SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
COMFORCE CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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previously. Identify the previous filing by registration statement number,
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COMFORCE Corporation
2001 Marcus Avenue
Lake Success, New York 11042
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 11, 1998
As a stockholder of COMFORCE Corporation (the "Company"), you are
invited to be present, or represented by proxy, at the Annual Meeting of
Stockholders, to be held at 395 North Service Road, Melville, New York on June
11, 1998 at 2:00 p.m., New York City time, and any adjournments thereof, for the
following purposes:
1. To elect James L. Paterek, Christopher P. Franco, Michael Ferrentino,
Michael D. Madden, Richard Barber, Keith Goldberg, Dr. Glen Miller and
Marc Werner to the Board of Directors of the Company for terms of one
(1) year. See "Proposal No. 1--Election of Directors" in the Proxy
Statement.
2. To ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent certified public accountants for the fiscal year ending
December 31, 1998. See "Proposal No. 2--Selection of Auditors" in the
Proxy Statement.
3. To transact such other business as may properly be brought before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on May 1, 1998 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.
By Order of the Board of Directors
/s/ Christopher P. Franco
---------------------------------
Christopher P. Franco
Chief Executive Officer and Secretary
May 1, 1998
COMFORCE Corporation
2001 Marcus Avenue
Lake Success, New York 11042
ANNUAL MEETING OF STOCKHOLDERS
June 11, 1998
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 8, 1998,
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 395
North Service Road, Melville, New York on June 11, 1998 at 2:00 p.m., New York
City time, and any adjournments thereof.
Holders of record of the Company's Common Stock at the close of
business on May 1, 1998 (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
15,637,947 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 abstain from voting or 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, AS SPECIFIED BELOW, TO (i) ELECT
JAMES L. PATEREK, CHRISTOPHER P. FRANCO, MICHAEL FERRENTINO, MICHAEL D. MADDEN,
RICHARD BARBER, KEITH GOLDBERG, DR. GLEN MILLER AND MARC WERNER AS DIRECTORS,
(ii) RATIFY THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS, AND (iii) 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,
telegram or in person without additional compensation therefor.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
Election of Directors
The Company's Bylaws provide that the Board of Directors shall consist
of from three to nine persons as fixed by the Board. Eight 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:
James L. Paterek, Christopher P. Franco, Michael Ferrentino, Michael D. Madden,
Richard Barber, Keith Goldberg, Dr. Glen Miller and Marc Werner.
Unless you indicate to the contrary, the persons named in the
accompanying proxy will vote it for the election of the nominees named above.
If, for any reason, a nominee should be unable to serve as a director at the
time of the meeting, which is not expected to occur, the persons designated
herein as proxies may not vote for the election of any other person not named
herein as a nominee for election to the Board of Directors. See "Information
Concerning Directors and Nominees."
Recommendation
The Board of Directors recommends a vote "FOR" the election of each of
the nominees. Proxies solicited by the Board of Directors will be voted in favor
of this proposal unless a contrary vote or authority withheld is specified.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
Directors and Nominees
Set forth below is information concerning each director and nominee for
director of the Company, including his business experience during at least the
past five years, his positions with the Company and the Company's wholly-owned
subsidiary, COMFORCE Operating, Inc. ("COI"), and certain directorships held by
him. Each nominee is currently a director of the Company. There are no family
relationships among any of the directors or nominees, nor, except as hereinafter
described, are there any arrangements or understandings between any director and
another person pursuant to which he was selected as a director or nominee. Each
director is to hold office until the next annual meeting of the stockholders or
until his successor have been elected and qualified.
Name Age Position
- ---- --- --------
James L. Paterek............ 36 Chairman of the Board
Christopher P. Franco....... 39 Chief Executive Officer and Director
Michael Ferrentino.......... 35 President and Director
Michael D. Madden........... 49 Vice Chairman
Richard Barber.............. 39 Director
Keith Goldberg.............. 35 Director
Dr. Glen Miller............. 62 Director
Marc Werner................. 40 Director
James L. Paterek has served as Chairman of the Board of COI since its
formation in October 1997 and of the Company since February 1997, having
previously served as consultant to the Company since December 1995. Mr. Paterek
was a founder of Yield TechniGlobal which was purchased by Spectrum Global
Services, Inc. (following
2
its acquisition by the Company, renamed COMFORCE Telecom, Inc.) ("COMFORCE
Telecom"), and he served as its President from 1987 to 1995.
Christopher P. Franco has served as the Chief Executive Officer and a
Director of COI since its formation in October 1997 and of the Company since
February 1997, having previously served as Executive Vice President of the
Company since December 1995. In addition, Mr. Franco has served as Secretary of
the Company since December 1995. From 1993 to 1995, Mr. Franco served as Vice
President and General Counsel of Spectrum Information Technologies, Inc.
(wireless transmissions, telecommunications and franchiser of computer stores).
From 1985 to 1993, Mr. Franco practiced law, principally in the field of
corporate securities, with the law firms of Fulbright & Jaworski (Houston),
Cummings & Lockwood (Hartford) and Kelley Drye & Warren (New York).
Michael Ferrentino has served as the President and a Director of COI
since its formation in October 1997 and of the Company since December 1995.
Mr. Ferrentino was a founder of COMFORCE Telecom, and he served as its Vice
President from 1987 to 1993 and as its Executive Vice President from 1993 to
1995. From 1984 through 1987, he was employed by Dun & Bradstreet.
Michael D. Madden has served as Vice Chairman of COI since its
formation in October 1997 and of the Company since September 15, 1997
and is a member of the Finance Committee of the Board. He has served as
Chairman of Hanover Capital L.L.C. (merchant banking) since July 1996
and as a Director of FM Properties, Inc. (real estate investments) since
1991. From 1994 to 1995, Mr. Madden served as a Vice Chairman and member
of the Executive Committee of the Board of Directors of PaineWebber
Incorporated (investment banking), having previously headed the
transition team to integrate Kidder Peabody & Co. (investment banking)
into PaineWebber Incorporated following their 1994 merger. Mr. Madden
held various positions with Kidder Peabody & Co. from 1973 to 1989 and
from 1993 to 1994, most recently as Executive Vice President responsible
for Global Origination. He previously served as Senior Managing Director
and co-head of Worldwide Investment Banking (1989 to 1993) and a
Director (1990 to 1993) of Lehman Brothers (investment banking).
Richard Barber has served as a Director of COI since its formation in
October 1997 and of the Company since December 1995 and is a member of the Audit
Committee of the Board. He is a partner at L.H. Frishkoff & Company, a certified
public accounting firm. Mr. Barber is a member of the American Institute of
Certified Public Accountants and the New York State Society of Certified Public
Accountants and has served as a committee member of the New York State Real
Estate Accounting Committee.
Keith Goldberg has served as a Director of COI since its formation in
October 1997 and of the Company since December 1995 and is a member of the
Compensation and Stock Option Committees of the Board. He is a senior partner at
J. Walter Thompson Advertising. Previously, he worked for BBDO Advertising as an
Associate Creative Director from 1994 to 1995. From 1990 through 1994, he served
as a Vice President at Young & Rubicam (advertising).
Dr. Glen Miller has served as a Director of COI since its formation in
October 1997 and of the Company since December 1995 and is a member of the
Audit, Compensation and Stock Option Committees of the Board. He is a Vice
President of Pacer International, a telecommunications construction company.
Prior thereto, he had served as Vice President of Cybertel Network Systems and
as Vice President of TeleData, both telecommunications service companies. From
1990 to 1994, Dr. Miller was responsible for strategic planning for the Harris
Corporation (electronics and communications). From 1984 to 1990, he was
responsible for the direction and arrangement of business activities in various
markets nationwide for GTE Telecom, a telecommunications company. Dr. Miller is
a retired Colonel, U.S. Air Force.
Marc Werner has served as a Director of COI since its formation in
October 1997 and of the Company since May 1997 and is a member of the Finance
Committee of the Board. He is the President and Chief Executive Officer of
Cornucopia Capital Advisors, Inc. (financial and strategic advisory services)
and serves as a director of each of Design Intelligence, Inc. (software) and
Spear Technologies, Inc. (software). In addition, Mr. Werner has served
3
as the Vice Chairman of Ameriquest Technologies, Inc. (computer products)
since 1993. Mr. Werner previously served as the President and Chief Executive
Officer of Werner Financial Inc. (investment, insurance, real estate and
claims management) (1995 to 1997); as the Chief Financial Officer of Werner
Holdings (PA) Inc. (climbing products, extruded industrial products and
financial services) (1986 to 1996); as the President and Chief Executive
Office of B-E Industries (industrial holding company) (1982 to 1986); and as
Vice President and Chief Financial Officer of Borg-Erickson (bathroom scale
manufacturer) (1981 to 1986). Mr. Werner is a certified public accountant.
Meetings of the Board of Directors
In 1997, the Board of Directors of the Company conducted eight
meetings. Each director of the Company attended at least 75% of the meetings
held during the time he served as director.
Committees
The standing committees of the Board of Directors include the Audit
Committee, the Compensation Committee, the Stock Option Committee and the
Finance Committee. The Audit Committee has responsibility for reviewing matters
with respect to the accounting, auditing and financial reporting practices and
procedures of the Company. Messrs. Miller and Barber are members of this
Committee. The Audit Committee met once during 1997.
The Compensation Committee has responsibility for reviewing executive
salaries, administering the bonus and incentive compensation of the Company,
approving the salaries and other benefits of the executive officers of the
Company. Messrs. Ferrentino, Goldberg and Miller are members of the Compensation
Committee. In 1997, the Compensation Committee acted by consent on two
occasions.
The Stock Option Committee has responsibility for administering the
Company's Long-Term Investment Plan. Messrs. Goldberg and Miller are members
of the Stock Option Committee. In 1997, the Stock Option Committee conducted
one meeting.
The Finance Committee was formed in the fourth quarter of 1997 for the
purpose of advising the Company as to corporate finance activities. Although
this Committee did not meet formally in the brief period during 1997 that it was
functioning, it did interview investment bankers and advise the Company as to
financial matters. The Finance Committee will hold regular meetings in 1998.
Messrs. Madden, Franco and Werner are members of the Finance Committee.
PROPOSAL NO. 2 -- SELECTION OF AUDITORS
The Proposal
The Board of Directors appointed Coopers & Lybrand L.L.P., independent
public accountants, to audit the financial statements of the Company and its
wholly owned subsidiaries for the fiscal year ending December 31, 1998. This
appointment is being presented to stockholders for ratification. Coopers &
Lybrand L.L.P. audited the Company's financial statements for the year ended
December 31, 1997.
A representative of Coopers & Lybrand is expected to attend the meeting
and will be afforded an opportunity to make a statement if he or she desires to
do so. This representative is also expected to be available to respond to
appropriate questions.
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.
4
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 and its COI subsidiary. Executive
officers are appointed by the Board of Directors and serve at the pleasure of
the Board. There are no family relationships among the executive officers, nor
are there any arrangements or understandings between any executive officer and
another person pursuant to which he was selected as an officer except as may be
hereinafter described.
Name Age Position
- ---- --- --------
Executive Officers
James L. Paterek....... 36 Chairman of the Board
Christopher P. Franco.. 39 Chief Executive Officer and Director
Michael Ferrentino..... 35 President and Director
Paul J. Grillo......... 45 Senior Vice President and Chief Financial Officer
Andrew Reiben.......... 33 Vice President of Finance and Chief Accounting Officer
Malcolm High........... 46 Corporate Controller
Other Key Employees
John Fanning........... 66 President of COMFORCE Financial Services Division
Rosemary Maniscalco.... 57 President of COMFORCE Professional Staffing Services
Stanley Rashkin........ 44 President of COMFORCE Technical Services, Inc.
Bruce Astrom........... 47 President of COMFORCE Telecom
Executive Officers
James L. Paterek. See "Information Concerning Directors and Nominees"
for information concerning Mr. Paterek.
Christopher P. Franco. See "Information Concerning Directors and
Nominees" for information concerning Mr. Franco.
Michael Ferrentino. See "Information Concerning Directors and Nominees"
for information concerning Mr. Ferrentino.
Paul J. Grillo has served as Senior Vice President of the Company
and COI since January 1998 and as Chief Financial Officer of COI since its
formation in October 1997 and of the Company since July 1996. In addition,
from July 1996 until January 1998, he served as Vice President of Finance of
the Company. From July 1991 to July 1996, Mr. Grillo provided business
planning and acquisition advisory services to a number of industries
including telecommunications, contract services, manufacturing, publishing
and real estate management. From April 1980 to June 1991, Mr. Grillo served
as Senior Vice President--Finance, Treasurer and Chief Financial Officer of
Butler Service Group, Inc., an international contract technical staffing
services company. Mr. Grillo is a certified public accountant.
Andrew Reiben has served as Vice President of Finance of the Company
and COI since January 1998 and as Chief Accounting Officer of COI since its
formation in October 1997 and of the Company since February 1996. From 1993 to
February 1996, Mr. Reiben served as Controller of Daystar Robinson, a C.H.
Robinson company (New
5
York). From 1989 to 1993, Mr. Reiben was a Senior Accountant with Coopers &
Lybrand LLP (New York), a certified public accounting firm. Mr. Reiben is a
certified public accountant.
Malcolm High has served as the Corporate Controller of COI since its
formation in October 1997 and of the Company since April 1997. Prior thereto,
from 1985 to April 1997, Mr. High held various positions with TAD Resources
International, Inc. (staffing services), including Vice President (1991 to
April 1997), Corporate Controller (1989 to April 1997) and Assistant
Corporate Controller (1985 to 1989). He is an associate member of the
Chartered Institute of Management Accountants (ACMA) of the United Kingdom.
Other Key Employees
John Fanning, founder of Uniforce, served as President and a director
of Uniforce from 1961, the year in which Uniforce's first office was opened,
until November 1997. Mr. Fanning entered the employment field in 1954, when he
founded the Fanning Personnel Agency, Inc., his interest in which he sold in
1967 to devote his efforts solely to Uniforce's operations. He also founded and
served as the first president of the Association of Personnel Agencies of New
York. In November 1997, Mr. Fanning became President of COMFORCE Financial
Services Division.
Rosemary Maniscalco joined Uniforce as Sales and Marketing
Coordinator in December 1981. In June 1982, her duties were expanded to
include direction of Uniforce's license marketing efforts, as well as the
development of marketing concepts. In 1983, she was appointed the Uniforce's
Director of Corporate Development, in May 1984, she was elected Executive
Vice President and in June 1992, she was designated Chief Operating Officer.
She served in that position until November 1997. In November 1997, she became
President of COMFORCE Professional Staffing Services Division.
Stanley Rashkin has served as President of the Company's subsidiary,
COMFORCE Technical Services, Inc. since May 1996, following the Company's
acquisition of RRA, Inc., Project Staffing Support Team, Inc. and DataTech
Technical Services, Inc. During the four years prior to May 1996, Mr. Rashkin
served as President of DataTech Technical Services, Inc. and Project Staffing
Support Team, Inc., which are technical staffing and consulting services
businesses.
Bruce Astrom has served as President, and prior thereto, Senior Vice
President, of the Company's COMFORCE Telecom subsidiary since May 1996. From
1982 to 1996, Mr. Astrom was employed by Butler International, most recently as
Vice President of Butler Telecom, an international telecommunications staffing
and specialty services provider.
EXECUTIVE COMPENSATION
Director Compensation and Arrangements
During 1997, non-employee directors received fees of $1,000 per quarter
(which has been increased to $2,500 per quarter for 1998). In addition, under
the Company's Long-Term Stock Investment Plan, each non-employee director is
entitled to receive options to purchase 10,000 shares of Common Stock upon his
initial election to the Board and, annually thereafter, options to purchase
10,000 shares upon his reelection to the Board, at an exercise price equal to
the market price on the date of grant. All options granted to non-employee
directors under these non-discretionary provisions of the Plan provide that the
options become exercisable one year from the date of grant and terminate 10
years from the date of grant.
Executive Officer Compensation
6
The following table shows all compensation paid by the Company and its
subsidiaries for the fiscal years ended December 31, 1997, 1996 and 1995 to each
person who has served as the chief executive officer of the Company at any time
since the beginning of the last completed fiscal year and to the Company's most
highly compensated executive officers who served as executive officers during
the last fiscal year whose income exceeded $100,000 (the "Named Executive
Officers"). No other executive officers of the Company received compensation in
excess of $100,000 in 1997.
Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards
--------------------------------- -----------------
Name and Position Year Salary ($) Bonus ($) Options/SAR's (#)
- ----------------- ---- ---------- --------- -----------------
Christopher P. Franco, 1997 150,000 222,777 --
Chief Executive Officer 1996 150,000 -- 112,500(2)
1995 28,846 739,264(1) --
Michael Ferrentino, 1997 150,000 223,088 --
President 1996 150,000 -- 281,250(2)
1995 79,703 739,264(1) --
James L. Paterek, 1997 208,000 271,849 --
Chairman of the Board(3) 1996 157,000 -- 281,250(2)
1995 39,250 1,232,106(1) --
Paul J. Grillo, 1997 135,000 60,000 --
Senior Vice President and 1996 59,500 5,000 5,000(4)
Chief Financial Officer 1995 -- -- --
Andrew C. Reiben, 1997 100,000 42,000 --
Vice President of Finance 1996 83,333 -- 20,000(5)
and Chief Accounting Officer 1995 -- -- --
- -----------
(1) This amount represents the value of shares of Common Stock which the
Company issued or agreed to issue in 1995 to Messrs. Franco and
Ferrentino for agreeing to direct the Company's entry into the
technical staffing business.
(2) Currently exercisable options to purchase the Company's Common Stock at
an exercise price of $6.75 per share.
(3) Includes compensation payable to Mr. Paterek during the period he
served as a consultant to the Company (October 1995 to February 1997).
(4) Options to purchase the Company's Common Stock at $18.00 per share,
12,500 of which are current exercisable.
(5) Currently exercisable options to purchase 20,000 shares of the
Company's Common Stock at an exercise price of $7.25 per share.
7
Option Awards and Values. No options or stock appreciation rights were
awarded to any of the Named Executive Officers in 1997. The following table sets
forth information concerning the aggregate number and values of options held by
Named Executive Officers as of December 31, 1997. None of the Named Executive
Officers holds stock appreciation rights and none of such persons exercised any
options in 1997.
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values (1)
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
Fiscal Year End (#) Fiscal Year End ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
- ---- ---------------------- --------------------
Christopher P. Franco....... 112,500/0 $140,625/$0
Michael Ferrentino.......... 281,250/0 $351,563/$0
James L. Paterek............ 281,250/0 $351,563/$0
Paul J. Grillo.............. 12,500/37,500 $0/$0
Andrew C. Reiben............ 10,000/10,000 $7,500/$7,500
- -----------
(1) This information is presented as of December 31, 1997. See the notes to
the "Summary Compensation Table" for a description of the terms of the
options listed in this table.
Employment Agreements
Effective as of December 1, 1997, the Company entered into employment
agreements with James L. Paterek, the Chairman of the Company, Christopher P.
Franco, the Chief Executive Officer of the Company, and Michael Ferrentino, the
President of the Company. Each agreement is for a term of three years and
provides for payment of (i) a salary of $200,000 per year ($258,000 in the case
of Mr. Paterek), subject to annual increases of the higher of 7% or the
percentage increase in the Consumer Price Index, (ii) an annual bonus, payable
in cash or Common Stock of the Company, and (iii) participation in the Company's
benefits. Each agreement is terminable by the Company only for "just cause," and
imposes customary non-competition and confidentiality restrictions on each
executive. In addition, each agreement provides that, if any such executive
resigns within one year, or is terminated within three years (other than for
just cause), following a change of control, such executive shall be entitled to
receive three times the amount of his annual salary, bonus, benefits and the
Company's pension contributions on his behalf. In addition, in such event, the
executive is entitled to receive an amount equal to the sum of the aggregate
exercise price of options to purchase Common Stock held by him, plus a "gross
up" payment based on projected federal income taxes payable by the executive,
health care benefits for three years and, in certain circumstances, a payment
intended to compensate the executive for any federal excise tax which may become
payable by him due to his receipt of such compensation.
Prior thereto, the Company had entered into employment agreements with
Messrs. Franco and Ferrentino in December 1995 for two year terms, and with Mr.
Paterek in February 1997, which agreement was terminated upon execution of a new
agreement with him in December 1997, as described above. The Company has also
entered into employment agreements with Messrs. Grillo and Reiben which include
customary non-competition and confidentiality restrictions. Each of these
agreements is terminable by the Company upon 30 days notice.
Compensation Committee Interlocks and Insider Participation
During 1997, Michael Ferrentino, Keith Goldberg and Dr. Glen Miller
served as the Company's Compensation Committee. There are no interlocking
relationships, as defined in the regulations of the Securities and
8
Exchange Commission, involving any of these individuals. Mr. Ferrentino
serves as the Company's President. See "Executive Compensation--Employment
Agreements" and "Certain Relations and Related Transactions" for a
description of certain transactions entered into by Mr. Ferrentino with the
Company since the beginning of the last fiscal year.
Report of the Compensation Committee
Overview and Philosophy
The Company's executive compensation policy is to provide compensation
to employees at such levels as will enable the Company to attract and retain
employees of the highest caliber, to compensate employees in a manner best
calculated to recognize individual, group and Company performances and to seek
to align the interests of the employees with the interests of the Company's
stockholders. The Compensation Committee has responsibility for reviewing
executive salaries, administering the bonus and incentive compensation of the
Company, approving the salaries and other benefits of the executive officers of
the Company.
In addition, 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 1997, 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.
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. In certain instances,
bonuses were awarded in 1997 for exemplary performance or the completion of
challenging projects, but the Company did not utilize quantitative measures
of Company or individual performance for purposes of fixing the salaries or
bonuses of its executives. The compensation of Christopher P. Franco, the
Chief Executive Officer of the Company, and Michael Ferrentino, the President
of the Company, had previously been fixed pursuant to employment agreements
negotiated by them with a former executive of the Company in 1995, which
agreements expired in December 1997. In December 1997, the Company entered
into new employment agreements with Messrs. Franco and Ferrentino as well as
with James L. Paterek, who serves as the Chairman of the Company. Each of
these executives negotiated his employment agreement with Dr. Glen Miller,
who, as Chairman of the Compensation Committee, acted on behalf of the
Compensation Committee. These agreements were subsequently approved by the
Compensation Committee. The decisions of the Compensation Committee regarding
compensation for these individuals were based upon various subjective factors
such as the executive's responsibilities, position, qualifications and
experience. In reaching these decisions, Dr. Miller and the Compensation
Committee each examined published analyses and reports of executive
compensation, but neither undertook a formal survey of compensation paid to
executives by comparable companies or employed quantitative measures of
performance. See "Executive Compensation--Employment Agreements."
Deductibility of Compensation
Under Section 162(m) of the Code, the Internal Revenue Service will
generally deny the deduction of compensation paid to certain executives to the
extent such compensation exceeds $1 million, subject to an exception for
compensation that meets certain "performance-based" requirements. The Company
has taken actions designed to increase its opportunity to deduct all
compensation paid to highly compensated officers for Federal income tax
purposes. However, no assurance can be given that such actions will ensure the
deductibility for Federal income tax purposes of all executive compensation paid
by the Company. Furthermore, neither the Board nor the Compensation
9
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.
10
Submission of Report
This report on Executive Compensation is submitted by Michael
Ferrentino, Keith Goldberg and Dr. Glen Miller, the current members of the
Compensation Committee.
Performance Information
Set forth below in tabular form is a comparison of the total
stockholder return (annual change in share price plus dividends paid,
assuming reinvestment of dividends when paid) assuming an investment of $100
on the starting date for the period shown for the Company, the Dow Jones
Equity Market Index (a broad equity market index which includes the stock of
companies traded on the American Stock Exchange) and the Dow Jones Industrial
Sector--Industrial and Commercial 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, 1992
through December 31, 1997.
COMFORCE Corporation Investment Date
---------- ----
$ 100.00 December 31, 1992
$ 642.86 December 31, 1993
$ 328.57 December 31, 1994
$1,057.14 December 31, 1995
$1,628.57 December 31, 1996
$ 914.29 December 31, 1997
Dow Jones Equity Market Index Investment Date
---------- ----
$100.00 December 31, 1992
$109.95 December 31, 1993
$110.76 December 31, 1994
$152.49 December 31, 1995
$187.63 December 31, 1996
$251.34 December 31, 1997
Dow Jones Industrial and Commercial Services Index Investment Date
---------- ----
$100.00 December 31, 1992
$ 91.20 December 31, 1993
$ 90.10 December 31, 1994
$110.70 December 31, 1995
$120.37 December 31, 1996
$140.51 December 31, 1997
11
PRINCIPAL STOCKHOLDERS
Securities Ownership of Certain Beneficial Owners and Management
The following table sets forth the number of shares and percentage of
Common Stock beneficially owned as of May 1, 1998 by (i) each person who is
known by the Company to own beneficially 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. There were 15,637,947 shares of Common
Stock issued and outstanding as of May 1, 1998. None of the officers or
directors owns any shares of the Company's outstanding Series F Preferred Stock.
Name and Address of
Beneficial Owner Number(1) Percentage(1)
- ------------------- --------- -------------
Management:
James L. Paterek(2)..................................... 1,947,572 12.2%
2001 Marcus Avenue
Lake Success, New York 11042
Christopher P. Franco(3)................................ 1,002,294 6.4%
2001 Marcus Avenue
Lake Success, New York 11042
Michael Ferrentino(4)................................... 2,381,012 15.0%
2001 Marcus Avenue
Lake Success, New York 11042
Andrew Reiben(5)........................................ 20,000 *
Paul Grillo(6).......................................... 12,500 *
Malcolm High(7)......................................... 2,500 *
Dr. Glen Miller(8)...................................... 20,000 *
Richard Barber(8)....................................... 20,000 *
Keith Goldberg(8)....................................... 20,000 *
Marc Werner(9).......................................... 195,000 1.2%
Michael D. Madden(10)................................... 50,000 *
Directors and officers as a group
(11 persons)(11)...................................... 4,793,084 28.9%
Other Significant Stockholders:
ARTRA GROUP Incorporated(12)............................ 1,525,500 9.8%
500 Central Avenue
Northfield, Illinois 60093
John Fanning(13)........................................ 914,996 5.9%
COMFORCE-Woodbury
415 Crossways Park Drive
P.O. Box 9006
Woodbury, NY 11797
Alberta, Canada (14).................................... 1,400,000 9.0%
Alberta Treasury, Room 530
Terrace Building
9515 107th Street
Edmonton, Alberta T5K 2C3
- -------------------------
* Less than 1%
12
(1) For purposes of this table, shares are considered "beneficially owned"
if the person directly or indirectly has the sole or shared power to
vote or direct the voting of the securities or the sole or shared power
to dispose of or direct the disposition of the securities. A person is
also considered to beneficially own shares that such person has the
right to acquire within 60 days, and options exercisable within such
period are referred to herein as "currently exercisable."
(2) The shares beneficially owned by Mr. Paterek, the Chairman of the
Company, include (i) 1,666,322 shares currently held of record by him
and (ii) 281,250 shares issuable to him upon exercise of an option at
an exercise price of $6.75 per share.
(3) The shares beneficially owned by Mr. Franco, the Chief Executive
Officer and a Director of the Company, include (i) 877,794 shares
currently held of record by him, (ii) 112,500 shares issuable to him
upon exercise of an option at an exercise price of $6.75 per share and
(iii) 12,000 held in a trust of which he is the sole trustee.
(4) The shares beneficially owned by Mr. Ferrentino, the President and a
Director of the Company, include (i) 999,794 shares currently held of
record by him, (ii) 281,250 shares issuable to him upon exercise of an
option at an exercise price of $6.75 per share, (iii) 877,794 shares
held of record by Christopher P. Franco which are subject to a voting
agreement among him, Mr. Ferrentino, and Kevin W. Kiernan, a Vice
President of COMFORCE Telecom, under which Mr. Ferrentino has voting
power (the "Voting Agreement"), and (iv) 222,174 shares held of record
by Mr. Kiernan which are subject to the Voting Agreement.
(5) The shares beneficially owned by Mr. Reiben, the Chief Accounting
Officer and Vice President of Finance of the Company, are shares
issuable upon the exercise of an option at an exercise price of $7.25
per share.
(6) The shares beneficially owned by Mr. Grillo, the Chief Financial
Officer of the Company, are issuable upon the exercise of an option at
an exercise price of $18.00.
(7) The shares beneficially owned by Mr. High are issuable upon the
exercise of an option at an exercise price of $8.00.
(8) The shares beneficially owned by this individual include 10,000 shares
issuable to him upon exercise of an option at an exercise price of
$6.75 per share and 10,000 shares issuable to him upon exercise of an
option at an exercise price of $17.00.
(9) The shares shown to be beneficially owned by Mr. Werner include
(i) 85,000 shares held in street name for his account, (ii) 100,000
shares issuable upon the exercise of a warrant at an exercise price of
$7.625 and (iii) options to purchase 10,000 shares at an exercise price
of $5.875 per share.
(10 The shares beneficially owned by Mr. Madden, the Vice Chairman of the
Company, are issuable to him upon the exercise of an option at an
exercise price of $7.375 per share.
(11 The shares shown to be beneficially owned by the directors and officers
as a group include (i) 3,628,910 shares held of record by them,
(ii) 222,174 shares held of record by Mr. Kiernan (under which
Mr. Ferrentino has voting power), (iii) 12,000 held in a trust of which
Christopher P. Franco is the sole trustee, (iv) 20,000 shares issuable
upon the exercise of an option at an exercise price of $7.25 per share,
(v) 705,000 shares issuable upon the exercise of an option at an
exercise price of $6.75 per share, (vi) 12,500 shares issuable upon the
exercise of an option at an exercise price of $18.00, (vii) 100,000
shares issuable upon the exercise of a warrant at an exercise price of
$7.625, (viii) 30,000 shares issuable upon the exercise of an option at
$17.00 per share, (ix) 50,000 shares issuable upon the exercise of an
option at an exercise
13
price of $7.375, (x) 10,000 shares issuable upon the exercise of an
option at an exercise price of $5.875 and (xi) 2,500 shares issuable
upon the exercise of an option at an exercise price of $8.00.
(12) ARTRA, a Delaware corporation, presently owns all of such shares of
record directly or through a wholly-owned subsidiary, Fill-Mor Holding,
Inc.
(13) Includes 188,601 shares held by a limited partnership of which
Mr. Fanning is the general partner. Mr. Fanning disclaims beneficial
ownership of the shares owned by such limited partnership in excess of
his proportional interest in the partnership.
(14) The shares beneficially owned by the stockholder are owned of record.
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 regulation 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 1997, except for the
following: Form 3s were not timely filed reporting the elections as directors of
the Company of Marc L. Werner or Michael D. Madden. Each failure to timely file
was inadvertent, neither of the persons required to file reports traded any of
the securities beneficially owned by him during the brief period of
noncompliance and such reports have since been filed with the SEC.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company made loans in 1995 and 1996 to James L. Paterek, the
Chairman of the Company, Christopher P. Franco, the Chief Executive Officer of
the Company, and Michael Ferrentino, the President of the Company, of $152,000,
$91,000 and $91,000, respectively, to cover their tax liabilities resulting from
their acquisition of common stock of the Company in order to direct the
Company's entry into the technical staffing business. The obligations were
evidenced by notes and bore interest at the rate of 6% per annum. As more fully
described below, these obligations were discharged in August 1997.
As a condition to the funding of the Fleet Credit Facility, the lenders
required Messrs. Paterek, Franco and Ferrentino to each pledge as additional
collateral to secure the Company's obligations under the Fleet Credit Facility
500,000 shares of the Company's common stock owned by them and all of the
options to purchase common stock held by them (281,250 shares in the case of
Messrs. Paterek and Ferrentino and 112,500 shares in the case of Mr. Franco),
which shares had a current market value in excess of $12 million as of the date
the Fleet Credit Facility was funded. In recognition of both the substantial
benefit afforded to the Company by the pledges and the cost to the principals of
making the pledges, in August 1997, the board of directors of the Company
authorized the issuance of an aggregate consideration of approximately $650,000
to Messrs. Paterek, Franco and Ferrentino. Of this amount, $152,000, $91,000 and
$91,000 was utilized to repay outstanding loans of Messrs. Paterek, Franco and
Ferrentino, respectively, due to the Company. The balance of this amount was
treated as bonuses payable to these officers and is included in the "Summary
Compensation Table" in Item 11 of this Report. The board of directors of the
Company determined this consideration to be reasonable based on the valuation of
the pledges as determined by the appraisal performed by the independent
valuation firm. The pledges were released when the Fleet Credit Facility was
repaid in November 1997.
14
See "Executive Compensation--Employment Agreements" for a description
of the employment agreements entered into between the Company and each of
Messrs. Paterek, Ferrentino, Franco, Grillo and Reiben.
The Company paid L.H. Frishkoff & Company, a certified public
accounting firm at which Richard Barber, a Director of the Company, is a
partner, approximately $208,000 in fees during 1997.
Michael D. Madden, the Vice Chairman of the Company, received options
under the Company's Stock Option Plan to purchase 90,000 Shares of the Company's
Common Stock at an exercise price of $7.375.
In connection with the closing of the New Credit Facility in November
1997, Heller required that John Fanning, the former controlling stockholder of
Uniforce and the current holder of approximately 5.9% of the issued and
outstanding Common Stock of the Company, provide cash collateral to it in the
amount of $5.0 million. This collateral was fully released in February 1998. As
consideration for agreeing to make this collateral available, the Company paid
to Mr. Fanning $85,342, representing a 12% per annum yield on his cash
collateral, less the actual return thereon as invested.
STOCKHOLDERS' PROPOSALS
To be considered for inclusion in the Company's Proxy Statement for the
1999 Annual Meeting of Stockholders, stockholder proposals must be sent to the
Company (directed to the attention of Office of the Secretary at 2001 Marcus
Avenue, Lake Success, New York 11042) for receipt not later than March 1, 1999.
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
/s/ Christopher P. Franco
---------------------------------
Christopher P. Franco
Chief Executive Officer and Secretary
Lake Success, New York
May 1, 1998
15
PROXY
COMFORCE CORPORATION
Solicited by The Board of Directors for the Annual Meeting of Stockholders
2001 Marcus Avenue
Lake Success, New York 11042
The undersigned hereby appoints Michael Ferrentino and Christopher P.
Franco as Proxies, each with the power to appoint his substitute, to vote all of
the shares of Common Stock of COMFORCE Corporation, a Delaware corporation (the
"Company"), held of record by the undersigned on the record date, May 1, 1998,
at the Annual Meeting of Stockholders to be held on June 11, 1998, 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 abstain from voting on any proposal or 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 execute and return the proxy unmarked, such votes will be voted
FOR all of the proposals. 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: James L. Paterek, Christopher P.
Franco, Michael Ferrentino, Michael D. Madden,
Richard Barber, Keith Goldberg, Dr. Glen Miller and
Marc Werner have been nominated.
FOR Withheld Withheld for the following
for all following (write the
nominee's name in the
space below).
/ / / / ---------------------------
2. Ratify appointment of independent auditors
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.
Date:
---------------------
- ----------------------------
Signature
- ----------------------------
Signature if held jointly
PLEASE SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.