As filed with the Securities and Exchange Commission on February 24, 1997
Registration No. 333-_______
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NAL FINANCIAL GROUP INC.
------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 23-2455294
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, FL 33309
-------------------------
(Address of Principal Executive Offices) (Zip Code)
NAL FINANCIAL GROUP INC.
AMENDED AND RESTATED 1994 STOCK OPTION PLAN;
NAL FINANCIAL GROUP INC.
DIRECTORS' 1996 STOCK OPTION PLAN
---------------------------------
(Full Title of each Plan)
Mr. Robert R. Bartolini
NAL Financial Group Inc.
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, FL 33309
-------------------------
(Name and Address of Agent for Service)
(954) 938-8200
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(Telephone Number, Including Area Code, of Agent for Service)
with a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll Professional Corporation
Two Logan Square, 12th Floor
18th and Arch Streets
Philadelphia, PA 19103
(215) 665-3800
If the only securities being registered on this form are being offered pursuant
to dividend or reinvestment plans, please check the following box. [ ]
<PAGE>
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Maximum Proposed Maximum Amount of
Title of Securities to Amount to be Offering Price Aggregate Offering Registration
be Registered Registered per Share(1) Price(1) Fee(1)
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<S> <C> <C> <C> <C>
Common Stock, $.15 par value per share 498,334(2) $5.875 $2,927,712 $887.19
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Common Stock, $.15 par value per share 66,664(3) $6.60 $439,982 $133.33
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Common Stock, $.15 par value per share 50,000(3) $16.50 $825,000 $250.00
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Common Stock, $.15 par value per share 143,502(3) $6.00 $861,012 $260.91
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Common Stock, $.15 par value per share 40,000(3) $15.00 $600,000 $181.82
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Common Stock, $.15 par value per share 181,500(3) $13.25 $2,404,875 $728.75
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Common Stock, $.15 par value per share 20,000(3) $13.00 $260,000 $78.79
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Common Stock, $.15 par value per share 210,000(4) $5.875 $1,233,750 $373.86
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Common Stock, $.15 par value per share 20,000(5) $14.38 $287,600 $87.15
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Common Stock, $.15 par value per share 20,000(5) $11.50 $230,000 $69.70
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Total 1,250,000 $10,069,931 $3,051.50
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</TABLE>
(1) For the purpose of determining the registration fee pursuant to Rule 457(h)
under the Securities Act of 1933, as amended, the Registrant has used (i)
with respect to shares of Common Stock which may be purchased upon the
exercise of options which may be granted in the future, the average of the
high and low prices per share of the Registrant's Common Stock as reported
on the Nasdaq Stock Market's National Market as of February 18, 1997; and
(ii) with respect to shares of Common Stock which may be purchased upon the
exercise of outstanding options, the price at which such options may be
exercised.
(2) The shares of Common Stock being registered represent the aggregate number
of authorized and unissued shares underlying options that may be granted
under the Amended and Restated 1994 Stock Option Plan as of the date of
this Registration Statement.
(3) The shares of Common Stock being registered represent the number of shares
underlying certain options granted under the Amended and Restated 1994
Stock Option Plan as of the date of this Registration Statement.
<PAGE>
(4) The shares of Common Stock being registered represent the aggregate number
of authorized and unissued shares underlying options that may be granted
under the Directors' 1996 Stock Option Plan as of the date of this
Registration Statement.
(5) The shares of Common Stock being registered represent the number of shares
underlying certain options granted under the Directors' 1996 Stock Option
Plan as of the date of this Registration Statement.
<PAGE>
PROSPECTUS
NAL FINANCIAL GROUP INC.
245,000 shares of Common Stock
$.15 par value per share
Issuable upon exercise of Options granted under the
Amended and Restated 1994 Stock Option Plan
----------------------------------------
250,000 shares of Common Stock
$.15 par value per share,
Issuable upon exercise of Options granted
under the Directors' 1996 Stock Option Plan
-----------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus is being used in connection with the offering from time
to time by certain executive officers and directors ("Selling Stockholders") of
NAL Financial Group Inc. (the "Company" or "NAL") of shares of common stock,
$.15 par value per share, of the Company (the "Common Stock") which may be
acquired upon the exercise of stock options pursuant to the Company's Amended
and Restated 1994 Stock Option Plan (the "1994 Plan") or the Directors' 1996
Stock Option Plan (the "Directors' Plan" and together with the 1994 Plan, the
"Plans"). The Company will not receive any of the proceeds from the sale of the
shares by the Selling Stockholders, but will receive funds upon the exercise of
the options covered by the Plans.
The Common Stock issuable upon exercise of the options covered by the
Plans may be sold from time to time by the Selling Stockholders or by their
pledgees, donees, transferees or other successors in interest. Such sales may be
made on the Nasdaq Stock Market's National Market (the "Nasdaq National
Market"), in the over-the-counter market or otherwise at prices and at terms
then prevailing or at prices related to the then current market price, or in
negotiated transactions.
<PAGE>
All discounts, commissions or fees incurred in connection with the sale of the
shares offered hereby will be paid by the Selling Stockholders or by the
purchasers of the shares, except that the expenses of preparing and filing this
Prospectus and the related Registration Statement with the Securities and
Exchange Commission and of registering or qualifying the shares will be paid by
the Company. See "Plan of Distribution."
The Common Stock of the Company is included in the Nasdaq National
Market under the symbol "NALF." On February 18, 1997, the last reported sales
price for the Company's Common Stock on the Nasdaq National Market was $6.00.
-----------------------------------
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than as contained herein, in
connection with the offer made in this Prospectus, and any information or
representations not contained herein must not be relied upon as having been
authorized by the Company or the Selling Stockholders. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any security
other than the Common Stock offered by this Prospectus, nor does it constitute
an offer to sell or a solicitation of any offer to buy any shares of Common
Stock offered hereby to any person in any jurisdiction where it is unlawful to
make such an offer or solicitation to such person. Neither the delivery of this
Prospectus nor any sale hereunder shall under any circumstances create any
implication that information contained herein is correct as of any time
subsequent to the date hereof.
SEE "RISK FACTORS" ON PAGES 3 TO 12 FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
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The date of this Prospectus is February 24, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the "Commission"). Copies of these reports may be inspected
and copied at the Public Reference Facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at 7 World Trade Center, Suite 1300, New York, New
York 10048, and at Northwest Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials can be obtained upon written
request addressed to the Commission's Public Reference Section, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the
Commission maintains a Web site at http://www.sec.gov containing reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission, including the Company.
In addition, the Company will provide without charge to each person to
whom this Prospectus is delivered, upon either the written or oral request of
such person, a copy of any or all of the documents incorporated herein by
reference other than exhibits to such documents. See "INCORPORATION OF DOCUMENTS
BY REFERENCE." Such requests should be directed to JoAnn Woodside, Vice
President-Investor Relations, NAL Financial Group Inc., 500 Cypress Creek Road
West, Suite 590, Fort Lauderdale, Florida 33309, telephone number (954)
958-3605.
<PAGE>
TABLE OF CONTENTS
Page
The Company....................................................................1
Risk Factors...................................................................3
Use of Proceeds...............................................................12
Selling Stockholders..........................................................12
Plan of Distribution..........................................................15
Legal Matters.................................................................15
Indemnification...............................................................16
Experts.......................................................................16
Incorporation of Documents by Reference.......................................16
<PAGE>
THE COMPANY
NAL is a specialized automobile finance company engaged in the purchase
and servicing of loan and lease contracts (the "Contracts") originated by
franchised and select independent dealers ("Dealers") in connection with sales
or leases of used and new automobiles to consumers with non-prime credit.
Consumers with non-prime credit are perceived to be relatively high credit risks
due to various factors, including the manner in which they have handled previous
credit, the absence or limited extent of their prior credit history and their
limited financial resources. The Company purchases Contracts relating
principally to the "C" credit segment of the automobile finance market. In
addition to purchasing loan contracts ("Loan Contracts") and lease contracts
("Lease Contracts") directly from Dealers, the Company has established diverse
programs that enable it to increase the volume of Contracts purchased from a
variety of Dealers with whom the Company does not maintain a direct
relationship. The Company purchases Contracts directly from Dealers through its
Dealer Program and through select third party entities that participate in the
Company's Captive Program, Affinity Program, Correspondent Program, Recourse
Program and Wholesale Program (collectively, the "Origination Programs").
Participants in these Origination Programs offer Contracts to the Company under
a variety of arrangements and allow the Company to increase its access to
Dealers. Each of these programs, other than the Recourse Program, is designed to
purchase Contracts relating primarily to the "C" credit segment of the market.
The Recourse Program is designed to purchase Contracts relating to the "D"
credit segment.
The Company has historically funded the purchase of its Contracts with
borrowings from banks and other lenders. Currently, the Company's primary
financing sources include a $100 million warehouse facility, $45 million of
revolving credit facilities, including a $25 million facility with General
Electric Capital Corporation ("GECC") and a specialized borrowing facility.
Beginning in December 1995, the Company began securitizing the majority of its
portfolio of Loan Contracts to increase the Company's liquidity, provide for the
redeployment of capital, reduce risks associated with interest rate fluctuations
and provide the Company with access to a cost-effective, diversified source of
financing. During the last five fiscal quarters, the Company completed
securitization transactions aggregating approximately $288.5 million. During
this period, gains on sale from the securitization transactions have constituted
the principal source of the Company's revenues. The Company plans to continue to
employ its securitization program as an integral component of its funding
strategy and anticipates that it will generally complete securitization
transactions on a quarterly basis. In addition, the Company completed an
underwritten public offering of 2,875,000 shares of Common Stock in December
1996 (the "Public Offering") resulting in net proceeds to the Company of
approximately $20.2 million. The Company also generates revenues from interest
income and fees earned on Contracts held in its portfolio, as well as servicing
fees from Loan Contracts sold in securitization transactions. The Company also
receives revenues from the sale of insurance and related products through its
insurance subsidiary, NAL Insurance Services, Inc. ("NIS").
The Company was founded in February 1991 as a specialized consumer
finance company. It became publicly held by virtue of a merger (the "Merger")
with a previously inactive public company on November 30, 1994. Until June 1994,
the Company's principal activities involved the bulk purchase and servicing of
seasoned and non-performing portfolios of consumer and
<PAGE>
mortgage loan and automobile loan and lease receivables. The principal focus of
the Company's business since June 1994 has shifted to the purchase and servicing
of automobile Loan and Lease Contracts.
The Company's principal executive office is located at 500 Cypress
Creek Road West, Suite 590, Fort Lauderdale, Florida 33309. Its telephone number
is (954) 938-8200.
2
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock involves a high degree of
risk. Prospective investors should carefully consider the following risk factors
in addition to the other information set forth in this Prospectus in connection
with the investment in the shares of Common Stock.
When used in this Prospectus, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend" and similar
expressions are intended to identify forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 regarding events, conditions and financial
trends that may affect the Company's future plans of operations, business
strategy, operating results and financial position. Prospective investors are
cautioned that any forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties and that actual results
may differ materially from those included within the forward-looking statements
as a result of various factors. Such factors are described in the risk factors
set forth below.
Dependence upon Adequate Sources of Financing. The Company is dependent
upon its warehouse facility, revolving credit facilities and other financing
arrangements to finance the purchase of its automobile Loan and Lease Contracts.
Accordingly, the Company's ability to maintain and expand its portfolio of Loan
and Lease Contracts, while dependent upon a number of factors, relies
predominantly upon the availability of adequate financing at rates and upon
terms acceptable to the Company. The Company also relies on the proceeds from
its securitization transactions to pay down its warehouse facility, thereby
permitting the purchase of additional Loan Contracts.
The Company employs its securitization program as an integral component
of its funding strategy. During the period from December 1995 through December
1996, the Company completed the sale of approximately $288.5 million of Loan
Contracts in five privately-placed securitization transactions. The Company has
historically applied the net proceeds from securitization transactions to repay
indebtedness under its warehouse facility, thereby increasing the amount
available under such facility to fund future purchases of Loan Contracts. Any
failure by the Company to effect additional securitizations of Loan Contracts on
terms acceptable to the Company would restrict the Company's financing
capabilities, could require the Company to curtail the purchase of Loan
Contracts and could have a material adverse effect on the Company. Furthermore,
the timing of any securitization transaction is affected by a number of factors
beyond the Company's control, including, among others, conditions in the
asset-backed securities markets, interest rates and approvals from third
parties. Although the Company expects to complete future securitization
transactions on a quarterly basis, some or all of these factors may cause delays
in closing a securitization or may prevent such transactions entirely. Gains
from the sale of Loan Contracts in securitization transactions constituted a
significant portion of the net earnings of the Company during the year ended
December 31, 1996 and are likely to continue to represent a significant portion
of the Company's net earnings. If the Company were unable to securitize Loan
Contracts in a financial reporting period, the Company would incur a significant
decline in total revenues and net earnings for such period. In addition, in
order for the Company to continue to fund the purchase of Contracts in
accordance with its growth strategy, the
3
<PAGE>
Company will require financing in excess of that provided by its cash flow from
operations, the net proceeds from the Public Offering and its credit facilities
(or any successor facilities). No assurance can be given that additional
financing sources, including securitization transactions, will be available on
terms acceptable to the Company.
The Company currently finances its Lease Contracts principally through
its agreements with GECC. There can be no assurances that such financing would
be available from another source upon similar terms and conditions. The
inability of the Company to arrange new credit facilities or to extend its
existing credit facilities would have a material adverse effect upon the
Company's ability to purchase Lease Contracts.
The Company remains in compliance with the terms of its existing credit
facilities and other financing agreements. A default under any of these
agreements in the future could have a material adverse effect on the Company's
financial condition. The Company's ability to keep these financing sources in
place depends on its continued compliance with the terms thereof. There can be
no assurance that the Company's sources of financing will continue to remain
available on terms acceptable to the Company, or that the Company will be able
to secure increased sources of financing.
Suspension or Loss of Excess Servicing Cash Flows and Servicing Fee.
The gain on sale of Contracts and the amount of the excess servicing receivable
recognized by the Company in each securitization reflects management's estimate
of future credit losses and prepayments for the Contracts included in that
securitization. If the actual rates of credit losses, prepayments, or both, on
such Contracts exceeds those estimated by management, the timing and the amount
of the excess servicing cash flows could be adversely affected and the value of
the excess servicing receivable impaired. On a quarterly basis, the Company
updates its credit loss and prepayment assumptions for the remaining life of
each securitization based on the past performance of the Loan Contracts within
the securitization and market conditions. If the Company concludes that its
ability to realize the excess servicing receivable has been impaired, the
Company reduces the amount of the excess servicing receivable by recording a
charge to earnings. To date, no such adjustment has been made. However, the
Company's results of operations and liquidity could be adversely affected if
credit losses or prepayment levels, or both, on Contracts substantially exceed
anticipated levels.
Under the terms of each securitization, the Company is required to
maintain a reserve account at specific levels during the life of the
securitization. Upon the occurrence of certain trigger events, which relate to
delinquency, repossession or credit loss rates exceeding certain levels, the
terms of the securitization transactions require the Company to maintain the
reserve account at higher levels by restricting the distribution of both
contractual servicing cash flows and excess servicing cash flows to the Company.
Once the reserve account is maintained at the higher level and the trigger
events cease to occur for a specified period, the Company continues to receive
its contractual servicing fees and excess servicing cash flows. The occurrence
of trigger events could materially adversely affect the Company's liquidity and
results of operations. Two of the Company's securitization transactions have
recently experienced trigger events. As a result, the Company's rights to
receive contractual servicing fees and excess servicing cash flows have been
suspended from these two securitization transactions. Continued occurrence of
the trigger
4
<PAGE>
events could delay cash flows to the Company which may have a material adverse
impact. Although, based upon management's analysis, there has been no impairment
of the excess servicing receivable to date, there can be no assurance that the
excess servicing receivable will not be impaired in the future.
Negative Operating Cash Flows. The Company's business requires
substantial cash to support the funding of reserve accounts in connection with
securitizations, the purchase of Contracts and other cash requirements, in
addition to debt service. These cash requirements increase as the volume of
Contracts purchased increases. The Company has operated historically on a
negative operating cash flow basis and expects to continue to do so for so long
as the Company's volume of Contracts purchased continues to grow at a
significant rate. As a result of the Company's historical growth rate, the
Company has used increasingly larger amounts of cash than it has generated from
its operating activities. The Company has funded these negative operating cash
flows principally through borrowings from financial institutions and private
placements of debt and equity securities. The Company's ability to execute its
growth strategy depends upon its continued ability to obtain substantial
additional long-term debt and equity capital through access to the capital
markets or otherwise. Although the Company completed the Public Offering in
December 1996, there can be no assurance that the Company will have access to
the capital markets when needed in the future or will be able to obtain
financing upon terms reasonably satisfactory to the Company. Factors that could
affect the Company's access to the capital markets, or the costs of such
capital, include changes in interest rates, general economic conditions, the
perception in the capital markets of the Company's business, results of
operations, leverage, financial condition and business prospects, and the
performance of the Company's securitization trusts. In addition, covenants with
respect to the Company's credit facilities may restrict the Company's ability to
incur additional indebtedness.
Default and Prepayment Risk. The Company's results of operations,
financial condition and liquidity depend, to a material extent, on the
performance of the Contracts. The performance of Contracts depends upon such
factors as the underwriting criteria, the collection efforts employed to prevent
defaults, and the proceeds from the sale of repossessed vehicles. The Company
bears the risk of losses resulting from defaults on Contracts. In the event of a
default, the liquidation proceeds from repossessed vehicles may not be
sufficient to cover the outstanding Contract balance and costs of recovery. The
Company, therefore, maintains a reserve for credit losses on its Contracts. The
reserve reflects management's estimate of anticipated credit losses based upon
expectations and historical performance of Contracts.
Based on static pool analyses of the performance of Contracts,
management has, from time to time, modified its credit underwriting criteria. In
view of the performance of Contracts purchased during the six months ended
December 31, 1995, the Company modified its underwriting criteria during the
fourth quarter of 1995. Notwithstanding management's approach for establishing a
reserve for credit losses, its estimates for anticipated credit losses may not
be adequate because the Company has a limited operating history and its Contract
portfolio is unseasoned. If the reserve is inadequate, the Company would
recognize as an expense the losses in excess of such reserve, and results of
operations would be adversely affected. Additionally, such losses may impair the
Company's ability to secure credit facilities and/or securitize its
5
<PAGE>
Contracts. While the Company believes that it maintains a reserve adequate to
cover potential credit losses, there can be no assurance to that effect.
The Company's servicing income can be adversely affected by defaults
and prepayments on Contracts. The Company's servicing income is based on the
outstanding balance of Contracts. If Contracts are prepaid or charged off, the
Company's servicing income will decline to the extent of such prepaid and
charged off Contracts. There can be no assurance as to what level of prepayment,
if any, will occur on the Contracts. Prepayments may be influenced by a variety
of economic, geographic, social and other factors, including borrowers' job
transfers, casualty, trade-ins and declines in interest rates.
Implementation of Business Strategies. The Company's ability to sustain
the growth of its business and maximize its profit potential is dependent upon
the implementation of its business strategies. The Company's strategies include:
(i) expanding and strengthening relationships with its origination sources in
order to increase the volume of Contracts purchased; (ii) providing diverse
products and services to Dealers; (iii) employing detailed underwriting
guidelines to ensure that the Company purchases and services Contracts within
acceptable levels of credit risk and loss; (iv) maintaining effective
collections and asset disposition systems; (v) diversifying financing sources;
(vi) continuing the growth of related businesses; and (vii) recruiting and
retaining experienced management. The Company's failure with respect to any or
all of these strategies could impair its ability to increase the volume of
Contracts purchased, which could have a material adverse effect on the Company's
results of operations and financial condition.
Relationships with Dealers and Other Origination Sources. The Company's
business depends in large part upon its ability to establish and maintain
relationships with Dealers and other origination sources. While the Company
believes that it has been successful in developing and maintaining relationships
with Dealers and other origination sources, these relationships are not
long-standing, and there can be no assurance that the Company will be successful
in maintaining such relationships or increasing the number of Dealers and other
origination sources with which it does business, or that its existing Dealer
base, and other origination sources, will continue to generate a volume of
Contracts comparable to the volume of such Contracts historically generated by
such Dealers and other origination sources.
Risks Associated with the Non-Prime Market. The principal focus of the
Company's business is the purchase of Contracts involving consumers with
non-prime credit. The non-prime market is comprised of consumers who are
perceived to be relatively high credit risks. Consequently, the Contracts
acquired by the Company typically bear a higher rate of interest than contracts
made to consumers with prime credit and are purchased at a discount. However,
these Contracts involve a higher probability of default, higher delinquency
rates and greater servicing costs than contracts made to consumers with prime
credit. The Company's profitability depends on its ability to evaluate properly
the credit risks, to price its Contracts accordingly and to service efficiently
its Contracts. However, there can be no assurance that the rates of future
defaults and losses will be consistent with prior experience or at levels that
will maintain the Company's profitability, that the credit performance of its
customers will be maintained, that the Company's credit analysis, servicing and
collection systems and controls will continue to be adequate, or that
6
<PAGE>
the current interest rates and discount levels can be maintained in the face of
competitive pressures.
Sensitivity to Increases in Interest Rates. The Company's profitability
is determined largely by the difference, or "spread," between the rate of
interest collected from customers on their Contracts and the rate of interest on
the funds obtained by the Company under its existing credit facilities and
through securitization transactions to finance its Contracts. Generally,
interest rates received by the Company on the Contracts it purchases are
determined by many factors beyond the Company's control, including competition,
state usury statutes and other consumer laws prohibiting or limiting the
Company's ability to impose various charges on its borrowers. Significant
increases in the interest rates at which the Company borrows under its revolving
credit facilities could reduce the Company's spread and thereby adversely affect
the Company's profitability with respect to the Contracts it purchases. In the
case of securitization transactions, the interest rate demanded by investors is
a function of prevailing market rates for comparable transactions and the
general interest rate environment. Because the Contracts purchased by the
Company have fixed interest rates, the Company bears the risk of interest rate
increases during the period from the date the Contracts are purchased until the
closing of its securitization for Contracts that are sold and for the entire
term for Contracts that are held by the Company and are not match-funded.
Moreover, the Company's warehouse facility gives the lender the right to make
margin calls in the event of a specified decrease in the market value in the
Contracts held for repurchase. The Company does not presently employ a hedging
strategy. There can be no assurances that the Company will not sustain losses as
a result of its policy relative to hedging.
Recovery of Residual Value. As of December 31, 1996, Lease Contracts
represented approximately 11% of the Company's servicing portfolio. In
connection with these Lease Contracts, the Company faces risks arising from its
estimate at lease inception of the projected value of the vehicle at the end of
the scheduled lease term (the "Residual Value"). Although the Company uses
industry guidelines to estimate the Residual Value and periodically reviews and
updates the Residual Values as considered necessary throughout the lease term,
there can be no assurance that the Residual Value will approximate the ultimate
proceeds received on the disposition of the vehicle. At the end of the scheduled
lease term, if the lessee does not purchase the vehicle, the Company generally
sells the vehicle through wholesale auctions or through the Company's
subsidiary, PCSF. To the extent that the Company realizes proceeds from such
disposition in an amount less than the Residual Value, whether due to changes in
the market for that vehicle, the used automobile market in general or otherwise,
the Company will realize a loss on the disposition of the vehicle. Significant
aggregate losses on the disposition of off-lease vehicles would have a material
adverse effect on the Company's financial condition and results of operations.
The Company's ability to realize a gain on the disposition of a vehicle will be
substantially determined by the accuracy of the Residual Value previously
estimated and by the Company's ability to remarket its off-lease vehicles in a
cost-efficient manner. Due to the continued growth in the volume of Lease
Contracts purchased and the trend towards shorter lease terms, the Company will
likely be required to remarket increasing numbers of vehicles in the future.
There can be no assurance that such increased remarketing volume will not have a
material adverse effect on the Company's financial condition and results of
operations.
7
<PAGE>
Competition. The Company is subject to a high level of competition in
the retail automobile finance industry. The market is highly fragmented and
historically has been serviced by a variety of financial entities, including the
captive finance affiliates of major automobile manufacturers, banks, savings
associations, independent finance companies, credit unions and leasing
companies. Many of these competitors have greater financial resources than the
Company and have significantly lower cost of funds. Many of these competitors
may also have long-standing relationships with automobile dealerships and may
offer dealerships or their customers other forms of financing or services not
provided by the Company. Furthermore, during the past two years, a number of
automobile finance companies have completed public offerings of securities, the
proceeds from which are to be used, at least in part, to fund expansion and
finance increased purchases of contracts. There can be no assurance that the
Company will be able to compete successfully with such competitors in the
future.
Geographic and Contract Purchase Concentrations. As of December 31,
1996, the Company purchased a majority of its outstanding Contracts from
Florida, Georgia, Louisiana and North Carolina. As a result, the Company's
profitability may be influenced by the general economic conditions prevailing in
any of these states, particularly Florida.
As of December 31, 1996, 3.8% of the Company's portfolio were Loan
Contracts purchased through its Recourse Program, which consists of Loans to
consumers with "D" credit. While Loans to "D" credit consumers involve higher
credit risks than those to "C" credit consumers, management believes that it
mitigates the credit risk through large discounts on the purchase of such Loan
Contracts and full recourse to the originating entity to repurchase certain
delinquent accounts. To date, the Company has not experienced any losses arising
out of the failure of the originating entities to repurchase any such delinquent
Loan Contracts. There can be no assurances, however, that the originating
entities will continue to have sufficient resources to cover recourse
obligations under this program; nor can there be any assurances that the level
of discounts associated with Loan Contracts originated under this program would
be sufficient to cover potential losses should the originating entity be unable
to satisfy its recourse obligations thereunder.
Prior to the acquisition of its business by the Company, SFI
historically represented a significant source of Contracts for the Company. As
of December 31, 1996, Loan Contracts purchased through SFI represented
approximately 45% of the Company's outstanding Contracts purchased. Since the
acquisition, SFI has continued to generate Loan Contract volume comparable to
historic levels. As a result of a management contract with the former principals
of SFI, and the retention by SFI of substantially all of the personnel necessary
to the operation of the business, management believes that SFI will continue to
generate Loan Contracts at a volume comparable to historic levels. However,
there can be no assurance to that effect. In light of the volume of Loan
Contracts purchased through SFI prior to the acquisition, a significant decline
in the volume of Loan Contracts purchased through SFI could have a material
adverse effect on the Company.
Management of Rapid Growth. The Company has experienced rapid growth
and expansion of its business. The Company's ability to support, manage and
control continued
8
<PAGE>
growth is dependent upon, among other things, its ability to train, supervise
and manage increased personnel. The success of the Company's growth strategy is
also dependent upon the Company's ability to maintain credit quality as its
Contract portfolio grows, which requires, among other things, the maintenance of
efficient collection procedures and adequate collection staffing, internal
controls and automated systems. There can be no assurance that the Company will
be successful in maintaining credit quality as its Contract portfolio grows or
that the Company's personnel, procedures, staff, internal controls or systems
will be adequate to support such growth.
Reliance on Key Personnel. The Company's future operating results
depend in significant part upon the continued service of its executive officers.
Should one or more of these individuals cease to be affiliated with the Company
before acceptable replacements are found, there could be a material adverse
effect on the Company's business and prospects. Mr. Robert R. Bartolini, the
Company's Chairman and Chief Executive Officer, is the only executive officer
with whom the Company has an employment agreement. Should any of the Company's
executive officers elect to terminate their employment, there can be no
assurance that suitable replacements could be hired without substantial
additional costs. The Company does not presently maintain key-man insurance on
any of its executives. The Company's continued success also depends on its
ability to attract and retain a sufficient number of qualified employees to
support its growth strategy. There can be no assurance that the Company will be
able to recruit and retain such personnel.
Control by Directors and Officers. The Company's officers and directors
own approximately 27% of the Common Stock of the Company. See "Selling
Stockholders." By virtue of the concentration of a substantial block of shares
with the Company's directors and officers, these stockholders are in a position
to elect all of the Company's directors and control the outcome of other
corporate matters without the approval of the Company's other stockholders. In
addition, applicable statutory provisions and the ability of the Board of
Directors to issue one or more series of Preferred Stock without stockholder
approval could deter or delay unsolicited changes in control of the Company by
discouraging open market purchases of the Company's stock or a non-negotiated
tender or exchange offer for such stock, which may be disadvantageous to a
majority of the Company's stockholders who may otherwise desire to participate
in such a transaction and receive a premium for their shares.
Regulation. The Company's business is subject to numerous federal and
state consumer protection laws and regulations, which, among other things,
require the Company to obtain and maintain certain licenses and qualifications,
to limit the interest rates, charges and other fees the Company is allowed to
charge, to provide specified disclosures, and to define the Company's rights to
repossess and sell collateral. A change in existing laws or regulations, or in
the interpretation thereof, or the promulgation of any additional laws or
regulations could have an adverse effect on the Company's business.
Due to the consumer-oriented nature of the industry in which the
Company operates, industry participants frequently are named as defendants in
litigation involving alleged violations of federal and state consumer lending or
other similar laws and regulations. A significant judgment against the Company
or another industry participant in connection with any litigation could have a
material adverse effect on the Company's financial condition and results of
operations.
9
<PAGE>
Substantial Dilution from Convertible Securities. The Company is
presently authorized to issue 50,000,000 shares of Common Stock, of which
10,363,859 shares were outstanding as of February 20, 1997. During the period
from April 1995 through September 1996, the Company sold in the aggregate $38.8
million principal amount of convertible debentures ("Debentures") in private
placement transactions. Primarily in connection with the sale of such
Debentures, the Company issued 2,873,625 common stock purchase warrants (the
"Warrants"). The Company has granted 40,000 Warrants in connection with
directors joining the Board of Directors. The Company may be caused to issue
3,278,774 additional shares upon the conversion of the principal and interest
due under the outstanding Debentures at their stated conversion prices and
2,913,625 shares upon the exercise of the Warrants, thus increasing the number
of shares outstanding from 10,363,859 to 16,556,258. This number may be subject
to material increase by virtue of price protection and adjustment features
contained in certain Debentures and Warrants.
The holders of the Debentures may exercise their rights of conversion,
and the holders of the Warrants may choose to exercise the Warrants, at prices
below the trading price of the Company's Common Stock at the time of conversion
or exercise and at a time when the Company might be able to obtain additional
capital through a new offering of securities at prevailing market prices. The
terms on which the Company may obtain additional financing during this period
may be adversely affected by the existence of such below market conversion and
exercise prices.
Conversion of all of the outstanding Debentures would, however, have
the effect of releasing the Company from its obligation to repay approximately
$27.6 million of principal and interest on the Debentures. In addition, the
exercise of all of the Warrants would have the effect of securing for the
Company additional working capital of up to approximately $29.5 million. The
proceeds to the Company of the Warrants may decrease by virtue of price
protection and adjustment features contained in certain Warrants.
As its rate of growth continues, the Company must secure increasing
amounts of financing to fund the acquisition of additional Contracts. This may
entail the sale of additional shares of Common Stock or Common Stock
equivalents, which would have the effect of further increasing the number of
shares outstanding.
In connection with other business matters deemed appropriate by the
Company's management, there can be no assurance that the Company will not
undertake the issuance of more shares of Common Stock without notice to
stockholders. This may be done in order to facilitate a business combination,
acquire assets or stock of another business, compensate employees or consultants
or for other valid business reasons in the discretion of the Company's Board of
Directors. The Company has two stock option plans, which are presently
authorized to grant options for the issuance in the aggregate of up to 1,250,000
shares of Common Stock. As of February 20, 1997, the Company had 541,666 options
outstanding under such plans.
Shares Eligible for Future Sale. The Company has a total of 10,363,859
shares of Common Stock outstanding. Of these shares, a total of approximately
6,486,825 shares are freely tradeable without restriction or further
registration under the Securities Act of 1933 (the "Securities Act"). The
remaining 3,877,034 shares of Common Stock outstanding are "Restricted
10
<PAGE>
Securities" as that term is defined in Rule 144 under the Securities Act, of
which approximately 2,689,364 are held by "affiliates" (as defined in the
Securities Act) of the Company.
The Restricted Securities are subject to all of the limitations on
resale imposed by Rule 144. In general, under Rule 144, as currently in effect,
any affiliate of the Company or any person (or persons whose shares are
aggregated in accordance with the Rule) who has beneficially owned Restricted
Securities for at least two years would be entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of 1.0%
of the outstanding shares of Common Stock (approximately 103,638 shares based
upon the number of shares outstanding after the Offering) and the reported
average weekly trading volume in the over-the-counter market for the four weeks
preceding the sale. Sales under Rule 144 are also subject to certain manner of
sale restrictions and notice requirements and to the availability of current
public information concerning the Company. Persons who have not been affiliates
of the Company for at least three months and who have held their shares for more
than three years are entitled to sell Restricted Securities without regard to
the volume, manner of sale, notice and public information requirements of Rule
144. Substantially all of the Restricted Securities were issued in November
1994. Accordingly, under Rule 144 (and subject to the conditions thereof), the
Restricted Securities are eligible for public resale. However, a majority of
such shares are held by executive officers and directors of the Company who have
agreed, in connection with the Public Offering, to certain restrictions upon the
resale of such shares until June 1997.
A substantial influx of shares into the market may have a significant
depressive effect upon the trading price of the Company's Common Stock. This may
occur upon the public resale of up to 3,278,774 shares issuable upon the
conversion of outstanding Debentures or 2,913,625 shares issuable upon the
exercise of outstanding Warrants.
As a result of certain registration rights granted by the Company in
connection with the shares issuable upon the conversion of outstanding
Debentures or upon the exercise of outstanding Warrants, the Company may have an
obligation to register for public resale up to 5,802,565 shares of Common Stock.
In connection with the Public Offering, the holders of substantially all of such
shares have agreed to defer their registration rights for a period of 120 or 180
days after December 23, 1996, the date of the Public Offering prospectus.
In connection with the Public Offering, the Company, its executive
officers and directors, certain debenture holders and certain warrant holders
have each agreed that they will not, directly or indirectly, offer, sell, offer
to sell, contract to sell, pledge, grant any option to purchase or otherwise
sell or dispose of (or announce any offer, sale, offer of sale, contract of
sale, pledge, grant of any option to purchase or other sale or disposition) any
shares of Common Stock or other capital stock or any securities convertible
into, or exercisable or exchangeable for, any shares of Common Stock or other
capital stock of the Company, through June 1997, without the prior written
consent of Prudential Securities Incorporated, on behalf of the underwriters of
the Public Offering, except for bona fide gifts or private transfers effected by
such stockholders other than on any securities exchange or in the
over-the-counter market to donees or transferees that agree to be bound by
similar agreements.
11
<PAGE>
The Company is unable to predict the effect, if any, that future sales
of shares, or the availability of shares for future sale, will have on the
market price for the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock, or the perception that such influx of
shares into the market could occur, could adversely affect the market price for
the Common Stock and could impair the Company's future ability to obtain capital
through offerings of equity securities.
Volatility of Stock Price. The market price of the Common Stock could
be subject to significant fluctuations in response to influxes of shares into
the market upon the conversion or exercise of outstanding convertible
securities, variations in financial results or announcements of material events
by the Company or its competitors. Developments in the automobile finance
industry or changes in general conditions in the economy or the financial
markets could also adversely affect the market price of the Common Stock.
Effects of Certain Anti-Takeover Provisions. Certain provisions of the
Company's Certificate of Incorporation, Bylaws and Delaware law may delay, defer
or prevent a change in control of the Company and may adversely affect the
voting and other rights of the holders of Common Stock. In particular, the
existence of the Company's classified Board of Directors, the ability of the
Board of Directors to issue "blank check" preferred stock without further
stockholder approval and the inability of stockholders to take action by written
consent may have the effect of delaying, deferring or preventing a change in
control of the Company.
Dividends. No dividends have been declared or paid by NAL since the
Merger. The declaration or payment of dividends is not contemplated in the
foreseeable future. Earnings are expected to be retained to finance the
development of the Company's business. The declaration or payment of future
dividends will be directly dependent upon the earnings of the Company, its
financial needs and other similarly unpredictable factors.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock
by the Selling Stockholders. The Company will, however, realize proceeds upon
the exercise of the presently outstanding stock options granted by the Company
to the Selling Stockholders pursuant to the Plans. The Company intends to use
any such proceeds for working capital and general corporate purposes.
SELLING STOCKHOLDERS
The following table sets forth the name of each Selling Stockholder,
the nature of his position, office, or other material relationship to the
Company and the number of shares of Common Stock of each such Selling
Stockholder (1) owned of record as of February 20, 1997; (2) which are to be
registered hereunder; and (3) the number of shares to be owned by each such
Selling Stockholder assuming the vesting and exercise of all options granted
under the Plans and the sale of all shares of Common Stock registered hereunder.
There can be no assurance that any of the Selling Stockholders will offer for
sale or sell any or all of the shares offered by them pursuant to this
Prospectus.
12
<PAGE>
In addition to certain of the Selling Stockholders identified below,
any person who may serve as a non-employee director of the Company in the
future, is eligible to participate in the Directors' Plan. These non-employee
directors may, in the future, sell shares issuable upon exercise of options
granted under the Directors' Plan pursuant to the Registration Statement of
which this Prospectus is a part. The Company will supplement this Prospectus as
the identity and number of shares to be offered by each non-employee director
becomes known to the Company. As of the date of this Prospectus, 210,000 shares
of Common Stock are authorized and reserved for issuance for future grants of
options under the Directors' Plan.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to Number of Shares Owned After
Name and Relationship to the Company Offering Hereunder(1) to be Sold(2) Offering Hereunder(1)
- ------------------------------------ --------------------- ---------------- ---------------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Robert R. Bartolini 2,334,198(3) 22.25% 125,000 2,209,198 21.06%
Chairman of the Board, President
and Chief Executive Officer of
NAL; Chairman and Chief
Executive Officer of NAL
Acceptance Corp. ("NAC").
John T. Schaeffer 359,080(4) 3.44% 65,000 294,080 2.82%
Director and Executive Vice
President of NAL; President and
Chief Operating Officer of NAC
Robert J. Carlson 90,196(5) * 30,000 60,196 *
Vice President and Principal
Accounting Officer of NAL and NAC
Dennis R. LaVigne 25,000(6) * 25,000 0 *
Vice President and Treasurer of
NAL and NAC
David R. Jones 20,000(7) * 20,000 0 *
Director of NAL
James F. DeVoe, Sr. 20,000(8) * 20,000 0 *
Director of NAL
</TABLE>
* represents less than 1%
(1) Except as otherwise indicated, includes total number of shares outstanding
and the number of shares that each Selling Stockholder has the right to
acquire, within 60 days through the exercise of options, warrants or
debentures, pursuant to Item 403 of Regulation S-K and
13
<PAGE>
Rule 13d-3(d)(i), promulgated under the Exchange Act. Also includes shares
underlying stock options granted to certain Selling Stockholders under the Plans
which remain subject to vesting. Based on 10,363,859 shares of Common Stock
outstanding as of February 20, 1997.
(2) Represents shares of Common Stock issuable upon exercise of stock options
granted under the Plans.
(3) Includes 1,896,245 shares held by Robert R. Bartolini and Marcia G.
Bartolini, Co-Trustees of the Robert R. Bartolini Revocable Trust dated
July 27, 1992, 210,000 shares of which are subject to options granted by
Mr. Bartolini during May 1995, 48,931 shares presently held by English,
McCaughan & O'Bryan, P.A. pursuant to the terms of a Voting Trust Agreement
and 264,022 shares held by Marcia G. Bartolini and Robert R. Bartolini,
Co-Trustees of the Marcia G. Bartolini Revocable Trust dated July 27, 1992.
Also includes vested stock options to purchase 55,890 shares of Common
Stock granted in December 1994 and December 1995 and stock options to
purchase 69,110 shares of Common Stock granted in December 1994 and
December 1995, which remain subject to vesting. Does not include 50,000
shares owned beneficially by Edward M. Bartolini, the adult brother of
Robert R. Bartolini. Also does not include 264,022 shares held by George
Schnabel, Trustee of the Robert R. Bartolini and Marcia G. Bartolini
Irrevocable Trust dated July 27, 1992.
(4) Includes 5,552 shares held by English McCaughan & O'Bryan, P.A. for the
benefit of Mr. Schaeffer pursuant to the terms of a Voting Trust Agreement,
4,952 shares held by Mr. Schaeffer's spouse, 35,001 vested stock options
granted to Mr. Schaeffer in December 1994 and December 1995, and 29,999
stock options granted to Mr. Schaeffer in December 1994 and December 1995,
which remain subject to vesting.
(5) Includes 9,652 shares held by English, McCaughan & O'Bryan, P.A. for the
benefit of Mr. Carlson pursuant to the terms of a Voting Trust Agreement,
15,000 vested incentive stock options granted to Mr. Carlson in December
1994 and December 1995 and 15,000 incentive stock options granted to
Mr. Carlson in December 1994 and December 1995, which remain subject to
vesting.
(6) Includes 25,000 stock options granted to Mr. LaVigne in December 1995,
which have not vested.
(7) Includes 20,000 stock options granted to Mr. Jones in connection with his
appointment as a director on February 5, 1996.
(8) Includes 20,000 stock options granted to Mr. DeVoe in connection with his
appointment as a director on March 11, 1996, which have not vested.
14
<PAGE>
PLAN OF DISTRIBUTION
The Common Stock may be sold from time to time by the Selling
Stockholders or by their pledgees, donees, transferees or other successors in
interest. Such sales may be made on the Nasdaq National Market, on the
over-the-counter market or otherwise at prices and at terms then prevailing or
at prices related to the then current market price, or in negotiated
transactions. The Common Stock may be sold by one or more of the following:
(a) a block trade in which the broker or dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker or dealer for
its account pursuant to this Prospectus; and (c) ordinary brokerage transactions
and transactions in which the broker solicits purchases. In effecting sales,
brokers or dealers engaged by the Selling Stockholders may arrange for other
brokers or dealers to participate. Brokers or dealers will receive commissions
or discounts from Selling Stockholders in amounts to be negotiated immediately
prior to the sale. Such brokers or dealers and any other participating brokers
or dealers may be deemed to be "underwriters" within the meaning of the Act in
connection with such sales. In addition, any securities covered by this
Prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule
144 rather than pursuant to this Prospectus. The Company will not receive any of
the proceeds from the sale of these shares, although it has paid the expenses of
preparing this Prospectus and the related Registration Statement. The Selling
Stockholders have been advised that they are subject to the applicable
provisions of the Exchange Act, including without limitation, Rules 10b-5, 10b-6
and 10b-7 thereunder.
LEGAL MATTERS
The validity of the Common Stock offered hereby has been passed upon
for the Company by Buchanan Ingersoll Professional Corporation, Two Logan
Square, 12th Floor, 18th & Arch Streets, Philadelphia, Pennsylvania, 19103.
15
<PAGE>
INDEMNIFICATION
The Company has adopted the provisions of Section 102(b)(7) of the
Delaware General Corporation Law ("GCL") which eliminate or limit the personal
liability of a director to the Company or its stockholders for monetary damages
for breach of fiduciary duty under certain circumstances. Furthermore, under
Section 145 of the GCL, the Company may indemnify each of its directors and
officers against his expenses (including reasonable costs, disbursements and
counsel fees) in connection with any proceeding involving such person by reason
of his having been an officer or director to the extent he acted in good faith
and in a manner reasonably believed to be in, or not opposed to, the best
interest of the Company, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The determination
of whether indemnification is proper under the circumstances, unless made by a
court, shall be determined by the Board of Directors.
Insofar as indemnification for liabilities under the Securities Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company in a successful defense of any action, suit
or proceeding) is asserted by a director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issuer.
EXPERTS
The consolidated financial statements incorporated in this Prospectus
by reference to the Annual Report on Form 10-KSB of NAL Financial Group Inc. for
the year ended December 31, 1995 have been so incorporated in reliance on the
report of Price Waterhouse LLP, independent certified public accountants, given
on the authority of said firm as experts in auditing and accounting.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission are
incorporated herein by reference:
(a) The Registrant's Annual Report on Form 10-KSB for fiscal year ended
December 31, 1995.
(b) The Registrant's Quarterly Report on Form 10-QSB for the period
ended March 31, 1996.
16
<PAGE>
(c) The Registrant's Quarterly Report on Form 10-QSB for the period
ended June 30, 1996.
(d) The Registrant's Quarterly Report on Form 10-QSB for the period
ended September 30, 1996.
(e) The section captioned "Description of Registrant's Securities to be
Registered" appearing in the Registrant's Registration Statement on Form 8-A
(File No. 0-25476) filed with the Commission on February 2, 1995, including any
amendments or reports filed for the purpose of updating such section.
(f) All documents subsequently filed by the Registrant pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment which indicates that all securities offered hereby
have been sold or deregisters all securities remaining unsold, shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
the filing of such reports and documents.
17
<PAGE>
PART II
INFORMATION REQUIRED IN THE
REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The Registrant incorporates the following documents by reference in
this Registration Statement:
(a) The Registrant's Annual Report on Form 10-KSB for fiscal year ended
December 31, 1995.
(b) The Registrant's Quarterly Report on Form 10-QSB for the period
ended March 31, 1996.
(c) The Registrant's Quarterly Report on Form 10-QSB for the period
ended June 30, 1996.
(d) The Registrant's Quarterly Report on Form 10-QSB for the period
ended September 30, 1996.
(e) The section captioned "Description of Registrant's Securities to be
Registered" appearing in the Registrant's Registration Statement on Form 8-A
(File No. 0-25476) filed with the Commission on February 2, 1995, including any
amendments or reports filed for the purpose of updating such section.
(f) All documents subsequently filed by the Registrant pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934,
prior to the filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or deregisters all securities remaining
unsold, shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of the filing of such reports and documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
II-1
<PAGE>
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company has adopted the provisions of Section 102(b)(7) the
Delaware General Corporation Law (the "Delaware Act") which eliminate or limit
the personal liability of a director to the Company or its stockholders for
monetary damages for breach of fiduciary duty under certain circumstances.
Furthermore, under Section 145 of the Delaware Act, the Company may indemnify
each of its directors and officers against his expenses (including reasonable
costs, disbursements and counsel fees) in connection with any proceeding
involving such person by reason of his having been an officer or director to the
extent he acted in good faith and in a manner reasonably believed to be in, or
not opposed to, the best interest of the Company, and, with respect to any
criminal action or proceeding, if he had no reasonable cause to believe his
conduct was unlawful. The determination of whether indemnification is proper
under the circumstances, unless made by a court, shall be determined by the
Board of Directors.
ITEM 7 EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
No. Description Method of Filing
--- ----------- ----------------
<S> <C> <C>
4.1 Copy of Specimen Common Stock Certificate Incorporated by reference to Exhibit 4.1
to the January 1995 Registration Statement
4.2 Form of 9% Subordinated Convertible Debenture Incorporated by reference to Exhibit 4.2
to the Registration Statement on Form
SB-2, Registration No. 33-97948, filed on
October 25, 1995 (the "October 1995
Registration Statement")
4.3 Form of Common Stock Purchase Warrant Incorporated by reference to Exhibit 4.3
to the October 1995 Registration Statement
4.4 Form of Common Stock Purchase Warrant Incorporated by reference to Exhibit 4.4
of the October 1995 Registration Statement
4.5 Securities Purchase Agreement between NAL Incorporated by reference to Exhibit 4.5
Financial Group Inc., Beneficial Standard to the Registrant's Quarterly Report on
Life Insurance Company and Great American Form 10-QSB for the period ended March
Reserve Insurance Company dated as of April 31, 1996 ("March 1996 10-QSB")
23, 1996
4.6 9% Subordinated Convertible Debenture in the Incorporated by reference to Exhibit 4.12
principal amount of $5,000,000 payable to to the June 1996 10-QSB
Great American Reserve Insurance Company
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C> <C>
4.7 9% Subordinated Convertible Debenture in the Incorporated by reference to Exhibit 4.7
principal amount of $5,000,000 payable to to the June 1996 10-QSB
Beneficial Standard Life Insurance Company
4.8 Common Stock Purchase Warrant granted to Incorporated by reference to Exhibit 4.8
Conseco, Inc. ($12.625) to the June 1996 10-QSB
4.9 Common Stock Purchase Warrant granted to Incorporated by reference to Exhibit 4.9
Conseco, Inc. ($14.52) to the June 1996 10-QSB
4.10 Stockholders' Agreement entered into as of Incorporated by reference to Exhibit 4.10
April 23, 1996 among NAL Financial Group to the June 1996 10-QSB
Inc., Beneficial Standard Life Insurance
Company and Great American Reserve Insurance
Company
4.11 Registration Rights Agreement between NAL Incorporated by reference to Exhibit 4.11
Financial Group Inc. and Conseco, Inc. to the June 1996 10-QSB
4.12 Registration Rights Agreement between NAL Incorporated by reference to Exhibit 4.12
Financial Group Inc., Beneficial Standard to the June 1996 10-QSB
Life Insurance Company and Great American
Reserve Life Insurance Company
4.13 Form of Amended and Restated Registration Incorporated by reference to Exhibit 4.13
Rights Agreement to the June 1996 10-QSB
4.14 Securities Purchase Agreement between NAL Incorporated by reference to Exhibit 4.14
Financial Group Inc. and Merrill Lynch World to the Registrant's Quarterly Report on
Income Fund, Inc. and Convertible Holdings, Form 10-QSB for the period ended
Inc. dated September 12, 1996 September 30, 1996 ("September 1996
10-QSB")
4.15 10% Subordinated Convertible Debenture in the Incorporated by reference to Exhibit 4.15
principal amount of $2,250,000 payable to to the September 1996 10-QSB
Bridge Rope & Co.
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C> <C>
4.16 10% Subordinated Convertible Debenture in the Incorporated by reference to Exhibit 4.16
principal amount of $2,750,000 payable to to the September 1996 10-QSB
Kane & Co.
4.17 Common Stock Purchase Warrant granted to Incorporated by reference to Exhibit 4.17
Bridge Rope & Co. ($13.92) to the September 1996 10-QSB
4.18 Common Stock Purchase Warrant granted to Kane Incorporated by reference to Exhibit 4.18
& Co. ($13.92) to the September 1996 10-QSB
4.19 Registration Rights Agreement between NAL Incorporated by reference to Exhibit 4.19
Financial Group Inc. and Merrill Lynch World to the September 1996 10-QSB
Income Fund, Inc. and Convertible Holdings,
Inc. dated September 12, 1996
5.1 Opinion of Buchanan Ingersoll Professional Filed herewith
Corporation
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C>
23.1 Consent of Buchanan Ingersoll Professional Included with Exhibit 5 hereto
Corporation (included in Exhibit 5)
23.2 Consent of Price Waterhouse LLP Filed herewith
</TABLE>
II-5
<PAGE>
ITEM 9. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Secuities Act of 1933
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement.
provided, however, that the undertakings set forth in paragraphs (1)(i) and
(1)(ii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant with the Securities and Exchange Commission pursuant to
section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities offered at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for the purpose of determining any liability under the
Securities Act of 1933, each filing of the Company's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
II-6
<PAGE>
unless in the opinion of its counsel that matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Fort Lauderdale, state of Florida, on February 21,
1997.
NAL FINANCIAL GROUP INC.
By: /s/ Robert R. Bartolini
---------------------------
Robert R. Bartolini
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on February 21, 1997, by the
following persons in the capacities indicated.
Signature Title
--------- -----
/s/ Robert R. Bartolini Chairman of the Board, President
- ------------------------------ and Chief Executive Officer
Robert R. Bartolini
/s/ Robert J. Carlson Vice President (Principal
- ------------------------------ Accounting Officer)
Robert J. Carlson
/s/ John T. Schaeffer Executive Vice President and
- ------------------------------ Director
John T. Schaeffer
/s/ Ngaire E. Cuneo Director
- ------------------------------
Ngaire E. Cuneo
/s/ James F. DeVoe Director
- ------------------------------
James F. DeVoe
/s/ David R. Jones Director
- ------------------------------
David R. Jones
<PAGE>
EXHIBIT INDEX
5.1 Opinion of Buchanan Ingersoll Professional Corporation
23.2 Consent of Price Waterhouse LLP
EXHIBIT 5.1
<PAGE>
February 21, 1997
NAL Financial Group Inc.
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, FL 33309
Gentlemen:
In connection with the Registration Statement on Form S-8 (the
"Registration Statement") filed by NAL Financial Group Inc. (the "Company")
under the Securities Act of 1933 for the purpose of registering 1,250,000 shares
of common stock of the Company, $.15 par value per share (the "Shares"), which
may be issued by the Company upon exercise of options granted under the
Company's Amended and Restated 1994 Stock Option Plan or Directors' 1996 Stock
Option Plan (collectively the "Plans"), pursuant to the terms set forth in
option agreements between the Company and the recipient of the Option (the
"Option Agreements"), we, as counsel for the Company, have examined such
corporate records, other documents, and questions of law as we have
considered necessary or appropriate for the purposes of this opinion.
Upon the basis, of such examination, we advise you that in our opinion
the Shares to be issued and sold by the Company have been duly and validly
authorized and, when the options granted under the Plans are exercised in the
manner contemplated in the applicable Option Agreement, will be legally issued,
fully paid and non-assessable assuming that the applicable option exercise price
(as set forth in the Option Agreement) is paid with respect to each share of
common stock prior to issuance and full compliance with the Plans is otherwise
made.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to this firm under the caption "Legal
Matters" in the Prospectus contained therein.
Very truly yours,
BUCHANAN INGERSOLL PROFESSIONAL CORPORATION
By: /s/ Stephen M. Cohen
-----------------------------
Stephen M. Cohen
SMC:ps
Consent of Independent Certified Public Accountant
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated February 27, 1996, except as to Note
19, which is as of March 22, 1996, appearing on Page F-1 of NAL Financial Group
Inc.'s Annual Report on Form 10-KSB for the year ended December 31, 1995. We
also consent to the reference to us under the heading "Experts" in such
Registration Statement.
/s/ Price Waterhouse LLP
- ---------------------------
PRICE WATERHOUSE LLP
Fort Lauderdale, Florida
February 24, 1997
