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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Comforce Corporation
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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 13, 2002
As a stockholder of COMFORCE Corporation (the "Company"), you are invited
to be present, or represented by proxy, at the Company's 2002 Annual Meeting of
Stockholders, to be held at the Garden City Hotel, 45 Seventh Street, Garden
City, New York on June 13, 2002 at 10:00 a.m., New York City time, and any
adjournments thereof, for the following purposes:
1. To elect John C. Fanning, Harry V. Maccarrone, Rosemary Maniscalco,
Kenneth J. Daley, 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 approve the COMFORCE Corporation 2002 Stock Option Plan. See
"Proposal No. 2 -- Stock Option Plan" in the Proxy Statement.
3. To ratify the appointment of KPMG LLP as the Company's independent
auditors for the fiscal year ending December 29, 2002. See "Proposal
No. 3--Selection of Auditors" in the Proxy Statement.
4. 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 April 30, 2002 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 V. Maccarrone
Secretary
May 6, 2002
COMFORCE CORPORATION
415 CROSSWAYS PARK DRIVE, P.O. BOX 9006
WOODBURY, NEW YORK 11797
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 13, 2002
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 10,
2002, 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
13, 2002 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
April 30, 2002 (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 16,659,271
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 V. Maccarrone, Rosemary Maniscalco, Kenneth J. Daley,
Daniel Raynor and Gordon Robinett as directors of the Company, (2) to approve
the COMFORCE Corporation 2002 Stock Option Plan, (3) to ratify the appointment
of KPMG LLP as the Company's independent auditors for the fiscal year ending
December 29, 2002 and (4) 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.
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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 V. Maccarrone, Rosemary Maniscalco, Kenneth J. Daley,
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 or her business experience during at
least the past five years, his or her positions with the Company and the
Company's wholly-owned subsidiary, COMFORCE Operating, Inc. ("COI"), and certain
directorships held by him or her. Each nominee 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 or nominee and another person pursuant to
which he or she was selected as a director or nominee. Each director is to hold
office until the next annual meeting of the stockholders or until his or her
successor has been elected and qualified.
NAME AGE CURRENT POSITION WITH THE COMPANY
- ---- --- ---------------------------------
John C. Fanning.................... 70 Chairman of the Board, Chief Executive Officer and
Director
Harry V. Maccarrone................ 54 Executive Vice President, Chief Financial Officer,
Secretary and Director
Rosemary Maniscalco................ 61 Vice Chairman of the Board and Director
Kenneth J. Daley................... 64 Director
Daniel Raynor...................... 42 Director
Gordon Robinett.................... 66 Director
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John C. Fanning has served as Chairman of the Board of Directors and Chief
Executive Officer of the Company since 1998. From 1997 to 1998 he was President
of the Company's Financial Outsourcing Services and Human Capital Management
divisions. Mr. Fanning was the founder of Uniforce Services, Inc. ("Uniforce")
and served as its Chairman, Chief Executive Officer 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 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 V. Maccarrone has served as Executive Vice President, Secretary and a
Director of the Company since 1998 and as the Chief Financial Officer of the
Company since 2000. Mr. Maccarrone, who joined Uniforce in 1988 as Assistant
Vice President--Finance, served as Vice President--Finance of Uniforce from 1989
to 1997. From 1989 until 1997 he also served as Uniforce's Treasurer and Chief
Financial Officer.
Rosemary Maniscalco has served as the Vice Chairman of the Company since
August 2001 and as a Director of the Company since June 2001. She has also
served since 1999 as the president of Corporate ImageMakers, Inc., a consulting
company that advises corporations on critical employment and timely workplace
issues. 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.
Kenneth J. Daley has served as a Director of the Company since 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 a 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.
Daniel Raynor has served as a Director of the Company since 1998. He is a
managing partner of The Argentum Group, a private equity firm, a position he has
held since 1987. Mr. Raynor also serves as a director of NuCO\\2\\, Inc., a
public company, 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 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 1989, after more than 20 years of service.
MEETINGS OF THE BOARD OF DIRECTORS
In 2001, the Board of Directors of the Company conducted five meetings.
Each director of the Company attended at least 75% of the meetings held during
the time he or she 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 and other financial
matters; 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; and
recommending
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changes in financial policies or procedures as suggested by the auditors. The
current members of the Audit Committee, Messrs. Daley, Robinett and Raynor, are
independent directors as defined by the rules of the American Stock Exchange.
The Audit Committee held four meetings during 2001 and acted by unanimous
consent on two other occasions. All of the members of the Committee attended at
least 75% of these meetings. 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 and Robinett are currently members of the Compensation Committee. The
Compensation Committee did not meet in 2001.
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. Daley and Robinett are currently members of the Stock
Option Committee. The Stock Option Committee did not meet in 2001.
PROPOSAL NO. 2 -- STOCK OPTION PLAN
BACKGROUND INFORMATION
On April 19, 2002, the Board of Directors of the Company adopted the
COMFORCE Corporation 2002 Stock Option Plan (the "Plan"), subject to its
submission to and approval by the stockholders of the Company. The Company may
also grant options under its existing Long-Term Stock Investment Plan until
December 31, 2002. The Plan authorizes the grant of options to purchase up to
1,000,000 shares of the Company's common stock to executives, directors,
employees and agents of the Company and its subsidiaries. Approval of the Plan
by the holders of a majority of the common stock of the Company who are entitled
to vote and are represented in person or by proxy at the annual meeting
(assuming a quorum exists) is necessary for the Company to issue incentive stock
options thereunder, but the Plan can otherwise be continued in effect on the
basis of the Board's adoption.
PARTICIPATION IN THE PLAN
All officers, directors (including members of the Committee), employees,
consultants and agents who, in the opinion of the Committee, have the capability
of making a substantial contribution to the success of the Company are eligible
to participate in the Plan. The Company estimates that four executive officers,
four directors (who are not executive officers), and approximately 100 other
officers and employees will be eligible to participate in the Plan. Under the
Plan, the Stock Option Committee has authority to award options to eligible
persons on the basis of the nature of their duties, their present and potential
contributions to the success of the Company and like factors. The Plan is
intended to offer participants substantial incentives to join or continue to
serve the Company and, by aligning their interests with those of shareholders,
to act in a manner calculated to maximize shareholder value. The Committee has
not determined whether it will award any options under the Plan in 2002.
SUMMARY OF THE PLAN
The following summary of the Plan is qualified by reference to the full
text of the Plan set forth in Annex A to this Proxy Statement. Generally, the
Committee or the Board may modify the standard option terms as set forth in the
Plan in any specific option agreement.
PURPOSE. The purpose of this Plan is to closely associate the interests of
directors, officers, key employees, consultants and agents of the Company with
the shareholders of the Company by reinforcing the relationship between
participants' rewards and shareholder gains; provide Plan participants with an
equity ownership in the Company
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commensurate with Company performance, as reflected in increased shareholder
value; maintain competitive compensation levels; and provide an incentive to
attract, retain and motivate Plan participants.
ADMINISTRATION. The Plan will be administered by either the full Board of
Directors or a Stock Option Committee (the "Committee") consisting of at least
two members of the Company's Board. Each member of the Committee must be a "non-
employee director" (as defined under applicable rules of the Securities and
Exchange Commission) when the Committee is acting to grant options to
participants who are also directors or officers. In addition, each member of the
Committee must be an "outside director" within the meaning of applicable
regulations under the Internal Revenue Code of 1986 (the "Code") when the
Committee is acting to grant options to the Company's chief executive officer,
one of the four most highly compensated officers (other than the chief executive
officer) or any participant who, in the judgment of the Board, is reasonably
likely to attain such status within the exercise period of any contemplated
option.
EXERCISE PRICE OF OPTIONS. The option price per share of common stock
deliverable upon the exercise of an option is the price determined by the
Committee at the time the option is granted, but cannot be less than 100% of the
fair market value of the Company's common stock on the date of grant.
TERM OF OPTIONS. The Plan provides for each option to have such term, not
in excess of 10 years, as is determined by the Committee, subject to immediate
termination in the event of the voluntary or involuntary termination of any
participant, except in the event of a termination due to (i) death, in which
event the option shall continue to be exercisable for a period of one year from
the date of death (unless the option earlier terminates) or (ii) retirement or
permanent disability, in which event the option shall continue to be exercisable
for a period of 36 months from the date of termination of the participant's
employment (unless the option earlier terminates). No awards may be made under
the Plan after April 19, 2012, the tenth anniversary of the original adoption
date of the Plan by the Board of Directors. However, all awards made under the
Plan prior to this date will remain in effect until such awards have been
satisfied or terminated in accordance with the Plan and the terms of such
awards. In addition, all options granted to a participant will terminate
immediately and be forfeited upon the termination of such participant's
employment for cause, as specified in the Plan.
VESTING OF OPTIONS. The Plan provides for each option to become
exercisable under the Plan in 25% increments beginning on the first, second,
third and fourth anniversaries of the date of grant, subject to immediate 100%
vesting upon the occurrence of a change of control as specified in the Plan.
MAXIMUM AMOUNT OF OPTION GRANTS. The maximum number of shares of common
stock that may be issued under the Plan will be 1,000,000 shares. In addition,
no participant is entitled to receive options in any calendar year to purchase
more than 350,000 shares of common stock, plus any amount of shares that were
available within this limit in any prior year for which options were not
granted. In order for options to qualify as incentive stock options under the
Code, the aggregate fair market value (determined at the time the option is
granted) of the shares issuable upon the exercise of options that vest during
each calendar year cannot exceed $100,000 per individual. Options awarded as
incentive stock options that exceed this limit would not be invalid, but would
be recharacterized as nonqualified stock options. See "--Certain Federal Income
Tax Matters," below, for a discussion of the federal income tax treatment of
incentive and nonqualified stock options.
AMENDMENT OF THE PLAN. The Board of Directors of the Company may, without
further action by the shareholders and without receiving further consideration
from the participants, amend the Plan, except that (i) no amendment of the Plan
may adversely affect any participant's rights under an option previously granted
(unless the participant consents) and (ii) shareholder approval to any amendment
must be obtained to the extent required under applicable law or necessary to
preserve any federal income tax or other benefit to the Company or the
participants.
ADOPTION OF THE PLAN. The effective date of the Plan is April 19, 2002,
the date the Board adopted the Plan. If the shareholders of the Company do not
approve the Plan by April 19, 2003, no options granted under the Plan will
constitute incentive stock options.
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CERTAIN FEDERAL INCOME TAX MATTERS. Under the Plan, the Committee may
grant either incentive stock options under section 422 of the Code or
nonqualified stock options which do not qualify for the tax treatment afforded
incentive stock options. Neither the grant of an incentive stock option nor the
grant of a nonqualified stock option will be treated as compensation to the
participant for federal income tax purposes, and neither will result in a
deduction for tax purposes for the Company. On exercise of an incentive stock
option, the participant will not recognize any compensation income, and the
Company will not be entitled to a deduction for tax purposes, although exercise
of an incentive stock option may give rise to liability under the alternative
minimum tax provisions of the Code. Generally, if the participant disposes of
shares acquired upon exercise of an incentive stock option within two years of
the grant or one year of the date of exercise, the participant will recognize
compensation income, and the Company will be entitled to a deduction for tax
purposes, in the amount of the excess of the fair market value of the shares of
common stock on the date of exercise over the option price (or the gain on sale,
if less). Otherwise, the Company will not be entitled to any deduction for tax
purposes upon disposition of such shares and the entire gain for the participant
will be treated as a capital gain. On exercise of a nonqualified stock option,
the amount by which the fair market value of the common stock on the date of
exercise exceeds the option price will generally be taxable to the participant
as compensation income and deductible for tax purposes by the Company.
RECOMMENDATION. The Board of Directors recommends that the shareholders
vote "FOR" this proposal. Proxies solicited by the Board of Directors will be
voted in favor of this proposal unless a contrary vote or abstention is
specified.
PROPOSAL NO. 3 -- 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 29, 2002. This appointment is
being presented to stockholders for ratification. KPMG LLP has audited the
Company's financial statements for the past three years.
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 $183,000 in fees for
professional services rendered in connection with the audit of the Company's
financial statements for the year ended December 30, 2001 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 30, 2001.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
KPMG LLP did not bill the Company or any of its affiliates for the year
ended December 30, 2001 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 $45,500 in fees for other
services rendered to the Company and its affiliates for the year ended December
30, 2001. This category consists of fees for audit-related services of $2,500,
and other services of $43,000. Audit-related services represent work on
registration statements filed with the U.S. Securities and Exchange Commission.
Other services represent tax services provided.
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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 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 or she was selected as an officer except as may be
hereinafter described.
Name Age Position
---- --------
John C. Fanning...................... 70 Chairman of the Board, Chief
Executive Officer and Director
Harry V. Maccarrone.................. 54 Executive Vice President, Chief
Financial Officer, Secretary and
Director
Robert F. Ende....................... 43 Senior Vice President, Finance
Linda Annicelli...................... 45 Vice President, Administration
John C. Fanning. See "Information Concerning Directors and Nominees" for
additional information concerning Mr. Fanning's business experience.
Harry V. Maccarrone. See "Information Concerning Directors and Nominees"
for additional information concerning Mr. Maccarrone's business experience.
Robert F. Ende has served as the Company's Senior Vice President, Finance
since April 2002, having previously served as the Company's Senior Vice
President, Finance from 2000 to April 2002, as its Vice President of Financial
Services from 1999 to 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, 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 2001, 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 2001 each director received options to
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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
The following table shows all compensation paid by the Company and its
subsidiaries for the fiscal years ended December 30, 2001, and December 31, 2000
and 1999 to (1) the person who has served as the chief executive officer of the
Company throughout 2001 (John C. Fanning) and (2) the three other persons who
served as executive officers of the Company during 2001 and whose income
exceeded $100,000 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE (1)
Annual Compensation Long Term
------------------- ---------
Compensation
------------
Securities Underlying
Name and Position Year Salary ($) Bonus ($) Options/SAR's (#)
----------------- ---- --------- --------- -----------------
John C. Fanning, 2001 389,877 (2) -- 10,000 (3)
Chairman and Chief 2000 129,034 (2) 188,211 200,000 (4)
Executive Officer 1999 266,250 (2) -- 200,000 (5)
Harry V. Maccarrone, 2001 249,524 (2) -- 10,000 (3)
Executive Vice President, 2000 208,950 (2) 25,000 120,000 (4)
Chief Financial Officer 1999 183,150 (2) -- 110,000 (6)
and Secretary --
Robert F. Ende, 2001 163,760 -- --
Senior Vice President, 2000 141,539 26,000 25,000 (4)
Finance 1999 125,000 -- 5,000 (4)
Linda Annicelli, 2001 137,608 (2) -- --
Vice President, 2000 123,019 (2) 28,000 10,000 (4)
Administration 1999 110,000 (2) 20,000 10,000 (4)
________________________
(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 $1.50 per share.
(4) Represents options to purchase the Company's common stock at an exercise
price of $2.00 per share.
(5) Represents options to purchase the Company's common stock at an exercise
price of $5.25 per share.
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(6) 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 $2.00 per
share.
OPTION AWARDS AND VALUES. In 1993, the Company adopted a Long-Term Stock
Investment Plan of the Company (the "1993 Plan") which currently authorizes the
grant of options to purchase up to 5,000,000 shares of the Company's common
stock to executives, key employees and agents of the Company and its
subsidiaries. All executive officers and other officers, directors and
employees, as well as independent agents and consultants, of the Company and its
subsidiaries are eligible to participate in the 1993 Plan.
The following table shows options awarded to the Named Executive Officers
in 2001 and the assumed appreciated value of such options. None of the Named
Executive Officers received stock appreciation rights in 2001.
OPTION GRANTS IN FISCAL YEAR 2001
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR OPTION
TERM (1)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTION/SARS EMPLOYEES BASE PRICE EXPIRATION
GRANTED (#) IN FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
----------- -------------- --------------- ---------- ------ ------
John C. Fanning 10,000 1.6% 1.50 6/12/2011 17,600 39,800
Harry V. Maccarrone 10,000 1.6% 1.50 6/12/2011 17,600 39,800
______________________________________________
(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 30, 2001.
None of the Named Executive Officers holds stock appreciation rights and none of
such persons exercised any options in 2001.
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............................... - - 333,333/76,667 0/0 (2)
Harry V. Maccarrone........................... - - 220,000/50,000 0/0 (2)
Robert Ende................................... - - 25,417/ 9,583 0/0 (2)
Linda Annicelli............................... - - 20,417/ 4,583 0/0 (2)
________________________________
(1) This information is presented as of December 30, 2001.
9
(2) The exercise prices of these options are less than the closing market price
of the Company's Common Stock on December 30, 2001. See the notes to the
"Summary Compensation Table" for a description of the terms of the options
listed in this table.
The following table shows additional information concerning options and
warrants issued as part of equity compensation plans. The Company had no other
equity compensation plans at December 30, 2001 that had not been approved by the
stockholders.
EQUITY COMPENSATION PLAN INFORMATION
Number of securities
remaining available
for future issuance
under equity
compensation plans
Number of securities to be Weighted-average exercise (excluding securities
issued upon exercise of price of outstanding options, reflected in
Plan Category outstanding options warrants and rights warrants and rights first column).
- ------------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans 2,638,912 $5.65 1,117,516
approved by security holders (1)
Equity compensation plans not 824,628 $2.92 0
approved by security holders (2)
Total 3,463,540 $5.00 1,117,516
___________________________________
(1) Represents options issued to officers, directors and employees under the
1993 Plan.
(2) Includes options to purchase 555,628 shares of the Company's common stock
issued to Austin Iodice and Anthony Giglio, former officer's of the Company, as
settlement of litigation concerning the continuing validity of options
originally granted to them under a plan approved by the stockholders. Although
these options were issued outside of the 1993 Plan, the Board has elected to
treat them as issued under the 1993 Plan solely for the purpose of determining
the shares remaining available for issuance under the 1993 Plan. The balance of
these securities are warrants issued as additional compensation to debtholders
for extending credit to the Company.
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, 2001 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 again amended to restore the original 1999
compensation terms and extend the term of the agreement to December 31, 2003.
In September 2001, the agreement was further amended to extend the term until
December 31, 2005 and provide for a non-accountable expense allowance of $20,000
annually. In 2001, Mr. Fanning elected to receive cash payments of less than
$5,000 in lieu of the Company's payment of medical insurance premiums on his
behalf.
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
10
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 V. 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. In September 2001, the agreement
was further amended to extend the term until December 31, 2005. 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 substantially the same as Mr. Fanning's agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Kenneth J. Daley 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 $100 on the starting date for
the period shown for the Company, the Dow Jones Total Market Index (a broad
equity market index which includes the stock of companies traded on the American
Stock Exchange) and the Dow Jones Industrial Sector -- Industrial Services Index
(an industry index which includes providers of staffing services).
No dividends were paid on the Company's Common Stock during the period
shown. The return shown is based on the percentage change from December 31,
1996 through December 30, 2001.
CUMULATIVE TOTAL RETURN ($)
1996 1997 1998 1999 2000 2001
COMFORCE CORPORATION 100.00 56.14 37.72 20.18 12.28 8.42
DOW JONES TOTAL MARKET 100.00 131.81 164.63 202.04 183.31 161.46
DOW JONES INDUSTRIAL SERVICES 100.00 111.83 127.68 165.48 105.97 107.38
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
11
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 2001, 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. Kenneth Daley 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 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. In the fourth quarter of 2000,
the Committee again reviewed Mr. Fanning's compensation and concluded that the
revised terms did not fairly compensate him in challenging market conditions.
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 decisions of the Compensation Committee to approve the
restructured term, to subsequently restore the original terms, to twice extend
the term of the agreement and to provide for a non-accountable expense
allowance were 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 no 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
12
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
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. 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 of
America, and the Audit Committee has reviewed and discussed the consolidated
financial statements with management and the independent auditors. The Audit
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 30, 2001 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
Daniel Raynor
Gordon Robinett
13
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 April 30, 2002 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 16,659,271
shares of Common Stock issued and outstanding as of April 30, 2002.
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER(1) PERCENTAGE(1)
------------------------------------ --------- -------------
MANAGEMENT:
John C. Fanning (2)................................... 5,462,379 32.0%
Harry V. Maccarrone, individually (3)................. 280,552 1.7%
Harry V. Maccarrone, as trustee of the John C.
Fanning Irrevocable Trust (3)..................... 5,028,179 30.2%
Rosemary Maniscalco (4)............................... 25,000 *
Daniel Raynor (5)..................................... 40,000 *
Gordon Robinett (6)................................... 41,043 *
Kenneth J. Daley (7).................................. 30,000 *
Robert Ende (8)....................................... 38,422 *
Linda Annicelli (9)................................... 27,031 *
Directors and officers as a group (10)................ 5,944,427 33.9%
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."
14
(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, (v) 200,000 shares issuable upon exercise of a currently
exercisable option at an exercise price of $2.00 per share, and (vi) 10,000
shares issuable to him upon the exercise of a currently exercisable option
at an exercise price of $1.50 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 V. 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) 130,000
shares issuable upon exercise of three currently exercisable options at an
exercise price of $2.00 per share, (v) 10,000 shares issuable to him upon
the exercise of a currently exercisable option at an exercise price of
$1.50 per share, (vi) 3,606,564 shares owned by the John C. Fanning
Irrevocable Trust, of which Mr. Maccarrone is the trustee, and (vii)
1,421,615 shares held by a limited partnership of which the John C. Fanning
Irrevocable Trust is the general partner. Harry V. 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 Ms. Maniscalco, the Vice Chairman and a
Director of the Company are (i) 15,000 shares currently held of record by
her, and (ii) 10,000 shares issuable to her upon the exercise of a
currently exercisable option at an exercise price of $1.50 per share.
(5) 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, (iii) 10,000 shares issuable to him upon the exercise
of a currently exercisable option at an exercise price of $1.75 per share
and (iv) 10,000 shares issuable to him upon the exercise of a currently
exercisable option at an exercise price of $1.50 per share.
(6) 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, (iv)
10,000 shares issuable to him upon the exercise of a currently exercisable
option at an exercise price of $1.75 per share, and (iv) 10,000 shares
issuable to him upon the exercise of a currently exercisable option at an
exercise price of $1.50 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, (ii) 10,000 shares issuable
to him upon the exercise of a currently exercisable option at an exercise
price of $1.75 per share, and (iii) 10,000 shares issuable to him upon the
exercise of a currently exercisable option at an exercise price of $1.50
per share.
(8) The shares beneficially owned by Mr. Ende, Senior Vice President, Finance
of the Company, are (i) 3,422 shares owned of record by him, (ii) 5,000
shares issuable to him upon exercise of a currently exercisable option at
an exercise price of $10.00 per share, and (iii) 30,000 shares issuable to
him upon the exercise of currently exercisable options at an exercise price
of $2.00 per share.
15
(9) The shares beneficially owned by Ms. Annicelli, the Vice President,
Administration of the Company, are (i) 2,031 shares owned of record by her,
(ii) 5,000 shares issuable to her upon exercise of a currently exercisable
option at an exercise price of $10.00 per share, and (iii) 20,000 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 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 2001, except that the
Named Executives and the current directors of the Company (except for Rosemary
Maniscalco) each failed to timely file the Form 5 that became due in February
2001 to report stock options awarded in 2000. 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
In September 2001, the Company completed the exchange of $18.0 million
principal amount of its 15% Senior Secured PIK Debentures due 2009 (the "PIK
Debentures") for its 8% Subordinated Convertible Note due December 2, 2009 (the
"Convertible Note") in the principal amount of $8.0 million, plus $1.0 million
in cash. Fanning CPD Assets, LP, a limited partnership in which John C.
Fanning, the Company's Chairman and Chief Executive Officer, holds the principal
economic interest, was the holder of the $18.0 million PIK Debentures that were
exchanged for the Convertible Note and cash. Rosemary Maniscalco, the Vice
Chairman of the Company, is the general partner of this limited partnership. By
virtue of this position, she is the beneficial owner of the Convertible Note.
Prior to the exchange, Ms. Maniscalco on behalf of this limited partnership, the
record holder of a majority in principal amount of the PIK Debentures, consented
to the elimination of certain of the covenants in the indenture governing the
PIK Debentures.
The purpose of this transaction was to improve the Company's balance sheet
through the exchange of higher interest rate debt (15% per annum) for lower
interest rate debt (8% per annum) and elimination of $10.0 million of debt. No
other holder of PIK Debentures accepted the Company's offer of exchange and
repurchase on these terms. The Company obtained the opinion of an independent
investment banking firm that this transaction was fair to the Company from a
financial point of view.
Ms. Maniscalco, through a company owned by her, provides consulting
services to the Company at the rate of $1,000 per day, plus expenses. During
2001, the Company paid $86,250 for such consulting services.
See "Executive Compensation--Employment Agreements" for a description of
the employment agreements entered into between the Company and each of John C.
Fanning, the Chairman and Chief Executive Officer of the Company, and Harry V.
Maccarrone, the Executive Vice President of the Company.
16
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,
Administration, at COMFORCE Corporation, 415 Crossways Park Drive, P.O. Box
9006, Woodbury, New York 11797, for receipt not later than January 13, 2003.
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 V. Maccarrone
Secretary
Woodbury, New York
May 6, 2002
17
ANNEX A
COMFORCE CORPORATION 2002 STOCK OPTION PLAN
ARTICLE 1
GENERAL
1.01 PLAN NAME.
This Plan shall be known as the COMFORCE Corporation 2002 Stock Option Plan
(the "Plan").
1.02 EFFECTIVE DATE.
The Effective date of the Plan shall be April 19, 2002; provided, however,
that if the shareholders of COMFORCE Corporation do not approve the Plan by
April 19, 2003, no Options (as defined in section 1.03) granted under the Plan
shall constitute Incentive Stock Options (as defined in clause (i) of paragraph
1.04(c)(2)).
1.03 PURPOSE.
The Plan authorizes COMFORCE Corporation (together with its subsidiaries,
the "Company") to award options ("Options") to purchase Common Stock of the
Company ("Common Stock"). The purposes of this Plan are to provide a means
whereby the Company may: closely associate the interests of directors, officers,
key employees, consultants and agents of the Company with the shareholders of
the Company by reinforcing the relationship between participants' rewards and
shareholder gains; provide Plan participants with an equity ownership in the
Company commensurate with Company performance, as reflected in increased
shareholder value; maintain competitive compensation levels; and provide an
incentive to attract, retain and motivate Plan participants.
1.04 ADMINISTRATION.
(a) STOCK OPTION COMMITTEE. Except as further provided in this paragraph
1.04(a), the Plan shall be administered by a Stock Option Committee
("Committee") consisting of either the full Board of Directors of the Company
(the "Board of Directors") or a committee of at least two members of the Board
of Directors who shall be appointed by, and serve at the pleasure of, the Board
of Directors. If the Committee is composed of less than the full Board of
Directors, then, unless the Board of Directors authorizes and directs otherwise,
the composition of the Committee shall be controlled by the following provisions
of this paragraph 1.04(a).
(1) Each member of the Committee must be a "non-employee director"
within the meaning of Rule 16b-3, as that Rule may be amended from time to time
("Rule 16b-3"), under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), when the Committee is acting to grant Options to those
employees who are also directors or officers. Those actions which require a
Committee of non-employee directors include:
(i) selecting the directors or officers to whom Options may be
granted;
(ii) determining the timing, price, number or other terms and
conditions of, or shares subject to, each Option made to an employee who is also
a director or officer; and
(iii) interpreting the Plan or Option agreements with regard to
Options granted to a director or officer.
1
An officer or director who also has an employment status described in
clause (i), (ii) or (iii) of paragraph 1.04(a)(2), shall also be limited to a
maximum number of Options under the Plan as provided under paragraph 1.04(a)(3).
(2) Each member of the Committee must be an "outside director" within
the meaning of Treasury Regulation Sect. 1.162-27(e)(3), as that Regulation may
be amended from time to time (the "Regulation"), under the Internal Revenue Code
of 1986, as amended (the "Code"), when the Committee is acting to grant Options
to an individual who has the following employment status with the Company:
(i) the chief executive officer of the Company or an
individual acting in that capacity;
(ii) one of the four highest compensated officers (other than
the chief executive officer) of the Company; or
(iii) an individual reasonably deemed likely, in the judgment
of the Board of Directors or the Committee, to become an employee described in
clause (i) or (ii) of this paragraph 1.04(a)(2) within the exercise period of
any contemplated option.
Those actions which require a Committee of outside directors include
the same actions as is described in paragraph 1.04(a)(1) except that the
employment relationships described in clauses (i), (ii) and (iii) of this
paragraph 1.04(a)(2) shall be substituted for the references to director or
officer. In addition, the provisions of paragraph 1.04(a)(3) shall apply.
If an individual who is being considered for a grant of Options is an
officer or director and also has an employment status described in clause (i),
(ii) or (iii) of this paragraph 1.04(a)(2), the members of the Committee shall
consist of whichever of the following director categories is the more
restrictive, non-employee directors as defined in paragraph 1.04(a)(1), or of
outside directors as defined in this paragraph 1.04(a)(2).
(3) In addition to any other limitation, the Committee shall not award
to any employee described in clause (i), (ii) or (iii) of paragraph 1.04(a)(2)
Options for more than an aggregate of 350,000 shares of Common Stock under this
Plan. Further, the number of shares of Common Stock under any Options awarded to
such an employee which are thereafter canceled shall continue to count against
the maximum number of shares of Common Stock which may be awarded to that
employee. In addition, any shares of Common Stock under an Option of such an
employee which are later repriced shall be deemed to be the cancellation of the
original Option for shares of Common Stock and the grant of a new Option for
additional shares of Common Stock for purposes of determining the number of
shares of Common Stock awarded to that employee.
(b) COMMITTEE ACTION. A majority of the members of the Committee shall
constitute a quorum, and the action of a majority of the members present at a
meeting at which a quorum is present, or which is authorized in writing by all
members, shall be the action of the Committee. A member participating in a
meeting by telephone or similar communications equipment shall be deemed present
for this purpose if the member or members who are present in person and the
member participating by telephone or similar communications equipment can hear
each other.
(c) AUTHORITY OF THE COMMITTEE. The Committee shall have the power: (1) to
determine and designate in its sole and absolute discretion from time to time
those employees of the Company and nonemployees who are eligible to participate
in the Plan and to whom Options are to be granted pursuant to section 1.05;
provided, however, no Option shall be granted after April 19, 2012, the tenth
anniversary of the original adoption date of the Plan, as provided by section
1.08; (2) to authorize the granting of (i) Options provided by Article 3 which
qualify as Incentive Stock Options within the meaning of Code Section 422 (each
an "Incentive Stock Option"), provided that only employees of the Company may be
granted Incentive Stock Options, and (ii) Options provided by Article 2 which do
not qualify under Code Section 422 (each a "Nonqualified Stock Option"); (3) to
determine the number of shares awarded with each Option, subject to limitations
provided under sections 1.07 and 3.05 and paragraph 1.04(a)(3); (4) to determine
the time
2
or times and the manner when each Option shall be exercisable and the duration
of the exercise period, subject to limits provided under sections 2.04 and 3.04;
and (5) to impose limitations, restrictions and conditions upon any Option as
the Committee shall deem appropriate. The Committee may interpret the Plan,
prescribe, amend and rescind any rules and regulations necessary or appropriate
for the administration of the Plan and make other determinations and take other
action as it deems necessary or advisable. Without limiting the generality of
the foregoing sentence the Committee may, in its discretion, treat all or any
portion of any period during which a Plan participant is on military or an
approved leave of absence from the Company as a period of employment of the Plan
participant by the Company, as the case may be, for the purpose of accrual of
rights under an Option. An interpretation, determination or other action made or
taken by the Committee shall be final, binding and conclusive.
(d) INDEMNIFICATION OF COMMITTEE. In addition to other rights that they
may have as members of the Board of Directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorney's fees actually and reasonably incurred
in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any Option granted thereunder, and against all amounts paid by them in
settlement thereof or paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in the action, suit or proceeding that the Committee member's action
or failure to act constituted self-dealing, willful misconduct or recklessness;
provided that within sixty (60) days after institution of any action, suit or
proceeding a Committee member shall in writing offer to the Company the
opportunity to handle and defend the same, at the Company's own expense.
1.05. ELIGIBILITY FOR PARTICIPATION.
The Committee may select participants in the Plan from officers, directors,
employees, consultants and agents who, in the opinion of the Committee, have the
capability of making a substantial contribution to the success of the Company.
Committee members are eligible for participation. In making this selection and
in determining the form and the number of shares awarded with an Option, the
Committee shall consider any factors deemed relevant, including the individual's
functions, responsibilities, value of services to the Company and past and
potential contributions to the Company's profitability and sound growth.
1.06. TYPES OF AWARDS UNDER PLAN.
Awards under the Plan may be in the form of any one or more of the
following:
(i) Nonqualified Stock Options, as described in Article 2; or
(ii) Incentive Stock Options, as described in Article 3.
1.07. AGGREGATE LIMITATION ON AWARDS.
Shares of stock which may be issued under the Plan shall be authorized and
unissued or treasury shares of Common Stock. The maximum number of shares of
Common Stock for which Options may be issued under the Plan shall be 1,000,000
shares, subject to adjustment as provided herein. If any Option granted under
the Plan shall terminate, expire or be canceled as to any shares, new Options
may thereafter be granted under the Plan covering those shares, subject to the
limitations imposed under paragraph 1.04(a)(3).
3
1.08. TERM OF PLAN.
No Options shall be granted under the Plan after April 19, 2012; provided,
however, that the Plan and all Options under the Plan granted prior to that date
shall remain in effect until the Options have been satisfied or terminated in
accordance with the Plan and the terms of the Options.
ARTICLE 2
NONQUALIFIED STOCK OPTIONS
2.01. AWARD OF NONQUALIFIED STOCK OPTIONS.
The Committee may from time to time, and subject to the provisions of the
Plan and the other terms and conditions as the Committee may prescribe, grant to
any participant in the Plan one or more Options to purchase for cash or shares
the number of shares of Common Stock allotted by the Committee. The date a
Nonqualified Stock Option is granted shall mean the date selected by the
Committee as of which the Committee allots a specific number of shares to a
participant pursuant to the Plan.
2.02. NONQUALIFIED STOCK OPTION AGREEMENTS.
The grant of a Nonqualified Stock Option shall be evidenced by a written
Nonqualified Stock Option agreement, executed by the Company and the holder of a
Nonqualified Stock Option, stating the number of shares of Common Stock subject
to the Nonqualified Stock Option evidenced thereby, and in the form as the
Committee may from time to time determine.
2.03. NONQUALIFIED STOCK OPTION PRICE.
Except as otherwise provided herein in the case of an exchange, the option
price per share of Common Stock deliverable upon the exercise of a Nonqualified
Stock Option shall be at least 100% of the fair market value of a share of
Common Stock on the date the Option is granted. As used in this Plan, the "fair
market value of a share of Common Stock on the date the Option is granted" shall
mean (i) if shares of Common Stock are listed or admitted to trading on any
securities exchange or the Nasdaq Stock Market, the closing price, regular way,
on the last preceding full business day during which such shares have been sold
on or through such exchange or quotation system, or if no sale has taken place
within 10 days prior to the date the determination of fair market value is made,
the average of the closing bid and asked prices on the last business day ended
prior to (and within 10 days of) the date the determination of fair market value
is made; (ii) if shares of Common Stock are publicly traded but are not then
listed or admitted to trading on any securities exchange or the Nasdaq Stock
Market, the average of the closing bid and the asked prices for the shares on
the last business day ended prior to (and within 10 days of) the date the
determination of fair market value is made, as reported by a reputable quotation
source; or (iii) in any other instance, the value of the Common Stock as
determined in good faith by the Board of Directors and certified in a board
resolution. Notwithstanding the foregoing, if a Nonqualified Stock Option is
granted under this Plan in exchange for a stock option granted outside this
Plan, the per share exercise price of the Nonqualified Stock Option issued under
this Plan may, at the election of the Committee, be the same price as that of
the stock option granted outside this Plan which is being exchanged.
2.04. TERM AND EXERCISE.
Each Nonqualified Stock Option shall first be exercisable and/or become
exercisable according to the vesting schedule as is determined by the Committee
and provided in the Nonqualified Stock Option agreement. Unless the Committee
determines otherwise as provided in a Nonqualified Stock Option agreement,
Nonqualified Stock Options shall vest in 25 percent increments, with the first
25 percent increment being exercisable on or after the first anniversary of the
date of the grant and an additional remaining 25 percent increment being
exercisable on or after each subsequent anniversary date so that 100% vesting
will have occurred on the fourth anniversary of the date of grant; provided that
if
4
the participant at the date of grant is an employee of the Company, the employee
continues to be employed by the Company on each of those dates. Unless the
Committee determines otherwise as provided in a Nonqualified Stock Option
agreement, as to a participant who is an employee on the date of grant, vesting
terminates once the participant is no longer an employee. Each Nonqualified
Stock Option shall be for a term of 10 years, subject to earlier termination as
provided in section 2.07, 2.08, 2.09 or 2.10, unless the Nonqualified Stock
Option agreement expressly provides for a different term, not in excess of 10
years, and/or expressly provides that the provisions of any or all of Section
2.07, 2.08, 2.09 or 2.10 shall not apply to cause the Nonqualified Stock Option
to earlier terminate. A Nonqualified Stock Option shall not be exercisable after
the expiration of its term.
2.05. MANNER OF PAYMENT.
Except as may otherwise be permitted under the Option agreement, upon the
exercise in respect of any shares of Common Stock subject thereto, the
participant shall pay to the Company, in full, the option price for the shares
in cash or with shares of Common Stock which have been held by the participant
for at least six months or, if the Common Stock is then publicly traded, through
either the surrender of immediately exercisable options having a value at the
time of exercise equal to the aggregate exercise price of the Options to be
exercised or another appropriate method of cashless exercise, as may be
determined by the Committee.
2.06. CERTIFICATES.
As soon as practicable after receipt of payment for shares of Common Stock
purchased upon the exercise of a Nonqualified Stock Option, the Company shall
deliver a certificate or certificates for those shares of Common Stock to the
participant. The participant shall become a shareholder of the Company with
respect to Common Stock represented by share certificates so issued and shall be
fully entitled to receive dividends, to vote and to exercise all other rights of
a shareholder.
2.07. DEATH OF PARTICIPANT.
(a) Unless modified pursuant to Section 2.04, upon the death of the
participant, any rights to the extent exercisable on the date of death may be
exercised by the participant's estate, or by a person who acquires the right to
exercise the Nonqualified Stock Option by bequest or inheritance or by reason of
the death of the participant, provided that the exercise occurs within both the
remaining effective term of the Nonqualified Stock Option and one year after the
participant's death.
(b) If the participant is an employee, the provisions of this Section
shall apply notwithstanding the fact that the participant's employment may have
terminated prior to death, but only to the extent of any rights exercisable on
the date of death.
2.08. RETIREMENT OR DISABILITY.
Unless modified pursuant to Section 2.04, if a participant is an employee,
upon termination of the participant's employment by reason of retirement or
permanent disability (as each is determined by the Committee), the participant
may, within 36 months from the date of termination, exercise any Nonqualified
Stock Options to the extent the Options are exercisable during that 36-month
period.
2.09 FORFEITURE FOR CAUSE.
Unless provided otherwise in the Option agreement or any employment or
consulting agreement, which terms shall be controlling over the terms of this
Section 2.09, all Options granted to a participant shall terminate immediately
and be forfeited upon the termination of such participant's employment or
engagement for "cause." A termination shall be for "cause" if it is by reason of
any of the following: (A) the participant's conviction of, or plea of nolo
contendere to, any felony or to any crime or offense causing harm to the Company
(whether or not for personal gain) or involving acts of
5
moral turpitude, (B) the participant's repeated intoxication by alcohol or drugs
during the performance of his or her duties or violation of the Company's or the
participant's substance abuse policy, (C) malfeasance in the conduct of the
participant's duties involving misuse or diversion of the Company's funds,
embezzlement or willful and material misrepresentations or concealments on any
written reports submitted to the Company, (D) repeated material failure by the
participant to perform the duties of his or her employment or engagement, (E)
material failure by the participant to follow or comply with the reasonable and
lawful directives of the Board of Directors of the Company or the participant's
immediate supervisor, or (F) a material breach by the participant of any written
agreement between the participant and the Company, including without limitation
the terms of any non-competition, non-solicitation or non-disclosure agreement,
whether in the Option agreement or in any other agreement. The Option agreement
under which options are awarded to any employee or consultant of the Company or
any employment agreement or agreement for services entered into with any
consultant may provide for termination of the Option immediately for any reason
whatsoever, including for any cause specified. To the extent that any definition
of "cause" (or terms or provisions of like import) in any agreement governing
participant's employment with or engagement by the Company establishes grounds
for termination of participant's employment or engagement, the term "cause" as
used in any such agreement shall govern. The Option agreement may also expressly
provide that any definition of "cause" used therein shall control over the
provisions hereof. A participant may be released from the forfeiture provisions
of this section if the Committee determines in its sole discretion that such
action is in the best interests of the Company.
2.10. TERMINATION FOR OTHER REASONS.
Unless modified pursuant to Section 2.04, if the participant is an
employee, except as provided in sections 2.07, 2.08 and 2.09, the employee's
Nonqualified Stock Options shall terminate three months after the termination of
the participant's employment.
ARTICLE 3
INCENTIVE STOCK OPTIONS
3.01. AWARD OF INCENTIVE STOCK OPTIONS.
The Committee may, from time to time and subject to the provisions of the
Plan and the other terms and conditions as the Committee may prescribe, grant to
any participant in the Plan who is an employee of the Company one or more
"incentive stock options" (intended to qualify under the provisions of Code
Section 422) to purchase for cash or shares the number of shares of Common Stock
allotted by the Committee. The date an Incentive Stock Option is granted shall
mean the date selected by the Committee as of which the Committee allots a
specific number of shares to a participant pursuant to the Plan. Notwithstanding
the foregoing, Incentive Stock Options shall not be granted to any owner of 10%
or more of the total combined voting power of the Company and its parent or
subsidiaries unless the option price per share complies with the requirements
set forth in section 3.03.
3.02. INCENTIVE STOCK OPTION AGREEMENTS.
The grant of an Incentive Stock Option shall be evidenced by a written
Incentive Stock Option Agreement, executed by the Company and the holder of an
Incentive Stock Option, stating the number of shares of Common Stock subject to
the Incentive Stock Option evidenced thereby, and in the form as the Committee
may from time to time determine.
3.03. INCENTIVE STOCK OPTION PRICE.
The option price per share of Common Stock deliverable upon the exercise of
an Incentive Stock Option shall be at least 100% of the fair market value of a
share of Common Stock on the date the Option is granted, unless the option has
been granted to an owner, determined with attribution, of 10% or more of the
total combined voting power of the Company or any parent or any subsidiary of
the Company. In that case, the option price shall be at least 110% of the fair
6
market value of a share of Common Stock on the date the Incentive Stock Option
is granted.
3.04. TERM AND EXERCISE.
Each Incentive Stock Option shall first be exercisable and/or become
exercisable according to the vesting schedule as is determined by the Committee
and provided in the Incentive Stock Option Agreement. Unless the Committee
determines otherwise as provided in an Incentive Stock Option Agreement,
Incentive Stock Options shall vest in 25 percent increments, with the first 25
percent increment being exercisable on or after the first anniversary of the
date of the grant and an additional remaining 25 percent increment being
exercisable on or after each subsequent anniversary date so that 100% vesting
will have occurred on the fourth anniversary of the date of grant; provided that
the employee continues to be employed by the Company on each of those dates.
Unless the Committee determines otherwise as provided in an Incentive Stock
Option Agreement, vesting terminates once the participant is no longer an
employee. Each Incentive Stock Option shall be for a term of 10 years (5 years
in the case of an award to an owner, determined with attribution, of 10% or more
of the total combined voting power of the Company or any parent or any
subsidiary of the Company), subject to earlier termination as provided in
section 3.06, 3.07 or 3.08, unless the Incentive Stock Option Agreement
expressly provides for a different term, not in excess of 10 years, and/or
expressly provides that the provisions of any or all of section 3.06, 3.07 or
3.08 shall not apply to cause the Incentive Stock Option to earlier terminate,
so long as the modifications shall not cause the Incentive Stock Option granted
thereby to cease to qualify as an "incentive stock option" under Code Section
422. An Incentive Stock Option shall not be exercisable after the expiration of
its term.
3.05. MAXIMUM AMOUNT OF INCENTIVE STOCK OPTION GRANT.
The aggregate fair market value (determined on the date the option is
granted) of Common Stock subject to all Incentive Stock Options granted to a
participant which are exercisable for the first time by the participant in any
calendar year shall not exceed $100,000.
3.06. DEATH OF PARTICIPANT.
(a) Unless modified pursuant to Section 3.04, upon the death of the
participant, any Incentive Stock Option exercisable on the date of death may be
exercised by the participant's estate or by a person who acquires the right to
exercise the Incentive Stock Option by bequest or inheritance or by reason of
the death of the participant, provided that the exercise occurs within both the
remaining option term of the Incentive Stock Option and one year after the
participant's death.
(b) The provisions of this Section shall apply notwithstanding the fact
that the participant's employment may have terminated prior to death, but only
to the extent of any Incentive Stock Options exercisable on the date of death.
3.07. RETIREMENT OR DISABILITY.
Unless modified pursuant to Section 3.04, upon the termination of the
participant's employment by reason of permanent disability or retirement (as
each is determined by the Committee), the participant may, within 36 months from
the date of termination of employment, exercise any Incentive Stock Options to
the extent the Incentive Stock Options were exercisable at the date of
termination of employment. Notwithstanding the foregoing, the tax treatment
available pursuant to Code Section 422 upon the exercise of an Incentive Stock
Option will not be available to a participant who exercises any Incentive Stock
Options more than (i) 12 months after the date of termination of employment due
to permanent disability or (ii) three months after the date of termination of
employment due to retirement.
3.08. FORFEITURE FOR CAUSE.
Unless provided otherwise in the Option agreement or any employment or
consulting agreement, which terms shall be controlling over the terms of this
Section 3.08, all Options granted to a participant shall terminate immediately
7
and be forfeited upon the termination of such participant's employment or
engagement for "cause." A termination shall be for "cause" if it is by reason of
any of the following: (A) the participant's conviction of, or plea of nolo
contendere to, any felony or to any crime or offense causing harm to the Company
(whether or not for personal gain) or involving acts of moral turpitude, (B) the
participant's repeated intoxication by alcohol or drugs during the performance
of his or her duties or violation of the Company's or the participant's
substance abuse policy, (C) malfeasance in the conduct of the participant's
duties involving misuse or diversion of the Company's funds, embezzlement or
willful and material misrepresentations or concealments on any written reports
submitted to the Company, (D) repeated material failure by the participant to
perform the duties of his or her employment or engagement, (E) material failure
by the participant to follow or comply with the reasonable and lawful directives
of the Board of Directors of the Company or the participant's immediate
supervisor, or (F) a material breach by the participant of any written agreement
between the participant and the Company, including without limitation the terms
of any non-competition, non-solicitation or non-disclosure agreement, whether in
the Option agreement or in any other agreement. The Option agreement under which
options are awarded to any employee or consultant of the Company or any
employment agreement or agreement for services entered into with any consultant
may provide for termination of the Option immediately for any reason whatsoever,
including for any cause specified. To the extent that any definition of "cause"
(or terms or provisions of like import) in any agreement governing participant's
employment with or engagement by the Company establishes grounds for termination
of participant's employment or engagement, the term "cause" as used in any such
agreement shall govern. The Option agreement may also expressly provide that any
definition of "cause" used therein shall control over the provisions hereof. A
participant may be released from the forfeiture provisions of this section if
the Committee determines in its sole discretion that such action is in the best
interests of the Company.
3.09. TERMINATION FOR OTHER REASONS.
Unless modified pursuant to Section 3.04, except as provided in sections
3.06, 3.07 and 3.08, all Incentive Stock Options shall terminate three months
after the termination of the participant's employment.
3.10. APPLICABILITY OF NONQUALIFIED STOCK OPTIONS SECTIONS.
Sections 2.05 and 2.06 hereof shall apply equally to Incentive Stock
Options. Those sections are incorporated by reference in this Article 3, but
substituting Incentive Stock Option for Nonqualified Stock Option, as though
fully set forth herein.
ARTICLE 4
LOCK-UP PROVISIONS
4.01. LOCK-UP PERIOD.
If the Company may elect to distribute its shares in any initial or
follow-on underwritten public offerings, the underwriter may require as a
condition of any such offering that certain of the then existing securityholders
of the Company agree to a lock-up of the shares of the Company's Common Stock
held by them or issuable to them upon the exercise of Options for a period
commencing with the filing of a registration statement with the Securities and
Exchange Commission and continuing for up to 270 days after the effective date
thereof (the "Lock-up Period").
4.02. RESTRICTIONS ON DISPOSITION.
It is a condition to the issuance of Options hereunder that, except to
the extent permitted herein or otherwise by the Company, no participant in the
Plan will be permitted during the Lock-up Period to sell or otherwise dispose of
any shares of Common Stock issued or issuable to such participant upon the
exercise of an Option. Without limiting the foregoing, no participant shall be
permitted during the Lock-up Period from (i) offering, pledging, announcing the
intention to sell, selling, issuing, contracting to sell, selling any option or
contract to purchase, purchasing any option or contract to sell, granting any
option, right or warrant to purchase, or otherwise transferring or disposing of,
8
directly or indirectly, any shares, or (ii) entering into any swap or other
agreement that transfers, in whole or in part, any of the economic consequences
of ownership of the shares, whether any such transaction described in clause (i)
or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. Notwithstanding the foregoing, this Section
4.02 shall not prohibit any transfer or other disposition by a participant
involving (i) a transfer or disposition of shares on his or her death to the
participant's estate, executor, administrator or personal representative or to
the participant's beneficiaries pursuant to a devise or bequest or by the laws
of descent and distribution or (ii) a transfer or disposition of shares as a
bona fide gift, provided that, in either such event, the transferee, pledgee or
other person receiving such shares shall be subject to all of the restrictions
set forth in this Article 4 and, if required by the Company, shall agree in
writing to be bound by such provisions.
4.03. RESTRICTIVE LEGEND.
In furtherance of the foregoing, the Company and any duly appointed
transfer agent for the registration or transfer of the Company's securities are
hereby authorized to decline to make any transfer of securities if such transfer
would constitute a violation or breach of the terms of this Section 4.01. The
Company may place an appropriate restrictive legend and a stop transfer order
restricting a transfer of any shares that would violate the terms of this
Article 4.
ARTICLE 5
EXTRAORDINARY TRANSACTIONS
5.01. CERTAIN EXTRAORDINARY TRANSACTIONS.
If the Company is merged into or consolidated with another company under
circumstances where the Company is not the surviving company, or if the Company
is liquidated, or sells or otherwise disposes of substantially all of its assets
to another company while unexercised Options remain outstanding under the Plan,
the Board may make any provision as it deems appropriate in connection with such
transaction for the continuance of the Plan and/or the assumption or
substitution of such Options with new options, stock appreciation rights or
stock awards covering the stock of the successor Company, or parent or
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices, or may make such awards to the holders as it deems
appropriate based on such factors as the exercise price of such Option, the kind
and value of the consideration to be received by the Company in any such merger,
consolidation, liquidation, or sale and like factors. Any such determination
made by the Board or Committee shall be final, binding and conclusive.
5.02. RIGHTS OF THE COMPANY.
The existence of outstanding Options shall not affect in any way the right
or power of the Company or its shareholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issuance of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
ARTICLE 6
MISCELLANEOUS
6.01. GENERAL RESTRICTION.
Each Option under the Plan shall be subject to the requirement that, if at
any time the Committee shall determine
9
that (i) the listing, registration or qualification of the shares of Common
Stock subject or related thereto upon any securities exchange or under any state
or federal law, or (ii) the consent or approval of any government regulatory
body, or (iii) an agreement by the grantee of an Option with respect to the
disposition of shares of Common Stock is necessary or desirable as a condition
of, or in connection with, the granting of the Option or the issue or purchase
of shares of Common Stock thereunder, the Option may not be consummated in whole
or in part unless the listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Committee.
6.02. NON-ASSIGNABILITY.
Unless the Committee determines otherwise as provided in a Nonqualified or
Incentive Stock Option Agreement, no Option under the Plan shall be assignable
or transferable by the recipient thereof, except by will or by the laws of
descent and distribution. If not determined otherwise by the Committee, during
the life of the recipient, the Option shall be exercisable only by that person
or by that person's guardian or legal representative.
6.03. WITHHOLDING TAXES.
Whenever the Company proposes or is required to issue or transfer shares of
Common Stock under the Plan, the Company shall have the right to require the
grantee to remit an amount sufficient to satisfy any federal, state and/or local
withholding tax requirements to the Company prior to the delivery of any
certificate or certificates for the shares. Alternatively, the Company may issue
or transfer the shares of Common Stock net of the number of shares sufficient to
satisfy the withholding tax requirements. For withholding tax purposes, the
shares of Common Stock shall be valued on the date the withholding obligation is
incurred.
6.04. RIGHT TO TERMINATE EMPLOYMENT.
Nothing in the Plan or in any agreement entered into pursuant to the Plan
shall confer upon any participant the right to continue in the employment of the
Company or affect any right which the Company may have to terminate the
employment of the participant.
6.05. NON-UNIFORM DETERMINATIONS.
The Committee's determinations under the Plan (including without limitation
determinations of the persons to receive Options, the form, number of shares
awarded with, and timing of Options, the terms and provisions of Options and the
agreements evidencing Options) need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, Options under
the Plan, whether or not the persons are similarly situated.
6.06. RIGHTS AS A SHAREHOLDER.
The recipient of any Option under the Plan shall not have the right to vote
or any other rights as a shareholder unless and until certificates for shares of
Common Stock are issued to that person. Nothing herein shall entitle the
participant to require the Company to register with the Securities and Exchange
Commission any shares of Common Stock issued or issuable to the participant.
6.07. LEAVES OF ABSENCE.
The Committee shall be entitled to make rules, regulations and
determinations as it deems appropriate under the Plan in respect of any leave of
absence taken by the recipient of any Option. Without limiting the generality of
the foregoing, the Committee shall be entitled to determine (i) whether or not
any leave of absence shall constitute a
10
termination of employment within the meaning of the Plan and (ii) the impact, if
any, of any leave of absence on Options under the Plan previously made to any
recipient who takes a leave of absence.
6.08. ADJUSTMENTS.
In the event of any change in the outstanding Common Stock by reason of a
stock dividend or distribution, recapitalization, merger, consolidation, split-
up, combination, exchange of shares or the like, the Committee may appropriately
adjust the number of shares of Common Stock which may be issued under the Plan,
the number of shares of Common Stock subject to Options previously granted under
the Plan, the option price of Options previously granted under the Plan and any
and all other matters deemed appropriate by the Committee.
6.09. AMENDMENT OF THE PLAN.
The Board of Directors of the Company may, without further action by the
shareholders and without receiving further consideration from the participants,
amend this Plan or condition or modify Options under this Plan, except that (i)
no such modification of any Option or amendment of the Plan shall affect any
participant's rights under an Option previously granted unless the participant
consents thereto and (ii) shareholder approval to any amendment of the Plan
shall be obtained to the extent required under applicable law or necessary to
preserve any federal income tax or other benefit to the Company or the
participants.
11
PROXY
COMFORCE CORPORATION
Solicited by The Board of Directors for the
2002 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 V. 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, April 30,
2002, at the 2002 Annual Meeting of Stockholders to be held on June 13, 2002, 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 that 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 V.
Maccarrone, Kenneth J. Daley, Rosemary Maniscalco,
Daniel Raynor and Gordon Robinett.
FOR Withheld for Withheld for the
all following (write the
Nominee's name in
the space below).
[_] [_] ________________
2. Approve the COMFORCE Corporation 2002 Stock Option
Plan
FOR Against Abstain
[_] [_] [_]
3. Ratify the appointment of KPMG LLP as the
Company's independent auditors for the fiscal year
ending December 29, 2002.
FOR Against Abstain When shares are held as joint tenants, both should
sign. When signing as attorney, executor,
[_] [_] [_] administrator, trustee or guardian, 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.