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