SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM 10-Q
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _________ To ____________
NAL FINANCIAL GROUP INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 0-25476 23-2455294
- ------------------------ --------------------- -------------------
(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, Florida 33309
Registrant's telephone number, including area code: (954) 938-8200
Not Applicable
-------------------------------------------
(Former Name, if Changed Since Last Report)
Indicate by check 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 such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes X No
--- ---
(2) Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the Registrant's sole class of common
stock, as of November 14, 1997 is 50,000,000 shares.
<PAGE>
NAL FINANCIAL GROUP INC.
INDEX
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 36
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description Method of Filing
- ----------- ----------- ----------------
3.4 Certificate of Designation of Series Filed herewith
A Preferred Stock
4.20 Investment Agreement between NAL Filed herewith
Financial Group Inc. and Conseco,
Inc. dated August 21, 1997
4.21 Credit Agreement between NAL Filed herewith
Acceptance Corporation and Conseco
Private Capital Group, Inc. dated
June 23, 1997
4.22 First Amendment to Credit Agreement Filed herewith
between NAL Acceptance Corporation
and Conseco Private Capital Group,
Inc. dated August 21, 1997
4.23 Second Amendment to Credit Agreement Filed herewith
between NAL Acceptance Corporation
and Conseco Private Capital Group,
Inc. dated October 1, 1997
4.24 Amendment to Registration Rights Filed herewith
Agreement between NAL Financial
Group, Inc., Beneficial Standard
Life Insurance Company, Great
American Reserve Insurance Company
and CIHC, Inc. dated October 1, 1997
4.25 Warrant to Purchase Common Stock of Filed herewith
NAL Financial Group Inc. (257,000
shares) dated June 23, 1997
<PAGE>
4.26 First Amendment to Warrant to Filed herewith
Purchase Common Stock of NAL
Financial Group Inc. (15,000 shares)
dated June 23, 1997
4.27 First Amendment to Warrant to Filed herewith
Purchase Common Stock of NAL
Financial Group Inc. (500,000
shares) dated June 23, 1997
4.28 Amendment to Warrant to Purchase Filed herewith
Common Stock between NAL Financial
Group Inc. and Bridge Rope & Co.
dated September 17, 1997
4.29 Amendment to Warrant to Purchase Filed herewith
Common Stock between NAL Financial
Group Inc. and Kane & Co. dated
September 17, 1997
4.30 First Amendment to 9% Subordinated Filed herewith
Convertible Debenture between NAL
Financial Group Inc. and Beneficial
Life Insurance Company dated June
23, 1997
4.31 Second Amendment to 9% Subordinated Filed herewith
Convertible Debenture between NAL
Financial Group Inc. and CIHC,
Incorporated dated October 1, 1997
(Beneficial)
<PAGE>
4.32 First Amendment to 9% Subordinated Filed herewith
Convertible Debenture between NAL
Financial Group Inc. and Great
American Reserve Insurance Company
dated June 23, 1997
4.33 Second Amendment to 9% Subordinated Filed herewith
Convertible Debenture between NAL
Financial Group Inc. and CIHC,
Incorporated dated October 1, 1997
(Great American)
4.34 Amendment to Subordinated Filed herewith
Convertible Debenture between NAL
Financial Group Inc. and CIHC,
Incorporated dated October 1, 1997 (Kane
& Co.)
4.35 Amendment to Subordinated Filed herewith
Convertible Debenture between NAL
Financial Group Inc. and CIHC,
Incorporated dated October 1, 1997
(Bridge Rope)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this Form 10-Q/A to be signed on its behalf by the
undersigned thereunto duly authorized.
NAL FINANCIAL GROUP INC.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Robert R. Bartolini Chairman of the Board; November 19, 1997
- ------------------------ President and Chief Executive
Robert R. Bartolini Officer
/s/ David H. Sheir Senior Vice President of Accounting November 19, 1997
- ------------------------
David H. Sheir
</TABLE>
37
CERTIFICATE OF DESIGNATION
of
SERIES A PREFERRED STOCK
of
NAL FINANCIAL GROUP INC.
Pursuant to Section 151(g) of the General Corporation Law
of the State of Delaware
NAL Financial Group Inc., a Delaware corporation (the "Company"),
certifies that pursuant to the authority contained in its Certificate of
Incorporation, as amended, and in accordance with the provisions of Section
151(g) of the General Corporation Law of the State of Delaware, its Board of
Directors (the "Board of Directors") has adopted the following resolution
designating a series of its Preferred Stock, $.01 par value, as Series A
Preferred Stock:
RESOLVED, that a series of the class of authorized Preferred Stock, $.01
par value, of the Company hereinafter designated "Series A Preferred Stock," be
hereby created, and that the designation and amount thereof and the voting
powers, preferences and relative, participating, optional and other special
rights of the shares of such series, and the qualifications, limitations or
restrictions thereof are as follows:
Section 1. Designation and Amount.
The shares of such series shall be designated as the "Series A Preferred
Stock" (the "Series A Preferred Stock") and the number of shares initially
constituting such series shall be 5,000,000.
Section 2. Dividends and Distributions.
(a) Each holder of shares of Series A Preferred Stock, in preference to
the holders of shares of the Common Stock, $.15 par value (the "Common Stock"),
of the Company and of any other capital stock of the Corporation ranking junior
to the Series A Preferred Stock as to payment of dividends, shall be entitled to
receive, when and as declared by the Board of Directors, a cash dividend
accruing at the per share rate of nine cents ($.09) per annum, payable
semi-annually. Dividend payments to the holders of shares of Series A Preferred
Stock shall be payable on each semi-annual anniversary of the date of the
original issuance of such shares to holders of record on the respective dates
fixed for that purpose by the Board of Directors. Dividends shall be payable in
cash by delivery of a check to each such holder of record at the address which
is registered with the Secretary of the Company.
<PAGE>
(b) Dividends payable pursuant to paragraph (a) of this Section 2 shall
begin to accrue from the date of the original issuance of the Series A Preferred
Stock and shall be cumulative. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allotted pro rata on a
share-by-share basis among all such shares at the time outstanding. Accruals of
dividends shall not bear interest.
(c) Notwithstanding anything to the contrary set forth in paragraphs (a)
or (b) of this Section 2, each holder of shares of Series A Preferred Stock
entitled to receive a dividend on a dividend payment date shall have the option
to receive such dividend in the form of shares of the Company's Common Stock in
such amount as is determined by dividing the total dividend payment due to each
holder on the relevant dividend payment date by the Dividend Ratio (as that term
is hereafter defined) in effect for such dividend. The holder of any shares of
Series A Preferred Stock may exercise such option by delivering to the Company,
at the Company's corporate office (presently 500 Cypress Creek Road, Suite 590,
Fort Lauderdale, Florida 33309), or any successor location, the form of election
(the "Dividend Election"), completed and executed as indicated thereon, no later
than ten (10) Business Days before the date on which the dividend is payable.
For purposes of this paragraph (c), the Dividend Election shall be deemed to be
delivered on the day on which it is received by the Company. For purposes
hereof, the term "Dividend Ratio" shall mean eighty percent (80%) of the Closing
Price (as that term is defined in Section 8) on the record date for the payment
of the dividend. In connection with the issuance of any shares of Common Stock
pursuant to this paragraph, no fractional shares of Common Stock shall be
issued, but in lieu thereof, the Company shall pay a cash adjustment in respect
of such fractional interest in an amount equal to such fractional interest
multiplied by the Closing Price on the record date for such dividend.
(d) The holders of shares of Series A Preferred Stock shall not be
entitled to receive any dividends or other distributions except as provided in
this Section 2.
(e) No dividends or other distributions shall be made with respect to
the Company's Common Stock or any other class of stock ranking junior to the
Series A Preferred Stock as to dividends if at the time of such dividend or
distribution the Company is in default with respect to any dividend payable on
the shares of Series A Preferred Stock.
Section 3. Voting Rights.
Except as required by law, the holders of shares of Series A Preferred
Stock shall have no voting rights and their consent shall not be required for
the taking of any corporate action.
Section 4. Liquidation, Dissolution or Winding Up.
(a) If the Company shall adopt a plan of liquidation or of dissolution,
or commence a voluntary case under the federal bankruptcy laws or any other
applicable state or federal bankruptcy, insolvency or similar law, or consent to
the entry of an order for relief in any involuntary case under such law or to
the appointment of a receiver, liquidator, assignee, custodian, trustee or
sequestrator (or similar official) of the Company or of any substantial part of
2
<PAGE>
its property, or make an assignment for the benefit of its creditors, or admit
in writing its inability to pay its debts generally as they become due and on
account of such event the Company shall liquidate, dissolve or wind up, or upon
any other liquidation, dissolution or winding up of the Company, then and in
that event, no distribution shall be made to the holders of shares of Common
Stock or any other class of stock ranking junior to the Series A Preferred Stock
as to the amounts distributable upon liquidation, dissolution or winding up,
unless, prior thereto, the holders of the Series A Preferred Stock shall have
first received an amount in cash or equivalent value in securities or other
consideration equal to the "liquidation preference" thereof. If upon any
liquidation, dissolution or winding up, the amount so payable or distributable
does not equal or exceed the "liquidation preference" of the Series A Preferred
Stock, then, and in that event, the amount of cash so payable, and amount of
securities or other consideration so distributable, shall be shared ratably
according to the respective "liquidation preference" due to the holders of the
Series A Preferred Stock. After payment in full of the "liquidation preference"
owed to the holders of the Series A Preferred Stock, the holders of the Common
Stock and of all other classes of stock ranking junior to the Series A Preferred
Stock as to the amounts distributable upon a liquidation, dissolution, or
winding up shall be entitled, to the exclusion of the holders of the Series A
Preferred Stock, to share in all remaining assets of the Company in accordance
with their respective interests. For the purposes hereof, the "liquidation
preference" of each share of Series A Preferred Stock shall be $1.00, less the
aggregate amount of all capital distributions (exclusive of dividends) made by
the Company with respect to a share of Series A Preferred Stock since the date
of the original issuance of the Series A Preferred Stock.
(b) Neither the voluntary consolidation, merger or other business
combination of the Company with or into any other Person or Persons nor the
voluntary sale, lease, exchange or conveyance of all or any part of the
property, assets or business of the Company to a Person or Persons other than
the holders of the Company's Common Stock, shall be deemed to be a liquidation,
dissolution or winding up of the Company for purposes of paragraph (a) of this
Section 4.
Section 5. Conversion.
(a) Subject to the provisions for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall be convertible in the manner hereinafter
set forth into fully paid and nonassessable shares of Common Stock. Each share
of Series A Preferred Stock may, at the option of the holder thereof, be
converted into a number of shares of Common Stock computed by dividing the sum
of $1.00 by the Conversion Price (as that term is hereafter defined). The term
"Conversion Price" shall mean a amount equal to eighty percent (80%) of the
Closing Price (as that term is defined in Section 8) of the Company's Common
Stock on the Conversion Date (as that term is defined in paragraph (d) of this
Section 5).
(b) The number of shares of Common Stock into which each share of Series
A Preferred Stock is convertible shall be subject to adjustment from time to
time as follows:
(i) In case the Company shall at any time or from time to time declare a
dividend, or make a distribution, on the outstanding shares of Common Stock in
shares of Common Stock or subdivide or reclassify the outstanding shares of
Common Stock into a greater
3
<PAGE>
number of shares of Common Stock or combine or reclassify the
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then, and in each case:
(A) the number of shares of Common Stock into which each share of
Series A Preferred Stock is convertible shall be adjusted so that the
holder of each share thereof shall be entitled to receive, upon the conversion
thereof, the number of shares of Common Stock which such holder would have been
entitled to receive after the happening of any of the events described above had
such share of Series A Preferred Stock been converted immediately prior to the
happening of such event or the record date therefor, whichever is earlier; and
(B) an adjustment made pursuant to this clause (i) shall become
effective (1) in the case of any such dividend or distribution, immediately
after the close of business on the record date for the determination of holders
of shares of Common Stock entitled to receive such dividend or distribution, and
(2) in the case of any such subdivision, reclassification or combination, at the
close of business on the day upon which such corporate action becomes effective.
(ii) Any capital reorganization, reclassification, consolidation,
merger or sale of all or substantially all of the Company's assets to
another Person (other than a transaction to which clause (i) of paragraph (b) of
this Section 5 applies) which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in exchange for Common Stock is
referred to herein as an "Organic Change." Prior to the consummation of any
Organic Change, the Company will make appropriate provisions to insure that each
of the holders of Series A Preferred Stock will thereafter have the right to
acquire and receive, in lieu of or in addition to the shares of Common Stock
immediately theretofore acquirable and receivable upon the conversion of such
holder's shares of Series A Preferred Stock, such shares of stock, securities or
assets as such holder would have received in connection with such Organic Change
if such holder had converted his Series A Preferred Stock immediately prior to
the effective date of such Organic Change. In any such case, the Company will
make appropriate provisions to insure that the provisions of this Section 5 will
thereafter be applicable to the Series A Preferred Stock. The Company will not
effect any such Organic Change unless prior to the commencement thereof, the
successor Person (if other than the Company) resulting from consolidation or
merger or the Person purchasing such assets assumes by written instrument the
obligation to deliver to each such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to acquire.
(c) In case the Company shall be a party to an Organic Change resulting
in the change or exchange of the Company's Common Stock then, from and after the
date of announcement of the pendency of such Organic Change transaction until
the effective date thereof, each share of Series A Preferred Stock may be
converted, at the option of the holder thereof, into shares of Common Stock on
the terms and conditions set forth in this Section 5, and if so converted during
such period, such holder shall be entitled to receive such consideration in
exchange for such holder's shares of Common Stock as if such holder had been the
holder of
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<PAGE>
such shares of Common Stock as of the record date for such change or
exchange of the Common Stock.
(d) The holder of any shares of Series A Preferred Stock may exercise
the right to convert such shares into shares of Common Stock by surrendering for
such purpose to the Company, at the Company's corporate office (presently 500
Cypress Creek Road, Suite 590, Fort Lauderdale, Florida 33309), or any successor
location, a certificate or certificates representing the shares of Series A
Preferred Stock to be converted with the form of election to convert (the
"Election to Convert") on the reverse side of the stock certificate completed
and executed as indicated, thereby stating that such holder elects to convert
all or a specified whole number of such shares in accordance with the provisions
of this Section 5 and specifying the name or names in which such holder wishes
the certificate or certificates for shares of Common Stock to be issued. In case
the Election to Convert shall specify a name or names other than that of such
holder, it shall be accompanied by payment of all transfer or other taxes
payable upon the issuance of shares of Common Stock in such name or names that
may be payable in respect of any issue or delivery of shares of Common Stock on
conversion of Series A Preferred Stock pursuant hereto. The Company will have no
responsibility to pay any taxes with respect to the Series A Preferred Stock. As
promptly as practicable, and in any event within three Business Days after the
surrender of such certificate or certificates and the receipt of the Election to
Convert, and, if applicable, payment of all transfer or other taxes (or the
demonstration to the satisfaction of the Company that such taxes have been
paid), the Company shall deliver or cause to be delivered (i) certificates
representing the number of validly issued, fully paid and nonassessable full
shares of Common Stock to which the holder of shares of Series A Preferred Stock
so converted shall be entitled and (ii) if less than the full number of shares
of Series A Preferred Stock evidenced by the surrendered certificate or
certificates are being converted, a new certificate or certificates, of like
tenor, for the number of shares evidenced by such surrendered certificate or
certificates less the number of shares converted. Such conversion shall be
deemed to have been made at the close of business on the date (the "Conversion
Date") of the Company's receipt of a duly completed Election to Convert and
surrender of the certificate or certificates representing the shares of Series A
Preferred Stock to be converted. The rights of the holder of shares of Series A
Preferred Stock surrendered for conversion shall cease with respect to such
shares on the Conversion Date except for the right to receive shares of Common
Stock in accordance herewith, and the person entitled to receive the shares of
Common Stock shall be treated for all purposes as having become the record
holder of such shares of Common Stock on the Conversion Date. The Company shall
not be required to convert, and no surrender of shares of Series A Preferred
Stock shall be effective for that purpose, while the transfer books of the
Company for the Common Stock are closed for any purpose (but not for any period
in excess of 15 calendar days); but the surrender of shares of Series A
Preferred Stock for conversion during any period while such books are so closed
shall become effective for conversion immediately upon the reopening of such
books, as if the conversion had been made on the date such shares of Series A
Preferred Stock were surrendered, and at the conversion rate in effect at the
date of such surrender.
(e) Upon conversion of any shares of Series A Preferred Stock, the
holder thereof shall be entitled to receive any accrued dividends in respect of
the shares so converted,
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<PAGE>
which dividends shall be prorated from the most recent
dividend payment date to the Conversion Date.
(f) In connection with the conversion of any shares of Series A
Preferred Stock, no fractional shares of Common Stock shall be issued, but in
lieu thereof the Company shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied by
the Closing Price on the Conversion Date.
Section 6. Reports as to Adjustments.
Whenever the number of shares of Common Stock into which each share of
Series A Preferred Stock is convertible is adjusted as provided in Section 5
hereof, the Company shall promptly mail to the holders of record of the
outstanding shares of Series A Preferred Stock at their respective addresses as
the same shall appear in the Company's stock records a notice stating that the
number of shares of Common Stock into which the shares of Series A Preferred
Stock are convertible has been adjusted and setting forth the new number of
shares of Common Stock (or describing the new stock, securities, cash or other
property) into which each share of Series A Preferred Stock is convertible as a
result of such adjustment, together with a brief statement of the facts
requiring such adjustment, the computation of such adjustment, and the date such
adjustment became effective.
Section 7. Reacquired Shares.
Any shares of Series A Preferred Stock converted, purchased or otherwise
acquired by the Company in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof, and, if necessary to provide
for the lawful purchase of such shares, the capital represented by such shares
shall be reduced in accordance with the General Corporation Law of the State of
Delaware. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock, $.01 par value, of the Company and may be
reissued as part of another series of Preferred Stock, $.01 par value, of the
Company.
Section 8. Certain Definitions.
For the purposes of this resolution and the Certificate of Designation
of Series A Preferred Stock which embodies this resolution, the following terms
shall have the following meanings:
"Business Day" means any day other than a Saturday, Sunday, or a day on
which banking institutions in the State of Florida are authorized or obligated
by law or executive order to close.
"Closing Price" shall mean the closing bid price of the Common Stock on
the over-the-counter market on the date for which the Closing Price is to be
determined, as reported by the National Association of Securities Dealers
Automated Quotation System, or a similarly generally accepted reporting service,
or if not so available, as determined in good faith by the Board of Directors on
the basis of such relevant factors as the Board of Directors in good faith
considers appropriate.
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<PAGE>
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a business trust, or any other entity or
organization.
"Trading Day" means a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of Florida are
authorized or obligated by law or executive order to close.
IN WITNESS WHEREOF, the Company has caused this Certificate of Designation of
Series A Preferred Stock to be duly executed by its Chief Executive Officer and
attested by its Secretary and has caused its corporate seal to be affixed
hereto, this 30th day of September, 1997.
NAL FINANCIAL GROUP INC.
By: /s/ Robert R. Bartolini
------------------------------
Robert R. Bartolini,
Chief Executive Officer
(Corporate Seal)
ATTEST:
By: /s/ JoAnn Woodside
------------------------------
JoAnn Woodside, Secretary
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 21st 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 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 thereafter 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
<PAGE>
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 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 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 common 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 have 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
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<PAGE>
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 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 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 there (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 purchase 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, not 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 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.
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<PAGE>
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.
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 reasonably 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.
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,
Chairman and
Chief Executive Officer
CREDIT AGREEMENT
between
CONSECO PRIVATE CAPITAL GROUP, INC.
and
NAL ACCEPTANCE CORPORATION
<PAGE>
CREDIT AGREEMENT
NAL ACCEPTANCE CORPORATION, a Florida corporation (the "Borrower"), and
CONSECO PRIVATE CAPITAL GROUP, INC., an Indiana corporation (the "Lender"),
agree as follows:
SECTION 1. RULES OF CONSTRUCTION AND DEFINITIONS.
(a) Rules of Construction.
Accounting Terms shall have the meanings given them under generally
accepted accounting principles ("GAAP"). Except as otherwise expressly provided
herein, all computations and determinations for purposes of determining
compliance with the financial requirements of this Agreement shall be made in
accordance with GAAP as in effect on the date hereof. If GAAP shall change
subsequent to the date hereof, Borrower may make such computations and
determinations for purposes of determining compliance with the financial
requirements of this Agreement in accordance with GAAP then in effect if
Borrower shall deliver to the Lender a letter from its independent certified
public accountants stating that such changes in GAAP subsequent to the date
hereof have not, in the aggregate, materially affected the computations and
determinations used in determining compliance with the financial requirements of
this Agreement.
(b) Definitions. The following terms when used herein shall have the
following meanings when used, except in the case of accounting terms, with the
initial letter capitalized:
"Adjusted LIBOR" means, for each LIBOR Loan, the rate per
annum (rounded up, if necessary, to the nearest 1/100%) determined by the Lender
to be equal to the quotient of (a) the LIBOR divided by (b) 1 minus the Reserve
Requirement.
"Advance" means a disbursement of proceeds of the Loan.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person or is a director or executive officer of such Person. For
purposes of this definition, the term "control" (including the terms
"controlling", "controlled by" and "under common control with") of a Person
means the possession, direct or indirect, of the power (whether or not
exercised) (i) to vote 10% or more of the securities having ordinary voting
power or (ii) to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" means this Credit Agreement.
"Authorized Officer" means the Chief Executive or Financial
Officer, or the President of the Borrower, or any other officer whose authority
to perform acts on behalf of the
<PAGE>
Borrower which must be performed by an "Authorized Officer" under the terms of
this Agreement, is evidenced to the Lender by a duly certified copy of a
resolution of the Board of Directors of the Borrower.
"Autorics II" means Autorics II, Inc., a Delaware corporation
which is the wholly owned subsidiary of the Borrower and is entitled to certain
excess reserve balances and residual distributions under the Trusts.
"Banking Day" means a day on which the Lender is open for the
purpose of conducting substantially all of its business activities in the City
of Carmel, Indiana.
"Base Rate" means the per annum rate equal to the sum of (i)
the Prime Rate in effect from time to time, plus (ii) one and one-half percent
(1-1/2%) per annum; which Base Rate shall change simultaneously with any change
in such Prime Rate.
"Change in Control" means the time at which (i) any Person
(including a Person's Affiliates and associates) or group (as that term is
understood under Section 13(d) of the Exchange Act and the rules and regulations
thereunder), has become the beneficial owner of a percentage (based on voting
power, in the event different classes of stock shall have different voting
powers) of the voting stock of Parent Corporation equal to at least twenty-five
percent (25%), other than existing shareholders which currently own in excess of
twenty-five percent (25%) and existing debenture holders whether upon exercise
of conversion rights currently existing or otherwise, (ii) there shall be
consummated any consolidation or merger of Parent Corporation pursuant to which
Parent Corporation's common stock (or other capital stock) would be converted
into cash, securities or other property, other than a merger or consolidation of
Parent Corporation in which the holders of such common stock (or such other
capital stock) immediately prior to the merger have the same proportionate
ownership, directly or indirectly, of common stock of the surviving corporation
immediately after the merger as they had of Parent Corporation's common stock
immediately prior to such merger, or (iii) all or substantially all of Parent
Corporation's assets shall be sold, leased, conveyed or otherwise disposed of as
an entirety or substantially as an entirety to any Person (including an
Affiliate of Borrower) in one or a series of transactions.
"Environmental Law" means any federal, state or local law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award relating to Hazardous Materials, the environment or to the release of any
materials into the environment, including, without limitation the Clean Air Act,
as amended, the Clean Water Act of 1977, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Hazardous Materials Transportation Act, as amended, and the Resource
Conservation and Recovery Act of 1976, as amended.
"Equity Infusion" means any equity funding, whether by the
sale of securities or contribution of capital in which the Borrower, the Parent
Corporation or any Subsidiary receives or has funds applied for its benefit in
an amount equal to or greater than Five Million Dollars ($5,000,000).
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<PAGE>
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Event of Default" means any event or condition identified as
such in Section 8 and the term "Default" shall mean any breach of any term,
condition, provision, covenant or representation by the Borrower or any other
event or condition which, with the lapse of time, the giving of notice, or both
would constitute an Event of Default.
"Hazardous Materials" means (i) materials the presence of
which requires investigation or remediation under any Federal, State or local
law, rule, regulation, ordinance, order, action or policy; (ii) materials listed
in 49 C.F.R. ss.172.101, materials defined as hazardous pursuant to Section
101(14) of the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended; (iii) any flammable, explosive, radioactive,
carcinogenic or mutagenic materials (including any biomedical materials or
wastes the use, storage, handling or disposal of which is regulated under any
Federal, State or local law, rule, regulation, ordinance, order, action or
policy); (iv) hazardous or toxic wastes or substances, petroleum or petroleum
distillates; (v) asbestos or material containing asbestos which have become
friable, or, polychlorinated biphenyls or similar materials which have been
released, in violation of any applicable Environmental Law; or (vi) infectious
or potentially infectious materials, blood and other bodily fluids in any form
(including laboratory specimens), used needles and syringes, used gloves and
other disposable protective clothing or devices, contaminated linen, uniforms or
laundry, or any other medical waste.
"Lender" and "Borrower" are used as defined in the preamble.
"LIBOR" means, as of any time the same is to be determined by
the Lender, the per annum interest rate (rounded up, if necessary, to the
nearest 1/100%) at which deposits of U.S. dollars in Permissible Increments
quoted for the offering to leading banks for the applicable LIBOR Interest
Period in the London interbank market at approximately 11:00 a.m. (London time)
on the date of commencement of each LIBOR Interest Period (or the first Banking
Day thereafter if not a Banking Day).
"LIBOR Interest Period" means each monthly period commencing
on the first day of each calendar month and ending on the last day of such
month.
"LIBOR Loans" means any Advances under the Loan when and to
the extent that the interest rate therefor is determined by reference to the
Adjusted LIBOR.
"LIBOR Rate" means a rate to be calculated by reference to the
LIBOR for the LIBOR Interest Period under Section 2(b).
3
<PAGE>
"Lien" means any lien, security interest, financing statement,
mortgage, pledge, collateral assignment, title retention lien, sale and
leaseback arrangement, or other charge, subordination or encumbrance of any kind
securing the payment or performance of any obligation, or any other type of
preferential or trust arrangement on or with respect to real or personal
property securing the payment or performance of any obligation, including,
without limitation, the lien or retained security title of a conditional vendor.
"Loan" means the Loan in the Maximum Amount not to exceed Five
Million Dollars ($5,000,000) constituting the indebtedness for borrowing money
owed by Borrower to Lender advanced pursuant to Section 2(a)(i) hereof.
"Loan Documents" mean this Agreement, the Note, the Security
Agreement, the Pledge Agreement, the Blocked Account Agreement referred to in
Section 2(a)(i)(D) and any other documents which at any time evidence or secure
the Loan.
"Maturity" means the earlier of (i) December 31, 1997, (ii)
the date of an Equity Infusion, or (iii) upon a Change in Control of the Parent
Corporation; at which time all Advances under the Loan shall be due and payable.
"Maximum Amount" means with respect to the limit on the
Loan the sum of Five Million Dollars ($5,000,000).
"Net Worth" means, as of the date of determination, that
amount determined to be the total shareholders' equity in the balance sheet of
the Parent Corporation, computed on a consolidated basis, furnished pursuant to
Section 5(b)(i) as of such date.
"Note" is the promissory note evidencing the Loan as used in
Section 2(a)(i)(C) and any other promissory note made by Borrower payable to the
Lender as may be outstanding from time to time.
"Obligations" mean:
(i) All obligations, liabilities and indebtedness,
and all renewals and extensions thereof, now or at any time hereafter owed to
the Lender by Borrower, whether such indebtedness, obligations and liabilities
are direct, indirect, fixed, contingent, liquidated, unliquidated, joint,
several or joint and several and whether such indebtedness, obligations and
liabilities now exist or hereafter arise, arising from, under, by virtue of or
pursuant to the Loan Documents and Securities Purchase Agreement, as the same
may hereafter be modified, amended, restated and/or extended from time to time,
together with all interest accruing thereon;
(ii) All obligations, indebtedness and liabilities of
Borrower to the Lender now existing or hereafter arising, under the terms of any
and all other security
4
<PAGE>
agreements, pledge agreements, assignments of collateral, mortgages or other
security documents (as the same may be amended, restated, modified, renewed
and/or extended from time to time and at any time) now or hereafter securing all
or any part of the Loan;
(iii) All costs of collection and all costs and
reasonable attorneys' fees incurred by the Lender in the enforcement of this
Agreement; and
(iv) Any and all modifications, renewals and
extensions of one or more of the indebtedness, liabilities, obligations listed
in clauses (i), (ii) and (iii) preceding, including without limitation: (A)
modifications of the required principal payment dates or interest payment dates,
deferring or accelerating payment dates wholly or partly; and (B) modifications,
extensions or renewals at a different rate of interest whether or not, in the
case of a promissory note or contract, the modification, extension or renewal is
evidenced by a new or additional promissory notes or other contract.
"Officer's Certificate" means a certificate signed by an
Authorized Officer of the Borrower confirming that all of the representations
contained in Section 4 of this Credit Agreement and Article V of the Securities
Purchase Agreement are true and correct as of the date of such Certificate
except as specified therein, and with the further exception that the
representation contained in Section 4(d) will refer to the latest financial
statements which have been furnished to the Lender under the terms of this
Credit Agreement as of the date of any such Certificate. Such Certificate shall
further confirm that no Event of Default or Default shall have occurred and is
then continuing, or if any Default or Event of Default shall have occurred and
is continuing, such Certificate shall describe it and describe the steps being
taken or planned by the Borrower to correct such situation. The Officer's
Certificate shall be substantially in the form of Exhibit "A".
"Permissible Increment" shall mean a minimum principal amount
of Two Hundred Thousand Dollars ($200,000) and in minimum increments of Fifty
Thousand Dollars ($50,000) above such minimum principal amount.
"Parent Corporation" means NAL Financial Group Inc., a
Delaware corporation which owns all of the issued and outstanding stock of the
Borrower.
"Permitted Encumbrances" is used as defined in Section 6(b).
"Person" means an individual, partnership, corporation, joint
stock company, trust (including a business trust), unincorporated association,
joint venture or other entity, or a government or any political subdivision or
agency thereof.
"Plan" means an employee pension benefit plan as defined in
ERISA.
"Pledge Agreement" is used as defined in Section 3(b) hereof.
5
<PAGE>
"Prime Rate" means a variable per annum interest rate adjusted
daily, equal at all times to the rate established and quoted from time to time
by the Lender's bank, Nations Bank, N.A., as the Prime Rate at its principal
office and changing contemporaneously with each change in such bank's prime
rate. The Prime Rate shall not necessarily have any relation to the rate of
interest which such bank actually charges Lender on any loans or class of loans.
"Reserve Requirement" means, for any LIBOR Loan for any LIBOR
Interest Period therefor, the daily average of the stated maximum rate
(expressed as a decimal) at which reserves, including any marginal,
supplemental, or emergency reserves, are required to be maintained during such
LIBOR Interest Period under Regulation D by member banks of the Federal Reserve
System against "Eurocurrency liabilities" (as such term is used in Regulation
D), but without benefit or credit of proration, exemptions, or offsets that
might otherwise be available from time to time under Regulation D, to the extent
applicable to Lender. Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by the
Lender against any category of liabilities that includes deposits by reference
to which the Adjusted LIBOR is to be determined or any category or extension of
credit or other assets that includes LIBOR Loans.
"Security Agreement" is used as defined in Section 3(a)
hereof.
"Securities Purchase Agreement" means the Securities Purchase
Agreement dated as of April 23, 1996, by and between the Parent Corporation and
Affiliates of the Lender, Beneficial Standard Life Insurance Company and Great
American Reserve Insurance Company.
"Subsidiary" means (a) any corporation of which an aggregate
of 50 percent or more of the outstanding stock (irrespective of whether, at the
time, stock of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned legally or beneficially by the Parent
Corporation and/or one or more Subsidiaries of the Parent Corporation, and (b)
any partnership in which Parent Corporation and/or one or more Subsidiaries of
the Parent Corporation shall have an interest (whether in the form of voting or
participation in profits or capital contribution) of 50 percent or more.
"Trust" means the Trusts listed on Exhibit "B" attached hereto
that have been used by Borrower for securitizations.
SECTION 2. THE LOAN.
(a) Terms of Loan.
(i) Loan Advances. From the date hereof and until the Banking
Day next preceding Maturity, the Lender will make Advances from time to time to
the Borrower, in amounts not exceeding the Maximum Amount of Five Million
Dollars ($5,000,000). Any Advance repaid by the Borrower shall not be
re-advanced by the Lender.
6
<PAGE>
The making of the Advances shall be subject to the further
provisions of this Section 2, and shall be subject to all of the conditions of
lending stated in Section 7 being fulfilled at the time of the Advance, and
provided further that each Advance shall be on the terms and subject to the
conditions hereinafter stated.
(A) Interest. The Loan shall bear interest
(calculated on the basis that an entire year's interest is earned in 360 days)
from the date of each Advance until repaid or until Maturity on any Permissible
Increment of outstanding Advances of the Loan, at the LIBOR Rate of Four and
Twenty-Five Hundredths Percent (4.25%) per annum above the Adjusted LIBOR,
compounded monthly. Adjusted LIBOR and the LIBOR Rate shall remain fixed
throughout the applicable LIBOR Period, with the same being adjusted monthly on
the first Banking Day of each month. After maturity, whether by acceleration or
scheduled Maturity, until paid in full, or when and so long as there shall exist
any uncured Default, the Loan shall bear interest at a rate equal to three
percent (3%) per annum above the otherwise applicable rate (calculated on the
basis that an entire year's interest is earned in 360 days). Interest shall be
due and payable quarterly. Any Advances or Loan balance not in a Permissible
Increment may at the option of the Lender accrue at a per annum rate equal to
the Base Rate.
(B) Use of Proceeds. The Advances may only be used by
the Borrower to initially pay the closing fees, charges and costs which are the
Borrower's expenses under the terms of this Agreement and subsequently for
working capital purposes. In addition to working capital purposes, the Advance
may be used by the Borrower for the following purposes:
(l) To fund the amounts owed in the acquisition
of motor vehicle leases with overdue
payments exceeding 90 days from General
Electric Capital Corporation in an amount
not to exceed $900,000;
(2) To fund the amounts owed in the acquisition
of motor vehicle leases without delivery of
vehicle titles within 120 days from General
Electric Capital Corporation in an amount
not to exceed $400,000;
(3) To fund repurchase obligations caused by
first payment defaults under Trust 1997 A in
an amount not to exceed One Million Three
Hundred Thousand Dollars ($1,300,000);
(4) To motor vehicle dealers which are owed
funds related to the acquisition of motor
vehicle leases in an amount not to exceed
$470,000.
The Borrower's working capital purposes shall further
include the Borrower's acquisition and financing of sub-prime motor vehicle
loans in the ordinary course of business. In no event shall the Borrower use any
Advance to fund repurchase obligations,
7
<PAGE>
reserves or losses or any other payment to any Trust, except as provided in
Sub-item (3) above, without the prior written consent of Lender.
(C) Method of Borrowing. The obligations of the
Borrower to repay the Loan shall be evidenced by a promissory note ("Note")
attached as Exhibit "C" and made a part hereof. The principal amount of the Loan
outstanding from time to time shall be determined by reference to the books and
records of the Lender on which all Advances under the Loan and all payments by
Borrower on account of the Loan shall be recorded. Such books and records shall
be deemed prima facie to be correct as to such matters absent manifest error.
Principal may be prepaid in part or in whole without premium or penalty,
provided that such prepayments shall not be re-advanced.
(D) Mandatory Principal Payments. The Borrower will
be required to make prepayments of principal of the Loan in such amounts as may
be distributed to the Borrower from Autorics II or the Trust. The Borrower shall
establish a bank account into which all such payments received from Autorics II
or the Trust shall be deposited, and the Lender shall have debit authority to
withdraw such amounts to apply towards the Loan and Borrower shall be prohibited
from making withdrawals pursuant to a Blocked Account Agreement acceptable to
Lender.
(E) Maturity of Loan. The Loan and all accrued
interest thereon shall be payable in full at Maturity.
(b) Procedures for Electing LIBOR Rates. LIBOR Rates must comply with
the following procedures and are subject to the other conditions contained in
this Agreement. In the event of noncompliance, the Lender at its option may
impose the Base Rate to accrue on the Loan in lieu of the LIBOR Rate.
(i) The Lender may elect to apply the Base Rate at any time a
Default or Event of Default exists.
(ii) Notwithstanding any other provision of this Agreement, in
the event that the Lender determines (which determination shall be conclusive
and binding upon the Borrower) that by reason of circumstances affecting the
London interbank market, adequate and reasonable means do not exist for
ascertaining the LIBOR for any LIBOR Interest Period at a time when the
outstanding balance of Advances under the Loan is being maintained at the LIBOR
Rate, the Lender shall forthwith give notice of such determination, confirmed in
writing, to the Borrower. If such notice is given, then the outstanding
principal balance of Advances under the Loan bearing interest at the LIBOR Rate
shall be converted, on the last day of the then current LIBOR Interest Period,
to a rate equal to the Base Rate.
(iii) If any law or any governmental regulation, guideline or
order or interpretation or application thereof by any governmental authority
charged with the interpretation or administration thereof or compliance with any
request or directive of any central
8
<PAGE>
bank or other governmental authority whether or not having the force of law (A)
imposes, modifies or deems applicable any reserve, special deposit or similar
requirement against assets held by, credit extended by, deposits with or for the
account of, or other acquisition of funds by, any bank (other than requirements
expressly included herein in the determination of the Adjusted LIBOR hereunder),
or (B) imposes upon any bank any other condition or expense with respect to this
Agreement, or the making, maintenance or funding of any part of the proceeds of
a LIBOR Rate Advance or any security therefor; and the result of any of the
foregoing is to increase the cost to, reduce the income receivable by, or impose
any expense upon the Lender with respect to the outstanding balance of the Loan
bearing interest at the LIBOR Rate or the making, maintenance or funding of any
part thereof by an amount which the Lender deems to be material (the Lender
being deemed for this purpose to have made, maintained or funded the proceeds of
a LIBOR Rate Advance from certificates of deposit), the Lender shall from time
to time notify the Borrower of the amount determined in good faith (using any
averaging and attribution methods employed in good faith) by the Lender (which
determination if made in good faith shall be presumed to be correct absent
manifest error) to be necessary to compensate the Lender for such increase in
cost, reduction in income or additional expense. Such amount shall be due and
payable by the Borrower to the Lender ten (10) Banking Days after such notice is
given. A certificate as to the amount of such increase in cost, reduction in
income or additional expense delivered by the Lender to the Borrower shall be
conclusive and binding for all purposes, absent manifest error.
(c) Method of Payment. All payments of principal and interest on the
Loan will be payable at the principal office of the Lender in Indianapolis,
Indiana in funds available for immediate use at that city and no such payment
will be considered to have been made until received in such funds.
9
<PAGE>
(d) Advances of the Loan. Each Advance will be conditioned upon receipt
by Lender from the Borrower of an executed closing statement or an application
for an Advance accompanied by an Officer's Certificate. The Lender shall be
entitled to rely on any oral or written request received by it in good faith
from anyone reasonably believed by the Lender to be an Authorized Officer. The
Borrower shall promptly confirm any oral communication by delivering an
Application upon request of Bank.
(e) Fees. The Borrower shall pay to the Lender at closing a commitment
fee for the Loan of One Hundred Thousand Dollars ($100,000). In addition, the
Parent Corporation shall grant Conseco, Inc. or its designee an additional
257,000 warrants with a strike price of fifteen cents ($. 15) per share with a
five (5) year maturity.
SECTION 3. COLLATERAL FOR THE OBLIGATIONS. All of the Obligations will
be secured and supporte as follows:
10
<PAGE>
(a) Security Interest. The Loan and all other Obligations are secured
by a security interest in certain payments due Borrower now existing or
hereafter acquired, which security interest will be created by a security
agreement (the "Security Agreement") in the form of Exhibit "D". The security
interest shall be a first priority security interest in the collateral stated
therein with no junior liens permitted.
(b) Pledge. The Loan and all other Obligations are secured by a pledge
by the Borrower of its stock of Autorics II, which pledge will be created by the
pledge agreement (the "Pledge Agreement") in the form of Exhibit "E". The pledge
shall be a first priority security interest and pledge in the collateral stated
therein with no junior liens permitted.
SECTION 4. REPRESENTATIONS AND WARRANTIES. To induce the Lender to
make the Loan, the Borrower represents and warrants to the Lender that:
(a) Organization of the Borrower. The Borrower is a corporation
organized, existing and in good standing under the laws of the State of Florida.
The Borrower is qualified to do business in every jurisdiction in which the
character of the properties owned or the nature of the business conducted by the
Borrower makes such licensing or qualification to do business necessary, except
where the failure to be in good standing or to be duly licensed or qualified to
do business would not have a material adverse effect on the Borrower. No
jurisdiction in which the Borrower is not qualified has asserted that the
Borrower is required to be qualified to do business therein.
(b) Authorization; No Conflict. The execution and delivery of this
Agreement, the borrowings hereunder, the execution and delivery of the other
Loan Documents required to be executed by the Borrower under the terms of this
Agreement and the performance by the Borrower of its obligations under this
Agreement, and such other Loan Documents are within the Borrower's corporate
powers, have been duly authorized by all necessary corporate action, and do not
and will not contravene or conflict with any provision of law or of the
certificate of incorporation or by-laws of the Borrower, and do not and will not
violate in a material manner any agreement binding upon the Borrower or a
material portion of its property.
(c) Validity and Binding Nature. This Agreement and the other Loan
Documents to which the Borrower is required to be a party under the terms of
this Agreement are the legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective terms,
except to the extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws enacted for the relief of
debtors generally, from time to time in effect.
(d) Financial Statements. The Borrower has delivered to the Lender
annual financial statements for the Borrower for the year ending December 31,
1996, and financial statements for the period ending April 30, 1997.
Such financial statements present fairly the financial position of the
Borrower as of the dates thereof and the results of the operations and changes
in financial position for the periods
11
<PAGE>
ending on the dates thereof, in accordance with GAAP consistently applied,
except as noted in the footnotes which are a part of such statements. Since the
date of the latest of such financial statements, there has been no material
adverse change in the financial condition of the Borrower or in the results of
the operations thereof. All projected operating results provided to the Lender,
or to be provided to the Lender under Section 5(b) hereof, were and shall be
prepared on the basis of assumptions, data, information, tests or other
conditions believed to be valid or accurate or to exist at the time such
estimates were prepared and furnished.
(e) Litigation and Contingent Liabilities. Except as shown in Exhibit
"F", no litigation, arbitration proceeding or governmental proceeding is pending
or is threatened against the Borrower or any Subsidiary which would, if
adversely determined, adversely affect the financial condition or continued
operations of the Borrower or any Subsidiary. The Borrower or any Subsidiary has
no material contingent liabilities not provided for or disclosed in the
financial statements referred to in Section 4(d).
(f) Ownership and Liens. The Borrower and its Subsidiaries have good
title to all of its properties and assets shown on its financial statements,
except such properties or assets as have been disposed of since the date of such
statements in the ordinary course of business or as no longer are used or useful
in the conduct of its business. None of the assets of the Borrower or any
Subsidiary is subject to any Lien.
(g) Solvency. Each of the following is true and correct for the
Borrower: (A) the fair value, the market value and the fair salable value of its
property is (i) greater than the total amount of its liabilities (including
contingent liabilities) and (ii) greater than the amount that would be required
to pay its probable aggregate liability on its existing debts as they mature;
(B) its property and capital is not unreasonable in relation to its business or
any contemplated or undertaken transaction; and (C) it does not intend to incur,
or believe that it will incur, debts beyond its ability to pay such debts as
they become due.
(h) Employee Benefit Plans. As of the date hereof the Borrower
maintains a Plan in compliance with all applicable laws and regulations, and
neither a "reportable event", nor a "prohibited transaction", has occurred
under, nor has there occurred any complete or partial withdrawal from, nor has
there occurred the appointment of a trustee to administer any Plan maintained
for employees of the Borrower or "affiliate", all within the meanings ascribed
by ERISA. The present value of all benefits under such Plan do not exceed, as of
the last annual valuation date, the value of the assets of such Plan allocable
to such vested benefits.
(i) Investment Company Act; Public Utility Holding Company. The
Borrower is not an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended. Neither the Borrower nor any Affiliate is a "holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
(j) Regulation U; Business Loans. The Borrower is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or
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carrying margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System. The Note evidences business loans
exempt from the federal Truth In Lending Act (15 USC 1601, et seq.), the Federal
Reserve Lender's Regulation Z (12 CFR 226, et seq.), and the proceeds thereof
are not being used for consumer purposes.
(k) Environmental Matters. The Borrower has duly complied in all
material respects with, and its business, operations, assets, equipment,
property, leaseholds, or other facilities are in compliance in all material
respects with, the provisions of all federal, state, and local environmental,
health, and safety laws, codes and ordinances, and all rules and regulations
promulgated thereunder, including Environmental Laws. The Borrower has been
issued and will maintain all required federal, state, and local permits,
licenses, certificates, and approvals relating to (1) air emissions, (2)
discharges to surface water or ground water, (3) noise emissions, (4) solid or
liquid waste disposal, (5) use, generation, storage, transportation, or disposal
of Hazardous Materials, or (6) other environmental, health or safety matters.
The Borrower has received no notice of, and knows of no, facts which might
constitute any violations of any federal, state, or local environmental, health
or safety laws, codes or ordinances, and any rules or regulations promulgated
thereunder with respect to its business, operations, assets, equipment,
property, leaseholds, or other facilities, materially adversely affecting the
existing or future operations or financial condition of the Borrower. To the
best of Borrower's knowledge, there has been no emission, spill, release, or
discharge by Borrower materially adversely affecting the existing or future
operations or financial condition of the Borrower into or upon (1) the air, (2)
soils or any improvements located thereon, (3) surface water or ground water, or
(4) the sewer, septic system or waste treatment, storage or disposal system
servicing owned facilities or any leased premises, of any Hazardous Materials at
or from the premises. There has been no complaint, order, directive, claim,
citation, or notice by any governmental authority or any person or entity
materially adversely affecting the existing or future operations or financial
condition of the Borrower with respect to (1) air emissions, (2) spills,
releases, or discharges to soils or improvements located thereon, surface water,
ground water or the sewer, septic or waste treatment, storage or disposal
systems servicing the premises, (3) noise emissions, (4) solid or liquid waste
disposal, (5) the use, generation, storage, transportation or disposal of
Hazardous Materials, or (6) other environmental, health, or safety matters
affecting the Borrower.
(l) Compliance with Law. The Borrower maintains such licenses, permits,
patents, copyrights, trademarks, and consents of appropriate governmental
agencies to own its properties as are necessary or useful to carry on its
business and is in compliance in all material respects with applicable laws and
regulations. All tax returns or reports of the Borrower required by law have
been filed, or will be timely filed before penalties attach, and all taxes,
assessments, contributions, fees and other governmental charges (other than
those presently payable without penalty or interest and those currently being
contested in good faith and against which adequate reserves have been
established) upon the Borrower or its assets, properties or income, which are
payable, have been paid.
(m) Casualty. Neither the business nor the properties of the Borrower
is presently affected by any fire, explosion, accident, strike, lockout or other
labor dispute, drought,
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storm, hail, earthquake, embargo, act of God or other casualty materially
adversely affecting the existing or future operations or financial condition of
the Borrower.
(n) Trust Representations. The Borrower represents and warrants that to
the best of its knowledge, the securitization projections attached hereto as
Exhibit "H" are accurate and correct with data and assumptions based upon the
reflection of the contractual terms of the loans held by each Trust, actual
gross loss and recovery experience, prepayment experience and the capitalization
of the Trusts which the Borrower believes will be representative of future
experience. The projections accurately reflect the terms and provisions of each
Trust, and there has been no adverse change in the Trust or such securitization
projections. The Borrower is in compliance with all of its material obligations
to each Trust, including those under each sale and servicing agreement, and
there is no condition or event which, with the lapse of time, or the giving of
notice, or both, would cause a default in such agreements. The Borrower has not
engaged and will not engage in any transaction with the Trust except as
contemplated by the existing documentation with respect to the Trusts.
SECTION 5. AFFIRMATIVE COVENANTS OF THE BORROWER. Until all obligations
of the Borrower under this Agreement and under the Note are paid in full, the
Borrower agrees that it will strictly observe the following covenants, unless at
any time the Lender shall otherwise expressly consent in writing:
(a) Corporate Existence. The Borrower will preserve its corporate
existence without any material amendments to its Certificate of Incorporation
and will maintain its existing fiscal year and accounting policies in accordance
with GAAP.
(b) Reports, Certificates and Other Information. The Borrower will
furnish to the Lender:
(i) Financial Purchase Agreement Information. The Borrower
will provide all financial statements and information required to be provided by
the Borrower under Article VI of the Securities Purchase Agreement. The Borrower
shall also furnish on a monthly basis, within thirty (30) days after the end of
each month, copies of consolidated and consolidating unaudited balance sheet and
statement of income and retained earnings, for such month for the portion of the
fiscal year ended as of the end of such month for the Borrower and each
Subsidiary, setting forth, at least quarterly, in comparative form the
corresponding figures for the corresponding dates and periods of the preceding
fiscal year. Such monthly financial statements shall calculate the financial
covenants set forth in Section 5(j) hereof.
(ii) Financial Projections. The Borrower shall provide to the
Lender on a weekly basis, cash flow projections for the following four week
period showing the projected cash flow for such period on a daily basis. Such
cash flow projections shall be furnished no later than Monday of each week
beginning June 30, 1997, and shall forecast the four week consecutive period
following such week.
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(iii) SEC and Other Reports. Promptly upon their becoming
available a copy of each registration statement or prospectus filed by the
Borrower with any state securities commission or similar authority or with the
Securities and Exchange Commission and copies of each periodic report or proxy
statement filed with the Securities and Exchange Commission pursuant to the
requirements of the Securities Exchange Act of 1934 in the event Borrower ever
makes such filings or becomes subject to such requirements.
(iv) Orders. Prompt notice of any orders in any material
proceedings to which the Borrower is a party, issued by any court or regulatory
agency, federal or state, and if the Lender should so request, copies of any
such order.
(v) Officers' Certificates. Contemporaneously with the
furnishing of each weekly financial statements provided for in Section 5(b)(ii),
a currently dated Officer's Certificate.
(vi) Notice of Default or Litigation. Immediately upon
learning of the occurrence of a Default, an Event of Default or the institution
of, or any adverse determination in, any litigation, arbitration proceeding or
governmental proceeding which is material to the Borrower or the occurrence of
any event which could have a material adverse effect upon the Borrower written
notice thereof describing the same and the steps being taken with respect
thereto.
(vii) Securitization Notices. Within five (5) Banking Days
after receipt, copies of any correspondence or other notifications from
Greenwich Capital Corporation or any rating agency that relates to the Trusts or
any contemplated securitizations by the Borrower.
(viii) Trust Information. Within thirty (30) days after the
end of each month, copies of the static pool analysis, expected loss analysis,
compliance reports and financial projections based upon actual losses,
prepayments and recoveries provided to the Trusts. Within 5 Banking Days before
funding, a summary of cash settlements expected to be received from any Trust.
(d) Books, Records, Inspections and Audits. The Borrower will maintain
complete and accurate books and records; permit the Lender to inspect and audit
said books and records at all reasonable times and permit the Lender to inspect
the properties and operations of the Borrower. Such inspection and audit shall
be made at the Borrower's expense.
(e) Taxes and Liabilities. The Borrower will pay when due all taxes,
assessments and other liabilities except such as are being contested in good
faith and by appropriate proceedings and for which appropriate reserves have
been established.
(f) Compliance with Legal and Regulatory Requirements. The Borrower
will comply in all material respects with the applicable provisions of all
federal and state statutes and regulations and any court orders or orders of
regulatory authorities issued thereunder.
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(g) Employee Benefit Plans. The Borrower will maintain any pension or
profit sharing Plan or other employee benefit Plan, if any, in compliance in all
material respects with ERISA, the Internal Revenue Code, and all rules and
regulations of regulatory authorities pursuant thereto and file all material
reports required to be filed pursuant to ERISA, the Internal Revenue Code, and
such rules and regulations.
(h) Payment of Expenses. The Borrower shall pay all reasonable costs at
closing incidental to the preparation of this Agreement, the Loan Documents and
the Loan, including, but not limited to, attorneys' fees and other legal and
documentation expenses, appraisal fees and costs, environmental consultant
charges, insurance premiums, lien search charges, inspecting engineers' and/or
architects' fees, and any and all other incidental expenses of the Lender.
(i) Hazardous Materials. The Borrower shall keep its property and any
leased premises free of all Hazardous Materials except for the use of such
materials in the ordinary course of business in compliance with all laws and
regulations.
(j) Financial Covenants. The Borrower shall maintain the following
minimum operating levels during the time period specified, all of which shall be
calculated on a consolidated basis with the Parent Corporation:
(i) Minimum Net Worth. A minimum net worth of at least Fifty
Million Dollars ($50,000,000) shall be maintained as of the end of each
fiscal quarter.
(ii) Leverage Ratio. The ratio derived by dividing the total
liabilities exclusive of subordinated debt by Net Worth shall not
exceed 2.50 to 1.00 as of the end of each fiscal quarter. Subordinated
debt for purposes of this section shall mean debt in which the holder
thereof is subject to the subordination in payment to the Borrower's
secured lenders.
SECTION 6. NEGATIVE COVENANTS OF THE BORROWER. Until all obligations of
the Borrower under the Loan Documents are paid in full, and any obligation of
the Lender to make further Advances has expired, the Borrower agrees that it
will strictly observe the following covenants unless at any time the Lender
shall otherwise expressly consent in writing:
(a) Restricted Payments. Borrower will not purchase or redeem any
shares of the capital stock of the Borrower, declare or pay any dividends
thereon, make any distribution to shareholders, or set aside any funds for any
such purpose, or prepay, purchase or redeem any other subordinated indebtedness
of the Borrower. The Borrower will not make any advances to its officers for
salaries, fees, bonuses or similar expenses until such amounts have been earned
and become properly due and payable.
(b) Liens. The Borrower will not create or permit to exist any Liens
with respect to any property or assets, now owned or hereafter acquired, except
the following permitted encumbrances ("Permitted Encumbrances"):
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(i) Those Liens created pursuant to any Debt incurred by the
Borrower or the Parent Corporation permitted in Section 6(h) hereof;
(ii) any Lien or deposit with any governmental agency required
to qualify the Borrower or to conduct business or exercise any privilege,
franchise or license, or to maintain self-insurance or to obtain the benefits of
or secure obligations under any law pertaining to workmen's compensation,
unemployment insurance, old age pensions, social security or similar matters, or
any similar lien or deposit arising in the ordinary course of business;
(iii) any landlord's, mechanic's, workmen's, repairmen's,
carrier's, warehousemen's or other like Liens arising in the ordinary course of
business for amounts not yet due, provided adequate provision has been made for
the payment of the same when due, or deposits to obtain the release of such
Liens have been made or if a Lien is being contested by the Borrower in good
faith and by appropriate legal proceedings, and provided the Borrower has
provided appropriate reserves for the payment of any such contested Lien;
(iv) Liens for taxes and governmental charges not yet due and
for the payment of which when due adequate provision has been, or which are
being contested in good faith by appropriate legal proceedings and for which
adequate reserves are provided;
(v) Liens created by or resulting from any litigation or legal
proceeding which is being contested in good faith by appropriate legal
proceedings and for which adequate reserves are provided;
(vi) those specific Liens now in existence and listed in
Exhibit "G";
(vii) purchase money security interest Liens incurred by the
Borrower or any Subsidiary in the ordinary course of business for the purchase
of fixed assets; and
(viii) the interest, if any, in distributions from Autorics II
to the Borrower granted to First Financial Acceptance, Inc., pursuant to the
synthetic automobile receivable participation agreement dated December 18, 1996;
provided, however, any such interest is limited to payment obligations to First
Financial Acceptance, Inc., resulting from "Joint Receivables" as defined in
such Participation Agreement and the Borrower represents and warrants that Joint
Receivables do not presently exceed Eleven Million Fifty Thousand Dollars
($11,050,000) and for future securitizations shall not exceed six percent (6%)
of the loans provided to Trusts.
(c) Guaranties, Loans or Advances; Investments. Except for debt
permitted in Section 6(h) hereof, the Borrower shall not make or permit to exist
any loans or advances, other than loans and other extensions of credit or credit
accommodations to customers or vendors other than Affiliates, made by the
Borrower in the ordinary course of its business as now conducted, for reasonable
salary advances to non-executive employees and other advances to agents and
employees for anticipated expenses to be incurred on behalf of the Borrower in
the course of discharging their assigned duties. The Borrower will not be a
guarantor or surety of, or otherwise be responsible in any manner (whether by
agreement to purchase any obligations, stock, assets, goods or services, or to
supply or advance any funds, assets, goods or services, or otherwise) with
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respect to any undertaking of any other Person. The Borrower or the Parent
Corporation will not purchase or acquire any securities of, or make investments
in, any Person except as permitted in Section 8.3 of the Securities Purchase
Agreement.
(d) Capitalization and Sales. The Borrower will not sell, transfer,
convey or lease all or any material part of its assets (more than 10% being
deemed material) or sell or assign with or without recourse any receivables
other than in the ordinary course of business pursuant to warehouse lines of
credit and securitizations. The Borrower will not (i) permit any change in the
Parent Corporation's ownership of the shares of any class of Borrower's stock,
(ii) incur, sell or otherwise dispose of any shares of its capital stock or
other securities, or rights, warrants or options to purchase or acquire any such
shares of securities, or (iii) sell, transfer or encumber any stock of its
Subsidiaries.
(e) Margin Stock. The Borrower will not use or cause or permit the
proceeds of the Loan to be used, either directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any margin
stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System, as amended from time to time.
(f) Other Agreements. The Borrower will not enter into any agreement
containing any provision which would be violated or breached by the performance
of its obligations hereunder or under any instrument or document delivered or to
be delivered by it hereunder or in connection herewith.
(g) Judgments. The Borrower will not permit any material judgment or
monetary penalty rendered against it in any judicial or administrative
proceeding to remain unsatisfied for a period in excess of thirty (30) days
unless such judgment or penalty is being contested in good faith and by
appropriate proceedings and unless an appropriate reserve has been established
with respect thereto.
(h) Debt. The Borrower or the Parent Corporation will not incur
indebtedness for borrowed money other than indebtedness incurred pursuant to
this Agreement, whether under a loan, purchase money security interest, or sale
and lease back arrangement, or for the acquisition of fixed assets, except for
warehouse lines of credit or permanent financing with respect thereto obtained
by the Borrower in the ordinary course of business consistent with past
practice.
(i) Name Change. The Borrower shall not fail to notify the Lender of
any change in the Borrower's name or any name Borrower begins to do business
under or name it assumes within thirty (30) days after the date of such change.
(j) Agreements with Affiliates. The Borrower or the Parent Corporation
shall not enter into any other contract or transaction with any Affiliate, and,
with respect to any agreements with any Affiliate presently in existence, shall
not amend or modify such agreements without prior written consent of Lender
(which shall be given or withheld within five (5) Banking Days of written
request) which shall not be unreasonably withheld.
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(k) Fixed Assets. The Borrower or the Parent Corporation will not make
any capital expenditures, purchase fixed assets or enter into any capital or
operating leases, except as permitted in Section 8.8 of the Securities Purchase
Agreement.
(l) Trust Payments. The Borrower shall not make any payments to fund,
secure or otherwise pay repurchase obligations, reserves or losses or any other
payment to any Trust, except as required by the terms thereof. The Borrower
shall not consent to the amendment to the terms of any agreement to which
Borrower is a party relating to any Trust or securitization, except for the
termination of Trust 1997A in connection with its transfer of assets and roll
over into a new securitization trust prior to July 1, 1997.
SECTION 7. CONDITIONS OF LENDING. The obligation of the Lender to
make each Advance under the Loan is subject to the following conditions
precedent:
(a) No Default. No Event of Default, or Default, shall have occurred
and be continuing, and the representations and warranties of the Borrower
contained in Article V of the Securities Purchase Agreement or in Section 4
hereof shall be true and correct as of the date of each Advance, except that the
representations contained in Section 4(d) will be construed so as to refer to
the latest financial statements furnished to the Lender by the Borrower pursuant
to the requirements of this Agreement.
(b) Documents to be Furnished at Initial Closing. The Lender shall have
received contemporaneously with the execution of this Agreement, the following,
each duly executed, dated the date of this Agreement and in form and substance
satisfactory to the Lender:
(i) Loan Documents. The Loan Documents.
(ii) Resolutions. A certified copy of a Resolution of the
Board of Directors of the Borrower authorizing the execution, delivery and
performance of each of the Loan Documents and any other documents provided for
in this Agreement.
(iii) Certification of Incumbency and Signatures. The
certificates of the Secretary of the Borrower certifying the names of the
officer or officers of the Borrower authorized to sign the various Loan
Documents, together with a sample of the true signature of each such person.
(iv) Corporate Documents. A certified copy of the Certificate
of Incorporation of the Borrower and Autorics II, a Certificate of Existence or
good standing
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issued for Borrower and Autorics II in each state where qualification is
necessary and copies of the By-Laws of the Borrower certified as complete and
correct by its Secretary.
(v) Opinion of Counsel for the Parent Corporation, Borrower
and Autorics II. The opinion of counsel for the Autorics II, Borrower and the
Parent Corporation acceptable to the Lender.
(vi) Amendment to 9% Subordinated Convertible Debentures. The
First Amendment to 9% Subordinated Convertible Debenture dated April 23, 1996,
amending the 9% Subordinated Convertible Debenture issued to Beneficial Standard
Life Insurance Company in the amount of $5,000,000 and the First Amendment to 9%
Subordinated Convertible Debenture dated April 23, 1996, amending the 9%
Subordinated Convertible Debenture issued to Great American Reserve Insurance
Company in the amount of $5,000,000, both payable by the Parent Corporation.
(vii) Amendment to Warrants. The First Amendment to Warrant to
Purchase Common Stock amending the Warrant to Purchase Common Stock of NAL
Financial Group, Inc. dated April 23, 1996 issued to Conseco, Inc. for 500,000
shares, subject to adjustment, and the First Amendment to Warrant to Purchase
Common Stock amending the Warrant to Purchase Common Stock of NAL Financial
Group, Inc. dated April 23, 1996 issued to Conseco, Inc. for 15,000 shares,
subject to adjustment.
(viii) Price Protection Waiver. All other parties shall waive
their price protection rights with respect to their warrants, and their
subordinated debt (including any Affiliates of Lender), resulting from the
indebtedness and warrants provided for in this Credit Agreement.
(ix) Subordinated Debt Extension. All subordinated notes held
by the subordinated creditors listed on Exhibit "I" attached hereto which mature
prior to December 31, 1997, shall have their maturity extended until December
31, 1997.
(x) Trust Payments. Evidence acceptable to Lender that
Autorics II has transferred its rights to receive 74% of payments from the
Trusts to the Borrower and the irrevocable instructions by the Borrower to the
Trusts directing payments to the account referenced in Section 2(a)(i)(D) with
an acknowledgment by the Trusts.
SECTION 8. EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:
(a) Nonpayment of the Loan. Default in the payment of principal or
interest under the terms of the Note or Loan Documents when due.
(b) Nonpayment of Other Indebtedness for Borrowed Money. Default in the
payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any other indebtedness for borrowed money of, or
guaranteed by, the Borrower, Parent Corporation or any Subsidiary whether owed
to the Lender or any other Person, or
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default in the performance or observance of any obligation or condition with
respect to any such other indebtedness in excess of $500,000 if the effect of
such default would entitle the holder thereof to accelerate the maturity of any
such indebtedness or to permit the holder or holders thereof, or any trustee or
agent for such holders, to cause such indebtedness to become due and payable
prior to its expressed maturity.
(c) Other Material Obligations. Subject to the expiration of any
applicable grace period, default in the payment when due, or in the performance
or observance of, any material obligation of, or condition agreed to by the
Borrower, Parent Corporation or any Subsidiary with respect to any material
purchase or lease of goods or services except only to the extent that the
existence of any such default is being contested by the Borrower or any
Subsidiary in good faith and by appropriate proceedings.
(d) Bankruptcy, Insolvency, etc. The Borrower, Parent Corporation or
any Subsidiary becoming insolvent or admitting in writing its inability to pay
its debts as they mature or the adjudication of the Borrower, Parent Corporation
or any Subsidiary as a
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bankrupt or as insolvent; or the Borrower, Parent Corporation or any Subsidiary
applying for, consenting to, or acquiescing in the appointment of, a trustee or
receiver for the Borrower, Parent Corporation or any Subsidiary or any material
amount of the property of the Borrower or any Subsidiary, or the Borrower,
Parent Corporation or any Subsidiary making a general assignment for the benefit
of creditors; or, in the absence of such application, consent or acquiescence, a
trustee or receiver being appointed for the Borrower, Parent Corporation or any
Subsidiary or for a material part of the property thereof and not being
discharged within 30 days; or any bankruptcy, reorganization, debt arrangement,
or other proceeding under any bankruptcy or insolvency law, or any dissolution
or liquidation proceeding being instituted by or against the Borrower, Parent
Corporation or any Subsidiary, and if instituted against the Borrower, Parent
Corporation or any Subsidiary, being consented to or acquiesced in by the
Borrower, Parent Corporation or any Subsidiary or remaining for 30 days
undismissed.
(e) ERISA Plan. A "reportable event" (as defined under ERISA) occurs
that would permit the Pension Benefit Guaranty Corporation to terminate any Plan
of the Borrower or Affiliate of the Borrower.
(f) Failure of the Borrower to Observe Covenants. Failure of the
Borrower to observe any of the covenants stated in Section 6 of this Agreement.
(g) Non-Compliance with other Provisions of this Agreement or Other
Loan Documents. Failure by the Borrower to comply with or to perform (i) any
other provision of this Agreement (which failure does not constitute an Event of
Default under any of the preceding provisions of this Section 8) or (ii) any
covenant or other provision of any other Loan Document, and continuance of any
such failure listed in (i) or (ii) above for ten (10) Banking Days after notice
thereof to the Borrower from the Lender.
(h) Warranties. Any warranty or representation made by the Borrower in
this Agreement or in any other Loan Document or in the Securities Purchase
Agreement proving to have been false or misleading in any material respect when
made, or any schedule, certificate, financial statement, report, notice, or
other writing furnished by the Borrower to the Lender proving to have been false
or misleading in any material respect when made or delivered.
(i) Default Under Securities Purchase Agreement. If there is any "Event
of Default" under and as defined in the Securities Purchase Agreement.
(j) Default Under Trusts. If there is any material default or
noncompliance under the Trusts, any Trust fails or is unable to meet its payment
obligations to its noteholders or certificateholders, or the transfer or
termination of any service, administrative or other agreement between the
Borrower, or its Subsidiaries, and the Trust. If Autorics II transfers, sells or
creates, incurs, assumes or permits to exist any Lien upon or with respect to
its rights to receive payment from the Trust, including the right to receive
certain excess reserve balances and dealer reserve balances and residual
distributions, or its beneficial ownership interest in the Trust, except for
dividend or other transfers to the Borrower.
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SECTION 9. EFFECT OF EVENT OF DEFAULT. If any Event of Default
described in Section 8(d) shall occur, repayment of the Loan shall immediately
be accelerated and the Note and the Loan evidenced thereby, and all other
Obligations of the Borrower to the Lender, shall become immediately due and
payable, all without notice of any kind. In the case of any other Event of
Default described in Section 8, the Lender or any other holder of the Note may
accelerate payment of the Note and declare the Note, and all other Obligations
of the Borrower to the Lender (if the Lender is then the holder of the Note
which is accelerated), due and payable, whereupon repayment of such Note, and
all other Obligations of the Borrower to the Lender (if the Lender is then the
holder of the Note), shall become immediately due and payable, all without
further notice of any kind. The Lender or any such other holder shall promptly
advise the Borrower of any such declaration, but failure to do so shall not
impair the effect of such declaration.
SECTION 10. WAIVER; AMENDMENTS. No delay on the part of the Lender in
the exercise of any right, power or remedy shall operate as a waiver thereof,
nor shall any single or partial exercise by any of them of any right, power or
remedy preclude any other or further exercise thereof, or the exercise of any
other right, power or remedy. No amendment, modification or waiver of, or
consent with respect to any of the provisions of this Agreement or the Note
shall be effective unless in writing and signed by the Lender.
SECTION 11. NOTICES. Any notice hereunder to the Borrower or the Lender
shall be in writing (including facsimiles) and, if delivered by facsimile or
hand shall be deemed to have been given when delivered to the recipient's
facsimile number or address, respectively, listed below, and if mailed, shall be
deemed to have been given three days after the date when sent by registered or
certified mail, postage prepaid, and addressed to the Borrower or the Lender at
their respective addresses shown below. The address and facsimile numbers listed
below, for purposes of this Section, may by written notice to the other party to
this Agreement, be changed from time to time as its address or facsimile for
such purpose. If either party provides notice by facsimile, it shall promptly
supply the recipient with an original of such written notice via hand delivery
or by registered or certified mail. The addresses and facsimile numbers referred
to are as follows:
As to the Lender: Mr. Michael Bonnet
Conseco, Inc.
745 Fifth Avenue, Suite 2700
New York, New York 10151
Fax: 212-980-6122
With a copies to: Mr. Christopher D. Long
Henderson, Daily, Withrow & DeVoe
2600 One Indiana Square
Indianapolis, Indiana 46204
Fax: 317-639-0191
and Mr. Richard R. Dykhouse
23
<PAGE>
Conseco, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
Fax: 317-817-3578
As to the Borrower: Ms. Mercedes Padin
General Counsel
NAL Acceptance Corporation
500 Cypress Creek Road, West, Suite 590
Ft. Lauderdale, Florida 33309
Fax: 954-489-0694
With a copy to: Ms. Judith Keiser
English, McCaughan & O'Bryan, P.A.
First Fort Lauderdale Place
100 N.E. Third Avenue, Suite 1100
Ft. Lauderdale, Florida 33301-1146
Fax: 954-763-2439
SECTION 12. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay or
reimburse the Lender on demand for all reasonable out-of-pocket costs and
expenses of the Lender (including reasonable attorneys' fees and legal expenses)
incurred by the Lender in connection with the enforcement of this Agreement or
any of the other Loan Documents. In addition, the Borrower agrees to pay, and to
save the Lender harmless from all liability for any stamp or similar documentary
or transaction taxes, or any intangibles tax, which may be payable in connection
with the execution or delivery of this Agreement, the borrowings hereunder, or
the issuance of the Note or of any other Loan Documents. All obligations
provided for in this Section shall survive any termination of this Agreement.
SECTION 13. CAPTIONS. Section captions used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
SECTION 14. GOVERNING LAW AND VENUE. This Agreement and all of the
other Loan Documents shall be construed as contracts made under and governed by
the laws of the State of Florida. All obligations of the Borrower and the rights
of the Lender expressed herein or any of the other Loan Documents shall be in
addition to and not in limitation of those provided by applicable law. Borrower
hereby irrevocably submits to the jurisdiction of an Indiana State or Federal
court sitting in Marion County or Hamilton County, Indiana, in any action or
proceeding arising out of or relating to this Agreement or the Loan Documents,
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such Indiana State court or, to the
extent permitted by law, in such Federal court. Borrower hereby irrevocably
waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum to the maintenance of such action or proceeding. Borrower
irrevocably consents to the service of any and all process in any action or
proceeding by the delivery of copies of such process to Borrower at the address
set forth in Section 11 of this Agreement.
24
<PAGE>
Borrower agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Section shall affect the
right of any party to service legal process in any other manner permitted by law
or affect the right of any party to bring any action or proceeding against any
other party or its property in the courts of other jurisdictions.
SECTION 15. NO JOINT VENTURE. Notwithstanding anything to the contrary
herein contained or implied, the Lender, by this Agreement, or by any action
pursuant hereto, shall not be deemed to be a partner of, or a joint venturer
with, the Borrower.
SECTION 16. SEVERABILITY. In the event any provision of this Agreement
or any of the Loan Documents shall be held invalid or unenforceable by any court
of competent jurisdiction, such holding shall not affect the validity,
enforceability or legality of the remaining provisions hereof or thereof, all of
which shall continue unaffected and unimpaired thereby.
SECTION 17. INDEMNIFICATION. Borrower covenants and agrees, at it sole
cost and expense, to indemnify, protect and save the Lender harmless against and
from any and all losses, claims, costs, damages, liabilities and expenses,
including, without limitation, all expenses of litigation or preparation
therefore (a "Loss"), of any kind or of any nature whatsoever (including,
without limitation, attorneys' and experts' fees and disbursements) which may at
any time be imposed upon, incurred by or asserted or awarded against the Lender
and arising from or out of any Hazardous Materials on, in, under, released from
Borrower's property in violation of any applicable Environmental Law or
affecting all or any portion of Borrower's property, or the enforcement of this
Agreement or the assertion by the Borrower of any defense to its obligations
hereunder, whether any of such matters arise before or after the foreclosure of
any Liens or the taking of title to all or any portion of the collateral by the
Lender. The Borrower shall further pay the Lender's expenses incurred in
connection with the cost of removal of any and all Hazardous Materials from all
or any portion of Borrower's Property and the additional costs required to take
necessary precautions to protect against the release of Hazardous Materials on,
in, or under such property, and the costs incurred to comply with Environmental
Laws in connection with all or any portion of such property. The indemnity set
forth herein shall be in addition to any other obligations of the Borrower to
the Lender hereunder or at common law or otherwise, and shall survive any
termination of this Agreement, the expiration of this Agreement and the payment
of all obligations thereunder. Payments by the Borrower under this Section 17
shall not reduce any other obligations.
SECTION 18. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the Borrower and the Lender and their respective successors and assigns,
and shall inure to the benefit of the Borrower and the Lender and the respective
successors and assigns of the Lender. This Agreement and the Loan Documents are
assignable by the Lender at any time.
SECTION 19. JURY WAIVER. The Lender and the Borrower after consulting
or having had the opportunity to consult with counsel, knowingly, voluntarily
and intentionally waive any right either of them may have to a trial by jury in
any litigation based upon or arising out of this Agreement or any other Loan
Document or any course of conduct, dealing, statements
25
<PAGE>
(whether oral or written), or actions of either of them. Neither the Lender nor
the Borrower shall seek to consolidate, by counterclaim or otherwise, any action
in which a jury trial has been waived with any other action which a jury trial
cannot be or has not been waived. These provisions shall not be deemed to have
been modified in any respect or relinquished by either the Lender or the
Borrower except by a written instrument executed by both of them.
SECTION 20. COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may
be executed in counterparts, each of which shall be deemed an original and all
of which shall be deemed one and the same document. This Agreement
and all Loan Documents may be executed by facsimile signatures.
[the remainder of this page intentionally left blank]
26
<PAGE>
Executed and delivered at ___________________________ on June 23,
1997.
CONSECO PRIVATE CAPITAL GROUP, INC. NAL ACCEPTANCE CORPORATION
By: /s/ Ngaire E. Cuneo By: /s/ Robert R. Bartolini
---------------------------- -------------------------------
Ngaire E. Cuneo Robert R. Bartolini
President Chief Executive Officer
27
FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment to Credit Agreement (the "First Amendment") is entered
into by and between NAL ACCEPTANCE CORPORATION, a Florida corporation (the
"Borrower"), and CONSECO PRIVATE CAPITAL GROUP, INC., an Indiana corporation
(the "Lender").
Recitals
A. Borrower and Lender are parties to a Credit Agreement dated June 23,
1997 (the "Credit Agreement").
B. The Borrower is facing a material liquidity issue, and desires immediate
short term financing from the Lender by increasing the amount of the Loan under
the Credit Agreement.
C. The Lender desires to make such additional loan, provided that certain
features of the convertible debentures of Borrower's Parent Corporation be
modified in order for Lender, or its affiliates, to consider ownership in the
Parent Corporation without being subject to market fluctuations, all as more
specifically provided hereinafter.
D. The terms used in this First Amendment with their initial letters
capitalized and which are not defined herein shall have the meanings ascribed to
them in the Credit Agreement.
Amendment
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual
covenants contained herein, and each act done pursuant thereto, the parties
hereby agree as follows:
1. The following definitions hereby supersede and replace the corresponding
definitions set forth in Section 1(b) of the Credit Agreement, as follows:
"Loan" means, collectively, unless the context otherwise requires, the
Original Loan in the amount of $5,000,000 advanced by the Lender to the
Borrower pursuant to Section 2(a)(i) hereof and the Working Capital Loan in
an amount not to exceed $5,000,000 advanced by Lender to Borrower pursuant
to Section 2(a)(ii) hereof.
"Maturity" with respect to the Original Loan means the earlier of (i)
December 31, 1997, (ii) the date of an Equity Infusion (other than by
Lender or its Affiliates), or (iii) upon a Change in Control of the Parent
Corporation; at which time all Advances under the Original Loan shall be
due and payable; and with respect to the Working Capital Loan means October
1, 1997.
<PAGE>
"Note" means, collectively, the promissory notes evidencing the Loan
as used in Section 2(a)(i)(C) and Section 2(a)(ii)(C), and any other
promissory note made by Borrower payable to Lender as may be outstanding
from time to time."
2. The following definition is hereby added to and included in Section 1(b)
of the Credit Agreement in alphabetical order within such section:
""Filing Approval" means the expiration of the waiting period under
the Hart-Scott-Rodino Act with respect to a filing made by Conseco, Inc.
concerning its acquisition of control of the Parent Corporation.
"Original Loan" means the Loan in the amount of $5,000,000 advanced by
the Lender to the Borrower pursuant to Section 2(a)(i) hereof.
"Working Capital Loan" shall be the loan advanced to Borrower by
Lender pursuant to Section 2(a)(ii) hereof."
3. Section 2(a)(ii) is hereby added to the Credit Agreement as follows:
"(ii) Working Capital Loan. From the date of the First Amendment and
until the close of business on the date of the Filing Approval, the Lender
will make Advances in addition to the Original Loan from time to time to
the Borrower, in amounts not exceeding the aggregate principal amount at
any time outstanding of Five Million Dollars ($5,000,000), upon the terms
and conditions hereinafter stated.
The making of the Advances shall be subject to the further provisions
of this Section 2, provided that Advances under the working Capital Loan
shall not be subject to the conditions of lending stated in Section 7 and
the Officer's Certificate may be subject to Events of Default caused by the
financial condition of the Borrower. Each Advance shall be on the terms and
subject to the conditions hereinafter stated. After the Filing Approval,
the Lender shall not be required to make any further Advances under the
Working Capital Loan.
(A) Interest. The Working Capital Loan shall bear the rate of
interest on the Loan set forth in Section 2(a)(i)(A) of this Credit
Agreement. After maturity, whether by acceleration or upon Maturity as
hereinafter provided, until paid in full, or when and so long as there
shall exist any uncured Default, the Working Capital Loan shall bear
interest at a rate equal to three percent (3%) per annum of the
otherwise applicable rate (calculated on the basis that an entire
year's interest is earned in 360 days). Interest shall be due and
payable at Maturity on October 1, 1997.
2
<PAGE>
(B) Maturity. The Working Capital Loan and all accrued interest
thereon shall be payable in full immediately upon Maturity on October
1, 1997.
(C) Method of Borrowing. The obligations of the Borrower to repay
the Working Capital Loan shall be evidenced by a promissory note
attached as Exhibit "C-1" and made a part hereof. The principal amount
of the Working Capital Loan outstanding from time to time shall be
determined by reference to the books and records of the Lender and all
payments by Borrower on account of the Working Capital Loan shall be
recorded. Such books and records shall be deemed prima facie to be
correct as to such matters absent manifest error. The principal may be
prepaid in part or in whole without premium or penalty, provided that
such prepayments shall not be re-advanced by Lender.
(D) Use of Proceeds. The Advances under the Working Capital Loan
may only be used by the Borrower to pay working capital expenditures
necessary to maintain the operations of the Borrower in the normal
course of business, such as payroll expenses, taxes, rent, payments to
repossession contractors and utilities, and any other expenses must be
approved by the Lender. The Borrower shall provide the Lender with
such reports requested by Lender showing the use of Advances."
4. The Borrower is herewith entering into the Note in the form attached
hereto as Exhibit "C-1".
5. The following Section 2(f) is hereby added to the Credit Agreement
immediately following Section 2(e) therein:
"(f) Extensions of Loan. If the Filing Approval is obtained
prior to the Maturity of the Working Capital Loan, then the Lender may,
in its sole discretion and at the request of the Borrower, extend the
Maturity of the Original Loan and/or the Working Capital Loan for one
or more successive periods of six (6) months each, provided that any
such extension must be evidenced by a writing executed on behalf of the
Lender. Any such extensions shall be conditioned upon the Borrower
having delivered to the Lender on or prior to the applicable Maturity a
new promissory note acceptable to the Lender to replace the Existing
Note, and any other documents requested by the Lender. Reference is
made to that certain Investment Agreement by and between Conseco, Inc.,
and the Parent Corporation of even date herewith, and the Lender agrees
to the renewal obligations in paragraph 4 therein, subject to the terms
and conditions of such Agreement."
6. This First Amendment and the making of the Working Capital Loan is
conditioned upon the amendment to the 9% Subordinated Convertible Debenture
issued to Beneficial Standard Life Insurance Company in the amount of $5,000,000
and the amendment to
3
<PAGE>
the 9% Subordinated Convertible Debenture dated April 23, 1996, issued to Great
American Reserve Insurance Company in the amount of $5,000,000, both payable by
the Parent Corporation, to provide that the conversion price therein is equal to
Thirty-Two Cents (32(cent)) per share effective upon the Filing Approval. In
addition, the Parent Corporation shall agree to set the conversion price at
Thirty-Two Cents (32(cent)) per share with respect to convertible debentures
currently held by Merrill Lynch World Income Fund, Inc., and Merrill Lynch
Convertible Fund, Inc., and Thirty Cents (30(cent)) per share for all other
convertible debentures as may be acquired by the Lender or its Affiliates from
other convertible debenture holders, all as shown on Exhibit "I-1" attached
hereto, upon such acquisition and the Filing Approval. The Parent Corporation
and its Board of Directors shall consent to the transfer of such debentures to
the Lender or its Affiliates and any exercise of the conversion rights therein,
and the parties shall promptly file and cooperate in any Hart-Scott Rodino
filing deemed necessary by the Lender. The foregoing shall be agreed to by the
Parent Corporation pursuant to the Investment Agreement.
7. The Borrower represents and warrants that to the best of its knowledge,
the projections attached hereto as Exhibit "H-1" are accurate and were prepared
on the basis of assumptions, data, information, tests or other conditions
believed to be valid and accurate.
8. The Working Capital Loan shall be secured by the Loan Documents which
shall remain unamended and in full force and effect. This First Amendment shall
not act to release, diminish or in any manner whatsoever, adversely affect the
Lender's security interest in, to or against any property of the Borrower
created by the Loan Documents, and shall be construed so as to sustain the
validity of such security interest. Except as expressly herein provided, the
Credit Agreement and this First Amendment shall be interpreted wherever possible
in a manner consistent with one another, but in the event of any irreconcilable
inconsistency, this First Amendment shall control.
9. The Borrower shall pay all costs incidental to this First Amendment,
including, but not limited to, attorneys' fees and other legal and documentation
expenses, and any and all other incidental expenses of the Lender in connection
with the amendment of the Credit Agreement as provided herein.
10. This First Amendment is subject to the Lender receiving
contemporaneously (except as indicated below) with the execution of this First
Amendment, the following, each duly executed, dated the date of this First
Amendment and in form and substance satisfactory to Lender:
(a) A certified copy of the resolutions of the Board of Directors of
the Borrower and the Parent Corporation, authorizing the execution,
delivery and performance of this First Amendment and the transactions
contemplated thereby to be furnished by noon August 25, 1997;
(b) Opinion of counsel to the Borrower and Parent Corporation
acceptable to Lender to be furnished by noon August 25, 1997;
4
<PAGE>
(c) The Note evidencing the Working Capital Loan; and
(d) The Investment Agreement required in paragraph 6 of this
Agreement.
11. This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which shall be deemed one and the same document.
This Agreement and all corresponding Loan Documents may be executed by facsimile
signatures.
5
<PAGE>
IN WITNESS WHEREOF, the parties have caused this First Amendment to be duly
executed on their behalf all as of the day and year first above written.
NAL ACCEPTANCE CORPORATION
By:
------------------------------------
Printed:
-------------------------------
Title:
---------------------------------
CONSECO PRIVATE CAPITAL GROUP, INC.
By:
------------------------------------
Ngaire E. Cuneo, President
6
<PAGE>
EXHIBIT "C-1"
<PAGE>
EXHIBIT "I-1"
List of Other Convertible Debentureholders
<TABLE>
<CAPTION>
DEBENTURE ISSUE DATE LENDER AMOUNT CONVERSION PRICE
- ------------ -------------- ------------------- ---------- ----------------
<S> <C> <C> <C> <C>
Subordinated Sept. 12, 1996 Merrill Lynch World $2,750,000 32'
Convertible Income Fund, Inc.
Debenture
Subordinated Sept. 12, 1996 Merrill Lynch $2,250,000 32'
Convertible Convertible Fund, Inc.
Debenture
9% Convertible Nov. 30, 1995 Westminster Capital, Inc. $1,250,000 30'
Subordinated (Belzburg)
Debenture
9% Convertible Jan. 29, 1996 Michael Karp $2,500,000 30'
Subordinated
Debenture
9% Convertible July 14, 1995 Florence Karp C/F $1,000,000 30'
Subordinated Penelope & Athena Karp
Debenture (assigned to Michael Karp)
9% Convertible July 28, 1995 Florence Karp C/F $1,000,000 30'
Subordinated Penelope & Athena Karp
Debenture (assigned to Michael Karp)
9% Convertible Aug. 22, 1995 Florence Karp C/F $1,000,000 30'
Subordinated Penelope & Athena Karp
Debenture (assigned to Michael Karp)
</TABLE>
<PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT
This Second Amendment to Credit Agreement (the "Second Amendment") is
entered into by and between NAL ACCEPTANCE CORPORATION, a Florida corporation
(the "Borrower"), and CONSECO PRIVATE CAPITAL GROUP, INC., an Indiana
corporation (the "Lender") as of the 1st day of October, 1997.
Recitals
A. Borrower and Lender are parties to a Credit Agreement dated June 23,
1997, as amended by that certain First Amendment to Credit Agreement dated
August 21, 1997 (as amended, the "Credit Agreement").
B. Parties desire to extend the Maturity of the Original Loan and Working
Capital Loan until April 1, 1998, all as more specifically provided hereinafter.
C. The terms used in this Second Amendment with their initial letters
capitalized and which are not defined herein shall have the meanings ascribed to
them in the Credit Agreement.
Amendment
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual
covenants contained herein, and each act done pursuant thereto, the parties
hereby agree as follows:
1. The following definition hereby supersedes and replaces the
corresponding definition set forth in Section 1(b) of the Credit Agreement, as
follows:
"Maturity" with respect to the Original Loan and the Working Capital
Loan means April 1, 1998.
2. The Borrower is herewith entering into the First Replacement Promissory
Note (Original Loan) and the First Replacement Promissory Note (Working Capital
Loan), in the forms attached hereto as Replacement Exhibit "C" and Replacement
Exhibit "C-1", respectively, to evidence the Original Loan and Working Capital
Loan with the new Maturity as defined in Section 1 of this Second Amendment, and
to supersede and replace such Exhibits to the Credit Agreement.
3. This Second Amendment shall not act to release, diminish or in any
manner whatsoever, adversely affect the Lender's security interest in, to or
against any property of the Borrower created by the Loan Documents, and shall be
construed so as to sustain the validity of such security interest. Except as
expressly herein provided, the Credit Agreement and this Second Amendment shall
be interpreted wherever possible in a manner consistent with one another, but in
the event of any irreconcilable inconsistency, this Second Amendment shall
control.
<PAGE>
4. The Borrower shall pay all costs incidental to this Second Amendment,
including, but not limited to, attorneys' fees and other legal and documentation
expenses, and any and all other incidental expenses of the Lender in connection
with the amendment of the Credit Agreement as provided herein.
5. This Second Amendment is subject to the Lender receiving
contemporaneously with the execution of this Second Amendment, the following,
each duly executed, dated the date of this Second Amendment and in form and
substance satisfactory to Lender:
(a) A certified copy of the resolutions of the Board of Directors of
the Borrower authorizing the execution, delivery and performance of this
Second Amendment; and
(b) The Replacement Note evidencing the Original Loan and Working
Capital Loan.
6. This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which shall be deemed one and the same document.
This Agreement and all corresponding Loan Documents may be executed by facsimile
signatures.
IN WITNESS WHEREOF, the parties have caused this Second Amendment to be
duly executed on their behalf all as of the day and year first above written.
NAL ACCEPTANCE CORPORATION
By: /s/ Robert R. Bartolini
------------------------------------
Printed: Robert R. Bartolini
-------------------------------
Title: Chief Executive Officer
---------------------------------
CONSECO PRIVATE CAPITAL GROUP, INC.
By: /s/ Rollin M. Dick
-------------------------------
Printed: Rollin M. Dick
--------------------------
Title: Exec. Vice Pres. & CFO
----------------------------
<PAGE>
REPLACEMENT EXHIBIT "C"
FIRST REPLACEMENT PROMISSORY NOTE
(Original Loan)
$5,000,000.00 Indianapolis, Indiana
Date: October 1, 1997
On or before Maturity, NAL ACCEPTANCE CORPORATION, a Florida corporation
(the "Maker"), promises to pay to the order of CONSECO PRIVATE CAPITAL GROUP,
INC., an Indiana corporation (the "Payee"), at 11825 Pennsylvania Street,
Carmel, Indiana, 46032, the outstanding principal sum of Five Million Dollars
($5,000,000.00) or so much of the principal amount of the Loan represented by
this Note as may be disbursed and outstanding by the Payee under the terms of
the Credit Agreement described below, and to pay interest on the unpaid
principal balance outstanding from time to time until Maturity, as herein
provided.
This Note evidences indebtedness incurred or to be incurred by the Maker
under a loan extended to the Maker by the Payee under a Credit Agreement dated
June 23, 1997, as amended by that First Amendment to Credit Agreement dated
August 21, 1997, and the Second Amendment to Credit Agreement of even date
herewith (as the same may be amended from time to time, the "Credit Agreement")
between Maker and Payee, which loan is referred to in the Credit Agreement as
the "Original Loan". All capitalized and designated terms in this Note shall
have the meanings ascribed to them in the Credit Agreement. The principal amount
of the Loan outstanding from time to time shall be determined by reference to
the books and records of the Payee on which all Advances under the Loan and all
payments by the Maker on account of the Loan shall be recorded. Such books and
records shall be deemed prima facie to be correct as to such matters absent
manifest error.
Interest on the unpaid portion of the principal balance of the Loan
outstanding from time to time, until maturity, whether by acceleration or
otherwise, will accrue at the LIBOR Rate, as provided in the Credit Agreement;
provided, however, interest may accrue in certain circumstances at the per annum
rate equal to the Base Rate, as provided in the Credit Agreement. After
maturity, whether by acceleration or otherwise, interest on the unpaid principal
balance of the Loan will accrue at Three Percent (3%) per annum above the
otherwise applicable rate.
Interest on the outstanding balance under this Note will be compounded
monthly on the first day of each month commencing with July 1, 1997, and
continuing on the first day of each consecutive month thereafter and at
Maturity. Accrued interest will be due and payable quarterly commencing on
September 30, 1997, and at the end of each fiscal quarter thereafter and at
Maturity.
<PAGE>
The entire principal balance of this Note shall be due and payable together
with accrued interest at Maturity. Principal may be prepaid only as provided in
the Credit Agreement and any such voluntary prepayment shall be applied first to
accrued interest and then to principal installments in their inverse order of
maturity. Principal shall also be prepaid as provided in Section 2(a)(i)(D) of
the Credit Agreement.
Receipt of a check or other item of payment in itself shall not constitute
payment. A payment by check and other item of payment shall, for the purpose of
determining the outstanding principal balance and calculating interest, be
credited (conditional upon final collection) after allowing one (1) Banking Day
for collection. Acceptance by the Payee of any payment which is less than full
payment of the amount due and owing or which is not in immediately available
funds shall not constitute a waiver of the Payee's right to receive payment in
full at such or at any other time in immediately available funds.
All amounts payable under the terms of this Note shall be payable with
attorneys' fees and without notice or protest.
This Note is issued pursuant to, is entitled to the benefit of, and is
subject to the provisions of the Credit Agreement, to which reference is made
hereby for, among other things, the definition of certain proper nouns used
herein, procedures to determine and requirements for interest and principal
payments and prepayments, for a statement of any security for the indebtedness
evidenced hereby, procedures for making Advances and for a statement of
provisions for acceleration of the maturity hereof upon the happening of certain
stated events.
The rights and remedies provided in this Note and the Credit Agreement are
cumulative, are in addition to any other right or remedy of Payee, and may be
exercised successively, concurrently or alternatively. Failure to exercise any
such right or remedy shall not operate as a waiver thereof.
The Maker and any endorsers or guarantors severally waive demand,
presentment for payment and notice of nonpayment of this Note, and each of them
consents to any renewals or extensions of the time of payment hereof without
notice.
If more than one party shall execute this Note, the term Maker as used
herein shall mean all parties signing this Note and each of them, and all such
parties, shall be the jointly and severally obligated and liable hereunder.
If any payment is not paid when due, or if default occurs under the Credit
Agreement or the Loan Documents, after any applicable grace period set forth in
the Credit Agreement or the Loan Documents, the holder may, at its option, after
the giving of any notice and the lapse of any period of grace afforded to Maker
thereunder declare the principal balance of this Note and all accrued interest
immediately due and payable, irrespective of the maturity date specified herein,
with interest thereon from the date of such default at the default rate
specified herein, all without relief from valuation or appraisement laws.
2
<PAGE>
This Note is made under and will be governed by the laws of the State of
Florida.
The Payee and the Maker, after consulting or having had the opportunity to
consult with counsel, knowingly, voluntarily and intentionally waive any right
either of them may have to a trial by jury in any litigation based upon or
arising out of this Note, the Credit Agreement, the Loan Documents, or any
related instrument or agreement or any of the transactions contemplated by this
Note or any course of conduct, dealing, statements (whether oral or written), or
actions of either of them. Neither the Payee nor the Maker shall seek to
consolidate, by counterclaim or otherwise, any action in which a jury trial has
been waived with any other action in which a jury trial cannot be or has not
been waived. These provisions shall not be deemed to have been modified in any
respect or relinquished by either the Payee or the Maker except by a written
instrument executed by both of them.
This Note supersedes and replaces that certain Promissory Note dated June
23, 1997, from Maker to Payee in the original principal amount of Five Million
Dollars ($5,000,000) Notice of acceptance of this Note in replacement thereof is
hereby waived.
IN WITNESS WHEREOF, Maker has executed this Note at __________________,
__________________ as of the date first hereinabove written.
NAL ACCEPTANCE CORPORATION
By:
-------------------------------
Printed:
--------------------------
Title:
----------------------------
3
<PAGE>
REPLACEMENT EXHIBIT "C-1"
FIRST REPLACEMENT PROMISSORY NOTE
(Working Capital Loan)
$5,000,000 Indianapolis, Indiana
Date: October 1, 1997
On or before Maturity, NAL ACCEPTANCE CORPORATION, a Florida corporation
(the "Maker"), promises to pay to the order of CONSECO PRIVATE CAPITAL GROUP,
INC., an Indiana corporation (the "Payee"), at 11825 Pennsylvania Street,
Carmel, Indiana, 46032, the outstanding principal sum of Five Million Dollars
($5,000,000) or so much of the principal amount of the Working Capital Loan
represented by this Note as may be disbursed and outstanding by the Payee under
the terms of the Credit Agreement described below, and to pay interest on the
unpaid principal balance outstanding from time to time until Maturity, as herein
provided.
This Note evidences indebtedness incurred or to be incurred by the Maker
under a loan extended to the Maker by the Payee under a Credit Agreement dated
June 23, 1997, as amended by that certain First Amendment to Credit Agreement
dated August 21, 1997, and the Second Amendment to Credit Agreement of even date
herewith (as the same may be amended from time to time, the "Credit Agreement")
between Maker and Payee, which loan is referred to in the Credit Agreement as
the "Working Capital Loan". All capitalized and designated terms in this Note
shall have the meanings ascribed to them in the Credit Agreement. The principal
amount of the Working Capital Loan outstanding from time to time shall be
determined by reference to the books and records of the Payee on which all
Advances under the Working Capital Loan and all payments by the Maker on account
of the Working Capital Loan shall be recorded. Such books and records shall be
deemed prima facie to be correct as to such matters absent manifest error.
Interest on the unpaid portion of the principal balance of the Working
Capital Loan outstanding from time to time, until maturity, whether by
acceleration or otherwise, will accrue at the LIBOR Rate, as provided in the
Credit Agreement; provided, however, interest may accrue in certain
circumstances at the per annum rate equal to the Base Rate, as provided in the
Credit Agreement. After maturity, whether by acceleration or otherwise, interest
on the unpaid principal balance of the Working Capital Loan will accrue at Three
Percent (3%) per annum above the otherwise applicable rate.
Interest on the outstanding balance under this Note will be compounded
monthly on the first day of each month commencing with September 1, 1997, and
continuing on the first day of each consecutive month thereafter and upon
Maturity. Accrued interest will be due and payable quarterly commencing on
September 30, 1997, and at the end of each fiscal quarter, if any, thereafter
and upon Maturity.
The entire principal balance of this Note shall be due and payable together
with accrued interest at Maturity.
Receipt of a check or other item of payment in itself shall not constitute
payment. A payment by check and other item of payment shall, for the purpose of
determining the outstanding principal balance and calculating interest, be
credited (conditional upon final collection) after allowing one (1) Banking Day
for collection. Acceptance by the Payee of any payment which is less than full
payment of the amount due and owing or which is not in immediately available
funds shall not constitute a waiver of the Payee's right to receive payment in
full at such or at any other time in immediately available funds.
<PAGE>
All amounts payable under the terms of this Note shall be payable with
attorneys' fees and without notice or protest.
This Note is issued pursuant to, is entitled to the benefit of, and is
subject to the provisions of the Credit Agreement, to which reference is made
hereby for, among other things, the definition of certain proper nouns used
herein, procedures to determine and requirements for interest and principal
payments and prepayments, and for a statement of any security for the
indebtedness evidenced hereby. The Working Capital Loan evidenced hereby
constitutes a portion of the "Loan" as defined in the Credit Agreement, payment
of which is secured by the Loan Documents.
The rights and remedies provided in this Note and the Credit Agreement are
cumulative, are in addition to any other right or remedy of Payee, and may be
exercised successively, concurrently or alternatively. Failure to exercise any
such right or remedy shall not operate as a waiver thereof.
The Maker and any endorsers or guarantors severally waive demand,
presentment for payment and notice of nonpayment of this Note, and each of them
consents to any renewals or extensions of the time of payment hereof without
notice.
If more than one party shall execute this Note, the term Maker as used
herein shall mean all parties signing this Note and each of them, and all such
parties shall be jointly and severally obligated and liable hereunder.
If any payment is not paid when due, or if default occurs under the Credit
Agreement or the Loan Documents occurs and is continuing after any applicable
grace period set forth in the Credit Agreement or the Loan Documents, the holder
may, at its option, declare the principal balance of this Note and all accrued
interest immediately due and payable, with interest thereon from the date of
such default at the default rate specified herein, all without relief from
valuation or appraisement laws.
This Note is made under and will be governed by the laws of the State of
Florida.
The Payee and the Maker, after consulting or having had the opportunity to
consult with counsel, knowingly, voluntarily and intentionally waive any right
either of them may have to a trial by jury in any litigation based upon or
arising out of this Note, the Credit Agreement, the Loan Documents, or any
related instrument or agreement or any of the transactions contemplated by this
Note or any course of conduct, dealing, statements (whether oral or written), or
actions of either of them. Neither the Payee nor the Maker shall seek to
consolidate, by counterclaim or otherwise, any action in which a jury trial has
been waived with any other action in which a jury trial cannot be or has not
been waived. These provisions shall not be deemed to have been modified in any
respect or relinquished by either the Payee or the Maker except by a written
instrument executed by both of them.
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<PAGE>
This Note supersedes and replaces that certain Promissory Note dated August
21, 1997 from Maker to Payee in the original principal amount of Five Million
Dollars ($5,000,000). Notice of acceptance of this Note in replacement thereof
is hereby waived.
IN WITNESS WHEREOF, Maker has executed this Note at __________________,
__________________ as of the date first hereinabove written.
NAL ACCEPTANCE CORPORATION
By:
-------------------------------
Printed:
--------------------------
Title:
----------------------------
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<PAGE>
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
This AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this "Amendment") made
and entered into as of this 1st day of October, 1997 by and among NAL FINANCIAL
GROUP INC., a Delaware corporation (the "Company"), BENEFICIAL STANDARD LIFE
INSURANCE COMPANY ("BSLIC"), GREAT AMERICAN RESERVE INSURANCE COMPANY ("GARCO")
and CIHC, INC. ("CONSECO"), amends that certain Registration Rights Agreement,
dated April 23, 1996, by and among the Company, BSLIC and GARCO (the
"Registration Rights Agreement").
WHEREAS, the Company has created a class of authorized Preferred Stock,
$.01 par value, of the Company designated "Series A Preferred Stock," the shares
of which have voting powers, preferences and other specials rights as more fully
set forth in the Certificate of Designation of Series A Preferred Stock of NAL
Financial Group Inc., of even date herewith (the "Certificate of Designation");
WHEREAS, the shares of Series A Preferred Stock (the "Series A Shares")
are convertible into shares of the Company's Common Stock in accordance with the
provisions of the Certificate of Designation;
WHEREAS, the holders of the Series A Shares may elect, in accordance
with the provisions of the Certificate of Designation, to receive dividend
payments thereon in the form of shares of the Company's Common Stock; and
WHEREAS, the parties hereto desire to amend the Registration Rights
Agreement to add the holder of the Series A Shares as a Holder and to provide
that any shares of Common Stock received by such Holder upon either the
conversion of Series A Shares or as a dividend payment on Series A Shares shall
be subject to registration rights identical to those afforded Registrable
Securities (as such term is defined in the Registration Rights Agreement) in the
Registration Rights Agreement.
NOW, THEREFORE, for and in consideration of the premises set forth above
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged and confessed, the parties hereto agree as follows:
1. The definition of the term "Common Stock" set forth in the Registration
Rights Agreement is hereby amended and restated in its entirety to read as
follows:
"Common Stock" means any outstanding shares of Common Stock of the
Company, as well as any shares of Common Stock of the Company issuable either
(i) upon the conversion of the Debentures or Series A Shares, or (ii) as a
dividend payment on the Series A Shares.
<PAGE>
2. The definition of the term "Holders" set forth in the Registration
Rights Agreement is hereby amended and restated in its entirety to read as
follows:
"Holders" means CIHC, Incorporated for so long as (and to the extent
that) they own any Registrable Securities, and each of their successors,
assigns, and direct and indirect transferees who become registered owners of
Registrable Securities or securities exercisable, exchangeable or convertible
into Registrable Securities.
3. The definition of the term "Registrable Security(ies)" set forth in the
Registration Rights Agreement is hereby amended and restated in its
entirety to read as follows:
"Registrable Security(ies)" means all or any portions of any shares of
Common Stock or other equity securities of the Company that may be issued upon
the conversion of, or as a dividend payment on, the Series A Shares, or upon the
conversion of, or in exchange for, the Debentures, and any additional shares of
Common Stock or other equity securities of the Company issued or issuable after
the date hereof in respect of any such securities (or other equity securities
issued in respect thereof) by way of a stock dividend or stock split, in
connection with a combination, exchange, reorganization, recapitalization or
reclassification of Company securities, or pursuant to a merger, division,
consolidation or other similar business transaction or combination involving the
Company; provided that: as to any particular Registrable Securities, such
securities shall cease to constitute Registrable Securities (i) when a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of thereunder, or (ii) when and to the extent such securities are
permitted to be distributed pursuant to Rule 144 (or any successor provision to
such Rule) under the Securities Act or are otherwise freely transferable to the
public without further registration under the Securities Act and are not subject
to any limitations on the amount of sales under Rule 144 or (iii) when such
securities shall have ceased to be Outstanding and, in the case of clause (ii),
the Company shall, if requested by the Holder or Holders thereof, have delivered
to such Holder or Holders the written opinion of independent counsel to the
Company to such effect. Any time this Agreement requires the vote or consent of
the Holders of a "majority" or other stated percentage of the Registrable
Securities, the term Registrable Securities shall, solely for purposes of
calculating such vote, be deemed to include only the Registrable Securities then
issuable under the Debentures, the Series A Preferred Shares, and any other
securities exercisable or exchangeable for, or convertible into, Registrable
Securities.
4. A definition of the term "Series A Shares" shall be added to Article 1
of the Registration Rights Agreement to read as follows:
"Series A Shares" means shares of the Company's preferred stock
designated as "Series A Preferred Stock," which have voting powers, preferences
and other specials rights as more fully set forth in the Certificate of
Designation of Series A Preferred Stock of NAL Financial Group Inc., dated as of
October 1, 1997.
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<PAGE>
5. The notice address for Stephen M. Cohen, Esquire set forth in Article
10(d) of the Registration Rights Agreement is hereby amended to read as
follows:
Stephen M. Cohen, Esquire
Buchanan Ingersoll Professional Corporation
Eleven Penn Center, 14th Floor
1835 Market Street
Philadelphia, PA 19103
6. The Notice Schedule attached to the Registration Rights Agreement is
hereby amended as set forth on Exhibit A attached hereto.
7. Except as otherwise provided herein, the terms of the Registration
Rights Agreement shall remain in full force and effect.
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<PAGE>
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
have executed this Amendment as of the date first written above.
NAL FINANCIAL GROUP INC.
By: /s/ Robert R. Bartolini
---------------------------------------
Name: Robert R. Bartolini
--------------------------------
Title: Chairman & CEO
--------------------------------
GREAT AMERICAN RESERVE
INSURANCE COMPANY
By: /s/ Donald F. Gangaware
---------------------------------------
Name: Donald F. Gangaware
--------------------------------
Title: President
-------------------------------
BENEFICIAL STANDARD LIFE INSURANCE
COMPANY
By: /s/ Rollin M. Dick
-----------------------------------------
Name: Rollin M. Dick
----------------------------------
Title: Executive Vice President and
Chief Financial Officer
----------------------------------
CIHC, INCORPORATED
By: /s/ David A. Hill
-----------------------------------------
Name: David A. Hill
----------------------------------
Title: Vice President
---------------------------------
4
<PAGE>
EXHIBIT A
NOTICE SCHEDULE:
5
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE HOLDER
IN CONNECTION WITH A CREDIT AGREEMENT DATED JUNE 23, 1997 BY AND BETWEEN NAL
ACCEPTANCE CORPORATION AND CONSECO PRIVATE CAPITAL GROUP, INC., AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF
EXEMPTION FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED
ON AN OPINION LETTER OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION."
WARRANT TO PURCHASE COMMON STOCK
OF
NAL FINANCIAL GROUP INC.
Void after June 23, 2002
WHEREAS, Conseco, Inc. ("Conseco" or "Holder") has arranged for Conseco
Private Capital Group, Inc. to provide $5,000,000 of financing to NAL Acceptance
Corporation, a wholly-owned subsidiary of NAL Financial Group Inc., a Delaware
corporation (the "Company") pursuant to the terms of a Credit Agreement, as of
the date hereof, by and among Conseco Private Capital Group, Inc. and NAL
Acceptance Corporation.
WHEREAS, for value received, Conseco, is entitled, subject to the terms set
forth below, to purchase from the Company, shares of the Common Stock of the
Company (the "Shares"), as constituted on the date hereof (the "Warrant Issue
Date"), with the Notice of Exercise attached hereto duly executed, and
simultaneous payment therefor in lawful money of the United States, at the
Exercise Price as set forth in Section 2 below. The number, character and
Exercise Price of the shares are subject to adjustment as provided below.
1. Term of Warrant. This Warrant shall be exercisable, in whole or in part,
during the term commencing on the Warrant Issue Date and ending at 5:00 p.m. on
June 23, 2002, and shall be void thereafter.
2. Exercise Price and Number of Shares.
2.1 Exercise Price. The Exercise Price at which this Warrant may be
exercised shall be $.15 per share of common stock, as adjusted pursuant to
Section 11 hereof.
2.2 Number of Shares. The number of shares of the Company's Common
Stock, $.15 par value per share ("Common Stock") which may be purchased pursuant
to this Warrant shall be 257,000 shares, as adjusted pursuant to Section 11
hereof.
3. Exercise of Warrant.
(a) The purchase rights represented by this Warrant are exercisable by
the Holder in whole or in part, at any time, or from time to time, by the
surrender of this Warrant and the Notice of Exercise annexed hereto duly
completed and executed on behalf of the Holder, at
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<PAGE>
the office of the Company (or such other office or agency of the Company
as it may designate by notice in writing to the Holder at the address of the
Holder appearing on the books of the Company), upon payment in cash or by check
acceptable to the Company.
(b) This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise as
provided above, and the person entitled to receive the shares of Common Stock
issuable upon such exercise shall be treated for all purposes as the holder of
record of such shares as of the close of business on such date. As promptly as
practicable on or after such date and in any event within ten (10) days
thereafter, the Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or certificates for the
number of shares issuable upon such exercise. In the event that this Warrant is
exercised in part, the Company at its expense will execute and deliver a new
Warrant of like tenor exercisable for the number of shares for which this
Warrant may then be exercised.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
5. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor and amount.
6. Rights of Stockholders. Subject to Sections 9 and 11 of this Warrant
and the provisions of any other written agreement between the Company and the
Holder, the Holder shall not be entitled to vote or receive dividends or be
deemed the holder of Common Stock or any other securities of the Company that
may at any time be issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock, change
of par value, or change of stock to no par value, consolidation, merger,
conveyance or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised as provided herein.
7. Transfer of Warrant.
7.1. Exchange of Warrant Upon a Transfer. On surrender of this Warrant
for exchange, properly endorsed, the Company at its expense shall issue to or on
the order of the Holder a new warrant or warrants of like tenor, in the name of
the Holder or as the Holder (on
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<PAGE>
payment by the Holder of any applicable transfer taxes) may direct, of
the number of shares issuable upon exercise hereof.
7.2. Compliance with Securities Laws; Restrictions on Transfers.
(a) The Holder of this Warrant, by acceptance hereof, acknowledges
that this Warrant and the Shares to be issued upon exercise hereof are
being acquired solely for the Holder's own account and not as a nominee for any
other party, and for investment, and that the Holder will not offer, sell or
otherwise dispose of this Warrant or any Shares to be issued upon exercise
hereof except under circumstances that will not result in a violation of
applicable federal and state securities laws. Upon exercise of this Warrant, the
Holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the shares of Common Stock so purchased are
being acquired solely for the Holder's own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or resale.
(b) Neither this Warrant nor any share of Common Stock issued upon
exercise of this Warrant may be offered for sale or sold, or otherwise
transferred or sold in any transaction which would constitute a sale thereof
within the meaning of the Securities Act of 1933, as amended (the "1933 Act"),
unless (i) such security has been registered for sale under the 1933 Act and
registered or qualified under applicable state securities laws relating to the
offer an sale of securities, or (ii) exemptions from the registration
requirements of the 1933 Act and the registration or qualification requirements
of all such state securities laws are available and the Company shall have
received an opinion of counsel satisfactory to the Company that the proposed
sale or other disposition of such securities may be effected without
registration under the 1933 Act and would not result in any violation of any
applicable state securities laws relating to the registration or qualification
of securities for sale, such counsel and such opinion to be satisfactory to the
Company.
(c) All Shares issued upon exercise hereof shall be stamped or
imprinted with a legend in substantially the following form (in addition
to any legend required by state securities laws).
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE HOLDER
IN CONNECTION WITH A CREDIT AGREEMENT DATED JUNE 23, 1997 BY AND BETWEEN NAL
ACCEPTANCE CORPORATION AND CONSECO PRIVATE CAPITAL GROUP, INC., AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF
EXEMPTION FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED
ON AN OPINION LETTER OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION."
Holder recognizes that investing in the Warrant and the Common Stock
involves a high degree of risk, and Holder is in a financial position to hold
the Warrant and the Common Stock indefinitely and is able to bear the economic
risk and withstand a complete loss of its investment in the Warrant and the
Common Stock. The Holder is a sophisticated investor and is capable of
evaluating the merits and risks of investing in the Company. The Holder has had
an opportunity
3
<PAGE>
to discuss the Company's business, management and financial affairs with
the Company's management, has been given full and complete access to information
concerning the Company, and has utilized such access to its satisfaction for the
purpose of obtaining information or verifying information and have had the
opportunity to inspect the Company's operation. Holder has had the opportunity
to ask questions of, and receive answers from the management of the Company (and
any person acting on its behalf) concerning the Warrant and the Common Stock and
the agreements and transactions contemplated hereby, and to obtain any
additional information as Holder may have requested in making its investment
decision. The Holder is an "accredited investor", as defined by Regulation D
promulgated under the Act.
8. Reservation of Stock. The Company covenants that during the term
that this Warrant is exercisable, the Company will reserve from its authorized
and unissued Common Stock a sufficient number of shares to provide for the
issuance of the shares upon the exercise of this Warrant, from time to time,
will take all steps necessary to amend its Certificate of Incorporation (the
"Certificate") to provide sufficient reserves of shares of Common Stock issuable
upon the exercise of the Warrant. The Company further covenants that all shares
that may be issued upon the exercise of rights represented by this Warrant, upon
exercise of the rights represented by this Warrant and payment of the Exercise
Price, all as set forth herein, will be free from all taxes, liens and charges
in respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously or otherwise specified herein). The Company agrees
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the shares of Common Stock upon
the exercise of this Warrant.
9. Notices.
(a) Whenever the Exercise Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall
issue a certificate signed by its Chief Financial Officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Exercise
Price and number of shares purchasable hereunder after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to the Holder of this Warrant.
(b) All notices, advices and communications under this Warrant shall be
deemed to have been given, (i) in the case of personal delivery, on the date of
such delivery and (ii) in the case of mailing, on the third business day
following the date of such mailing, addressed as follows:
If to the Company:
NAL Financial Group Inc.
500 Cypress Creek Road West, Suite 590
Ft. Lauderdale, FL 33309
Attention: Mr. Robert R. Bartolini
4
<PAGE>
With a Copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll, Professional Corporation
Eleven Penn Center
1835 Market Street, 14th Floor
Philadelphia, PA 191032985
and to the Holder:
at the address of the Holder appearing on the books of the
Company or the Company's transfer agent, if any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Paragraph 9.
10. Amendments.
(a) Any term of this Warrant may be amended with the written consent of
the Company and the Holder. Any amendment effected in accordance with this
Section 10 shall be binding upon the Holder, each future holder and the Company.
(b) No waivers of, or exceptions to, any term, condition or provision of
this Warrant, in any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such term, condition or provision.
11. Adjustments. The number of Shares of Common Stock purchasable
hereunder and the Exercise Price is subject to adjustment from time to time upon
the occurrence of certain events, as follows:
11.1. Reorganization, Merger or Sale of Assets. If at any time while
this Warrant, or any portion thereof, is outstanding and unexpired there shall
be (i) a reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, or (iii) a sale or transfer of substantially all of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such reorganization, merger, consolidation, sale or transfer,
lawful provision shall be made so that the holder of this Warrant shall
thereafter be entitled to receive upon payment of the Exercise Price then in
effect, the number of shares of stock or other securities or
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<PAGE>
property of the successor corporation resulting from such reorganization,
merger, consolidation, sale or transfer that a holder of the shares deliverable
upon exercise of this Warrant would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this Warrant
had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 11. The foregoing provisions of this Section 11.1 shall
similarly apply to successive reorganizations, consolidations, mergers, sales
and transfers and to the stock or securities of any other corporation that are
at the time receivable upon the exercise of this Warrant. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.
11.2. Reclassification. If the Company, at any time while this Warrant,
or any portion thereof, remains outstanding and unexpired, by reclassification
of securities or otherwise, shall change any of the securities as to which
purchase rights under this Warrant exist into the same or a different number of
securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Warrant immediately prior to such
reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 11.
11.3. Split, Subdivision or Combination of Shares. If the Company at any
time while this Warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price and the number of shares issuable upon exercise
of this Warrant shall be proportionately adjusted.
11.4. Adjustments for Dividends in Stock or Other Securities or
Property. If while this Warrant, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible Stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of the security receivable upon exercise of this
Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company that such holder would hold on the date of such
exercise had it been the holder of record of the security receivable upon
exercise of this Warrant on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise,
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<PAGE>
retained such shares and/or all other additional stock, other securities
or property available by this Warrant as aforesaid during such period.
11.5. Cumulative Adjustments for Issuance(s) of Shares.
(a) If at any time while this Warrant shall remain outstanding, the
Company shall offer and sell Additional Shares of Common Stock (as hereinafter
defined) for consideration per share less than the Exercise Price in effect
immediately prior to the issuance of such Additional Shares of Common Stock, the
Exercise Price in effect immediately prior to each such issuance shall forthwith
be adjusted upon such issuance to a price equal to the price paid per share for
such Additional Shares of Common Stock;
(b) For the purpose of this Section 11.5, the consideration received
by the Company for any issue or sale of securities shall, (i) to the extent it
consists of cash, be computed at the gross amount of cash received by the
Company before deduction of any underwriting or similar commissions, concessions
or compensation paid or allowed by the Company in connection with such issue or
sale, (ii) to the extent it consists of a service or property other than cash,
be computed at the fair value of that service or property as determined in good
faith by the Board of Directors; and (iii) if Additional Shares of Common Stock,
Convertible Securities (as hereinafter defined), or rights or options to
purchase either Additional Shares of Common Stock or Convertible Securities are
issued or sold together with other stock or securities or other assets of the
Company for a consideration that covers both, be computed as the portion of the
consideration so received that may be reasonably determined in good faith by the
Board to be allocable to such Additional Shares of Common Stock, Convertible
Securities or rights or options.
(c) For the purpose of the calculations provided in this Section
11.5, if at any time or from time to time while this Warrant remains
outstanding the Company shall issue any rights or options for the purchase of,
or stock or other securities convertible into, Additional Shares of Common Stock
(such Common Stock or securities being hereinafter referred to as "Convertible
Securities"), then, and in each case, if the Effective Price (as hereinafter
defined) of such rights, options or Convertible Securities shall be less than
the Exercise Price, the Company shall be deemed to have issued at the time of
the issuance of such rights or options or Convertible Securities the maximum
number of Additional Shares of Common Stock issuable upon exercise or conversion
thereof and to have received as consideration for the issuance of such shares an
amount equal to the total amount of the consideration, if any, payable to the
Company upon exercise or conversion of such options or rights. "Effective Price"
shall mean the quotient determined by dividing the total of all of such
consideration by such maximum number of Additional Shares of Common Stock. No
further adjustment shall be made as a result of the actual issuance of
Additional Shares of Common Stock on the exercise of any such rights or options
or the conversion of any such Convertible Securities. In the case of Convertible
Securities which have a conversion price which is based, in whole or in part,
upon a discount to the market price or value of the Common Stock, then for the
purposes of calculating the Effective Price, the consideration shall be deemed
to include the minimum conversion price payable to the Company.
7
<PAGE>
If any such rights or options or the conversion privilege represented by
any such Convertible Securities shall expire without having been exercised, the
adjustment to the number of shares available hereunder upon the issuance of such
rights, options or Convertible Securities shall be readjusted to the number of
shares that would have been in effect had an adjustment been made on the basis
that the only Additional Shares of Common Stock so issued were the Additional
Shares of Common Stock, if any, actually issued or sold on the exercise of such
rights or options or rights of conversion of such Convertible Securities, and
such Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company for the granting of all such
rights or options, whether or not exercised, plus the consideration received for
issuing or selling the Convertible Securities actually converted plus the
consideration, if any, actually received by the Company on the conversion of
such Convertible Securities.
(d) For the purpose of the calculations provided for in this Section
11.5, if at any time or from time to time while this Warrant remains outstanding
the Company shall issue any rights or options for the purchase of Convertible
Securities, then, in each such case, if the Effective Price thereof is less than
the then Exercise Price, the Company shall be deemed to have issued at the time
of the issuance of such rights or options the maximum number of Additional
Shares of Common Stock issuable upon conversion of the total amount of
Convertible Securities covered by such rights or options and to have received as
consideration for the issuance of such Additional Shares of Common Stock an
amount equal to the amount of consideration, if any, received by the Company for
the issuance of such rights or options, plus the consideration, if any, payable
to the Company upon the conversion of such Convertible Securities. "Effective
Price" shall mean the quotient determined by dividing the total amount of such
consideration by such maximum number of Additional Shares of Common Stock. No
further adjustment of such Exercise Price adjusted upon the issuance of such
rights or options shall be made as a result of the actual issuance of the
Convertible Securities upon the exercise of such rights or options or upon the
actual issuance of Additional Shares of Common Stock upon the conversion of such
Convertible Securities.
The provisions of subsection (c) above for readjustment upon the
expiration of rights or options or the rights of conversion of Convertible
Securities, shall apply mutatis mutandis to the rights, options and Convertible
Securities referred to in this subsection (d).
(e) The term "Additional Shares of Common Stock" as used herein shall
mean all shares of Common Stock issued or deemed issued by the Company, other
than (i) the Warrants covered by this Warrant Agreement or otherwise subject to
repricing pursuant to the terms of the Credit Agreement; (ii) shares of Common
Stock issued upon conversion of convertible securities or the exercise of common
stock purchase warrants outstanding as of the Warrant Issue Date; (iii) shares
of Common Stock issuable to employees, officers or directors pursuant to the
Company's stock option plan; (iv) shares of Common Stock issued or issuable to
directors in connection with their service as directors; (v) shares of Common
Stock issued or issuable to directors, officers or employees for services
rendered or to be rendered pursuant to
8
<PAGE>
arrangements approved by the Board of Directors; and (vii) shares of Common
Stock issued in connection with a business combination, merger, consolidation,
asset acquisition or the acquisition of the business of another corporation
(through the purchase of stock or assets) approved by the Board of Directors.
11.6 The Company will not, by any voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in the carrying out of all the provisions of this Section 11 and in the taking
of all such action as may be necessary or appropriate in order to protect the
rights of the Holders of this Warrant against impairment.
12. Registration Rights. The Shares of Common Stock issuable upon the
exercise of this Warrant shall be subject to registration and the Holder shall
be entitled to the registration rights set forth in that certain Registration
Rights Agreement dated April 23, 1996 by and between the Company and such
Holder.
13. Severability. Whenever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this Warrant
in such jurisdiction or affect the validity, legality or enforceability of any
provision in any other jurisdiction, but this Warrant shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
14. Governing Law. The corporate law of the State of Delaware shall
govern all issues and questions concerning the relative rights of the Company
and its stockholders. All other questions concerning the construction, validity,
interpretation and enforceability of this Warrant and the exhibits and schedules
hereto shall be governed by, and construed in accordance with, the laws of the
State of Delaware, without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Delaware.
15. Jurisdiction. The Holder and the Company agree to submit to personal
jurisdiction and to waive any objection as to venue in the federal or state
courts in the County of Marion, State of Indiana. Service of process on the
Company or the Holder in any action arising out of or relating to this Warrant
shall be effective if mailed to such party at the address listed in Section 9
hereof.
16. Arbitration. If a dispute arises as to interpretation of this Warrant,
it shall be decided finally by three arbitrators in an arbitration proceeding
conforming to the Rules of the American Arbitration Association applicable to
commercial arbitration. The arbitrators shall be appointed as follows: one by
the Company, one by the Holder and the third by the said two arbitrators, or,
if they cannot agree, then the third arbitrator shall be appointed by the
American Arbitration Association. The third arbitrator shall be chairman of the
panel and shall be impartial. The arbitration shall take place
in Carmel, Indiana. The decision of a majority of the
9
<PAGE>
Arbitrators shall be conclusively binding upon the parties and final,
and such decision shall be enforceable as a judgment in any court of competent
jurisdiction. Each party shall pay the fees and expenses of the arbitrator
appointed by it, its counsel and its witnesses. The parties shall share equally
the fees and expenses of the impartial arbitrator.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officers thereunto duly authorized.
Dated: June 23, 1997
HOLDER: CONSECO, INC. NAL FINANCIAL GROUP INC.
By: /s/ Ngaire E. Cuneo By: /s/ Robert R. Bartolini
--------------------------- --------------------------
Ngaire E. Cuneo Robert R. Bartolini
Executive Vice President Chief Executive Officer
10
<PAGE>
NOTICE OF EXERCISE
TO: NAL FINANCIAL GROUP INC.
(1) The undersigned hereby elects to purchase _______ shares of Common
Stock of NAL FINANCIAL GROUP INC. pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price for such shares in full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon conversion
thereof are being acquired solely for the account of the undersigned and not as
a nominee for any other party, and for investment, and that the undersigned will
not offer, sell or otherwise dispose of any such shares of Common Stock except
under circumstances that will not result in a violation of the Securities Act of
1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
-----------------------------------
(Name)
-----------------------------------
(Name)
(4) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as is
specified below:
-----------------------------------
(Name)
- -------------------- -----------------------------------
(Date) (Signature)
FIRST AMENDMENT TO
WARRANT TO PURCHASE COMMON STOCK
On April 23, 1996, Conseco, Inc. (the "Holder") and NAL Financial Group,
Inc. (the "Company") executed a warrant under which the Company inter alia
granted to Holder the right to purchase up to 15,000 shares of common stock of
the Company (the "Warrant") subject to adjustment.
For good and valuable consideration, receipt of which is acknowledged,
Holder and the Company agree to amend the Warrant as follows:
1. Section 2 shall be amended and restated to read as follows:
"2. Exercise Price and Number of Shares.
2.1. Exercise Price. The Exercise Price at which this Warrant may be
exercised shall be $0.15 per share of common stock, as adjusted
pursuant to Section 11 hereof.
2.2. Number of Shares. The number of shares of the Company's Common Stock,
$.15 par value per share, ("Common Stock") which may be purchased
pursuant to this Warrant shall be 15,000 shares, as adjusted pursuant
to Section 11 hereof."
2. In all other respects the Warrant shall continue unamended and in full
force and effect.
[The remainder of this page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF the parties have executed this First Amendment to be
effective as of June 23, 1997.
CONSECO, INC. NAL FINANCIAL GROUP, INC.
as Holder as the Company
By: /s/ Ngaire E. Cuneo By: /s/ Robert R. Bartolini
------------------------- ---------------------------
Ngaire E. Cuneo Robert R. Bartolini
Executive Vice President Chief Executive Officer
2
FIRST AMENDMENT TO
WARRANT TO PURCHASE COMMON STOCK
On April 23, 1996, Conseco, Inc. (the "Holder") and NAL Financial Group,
Inc. (the "Company") executed a warrant under which the Company inter alia
granted to Holder the right to purchase up to 500,000 shares of common stock of
the Company (the "Warrant") subject to adjustment.
For good and valuable consideration, receipt of which is acknowledged,
Holder and the Company agree to amend the Warrant as follows:
1. Section 2 shall be amended and restated to read as follows:
"2. Exercise Price and Number of Shares.
2.1. Exercise Price. The Exercise Price at which this Warrant may be
exercised shall be $0.15 per share of common stock, as adjusted
pursuant to Section 11 hereof.
2.2. Number of Shares. The number of shares of the Company's Common Stock,
$.15 par value per share, ("Common Stock") which may be purchased
pursuant to this Warrant shall be 500,000 shares, as adjusted pursuant
to Section 11 hereof."
2. In all other respects the Warrant shall continue unamended and in full
force and effect.
[The remainder of this page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF the parties have executed this First Amendment to be
effective as of June 23, 1997
CONSECO, INC. NAL FINANCIAL GROUP, INC.
as Holder as the Company
By: /s/ Ngaire E. Cuneo By: /s/ Robert R. Bartolini
------------------------- ------------------------------
Ngaire E. Cuneo Robert R. Bartolini
Executive Vice President Chief Executive Officer
2
AMENDMENT
TO
WARRANT TO PURCHASE COMMON STOCK
OF
NAL FINANCIAL GROUP INC.
This AMENDMENT TO WARRANT TO PURCHASE COMMON STOCK (this "Amendment") made
and entered into as of this 17th day of September, 1997 by and between NAL
FINANCIAL GROUP INC., a Delaware corporation (the "Company"), and BRIDGE ROPE &
CO., AS NOMINEE FOR MERRILL LYNCH WORLD INCOME FUND, INC. ("Holder") amends
that certain Warrant to Purchase Common Stock of NAL Financial Group Inc., dated
September 12, 1996, given by the Company to the Holder (the "Warrant").
WHEREAS, the parties hereto desire to amend the Warrant to fix the Exercise
Price at which the Warrant may be exercised.
NOW, THEREFORE, for and in consideration of the premises set forth above
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Any capitalized term used but not defined herein shall have the
meaning assigned to such term in the Warrant.
2. Section 2.1 of the Warrant is hereby amended and restated in its
entirety to read as follows:
2.1 Exercise Price. The Exercise Price at which this Warrant may
be exercised shall be $.71875 per share of common stock, as adjusted
pursuant to Section 11 hereof.
3. Section 11.5 of the Warrant is hereby deleted in its entirety.
4. Except as otherwise provided herein, the terms and provisions of
the Warrant shall remain in full force and effect.
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties have
1
<PAGE>
executed this Amendment as of the date first written above.
NAL FINANCIAL GROUP INC.
By: /s/ Robert R. Bartolini
---------------------------------
Name: Robert R. Bartolini
----------------------------
Title: Chairman and CEO
---------------------------
[BRIDGE ROPE & CO., AS NOMINEE FOR]
MERRILL LYNCH WORLD INCOME FUND, INC.
By: /s/ Daniel Luchansky
---------------------------------
Name: Daniel Luchansky
----------------------------
Title: Vice President
---------------------------
2
AMENDMENT
TO
WARRANT TO PURCHASE COMMON STOCK
OF
NAL FINANCIAL GROUP INC.
This AMENDMENT TO WARRANT TO PURCHASE COMMON STOCK (this "Amendment") made
and entered into as of this 17th day of September, 1997 by and between NAL
FINANCIAL GROUP INC., a Delaware corporation (the "Company"), and KANE & CO.,
AS NOMINEE FOR MERRILL LYNCH CONVERTIBLE FUND, INC. ("Holder") amends that
certain Warrant to Purchase Common Stock of NAL Financial Group Inc., dated
September 12, 1996, given by the Company to the Holder (the "Warrant").
WHEREAS, the parties hereto desire to amend the Warrant to fix the Exercise
Price at which the Warrant may be exercised.
NOW, THEREFORE, for and in consideration of the premises set forth above
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Any capitalized term used but not defined herein shall have the
meaning assigned to such term in the Warrant.
2. Section 2.1 of the Warrant is hereby amended and restated in its
entirety to read as follows:
2.1 Exercise Price. The Exercise Price at which this Warrant may
be exercised shall be $.71875 per share of common stock, as adjusted
pursuant to Section 11 hereof.
3. Section 11.5 of the Warrant is hereby deleted in its entirety.
4. Except as otherwise provided herein, the terms and provisions of
the Warrant shall remain in full force and effect.
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties have
1
<PAGE>
executed this Amendment as of the date first written above.
NAL FINANCIAL GROUP INC.
By: /s/ Robert R. Bartolini
---------------------------------
Name: Robert R. Bartolini
----------------------------
Title: Chairman and CEO
---------------------------
[KANE & CO., AS NOMINEE FOR] MERRILL
LYNCH CONVERTIBLE FUND, INC.
By: /s/ Daniel Luchansky
---------------------------------
Name: Daniel Luchansky
----------------------------
Title: Vice President
---------------------------
2
FIRST 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 Beneficial
Standard Life Insurance Company as lender ("Lender"). For good and valuable
consideration, receipt of which is acknowledged, the parties agree to amend the
Debenture as follows:
1. Paragraph 1 of the Debenture is hereby superseded and replaced in its
entirety with the following:
"1. Principal and all unpaid interest which accrues thereon shall be
payable in full at the election of Lender upon the earlier of (i) October
23, 1997, or (ii) a Change in Control, as hereinafter defined (hereinafter
the "Maturity"). Interest on the outstanding principal balance of this
Debenture at the rate of 9% per annum, shall be due and payable on a
quarterly basis, on March 31, June 30, September 30 and December 31. Maker
may not prepay part or all of the principal due under this Debenture
without the consent of Lender. "Change in Control" means the time at which
(i) any Person (including a Person's affiliates and associates) or group
(as that term is understood under Section 13(d) of the Exchange Act and the
rules and regulations thereunder), has become the beneficial owner of a
percentage (based on voting power, in the event different classes of stock
shall have different voting powers) of the voting stock of the Company
equal to at least twenty-five percent (25%), other than existing
shareholders which currently own in excess of twenty-five percent (25%) and
existing debenture holders whether upon exercise of conversion rights
currently existing or otherwise, (ii) there shall be consummated any
consolidation or merger of the Company pursuant to which the Company's
common stock (or other capital stock) would be converted into cash,
securities or other property, other than a merger or consolidation of the
Company in which the holders of such common stock (or such other capital
stock) immediately prior to the merger have the same proportionate
ownership, directly or indirectly, of common stock of the surviving
corporation immediately after the merger as they had of the Company's
common stock immediately prior to such merger, or (iii) all or
substantially all of the Company's assets shall be sold, leased, conveyed
or otherwise disposed of as an entirety or substantially as an entirety to
any Person in one or a series of transactions."
2. The following language shall be added to paragraph 2 of the Debenture:
"The Lender at its option shall be entitled to cause the Company to
repay the Debenture at Maturity by paying to Lender the "Equity Value"
(as defined below) of the Debenture in lieu of the payment of
outstanding principal and interest or the conversion thereof into
<PAGE>
the Common Stock of the Company. Lender may make this election by
delivery of a written request for payment of the Equity Value one day
prior to the Maturity date. Upon receipt of such request, the Company
shall repay the Debenture by paying to the holder thereof the Equity
Value. Equity Value means an amount equal to the market value of the
greatest number of shares of common stock into which this Debenture is
convertible (assuming conversion of both outstanding principal and
interest) on the date of election. The market value of the maximum
number of shares of common stock into which the Debenture is
convertible shall be determined using the closing bid price of a share
of common stock as reported by the Nasdaq system or the closing price
of a share of common stock as reported by the principal stock exchange
upon which shares of common stock are traded on the date Lender makes
its election to receive the Equity Value. If the common stock is not
listed for trading on a nationally recognized stock exchange or on the
Nasdaq system on such date the market value of a share of common stock
shall be determined by reference to the closing bid price of a share
of common stock as reported by the Nasdaq/NMS system on June 23,
1997."
3. Paragraph 5 of the Debenture is hereby superseded and replaced in its
entirety with the following:
"5. An Event of Default under this Debenture means any of the
following events (whether the reason for such Event of Default shall be
voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body): (i) nonpayment of principal or
interest when due which nonpayment is unremedied for a period of ten (10)
days; (ii) any other material breach of the terms hereof which shall remain
unremedied for a period ending on the first to occur of ten (10) days after
the Maker shall receive written notice of any such failure from the Lender
or fifteen (15) days after the Maker shall become aware thereof; (iii) a
material breach of the terms of the Securities Purchase Agreement, the
occurrence of a "Triggering Event" (as defined in the Securities Purchase
Agreement) or the occurrence of a default under the Securities Purchase
Agreement any or each of which remain unremedied after notice and to the
extent set forth within Sections 9 or 10 of the Securities Purchase
Agreement, whichever is applicable; or (iv) an Event of Default occurs
under that certain credit agreement between Conseco Private Capital Group,
Inc. and NAL Acceptance Corporation dated June 23, 1997 (the "Credit
Agreement")."
2
<PAGE>
4. Paragraph 14 of the Debenture is amended and restated to read as
follows:
"This Debenture is transferable at any time prior to maturity without
the consent of Maker, but subject to compliance with all applicable federal
and state securities laws."
5. The applicability of paragraph 7.5 of the Debenture is waived with
respect to the transaction or transactions required by the Credit Agreement,
including the reduction in the exercise price of 515,000 warrants previously
issued to Conseco, Inc., and the granting of 257,000 additional warrants to
Conseco, Inc., all for the price of $ .15 per share. The foregoing waiver shall
be strictly construed to waive the application of such paragraph 7.5 to the
foregoing transactions, and shall not constitute a waiver, or as a commitment by
the Lender to waive the application thereof, to any other transactions.
6. In all other respects, the Debenture shall remain unamended and in full
force and effect.
[The remainder of this page intentionally left blank]
WITNESS WHEREOF, the parties have executed this amendment to be
effective as of June 23, 1997.
3
<PAGE>
BENEFICIAL STANDARD LIFE NAL FINANCIAL GROUP INC.
INSURANCE COMPANY as the Company
as Lender
By: By:
------------------------------ ------------------------------------
Robert R. Bartolini
Chief Executive Officer
4
<PAGE>
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 Beneficial
Standard Life Insurance Company as lender ("BSLI"), as amended by that certain
First Amendment to 9% Subordinated Convertible Debenture dated June 23, 1997.
BSLI has transferred the Debenture to CIHC, Incorporated (the "Lender"). 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
Lender."
3. In all other respects, the Debenture as amended shall remain unamended
and in full force and effect.
<PAGE>
WITNESS WHEREOF, the parties have executed this amendment to be effective
as of October 1, 1997.
CIHC, INCORPORATED NAL FINANCIAL GROUP INC.
as Lender as the Company
By: /s/ David A. Hill By: /s/ Robert R. Bartolini
------------------------------ ----------------------------
David A. Hill, Vice President Robert R. Bartolini
Chief Executive Officer
2
FIRST 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 America
Reserve Insurance Company as lender ("Lender"). For good and valuable
consideration, receipt of which is acknowledged, the parties agree to amend the
Debenture as follows:
1. Paragraph 1 of the Debenture is hereby superseded and replaced in its
entirety with the following:
"1. Principal and all unpaid interest which accrues thereon shall be
payable in full at the election of Lender upon the earlier of (i) October
23, 1997, or (ii) a Change in Control, as hereinafter defined (hereinafter
the "Maturity"). Interest on the outstanding principal balance of this
Debenture at the rate of 9% per annum, shall be due and payable on a
quarterly basis, on March 31, June 30, September 30 and December 31. Maker
may not prepay part or all of the principal due under this Debenture
without the consent of Lender. "Change in Control" means the time at which
(i) any Person (including a Person's affiliates and associates) or group
(as that term is understood under Section 13(d) of the Exchange Act and the
rules and regulations thereunder), has become the beneficial owner of a
percentage (based on voting power, in the event different classes of stock
shall have different voting powers) of the voting stock of the Company
equal to at least twenty-five percent (25%), other than existing
shareholders which currently own in excess of twenty-five percent (25%) and
existing debenture holders whether upon exercise of conversion rights
currently existing or otherwise, (ii) there shall be consummated any
consolidation or merger of the Company pursuant to which the Company's
common stock (or other capital stock) would be converted into cash,
securities or other property, other than a merger or consolidation of the
Company in which the holders of such common stock (or such other capital
stock) immediately prior to the merger have the same proportionate
ownership, directly or indirectly, of common stock of the surviving
corporation immediately after the merger as they had of the Company's
common stock immediately prior to such merger, or (iii) all or
substantially all of the Company's assets shall be sold, leased, conveyed
or otherwise disposed of as an entirety or substantially as an entirety to
any Person in one or a series of transactions."
2. The following language shall be added to paragraph 2 of the Debenture:
"The Lender at its option shall be entitled to cause the Company to
repay the Debenture at Maturity by paying to Lender the "Equity Value"
(as defined below) of the Debenture in lieu of the payment of
outstanding principal and interest or the conversion thereof into
<PAGE>
the Common Stock of the Company. Lender may make this election by
delivery of a written request for payment of the Equity Value one day
prior to the Maturity date. Upon receipt of such request, the Company
shall repay the Debenture by paying to the holder thereof the Equity
Value. Equity Value means an amount equal to the market value of the
greatest number of shares of common stock into which this Debenture is
convertible (assuming conversion of both outstanding principal and
interest) on the date of election. The market value of the maximum
number of shares of common stock into which the Debenture is
convertible shall be determined using the closing bid price of a share
of common stock as reported by the Nasdaq system or the closing price
of a share of common stock as reported by the principal stock exchange
upon which shares of common stock are traded on the date Lender makes
its election to receive the Equity Value. If the common stock is not
listed for trading on a nationally recognized stock exchange or on the
Nasdaq system on such date the market value of a share of common stock
shall be determined by reference to the closing bid price of a share
of common stock as reported by the Nasdaq/NMS system on June 23,
1997."
3. Paragraph 5 of the Debenture is hereby superseded and replaced in its
entirety with the following:
"5. An Event of Default under this Debenture means any of the
following events (whether the reason for such Event of Default shall be
voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body): (i) nonpayment of principal or
interest when due which nonpayment is unremedied for a period of ten (10)
days; (ii) any other material breach of the terms hereof which shall remain
unremedied for a period ending on the first to occur of ten (10) days after
the Maker shall receive written notice of any such failure from the Lender
or fifteen (15) days after the Maker shall become aware thereof; (iii) a
material breach of the terms of the Securities Purchase Agreement, the
occurrence of a "Triggering Event" (as defined in the Securities Purchase
Agreement) or the occurrence of a default under the Securities Purchase
Agreement any or each of which remain unremedied after notice and to the
extent set forth within Sections 9 or 10 of the Securities Purchase
Agreement, whichever is applicable; or (iv) an Event of Default occurs
under that certain credit agreement between Conseco Private Capital Group,
Inc. and NAL Acceptance Corporation dated June 23, 1997 (the "Credit
Agreement")."
2
<PAGE>
4. Paragraph 14 of the Debenture is amended and restated to read as
follows:
"This Debenture is transferable at any time prior to maturity without
the consent of Maker, but subject to compliance with all applicable federal
and state securities laws."
5. The applicability of paragraph 7.5 of the Debenture is waived with
respect to the transaction or transactions required by the Credit Agreement,
including the reduction in the exercise price of 515,000 warrants previously
issued to Conseco, Inc., and the granting of 257,000 additional warrants to
Conseco, Inc., all for the price of $ .15 per share. The foregoing waiver shall
be strictly construed to waive the application of such paragraph 7.5 to the
foregoing transactions, and shall not constitute a waiver, or as a commitment by
the Lender to waive the application thereof, to any other transactions.
6. In all other respects, the Debenture shall remain unamended and in full
force and effect.
[The remainder of this page intentionally left blank]
WITNESS WHEREOF, the parties have executed this amendment to be
effective as of June 23, 1997.
3
<PAGE>
GREAT AMERICA RESERVE NAL FINANCIAL GROUP INC.
INSURANCE COMPANY as the Company
as Lender
By: By:
------------------------------ ------------------------------------
Robert R. Bartolini
Chief Executive Officer
4
<PAGE>
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 ("GARCO"), as amended by that certain First
Amendment to 9% Subordinated Convertible Debenture dated June 23, 1997. GARCO
has transferred the Debenture to CIHC, Incorporation (the "Lender"). 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
Lender."
3. In all other respects, the Debenture as amended shall remain unamended
and in full force and effect.
<PAGE>
WITNESS WHEREOF, the parties have executed this amendment to be effective
as of October 1, 1997.
CIHC, INCORPORATED NAL FINANCIAL GROUP INC.
as Lender as the Company
By: /s/ David A. Hill By: /s/ Robert R. Bartolini
------------------------------ ----------------------------
David A. Hill, Vice President Robert R. Bartolini
Chief Executive Officer
2
AMENDMENT TO
SUBORDINATED CONVERTIBLE DEBENTURE
On September 12, 1996, NAL Financial Group Inc., a Delaware corporation
("Maker" or the "Company") entered into a convertible debenture in the principal
amount of $2,750,000 (the "Debenture") payable to the order of Kane & Co. as
lender. The Debenture has been transferred to CIHC, Incorporation (the
"Lender"). 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. Conversion Feature. 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. In all other respects, the Debenture as amended shall remain unamended
and in full force and effect.
<PAGE>
WITNESS WHEREOF, the parties have executed this amendment to be effective
as of October 1, 1997.
CIHC, INCORPORATED NAL FINANCIAL GROUP INC.
as Lender as the Company
By: /s/ David A. Hill By: /s/ Robert R. Bartolini
------------------------------ ----------------------------
David A. Hill, Vice President Robert R. Bartolini
Chief Executive Officer
2
AMENDMENT TO
SUBORDINATED CONVERTIBLE DEBENTURE
On September 12, 1996, NAL Financial Group Inc., a Delaware corporation
("Maker" or the "Company") entered into a convertible debenture in the principal
amount of $2,250,000 (the "Debenture") payable to the order of Bridge Rope & Co.
as lender. The Debenture has been transferred to CIHC, Incorporation (the
"Lender"). 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. Conversion Feature. 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. In all other respects, the Debenture as amended shall remain unamended
and in full force and effect.
<PAGE>
WITNESS WHEREOF, the parties have executed this amendment to be effective
as of October 1, 1997.
CIHC, INCORPORATED NAL FINANCIAL GROUP INC.
as Lender as the Company
By: /s/ David A. Hill By: /s/ Robert R. Bartolini
------------------------------ ----------------------------
David A. Hill, Vice President Robert R. Bartolini
Chief Executive Officer
2
