EXHIBIT 10.1
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 Westminster Capital, Inc. ("Westminster").
WHEREAS, in consideration of a payment of $1,000,000.00 from
Westminster to ARTRA, ARTRA is willing to issue to Westminster 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 Westminster to ARTRA
of the sum of $1,000,000.00 in good and immediately available funds, ARTRA
hereby agrees to issue to Westminster 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 Westminster. The Note shall also have a conversion feature which
shall allow Westminster 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 Westminster 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 Westminster
to ARTRA of the sum of $1,000,000.00, ARTRA hereby agrees to cause the delivery
to Westminster 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 Westminster the Note to be
purchased by Westminster dated as of the Closing Date, against delivery by
Westminster to ARTRA 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 Westminster 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 Westminster 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, Westminster 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 Westminster 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 Rights 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 Westminster 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 and
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 Westminster 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 Westminster. Westminster represents
and warrants to ARTRA as follows:
4.1 Westminster represents and warrants to ARTRA that it has
full corporate power to own its properties, to carry on its businesses and to
execute, deliver and perform this Agreement.
4.2 Each of the Transaction Documents will be, when executed
and delivered by Westminster, a legal, valid and binding obligation of
Westminster enforceable against Westminster, 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 Westminster 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
Westminster 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 Westminster represents that it is purchasing the Note
for investment purposes only and that in all respects Westminster
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 Westminster 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
Westminster 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. Westminster 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
Westminster, in form and substance satisfactory to Westminster:
(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
Westminster an opinion of counsel dated as of the date hereof, which opinion
shall be in form and substance satisfactory to Westminster.
6.4 Other Documents ARTRA shall have delivered to Westminster
the following documents, in form and substance satisfactory to Westminster:
(i) the Note, duly executed by ARTRA;
(ii) the Registration Rights Agreement, duly executed
by ARTRA and Westminster.
6.5 Payment Shares. ARTRA shall have delivered to Westminster
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 Westminster:
(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 Westminster:
(i) the Guaranty, duly executed by Fill-Mor; and
(ii) the Pledge Agreement duly executed by Fill-Mor
and Westminster, including delivery of one or more
certificates evidencing the Pledged Securities accompanied by
separate stock powers appropriately executed in blank to
Westminster as contemplated therein
6.8 Concurrent Closing of Other Loan. The loan being made to
ARTRA by Xxxxxx Xxxxxxx 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. Westminster 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
Westminster and then only to the extent therein set forth. A waiver by
Westminster of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which Westminster 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) Westminster
Westminster Capital, Inc.
0000 Xxxxxxxx Xxxx., Xxxxx X-00
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxx
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 Westminster
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: ____________________________________
WESTMINSTER CAPITAL, INC.
By: ____________________________________
Title: ____________________________________
