Stock Exchange Agreement

STOCK EXCHANGE AGREEMENT


This Stock Exchange Agreement, dated this 20th day of July, 1998, is made and entered into by and between Ameri-Cap Finance Group, Inc., a Florida corporation ["Buyer"], the individuals named on Exhibit A attached hereto [collectively referred to as "Sellers"], Medley Credit Acceptance Corp., a Delaware corporation ["Medley"], and Ameritrust Holdings Inc., a Florida corporation ["Corporation"]. [The Buyer and Sellers may be referred to collectively throughout this Agreement as "Parties" for convenience].


WITNESSETH


WHEREAS, the Sellers collectively owns 100% of the authorized, issued, and outstanding common shares of Ameritrust Holdings, Inc., consisting of 1,495,000 common shares [the "Shares"], and


WHEREAS, the Corporation is organized and existing under the laws of the State of Florida and is engaged in commercial and residential lending and home improvements, and


WHEREAS, the Buyer is a Florida corporation and is desirous of purchasing from the Seller 90% of the authorized, issued, and outstanding common shares of the Corporation at closing and the Seller is desirous of selling same to the Buyer, and


WHEREAS, the Buyer shall have the right to acquire subsequent to closing the balance of the Corporation's common shares, and


WHEREAS, the Buyer is a wholly owed subsidiary of Medley, and


WHEREAS, Medley is a publically traded over-the-counter company, and


WHEREAS, a portion of the Shares have been sold pursuant to an exemption to the Securities Act of 1933 (the "Act") pursuant to Section 504, and


WHEREAS, the Parties desire to document their representations, warranties, covenants, agreements, and conditions relating to the exchange of the Shares in a written agreement.


NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:


1. RECITALS: The above and foregoing recitals are true and correct and are incorporated herein.


2. EXCHANGE AND TRANSFER OF SHARES: The Seller shall transfer, and convey to the Buyer and the Buyer shall acquire from the Seller 90% of the authorized, issued, and outstanding common shares of the Corporation consisting of 1,345,500 shares as follows:


A. 504 Shares: The Buyer will exchange with the Sellers owning the Corporation's Shares sold pursuant to Section 504 of the Act ["504 Shares"] one common share of Medley for each 504 Share owned by the Sellers. The total number of 504 Shares outstanding by the Corporation are 95,000 shares and all outstanding 504 Shares owned by the Sellers shall be exchanged on the closing date.


(1) Medley agrees with respect to the Exchanged 504 Shares to
file a registration statement with the Securities and
Exchange Commission within 30 days following the closing date
and diligently pursue the registration of said shares,
including responding to comment letters, if any, and to do
its best to have the registration become effective.


B. Restricted Shares: The balance of the outstanding Shares of the Corporation


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owned by the Sellers are not registered under the Act and shall hereafter be referred to as the "Restricted Shares". The Restricted Shares shall be exchanged as follows:


(1) At closing the Buyer shall exchange 400,000 common shares of
Medley for 1,345,500 Restricted Shares of the Corporation
owned by the Sellers. The Shares will be exchanged on a pro
rata basis with each selling Shareholder based upon the
number of Shares owned by the selling shareholder in the
Corporation. No fractional shares shall be issued by Medley
and the Sellers agree to determine the pro rata method of
distribution prior to closing and to deliver a written letter
of direction signed by all Sellers setting forth the
distribution computation to the Buyer.


(2) The Restricted Shares not exchanged at the closing shall be
retained solely in the possession of the Sellers and shall be
available for a future exchange with the Buyer according to
the following:


(a) Period 1: The year ending December 31, 1998. If net earnings before taxes (the "earnings hurdle") of Ameritrust exceed $250,000, Sellers will exchange 18,678.5 shares of their Restricted Shares for 125,000 shares of Medley Common Stock.


(b) Period 2, 3 and 4: The calendar years ending 1999, 2000, and 2001, the earnings hurdle shall be $500,000; $750,000; $1,000,000 in each year respectively. For each year that the net earnings before taxes of Ameritrust exceed the earnings hurdle in that year, Sellers shall exchange 37,375 shares of their Restricted Shares for 250,000 shares of the Common Stock of Medley.


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(c) Period 5: The six months ending June 30, 2002, the earnings hurdle shall be $1,250,000 annualized. If the net earnings before taxes of Ameritrust exceed the earnings hurdle, Sellers shall exchange 18,678.5 shares of their Restricted Shares for 125,000 shares of Common Stock of Medley.


(d) Adjustment to Shares to be Exchanged: If at the end of each exchange period as delineated in (a), (b) or (c) above, net earnings before taxes is less than the earnings hurdle, but greater than 80% of the then applicable earnings hurdle, Sellers shall exchange their Restricted Shares indicated for that period with an amount of Medley shares equal to the actual net earnings before taxes divided by the earnings hurdle, with that number multiplied by the number of Medley shares to be exchanged pursuant to the above.


If the net earnings is greater than 33% of the earnings hurdle but less 80% of the than the earnings hurdle, than no exchange of shares shall take place. However, the date for the un-achieved earning hurdle shall be extended for an additional one (1) calendar year or half year as applicable.


If the net earnings is equal to or below 33% of the earnings hurdle then Sellers will deliver to Buyer the applicable shares for the period for no additional Medley Shares and forfeit that period's exchange rights.


As of December 31, 2003, any remaining Restricted Shares of Ameritrust Common Stock not exchanged by the Sellers due to the Company's failure to achieve its earnings hurdle shall be conveyed to Buyer or its assigns without exchange of Medley Shares or consideration.


3. DUE DILIGENCE PERIOD AND RIGHT OF TERMINATION:


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A. By Buyer: The Sellers and Buyer hereby acknowledge that the Buyer, as of the effective date of this Agreement, has not had the opportunity to review and evaluate all aspects of the Corporation, as represented by the Sellers. Therefore, the Buyer shall have, from the effective date through the end of business 20 days thereafter [Due Diligence Period] to inspect and assess all aspects of the Corporation, financial and otherwise, and to make such investigations as the Buyer deems necessary in the Buyer's sole discretion. The Seller agrees to assist the Buyer in reviewing all records of the Corporation and to aid and assist the Buyer in arranging meetings and providing documents, records, and/or information reasonably required by the Buyer or the Buyer's attorneys or other agents including accountants, in order that the Buyer may determine the viability of the transaction contemplated by this Agreement. During the Due Diligence Period, Sellers shall advise the Buyer of any negative information learned by the Sellers which would have a material, financial impact: upon the Corporation. In the event the Buyer determines in its sole and absolute discretion that the representations made by the Sellers prior to execution of this agreement or those made in this agreement are false, misleading or incomplete so that the acquisition of the Shares would have a negative impact on the Buyer or Medley, the Buyer may notify the Seller in writing by facsimile delivery, mail or hand delivery, prior to the termination of the Due Diligence Period and the Buyer may at the Buyer's sole discretion terminate this Agreement. The Buyer's failure to provide written notice of termination within the time period set forth in this section shall be deemed conclusive evidence that the Buyer has waived its right to terminate as contained herein.


B. By Seller: The Sellers and Buyer hereby acknowledge that the Sellers, as of the effective date of this Agreement, have not had the opportunity to review and evaluate all aspects of the Buyer and Medley, as represented in this agreement. Therefore, the Sellers shall have, from


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the effective date through the end of business 20 days thereafter [Due Diligence Period] to inspect and assess all aspects of the Buyer and Medley, financial and otherwise, and to make such investigations as the Sellers deems necessary in the Sellers' sole discretion. The Buyer and Medley agree to assist the Sellers in reviewing all records of the Buyer and Medley and to aid and assist the Sellers in arranging meetings and providing documents, records, and/or information reasonably required by the Sellers or the Sellers' attorneys or other agents including accountants, in order that the Sellers may determine the viability of the transaction contemplated by this Agreement. During the Due Diligence Period, Buyer shall advise the Sellers of any negative information learned by the Buyer which would have a material, financial impact upon the Sellers. In the event the Sellers determine in their sole and absolute discretion that the representations made by the Buyer or Medley prior to execution of this agreement or those made in this agreement are false, misleading or incomplete so that the acquisition of the Shares would have a negative impact on the Sellers, the Sellers may notify the Buyer in writing by facsimile delivery, mail or hand delivery, prior to the termination of the Due Diligence Period and the Sellers may at the Sellers' sole discretion terminate this Agreement. The Sellers' failure to provide written notice of termination within the time period set forth in this section shall be deemed conclusive evidence that the Sellers have waived their right to terminate as contained herein.


4. CLOSING DATE: The Closing under this Agreement shall take place on or before August 15, 1998 at the Law Offices of Maynard J. Hellman, Esquire, 1100 Ponce de Leon Boulevard, Coral Gables, Florida 33134 or at such other time and place as shall be set forth in a writing signed by the Parties hereto.


5. REPRESENTATIONS AND WARRANTIES OF SELLER: The Sellers represent


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and warrant to the Buyer as follows:


a. The Corporation is a validly existing Corporation in good
standing under the laws of the State of Florida and is
validly conducting business pursuant to the laws of the State
of Florida.


b. The Sellers and the Corporation have the power to enter into
and carry out their obligations under this Agreement.


c. The Corporation holds all licenses necessary to conduct the
business of the Corporation and complies with all laws, rules
and regulations presently established by all governmental
agencies in connection with same.


d. The Shares being exchanged by the Seller to the Buyer are
fully paid and non-assessable.


e. The aggregate number of shares that the Corporation is
authorized to have outstanding as of the date hereof is
7,500,000 shares of common stock of which 1,495,000 are
presently issued and outstanding and held collectively in the
name of the Sellers.


f. The only stock authorized to be outstanding by the
Corporation is one class of common stock represented by the
shares owned by the Sellers.


g. The Seller is and will be on the closing date the sole owners
of all of the authorized, issued, and outstanding shares of
the common stock of the Corporation, free and clear of any
and all liens and encumbrances.


h. That as of the date of executing this Agreement, as well as
on the date of closing, the Corporation shall have no debts,
liabilities, or obligations for


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which payment needs to be made except for those debts,
liabilities, and obligations set forth on Exhibit "B"
attached to this Agreement.


i. The Sellers do not have any knowledge or any basis for the
assertion of any material liability against the Corporation.


j. The Corporation is not subject to any order, judgment,
decree, stipulation, or any other agreements with any
governmental body or agency with respect to the Corporation
unless specifically set forth in this Agreement.


k. The Corporation is not a party to any long-term contract or
commitment unless specifically set forth in this Agreement on
Exhibit "C" attached hereto. The only Employment Agreements
between the Corporation and its employees are attached as
Exhibit "D".


l. Neither the Sellers nor the Corporation have received notice
nor have any claims been made against the Corporation or the
Sellers by any governmental authority to the effect that the
Corporation or the business of the Corporation fails to
comply in any material respect to any law, rule, regulation,
or ordinance or that a license, permit, or order which is not
in the possession of the Corporation is necessary for the
Corporation to conduct its business.


m. On the day of closing, the Sellers will have the full and
unrestrictive legal and equitable title to the shares being
sold to the Buyer, free and clear of all liens and
encumbrances.


n. Any action required to be taken by the Corporation in order
to complete the transaction contemplated in this Agreement
has been or will be by the closing


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date duly approved by the Board of Directors and
Shareholders of the Corporation.


o. The Sellers represent that their are no liabilities,
including but not limited to liabilities for federal, state,
and local taxes, penalties, assessments, lawsuits or claims
against the Corporation or the Sellers, whether such
liabilities, suits, or claims are contingent or absolute,
direct or indirect, matured or unmatured, which could in any
way affect the shares being conveyed hereunder, the assets of
the Corporation, or the Corporation's ability to conduct its
business.


p. The Articles of Incorporation and By-Laws attached to this
Agreement as Exhibit "E" are complete and accurate as of the
date hereof and contain all amendments through the date
hereof. The Minute Book of the Corporation is complete and
accurate and reflects all proceedings of ...