As filed with the Securities and Exchange Commission on October 24, 1997
Registration No. 333-35451
--------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2
to
FORM S-4
REGISTRATION STATEMENT
Under The Securities Act of 1933
COMFORCE Corporation
(Exact name of registrant as specified in its charter)
Delaware 7361 36 - 2262248
(State or other jurisdiction of (Primary Standard Industrial (I.R.S Employer
incorporation or organization) Classification Code Number) Identification No.)
--------------------
COMFORCE Corporation
2001 Marcus Avenue
Lake Success, New York 11042
(516) 328-7300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------
Christopher P. Franco
Chief Executive Officer
COMFORCE Corporation
2001 Marcus Avenue
Lake Success, New York 11042
(516) 328-7300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------
Copy to:
David G. Edwards, Esquire
Doepken Keevican & Weiss Professional Corporation
58th Floor, USX Tower
600 Grant Street
Pittsburgh, Pennsylvania 15219-2703
(412) 355-2600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------
(Cover page continued)
Approximate date of commencement of proposed
sale of the securities to the public:
October 27, 1997
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
===================================================================================================================
Title of Each Class of Securities to Proposed Maximum Aggregate Amount of Registration Fee (2)(3)
be Registered (1) Offering Price (2)
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Common Stock, par value $0.01 $11,084,297 $3,822.17
===================================================================================================================
(1) This Registration Statement relates to shares of common Stock of COMFORCE
Corporation ("COMFORCE") issuable to holders of common stock of Uniforce
Services, Inc. ("Uniforce") pursuant to the transactions described in the
Prospectus/Proxy Statement which is a part of this Registration Statement.
In exchange for one share of Uniforce common stock, each holder of Uniforce
common stock will receive $28.00 in cash and 0.5217 shares of COMFORCE
common stock.
(2) Estimated solely for the purpose of calculating the registration fee.
Pursuant to Rule 457(f)(1), the offering price and registration fee are
computed on the basis of the average of the high and low prices of shares
of Uniforce common stock traded on the American Stock Exchange within five
business days prior to the filing of this Amendment No. 2 to the
Registration Statement. The price of $31.25 per share of Uniforce common
stock represents such average on October 21, 1997. Included in this
calculation are 3,038,543 issued and outstanding shares of Uniforce common
stock and options to purchase 372,010 shares of Uniforce common stock.
Pursuant to Rule 457(f)(3), for purposes of calculating the registration
fee, the offering price calculated as described above is reduced by the
amount of cash payable to the holders of Uniforce common stock ($28.00 per
share or $95,495,484 in the aggregate).
(3) A fee in the amount of $4,543.38 was paid at the time of the filing of the
original Registration Statement on September 10, 1997 and, accordingly, no
additional amounts are being paid in connection with the filing of this
Amendment No. 2.
THE COMPANY HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
COMFORCE CORPORATION
PROSPECTUS
Offer to Purchase
any and all outstanding shares of Common Stock of
Uniforce Services, Inc.
UNIFORCE SERVICES, INC.
PROXY STATEMENT
Solicitation of Proxies for Special Meeting
of Shareholders to be held on December 2, 1997
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON NOVEMBER 24, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). SHARES
WHICH ARE TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO
THE EXPIRATION OF THE OFFER.
COMFORCE Corporation, a Delaware corporation ("COMFORCE"), hereby offers,
on the terms and subject to the conditions set forth in this Prospectus/Proxy
Statement and in the accompanying Letter of Transmittal, to purchase any and all
outstanding shares of Common Stock, par value $.01 per share ("Uniforce Common
Stock"), of Uniforce Services, Inc., a New York corporation ("Uniforce"), for a
per share price (the "Per Share Amount") of $28.00 in cash and 0.5217 shares of
Common Stock, par value $.01 per share ("COMFORCE Common Stock") (the "Offer").
The cash and COMFORCE Common Stock to be received pursuant to the Offer are
referred to herein as the "Tender Offer Consideration." COMFORCE's obligation to
accept for payment and pay for shares of Uniforce Common Stock ("Shares")
pursuant to the Offer is subject to (i) the condition (the "Minimum Condition")
that at least that number of Shares that, when combined with the Shares already
owned by COMFORCE through its subsidiary, constitutes at least two-thirds of the
outstanding Shares, shall have been validly tendered and not withdrawn prior to
the Expiration Date (as hereinafter defined); and (ii) certain other conditions
including the receipt by COMFORCE of financing in an amount sufficient to pay
the aggregate Per Share Amount.
This Prospectus/Proxy Statement is also being furnished to holders of
Uniforce Common Stock in connection with the solicitation by the Board of
Directors of Uniforce of proxies for use at a special meeting of shareholders of
Uniforce (the "Shareholders"), to be held at 10:00 a.m., local time, on December
2, 1997, at the Garden City Hotel, 45 Seventh Street, Garden City, New York
11530-2890 and at any postponements or adjournments thereof (the "Special
Meeting"). At the Special Meeting, the Shareholders will be asked to consider
and vote upon a proposal to approve and adopt an Agreement and Plan of Merger
dated as of August 13, 1997, among COMFORCE, COMFORCE Columbus, Inc., a newly
formed New York corporation that is an indirect wholly-owned subsidiary of
COMFORCE ("Subsidiary"), and Uniforce (the "Merger Agreement"). A copy of the
Merger Agreement is appended to this Prospectus/Proxy Statement as Appendix A.
The Merger Agreement provides for the merger (the "Merger") of Uniforce and
Subsidiary, with Uniforce to be the surviving corporation and an indirect
wholly-owned subsidiary of COMFORCE. Consummation of the Merger is subject to a
number of conditions. At the effective time of the Merger, which is expected to
occur after the Expiration Date, but as soon as practicable following
consummation of the Offer, (i) each outstanding share of Uniforce Common Stock
(other than treasury shares, Shares held by COMFORCE or Subsidiary and Shares
held by Shareholders who have perfected appraisal rights under New York law)
will be cancelled and extinguished and converted into the right to receive cash
and COMFORCE Common Stock in an amount equal to the Per Share Amount; (ii) each
share of Uniforce Common Stock held by COMFORCE or Subsidiary will be canceled
and will cease to exist; and (iii) each share of common stock of Subsidiary will
be converted into one share of common stock of the surviving corporation. If the
Offer and the Merger are both
consummated, Shares held by Shareholders who do not tender Uniforce Common Stock
in the Offer and who do not perfect appraisal rights under New York law will
nonetheless be converted into the right to receive cash and COMFORCE Common
Stock in an amount equal to the Per Share Amount, the same amount and kind of
consideration as such Shareholders would have received had they tendered their
Uniforce Common Stock pursuant to the Offer. The cash and COMFORCE Common Stock
to be issued in the Merger are referred to herein as the "Merger Consideration."
Pursuant to a Stockholders Agreement, dated as of August 13, 1997 (the
"Stockholders Agreement"), John Fanning, Chairman of the Board, President and
Chief Executive Officer of Uniforce, and a limited partnership of which Mr.
Fanning is the general partner (collectively, the "Fanning Shareholders"),
holding, in the aggregate, in excess of 59% of the Uniforce Common Stock, have
agreed to tender, and not withdraw, all Uniforce Common Stock which they
beneficially own in the Offer and to vote all Uniforce Common Stock which they
beneficially own in favor of the Merger. As described under "Summary - The
Special Meeting," Mr. Fanning has advised that, subject to consummation of the
Offer, he will contribute certain of these shares to the capital of Uniforce
which will issue a like number of shares to certain employees of Uniforce. Such
contribution and issuance will take place immediately prior to consummation of
the Merger.
See "Risk Factors" beginning on page 10 for a description of certain
matters that should be considered by Shareholders before tendering Uniforce
Common Stock and before voting on the Merger.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus/Proxy Statement is dated and is being mailed to
shareholders on or about October 27, 1997.
AVAILABLE INFORMATION
COMFORCE and Uniforce are subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith
file reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information filed by COMFORCE and Uniforce may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 and at the following Regional Offices of
the Commission: Suite 1400, 500 West Madison Street, Chicago, Illinois 60661;
and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of
such material may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 upon
payment of prescribed fees. The COMFORCE Common Stock and the Uniforce Common
Stock are listed on the American Stock Exchange and such reports, proxy material
and other information are also available for inspection at the American Stock
Exchange, 86 Trinity Place, New York, New York 10006. The Commission also
maintains a Web site at "http://www.sec.gov" which contains reports, proxy
statements and other information regarding registrants that file electronically
with the Commission.
COMFORCE has filed with the Commission a Registration Statement on Form
S-4, together with all amendments and exhibits thereto (the "Registration
Statement") under the Securities Act of 1933 (the "Securities Act"), with
respect to the securities offered hereby. This Prospectus/Proxy Statement 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. The Registration Statement, including exhibits and schedules
filed therewith, may be obtained from the Commission's principal office at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, upon payment of fees
prescribed by the Commission. Statements made in the Prospectus/Proxy Statement
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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by COMFORCE (File No.
1-06081) pursuant to the Exchange Act are incorporated by reference in this
Prospectus:
1. Annual Report on Form 10-K for the Year ended December 31, 1996.
2. Amendment No. 1 to Annual Report on Form 10-K/A for the Year ended
December 31, 1996.
3. Amendment No. 1 to Current Report on Form 8-K/A dated January 13,
1997, amending original Current Report on Form 8-K filed November 8,
1996.
4. Amendment No. 1 to Current Report on Form 8-K/A dated January 13,
1997, amending original Current Report on Form 8-K filed November 19,
1996.
5. Amendment No. 2 to Current Report on Form 8-K/A dated January 13,
1997, amending original Current Report on Form 8-K filed September 3,
1996.
6. Amendment No. 2 to Current Report on Form 8-K/A dated February 4,
1997, amending original Current Report on Form 8-K filed November 8,
1996.
7. Amendment No. 2 to Current Report on Form 8-K/A dated February 4,
1997, amending original Current Report on Form 8-K filed November 19,
1996.
8. Amendment No. 3 to Current Report on Form 8-K/A dated February 3,
1997, amending original Current Report on Form 8-K filed May 23, 1996.
9. Current Report on Form 8-K dated March 14, 1997 and Amendment No. 1 to
Current Report on Form 8- K/A dated April 14, 1997.
10. Current Report on Form 8-K dated July 10, 1997 and Amendment No. 1 to
Current Report on Form 8- K/A dated July 11, 1997.
11. Current Report on Form 8-K dated August 20, 1997.
12. Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.
13. Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
14. The description of COMFORCE's Common Stock included in the
Registration Statement on Form 8-A filed October 10, 1985, as amended
by Amendment No. 1 thereto on Form 8-A/A dated July 25, 1997.
Each document filed by COMFORCE pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus/Proxy
Statement and prior to the termination of the offering of COMFORCE Common Stock
pursuant hereto shall be deemed to be incorporated by reference in this
Prospectus/Proxy Statement and to be a part of this Prospectus/Proxy Statement
from the date of filing of such document. Any statement contained in this
Prospectus/Proxy Statement or in a document incorporated or deemed to be
incorporated by reference in this Prospectus/Proxy Statement shall be deemed to
be modified or superseded for purposes of the Registration Statement and this
Prospectus/Proxy Statement to the extent that a statement contained in this
Prospectus/Proxy Statement, or in any subsequently filed document that also is
or is deemed to be incorporated by reference in this Prospectus/Proxy Statement,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement or this Prospectus/Proxy
Statement.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE UPON
WRITTEN OR ORAL REQUEST BY A PERSON TO WHOM THIS PROSPECTUS HAS BEEN DELIVERED
FROM LINDA CONNOLLY, COMFORCE CORPORATION, 2001 MARCUS AVENUE, LAKE SUCCESS, NEW
YORK 11042; TELEPHONE NUMBER (516) 328-7300. IN ORDER TO ENSURE TIMELY DELIVERY
OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE AT LEAST FIVE BUSINESS DAYS PRIOR
TO THE DATE ON WHICH A FINAL INVESTMENT DECISION IS TO BE MADE.
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SUMMARY
The following is a summary of certain information contained elsewhere in this
Prospectus/Proxy Statement. The information contained in this summary is
qualified in its entirety by, and should be read in conjunction with, the more
detailed information appearing elsewhere in this Prospectus/Proxy Statement and
the documents incorporated herein by reference.
The Companies
COMFORCE Corporation
COMFORCE Corporation ("COMFORCE") is a provider of staffing, consulting and
outsourcing solutions focused on the high technology needs of businesses.
COMFORCE provides services through a highly-skilled labor force that includes
computer programmers, engineers, technicians, scientists and researchers.
COMFORCE serves customers in three principal sectors - telecommunications,
information technology and technical services. COMFORCE Columbus, Inc.
("Subsidiary") is an indirect wholly-owned subsidiary of COMFORCE organized for
the purpose of effecting the Merger pursuant to the Merger Agreement. Subsidiary
has no material assets and has not engaged in any activities except in
connection with the Merger Agreement. COMFORCE's headquarters is located at 2001
Marcus Avenue, Lake Success, New York 11042. COMFORCE's telephone number is
(516) 328-7300.
Uniforce Services, Inc.
Uniforce Services, Inc. ("Uniforce") is a supplemental staffing company
focused in the areas of information services, technology, office automation,
medical office support and light industrial. It supplies supplemental staffing
services to businesses, educational institutions, professional and service
organizations, health care facilities, federal, state and local governmental
agencies and others in the United States. In addition, Uniforce supplies
payroll, billing and/or financial support services to independently owned and
operated supplemental staffing firms. Uniforce also supplies supplemental
laboratory staffing support to the scientific community and provides
confidential consulting and payrolling services, permitting clients to utilize
former 1099 independent contractors and consultants. The principal executive
office of Uniforce is located at 415 Crossways Park Drive, Woodbury, New York
11797. Its telephone number at that address is (516) 437-3300.
The Transactions
The Tender Offer
COMFORCE, through the Subsidiary, hereby offers to purchase all of the
issued and outstanding shares (the "Shares") of Uniforce Common Stock at $28.00
per Share, net to the seller in cash, without interest thereon, plus 0.5217
shares of COMFORCE Common Stock per Share (collectively the "Per Share Amount")
upon the terms and subject to the conditions set forth in this Prospectus/Proxy
Statement and in the related letter of transmittal (which, as amended from time
to time, together constitute the "Offer"). The purpose of the Offer is to
acquire Uniforce. Upon consummation of the Offer, COMFORCE will seek to obtain
representation, at least commensurate with its equity interest, on the Board of
Directors of Uniforce. COMFORCE also intends to consummate the Merger between
Uniforce and its Subsidiary immediately following the consummation of the Offer
pursuant to which Uniforce will become an indirect wholly-owned subsidiary of
COMFORCE. See "The Transactions - The Tender Offer".
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), COMFORCE will accept for payment and pay for any and all Shares
which are validly tendered on or prior to the Expiration Date (as hereinafter
defined) and not theretofore withdrawn. The term "Expiration Date" means 5:00
p.m., New York City time on November 29, 1997 unless and until COMFORCE shall
have extended the period of time for which the Offer is open, in which
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event the term "Expiration Date" shall mean the latest date on which the Offer,
as so extended by COMFORCE, shall expire. Consummation of the Offer is
conditioned upon, among other things, the satisfaction or waiver by COMFORCE of
certain conditions including the Minimum Condition and including the receipt by
COMFORCE of financing necessary to pay the aggregate cash portion of the Per
Share Amount. See "The Transactions - The Tender Offer - Terms of the Offer;
Extension of Tender Period; Termination; Amendments" and "The Transactions -
Certain Conditions of the Offer".
The Merger
COMFORCE, Subsidiary and Uniforce have entered into the Merger Agreement
which provides, subject to certain conditions including the approval of the
Shareholders of Uniforce should such approval be required, that Subsidiary will
be merged with and into Uniforce whereupon Uniforce will become an indirect
wholly-owned subsidiary of COMFORCE and each outstanding Share which had not
previously been tendered to Subsidiary pursuant to the Offer (other than
treasury shares, shares held by COMFORCE or Subsidiary and Shares held by
Shareholders who have perfected appraisal rights under New York law), will be
automatically converted into the right to receive the Merger Consideration,
which is exactly equal to the Per Share Amount offered in the Offer. See "The
Transactions - The Merger".
The Merger Agreement contains various representations and warranties of the
parties. The Merger Agreement may be terminated by Uniforce if, among other
things, (i) Uniforce's Board of Directors reasonably determines that the
representations and warranties of COMFORCE contained in the Merger Agreement are
not true and correct in any material respect, (ii) the Merger is not completed
by December 31, 1997, (iii) the Merger is enjoined by a final, nonappealable
court order; (iv) Uniforce or its shareholders receive an offer from a third
party with respect to a merger, sale of substantial assets, or other business
combination or a tender offer is commenced by a third party for all outstanding
Uniforce Common Stock and Uniforce's Board of Directors determines in good faith
and, in either case, after consultation with an independent financial advisor,
that such offer would yield a higher value to Uniforce or its shareholders than
the Merger and COMFORCE fails, within five (5) business days after being
notified of such determination and the terms and conditions of such offer, to
make an offer which is substantially equivalent to, or more favorable than such
offer, or (v) COMFORCE fails to perform in any material respects any of its
material covenants contained in the Merger Agreement and does not cure such
default within thirty (30) days after notice thereof. The Merger Agreement may
be terminated by COMFORCE if, among other things, (i) COMFORCE's Board of
Directors reasonably determines that the representations and warranties of
Uniforce contained in the Merger Agreement are not true and correct in any
material respect; (ii) the Merger is not completed by December 31, 1997; (iii)
the Merger is enjoined by a final, nonappealable court order; or (iv) Uniforce
fails to perform in any material respect any of its material covenants contained
in the Merger Agreement and does not cure such default within thirty (30) days
after notice thereof. The Merger Agreement also contains certain provisions
regarding the conduct of Uniforce pending the Merger. See "The Transactions -
The Merger - Representations and Warranties, Termination of the Merger
Agreement" and "The Transactions - The Merger - Conduct of Uniforce Pending the
Merger".
Background and Purpose of the Transactions
The managements of COMFORCE and Uniforce first met in April 1997. Shortly
thereafter, the parties met again and discussed the potential strategic fit
between the parties, particularly noting the fact that the parties' headquarters
were located very close to one another, the fact that Uniforce had a
particularly attractive and efficient back office which could be used by
COMFORCE, the fact that the two companies had a complementary IT business and
the fact that there appeared to be a minimum overlap of customers shared by the
parties. The parties met on several occasions over the summer of 1997 and
formulated the terms of the proposed Offer and Merger. These meetings culminated
in the execution and delivery of the Merger Agreement and the Stockholders
Agreement on August 13, 1997.
In evaluating the decision to commence the Offer and the Merger, the
management and board of directors of COMFORCE considered a variety of factors
including those discussed in the April meeting. The acquisition of
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Uniforce by COMFORCE is consistent with COMFORCE's expansion strategy of
acquiring staffing and consulting companies with profitable track records and
recognized local and regional presence in order to expand COMFORCE's geographic
base, diversify its capacity and strengthen its existing expertise as well as
expand its proprietary database of highly skilled technical talent. See
"Background and Purpose of the Transactions".
Recommendation of the Uniforce Board of Directors
The Board of Directors of Uniforce (the "Uniforce Board") has unanimously
approved the Merger Agreement and the transactions contemplated thereby and
recommends that the Shareholders of Uniforce tender their Uniforce Common Stock
in the Offer and vote for approval of the Merger Agreement at the Special
Meeting. See "Recommendation of the Uniforce Board of Directors" for a
description of the material factors considered by the Board in approving the
Merger Agreement.
Opinion of Financial Advisor
The Uniforce Board has received an opinion dated September 3, 1997 from
Chartered Capital Advisers, Inc. (the "Financial Advisor") that the
consideration to be received by the Shareholders of Uniforce pursuant to the
Merger Agreement is fair to the Shareholders of Uniforce from a financial point
of view. See "Opinion of Financial Advisor" for a description of that opinion
and the material factors considered by the Financial Advisor in reaching its
conclusion. A copy of the opinion of the Financial Advisor is appended to this
Prospectus/Proxy Statement as Appendix C.
Withdrawal Rights
Shares tendered in the Offer may be withdrawn at any time prior to the
Expiration Date, and, unless theretofore accepted for payment by COMFORCE as
provided in this Prospectus/Proxy Statement, may also be withdrawn at any time
after December 26, 1997 or at such later time as may apply if the Offer is
extended. See "The Transactions - The Tender Offer - Withdrawal Rights" for a
description of the procedures which must be followed in order to make an
effective withdrawal.
If COMFORCE extends the Offer, is delayed in its acceptance for payment of
any Shares tendered or is unable to accept for payment or pay for Shares
tendered pursuant to the Offer for any reason whatsoever, then, without
prejudice to COMFORCE's rights set forth in this Prospectus/Proxy Statement, the
Depositary may, nevertheless, on behalf of COMFORCE, retain tendered Shares, and
such Shares may not be withdrawn except to the extent that tendering
shareholders are entitled to and duly exercise withdrawal rights as described
above and under "The Transactions - The Tender Offer - Withdrawal Rights." Any
such delay will be accompanied by an extension of the Offer to the extent
required by law.
Withdrawals of tenders of Shares may not be rescinded, and Shares properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by again following the
procedures described herein under the heading "The Transactions - The Tender
Offer - Procedure for Tendering" at any time prior to the Expiration Date.
No Fractional Shares
No certificates or scrip for fractional shares of COMFORCE Common Stock
shall be issued in either the Offer or the Merger. In lieu of any such
fractional shares, each holder of Uniforce Common Stock who would otherwise have
been entitled to receive a fraction of a share of COMFORCE Common Stock upon
surrender of the Share certificates for exchange pursuant to the Offer or the
Merger shall be entitled to receive a cash payment equal to such fraction
multiplied by $7.667. See "The Transactions - Fractional Shares".
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Appraisal Rights
Pursuant to Section 910 of the New York Business Corporation Law (the
"NYBCL"), a Uniforce shareholder whose Shares have not been tendered into the
Offer and accepted by COMFORCE and who has not voted in favor of the Merger may
demand payment of the "fair value" of such holder's Shares in lieu of accepting
the payment to be made pursuant to the Merger. Any holder of Shares wishing to
exercise such appraisal rights must fully comply with Section 623 of the NYBCL,
the complete text of which is set forth as Appendix B to this Prospectus/Proxy
Statement.
A shareholder of Uniforce Common Stock electing to demand an appraisal must
deliver to Uniforce before the taking of the vote on the Merger, a written
demand for appraisal of such shareholder's Shares. A proxy or vote against the
Merger or an abstention or broker non-vote will not constitute such a demand. A
vote in favor of the Merger will have the effect of waiving the holder's
appraisal rights. If the Merger is consummated without the need for a vote of
the Uniforce shareholders, within twenty (20) days after the giving of notice to
him, any shareholder who elects to dissent must file with Uniforce a written
notice of his election to dissent stating his name and residence address, the
number of Shares as to which he dissents and a demand for the fair value of his
Shares. See "The Transactions - Appraisal Rights" and Appendix B to this
Prospectus/Proxy Statement.
Federal Income Tax Consequences of the Offer and the Merger
In the opinion of Doepken Keevican & Weiss Professional Corporation,
counsel to COMFORCE, the receipt of cash and COMFORCE Common Stock for Shares
pursuant to either the Offer or the Merger will be a taxable transaction for
federal income tax purposes. In general, a shareholder will recognize gain or
loss for such purposes equal to the difference between such shareholder's
adjusted basis for the Shares and the value of the cash and COMFORCE Common
Stock received therefor. See "Certain Federal Income Tax Consequences of the
Offer and the Merger".
Accounting Treatment of the Offer and the Merger
The acquisition of Uniforce by COMFORCE will be accounted for by the
purchase method of accounting.
Financing
COMFORCE and Subsidiary estimate that the total amount of funds required by
Subsidiary to purchase all of the 3,038,543 Shares issued and outstanding (which
number excludes 2,084,245 treasury shares held by Uniforce) and 370,010 Shares
issuable upon exercise of the outstanding Uniforce stock options, pursuant to
the Offer and the Merger will be approximately $93.6 million. In addition,
COMFORCE and Subsidiary estimate that the total amount of funds required to
refinance certain existing indebtedness of COMFORCE and Uniforce, provide for
working capital and pay fees and expenses incurred in connection with the Offer
and the Merger will be approximately $75.3 million.
COMFORCE and its Subsidiary expect to obtain debt financing in the
aggregate amount of $210 million, of which approximately $93.6 million will be
applied to purchase the Shares in the Offer and effect the Merger, and $75.3
million will be used to pay related fees and expenses and refinance certain
existing indebtedness of Uniforce and COMFORCE. Of this amount, approximately
$110 million is expected to be obtained from an offering of Senior Subordinated
Notes by a subsidiary of COMFORCE, $25 million is expected to be obtained from
an offering of Senior Secured PIK Debentures of COMFORCE and $25 million is
expected to be drawn from a $75 million revolving credit facility as described
under "The Financing." The Offer and the Merger are both conditioned upon the
receipt of this financing by COMFORCE.
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The Special Meeting
The Special Meeting will be held at 10:00 a.m., local time, on December 2,
1997 at the Garden City Hotel, 45 Seventh Street, Garden City, New York
11530-2890 for the purpose of considering and acting upon the proposal to
approve and adopt the Merger Agreement and the transactions contemplated
thereby. Only those Uniforce shareholders of record at the close of business on
October 27, 1997 (the "Record Date"), are entitled to notice of, and to vote at,
the Special Meeting.
Pursuant to the relevant provisions of the NYBCL, the affirmative vote of
two-thirds of all outstanding shares of Uniforce Common Stock is required to
approve and adopt the Merger Agreement. As of the Record Date, there were
3,038,543 Shares outstanding. As a result, the affirmative vote of 2,025,696
Shares is necessary to approve and adopt the Merger and the Merger Agreement.
The Fanning Shareholders have entered into the Stockholders Agreement
pursuant to which they agreed to vote in favor of the Merger and the Merger
Agreement. John Fanning has advised that he will contribute 51,562 shares of
Uniforce Common Stock to the capital of Uniforce which will issue a like number
of shares to certain employees of Uniforce, subject to consummation of the Offer
and to such employees agreeing to be bound by the terms of the Stockholders
Agreement. Such contribution and issuance will take place immediately prior to
consummation of the Merger. A total of 1,809,030 Shares is subject to the
Stockholders Agreement. Assuming the Fanning Shareholders and the employee
assignees vote as they have agreed, the affirmative vote of 216,666 additional
Shares is needed to approve and adopt the Merger and the Merger Agreement.
The adoption and approval of the Merger will be considered at the Special
Meeting and proxies of the Shareholders of Uniforce are being solicited for that
purpose. However, pursuant to the relevant provisions of the NYBCL, if
Subsidiary holds ninety (90%) percent or more of the outstanding Shares, the
Merger can be consummated without the need for the Special Meeting. Therefore,
if Subsidiary receives and accepts at least ninety (90%) percent of the
outstanding Shares pursuant to the Offer, COMFORCE may cause Uniforce to cancel
the Special Meeting and proceed with the Merger. See "The Transactions - The
Merger" and "The Special Meeting".
UNIFORCE SHAREHOLDERS ARE URGED TO BOTH TENDER THEIR SHARES INTO THE OFFER
BY COMPLETING THE ENCLOSED LETTER OF TRANSMITTAL AND TO VOTE IN FAVOR OF THE
APPROVAL AND ADOPTION OF THE MERGER AND THE MERGER AGREEMENT.
Change in COMFORCE Board of Directors
COMFORCE's Bylaws provide that the Board of Directors shall consist of from
three to nine persons as fixed by the Board. In September 1997, COMFORCE's Board
of Directors amended its Bylaws to increase the number of directors to eight
from seven and elected Michael D. Madden to fill the vacancy and serve as Vice
Chairman. In addition, Mr. Madden was appointed to serve on the Finance
Committee of the Board. Mr. Madden has served as Executive Director of Hanover
Capital L.L.C. (merchant banking) since July 1996. From 1994 to 1995, he served
as a Vice Chairman and member of the Executive Committee of the Board of
Directors of PaineWebber Incorporated (investment banking), having previously
headed the transition team to integrate Kidder Peabody & Co. (investment
banking) into PaineWebber Incorporated following their 1994 merger. Mr. Madden
held various positions with Kidder Peabody & Co. from 1973 to 1989 and from 1993
to 1994, most recently as a Director and Executive Managing Director responsible
for Global Origination. He previously served as Senior Managing Director and
Co-Head of Worldwide Investment Banking (1989 to 1993) and a Director (1990 to
1993) of Lehman Brothers (investment banking).
9
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RISK FACTORS
In deciding whether to tender their shares in the Offer and whether to vote
in favor of the Merger, Uniforce shareholders should consider the factors set
forth below regarding certain risks relating to COMFORCE, as well as other
information contained in this Prospectus/Proxy Statement. The risk factors
described under "Risk Factors - Effect of Fluctuations in the General Economy,"
"- Liabilities for Customer and Employee Actions," "Increases in Unemployment
Insurance Premiums and Workers' Compensation Rates," "- Dependence on
Availability of Qualified Staffing Personnel," and "- Highly Competitive Market;
Limited Barriers to Entry" affect the business of Uniforce as well as the
business of COMFORCE and will continue to affect the business of COMFORCE if the
Offer and the Merger are consummated. This Prospectus/Proxy Statement and the
documents incorporated by reference herein contain, in addition to historical
information, forward-looking statements that involve risks and uncertainties.
COMFORCE's and Uniforce's actual results could differ materially from those
projected or suggested in any forward-looking statement. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed below as well as those discussed elsewhere in this Prospectus/Proxy
Statement and in the documents incorporated by reference herein.
Absence of Combined Operating History; Potential Inability to Integrate Acquired
Businesses
COMFORCE's technical staffing business has been developed principally
through the acquisition of established technical staffing businesses, all of
which have been acquired since October 1995. Prior to their acquisition by
COMFORCE, each of these acquired companies operated as an independent entity.
The pro forma financial and operating data of COMFORCE set forth in this
Prospectus/Proxy Statement include the combined operating results of Uniforce
and of these recently acquired businesses during periods when they were not
under common control or management and as such may not be indicative of
COMFORCE's future financial or operating results. There can be no assurance that
COMFORCE's management group will be able to adequately manage COMFORCE and
effectively implement COMFORCE's strategy or effectively integrate Uniforce or
the other businesses acquired. If COMFORCE is unable to integrate the management
personnel needed to manage the acquired businesses, if such personnel are unable
to achieve anticipated performance levels or if COMFORCE is unable to implement
effective controls, COMFORCE's business, financial condition and results of
operations would be adversely affected. Future operating results will depend
upon many factors, including fluctuations in the economy, the degree and nature
of competition, demand for COMFORCE's services, and COMFORCE's ability to
integrate the operations of acquired businesses, to recruit and place staffing
professionals, to expand into new markets, and to maintain margins in the face
of pricing pressures.
Reliance on Acquisitions for Company Growth and Risks Associated with
Acquisitions
The ability of COMFORCE to achieve growth through acquisitions will depend
on a number of factors, including the availability of attractive acquisition
opportunities, the availability of funds needed to complete acquisitions, the
availability of working capital needed to fund the operations of acquired
businesses and the effect of existing and emerging competition on operations.
COMFORCE has recently consummated several acquisitions. These prior
acquisitions, as well as the acquisition of Uniforce contemplated by the Merger
Agreement, may not achieve levels of revenue, profitability or productivity
comparable to those of COMFORCE's existing operations or may not otherwise
perform as expected. Acquisitions also involve special risks, including risks
associated with unanticipated liabilities and contingencies, diversion of
management attention and possible adverse effects on earnings resulting from
increased goodwill amortization, increased interest costs, the issuance of
additional securities and difficulties related to the integration of the
acquired business. COMFORCE is actively seeking additional acquisition
opportunities, although COMFORCE has no agreements, understandings or plans
regarding any material acquisitions at this time other than the Merger
Agreement. There can be no assurance that COMFORCE will be able to successfully
identify additional suitable acquisition candidates, complete additional
acquisitions or integrate acquired businesses into its operations.
10
Future Capital Needs; Uncertainty of Additional Financing; Dilution
COMFORCE will need to obtain additional financial resources to fund its
strategy of growth through acquisition, geographic expansion and market
development, including consummation of the Offer and the Merger. While COMFORCE
is currently in discussions with financing sources, there can be no assurance
that it will obtain such financing. COMFORCE can give no assurance that its
existing capital resources, the funds it intends to raise to finance the Offer
and the Merger and its cash flow from operations will either individually or
collectively be sufficient to fund future acquisitions or satisfy its working
capital requirements. See "The Financing."
If additional funds are raised by issuing equity securities, COMFORCE's
shareholders may experience dilution. Further, such equity securities may have
rights, preferences, or privileges senior to those of the COMFORCE Common Stock.
To the extent COMFORCE finances its activities by issuing debt securities,
COMFORCE may become subject to certain financial and other covenants which may
restrict its ability to pursue its strategy of growth through acquisition. There
can be no assurance that adequate equity or debt will be available as needed or
on terms acceptable to COMFORCE. A lack of available funds may require COMFORCE
to delay, scale back or eliminate all or some of its market development and
acquisition projects and could have a material adverse effect on COMFORCE's
business, financial condition and results of operations.
Limited Experience in Managing Rapid Growth
COMFORCE's officers have had limited experience in managing companies as
large and as rapidly growing as COMFORCE. COMFORCE's strategy of continuing its
growth and expansion will place additional demands upon COMFORCE's current
management and will require additional information systems and management,
operational and other financial resources. Not all factors affecting COMFORCE's
growth are within the control of COMFORCE. COMFORCE's ability to manage growth
successfully will require COMFORCE to continue to enhance its operational,
management, financial and information systems and controls. No assurance can be
given that COMFORCE will be able to manage its expanding operations and, if
COMFORCE's management is unable to manage growth effectively, COMFORCE's
business, financial condition and results of operations could be materially
adversely affected.
Risks Related to the Loss of Key Customers
As is common in the staffing industry, COMFORCE's engagements to provide
services to its customers are generally non-exclusive, of a short-term nature
and subject to termination by the customer with little or no notice. On a
historical basis, for 1996, sales to one customer accounted for more than 19% of
COMFORCE's revenues, and for 1995, sales to three customers accounted for 17.3%,
12.6% and 10.1% of COMFORCE's revenues. In addition, on a historical basis, in
each of 1995 and 1996, revenues of COMFORCE's 10 largest customers accounted for
more than 50% of COMFORCE's total revenues. On a pro forma basis (taking into
account the Rhotech and Uniforce acquisitions), in 1996, sales to one customer
accounted for 8% of COMFORCE's revenues, and sales to the 10 largest customers
of COMFORCE accounted for more than 30% of its revenues. The loss of or a
material reduction in the revenues from any of COMFORCE's significant customers
could have an adverse effect on COMFORCE's business, results of operations and
financial condition.
Substantial Leverage and Ability to Service Debt
After the consummation of the Offer and the Merger, COMFORCE will be highly
leveraged. After giving pro forma effect to the transactions, COMFORCE would
have had total indebtedness at June 30, 1997 of approximately $161 million (80%
of total capitalization). See "COMFORCE Corporation and Subsidiaries Unaudited
Pro Forma Financial Statements."
This degree of leverage could have important consequences, including the
following: (i) the ability of COMFORCE to obtain additional financing for
working capital, capital expenditures, debt service requirements or
11
other purposes may be impaired; (ii) a substantial portion of COMFORCE's cash
flow from operations will be required to pay COMFORCE's debt service; (iii)
COMFORCE may be more highly leveraged than companies with which it competes,
which may place it at a competitive disadvantage; (iv) COMFORCE may be
particularly vulnerable in the event of a downturn in its business or in the
economy generally; and (v) to the extent that COMFORCE incurs any additional
borrowings under the proposed secured revolving credit facility, COMFORCE will
be vulnerable to increases in interest rates.
After the transactions are consummated, a significant portion of COMFORCE's
cash flow will be required to service indebtedness and will not be available for
other purposes. After giving pro forma effect to the transactions as if they had
been consummated on January 1, 1996, COMFORCE's fixed charges will exceed its
earnings as a result of the pro forma loss before income taxes of $6,571,000 for
the year ended December 31, 1996 and $8,237,000 for the six month period ended
June 30, 1997. In the absence of adequate operating results and cash flows,
COMFORCE may be required to dispose of material assets or operations or
refinance its indebtedness to meet its debt service obligations. There can be no
assurance that COMFORCE will be successful in this regard should such actions
become necessary.
Effect of Fluctuations in the General Economy
Demand for staffing services is significantly affected by the general level
of economic activity in the country. Companies use staffing services to manage
personnel costs and changes in staffing needs due to business fluctuations. When
economic activity increases, employees from staffing companies are often added
before full-time employees are hired. As economic activity slows, many companies
reduce their usage of employees from staffing companies before undertaking
layoffs of their regular employees. In addition, COMFORCE and Uniforce may
experience more competitive pricing pressure during such periods of economic
downturn. Therefore, any significant economic downturn could have a material
adverse effect on the businesses of COMFORCE and Uniforce.
Liabilities for Customer and Employee Actions
Staffing service providers are in the business of employing people and
placing them in the workplace of other businesses. An attendant risk of such
activity includes possible claims by customers of employee misconduct or
negligence, including claims of discrimination and harassment, employment of
illegal aliens and other similar claims. COMFORCE and Uniforce have policies and
guidelines in place to reduce exposure to these risks. However, a failure to
follow these policies and guidelines may result in negative publicity and the
payment by COMFORCE or Uniforce of money damages or fines. Although neither
COMFORCE nor Uniforce historically has had any significant problems in this
area, there can be no assurance that either company will not experience such
problems in the future. COMFORCE and Uniforce are also exposed to liability with
respect to actions taken by employees while on assignment, such as damages
caused by employee errors, misuse of customer proprietary information or theft
of customer property. Although COMFORCE and Uniforce maintain insurance, due to
the nature of the assignments of both COMFORCE and Uniforce, in particular their
access to customer information systems and confidential information, and the
potential liability with respect thereto, there can be no assurance that
insurance coverage will continue to be available or that it will be adequate to
cover any such liability.
Increases in Unemployment Insurance Premiums and Workers' Compensation Rates
COMFORCE and Uniforce are required to pay unemployment insurance premiums
and workers' compensation benefits for their billable employees. Unemployment
insurance premiums are set annually by the states in which employees perform
services and could increase as a result of, among other things, increased levels
of unemployment and the lengthening of periods for which unemployment benefits
are available. Workers' compensation costs have increased as various states in
which COMFORCE and Uniforce conduct operations have raised levels of
compensation and liberalized allowable claims. COMFORCE and Uniforce may incur
costs related to workers' compensation claims at rates higher than anticipated
due to higher than anticipated losses from
12
known claims or an increase in the number or the severity of new claims. In
addition, costs could increase as the result of any future health care reforms.
Certain federal and state legislative proposals have included provisions
extending health insurance benefits to billable employees who do not presently
receive such benefits. There can be no assurance that either COMFORCE or
Uniforce will be able to increase the fees charged to customers in a sufficient
amount to cover increased costs related to workers' compensation and
unemployment insurance. Further, there can be no assurance that COMFORCE or
Uniforce will be able to obtain or renew workers' compensation insurance
coverage in amounts and types desired at reasonable premium rates.
Dependence on Availability of Qualified Staffing Personnel
Both COMFORCE and Uniforce depend on their ability to attract, train and
retain personnel who possess the skills and experience necessary to meet the
staffing requirements of their customers. Competition for individuals with
proven skills in certain areas, particularly information technology and
telecommunications, is intense. COMFORCE and Uniforce compete for such
individuals with other providers of technical staffing services, systems
integrators, providers of outsourcing services, computer systems consultants,
customers and personnel agencies. COMFORCE and Uniforce must continually
evaluate, train and upgrade their bases of available personnel to keep pace with
changing customers' needs and emerging technologies. There can be no assurance
that qualified personnel will continue to be available to COMFORCE or Uniforce
in sufficient numbers and on economic terms acceptable to COMFORCE or Uniforce.
In addition, although COMFORCE's employment agreements contain non-compete
covenants, there can be no assurance that COMFORCE can effectively enforce such
agreements against its former employees.
Highly Competitive Market; Limited Barriers to Entry
The staffing services industry is highly competitive and has low barriers
to entry. Heightened competition for customers as well as for technical
personnel could adversely impact margins of both COMFORCE and Uniforce.
Heightened competition for customers could result in COMFORCE or Uniforce being
unable to maintain current fee scales without being able to reduce the personnel
costs of billable employees. Shortages of qualified technical personnel, which
currently exist in some technical specialties and could occur in the future, may
result in COMFORCE or Uniforce being unable to fulfill customers' needs.
Moreover, customers could employ technical staff directly (rather than using
supplemental staffing services) to ensure the availability of such personnel.
Many of the competitors of COMFORCE and Uniforce have greater marketing,
financial and personnel resources than either entity does or than COMFORCE will
have if the Offer and the Merger are consummated. Such competitors could provide
increased competition to COMFORCE and Uniforce. COMFORCE expects that the level
of competition will remain high in the future, which could have a material
adverse effect on the businesses of COMFORCE and Uniforce. Additionally, in
certain markets COMFORCE and Uniforce have experienced significant pricing
pressure from some of their competitors.
Potential Impairment of Intangible Assets
As of June 30, 1997, approximately $39 million, making up more than 50% of
COMFORCE's total assets, were intangible assets. These intangible assets
represent substantially amounts attributable to goodwill recorded in connection
with COMFORCE's acquisitions and are being amortized over a five to forty year
period, resulting in annual charges in excess of $1 million before the Merger.
After the Merger, the amount and percentage of intangible assets is expected to
grow as well as the corresponding amortization charges. Various factors could
impact COMFORCE's ability to generate the earnings necessary to support this
amortization schedule, including fluctuations in the economy, the degree and
nature of competition, demand for COMFORCE's services, and COMFORCE's ability to
integrate the operations of acquired businesses, to recruit and place staffing
professionals, to expand into new markets and to maintain gross margins in the
face of pricing pressures. Although COMFORCE does not believe any impairment has
occurred through the date of this Prospectus/Proxy Statement, the failure of
COMFORCE to generate earnings necessary to support these amortization charges
may result in an impairment of this asset. The resulting write-off could have a
material adverse effect on COMFORCE's business, financial condition and results
of operations.
13
Dependence on Key Personnel
COMFORCE is highly dependent on its management. COMFORCE's success depends
upon the availability and performance of James L. Paterek, the Chairman of
COMFORCE, Christopher P. Franco, the Chief Executive Officer of COMFORCE, and
Michael Ferrentino, the President of COMFORCE. The loss of services of any of
these key persons could have a material adverse effect upon COMFORCE. COMFORCE
has entered into employment agreements with all of such individuals. The
agreement with Mr. Paterek expires in April 1999 and the agreements with Messrs.
Ferrentino and Franco expire in December 1997. COMFORCE does not maintain key
man life insurance on any of these individuals.
Control by Insiders
Current management of COMFORCE currently controls more than one-quarter of
COMFORCE's outstanding shares of Common Stock. As a result, such persons are
expected to have the ability to significantly influence all issues submitted to
COMFORCE's shareholders including with respect to its management and the
selection of its Board of Directors. Such concentration of ownership could limit
the price that certain investors might be willing to pay in the future for
shares of Common Stock and could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from attempting to
acquire, control of COMFORCE.
Historical and Pro Forma Losses
COMFORCE had a net loss for the six months ended June 30, 1997 of $1.9
million. On a pro forma basis, the Company had net losses for the year ended
December 31, 1996 and the six months ended June 30, 1997 of $5.1 million and
$5.5 million, respectively. No assurance can be given that the Company's
operations will be profitable in the future. See "Unaudited Pro Forma Financial
Statements of COMFORCE Corporation and Subsidiaries."
Anti-Takeover Provisions
Certain provisions of COMFORCE's Certificate of Incorporation and Bylaws
authorize the issuance of "blank check" Preferred Stock and the establishment of
advance notice requirements for director nominations and actions to be taken at
stockholder meetings. These provisions could discourage or impede a tender
offer, proxy contest or other similar transaction involving control of COMFORCE,
including transactions in which the stockholders might otherwise receive a
premium for their shares over then current market prices and other transactions
that they may deem to be in their best interests. In particular the issuance of
Preferred Stock could have an adverse effect on holders of Common Stock by
delaying or preventing a change in control of COMFORCE, making removal of the
present management of COMFORCE more difficult or resulting in restrictions upon
the payment of dividends and other distributions to the holders of COMFORCE
Common Stock. For example, COMFORCE could issue shares of Preferred Stock with
extraordinary voting rights or liquidation preferences to make it more difficult
for a hostile acquiror to gain control of COMFORCE. In addition to the
anti-takeover effect of the issuance of preferred stock, holders of preferred
stock have a preferred position over holders of common stock on liquidation, the
right to a fixed or minimum dividend before any dividend is paid (or accrued) on
common stock, and the right to approve certain extraordinary corporate matters.
No Cash Dividends
Historically, Uniforce has paid quarterly cash dividends, which since March
1990 have been at a rate of $0.03 per Share. However, COMFORCE anticipates that
for the foreseeable future its earnings will be retained for the operation and
expansion of its business and that it will not pay cash dividends on its Common
Stock. In addition, COMFORCE's revolving credit facility prohibits the payment
of cash dividends on the Common Stock without the lender's consent, and the
instruments entered into in connection with the Offer, the Merger and the
refinancing of the existing debt of Uniforce and COMFORCE will also restrict the
payment of cash dividends.
14
No Interest Payable on Purchase Price
Under certain circumstances COMFORCE has the right to delay acceptance for
payment of Shares or, regardless of whether such Shares were theretofore
accepted for payment, payment for Shares tendered in the Offer. See "The
Transactions - The Tender Offer - Terms of the Offer; Extension of Tender
Period; Termination; Amendments." In addition, delays may occur in payment of
Merger Consideration in the Merger. COMFORCE will not pay interest on the
purchase price for the Shares tendered in the Offer or on Merger Consideration
because of any delay in making such payment. See "The Transactions - The Tender
Offer Acceptance for Payment and Payment of Offer Price" and "The Transactions -
The Merger - Merger Consideration and the Conversion of Shares."
Potential Environmental Liability
COMFORCE, through a predecessor company that was engaged in manufacturing
activities, has been named as one of 80 defendants in a case alleging that the
defendants disposed of hazardous substances at a site in Gary, Indiana. Although
COMFORCE is entitled to be indemnified for any environmental liabilities in
connection with disposal of hazardous substances at this site, no assurance can
be given that COMFORCE will be effectively indemnified or will not otherwise
ultimately sustain liability for disposing of hazardous substances.
Possible Volatility of Stock Price
From time to time, there has been and may continue to be significant
volatility in the market price for COMFORCE's Common Stock. Quarterly operating
results of COMFORCE or of other staffing companies, changes in general
conditions in the economy, the financial markets or the staffing industry,
natural disasters or other developments could cause the market price of
COMFORCE's Common Stock to fluctuate substantially. In addition, in recent years
the stock market has experienced extreme price and volume fluctuations. This
volatility has had a significant effect on the market prices of securities
issued by many companies for reasons unrelated to their operating performance.
THE COMPANIES
COMFORCE
COMFORCE Corporation is a provider of staffing, consulting and outsourcing
solutions focused on the high technology needs of businesses. COMFORCE provides
services through a highly-skilled labor force that includes computer
programmers, engineers, technicians, scientists and researchers. COMFORCE's
customers include telecommunication equipment manufacturers, telecommunication
service providers (wireline and wireless), computer software and hardware
manufacturers, aerospace and avionics firms, utilities and national research
laboratories such as Los Alamos National Laboratory, Sandia National Laboratory
and Lawrence Livermore National Laboratory. COMFORCE maintains its headquarters
in Lake Success, NY and has more than 30 branch offices throughout the United
States to enable it to meet the needs of national as well as local customers.
COMFORCE employs approximately 3,800 persons and maintains a proprietary
database of over 110,000 prospective employees with expertise in the technical
disciplines served by COMFORCE.
COMFORCE serves customers in three principal sectors -- telecommunications,
information technology ("IT") and technical services. In the telecommunications
sector, COMFORCE provides staffing for wireline and wireless communications
systems development, satellite and earth station deployment, network management
and plant modernization. In the information technology sector, COMFORCE provides
staffing for specific projects requiring highly specialized skills such as
applications programming and development, client/server development, systems
software architecture and design, systems engineering and systems integration.
In the technical services sector, COMFORCE provides staffing for national
laboratory research in such areas as environmental safety, alternative energy
source development and laser technology, and provides highly-skilled labor
meeting diverse
15
commercial needs in the avionics and aerospace, architectural, automotive,
energy and power, pharmaceutical, marine and petrochemical fields.
COMFORCE's objective is to be a leading provider of technical staffing,
consulting and outsourcing solutions for the high technology needs of
businesses. COMFORCE will seek to achieve its objective by focusing on high
technology markets; pursuing acquisitions of staffing and consulting companies
with profitable track records and recognized local or regional presence;
expanding geographically in the United States and internationally; continuing to
develop innovative and flexible service packages to offer to customers; and
capitalizing on its efficient management information systems.
COMFORCE was incorporated in Illinois in 1954 and became a Delaware
corporation through its merger with a Delaware subsidiary in 1969. It maintains
its headquarters at 2001 Marcus Avenue, Lake Success, New York 11042. COMFORCE's
telephone number is (516) 328-7300 and its address on the World Wide Web is
www.comforce.com.
Uniforce
Uniforce is a supplemental staffing company focused in the areas of
Information Services ("IS"), technology, office automation, medical office
support and light industrial. It provides supplemental staffing services through
offices owned and operated by Uniforce and its subsidiaries and by licensees of
Uniforce ("Licensees") to businesses, educational institutions, professional and
service organizations, health care facilities, federal, state and local
governmental agencies and others in the United States. In addition, Uniforce
supplies payroll, billing and/or financial support services to independently
owned and operated supplemental staffing firms (the "Associated Offices"),
provides supplemental laboratory staffing support to the scientific community
and provides confidential consulting and payrolling services, permitting clients
to utilize former 1099 independent contractors and consultants.
Uniforce Information Services/Brannon & Tully(R) and Uniforce Information
Services/Montare International(TM) specialize in placing highly skilled
Information Technology ("IT") professionals on a supplemental staffing basis.
PrO Unlimited, Inc. ("PrO Unlimited(R)") provides confidential employee payroll
conversion and consulting services enabling client companies to utilize the
services of former 1099 independent contractors, consultants and returning
retirees. Employee conversion results in the employment of former 1099
independent contractors and consultants by PrO Unlimited and the assignment of
these persons to work for clients of PrO Unlimited. LabForce of America, Inc.
("LabForce(R)") provides laboratory professionals, including chemists,
biologists, engineers and other supplemental scientific support personnel to a
broad range of industries.
Temporary Help Industry Servicing Company, Inc. ("THISCO(R)") and its
subsidiary, Brentwood Service Group, Inc. ("Brentwood"), provide confidential
financing and perform certain payroll, billing and back office services for
Associated Offices. These functions are performed under contract for a service
charge.
At September 3, 1997, Uniforce's Licensees operated 31 licensed offices,
Uniforce owned and operated 10 offices, LabForce operated 10 offices, PrO
Unlimited operated 5 offices and Uniforce Information Services operated 5
offices. Some of the LabForce and PrO Unlimited offices occupied space shared
with other Uniforce offices. At that date, THISCO and Brentwood serviced 98
Associated Offices.
Uniforce was incorporated in New York in 1984. Its principal executive
offices are located at 415 Crossways Park Drive, Woodbury, New York 11797. Its
telephone number at that address is 516-437-3300.
16
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
OF COMFORCE CORPORATION AND SUBSIDIARIES
The following unaudited pro forma financial statements reflect (i) the
treatment of the operation of COMFORCE's jewelry business prior to September
1995 as a discontinued operation, (ii) the acquisition of businesses operating
in the staffing industry, including COMFORCE Telecom, Inc. (for a purchase price
of $6.7 million) in 1995, Williams Communications Services, Inc. (for a purchase
price of $2 million and a contingent payout not to exceed $2 million), RRA, Inc.
(for a purchase price of $5.1 million and a contingent payout not to exceed
$650,000), Force Five, Inc. (for a purchase price of $2 million and contingent
payouts not to exceed $2 million), Continental Field Services Corp. (for a
purchase price of $5 million and contingent payout not to exceed $1.02 million),
and AZATAR Computer Systems, Inc. (for a purchase price of $5.15 million and a
contingent payout not to exceed $1.2 million), completed in 1996, RHO Company
Incorporated (for a purchase price of $14.8 million and a contingent payout not
to exceed $3.3 million), completed in 1997, and the proposed acquisition of
Uniforce Services, Inc. (for a purchase price of $105.7 million) as if such
acquisitions had occurred on January 1, 1996 (other than the unaudited pro forma
balance sheet at June 30, 1997, which has been prepared as if all such
acquisitions were consummated as of such date) (and accounted for by the
purchase method), and (iii) the financing of $160 million of debt contemplated
by this transaction as if such debt was outstanding for all periods presented
and replaced all historical financing arrangements. Prior to its acquisition by
COMFORCE, each of these acquired businesses operated as a separate independent
entity. Since the unaudited pro forma financial statements present the combined
financial condition and operating results of these recently acquired businesses
and Uniforce during periods when they were not under common control or
management, the information presented may not be indicative of the results which
would have actually been obtained had such acquisitions been completed on the
dates indicated, or COMFORCE's future financial or operating results. These
unaudited pro forma financial statements should be read in conjunction with the
financial statements of the respective entities included therein, and the
related notes thereto.
17
COMFORCE Corporation
Unaudited Pro Forma Balance Sheet
as of June 30, 1997
(in thousands)
Pro Forma
Current assets: COMFORCE Uniforce Adjustments(1) Pro Forma
Cash and cash equivalents $ 3,562 $ 4,697 $ (7,903) $ 356
Restricted cash and equivalents 1,000 -- (1,000) --
Accounts receivable and Service fees receivable, net 26,388 44,956 -- 79,719
Prepaid expenses 1,160 721 -- 1,881
Deferred financing fees 1,762 -- (1,762) --
Income tax receivable 889 -- -- 889
Deferred income taxes 2,028 201 3,000 5,229
Other assets 20 -- -- 20
--------- --------- --------- ---------
Total current assets 36,809 50,575 (7,665) 81,230
--------- --------- --------- ---------
Deferred financing fees -- 351 8,149 8,500
Property and equipment, net of accumulated 1,417 4,269 -- 5,686
depreciation
Intangible assets, net of accumulated amortization 39,034 7,171 86,814 133,019
Other assets 181 -- -- 181
--------- --------- --------- ---------
Total assets $ 77,441 $ 62,366 $ 87,298 $ 227,105
========= ========= ========= =========
Current liabilities:
Borrowings under revolving line of credit $ 15,588 $ 2,000 $ (13,588) $ 4,000
Accounts payable 1,335 1,436 -- 2,771
Accrued expenses 7,507 5,845 -- 13,352
Accrued payroll and payroll taxes 3,577 6,885 -- 10,462
Income taxes -- 94 -- 94
--------- --------- --------- ---------
Total current liabilities 28,007 16,260 (13,588) 30,679
--------- --------- --------- ---------
Capitalized lease obligations -- 631 -- 631
Deferred income tax 90 -- -- 90
Long-term bank debt 20,000 29,250 (28,250) 21,000
Subordinated Debt -- -- 135,000 135,000
Other 781 -- -- 781
Commitments and contingencies
Stockholders equity:
Series F Senior convertible preferred stock 1 -- -- 1
Common stock 136 51 (34) 153
Additional paid-in capital 30,665 8,944 3,162 42,771
Retained earnings, since January 1, 1996 (2,239) -- (1,762) (4,001)
Retained earnings -- 29,181 (29,181) --
Treasury stock -- (21,951) 21,951 --
--------- --------- --------- ---------
Total stockholders equity 28,563 16,225 (5,864) 38,924
--------- --------- --------- ---------
Total liabilities and stockholders equity $ 77,441 $ 62,366 $ 87,298 $ 227,105
========= ========= ========= =========
See notes to unaudited pro forma financial statements.
18
COMFORCE CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997(2)
(in thousands except per share data)
COMFORCE Pro Forma
Corporation RHOTECH Uniforce Adjustments(3) Pro Forma
----------- ------- -------- -------------- ---------
Revenues $91,477 $15,416 $86,163 $193,056
Cost of revenues 79,751 14,411 70,001 164,163
--------- --------- --------- ---------
Gross Profit 11,726 1,005 16,162 28,893
Operating Expenses:
Selling, general and administrative 7,339 1,524 11,069 19,932
Depreciation and amortization 802 40 594 1,002 2,438
--------- --------- --------- --------- ---------
Income (loss) from operations 3,585 (559) 4,499 (1,002)
6,523
Other (income) expense
Bridge financing costs 5,822 5,822
Other (344) 384 10 50
Interest expense 1,019 207 1,157 6,505 8,888
--------- --------- --------- --------- ---------
6,497 591 1,167 6,505 14,760
--------- --------- --------- --------- ---------
Income (loss) before income taxes (2,912) (1,150) 3,332 (7,507) (8,237)
Provision (credit) for income taxes (1,037) 1,265 (2,946) (2,718)
--------- --------- --------- --------- ---------
Net Income (loss) (1,875) ($1,150) $2,067 ($4,561) (5,519)
========= ========= =========
Dividends on preferred stock 726 12(5)
--------- ---------
Income (loss) available for common stock ($2,601) ($5,531)
========= =========
(Loss) per share from operations ($0.20) ($0.36)
========= =========
Weighted average shares outstanding 13,050 15,306(4)
========= =========
See notes to unaudited pro forma financial statements.
19
COMFORCE CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (2)
(in thousands except per share data)
COMFORCE
Corporation Williams RRA FORCE 5 RHOTECH AZATAR Continental
----------- -------- --- ------- ------- ------ -----------
Revenues $13,158 $657 $22,799 $4,493 $41,804 $3,854 $4,667
Cost of revenues 11,002 499 20,959 3,324 37,509 3,079 3,955
--------- --------- --------- --------- --------- --------- ---------
Gross Profit 2,156 158 1,840 1,169 4,295 775 712
Operating Expenses:
Selling General and Administrative 1,173 64 1,375 938 3,420 371 549
Depreciation and Amortization 228 1 34 16 124 16 9
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations 755 93 431 215 751 388 154
Other (income) expense (16) (39) (7) (16)
Interest expense 51 34 5 671 (10) 3
--------- --------- --------- --------- --------- --------- ---------
35 34 5 632 (17) (13)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes 720 93 397 210 119 405 167
Provision (credit) for income taxes 268 39 173
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) 452 $54 $397 $210 $119 $232 $167
========= ========= ========= ========= ========= =========
Less dividends on preferred stock
---------
Income (loss) available for common stock $452
=========
Income (loss) per share from operations $0.03
=========
Weighted average shares outstanding 13,819
=========
Pro Form
Uniforce MONTARE Adjustments(3) Pro Forma
-------- ------- -------------- ---------
Revenues $66,526 $2,474 $160,432
Cost of revenues 52,747 1,671 134,745
--------- --------- ---------
Gross Profit 13,779 803 25,687
Operating Expenses:
Selling General and Administrative 9,690 546 18,126
Depreciation and Amortization 473 6 1,473 2,380
--------- --------- --------- ---------
Income (loss) from operations 3,616 251 (1,473) 5,181
Other (income) expense (18) (14) (110)
Interest expense 973 7,161 8,888
--------- --------- --------- ---------
955 (14) 7,161 8,778
--------- --------- --------- ---------
Income (loss) before income taxes 2,661 265 (8,634) (3,597)
Provision (credit) for income taxes 1,011 (2,353) (862)
--------- --------- --------- ---------
Net income (loss) $1,650 $265 ($6,281) (2,735)
========= ========= =========
Less dividends on preferred stock 12(5)
---------
Income (loss) available for common stock $(2,747)
=========
Income (loss) per share from operations ($0.21)
=========
Weighted average shares outstanding 13,356(4)
=========
See notes to unaudited pro forma financial statements.
20
COMFORCE CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 (2)
(in thousands except per share data)
COMFORCE
Corporation Williams RRA FORCE 5 RHOTECH AZATAR
----------- -------- --- ------- ------- ------
Revenues $55,867 $657 $22,799 $4,598 $85,746 $6,403
Cost of revenues 47,574 499 20,959 3,454 76,457 5,054
--------- -------- --------- -------- -------- --------
Gross profit 8,293 158 1,840 1,144 9,289 1,349
Operating Expenses:
Selling General and administrative 5,266 64 1,375 1,274 7,215 612
Depreciation and amortization 614 1 34 14 297 28
------- -------- --------- -------- -------- --------
Income (loss) from operations 2,413 93 431 (144) 1,777 709
Other (income) expense (40) 260 (54)
Interest expense 201 34 7 1,317 29
------- -------- --------- -------- -------- --------
161 34 7 1,577 (25)
------- -------- --------- -------- -------- --------
Income (loss) before income taxes 2,252 93 397 (151) 200 734
Provision (credit) for income taxes 900 39 (49) 301
------- -------- --------- -------- -------- --------
Net income (loss) 1,352 $54 $397 ($102) $200 $433
======== ========= ======== ======== ========
Less dividends on preferred stock 325
Less accretive dividend on Series F
Preferred Stock 665
-------
$362
=======
Income (loss) per share from operations $0.03
=======
Weighted average shares outstanding 12,991
=======
Pro Form
Continental Uniforce MONTARE Adjustments(3) Pro Forma
----------- -------- ------- -------------- ---------
Revenues $8,368 $142,151 $2,474 $329,063
Cost of revenues 7,017 112,663 1,671 275,348
------ -------- ------ --------
Gross profit 1,351 29,488 803 53,715
Operating Expenses:
Selling General and administrative 898 20,434 546 37,684
Depreciation and amortization 13 1,074 6 2,769 4,850
------ -------- ------ ------- --------
Income (loss) from operations 440 7,980 251 (2,769) 11,181
Other (income) expense (25) (150) (14) (23)
Interest expense 5 2,275 13,907 17,775
------ -------- ------ ------- --------
(20) 2,125 (14) 13,907 17,752
------ -------- ------ ------- --------
Income (loss) before income taxes 460 5,855 265 (16,676) (6,571)
Provision (credit) for income taxes 0.00 2,185 (4,850) (1,474)
------ -------- ------ ------- --------
Net income (loss) $460 $3,670 $265 ($11,826) ($5,097)
====== ======== ====== =======
Less dividends on preferred stock 25(5)
Less accretive dividend on Series F
Preferred Stock 100(5)
--------
($5,222)
========
Income (loss) per share from operations ($0.39)
========
Weighted average shares outstanding 13,527(4)
========
See notes to unaudited pro forma financial statements.
21
COMFORCE Corporation
Notes to Unaudited Pro Forma Financial Statements
(1) Adjustment to record the acquisition of Uniforce and related financing as
follows:
(in thousands)
--------------
Source of Funds:
Subordinated debt financing $135,000
Bank financing 25,000
Existing cash balances 8,903
--------
Total Sources $168,903
========
Use of Funds:
Pay off COMFORCE facility $ 35,588
Pay off Uniforce facility 31,250
Purchase of Uniforce shares 93,565
Transaction Costs 8,500
--------
Total Uses $168,903
========
In addition, COMFORCE will issue approximately 1,585,000 shares of COMFORCE
common stock with a value of $12,157,000, which, together with the cash
portion of the purchase price of $93,569,000, will result in intangibles,
principally goodwill, of approximately $86,814,000.
In addition, COMFORCE will write off $1,762,000 of deferred financing fees
associated with COMFORCE's previous financing arrangements, which amount
has not been recorded as an expense in the pro forma statement of
operations.
(2) The unaudited pro forma statements of operations include the statements of
operations for the companies listed for the periods prior to their
acquisition by COMFORCE. The unaudited pro forma statement of operations
for the period ended June 30, 1997 presents the financial statements of
COMFORCE and Uniforce for their respective 1997 six month periods and the
results of operations for RHO Company incorporated ("RHO") (which was
acquired on February 28, 1997) from January 1, 1997 to February 28, 1997.
The unaudited pro forma statement of operations for the period ended June
30, 1996 presents the financial statements of COMFORCE, Uniforce, RHO,
Force Five, Inc. ("Force Five"), AZATAR Computer Systems Inc. ("AZATAR")
and Continental Field Services Corp. ("Continental") for their respective
1996 six month periods and the results of operations for companies acquired
during the six month period ended June 30, 1996 as follows: Williams
Communications Services, Inc. ("Williams") (January 1 through March 3,
1996), RRA, Inc., Project Staffing Support Team, Inc. and DataTech
Technical Services, Inc. (collectively, "RRA") (January 1 through May 10,
1996) and Montare International ("Montare") January 1, 1996 through May 17,
1996. Montare was acquired by Uniforce on May 17 1996. The acquisition of
Montare did not have a material impact on Uniforce results of operations.
The unaudited pro forma statement of operations for the year ended December
31, 1996 includes the annual 1996 results of
22
operations for COMFORCE, Uniforce, and RHO and the results of operations
for companies acquired during the period as follows: Williams (January 1
through March 3, 1996), RRA (January 1 through May 10, 1996), Force Five
(January 1 through July 31, 1996) AZATAR (January 1 through November 3,
1996), Continental (January 1 through November 17, 1996) and Montare
(January 1, 1996 through May 17, 1996). The pro forma results of operations
are presented as if these companies were acquired on January 1, 1996 and do
not purport to be an indication of the results of operations had these
acquisitions been made as of that date or of results which may occur in the
future.
(3) Pro forma adjustments include the following:
Six Months Ended Year Ended
June 30, December 31,
-------------------- ------------
1997 1996 1996
-------- -------- ------------
(in thousands)
Additional amortization of intangibles (a) $ (1,002) $ (1,473) $ (2,769)
(Increase) in interest expense (b) (6,505) (7,161) (13,907)
Decrease in provision for income taxes (c) 2,946 2,353 4,850
-------- -------- --------
Total pro forma adjustments $ (4,561) $ (6,281) $(11,826)
======== ======== ========
(a) Amortization of intangibles assumes all of the acquisitions and proposed
acquisitions occurred on January 1, 1996. The table below reflects the
amortization of intangibles with lives ranging from 5 to 40 years,
including Uniforce goodwill amortized over 40 years:
Six months ended Year ended
June 30, December 31,
--------------------- -----------
1997 1996 1996
------- ------- ------------
(In thousands)
Pro forma amortization:
Telecom $ 129 $ 129 $ 258
Williams 26 26 52
RRA 86 86 169
Force Five 26 26 52
Continental 67 67 133
AZATAR 112 112 224
RHO 179 179 357
Uniforce 1,352 1,352 2,704
Less: historical amortization (975) (504) (1,180)
------- ------- -------
Pro forma adjustment $ 1,002 $ 1,473 $ 2,769
======= ======= =======
The allocation of excess purchase price over the fair value of the assets
acquired has not been finalized and management believes that any change to
the allocation will not have a material effect on the financial statements
of COMFORCE.
(b) The pro forma adjustment to interest expense reflects interest expense on
the placement of Subordinated Debt and borrowings under a new revolving
credit facility aggregating $160 million.
23
Pro forma interest expense has been calculated using an average interest
rate of 10.7% per annum plus the amortization of debt financing costs.
Financing costs do not include the effects of warrants, if any, which may
be granted in connection with the placement of this debt.
(c) The pro forma adjustment for income taxes reflects the tax effect of the
proforma adjustments (excluding non-deductible amortization), the tax
effect of S Corporation earnings treated as C Corporation earnings and the
tax benefit of losses by other entities within the pro forma combined
group.
(4) Pro forma weighted average shares outstanding are calculated as follows:
Six months ended Year ended
June 30, December 31,
------------------- ------------
1997 1996 1996
---- ---- ----
(In thousands of shares)
Historical weighted average shares outstanding 13,050 13,819 12,991
Shares issued - Uniforce acquisition 1,585 1,585 1,585
Shares issued as compensation * * *
Shares issued-Telecom acquisition * * *
Shares issued-Force Five acquisition * 27 *
Shares issued-AZATAR acquisition * 243 *
Shares issued-Continental acquisition * 37 *
Common stock sold to fund Continental acquisition * 460 *
Common stock equivalents Series D and E preferred stock 671 1,558 893
Common stock equivalents on Series F preferred stock ** ** **
Warrants issued in connection with the Continental ** ** **
acquisition ** ** **
Warrants issued in connection with the Telecom * ** **
acquisition ** (4,373) (1,942)
Shares issued to certain shareholders ** ** **
------ ------ ------
Common stock equivalents which have become anti-dilutive 15,306 13,356 13,527
====== ====== ======
Contingent shares
Total Pro Forma Shares
* Included in historical weighted average shares outstanding.
** Excluded as the effect would be anti-dilutive.
(5) Pro forma dividends for all periods presented represent dividends and
accretive dividends on $500,000 of Series F preferred stock remaining
outstanding as of June 30, 1997 and deemed outstanding for all periods
presented. Proceeds from this transaction of $160 million have been deemed
to be fully outstanding on a pro forma basis for all periods presented.
Accordingly, Series D preferred stock, the proceeds of which were utilized
for working capital purposes, and Series E preferred stock, the proceeds of
which were utilized to acquire RRA, have been deemed to have been converted
to common stock effective January 1, 1996, with the effects of such common
shares included in weighted average shares outstanding for all periods
presented.
24
Summary Historical and Unaudited Pro Forma Financial Data
The following table presents summary historical financial data of COMFORCE
and Uniforce, and summary pro forma combined financial data after giving effect
to the Merger under the purchase method of accounting. COMFORCE and Uniforce
summary financial data as of and for each of the last five fiscal years have
been derived from the respective Company's audited consolidated financial
statements. The summary historical data as of and for the six month periods
ended June 30, 1997 and 1996 have been derived from the unaudited financial
statements of the respective companies and, in the opinion of COMFORCE's and
Uniforce's respective management, include all adjustments necessary for a fair
presentation of such information as of and for such interim periods.
The summary unaudited pro forma financial data have been derived from the
unaudited pro forma financial statements included elsewhere in the registration
statement. The pro forma data has been presented for illustrative purposes only
and are not indicative of the financial position or operating results that would
have occurred or that will occur upon consummation of the Merger. The following
summary financial data should be read in conjunction with such historical and
unaudited pro forma financial statements and notes thereto included in this
registration statement.
25
6 months 6 months
ended ended
6/30/97 6/30/96 1996 1995 1994 1993 1992
----------------------------------------------------------------------------------------
(unaudited) (unaudited)
COMFORCE HISTORICAL: (in thousands, except per share data)
Net Sales $ 91,477 $ 13,158 $ 55,867 $ 2,387 --
Income (loss) from continuing
operations (1,875) 452 1,352 (4,332) (2,282) (1,456) (421)
Net income (loss) per share from
continuing operations (0.20) 0.03 0.03 (0.95) (0.72) (0.39) (0.13)
Working Capital 8,802 4,385 8,012 (1,697) (3) (3) (3)
Total assets (2) 77,441 22,124 43,366 8,536 (3) (3) (3)
Long-term debt 20,000 (3) (3) (3)
Preferred stock 1 2 2 -- (3) (3) (3)
Stockholders' equity 28,563 16,304 34,744 2,238 (3) (3) (3)
Cash dividends on preferred stock 262 -- 228 -- (3) (3) (3)
Book value per share 2.18 1.18 2.67 0.49 (3) (3) (3)
Cash dividends per common share 0 0 0 0 (3) (3) (3)
--------- --------- --------- ---------
6 months 6 months
ended ended
6/30/97 6/30/96 1996 1995 1994 1993 1992
----------------------------------------------------------------------------------------
(unaudited) (unaudited)
UNIFORCE HISTORICAL: (in thousands, except per share data)
$ 86,163 $ 66,526 $ 142,151 $ 134,471 $ 115,181 $ 86,142 $ 82,925
Income (loss) from continuing
operations 2,067 1,650 3,670 3,563 2,951 1,493 1,144
Net income (loss) attributable
to common shares 0.65 0.50 1.13 0.83 0.65 0.35 0.26
Working Capital 34,315 28,412 29,003 29,181 19,281 17,508 16,661
Total assets 62,366 53,943 54,969 50,596 41,496 30,235 28,040
Long-term debt 29,880 27,996 26,483 11,676 2,800 -- --
Stockholders' equity 16,225 12,311 14,222 24,160 23,112 20,708 19,851
Cash dividends 182 182 363 526 533 517 522
Book value per share 5.07 3.73 4.36 5.60 5.08 4.81 4.57
Cash dividends per share .06 .06 .12 .12 .12 .12 .10
26
6 months ended Year Ended
6/30/97 12/31/96
-------------------------------------
(Unaudited) (Unaudited)
Pro Forma -- Combined (4) (5) (In thousands, except per share data)
Net sales $ 193,056 $ 329,063
Net loss (5,519) (5,097)
Net loss attributable to common shares (5,531) (5,222)
Net income (loss) per share attributable to common shares (0.36) (0.39)
Working capital 50,551
Total assets (2) 227,105
Long-term debt 156,631
Preferred stock 1
Stockholders' equity 38,924
Cash dividends 12
Book value per share 2.54
Equivalent pro forma - Uniforce (.19) (.20)
Loss per share
Cash dividends per common share -0-
Book value per share 1.33
(1) COMFORCE's results of the second quarter of fiscal 1997 included a charge
of $726 for dividends to preferred shareholders. For fiscal 1996 COMFORCE's
net income available to common shares was not of accretive dividends on its
Series F Preferred Stock of $665 and $325 on the remaining Preferred Stock
outstanding.
(2) As partial consideration for a debt settlement agreement, in December 1994,
COMFORCE's bank lender received all the assets of COMFORCE's former New
Dimension subsidiary.
(3) Data not presented as information is not meaningful since COMFORCE was not
in the staffing business during such periods.
(4) The pro forma combined financial data includes the results of pro forma
COMFORCE and Uniforce combined. These results include COMFORCE's prior
acquisitions and Uniforce's acquisition of Montare as if such acquisitions
had occurred at the beginning of the respective periods.
(5) See the notes to the Unaudited Pro Forma Combined Financial statements
included on pages F-2 - F-11, herein.
(6) Equivalent pro forma per share amounts are calculated by multiplying the
pro forma data presented by the Uniforce stock exchange rate of 0.5217.
27
COMPARATIVE MARKET PRICES AND DIVIDENDS
COMFORCE
COMFORCE's Common Stock, $.01 par value, is traded on the American Stock
Exchange (AMEX:CFS). The high and low sales prices for COMFORCE's Common Stock,
as reported by the American Stock Exchange in the Monthly Market Statistics for
the periods indicated, were as follows:
Prior to Acquisition of COMFORCE Telecom, Inc: (1)
High Low
Fiscal Year 1995
First Quarter ................................. 3-7/8 1-15/16
Second Quarter ................................ 3-1/2 2
Third Quarter ................................. 4-3/4 1-9/16
Fourth Quarter (through October 16, 1995) ..... 4-3/8 3-1/4
Following Acquisition of COMFORCE Telecom, Inc.:
Fourth Quarter (commencing October 17, 1995) .. 9-1/4 3-1/4
Fiscal Year 1996
First Quarter ................................. 10-3/8 6
Second Quarter ................................ 34-1/8 9-3/8
Third Quarter ................................. 28-1/2 15-1/2
Fourth Quarter ................................ 18-3/8 11-1/2
Fiscal Year 1997
First Quarter ................................. 14 6-1/8
Second Quarter ................................ 7-1/2 4
Third Quarter ................................. 9-5/16 5-7/8
Fourth Quarter (through October 23, 1997) ..... 7-7/8 8-9/16
(1) In October 1995 COMFORCE entered the technical staffing business
through the acquisition of COMFORCE Telecom, Inc. Prior to that time it had been
primarily engaged in the jewelry business under the name The Lori Corporation.
The last reported sale price of the COMFORCE Common Stock on the American
Stock Exchange on October 23, 1997 was $8-1/8. As of October 23, 1997, there
were approximately 5,000 shareholders of record.
COMFORCE anticipates that it will not pay cash dividends on the COMFORCE
Common Stock for the foreseeable future and that it will retain its earnings to
finance future growth. The declaration and payment of dividends by COMFORCE are
subject to the discretion of its Board of Directors and compliance with
applicable law. Any determination as to the payment of dividends in the future
will depend upon, among other things, general business conditions, the effect of
such payment on COMFORCE's financial condition and other factors COMFORCE's
Board of Directors may in the future consider relevant. Under COMFORCE's
existing revolving credit facility, COMFORCE is prohibited from paying cash
dividends on its Common Stock or, subject to limited exceptions, its Preferred
Stock, and the instruments entered into in connection with the Offer, the Merger
and the refinancing of the existing debt of Uniforce and COMFORCE will also
restrict the payment of cash dividends. No dividends have been declared or paid
on the COMFORCE Common Stock during 1995, 1996 or 1997.
28
Uniforce
The Uniforce Common Stock, $.01 par value, has been traded on the American
Stock Exchange (AMEX:UFR) since June 26, 1997 and prior to that time was traded
on the Nasdaq National Market (ticker symbol: UNFR). The following table sets
forth, for the periods indicated, the high and low closing bid prices for the
Uniforce Common Stock, as reported by Nasdaq prior to June 26, 1997 and the high
and low sales prices as reported by the American Stock Exchange on and after
June 26, 1997.
High Low
Fiscal Year 1995
First Quarter 10-1/8 9
Second Quarter 11-1/4 8
Third Quarter 9-5/8 8-3/4
Fourth Quarter 11 8-3/4
Fiscal Year 1996
First Quarter 18-1/2 9-1/2
Second Quarter 30 12-1/4
Third Quarter 23-3/4 21-1/4
Fourth Quarter 22 17
Fiscal Year 1997
First Quarter 19-3/4 14-3/4
Second Quarter (through June 25, 1997) 19-1/4 13-1/2
Second Quarter (June 26-30, 1997) 18-1/8 18-1/8
Third Quarter 30-3/8 17-3/4
Fourth Quarter (through October 23, 1997) 30-7/8 31-1/4
During 1996 and the first three quarters of 1997, Uniforce paid quarterly
cash dividends on shares of its Common Stock at the quarterly rate of $.03 per
share.
As of October 23, 1997, there were 167 holders of record of Uniforce Common
Stock. Uniforce believes that there are in excess of 1,520 beneficial owners of
Uniforce Common Stock in addition to such holders of record. The last reported
sale price of the Uniforce Common Stock on the American Stock Exchange on August
13, 1997, the day before the announcement of the transactions, was $23-7/16 and
on October 23, 1997 was $31-1/8.
29
BACKGROUND AND PURPOSE OF THE TRANSACTIONS
Background of the Transactions
The initial meeting between management of COMFORCE and the management of
Uniforce occurred in mid-April 1997, when each attended a staffing industry
conference in Washington, D.C. At that initial meeting the parties exchanged
introductions and inquired as to each other's general business. Upon returning
from the staffing conference, senior management of COMFORCE determined,
consistent with COMFORCE's acquisition strategy, to meet with representatives of
Uniforce to see if a potential transaction could take place. Shortly thereafter,
senior management of COMFORCE met over lunch with senior management of Uniforce.
At that lunch, additional facts about each company were exchanged, but no
particular transaction was discussed or proposed. The discussion instead focused
on the potential strategic fit between the two parties, particularly noting the
fact that each company's headquarters were located very close to one another,
the fact that Uniforce had a particularly attractive and efficient back office
which could be used by COMFORCE, the fact that the two companies had a
complementary IT business and the fact that there appeared to be a minimum
overlap of customers shared by the parties.
In early May, senior management of COMFORCE and Uniforce again met over
lunch. At this meeting, for the first time, a proposed transaction was
discussed. Senior management for Uniforce informed COMFORCE that a transaction
would have to be structured as an all, or substantially all, cash transaction.
At that time, senior management of Uniforce informed COMFORCE that John Fanning,
the Chairman and Chief Executive Officer of Uniforce, wished to purchase the
ProUnlimited business line from Uniforce. Although pricing was not discussed,
Uniforce's management told COMFORCE of the existence of a transaction that could
have been consummated for $26.00 in cash, which Uniforce's management chose not
to pursue and implied that any offer by COMFORCE would have to exceed $26.00 in
cash.
On March 27, 1996, Uniforce had engaged a financial advisor to assist in
locating a party with which it might enter into a transaction for the transfer
of the control or assets of Uniforce. From that date until December 31, 1996,
the financial advisor and executives of Uniforce diligently sought a company
with which such a transaction could be consummated. The financial advisor made
an extensive number of contacts with potential domestic and foreign strategic
and financial buyers without eliciting an indication of interest other than the
potential transaction at $26 a share referred to above.
Uniforce management determined that an all or substantially all cash
transaction would be in the best interests of the Uniforce shareholders because
it would limit any uncertainty involving the value of the consideration to be
received by the shareholders and protect against market declines, provide cash
for the payment of income taxes that would be imposed in the transaction, and
provide the shareholders with as much liquidity and freedom of choice as to
their future investment decisions as possible in connection with the
transaction.
In May, June and July, COMFORCE's management had several discussions with
investment banking firms about the feasibility of financing a primarily cash
transaction of the approximate size of the Offer and Merger. During those
discussions, NatWest Capital Markets Limited ("NatWest") expressed its high
level of confidence in its ability to sell or place high yield securities in an
aggregate principal amount sufficient to fund the proposed transaction in
conjunction with the refinancing of COMFORCE's existing credit facility.
In mid-July, senior management of COMFORCE again contacted senior
management of Uniforce to explore the terms of a transaction. Several meetings
occurred in mid to late July in which the general terms of the transaction were
discussed. The parties discussed the terms of the proposed transaction pursuant
to which COMFORCE would acquire Uniforce without the ProUnlimited business.
30
On July 28, 1997, senior management of Uniforce and COMFORCE, as well as
their advisors, met to attempt to negotiate the terms of the transaction. At the
end of such meetings, the terms had not yet been concluded, as the details of
the proposed ProUnlimited transaction had not been discussed. Throughout that
week, management of both companies had further discussions and on August 4, the
parties met again to discuss further the proposed transaction. That meeting
ended without an agreement on the terms of the transaction with particular
disagreement on the terms of the ProUnlimited transaction. During the next week,
members of management of both companies met and exchanged detailed information
about ProUnlimited, and, during that time, COMFORCE's management came to the
conclusion that it was not economically feasible or desirable to purchase
Uniforce without the ProUnlimited business. On August 8, senior management of
both companies met again and discussed the terms of the transaction without the
sale of the ProUnlimited business to Mr. Fanning.
The board of directors of Uniforce met on August 1 and discussed the terms
of the proposed transactions and authorized management to continue discussions.
On August 13, the Uniforce board acted to approve the Agreement and Plan of
Merger. On July 30 and August 11, the board of directors of COMFORCE met and
approved the Agreement and Plan of Merger. The Merger Agreement was executed on
August 13, 1997. Also on August 13, the Fanning Shareholders, who held greater
than 59% of the outstanding voting Shares of Uniforce Common Stock, executed the
Stockholders Agreement, pursuant to which they agreed to vote in favor of the
Merger and the Merger Agreement and to tender their shares into the Offer.
Purpose of the Transactions
In evaluating the decision to commence the Offer and the Merger, the
management and Board of Directors of COMFORCE considered a variety of factors in
the context of COMFORCE's strategic objectives. A key element of COMFORCE's
expansion strategy is to acquire staffing and consulting companies with
profitable track records and recognized local or regional presence in order to
expand COMFORCE's geographic service base, diversify its capabilities in the
high technology sectors, strengthen its existing expertise and expand its
proprietary database of highly skilled technical talent.
With the acquisition of Uniforce, COMFORCE will have the ability to provide
a full range of services on a nationwide basis. In general, COMFORCE and
Uniforce do not currently serve the same customers, so that the combination of
the customer bases of COMFORCE and Uniforce will result in a significant
expansion in the number of customers currently served by COMFORCE.
The acquisition brings to COMFORCE Uniforce's back office operation, which
COMFORCE believes is advanced and efficient. This back office processing
capability represents a significant advantage which should allow faster and more
successful integration of future acquisitions and should allow COMFORCE to
realize operating efficiencies which will be increasingly important as the
consolidation of the supplemental staffing industry continues. Sale of back
office services to other staffing and consulting firms, in addition to providing
a source of revenue, may also allow COMFORCE to identify potential future
acquisitions of complementary businesses. In addition, the efficient back office
operations should allow COMFORCE to perform payroll and other services for
customers in a more cost-effective manner, resulting in anticipated greater
profitability in this aspect of COMFORCE's business, which typically generates
lower margins than providing supplemental staffers.
COMFORCE's management considered the impact of certain general and
administrative cost savings it believed could be realized following the Merger
and evaluated the pro forma financial impact of the Merger. Additionally,
COMFORCE's management considered certain projected financial information
supplied by Uniforce. See "Projected Financial Information of Uniforce".
31
RECOMMENDATION OF THE UNIFORCE BOARD OF DIRECTORS
The Uniforce Board of Directors has unanimously approved the Merger
Agreement and recommends that the Shareholders of Uniforce tender their shares
in the Offer and vote FOR approval of the Merger Agreement. The Uniforce Board
of Directors believes that the Offer and Merger are in the best interests of the
Uniforce Shareholders. The following are the material factors considered by the
Board in reaching this conclusion: (i) the financial condition, earnings,
business, operations, assets, management and prospects of Uniforce; (ii) the
recent market prices of the Uniforce Common Stock and the COMFORCE Common Stock;
(iii) the consideration to be paid under the Merger Agreement as compared to
consideration paid in other business combinations; (iv) prior expressions of
interest by third parties in effecting a business combination with Uniforce; (v)
the general interest in the investment community in temporary staffing
companies; and (vi) the opinion of Chartered Capital Advisers, Inc., which
opinion was rendered after approval of the Merger Agreement but prior to the
date of this Prospectus/Proxy Statement, that the consideration to be received
by the Shareholders of Uniforce pursuant to the Merger Agreement is fair from a
financial point of view to the Shareholders of Uniforce. The Board did not
attach any particular weight to any one factor. The Uniforce Board of Directors
did not consider requiring the separate approval of any subset of the
shareholders or other special procedural devices in connection with the Merger
because the Board of Directors did not believe they were warranted by the facts
or circumstances or required by applicable law. In considering the
recommendation of the Board, Uniforce Shareholders should be aware that certain
members of the Board and executive officers of Uniforce have interests in the
transaction which may present them with conflicts of interest. See "The
Transactions--Interests of Certain Persons in the Transactions." The members of
the Board were aware of these potential conflicts and considered them in making
their recommendation and approving the Merger Agreement.
OPINION OF FINANCIAL ADVISOR
Chartered Capital Advisers, Inc. (the "Financial Advisor") was retained by
Uniforce on behalf of the Board of Directors to render its opinion to the Board
as to the fairness to the Shareholders of Uniforce from a financial point of
view of the consideration to be received by the Shareholders of Uniforce
pursuant to the Merger Agreement. No limitations were imposed by Uniforce with
respect to the opinion to be rendered by the Financial Advisor.
The Financial Advisor was not involved in determining the terms of the
Merger Agreement. The Financial Advisor was selected by the Board of Directors,
after consideration of other investment bankers, based upon favorable past
experience with the Financial Advisor and its familiarity with Uniforce and upon
the Uniforce Board's view of the Financial Advisor's qualifications, expertise
and reputation. The Board of Directors considered and obtained proposals from
three investment bankers, each of which had considerable experience in rendering
fairness opinions and providing financial advisory services. An independent
committee of the Board, consisting of Joseph A. Driscoll, John H. Brinkerhoff
and Gordon Robinett, discussed the experience and qualifications of the three
firms and, in the case of Chartered Capital Advisers, Inc., its prior
engagements with Uniforce. The committee recommended and the Board selected
Chartered Capital Advisers, Inc. because it had previously provided services
that were rendered in a timely and satisfactory manner and because of its
familiarity with the operations, financial condition and prospects of Uniforce.
The Financial Advisor is regularly engaged in the valuation of businesses
and securities in connection with mergers and acquisitions, private placements,
shareholder transactions, estate and gift taxes, litigation, and for other
purposes.
At a meeting of the Uniforce Board of Directors held on August 13, 1997,
the Board determined that the Merger Agreement and the transactions contemplated
thereby are fair to and in the best interests of the
32
Shareholders of Uniforce, subject to receipt of a written opinion from an
investment banking firm as to the fairness from a financial point of view of the
consideration to be received by Uniforce Shareholders pursuant to the Merger
Agreement. At a meeting of the Uniforce Board held on September 3, 1997, the
proposed written opinion of the Financial Advisor was considered and discussed
by the Board, and accepted as fulfilling the foregoing condition. Thereafter,
the Financial Advisor issued its opinion dated September 3, 1997. The opinion
states that the consideration to be received by the Shareholders of Uniforce
pursuant to the Merger Agreement (the "Consideration") is fair from a financial
point of view to the Shareholders of Uniforce.
Reference is made to the full text of the opinion of the Financial Advisor,
which is set forth as Appendix C to this Prospectus/Proxy Statement and is
hereby incorporated herein by reference. Shareholders of Uniforce are urged to
read the opinion carefully in its entirety. As described in its opinion, the
Financial Advisor, among other things, (i) reviewed the Merger Agreement, the
Stockholders Agreement, and the Registration Rights Agreement, Noncompetition
Agreement and Employment Agreements signed by Uniforce, COMFORCE and/or certain
executives of Uniforce as of August 13, 1997; (ii) reviewed the Parent
Disclosure Schedule provided by COMFORCE pursuant to the Merger Agreement; (iii)
reviewed a draft of the Registration Statement of which this Prospectus/Proxy
Statement forms a part; (iv) analyzed financial information with respect to
Uniforce, including but not limited to unaudited financial statements for the
six months ended June 30, 1997, audited financial statements for the five years
ended December 31, 1996 and various internal management information reports; (v)
analyzed financial information with respect to COMFORCE, including but not
limited to unaudited financial statements for the six months ended June 30,
1997, and audited financial statements as of and for the two years ended
December 31, 1996; (vi) reviewed various documents filed by Uniforce with the
Securities and Exchange commission, including the Form 8-K filed on August 19,
1997, the Forms 10-Q for the quarters ended March 31, 1997 and June 30, 1997,
the Forms 10-K for the five years ended December 31, 1996 and the Definitive
Proxy filed on April 29, 1997; (vii) reviewed various documents filed by
COMFORCE with the Securities and Exchange Commission, including the Form 8-K
filed on August 20, 1997, the Forms 10-Q for the quarters ended March 31, 1997
and June 30, 1997, the Forms 10-K for the two years ended December 31, 1996, the
Form S-3 filed on July 11, 1997 and the Definitive Proxy filed on June 30, 1997;
(viii) visited the facilities of Uniforce and held discussions with certain
members of its management and advisors concerning the past, current, and planned
operations, financial condition, and business of Uniforce; (ix) analyzed
historical stock prices of Uniforce and COMFORCE; (x) discussed with the legal
advisors of Uniforce the results of their due diligence; (xi) considered
financial data for publicly held companies with similar investment
characteristics to Uniforce; (xii) considered financial data of Uniforce, and
compared that data with similar data for certain business combinations and other
transactions that have recently been effectuated; (xiii) considered the cash
flow and net asset value of Uniforce; (xiv) considered the projected financial
performance of Uniforce; (xv) considered the acquisition premium reflected in
the consideration to be received by the Uniforce Shareholders as a result of the
Offer and the Merger, and compared that premium to other relevant transactions;
and (xvi) considered such other information, financial studies and analyses as
the Financial Advisor deemed relevant, and performed such analyses, studies and
investigations as it deemed appropriate.
The Financial Advisor utilized several analyses in rendering its fairness
opinion. They are briefly described below.
Capitalization multiples were developed for 52 publicly traded staffing
companies - substantially all of the publicly traded companies in the industry.
The capitalization multiples developed reflected the price per share on August
27, 1997 of each of these companies divided by their historical earnings,
projected 1997 earnings, projected 1998 earnings, revenues, and book value. The
capitalization multiples developed from these companies were applied to the
historical earnings, projected 1997 earnings, projected 1998 revenues, and book
value of Uniforce to develop a range of value. The range of value resulting from
the application of this methodology was between $86,000,000 and $105,000,000, or
$28.44 to $34.73 per share. The Consideration is at the high end of
33
the indicated range. Accordingly, this methodology supports the Financial
Advisor's opinion that the Consideration is fair, from a financial point of
view, to the shareholders of Uniforce.
Capitalization multiples developed from 24 staffing companies that were
acquired between 1994 and 1997 were applied to the revenues, earnings, cash
flow, book value and net tangible assets of Uniforce. The range of value
resulting from the application of this methodology was between $60,000,000 and
$75,000,000, or $19.84 to $24.81 per share. The Consideration is above the high
end of the indicated range. Accordingly, this methodology supports the Financial
Advisor's opinion that the Consideration is fair, from a financial point of
view, to the shareholders of Uniforce.
The historical cash flows of Uniforce were capitalized, using two
alternative capital structures for purposes of developing a cash flow
capitalization multiple. One capital structure was based on the indebtedness of
Uniforce at June 30, 1997; the alternative analysis assumed a 3:1 debt/equity
ratio. The alternative capital structures resulted in two different ranges of
value. The range of value based on the capital structure of Uniforce at June 30,
1997 was between $45,000,000 and $55,000,000, or $14.88 to $18.19 per share. The
range of value based on a 3:1 debt/equity ratio was between $74,000,000 and
$90,000,000, or $24.47 to $29.77 per share. The Consideration is above the high
end of the indicated ranges. Accordingly, these methodologies support the
Financial Advisor's opinion that the Consideration is fair, from a financial
point of view, to the shareholders of Uniforce.
An estimate of value was developed, based on a pro forma capital structure
supportable by the assets and cash flow of Uniforce under a leveraged buyout.
The range of value resulting from the application of this methodology was
between $36,000,000 and $44,000,000, or $11.91 to $14.55 per share. The
Consideration is above the high end of the indicated range. Accordingly, this
methodology supports the Financial Advisor's opinion that the Consideration is
fair, from a financial point of view, to the shareholders of Uniforce.
Discounted cash flow analysis was used to estimate value based on the
projected cash flows of Uniforce. The analysis is based on the projections
contained herein in the "Projected Financial Information of Uniforce." These
projections, covering 1997 and 1998, were extrapolated through the year 2002,
and adjusted to take into consideration the capital requirements of Uniforce.
The cash flows were discounted to a present value, based on an estimate of a pro
forma weighted average cost of capital. At the end of the period projected, a
terminal value was estimated, by capitalizing the projected operating income in
2002 at the weighted average cost of capital. The Consideration exceeds the
range of value developed under discounted cash flow analysis. The range of value
resulting from the application of this methodology was between $78,000,000 and
$96,000,000, or $25.80 to $31.75 per share. The Consideration is above the high
end of the indicated range. Accordingly, this methodology supports the Financial
Advisor's opinion that the Consideration is fair, from a financial point of
view, to the shareholders of Uniforce.
The net tangible asset value of Uniforce was estimated as of June 30, 1997.
Adjustments were made to eliminate goodwill, deferred costs, and other
intangible assets. The range of value resulting from the application of this
methodology was between $8,800,000 and $10,700,000, $2.91 to $3.54 per share.
The Consideration is above the high end of the indicated range. Although this
methodology supports the Financial Advisor's opinion that the Consideration is
fair, from a financial point of view, to the shareholders of Uniforce, the
Financial Advisor attributed no weight to this methodology, since it is not an
appropriate basis for valuing a company such as Uniforce. However, for purposes
of performing a comprehensive valuation analysis, the Financial Advisor
performed an analysis of net tangible asset value.
The Financial Advisor considered the premium reflected in the Consideration
in relation to the price of Uniforce common stock the day prior to the
announcement of the Merger (a 39.1% premium), as well as the premium based on a
comparison of the Consideration to the closing price of Uniforce common stock 30
days earlier (a 58.0% premium), 60 days earlier (an 85.5% premium), and the
average 1997 stock price prior to August 13, 1997 (an 82.1% premium). The
acquisition premium is high in relationship to the premium of
34
43.09% (based on a 30 day average of the closing price) reflected in other
acquisitions of publicly held companies where transaction sizes were equal to or
greater than $20 million and were announced during the first seven months of
1997. The Consideration reflects a substantial premium over the price of
Uniforce common stock over the past five years, and is in excess of the highest
price that Uniforce common stock has traded during that period.
In rendering its opinion, the Financial Advisor relied on the accuracy and
completeness of the financial and other information furnished to it, as well as
upon publicly available information, and did not independently verify such
information. The opinion is based upon economic, market, and other conditions as
of the date that it was rendered. It is limited to the fairness from a financial
point of view of the Consideration. It is not an opinion of the value of
Uniforce or COMFORCE, nor does it constitute a representation regarding the
business decision to enter into the Merger Agreement, or any other terms of the
Merger Agreement.
See "Projected Financial Information of Uniforce" for a summary of certain
projections provided to the Financial Advisor. The Financial Advisor has
consented to the use of its opinion in this Prospectus/Proxy Statement.
Uniforce will pay the Financial Advisor a fee of $50,000 for rendering its
opinion. In addition, Uniforce agreed to reimburse the Financial Advisor for
reasonable out-of-pocket expenses and to indemnify the Financial Advisor and its
directors, officers and employees against any loss or claims arising out of its
engagement by Uniforce, subject to certain exceptions.
From 1994 through 1997, the Financial Advisor provided certain valuation
and financial advisory services to Uniforce and its outside directors. The fees
received by the Financial Advisor for these services have approximated $35,000.
35
PROJECTED FINANCIAL INFORMATION OF UNIFORCE
In the course of discussions with COMFORCE, Uniforce provided COMFORCE and
Chartered Capital Advisers, Inc. (the "Financial Advisor") with certain
projected financial data for the fiscal years ending December 31, 1997 and 1998.
This data, which constitutes forward-looking information, was not prepared with
a view to public disclosure or compliance with published guidelines of the
Commission or the guidelines of the American Institute of Certified Public
Accountants ("AICPA") regarding projections, and is included in this
Prospectus/Proxy Statement only because it was provided to COMFORCE and the
Financial Advisor. Uniforce's and COMFORCE's independent auditors have not
examined, compiled or applied any procedures with respect to this data in
accordance with standards established by the AICPA and express no opinion or any
kind of assurance on their reasonableness or achievability. While presented with
numerical specificity, the projected financial data were prepared based on facts
and circumstances which may have changed since the preparation thereof and on a
variety of assumptions relating to the business of Uniforce (which are
summarized below) which, although considered appropriate at the time to
Uniforce, may not be realized. Moreover, the data, and the assumptions on which
it is based, are subject to significant uncertainties and contingencies, many of
which are beyond the control of Uniforce. Certain of the factors which may cause
or contribute to differences between the forward-looking statements set forth
below and Uniforce's actual results are identified under "Risk Factors."
Consequently, this projected data and the underlying assumptions are necessarily
speculative in nature and inherently imprecise, and there can be no assurance
that projected financial results will be realized. It is expected that there
will be differences between actual and projected results, and actual results may
vary materially from those shown. Neither Uniforce nor COMFORCE has updated or
intends to update or otherwise revise this projected data. The inclusion of the
projections herein should not be regarded as an indication that Uniforce,
COMFORCE, their respective independent auditors, or the Financial Advisor
considers them an accurate prediction of future results. Uniforce shareholders
are cautioned not to place undue reliance on the projections, which should be
read together with other information relating to the business, assets and
financial condition of Uniforce and the consolidated financial statements of
Uniforce included herein. Set forth below is a summary of the projected
financial data compiled by Uniforce in June 1997 based on data prepared and
gathered over the period from November 1996 through June 1997 and subsequently
provided to COMFORCE and the Financial Advisor.
For the Year Ending December 31,
--------------------------------
(in millions)
Income Statement Data: 1997 1998
---- ----
Total revenues $186.8 $205.8
Operating expenses (excluding
depreciation and amortization) 175.1 191.8
Depreciation and amortization 1.4 1.6
Operating profit 10.3 12.4
Interest expense and debt
amortization costs 2.5 3.1
Income taxes 3.0 3.5
Net Income 4.8 5.8
36
Balance Sheet Data: at December 31,
--------------------------------
(in millions)
1997 1998
---- ----
Accounts and funding and service
fees receivable $49.3 $58.0
Net fixed assets 4.4 4.6
Long-term debt (including current portion) 33.7 36.9
The following summarizes the material assumptions on which the foregoing
projections were based:
1. United States Economy and Staffing Industry. The projections assume that
the United States gross domestic product would continue to grow at annual rate
of 2 1/2% to 3% for the balance of 1997 and 1998. During the past five years,
growth in the staffing industry has outpaced overall economic growth in the
United States. Consolidation in the staffing industry has caused several of the
larger companies to achieve a superior rate of growth as a result of
acquisitions. The projections assume that the revenues and gross margin of
Uniforce will not be adversely affected by the consolidations in the staffing
industry.
2. Revenues. Revenue growth was projected based on individual projections
for each of the business units of Uniforce. The projections assumed that the
number of licensed offices operating as Uniforce Staffing Services, Inc. would
remain constant and that Uniforce would not suffer any major client losses.
The projections for 1997 reflect an assumed increase in revenues of 31.4%
compared to 1996. During the first half of 1997, revenues increased by 29.5%
over the 1996 first-half revenues. Revenues during 1998 are projected to
increase by 10.2%. These projections reflect assumed increases ranging between
0% and 20% for the various Uniforce business units.
3. Operating Expenses. Operating expenses are comprised of the cost of
supplemental staffing, the portion of gross profits shared with licensees, and
general and administrative expenses. During the first half of 1997, operating
expenses, exclusive of depreciation and amortization, represented 94.1% of
revenues. During the second half of 1997 and for 1998 operating expenses were
projected to be 93.4% and 93.2% of revenues, respectively. The projected
reduction of operating expenses as a percent of revenues was based on assumed
economies of scale and changes in the mix of business.
4. Depreciation and Amortization. The annualized rate of depreciation and
amortization during the first half of 1997 was approximately $1.2 million. The
projections reflect assumed annual depreciation and amortization expenses of
$1.4 million for 1997 and $1.6 million in 1998. The increases were based on
Uniforce's capital expenditure budget, and assumed straight-line amortization of
depreciable and amortizable assets over their estimated useful lives.
5. Interest Expense and Debt Amortization Costs. Net interest and debt
amortization costs for the first half of 1997 were approximately $1.2 million.
The projections reflect assumed annual interest and debt amortization costs of
$2.5 million and $3.1 million during 1997 and 1998, respectively. The
projections assumed no changes in interest rates from the approximately 8%
average rate for the six months ended June 30, 1997, but assumed overall growth
in interest expense as a result of increased revenues and borrowing costs
associated with financing accounts receivable.
37
6. Income Taxes. The projections reflect an assumed effective tax rate of
approximately 38%, which is consistent with Uniforce's historical experience.
7. Other. The projections also assumed that: (i) there would be no material
changes in taxes or other laws that could have an adverse effect on Uniforce's
business; (ii) staff compensation and benefits as a percent of revenues would be
consistent with historical levels for each business unit; (iii) Uniforce's
success at recruiting and retaining supplemental staffing personnel would be
consistent with its historical experience; and (iv) no significant acquisitions
would be made.
THE TRANSACTIONS
The detailed terms and conditions of the Offer and the Merger are contained
in a certain Agreement and Plan of Merger dated as of August 13, 1997 among
COMFORCE, the Subsidiary and Uniforce (the "Merger Agreement"), which is
attached hereto as Appendix A and incorporated herein by reference. The
following discussion sets forth a description of the material terms and
conditions of the Merger Agreement. The description in this Prospectus/Proxy
Statement of the terms and conditions of the Offer and the Merger is qualified
in its entirety by reference to the Merger Agreement.
The Tender Offer
Introduction
COMFORCE, through its Subsidiary, hereby offers to purchase all the issued
and outstanding shares (the "Shares") of Uniforce Common Stock, at $28.00 per
Share, net to the seller in cash, without interest thereon, plus 0.5217 shares
of COMFORCE Common Stock per Share (collectively the "Per Share Amount"), upon
the terms and subject to the conditions set forth in this Prospectus/Proxy
Statement and in the related Letter of Transmittal (which, as amended from time
to time, together constitute the "Offer").
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal, stock
transfer taxes on the purchase of Shares by COMFORCE pursuant to the Offer.
However, any tendering shareholder or other payee who fails to complete and sign
the Substitute Form W-9 that is included in the Letter of Transmittal may be
subject to a required backup federal income tax withholding of 31% of the gross
proceeds payable to such shareholder or other payee pursuant to the Offer. See
"The Transactions - Certain Federal Income Tax Consequences of the Offer and the
Merger". COMFORCE will pay all charges and expenses of MacKenzie Partners, as
Information Agent (the "Information Agent"), and American Stock Transfer & Trust
Company, as Depositary (the "Depositary"), incurred in connection with the
Offer.
The purpose of the Offer is to acquire Uniforce. Upon consummation of the
Offer, COMFORCE will seek to obtain representation, at least commensurate with
its equity interest, on the Board of Directors of Uniforce. COMFORCE also
intends to consummate the Merger between Uniforce and Subsidiary as soon as
possible following the consummation of the Offer pursuant to which Uniforce will
become an indirect wholly-owned subsidiary of COMFORCE.
The Board of Directors of Uniforce has unanimously determined that the
Offer is fair to, and in the best interests of, the Shareholders and recommends
that the Shareholders accept the Offer and tender their shares pursuant to the
Offer.
38
COMFORCE, the Subsidiary and Uniforce have each executed and delivered the
Merger Agreement, pursuant to which, among other things, COMFORCE agreed to make
the Offer and Uniforce agreed to recommend the Offer to the Shareholders.
Pursuant to the Merger Agreement, COMFORCE's obligation to accept for payment
and pay for Shares pursuant to the Offer is subject to (i) the condition (the
"Minimum Condition") that at least that number of Shares that, when combined
with the Shares already owned by the Subsidiary, constitutes at least two-thirds
of the outstanding Shares, shall have been validly tendered and not withdrawn
prior to the Expiration Date (as hereinafter defined); and (ii) certain other
conditions including the receipt by COMFORCE of financing in an amount
sufficient to pay the aggregate Per Share Amount. The Offer is also subject to
certain other conditions. See "The Transactions - The Tender Offer - Certain
Conditions of the Offer" and "The Transactions - The Financing".
Also on August 13, 1997, COMFORCE signed a certain Stockholders Agreement
(the "Stockholders Agreement") with each of the Fanning Shareholders who
collectively hold in excess of 59% of the voting Shares outstanding. Pursuant to
the Stockholders Agreement, among other things, the Fanning Shareholders agreed
to tender (and not withdraw) their Shares into the Offer and vote their Shares
in favor of the Merger and against any other business combination or fundamental
change transaction or any other action which could reasonably be expected to
impede, interfere with, delay, postpone, or materially adversely affect the
Offer or the Merger. The Fanning Shareholders also granted COMFORCE a proxy to
vote their Shares as outlined above. The obligations of the Fanning Shareholders
pursuant to the Stockholders Agreement will terminate if the Merger Agreement is
terminated in accordance with its terms. John Fanning has advised that he will
contribute 51,562 shares of Uniforce Common Stock to the capital of Uniforce
which will issue a like number of shares to certain employees of Uniforce,
subject to consummation of the Offer and to such employees agreeing to be bound
by the terms of the Stockholders Agreement. See "The Transactions - Interests of
Certain Persons in the Transactions."
THIS PROSPECTUS/PROXY STATEMENT AND THE RELATED LETTER OF TRANSMITTAL
CONTAIN IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY
DECISION IS MADE WITH RESPECT TO THE OFFER.
Terms of the Offer; Extension of Tender Period; Termination; Amendments
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), COMFORCE will accept for payment and pay for any and all Shares
which are validly tendered on or prior to the Expiration Date (as hereinafter
defined) and not theretofore withdrawn as set forth herein (See "The
Transactions - The Tender Offer Withdrawal Rights"). The term "Expiration Date"
means 12:00 midnight, New York City time, on November 24, 1997, unless and until
COMFORCE shall have extended the period of time for which the Offer is open, in
which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by COMFORCE, shall expire.
Consummation of the Offer is conditioned upon, among other things,
satisfaction or waiver by COMFORCE of certain conditions, including the Minimum
Condition. If any or all of such conditions are not satisfied or any or all of
the other events set forth herein (See "The Transactions - The Tender Offer -
Certain Conditions of the Offer") shall have occurred or shall be determined by
COMFORCE to have occurred prior to the Expiration Date, COMFORCE reserves the
right (but shall not be obligated) to (i) decline to purchase any or all of the
Shares tendered and terminate the Offer, and return all such tendered Shares to
tendering shareholders, (ii) waive any or all unsatisfied conditions and,
subject to complying with applicable rules and regulations of the Commission,
purchase all Shares validly tendered by the Expiration Date and not withdrawn,
(iii) extend the Offer and, subject to the right of shareholders to withdraw
Shares until the Expiration Date, retain the Shares that have been tendered
until the expiration of the Offer as extended, or (iv) otherwise amend the
Offer. Notwithstanding the foregoing, the Merger Agreement provides that
COMFORCE may not make any change to the Offer which (i) decreases the Per Share
Amount, (ii) reduces the maximum number of Shares to be purchased,
39
(iii) imposes additional conditions to the Offer; (iv) amends or changes the
terms and conditions of the Offer in any manner materially adverse to the
holders of Shares, or (v) changes or waives the Minimum Condition.
COMFORCE expressly reserves the right, in its sole discretion, at any time
and from time to time, to extend for any reason the period of time during which
the Offer is open, including as a result of the occurrence of any of the events
specified herein under the heading "Certain Conditions of the Offer", by giving
oral or written notice of such extension to the Depositary and by making a
public announcement thereof, as described below. During any such extension, all
Shares previously tendered and not withdrawn will remain subject to the Offer,
subject to the rights of a tendering shareholder to withdraw any tendered
Shares.
Subject to the applicable regulations of the Commission, COMFORCE also
expressly reserves the right, in its sole reasonable discretion, at any time or
from time to time, to (i) delay acceptance for payment of or, regardless of
whether such Shares were theretofore accepted for payment, payment for any
Shares, pending receipt of any regulatory or third-party approval specified
herein (See "The Transactions - Certain Regulatory Matters") or in order to
comply in whole or in part with any applicable law, (ii) terminate the Offer
(whether or not any Shares have theretofore been accepted for payment) if any of
the conditions referred to herein under the heading "Certain Conditions of the
Offer" have not been satisfied or upon the occurrence of any of the events
herein under the heading "Certain Regulatory Matters", and (iii) waive any
condition other than the Minimum Condition or, to the extent permitted by the
Merger Agreement, otherwise amend the Offer in any respect, in each case by
giving oral or written notice of such delay, termination, waiver or amendment to
the Depositary and by making a public announcement thereof, as described below.
COMFORCE acknowledges that (a) Rule 14e-l(c) under the Exchange Act requires
COMFORCE to pay the consideration offered or return the Shares tendered promptly
after the termination or withdrawal of the Offer, and (b) COMFORCE may not delay
acceptance for payment of, or payment for (except as provided in the clause (i)
of this paragraph), any Shares upon the occurrence of any of the events
specified herein under the heading "Certain Conditions of the Offer" without
extending the period of time during which the Offer is open.
Any extension, delay, termination or amendment of the Offer will be
followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension to be issued no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 14d-4(c), 14d-6(d)
and 14e-1 under the Exchange Act, which require that material changes be
promptly disseminated to shareholders in a manner reasonably designed to inform
them of such changes) and without limiting the manner in which COMFORCE may
choose to make any public announcement, COMFORCE shall have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by issuing a press release or other public announcement.
If COMFORCE makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, COMFORCE will disseminate additional tender offer materials (including by
public announcement as set forth above) and extend the Offer to the extent
required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act.
If, prior to the Expiration Date, COMFORCE decides to increase the
consideration being offered in the Offer, such increase in the consideration
being offered will be applicable to all shareholders whose Shares are accepted
for payment pursuant to the Offer and, if at the time notice of such increase in
the consideration being offered is first published, sent or given to holders of
such Shares, the Offer is scheduled to expire at any time earlier than the
period ending on the tenth business day from and including the date that such
notice is first so published, sent or given, the Offer will be extended at least
until the expiration of such ten-business-day period. For purposes of the Offer,
a "business day" means any day other than a Saturday, Sunday or federal holiday
and consists of the time period from 12:01 a.m. through 12:00 midnight, New York
City time.
40
Uniforce has provided COMFORCE with its shareholder list and security
position listings for the purpose of disseminating the Offer to holders of
Shares. This Prospectus/Proxy Statement and the related Letter of Transmittal
and, if required, other relevant materials will be mailed to record holders of
Shares or to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on Uniforce's
shareholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing for subsequent transmittal to beneficial
owners of Shares.
Acceptance for Payment and Payment of Offer Price
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), COMFORCE will accept for payment and will pay for any and all Shares
validly tendered prior to the Expiration Date (and not properly withdrawn in
accordance with the terms hereof [See "The Transactions - The Tender Offer -
Withdrawal Rights"]) as soon as practicable after the Expiration Date, assuming
the satisfaction or waiver (to the extent waiver is permitted by the Merger
Agreement) of the conditions of the Offer set forth herein under the heading
"Certain Conditions of the Offer". Any determination concerning the satisfaction
of such terms and conditions shall be within the sole reasonable discretion of
COMFORCE, and such determination shall be final and binding on all tendering
shareholders. COMFORCE expressly reserves the right to delay acceptance for
payment of, or payment for, Shares in order to comply in whole or in part with
any applicable law. See "The Transactions - Certain Regulatory Matters".
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates
representing such Shares (or a timely confirmation of a book-entry transfer of
such Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities), (ii) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) with any required signature guarantees, or an Agent's
Message (as defined herein) in connection with a book-entry transfer, and (iii)
any other documents required by the Letter of Transmittal.
The term "Agent's Message" means a message transmitted through electronic
means by a Book-Entry Transfer Facility to, and received by, the Depositary and
forming a part of a book-entry confirmation, which states that such Book-Entry
Transfer Facility has received an express acknowledgment from the participant in
such Book-Entry Transfer Facility tendering the Shares that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that COMFORCE may enforce such agreement against the participant.
For purposes of the Offer, COMFORCE will be deemed to have accepted for
payment, and thereby purchased, tendered Shares when, as and if COMFORCE gives
oral or written notice to the Depositary of COMFORCE's acceptance of such Shares
for payment. Payment for Shares accepted pursuant to the Offer will be made by
the deposit of the aggregate cash purchase price and shares of COMFORCE Common
Stock with the Depositary, which will act as agent for the tendering
shareholders for the purpose of receiving such payment from COMFORCE and
transmitting payment to such tendering shareholders. UNDER NO CIRCUMSTANCES WILL
COMFORCE PAY INTEREST ON THE PURCHASE PRICE FOR SHARES BY REASON OF ANY DELAY IN
MAKING SUCH PAYMENT. Upon the deposit of funds and shares of COMFORCE Common
Stock with the Depositary for the purpose of making payments to tendering
shareholders, COMFORCE's obligation to make such payment shall be satisfied and
tendering shareholders must thereafter look solely to the Depositary for payment
of amounts owed to them by reason of the acceptance for payment of Shares
pursuant to the Offer. If, for any reason whatsoever, acceptance for payment of
or payment for any Shares tendered pursuant to the Offer is delayed, or COMFORCE
is unable to accept for payment or pay for Shares tendered pursuant to the
Offer, then, without prejudice to COMFORCE's rights set forth herein, the
Depositary may, nevertheless, on behalf of COMFORCE, retain tendered Shares, and
such Shares may not be withdrawn, except to the extent that the tendering
shareholder is entitled to and duly exercises withdrawal rights as described
herein under the heading "Withdrawal Rights". Although COMFORCE does not believe
that there are any stock transfer taxes incident to
41
the transfer to it of validly tendered Shares, COMFORCE will pay any such stock
transfer taxes, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, as well as any charges and expenses of the Depositary and the
Information Agent.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer or if Share certificates are submitted
evidencing more Shares than are tendered, Share certificates evidencing
unpurchased or untendered Shares will be returned, without expense to the
tendering shareholder (or, in the case of Shares tendered by book-entry transfer
into the Depositary's account at a Book-Entry Transfer Facility pursuant to the
procedure set forth herein, such Shares will be credited to an account
maintained at such Book- Entry Transfer Facility), as promptly as practicable
following the expiration or termination of the Offer.
IF, PRIOR TO THE EXPIRATION DATE, COMFORCE INCREASES THE CONSIDERATION
OFFERED TO HOLDERS OF SHARES PURSUANT TO THE OFFER, COMFORCE WILL PAY SUCH
INCREASED CONSIDERATION FOR ALL SHARES ACCEPTED FOR PAYMENT PURSUANT TO THE
OFFER, WHETHER OR NOT SUCH SHARES HAVE BEEN TENDERED OR ACCEPTED FOR PAYMENT
PRIOR TO SUCH INCREASE IN THE CONSIDERATION.
COMFORCE and Subsidiary reserve the right to transfer or assign, in whole
at any time or in part from time to time, to one or more of their affiliates,
the right to purchase all or any portion of the Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve COMFORCE and
Subsidiary of their obligations under the Offer and will in no way prejudice the
rights of tendering shareholders to receive payment for Shares validly tendered
and accepted for payment pursuant to the Offer.
Procedure for Tendering Shares
Valid Tenders. Except as set forth below, in order for Shares to be validly
tendered pursuant to the Offer, the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, together with any required
signature guarantees, or an Agent's Message in connection with a book-entry
transfer of Shares, and any other documents required by the Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth in this Prospectus/Proxy Statement on or prior to the Expiration Date, and
either (i) certificates evidencing tendered Shares must be received by the
Depositary along with the Letter of Transmittal, (ii) Shares must be tendered
pursuant to the procedure for book-entry transfer described below (and
confirmation of receipt of such delivery must be received by the Depositary), in
each case, prior to the Expiration Date, or (iii) the tendering shareholder must
comply with the guaranteed delivery procedures described below. No alternative,
conditional or contingent tenders will be accepted.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY FACILITY,
IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (i) if such Letter of Transmittal is signed by the registered holder
of the Shares tendered therewith, unless such holder has completed either the
box entitled "Special Delivery Instructions" or the box entitled "Special
Payment Instructions" in the Letter of Transmittal, or (ii) if Shares are
tendered for the account of a firm that is a member in good standing of the
Security Transfer Agent's Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchange Medallion Program (each being
hereinafter referred to as an "Eligible Institution"). See Instruction 1 of the
Letter of Transmittal.
42
If a certificate representing Shares is registered in the name of a person
other than the signer of the Letter of Transmittal, or if payment is to be made
or Shares not accepted for payment or not tendered are to be returned to a
person other than the registered holder, the certificate must be endorsed or
accompanied by an appropriate stock power, in either case signed exactly as the
name(s) of the registered holder(s) appears on the certificate, with the
signature(s) on the certificate or stock power guaranteed by an Eligible
Institution. If the Letter of Transmittal or stock powers are signed or any
certificate is endorsed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing and,
unless waived by COMFORCE, proper evidence satisfactory to COMFORCE of their
authority so to act must be submitted. See Instruction 5 of the Letter of
Transmittal.
Book-Entry Transfer. The Depositary will make a request to establish
accounts with respect to the Shares at Depositary Trust Company, 7 Hanover
Square, New York, New York (the "Book-Entry Transfer Facility") for purposes of
the Offer within two business days after the date of this Prospectus/Proxy
Statement, and any financial institution that is a participant in any of the
Book-Entry Transfer Facility's systems may make book-entry delivery of the
Shares by causing the Book-Entry Transfer Facility to transfer such Shares into
the Depositary's account in accordance with the Book-Entry Transfer Facility's
procedure for such transfer. Although delivery of Shares may be effected through
book-entry transfer at the Book-Entry Transfer Facility, a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, or an Agent's Message and any other required
documents, must, in any case, be transmitted to and received by the Depositary
at one of its addresses set forth in this Prospectus/Proxy Statement prior to
the Expiration Date, or the guaranteed delivery procedures described below must
be complied with.
REQUIRED DOCUMENTS MUST BE TRANSMITTED TO AND RECEIVED BY THE DEPOSITARY AT
ITS ADDRESS SET FORTH IN THIS PROSPECTUS/PROXY STATEMENT. DELIVERY OF DOCUMENTS
TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Guaranteed Delivery. If a Shareholder desires to tender Shares pursuant to
the Offer and such Shareholder's Share certificates are not immediately
available (or the procedures for book-entry transfer cannot be completed on a
timely basis) or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such Shares may nevertheless be
tendered, provided that all of the following conditions are satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives, prior to the Expiration Date, a properly
completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by COMFORCE herewith; and
(c) the certificates representing all tendered Shares in proper form
for transfer (or confirmation of a book-entry transfer of such
Shares into the Depositary's account at the Book-Entry Transfer
Facilities), together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) with any required
signature guarantees (or, in connection with a book-entry
transfer, an Agent's Message) and any other documents required by
the Letter of Transmittal are received by the Depositary within
three trading days after the date of such Notice of Guaranteed
Delivery. For purposes of this Offer, a "trading day" is any day
on which the American Stock Exchange is open for business.
43
A Notice of Guaranteed Delivery may be delivered by hand, or may be
transmitted by telegram, telex, facsimile transmission or mail, to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in the Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of certificates representing such Shares (or timely
confirmation of a book-entry transfer of such Shares into the Depositary's
account at a Book-Entry Transfer Facility), a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), together with any
required signature guarantees (or, in connection with a book-entry transfer, an
Agent's Message) and any other documents required by the Letter of Transmittal.
Accordingly, tendering shareholders may be paid at different times depending
upon when certificates representing Shares or confirmations of book-entry
transfers of such Shares are actually received by the Depositary.
Backup United States Federal Withholding Tax. Under the United States
federal income tax laws, the Depositary will be required to withhold 31% of the
amount of any payments made to certain shareholders pursuant to the Offer. To
prevent federal income tax backup withholding on payments made to shareholders
with respect to Shares purchased pursuant to the Offer, each shareholder must
provide the Depositary with his correct taxpayer identification number and
certify that he is not subject to backup federal income tax withholding by
completing the Substitute Form W-9 included in the Letter of Transmittal.
Foreign holders must submit a completed Form W-8 to avoid backup withholding.
This form may be obtained from the Depositary. See "The Transactions - Certain
Federal Income Tax Consequences of the Offer and the Merger" and Instruction 10
of the Letter of Transmittal.
Determination of Validity. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tendered Shares will be determined by COMFORCE, in its sole discretion,
whose determination shall be final and binding on all parties. COMFORCE reserves
the absolute right to reject any or all tenders of any Shares that it determines
are not in appropriate form or the acceptance for payment of or payment for
which may, in the opinion of COMFORCE's counsel, be unlawful. COMFORCE also
reserves the absolute right, in its reasonable discretion, to waive any of the
conditions of the Offer other than the Minimum Condition or any defect or
irregularity in any tender with respect to any particular Shares or any
particular shareholder, whether or not similar defects or irregularities are
waived in the case of other shareholders. No tender of Shares will be deemed to
have been validly made until all defects or irregularities relating thereto have
been cured or expressly waived to the satisfaction of COMFORCE. COMFORCE's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the Instructions thereto) will be final and binding. None of
COMFORCE, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in tenders,
nor shall any of them incur any liability for failure to give any such
notification.
Other Requirements. COMFORCE's acceptance for payment of Shares tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering shareholder and COMFORCE upon the terms and
subject to the conditions of the Offer. By executing a Letter of Transmittal, a
tendering Shareholder appoints designees of COMFORCE as his attorneys-in-fact
and proxies (which appointment shall be irrevocable upon acceptance of the
Shares by COMFORCE), with full power of substitution, in the manner set forth in
the Letter of Transmittal, to the full extent of the Shareholder's rights with
respect to the Shares tendered by the Shareholder and purchased by COMFORCE and
with respect to any and all other Shares or other securities issued or issuable
in respect of those Shares, on or after the date of the Offer. All such powers
of attorney and proxies will be considered coupled with an interest in the
tendered Shares. Such appointment will be effective when, and only to the extent
that, COMFORCE accepts the Shares for payment. Upon acceptance for payment, all
prior powers of attorney and proxies given by the Shareholder with respect to
the Shares (any other Shares or other securities so issued in respect of such
purchased Shares) will be revoked, without further action, and no subsequent
powers of attorney and proxies may be given (and, if given, will not be deemed
44
effective) by the Shareholder. The designees of COMFORCE will be empowered to
exercise all voting and other rights of the Shareholder with respect to such
Shares (and any other Shares or securities so issued in respect of such
purchased Shares) as they in their sole discretion may deem proper, including,
without limitation, in respect of any annual or special meeting of the
Shareholders, or any adjournment or postponement of any such meeting, or in
connection with any action by written consent in lieu of any such meeting or
otherwise (including any such meeting or action by written consent to approve
the Merger). COMFORCE reserves the absolute right to require that, in order for
Shares to be validly tendered, immediately upon COMFORCE's acceptance for
payment of the Shares, COMFORCE must be able to exercise full voting and other
rights with respect to the Shares, including voting at any meeting of
Shareholders then scheduled.
Withdrawal Rights
Except as otherwise expressly provided in this section, tenders of Shares
made pursuant to the Offer will be irrevocable. Shares tendered may be withdrawn
at any time prior to the Expiration Date, and, unless theretofore accepted for
payment by COMFORCE as provided herein, may also be withdrawn at any time after
December 26, 1997 or at such later time as may apply if the Offer is extended.
If COMFORCE extends the Offer, is delayed in its acceptance for payment of
any Shares tendered or is unable to accept for payment or pay for Shares
tendered pursuant to the Offer for any reason whatsoever, then, without
prejudice to COMFORCE's rights set forth herein, the Depositary may,
nevertheless, on behalf of COMFORCE, retain tendered Shares, and such Shares may
not be withdrawn except to the extent that tendering shareholders are entitled
to and duly exercise withdrawal rights as described in this Section. Any such
delay will be accompanied by an extension of the Offer to the extent required by
law.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth in this Prospectus. Any such notice
of withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name(s) in which the
certificate(s) representing such Shares are registered, if different from that
of the person who tendered such Shares. If certificates for Shares to be
withdrawn have been delivered or otherwise identified to the Depositary, the
name of the registered holder and the serial numbers shown on the particular
certificates evidencing such Shares to be withdrawn must also be furnished to
the Depositary prior to the physical release of the Shares to be withdrawn. The
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution (except in the case of Shares tendered by an Eligible Institution).
If Shares have been tendered pursuant to the procedures for book-entry transfer,
any notice of withdrawal must specify the name and number of the account at the
appropriate Book-Entry Transfer Facility to be credited with such withdrawn
Shares and must otherwise comply with such Book-Entry Transfer Facility's
procedures.
Withdrawals of tenders of Shares may not be rescinded, and Shares properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by again following the
procedures described herein under the heading "Procedure for Tendering" at any
time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by COMFORCE, in its sole discretion,
whose determination will be final and binding. None of COMFORCE, the Depositary,
the Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal, nor
shall any of them incur any liability for failure to give any such notification.
Certain Conditions of the Offer
45
Notwithstanding any other term of the Offer, and in addition to (and not in
limitation of) COMFORCE's rights to extend and amend the Offer at any time, in
its sole reasonable discretion (subject to the provisions of the Merger
Agreement), COMFORCE shall not be required to accept for payment or, subject to
any applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to COMFORCE's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay for,
and may delay the acceptance for payment of or, subject to the restriction
referred to above, the payment for, any tendered Shares, and may terminate the
Offer, if, in the sole reasonable judgment of COMFORCE (i) the Minimum Condition
shall not have been satisfied, (ii) at or prior to the Expiration Date, any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act") shall not have expired or been terminated,
(iii) COMFORCE shall not have received the financing necessary to pay the
aggregate Per Share Amount for all outstanding Shares (See "The Transactions -
The Financing"), or (iv) at any time on or after August 13, 1997 and before the
Expiration Date (whether or not any Shares have theretofore been accepted for
payment pursuant to the Offer), any of the following events or conditions exist
or shall occur and remain in effect or shall be determined by COMFORCE to exist
or have occurred:
(a) there shall have been instituted or be pending any action or
proceeding brought by any governmental, administrative or regulatory
authority or agency, domestic or foreign, before any court or governmental,
administrative or regulatory authority or agency, domestic or foreign, (i)
challenging or seeking to make illegal, materially delay or otherwise
directly or indirectly restrain or prohibit or make materially more costly
the making of the Offer, the acceptance for payment of, or payment for, any
Shares by COMFORCE, Subsidiary, or any other affiliate of COMFORCE pursuant
to the Offer or seeking to obtain material damages in connection with the
Offer or the Merger; (ii) seeking to prohibit or limit materially the
ownership or operation by Uniforce, COMFORCE or any of their subsidiaries
of all or any material portion of the business or assets of Uniforce,
COMFORCE or any of their subsidiaries, or to compel Uniforce, COMFORCE or
any of their subsidiaries to dispose of or hold separate all or any
material portion of the business or assets of Uniforce, COMFORCE or any of
their subsidiaries, as a result of the Offer or the Merger; (iii) seeking
to impose or confirm limitations on the ability of COMFORCE, Subsidiary, or
any other affiliate of COMFORCE to exercise effectively full rights of
ownership of any Shares, including, without limitation, the right to vote
any Shares acquired by COMFORCE pursuant to the Offer, or otherwise on all
matters properly presented to Uniforce's shareholders; or (iv) seeking to
require divestiture by COMFORCE, or any other affiliate of COMFORCE, of any
Shares;
(b) there shall have been issued any injunction, order or decree by
any court or governmental, administrative or regulatory authority or
agency, domestic or foreign, resulting from any action or proceeding
brought by any person other than any governmental, administrative or
regulatory authority or agency, domestic or foreign, which (i) restrains or
prohibits the making of the Offer or the consummation of the Offer or the
Merger; (ii) prohibits or limits ownership or operation by Uniforce,
COMFORCE, or Subsidiary of all or any material portion of the business or
assets of Uniforce, COMFORCE or any of their subsidiaries, in each case as
a result of the Offer and the Merger; (iii) imposes limitations on the
ability of COMFORCE or Subsidiary to exercise effectively full rights of
ownership of any Shares, including, without limitation, the right to vote
any Shares acquired by COMFORCE pursuant to the Offer, or otherwise, on all
matters properly presented to Uniforce's shareholders; or (iv) requires
divestiture by COMFORCE or Subsidiary of any Shares;
(c) there shall have been any action taken, or any statute, rule,
regulation, order or injunction enacted, entered, enforced, promulgated,
amended, issued or deemed applicable to (i) COMFORCE, Uniforce or any
subsidiary or affiliate of COMFORCE or Uniforce or (ii) the Offer or the
Merger, by any legislative body, court, government or governmental,
administrative or regulatory authority or agency, domestic or foreign,
which results in any of the consequences referred to in clauses (i) through
(iv) of paragraph (b) above;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities of Uniforce on the American
Stock Exchange, (ii) any decline, measured from the date
46
hereof, in the Standard & Poor's 500 Index or FTSE 100 Index by an amount
in excess of 20%, (iii) a currency moratorium on the exchange markets in
New York City, (iv) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States, (v) any limitation
(whether or not mandatory) by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign, on
the extension of credit by banks or other lending institutions which is
likely to have a material adverse effect upon any financing arranged by
COMFORCE in respect of the Offer, (vi) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States or (vii) in the case of any of the
foregoing existing on the date hereof, a material acceleration or worsening
thereof;
(e) (i) it shall have been publicly disclosed or Subsidiary shall have
otherwise learned that beneficial ownership of 20% or more of the then
outstanding Shares has been acquired by any other person other than
COMFORCE or its affiliates or (ii) the Board of Directors of Uniforce shall
have withdrawn or modified in a manner adverse to COMFORCE the
recommendation of the Offer or approves or recommends any takeover proposal
or any other acquisition of Shares other than the Offer;
(f) Uniforce shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any material
agreement or covenant of Uniforce to be performed or compiled with by it
under the Merger Agreement;
(g) the Merger Agreement shall have been terminated in accordance with
its terms; or
(h) COMFORCE, Subsidiary and Uniforce shall have agreed that COMFORCE
shall terminate the Offer or postpone the acceptance for payment of or
payment for Shares thereunder.
HSR Act Notification and Report Forms relating to the transactions were
filed with the Federal Trade Commission effective September 15, 1997 and,
because no request for additional information or documentary material was
received, the waiting period under that act expired on October 15, 1997.
With respect to the condition that COMFORCE obtain the financing necessary
to pay the Per Share Amount in the Offer and the Merger, COMFORCE has accepted a
proposal letter (the "Proposal Letter") relating to the terms of a $75 million
senior credit facility (the "New Credit Facility") to be provided by Heller
Business Credit, a division of Heller Financial, Inc. ("Heller") to COMFORCE
Operating, Inc., a wholly-owned subsidiary of COMFORCE ("COI"). The Proposal
Letter serves as the basis for discussions between the Company and Heller
relating to the terms of such a facility and does not constitute a commitment by
Heller to fund such a facility. In addition, simultaneously with or as soon as
practicable following the commencement of the Offer, COI intends to commence a
private placement of $110 million in principal amount of Senior Subordinated
Notes due 2007 (the "Notes"), and COMFORCE intends to commence a private
placement of 25,000 Units (the "Units") representing $25 million in principal
amount of Senior Secured PIK Debentures due 2009 (the "Debentures") with
Warrants to purchase COMFORCE Common Stock (the "Warrants"). See "The Financing"
for a description of the anticipated terms of the New Credit Facility, the Notes
and the Units.
The foregoing conditions are for the sole benefit of COMFORCE and may be
asserted by COMFORCE regardless of the circumstances giving rise to any such
condition or, with the exception of the Minimum Condition, may be waived by
COMFORCE in whole or in part at any time and from time to time in its sole
reasonable discretion. The failure by COMFORCE at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right; the waiver
of any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances; and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time. Any determination by COMFORCE concerning any
condition or event described in this section shall be final and binding upon all
parties.
47
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall forthwith be returned
by the Depositary to the tendering shareholders.
The Merger
Introduction
The Merger Agreement provides that, upon the filing of the certificate of
merger in the form attached to the Merger Agreement with the Secretary of State
of New York (the "Effective Time"), Subsidiary will merge with and into
Uniforce, whereupon Uniforce will become an indirect wholly-owned subsidiary of
COMFORCE (the "Surviving Corporation") and each outstanding Share (other than
treasury shares, Shares held by COMFORCE or Subsidiary and Shares held by
Shareholders who have perfected appraisal rights under New York law) will be
converted into the right to acquire the Merger Consideration. The Effective Time
is expected to occur as soon as practicable after the Expiration Date of the
Offer.
The Board of Directors of Uniforce has unanimously determined that the
terms of the Merger Agreement and the Merger are fair to, and in the best
interest of, Uniforce and the holders of Shares. All members of the Board of
Directors of Uniforce approved the Merger Agreement and recommend that the
holders of Shares vote for adoption and approval of the Merger.
The adoption and approval of the Merger will be considered at the Special
Meeting and the proxies of the holders of Uniforce Common Stock are being
solicited for that purpose. However, pursuant to the relevant provisions of the
NYBCL, if Subsidiary holds ninety percent (90%) or more of the outstanding
Shares, the Merger can be consummated without the need for the Special Meeting.
Therefore, if Subsidiary receives and accepts at least ninety percent (90%) of
the outstanding Shares pursuant to the Offer, COMFORCE may cause Uniforce to
cancel the Special Meeting and cause the Merger to occur without the need for
the Special Meeting. See "The Special Meeting".
The Surviving Corporation
Pursuant to the Merger Agreement, the Certificate of Incorporation and
By-laws of the Surviving Corporation shall be amended to be identical to the
Certificate of Incorporation and By-laws, respectively, of Subsidiary except the
name of the surviving corporation shall remain "Uniforce Services, Inc." The
directors and officers of Subsidiary immediately prior to the Effective Time
shall be the directors and officers, respectively, of the Surviving Corporation.
Merger Consideration and the Conversion of Shares
At the Effective Time each holder of an outstanding certificate that
immediately prior to the Effective Time represented Shares shall be entitled to
receive in exchange therefor, upon surrender to the Depositary, the applicable
Merger Consideration, which is identical to the Per Share Amount (including, if
the Per Share Amount payable in the Offer is increased, any such increase in the
Per Share Amount). WITHOUT REGARD TO WHEN SUCH CERTIFICATES ARE SURRENDERED FOR
EXCHANGE, NO INTEREST SHALL BE PAID ON ANY PAYMENT OF THE MERGER CONSIDERATION.
Promptly after the Effective Time, the Depositary shall mail to each holder
of record of Shares immediately prior to the Effective Time who did not tender
his Shares into the Offer, a form of transmittal letter and instructions for use
in effecting the surrender of the certificates representing Shares. Upon
surrender of the certificates representing such Shares to the Depositary
together with a duly executed letter of transmittal and such other documents as
the Depositary shall reasonably require, the holder of such Shares shall be
entitled to receive
48
the Merger Consideration into which the Shares shall have been converted and the
certificates representing the Shares shall be cancelled.
UNIFORCE SHAREHOLDERS WHO DO NOT WISH TO TENDER THEIR SHARES INTO THE OFFER
SHOULD NOT SEND STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD.
Employee Stock Options
Under the Merger Agreement, Uniforce is to take such action, if any, as may
be necessary to cause, effective at or prior to the Effective Time, each then
outstanding option to purchase Shares theretofore granted under any stock option
plan or agreement in effect with respect to Uniforce Common Stock which has not
been exercised and remains outstanding at the time (whether or not such option
is vested or immediately exercisable) to be extinguished and converted to the
right to receive a cash payment from Uniforce in an amount equal to the product
of (i) the difference between the cash value of the merger consideration ($32.00
per Share) and the per Share exercise price of such option and (ii) the total
number of Shares which the holder of such option is entitled to purchase under
such option, subject to any required withholding taxes, whereupon such options
to purchase Shares shall be canceled. It is anticipated that Uniforce will
obtain written agreements from each holder of an outstanding option to effect
the foregoing arrangements effective on the day immediately prior to
consummation of the Offer, with the payment to each option holder being made at
or immediately after the consummation of the Offer. As of September 3, 1997,
there were outstanding options to purchase an aggregate of 370,010 Shares.
Conditions to the Merger
Pursuant to the Merger Agreement, the Merger is conditioned upon, among
other things, (i) the approval, by the requisite vote, of the shareholders of
Uniforce; (ii) the receipt by COMFORCE of financing in an amount sufficient to
pay the aggregate Merger Consideration payable in the Merger for all shares of
Uniforce Common Stock outstanding; (iii) the receipt of necessary governmental
waivers, consents, orders and approvals; and (iv) the failure to exist of any
preliminary or permanent injunction or other order or decree or other
governmental action which prevents the consummation of the Merger (as of the
date of this Prospectus/Proxy Statement, no such action is pending).
Representations and Warranties
The Merger Agreement contains various representations and warranties of
COMFORCE and Subsidiary relating to, among other things, the following matters
(subject, in certain cases, to specified exceptions): (i) due organization,
existence and good standing of such parties; (ii) the capitalization of such
parties; (iii) the corporate power and authority of such parties to enter into
the Merger Agreement and consummate the transaction contemplated thereby and the
absence of any conflicts with such parties' charter or by-laws or with
applicable law or with certain material contracts and the absence of
governmental or regulatory approvals required to consummate the Merger; (iv) the
filing of all required filings by COMFORCE with the Commission and the failure
of such filings to contain materially untrue statements or omissions as well as
the fair presentation of certain financial statements included in such filings;
(v) the absence of material adverse changes to each such party since the date of
the most recent filing with the Commission; (vi) the absence of pending or
threatened material litigation affecting COMFORCE or its subsidiaries; (vii) the
absence of undisclosed liabilities affecting COMFORCE or its subsidiaries; and
(viii) the absence of material violations of law by COMFORCE or its
subsidiaries.
The Merger Agreement contains various representations and warranties of
Uniforce relating to, among other things, the following matters (subject, in
certain cases, to specified exceptions): (i) similar representations to those
set forth with respect to COMFORCE and Subsidiary, but applicable to Uniforce;
(ii) compliance by
49
Uniforce and its subsidiaries with the terms of their respective charters and
by-laws and with certain material agreements; (iii) certain tax matters; (iv)
certain employee benefit plan matters; (v) certain labor matters; (vi) certain
environmental matters; (vii) certain intellectual property matters; (viii)
certain matters regarding the title to assets and their relationship to the
business of Uniforce; and (ix) certain agreements between Uniforce and its
Licensees.
Termination of the Merger Agreement
Pursuant to its terms, the Merger Agreement may be terminated by Uniforce
if (i) Uniforce's Board of Directors reasonably determines that the
representations and warranties of COMFORCE contained in the Merger Agreement are
not true and correct in any material respect or that all necessary governmental
and other third party consents cannot be obtained; (ii) the Merger is not
completed by December 31, 1997 otherwise than on account of delay or default on
the part of Uniforce; (iii) the Merger is enjoined by a final, unappealable
court order not entered at the request of Uniforce; (iv) Uniforce or its
shareholders receive an offer from a third party with respect to a merger, sale
of substantial assets, tender offer or other business combination and Uniforce's
Board of Directors determines in good faith and after consultation with an
independent financial advisor, that such offer would yield a higher value to
Uniforce or its shareholders than the Merger and COMFORCE fails, within five (5)
business days of being notified of such determination and the terms and
conditions of such offer, to make an offer which is substantially equivalent to,
or more favorable than, such offer; or (v) COMFORCE fails to perform in any
material respect any of its material covenants contained in the Merger Agreement
and does not cure such default in all material respect within thirty (30) days
after notice of the default is given to COMFORCE by Uniforce.
Pursuant to its terms, the Merger Agreement may be terminated by COMFORCE
if (i) COMFORCE's Board of Directors reasonably determines that the
representations and warranties of Uniforce contained in the Merger Agreement are
not true and correct in any material respect or that all necessary governmental
and other third party consents cannot be obtained; (ii) the Merger is not
completed by December 31, 1997 otherwise than on account of delay or default on
the part of COMFORCE; (iii) the Merger is enjoined by a final, unappealable
court order not entered at the request of COMFORCE; or (iv) Uniforce fails to
perform in any material respects any of its material covenants contained in the
Merger Agreement and does not cure such default in all material respects within
thirty (30) days after notice is given to Uniforce by COMFORCE.
Conduct of Uniforce Pending the Merger
Uniforce has agreed until the Effective Time, except as otherwise
contemplated by the Merger Agreement or as otherwise agreed to in writing by
COMFORCE: (a) to conduct its business in the ordinary and usual course of
business consistent with past practice; (b) not to (i) amend its charter or
by-laws; (ii) split or reclassify its stock; (iii) declare or pay any dividend
or distribution except payment of quarterly cash dividends in accordance with
past practices in an amount not in excess of $0.03 per share; (iv) issue, sell
or pledge any additional shares of, or options, warrants or rights to acquire,
any capital stock or other securities convertible or exchangeable for such
capital stock; (c) to use all reasonable efforts to preserve intact its business
organizations and goodwill and keep available the services of its officers and
key employees and preserve the goodwill and business relationships with
customers and not engage in any action with the intent to adversely impact the
transactions contemplated by the Merger Agreement; (d) to confer on a regular
and frequent basis with COMFORCE on operational matters; and (e) except as
specifically noted, not to enter into or amend any employment or related
agreements or bonus, profit sharing, compensation, stock option, retirement or
other similar agreements, trusts, funds or arrangements with or for the benefit
of any directors, employees or others, except in the ordinary course of business
and consistent with past practice.
50
Expenses
Except as described in the following two sentences, all costs and expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such expenses.
Notwithstanding the foregoing, Uniforce has agreed to pay COMFORCE $6,600,000
if: (i) Uniforce terminates the Merger Agreement because it or its shareholders
receives a merger, asset sale, tender offer or other business combination offer
from a third party which will result in a higher value to Uniforce or its
shareholders than the Merger and COMFORCE does not choose to match or exceed
such offer within a specified period of time; or (ii) COMFORCE terminates the
Merger Agreement because of a default by Uniforce and Uniforce enters into any
of certain specified business combination transactions within nine months of
such termination. Additionally, COMFORCE has agreed to reimburse Uniforce for
reasonable out-of-pocket expenses incurred by Uniforce in connection with the
Merger Agreement if COMFORCE terminates the Offer because it did not receive the
financing so long as Uniforce has not materially breached the Merger Agreement.
Fractional Shares
No certificates or scrip for fractional shares of COMFORCE Common Stock
shall be issued in either the Offer or the Merger and such fractional interests
shall not entitle the owner thereof to vote or to any other rights of a security
holder. In lieu of any such fractional shares, each holder of Uniforce Common
Stock who would otherwise have been entitled to receive a fraction of a share of
COMFORCE Common Stock upon surrender of Share certificates for exchange pursuant
to the Offer or the Merger shall be entitled to receive from the Depositary a
cash payment equal to such fraction multiplied by $7.667. The $7.667 per share
represents the average closing price of a share of COMFORCE Common Stock on the
American Stock Exchange for the three trading days immediately preceding the
date of the public announcement of the Offer and for the three trading days
immediately after the date of such public announcement as determined by the
terms of the Merger Agreement.
Appraisal Rights
Pursuant to Section 910 of the New York Business Corporation Law (the
"NYBCL"), a Uniforce shareholder whose Shares have not been tendered into the
Offer and accepted by COMFORCE and who has not voted in favor of the Merger may
demand payment of the "fair value" of such holder's Shares in lieu of accepting
the payment to be made pursuant to the Merger. Any holder of Shares wishing to
exercise such appraisal rights must fully comply with Section 623 of the NYBCL.
A holder may not exercise appraisal rights with respect to less than all of the
Shares owned by such holder.
The following is a summary of Section 623 of the NYBCL and the procedures
that must be followed to perfect appraisal rights thereunder. The complete text
of Section 623 is set forth as Appendix B to this Prospectus/Proxy Statement.
Under Section 623, a corporation must notify each of its shareholders entitled
to appraisal rights as of the record date of the meeting that such appraisal
rights are available and include in such notice a copy of Section 623.
THIS PROSPECTUS/PROXY STATEMENT CONSTITUTES SUCH NOTICE TO THE HOLDERS OF
UNIFORCE COMMON STOCK. HOLDERS OF UNIFORCE COMMON STOCK WISHING TO EXERCISE
APPRAISAL RIGHTS ARE URGED TO REVIEW CAREFULLY THE COMPLETE TEXT OF SECTION 623.
Each holder of Uniforce Common Stock electing to demand payment of the
"fair value" of such holder's Shares if the Merger is consummated must deliver
to Uniforce, before the taking of the vote on the Merger, a written objection to
the Merger with respect to such holder's Shares. Such objection must include a
notice of such holder's election to dissent, the name and residence address of
the holder, the number of Shares as to which the
51
dissent applies and a demand for payment of the "fair value" of such shares if
the action is taken. A proxy or vote against the Merger or an abstention will
not constitute such a demand; a holder of Uniforce Common Stock electing to take
such action must do so by a separate written demand. Such demands should be
mailed or delivered to Uniforce at 415 Crossways Park Drive, P.O. Box 9006,
Woodbury, New York 11797, Attention:
Diane J. Geller, Secretary.
If the Merger is consummated without the need for a vote of the Uniforce
shareholders, any shareholder who elects to dissent need not file written
objections as described in the above paragraph. Instead, upon the determination
that a vote is not required, a notice will be sent to Uniforce shareholders in
accordance with the provisions of Section 623. Within 20 days after the giving
of such notice to him, any such shareholder must file with the corporation a
written notice of his election to dissent stating his name and residence
address, the number of Shares as to which he dissents and a demand for payment
of the fair value of his Shares.
Upon consummation of the Merger, the dissenting holder shall cease to have
any of the rights of a shareholder except the right to be paid the "fair value"
of his Shares. Within 10 days after the Effective Time, the Surviving
Corporation will notify each former holder of Uniforce Common Stock who has made
a proper written demand and who has not voted in favor of or consented to the
Merger as of the Effective Time. A vote in favor of the Merger by a holder of
Shares will have the effect of waiving shareholder's appraisal rights.
The right of appraisal may be lost if the procedural requirements of
Section 623 are not followed exactly. If the right of appraisal is lost, the
former holder of Uniforce Common Stock will be entitled to receive the Merger
Consideration, without interest, for each Share owned at the Effective Time upon
surrender of the certificates representing such Shares.
At the time of filing the notice of election to dissent or within one month
thereafter, a holder of Shares shall submit the certificates representing such
Shares to Uniforce or to ChaseMellon Shareholder Services, its transfer agent,
who will note conspicuously thereon that a notice of election has been filed and
return the certificates to the shareholder. Any holder of Uniforce Common Stock
who fails to submit his certificates for such notation will, at the Surviving
Corporation's option exercised by written notice to such shareholder within 45
days from the date of filing of such notice of election to dissent, lose his,
her or its dissenter's rights unless a court otherwise directs.
Within 15 days after the expiration of the period within which holders of
Shares may file their notices of election to dissent, or within 15 days after
the consummation of the Merger as to which objection has been filed, whichever
is later (but in no case later than 90 days from the Special Meeting
authorization date), the Surviving Corporation must make a written offer by
registered mail to each shareholder who has filed such notice of election to pay
for his Shares at a specific price which the Surviving Corporation considers to
be their "fair value." Such offer must be accompanied by a statement setting
forth the aggregate number of shares with respect to which notices of election
to dissent have been received and the aggregate number of holders of such
Shares. If the Merger has been consummated, such offer must also be accompanied
by (1) advance payment to each such shareholder who submitted his, her or its
certificates to Uniforce of an amount equal to 80% of the amount of such offer
or (2) as to each shareholder who has not yet submitted his, her or its
certificates, a statement that advance payment to such holder of an amount equal
to 80% of the amount of such offer will be made by the Surviving Corporation
promptly upon submission of his, her or its certificates. Every advance payment
or statement as to advance payment must include advice to the shareholder to the
effect that acceptance of such payment does not constitute a waiver of any
dissenters' rights. If the Merger has not been consummated upon the expiration
of the 90-day period after it was authorized by the holders of Shares, the offer
may be conditioned upon the consummation of the Merger. Such offer must be made
at the same price per Share to all dissenting shareholders of the same class. If
within 30 days after the making of such offer, Uniforce and any shareholder
agree upon the price to be paid for his, her or its shares, payment therefor
must be made within 60 days after the
52
making of such offer or the consummation of the corporate action to which such
shareholder objected, whichever is later, upon the surrender of the certificates
representing such Shares.
A notice of election may be withdrawn by the dissenting shareholder at any
time prior to such holder's acceptance in writing of an offer made by the
Surviving Corporation, but in no case later than 60 days from the date of the
consummation of the Merger. Upon expiration of such time, withdrawal of a notice
of election will require the written consent of the Surviving Corporation. If a
notice of election is withdrawn, a shareholder will, as provided in Section 623,
be reinstated as to all his rights as a shareholder as of the consummation of
the Merger and, as a result, his shares of Uniforce Common Stock will be
converted into the right to receive the Merger Consideration, without interest,
pursuant to the Merger.
The following procedures apply if Uniforce fails to make such offer within
such period of 15 days, or if it makes the offer and any dissenting Uniforce
shareholder fails to agree with it within the period of 30 days thereafter upon
the price to be paid for their Shares.
(1) Uniforce must, within 20 days after the expiration of whichever
is applicable of the two periods last mentioned, institute a
special proceeding in the appropriate New York State court to
determine the rights of dissenting holders of Shares and to fix
the "fair value" of their Shares.
(2) If Uniforce fails to institute such proceeding within such period
of 20 days, any dissenting holder of Uniforce Common Stock may
institute such proceeding for the same purpose not later than 30
days after the expiration of such 20-day period. If such
proceeding is not instituted within such 30-day period, all
dissenter's rights will be lost unless the court otherwise
directs.
(3) All dissenting shareholders, excepting those who have agreed with
Uniforce upon the price to be paid for their Shares, must be made
parties to such proceeding, which will have the effect of an
action quasi in rem against their Shares. The jurisdiction of the
court will be plenary and exclusive.
(4) The court will fix the value of the Shares, which will be the
"fair value" as of the close of business on the day prior to the
date of the Special Meeting, considering the nature of the
transaction giving rise to the shareholders' right to receive
payment for Shares, and its effects on Uniforce and its
shareholders, the concepts and methods then customary in the
relevant securities and financial markets for determining fair
values of shares of a corporation engaging in a similar
transaction under comparable circumstances and all other relevant
factors.
Within 60 days after final determination of the proceeding, the Surviving
Corporation must pay to each dissenting shareholder the amount found to be due
such holder, upon surrender of the Certificates representing such Shares. Both
the Surviving Corporation and the dissenting shareholder will, generally, bear
their respective costs and expenses in the proceeding.
The foregoing does not purport to be a complete statement of the provisions
of Section 623 and is qualified in its entirety by reference to said section,
which is reproduced in full in Appendix B to this Prospectus/Proxy Statement.
ANY HOLDER OF UNIFORCE COMMON STOCK WHO WISHES TO EXERCISE APPRAISAL RIGHTS
BUT WHO DOES NOT FOLLOW THE PROCEDURES PROVIDED UNDER SECTION 623 IN A PROPER
AND TIMELY MANNER WILL BE UNABLE TO PERFECT APPRAISAL RIGHTS. IN THAT CASE, THE
SHARES OWNED BY SUCH SHAREHOLDER IMMEDIATELY PRIOR TO THE EFFECTIVE TIME WILL BE
CONVERTED INTO THE RIGHT TO RECEIVE THE MERGER CONSIDERATION, WITHOUT INTEREST,
PURSUANT TO THE MERGER.
53
Effects of the Offer and the Merger on the Market for Shares; Stock Quotations;
Registration Under the Exchange Act
The purchase of Shares pursuant to the Offer is expected to reduce the
number of holders of Shares and the number of Shares that might otherwise trade
publicly. Consequently, depending upon the number of Shares purchased and the
number of remaining holders of Shares, the purchase of Shares pursuant to the
Offer may adversely affect the liquidity and market value of the remaining
Shares held by the public. COMFORCE cannot predict whether the reduction in the
number of Shares that might otherwise trade publicly would have an adverse or
beneficial effect on the market price for, or marketability of, the Shares or
whether it would cause future market prices to be greater or less than the Offer
price. However, if the Merger is consummated, COMFORCE will be the only holder
of Shares and no public market will exist for the Shares.
The Uniforce Common Stock is currently listed and traded on the American
Stock Exchange ("Exchange"), which constitutes the principal trading market for
the Uniforce Common Stock. Depending upon the aggregate market value and the
number of Shares not purchased pursuant to the Offer and depending upon whether
the Merger is consummated, the Shares may no longer meet the quantitative
maintenance criteria of the Exchange for continued inclusion on the Exchange and
may cease to be authorized for quotation on such market. The Exchange's
published guidelines require that an issuer have at least 200,000 publicly held
shares (exclusive of holdings of officers, directors or beneficial owners of
more than 10%), held by at least 300 record shareholders of round lots, with a
market value of at least $1 million and must have shareholders' equity of at
least either $2 million or $4 million depending on profitability levels during
the issuer's recent fiscal years.
The Offer and the Merger are expected to result in a reduction in the
number of record holders of Uniforce Common Stock to fewer than 300. If, as a
result of the purchase of Shares pursuant to the Offer or otherwise, the
Uniforce Common Stock no longer meets the requirements of the Exchange for
continued inclusion on the Exchange, and the Exchange acts to delist the
Uniforce Common Stock, the market for Uniforce Common Stock could be adversely
affected. However, if both the Offer and the Merger are consummated, COMFORCE
will be the only stockholder of Uniforce.
The Uniforce Common Stock is currently registered under the Exchange Act.
Such registration may be terminated upon application of Uniforce to the
Commission if such Uniforce Common Stock is not listed on a national securities
exchange and there are fewer than 300 holders of record of the Uniforce Common
Stock. COMFORCE intends to cause Uniforce to so apply to terminate registration
of the Uniforce Common Stock. The termination of the registration of the
Uniforce Common Stock under the Exchange Act would substantially reduce the
information required to be furnished by Uniforce to its shareholders and to the
Commission, and would make certain of the provisions of the Exchange Act, such
as the short-swing profit recovery provisions of Section 16(b) and the
requirement of furnishing a proxy statement in connection with shareholders'
meetings and the related requirement of an annual report to shareholders, and
the requirements of Rule 13e-3 with respect to going private transactions, no
longer applicable with respect to the Shares or to Uniforce. Furthermore, if
registration of the Shares under the Exchange Act were terminated, the ability
of "affiliates" of Uniforce and persons holding "restricted securities" of
Uniforce to dispose of such securities pursuant to Rule 144 promulgated under
the Securities Act of 1933, as amended, may be impaired or, with respect to
certain persons, eliminated. However, if both the Offer and the Merger are
consummated, COMFORCE will be the only stockholder of Uniforce.
Interests of Certain Persons in the Transactions
In considering the recommendations of the Board of Directors of Uniforce
with respect to the Offer and the Merger, holders of Uniforce Common Stock
should be aware that certain members of the Board of Directors and management of
Uniforce have certain interests separate from their interests as shareholders.
Those interests consist of the financial and employment interests of Mr.
Fanning, Ms. Maniscalco and Mr. Maccarrone under the
54
Employment Agreements, and Mr. Fanning's registration rights under the
Registration Rights Agreement and tender and voting obligations under the
Stockholders Agreement, referred to below.
Stockholders Agreement
Under the Stockholders Agreement, the Fanning Shareholders agreed to tender
(and not withdraw) all Uniforce Common Stock beneficially owned by them pursuant
to the Offer, to vote all shares of Uniforce Common Stock beneficially owned by
them in favor of the Merger and not to take certain actions that are intended,
or could reasonably be expected, to impede, interfere with, delay, postpone or
materially adversely affect the Offer or the Merger. In addition, the Fanning
Shareholders granted to COMFORCE an irrevocable proxy to vote all Uniforce
Common Stock beneficially owned by them in accordance with the Stockholders
Agreement. The Fanning Shareholders beneficially own, in the aggregate, in
excess of 59% of the outstanding Uniforce Common Stock. The obligations of the
Fanning Shareholders pursuant to the Stockholders Agreement will terminate if
the Merger Agreement is terminated in accordance with its terms. John Fanning
has advised that he will contribute 51,562 shares of Uniforce Common Stock to
the capital of Uniforce which will issue a like number of shares to certain
employees of Uniforce, subject to consummation of the Offer and to such
employees agreeing to be bound by the terms of the Stockholders Agreement. Such
contribution and issuance will take place immediately prior to consummation of
the Merger. See "Security Ownership of Certain Uniforce Beneficial Owners and
Management."
Registration Rights Agreement
Under a Registration Rights Agreement dated as of August 13, 1997 with
COMFORCE (the "Registration Rights Agreement"), at any time after the Effective
Time, the Fanning Shareholders will have the right to include all shares of
COMFORCE Common Stock issued to them in the Offer and the Merger (the
"Registrable Securities") in any registration of equity securities of COMFORCE
relating to an offering other than an underwritten offering or an offering
relating solely to any acquisition of any entity or business or to equity
securities issuable in connection with stock option or other employee benefit
plan. This right may be waived by Fanning Shareholders holding a majority in
interest of the Registrable Securities and terminates when COMFORCE has afforded
the Fanning Shareholders the right to exercise the above described registration
rights on two occasions or when all of the Registrable Securities then held by
any Fanning Shareholder may be sold under Rule 144 under the Securities Act
within any three-month period. If COMFORCE has not afforded the Fanning
Shareholders the right to register the Registrable Securities on at least one
occasion within one year after the Effective Time, any Fanning Shareholder
holding a majority of the Registrable Securities has the right to require
COMFORCE to register the Registrable Securities under the Securities Act on one
occasion.
COMFORCE will pay all expenses (other than underwriting discounts and
commissions and other fees and expenses of investment bankers and other than
brokerage commissions) of any such registrations, including fees and expenses
not exceeding $10,000 of one counsel for the holders of the Registrable
Securities. COMFORCE will also indemnify the Fanning Shareholders against
certain liabilities under the federal securities laws in connection with any
such registration.
John Fanning has advised that he will contribute 51,562 of the Registrable
Securities to the capital of Uniforce which will issue a like number of shares
to certain employees of Uniforce, subject to such employees agreeing to be bound
by the terms of the Stockholders Agreement. Such contribution and issuance will
take place immediately prior to consummation of the Merger. COMFORCE has agreed
to afford such employee assignees the benefits of the Registration Rights
Agreement on the same basis as if they were Fanning Shareholders.
55
Employment Agreements
Uniforce has entered into Employment Agreements dated as of August 13, 1997
with John Fanning (who is currently the Chairman of the Board, President and
Chief Executive Office of Uniforce), Rosemary Maniscalco (who is currently the
Executive Vice President and Chief Operating Officer of Uniforce) and Harry V.
Maccarrone (who is currently the Vice President Finance, Chief Financial Officer
and Treasurer of Uniforce). Each employment agreement becomes effective on the
date (the "Employment Date") that COMFORCE has acquired at least 51% of the
issued and outstanding Uniforce Common Stock and will continue in effect
following consummation of the Transactions. Until the Employment Date the
existing employment agreements and incentive arrangements with each such person
remain in effect. See "Management of Uniforce -- Employment Agreements."
Under Mr. Fanning's Employment Agreement, Mr. Fanning will be employed as
President of the Financial Services Division of Uniforce or in such other
executive capacity as is from time to time designated by the Board of Directors
of Uniforce for an initial term of one year from the Employment Date and on a
year-to-year basis thereafter until such Employment Agreement is terminated. Mr.
Fanning is to be paid a base salary of $150,000 per year plus supplemental pay
of $134,500 per year, as well as incentive compensation payable with respect to
the period prior to the Employment Date and a $25,000, previously earned, bonus
to the extent that such amounts have not been paid prior to the Employment Date.
The Employment Agreement may be terminated if Mr. Fanning dies, is permanently
disabled and for certain events constituting "cause". In addition, the
Employment Agreement may be terminated by Uniforce by written notice at any time
(subject to the obligation to make severance payments if termination occurs
during the initial term equal to the amount of base salary and supplemental pay
which would be due to Mr. Fanning until the end of the initial term). Under a
separate Noncompetition Agreement dated as of August 13, 1997 among Mr. Fanning,
COMFORCE, Uniforce and Subsidiary, effective on the Employment Date, Mr. Fanning
has agreed not to compete with Uniforce for a period commencing on the Effective
Date and terminating on the later of four years after the Employment Date or two
years after termination of Mr. Fanning's employment with Uniforce for any
reason.
Under Ms. Maniscalco's Employment Agreement, Ms. Maniscalco will be
employed as President of Uniforce or in such other executive capacity as is from
time to time designated by the Board of Directors of Uniforce for an initial
term of two years from the Employment Date and on a year-to-year basis
thereafter until such Employment Agreement is terminated. Ms. Maniscalco is to
be paid a base salary of $150,000 per year, supplemental pay of $90,000 per year
and a one-time bonus of $10,000 if she continues to be employed by and work
full-time for Uniforce for six months after the Employment Date, as well as
incentive compensation payable with respect to the period prior to the
Employment Date and a $25,000, previously earned, bonus to the extent that such
amounts have not been paid prior to the Employment Date. The Employment
Agreement also provides that COMFORCE will grant to Ms. Maniscalco an incentive
stock option to purchase 50,000 shares of COMFORCE Common Stock at a price equal
to the closing price of the COMFORCE Common Stock on the American Stock Exchange
on the Employment Date. Such option becomes exercisable by Ms. Maniscalco if she
remains employed with Uniforce over a two year period. Ms. Maniscalco is also
entitled to receive incentive compensation for each fiscal year during the term
of her employment in an amount equal to 5% of the Managed Pre-Tax Operating
Income (which generally relates to operating income of subsidiaries and business
units of Uniforce for which Ms. Maniscalco has management responsibilities and
is more fully defined in her Employment Agreement) in excess of $2,500,000 but
not in excess of $3,000,000, and 1% of such income in excess of $3,000,000. Such
targets may be changed as appropriate in the event that Ms. Maniscalco has
management responsibilities for additional or for fewer business units or
subsidiaries. Ms. Maniscalco is also entitled to receive 1% of the sales of
offices of businesses acquired by Uniforce or any of its subsidiaries after the
Employment Date if such acquisition opportunity was brought to the attention of
Uniforce or COMFORCE solely through the efforts of Ms. Maniscalco and she used
her best efforts to assist in such acquisition. The Employment Agreement may be
terminated if Ms. Maniscalco dies, is permanently disabled and for certain
events constituting "cause". In addition, the Employment Agreement may be
terminated by Uniforce by written notice at any time
56
(subject to the obligation to make severance payments if termination occurs
during the initial term equal to the amount of base salary and supplemental pay
which would be due to Ms. Maniscalco for the lesser of one year or the period
until the end of the initial term). Ms. Maniscalco has also agreed not to
compete with Uniforce for a period of two years after termination of her
employment with Uniforce for any reason.
Under Mr. Maccarrone's Employment Agreement, Mr. Maccarrone will be
employed as Vice President - Finance of Uniforce or in such other executive
capacity as is from time to time designated by the Board of Directors of
Uniforce. Mr. Maccarrone's Employment Agreement has no specified term. Mr.
Maccarrone is to be paid a base salary of $150,000 per year, plus supplemental
pay of $16,500 per year, as well as a $25,000, previously earned, bonus to the
extent that such amount has not been paid prior to the Employment Date. The
Employment Agreement also provides that COMFORCE will grant to Mr. Maccarrone an
incentive stock option to purchase 30,000 shares of COMFORCE Common Stock at a
price equal to the closing price of the COMFORCE Common Stock on the American
Stock Exchange on the Employment Date. Such option becomes exercisable by Mr.
Maccarrone, if he remains employed with Uniforce, over a two year period. Mr.
Maccarrone has also agreed not to compete with Uniforce, in certain
circumstances, for a period of one year after termination of his employment with
Uniforce for any reason.
Certain Regulatory Matters
General. Except as disclosed herein, based on a review of publicly
available filings by Uniforce with the Commission, COMFORCE is not aware of any
license or regulatory permit, other than compliance with the HSR Act, that
appears to be material to the business of Uniforce and that might be adversely
affected by COMFORCE's acquisition of Shares pursuant to either the Offer or the
Merger, or of any approval or other action by any governmental, administrative
or regulatory agency or authority, domestic or foreign, that would be required
for the acquisition or ownership of Shares by COMFORCE pursuant to the Offer.
Should any such approval or other action be required, it is presently
contemplated that such approval or action would be sought. While COMFORCE does
not currently intend to delay acceptance for payment of Shares tendered pursuant
to the Offer pending the outcome of any such matter, there can be no assurance
that any such approval or other action, if required, would be obtained without
substantial conditions or that adverse consequences would not result to the
business of Uniforce or COMFORCE in the event that such approvals were not
obtained or such other actions were not taken or in order to obtain any such
approval or other action, any of which may delay acceptance for payment of
Shares tendered.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, shareholders, executive offices or places of business in those states.
In Edgar v. MITE Corp., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS Corp.
V. Dynamics Corp. Of America, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining shareholders, provided that the laws were applicable
only under certain conditions.
Section 912 of the NYBCL limits the ability of a New York corporation to
engage in business combinations with "interested shareholders" (defined as any
beneficial owner of 20% or more of the outstanding voting stock of the
corporation) unless, among other things, the corporation's board of directors
has given its prior approval of either the business combination or the
transaction which resulted in the shareholder becoming an "interested
shareholder." Uniforce's Board of Directors has given its prior approval to the
Offer and the Merger and as a result, COMFORCE does not believe that Section 912
of the NYBCL will interfere with COMFORCE's
57
ownership of Shares, or its ability to sell or dispose of Shares or with
Uniforce's ability to engage in transactions with COMFORCE in the future,
including the Merger.
Based on information supplied by Uniforce, COMFORCE does not believe that
any state takeover statutes apply to the Offer. COMFORCE has not currently
complied with any state takeover statute or regulation. COMFORCE reserves the
right to challenge the applicability or validity of any state law purportedly
applicable to the Offer, and nothing in this Prospectus/Proxy Statement or any
action taken in connection with the Offer is intended as a waiver of that right.
If it is asserted that any state takeover statute is applicable to the Offer and
an appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer, COMFORCE might be required to file certain information
with, or to receive approvals from, the relevant state authorities, and COMFORCE
might be unable to accept for payment or pay for Shares tendered pursuant to the
Offer, or be delayed in consummating the Offer or the Merger. In such case,
COMFORCE may not be obligated to accept for payment or pay for any Shares
tendered pursuant to the Offer or consummate the Merger.
Antitrust. Under the provisions of the HSR Act applicable to the Offer, the
purchase of Shares under the Offer may be consummated following the expiration
of a 30 calendar-day waiting period following the filing by COMFORCE of a
Notification and Report Form with respect to the Offer, unless COMFORCE receives
a request for additional information or documentary material from the United
States Department of Justice Antitrust Division (the "Antitrust Division") or
the Federal Trade Commission (the "FTC") or unless early termination of the
waiting period is granted. Such filing was made effective September 5, 1997 and
such waiting period expired at 11:59 p.m. on October 15, 1997.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as COMFORCE's proposed acquisition of
the Shares of Uniforce. At any time before or after COMFORCE's purchase of
Shares pursuant to the Offer, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares acquired by
COMFORCE or the divestiture of substantial assets of COMFORCE or its
subsidiaries, or Uniforce or its subsidiaries. Private parties may also bring
legal action under the antitrust laws under certain circumstances. There can be
no assurance that a challenge to the Offer or the Merger on antitrust grounds
will not be made or, if such a challenge is made, of the result of that
challenge.
Certain Federal Income Tax Consequences of the Offer and the Merger
The the matters described under "--Certain Federal Income Tax Consequences
of the Offer and Merger" constitute the opinion of Doepken Keevican & Weiss
Professional Corporation. Without limiting the foregoing, it is the opinion of
Doepken Keevican & Weiss Professional Corporation that the receipt of cash and
COMFORCE Common Stock for Shares pursuant to either the Offer or the Merger will
be a taxable transaction for federal income tax purposes (and may also be a
taxable transaction under applicable state, local or other tax laws). In
general, a Shareholder will recognize gain or loss for such purposes equal to
the difference between such Shareholder's adjusted tax basis for the Shares such
Shareholder sells in such transaction and the value of cash and COMFORCE common
stock received therefor. Gain or loss must be determined separately for each
block of Shares (i.e., Shares acquired at the same cost in a single transaction)
sold pursuant to the Offer or the Merger. Such gain or loss will be capital gain
or loss if the Shares are a capital asset in the hands of the Shareholder. If
the Shares were held for 12 months or less, the capital gain will be a
short-term capital gain and taxed at ordinary income rates. If the Shares were
held for more than 18 months, the capital gain will be a long-term capital gain
and taxed at the rate of 20% (10% if the Shareholder is in the 15% tax bracket).
If the Shares were held for more than 12 months, but not for more than 18
months, the capital gain will be taxed at the rate of 28% (15% if the
Shareholder is in the 15% tax bracket). For corporate Shareholders, capital
gains are taxed at ordinary income rates.
58
Doepken Keevican & Weiss Professional Corporation has further advised
COMFORCE that payments in connection with the Offer may be subject to "backup
withholding" at a rate of 31%. Backup withholding generally applies if the
Shareholder (a) fails to furnish his social security number or TIN, (b)
furnishes an incorrect TIN, or (c) under certain circumstances, fails to provide
a certified statement, signed under penalties of perjury, that the TIN provided
is his correct number and that he is not subject to backup withholding. Backup
withholding is not an additional tax but merely an advance payment, which may be
refunded to the extent it results in an overpayment of tax. Certain persons
generally are entitled to exemption from backup withholding, including
corporations and financial institutions. Certain penalties apply for failure to
furnish correct information and for failure to include reportable payments in
income. Each Shareholder should consult with his own tax advisor as to his
qualification for exemption from backup withholding and the procedure for
obtaining such exemption. Tendering Shareholders may be able to prevent backup
withholding by completing the Substitute Form W-9 included in the Letter of
Transmittal.
The discussion of United States federal income tax consequences set forth
above is for general information only and is based on existing law as of the
date hereof. This discussion does not address all United States federal income
tax considerations that may be relevant to particular Shareholders in light of
their specific circumstances, such as Shareholders who are dealers in
securities, foreign persons or Shareholders who acquired their shares pursuant
to the exercise of an employee stock option or otherwise as compensation.
Shareholders of Uniforce are urged to consult their own tax advisors to
determine the particular tax consequences to them of the Offer (including the
applicability and effect of federal, state, local, foreign and other tax laws,
and possible changes in such tax laws, which may have retroactive effect).
ACCOUNTING TREATMENT OF THE OFFER AND THE MERGER
The acquisition of Uniforce by COMFORCE will be accounted for by the
purchase method and, accordingly, the assets and liabilities of Uniforce will be
included in COMFORCE'S financial statements at their estimated fair market value
at the date of acquisition and Uniforce's operations will be included in
COMFORCE'S statement of operations from the date of acquisition.
THE FINANCING
COMFORCE and Subsidiary estimate that the total amount of funds required by
Subsidiary to purchase all of the 3,038,543 Shares issued and outstanding (which
number excludes 2,084,245 treasury shares held by Uniforce) and 370,010 Shares
issuable upon exercise of the outstanding Uniforce stock options, pursuant to
the Offer and the Merger will be approximately $93.6 million. In addition,
COMFORCE and Subsidiary estimate that the total amount of funds required to
refinance certain existing indebtedness of COMFORCE and Uniforce, provide for
working capital and pay fees and expenses incurred in connection with the Offer
and the Merger will be approximately $75.3 million.
COMFORCE and COI expect to obtain debt financing in the aggregate amount of
$210 million, of which approximately $93.6 million will be applied to purchase
the Shares in the Offer and effect the Merger and $75.3 million will be used to
pay related fees and expenses and refinance certain existing indebtedness of
Uniforce and COMFORCE. The Offer and the Merger are both conditioned upon the
receipt of this financing by COMFORCE.
The following table has been prepared by COMFORCE and Subsidiary after
discussions with management of Uniforce and sets forth the proposed sources and
uses of funds necessary to consummate the Offer and the Merger.
(in millions)
Sources: Notes to be issued by COI ................ $ 110.0
Units to be issued by COMFORCE ........... 25.0
Bank Financing ........................... 25.0
59
Existing Cash Balances ................... 7.4
-------
Total $ 167.4
=========
Uses: Purchase of Shares of Uniforce ........... $ 92.1
Refinance Existing Debt of Uniforce ...... 31.2
Refinance Existing Debt of COMFORCE ...... 35.6
Transaction Costs ........................ 8.5
-------
Total $ 167.4
=========
COMFORCE has entered into an Engagement Letter, dated August 1, 1997,
pursuant to which COMFORCE engaged NatWest to act as its exclusive financial
advisor and initial purchaser or lead placement agent in connection with one or
more debt offerings to fund the Offer and Merger to be conducted on a best
efforts basis.
COMFORCE expects to finance the Uniforce acquisition and the refinancing of
the existing credit facilities of COMFORCE and Uniforce through (i) $110 million
in principal amount of Senior Subordinated Notes due 2007 (the "Notes") to be
issued by COI, a wholly-owned subsidiary of COMFORCE, (ii) 25,000 Units (the
"Units") representing $25 million in principal amount of Senior Secured PIK
Debentures due 2009 (the "Debentures") with Warrants to purchase COMFORCE Common
Stock (the "Warrants") to be issued by COMFORCE and (iii) a draw down of $25
million on a $75 million revolving credit facility (the "New Credit Facility")
to be entered into by COI and Heller. The following are the expected terms of
the Notes, the Debentures, the Warrants and the New Credit Facility. However,
because the terms, conditions and covenants of Notes, the Debentures, the
Warrants and the New Credit Facility are subject to the negotiation and
execution and delivery of definitive documentation, certain of the actual terms,
and conditions of the Notes, the Debentures, the Warrants and the New Credit
Facility may be more or less restrictive or otherwise differ from those
described below.
The Notes
COI intends to issue $110 million in principal amount of Notes in a private
placement. The Notes will be unsecured and subordinated in right of payment to
all existing and future senior indebtedness of COI (including indebtedness under
the New Credit Facility described below) and senior in right of payment to all
existing and future subordinated indebtedness of COI.
Interest on the Notes will be payable semi-annually in cash. The Notes are
expected to mature in ten years. Except in certain limited circumstances, COI
may not redeem the Notes for five years. On or after such date, COI may redeem
the Notes, in whole or in part, at any time, at redemption prices which will
include a premium prior to eight years after issuance of the Notes, together
with accrued and unpaid interest, if any, to the date of redemption. In
addition, at any time and from time to time on or prior to three years after
issuance of the Notes, COI may, subject to certain requirements, redeem up to
35% of the aggregate principal amount of the Notes with the cash proceeds of one
or more public offerings of the equity securities of COMFORCE or COI at a
redemption price which will include a premium, together with accrued and unpaid
interest, if any, to the date of redemption. Upon the occurrence of a Change of
Control (as such term will be defined in the Indenture governing the Notes (the
"Notes Indenture")), COI will be required to make an offer to repurchase the
Notes at a price equal to 101% of the principal amount thereof, together with
accrued and unpaid interest, if any, to the date of repurchase. The Notes will
not be subject to any sinking fund requirement. The interest rate and the amount
of premiums to be paid on prepayment of the Notes will be negotiated between COI
and the initial purchaser of the Notes.
The Notes Indenture will be unconditionally guaranteed on an unsecured,
senior subordinated basis, by each of COI's subsidiaries on the issue date of
the Notes and by each subsidiary of COI acquired thereafter (in
60
each case, excluding subsidiaries that may be designated as Unrestricted
Subsidiaries under the terms of the Notes Indenture). The Notes Indenture will
permit COI to incur additional indebtedness subject to certain limitations.
The Notes will contain covenants customary for securities of similar type
and maturity, including covenants restricting (i) incurrence of indebtedness,
(ii) distributions on or in respect of the capital stock of COI and the making
of certain other restricted payments, (iii) creation or permitting to exist of
restrictions on the ability of COI's subsidiaries to make distributions to COI,
(iv) creation or permitting to exist of certain liens, (v) sales of assets and
stock of subsidiaries, (vi) transactions with affiliates, (vii) issuances of
capital stock of subsidiaries to persons other than COI or its wholly-owned
subsidiaries, (viii) sale/leaseback transactions and (ix) mergers and
consolidations. The Notes Indenture will also contain events of default
customary for securities of similar type and maturity.
In connection with the issuance of the Notes, COI will enter into a
registration rights agreement pursuant to which COI will agree to exchange the
Notes for Notes with substantially identical terms which are registered under
the Securities Act. In the event COI fails to meet certain target dates in
connection with such registration and exchange offer, additional interest will
be payable on the Notes (up to an additional 2%) until the required actions are
completed.
The Debentures
The Units will include $25 million in Debentures. The Debentures will be
senior secured obligations of COMFORCE and will be secured by a pledge by
COMFORCE of all of the issued and outstanding common stock of COI. The payment
obligations of COMFORCE under the Debentures will at all times rank at least
equal in priority of payment with all existing and future senior indebtedness of
COMFORCE.
Interest on the Debentures will be payable semi-annually. For five years
following issuance of the Debentures, interest will be payable either in cash or
in additional Debentures, at the option of COMFORCE. Thereafter, interest will
be payable in cash. To the extent COMFORCE is prohibited from paying interest in
cash at such time, the interest payable on the Debentures will increase by 20%
per annum. The Debentures are expected to mature in twelve years. Except in
certain limited circumstances, COMFORCE may not redeem the Debentures for five
years. On or after such date, COMFORCE may redeem the Debentures, in whole or in
part, at any time, at redemption prices which will include a premium prior to
eight years after issuance of the Debentures, together with accrued and unpaid
interest, if any, to the date of redemption. In addition, at any time and from
time to time on or prior to three years after issuance of the Debentures,
COMFORCE may, subject to certain requirements, redeem up to 35% of the aggregate
principal amount of the Debentures, with the cash proceeds of one or more public
offerings of the equity securities of COMFORCE at a redemption price which will
include a premium, together with accrued and unpaid interest, if any, to the
date of redemption. Upon the occurrence of a Change of Control (as such term
will be defined in the Indenture governing the Debentures (the "Debentures
Indenture")), COMFORCE will be required to make an offer to repurchase the
Debentures at a price equal to 101% of the principal amount thereof, together
with accrued and unpaid interest, if any, to the date of repurchase. The
Debentures will not be subject to any sinking fund requirement. The interest
rate and the amount of premiums to be paid on prepayment of the Debentures will
be negotiated between COMFORCE and the initial purchaser of the Debentures.
The Debentures Indenture will permit COMFORCE to incur additional
indebtedness subject to certain limitations. The Debentures Indenture will
contain covenants customary for securities of similar type and maturity,
including covenants restricting (i) incurrence of indebtedness, (ii)
distributions on or in respect of the capital stock of COMFORCE and the making
of certain other restricted payments, (iii) creation or permitting to exist of
restrictions on the ability of COMFORCE's subsidiaries to make distributions to
COMFORCE, (iv) creation or permitting to exist of certain liens, (v) sales of
assets and stock of subsidiaries, (vi) transactions with affiliates, (vii)
issuances of capital stock of subsidiaries to persons other than COMFORCE or its
wholly-owned
61
subsidiaries, (viii) sale/leaseback transactions and (ix) mergers and
consolidations. The Debentures Indenture will also contain events of default
customary for securities of similar type and maturity.
In connection with the issuance of the Debentures, COMFORCE will enter into
a registration rights agreement pursuant to which COMFORCE will agree to
exchange the Debentures for Debentures with substantially identical terms which
are registered under the Securities Act. In the event COMFORCE fails to meet
certain target dates in connection with such registration and exchange offer,
additional interest will be payable on the Debentures (up to an additional 2%)
until the required actions are completed.
The Warrants
Each Warrant will entitle the holder to acquire a number of shares of
COMFORCE Common Stock to be agreed by COMFORCE and the initial purchaser of the
Units at a price per share equal to a premium of 10% over the Market Price of
the Common Stock (as such term will be defined in the Warrants), subject to
adjustment from time to time upon the occurrence of events. The Warrants will be
exercisable for twelve years after issuance.
In connection with issuance of the Warrants, COMFORCE will agree to file a
registration statement under the Securities Act covering the resale of the
shares of Common Stock issuable upon exercise of the Warrants by the holders
thereof and to use its reasonable efforts to cause the registration statement to
be declared effective.
The New Credit Facility
Heller Business Credit, a division of Heller Financial, Inc. ("Heller") has
issued, and COMFORCE has accepted, a proposal letter (the "Proposal Letter")
relating to the terms of a senior credit facility to be provided by Heller to
COI. The Proposal Letter serves as the basis for discussions between COMFORCE
and Heller relating to the terms of such a facility and does not constitute a
commitment by Heller to fund such a facility. In the event that Heller issues a
commitment to fund such a facility, COMFORCE and Heller would negotiate a credit
agreement (the "New Credit Agreement") setting forth the terms of such facility,
which would constitute the New Credit Facility. Heller has reserved the right to
syndicate all or part of any commitment which it might issue to COI to one or
more other lenders (together with Heller, the "Lenders"). Heller would act as
the lead agent for the Lenders under the New Credit Agreement (in such capacity,
the "Agent"). The following discussion assumes that the terms of the New Credit
Agreement will be those described in the Proposal Letter.
Heller has proposed to provide a $75 million revolving loan facility based
upon an advance rate of up to 85% of the net amount of COI's eligible accounts
receivable, to be defined in the New Credit Agreement. The facility would be
available for a five-year term.
From the date of the closing of the New Credit Agreement (the "Closing
Date"), until Heller receives COI's audited financial statements for the year
ended December 31, 1998 (the "Margin Date"), borrowings under the New Credit
Agreement will bear interest, at COI's option, at a rate equal to the Base Rate
(generally, the rate of interest from time to time published by the Board of
Governors of the Federal Reserve System) plus 0.25%, or LIBOR plus 2.00%.
Subsequent to the Margin Date, the interest rate will be adjusted quarterly by a
percentage in excess of or less than the Base Rate or LIBOR as set forth below,
depending on the ratio (the "Leverage Ratio") of COI's Funded Debt to its
Adjusted EBITDA (each, to be defined in the New Credit Agreement) calculated on
a rolling four-quarter basis and excluding non-cash items:
Leverage Ratio Base Rate LIBOR
-------------- --------- -----
Greater than 6.00 +.75 +2.50
62
Greater than 5.50 but less than +.50 +2.25
or equal to 6.00
Greater than 4.50 but less than +.25 +2.00
or equal to 5.50
Greater than 4.00 but less than +.00 +1.75
or equal to 4.50
Equal to or less than 4.00 -.25 +1.50
The indebtedness of COI under the New Credit Facility will be secured by
security interests in and liens upon all of the real and personal property of
COI and its subsidiaries and the proceeds thereof and a pledge of all of the
capital stock of the subsidiaries.
The New Credit Agreement will contain financial covenants that require COI
to maintain a minimum EBITDA and a minimum Fixed Charge Coverage Ratio, to be
defined in the New Credit Agreement, if availability under the New Credit
Facility falls below $15 million. In addition, the New Credit Agreement will
contain other covenants customary for a transaction of this type, including, but
not limited to, limitations on payment of dividends and transactions with
affiliates. The New Credit Agreement will also contain certain limitations on
COI's ability to make acquisitions and to incur indebtedness without the consent
of the Lenders.
It is contemplated that the New Credit Agreement will specify various
events as Events of Default which will permit the Lenders to cease making loans
and to declare all amounts payable in respect of the New Credit Facility to be
immediately due and payable. These events will include customary Events of
Default for similar types of credit facilities and any additional ones
appropriate in the context of the Transactions.
Pursuant to the Proposal Letter, the Company has agreed to indemnify the
Agent, the Lenders and related persons from and against any and all losses,
liabilities, claims, damages or expenses, including amounts paid in settlement,
incurred by any of them arising out of or by reason of any investigation,
litigation or other proceeding brought or threatened relating to any loan made
or proposed to be made to the Company in connection with the Proposal Letter.
THE SPECIAL MEETING
General
This Prospectus/Proxy Statement is being furnished by Uniforce to the
holders of Uniforce Common Stock in connection with the solicitation of proxies
by the Board of Directors of Uniforce for use at a Special Meeting of
Shareholders of Uniforce (the "Special Meeting") to be held at the Garden City
Hotel, 45 Seventh Street, Garden City, New York 11530 on December 2, 1997 at
10:00 A.M., local time, and any adjournments or postponements thereof.
Additionally, by executing the Letter of Transmittal, a tendering Shareholder
irrevocably appoints designees of COMFORCE as his proxies to, among other
things, vote the Shares tendered in favor of the Merger. Such proxies will be
effective when, and only to the extent that COMFORCE accepts the tendered Shares
for payment. Such proxies contained in the Letter of Transmittal are solicited
by COMFORCE.
This Prospectus/Proxy Statement, the attached Notice of Meeting and the
accompanying form of proxy are first being mailed to Shareholders of Uniforce on
or about October 27, 1997.
Matters to be Considered at the Special Meeting
63
At the Special Meeting, holders of shares of Uniforce Common Stock will
consider and vote on a proposal to approve and adopt the Merger Agreement and
the transactions contemplated thereby, and such other business as may properly
come before the Special Meeting.
The Uniforce Board of Directors has unanimously approved the Merger
Agreement and the transactions contemplated thereby. Based in part on an opinion
of Chartered Capital Advisors, Inc., the Uniforce Board of Directors believes
that the terms of the Merger are fair to, and in the best interests of, the
Uniforce Shareholders and unanimously recommends that the holders of Uniforce
Common Stock vote FOR approval and adoption of the Merger Agreement and the
transactions contemplated thereby. For further information, see "Background and
Purpose of the Transactions", "Recommendation of the Uniforce Board of
Directors" and "Opinion of Financial Advisor."
Record Date
The Board of Directors of Uniforce has fixed the close of business on
October 27, 1997, as the record date ("Record Date") for the determination of
Uniforce shareholders entitled to notice of, and to vote at, the Special
Meeting. Accordingly, only holders of record of shares of Uniforce Common Stock
at the close of business on the Record Date are entitled to notice of, and to
vote at, the Special Meeting. As of the Record Date, 3,038,548 shares of
Uniforce Common Stock were outstanding and held of record by 167 Uniforce
shareholders.
Proxies
When a proxy card is returned, properly signed and dated, the shares of
Uniforce Common Stock represented thereby will be voted in accordance with the
instructions on the proxy card. If a Uniforce shareholder does not attend the
Special Meeting and does not return the signed proxy card or a Letter of
Transmittal which is accepted by COMFORCE, such shareholder's shares will not be
voted. If a Uniforce shareholder returns a signed proxy card but does not
indicate how his or her shares are to be voted, such shares of Uniforce Common
Stock will be voted FOR approval of the Merger Agreement and the transactions
contemplated thereby. As of the date of this Prospectus/Proxy Statement, the
Uniforce Board of Directors does not know of any other matters which are to come
before the Special Meeting. If any other matters are properly presented at the
Special Meeting for consideration, the persons named in the enclosed form of
proxy and acting thereunder will have discretion to vote on such matters in
accordance with their best judgment. No proxy will be voted to adjourn the
Special Meeting unless such proxy has voted in favor of the Merger.
Except as provided below, any proxy given pursuant to this solicitation may
be revoked by the person giving it at any time before it is voted. Proxies may
be revoked by (i) filing with the Secretary of Uniforce, at or before the taking
of the vote at the Special Meeting, a written notice of revocation bearing a
later date than the proxy, (ii) duly executing a later dated proxy relating to
the same shares of Uniforce Common Stock and delivering it to the Secretary of
Uniforce before the taking of the vote at the Special Meeting or (iii) attending
the Special Meeting and voting in person (although attendance at the Special
Meeting will not in and of itself constitute revocation of a proxy). Any written
notice of revocation or subsequent proxy should be sent so as to be delivered to
Uniforce, Attention: Diane J. Geller, Secretary, at or before the taking of the
vote at the Special Meeting. Notwithstanding the foregoing, the proxy contained
in the Letter of Transmittal will be considered coupled with an interest in the
tendered Shares. If such tendered Shares are accepted by COMFORCE, such proxies
cannot be revoked. Upon acceptance of such tendered Shares all prior powers of
attorney and proxies given by a Shareholder with respect to the Shares will be
revoked.
COMFORCE will bear the cost of the solicitation of proxies from Uniforce
shareholders. In addition to solicitation by use of the mails, proxies may be
solicited by directors, officers, and employees of Uniforce and COMFORCE in
person or by telephone or other means of communication. Such directors, officers
and
64
employees of Uniforce and COMFORCE will not be additionally compensated, but may
be reimbursed for out-of-pocket expenses incurred in connection with such
solicitation. Arrangements also will be made with custodians, nominees and
fiduciaries for the forwarding of proxy solicitation materials to beneficial
owners of shares held of record by such custodians, nominees and fiduciaries,
and Uniforce will reimburse such custodians, nominees and fiduciaries for
reasonable expenses incurred in connection therewith.
The proxies contained in the Letter of Transmittal will be considered
coupled with an interest and, if accepted by COMFORCE, will revoke all proxies
including any proxy indicated in the enclosed proxy card. AS A RESULT, ANY
SHAREHOLDER WHO TENDERS HIS SHARES INTO THE OFFER BY EXECUTING THE LETTER OF
TRANSMITTAL WILL, UPON ACCEPTANCE OF THE SHARES BY COMFORCE, BE DEEMED TO HAVE
VOTED FOR THE MERGER EVEN IF HE DOES NOT COMPLETE THE ENCLOSED PROXY CARD OR
EVEN IF HE ATTEMPTS TO VOTE AGAINST THE MERGER AFTER COMFORCE SO ACCEPTS THE
TENDERED SHARES.
UNIFORCE SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS. THE PROCEDURES FOR THE EXCHANGE OF SHARES OF UNIFORCE COMMON STOCK
AFTER THE MERGER IS CONSUMMATED ARE SET FORTH HEREIN. SEE "THE TRANSACTIONS -
THE MERGER - MERGER CONSIDERATION AND THE CONVERSION OF SHARES".
Quorum
The presence, either in person or by properly executed proxies, of the
holders of a majority of the outstanding shares of Uniforce Common Stock is
necessary to constitute a quorum at the Special Meeting. Both abstentions and
broker non-votes are considered present for purposes of determining a quorum but
are excluded from votes cast.
Stockholders Agreement
The Fanning Shareholders have entered into the Stockholders Agreement
pursuant to which they agreed to vote in favor of the Merger and the Merger
Agreement. John Fanning has advised that he will contribute 51,562 shares of
Uniforce Common Stock to the capital of Uniforce which will issue a like number
of shares to certain employees of Uniforce, subject to consummation of the Offer
and to such employees agreeing to be bound by the terms of the Stockholders
Agreement. Such contribution and issuance will take place immediately prior to
consummation of the Merger. The Shares of Uniforce Common Stock subject to the
Stockholders Agreement represent 1,809,030 Shares or in excess of 59% of the
outstanding Uniforce Common Stock.
Vote Required
Uniforce shareholders are entitled to one vote at the Special Meeting for
each share of Uniforce Common Stock held of record by them on the Record Date.
The affirmative vote of two-thirds of all outstanding shares of Uniforce Common
Stock is required to approve and adopt the Merger Agreement. Since approval of
the Merger Agreement requires the affirmative vote of two-thirds of all
outstanding shares of Uniforce Common Stock, abstentions and broker non-votes
will have the effect of votes against the Merger Agreement. As of the Record
Date, there were 3,038,543 Shares outstanding. As a result, the affirmative vote
of 2,025,696 Shares are necessary to approve and adopt the Merger and the Merger
Agreement. Assuming the Fanning Shareholders (and the employee assignees of
Shares held by John Fanning) vote pursuant to the terms of the Stockholders
Agreement, the affirmative vote of 216,666 additional Shares are needed to
approve and adopt the Merger and the Merger Agreement. If, for any reason, a
suit or other legal challenge is brought opposing the Merger, shareholder
approval of the Merger, among other things, may be asserted as a defense to such
suit or challenge.
65
Potential Ability to Consummate the Merger Without the Special Meeting.
Pursuant to the provisions of Section 905 of the NYBCL, any domestic
corporation owning at least 90% of the outstanding shares of each class of
another domestic corporation may merge itself into such subsidiary corporation
(with the authorization of the parent corporation's shareholders) without the
need for the authorization of the subsidiary corporation's shareholders. If
Subsidiary obtains at least 90% of the outstanding Shares pursuant to the Offer,
COMFORCE intends to authorize the Merger of Subsidiary into Uniforce pursuant to
the terms of Section 905. As a result, in such case, COMFORCE may cause Uniforce
to cancel the special meeting and proceed with the Merger.
BUSINESS OF UNIFORCE
Uniforce is a supplemental staffing company focused in the areas of
Information Services ("IS"), technology, office automation, medical office
support and light industrial. It provides supplemental staffing services through
offices owned and operated by Uniforce and its subsidiaries and by licensees of
Uniforce ("Licensees") to businesses, educational institutions, professional and
service organizations, health care facilities, federal, state and local
governmental agencies and others in the United States. In addition, Uniforce
supplies payroll, billing and/or financial support services to independently
owned and operated supplemental staffing firms (the "Associated Offices"),
provides supplemental laboratory staffing support to the scientific community
and provides confidential consulting and payrolling services, permitting clients
to utilize former 1099 independent contractors and consultants.
Uniforce assists clients in meeting peak workloads, handling special
projects, overcoming personnel shortages and solving staffing emergencies by
supplying them with a supplemental work force. Supplemental staffing assignments
range in duration from days and weeks to many months. Planned use of
supplemental staffing affords economies and flexibility to clients by permitting
the hiring of only such permanent employees as are required for the basic
day-to-day workload. As clients pay only for actual hours worked by supplemental
staff, the cost of such personnel is directly related to production and work
flow. Use of services provided by Uniforce on a routine basis also eliminates or
reduces clients' recordkeeping, payroll tax, insurance, benefits, hiring,
training and turnover costs.
Uniforce Information Services/Brannon & Tully(R) and Uniforce Information
Services/Montare International(TM) specialize in placing highly skilled
Information Technology ("IT") professionals on a supplemental staffing basis.
PrO Unlimited, Inc. ("PrO Unlimited(R)") provides confidential employee payroll
conversion and consulting services enabling client companies to utilize the
services of former 1099 independent contractors, consultants and returning
retirees. Employee conversion results in the employment of former 1099
independent contractors and consultants by PrO Unlimited and the assignment of
these persons to work for clients of PrO Unlimited. LabForce of America, Inc.
("LabForce(R)") provides laboratory professionals, including chemists,
biologists, engineers and other supplemental scientific support personnel to a
broad range of industries. One of Uniforce's customers represented 10.2% of
revenues in 1996.
Temporary Help Industry Servicing Company, Inc. ("THISCO(R)") and its
subsidiary, Brentwood Service Group, Inc. ("Brentwood"), provide confidential
financing and perform certain payroll, billing and back office services for
Associated Offices. These functions are performed under contract for a service
charge.
At September 3, 1997, Uniforce's Licensees operated 31 licensed offices,
Uniforce owned and operated 10 offices, LabForce operated 10 offices, PrO
Unlimited operated 5 offices and Uniforce Information Services operated 5
offices. Some of the LabForce and PrO Unlimited offices occupied space shared
with other Uniforce offices. At that date, THISCO(R) and Brentwood serviced 98
Associated Offices. In addition to its headquarters in Woodbury, New York,
Uniforce maintains a southeastern regional office in Boca Raton, Florida and a
midwestern regional office in Overland Park, Kansas. These offices are
responsible for Uniforce's operations in
66
these areas and, together with the headquarters office, the servicing of
licensed and owned offices. Uniforce also maintains an administrative and
operating office in Cleveland, Tennessee, which is responsible for servicing the
clients of Brentwood, an operating office in Atlanta, Georgia, which is
responsible for servicing the IS clients of Uniforce Information
Services/Brannon & Tully, and an operating office in Dallas, TX which is
responsible for servicing the clients of Uniforce Information Services/Montare
International.
References herein to "Uniforce" are references to Uniforce Services, Inc.
and its subsidiaries and where applicable, the Licensees.
Uniforce Staffing Services, Inc. and Licensees
Uniforce furnishes a variety of skilled and semi-skilled supplemental
staffing services in the categories described below. In 1996, 1995 and 1994,
general and automated office, technical and professional services accounted for
approximately 88%, 81% and 72%, respectively, of the total revenues derived from
the sale of supplemental staffing services and light industrial services
accounted for approximately 12%, 19% and 28%, respectively, of such revenues.
Uniforce obtains clients through the efforts of its and the Licensees'
sales personnel, direct mail solicitation and referrals from other clients.
Uniforce also administers public relations programs and advertising campaigns
using the slogans, "Workstyles To Fit Your Lifestyle(R)," "Your Search for
Excellence is Over!(R)," "Work When You Want To Work(R)," "Get Ahead in
Style(TM)," "The Productivity People(R)" and "Productivity Through People(R)."
Supplemental staffers are recruited primarily through local media advertising
and through referrals from other supplemental staffers.
Although Uniforce does not consider its business to be seasonal, assignment
lengths vary, and resultant revenues vary from quarter to quarter, due to
holidays, seasonal needs and adverse weather conditions.
Information Services and Technical Services
Uniforce furnishes highly skilled Information Technology professionals as
consultants, programmers, systems analysts, project managers, application
development and maintenance data base administrators, network specialists,
software engineers and technical writers, as well as in various other
specialized capacities, to a variety of industries.
Automated Services
These supplemental staffers are skilled individuals who perform data
processing, data entry to word processing, desk-top publishing and
spread-sheeting for multiple operating systems.
General Office Services
Supplemental staffers perform as secretaries, typists, receptionists,
clerical assistants and records management clerks, as well as in other general
office categories.
Medical Office Support
Uniforce provides experienced, highly skilled medical office support
staffers for today's highly sophisticated health care industry. Medical office
support staffers range from billers/accounting clerks, claims processors and
coding specialists to medical secretaries, transcriptionists and medical records
personnel.
Legal and Accounting
67
Legal staffers serve as legal secretaries/ typists, paralegals, law clerks,
librarians and in other law-related areas. Uniforce provides supplemental
staffers for general accounting services and other finance-related tasks, such
as bookkeeping, recordkeeping and credit and collection.
Light Industrial
Uniforce provides both skilled and semi-skilled employees to supplement its
clients' regular work force in manufacturing plants, warehouses, distribution
centers, retail outlets, hotels and convention centers. Staffers assist in
shipping and receiving, packing, general assembly, inventory and hospitality
services.
Uniforce Information Services/Brannon & Tully and Montare International
These highly skilled contract consultant professionals perform as
programmers, systems analysts, technical writers, database analysts, project
managers, application developers, software engineers and LAN/WAN (Local Area
Network/Wide Area Network) specialists.
LabForce(R)
LabForce provides services nationwide to companies involved in
pharmaceutical, environmental, biotech and processing businesses. LabForce
staffers include highly specialized professional chemists, biologists,
engineers, lab instrumentation operators, technicians and others.
PrO Unlimited(R)
PrO Unlimited provides confidential consulting and conversion services to
companies that require assistance in complying with regulations regarding the
use of 1099 independent contractors, returning retirees, consultants or other
mission- critical professionals. Using its SCORE 1099(R) system, it offers
client companies consulting services incorporating a proprietary liability and
risk scoring system to assess the likelihood of a client's independent
contractor being reclassified as an employee by a governmental authority.
THISCO/Brentwood
THISCO and Brentwood offer supplemental staff payroll financing and/or
total back office administrative services to Associated Offices. During 1996,
THISCO and Brentwood began to market to the Information Technology staffing
industry through Computer Consultants Funding & Support, Inc. and Information
Technology Funding & Support. Uniforce's back office services include provision
of various management reports and analysis, payment of all federal, state and
local payroll taxes and preparation and filing of quarterly and annual payroll
tax returns for the supplemental staffers placed by independently owned and
operated Associated Offices. Customized paychecks and invoices are provided to
the clients of the Associated Offices in the name of the Associated Offices.
Clients of the Associated Offices remit payment directly to Uniforce, which is
the owner of the receivables from such clients.
Support Services
Uniforce's headquarters is staffed by a team of professionals who provide
various support services to Licensees, their staffs and supplemental staffers,
and to the various subsidiaries of Uniforce and Associated Offices. Uniforce
maintains an accounting and data processing service center that prepares
supplemental staffer payrolls and client billing, assists in accounts receivable
collection and furnishes computerized management information and analysis to
Uniforce's offices and clients and to Associated Offices. Licensees are assigned
a field service representative to provide on-site and telephonic assistance in
developing their offices to their full potential. Licensees, and in some
instances, their in-house staff members, receive training at Uniforce's training
center. In
68
addition, periodic seminars are conducted for Licensees and managers. Uniforce
provides ongoing training and orientation programs for use by in-house and
supplemental staffers. Its marketing department prepares and distributes
programs and promotional literature designed to attract and educate clients to
the benefits of using Uniforce's services and to recruit personnel for such
subsidiaries. Uniforce maintains various regional administrative and sales
offices throughout the country that seek new Licensees to expand the Uniforce
network and new clients for Uniforce's services.
Licensed Offices
Uniforce grants licenses to operate Uniforce offices and presently offers
several different licensing programs. Licensees have the exclusive right to open
and maintain one or more offices within a designated territory, using the
Uniforce(R) name and service marks, and the "Uniforce System," consisting of
marketing programs, operating methods, forms, advertising and promotional
materials. Uniforce-owned branch offices and licensed offices are generally not
operated in the same territory, although, if the Offer and the Merger are
consummated, it is contemplated that certain existing COMFORCE offices which
operate in the same territory as Uniforce Licensees will continue to operate
under the COMFORCE name.
All Licensees receive initial training at the Uniforce training center,
supplemented by written, audio and videotaped training materials used at the
their offices. Thereafter, ongoing advisory service and support is provided to
each office by Uniforce headquarters and regional headquarters staff.
Licensees recruit supplemental staffers and promote their services to both
existing and new clients obtained through the Licensees' marketing efforts.
Performance of the supplemental staffers and overall service quality is the
direct responsibility of Licensees. As Licensees are ultimately responsible for
the collection of accounts receivable, they must conform to strict credit and
collection practices structured by Uniforce.
Uniforce and its Licensees share the gross profits from each licensed
office. While licensing agreements have a perpetual term, Uniforce may terminate
a license for material breach by a Licensee or for other significant good cause
as prescribed in the licensing agreements. In addition, at any time after 18
months, a Licensee (other than one granted a license under the Affiliation
Licensing Program) may surrender its license and withdraw from the supplemental
staffing service business in the territory or, upon payment to Uniforce of an
amount based on a predetermined formula, assume and continue the operation of
the business independently of Uniforce, the Uniforce name and the Uniforce
System. Affiliation Licensing Program Licensees generally must wait five or 10
years from commencement of operations under the Uniforce name before exercising
this option. In either event, if a Licensee exercises this option, Uniforce may
then license a new office or operate a Uniforce-owned office under the Uniforce
name in the territory.
Employees
Uniforce currently has approximately 260 employees (not including
supplemental staffers) at its headquarters, its regional headquarters,
Company-owned offices and in the offices of its various subsidiaries. In
addition, Licensees' offices generally employ two to four in-house employees,
depending upon the size of the office. Supplemental staffers may be employed by
Uniforce or by Licensees, depending upon arrangements with each Licensee. All
employees of Uniforce are covered by workers' compensation and general liability
insurance and by a fidelity bond. Uniforce encourages long-term relationships
with its supplemental staffers through their participation in its 401(k) plan.
During 1996, Uniforce and the Associated Offices provided the supplemental
staffing services of approximately 61,000 persons.
69
Competition
The supplemental staffing industry is highly competitive. Competition is
encountered from national, regional and local personnel services in attracting
licensees, employees and clients. Certain national supplemental service
companies, such as Kelly Services, Inc., Olsten Corporation, Manpower, Inc. and
Adia Services, Inc., are substantially larger in size than Uniforce and possess
substantially greater operational, financial and personnel resources.
Uniforce believes that niche marketing, quality service, high caliber
professional supplemental employees, proper pricing, value added services and
the range of services offered by it are the principal competitive factors that
enable it to compete effectively within local markets. It views its rate
structure as competitive with those of others in the industry.
PrO Unlimited has principally regional or local competition with no one
company directly competing against it in the national marketplace. The principal
competitor of LabForce is Lab Support, Inc. In financial and back office support
services, THISCO/Brentwood's principal competitors are Resource Funding Group,
Tricom, Inc., Damian Services Corporation and Capital TempFunds, Inc. Uniforce
Information Services/Brannon & Tully and Uniforce Information Services/Montare
International compete both with national and regional providers of IS
professionals.
While Uniforce has experienced competitive pressures in its business, it
believes that being a national provider with centralized support services has
enabled it to distribute the costs associated with its businesses among its
Licensees, Company-owned facilities and Associated Offices.
Governmental Regulation
The primary business of Uniforce is not subject to governmental regulation.
The sale of franchises or licenses, however, is subject to such regulation, both
by the Federal Trade Commission and a number of states. Uniforce believes that
it is in compliance with all material requirements of federal and state laws
applicable to the sale of franchises or licenses in those states in which it has
engaged in marketing licenses.
Trademarks
Uniforce holds United States service mark registrations for the name
"Uniforce(R)" (with logo design), "Your Search for Excellence is Over!(R),"
"Work When You Want To Work(R)," "The Productivity People(R)," "Productivity
Through People(R)," "Employers Overload(R)," "THISCO(R)," "Brentwood Service
Group(R)," "LabForce(R)," "PrO Unlimited(R)," "Workstyles To Fit Your
Lifestyle(R)," "Brannon & Tully(R)" and "Score 1099(R)." Uniforce also holds
United States trademark registrations for "Skill Wiz(R)" (a program for the
testing of automated office skills of supplemental personnel), "Fax A Temp(R)"
(a system for obtaining job requests and other client information via telecopier
equipment), "Factfile(R)" (a system for organizing detailed facts regarding
client requirements), "Unimation(R)" (a specialized program providing a full
range of office automation services), "OA Templine(R)" (a software support,
800-number hotline for supplemental staffers on assignment), "Careertemp
Club(R)" (with logo design) (a program providing a wide range of benefits to
career supplemental employees) and "Get Up and Go(R)" (a program that allows
supplemental staffers the mobility to transfer from a Uniforce office in one
city to one in another city). Uniforce has applied for trademark registration of
"Uniskill," "Brentware," "Thiskill" (specialized software), and "Returning
Retiree Solutions". Uniforce has also obtained certain New York State service
marks. Uniforce has service mark registrations for "Uniforce" (with logo
design), THISCO and Payroll Options Unlimited in Canada, Tempfunds U.K. in the
United Kingdom and "Uniforce" in Mexico.
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Properties
The following table sets forth at September 3, 1997 the principal use and
location, approximate floor space, annual rental and lease expiration date of
Uniforce's principal facilities. Facilities leased by Licensees are not
included.
Principal Use and Approximate Square Ft Annual Rental Lease Expiration Date
Location
Executive Office 23,360 $443,840 (1) 5/31/06
Woodbury, NY
Regional Service and 8,503 108,652 (2) 11/09/99
Operating Office
Boca Raton, Fl
Administrative and 6,425 42,020 12/31/97
Operating Office
Cleveland, Tn
Operating Office 8,940 123,840 4/18/99
Atlanta, Ga
Operating Office 4,000 70,000 3/31/01
Dallas, Tx
(1) The lease provides for annual rental increases of approximately $20,000.
(2) Additional rent is payable in the event of increases in taxes and/or
operating costs.
Legal Proceedings
In the ordinary course of its business, Uniforce is from time to time
involved in litigation relating to its operations and services. Uniforce
believes that such litigation, individually and in the aggregate, will not have
a material adverse effect on Uniforce's business, financial condition or results
of operations.
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SELECTED HISTORICAL FINANCIAL INFORMATION OF UNIFORCE
(In thousands, except per share amounts)
Six Months Ended
June 30, Years Ended December 31,
------------------- --------------------------------------------------------------
Consolidated Summary 1997 1996 1996 1995 1994 1993 1992
Earnings Data ---- ---- ---- ---- ---- ---- ----
- --------------------
System-wide sales (1) $191,362 $163,181 $341,884 $307,069 $249,759 $170,491 $153,295
Total revenues 86,163 66,526 142,151 134,471 115,181 86,142 82,925
Earnings from operations 4,499 3,616 7,980 6,444 4,846 2,331 1,658
(2) (3)
Net Earnings 2,067 1,650 3,670 3,563 2,951 1,493 1,144
(2) (3)
Net earnings per share $ 0.65 $ 0.50 $ 1.13 $ 0.83 $ 0.65 $ 0.35 $ 0.26
(2) (3)
Weighted average number of 3,199 3,298 3,258 4,311 4,553 4,307 4,348
shares outstanding
- -------------------------------------------------------------------------------
At June 30, At December 31,
------------------- --------------------------------------------------------------
Consolidated Balance 1997 1996 1996 1995 1994 1993 1992
Sheet Data (4) ---- ---- ---- ---- ---- ---- ----
- --------------------
Working capital $ 34,315 $ 28,412 $ 29,003 $ 29,181 $ 19,281 $ 17,508 $ 16,661
Total assets 62,366 53,943 54,969 50,596 41,496 30,235 28,040
Long-term debt 29,880 27,996 26,483 11,676 2,800 -- --
Total liabilities 46,141 41,632 40,747 26,436 18,384 9,527 8,189
Stockholders' equity $ 16,225 $ 12,311 $ 14,222 $ 24,160 $ 23,112 $ 20,708 $ 19,851
(2)
- ----------
(1) System-wide sales are the sales of Uniforce and the Associated Offices.
(2) As a result of the tender offer described in Note 9 of Notes to
Consolidated Financial Statements appearing elsewhere in this
Prospectus/Proxy Statement, stockholders' equity was reduced by
approximately $14,160,000. In addition, borrowings incurred to fund
repurchases in the tender offer have caused interest expense to increase,
thereby affecting net earnings.
(3) Includes a non-recurring pre-tax charge of $360,000 relating to a trademark
litigation settlement described in Note 10 of Notes to Consolidated
Financial Statements appearing elsewhere in this Prospectus/Proxy
Statement.
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(4) Certain reclassifications have been made to the previous years'
consolidated balance sheet data to conform to the current year's
presentation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF UNIFORCE
Forward-Looking Statements
The following discussion contains forward-looking statements and
information that is based on Uniforce management's beliefs and assumptions, as
well as information currently available to Uniforce management. Although
Uniforce believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to be correct. Such statements are subject to certain risks, uncertainties
and assumptions. Should one or more of these risks or uncertainties materialize,
or should the underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated or expected. Among the risks that
might cause Uniforce's actual results to vary from those projected or suggested
in any forward-looking statements are those discussed under "Risk Factors."
RESULTS OF OPERATIONS
GENERAL
The following table sets forth, for the periods indicated, the percentages
that certain income and expense items bear to the total revenues of Uniforce:
Years Ended Six Months
December 31, Ended June 30,
------------------------------------ ---------------------
1996 1995 1994 1997 1996
--------- --------- -------- ------- --------
Sales of supplemental staffing services 94.6 93.9 94.2 95.8 94.5
Service revenues and fees 5.4 6.1 5.8 4.2 5.5
--------- --------- -------- ------- --------
Total revenues 100.0 100.0 100.0 100.0 100.0
--------- --------- -------- ------- --------
Costs and expenses:
Cost of supplemental staffing services 73.6 73.0 72.7 76.2 73.7
Licensees' share of gross margin 5.6 7.0 8.6 5.0 5.6
General and administrative 14.1 14.5 13.7 12.9 14.6
Litigation settlement .3 -- -- -- --
Depreciation and amortization .8 .7 .8 .7 .7
--------- --------- -------- ------- --------
Total costs and expenses 94.4 95.2 95.8 94.8 94.6
--------- --------- -------- ------- --------
Earnings from operations 5.6 4.8 4.2 5.2 5.4
Other income (expense):
Interest expense - net (1.5) (.5) (.1) (1.3) (1.4)
Other income -- -- -- -- --
--------- --------- -------- ------- --------
Earnings before provision for income taxes 4.1 4.3 4.1 3.9 4.0
Provision for income taxes 1.5 1.6 1.5 1.5 1.5
--------- --------- -------- ------- --------
NET EARNINGS 2.6 2.7 2.6 2.4 2.5
========= ========= ======== ======= ========
73
The increases in revenues described throughout this section were primarily the
result of volume increases relating to new and existing clients.
Period Ended June 30, 1997 Compared to Period Ended June 30, 1996
Total revenues increased by $10,911,435, or 32.0%,from $34,046,395 in the
second quarter of 1996 to $44,957,830 in the second quarter of 1997. For the
first six months, total revenues increased by $19,637,122 or 29.5% from
$66,525,728 in 1996 to $86,162,850 in 1997.
Sales of supplemental staffing services increased by $10,830,300 and
$19,657,077, respectively, for the second quarter and first six months of 1997
as compared to 1996. Sales of two of Uniforce's subsidiaries, PrO Unlimited and
Uniforce Information Services/Brannon & Tully continued to increase during the
second quarter of 1997. PrO Unlimited sales increased by $2,590,689 or 27.9% and
$5,361,872 or 30.1%, respectively, for the second quarter and first six months
of 1997 as compared to 1996. Uniforce Information Services/Brannon & Tully sales
increased by $4,381,957 or 62.0% and $6,749,798 or 45.8%, respectively, for the
second quarter and first six months of 1997 as compared to 1996. Further
contributing to the increase in sales was Uniforce's acquisition in May 1996 of
certain assets of Montare International, a provider of information technology
("IT") contract professionals. This acquisition contributed $2,275,599 and
$4,101,018, respectively, of sales for the second quarter and first six months
of 1997 and $883,183 for the period from May 16, 1996 to June 30, 1996.
Service revenues and fees increased by 4.2% from $1,932,960 in the second
quarter of 1996 to $2,014,095 in the second quarter of 1997 and decreased 0.5%
from $3,648,965 for the first six months of 1996 to $3,629,010 for the first six
months of 1997. Increased service revenues and fees that were generated by
THISCO and its subsidiaries were offset by the loss of service revenues for the
first six months of 1997 due to the contract termination of one major client and
the reevaluation and termination of relationships with certain less profitable
customers of Brentwood.
System-wide sales, which includes sales of associated offices serviced by
THISCO and Brentwood, increased by $20,149,485 or 23.7% from $84,864,741 in the
second quarter of 1996 to $105,014,226 in the second quarter of 1997. In the
first six months, system-wide sales increased by $28,180,829 or 17.3% from
$163,181,170 in 1996 to $191,361,999 in 1997.
Cost of supplemental staffing services was 79.5% of sales of supplemental
staffing services in the second quarter of 1997 compared to 77.6% in the second
quarter of 1996. For the first six months, cost of supplemental staffing
services was 79.6% of sales of supplemental staffing services in 1997 and 78.0%
in 1996. The higher percentage in the second quarter and first six months of
1997 was a result of increased sales of PrO Unlimited, which have a high
percentage payroll expense in relation to sales.
Licensees' share of gross margin is principally based upon a percentage of
the gross margin generated from sales by licensed offices. The gross margin from
sales of supplemental staffing services amounted to $8,822,903 and $7,191,025
for the second quarter of 1997 and 1996, respectively. For the first six months,
gross margin from such sales amounted to $16,860,930 in 1997 and $13,840,986 in
1996. Licensees' share of gross margin was 25.2% in the second quarter of 1997
as compared to 26.4% for the second quarter of 1996. For the first six months,
licensees' share of gross margin was 25.7% in 1997 and 26.8% in 1996. The lower
share as a percentage of total gross margin in 1997 is due to increased sales of
Uniforce Information Services/Brannon & Tully and Uniforce Information
Services/Montare International for which there are no related licensee
distributions and to the increased sales of PrO Unlimited for which there are
limited distributions.
General and administrative expenses increased by $840,746 or 17.4% during
the second quarter of 1997 as compared to the second quarter of 1996. For the
first six months of 1997 general and administrative expenses increased by
$1,379,318 or 14.2% as compared to the first six months of 1996. This increase
resulted principally
74
from higher payroll and recruiting costs with respect to permanent staff,
expenses relating to Uniforce Information Services/Montare International
operations (acquired in May 1996) and higher facility costs. The increase was
partially offset by a reduction of professional costs associated with Uniforce's
litigation (settled in July, 1997) described in Note 3 of the Uniforce
consolidated condensed financial statements appearing elsewhere in this
Prospectus/Proxy Statement, after giving consideration to certain insurance
coverages.
Net interest expense increased by $87,210 or 16.3% during the second
quarter of 1997 as compared to the second quarter of 1996. For the first six
months of 1997, net interest expenses increased by $184,714 or 19.0% as compared
to 1996. The increase in interest expense for the 1997 period compared to 1996
is a result of increased borrowings for the acquisition of Montare International
and increased working capital requirements due to the continued growth in
Uniforce's business.
As a result of the factors discussed above, net earnings increased by 24.7%
from $993,542 ($.31 per share) in the second quarter of 1996 to $1,238,736 ($.39
per share) in the second quarter of 1997. For the first six months, net earnings
increased by 25.2% from $1,650,370 ($.50 per share) in 1996 to $2,066,699 ($.65
per share) in 1997.
1996 Compared to 1995
Total revenues increased by 5.7% from $134,471,332 in 1995 to $142,151,356
in 1996. Sales of supplemental staffing services increased by 6.5%, or
$8,169,579, in 1996 as compared to 1995. PrO Unlimited sales increased by
$13,077,038 or 52.9% in 1996, and Uniforce Information Services/Brannon & Tully
sales increased by $4,829,230 or 18.9%, in 1996 as compared to 1995. Further
contributing to the increase in sales was Uniforce's acquisition in May 1996 of
certain assets of Montare International, a provider of IT contract
professionals. This acquisition contributed $4,191,737 of sales from May 17,
1996 through year end. These increases were offset by a $15,519,782 decrease in
sales of licensed offices, principally due to a reduction in the number of
licensed offices as a result of contract buyouts by two of its operators.
Service revenues and fees decreased by 6.0% from $8,203,490 in 1995 to
$7,713,935 in 1996. This decline was the result of increased service revenues
and fees generated by THISCO, one of Uniforce's subsidiaries, being more than
offset by certain Licensee service revenues and fees relating to the contract
buyouts noted above which were recorded in 1995. Uniforce intends to continue to
expand this portion of its business through THISCO and Brentwood.
System-wide sales, which include sales of Associated Offices serviced by
two of Uniforce's subsidiaries, THISCO and Brentwood, increased $34,815,470, or
11.3%, from $307,068,836 in 1995 to $341,884,306 in 1996.
Cost of supplemental staffing services was 77.9% of sales of supplemental
staffing services during 1996 as compared to 77.7% in 1995. The higher
percentage in 1996 was the result of increased sales by PrO Unlimited, which
have a high percentage of payroll expense in relation to sales.
Licensees' share of gross margin is principally based upon a percentage of
the gross margin generated from sales by licensed offices. The gross margin from
sales of supplemental staffing services amounted to $29,751,823 and $28,105,271
for 1996 and 1995, respectively. Licensees' share of gross margin was 26.8% for
1996 as compared to 33.7% in 1995. The lower share as a percentage of gross
margin in 1996 is due to lower Licensee sales, increased sales of Uniforce
Information Services/Brannon & Tully and Uniforce Information Services/Montare
International, for which there are no related Licensee distributions, and to the
increased sales of PrO Unlimited for which there are limited distributions.
75
General and administrative expenses increased by 3.2%, or $623,944, in 1996
as compared to 1995. The increase resulted principally from expenses relating to
the operations of Uniforce Information Services/Montare International. Further
contributing to the increase were higher facility costs, payroll and recruiting
costs with respect to permanent staff and costs relating to the implementation
of a new payroll and billing system. These increases were offset by a reduction
in Uniforce's provision for bad debts and, after giving consideration to certain
insurance coverages, a reduction of professional costs associated with certain
litigation.
In January 1996, various vendors of training films filed an action against
Uniforce. The plaintiffs alleged that Uniforce improperly used and/or copied
plaintiffs' tapes. Uniforce incurred a charge of $360,000 in settling this
matter.
Net interest expense increased by $1,442,406 during 1996. The increase in
1996 as compared to 1995 is a result of increased borrowings used for the
repurchase of 1,250,000 shares of Uniforce Common Stock in the tender offer, the
acquisition of Montare International and increased working capital required due
to the continued growth in Uniforce's business.
There was no material difference in the effective income tax rate in 1996
as compared to 1995.
As a result of the factors discussed above, net earnings increased by 3.0%
from $3,563,393 in 1995 to $3,669,731 in 1996.
1995 Compared to 1994
Total revenues increased by 16.7% from $115,180,734 in 1994 to
$134,471,332, in 1995. Sales of supplemental staffing services increased by
16.4% or $17,781,850 in 1995 as compared to 1994. These increases resulted
principally from Uniforce's acquisition in April 1994 of certain assets of
Brannon & Tully. This acquisition contributed $25,528,957 of sales in 1995 as
compared to $12,445,869 for the period from April 18, 1994 to December 31, 1994.
This acquisition has had a favorable impact on Uniforce's results of operations
and its ability to develop higher margin professional services. Sales by
Uniforce's subsidiaries, PrO Unlimited, and to a lesser degree LabForce,
continued to increase as Uniforce emphasized the marketing of these services.
The sales of PrO Unlimited increased by $9,915,331 in 1995 as compared to 1994.
Service revenues and fees increased by 22.5% from $6,694,742 in 1994 to
$8,203,490 in 1995. Service revenues and fees generated by THISCO and Brentwood
increased by $1,015,084 in 1995 compared to 1994. Also contributing to this
increase were certain Licensee service revenues and fees which increased by
$493,664 in 1995 as compared to 1994.
In addition, system-wide sales, which include sales of Associated Offices
serviced by THISCO and Brentwood, increased by 22.9%, from $249,758,846 in 1994
to $307,068,836 in 1995.
Cost of supplemental staffing services was 77.7% of sales of supplemental
staffing services during 1995 as compared to 77.2% in 1994. The higher
percentage in 1995 was the result of increased sales by PrO Unlimited, which
have a high percentage of payroll expense in relation to sales.
Licensees' share of gross margin is principally based upon a percentage of
the gross margin generated from sales by licensed offices. The gross margin from
sales of supplemental staffing services amounted to $28,105,271 and $24,719,266
for 1995 and 1994, respectively. Licensees' share of gross margin was 33.7% for
1995 as compared to 40.0% in 1994. The lower share as a percentage of gross
margin in 1995 is due, in part, to the sales of Uniforce Information
Services/Brannon & Tully for which there are no related Licensee distributions,
and to PrO Unlimited for which there are limited distributions.
76
General and administrative expenses increased by 23.6% or $3,719,790 in
1995 as compared to 1994. As a percentage of revenues, general and
administrative expenses were 14.5% and 13.7% for 1995 and 1994, respectively.
These increases resulted principally from compensation and overhead expenses
relating to Uniforce Information Services/Brannon & Tully operations. Further
contributing to the increase were higher expenses relating to payroll costs with
respect to permanent staff offset by savings in staff recruiting costs and
increased legal fees relating to certain litigation. In addition, the provision
for possible losses on receivables, notes receivable and other assets increased
in 1995 as compared to 1994.
Net interest expense increased by $600,602 during 1995. The increase in
1995 as compared to 1994 is a direct result of increased borrowings used for the
acquisition of Brannon & Tully and to meet working capital requirements due to
the increased system-wide sales.
There was no material difference in the effective income tax rate in 1995
as compared to 1994.
As a result of the factors discussed above, net earnings increased by 20.8%
from $2,950,751 in 1994 to $3,563,393 in 1995.
Financial Condition
As of June 30, 1997, Uniforce's working capital increased to $34,314,764,
as compared to $29,002,663 at December 31, 1996. This increase was due primarily
to the continuing profitable operations of Uniforce. The increase in system-wide
sales, which include sales of associated offices, during the second quarter of
1997 resulted in increases in accounts and funding and service fees receivable.
The increase in accounts receivable and funding and service fees receivable was
largely financed through Uniforce's long term credit facility.
During the first six months of 1997, Uniforce paid quarterly cash dividends
on shares of its Common Stock at $.03 per share ($182,012). During 1996,
Uniforce paid quarterly cash dividends on shares of its Common Stock at $.03 per
share ($363,311).
On December 8, 1995, Uniforce entered into an agreement with Heller
creating a three-year $35,000,000 credit facility (the "Credit Facility").
Effective June 30, 1997, the Credit Facility was increased to $46,000,000 and
extended until June 30, 2000. The Credit Facility comprises a term loan in the
amount of $6,000,000, amended from $3,000,000 (the "Term Loan"), to be paid in
thirty six consecutive monthly installments of $166,667 commencing with the
balance outstanding due on June 30, 2000, and a $40,000,000 revolving credit
facility, amended from $32,000,000 (the "Revolving Facility"), which expires on
June 30, 2000. Uniforce may borrow against the Revolving Facility up to 85% of
eligible accounts receivable and eligible service and funding fees receivable.
The Term Loan bears interest at Uniforce's election at either the lender's
floating base rate or LIBOR (London Interbank Offered Rate) plus 2.00%.
Borrowings under the Revolving Facility bear interest at Uniforce's election at
either the lender's floating base rate minus .25%, or LIBOR plus 1.75%. Prior to
June 30, 1997, the Term Loan bore interest at Uniforce's election at either the
lender's floating base rate plus .25%, or LIBOR plus 2.25% and interest under
the Revolving Facility bore interest at Uniforce's election at either the
lender's floating base rate, or LIBOR plus 2.125%. Borrowings under the Credit
Facility are secured by a first priority security interest in all owned and
after-acquired real and personal property of Uniforce.
At June 30, 1997, Uniforce had outstanding borrowings of $6,000,000 under
the Term Loan bearing interest at an average rate of 8.05% and $25,250,000 of
borrowings under the Revolving Facility bearing interest at an average rate of
7.93%.
The Credit Facility contains a variety of affirmative and negative
covenants of types customary in an asset-based lending facility, including those
relating to reporting requirements, maintenance of records, properties and
corporate existence, compliance with laws, incurrence of other indebtedness and
liens, restrictions on certain
77
payments and transactions and extraordinary corporate events. The Credit
Facility also contains financial covenants relating to maintenance of levels of
minimal tangible net worth, EBITDA (earnings before interest, taxes,
depreciation and amortization), net income and fixed charge coverage and
restricting the amount of capital expenditures. In addition, the Credit Facility
contains certain events of default of types customary in an asset-based lending
facility. Uniforce was in compliance with all covenants at June 30, 1997.
Indebtedness under the Credit Facility will become due and payable upon the
consummation of the Merger, unless the terms of the Credit Facility are
renegotiated. It is anticipated that the Credit Facility will be repaid from
proceeds available under the New Credit Facility, and that the New Credit
Facility will be used to fund Uniforce's operations, among other purposes. See
"The Financing--The New Credit Facility."
In January 1996, Uniforce successfully completed its offer to purchase
1,250,000 shares of Uniforce Common Stock at $11.25 per share. The total amount
required to purchase such shares was $14,062,500, exclusive of related fees and
other expenses. The purchase price and related expenses were funded with
borrowings available under the Credit Facility.
As of Thursday, June 26, 1997, the Uniforce Common Stock commenced trading
on the American Stock Exchange under the symbol UFR. Uniforce's Common Stock
ceased trading on the Nasdaq National Market (ticker symbol: UNFR) after the
close on Wednesday, June 25, 1997.
78
MANAGEMENT OF UNIFORCE
Directors and Executive Officers
The following table sets forth certain information about the directors and
executive officers of Uniforce who are expected to continue as officers of
Uniforce or any of its divisions following the Merger:
Name and Age Current Positions Expected Positions with Uniforce if
------------ ----------------- -----------------------------------
Merger is Consummated
---------------------
John Fanning (66)...................... Chairman of the Board, President and President, Financial Services Division
Chief Executive Officer of Uniforce
Rosemary Maniscalco (56)............... Executive Vice President and Chief President
Operating Officer of Uniforce;
Director of Uniforce
Harry V. Maccarrone (50)............... Vice President Finance, Chief Vice President - Finance
Financial Officer and Treasurer of
Uniforce; Director of Uniforce
John Fanning, founder of Uniforce, has served as President and a director
since 1961, the year in which Uniforce's first office was opened. Mr. Fanning
entered the employment field in 1954, when he founded the Fanning Personnel
Agency, Inc., his interest in which he sold in 1967 to devote his efforts solely
to Uniforce's operations. He also founded and served as the first president of
the Association of Personnel Agencies of New York.
Rosemary Maniscalco joined Uniforce as Sales and Marketing Coordinator in
December 1981. In June 1982, her duties were expanded to include direction of
Uniforce's license marketing efforts, as well as the development of marketing
concepts. In 1983, she was appointed Uniforce's Director of Corporate
Development, in May 1984, she was elected Executive Vice President and in June
1992, she was designated Chief Operating Officer.
Harry V. Maccarrone joined Uniforce in December 1988 as Assistant Vice
President-Finance. He has served as Vice President-Finance, Treasurer and
Uniforce's Chief Financial Officer since May 1989.
In addition, Michael Ferrentino (age 34), the sole director of Subsidiary,
will be the sole director of the Surviving Corporation after the Merger. Mr.
Ferrentino has served as the President and a Director of COMFORCE since
December, 1995. Mr. Ferrentino was a founder of COMFORCE Telecom, Inc. and he
served as COMFORCE Telecom, Inc.'s Executive Vice President from 1987 to 1995.
From 1984 through 1987, he was employed by Dun & Bradstreet.
79
Executive Compensation
The following table sets forth, for the fiscal years indicated, all
compensation awarded to, earned by or paid to the chief executive officer (the
"CEO") of Uniforce (Mr. John Fanning, Chairman of the Board and President of
Uniforce) and the other most highly compensated executive officers of Uniforce
other than the CEO whose salary and bonus exceeded $100,000 (three individuals,
the "named executive officers") for one or more of the fiscal years presented.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
------------------------------ -------------------------------
Securities All Other All Other
Underlying Compensation Compensation
Name and Principal Position Year Salary Bonus Options (#) (1) (2)
- ----------------------------------- ------- ----------- ------------- ------------ -------------- ---------------
John Fanning....................... 1996 $225,000 $223,905 (3) --- $8,603 $4,000
Chairman of the Board, President 1995 225,000 153,834 (4) --- 4,499 4,000
and Chief Executive Officer 1994 191,668 119,630 (5) --- 2,875 2,000
Rosemary Maniscalco................ 1996 $178,366 $141,604 (6) 69,401 $11,025 $4,000
Executive Vice President and Chief 1995 175,000 169,236 (7) --- 4,365 4,000
Operating Officer 1994 177,019 194,353 (8) --- 2,655 2,000
Harry V. Maccarrone................ 1996 $152,615 $25,000 (9) 23,134 $3,695 $4,000
Vice President Finance, Treasurer 1995 138,837 25,000 (9) --- 2,951 4,000
and Chief Financial Officer 1994 133,752 25,000 (9) --- 2,006 2,000
Diane J. Geller.................... 1996 $132,282 $15,000 (9) --- $2,976 $4,000
Secretary 1995 118,651 15,000 (9) --- 2,524 4,000
1994 114,303 15,000 (9) --- 1,715 2,000
- -------------------
(1) Such amount represents payments (including interest thereon) contributed by
Uniforce under a Deferred Compensation Plan.
(2) Such compensation represents directors fees. Perquisites and other personal
benefits, securities or property received by each executive officer did not
exceed the lesser of $50,000 or 10% of such executive officer's annual
salary and bonus.
(3) Such amount represents incentive compensation of $198,905 and a
discretionary bonus of $25,000.
(4) Such amount represents incentive compensation of $128,834 and a
discretionary bonus of $25,000.
(5) Such amount represents incentive compensation of $94,630 and a
discretionary bonus of $25,000.
(6) Such amount represents additional compensation of $25,000 based upon the
terms of her employment agreement, incentive compensation of $49,687, a
discretionary bonus of $25,000 and sales compensation of $41,917. See "--
Employment Agreements."
(7) Such amount represents additional compensation of $25,000 based upon the
terms of her employment agreement, incentive compensation of $32,613, a
discretionary bonus of $25,000 and sales compensation of $86,623. See "--
Employment Agreements."
80
(8) Such amount represents additional compensation of $25,000 based upon the
terms of her employment agreement, incentive compensation of $19,894, a
discretionary bonus of $25,000 and sales compensation of $124,459. See "--
Employment Agreements."
(9) Such amount represents a discretionary bonus.
Option Grants during 1996 Fiscal Year
The following table provides information related to options to purchase
Uniforce Common Stock granted to the named executive officers during 1996.
Uniforce currently does not have any plans providing for the grant of stock
appreciation rights.
Potential Realizable Value
at Assumed Rates of Stock
Price Appreciation for
Individual Grants Option Term (2)
- ------------------------------------------------------------------------------------------------- ----------------------------
% of Total
Number of Options Exercise
Securities Granted to or Base
Underlying Employees in Price
Name Option (#) (1) Fiscal Year ($/Sh) (2) Expiration Date 5% 10%
- ---------------------- -------------- -------------- ----------- ------------------- ---------- ------------
Rosemary Maniscalco 69,401 57.3% $11.25 February 19, 2006 $491,017 $1,244,332
Harry V. Maccarrone 23,134 19.1% $11.25 February 19, 2006 $163,675 $414,783
- -------------------
(1) The option exercise price may be paid in shares of Uniforce Common Stock
owned by the executive, in cash, or a combination of any of the foregoing,
as determined by the Stock Option Committee administering Uniforce's stock
option plans. The exercise price is equal to the fair market value of the
Uniforce Common Stock on the date of grant.
(2) The potential realizable value portion of the foregoing table illustrates
values that might be realized upon exercise of the options immediately
prior to the expiration of their term, assuming the specified compounded
rates of appreciation on the Uniforce Common Stock over the term of the
options. These numbers do not take into account provisions of certain
options providing for termination of the option following termination of
employment, non-transferability or differences in vesting periods.
Regardless of the theoretical value of an option, its ultimate value will
depend upon the market value of the Uniforce Common Stock at a future date,
and that value will depend on a variety of factors, including the overall
condition of the stock market and Uniforce's results of operations and
financial condition. There can be no assurance that the values reflected in
this table will be achieved.
81
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The following table provides information related to options exercised by
the named executive officers during 1996 and the number and value of options
held by the named executive officers at fiscal year end.
Number of Securities Value of Unexercised In-the-
Underlying Unexercised Money Options at FY-End ($)
Common Options at FY-End (#) (1)
Stock Value ------------------------------- --------------------------------
Acquired on Realized
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------- ------------- ----------- ------------ -------------- ------------ ---------------
John Fanning.............. -- -- 45,250 29,750 927,625 609,875
Rosemary Maniscalco....... 8,330 170,765 55,101 81,800 1,129,571 1,676,900
Harry V. Maccarrone....... 1,059 21,710 35,909 19,900 736,135 407,950
Diane J. Geller........... -- -- 0 2,550 0 52,275
- -------------------
(1) Based on the closing price of a share of Uniforce Common Stock on December
31, 1996 of $20.50, as reported on the National Association of Securities
Dealers, Inc. Automated Quotation System ("Nasdaq") National Market.
Employment Agreements
Under an employment agreement dated as of January 26, 1984, as amended
through January 1, 1997, between Uniforce and John Fanning, Mr. Fanning is
employed as Chief Executive Officer and President for a term that will expire on
December 31, 1997. Mr. Fanning receives a base salary of $250,000, increased
from $225,000 effective January 1, 1997. Such agreement also provides for
incentive compensation equal to 5% of Uniforce's "pre-tax operating income" (as
defined therein) in excess of $2,500,000 but not in excess of $3,000,000, plus
3.5% of such income in excess of $3,000,000.
Under an employment agreement dated as of May 1, 1993, as amended through
January 1, 1997, between Uniforce and Rosemary Maniscalco, Ms. Maniscalco is
employed as Executive Vice President and Chief Operating Officer for a term that
will expire on December 31, 1997 and thereafter shall be extended for successive
one-year periods unless either party notifies the other party at least 90 days
prior to December 31, 1997, or the expiration of any such subsequent one-year
term. Ms. Maniscalco receives a base salary of $225,000 per annum (increased
from $175,000, effective January 1, 1997) and (i) incentive compensation equal
to 5% of Uniforce's "pretax operating income" (as defined in such agreement) in
excess of $2,500,000 but not in excess of $3,000,000, plus 1% of such income in
excess of $3,000,000; and (ii) sales compensation based upon (A) the sales of,
and/or licensing fees actually paid by, licensed offices of Uniforce acquired by
it or converted to the Uniforce system as a direct result of Ms. Maniscalco's
sales efforts and (B) the gross profit of offices located within the United
States that are acquired by Uniforce with respect to sales of such offices
derived from sales of Uniforce's PrO Unlimited product line. In all events, the
aggregate of base salary, incentive compensation and sales compensation in
respect of any full fiscal year may not be less than $250,000.
In addition, Uniforce has entered into arrangements with Ms. Maniscalco and
Mr. Maccarrone under which Ms. Maniscalco is entitled to receive a cash bonus of
$780,761 (subject to reduction in certain circumstances) and Mr. Maccarrone is
entitled to receive a cash bonus of $260,257, each payable to the extent of 10%
thereof on January 11, 1999, to the extent of 30% thereof on January 11, 2000
and as to the balance thereof
82
on January 11, 2001, provided that the recipient is then employed by Uniforce.
The cash bonus installments are subject to acceleration in the event of the
recipient's death, the merger of Uniforce, the sale of all or substantially all
of Uniforce's assets or a change of control of Uniforce and, accordingly, will
be paid in full upon the consummation of the Merger.
See "The Transactions -- Interests of Certain Persons in the Transactions "
for a description of employment agreements entered into by Mr. Fanning, Ms.
Maniscalco and Mr. Maccarrone which will take effect when COMFORCE acquires at
least 51% of the outstanding Uniforce Common Stock and which, at that time, will
supersede the employment agreements but not the other arrangements described
above.
Compensation of Directors
Each director of Uniforce receives a fee of $1,000 for each meeting
attended in person. In addition, pursuant to the Directors Stock Option Plan,
each director of Uniforce who is not an employee of Uniforce was granted an
option to purchase 5,000 shares of Common Stock on December 13, 1994, 1,000
shares of Common Stock on January 1, 1996 and will be granted an option to
purchase an additional 1,000 shares of Common Stock on each January 1 so long as
he remains a director. In addition, on March 14, 1997, each director of Uniforce
received an option to purchase 1,000 shares of Common Stock at an exercise price
of $16.00 per share, exercisable 6 months form the date of grant. After the
Merger it is not contemplated that directors of the Surviving Corporation will
be compensated.
SECURITY OWNERSHIP OF CERTAIN UNIFORCE BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information at September 3, 1997 as
to the Uniforce Common Stock beneficially owned by directors, certain executive
officers and all directors and certain executive officers of Uniforce as a group
and by certain principal shareholders. Unless otherwise indicated, the address
of each person listed below is 415 Crossways Park Drive, Woodbury, New York
11797.
Number of Shares and
Nature of Beneficial Percent of
Name and Address of Beneficial Owner Ownership (1) Class (2)
- ------------------------------------ -------------------- ----------
John Fanning (3)........................ 1,860,530 (4) 60.2%
Fanning Asset Partners, L.P............. 361,513 11.9%
Northern Trust Plaza, Suite 4160
Boca Raton, FL 33431
Dimensional Fund Advisors Inc. (5)...... 221,400 (5) 7.3%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Rosemary Maniscalco..................... 78,701 (6) 2.5%
Harry V. Maccarrone..................... 44,202 (7) 1.4%
Gordon Robinett......................... 10,000 (8) (9)
John H. Brinckerhoff III................ 8,108 (8) (9)
Joseph A. Driscoll...................... 9,000 (8) (9)
Diane J. Geller......................... 1,450 (10) (9)
Directors and executive officers ....... 2,011,991 (11) 62.1%
as a group (8 persons)
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- ----------------------
(1) Each beneficial owner named below exercises sole voting and dispositive
power with respect to the shares beneficially owned.
(2) Includes the shares of Uniforce Common Stock subject to options
(exercisable within 60 days after September 3, 1997) held by each of the
named individuals or the directors and executive officers as a group for
purposes of calculating the respective percentages of Uniforce Common Stock
owned by such individuals or by the directors and executive officers as a
group.
(3) Includes 361,513 shares owned by Fanning Asset Partners, L.P., a Georgia
limited partnership of which Mr. Fanning is the general partner. Mr.
Fanning disclaims beneficial ownership of the shares owned by said
partnership in excess of his proportional interest in the partnership.
Under the rules and regulations of the Securities and Exchange Commission,
Mr. Fanning may be deemed a "control person" of Uniforce.
(4) Includes 51,500 shares of Uniforce Common Stock subject to options.
(5) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 221,400 shares of
Uniforce Common Stock as of December 31, 1996, all of which shares are held
in portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company, or in series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
(6) Represents 78,701 shares of Uniforce Common Stock subject to options.
(7) Includes 43,143 shares of Uniforce Common Stock subject to options.
(8) Includes 8,000 shares of Uniforce Common Stock subject to options.
(9) Less than 1% of the number of outstanding shares of Uniforce Common Stock
at September 3, 1997.
(10) Represents 1,450 shares of Uniforce Common Stock subject to options.
(11) Includes an aggregate of 198,794 shares of Uniforce Common Stock subject to
options.
CERTAIN UNIFORCE RELATIONSHIPS AND RELATED TRANSACTIONS
See "The Transactions -- Interests of Certain Persons in the Transactions "
for a description of employment agreements entered into by Mr. Fanning, Ms.
Maniscalco and Mr. Maccarrone which will take effect when COMFORCE acquires at
least 51% of the outstanding Uniforce Common Stock.
COMPARISON OF RIGHTS OF UNIFORCE AND COMFORCE SHAREHOLDERS
A portion of the Tender Offer Consideration and the Merger Consideration
will consist of COMFORCE Common Stock. As a result, if the Offer and the Merger
are consummated, all holders of Uniforce Common Stock will become holders of
COMFORCE Common Stock. Thus, their rights as stockholders will be governed by
the Delaware General Corporation Law (the "DGCL") and COMFORCE's Certificate of
Incorporation, as amended (the "COMFORCE Certificate"), and Amended and Restated
Bylaws (the "COMFORCE Bylaws),
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rather than by the New York Business Corporation Law (the "NYBCL") and
Uniforce's Certificate of Incorporation, as amended (the "Uniforce
Certificate"), and Bylaws, as amended (the "Uniforce Bylaws"). It is not
practical to describe all of the differences between the DGCL, the COMFORCE
Certificate and the COMFORCE Bylaws, on the one hand, and the NYBCL, the
Uniforce Certificate and the Uniforce Bylaws, on the other hand. The following
is a summary of the material differences which may affect the rights of
shareholders of Uniforce. This summary is qualified in its entirety by reference
to the DGCL, the NYBCL, the COMFORCE Certificate, the COMFORCE Bylaws, the
Uniforce Certificate and the Uniforce Bylaws. See "Available Information" for
information as to how to obtain copies of the COMFORCE Certificate, the COMFORCE
Bylaws, the Uniforce Certificate and the Uniforce Bylaws.
Capital Stock
Authorized Capital Stock
The authorized capital stock of COMFORCE consists of 110,000,000 shares,
consisting of 100,000,000 shares of Common Stock having a par value of $.01 per
share and 10,000,000 shares of Preferred Stock having a par value of $.01 per
share. As of the Record Date, approximately 13,754,039 shares of COMFORCE Common
Stock and 500 shares of COMFORCE's Preferred Stock, issued in one series, were
outstanding. Holders of COMFORCE capital stock do not have preemptive rights. As
of the Record Date, COMFORCE also had outstanding warrants to purchase an
aggregate of 1,818,794 shares of Common Stock at exercise prices ranging from
$2.00 to $24.00 per share. All warrants expire by December 15, 2000. Additional
warrants will be issued in connection with the offering of the Units. See "The
Transactions--Financings."
The authorized capital stock of Uniforce consists of 12,000,000 shares,
consisting of 10,000,000 shares of Common Stock having a par value of $.01 per
share and 2,000,000 shares of Preferred Stock having a par value of $.01 per
share. As of the Record Date, approximately 3,038,543 shares of Uniforce Common
Stock and no shares of Uniforce's Preferred Stock were outstanding. Holders of
Uniforce capital stock do not have preemptive rights.
Preferred Stock
Under both the COMFORCE Certificate and the Uniforce Certificate, the Board
of Directors is authorized, subject to certain limitations imposed by law,
without further stockholder approval, to issue from time to time preferred stock
(10,000,000 shares in COMFORCE's case and 2,000,000 in Uniforce's case) in one
or more series with such designations and such powers, preferences and rights,
and such qualifications, limitations or restrictions as the Board may fix by
resolution. As of the Record Date COMFORCE had outstanding 500 shares of
preferred stock in one series, as described below. Uniforce has not issued any
preferred stock.
On October 25, 1996, the COMFORCE Board authorized the issuance of up to
10,000 shares of Preferred Stock, par value $0.01 per share, designated the
Series F Convertible Preferred Stock ("Series F Preferred Stock"). As
subsequently modified by agreement of COMFORCE and the holders, each share of
Series F Preferred Stock will, (i) at the option of the holder or (ii)
automatically on the second anniversary of the date of issuance, be converted
into such number of shares of Common Stock determined by dividing $1,000 plus
all accrued, unpaid dividends thereon by the per share conversion price. The
conversion price is 83% of the average closing bid price of the Common Stock for
the five trading days immediately preceding the conversion date, subject to
certain limitations. Holders of shares of Series F Preferred Stock are entitled
to cumulative dividends of 5% per annum, payable quarterly on the first day of
March, June, September and December in each year, payable in cash or Common
Stock (valued at the closing price on the date of declaration), at COMFORCE's
election. The Series F Preferred Stock has a liquidation preference over the
Common Stock in the event of any liquidation or sale of COMFORCE. Except as
otherwise provided by law, the holders of Series F Preferred Stock
85
are not entitled to vote. As of June 30, 1997, there were 500 shares of Series F
Preferred Stock outstanding with a liquidation value of $500,000.
Except for the Series F Preferred Stock, there are no other series or
classes of COMFORCE Preferred Stock with currently outstanding shares. All the
shares of all other series or classes of Preferred Stock previously authorized
by the COMFORCE Board of Directors have been repurchased by COMFORCE, canceled
or converted into COMFORCE Common Stock and are not subject to reissue.
The issuance of any additional series of COMFORCE Preferred Stock, and the
relative powers, preferences, rights, qualifications, limitations and
restrictions of such series, if and when established, will depend upon, among
other things, the future capital needs of COMFORCE, the then-existing market
conditions and other factors that, in the judgment of the COMFORCE Board of
Directors, might warrant the issuance of Preferred Stock. The issuance of
additional series of Preferred Stock by the COMFORCE Board of Directors could,
among other things, adversely affect the voting power of the holders of COMFORCE
Common Stock and, under certain circumstances, make it more difficult for a
person or group to gain control of COMFORCE. At the date of this
Prospectus/Proxy Statement, there are no plans, agreements or understandings
relative to the issuance of any shares of COMFORCE Preferred Stock.
Directors
The COMFORCE Bylaws provide that the COMFORCE Board will consist of seven
directors, unless the COMFORCE Board by resolution fixes another number, which
will be no less than three nor more than nine. A majority of the COMFORCE Board
must consist of non-employee directors. The Uniforce Bylaws provide that the
number of directors will be determined by the Uniforce Board, but will be no
less than three nor more than 15. The Uniforce Board has set the number of
directors at six.
Under the DGCL, any director or the entire board of directors may be
removed with or without cause by holders of a majority of the outstanding shares
entitled to vote generally in an election of directors. Under the NYBCL and the
Uniforce Bylaws, directors may be removed for cause by action of the Uniforce
Board and with or without cause by action of the Uniforce shareholders.
Under the COMFORCE Bylaws vacancies in the COMFORCE Board, including
vacancies resulting from an increase in the number of directors, may be filled
by the vote of the remaining directors, though less than a quorum, by electing a
person to serve until the next annual meeting of stockholders. Under the
Uniforce Bylaws, vacancies in the Uniforce Board, including vacancies resulting
from an increase in the number of directors or for any other reason except the
removal of directors by shareholders may be filled by a vote of a majority of
the remaining directors, though less than a quorum. Vacancies occurring as a
result of the removal of a director by shareholders must be filled by a vote of
the shareholders. A director elected to fill a vacancy on the Uniforce Board is
elected to hold office for the unexpired term of his predecessor.
Meetings of Shareholders
Under the DGCL and the NYBCL, special meetings of shareholders may be
called by the board of directors and by such other person or persons authorized
to do so by the corporation's certificate of incorporation or by-laws. The
COMFORCE Bylaws provide that special meetings of stockholders may be called by
the Board of Directors or the President. The Uniforce By-Laws provide that
special meetings of shareholders may be called by the Board of Directors or,
subject to the control of the Board, by the President, and must be called by the
Board at the request in writing by stockholders owning a majority of the
outstanding shares entitled to vote. Thus, COMFORCE shareholders do not have the
ability to call a special meeting of shareholders, while holders of a majority
of the outstanding shares of Uniforce could call such a meeting.
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The NYBCL provides that if, for a period of one month after the date fixed
by or under the by-laws for the annual meeting of shareholders, or if no date
has been fixed for a period of 13 months after the last annual meeting, there is
a failure to elect a sufficient number of directors to conduct the business of
the corporation, the board of directors shall call a special meeting for the
election for directors. If the board fails to call such meeting within two weeks
of expiration of that period of time, or if it is so called but there is a
failure to elect such directors for a period of two months after the expiration
of such period, the holders of 10% of the shares entitled to vote in an election
of directors may demand the call of a special meeting for the election of
directors. Under the DGCL, if an annual meeting is not held within 30 days of
the date designated for such a meeting, or is not held for a period of 13 months
after the last annual meeting, the Delaware Court of Chancery may summarily
order a meeting to be held upon the application of any stockholder or director.
In both New York and Delaware, the number of shares represented at such meeting
constitutes a quorum without regard to other provisions of law.
Under the DGCL and the NYBCL, unless the certificate of incorporation
provides otherwise, a majority of the shares entitled to vote constitutes a
quorum, and shareholder action is generally by majority vote, except that
directors are elected by a plurality vote and the NYBCL requires the vote of at
least two thirds of the outstanding shares in connection with certain mergers,
consolidations and sales of assets, including the Merger (see "-- Mergers and
Business Combinations; Sales of Assets"). The COMFORCE By-Laws provide that a
majority of the shares entitled to vote on a particular matter constitutes a
quorum for the purpose of considering such matter, and all action may be
authorized by the vote of the 51% of the outstanding common stock represented at
any meeting, unless otherwise provided by law. The Uniforce By-Laws provide that
a majority of the shares entitled to vote constitutes a quorum, provided that
when a specified item of business is required to be voted on by a class or
series, voting as a class, the holders of a majority of the shares of such class
or series constitute a quorum for the transaction of such specified item of
business. The Uniforce By-laws also provide that (except for the election of
directors, which requires a plurality of the votes cast at a meeting by the
holders of shares entitled to vote in the election and except as otherwise
required by law) the vote of a majority of shares is required for shareholder
action. The COMFORCE Certificate and the Uniforce Certificate both provide that
there is no cumulative voting in the election of directors.
Under the DGCL, unless otherwise provided by the certificate of
incorporation, any action which is to be taken by stockholders may be taken
without a meeting if such action is authorized by written consent signed by
shareholders having not less than the minimum number of votes necessary to take
such action at a meeting at which all shares were present and voting. The
COMFORCE Certificate does not otherwise provide. Under the NYBCL, any required
or permitted action taken by shareholders may be taken without a meeting with
the written consent of all outstanding shares entitled to vote, unless the
certificate of incorporation otherwise provides for a lesser number. The
Uniforce Certificate does not otherwise provide.
Mergers, Consolidations and Sales of Assets
Under the DGCL, when stockholder approval is required for a merger or
consolidation or a sale, lease or exchange of all or substantially all of a
corporation's assets, such transaction must be approved by a majority of
outstanding shares entitled to vote, unless a greater proportion is specified in
the certificate of incorporation. The COMFORCE Certificate does not provide for
any greater proportion. Under the NYBCL, when shareholder approval is required
for a merger or consolidation or sale, lease, exchange or disposition of all or
substantially all of a corporation's assets, such transaction must be approved
by two-thirds of the outstanding shares entitled to vote.
Under the DGCL, unless required by a corporation's certificate of
incorporation (the COMFORCE Certificate does not contain such requirement), no
vote of stockholders of the surviving corporation in a merger is required if (i)
the agreement of merger does not amend the certificate of incorporation of the
surviving corporation, (ii) each share of stock of such surviving corporation
outstanding immediately prior to the effective date of the merger will be an
identical outstanding or treasury share of the surviving corporation after such
87
effective date, (iii) either no shares of common stock of the surviving
corporation and no shares, securities or obligations convertible into such stock
are to be issued or delivered under the plan of merger, or the authorized
unissued shares or treasury shares of common stock of the surviving corporation
to be issued or delivered under the plan of merger plus those initially issuable
upon conversion of any other securities or obligations to be issued or delivered
under such plan, do not exceed 20% of the issuer's common shares outstanding
immediately prior to the merger and (iv) certain other requirements are
satisfied. The DGCL also provides that a Delaware corporation which is the
record holder of at least 90% of each class of outstanding shares of a Delaware
subsidiary may merge such subsidiary into such parent without approval of such
subsidiary's shareholders or board of directors.
Under the NYBCL, the vote of at least two thirds of the outstanding shares
of stock of each New York corporation that is a party to a merger is required to
approve such merger. A New York corporation owning at least 90% of each class of
outstanding shares of another New York corporation may merge such other
corporation into itself without authorization of the shareholders of any such
corporation; such a merger may also be accomplished by a New York corporation
and a corporation organized under the laws of another jurisdiction if permitted
by the laws of such jurisdiction.
Business Combinations
Under the DGCL, a corporation is not permitted to engage in any business
combination with any interested stockholder for a period of three years
following the date such stockholder became an interested stockholder. The DGCL
defines an "interested stockholder" to mean any person who is the owner of 15%
or more of the outstanding voting stock of the corporation or any person who is
an affiliate of the corporation and was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the preceding
three year period. A "business combination" means, inter alia, (i) any merger of
the corporation or any majority owned subsidiary of the corporation with the
interested stockholder or with any other corporation if the merger is caused by
the interested stockholder, (ii) any sale, transfer or other disposition to or
with the interested stockholder of 10% or more of the assets of the corporation
or of any majority owned subsidiary, (iii) any transaction which results in the
issuance or transfer by the corporation or any majority owned subsidiary of any
stock of the corporation or of such subsidiary except (A) pursuant to the
exercise, exchange or conversion of securities which were outstanding prior to
the time the interested stockholder became such or (B) pursuant to a merger
under Section 251(g) of the DGCL. Business combinations are permitted within the
three-year period if, prior to the date such stockholder became an interested
stockholder, the board of directors approved either the business combination or
the transaction which resulted in the stockholder becoming an interested
stockholder. The DGCL also allows business combinations if (i) upon consummation
of the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the outstanding
voting stock of the corporation at the time the transaction commenced (excluding
shares owned by directors, officers and employee stock plans) or (ii) on or
subsequent to the date on which such person became an interested stockholder,
the business combination is approved by the board of directors and authorized at
a stockholders' meeting by two-thirds of the disinterested stockholders.
Under the NYBCL, a resident domestic corporation (as that term is defined
in the NYBCL) is generally prohibited from engaging in a business combination
with an "interested shareholder" for a period of five years from the time the
shareholder acquired the stock in such resident domestic corporation, unless
certain conditions are met. The NYBCL defines an "interested shareholder" as any
person who is the owner of 20% or more of the outstanding voting stock of the
corporation or any person who is an affiliate of the corporation and was the
owner of 20% or more of the outstanding voting stock of the corporation at any
time within the preceding five year period. A "business combination" means,
inter alia, (i) any merger of the corporation or any subsidiary of the
corporation with the interested shareholder or with any other corporation which
is an affiliate of such interested shareholder, (ii) any sale, transfer or other
disposition to or with the interested shareholder of 10% or more of the assets
of the corporation or of any subsidiary, (iii) any transaction which results in
the issuance or transfer by the
88
corporation or any subsidiary of stock of the corporation or of such subsidiary
which has a market value of 5% or more of the aggregate market value of the
stock of the corporation or subsidiary.
The resident domestic corporation may engage in a business combination with
the interested shareholder within the five-year period if the interested
shareholder's stock purchase was approved by the corporation's board of
directors prior to the purchase. The business combination is also permitted if
any of the following criteria are met: (1) the business combination was approved
by the board of directors prior to the interested shareholder's stock
acquisition date; (2) the combination was approved by the majority of
disinterested shareholders at a meeting called no earlier than five years after
the interested shareholder's stock acquisition date; or (3) the price paid to
all the shareholders meets statutory criteria establishing a formula price. The
formula price is the higher of the price paid by the interested shareholder or
the market value of the stock, computed as the higher of the value when acquired
or when the announcement of the business combination was made.
Dividends, Redemptions and Repurchases
Under the NYBCL and the DGCL, a corporation may generally pay dividends out
of surplus. New York requires a board of directors to make certain disclosures
when paying dividends out of any account other than earned surplus. The DGCL
also permits a corporation, unless otherwise provided in its certificate of
incorporation (which the COMFORCE Certificate does not), to pay dividends, if
there is no surplus, out of net profits for the fiscal year in which the
dividends are declared and/or for the preceding fiscal year. Dividends out of
net profits may not be paid when the capital of the corporation amounts to less
than the aggregate amount of capital represented by the issued and outstanding
stock of all classes having a preference upon the distribution of assets. See
"Comparative Market Prices and Dividends."
Shareholder Lists; Inspection Rights
Under the DGCL, stockholders have a right during regular business hours and
for at least 10 days prior to any shareholders meeting and during such meeting
to examine a list of shareholders for any purpose germane to such meeting.
Additionally, under the DGCL, any stockholder, following a written request, also
has the right to inspect the corporation's books and records, including the
stockholder list, during normal business hours for a proper purpose.
Under the NYBCL, a person who has been a shareholder for at least six
months preceding his demand, or any person holding, or authorized in writing by
the holders of, at least five percent of any class of outstanding shares, upon
at least five days' prior written demand, has the right to examine, during
normal business hours, minutes of shareholder meetings and the record of
shareholders and to make extracts therefrom unless such shareholder refuses upon
request to furnish to the corporation, its transfer agent or registrar an
affidavit that such inspection is not desired for a purpose which is in the
interest of a business or object other than the business of the corporation and
that such shareholder has not within five years sold or offered for sale any
list of shareholders of any corporation.
Transactions with Interested Directors
Generally, under the NYBCL and the DGCL, no contract or transaction between
a corporation and one or more of its directors or between a corporation and
another entity in which one or more of its directors are directors or officers
or in which one or more of its directors have a material financial interest is
void or voidable because of such relationship or interest, if (i) the material
facts of the transaction and the director's interest are disclosed (under the
NYBCL, in good faith) or known to the board of directors or a committee of the
board of directors which authorizes, approves or ratifies the transaction by the
vote of a majority of directors who have no direct or indirect interest in the
transaction (or, under the NYBCL, if the votes of the disinterested directors
are insufficient to constitute board action, by the unanimous vote of the
disinterested directors); (ii) the material facts
89
of the transaction and the director's interest are disclosed (under the NYBCL,
in good faith) or known to shareholders entitled to vote and they authorize,
approve or ratify the transaction; or (iii) the transaction is fair (and, under
the NYBCL, reasonable) to the corporation.
Indemnification; Limitation of Liability
Both Delaware and New York allow broad indemnification by a corporation of
its officers, directors, employees and other agents and permit, with certain
exceptions, corporations to provide in their certificate of incorporation or
by-laws (which COMFORCE and Uniforce have done) for elimination of liability of
directors to the corporation or its shareholders for monetary damages for breach
of such directors' fiduciary duty of care.
The DGCL authorizes a Delaware corporation to indemnify any person who was,
is, or is threatened to be made, a party in any civil, criminal, administrative
or investigative pending or completed action, suit or proceeding (other than an
action by or in the right of a corporation) by reason of the fact that he is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another entity, for expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with any threatened, pending or completed action, suit or
proceeding. With respect to actions by or in the right of a corporation, the
DGCL authorizes indemnification of such person for expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit. To be entitled to indemnification,
a person must have 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 action or proceeding, had no reasonable cause to believe
such conduct was unlawful with respect to actions taken by or in the right of
the corporation. With respect to actions by or in the right of the corporation,
court approval is required for indemnification relating to any claim as to which
a person has been adjudged liable to the corporation.
The DGCL requires indemnification for expenses actually and reasonably
incurred by any director, officer, employee or agent in connection with a
proceeding against such person for actions in such capacity to the extent that
the person has been successful on the merits or otherwise. Advancement of
expenses (i.e., payment prior to a determination on the merits) is permitted,
but not required, by the DGCL. A director or officer must undertake to repay
such expenses if it is ultimately determined that he is not entitled to
indemnification. The disinterested members of the board (or independent legal
counsel or stockholders) must determine, in each instance where indemnification
is not required by the DGCL, that such director, officer, employee or agent is
entitled to indemnification. The DGCL provides that the statutory
indemnification is not exclusive.
The COMFORCE Certificate provides that COMFORCE will indemnify to the
fullest extent permitted by the DGCL each person who was or is involved in any
manner (including without limitation as a party or a witness) or was or is
threatened to be made so involved in any action (civil, criminal or
investigative, including without limitation any action by or in the right of the
corporation) by reason of the fact that he is or was a director or officer of
COMFORCE or is or was serving at the request of COMFORCE as a director or
officer of another entity. The COMFORCE Certificate provides that the right to
indemnification includes the right to receive payment in advance of expenses
incurred in connection with the action, consistent with applicable law as then
in effect.
Under the NYBCL, a corporation may indemnify any person made, or threatened
to be made, a party to any action or proceeding except for actions by or in the
right of the corporation, by reason of the fact that he was a director or
officer of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another entity,
provided such director or officer acted in good faith for a purpose which he
reasonably believed to be in the best interests of the corporation (or, in the
case of service for any other entity, not opposed to the best interest of the
corporation) and, in criminal proceedings, in addition, had no reasonable cause
to believe his conduct was unlawful. In the case of actions by or in the right
of the corporation, the corporation
90
may indemnify any person who was a director or officer of the corporation if he
acted in good faith for a purpose which he reasonably believed to be in the best
interests of the corporation (or, in the case of service for any other entity,
not opposed to the best interest of the corporation), except that no
indemnification may be made for (i) a threatened action, or a pending action
which is settled or otherwise disposed of, or (ii) any claim, issue or matter as
to which such person has been adjudged to be liable to the corporation, unless
and only to the extent that the court in which the action was brought or, if no
action was brought, any court of competent jurisdiction, determines upon
application that, in view of all circumstances, the person is fairly and
reasonably entitled to an indemnity for such portion of the settlement amount
and expenses as the court deems proper.
Indemnification under the NYBCL is not exclusive of other indemnification
rights to which a director or officer may be entitled, whether contained in the
certificate of incorporation or by-laws, or when authorized by (i) such
certificate of incorporation or by-laws, (ii) a resolution of shareholders or
directors or (iii) an agreement providing for such indemnification, provided
that no indemnification may be made to or on behalf of any director or officer
if a judgment or other final adjudication adverse to the director or officer
establishes that his acts were committed in bad faith or were the result of
active and deliberate dishonesty and were material to the cause of action so
adjudicated, or that he personally gained a financial profit or other advantage
to which he was not legally entitled.
Under the NYBCL, any person to whom such provisions regarding
indemnification apply who has been successful on the merits or otherwise in the
defense of a civil or criminal action or proceeding is entitled to
indemnification. Except as provided in the preceding sentence, unless ordered by
a court pursuant to the NYBCL, indemnification under the NYBCL may be made only
if authorized in the specific case and after a finding that the director or
officer met the requisite standard of conduct (i) by the board acting by a
quorum of disinterested directors or (ii) if such quorum is not available, if so
directed by either (A) the board upon the written opinion of counsel or (B) by
shareholders.
The Uniforce Certificate provides that Uniforce will indemnify to the
maximum extent possible under the NYBCL, all persons whom Uniforce has the right
to indemnify under the NYBCL from and against any expenses, liabilities or other
matters referred to in the provisions of the NYBCL dealing with indemnification
of officers, directors and employees.
Uniforce has also entered into indemnification agreements with certain of
its officers, directors and employees under which Uniforce has agreed to
indemnify such persons against all liabilities, costs and expenses which such
persons may incur by reason of their service as an officer, director, employee,
agent, fiduciary or representative of Uniforce or any related entity to the
fullest extent permitted by law. The agreements provide that Uniforce has the
burden of proving that indemnification is not proper in any case. The agreements
also provide that costs and expenses will be advanced at the request of the
officer, director or employee prior to an ultimate determination of whether such
person is entitled to indemnification.
Appraisal Rights
Under the DGCL, a stockholder of a corporation who does not vote in favor
of certain mergers or consolidations and demands appraisal of his shares, under
varying circumstances, may be entitled to dissenters' rights pursuant to which
such shareholder may receive cash for the "fair value" of his shares (as
determined by a Delaware court) in lieu of the consideration otherwise
receivable in the transaction. Unless the corporation's certificate of
incorporation provides otherwise (the COMFORCE Certificate does not), such
dissenters' rights are not available in certain circumstances, including (a) the
sale of all or substantially all of the assets of a corporation, (b) the merger
or consolidation by a corporation the shares of which are either listed on a
national securities exchange (or designated as a national market security by the
National Association of Securities Dealers, Inc.) or held of record by more than
2,000 holders, if a stockholder receives only shares of the surviving
corporation or of any other corporation which are either listed on a national
securities exchange (or so designated
91
as stated above) or held of record by more than 2,000 holders, or cash in lieu
of fractional shares or any combination of the foregoing or (c) to shareholders
of a corporation surviving a merger if no vote of stockholders of the surviving
corporation is required to approve the merger because the merger agreement does
not amend the existing certificate of incorporation, each share of the surviving
corporation outstanding prior to the merger is to be an identical outstanding or
treasury share after the merger, and the number of shares to be issued in the
merger does not exceed 20% of the shares of the surviving corporation
outstanding immediately prior to the merger, and certain other conditions are
met.
Under the NYBCL, holders of shares have the right, in certain
circumstances, to dissent from certain mergers, consolidations, sales and other
dispositions of assets requiring shareholder approval and share exchanges and to
demand payment in cash for their shares equal to the "fair value" of such shares
in an action timely brought by the dissenters. For a description of the NYBCL
regarding dissenters' rights, see "The Transaction -- Appraisal Rights" and
Appendix B hereto.
Issuance of Rights or Options to Purchase Shares to Directors, Officers and
Employees
The DGCL does not contain any provision requiring the issuance of rights or
options to officers, directors and employees to be approved by a stockholder
vote. The NYBCL requires that the issuance to officers, directors or employees
of rights or options to purchase shares must be authorized by a majority of all
outstanding shares entitled to vote thereon. Consequently, stockholders of
COMFORCE have no right under state law to approve the grant of options and other
rights to purchase shares of COMFORCE Common Stock to COMFORCE's officers and
directors, although stockholder approval may be required by American Stock
Exchange rules or for tax law or other purposes.
Loans to Directors
The DGCL allows loans to and guarantees of obligations of officers and
directors without any shareholder approval. The NYBCL requires that any loan
made by the corporation to any director must be authorized by a vote of the
shareholders. For the purposes of this authorization, the shares held by the
director who would be the borrower in the transaction are not entitled to vote.
Consequently, COMFORCE may make loans to its officers and directors without
shareholder approval.
Anti-Greenmail
The DGCL does not contain any provisions prohibiting the selective
repurchase by a corporation of its stock at a premium over market price
("greenmail"). Delaware courts have permitted the repurchase of shares at a
premium in certain cases.
Section 513 of the NYBCL provides that no domestic corporation may purchase
more than 10% of its stock from a shareholder who has held the shares for less
than two years at any price which is higher than the market price unless such
transaction is approved by both the corporation's board of directors and a
majority of the shares entitled to vote or the corporation offers to purchase
shares from all shareholders on the same terms. Consequently, there is no
statutory prohibition against the payment of greenmail by COMFORCE, as there is
in the case of Uniforce.
92
LEGAL MATTERS
The legality of the COMFORCE Common Stock being offered hereby will be
passed upon for COMFORCE by Doepken, Keevican &Weiss Professional Corporation,
Pittsburgh, Pennsylvania. In addition, Doepken Keevican & Weiss Professional
Corporation has reviewed the statements made in the Registration Statement under
the headings "Summary--Federal Income Tax Consequences of the Offer and the
Merger@ and "The Transactions--Certain Federal Income Tax Consequences of the
Merger,@ and has given its opinion that such statements are correct.
EXPERTS
The consolidated financial statements of COMFORCE as of December 31, 1996
and 1995 (and for each of the three years in the period ended December 31,
1996), incorporated by reference in this Prospectus/Proxy Statement, have been
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The financial statements of RHO Company Incorporated which are incorporated
by reference in this Prospectus/Proxy Statement from COMFORCE's Annual Report on
Form 10-K for the year ended December 31, 1996 have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto which is incorporated herein by reference, and have been so
incorporated in reliance upon the authority of said firm as experts in giving
said report.
The consolidated financial statements of Uniforce as of December 31, 1996
and 1995, and for each of the years in the three-year period ended December 31,
1996, have been included herein and in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
93
INDEX TO UNIFORCE FINANCIAL STATEMENTS
Independent Auditors' Report ........................................... F-2
Consolidated Balance Sheets: December 31, 1996 and 1995 ............... F-3
Consolidated Statements of Earnings: Years Ended December 31, 1996,
1995 and 1994 ................................................. F-4
Consolidated Statements of Stockholders' Equity: Years Ended
December 31, 1996, 1995 and 1994 .............................. F-5
Consolidated Statements of Cash Flows: Years Ended
December 31, 1996, 1995 and 1994 .............................. F-6
Notes to Consolidated Financial Statements ............................. F-7
Consolidated Condensed Balance Sheet: June 30, 1997 (unaudited) ....... F-17
Consolidated Condensed Statements of Earnings:
Six Months Ended June 30, 1997 and 1996 (unaudited) ........... F-18
Consolidated Condensed Statements of Cash Flows:
Six Months Ended June 30, 1997 and 1996 (unaudited) ........... F-19
Notes to Consolidated Condensed Financial Statements
(unaudited) ................................................... F-20
F-1
Independent Auditors' Report
The Board of Directors and Stockholders
Uniforce Services, Inc.:
We have audited the accompanying consolidated balance sheets of Uniforce
Services, Inc. and subsidiaries as of December 31, 1996 and 1995 and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Uniforce Services,
Inc. and subsidiaries at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Jericho, New York
March 7, 1997
F-2
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
Assets 1996 1995
------ ---- ----
Current assets:
Cash and cash equivalents $ 5,283,422 6,444,859
Accounts receivable (net of allowance for doubtful accounts of
$68,000 and $167,000, in 1996 and 1995, respectively) 17,224,885 14,827,862
Funding and service fees receivable (net of allowance for doubtful
accounts of $212,000 and $402,000 in 1996 and 1995,
respectively) 18,759,814 20,918,753
Current maturities of notes receivable from licensees (net of
allowance for possible loss of $42,000 and $67,000 in 1996 and
1995, respectively) 87,051 132,258
Prepaid expenses and other current assets 1,710,969 1,270,268
Deferred income taxes 201,149 347,149
------------ ------------
Total current assets 43,267,290 43,941,149
------------ ------------
Notes receivable from licensees (net of current maturities and allowance for
possible loss of $64,000 and $92,000
in 1996 and 1995, respectively) 136,157 182,642
Fixed assets - net 3,775,661 2,125,413
Deferred costs and other assets (net of accumulated amortization of
$2,105,777 and $1,685,970 in 1996 and 1995, respectively) 1,402,032 821,244
Cost in excess of fair value of net assets acquired (net of accumulated
amortization of $681,601 and $335,954 in 1996 and 1995, respectively) 6,388,240 3,525,741
------------ ------------
$ 54,969,380 50,596,189
============ ==========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Loan payable $ 1,000,000 750,000
Payroll and related taxes payable 6,372,319 7,540,947
Payable to licensees and clients 1,484,238 2,025,563
Income taxes payable -- 351,690
Accrued expenses and other liabilities 5,408,070 4,092,058
------------ ------------
Total current liabilities 14,264,627 14,760,258
------------ ------------
Loan payable - non-current 25,750,000 11,250,000
Capital lease obligation - non-current 732,658 426,109
Stockholders' equity:
Common stock $.01 par value, authorized 10,000,000 shares; issued 5,109,788
and 4,991,213 shares in 1996 and 1995,
respectively 51,098 49,912
Additional paid-in capital 8,825,128 7,789,598
Retained earnings 27,296,463 23,990,043
------------ ------------
36,172,689 31,829,553
Treasury stock, at cost, 2,084,245 and 829,500 shares in
1996 and 1995, respectively (21,950,594) (7,669,731)
------------ ------------
F-3
Total stockholders' equity 14,222,095 24,159,822
------------ -----------
$54,969,380 50,596,189
=========== ==========
See accompanying notes to consolidated financial statements.
F-4
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Sales of supplemental staffing services $ 134,437,421 126,267,842 108,485,992
Service revenues and fees 7,713,935 8,203,490 6,694,742
------------- ------------- -------------
Total revenues 142,151,356 134,471,332 115,180,734
Cost of supplemental staffing services 104,685,598 98,162,571 83,766,726
Licensees' share of gross margin 7,976,831 9,473,431 9,895,870
General and administrative 20,074,672 19,450,728 15,730,938
Litigation settlement 360,000 -- --
Depreciation and amortization 1,073,759 940,668 941,196
------------- ------------- -------------
Total costs and expenses 134,170,860 128,027,398 110,334,730
------------- ------------- -------------
Earnings from operations 7,980,496 6,443,934 4,846,004
Other income (expense):
Interest expense - net of interest and dividend
income of $105,389, $161,504 and $131,970 in
1996, 1995 and 1994, respectively (2,170,386) (727,980) (127,378)
Other income 44,621 29,439 7,125
------------- ------------- -------------
Earnings before provision for income taxes 5,854,731 5,745,393 4,725,751
Provision for income taxes 2,185,000 2,182,000 1,775,000
------------- ------------- -------------
Net earnings $ 3,669,731 3,563,393 2,950,751
============= ============= =============
Weighted average number of shares outstanding 3,257,685 4,311,358 4,553,303
============= ============= =============
Net earnings per share $ 1.13 .83 .65
============= ============= =============
See accompanying notes to consolidated financial statements.
F-5
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1996, 1995 and 1994
Additional Total
Common stock paid-in Retained Treasury stockholders'
Shares Par value capital earnings stock equity
------------------------- ------------ ------------ ------------ ------------
Balance at December 31, 1993 4,721,443 $ 47,214 $ 5,842,145 $ 18,534,895 $ (3,716,141) $ 20,708,113
Common stock issued 225,370 2,254 1,399,303 -- -- 1,401,557
Cash dividend declared ($.12 per share) -- -- -- (533,052) -- (533,052)
Stock option compensation expense -- -- 18,000 -- -- 18,000
Tax benefit of disqualifying dispositions -- -- 152,124 -- -- 152,124
Treasury stock acquired -- -- -- -- (1,585,086) (1,585,086)
Net earnings -- -- -- 2,950,751 -- 2,950,751
---------- ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1994 4,946,813 49,468 7,411,572 20,952,594 (5,301,227) 23,112,407
Common stock issued 44,400 444 259,806 -- -- 260,250
Cash dividend declared ($.12 per share) -- -- -- (525,944) -- (525,944)
Stock option compensation expense -- -- 18,000 -- -- 18,000
Tax benefit of disqualifying dispositions -- -- 100,220 -- -- 100,220
Treasury stock acquired -- -- -- -- (2,368,504) (2,368,504)
Net earnings -- -- -- 3,563,393 -- 3,563,393
---------- ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1995 4,991,213 49,912 7,789,598 23,990,043 (7,669,731) 24,159,822
Common stock issued 118,575 1,186 870,908 -- -- 872,094
Cash dividend declared ($.12 per share) -- -- -- (363,311) -- (363,311)
Stock option compensation expense -- -- 18,000 -- -- 18,000
Tax benefit of disqualifying dispositions -- -- 146,622 -- -- 146,622
Treasury stock acquired -- -- -- -- (14,280,863) (14,280,863)
Net earnings -- -- -- 3,669,731 -- 3,669,731
---------- ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1996 5,109,788 $ 51,098 $ 8,825,128 $ 27,296,463 $(21,950,594) $ 14,222,095
========== ============ ============ ============ ============ ============
See accompanying notes to consolidated financial statements.
F-6
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net earnings $ 3,669,731 3,563,393 2,950,751
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Depreciation and amortization 1,073,759 940,668 941,196
Deferred income taxes 146,000 32,622 175,000
Provision (recovery) for possible losses on
receivables (207,361) 583,998 140,651
Provision (recovery) for possible losses on notes
receivable and other assets (245,850) 247,165 (258,599)
Stock option compensation expense 18,000 18,000 18,000
(Increase) in accounts receivable (1,480,962) (3,137,221) (1,203,381)
(Increase) decrease in funding and service fees
receivable 2,294,726 (6,907,658) (5,164,472)
(Increase) in prepaids and other assets (431,020) (769,180) (44,131)
Increase (decrease) in payroll and related taxes
payable (1,168,628) 533,026 799,426
Increase (decrease) in payable to licensees and clients (541,325) 115,452 414,379
Increase (decrease) in income taxes payable (205,068) 451,910 (217,336)
Increase in accrued expenses and other liabilities 1,211,623 843,043 1,713,010
------------ ------------ ------------
Net cash provided (used) by operating activities 4,133,625 (3,484,782) 264,494
------------ ------------ ------------
Cash flows from investing activities:
Acquisition of certain assets in connection with
business combinations (3,783,655) -- (3,204,772)
Purchase of receivables in connection with
acquisitions (844,487) -- (1,301,595)
Notes receivable from licensees (100,325) (163,741) (391,557)
Repayments on notes receivable from licensees 244,018 548,748 638,749
(Increase) in deferred costs and other assets (178,027) (134,358) (121,950)
Purchases of fixed assets (1,464,477) (669,979) (591,796)
------------ ------------ ------------
Net cash (used) by investing activities (6,126,953) (419,330) (4,972,921)
------------ ------------ ------------
Cash flows from financing activities:
Principal payments on capital lease obligations (146,029) (15,654) --
Borrowings under loans payable 14,750,000 15,700,000 6,300,000
Principal payments on loans payable -- (10,000,000) --
Proceeds from issuance of common stock 872,094 260,250 670,307
Cash dividends paid (363,311) (525,944) (533,052)
Purchase of treasury stock (14,280,863) (2,368,504) (1,585,086)
------------ ------------ ------------
Net cash provided by financing activities 831,891 3,050,148 4,852,169
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (1,161,437) (853,964) 143,742
Cash and cash equivalents at beginning of year 6,444,859 7,298,823 7,155,081
------------ ------------ ------------
Cash and cash equivalents at end of year $ 5,283,422 6,444,859 7,298,823
============ ============ ============
Supplemental disclosures:
Cash paid for:
Interest $ 1,894,606 590,524 131,328
============ ============ ============
Income taxes, net of refunds $ 2,376,805 1,690,040 1,835,734
============ ============ ============
Non-cash Investing and Financing Activities:
During 1994, 127,720 shares of the Company's Common Stock, with an aggregate
market value of $731,250 were issued in connection with the purchase of certain
assets of Brannon & Tully(R).
During 1996 and 1995, the Company entered into capital leases for software and
office equipment in the amounts of $556,967 and $524,909, respectively.
See accompanying notes to consolidated financial statements.
F-7
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(1) Description of Business
Uniforce Services, Inc., together with its subsidiaries (the "Company"),
provides supplemental personnel services to businesses, educational
institutions, professional and service organizations, federal, state and
local governmental agencies and others in the United States. The Company
has selected specialized product lines within several of its licensed and
company owned offices to provide skilled Information Services ("IS")
professional employees, office automation specialists and medical office
support. The Company also supplies financial, payroll and billing support
services to independent supplemental staffing services. In addition,
subsidiaries of the Company provide temporary laboratory staffing support
to the scientific community; and provide confidential employee conversion
and consulting services which enable client companies to utilize the
services of former independent contractors and consultants. One of the
Company's customers represented 10.2% of revenues in 1996.
(2) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of Uniforce
Services, Inc. and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
(b) Depreciation and Amortization
Depreciation and amortization of fixed assets is computed on a
straight-line method over the estimated useful lives of the assets.
Leasehold improvements are amortized over the lesser of their
estimated useful lives or the respective lease periods.
Intangible assets, which include covenants not to compete and
territorial rights acquired, are being amortized over their estimated
useful lives ranging from five to 10 years using the straight-line
method. The unamortized balance is included in deferred costs and
other assets in the accompanying consolidated balance sheets.
(c) Deferred Licensee Acquisition Costs
The Company has executed contracts for affiliation with existing
supplemental staffing service companies. Such contracts require the
Company to pay an affiliation fee which is amortized on a
straight-line method over the minimum terms of the affiliation
agreements which are generally five or 10 years. In addition, the
Company has paid similar fees for existing supplemental staffing
service companies acquired by the Company's licensees. Under these
arrangements, the Company has agreed to pay, on behalf of its
licensees, one-half of the acquisition cost. Such costs are amortized
on a straight-line basis over five or 10 years. Amortization of
deferred licensee acquisition costs amounted to $121,796, $129,530 and
$183,649 in 1996, 1995 and 1994, respectively.
(d) Income Taxes
The Company accounts for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No.
109 "Accounting for Income Taxes." SFAS 109 provides that income taxes
be accounted for using the asset and liability method which requires
the recognition of deferred income taxes for temporary differences
between the financial reporting basis and tax basis of assets and
liabilities.
F-8
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(e) Earnings Per Share
Earnings per share amounts are determined using the weighted average
number of common shares and dilutive common share equivalents
(options) outstanding.
(f) Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(g) Financial Instruments
The fair values of all financial instruments classified as current
assets or liabilities approximate their respective carrying values
because of the short maturity of those instruments. The fair value of
the Company's loans approximates book value since the interest rates
are variable and accordingly are adjusted for market rate
fluctuations.
(h) Long-Lived Assets
In March 1995, SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," was
issued. SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used or disposed of by an
entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable measured by comparing the carrying amount of an asset to
the future net cash flows expected to be generated by the asset.
During 1996, the Company adopted SFAS No. 121 and determined that no
impairment loss need be recognized for applicable assets and thus, it
did not have a material impact on the Company's financial position or
results of operations.
(i) Accounting for Stock-Based Compensation
The Company records compensation expense for stock options only if the
current market price of the underlying stock exceeds the exercise
price on the date of the grant. On January 1, 1996, the Company
adopted SFAS No. 123, "Accounting for Stock-Based Compensation." The
Company has elected not to implement the fair value based accounting
method for stock options, but has elected to disclose the pro forma
net earnings and pro forma earnings per share for employee and
director stock option and warrant grants made beginning in 1995 as if
such method had been used to account for stock-based compensation cost
as described in SFAS No. 123.
(j) Reclassifications
Certain reclassifications have been made to the 1994 financial
statements to conform to the 1995 and 1996 presentation.
(3) Acquisitions
On May 17, 1996, the Company acquired certain assets of Montare
International, a provider of Information Technology ("IT") contract
professionals. The purchase price was $3,600,000 in cash. Pursuant to a
separate agreement, the Company also acquired certain accounts receivable
for $844,487. The purchase price and the accounts receivable acquired were
financed through borrowings available under the Company's credit facility.
This acquisition has been accounted for as a purchase and accordingly, the
purchase price was allocated to assets based on the estimated fair value as
of the date of the acquisition. The excess of the consideration paid over
the estimated fair value of assets acquired in the amount of $3,158,022 has
been recorded as cost in excess of fair value of net assets acquired
(goodwill) and is being amortized over 20 years on the straight-line
method. The Company assesses the recoverability of unamortized goodwill
using the undiscounted projected future earnings from the related
businesses. The operating results of Montare International have
F-9
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
been included in the consolidated statement of earnings from the purchase
date. The acquisition of Montare did not have a material impact on the
Company's results of operations.
On April 18, 1994, the Company acquired certain assets of Brannon & Tully,
a provider of IS contract professionals. The purchase price totaled
$3,881,250 and consisted of $3,150,000 in cash and the issuance of 127,720
shares of Common Stock of the Company. Pursuant to a separate agreement,
the Company also acquired certain accounts receivable, with recourse, for
$1,301,595. The cash portion of the purchase price and the accounts
receivable acquired were financed through borrowings available under the
Company's credit facility.
This acquisition has been accounted for as a purchase and accordingly, the
purchase price was allocated to assets based on the estimated fair value as
of the date of the acquisition. The excess of the consideration paid over
the estimated fair value of assets acquired in the amount of $3,781,925 has
been recorded as cost in excess of fair value of net assets acquired
(goodwill) and is being amortized over 20 years on the straight-line
method.
F-10
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The operating results of Brannon & Tully have been included in the
consolidated statements of earnings from the purchase date. The following
unaudited pro forma consolidated results of operations assume the
acquisition of Brannon & Tully occurred on January 1, 1994:
December 31,
1994
------------
Revenues $118,826,683
Net earnings 3,181,632
Earnings per share $ .69
============
The pro forma results of operations are not necessarily indicative of the
actual results of operations that would have occurred had the acquisition
occurred at the beginning of the period or of results which may occur in
the future.
One of the former principals of Brannon & Tully entered into an employment
agreement with the Company. His employment agreement was for a term of five
years, but could be terminated by either party at any time after one year,
upon not less than 90 days notice. Beginning in 1995, the employment
agreement provided for incentive compensation based upon improvements in
gross profits relating to certain offices to which the officer rendered
employment services and provided active assistance. The amount of incentive
compensation earned in 1995 under the agreement was $370,172. The
employment agreement was terminated during 1995.
(4) Fixed Assets
Fixed assets are stated at cost as follows:
Dec. 31, Dec. 31, Estimated
1996 1995 useful life
---- ---- -----------
Computer equipment $2,461,249 $2,050,173 8 years
Computer software 1,451,319 670,605 3-5 years
Furniture, fixtures, office
equipment and other 1,545,706 1,480,125 5-15 years
Leasehold improvements & signs 534,878 488,099 Life of lease
---------- ----------
5,993,152 4,689,002
Less accumulated depreciation and
amortization 2,217,491 2,563,589
---------- ----------
$3,775,661 $2,125,413
========== ==========
Depreciation and amortization expense on fixed assets amounted to $403,952,
$364,025 and $291,751 for the years ended December 31, 1996, 1995 and 1994,
respectively.
F-11
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) Loan Payable
On December 8, 1995, the Company entered into an agreement with a financial
institution creating a three-year $35,000,000 credit facility (the "Credit
Facility"). The Credit Facility comprises a term loan in the amount of
$3,000,000 (the "Term Loan") to be paid in monthly installments of $62,500
in 1996, $83,333 in 1997 and $104,167 in 1998, with the balance outstanding
due on December 1, 1998 and a $32,000,000 revolving credit facility (the
"Revolving Facility") which expires on December 1, 1998 . The Company may
borrow against the Revolving Facility up to 85% of eligible accounts
receivable and eligible service and funding fees receivable. The Term Loan
bears interest at the Company's election at either the lender's floating
base rate plus .25%, or LIBOR (London Interbank Offered Rate) plus 2.25%.
Borrowings under the Revolving Facility bear interest at the Company's
election at either the lender's floating base rate, or LIBOR plus 2.125%.
Borrowings under the Credit Facility are secured by a first priority
security interest in all owned and after-acquired real and personal
property of the Company.
At December 31, 1996, the Company had outstanding borrowings of $2,250,000
under the Term Loan bearing interest at an average rate of 7.8% and
$24,500,000 of borrowings under the Revolving Facility bearing interest at
an average rate of 7.7%.
The Credit Facility contains a variety of affirmative and negative
covenants of types customary in an asset-based lending facility including,
among other things, minimum net worth and profitability levels, with which
the Company is in compliance as of December 31, 1996.
The Credit Facility was used to repay existing indebtedness as described
below and to finance the offer to purchase the Company's Common Stock in
January 1996 as described in Note 9.
Prior to December 8, 1995, the Company maintained, with two banks, a
working capital credit facility and a revolving credit and term loan
facility. The working capital credit facility represented an open line of
credit of up to $12,000,000 (increased from $10,000,000, effective in
November 1995), borrowings under which were payable on demand. Outstanding
borrowings bore interest, at the Company's option, at the banks' prime rate
or at a rate 120 basis points above the banks' LIBOR Rate. This working
capital credit facility was terminated on December 8, 1995. In addition,
the Company maintained a revolving credit and term loan agreement which
provided for a two-year $6,000,000 facility, outstanding borrowings under
which, at the Company's option, could be converted at the maturity of the
revolving credit facility into a five-year term loan. Effective November
1995, in connection with the increase in the Company's working capital
facility described above, the revolving credit and term loan agreement
(under which there were no outstanding borrowings) was terminated.
F-12
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
6) Income Taxes
The components of the provision for Federal and state income taxes are as
follows:
1996 1995 1994
---- ---- ----
Federal:
Current $1,756,500 $1,868,000 $1,384,000
Deferred 135,500 27,000 151,000
State:
Current 282,500 282,000 216,000
Deferred 10,500 5,000 24,000
---------- ---------- ----------
$2,185,000 $2,182,000 $1,775,000
========== ========== ==========
Income tax expense differed from that which would have resulted by applying
the statutory Federal income tax rates to earnings before provision for
income taxes as a result of the following items:
1996 1995 1994
---- ---- ----
Expected tax on pre-tax
earnings $ 1,991,000 34.0% $ 1,953,000 34.0% $ 1,607,000 34.0%
Tax-exempt interest and
qualified dividends -- -- (5,000) (.1) (13,000) (.3)
State taxes, net of Federal
income tax benefit 193,000 3.3 189,000 3.3 158,000 3.4
Other, net 1,000 -- 45,000 .8 23,000 .5
----------- ---- ----------- ---- ----------- ----
Income tax provision $ 2,185,000 37.3% $ 2,182,000 38.0% $ 1,775,000 37.6%
=========== ==== =========== ==== =========== ====
F-13
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The tax effect of temporary differences which give rise to significant
portions of deferred tax assets and liabilities are as follows:
Dec. 31, 1996 Dec. 31, 1995
------------- -------------
Notes receivable, due primarily to allowances
for possible loss $122,960 $142,356
Receivables, due primarily to allowances
for doubtful accounts 104,803 212,148
Accrued expenses not currently deductible 67,140 --
Accelerated depreciation and amortization for
tax purposes (164,094) (61,240)
Other 70,340 53,885
-------- --------
$201,149 $347,149
======== ========
(7) Employment Agreements and Transactions
The Company has employment agreements with two of its officers providing
for, among other things, their continued employment through December 31,
1997. In addition, the agreements provide for incentive compensation which
is based upon the Company's pre-tax earnings. Incentive compensation earned
in 1996, 1995 and 1994, pursuant to such agreements, was $273,592, $221,298
and $263,677, respectively.
In January 1996, the Company entered into arrangements with two of its
officers. Under such arrangements, the executive officers are entitled to
receive cash bonuses aggregating $1,041,018 payable to the extent of 10%
thereof three years after consummation of the tender offer described in
Note 9, to the extent of 30% thereof four years after consummation of the
offer and as to the balance thereof five years after consummation of the
offer, provided that the recipient is then employed by the Company. The
executive officers were granted options to purchase an aggregate of 92,535
shares of Common Stock, such options to vest in installments through
January 1999. The exercise price of such options was $11.25 per share. The
cash bonus installments and option installments are subject to acceleration
in the event of death, merger of the Company, sale of all or substantially
all of the Company's assets or a change in control of the Company.
(8) Stock Options
During 1991, the Board of Directors of the Company approved the 1991 Stock
Option Plan (the 1991 Plan) which provides for the issuance of up to
500,000 stock options to officers and employees of the Company. Each option
granted pursuant to the 1991 Plan shall be designated at the time of grant
as either an "incentive stock option" or as a "non-qualified stock option."
F-14
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
In addition, the Company maintains two employee stock option plans, and a
non-qualified stock option plan for its Licensees. The plans (except for
options designated as non-qualified stock options) provide for options to
be granted at 100% of the fair market value of the Company's Common Stock
and provide that the exercise price of options may not be less than 110% of
such fair market value in the case of an employee owning 10% or more of the
voting power of the Company's stock. At the time options are granted, the
Company may impose a waiting period before options can be exercised.
Non-qualified stock options may not be granted at less than 75% of the fair
market value of the Company's Common Stock at the date of grant.
During 1991, non-qualified stock options with respect to 90,000 shares were
granted under the 1991 Plan at 75% of the fair market value of the
Company's Common Stock on the date of the grant. The grant resulted in
compensation expense of $180,000 to be allocated to current and future
periods as earned. Additional paid-in capital has been credited to the
extent of aggregate compensation earned since the grant of $103,500.
In 1995 the Stockholders of the Company approved the Directors' Stock
Option Plan (the "Directors' Plan") which permits the granting of a maximum
of 100,000 stock options to its outside Directors. The purpose of the plan
is to secure for the Company and its stockholders the benefits arising from
stock ownership by its outside Directors.
At December 31, 1996, an aggregate of 507,538 shares of common stock has
been reserved for issuance under the plans. Activity in stock options is
summarized as follows:
Outstanding Weighted average
options exercise price
------- --------------
December 31, 1993 534,575 $ 7.16
Options granted 41,878 11.37
Options exercised (97,650) 6.86
Options lapsed/canceled (18,800) 11.02
-------
December 31, 1994 460,003 7.45
Options granted 2,500 8.25
Options exercised (44,400) 5.86
Options lapsed/canceled (89,553) 10.74
-------
December 31, 1995 328,550 6.77
Options granted 121,035 11.31
Options exercised (118,575) 7.35
Options lapsed/canceled (500) 11.50
-------
December 31, 1996 330,510 $ 8.22
=======
F-15
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
There are 199,060 options exercisable as of December 31, 1996 at a weighted
average exercise price of $7.85.
The per share weighted average fair value of stock options granted during
1996 was $4.06 on the date of the grant using the Black Scholes
option-pricing model with the following weighted average assumptions: risk
free interest rate of 5.3%, expected stock volatility of 50% and an
expected option life of 3.5 years. The aggregate fair value of the options
granted in 1995 was not material.
The Company applies APB Opinion No. 25 in accounting for its stock option
grants and, accordingly, no compensation cost has been recognized in the
financial statements for its stock options which have an exercise price
equal to or greater than the fair value of the stock on the date of the
grant. Had the Company determined compensation cost based on the fair value
at the grant date for its stock options under SFAS No. 123, the Company's
net earnings and earnings per share would have been reduced to the pro
forma amounts indicated below:
1996
----
Net earnings:
As reported $3,669,731
Pro forma 3,523,089
Earnings per share:
As reported $ 1.13
Pro forma 1.08
Pro forma net earnings reflect only options granted in 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net earnings
amounts presented above because compensation cost is reflected over the
options' vesting period and compensation cost for options granted prior to
January 1, 1995 was not considered.
Optionees have made disqualifying dispositions of common stock which had
been acquired through the exercise of incentive and non-qualified stock
options. As a result of the disqualifying dispositions, the Company
receives a tax benefit for the difference between the option price and the
fair market value of its common stock. The benefit of $146,622, $100,220
and $152,124 in 1996, 1995 and 1994, respectively, has been reflected in
the accompanying consolidated statements of stockholders' equity.
F-16
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) Tender Offer
On December 11, 1995, the Company made an offer to purchase for cash up to
1,250,000 shares of its Common Stock at $11.25 net per share (the "Offer").
The 1,250,000 shares that the Company offered to purchase represented
approximately 30% of the Shares outstanding. In January 1996, the Offer was
successfully completed. The total amount required to purchase the 1,250,000
shares was $14,062,500, exclusive of related fees and other expenses. The
purchase price and related expenses were funded with available borrowings
under the Credit Facility.
(10) Commitments and Contingencies
In April 1994, various prior insurance carriers and their not-for-profit
trade association filed a civil action against the Company, its officers
and various other parties. The Plaintiffs allege breach of contract and
tort causes of action for underpayment of premiums. The Company denies the
validity of the Plaintiffs' claims. The Company has asserted substantial
claims in opposition to the Plaintiffs' claims. Additionally, the Company
and its subsidiaries have filed suit against various prior worker
compensation carriers alleging claims mismanagement. Management regards as
unlikely that the outcome of those actions will have a material adverse
effect on the financial position of the Company.
In January 1996, various vendors of training films filed an action against
the Company. The plaintiffs alleged that the Company improperly used and/or
copied plaintiffs' tapes. In 1996 the Company settled this matter.
The Company is obligated under various leases for office space and
equipment through 2006. Net rental expense for the years ended December 31,
1996, 1995 and 1994 amounted to approximately $1,100,000, $871,000 and
$734,000, respectively.
Following is a schedule of total minimum lease payments under noncancelable
operating leases as of December 31, 1996:
1997 $1,153,272
1998 1,034,708
1999 857,584
2000 562,115
2001 534,847
Thereafter 2,596,140
----------
Total minimum lease payments $6,738,666
F-17
UNIFORCE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
June 30, 1997
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 4,696,682
Accounts receivable - net 20,805,337
Funding and service fees receivable - net 24,150,613
Prepaid expenses and other current assets 721,103
Deferred income taxes 201,149
------------
Total current assets 50,574,884
------------
Fixed assets - net 4,269,213
Deferred costs and other assets - net 1,310,963
Cost in excess of fair value of net assets acquired 6,210,872
------------
$ 62,365,932
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loan payable $ 2,000,000
Payroll and related taxes payable 6,885,018
Payable to licensees and clients 1,435,655
Income taxes payable 94,115
Accrued expenses and other liabilities 5,845,332
------------
Total current liabilities 16,260,120
------------
Loan payable - non-current 29,250,000
Capital lease obligation - non-current 630,498
Stockholders' equity:
Common stock $.01 par value 51,178
Additional paid-in capital 8,943,580
Retained earnings 29,181,150
------------
38,175,908
Treasury stock, at cost, 2,084,245 shares in 1997 (21,950,594)
------------
Total stockholders' equity 16,225,314
------------
$ 62,365,932
============
See accompanying notes to consolidated condensed financial statements.
F-18
UNIFORCE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
Six Months Ended
June 30,
1997 1996
------------ ------------
Sales of supplemental staffing services $ 82,533,840 $ 62,876,763
Service revenues and fees 3,629,010 3,648,965
------------ ------------
Total revenues 86,162,850 66,525,728
------------ ------------
Costs and expenses:
Cost of supplemental staffing services 65,672,910 49,035,777
Licensees' share of gross margin 4,328,115 3,711,309
General and administrative 11,069,089 9,689,771
Depreciation and amortization 594,214 472,981
------------ ------------
Total costs and expenses 81,664,328 62,909,838
------------ ------------
Earnings from operations 4,498,522 3,615,890
Other income (expense):
Interest - net (1,156,930) (972,216)
Other - net (9,893) 17,696
------------ ------------
Earnings before provision for income taxes 3,331,699 2,661,370
Provision for income taxes 1,265,000 1,011,000
------------ ------------
NET EARNINGS $ 2,066,699 $ 1,650,370
============ ============
Weighted average number of shares outstanding 3,199,480 3,297,943
NET EARNINGS PER SHARE $ .65 $ .50
============ ============
See accompanying notes to consolidated condensed financial statements.
F-19
UNIFORCE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
1997 1996
------------ ------------
Cash flows from operating activities:
Net earnings $ 2,066,699 $ 1,650,370
Adjustments to reconcile net earnings to net cash (used) by operating activities:
Depreciation and amortization 594,214 472,981
(Increase) in receivables and prepaid expenses (7,894,334) (1,686,800)
Stock option compensation expense 9,000 9,000
Increase (decrease) in liabilities 1,097,653 (1,652,027)
------------ ------------
Net cash (used) by operating activities (4,126,768) (1,206,476)
------------ ------------
Cash flows from investing activities:
Purchases of fixed assets (822,862) (516,602)
(Increase) decrease in deferred costs and other assets 37,530 (443,671)
Net assets acquired from Montare -- (4,618,037)
------------ ------------
Net cash (used) by investing activities (785,332) (5,578,310)
------------ ------------
Cash flows from financing activities:
Principal payments on capital lease obligations (102,160) (148,397)
Increase in loan payable 4,500,000 16,041,700
Cash dividends paid (182,012) (182,079)
Purchase of treasury stock -- (14,280,863)
Proceeds from issuance of common stock 109,532 954,341
------------ ------------
Net cash provided by financing activities 4,325,360 2,384,702
------------ ------------
Net (decrease) in cash and cash equivalents (586,740) (4,400,084)
Cash and cash equivalents at beginning of period 5,283,422 6,444,859
------------ ------------
Cash and cash equivalents at end of period $ 4,696,682 $ 2,044,775
============ ============
Supplemental disclosures:
Cash paid for:
Interest $ 1,011,459 $ 902,105
------------ ------------
Income taxes $ 984,840 $ 1,019,962
------------ ------------
Non-cash financing activities:
During 1996, the Company entered into capital leases in the amount of $551,405.
See accompanying notes to consolidated condensed financial statements.
F-20
UNIFORCE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Principles of consolidation
The consolidated financial statements include the accounts of Uniforce
Services, Inc. and its wholly-owned subsidiaries (the "Company"). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
2. Consolidated condensed financial statements
The consolidated condensed financial statements have been prepared by the
Company without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at June 30, 1997, and
for all periods presented have been made.
Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed, reclassified or omitted. It is suggested that
these be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's December 31, 1996 financial statements.
The results of operations for the periods ended June 30, 1997 are not
necessarily indicative of the operating results which may be achieved for the
full year.
Tax accruals have been made based on estimated effective annual tax rates
for the periods presented.
3. Litigation Settlement
In April 1994, various insurance carriers and their not-for-profit trade
association filed an action against the Company, its officers and various other
parties; in May 1996, the Plaintiffs filed their Third Amended Complaint. The
Plaintiffs alleged breach of contract and tort causes of action for underpayment
of premiums. The Company denied liability and asserted substantial claims in
opposition to the Plaintiffs' claims. Additionally the Company and its
subsidiaries filed suit against various prior workers' compensation carriers
alleging claims mismanagement. In July 1997, both matters were settled. The
terms of the settlement are confidential by agreement. The settlement did not
have a material effect on the Company's financial condition or operating
results.
F-21
APPENDIX A
AGREEMENT AND PLAN OF MERGER
Dated as of
August 13, 1997
by and among
COMFORCE Corporation
and
COMFORCE Columbus, Inc.
and
Uniforce Services, Inc.
TABLE OF CONTENTS
Page
----
ARTICLE I
THE OFFER
SECTION 1.1. The Offer.......................................................2
SECTION 1.2. Company Action..................................................3
SECTION 1.3. Directors.......................................................5
ARTICLE II
THE MERGER
SECTION 2.1. The Merger......................................................5
SECTION 2.2. Effective Time of the Merger....................................5
ARTICLE III
THE SURVIVING AND PARENT CORPORATIONS
SECTION 3.1. Certificate of Incorporation....................................6
SECTION 3.2. By-Laws.........................................................6
SECTION 3.3. Directors.......................................................6
SECTION 3.4. Officers........................................................6
ARTICLE IV
CONVERSION OF SHARES
SECTION 4.1. Conversion of Company Shares in the Merger......................6
SECTION 4.2. Conversion of Subsidiary Shares.................................7
SECTION 4.3. Exchange of Certificates........................................7
SECTION 4.4. Appraisal Rights Shares.........................................8
SECTION 4.5. Closing.........................................................9
SECTION 4.6. Closing of the Company's Transfer Books.........................9
SECTION 4.7. No Fractional Securities........................................9
SECTION 4.8. Treatment of Employee Stock Options.............................9
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUBSIDIARY
SECTION 5.1. Organization and Qualification..................................10
SECTION 5.2. Capitalization..................................................10
SECTION 5.3. Authority; Non-Contravention; Approvals.........................10
SECTION 5.4. Reports and Financial Statements................................12
SECTION 5.5. Absence of Certain Changes or Events............................12
SECTION 5.6. Litigation......................................................12
SECTION 5.7. Registration Statement and Proxy Statement......................13
SECTION 5.8. Voting Requirements.............................................13
SECTION 5.9. Financing.......................................................13
SECTION 5.10 Absence of Disclosed Liabilities................................13
SECTION 5.11 No Violation of Law.............................................13
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 6.1. Organization and Qualification..................................14
SECTION 6.2. Capitalization..................................................14
SECTION 6.3. Subsidiaries....................................................15
SECTION 6.4. Authority; Non-Contravention; Approvals.........................15
SECTION 6.5. Reports and Financial Statements................................16
SECTION 6.6. Absence of Undisclosed Liabilities..............................17
SECTION 6.7. Absence of Certain Changes or Events............................17
SECTION 6.8. Litigation......................................................17
SECTION 6.9. Registration Statement and Proxy Statement......................18
SECTION 6.10. No Violation of Law.............................................18
SECTION 6.11. Compliance with Agreements......................................18
SECTION 6.12. Taxes...........................................................19
SECTION 6.13. Employee Benefit Plans; ERISA...................................19
SECTION 6.14. Labor Controversies.............................................21
SECTION 6.15. Environmental Matters...........................................21
SECTION 6.16. Intellectual Property...........................................22
SECTION 6.17. Title to Assets.................................................23
SECTION 6.18. Assets Relationship to Business of the Company..................24
SECTION 6.19. Certain Relationships; Transactions with Management.............24
SECTION 6.20. Improper Payments...............................................24
SECTION 6.21. Agreements with Licensees.......................................25
ARTICLE VII
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 7.1. Conduct of Business by the Company Pending the Merger...........25
SECTION 7.2. Control of the Company's Operations.............................26
SECTION 7.3. Acquisition Transactions........................................26
ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.1. Access to Information...........................................27
SECTION 8.2. Registration Statement and Proxy Statement......................28
SECTION 8.3. Stockholders' Approvals.........................................29
SECTION 8.4. Expenses and Fees...............................................29
SECTION 8.5. Agreement to Cooperate..........................................30
SECTION 8.6. Public Statements...............................................31
SECTION 8.7. Notification of Certain Matters.................................31
SECTION 8.8. Directors' and Officers' Indemnification........................31
SECTION 8.9. Corrections to the Registration Statement and Proxy Statement...32
SECTION 8.10. Amendment of Employment Contracts...............................32
SECTION 8.11. Fairness Opinion................................................33
SECTION 8.12. Financing.......................................................33
SECTION 8.13. Payments to Certain Executives..................................33
ARTICLE IX
CONDITIONS
SECTION 9.1. Conditions to Each Party's Obligation to Effect the Merger......33
SECTION 9.2. Conditions to Obligation of the Company to Effect the Merger....34
SECTION 9.3. Conditions to Obligations of Parent and Subsidiary to Effect
the Merger....................................................34
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.1. Termination.....................................................35
SECTION 10.2. Effect of Termination...........................................36
SECTION 10.3. Amendment.......................................................37
SECTION 10.4. Waiver..........................................................37
ARTICLE XI
GENERAL PROVISION
SECTION 11.1. Non-Survival of Representations and Warranties..................37
SECTION 11.2. Brokers.........................................................37
SECTION 11.3. Notices.........................................................37
SECTION 11.4. Interpretation..................................................38
SECTION 11.5. Miscellaneous...................................................38
SECTION 11.6. Governing Law...................................................38
SECTION 11.7. Counterparts....................................................39
SECTION 11.8. Parties in Interest.............................................39
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 13, 1997, (the
"Agreement"), by and among COMFORCE Corporation, a Delaware corporation
("Parent"), COMFORCE Columbus, Inc., a New York corporation and a wholly-owned
subsidiary of Parent ("Subsidiary"), and Uniforce Services, Inc., a New York
corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, Subsidiary and the Company have
each determined that it is in the best interests of their respective
stockholders for Parent, through Subsidiary, to acquire the Company upon the
terms and subject to the conditions set forth herein; and
WHEREAS, in furtherance of such acquisition, it is proposed that Subsidiary
shall make a tender offer (the "Offer") to acquire all the issued and
outstanding shares of common stock, par value $0.01 per share, of the Company
(the "Company Common Stock"; shares of Company Common Stock being hereinafter
collectively referred to as the "Shares") for $28.00 per Share in cash plus that
number of shares of common stock, par value $0.01 per share, of Parent (the
"Parent Common Stock") for each Share equal to a fraction the numerator of which
shall be $4.00 and the denominator of which shall be the average closing price
of a share of Parent Common Stock on the American Stock Exchange for the three
(3) trading days immediately preceding the date of the public announcement of
the Offer in accordance with Section 1.1(b) hereof and for the three (3) trading
days immediately after the date of such public announcement (such average
closing price being hereinafter referred to as the "Average Price" and such
consideration in the amount of cash and Parent Common Stock, or any greater
amount, per Share paid pursuant to the Offer, being hereinafter referred to as
the "Per Share Amount") net to the seller, without interest thereon, upon the
terms and subject to the conditions of this Agreement and the Offer; and
WHEREAS, the Board of Directors of Parent and Subsidiary have unanimously
approved the making of the Offer and the transactions related thereto; and
WHEREAS, the Board of Directors of the Company (the "Board") has
unanimously approved the making of the Offer and resolved and agreed, subject to
the terms and conditions contained herein, to recommend that holders of Shares
tender their Shares pursuant to the Offer; and
WHEREAS, also in furtherance of such acquisition, the Boards of Directors
of Parent, Subsidiary and the Company have each approved the merger (the
"Merger") of Subsidiary with and into the Company upon the terms and subject to
the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1. The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 10.1 and none of the events set forth in Exhibit A
attached hereto and made a part hereof shall have occurred or be existing
(unless such event shall have been waived by Parent), Parent shall cause
Subsidiary to commence, and Subsidiary shall commence, the Offer at the Per
Share Amount. The obligation of Subsidiary to accept for payment and pay for
Shares tendered pursuant to the Offer shall be subject only to (i) the condition
(the "Minimum Condition") that at least the number of Shares that, when combined
with the Shares already owned by Subsidiary and its direct or indirect
subsidiaries, constitute at least sixty-six and 2/3rds percent (66.66%) of the
then outstanding Shares on a fully diluted basis, including, without limitation,
all Shares issuable upon the conversion of any convertible securities or upon
the exercise of any options, warrants or rights shall have been validly tendered
and not withdrawn prior to the expiration of the Offer and (ii) the satisfaction
or waiver of the other conditions set forth in Exhibit A hereto. Subsidiary
expressly reserves the right to waive any such condition (other than the Minimum
Condition), to increase the Per Share Amount payable in the Offer, and to make
any other changes in the terms and conditions of the Offer (notwithstanding
Section 10.3); provided, however, that no change may be made which (i) decreases
the Per Share Amount payable in the Offer, (ii) reduces the maximum number of
Shares to be purchased in the Offer, (iii) imposes conditions to the Offer in
addition to those set forth in Exhibit A hereto, (iv) amends or changes the
terms and conditions of the Offer in any manner materially adverse to the
holders of Shares (other than Parent and its subsidiaries) or (v) changes or
waives the Minimum Condition. The Per Share Amount shall, subject to applicable
withholding of taxes, be net to the seller, without interest thereon, upon the
terms and subject to the conditions of the Offer. Subject to the terms and
conditions of the Offer (including, without limitation, the Minimum Condition),
Subsidiary shall accept for payment and pay, as promptly as practicable after
expiration of the Offer, for all Shares validly tendered and not withdrawn.
(b) Upon the execution and delivery of this Agreement, the Parent and
Subsidiary shall make a public announcement disclosing only the information
pertaining to the Offer permitted by Rule 135(a)(4) promulgated by the
Securities and Exchange Commission (the "SEC") pursuant to the Securities Act of
1933, as amended (the "Securities Act"). Promptly after such public
announcement, Parent and Subsidiary shall file a Registration Statement on Form
S-4 (the "Registration Statement") with the SEC for purposes of registering the
Parent Common Stock pursuant to the Securities Act. Parent and Subsidiary shall
take all reasonable efforts to cause the Registration Statement to be declared
effective by the SEC as soon as possible after filing.
(c) As soon as reasonably practicable after the Registration Statement is
declared effective by the SEC, Subsidiary shall file with the SEC and
disseminate to holders of Shares to the extent required by law a Tender Offer
Statement on Schedule 14D-1 (together with all amendments and supplements
thereto, the "Schedule 14D-1") with respect to the Offer. The Schedule 14D-1
shall contain or shall incorporate by reference an offer to purchase the Shares,
which may be comprised
2
of the prospectus contained in the Registration Statement, (the "Offer to
Purchase") and forms of the related letter of transmittal and any related
summary advertisement (the Schedule 14D-1, the Offer to Purchase and such other
documents, together with all supplements and amendments thereto, being referred
to herein collectively as the "Offer Documents"). Parent, Subsidiary and the
Company agree to correct promptly any information provided by any of them for
use in the Registration Statement or Offer Documents which shall have become
false or misleading, and Parent and Subsidiary further agree to take all steps
necessary to cause the Registration Statement and Schedule 14D-1 as so corrected
to be filed with the SEC and the other Offer Documents as so corrected to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. The Company and its counsel shall be given a
reasonable opportunity to review and comment on the Registration Statement and
Offer Documents and any amendments thereto prior to the filing thereof with the
SEC. Parent and Subsidiary will provide the Company and its counsel with a copy
of any written comments or telephonic notification of any oral comments Parent
or Subsidiary may receive from the SEC or its staff with respect to the
Registration Statement or Offer Documents promptly after the receipt thereof and
will provide the Company and its counsel with a copy of any written responses
and telephonic notification of any oral response of Parent, Subsidiary or their
counsel. In the event that the Offer is terminated or withdrawn by Subsidiary,
Parent and Subsidiary shall cause all tendered Shares to be returned promptly
(and to full extent within their power, within five (5) business days) to the
registered holders of the Shares represented by the certificate or certificates
surrendered to the paying agent designated in the Offer Documents.
SECTION 1.2. Company Action.
(a) The Company hereby approves of and consents to the Offer and represents
that the Board, at a meetings duly called and duly held on August 1, 1997 and
August 13, 1997, has (A) determined that this Agreement and the transactions
contemplated hereby, including, without limitation, each of the Offer and the
Merger (the "Transactions"), are fair to and in the best interests of the
holders of Shares other than Parent and its subsidiaries, (B) approved and
adopted this Agreement and the Transactions (which approval expressly included
the approval of the foregoing for the purposes of Section 912 of the New York
Business Corporation Law, as amended [the "BCL"]) and (C) resolved to recommend,
subject to the conditions set forth herein, that the stockholders of the Company
accept the Offer and approve and adopt this Agreement and the Transactions.
Subject to the fiduciary duties of the Board under applicable law as advised by
outside counsel, the Company hereby consents to the inclusion in the
Registration Statement and Offer Documents of the recommendation of the Board
described above. John Fanning and Fanning Limited Partners L.P., a Georgia
limited partnership (the "Stockholders"), who are the owners of in excess of 59%
of the outstanding Shares, have executed and delivered to the Parent and
Subsidiary a Stockholders Agreement of even date herewith.
(b) As soon as reasonably practicable after the date of commencement of the
Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule 14D-9") containing, subject only to the fiduciary duties
of the Board under applicable law as advised in writing by outside counsel, the
recommendation of the Board described in Section 1.2(a) and shall disseminate
the
3
Schedule 14D-9 to the extent required by Rule 14D-9 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any other
applicable federal securities laws. The Company, Parent and Subsidiary agree to
correct promptly any information provided by any of them for use in the Schedule
14D-9 that shall have become false or misleading, and the Company further agrees
to take all steps necessary to cause the Schedule 14D-9 as so corrected to be
filed with the SEC and disseminated to holders of Shares, in each case as and to
the extent required by applicable federal securities laws. Parent, Subsidiary
and their counsel shall be given a reasonable opportunity to review and comment
on the Schedule 14D-9 and any amendments thereto prior to the filing thereof
with the SEC. The Company will provide Parent and Subsidiary and their counsel
with a copy of any written comments or telephonic notification of any oral
comments the Company may receive from the SEC or its staff with respect to the
Schedule 14D-9 promptly after the receipt thereof and will provide Parent and
Subsidiary and their counsel with a copy of any written responses and telephonic
notification of any oral response of the Company or its counsel.
(c) The Company shall promptly after the execution and delivery of this
Agreement furnish Subsidiary with mailing labels containing the names and
addresses of all record holders of Shares and with security position listing of
Shares held in stock depositories, each as of the most recent date reasonably
practicable, together with all other available listings and computer files
containing names, addresses and security position listings of record holders and
non-objecting beneficial owners of Shares as of the most recent date reasonably
practicable. The Company shall furnish Subsidiary with such additional
information, including, without limitation, updated listings and computer files
of stockholders, mailing labels and security position, and such other assistance
as Parent, Subsidiary and their agents may reasonably request. Subject to the
requirements of applicable law and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Offer or the Merger, Parent and Subsidiary shall hold in confidence the
information contained in such labels, listings and files, shall use such
information only in connection with the Offer and the Merger, and, if this
Agreement shall be terminated in accordance with Section 10.1, shall deliver
promptly to the Company all copies of such information then in their possession
and shall certify in writing to the Company its compliance with this Section
1.2(c).
(d) In the event that the Offer is completed as contemplated by this
Article I, the Merger shall be consummated as soon as practicable thereafter in
accordance with the provisions of Article II hereof; provided, however, that in
the event the Offer is completed and Subsidiary receives at least 90% of the
outstanding Shares as a result of the Offer, the Company shall not be required
to distribute the Proxy Statement (as defined in Section 8.2) or hold the
Stockholders Meeting (as defined in Section 8.3).
(e) In the event that the Offer is not completed because the conditions to
the Offer shall not have been satisfied, and provided this Agreement has not
been and is not terminated pursuant to Section 10.1 hereof, at the option of
Parent, exercised by written notice given to the Company within fifteen (15)
days after expiration of the Offer, the Company shall submit this Agreement and
the transactions contemplated hereby to its stockholders pursuant to Section 8.3
hereof and, if the Merger is as a result thereof approved, the Merger shall be
consummated in accordance with the provisions of Article II hereof as soon as
practicable in accordance with Section 4.5.
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SECTION 1.3. Directors.
(a) Promptly upon the purchase by Parent or any of its subsidiaries of such
number of Shares of Company Common Stock that represents at least 51% of the
outstanding Shares of Company Common Stock (on a fully diluted basis), and from
time to time thereafter, Parent shall be entitled to designate such number of
directors, rounded up to the next whole number (but in no event more than one
less than the total number of directors on the Board) as will give Parent,
subject to compliance with Section 14(f) of the Exchange Act, representation on
the Board equal to the product of (x) the number of directors on the Board
(giving effect to any increase in the number of directors pursuant to this
Section 1.3) and (y) the percentage that such number of Shares so purchased
bears to the aggregate number of Shares outstanding (such number being the
"Board Percentage"), and the Company shall, upon request by Parent, promptly
satisfy the Board Percentage by (i) increasing the size of the Board or (ii)
using its best efforts to secure the resignations of such number of directors as
is necessary to enable Parent's designees to be elected to the Board and shall
cause Parent's designees promptly to be so elected, provided that no such action
shall be taken which would result in there being, prior to the consummation of
the Merger, less than one director of the Company that is not affiliated with
Parent. At the request of Parent, the Company shall take, at the Company's
expense, all lawful action necessary to effect any such election, including
without limitation, mailing to its stockholders the information required by
Section 14(f) of the Exchange Act and Rule 14(f)-1 promulgated thereunder,
unless such information has previously been provided to the Company's
stockholders in Schedule 14D-9.
(b) Following the election or appointment of Parent's designees pursuant to
this Section 1.3 and prior to the Effective Time (as defined in Section 2.2) of
the Merger, any amendment or termination of this Agreement, extension for the
performance or waiver of the obligations or other acts of Parent or Subsidiary
or waiver of the Company's rights thereunder shall require the concurrence of a
majority of directors of the Company then in office who are "Continuing
Directors". The term "Continuing Director" shall mean (i) each member of the
Board on the date hereof who voted to approve this Agreement and (ii) any
successor to any Continuing Director that was recommended to succeed such
Continuing Director by a majority of the Continuing Directors then on the Board.
ARTICLE II
THE MERGER
SECTION 2.1. The Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 2.2) in accordance
with the BCL, Subsidiary shall be merged with and into the Company and the
separate existence of Subsidiary shall thereupon cease. The Company shall be the
surviving corporation in the Merger and is hereinafter sometimes referred to as
the "Surviving Corporation."
SECTION 2.2. Effective Time of the Merger. The Merger shall become
effective at such time (the "Effective Time") as shall be stated in the
Certificate of Merger, in the form attached hereto and made a part hereof as
Exhibit "B", to be filed with the Secretary of State of the
5
State of New York in accordance with the BCL (the "Merger Filing"). The Merger
shall be made simultaneously with or as soon as practicable after the closing of
the transactions contemplated by this Agreement in accordance with Section 4.5.
The parties acknowledge that it is their mutual desire and intent to consummate
the Merger as soon as practicable after the date hereof. Accordingly, the
parties shall use all reasonable efforts to consummate, as soon as practicable,
the transactions contemplated by this Agreement.
ARTICLE III
THE SURVIVING AND PARENT CORPORATIONS
SECTION 3.1. Certificate of Incorporation. The Certificate of Incorporation
of the Surviving Corporation shall be amended and restated at and as of the
Effective Time to be identical to the Certificate of Incorporation of Subsidiary
as in effect immediately prior to the Effective Time (except that the name of
the Surviving Corporation will remain unchanged), and thereafter may be amended
in accordance with its terms and as provided in the BCL.
SECTION 3.2. By-Laws. The By-laws of the Surviving Corporation shall be
amended at and as of the Effective Time to be identical to the By-laws of
Subsidiary as in effect immediately prior to the Effective Time, and thereafter
may be amended in accordance with their terms and as provided by the Certificate
of Incorporation of the Surviving Corporation and the BCL.
SECTION 3.3. Directors. The directors of Subsidiary immediately prior to
the Effective Time shall be the initial directors of the Surviving Corporation,
each to hold office in accordance with the Certificate of Incorporation and
By-laws of the Surviving Corporation.
SECTION 3.4. Officers. Except as otherwise agreed, the officers of the
Subsidiary in office immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, to serve in accordance with the By-laws
of the Surviving Corporation until their respective successors are duly elected
or appointed and qualified.
ARTICLE IV
CONVERSION OF SHARES
SECTION 4. 1. Conversion of Company Shares in the Merger. At the Effective
Time, by virtue of the Merger and without any action on the part of any holder
of any capital stock of the Company:
(a) each Share issued and outstanding immediately prior to the
Effective Time, subject to Sections 4.3 and 4.4, shall be automatically
canceled and extinguished and converted automatically into the right to
receive an amount equal to the Per Share Amount (the "Merger
Consideration") payable, without interest, to the holder of such Share,
upon surrender, in the manner provided in Section 4.3, of the certificate
that formerly evidenced such Share; and
6
(b) each share of capital stock of the Company, if any, owned by
Parent or any subsidiary of Parent or held in treasury by the Company or
any subsidiary of the Company immediately prior to the Effective Time shall
be canceled and shall cease to exist from and after the Effective Time.
SECTION 4.2. Conversion of Subsidiary Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of Parent as the sole
stockholder of Subsidiary, each issued and outstanding share of common stock,
par value $0.01 per share, of Subsidiary ("Subsidiary Common Stock") shall be
converted into one share of common stock, par value $0.01 per share, of the
Surviving Corporation.
SECTION 4.3. Exchange of Certificates.
(a) From and after the Effective Time, each holder of an outstanding
certificate that immediately prior to the Effective Time represented Shares
shall be entitled to receive in exchange therefor, upon surrender thereof to
Chase Mellon Shareholder Services, Harris Bank, or such other exchange agent as
is reasonably satisfactory to Parent and the Company (the "Exchange Agent"), the
Merger Consideration to which such holder is entitled pursuant to Section
4.1(a). Notwithstanding any other provision of this Agreement, without regard to
when such certificates representing Shares are surrendered for exchange as
provided herein, no interest shall be paid on any payment of the Merger
Consideration.
(b) If any Merger Consideration is to be issued in a name other than that
in which the certificate for Shares surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the person requesting
such exchange shall pay any transfer or other taxes required by reason of the
issuance of such Merger Consideration in a name other than that of the
registered holder of the certificate surrendered, or shall establish to the
satisfaction of Parent that such tax has been paid or is not applicable.
(c) Promptly at the Effective Time, Parent shall make available to the
Exchange Agent the cash in immediately available United States funds and Parent
Common Stock necessary for payment of all the Merger Consideration.
(d) Promptly after the Effective Time, the Exchange Agent shall mail to
each holder of record of a certificate or certificates that immediately prior to
the Effective Time represented outstanding Shares (the "Company Certificates")
(i) a form letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Company Certificates shall pass,
only upon actual delivery of the Company Certificates to the Exchange Agent) and
(ii) instructions for use in effecting the surrender of the Company Certificates
in exchange for the applicable Merger Consideration. Upon surrender of Company
Certificates for cancellation to the Exchange Agent, together with a duly
executed letter of transmittal and such other documents as the Exchange Agent
shall reasonably require, the holder of such Company Certificates shall be
entitled to receive in exchange therefor the applicable Merger Consideration
into which the Shares theretofore represented by the Company Certificates so
surrendered shall have been converted pursuant to the provisions of Section
4.1(a), and the Company Certificates so surrendered shall forthwith be canceled.
Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto
shall be
7
liable to a holder of Shares for Merger Consideration delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(e) Promptly following the date which is nine months after the Effective
Date, the Exchange Agent shall deliver to Parent all cash, certificates and
other documents in its possession relating to the transactions described in this
Agreement, and the Exchange Agent's duties shall terminate. Thereafter, each
holder of a Company Certificate may surrender such Company Certificate to the
Surviving Corporation and (subject to applicable abandoned property, escheat and
similar laws) receive in exchange therefor the Merger Consideration, without any
interest thereon. Notwithstanding the foregoing, none of the Exchange Agent,
Parent, Subsidiary, the Company or the Surviving Corporation shall be liable to
a holder of Company Common Stock for any Merger Consideration delivered to a
public official pursuant to applicable abandoned property, escheat and similar
laws.
(f) In the event any Company Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Company Certificate to be lost, stolen or destroyed, the Surviving
Corporation shall issue in exchange for such lost, stolen or destroyed Company
Certificate the Merger Consideration deliverable in respect thereof determined
in accordance with this Article IV. When authorizing such payment in exchange
therefor, the Board of Directors of the Surviving Corporation may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Company Certificate to give the
Surviving Corporation such indemnity as it may reasonably direct as protection
against any that may be made against the Surviving Corporation with respect to
the Company Certificate alleged to have been lost, stolen or destroyed.
SECTION 4.4. Appraisal Rights Shares.
(a) Notwithstanding any provision of this Agreement to the contrary, any
Shares held by a holder who has demanded and perfected his right for payment of
the fair value of such Shares in accordance with the BCL and who, as of the
Effective Time, has not effectively withdrawn or lost such right to payment,
shall not be converted into or represent a right to receive the Merger
Consideration pursuant to Section 4.1, but the holder thereof shall only be
entitled to such rights as are granted by the BCL.
(b) Notwithstanding the provisions of subsection (a), if any holder of
Shares who demands payment of the fair value of such Shares under the BCL shall
effectively withdraw or lose (through failure to perfect or otherwise) his right
to payment, then, as of the later of Effective Time or the occurrence of such
event, such holder's Shares shall automatically be converted into and represent
only the right to receive the Merger Consideration as provided in Section 4.1,
without interest thereon, upon surrender of the certificate or certificates
representing such Shares.
(c) The Company shall give Parent (i) prompt notice of any written notice
of dissent, written demands for payment of the fair value of any Shares,
withdrawals of such demands, and any other instruments served pursuant to the
BCL and received by the Company and (ii) the opportunity to participate in all
negotiations and proceedings with respect to demands for payment of the fair
8
value under the BCL. The Company shall not, except with the prior written
consent of Parent, voluntarily make any payment with respect to any demands for
payment of the fair value of any Shares or offer to settle any such demands.
SECTION 4.5. Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at a location mutually agreeable
to Parent and the Company on the first business day immediately following the
date on which the last of the conditions set forth in Article IX is fulfilled or
waived, or at such other time and place as Parent and the Company shall agree
(the date on which the Closing occurs is referred to in this Agreement as the
"Closing Date").
SECTION 4.6. Closing of the Company's Transfer Books. At and after the
Effective Time, holders of Shares shall cease to have any rights as stockholders
of the Company, except for the right to receive the applicable Merger
Consideration pursuant to Section 4.3. At the Effective Time, the stock transfer
books of the Company shall be closed and no transfer of Shares which were
outstanding immediately prior to the Effective Time shall thereafter be made.
SECTION 4.7. No Fractional Securities. Notwithstanding any other provision
of this Agreement, no certificates or scrip for fractional shares of Parent
Common Stock shall be issued in the Merger or the Offer and no Parent Common
Stock dividend, stock split or interest shall relate to any fractional security,
and such fractional interests shall not entitle the owner thereof to vote or to
any other rights of a security holder. In lieu of any such fractional shares,
each holder of Company Common Stock who would otherwise have been entitled to
receive a fraction of a share of Parent Common Stock upon surrender of Company
Certificates for exchange pursuant to the Offer or the Merger shall be entitled
to receive from the Exchange Agent a cash payment equal to such fraction
multiplied by the Average Price.
SECTION 4.8. Treatment of Employee Stock Options.
(a) Unless the Parent has provided the written notice contemplated by
Section 4.8(b) following, the Company shall cause, immediately prior to the
Effective Time, each then outstanding option to purchase Shares theretofore
granted under any stock option plan or agreement in effect with respect to
Company Common Stock to either be exercised (whether or not such option is
vested or immediately exercisable) or to be extinguished by virtue of the Merger
if it has not been exercised prior to the Merger. The Company may provide for
the "cashless" exercise of options by advancing the funds necessary for the
exercise to be repaid out of the Merger Consideration.
(b) Notwithstanding the provisions of Section 4.8(a) above, if within
thirty (30) days of the date hereof, the Parent provides the Company with
written notice that it desires to have employee stock options treated in
accordance with the provisions of this Section 4.8(b), the Company shall take
such action, if any, as may be necessary to cause, at or prior to the Effective
Time, each then outstanding option to purchase Shares theretofore granted under
any stock option plan or agreement in effect with respect to the Company Common
Stock which has not been exercised and remains outstanding at the time of the
Company's action (whether or not such option is vested or immediately
exercisable) to be extinguished and converted to the right to receive a cash
payment from the Company in an amount equal to the product of (i) the difference
between the cash value of
9
the Merger Consideration ($32.00 per Share) and the per Share exercise price of
such option and (ii) the total number of Shares which the holder of such option
is entitled to purchase under such option, subject to any required withholding
taxes, whereupon such options to purchase Shares and the stock appreciation
rights appurtenant thereto, if any, shall be canceled.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUBSIDIARY
Parent and Subsidiary each represent and warrant to the Company as
follows:
SECTION 5.1. Organization and Qualification. Each of Parent and Subsidiary
is a corporation duly organized, validly existing and in good standing under the
laws of the state of Delaware and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. Each of Parent and Subsidiary is qualified to do
business and is in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
and in good standing will not, when taken together with all other such failures,
have a material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of Parent and
its subsidiaries, taken as a whole, or Subsidiary. True, accurate and complete
copies of each of Parent's and Subsidiary's Certificates of Incorporation and
By-laws, in each case as in effect on the date hereof, including all amendments
thereto, have heretofore been delivered to the Company.
SECTION 5.2. Capitalization.
(a) The authorized capital stock of Parent consists of (i) 100,000,000
shares of Parent Common Stock of which 13,688,962 shares were outstanding as of
July 22, 1997 with options and warrants outstanding to acquire an additional
3,953,824 shares of Parent Common Stock as of July 22, 1997, and (ii) 10,000
shares of Series F preferred stock, par value $0.01 per share, 500 of which were
issued and outstanding as of July 22, 1997; and
(b) The authorized capital stock of Subsidiary consists of 200 shares of
Subsidiary Common Stock, all of which are issued and outstanding and are owned
beneficially and of record by Parent.
SECTION 5.3. Authority; Non-Contravention; Approvals.
(a) Parent and Subsidiary each have full corporate power and authority to
enter into this Agreement and, subject to the Parent Required Statutory
Approvals (as defined in Section 5.3(c)), to consummate the transactions
contemplated hereby. This Agreement has been approved by the Boards of Directors
of Parent and Subsidiary, and no other corporate proceedings on the part of
Parent or Subsidiary are necessary to authorize the execution and delivery of
this Agreement or the
10
consummation by Parent and Subsidiary of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by each of Parent and
Subsidiary, and, assuming the due authorization, execution and delivery hereof
by the Company, constitutes a valid and legally binding agreement of each of
Parent and Subsidiary enforceable against each of them in accordance with its
terms, except that such enforcement may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (ii) general
equitable principles.
(b) The execution and delivery of this Agreement by each of Parent and
Subsidiary do not violate, conflict with or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of Parent or any of
its subsidiaries under any of the terms, conditions or provisions of (i) the
respective charters or By-laws of Parent or any of its subsidiaries, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to
Parent or any of its subsidiaries or any of their respective properties or
assets or (iii) any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument, obligation
or agreement of any kind to which Parent or any of its subsidiaries is now a
party or by which Parent or any of its subsidiaries or any of their respective
properties or assets may be bound or affected. The consummation by Parent and
Subsidiary of the transactions contemplated hereby will not result in any
violation, conflict, breach, termination, acceleration or creation of liens
under any of the terms, conditions or provisions described in clauses (i)
through (iii) of the preceding sentence, subject (x), in the case of the terms,
conditions or provisions described in clause (ii) above, to obtaining (prior to
the Effective Time) the Parent Required Statutory Approvals and (y) in the case
of the terms, conditions or provisions described in clause (iii) above, to
obtaining (prior to the Effective Time) consents required from commercial
lenders, lessors or other third parties each as listed in Section 5.3 of the
Parent Schedule that has been provided by Parent to the Company on or prior to
the date hereof that expressly relates to this Agreement (the "Parent
Schedule"). Excluded from the foregoing sentences of this paragraph (b), insofar
as they apply to the terms, conditions or provisions described in clauses (ii)
and (iii) of the first sentence this paragraph (b), are such violations,
conflicts, breaches, defaults, terminations, accelerations or creations of
liens, security interests, charges or encumbrances that would not, in the
aggregate, have a material adverse effect on the business, operations,
properties, assets, condition (financial or otherwise) or results of operations
of the Parent and its subsidiaries taken as a whole.
(c) Except for (i) the filings by Parent and the Company required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
(ii) the making of the Merger Filing with the Secretary of State of the State of
New York in connection with the Merger and (iii) the filing of the Registration
Statement and the Schedule 14D-1 with the SEC (the filings and approvals
referred to in clauses (i), (ii) and (iii) are collectively referred to as the
"Parent Required Statutory Approvals"), no declaration, filing or registration
with, or notice to, or authorization, consent or approval of, any governmental
or regulatory body or authority is necessary
11
for the execution and delivery of this Agreement by Parent or Subsidiary or the
consummation by Parent or Subsidiary of the transactions contemplated hereby.
SECTION 5.4. Reports and Financial Statements. Since December 31, 1995,
Parent has filed with the SEC all forms, statements, reports and documents
(including all exhibits, amendments and supplements thereto) required to be
filed by it under each of the Securities Act, the Exchange Act and the
respective rules and regulations thereunder, all of which, as amended if
applicable, complied in all material respects with an applicable requirements of
the appropriate act and the rules and regulations thereunder. Parent has
previously delivered to the Company copies of its (a) Annual Reports on Form
10-K for each of the two immediately preceding fiscal years, as filed with the
SEC, (b) proxy and information statements relating to (i) all meetings of its
stockholders (whether annual or special) and (ii) actions by written consent in
lieu of a stockholders' meeting from December 31, 1995, until the date hereof,
and (c) all other reports, including quarterly reports, or registration
statements filed by Parent with the SEC since December 31, 1995 (other than
Registration Statements recorded on Form S-8) (collectively, the "Parent SEC
Reports"). As of their respective dates, the Parent SEC Reports did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim consolidated
financial statements of Parent included in such reports (collectively, the
"Parent Financial Statements") have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated therein or in the notes thereto) and fairly present in all material
respects the financial position of Parent and its subsidiaries as of the dates
thereof and the results of their operations and changes in financial position
for the periods then ended, subject, in the case of the unaudited interim
financial statements, to normal year-end audit adjustments and any other
adjustments described therein.
SECTION 5.5. Absence of Certain Changes or Events. Since the date of the
most recent Parent SEC Report, there has not been any material adverse change in
the business, operations, properties, liabilities, condition (financial or
other), results of operations or prospects of Parent and its subsidiaries, taken
as a whole or of Subsidiary.
SECTION 5.6. Litigation. Except as disclosed in the Parent SEC Reports or
in Section 5.6 of the Parent Schedule, there are no claims, suits, actions or
proceedings pending or, to the knowledge of Parent, threatened against, relating
to or affecting Parent or any of its subsidiaries, before any court,
governmental department, commission, agency, instrumentality or authority, or
any arbitrator that seek to restrain or enjoin the consummation of the Merger or
which could reasonably be expected, either alone or in the aggregate with all
such claims, actions or proceedings, to materially and adversely affect the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Parent and its subsidiaries, taken as a
whole, or of Subsidiary. Except as set forth in the Parent SEC Reports, neither
Parent nor any of its subsidiaries is subject to any judgment, decree,
injunction, rule or order of any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator which prohibits or
restricts the consummation of the transactions contemplated hereby or would have
any material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of Parent and
its subsidiaries, taken as a whole, or of Subsidiary.
12
SECTION 5.7. Registration Statement and Proxy Statement. None of the
information to be supplied by Parent or its subsidiaries for inclusion in either
the Proxy Statement (as defined in Section 8.2) or the Registration Statement
will, in the case of the Proxy Statement or any amendments thereof or
supplements thereto, at the time of the mailing of the Proxy Statement and any
amendments or supplements thereto, and at the time of the Stockholders Meeting
(as defined in Section 8.3), or, in the case of the Registration Statement, as
amended or supplemented, at the time it becomes effective and throughout the
duration of the Offer, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. No representation is made by the Parent or the
Subsidiary with respect to information supplied by the Company for inclusion in
either the Registration Statement or the Proxy Statement.
SECTION 5.8. Voting Requirements. No action by the stockholders of Parent
is required to approve this Agreement and the transactions contemplated hereby.
Parent, as the sole stockholder of Subsidiary, has approved this Agreement and
the Merger.
SECTION 5.9. Financing. Parent and Subsidiary have delivered to the Company
true and complete copies of "highly confident" letters obtained by Parent and
Subsidiary from financially responsible third parties in respect of the debt
financing for the transactions contemplated hereby.
SECTION 5.10. Absence of Undisclosed Liabilities. Except as disclosed in
the Parent SEC Reports, neither the Parent nor any of its subsidiaries had at
March 31, 1997, or has incurred since that date, any liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of any nature, except (a)
liabilities, obligations or contingencies (i) which are accrued or reserved
against in the Parent Financial Statements or reflected in the notes thereto or
(ii) which were incurred after March 31, 1997, and were incurred in the ordinary
course of business and consistent with past practices, (b) liabilities,
obligations or contingencies which (i) would not, in the aggregate, have a
material adverse effect on the business, operations, properties, assets,
financial condition or results of operations of the Parent and its subsidiaries,
taken as a whole, or (ii) have been discharged or paid in full prior to the date
hereof, and (c) liabilities which are of a nature not required to be reflected
in the consolidated financial statements of the Parent and its subsidiaries
prepared in accordance with generally accepted accounting principles
consistently applied and which were incurred in the normal course of business.
SECTION 5.11 No Violation of Law. Except as disclosed in the Parent SEC
Reports, neither the Parent nor any of its subsidiaries is in violation of or
has been given notice or been charged with any violation of, any law, statute,
order, rule, regulation, ordinance or judgment (including, without limitation,
any applicable environmental law, ordinance or regulation) of any governmental
or regulatory body or authority, except for violations which, in the aggregate,
could not reasonably be expected to have a material adverse effect on the
business, operations, properties, assets, condition (financial or otherwise) or
results of operations of the Parent and its subsidiaries, taken as a whole.
Except as disclosed in the Parent SEC Reports, as of the date of this Agreement,
to the knowledge of the Parent, no investigation or review by any governmental
or regulatory body or authority is pending or threatened, nor has any
governmental or regulatory body or authority indicated an intention to conduct
the same. The Parent and its subsidiaries have all permits, licenses,
13
franchises, variances, exemptions, orders and other governmental authorizations,
consents and approvals necessary to conduct their businesses as presently
conducted (collectively, the "Parent Permits"). The Parent and its subsidiaries
are not in violation of the terms of any Parent Permit, except for delays in
filing reports or violations which, alone or in the aggregate, would not have a
material adverse effect on the business, operations, properties, assets,
condition (financial or otherwise) or results of operations of the Parent and
its subsidiaries, taken as a whole.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Subsidiary as follows:
SECTION 6.1. Organization and Qualification. The Company is a corporation
duly organized, validly existing and presently subsisting under the laws of the
State of New York and has the requisite corporate power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. The Company is qualified to do business and is in good
standing in each jurisdiction in which the properties owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified and in good standing will
not, when taken together with all other such failures, have a material adverse
effect on the business, operations, properties, assets, condition (financial or
other), or results of operations of the Company and its subsidiaries, taken as a
whole. True, accurate and complete copies of the Company's Certificate of
Incorporation and By-laws, in each case as in effect on the date hereof,
including all amendments thereto, have heretofore been delivered to Parent.
SECTION 6.2. Capitalization.
(a) The authorized capital stock of the Company consists of (i) 10,000,000
Shares and (ii) 2,000,000 shares of Preferred Stock, $0.01 per share (the
"Preferred Shares"). As of May 2, 1997, 3,033,543 Shares were issued and
outstanding, 2,085,245 Shares were held in treasury and no Preferred Shares were
issued or outstanding. All of such are validly issued and are fully paid,
nonassessable and free of preemptive rights. No subsidiary of the Company holds
any Shares.
(b) Except as set forth in Section 6.2 of the Disclosure Schedule that has
been provided by the Company to the Parent on or prior to the date hereof that
expressly relates to this Agreement (the "Disclosure Schedule") as of the date
hereof there were no outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement and also including any rights plan or other
anti-takeover agreement, obligating the Company or any subsidiary of the Company
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of the capital stock of the Company or obligating the Company or any
subsidiary of the Company to grant, extend or enter into any such agreement or
commitment. Except as set forth in Section 6.2 of the Disclosure Schedule, there
are no voting trusts, proxies or other agreements or understandings to which the
Company or any subsidiary of the Company is a party or is bound with respect to
the voting of any shares of capital stock of the Company.
14
SECTION 6.3. Subsidiaries. Except as set forth in Section 6.3 of the
Disclosure Schedule, each direct and indirect corporate subsidiary of the
Company is duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has the requisite power and authority
to own, lease and operate its and properties and to carry on its business as it
is now being conducted. Each subsidiary of the Company is qualified to do
business, and is in good standing, in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
and in good standing will not, when taken together with all such other failures,
have a material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole. All of the outstanding shares of capital stock
of each corporate subsidiary of the Company are validly issued, fully paid,
nonassessable and free of preemptive rights and are owned directly or indirectly
by the Company free and clear of any liens, claims, encumbrances, security
interests, equities, charges and options of any nature whatsoever except as set
forth in Section 6.3 of the Disclosure Schedule. There are no subscriptions,
options, warrants, rights, calls, contracts, voting trusts, proxies or other
commitments, understandings, restrictions or arrangements relating to the
issuance, sale, voting, transfer, ownership or other rights with respect to any
shares of capital stock of any corporate subsidiary of the Company, including
any right of conversion or exchange under any outstanding security, instrument
or agreement.
SECTION 6.4. Authority; Non-Contravention; Approvals.
(a) The Company has full corporate power and authority to enter into this
Agreement and, subject to the Company Stockholders' Approval (as defined in
Section 8.3) and the Company Required Statutory Approvals (as defined in Section
6.4(c)), to consummate the transactions contemplated hereby. This Agreement has
been approved by the Board of Directors of the Company, and no other corporate
proceedings on the part of the Company are necessary to authorize the execution
and delivery of this Agreement or, except for the Company Stockholders'
Approval, the consummation by the Company of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company, and,
assuming the due authorization, execution and delivery hereof by Parent and
Subsidiary, constitutes a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except that such
enforcement may be subject to (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and (b) general equitable principles.
(b) The execution and delivery of this Agreement by the Company do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any of its
subsidiaries under any of the terms, conditions or provisions of (i) the
respective charters or By-laws of the Company or any of its subsidiaries, (ii)
any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental authority
applicable to the Company or any of its subsidiaries or any of their
15
respective properties or assets, or (iii) any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which the Company or any of
its subsidiaries is now a party or by which the Company or any of its
subsidiaries or any of their respective properties or assets may be bound or
affected. The consummation by the Company of the transactions contemplated
hereby will not result in any violation, conflict, breach, termination,
acceleration or creation of liens under any of the terms, conditions or
provisions described in clauses (i) through (iii) of the preceding sentence,
subject (x) in the case of the terms, conditions or provisions described in
clause (ii) above, to obtaining (prior to the Effective Time) the Company
Required Statutory Approvals and the Company Stockholder's Approval and (y) in
the case of the terms, conditions or provisions described in clause (iii) above,
to obtaining (prior to the Effective Time) consents required from commercial
lenders, lessors or other third parties each as listed in Section 6.4 of the
Disclosure Schedule. Excluded from the foregoing sentences of this paragraph
(b), insofar as they apply to the terms, conditions or provisions described in
clauses (ii) and (iii) of the first sentence of this paragraph (b), are such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens, security interests, charges or encumbrances that would not,
in the aggregate, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
the Company and its subsidiaries, taken as a whole.
(c) Except for (i) the filings by Parent and the Company required by the
HSR Act, (ii) the filing of the Proxy Statement and the Schedule 14D-9 with the
SEC pursuant to the Exchange Act and any filings required to be made under
Section 14(f) of the Exchange Act, and (iii) the making of the Merger Filing
with the Secretary of State of the State of New York in connection with the
Merger (the filings and approvals referred to in clauses (i), (ii) and (iii) are
collectively referred to as the "Company Required Statutory Approvals"), no
declaration, recording or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, other than
such declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not, in the
aggregate, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
the Company and its subsidiaries, taken as a whole.
SECTION 6.5. Reports and Financial Statements. Except as set forth in
Section 6.5 of the Disclosure Schedule, since December 31, 1995, the Company has
filed with the SEC all material forms, statements, reports and documents
(including all exhibits, amendments and supplements thereto) required to be
filed by it under each of the Securities Act, the Exchange Act and the
respective rules and regulations thereunder, all of which, as amended if
applicable, complied in all material respects with all applicable requirements
of the appropriate act and the rules and regulations thereunder. The Company has
previously made available to Parent copies of its (a) Annual Reports on Form
10-K for each of the two immediately preceding fiscal years, as filed with the
SEC, (b) proxy and information statements relating to (i) any meetings of its
stockholders (whether annual or special) and (ii) actions by written consent in
lieu of a stockholders' meeting from December 31, 1995 until the date hereof,
and (c) all other reports, including quarterly reports, or registration
statements filed by the Company with the SEC since December 31, 1995 (other than
16
Registration Statements filed on Form S-8) and (the documents referred to in
clauses (a), (b) and (c) are collectively referred to as the "Company SEC
Reports"). At the time of filing, the Company SEC Reports did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated financial
statements of the Company included in the Company SEC Reports (collectively, the
"Company Financial Statements") have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated therein or in the notes thereto) and fairly present in all material
respects the financial position of the Company and its subsidiaries as of the
dates thereof and the results of their operations and changes in financial
position for the periods then ended, subject, in the case of the unaudited
interim financial statements, to normal year-end audit adjustments and any other
adjustments described therein.
SECTION 6.6. Absence of Undisclosed Liabilities. Except as disclosed in the
Company SEC Reports or as set forth in Section 6.6 of the Disclosure Schedule,
neither the Company nor any of its subsidiaries had at March 31, 1997, or has
incurred since that date, any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of any nature, except (a) liabilities,
obligations or contingencies (i) which are accrued or reserved against in the
Company Financial Statements or reflected in the notes thereto or (ii) which
were incurred after March 31, 1997, and were incurred in the ordinary course of
business and consistent with past practices, (b) liabilities, obligations or
contingencies which (i) would not, in the aggregate, have a material adverse
effect on the business, operations, properties, assets, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole, or
(ii) have been discharged or paid in full prior to the date hereof, and (c)
liabilities and obligations which are of a nature not required to be reflected
in the consolidated financial statements of the Company and its subsidiaries
prepared in accordance with generally accepted accounting principles
consistently applied and which were incurred in the normal course of business.
SECTION 6.7. Absence of Certain Changes or Events. Except as set forth in
Section 6.7 of the Disclosure Schedule, since the date of the most recent
Company SEC Report, there has not been any material adverse change in the
business, operations, properties, assets, liabilities, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole.
SECTION 6.8. Litigation. Except as referred to in the Company SEC Reports
or in Section 6.8 of the Disclosure Schedule, there are no claims, suits,
actions or proceedings pending or, to the knowledge of the Company, threatened
against, relating to or affecting the Company or any of its subsidiaries, before
any court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator that seek to restrain the consummation of the
Merger or which could reasonably be expected, either alone or in the aggregate
with all such claims, actions or proceedings, to materially and adversely affect
the business, operations, properties, assets, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole. Except as
referred to in the Company SEC Reports or in Section 6.8 of the Disclosure
Schedule, neither the Company nor any of its subsidiaries is subject to any
judgment, decree, injunction, rule
17
or order of any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator which prohibits or restricts the
consummation of the transactions contemplated hereby or would have any material
adverse effect on the business, operations, properties, assets, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole.
SECTION 6.9. Registration Statement and Proxy Statement. None of the
information to be supplied by the Company or its subsidiaries for inclusion in
either the Proxy Statement (as defined in Section 8.2) or the Registration
Statement will, in the case of the Proxy Statement or any amendments thereof or
supplements thereto, at the time of the mailing of the Proxy Statement and any
amendments or supplements thereto, and at the time of the Stockholders Meeting
(as defined in Section 8.3), or, in the case of the Registration Statement, as
amended or supplemented, at the time it becomes effective and throughout the
duration of the Offer, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. No representation is made by the Company with respect
to information supplied by the either the Parent or the Subsidiary for inclusion
in either the Registration Statement or the Proxy Statement.
SECTION 6.10. No Violation of Law. Except as disclosed in the Company SEC
Reports or in Section 6.10 of the Disclosure Schedule, neither the Company nor
any of its subsidiaries is in violation of or has been given notice or been
charged with any violation of, any law, statute, order, rule, regulation,
ordinance or judgment (including, without limitation, any applicable
environmental law, ordinance or regulation) of any governmental or regulatory
body or authority, except for violations which, in the aggregate, could not
reasonably be expected to have a material adverse effect on the business,
operations, properties, assets, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole. Except as
disclosed in the Company SEC Reports, as of the date of this Agreement, to the
knowledge of the Company, no investigation or review by any governmental or
regulatory body or authority is pending or threatened, nor has any governmental
or regulatory body or authority indicated an intention to conduct the same. The
Company and its subsidiaries have all permits, licenses, franchises, variances,
exemptions, orders and other governmental authorizations, consents and approvals
necessary to conduct their businesses as presently conducted (collectively, the
"Company Permits"). The Company and its subsidiaries are not in violation of the
terms of any Company Permit, except for delays in filing reports or violations
which, alone or in the aggregate, would not have a material adverse effect on
the business, operations, properties, assets, condition (financial or otherwise)
or results of operations of the Company and its subsidiaries, taken as a whole.
Any matter scheduled on Section 6.10 of the Disclosure Schedule shall not, alone
or in the aggregate, have a material adverse effect upon the Company and its
subsidiaries, taken as a whole.
SECTION 6.11. Compliance with Agreements. Except as disclosed in the
Company SEC Reports and Section 6.11 of the Disclosure Schedule, the Company and
each of its subsidiaries are not in breach or violation of or in default in the
performance or observance of any term or provision of, and no event has occurred
which, with lapse of time or action by a third party, could result in a default
under, (a) the respective charters, By-laws or similar organizational
instruments of the Company or any of its subsidiaries or (b) any contract,
commitment, agreement, indenture,
18
mortgage, loan agreement, note, lease, bond, license, approval or other
instrument to which the Company or any of its subsidiaries is a party or by
which any of them is bound or to which any of their property is subject, which
breaches, violations and defaults, in the case of clause (b) of this Section
6.11, would have, in the aggregate, a material adverse effect on the business,
operations, properties, assets, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole.
SECTION 6.12. Taxes. Except as disclosed in Section 6.12 of the Disclosure
Schedule, the Company and its subsidiaries have (i) duly filed with the
appropriate governmental authorities all tax returns required to be filed by
them for all periods ending on or prior to the Effective Time, other than those
tax returns that are on extension (which extensions are disclosed in Section
6.12 of the Disclosure Schedule), and (ii) duly paid in full or made adequate
provision for the payment of all taxes for all periods ending at or prior to the
date hereof (including, without limitation, all withholding and other employee
related taxes), except in the case of both clauses (i) and (ii), for failures
that would not have a material adverse effect on the business, operations,
properties, assets, condition (financial or otherwise) or results of operations
of the Company and its subsidiaries, taken as a whole. All such tax returns are
true, correct and complete in all material respects The liabilities and reserves
for taxes reflected in the Company balance sheet included in the latest Company
SEC Report are adequate to cover all taxes for all periods ending at or prior to
the date hereof and there are no material liens for taxes upon any property or
asset of the Company or any subsidiary thereof, except for liens for taxes not
yet due. There are no unresolved issues of law or fact arising out of a notice
of deficiency, proposed deficiency or assessment from the Internal Revenue
Service or any other governmental taxing authority with respect to taxes of the
Company or any of its subsidiaries which, if decided adversely, singly or in the
aggregate, would have a material adverse effect on the business, operations,
properties, assets, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole. Neither the Company nor any of its
subsidiaries is a party to any agreement providing for the allocation or sharing
of taxes with any entity that is not, directly or indirectly, a wholly-owned
corporate subsidiary of the Company. Neither the Company nor any of its
corporate subsidiaries has, with regard to any assets or property held, acquired
or to be acquired by any of them, filed a consent to the application of Section
341(f) of the Internal Revenue Code of 1986, as amended, and any successor
statute thereto, and the rules and regulations promulgated thereunder (the
"Code").
SECTION 6.13. Employee Benefit Plan; ERISA.
(a) Section 6.13 of the Disclosure Schedule, taken together with the
Company's SEC Reports, identifies any material employee benefit plans as defined
in Section 3(3) of the Employee Retirement Security Act of 1974, as amended, and
any successor statute thereto, and the rules and regulations promulgated
thereunder ("ERISA"), that (i) is subject to any provision of ERISA, (ii) is
maintained, administered, or contributed to by the Company or any subsidiary
which, together with the Company, is treated as a single employer under Section
414 of the Code ("ERISA Affiliate") or (iii) covers any employee or former
employee of the Company or any subsidiary ("Employee Plan"). Section 6.13 of the
Disclosure Schedule lists all Multi-Employer Plans within the meaning of Section
3(37) of ERISA or a Multiple Employer Plan within the meaning of Section 413(c)
of the Code. Section 6.13 of the Disclosure Schedule, taken together with the
Company SEC Reports,
19
identifies any material employment, severance or similar contract, arrangement
or policy, or any plan or arrangement (whether or not written) providing for
severance benefits, insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement options, stock appreciation
rights or other forms of incentive benefits that (a) is not an Employee Plan,
(b) is entered into or maintained by the Company or any subsidiary and (c)
covers any United States employee or former employee of the Company or any
subsidiary (any of the foregoing a "Benefit Arrangement"). Copies of Employee
Plans and Benefit Arrangements have been furnished or made available to the
Parent (together with the most recent annual report prepared in connection with
any Employee Plan). Except as disclosed in Section 6.13 of the Disclosure
Schedule, each Employee Plan and Benefit Arrangement has been maintained in
substantial compliance with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations, including but not limited
to ERISA and the Code, that are applicable to such Employee Plan or Benefit
Arrangement. Any non-compliance scheduled on Section 6.13 of the Disclosure
Schedule shall not, alone or in the aggregate, have a material adverse effect
upon the Company and its subsidiaries, taken as a whole.
(b) Except as disclosed in the Company SEC Reports, (i) there have been no
prohibited transactions within the meaning of Section 406 or 407 of ERISA or
Section 4975 of the Code with respect to any of the Benefit Arrangements or
Employee Plans that could result in penalties, taxes or liabilities which,
singly or in the aggregate, could have a material adverse effect on the
business, operations, properties, assets, condition (financial or other) results
of operations or prospects of the Company and its subsidiaries, taken as a
whole, (ii) except for premiums due, there is no outstanding material liability,
whether measured alone or in the aggregate, under Title IV of ERISA with respect
to any of the Benefit Arrangements or Employee Plans, (iii) neither the Pension
Benefit Guaranty Corporation nor any plan administrator has instituted
proceedings to terminate any of the Benefit Arrangements or Employee Plans
subject to Title IV of ERISA other than in a "standard termination" described in
Section 404(b) of ERISA, (iv) none of the Benefit Arrangements or Employee Plans
has incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, as of the last day of
the most recent fiscal year of each of the Benefit Arrangements or Employee
Plans ended prior to the date of this Agreement, (v) the current present value
of all projected benefit obligations under each of the Benefit Arrangements or
Employee Plans which is subject to Title IV of ERISA did not, as of its latest
valuation date, exceed the then current value of the assets of such plan
allocable to such benefit liabilities by more than the amount, if any, disclosed
in the Company SEC Reports as of March 31, 1997, based upon reasonable actuarial
assumptions currently utilized for such Benefit Arrangements or Employee Plans,
(vi) each of the Benefit Arrangements and Employee Plans has been operated and
administered in all material respects in accordance with applicable laws during
the period of time covered by the applicable statute of limitations, (vii) each
of the Benefit Arrangements and Employee Plans which is intended to be
"qualified" within the meaning of Section 401(a) of the Code has been determined
by the Internal Revenue Service to be so qualified and such determination has
not been modified, revoked or limited by failure to satisfy any condition
thereof or by a subsequent amendment thereto or a failure to amend, except that
it may be necessary to make additional amendments retroactively to maintain the
"qualified" status of such Benefit Arrangements or Employee Plans, and the
period for making any such necessary retroactive amendments has not expired,
(viii) with respect to Multi-Employer Plans, neither the Company nor any of its
subsidiaries
20
has, made or suffered a "complete withdrawal" or a "partial withdrawal", as such
terms are respectively defined in Sections 4203, 4204 and 4205 of ERISA and, to
the best knowledge of the Company and its subsidiaries, no event has occurred or
is expected to occur which presents a material risk of a complete or partial
withdrawal under said Sections 4203, 4204 and 4205, (ix) to the best knowledge
of the Company and its subsidiaries, there are no material pending, threatened
or anticipated claims involving any of the Benefit Arrangements or Employee
Plans other than claims for benefits in the ordinary course, and (x) the Company
and its subsidiaries have no current material liability, whether measured alone
or in the aggregate, for plan termination or withdrawal (complete or partial)
under Title IV of ERISA based on any plan to which any entity that would be
deemed one employer with the Company and its subsidiaries under Section 4001 of
ERISA or Section 414 of the Code contributed during the period of time covered
by the applicable statute of limitations (the "Company Controlled Group Plans"),
and the Company and its subsidiaries do not reasonably anticipate that any such
liability will be asserted against the Company or any of its subsidiaries. None
of the Company Controlled Group Plans has an "accumulated funding deficiency"
(as defined in Section 302 of ERISA and 412 of the Code).
(c) Schedule 6.13 of the Disclosure Schedule contains a true and complete
summary or list of or otherwise describe all material employment contracts and
other employee benefit arrangements with "change of control" or similar
provisions and all severance agreements with executive officers.
SECTION 6.14. Labor Controversies. Except as set forth in the Company SEC
Reports, (a) there are no significant controversies pending or, to the knowledge
of the Company, threatened between the Company or its subsidiaries and any
representatives of any of their employees, (b) to the knowledge of the Company,
there are no organizational efforts presently being made involving any of the
presently unorganized employees of the Company or any of its subsidiaries, (c)
the Company and its subsidiaries have, to the knowledge of the Company, complied
with respect to all employees, including without limitation, staff employees and
those chargeable to others, with all laws relating to the employment of labor,
including, without limitation, any provisions thereof relating to wages, hours,
collective bargaining, and the payment of social security and similar taxes
except for failures to comply which, alone or in the aggregate, would not have a
material adverse effect on the business, operations, properties, assets,
condition (financial or otherwise) or results of operations of the Company and
its subsidiaries, taken as a whole, and (d) no person has, to the knowledge of
the Company, asserted that the Company or any of its subsidiaries is liable in
any material amount for any arrears of wages or any taxes or penalties for
failure to comply with any of the foregoing. Except as set forth in Section 6.14
of the Disclosure Schedule, there are no proceedings now pending or threatened
against the Company before the National Labor Relations Board, any state
department of labor, any state commission on human rights, the Equal Employment
Opportunity Commission or any other local, state or federal agencies having
jurisdiction over employee rights nor have there been any such proceedings since
January 1, 1995.
SECTION 6.15. Environmental Matters.
(a) Except as set forth in the Company SEC Reports, (i) the Company and its
subsidiaries have conducted their respective businesses in compliance with all
applicable Environmental Laws
21
(as hereinafter defined), including, without limitation, having all permits,
licenses and other approvals and authorizations necessary for the operation of
their respective businesses as presently conducted, (ii) neither the Company nor
any of its subsidiaries has received any notices, demand letters or requests for
information from any federal, state, local or foreign governmental entity or
third party indicating that the Company or any of its subsidiaries may be in
violation of, or liable under, any Environmental Law in connection with the
ownership or operation of their businesses, (iii) there are no civil, criminal
or administrative actions, suits, demands, claims, hearings, investigations or
proceedings pending or to Company's knowledge threatened, against the Company or
any of its subsidiaries relating to any violation, or alleged violation, of any
Environmental Law, (iv) no reports have been filed, or are required to be filed,
by the Company or any of its subsidiaries concerning the release of any
Hazardous Substance (as hereinafter deemed), taken as a whole, or the threatened
or actual violation of any Environmental Law, (v) there have been no
environmental assessments or tests which are in the possession of the Company or
any of its subsidiaries relating to the activities of the Company or its
subsidiaries which have not been delivered to Parent prior to the date hereof,
and (vi) neither the Company, its subsidiaries nor any of their respective
properties are subject to any material liabilities or expenditures relating to
any suit, settlement, court order, administrative order, regulatory requirement,
judgment or claim asserted or arising under any Environmental Law, except for
such matters covered in foregoing clauses (i) through (vi) that, singly or in
the aggregate, would not reasonably be expected to have a material adverse
effect on the business, operations, properties, assets, condition (financial or
otherwise) or results of operations of the Company and its subsidiaries
considered as one enterprise.
(b) As used herein, "Environmental Law" means any federal, state, local or
foreign law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, judgment, decree, injunction,
requirement or agreement with any governmental entity relating to (i) the
protection, preservation or restoration of the environment (including, without
limitation, air, surface water, groundwater, surface land, subsurface land, or
to human health or safety or (ii) the exposure to, or the use, storage,
treatment, generation, transportation, processing, handling, release or disposal
of Hazardous Substances, in each case as amended and as in effect on the date
hereof.
(c) As used herein, "Hazardous Substance" means any substance presently
listed, deemed, designated or classified as hazardous, toxic, radioactive,
caustic or otherwise hazardous including petroleum, its derivatives, byproducts
and other hydrocarbons regulated under any Environmental Law.
SECTION 6.16. Intellectual Property.
(a) Section 6.16(a) of the Disclosure Schedule sets forth a true and
complete list and a brief description, including a complete identification of
each patent and patent application and each trademark or copyright registration
or application for registration thereof, of all Intellectual Property (as herein
defined) owned or licensed by the Company and its subsidiaries. Except as
otherwise described in Section 6.16(a) of the Disclosure Schedule, in each case
where a registration or patent or application for registration or patent listed
in Section 6.16(a) of the Disclosure Schedule is held by assignment, the
assignment has been duly recorded with the United States Patent Office,
Trademark Office or Copyright Office or state trademark office from which the
original patent or
22
registration issued or before which the application for trademark or copyright
registration is pending. Except as disclosed in Section 6.16(a) of the
Disclosure Schedule, to the knowledge of the Company, the rights of the Company
or any subsidiary, as the case may be, in or to such Intellectual Property do
not conflict with or infringe on the rights of any other person, and neither the
Company nor any subsidiary has received any claim or written notice from any
person, to such effect.
(b) Except as disclosed in Section 6.16(b) of the Disclosure Schedule: (i)
all the Intellectual Property that is owned by the Company and its subsidiaries
is free and clear of any mortgages, liens, pledges, charges or encumbrances of
any nature whatsoever and (ii) no actions have been made or asserted or are
pending (nor, to the best knowledge of the Company, has any such action been
threatened) against the Company or any subsidiary either (A) based upon or
challenging or seeking to deny or restrict the use by the Company or any
subsidiary of any of Intellectual Property or (B) alleging that any services
provided, or products manufactured or sold by the Company or any subsidiary are
being provided, manufactured or sold in violation of any patents or trademarks,
or any other rights of any person. To the best knowledge of the Company and
except as disclosed in Section 6.16(b) of the Disclosure Schedule, no person is
using any patents, copyrights, trademarks, service marks, or trade names owned
by the Company and its subsidiaries or that infringe upon the Intellectual
Property or upon the rights of the Company or any subsidiary therein. Except as
disclosed in Section 6.16(b) of the Disclosure Schedule, neither the Company nor
any subsidiary has granted any license or other right to any other person with
respect to the Intellectual Property owned by the Company and its subsidiaries.
The consummation of the transactions contemplated by this Agreement will not
result in the termination or impairment of any of the intellectual property
owned by the Company and its subsidiaries.
(c) For purposes hereof, the term "Intellectual Property" shall mean all
computer software, patent and registrations for trademarks, trade names, service
marks and copyrights which are unexpired as of the date of this Agreement and
which are used in connection with the operation of the Company's and its
subsidiaries' businesses, as well as all applications pending on said date for
patents or for trademarks, trade name, service mark or copyright registrations.
SECTION 6.17. Title to Assets. Except as set forth in Section 6.17 of the
Disclosure Schedule, the Company and each of its subsidiaries has good and
marketable title in fee simple to all its real property and good title to all
its leasehold interests and other properties, as reflected in the most recent
balance sheet included in the Company Financial Statements, except for
properties and assets that have been disposed of in the ordinary course of
business since the date of such balance sheet, free and clear of all mortgages,
liens, pledges, charges or encumbrances of any nature whatsoever, except (a) the
lien of current taxes, payments of which are not yet delinquent, (b) such
imperfections in title and easements and encumbrances, if any, as are not
substantial in character, amount or extent and do not materially detract from
the value, or interfere with the present use of the property subject thereto or
affected thereby, or otherwise materially impair the Company's business
operations (in the manner presently carried on by the Company), (c) as disclosed
in the Company SEC Reports, or (d) for such matters which, singly or in the
aggregate, could not reasonably be expected to materially and adversely affect
the business, operations, properties, assets, condition (financial or otherwise)
or results of operations of the Company and its subsidiaries, taken as a whole.
All leases under which the Company or any of its subsidiaries leases any real or
personal
23
property have been delivered to Parent and are in good standing, valid and
effective in accordance with their respective terms, and, to the knowledge of
the Company, there is not, under any of such leases, any existing default or
event which with notice or lapse of time or both would become a default other
than defaults under such leases which in the aggregate will not materially and
adversely affect the condition (financial or otherwise) of the Company and its
subsidiaries, taken as a whole.
SECTION 6.18. Assets Relationship to Business of the Company. The assets
owned or leased by the Company constitute all of the properties and assets used
or useful in or necessary to the conduct of the business and affairs of the
Company.
SECTION 6.19. Certain Relationships; Transactions with Management.
(a) Section 6.19 of the Disclosure Schedule, taken together with the
Company SEC Reports, accurately describe all relationships among the directors,
the officers and the significant shareholders of the Company.
(b) Except as described in Section 6.19 of the Disclosure Schedule, or in
the Company SEC Reports, the Company is not a party to any contract, lease or
commitment with any officer, director or shareholder (or any affiliate of any
such officer, director or shareholder) of the Company, nor are there any loans
outstanding to any of such persons (or any affiliate of any such person) from
the Company. The Company has concurrently with the execution of this Agreement
entered into Employment Agreements with John Fanning, Rosemary Maniscalco and
Harry Maccarrone in forms approved by Parent and such officers continue to be
employed by the Company on a full-time basis. In addition, the Company has
concurrently with the execution of this Agreement entered into a Noncompetition
Agreement with John Fanning and Parent in form approved by Parent.
(c) Neither the Company nor any of the directors, officers or significant
shareholders of the Company (and/or any member of their respective families) has
a financial interest (direct or indirect) in any competitor, supplier or
customer of the Company.
SECTION 6.20. Improper Payments. Neither the Company (including any present
or former officers, directors, employees or agents or other third party acting
on behalf of the Company) have: (i) directly or indirectly, made or authorized
to be made, any bribes, kickbacks or other payments of a similar nature, whether
lawful or not, to any person or entity, public or private, regardless of the
form thereof, whether in money, property or services, to obtain favorable
treatment in securing business, to obtain special concessions to pay for
favorable treatment for business secured or for special concessions already
obtained or to otherwise attempt to influence any such person or entity to take
or refrain from taking any action relating to the Company; (ii) paid, donated,
leased or made available funds or property of any kind, directly or indirectly,
for the benefit of, or for the purpose of opposing, any government or
subdivision thereof, political party, candidate or committee, either domestic or
foreign; (iii) made any loans, donations, or other disbursements, directly or
indirectly, to officers or employees of the Company, so that contributions,
donations, loans or payments could be made, directly or indirectly, for the
benefit of, or for the purpose of opposing, any government or subdivision
thereof, political party, candidate or committee, either domestic or foreign; or
(iv) maintained a bank account or other account of any kind, whether
24
domestic or foreign, which account was not reflected in the corporate books and
records or which account was not listed, titled or identified in the name of the
Company.
SECTION 6.21. Agreements with Licensees. Section 6.21 of the Disclosure
Schedule lists all agreements with licensees or franchisees pursuant to which
the Company has granted any right to the other party thereto to operate an
office using the Company name or otherwise. Except as set forth in Section 6.21
of the Disclosure Schedule, upon the consummation of the transactions
contemplated by this Agreement, none of such agreements will restrict Parent or
any of its subsidiaries from operating in the ordinary course of business within
any specified territory.
ARTICLE VII
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 7.1. Conduct of Business by the Company Pending the Merger. Except
as otherwise contemplated by this Agreement, after the date hereof and prior to
the Closing Date or earlier termination of this Agreement, unless Parent shall
otherwise agree in writing, the Company shall, and shall cause its subsidiaries,
to:
(a) conduct its business in the ordinary and usual course of business
and consistent with past practice;
(b) not (i) amend or propose to amend its charter or by-laws, (ii)
split, combine or reclassify its outstanding capital stock or (iii)
declare, set aside or pay any dividend or distribution payable in cash,
stock, property or otherwise, except for the payment of dividends or
distributions by a wholly-owned subsidiary of the Company and the payment
of a quarterly cash dividend by the Company in accordance with its prior
practices in an amount not in excess of $0.03 per share;
(c) not issue, sell or pledge, or agree to issue, sell or pledge any
additional shares of, or any options, warrants or rights of any kind to
acquire any shares of its capital stock of any class or any debt or equity
securities convertible into or exchangeable for such capital stock;
(d) use all reasonable efforts to preserve intact its business
organizations and goodwill, keep available the services of its officers and
key employees, and preserve the goodwill and business relationships with
customers and others having business relationships with the Company and not
engage in any action, directly or indirectly, with the intent to adversely
impact the transactions contemplated by this Agreement;
(e) confer on a regular and frequent basis with one or more designated
representatives of Parent to report operational matters of materiality and
the general status of ongoing operations;
(f) except as contemplated in Section 7.1 of the Disclosure Schedule,
not enter into or amend any employment, severance, special pay arrangement
with respect to termination of
25
employment or other similar arrangements or agreements with any directors,
officers or key employees, except in the ordinary course and consistent
with past practice; and
(g) not adopt, enter into or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
health care, employment or other employee benefit plan, agreement, trust,
fund or arrangement for the benefit or welfare of any employee or retiree,
except as required to comply with changes in applicable law.
SECTION 7.2. Control of the Company's Operations. Unless and until the
Parent has availed itself of its right to Board representation pursuant to
Section 1.3 hereof, nothing contained in this Agreement shall give to Parent,
directly or indirectly, rights to control or direct the Company's operations
prior to the Effective Time. Prior to the Effective Time, the Company shall
exercise, consistent with the terms and conditions of this Agreement, complete
control and supervision of its operations.
SECTION 7.3. Acquisition Transactions.
(a) After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, the Company shall not, and shall not permit any
of its subsidiaries to, initiate, solicit, negotiate, encourage or provide
confidential information to facilitate, and the Company shall, and shall cause
its subsidiaries to, (i) cause any officer, director or employee of, or any
attorney, accountant or other agent retained by it and (ii) use its reasonable
best efforts to cause any financial advisor or investment banker retained by it,
not to initiate, solicit, negotiate, encourage or provide non-public or
confidential information to facilitate, any proposal or offer to acquire all or
any substantial part of the business and properties of the Company or any
capital stock of the Company, whether by merger, purchase of, tender offer or
otherwise, whether for cash, securities or any other consideration or
combination thereof (any such transactions being referred to herein as
"Acquisition Transactions").
(b) Notwithstanding the provisions of paragraph (a) above, the Company may,
in response to an unsolicited written proposal with respect to an Acquisition
Transaction furnish (subject to a confidentiality agreement reasonably
acceptable to the Company) confidential or non-public information concerning its
business, properties or assets to a financially capable corporation,
partnership, person or other entity or group (a "Potential Acquirer") or
negotiate with such Potential Acquirer if (i) it has in connection therewith
complied with subsection (c) of this Section, and (ii) based upon advice of
outside legal counsel to the special committee of the Board (the "Special
Committee") established to review and evaluate the transactions contemplated by
this Agreement, the Special Committee and the Board determines in good faith
that there is a risk that the failure to provide such confidential or non-public
information to such Potential Acquirer would constitute a breach of its
fiduciary duty to its shareholders.
(c) In the event the Company shall determine to provide any information or
negotiate as described in paragraph (b) above, or shall receive any offer of the
type referred to in paragraph (b) above, it shall promptly (and in any event, at
least prior to providing information or commencing negotiations) inform Parent
that information is to be provided, that negotiations are to take place or
26
that an offer has been received and shall furnish to Parent the identity of the
person receiving such information or the proponent of such offer, if applicable,
and, if an offer has been received, a description of the material terms thereof.
(d) The Company may enter into a definitive agreement for an Acquisition
Transaction which meets the requirements set forth above with a Potential
Acquirer with which it is permitted to negotiate pursuant to paragraph (b)
above, but only if (i) the Board shall have duly determined that such
Acquisition Transaction would yield a higher value to the Company's shareholders
than the aggregate Merger Consideration and that the execution of such
definitive agreement is in the best interests of the Company's shareholders,
(ii) at least five (5) business days prior to the execution of such definitive
agreement, the Company shall have furnished the Parent with a copy of such
definitive agreement, and (iii) the Parent shall have failed within such five
(5) business day period to offer to amend the terms of this Agreement in order
that the Merger would yield a value to the Company's shareholders at least equal
in the good faith judgment of the Board to the Acquisition Transaction.
(e) The Company (i) acknowledges that a breach of any of its covenants
contained in this Section 7.3 will result in irreparable harm to the other party
which will not be compensable in money damage and (ii) agrees that such covenant
shall be specifically enforceable and that specific performance and injunctive
relief shall be a remedy properly available to the Parent for a breach of such
covenant.
ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.1. Access to Information.
(a) The Company and its subsidiaries shall afford to Parent and Subsidiary
and, on a need to know basis, their respective accountants, counsel, financial
advisors and other representatives (the "Parent Representatives") full access
during normal business hours throughout the period prior to the Effective Time
to all of their respective properties, books, contracts, commitments and records
(including, but not limited to, tax returns) and, during such period, shall
furnish promptly to the Parent or Parent Representatives (i) a copy of each
report, schedule and other document filed by any of them with the SEC in
connection with the transactions contemplated by this Agreement or which may
have a material effect on their respective businesses, properties or personnel
and (ii) such other information concerning the Company's business as Parent or
Subsidiary shall reasonably request including, without limitation, access to
customers of the Company; provided that no investigation pursuant to this
Section 8.1 shall amend or modify any representations or warranties made herein
or the conditions to the obligations of the respective parties to consummate the
Merger. Parent and its subsidiaries shall hold and shall use their reasonable
best efforts to cause the Parent Representatives to hold in strict confidence
all non-public documents and information furnished to Parent and Subsidiary in
connection with the transactions contemplated by this Agreement, except that (i)
Parent and Subsidiary may disclose such information as may be necessary in
connection with
27
seeking the Parent Required Statutory Approvals and (ii) each of Parent and
Subsidiary may disclose any information that it is required by law or judicial
or administrative order to disclose.
(b) The Parent and Subsidiary shall afford to the Company and its
subsidiaries and, on a need to know basis, their respective accountants,
counsel, financial advisors and other representatives (the "Company
Representatives") full access during normal business hours throughout the period
prior to the Effective Time to all of their respective properties, books,
contracts, commitments and records (including, but not limited to, tax returns)
and, during such period, shall furnish promptly to the Company and its
subsidiaries or the Company Representatives (i) a copy of each report, schedule
and other document filed by any of them with the SEC in connection with the
transactions contemplated by this Agreement or which may have a material effect
on their respective businesses, properties or personnel and (ii) such other
information concerning the Parent's and/or Subsidiary's business as the Company
or its subsidiaries shall reasonably request; provided that no investigation
pursuant to this Section 8.1 shall amend or modify any representations or
warranties made herein or the conditions to the obligations of the respective
parties to consummate the Merger. The Company and its subsidiaries shall hold
and shall use their reasonable best efforts to cause the Company Representatives
to hold in strict confidence all non-public documents and information furnished
to the Company and its subsidiaries in connection with the transactions
contemplated by this Agreement, except that (i) the Company and its subsidiaries
may disclose such information as may be necessary in connection with seeking the
Company Required Statutory Approvals and (ii) the Company may disclose any
information that it is required by law or judicial or administrative order to
disclose.
(c) In the event that this Agreement is terminated in accordance with its
terms, each party shall promptly redeliver to the other all non-public written
material provided by the other pursuant to this Section 8.1 and shall not retain
any copies, extracts or other reproductions in whole or in part of such written
material. In such event, all documents, memoranda, notes and other writings
prepared by Parent or Parent Representatives or the Company or Company
Representatives based on the information in such material shall be destroyed
(and Parent and Parent Representatives and Company and Company Representatives
shall use their best efforts to cause their advisors and representatives to
similarly destroy their documents, memoranda and notes), and such destruction
(and best efforts) shall be certified in writing by an authorized officer
supervising such destruction.
SECTION 8.2. Registration Statement and Proxy Statement.
(a) The Parent and Subsidiary shall file with the SEC promptly after the
public announcement of the offer complying with Rule 135(a)(4) the Registration
Statement. The Company shall promptly furnish to the Parent and the Subsidiary
all information, and take such other actions, as may reasonably be requested in
connection with any action by the Parent or the Subsidiary in connection with
the preceding sentence. The information provided and to be provided by Company
and the Parent or the Subsidiary, respectively, for use in the Registration
Statement shall be true and correct in all material respects without omission of
any material fact which is required to make such information not false or
misleading as of the date thereof and in light of the circumstances under which
given or made.
28
(b) The Company shall file with the SEC as soon as is reasonably
practicable after the date hereof a proxy statement to be distributed in
connection with the Stockholders Meeting (as defined in Section 8.3), which, if
requested by the Parent, will be combined in the prospectus contained in the
Registration Statement (the "Proxy Statement"). The Company will take all
reasonable efforts to aid the Parent to include the Proxy Statement in the
Registration Statement if the Parent so requests. Parent shall promptly furnish
to the Company all information, and take such other actions, as may reasonably
be requested in connection with any action by the Company in connection with the
preceding sentence. The information provided and to be provided by Parent and
the Company, respectively, for use in the Proxy Statement shall be true and
correct in all material respects without omission of any material fact which is
required to make such information not false or misleading as of the date thereof
and in light of the circumstances under which given or made.
SECTION 8.3. Stockholders' Approvals. The Company shall, as promptly as
practicable, submit this Agreement and the transactions contemplated hereby for
the approval of its stockholders at a meeting of stockholders (the "Stockholders
Meeting") and, subject to the fiduciary duties of the Board of Directors of the
Company under applicable law, shall use its reasonable best efforts to obtain
stockholder approval and adoption (the "Stockholders' Approval") of this
Agreement and the transactions contemplated hereby. The Stockholders Meeting
shall be held as soon as practicable following the date upon which the Company
has cleared all comments, if any, from the SEC with respect to the Proxy
Statement. Subject to the fiduciary duties of the Board of Directors of the
Company under applicable law, the Company shall, through its Board of Directors,
recommend to its stockholders approval of this Agreement and the transactions
contemplated by this Agreement.
SECTION 8.4. Expenses and Fees.
(a) Except as provided in Section 8.4(b), all costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses.
(b) The Company agrees to pay to Parent a fee equal to $6,600,000
(i) if the Company terminates this Agreement pursuant to clause (iv)
or (v) of Section 10.1(a);
(ii) if (A) Parent terminates this Agreement pursuant to clause (iv)
of Section 10.1(b) and (B) one or more of the following events shall occur
prior to nine months after such termination:
(1) the Company is acquired by merger or otherwise by another
person under the terms which provide for the Company and/or
its stockholders to receive consideration having a fair
value on the date of the first public announcement of such
merger or other acquisition transaction equal to or greater
than the Merger Consideration;
29
(2) the Company enters into a merger or other agreement which
contemplates the acquisition of the Company by another
person under terms which provide for the Company and/or its
stockholders to receive consideration having a fair value on
the date of the first public announcement of such merger or
other agreement equal to or greater than the Merger
Consideration;
(3) another person acquires or becomes the beneficial owner of
more than 50% of the outstanding shares of the Company
Common Stock for consideration having a fair value on the
date of such acquisition greater than the Merger
Consideration;
(4) another person acquires all or any substantial portion of
the Company's assets under terms which provide for the
Company and/or its stockholders to receive consideration
having a fair value on the date of the first public
announcement of such acquisition transaction equal to or
greater than the Merger Consideration;
(5) the Company adopts a plan of liquidation relating to all or
a substantial portion of its assets or declares a
distribution to its stockholders of all or a substantial
portion of its assets and in connection therewith the
stockholders receive consideration having a fair value on
the date of the first public announcement of such plan of
liquidation or dividend declaration equal to or greater than
the Merger Consideration.
(c) The Parent agrees to reimburse the Company for the reasonable
out-of-pocket expenses incurred by the Company in connection with this Agreement
and the transactions contemplated hereby if Parent terminates this Offer because
the debt financing source contemplated by Section 5.9 of this Agreement shall
not have provided to the Parent and to the Subsidiary the applicable debt
financing in an amount sufficient to pay the aggregate Per Share Amount for all
outstanding Shares, provided Parent shall not be obligated to make any payment
to the Company pursuant to this Section 8.4(c) in the event that Parent
reasonably determines that the Company has breached in any material respects any
of its representations, warranties or covenants contained herein.
SECTION 8.5. Agreement to Cooperate.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto shall use all reasonable efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including using its reasonable
efforts to obtain all necessary or appropriate waivers, consents and approvals
to effect all necessary filings and submissions, and including, if appropriate,
agreeing to amend any specific provisions of
30
this Agreement if the parties agree that such amendment would be beneficial to
the parties and not adversely affect the economic terms hereof.
(b) Without limitation of the foregoing, each of Parent and the Company
undertakes and agrees to file as soon as practicable after the date hereof a
Notification and Report Form under the HSR Act with the Federal Trade Commission
(the "FTC") and the Antitrust Division of the Department of justice (the
"Antitrust Division"). Each of Parent and the Company shall (i) use its best
efforts to comply as expeditiously as possible with all lawful requests of the
FTC or the Antitrust Division for additional information and documents and (ii)
not extend any waiting period under the HSR Act or enter into any agreement with
the FTC or the Antitrust Division not to consummate the transactions
contemplated by this Agreement, except with the prior consent of the other
parties hereto.
SECTION 8.6. Public Statements. The parties shall use reasonable efforts to
consult with each other prior to issuing any press release or any written public
statement with respect to this Agreement or the transactions contemplated hereby
and shall not issue any such press release or written public statement prior to
such reasonable efforts.
SECTION 8.7. Notification of Certain Matters. Each of the Company, Parent
and Subsidiary agrees to give prompt notice to each other of, and to use their
respective reasonable best efforts to prevent or promptly remedy, (a) the
occurrence or failure to occur or the impending or threatened occurrence or
failure to occur, of any event which occurrence or failure to occur would be
likely to cause any of its representations or warranties in this Agreement to be
untrue or inaccurate in any material respect at the date hereof or the Effective
Time and (b) any material failure on its part to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 8.7 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
SECTION 8.8. Directors' and Officers' Indemnification.
(a) After the Effective Time, Parent and the Surviving Corporation shall,
to the fullest extent permitted under applicable law, jointly and severally
indemnify and hold harmless, each present and former director, officer, employee
and agent of the Company or any of its subsidiaries (each, together with such
person's heirs, executors or administrators, an "Indemnified Party" and
collectively, the "Indemnified Parties") against any costs or expenses
(including attorneys fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of, relating to or in connection with any action or
omission occurring prior to the Effective Time (including, without limitation,
acts or omissions in connection with such persons serving as an officer,
director or other fiduciary in any entity if such service was at the request or
for the benefit of the Company) or arising out of or pertaining to the
transactions contemplated by this Agreement. In furtherance of the foregoing
agreement, the Surviving Corporation hereby affirms its obligations as the
surviving corporation of the Merger after the Effective Time under the
Indemnification Agreements between the Company and its officers and
31
directors which are identified in Schedule 8.8 of the Disclosure Schedule, true,
correct and complete copies of which have been made available to the Parent or
its counsel. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) Parent
and the Surviving Corporation shall pay the reasonable fees and expenses of
counsel selected by the Indemnified Parties, which counsel shall be reasonably
satisfactory to Parent and the Surviving Corporation, promptly after statements
therefor are received, (ii) Parent and the Surviving Corporation will cooperate
in the defense of any such matter, and (iii) any determination required to be
made with respect to whether an Indemnified Party's conduct complies with the
standards set forth under the BCL shall be made by outside legal counsel
acceptable to the Parent, the Surviving Corporation and the Indemnified Party;
provided, however, that neither Parent nor the Surviving Corporation shall be
liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld).
(b) For a period of three (3) years following the Effective Date, Parent
and the Surviving Corporation shall maintain in full force and effect a policy
of directors and officers liability insurance in an amount which is not less
than the coverage presently maintained by the Company and covering each
individual who served as an officer or director of the Company prior to the
Effective Time; provided, however, that Parent and the Surviving Corporation
shall not be required to pay annual premiums for such insurance in excess of Two
Hundred Percent (200%) of the amount currently paid by the Company for the
coverage presently maintained and, as a result, Parent may reduce the amount of
coverage provided under this subsection so its cost for such coverage is Two
Hundred Percent (200%) of the amount currently paid by the Company for the
coverage presently maintained.
(c) In the event the Surviving Corporation or Parent or any of their
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Surviving
Corporation or Parent shall assume the obligations set forth in this Section
8.8.
SECTION 8.9. Corrections to the Registration Statement and the Proxy
Statement. Prior to the date of approval of the Merger by the shareholders of
the Company, each of the Company, Parent and Subsidiary shall correct promptly
any information provided by it to be used in either the Registration Statement
or the Proxy Statement that shall have become false or misleading in any
material respect and shall take all steps necessary to file with the SEC and
have cleared by the SEC and delivered to the shareholders of the Company, as
necessary, any amendment or supplement to the Registration Statement or Proxy
Statement, as the case may be, so as to correct the same and to cause the Offer
to Purchase contained in the Registration Statement or Proxy Statement, as the
case may be, as so corrected to be disseminated to the stockholders of the
Company to the extent required by applicable law.
SECTION 8.10. Pension Plan Termination. The Company shall upon the request
of the Parent terminate its Employee Plans immediately prior to the time the
Company is to become a part of the Parent's control group.
32
SECTION 8.11. Fairness Opinion. The Company will make all reasonable
efforts to receive a written opinion from a nationally recognized investment
banking firm as to the fairness from a financial point of view of the
consideration to be received by the holders of Shares (other than Parent and its
subsidiaries) pursuant to each of the Offer and the Merger.
SECTION 8.12. Financing. Parent and Subsidiary shall use their best efforts
to obtain the debt financing contemplated by Section 5.9. In connection
therewith, neither Parent nor Subsidiary shall engage in any conduct or actions
intended to forestall or impede the financing nor will they assert failure to
satisfy the condition to the Offer set forth in clause (iii) of Exhibit A as the
reason for failing to consummate the Offer unless they shall have been advised
in writing by a debt financing source contemplated by Section 5.9 hereof, when
and after they have selected to arrange such financing, that such financing will
not be provided.
SECTION 8.13. Payments to Certain Executives. At the Effective Time, the
Company shall pay to Harry Maccarone and Rosemary Maniscalco the amounts due to
them under their respective letter agreements with the Company dated January 11,
1996 as amended by letter agreement dated August 13, 1997.
ARTICLE IX
CONDITIONS
SECTION 9.1. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) this Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite vote of the stockholders of the
Company under applicable law and applicable listing requirements;
(b) the waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated;
(c) no preliminary or permanent injunction or other order or decree by
any federal or state court which prevents the consummation of the Merger
shall have been issued and remain in effect (each party agreeing to use its
reasonable efforts to have any such injunction, order or decree lifted);
(d) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the
consummation of the Merger or make the consummation of the Merger illegal;
and
(e) all material governmental waivers, consents, orders and approvals
required for the consummation of the Merger and the transactions
contemplated hereby, and all material consents
33
from lenders required to consummate the Merger, shall have been obtained
and be in effect at the Effective Time.
SECTION 9.2. Conditions to Obligation of the Company to Effect the Merger.
Unless waived by the Company, the obligation of the Company to effect the Merger
shall be subject to the fulfillment at or prior to the Closing Date of the
following additional conditions:
(a) Parent and Subsidiary shall have performed in all material
respects their agreements contained in this Agreement required to be
performed on or prior to the Closing Date and the representations and
warranties of Parent and Subsidiary contained in this Agreement shall be
true and correct in all material respects on and as of the date made and on
and as of the Closing Date as if made at and as of such date, and the
Company shall have received a certificate of an officer of Parent and of
Subsidiary to that effect;
(b) the Company shall have received an opinion from Doepken Keevican &
Weiss Professional Corporation, counsel to Parent and Subsidiary, dated the
Closing Date, reasonably satisfactory to the Company and covering the due
incorporation of Parent and Subsidiary, the binding nature of this
Agreement and the effectiveness of the Merger; and
SECTION 9.3. Conditions to Obligations of Parent and Subsidiary to Effect
the Merger. Unless waived by Parent and Subsidiary, the obligations of Parent
and Subsidiary to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the additional following conditions:
(a) the Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior
to the Closing Date and the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material
respects on and as of the date made and on and as of the Closing Date as if
made at and as of such date, and Parent shall have received a Certificate
from an officer of the Company to that effect; and
(b) Parent shall have received an opinion from Olshan Grundman Frome &
Rosenzweig LLP, counsel to the Company, dated the Closing Date, reasonably
satisfactory to the Parent and covering the due incorporation of the
Company, the binding nature of the Agreement, the lack of contravention of
the Merger with the constituent documents and material contracts of the
Company, the effectiveness of the Merger and due approval of this Agreement
and the Transactions (expressly including approval of the foregoing for
purposes of Section 912 of the BCL).
(c) all material governmental waivers, consents, orders and approvals
required for the consummation of the Merger and the transactions
contemplated hereby, and all material consents from lenders and other third
parties required to consummate the Merger, shall have been obtained and be
in effect at the Effective Time.
(d) Parent shall have completed the debt financing contemplated by
Section 5.9 hereof and received the funds therefrom in amounts sufficient
to pay the Merger Consideration for all Shares outstanding.
34
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.1. Termination. This Agreement may be terminated at any time
prior to the Closing Date, whether before or after approval by the stockholders
of the Company or Parent, by mutual consent or as follows:
(a) The Company shall have the right to terminate this Agreement:
(i) if the Company's Board of Directors:
(A) reasonably determines that the representations and
warranties of Parent and Subsidiary contained in this
Agreement are not true and correct in any material
respect on and as of the date made and on and as of the
date of the Board's determination;
(B) reasonably determines that the condition set forth in
Section 9.1(e) above cannot be satisfied in all
material respects on or prior to the Closing Date;
(ii) if the Merger is not completed by December 31, 1997
otherwise than on account of delay or default on the part of the
Company or the Stockholder or any of their affiliates or associates;
(iii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of the Company or
the Stockholder or any of their affiliates or associates;
(iv) if (A) the Company receives an offer from any third party
(excluding any affiliate of the Company or any group of which any
affiliate of the Company is a member) with respect to a merger, sale
of substantial assets or other business combination involving the
Company, (B) the Company's Board of Directors determines, in good
faith and after consultation with an independent financial advisor,
that such offer would yield a higher value to the Company or its
stockholders than the Merger and (C) Parent fails, within five (5)
business days after Parent is notified of such determination and of
the terms and conditions of such offer, to make an offer which is
substantially equivalent to, or more favorable than, such offer;
(v) if (A) a tender/exchange offer is commenced by a third party
(excluding any affiliate of the Company or any group of which any
affiliate of the Company is a member) for all outstanding shares of
Company Common Stock, (B) the Company's Board of Directors determines,
in good faith and after consultation with an independent financial
advisor, that such offer would yield a higher value to the Company or
its stockholders than the Merger and (C) Parent fails, within five (5)
business days after Parent is notified of such
35
determination, to make an offer which is substantially equivalent to,
or more favorable than, such tender/exchange offer; or
(vi) if Parent (A) fails to perform in any material respect any
of its material covenants in this Agreement and (B) does not cure such
default in all material respects within thirty (30) days after notice
of such default is given to Parent by the Company.
(b) Parent shall have the right to terminate this Agreement;
(i) if Parent's Board of Directors:
(A) reasonably determines that the representations and
warranties of Company contained in this Agreement are
not true and correct in any material respect on and as
of the date made and on and as of the date of the
Board's determination;
(B) reasonably determines that the conditions set forth in
Section 9.1(e) above cannot be satisfied in all
material respects on or prior to the Closing Date;
(ii) if the Merger is not completed by December 31, 1997
otherwise than account of delay or default on the part of the Parent
or any of its affiliates or associates;
(iii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of the Parent or
any of its affiliates or associates;
(iv) if the Company (A) fails to perform in any material respect
any of its material covenants in this Agreement and (B) does not cure
such default in all material respects within 30 days after notice of
such default is given to the Company by Parent.
(c) As used in this Section 10.1, (i) "affiliate" has the meaning set forth
in Rule 144 promulgated by the SEC pursuant to the Securities Act (ii)
"associate" has the meaning set forth in Rule 12b-2 promulgated by the SEC
pursuant to the Exchange Act and (iii) "group" has the meaning set forth in
Section 13(d) of the Exchange Act and the rules and regulations thereunder.
SECTION 10.2. Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company, as provided in Section 10.1, this
Agreement shall forthwith become void and there shall be no further obligation
on the part of the Company, Parent, Subsidiary or their respective officers or
directors (except as set forth in this Section 10.2 and in Sections 8.1(b), 8.4
and 8.6 all of which shall survive the termination). Nothing in this Section
10.2 shall relieve any party from liability for any breach of this Agreement.
SECTION 10.3. Amendment. This Agreement may not be amended except by action
taken by the respective Boards of Directors of each of the parties hereto or
duly authorized
36
committee thereof and then only by an instrument in writing signed on behalf of
each of the parties hereto and in compliance with applicable law.
SECTION 10.4. Waiver. At any time prior to the Effective Time, the
parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.1. Non-Survival of Representations and Warranties. All
representations and warranties in this Agreement shall not survive the Merger,
and after the Effective Time of the Merger neither the Company, Parent,
Subsidiary or their respective officers or directors shall have any further
obligation with respect thereto. Notwithstanding the immediately preceding
sentence, the Surviving Corporation's obligations set forth in Section 8.8 shall
continue in full force and effect following the Effective Time.
SECTION 11.2. Brokers. The Company represents and warrants that no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
Parent and Subsidiary jointly and severally represent and warrant they shall pay
any fee required to be paid to any broker, finder or investment banker that may
be entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Subsidiary.
SECTION 11.3. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested) or sent via overnight
courier or facsimile to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) If to Parent or Subsidiary to:
COMFORCE Corporation
2001 Marcus Avenue
Lake Success, NY 11042
Phone No. (516) 328-7300
Fax No.: (516) 352-1953
Attention: Chief Executive Officer
37
with a copy to:
Doepken Keevican & Weiss Professional Corporation
58th Floor, USX Tower
600 Grant Street
Pittsburgh, PA 15219
Phone No. (412) 355-2960
Fax No. (412) 355-2609
Attention: David J. Hirsch, Esquire
(b) If to the Company, to:
Uniforce Services, Inc.
415 Crossways park Drive
P.O. Box 9006
Woodbury, NY 11797
Phone No. (516) 437-3300
Fax No. (516) 327-0249
Attention: Chief Executive Officer
with a copy to:
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, NY 10022
Phone No. (212) 753-7200
Fax No. (212) 755-1467
Attention: David J. Adler, Esquire
SECTION 11.4. Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement, unless a contrary intention
appears, (a) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision and (b) reference to any Article or
Section means such Article or Section hereof. No provision of this Agreement
shall be interpreted or construed against any party hereto solely because such
party or its legal representative drafted such provision.
SECTION 11.5. Miscellaneous. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof.
SECTION 11.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND
38
EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS AND TO BE
EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
SECTION 11.7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 11.8. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and except for the rights of
indemnified Parties under Section 8.8, nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
IN WITNESS WHEREOF, Parent, Subsidiary and the Company have caused this
Agreement to be signed by their respective officers as of the date first written
above.
COMFORCE CORPORATION
By: s/ James L. Paterek
---------------------------
Name: James L. Paterek
Title: Chairman
COMFORCE COLUMBUS, INC.
By: s/ James L. Paterek
---------------------------
Name: James L. Paterek
Title: Chairman
UNIFORCE SERVICES, INC.
By: s/ John Fanning
---------------------------
Name: John Fanning
Title: President
39
EXHIBIT A TO THE
AGREEMENT AND PLAN OF MERGER
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Subsidiary shall not be
required to accept for payment or pay for any Shares tendered pursuant to the
Offer, and may terminate or amend the Offer and may postpone the acceptance for
payment of and payment for Shares tendered, if (i) the Minimum Condition shall
not have been satisfied, or (ii) any applicable waiting period under the HSR Act
shall not have expired or been terminated prior to the expiration of the Offer
after 30 days from the commencement of the Offer., (iii) the debt financing
source contemplated by Section 5.9 of this Agreement shall not have provided to
the Parent and the Subsidiary the applicable debt financing in an amount
sufficient to pay the aggregate Per Share Amount for all outstanding Shares,
(iv) at any time on or after the date of this Agreement, and prior to the
acceptance for payment of Shares, any of the following conditions shall exist:
(a) there shall have been instituted or be pending any action or
proceeding brought by any governmental, administrative or regulatory
authority or agency, domestic or foreign, before any court or governmental,
administrative or regulatory authority or agency, domestic or foreign, (i)
challenging or seeking to make illegal, materially delay or otherwise
directly or indirectly restrain or prohibit or make materially more costly
the making of the Offer, the acceptance for payment of, or payment for, any
Shares by Parent, Subsidiary or any other affiliate of Parent pursuant to
the Offer or the consummation of any other Transaction, or seeking to
obtain material damages in connection with any Transaction; (ii) seeking to
prohibit or limit materially the ownership or operation by the Company,
Parent or any of their subsidiaries of all or any material portion of the
business or assets of the Company, Parent or any of their subsidiaries, or
to compel the Company, Parent or any of their subsidiaries to dispose of or
hold separate all or any material portion of the business or assets of the
Company, Parent or any of their subsidiaries, as a result of the
Transactions; (iii) seeking to impose or confirm limitations on the ability
of Parent, Subsidiary or any other affiliate of Parent to exercise
effectively full rights of ownership of any Shares, including, without
limitation, the right to vote any Shares acquired by Subsidiary pursuant to
the Offer, or otherwise on all matters properly presented to the Company's
stockholders, including, without limitation, the approval and adoption of
this Agreement and the transactions contemplated hereby; or (iv) seeking to
require divestiture by Parent, Subsidiary or any other affiliate of Parent
of any Shares;
(b) there shall have been issued any injunction, order or decree by
any court or governmental, administrative or regulatory authority or
agency, domestic or foreign, resulting from any action or proceeding
brought by any person other than any governmental, administrative or
regulatory authority or agency, domestic or foreign, which (i) restrains or
prohibits the making of the Offer or the consummation of any other
Transaction; (ii) prohibits or limits ownership or operation by the
Company, Parent or Subsidiary of all or any material portion of the
business or assets of the Company, Parent or any of their subsidiaries, in
each case as a result of the Transactions; (iii) imposes limitations on the
ability of Parent or Subsidiary to exercise effectively full rights of
ownership of any Shares, including, without limitation, the right to vote
any Shares
acquired by Subsidiary pursuant to the Offer, or otherwise on all matters
properly presented to the Company's stockholders, including, without
limitation, the approval and adoption of this Agreement and the
Transactions; (iv) requires divestiture by Parent or Subsidiary of any
Shares;
(c) there shall have been any action taken, or any statute, rule,
regulation, order or injunction enacted, entered, enforced, promulgated,
amended, issued or deemed applicable to (i) Parent, the Company or any
subsidiary or affiliate of Parent or the Company or (ii) any Transaction,
by any legislative body, court, government or governmental, administrative
or regulatory authority or agency, domestic or foreign, in the case of both
(i) and (ii) other than the routine application of the waiting period
provisions of the HSR Act to the Offer Merger, which results in any of the
consequences referred to in clauses (i) through (iv) of paragraph (b)
above;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities of the Company on the
American Stock Exchange, (ii) any decline, measured from the date hereof,
in the Standard & Poor's 500 Index or FTSE 100 Index by an amount in excess
of 20%, (iii) a currency moratorium on the exchange markets in New York
City, (iv) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (v) any limitation
(whether or not mandatory) by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign, on
the extension of credit by banks or other lending institutions which is
likely to have a material adverse effect upon any financing arranged by
Parent or Subsidiary in respect of the Offer, (vi) a commencement of a war
or armed hostilities or other national or international calamity directly
or indirectly involving the United States or (vii) in the case of any of
the foregoing existing on the date hereof, a material acceleration or
worsening thereof;
(e) (i) it shall have been publicly disclosed or Subsidiary shall have
otherwise learned that beneficial ownership (determined for the purposes of
his paragraph set forth in Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of the then outstanding Shares has been acquired by any
person, other than Parent or any of its affiliates or (ii) (A) the Board
shall have withdrawn or modified in a manner adverse to Parent or
Subsidiary the approval or recommendation of the Offer, the Merger or this
Agreement or approved or recommended any takeover proposal or any other
acquisition of Shares other than the Offer and the Merger or (B) the Board
shall have resolved to do any of the foregoing;
(f) the Company shall have failed to perform in any material respect
any material obligation or to comply in any material respect with any
material agreement or covenant of the Company to be performed or complied
with by it under this Agreement;
(g) this Agreement shall have been terminated in accordance with its
terms; or
(h) Parent, Subsidiary and the Company shall have agreed that
Subsidiary shall terminate the Offer or postpone the acceptance for payment
of or payment for Shares thereunder.
The foregoing conditions are for the sole benefit of Subsidiary and Parent
and may be asserted by Subsidiary or Parent regardless of the circumstances
giving rise to any such condition
2
or may be waived by Subsidiary or Parent in whole or in part at any time and
from time to time in their sole discretion. The failure by Parent or Subsidiary
at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right; the waiver of any such right with respect to particular facts
and other circumstances shall not be deemed a waiver with respect to any other
facts and circumstances; and each such right shall be deemed an ongoing right
that may be asserted at any time and from time to time.
3
EXHIBIT B TO THE
AGREEMENT AND PLAN OF MERGER
CERTIFICATE OF MERGER
OF
COMFORCE COLUMBUS, INC.
INTO
UNIFORCE SERVICES, INC.
(Under Section 904 of the Business Corporation Law)
It is hereby certified, upon behalf of each of the constituent corporations
herein named, as follows:
FIRST: The Board of Directors of each of the constituent corporations has
duly adopted a plan of merger setting forth the terms and conditions of the
merger of said corporations.
SECOND: The name of the domestic constituent corporation, which is to be
the surviving corporation, and which is hereinafter sometimes referred to as the
"surviving constituent corporation," is Uniforce Services, Inc. The date upon
which its certificate of incorporation was filed by the Department of State is
January 11, 1984 under the name of UTPI Corp.
THIRD: The name of the domestic constituent corporation, which is being
merged into the surviving constituent corporation, and which is hereinafter
sometimes referred to as the "merged constituent corporation," is COMFORCE
Columbus, Inc. The date upon which its certificate of incorporation was filed by
the Department of State is August 13, 1997.
FOURTH: As to each constituent corporation, the plan of merger sets forth
the designation and number of outstanding shares of each class and series, the
specification of the classes and series entitled to vote on the plan of merger,
and the specification of each class and series entitled to vote as a class on
the plan of merger, as follows:
Uniforce Services, Inc. has authorized (i) 10,000,000 shares of Common
Stock, $0.01 par value per share, all of which are entitled to vote, and of
which 3,033,543 shares are issued and outstanding and 2,065,248 shares were held
in treasury by Uniforce Services, Inc. and (ii) 2,000,000 shares of Preferred
Stock, $0.01 par value per share, none of which is entitled to vote, and none of
which is outstanding.
COMFORCE Columbus, Inc. has authorized 200 shares of Common Stock, $0.01
par value per share, all of which are entitled to vote and of which 200 shares
are issued and outstanding.
FIFTH: The merger herein certified was authorized in respect of the
surviving constituent corporation by vote of the holders of at least two-thirds
of all outstanding shares of the corporation entitled to vote on the plan of
merger.
SIXTH: The merger herein certified was authorized in respect of the merged
constituent corporation by the unanimous written consent of its sole
shareholder.
SEVENTH: The following is a statement of any amendments or changes in the
certificate of incorporation of the surviving constituent corporation to be
effected by the merger:
Paragraph "FOURTH" shall be amended to read as follows:
"FOURTH: The aggregate number of shares which the Corporation shall
have the authority to issue is 1,000 shares, $0.01 par value per share, all
of which are of the same class and all of which are designated as common
shares (the "Common Stock")."
Paragraph "SEVENTH" shall be amended to read as follows:
"SEVENTH: The Secretary of the State of New York is designated as the
agent of the Corporation upon whom process in any action or proceeding
against the Corporation may be served. The post office address to which the
Secretary of State shall mail a copy of any process against the Corporation
served upon him as agent of this Corporation is: Doepken Keevican & Weiss,
Professional Corporation, 58th Floor, USX Tower, 600 Grant Street,
Pittsburgh, Pennsylvania 15219, Attention: David G. Edwards, Esquire."
IN WITNESS WHEREOF, we have subscribed this document on the date set
opposite each of our names below and do hereby affirm, under the penalties of
perjury, that the statements contained therein have been examined by us and are
true and correct.
Dated: ________________, 1997
COMFORCE COLUMBUS, INC.
By:__________________________________
Title:_______________________________
Dated: _______________, 1997
UNIFORCE SERVICES, INC.
By:__________________________________
Title:_______________________________
2
APPENDIX B
SECTION 623 OF THE NEW YORK BUSINESS CORPORATION LAW
(a) A shareholder intending to enforce his right under a section of this
chapter to receive payment for his shares if the proposed corporate action
referred to therein is taken shall file with the corporation, before the meeting
of shareholders at which the action is submitted to a vote, or at such meeting
but before the vote, written objection to the action. The objection shall
include a notice of his election to dissent, his name and residence address, the
number and classes of shares as to which he dissents and a demand for payment of
the fair value of his shares if the action is taken. Such objection is not
required from any shareholder to whom the corporation did not give notice of
such meeting in accordance with this chapter or where the proposed action is
authorized by written consent of shareholders without a meeting.
(b) Within ten days after the shareholders' authorization date, which term
as used in this section means the date on which the shareholders' vote
authorizing such action was taken, or the date on which such consent without a
meeting was obtained from the requisite shareholders, the corporation shall give
written notice of such authorization or consent by registered mail to each
shareholder who filed written objection or from whom written objection was not
required, excepting any shareholder who voted for or consented in writing to the
proposed action and who thereby is deemed to have elected not to enforce his
right to receive payment for his shares.
(c) Within twenty days after the giving of notice to him, any shareholder
from whom written objection was not required and who elects to dissent shall
file with the corporation a written notice of such election, stating his name
and residence address, the number and classes of shares as to which he dissents
and a demand for payment of the fair value of his shares. Any shareholder who
elects to dissent from a merger under section 905 (Merger of subsidiary
corporation) or paragraph (c) of section 907 (Merger or consolidation of
domestic and foreign corporations) or from a share exchange under paragraph (g)
of Section 913 (Share exchanges) shall file a written notice of such election to
dissent within twenty days after the giving to him of a copy of the plan of
merger or exchange or an outline of the material features thereof under section
905 or 913.
(d) A shareholder may not dissent as to less than all of the shares, as to
which he has a right to dissent, held by him of record, that he owns
beneficially. A nominee or fiduciary may not dissent on behalf of any beneficial
owner as to less than all of the shares of such owner, as to which such nominee
or fiduciary has a right to dissent, held of record by such nominee or
fiduciary.
(e) Upon consummation of the corporate action, the shareholder shall cease
to have any of the rights of a shareholder except the right to be paid the fair
value of his shares and any other rights under this section. A notice of
election may be withdrawn by the shareholder at any time prior to his acceptance
in writing of an offer made by the corporation, as provided in paragraph (g),
but in no case later than sixty days from the date of consummation of the
corporate action except that if the corporation fails to make a timely offer, as
provided in paragraph (g), the time for withdrawing a notice of election shall
be extended until sixty days from the date an offer is made. Upon expiration of
such time, withdrawal of a notice of election shall require the written consent
of the corporation. In order to be effective, withdrawal of a notice of election
must be accompanied by the return to the corporation of any advance payment made
to the shareholder as provided in paragraph (g). If a notice of election is
withdrawn, or the corporate action is rescinded, or a court shall determine that
the shareholder is not entitled to receive payment for his shares, or the
shareholder shall otherwise lose his dissenters' rights, he shall not have the
right to receive payment for his shares and he shall be reinstated to all his
rights as a shareholder as of the consummation of the corporate action,
including any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution or, if any such rights have expired
or any such dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of the corporation, the fair value thereof in cash
as determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim.
B-1
(f) At the time of filing the notice of election to dissent or within one
month thereafter the shareholder of shares represented by certificates shall
submit the certificates representing his shares to the corporation, or to its
transfer agent, which shall forthwith note conspicuously thereon that a notice
of election has been filed and shall return the certificates to the shareholder
or other person who submitted them on his behalf. Any shareholder of shares
represented by certificates who fails to submit his certificates for such
notation as herein specified shall, at the option of the corporation exercised
by written notice to him within forty-five days from the date of filing of such
notice of election to dissent, lose his dissenter's rights unless a court, for
good cause shown, shall otherwise direct. Upon transfer of a certificate bearing
such notation, each new certificate issued therefor shall bear a similar
notation together with the name of the original dissenting holder of the shares
and a transferee shall acquire no rights in the corporation except those which
the original dissenting shareholder had at the time of transfer.
(g) Within fifteen days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within fifteen
days after the proposed corporate action is consummated, whichever is later (but
in no case later than ninety days from the shareholders' authorization date),
the corporation or, in the case of a merger or consolidation, the surviving or
new corporation, shall make a written offer by registered mail to each
shareholder who has filed such notice of election to pay for his shares at a
specified price which the corporation considers to be their fair value. Such
offer shall be accompanied by a statement setting forth the aggregate number of
shares with respect to which notices of election to dissent have been received
and the aggregate number of holders of such shares. If the corporate action has
been consummated, such offer shall also be accompanied by (1) advance payment to
each such shareholder who has submitted the certificates representing his shares
to the corporation, as provided in paragraph (f), of an amount equal to eighty
percent of the amount of such offer, or (2) as to each shareholder who has not
yet submitted his certificates a statement that advance payment to him of an
amount equal to eighty percent of the amount of such offer will be made by the
corporation promptly upon submission of his certificates. If the corporate
action has not been consummated at the time of the making of the offer, such
advance payment or statement as to advance payment shall be sent to each
shareholder entitled thereto forthwith upon consummation of the corporate
action. Every advance payment or statement as to advance payment shall include
advice to the shareholder to the effect that acceptance of such payment does not
constitute a waiver of any dissenters' rights. If the corporate action has not
been consummated upon the expiration of the ninety day period after the
shareholders' authorization date, the offer may be conditioned upon the
consummation of such action. Such offer shall be made at the same price per
share to all dissenting shareholders of the same class, or if divided into
series, of the same series and shall be accompanied by a balance sheet of the
corporation whose shares the dissenting shareholder holds as of the latest
available date, which shall not be earlier than twelve months before the making
of such offer, and a profit and loss statement or statements for not less than a
twelve-month period ended on the date of such balance sheet or, if the
corporation was not in existence throughout such twelve month period, for the
portion thereof during which it was in existence. Notwithstanding the foregoing,
the corporation shall not be required to furnish a balance sheet or profit and
loss statement or statements to any shareholder to whom such balance sheet or
profit and loss statement or statements were previously furnished, nor if in
connection with obtaining the shareholders' authorization for or consent to the
proposed corporate action the shareholders were furnished with a proxy or
information statement, which included financial statements, pursuant to
Regulation 14A or Regulation 14C of the United States Securities and Exchange
Commission. If within thirty days after the making of such offer, the
corporation making the offer and any shareholder agree upon the price to be paid
for his shares, payment therefor shall be made within sixty days after the
making of such offer or the consummation of the proposed corporate action,
whichever is later, upon the surrender of the certificates for any such shares
represented by certificates.
(h) The following procedure shall apply if the corporation fails to make
such offer within such period of fifteen days, or if it makes the offer and any
dissenting shareholder or shareholders fail to agree with it within the period
of thirty days thereafter upon the price to be paid for their shares:
(1) The corporation shall, within twenty days after the expiration of
whichever is applicable of the two periods last mentioned, institute a
special proceeding in the supreme court in the judicial district in which
the office of the corporation is located to determine the rights of
dissenting shareholders and to fix the fair value of their shares. If, in
the case of merger or consolidation, the surviving or new corporation is a
foreign corporation without an office in this
B-2
state, such proceeding shall be brought in the county where the office of
the domestic corporation, whose shares are to be valued, was located.
(2) If the corporation fails to institute such proceeding within such
period of twenty days, any dissenting shareholder may institute such
proceeding for the same purpose not later than thirty days after the
expiration of such twenty day period. If such proceeding is not instituted
within such thirty day period, all dissenter's rights shall be lost unless
the supreme court, for good cause shown, shall otherwise direct.
(3) All dissenting shareholders, except those who, as provided in
paragraph (g), have agreed with the corporation upon the price to be paid
for their shares, shall be made parties to such proceeding, which shall
have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in such proceeding upon each
dissenting shareholder who is a resident of this state in the manner
provided by law for the service of a summons, and upon each nonresident
dissenting shareholder either by registered mail and publication, or in
such other manner as is permitted by law. The jurisdiction of the court
shall be plenary and exclusive.
(4) The court shall determine whether each dissenting shareholder, as
to whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation does not
request any such determination or if the court finds that any dissenting
shareholder is so entitled, it shall proceed to fix the value of the
shares, which, for the purposes of this section, shall be the fair value as
of the close of business on the day prior to the shareholders'
authorization date. In fixing the fair value of the shares, the court shall
consider the nature of the transaction giving rise to the shareholder's
right to receive payment for shares and its effects on the corporation and
its shareholders, the concepts and methods then customary in the relevant
securities and financial markets for determining fair value of shares of a
corporation engaging in a similar transaction under comparable
circumstances and all other relevant factors. The court shall determine the
fair value of the shares without a jury and without referral to an
appraiser or referee. Upon application by the corporation or by any
shareholder who is a party to the proceeding, the court may, in its
discretion, permit pretrial disclosure, including, but not limited to,
disclosure of any expert's reports relating to the fair value of the shares
whether or not intended for use at the trial in the proceeding and
notwithstanding subdivision (d) of section 3101 of the civil practice laws
and rules.
(5) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting shareholder who is a party to the
proceeding and is entitled thereto for the value of his shares so
determined.
(6) The final order shall include an allowance for interest at such
rate as the court finds to be equitable, from the date the corporate action
was consummated to the date of payment. In determining the rate of
interest, the court shall consider all relevant factors, including the rate
of interest which the corporation would have had to pay to borrow money
during the pendency of the proceeding. If the court finds that the refusal
of any shareholder to accept the corporate offer of payment for his shares
was arbitrary, vexatious or otherwise not in good faith, no interest shall
be allowed to him.
(7) Each party to such proceeding shall bear its own costs and
expenses, including the fees and expenses of its counsel and of any experts
employed by it. Notwithstanding the foregoing, the court may, in its
discretion, apportion and assess all or any part of the costs, expenses and
fees incurred by the corporation against any or all of the dissenting
shareholders who are parties to the proceeding, including any who have
withdrawn their notices of election as provided in paragraph (e), if the
court finds that their refusal to accept the corporate offer was arbitrary,
vexatious or otherwise not in good faith. The court may, in its discretion,
apportion and assess all or any part of the costs, expenses and fees
incurred by any or all of the dissenting shareholders who are parties
B-3
to the proceeding against the corporation if the court finds any of the
following: (A) that the fair value of the shares as determined materially
exceeds the amount which the corporation offered to pay; (B) that no offer
or required advance payment was made by corporation; (C) that the
corporation failed to institute the special proceeding within the period
specific therefor; or (D) that the action of the corporation in complying
with its obligations as provided in this section was arbitrary, vexatious
or otherwise not in good faith. In making any determination as provided in
clause (A), the court may consider the dollar amount or the percentage, or
both, by which the fair value of the shares as determined exceeds the
corporate offer.
(8) Within sixty days after final determination of the proceeding, the
corporation shall pay to each dissenting shareholder the amount found to be
due him, upon surrender of the certificates for any such shares represented
by certificates.
(i) Shares acquired by the corporation upon the payment of the agreed value
therefor or of the amount due under the final order, as provided in this
section, shall become treasury shares or be canceled as provided in section 515
(Reacquired shares), except that, in the case of a merger or consolidation, they
may be held and disposed of as the plan of merger or consolidation may otherwise
provide.
(j) No payment shall be made to a dissenting shareholder under this section
at a time when the corporation is insolvent or when such payment would make it
insolvent. In such event, the dissenting shareholder shall, at his option:
(1) Withdraw his notice of election, which shall in such event be
deemed withdrawn with the written consent of the corporation; or
(2) Retain his status as a claimant against the corporation and, if it
is liquidated, be subordinated to the rights of creditors of the
corporation, but have rights superior to the non-dissenting shareholders,
and if it is not liquidated, retain his right to be paid for his shares,
which right the corporation shall be obliged to satisfy when the
restrictions of this paragraph do not apply.
(3) The dissenting shareholder shall exercise such option under
subparagraph (1) or (2) by written notice filed with the corporation within
thirty days after the corporation has given him written notice that payment
for his shares cannot be made because of the restrictions of this
paragraph. If the dissenting shareholder fails to exercise such option as
provided, the corporation shall exercise the option as provided, the
corporation shall exercise the option by written notice given to him within
twenty days after the expiration of such period of thirty days.
(k) The enforcement by a shareholder of his right to receive payment for
his shares in the manner provided herein shall exclude the enforcement by such
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in paragraph (e), and except that this
section shall not exclude the right of such shareholder to bring or maintain an
appropriate action to obtain relief on the ground that such corporate action
will be or is unlawful or fraudulent as to him.
(l) Except as otherwise expressly provided in this section, any notice to
be given by a corporation to a shareholder under this section shall be given in
the manner provided in section 605 (Notice of meetings of shareholders).
(m) This section shall not apply to foreign corporations except as provided
in subparagraph (e) (2) of section 907 (Merger or consolidation of domestic and
foreign corporations). (Last amended by L. 1986, Ch. 117, Section 3.)
B-4
Board of Directors
September 3, 1997
Page 1
CHARTERED CAPITAL ADVISERS, INC. APPENDIX C
145 FOURTH AVENUE
NEW YORK, NEW YORK 10003
(212) 505-9743 o (212) 533-9680 FAX
September 3, 1997
Board of Directors
Uniforce Services, Inc.
415 Crossways Park Drive
Woodbury, NY 11797
Dear Members of the Board of Directors:
We understand that Uniforce Services, Inc. ("Uniforce" or the "Company")
has signed an Agreement and Plan of Merger (the "Merger Agreement") under which
a wholly owned subsidiary of COMFORCE Corporation ("COMFORCE") proposes to make
a, tender offer (the "Offer") to acquire all the issued and outstanding common
stock of Uniforce. Under the terms of the Merger Agreement, Uniforce will merge
with a wholly owned subsidiary of COMFORCE, and will thereby become a wholly
owned subsidiary of COMFORCE. The per-share consideration (the "Consideration")
to be paid by COMFORCE under the Offer and subsequent merger will consist of:
(1) $28.00 in cash; plus (2) COMFORCE common stock equivalent in value to $4.00,
calculated based on the average closing price of COMFORCE common stock during
the three days preceding and following the announcement of the Offer.
You have requested our opinion as to the fairness of the Consideration,
from a financial point of view, to the shareholders of Uniforce. Chartered
Capital Advisers, Inc. is customarily engaged in the valuation of businesses and
their securities in connection with mergers & acquisitions, private placements,
shareholder transactions, estate and gift taxes, litigation, and for other
purposes.
In connection with rendering our opinion we have, among other things:
(1) Reviewed the Agreement and Plan of Merger, Stockholders Agreement,
Registration Rights Agreement, Noncompetition Agreement, and
Employment Agreements signed by and among Uniforce, COMFORCE, and/or
certain of the key executives of Uniforce as of August 13, 1997;
(2) Reviewed the Parent Disclosure Schedule Provided by COMFORCE Pursuant
to the Terms of the Agreement and Plan of Merger Dated as of August
13, 1997;
(3) Reviewed a draft of the proposed Registration Statement, Prospectus,
and Proxy Statement to be filed in connection with the Merger
Agreement;
(4) Analyzed financial information with respect to Uniforce, including but
not limited to unaudited financial statements for the six months ended
June 30, 1997, audited financial statements for the five years ended
December 31, 1996, and various internal management information
reports;
(5) Analyzed financial information with respect to COMFORCE, including but
not limited to unaudited financial statements for the six months ended
June 30, 1997, and audited financial statements as of and for the two
years ended December 31, 1996;
(6) Reviewed various documents filed by Uniforce with the Securities and
Exchange Commission, including the Form 8-K filed on August 19,1997,
the Forms 10-Q for the quarters ended March 31, 1997 and June 30,
1997, the Forms 10-K for the five years ended December 31, 1996, and
the Definitive Proxy filed on April 29, 1997;
(7) Reviewed various documents filed by COMFORCE with the Securities and
Exchange Commission,
C-1
Board of Directors
September 3, 1997
Page 2
including the Form 8-K filed on August 20, 1997, the Forms 10-Q for
the quarters ended March 31, 1997 and June 30, 1997, the Forms 10-K
for the two years ended December 31, 1996, the Form S-3 filed on July
11, 1997, and the Definitive Proxy filed on June 30, 1997;
(8) Visited the facilities of Uniforce and held discussions with certain
members of its management and advisers concerning the past, current,
and planned operations, financial condition, and business prospects of
Uniforce;
(9) Analyzed historical stock prices of Uniforce;
(10) Discussed with the legal advisors of Uniforce the results of their due
diligence;
(11) Considered financial data of Uniforce, and have compared that data
with similar data for publicly held companies with similar investment
characteristics to Uniforce;
(12) Considered financial data of Uniforce, and have compared that data
with similar data for certain business combinations and other
transactions that have recently been effectuated;
(13) Considered the cash flow and net asset value of Uniforce;
(14) Considered the projected financial performance of Uniforce;
(15) Considered the acquisition premium reflected in the Consideration, and
compared that premium to other relevant transactions; and
(16) Considered such other information, financial studies, and analyses as
we deemed relevant, and performed such analyses, studies, and
investigations as we deemed appropriate.
Chartered Capital Advisers, Inc. has assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by us. We have assumed that the representations of management have been
made in good faith, and that they reflect the best currently available
management judgments as to the matters covered. Our opinion is necessarily based
upon economic, market, and other conditions as in effect on, and the information
made available to us as of, the date of this letter. Our opinion is limited to
the fairness of the Consideration as of the date hereof, from a financial point
of view. We make no representations with respect to the business decision to
enter into the Merger Agreement, or any other terms of the Merger Agreement.
This opinion does not represent our opinion as to the value of Uniforce or
COMFORCE as of the date of this letter.
We understand that in considering the Merger Agreement, the Board of
Directors of Uniforce may have considered a wide range of financial and
nonfinancial factors, many of which may be beyond the scope of this letter. This
letter is not intended to substitute for the Board's exercise of its own
business judgment in reviewing the Merger Agreement.
Based upon and subject to the foregoing considerations, it is our opinion
as financial advisors that the Consideration is fair, from a financial point of
view, to the shareholders of Uniforce.
C-2
Board of Directors September 3, 1997 Page 3 The foregoing opinion is to be
used solely for the information and assistance of Uniforce. Accordingly, it is
understood and agreed that no person other than Uniforce and its officers,
directors and shareholders shall be allowed to use or rely upon this opinion.
We hereby consent to the use of this opinion in the Prospectus/Proxy and
Schedule 14D-9 Statement to be filed with the Securities and Exchange Commission
and to the use of our name in the Prospectus and Schedule 14D-9 in connection
with the matters referred to under the caption "Opinion of Financial Advisor."
Very truly yours,
CHARTERED CAPITAL ADVISERS, INC.
/s/ Ronald G. Quintero
---------------------------------
Ronald G. Quintero, CPA, CFA
Managing Director
C-3
================================================================================
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of any offer to buy any
securities in any jurisdiction in which such an offer or solicitation would be
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall under any circumstances create any implication that there has been no
change in the affairs of the Company since the date hereof.
--------------
TABLE OF CONTENTS
Page
----
Available Information .................................................... 3
Incorporation of Certain Documents by
Reference ......................................................... 3
Summary of Prospectus/Proxy Statement .................................... 5
Risk Factors ............................................................. 10
The Companies ............................................................ 15
Unaudited Pro Forma Financial Statements
of COMFORCE Corporation
and Subsidiaries ....................................................... 17
Comparative Market Prices and Dividends .................................. 28
Background and Purpose of the Transactions ............................... 30
Recommendation of the Uniforce Board
of Directors ...................................................... 32
Opinion of Financial Advisor ............................................. 32
Projected Financial Information of Uniforce .............................. 36
The Transactions ......................................................... 38
Accounting Treatment of the Offer and
the Merger ....................................................... 59
The Financing ............................................................ 59
The Special Meeting ...................................................... 61
Business of Uniforce ..................................................... 66
Selected Historical Financial Information
of Uniforce ..................................................... 72
Management's Discussion and Analysis of
Financial Condition and Results of
Operations of Uniforce .......................................... 73
Management of Uniforce ................................................... 79
Security Ownership of Certain Uniforce
Beneficial Owners
and Managements ................................................ 83
Certain Uniforce Relationships and
Related Transactions ........................................... 84
Comparison of Rights of Uniforce and
COMFORCE Stockholders .......................................... 84
Legal Matters ............................................................ 93
Experts .................................................................. 93
Index to Uniforce Financial Statements ................................... F-1
Appendix A - Agreement and Plan of Merger ................................ A-1
Appendix B - Section 623 of NYBCL ........................................ B-1
Appendix C - Fairness Opinion ............................................ C-1
--------------
================================================================================
================================================================================
1,779,000 Shares
COMFORCE
Corporation
Common Stock
Depositary:
American Stock Transfer & Trust Company
By mail or By Hand/Overnight Delivery:
40 Wall Street
New York, NY 10005
By Facsimile Transmission:
(718) 238-5001
(Telephone Confirmation)
(718) 921-8200
Any questions and requests for assistance
or additional copies of this Prospectus,
the Letter of Transmittal and the Notice of
Guaranteed Delivery may be directed to the
Information Agent. You may also contact your
local broker, dealer, commercial bank or
trust company for assistance.
Information Agent:
MacKenzie Partners
156 Fifth Avenue
New York, NY 10010
(212) 929-5500
--------------------
PROSPECTUS/PROXY STATEMENT
OCTOBER 27, 1997
--------------------
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Registrant's Bylaws effectively provide that the Registrant, to the
full extent permitted by Section 145 of the General Corporation Law of the State
of Delaware, as amended from time to time ("Section 145"), shall indemnify all
directors and officers of the Company and may indemnify all employees,
representatives and other persons as permitted pursuant thereto.
Section 145 permits a corporation to indemnify its directors and officers
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlements actually and reasonably incurred by them in connection with any
action, suit or proceeding brought by a third party if such directors or
officers acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, indemnification may be made only for expenses
actually and reasonably incurred by directors and officers in connection with
the defense or settlement of an action or suit and only with respect to a matter
as to which they shall have acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interest of the corporation, except
that no indemnification shall be made if such person shall have been adjudged
liable to the corporation, unless and only to the extent that the court in which
the action or suit was brought shall determine upon application that the
defendant officers or directors are reasonably entitled to indemnity for such
expenses despite such adjudication of liability.
COMFORCE has entered into separate indemnification agreements with each of
its outside directors which provides for indemnification of such directors to
the fullest extent permitted by law. COMFORCE may also enter into
indemnification agreements with other directors, officers or employees or with
anyone else it is permitted to indemnify under Delaware law, but has no present
intention of doing so.
COMFORCE maintains insurance against liabilities under the Securities Act
of 1933 (the "Securities Act") for the benefit of its officers and directors.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling COMFORCE pursuant
to the foregoing provisions, the Company has been informed that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
2.1 Stock Purchase Agreement dated September 11, 1995 among Spectrum
Technologies, Inc., the Company, COMFORCE Corporation, ARTRA Group
Incorporated, Peter R. Harvey, Marc L. Werner, James L. Paterek, Michael
Ferrentino and Christopher P. Franco (included as an exhibit to the
Company's Current Report on Form 8-K dated September 11, 1995 and
incorporated herein by reference).
2.2 Purchase Agreement among COMFORCE Telecom, Inc., Williams Communications
Services, Inc. and Bruce Anderson (included as an exhibit to the Company's
Current Report on Form 8-K dated March 13, 1996 and incorporated herein by
reference).
2.3 Stock Purchase Agreement effective as of May 13, 1996 among the Company,
COMFORCE Technical Services, Inc., Project Staffing Support Team, Inc.,
Raphael Rashkin and Stanley Rashkin (included as an exhibit to the
Company's Amended Quarterly Report on Form 10-Q/A for the quarter ended
March 31, 1996 filed May 16, 1996 and incorporated herein by reference).
2.4 Asset Purchase Agreement effective as of May 13, 1996 among the Company,
COMFORCE Technical Services, Inc., DataTech Technical Services, Inc.,
Raphael Rashkin and Stanley Rashkin (included as an
1
exhibit to the Company's Amended Quarterly Report on Form 10-Q/A for the
quarter ended March 31, 1996 filed May 16, 1996 and incorporated herein by
reference).
2.5 Asset Purchase Agreement effective as of May 13, 1996 among the Company,
COMFORCE Technical Services, Inc., RRA, Inc., Raphael Rashkin and Stanley
Rashkin (included as an exhibit to the Company's Amended Quarterly Report
on Form 10-Q/A for the quarter ended March 31, 1996 filed May 16, 1996 and
incorporated herein by reference).
2.6 Letter Agreement dated May 6, 1996 amending Asset Purchase Agreement
effective as of May 13, 1996 among the Company, COMFORCE Technical
Services, Inc., RRA, Inc., Raphael Rashkin and Stanley Rashkin (included as
an exhibit to the Company's Amended Quarterly Report on Form 10-Q/A for the
quarter ended March 31, 1996 filed May 16, 1996 and incorporated herein by
reference).
2.7 Letter Agreement dated April 19, 1996 among CTS Acquisition Co. I, COMFORCE
Technical Services, Inc., Project Staffing Support Team, Inc. and RRA, Inc.
(included as an exhibit to the Company's Amended Quarterly Report on Form
10-Q/A for the quarter ended March 31, 1996 filed May 16, 1996 and
incorporated herein by reference).
2.8 Agreement and Plan of Reorganization dated October 22, 1996 between AZATAR
Computer Systems, Inc. and the Company (included as an exhibit to the
Company's Current Report on Form 8-K dated November 8, 1996 and
incorporated herein by reference).
2.9 Asset Purchase Agreement dated October 25, 1996 by and among Continental
Field Services Corporation, Michael Hill, Roy Hill and COMFORCE Telecom,
Inc. (included as an exhibit to the Company's Current Report on Form 8-K
dated November 19, 1996 and incorporated herein by reference).
2.10 Asset Purchase Agreement dated October 25, 1996 between Progressive
Telecom, Inc., Beth Wilson Hill and COMFORCE Telecom, Inc. (included as an
exhibit to the Company's Current Report on Form 8-K dated November 19, 1996
and incorporated herein by reference).
2.11 Amendment to Escrow Agreement and Purchase Agreements dated November 8,
1996 by and among Continental Field Service Corporation, Progressive
Telecom, Inc., Michael Hill, Roy Hill, Beth Wilson Hill, McCarthy, Fingar,
Donovan, Drazen & Smith, and COMFORCE Telecom, Inc. (included as an exhibit
to the Company's Current Report on Form 8-K dated November 19, 1996 and
incorporated herein by reference).
2.12 Subscription Agreement dated October 28, 1996 by and among RHO Company,
Inc., J. Scott Erbe, COMFORCE Corporation and COMFORCE Technical Services,
Inc. (included as an exhibit to the Company's Current Report on Form 8-K
dated November 19, 1996 and incorporated herein by reference).
2.13 Stock Sale and Termination Agreement dated October 28, 1996 by and between
James R. Ratcliff and RHO Company, Inc. (included as an exhibit to the
Company's Current Report on Form 8-K dated November 19, 1996 and
incorporated herein by reference).
2.14 Letter Agreement dated November 4, 1996 amending Stock Sale and Termination
Agreement between RHO Company, Inc. and James R. Ratcliff (included as an
exhibit to the Company's Current Report on Form 8-K dated November 19, 1996
and incorporated herein by reference).
2.15 Agreement and Plan of Merger, dated as of August 13, 1997, by and among
COMFORCE Corporation, COMFORCE Columbus, Inc. and Uniforce Services, Inc.
(included as an exhibit to the Company's Current Report on Form 8-K dated
August 20, 1997 and incorporated herein by reference).
2.16 Stockholders Agreement, dated as of August 13, 1997, by and among COMFORCE
Corporation, COMFORCE Columbus, Inc., John Fanning and Fanning Limited
Partnership, L.P. (included as an exhibit to the Company's Current Report
on Form 8-K dated August 20, 1997 and incorporated herein by reference).
2
3.1 Restated Certificate of Incorporation of the Company, as amended by
Certificates of Amendment filed with the Delaware Secretary of State on
June 14, 1987 and February 12, 1991 (included as an exhibit to Amendment
No. 1 to the Registration Statement on Form S-1 of the Company filed with
the Commission on May 10, 1996 and incorporated herein by reference).
3.2 Certificate of Ownership (Merger) of COMFORCE Corporation into the Company
(included as an exhibit to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995 and incorporated herein by reference).
3.3 Bylaws of the Company, as amended and restated effective as of February 26,
1997 (included as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996 and incorporated herein by reference)
3.4 Designation of Rights and Preferences of Series F Preferred Stock (included
as an exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by reference).
3.5 Certificate of Ownership (Merger) of AZATAR into the Company (included as
an exhibit to the Company's Current Report on Form 8-K dated November 8,
1996 and incorporated herein by reference).
5.1 Opinion of Doepken Keevican & Weiss Professional Corporation.
8.1 Opinion of Doepken Keevican & Weiss Professional Corporation as to tax
matters (included in opinion filed as Exhibit 5.1 to this Registration
Statement).
10.1 Management Agreement dated as of April 9, 1993 between the Company and
Nitsua, Ltd. (a corporation wholly-owned by Austin Iodice, formerly Lori's
Chairman and Chief Executive Officer) (included as an exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31, 1992
and incorporated herein by reference).
10.2 Letter Agreement dated June 29, 1995, among the Company, ARTRA Group
Incorporated, James L. Paterek, Michael Ferrentino and Christopher P.
Franco (included as an exhibit to the Company's Current Report on Form 8-K
dated September 11, 1995 and incorporated herein by reference).
10.3 Amendment dated October 6, 1995 of Letter Agreement dated June 29, 1995,
among the Company, ARTRA Group Incorporated, James L. Paterek, Michael
Ferrentino and Christopher P. Franco (included as an exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31, 1995
and incorporated herein by reference).
10.4 Employment Agreement dated December 9, 1995 between the Company and Michael
Ferrentino (included as an exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1995 and incorporated herein by
reference).
10.5 Employment Agreement dated December 9, 1995 between the Company and
Christopher Franco (included as an exhibit to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995 and incorporated herein
by reference).
10.6 Assumption Agreement dated October 17, 1995 between the Company and ARTRA
GROUP Incorporated respecting ARTRA's assumption of substantially all of
the Company's pre-existing liabilities (included as an exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31, 1995
and incorporated herein by reference).
10.7 Asset Purchase Agreement dated as of April 11, 1996 among Lawrence Jewelry
Corporation, ARTRA GROUP Incorporated, the Company and Hanover Advisors,
Inc. respecting the disposition of the assets of the Company's jewelry
business (included as an exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1995 and incorporated herein by
reference).
10.8 Loan Agreement dated as of June 25, 1997 among the Company, COMFORCE
Telecom, Inc., Sumtec Corporation, COMFORCE Technical Services, Inc.,
Project Staffing Support Team, Inc., COMFORCE
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Information Technologies, Inc., Force Five, Inc., COMFORCE IT Acquisition
Corp., RHO Acquisition Company, RHO Company Incorporated, Fleet National
Bank, as bank and agent, and U.S. Bank, Washington, as bank (included as an
exhibit to Registration Statement on Form S-3 filed by the Company on July
11, 1997 and incorporated herein by reference).
10.9 Stock Option Agreement dated as of September 8, 1997 between the Company
and Michael D. Madden.*
21.1 List of Subsidiaries (included as an exhibit to the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 and incorporated herein
by reference).
23.1 Consent of Doepken Keevican & Weiss Professional Corporation (included in
the opinion filed as Exhibit 5.1 to this Registration Statement).
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Arthur Andersen L.L.P.
23.4 Consent of KPMG Peat Marwick LLP
23.5 Consent of Chartered Capital Advisers, Inc. (included in the opinion filed
as Appendix C to this Registration Statement).
24.1 Powers of Attorney (included on signature page of the Registration
Statement).
99.1 Letter of Transmittal to Tender Shares of Common Stock of Uniforce
Services, Inc.
99.2 Notice of Special Meeting of Shareholders of Uniforce Services, Inc.
99.3 Form of Proxy for Proxy Solicited by the Board of Directors of Uniforce
Services, Inc. for Special Meeting of Shareholders.
99.4 Registration Rights Agreement dated as of August 13, 1997 by and among the
Company, John Fanning and Fanning Asset Partners, L.P. a Georgia limited
partnership.
- ---------------
*Previously filed in Amendment No. 1 to the Registration Statement.
(b) Financial Statement Schedules. Set forth below is a list of the Financial
Statement Schedules included as a part of the Registration Statement. Schedules
not listed have been omitted because they are not applicable or the required
information has been included in the financial statements or notes thereto.
Schedule II - Valuation and Qualifying Accounts for the years ended
December 31, 1996, 1995 and 1994 (incorporated by reference from page F-35 of
COMFORCE's Annual Report on Form 10-K for the fiscal year ended December 31,
1996).
(c) Reports, Opinions and Appraisals. Set forth below is a list of reports,
opinions and appraisals materially relating to the transaction received from an
outside party included as a part of the Registration Statement.
Opinion of Chartered Capital Advisers, Inc. dated September 3, 1997.
Item 22. Undertakings.
The Registrant hereby undertakes:
(1) 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 Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities 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 the
initial bona fide offering thereof.
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(2) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(3) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(4) 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 Securities and
Exchange Commission such indemnification is against public policy as
expressed in the 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 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 Act and will be governed by the
final adjudication of such issue.
(5) 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 of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this 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 this
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(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 (5)(i) and (5)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(6) That, for the purpose of determining any liability under the Securities
Act of 1933, 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 the time shall be deemed to be the initial
bona fide offering thereof.
(7) 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.
(8) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(9) That every prospectus (i) that is filed pursuant to paragraph (8)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be
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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.
6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be filed on its behalf by the
undersigned, thereupon duly authorized, in the City of Lake Success, State of
New York, on October 24, 1997.
COMFORCE Corporation
(Registrant)
By: /s/ Christopher P. Franco
-----------------------------------------------
Christopher P. Franco, Chief Executive Officer
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Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ James L. Paterek* Chairman October 24, 1997
- ---------------------------------------
James L. Paterek
/s/ Christopher P. Franco* Chief Executive Officer,
- --------------------------------------- Secretary and Director October 24, 1997
Christopher P. Franco
/s/ Michael Ferrentino* President and
- --------------------------------------- Director October 24, 1997
Michael Ferrentino
/s/ Paul Grillo* Chief Financial Officer
- --------------------------------------- (Principal Financial
Paul Grillo Officer) October 24, 1997
/s/ Andrew Reiben* Director of Finance and October 24, 1997
- --------------------------------------- Chief Accounting Officer
Andrew Reiben (Principal Accounting Officer)
Director
- ---------------------------------------
Richard Barber
Director
- ---------------------------------------
Keith Goldberg
Director
- ---------------------------------------
Glen Miller
/s/ Marc Werner* Director October 24, 1997
- ---------------------------------------
Marc Werner
/s/ Michael D. Madden* Director October 24, 1997
- ---------------------------------------
Michael D. Madden
* By: /s/ Christopher P. Franco
------------------------------------
Christopher P. Franco, as
Attorney-in-Fact
8