INVESTMENT AGREEMENT
This Agreement is by and between NAL Financial Group Inc., a Delaware
corporation ("Company") and Conseco, Inc., an Indiana corporation or its assigns
("Conseco") to be effective as of this 22nd day of August, 1997.
RECITALS
A. Conseco Private Capital Group, Inc. ("Lender") and Company's
wholly owned subsidiary, NAL Acceptance Corporation, a Florida corporation
("Borrower") have entered into a First Amendment to Credit Agreement ("First
Amendment") of even date herewith.
B. Subject to the terms and conditions hereof, Conseco or its
designee, has agreed to purchase certain preferred stock of the Company.
C. As inducement for the Lender to advance funds under the
First Amendment and for Conseco to purchase the preferred stock, the Company has
agreed to amend the 9% Subordinated Convertible Debenture dated April 23, 1996,
issued to Beneficial Standard Life Insurance Company in the amount of $5,000,000
and the 9% Subordinated Convertible Debenture dated April 23, 1996, issued to
Great American Reserve Insurance Company in the amount of $5,000,000
(collectively, the "Conseco Debentures") to provide that the conversion price
therein is fixed at thirty-two (32(cent)) cents per share based upon eighty
percent (80%) of the closing bid price of the Company's common stock on August
19, 1997, pursuant to the Second Amendment in the form attached hereto as
Exhibit "A" (the "Conseco Debenture Amendments").
D. As a condition of Lender's execution and delivery of the First
Amendment, the Company shall amend certain other convertible debentures now held
by third parties, as listed
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 Xxxxxxx Xxxxx World Income Fund, Inc. and
Xxxxxxx Xxxxx Convertible Fund, Inc. (the "Merrill Debentures") and (ii)
thirty-two (32(cent)) per share for the Merrill Debentures as to (i) and (ii)
when and as Conseco or any affiliate acquires such Other Debentures all as
hereinafter more specifically provided for herein.
E. As an inducement to the Company to enter into this Agreement,
Conseco agrees to convert the Conseco Debentures and Other Debentures it
acquires at the Closing or as soon therefter as possible.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals, and to
induce the Lender to enter into the First Amendment, the parties hereby agree as
follows:
1. For purposes of this Agreement, the term "Closing" shall mean one
business day following the later of (i) the expiration of the waiting period
under the Xxxx-Xxxxx-Xxxxxx Act with respect to a filing made by Conseco
thereunder with respect to its proposed acquisition of control of the Company
("HSR Filing") or (ii) the resolution of any objections or antitrust issues
raised by the government as a result of such filing. Conseco and the Company
agree to make the necessary filings under the Xxxx-Xxxxx Xxxxxx 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 comon
stock or preferred stock or securities convertible into common or preferred
stock without consent of Conseco.
6. The Company certifies that its Board of Directors has adopted
resolutions increasing the members of its Board of Directors by three (3)
positions to create three (3) vacancies effective as of Closing, and have
authorized such vacant positions to be filled by Conseco appointees at the
Closing.
7. At the Closing, Conseco or its designee shall contribute additional
equity in an amount equal to the difference between Ten Million Dollars
($10,000,000), and the amount of loan advances made by the Lender to the Company
under the Working Capital Loan as defined in the First Amendment as of the
Closing in exchange for preferred stock of the Company having terms acceptable
to Lender and consistent with the provisions of Exhibit "C" attached hereto.
8. Conseco's obligations to close shall be subject to the following
conditions: (i) no government agency has raised any objections or antitrust
issues with respect to the acquisition of the Other Debentures by Conseco or its
affiliates, (ii) the Borrower is not in material default of its obligations to
Lender beyond applicable cure periods, (iii) the holders of the Other Debentures
shall have complied with their agreements to sell the Other Debentures to
Conseco or its affiliates (iv) the Company is not a party to any insolvency,
receivership or bankruptcy proceedings, (v) the Company has not breached its
obligations under this Agreement, or (vi) there has been no material adverse
change in the financial condition or
business prospects of the Company and its subsidiaries since the date hereof
provided Lender provides the advances required under the Credit Agreement with
Borrower.
9. Conseco agrees that (i) from the date hereof, until Closing, neither
Conseco nor any of of its Affiliates will initiate or cooperate in the
initiation of any reorganization or liquidation proceeding with respect to the
Company under the Bankruptcy Act, (ii) for a period of six (6) months following
the Closing, Conseco will not cause the Company to engage in a cash out merger
with Conseco or any Conseco affiliate or any other transaction in which minority
shareholders are forced to exchange their shares for cash or other consideration
unless the transaction is approved by a majority of the disinterested members of
the Board of the Company, (iii) for a period of three (3) months following the
Closing, Conseco will not cause the Company to engage in a cash out merger with
Conseco or any Conseco affiliate or other transaction in which minority
shareholders of the Company are forced to exchange their shares for cash or
other consideration unless the transaction is approved by a majority of such
minority shareholders. This paragraph does not prohibit purchases of Company
shares by Conseco or its affiliates on a voluntary basis.
10. This Agreement is for the benefit of the Lender, Conseco, and its
affiliates, and shall have no effect on any Other Debentures not transferred to
Conseco or its affiliates, nor shall it benefit current holders of the Other
Debentures.
11. The Company agrees that upon Conseco's purchase of the Merrill
Debentures, the Company shall amend all those certain warrants issued September
12, 1996, to the holders of Merrill Debentures of shares of common stock of the
Company so as to provide a strike price being adjusted to one hundred percent
(100%) of the closing bid price of the Company's
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 Xxxxxxx Xxxxx affiliate).
12. The Company represents that it has been duly authorized to enter
into and perform this Agreement and that the execution and performance of this
Agreement by the Company will not violate or cause a default under any orders,
agreements, indentures or laws to which the Company is a party or by which it is
bound.
13. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties.
14. This Agreement may be executed in any number of counterparts
and by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
15. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
16. In the event any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provisions
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
17. This Agreement is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein.
18. In any action or proceeding brought to enforce any provision of
this Agreement, or where any provision hereof is validly asserted as a defense,
the successful party shall be entitled to recover reasonable attorneys' fees in
addition to any other available remedy. In addition, the Company shall pay the
reasonable attorney fees incurred by Conseco in connection with the transactions
contemplated by this Agreement and the preparation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
as of the first above-mentioned date.
CONSECO, Inc.
By:/S/XXXXXX X. XXXXX
----------------------------
Xxxxxx X. Xxxxx, Executive Vice President
NAL FINANCIAL GROUP INC.
By:/S/XXXXXX X. XXXXXXXXX
-----------------------------
Xxxxxx X. Xxxxxxxxx, President
EXHIBIT "A"
SECOND AMENDMENT TO 9% SUBORDINATED
CONVERTIBLE DEBENTURE DATED APRIL 23, 1996
On April 23, 1996 NAL Financial Group Inc., a Delaware corporation
("Maker" or the "Company") entered into a convertible debenture in the principal
amount of $5,000,000 (the "Debenture") payable to the order of Great American
Reserve Insurance Company as lender ("Lender"), as amended by that certain First
Amendment to 9% Subordinated Convertible Debenture dated June 23, 1997. For good
and valuable consideration, receipt of which is acknowledged, the parties agree
to amend the Debenture as follows:
1. Paragraph 6 of the Debenture is hereby superseded and replaced
in its entirety with the following:
"6. The unpaid principal of this Debenture is convertible at
the option of the Lender, in whole or in part, upon surrender
of this Debenture at the principal office of the Company, into
restricted shares of the Maker's Common Stock at a fixed
conversion price ("Conversion Price") equal to Thirty-Two
Cents (32(cent)) per share. Upon such conversion and issuance
of the Common Stock, all principal due under this Debenture
shall be discharged and the Company released from all
obligations hereunder, however, accrued interest shall be paid
to the date of conversion. At the option of the Lender,
accrued interest may also be subject to conversion in the same
manner as principal.
The shares of the Company's Common Stock issuable
upon the exercise of the conversion feature shall be
"restricted securities" as that term is defined under Rule 144
of the 1933 Act and, as a consequence, may not be sold or
otherwise transferred except pursuant to registration under
the 1933 Act or an available exemption therefrom."
2. Paragraph 7.5 of the Debenture is hereby superseded and
replaced in its entirety with the following:
"7.5 The Company shall not issue, offer or sell
additional shares of Common Stock or any preferred stock, or
issue any rights or options for the purchase of, or securities
convertible into shares of Common Stock or preferred stock,
without the prior written consent of Conseco Private Capital
Group, Inc."
3. In all other respects, the Debenture as amended shall remain unamended
and in full force and effect.
IN WITNESS WHEREOF, the parties have executed this amendment to be
effective as of August __, 1997.
GREAT AMERICAN RESERVE NAL FINANCIAL GROUP INC.
INSURANCE COMPANY as the Company
as Lender
By: By:
----------------------- ------------------------
EXHIBIT "B"
List of Other Convertible Debentureholders
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DEBENTURE ISSUE DATE LENDER AMOUNT CONVERSION
PRICE
------------------------------------------------------------------------------------------------------------------------------------
Subordinated Sept. 12, 1996 Xxxxxxx Xxxxx World $2,750,000 32 cents
Convertible Debenture Income Fund, Inc.
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Subordinated Sept. 12, 1996 Xxxxxxx Xxxxx $2,250,000 32 cents
Convertible Debenture Convertible Fund, Inc.
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9% Convertible Nov. 30, 1995 Westminster Capital, $1,250,000 30 cents
Subordinated Inc. (Belzburg)
Debenture
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9% Convertible Jan. 29, 1996 Xxxxxxx Xxxx $2,500,000 30 cents
Subordinated
Debenture
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9% Convertible July 14, 1995 Xxxxxxxx Xxxx C/F $1,000,000 30 cents
Subordinated Penelope & Athena
Debenture Xxxx (assigned to
Xxxxxxx Xxxx)
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9% Convertible July 28, 1995 Xxxxxxxx Xxxx C/F $1,000,000 30 cents
Subordinated Penelope & Athena
Debenture Xxxx (assigned to
Xxxxxxx Xxxx)
------------------------------------------------------------------------------------------------------------------------------------
9% Convertible Aug. 22, 1995 Xxxxxxxx Xxxx C/F $1,000,000 30 cents
Subordinated Penelope & Athena
Debenture Xxxx (assigned to
Xxxxxxx Xxxx)
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EXHIBIT "C"
PREFERRED STOCK TERMS
* convertible to common stock at option of holder at 80% of market value at
date of conversion.
* 9% cumulative preferential dividend rate
* payable semi-annually in cash or at the option of holder in common stock
of the Company valued at 80% of fair market value at time of issuance
* liquidation priority equal to cost less capital distributions
* common shares issued upon conversion shall have the same registration
rights as common shares issued upon conversion of the Conseco Debentures
