SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant[X]
Filed by party other than the Registrant[ ]
Check the appropriate box:
[ ]Preliminary Proxy Statement
[ ]Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X ]Definitive Proxy Statement
[ ]Definitive Additional Materials
[ ]Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
------------------------
NATIONAL AFFILIATED CORPORATION
(Name of Registrant as Specified In Its Charter)
NATIONAL AFFILIATED CORPORATION
(Name of Person(s) Filing Proxy Statement)
------------------------
Payment of Filing Fee (Check the appropriate box):
[X ]No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1 Title of each class of securities to which transaction applies:
-----------------------------------
2 Aggregate number of securities to which transaction applies:
-----------------------------------
3 Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was determined):
-----------------------------------
4 Proposed maximum aggregate value of transaction:
-----------------------------------
5 Total fee paid:
-----------------------------------
[ ]Fee paid previously with preliminary materials.
[ ]Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1 Amount Previously Paid:
-----------------------------------
2 Form, Schedule or Registration Statement No.:
-----------------------------------
3 Filing Party:
-----------------------------------
4 Date Filed:
-----------------------------------
NATIONAL AFFILIATED CORPORATION
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
May 29, 1998
A Special Meeting of the Shareholders of National Affiliated Corporation,
a Louisiana corporation (the "Company"), will be held beginning at 10:00 a.m. on
Friday, May 29, 1998, at the Louisiana Convention Centre, 2225 North MacArthur
Drive, Alexandria, Louisiana 71301 for the following purposes:
1. To consider and act upon a proposal to increase the number of
authorized shares of common stock of the Company from 14,000,000 to 100,000,000;
and
2. To transact such other business as may properly come before the
meeting.
The record date for determination of the shareholders entitled to notice
of and to vote at the meeting and any adjournments thereof is the close of
business on May 1, 1998.
Whether or not you expect to attend the Special Meeting in person,
please complete, sign, date and promptly return the enclosed proxy in the
envelope provided, which requires no postage if mailed in the United States.
By Order of the Board of Directors
/s/ T. Brent Chapel
T. Brent Chapel
Vice Chairman of the Board
May 1, 1998
Bethesda, Maryland
NATIONAL AFFILIATED CORPORATION
7228 ENGLAND DRIVE, SUITE 24
ALEXANDRIA, LA 71303
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS
May 29, 1998
INTRODUCTION
The Special Meeting of Shareholders of National Affiliated Corporation
(the "Company") will be held on Friday, May 29, 1998, at 10:00 a.m., Central
Standard Time, at the Louisiana Convention Centre, 2225 North MacArthur
Drive, Alexandria, Louisiana 71301, or at any adjournments thereof (the
"Special Meeting"), for the purposes set forth in the Notice of Meeting.
A proxy card is enclosed for your use. You are solicited on behalf of the
Board of Directors to SIGN AND RETURN THE PROXY CARD AS SOON AS
POSSIBLE IN THE ACCOMPANYING ENVELOPE. No postage is required if
mailed within the United States. The cost of soliciting proxies, including the
preparation, assembly and mailing of proxies and soliciting material, as well as
the cost of forwarding such material to the beneficial owners of the Company's
Common Stock, will be borne by the Company. In addition, Directors, officers and
regular employees of the Company may, without compensation other than their
regular compensation, solicit proxies by telephone, telegraph or personal
conversation. The Company may reimburse brokerage firms and others for
expenses in forwarding proxy materials to the beneficial owners of Common Stock.
Any shareholder giving a proxy may revoke it at any time prior to its use
at the Special Meeting either by giving written notice of such revocation to T.
Brent Chapel, the Chief Financial Officer of the Company, by filing a duly
executed proxy bearing a later date with the Secretary of the Company, or by
appearing at the Special Meeting and filing written notice of revocation with
the Secretary of the Company prior to use of the proxy. Proxies will be voted as
specified by shareholders. Proxies that are signed by shareholders but lack any
such specification will be voted in favor of the proposals set forth in the
Notice of Meeting.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE APPROVAL OF THE PROPOSALS SET FORTH IN THE NOTICE
OF MEETING.
The Company expects that this proxy material will be mailed first to
shareholders on or about May 1, 1998.
VOTING OF SHARES
Only holders of the Company's common stock, no par value ("Common
Stock") of record at the close of business on May 1, 1998 will be entitled to
vote at the Special Meeting. On March 31, 1998, the Company had 14,000,000
outstanding shares of Common Stock, each such share entitling the holder thereof
to one vote on each matter to be voted on at the Special Meeting. The holders of
a majority of the shares entitled to vote and represented in person or by proxy
at the Special Meeting will constitute a quorum for the transaction of business
at the Special Meeting. In general, shares of Common Stock represented by a
properly signed and returned proxy card will be counted as shares present and
entitled to vote at the meeting for purposes of determining a quorum, without
regard to whether the card reflects abstentions (or is left blank) or reflects a
"broker non-vote" on a matter (i.e., a card returned by a broker because voting
instructions have not been received and the broker has no discretionary
authority to vote). Holders of shares of Common Stock are not entitled to
cumulative voting rights.
The approval of each of the proposals described in this Proxy Statement
requires the approval of a majority of the shares present and entitled to vote
in person or by proxy on that matter (and at least a majority of the minimum
number of votes necessary for a quorum to transact business at the Special
Meeting). Shares represented by a proxy card voted as abstaining on any of the
proposals will be treated as shares present and entitled to vote that were not
cast in favor of a particular matter, and thus will be counted as votes against
the matter. Shares represented by a proxy card including any broker non-vote on
a matter will be treated as shares not entitled to vote on that matter, and thus
will not be counted in determining whether that matter has been approved.
PRINCIPAL SHAREHOLDERS AND BENEFICIAL
OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company as of March 31, 1998, unless
otherwise noted, (a) by each shareholder who is known by the Company to own
beneficially more than 5% of the outstanding Common Stock, (b) by each Director
of the Company, (c) by each "named executive officer" as defined in Item
402(a)(2) of Regulation S-B of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") for the fiscal year ended December 31, 1997, and (d) by all
executive officers and Directors of the Company as a group.
<TABLE>
<S> <C> <C> <C>
SHARES OF COMMON STOCK BENEFICIALLY OWNED
----------------------------
PERCENT OF
NAME AMOUNT CLASS
----------------------------- ------------ ---------------
Edward J. Biranne, Jr. 30,000 0.21%
T. Brent Chapel 5,494,517 1/ 39.25%
Robert W. Chapel 20,000 2/ 0.14%
Susan A. Davis 20,000 3/ 0.14%
Mary K. Descant 16,500 0.12%
Michael J. Dugan 20,000 0.14%
Lee M Gammill, Jr. 20,000 0.14%
Robert F. Meredith, III 16,474 0.12%
Sidney C. "Rusty" Shaw 20,000 0.14%
Benjamin P. Wall 67,657 0.48%
G. Vaughn Walton 19,476 0.14%
Bobby Williams 14,325 0.10%
The Southern Group 5,457,928 4/ 39.00%
Executive Officers and
Directors as a group 5,758,949 41.00%
(12 persons)
</TABLE>
1/ Family members hold 20,489 shares. Also reflects shares owned by The
Southern Group as to which Mr. Brent Chapel has voting and investment
power.
2/ Brother of Mr. Brent Chapel.
3/ Sister-in-law of Mr. Brent Chapel.
4/ The Southern Group relinquished all of its rights to purchase 4,899,117
common shares.
PROPOSAL TO AMEND THE COMPANY'S
AMENDED AND RESTATED ARTICLES OF INCORPORATION
TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
INTRODUCTION
Currently, the Company's Articles of Incorporation (the "Articles")
authorize the issuance of 14,000,000 shares of Common Stock. As of March 31,
1998, 14,000,000 shares of Common Stock were issued and outstanding. The
Company has issued several series of redeemable, convertible debentures, defined
hereunder as "Debentures", that give the holders the right to convert the
debentures into Common Stock at a conversion rate specified in the debentures.
Currently, the Company has 2,847,014 shares of Common Stock held in escrow
pursuant to the terms of the Debentures. The aggregate face amount of the
debentures is $9,049,017.
Accordingly, on May 1, 1998, if all outstanding debentures were converted
at $.60 per share and if the Company issued all of the shares of Common Stock
upon such conversion, the Company would exceed its total number of authorized
shares by 9,777,762 shares.
AMENDMENT
On April 14, 1998, the Board approved an increase in the authorized
number of shares of Common Stock from 14,000,000 to 100,000,000 shares,
subject to shareholder approval. If this amendment is approved by the Company's
shareholders, 86,000,000 additional shares of Common Stock will be authorized
and available for issuance or sale by the Company immediately after the Special
Meeting (excluding shares reserved for issuance for some special purpose such as
a stock option plan).
PURPOSES OF PROPOSED AMENDMENT
During the second half of 1997, the Company issued several series of
Debentures to offshore investors pursuant to Regulation S as promulgated under
the Securities Act of 1933, as amended, in an effort to raise capital for
acquisitions of the Company. As part of the agreement of the Debentures, the
Company represented to the Debenture holders that the Company would have
available from its authorized but unissued Common Stock enough shares necessary
to allow for such conversions. At present time, the Company does not have the
necessary number of authorized shares to comply with the conversion terms of the
Debentures. If all shares were to be converted using a $.60 per share
conversion price on May 1, 1998, the Company would need to issue 9,777,762
shares. Therefore, the Company must have, available for issuance, a minimum of
9,777,762 shares of its Common Stock.
A summary of the Debentures follows:
The offered convertible debentures, except for those debentures in (2) and
(3) below, are guaranteed by The Southern Group, which holds 39% of the
Company's outstanding shares. The following information is provided with
respect to such convertible debentures:
<TABLE>
<S> <C> <C> <C> <C>
Debenture Face Offering Broker's Net
Number Amount Price Fee Proceeds
(1) $1,788,000 $1,490,000 $178,800 $1,311,200
(2) $360,000 $300,000 $36,000 $264,000
(3) $1,199,904 $1,000,000 $120,000 $880,000
(4) $240,000 $200,000 $24,000 $176,000
(5) $1,380,000 $1,150,000 $138,000 $1,012,000
(6) $1,111,112 $1,000,000 $186,660 $813,340
(7) $2,970,001 $2,673,000 $320,760 $2,352,240
Total $9,049,017 $7,813,000 $1,004,220 $6,807,780
</TABLE>
(1)On September 15, 1997, September 18, 1997, and September 22,
1997, the Company sold convertible debentures entitled 12% Series A
Subordinated Convertible Redeemable Debenture due August 31, 1998, in the face
amount of $1,788,000 ("Debenture," see Exhibits). The total offering price was
$1,490,000, a 16.67% discount from the face amount of the Debentures. The
broker, Vengua Capital Markets ("Vengua"), a placement agent in Lemington Spa,
Great Britain, was paid a broker's fee of 12% or $178,800. The Company received
cash in an amount equal to the offering price net of the broker's fee or
$1,311,200.
The holder of the Debenture, commencing 45 days after the closing of the
offering, has the option to convert all or any amount over $10,000 of the face
amount of the Debenture to Common Stock, at a conversion price equal to the
lower of (i) 75% of the average of the closing bid prices of the Common Stock
for the five business days immediately preceding the date of receipt by the
Company of a notice of conversion or (ii) 80% of the closing bid price of the
Common Stock for the business day immediately preceding the closing date as
reported by the National Association of Securities Dealers Electronic Bulletin
Board ("Conversion Shares"). If the number of resultant Conversion Shares would
as a matter of law or pursuant to a regulatory authority require the Company to
seek shareholder approval of such issuance, the Company shall take the necessary
steps to obtain such approval. If such approval is not obtained within 45 days,
the Company shall be required to redeem the Debentures. Debenture holders have
temporarily waived this condition pending authorization at the Special Meeting
to increase the number of authorized shares of Common Stock. If it fails to
deliver the Conversion Shares to holder within ten days of the conversion, the
Company has agreed to pay liquidated damages to the holder in the amount of $500
per day late, starting after the initial ten days, for up to ten additional days
late and $5,000 plus an additional $1,000 for every day late after the
additional ten days late. The Company can redeem the Debenture within 45 days
of issuance by paying 100% of the face amount or after 90 days from issuance
by paying 120% of face amount.
(2)On September 19, 1997, the Company sold one convertible
debenture entitled 12% Convertible Debenture due September 18, 1998, in the face
amount of $360,000 ("Debenture," see Exhibits). The total offering price was
$300,000, a 16.67% discount from the face value of the Debenture. The broker,
Vengua, a placement agent in Lemington Spa, Great Britain, was paid a broker's
fee of 12% or $36,000. The Company received cash in an amount equal to the
offering price net of the broker's fee or $264,000.
The holder of the Debenture, commencing on or after October 29, 1997,
has the option to convert all or any amount, in increments of $50,000, of the
face amount of the Debenture to Common Stock at a conversion price equal to
(i) 80% of the five days average lower bid price prior to the date of execution
of the Debenture or (ii) the lower of (x) 75% of the average of the closing bid
prices of the Common Stock for the five business days immediately preceding the
date of receipt by the Company of a notice of conversion or (x) 75% of the lower
bid price of the Common Stock for the day immediately prior to conversion as
reported by the National Association of Securities Dealers Electronic Bulletin
Board. If it fails to deliver the Common Stock within five days of the
conversion, the Company will pay to the holder a monthly penalty of an
additional three percent discount to the stated value of Common Stock upon
conversion. The Company can redeem the Debenture at any time within 90 days of
the issuance by paying 120% of face value.
(3)On September 23, 1997, the Company sold convertible debentures
entitled 12% Senior Convertible Redeemable Debenture due September 25, 1998,
in the face amount of $1,199,904 ("Debenture," see Exhibits). The total offering
price was $1,000,000, a 16.66% discount from the face value of the Debenture.
The broker, Vengua, a placement agent in Lemington Spa, Great Britain, was paid
a broker's fee of 12% or $120,000. The Company received cash in an amount
equal to the offering price net of the broker's fee or $880,000.
The holder of the Debenture, at any time commencing 45 days after the
issue date of the Debenture, has the option to convert all or any amount, in
increments of $50,000, of the face amount of the Debenture to Common Stock at
a conversion price equal to (i) $.80 or (ii) 75% of the closing bid price of the
Common Stock on the last day that the Common Stock trades immediately
preceding the date of receipt by the Company of a notice of conversion by the
holder as such closing price is quoted by the National Association of Securities
Dealers Electronic Bulletin Board. If the number of resultant Conversion Shares
would as a matter of law or pursuant to a regulatory authority require the
Company to seek shareholder approval of such issuance, the Company shall take
the necessary steps to obtain such approval. Debenture holders have temporarily
waived this condition pending authorization at the Special Meeting to increase
the number of authorized shares of Common Stock. If such approval is not
obtained within 30 days, the Company shall be required to redeem the Debenture.
If the Conversion Shares are not delivered to the holder within three days of
the conversion, the Company will pay a cash penalty equal to .5% of the face
amount of the Debenture.
(4)On October 23, 1997, the Company sold convertible debentures
entitled 12% Series D Subordinated Convertible Redeemable Debenture due
October 31, 1998, in the face amount of $240,000 ("Debenture" see Exhibits).
The total offering price was $200,000, a 16.67% discount from the face value of
the Debenture. The broker, Vengua Capital Markets ("Vengua"), a placement agent
in Lemington Spa, Great Britain, was paid a broker's fee of 12% or $24,000.
The Company received cash in an amount equal to the offering price net of the
broker's fee or $176,000.
The holder of the Debenture, commencing 45 days after the closing of the
offering, has the option to convert all or any amount over $10,000 of the face
amount to the Debenture to Common Stock at a conversion price equal to the
lower of (i) $2.41, (ii) 80% of the average of the closing bid prices of the
Common Stock for the five business days immediately preceding the date of
receipt by the Company of a notice of conversion as reported by the National
Association of Securities Dealers Electronic Bulletin Board. If the number of
resultant Conversion Shares would as a matter of law or pursuant to a regulatory
authority require the Company to seek shareholder approval of such issuance, the
Company shall take the necessary steps to obtain such approval. If such approval
is not obtained within 45 days, the Company shall be required to redeem the
Debenture. Debenture holders have temporarily waived this condition pending
authorization at the Special Meeting to increase the number of authorized shares
of Common Stock. If it fails to deliver the Conversion Shares to holder within
ten days of the conversion, the Company has agreed to pay liquidated damages to
the holder in the amount of $500 per day late, starting after the initial ten
days, for up to ten additional days late and $5,000 plus an additional $1,000
for every day late after the additional ten days late. The Company can redeem
the Debenture at any time within 45 days of issuance or after 90 from issuance
by paying 120% of face value.
(5)On October 27, 1997, the Company sold convertible debentures
entitled 12% Series D Subordinated Convertible Redeemable Debenture due
October 31, 1998, in the face amount of $1,380,000 ("Debenture" see Exhibits).
The total offering price was $1,150,000, a 16.67% discount from the face value
of the Debenture. The broker, Vengua, a placement agent in Lemington Spa, Great
Britain, was paid a broker's fee of 12% or $138,000. The Company received cash
in an amount equal to the offering price net of the broker's fee or $1,012,000.
The holder of the Debenture, commencing 45 days after the closing of the
offering, has the option to convert all or any amount over $10,000 of the face
amount to the Debenture to common stock ("Common Stock") at a conversion
price equal to the lower of (i) $.80, (ii) 75% of the average of the closing bid
prices of the Common Stock for the five business days immediately preceding the
date of receipt by the Company of a notice of conversion, or (iii) 75% of the
closing bid price of the Common Stock for the business day immediately preceding
the closing date as reported by the National Association of Securities Dealers
Electronic Bulletin Board. If the number of resultant Conversion Shares would
as a matter of law or pursuant to a regulatory authority require the Company to
seek shareholder approval of such issuance, the Company shall take the necessary
steps to obtain such approval. If such approval is not obtained within 45 days,
the Company shall be required to redeem the Debenture. Debenture holders have
temporarily waived this condition pending authorization at the Special Meeting
to increase the number of authorized shares of Common Stock. If it fails to
deliver the Conversion Shares to holder within ten days of the conversion, the
Company has agreed to pay liquidated damages to the holder in the amount of
$500 per day late, starting after the initial ten days, for up to ten additional
days late and $5,000 plus an additional $1,000 for every day late after the
additional ten days late. The Company can redeem the Debenture at any time
within 45 days of issuance or after 90 from issuance by paying 120% of face
value.
(6)On November 14, 1997, the Company sold one convertible
debenture entitled 12% Series X Subordinated Convertible Redeemable Debenture
due November 30, 1998, in the face amount of $1,111,112 ("Debenture" see
Exhibits). The total offering price was $1,000,000, a 16.67% discount from the
face value of the Debenture. The broker, Vengua, a placement agent in Lemington
Spa, Great Britain, was paid a broker's fee of 12% or $186,660. The Company
received cash in an amount equal to the offering price net of the broker's fee
or $813,340.
The holder of the Debenture, commencing 45 days after the closing of the
offering, has the option to convert all or any amount over $10,000 of the face
amount to the Debenture to common stock ("Common Stock") at a conversion
price equal to the lower of (i) 80% of the average of the closing bid prices of
the Common Stock for the five business days immediately preceding the date of
receipt by the Company of a notice of conversion or (ii) the average of the
closing bid price of the Common Stock for the business day immediately preceding
the closing date as reported by the National Association of Securities Dealers
Electronic Bulletin Board. If the number of resultant Conversion Shares would
as a matter of law or pursuant to a regulatory authority require the Company to
seek shareholder approval of such issuance, the Company shall take the necessary
steps to obtain such approval. If such approval is not obtained within 45 days,
the Company shall be required to redeem the Debenture. Debenture holders have
temporarily waived this condition pending authorization at the Special Meeting
to increase the number of authorized shares of Common Stock. If it fails to
deliver the Conversion Shares to holder within ten days of the conversion, the
Company has agreed to pay liquidated damages to the holder in the amount of $500
per day late, starting after the initial ten days, for up to ten additional days
late and $5,000 plus an additional $1,000 for every day late after the
additional ten days late. The Company can redeem the Debenture at any time
within 45 days of issuance or after 90 from issuance by paying 120% of face
value.
(7)On December 12, 1997, and December 15, 1997, the Company sold
convertible debentures entitled 12% Series J Subordinated Convertible Redeemable
Debenture Due December 31, 1998, in the face amount of $2,970,001
("Debenture" see Exhibits). The total offering price was $2,673,000, a 10%
discount from the face value of the Debenture. The broker, Vengua, a placement
agent in Lemington Spa, Great Britain, was paid a broker's fee of 12% or
$320,760. The Company will receive cash in an amount equal to the offering
price net of the broker's fee or $2,352,240.
The holder of the Debenture, commencing 45 days after the closing of the
offering, has the option to convert all or any amount over $10,000 of the face
amount to the Debenture to Common Stock at a conversion price equal to the
lower of (i) 75% of the average of the closing bid prices of the Common Stock
for the five business days immediately preceding the date of receipt by the
Company of a notice of conversion, or (ii) 80% of the average of the closing bid
prices of the Common Stock for the five business days immediately preceding the
closing date as reported by the National Association of Securities Dealers
Electronic Bulletin Board. If the number of resultant Conversion Shares would
as a matter of law or pursuant to a regulatory authority require the Company to
seek shareholder approval of such issuance, the Company shall take the necessary
steps to obtain such approval. If such approval is not obtained within 45 days,
the Company shall be required to redeem the Debenture. Debenture holders have
temporarily waived this condition pending authorization at the Special Meeting
to increase the number of authorized shares of Common Stock. If it fails to
deliver the Conversion Shares to holder within ten days of the conversion, the
Company has agreed to pay liquidated damages to the holder in the amount of $500
per day late, starting after the initial ten days, for up to ten additional days
late and $5,000 plus an additional $1,000 for every day late after the
additional ten days late. The Company can redeem the Debenture at any time
within 30 days of issuance by paying 120% of face value or at any time after
90 days from issuance by paying 125% of face value.
On December 4, 1997, the Company issued warrants entitled Outstanding
Investor Warrants ("Warrants") for the benefit of investors in the Series D
Subordinated Convertible Redeemable Debentures discussed above. The Company
delivered to an escrow agent a total of 675,000 Warrants as described in the
following table:
<TABLE>
<C> <C> <C> <C> <C> <C> <C>
Face
Amount Series 1 Series 2 Series 3 Series 4 Series 5 Total
$1,380,000 135,000 135,000 135,000 135,000 135,000 675,000
</TABLE>
The Warrants were issued at a ratio of 5 Warrants for every $10 of cash
invested in the debentures. Each Warrant can be exercised and converted into
Common Stock at any time prior to the 31st day of October, 1999. The following
exercise prices apply to each series of Warrants as indicated: Series 1 $3.00
per warrant, Series 2 $3.25 per warrant, Series 3 $3.50 per warrant, Series 4
$3.75 per warrant, and Series 5 $4.00 per warrant.
As of January 26, 1998, the following conversions have occurred with
respect to the convertible Debentures:
Debenture Face Amount Number of Face Amount Shares in
Number Amount Converted Shares Remaining Escrow
(1) $1,788,000 $1,738,000 1,786,108 $50,000 0
(2) $360,000 $360,000 362,920 0 0
(3) $1,199,904 $50,000 62,500 $410,544* 1,346,514**
(4) $240,000 $10,000 14,198 $230,000 222,500
(5) $1,380,000 $185,000 344,169 $1,195,000 1,228,000
(6) $1,111,112 $100,000 206,794 $1,011,112 0
(7) $2,970,001 $0 0 $2,970,001 0
Total $9,049,017 $2,443,000 2,776,689 $5,866,657 2,797,014
___________
* The Company repurchased $739,360 of face amount of debentures.
** These shares represent two share certificates. The Company issued a
replacement share certificate for 833,334 shares and did not receive a
certificate representing the shares being replaced. The remaining 513,180
shares are presently being disputed by the Company as superseded by the
replacement shares.
EFFECTS OF PROPOSED AMENDMENT
Under the Company's Articles, the Company's shareholders do not have
preemptive rights with respect to the Common Stock. Thus, should the Board elect
to issue additional shares of Common Stock, existing shareholders would not have
any preferential rights to purchase such shares, and any such issuances could,
therefore, have a dilutive effect on the shareholdings of current shareholders.
The proposed amendment to increase the authorized number of shares of
Common Stock could, under certain circumstances, have an anti-takeover effect,
although this is not the intention of this proposal. In the event of a hostile
attempt to take over the Company, it might be possible for the Company to try to
impede such an attempt by issuing shares of the Common Stock through a "private
placement" to a friendly party, thereby diluting the voting power of the other
outstanding shares and increasing the potential cost to acquire control of the
Company. The overall effect, therefore, could be to discourage unsolicited
takeover attempts. By potentially discouraging initiation of any such
unsolicited takeover attempt, the proposed amendment may limit the opportunity
for the Company's shareholders to dispose of their shares at the higher price
generally available in takeover attempts or that may be available under a merger
proposal. The proposed amendment may have the effect of permitting the Company's
current management, including the current Board, to retain its position and
place it in a better position to resist changes that shareholders may wish to
make if they are dissatisfied with the conduct of the Company's business.
As previously stated, however, the only intended purpose of the proposed
amendment is to increase the number of available shares of Common Stock in
order to have sufficient shares to allow conversion if elected by the Company
and to provide the Board more flexibility in conducting normal business
operations, and the proposal is not being presented as, nor is it part of, a
plan to adopt a series of anti-takeover measures.
PROPOSED RESOLUTION
A resolution in substantially the following form will be submitted to the
shareholders at the Special Meeting:
"RESOLVED, that the Company's authorized shares of Common
Stock be increased from 14,000,000 shares to 100,000,000 shares.
RESOLVED FURTHER, that appropriate officers of the Company
be, and the same are, hereby resolved, empowered and directed in
the name on behalf of the Company to take such action and execute
such documents as may be deemed necessary or desirable to carry
out the intent and purpose of the foregoing resolution."
RECOMMENDATION OF THE BOARD
The Board recommends a vote FOR approval of the amendment to
Company's Articles to increase the number of authorized shares of Common Stock.
The affirmative vote of the holders of a majority of shares of Common Stock
present in person or by proxy at the Special Meeting, assuming a quorum is
present, is necessary for approval. Unless a contrary choice is specified,
proxies solicited by the Board will be voted FOR approval of such increase.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
It is anticipated that the next shareholders meeting will be held in May
1998. Shareholder proposals intended to be presented in the proxy materials
relating to the 1998 Annual Meeting of Shareholders must be received by the
Company at its principal executive offices on or about April 30, 1998.
OTHER BUSINESS
The Company knows of no business that will be presented for consideration
at the Special Meeting other than that described in this Proxy Statement. As to
other business, if any, that may properly come before the Special Meeting, it is
intended that proxies solicited by the Board will be voted in accordance with
the judgment of the person or persons voting the proxies.
By Order of the Board of Directors
/s/ T. Brent Chapel
T. Brent Chapel
Vice-Chairman of the Board, and Chief Executive Officer
May 1, 1998
Bethesda, Maryland
NATIONAL AFFILIATED CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints T. Brent Chapel and Mary K. Descant,
as Proxies, each with full power of substitution, and hereby authorizes each of
them to represent and to vote, as designated below, all the shares of Common
Stock of National Affiliated Corporation held of record by the undersigned as of
May 1, 1998, at the Special Meeting of Shareholders to be held on May 29, 1998,
or any adjournment thereof.
1.PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK OF THE COMPANY FROM 14,000,000 TO
100,000,000.
|_| FOR |_| AGAINST |_| ABSTAIN
2.In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR
PROPOSAL 1 ABOVE. Please sign exactly as name appears below. When shares
are held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Dated:_____________, 1998
______________________________________
Signature
______________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
[Place Shareholder Sticker here.]
