As filed with the Securities and Exchange Commission
on September 30, 1997
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM S - 8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
ARTRA GROUP INCORPORATED
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1095978
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 CENTRAL, NORTHFIELD, IL 60093
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
ARTRA GROUP INCORPORATED 1996 STOCK OPTION PLAN
ARTRA GROUP INCORPORATED 1966 DISINTERESTED
DIRECTORS' STOCK OPTION PLAN
(Full title of the Plans)
PETER R. HARVEY
PRESIDENT AND CHIEF OPERATING OFFICER
C/O ARTRA GROUP INCORPORATED
500 CENTRAL, NORTHFIELD, IL 60093
(NAME AND ADDRESS OF AGENT FOR SERVICE)
(847) 441-6650
(Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of maximum maximum
securities Amount to be offering aggregate Amount of
to be to be price offering registration
registered registered per share price fee
- --------------------------------------------------------------------------------
Common Stock, 2,200,000* $5.25(1) $8,788,617(1) $3,031.00
$.01 par value shares
(1) 532,750 shares are being offered at $5.25 and the balance 1,667,250
shares, are estimated solely for the purpose of calculating the
registration fee, and based upon the average of the high and low prices
of the Common Stock on the New York Stock Exchange on September 26, 1997
in accordance with Rules 457(a) and 457(h) of the Securities Act of
1933.
* 2,000,000 shares are being registered for the Stock Option Plan and 200,000
are being registered for the Disinterested Directors' Plan.
<PAGE>
PART I. INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The information required by Part I is included in documents sent or
given to participants in the Registrant's 1996 Stock Option Plan for ARTRA GROUP
Incorporated Stock Option holders and the ARTRA GROUP Incorporated 1996
Disinterested Directors' Stock Option Plan holders pursuant to Rule 428(b)(1) of
the Securities Act of 1933, as amended (the "Securities Act").
The following reoffer prospectus filed as part of the this Registration
Statement has been prepared in accordance with the requirements of Part I of
Form S-3 and, pursuant to General Instruction C of Form S-8, may be used for
reofferings and resales of Common Stock to be acquired by "affiliates" of the
Company (as defined in Rule 405 under the Securities Act) upon the exercise of
acquisition by such affiliates of Common Stock upon exercise of options
heretofore or hereafter granted under the Company's Plans.
REOFFER PROSPECTUS
This Prospectus is being used in connection with the offering from time
to time by employees and non-employee directors (the "Selling Shareholders") of
Artra Group Incorporated, a Pennsylvania corporation (the "Company"), who may be
deemed "affiliates" of the Company as defined in Rule 405 under the Securities
Act of 1933, as amended (the "Securities Act"), of shares of common stock, no
par value shares, of the Company (the "Common Stock") that have been or may be
acquired by them pursuant to the Company's Plans being registered herein.
The shares of Common Stock may be sold from time to time to purchasers
directly by any of the Selling Shareholders. Alternatively, the Selling
Shareholders may sell the shares of Common Stock in one or more transactions
(which may involve one or more block transactions) on the New York Stock
Exchange in separately negotiated transactions, or in a combination of such
transactions. Each sale may be made either at market prices prevailing at the
time of such sale or at negotiated prices. Some or all of the shares of Common
Stock may be sold through brokers acting on behalf of the Selling Shareholders
or to dealers for resale by such dealers, and in connection with such sales,
such brokers or dealers may receive compensation in the form of discounts or
commissions from the Selling Shareholders and/or the purchasers of such shares
for whom they may act as broker or agent (which discounts or commissions are not
anticipated to exceed those customary in the types of transactions involved).
However, any securities covered by this Prospectus that qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather
than pursuant to this Prospectus. All expenses of registration incurred in
connection with this offering are being borne by the Company, but all brokerage
commissions and other expenses incurred by individual Selling Shareholders will
be borne by each such Selling Shareholder. The Company will not be entitled to
any of the proceeds from such sales, although the Company will, with respect to
the Plans, receive the exercise price in cash upon the exercise of the options
pursuant to which the shares of Common Stock are acquired by the participants
thereto.
As of this time, the Company does not satisfy the registrant
requirements for use of Form S-3, and consequently, the Common Stock being
registered hereby and the amount of shares of Common Stock that that may be
reoffered or resold by means of the reoffer prospectus, by each person, and any
other person with whom he or she is acting in concert for the purpose of selling
control Common Stock of the Company, may not exceed, during any three month
period, the amount specified in Rule 144(e) (230.144(e)).
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<PAGE>
AVAILABLE INFORMATION
The Company filed on May 30, 1997 with the Securities and Exchange
Commission (the "Commission"), in Washington, D.C., a Registration Statement on
Form S-1, No. 333-16965, together with all amendments and exhibits thereto (the
"Registration Statement") under the Securities Act. This prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the Rules and Regulations of the
Commission. Statements made in the Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete;
with respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. The Registration
Statement, including exhibits and schedules filed therewith, may be inspected at
the Commission's Public Reference Section, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the regional offices of the Commission located at
7 World Trade Center, 13th Floor, New York, New York 10048 and Suite 1400, 500
West Madison Street, Chicago, Illinois 60661. Copies of such material may be
obtained upon written request from the Public Reference Section of the
Commission at the address set forth above upon payment of prescribed fees. The
Commission also maintains a Web site at "http://www.sec.gov" which contains
reports, financial statements and other information regarding registrants that
file electronically with the Commission.
The Company is subject to the Securities Exchange Act of 1934 and in
accordance therewith files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information may be
inspected at the Public Reference Section of the Commission or the Commission's
regional offices at the addresses set forth above or accessed through the
Commission's Web site identified above, and copies of such material may be
obtained upon written request from the Public Reference Section of the
Commission upon payment of prescribed fees.
The Common Stock of the Company is listed on the New York Stock
Exchange and such reports, proxy material other information are also available
for inspection at the New Stock Exchange, 20 Broad St, New York, New York,
10005.
Documents Incorporated by Reference
See Part 2 Item 3, page 23 hereafter for Documents Incorporated by
Reference.
Bagcraft Corporation of America
Products, Markets, Customers and Distribution
Bagcraft, Artra Group Incorporated Operating Subsidiary, established in
1947, is a leading manufacturer and supplier of flexible packaging products to
the fast food, bakery, microwave popcorn and supermarket industries and is also
a significant supplier to the theater industry. Several of Bagcraft's products
are widely recognized and have become standard items within various segments of
the food industry. Bagcraft is a full-service supplier complete with its own
laboratory and engineering departments. Bagcraft's sales and technical staff
work in conjunction with Bagcraft's customers to determine the proper components
of the package. Bagcraft's art department creates packaging designs, subject to
customer approval, or duplicates customer-supplied designs. Thereafter, the
packaging is produced in accordance with customer specifications using a variety
of papers, film, foil and lamination. Bagcraft has developed a number of
proprietary innovations in the manufacture of its packaging products. Such
innovations include the Dubl-WaxTM bag, which introduced specialty waxed bags to
the retail bakery industry. Bagcraft is also credited with being instrumental in
developing and producing the first microwave popcorn bags.
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<PAGE>
Bagcraft currently produces over three billion bags and three billion
sheets and wrappers annually for the packaging of more than 1,000 different
products.
Sales orders are processed, and manufacturing and delivery schedules
are determined primarily at Bagcraft's headquarters and principle production
facility in Chicago. In September, 1994, Bagcraft completed the construction of
a new 265,000 sq. ft. production facility in Baxter Springs, Kansas. The new
Kansas facility, which has added production capacity in Bagcraft's growing food
service products business, has replaced Bagcraft's production facility in
Joplin, Missouri (which was conveyed to a contractor involved in constructing
the Baxter Springs facility in partial consideration of such contractor's fees),
its facility in Carteret, New Jersey (which was sold in 1994) and its facility
in Forest Park, Georgia (which was converted into a distribution facility).
Bagcraft's products are sold throughout the United States by a sales
force of approximately 15 full-time salespersons who sell to wholesale
distributors and a number of independent brokers who sell Bagcraft product lines
to large food processors and food chains. Bagcraft presently sells its products
to more than 2,000 customers. Although some of these are the largest and most
recognizable companies in the food industry, no single customer accounted for
more than 10% of Bagcraft's consolidated net sales in 1996.
Sales to customers are made pursuant to orders placed in advance for
periods of up to one year. In certain instances Bagcraft and a customer can
enter into an agreement to maintain a specified minimum inventory for the
customer. The contracts entered into by Bagcraft with its customers vary in
length depending on the customer's needs and Bagcraft's capacity to meet the
customer's requirements. Generally, Bagcraft's contracts provide advance notice
of from 30 days to one year to terminate a contract. The contracts typically
provide for delivery of goods at an agreed-upon fixed price, subject to
adjustment upon timely notice in advance. Bagcraft usually grants its customers
rights of return, subject to penalty, except in the case of goods produced to
specification. In addition, Bagcraft typically requires payment for goods 30
days after shipment, but gives its customers a 1% discount if payment is made
within 10 days after shipment.
During 1996, Bagcraft's products were sold by four marketing divisions
as described below. However, in 1997, Bagcraft structured its marketing its
marketing department into seven segments: Concessions, Distributors, Food
Service, Microwave Popcorn, Supermarket Deli/Bakery, Retail Packaging and
International.
Paper Division
Bagcraft believes it is the industry leader in specialty paper bags,
which represented approximately 31% of Bagcraft's 1996 sales. Bakeries account
for approximately 63% of the paper division's sales which also include
supermarkets and various retail food chains. A number of the paper division's
products, including Dubl-WaxTM, Dubl-PanelTM, Dubl-ClearTM and Sealing-StripTM
represent significant manufacturing innovations which have contributed to
Bagcraft's position as the industry leader. Major customers include Walgreen's,
Albertson's, Dunkin' Donuts and Boston Market and Publix. Bagcraft believes the
outlook for the future indicates stability and growth.
Bagcraft's Paper Division stocks approximately 150 generic products,
which enables Bagcraft to lead the industry in providing the widest variety of
immediately available unprinted and stock printed bags and sheets in the
industry. Stock products are bought and inventoried by distributors who, in
turn, sell them in varying quantities to end-users for a multitude of purposes.
The stock line is sold mainly through Bagcraft field salespeople and
telemarketing from Bagcraft's Chicago home office.
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<PAGE>
Food Service Division
The Food Service Division, which represented approximately 46% of
Bagcraft's 1996 sales, is a leader among its competitors. Bagcraft's products
sold to the food service industry include foil and paper bags and sheets for
sandwiches, french fries, chicken and other prepared corporation. Major
customers in this industry include Wendy's, Burger King, Taco Bell, Dairy Queen
and McDonald's.
The development of the Honeycomb sheet helped propel Bagcraft to its
industry leading position. The Honeycomb sheet incorporates a moisture absorbing
layer which prevents buns from becoming soggy and tends to keep food warm for a
longer period of time. When used to replace rigid packaging, it represents
significant source reduction to the solid waste system. Additionally, Bagcraft
was the first manufacturer to print 6-color sheets.
Specialty Bag Division
The Specialty Bag Division represented approximately 17% of Bagcraft's
1996 sales. Many of the division's products represent unique additions to
Bagcraft's standard products. The Cue-Pon BagTM has a "tear out" coupon affixed
near the window on the bag which offers the shopper the immediate benefit of the
coupon upon purchase. The Cue-Pon Pocket BagTM has a pouch on the front of the
bag which can be filled with novelty items by the retailer. The division
features products for the packaging of bakery goods, such as cookies and donuts,
coffee, pre-popped popcorn and specialized promotional items. This division
provides bags with transparent windows, metal tin tie attachments and convenient
self-opening bottoms. Customers for the division include Bake-Line Products and
Interstate Brands.
This division also produces theater popcorn bags, which provide the
theater chains with a more economical package that is easy to dispose of and
substantially reduces the amount of space needed to inventory the product. These
double wall bags provide many of the properties of rigid containers such as tubs
and cartons with the environmental and storage advantages of bags. Bagcraft is
the leading supplier of popcorn bags to theater chains such as General Cinema
Corporation, Carmike and Mann Theaters.
As discussed in Note 14 to the condensed consolidated financial
statements for the quarter ended June 26, 1997, effective January 2, 1997,
Bagcraft purchased the business assets, subject to buyer's assumption of certain
liabilities, of AB Specialty Holding Company, Inc. ("AB"). The acquisition of
AB, is expected to enhance Bagcraft's specialty bag business.
Microwave Popcorn Division
The Microwave Popcorn Division, which represented approximately 6% of
Bagcraft's 1996 sales, represents an example of Bagcraft's high technology
advancements. Bagcraft supplies microwave popcorn packaging to several industry
leaders, including Hunt-Wesson (Orville Redenbacher) and U.S.A. Family
Corporation.
Bagcraft was instrumental in the development of the first microwave
popcorn bag and played an important role in developing "susceptor" accelerator
technology which it has incorporated into its products. The susceptor technology
involves placing a metallized material into the popcorn bag which accelerates
the heat transfer and results in a higher percentage of the popcorn kernels
being popped.
In recent years, Bagcraft has experienced a decline in its domestic
microwave popcorn business due to the acquisition of one of its major customers
by a company with its own packaging ability. Accordingly, at December 31, 1995,
Bagcraft incurred a charge to operations of approximately $1,500,000 to
write-down the carrying value of idle machinery and equipment dedicated to the
production of microwave popcorn products.
4
<PAGE>
Competitive Conditions
Bagcraft believes that it is the manufacturer of the most diversified
line of flexible packaging products in the United States. However, there are a
number of domestic and foreign companies which compete directly with Bagcraft in
each of its major product lines, certain of which have a larger market share
with respect to specific product lines. Bagcraft's competitors range from small
companies to divisions of large corporations which have substantially greater
financial resources than those available to Bagcraft. Bagcraft competes on the
basis of quality, service and the price of its products.
Trademarks, Patents and Research Activities
Bagcraft believes that only a modest level of continuing research and
development and strict quality and process control will be necessary to maintain
and improve its position in the flexible packaging industry. All product
modifications and manufacturing innovations reflect input from its personnel in
general management, sales, marketing design, R&D and engineering. Bagcraft has
filed for and holds patents and registers trademarks and tradenames in all
instances where such actions are considered valuable to its business.
Raw Materials
Bagcraft purchases the paper, foil, films and chemicals it uses from a
number of different unaffiliated suppliers. Since Bagcraft purchases each of the
raw materials it requires from more than one supplier, it is not dependent upon
a single supplier for any specific materials or supplies.
Environmental Matters
In January, 1985 the United States Environmental Protection Agency
("EPA") notified the Company's Bagcraft subsidiary that it was a potentially
responsible party ("PRP") under the Comprehensive Environmental Responsibility
Compensation and Liability Act ("CERCLA") for alleged release of hazardous
substances at the Cross Brothers site near Kankakee, Illinois. Although Bagcraft
has denied liability for the site, it has entered into a settlement agreement
with the EPA, along with the other third party defendants, to resolve all claims
associated with the site except for state claims. In May, 1994 Bagcraft paid
$850,000 to formally extinguish the EPA claim. In September 1989, Bagcraft was
served with a complaint filed by the State of Illinois against seventeen parties
for alleged involvement with the Cross Brothers site. The complaint alleged
Bagcraft was responsible for the costs of cleanup incurred and to be incurred.
Although Bagcraft has denied liability for the site, it has entered into a
settlement agreement with the State, along with the other potential responsible
parties, to resolve all claims associated with the site. In July 1997 Bagcraft
paid approximately $150,000 to formally extinguish the State's claim.
Bagcraft has been notified by the EPA that it is a potentially
responsible party for the disposal of hazardous substances at the Ninth Avenue
site in Gary, Indiana. This site is listed on the EPA's National Priorities
list. A group of defendant PRPs, known as the Ninth Avenue Remedial Group,
settled with the USEPA and agreed to remediate the site. This Group subsequently
sued numerous third party defendants, including Bagcraft, alleged also to be
responsible parties at the site. The plaintiffs have produced only limited
testamentary evidence, and no documentary evidence, linking Bagcraft to this
site, and the Company has neither discovered any records which indicate, nor
located any current or former employees who have advised, that Bagcraft
deposited hazardous substances at the site. Based on the foregoing, management
of the Company does not believe that it is probable that the Company will have
any liability for the costs of the clean-up of this site. The Company intends to
vigorously defend itself in this case.
Bagcraft reported a release associated with solvent tanks located in a
vault at its Chicago facility. After seeking approval from the IEPA, Bagcraft
installed and is currently operating a soil vapor gas extraction system designed
to achieve remedial objectives which the IEPA has determined to be appropriate
to the site.
Bagcraft's Chicago facility has also been the subject of allegations
that it violated laws and regulations associated with the Clean Air Act. The
facility has numerous sources of air emissions of volatile organic materials
("VOMs") associated with its printing operations and is required to maintain and
comply with permits and emissions regulations with regard to each of these
emission sources.
5
<PAGE>
In November of 1995, the EPA issued a Notice of Violation ("NOV")
against Bagcraft's Chicago facility alleging numerous violations of the Clean
Air Act and related regulations. The NOV alleges that the facility installed and
operated emission sources without permits, that it failed to operate air
pollution control equipment at required efficiencies and that there were
releases of VOMs above permitted limits. In April 1997, the EPA filed an
administrative complaint and has proposed a $250,000 civil penalty. Bagcraft has
filed a response to the complaint and is attempting to negotiate a settlement.
Bagcraft has been notified that it may have responsibility with respect
to a clean-up site on Basket Creek Road, Georgia. Bagcraft presently has no
indication of its liability, if any or whether it is a responsible party.
Employees
The Company currently employs approximately 900 persons. The Company
considers its relationships with its employees to be good.
Properties
Bagcraft believes that all of their facilities are adequate for their
present and reasonably anticipated future business. At September 15, 1997 and
December 28, 1996, the principal physical properties of Bagcraft consisted of
the following:
<TABLE>
<CAPTION>
Location General Description Ownership
- -------- ------------------- ---------
<S> <C> <C>
Chicago, IL Administrative and manufacturing facility of Owned
approximately 148,000 sq. ft.
Chicago, IL (1) Warehouse and office facility of Leased
approximately 63,000 sq. ft, expiring in 2006
Baxter Springs, KS (4) Manufacturing, warehouse and office facility of Owned
approximately 265,000 sq. ft.
Hialeah, FL (2) (3) Manufacturing, warehouse and office facility Leased
of approximately 25,000 sq. ft., expiring in 1998
Medley, FL (2) (3) Warehouse facility of approximately 20,000 sq.ft. Leased
expiring in 1999
Forest Park, GA (4) Warehouse and office facility of approximately Owned
5,000 sq. ft
<FN>
(1) This lease provides for a ten-year option to renew at the current
market rate.
(2) This lease was assumed in conjunction with Bagcraft's January
acquisition of AB Specialty Holding Company.
(3) This lease provides for a two-year renewal option.
(4) In September, 1994, Bagcraft completed construction of a new 265,000
sq. ft. production facility in Baxter Springs, Kansas. This facility
replaced Bagcraft's production facilities in Joplin, Missouri,
Carteret, New Jersey and Forest Park, Georgia. Bagcraft conveyed the
former Joplin, Missouri facility to one of the contractors involved in
the construction of the Baxter Springs, Kansas facility as partial
consideration for the work performed by this contractor. Bagcraft sold
the Carteret, New Jersey facility in 1994. The Forest Park, Georgia
facility was retained as a distribution center until it was closed in
June 1996.
</FN>
</TABLE>
Legal Proceedings
See the description above entitled "Environmental Matters" for a
discussion of the Bagcraft pending legal proceedings.
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<PAGE>
RISK FACTORS
THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS INVOLVE A HIGH DEGREE OF
RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, AMONG OTHER THINGS, THE
FOLLOWING RISK FACTORS INHERENT IN AND AFFECTING THE BUSINESS OF THE COMPANY AND
THIS OFFERING, TOGETHER WITH THE OTHER INFORMATION IN THIS PROSPECTUS, BEFORE
MAKING AN INVESTMENT DECISION.
Continuing Losses
The Company ("Artra") has experienced losses from continuing operations
in recent years, including losses from continuing operations in each year during
the period 1990 - 1995. Losses from continuing operations of $16,943,000 and
$13,529,000 were experienced in 1995 and 1994, respectively. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
(contained in Form 10-K for the year ended December 26, 1996, incorporated by
reference).
Indebtedness
As of September 19, 1997, the Company had outstanding short-term
indebtedness of approximately $18,000,000. Bagcraft, the Company's operating
subsidiary, is also obligated to pay substantial amounts in the near future
under the terms of its debt obligations. At September 19, 1997, Bagcraft had
total borrowings of $52,372,000 consisting of $42,401,000 (before reduction for
unamortized discount of $3,309,000) outstanding under its Credit Agreement and
loans from the City of Baxter Springs, Kansas totaling $9,971,000.
In December 1996, Bagcraft's Credit Agreement was amended to provide
for a $20,000,000 term loan payable in varying quarterly installments through
maturity on September 30, 2002 and a revolving credit loan, subject to a
borrowing base, with maximum borrowings of $18,000,000. Term loan installments
totaling $2,000,000 are payable during the next twelve months. As of September
19, 1997, the oustanding balance on the term loan was $18,500,000. At September,
1997, the revolving credit loan had outstanding borrowings of $11,401,000 due
September 30, 2002. Initial borrowings under Bagcraft's Credit Agreement in
December 1993 refinanced borrowings under a previous bank loan agreement.
Effective May 15, 1997, the Credit Agreement was amended to provide for
a $5,000,000 term loan (Term Loan B) with interest at the lender's index rate
plus .75%. Term Loan B is payable on May 8, 1998, unless accelerated under terms
of the Credit Agreement. The proceeds of Term Loan B were advanced to Artra
under terms of an intercompany note payable to Bagcraft on May 8, 1998. Because
the Artra /Bagcraft note results from an intercompany transaction, it has not
been included in Artra 's short-term indebtedness. Artra used the proceeds of
this loan to repay certain Artra debt obligations as discussed below.
Effective July 17, 1997, the Credit Agreement was amended to provide
for a $7,500,000 term loan (Term Loan C) with interest at the lender's index
rate plus 1%. Term Loan C is payable on July 15, 2000, unless accelerated under
terms of the Credit Agreement. The proceeds of Term Loan C were advanced to
Artra under terms of an intercompany note payable to Bagcraft on July 15, 2000.
Because the Artra /Bagcraft note results from an intercompany transaction, it
has not been included in Artra 's short-term indebtedness. Artra used the
proceeds of this loan to repay certain Artra debt obligations and for working
capital.
Bagcraft has $3,137,000 payable during the next twelve months, on loans
from the City of Baxter Springs, Kansas, the aggregate principal amount of which
was $9,971,000 as of August 20, 1997. Proceeds from the Baxter Springs, Kansas
loans financed the construction of Bagcraft's 265,000 sq. ft. production
facility.
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<PAGE>
In June 1997, Artra completed private placements of $4,950,000 of 12%
secured promissory notes due in December 1997. As additional consideration the
noteholders received warrants to purchase an aggregate of 227,500 Artra common
shares at a price of $5.00 per share. The warrants expire in June 1999. The
warrantholders have the right to put these warrants back to Artra at any time
during a six month period commencing in December 1997, at prices of $2.00 to
$2.40 per share. The cost of this obligation ($514,000 if all warrants are put
back to the Company) is being accrued in the Company's financial statements as a
charge to interest expense over the period June 1997 (the commencement date of
the private placement) through December 1997 (the maturity date of the notes).
The proceeds from the private placement were used principally to pay down other
debt obligations. The secured promissory notes are collateralized principally as
follows:
Promissory notes with an aggregate principal amount of $2,000,000 are
collateralized by a 25% interest in the common stock of Artra 's BCA
subsidiary (the parent of Bagcraft).
The Company and the lender are currently negotiating the form of
collateral for certain promissory notes with an aggregate principal
amount of $2,950,000, which is anticipated to be substantially all of
the Company's otherwise unencumbered COMFORCE common shares
(approximately 1,000,000 shares).
In July 1997, Artra completed private placements of $7,475,000
of 12% secured promissory notes due in January 1998. As additional consideration
the noteholders received warrants to purchase an aggregate of 199,311 Artra
common shares at a price of $4.50 per share. The warrants expire in July 1998.
The warrantholders have the right to put these warrants back to Artra at any
time during a six month period commencing on the earlier of the date the
principal amount of the notes are paid or the maturity date of the notes, at a
price of $3.00 per share. The cost of this obligation ($598,000 if all warrants
are put back to the Company) will be accrued in the Company's financial
statements as a charge to interest expense over the period July 1997 (the date
of the private placement) through January (the scheduled maturity date of the
notes). In the event of a default, as defined in the note agreements, the
secured promissory notes will bear interest at 37%. The secured promissory notes
are collateralized principally as follows:
A $4,000,000 note is collateralized by 575,000 shares of COMFORCE
common stock owned by the Company's Fill-Mor subsidiary and a secondary
interest in the common stock of Artra 's BCA subsidiary (the parent of
Bagcraft).
Promissory notes with an aggregate principal amount of $3,475,000 are
collateralized by 652.285 shares of Artra redeemable preferred stock (a
17.4% interest), 1,784.02 shares of BCA Series A redeemable preferred
stock (a 48.5% interest) and 6,488.8 shares of BCA Series B redeemable
preferred stock (a 79.8% interest).
The proceeds from the July 1997 private placement were advanced to
Peter R. Harvey and Mr. Harvey provided additional collateral for his advances
as discussed in Note 13 to the Company's condensed consolidated financial
statements contained in Form 10-Q for the quarter ended June 26, 1997,
incorporated by reference.
In August, 1996, Artra borrowed $500,000 from Howard Conant, then a
private investor, evidenced by an short-term note, due December 23, 1996,
bearing interest at 10%. The loan was collateralized by 125,000 shares of
COMFORCE common stock owned by the Company's Fill-Mor subsidiary. As additional
compensation for the loan, Mr. Conant received a warrant, expiring in 2001, to
purchase 25,000 Artra common shares at a price of $5.00 per share. The proceeds
of the loan were used for working capital. At the Company's annual meeting of
shareholders, held August 29, 1996, Mr. Conant was elected to the Company's
board of directors. In December, 1996, the loan was extended until April 23,
1997 and Mr. Conant received, as additional compensation, a warrant , expiring
in 2001, to purchase 25,000 Artra common shares at a price of $5.875 per share.
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<PAGE>
In January, 1997, Artra borrowed an additional $300,000 from Mr. Conant
evidenced by a short-term note, due December 23, 1997, bearing interest at 8%.
The loan was collateralized by 100,000 shares of COMFORCE common stock owned by
the Company's Fill-Mor subsidiary. As additional compensation for the loan, Mr.
Conant received a warrant, expiring in 2002, to purchase 25,000 Artra common
shares at a price of $5.75 per share.
In March 1997, Artra borrowed an additional $1,000,000 from Mr. Conant
evidenced by a short-term note, due May 26, 1997, bearing interest at 12%. The
loan was collateralized by 585,000 shares of COMFORCE common stock owned by the
Company's Fill-Mor subsidiary. As additional compensation, Mr. Conant received
an option to purchase 25,000 shares of COMFORCE common stock owned by the
Company's Fill-Mor subsidiary at a price of $4.00 per share, with the right to
put the option back to Artra on or before May 30, 1997 for a total put price of
$50,000. In May 1997, Mr. Conant exercised his rights and put the COMFORCE
option back to Artra for $50,000. The proceeds from this loan were used in part
to repay an Artra /Fill-Mor $2,500,000 bank term loan.
In April 1997, Artra borrowed $5,000,000 from Mr. Conant evidenced by a
note, due April 20, 1998, bearing interest at 10%. As additional compensation,
the lender received a warrant to purchase 333,333 Artra common shares at a price
of $5.00 per share. The warrantholder has the right to put this warrant back to
Artra at any time during the period April 21, 1998 to April 20, 2000, for a
total purchase price of $1,000,000. The cost of this obligation will be accrued
in the Company's financial statements as a charge to interest expense over the
period April 21, 1997 (the date of the loan) through April 21, 1998 (the date
the warrantholder has the right to put the warrant back to Artra ). The proceeds
from this loan were used to repay Mr. Conant's outstanding borrowings of
$1,800,000 and to pay down other Artra debt obligations.
In June 1997, Artra borrowed an additional $1,000,000 from Mr. Conant,
due December 10, 1997, bearing interest at 12%. As additional compensation, the
lender received a warrant to purchase 40,000 Artra common shares at a price of
$5.00 per share. The warrantholder has the right to put this warrant back to
Artra at any time during the period December 10, 1997 to June 10, 1998, for a
total purchase price of $80,000. The cost of this obligation will be accrued in
the Company's financial statements as a charge to interest expense over the
period June 10, 1997 (the date of the loan) through December 10, 1997 (the date
the warrantholder has the right to put the warrant back to Artra ). The proceeds
from this loan were used to pay down other Artra debt obligations. In July 1997,
borrowings from Mr. Conant were reduced to $3,000,000 with proceeds advanced to
Artra from a Bagcraft term loan as discussed above. As of August 20, 1997, Artra
had total outstanding borrowings of $3,000,000 from Mr. Conant collateralized by
a 75% interest in the common stock of Artra 's BCA subsidiary (the parent of
Bagcraft).
At December 26, 1996 (the end of Artra 's most recent fiscal year),
Artra was the obligor under two demand notes origininally issued to CIPKA S.A.,
an unrelated Swiss company, in the amount of approximately $2,300,000, including
accrued interest. The notes were issued in October, 1990 with interest at 15
percent. In January 1997, Artra received notice that its obligations to CIPKA
were sold, effective October 26, 1996, to PRESTWOOD LIMITED, an unrelated
company registered in Tortola, BVI. In July 1997, Artra paid all outstanding
interest on these demand notes and reduced the outstanding borrowings under the
demand notes to approximately $1,500,000. Artra is currently negotiating with
the noteholder to extend or refinance this obligation.
Artra also has outstanding short-term borrowings from other unrelated
parties aggregating approximately $1,100,000. The remaining amounts come due at
various times in 1997 and 1998. The notes were issued at various times during
1997 and the interest rates vary between 10 and 12 percent. The proceeds of
these loans were used principally for working capital.
9
<PAGE>
Artra has suffered recurring losses from operations in recent years. As
a result of these factors, Artra has experienced difficulty in obtaining
adequate financing to replace certain current credit arrangements, certain of
which are in default, to fund its debt service and liquidity requirements. Due
to its limited ability to receive operating funds from its operating subsidiary,
Artra historically has met its operating expenditures with funds generated by
such alternative sources as private placements of Artra common stock and notes,
sales of Artra common stock with put options, loans from officers/directors and
private investors, as well as through sales of assets (including COMFORCE
shares) and/or other equity infusions. Artra plans to continue to seek such
alternative sources of funds to meet its future operating expenditures. However,
there can be no assurance that it will be successful in doing so in the future.
If Artra is unable to negotiate extensions with its creditors and complete the
above mentioned transactions, Artra could suffer severe adverse consequences,
and as a result, Artra may be forced to liquidate its assets or file for
protection under the Bankruptcy Code. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Status of Debt Agreements
and Operating Plan" (contained in Form 10-Q for the quarter ended June 26, 1997
incorporated by reference).
Potential Volatility in Market Price of COMFORCE Common Stock
Artra, along with its wholly owned Fill-Mor subsidiary, owns a
significant minority interest in COMFORCE, consisting of 1,728,000 shares or
approximately 13% of the outstanding common stock of COMFORCE as of September
19, 1997, with an aggregate value as of that date of approximately $12,852,000
(value at December 26, 1996 was $22,564,000). The value of COMFORCE stock has
fluctuated substantially in recent periods. The high per share for the twelve
month period ending August 31, 1997 was $19.125 and the per share low during the
same period was $4.00. There can be no assurance that the value of the COMFORCE
shares will not decline substantially in the future, which would have a material
adverse effect on the value of Artra .
The COMFORCE shares constitute unregistered securities under the
Securities Act of 1933 (the "Act"). As a result of Artra's former involvement in
the operations and management of COMFORCE, Artra was considered an "affiliate"
of COMFORCE under the Act, and because of this, the number of shares that Artra
could sell without registration under the Act within any three-month period was
limited. For the reasons set forth below, the Company believes that an exemption
from registration under Rule 144(k) promulgated under the Act is now available
to it, and therefore the limitations under Rule 144 on the number of restricted
shares that Artra could sell within any three-month period without registration
are no longer applicable to it.
Rule 144(k) of the Act permits the sale without registration under the
Act of restricted shares of an issuer that have been held in excess of three
years (two years as of April 29, 1997) by persons who have not been "affiliates"
of the issuer for the preceding three months. Since December 28, 1995, Artra ,
Fill-Mor and their respective officers, directors, affiliates and employees have
held no managerial or executive positions with COMFORCE nor have any of the
above served in the capacity of directors, nor have any of them had the right
under any agreement or otherwise to serve in such capacity since December 28,
1995. Likewise, neither Artra , Fill-Mor nor any of the above had the right
under any agreement or otherwise to serve in such capacity since December 28,
1995. Finally, since that time, neither Artra , Fill-Mor nor any of their
respective officers, directors, affiliates and employees have had any material
involvement in, nor have they been able to exercise any control over, COMFORCE,
either individually or together with any other person or entity. Because of
this, the Company believes that Artra and Fill-Mor are not "affiliates" of
COMFORCE and, since they have held their shares in excess of three years,
qualify for the exemption under Rule 144(k) set forth above.
There can be no assurance that the Securities and Exchange Commission
would concur with the Company's position. Notwithstanding this, Artra does not
believe that its ability to sell COMFORCE shares, or eventually to realize on
the value of its COMFORCE shares, will be affected in a material adverse way,
although it may not be able to sell its COMFORCE shares as quickly as it could
if it were to use Rule 144(k), and in any event, an attempt to sell a large
10
<PAGE>
number of its COMFORCE shares over a limited period could be expected to result
in a reduction in the value of such shares. Effective December 19, 1996, Artra
and COMFORCE entered into a Settlement Agreement pursuant to which COMFORCE
agreed to include in a proposed underwritten public offering 380,000 shares of
COMFORCE common stock held by Artra and its Fill-Mor subsidiary and Artra agreed
to a Lock-up agreement which limits its ability to sell its remaining COMFORCE
common shares for a period of 360 days after the effective date of Comforce's
proposed underwritten public offering. COMFORCE did not retain an underwriter
for the proposed underwritten public offering and, accordingly, effective April
30, 1997 Artra was released from the provisions of the Lock-up Agreement. The
sale of 1,295,000 COMFORCE common shares held by Artra and Fill-Mor is
restricted because the shares are collateral for various short-term loans
(449,703 shares held by Artra and Fill-Mor remain unencumbered at May 28, 1997).
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Investment in COMFORCE Corporation" (contained in Form 10-Q for
the quarter ended June 26, 1997, incorporated by reference).
The sale of 700,000 COMFORCE common shares held by Artra and Fill-Mor
is restricted because the shares are collateral for various debt obligations.
Additionally, the Company and a lender are currently negotiating the form of
collateral for certain promissory notes issued in June 1997 with an aggregate
principal amount of $2,950,000. The collateral is anticipated to be
substantially all of it the Company's otherwise unencumbered COMFORCE common
shares (approximately 1,000,000 shares). See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Investment in
COMFORCE Corporation" (contained in Form 10-Q for the quarter ended June 26,
1997, incorporated by reference).
Inability to Honor Put Options
Artra has entered into various agreements under which it has sold its
common shares along with put options that require Artra to repurchase these
shares at the option of the holder, usually one year after the date of each such
agreement. At September 19, 1997, options were outstanding that, if exercised,
would require Artra to repurchase 72,984 shares of its Common Stock for an
aggregate of approximately $3,300,000. Artra does not have adequate resources to
make such redemptions. However, the holders have the option to sell their shares
in the market, subject to the limitations of Rule 144 of the Securities Act,
which could adversely impact the market price of the Common Stock. At its
discretion and subject to its financial ability, Artra could reimburse the
option holders for any shortfall resulting from such sale. At the present time
none of the option holders have demanded payment, and all of the option holders
have indicated to the Company a willingness to work with the Company to satisfy
the obligations, in some manner other than a demand for payment under the put
option. See "Risk Factors - Dilution and Depression of Market Price from
Issuance of Additional Common Stock" and "- Limited Trading Activity." See also
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources (contained in Form 10-Q for the
quarter ended June 26, 1997, incorporated by reference)."
Need for Additional Funds; Unfavorable Credit Terms
The Company continues to be engaged in efforts to obtain equity and
debt financing. Even if the Company's Bagcraft subsidiary generates positive
cash flow (and there can be no assurances that it will), it is restricted in
paying dividends or making distributions to the Company under certain loan
agreements (except for limited overhead allocations payable to Artra in certain
circumstances and payments under tax sharing arrangements where applicable) . As
a result, Artra does not have a means of generating cash flow on a regular
basis. Consequently, Artra is reliant on its ability to place debt and equity
securities privately and to sell COMFORCE shares to raise cash needed to meet
its working capital requirements.
11
<PAGE>
The costs and conditions associated with raising required capital may
not be on favorable terms, and the Company may not be able to sell COMFORCE
shares at favorable prices. In recent years, short-term borrowings by the
Company from private investors have generally been available, but at a high cost
to the Company. Stated base interest rates on its notes have been as high as 20%
(with substantially higher default rates), and certain of the borrowers have
demanded warrants as additional consideration for agreeing to extend credit to
the Company. Warrants to purchase approximately 2,708,676 shares of the
Company's common stock (at exercise prices at the market price when issued,
which has ranged from $3.50 to $8.00 per share) have previously been issued to
private lenders in connection with these transactions. The continuation of such
practices could result in further dilution of the existing shareholders'
interests in the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations Status of Debt Agreements and Operating
Plan" (contained in Form 10-Q for the quarter ended June 26, 1997, incorporated
by reference).
Risks Relating to Peter R. Harvey
The Company's ability to continue to refinance its operations is
dependent on the ability of the Company's officers and directors, especially
Peter R. Harvey, to raise capital. In the event Mr. Harvey were not affiliated
with the Company for any reason, this could adversely affect the ability of the
Company to survive.
As of September 19 1997, Artra has outstanding total amounts due from
Peter R. Harvey, including accrued interest, of $17,025,000. The advances bear
interest at the prime rate plus 2%, which was 10.5% at September 19, 1997. This
receivable has been classified as a reduction of shareholder's equity. See Note
13 to the Company's condensed consolidated financial statements for the quarter
ended June 26, 1997 for a further discussion of the receivable from Peter R.
Harvey.
Peter R. Harvey has not received other than nominal compensation for
his services as an officer or director of Artra or any of its subsidiaries since
October of 1990 and Mr. Harvey has agreed not to accept any compensation for his
services as an officer or director of Artra or any of its subsidiaries until his
obligations to Artra , described above, are fully satisfied. Additionally, since
December 31, 1986, Peter R. Harvey has guaranteed approximately $40,000,000 of
Artra obligations to private and institutional lenders (John Harvey also was a
co-guarantor of a $26,700,000 loan included in that total with Peter R. Harvey)
and has also hypothecated personal assets as security for certain Artra
obligations.
In prior years, as partial collateral for amounts due from Peter R.
Harvey, the Company has received the pledge of 1,523 shares of Artra redeemable
Series A preferred stock (with a liquidation value of $1,523,000, plus accrued
dividends) which are owned by Mr. Harvey. In addition, Mr. Harvey has pledged a
25% interest in Industrial Communication Company (a private company) . Such
interest is valued by Mr. Harvey at $800,000 to $1,000,000. During 1995, Peter
R. Harvey entered into a pledge agreement with Artra whereby Mr. Harvey pledged
additional collateral consisting of 42,067 shares of Artra common stock and
707,281 shares of PureTec Corporation, a publicly traded corporation ("PureTec")
. As of August 20, 1997, the closing market price of PureTec on the NASDAQ
National Market was $1.75 per share. As collateral for a July 1997 advance of
$7,475,000, Mr. Harvey provided Artra with additional collateral for his
advances consisting of 652.285 shares of Artra redeemable preferred stock (a
17.4% interest), 1,784.02 shares of BCA Series A redeemable preferred stock (a
48.5% interest) and 6,488.8 shares of BCA Series B redeemable preferred stock (a
79.8% interest). As of September 19, 1997, this additional collateral had a
carrying value in Artra 's condensed consolidated balance sheet of approximately
$11,000,000. The fair market value of this additional collateral is not known.
In addition, in connection with a discharge of certain bank
indebtedness discussed below, Artra received rights under a mortgage of certain
real estate owned by Mr. Harvey. The real estate had an appraised value of $2
million as of December 13, 1993. The mortgage collateralized $2,150,000 of the
amount owed by Mr. Harvey. Bank of America Illinois had a senior security
interest in the amount of $850,000. See "Transactions with Management And Others
- -- Settlement of the Bank of America Illinois Debt." In March 1997, the bank
sold its interest in Mr. Harvey's note and the related collateral to a private
investor. Artra retained its $2,150,000 security interest the real estate,
subordinated to the noteholder's $850,000 security interest in this real estate.
12
<PAGE>
Explanatory Paragraph in Report of Independent Accountants
The Company's independent accountants, Coopers & Lybrand L.L.P.
("Coopers & Lybrand"), has issued an explanatory paragraph with respect to the
Company, that expresses substantial doubt as to the ability of the Company to
continue as a going concern due to recurring losses from operations and a net
capital deficiency at December 26, 1996. Coopers & Lybrand has stated in its
report that, as a result of these factors, the Company has experienced
difficulty in obtaining adequate financing to replace the current credit
agreements, to fund its debt service and liquidity requirements. The
Consolidated Financial Statements do not include any adjustments that might
result from this uncertainty. If the Company ceases to operate as a going
concern, an investor would be likely to lose his entire investment in the
Company's Common Stock. See Note 1 to "Consolidated Financial Statements."
Dilution and Depression of Market Price from Issuance of Additional
Common Stock
As of September 19, 1997, there were 7,932,912 shares of the Company's
common stock outstanding. The Company's Board of Directors has the power to
issue any and all authorized but unissued shares without shareholder approval.
At the annual meeting held on August 29, 1996, the Company's shareholders
approved an amendment to the Company's Articles of Incorporation to increase the
number of authorized common shares from 7,500,000 to 20,000,000. In addition,
the Company anticipates that holders of options and warrants will exercise their
options and warrants in order to sell the underlying shares registered hereby.
Such an exercise could result in a dilution of the interests of existing
shareholders. Purchasers of the Shares offered hereby should be aware that the
issuance of additional shares may result in a reduction in the market price of
the Company's Common Stock then outstanding. See "Description of the Company's
Securities." See also "Risk Factors - Limited Trading Activity."
Possible Delisting of Securities from the New York Stock Exchange and
the Pacific Stock Exchange
The Company's Common Stock is currently listed on the New York and
Pacific Stock Exchanges. The Company has been unable to maintain the standards
for continued listing on these exchanges, and the Company's securities could be
subject to delisting from these exchanges at any time. Trading of the Common
Stock might thereafter be conducted in the over-the-counter markets on the
electronic bulletin board established for securities that do not meet the New
York and Pacific Stock exchange listing requirements or in what is commonly
referred to as the "pink sheets." If delisting were to occur, an investor could
find it more difficult to dispose of, or to obtain accurate quotations regarding
the price of the Company's Common Stock, and the market price of the Common
Stock could decline significantly,
Composition of the Board
The Company's Articles of Incorporation require that at least six
persons serve on the Board of Directors. Vacancies existed on the Company's
Board between 1989 and August 29, 1996. All corporate actions taken between
October 12, 1993 and August 29, 1996 are potentially voidable since such actions
were taken in reliance on the consent or affirmative vote of less than four of
the Company's directors which would constitute a majority of the required six
person Board.
Conflicts of Interest
In the past, the Company has been a party to numerous transactions with
officers and directors of the Company or with entities in which officers and
directors of the Company own substantial equity interests. While the Company
does not presently contemplate effectuating any additional transactions with
officers and directors of the Company or with management-owned entities, there
can be no assurance that it will not do so in the future. See "Transactions with
Management and Others." In addition, as described under "Principal
Shareholders," various officers and directors hold warrants or options to
purchase shares of the Company's Common Stock, including at exercise prices
lower than the market price of the Company's Common Stock as of the date hereof.
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Limited Trading Activity
During the six months ended August 31, 1997, the daily average number of shares
of Common Stock traded on the New York Stock Exchange was approximately 30,000
shares. If such trading levels continue, it may be difficult for Selling
Shareholders to effect sales of their shares on the New York and Pacific Stock
Exchanges, and the placement of a substantially larger number of sell orders
could materially and adversely impact the market price of the Common Stock. See
also "Risk Factors - Dilution and Depression of Market Price from Issuance of
Additional Common Stock."
Competitive Conditions in the Packaging Products Industry
The packaging products industry is highly competitive. The Company's
Bagcraft subsidiary competes as a printer and converter within the competitive
flexible packaging business. Management believes the principal competitive
factors in the Company's markets are product quality and functionality, price,
service and reputation. Bagcraft encounters competition from both integrated
producers and independents in each of its marketing divisions. Some of these
competitors are larger and have access to greater financial resources than
Bagcraft. Bagcraft's costs have increased substantially in recent years, largely
due to increases in the cost of paper. Although Bagcraft generally seeks to pass
its increased costs on to its customers, this is frequently not possible due to
the competitive nature of the paper products industry. See "Business and
Properties - Packaging Products Segment."
Litigation
At June 26, 1997, the end of its most recent fiscal quarter, Artra has
accrued $1,900,000 for business litigation and environmental liabilities. Based
on investigation and settlement discussions, the Company believes this to be a
sufficient amount for any potential costs or liabilities for the matters
described below. However, no assurance can be given that the reserved amount is
sufficient to satisfy all potential business litigation and environmental
liabilities. As described under "Business and Properties - Legal Proceedings"
herein, Artra or its predecessors or their subsidiaries have been identified by
the U.S. Environmental Protection Agency ("EPA") as potentially responsible
parties for environmental clean-up costs (or sued by a named potentially
responsible party seeking indemnification or contribution for clean-up costs)
for waste sent to several sites included on the EPA's National Priorities List,
which are commonly known as "Superfund" sites. In addition, Artra or its
predecessors and their subsidiaries are alleged to have sent hazardous
substances to certain other sites which, although not designated as Superfund
sites, are sites at which environmental clean-up or remediation may be required
to be undertaken. Artra and its predecessors, directly and through subsidiaries,
have, since 1960, operated in excess of 30 manufacturing facilities. Certain of
these facilities used and/or generated hazardous materials and disposed of the
hazardous substances, directly or through third party waste disposal firms at
various off-site waste disposal locations, in most cases before laws had been
enacted governing the safe disposal of hazardous substances.
Artra has not conducted a comprehensive audit of potential
environmental liability at the facilities formerly owned or operated by Artra or
its predecessors and their subsidiaries since it is no longer the owner or
operator of most of the properties at which it or its predecessors or their
affiliates conducted manufacturing operations. As a result, Artra cannot
accurately quantify potential environmental liability associated with past
ownership or operation of these facilities. Artra did not keep records of the
companies with which it contracted for the disposal of wastes before such
record-keeping became mandated by law.
In addition, even if Artra is not found to be responsible for clean-up
costs at any particular site, the costs of defending itself in any proceedings
or inquiries instituted by the EPA, any state environmental agencies or private
parties could itself be significant. As described under "Risk Factors - Need for
Additional Funds" herein, Artra has limited funds available to it, including for
its legal defense. In certain cases, Artra may be unable to raise the funds
needed to mount an adequate (or any) defense against the claims raised, even if
it has legal grounds to do so. In one case described under "Business and
Properties - Legal Proceedings" herein, Artra did not prosecute an appeal of a
decision adverse to Artra in which its insurer was held not responsible for
defending or indemnifying Artra in connection with two environmental clean-up
cases in California. In addition, in another case, Artra entered into a consent
decree with the EPA to pay certain clean-up costs, but was unable to pay the
costs it had agreed to bear. See "Business and Properties -- Legal Proceedings."
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No Cash Dividends
The Company has not paid any cash dividends on its Common Stock in
recent years and does not anticipate paying any such dividends in the
foreseeable future. In addition, the Bagcraft operating subsidiary of the
Company is prohibited from or restricted in paying dividends or making
distributions to the Company under various loan agreements (except for limited
overhead allocations payable to Artra in certain circumstances and tax sharing
agreements where applicable). Accordingly, even if Artra were able to pay
dividends to its shareholders, the restrictions or limitations on Bagcraft in
upstreaming payments would make payment of dividends by Artra unlikely. See
"Description of the Company's Securities."
Negative Effect on Shareholders from Possible Issuance of Preferred
Stock
The Company is authorized to issue up to 2,000,000 shares of preferred
stock, par value $1,000 per share. The preferred stock may be issued in one or
more series, the terms of which may be determined at the time of issuance by the
Board of Directors, without further action by shareholders, and may include
voting rights (including the right to vote as a series on particular matters),
preferences as to dividends and liquidation, conversion and redemption rights
and sinking fund provisions. In 1990 the Company issued 3,750 shares of Series A
Preferred Stock. No other preferred stock is currently outstanding and the
Company has no present plans for the issuance thereof. The issuance of any
preferred stock could affect the rights of the holders of Common Stock and, in
certain circumstances, reduce the value of the Common Stock. See "Description of
the Company's Securities."
PRINCIPAL SHAREHOLDERS
As of September 19, 1997, there were 7,931,912 shares of Common Stock
issued and outstanding. The following table sets forth the number and percentage
of Common Stock known by management of Artra to be beneficially owned as of
September 19, 1997 by (i) all stockholders known by management of Artra to own
5% or more of Artra's Common Stock, (ii) all directors of Artra , (iii) each
executive officer included in the Summary Compensation Table in the 1996 Form
10-K and (iv) all directors, executive officers and other key employees of Artra
as a group (9 persons). Unless stated otherwise, each person so named exercises
sole voting and investment power as to the shares of Common Stock so indicated.
As of September 19, 1997, 3,750 shares of Series A Preferred Stock of
Artra , par value $1,000 per share, had been issued, of which 3,583.62 shares
were outstanding. Each share of this Series A Preferred Stock entitles the
holder to one vote on an equal basis with each share of Common Stock.
Accordingly, for purposes of showing ownership of Common Stock in the table
below, the Series A Preferred Stock is treated as Common Stock.
Number
of Shares
Beneficially
Name of Beneficial Owner Owned Percent
- ----------------------------------------- ---------- -------
Research Center of Kabbalah(l) 647,250 7.9%
Peter R. Harvey(2) Common 440,243 5.6%
Preferred 2,175 60.7%
John Harvey(3) 423,796 5.2%
Gerard M. Kenny(4) 240,048 3.0%
Maynard K. Louis(5) 121,000 1.5%
Howard R. Conant(6) 578,333 6.9%
Edward A. Celano 18,18 *
Robert L. Johnson 2,873 *
John G. Hamm(7) 143,498 1.8%
Robert S. Gruber(8) 141,104 1.8%
James D. Doering(9) 124,311 1.5%
All directors and executive officers
as a group (12 persons) 2,460,082 26.1%
* Less than 1% of the outstanding shares.
Ozite Corporation, an affiliate of Artra by reason of Peter R. Harvey
and John Harvey being directors of the parent corporation, PureTec, is the
record holder of 2,227 shares (59.4%) of the Artra Series A Preferred.
15
<PAGE>
(1) The address of Research Center of Kabbalah ("RCK") is 83-84 115th
Street, Richmond Hill, New York 11418. The shares beneficially owned by
RCK consist of 361,000 shares of Common Stock owned directly, 21,250
shares of Common Stock issuable under a warrant which expires October
29, 1998 at an exercise price of $6.00 per share, 65,000 shares of
Common Stock issuable issuable under a warrant which expires December
31, 1998 at an exercise price of $7.00 per share, 100,000 shares of
Common Stock issuable under a warrant which expires February 14, 2002
at an exercise price of $5.625 per share and 100,000 shares of Common
Stock issuable under a warrant which expires April 13, 2002 at an
exercise price of $5.00 per share.
(2) Mr. Peter R. Harvey's business address is 500 Central Avenue,
Northfield, Illinois 60093. The shares beneficially owned by Mr. Harvey
consist of 375,790 shares held directly by him (of which 373,615 are
Common Stock and 2,175 are shares of Series A Preferred Stock), 23,001
shares held as trustee for the benefit of his nieces, 800 shares owned
by his wife and children, 634 shares held in his 401(k) plan, 7,193
shares held in his individual retirement account, 20,000 shares
issuable under an option which expires September 19, 2001 at an
exercise price of $3.65 per share and 15,000 shares issuable under an
option which expires January 8, 2003 at an exercise price of $3.75 per
share.
(3) Mr. John Harvey's business address is 500 Central Avenue, Northfield,
Illinois 60093. The shares of Common Stock beneficially owned by Mr.
Harvey consist of 123,100 shares held directly by him, 1,705 shares
held in his 401(k) plan, 5,746 shares held in his individual retirement
account, 100,000 shares held by Mr. Harvey's daughters, 75,000 shares
issuable under an option which expires December 19, 2000 at an exercise
price of $3.65 per share, 1,000 shares issuable under an option which
expires September 19, 2001 at an exercise price of $3.65 per share,
4,000 shares issuable under an option which expires January 8, 2003 at
an exercise price of $3.75 per share, 141,000 shares issuable under an
option which expires October 4, 2006 at an exercise price of $5.25 per
share and an aggregate of 72,245 shares issuable under warrants
expiring at various dates in 2000 and 2001 received in 1995 and 1996 as
additional compensation for 1995 and 1996 short-term loans at exercise
prices of $3.75 per share to $6.25 per share.
(4) The shares beneficially owned by Mr. Kenny consist of 2,000 shares of
Artra's common stock issuable upon the exercise of an option at $10.00
per share expiring November 28, 1996, 75,652 shares held by (or
issuable to) Kenny Construction Company, 14,411 shares held by Clinton
Industries, and 75,001 shares issuable under a warrant held by Clinton
Industries which expires November 10, 1997 at an exercise price of
$5.00 per share. Kenny Construction Company holds put options to sell
to Artra (I) 23,004 shares of Common Stock for a put price of $83.45
per share plus an amount equal to 15% per annum for each day from March
1, 1991 to the date of payment by Artra , which put option expires
December 31, 1997, and (ii) 49,980 shares of Common Stock for a put
price of $21.19 per share, subject to an annual increase of $2.25,
which put option is exercisable on the later of the date Artra's
obligations to Bank of America are repaid or the $2,500,000 note of
Artra payable to Kenny Construction Company (as described in paragraph
5 under "Transactions with Management and Others." If the stock subject
to the put is sold at a price less than the put price, the Company
would remain liable to the holder of the put for the amount by which
the put price of the shares exceeds the selling price. Mr. Kenny is
Executive Vice President, Director and beneficial owner of 16.66% of
the issued and outstanding stock of Kenny Construction Company. He is
also the General Partner and a 14.28% beneficial owner of Clinton
Industries, a limited partnership. See paragraphs 4 and 5 under
"Transactions with Management and Others."
(5) Mr. Louis is the holder of warrants to purchase 121,000 shares of Artra
common stock at prices of $4.50 to $8.00 per share which warrants
expire on various dates commencing in 1997 and ending June 13, 2001.
(6) Mr. Conant holds 140,000 Artra common shares directly, Mrs. Conant
holds 5,000 Artra common shares and Mr. Conant holds warrants to
acquire 433,000 shares of Artra common stock at prices of $5.00 to
$5.75 per share which warrants expire on various dates in 2001 and
2002.
16
<PAGE>
(7) The shares of Common Stock beneficially owned by Mr. Hamm consist of 50
shares held directly by him, 93 shares held by him and his wife
jointly, 2,905 shares held in his 401(k) plan, 25,000 shares issuable
under an option which expires December 19, 2000 at an exercise price of
$3.65 per share, 1,000 shares issuable under an option which expires
September 19, 2001 at an exercise price of $3.65 per share, 13,200
shares issuable under an option which expires January 8, 2003 at an
exercise price of $3.75 per share, and 101,250 shares issuable under an
option which expires October 4, 2006, at an exercise price of $5.25 per
share.
(8) The shares of Common Stock beneficially owned by Mr. Gruber consist of
20,190 shares held directly by him, 943 shares held in his 401(k),
plan, 1,221 shares held in his individual retirement account, 8,000
shares issuable under an option which expires December 19, 2000 at an
exercise price of $3.65 per share, 1,000 shares issuable under an
option which expires September 19, 2001 at an exercise price of $3.65
per share, 12,000 shares issuable under an option which expires January
8, 2003 at an exercise price of $3.75 per share and 97,750 shares
issuable under an option which expires October 4, 2006, at an exercise
price of $5.25 per share.
(9) The shares of Common Stock beneficially owned by Mr. Doering consist of
10,500 shares held by him in joint tenancy with his wife, 1,693 shares
held in his 401(k) plan, 1,118 shares held in his individual retirement
account, 22,500 shares issuable under an option which expires December
19, 2000 at an exercise price of $3.65 per share, 31,000 shares
issuable under an option which expires January 8, 2003 at an exercise
price of $3.75 per share and 57,500 shares issuable under an option
which expires October 4, 2006, at an exercise price of $5.25 per share.
SELLING SHAREHOLDERS
The following table sets forth certain information regarding the shares
of Common Stock issuable upon the exercise of Options held by any affiliate of
the Company (as defined in Rule in 405 under the Securities Act) granted under
the Company's Plans ("Selling Shareholders"). In cases where the Selling
Shareholder serves or has served within the past three years as an officer,
director or employee of the Company or any of its subsidiaries or has had
another material relationship with the Company, this relationship is noted. All
of the shares offered hereby and shares issued or issuable upon the exercise of
Options granted under the Company's Plans, including Options which are not
presently exercisable. Non-employee directors are entitled to receive Options to
purchase 10,000 shares of Common Stock upon election as a director and 2,500
shares of Common Stock annually thereafter, and the Company's Stock Option
Committee or Board of Directors may award additional options to such
non-employee directors and other directors, officers, employees and agents from
time to time. This prospectus may be supplemented from time to time to include
additional shares of Common Stock issuable upon the exercise of Options which
may hereafter be granted to affiliates of the Company.
The Selling Shareholders and any dealer participating in the
distribution of any shares of Common Stock or any broker executing selling
orders on behalf of the Selling Shareholders may be deemed to be "underwriters"
within the meaning of the Securities Act, in which event any profit on the sale
of any or all of the shares of Common Stock by them and any discounts or
commissions received by any such brokers or dealers may be deemed to be
underwriting discounts and commissions under the Securities Act. All options
granted to the disinterested directors were granted August 29, 1996 at an
exercise price of $5.25 per share. The directors granted such options are:
Edward A. Celano, Howard R. Conant, Robert L. Johnson, Gerard M. Kenny and
Maynard K. Louis.
17
<PAGE>
The officers and employees receiving options at an exercise price of
$5.25 in all instances during 1996 pursuant to the Stock Option Plan and the
number of shares are as follows:
Name of Grantee Number of Shares
--------------- ----------------
John P. Conroy 34,750
James D. Doering 57,500
Robert S. Gruber 97,750
John G. Hamm 101,250
John Harvey 141,000
Lawrence D. Levin 38,500
Richard Mandra 27,750
Edwin G. Rymek 34,250
All options expire on October 4, 2006. No options granted and as listed
above have been exercised. All of the above persons except for Mr. Mandra are
officers of the Company, and in addition, John Harvey is a director, chairman of
the board and the chief executive officer.
The Common Stock is traded on the New York Stock Exchange under the
symbol "ATA". On September 26, 1997, the closing price of the Common Stock as
reported on the New York Stock Exchange was $3.625 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PART II. INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference
The following documents, which are filed with the Securities and
Exchange Commission (the "Commission"), are incorporated in this Registration
Statement by reference:
(1) The Registrant's latest annual report for the year ended December
26, 1996 filed pursuant to Sections 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the latest year
for which audited financial statements have been filed.
(2) All other reports filed pursuant to Sections 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the annual
report including, but not limited to the Registrant's Quarterly Reports
on Form 10-Q for the quarters ended March 27, 1997 and June 26, 1997.
(3) The description of the common stock of the Registrant, no par value
shares (the "Common Stock"), contained in the Registrant's Registration
Statement on Form 8-A filed under the Exchange Act, including any
amendment or report filed for the purpose of updating such description.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, subsequent to the effective date
of the Registration Statement and prior to the filing of a post-effective
amendment which indicates that all shares of Common Stock offered hereby have
been sold or which deregisters all shares of Common Stock then remaining unsold,
shall be deemed to be incorporated by reference herein and to be part hereof
from the date of the filing of such documents.
18
<PAGE>
Item 4. Description of Securities
Not applicable.
Item 5. Interests of Named Experts and Counsel
Kwiatt, Silverman & Ruben, Ltd. have rendered its legal opinion
attached hereto as exhibit 5.1. The equity stockholders of the firm who own
common stock and voting preferred stock of the Registrant and the number of
shares owned by them are as follows:
Common Stock Preferred Stock
------------ ---------------
Kenneth L. Kwiatt 21,587 44.25
Michael Silverman 18,687
Philip E. Ruben 20,687 44.25
Additionally, the firm holds 12,000 shares of the common stock
and the Kwiatt, Silverman & Ruben, Ltd. 401(k) Profit Sharing Plan is the holder
of 15,000 shares of the common stock.
Item 6. Indemnification of Directors and Officers
Subchapter D, Section 1741 et seq. of the Business Corporation Law of
Pennsylvania ("BCL") provides authority for the Registrant to indemnify its
officers and directors and the by-laws provide indemnity to an officer or
director and the Registrant may indemnify any other employee or agent, in
connection with any completed action, pending or threatened suit or
administrative proceeding against such person by reason of such person serving
as a director, officer, employee or agent of the Registrant or, at the request
of the Registrant, in such capacity for another entity. However, no
indemnification will be made if the act giving rise to the claim for
indemnification is determined by a court to have constituted willful misconduct
or recklessness. In addition, the by-laws provide that the above indemnification
provisions are not exclusive of any other rights to indemnification any such
person may have under any contract or vote of shareholders or disinterested
shareholders or as determined by a court. The by-laws expressly provide that it
is the Registrant's policy to permit indemnification to the fullest extent
permitted by law. The by laws further provide the indemnification provisions
will be deemed to be amended upon any amendment of the BCL, which expands or
enlarges the powers of corporations to indemnify.
See Article IV of the By-Laws, Exhibit 3.2(1) for a complete statement
of the indemnification authorized by the Registrant.
The BCL provides that a corporation will have the power to indemnify
any representative of a corporation, or of any other entity at the request of
the corporation, if such person acted in good faith and in a manner he
reasonably believed to be in, or not opposed to the best interests of the
corporation and, with respect to any criminal proceeding, had no reasonable
cause to believe his conduct was unlawful.
The BCL further provides that indemnification is mandatory where the
representative is "successful on the merits or otherwise" in defense of an
action or proceeding, and in addition, the BCL provides that the method of
indemnification provided by the act is not exclusive of rights under any by law,
vote of shareholders or disinterested shareholders or otherwise, unless the act
giving rise to the claim for indemnification is determined by a court to have
constituted willful misconduct or recklessness.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
The Company has purchased a general liability insurance policy which
covers certain liabilities of directors and officers of the Company arising out
of claims based on acts or omissions in their capacity as directors or officers.
Item 7. Exemption from Registration Claimed
Not applicable.
19
<PAGE>
Item 8. Exhibits
Exhibit
Number Description
- ------ -----------
3.1 Amended and Restated Certificate of Incorporation of the Registrant
3.2 (*) By-Laws of the Registrant
4.1 Artra Group Incorporated 1996 Stock Option Plan
4.1 Artra Group Incorporated 1996 Disinterested
Directors' Stock Option Plan
5.1 Opinion of Kwiatt, Silverman & Ruben, Ltd.
23.1 Consent of Kwiatt, Silverman & Ruben, Ltd. (included in Exhibit 5.1)
23.2 Consent of Coopers & Lybrand L.L.P.
24.1 Power of Attorney (included on the signature page of this
Registration Statement)
(*) Incorporated herein by reference from the Registrant's Registration
Statement on Form S-1 (File No. 333-16965)
Item 9. Undertakings
(a) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
Registration Statement:*
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of
the Registration Statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the Registration
Statement; and
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in this Registration
Statement or any material change to such
information in this Registration Statement;
provided, however, that paragraphs (i) and
(ii) do not apply if the Registration
Statement is on Form S-3 or Form S-8 or Form
F-3, and the information required to be
included in a post-effective amendment by
those paragraphs is contained in periodic
reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are
incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective
amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein,
and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
20
<PAGE>
(b) The Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be in the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
* Incorporated herein by reference from the Registrant's Registration
Statement on Form S-1 (File No. 333-16965) . Information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section
15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Northfield, State of Illinois, on September 30, 1997.
ARTRA GROUP Incorporated
By: /s/ Peter R. Harvey
- ------------------------------
Peter R. Harvey
President and Chief
Operating Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of Artra Group Incorporated
hereby severally constitute Peter R. Harvey, James Doering, Lawrence D. Levin,
and Kenneth L. Kwiatt Esq., and each of them singly, our true and lawful
attorneys with full power to them, and each of them singly, to sign for us and
in our names in the capacities indicated below, the Registration Statement on
Form S-8 filed herewith and any and all subsequent amendments to said
Registration Statement, and generally to do all such things in our names and
behalf in our capacities as officers and directors to enable Artra Group
Incorporated to comply with all requirements of the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as they may be signed
by said attorneys, or any of them, to said Registration Statement and any and
all amendments thereto.
Pursuant to the requirements of the Securities Act, this Registration Statement
has been signed below by the following persons in the capacities and on the date
indicated.
Signature Title Date
- --------- ----- ----
/s/Peter R. Harvey Director September 30,1997
- ---------------------------
Peter R. Harvey
/s/ John G. Hamm Executive Vice President September 30,1997
- ---------------------------
John G. Hamm
/s/ James D. Doering Vice President and September 30,1997
- --------------------------- Treasurer, Chief Financial
James D. Doering Officer
/s/ Lawrence D. Levin Controller September 30,1997
- ---------------------------
Lawrence D. Levin
/s/Edward A. Celano Director September 30,1997
- ---------------------------
Edward A. Celano
/s/Howard R. Conant Director September 30,1997
- ---------------------------
Howard R. Conant
/s/John Harvey Chairman and Chief September 30,1997
- --------------------------- Executive Officer
John Harvey (Principal Executive officer);
Director
/s/Robert L. Johnson Director September 30,1997
- ---------------------------
Robert L. Johnson
/s/Gerard M. Kenny Director September 30,1997
- ---------------------------
Gerard M. Kenny
/s/Maynard K. Louis Director September 30,1997
- ---------------------------
Maynard K. Louis
22
<PAGE>
Exhibit
Number Description
3.1 Amended and Restated Certificate of Incorporation of the
Registrant
3.2 (*) By-Laws of the Registrant
4.1 Artra Group Incorporated 1996 Stock Option Plan
4.1 Artra Group Incorporated 1966 Disinterested
Directors' Stock Option Plan
5.1 Opinion of Kwiatt, Silverman & Ruben, Ltd.
23.1 Consent of Kwiatt, Silverman & Ruben, Ltd.
(included in Exhibit 5.1)
23.2 Consent of Coopers & Lybrand.
24.1 Power of Attorney (included on the signature page of this
Registration Statement)
- -------------------------
(*) Incorporated herein by reference from the Registrant's Registration
Statement on Form S-1 (File No. 333-16965).
23
EXHIBIT 3.1
STATEMENT OF CORRECTION TO AMENDED
AND RESTATED ARTICLES OF INCORPORATION
FOR ARTRA GROUP INCORPORATED
In compliance with the requirements of 15 Pa.C.S. ss.138 (relating to
statement of correction) the undersigned association or other person, desiring
to correct an inaccurate record of corporate or other action or correct
defective or erroneous execution of a document, hereby states that:
1. The name of the corporation is ARTRA GROUP Incorporated.
2. The location and post office address of the Corporation's registered
office in the Common wealth of Pennsylvania is 100 Pine Street, Harrisburg,
Pennsylvania 17108.
3. The original Articles of Incorporation of ARTRA GROUP Incorporated
were filed with the Department of State of the Commonwealth of Pennsylvania on
November 3, 1933 pursuant to the Business Corporation Law of the Commonwealth of
Pennsylvania (Act 106 of May 5, 1933). The name under which the Corporation was
originally incorporated was Campbell Teletector Corp. of Penna. Pursuant to the
requirements of 15 Pa.C.S. ss.1915 an Amended and Restated Articles of
Incorporation was filed with the Department of State on August 29, 1996.
4. The inaccuracy or defect, which appears in Department of State form
for Amended and Restated Articles of Incorporation filed on August 29, 1996
("Amendment") in Roll and Film Number 9659-320 is in Article FIFTH of the
Amendment wherein the number of shares of common stock authorized should have
read 20,000,000 instead of 7,500,000.
5. Article FIFTH of the Amendment should be deleted in its entirety and
replaced with the following:
"FIFTH. The number of shares which the Corporation has authority to
issue is 20,000,000 shares of common stock, without par value, and
2,000,000 shares of preferred stock, par value $1,000.00 per share. The
Board of Directors shall have the authority to authorize the issuance,
from time to time without any vote or other action by the shareholders
of any or all shares of stock of the Corporation of any class at any
time authorized.
(a) Each share of common stock shall have equal voting powers and each
such share shall be entitled to one (1) vote in all proceedings in
which shareholders shall be entitled to vote. In each election for
Directors every shareholder entitled to vote shall have the right, in
person or by proxy, to multiply the number of votes to which he may be
entitled by the total number of Directors to be elected in the same
election, and he may cast the whole number of such votes for one
candidate or he may distribute them among any two or more candidates.
The candidates receiving the highest number of votes shall be elected.
1
<PAGE>
(b) The Corporation shall not issue any shares of non-voting common
stock.
(c) The preferred stock may be issued from time to time in one or more
series. The designations, preferences, qualifications, privileges,
limitations, options, conversion rights, and other special rights shall
be as stated and expressed in this Article FIFTH and, to the extent not
so stated and expressed, shall be fixed by resolution or resolutions
providing for the issuance of such shares duly adopted by the Board of
Directors (authority to do so being hereby expressly granted). Such
resolution or resolutions shall (a) fix the dividend rights of holders
of shares of each such series, (b) fix the terms on which stock of each
such series may be redeemed if the shares of such series are to be
redeemable, (c) fix the rights of the holders of stock of each such
series upon dissolution or any distribution of assets, (d) fix the
terms or amount of the sinking fund, if any, to be provided for the
purchase or redemption of stock of each such series, (e) fix the terms
upon which the stock of each such series may be converted into or
exchanged for stock of any other class or classes of any one or more
series of preferred stock if the share of such series are to be
convertible or exchangeable, (f) fix the voting rights, if any, of the
shares of each such series and (g) fix such other designations,
preferences and relative, participating, operational or other special
rights, and qualifications, limitations or restrictions thereof desired
to be so fixed.
All shares of any one series of preferred stock shall be
identical with each other in all respects except that shares of any one
series issued at different times may differ as to the dates from which
dividends thereon shall accumulate thereon, and all series of preferred
stock shall rank equally and be identical in all respects except as
specified in the respective resolutions of the Board of Directors
providing for the initial issue thereof.
Subject to the prior and superior rights of the preferred
stock as set forth in any resolution or resolutions of the Board of
Directors providing for the initial issue of a particular issue of
preferred stock, such dividends (payable in cash, stock or otherwise)
as may be determined by the Board of Directors may be declared and paid
on the common stock from time to time out of any funds legally
available therefore and the preferred stock shall not be entitled to
participate in any such dividend. No interest shall accrue or be
payable on dividends on preferred stock not paid when due.
No holder of stock of the Corporation shall be entitled as
such to any right, preemptive or otherwise to subscribe for, purchase
or receive any part of the shares of stock of the Corporation at any
time held in its treasury or of the unissued shares of stock of the
Corporation either authorized at present or which may at any time
hereafter be authorized, or of any issue of notes, bonds or debentures,
whether or not convertible into any class of stock of the Corporation,
or of any issue of warrants, options or rights to subscribe for shares
of any class of stock of the Corporation."
6. This Statement of Correction shall be effective as of the date the
original document was effective (August 29, 1996) as there are no persons who
are substantially and adversely affected by this correction.
ARTRA GROUP Incorporated
By:___________________________
Peter R. Harvey, President
2
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ARTRA GROUP INCORPORATED
Pursuant to the Business Corporation Law
of 1988 of the Commonwealth of Pennsylvania
The original Articles of Incorporation of ARTRA GROUP Incorporated (the
present name of the corporation) were filed with the Department of State of the
Commonwealth of Pennsylvania on November 3, 1933 pursuant to the Business
Corporation Law of the Commonwealth of Pennsylvania (Act 106 of May 5, 1933).
The name under which the Corporation was originally incorporated was Campbell
Teletector Corp. of Penna. The following Amended and Restated Articles of
Incorporation not only restate and integrate the original Articles of
Incorporation and all amendments filed with the Department of State prior to
August 29, 1996, but also include further amendments adopted by the shareholders
of the Corporation at an annual meeting held on that date. The registered office
of the Corporation is as set forth in Article SECOND. The original Articles of
Incorporation and all amendments previously made thereto are superseded and are
amended and restated in their entirety to read as follows:
FIRST. The name of the Corporation is ARTRA GROUP Incorporated.
SECOND. The location and post office address of the Corporation's
registered office in the Commonwealth of Pennsylvania is 100 Pine Street,
Harrisburg, Pennsylvania 17108.
THIRD. (a) The Corporation shall have unlimited power to engage in and
to do any lawful act concerning any or all lawful business for which
corporations may be incorporated under the Business Corporation Law of 1988 of
the Commonwealth of Pennsylvania.
(b) Without limiting the generality of paragraph (a) of this
Article, the Corporation is authorized to manufacture, construct, improve,
process, buy, acquire, own, hold, sell, trade, dispose of, encumber and
generally deal in property, real and personal, tangible and intangible,
products, goods, wares, merchandise, commodities and services of any and every
class and description.
FOURTH. The term of the Corporation's existence is perpetual.
FIFTH. The number of shares which the Corporation has authority to
issue is 7,500,000 shares of common stock, without par value, and 2,000,000
shares of preferred stock, par value $1,000.00 per share. The Board of Directors
shall have the authority to authorize the issuance, from time to time without
any vote or other action by the shareholders of any or all shares of stock of
the Corporation of any class at any time authorized.
(a) Each share of common stock shall have equal voting powers and each
such share shall be entitled to one (1) vote in all proceedings in which
shareholders shall be entitled to vote. In each election for Directors every
shareholder entitled to vote shall have the right, in person or by proxy, to
multiply the number of votes to which he may be entitled by the total number of
Directors to be elected in the same election, and he may cast the whole number
of such votes for one candidate or he may distribute them among any two or more
candidates. The candidates receiving the highest number of votes shall be
elected.
(b) The Corporation shall not issue any shares of non-voting common
stock.
3
<PAGE>
(c) The preferred stock may be issued from time to time in one or more
series. The designations, preferences, qualifications, privileges, limitations,
options, conversion rights, and other special rights shall be as stated and
expressed in this Article FIFTH and, to the extent not so stated and expressed,
shall be fixed by resolution or resolutions providing for the issuance of such
shares duly adopted by the Board of Directors (authority to do so being hereby
expressly granted). Such resolution or resolutions shall (a) fix the dividend
rights of holders of shares of each such series, (b) fix the terms on which
stock of each such series may be redeemed if the shares of such series are to be
redeemable, (c) fix the rights of the holders of stock of each such series upon
dissolution or any distribution of assets, (d) fix the terms or amount of the
sinking fund, if any, to be provided for the purchase or redemption of stock of
each such series, (e) fix the terms upon which the stock of each such series may
be converted into or exchanged for stock of any other class or classes of any
one or more series of preferred stock if the share of such series are to be
convertible or exchangeable, (f) fix the voting rights, if any, of the shares of
each such series and (g) fix such other designations, preferences and relative,
participating, operational or other special rights, and qualifications,
limitations or restrictions thereof desired to be so fixed.
All shares of any one series of preferred stock shall be identical with
each other in all respects except that shares of any one series issued at
different times may differ as to the dates from which dividends thereon shall
accumulate thereon, and all series of preferred stock shall rank equally and be
identical in all respects except as specified in the respective resolutions of
the Board of Directors providing for the initial issue thereof.
Subject to the prior and superior rights of the preferred stock as set
forth in any resolution or resolutions of the Board of Directors providing for
the initial issue of a particular issue of preferred stock, such dividends
(payable in cash, stock or otherwise) as may be determined by the Board of
Directors may be declared and paid on the common stock from time to time out of
any funds legally available therefore and the preferred stock shall not be
entitled to participate in any such dividend. No interest shall accrue or be
payable on dividends on preferred stock not paid when due.
No holder of stock of the Corporation shall be entitled as such to any
right, preemptive or otherwise to subscribe for, purchase or receive any part of
the shares of stock of the Corporation at any time held in its treasury or of
the unissued shares of stock of the Corporation either authorized at present or
which may at any time hereafter be authorized, or of any issue of notes, bonds
or debentures, whether or not convertible into any class of stock of the
Corporation, or of any issue of warrants, options or rights to subscribe for
shares of any class of stock of the Corporation.
SIXTH. The number of Directors of the Corporation shall be fixed, from
time to time, in the manner provided in the By-laws, but in no event shall the
number of directors be less than six. No decrease in the number of directors
shall shorten the term of any incumbent director. Any vacancy occurring in the
Board of Directors caused by death, resignation, or removal, and any newly
created directorship resulting from an increase in the number of directors, may
be filled by a majority of the directors in office, although less than quorum.
Each director chosen to fill a vacancy or newly created directorship shall hold
office until the next election for which such director shall have been chosen
and until his successor shall be duly elected and qualified.
SEVENTH. At a meeting of the shareholders, the holders of 50% of the
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum requisite for the transaction of
business, except as otherwise provided by law.
No action required to be taken, or which may be taken at any annual or
special meeting of shareholders of the Corporation, may be taken without a
meeting and the power of shareholders to consent in writing to the taking of any
action is specifically denied.
4
<PAGE>
In the event that the holders of the stock of the Corporation issued
and outstanding and entitled to vote at a meeting with respect to a particular
matter (such stock is hereafter referred to as "Voting Stock" and references
thereto shall mean each class of Voting Stock to the extent the holders of stock
of any class are entitled to vote as a class on any matter) are entitled to vote
on
(i) a proposal that this Corporation enter
into a merger or consolidation with any Person (as hereinafter
defined), or that this Corporation sell, lease or exchange
substantially all of its assets and property, with or without
the good will of the Corporation, to any such Person, and such
Person and his or its affiliates, singly or in the aggregate,
own or control, directly or indirectly, 5% or more of the
Voting Stock at the record date for determining shareholders
entitled to vote, or
(ii) a proposal to reclassify securities,
recapitalize or other transaction (except redemptions
permitted by the terms of the security to be redeemed or
repurchased by this Corporation of its securities for
cancellation or for its treasury) designed to decrease the
number of holders of the Voting Stock remaining after any
Person has acquired 5% of such Voting Stock,
the affirmative vote of the holders of shares of Voting Stock of the Corporation
representing at least 80% of the votes entitled to be cast at a meeting of the
shareholders duly called for the consideration of any such proposal shall be
required for the approval of such proposal; provided, however, that the
foregoing requirements shall not apply to any such merger, consolidation or sale
of assets and property, with or without the good will of the Corporation (i)
which shall have been approved by a resolution duly adopted by a majority of the
directors in office, although less than a quorum, and the affirmative vote of
the holders of shares of Voting Stock of the Corporation representing at least a
majority of the votes entitled to be cast at a meeting of shareholders called
for such purpose, or (ii) between the Corporation and another corporation, 50%
or more of the Voting Stock of which is owned by the Corporation, if the
Corporation and another corporation, 50% or more of the Voting Stock of which is
owned by the Corporation, if the Corporation is the survivor or purchaser.
For the purposes hereof, a "Person" shall mean any corporation,
partnership, association, trust (other than any trust holding stock of the
employees of the Corporation pursuant to any stock purchase, ownership or
employee benefit plan of the Corporation), business entity, estate or individual
or any Affiliate (as hereinafter defined) of any of the foregoing. As
"Affiliate" shall mean any corporation, partnership, association, trust,
business entity, estate or individual who, directly or indirectly, through one
or more intermediaries, controls, or is controlled by, or is under common
control with, a Person. "Control" shall mean the possession, directly or
indirectly, of power to direct or cause the direction of the management and
policies of a Person through the ownership of voting securities, by contract, or
otherwise.
EIGHTH. The provisions of Article SEVENTH and this Article EIGHTH may
not be amended, altered, changed or repealed in any respect unless such
amendment, alteration, change or repeal is approved by (i) the affirmative vote
of the holders of shares of Voting Stock of the Corporation representing at
least 80% of the votes entitled to be cast at a meeting of the shareholders duly
called for the consideration of such amendment, alteration, change or repeal, or
(ii) the affirmative vote of at least 80% of the directors in office, although
less than a quorum, and the affirmative vote of the holders of shares of Voting
Stock of the Corporation representing at least a majority of the votes entitled
to be cast at such meeting of shareholders.
Executed this ____ day of August, 1996.
ARTRA GROUP Incorporated
By____________________________
Peter R. Harvey, President
5
EXHIBIT 3.2
BY-LAWS OF ATRTRA GROUP INCORPORATED
Incorporated herein by reference from the Registrant's Registration Statement on
Form S-1 (File No. 333-16965).
EXHIBIT 4.1
ARTRA GROUP INCORPORATED
1996 STOCK OPTION PLAN
There is hereby established a 1996 Stock Option Plan (the
"Plan"). The Plan provides for the grant to certain employees and others who
render services to Artra or its subsidiaries of options ("Options") to purchase
shares of common stock of the Company ("Common Stock").
Purpose: The purpose of the Plan is to provide additional
incentive to the officers, employees, and others who render services to the
Company, who are responsible for the management and growth of the Company, or
otherwise contribute to the conduct and direction of its business, operations
and affairs. It is intended that Options granted under the Plan strengthen the
desire of such persons to join and remain in the employ of the Company and
stimulate their efforts on behalf of the Company.
The Stock: The aggregate number of shares of Common Stock
which may be subject to Options shall not exceed 2,000,000. Such shares may be
either authorized and unissued shares, or treasury shares. If any Option granted
under the Plan shall expire, terminate or be canceled for any reason without
having been exercised in full, the corresponding number of unpurchased shares
shall again be available for the purposes of the Plan.
Types of Options. Options granted under the Plan shall be in
the form of (i) incentive stock options ("ISOs"), as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code") or (ii) non-statutory
options which do not qualify under such Section ("NSOs"), or both, in the
discretion of the Board of Directors or any committee appointed by the Board
(each, the "Committee"). The status of each Option shall be identified in the
Option Agreement.
Eligibility:
ISOs may be granted to such employees (including officers and directors
who are employees) of the Company as the Committee shall select from time to
time.
NSOs may be granted to such employees (including officers and
directors) of the Company, and to other persons who render services to the
Company, as the Committee shall select from time to time.
General Terms of Options:
Option Price. The price or prices per share of Common Stock to be sold
pursuant to an Option (the "exercise price") shall be such as shall be fixed by
the Committee but shall in any case not be less than: the fair market value per
share for such Common Stock on the date of grant in the case of ISOs other than
to a 10% Shareholder, 110% of the fair market value per share for such Common
Stock on the date of grant in the case of ISOs to a 10% Shareholder, and the
fair market value per share on the date of grant in the case of NSOs. A "10%
Shareholder" means an individual who within the meaning of Section 422(b)(6) of
the Code owns stock possessing 10 percent or more of the total combined voting
power of all classes of stock of the Company or of its parent or any subsidiary
corporation.
Period of Option Vesting. The Committee shall determine for each Option
the period during which such Option shall be exercisable in whole or in part,
provided that no ISO to a 10% Shareholder shall be exercisable more than five
years after the date of grant.
Special Rule for ISOs. The aggregate fair market value (determined at
the time the ISO is granted) of the stock with respect to which ISOs are
exercisable for the first time by an Optionee during any calendar year (under
all such plans of the Company, its parent or subsidiary) shall not exceed
$100,000, and any excess shall be considered an NSO.
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Effect of Termination of Employment.
The Committee shall determine for each Option the extent, if any, to
which such Option shall be exercisable in the event of the termination of the
Optionee's employment with or rendering of other services to the Company.
However, any such Option which is an ISO shall in all events lapse
unless exercised by the Optionee: prior to the 89th day after the date on which
employment terminated, if termination was other than by reason of death; and
within the twelve-month period next succeeding the death of the Optionee, if
termination is by reason of death.
The Committee shall have the right, at any time, and from time to time,
with the consent of the Optionee, to modify the lapse date of an Option and to
convert an ISO into an NSO to the extent that such modification in lapse date
increases the life of the ISO beyond the dates set forth above or beyond dates
otherwise permissible for an ISO.
Payment for Shares of Common Stock. Upon exercise of an Option, the
Optionee shall make full payment of the Option Price: in cash, or, with the
consent of the Committee and to the extent permitted by it: with Common Stock of
the Company valued at fair market value on date of exercise, but only if held by
the Optionee for a period of time sufficient to prevent a pyramid exercise that
would create a charge to the Company's earnings, with a full recourse interest
bearing promissory note of the Optionee, secured by a pledge of the shares of
Common Stock received upon exercise of such Option, and having such other terms
and conditions as determined by the Committee, by delivering a properly executed
exercise notice together with irrevocable instructions to a broker to sell
shares acquired upon exercise of the Option and promptly to deliver to the
Company a portion of the proceeds thereof equal to the exercise price, or any
combination of any of the foregoing.
Option Exercises. Options shall be exercised by submitting to the
Company a signed copy of notice of exercise in a form to be supplied by the
Company. The exercise of an Option shall be effective on the date on which the
Company receives such notice at its principal corporate offices. The Company may
cancel such exercise in the event that payment is not effected in full, subject
to the terms of Section 1(e) above.
Non-Transferability of Option. No Option shall be transferable by the
Optionee or otherwise than by will or by the laws of descent and distribution.
During the Optionee's lifetime, such Option shall be exercisable only by such
Optionee. If an Optionee should die while in the employ of the Company, the
Option theretofore granted to the Optionee, to the extent then otherwise
exercisable, shall be exercisable only by the estate of the Optionee or by a
person who acquired the right to exercise such Option by bequest or inheritance
or otherwise by reason of the death of the Optionee.
Other Plan Terms.
Number of Options which may be Granted to, and Number of Shares of
Common Stock which may be Acquired by Employees.
The Committee may grant more than one Option to an individual, and,
subject to the requirements of Section 422 of the Code, with respect to ISOs,
such Option may be in addition to, in tandem with, or in substitution for,
Options previously granted under the Plan or of another corporation and assumed
by the Company.
The Committee may permit the voluntary surrender of all or a portion of
any Option granted under the Plan or otherwise to be conditioned upon the
granting to the employee of a new Option for the same or a different number of
shares of Common Stock as the Option surrendered, or may require such voluntary
surrender as a condition precedent to a grant of a new Option to such employee.
Such new Option shall be exercisable at the price, during the period, and in
accordance with any other terms or conditions specified by the Committee at the
time the new Option is granted, all determined in accordance with the provisions
of the Plan without regard to the price, period of exercise, or any other terms
or conditions of the Option surrendered.
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<PAGE>
Period of Grant of Options. Options under the Plan may be granted at
any time after the Plan has been approved by the shareholders of the Company.
However, no Option shall be granted under the Plan after August 29, 2006.
Effect of Change in Common Stock. In the event of a reorganization,
recapitalization, liquidation, stock split, stock dividend, combination of
shares, merger or consolidation, or the sale, conveyance, lease or other
transfer by the Company of all or substantially all of its property, or any
change in the corporate structure or shares of common stock of the Company,
pursuant to any of which events the then outstanding shares of the common stock
are split up or combined or changed into, become exchangeable at the holder's
election for, or entitle the holder thereof to other shares of common stock, or
in the case of any other transaction described in Section 424(a) of the Code,
the Committee may change the number and kind of shares of Common Stock available
under the Plan and any outstanding Option (including substitution of shares of
common stock of another corporation) and the price of any Option and the fair
market value determined under this Plan in such manner as it shall deem
equitable in its sole discretion.
Optionees not Shareholders. An Optionee or a legal representative
thereof shall have none of the rights of a stockholder with respect to shares of
Common Stock subject to Options until such shares shall be issued or transferred
upon exercise of the Option.
Option Agreement. The Company shall effect the grant of Options under
the Plan, in accordance with determinations made by the Committee, by execution
of instruments in writing in a form approved by the Committee. Each Option shall
contain such terms and conditions (which need not be the same for all Options,
whether granted at the time or at different times) as the Committee shall deem
to be appropriate and not inconsistent with the provisions of the Plan, and such
terms and conditions shall be agreed to in writing by the Optionee.
Certain Definitions.
Fair Market Value. As used in the Plan, the term "fair market value"
shall mean as of any date:
if the Common Stock is not traded on any over-the-counter market or on
a national securities exchange, the value determined by the Committee using the
best available facts and circumstances,
if the Common Stock is traded in the over-the-counter market, based on
most recent closing prices for the Common Stock on the date the calculation
thereof shall be made, or
if the Common Stock is listed on a national securities exchange, based
on the most recent closing prices for the Common Stock of the Company on such
exchange.
Subsidiary and Parent. The term "subsidiary" and "parent" as used in
the Plan shall have the respective meanings set forth in Sections 424(f) and (e)
of the Internal Revenue Code.
Not an Employment Contract. Nothing in the Plan or in any Option or
stock option agreement shall confer on any Optionee any right to continue in the
service of the Company or any parent or subsidiary of the company or interfere
with the right of the Company to terminate such Optionee's employment or other
services at any time.
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<PAGE>
Withholding Taxes:
(a) Whenever the Company proposes or is required to issue or transfer
shares of Common Stock under the Plan, the Company shall have the right to
require the Optionee to remit to the Company an amount sufficient to satisfy any
Federal, state and/or local withholding tax requirements prior to the delivery
of any certificate or certificates for such shares. Alternatively, the Company
may, in its sole discretion from time to time, issue or transfer such shares of
Common Stock net of the number of shares sufficient to satisfy the withholding
tax requirements. For withholding tax purposes, the shares of Common Stock shall
be valued on the date the withholding obligation is incurred.
(b) In the case of shares of Common Stock that an Optionee receives
pursuant to his exercise of an Option which is an ISO, if such Optionee disposes
of such shares of Common Stock within two years from the date of the granting of
the ISO or within one year after the transfer of such shares of Common Stock to
him, the Company shall have the right to withhold from any salary, wages, or
other compensation for services payable by the Company to such Optionee, amounts
sufficient to satisfy any withholding tax obligation attributable to such
disposition.
(c) In the case of a disposition described in Section (b), the Optionee
shall give written notice to the Company of such disposition within 30 days
following the disposition, which notice shall include such information as the
Company may reasonably request to effectuate the provisions hereof.
Agreements and Representations of Optionees:
As a condition to the exercise of an Option, unless counsel to the
Company opines that it is not necessary under the Securities Act of 1933, as
amended, and the pertinent rules thereunder, as the same are then in effect, the
Optionee shall represent in writing that the shares of Common Stock being
purchased are being purchased only for investment and without any present intent
at the time of the acquisition of such shares of Common Stock to sell or
otherwise dispose of the same.
Administration of the Plan:
The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee shall have authority, in its discretion,
to determine the individuals to receive Options, the period of time that the
option may be exercised, not to exceed 10 years from the date of grant, the
times when they shall receive them and the number of shares of Common Stock to
be subject to each Option, and other terms relating to the grant of Options.
Directors, including those that may be members of the Committee, shall be
eligible to receive Options under the Plan.
Subject to the express provisions of the Plan, the Committee shall have
authority to construe the respective option agreements and the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the respective option agreements (which
need not be identical) and, as specified in this Plan, the fair market value of
the common stock, and to make all other determinations necessary or advisable
for administering the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any option agreement
in the manner and to the extent it shall deem expedient to carry it into effect,
and it shall be the sole and final judge of such expediency. The determinations
of the Committee on the matters referred to in this section shall be conclusive.
The Committee may, in its sole discretion, and subject to such terms
and conditions as it may adopt, accelerate the date or dates on which some or
all outstanding Options may be exercised.
4
<PAGE>
The Committee may require that any Option Shares issued be legended as
necessary to comply with applicable federal and state securities laws.
Amendment and Discontinuance of the Plan:
The Board of Directors of the Company may at any time alter, suspend or
terminate the Plan, but no change shall be made which will have a material
adverse effect upon any Option previously granted, unless the consent of the
Optionee is obtained; provided, however, that the Board of Directors may not
without further approval of the shareholders, (i) increase the maximum number of
shares of Common Stock for which Options may be granted under the Plan or which
may be purchased by an individual Optionee, (ii) decrease the minimum option
price provided in the Plan, or (iii) change the class of persons eligible to
receive Options.
The Company intends that Options designated by the Committee as ISOs
shall constitute ISOs under Section 422 of the Code. Should any provision in
this Plan for ISOs not be necessary in order to so comply or should any
additional provisions be required, the Board of Directors of the Company may
amend the Plan accordingly without the necessity of obtaining the approval of
the shareholders of the Company.
Other Conditions: If at any time counsel to the Company shall be of the
opinion that any sale or delivery of shares of Common Stock pursuant to an
Option granted under the Plan is or may in the circumstances be unlawful under
the statutes, rules or regulations of any applicable jurisdiction, the Company
shall have no obligation to make such sale or delivery, and the Company shall
not be required to make any application or to effect or to maintain any
qualification or registration under the Securities Act of 1933 or otherwise with
respect to shares of Common Stock or Options under the Plan, and the right to
exercise any such Option may be suspended until, in the opinion of said counsel,
such sale or delivery shall be lawful.
At the time of any grant or exercise of any Option, the Company may, if
it shall deem it necessary or desirable for any reason connected with any law or
regulation of any governmental authority relative to the regulation of
securities, condition the grant and/or exercise of such Option upon the Optionee
making certain representations to the Company and the satisfaction of the
Company with the correctness of such representations.
Approval; Effective Date; Governing Law. The Plan was adopted by the
Board of Directors on July 8, 1996. This Plan shall be interpreted in accordance
with the internal laws of the State of Pennsylvania.
Approval of the Amendment to approve the adoption of the stock option
plans requires an affirmative vote by the holders of a majority of the stock
present in person or represented by proxy and entitled to vote thereon at a
meeting of the shareholders (assuming a quorum exists). Management intends to
cast properly executed proxies in favor of the establishment of the ARTRA stock
option plan and Proxies solicited by management will be voted in favor of this
proposal unless a contrary vote or authority withheld is specified.
5
EXHIBIT 4.1
ARTRA GROUP INCORPORATED
1996 DISINTERESTED DIRECTORS STOCK OPTION PLAN
There is hereby established a 1996 Disinterested Directors
Stock Option Plan (the "Plan"). The Plan provides for the grant to certain
directors of Artra of options ("Options") to purchase shares of common stock of
the Company ("Common Stock").
Purpose: The purpose of the Plan is to provide incentive to
directors of the Company who are not employees or officers to receive options or
awards which will disqualify them from serving as disinterested persons (within
the meaning of Rule 16b-3 under the Securities Exchange Act of 1934) in the
administration of the Company's stock option plans.
The Stock: The aggregate number of shares of Common Stock
which may be subject to Options shall not exceed 200,000. Such shares may be
either authorized and unissued shares, or treasury shares. If any Option granted
under the Plan shall expire, terminate or be cancelled for any reason without
having been exercised in full, the corresponding number of unpurchased shares
shall again be available for the purposes of the Plan.
Type of Options:
Options granted under the Plan shall be in the form
of non-statutory options.
Eligibility:
The Company will grant to each director who
participates in this Plan an Option to purchase a maximum of 10,000 shares of
Common Stock if such person first became a director concurrently with or after
the adoption of this Plan, and an Option to purchase 2,500 shares of Common
Stock on each February 1 thereafter so long as such person on such May 1
continues to serve as a disinterested director in the administration of the
Company's stock option plans, and so long as such February 1 is at least six
months after the initial date upon which such person became a director.
General Terms of Options:
Option Price. The price or prices per share of
Common Stock to be sold pursuant to an Option (the "exercise price") shall be
the fair market value on the date of grant.
Period of Option Vesting. All Options shall vest
immediately, provided that Optionee must retain ownership of shares acquired
upon exercise of an Option until six months has elapsed from the date of grant
of the Option.
Effect of Termination of Director Status.
Each Optionee must exercise his or her Option
within 10 days after such Optionee ceases to be a director of the Company,
unless such termination is the result of permanent disability or upon retirement
after having attained age 65, in which event such exercise shall be valid if
made within one year after such termination. However, if the Optionee should die
while a director, the Option shall be exercisable only by the estate of the
Optionee or by a person who acquired the right to exercise such Option by
bequest or inheritance or otherwise by reason of the death of the Optionee, and
only within the one-year period next succeeding the death of the Optionee.
1
<PAGE>
Payment for Shares of Common Stock. Upon exercise
of an Option, the Optionee shall make full payment of the Option Price: in cash,
with Common Stock of the Company valued at fair market value on date of
exercise, but only if held by the Optionee for a period of time sufficient to
prevent a pyramid exercise that would create a charge to the Company's earnings,
with a full recourse interest bearing promissory note of the Optionee, secured
by a pledge of the shares of Common Stock received upon exercise of such Option,
and having such other terms and conditions as determined by the Board of
Directors or any committee appointed by the Board (each, the "Committee"), by
delivering a properly executed exercise notice together with irrevocable
instructions to a broker to sell shares acquired upon exercise of the Option and
promptly to deliver to the Company a portion of the proceeds thereof equal to
the exercise price, or any combination of any of the foregoing.
Option Exercises. Options shall be exercised by
submitting to the Company a signed copy of notice of exercise in a form to be
supplied by the Company. The exercise of an Option shall be effective on the
date on which the Company receives such notice at its principal corporate
offices. The Company may cancel such exercise in the event that payment is not
effected in full, subject to the terms stated above.
Non-Transferability of Option. No Option shall be
transferable by the Optionee or otherwise than by will or by the laws of descent
and distribution. During the Optionee's lifetime, such Option shall be
exercisable only by such Optionee. Upon an Optionee's death, the Option
theretofore granted to the Optionee, to the extent then otherwise exercisable,
shall be exercisable only by the estate of the Optionee or by a person who
acquired the right to exercise such Option by bequest or inheritance or
otherwise by reason of the death of the Optionee.
Other Plan Terms.
Period of Grant of Options. No Option shall be
granted under the Plan after August 29, 2006.
Effect of Change in Common Stock. In the
event of a reorganization, recapitalization, liquidation, stock split, stock
dividend, combination of shares, merger or consolidation, or the sale,
conveyance, lease or other transfer by the Company of all or substantially all
of its property, or any change in the corporate structure or shares of common
stock of the Company, pursuant to any of which events the then outstanding
shares of the common stock are split up or combined or changed into, become
exchangeable at the holder's election for, or entitle the holder thereof to
other shares of common stock, or in the case of any other transaction described
in Section 424(a) of the Code, the number and kind of shares of Common Stock
available under the Plan and any outstanding Option (including substitution of
shares of common stock of another corporation) and the price of any Option and
the fair market value determined under this Plan shall be appropriately
adjusted.
Optionees not Shareholders. An Optionee or a legal
representative thereof shall have none of the rights of a stockholder with
respect to shares of Common Stock subject to Options until such shares shall be
issued or transferred upon exercise of the Option.
Option Agreement. The Company shall effect the grant of
Options under the Plan by execution of an instrument consistent with the terms
and conditions set forth in this Plan. The execution of such instrument shall be
a pre-condition to participation in the Plan.
Certain Definitions.
Fair Market Value. As used in the Plan, the term
"fair market value" shall mean as of any date:
if the Common Stock is not traded on any
over-the-counter market or on a national securities exchange, the value
determined by the Committee using the best available facts and circumstances,
2
<PAGE>
if the Common Stock is traded in the over-
the-counter market, based on most recent closing prices for the Common Stock on
the date the calculation thereof shall be made, or
if the Common Stock is listed on a national
securities exchange, based on the most recent closing prices for the Common
Stock of the Company on such exchange.
Subsidiary and Parent. The term "subsidiary" and
"parent" as used in the Plan shall have the respective meanings set forth in
Sections 424(f) and (e) of the Internal Revenue Code.
Agreements and Representations of Optionees:
As a condition to the exercise of an Option, unless
counsel to the Company opines that it is not necessary under the Securities Act
of 1933, as amended, and the pertinent rules thereunder, as the same are then in
effect, the Optionee shall represent in writing that the shares of Common Stock
being purchased are being purchased only for investment and without any present
intent at the time of the acquisition of such shares of Common Stock to sell or
otherwise dispose of the same.
Administration of the Plan:
The Plan shall be administered, to the extent
required, by the Committee.
Subject to the express provisions of the Plan, the
Committee shall have authority to construe the respective option agreements and
the Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, and to make all other determinations necessary or advisable for
administering the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any option agreement
in the manner and to the extent it shall deem expedient to carry it into effect,
and it shall be the sole and final judge of such expediency. The determinations
of the Committee on the matters referred to in this section shall be conclusive.
The Committee may require that any Option Shares
issued be legended as necessary to comply with applicable federal and state
securities laws.
Amendment and Discontinuance of the Plan:
The Board of Directors of the Company may at any time
alter, suspend or terminate the Plan, but no change shall be made which will
have a material adverse effect upon any Option previously granted, unless the
consent of the Optionee is obtained; provided, however, that the Board of
Directors may not without further approval of the shareholders: increase the
maximum number of shares of Common Stock for which Options may be granted under
the Plan or which may be purchased by an individual Optionee; cause shares to be
granted at less than fair market value or change such price once a grant has
been made; or change the class of persons eligible to receive Options; and
provided, further, that Plan provisions referred to in Rule 16b-3(c)(2)(ii)(A)
under the Securities Exchange Act of 1934 may in no event be amended more than
once every six months, other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act, or the rules
thereunder.
Other Conditions: If at any time counsel to the Company shall
be of the opinion that any sale or delivery of shares of Common Stock pursuant
to an Option granted under the Plan is or may in the circumstances be unlawful
under the statutes, rules or regulations of any applicable jurisdiction, the
Company shall have no obligation to make such sale or delivery, and the Company
shall not be required to make any application or to effect or to maintain any
qualification or registration under the Securities Act of 1933 or otherwise with
respect to shares of Common Stock or Options under the Plan, and the right to
exercise any such Option may be suspended until, in the opinion of said counsel,
such sale or delivery shall be lawful.
At the time of any grant or exercise of any Option, the
Company may, if it shall deem it necessary or desirable for any reason connected
with any law or regulation of any governmental authority relative to the
regulation of securities, condition the grant and/or exercise of such Option
upon the Optionee making certain representations to the Company and the
satisfaction of the Company with the correctness of such representations.
3
<PAGE>
Approval; Effective Date; Governing Law. The Plan was adopted
by the Board of Directors on July 8, 1996. This Plan shall be interpreted in
accordance with the internal laws of the State of Pennsylvania.
Approval of the Amendment to approve the adoption of the ARTRA 1996
DISINTERESTED DIRECTORS STOCK OPTION PLAN requires an affirmative vote by the
holders of a majority of the stock present in person or represented by proxy and
entitled to vote thereon at a meeting of the shareholders (assuming a quorum
exists). Management intends to cast properly executed proxies in favor of the
establishment of the ARTRA 1996 DISINTERESTED DIRECTORS STOCK OPTION PLAN unless
a contrary vote or authority withheld is specified.
4
EXHIBITS 5.1 & 23.1
OPINION AND CONSENT OF KWIATT, SILVERMAN & RUBEN, LTD.
REGARDING LEGALITY OF SHARES OF COMMON STOCK
September 30, 1997
Artra Group Incorporated
500 Central
Northfield, Illinois 60092
Re: 1996 Artra Group Incorporated Stock Option Plan and the Artra
Group Incorporated 1996 Disinterested Directors' Stock Option Plan
Gentlemen:
We have assisted in the preparation of a Registration Statement on Form S-8 (the
"Registration Statement") to be filed on September 30, 1997 with the Securities
and Exchange Commission relating to 2,200,000 shares of the Common Stock, no par
value shares ("Shares"), of Artra Group Incorporated, a Pennsylvania corporation
(the "Company"), issuable under the Company's 1996 Stock Option Plan for Artra
Group Incorporated Stock Option holders and the Artra Group Incorporated 1966
Disinterested Directors' Stock Option Plan (the "Plans").
We have examined the Amended and Restated Certificate of Incorporation, the
Statement of Correction and the By-laws of the Company and originals, or copies
certified to our satisfaction, of all pertinent records of the meetings of the
directors and stockholders of the Company, the Registration Statement and such
other documents relating to the Company as we have deemed material for the
purposes of this opinion.
In our examination of the foregoing documents, we have assumed the genuineness
of all signatures and the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to us
as certified or photostatic copies and the authenticity of the originals of such
latter documents.
Based upon the foregoing, we are of the opinion that the Company is a
corporation duly organized and validly existing under the laws of the State of
Pennsylvania and that the Company has duly authorized for issuance the Shares,
and the Shares, when issued and paid for in accordance with the terms of the
Plans will be legally issued, fully-paid and nonassessable.
We hereby consent to the filing of this opinion with the Securities and Exchange
Commission in connection with the Registration Statement.
Very truly yours,
Kwiatt, Silverman & Ruben, Ltd.
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-8 (File No.
_____) of our report, which includes an explanatory paragraph referring to an
uncertainty concerning the Company's ability to continue as a going concern,
dated April 2, 1997 on our audits of the consolidated financial statements and
financial statement schedules of ARTRA GROUP Incorporated as of December 26,
1996 and December 28, 1995, and for each of the three fiscal years in the period
ended December 26, 1997, which is included in the Company's 1996 annual report
on Form 10-K.
Coopers & Lybrand L.L.P.
Chicago, Illinois
September 25, 1997
EXHIBIT 24.1
POWER OF ATTORNEY
Power of Attorney is contained in signature pages.
