SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): December 19, 2000 (November
29, 2000)
COMFORCE Corporation
COMFORCE Operating, Inc.
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(Exact Name of Registrant as Specified in its Charter)
COMFORCE Corporation: Delaware
COMFORCE Operating, Inc.: Delaware
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(State or Other Jurisdiction of Incorporation)
COMFORCE Corporation: 1-6081 COMFORCE Corporation: 36-23262248
COMFORCE Operating, Inc.: 333-43341 COMFORCE Operating, Inc.: 11-3407855
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(Commission File Number) (IRS Employer Identification No.)
415 Crossways Park Drive, P.O. Box 9006, Woodbury, New York 11797
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (516) 437-3300
Item 5. Other Events.
New Credit Facility
On December 14, 2000, COMFORCE Corporation ("COMFORCE"), COMFORCE
Operating, Inc. ("COI") and various of their operating subsidiaries (together
with COMFORCE and COI, the "Company") entered into a Loan and Security Agreement
with IBJ Whitehall Business Credit Corporation ("IBJ"), as lender and agent for
other participating lenders, to provide for a $100 million revolving credit
facility with available borrowings to be based upon a specified percentage of
the Company's eligible accounts receivable (the "IBJ Credit Facility"). At
closing, the Company borrowed $72 million and repaid the Company's existing
credit facility with Heller Financial, Inc., as lender and agent for other
participating lenders (the "Heller Credit Facility"), which was thereupon
terminated. The Heller Credit Facility, which the Company entered into in
November 1997, provided for borrowings of up to $75 million.
Borrowings under the IBJ Credit Facility bear interest, at the Company's
option, at a per annum rate equal to either (1) the base commercial lending rate
of IBJ as announced from time to time (but not less than 0.5% in excess of the
weighted average of the rates on overnight Federal funds transactions), plus a
margin ranging from 0% if the Company's leverage ratio is 4.00 or less to 1% if
the Company's leverage ratio is greater than 6.00 (which margin will be fixed at
0.75% through December 14, 2001), or (2) LIBOR plus a margin ranging from 1.75%
if the Company's leverage ratio is 4.00 or less to 2.75% if the Company's
leverage ratio is greater than 6.00 (which margin will be fixed at 2.50% through
December 14, 2001).
The obligations evidenced by the New Credit Facility are collateralized
by a pledge of the capital stock of the subsidiaries of the Company and by
security interests in substantially all of the assets of the Company. The
agreements evidencing the New Credit Facility contain various financial and
other covenants and conditions, including, but not limited to, limitations on
paying dividends, engaging in affiliate transactions, making acquisitions and
incurring additional indebtedness. The scheduled maturity date of the IBJ Credit
Facility is December 14, 2003.
The Company entered into the IBJ Credit Facility to permit it to
increase its borrowing availability, which management believes will position the
Company to better address its financial needs in the future. As discussed below
under "Amendment of Indentures," the Company obtained consents from its public
debtholders to amend its indentures to enable the Company to increase its credit
facility borrowings. The Company will incur a charge of approximately $800,000
in the fourth quarter of 2000 for the early retirement of the Heller Credit
Facility.
Amendment of Indentures
In November 2000, the Company solicited the consents of its public
debtholders to amend the Indenture dated November 26, 1997 between COI and
Wilmington Trust Company, as trustee, with respect to the 12% Senior Notes due
2007 of COI (the "Notes") and the Indenture dated November 26, 1997 between
COMFORCE and The Bank of New York, as trustee, with respect to the 15% Senior
Secured PIK Debentures due 2009 of COMFORCE (the "Debentures"). Upon obtaining
the requisite consents, the Company entered into First Supplemental Indentures
dated as of November 29, 2000 with Wilmington Trust Company and The Bank of New
York to give effect to the amendments approved. COI made
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consent payments to the holders of the Notes in the aggregate amount of $241,000
in connection with its solicitation of the consents. No consent payments were
made to the holders of Debentures. The amendments adopted in the First
Supplemental Indentures are summarized as follows:
. The amendments expand the permitted maximum amount of credit facility
debt to the greater of (1) $75 million at any time outstanding, less
the amount repaid with the proceeds of asset dispositions, or (2) 90%
of eligible accounts receivable outstanding at any time without
reduction for repayments of principal.
. The amendments liberalize the definition of "Asset Disposition" to
permit the sale of accounts receivable through one or more
securitization vehicles provided that the dollar amount outstanding
under such securitization vehicles would not, when considered together
with credit facility debt, exceed the amount of permitted debt. This
amendment is intended to allow the Company the flexibility to use
securitization financing techniques when they are more cost effective
and provide greater flexibility than other financing vehicles.
. The amendments increase the permitted amount of public company expense
reimbursements from $1.25 million to $2 million to ensure that
COMFORCE has greater access to funds to pay permitted public company
expenses in line with any growth in its business.
. The amendments permit the Company to pay income tax on forgiveness of
up to $10 million of COMFORCE indebtedness. This provision is intended
to facilitate the purchase or exchange by COMFORCE of Debentures at
less than par from willing sellers, which would result in COMFORCE
incurring tax liabilities.
. At the request of the holders of Notes, the amendments reduce the
aggregate principal amount of Notes that can be outstanding under the
Note Indenture from $200 million to $110 million. Currently, $100
million principal amount of Notes is outstanding.
. At the request of the holders of Notes, the amendments make clear that
the calculation of the Company's consolidated net income (for purposes
of determining, among other things, permitted dividends) would not be
impacted by its repurchase of Debentures, but would be reduced by the
loss incurred by the Company in connection with a consent solicitation
Shortly after adoption of these amendments, IBJ requested that further
amendments be adopted to clarify the scope of eligible accounts receivable, as
defined in the amendments of November 29, 2000, before it entered into the IBJ
Credit Facility. Accordingly, the Company entered into Second Supplemental
Indentures dated as of December 4, 2000 with Wilmington Trust Company and The
Bank of New York to adopt the clarifying amendments. These amendments did not,
in the opinion of management, substantively modify the terms of the First
Supplemental Indentures.
Settlement of Litigation
In January 1997, Austin A. Iodice, who served as the Company's chief
executive officer, president and vice chairman from 1993 to 1995 while the
Company was engaged in the jewelry business, and Anthony Giglio, who performed
the functions of the Company's chief operating officer during this same period,
filed separate suits against the Company in the Connecticut Superior Court
alleging that the
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Company had breached the terms of management agreements entered into with them
by failing to honor options awarded to them in 1993. Mr. Iodice had received
options to purchase 370,419 shares of the Company's common stock and Mr. Giglio
had received options to purchase 185,209 shares of common stock, each at an
exercise price of $1.125 per share. The Company maintained that these options
had expired in 1996, three months after the plaintiffs ceased to be employed by
the Company, as provided in the Company's Long-Term Stock Investment Plan. The
plaintiffs maintained that they were agents and not employees of the Company and
that, therefore, these options had not expired.
The plaintiffs alleged that they were entitled to an unspecified amount of
damages based upon the difference between the exercise price and highest market
price of the Company's common stock following the date of the purported exercise
of all options, plus costs and expenses. They also claimed entitlement to treble
these damages under Connecticut law. They filed offers of judgment with the
court for $6.0 million in the aggregate based upon the significantly higher
prices of the Company's common stock in 1996 and 1997, but this offer did not
limit the amount of damages they could claim at trial.
On November 30, 2000, immediately prior to the scheduled jury trial, the
parties reached settlement of these suits, the terms of which were entered with
the court. Under the terms of settlement, the Company has agreed to pay to the
plaintiffs $325,000 on January 2, 2001 and $300,000 on May 1, 2001 and to issue
to them options on January 2, 2001 to purchase 555,628 shares of common stock in
the aggregate at an exercise price of $0.6625 per share. While management of the
Company believes that the options originally issued to the plaintiff's had
expired, it believes that settlement was advisable given the exposure faced by
the Company in the event of an adverse judgment in the jury trial. The Company
will recognize a charge in the fourth quarter of 2000 of approximately $1.1
million as a result of this settlement.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
10.1 Loan and Security Agreement dated as of December 14, 2000
among COMFORCE Corporation, COMFORCE Operating, Inc. and
other named subsidiaries, and IBJ Whitehall Business Credit
Corporation, as lender and agent, and other named
participating lenders.
10.2 First Supplemental Indenture dated as of November 29, 2000
between COMFORCE Corporation and The Bank of New York, as
trustee, to Indenture dated as of November 26, 1997.
10.3 First Supplemental Indenture dated as of November 29, 2000
between COMFORCE
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Corporation and Wilmington Trust Company, as trustee, to
Indenture dated as of November 26, 1997.
10.4 Second Supplemental Indenture dated as of December 4, 2000
between COMFORCE Corporation and The Bank of New York, as
trustee, to Indenture dated as of November 26, 1997.
10.5 Second Supplemental Indenture dated as of December 4, 2000
between COMFORCE Corporation and Wilmington Trust Company,
as trustee, to Indenture dated as of November 26, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COMFORCE Corporation
By: /s/ Harry Maccarrone
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Harry Maccarrone
Executive Vice President and Chief Financial Officer
Dated: December 19, 2000
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