EXHIBIT 2
LETTER AGREEMENT WITH ARABELLA S.A.
February 27, 1997
Xx. Xxxx X. Xxxxxxx
000 Xxxxxxxxxx Xxxx
Xxxxxxxxxxxx, Xxxxxxxxxx 00000
Re: $4,200,000 Loan from Arabella S.A. to Xxxx X. Xxxxxxx
Dear Xx. Xxxxxxx:
Reference is made to that certain Credit Agreement dated as of May 31, 1996
(the "Credit Agreement"), by and between Xxxx X. Xxxxxxx, an individual (the
"Borrower"), and Arabella S.A., a company organized under the laws of
Luxembourg (the "Lender"), and that certain Promissory Note dated May 31, 1996
(the "Promissory Note" and together with the Credit Agreement, the "Credit
Documents"). As of the date hereof, the Borrower owes an aggregate principal
sum of $3,867,491.06 pursuant to the Credit Documents, which sum has accrued
interest which is due and not yet paid in the amount of $266,547.29. Borrower
may also borrow additional amounts pursuant to the Credit Documents, which
will accrue interest at the rate set forth in the Credit Documents. This
letter agreement (the "Agreement") confirms our agreement with respect to the
repayment of all obligations (including any additional amounts owing on the
date "Payment" as defined below is made) owed by the Borrower to the Lender
under the Credit Documents (the "Debt"). This Agreement modifies the Credit
Agreement and the Promissory Note to the extent set forth herein. The Lender
and the Borrower hereby agree as follows:
1. The Lender agrees to accept as payment in full of the Debt at maturity
the sum of Two Million Dollars ($2,000,000) in cash and Three Hundred Thousand
(300,000) shares of the common stock (the "Shares") of National Insurance
Group, a California corporation, as such number may be adjusted for any
additions to or reductions from such Shares occurring through the date the
payment is made because of a subdivision or combination of such Shares into a
smaller or larger number of shares plus any securities paid by dividend, spin-
off or otherwise on National Insurance Group common stock following the date
of this Agreement but prior to the date the Payment is made (collectively, the
"Payment").
2. Upon receipt of the Payment by the Lender, (i) the Debt shall be deemed
paid in full, (ii) the Lender shall promptly return the original Note marked
"PAID IN FULL" to the Borrower, and (iii) the Credit Agreement shall be deemed
terminated and the Borrower shall have no further obligations under the Credit
Documents.
3. The Lender and the Borrower agree that the value of the Payment is equal
to the amount of the Debt.
4. The maturity date of the Note shall be and hereby is extended to June 30,
1997.
5. The Lender hereby represents that it is acquiring the Shares solely for
the Lender's own account, for investment purposes only, and not with a view to
distribution, selling, or otherwise disposing of the Shares.
6. The Lender acknowledges that the Shares will be acquired in a private
transaction from an affiliate of National Insurance Group and acknowledges and
agrees that such Shares may not be resold without an effective registration
statement under the Securities Act of 1933, as amended and restated, or in
reliance on an exemption therefrom.
7. The Lender hereby acknowledges that it is a sophisticated investor and is
capable of evaluating the merits and risks of this Agreement and of protecting
its own interests in connection with this transaction, and that it has made
whatever inquiry is necessary or appropriate under the circumstances in
deciding to enter into this Agreement and to perform its obligations
hereunder.
8. The Borrower represents and warrants that, as of the date of delivery of
the Shares to Lender, Borrower owns all right, title and interest in and to,
and has good, marketable and transferable title to, the Shares, free of any
liens, claims or encumbrances. THE BORROWER MAKES NO OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE SHARES.
9. Lender has been provided a copy of the Purchase and Sale Agreement
("Purchase Agreement") to be entered into between Borrower and Scorpion
Acquisition, LLC. Lender acknowledges and consents to the execution and
delivery of the Purchase Agreement and to the transactions contemplated by the
Purchase Agreement, and waives any rights it may have to with respect to the
Purchase Agreement or the transactions contemplated therein.
The Lender and the Borrower agree further that this Agreement (i) sets forth
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersedes all prior and contemporaneous
written and oral discussions, negotiations and commitments with respect to
such subject matter, (ii) may not be modified, amended, changed or
supplemented, and no provision hereof may be waived, unless the same is in
writing and signed by the party (or parties) sought to be bound thereby, (iii)
may be executed in counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same instrument, (iv) is
intended to be solely for the benefit of the parties hereto and no other
person or entity shall be entitled to rely on any term or provision hereof or
otherwise derive any right or benefit hereunder, (v) is binding on the parties
hereto, and their respective successors, permitted assigns and legal
representatives and (vi) shall be governed by California law without respect
to the conflicts of laws provisions thereof. Executed facsimiles of
correspondence, agreements or other instruments shall be legally effective and
binding on the applicable party (or parties).
If the foregoing correctly sets forth our agreement, please date and execute
both this Agreement and the enclosed copy in the appropriate spaces below and
return this Agreement to the Lender; the other copy is for your records.
Sincerely,
ARABELLA S.A.
/S/XXXXXX XXXXXX
By: Xxxxxx Xxxxxx
Its: Attorney-in-Fact
ACKNOWLEDGED AND AGREED TO:
/S/XXXX X. XXXXXXX
Xxxx X. Xxxxxxx
Date: February 27, 1997