SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
_______________
Date of Report (Date of earliest event reported):
December 31, 1996
NATIONAL AFFILIATED CORPORATION
Louisiana
(State or other jurisdiction of incorporation or organization)
0-13538
(Commission File No. )
72-0947819
(I.R.S. Employer
Identification No.)
7228 England Drive, Suite 24
Alexandria, Louisiana
(Address of principal executive offices)
71303
(Zip Code)
Registrant's telephone number, including area code: (318) 473-4355
______________________________________
(Former address, if changed since last report)
INFORMATION INCLUDED IN THIS REPORT
Item 1. Changes in Control of Registrant.
On December 31, 1996, The Southern Group, Inc., a Maryland corporation
("TSG"),completed the purchase of 1,400,825 shares of the common stock, no par
value per share (the"Common Stock"), of the Registrant as a result of which TSG
owns approximately 62% of the total issued and outstanding Common Stock of the
Registrant.
TSG's purchases of stock of the Registrant was first reported in the Form
8-K of the Registrant dated January 15, 1996, in connection with the execution
by TSG and
the Registrant of a Stock Purchase Agreement (the "Stock Purchase Agreement").
On February 26, 1996, TSG and the Registrant entered into a First Amendment to
Stock Purchase Agreement, pursuant to which TSG purchased 300,000 shares
(approximately 9%) of Common Stock in exchange for $400,000 of government and
corporate bonds. On May 13, 1996, TSG and the Registrant entered into a Second
Amendment to Stock Purchase Agreement pursuant to which TSG purchased 5,000
shares of non-voting preferred stock (the "Preferred Stock") of the Registrant
for a portfolio of corporate stock and bonds with a stated value of $500,000.
On August 13, 1996, TSG and the Registrant entered into that certain Third
Amendment to
Stock Purchase Agreement pursuant to which TSG acquired 19,277 additional shares
of Preferred Stock in exchange for certain secured promissory notes with a
stated value of $881,822; such notes having been obtained by TSG from the
issuer thereof
in exchange for unsecured promissory notes in an equal amount issued by TSG. On
December 31, 1996, TSG and the Registrant entered into a Fourth Amendment to
Stock Purchase Agreement (attached hereto as Exhibit 1.01) in connection with
the acquisition by TSG of 1,400,825 shares of Common Stock. Pursuant to the
terms of the Preferred Stock and the Fourth Amendment, on December 31, 1996, in
connection with the purchase of the Common Stock by TSG on such date, the
Preferred Stock owned by TSG was converted into 3,735,103 shares of Common
Stock. As of the date hereof, TSG owns in the aggregate 5,435,928 shares of the
Common Stock of the Registrant.
Subject to the voting agreement described below, through the ownership of
more than a majority of the Common Stock of the Registrant, TSG has the ability
to elect or remove all of the directors of the Registrant and, generally, as a
result thereof, to
exercise control over the management and affairs of the Registrant. By
agreement between TSG and the Registrant, following the acquisition by TSG of a
majority of the Common Stock of the Registrant, a board of directors meeting of
the Registrant was held January 7, 1997, for the purpose of electing five
persons nominated by TSG
to serve on the board of directors of the Registrant. In order to make room on
the board of directors for the nominees of TSG, John Boxberger, a member of the
board of directors of the Registrant, voluntarily resigned his position on the
board. At the meeting, TSG nominated Sydney Shaw, Mike Dugan, Susan Davis,
Robert Chapel
and Ira Gottshall to the board of directors of the Registrant and the remaining
members of the board of directors of the Registrant duly elected such persons to
serve as directors until the next annual meeting of stockholders. In addition,
Brent Chapel was elected to serve as Vice Chairman and Mr. Gottshall was
elected to serve as Chief Executive Officer of the Registrant. Accordingly,
certain persons nominated
by TSG, who also serve on the board of directors of TSG, now comprise a majority
of the board of directors of the Registrant and occupy certain executive officer
positions.
Pursuant to the terms of the Fourth Amendment, TSG has agreed to vote its
shares of Common Stock of the Registrant for five persons designated by the
Registrant to serve as directors of the Registrant. In addition, TSG has agreed
for a period of two
years (commencing on December 31, 1996) to vote its shares of Common Stock of
the Registrant in favor of the election of not fewer than three persons
designated by the Registrant to serve as directors of the Registrant and to
cause all committees of
the board of directors of the Registrant to have at least one member who is a
designee
of the Registrant. The Fourth Amendment also provides that if TSG does not
complete the purchase of 6,321,942 shares of Common Stock of the Registrant
remaining unissued on or before April 30, 1997, TSG will for two years
thereafter vote its Common Stock to elect such number of designees of the
Registrant to the
board of directors of the Registrant as is necessary to constitute a majority.
Brent Chapel, Chairman of the board of directors of TSG, owns approximately
67% of the voting securities of TSG and, therefore, has the ability to control
the management and affairs of TSG through the election and removal of its
directors. Certain shares of preferred stock of TSG owned by Mr. Chapel has
been pledged by
him to secure certain promissory notes issued by him in connection with the
acquisition of certain notes and assets that were contributed by Mr. Chapel to
TSG in exchange for shares of TSG stock. Certain of these notes and assets
have been used by TSG to purchase the Common and Preferred Stock of the
Registrant, as set forth above. To the knowledge of the Registrant, an event of
default by Mr. Chapel under the notes or documents securing such notes and the
foreclosure by the holders
thereof upon the preferred stock of TSG securing same would not result in any
change of control of TSG or of the Registrant.
Item 7. Financial Statements and Exhibits
(c)Exhibits
Exhibit 1.01-Fourth Amendment to Stock Purchase Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 15, 1997.
NATIONAL AFFILIATED CORPORATION
By: ______________________________
Print: ____________________________
Title: ___________________________
FOURTH AMENDMENT TO STOCK PURCHASE AGREEMENT
This Fourth Amendment ("Amendment") is to that certain Stock Purchase
Agreement ("Agreement") dated January 15, 1996, and as amended as of February
26, 1996, May 13, 1996, and August 13, 1996 by and between National Affiliated
Corporation, a Louisiana corporation and registered insurance holding \
corporation ("Seller" or "NAC"), and The Southern Group, Inc. a Maryland
corporation ("Buyer").
WHEREAS, the parties entered into that certain Amendment to Stock Purchase
Agreement dated as February 26, 1996 whereby Buyer acquired approximately 9%
of the issued and outstanding capital shares of NAC, or 300,000 shares of NAC
Common Stock (181,539 shares issued and held by the Seller as treasury stock,
and 118,461 shares of authorized but unissued shares), for $400,000, which
preliminary transaction was treated as part of the acquisition of the NAC Shares
contemplated in the Agreement;
WHEREAS, the approval of the Louisiana Department of Insurance ("Louisiana
Regulatory Approval") of the acquisition of the NAC Shares as contemplated by
the Agreement has been obtained by the parties;
WHEREAS, the parties entered into that certain Second Amendment to the
Stock Purchase Agreement ("Second Amendment") to evidence the acquisition of
5,000 shares of NAC non-voting preferred stock, having a par value and
liquidation preference of $100 per share ("NAC Preferred Stock") by the Buyer
in exchange for the assets listed in such Second Amendment, which assets had a
stated value of $500,000;
WHEREAS, the parties entered into that certain Third Amendment to the Stock
Purchase Agreement ("Third Amendment") to evidence the acquisition of nineteen
thousand two hundred seventy seven (19,277) additional shares of NAC non-voting
preferred stock, having a par value and liquidation preference of $100 per share
("Additional NAC Preferred Stock") by the Buyer in exchange for the assets
listed in the Third Amendment;
WHEREAS, the parties desire to enter into this Fourth Amendment to the
Stock Purchase Agreement ("Fourth Amendment") to provide for the extension of
the closing date for the acquisition of the NAC Shares, for an adjustment in the
price per share for any NAC Shares acquired after February 1, 1997;
WHEREAS, the parties desire for the acquisition of the NAC Preferred Stock,
Additional NAC Preferred Stock and the NAC Shares, as described in the
Agreement, the Amendment, the Second Amendment, the Third Amendment and the
Fourth Amendment, to constitute a series of acquisitions all part of a common
plan of transfer of assets from Buyer to NAC in a transaction that will qualify
as a non-taxable corporate reorganization under section 368 of the Internal
Revenue Code of 1986, as amended as soon as the parties have received the
approval of the Louisiana Department of Insurance and the Maryland Department of
Insurance of the transaction;
NOW THEREFORE, the parties hereby agree to modify the terms of the
Agreement as follows:
1.(a)The Closing contemplated by the Agreement shall occur on or before
November 12, 1996. Seller agrees to waive the delivery by Buyer at the Closing
of any additional consideration beyond the consideration previously delivered to
Buyer by Seller at the Preliminary Closing, the Preliminary Preferred Closing
and the Second Preliminary Preferred Closing, and Seller will not at the Closing
deliver any additional NAC Shares beyond the number of shares of NAC Common
Stock into which the
Class A Preferred Stock - Series One and Class A Preferred Stock - Series Two is
convertible (together, the "Conversion Shares"). At the Closing, Seller will
deliver to Buyer (a) certificates representing the Conversion Shares against
delivery by buyer to Seller of the certificates evidencing the Class A Preferred
Stock - Series One and
the Class A Preferred Stock - Series Two, free and clear of all liens and
encumbrances; (b) the certificate required by Section 11.1 of the Agreement;
(c) the legal opinion required by Section 11.2 of the Agreement; (d) an executed
Registration Rights Agreement in the form of Exhibit 3.2 to the Agreement; and
(e) such other documents as may be required to be delivered by Seller pursuant
to the terms of this
Agreement. At the Closing, Buyer will deliver to Seller (a) certificates
representing the Class A Preferred Stock - Series One and the Class A Preferred
Stock - Series Two, free and clear of all liens and encumbrances; (b) the
certificate required by Section 10.1 of the Agreement; (c) the legal opinion
required by Section 10.2 of the Agreement; (d) an executed Registration Rights
Agreement in the form of Exhibit 3.2
to the Agreement; and (e) such other documents as may be required to be
delivered by Buyer pursuant to the terms of this Agreement.
(b)The parties agree that after the Closing: (i) Seller's continuing
compliance with the covenants set forth in Section 6 of the Agreement is
waived by Buyer; (ii) Buyer's
continuing compliance with the Covenants set forth in Section 7 of the
Agreement, other than the covenants set forth in Section 7.7, is waived by
Seller (iii) none of the
conditions to closing set forth in Section 10 and 11 will be conditions to any
Additional Closing except Sections 10.3, 10.4, 11.3, 11.4, and 11.5, as amended
below; (iv) Section 12 of the Agreement will not be applicable to NAC Shares
purchased at any Additional Closing; and (v) Section 13 of the Agreement is
deleted in its entirety.
2.The Agreement is amended hereby to permit additional closings after the
Closing at any time prior to May 1, 1997, at which Buyer may purchase any or all
of the 6,321,942 NAC Shares which have not been issued as of the Closing
("Additional Closings"), provided that the aggregate Purchase Price to be
delivered at each Additional Closing will not be less than $500,000. Section
2.1 of the Agreement is
amended hereby to provide that at each Additional Closing, in lieu of
Transferred Assets, the Purchase Price will consist of at least three million
dollars ($3,000,000) in cash and cash equivalents, with the remaining Purchase
Price to be paid in cash, cash equivalents, residential or commercial real
estate mortgages, corporate securities
or other assets acceptable to the Louisiana Department of Insurance and to the
president and chief financial officer of the Company ("Remaining Purchase Price
Assets"); provided, however if Seller shall receive written notice from the
Louisiana Department of Insurance that any of the Remaining Purchase Price
Assets fail to qualify as "Admitted Assets", the Buyer shall be notified of such
determination and shall be required within ten (10) business days of such
notification to replace such
Remaining Purchase Price Asset so failing to qualify as an "Admitted Assets" by
delivering to Seller a substitute asset or assets that shall qualify as an
"Admitted Asset", whereupon, Seller shall deliver to Buyer the replaced
Remaining Purchase Price Asset. Notwithstanding the foregoing, Seller and Buyer
agree that the shares of
common stock of INTERNATIONAL MERCANTILE CORPORATION are not
intended to qualify as "Admitted Assets" and the foregoing requirements shall
not be applied to such shares."
3.At each Additional Closing, Seller will deliver to Buyer the NAC Shares
to be issued, free and clear of all liens and encumbrances and Buyer will
deliver to Seller the
Purchase Price therefor, and no other deliveries of documents contemplated by
Section 3.2 or 3.3 of the Agreement will be required.
4.(a)Section 11.5 of the Agreement is amended to provide that promptly
after the Closing, Seller will call and hold a meeting of Seller's shareholders
("1996 Shareholders' Meeting") at which there will be nominated for election as
directors of Seller the six persons to be named by Buyer ("Buyer's Designees")
and five persons named by the current members of Seller's Board of Directors
("Seller's Designees").
For a period ending two (2) years from the date of this Agreement ("Special
Voting Period"), Buyer agrees that Buyer will vote Buyer's shares of NAC Common
Stock for the election of not fewer than three (3) persons who are Seller's
Designees, for election to the Board of Directors of NAC; provided that at the
1996 Shareholders' Meeting, Buyer will vote for the five (5) persons named as
the Seller's Designees.
(b)During the Special Voting Period, Buyer agrees that it will take all
necessary action to cause the composition of all committees of the Board of
Directors to match as closely as is possible the composition of the whole Board
of Directors as to the relative proportions of Seller's Designees (as Seller's
Designees may by majority vote
designate) and Buyer's Designees, and in no event will Buyer permit there to be
designated or created any committee of the Board of Directors that does not
include at least one director who is a Seller Designee (who shall be determined
by majority vote of Seller's Designees). During the Special Voting Period,
Buyer agrees that it will take all necessary action to cause the board of
directors of each subsidiary and
each committee of such board to include proportionate numbers of Seller's
Designees and Buyer's Designees as is contemplated by this Section 4.
(c)If Buyer (i) does not complete the purchase of the 6,321,942 NAC Shares
remaining unissued as of the Closing on or before April 30, 1997, or (ii)
breaches its obligations under this Section 4, then Buyer agrees that Buyer will
thereafter vote Buyer's shares of NAC Common Stock for, and take all other
necessary action to complete, the election of a number of additional persons,
as Seller's Designees may
by majority vote recommend, for election to the Board of Directors of NAC (and
each subsidiary), such that Seller's Designees shall constitute a majority of
the Board of Directors of NAC. This Section 4 will constitute a voting
agreement by Buyer and will continue in effect for a period of two (2) years
from the date of this Amendment.
Buyer agrees that its NAC Shares shall bear a legend referencing this Amendment,
and that its agreement set forth in this Section 4 will be binding upon any
purchaser of the NAC Shares.
5.Effective upon the Closing, the NAC Preferred Stock (5,000 shares) and
the Additional NAC Preferred Stock (19,277 shares) shall be converted into
3,735,103 shares of NAC Common Stock ($2,427,798 divided by $0.65 per share of
NAC Common Stock) in accordance with the conversion rights set out in the
Preferred Stock Designation for CLASS A PREFERRED STOCK -- SERIES ONE, which was
attached to the Second Amendment ("Series One Designation") and for CLASS A
PREFERRED STOCK -- SERIES TWO, which was attached to the Third
Amendment ("Series Two Designation").
6.Sections 3.2 and 3.3 of the Agreement shall be modified to reflect the
transfers made at the Preliminary Preferred Closing, the Second Preliminary
Preferred Closing and any Additional Preliminary Closing, such that the NAC
Shares delivered by Seller to Buyer at Closing pursuant to 3.2(a) shall be
offset by (i) the Preliminary NAC
Shares, (ii) the NAC Common Stock into which the Preliminary NAC Preferred
Shares were converted and (iii) the NAC Shares delivered to Buyer according to
any Additional Preliminary Closing and the Purchase Price delivered by Buyer to
Seller at Closing pursuant to 3.3(a) shall be reduced by (w) $400,000 with
respect to the
Preliminary Closing, (x) an additional $500,000 with respect to the Preliminary
Preferred Closing, (y) an additional $1,927,798 with respect to the Second
Preliminary Preferred Closing and (z) the value of any additional Southern Group
Assets delivered to Seller according to any Additional Preliminary Closing.
7.The price per share of each of the NAC Shares shall remain $0.65 for any
acquisition of NAC Shares that is closed on or before February 1, 1997, shall be
increased to $0.70 for any acquisition of NAC Shares that is closed after
February 1, 1997 but before March 1, 1997, and shall be increased to $0.75 for
any acquisition of NAC Shares that is closed after March 1, 1997 but before
April 1, 1997, and shall be increased to $.80 per share for any acquisition of
NAC Shares that closes after April 1, 1997 and before April 30, 1997.
8.If for any reason, the Closing does not take place before April 30,
1997, the parties agree to provide, each to the other, within 15 days of either
party's written request, the consents, certificates, registration rights
agreement, and other documents required to be delivered by the parties to the
other by the terms of the Agreement,
which documents shall reflect only the transfer to Buyer of the Preliminary NAC
Shares, the Preliminary NAC Preferred Shares, the Additional Preliminary NAC
Preferred Shares and any NAC Shares delivered according to any Additional
Preliminary Closings.
9.After the Closing, all transactions proposed between Buyer, its
affiliates and any of their officers and directors, on the one hand, and Seller
and any of its subsidiaries,
on the other hand, will be reviewed by a special transactions committee of
disinterested directors and must be approved by a majority of the members of the
Board of Directors who are deemed disinterested in such transaction by the
special transactions committee. The Board of Directors will elect a special
public information committee to establish policies and procedures for the
dissemination of public information and for the protection of Company
confidential materials, which policies
and procedures are expected to contain provisions similar to the Company's
current policy that requires that all information regarding the Company that is
proposed to be made publicly available or provided to the financial community
will be approved in advance by the President or Chief Executive Officer of the
Company, with the advise of counsel.
10.Except as expressly amended hereby, the Agreement, specifically
including Sections 3.1, 3.2, and 3.3, and all obligations, duties, rights and
powers created thereby or thereunder are in all respects ratified and confirmed
and remain in full force
and effect. Where any section, subsection or clause of the Agreement is
modified or deleted by this Amendment, any unaltered provision of such section,
subsection or clause of the Agreement shall remain in full force and effect.
However, where any
provision of this Amendment conflicts or is inconsistent with the Agreement, the
provision of this Amendment shall control.
11.Terms used herein, which are not otherwise defined or modified herein,
but which are defined in the Agreement, shall have the meanings therein ascribed
to them.
12.This Amendment (a) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns; (b) may be
modified or amended only in writing signed by each party hereto; (c) may be
executed by facsimile signatures and in several counterparts, and by the parties
hereto on separate counterparts, and each counterpart, when so executed and
delivered, shall constitute
an original agreement, and all such separate counterparts shall constitute one
and the same agreement; and (d) embodies the entire agreement and understanding
between the parties with respect to the subject matter hereof and supersedes
all prior agreements relating to such subject matter.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on this
the 31st day of December, 1996.
SELLER:
NATIONAL AFFILIATED CORPORATION
By:______________________________
Name:___________________________
Its:______________________________
SUBSIDIARIES:
NATIONAL AFFILIATED INVESTORS LIFE INSURANCE COMPANY
By:______________________________
Name:___________________________
Its:______________________________
NATIONAL AFFILIATED MARKETING COMPANY
By:______________________________
Name:___________________________
Its:______________________________
AFFILIATED INVESTMENT MARKETING
By:______________________________
Name:___________________________
Its:______________________________
NATIONAL AFFILIATED FINANCE COMPANY
By:______________________________
Name:___________________________
Its:______________________________
PRACTICAL LEASING UNLIMITED SYSTEMS
By:______________________________
Name:___________________________
Its:______________________________
BUYER:
THE SOUTHERN GROUP, INC.
By:______________________________
Name:___________________________
Its:______________________________
