SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): April 19, 1999
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ARTRA GROUP INCORPORATED
(Exact name of registrant as specified in its charter)
Pennsylvania
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State or Other Jurisdiction of Incorporation
1-3916 25-1095978
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Commission File Number I.R.S. Employer
Identification No.
500 Central Avenue, Northfield, IL 60093
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Address of principal executive offices Zip Code
Registrant's telephone number, including area code: (847) 441-6650
Not Applicable
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Former name, former address and former fiscal year, if changed since last report
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Item 5. Other Events
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On April 19, 1999, ARTRA GROUP Incorporated ("ARTRA" or the
"Registrant") entered into a letter of intent to purchase all of
the issued and outstanding common stock of Public Liquidations
Systems, Inc. and Asset Liquidation Group, Inc., d/b/a as
Nationwide Auction Systems Corp. The purchase price shall consist
of cash of $10,800,000 payable at closing, 1,570,000 shares of
ARTRA common stock and a $14,000,000 note, subject to adjustment,
payable over a two year period subsequent to the closing of the
transaction. Consummation of the transaction is subject to
certain conditions, including performance of the buyer's and
seller's due diligence and negotiation of a definitive asset
purchase agreement. The letter of intent expires on May 16, 1999
unless extended by the parties prior to that date. This potential
acquisition is not as yet deemed probable as no assurance can be
given that the parties will complete their due diligence or enter
into a definitive agreement by that date.
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Item 7. Exhibits
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99.1 Letter of intent, dated April 19, 1999, between ARTRA
GROUP Incorporated ("Buyer") and Public Liquidations
Systems, Inc. and Asset Liquidation Group, Inc., d/b/a
as Nationwide Auction Systems Corp. ("Seller ")
regarding purchase of all of the issued and outstanding
common stock of Seller.
99.2 Press Release dated April 19, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
ARTRA GROUP INCORPORATED
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Registrant
Dated: May 7, 1999 /s/ James D. Doering
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JAMES D. DOERING
Vice President/Treasurer
Chief Financial Officer
EXHIBIT 99.1
ARTRA GROUP INCORPORATED
500 Central Avenue
Northfield, IL 600093
April 19, 1999
Don Haidl, President
Nationwide Auction Systems
19800 MacArthur Boulevard
Suite 8800
Irvine, CA 92619
Re: Proposed Purchase of All Outstanding Common Stock
of Public Liquidation Systems, Inc. and Asset Liquidation
Group, Inc., d/b/a Nationwide Auction Systems
Gentlemen:
This letter of intent summarizes some but not all of the principal
terms and conditions upon which Don Haidl ("Haidl") and Corey P. Schlossmann
(collectively the "Stockholders") will agree to sell to Artra Group Incorporated
("Artra") all of the outstanding Common Stock of Public Liquidation Systems,
Inc. and Asset Liquidation Group, Inc. (together, the "Company").
1. Sale of Stock. Subject to the terms and conditions hereof, Artra
either directly or through an affiliated entity (the "Buyer") will purchase from
the Stockholders, and the Stockholders will sell to the Buyer, all of the
outstanding Common Stock of the Company (the "Common Stock"). Artra agrees that
neither Artra nor the Buyer will make an election under Section 338 of the
Internal Revenue Code with respect to the transaction; provided, however, that
the Stockholders have agreed that they are willing to have discussions of terms
upon which they might consent to a Section 338 election. The purchase price for
the Common Stock will be as follows:
(a) 1,570,000 shares of Artra Common Stock, to be issued in a private
transaction under an exemption from registration under the Securities Act of
1933 (the "Securities Act");
(b) $10.8 million in cash; and
(c) an unsecured note (the "Note") executed by Artra or guaranteed by
Artra if it is not the Buyer in the principal amount of $14 million, payable in
three installments as follow: $3.5 million on the 180th day after the closing
date of the transaction, $3.5 million on the first anniversary of the closing
date of the transaction, and $7 million on the second anniversary of
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Nationwide Auction Systems
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April 19, 1999
the closing date of the transaction. The Note shall bear interest at the rate of
to per annum, and accrued interest shall be payable quarterly. Artra agrees that
the assets of the Company will not be encumbered until the Note has been repaid
in full. It is Artra's intent not to issue any debt of Artra or any of its
subsidiaries in connection with the Agreement and Plan of Merger among Artra,
WorldWide Web NetworX Corporation, NA Acquisition Corporation and WWWX Merger
Subsidiary, Inc. (the "WWWX Agreement").
Notwithstanding the foregoing however:
(y) if the average closing sale price of Artra's Common Stock during
the five trading days immediately prior to the closing date (the "Average
Price") is less than $10 per share, the principal amount of the Note shall be
increased by an amount determined by (i) subtracting the Average Price from $10
and (ii) multiplying the remainder by 1,570,000.
(z) it; at any time while the Note is outstanding, Artra shall effect a
sale of shares of its Common Stock to the general public pursuant to an
effective registration statement under the Securities Act pursuant to which
Artra receives net proceeds of at least $30 million: (i) the Note shall be
prepaid in full within 30 days after the closing of such public offering and
(ii) the Stockholders shall be permitted to sell up to 15% of the Artra shares
issued in the transaction that continue to be held by them but have not been
cleared for trading on the first closing date of such public offering
notwithstanding the restrictions set forth in Section 3 of this letter of
intent.
Prior to the closing of the transaction, the business of the Company will be
conducted in the ordinary course consistent with past practice, and, except as
provided in Section 11, no dividend or other distribution shall be made by the
Company. The Stockholders shall continue to hold all of the outstanding shares
of the Company's capital stock.
2. Board Seat. Upon the closing of the transaction, the Board of
Directors of Artra shall appoint Haidl or a designee of Haidl who is reasonably
acceptable to Artra as a member of Artra's Board of Directors.
3. Registration Rights. Artra shall file a registration statement
covering the sale by the Stockholders of the 1,570,000 Artra shares to be issued
in the transaction within 60 days after the closing under the WWWX Agreement and
shall use its best efforts to keep such registration statement in effect until
the second anniversary of the closing date of the transaction. Notwithstanding
such registration however, and subject to Section 1(z) hereof, the Stockholders
agree that (i) they may sell only 400,000 of the Artra shares issued in the
transaction pursuant to such registration statement until such time, if any, as
the closing price of Artra's Common Stock reaches $20 per share and continues to
close at that level for at least ten successive trading days, whereupon the
Stockholders may sell an additional 100,000 of the Artra shares, and (ii) the
number of Artra shares that the Stockholders may thereafter sell shall be
increased by
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Nationwide Auction Systems
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April 19, 1999
100,000 shares each time the closing price of Artra's Common Stock increases by
an additional $10 per share and continues to close at that level for ten
successive trading days. All restrictions imposed by this Section 3 shall expire
on the first anniversary of the closing date of the transaction.
4. Access to Information and Confidentiality. The Stockholders and the
Company will give to Artra, and to its employees, counsel, accountants,
potential financing sources and other representatives, access to all properties,
books, contracts, documents and records with respect to their affairs as Artra
may reasonably request in connection with matters relating to the transaction.
Artra will give to the Stockholders and the Company, and to their employees,
counsel, accountants and other representatives, such information regarding Artra
and the Buyer as the Stockholders may reasonably request in connection with
matters relating to the transaction. Each party will ensure that all
confidential information that such party or any of their respective officers,
directors, employees, counsel, accountants, potential financing sources or other
representatives may now possess or may hereafter obtain relating to the other
party or any constituent entity of the Company shall not be published, disclosed
or made accessible by any of such persons to any other person at any time or
used by any of such persons for any purpose other than in connection with the
structuring and negotiation of the transaction. Neither Artra, the Stockholders
nor the Company shall make any announcement or disclosure of the transaction,
this letter of intent or the negotiations hereunder unless the other party shall
have consented thereto in writing, except as shall be reasonably necessary to
secure any required approvals and consents and except that Artra may take such
actions as it believes it is obligated to take as a public company to meet its
disclosure obligations. The parties acknowledge that any breach by a party of
the foregoing confidentiality agreements will result in irreparable and
continuing damage to the other party for which there is no adequate remedy at
law; and each party agrees that, in the event of any breach of such agreements,
the other party shall be entitled to injunctive relief and to such other and
further relief, including damages, as may be proper.
5. Negotiation of Definitive Agreement. Upon the acceptance of this
letter of intent by the Stockholders and the Company, the Stockholders, the
Company and Artra each agree promptly to proceed to negotiate in good faith a
definitive agreement, and other documents contemplated hereby (collectively the
"Definitive Agreement"), which will reflect more specifically the understandings
outlined in this letter of intent as well as other matters, issues, terms and/or
conditions not contained herein. The Definitive Agreement shall, among other
terms:
(a) contain such terms, conditions, covenants, representations,
warranties, indemnifications and other provisions as each of the parties
believes are necessary or appropriate to safeguard the respective interests of
the parties;
(b) provide that the Stockholders will enter into five-year noncompete
agreements with Artra and, as applicable, the Buyer;
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Nationwide Auction Systems
Page 4
April 19, 1999
(c) provide that certain key employees of the Company, as determined by
Artra during its due diligence examination, will enter into employment,
noncompete and nonsolicitation agreements with the Buyer, but not as a condition
of closing of the transaction by the Stockholders, and the failure to obtain the
agreements shall not give rise to any liability by the Stockholders or the
Company;
(d) provide that the Stockholders will own lOO% of the Company's
outstanding capital stock on the closing date; and
(e) provide that the obligations of the parties to consummate the
purchase of the Common Stock shall be subject to a number of conditions,
including (i) completion by each party, to its sole satisfaction, of its
business and legal due diligence examination and analysis, (ii) approval of the
Definitive Agreement by the board of directors of Artra, (iii) receipt by the
Stockholders, the Company, Artra and the Buyer of any required approvals from
governmental and regulatory agencies on terms acceptable to the parties, (iv)
receipt by the Stockholders, the Company Artra and the Buyer of all necessary
consents from third parties, and (v) no material adverse change having occurred
with respect to the financial condition, business operations or prospects of the
Company, Artra or the Buyer.
6. Exclusivity. In consideration of the undertaking by Artra of
substantial legal, accounting and other expenses related to the purchase and
sale of the Common Stock, each of the Stockholders and the Company each hereby
agrees that, until the earlier to occur of May 16, 1999 or the termination of
this letter of intent, each of them will, and will cause all of the directors,
officers, employees, representatives and agents of the Company to, immediately
cease and cause to be terminated any discussions or negotiations with any third
parties conducted heretofore with respect to any merger, sale of assets (Other
than in the ordinary course of business consistent with past practice), sale of
material equity interests or subordinated debt or other business combination
involving the Company or any constituent entity (a "Third Party Acquisition"),
except to the extent expressly permitted by Artra in writing. In addition, each
of the Stockholders and the Company hereby agrees that, until the termination of
this letter of intent, none of them shall, nor permit any of the directors,
officers, employees, representatives or agents of the Company to, directly or
indirectly: (a) solicit or initiate discussions or negotiations with any person
other than Artra concerning a Third Party Acquisition, or (b) otherwise solicit
or initiate inquiries or the submission of any proposal contemplating a Third
Party Acquisition. Each of the Stockholders and the Company agrees that it will
immediately notify Artra orally and in writing of any such inquiries or
proposals.
7. Expenses. The Stockholders and the Company on the one hand and Artra
on the other hand shall each bear their own respective costs and expenses,
including the costs of their respective counsel accountants, financial advisors
and other representatives relating to this letter
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Nationwide Auction Systems
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April 19, 1999
of intent. The parties agree that all compensation payable to Joe Kowal shall be
the sole obligation of the Stockholders
8. No Binding Agreement Regarding the Transaction. This letter of
intent constitutes only a statement of the current intentions of the parties and
does not constitute a binding obligation, except to the extent expressly
provided in this Section 8. No contract or agreement of any nature, express or
implied, providing for or relating to the transaction shall be deemed to exist
unless and until a Definitive Agreement has been executed and delivered by
Artra, the Company, the Stockholders and any other necessary parties thereto.
Unless and until such a Definitive Agreement has been executed and delivered by
all such parties, neither the Company, the Stockholders, Artra, nor any other
person, shall have any legal obligation of any kind whatsoever with respect to
the transaction or the negotiation thereof by virtue of this letter of intent or
any other written or oral expression with respect to the transaction.
Notwithstanding the foregoing, Sections 4, 6, 7, 8, 9 and 10 of this letter of
intent are agreed by Artra, the Stockholders and the Company to be fully binding
on the parties hereto. Neither this Section 8 nor any other provision of this
letter of intent may be waived or amended except by written consent of all
parties, which consent shall specifically refer to this paragraph (or such other
provision) and explicitly state such waiver or amendment. Each of the
Stockholders, the Company and Artra represents that this letter of intent does
not violate, breach, conflict with or otherwise contravene the provisions of any
existing agreement, commitment or debt instrument of such party.
9. Termination of Letter of Intent. This letter of intent shall expire
at 5 p.m. (Eastern Time) on May 16, 1999 unless extended by the parties prior to
that date. Sections 4, 7, 8 and 10 shall survive the termination of this letter
of intent.
10. Governing Law. This letter of intent is solely for the benefit of
the Stockholders, the Company and Artra. The provisions of this letter of intent
shall be governed by, and shall be interpreted under, the laws of the
Commonwealth of Pennsylvania, without giving effect to such state s choice of
law provisions.
11. Certain Distributions. The Stockholders shall continue to receive
Subchapter S distributions through closing date of the transaction consistent
with prior practices.
12. Buyer's Obligations. All provisions of Sections 4, 5, 7 and 8
herein that reference Artra shall also be applicable to Buyer; and Artra and
Buyer shall be jointly and severally liable for the obligations of Artra and/or
Buyer contained herein.
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Nationwide Auction Systems
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April 19, 1999
If you are in agreement with the foregoing, please sign and return one
copy of this letter of intent prior to 5 p.m. (Eastern Time) on April 20, 1999,
in which event this letter will constitute our legally binding agreement with
respect to the subject matter hereof to the extent provided herein.
Very truly yours,
ARTRA GROUP INCORPORATED
By: /s/ Peter R. Harvey
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Title: President
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ACKNOWLEDGED AND AGREED TO
AS OF THE DATE SET FORTH ABOVE
PUBLIC LIQUIDATION SYSTEMS, INC.
By: /s/ Don Haidl
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Title: Chairman
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ASSET LIQUIDATION GROUP, INC.
By: /s/ Don Haidl
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Title: Chairman
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/s/ Don Haidl
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Don Haidl
/s/ Corey P. Schlossman
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Corey P. Schlossmann
FOR: ARTRA GROUP INCORPORATED
500 CENTRAL AVENUE FOR IMMEDIATE RELEASE
NORTHFIELD, ILLINOIS 60093
Contact: Mr. Robert S. Gruber, Vice President (212) 628-2554
ARTRA GROUP ANNOUNCES
LETTER OF INTENT TO ACQUIRE
NATIONWIDE AUCTION SYSTEMS
Northfield, Ill., April 19, 1999 ------- ARTRA GROUP Incorporated
(NYSE:ATA) today announced that it has signed a Letter of Intent to acquire
Nationwide Auction Systems Corp. for an undisclosed amount in stock, cash and
notes. Nationwide is a twenty year old privately held firm with gross auction
revenues exceeding 80 million dollars in 1998. Nationwide Auction Systems
auctions a wide array of vehicles, personal property, real estate and equipment
on behalf of over 6,000 commercial and governmental clients across the United
States at their six facilities located in California, Missouri, Delaware, and
Georgia. Clients include municipalities, law enforcement agencies, utilities,
and major corporations.
This acquisition is in addition and complementary to the previously
announced agreement to acquire Entrade.com (which includes a 25% interest in
AsseTrade.com) for 2,000,000 shares of common stock and $5.4 million of funding.
The acquisition is subject to the approval of the shareholders of ARTRA GROUP.
entrade.com is a business-to-business Internet e-commerce and on-line
auction company focused on providing asset disposition solutions for the utility
industry and large industrial manufacturing sectors.
asseTrade.com was established by three principal groups, two of which
are industry leaders in traditional asset recovery and disposal methodologies.
Henry Butcher and Michael Fox International, Inc. are ranked among the world's
leading asset evaluation, recovery, disposal and consulting companies, with more
than 150 years of combined experience and expertise. The principal business of
asseTrade.com is a Business to Business internet Auction Company. asseTrade.com
utilizes entrade's propriety internet technology for the comprehensive
asset/inventory recovery, disposal, remarketing and management solutions for
corporate clients.
Robert Kohn, President of Entrade.com said, "Our Internet auction
business will enhance Nationwide's position as one of the nations leading public
auction companies by providing a distribution channel on the Internet for its
consignees. The transaction will afford Nationwide the opportunity to expand its
product line to include asset disposition solutions for its Utility and
Industrial clients as well as its auto fleets. Our aim is to leverage upon this
foundation to create and provide enhanced electronic commerce Internet-based
business-to-business solutions for individual clients and industry sectors."
<PAGE>
Robert Gruber, Vice President, stated that ARTRA has fallen below
certain of the New York Stock Exchange's quantitative and other continued
listing criteria. ARTRA and the New York Stock Exchange have had on-going
discussions concerning this lack of compliance. The New York Stock Exchange has
requested, and ARTRA has provided, a definitive action plan demonstrating
ARTRA's ability to achieve compliance with the New York Stock Exchange's listing
standards. There can be no assurances that the New York Stock Exchange will
accept ARTRA's definitive action plan and continue the listing of ARTRA's common
stock. If ARTRA's definitive action plan is accepted by the New York Stock
Exchange, ARTRA will be subject to on-going quarterly monitoring for compliance
with the milestones contained within this plan. Failure to meet any of the
quarterly plan projections could result in the suspension from trading and
subsequent delisting of ARTRA.
Statements contained in the press release which are not historical
facts are forward-looking statements. Such forward-looking statements are
necessary estimates reflecting the best judgment of the party making such
statements based upon current information and involve a number of risks and
uncertainties. Forward-looking statements contained in this press release or in
other public statements of the parties should be considered in light of those
factors. There can be no assurances that such factors or other factors will not
affect the accuracy of such forward-looking statements.
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Nationwide Auction Systems Corp. - http://www.nationwideauction.com
Entrade.com - http://www.entrade.com
AsseTrade.com - http://home.assetrade.com
