UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
COMFORCE CORPORATION
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(Name of Registrant as Specified In Its Charter)
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COMFORCE Corporation
415 Crossways Park Drive, P.O. Box 9006
Woodbury, New York 11797
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 12, 2001
As a stockholder of COMFORCE Corporation (the "Company"), you are invited
to be present, or represented by proxy, at the Company's 2001 Annual Meeting of
Stockholders, to be held at the Garden City Hotel, 45 Seventh Street, Garden
City, New York on June 12, 2001 at 10:00 a.m., New York City time, and any
adjournments thereof, for the following purposes:
1. To elect John C. Fanning, Harry Maccarrone, Kenneth J. Daley, Rosemary
Maniscalco, Daniel Raynor and Gordon Robinett to the Board of
Directors of the Company for terms of one (1) year. See "Proposal No.
1--Election of Directors" in the Proxy Statement.
2. To ratify the appointment of KPMG LLP as the Company's independent
certified public accountants for the fiscal year ending December 30,
2001. See "Proposal No. 2--Selection of Auditors" in the Proxy
Statement.
3. To transact such other business as may properly be brought before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on May 1, 2001 are entitled
to vote at the Annual Meeting of Stockholders and all adjournments thereof.
Since a majority of the outstanding shares of the Company's Common Stock must be
represented at the meeting in order to constitute a quorum, all stockholders are
urged either to attend the meeting or to be represented by proxy.
If you do not expect to attend the meeting in person, please sign, date and
return the accompanying proxy in the enclosed reply envelope. Your vote is
important regardless of the number of shares you own. If you later find that
you can be present and you desire to vote in person or, for any other reason,
desire to revoke your proxy, you may do so at any time before the voting.
If you plan to vote at the meeting in person and your shares are held in
the name of your broker, bank or other nominee, please request from such broker,
bank or other nominee a letter to present to the judge of the election
evidencing your ownership of the shares and your authority to vote the shares at
the meeting.
By Order of the Board of Directors
Harry Maccarrone
Secretary
May 1, 2001
COMFORCE Corporation
415 Crossways Park Drive, P.O. Box 9006
Woodbury, New York 11797
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 12, 2001
PROXY STATEMENT
This Proxy Statement and the Notice of Annual Meeting and Form of Proxy
accompanying this Proxy Statement, which will be mailed on or about May 11,
2001, are furnished in connection with the solicitation by the Board of
Directors of COMFORCE Corporation, a Delaware corporation (the "Company" or
"COMFORCE"), of proxies to be voted at the annual meeting of stockholders to be
held at the Garden City Hotel, 45 Seventh Street, Garden City, New York on June
12, 2001 at 10:00 a.m., New York City time, and any adjournments thereof.
Holders of record of the Company's Common Stock at the close of business on
May 1, 2001 (the "record date") will be entitled to one vote at the meeting or
by proxy for each share then held. On the record date, there were 16,661,739
shares of Common Stock of the Company outstanding. All shares represented by
proxy will be voted in accordance with the instructions, if any, given in such
proxy. A stockholder may withhold authority to vote for the nominees by marking
the appropriate box on the accompanying proxy card, or may withhold authority to
vote for an individual nominee by drawing a line through such nominee's name in
the appropriate place on the accompanying proxy card. Unless instructions to
the contrary are given, each properly executed proxy will be voted (1) to elect
John C. Fanning, Harry Maccarrone, Kenneth J. Daley, Rosemary Maniscalco, Daniel
Raynor and Gordon Robinett as directors of the Company, (2) to ratify the
appointment of KPMG LLP as the Company's independent certified public
accountants for the fiscal year ending December 30, 2001 and (3) to transact
such other business as may properly be brought before the meeting or any
adjournment thereof.
All proxies may be revoked and execution of the accompanying proxy will not
affect a stockholder's right to revoke it by giving written notice of revocation
to the Secretary at any time before the proxy is voted or by the mailing of a
later-dated proxy. Any stockholder attending the meeting in person may vote his
or her shares even though he or she has executed and mailed a proxy. A majority
of all of the issued and outstanding shares of the Company's Common Stock is
required to be present in person or by proxy to constitute a quorum. Directors
are elected by a plurality. The favorable vote of the holders of a majority of
the shares of Common Stock represented in person or by proxy at the meeting is
required to approve or adopt the other proposals presented to the meeting.
This Proxy Statement is being solicited by the Board of Directors of the
Company. The expense of making this solicitation is being paid by the Company
and consists of the preparing, assembling and mailing of the Notice of Meeting,
Proxy Statement and Proxy, tabulating returns of proxies, and charges and
expenses of brokerage houses and other custodians, nominees or fiduciaries for
forwarding documents to stockholders. In addition to solicitation by mail,
officers and regular employees of the Company may solicit proxies by telephone,
facsimile or in person without additional compensation therefor.
PROPOSAL NO. 1--ELECTION OF DIRECTORS
Election of Directors
The Company's Bylaws provide that the Board of Directors shall consist of
from three to nine persons as fixed by the Board. Six persons have been
nominated to serve as directors to hold office until the next annual meeting or
until their successors shall be duly elected and qualified. It is intended that
proxies in the form enclosed granted by the
stockholders will be voted, unless otherwise directed, in favor of electing the
following persons as directors: John C. Fanning, Harry Maccarrone, Kenneth J.
Daley, Rosemary Maniscalco, Daniel Raynor and Gordon Robinett.
Unless you indicate to the contrary, the persons named in the accompanying
proxy will vote it for the election of the nominees named above. If, for any
reason, a nominee should be unable to serve as a director at the time of the
meeting, which is not expected to occur, the persons designated herein as
proxies may not vote for the election of any other person not named herein as a
nominee for election to the Board of Directors. See "Information Concerning
Directors and Nominees."
Recommendation
The Board of Directors recommends a vote "FOR" the election of each of the
nominees. Proxies solicited by the Board of Directors will be voted in favor of
this proposal unless a contrary vote or authority withheld is specified.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
Directors and Nominees
Set forth below is information concerning each director and nominee for
director of the Company, including his business experience during at least the
past five years, his positions with the Company and the Company's wholly-owned
subsidiary, COMFORCE Operating, Inc. ("COI"), and certain directorships held by
him. Each nominee, other than Rosemary Maniscalco, is currently a director of
the Company. There are no family relationships among any of the directors or
nominees, nor, except as hereinafter described, are there any arrangements or
understandings between any director and another person pursuant to which he was
selected as a director or nominee. Each director is to hold office until the
next annual meeting of the stockholders or until his successor has been elected
and qualified.
Name Age Current Position with the Company
- ---- --- ---------------------------------
John C. Fanning.................... 69 Chairman of the Board and Chief Executive Officer
Harry Maccarrone................... 53 Executive Vice President, Chief Financial Officer, Secretary and Director
Kenneth J. Daley................... 63 Director
Keith Goldberg..................... 38 Director (not standing for reelection)
Rosemary Maniscalco................ 60 Nominee
Daniel Raynor...................... 41 Director
Gordon Robinett.................... 65 Director
John C. Fanning has served as Chairman of the Board of Directors and Chief
Executive Officer of the Company since September 1998. From November 1997 to
September 1998 he was President of the Company's Financial Services and Human
Capital Management divisions. Mr. Fanning was the founder of Uniforce Services,
Inc. ("Uniforce") and served as its Chairman, Chief Executive Office and
President and as one of its directors from 1961, the year in which Uniforce's
first office was opened, until its acquisition by the Company in November 1997.
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.
Harry Maccarrone has served as Executive Vice President, Secretary and a
Director of the Company since September 1998 and as the Chief Financial Officer
of the Company since July 2000. Mr. Maccarrone, who joined Uniforce in December
1988 as Assistant Vice President--Finance, served as Vice President--Finance of
Uniforce from
2
May 1989 to November 1997. From May 1989 until December 1997 he also served as
Uniforce's Treasurer and Chief Financial Officer.
Kenneth J. Daley has served as a Director of the Company since June 1999.
From 1957 until his retirement in 1998, Mr. Daley held various positions with
Chase Manhattan Bank ("Chase") and, prior to its acquisition by Chase, Chemical
Banking Corporation, most recently as Division Executive responsible for middle
market business in the Long Island region. He currently serves as Director of
National Medical Health Card Systems Inc., a provider of prescription benefit
management services, a consultant to Key Span Energy and Citicorp, a trustee of
Briarcliff College and a trustee of the Long Island Catholic Charities.
Keith Goldberg has served as a Director of the Company since December 1995.
He has served as a Senior Vice President of D'Arcy Advertising since 1999.
Prior thereto, he served as a Senior Partner of J. Walter Thompson Advertising
(1994 to 1999), as an Associate Creative Director of BBDO Advertising (1994 to
1995) and as a Vice President of Young & Rubicam (1990 to 1994). Mr. Goldberg
is not standing for reelection to the Board.
Rosemary Maniscalco has served as the president of Corporate ImageMakers,
Inc., a consulting company that advises corporations on critical employment and
timely workplace issues, since 1999. Prior thereto, Ms. Maniscalco served with
Uniforce from 1981 until its 1997 merger with the Company, including as a member
of Uniforce's board of directors (from 1984 to 1997) and as its president and
chief operating officer (from 1992 to 1997). Following Uniforce's merger with
the Company, she served as the president of the Company's Staff Augmentation
division until joining Corporate ImageMakers(TM) in 1999.
Daniel Raynor has served as a Director of the Company since September 1998.
He is a Managing Partner of The Argentum Group, a private equity firm, a
position he has held since 1987. He also serves as a general partner of
Argentum's affiliated investment partnerships. Mr. Raynor also serves as a
director of Dynamic Healthcare Technologies, Inc. and NuCO\2\, Inc., both public
companies, and several privately-held companies. He received a B.S. in economics
from The Wharton School, University of Pennsylvania.
Gordon Robinett has served as a Director of the Company since September
1998. He is currently a consultant to Command Security, a security services
firm based in Poughkeepsie, New York. Mr. Robinett retired as the Vice
President--Finance and Treasurer of Uniforce in May 1989, after more than 20
years of service.
Meetings of the Board of Directors
In 2000, the Board of Directors of the Company conducted three meetings.
Each director of the Company attended at least 75% of the meetings held during
the time he served as director.
Committees
The standing committees of the Board of Directors include the Audit
Committee, the Compensation Committee and the Stock Option Committee.
The functions of the Audit Committee include recommending independent
auditors to be retained by the Company; conferring with the independent auditors
regarding their audit of the Company's financial statements; reviewing the fees
of such auditors and other terms of their engagement; considering the adequacy
of internal financial controls and the results of fiscal policies and financial
management of the Company; meeting with the Company's internal auditors;
reviewing with the independent and internal auditors the results of their
examinations; and recommending changes in financial policies or procedures as
suggested by the auditors. All members of the Audit Committee are independent
directors as defined by the rules of the American Stock Exchange. Messrs.
Daley, Goldberg and Raynor are members of the Audit Committee. In addition to
informal conferences among members, the Audit Committee held one formal meeting
during 2000 and the chairman of the Audit Committee met with the Board on three
separate occasions. All of the members of the Committee attended at least 75%
of these meetings.
3
See "Report of the Audit Committee."
The Compensation Committee has responsibility for reviewing and approving
executive and employee salaries, bonuses, non-cash incentive compensation and
benefits, exclusive of stock options and stock appreciation rights. Messrs.
Daley, Goldberg and Robinett are currently members of the Compensation
Committee. The Compensation Committee met once and acted by unanimous consent
once in 2000. All of the members of the Committee attended this meeting.
The Stock Option Committee has responsibility for administering the
Company's Long-Term Investment Plan and awarding and fixing the terms of stock
option grants. Messrs. Goldberg and Robinett are currently members of the Stock
Option Committee. The Stock Option Committee met once and acted by unanimous
consent on two occasions in 2000. All of the members of the Committee attended
this meeting.
PROPOSAL NO. 2--SELECTION OF AUDITORS
The Proposal
The Board of Directors appointed KPMG LLP, independent public accountants,
to audit the financial statements of the Company and its wholly owned
subsidiaries for the fiscal year ending December 30, 2001. This appointment is
being presented to stockholders for ratification. KPMG LLP audited the
Company's financial statements for the years ended December 31, 1999 and 2000.
Representatives of KPMG LLP will be present at the meeting and will make a
statement if they desire to do so, and will respond to appropriate questions
that may be asked by stockholders.
Audit Fees
KPMG LLP billed the Company an aggregate of $175,000 in fees for
professional services rendered in connection with the audit of the Company's
financial statements for the year ended December 31, 2000 and for the reviews of
the financial statements included in each of the Company's quarterly reports on
Form 10-Q during the year ended December 31, 2000.
Financial Information Systems Design and Implementation Fees
KPMG LLP did not bill the Company or any of its affiliates for the year
ended December 31, 2000 for professional services rendered in connection with
financial information systems design or implementation, the operation of the
Company's information system or the management of its local area network.
All Other Fees
KPMG LLP billed the Company an aggregate of $55,000 in fees for other
services rendered to the Company and its affiliates for the year ended December
31, 2000.
Recommendation
The Board of Directors recommends that the stockholders vote "FOR" the
proposal. Proxies solicited by the Board of Directors will be voted in favor of
this proposal unless a contrary vote or abstention is specified.
INFORMATION REGARDING EXECUTIVE OFFICERS
The following table sets forth certain information concerning each
individual who currently serves as an
4
executive officer or key employee of the Company, including such person's
business experience during at least the past five years and positions held with
the Company. Executive officers are appointed by the Board of Directors and
serve at the discretion of the Board. There are no family relationships among
the executive officers, nor are there any arrangements or understandings between
any executive officer and another person pursuant to which he was selected as an
officer except as may be hereinafter described.
Name Age Position
---- --- --------
John C. Fanning.......................... 69 Chairman of the Board and Chief
Executive Officer
Harry Maccarrone......................... 53 Executive Vice President, Chief Financial
Officer, Secretary and Director
Robert Ende.............................. 42 Vice President of Finance
Linda Annicelli.......................... 44 Vice President of Administration
John C. Fanning. See "Information Concerning Directors and Nominees" for
additional information concerning Mr. Fanning's business experience.
Harry Maccarrone. See "Information Concerning Directors and Nominees" for
additional information concerning Mr. Maccarrone's business experience.
Robert Ende has served as the Company's Vice President of Finance since
July 2000, having previously served as the Company's Vice President of Financial
Services from 1999 to July 2000 and as its Vice President and Controller from
the time of Uniforce's merger with the Company in 1997 until 1999. Mr. Ende
previously served as the Controller of Uniforce from 1994 to 1997. Prior to
joining Uniforce, he held various financial executive positions in the service
industry from 1983 to 1994. Mr. Ende was associated with Ernst & Young from 1980
to 1983 and is a certified public accountant.
Linda Annicelli has served as the Company's Vice President of
Administration since 1999, having previously served as the Company's General
Manager and Director of Corporate Services from 1998 to 1999 and as its General
Manager from the time of Uniforce's merger with the Company in 1997 until 1998.
Prior thereto, Ms. Annicelli held various marketing and administrative positions
with Uniforce, including as General Manager from 1992 to 1997 and as Director of
Communications and Administration from 1989 to 1992.
EXECUTIVE COMPENSATION
Director Compensation and Arrangements
During 2000, all directors received fees of $2,500 per quarter. In
addition to awards made to Messrs. Fanning and Maccarrone for their service as
executive officers of the Company, during 2000 each director received options to
purchase 10,000 shares of Common Stock under the Company's Long-Term Stock
Investment Plan. Each director is entitled to receive options to purchase
10,000 shares of the Company's Common Stock upon his or her initial election to
the Board and, annually thereafter, upon his or her reelection to the Board, at
an exercise price equal to the market price on the date of grant. All of the
options awarded to date are for terms of 10 years, subject to earlier
termination following the conclusion of a director's service as a director and
under certain other circumstances as provided in the Long-Term Stock Investment
Plan.
Executive Officer Compensation
5
The following table shows all compensation paid by the Company and its
subsidiaries for the fiscal years ended December 31, 2000, 1999 and 1998 to (1)
the person who has served as the chief executive officer of the Company
throughout 2000 (John C. Fanning) and (2) the three other persons who served as
executive officers of the Company during 2000 and whose income exceeded $100,000
(collectively, the "Named Executive Officers").
Summary Compensation Table (1)
Long Term
Annual Compensation Compensation
------------------------- ---------------------
Securities Underlying
Name and Position Year Salary ($) Bonus ($) Options/SAR's (#)
- ----------------- ---- ---------- ------------- ---------------------
John C. Fanning, 2000 129,034(2) 188,211 200,000(3)
Chairman and Chief 1999 266,250(2) - 200,000(4)
Executive Officer 1998 260,192(2) 25,000 -
Harry Maccarrone, 2000 208,950(2) 25,000 120,000(3)
Executive Vice President, 1999 183,150(2) - 110,000(5)
Chief Financial Officer 1998 170,359(2) 25,000 -
and Secretary
Robert Ende, 2000 141,539 26,000 25,000(3)
Vice President of Finance 1999 125,000 - 5,000(3)
1998 117,969 15,000 5,000(6)
Linda Annicelli, Vice 2000 123,019(2) 28,000 10,000(3)
President of 1999 110,000(2) 20,000 10,000(3)
Administration 1998 97,123(2) 20,100 5,000(6)
- ----------------
(1) Does not include perquisites and other personal benefits, securities or
other property, if any, received by
any such executive officer which did not exceed the lesser of $50,000 or
10% of such executive officer's salary and bonus for the year indicated.
(2) Includes compensation which the executive officer elected to defer under a
deferred compensation plan.
(3) Represents options to purchase the Company's Common Stock at an exercise
price of $2.00 per share.
(4) Represents options to purchase the Company's Common Stock at an exercise
price of $5.25 per share.
(5) Represents options to purchase 100,000 shares of the Company's Common Stock
at an exercise price of $5.25 per share and options to purchase 10,000
shares of the Company's Common Stock at an exercise price of $2.00 per
share.
(6) Represents options to purchase the Company's Common Stock at an exercise
price of $10.00 per share.
Option Awards and Values. In 1993, the Company adopted a Long-Term Stock
Investment Plan of the Company (the "Plan") which currently authorizes the grant
of options to purchase up to 5,000,000 shares of the Company's Common Stock to
executives, key employees and agents of the Company and its subsidiaries. All
executive
6
officers and other officers, directors and employees, as well as independent
agents and consultants, of the Company and its subsidiaries are eligible to
participate in the Plan.
The following table shows options awarded to the Named Executive Officers
in 2000 and the assumed appreciated value of such options. None of the Named
Executive Officers received stock appreciation rights in 2000.
Option Grants in Fiscal Year 2000
Potential Realizable Value
at Assumed Annual Rates of
Number of % of Total Stock Price Appreciation for
Securities Options/SARs Option Term (1)
Underlying Granted to Exercise or ----------------------------
Option/SARs Employees Base Price Expiration
Granted (#) in Fiscal Year ($/Sh) Date 5%($) 10%($)
----------- -------------- --------------- ---------- ----------- -----------
John C. Fanning 200,000 28.5 2.00 4/3/10 252,000 696,000
Harry Maccarrone 100,000 14.2 2.00 4/3/10 126,000 348,000
Harry Maccarrone 20,000 2.8 2.00 5/17/10 25,200 69,600
Robert Ende 5,000 0.7 2.00 4/3/10 6,300 17,400
Robert Ende 20,000 2.8 2.00 5/17/10 25,200 69,600
Linda Annicelli 10,000 1.4 2.00 4/3/10 12,600 34,800
- -----------------
(1) The potential realizable value shown is calculated based upon appreciation
of the Company's Common Stock issuable under options, calculated over the
full term of the options assuming 5% and 10% annual appreciation in the
value of the Common Stock from the date of grant, net of the exercise price
of the options.
The following table shows information concerning the aggregate number and
values of options held by the Named Executive Officers as of December 31, 2000.
None of the Named Executive Officers holds stock appreciation rights and none of
such persons exercised any options in 2000.
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values (1)
Number of Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares Fiscal Year End (#) Fiscal Year End ($)
Acquired Value Exercisable/ Exercisable/
Name Or Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------ --------------------- -------------------
John C. Fanning............................... - - 166,667/233,333 0/0(2)
Harry Maccarrone.............................. - - 125,000/135,000 0/0(2)
Robert Ende................................... - - 13,333/21,667 0/0(2)
Linda Annicelli............................... - - 10,833/24,167 0/0(2)
- ------------------
(1) This information is presented as of December 31, 2000.
(2) The exercise prices of these options less than the closing market price of
the Company's Common Stock on
7
December 31, 2000. See the notes to the "Summary Compensation Table" for a
description of the terms of the options listed in this table.
Employment Agreements
Effective as of January 1, 1999, the Company entered into an employment
agreement with John C. Fanning, Chairman and Chief Executive Officer of the
Company. The agreement, as in effect in 1999 and currently, provides for a
salary of $385,000 per year, subject to annual increases of the higher of 7% or
the percentage increase in the Consumer Price Index, annual incentive
compensation equal to 5% of the Company's pre-tax operating income in excess of
$2.5 million and less than $3.0 million and 3.5% of the Company's pre-tax
operating income in excess of $3.0 million, and participation in the Company's
benefit programs. The agreement was amended in March 2000 to provide for a
lower base salary ($100,000) and a higher incentive compensation. For 2000,
Mr. Fanning was entitled to receive specified percentages of the Company's
annual pre-tax operating income ranging from 10% of the income between $2
million and $4 million to 3.5% of the income in excess of $10 million. In
January 2001, the agreement was further amended to restore the original 1999
compensation terms and extend the term of the agreement to December 31, 2003.
The agreement is terminable by the Company only for "just cause," and
imposes customary non-competition and confidentiality restrictions. The
agreement provides that, if it is terminated or not extended, other than for
just cause, Mr. Fanning will be entitled to a severance payment equal to one
year's compensation (with the bonus calculated at the highest rate during the
last three years) and reimbursement for health insurance costs for three years.
Furthermore, the agreement provides that, if Mr. Fanning resigns within one year
following a "change of control," or if the agreement is terminated or not
extended within three years following a change of control, other than for just
cause, he will be entitled to receive three times the amount of the Company's
pension, deferred compensation and like contributions made by the Company on his
behalf, if any, and his annual base salary and bonus (calculated at the highest
rate during the last three years). In addition, in the event the agreement is
terminated or not extended prior to a change of control or within three years
after a change of control, other than for just cause, or if Mr. Fanning resigns
within one year after a change of control, all unvested stock options shall
immediately vest and remain exercisable throughout their original term. Mr.
Fanning is also entitled to receive a payment equal to the excise taxes payable
by him in respect of any of the termination payments described above plus a
"gross up" payment based on projected federal, state and local income taxes
payable by him due to his receipt of this additional compensation.
Effective as of January 1, 1999, the Company entered into an employment
agreement with Harry Maccarrone, who then served as the Company's Executive Vice
President and Secretary of the Company. In July 2000, Mr. Maccarrone was also
appointed to the position of Chief Financial Officer. In January 2001, the
agreement was amended to increase Mr. Maccarrone's base salary and extend the
term of the agreement to December 31, 2003. The agreement currently provides
for a salary of $250,000 per year, subject to annual increases of the higher of
7% or the percentage increase in the Consumer Price Index, and participation in
the Company's benefit programs. His agreement is in other respects identical to
Mr. Fanning's.
Compensation Committee Interlocks and Insider Participation
Keith Goldberg and Gordon Robinett serve on the Company's Compensation
Committee. There are no interlocking relationships, as defined in the
regulations of the Securities and Exchange Commission, involving any of these
individuals.
Performance Information
Set forth below in tabular form is a comparison of the total stockholder
return (annual change in share price plus dividends paid, assuming reinvestment
of dividends when paid) assuming an investment of $100 on the starting date for
the period shown for the Company, the Dow Jones Equity Market Index (formerly
known as the Dow Jones Equity Market Index, a broad equity market index which
includes the stock of companies traded on the American Stock Exchange) and the
Dow Jones Industrial Sector -- Industrial Services Index (an industry index
which includes providers
8
of staffing services).
No dividends were paid on the Company's Common Stock during the period
shown. The return shown is based on the percentage change from December 31,
1995 through December 31, 2000.
Cumulative Total Return
1995 1996 1997 1998 1999 2000
COMFORCE CORPORATION 100.00 154.05 86.49 58.11 31.08 18.92
DOW JONES TOTAL MARKET 100.00 122.02 160.84 200.88 246.53 223.68
DOW JONES INDUSTRIAL SERVICES 100.00 107.77 120.52 137.61 178.35 114.20
REPORT OF THE COMPENSATION COMMITTEE
Overview and Philosophy
The Company's executive compensation policy is to provide compensation to
employees at such levels as will enable the Company to attract and retain
employees of the highest caliber, to compensate employees in a manner best
calculated to recognize individual, group and Company performances and to seek
to align the interests of the employees with the interests of the Company's
stockholders. The Compensation Committee has responsibility for reviewing and
approving executive and employee salaries, bonuses, non-cash incentive
compensation and benefits, exclusive of stock options and stock appreciation
rights.
The Company's Stock Option Committee administers the Stock Option Plan
under which awards of incentive stock options, non-qualified stock options and
stock appreciation rights may be made to key management personnel and thereby
provide additional incentives for such persons to devote themselves to the
maximum extent practicable to the business of the Company. The Stock Option
Plan is also intended to aid in attracting persons of outstanding ability to
enter and remain in the employ of the Company. During 2000, grants were awarded
to specific key managers based on the salary ranges applicable to such officers
and employees at the time of the award and various subjective factors such as
the executive's responsibilities, individual performance and anticipated
contribution to the Company's performance. Keith Goldberg and Gordon Robinett
currently serve on the Stock Option Committee.
Compensation of Executive Officers
Salary determinations for executive officers are based upon various
subjective factors such as the executive's responsibilities, position,
qualifications, individual performance and experience. The Company did not
utilize quantitative measures of Company or individual performance for purposes
of fixing the salaries or bonuses of its executives except as described below
under "--Compensation of Chief Executive Officer."
Compensation of Chief Executive Officer
John C. Fanning was appointed as the Company's Chief Executive Officer in
October 1998. In determining the appropriate compensation for Mr. Fanning, the
Compensation Committee engaged PricewaterhouseCoopers LLP to undertake an
analysis of the salaries and incentive compensation paid to the chief executive
officers of 15 other public staffing companies with annual revenues of from $142
million to $7.2 billion. To ensure comparability, the report size-adjusted the
compensation data from these companies through regression analysis and reported
competitive practices at the 50th and 75th percentile pay levels. In considering
Mr. Fanning's compensation and the terms of his employment agreement with the
Company, the Committee considered this report and considered the size and
earnings history of the
9
Company as compared to the companies listed in the report. The Committee also
considered various subjective factors such as Mr. Fanning's responsibilities,
position, qualifications and experience. The Committee approved Mr. Fanning's
employment agreement in January 1999.
The Committee subsequently approved a restructuring of Mr. Fanning's
compensation to lower his base salary and create greater performance
incentives, and the Company and Mr. Fanning entered into an amendment to his
employment agreement to reflect these terms in March 2000. However, in the
fourth quarter of 2000, the Committee again reviewed Mr. Fanning's
compensation and concluded that the revised terms did not fairly compensate
Mr. Fanning. Accordingly, the Committee recommended that the Company enter
into an amendment to his employment agreement to restore the original
compensation terms. This amendment was executed in January 2001. See
"Executive Compensation--Employment Agreements." The decision of the
Compensation Committee to approve the restructured terms and later to restore
the original terms was based in each instance upon various subjective factors,
including Mr. Fanning's qualifications and years of experience and the
perceived benefits to the Company's shareholders of performance incentives. In
neither instance did the Committee undertake a new survey or analysis of the
compensation paid to chief executives by other similarly situated companies.
Deductibility of Compensation
Under Section 162(m) of the Code, the Internal Revenue Service will
generally deny the deduction of compensation paid to certain executives to the
extent such compensation exceeds $1 million, subject to an exception for
compensation that meets certain "performance-based" requirements. The Company
has taken actions designed to increase its opportunity to deduct all
compensation paid to highly compensated officers for federal income tax
purposes. However, no assurance can be given that such actions will ensure the
deductibility for federal income tax purposes of all executive compensation paid
by the Company. Furthermore, neither the Board nor the Compensation Committee
subscribes to the view that any executive's compensation should be limited to
the amount deductible if such executive deserves compensation in excess of $1
million and it is not reasonably practicable to compensate him or her in a
manner such that the compensation payable is fully deductible by the Company.
Compensation Committee:
Kenneth J. Daley
Keith Goldberg
Gordon Robinett
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is comprised of three independent directors and
operates under a written charter adopted by the Board of Directors in accordance
with rules of the American Stock Exchange. This charter as currently in effect
is attached as Annex A to this Proxy Statement. The Committee recommends to the
Board of Directors, subject to stockholder ratification, the selection of the
Company's independent auditors.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States of America and to issue a report thereon. The Audit Committee's
responsibility is to monitor and oversee these processes.
In this context, the Audit Committee has met and held discussions with
management and the independent auditors. Management represented to the Audit
Committee that the Company's consolidated financial statements were prepared in
accordance with accounting principles generally accepted in the United States,
and the Audit Committee has reviewed and discussed the consolidated financial
statements with management and the independent auditors. The Audit
10
Committee discussed with the independent auditors matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees).
The Company's independent auditors also provided to the Audit Committee
the written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Audit Committee
discussed with the independent auditors that firm's independence.
Based upon the Audit Committee's discussion with management and the
independent auditors and the Audit Committee's review of the representations of
management and the report of the independent auditors to the Audit Committee,
the Audit Committee recommended that the Board of Directors include the audited
consolidated financial statements in the Company's annual report on Form 10-K
for the year ended December 31, 2000 filed with the Securities and Exchange
Commission.
The Audit Committee also considered whether the provision of non-audit
services is compatible with maintaining the principal auditors' independence.
Audit Committee:
Kenneth J. Daley
Keith Goldberg
Daniel Raynor
PRINCIPAL STOCKHOLDERS
Securities Ownership of Certain Beneficial Owners and Management
The following table sets forth the number of shares and percentage of
Common Stock known to the Company (based upon representations made to it or
public filings with the Securities and Exchange Commission) to be beneficially
owned as of May 1, 2001 by (i) each person who beneficially owns more than 5% of
the shares of Common Stock, (ii) each director and executive officer of the
Company, and (iii) all directors and executive officers of the Company as a
group. Unless stated otherwise, each person so named exercises sole voting and
investment power as to the shares of Common Stock so indicated. Unless
otherwise indicated below, the business address for each person shown is 415
Crossways Park Drive, P.O. Box 9006, Woodbury, NY 11797. There were 16,661,739
shares of Common Stock issued and outstanding as of May 1, 2001.
11
Name and Address of Beneficial Owner Number(1) Percentage(1)
- ------------------------------------ --------- -------------
Management:
John C. Fanning (2)................................... 5,385,712 31.7%
Harry Maccarrone, individually (3).................... 225,552 1.4%
Harry Maccarrone, as trustee of the John C.
Fanning Irrevocable Trust (3)....................... 5,028,179 30.2%
Daniel Raynor (4)..................................... 30,000 *
Gordon Robinett (5)................................... 31,043 *
Keith Goldberg (6).................................... 50,000 *
Kenneth J. Daley (7).................................. 20,000 *
Robert Ende (8)....................................... 26,339 *
Linda Annicelli (9)................................... 22,448 *
Directors and officers as a group (10)................ 5,791,084 33.3%
Other Significant Stockholders:
ARTRA GROUP Incorporated (11)......................... 1,525,500 9.2%
500 Central Avenue
Northfield, Illinois 60093
Alberta, Canada....................................... 1,400,000 8.4%
Alberta Treasury, Room 530
Terrace Building
9515 107th Street
Edmonton, Alberta T5K 2C3
- -----------------
* Less than 1%
(1) For purposes of this table, shares are considered "beneficially owned" if
the person directly or indirectly has the sole or shared power to vote or
direct the voting of the securities or the sole or shared power to dispose
of or direct the disposition of the securities. A person is also considered
to beneficially own shares that such person has the right to acquire within
60 days, and options exercisable within such period are referred to herein
as "currently exercisable."
(2) The shares beneficially owned by Mr. Fanning, the Chairman and Chief
Executive Officer of the Company, are (i) 24,200 shares currently held of
record by him, (ii) 3,606,564 shares owned by the John C. Fanning
Irrevocable Trust, of which Mr. Fanning is the beneficiary, (iii) 1,421,615
shares held by a limited partnership of which the John C. Fanning
Irrevocable Trust is the general partner, (iv) 200,000 shares issuable upon
exercise of a currently exercisable option at an exercise price of $5.25
per share, and (v) 133,333 shares issuable upon exercise of a currently
exercisable option at an exercise price of $2.00 per share. Mr. Fanning
disclaims beneficial ownership of shares owned by the limited partnership
in excess of his proportionate interest in the limited partnership. Harry
Maccarrone holds sole voting power with respect to the shares held by the
limited partnership and the John C. Fanning Irrevocable Trust.
(3) The shares beneficially owned by Mr. Maccarrone, Executive Vice President,
Chief Financial Officer and Secretary of the Company, are (i) 10,552 shares
currently held of record by him, (ii) 30,000 shares issuable to him upon
exercise of a currently exercisable option at an exercise price of $7.00
per share, (iii) 100,000 shares issuable upon exercise of a currently
exercisable option at an exercise price of $5.25 per share, (iv) 85,000
12
shares issuable upon exercise of three currently exercisable options at an
exercise price of $2.00 per share, (v) 3,606,564 shares owned by the John
C. Fanning Irrevocable Trust, of which Mr. Maccarrone is the trustee, and
(vi) 1,421,615 shares held by a limited partnership of which the John C.
Fanning Irrevocable Trust is the general partner. Harry Maccarrone holds
sole voting power with respect to the shares held by the limited
partnership and the John C. Fanning Irrevocable Trust.
(4) The shares beneficially owned by Mr. Raynor, a Director of the Company, are
(i) 10,000 shares issuable to him upon exercise of a currently exercisable
option at an exercise price of $4.94 per share, (ii) 10,000 shares issuable
to him upon exercise of a currently exercisable option at an exercise price
of $3.13 per share and (iii) 10,000 shares issuable to him upon the
exercise of a currently exercisable option at an exercise price of $1.75
per share.
(5) The shares beneficially owned by Mr. Robinett, a Director of the Company,
are (i) 1,043 shares owned of record, (ii) 10,000 shares issuable to him
upon exercise of a currently exercisable option at an exercise price of
$4.94 per share, (iii) 10,000 shares issuable to him upon exercise of a
currently exercisable option at an exercise price of $3.13 per share and
(iv) 10,000 shares issuable to him upon the exercise of a currently
exercisable option at an exercise price of $1.75 per share.
(6) The shares beneficially owned by Mr. Goldberg, a Director of the Company,
are (i) 10,000 shares issuable to him upon exercise of a currently
exercisable option at an exercise price of $6.75 per share, (ii) 10,000
shares issuable to him upon exercise of a currently exercisable option at
an exercise price of $10.75 per share, (iii) 10,000 shares issuable to him
upon exercise of a currently exercisable option at an exercise price of
$7.625 per share, (iv) 10,000 shares issuable to him upon exercise of a
currently exercisable option at an exercise price of $3.13 per share and
(v) 10,000 shares issuable to him upon the exercise of a currently
exercisable option at an exercise price of $1.75 per share.
(7) The shares beneficially owned by Mr. Daley, a Director of the Company, are
(i) 10,000 shares issuable to him upon exercise of a currently exercisable
option at an exercise price of $3.13 per share and (ii) 10,000 shares
issuable to him upon the exercise of a currently exercisable option at an
exercise price of $1.75 per share.
(8) The shares beneficially owned by Mr. Ende, the Vice President of Finance of
the Company, are (i) 3,422 shares owned of record by him, (ii) 3,750 shares
issuable to him upon exercise of a currently exercisable option at an
exercise price of $10.00 per share, and (iii) 19,167 shares issuable to him
upon the exercise of currently exercisable options at an exercise price of
$2.00 per share.
(9) The shares beneficially owned by Ms. Annicelli, the Vice President of
Administration of the Company, are (i) 2,031 shares owned of record by her,
(ii) 3,750 shares issuable to her upon exercise of a currently exercisable
option at an exercise price of $10.00 per share, and (iii) 16,667 shares
issuable to her upon the exercise of currently exercisable options at an
exercise price of $2.00 per share.
(10) The shares shown to be beneficially owned by the directors and officers as
a group include shares held of record by them or an affiliate and shares
issuable upon the exercise of options.
(11) ARTRA Group Incorporated, a Delaware corporation, presently owns all of
such shares of record directly or through a wholly-owned subsidiary, Fill-
Mor Holding, Inc.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, certain of its officers and persons who own more than 10% of the
Company's Common Stock to file reports of ownership and changes in
13
ownership with the SEC. Such persons are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Company, the Company believes that all Section 16(a) filing requirements
applicable to persons who are officers or directors of the Company or holders of
10% of the Company's Common Stock were complied with in 2000, except that the
Named Executives and the current directors of the Company each failed to timely
file the Form 5 that became due in February 2000 to report stock options awarded
in 1999. In each instance, these option awards have previously been reported in
the Company's disclosures and Form 5s reporting these awards have since been
filed with the SEC.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Executive Compensation--Employment Agreements" for a description of
the employment agreements entered into between the Company and each of Messrs.
Fanning and Maccarrone.
STOCKHOLDERS' PROPOSALS
To be considered for inclusion in the Company's Proxy Statement for next
year's annual meeting of stockholders, stockholder proposals must be sent to the
Company, directed to the attention of Linda Annicelli, Vice President of
Administration, at COMFORCE Corporation, 415 Crossways Park Drive, P.O. Box
9006, Woodbury, New York 11797, for receipt not later than January 12, 2002.
GENERAL AND OTHER MATTERS
Management knows of no matters, other than those referred to in this Proxy
Statement, which will be presented to the meeting. However, if any other
matters properly come before the meeting or any adjournment, the persons named
in the accompanying proxy will vote it in accordance with their best judgment on
such matters.
The Company will bear the expense of preparing, printing and mailing this
Proxy Statement, as well as the cost of any required solicitation. In addition
to the solicitation of proxies by use of the mails, the Company may use regular
employees, without additional compensation, to request, by telephone or
otherwise, attendance or proxies previously solicited.
By Order of the Board of Directors
Harry Maccarrone
Secretary
Woodbury, New York
May 1, 2001
14
Annex A
COMFORCE Corporation
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I. Purpose
The primary purpose of the Audit Committee (the "Committee" or the "Audit
Committee") is to assist the Board of Directors in fulfilling its oversight
responsibilities by reviewing: financial reports and information provided by
COMFORCE Corporation (the "Corporation") to any governmental body or to the
public; the Corporation's systems of internal controls regarding finance and
accounting that the Board has established; and the Corporation's auditing,
accounting and financial reporting processes generally. The Audit Committee's
primary duties and responsibilities are to:
. Serve as an independent and objective party to monitor the Corporation's
financial reporting process and internal control system;
. Review and appraise the audit efforts of the Corporation's outside
auditors and internal auditing department; and
. Provide an open avenue of communication among the outside auditors,
financial and senior management, the internal auditing department, and
the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section IV of this Charter.
II. Composition
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors, and free
from any relationship that, in the opinion of the Board, would interfere with
the exercise of independent judgment. All members of the Committee shall have
working knowledge of basic finance and accounting practices and at least one
member of the Committee shall have accounting or related financial management
experience.
The members of the Committee shall be elected by the Board at its annual
meeting. The members shall elect a Chair by majority vote of the full Committee
membership.
III. Meetings
The Committee shall meet at least once annually, or more frequently as
circumstances dictate. The Committee shall also meet at least once annually
with management, the director of the internal auditing department and the
outside auditors in separate sessions to discuss matters that should be
discussed privately. Additionally, the Committee Chair shall meet with the
outside auditors and management on a quarterly basis to review the Corporation's
financial information.
IV. Responsibilities and Duties
The Committee shall:
15
Review of Reports
1. Review and update this Charter at least annually, as conditions
dictate.
2. Review the Company's annual financial statements and any other
financial information or reports submitted to any governmental body,
or the public, including any certification, report, opinion, or review
rendered by the outside auditors.
3. Review a summary of findings from completed internal audits and a
progress report on the proposed internal audit plan, with explanations
for any deviations from the original plan.
4. Review with financial management and the outside auditors the
quarterly report prior to its filing or prior to the release of
earnings. The Chair shall represent the Committee at these meetings.
Outside auditors
5. Recommend to the Board the selection of the outside auditors, who are
accountable to the Board and to the Audit Committee as representatives
of the shareholders. The Committee shall consider the independence
and effectiveness of the outside auditors and approve the fees and
other compensation to be paid. The Committee shall oversee the
independence of the accountants consistent with Independent Standards
Board Standard No. 1, and actively engage in a dialogue with the
outside auditors with respect to any disclosed relationships or
services that may affect the outside auditors' objectivity and
independence.
6. Evaluate the performance of the outside auditors, and make
recommendations to the Board of Directors as to the selection,
retention and replacement of the outside auditors and advise the
outside auditors that they ultimately are accountable to the Committee
and the Board of Directors.
7. Consult with the outside auditors out of the presence of management
about internal controls and the fullness and accuracy of the
Corporation's financial statements.
Financial Reporting Process
8. In consultation with the outside auditors and the internal auditors,
review the integrity of the Corporation's financial reporting
processes, both internal and external.
9. Consider the outside auditors' judgments about the quality and
appropriateness of the Corporation's accounting principles as applied
in its financial reporting.
10. Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices as
suggested by the outside auditors, management, or the internal
auditing department.
Improvements
11. Following the annual audit, review separately with each of management,
the outside auditors, and the internal auditing department any
significant difficulties encountered during the scope of the audit,
including any restriction on the scope of work or access to required
information.
12. Review with the outside auditors, the internal auditing department and
management the extent to which changes or improvements in financial or
accounting practices, as approved by the Committee, have been
implemented.
16
Proxy Statement Report
13. Include a Committee report in the Corporation's proxy statement,
including:
(a) whether the Committee has reviewed and discussed the Corporation's
audited financial statements with management;
(b) whether the Committee has discussed with the outside auditors the
matters required to be discussed by SAS 61;
(c) whether the Committee has received the written disclosures and
letter from the Corporation's outside auditors relating to their
independence as required by Independent Standards Board Standard
No. 1, and has discussed with the outside auditors their
independence; and
(d) whether the Committee has recommended to the Board of Directors,
based upon the reviews and discussions referenced to in (a), (b)
and (c), that the Corporation's audited financial statements be
included in the Corporation's Annual Report on Form 10-K.
17
PROXY
COMFORCE CORPORATION
Solicited by The Board of Directors for the
2001 Annual Meeting of Stockholders
415 Crossways Park Drive, P.O. Box 9006
Woodbury, New York 11797
The undersigned hereby appoints John C. Fanning and Harry Maccarrone as
Proxies, each with the power to appoint his substitute, to vote all of the
shares of Common Stock of COMFORCE Corporation, a Delaware corporation (the
"Company"), held of record by the undersigned on the record date, May 1, 2001,
at the 2001 Annual Meeting of Stockholders to be held on June 12, 2001, or any
adjournment thereof, as directed and, in their discretion, on all other matters
which may properly come before the meeting. The undersigned directs said
proxies to vote as specified upon the items shown on the reverse side, which are
referred to in the Notice of Annual Meeting and set forth in the Proxy
Statement.
Holders of record of the Company's Common Stock at the close of business on
the record date will be entitled to vote at the Annual Meeting. Holders of
Common Stock will be entitled to one vote for each share then held. Each
stockholder may vote in person or by proxy. All shares represented by proxy
will be voted in accordance with the instructions, if any, given in such proxy.
A stockholder may withhold authority to vote for any nominee(s) by so indicating
on the reverse side.
The votes represented by this proxy will be voted as marked by you.
However, if you properly execute and return the proxy unmarked, such votes will
be voted FOR all of the proposals. Any proxy which is not properly executed
shall be ineffective. Please mark each box with an "x".
(Continued, and to be marked, dated and signed, on the other side)
The votes represented by this proxy will be voted as marked by you. However, if
you execute and return the proxy unmarked, such votes will be voted FOR all of
the proposals. Please mark each box with an "x".
The Board of Directors Recommends a Vote "For" all proposals.
1. Election of Directors: John C. Fanning,
Harry Maccarrone, Kenneth J. Daley,
Rosemary Maniscalco, Daniel Raynor and
Gordon Robinett.
FOR Withheld Withheld for the
for all following (write the
Nominee's name in
the space below).
[_] [_] -------------------
2. Ratify the appointment of KPMG
LLP as the Company's independent When shares are held as joint
certified public accountants for the tenants, both should sign. When
fiscal year ending December 30, 2001. signing as attorney, executor,
administrator, trustee or guardian,
FOR Against Abstain please give full title as such. If
a corporation, please sign in full
[_] [_] [_] corporate name by President or
other authorized officer. If a
partnership, please sign in the
partnership name by authorized
person.
Dated:
-----------------------------------
Signature
-----------------------------------
Signature if held jointly
PLEASE SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.