EXHIBIT 10.2
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT (this "Agreement") is made this 20th day
of February, 1996, by and between ARTRA GROUP Incorporated, a Pennsylvania
corporation ("ARTRA"), Fill-Mor Holding, Inc., a Delaware corporation
("Fill-Mor") and Xxxxxx Xxxxxxx ("Xxxxxxx").
WHEREAS, in consideration of a payment of $1,000,000.00 from Xxxxxxx to
ARTRA, ARTRA is willing to issue to Xxxxxxx a 10% Secured Convertible Promissory
Note of even date herewith in the principal amount of $1,200,000.00 (the
"Note"); and
WHEREAS, the parties desire to enter into certain other agreements
related to the issuance of the Note.
NOW THEREFORE, in consideration of the foregoing and of the mutual
promises and agreements hereinafter set forth, the parties agree as follows:
1. Transaction.
(i) In consideration for the delivery by Xxxxxxx to ARTRA of
the sum of $1,000,000.00 in good and immediately available funds, ARTRA hereby
agrees to issue to Xxxxxxx the Note. The Note shall bear interest at the rate of
10% per annum and shall be due and payable 120 days from the date of issuance.
Payment by ARTRA of the Note shall be guaranteed by ARTRA's wholly-owned
subsidiary, Fill-Mor and such guaranty shall be evidenced by a guaranty of even
date herewith (the "Guaranty") duly executed by Fill-Mor. The Guaranty shall be
secured by 990,000 shares of common stock of COMFORCE Corporation owned by
Fill-Mor, and such security interest shall be evidenced by a Pledge Agreement of
even date herewith (the "Pledge Agreement") entered into by Fill-Mor and
Xxxxxxx. The Note shall also have a conversion feature which shall allow Xxxxxxx
to convert up to $200,000.00 of the Note's principal balance, plus related
accrued and unpaid interest, into shares of ARTRA common stock (the "Conversion
Shares") at the conversion price of $5.00 per share. The registration rights of
Xxxxxxx in regard to the Conversion Shares shall be evidenced by a Registration
Rights Agreement of even date herewith (the "Registration Rights Agreement")
entered into by the parties. This Agreement, the Note, and the Registration
Rights Agreement are sometimes collectively referred to hereafter as the
"Transaction Documents".
(ii) In further consideration for the delivery by Xxxxxxx to
ARTRA of the sum of $1,000,000.00, ARTRA hereby agrees to cause the delivery to
Xxxxxxx of 10,000 shares of common stock of COMFORCE Corporation owned by
Fill-Mor (the "Payment Shares").
2. Closing. The Closing shall take place on even date herewith (the
"Closing Date") at the offices of ARTRA's counsel, Xxxxxx, Xxxxxxxxx & Xxxxx,
Ltd., 000 Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx, or at such other time and place
as mutually agreed upon by the parties. The effectiveness of the Closing shall
be conditioned upon the occurrence of the events specified in Section 6 hereof.
At the Closing ARTRA will deliver to Xxxxxxx the Note to be purchased
by Xxxxxxx dated as of the Closing Date, against delivery by Xxxxxxx to XXXXX of
the purchase price therefor by wire transfer of immediately available funds in
the amount of such purchase price into the Xxxxxx, Xxxxxxxxx & Xxxxx, Ltd.
Escrow Account # XX0000000 at Manufacturers Bank in Chicago, Illinois. At the
Closing Fill-Mor shall deliver to Xxxxxxx the Payment Shares, as well as the
collateral pursuant to the Pledge Agreement. If at the Closing ARTRA shall fail
to tender such Note, or if Fill-Mor shall fail to deliver such Payment Shares
and such collateral to Xxxxxxx as provided in this Section 2, or if any of the
conditions specified in Section 6 hereof shall not have been fulfilled to its
satisfaction, Xxxxxxx shall, at its election, be relieved of all further
obligations under this Agreement, without thereby waiving any other rights it
may have by reason of such failure or nonfulfillment.
3. Representations and Warranties of ARTRA. ARTRA and Fill-Mor
represent and warrant to Xxxxxxx as follows:
3.1 Organization.
(i) ARTRA is a corporation duly organized, validly
existing, and in good standing in the State of Pennsylvania, has full corporate
power to own and lease its properties, to carry on its businesses and to
execute, deliver and perform the transactions contemplated by, the Transaction
Documents and is duly qualified to do business and in good standing in each
jurisdiction in which the character of its properties or transactions material
to its business makes such qualification necessary, except that ARTRA is not in
good standing in the State of Illinois.
(ii) COMFORCE Corporation ("COMFORCE") is a
corporation duly organized, validly existing, and in good standing in the State
of Delaware, has full corporate power to own its properties, to carry on its
businesses and is duly qualified to do business and in good standing in each
jurisdiction in which the character of its properties or transactions material
to its business makes such qualification necessary.
3.2 Authority.
(i) The execution, delivery and performance by ARTRA of this
Agreement, the Note, the Registration Agreement, and all other related
undertakings of ARTRA have been duly authorized by all requisite corporate
action of ARTRA, do not require the approval of the stockholders of ARTRA, do
not require the consent or approval of any governmental authority, will not
violate any law or regulation (including, without limitation, Regulation G, U or
X of the Federal Reserve Board and all applicable state securities laws) will
not violate the certificate of incorporation or by-laws of ARTRA, and will not
violate or constitute (with due notice or lapse of time or both) a default under
any indenture, agreement, license or other contract to which ARTRA is a party or
by which it or its properties are bound.
(ii) The execution, delivery and performance by Fill-Mor of
this Agreement, the Guaranty, the Pledge Agreement, and all other related
undertakings of Fill-Mor have been duly authorized by all requisite corporate
action of Fill-Mor, do not require the approval of the stockholders of Fill-Mor,
do not require the consent or approval of any governmental authority, will not
violate any law or regulation (including, without limitation, Regulation G, U or
X of the Federal Reserve Board and all applicable state securities laws) will
not violate the certificate of incorporation or by-laws of Fill-Mor, and will
not violate or constitute (with due notice or lapse of time or both) a default
under any indenture, agreement, license or other contract to which Fill-Mor is a
party or by which it or its properties are bound.
3.3 Enforcement. Each of the Transaction Documents will be,
when executed and delivered by ARTRA, a valid, legal and binding obligation of
ARTRA, enforceable against ARTRA in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforceability of
creditor's rights generally.
3.4 Financial Statements.
(i) ARTRA's financial statements , included in
ARTRA's Form 10-K for the fiscal year ended December 29, 1994 and in ARTRA's
Form 10-Q for the quarterly period ended September 28, 1995, present fairly, in
all material respects, the financial condition and the results of operations and
cash flows of ARTRA in accordance with generally accepted accounting principles.
(ii) COMFORCE's financial statements , included in
COMFORCE's Form 10-K for the fiscal year ended December 31, 1994 and in
COMFORCE's Form 10-Q for the quarterly period ended September 30, 1995, present
fairly, in all material respects, the financial condition and the results of
operations and cash flows of COMFORCE in accordance with generally accepted
accounting principles.
3.5 Litigation. No litigation, or governmental proceedings are
pending or threatened against ARTRA or COMFORCE, nor do any other circumstances
exist, the results of which might materially and adversely affect the financial
condition or results of operations of each company, except those disclosed in
the respective financial statements of each referenced in subsection 3.4 hereof.
3.6 Authorization of Conversion Shares. The issuances of the
Conversion Shares under the circumstances described in, and pursuant to the
terms of, the Note have been duly authorized and, when issued and delivered in
accordance with the provisions of the Note, the Conversion Shares will be
validly issued, fully paid and nonassessable, and the holders thereof will not
be subject to personal liability solely by reason of being such holders. The
Conversion Shares are not subject to the preemptive rights of any security
holder of ARTRA.
3.7 Authorization of COMFORCE Shares. The Payment Shares
received by Xxxxxxx from Fill-Mor, and the common shares of COMFORCE pledged by
Fill-Mor pursuant to the Pledge Agreement have been duly authorized and validly
issued, are fully paid and nonassessable, and the holders thereof will not be
subject to personal liability solely by reason of being such holders. Fill-Mor
has good and marketable title to the Payment Shares and the shares of common
stock of COMFORCE pledged under the Pledge Agreement free and clear of all
liens, claims, encumbrances, restrictions and covenants, except the security
interest which will be released concurrently with the Closing. The Payment
Shares and the COMFORCE shares pledged under the Pledge Agreement are not
subject to the preemptive rights of any security holder of COMFORCE.
3.8 Noncontravention. Neither ARTRA nor COMFORCE is in any
violation of, or in default under, nor will the execution and delivery or
performance of the Transaction Documents result in the violation of (i) any term
or provision of its respective Articles of Incorporation or By-Laws, as amended;
(ii) except as may be otherwise disclosed in the financial statements of ARTRA
and COMFORCE, referred to in Section 3.4 hereof, any material term or provision,
or any financial covenants, of any indenture, mortgage, contract, commitment or
other agreement or instrument to which either is a party or by which either or
any of the respective properties or businesses of either is or may be bound or
affected; or (iii) any existing applicable law, rule, regulation, judgment,
order or decree of any governmental agency or court, domestic or foreign, having
jurisdiction over ARTRA or COMFORCE, as applicable, or any of the properties or
businesses of either, as applicable. ARTRA or COMFORCE, as applicable, own,
possess or have obtained all governmental and other licenses, permits,
certifications, registrations, approvals or consents and other authorizations
("Permits") necessary to own or lease, as the case may be, and to operate its
respective properties and to conduct its respective businesses or operations as
currently conducted and all such Permits are outstanding and in good standing,
and there are no proceedings pending or, to ARTRA's knowledge, threatened, nor
is there any basis therefor, seeking to cancel, terminate or limit such Permits.
3.9 Reg D Qualification; Offering Documents. Assuming the
representations and warranties of Xxxxxxx contained herein are true and correct,
the offer and sale of the Note by ARTRA has satisfied and on the Closing Date
will have satisfied all of the requirements of Regulation D under the Securities
Act of 1933, as amended, ("Reg D") and ARTRA is not disqualified from the
exemption under Rule 505 contained in Reg D by virtue of the disqualifications
contained in Rule 505(b)(2)(iii), or the exemption under Reg D by virtue of the
disqualification contained in Rule 507.
3.10 Intangibles. Each of ARTRA and COMFORCE own or possess
adequate and enforceable rights to use all patents, patent applications,
trademarks, service marks, copyrights, rights, trade secrets, confidential
information, processes and formulations used or proposed to be used in the
conduct of the respective business of each (collectively the "Intangibles"); to
ARTRA's knowledge, neither ARTRA or COMFORCE has infringed or is infringing upon
the rights of others with respect to the respective Intangibles of each and
neither ARTRA or COMFORCE has received any notice that it has or may have
infringed or is infringing upon the rights of others with respect to the
Intangibles; and neither ARTRA or COMFORCE has received any notice of conflict
with the asserted rights of others with respect to the respective Intangibles of
each which could, singly or in the aggregate, materially adversely affect the
respective business, financial condition or results of operations of each and
ARTRA does not know of any basis therefor; and, to ARTRA's knowledge, no others
have infringed upon the respective Intangibles of each of ARTRA and COMFORCE.
3.11 Labor Relations. To the best of ARTRA's knowledge, no
labor problem exists with ARTRA's employees or is imminent which could adversely
affect ARTRA, nor do labor problem exists with COMFORCE's employees or is
imminent which could adversely affect COMFORCE
3.12 Insurance. Each of ARTRA and COMFORCE has adequately
insured its properties against loss or damage by fire or other casualty and
maintains, in amounts which it deems, in good faith, to be adequate, such other
insurance, including but not limited to, liability insurance, as is usually
maintained by companies engaged in the same or similar businesses.
3.13 Taxes. ARTRA and COMFORCE have filed all tax returns
which are required by law to have been filed and have paid all taxes,
assessments, fees and charges of each governmental body shown to be due and
payable on such returns to the extent the same have become due and payable and
before they have become delinquent other than those presently payable without
penalty or interest and those being contested in good faith by appropriate
proceedings as to which adequate reserves have been established in accordance
with generally accepted accounting principles ("GAAP") with respect thereto. In
the opinion of ARTRA, all tax liabilities are adequately provided for on the
books of ARTRA and COMFORCE in accordance with GAAP.
3.14 No Adverse Change. Since the respective dates, referenced
in Section 3.4 hereof, as of which information is given in ARTRA's and
COMFORCE's financial statements as referenced in section 3.4, neither has
incurred any material liability or obligation, direct or contingent, nor entered
into any material transaction, whether or not in the ordinary course of
business, nor sustained any material loss or interference with its business from
fire, storm, explosion, flood or other casualty, nor experienced any labor
dispute, nor incurred any court or governmental action, order or decree, which
would have a material adverse change in the respective financial conditions of
each of ARTRA and COMFORCE.
3.15 Investment Company Act. ARTRA is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
nor is subject to regulation under such act.
4. Representations and Warranties of Xxxxxxx. Xxxxxxx
represents and warrants to ARTRA as follows:
4.1 Xxxxxxx represents and warrants to ARTRA that he has full
power to own his properties, to carry on his businesses and to execute, deliver
and perform this Agreement.
4.2 Each of the Transaction Documents will be, when executed
and delivered by Xxxxxxx, a legal, valid and binding obligation of Xxxxxxx
enforceable against Xxxxxxx, in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforceability of
creditors' rights generally or general equity principles.
4.3 The execution, delivery and performance by Xxxxxxx of the
Transaction Documents will not violate any law or regulation, violate or
constitute (with due notice or lapse of time or both), a material default under
any indenture, agreement, license or other instrument or contract to which
Xxxxxxx is a party or by which its properties are bound, and do not require any
filing or registration, permit, license, consent or approval of any governmental
agency.
4.4 Xxxxxxx represents that it is purchasing the Note for
investment purposes only and that in all respects Xxxxxxx acknowledges its
understanding that ARTRA is relying on the exemptions contained in Section 4(2)
of the Securities Act of 1933 and Section 4(Q) of the Illinois Securities Law of
1953 in making the sale contemplated under this Agreement.
5. Covenants of ARTRA. ARTRA hereby covenants as follows:
5.1 Upon an exercise by Xxxxxxx of its conversion rights under
the Note, ARTRA covenants that it shall issue the requisite number of Conversion
Shares, which shares shall be duly authorized, validly issued, fully paid and
non-assessable, and issued free and clear of all liens and defects to title.
5.2 ARTRA agrees to include the Conversion Shares in the Form
S-1 Registration Statement presently being prepared, in accordance with the
terms of the Registration Agreement, and to keep such registration statement
effective in accordance with the terms of the Registration Rights Agreement.
5.3 ARTRA agrees to provide anti-dilution protection to
Xxxxxxx in regard to the Conversion Shares, in accordance with the anti-dilution
provisions of the Note.
5.4 Within 10 days after the date of this Agreement, ARTRA
agrees to cause to be paid or forgiven at least $13 million of its presently
outstanding bank indebtedness.
6. Conditions To Effectiveness. The parties do not intend to
be bound by this Agreement unless the actions listed in this section 6 have
occurred at the Closing; such actions shall be deemed to have occurred
concurrently with the execution of this Agreement. Any party has the right to
withdraw any signed Transaction Document and not to close the transaction until
the following actions have occurred:
6.1 Delivery of Funds. Xxxxxxx shall have delivered to ARTRA
the sum of $1,000,000.00 in good and immediately available funds by wire
transfer, or in such other manner as mutually agreed upon by the parties.
6.2 Corporate Authority ARTRA shall have delivered to Xxxxxxx,
in form and substance satisfactory to Xxxxxxx:
(i) copies, certified by ARTRA's secretary or
assistant secretary, of its Articles of Incorporation,
By-laws, and resolutions of its Board of Directors authorizing
the execution and delivery of this Note and all other
documents to be delivered by ARTRA hereunder; and
(ii) a certificate by the secretary or assistant
secretary of ARTRA certifying the names of its officers
authorized to sign this Agreement and all other documents to
be delivered by ARTRA hereunder, together with true signatures
of such officers.
6.3 Opinion of Counsel ARTRA shall have delivered to Xxxxxxx
an opinion of counsel dated as of the date hereof, which opinion shall be in
form and substance satisfactory to Xxxxxxx.
6.4 Other Documents ARTRA shall have delivered to Xxxxxxx the
following documents, in form and substance satisfactory to Xxxxxxx:
(i) the Note, duly executed by ARTRA;
(ii) the Registration Rights Agreement, duly executed
by ARTRA and Xxxxxxx.
6.5 Payment Shares. ARTRA shall have delivered to Xxxxxxx
certificates evidencing the Payment Shares, accompanied by stock powers
appropriately executed in blank.
6.6 Corporate Authority of Fill-Mor. Fill-Mor shall have
delivered to Xxxxxxx:
(i) a copy, certified by Fill-Mor's secretary or
assistant secretary, of resolutions of its Board of Directors
authorizing the execution, delivery and performance of the
Guaranty and the Pledge Agreement.
(ii) a certificate by the secretary or assistant
secretary of Fill-Mor certifying the names of its officers
authorized to sign the Guaranty and the Pledge Agreement,
together with true signatures of such officers.
6.7 Delivery of Guaranty and Pledge Agreement. Fill-Mor shall
have delivered to Xxxxxxx:
(i) the Guaranty, duly executed by Fill-Mor; and
(ii) the Pledge Agreement duly executed by Fill-Mor
and Xxxxxxx, including delivery of one or more certificates
evidencing the Pledged Securities accompanied by separate
stock powers appropriately executed in blank to Xxxxxxx as
contemplated therein.
6.8 Concurrent Closing of Other Loan. The loan being made to
ARTRA by Westminster Capital, Inc. in the amount of $1,000,000 on substantially
the same terms as the loan contemplated by this Agreement shall have closed
concurrently with the closing of the transactions contemplated by this
Agreement.
7. [Intentionally Deleted]
8. No Waiver; Cumulative Remedies. Xxxxxxx shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder, and no waiver shall be void unless in writing, signed by Xxxxxxx and
then only to the extent therein set forth. A waiver by Xxxxxxx of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which Xxxxxxx would otherwise have had on any future occasion.
The rights and remedies hereunder provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights and remedies
provided by law. None of the terms or provisions of this Agreement may be
waived, altered, modified or amended except by an instrument in writing, duly
executed by the parties.
9. Assignment. This Agreement may not be assigned by a party to one or
more third parties without the prior written consent of the other party, but
nothing herein shall limit or affect the assignment of the Note or the other
Transaction Documents.
10. Successors and Assigns. This Agreement inures to the benefit of the
parties and binds each party, and its respective successors and permitted
assigns.
11. Governing Law. This Agreement shall be governed by the laws of the
State of Illinois applicable to contracts made by parties resident in, and to be
performed in said state (not including the provisions of conflict of laws).
12. Notices. All notices required to be given to any of the parties
hereunder shall be in writing and shall be deemed to have been sufficiently
given for all purposes when presented personally to such party, sent by
telecopier (with original timely mailed), or sent by certified, registered or
express mail, return receipt requested, to such party at its address set forth
below:
(a) ARTRA
ARTRA GROUP Incorporated
000 X. Xxxxxxx Xxx.
Xxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
Fax #: (000) 000-0000
(b) Xxxxxxx
Xxxxxx Xxxxxxx
c/o Herrick Co.
0000 Xxxxxxxxx Xxxx., Xxxxx 000
P.O. Box 5010
Xxxx Xxxxx, Xxxxxxx 00000
Fax #: (000) 000-0000
13. Entire Agreement. This Agreement, the other Transaction Documents,
the Guaranty and the Pledge Agreement entered into concurrently herewith embody
the entire agreement and understanding between ARTRA, Fill-Mor and Xxxxxxx and
supersede all prior agreements and understandings relating to the subject matter
hereof and thereof. This Agreement and the transactions contemplated hereby are
not contingent upon, and shall not be affected by, any other transaction on
similar terms being entered into by ARTRA with any person or entity concurrently
or substantially concurrently with the transactions contemplated by this
Agreement.
14. Counterparts. This Agreement may be executed in any number of
counterparts which shall, collectively and separately, constitute one agreement.
* * *
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
ARTRA GROUP INCORPORATED
By: ____________________________________
Title: ____________________________________
FILL-MOR HOLDING, INC.
By: ____________________________________
Title: ____________________________________
XXXXXX XXXXXXX
_______________________________________
