SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
AMENDMENT NO. 2
NAL Financial Group Inc.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
62872M106
(CUSIP Number)
August 22, 1997
(Date of Event which requires filing of this Statement)
If the filing person has previously filed a Statement on Schedule 13G to report
the acquisition which is the subject of this Statement and is filing this
Statement because of Rule 13d-1(b)(3) or (4), check the following box:
[ ]
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
CUSIP No..........................................................................................................62872M106
1. NAME OF REPORTING PERSON......................................................................................Conseco, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON................................................................35-1468632
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ X ] (b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS..........................................................................................................AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION..................................................................United States Citizen
Number of 7. SOLE VOTING POWER........................................................................515,000
Shares
Beneficially 8. SHARED VOTING POWER.................................................................. 74,041,937
Owned By
Each 9. SOLE DISPOSITIVE POWER...................................................................515,000
Reporting
Person With 10. SHARED DISPOSITIVE POWER..............................................................74,041,937
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
74,556,937
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES SHARES
[ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
85.3%
14. TYPE OF REPORTING PERSON.............................................................................................HC, CO
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
CUSIP No..........................................................................................................62872M106
1. NAME OF REPORTING PERSON................................................................Conseco Private Capital Group, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON................................................................35-1882445
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ X ] (b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS.........................................................................................................AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION..................................................................United States Citizen
Number of 7. SOLE VOTING POWER........................................................................257,000
Shares
Beneficially 8. SHARED VOTING POWER............................................................................0
Owned By
Each 9. SOLE DISPOSITIVE POWER...................................................................257,000
Reporting
Person With 10. SHARED DISPOSITIVE POWER......................................................................0
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
257,000
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES SHARES
[ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.0%
14. TYPE OF REPORTING PERSON.................................................................................................CO
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
CUSIP No..........................................................................................................62872M106
1. NAME OF REPORTING PERSON.........................................................Beneficial Standard Life Insurance Company
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON................................................................95-0540891
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ X ] (b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS.........................................................................................................PF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION..................................................................United States Citizen
Number of 7. SOLE VOTING POWER.....................................................................17,488,281
Shares
Beneficially 8. SHARED VOTING POWER............................................................................0
Owned By
Each 9. SOLE DISPOSITIVE POWER................................................................17,488,281
Reporting
Person With 10. SHARED DISPOSITIVE POWER.......................................................................0
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
17,488,281
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES SHARES
[ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
57.7%
14. TYPE OF REPORTING PERSON.................................................................................................IC
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
CUSIP No..........................................................................................................62872M106
1. NAME OF REPORTING PERSON.......................................................... Great American Reserve Insurance Company
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON................................................................75-0300900
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ X ] (b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS.........................................................................................................PF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION..................................................................United States Citizen
Number of 7. SOLE VOTING POWER.....................................................................17,488,281
Shares
Beneficially 8. SHARED VOTING POWER............................................................................0
Owned By
Each 9. SOLE DISPOSITIVE POWER................................................................17,488,281
Reporting
Person With 10. SHARED DISPOSITIVE POWER.......................................................................0
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
17,488,281
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES SHARES
[ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
57.7%
14. TYPE OF REPORTING PERSON.................................................................................................IC
</TABLE>
5
<PAGE>
Item 1. Security and Issuer
This Schedule 13D is being filed by Conseco, Inc. ("Conseco"), Conseco
Private Capital Group, Inc., a wholly owned subsidiary of Conseco, ("CPCG"),
Beneficial Standard Life Insurance Company ("BSLIC"), a wholly owned subsidiary
of Conseco, and Great American Reserve Insurance Company ("GARCO"), a wholly
owned subsidiary of Conseco, relating to the Common Stock (the "Common Stock"),
$.15 par value, of NAL Financial Group Inc. (the "Company").
The Company's principle executive offices are located at 500 Cypress
Creek Road West, Suite 590, Ft. Lauderdale, Florida 33309.
Item 2. Identity and Background
Not amended. See Amendment No. 1 to Schedule 13D, dated June 25, 1997,
previously filed.
Item 3. Source and Amount of Funds or Other Consideration
Effective April 23, 1996, BSLIC, GARCO and the Company entered into a
Securities Purchase Agreement (the "Securities Purchase Agreement") pursuant to
which each of GARCO and BSLIC purchased $5 million of 9% Convertible
Subordinated Debentures of the Company (the "Debentures"). GARCO and BSLIC made
the investment out of their working capital. The Debentures are convertible into
shares of Common Stock. On August 22, 1997, Conseco agreed to provide up to $10
million to the Company (the "Conseco Commitment"), up to $5 million of which may
be in the form of loans to NAL Acceptance Corporation, a subsidiary of the
Company. Subject to termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvement Act ("HSR Wait Termination") and
satisfaction of certain
6
<PAGE>
other conditions, Conseco has agreed that the Debentures will be exercised and
the Company agreed to fix the conversion price at $.32 per share. Because of the
fixed conversion price, this Amendment reflects a higher number of shares of
Common Stock into which the Debentures are convertible. The accrued interest on
the Debenture since Amendment No. 1 to Schedule 13D, dated June 25, 1997, has
also resulted in an increase in the number of shares of Common Stock into which
the Debentures are convertible.
Conseco has also reached tentative agreements with holders of
convertible debentures of the Company (the "Non-Conseco Debentures"). Upon
obtaining HSR Wait Termination, Conseco or its affiliates will acquire the
Non-Conseco Debentures for approximately $8.8 million and convert the
Non-Conseco Debentures into shares of Common Stock. Pursuant to the terms of the
Conseco Commitment, the Company has agreed that, upon Conseco's acquisition of
the Non-Conseco Debentures, the conversion price shall be fixed at $.30 per
share for all but $5 million of such debentures for which the conversion price
will be $.32 per share. Upon conversion of the principal and accrued interest of
the Non-Conseco Debentures, Conseco could obtain an additional 38,808,374 shares
of Common Stock.
Conseco has agreed that the portion of the Conseco Commitment not
loaned to NAL Acceptance Corporation will be invested in the Company at the time
of conversion of the Debentures in exchange for shares of newly issued preferred
stock providing for a 9%
7
<PAGE>
cumulative dividend and convertible to common stock at the option of the holder
at 80% of the market price at the time of conversion.
Also, see Amendment No. 1 to Schedule 13D, dated June 25, 1997,
previously filed for a description of beneficial ownership of the Common Stock
of the Company previously acquired.
Item 4. Purpose of Transaction
Conseco, CPCG, BSLIC and GARCO now intend to gain control of the
Company through the acquisition of the Non-Conseco Debentures and the exercise
of their rights to acquire shares of Common Stock pursuant to warrants, the
Debentures and the Non-Conseco Debentures. Pursuant to the terms of the Conseco
Commitment, Conseco has agreed that, for three months after the closing, it will
refrain from conducting any non-consensual going-private transactions. For an
additional three-month period, any transactions that would take the Company
private would require the approval of disinterested members of the Board of
Directors of the Company. Pending the closing under the Conseco Commitment,
Conseco has agreed that neither it nor its affiliates will initiate bankruptcy
proceedings with respect to the Company.
Item 5. Interest in Securities of the Issuer
(a) As a result of its ownership of the Warrants, its wholly owned
subsidiaries ownership of the Debentures and CPCG Warrant (as defined in
Amendment No. 1 to Schedule 13D) and its agreements to acquire the Non-Conseco
Debentures, Conseco beneficially owns 74,556,937 shares of the Common Stock
representing 85.3% of the shares of Common Stock deemed to be outstanding. Of
such shares,
8
<PAGE>
GARCO beneficially owns 17,488,281 shares of Common Stock representing 57.7% of
the shares deemed to be outstanding if only GARCO exercised its conversion
rights under the Debentures, and BSLIC beneficially owns 17,488,281 shares of
Common Stock representing 57.7% of the shares deemed to be outstanding, if only
BSLIC exercised its conversion rights under the Debentures. Such beneficial
ownership by GARCO and BSLIC is based upon a conversion price of $.32 per share
under the Debentures. Of the shares beneficially owned by Conseco, CPCG
beneficially owns 257,000 shares of the Common Stock representing 2.0% of the
shares of Common Stock deemed to be outstanding if only CPCG exercised its
rights to acquire shares of Common Stock.
(b) Upon exercise of the Warrants, the CPCG Warrants, conversion of the
Debentures and acquisition and conversion of the Non-Conseco Debentures, Conseco
will have the sole power to vote or to direct the vote and the sole power to
dispose or direct the disposition of 39,323,374 shares of Common Stock and the
shared power to dispose or direct the disposition and the shared power to vote
35,233,562 shares of Common Stock through its wholly owned subsidiaries CPCG,
GARCO and BSLIC. Upon conversion of the Debentures, based upon a $.32 per share
conversion price, GARCO and BSLIC each individually will have the sole power to
vote and the sole power to dispose of 17,488,281 shares of Common Stock. Upon
the exercise of the CPCG Warrants, CPCG will have the sole power to vote and the
sole power to dispose of 257,000 shares of Common Stock.
(c) The only transactions involving the Common Stock affected during
the past 60 days by Conseco, CPCG, BSLIC or GARCO are
9
<PAGE>
described in this Schedule 13D, as amended by Amendment No. 1 and this Amendment
No. 2.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer
See Amendment No. 1 to Schedule 13D, dated June 25, 1997. Conseco has
negotiated terms upon which it will acquire the Non- Conseco Debentures. The
purchase of the Non-Conseco Debentures is subject to, among other things, HSR
Wait Termination, entering into definitive purchase agreements, no material
adverse changes in the Company's business and approval of the Company to the
transfer of such debentures. Pursuant to the Conseco Commitment, at the closing,
the Company will increase the size of its Board of Directors from four to seven
and appoint three designees of Conseco to fill such new positions.
Item 7. Material to Be Filed as Exhibits
(1) Joint Filing Agreement by and among BSLIC, GARCO, Conseco and CPCG;
*(2) Securities Purchase Agreement, dated April 23, 1996, by and among the
Company, BSLIC and GARCO;
*(3) Warrant to purchase 500,000 shares of Common Stock issued to Conseco
April 23, 1996;
*(4) Warrant to purchase 15,000 shares of Common Stock issued to Conseco
April 23, 1996;
10
<PAGE>
*(5) Stockholders' Agreement, dated April 23, 1996, by and among GARCO,
BSLIC, the Company and the shareholders named therein;
*(6) Registration Rights Agreement, dated April 23, 1996, by and among the
Company, GARCO and BSLIC;
*(7) Registration Rights Agreement, dated April 23, 1996, by and between the
Company and Conseco;
*(8) $5,000,000 9% Subordinated Convertible Debenture issued to GARCO, dated
April 23, 1996; and
*(9) $5,000,000 9% Subordinated Convertible Debenture issued to BSLIC,
dated April 23, 1996.
**(10)First Amendment to 9% Subordinated Convertible Debenture, dated
April 23, 1996, issued to BSLIC.
**(11) First Amendment to 9% Subordinated Convertible Debenture, dated
April 23, 1996, issued to GARCO.
**(12)First Amendment to Warrant to Purchase Common Stock in connection with
the warrant for 500,000 shares issued to
Conseco.
**(13) First Amendment to Warrant to Purchase Common Stock in connection with
the warrant for 15,000 shares issued to Conseco.
**(14)Warrant to Purchase 257,000 shares of Common Stock issued to CPCG dated
June 23, 1997.
(15)Investment Agreement by and between Conseco and the Company dated
August 22, 1997.
11
<PAGE>
(16) Letter Agreement between Conseco and Merrill Lynch dated
August 22, 1997.
(17) Letter Agreement between Conseco and Westminster Capital,
Inc. dated August 22, 1997.
(18) Letter Agreement between Conseco and Michael Karp dated
August 22, 1997.
- ---------------------------
* Incorporated by reference from Schedule 13D, dated April
23, 1996.
** Incorporated by reference from Amendment No. 1 to
Schedule 13D, dated June 25, 1997.
12
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief,
we certify that the information set forth in this statement is true, complete
and correct.
Date: August 26, 1997.
CONSECO, INC.
By: /s/Donald F. Gongaware
----------------------------
Donald F. Gongaware,
Executive Vice President
CONSECO PRIVATE CAPITAL GROUP, INC.
By: /s/Michael F. Bonnet
----------------------------
Michael F. Bonnet,
Vice President
BENEFICIAL STANDARD LIFE INSURANCE COMPANY
By: /s/Donald F. Gongaware
------------------------------
Donald F. Gongaware,
President
GREAT AMERICAN RESERVE INSURANCE COMPANY
By: /s/Donald F. Gongaware
------------------------------
Donald F. Gongaware,
President
JOINT FILING AGREEMENT
This will confirm the agreement by and among all the undersigned that
the Schedule 13D filed on or about this date with respect to the beneficial
ownership of the undersigned of shares of the Common Stock, $.15 par value, of
NAL Financial Group Inc. is being filed on behalf of each of the undersigned.
This agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
Dated: August 26, 1997 CONSECO, INC.
By: /s/Donald F. Gongaware
-----------------------
Donald F. Gongaware,
Executive Vice President
CONSECO PRIVATE CAPITAL GROUP, INC.
By: /s/Michael F. Bonnet
------------------------
Michael F. Bonnet,
Vice President
BENEFICIAL STANDARD LIFE INSURANCE
COMPANY
By: /s/Donald F. Gongaware
------------------------
Donald F. Gongaware,
President
GREAT AMERICAN RESERVE LIFE INSURANCE
COMPANY
By: /s/Donald F. Gongaware
------------------------
Donald F. Gongaware,
President
INVESTMENT AGREEMENT
This Agreement is by and between NAL Financial Group Inc., a Delaware
corporation ("Company") and Conseco, Inc., an Indiana corporation or its assigns
("Conseco") to be effective as of this 22nd day of August, 1997.
RECITALS
A. Conseco Private Capital Group, Inc. ("Lender") and Company's
wholly owned subsidiary, NAL Acceptance Corporation, a Florida corporation
("Borrower") have entered into a First Amendment to Credit Agreement ("First
Amendment") of even date herewith.
B. Subject to the terms and conditions hereof, Conseco or its
designee, has agreed to purchase certain preferred stock of the Company.
C. As inducement for the Lender to advance funds under the
First Amendment and for Conseco to purchase the preferred stock, the Company has
agreed to amend the 9% Subordinated Convertible Debenture dated April 23, 1996,
issued to Beneficial Standard Life Insurance Company in the amount of $5,000,000
and the 9% Subordinated Convertible Debenture dated April 23, 1996, issued to
Great American Reserve Insurance Company in the amount of $5,000,000
(collectively, the "Conseco Debentures") to provide that the conversion price
therein is fixed at thirty-two (32(cent)) cents per share based upon eighty
percent (80%) of the closing bid price of the Company's common stock on August
19, 1997, pursuant to the Second Amendment in the form attached hereto as
Exhibit "A" (the "Conseco Debenture Amendments").
D. As a condition of Lender's execution and delivery of the First
Amendment, the Company shall amend certain other convertible debentures now held
by third parties, as listed
<PAGE>
on Exhibit "B" attached hereto ("Other Debentures") to provide for a fixed
conversion price of (i) thirty (30(cent)) cents per share for all Other
Debentures other than those now held Merrill Lynch World Income Fund, Inc. and
Merrill Lynch Convertible Fund, Inc. (the "Merrill Debentures") and (ii)
thirty-two (32(cent)) per share for the Merrill Debentures as to (i) and (ii)
when and as Conseco or any affiliate acquires such Other Debentures all as
hereinafter more specifically provided for herein.
E. As an inducement to the Company to enter into this Agreement,
Conseco agrees to convert the Conseco Debentures and Other Debentures it
acquires at the Closing or as soon therefter as possible.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals, and to
induce the Lender to enter into the First Amendment, the parties hereby agree as
follows:
1. For purposes of this Agreement, the term "Closing" shall mean one
business day following the later of (i) the expiration of the waiting period
under the Hart-Scott-Rodino Act with respect to a filing made by Conseco
thereunder with respect to its proposed acquisition of control of the Company
("HSR Filing") or (ii) the resolution of any objections or antitrust issues
raised by the government as a result of such filing. Conseco and the Company
agree to make the necessary filings under the Hart-Scott Rodino Act by August
27, 1997.
2. At the Closing, Conseco shall cause the Conseco Debentures and Other
Debentures owned by Conseco to be converted to common stock of the Company in
accordance with their amended conversion prices as provided herein to the extent
that the
<PAGE>
Company has sufficient authorized common shares, and will complete all such
remaining conversions after sufficient authorized shares are available.
3. Conseco or its designees will use its best efforts to acquire the
Other Debentures at or prior to Closing on the terms reflected in term sheets
sent to the holders of the Other Debentures. At the Closing, the Company shall
execute and deliver the Conseco Debenture Amendments reflecting the fixed
conversion price of thirty-two (32(cent)) cents per share and at the Closing
upon receipt of written notification from Conseco that Conseco, or one of its
affiliates, has acquired all or any part of the Other Debentures, the Company
shall enter into an amendment with such acquiring party providing for the
amendment of the conversion price of the Other Debentures so acquired to a fixed
price of thirty (30(cent)) cents per share except for the Merrill Debentures
whose conversion price shall be amended to a fixed price of thirty-two
(32(cent)) cents per share; such amendments being substantially in the same form
as the Conseco Debenture Amendments.
4. At the Closing, Conseco shall cause the Lender to extend the
maturity date of all monies (i.e., the Original Loan and the Working Capital
Loan) advanced to Borrower by Lender under its Credit Agreement with Borrower to
April 1, 1998.
5. The Company shall immediately undertake to amend its Certificate of
Incorporation to increase its authorized shares of common stock in an amount
sufficient to issue common stock upon conversion of the Conseco Debentures and
Other Debentures (assuming the same are acquired and converted by Conseco or its
affiliates) at the amended conversion price. The Company certifies that its
Board of Directors has adopted a resolution proposing such an amendment to its
shareholders. Conseco shall cooperate with the Company
<PAGE>
in connection with such amendment and vote in favor thereof. Prior to the
Closing, the Company agrees not to issue, offer or sell any shares of comon
stock or preferred stock or securities convertible into common or preferred
stock without consent of Conseco.
6. The Company certifies that its Board of Directors has adopted
resolutions increasing the members of its Board of Directors by three (3)
positions to create three (3) vacancies effective as of Closing, and have
authorized such vacant positions to be filled by Conseco appointees at the
Closing.
7. At the Closing, Conseco or its designee shall contribute additional
equity in an amount equal to the difference between Ten Million Dollars
($10,000,000), and the amount of loan advances made by the Lender to the Company
under the Working Capital Loan as defined in the First Amendment as of the
Closing in exchange for preferred stock of the Company having terms acceptable
to Lender and consistent with the provisions of Exhibit "C" attached hereto.
8. Conseco's obligations to close shall be subject to the following
conditions: (i) no government agency has raised any objections or antitrust
issues with respect to the acquisition of the Other Debentures by Conseco or its
affiliates, (ii) the Borrower is not in material default of its obligations to
Lender beyond applicable cure periods, (iii) the holders of the Other Debentures
shall have complied with their agreements to sell the Other Debentures to
Conseco or its affiliates (iv) the Company is not a party to any insolvency,
receivership or bankruptcy proceedings, (v) the Company has not breached its
obligations under this Agreement, or (vi) there has been no material adverse
change in the financial condition or
<PAGE>
business prospects of the Company and its subsidiaries since the date hereof
provided Lender provides the advances required under the Credit Agreement with
Borrower.
9. Conseco agrees that (i) from the date hereof, until Closing, neither
Conseco nor any of of its Affiliates will initiate or cooperate in the
initiation of any reorganization or liquidation proceeding with respect to the
Company under the Bankruptcy Act, (ii) for a period of six (6) months following
the Closing, Conseco will not cause the Company to engage in a cash out merger
with Conseco or any Conseco affiliate or any other transaction in which minority
shareholders are forced to exchange their shares for cash or other consideration
unless the transaction is approved by a majority of the disinterested members of
the Board of the Company, (iii) for a period of three (3) months following the
Closing, Conseco will not cause the Company to engage in a cash out merger with
Conseco or any Conseco affiliate or other transaction in which minority
shareholders of the Company are forced to exchange their shares for cash or
other consideration unless the transaction is approved by a majority of such
minority shareholders. This paragraph does not prohibit purchases of Company
shares by Conseco or its affiliates on a voluntary basis.
10. This Agreement is for the benefit of the Lender, Conseco, and its
affiliates, and shall have no effect on any Other Debentures not transferred to
Conseco or its affiliates, nor shall it benefit current holders of the Other
Debentures.
11. The Company agrees that upon Conseco's purchase of the Merrill
Debentures, the Company shall amend all those certain warrants issued September
12, 1996, to the holders of Merrill Debentures of shares of common stock of the
Company so as to provide a strike price being adjusted to one hundred percent
(100%) of the closing bid price of the Company's
<PAGE>
common stock, as reported on the principal exchange or automated quotation
system upon which the Company's common stock trades on the day of the expiration
of the waiting period for the HSR filing made by Conseco with respect to its
proposed acquisition of control of the Company (said warrants being retained by
such Merrill Lynch affiliate).
12. The Company represents that it has been duly authorized to enter
into and perform this Agreement and that the execution and performance of this
Agreement by the Company will not violate or cause a default under any orders,
agreements, indentures or laws to which the Company is a party or by which it is
bound.
13. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties.
14. This Agreement may be executed in any number of counterparts
and by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
15. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
16. In the event any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provisions
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
17. This Agreement is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein.
<PAGE>
18. In any action or proceeding brought to enforce any provision of
this Agreement, or where any provision hereof is validly asserted as a defense,
the successful party shall be entitled to recover reasonable attorneys' fees in
addition to any other available remedy. In addition, the Company shall pay the
reasonable attorney fees incurred by Conseco in connection with the transactions
contemplated by this Agreement and the preparation of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
as of the first above-mentioned date.
CONSECO, Inc.
By:/S/NGAIRE E. CUNEO
----------------------------
Ngaire E. Cuneo, Executive Vice President
NAL FINANCIAL GROUP INC.
By:/S/ROBERT R. BARTOLINI
-----------------------------
Robert R. Bartolini, President
<PAGE>
EXHIBIT "A"
SECOND AMENDMENT TO 9% SUBORDINATED
CONVERTIBLE DEBENTURE DATED APRIL 23, 1996
On April 23, 1996 NAL Financial Group Inc., a Delaware corporation
("Maker" or the "Company") entered into a convertible debenture in the principal
amount of $5,000,000 (the "Debenture") payable to the order of Great American
Reserve Insurance Company as lender ("Lender"), as amended by that certain First
Amendment to 9% Subordinated Convertible Debenture dated June 23, 1997. For good
and valuable consideration, receipt of which is acknowledged, the parties agree
to amend the Debenture as follows:
1. Paragraph 6 of the Debenture is hereby superseded and replaced
in its entirety with the following:
"6. The unpaid principal of this Debenture is convertible at
the option of the Lender, in whole or in part, upon surrender
of this Debenture at the principal office of the Company, into
restricted shares of the Maker's Common Stock at a fixed
conversion price ("Conversion Price") equal to Thirty-Two
Cents (32(cent)) per share. Upon such conversion and issuance
of the Common Stock, all principal due under this Debenture
shall be discharged and the Company released from all
obligations hereunder, however, accrued interest shall be paid
to the date of conversion. At the option of the Lender,
accrued interest may also be subject to conversion in the same
manner as principal.
The shares of the Company's Common Stock issuable
upon the exercise of the conversion feature shall be
"restricted securities" as that term is defined under Rule 144
of the 1933 Act and, as a consequence, may not be sold or
otherwise transferred except pursuant to registration under
the 1933 Act or an available exemption therefrom."
2. Paragraph 7.5 of the Debenture is hereby superseded and
replaced in its entirety with the following:
"7.5 The Company shall not issue, offer or sell
additional shares of Common Stock or any preferred stock, or
issue any rights or options for the purchase of, or securities
convertible into shares of Common Stock or preferred stock,
without the prior written consent of Conseco Private Capital
Group, Inc."
<PAGE>
3. In all other respects, the Debenture as amended shall remain unamended
and in full force and effect.
IN WITNESS WHEREOF, the parties have executed this amendment to be
effective as of August __, 1997.
GREAT AMERICAN RESERVE NAL FINANCIAL GROUP INC.
INSURANCE COMPANY as the Company
as Lender
By: By:
----------------------- ------------------------
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT "B"
List of Other Convertible Debentureholders
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
DEBENTURE ISSUE DATE LENDER AMOUNT CONVERSION
PRICE
- ------------------------------------------------------------------------------------------------------------------------------------
Subordinated Sept. 12, 1996 Merrill Lynch World $2,750,000 32 cents
Convertible Debenture Income Fund, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Subordinated Sept. 12, 1996 Merrill Lynch $2,250,000 32 cents
Convertible Debenture Convertible Fund, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
9% Convertible Nov. 30, 1995 Westminster Capital, $1,250,000 30 cents
Subordinated Inc. (Belzburg)
Debenture
- ------------------------------------------------------------------------------------------------------------------------------------
9% Convertible Jan. 29, 1996 Michael Karp $2,500,000 30 cents
Subordinated
Debenture
- ------------------------------------------------------------------------------------------------------------------------------------
9% Convertible July 14, 1995 Florence Karp C/F $1,000,000 30 cents
Subordinated Penelope & Athena
Debenture Karp (assigned to
Michael Karp)
- ------------------------------------------------------------------------------------------------------------------------------------
9% Convertible July 28, 1995 Florence Karp C/F $1,000,000 30 cents
Subordinated Penelope & Athena
Debenture Karp (assigned to
Michael Karp)
- ------------------------------------------------------------------------------------------------------------------------------------
9% Convertible Aug. 22, 1995 Florence Karp C/F $1,000,000 30 cents
Subordinated Penelope & Athena
Debenture Karp (assigned to
Michael Karp)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT "C"
PREFERRED STOCK TERMS
* convertible to common stock at option of holder at 80% of market value at
date of conversion.
* 9% cumulative preferential dividend rate
* payable semi-annually in cash or at the option of holder in common stock
of the Company valued at 80% of fair market value at time of issuance
* liquidation priority equal to cost less capital distributions
* common shares issued upon conversion shall have the same registration
rights as common shares issued upon conversion of the Conseco Debentures
August 19th, 1997
Conseco, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
Re: NAL Financial Group, Inc. ("Company")
Dear Sir or Madam:
As you know, the undersigned, or its affiliates, are the holders of
certain Subordinated Convertible Debentures dated on or about September 12,
1996, in the aggregate original principal amount of $5,000,000 (the
"Debentures"). This confirms that the undersigned shall, or cause its affiliates
to, sell the Debentures to Conseco, Inc., or its designated party ("Purchaser"),
in accordance with the terms on the attached Term Sheet, subject to the parties
entering into a definitive Purchase and Sale Agreement containing customary
terms and provisions. During the time period that such Agreement is being
prepared, the Debentures shall not be converted. This offer to sell shall remain
open until August 22, 1997, and thereafter, if not accepted, shall be subject to
withdrawal upon notice by the undersigned to the Purchaser.
Very truly yours,
MERRILL LYNCH
By: /s/ DANIEL LUCHANSKY
--------------------
Daniel Luchansky, Vice President
ACCEPTED this 22nd day of August, 1997.
CONSECO, INC.
By: /s/ DONALD F. GONGAWARE
------------------------
Donald F. Gongaware, Executive Vice President
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
TERMS FOR NAL SUBORDINATED DEBT PURCHASE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Merrill Lynch Purchase:
Security to be Purchased: Convertible Subordinated Debt of NAL Financial Group,
Inc. (the "Company")
Principal Amount of Debt
Currently Outstanding: $5,000,000
Conseco Purchase: Conseco, Inc., or its affiliates ("Purchaser") will purchase
all debt owned by Merrill Lynch or its affiliates ("Seller")
for $4,000,000 (80% of face).
Warrants & Releases: Seller shall retain its warrants with the strike price
being adjusted to 100% of the closing bid price on
the date the purchase transaction is approved under the
Hart-Scott- Rodino Act. Merrill Lynch shall release the
Company from all other liability from prior transactions.
Purchaser's Conditions The closing shall occur upon the following conditions:
to Closing:
1. Approval by all required governmental agencies
including Hart-Scott Rodino approval.
2. No material change in the Company's business as of
August 19th, 1997.
3. Company shall not have filed for bankruptcy protection.
4. The purchase by Purchaser of all other convertible debt
of the Company.
5. Satisfactory documentation.
6. Receipt of Company approval for transfer of convertible
debt.
7. Approval of all third parties including lenders of
Company.
Closing Date: No later than one business day after HSR approval.
</TABLE>
August 21, 1997
12:00 PM, PDT
Conseco, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
Re: NAL Financial Group, Inc. ("Company")
Dear Sir or Madam:
As you know, the undersigned is the holder of a certain Subordinated
Convertible Debenture dated on or about November 30, 1995, in the original
principal amount of $1,250,000 (the "Debenture"). This confirms that the
undersigned shall sell the Debenture to Conseco, Inc., or its designated party
("Purchaser"), in accordance with the terms on the attached Term Sheet, subject
to the parties entering into a definitive Purchase and Sale Agreement containing
customary terms and provisions. During the time period that such Agreement is
being prepared which shall be no later than August 27, 1997, the Debenture shall
not be converted. This offer to sell shall remain open until 5:00 PM, PDT on
August 22, 1997, and, if not accepted by such date and time, shall terminate
without notice.
Very truly yours,
WESTMINISTER CAPITAL, INC.
By: /s/WILLIAM BELZBERG
----------------------------
William Belzberg
Executive Vice President
ACCEPTED this 22ND day of August, 1997.
CONSECO, INC.
By: /s/DONALD F. GONGAWARE
----------------------------
Donald F. Gongaware
Executive Vice President
TERMS FOR NAL SUBORDINATED DEBT PURCHASE
Westminister Capital Purchase:
Security to be Purchased: Convertible Subordinated Debt of NAL Financial Group,
Inc. (the "Company")
Principal Amount of Debt
Currently Outstanding:
$513,694.26
Conseco Purchase: Conseco, Inc., or its affiliates ("Purchaser") will purchase
all debt owned by Westminster Capital or its affiliates ("Seller") for
$410,955.41 (80% of face), or if more favorable terms of purchase are offered to
any other holder of Convertible debt, then at Westminster's option, on such
favorable terms.
Releases: Seller shall release the Company from all liability from prior
transactions and release any warrants.
Purchaser's Conditions
to Closing: The closing shall occur upon the following conditions:
1. Approval by all required governmental agencies including Hart-Scott
Rodino approval.
2. No material change in the Company's business as of August 19, 1997.
3. Company shall not have filed for bankruptcy protection.
4. The purchase by Purchaser of all other convertible debt of the Company.
5. Satisfactory documentation.
6. Receipt of Company approval for transfer of convertible debt.
7. Approval of all third parties including lenders of Company.
Closing Date: Within 10 days of Hart-Scott Rodino exemption or approval, but in
no event later than October 23, 1997.
August 19, 1997
Conseco, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
Re: NAL Financial Group, Inc. ("Company")
Dear Sir or Madam:
As you know, the undersigned are the holders of a certain Subordinated
Convertible Debentures listed on the attached Term Sheet (the "Debentures").
This confirms that the undersigned shall sell the Debentures to Conseco, Inc.,
or its designated party ("Purchaser"), in accordance with the terms on the
attached Term Sheet, subject to the parties entering into a definitive Purchase
and Sale Agreement containing customary terms and provisions. During the time
period that such Agreement is being prepared, the Debenture shall not be
converted. This offer to sell shall remain open until August 22, 1997, and
thereafter, if not accepted, shall be subject to withdrawal upon notice by the
undersigned to the Purchaser.
Very truly yours,
/s/MICHAEL KARP
-------------------
MICHAEL KARP
ACCEPTED this 22ND day of August, 1997.
CONSECO, INC.
By: /S/DONALD F. GONGAWARE
----------------------
Donald F. Gongaware,
Executive Vice President
TERMS FOR NAL SUBORDINATED DEBT PURCHASE
Karp Purchase:
Security to be Purchased: Convertible Subordinated Debt of NAL Financial Group,
Inc. (the "Company")
Principal Amount of Debt Currently Outstanding:
9% Subordinated Convertible Debenture dated July 14, 1995 for $1,000,000
9% Subordinated Convertible Debenture dated July 28, 1995 for $1,000,000
9% Subordinated Convertible Debenture dated August 22, 1995 for $1,000,000
9% Subordinated Convertible Debenture dated January 29, 1996 for $2,500,000
Conseco Purchase: Conseco, Inc., or its affiliates ("Purchaser") will
purchase all debt owned by Michael Karp and Florence Karp c/f Penelope and
Athena Karp ("Seller") for $4,400,000 (80% of face).
Releases: Seller shall waive unpaid interest, release the Company from all
liability from prior transactions and release any warrants.
Purchaser's Conditions
to Closing: The closing shall occur upon the following conditions:
1. Approval by all required governmental agencies including Hart-Scott
Rodino approval.
2. Company shall not have filed for bankruptcy protection.
3. The purchase by Purchaser of all other convertible debt of the Company.
4. Satisfactory documentation.
5. Receipt of Company approval for transfer of convertible debt.
6. Approval of all third parties including lenders of Company.
Closing Date: No later than October 23, 1997.
