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 Paragraph 1 of the Debenture is hereby superseded and replaced in its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
the Common Stock of the Company. Xxxxxx 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")."
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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.
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WITNESS WHEREOF, the parties have executed this amendment to be
effective as of June 23, 1997.
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GREAT AMERICA RESERVE NAL FINANCIAL GROUP INC.
INSURANCE COMPANY as the Company
as Lender
By: By:
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Xxxxxx X. Xxxxxxxxx
Chief Executive Officer
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