11-19

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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10

M.B.A. HOLDINGS, INC.
(Exact name of business issuer as specified in its charter)

Nevada 87-0522680
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

9419 E. San Salvador, Suite 105
Scottsdale, AZ 85258-5510
(480)-860-2288
(Address of principal executive offices, including telephone number)

Securities registered under Section 12(b) of the Exchange Act: None.

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $.001 par value
(Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ ] No [X].

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10 or any
amendment to this Form 10. Yes [ ] No [X]

The issuer's revenues for its most recent fiscal year ended October 31, 1998
were $25,010,771. The aggregate market value of the voting stock held by
non-affiliates of the issuer, based on the average high and low prices of such
stock on August 31, 1999, as reported on NASDAQ, was $5,495,746.

As of August 31, 1999, there were 2,005,121 shares of the issuer's common stock
issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents, in whole or in part, are specifically incorporated by
reference in the indicated part of this Annual Report on Form 10: None
<PAGE>
ITEM 1. BUSINESS

MBA Holdings, Inc. ("the Company"), through its wholly-owned subsidiary,
Mechanical Breakdown Administrators, Inc., markets and administers vehicle
service contracts and extended warranties. The Company is a third party
administrator for claims adjudication and offers call center and technical
computer services. The Company assists dealer/clients in obtaining insurance
policies from highly rated independent insurance companies for all contracts and
programs offered. The insurance company is then responsible for the cost of
repairs or replacements for the contracts administered by the Company. The
Company administers extended warranties on automobiles, light trucks,
recreational vehicles and automotive components. These products are sold
principally by franchised and independent automobile dealers, direct mail,
magazine advertisements and financial institutions.

The terms of the vehicle service contracts and extended warranties range from
twelve (12) to eighty-four (84) months. The Company acts as a third party
administrator on behalf of the dealer/clients and insurance companies. The
actual repairs and replacements required under the service contract agreements
are performed by independent third party authorized repair facilities. While the
dealer/retailer and the Company are the sellers of the service contract, the
cost of these repairs is borne by the insurance companies which have the
ultimate responsibility for the claims. The insurance policy indemnifies the
dealer/clients and the Company against losses resulting from service contract
claims and protects the consumer by ensuring their claims will be paid. The
Company's service contract programs benefit consumers with expanded and/or
extensions of product coverage for a specified period of time (and/or mileage in
the case of automobiles and recreational vehicles), similar to that provided by
manufacturers under the terms of their product warranties. Such coverage
generally provides for the repair or replacement of the product, or a component
thereof, in the event of its failure. The Company's service contract programs
benefit the dealer/clients by providing enhanced value to the goods and services
they offer. It also provides the opportunity for increased revenue and income
while outsourcing the costs and responsibilities of operating an extended
warranty program.

On May 9, 1989, the principals of the Company organized under the name
Mechanical Breakdown Administrators, Inc. ("MBA"). During November 1995, MBA and
Brixen Enterprises, Inc. ("Brixen") merged in a stock exchange with the MBA
shareholders retaining control of the merged company. Brixen had been an
inactive publicly-held shell corporation prior to the November 1995 transaction.
Subsequent to the merger, Brixen changed its name to M.B.A. Holdings, Inc. and
its legal domicile from Utah to Nevada.

VEHICLE SERVICE CONTRACTS AND EXTENDED WARRANTY PROGRAMS

The Company markets and administers vehicle service contract ("VSC") programs
which enhance the profitability of the sale of automobiles, light trucks,
recreational vehicles and automotive components. These products are sold
principally by franchised and independent automobile dealers. The VSC is a
contract between the dealer/lessor and the vehicle purchaser/lessee that offers
coverage which runs from twelve (12) to eighty-four (84) months and/or 1,000 to
100,000 miles. Coverage is afforded in the event of the failure of a broad range
of mechanical components that occurs during the term of the VSC, exclusive of
failures covered by a manufacturers warranty.

The programs marketed and administered by MBA require that the dealer enter into
an agreement whereby MBA is the provider of services to the dealer. Among these
services is the development and distribution of marketing materials, processing
of dealer produced VSC's, and the administration and payment of claims filed by
contract holders under the terms of their VSC. For the nine months ended July
31, 1999, fiscal year ended October 31, 1998 and fiscal year ended October 31,
1997, there were approximately 600 credit unions, automobile dealers, and
recreational vehicles & travel trailer dealers offering the Company's vehicle
service contracts or extended warranties.

1
<PAGE>
With respect to the VSC and extended warranty programs, liability is borne by
insurers who have issued insurance policies to assume this risk in exchange for
the payment of agreed upon premiums and fees. The Company has reached agreements
with American Bankers Insurance Group of Florida and American Modern Home
Insurance Company where these companies will insure all of MBA's VSC and
extended warranty programs. Prior to these insurance carriers, the programs were
insured by the New Hampshire Insurance Company and other American International
Group, Inc. ("AIG") member companies.

For extended warranties, the policy premium has been established by the
insurance companies and agreed to by the Company and insurance regulators. In
general, when a premium is sold approximately 51% of the premium is remitted to
the insurance company. The remainder is split between the agent who sold the
policy and the Company. The agent will receive 20%-36% of the premium depending
on the agreement with the Company. The Company retains the balance of the
premium paid by the policy holder.

Essential to the success of MBA is its ability to capture, maintain, track and
analyze all relevant data regarding a VSC or extended warranty. To support this
function, the Company operates proprietary software developed internally that
consists of custom designed relational databases with interactive capabilities.
This configuration provides ample capacity and processing speed for current
requirements as well as the ability to support significant future growth in this
area.

SIGNIFICANT CUSTOMERS

The Company does not have any significant customers. The loss of one large
customer would not have a material impact on operating results.

COMPETITION

M.B.A. Holdings, Inc. competes with a number of independent administrators,
divisions of distributors and manufacturers, financial institutions and
insurance companies. While the Company believes that it occupies a strong
position among competitors in its field, it may not be the largest marketer and
administrator of vehicle service contracts and extended warranties. Some
competitors may have greater operating experience, more employees and/or greater
financial resources. Further, many manufacturers of motor vehicles, market and
administer their own vehicle service contract programs for and through their
dealers.

SALES AND MARKETING

The Company maintains its own sales and marketing personnel. Sales training and
motivational programs are a primary form of specialized assistance provided by
the Company to retailers/dealers and financial institutions, to assist them in
increasing the effectiveness and profitability of their vehicle service contract
and extended warranty program sales efforts. The Company develops materials and
conducts educational seminars. These seminars are conducted either at the
client's place of business or an offsite facility.

MBA also direct markets to the consumer through direct mail campaigns. The
direct marketing campaigns generate sales by obtaining a list of recent car
sales through various list services. This list is uploaded into MBA's
state-of-the-art direct mailing computer system. This system generates different
policy and premium options for the car purchased. The potential customer can
send in the premium via the U.S. mail or call the MBA sales support staff on a
toll free number and pay by a major credit card.

Insurance Coverage Liability for performance under the terms of vehicle service
contracts and extended warranties issued by clients/dealers, financial
institutions, or direct mail campaigns is assumed by the insurer in return for
the payment of the agreed-upon premium for the assumption of the risk from the
insured. This coverage provides indemnification against loss resulting from
service contract claims and protects the consumer by ensuring that their claim
will be paid. The insurance protection is provided by highly rated independent
insurance companies. This includes American Bankers Insurance Group and American
Modern Home Insurance Co which are rated A - (Excellent) by A.M. Best Company.
Other programs are insured by New Hampshire Insurance Company, and other AIG
member companies which is rated A++ (Superior) by the A.M. Best Company.

2
<PAGE>
In accordance with the insurance arrangements with these insurers, a fixed
amount is remitted for each vehicle service contract or extended warranty sold.
The amount is set by the insurance company's and is based upon actuarial
analysis of data collected and maintained for each type of coverage and contract
term. The insurer is obligated to pay all the claims which fall under the policy
even if the claims exceed the premium. Some contracts between the Company and
the insurer contain agreements that allow the Company to share in the profits
earned by the programs. The Company did not accrue or receive any profit sharing
amounts for the nine months ended July 31, 1999 and the 1998, 1997 or 1996
fiscal years.

The number of policies sold for the last three fiscal years and the nine months
ended July 31, 1999 are noted below:

Number
Time Period of Policies
- ----------- -----------
For the nine months ended July 31, 1999 24,505
For the twelve months ended October 31, 1998 36,477
For the twelve months ended October 31, 1997 27,000
For the twelve months ended October 31, 1996 8,095

This increase is reflected in the increase in gross revenue and net income.
Majority of the increase was due to additional sales from the Company's
concerted effort to expand into the vehicle service contract and credit union
niche. The Company will continue to look for ways to increase sales. Currently,
the Company is in the process of exploring strategic relations with other highly
rated insurance companies regarding different motorized machinery; like boats
and motorcycles.

FEDERAL AND STATE REGULATION

The vehicle service contract and extended warranty programs developed and
marketed by MBA, are regulated by federal law and the statutes of a significant
number of states. The Company continually reviews all existing and proposed
statutes and regulations to ascertain their applicability to its existing
operations, as well as new programs that are developed by the Company. Generally
speaking, these statutes concern the scope of the vehicle service contract and
extended warranty coverage and content of the vehicle service contract or
extended warranty document. In such instances, the state statute will require
that specific wording be included in the vehicle service contract or extended
warranty expressly stating the consumer's rights in the event of a claim, how
the service contract may be canceled and identification of the insurance company
that indemnifies the dealers, financial institution, or the Company against loss
for performance under the terms of the contract. Insurance departments in some
states have sought to interpret the vehicle service contract and/or extended
warranty, or certain items covered under the contract as a form of insurance,
requiring that the issuer be a duly licensed and chartered insurance company.

The Company does not believe that they are insurers and have no intention of
filing the documents and meeting the capital and surplus requirements that are
necessary to obtain such a license. There are instances where the applicability
of statutes and regulations to programs marketed and administered by the Company
and compliance therewith, involve issues of interpretation. The Company uses its
best efforts to comply with applicable statutes and regulations but it cannot
assure that its interpretations, if challenged, would be upheld by a court or
regulatory body. In any situation in which the Company has been specifically
notified by any regulatory bodies that its methods of doing business were not in
compliance with state regulation, the Company has taken the steps necessary to
comply. If the Company's right to operate in any state is challenged
successfully, the Company may be required to cease operations in the state and
the state might also impose financial sanctions against the Company. These
actions, should they occur, could have materially adverse consequences and could
affect the Company's ability to continue operating. However, within the
framework of currently known statutes, the Company does not feel that this is a
present concern.

3
<PAGE>
EMPLOYEES

The Company and its subsidiary employ approximately fifty individuals at August
31, 1999, an increase of approximately ten over the fiscal year ended October
31, 1998. The increase is due to the expansion of customer service and claims
representatives to meet the needs of the Company's expanding business. Total
amount of external sales force equals three. These people train the insurance
agent or representative at the financial institution, dealership, or other sales
venue. Internally, there are approximately eight people who handle product
inquiries that may result in sales. The rest of the staff is located in the
following departments: claims, customer service, data entry, information
systems, finance, administration. None of the Company's employees are covered by
a collective bargaining agreement. The Company considers its relations with its
employees to be good.

ITEM 2. FINANCIAL INFORMATION

<TABLE>
<CAPTION>
FISCAL YEAR ENDING IN 1998 1997 1996 1995 1994
- --------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Gross Sales $ 25,010,771 $ 16,495,750 $ 4,688,097 $ 936,003 $ 1,296,003
Cost associated with sales,
including cancellations (21,860,902) (14,517,129) (4,012,544) (597,021) (658,527)

Net Sales 3,149,869 1,978,621 675,553 338,982 637,476

Income from continuing operations 327,868 263,377 49,752 348,673 189,465
Income per common share 0.16 0.13 0.02 N/A N/A

Total Assets 3,168,195 2,176,874 1,588,897 693,373 768,936

L-T Obligation and redeemable
preferred stock -- -- -- 73,880 260,835

Cash Dividends declared per common
share -- -- -- -- --

NINE MONTHS ENDED JULY 31, 1999 1998
- -------------------------- ----------- -----------
Gross Sales 20,299,762 17,408,068
Cost associated with sales, including cancellations (17,884,766) (15,222,476)

Net Sales 2,414,996 2,185,592

Income from continuing operations 322,824 233,639
Income per common share 0.16 0.12

Total Assets 4,896,339 2,823,657

L-T Obligation and redeemable preferred stock -- --

Cash Dividends declared per common share -- --
</TABLE>

4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion and analysis provides information that the Company's
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. The discussion should
be read in conjunction with the financial statements and footnotes that appear
elsewhere in this report. This report contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A
of the Securities Act of 1993 and Section 21E of the Securities Exchange Act of
1934. The words "believe," "expect," "anticipate," "intend," "estimate," and
other expressions that are predictions of or indicate future events and trends
and that do not relate to historical matters identify forward-looking
statements. Such statements involve risks and uncertainties that could cause
actual results to differ materially from those set forth in such forward-looking
statements. The Company undertakes no obligation to publicly update or revise
any forward-looking statement, whether as a result of new information, future
events or otherwise.

RESULTS OF OPERATIONS

COMPARISON OF NINE MONTHS ENDED JULY 31, 1999 AND 1998

Net commission income, which consists of gross income less premiums to insurers,
agent commissions, and cancellations, for the nine months ended July 31, 1999
totaled $2,415,000, an increase of $229,000 from net revenues of $2,186,000 for
the nine months ended July 31, 1998. The number of contracts sold of 24,505 for
the nine months ended July 31, 1999 decreased from the number of contracts sold
of 25,521 for the nine months ended July 31, 1998. The increase in gross and net
commission income is due to a larger percentage of the sales in 1999 are VSC
sales versus extended warranty sales. The VSC sales have a higher sale price
than the extended warranty premium. In addition, there were a greater number of
direct mail sales in 1999 than in 1998. The direct mail sales do not have an
agent associated with them so the Company does not have to pay agent / broker
commissions.

Operating income increased by $70,000 to $424,000 for the nine months ended July
31, 1999, from $354,000 for the nine months ended July 31, 1998. As a percentage
of net commission income, operating income increased by 1.3 percentage points to
17.5% for the nine months ended July 31, 1999 from 16.2% for the nine months
ended July 31, 1998. The increase is due to an increase in the VSC and direct
mail revenue which have a higher percentage of premiums being retained by the
Company.

Selling expenses, which is attributed mainly to mailings and postage from the
direct mail product, totaled $259,000, or 10.7 percent of net commission income,
for the nine months ended July 31, 1999. This is an increase from $212,000, or
9.7 percent of net revenues, for the comparable period ending July 31, 1998.
This $47,000 increase was attributable primarily to an increase in mailings
during 1999 as the company purchased additional printers which increased its
capacity to produce direct mailing materials. The new printers were not
available for all of the nine months ending July 31, 1998 while they were being
used for the entire nine months ending July 31, 1999.

General and administrative expenses including mailings and postage were
$1,991,000 for the nine months ended July 31, 1999, compared to $1,832,000 for
the nine-month period ended July 31, 1998. As a percentage of net commission
income, general and administrative expenses were 82.4 percent for the nine
months ended July 31, 1999, compared to 83.8 percent for the nine months ended
July 31, 1998. The increase in expenses is due to additional customer service
and claims personnel. This increase was considered necessary given the increase
in sales.

5
<PAGE>
Net income for the nine months ended July 31, 1999 was $323,000, compared to a
net income for the nine months ended July 31, 1998 of $234,000, which is a
result of the foregoing factors. The increase in net income was consistent with
the increase in net commission income.

COMPARISON OF FISCAL YEAR 1998 AND FISCAL YEAR 1997

Net commission income, which consists of gross income less premiums to insurers,
agent commissions, and cancellations, for the fiscal year ended October 31, 1998
totaled $3,150,000, an increase of $1,171,000 from net revenues of $1,979,000
for the fiscal year ended October 31, 1997. This increase is consistent with the
increase in the number of policies sold in fiscal 1998 versus fiscal 1997. In
1998 and 1997, there were 36,477 and 27,000 policies sold, respectively. The
increase is due to an increase in the VSC and direct mail revenue which have a
higher percentage of premiums being retained by the Company.

Operating income increased by $260,000 to $524,000 for the fiscal year ended
October 31, 1998, from $264,000 for the fiscal year ended October 31, 1997. As a
percentage of net revenues, operating income increased by 3.3 percentage points
to 16.6% for the fiscal year ended October 31, 1998 from 13.3% for the fiscal
year ended October 31, 1997. This increase is due to additional VSC revenue.

Selling expenses which are attributed mainly to mailings and postage from the
direct mail product totaled $282,000, or 9.0 percent of net commission income,
for the fiscal year ended October 31, 1998, an increase from $249,000, or 12.6
percent of net revenues, for the comparable period ending October 31, 1997. This
$33,000 increase was attributable primarily to an increase in mailings during
1998 as the company purchased additional printers which increased its capacity
to produce direct mailing materials.

General and administrative expenses including selling expenses were $2,626,000
for the fiscal year ended October 31, 1998, compared to $1,714,000 for the
fiscal year ended October 31, 1997. As a percentage of net commission income,
general and administrative expenses were 83.4 percent for the fiscal year ended
October 31, 1998, compared to 86.6 percent for the fiscal year ended October 31,
1997. The increase in expenses is due to additional customer service and claims
personnel. This increase was considered necessary given the increase in sales.

As a result of the foregoing factors, the net income for the fiscal year ended
October 31, 1998 was $328,000, compared to a net income for the fiscal year
ended October 31, 1997 of $263,000. The increase in net income was consistent
with the increase in net commission income.

COMPARISON OF FISCAL YEAR 1997 AND FISCAL YEAR 1996

Net commission income, which consists of gross income less premiums to insurers,
agent commissions, and cancellations, for the fiscal year ended October 31, 1997
totaled $1,979,000, an increase of $1,303,000 from net revenues of $675,000 for
the fiscal year ended October 31, 1996. The increase is due to an increase in
the VSC and extended warranty revenue. Total policies sold in fiscal year 1997
equals 27,000 which is an increase of 18,905 from policies sold in fiscal year
1996 of 8,095. The Company was able to develop relationships in the industry
that produced additional streams of revenue particularly with credit unions and
dealerships offering vehicle service contracts.

6
<PAGE>
Operating income increased by $210,000 to $264,000 for the fiscal year ended
October 31, 1997, from $54,000 for the fiscal year ended October 31, 1996. As a
percentage of net revenues, Operating income increased by 5.3 percentage points
to 13.3% for the fiscal year ended October 31, 1997 from 8.0% for the fiscal
year ended October 31, 1996. This increase is due to additional revenues as
noted above.

Selling expenses which are attributed mainly to mailings and postage from the
direct mail product totaled $249,000, or 12.6 percent of net commission income,
for the fiscal year ended October 31, 1997, an increase from $93,000, or 13.8
percent of net revenues, for the comparable period ending October 31, 1996. This
$156,000 increase was due to the fact that in fiscal year 1996 the mailing
program profitability was being reviewed by management and all mailings were put
on hold at that time. In fiscal year 1997, the direct mailing program was
resumed and direct mail costs, as noted above, increased.

General and administrative expenses including selling expenses were $1,714,000
for the fiscal year ended October 31, 1997, compared to $622,000 for the fiscal
year ended October 31, 1996. The increase in expense is mainly due to an
increase in salaries. The Company hired additional employees for claims,
customer service, and data entry to meet the needs of our customers as sales
continued to grow.

As a result of the foregoing factors, the net income for the fiscal year ended
October 31, 1997 was $263,000, compared to a net income for the fiscal year
ended October 31, 1996 of $50,000. The increase in net income was due to the
Company receiving approximately $168,000 as part of a lawsuit settlement in
fiscal year 1997. After the lawsuit settlement net income is consistent to the
increase in net commission income.

LIQUIDITY AND CAPITAL RESOURCES

COMPARISON OF FISCAL YEAR 1998 AND NINE MONTHS ENDED JULY 31, 1999

As of July 31, 1999, the Company's cash position increased to $3,584,000, from
$1,914,000 at October 31, 1998. Of the $3,584,000, $500,000 is classified as
restricted cash; there was $451,000 of restricted cash at October 31, 1998. The
largest component of the restricted cash was claims payment advances provided by
insurance companies. This enables the Company to make claims payments on behalf
of the insurance companies.

The Company collects funds throughout the year and remits a portion of the funds
to the insurance companies. As of July 31, 1999, amount owed to the insurance
companies increased to $3,087,000, from $1,633,000 at October 31, 1998, which is
primarily because gross sales were accelerating.

The Company is not operating with a working capital line of credit from any
facility or any other debt instrument. The Company's ability to fund its
operations over the short-term is not hindered by lack of short-term financing.
The Company uses premium received to pay agent commissions and fund operations
and claims payment advances provided by insurance companies to administer and
pay claims.

COMPARISON OF FISCAL YEAR 1998 AND FISCAL YEAR 1997

As of October 31, 1998, the Company's cash position increased to $2,365,000,
from $1,653,000 at October 31, 1997. Of the $2,365,000, $451,000 is classified
as restricted cash; there was also $211,000 of restricted cash at October 31,
1997. The largest component of the restricted cash was funds provided by
insurance companies for claims payment advances. This enables the Company to
make claims payments on behalf of the insurance companies without a wait time
for the policy holder.

7
<PAGE>
The Company collects funds throughout the year and remits a portion of the funds
to the insurance companies. The Company will receive cash for a policy and
deposit into a bank account for the appropriate insurance company. Then the
Company will remit the amount due to the insurance company on a timely basis.
Due to the timing of when cash is deposited into the Company's bank accounts and
when a check is issued to the insurance, there will be a liability owed to the
insurance companies. This liability has constant turnover as money is paid to
the insurance companies and additional money is received for premiums. As of
October 31, 1998, amount owed to the insurance companies increased to
$1,633,000, from $1,057,000 at October 31, 1997. An increase in the amount owed
to insurance companies is due to an increase in gross sales for the year ended
October 31, 1998 from the year ended October 31, 1997.

During 1998, the company repaid a note payable to a related party. The balance
on the note as of October 31, 1997 was $73,189. The funds used to repay the note
were from operations. This payment did not have an adverse effect on the
Company's cash flow.

The Company is not operating with a working capital line of credit facility or
any other debt instrument. As such, the Company's ability to fund its operations
over the short-term is not hindered by lack of short-term financing. The Company
uses its portion of the premium received to fund operations. It receives money
from the insurance companies to pay for adjudicated claims. Management believes
the Company has sufficient cash flow from operations for its working capital and
capital expenditure requirements for the foreseeable future.

QUALITATIVE INFORMATION ABOUT MARKET RISK

Since the Company does not underwrite its own policies, then a change in the
current rates of inflation or hyperinflation is not expected to have a material
effect on the company. However, the precise effect of inflation on operations
can not be determined.

The Company does not have any outstanding debt or long-term receivables.
Therefore, it is not subject to significant interest rate risk.

ITEM 3. PROPERTIES

The Company's executive offices are located in leased premises at 9419 E. San
Salvador, Suite 105, Scottsdale, Arizona. The premises, pursuant to a lease
agreement (the "Lease"), consist of approximately 16,750 square feet. The lease
expired on December 31, 1998. The Company has signed a new lease (the "New
Lease") in the same office space with total square footage equal to 19,750. The
New Lease, which commenced on January 1, 1999 and expires on December 31, 2003,
provides for annual base rent payments ranging from $212,000 to $281,000.

The premises are owned by an affiliate entity named Cactus Partnership. The
partners in Cactus Partnership are Gaylen Brotherson, the CEO of the Company,
and Judy Brotherson, the Vice-President of the Company. All lease negotiations
are made at fair market value between Cactus Partnership and the Company based
on leases with other occupants of the building (See Item 7 Certain relationships
and Related Transactions).

8
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth information as of August 31, 1999 concerning
shares of Common Stock with $.001 par value, the Company's only voting
securities. This table includes all beneficial owners who own more than 5% of
the outstanding voting securities, each of the Company's directors by each
person who is known by the Company to own beneficially more than 5% of the
outstanding voting securities of the Company, and by the Company's executive
officers and directors as a group.

Name and Address Amount and Nature
Title of Class of Beneficial Owner of Beneficial Owner Percent of Class
- -------------- ------------------- ------------------- ----------------
Common Stock Gaylen Brotherson 830,955 shares(1) 41.6%
9419 E. San Salvador
Suite 105
Scottsdale, AZ 85258

Common Stock Judy Brotherson 811,701 shares(1) 40.6%
9419 E. San Salvador
Suite 105
Scottsdale, AZ 85258

Common Stock CEDE & Co 171,062 shares 8.6%
Box 220
Bowling Green Station
New York, NY 10274

Common Stock Shelly Beesley 334 shares 0.0%
9419 E. San Salvador
Suite 105
Scottsdale, AZ 85258

Common Stock All Directors and
Executive Officers as 1,642,990 shares 82.2%
a Group (three people)

(1) This amount represents shares owned and excludes the 60,001 options to
purchase common stock for Gaylen Brotherson and the 125,000 options to purchase
common stock for Judy Brotherson. If these options were exercised by Gaylen
Brotherson and Judy Brotherson, then their percentage of ownership would change
to 40.8% and 42.9%, respectively (see Item 6. Executive Compensation).

ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.

The Company's Board of Directors consists of three people. All Directors hold
offices until the next annual meeting. At which time there is an election for
their successors.

Name Age Position With Company
---- --- ---------------------
Gaylen M. Brotherson 59 President, CEO, Chairman of the Board, Director
Judy K. Brotherson 52 Vice-President, Director
Edward E. Wilczewski 59 Director

Gaylen and Judy Brotherson are husband and wife. No other family relationship
exists between the Directors or the executive officers.

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<PAGE>
THE BUSINESS EXPERIENCE OF EACH OF THE COMPANY'S DIRECTORS IS AS FOLLOWS:

Gaylen Brotherson, 59, is the founder of Mechanical Breakdown Administrators,
Inc. Mr. Brotherson served in the United States Navy. In 1960, he received his
life, health and accident licenses as well as his property and casualty license.
Presently, he is licensed in 27 states and has been actively involved in
marketing and administering Mechanical Breakdown insurance warranties and
vehicle service contracts.

Judy Brotherson, 52, has been Vice-President of the Company since 1989. Mrs.
Brotherson is a graduate of Creighton University. Since 1975, she has worked
primarily in family owned businesses. She holds insurance licenses in
approximately 32 states. She was one of the chief designers of the MBA software
management system.

Edward Wilczewski, 59, has been a Director to the company for approximately one
year. Mr. Wilczewski served in the Navy for six years. Mr. Wilczewski is a
graduate of the University of Omaha. Primarily for the past thirty years
including the present time, he has owned and operated a real estate development
company. He has orchestrated developments ranging from single family homes to
regional shopping centers.

OTHER EXECUTIVE OFFICERS AND KEY EMPLOYEES

Michael Zimmerman, 28, is the Chief Financial Officer. He joined the Company in
September of 1999. Prior to joining the Company, Mr. Zimmerman worked at
PacifiCare, Inc. from November of 1997 to September of 1999 as the accounting
supervisor in charge of the day to day accounting for the Nevada HMO and the
Nevada and Arizona life insurance products. Prior to joining PacifiCare, Inc.,
Mr. Zimmerman was an employee from September 1993 to November 1997 at the
international accounting and consulting firm KPMG Peat Marwick LLP.

Shelly Beesley, 34, is the Corporate Secretary and Assistant to the President.
She has been employed by the Company since January 1993. She originally served
as the Executive Assistant for the President and Vice President. At the
beginning of 1996, Mrs. Beesley became the corporate secretary. Also, in 1996
Mrs. Beesley served as a Director to the company. Prior to joining the Company,
Mrs. Beesley worked in the automotive industry as a Systems Administrator,
Customer Service Manager and Assistant Sales Manager.

Michael Gannon, 43, is the Information Systems Manager. He is a graduate of
Devry Technical Institute. Mr. Gannon has been employed by the Company since
January, 1995. He has helped develop MBA's integrated computer system to serve
all customer service, claims, data entry, and sales functions for all the
different products MBA offers.

10
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION

The following table provides the annual and other compensation of the Chief
Executive Officer and any other employee who qualifies under Regulation S-K
section 229.402 for the years ended October 31, 1996, 1997 and 1998.

<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------- ----------------------
Restricted Stock
Stock Option
(shares) (Shares)
Name of Principal Position Year Salary Bonus Other(1) awards awards
- ----------------- -------- ---- ------ ----- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Gaylen M. Brotherson Chairman of Board 1996 $ 23,077 $ 16,275 33,334
Chief Executive Officer 1997 47,885 60,000 17,248
1998 165,497 150,000 20,522 26,667

Judy K. Brotherson Vice-President 1996 $ 23,077
1997 47,885 40,000 12,145
1998 50,000 10,910 125,000

Richard John, Jr.(2) Vice President - Sales 1996 $ 66,626 3,334
1997 290,431 13,334
1998 303,732
</TABLE>

(1) Included in Other Annual Compensation are an auto lease paid for Gaylen
Brotherson in fiscal 1996, 1997 and 1998, an auto lease paid for Judy Brotherson
in fiscal 1997 and 1998, auto insurance for Gaylen Brotherson in fiscal 1996,
1997 and 1998, auto insurance for Judy Brotherson in fiscal 1997 and 1998, and
life insurance premiums for Gaylen Brotherson and Judy Brotherson in years 1996,
1997 and 1998.

(2) Richard John's employment at the Company ended October of 1999.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information with respect to options to
purchase Common Stock granted during the fiscal year ended October 31, 1998 to
each of the named executive officers.

<TABLE>
<CAPTION>
Potential Realizable Value at Assumed Annual
Rates of Stock Price Appreciation for Option
Individual Grants Term (1)
------------------------- --------------------------------------------
Number of Percentage of
Securities Total Options
Underlying / SARs Exercise
Options / Granted to of Base
SARs Employees in Price Expiration
Name Granted(#) Fiscal Year (#/Sh) Date 5%($) 10%($)
- ---- ---------- ----------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Gaylen Brotherson 25,000 0.16 $ 1.20 9/30/08 111,987 178,320
1,667 0.01 $ 1.20 10/31/08 7,467 11,890

Judy Brotherson 100,000 0.66 $ 0.94 6/1/08 447,946 713,279
20,000 0.13 $ 1.05 9/30/08 89,589 142,656
5,000 0.03 $ 1.05 10/31/08 22,397 35,664
</TABLE>

(1) Based upon the Company's price per share of $2.75, as reported on the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
OTC Bulletin Board on October 31, 1998.

11
<PAGE>
OTHER INCENTIVES AND COMPENSATION

The Company does not have a formal stock option plan. Currently, stock options
are granted by the Board of Directors. At October 31, 1998, there were only two
employees, Gaylen Brotherson and Judy Brotherson, that had stock options. All
options are exercisable. Below is a summary of existing options.

Number of Strike Expiration
Name Shares Price Date
---- --------- ------ ----------
Gaylen Brotherson 33,334 $ 2.25 2/15/06
25,000 $ 1.20 10/31/08
1,667 $ 1.20 10/31/08

Judy Brotherson 100,000 $ 0.94 6/1/08
20,000 $ 1.05 9/30/08
5,000 $ 1.05 10/31/08

In addition per the Board of Directors resolution dated February 15, 1996,
Gaylen Brotherson receives an option to purchase 1,667 shares @ 80% of the
stock's fair market value for each $5,000,000 increase in sales after
$25,000,000 on the date the sales goals are reached. Per the Board of Directors
resolution dated June 1, 1998, Judy Brotherson receives an option to purchase
5,000 shares @ 70% of the stock's fair market value for each $5,000,000 increase
in sales after $25,000,000 on the date the sales goals are reached. These
options will expire ten years from the grant date.

ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company had a note payable with Gaylen Brotherson, the Chief Executive
Officer. As of October 31, 1997 the unpaid balance equaled $73,189. The note is
unsecured and paid per annum with a variable interest rate. During 1998, the
Company repaid the note in full.

The Company leases its office space from Cactus Partnership. The managing
partner of Cactus Partnership is Gaylen Brotherson, the Chief Executive Officer.
Rent expense for this office space was $187,067 and $114,000 for the years
ending October 31, 1998 and 1997, respectively. The Company signed a new lease
with the affiliated entity in 1999. This new lease expires on December 31, 2003.

ITEM 8. LEGAL PROCEEDINGS

The Company is subject to claims and lawsuits that arise in the ordinary course
of business, consisting principally of alleged errors and omissions in
connection with the sale of insurance. On the basis of information presently
available, management does not believe the settlement of any such claims or
lawsuits will have a material adverse effect on the financial position, results
of operations or cash flows of the Company.

ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.

The Company's Common Stock has been reported in NASDAQ, and currently is
reported on NASDAQ's OTC: BB under the trading symbol "MBAI". The number of
shareholders of record of the Company's Common Stock as of August 31, 1999 was
186. As of August 31, 1999 there were 1,998,453 Common Shares outstanding. On

12
<PAGE>
that date, the closing bid price for the Company's common stock, as reported by
NASDAQ was $2.75. Following is a summary of the price range of the Company's
Common Stock during its 1998 and 1997 fiscal years and the first, second, and
third quarter of fiscal year 1999:

Common Stock High Low Bid
- ------------ --------------
QUARTER OF FISCAL 1999
First 2.00 1.88
Second 2.75 1.75
Third 2.50 2.00

QUARTER OF FISCAL 1998
First 5.00 3.00
Second 5.00 1.25
Third 3.25 1.25
Fourth 2.75 1.25

QUARTER OF FISCAL 1997
First 2.00 2.00
Second 2.00 1.75
Third 5.00 2.75
Fourth 5.50 3.75

The Company has never paid cash dividends on any shares of its Common Stock, and
the Company's Board of Directors intends to continue this policy for the
foreseeable future. Earnings, if any, will be used to finance the development
and expansion of the Company's business. Future dividend policy will depend upon
the Company's earnings, capital requirements, financial condition and other
factors considered relevant by the Company's Board of Directors.

ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES

There were no sales of unregistered securities.

ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED

COMMON STOCK, $.001 PAR VALUE

The Company is authorized to issue up to 80,000,000 shares of Common Stock, par
value $.001 per share, of which 2,005,121 shares of Common Stock were issued and
outstanding as of August 31, 1999 and held by 186 shareholders.

Holders of the Common Stock are entitled to one vote per share on all matters to
be voted upon by the stockholders. Subject to preferences that may be applicable
to any outstanding Preferred Stock, holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared by the Board of
Directors out of funds legally available. Upon liquidation, dissolution, or
winding up of the Company, the holders of Common Stock are entitled to share
ratably in all assets of the Company which are legally available for
distribution, after payment of all debts and other liabilities and the
liquidation preference of any outstanding Preferred Stock. Holders of Common
Stock have no preemptive, subscription, redemption or conversion rights. The
outstanding shares of Common Stock are validly issued, fully paid and
non-assessable.

13
<PAGE>
PREFERRED STOCK, $.001 PAR VALUE

The Company is authorized to issue up to 5,000,000 shares of Preferred Stock,
par value $.001 per share. As of August 31, 1999, the Company had not issued any
Preferred Stock.

The Board of Directors is authorized, subject to any limitations prescribed in
the laws of the State of Nevada, but without further action by the Company's
stockholders, to provide for the issuance of Preferred Stock in one or more
series, to establish from time to time the number of shares of each such series
and any qualifications, limitations or restrictions thereof, and to increase or
decrease the number of shares of any such series without any further vote or
action by the stockholders. The Board of Directors may authorize and issue
Preferred Stock with voting or conversion rights that could adversely affect the
voting power or other rights of the holders of Common Stock. In addition, the
issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of the Company. The Company has no current plan
to issue any shares of Preferred Stock.

ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

1. As permitted by State of Nevada, the Company's Articles of Incorporation
eliminates a director's personal liability for monetary damages to the Company
and its stockholders arising from a breach of a director's fiduciary duty except
for any stated liability under Nevada Law. This includes any liability for any
breach of the director's duty of loyalty to the Company or its stockholders, for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law or for any transaction from which the director derived
an improper personal benefit. The effect of this provision in the Articles of
Incorporation is to eliminate the rights of the Company and its stockholders to
recover monetary damages against a director for breach of fiduciary duty as a
director except in the situations described above.

2. The Registrant's bylaws provide for the indemnification of any persons who
was, is, or is threatened to be made a party or is threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative, except an action by or in the right of the corporation, or is
or was serving at the request of the corporation as a director, officer or
employee of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with the action, suit or proceeding if he acted in good faith and in a manner
which he 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 his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendre or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.

3. The Company presently maintains policies of insurance under which its
directors are insured. These policies are within the limits and subject to the
limitations against certain expenses in connection with the defense of actions,
suits or proceedings, and certain liabilities which might be imposed to which
they are parties by reason of being, or having been, such directors.

4. There is no litigation pending. The Company does not nor do any of its
directors know of any threatened litigation or proceedings which might result in
a claim for indemnification by any officer or director.

ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

All financial statements are included by attachments. Supplementary financial
information is not required per Regulation S-K (229.302).

14
<PAGE>
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS

1. AND 2. FINANCIAL STATEMENTS

Index to Consolidated Financial Statements for the nine months ended July 31,
1999 and 1998, years ended October 31, 1998 and 1997:

Report of Independent Accountants
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Changes in Shareholders' Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements

Index to Consolidated Financial Statements for the year ended October 31, 1996:

3(i) - Articles of Incorporation

3(ii) - Bylaws of the Company

10 (a) - General Agency Agreement between American International Group,
Inc. under its subsidiaries, National Union Fire Insurance
Company and New Hampshire Insurance Company, and Mechanical
Breakdown Administrators, Inc.

(b)- Agency Agreement between American Bankers Insurance Company of
Florida and Mechanical Breakdown Administrators, Inc.

(c)- Claims Service Agreement between American Bankers Insurance
Company of Florida and Mechanical Breakdown Administrators, Inc.

(d)- Contractual Liability Insurance Policy for Extended Service
Contract and Administration/Agency Agreement between American
Modern Home Insurance Company and Mechanical Breakdown
Administrators, Inc.

(e)- Board of Directors resolution dated February 15, 1996 regarding
Gaylen M. Brotherson's stock options.

(f)- Board of Directors resolution dated June 1, 1998 regarding Judy
K. Brotherson's stock options.

(g)- Office Lease

11. - Statement re computation of per share earnings

21. - Subsidiary of the Company

27. - Financial Data Schedule.

15
<PAGE>
INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
M.B.A. Holdings, Inc.
Scottsdale, Arizona

We have audited the accompanying consolidated balance sheets of M.B.A. Holdings,
Inc. and subsidiary (the "Company") as of October 31, 1998 and 1997, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the years then ended. These 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 consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of October 31, 1998
and 1997, and the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
PHOENIX, ARIZONA

January 9, 1999

F-1
<PAGE>
M.B.A. HOLDINGS, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
JULY 31, 1999 (Unaudited), OCTOBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OCTOBER 31,
JULY 31, -----------------------------
ASSETS 1999 1998 1997
----------- ----------- -----------
(Unaudited)
(NOTE 7)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,584,254 $ 1,914,001 $ 1,322,324
Restricted cash 500,323 450,988 210,747
Certificates of deposit 120,000
Receivables:
Accounts receivable, net of allowance
for doubtful accounts of $10,000 226,986 256,173 144,236
Receivable from affiliated entities 45,698 29,770 25,894
Note receivable from stockholder 115,586
Prepaid expenses and other assets 136,910 136,752 1,287
Deferred income tax asset (Note 3) 42,000 41,686 12,428
----------- ----------- -----------
Total current assets 4,536,171 2,829,370 1,952,502
----------- ----------- -----------
PROPERTY AND EQUIPMENT:
Computer equipment 215,150 148,493 422,797
Office equipment and furniture 129,429 136,929 188,625
Vehicles 16,400 16,400
Leasehold improvements 61,153 61,153 40,919
----------- ----------- -----------
Total property and equipment 422,132 362,975 652,341
Accumulated depreciation and amortization (138,736) (101,236) (504,980)
----------- ----------- -----------
Property and equipment - net 283,396 261,739 147,361
----------- ----------- -----------
DEFERRED INCOME TAX ASSET (Note 3) 76,772 77,086 77,011
----------- ----------- -----------

TOTAL $ 4,896,339 $ 3,168,195 $ 2,176,874
=========== =========== ===========
</TABLE>
(Continued)

F-2
<PAGE>
M.B.A. HOLDINGS, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
JULY 31, 1999 (UNAUDITED), OCTOBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OCTOBER 31,
JULY 31, --------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998 1997
---------- ---------- ----------
(Unaudited)
(NOTE 7)
<S> <C> <C> <C>
CURRENT LIABILITIES:
Net premiums payable to insurance companies $3,086,954 $1,633,077 $1,056,620
Accounts payable and accrued expenses 198,981 282,238 100,538
Accounts payable to stockholder 54,740
Accounts payable to affiliated entities 100,694 33,287 17,373
Deferred revenues 70,000 70,000
Income taxes payable (Note 3) 6,816 75,529 209,642
Notes payable to affiliated entity (Note 2) 73,189
---------- ---------- ----------
Total current liabilities 3,463,445 2,094,131 1,512,102
DEFERRED REVENUES 286,211 250,205 219,281
---------- ---------- ----------
Total liabilities 3,749,656 2,344,336 1,731,383
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 5 and 6)
STOCKHOLDERS' EQUITY (Note 4):
Preferred stock, $.001 par value; 20,000,000 shares
authorized; none issued and outstanding
Common stock, $.001 par value; 80,000,000 shares
authorized; 2,005,121shares issued and outstanding
in 1998 and 1997 2,005 2,005 2,005
Additional paid-in-capital 274,104 274,104 223,604
Retained earnings 870,574 547,750 219,882
---------- ---------- ----------
Total stockholders' equity 1,146,683 823,859 445,491
---------- ---------- ----------

TOTAL $4,896,339 $3,168,195 $2,176,874
========== ========== ==========
</TABLE>

See notes to consolidated financial statements. (Concluded)

F-3
<PAGE>
M.B.A. HOLDINGS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED JULY 31, 1999 AND 1998 (UNAUDITED), AND
YEARS ENDED OCTOBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
----------------------------- -----------------------------
1999 1998 1998 1997
------------ ------------ ------------ ------------
(UNAUDITED)
(NOTE 7)
<S> <C> <C> <C> <C>
NET COMMISSION INCOME:
Premiums on policies issued $ 20,299,762 $ 17,408,068 $ 25,010,771 $ 16,495,750
Premiums owed to insurers (8,602,639) (7,913,459) (11,202,871) (8,075,979)
Agent commission expenses (8,225,182) (6,534,869) (9,601,854) (5,889,861)
Cancellations - net of related charges (1,056,945) (774,148) (1,056,177) (551,289)
------------ ------------ ------------ ------------
Net commission income 2,414,996 2,185,592 3,149,869 1,978,621
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Salaries and employee benefits 1,115,512 1,095,802 1,552,347 877,031
Mailings and postage 259,445 212,031 282,018 249,105
Rent and lease expense 183,439 185,560 248,418 153,421
Professional fees 121,342 107,252 193,259 174,197
Telephone 95,046 46,811 80,905 64,530
Depreciation and amortization 41,874 42,453 52,770 42,190
Merchant and bank charges 14,344 16,672 22,992 15,503
Insurance 17,331 32,127 42,717 35,841
Supplies 36,383 19,605 30,676 34,701
License and fees 7,310 7,195 9,180 3,521
Other operating expenses 99,415 66,567 110,672 64,242
------------ ------------ ------------ ------------
Total operating expenses 1,991,441 1,832,075 2,625,954 1,714,282
------------ ------------ ------------ ------------
OPERATING INCOME 423,555 353,517 523,915 264,339
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Proceeds from settlement of lawsuit 168,383
Finance fee income 34,198 21,064 14,210 10,937
Interest income 78,477 33,535 62,880 30,191
Interest expense (2,806) (10,777) (39,480) (13,313)
Other expense (8,103) (28,123)
------------ ------------ ------------ ------------
Total other income 109,869 43,822 29,507 168,075
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 533,424 397,339 553,422 432,414
INCOME TAXES (Note 3) 210,600 163,700 225,554 169,037
------------ ------------ ------------ ------------
NET INCOME $ 322,824 $ 233,639 $ 327,868 $ 263,377
============ ============ ============ ============
BASIC AND DILUTED NET INCOME PER SHARE $ 0.16 $ 0.12 $ 0.16 $ 0.13
============ ============ ============ ============
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - BASIC 2,001,787 2,005,121 2,005,121 2,002,343
============ ============ ============ ============
AVERAGE NUMBER OF COMMON AND
DILUTIVE SHARES OUTSTANDING 2,022,928 2,020,677 2,046,813 2,006,777
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.

F-4
<PAGE>
M.B.A. HOLDINGS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED OCTOBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(ACCUMULATED
DEFICIT) TOTAL
COMMON STOCK ADDITIONAL RETAINED STOCKHOLDERS'
SHARES AMOUNT PAID-IN-CAPITAL EARNINGS EQUITY
--------- ---------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, NOVEMBER 1, 1996 1,998,453 $ 1,998 $ 201,939 $ (43,495) $ 160,442

Stock compensation expense 6,668 7 21,665 21,672

Net income 263,377 263,377
--------- ---------- ---------- ---------- ----------

BALANCE, OCTOBER 31, 1997 2,005,121 2,005 223,604 219,882 445,491

Compensation expense for options granted 50,500 50,500

Net income 327,868 327,868
--------- ---------- ---------- ---------- ----------

BALANCE, OCTOBER 31, 1998 2,005,121 2,005 274,104 547,750 823,859

Net income (unaudited) 322,824 322,824
--------- ---------- ---------- ---------- ----------

BALANCE, JULY 31, 1999 (Unaudited) 2,005,121 $ 2,005 $ 274,104 $ 870,574 $1,146,683
========== ========== ========== ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>

M.B.A. HOLDINGS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JULY 31, 1999 AND 1998 (UNAUDITED), AND
YEARS ENDED OCTOBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
------------------------- ---------------------------
1999 1998 1998 1997
----------- ----------- ----------- -----------
(UNAUDITED)
(NOTE 7)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 322,824 $ 233,639 $ 327,868 $ 263,377
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 41,874 42,453 52,770 42,190
Gain on sale of equipment (3,874)
Deferred income taxes (29,333) (63,846)
Stock-based compensation 31,250 50,500 21,672
Changes in assets and liabilities:
Restricted cash (49,335) 210,747 (240,241) (210,747)
Accounts receivable 29,187 (610,819) (111,937) 41,353
Receivable from affiliated entities (15,928) 8,114 (3,876) (25,894)
Prepaid expenses and other assets (158) (47,299) (135,465) 2,572
Net premiums payable to insurance companies 1,453,877 383,393 576,457 46,524
Accounts payable and accrued expenses (83,257) 234,027 181,700 32,252
Accounts payable to affiliated entities 67,407 (14,990) 15,914 (85,375)
Income taxes payable (68,713) (168,300) (134,113) 180,682
Deferred revenues 36,006 75,693 100,924 146,723
----------- ----------- ----------- -----------
Net cash provided by operating activities 1,729,910 377,908 651,168 391,483
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (66,657) (133,592) (167,148) (117,131)
Proceeds from sale of equipment 7,000
Net decrease in certificates of deposit 40,000 120,000 22,264
----------- ----------- ----------- -----------
Net cash used in investing activities (59,657) (93,592) (47,148) (94,867)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on notes payable to affiliated entity (73,189) (73,189) (2,998)
Net payments on payables to Company stockholder (54,740) (54,740) (14,880)
Payment (issuance) of note receivable from stockholder 115,586 115,586 (115,586)
----------- ----------- ----------- -----------
Net cash used in financing activities (12,343) (12,343) (133,464)
----------- ----------- ----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,670,253 271,973 591,677 163,152
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 1,914,001 1,322,324 1,322,324 1,159,172
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,584,254 $ 1,594,297 $ 1,914,001 $ 1,322,324
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 1,134 $ 7,279 $ 8,100 $ 7,500
=========== =========== =========== ===========
Cash paid for income taxes $ 279,313 $ 332,000 $ 389,000 $ 52,000
=========== =========== =========== ===========
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>
M.B.A. HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JULY 31, 1999 AND 1998 (UNAUDITED), AND
YEARS ENDED OCTOBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS - M.B.A. Holdings, Inc. and subsidiary (the
"Company") are located in Scottsdale, Arizona and are principally engaged
in the sale and claims administration of auto warranties and vehicle
service contracts for new autos, trucks, recreational vehicles, and travel
trailers for three domestic insurance companies. The insurance companies
retain the liability for future performance under the warranties and
contracts. The consolidated financial statements include the accounts of
M.B.A. Holdings, Inc. and its wholly-owned subsidiary, Mechanical Breakdown
Administrators, Inc. ("MBA"). All significant intercompany balances and
transactions have been eliminated.

SIGNIFICANT ACCOUNTING POLICIES are as follows:

a. CASH AND CASH EQUIVALENTS - The Company considers all cash and highly
liquid investments with original maturities of three months or less when
purchased to be cash equivalents.

b. RESTRICTED CASH represents funds collected by the Company on behalf of
insurance companies and claims payment advances provided by the insurance
companies, to enable the Company to make claims payments on behalf of the
insurance companies.

c. PROPERTY AND EQUIPMENT - The historical cost of computer equipment, office
equipment and furniture is depreciated by accelerated and straight-line
methods over their estimated useful lives which range from three to seven
years. Leasehold improvements are amortized over the shorter of the life of
the asset or the related lease term.

d. BENEFIT PLAN - The Company has a profit-sharing plan covering substantially
all employees who have attained the age of 21 and have completed one year
of service. Participation commences on the earliest plan entry date after
an employee meets eligibility requirements. The only contributions made to
the plan are discretionary employer contributions. No discretionary
contributions were made during the years ended October 31, 1998 and 1997.

e. NET PREMIUMS PAYABLE TO INSURANCE COMPANIES represent premiums collected
from the policyholders on behalf of the insurance companies. Amounts
collected are periodically remitted to the appropriate insurance company.

f. REVENUE RECOGNITION - Net commission income consists principally of
premiums on policies sold, less premiums owed to insurers, agent commission
expenses and cancellations. Revenues are recognized when the service
contract or extended warranty sold by the dealer, credit union, or other is
received and accepted by the Company. Deferred revenues represent insurance
premiums collected and deferred to the extent of estimated future costs
associated with administering claims for insurance contracts sold. Premium
adjustments, including policy cancellations, are recorded as they occur.

F-7
<PAGE>
g. INCOME TAXES - Deferred income taxes are recorded based on differences
between the financial statement and tax basis of assets and liabilities
based on income tax rates currently in effect.

h. NET INCOME PER SHARE - In March 1997, Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.
128, EARNINGS PER SHARE, which is effective for financial statements for
both interim and annual periods ending after December 15, 1997. This new
standard requires dual presentation of BASIC and DILUTED EPS on the face of
the earnings statements and requires a reconciliation of the numerator and
denominator of basic and diluted EPS calculations. Basic earnings per
common share is computed on the weighted average number of shares of common
stock outstanding during each period. Earnings per common share assuming
dilution is computed on the weighted average number of shares of common
stock outstanding plus additional shares representing the exercise of
outstanding common stock options using the treasury stock method.

i. STOCK-BASED COMPENSATION -The Company adopted SFAS No. 123 during 1997.
SFAS No. 123 requires expanded disclosures of stock-based compensation
arrangements with employees and encourages, but does not require,
compensation costs to be measured based on the fair value of the equity
instrument awarded. The Company has elected to measure its stock-based
compensation awards to employees based on the provisions of APB Opinion No.
25. APB No. 25 allows recognition of compensation cost based on the
intrinsic value of the equity instrument awarded rather than fair value.

J. USE OF ESTIMATES - 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, 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.

k. FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying value of the Company's
financial instruments approximate fair value as the rates in effect
approximate current rates obtainable in an open market.

l. NEW ACCOUNTING PRONOUNCEMENT - In June 1998, the FASB issued SFAS No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133
requires that an enterprise recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. The statement is effective for the Company's
fiscal year ending October 31, 2001. The Company has not completed
evaluating the impact of implementing the provisions of SFAS No. 133.

m. RECLASSIFICATIONS - Certain reclassifications have been made to the 1997
financial statements to conform to the 1998 presentation.

2. NOTE PAYABLE TO AFFILIATED ENTITY

The Company's note payable to an affiliated entity at October 31, 1997
consisted of $73,189 at a variable interest rate (6% as of October 31,
1997). The balance was paid in full during 1998.

F-8
<PAGE>
3. INCOME TAXES

Income taxes were as follows for the years ended October 31:

1998 1997
---- ----

Current $ 254,887 $ 235,642
Deferred (29,333) (66,605)
--------- ---------

Total income tax expense $ 225,554 $ 169,037
========= =========

The tax effects of temporary differences that give rise to significant
portions of deferred income tax assets at October 31 were as follows:

1998 1997
---- ----

Deferred revenue $ 131,284 $ 85,520
Allowance for doubtful accounts 4,100 3,900
Accrued compensation 8,886 8,452
Depreciation (25,498) (8,509)
Other 76
--------- ---------
Net deferred income tax assets $ 118,772 $ 89,439
========= =========

The effective income tax rate differs from the federal statutory income tax
rate in effect each year as a result of the following items:

1998 1997
---- ----

Federal statutory income tax rate 34% 34%
State taxes 6 6
Other 1 (1)
---- ----
Effective income tax rate 41% 39%
==== ====

4. STOCK OPTIONS AND STOCK AWARDS

During the years ended October 31, 1998 and 1997, the Company issued stock
options to certain employees. The Company applies APB Opinion No. 25 and
related interpretations in measuring compensation expense for its stock
options. During the years ended October 31, 1998 and 1997, compensation
expense of $50,500 and $-0-, respectively, was recognized for the
difference between the option exercise price and the estimated fair value
of the common stock at the date of grant. Had compensation cost for the
Company's stock options been determined based on the fair value of the
options at the date of grant consistent with SFAS No. 123, the Company's
net income and net income per common share would not have been materially
different for the years ended October 31, 1998 and 1997. Options granted
are immediately vested and exercisable.

F-9
<PAGE>
A summary of the Company's outstanding options as of October 31, 1998 is
presented below:

EXERCISE EXPIRATION
OPTIONS PRICE DATE
------- ----- ----

33,334 $ 2.25 February 15, 2006
25,000 1.20 September 30, 2008
1,667 1.20 October 31, 2008
100,000 0.94 June 1, 2008
20,000 1.05 September 30, 2008
5,000 1.05 October 31, 2008
-------
185,001
=======

A summary of the activity regarding the Company's outstanding options for
the years ended October 31 is presented below:
<TABLE>
<CAPTION>
1998 1997
------------------- --------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Options outstanding at beginning of year 39,834 $2.32 33,334 $2.25
Options granted 160,167 1.13 6,500 2.67
Options exercised -- -- -- --
Options cancelled (15,000) 3.06 -- --
-------- ------ ------ -----

Options outstanding at end of year 185,001 $1.23 39,834 $2.32
======== ===== ====== =====

Fair value of options granted during the year $ .79 $1.36
===== =====
</TABLE>

During 1997, the Company issued 6,668 shares of common stock to an
employee. In connection therewith, the Company recorded $21,672 of
compensation expense.

In addition to the options and shares issued during the years ended October
31, 1998 and 1997, discussed above, the Company also has reserved, for
issuance, various options and shares to employees which are based on the
occurrence of future events including the Company reaching certain sales
levels. Under an arrangement approved by the Board of Directors, the CEO
and President will be granted options if sales growth goals are met. For
every $5 million in sales growth, the CEO will receive 1,667 options with
an exercise price of 80 percent of market price at the date sales goals are
met. The President will receive 5,000 options with an exercise price of 70
percent of the market price at the date sales goals are met, for every $5
million in sales growth.

F-10
<PAGE>
OPERATING LEASES

The Company has operating leases for office space and equipment which
expire on various dates through the year ending October 31, 2004. Total
rental expense was approximately $248,000 and $153,000 for the years ended
October 31, 1998 and 1997, respectively. Future minimum lease payments
under noncancelable operating leases at October 31, 1998 are as follows:

1999 $51,254
2000 10,938
2001 8,391
2002 8,391
2003 and thereafter 10,488
-------
Total $89,462
=======

The Company leases its office space from an affiliate of the majority
stockholder. Rent expense for this office space was $187,067 and $114,000
for the years ended October 31, 1998 and 1997, respectively. The lease
expired on December 31, 1998; the Company continues to rent the space on a
month-to-month basis.

6. COMMITMENTS AND CONTINGENCIES

The Company is subject to claims and lawsuits that arise in the ordinary
course of business, consisting principally of alleged errors and omissions
in connection with the sale of insurance. On the basis of information
presently available, management does not believe the settlement of any
such claims or lawsuits will have a material adverse effect on the
financial position, results of operations or cash flows of the Company.

7. NINE-MONTH PERIODS ENDED JULY 31, 1999 AND 1998 (UNAUDITED)

The accompanying interim financial statements have been prepared by the
Company in accordance with the rules and regulations of the Securities and
Exchange Commission for interim reporting and generally accepted accounting
principles as they relate to interim financial reporting. Accounting
policies utilized in the preparation of financial information herein
presented are the same as set forth in the Company's annual financial
statements. Certain disclosures and information normally included in
financial statements have been condensed or omitted. In the opinion of the
management of the Company, these financial statements contain all
adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of the interim financial statements. Interim results of
operations are not necessarily indicative of the results of operations for
the full year.

a. STOCK OPTIONS - During the nine months ended July 31, 1999, there were
no options granted by the Company's Board of Directors.

The Company accounts for options issued to employees in accordance
with APB Opinion No. 25 and related interpretations in measuring
compensation expense for its stock options. The compensation cost that
has been charged against income for the nine months ended July 31,
1999 and 1998 for stock options is $0 and $31,250, respectively.

F-11
<PAGE>
b. OPERATING LEASES - The Company entered into a new operating lease
agreement for existing office space on January 1, 1999 from an
affiliate of the majority stockholder. Total rent expense for the nine
months ended July 31, 1999 and 1998 was approximately $186,000 and
$183,000, respectively. Future minimum payments as of July 31, 1999
for the fiscal years ending October 31 are as follows:

1999 $ 58,350
2000 241,180
2001 250,826
2002 262,964
2003 278,318
2004 and thereafter --
----------
Total $1,091,638
==========

* * * * * *

F-12
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
M.B.A. Holdings, Inc. and Subsidiary
Scottsdale, Arizona

We have audited the consolidated balance sheet of M.B.A. Holdings, Inc. and
Subsidiary (Company) as of October 31, 1996 and the related consolidated
statements of income, stockholders' equity, and of cash flows for the year then
ended. These financial statements are the responsibility of Company management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of October 31, 1996
and the results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Phoenix, Arizona

December 20, 1996

F-13
<PAGE>
M.B.A. HOLDINGS, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET
OCTOBER 31, 1996
- --------------------------------------------------------------------------------

ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 1,159,172
Commercial paper 142,264
Accounts receivable, net of allowance for
doubtful accounts of $10,000 592,953
Prepaid expenses and other assets 3,859
Deferred tax asset 3,100
-----------
Total current assets 1,901,348
-----------
PROPERTY AND EQUIPMENT:
Computer equipment 343,923
Office equipment and furniture 150,368
Leasehold improvements 40,919
-----------
Total property and equipment 535,210

Accumulated depreciation 462,790
-----------
Net property and equipment 72,420
-----------
DEFERRED TAX ASSET 22,493
-----------

TOTAL ASSETS $ 1,996,261
===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Net premiums payable to insurance companies $ 1,417,460
Accounts payable and accrued expenses 97,246
Accounts payable to Company stockholder 69,620
Accounts payable to affiliated entity 102,748
Current portion of long-term debt - affiliated entity 76,187
-----------
Total current liabilities 1,763,261

DEFERRED REVENUES 72,558
-----------

Total liabilities 1,835,819
-----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value; 20,000,000 shares
authorized; none issued and outstanding
Common stock, $.001 par value, 80,000,000 shares
authorized; 1,997,928 shares issued and
outstanding 1,998
Additional paid-in capital 201,939
Accumulated deficit (43,495)
-----------
Total stockholders' equity 160,442
-----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,996,261
===========

See notes to consolidated financial statements.

F-14
<PAGE>
M.B.A. HOLDINGS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED OCTOBER 31, 1996
- --------------------------------------------------------------------------------

NET COMMISSION INCOME:
Premiums on policies issued $ 4,688,097
Premiums owed to insurers (2,376,162)
Agent commission expenses (1,553,720)
Cancellations, net of related charges (82,662)
-----------
Net commission income 675,553
-----------
OPERATING EXPENSES:
Salaries and employee benefits 215,723
Mailings and postage 92,972
Rent and lease expense 74,544
Professional fees 87,195
Telephone 24,890
Depreciation 38,023
Merchant and bank charges 11,426
Insurance 18,527
Supplies 13,095
License and fees 10,296
Other operating expenses 35,235
-----------
Total operating expenses 621,926
-----------
OPERATING INCOME 53,627
-----------
OTHER (INCOME) EXPENSE:
Finance fee income (8,356)
Interest income (14,340)
Other income (4,930)
Interest expense 28,133
-----------
Total other expense 507
-----------
INCOME BEFORE INCOME TAXES 53,120

INCOME TAX EXPENSE 3,368
-----------
NET INCOME $ 49,752
===========
NET INCOME PER COMMON SHARE $ 0.02
===========
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 1,997,928
===========

See notes to consolidated financial statements.

F-15
<PAGE>
M.B.A. HOLDINGS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED OCTOBER 31, 1996
- --------------------------------------------------------------------------------

Common Stock Additional Total
------------------------ Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit (Deficit) Equity
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AS OF NOVEMBER 1, 1995 1,917,569 $ 320 $ 91,675 $ (93,247) $ (1,252)

Reverse stock split (2 for 1) (958,784)

Issuance of stock to MBA for acquisition 5,035,000 1,678 110,264 111,942

Reverse stock split (3 for 1) (3,995,857)

Net income 49,752 49,752
---------- ---------- ---------- ---------- ----------
BALANCE AS OF OCTOBER 31, 1996 1,997,928 $ 1,998 $ 201,939 $ (43,495) $ 160,442
========== ========== ========== ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-16
<PAGE>
M.B.A. HOLDINGS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED OCTOBER 31, 1996
- --------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 49,752
-----------
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation 38,023
Deferred income taxes (25,593)
Changes in:
Accounts receivable (549,525)
Prepaid expenses and other assets (3,315)
Net premiums payable to insurance companies 1,092,026
Accounts payable and accrued expenses 22,481
Accounts payable to affiliated party 102,748
Deferred revenues 46,850
-----------
Total adjustments 723,695
-----------
Net cash provided by operating activities 773,447
-----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (11,939)
Net increase in commercial paper 59,427
Proceeds from notes receivable 198,937
-----------
Net cash provided by investing activities 246,425
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on notes payable to affiliated entity 71,740
Net decrease in notes payable (30,000)
Net cash provided by financing activities 41,740
-----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 1,061,612

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 97,560
-----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,159,172
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 4,056
===========
Cash paid for income taxes $ --
===========

See notes to consolidated financial statements.

F-17
<PAGE>
M.B.A. HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED OCTOBER 31, 1996
- --------------------------------------------------------------------------------

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS - M.B.A. Holdings, Inc. and Subsidiary (Company)
are located in Scottsdale, Arizona and are principally engaged in the sale
and claims administration of auto warranties for new autos and trucks for
three domestic insurance companies. The consolidated financial statements
include the accounts of M.B.A. Holdings, Inc. and its subsidiary Mechanical
Breakdown Administrators, Inc. (wholly-owned by the Company). All
significant intercompany balances and transactions have been eliminated.

During November 1995, Brixen Enterprises, Inc. (Brixen) acquired Mechanical
Breakdown Administrators, Inc. (M.B.A.) in a stock exchange. Brixen issued
5,035,000 shares representing 84% of its outstanding shares, for 100% of
the stock of M.B.A. Brixen had been an inactive publicly held shell
corporation prior to the November 1995 transaction. Financial statements of
Brixen for fiscal 1995 and 1994 are not presented due to its inactive
status. Subsequent to the merger, Brixen changed its name to M.B.A.
Holdings, Inc. and its legal domicile from Utah to Nevada.

CASH AND CASH EQUIVALENTS - The Company considers all cash and highly
liquid investments with maturities of three months or less when purchased
to be cash equivalents.

COMMERCIAL PAPER - Commercial paper is valued at cost which approximates
market. The commercial paper is escrowed for potential payments for
insurance claims.

PROPERTY AND EQUIPMENT - The historical cost of computer equipment, office
equipment and furniture is depreciated over their estimated useful lives.
Leasehold improvements are amortized over the shorter of the life of the
asset or the related lease term.

NET PREMIUMS PAYABLE TO INSURANCE COMPANIES - Net premiums payable to
insurance companies represent premiums collected from the policyholders on
behalf of the insurance companies. Amounts collected are periodically
remitted to the appropriate insurance company.

DEFERRED REVENUES - Deferred revenues represent insurance premiums
collected and deferred to the extent of estimated future costs associated
with administering claims for insurance contracts sold.

REVENUE RECOGNITION - Net commission income consists principally of
premiums for policies issued, premiums owed to insurers, agent commission
expenses and cancellations. Insurance commissions generally are recognized
when substantially all required services related to placing the insurance
have been rendered (that date generally is the date on which the first
installment premium is billable to the policyholder) and no significant
obligation exists to perform services after the insurance has become
effective.

INCOME TAXES - Deferred income taxes are recorded based on differences
between financial statement and tax basis of assets and income tax rates
currently in effect.

F-18
<PAGE>
USE OF ESTIMATES - 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, 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.

NET INCOME PER COMMON SHARE - Net income per common share calculations are
based on the weighted average number of common shares outstanding, adjusted
for stock splits and for common stock equivalents arising from the assumed
exercise of outstanding stock options.

SFAS No. 123 ("Statement 123") - Accounting for Stock-Based Compensation
will be effective for the Company in fiscal 1997. Statement 123 requires
expanded disclosures of stock-based compensation arrangements with
employees and encourages (but does not require) compensation costs to be
measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply APB Opinion No. 25
("Opinion 25"), which recognizes compensation cost based on the intrinsic
value of the equity instrument awarded. The Company will continue to apply
Opinion 25 to its stock based compensation awards to employees.

FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying value of long-term debt
and notes payable approximate fair value as the rates in effect would
approximate current rates that could be obtained by the Company if
refinancing occurred.

2. LONG-TERM DEBT

The Company's long-term debt consisted of the following as of October 31,
1996:

Variable interest rates (6.72% as of October 31, 1996),
interest paid annually with balance due December 31,
1996, unsecured $ 76,187
Current portion of long-term debt (76,187)
--------

Long-term debt $ --
========

3. INCOME TAXES

Income taxes were as follows for the year ended October 31, 1996:

Current:
Federal $ 20,553
State 8,408
--------

Total current 28,961

Deferred:
Federal (18,163)
State (7,430)

Total deferred (25,593)

Total income tax expense $ 3,368
========

F-19
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of deferred income tax assets at October 31, 1996 were as follows:

Deferred income tax assets:
Deferred revenue $22,493
Allowance for doubtful accounts 3,100
-------

Total deferred income tax assets $25,593
=======

The effective income tax rate differs from the federal statutory income tax
rate in effect each year as a result of the following items:

Federal statutory income tax rate 34%
Decrease due to rate differential (4)
Decrease due to termination of Sub Chapter S corporation election (24)

Effective income tax rate 6%

Effective November 1, 1995, the Company's wholly owned subsidiary,
Mechanical Breakdown Administrators, Inc., revoked its election to be taxed
as an S Corporation and became a C Corporation. As a C Corporation, the
subsidiary's financial statement income tax expense is reported by the
Company. In connection with the election, the subsidiary recorded deferred
tax assets of $25,593. Prior to the revocation of the election, income was
taxed directly to the subsidiary's shareholders.

4. STOCK OPTIONS

STOCK OPTION PLANS - The Company has stock options under which shares of
common stock have been reserved for issuance to the majority stockholder of
the Company. Stock options are granted by the Board of Directors of the
Company for issuance at an exercise price equal to the market value of the
common stock determined as of the date of grant. Shares and option prices
have been adjusted for stock splits.

During 1996, the Company issued certain stock options to the majority
stockholder of the Company. These options are as follows:

* 100,000 stock options at $2.25 per share will be exercisable upon
Mechanical Breakdown Administrators, Inc.'s gross warranty sales
reaching $10,000,000. An additional 75,000 stock options to be
exercisable at a price of 80% of the market price per share on the
date when gross warranty sales reach $20,000,000. Also, an additional
5,000 stock options to be exercised at a price of 80% of the market
price per share (on the date reached) upon achieving each additional
$5,000,000 sales increase above the $20,000,000 sales level.

No stock options were exercised or canceled during 1996.

F-20
<PAGE>
5. COMMITMENTS AND CONTINGENCIES

The Company is subject to claims and lawsuits that arise in the ordinary
course of business, consisting principally of alleged errors and omissions
in connection with the placement of insurance. Some of these claims and
lawsuits seek damages, including punitive damages, in amounts that could,
if assessed, be significant. On the basis of information presently
available and advice received from legal counsel, the settlement of such
claims and lawsuits will not have a material adverse effect on the
financial position or results of the operations of the Company.

* * * * * *

F-21

<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereto duly authorized.

MBA Holdings, Inc.

Dated: November 19, 1999 By: /s/ Gaylen Brotherson
------------------------------------
Gaylen Brotherson
Chairman of the Board and Chief
Executive Officer

Dated: November 19, 1999 By: /s/ Michael J. Zimmerman
------------------------------------
Michael J. Zimmerman,
Chief Financial Officer

ARTICLES OF INCORPORATION

M.B.A. HOLDINGS, INC.

That we, the undersigned, have this day associated ourselves for the
purpose of forming a corporation under the laws of the State of Nevada pursuant
to Nevada Revised Statutes Chapter 78, and do hereby adopt the following
Articles of Incorporation.

ARTICLE I
Name of Corporation

The name of this Corporation shall be M.B.A. Holdings, Inc..

ARTICLE II
Resident Agent

This Corporation hereby appoints Corporate Services Company, 516 South 4th
Street, Las Vegas, Nevada 89101 with a mailing address of P.O. Box 7346, Las
Vegas, Nevada 89125-2346 as Resident Agent of this Corporation. The Board of
Directors may, at any time, effect the revocation of this or any other
appointment of such agent.

ARTICLE III
Stock

The authorized capital stock of this Corporation shall be: eighty million
(80,000,000) shares of Common Stock having a par value of $0.001 per share and
twenty million (20,000,000) shares of Preferred Stock, having a par value of
$0.001 per share. The board of directors is authorized to fix and determine in a
resolution the classes, series and numbers of each class or series as provided
in NRS 78.195 and 78.196.

ARTICLE IV
Board of Directors

The business and affairs of this Corporation shall be conducted by a Board
of Directors of not less than one (1) nor more than seven (7) members, as
established from time to time by said Board. The following named persons and
their addresses shall constitute the first Board of Directors, the size of which
is set at 3:

Gaylen Brotherson
8925 North 83rd Street
Scottsdale, Arizona 85258

Judy Brotherson
8925 North 83rd Street
Scottsdale, Arizona 85258

Shelly Beesley
1630 East Hale Street
Mesa, Arizona 85203

ARTICLE V
Incorporator

The incorporator of the Corporation and his address is as follows:

Gary R. Blume, Esq.
Gary R. Blume, P.C.
11801 North Tatum Boulevard, Suite 108
Phoenix, Arizona 85028
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused these Articles to be
executed as of the 17th day of June 1996.

/s/Gary R. Blume

STATE OF ARIZONA )
) ss
County of Maricopa )

On this, the 17TH day of JUNE 1996 before me, the undersigned Notary
Public, personally appeared Gary R. Blume, known to me to be the persons whose
names are subscribed to the within instrument and acknowledged to me that they
executed the same for the purposes therein contained.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal.

/s/ Lori A. VanDaele
Notary Public

My Commission Expires:

11/04/99
<PAGE>
ACCEPTANCE OF APPOINTMENT BY RESIDENT AGENT
FOR
M.B.A. HOLDINGS, INC.

CORPORATE SERVICES COMPANY , having been designated to act as Resident
Agent, hereby consents to act in that capacity for the above named corporation
in accordance with applicable law.

- --------------------------------------------
Signature of Resident Agent MANAGER

DATED: JUNE 18, 1996

BYLAWS
OF
M.B.A. HOLDINGS, INC.

SECTION 1. IDENTIFICATION

1.1 NAME. The name of the corporation is M.B.A. Holdings, Inc.

1.2 REGISTERED OFFICE. The registered office of the corporation shall be
Corporate Services Company, 516 South 4th Street, Las Vegas, Nevada 89101, Post
Office Box 7346, Las Vegas, Nevada 89125-2356. Additional offices may be
maintained at such other places within or without the State of Nevada as the
Board of Directors may from time to time designate.

1.3 FISCAL YEAR. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors. The current fiscal year end is October 31.

SECTION 2. MEETINGS OF SHAREHOLDERS

2.1 ANNUAL MEETING. A meeting of the shareholders shall be held annually at
such place as the Board of Directors shall designate, either within or without
the State of Nevada, at 10:00 o'clock a.m. on the first Monday of June of each
year, for the purpose of electing directors and for the transaction of any other
business which may properly come before it.

2.2 NOTICE. Unless properly waived, notice of the annual meeting and any
special shareholder meeting shall be mailed to the last known address of each
shareholder as the same appears on the records of the corporation, at least ten
(10) days and not more than sixty (60) days prior to such meeting date. Notice
of any special shareholder meeting shall state in general the purpose(s) for
which the meeting is called and the time when and the place where it is to be
held. Notices of meetings shall be in writing and signed by the president or a
vice president, or the secretary, or an assistant secretary, or by such other
person or persons as the directors shall designate. Such notice shall state the
purpose or purposes for which the meeting is called and the time when and the
place where it is to be held.

2.3 PRESIDING OFFICER. The President, or in his absence, a chairman
appointed by the shareholders present, shall call to order meetings of the
shareholders, and shall act as chairman thereof.

2.4 QUORUM. The holders of a majority of the voting stock issued and
outstanding and entitled to vote, present in person or represented by proxy,
shall constitute a quorum at all meetings of the shareholders for the
transaction of business, except as otherwise provided by statute or by the
Articles of Incorporation. If' however, such quorum shall not be present or
represented at any meeting of the shareholders, the shareholders so entitled to
vote shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed. When a quorum is present or represented at
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any meeting, the vote of the holders of a majority of the stock having voting
power, present in person or represented by proxy, shall decide any matter
brought before such meeting, unless the matter is one upon which, by express
provision of the statutes or of the Articles of Incorporation, a different vote
is required, in which case such express provision shall govern and control the
decision of such matter.

2.5 SPECIAL MEETINGS. Special meetings of the shareholders for any purpose
described in the meeting notice required under N.R.S. ss.78.370 shall be held
whenever called by the President or Secretary at the request in writing of a
majority of the Board of Directors or shall be held whenever called by a
majority of the shareholders owning a majority of shares entitled to vote on
such matter. Notice thereof shall be given as provided in Section 2.2 herein.

2.6 VOTING. At all annual and special meetings of shareholders, every
holder of voting shares of stock may appear and vote either in person or by
proxy in writing, and shall have one vote for each share of voting stock, so
held and represented at such meeting, with the right to cumulate such votes for
the election of directors as permitted pursuant to N.R.S. ss.78.360. At any
meeting of the shareholders, any shareholder may be represented and vote by a
proxy or proxies appointed by an instrument in writing. Execution may be
accomplished by the signing of the writing by the shareholder or any person
authorized to act on behalf of a shareholder. No such proxy shall be valid after
the expiration of six (6) months from the date of its execution, unless coupled
with an interest, or unless the shareholder specifies therein the length of time
for which it is to continue in force, which in no case shall exceed seven (7)
years from the date of its execution. Subject to the above, any proxy duly
executed is not revoked and continues in full force and effect until an
instrument revoking it or a duly executed proxy bearing a later date is filed
with the Secretary of the corporation. Upon demand of any shareholder, voting
upon any question at any meeting shall be by ballot.

2.7 ORDER OF BUSINESS AND RULES OF PROCEDURE. The order of business and the
rules of procedure used at any meeting of the shareholders shall be as
determined by the presiding officer, as provided in Section 2.3.

2.8 CLOSING OF TRANSFER BOOKS; REGISTERED SHAREHOLDERS. The directors may
prescribe a period not exceeding sixty (60) days prior to any meeting of the
shareholders during which no transfer of stock on the books of the corporation
may be made, or may fix a day not more than sixty (60) days prior to the holding
of any such meeting as the day as of which shareholders entitled to notice of
and to vote at such meeting shall be determined. Only shareholders of record on
such day shall be entitled to notice or to vote at such meeting. The corporation
shall be entitled to recognize the exclusive right of a person registered on its
books as the owner of shares to receive dividends, and to vote as such owner,
and to hold liable for calls and assessments a person registered on its books as
the owner of shares, 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 under the laws of the State of Nevada.

14
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2.9 ACTION WITHOUT A MEETING. Any action which may be taken at a meeting of
the shareholder, may be taken without a meeting if authorized by the written
consent of shareholders holding at least a majority of the voting power, unless
the provisions of the statutes or of the Articles of Incorporation require a
greater proportion of voting power to authorize such action, in which case such
greater proportion of written consents shall be required.

SECTION 3. BOARD OF DIRECTORS

3.1 NUMBER. The Articles of Incorporation authorize the business and
affairs of the corporation to be managed and controlled by a Board of Directors
of not less than one (1) nor more than seven (7) directors, who need not be
shareholders of the corporation or residents of the State of Nevada. Initially,
the Board shall be comprised of three (3) members.

3.2 TERMS. Each director shall serve for a term of one (1) year, or until
his successor shall have been elected and duly qualified, unless properly
removed from office. At a meeting of shareholders for which the meeting notice
states that a purpose or one of the purposes of the meeting is removal of a
director, any director or the entire Board of Directors may be removed, with or
without cause, by a vote of the holders of not less than two-thirds (2/3) of the
voting power of the issued and outstanding stock entitled to vote to remove the
director(s); provided, however, that, if the Articles of Incorporation provides
for election of directors by cumulative voting, no director may be removed if
the votes cast against his removal would be sufficient to elect him if then
cumulatively voted at an election of the entire Board of Directors. Whenever the
holders of any class or series of shares are entitled to elect one or more
directors, unless otherwise provided in the Articles of Incorporation, removal
of any such director requires only the proportion of votes, as provided herein,
of the holders of that class or series, and not the votes of the outstanding
shares as a whole.

3.3 ANNUAL MEETING. The first meeting of each newly elected Board of
Directors shall be held at such time and place as shall be fixed by the vote of
the shareholders and no notice of such meeting shall be necessary to the newly
elected directors in order to legally constitute the meeting, provided a quorum
shall be present. Unless otherwise fixed by the shareholders, on the first
Monday in June of each year, immediately after the annual meeting of
shareholders, the newly elected directors shall meet for the purpose of
organization, the election of officers, and the transaction of other business.

3.4 SPECIAL MEETINGS. Special meetings of the Board may be called by the
President or Secretary or on written request of one director after proper notice
has been given, unless properly waived. Unless otherwise specified in the notice
thereof' any and all business may be transacted at a special meeting.

3.5 NOTICE OF MEETINGS. No notice of a regular meeting, including without
limitation, the annual meeting of the Board of Directors, need be given. Unless
properly waived, notice of any special meeting of the Board of Directors,
stating the time and in general terms the purpose or purposes thereof' shall be
transmitted to all of the directors at least two (2) days prior to such meeting
and sent to the last known address or facsimile number of each director as the
same appears on the records of the corporation.

3.6 PLACE OF MEETING. The directors shall hold their meetings, have an
office and keep the books of the corporation at such place or places within or
without the State of Nevada as the Board of Directors from time to time may
determine. Unless otherwise determined, such place shall be at the principal
office of the corporation, as stated in Section 1.2 hereof. Meetings of the
Board of Directors, whether regular or special, may be held by use of any means
of communication by which all directors participating in the meeting can
simultaneously hear each other during the meeting, and participation in such a
meeting shall constitute presence in person at such meeting.
<PAGE>
3.7 QUORUM. A majority of the Board of Directors shall constitute a quorum
for tile transaction of business. The act of the majority of the voting power of
the directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors unless the act of a greater number is required by
statute or by the Articles of Incorporation.

3.8 CHAIRMAN. At all meetings of the Board of Directors, the President, or
in his absence a chairman chosen by a majority of the directors present, shall
preside.

3.9 COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the voting power of the Board, designate one or more committees,
each committee to consist of one or more of the directors of the corporation and
such natural persons not directors as appointed by the Board of Directors,
which, to the extent provided in the resolution, shall have and may exercise the
powers of the Board of Directors in the management of the business and affairs
of the corporation, and may have power to authorize the seal of the corporation
to be affixed to all papers on which the corporation desires to place a seal.
Such committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the Board of Directors. The
committees shall keep regular minutes of their meetings and proceedings and
report the same to the Board when required.

3.10 COMPENSATION. As determined by a majority in voting power of the Board
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 therefore as
determined by a majority of the Board of Directors, members of committees may be
allowed compensation for attending committee meetings. Nothing herein shall
preclude the paying by the corporation of a salary or other compensation to an
officer or employee who is also a director.

3.11 VACANCIES. In case of any vacancy among the directors through death,
resignation, disqualification, or other cause, or in the case of a vacancy
arising from the creation of a new directorship, the other directors, by
affirmative vote of a majority thereof or, if the corporation has no directors
in office, a majority vote of the shareholders entitled to elect a director, may
fill such vacancy for the unexpired portion of the term of directorship which is
vacant, and until election of and qualification of his successor.

3.12 ACTION WITHOUT A MEETING. Any action that may be taken at a meeting of
the directors or of a committee may be taken without a meeting if one or more
consents in writing, setting forth the action taken, shall be signed by all of
the directors or all of the members of the committee, as the case may be,
entitled to vote with respect to the subject matter thereof and shall be
included in the minutes or filed with the corporate records reflecting the
action taken. Action taken under this Section 3.12 is effective when the last
director signs the consent, unless the consent specifies a different effective
date. A consent signed under this Section 3.12 has the effect of a meeting vote
and may be described as such in any document.
<PAGE>
SECTION 4. OFFICERS

4.1 EXECUTIVE. The executive officers of the corporation shall be a
President, Secretary and Treasurer, and other officers as may from time to time
be appointed, each of whom shall hold his office at the discretion of the Board
of Directors. The officers of the corporation shall be chosen by a majority vote
of the Board of Directors. The officers need not be a member of the Board. The
Board of Directors also may appoint a Chief Executive Officer ("CEO"), Chief
Financial Officer ("CFO"), additional vice presidents, assistant secretaries and
assistant treasurers and such other officers and agents as it shall deem
necessary who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board. The salaries of all officers and agents of the corporation shall be fixed
by the Board of Directors. The officers of the corporation shall hold office
until their successors are chosen and qualify. Any officer elected or appointed
by the Board of Directors may be removed at any time by the affirmative vote of
a majority of the Board of Directors. Any vacancy occurring in any office of the
corporation by death, resignation, removal or otherwise shall be filled by the
affirmative vote of a majority of the Board of Directors.

4.2 TENURE OF OFFICE. All officers shall be subject to removal at any time,
with or without cause, by the affirmative vote of a majority of the Board of
Directors.

4.3 PRESIDENT. The President shall be a member of and the Chairman of the
Board of Directors. The President shall be the executive officer of the
corporation and shall preside at all meetings of the shareholders and of the
directors. He may, from time to time, call special meetings of the Board of
Directors whenever he shall deem it proper to do so and shall do so when a
majority of the Board of Directors shall request him in writing to do so. The
President may sign and execute all authorized contracts, other instruments or
obligations in the name of the corporation. The President may sign all
authorized checks in the name of the corporation. Subject to the Board of
Directors, he shall have general charge of the business and affairs of the
corporation. The President shall do and perform such other duties and have such
other powers as from time to time may be assigned to him by the Board of
Directors.

4.4 VICE PRESIDENT. If so appointed by the Board of Directors, the Vice
President, unless otherwise directed by the CEO or the Board, shall, in the
event of the President's absence or inability to act, have all of the powers of
the President. He shall perform such other duties as the Board of Directors
shall delegate to him.

4.5 SECRETARY. If the Board does not appoint a Vice President, unless
otherwise directed by the CEO or the Board, the Secretary shall, in the event of
the President's absence or inability to act, have all of the powers of the
President. The Secretary shall keep the minutes of all proceedings of the Board
and the minutes of all meetings of shareholders. He shall attend to the giving
and serving of all notices for the corporation when directed by the President.
He may sign with the President, in the name of the corporation, all contracts
authorized by the Board, and shall have authority to authenticate records of the
corporation. He shall have charge of all certificate books and such other books
and papers as the Board may direct; he shall sign, with the President,
certificates of stock. He shall, in general, perform all the duties incident to
the office of the Secretary, subject to the control of the Board.
<PAGE>
4.6 TREASURER. The Treasurer shall have the custody of all the funds and
securities of the corporation which may come into his hands. He may endorse on
behalf of the corporation for collection, checks, notes and other obligations,
and shall deposit the same to the credit of the corporation in such bank or
banks or depositories as the Board of Directors may designate. He may sign
receipts and. vouchers for payments made to the corporation. He may sign checks
made by the corporation and pay out and dispose of the same under the direction
of the Board. He may sign, with the President, or such other person or persons
as may be designated by the Board, all authorized promissory notes and bills of
exchange of the corporation; whenever required by the Board he shall render a
statement of his cash accounts. He shall enter regularly in books of the
corporation, to be kept by him for that purpose, full and accurate accounts of
all monies received and paid by him on account of the corporation. He shall
perform all duties incident to the position of Treasurer subject to the control
of the Board. The powers and duties of the Treasurer may be exercised and
performed by any of the other officers, as the Board may direct.

4.7 MISCELLANEOUS. Vice Presidents, Assistant Secretaries and Assistant
Treasurers may be selected by the Board of Directors at any meeting. They shall
perform any and all duties as the Board of Directors may require.

4.8 SELECTION OF OFFICERS. Any two or more offices can be held by the same
person.

SECTION 5. CAPITAL STOCK

5.1 PAYMENT FOR SHARES. The Board of Directors may authorize shares to be
issued for consideration consisting of any tangible or intangible property or
benefit to the corporation, including, but not limited to, cash, promissory
notes, services performed, contracts for services to be performed or other
securities of the corporation. Before the corporation issues shares, the Board
of Directors must determine that the consideration received or to be received
for the shares to be issued is adequate. The judgment of the Board of Directors
as to the adequacy of the consideration received for the shares issued is
conclusive in the absence of actual fraud in the transaction. When the
corporation receives the consideration for which the Board of Directors
authorized the issuance of shares, the shares issued therefor are fully paid.
The corporation may place in escrow shares issued for a contract for future
services or benefits or a promissory note, or make any other arrangements to
restrict the transfer of the shares. The corporation may credit distributions
made for the shares against their purchase price, until the services are
performed, the benefits are received or the promissory note is paid. If the
services are not performed, the benefits are not received or the promissory note
is not paid, the shares escrowed or restricted and the distributions credited
may be canceled in whole or in part.

5.2 CERTIFICATES REPRESENTING SHARES. Every shareholder shall be entitled
to have a certificate of the corporation, certifying the number of shares owned
by him in the corporation. If the corporation is authorized to issue shares of
more than one class or more than one series of any class, there shall be set
forth upon the face or back of the certificate, or the certificate shall have a
statement that the corporation will furnish to any shareholders upon request and
without charge, a full or summary statement of the designations, preferences and
relative, participating, optional or other special rights of the various classes
of stock or series thereof and the qualifications, limitations or restrictions
of such rights, and, if the corporation shall be authorized to issue only
special stock, such certificate shall set forth in full or summarize the rights
of the holders of such stock. The corporation may issue uncertificated shares of
<PAGE>
some or all of the shares of any or all of its classes or series. The issuance
of uncertificated shares has no effect on existing certificates for shares until
surrendered to the corporation, or on the respective rights and obligations of
the shareholders. Unless otherwise provided by a specific statute, the rights
and obligations of shareholders are identical whether or not their shares of
stock are represented by certificates. Within a reasonable time after the
issuance or transfer of shares without certificates, the corporation shall send
the shareholder a written statement containing the information required on the
certificates as provided hereunder. At least annually thereafter, the
corporation shall provide to its shareholders of record, a written statement
confirming the information contained in the informational statement previously
sent pursuant to this Section 5.2.

5.3 LOST, STOLEN OR DESTROYED CERTIFICATES. The corporation shall issue a
new stock certificate in place of any certificate theretofore issued where the
holder of record of the certificate:

(a) Makes proof in affidavit form that the certificate has been lost,
destroyed or wrongfully taken;

(b) Requests the issuance of a new certificate before the corporation
has notice that the certificate has been acquired by a purchaser for value
in good faith and without notice of any adverse claim;

(c) Gives a bond in such form and with such surety as the corporation
may direct, to indemnify the corporation against any claim that may be made
on account of the alleged loss, destruction, or theft of the certificate;
and

(d) Satisfies any other reasonable requirement imposed by the
corporation.

When a certificate has been lost, apparently destroyed, or wrongfully taken and
the holder of record fails to notify the corporation within a reasonable time
after he has actual or constructive notice of it and the corporation registers a
transfer of the shares represented by this certificate before receiving such
notification, the holder of record is precluded from making any claim against
the corporation for the transfer or for a new certificate.

5.4 PURCHASE OF ITS OWN SHARES. The corporation may purchase its own shares
of stock from the holders thereof subject to the limitations imposed by the
Articles of Incorporation with respect thereto.

5.5 DISTRIBUTIONS. The Board, in its discretion, may from time to time
declare distributions upon the capital stock; provided, however, that no
distribution shall be made if after giving it effect, either: (i) the
corporation would not be able to pay its debts as they become due in the usual
course of business; or (ii) except as otherwise specifically allowed by the
Articles of Incorporation, the corporation's total assets would be less than the
sum of its total liabilities plus the amount that would be needed (if the
corporation were to be dissolved at the time of the distribution) to satisfy the
preferential rights on dissolution of shareholders whose preferential rights are
<PAGE>
superior to those receiving the distribution. The Board of Directors shall
determine the effect of such distribution under the terms of N.R.S. ss.78.288(4)
and may base its determination that a distribution is not prohibited hereunder
pursuant to the terms of N.R.S. ss.78.288(3).

SECTION 6. WAIVER OF NOTICE

Any shareholder, director or officer may waive any notice required to be given
by these Bylaws of any meeting otherwise prescribed hereunder. Any meeting at
which all shareholders or directors are present (or with respect to which notice
is waived by any absent shareholder or director) may be held at any time for any
purpose and at any place and shall be deemed to have been validly called and
held, and all acts performed and all business conducted at such meeting shall be
valid in all respects.

SECTION 7. INDEMNIFICATION

7.1 INDEMNIFICATION. The corporation shall indemnify any person who was or
is a party or is threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, except an action by or
in the right of the corporation, by reason of the fact that he is or was a
director, officer or employee of the corporation, or is or was serving at the
request of the corporation as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with the
action, suit or proceeding if he acted in good faith and in a manner which he
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 his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendre or its equivalent, does not, of itself' create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.

7.2 The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer or employee of the
corporation, or is or was serving at the request of the corporation as a
director, officer or employee or of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.

7.3 To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 7.1 and 7.2 herein, or in
defense of any claim, issue or matter therein, he shall be indemnified by the
corporation against expenses, including attorneys' fees, actually and reasonably
incurred by him in connection with the defense.

7.4 Any indemnification under Sections 7.1 and 7.2 herein, unless ordered
by a court or advanced pursuant to Section 5 herein, must be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances. The determination must be made:
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(a) By the shareholders;

(b) By the Board of Directors by majority vote of a quorum consisting
of directors who were not parties to the act, suit or proceeding;

(c) If a majority vote of a quorum consisting of directors who are not
parties to the act, suit or proceeding so orders, by independent legal
counsel in a written opinion; or

(d) If a quorum consisting of directors who were not parties to the
act, suit or proceeding cannot be obtained, by independent legal counsel in
a written opinion.

7.5 The expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding shall be paid by the corporation as they are
incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this Section 7.5 do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.

7.6 The indemnification and advancement of expenses authorized in or by a
court pursuant to this Section:

(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the
Articles of Incorporation or any agreement, vote of shareholders or
disinterested directors or otherwise, for either an action in his official
capacity or an action in another capacity while holding his office, except
that indemnification, unless ordered by a court pursuant to Section 7.2
herein or for the advancement of expenses made pursuant to Section 7.5
herein may not be made to or on behalf of any director or officer if a
final adjudication establishes that his acts or omissions involved
intentional misconduct fraud or a knowing violation of the law and were
material to the cause of action.

(b) Continues for a person who has ceased to be a director, officer or
employee and inures to the benefit of the heirs, executors and
administrators of such a person.

SECTION 8. AMENDMENT AND REPEAL

These Bylaws may be amended or repealed or new Bylaws may be adopted by the
unanimous approval of all shareholders or the Board of Directors at either a
special or a regular meeting thereof' if notice of such alteration or repeal is
contained in the notice of such special meeting.

Dated as of the 7th day of May, 1998

/s/ GAYLEN M. BROTHERSON, President

ATTEST:

/s/ SHELLY M. BEESLEY, Secretary
<PAGE>
The undersigned, Secretary of M.B.A. Holdings, Inc., does hereby certify
that the foregoing copy of the Bylaws of this corporation is a true and correct
copy of the corporation's Bylaws, duly adopted by the Board of Directors, and
that such Bylaws have not been amended or repealed.

DATED: May 7, 1998.

/s/ SHELLY M. BEESLEY, Secretary

GENERAL AGENCY AGREEMENT

THIS AGREEMENT is made effective January 1, 1994 between the Insurance
Companies subscribing hereto, (collectively hereinafter referred to as "the
Company") and MECHANICAL BREAKDOWN ADMINISTRATORS of 9419 E. San Salvador,
Scottsdale, Arizona 85261 (hereinafter referred to as the "General Agent".)

WITNESSETH: In consideration of the mutual covenants and promises herein
contained, the parties hereto agree as follows:

1. APPOINTMENT: Subject to the terms and conditions of this
Agreement, the General Agent is hereby appointed
to solicit, bind, write and administer insurance
as expressly set forth in Addendum A to this
Agreement. The General Agent hereby accepts such
appointment, and agrees to perform faithfully
the duties thereof to the best of its knowledge,
skill and judgment.

2. TERMS OF THE AGREEMENT: The word "Agreement" herein shall be understood
to include any and all Addenda attached in
accordance with the terms and conditions herein
specified.

3. TERRITORY: The territory within which the General Agent
shall operate is as defined in Addendum A. Such
territory is not assigned exclusively to the
General Agent.

Nothing herein contained shall be construed to
create the relation of employer and employee
between the General Agent and the Company or
between the Company and any of the General
Agent's employees or representatives. It is the
express intent of the parties hereto that the
General Agent is not an employee of the Company
for any purpose, but is an independent
contractor for all purposes and in all
situations. The General Agent shall not
represent that he is an employee of the Company,
nor shall he in any manner hold himself out to
be an employee of the Company.

4. RELATIONSHIP: The General Agent shall be free to exercise
independent judgment as to the time, place and
manner of soliciting insurance and servicing
policyholders; however, the General Agent shall
perform its duties at all times in accordance
with this Agreement.

5. AUTHORITY OF THE The General Agent shall have no power or
GENERAL AGENT: authority other than as granted and set forth
herein and no other or greater power shall be
implied from the grant or denial of powers
specifically mentioned herein. The General Agent
shall have no power or authority on lines of
business other than those set forth in the
attached Addendum A for purposes of this
Agreement.

1
<PAGE>
6. ADMINISTRATIVE SERVICES The General Agent shall perform the following
OF GENERAL AGENT: administrative services on behalf of the
Company:

A. Assist Company to develop underwriting and
Producer Guidelines and modifications thereof
for the underwriting program, to be approved by
the Company in writing prior to use, which use
shall include advertising, program
implementation, and binding insurance coverage.

B. Process applications for insurance.

C. Collect and account for premiums.

D. Rate, quote and issue policies of insurance,
and certificates of insurance consistent with
Company's rate, rule and form filings made or
adopted in writing by Company, and the authority
granted herein, as well as to provide policy
information services for insured.

E. Make individual risk filings as appropriate
under the Underwriting Guidelines with respect
to "a" rate filings, special endorsement filings
or similar individual account filings. The
General Agent shall have no authority to make
modifications in underwriting or binding
coverage not already approved by Company in an
Addenda, Underwriting Guideline or related
manual without prior written approval of
Company. Further, the General Agent shall have
no authority to make any rate or form filing
other than individual risk filings on a per
policy basis.

F. Develop and maintain proper underwriting
files on behalf of Company which become the
property of Company, except as to the ownership
of expirations which are the property of the
General Agent if the General Agent has paid all
monies owed to Company and if the General Agent
has performed faithfully all duties set forth in
this Agreement.

G. Use best efforts and good faith to achieve an
underwriting profit on all business placed with
Company.

H. Provide proper and timely cancellation or
non-renewal notice to policyholders, certificate
holders and regulatory bodies as required by the
policy, any statute or regulation, any
regulatory order or by the Company.

I. Remit premiums received net of the
compensation due to General Agent, according the
to the provisions of the Paragraph entitled
"Premiums", below.

7. LIMITATION OF AUTHORITY: In addition to any other Limitations expressly
or impliedly contained in this Agreement, any
exhibits or addendum thereto or any Underwriting
Guideline, bulletin or instruction which may be

2
<PAGE>
issued from time to time by the Company to
General Agent, the General Agent has no
authority to act as outlined below:

A. Make, accept or endorse notes or otherwise
incur any liability which is not incurred in the
ordinary course of business of the General Agent
on behalf of the Company, pursuant to the terms
and conditions of this Agreement.

B. Waive a forfeiture or issue a guaranty, other
than as permitted expressly in writing by the
Company.

C. Extend the time for the payment of premiums
or other monies due the Company.

D. Institute, prosecute, defend or maintain any
legal proceedings in connection with any matter
pertaining to the Company's business.

E. Directly or indirectly solicit, sell, offer,
bind, issue, or deliver any insurances at any
reduction or deviation from the rates, terms or
conditions specified therefor by the Company,
and shall adhere strictly to the rates and forms
promulgated and filed by the Company.

F. Transact business in contravention of the
rules and regulations of any Insurance
Department and/or other governmental authorities
having jurisdiction of the subject matters
embraced within this Agreement, all instructions
issued by the Company; and the applicable laws
of any jurisdiction concerned.

G. Hold himself out as an agent of the Company
in any other manner, or for any other purpose
than is specifically prescribed in this
Agreement.

H. Waive premium payment.

I. Withhold any monies or property of the
Company.

J. Offer or pay any rebate of premium.

K. Negotiate or place any reinsurance on behalf
of Company or any insurance company represented
by Company whether such reinsurance is elective
or required by the Underwriting Guidelines.

L. Bind coverage subsequent to effective date
without prior written approval of Company,
except during the fifteen (15) day period after
the coverage effective date but only if the
insured has warranted in writing that there are
no known losses.

M. Effect or authorize a flat cancellation more
than thirty (30) days after the effective date
without prior written approval of Company. In
the event of such flat cancellation, the General
Agent shall document the existence of
substituted coverage or other reasons why
Company has no liability for payment of loss
while coverage was in force.

3
<PAGE>
N. The General Agent shall not reinstate
policies or certificates cancelled by Company
for other than non-payment of premium without
the prior written approval of Company.

O. The General Agent shall have no authority to
assign or delegate its rights and duties
hereunder or to appoint sub-agents for Company
without prior written approval of Company,
although the General Agent may employ other
entities to assist it in the performance of its
duties under this Agreement.

P. The General Agent may endorse checks payable
to Company or any insurance company represented
by Company.

Q. The General Agent shall not bind coverage
hereunder if the General Agent is aware that the
risk was previously declined or cancelled by any
office of the Company, its affiliates or
subsidiaries without disclosing such prior
declination or cancellation to the Company.

8. CLAIMS AUTHORITY: A. Except as may otherwise be authorized in an
Addendum to this Agreement, the General Agent
shall have no authority to investigate, defend,
approve or deny any claim made against the
Company or an insurance company represented by
the Company or under any policy issued pursuant
to this Agreement and the General Agent shall
have no authority to assign an adjuster or
attorney to investigate or defend any claims.

B. The General Agent agrees to give Company
prompt written notice of any claim, demand,
action, suit or proceeding raised, brought,
threatened, made or commenced against the
Company or an insurance company represented by
Company that relates to any matter to which the
provisions of this Agreement shall apply.

C. The General Agent agrees to cooperate fully
in the investigation and adjustment of all
claims against insurance companies represented
by Company and on policies issued pursuant to
this Agreement.

D. The General Agent agrees to send to offices
designated by Company copies of all binders,
policies, endorsements and evidence of
cancellations within thirty (30) days of the
effective date of such binder, policy,
endorsement or cancellation.

9. ERRORS AND OMISSIONS The General Agent warrants that it now has and
AND FIDELITY BOND: shall maintain during the term of this Agreement
insurance coverage for Errors and Omissions
Liability in an amount not less than two million
dollars ($2,000,000) for any one event or
occurrence and in an amount not less than two
million dollars ($2,000,000) in the aggregate.
The Company shall receive a Certificate of
Insurance in its name containing the following
provision: The Company shall receive thirty (30)
days written notice of any change, cancellation
or other termination of this Policy.

4
<PAGE>
General Agent shall maintain a Fidelity Bond
covering all operations, employees and
subcontractors servicing the business of this
Agreement, in an amount and on a form and with a
deductible satisfactory to the Company. General
Agent shall provide a certificate for the
Fidelity Bond with the same provision as
provided for the Errors & Omissions coverage.

10. ADVERTISING AND The General Agent shall use no advertising
REPRESENTATION: material, prospectus, proposal, or
representation, either in general or in relation
to a particular policy of the Company, or use
its name or the name of any of its affiliates or
member companies, or associated companies,
unless furnished by the Company or until the
consent of the Company thereto in writing shall
have first been secured. Such approval shall not
in any event be construed as charging or binding
the Company to bear any part of the cost or
expenses thereof. The General Agent shall not
issue or circulate any illustration, circular,
statement or memorandum of any sort
misrepresenting the terms, benefits, or
advantages of any policy issued by the Company
or make any misleading statement as to the
financial security of the Company.

11. RULES AND REGULATIONS: The General Agent shall comply with and be bound
by all of he underwriting guides, rules,
bulletins, manuals or other written instructions
issued by the Company now in force or as they
hereafter may be amended or supplemented, and
all applicable laws and regulations of the
appropriate jurisdiction.

12. LICENSING AND A. The General Agent warrants that it now has
COUNTERSIGNATURE and shall maintain during the term of this
REQUIREMENTS: Agreement the license or licenses necessary to
place the business described in this Agreement.
In the event the General Agent will comply with
licensing laws by utilizing the license of a
principal, director, officer, or employee then
General Agent promises, warrants and guarantees
that the licenses will comply with all
requirements of this Agreement and specifically
with this Paragraph. The General Agent is
responsible for all damages, penalties, fines
and liabilities incurred by said parties and for
which the Company is responsible to the same
extent as if the applicable license was held
directly by the General Agent. In the event that
any license the General Agent utilizes to
fulfill the requirements of the Agreement
expires, terminates or is suspended for any
reason, this Agreement terminates automatically
and the Company may avail itself of any rights
provided under the paragraph entitled
"Termination."

The General Agent shall be responsible to assure
that all business is properly countersigned. The
General Agent shall be responsible for and pay
any necessary countersignature expense. The
Company shall not be responsible for payment of
any countersignature expense.

5
<PAGE>
13. PREMIUMS: A. The General Agent agrees to pay Company all
insurance charges and all premiums on business
produced by the General Agent on behalf of
Company, whether or not collected by the General
Agent from insureds. General Agent does not
possess the funds collected for any other
reason. All such premiums received by the
General Agent pursuant to this Agreement shall
be held by the General Agent in a fiduciary
capacity as trustee for Company. The privilege
of taking commissions from premium monies
received by the General Agent shall not be
construed as an alteration of this fiduciary
capacity.

B. All monies received on behalf of the Company
shall be promptly deposited in a fiduciary
account in a bank which is a member of the
Federal Reserve System, and shall be invested in
the following types of accounts and/or
instruments and no other: demand accounts, time
accounts and certificates of deposit. General
Agent will cooperate with Company if Company
attempts to perfect a security interest in the
account and/or instrument. The General Agent
shall not commingle any premium monies collected
pursuant to this Agreement with operating funds
or funds held by the General Agent in any other
capacity. The General Agent must procure and
maintain a fiduciary account dedicated to funds
held for policies written for the Company and
its affiliates. The General Agent may retain any
interest or income earned from such investments.
Withdrawals from bank accounts must be in
accordance with the laws of the various states
and this Agreement. The net amounts due to
Company shall be forwarded to Company, as
described in this Agreement.

C. The General Agent shall submit to Company all
binders, policies, endorsements and
cancellations within twenty-five (25) days and
of the effective date of the binder, policy,
endorsement or respectively.

D. The General Agent shall submit to Company a
detailed and itemized monthly Account Current of
all premiums written and premium adjustments
made (whether additional or return) with respect
to all business and transactions effective in
that month not later than the twenty-fifth day
of the subsequent month. For example, binders,
policies, monthly reports and endorsements
effective in December are to be reported no
later than January 25. However, the Company
shall have the. - - -privilege, exercisable at
its option, of preparing the Account Current. -

E. Premiums on each binder, policy or
transaction are due within twenty five (25) days
of the effective date of the binder, policy or
transaction was effective. Additional premiums
developed by adjustments or audits are due
within twenty five (25) days of the date of the
billing by Company to the General Agent.

6
<PAGE>
F. The General Agent agrees to provide Company
with all pertinent statistical information as
requested by Company in the form required by
Company.

G. The General Agent shall be responsible for
conducting a quality assurance program for all
premium, accounting and statistical reports and
all policy transactions to assure compliance
with all terms of this Agreement and
reconciliation procedures.

H. If the General Agent is delinquent in either
accounting for or payment of monies due to
Company, then Company may, by written notice to
the General Agent, suspend or modify any of the
provisions of this Agreement or immediately
terminate this Agreement

I. The Company may offset any balance or
balances due from the General Agent under this
Agreement with any balance Company holds due the
General Agent.

J. Notwithstanding anything contained in Items
A-I, General Agent is not responsible to remit
premiums due for premium audits if General Agent
makes all reasonable efforts to collect the
premium due but is unable and so informs the
Company within thirty (30) days of the date of
the premium audit. In that event General Agent
will not receive commissions for amounts
collected by the Company but will receive credit
on his account.

14. BOOKS, ACCOUNTS, The General Agent shall keep complete and
AND RECORDS: accurate records of the business transacted by
him under this Agreement, including but not
limited to all policy and premium records during
the term of this Agreement and for seven (7)
years thereafter and shall forward to the
Company such reports of said business as the
Company may prescribe. The General Agent shall
be responsible for retaining all policy and
premium records on behalf of Company in hard
copy form, microfilm and/or other generally
accepted information storage medium, as well as
in any reasonable back-up form requested by
Company for the period described above. The
Company shall have the right to examine said
books, files and records at any time and to make
such records as it may deem necessary. All
books, accounts, or other documents relating to
the business of the Company, except computer
software systems, are the property of the
Company whether paid for by it or not. The books
and accounts of the Company shall be accepted as
full and final evidence in all matters relating
to this Agreement.

7
<PAGE>
The provisions of this Section, which are
binding upon the parties subsequent to the
termination of this Agreement, shall survive
such termination until all obligations are
finally discharged.

Company may examine all books and records of the
General Agent pertaining to business written
under this Agreement at all reasonable times on
the premises of the General Agent. Company may
make copies of all books and records described
herein.

In the event of termination of this Agreement,
the General Agent shall forward to Company all
supplies and policy files pertaining to the
terminated Underwriting Program and shall return
all unused policy forms with an accounting of
all such policies provided to the General Agent.

15. CURRENCY: Unless otherwise specified in the Addenda to
this Agreement, all transactions will be
reported and paid in U.S. dollars.

16. EXPENSES: The General Agent shall be responsible for all
expenses incurred by the General Agent in the
performance of its obligation under this
Agreement including but not limited to rentals,
transportation facilities, remuneration of
clerks, solicitors or other employees, postage,
advertising, city license fees, and all other
agency expenses of whatever nature. The conduct
by the General Agent of its business shall be
its own sole cost, credit, risk, and expense.

The General Agent shall not charge or commit the
Company to any expense, agreement, payment, debt
or obligation other than the insurance expressly
described in the Addenda hereto which the
General Agent is authorized to write.

17. SUPPLIES: The ownership of all books, supplies,
undelivered policies, or other property
furnished by the Company to the General Agent
shall be vested in the Company, and these shall
be delivered to the Company or its authorized
representatives immediately upon the termination
or cancellation of this Agreement or at any time
upon the request of the Company. The General
Agent agrees, without expense to the Company, to
surrender the same peaceably. The General Agent
has no authority to release blank policy or
certificate supplies to sub-brokers or
sub-agents. The General Agent must keep a policy
register and all voided policies must be
returned to the Company every thirty (30) days.

8
<PAGE>
18. COMPANY'S RIGHT TO The Company shall have the right at any time to
CANCEL OR NON-RENEW: cancel or non-renew any policies or contracts of
insurance issued by the General Agent under this
Agreement; the Company reserves the right to
withdraw authority at any time without notice
effective immediately from the General Agent to
solicit, bind, or write any one or more
particular lines or classes of insurance and to
decline to accept any particular risk or class
of risk.

19. COMPENSATION: Subject to the provisions hereof, the General
Agent's sole remuneration for all services that
the General Agent may perform for the Company
shall be its commissions at the rates set forth
on the attached Addendum A.

Unless otherwise agreed, such commissions
include the complete compensation to the General
Agent for its services hereunder. The General
Agent is responsible for all expenses in
connection with solicitation of insurance or
performance of any duties or obligations of the
General Agent, all countersignature fees and
commissions, all commissions to sub-producers
and any other expenses of the General Agent,
such as rent, office upkeep, salaries,
promotional and advertising expenses and
traveling expenses.

In the event of policy cancellation or
endorsement resulting in a premium return to a
policyholder, the General Agent shall be
responsible for refunding to Company the entire
amount of any commission paid or allowed on the
returned premium, including commissions to
sub-producers.

20. TERMINATION: Either party hereto shall have the right at any
and all times to terminate this Agreement by
written notice specifying the effective date of
termination, which shall be not less than ninety
(90) days thereafter, such notice to be by
certified mail, return receipt requested, to the
other party at its address hereinabove set
forth. Any such termination shall not affect the
rights and obligations of the parties hereto as
to transactions, acts, or things done by either
party prior to the effective date of
termination.

9
<PAGE>
This Agreement shall terminate automatically in
the event that reinsurance purchased by Company,
which Company considers to be an integral part
of the underwriting program, has been restricted
or cancelled by reinsurers, in which event, the
date of restriction or cancellation shall become
the termination date of this Agreement.

This Agreement shall terminate automatically in
the event that Company, in its sole discretion,
determines that the General Agent has not acted
in compliance with the Underwriting Guidelines
or rules of the Company, or the insurance
companies that it represents, in connection with
the underwriting program involved. This
Agreement may be cancelled by Certified Mail and
within ten (.10) days' prior written notice, by
the Company at its option upon the breach,
non-performance, or violation by the General
Agent or any person for whom the General Agent
may be responsible, of any provision, term or
condition hereof. The Company may, at its
option, permit the General Agent to rectify such
breach, non-performance, or violation within ten
(10) business days after receipt of written
notice from Company or, where cure would take
longer, to commence to cure within five (5)
business days and continues in good faith to
cure thereafter.

At the Company's option, this Agreement may be
terminated immediately in the event that the
General Agent shall have committed a fraudulent
act or illegal conduct, become insolvent or
bankrupt or commit an act of bankruptcy or make
an assignment for the benefit of creditors.

This Agreement shall terminate automatically
upon the effective date of the sale, transfer or
merger of the General Agent's business. This
Agreement shall terminate automatically if the
General Agent knowingly violates any provision
of this Agreement, or if the General Agent fails
to remit premiums when due.

Upon termination of this Agreement, unless
otherwise stipulated by the Company, the General
Agent shall account to the Company for all
premiums or other transactions unaccounted for
at the time of termination or arising thereafter
with respect to insurance covered by this
Agreement.

If this Agreement is terminated and the General
Agent has paid to Company all monies owing to
the Company, the expirations on business written
pursuant to this Agreement shall remain the
property of the General Agent. If the General
Agent is in default on the payment of monies to
the Company under the terms of this Agreement

10
<PAGE>
for any reason, any and all expirations or other
business shall become the property of the
Company upon the termination of this Agreement.
The General Agent shall receive no commissions
for premiums which the General Agent fails to
collect and which the Company collects but the
General Agent shall receive credit for the
premium in their mutual account.

All termination provisions of this Paragraph are
subject to the law of the jurisdiction
applicable to this termination.

After the effective date of termination of this
Agreement, the General Agent shall neither issue
any new policies nor bind any new insurance on
behalf of the Company, nor extend, renew or
increase the Company's liability on any existing
policy or binder, but at the Company's option
and except as aforesaid, all of the General
Agent's powers and authorities and al of the
rights and obligations of the parties hereto,
including the collection of premiums and the
accounting of premiums and commissions and
settling of all balances, shall remain in full
force and effect until all liabilities of the

21. FINANCING OF PREMIUMS: Company under all policies issued by the General
Agent hereunder are finally discharged. Company
retains the right to cancel or non-renew any
policy written by the General Agent for any
reason permitted by law

The General Agent shall forward to the Company
immediately upon receipt, or upon the General
Agent's knowledge thereof, all correspondence or
notices with relation to the financing or
proposed financing of premiums by any
policyholder. The General Agent shall not accept
premium financing on policies for which the
premium is provisional, deposit, minimum, or
otherwise adjustable.

The General Agent is not and shall not hold
itself out as the agent of the Company for the
purpose of obtaining premium financing.

The Company reserves the right to refund
premiums directly to the premium finance company
upon cancellation of a policy(ies). The General
Agent agrees to procure the agreement of any
sub-producer to Company's action. The General
Agent shall refund applicable commission to the
premium finance company in the event of a
cancellation of a policy(ies).

Premium finance company must agree, and General
Agent agrees to procure any sub-producer's
consent, to:

(A) Directly notify Company in writing if the
premium finance company cancels a policy(ies)
and

11
<PAGE>
(B) Acknowledge that Company is under no duty to
reinstate a policy(ies) if the policy(ies) is
(are) cancelled.

General Agent also agrees to:

(1) Notify Company in writing if General Agent
desires to reinstate a policy(ies) that has
(have) been cancelled; and

(2) Remain responsible as provided in the
Paragraph entitled "Premium" for collecting the
gross written premium of any financed
policy(ies) regardless of the financing of
premium.

The provisions of this Section, which are
binding upon the parties subsequent to the
termination of this Agreement, shall survive
such termination until all obligations are
finally discharged.

22. INDEMNIFICATION; The General Agent agrees to indemnify and save
the Company, its affiliates and subsidiaries and
their officers, directors, and employees
harmless from any damage and against any
liability for loss, cost, expenses, fines,
penalties, including punitive or exemplary
damages and all cost of defense: (i) resulting
from any act, error or omission, whether
intentional or unintentional, by the General
Agent and its officers, directors, employees,
and its sub-producers, related to or which arise
out of the business covered by this Agreement,
or (ii) resulting from any obligation, act or
transaction created or performed by the General
Agent in violation of, in excess of, or in
contravention of the power and authority of the
General Agent set forth in this Agreement.

The Company will choose defense counsel for all
lawsuits hereunder and defend itself and the
General Agent will pay all expense. The Company
shall decide in its sole opinion whether claims
or suits may be settled.

The General Agent expressly authorizes the
Company without precluding the Company from
exercising any other remedy it may have, to
charge against all compensation due or to become
due to the General Agent under this Agreement
any monies paid or liabilities incurred by the
Company by reason of any occurrence described
herein.

12
<PAGE>
23. ASSIGNMENT: No assignment of this Agreement, or of any
commissions or fees hereunder shall be valid
unless authorized in advance in writing by the
Company. Every assignment shall be subject to
any indebtedness and obligation of the General
Agent that may be due or become due at any time.

24. AMENDMENT: The Company shall have the exclusive right to
amend this Agreement or any of its provisions or
terms of compensation by written notice to said
effect, but such amendments shall not affect any
rights accruing or compensation or commissions
earned prior thereto. This Agreement cannot be
amended by any subsequent practices or courses
of dealing by the parties inconsistent herewith.
No oral agreement or representation concerning
this Agreement or the General Agent's
relationship to the Company shall be binding on
the Company. Any amendment to this Agreement
must be in writing and signed by an officer of
the Company.

25. NOTICE: All notices required or permitted to be given
hereunder shall be in writing and shall be given
as follows:

A. If given by the Company:

Mailed by certified mail to the General Agent at
its address as shown herein, or to such other
address as the General Agent may have previously
specified to the Company in writing; or

B. If given by the General Agent:

Mailed by certified mail, to the Company's
office as hereinabove specified and copy to
American International Group, Inc.; Att: General
Counsel, 70 Pine Street, New York, NY 10270

26. SERVICE OF PROCESS: In the event any legal process or notice is
served on the General Agent in-a suit or
proceeding against the Company, the General
Agent shall forthwith forward such process or
notice to American International Group, Inc. at
70 Pine Street (General Counsel), City of New
York, County of New York, State of New York
10270, by Registered Mail.

27. WAIVER: No waiver or modification of this Agreement
shall be effective unless it be in writing and
signed by a duly authorized officer of the
Company. The failure of the Company to enforce
any provision of this Agreement shall not
constitute a waiver by the Company of any such
provision. The past waiver of a provision by the
Company shall not constitute a course of conduct
or a waiver in the future of that same
provision.

13
<PAGE>
28. CHOICE OF LAWS, VENUE, The laws of New York shall govern all matters
JURISDICTION: concerning the validity, performance, and
interpretation of this Agreement. The Venue for
any action in law or equity between the parties
shall be designated exclusively as the Supreme
Court of the State of New York, County of New
York. The parties consent to the jurisdiction of
the Supreme Court of the State of New York for
any action between the parties in law or equity.

29. DIVISIBILITY: If any separable provision hereof shall be held
to be invalid, or unenforceable under the laws
or Insurance Department regulations now or
hereafter in effect in the jurisdiction
governing this Agreement, such invalidity or
unenforceability shall not affect any other
provisions hereof.

30. REGULATORY NOTICES: The General Agent shall forward promptly to the
Company all correspondence pertaining to this
Agreement received from any government
regulatory agency.

31. MERGER: This instrument with Addenda attached embraces
the entire Agreement between the parties and
supersedes all previous Agreements entered into
between the parties hereto, and any prior
statements, agreements or representations
between the parties are merged herein.

14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement in
duplicate.

INSURANCE COMPANIES SUBSCRIBING
THIS AGREEMENT

03/03/95 ----------------------------------------
(Date) (Name)

Vice President
----------------------------------------
(Title)

----------------------------------------
(Name)

Secretary
----------------------------------------
(Title)

New Hampshire Insurance Company
----------------------------------------
(Name of Company)

70 Pine Street, N.Y., N.Y. 10270
----------------------------------------
(Address)

Subscribed and sworn to before me this 8th day of March 1995

My commission Expires: 09/30/96
Helen Rennert
Notary Public, State of New York'
No. 24-4517599 /s/Helen Rennert
Commission Expires 09/30/96 (Notary Republic)

- -------------------------- ----------------------------------------
(Date) (Name)

Vice President
----------------------------------------
(Title)

----------------------------------------
(Name)

Secretary
----------------------------------------
(Title)

National Union Fire Ins. Co. of
Pittsburgh. Pa
----------------------------------------
(Name of Company)

70 Pine Street, N.Y., N.Y. 10270
----------------------------------------
(Address)

Subscribed and sworn to before me this 8th day of March 1995

My commission Expires: 09/30/96
Helen Rennert
Notary Public, State of New York
No. 24-4517599 /s/Helen Rennert
Commission Expires 09/30/96 ----------------------------------------
(Notary Republic)

15
<PAGE>
FOR THE GENERAL AGENT

03/03/95 /s/ Gaylen M. Brotherson
(Date) ----------------------------------------
(Name)

CEO
----------------------------------------
(Title)

/s/ Judy K. Brotherson
----------------------------------------
(Name)

President
----------------------------------------
(Title)

Mechanical Breakdown Administrators
----------------------------------------
(Name of Company)

9419 E. San Salvador #105 Scottsdale, AZ
85258
----------------------------------------
(Address)

Subscribed and sworn to before me this 6th day of March, 1995

My commission Expires: 09/30/96
Shelley Beesley
Notary Public, State of Arizona
Maricopa County /s/ Shelly Beesley
Commission Expires 09/30/99 ----------------------------------------
(Notary Republic)

TO BE EXECUTED IF THE GENERAL AGENT IS A CORPORATION OR PARTNERSHIP

INDIVIDUAL GUARANTEE: In consideration for the placement of
business through the Company pursuant to
the foregoing Agreement, the
undersigned, individually, hereby
personally and fully guarantees the
performance by the General Agent of
every agreement, covenant and
undertaking hereunder provided such
person or persons has signed this.
Agreement individually or on behalf of
the General Agent.

IN WITNESS WHEREOF,

____________________________________ BY:

Subscribed and sworn to before me this ___________ day of _____________ 19______

My commission Expires:
----------------------------------------

----------------------------------------
Notary Republic

16
<PAGE>
ADDENDUM A

This Addendum A is made a part of, and is subject to the conditions of the
General Agency Agreement effective January 1, 1994 between the Insurance
Companies Subscribing Hereto (hereinafter collectively referred to as the
"Company") and Mechanical Breakdown Administrators of 9419 E. San Salvador,
Scottsdale, Arizona 85261 (hereinafter referred to as the "General Agent".)

It is agreed and understood that the Territory within which the General Agent
shall operate is: AZ, CO, FL, IL, MA, MI, NE, NY, OR, WA

Issuing Company(ies): New Hampshire Insurance Company and National Union Fire
Insurance Company of Pittsburgh, Pa.

The General Agent shall bind and write the following lines of business, at the
commission rates shown herein, for the Mechanical Breakdown Insurance Program,
in accordance with the Underwriting Guidelines, rules, manuals and instructions
of the Company to General Agent, as follows:

Line of Business Commission
- ---------------- ----------
Mechanical Breakdown Insurance 45%

The General Agent shall deduct and retain commission on net written premiums
written and collected hereunder. For the purpose of the Agreement, net written
premiums means gross premiums written less cancellation and return premiums.

Line of Business Commission
- ---------------- ----------
Vehicle Service Contract 0%

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement in
duplicate.

INSURANCE COMPANIES SUBSCRIBING
THIS AGREEMENT

03/03/95
(Date) ----------------------------------------
(Name)

Vice President
----------------------------------------
(Title)

----------------------------------------
(Name)

Secretary
----------------------------------------
(Title)

New Hampshire Insurance Company
----------------------------------------
(Name of Company)

70 Pine Street, N.Y., N.Y. 10270
----------------------------------------
(Address)

Subscribed and sworn to before me this 8th day of March 1995

My commission Expires: 09/30/96
Helen Rennert
Notary Public, State of New York'
No. 24-4517599 /s/ Helen Rennert
Commission Expires 09/30/96 ----------------------------------------
(Notary Republic)

17
<PAGE>
----------------------------------------
(Name)

Vice President
----------------------------------------
(Title)

----------------------------------------
(Name)

Secretary
----------------------------------------
(Title)

National Union Fire Ins. Co. of
Pittsburgh. Pa
----------------------------------------
(Name of Company)

70 Pine Street, N.Y., N.Y. 10270
----------------------------------------
(Address)

Subscribed and sworn to before me this 8th day of March 1995

My commission Expires: 09/30/96
Helen Rennert
Notary Public, State of New York'
No. 24-4517599 /s/ Helen Rennert
Commission Expires 09/30/96 ----------------------------------------
(Notary Republic)

FOR THE GENERAL AGENT

03/10/95 /s/ Gaylen M. Brotherson
(Date) ----------------------------------------
(Name)

CEO
----------------------------------------
(Title)

/s/ Judy K. Brotherson
----------------------------------------
(Name)

President
----------------------------------------
(Title)

Mechanical Breakdown Administrators
----------------------------------------
(Name of Company)

9419 E. San Salvador #105 Scottsdale, AZ
85258
----------------------------------------
(Address)

Subscribed and sworn to before me this 10th day of March, 1995

AGENCY AGREEMENT

By this Agreement, the insurance companies named in Schedule A attached to and
forming a part of this Agreement (hereinafter referred to as "Company") grant to
Mechanical Breakdown Administrators and its affiliated or subsidiary insurance
agents or agencies (hereinafter collectively referred to as "Agent"):, effective
January 1, 1998 ("Effective Date"), the nonexclusive authority to solicit on
Company's behalf the lines and classes of insurance listed in Schedule A
attached hereto, subject to the following terms and conditions:

A. DEFINITIONS.

1. "Insurance" means the insurance coverage identified in Schedule A, as amended
from time to time, and all policies, certificates and contracts evidencing such
insurance coverage.

2. "Insured" means an individual or corporate entity which is insured under the
terms of the Insurance.

3. "Net Written Premiums" means gross premiums received by Company less
cancellation refunds or other return of premiums. "Cumulative Net Written
Premiums" means the total amount of Net Written Premiums received by Company
since the Effective Date.

4. "State/Legal Requirements" means Company action which is based upon an
insurance statute, regulation, regulatory action or litigation.

B. DUTIES OF COMPANY.

Company shall have the following duties:

I. Pay Agent a Commission pursuant to the terms and conditions hereof.

2. Perform such other administrative activities as may be agreed between Company
and Agent.

C. DUTIES AND AUTHORITY OF AGENT.

Agent shall have the following duties and authority:

I. Offer and issue Insurance pursuant to the terms hereof and the applicable
insurance policies, certificates or contracts.

2. Adjust, settle, pay and/or deny claims in accordance with applicable law and
the terms of the Insurance.

3. Receive and accept proposals for, and solicit and sell Insurance issued by
Company in accordance with the guidelines and instructions of Company provided
to Agent. Use of any advertising material with respect to the Insurance must
have the prior written approval of Company.

4. Collect, receive and receipt for premiums on Insurance which are due Company,
and transmit such premiums to Company in accordance with the manuals, rate
charts or other instructions from Company. Net Written Premiums, less
Commissions due Agent, as set forth in Schedule A, shall be remitted and reports
provided to Company within fifteen (15) days after the end of the month in which
the premiums are collected by Agent. If not paid within said time, interest
shall accrue on the amounts due Company from the due date until paid at the rate
of 1% per month.

5. Keep true and complete records and accounts of all transactions with
Insureds, policyholders and Company.

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<PAGE>
6. Promptly forward to Company records of all insurance transactions between
Insureds and Company, as well as all communications and notices of claims
received from Insureds.

7. Perform faithfully and to the best of Agent's professional knowledge, skill
and judgment, the duties as Agent in compliance with written guidelines,
instructions, rules and regulations of Company.

8. Perform such other administrative activities as may be agreed between Company
and Agent.

9. Comply fully with all applicable laws, regulations and other legal
requirements.

10. Maintain at all times relevant hereto all licenses and other authorizations
necessary to transact the business contemplated hereunder in the state(s) in
which Agent is operating. Agent shall furnish Company with copies of all
licenses required of Agent.

11. If Insurance is sold pursuant hereto to Texas residents, obtain a license as
a local recording agent, or utilize a local recording agent resident in Texas or
other properly licensed agent in Texas and provide to Company (a) the amount of
any cancellation refund due to any Texas Insured or policyholder, if the refund
is calculated by Agent, and (b) verification that such cancellation refund was
remitted to the Insured or policyholder by Agent.

12. With respect to Insurance provided to Texas Insureds by Financial Insurance
Exchange (if any), obtain the execution of and transmit to Company any and all
Subscriber Agreements, properly executed by each policyholder or, if so
authorized by such policyholders, by Agent. Executed Subscriber Agreements shall
be provided to Company by Agent prior to the issuance of any coverage to such
Insureds and prior to the time Company becomes obligated to pay Agent any
Commission on such business.

D. COMMISSION. In consideration of the services to be performed by Agent,
Company agrees to pay monthly to Agent an amount ("Commission") calculated by
applying the percentage rate indicated on Schedule A ("Commission Rate") to Net
Written Premiums for the preceding month, provided, however, that no Commission
shall be paid to Agent unless Agent is in compliance with the licensing
requirements of the state in which the Insurance business is written as well as
all other terms and conditions of this Agreement.

At all times, Agent shall participate in cancellation refunds or other return of
premiums at the same percentage at which Commission on such premiums was paid to
Agent. This requirement shall in no way affect or be affected by the
indemnification provided in Section N hereof.

Company may change the rate of Agent's Commission (i) as necessitated by
State/Legal Requirements; or (ii) due to unprofitability if the unprofitability
cannot be corrected, at Company's sole discretion, by an increase in the retail
price of the Insurance or a decrease in the coverage, as determined by Company,
upon ninety (90) days written notice. The change in the Commission Rate shall
apply with respect to Net Written Premiums that are remitted by Agent after the
effective date of the change.

This Section shall survive termination of this Agreement.

E. PRODUCT CHANGES. Company may cease offering an Insurance product as
necessitated by State/Legal Requirements; or upon ninety (90) days written
notice, due to Company's determination of unprofitability. This Section shall
survive termination of this Agreement.

F. SEGREGATED ACCOUNT. Agent shall deposit all premiums received for Company,
less Commission due Agent, in a segregated account. All premiums shall be the
property of Company at all times, and Agent shall not commingle premiums with
any of its other funds. Agent shall disburse premiums from the segregated
account only to pay cancellation refunds and to remit amounts due to Company.
This Section shall survive termination of this Agreement.

2
<PAGE>
G. POLICY CANCELLATIONS. Agent is authorized to effect cancellation of
individual policies or certificates placed with Company by legal notice, in
accordance with the terms and conditions of said individual policies or
certificates, for non-payment of premiums, for ineligibility or for causes
inherent in a particular risk, but shall not otherwise cancel policies or
certificates of Company, nor cancel and replace policies or certificates of
Company with those of another company without prior agreement and written
instruction by Company. Upon instruction by Company, Agent shall promptly cancel
any outstanding policy or certificate. If Notice of Intention Not To Renew or
similar notice is required by applicable law, Agent agrees to issue such notice
on any policy not renewed with Company.

H. OWNERSHIP OF EXPIRATIONS. Upon termination of this Agreement, the use and
control of any Insurance information, including the name and address of the
Insureds, amount of Insurance coverage and Insurance expiration dates, shall
vest exclusively with Agent, who shall have exclusive renewal rights with
respect to all Insurance written pursuant to this Agreement, provided that Agent
has accounted for and paid over to Company all premiums due Company upon
Insurance risks placed by Agent. This Section shall survive termination of this
Agreement.

TERM. The initial term of this Agreement ("Initial Term") shall end on the
latest of:

1. three (3) years from the Effective Date, or

2. three (3) years from the first day of the month in which premiums are first
received by Company, or

3. the last day of the month in which Cumulative Net Written Premiums equal
$75,000,000,

unless otherwise terminated as provided herein. Upon expiration of the Initial
Term, this Agreement shall automatically renew for successive one (1) year terms
(each a "Renewal Term") unless written notice is given at least one hundred
eighty (180) days prior to the effective date of any Renewal Term, except as
otherwise specified by applicable law.

J. TERMINATION. Except as otherwise specified by applicable law, this Agreement
may be terminated during the Initial Term or any Renewal Term as follows:

1. by either party for cause. "Cause" is defined as a material breach of this
Agreement which is not cured by the breaching party within sixty (60) days of
written notice by the non-breaching party, except that in the event of
non-payment of any premium received by Agent but not paid to Company when due,
Company may terminate this Agreement immediately upon written notice to Agent.

2. by Company, at any time upon one hundred eighty (180) days written notice by
mutual written consent of the parties at any time.

K. RECAPTURE. If any Insurance is terminated by Agent prior to expiration of
thirty-six (36) months from the date any costs, expenses or fees were incurred
by Company in connection with such Insurance and Agent aids in, assists in or
attempts, either directly or indirectly, the substitution or replacement of such
Insurance, Agent shall reimburse Company for any and all costs, expenses and
fees which were incurred by Company during the thirty-six (36) months prior to
such termination in connection with the writing of such Insurance. This
paragraph shall survive termination of this Agreement.

L. DUTIES POST TERMINATION. Upon termination of this Agreement, Agent shall
promptly account for and pay to Company all amounts due under this Agreement,
and shall return all property of Company provided to Agent. With respect to any
Insurance still in force after termination of this Agreement, Agent agrees to
continue to render all services specified under this Agreement during the
remaining term of the Insurance. This Section shall survive termination of this
Agreement.

3
<PAGE>
M. OFFSET. Company reserves the right to offset any amounts due to Agent under
this Agreement against any amounts due from Agent under this or any other
agreements which Agent may have from time to time with Company and/or any other
subsidiaries or affiliates of American Bankers Insurance Group, Inc. This
Section shall survive termination of this Agreement.

N. EXPENSES. Company shall not be responsible for any agency expenses
whatsoever, nor any local license fees, municipal, county or occupational taxes
of any kind, nature or description, unless levied directly on Company by law.

O. INDEMNIFICATION. Company shall indemnify Agent against all claims, costs and
expenses (including reasonable attorneys' fees) arising from any breach of this
Agreement by Company, and from any negligent act or omission or willful
misconduct of Company, its employees, agents or representatives (other than
Agent, its employees, agents or representatives). Agent shall indemnify Company
against all claims, costs and expenses (including reasonable attorneys' fees)
arising from any breach of this Agreement by Agent, and from any negligent act
or omission or willful misconduct of Agent, its employees, subagents or
representatives. Additionally, Agent will indemnify Company for any claims
arising from Agent's or Agent's employees', subagents' or representatives'
failure to perform any of its or their duties in accordance with this Agreement.

This Section shall survive termination of this Agreement.

P. INSPECTION OF RECORDS. Agent shall, upon reasonable notice from Company's
authorized representative, make available for inspection, during Agent's regular
business hours, all records pertaining to the Insurance. This Section shall
survive termination of this Agreement.

Q. CONFIDENTIALITY. All information which relates to a party's business or
customers, and which is provided by that party (the "providing party") is
"Confidential Information." Excluded is any information which is (i) previously
known by the party receiving the information (the "receiving party"), (ii)
available from public sources, or (iii) available from third parties on a
non-confidential basis. Unless otherwise agreed in writing, the Confidential
Information shall be used solely for the purposes for which provided, and may be
disclosed only to employees and others with a need to know ("Representatives").
Representatives shall be required to comply with this Section, and the receiving
party shall be liable for any breach of this Section by its Representatives. The
receiving party shall immediately notify the providing party if it is compelled
by legal process to disclose any Confidential Information, and shall assist and
cooperate with all efforts of the providing party to obtain a protective order,
negotiate the terms of disclosure, or otherwise respond to the legal process.
This Section shall survive termination of this Agreement.

R. ARBITRATION. Any controversy or claim arising out of or relating to this
Agreement shall be settled by arbitration in accordance with the rules of the
American Arbitration Association. One arbitrator shall be selected by each
party. A third neutral arbitrator shall be selected by the arbitrators named by
each party. In the event an agreement cannot be reached as to the third
arbitrator, either party may petition a court of competent jurisdiction to
appoint a neutral arbitrator as the third arbitrator. Each party shall be
responsible for its own costs and expenses, but the costs and expenses of the
third arbitrator shall be shared by the parties. The arbitration proceeding
shall take place in Miami, Florida, unless otherwise mutually agreed by the
parties. This Section shall survive termination of this Agreement.

S. ASSIGNMENT OF RIGHT TO PAYMENT; DELEGATION OF DUTIES. Agent may assign its
rights or delegate its duties under this Agreement only upon the written consent
of Company. This Section shall survive termination of this Agreement.

T. NOTICES. All written notices to be provided under this Agreement shall be
given by certified mall, return receipt requested, or by courier (with proof of
delivery), shall be effective when so mailed, and shall be addressed as follows:

4
<PAGE>
If to Company:

Claude Borrelli, Vice President
Emerging Markets
American Bankers Insurance Group
11222 Quail Roost Drive
Miami, Florida 33157

If to Agent:

Gaylen Brotherson, CEO & Chairman
9419 E. San Salvador Drive, Suite 105
Scottsdale, Arizona 85258-5510

U. STATUTE COMPLIANCE. Any terms or conditions of this Agreement which are in
conflict with the statutes or lawful regulations of the state wherein business
is written are hereby amended without notice to comply with such statutes and
regulations as from time to time governing.

V. INDEPENDENT CONTRACTOR. Agent is and shall be an independent contractor
during the term of this Agreement. As an independent contractor, Agent has the
right to exercise independent judgment as to the time, place and manner of
performing under this Agreement and is solely and entirely responsible for its
acts and the acts of its employees, subagents, and representatives, provided,
however, that the performance contemplated herein must be in accord with the
rules and regulations of Company including, without limitation, the underwriting
guidelines of Company, and in accord with the laws and regulations of the state
wherein Agent transacts insurance business.

W. YEAR 2000. Agent represents and warrants that it is capable of performing its
duties and obligations hereunder in such a manner so as to be "year 2000
compliant." "Year 2000 compliant" shall mean that Agent's software, hardware,
computer systems, procedures and processes shall perform Agent's obligations
under this Agreement without interruption, delay, error or loss of functionality
in any way related to or arising from going from the twentieth to the
twenty-first century5 or from data entry of records that begin with the year
2000.

X. SUBPRODUCERS/SUBAGENTS/REPRESENTATIVES. All current and future subproducers,
subagents and representatives that Agent has negotiated and executed
Agent/Agency contracts with, shall be the property of Agent. Company, as used in
this Section W, refers to the company named in Schedule A only and not to its
successors, assigns, affiliates or parent company. Subproducer, subagent and
representatives' names and lists shall be the property of Agent and shall be
held as Confidential Information and not disclosed by Company to any entity,
unless required by law.

Y. COMPETITION. Company agrees not to compete with Agent on a direct basis by
offering the Agent's MBI Insurance to those credit unions which Agent is writing
business. Company, as used in this Section Y, refers to the Company named in
Schedule A only and not to its successor, assigns, affiliates or parent company.

Z. MISCELLANEOUS.

1. AMENDMENTS. This Agreement may be amended only by a writing signed by both
parties, except as otherwise provided herein.

2. GOVERNING LAW. This Agreement shall be governed by Florida law.

3. WAIVER. The failure by either party to enforce any provision of this
Agreement shall not constitute a waiver of that provision.

4. ENTIRE AGREEMENT. This Agreement represents the entire agreement between
Company and Agent and supersedes all other prior oral or written agreements
relating to the subject matter of this Agreement, except as otherwise provided
herein.

5. SUCCESSORS. HEIRS AND ASSIGNS. Agent, by accepting this Agreement, hereby
agrees for itself, its successors, heirs, executors, administrators and assigns,
to faithfully perform all terms and conditions hereof.

5
<PAGE>
6. COUNTERPARTS. This Agreement may be executed in a number of counterparts, any
of which may be taken as an original.

SCHEDULES AND ADDENDA. The following Schedules and Addenda are attached to and
made a part of this Agreement at its inception:

Names of
Schedule or Addenda Subscribing Companies*
- ------------------- ----------------------
Schedule A ABIC
Profit Sharing Addendum ABIC
Exhibit A ABIC

* Initials designate the following companies:
ABIC - American Bankers Insurance Company of Florida

Executed on behalf of Company at Executed by or on behalf of Agent at
Miami, Florida this ____ day of Scottsdale, AZ, this 9th day of
___________, 1999. February, 1998.

AMERICAN BANKERS MECHANICAL BREAKDOWN
INSURANCE COMPANY OF FLORIDA ADMINISTRATORS
("Company") ("Agent")

By: By: /s/ Gaylen Brotherson
-------------------------------- --------------------------------
Title: Vice President Title: CEO
Witness Witness:

6
<PAGE>
AGENCY AGREEMENT
SCHEDULE A

This Schedule is attached to and by reference made a part of the Agency
Agreement indicated above (the "Agreement") between the insurance companies
named below ("Company") and Mechanical Breakdown Administrators ("Agent"). This
Schedule is effective January 1, 1998.

NOW, THEREFORE, IT IS MUTUALLY UNDERSTOOD AND AGREED AS FOLLOWS:

1. Company hereby grants authority to Agent to solicit, on Company's behalf, the
types of Insurance as indicated in Paragraph 2 below, to the borrowers,
customers, members or lessees of:

MECHANICAL BREAKDOWN ADMINISTRATORS, INC.

2. Pursuant to the Agreement, Company grants authority to Agent to solicit the
types of Insurance shown below in the states listed with limits as shown and for
the Commission Rate shown:

MAXIMUMS ALLOWED

Type of Agent's Monthly
Company Insurance State Commission Rate Coverage Benefits Term
- ------- --------- ----- --------------- -------- -------- ----
ABIC Mechanical * ** $2,500 N/A 72 mos.
Breakdown
Insurance

* AZ, CA, CO, DE, FL, IA, IN, MI, MO, MS, NY, NC, NV, OP, OH, WI (when
approved). All other stated will be added by Addendum.

** For the first six (6) months, Agent's Commission Rate will be forty-nine
percent (49%) of Net Written Premium. ABIC will warehouse two percent (2%) of
the forty-nine percent (49%) as additional claim reserves. ABIC will conduct an
audit after six (6) months to determine if the loss ratio is greater than
fifty-two percent (52%). The warehoused amount will be utilized to offset any
losses in excess of a fifty-two percent (52%) loss ratio. If loss ratio is less
than fifty-two percent (52%) , Agent shall be refunded the warehoused amount
that is being held by ABIC including any investment income that was generated
from the warehoused amount. After the first six (6) months, the compensation
will continue to be forty-nine percent (49%) and ABIC will no longer require two
percent (2%) to be warehoused.

Initials designate the following companies:
ABIC - American Bankers Insurance Company of Florida

7
<PAGE>
AGENCY AGREEMENT

PROFIT SHARING PLAN ADDENDUM

This Profit Sharing Plan Addendum is attached to and made a part of the Agency
Agreement No. DG4YGWGH (UT-980 101) ("the Agreement") by and between Company, as
identified in Section B, and Mechanical Breakdown Administrators ("Agent") and
is effective January 30, 1998.

A. DEFINITIONS.

1. Definitions contained in the Agreement are incorporated herein.

2. "Accounting Date," during the term of the Agreement, means the December 31
immediately preceding each Payment Date. Upon and after termination, the
Accounting Date may be a date other than December 31, in accordance with Section
F.

3. "Accounting Period" means the twelve (12) month period ending on the
Accounting Date. The Accounting Period may be longer or shorter than twelve (12)
months, in the circumstances described in Sections E and F.

4. "Losses and Loss Adjustment Expenses" means all amounts for which Agent is
liable or obligated, arising out of Agent's investigation, handling, adjustment,
settlement, denial, defense or litigation of, or agreement to pay, claims made
pursuant to Insurance contracts, including, damages, court awards or judgments
of any kind or nature assessed against Agent or for which Agent may be liable;
and the costs and fees of examiners, investigators, adjusters and attorneys, and
court costs.

5. "Payment Date," during the term of the Agreement, means April 30, 1999, and
each April, 30 thereafter. Upon and after termination, the Payment Date may be a
date other thin April 30, in accordance with Section F.

B. APPLICABILITY. Company shall pay Agent a Profit Share, subject to the terms
of this Addendum, on the percentage of earned premiums indicated below, for each
type of insurance indicated below, in the states indicated:

Percentage of
Company Type of Insurance State Earned Premiums
- ------- ----------------- ----- ---------------
ABIC Mechanical Breakdown Ins * 50%

* AZ, CA, CO, DE, FL, IA, IN, MI, MO, MS, NY, NC, NV, OP, OH, WI (when
approved). All other stated will be added by Addendum.

C. ACCOUNTING. Except as otherwise provided in Sections E and F, Company shall
calculate and send Agent an accounting on or before each Payment Date (see
Exhibit A for Profit Share Plan formula). The premium for new automobile
policies will be earned by the reverse rule of 78's. The premium for used
automobile policies will be earned pro rata or any other suitable actuarial
method as determined by Company. For each type of Insurance shown in Section B,
there shall be deducted from the applicable portion of earned premiums during
the Accounting Period, as determined by applying the percentage indicated in
Paragraph B, the following items for that type of insurance during the
Accounting Period:

8
<PAGE>
1. All premium and other applicable taxes, including applicable federal, state
and municipal taxes, licensing fees, special ceding assessment fees and the
proportional amounts of board, exchange, bureau, guaranty fund, joint
underwriting or other assessments, and management or service fees under
reinsurance arrangements; and

2. Losses and Loss Adjustment Expenses paid by Agent; and

3. All claims reserves as of the Accounting Date, including reserves for claims
reported but unpaid, claims incurred but not reported, and continuing claims,
less claims reserves at the last Accounting Date.

I). PROFIT SHARE AMOUNT.

1. If the amounts computed in Section C for all types of insurance subject to
this Addendum are totaled, and the sum is a positive number, then the Profit
Share due Agent shall be equal to fifty percent (50%) of that sum, less the
deductions listed below, multiplied by an investment income component and plus
any positive amounts carried forward from previous accountings. If the sum is a
negative number, then no Profit Share shall be due Agent, and such negative
amount, plus the deductions listed below, and less any positive amounts carried
forward from previous accountings, shall be offset or carried forward to
subsequent accountings. The deductions shall be as follows:

a. Negative amounts carried forward from previous accountings; and

b. Marketing Costs as specified in the Agreement or any Direct Mail Marketing
Addendum, Telemarketing Addendum, or other Addendum; and

c. Costs and expenses for special services as specified in the Agreement or any
Special Services Addendum or other Addendum. The Company agrees that these
expenses shall not exceed three percent (3%).

2. If claims stabilization reserves are required, then any and all amounts
necessary to completely fund such reserves, as specified in the Agreement or any
Claims Stabilization Reserve Addendum or other Addendum, shall be deducted from
any Profit Share due before any payment is made to Customer.

E. CONDITIONS. Performance of any accounting and payment of any Profit Share
shall be subject to the following conditions:

1. If the Agreement is terminated in the middle of an Accounting Period, then an
accounting may be made for the period that the Agreement was in effect since the
last Accounting Date, subject to Section F.

2. Agent shall not be eligible to receive a Profit Share at any Payment Date,
unless the amount of Net Written Premiums received by Company under the
Agreement for the Accounting Period, combined for all types of Insurance listed
in Section B, equals or exceeds $15,000,000 ("Minimum Volume"). For Accounting
Periods longer or shorter than twelve (12) months, eligibility shall be based
upon a proportionate Minimum Volume. Unless requested by Agent, Company shall
not be obligated to provide an accounting for any period for which the Minimum
Volume or proportionate Minimum Volume was not met, or for any period in which
there is a negative amount outstanding.

9
<PAGE>
3. Company shall not be obligated to pay Agent any Profit Share, unless Agent,
when requested by Company, has certified in writing to Company that all known
claims and cancellations have been reported to Company, and that all premiums
due for the Accounting Period have been remitted to Company.

4. Company shall not pay Agent any portion of the Profit Share in excess of
compensation limitations imposed by State/Legal Requirements.

5. Agent agrees to repay Company any amount received by or allowed Agent as
Profit Share because of an error in calculation, or in the event of a return of
premiums due to State/Legal Requirements.

6. Company reserves the right to offset any amounts due to or from Agent under
this Addendum against any amounts due to or from Agent under the Agreement
(including this Addendum and any other Schedules or Addenda) or any other
agreements (including schedules and addenda) between Agent and any subsidiary or
affiliate of American Bankers Insurance Group, Inc.

F. TERMINATION.

1. This Addendum shall terminate automatically upon termination of the
Agreement.

2. If the Agreement is terminated by Company for cause, then performance of any
Accounting or payment of any Profit Share as of the date of termination of the
Agreement shall be at the discretion of Company. If an accounting is performed,
and a negative amount is outstanding, then Agent shall reimburse Company for all
such negative amounts, within ten (10) days of request by Company.

3. If the Agreement is otherwise terminated, then the following shall apply:

a. Company, at Agent's request or Company's option, may perform an accounting as
of the date of termination of the Agreement. If an accounting is performed, the
Company, upon request by Agent, shall pay Agent any Profit Share due or, within
thirty (30) days after request by Company, Agent shall reimburse Company for
negative amounts outstanding. Agent's responsibility under this Section 3.a.
shall be limited to the amount previously paid by the Company to Agent under the
Profit Share Plan Addendum.

b. After all Insurance policies, certificates and contracts written under the
Agreement have expired and all premiums and claims on such Insurance have been
earned or settled ("run-off"), Company, at Agent's request or Company's option,
may perform a final accounting as of the run-off date. If a final accounting is
performed, then Company, upon request by Agent, shall pay Agent any Profit Share
due, or, within thirty (30) days after request by Company, Agent shall reimburse
Company for any negative amount determined by the final accounting.

4. The total of all reimbursements of negative amounts which are made by Agent
under Sections F.2 or F.3 shall not exceed the total of all Expense
Reimbursements and Profit Share paid or allowed Agent under the Agreement or
this Addendum.

5. Performance of any accounting and payment of any Profit Share upon or after
termination shall be in accordance with all terms and conditions of this
Addendum, except that Section D.2 shall not apply to any final accounting.

Executed on behalf of Company at Miami, Florida this 12th Executed on behalf of
Agent at Scottsdale, AZ, this 9th day of February, 1998. day of February, 1998.

10
<PAGE>

AMERICAN BANKERS INSURANCE MECHANICAL BREAKDOWN
COMPANY OF FLORIDA ADMINISTRATORS
("Company") ("Agent")

By: By: /s/ Gaylen Brotherson
-------------------------------- --------------------------------
Title: Vice President Title: CEO
Witness: Witness:

* Initials designate the following companies:
ABIC - American Bankers Insurance Company of Florida

11
<PAGE>
EXHIBIT A

PROFIT SHARE PLAN FORMULA

Profit Share = (52% - LOSS RATIO - PREMIUM TAX) X EARNED PREMIUM X 1.03
-------------------------------------------------------
2

where Loss Ratio = Incurred Losses / Earned Premium

Incurred Losses = Paid losses + Change in Case and IBNR Reserves

Case Reserves = Reserves set by MBA for outstanding claims

IBNR Reserves = Reserves set by Company for Incurred But Not Reported claims.

Earned Premium = Premium for New Cars will be earned by Reverse Rule of 78's and
Premium for Used Cars will be earned pro rata to begin with. However, in the
future, another suitable actuarial method may be selected by American Bankers.

Premium Tax = Premium Tax paid by Company to Insurance Departments.

1.03 = Corporate Investment Yield of six percent (6%) divided by two (2) to
reflect half a year's investment income earnings.

Examples of Profit Shares:

1.52 - .44 - .025) X $1,000,000 X 1.03 = $28,325
- ------------------------------------------------
2

1.52-.48-.025) X $1.000.000 X I.03=$7,725
- -----------------------------------------
2

1.52 - .52 - .025) X $L,000,000 X 1.03 = ($25,000) CARRY FORWARD
- ----------------------------------------------------------------
2

CLAIMS SERVICES AGREEMENT

This Claims Services Agreement ("this Agreement") is entered into by and between
Mechanical Breakdown Administrators, as a claims administrator ("Servicer"), and
American Bankers Insurance Company of Florida ("Company"). This Agreement is
effective as of January 1, 1998 (the "Effective Date").

WITNESSETH:

Whereas, Servicer renders claims services for certain insureds; and

Whereas, Company is desirous of contracting with Servicer for the performance of
claim services with respect to Company's policies, and Servicer is desirous of
performing such services;

NOW, THEREFORE, Company and Servicer, in consideration of mutual promises
contained herein and other good and valuable consideration, do hereby contract
and agree as follows:

1. SCOPE OF SERVICES

This Agreement shall apply to the coverages issued by Company as described on
Schedule "A" attached hereto (hereinafter the "Insurance") for designated
customers of Company. Servicer acknowledges that the scope of services hereunder
may be expanded in the future and agrees to provide additional claims services
for additional areas, as are mutually agreed between Servicer and Company.

2. SERVICER'S DUTIES

Servicer covenants and agrees to act as Company's representative in processing
and paying Insurance claims, and shall do the following:

A. provide and maintain, at its own expense, suitable facilities, staff
equipment, office supplies and telephone service for the performance of
Servicer's responsibilities.

B. certify the eligibility of claimants, determine the validity of claims, and
make appropriate investigations as may be necessary.

C. accurately pay legitimate claims in accordance with the terms of Company's
policies and procedures, applicable state laws and regulations and in accordance
with the standards as agreed between Company and Servicer.

D. process (pay, deny or request additional information) all claims within
twenty-five (25) days, unless applicable statute or regulation requires
processing within fewer days.

E. promptly notify Company of any claims that are disputed, fraudulent, or
otherwise questionable (including but not limited to any claims involving
allegations of improper claim handling, breach of contract, misrepresentation,
negligence, breach of statutory duty, and failure to act in good faith), refer
such claims to Company for consideration and final decision and act on Company's
instructions following such referral.

F. notify Company within forty-eight (48) hours of receipt of any claims-related
inquiries from State Insurance Departments or other regulatory agencies.

G. notify Company within forty-eight (48) hours of receipt of any notice or
service of threatened, pending, imminent, or existing litigation relating to
claims-related matters.

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H. report to Company on an agreed basis all detailed Insurance claim information
in format as reasonably specified by Company.

I. perform any other administrative functions incidental to the proper and
business-like execution of the claim service function as may be required and
mutually agreed to by Company and Servicer or as may be required by applicable
law.

J obtain any and all authorizations and licenses, if any, required for Servicer
to adjust and settle claims on behalf of Company in all states that Servicer
does business hereunder.

K. withhold payment of any claim, where Company has requested that Servicer do
so, for such period of time as may be specified by Company.

L. allow Company to conduct periodic on-site audits of all claim files.

M. secure all of Company's drafts and checks in a locked and restricted cabinet.

N. maintain a disaster recovery capability, and furnish a copy of such plan to
Company upon request.

O. ensure that all systems used to administer claims for Company are year 2000
compliant.

P. maintain errors and omissions coverage of at least $1,000,000 with a
deductible no greater than $50,000, and provide evidence thereof to Company upon
request.

In no event shall this Agreement be construed to obviate or constitute a waiver
of Company's authority to review and supervise all claims services performed by
Servicer.

3. COMPANY'S DUTIES

Company agrees to:

A. provide to Servicer sufficient information concerning coverage in force to
enable Servicer to properly execute the claim service function.

B. provide Servicer with copies of the Company's claims policies and procedures.

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C. make a final decision on any disputed, fraudulent or other questionable
claims as may be referred to Company by Servicer under this Agreement.

D. provide Servicer with all necessary claim forms and accounting forms or
formats which Company may require Servicer to utilize in performing its duties.

E. provide Servicer with any necessary system training and support to utilize
Company's on-line claim system, if applicable.

4. Books and Records

Servicer shall maintain books and records of all transactions in accordance with
prudent standards of insurance record keeping for a minimum of seven (7) years
after termination of this Agreement, or in accordance with state requirements,
whichever is greater.

For each individual claim, Servicer's records shall include:

(a) the identities of all persons involved in the claim,
(b) an estimated value of the claim and recommended loss reserve established by
Servicer,
(c) a claim reference number designed to follow the progress of the claim, and
(d) information relating to individual claim payments made, and whether such
payment was in partial or total satisfaction of the claim, and a history of
any claims previously made by such claimant.

Notwithstanding that Servicer may have physical possession of the claim records,
all such records shall be and remain the property of Company. Servicer shall
provide Company full access to and/or copies of such files and documents as
Company may request. Upon termination of this Agreement, Servicer shall forward
to Company all records and information relating hereto, or, upon Company's
request, destroy such records and information.

This section shall survive termination of this Agreement.

5. TERM AND TERMINATION

This Agreement shall be effective as of the Effective Date stated above and
shall continue until terminated as follows:

A. by either party upon written notice to the other party at least ninety (90)
days prior to such termination date.

B. by either party for cause. "Cause" shall be defined as a breach of this
Agreement which is not cured within thirty (30) days of receipt of written
notice by the non-breaching party. During such period, Company, in its sole
discretion, may suspend any and all settlements or payments. Upon receipt
of such notice, Servicer shall immediately return to Company all blank
check stock in its possession.

C. by either party immediately upon written notice in the event the other
party:

(1) does not pay, or admits in writing its inability to pay, its debts
generally as they become due; or

(2) institutes or has instituted against it any proceeding in bankruptcy or any
other insolvency or reorganization proceeding, and such proceeding is not
dismissed within thirty (30) days; or

(3) makes an assignment of all or substantially all of its assets for the
benefit of creditors.

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D. by Company immediately upon written notice in the event:

(1) any material change occurs in the ownership, management or control of
Servicer, or substantially all of Servicer's assets are sold; or

(2) Servicer's authority to conduct its business or any part thereof is
terminated or restricted by any public authority.

In the event of termination of this Agreement for any reason, Servicer shall
continue to provide the claims administration and adjustment services hereunder
after the effective date of termination with respect to all claims taking place
prior to such termination and shall, unless advised to the contrary by Company,
administer such claims to conclusion.

6. INDEMNIFICATION

A. By Servicer

Servicer shall use reasonable care and due diligence in performing its
obligations hereunder and all services rendered shall be done with reasonable
dispatch and in conformity with all applicable laws and regulations. Servicer
shall notify Company immediately of any notice received of any alleged violation
thereof and shall promptly correct any such violation, regardless of its cause.
Servicer agrees to indemnify Company, its officers, agents and employees, and
hold them harmless from any and all liability, loss, damage, costs and expenses,
including any extra-contractual damages, as they or any of them from time to
time incur resulting from claims, demands, disputes, investigations,
proceedings, actions, litigation, or judgments resulting directly or indirectly
from Servicer's breach of this Agreement or the negligence, willful misconduct
or fraudulent acts of Servicer or any of its officers, agents or employees.

In no event, however, shall Servicer indemnify Company or hold it harmless as
hereinbefore specified for the amount of the policy benefits which may be found
to be owed by Company, nor shall Servicer be responsible if the liability, loss
or damages, costs and expenses arise due to any negligence or willful misconduct
or fraudulent acts of Company, its officers, agents (excluding Servicer and its
subagents) or employees, or to the extent Servicer follows and complies with
Company's claims handling procedures, manuals, guidelines and instructions in
accordance with the terms of this Agreement.

Servicer shall pay all reasonable attorney's fees in connection with the defense
of any such indemnifiable action should it arise; provided, however, that
Company shall have the right to decide whether such action shall be compromised
or defended to its final outcome and Company shall direct such compromise or
defense.

If any claim payment is made hereunder to an ineligible person by Servicer, or
if it is determined that more or less than the correct amount has been paid by
Servicer, Servicer then will attempt to recover or adjust such payment, but is
not required to initiate court proceedings to effect any such adjustment. If
Servicer is unsuccessful in making such adjustments, it shall so notify Company
in order that Company may take such appropriate action as may be available.

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B. By Company

Company agrees to indemnify Servicer, its officers, agents and employees and
hold them harmless from any and all liability, loss, damage, costs and expenses
as they or any of them may from time to time incur resulting from claims,
demands, disputes, investigations, proceedings, actions, litigation or judgments
resulting directly or indirectly from the negligence or willful misconduct or
fraudulent acts of Company or any of its officers, agents (excluding Servicer
and its subagents) or employees; provided, however, that except for the amount
of actual policy benefits, Company shall not be obligated to indemnify customer
as hereinbefore specified for liability, loss or damages, costs and expenses
which arise due to any negligence, willful misconduct or fraudulent acts of
Servicer, its officers, agents or employees.

Company shall pay all reasonable attorney's fees in connection with the defense
of any such indemnifiable action should it arise; provided, however, that
Company shall have the right to decide whether such action shall be compromised
or pursued to its final outcome.

C. This section shall survive termination of this Agreement.

7. CONFIDENTIALITY

Neither Company nor Servicer shall disclose or communicate at any time to any
other person any confidential information or trade secrets relating to the
business of the other party or any affiliate or agent thereof, including but not
limited to business methods and techniques, research data, marketing and sales
information, customer lists, know-how and any other information concerning the
business of the other party or any affiliate or agent thereof, its manner of
operation, plans or other data not disclosed to the general public, unless prior
written consent is obtained from the other party. This section shall survive
termination of this Agreement.

8. INDEPENDENT CONTRACTOR

Servicer shall be an independent contractor, and nothing herein shall be
construed to create the relationship of employer/employee, partners or joint
venturers between Servicer and Company. Servicer is acting only as an agent of
Company and the rights and responsibilities of the parties hereto shall be
determined in accordance with the law of agency. Servicer, in performing its
obligations hereunder, may exercise its own judgment within the parameters set
forth herein.

9. NOTICE

Any notice to Servicer under this section shall be sufficient if addressed to:

Gaylen Brotherson, President & CEO
Mechanical Breakdown Administrators
9419 E. San Salvador, Suite 105
Scottsdale, AZ 85258-5510

Any notice to Company under this Addendum shall be sufficient if addressed to:

Terri Prestage-White. Senior Vice President, CMS
American Bankers Insurance Company
11222 Quail Roost Drive
Miami, FL 33157-6596

Any notice hereunder shall be hand delivered or sent by prepaid commercial
overnight courier, and shall be effective upon receipt.

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10. NO WAIVER

The failure by either party to enforce any provision of this Agreement shall not
constitute a waiver of that provision or the party's right to subsequently
enforce such provision.

11. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Florida, without regard to the principles of
conflicts of law.

12. INVALID OR UNENFORCEABLE PROVISIONS

The invalidity or unenforceability of any particular provision of this Agreement
shall not affect the other provisions hereof, and this Agreement shall be
construed in all respects as if the invalid or unenforceable provision had been
omitted. To the extent this Agreement requires the approval of any public
official or agency, it shall not be effective until such approval shall have
been obtained as required by applicable law.

13. ENTIRE AGREEMENT; AMENDMENTS

The terms and provisions contained herein constitute the entire agreement
between the parties and supersede any previous communications, representations
or agreements, either oral or written, with respect to the subject matter
hereof. This Agreement may be amended only by a written document signed by both
parties hereto.

14. DELEGATION OF DUTIES

Servicer may seek the advice of experts in performing its duties and obligations
under this Agreement; however, Servicer may not delegate its obligations under
this Agreement to a company unaffiliated with Servicer, except with the written
permission of Company.

15. SUCCESSORS AND ASSIGNS

This Agreement shall be binding upon and inure to the benefit of each party, its
successors and assigns; however, no right, benefit or interest hereunder may be
assigned without the prior written consent of Company.

16. ARBITRATION

In the event of any dispute between Company and Servicer which they are unable
to resolve, the dispute shall be submitted to arbitration at the request of
their party. The party requesting arbitration shall so notify the other party in
writing and shall specify the question or questions to be arbitrated. Within
thirty (30) days after receipt of such notification, Company and Servicer shall
each select an arbitrator and give the name and address thereof to the other.
The two persons selected as arbitrators shall promptly select a competent and
disinterested party as a third arbitrator. A decision rendered in writing,
signed by any two of the three arbitrators so chosen, shall be final and
conclusive on Company and Servicer and judgment may be entered thereon. If a
party fails to designate an arbitrator within thirty (30) days after
notification by the first designating party, then the entire arbitration panel
shall consist of one (1) arbitrator selected by the first designating party. In
this event, an arbitration decision shall be rendered in writing and signed by
the one (1) arbitrator and shall be conclusive and final on Company and Servicer
and judgment may be entered thereon. All expenses of arbitration shall be borne
equally by Company and Servicer. Arbitration under these provisions shall be
governed by laws of the State of Florida and shall take place in Miami, Florida,
unless another location is mutually agreed upon by Company and Servicer. This
section shall survive termination of this Agreement.

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17. COUNTERPARTS

This Agreement may be executed in multiple counterparts, each of which shall be
considered an original, but all of which together shall be considered one and
the same instrument.

18. YEAR 2000

Servicer represents and warrants that it is capable of performing its duties and
obligations hereunder in such a manner so as to be "year 2000 compliant." "Year
2000 compliant" shall mean that Servicer's software, hardware, computer systems,
procedures and processes shall perform Servicer's obligations under this
Agreement without interruption, delay, error or loss of functionality in any way
related to or arising from going from the twentieth to the twenty-first century,
or from data entry of records that begin with the year 2000.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by respective officers duly authorized to do so.

Executed by or on behalf of Servicer at
Executed on behalf of Company at Scottsdale, Arizona, this 25th day of
Miami, Florida, this 14th day of June, 1999
July, 1999

American Bankers Insurance Co. MBA, INC.
("Company") ("Servicer")

By: /s/ Terri Prestage-White By: /s/ Gaylen M. Brotherson
----------------------------------- -----------------------------------
Its: Senior Vice-President Its: CEO
Witness: Witness: /s/ Shelley Beesley
--------------------------- --------------------------

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Schedule "A"

DESCRIPTION OF INSURANCE

Product/ Settlement Payment
Effective Date Line of Business Authority Authority
-------------- ---------------- --------- ---------
January 1, 1998 Mechanical Breakdown $3,500 $3,500
Insurance
&
Vehicle Service
Contracts

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Exhibit B

Claims Authority Processing Options

Option I - Claim payments are issued with account fluids.

* Account submits a weekly claims paid report, listing claim and expense
payments issued and voided. A copy of the required report format is attached.
(Exhibit A)

* A weekly check or ACH direct deposit would be issued for the net total of the
weekly claims paid report.

* Claim payments made in error that cannot be voided should be settled by the
account issuing a check to ABIC, providing payment was received based on prior
report.

* Account should obtain a completed W-9 form from all vendors/attorneys
providing services (ie: independent adjuster). The original should be forwarded
to American Bankers for tax reporting purposes.

Option II - Claim payments are issued with American Bankers (ABIC) check stock.

* ABIC would provide the account with a check stock or the account can design
checks to meet their format. Checks designed by the account must be in
compliance with the check specifications attached. (Exhibit B) Chase Manhattan
MUST approve the checks prior to payments being issued. A check number series
will be provided by ABIC.

* Account submits a weekly claims paid report, listing claim and expense
payments issued and voided. Check copies and voided/spoiled checks should be
attached to the weekly report. A copy of the required format is attached.
(Exhibit A)

* Claim payments made in error that cannot be voided should be settled by the
account issuing a check to ABIC.

* Account should contact American Bankers Claims Accounting Department to
request stop payment. The accounting department will notify the account when
confirmation of the stop payment(s) has been received and provide approval to
re-issue the check(s), if necessary.

* Account should obtain a completed W-9 form from all vendors/attorneys
providing services (ie; independent adjuster). The original should be forwarded
to American Bankers for tax reporting purposes.

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EXHIBIT A

WEEKLY CLAIMS PAID REPORT

<TABLE>
<CAPTION>
CAUSE OF
CHECK NUMBER CHECK AMOUNT DATE ISSUED POLICY NUMBER LOSS DATE LOSS INSURED NAME PAYEE TYPE OF PAYMENT*
- ------------ ------------ ----------- ------------- --------- ---- ------------ ----- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
XXXXX 9999.99 MMDDYY XX XXXXXXX MMDDYY XXXXX XXXXXXXXXX XXXXXXXXX X
</TABLE>

Type of payment = P = Partial Payment, F = Final, S =Supplemental, E = Expense,
V = Void

Report should be in check number order. Please provide explanation for missing
checks.

All voided/spoiled checks must be attached to report.

For tax reporting we are required to obtain a W-9 for all vendors. Please
include a copy of the invoice for all vendor payments.

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EXHIBIT. B

CHASE

CHECK SPECIFICATION FORMAT ESSENTIALS

It is important to review and share this information with those involved in
creating your check stock. We require 50 VOIDED, BURSTED checks to test prior to
usage. The checks are reviewed to ensure the correct information is printed on
the face of the checks. The checks are then run through our check processing
equipment to test the quality as well as the accuracy of the micr line. We
retain two samples for our files. If the enclosed check spec sheet does not meet
your requirements, please notify me. CHASE MANHATTAN BANK DELAWARE (CMBD) will
test all checks as quickly as possible, usually within 3 work days. If checks
are not voided and bursted prior to reaching the bank, a delay in testing may
occur.

CHECK SIZE

Recommended Check Size 71/2" wide x 3" long

Maximum Check Size 81/2|" wide x 3 2/3" long

Minimum Check Sizes

6 digit check numbers 7" wide x 23/4" long
8 digit check numbers 71/4" wide x 23/4" long
10 digit check numbers 71/2" wide x 23/4" long

MICR ENCODING STRIP. AN AREA 5/8" DEEP BY THE LENGTH OF THE CHECK IS RESERVED
FOR MICR CHARACTERS. MICR CHARACTERS SHOULD BE WITHIN A 1/4" HIGH BAND WITH A
CLEAR BAND OF 3/16" ABOVE AND BELOW THIS STRIP. NO OTHER MAGNETIC INK PRINTING
MAY APPEAR IN THIS AREA.

SELF MAILERS

Self mailer checks are not recommended. Checks with perforations on all sides
are often not properly bursted and may not be efficiently processed through the
various processing points throughout the banking system.

CHECK NUMBER.

CMBD'S reporting system requires that check numbers be no less than 6 digits
and, no greater then 10 digits. The check number printed on your check must
match the check number printed in the MICR line.

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EXHIBIT C

DISASTER RECOVERY PLAN

A Disaster Plan is designed to create a state of readiness that will provide an
immediate response to any disaster that affects the physical plant and the
ability to use the facilities for normal business functions.

OBJECTIVE

The overall recovery objective is to restore critical functions Within 24-72
hours of a disaster occurrence. To facilitate recovery processing, critical
business functions are prioritized according to their impact on the day to day
operation. Functions related to claims, premium processing and cash management
have the highest priority.

PREMISE

The premise for the Disaster Recovery Plan is built upon the following:

* A disaster has occurred causing physical damage to the office facilities and
equipment resulting in the inability to use the facility to support normal
operations;

* Office facility is inaccessible following the disaster and may remain
inaccessible for an extended period of time;

* Computer equipment, software, data, documentation, supplies, etc., located in
the building have been damaged or destroyed.

DISASTER DESCRIPTION

A disaster is defined as "any unplanned event which results in the inability of
the corporation to support operations within the current environment, requiring
relocation of the functions to an alternate processing environment."

ASSUMPTIONS

The Disaster Recovery Plan is based on the following assumptions:

* Recovery procedures have been written such that recovery personnel are not
dependent on the availability of any one key individual.

* Various essential materials and resources are stored off-site or are readily
available.

- Vital records
- Hardware and software
- Critical forms
- Department and account/customer phone lists
- Disaster recovery plan
- Business procedures.

* Plan review, maintenance and updates are scheduled on a regular basis to
ensure that the plan remains current and viable.

* The off-site storage facility, where critical backup files and information are
stored, is intact and accessible.

* Organizations external to the corporation, such as customers, vendors,
government agencies and others, will be reasonably co-operative during the
recovery period.

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DISASTER RECOVERY PLAN OUTLINE

I. Telephone contact lists

A. Key employees by function or department
B. All Employees
C. Key vendors
1. Phone lines
2. Hardware/software
3. Alternate office space

D. All other vendors

II. Equipment and supplies

A. Priority functions/departments (24-72 hours)
1. Furniture
2. Office supplies
3. Hardware/software
4. Documentation-data files
5. Vendors
6. Personnel list

B. Non priority functions/departments
1. Furniture
2. Office supplies
3. Hardware/software
4. Documentation-data files
5. Vendors
6. Personnel list

III. Recovery team tasks

A. Determine area of disaster. Determine where recovery will occur
B. Determine telephone/data lines status. Necessary action to reroute/recover
C. Determine if data processing available or when it will be
D. Contact employees to inform where and when they need to report
E. Arrange recovery issues with disaster team leader to replace equipment,
supplies and recovery of files and data

IV. Set up work place and work force to carry out critical functions of
corporation

A. Monitor staff for fatigues, illness and safety
B. Monitor process and make changes where needed to ensure critical functions
are accomplished

V. Set up work place and work force to carry out the non-critical functions of
corporation should disaster last beyond week

VI. At end of disaster record what went wrong and what went right and modify
The Disaster Recovery Plan

CONTRACTUAL LIABILITY INSURANCE POLICY
FOR EXTENDED SERVICE CONTRACTS
AMERICAN MODERN HOME INSURANCE COMPANY
CINCINNATI, OHIO

A. INSURING AGREEMENT

In consideration of the payment of the premium and subject to all of the
terms and conditions of this policy, American Modern Home Insurance Company
(the "Company") agrees to reimburse the Insured or any Additional Insured
for all costs reasonably incurred in fulfilling its legally binding
obligations under each Extended Service Contract validly issued by the
Insured or any Additional Insured during the Policy Term, in accordance
with the terms and conditions of such Extended Service Contract. The
reimbursements of those costs shall be made directly to the Insured or any
Additional Insured, and in the event such costs are incurred by another
party's performance of repair or replacement services pursuant to such
obligations, the reimbursement may be made, on behalf of the Insured or any
Additional Insured, directly to such other party. The Company shall not
have any duty to defend the Insured or any Additional Insured in any
lawsuit or other judicial or administrative proceeding involving the
Insured or any Additional Insured.

B. DEFINITIONS

(1) INSURED: The person(s) or organization named as the Insured in the
Declaration.

(2) ADDITIONAL INSURED: Any person(s) or organization added to this policy
as an additional insured at the request of the Insured upon written
approval of the Company signed by a duly authorized representative of
the Company.

(3) EXTENDED SERVICE CONTRACT: A contract described in the attached
Schedule and issued by the Insured or any Additional Insured while
this policy is in force on a form approved in writing by the Company,
and for which the proper premium is timely paid.

(4) Contractual OBLIGATION: The Insured's or any Additional Insured's
obligation to properly repair or replace covered parts or to reimburse
the reasonable cost of proper repair or replacement of covered parts
under an Extended Service Contract. No other obligations or
liabilities which may arise from an Extended Service Contract are
insured by this policy. See C. EXCLUSIONS. The amount of a Contractual
Obligation shall not exceed the reasonable cost to properly repair or
replace a covered part nor shall it exceed the liability provided
under an Extended Service Contract.

(5) CONTRACT HOLDER: The original purchaser of an Extended Service
Contract or someone who has qualified as a transferee under the terms
of the Extended Service Contract.

(6) CONTRACT HOLDER CLAIM: A claim by a Contract Holder which constitutes
a Contractual Obligation.

(7) LOSS: Expenses actually incurred by the Insured or any Additional
Insured or on behalf of the Insured or any Additional Insured in the
performance of Contractual Obligation.

(8) SERVICE CENTER: A person or organization authorized by or on behalf of
the Insured or any Additional Insured to perform services or repairs
under an Extended Service Contract.

(9) INSURED'S CLAIM: A claim by the Insured or any Additional Insured for
benefits under this policy based on a Contractual Obligation.

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C. EXCLUSIONS

This policy does not insure for any obligation or liability other than a
Contractual Obligation, and does not apply to:

(1) liability for any and all consequential damages, including but not
limited to punitive or extra-contractual damages and/or bodily injury,
arising from performance by the Insured or any Additional Insured, the
Insured's or any Additional Insured's agents or employees or any
Service Center under an Extended Service Contract;

(2) any and all obligations and liabilities which may arise by virtue of
performance under an Extended Service Contract by the Insured or any
Additional Insured or anyone else;

(3) breach of any and all implied warranties of merchantability;

(4) breach of any and all implied warranties of fitness;

(5) any and all liabilities for negligence;

(6) any and all liabilities for defective products, including strict
liability;

(7) any and all obligations and liabilities which may arise by virtue of
the sale by Insured or any Additional Insured of the item which is the
subject of an Extended Service Contract, or any part or component of
such item. Among the kinds of obligations and liabilities excluded by
this Exclusion are:

(a) any and all implied warranties of merchantability;
(b) any and all implied warranties of fitness;
(c) any and all liabilities for negligence;
(d) any and all liabilities for defective products, including strict
liability;

(8) any and all liabilities or obligations extending to anyone other than
the Contract Holder;

(9) any arid all obligations, liabilities or claims of the Insured or any
Additional Insured arising from any fraudulent, dishonest or criminal
act of the Insured or any Additional Insured or his agents or
employees;

(10) any duty to defend the Insured or any Additional Insured in any
lawsuit or other judicial or administrative proceeding involving the
Insured or any Additional Insured;

(11) labor and/or parts performed by or on behalf of the Insured or any
Additional Insured arising out of work or any portion thereof, or out
of materials, parts or equipment, as a result of recall by the
manufacturer or dealer:

(12) seizure or destruction of property by order of governmental authority;

(13) any Extended Service Contract not sold or bound as set forth in
Section D. CONDITIONS:

(14) for bodily injury, sickness, disease or death of any person.

D. CONDITIONS

(1) SALE OF EXTENDED SERVICE CONTRACT: Within 30 days after the date on
which an Extended Service Contract was issued. The Insured or any
Additional Insured shall report the sale of the Extended Service
Contract, on the forms provided by the Company, and forward to the
Company or its authorized agent the proper premium. Issuance of an
Extended Service Contract on behalf of an insurer other than Company
will void coverage under this policy.

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(2) PREMIUM DETERMINATION: The premium for liability under each Extended
Service Contract shall be computed in accordance with the schedule
rates attached hereto and made a part hereof and with Company's rules,
rating plans and minimum premium requirements. These rates shall
remain in effect until modified by the Company, and, after thirty (30)
days, prior written notice of the change shall have been given to the
Insured or any Additional Insured.

(3) LIMIT OF LIABILITY: The Company's limit of liability with respect to
any one Contractual Obligation shall not exceed One Hundred Twenty
Percent (120%) of the Insured's or any Additional Insured's wholesale
invoice cost of the merchandise.

(4) NOTICE OF INSURED'S CLAIM: When a Contract Holder makes a Contract
Holder Claim, prior to undertaking any performance under an Extended
Service Contract the Insured or any Additional Insured shall notify
the Company or its authorized agent of the Contract Holder Claim,
supplying particulars of the claim.

(5) PRIOR AUTHORIZATION: The Insured or any Additional Insured shall not
undertake any performance under an Extended Service Contract without
first receiving authorization to perform from the Company or its
authorized agent, and after giving proper notice of the Insured's or
any Additional Insured's claim.

(6) PROOF OF LOSS: As soon as practicable (but, in any event, not later
than 30 days after the Loss), the Insured or any Additional Insured
shall give to the Company written proof of Loss, under oath if
required, including full particulars of the nature and the extent of
the Loss and other details entering into the determination of the
amount payable. The Insured or any Additional Insured shall submit to
examination under oath by any person named by the Company and
subscribe to same, as often as may reasonably be required. Proof of
Loss shall be on forms furnished by the Company unless the Company
shall have failed to furnish such forms within 15 days after receiving
notice of claim.

(7) INSPECTION AND AUDIT: The Insured or any Additional Insured shall keep
complete records and accounts of all transactions pertaining to
Extended Service Contracts. The Company shall be permitted but not
obligated to inspect at any reasonable time the Insured's or any
Additional Insured's premises, books and records as they pertain to
coverage under this policy. This right shall exist so long as Extended
Service Contracts are outstanding. Neither the Company's right to make
inspections nor the making thereof nor any report thereon shall
constitute an undertaking. on behalf of or for the benefit of the
Insured or any Additional Insured or others, to determine or warrant
that such property or operations are safe or healthful, or are in
compliance with any law, rule or regulation.

(8) ACTION AGAINST THE COMPANY: No action shall lie against the Company
unless, as a condition precedent thereto, there shall have been full
compliance by the Insured or any Additional Insured with all of the
terms of this policy and until the amount of the Insured's or any
Additional Insured's Loss shall have been finally determined either by
judgment against the Insured or any Additional Insured after trial or
by written agreement of the Insured or any Additional Insured, the
Contract Holder, and the Company. Any person or organization or the
legal representative thereof who has secured such judgment or written
agreement shall thereafter be entitled to recover under this policy to
the extent of the insurance afforded by this policy. No person or
organization shall have any right under this policy to join the
Company as a party to any action against the Insured or any Additional
Insured to determine the Insured's or any Additional Insured's
liability, nor shall the Company be impleaded by the Insured or any
Additional Insured or his legal representative. Bankruptcy or
insolvency of the Insured or any Additional Insured or of the
Insured's or any Additional Insured's estate shall not relieve the
Company of any of its obligations under this policy.

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<PAGE>
E. GENERAL PROVISIONS

(1) INSURED'S OR ANY ADDITIONAL INSURED'S REPRESENTAONS IN THE
DECLARATIONS: By acceptance of this policy. the Insured or any
Additional Insured agrees that the statements in the Declarations are
his agreements and representations, that this policy is issued in
reliance upon the truth of such representations and that this policy
embodies all agreements existing between himself and the Company or
any of its agents relating to this insurance.

(2) CANCELLATION: Prospective Cancellation: The Insured or any Additional
Insured may cancel this policy by surrendering the policy to the
Company or any of its authorized agents or by mailing to the Company
written notice stating when thereafter the cancellation shall be
effective. The Company may cancel this policy by mailing to the
Insured or any Additional Insured at the address shown in this policy
written notice stating when not less than thirty (30) days thereafter
such cancellation shall be effective. If cancellation by the Company
is for non-payment of premium. ten (10) days written notice shall be
given. All liability of the Company under this policy shall terminate
upon the effective date of cancellation, except with respect to those
Extended Service Contracts reported with premium paid to Company prior
to the effective date of cancellation.

Retrospective Cancellation: The Company may not cancel this policy
with respect to Extended Service Contracts which are in effect on the
date of cancellation. The Insured or any Additional Insured may cancel
this policy with respect to all Extended Service Contracts which are
in effect on the date of cancellation by surrendering the policy to
the Company or any of its authorized agents or by mailing to the
Company written notice stating when thereafter the cancellation shall
be effective. Any retrospective cancellation by the Insured or any
Additional Insured shall be with respect to all Extended Service
Contracts in effect on the date of cancellation. The mailing of notice
as aforesaid shall be sufficient proof of notice. Delivery of written
notice by the Insured or any Additional Insured or by the Company
shall be equivalent to mailing.

If the Insured or any Additional Insured cancels the policy with
respect to Extended Service Contracts in effect on the date of
cancellation (retrospective cancellation), earned premiums shall be
computed with respect to such Extended Service Contracts in accordance
with customary short rate table and procedure. Premium adjustments may
be made either at the time cancellation is effected or as soon as
practicable after cancellation becomes effective, but payment or
tender of unearned premiums is not a condition of cancellation.

(3) SUBROGATION: In the event of any payment by the Company under this
policy, the Company shall be subrogated to all of the Insured's or any
Additional Insured's rights of recovery therefor against any person or
organization. and the Insured or any Additional Insured shall execute
and deliver instruments and papers and do whatever is necessary to
secure such rights. The Insured or any Additional Insured shall do
nothing to prejudice such rights.

(4) ASSIGNMENT: Assignment of interest under this policy shall not bind
the Company unless its consent is endorsed hereon. No liability of the
Company shall exist under this policy unless the assignment is
accepted and the policy is endorsed.

(5) CHANGES IN THE POLICY: No waiver or change of the terms of this policy
shall be made except by endorsement issued to form part of this policy
and signed by a duly authorized representative of the Company. Notice
to any agent or knowledge possessed by any agent or by any person
shall not effect a waiver or change in any part of this policy or stop
the Company from asserting any right under the terms of this policy.

(6) TERRITORY: This policy applies only to Losses which occur while the
item covered by an Extended Service Contract is within the United
States of America, its territories or possessions.

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<PAGE>
(7) RECOVERIES: All amounts recovered by the Insured or any Additional
Insured for which he has received benefits under this policy shall
belong to, and be paid to the Company by the Insured or any Additional
Insured up to the total amount of benefits paid by the Company.

(8) OTHER INSURANCE: If the Insured or any Additional Insured has other
insurance against a Contractual Obligation covered by this policy, the
Company shall not be liable under this policy for a greater proportion
of such Contractual Obligation than the applicable limit of liability
of this policy bears to the total applicable limit of liability of all
valid and collectible insurance against such Contractual Obligation.

(9) RENEWAL: This policy shall be automatically renewed for successive one
(1) year terms.

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<PAGE>

IN WITNESS WHEREOF, American Modem Home Insurance Company has caused this policy
to be signed by its President and Secretary and countersigned by a duly
authorized agent of the Company.

President

Secretary

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<PAGE>
CHANGE ENDORSEMENT

INSURED, ANY ADDITIONAL INSURED AND COMPANY HEREBY AGREE TO THE FOLLOWING
CHANGES:

C. EXCLUSIONS is supplemented by the addition of the following:

(15) Any Extended Service Contracts which have not been approved by Company
or the service contract administrator, provided, however, such service
contract administrator shall be approved by Company.

D. CONDITIONS - Subsection (1) is deleted and replaced with the following:

(1) SALE OF EXTENDED SERVICE CONTRACT: If the Insured is a Manufactured
Home Dealer, within (30) days after the date on which an Extended Service
Contract was issued, Insured or any Additional Insured shall report the
sale of the Extended Service Contract, on the forms provided by the
Company, and forward to Company or its authorized agent the proper premium.
The application for any such service contracts forwarded to Company by
Insured or Additional Insured must state the correct and exact price
charged to a Contract Holder for such Extended Service Contract. Issuance
of an Extended Service Contract on behalf of an insurer other than Company
will void coverage under this policy. If Insured is an appliance Dealer the
former Subsection (1) applies.

D. CONDITIONS - Subsection (3) is deleted and replaced with the following:

(3) LIMIT OF LIABILITY: The Company's limit of liability with respect to
any one contractual obligation shall not exceed one hundred percent (120%)
of the Insured's or any Additional Insured's wholesale invoice cost of the
item subject to the Extended Service Contract.

E. GENERAL PROVISIONS - Subsection (2) is deleted and replaced with the
following:

(2) CANCELLATION: Insured or any Additional Insured may cancel this policy
by surrendering the policy to Company or its authorized agent or by mailing
to Company written notice stating when thereafter the cancellation shall be
effective. Company may cancel this policy by mailing written notice of
cancellation to the insured or any additional insured at the address shown
on this policy at least (30) days prior to the effective date of
cancellation. If cancellation by Company is for non-payment of premium,
fraud, or misrepresentation in any way relating to this policy, ten (10)
days written notice of cancellation shall be provided. All liability of
Company under this policy shall terminate upon the effective date of
cancellation. except with respect to those extended service contracts
reported with premium paid to Company prior to the effective date of
cancellation.
<PAGE>
ADMINISTRATION/AGENCY AGREEMENT

This Agreement is entered into the 19th day of May, 1998, by and between
American Modern Home Insurance Company, American Family Home Insurance Company,
American Southern Home Insurance Company, American Western Home Insurance
Company and American Modern Home Service Company (hereinafter collectively
referred to as "Company") with principle place of business at Amelia, Ohio, and
Mechanical Breakdown Administrators, Inc. (hereinafter referred to as "MBA")
with principal place of business at Scottsdale, Arizona.

WHEREAS, Company desires to write in various service contract, warranty and
mechanical breakdown insurance programs as are more fully set forth in Exhibit A
hereto;

WHEREAS, MBA has the ability to serve as administrator and/or agent for Company
with respect to such programs;

NOW THEREFORE, in consideration of the mutual promises herein, Company and MBA
agree as follows:

1. Authority/Appointment: Subject to the terms and conditions of this
Agreement, Company hereby appoints MBA as an agent and program
administrator for the programs set forth in Exhibit A hereto. This
Agreement shall not be construed as creating an employer/employee
relationship between Company and MBA and MBA agrees that it is an
independent contractor. Only such authority as specified in this
Agreement is granted to MBA and all such programs written hereunder
are restricted to the United States unless otherwise set forth in
Exhibit A hereto. MBA shall not use the name of Company in any type of
advertisement without the prior approval of Company and this Agreement
shall in no way be construed as granting MBA an exclusive
administration or agency relationship with respective products listed
in Exhibit A. Company will issue to MBA, from time to time, written
underwriting guidelines which shall contain basic operating procedures
required by Company. MBA shall abide by such underwriting guide or
other underwriting instructions, manuals, rates, or other
specifications which apply to MBA and provided by Company, from time
to time, by written notice. Any such modification or supplementation
of such underwriting guide (including, without limitation, withdraw of
MBA's authority with respect to any particular line(s) of business)
may be effected unilaterally by Company without the consent of MBA and
will constitute a modification of this Agreement. However, Company can
only unilaterally eliminate authority for a line of business if
directed by a regulatory authority. Company may allow MBA a reasonable
amount of time in which to effect such unilateral modifications or
supplementation to such underwriting guide. Company may establish
production standards for MBA including to, but not limited to,
production quotas and prescribed loss ratios.

2. Administrative functions: MBA agrees to perform administrative
functions including, but not limited to, product development,
developing program procedures, marketing, processing applications,
collecting premium, issuing policies consistent with Company's
rates/rules/forms filings, implementing Company's underwriting and
program guidelines, issuing cancellation and non-renewal notices
consistent with applicable law and policy/contract language, paying
commissions consistent with applicable law, adjusting and paying
claims consistent with this Agreement and applicable law, maintaining
claim data, data processing, performing necessary subrogation and
salvage functions, assisting in the development of management
procedures and assisting Company in the development of program
management capabilities.

3. Reports: MBA agrees to report on all facets, of such business subject
to this Agreement, in a manner and timing as specified herein or as
agreed to by Company and MBA.

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<PAGE>
4. Subproducers: MBA shall have the power and authority to appoint
subproducers, local agents, brokers, retailers and dealers
(hereinafter collectively referred to as "sub producers") shall
arrange for licensing of such sub producers if necessary and shall be
responsible for their conduct and operations. MBA, where appropriate,
shall report promptly to Company all appointments, renewals and
changes of sub producers and Company shall have the right to either
decline or approve such appointment or continued appointment of any
such subproducer. MBA agrees to furnish all such information as
Company may from time to time request in connection with such business
produced by the subproducers. In the event MBA arranges for the
service contracts or warranties to be marketed through retailers or
dealers, MBA shall ensure compliance of such marketing or the sale by
such retailers or dealers with applicable laws and regulations
relating to the business subject to this Agreement. In states where
retailers or dealers are required to be the obligor under service
contracts marketed hereunder, MBA shall be responsible for issuing
contractual liability policies to such retailers or dealers. MBA shall
provide reports of all such policies issued and shall follow authority
guidelines set forth in Paragraph 1. of this Agreement. MBA shall also
sign all such retailers or dealers to appropriate dealer Agreements
and such dealer Agreement to be used shall be attached hereto as
Exhibit B.

5. Premiums/Fees: MBA shall be obligated to collect and shall be liable
to pay to Company and does hereby guarantee payment to Company of the
premium/contract fee and/or Administration fee on each risk, policy,
endorsement, warranty, certificate or service contract solicited
and/or written by or through MBA, including those risks, policies,
endorsements, warranties, certificates or service contracts solicited
by or through subproducers, dealers or retailers acting by or through
MBA, whether or not the premium or fee on each such risk, policy,
endorsement, warranty, certificate or service contract has been
collected by either MBA or the subproducer, dealer or retailer as the
case may be. MBA agrees to place all such premium and fees collected
in a segregated trust account and acknowledges and agrees that MBA is
a fiduciary as trustee with respect to such funds.

6. Accounting: Commencing with the effective date of this Agreement, MBA
shall within twenty days of the end of each month provide a complete
and accurate account of transactions between MBA and Company during
each such calendar month. Payment of all applicable premiums and fees
due Company shall accompany such account of transactions. MBA shall
have the authority to deposit into Company accounts all checks payable
to Company or its affiliates. MBA acknowledges and agrees that it is a
fiduciary with respect to all funds due Company.

7. Claims Authority:

A. MBA shall have the authority to adjust, pay and settle all claims up
to the lesser of 6,000 dollars ($6,000) or the maximum amount of
coverage provided under each such policy, warranty or service contract
subject to this Agreement. Company reserves the right to participate
in the adjustment and settlement of any claim and to further direct
that any such claim be paid.

B. MBA shall promptly report to Company all claims in a form and time
period as to be agreed by Company and MBA. MBA shall fully cooperate
in the investigation and adjustment of any claims or suits and agrees
to provide Company with all information relative to such claims at any
time.

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<PAGE>
C. In the event of any litigation, arbitration or other dispute
resolution process which arises as a result of MBA's adjustment of any
claim, Company shall pay all costs in connection with such proceeding
unless such proceeding is a result of any error, omission,
misrepresentation, bad faith, fraud, or violation of any deceptive
trade practice or deceptive claims practice act by MBA. Company's
Agreement to provide any defense under this paragraph shall not in any
way waive MBA's indemnification obligations contained in this
Agreement.

D. MBA acknowledges that it has all adjuster licenses' necessary for
adjusting claims pursuant to this Agreement.

8. Claims Imprest Account: MBA shall create and operate a Claims Imprest
Account to be funded by Company from premium/contract fees collected by MBA
and received by Company. MBA shall use such funds to pay claims consistent
with this Agreement. MBA shall serve as a fiduciary to such funds and shall
not pay any fees or expenses out of such Claims Imprest Account. MBA shall
make no transfer of any such funds except for the payment of claims.
Company shall ensure that any such account balance shall be no less than an
amount equal to two (2) months paid claims based on the most recent monthly
average claim payment amount. All funds in such Claims Imprest Account
shall be property of Company and Company shall be entitled to any interest
earned thereon. Such funds contained in Claims Imprest Account shall not be
subject to any levy or attachment by any creditors of MBA.

9. Compensation: MBA's compensation for the administration of programs subject
to this Agreement and the placement of policies or service contracts
subject hereto shall be at a rate as specified in Exhibit A hereto. There
shall be no contingent or bonus commission due MBA unless specifically
agreed to by Company in writing.

In the event of cancellation of warranties, service contracts, polices or
the reduction of warranty, service contract fees or policy premium, MBA
shall be liable for payment of the entire service contract retail price or
policy premium for any such service contract or policy, as computed by the
unearned warranty, service contract or premium formula specified by Company
or the warranty, policy or service contract sold. MBA shall have the
responsibility for refunding the entire unearned amount, including dealer
or subproducer compensation or markup if applicable, to the particular
warranty, service contract or policy holder, and Company shall credit MBA
with Company's portion on the next monthly account of the parties after
such refund. MBA hereby guarantees that such return/refund shall be made
and agrees to hold harmless and indemnify Company for any failure by MBA,
its subproducers or dealers to refund the unearned warranty, service
contract or policy amount, including dealer/subproducer compensation. Any
cancellation fee contained in any warranty, service contract or policy
shall be property of Company.

10. Employees/Expenses: All employees, subproducers and agents of MBA shall be
MBA's employees, agents and subproducers and shall not be deemed employees
of Company for any reason what so ever. All expenses of MBA, including but
not limited to, rentals, transportation, facilities, postage, advertising,
local licensing fees, costs of equipment, utilities, supplies not furnished
by Company and inspections or audits of contract/policy holders, shall be
borne by MBA and shall not under any circumstance be considered expenses of
Company in the absence of Company's written Agreement. MBA shall be
responsible for tracking all fees or compensation due subproducers,
retailers or dealers and shall hold Company harmless for any claim for such
fees or compensation against Company.

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<PAGE>
11. Records/Audits: MBA shall keep in a manner and form prescribed or approved
by Company, true and accurate records and books of account of all
transactions under this Agreement with Company. MBA shall hold and preserve
the property of Company (which shall include but not limited to any
records, contracts, contract forms, policies, policy forms, brochures,
applications, manuals, underwriting guides and all other property of
Company) which shall at any time come into MBA's possession or under its
control. MBA shall surrender such property to Company upon demand. MBA
shall, as often as required, submit to a representative of Company, all
such books and records for examination and copying as said Representative
shall desire to make, and MBA shall cooperate and assist in such
examination or audit. Company may request corrective action be made
promptly and MBA shall confirm completion thereof in writing. Company's
right to inspect and copy records relating to Company and/or business
written by MBA under this Agreement shall survive termination of this
Agreement and shall continue until all matters affecting Company are
settled. MBA shall make such reports of all transactions under this and all
previous Agreements as may be required by Company. MBA agrees to conduct
daily and monthly backups of its computer system and place a yearly backup
in a safety deposit for protection in the event of any disaster or
emergency damaging MBA's systems and records.

12. Administration Runoff Account: MBA shall under the direction of Company
establish an account in Company's and MBA's name for the purpose of
providing Company with appropriate funds in the event that Company must
obtain an alternative third party administrator with respect to business
written hereunder due to MBA being unable to perform its duties pursuant to
this Agreement. Such accounts shall not be an asset of MBA and shall not be
attached by MBA creditors. MBA agrees to fund such trust account with
eighteen dollars ($18.00) per service contract, extended warranty,
certificate or insurance policy sold by MBA under this Agreement. Such
funding shall occur immediately upon the premium or fee being received by
MBA for such service contract, extended warranty, certificate or insurance
policy. MBA shall have no authority to withdraw funds from such account.
The trust account shall continue to be funded until the amount held in
trust contains eighteen dollars ($18.00) for each contract, extended
warranty, certificate or insurance policy in force. Thereupon, Company
shall conduct a quarterly review of such trust account to ensure that the
amount held in the account is equal to eighteen dollars ($18.00) per in
force service contract, extended warranty, certificate or insurance policy.
If the amount held in the account is deficient, then funding by MBA shall
resume pursuant to this paragraph. In the event the amount held in such
trust account is in excess of that required by this paragraph, the amount
of such excess shall be a credit on the next monthly account of
transactions between MBA and Company and Company may transfer such excess
to its other accounts. The trust account shall be established in a
federally insured bank and shall be invested in any of the following
instruments: Demand Accounts, Time Accounts or Certificates of Deposit. All
interest earned on such accounts in each calendar year shall be paid to MBA
within forty-five days after the end of such calendar year. In the event
this Agreement is terminated pursuant to Paragraph 14.B., MBA shall not
service business written pursuant to this Agreement after termination and
the trust account shall remain property of Company. However, any amounts in
the trust account in excess of those required to meet the minimum dollar
amount per contract, warranty, certificate or policy issued hereunder shall
be paid to MBA. Company may offset any amounts due MBA under this paragraph
against any amounts MBA owes Company under this Agreement. if termination
of this Agreement is pursuant to Paragraph 14.A. or Paragraph 14.C., MBA
shall continue to service business written hereunder after termination and
Company shall pay MBA from the account on a quarterly basis as each in
force service contract, extended warranty, certificate or insurance policy
is earned out. For purposes of this payment only, such in force business
shall be considered as being earned pro-rata. In the event MBA is servicing
business after termination and the projected loss ratio for in force
business equals or exceeds a ninety percent (90%) loss ratio or MBA is in
violation of any of its responsibilities under this Agreement which apply
to servicing business after termination, Company reserves the right to
require MBA to cease servicing such business and move such servicing to
another administrator. In such event all payments of the trust account to

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<PAGE>
MBA hereunder shall cease. For purposes of this paragraph loss ratio shall
be defined as the percentage resulting from losses and loss adjustment
expense being divided by the gross amount of money to Company from MBA from
business produced hereunder.

13. Indemnification and Right of Offset: MBA shall at all times indemnify and
save harmless Company from and against all manner of actions, suits,
liabilities, costs or expenses by reason of any act or failure to act on
part of MBA, its employees, subproducers or agents. Company shall at all
times have the right to receive and apply any amount of money held by it on
account of all obligations and liabilities of MBA to Company, whether
arising from this Agreement or otherwise, and for all liabilities, damages,
costs or expenses which Company may sustain or be liable by reason of any
act or failure to act on the part of MBA, its employees, subproducers, or
agents.

14. Termination:

A. Either party may terminate this Agreement by providing the other with
not less than three hundred and sixty five (365) days written notice
prior to the effective date of termination.

B. Company may terminate this Agreement:

a. Immediately upon written notice in the event that MBA has failed
to promptly comply with any of its material duties and material
obligations under this Agreement or;
b. Immediately upon MBA committing any fraudulent or illegal act,
gross, willful or negligent misconduct or threat of insolvency.

C. MBA may terminate this Agreement upon providing written notice of any
fraudulent or illegal act, gross, willful or negligent misconduct or
threat of insolvency.

D. Upon termination of this Agreement, MBA shall cease writing all such
business on behalf of Company and any right to use the name of Company
or any of its products shall immediately cease. MBA shall immediately
cause to be delivered to Company all property of Company, including
but not limited to applications, unused claims drafts, service
contracts, warranties, policies, pricing guides, manuals, forms and
brochures. If MBA fails to deliver such items, MBA shall bear any
expense which Company may incur in obtaining such items and MBA shall
be liable in damages for losses resulting in whole or in part from
MBA's failure to immediately deliver such property to Company. In the
event that unused drafts, warranties, applications, contracts or
policies cannot be accounted for by MBA, MBA hereby agrees to protect
and forever defend Company against and to hold harmless and indemnify
Company on account of all persons and claims whatsoever on said
applications, drafts, warranties, policies or contracts. Expiration
and renewals rights for all such policies written shall be the
property of MBA unless MBA is in default under any obligation under
this Agreement, then such renewal rights and such polices shall be
property of Company.

15. Miscellaneous:

A. This Agreement shall not be assigned without prior written consent of
Company and it may not be modified verbally, or be modified with any
subsequent practice or course of dealing by the parties, nor in any
other manner other than by writing signed by the parties hereto. No
forbearance or neglect on the part of Company to enforce any of the
provisions of this Agreement shall be construed as a waiver of any of
Company's rights or privileges hereunder unless in each instance a
written memorandum specifically expressing such waiver be made and
subscribed by the President or a Vice President of Company. No waiver
of such rights arising from any default or failure of performance of
MBA's obligations shall modify this Agreement, or extend to affect

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<PAGE>
rights of Company arising from the subsequent default or failure of
performance. Where used herein, the pronoun referenced to MBA shall
include the masculine and the feminine, and the singular and the
plural. The obligations of MBA, express and implied shall be joint and
several. The parties agree that if this Agreement is terminated the
promises, duties and obligations contained herein shall outlive this
Agreement and shall remain in effect to the extent required until all
transactions and obligations between the parties hereto are settled.

B. More than one corporation may be a party to this Agreement as an
Underwriter. In such event, any reference herein contained to
"Company" shall be collective in this application and, where the
context requires, the word "Company1' and/or the pronoun "it" or "its"
when referring to Company shall include the plural as well as the
singular. MBA may be appointed as a general agent or administrator for
one or more of such corporations. In the event of appointment of MBA
as an administrator or agent by less than all of the corporations who
are parties to this Agreement, the rights and obligations of Company
and MBA as set forth in this Agreement shall be deemed to be
applicable to and undertaken by only that corporation or corporations
that has in fact appointed MBA as its general agent or administrator.
MBA warrants that it is in compliance so long as this Agreement is in
effect with all applicable laws and/or regulations governing the
conduct of business subject to this Agreement. MBA shall be
responsible for tracking all unused applications, extended service
contracts, warranties or policies, and also shall be responsible for
contractual liability issuance and countersigning in states where
retailers or dealers are required to be the obligor under service
contracts written.

16. Severability: This Agreement is issued under, is subject to and shall
be interpreted in accordance with the laws of the state of Ohio by any
court of competent jurisdiction in Clermont County, Ohio. if any
provisions are contrary to any applicable controlling federal, state
or local law or regulation it shall be severed from the Agreement and
shall not affect the validity of this Agreement. This Agreement
supercedes all previous Agreements, either expressed or implied
between the parties hereto.

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<PAGE>

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

Witness: /s/ Shelly Beesley
MECHANICAL BREAKDOWN ADMINISTRATORS

By: /s/ Gaylen M. Brotherson
Title: CEO

Witness:
AMERICAN MODERN HOME INSURANCE COMPANY
AMERICAN FAMILY HOME INSURANCE COMPANY
AMERICAN SOUTHERN HOME INSURANCE COMPANY
AMERICAN WESTERN HOME INSURANCE COMPANY
AMERICAN MODERN HOME SERVICES COMPANY

By:
Title: SVP

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<PAGE>
EXHIBIT A

This Exhibit A is effective May 19, 1998, and forms a part of the Agreement
dated May 19, 1998, by and between American Modern Home Insurance Company,
American Family Home Insurance Company, American Southern Home Insurance
Company, American Western Home Insurance Company and American Modern Home
Service Company (hereinafter collectively referred to as ("Company") and
Mechanical Breakdown Administrators, Inc. (hereinafter referred to as 'MBA").

It is hereby agreed by Company and MBA that MBA shall serve as Administrator
and/or Agent for the following types of business:

Compensation
-----------------------
Commission Admin.Fee
---------- ---------
RV and Travel Trailer Service Contracts 0% *
TX Auto MBI 49% 0%

*The difference between the dealer net cost and the gross amount due Company for
such business.

This Exhibit A supercedes any previous Exhibit A to the above mentioned
Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Exhibit A as the date
first listed above:

Witness: /s/ Shelley Beesley
MECHANICAL BREAKDOWN ADMINISTRATORS, INC.

By: /s/ Gaylen M. Brotherson
Title: CEO

By:
Title: SVP
<PAGE>
CONTINGENT COMMISSION ADDENDUM

This addendum is effective May 19, 1998 and forms a part of the
Administration/Agency Agreement between American Modern Home Insurance Company,
American Family Home Insurance Company, American Southern Home Insurance
Company, American Western Home Insurance Company and American Modern Home
Service Company (hereinafter collectively referred to as "Company") and
Mechanical Breakdown Administrators, Inc. (hereinafter referred to as "MBA").

MBA may qualify for contingent commissions as calculated in accordance with this
Contingent Commission Addendum and predicated on the experience of Expired
Service Contracts from Subject Business written under the above-mentioned
Agreement. The Contingent Commission calculation for such Expired Service
Contracts shall occur in the next subsequent calendar quarter after the service
contract expiry. Definitions and the formula for the calculation are as follows:

A. Expired Service Contracts - Shall mean all service contracts from
Subject Business written under this Agreement which have come to their
natural expiry or have been cancelled and the cost of such contract
due Company (both premium and fees) has been fully earned.

B. Subject Business - Shall mean that business written pursuant to the
above-mentioned Agreement and classified by Company as Recreational
Vehicle and Travel Trailer service contract business.

C. Interest - Shall mean all interest generated by Expired Service
Contracts from Subject Business in the calendar quarter subject to
calculation. This interest shall be generated at a rate equal to that
of a ninety (90) day U.S. Treasury Bill.

D. The Contingent Commission shall be calculated in the following manner:

There shall be deducted from premium and fees received by Company from
Expired Service Contracts for Subject Business plus Interest, the sum
of:

1. Company's retention equal to twenty percent (20%) of premiums and
fees due and received by Company for Expired Service Contracts;
plus

2. The net amount of any front commission paid or credited to MBA
for Expired Service Contracts; plus

3. The total of losses paid, loss expense paid and outstanding
losses for Expired Service Contracts at the end calendar quarter
subject to this calculation, less salvage recovered, subrogation
recovered and outstanding losses for Extended Service Contracts
at the beginning of the calendar quarter subject to this
calculation; plus

4. Any carryover from a negative calculation in the calendar quarter
immediately proceeding the quarter subject to this calculation.
<PAGE>
In the event the above calculation results in a positive amount,
fifty-five percent (55%) of such an amount shall be contingent
commission and shall be payable to MBA within 120 days of the end of
the quarter subject to calculation, except as set forth in Paragraph
D. if such calculation results in a negative amount, such amount shall
be carried forward to the calculation for the next calendar quarter.
Notwithstanding anything to the contrary, it is agreed and understood
that any negative amount calculated under this Addendum shall offset
any positive amount calculated under any other contingent commission
addendum to the Administration/Agency Agreement and any negative
amount calculated under such other Addendum shall offset any positive
amount calculated under this Addendum.

E. In the event that projected losses for Subject Business under this
Agreement show a loss ratio equal to or greater than ninety percent
(90%) for unexpired service contracts or for service contracts
expiring in the calendar quarter immediately subsequent to the
calendar quarter subject to this calculation, based on loss
projections and earning methodology establish by Company, no
contingent commission payments pursuant to this Contingent Commission
Addendum shall be paid for the calendar quarter subject to calculation
hereunder and there shall be no carry forward of such commission to
the next accounting period.

In the event the above-mentioned Agreement is terminated, all terms and
conditions of this Addendum shall apply and contingent commission shall continue
to be calculated, except that after notice of termination, the payment of
contingent commission, if any, shall be suspended until such time as all
liability of Company, including losses and loss expenses paid and outstanding
arising out of business issued pursuant to the above-mentioned Agreement shall
have been terminated and until MBA shall have certified in writing that all
known claims against Company have been duly reported to Company. Thereupon, the
final contingent commission shall be calculated for the entire period. If this
results in a positive amount, Company shall pay fifty-five percent (55%) of such
amount upon the mailing to MBA of a final accounting statement, and in
consideration thereof, MBA agrees to hold harmless and indemnify Company against
all losses, demands and claims, including those for unearned premium return,
arising from policies or contracts placed pursuant to the above-mentioned
Agreement.

Witness:

AMERICAN MODERN HOME INSURANCE COMPANY
AMERICAN FAMILY HOME INSURANCE COMPANY
AMERICAN MODERN HOME SERVICES COMPANY
AMERICAN SOUTHERN HOME INSURANCE COMPANY
AMERICAN WESTERN HOME INSURANCE COMPANY

By:
Title: SVP

Witness: /s/ Shelly Beesley

MECHANICAL BREAKDOWN ADMINISTRATORS

By: /s/ Gaylen Brotherson
Title: CEO

BOARD OF DIRECTORS MEETING

RESOLUTION

FEBRUARY 15, 1996

It has been approved and directed that Gaylen M. Brotherson will receive a
100,000 share stock option at $0.75 per share (Stock Price on February 15, 1996)
when MECHANICAL BREAKDOWN ADMINISTRATORS, INC.'s gross warranty sales reach
$10,000,000 (ten million dollars) plus an additional 75,000 share stock option
at 80% of price per share on date reached, when gross warranty sales reach
$20,000 ,000 (twenty million dollars) and will receive a 5,000 share stock
option at 80% of share retail price per share for each $5,000,000 (five million
dollar) increase in sales after $20,000,000 (twenty million dollars) of gross
revenue.

These options will expire 10 years from date granted and can be transferred.

/s/ Gaylen Brotherson
- -----------------------------
Director

/s/ Judy K. Brotherson
- -----------------------------
Director

/s/ Shelly Beesley
- -----------------------------
Director

Board of Directors Meeting
Resolution
June 1, 1998

It has been approved and directed that Judy K. Brotherson will receive a 100,000
share stock option at 75% of the bid price as of May 27, 1998 ($1.25) per share
of MBAI stock.

It is further approved that Judy K. Brotherson will receive a 20,000-share
option when sales reach $20,000,000 gross revenue for MBA Holdings and
5,000-share option for each $5,000,000 increase in sales. They will be at 70% of
the bid share price on date gross sales is reached.

These options will expire ten (10) years from date granted and can be
transferred .

/s/ Gaylen Brotherson

/s/ Judy K. Brotherson

/s/ Shelly Beesley

OFFICE LEASE

This lease is made between: CACTUS FAMILY INVESTMENTS, LLC called Lessor

and

MECHANICAL BREAKDOWN ADMINISTRATORS, INC. called Lessee.

IT IS AGREED BETWEEN LESSOR AND LESSEE AS FOLLOWS:

PREMISES

1. Lessor hereby leases and Lessee hereby hires, upon the terms and
conditions herein set forth, that certain office space known as Suite Number
105A, 105B (5100 SQ. FT) TOP & (5100 SQ. FT) BOTTOM FLOORS, 106A BOTTOM FLOOR
(1250 SQ. FT) & TOP FLOOR (2550 SQ. FT), 106B TOP FLOOR (2550 SQ. FT) consisting
of approximately 16,750 square feet of floor space, hereinafter referred to as
the "Premises" situated on 105A, 105B, 106A TOP & BOTTOM FLOORS, 106B TOP FLOOR
of the building, hereinafter referred to as the "Building", located at 9419 East
San Salvador, Scottsdale, Arizona.

TERM

2. The term of this Lease shall be for a period of 60 MONTHS / (5) year(s)
commencing on the 01 day of JANUARY , 19 99 , and terminating on the 31 day of
DECEMBER , 20 03 .

RENT

3. (a) Lessee will pay to Lessor, at the office of the building, as rent
for the premises, the total sum of $ 197,400.00 , ONE HUNDRED AND NINETY-SEVEN
THOUSAND FOUR HUNDRED AND 00/100 DOLLARS (per year) payable in equal monthly
installments of $16,450.00 plus applicable city and state taxes, in advance, on
the first day of each calendar month, $987,000.00 for the term of the lease,
commencing on this 01 day of JANUARY , 19 99 , signed this 04 day of APRIL , 19
99 , and continuing thereafter until said total shall be paid.

On August 01, 1999 Lessee will lease an additional 3,000 square feet,
located at 9419 E. San Salvador Dr., Suite #104, Scottsdale, AZ 85258, at the
same rental rate of $12.00 per square foot. A total of 19,450 square feet
rented, cost in 1999 is $212,400.00 for total rent. For years 2, 3, 4, and 5,
cost will be $233,400.00; plus yearly percentage increase, in lease payments per
year; $19,450.00 per month plus percentage increase; $1,146,000.00 in payments
for the entire lease term plus yearly increases. This Lease will expire on the
31ST day of DECEMBER , 20 03 .

(b) Prior to commencement of this Lease, Lessee agrees to deposit with the
Lessor the sum of N/A , to be held as a Security Deposit to secure the
performance of each and every covenant of this Lease. On termination of this
Lease and full payment of all amounts due and performance of all Lessee's
covenants and agreements, the Security Deposit shall be returned to Lessee.

(c) Rental payments shall be made on or before the first day of every
month. Payments received later than the 10th of the month shall be assessed a
late charge of five percent (5%) of the monthly rental as additional rent the
following month. Failure to pay this late charge shall constitute a default of
this Lease.

1
<PAGE>
(d) Lessee further agrees to pay any and all excise, privilege, rent, real
state taxes, sales taxes or other applicable taxes, except Lessor's income taxes
levied by any governmental authority on the rent or other charges required to be
paid under this Lease.

(e) Lessee will pay an additional two percent (2%) in year two (2)
beginning January 01, 2000, four percent (4%) in year three (3), five percent
(5%) in year four (4), and six percent (6%) in the fifth (5) year.

UTILITIES

4. Lessee will use reasonable efforts to provide the premises with heat,
air conditioning and electricity in quantities required for normal usage of the
premises, without liability for failures or interruptions resulting from any
cause or from good faith acts or decisions of the Lessor. Lessee shall be
responsible for telephones and all other utilities and services not specifically
stated above to be provided by Lessor. It shall be Lessee's obligation to turn
off all lights, air conditioning or heating at the close of each business day to
conserve energy.

JANITORIAL SERVICE

5. Lessee shall provide janitorial service for office space only, which
will consist of vacuuming, trash bin waste disposal and bathroom cleaning.

LESSEE NOT TO MISUSE

6. The Lessee will use the premises only for GENERAL OFFICE USE and will
not use said premises for lodging or sleeping purposes, or for any immoral or
illegal purposes. The Lessee, at his expense, will comply and will cause his
employees, agents, and invitees, to comply with all applicable rules and
regulations of governmental agencies. The Lessee shall not use or permit upon
said premises anything that will increase the rate of insurance thereon, or
anything that may be dangerous to life or limb; and will do nothing to create a
nuisance or to disturb any other Lessee in said building.

CONDITION OF PREMISES

7. Lessee acknowledges that his acceptance of possession of the premises
constitutes a conclusive admission that he has inspected the premises and has
found it in good condition and repair and in all respects in accordance with the
obligation of Lessor under this Lease.

UNDERTAKINGS BY TENANT

8. (a) Lessee shall purchase, during the term of this Lease, comprehensive
general liability insurance for bodily injury for limits up to $500,000.00
single limit and property damage in the amount of $11,000.00 per occurrence
arising out of the maintenance or use by the Lessee of the premises covered
under this Lease Agreement. Further, a Certificate of Insurance shall be
furnished to the Lessor, indicating that the Lessor has been named as additional
insured on the Lessee's insurance policy.

(b) Lessee will hold Lessor and all other Lessees of the building and their
employees, agents and invitees, harmless from any loss, damage, or liability,
caused by Lessee or his employees, agents, invitees to the extent that Lessor or
the other Lessees shall not be reimbursed by insurance. Lessee will not claim
damages, other than a prorated abatement of the rent, if delivery of possession
of the premises shall be delayed beyond commencement of the term of this Lease,
regardless of the cause.

2
<PAGE>
(c) Upon observing that any part of the premises, including the fixtures
and facilities, is or appears to be defective, damaged, or in disrepair,
regardless of the nature or cause, Lessee will notify Lessor immediately.

(d) Lessee will not conduct any activities or keep any materials,
substances or articles in or about the premises which will impair or invalidate,
or increase the premium cost of insurance policies carried by Lessor.

(e) During the term, the Lessee will maintain the premises in good
condition and repair, except such repair and maintenance which are the
obligations of Lessor as provided hereafter, and Lessee will maintain all of
Lessee's furniture, furnishings, and equipment located in and on the premises in
good, neat, and attractive condition and in good taste and repair.

(f) Lessee will not make any alterations or additions to or install
partitions or built-in fixtures or facilities on the premises without Lessor's
previous written consent. Any alterations, additions, partitions or built-in
fixtures or facilities made to or installed in the premises by Lessee with
lessor's consent will be done in accordance with and subject to the written
directions and conditions issued by Lessor and shall become a part of the
building and the property of the Lessor. Lessor may repair, alter, improve or
remodel any portion of the premises or the building but without obligation to do
so, without liability to Lessee for any damage or for any inconvenience to or
temporary impairment of the enjoyment of the premises by Lessee.

(g) Lessee will not cause or permit any lien to be imposed upon the
premises or the building and will pay all taxes and license fees imposed by
reason of any improvements made by Lessee to the premises or imposed upon any
personal property located in the premises.

(h) Lessee will reimburse Lessor for all expenditures made by Lessor for
the account or benefit of Lessee.

(i) Should any part of the premises or the building be taken from Lessor as
a result of condemnation proceedings, threatened or filed, Lessee does and will
relinquish to Lessor any interest in the proceeds or award. Should all or a
substantial part of the premises be taken or requisitioned by a public utility
or governmental agency by condemnation or otherwise, Lessor may terminate this
Lease on not less than thirty (30) days written notice to Lessee.

(j) Lessee will permit upon given notice, any agent, or employee of Lessor
to enter the premises, with a pass key or otherwise, at any time for inspection
or other reasonable purposes, and Lessee releases Lessor from any responsibility
for any resulting theft or damage.

(k) Lessee, at its expense, agrees to install portable fire extinguishers
on the premises as required by the insurance companies or municipal authorities.

(l) Lessee, shall promptly comply with all statutes, ordinances, rules,
regulations, orders, and requirements of all governmental bodies during the term
of this lease.

(m) Lessee shall have the privilege, after obtaining Lessor's written
consent, of placing such signs on the premises as it deems necessary in the
conduct of its business, provided Lessee pays all required fees and obtains all
required legal permissions. Lessee agrees to identify and save Lessor harmless
from any and all losses, claims and suits for injury to person or property
caused by any sign.

3
<PAGE>
RULES AND REGULATIONS

9. The Lessee, and his agents and servants, shall at all times observe,
perform and abide by all the rules and regulations printed upon the back of this
instrument and such reasonable modifications thereof and additions thereto as
may be hereafter adopted by the Lessor and which apply to all Lessees of the
building in which the premises are located. Reference "Rules and Regulations"
page 6.

REPAIRS AND MAINTENANCE

10. Lessor shall furnish the premises during reasonable and usual business
hours, usual maintenance service. Lessee hereby assumes all maintenance
including cleaning, repairs to air conditioning and other cooling devices.
Lessor, however, shall not be obligated to furnish such maintenance service when
the need therefore is caused by the negligence or willful act of Lessee, his
employees or invitees.

NON-LIABILITY OF LESSOR

11. The Lessor shall not be liable for any damage, either to person or
property, sustained by Lessee or by other persons, due to the building or any
part thereof or any appurtenances thereof becoming cut or repair, resulting from
faulty or leaky plumbing, gas, water, steam, electrical, heating, cooling,
ventilating or air conditioning fixtures, facilities, or conduits; from acts of
officers, agents or employees of Lessor or invitees; or from any trespass or
public offence committed in or about the premises of the building.

ASSIGNMENT AND SUB-ORDINATION

12. Lessee may not assign or hypothecate this Lease, or sublet the
premises, in whole or in part, directly or indirectly, without the prior written
consent of Lessor, which consent shall not be unreasonably withheld. Any
attempted transfer of this Lease, or any right of Lessee in the Lease or in the
premises, voluntary or involuntary, direct or indirect, in bankruptcy,
reorganization, receivership, probate, law, equity, or otherwise shall be void
unless effected with the prior written consent of Lessor. Any assignee or
subtenant of Lessee, approved in writing by Lessor, shall be bound by this
Lease. Lessor may assign or hypothecate this Lease or convey the building
without affecting the obligations of Lessee. This Lease shall be subordinate to
any trust deed or mortgage now on the building and any extension or renewal of
either and to any trust deed or mortgage which Lessor shall constitute a future
waiver or an impairment of the provisions of this paragraph.

CASUALTY

13. If the premises or building are destroyed in whole or in part by fire
or other casualty so as to render the premises unfit for occupancy, Lessor may
terminate this Lease or Lessor may at Lessor's cost, restore the premises or
building so destroyed, with an equitable abatement of Lessee's rent during the
time of such restoration.

DEFAULT

14. If Lessee should become in default under this Lease, Lessor, at its
option and without notice, (1) may terminate this Lease, take possession of the
premises and relet the premises at any rent obtainable, recovering from Lessee,
in successive actions or in a single action, any deficit between the rent
received or to be received and the rent provided to be paid under this Lease,
plus all expenses, including attorney's fees, incurred in the taking possession
and reletting; or (2) without attempting to relet the premises and with or
without terminating this lease, may (a) sue, at regular or irregular intervals
and in successive suits, to recover unpaid rent for the remaining term of this
Lease, or (b) sue, for general and special damages. If Lessor should take
possession of the premises under the provisions of this paragraph or at the end
of the term, Lessor may remove to any place of storage, or any dumping ground,
at Lessee's risk and expense and without incurring any responsibility to Lessee
for loss, damage, or theft, all property in or about the leasehold belonging to
or in the custody of Lessee. The remedies provided in this paragraph are
cumulative and may be exercised simultaneously with, in addition to, or
independently of, any other legal remedy.

4
<PAGE>
RESTORATION OF PREMISES

15. Upon termination of this Lease, Lessee will restore the premises to
Lessor in the same condition as it existed at the commencement of the term,
except as otherwise permitted or required by this Lease, and except for
reasonable use and wear. Cleaning or repairs of misuse will be deducted from
Security Deposit.

HOLDING OVER

16. Should Lessee hold over the premises after the term of this Lease, he
will be a tenant by sufferance from day to day with a rental of N / A per day
unless Lessor shall consent in writing to a different tenancy.

INTEREST ON MONETARY OBLIGATIONS

17. All monetary obligations of Lessee to Lessor under this Lease shall
carry N/A percent (____%) interest per annum from the date due until paid.

TIME OF ESSENCE

18. Time is of the essence of this Lease.

CONDITION

19. Each term of this Lease shall constitute a condition.

NOTICES

20. Notices shall be deemed served upon Lessee which left at or mailed,
postage prepaid, to the premises.

WAIVER

21. No waiver, benefit, privilege, or service, voluntarily granted or
performed by Lessor to or for Lessee, or any other Lessee in the building, shall
be construed to vest any contractual right in Lessee by custom, estoppel, or
otherwise. No waiver by Lessor of a default by Lessee under this Lease shall
constitute a waiver of a subsequent default and after a waiver, expressed or
implied, no notice need be given that strict compliance in the future will be
required.

ATTORNEY'S FEES

22. If Lessor shall commence any legal proceedings by reason of Lessee's
default hereunder and if Lessor shall be the prevailing party in such legal
proceedings, Lessee shall pay all costs incurred by Lessor, including reasonable
attorney's fees.

PARTIAL INVALIDITY

23. No partial invalidity of this Lease shall affect the remainder.

5
<PAGE>
HEADINGS

24. Headings shall not limit or affect any paragraph in this Lease.

REMEDIES CUMULATIVE

25. All rights and remedies of the Lessor under this Lease shall be
cumulative, and none shall exclude any other rights and remedies allowed by law.

SUCCESSORS AND ASSIGNS

26. Each of the provisions of this Lease shall extend to and shall, as the
case may require, bind or inure to the benefit of, not only the Lessor and the
Lessee but also their respective successors, legal representatives and assigns.

ENTIRE AGREEMENT

27. This Lease contains the complete agreement between Lessor and Lessee
and no supplement, amendment, or other commitment will be binding unless in
writing and signed by the obligated party.

Executed this 4 day of April, 1999, at Scottsdale, Arizona for Cactus
Family Investments, LLC.

LESSOR: Cactus Family Investments, LLC
BY:/s/ Gaylen M. Brotherson
TITLE: Managing Member
Witnessed:
4 day of April, 1999.

/s/ Shelly Beesley
Signature

Executed this 4 day of April, 1999, at Scottsdale, AZ for MBA, Inc.
LESSEE: MBA, Inc. a division of MBA holdings, Inc.
BY: /s/ Judy K. Brotherson
TITLE: President
Witnessed:
4 day of April, 1999.
Shelly Beesley
Signature

6
<PAGE>
RULES AND REGULATIONS

1. PUBLIC AREAS. All public areas of the Building shall be under the sole
and absolute control of Landlord and Landlord shall have the exclusive right to
regulate, modify and control these areas.

2. WIRING. When electric wiring of any kind is introduced, it must be
connected as directed by the Landlord, and no boring or cutting for wires will
be allowed except with the written consent of the Landlord. No apparatus, other
than normal office machines and equipment of any kind, shall be connected with
the electric wiring of the Leased Premises and/or the Building without the
written consent of the Landlord.

3. INCREASE IN RISK. No tenant shall do anything in the Lease Premises,
and/or the Building or bring or keep anything therein, which will in any way
increase or tend to increase the risk of fire, or which shall conflict with the
regulations of the Fire Department or the fire laws, or with any rules or
ordinances established by the Board of Health. No tenant shall use any machinery
which may cause any objectional noise, jar, or tremor to the floors or walls, or
which, by its weight, might injure the floors of the Building.

4. NO AUCTIONS. No tenant shall conduct any auction on the Leased Premises.
No tenant shall store goods, wares or merchandise on the Leased Premises, except
for such tenant's own personal use.

5. MOVING. All freight, furniture, fixtures and equipment must be moved
into, within, and out of the Building under the supervision of the Landlord, and
according to such regulations as determined by Landlord from time to time.

6. TENANT REQUESTS. The requests of any tenant will be attended to only
upon written application at the office of the Building. Employees of Landlord
shall not perform any work, nor do anything outside of their regular duties
unless special written instructions from the Landlord are first had and obtained
and no employee shall admit any person (whether a tenant or otherwise) to any
part of the Building without specific instructions from the Landlord or
Landlord's agent.

7. KEYS. All keys shall be obtained from the Landlord and all keys shall be
returned to the Landlord upon the termination or earlier expiration of this
Lease. No tenant shall change the locks, or install other locks, on the doors to
the Leased Premises or elsewhere without the written consent of Landlord.

8. LOCKING OF LEASED PREMISES. Each tenant shall see that the windows and
doors of the Leased Premises are closed and securely locked before leaving the
Leased Premises and that all lights are properly turned off.

9. NOTICE OF ACCIDENTS. Each tenant shall give Landlord prompt notice of
any accident to, or defects in, the Building, the Leased Premises, the plumbing,
electric wiring, heating or air conditioning so that the same may be attended to
promptly.

7
<PAGE>
10. JANITORIAL SERVICES. All cleaning and janitorial services for the
Building and the Leased Premises shall be provided exclusively through Landlord.

11. UTILITIES. No tenant shall use any method of heating or air
conditioning other than that supplied by Landlord.

12. COOPERATION WITH LANDLORD. Each tenant shall cooperate with Landlord in
obtaining maximum effectiveness of the cooling system by closing drapes and
other window coverings when the sun's rays fall on the windows of the Leased
Premises. No tenant shall not tamper with, alter or change the setting of any
thermostats or temperature control valves.

13. CONTROL BY LANDLORD. Landlord reserves the right to exclude or expel
from the Building any person who, in the judgement of Landlord is intoxicated or
under the influence of liquor or drugs, or who shall in any manner act in
violation of any of the rules and regulations of the Building.

14. SERVICES. All services to be provided by Landlord as specified shall be
subject to schedule change as Landlord shall deem necessary.

15. PASSES. Landlord reserves the right to exclude from the Building at all
times, other than the reasonable hours of the generally recognized business day
as determined by Landlord, all persons who do not present a pass or other
identification acceptable to Landlord.

16. CANVASSING. Canvassing, soliciting and peddling in the Building are
prohibited and each tenant shall cooperate to prevent such activities.

17. HAND TRUCKS. There shall not be used in any space, or in the public
halls of the Building either by any tenant or others, any hand trucks except
those which are approved by Landlord in writing and which had trucks are
equipped with rubber tires and side guards.

18. PLUMBING. The toilets, wash basins and other plumbing fixtures shall
not be used for any purpose other than those for which they were constructed,
and no sweepings, rubbish, rags or other substance shall be thrown therein. All
damage resulting from any misuse of fixtures shall be borne by the tenant who,
or whose employees, agents or visitors shall have caused the same.

19. VEHICLES, COOKING, PETS. No bicycles, vehicles or animals of any kind
shall be brought into or kept in or about the Leased Premises, and/or the
Building and, except for any restaurant tenant permitted by Landlord to do so,
no cooking shall be done or permitted by any tenant on the Leased Premises
and/or the Building except the preparation of coffee, tea, hot chocolate and
similar items for the Tenant, its employees and business visitors. No tenant
shall cause or permit any unusual or objectionable odors to escape from the
Leased Premises.

20. ADVERTISING. No tenant shall engage in advertising which, in Landlord's
opinion, tends to impair the reputation of the Building or its desirability.

21. AMENDMENT. Landlord reserves the right at any time to rescind any one
or more of these rules and regulations, or to make such other and further
reasonable rules and regulations as in Landlord's judgement may from time to
time be necessary for the safety, care and cleanliness of the Leased Premises,
the Building and for the preservation of order therein.

8
<PAGE>
22. HEADINGS. The headings of the Paragraphs of these rules and regulations
are for convenience of reference only and shall not limit or define, in any way
the terms and provisions hereof.

23. PROHIBITIVE USES. No premises shall be used for manufacturing or for
the storage of merchandise except as such storage may be incidental to the use
of such premises for general office purposes. No tenant shall occupy or permit
any portion of its premises to be occupied for the manufacture or sale of
liquor, narcotics, or tobacco in any form, or as a medical office, or as a
barber shop or manicure shop without the prior written consent of Landlord. No
tenant shall advertise for laborers giving an address at the Building. No
promises shall be used for lodging or sleeping or for illegal purposes.

24. COMBUSTIBLE MATERIALS. No tenant shall use or keep in any premises or
at the Building any kerosene, gasoline or inflammable or combustible fluid or
material.

25. WINDOW COVERINGS. Tenant shall not place any coverings on the windows
without first obtaining Landlord's written consent. The acceptability of any
such covering shall be at Landlord's sole discretion.

26. EXTERIOR FURNITURE. Tenant shall not place any furnishings on the
balconies or patios of the Building.

DATED this 4 day of April, 1999

/s/ Gaylen Brotherson
"LANDLORD"

RECEIPT BY TENANT

The undersigned Tenant hereby acknowledges receipt of a complete copy of the
foregoing rules and regulations.

DATED this 4 day of April, 1999

/s/ Judy K. Brotherson
"TENANT"

i. Fiscal year calculation:

AVERAGE AVERAGE COMMON &
FISCAL COMMON SHARES DILUTIVE SHARES BASIC DILUTIVE
YEAR NET INCOME O/S O/S (1) EPS EPS
---- ---------- --- ------- --- ---
1998 327,868 2,005,121 2,046,813 0.16 0.16
1997 263,377 2,002,343 2,006,777 0.13 0.13
1996 49,752 1,997,928 2,001,532 0.02 0.02

ii. Stub period calculation:

AVERAGE AVERAGE COMMON
COMMON & DILUTIVE BASIC DILUTIVE
NINE MONTHS ENDED NET INCOME SHARES O/S SHARES O/S (1) EPS EPS
----------------- ---------- ---------- -------------- --- ---

July 31, 1999 322,824 2,001,787 2,022,928 0.16 0.16

July 31, 1998 233,640 2,005,121 2,020,677 0.12 0.12

(1) The difference between the average common shares outstanding and the
average common & dilutive shares outstanding is due to the options held by
Gaylen Brotherson and Judy Brotherson (See Item 6 executive compensation)

Mechanical Breakdown Administrators, Inc.
a Delaware corporation

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NINE
MONTHS ENDING JULY 31, 1999 INCOME STATEMENT, JULY 31, 1999 BALANCE SHEET, THE
12 MONTHS ENDING OCTOBER 31, 1998, 1997, 1996 INCOME STATEMENTS, AND THE OCTOBER
31, 1998, 1997, 1996 BALANCE SHEETS.
</LEGEND>

<S> <C> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1997 DEC-31-1996
<PERIOD-END> SEP-30-1999 DEC-31-1998 DEC-31-1997 DEC-31-1996
<CASH> 3,584,254 1,914,001 1,442,324 1,301,436
<SECURITIES> 0 0 0 0
<RECEIVABLES> 236,986 266,173 154,236 195,589
<ALLOWANCES> 10,000 10,000 10,000 10,000
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 4,535,171 2,829,370 1,952,502 1,493,984
<PP&E> 422,132 362,975 652,341 535,210
<DEPRECIATION> 138,736 101,236 504,980 462,790
<TOTAL-ASSETS> 4,896,339 3,168,195 2,176,874 1,588,897
<CURRENT-LIABILITIES> 3,463,445 2,094,131 1,512,102 1,355,897
<BONDS> 0 0 73,189 76,187
0 0 0 0
0 0 0 0
<COMMON> 276,109 276,109 225,609 203,937
<OTHER-SE> 870,574 547,750 219,882 (43,495)
<TOTAL-LIABILITY-AND-EQUITY> 1,146,683 3,168,195 2,176,874 1,588,897
<SALES> 20,299,762 25,010,771 16,495,750 4,688,097
<TOTAL-REVENUES> 20,299,762 25,010,771 16,495,750 4,688,097
<CGS> 19,876,207 24,486,856 16,231,411 4,634,470
<TOTAL-COSTS> 19,876,207 24,486,856 16,231,411 4,634,470
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 0 0 0 0
<INCOME-PRETAX> 533,424 553,422 432,414 53,120
<INCOME-TAX> 210,600 225,554 169,037 3,368
<INCOME-CONTINUING> 322,824 327,868 263,377 49,752
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 322,824 327,868 263,377 49,752
<EPS-BASIC> 0.16 0.16 0.13 0.02
<EPS-DILUTED> 0.16 0.16 0.13 0.02

</TABLE>