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 American
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 Paragraph 1 of the Debenture is hereby superseded and replaced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")."
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.
GREAT AMERICA RESERVE NAL FINANCIAL GROUP INC.
INSURANCE COMPANY as the Company
as Lender
By:/s/ XXXXXX X. XXXX By:/s/ XXXXXX X. XXXXXXXXX
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Xxxxxx X. Xxxxxxxxx
Chief Executive Officer
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