PRELIMINARY
COMFORCE Corporation
(formerly The Lori Corporation)
2001 Marcus Avenue
Lake Success, New York 11042
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on February 5, 1996
As a stockholder of COMFORCE Corporation, formerly The Lori
Corporation (the "Company"), you are invited to be present, or represented by
proxy, at the Annual Meeting of Stockholders, to be at 2001 Marcus Avenue, Lake
Success, New York on February 5, 1996 at 10:00 a.m., New York City time, and any
adjournments thereof, for the following purposes:
1. To elect Michael Ferrentino, Dr. Glen Miller, Richard Barber, Peter Matthy
and Keith Goldberg 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 Company's issuance of 3,225,098 shares of its Common Stock to
certain individuals in consideration of their agreement to act as officers
of or consultants to the Company to assist the Company in developing a
technical staffing business. See "Proposal No. 2 - Ratification of the
Issuance of Stock to Certain Persons" in the Proxy Statement.
3. To ratify the Company's entering into the technical staffing business and
exiting the fashion jewelry business and transactions related thereto,
including (i) its acquisition of all of the capital stock of Spectrum
Global Services, Inc., d/b/a YIELD Global, (ii) its issuance of 1,863,333
shares of its Common Stock plus detachable warrants to purchase 931,669
shares of its Common Stock in a private placement, (iii) its issuance of
100,000 shares and 150,000 shares, respectively, of its Common Stock to
ARTRA GROUP Incorporated, an affiliate of the Company ("ARTRA"), and Peter
R. Harvey, a director of the Company, in consideration of their agreements
to assume or guarantee, or to indemnify the Company in respect of, certain
obligations and liabilities, (iv) its exchange of 100,000 shares of its
Common Stock to ARTRA for the 9,701 shares of the Company's Series C
Preferred Stock held by ARTRA, and (v) its disposition of its discontinued
fashion jewelry operations. See "Proposal No. 3 - Ratification of the YIELD
Transactions" in the Proxy Statement.
4. To approve an amendment of the Company's Certificate of Incorporation to
increase the number of authorized shares of the Company's capital stock
from 10,000,000 shares to 40,000,000 shares of Common Stock and from
1,000,000 shares to 10,000,000 shares of Preferred Stock. See "Proposal No.
4 - Amendment to the Company's Certificate of Incorporation" in the Proxy
Statement.
5. To amend the Company's Long-Term Stock Investment Plan to (i) increase the
maximum number of shares which may be issued under such Plan from 1,500,000
to 3,000,000 shares, and (ii) provide for the grant of options to
non-employee directors. See "Proposal No. 5 - Amendment to Stock Option
Plan" in the Proxy Statement.
6. 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, 1995. See "Proposal No. 6 - Selection of Auditors" in the
Proxy Statement.
7. To transact such other business as may properly be brought before the
meeting or any adjournment thereof.
<PAGE>
Stockholders of record at the close of business on December 15, 1995 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
Christopher P. Franco, Secretary
December 28, 1995
<PAGE>
PRELIMINARY
COMFORCE Corporation
(formerly The Lori Corporation)
2001 Marcus Avenue
Lake Success, New York 11042
ANNUAL MEETING OF STOCKHOLDERS
February 5, 1996
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 December 28,
1995, are furnished in connection with the solicitation by the Board of
Directors of COMFORCE Corporation, formerly The Lori Corporation (the "Company"
or "COMFORCE"), of proxies to be voted at the annual meeting of stockholders to
be held at 2001 Marcus Avenue, Lake Success, New York on February 5, 1996 at
10:00 a.m., New York City time, and any adjournments thereof.
Stockholders of record at the close of business on December 15, 1995 (the
"record date") will be entitled to vote at the meeting for each share then held.
On the record date, there were 8,960,770 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.
Each share is entitled to one vote in person or by proxy, with the
privilege of cumulative voting in connection with the election of directors.
Cumulative voting means each stockholder shall be entitled to as many votes as
shall equal the number of shares owned multiplied by the number of directors to
be elected. The stockholder may cast all of such votes for a single nominee for
director or any two or more of them as the stockholder sees fit. The Company has
not adopted any pre-conditions to the exercise of cumulative voting for
directors. The Board of Directors is soliciting discretionary authority to
cumulate votes.
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.
<PAGE>
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
The Company's By-laws provide that the Board of Directors shall consist of
up to eight persons. The Board of Directors has nominated five directors to be
elected 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: Michael Ferrentino, Dr.
Glen Miller, Richard Barber, Peter Matthy and Keith Goldberg.
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."
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 nominee for
director of the Company, including his business experience during at least the
past five years, his positions with the Company and certain directorships held
by him. Each nominee is currently a director of the Company, except for Mr.
Matthy. 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.
Michael Ferrentino, age 33. President and Director of the Company since
December 1995. Mr. Ferrentino was a founder of Spectrum Global Services, Inc.,
d/b/a YIELD Global, a telecommunications and computer staffing company
("YIELD"), and he served as YIELD's Executive Vice President from 1987 to 1995.
From 1984 through 1987, he worked for Dunn & Bradstreet as a Senior Auditor. Mr.
Ferrentino received a B.S. Degree in Accounting from St. John's University.
Dr. Glen Miller, age 59. Director since December 1995. Vice President -
Business Development of TeleData International, a telecommunications service
company. From 1990 to 1994, Dr. Miller was responsible for strategic planning
for the Harris Corporation. 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, and earned a Ph.D. from Columbia Pacific University.
Richard Barber, age 36. Director since December 1995. Partner at L.H.
Friskoff & Company, a certified public accounting firm. Mr. Barber is a member
of the American Institute of Certified Public Accountants, the New York State
Society of Certified Public Accountants and served as a committee member of the
New York State Real Estate Accounting Committee. Mr. Barber received a B.A.
Degree from Sheffield Polytechnic in the United Kingdom.
Peter D. Matthy, age 49. Principal of Tanglewilde Consulting. From 1979
through 1994, he held various senior positions with IBJ Schroder Bank & Trust
Company, including Executive Vice President-Director of Corporate Banking,
Chairman and Chief Executive Officer of IBJ Schroder Leasing Corp., and Chairman
and Chief Executive Officer of IBJ Schroder Capital Corp. Mr. Matthy earned a
B.S. Degree from Bucknell University and attended Dartmouth College Graduate
School of Credit and Finance.
<PAGE>
Keith Goldberg, age 34. Director since December 1995. Partner at J. Walter
Thompson Advertising. Previously, he worked for BBDO Advertising as an Associate
Creative Director from 1994 to 1995. From 1989 through 1994, he served as a Vice
President at Young & Rubicam. Mr. Goldberg is the recipient of several Clio and
Effie awards. He received a B.A. Degree in Communications from St. John's
University.
Each director shall hold office until the next annual meeting of the
stockholders or until his successor shall have been duly elected and qualified.
Other Directors
The individuals named below currently serve as directors of the Company,
but none of these individuals are standing for election. Certain of these
directors hold or have held positions with ARTRA GROUP Incorporated ("ARTRA"),
an affiliate of the Company, which owns approximately 25.4% of the Company's
currently issued and outstanding Common Stock. ARTRA is principally engaged in
the flexible packaging business. Pure Tech International, Inc. ("Pure Tech"),
which is engaged in manufacturing textiles, hose and tubing, is an affiliate of
the Company. John Harvey and Peter R. Harvey are brothers.
John Harvey, age 63. Chief Executive Officer from 1990 to April 1993,
Chairman of the Board from 1985 to December 1995, and a Director since 1982.
Chairman of the Executive Committee. Chairman of the Board and Chief Executive
Officer of ARTRA since 1968 and a Director of Pure Tech since 1995.
Peter R. Harvey, age 61. Director since 1982 and Vice President since 1995.
President, Chief Operating Officer and a Director of ARTRA since 1968 and a
Director of Pure Tech since 1995.
Austin A. Iodice, age 54. Director since 1990, Vice Chairman, President and
Chief Executive Officer from 1992 to December 1995. President of Ansa Company,
Inc. (baby bottles and accessories) from 1990 to present. Associated with
Technical Tape Incorporated (pressure sensitive tape) from 1964 to 1989 in
various capacities, including as a director and most recently as president and
chief executive officer from 1980 until 1989. Mr. Iodice served as the Chairman
and Chief Executive Officer of the Company's New Dimensions subsidiary until
shortly before it filed a voluntary petition under Chapter 11 of the Bankruptcy
Code in February 1993. New Dimensions was reorganized and emerged from the
protection of the Bankruptcy Code in May 1993, at which time Mr. Iodice was
reappointed to these offices. New Dimensions ceased operations in December 1994.
Alexander Verde, age 62. Director since 1990. President of AVS Marketing
Specialists Incorporated (sales and marketing) from 1974 to present.
Meetings of the Board of Directors
In 1994, the Board of Directors of the Company conducted two meetings. In
addition, the Board of Directors transacted business on seven other occasions by
unanimous written consent during 1994.
Committees
During 1994, there were three standing committees of the Board of
Directors: the Committee on Audit and Finance, the Committee on Compensation and
Options and the Executive Committee.
The Executive Committee's function was to generally supervise
the operations of the Company and develop organizational and managerial
structures for the Company. John Harvey and Peter R. Harvey served on the
Executive Committee during 1994, but the Executive Committee did not meet
in
such year. Following the election of the new directors at the annual meeting of
stockholders, the Company Executive Committee will be terminated.
The Committee on Audit and Finance has responsibility for
reviewing the professional services to be provided by the Company's
independent
auditors, the scope of the audit by the Company's independent auditors, the
annual financial statements of the Company, the Company's system of internal
accounting controls and such other matters with respect to the accounting,
auditing and financial reporting practices and procedures of the Company as it
<PAGE>
may find appropriate or as may be brought to its attention. Alexander Verde and
Austin Iodice served on the Audit Review Committee during 1994, but the
Committee did not meet in such year. Following the election of the new directors
at the annual meeting of stockholders, Dr. Glen Miller and Richard Barber are
expected to be appointed to serve on the Committee on Audit and Finance.
The Compensation Committee has responsibility for reviewing
executive salaries, administering the bonus and incentive compensation of the
Company, and approving the salaries and other benefits of the executive officers
of the Company. In addition, the Compensation Committee consults with the
Company's management regarding pension and other benefit plans, and compensation
policies and practices of the Company. Peter R. Harvey and Austin Iodice served
on the Compensation Committee in 1994, but the Committee did not meet during
such year. Following the election of the new directors at the annual meeting of
stockholders, Michael Ferrentino, Peter Matthy and Keith Goldberg are
expected
to be appointed to serve on the Compensation Committee, and on a Stock Option
Committee expected to be created to administer the Company's Long-Term
Investment Plan.
INFORMATION REGARDING EXECUTIVE OFFICERS
Michael Ferrentino. See "Management - Information Regarding Directors" for
information concerning Mr. Ferrentino.
Christopher P. Franco, age 36. Executive Vice President and Secretary of
the Company since December 1995. From 1993 to September 1995, Mr. Franco served
as Vice President and General Counsel of Spectrum Information Technologies, Inc.
("Spectrum") (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).
Mr. Franco received his B.S.B.A. in business administration from Georgetown
University and his J.D. from Southern Methodist University School of Law.
James D. Doering, age 58. Vice President and Chief Financial Officer of the
Company since 1988. Mr. Doering has also served as the Vice President, since
1980, Treasurer, since 1987, Chief Financial Officer, since
1988, and Controller, from 1980 to 1987, of ARTRA.
Peter R. Harvey. See "Management - Information Regarding Directors" for
information concerning Mr. Harvey.
Lawrence D. Levin, age 43. Controller of the Company since 1989 and
Assistant Chief Financial Officer of the Company since 1993. Mr. Levin has also
served as the Controller, since 1987, and Assistant Controller, from 1980 to
1987, of ARTRA.
Richard Mandra, age 47. Assistant Controller of the Company since 1993.
Vice President and Treasurer of the Company from 1985 to 1993 and from January
1995 to the present.
Officers are appointed by the boards of directors of COMFORCE and its
subsidiaries and serve at the pleasure of each respective board. There are no
family relationships among the executive officers and/or directors, nor are
there any arrangements or understandings between any officer and another person
pursuant to which he was appointed to office except as may be hereinafter
described.
<PAGE>
EXECUTIVE COMPENSATION
Directors' Compensation
Directors' fees of $1,000 per quarter were earned in 1994 by each
non-employee director of the Company. The Chairman, John Harvey, earned a fee of
$2,000 per month in 1994. Such fees were accrued but not paid in 1994.
Commencing in February 1996, non-employee directors will receive fees of $1,000
per quarter and $500 per meeting. In addition, the Company has proposed adopting
an amendment to the Long-Term Stock Incentive Plan, which, if adopted, will
entitle each non-employee director serving as a director on February 5, 1996 and
annually thereafter on the date any such non-employee director is elected or
re-elected by the stockholders, to receive options to purchase 5,000 shares of
the Company's common stock, unless the plan is subsequently amended as permitted
therein.
Executive Officer Compensation
The following table shows all compensation paid by the Company and its
subsidiaries for the fiscal years ended December 31, 1994, 1993 and 1992, to the
chief executive officer of the Company. No other executive officers of the
Company received compensation in excess of $100,000 in 1994.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
Options -
Name and Salary Number of All Other
Principal Positions Year Paid Bonus Shares Compensation
------------------- ---- ---- ----- ------ ------------
<S> <C> <C> <C> <C> <C>
Austin A. Iodice, Vice 1994 260,000 -0- -0- -0-
Chairman, Chief Executive 1993 260,000 -0- 370,419(2) -0-
Officer and President(1) 1992 125,000 -0- -0- -0-
- - - ----------------------------------
<FN>
(1) As of December 31, 1992, Mr. Iodice did not hold the title of chief
executive officer of the Company but acted in such capacity. In November and
December 1992, Mr. Iodice was engaged as a management consultant to New
Dimensions by New Dimension's bank lender. The consulting fees earned by Mr.
Iodice (for which the bank lender was reimbursed by the Company in 1993),
$125,000, are included in the salary column for Mr. Iodice for 1992.
(2) See the notes under "Principal Stockholders - Securities Ownership of
Management" and "Transactions with Management and Others" for a description of
the option granted to Mr. Iodice.
</FN>
</TABLE>
Option Values. The following table sets forth information concerning the
aggregate number and values of options held by Named Executives. None of the
Named Executives hold stock appreciation rights ("SARs") and none of the Named
Executives exercised any options in 1994.
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs Options/SARs at
at Fiscal Year End Fiscal Year End
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable(1) Unexercisable(2)
- - - ---------------- --------------- -------- --------------------- -----------------------
<S> <C> <C> <C> <C>
Austin A. Iodice 0 $ 0 370,419/ 0 $166,886/ $0
- - - ----------------------------------
<PAGE>
<FN>
(1) See the notes under "Principal Stockholders - Securities Ownership of
Management" for a description of the terms of the option granted to Mr. Iodice,
as well as other options granted to other executive officers of the Company.
(2) The listed option was issued at per share exercise price of $1.125 per
share. The market price of the Company's common stock as of the close of trading
on December 31, 1994 on the American Stock Exchange was $2.875. The value shown
in this column for in-the-money options is the amount by which the market price
at December 31, 1994 for all of the shares issuable upon Mr. Iodice's exercise
of his option exceeded the exercise price thereof.
</FN>
</TABLE>
Employment Agreements
The Company entered into employment agreements in December 1995 with
Michael Ferrentino, the President of the Company, and Christopher P. Franco, the
Executive Vice President and Secretary of the Company. Each agreement is for a
term of two years and is terminable by the Company only for "just cause." "Just
cause" includes the employee's consistent failure to follow written policies or
directions, wrongful conduct which has or is expected to have a material adverse
effect on the Company, material violations of the employment agreement and
disruption of a harmonious work environment, except that, following a change in
control of the Company, the term "just cause" is generally limited in
application to criminal acts. Under these agreements, each of Messrs. Ferrentino
and Franco are entitled to compensation of $150,000 annually plus such bonuses
as are awarded by the Board, and each are entitled to participate in the
Company's normal benefit programs. If the Company terminates either agreement,
the employee shall be entitled to receive full compensation and to continue to
participate in the Company's benefit programs for the greater of one year or the
balance of the term of the agreement, payable in full at the time of
termination. Each agreement contains customary confidentiality, non-disclosure
and employee non-solicitation provisions. See also "Transactions with Management
and Others" for a description of the consulting agreement and management
agreement entered into by the Company with certain companies controlled by James
L. Paterek and Austin A. Iodice, respectively.
Compensation Committee Interlocks and Insider Participation
During 1994, authority to determine the compensation of executive officers
was conferred upon the Company's Board of Directors or, in the case of officers
paid by New Dimensions, Rosecraft or Lawrence, by the respective boards of these
subsidiaries. However, except as described below in the case of Austin A.
Iodice, none of these boards considered the compensation of its officers in
1994. The decisions concerning the 1994 compensation of all of the executive
officers of the Company, except for Mr. Iodice, were made by Mr. Iodice. During
1994, Mr. Iodice served as the Vice Chairman, President and Chief Executive
Officer of the Company. Mr. Iodice's compensation was fixed by the terms of a
management agreement approved by the Board of Directors of the Company in 1992.
No deliberations regarding Mr. Iodice's compensation were held during 1994.
Although the Company has a Committee on Compensation and Options, this committee
did not meet in 1994. There are no interlocking relationships, as defined in the
regulations of the Securities and Exchange Commission, involving any of these
individuals. See "Transactions with Management and Others" for a description of
certain transactions entered into between the Company and Austin A. Iodice.
Report on Executive Compensation
Compensation of Executive Officers
The salaries paid during 1994 to the Company's executive officers were
either approved by Austin A. Iodice, then the Vice Chairman, President and Chief
Executive Officer of the Company, or, in the case of Mr. Iodice's compensation,
fixed pursuant to a management agreement approved by the Board in 1992. See
"Transactions with Management and Others." Mr. Iodice's decisions regarding
compensation were based upon various subjective factors such as the executive's
responsibilities, position, qualifications, individual performance and years of
experience. In no such case did he undertake a formal survey or analysis of
compensation paid by other companies. The terms of Mr. Iodice's employment
agreement were fixed based upon negotiations between Mr. Iodice and
representatives of the Company in 1992. In approving these terms, the Board
considered various subjective factors, but not undertake a formal analysis of
compensation paid by other companies.
<PAGE>
Deductibility of Compensation.
Effective January 1, 1994, the Internal Revenue Service under Section
162(m) of the Internal Revenue Code 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. Whether the Section 162(m) limitation with
respect to an executive will be exceeded and whether the Company's deductions
for compensation paid in excess of the $1 million cap will be denied will depend
upon the resolution of various factual and legal issues that cannot be resolved
at this time. As to options granted under any stock option plans, the Company
intends to endeavor to comply with the rules governing the Section 162(m)
limitation so that compensation attributable to such options will not be subject
to limitation under such rules. As to other compensation, while it is not
expected that compensation to executives of the Company will exceed the Section
162(m) limitation in the foreseeable future (and no officer of the Company
received compensation in 1994 which resulted under Section 162(m) in the
non-deductibility of such compensation to the Company), various relevant
considerations will be reviewed from time to time, taking into account the
interests of the Company and its stockholders, in determining whether to
endeavor to cause such compensation to be exempt from the Section 162(m)
limitation.
Submission of Report
This report on Executive Compensation is submitted by Austin A. Iodice.
Performance Information
Set forth below in tabular form is a comparison of the total shareholder
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 Consumer Sector Apparel Index (an industry
index which includes manufactures of jewelry and apparel). 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, 1989 through December 31, 1994.
PROPOSAL NO. 2 - RATIFICATION OF THE ISSUANCE OF STOCK TO CERTAIN PERSONS
On June 29, 1995, the Company entered into a letter agreement with
James L. Paterek, Michael Ferrentino and Christopher P. Franco, subsequently
amended as of October 6, 1995 (as amended, the "Letter Agreement"), pursuant to
which Messrs. Ferrentino and Franco agreed to serve as employees of, and Mr.
Paterek agreed to serve as a business consultant to, the Company to enable the
Company to enter into the telecommunications and computer staffing business. As
consideration for agreeing to provide such services to the Company, the Company
agreed to (i) issue to Messrs. Paterek, Ferrentino and Franco and one other
individual who agreed to serve as a Vice President of the Company, Kevin W.
Kiernan (collectively, the "Designated Individuals"), such number of shares of
Common Stock equal to 35% of the Company's issued and outstanding Common Stock
(together with certain anti-dilution rights); (ii) sell or otherwise dispose of
all or substantially all of the Company's interest in the fashion jewelry
business (the "Jewelry Business"); (iii) nominate four individuals selected by
the Designated Individuals to serve on the Company's Board of Directors (which
is to consist of eight directors); (iv) enter into two-year employment
agreements with Messrs. Ferrentino and Franco and a three-year business
consulting agreement with Mr. Paterek and (v) and issue to such individuals
stock options under the Company's Long-Term Stock Investment Plan. See
"Executive Compensation - Employment Agreements" and "Transactions with
Management and Others."
On October 6, 1995, 3,091,302 shares of the Company's Common Stock were
issued to the Designated Individuals. The Designated Individuals are entitled to
receive additional shares of the Company's Common Stock in order that their
ownership percentage of 35% of the Company's outstanding Common Stock will be
maintained following the transactions described below. The Designated
Individuals are not entitled to any other anti-dilution rights. ARTRA, then the
majority stockholder of the Company, previously approved the issuance of such
shares. The Company has agreed to make a loan of approximately $345,000 in the
aggregate to the Designated Individuals to cover their anticipated tax
liabilities resulting from these transactions, all on terms to be negotiated.
<PAGE>
The Board of Directors of the Company believes that it is in the interests
of the Company that the Designated Individuals assist the Company in developing
a technical staffing business. Accordingly, the Board is requesting that the
stockholders ratify the agreements entered into with the Designated Individuals.
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.
PROPOSAL NO. 3 - RATIFICATION OF THE YIELD TRANSACTIONS
Descriptions of the Transactions
Due to continuing losses in the Company's fashion jewelry operations and
the erosion of the markets for its products, the Company determined to seek to
enter into another line of business. On October 17, 1995, the Company acquired
all of the capital stock of YIELD. YIELD provides telecommunications and
computer technical staffing services worldwide primarily to Fortune 500
companies and maintains an extensive, global database of technical specialists,
with an emphasis in wireless communications capability. ARTRA, then the majority
stockholder of the Company, approved these transactions.
The purchase price for the YIELD stock was $6 million, net of cash acquired
and 450,000 shares of the Company's common stock issued as consideration for
various fees and guarantees associated with the transaction. The cash
consideration included net cash payments to the selling shareholders of
approximately $5.1 million. The 450,000 shares issued by the Company consisted
of (i) 100,000 shares issued to an unrelated party for guaranteeing certain of
the Company's obligations, (ii) 100,000 shares issued to ARTRA in consideration
of its agreeing to enter the Assumption Agreement described below, (iii) 100,000
issued to an unrelated party for advisory services in connection with the
acquisition, and (iv) 150,000 shares issued to Peter R. Harvey, a Vice President
and director of the Company, in consideration of his assumption of certain of
the Company's existing obligations and agreement to indemnify the Company for
certain of its potential future obligations.
In conjunction with the YIELD acquisition, the Company and ARTRA entered
into an Assumption Agreement dated as of October 17, 1995 (the "Assumption
Agreement") under which ARTRA agreed to pay and discharge all of the liabilities
and obligations of the Company then outstanding, including indebtedness,
corporate guarantees, accounts payable and environmental liabilities. ARTRA also
agreed to assume responsibility for all of liabilities of the Jewelry Business
from and after October 17, 1995, and is entitled to receive the net proceeds, if
any, from the sale thereof.
In October, 1995, in order to fund the acquisition of YIELD and meet
certain working capital requirements, the Company sold 1,863,338 shares of its
Common Stock in a private offering in units consisting of one share of Common
Stock with a detachable warrant to purchase one-half share of Common Stock
(931,669 shares in the aggregate) for a selling price of $3.00 per unit. The
gross proceeds from the offering were $5,590,000. The exercise price of the
warrants is $3.375 per share (the market price of the shares on the date of
grant, October 17, 1995, as reported on the American Stock Exchange), and the
warrants are immediately exercisable for a three-year period which ends October
17, 1998.
In order to facilitate the YIELD transactions, ARTRA agreed to exchange all
of the Series C Preferred Stock of the Company then held by it (9,701 shares,
which constituted all of the issued and outstanding Preferred Stock of the
Company) for 100,000 shares of the Company's Common Stock. As the holder of all
of the outstanding shares of Series C Preferred Stock, ARTRA was entitled to
receive dividends at the per annum rate of 13% of the liquidation value thereof.
The liquidation value of the Series C Preferred Stock was $2,011.65 per share or
$19.5 million in the aggregate, being the sum of (i) initial selling price
thereof ($1,288.94 per share or $12.5 million in the aggregate) and (ii) the
amount of unpaid, cumulated dividends thereon ($722.71 per share or $7 million
in the aggregate). ARTRA had previously agreed to a moratorium on the
accumulation of additional dividends on the Series C Preferred Stock. See
"Proposal No. 4 - Amendment of the Company's Certificate of Incorporation -
Description of the Company's Capital Stock."
In the second quarter of 1995, due to the continued losses from the
operations of the Jewelry Business and the Company's inability to obtain
conventional bank financing, the Company determined that its remaining goodwill
<PAGE>
balance could no longer be recovered over its remaining life through forecasted
future operations. Accordingly, the Company recorded a charge against operations
of $12.9 million to write-off the goodwill of the Jewelry Business at June 30,
1995. In September 1995, the Company adopted a plan to discontinue the Jewelry
Business and recorded a provision of $1 million for the estimated costs to
complete disposal of this business. The Company is presently seeking offers to
purchase all or any portion of the Jewelry Business.
The Board of Directors of the Company believes that it is in the interests
of the Company to approve the foregoing transactions, all of which it regards as
integrated, to enable the Company to enter into the technical staffing business.
The Board does not believe that the Company could long continue operating only
the Jewelry Business, which has continued to deteriorate. Accordingly, the Board
is requesting that the stockholders ratify the foregoing transactions.
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.
PROPOSAL NO. 4 - AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
Description of the Company's Capital Stock
As of December 15, 1995, the authorized capital stock of the Company
consisted of (i) 10,000,000 shares of common stock having a par value of $.01
per share, of which 8,960,770 shares have been issued and are were outstanding,
and (ii) 1,000,000 shares of Preferred Stock, par value $0.01 per share, which
may be issued in one or more series with such rights and preferences as
determined by the Board of Directors, none of which were issued and outstanding
as of such date. As of such date, there were approximately 5,600 holders of
record of the Company's common stock.
The common stock of the Company is not subject to any conversion or
redemption provisions and the holders thereof are not provided any pre-emptive
rights. All outstanding shares of the common stock of the Company are fully-paid
and non-assessable. Each share of common stock has equal voting rights and each
share shall be entitled to one vote in all matters in which stockholders shall
be entitled to vote. The Certificate of Incorporation provides for cumulative
voting in the election of directors. Therefore, every stockholder entitled to
vote for directors shall have the right, in person or by proxy, to multiply the
number of votes to which he or she may be entitled by the total number of
directors to be elected in the same election, and he or she may cast the whole
number of such votes for one candidate or may distribute them among any two or
more candidates. Without cumulative voting, the holders of a majority of the
shares present or represented at an annual meeting would be able to elect all
the directors to be elected at that meeting, and no person could be elected
without the support of a majority of the stockholders.
The Company has not paid any cash dividends on its common stock in recent
years and does not anticipate paying any such dividends in the foreseeable
future.
The Certificate of Incorporation of the Company authorizes its Board of
Directors to establish series or classes of preferred stock and fix the rights,
preferences, privileges and restrictions thereof. The Board is authorized to
issue up to 1,000,000 shares of preferred stock (proposed to be increased to
10,000,000 shares). Delaware law provides that if any proposed amendment to the
certificate of incorporation of a corporation adversely affects the preferences,
limitations or special rights of any class of shares, then the holders of shares
of such class are entitled to vote as a class as to such amendment. However,
since the holders of common stock approved an amendment to the certificate of
incorporation of the Company which permits the Board of Directors to authorize
the issuance of new series of preferred stock with such rights (including voting
rights) and preferences as fixed by the Board of Directors, the holders of
common stock will not have the right to vote, whether as class or otherwise, to
authorize the issuance of new series of preferred stock with preferences as to
dividends and distributions on liquidation.
By authorizing and issuing preferred stock with particular rights, the
Company might be able to deter a hostile acquisition. For example, the Company
could issue shares of preferred stock with extraordinary voting rights or
liquidation preferences to make it more difficult for a hostile acquirer to gain
control of the Company. In addition to the anti-takeover effect of the issuance
of preferred stock, holders of preferred stock have a preferred position over
<PAGE>
holders of common stock on liquidation, the right to a fixed or minimum dividend
before any dividend is paid (or accrued) on common stock, and the right to
approve certain extraordinary corporate matters.
Amendment of Certificate of Incorporation
The Board of Directors of the Company has unanimously approved and
recommended the adoption by the stockholders of the following amendment to the
Company's Certificate of Incorporation, which would increase the number of
authorized shares of Common Stock and Preferred Stock:
RESOLVED; that the first paragraph of Article FOURTH of the Certificate of
Incorporation of the Corporation be amended and restated to read as
follows:
FOURTH. The total number of shares which the Corporation shall have
authority to issue is Fifty Million (50,000,000) of which Forty Million
(40,000,000) shall be Common Stock with par value of one cent ($0.01)
per share and Ten Million (10,000,000) shall be Preferred Stock with
par value of one cent ($0.01) per share.
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.
PROPOSAL NO. 6 - AMENDMENT TO STOCK OPTION PLAN
Background Information
On October 12, 1993, the Board of Directors of Lori approved a proposed
Long-Term Stock Investment Plan of the Company (the "Plan" or the "Stock Option
Plan") which authorizes the grant of options to purchase the Company's common
stock to executives, key employees and agents of the Company and its
subsidiaries. At the December 16, 1993 meeting of the stockholders of the
Company, the stockholders approved the Plan.
Proposed Amendment
The Board has approved amendment to the Plan to (i) increase the maximum
number of shares which may be issued under such Plan from 1,500,000 to 3,000,000
shares, and (ii) provide for the grant of options to non-employee directors. A
copy of the proposed amendment to the Plan is set forth in Appendix A to this
Proxy Statement. The Board believes that the additional shares are needed to
attract and retain talented management personnel. The Board further believes
that a mechanism needs to be established, consistent with applicable Federal
securities and tax laws, to enable the Company to grant stock options to
non-employee directors which will enable them to qualify to serve as
administrators of the Plan as disinterested directors or members of the Stock
Option Committee without adversely affecting the tax status of incentive stock
options or the treatment of any options under Section 16(b) of the Securities
Exchange Act of 1934. Under the amendment proposed, each non-employee director
serving as a director on February 5, 1996 and annually thereafter on the date
any such non-employee director is elected or re-elected by the stockholders, is
entitled to receive options to purchase 5,000 shares of the Company's common
stock, unless the plan is subsequently amended as permitted therein. The
amendment provides that these options will vest on the first anniversary of the
date of grant and will terminate 10 years from the date of grant.
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.
Participation in the Plan
Set forth below is a table which provides certain information concerning
option awards to the executive officers included in the Summary Compensation
Table, all current executive officers as a group, all non-executive officer
directors as a group and all non-executive officer employees as a group. All of
the options granted under the Plan are
<PAGE>
exercisable for a period of 10 years, subject to earlier termination of the
right of employees (but not agents who are not employees) to exercise their
options as described below under "Summary of the Plan - Term of Options," upon
death or termination of employment. The options described in this table are
those presently determinable. As more fully described below under "Summary of
the Plan - Administration" and "- Eligibility," the Board of Directors (or a
committee appointed by the Board) has discretion to issue such number of options
to such of the officers, key employees, agents or consultants of the Company who
occupy responsible managerial or professional positions or who have the
capability of making substantial contributions to the success of the Company as
the Board or the committee determines. Accordingly, the options shown in the
"New Plan Benefits" table should not be regarded by stockholders as the only
options that can or will be issued under the Plan should it be approved and
adopted by the stockholders.
NEW PLAN BENEFITS
COMFORCE Corporation Long-Term Stock Investment Plan
Number
Names and Position Dollar Values(1) of Units
------------------ ---------------- --------
Austin A. Iodice, formerly Vice 1,875,246 370,419
Chairman, Chief Executive Officer and
Pres.
All Current Executive Officers (as a 926,438 183,000
group) (6 persons)
Non-Executive Officer Directors (as a 2,300,490 454,419
group) (6 persons)
Non-Executive Officer Employees (as a 513,843 101,500
group) (5 persons)(2)
(1) The Dollar Value of the Options granted is the amount by which the market
price of the Company's common stock as reported on the American Stock Exchange
as of December 13, 1995 ($6.1875) exceeds the exercise price of the options
granted (being the market price of the Company's common stock as of the business
day ended prior to the date of grant). The Board of Directors originally
authorized the issuance of the options on March 16, 1993 at a $1.125 per share
exercise price (being the closing price on March 15, 1993).
(2) In addition to these options, Anthony Giglio, an agent formerly responsible
for providing certain management services to the Company and its operating
subsidiaries, received options to purchase 185,209 shares of the Company's
common stock at an exercise price of $1.125 per share resulting in a benefit
(calculated in the same manner as in this table) of $937,621.
Summary of the Plan
The following summary of the Plan as proposed to be amended is qualified by
reference to the full text of the Plan, a copy of which will be made available
to any stockholder, without charge, upon request. The proposed amendment is set
forth in Annex A to this Proxy Statement.
Purposes. The purposes of the Plan are to: (1) closely associate the
interests of the management of the Company with the stockholders by reinforcing
the relationship between participants' rewards and stockholder gains; (2)
provide management with an equity ownership in the Company commensurate with
Company performance, as reflected in increased stockholder value; (3) maintain
competitive compensation levels; and (4) provide an incentive to management for
continuous employment with the Company.
<PAGE>
Administration. The Plan will be administered by the Board of Directors of
the Company or, if directed by the Board, a Committee of disinterested persons
appointed by the Board (the "Committee"). The Committee, which will be subject
to the supervision of the Board, will be of such size, will have such authority
and will have such members as the Board determines from time to time, and shall
include at least two members of the Board to the extent two disinterested
members are available and agree to serve on the Committee. As used in this
Summary, the term "Administrator" means the Board of Directors or, to the extent
authority for any right or obligation is delegated to the Committee, means the
Committee.
Eligibility. Participants in the Plan will be selected by the Administrator
from the executive officers and other key employees of the Company who occupy
responsible managerial or professional positions and who have the capability of
making a substantial contribution to the success of the Company. In addition,
key non-employee consultants and agents who have the capability of making a
substantial contribution to the success of the Company may also be allowed to be
participants in the Plan. In making this selection and in determining the form
and amount of awards, the Administrator will 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. As proposed to be amended, non-employee
directors will be eligible to participate in the Plan through non-discretionary
annual grants of non-qualified options to purchase 5,000 shares. See
"Non-employee Directors." Consequently, references in this summary to action
taken in the discretion of the Administrator do not apply to such
non-discretionary grants to non-employee directors.
Types of Options and Rights. Three types of options or rights are permitted
under the Plan: stock options, incentive stock options, and alternate
appreciation rights. A stock option is an option to purchase the Company's
common stock that may be granted to any participant. An incentive stock option
is an option that qualifies for favorable Federal income tax treatment.
Incentive stock options may only be granted to employees. An alternate
appreciation right is a right to receive shares of the Company's common stock
having a value equal to the amount by which the market price thereof exceeds the
exercise price of options held by the participant. Alternate appreciation rights
may be issued concurrently with or following the issuance of stock options or
incentive stock options.
Exercise Price of Options. The option price per share of common stock
deliverable upon the exercise of an Option is the closing price of the common
stock as reported on the American Stock Exchange on the trading day last ended
prior to the time the option is granted, except that option price per share of
incentive stock options granted to an owner of 10% or more of the total combined
voting power of the Company and its subsidiaries will be 110% of such closing
price.
Term of Options. Each option is fully exercisable six months from the date
of its grant and unless a shorter period is provided by the Administrator, may
be exercised during an option term of 10 years from the date of grant. Upon the
death of the participant, any option rights to the extent exercisable on the
date of death may be exercised by the participant's estate within both the
remaining effective term of the option and one year after the participant's
death (except that alternative appreciation rights are not exercisable after
death). Upon termination of participant's death (except that alternative
appreciation rights are not exercisable after death). Upon termination of a
participant's employment by reason of retirement or permanent disability (as
each is determined by the Administrator), the participant may exercise any
options to the extent such options remain exercisable during a 36-month period
following termination (six months in the case of alternative appreciation
rights). Upon termination of a participant's employment for any other reason,
the participant may exercise any options to the extent such options remain
exercisable during a three-month period following termination (except that
alternative appreciation rights are not exercisable after any such termination).
No awards may be made under the Plan after December 31, 2002. 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. The Plan does not provide for the termination of options
held by agents or consultants upon death of the optionee or termination of the
parties' relationship; rather, the termination of the options is governed by the
contractual relationship between the parties (except that the options cannot
exceed 10 years in duration).
Maximum Amount of Option Grants. Shares of stock which may be issued under
the Plan will be authorized and unissued or treasury shares of common stock of
the Company. The maximum number of shares of common stock which may be issued
under the Plan will be 3,000,000. The aggregate fair market value (determined on
the date the option is granted) of common stock subject to incentive stock
options in any calendar year will not exceed $100,000.
<PAGE>
Alternative Appreciation Rights. Concurrently with or subsequent to the
award of any option, the Administrator may award to any participant a related
alternate appreciation right, permitting the participant to be paid the
appreciation on the option in lieu of exercising the option. A participant who
has been granted alternate rights may, in lieu of the exercise of an equal
number of options, elect to exercise one or more alternate rights and thereby
become entitled to receive from the Company payment in common stock for the
appreciation of his options.
Non-employee Directors. Under the amendment proposed, each non-employee
director will receive options to purchase 5,000 shares of the Company's Common
Stock on February 5, 1996 and annually thereafter on the date any such
non-employee director is elected or re-elected by the Stockholders. Such options
are to vest on the first anniversary of the date of grant, and shall exercisable
10 years from the date of grant.
Amendment of the Plan. The Board of Directors of the Company may, without
further action by the stockholders and without receiving further consideration
from the participants, amend the Plan or condition or modify awards under the
Plan in response to changes in securities or other laws or rules. The Board may
also at any time terminate or modify or amend the Plan in any respect, except
that without stockholder approval the Board may not (i) increase the maximum
number of shares of common stock which may be issued under the Plan (other than
for certain adjustments as a result 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), (ii)
extend the period during which any award may be granted or exercised, or (iii)
extend the term of the Plan. As proposed to be amended, the provisions of the
Plan relating to non-employee directors cannot be amended more than once every
six months.
PRINCIPAL STOCKHOLDERS
Securities Ownership of Certain Beneficial Owners
The following table sets forth the number of shares and percentage of
Common Stock beneficially owned as of December 15, 1995 by the only stockholder
known by management of COMFORCE to own 5% or more of COMFORCE's $.01 par value
Common Stock as of December 15, 1995. As of such date, there were 8,960,770
shares of common stock issued and outstanding.
Name and Address of Number of Shares Percentage of Shares
Beneficial Owner Beneficially Owned Beneficially Owned
---------------- ------------------ ------------------
ARTRA GROUP Incorporated 2,301,036 25.6%
500 Central Avenue(1)(2)
Northfield, Illinois 60093
James L. Paterek(3) 1,324,844 14.7%
86 South Drive
Plandome, New York 11030
Michael Ferrentino(3) 794,907 8.8%
2001 Marcus Avenue
Lake Success, New York 11042
Christopher P. Franco(3) 794,907 8.8%
2001 Marcus Avenue
Lake Success, New York 11042
- - - -----------------------
<PAGE>
(1) John Harvey and Peter R. Harvey, each of whom serves as an officer and
director of the Company, control the management and operations of ARTRA, which
owns 25.6% of the Company's common stock. Insofar as they are deemed beneficial
owners of the Company's shares owned of record by ARTRA, Peter R. Harvey owns
2,495,869 shares (27.6%) of the Company's Common Stock and John Harvey owns
2,370,669 shares (26.2%) of the Company's Common Stock. Each such person
maintains a business address at 500 Central Avenue, Northfield, Illinois 60093.
(2) ARTRA, through a wholly-owned subsidiary, Fill-Mor Holding, Inc.
("Fill-Mor"), a Delaware corporation (hereinafter all holdings of Fill-Mor are
referred to as ARTRA's), presently owns 2,301,036 shares of record (25.6% of the
outstanding common stock of COMFORCE).
(3) The shares beneficially owned by Mr. Paterek, Mr. Ferrentino, the
President and a Director of the Company, and Mr. Franco, the Executive Vice
President of the Company, are owned of record by each such person. Furthermore,
Messrs. Paterek, Ferrentino and Franco are each entitled to receive additional
shares, so that, in accordance with the terms of the Letter Agreement, the
percentage of shares beneficially owned by them and Kevin W. Kiernan, a Vice
President of the Company, will collectively be maintained at 35% of the
Company's outstanding Common Stock (and will preserve the ownership percentages
shown in the table) during the immediate future. Mr. Ferrentino and Mr. Franco,
along with Mr. Kiernan, (a beneficial owner of 176,644 shares of Common Stock),
have entered into a voting trust agreement with respect to the shares held of
record by them to ensure that all such shares are voted in the manner directed
by Mr. Ferrentino. However, Mr. Ferrentino, Mr. Franco and Mr. Kiernan have
disclaimed beneficial ownership of shares held of record by the other
participants in the voting trust.
Securities Ownership of Management
The following table sets forth the number and percentage of COMFORCE's
$.01 par value Common Stock known by management of the Company to be
beneficially owned as of December 15, 1995 by (i) all directors of COMFORCE,
(ii) Austin A. Iodice, the only executive officer included in the Summary
Compensation Table, and (iii) all directors, executive officers and other key
employees of COMFORCE as a group (12 persons). Unless stated otherwise, each
person so named exercises sole voting and investment power as to the shares of
Common Stock so indicated.
<TABLE>
<CAPTION>
Name of Number of Shares Percentage of Shares
Beneficial Owner Beneficially Owned Beneficially Owned
---------------- ------------------ ------------------
<S> <C> <C>
Michael Ferrentino 794,907 8.8%
Austin A. Iodice(1) 370,419 4.0%
Alex Verde(2) 165,000 1.8%
Peter R. Harvey(3) 190,500 2.1%
John Harvey(4) 69,0000 0.8%
Dr. Glen Miller -- --
Richard Barber -- --
Keith Goldberg -- --
Directors and officers as a group 2,534,759 26.2%
(12) persons)(5)
</TABLE>
(1) The shares beneficially owned by Mr. Iodice consist of 370,419
shares issuable upon the exercise of an option held by Nitsua, Ltd., a
corporation wholly-owned by Mr. Iodice (granted under the Option Plan), which
expires March 15, 2003 at an exercise price of $1.125 per share. See paragraph 1
under "Transactions with Management and Others."
<PAGE>
(2) The shares beneficially owned by Mr. Verde consist of 150,000
shares owned directly by Mr. Verde and 15,000 shares issuable upon the exercise
of an option held directly by him (granted under the Option Plan) which expires
March 15, 2003 at an exercise price of $1.125 per share.
(3) The shares beneficially owned by Mr. Peter R. Harvey consist of
150,500 shares owned directly by him and 40,000 shares issuable upon the
exercise of an option held directly by him (granted under the Option Plan) which
expires March 15, 2003 at an exercise price of $1.125 per share.
(4) The shares beneficially owned by Mr. John Harvey consist of 69,000
shares issuable upon the exercise of an option held directly by him (granted
under the Option Plan) which expires March 15, 2003 at an exercise price of
$1.125 per share.
(5) The shares beneficially owned by these persons include (i)
1,739,840 shares owned of record, and (ii) 528,419 shares in the aggregate
issuable upon the exercise of options granted under the Option Plan held by such
officers and directors as a group (including those shares issuable pursuant to
options described in the notes above), which options expire March 15, 2003, at
an exercise price of $1.125 per share.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
1. In August 1982, ARTRA acquired 36.6% of the issued and outstanding
common shares of the Company plus preferred shares for $2,250,000 (the
"Investment"). The Investment was carried at cost plus equity in undistributed
earnings (loss) since the date of acquisition, less the amortization over a
25-year period of the excess of cost over the equity in the Company's net assets
at the date of acquisition.
In February 1985, the Company acquired in an arms-length transaction
negotiated by management of ARTRA, through a wholly-owned subsidiary, all of the
issued and outstanding shares of New Dimensions, a creator and distributor of
fashion jewelry, for consideration of $28,500,000 including cash of $21,850,000,
a $3,000,000 9% promissory note due February 8, 1990 (which was prepaid), an
earnout equal to 20% of New Dimension's pre-tax earnings during the calendar
years 1985 through 1989 and 200,000 shares of Common Stock delivered from its
treasury with an agreed fair market value of $20.00 per share or $4,000,000. The
delivery of ARTRA's shares to the former stockholders of New Dimensions was
approved by ARTRA's stockholders at their July 18, 1985 annual meeting.
In exchange for the 200,000 shares of its Common Stock, ARTRA received
534,878 shares of the Company's common stock (thereby increasing its ownership
of the Company from 36.6% to 55.9%) and 10,000 shares of the Company's Series B
Preferred Stock convertible into additional Company common shares. In exchange
for the cancellation of advances by ARTRA to the Company, amounting to
$6,457,000 as of January 31, 1985, and an additional cash advance by ARTRA to
the Company of $7,300,000, which latter sum was used by the Company to acquire
New Dimensions, ARTRA received 10,000 shares of the Company's Series A Preferred
Stock.
In August 1985, the Company's stockholders approved a 1-for-30 reverse
split of all authorized, issued, outstanding and reserved shares of common
stock, increased the number of resulting authorized shares of the Company's
common stock from 1,833,333 to 6 million and approved a 1-for-10 reverse split
of all issued, outstanding and reserved shares of its preferred stock. ARTRA
then converted its shares of the Company's Series B Preferred Stock into
1,099,108 shares of the Company's common stock, thereby increasing its ownership
interest in the Company to 72.8%.
In December 1985, ARTRA purchased 50,000 of the Company's common stock
purchase warrants (14.4% of the 347,600 outstanding common stock purchase
warrants) for $391,000. The warrants were issued in conjunction with a 1985 New
Dimensions bond offering. The warrants, as adjusted, provided for the purchase
of 75,000 of the Company's shares at $12.00 per share and were convertible into
the Company's common stock at the rate of 0.375 shares of the
<PAGE>
Company's common stock for each warrant. In September 1990 ARTRA converted such
warrants and received 18,750 shares of the Company's common stock therefor.
ARTRA and a wholly-owned subsidiary of ARTRA held notes from the Company at
February 1, 1993 in the amount of $15,990,000 which were due April 1, 1994. Due
to the limited ability of the Company to receive funds from its operating
subsidiaries, effective July 1, 1989 ARTRA placed an indefinite moratorium on
the accrual of interest on its Company note and declaration of dividends on its
Company preferred stock. In February 1993, ARTRA and this wholly-owned
subsidiary transferred these notes to the Company's capital account.
During the nine months ended September 30, 1995, ARTRA made advances of
$365,000 to the Company. In August 1994, ARTRA entered into a $1,850,000
short-term loan agreement with a non-affiliated corporation, the proceeds of
which were advanced to the Company and used to fund amounts due the Company's
bank. The loan, due June 30, 1995, was collateralized by 100,000 shares of the
Company's common stock. In August 1995, these shares were transferred to the
lender in consideration of extending the loan and the carrying value of these
100,000 shares ($700,000) was transferred to ARTRA as reduction of amounts due
ARTRA.
During 1994, ARTRA made net advances to the Company of $2,531,000. The
advances consisted of a $1,850,000 short-term note with interest at 10%, the
proceeds of which were used to fund the $1,900,000 cash payment to the bank in
conjunction with the amended settlement agreement with the Company's bank lender
(described in paragraph 4 of "Transactions with Management and Others"), and
certain non-interest bearing advances used to fund the Company's working capital
requirements. Effective December 29, 1994, ARTRA exchanged $2,242,000 of its
notes and advances for additional Company Series C preferred stock.
Additionally, the settlement agreement entered into with the Company's bank
lender required ARTRA to contribute cash of $1,500,000 and ARTRA common stock
with a fair market value of $2,500,000 to the Company's capital account in
August 1994.
ARTRA, as the holder of the Series C Preferred Stock, was entitled to
receive dividends at the per annum rate of 13% of the liquidation value thereof
before any distributions in liquidation of the assets of the Company could be
paid in respect of the Common Stock. As of December 14, 1995, the liquidation
value of the Series C Preferred Stock was $2,011.65 per share or $19.5 million
in the aggregate, being the sum of (i) initial selling price thereof ($1,288.94
per share or $12.5 million in the aggregate) and (ii) the amount of unpaid,
cumulated dividends thereon ($722.71 per share or $7 million in the aggregate).
Dividends on the Series C Preferred Stock were cumulated quarterly from the date
of issuance until July 1, 1989. On July 1, 1989, a moratorium on the
accumulation of dividends on the Series C Preferred Stock became effective. In
connection with the YIELD transactions described under "Proposal No. 3 -
Ratification of the YIELD Transactions," ARTRA agreed to exchange all of the
Series C Preferred Stock (and dividends accrued thereon) for 100,000 shares of
Common Stock. This exchange was effected as of December 15, 1995.
ARTRA provides certain financial, accounting and administrative services
for the Company's corporate entity. Additionally, the Company's corporate entity
leases its administrative office space from ARTRA. During 1994, 1993 and 1992
fees for these services amounted to $151,000, $115,000 and $307,000,
respectively. Prior to February, 1993, these fees were added to the Company's
note to ARTRA. During 1993 and 1992 the Company made net payments (borrowing) on
the ARTRA note of $35,000 and $(44,000), respectively. In February, 1993, ARTRA
contributed its notes to the Company's capital. Subsequent to February 1993, the
Company made net payments to ARTRA of $139,000 and $115,000 in 1994 and 1993,
respectively, for administrative services.
The Company and ARTRA entered into the Assumption Agreement in October
1995, under which ARTRA agreed to pay and discharge all of the liabilities and
obligations of the Company then outstanding, including indebtedness, corporate
guarantees, accounts payable and environmental liabilities. ARTRA also agreed to
assume responsibility for all of the assets of the Jewelry Business and is
entitled to receive the net proceeds, if any, from the sale thereof.
<PAGE>
2. In April 1993, the Company entered into a management agreement with
Nitsua, Ltd. ("Nitsua"), a corporation wholly-owned by Austin A. Iodice, then
the Vice Chairman, President and Chief Executive Officer of the Company. This
management agreement was approved and accepted by the Company's New Dimensions,
Rosecraft and Lawrence subsidiaries (the "Jewelry Subsidiaries"). Pursuant to
the terms of this agreement, Mr. Iodice had all of the responsibilities of a
chief executive officer of the Company and the Jewelry Subsidiaries (subject to
the supervision of the boards of directors of the Company and the Jewelry
Subsidiaries). Mr. Iodice continues to fulfill these responsibilities in respect
of the Jewelry Business. The agreement terminates on March 31, 1996, subject to
earlier termination by the Company for "cause." "Cause" includes the disability
of Mr. Iodice (or other designated agent), breach of the agreement by Mr. Iodice
(or other designated agent), fraud, dishonesty, commission of a felony or the
like, or the other failure of Mr. Iodice (or other designated agent) to
reasonably perform its duties under the agreement.
As compensation for its services under the agreement, Nitsua is entitled to
receive (i) a management fee of $260,000 per annum, (ii) reimbursement of all
documented expenses reasonably incurred by Nitsua in connection with the
performance of its duties, (iii) options to purchase 370,419 shares of the
Company's common stock at an exercise price of $1.125 per share or stock
appreciation rights, exercisable for a period of 10 years, subject to certain
adjustments.
The agreement to grant to Nitsua fully vested options (under the Option
Plan) to acquire 370,419 shares of the Company's common stock is subject to the
following conditions: If, in the opinion of the Company's tax advisors, the
exercise of these options would more likely than not cause the Company to be
unable to utilize a substantial amount of its net operating loss carryforwards
("NOL's") for Federal income tax purposes, then the options cannot be exercised
to the extent the exercise would result in the Company being unable to utilize
its NOL's. In the event any of these options cannot be exercised, the number of
shares prohibited from being exercised will convert into stock appreciation
rights and provide a cash payment equal to the gain in market price from the
date of grant to the date of exercise on such prohibited shares.
On October 1, 1993, Mr. Iodice made a short term loan to BCA Holdings Inc.
and A G Holding Corp., subsidiaries of the Company's parent, ARTRA, in the
principal amount of $150,000 bearing interest at the rate of 15% per annum. This
loan was repaid in January 1994. As consideration for making this loan, Mr.
Iodice received warrants to purchase 15,000 shares of ARTRA's common stock at an
exercise price of $5.375 per share, which warrants expire October 1, 1998.
3. As described in Note 4 to the Consolidated Financial Statements for the
year ended December 31, 1994, the Company, its operating subsidiaries, ARTRA and
Fill-Mor, entered into a settlement agreement with its bank lender, IBJ Schroder
Bank & Trust Company ("Schroder") on August 18, 1994, as amended December 23,
1994, to discharge the indebtedness of the Company, its operating subsidiaries
and Fill-Mor aggregating approximately $25,000,000. Upon payment of certain sums
and satisfaction of certain conditions, this indebtedness was reduced to
$10,500,000 (of which $7,855,000 was attributable to the obligations of the
Company and its subsidiaries and $2,645,000 was attributable to the obligations
of Fill-Mor). Under the terms of the amended settlement agreement with Schroder,
this remaining indebtedness was to be discharged upon payment to Schroder of
$750,000 by March 31, 1995 and upon ARTRA's registration of certain shares of
its common stock.
The Company did not have sufficient funds available to repay this
indebtedness. Accordingly, on March 31, 1995, Alex Verde, a director of the
Company, entered into an assignment agreement with Schroder to purchase this
indebtedness for $750,000, and advanced an additional $100,000 to the Company.
In this connection, Mr. Verde and the Company also entered into an agreement
whereby he reduced this indebtedness to $850,000 in consideration of the
Company's issuance to him of 150,000 shares of its common stock valued at
$337,500 ($2.25 per share) based upon closing market value of the shares on
March 30, 1995. The principal amount of the loan was reduced to $775,000 at June
30, 1995 and further reduced to $750,000 at July 31, 1995. The remaining loan
principal was not repaid on its scheduled maturity date of July 31, 1995. Under
the terms of the loan agreement, Mr. Verde received an additional 50,000 shares
of the Company's common stock as compensation for the non-payment of the loan at
its originally
<PAGE>
scheduled maturity. The maturity date of the loan was subsequently extended to
September 30, 1995. ARTRA assumed the obligation to repay this loan under the
terms of the Assumption Agreement entered into with the Company.
4. See "Proposal No. 3 - Ratification of the YIELD Transactions -
Description of the Transactions" for a description of various additional
transactions entered into between the Company and each of ARTRA and Peter R.
Harvey, which description is incorporated herein by reference.
5. See "Executive Compensation - Employment Agreements" for a description
of the employment agreements entered into between the Company and each of
Michael Ferrentino and Christopher P. Franco, which description is incorporated
herein by reference.
6. See "Proposal No. 2 - Ratification of the Issuance of Stock to Certain
Persons" for a description of certain transactions entered into between the
Company and each of James L. Paterek, Michael Ferrentino and Christopher P.
Franco, which description is incorporated herein by reference. In addition,
Yield Industries, Inc., a corporation wholly-owned by Messrs. Paterek and
Ferrentino earned a delivery fee of $500,000 in connection with the Company's
acquisition of YIELD, $250,000 of which has been paid and the balance of which
is payable on January 2, 1996.
7. In October 1995, the Company has entered into a consulting agreement
with Tarek Corporation ("Tarek"), which is a corporation wholly-owned by James
L. Paterek, the holder of approximately 14.7% of the Company's issued and
outstanding Common Stock. Mr. Paterek, age 34, was a founder of YIELD and served
as its President from 1985 to September 1995. Tarek has agreed to engage Mr.
Paterek to perform the services required under the agreement. Under the terms of
the agreement, Tarek has agreed to devote at least 50 hours per month performing
services for the Company. The agreement is for a term of three years and is
terminable by the Company only for "good cause." "Good cause" includes Paterek's
fraud, misappropriation of Company assets, or the commission of a felony during
the term of the agreement which is directly related to the Company and causes it
material harm. Tarek has the right to terminate the agreement upon 30 days
notice or immediately in the event of a change in control. Under this agreement,
the consultant is entitled to compensation of $157,000 annually plus
reimbursement for expenses incurred in performing its duties under the
agreement. In addition, Mr. Paterek is entitled to participate in the Company's
normal benefit programs. If the Company terminates the agreement without good
cause, Tarek shall be entitled to receive full compensation for the balance of
the term of the agreement. The agreement requires Tarek to enter into an
agreement with Mr. Paterek under which he agrees not to compete with the Company
during the term of the agreement and not to disclose confidential information.
During 1995, Mr. Paterek was indicted in the United States District Court for
the Eastern District of New York for allegedly conspiring to commit mail/wire
fraud. He entered a plea of innocent and the matter is still pending.
PROPOSAL NO. 6 -- SELECTION OF AUDITORS
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, 1995. 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, 1994.
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.
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.
<PAGE>
STOCKHOLDERS' PROPOSALS
To be considered for inclusion in the Company's Proxy Statement for the
1996 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 July 1, 1996.
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.
Upon written request to the Company (directed to the attention of the
Office of the Secretary at 2001 Marcus Avenue, Lake Success, New York 11042) by
any stockholder whose proxy is solicited hereby, the Company will furnish a copy
of any exhibits to its Annual Report on Form 10-K for the year ended December
31, 1994 upon a reasonable charge to cover the costs of copying the same.
By the Order of the Board of Directors
Christopher P. Franco
Secretary
Lake Success, New York
December 28, 1995
ANNEX A
PROPOSED AMENDMENT TO LONG-TERM STOCK INVESTMENT PLAN
At Section 1.03, fifth line, following second sentence, add the following:
Non-employee directors, however, shall only be eligible for formula
awards under Article 6.
At Section 1.05, third line, change "1,500,000 to 3,000,000."
At Section 5.10, at the end of (b), add the following:
No amendment which affects one or more provisions of the Plan
which are required under Rule 16b-3 under the Securities Exchange Act
of 1934, as amended, for qualification of Article 6 as a formula plan,
including the designation of the persons entitled to receive a grant of
a Stock Option, the Stock Option price, the number of shares that are
granted under a Stock Option, and the timing of the grant or exercise
of Stock Options, (or otherwise would cause Rule 16b-3 to become
inapplicable) may be made within six (6) months of a prior amendment
which also affects one of those provisions.
Add new Article 6 as follows:
ARTICLE 6
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN PROVISIONS
6.01. Purpose.
The purpose of this Article 6 is to provide a means whereby the Company
may, through the grant of Options pursuant to a formula to non-employee
directors of the Company, attract and retain persons of ability as directors
(including directors who are also officers, but excluding directors who are also
employees) and motivate those directors to exert their best efforts on behalf of
the Company. In addition, the formula limitation established under this Article
6 for Stock Option awards to non-employee directors is to maintain the
disinterested status of the recipients.
6.02. Number of Shares Available.
Subject to the aggregate number of shares of Common Stock provided for
under the Plan, Stock Options shall be granted by the Company from time to time
to non-employee directors of the Company as provided in this Article 6.
6.03. Terms and Conditions.
All options granted under this Article 6 shall constitute Stock Options
and not Incentive Stock Options.
Each Stock Option granted under this Article 6 shall be evidenced by an
agreement, in form approved by the Committee, which shall be subject to the
following expressed terms and conditions and to other terms and conditions as
the Committee may deem appropriate, including those imposed by Section 5.10
following amendment of the Plan requiring shareholder approval.
(a) Grant of Stock Option. Subject to the limitations provided under
this paragraph (a) of Section 6.03, Stock Options shall be granted to each
non-employee director as follows: (i) a Stock Option for 5,000 shares of Common
Stock, following the non-employee director's initial election to the Board of
Directors of the Company and (ii) a Stock Option for 5,000 shares of Common
Stock for each year thereafter during which the non-employee director is either
reelected as a non-employee director or maintains that status. Each stock option
granted shall become fully vested and exercisable on the first anniversary of
the date of grant. On the date this Plan is amended to include this
<PAGE>
Article 6, subject to restrictions provided at Section 5.10, each current
non-employee director shall be granted a Stock Option for shares of Common Stock
in an amount to be determined using the same formula as is provided for under
the preceding sentence but based upon all election and re-elections of that
non-employee to the Board of Directors of the Company (and for years for which
the non-employee director maintained membership on the Board) which occurred
prior to the inclusion of this Article 6. After the initial grants, future
grants shall be made annually on the same date as the annual meeting of the
shareholders of the Company. The maximum aggregate number of shares of Common
Stock which shall be granted under all Stock Options granted under this Article
6 to any individual non-employee director is 50,000.
(b) Stock Option Price. The Stock Option price per share of Common
Stock shall be, as provided under Section 2.03, the fair market value of a share
of Common Stock on the date the Stock Option is granted (but in no event less
than the par value if any).
(c) Exercise in the Event of Death or Termination of Non-employee
Director Status. (1) If any Optionee shall die (i) while a non-employee director
of the Company (ii) within three (3) months of ceasing to be a member of the
Board of Directors of the Company other than for cause, or (iii) within three
(3) months after the Optionee's resignation or removal as a non-employee
director of the Company because the Optionee is permanently and totally disabled
(as determined by the Administrator) the Optionee's Stock Options may be
exercised by the person or persons to whom the Optionee's rights under the Stock
Options pass by will or applicable law or if no person has that right, by the
Optionee's executors or administrators, at any time, or from time to time (50
share increments), within one (1) year of the date of the Optionee's death if
(c)(1)(i) of this Section 6.03 is applicable and within one (1) year of the date
of the Optionee's resignation or removal if (c)(1)(ii) or (iii) of this Section
6.03 is applicable, but in no event later than the expiration date specified in
Section 2.04. (2) If an Optionee (i) resigns or is removed by the Company
because of disability, or (ii) resigns because of retirement (s determined by
the Administrator), the Optionee may exercise the Optionee's Stock Options at
any time, or from time to time (50 share increments), within one (1) year of the
date of the Optionee's resignation or removal, but in no event later than the
expiration date specified in Section 2.04. Except as provided by (1) and (2) of
this paragraph (c) of Section 6.03, if an Optionee voluntarily resigns without
cause or is involuntary removed without cause, the Optionee may exercise the
Optionee's Stock Options at any time, or from time to time (50 share
increments), within three (3) months of the date of the Optionee's resignation
or removal, but in no event later than the expiration date specified in other
portions of this Plan. (4) If an Optionee voluntarily resigns for cause or is
involuntary removed for cause, the Optionee's Stock Options shall terminate
immediately.
(d) No Additional Rights. The Plan and any Stock Option granted under
the Plan shall not confer upon any Optionee any right with respect to continued
membership on the Board of Directors of the Company, nor any other position with
the Company.
(e) Other Terms. Except as modified under this Article 6, Stock Options
granted to non-employee directors of the Company shall be subject to the
provisions generally applicable to Stock Options under Article 2.
6.04. Effective Date.
The effective date of this Article 6 shall be February 5, 1996.
6.05. Name.
This Article of the Plan shall be known as the "Long-Term Stock
Investment Plan for Non-employee Directors."
PROXY
COMFORCE CORPORATION
SOLICITED BY THE BOARD OF DIRECTORS for 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 or her 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, December 15, 1995, at the annual meeting of stockholders to be held on
February 5, 1996, or any adjournment thereof, as directed and, in their
Your vote for five directors may be indicated on the reverse side.
Michael Ferrentino, Dr. Glen Miller, Richard Barber, Peter D. Matthy and Keith
Goldberg have been nominated for one year terms.Notice of Annual Meeting and set
forth in the Proxy Statement.
Your vote for five directors may be indicated on the reverse side.
Michael Ferrentino, Dr. Glen Miller, Richard Barber, Peter D. Matthy and Keith
Goldberg have been nominated for one year terms.
<PAGE>
The Board of Directors Recommends a Vote "For" all proposals.ever, if you
execute and return the proxy unmarked, such votes will be voted FOR all of the
proposals. Please mark box p or x
The Board of Directors Recommends a Vote "For" all proposals.
1. Election of Directors: (duly nominated Withheld for the following
and named only on the reverse side of (write the nominee's name in
this proxy) the space below).
FOR Withheld
for all _________________________________________
2. Ratify issuance of stock
FOR Against Abstain
3. Ratify YEILD transactions
FOR Against Abstain
4. Amend Certificate of Incorporation
FOR Against Abstain
5. Amend Long-Term Stock Investment Plan
FOR Against Abstain
6.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.
Dated: __________________________________________________, 199_
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Signature
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Signature if held jointly