SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 For the fiscal year ended December 31, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the transition period from to
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Commission file number: 1-3916
ARTRA GROUP INCORPORATED
(Exact name of registrant as specified in its charter)
Commonwealth of Pennsylvania 25-1095978
-------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
- ------------------------------- -----------------------
Common stock, without par value New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant at January 29, 1999: $36,435,000.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at January 29, 1999
- -------------------------------- -------------------------------
Common stock, without par value 7,864,228
Documents Incorporated by Reference: None.
Items Amended: Part III, Item 10, Item 11, Item 12 and Item 13.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
Directors and Executive Officers of Artra
Information Regarding Directors
The following table lists the name and age of each director of Artra,
his business experience, his positions with Artra and certain directorships.
Name Age Positions and Experience
- ---- --- ------------------------
John Harvey 67 Chairman of the Board of Directors and
Chief Executive Officer of Artra;
Director since 1968; Chairman of the
Board of Directors, since 1985, a
Director from 1982 to December 1995 and
the Chief Executive Officer from 1990 to
November 1995 of COMFORCE Corporation
(temporary professional employment,
formerly The Lori Corporation); a
Director of Plastic Specialties and
Technologies, Inc. (textiles, hose and
tubing); Director of PureTec
Corporation, the successor by merger to
Ozite, until March of 1998, when PureTec
was merged into Teckni-Plex, Inc.
Peter R. Harvey 64 President and Chief Operating Officer
and a Director since 1968; Director of
COMFORCE Corporation (temporary
professional employment, formerly The
Lori Corporation) from 1985 to December
1995 and a vice president through
January 1996; Director of PureTec
Corporation (textiles, hose and tubing),
the successor by merger to Ozite, until
March of 1998, when PureTec Corporation
was merged into Teckni-Plex, Inc.
Gerard M. Kenny 46 Director since 1988; Executive Vice
President and Director since 1982 of
Kenny Construction Company since 1982
(diversified heavy construction);
General Partner of Clinton Industries
(investments), a limited partnership,
since 1972.
Edward A. Celano 60 Director since 1996; Executive Vice
President of the Atlantic Bank of New
York since May 1, 1996, Senior Vice
President of National Westminster, USA
from 1984 through April 1996, corporate
finance.
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Howard R. Conant 74 Director since 1996; Retired Chairman of
the Board of Interstate Steel Co., 1970
to 1990, and a consultant to Interstate
through 1992.
Maynard K. Louis 69 Director since 1996; Retired Chairman of
the Board of Lord Label, a printing
company now known as Porter & Chadburn,
from 1965 to 1989, Vice President, 1989
to 1993, director of Artra from 1993
through 1995.
Robert L. Johnson 62 Director since 1996; Chairman and Chief
Executive Officer of Johnson Bryce,
Inc., flexible packaging materials of
food products since 1991, and
previously, for many years, a vice
president of Sears Roebuck & Co.
(retailing company).
Mark Santacrose 39 Director since 1997; President of
Bagcraft Corporation of America (n/k/a
Golden Corp.), flexible packaging
materials of food products, since 1994;
Executive Vice President of Bagcraft
since 1993; following the sale of
substantially all of the assets of
Bagcraft in 1998, President of Bagcraft
Packaging LLC, a subsidiary of Packaging
Dynamics LLC since 1998.
John K. Tull 72 Director since 1998; President of J.K.
Tull Associates LTD., a mergers and
acquisitions firm, since 1986.
COMFORCE Corporation was a 64.3% owned subsidiary of Artra until
December, 1995. Artra now owns approximately 9% of COMFORCE Corporation. PureTec
International, Inc. and Plastics Specialities and Technologies, Inc. were
affiliates of Artra. Bagcraft was a wholly owned subsidiary of BCA Holdings,
Inc., a wholly owned subsidiary of Artra. In November, 1998, substantially all
of the assets of Bagcraft were sold to Packaging Dynamics LLC, the parent entity
of Bagcraft Packaging LLC.
Information Regarding Executive Officers
Set forth below is information concerning the executive officers and
other key employees of Artra who were in office or employed as of the date of
this Proxy Statement/Prospectus.
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Name Age Position
- ---- --- --------
John Harvey 67 Chairman of the Board and Chief Executive Officer
Peter R. Harvey 64 President and Chief Operating Officer
John G. Hamm 60 Executive Vice President
Robert S. Gruber 64 Vice President - Corporate Relations
James D. Doering 62 Vice President, Treasurer and Chief Financial Officer
John Conroy 54 Vice President - Corporate Administration
Lawrence D. Levin 47 Controller
Edwin G. Rymek 68 Secretary
John Harvey is the Chairman and Chief Executive Officer of Artra. See
"Information Concerning Directors" above for a description of Mr. Harvey's
relevant business experience.
Peter R. Harvey is the President and Chief Operating Officer of Artra.
See "Information Concerning Directors" above for a description of Mr. Harvey's
relevant business experience.
John G. Hamm is the Executive Vice President of Artra. Mr. Hamm has
served as Executive Vice President since February 1988 and as the Vice President
- - Finance from 1975 until 1988 of Artra. Mr. Hamm has also served as Vice
President Finance from August 1990 until July 1995 and as a Director from 1984
until July 1995 of Ozite Corporation. Mr. Hamm has also served as a Director of
SoftNet Systems, Inc. from 1985 to February 1999 and a Director of Plastic
Specialties and Technologies, Inc. from 1985 until January, 1996.
Robert S. Gruber is the Vice President - Corporate Relations of Artra.
Mr. Gruber has served as Vice President - Corporate Relations of Artra since
1975 and as a consultant to The Lori Corporation from 1982 to 1995. Mr. Gruber
has also served as a consultant to COMFORCE Corporation during 1996.
James D. Doering is the Vice President, Treasurer and Chief Financial
Officer of Artra. Mr. Doering has served as Vice President since 1980, Treasurer
since 1987, Chief Financial Officer since February 1988, and Controller from
1980 to 1987. Mr. Doering has also served as Vice President and Chief Financial
Officer of COMFORCE Corporation from February 1988 through January 1996.
John Conroy is the Vice President - Corporate Administration of Artra.
Mr. Conroy has served as Vice President - Corporate Administration since March
1990. Prior thereto, he served as Vice President - Corporate Administration, of
Sargent-Welch Scientific Company from September 1988 to December 1989. Mr.
Conroy previously served in various risk management positions with Artra from
1978 to September 1988, most recently as Corporate Risk Director.
Lawrence D. Levin is the Controller of Artra. Mr. Levin has served as
Controller since 1987, Assistant Treasurer and Assistant Secretary since 1980
and Assistant Controller
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from 1980 to 1987. Mr. Levin has also served as Controller of COMFORCE since
December 1989 through January 1996 and as the Assistant Chief Financial Officer
of COMFORCE Corporation from May 1993 through January 1996.
Edwin G. Rymek is the Secretary of Artra. Mr. Rymek has served as
Secretary of Artra since 1987 and of COMFORCE Corporation from 1982 through
1995.
Officers are appointed by the Artra Boards of Directors and its
subsidiaries and serve at the pleasure of each respective board. Except for the
relationship of Peter R. Harvey and John Harvey who are brothers, there are no
family relationships among the executive officers and/or directors, nor are
there any arrangements or understandings between any officer and another person
pursuant to which he was appointed to office except as may be hereinafter
described.
Section 16(a) Beneficial Reporting Compliance
Section 16(a) of the Exchange Act requires that officers and directors
of Artra, as well as persons who own more than 10% of a class of equity
securities of Artra, file reports of their ownership of such securities, as well
as monthly statements of changes in such ownership, with Artra and the
Commission. Based upon written representations received by Artra from its
officers and directors and reports filed with Artra during 1998, Artra believes
that all such filings required during 1998 were made on a timely basis.
Item 11. Executive Compensation
Directors' Compensation
Directors who are not employees of Artra are entitled to receive an
annual retainer of $10,000. Each outside director who sits on an established
committee of Artra is entitled to receive $250 per committee meeting attended
and the chairman of a committee is entitled to receive $500 for each meeting.
Employees of Artra who also serve as directors or committee members receive no
additional compensation for such service. During the year ended December 21,
1998, Artra granted to each of its five outside directors stock options to
purchase 12,500 shares of Artra Common Stock at a purchase price of $3.125 per
share.
These options have a term of ten years form the date of grant.
Executive Officer Compensation
The following table shows all compensation paid by Artra and its
subsidiaries for the fiscal years ended December 31, 1998, and December 31, 1997
and December 26, 1996, to the chief executive officer of Artra and each of its
other most highly compensated executive officers who were serving as executive
officers of Artra as of December 31, 1998, or who
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would have been included had he been serving as an executive officer of Artra as
of December 31, 1998, and whose compensation exceeded $100,000 in 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
--------------
Annual Compensation Awards
------------------------------- --------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary($) Compensation($) Options(2) Compensation($)
- --------------------------- ---- --------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
John Harvey, 1998 $157,404 -0- -0- $4,750 (3)
Chairman and Chief 1997 190,000 -0- -0- -0-
Executive Officer 1996 137,811 -0- 141,000 5,456
Peter R. Harvey, 1998 $252,000 -0- -0- 5,000 (3)
President and Chief 1997 17,000 -0- -0- -0-
Operating Officer 1996 17,000 -0- -0- -0-
James D. Doering 1998 $147,000 11,500 -0- 5,000 (3)
Vice President, Treasurer 1997 147,000 -- -0- 4,750
and Chief Financial Officer 1996 133,600 -- 57,500 6,000
John G. Hamm, 1998 $147,000 -0- 5,000
Executive Vice President 1997 147,000 -0- -0- 4,750
1996 133,600 -0- 101,250 6,000
-0-
Robert S. Gruber, 1998 $110,400 -0- -0- -0- (3)
Vice President 1997 110,400 -0- -0- 6,000
Corporation Relations 1996 92,000 -0- 97,750 2,868
Mark Santacrose, 1998 $212,648 $590,000(4) -0- 4,750 (3)
President Bagcraft Corporation 1997 225,000 75,000 -0- 144,616
of America 1996 200,000 17,500 -0- 89,524
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<FN>
(1) No additional annual compensation was paid, no restrictive stock awards
or stock appreciation rights were granted, and no long-term incentive
plan payouts were made to any of the officers listed in the table. Only
compensation earned in 1998 (irrespective of the year in which paid) is
considered in determining inclusion in this table.
(2) All of the options shown in this column were granted under Artra's 1996
Stock Option Plan at an exercise price of $5.25 per share, being the
closing price of Artra Common Stock on the New York Stock Exchange on
October 4, 1996, the date of grant. These options expire October 4,
2006.
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(3) These amounts include Artra's contributions to the 401(k) plan during
1998, 1997 and 1996.
(4) Mr. Santacrose also participated in a Bagcraft unfunded deferred
compensation plan. The 1998 bonus amount includes approximately
$340,000 realized from Mr. Santacrose's participation in such plan. The
balance of amounts due Mr. Santacrose under such plan, approximately
$340,000, were paid in 1999.
</FN>
</TABLE>
Artra did not grant options to purchase Artra Common Stock to any of
the executive officers named in the Summary Compensation Table during the year
ended December 31, 1998.
The following table sets forth information concerning the aggregate
number and values of options held by the Chief Executive Officer and the other
executive officers of Artra listed in the Summary Compensation Table as of
December 31, 1998 which were granted to such officers in consideration of their
services as officers or directors of Artra. No other options held by the Chief
Executive Officer or any other executive officers of Artra listed in the Summary
Compensation Table were exercised in 1998.
Aggregated Option Exercises in 1998 And Option Values As Of December 31, 1998
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options at Options
Fiscal Year-End at Fiscal Year-End(2)
------------------------------ ---------------------------
Acquired on Value
Name Exercise(#) Realized(1) Exercisable(#) Unexercisable(#) Exercisable Unexercisable
- ---- ----------- ----------- -------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John Harvey............... -0- $-0- 221,000 -0- $42,600 -0-
James D. Doering.......... -0- -0- 111,000 -0- 22,657 -0-
John G. Hamm.............. -0- -0- 140,450 -0- 19,750 -0-
Robert S. Gruber.......... -0- -0- 118,750 -0- 10,088 -0-
Mark Santacrose........... -0- -0- -0- -0- -0- -0-
- ------------------------
<FN>
(1) See the notes under "Principal Shareholders" for a description of the
options (including exercise prices) granted to each of the executive
officers listed in this table.
(2) The listed options were issued at per share exercise prices of from
$3.65 per share to $5.25 per share. The market price of Artra Common
Stock as of the close of trading on December 31, 1998 on the New York
Stock Exchange was $4.1875 per share.
</FN>
</TABLE>
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Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of April 23, 1999, the amount and
percentage of Artra Common Stock and Artra Series A Preferred Stock beneficially
owned by (i) each person who is known by Artra to own beneficially more than 5%
of the outstanding shares of Artra Common Stock or Artra Series A Preferred
Stock, (ii) each director and nominee for director, (iii) each executive officer
named in the Summary Compensation Table and (iv) all executive officers and
directors of Artra as a group.
Number
of Shares
Beneficially
Name of Beneficial Owner Owned Percent
- ------------------------ -------- -------
The Equitable Companies Incorporated (1) 559,099 6.4%
Peter R. Harvey (2) Common 590,243 6.6%
Preferred 441 23.9%
John Harvey(3) 531,906 5.9%
Gerard M. Kenny(4) 180,064 2.0%
Maynard K. Louis(5) 84,500 1.0%
Edward A. Celano(6) 18,700 *
Howard R. Conant(7) 324,000 3.7%
Robert L. Johnson(8) 17,873 *
John G. Hamm(9) 177,232 2.0%
Robert S. Gruber(10) 152,354 1.7%
James D. Doering(11) 147,693 1.7%
Mark Santacrose (12) 23,555 *
John K. Tull (13) 35,143 *
All directors and officers as a group (15 persons) 2,598,782 25.2%
- ------------------
* Less than 1% of the outstanding shares.
(1) The address of The Equitable Companies Incorporated ("Equitable"), a
Delaware corporation, is 1290 Avenue of the Americas, New York, New York.
The shares beneficially owned by Equitable consist of 559,100 shares of
Artra Common Stock owned by four French mutual insurance companies, AXA
Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, Alpha Assurances
Vie Mutuelle and AXA Courtage Assurances Mutuelle, which as a group
beneficially own a majority interest in AXA-UAP, which owns a majority
interest in Equitable.
(2) Mr. Peter R. Harvey's business address is 500 Central Avenue, Northfield,
Illinois 60093. The shares beneficially owned by Mr. Harvey consist of
374,056 shares held directly by him, of which 373,615 are shares of Artra
Common Stock and 441 are shares of Artra 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
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shares issuable under an option which expires September 19, 2001 at an
exercise price of $3.65 per share, 15,000 shares issuable under an option
which expires January 8, 2003 at an exercise price of $3.75 per share and
150,000 shares issuable under an option which expires January 6, 2009 at an
exercise price of $4.75 per share.
(3) Mr. John Harvey's business address is 500 Central Avenue, Northfield,
Illinois 60093. The shares of Artra Common Stock beneficially owned by Mr.
Harvey consist of 7,452 shares held in his 401(k) plan, 139,806 shares held
as trustee for the benefit of the Harvey Family Trust, 100,000 shares held
by Mr. Harvey's daughters, 47,603 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,
131,000 shares issuable under an option which expires October 4, 2006 at an
exercise price of $5.25 per share, 35,000 issuable under an option which
expires January 6, 2009 at an exercise price of $4.75 per share and an
aggregate of 66,045 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 of Artra Common Stock beneficially owned by Mr. Kenny consist of
75,652 shares held by Kenny Construction Company, 14,411 shares held by
Clinton Industries, 12,500 shares issuable under an option which expires
May 28, 2008 at an exercise price of $3.125 per share, 2,500 shares
issuable under an option which expires February 1, 2009 at an exercise
price of $5.375 per share and 75,001 shares issuable under a warrant held
by Clinton Industries which expires November 10, 1999 at an exercise price
of $4.00 per share. 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) The shares of Artra Common Stock beneficially owned by Mr. Louis consist of
17,500 shares held directly by him, 12,500 shares issuable under an option
which expires May 28, 2008 at an exercise price of $3.125 per share, 2,500
shares issuable under an option which expires February 1, 2009 at an
exercise price of $5.375 per share and warrants to purchase 52,000 shares
of ARTRA common stock at prices of $5.125 to $8.00 per share which warrants
expire on various dates commencing in 1999 and ending June 13, 2001.
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(6) The shares of Artra Common Stock beneficially owned by Mr. Celano consist
of 3,700 shares held directly by him, 12,500 shares issuable under an
option which expires May 28, 2008 at an exercise price of $3.125 per share
and 2,500 shares issuable under an option which expires February 1, 2009 at
an exercise price of $5.375 per share.
(7) Mr. Conant holds 150,000 shares of Artra Common Shares directly and 20,000
shares in his individual retirement account. Mr. Conant's wife holds 9,000
shares of Artra Common Stock. The shares of Artra Common Stock beneficially
owned by Mr. Conant also include 12,500 shares issuable under an option
which expires May 28, 2008 at an exercise price of $3.125 per share, 2,500
shares issuable under an option which expires February 1, 2009 at an
exercise price of $5.375 per share and warrants to acquire 130,000 shares
of Artra Common Stock at prices of $3.9375 to $5.875 per share which
warrants expire on various dates in 2001 and 2002.
(8) The shares of Artra Common Stock beneficially owned by Mr. Johnson consist
of 2,873 shares held directly by him, 12,500 shares issuable under an
option which expires May 28, 2008 at an exercise price of $3.125 per share
and 2,500 shares issuable under an option which expires February 1, 2009 at
an exercise price of $5.375 per share.
(9) The shares of Artra Common Stock beneficially owned by Mr. Hamm consist of
50 shares held directly by him, 93 shares held by him and his wife jointly,
1,639 shares held in his 401(k) plan, 2,767 shares held in his individual
retirement account, 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, 101,250
shares issuable under an option which expires October 4, 2006, at an
exercise price of $5.25 per share and 35,000 shares issuable under an
option which expires January 6, 2009 at an exercise price of $4.75 per
share.
(10) The shares of Artra 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, 97,750 shares issuable under an option
which expires October 4, 2006, at an exercise price of
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<PAGE>
$5.25 per share and 11,250 shares issuable under an option which expires
January 6, 2009 at an exercise price of $4.75 per share.
(11) The shares of Artra Common Stock beneficially owned by Mr. Doering consist
of 1,693 shares held in his 401(k) plan, 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 and 35,000 shares issuable under an option which expires January 6,
2009 at an exercise price of $4.75 per share.
(12) The shares of Artra Common Stock beneficially owned by Mr. Santacrose
consist of 10,000 shares owned by him directly, 1,055 shares in his
individual retirement account, 10,000 shares issuable under an option which
expires January 6, 2009 at an exercise price of $4.75 per share and 2,500
shares issuable under an option which expires February 1, 2009 at an
exercise price of $5.375 per share.
(13) The shares of Artra Common Stock beneficially owned by Mr. Tull consist of
22,643 shares held directly by him, 10,000 shares issuable under an option
which expires January 6, 2009 at an exercise price of $4.75 per share and
2,500 shares issuable under an option which expires February 1, 2009 at an
exercise price of $5.375 per share.
Item 13. Certain Relationships and Related Transactions
John Harvey and Peter Harvey
The Harvey Family Trust is the owner of the real estate at 500 Central,
Northfield, Illinois, the corporate offices of Artra which was acquired by the
Trust in September 1996. Artra rents approximately 7,000 square feet of office
space and 1,000 square feet of warehouse space from the trust at an annual
rental of $126,000 pursuant to a lease expiring in January 1999. Artra may renew
the lease for an additional one-year period at an increased rent in the sum of
$132,000. The building contains approximately 29,500 total square feet. In the
opinion of Artra's management, the Artra rental obligation to the trust does not
exceed the fair market value for similar rentals. John Harvey is the grantor and
beneficiary of the trust. John Harvey and Peter R. Harvey are brothers.
In June 1996, Peter R. Harvey loaned Artra 100,000 shares of Artra
Common Stock, which had a then fair market value of $587,000. Artra principally
issued these shares to certain lenders as additional consideration for
short-term loans. In September 1996, after Artra's shareholders approved an
increase in the number of authorized common shares, Artra repaid this loan. At
Peter R. Harvey's direction, the 100,000 shares of Artra
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Common Stock were issued in blocks of 25,000 shares to the four daughters of
John Harvey.
In March 1998, the Artra Board of Directors ratified a proposal to
settle Peter R. Harvey's previous advances from Artra in the amount of
$15,437,000 as follows:
(a) Effective December 31,1997, Peter R. Harvey's net advances from
Artra were offset by $2,816,000 ($5,606,000 net of interest accrued and reserved
for the period 1993- 1997) to $12,621,000. This offset of Peter R. Harvey's
advances represented a combination of compensation for prior year guarantees of
Artra obligations to private and institutional lenders, compensation in excess
of the nominal amounts Peter R. Harvey received for the years 1995-1997 and
reimbursement for expenses incurred to defend Artra against certain litigation.
(b) Effective January 31, 1998, Peter R. Harvey's remaining advances
totaling $12,787,000 were paid with consideration consisting of the following
Artra Series A Preferred Stock and BCA Holdings Inc. preferred stock held by
Peter R. Harvey:
Face Value Plus
Security Accrued Dividends
-------- -----------------
Artra Series A Preferred Stock, 1,734.28 shares $ 2,751,000
BCA Holding Series A Preferred Stock, 1,784.029 shares 2,234,000
BCA Holding Series B Preferred Stock, 6,172 shares 7,802,000
$12,787,000
For additional related-party transactions between Artra and Peter R.
Harvey, see Note 16 to the consolidated financial statements for the year ended
December 31, 1998.
On September 27, 1989, Artra received a proposal to purchase Bagcraft
from Sage Group, Inc., a privately-owned corporation. Effective March 3, 1990, a
wholly-owned subsidiary of Artra indirectly acquired from Sage Group, Inc. 100%
of the issued and outstanding common shares of BCA Holdings, Inc., which in turn
owned 100% of the stock of Bagcraft, for total consideration which was delivered
to Ozite as the successor by merger to Sage Group, Inc. upon approval of Artra's
shareholders. The consideration for the Bagcraft acquisition consisted of
772,000 shares of Artra Common Stock and 3,750 shares of Artra Series A
Preferred Stock, its $1,000 par value junior non-convertible payment-in-kind
preferred stock bearing a dividend rate of 6%. The issuance of the Artra Common
Stock and Artra Series A Preferred Stock as consideration was approved by
Artra's shareholders at the December 1990 annual meeting of shareholders. Upon
the merger of Sage Group, Inc. into Ozite on August 24, 1990, Ozite became
entitled to receive this consideration, which right Ozite assigned to its PST
subsidiary. Peter R. Harvey and John Harvey were the principal shareholders of
Sage Group, Inc. and Ozite as of the times that the merger agreements were
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executed and the mergers consummated. Ozite subsequently repurchased the 3,750
shares of Artra Series A Preferred Stock in February 1992, of which 1,523 shares
were subsequently assigned to Peter R. Harvey in consideration of his discharge
of certain indebtedness of Ozite to him in April 1992. Peter R. Harvey pledged
these 1,523 shares of Artra Series A Preferred Stock preferred shares to Artra.
The $4,750,000 price of the 772,000 shares of Artra Common Stock and 3,750
shares Artra Series A Preferred Stock was equal to the fair market value thereof
as of January 31, 1991 as determined by an independent investment banking firm
engaged by PST to make such determination. In November, 1998, substantially all
of the assets of Bagcraft were sold to Packaging Dynamics LLC, the parent entity
of Bagcraft Packaging LLC.
Peter R. Harvey and John Harvey were significant shareholders of PST's
parent, PureTec. Peter R. Harvey formerly was a Vice President and a director of
PST and a director of PureTec. John Harvey formerly was a director of PST and
PureTec.
Gerald M. Kenny
During 1986 and through August 10, 1988, Artra entered into a series of
short-term borrowing agreements with private investors. Each agreement granted
an investor a put option, principally due in one year, that required Artra to
repurchase any or all of the shares sold at a 15% to 20% premium during a
specified put period.
Kenny Construction Company ("Kenny") entered into a put option
agreement with Artra, which has been extended from time to time, most recently
on November 11, 1992. At such time Artra and Kenny agreed to extend the put
option whereby Kenny received the right to sell to Artra 23,004 shares of Artra
Common Stock at a put price of $56.76 plus an amount equal to 15% per annum for
each day from March 1, 1991 to the date of payment by Artra, which option was
scheduled to expire on December 31, 1997. Gerard M. Kenny, a director of Artra,
is the Executive Vice-President and Chief Executive Officer and a director of
Kenny Construction Company and beneficially owns 16.66% of Kenny's capital
stock.
On March 21, 1989, Artra borrowed $5,000,000 from its bank lender
evidenced by a promissory note. This note has been amended and extended from
time to time. The borrowings on this note were collateralized by, among other
things, a $2,500,000 guaranty by Kenny. Kenny received compensation in the form
of 833 shares of Artra Common Stock for each month that its guaranty remained
outstanding through March 31, 1994. Under this arrangement, Kenny received
49,980 shares of Artra Common Stock as compensation for its guaranty.
On March 31, 1994, Artra entered into a series of agreements with its
bank lender and with Kenny. Under the terms of these agreements, Kenny purchased
a $2,500,000 participation in the $5,000,000 note payable to Artra's bank
lender. Kenny's participation is
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evidenced by a $2,500,000 Artra note (the "Kenny Note") bearing interest at the
prime rate. As consideration for its purchase of this participation, the bank
lender released Kenny from its $2,500,000 loan guaranty. As additional
consideration, Kenny received an option to put back to Artra the 49,980 shares
of Artra Common Stock received as compensation for its $2,500,000 Artra loan
guaranty at a price of $15.00 per share. The put option was subject to increase
at the rate of $2.25 per share per annum ($21.188 at December 26, 1996). The put
option was exercisable on the later of the date the Kenny Note is repaid or the
date Artra's obligations to its bank lender were fully paid. During the first
quarter of 1996, the $2,500,000 note and related accrued interest was paid in
full, principally with the proceeds from additional short-term borrowings.
In December 1997, Kenny exercised all of its put options and Artra
repurchased 72,984 shares of Artra Common Stock for cash of $2,379,000.
Edward A. Celano
In May 1996, Artra borrowed $100,000 from Edward A. Celano, then a
private investor, evidenced by an unsecured short-term note, due August 7, 1996,
and renewed to February 6, 1997, bearing interest at 10%. The proceeds of the
loan were used for working capital. At Artra's annual meeting of shareholders,
held August 29, 1996, Mr. Celano was elected to Artra's board of directors.
Effective January 17, 1997, Mr. Celano exercised his conversion rights and
received 18,182 shares of Artra Common Stock as payment of the principal balance
of his note.
Howard Conant
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 Artra's Fill-Mor subsidiary. As additional
compensation for the loan, Mr. Conant received a warrant, expiring in 2001, to
purchase 25,000 shares of Artra Common Stock at a price of $5.00 per share. The
proceeds of the loan were used for working capital. At Artra's annual meeting of
shareholders, held August 29, 1996, Mr. Conant was elected to Artra'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 shares of Artra Common Stock at a price of $5.875 per share.
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
Artra's Fill-Mor subsidiary. As additional compensation for the loan, Mr. Conant
received a warrant, expiring in 2002, to purchase 25,000 shares of Artra Common
Stock at a price of $5.75 per share.
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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
Artra's Fill-Mor subsidiary. As additional compensation, Mr. Conant received an
option to purchase 25,000 shares of COMFORCE common stock owned by Artra'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,
Mr. Conant received a warrant to purchase 333,333 shares of Artra Common Stock
at a price of $5.00 per share. Mr. Conant had 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. In May 1998, Mr. Conant sold the warrant to
an unrelated third party who put the warrant back to Artra for a total purchase
price of $1,000,000. 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, Mr.
Conant received a warrant to purchase 40,000 shares of Artra Common Stock at a
price of $5.00 per share. Mr. Conant had 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, and Mr. Conant put the warrant back to Artra
for $80,000 in 1998. 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. In December 1997, borrowings from Mr. Conant were reduced to
$2,000,000 with proceeds from other short-term borrowings. The borrowings from
Mr. Conant were collateralized by 490,000 shares of COMFORCE common stock by
Artra's Fill- Mor subsidiary.
In August 1998 Artra borrowed an additional $500,000 from Mr. Conant,
due December 20, 1998, bearing interest at 15%. As additional compensation, the
lender received a warrant to purchase 20,000 shares of Artra Common Stock at a
price of $3.9375 per share. The proceeds from this loan were used to pay down
other Artra debt obligations.
In November 1998, all borrowings from Mr. Conant were repaid with
proceeds from the sale of the business assets of Bagcraft.
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ARTRA GROUP INCORPORATED
By: /s/ James D. Doering
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James D. Doering, Vice President,
Treasurer and Chief Financial Officer
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