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): July 31, 1995
ARTRA GROUP INCORPORATED
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania
--------------------------------------------
State or Other Jurisdiction of Incorporation
1-3916 25-1095978
---------------------- -----------------
Commission File Number I.R.S. Employer
Identification No.
500 Central Avenue, Northfield, IL 60093
- -------------------------------------- --------
Address of principal executive offices Zip Code
Registrant's telephone number, including area code: (708) 441-6650
Not Applicable
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
<PAGE>
Item 5. Other Events
On July 31, 1995, ARTRA GROUP Incorporated ("ARTRA" or the
"Registrant") and its wholly-owned subsidiary, Bagcraft
Corporation of America ("Bagcraft"), entered into a letter of
intent to sell the business assets, subject to the buyer's
assumption of certain liabilities, of Bagcraft's wholly-owned
Arcar Graphics, Inc. ("Arcar") subsidiary. Arcar is a
manufacturer and distributor of waterbase inks. The purchase
price shall be cash of $21,000,000 payable at closing and the
buyer's assumption of certain liablities. Consumation of the
transaction is subject to certain conditions, including
performance of the buyer's due diligence, buyer's financing of
the acquisition and negotiation of a definitive asset purchase
agreement.
<PAGE>
Item 7. Exhibits
99.1 Letter of intent, dated July 31, 1995, between ARTRA
GROUP Incorporated, Bagcraft Corporation of America
and Arcar Graphics, Inc. ("Sellers") and Alper
Holdings USA, Inc. ("Buyer") regarding purchase of
the business assets, subject to Buyer's assumption of
certain liabilities, of Seller's Arcar subsidiary.
99.2 Press Release dated August 2, 1995.
<PAGE>
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 thereunder duly authorized.
ARTRA GROUP INCORPORATED
Registrant
Dated: August 3, 1995 JAMES D. DOERING
------------------------------------------
Vice President and Chief Financial Officer
EXHIBIT 99.1
Alper Holdings USA, Inc.
767 Third Avenue
New York, NY 10017
July 31, 1995
Arcar Graphics, Inc.
450 Wegner Drive
Chicago, IL 60185
Attn: Mark F. Santacrose, Chairman
Bagcraft Corporation of America
3900 West 43rd Street
Chicago, IL 60632
Attn: Mark F. Santacrose, President
Artra Group Incorporated
500 Central Avenue
Northfield, Illinois 60093
Attn: Peter R. Harvey, President
Dear Pete and Mark:
This letter outlines the terms pursuant to which an affiliate of, or
corporation to be formed by, Alper Holdings USA, Inc. ("Alper" or the "Buyer")
is prepared to purchase from Arcar Graphics, Inc. ("Arcar") certain assets owned
by or used in connection with the business, the "Purchased Assets", as hereafter
defined, and assume certain liabilities, the "Assumed Liabilities", as hereafter
defined, of Arcar (the "Arcar Business").
For purposes of this letter, the term "Seller" shall mean Arcar and the
term "Proposal" shall mean the transaction proposed hereby. The term "Purchased
Assets" shall mean all tangible and intangible assets owned by, or utilized in
connection with the business of, Arcar, including, without limitation, the
following: plant, equipment, inventory, realty, vehicles, intellectual property,
patents, processes, trademarks, contract rights, receivables and all assets
reflected on the Arcar balance sheet dated as of June 30, 1995; but excluding
the following: any cash or cash equivalents and any obligation for money
borrowed owed by Artra Group Incorporated ("Artra") or Bagcraft Corporation of
America ("Bagcraft") to Arcar. The term "Assumed Liabilities" shall mean
liabilities and obligations under scheduled purchase orders, supply agreements,
accounts payable, normal operating accruals, vehicle leases and facility leases.
<PAGE>
1. Closing: Purchase Price. On a date to be agreed upon, but no later
than September 15, 1995 (the "Closing"), Buyer will purchase from Seller the
Purchased Assets and assume the Assumed Liabilities. The purchase price for the
Purchased Assets (the "Purchase Price") shall be $21,000,000, payable in cash at
the Closing, and the assumption of the Assumed Liabilities. A portion of the
Purchase Price, in an amount to be determined by Buyer and Seller, will be
allocable to a covenant not-to-compete as to Ink Products (as hereinafter
defined) and the ink dispersions business to be executed by Seller, Bagcraft and
Artra and their respective affiliates in favor of Buyer. Buyer will reimburse
Bagcraft for all of its out-of-pocket expenses, including amounts paid to
Paulette Messer since July 1, 1995, related to the agreement dated June 1, 1995
with Edwin Messer (up to $100,000) in consideration of Bagcraft terminating said
agreement and releasing any and all rights to the establishment of a dispersions
business. Furthermore, subject to a balance sheet audit by a nationally
recognizable independent accounting firm, the Purchase Price shall be adjusted
dollar-for-dollar by the increase (upward Purchase Price) or decrease (reduction
in Purchase Price) in net working capital (defined as accounts receivable,
including the receivable from Bagcraft, and inventory less normal accrued
operating expenses and accounts payable) ("Net Working Capital") as of the
Closing Date from the amount of working capital shown on the June 30, 1995
balance sheet.
2. Purchase Agreement. Buyer and Seller shall diligently negotiate in
good faith the terms of a definitive asset purchase agreement (the "Purchase
Agreement"), which will set forth the specific terms and conditions of the
Proposal. As more particularly set forth in the following paragraphs, the
Purchase Agreement will contain, among other things, terms with respect to
representations and warranties of the Seller, covenants with respect to the
operation of the Arcar Business prior to Closing, and closing conditions and
indemnities, including an escrow, if satisfactory to Buyer and Seller.
3. Closing Conditions. Without limiting the generality of the
foregoing, the Purchase Agreement will provide, among other things, that Buyer's
obligation to close the transaction proposed hereby will be subject to the
satisfaction of each of the following conditions:
(a) Buyer and Buyer's lender or lenders shall have had the opportunity
to complete a satisfactory comprehensive due diligence investigation with
respect to the Arcar Business and the business, assets and commitments thereof,
including, without limitation, an environmental review, analysis of accounting
systems, supplier relationships, employee relationships, etc., and such due
diligence investigation shall have been completed to the satisfaction of Buyer.
For the purpose of carrying out such due diligence investigation, Seller shall
afford Buyer's officers, employees, counsel, accountants and other
representatives free and full access to, and the right to inspect, during normal
business hours, all of the premises, properties, assets, records, contracts and
other documents relating to the Arcar Business and the business, assets and
commitments thereof.
(b) The representations and warranties contained in the Purchase
Agreement shall be true and correct.
<PAGE>
(c) There shall have occurred no material adverse change in, and there
shall have occurred no event which has resulted or could result in a material
adverse change in, the business, properties, profits, prospects or condition
(financial or other) of the Arcar Business.
(d) Seller, Bagcraft and Artra shall have executed and delivered to
Buyer a covenant not-to-compete as to Ink Products (as hereinafter defined) and
the ink dispersions business in a form to be agreed to by Buyer and Seller.
(e) There shall not exist any pending or threatened litigation which,
in the opinion of counsel to Buyer, has or could have any material adverse
effect on the consummation of the sale and purchase of the Purchased Assets or
assumption of the Assumed Liabilities or the enjoyment of the benefits thereof.
(f) Receipt of all consents and approvals necessary or appropriate to
complete the Proposal.
(g) Buyer's receipt of financing adequate to consummate the Proposal on
terms and conditions satisfactory to Buyer.
(h) Termination of all existing employment agreements between Arcar,
and the execution of new employment agreements satisfactory in form and
substance to Buyer with, Messrs. Billings, Tinerella and Phillips on terms and
conditions satisfactory to Buyer.
(i) Execution of an ink purchase agreement between Buyer and Bagcraft
in form and substance satisfactory to Buyer and Bagcraft.
(j) Payment in full of all fees and expenses owing to Alper pursuant to
the letters dated October 20, 1994 and January 30, 1995.
(k) Seller's compliance with all its obligations under this letter.
(l) Termination of the agreement between Bagcraft and Edwin Messer and
the execution of an agreement between Edwin Messer and Buyer relating to the
establishment of a dispersions business, in form and substance satisfactory to
Buyer.
(m) Absence of defaults by Seller with respect to any material
agreement.
(n) Absence of defaults by Bagcraft with respect to and in connection
with that certain documentation with General Electric Capital Corporation, the
City of Baxter Springs, Kansas and any other senior or secured financing
documents.
<PAGE>
4. Ink Products Agreement. Buyer and Bagcraft shall diligently
negotiate in good faith the terms of an agreement relating to the purchase of
inks, coatings, varnishes, extenders and related products (collectively "Ink
Products") (the "Ink Products Agreement") to be entered into at the Closing as
between Bagcraft and its affiliates (in this Section 4, Bagcraft shall mean
Bagcraft and its affiliates excluding Artra) and Buyer. The Ink Products
Agreement will contain, among other things, the following provisions:
(a) A five (5) year term.
(b) Bagcraft will agree to purchase Ink Products from Buyer in the
following minimum amounts for the periods indicated:
Minimum Amount
Period $000
------ ----
1 $4,100
2 $4,300
3 $4,500
4 $3,375
5 $2,250
A Period shall be defined as a consecutive twelve (12) month
period with Period 1 commencing on the first day after the Closing, and each
successive Period commencing the day after the previous Period ends.
Bagcraft will further agree to purchase no less than
seventy-five percent (75%) of Bagcraft's Ink Products from Buyer during Periods
1, 2 and 3 but no less than the Minimum Amount for such period.
In the event Bagcraft elects not to purchase the Minimum
Amount in a respective Period, and intends in good faith to continue the Ink
Product Agreement, Bagcraft agrees to reimburse, within forty-five (45) days
after the end of such respective Period, to Buyer the following percentage of
the shortfall (this provision shall not excuse Bagcraft from the seventy-five
percent (75%) requirement):
Reimbursement % of
Period Shortfall of Minimum Amount
------ ---------------------------
1 27.5
2 27.5
3 25.0
4 15.0
5 15.0
<PAGE>
(c) The prices for Ink Products shall be at the most favorable price
offered to Arcar's best customers.
(d) In addition to any other normal and ordinary discounts and rebates,
if any, Buyer will agree to rebate or, at Buyer's option, credit against amounts
past due, within forty-five (45) days after the end of such Period, to Bagcraft
ten percent (10%) of the purchase price of the ink products for any amounts
purchased in excess of the Minimum Amount, with respect to Periods 1, 2 and 3 or
$4,725 and $4,960 with respect to Periods 4 and 5, respectively, in any given
Period.
(e) Buyer shall grant Bagcraft 45 days open account credit. Buyer shall
have the right to charge Bagcraft a 1% monthly finance charge for invoices not
paid within 45 days. Buyer shall have the right to withhold shipments to
Bagcraft if the account is more than fourteen (14) days past due.
(f) Buyer shall have the right to cease further shipment of ink
products in the event that the total amount owing by Bagcraft exceeds the
following amounts for the Periods indicated:
Period Amount $000
------ -----------
1 $500
2 $525
3 $550
4 $415
5 $280
(g) If the Bagcraft account becomes past due, Buyer shall have the
right to sell ink products to Bagcraft on a consignment basis.
(h) If after specified procedures (including advance written notice)
Buyer is unable for reasons other than force majeur to meet Bagcraft's needs for
Ink Products, then Bagcraft may purchase Ink Products from a supplier other than
Buyer and count such purchases against the applicable Minimum Amount, but only
to the extent such purchases exceed twenty-five percent (25%) of Bagcraft's Ink
Product purchases for the Period.
(i) All other terms and conditions of the Ink Products Agreement shall
be as mutually agreed.
5. Indemnification. Without limiting the generality of the foregoing,
the Purchase Agreement will contain indemnities from Seller, Bagcraft and Artra
and Buyer as may be mutually agreed upon.
<PAGE>
6. Operation of the Arcar Business Prior to Closing. Prior to Closing,
Seller will:
(a) cause the Arcar Business to be operated in the ordinary course;
(b) use its best efforts to keep available to Buyer and the Arcar
Business the services of the present employees and agents of the Arcar Business
and to maintain and cause the Arcar Business to maintain and preserve the
relations and goodwill with suppliers, customers, distributors and any others
having business relations with the Arcar Business;
(c) not cause or permit the Arcar Business to undertake commitments or
agreements for capital expenditures or capital additions, except as may be
involved in ordinary repair, maintenance or replacement of the assets of the
Arcar Business;
(d) maintain a minimum Net Working Capital, as defined, balance not
less than the Net Working Capital balance on June 30, 1995; and
(e) Immediately notify Buyer of any deviation or exception from the
commitments set forth in (a) through (c) above.
7. Exclusivity. For the period ending 28 days from the date of this
letter (the "Negotiating Period"), the Seller, Bagcraft and Artra shall not,
directly or indirectly through any officer, director, employee, agent, partner,
affiliate or otherwise, enter into any agreement, agreement in principle or
other commitment (whether or not legally binding) relating to any business
combination with, recapitalization of, or acquisition or purchase of all or a
significant portion of the assets of, or any material equity interest in, Arcar
(a "Competing Transaction"), or solicit, initiate or encourage the submission of
any proposal or offer from any person or entity (including any of their
officers, directors, employees and agents) relating to any Competing
Transaction, nor participate in any negotiations with any other person or entity
with respect to a Competing Transaction. The Seller, Bagcraft and Artra shall
notify Alper promptly if any proposal regarding a Competing Transaction (or any
inquiry or contact with any person or entity with respect thereto) is made, and
shall advise Alper of the contents thereof (and, if in written form, provide
Alper with copies thereof).
8. Financing. Seller hereby authorizes Buyer to take such action
necessary to secure financing to complete a proposal, including discussions with
Arcar's existing lender, American National Bank.
9. Termination. This Proposal may be terminated (i) by Seller or Buyer
if (a) by August 25, 1995, Buyer shall not have selected a senior lender for
this transaction and shall have not made a good faith deposit in order to obtain
a commitment from a bank or other financial institution to extend senior debt
financing for the transaction proposed hereby for an amount and on terms
acceptable to Buyer or (b) by September 10, 1995, Buyer shall not have obtained
and accepted a written commitment from a bank or other financial institution to
extend senior debt financing for an amount and on terms acceptable to Buyer or
not waived such contingency or (c)
<PAGE>
execution of a mutually satisfactory Purchase Agreement has not occurred on or
before August 25, 1995, or (d) a closing has not consummated or occurred by
September 15, 1995 or (e) by mutual consent; or (ii) by Seller if within 28 days
from the date of this letter Buyer or Buyer's agents have not completed and
signed off on their due diligence.
10. Competing Transaction Fee. In the event that the Seller, Bagcraft
or Artra engages in a Competing Transaction within one year after the date of
this letter and (i) this letter has not been terminated pursuant to paragraph
9(i)(a), (b), (e) or (ii) above, or (ii) Seller and Buyer have negotiated a
definitive purchase agreement and have resolved all material issues with respect
thereto and Buyer is prepared to execute such definitive purchase agreement
prior to August 25, 1995; or (iii) Buyer has not breached this letter, the
Seller shall reimburse Buyer for all out-of-pocket expenses related in the
Proposal and pay Buyer a fee of $750,000 upon the consummation of such Competing
Transaction. Artra and Bagcraft hereby guarantee the payment of such fee.
11. Non-Disclosure. No public disclosure of the Proposal shall be made
by Seller or Buyer or their respective representatives, without the approval of
the other parties except as may be required by law. Any party intending to make
disclosure of the Proposal required by law shall notify and consult with the
other party in advance.
12. Brokers. Each party represents to the other party and agrees to
indemnify and hold the other harmless that no investment banker, broker or
finder is entitled to any fees due to the transactions described herein.
13. Expenses. Except as provided herein, each party agrees to be
responsible for its own legal, accounting, brokerage and other advisory fees and
expenses incurred in connection with the transaction proposed hereby.
14. Expiration of Proposal. This Proposal shall expire unless accepted
in writing prior to July 31, 1995 at 5:00 p.m. Chicago time.
Except with respect to Paragraph 7, 9, 10 and 11 hereof, nothing herein
shall constitute the legally binding agreement of Alper, Artra, Bagcraft or
Arcar. However, this letter does evidence the intent of said parties to
expeditiously proceed in good faith to negotiate a definitive Purchase Agreement
in accordance with the terms outlined herein.
<PAGE>
We greatly appreciate the opportunity to submit this Proposal. Kindly
acknowledge your intent to proceed in accordance with the terms hereof by
executing this letter below.
Very truly yours,
ALPER HOLDINGS USA, INC.
By: ______________________________
Acknowledged and accepted this ____ day of _____________, 1995.
ARTRA GROUP INCORPORATED
By: _____________________________
Peter R. Harvey, President
BAGCRAFT CORPORATION OF AMERICA
By: ______________________________
Mark F. Santacrose, President
ARCAR GRAPHICS, INC.
By: ______________________________
Mark F. Santacrose, Chairman
EXHIBIT 99.2
FOR: ARTRA GROUP INCORPORATED FOR IMMEDIATE RELEASE
500 CENTRAL AVENUE
NORTHFIELD, ILLINOIS 60093
Contact: Mr. Robert Gruber, Vice President (212) 628-2554
ARTRA GROUP SUBSIDIARY
ANNOUNCES AGREEMENT TO SELL PRINTING INK UNIT
FOR APPROXIMATELY $21 MILLION
Northfield, Ill., August 2, 1995 --- ARTRA GROUP Incorporated
(NYSE:ATA) announced today that its wholly-owned subsidiary, Bagcraft
Corporation of America, has signed a Letter of Intent to sell the assets of its
printing ink unit to Alper Holdings, USA.
The sale price is approximately $21 million in a cash transaction which
is expected to be completed in the current (September) quarter.
ARTRA expects to use the proceeds of the sale to retire various debt
obligations with the balance being used for working capital.
As a result of the sale, and various debt restructuring, ARTRA expects
to report a non-recurring gain in excess of $20 million in the current
(September) quarter.
Alper is a privately-owned, New York-based company engaged in the
acquisition and management of operating companies. Through its subsidiaries,
Alper's operations currently include real estate development, manufacture and
sale of fastener products and venture capital investing.
ARTRA's management commented on current operations:
- Bagcraft's sales and profit margins have gradually increased during
the second quarter (as compared to the 1995 first quarter) despite the negative
impact of record rising raw material costs.
<PAGE>
ARTRA GROUP INCORPORATED -2- August 2, 1995
The Baxter Springs, Kansas plant is now fully operational and the food
service division continues to show significant growth. Also, Bagcraft completed
a major cost-cutting restructuring during the second quarter.
- The Lori Corporation continues to be negatively impacted by
inadequate working capital and a general softness in the retail accessory
market. Lori is in the process of establishing a new credit line and has been
granted a number of new licenses - including the Disney "Cinderella" trademark -
to market childrens' jewelry products.
Due to the seasonality of its business, Lori expects a significant
operations upswing during the last four months of 1995. Lori is also exploring
an acquisition opportunity that is unrelated to its present business.
ARTRA said that by the end of the third quarter, it expects to
eliminate all bank debt at the parent level and will have positioned itself to
return to profitability during the 1995 fourth quarter.
ARTRA consists of:
- Bagcraft Corporation, 100%-owned, which supplies specialty wraps and
bags to the food industry, including such well-known customers as McDonalds,
Burger King, Publix Supermarkets, Taco Bell, Dunkin' Donuts and other industry
leaders.
- Lori Corporation (ASE:LRC), which is 64.3%-owned. Lori's
fashion/costume jewelry products and accessories are sold in retail outlets
nationwide.
###
