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):
March 14, 1997 (February 28, 1997)
COMFORCE Corporation
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
1-6081 36-2262248
(Commission File Number) (I.R.S. Employer Identification No.)
2001 Marcus Avenue, Lake Success, NY 11042
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (516) 328-7300
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Completion of RHO Acquisition
On February 28, 1997, the Company, through its subsidiary COMFORCE
Technical Services, Inc., purchased all of the stock of RHO Company Incorporated
("RHO") for $14.8 million payable in cash, plus a contingent payout to be paid
over two or three years based on future earnings of RHO payable in stock in an
aggregate amount not to exceed $3.3 million. The maximum amount of the
contingent payout in any year cannot exceed $1.67 million, which, if earned in
full, would bring the total purchase price to $18.1 million. The total number of
shares issuable as contingent payouts is equal to the quotient of $3.3 million
and the average value of the Common Stock for the 20 consecutive business days
ending three business days prior to the closing of the RHO acquisition.
The acquisition was completed under the terms of definitive agreements
entered into by the parties in November 1996, as previously reported on a
Current Report on Form 8-K filed with the Securities and Exchange Commission on
November 19, 1996. The cash portion of the purchase price paid at closing, $13.8
million, was principally funded through the Company's offering of convertible
debentures, as described below. Terms of the transaction were determined through
arms length negotiations between the parties. RHO provides specialists for its
customers primarily in the technical services and IT sectors. RHO's headquarters
are located in Redmond, Washington. The acquisition of RHO adds nine branch
offices.
ITEM 5. OTHER EVENTS.
Sale of Convertible Debentures
The Debentures. From February 28 to March 13, 1997, the Company sold its
Subordinated Convertible Debentures ("Debentures") to certain institutional
investors for cash or in exchange for shares of the Company's Series F Preferred
Stock, as described below, in the principal amount of $22.2 million. The
Debentures bear interest at the rate of 8% per annum during the 180 day period
following Closing (as defined below) and thereafter at the rate of 10% per annum
continuing until fully paid or converted. Interest on the Debentures is payable
quarterly in cash or in Common Stock of the Company, at the Company's option.
The Debentures may be redeemed by the Company at any time from and after the
date of issuance, in whole or in part, within 360 days after any disbursement to
the Company of net proceeds from the sale of Debentures (each a "Closing"), at a
redemption price equal to the sum of (i) the principal amount thereof, (ii) all
accrued, unpaid interest thereon and (iii) premiums ranging from 5% (2.5% in the
case of Debentures exchanged for Series F Preferred Stock) for Debentures
redeemed within 60 days after Closing to 25% for Debentures redeemed between 181
and 360 days after Closing.
The Company has also effected the repurchase of 2,750 of the 3,250
outstanding shares of its Series F Preferred Stock by issuing additional
debentures in the original principal amount of 115% of the liquidation value of
the Series F Preferred Stock to the holders thereof (the "Series F Holders") in
exchange for the Series F Preferred Stock. The Debentures received by the Series
F Holders may be redeemed by the Company, at any time from and after the
Closing, in whole or in part, at a redemption price equal to the redemption
price for the Debentures, except that the redemption premium is 50% of the
Debenture premium for redemptions effected through 90 days after Closing.
Conversion. The Debentures may be converted, in whole or in part, at the
option of the respective holder thereof (each a "Buyer") beginning 181 days
following the Closing. The Company has the option to make the requested
conversion in either cash or in shares of the Company's Common Stock, or in any
combination thereof. Cash conversions are payable at 125% of face value (plus
accrued interest). Stock conversions are payable at 100% of face value (plus
accrued interest) in Common Stock valued at 75% of the average closing bid price
for the five trading days ending on the trading day before the conversion. Any
portion of any Debenture which remains outstanding on the 360th day following
the Closing will be automatically converted to cash or shares of Common Stock,
or any combination thereof, as determined by the Company. Under certain
circumstances, the aggregate number of shares of Common Stock issuable upon
exercise of the Warrants and the Additional Warrants (described below under
"--Warrants") or upon conversion of the Debentures is limited, which could
require that the Company effect certain conversion through cash payments.
Warrants. From February 28 to March 13, 1997, the Company issued or agreed
to issue warrants ("Warrants") to purchase 444,000 shares of its Company's
Common Stock to the Buyers, which Warrants are exercisable as follows: (a)
Warrants to purchase 88,800 shares become exercisable beginning 6 months after
Closing and ending three years thereafter; (b) if the Debentures are not
redeemed within 60 days after Closing, Warrants to purchase 88,800 shares become
exercisable beginning 6 months after Closing and ending three years thereafter;
(c) if the Debentures are not redeemed within 90 days after Closing, Warrants to
purchase 88,800 shares become exercisable beginning 6 months after Closing and
ending three years thereafter; (d) if the Debentures are not redeemed within 120
days after Closing, Warrants to purchase 88,800 shares become exercisable
beginning 6 months after Closing and ending three years thereafter; and (e) if
the Debentures are not redeemed within 150 days after Closing, Warrants to
purchase 88,800 shares become exercisable beginning 6 months after Closing and
ending three years thereafter. The exercise price of the Warrants issued ranges
from $7.45 to $7.65 per share, which is equal to the average closing bid price
of the Company's Common Stock for the five-day trading period ending on the day
prior to each Closing.
The Company is also required to issue additional warrants ("Additional
Warrants") to purchase 444,000 shares of the Company's Common Stock to the
Buyers, which Additional Warrants become exercisable to the extent that
Debentures are not redeemed within 180 days following Closing, beginning on the
later of (i) the date the Replacement Debentures are required to be issued or
(ii) the effective date of the registration statement described below under "--
Registration" and ending three years thereafter. The Additional Warrants will
have an exercise price equal to the average closing bid price of the Company's
Common Stock over the five-day trading period ending 179 days after the Closing.
Registration. The Company is required to cause the shares issuable upon
conversion of the Debentures (or payable as interest thereon) or upon the
exercise of the Warrants and Additional Warrants to be registered for resale
under a registration statement filed with the Securities and Exchange Commission
under the Securities Act of 1933 within six months after Closing.
Changes in Management
New Directorships. In February 1997, the Company's Board of Directors
amended its Bylaws to increase the number of directors to seven from four and
elected James L. Paterek and Christopher P. Franco to fill two of the vacancies.
The Company is currently considering candidates to fill the remaining vacancy.
This vacancy will be filled by a non-employee director, which will result in
outside directors constituting a majority of the Board.
Election of Officers. In February 1997, the Company's Board of Directors
elected James L. Paterek to the position of Chairman of the Board and
Christopher P. Franco to the position of Chief Executive Officer. Mr. Paterek
had previously served as a consultant to the Company and Mr. Franco had served
as the Company's Executive Vice President. Michael Ferrentino continues to serve
as the Company's President.
Management Table. Set forth below is information concerning each director
and executive officer of the Company effective following the actions taken by
the Board in February 1997:
Name Age Position
James L. Paterek 35 Chairman of the Board
Christopher P. Franco 37 Chief Executive Officer,
Secretary and Director
Michael Ferrentino 34 President and Director
Dr. Glen Miller 59 Director
Keith Goldberg 33 Director
Richard Barber 36 Director
Paul J. Grillo 44 Vice President - Finance and
Chief Financial Officer
Andrew Reiben 32 Chief Accounting Officer and
Corporate Controller
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of businesses acquired.
Financial statements of RHO were filed with the Commission with Form 8-K/A,
Amendment No. 2, filed February 3, 1997, and are incorporated herein by
reference.
(b) Pro forma financial information.
Pro forma financial information was filed with the Commission with Form
8-K/A, Amendment No. 2, filed February 3, 1997, and is incorporated herein by
reference.
(c) Exhibits
2.1* Subscription Agreement dated October 28, 1996 by and among RHO Company,
Inc., J. Scott Erbe, COMFORCE Corporation and COMFORCE Technical Services,
Inc.
2.2* Stock Sale and Termination Agreement dated October 28, 1996 by and between
James R. Ratcliff and RHO Company, Inc.
2.3* Letter Agreement dated November 4, 1996 amending Stock Sale and Termination
Agreement between RHO Company, Inc. and James R. Ratcliff.
*Incorporated by reference to the Company's Current Report on Form 8-K filed
with the Commission on November 19, 1996.
SIGNATURE
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 hereunto duly authorized.
COMFORCE Corporation
(Registrant)
By /s/ Andrew Reiben
------------------------------
Andrew Reiben, Chief Accounting Officer
Dated: March 14, 1997