COMFORCE CORP
10-K/A, 1997-04-30
COSTUME JEWELRY & NOVELTIES
Previous: ANDREA ELECTRONICS CORP, 10-K/A, 1997-04-30
Next: ARMCO INC, 10-Q, 1997-04-30



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A
                                 AMENDMENT NO. 1


[X]  Annual  Report  Pursuant  to  Section  13 or  15(d) of the  Securities  and
     Exchange Act of 1934 For the fiscal year ended December 31, 1996

                                       OR

[ ]  Transition  Report  Pursuant to Section 13 or 15(d) of the  Securities  and
     Exchange Act of 1934 For the transition period from _________ to __________

                          Commission file number 1-6081

                              COMFORCE CORPORATION
             (Exact name of registrant as specified in its charter)

                  Delaware                                       36-23262248
      (State or other jurisdiction of                           (IRS Employer 
       incorporation or organization)                        Identification No.)

  2001 Marcus Avenue Lake Success, New York                         11042
   (Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code: (516) 328-7300

Securities registered pursuant to Section 12(b) of the Act:
                                                          Name of Each Exchange
    Title of Each Class                                    on Which Registered
    -------------------                                    -------------------
Common stock, $.01 par value                             American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best  of  registrant's   knowledge,  in  the  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes __X__    No _____

State the aggregate  market value of the voting stock held by  nonaffiliates  of
the registrant at March 27, 1997: $76,662,564

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

            Class                                  Outstanding at March 27, 1997
            -----                                  -----------------------------
Common stock, $.01 par value                                12,819,649

Documents Incorporated by Reference: None.

<PAGE>

                                    PART III

ITEM 10.

Information Concerning Directors

     On February 26, 1997, the Company's  Board of Directors  amended its Bylaws
to increase  the number of  directors  to seven from four and  elected  James L.
Paterek and  Christopher P. Franco to fill two of the vacancies.  The Company is
currently  considering  candidates to fill the remaining  vacancy.  This vacancy
will be  filled  by a  non-employee  director,  which  will  result  in  outside
directors  constituting a majority of the Board.  Directors are elected annually
and hold office  until the next annual  meeting of the  stockholders  or until a
successor  shall  have  been duly  elected  and  qualified.  There are no family
relationships among the directors and/or executive officers.

     Set forth below is  information  concerning  each  current  director of the
Company.


                   Name                              Age
                   ----                              ---
                   James L. Paterek                  35
                   Christopher P. Franco             38
                   Michael Ferrentino                34
                   Richard Barber                    38
                   Keith Goldberg                    34
                   Dr. Glen Miller                   61

     James L.  Paterek has served as Chairman of the Board of the Company  since
February  1997,  having  previously  served as  consultant  to the Company since
December 1995.  Mr.  Paterek was a founder of COMFORCE  Telecom and he served as
COMFORCE Telecom's President from 1987 to 1995.

     Christopher  P.  Franco has  served as the Chief  Executive  Officer  and a
Director  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 the
Company since December 1995. Mr.  Ferrentino was a founder of COMFORCE  Telecom,
and he served as COMFORCE Telecom's  Executive Vice President from 1987 to 1995.
From 1984 through 1987, he was employed by Dun & Bradstreet.

     Richard  Barber has  served as a  Director  since  December  1995.  He is a
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.


                                        2

<PAGE>

     Keith  Goldberg  has  served as a Director  since  December  1995.  He is a
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  (advertising).
Mr. Goldberg is the recipient of several advertising industry awards.

     Dr. Glen Miller has served as a Director  since December 1995. He is a Vice
President of Cybertel Network  Systems,  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.

Information Concerning Executive Officers

     On February 26, 1997,  the  Company's  Board of Directors  elected James L.
Paterek to the  position of Chairman of the Board and  Christopher  P. Franco to
the position of Chief Executive Officer.  Mr. Paterek had previously served as a
consultant to the Company and Mr.  Franco had served as the Company's  Executive
Vice President. Set forth below is information concerning each executive officer
of the Company.


     Name                        Age        Position
     ----                        ---        --------
     James L. Paterek            35         Chairman

     Christopher P. Franco       38         Chief Executive Officer and
                                            Secretary

     Michael Ferrentino          34         President

     Paul J. Grillo              44         Vice President - Finance and Chief
                                            Financial Officer

     Andrew Reiben               32         Director of Finance and Chief
                                            Accounting Officer

     Malcolm High                45         Corporate Controller


     James L. Paterek.  See "Information  Concerning  Directors" in this Item 10
for information concerning Mr. Paterek.

     Christopher P. Franco. See "Information  Concerning Directors" in this Item
10 for information concerning Mr. Franco.

     Michael Ferrentino.  See "Information Concerning Directors" in this Item 10
for information concerning Mr. Ferrentino.

     Paul J. Grillo has served as Vice  President - Finance and Chief  Financial
Officer of the Company since July 1996.  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.


                                        3

<PAGE>

     Andrew Reiben has served as Chief  Accounting  Officer of the Company since
February 1996 and as Director of Finance of the Company  since April 1997.  From
June 1993 to February 1996, Mr. Reiben served as Controller of Daystar Robinson,
a C.H. Robinson company (New York). From September 1987 to June 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 the Company since
April  1997.  Prior  thereto,  from 1985 to March 1997,  Mr.  High held  various
positions with TAD Resources International,  Inc. (staffing services), including
Vice President (1991 to March 1997),  Corporate  Controller (1989 to March 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.

     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 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.

Employment Agreements

     The Company  entered into  employment  agreements with all of its executive
officers.  In most cases,  these  agreements are for a term of two years and are
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 the  executives  named in the  Summary
Compensation  Table under Item 11,  Christopher P. Franco,  the Chief  Executive
Officer and Secretary of the Company,  and Michael Ferrentino,  the President of
the Company, is entitled to annual  compensation of $150,000,  plus such bonuses
as are  awarded  by the  Board,  and  each is  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.

Compensation Committee Interlocks and Insider Participation

     During 1996, 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 Exchange
Commission, involving any of these individuals.


ITEM 11. EXECUTIVE COMPENSATION

Directors' Compensation

     Non-employee  directors  receive fees of $1,000 per  quarter.  In addition,
during 1996, under the Company's Long-Term Stock Investment Plan (the "Long-Term
Plan"),  each  non-employee  director  received  options to purchase  (i) 10,000
shares of the Company's  Common Stock as of January 1, 1996 (the  effective date
of the non-employee  director option  provisions under the Long-Term Plan) at an
exercise  price of $6.75 per  share,  and (ii)  10,000  shares of the  Company's
Common  Stock as of  October  28,  1996  (the  date of  reelection  of each such
non-employee  director to the Board) at an  exercise  price of $17.00 per share.
Under the  Long-Term  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,  upon his  reelection to the Board,  at an
exercise price equal to the market price on the date of

                                        4

<PAGE>

grant.   All   options   granted   to   non-employee   directors   under   these
non-discretionary  provisions  of the  Long-Term  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

     The  following  table  shows all  compensation  paid by the Company and its
subsidiaries  for the fiscal years ended  December 31, 1996,  1995 and 1994,  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 1996.

                           Summary Compensation Table

Name and Position         Year     Annual Compensation    Long Term Compensation
- -----------------         ----     -------------------    ----------------------
                                   Salary      Bonus               Awards
                                    ($)         ($)           Options/SAR's (#)
- --------------------------------------------------------------------------------

Christopher P. Franco     1996    150,000       --               112,500(2)
Chief Executive           1995     28,846    739,264(1)             --
Officer and Secretary     1994       --         --                  --

Michael Ferrentino,       1996    150,000       --               281,250(2)
President                 1995     79,703    739,264(1)             --
                          1994       --         --                  --

(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. Management valued the shares based on its discussions with market
     makers and other  advisors,  taking into account (i) that the business then
     conducted by the Company,  which was discontinued  during the third quarter
     of 1995,  had a  negligible  value,  and (ii) the value of the  shares  was
     principally  related to the  potential  effect  that a purchase of COMFORCE
     Telecom, if successfully  concluded,  would have on the market value of the
     Company's  Common  Stock.  Management  believes  this  value  is a fair and
     appropriate  value based upon the Company's  financial  condition as of the
     date the Company became obligated to issue these shares. See Item 13.

(2)  The  options  shown are  currently  exercisable  options  to  purchase  the
     Company's  Common  Stock at an  exercise  price of $6.75 per  share.  These
     options were granted pursuant to a letter agreement dated June 29, 1995 and
     subsequently amended as of October 6, 1995.

     Option  Awards.  The  following  table  sets forth  information  concerning
options to  purchase  the  Company's  Common  Stock  granted to Named  Executive
Officers in 1996. No stock appreciation  rights were awarded to any of the Named
Executive Officers in 1996.


                                        5

<PAGE>

                        Option Grants in Fiscal Year 1996

<TABLE>
<CAPTION>
                                                                                                      Potential Realizable
                                                                                                        Value at Assumed
                                                                                                         Annual Rates of
                                                                                                           Stock Price
                                                                                                        Appreciation for
                                      Individual Grants                                                   Option Term2
- ---------------------------------------------------------------------------------------------    -------------------------------
                              Number of          % of Total
                              Securities        Options/SARs
                              Underlying         Granted to         Exercise
Name                         Option/SARs          Employees      or Base Price   Expiration
                             Granted (#)1      in Fiscal Year        ($/Sh)         Date             5% ($)          10% ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>                 <C>               <C>           <C>             <C>              <C>      
Christopher P. Franco          112,500              9.0%             $6.75         1/10/06           477,563        1,210,275
Michael Ferrentino             281,250             22.6%             $6.75         1/10/06         1,193,916        3,025,620
</TABLE>

(1)  The options shown are currently exercisable options granted to purchase the
     Company's  Common  Stock at an  exercise  price of $6.75 per  share.  These
     options were granted pursuant to a letter agreement dated June 29, 1995 and
     subsequently  amended as of October 6, 1995.  These  options  terminate  on
     January 10, 2006.

(2)  The potential  realizable value shown is calculated based upon appreciation
     of the Common Stock issuable under options,  calculated  over the full term
     of the options assuming 5% and 10% annual  appreciation in the value of the
     Company's Common Stock from the date of grant, net of the exercise price of
     the options.


     Option Values.  The following table sets forth  information  concerning the
aggregate  number and values of options held by Named  Executive  Officers as of
December 31, 1996. None of the Named Executive  Officers hold stock appreciation
rights and none of the Named Executive Officers exercised any options in 1996.


                 Aggregated Option Exercises in Last Fiscal Year
                            and FY-End Option Values


                                 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(1)          Unexercisable(1)
- --------------------------------------------------------------------------------
Christopher P. Franco                  112,500/0                 $843,750/0
Michael Ferrentino                     281,250/0               $2,109,375/0

(1)  This  information  is presented as of December 31, 1996.  See Note 1 to the
     "Option  Grants in Fiscal  Year 1996"  table and the notes to the  "Summary
     Compensation  Table" in this Item 11 for a description  of the terms of the
     options listed in this table.


                                        6

<PAGE>

ITEM 12. SECURITY 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 April 28, 1997 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  (nine  persons).
Unless  stated  otherwise,  each  person  so named  exercises  sole  voting  and
investment  power as to the  shares of Common  Stock so  indicated.  None of the
officers  or  directors  own any shares of the  outstanding  Series F  Preferred
Stock. There were 12,819,649 shares of Common Stock issued and outstanding as of
April 28, 1997.

                                           Number of           Percentage of
Name and Address of                   Shares Beneficially   Shares Beneficially
 Beneficial Owner                          Owned(1)              Owned(1)
- --------------------------------------------------------------------------------
Management:

Christopher P. Franco(2)                   1,002,294               7.7%
2001 Marcus Avenue
Lake Success, New York 11042

James L. Paterek(3)                        1,947,572              14.9%
2001 Marcus Avenue
Lake Success, New York 11042

Michael Ferrentino(4)                      2,393,012              18.3%
2001 Marcus Avenue
Lake Success, New York 11042

Andrew Reiben(5)                              10,000                 *

Paul Grillo                                       --                --

Malcolm High                                      --                --

Dr. Glen Miller(6)                            10,000                 *

Richard Barber(6)                             10,000                 *

Keith Goldberg(6)                             10,000                 *

Directors and officers as a group
((9) persons)(7)                           4,493,084              33.2%

Other Significant Stockholders:

ARTRA GROUP Incorporated                   1,969,703              15.4%
500 Central Avenue(8)(9)
Northfield, Illinois 60093

Cypress Partners L.P.(10)                    730,000               5.7%
P.O. Box 71289
Atlantic Richfield Plaza Station
Los Angeles, California 90071


                                       7

<PAGE>

                                           Number of           Percentage of
Name and Address of                   Shares Beneficially   Shares Beneficially
 Beneficial Owner                          Owned(1)              Owned(1)
- --------------------------------------------------------------------------------
Manufacturers Indemnity and
Insurance Company of America(11)           1,212,876               9.3%
5775 Flat Iron Parkway
No. 205
Boulder, Colorado 80301

Infinity Investors Ltd.(12)                1,154,319               8.9%
27 Wellington Road
Cork, Ireland

- ----------
(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. Franco, the Chief Executive Officer and
Secretary of the Company include (i) 889,794 shares  currently held of record by
him and (ii)  112,500  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. Paterek 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.

(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)  889,794  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 Director of Finance of the Company, are shares issuable upon the exercise of
an option at an exercise price of $7.00 per share.

(6) 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.

(7) The shares shown to be beneficially owned by the directors and officers as a
group include (i) 3,555,910  shares held of record by them,  (ii) 222,174 shares
held of record by Mr.  Kiernan  (under which Mr.  Ferrentino  has voting power),
(iii) 10,000 shares issuable upon the exercise of an option at an exercise price
of $7.25 per share,  and (iv) 705,000  shares  issuable  upon the exercise of an
option at an exercise price of $6.75 per share.

(8) John Harvey and Peter R. Harvey,  each of whom formerly served as an officer
and director of the Company,  control the  management  and  operations of ARTRA,
which  indirectly owns 15.4% of the Company's  Common Stock.  Insofar as each is
deemed to be a beneficial  owner of the Company's shares owned of record in each
case by ARTRA,  Peter R. Harvey owns  2,014,536  shares (15.7%) of the Company's
Common  Stock and John Harvey owns  2,045,036  shares  (15.9%) of the  Company's
Common  Stock.  Each such  person  maintains  a business  address at 500 Central
Avenue, Northfield, Illinois 60093.

                                        8

<PAGE>

(9) ARTRA,  a Delaware  corporation,  presently owns 200,000 shares of record in
its name and  1,769,703  shares of record  through  a  wholly-owned  subsidiary,
Fill-Mor  Holding,  Inc.  ("Fill-Mor")(hereinafter  all holdings of Fill-Mor are
referred to as ARTRA's).

(10) The shares  beneficially owned by Cypress Partners L.P. include (i) 620,000
shares  held of record by it and (ii)  110,000  shares held of record by Cypress
International Partners Limited, an affiliate of Cypress Partners L.P.

(11) The shares  beneficially  owned by  Manufacturers  Indemnity  and Insurance
Company of America  ("MIICA")  consist of (i)  927,876  shares held of record by
MIICA and (ii) 285,000  shares  issuable  upon the exercise of a warrant held by
MIICA.

(12) The shares  beneficially owned by Infinity  Investors Limited  ("Infinity")
consist of 933,391 currently outstanding shares and 220,928 shares issuable upon
the exercise of warrants reported by Infinity on its Schedule 13D filed with the
Securities  and  Exchange  Commission  ("SEC")  as being  owned of record by (or
issuable  upon the  exercise  of  warrants  held in the  name of) the  following
members of a group: (i) Infinity;  (ii) Seacrest Capital Limited;  (iii) Fairway
Capital Limited;  (iv) Infinity Emerging  Opportunities  Limited; and (v) Global
Growth Limited.

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 its  directors,  officers  and 10%  stockholders  for  1996  were
complied with, except for the following: a Form 3 was not timely filed reporting
Andrew Reiben's election as Chief Accounting Officer,  but which did not involve
a  reportable  stock  transaction;  a Form  4 for  each  of  James  L.  Paterek,
Christopher P. Franco and Michael  Ferrentino was not timely filed reporting the
issuance  of  stock  to  each  of them by the  Company  on one  occasion,  which
transactions   had  previously  been  disclosed  in  the  Company's  1996  Proxy
Statement;  and a Form 5 was not  timely  filed  reporting  the  grant  of stock
options to each of the Company's  directors on one occasion (except Mr. Paterek,
the  report  for whom was  timely  filed),  which  grants  had  previously  been
disclosed in the Company's 1996 Proxy Statement. Each failure to timely file was
inadvertent,  none of the  persons  required to file  reports  traded any of the
securities  beneficially owned by him during the period of noncompliance and all
reports involving these transactions have since been filed with the SEC.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On June  29,  1995,  the  Company  entered  into a  letter  agreement  with
Christopher P. Franco, the Chief Executive Officer and Secretary of the Company,
James L.  Paterek,  the Chairman of the  Company,  and Michael  Ferrentino,  the
President  of the  Company,  subsequently  amended  as of  October  6,  1995 (as
amended, the "Letter Agreement"),  pursuant to which Messrs. Franco, Paterek and
Ferrentino  agreed to direct the  Company's  entry into the  technical  staffing
business.  As  consideration  for agreeing to guide the Company's entry into the
technical  staffing  business,  the Company agreed,  inter alia, to (i) issue to
Messrs. Franco,  Paterek and Ferrentino,  and one other individual who agreed to
serve as a Vice President of COMFORCE Telecom,  Kevin W. Kiernan  (collectively,
the "Designated Individuals"),  such number of shares of Common Stock then equal
to 35% of the Company's then issued and  outstanding  Common Stock together with
additional  shares issued and warrants or options to purchase  additional shares
granted  between  October 6, 1995 and  December 1, 1995;  (ii) sell or otherwise
dispose of all or substantially all of the Company's  interest in the businesses
it then  operated;  (iii) nominate four  individuals  selected by the Designated
Individuals to serve on the Company's  Board of Directors;  and (iv) reserve for
issuance  to the  Designated  Individuals  and other  employees  of the  Company
options or warrants to purchase 10% of the Company's then issued and outstanding
Common Stock together with  additional  shares issued and warrants or options to
purchase additional shares granted between October 6, 1995 and December 1, 1995.

     In the  aggregate,  3,888,084  shares of the  Company's  Common  Stock were
issued to the  Designated  Individuals in October 1995 and December 1996 in full
satisfaction of the Company's obligations to issue its shares under the terms of
the Letter Agreement, all as follows:

                                9

<PAGE>

            Name                                  No. of Shares
            ----                                  -------------

            Michael Ferrentino                        999,794

            Christopher P. Franco                     999,794

            James L. Paterek                        1,666,322

            Kevin W. Kiernan                          222,174
                                                    ---------
            Total                                   3,888,084

     These shares have the same rights and privileges as all other shares of the
Company's Common Stock.

     The Company made loans in 1995 and 1996 of $367,000 in the aggregate to the
Designated  Individuals  to cover  their tax  liabilities  resulting  from these
transactions.  The obligations are evidenced by notes which bear interest at the
rate of 6% per annum and mature on September 30, 1997.

     See "Employment  Agreements" in Item 10 for a description of the employment
agreements  entered into between the Company and each of Messrs.  Ferrentino and
Franco.

     In October 1995, the Company entered into a consulting agreement with Tarek
Corporation  ("Tarek"),  a corporation  wholly-owned by Mr. Paterek. Mr. Paterek
was a founder  of  COMFORCE  Telecom  and served as its  President  from 1985 to
September  1995.  Tarek  agreed to engage Mr.  Paterek to perform  the  services
required  under  the  agreement,   principally  to  advise  the  Company  as  to
fundamental   strategies  and  policies  relating  to  its  operations,   as  to
acquisitions  and  the  integration  of  acquired  businesses  and as to  growth
strategies generally.  Under the terms of the agreement,  Tarek agreed to devote
at least 50 hours per month performing  services for the Company.  The agreement
was originally for a term of three years,  but was terminated upon Mr. Paterek's
election as Chairman of the Company in February 1997. Under this agreement,  Mr.
Paterek  received  compensation  of $157,000  annually  plus  reimbursement  for
expenses incurred in performing his duties under the agreement. In addition, Mr.
Paterek was entitled to participate in the Company's normal benefit programs.

     Yield Industries,  Inc., a corporation  wholly-owned by Messrs. Paterek and
Ferrentino  earned a fee of $500,000 related to its interest in COMFORCE Telecom
in connection with the Company's  acquisition of COMFORCE  Telecom,  $250,000 of
which was paid in 1995 and the balance of which was paid in January 1996.  Yield
Industries, Inc. was not affiliated with COMFORCE Telecom.

     The Company paid L.H.  Friskoff & Company,  a certified  public  accounting
firm  at  which  Richard  Barber,  a  Director  of the  Company,  is a  partner,
approximately $104,000 in fees during 1996 for tax-related advisory services.

                                       10

<PAGE>

                                    SIGNATURE

     The undersigned registrant hereby files this amendment to its Annual Report
on Form 10-K/A for the year ended  December 31, 1996 to include the  information
required by Part III thereto.

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                        COMFORCE Corporation

                                        By:  /s/  Michael Ferrentino
                                             ----------------------------
                                                  Michael Ferrentino
                                                  President

Date: April 30, 1997

                                       11


© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission