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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
TEAM MUCHO, INC.
----------------
(Name of Registrant as Specified in its Charter)
N/A
---------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:_______
(2) Aggregate number of securities to which transaction applies:__________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
_______________________________________________________________________
(4) Proposed maximum aggregate value of transaction: ____________________
(5) Total fee paid: _____________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: __________________________________________________
2) Form, Schedule or Registration Statement No.: ____________________________
3) Filing Party: ____________________________________________________________
4) Date Filed: ______________________________________________________________
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TEAM MUCHO, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
SEPTEMBER 20, 2001
AND
PROXY STATEMENT
- --------------------------------------------------------------------------------
IMPORTANT
PLEASE MARK, SIGN AND DATE YOUR PROXY
AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE
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TEAM MUCHO, INC.
110 East Wilson Bridge Road
Columbus, Ohio 43085
(614) 848-3995
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 20, 2001
August 22, 2001
To Our Shareholders:
Notice is hereby given that the Annual Meeting of the Shareholders of
TEAM Mucho, Inc. will be held at the Clarion Hotel, located at 7007 North High
Street, Worthington, Ohio, on September 20, 2001, at 10:00 a.m. (local time),
for the following purposes:
1. To elect four Class I Directors, each to serve for a
three-year term expiring at the 2004 Annual Meeting and until
their successors are duly elected and qualified.
2. To approve an amendment to the Corporation's Second Amended
Articles of Incorporation allowing the Series A Preferred
Shareholders to elect two members to our board of directors
and to eliminate the mandatory redemption provisions of the
Preferred Shares.
3. To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on August 2, 2001
will be entitled to notice of and to vote at the meeting or any adjournment
thereof.
You will be most welcome at the meeting, and we hope you can attend.
Directors and officers of the Corporation and representatives of its independent
public accountants will be present to answer your questions and to discuss the
Corporation's business.
We urge you to execute and return the enclosed proxy as soon as
possible so that your shares may be voted in accordance with your wishes. If you
attend the meeting, you may vote in person and your proxy will not be used.
By Order of the Board of Directors,
S. Cash Nickerson
Chairman of the Board of Directors
---------------------------------------------------
PLEASE SIGN AND MAIL THE ENCLOSED PROXY
IN THE ACCOMPANYING ENVELOPE
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES
---------------------------------------------------
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TEAM MUCHO, INC.
110 East Wilson Bridge Road
Columbus, Ohio 43085
(614) 848-3995
-----------------------------
PROXY STATEMENT
-----------------------------
ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 20, 2001
-----------------------------
This Proxy Statement is furnished to the shareholders of TEAM Mucho,
Inc. (the "Corporation") in connection with the solicitation of proxies to be
used in voting at the Annual Meeting of Shareholders to be held on September 20,
2001, and at any adjournment thereof (the "Annual Meeting"). The enclosed proxy
is solicited by the Board of Directors of the Corporation. This Proxy Statement,
together with the Corporation's Annual Report to Shareholders for the fiscal
year ended December 31, 2000 ("fiscal 2000"), will be first sent or given to the
Corporation's shareholders on or about August 22, 2001.
The close of business on August 2, 2001 has been fixed as the date of
record for those shareholders entitled to vote at the Annual Meeting. The stock
transfer books of the Corporation will not be closed. As of August 2, 2001, the
Corporation had outstanding and entitled to vote 8,058,799 shares of common
stock, without par value ("Common Stock"), each of which is entitled to one
vote, and 110,000 shares of preferred stock, without par value ("Preferred
Stock"), each of which is entitled to 148.148 votes. The Corporation has no
other class of capital stock outstanding.
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock and Preferred Stock of the Corporation is necessary to
constitute a quorum for the transaction of business at the Annual Meeting.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum. Broker non-votes occur when brokers, who hold
their customers' shares in street name, sign and submit proxies for such shares
and vote such shares on some matters, but not others. Typically, this would
occur when brokers have not received any instructions from their customers, in
which case the brokers, as the holders of record, are permitted to vote on
"routine" matters, which typically include the election of directors.
Under Ohio law, the nominees for election as Directors at the Annual
Meeting receiving the greatest number of votes shall be elected. The amendment
to the Articles of Incorporation requires the approval of a majority of the
Common Stock and a majority of the Preferred Stock, each voting as a separate
class.
Any shareholder giving the enclosed proxy has the power to revoke it at
any time before it is voted if notice of revocation is given to the Secretary of
the Corporation in writing or at the Annual Meeting. The shares represented by
the enclosed proxy will be voted as specified by the shareholders. If no choice
is specified, the proxy will be voted FOR the election as Directors of the
nominees named herein; and FOR the amendment to the Corporation's Second Amended
and Restated Articles of Incorporation.
The cost of soliciting proxies and preparing the proxy materials will
be borne by the Corporation. In addition, the Corporation will request
securities brokers, custodians, nominees, and fiduciaries to forward
solicitation material to the beneficial owners of Common Stock and Preferred
Stock held of record and will reimburse them for their reasonable out-of-pocket
expenses in forwarding such solicitation material. Proxies may be solicited
personally or by telephone or telegram by directors, officers and employees of
the Corporation without additional compensation to them. The Corporation may
engage an outside firm to distribute proxy solicitation materials to brokers,
banks and other nominees.
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NOMINATION AND ELECTION OF DIRECTORS
The number of Directors has been fixed by the Board of Directors of the
Corporation at 12. The Board of Directors currently is divided into three
classes. Class I currently has four members, Class II currently has four
members, and Class III currently has four members. There are currently no
vacancies among the classes. The members of the four classes are elected to
serve for staggered terms of three years.
At the Annual Meeting, four Class I Directors will be elected, each to
hold office for a term of three years and until a successor is elected and
qualified. Jose Blanco, William W. Johnston, Joseph Mancuso and Robert G.
McCreary III are nominees (collectively, the "Nominees") for election as
Directors at the Annual Meeting, each to hold office for a term of three years
until the 2004 Annual Meeting of Shareholders. The terms of Kevin T. Costello,
Crystal Faulkner, Jay R. Strauss and Michael H. Thomas (collectively, the
"Continuing Class II Directors") expire in 2002. The terms of Daniel J. Jessee,
Lawrence A McLernon, S. Cash Nickerson and James D. Robbins (collectively, the
"Continuing Class III Directors") expire in 2003.
All the Nominees have indicated a willingness to stand for election and
to serve if elected. It is intended that the shares represented by the enclosed
proxy will be voted for the election of the Nominees. Although it is anticipated
that each Nominee will be available to serve as a Director, should any Nominee
be unavailable to serve, the proxies will be voted by the proxy holders in their
discretion for another person designated by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEES FOR DIRECTOR.
The following table sets forth the names of each Nominee, Continuing
Class II Director and Continuing Class III Director, their ages, the year in
which each first became a Director, their principal occupations during the past
five years and other directorships, if any, held by them in companies with a
class of equity securities registered pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or otherwise subject to its periodic
reporting requirements. See "Security Ownership of Certain Beneficial Owners and
Management" for information regarding such persons' holdings of equity
securities of the Corporation.
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CLASS I DIRECTORS
(NOMINEES FOR TERMS EXPIRE IN 2004)
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION FOR THE PAST FIVE YEARS
---- --- ----- --------------------------------------------
William W. Johnston 55 1990 Assistant Secretary since 2000 and Secretary of the
Corporation from 1990 to 1998; outside counsel to the
Corporation since 1989.
Robert G. McCreary III 49 nominee Founder and currently a principal of Capital Works, LLC
(a private equity group focusing on privatizations of
public companies). President of Carleton, McCreary,
Holmes & Co. from 1993-1996. Mr. McCreary has served
in numerous managing partner positions in investment
banking firms and as a partner in a large regional
corporate law firm. Mr. McCreary serves as a director
of Pioneer-Standard Electronics, Inc.
Jose Blanco 44 2000 Chief Financial Officer of the Corporation since
December 2000; Chief Financial Officer of Mucho.com,
Inc. since July 1999. Assistant Professor of Finance
in the MBA and Executive MBA programs at St. Mary's
College, Moraga, California since September 1996. From
September 1994 to September 1996, Mr. Blanco attended
Utah State University, where he received a Ph.D. with a
focus in Econometrics, Applied Microeconomics and
Finance.
Joseph Mancuso 59 2000 Chief Executive Officer of the CEO Club, Inc. and of
the Center for Entrepreneurial Management, Inc. since
1977. Chairman of the Management Department at
Worcester Polytechnic Institute in Massachusetts since
1978.
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CLASS II DIRECTORS
(TERMS EXPIRING IN 2002)
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION FOR THE PAST FIVE YEARS
---- --- ----- --------------------------------------------
Kevin T. Costello 51 1992 Chief Operating Officer of the Corporation since
December 2000; Chief Executive Officer of the
Corporation from 1999 to 2000; President of the
Corporation since 1998; Senior Vice President of
Operations and Chief Operating Officer of the
Corporation from 1993 to 1998; Vice President of Sales
and Marketing of the Corporation from 1991 to 1993.
Crystal Faulkner 40 1997 Principal in the accounting firm of Cooney, Faulkner & Stevens,
LLC, Cincinnati, Ohio, since 1999. Principal in the
accounting firm of Rippe & Kingston, Cincinnati, Ohio from
1991 to 1999.
Jay R. Strauss 56 2000 Chief Legal Officer and Vice President of the Corporation since
December 2000. Chief Legal Officer and director of Mucho.com Inc.
from July 1999 until December 2000. Partner in the law firm of
Strauss Nickerson LLP, Lafayette, California, from August 1998 to
July 2000. Practiced law with the firm of Foley, McIntosh, Frey,
Claytor and Strauss, Lafayette, California from 1990 to
August 1998.
Michael H. Thomas 51 2000 Principal of Stonehenge Partners, Inc., a private
equity group based in Columbus, Ohio, since August
1999. Business consultant specializing in investments,
mergers and acquisitions from January 1998 to July
1999. Executive Vice President and Treasurer of JMAC,
Inc., a private holding company, from 1980 to 1998.
While with JMAC, Inc., Mr. Thomas's duties involved
investments, acquisitions, and financial and tax
planning.
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CLASS III DIRECTORS
(TERMS EXPIRING IN 2003)
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION FOR THE PAST FIVE YEARS
---- --- ----- --------------------------------------------
S. Cash Nickerson 41 2000 Chairman and Chief Executive Officer of the Corporation since
December 2000; Chairman and Chief Executive officer of Mucho.com,
Inc. since 1999; Member of the board of directors of the
Corporation from 1997 to 1999; partner in the law firm of Strauss
Nickerson LLP, Lafayette, California, from 1998 to 2000; and from
1995 to 1997, Mr. Nickerson was the President and founder of
Workforce Strategies, Inc. which was sold to the Corporation in
1997.
Lawrence A. McLernon 62 2000 Executive Vice President of Dynegy Inc. and Chief Executive
Officer and President of Dynegy Global Communications. Chairman,
President and Chief Executive Officer of Extant, Inc., from
September 1998 to September 2000. Chairman of Rummler-Brache
Group, Ltd. from January 1996 to December 1998.
Daniel J. Jessee 48 2000 Principal of Stonehenge Financial Holdings, a private
investing group headquartered in Columbus, Ohio since August
1998. Senior Manager Corporate Finance for Banc One Capital
Corporation from August 1991 to August 1998.
James D. Robbins 55 2001 President of James D. Robbins and Co., a financial advisory and
investment company, since July 2001. Managing partner of
PricewaterhouseCoopers LLP (and its predecessor firm Coopers &
Lybrand), Columbus market, from November 1, 1993 until his
retirement on June 30, 2001. Mr. Robbins is a certified public
accountant in the State of Ohio and the Commonwealth of Kentucky.
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INFORMATION CONCERNING THE BOARD OF DIRECTORS, EXECUTIVE OFFICERS,
AND PRINCIPAL SHAREHOLDERS
MEETINGS, COMMITTEES, AND COMPENSATION OF THE BOARD OF DIRECTORS
A total of 18 meetings of the Directors of the Corporation were held
during fiscal 2000. Each of the Directors attended 75% or more of the meetings
of the Directors held while the respective director was in office.
The Corporation has an Audit Committee, a Compensation Committee and a
Marketing Committee. The Audit and Compensation committees were formed by the
Board of Directors at its first meeting following the completion of the
Corporation's initial public offering in December 1996. The Marketing Committee
was formed on May 2, 2001.
Audit Committee. The Audit Committee, which consists of Messrs. Swartz
and Mancuso and Ms. Faulkner is charged with the responsibility of reviewing
such financial information (both external and internal) about the Corporation
and its subsidiaries, so as to ascertain (i) that the overall audit coverage of
the Corporation and its subsidiaries is satisfactory and appropriate and (ii)
that an adequate system of internal financial control has been implemented
throughout the Corporation and is being effectively followed. The Board of
Directors adopted a written charter for the Audit Committee on June 8, 2000. The
Audit Committee Charter is attached as Appendix A to this Proxy Statement. The
Audit Committee met four times in fiscal 2000. See "Report of Audit Committee."
Compensation Committee. The Compensation Committee, which consists of
Messrs. Mancuso, Swartz and McLernon, considers and formulates recommendations
to the Board with respect to all aspects of compensation to be paid to the
executive officers of the Corporation subject to the provisions of the
applicable employment agreements, undertakes such evaluations and makes such
reports as are required by then applicable rules of the Securities and Exchange
Commission and performs and exercises such other duties and powers as shall from
time to time be designated by action of the Board of Directors. The Compensation
Committee met once during fiscal 2000. See "Report of Compensation Committee."
Marketing Committee. The Marketing Committee, which consists of Messrs.
Costello, Jessee and Mancuso and Ms. Faulkner, meets with management quarterly
to review the Corporation's marketing plan and assist management in identifying
ways in which to better market the Corporation's services.
In connection with the initial public offering of the Corporation's
Common Stock in December 1996, the Corporation granted to each non-employee
Director an option to purchase 5,000 shares of Common Stock at $12.00 per share,
subject to vesting on December 9, 1997. These options are subject to the terms
and conditions of the Corporation's 1996 Incentive Stock Plan. On September 3,
1997, the options issued in December 1996 were cancelled and replaced with
options to purchase 5,000 shares of Common Stock at $8.50 per share. In
addition, Ms. Faulkner was granted an option to acquire 5,000 shares of Common
Stock at $8.50 per share. These options expire September 2, 2007. On June 8,
2000, Messrs. Johnston and Swartz and Ms. Faulkner each received an option to
purchase 20,000 shares of Common Stock at $4.00 per share which vested on June
7, 2001.
Non-employee Directors receive $1,000 for each Board of Directors and
committee meeting attended, plus out-of-pocket expenses incurred in connection
with attending meetings. Directors who are employees do not receive any separate
compensation for their services as Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Common Stock as of July 15, 2001, by each person known by the
Corporation to own beneficially more than five percent of the Corporation's
outstanding Common Stock, by each Nominee and Continuing Director, by each
executive officer named in the Summary Compensation table contained in
"Executive Compensation," and by all directors and executive officers as a
group. Except as otherwise noted, each person named in the table has sole voting
and investment power with respect to all shares shown as beneficially owned by
him or her.
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PERCENT
OF SHARES
NAME AND ADDRESS OF SHARES BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER (1) OWNED AT JULY 15, 2001 OWNED(2)
- -------------------- ---------------------- --------
S. Cash Nickerson.............................................................. 2,233,000 (3) 27.7%
Kevin T. Costello.............................................................. 1,538,100 (4) 19.1%
Jose Blanco.................................................................... 200,475 (3) 2.5%
Jay R. Strauss................................................................. 195,003 (3) 2.4%
Thomas A. Gerlacher............................................................ 6,000 (7) *
Joseph Mancuso................................................................. 52,908 *
Crystal Faulkner............................................................... 25,000 (8) *
William W. Johnston............................................................ 40,080 (9) *
M. R. Swartz................................................................... 36,000 (10) *
Daniel J. Jessee............................................................... 0 --
Michael H. Thomas.............................................................. 0 --
Lawrence A. McLernon........................................................... 0 --
Robert G. McCreary, III........................................................ 0 --
James D. Robbins............................................................... 1,000 *
Stonehenge Opportunity Fund LLC................................................ 2,970,370 (11) 36.8%
Forrest Note Trust............................................................. 456,030 5.6%
All Directors and Executive Officers as a group (13 Persons)................... 4,327,566 (12) 53.7%
* Represents less than 1% of the Corporation's outstanding shares of common
stock.
(1) The address of each of the directors and officers listed in the table
is 110 East Wilson Bridge Road, Worthington, Ohio 43085. The address
for Stonehenge Opportunity Fund LLC is 191 W. Nationwide Boulevard
Columbus, Ohio 43215. The address for the Forrest Note Trust is 3390
Mt. Diablo Boulevard, Lafayette, California 94549.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attribute ownership
of securities to persons who possess sole or shared voting power and/or
investment power with respect to those shares. "Percent of Shares
Beneficially Owned" is calculated on the basis of the number of shares
outstanding on July 15, 2001, or 8,058,799 shares, plus the number of
shares a person has the right to acquire within 60 days of July 15,
2001.
(3) Includes escrowed shares from the merger of Mucho.com, Inc. with and
into the Corporation on December 28, 2000. The shares will be released
from escrow upon the attainment of certain performance goals of
Mucho.com, Inc.
(4) Includes 280,900 shares owned of record by Mr. Costello and his wife,
Anne M. Costello, as joint tenants, of which Mr. Costello shares with
his wife voting and investment power. Also includes 232,200 shares,
which Mr. Costello has a right to vote and dispose as general partner
of TEAM Partners LP, a limited partnership. Also includes 1,025,000
shares as to which Mr. Costello has the right to acquire beneficial
ownership upon the exercise of stock options exercisable within 60 days
of July 15, 2001.
(5) Includes 95,238 shares as to which Mr. Blanco has the right to acquire
beneficial ownership upon the exercise of stock options exercisable
within 60 days of July 15, 2001.
(6) Includes 26,455 shares as to which Mr. Strauss has the right to acquire
beneficial ownership upon the exercise of stock options exercisable
within 60 days of July 15, 2001.
(7) Includes 6,000 shares as to which Mr. Gerlacher has the right to
acquire beneficial ownership upon the exercise of stock options
exercisable within 60 days of July 15, 2001
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(8) Includes 25,000 shares as to which Ms. Faulkner has the right to
acquire beneficial ownership upon the exercise of stock options
exercisable within 60 days of July 15, 2001.
(9) Includes 39,720 shares as to which Mr. Johnston has the right to
acquire beneficial ownership upon the exercise of stock options
exercisable within 60 days of July 15, 2001.
(10) Includes 25,000 shares as to which Mr. Swartz has the right to acquire
beneficial ownership upon the exercise of stock options exercisable
within 60 days of July 15, 2001.
(11) Includes 1,185,185 shares as to which Stonehenge Opportunity Fund LLC
has the right to acquire beneficial ownership upon the exercise of
warrants exercisable within 60 days of July 15, 2001. Also includes
1,185,185 shares issuable upon conversion of preferred stock.
(12) Includes 1,242,413 shares issuable from the exercise of stock options
exercisable within 60 days of July 15, 2001.
EXECUTIVE OFFICERS
The following table and biographies set forth information concerning
our executive officers, who are elected by the Board of Directors:
NAME AGE POSITION
- ---- --- --------
S. Cash Nickerson.................... 41 Chairman and Chief Executive Officer
Kevin T. Costello.................... 50 President, Chief Operating Officer and a Director
Jose Blanco.......................... 44 Chief Financial Officer, Treasurer and a Director
Jay R. Strauss....................... 56 Chief Legal Officer, Vice President, Secretary and a Director
Thomas Gerlacher..................... 57 Chief Accounting Officer
The backgrounds of each of Messrs. Nickerson, Costello, Blanco and
Strauss are set forth above.
Thomas Gerlacher has been Chief Accounting Officer of the Corporation since
December 2000. Mr. Gerlacher was Vice President of Finance, Treasurer and Chief
Financial Officer of the Corporation from March 2000 to December 2000. Mr.
Gerlacher was Vice President of Finance for United Magazine Company from July
1998 to February 1999 and Chief Financial Officer of United Magazine Company
from December 1993 to July 1998.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the
annual and long-term compensation of the chief executive officer of the
Corporation and the other executive officers (together, the "Named Executives"),
whose total salary and bonus for the last completed fiscal year exceeded
$100,000.
SUMMARY COMPENSATION TABLE
ANNUAL LONG TERM
COMPENSATION COMPENSATION
------------ ------------
STOCK OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS # GRANTED ALL OTHER
- --------------------------- ---- ------ ----- --------- COMPENSATION (1)
----------------
S. Cash Nickerson, Chairman and 2000 -- -- -- --
Chief Executive Officer (2)............ 1999 -- -- -- --
1998 $ 100,000 -- -- $ 6,195
Kevin T. Costello, President and 2000 $ 378,478(3) $ 135,000 850,000 $ 9,210
Chief Operating Officer................ 1999 $ 351,550(3) 63,000 -- $ 8,703
1998 $ 308,752(3) -- 50,000 $ 8,587
Thomas Gerlacher, Chief Accounting 2000 $ 96,619 $ 22,500 70,000 $ 7,849
Officer................................ 1999 -- -- -- --
1998 -- -- -- --
(1) Represents health care insurance premiums paid by the Corporation for
the benefit of the indicated Named Executive Officer and the
compensatory value of a company provided car.
(2) Mr. Nickerson was elected Chief Executive Officer on December 28, 2000.
Mr. Nickerson earned $0 in 1999 and $100,000 in 1998 while employed by
the Corporation as the President of TEAM America of California, Inc.
(3) Includes commissions in the amounts of $143,116 in 2000, $134,704 in
1999, and $115,620 in 1998 paid to Mr. Costello.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning options
granted during fiscal 2000 to the Named Executives.
INDIVIDUAL GRANTS
-----------------
PERCENTAGE
OF TOTAL POTENTIAL
OPTIONS REALIZABLE VALUE AT
NUMBER GRANTED TO EXERCISE ASSUMED ANNUAL RATES
OF EMPLOYEES PRICE OF STOCK PRICE
OPTIONS IN FISCAL PER EXPIRATION APPRECIATION
NAME GRANTED 2000 SHARE DATE FOR OPTION TERM(1)(2)
- ---- ------- ---- ----- ---- ---------------------
5%($) 10%($)
----- ------
Kevin T. Costello........... 125,000 11.3% $ 4.000 05/17/10 $ 314,447 $ 796,871
125,000 11.3% $ 4.785 12/13/10 $ 376,158 $ 953,257
600,000 54.1% $ 3.875 12/27/10 $ 1,462,180 $ 3,705,451
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Thomas Gerlacher............ 30,000 2.7% $ 4.000 05/17/10 $ 75,467 $ 191,249
40,000 3.6% $ 4.785 12/13/10 $ 120,370 $ 305,042
(1) The dollar amounts in these columns are the product of (a) the
difference between (1) the product of the per share market price at
the date of the grant and the sum of 1 plus the assumed rate of
appreciation (5% and 10%) compounded over the term of the option (ten
years) and (2) the per share exercise price and (b) the number of
shares underlying the grant.
(2) The appreciation rates stated are arbitrarily assumed, and may or may
not reflect actual appreciation in the stock price over the life of
the option. Regardless of any theoretical value which may be placed on
a stock option, no increase in its value will occur without an
increase in the value of the underlying shares. Whether such an
increase will be realized will depend not only on the efforts of the
recipient of the option, but also upon conditions in the Corporation's
industry and market area, competition, and economic conditions, over
which the optionee may have little or no control.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth certain information concerning the value
of unexercised stock options held as of December 31, 2000 by the Named
Executives.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(2)
SHARES VALUE ------------------------------ -------------------------
ACQUIRED ON REALIZED
EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------ ----------- ------------- ----------- -------------
S. Cash Nickerson...................... 0 0 0 0 $ 0 $ 0
Kevin T. Costello ..................... 0 0 695,000 330,000 $ 0 $ 167,500
Thomas Gerlacher....................... 0 0 6,000 64,000 $ 6,375 $ 36,600
(1) Represents the difference between the per share fair market value on
the date of exercise and the per share option exercise price,
multiplied by the number of shares to which the exercise relates.
(2) Represents the total gain which would be realized if all in-the-money
options held at year end were exercised, determined by multiplying the
number of shares underlying the options by the difference between the
per share option exercise price and per share fair market value at
year end. An option is in-the-money if the fair market value of the
underlying shares exceeds the exercise price of the option.
EMPLOYMENT AGREEMENTS
Effective November 1999, Mr. Costello executed an employment agreement
with the Corporation pursuant to which he agreed to serve as President for a
period of three years and, unless terminated in accordance with the provisions
therein, on the first day of each month that the agreement is in effect, the
remaining term thereof will be automatically extended for one additional month.
Under the terms of the agreement, Mr. Costello received an annual base salary
which was $235,362 in 2000, plus incentive compensation in an amount determined
by the Corporation's compensation committee based upon various factors including
the Corporation's results of operations and financial condition and Mr.
Costello's performance during the relevant period. In addition to such base
salary and incentive compensation, Mr. Costello may receive commissions on sales
to clients for which he is responsible pursuant to terms and conditions
determined by the Corporation's compensation committee. In the event Mr.
Costello's employment is terminated for cause, the Corporation will pay Mr.
Costello the compensation and benefits due under his employment agreement
through the date of such termination. Mr. Costello's employment agreement
contains certain noncompetition and non-solicitation provisions which prohibit
him from competing with the Corporation during his employment and for a period
of one year after termination of his employment.
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The Corporation has agreed to maintain one or more life insurance
policies on the life of Mr. Costello in an aggregate amount sufficient to pay
Mr. Costello's widow approximately $110,000 per year for 15 years in the event
that he dies prior to his retirement. No such benefit will be paid in the event
that Mr. Costello dies after his retirement. In addition, upon Mr. Costello's
retirement on or after his sixty-fifth birthday, the Corporation will pay him an
amount calculated to be equal to the maximum loan available from such insurance
policy which will not cause the insurance policy to lapse prior to his life
expectancy. Thereafter, such amount shall be recalculated on an annual basis and
the Corporation will pay Mr. Costello any increase in such amount. Additionally,
the Corporation maintains a key man life insurance policy on Mr. Costello in the
amount of $750,000 for the benefit of the Corporation.
The following Compensation Committee Report and Performance Graph shall
not be deemed incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any of our filings under the Securities
Act of 1933, or the Securities Exchange Act of 1934, except to the extent that
the Corporation specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such Acts.
REPORT OF COMPENSATION COMMITTEE
THE COMPENSATION COMMITTEE
The Compensation Committee consisted of Messrs. Mancuso, Swartz and
McLernon in fiscal 2000.
COMPENSATION POLICIES
The Corporation's compensation program is designed to attract and
retain highly qualified executive officers and managers and to motivate them to
maximize the Corporation's earnings and shareholder returns. The Corporation's
executive and key personnel compensation consists of two principal components:
(i) cash compensation, consisting of a base salary and, in certain cases,
commissions on sales to clients and/or a bonus which is based upon the
Corporation's operating performance, and (ii) stock options. Stock options are
intended to encourage key employees to remain employed by the Corporation by
providing them with a long-term interest in the Corporation's overall
performance as reflected by the performance of the market for the Corporation's
common stock.
The compensation of the Corporation's executive officers, other than
the chief executive officer, is established annually by the CEO in consultation
with the Compensation Committee, subject to the provisions of any applicable
employment agreements. See "Executive Compensation--Employment Agreements." In
establishing the compensation of executive officers, various factors are
considered, including the executive officer's individual scope of
responsibilities, the quality of his or her performance in discharging those
responsibilities and the Corporation's financial performance as a whole.
CEO COMPENSATION
The minimum annual base salary for Mr. Costello was established
pursuant to an employment agreement, which was executed on October 26, 1999. In
fiscal 2000, the CEO's potential compensation included base salary and a bonus
which were determined by the Board of Directors based upon its perception of the
individual performance of the CEO and the performance of the Corporation as a
whole. No particular weight was given by the Board of Directors to any
particular factor in its evaluation of each component of the CEO's compensation
for fiscal 2000. In 2001, Mr. Nickerson's base salary will be as set by the
Compensation Committee and his bonus, stock options and commissions, if any,
will be determined by the Compensation Committee based upon the foregoing
factors.
The Budget Reconciliation Act of 1993 amended the Internal Revenue Code
to add Section 162(m) ("Section 162(m)") which bars a deduction to any publicly
held corporation for compensation paid to a "covered employee" in excess of
$1,000,000 per year. Generally, the Corporation intends that compensation paid
to covered employees shall be deductible to the fullest extent permitted by law.
The 1996 Incentive Stock Plan, as defined and described in this Proxy Statement,
is intended to qualify under Section 162(m).
THE COMPENSATION COMMITTEE
Lawrence McLernon
M.R. Swartz
Joseph Mancuso
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REPORT OF AUDIT COMMITTEE
The Audit Committee consists of Messrs. Swartz and Mancuso and Ms.
Faulkner.
In fulfilling its responsibilities, the Committee recommended to the
Board, the selection of Arthur Andersen LLP as the Corporation's independent
public accountants for fiscal 2000.
The primary responsibility of the Audit Committee is to assist the
Board of Directors in fulfilling its oversight responsibilities relating
primarily to the quality and integrity of the Corporation's financial reporting
processes and reports, its systems of internal accounting and controls, and the
independent audit of its financial statements. Management is responsible for
preparing the financial statements, and the outside auditor is responsible for
auditing those financial statements.
In fulfilling its oversight responsibilities, the Audit Committee
reviewed the financial statements in the Annual Report on Form 10-K with
management and the outside auditors, including their judgment about the quality
and appropriateness of accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the financial statements. In
addition, the Audit Committee discussed with the outside auditors any matter
required to be communicated under generally accepted auditing standards by
Auditing Standards 61, as amended. The Audit Committee also discussed with the
outside auditors the auditors' independence from management and the Corporation
including the matters in the formal written statement required by the
Independence Standards Board Standard No. 1.
The Audit Committee discussed with the Corporation's outside auditors
the overall scope and plan for their audit of the consolidated financial
statements of the Corporation for the year ended December 31, 2000. The Audit
Committee met separately with the outside auditors, with and without management
present, to discuss the results of their audits, including the integrity,
adequacy, and effectiveness of the accounting and financial reporting processes
and controls, and the overall quality of the Corporation's reporting.
Based upon its work and the information received in the inquiries
outlined above, the Committee is satisfied that its responsibilities under the
charter for the period ended December 31, 2000, were met and that the financial
reporting and audit processes of the Corporation are functioning effectively.
Further, in reliance on the reviews and discussions outlined above, the Audit
Committee recommended to the Board of Directors (and the Board approved) that
the audited financial statements be included in the Corporation's Annual Report
on Form 10-K for the year ended December 31, 2000.
THE AUDIT COMMITTEE
M.R. Swartz
Crystal Faulkner
Joseph Mancuso
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PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return of
the Corporation's common stock from December 10, 1996 (the date the Corporation
became a public company), until December 31, 2000, with the cumulative total
return of (a) the Nasdaq Stock Market-US Index and (b) the S&P SmallCap 600
Services (Commercial and Consumer) Index. The graph assumes the investment of
$100 in the Corporation's common stock, the Nasdaq Stock Market-US Index and the
S&P SmallCap 600 Services (Commercial and Consumer) Index. The initial public
offering price of the Corporation's common stock was $12.00 per share and the
closing price of the shares on the first day of trading was $12.25.
Cumulative Total Return
------------------------------------------------------------------------
12/6/96 12/96 12/97 12/98 12/99 12/00
TEAM MUCHO, INC. 100.00 94.79 87.50 47.92 47.40 42.19
NASDAQ STOCK MARKET (U.S.) 100.00 100.11 122.61 172.87 321.26 193.20
PEER GROUP 100.00 101.11 145.90 177.34 160.64 135.82
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. McLernon, Mancuso and Swartz are not employees of the
Corporation.
During fiscal 2000, Mr. Johnston received fees for legal services
provided to the Corporation in the amount of $156,000. Ms. Faulkner received
fees for tax services provided to the Corporation in the amount of
$104,000 in fiscal 2000.
Mr. Johnston has entered into the Corporation's standard client
agreement pursuant to which he is both the Corporation's client and worksite
employee. The Corporation has provided, and expects to continue to provide,
professional employer organization services to Mr. Johnston upon terms and
conditions no more favorable than those generally provided to the Corporation's
other clients.
TRANSACTIONS BETWEEN EXECUTIVE OFFICERS AND THE CORPORATION
Effective December 28, 2000, TEAM Merger Corporation, a wholly owned
subsidiary of TEAM America Corporation merged with and into Mucho.com, Inc. This
merger effectively merged Mucho.com, Inc. with TEAM America Corporation. Each of
Messrs. Nickerson, Blanco and Strauss were directors and officers of Mucho.com,
Inc. In 2000, the Corporation paid $90,000 to a law firm in which Mr. Nickerson
and Mr. Strauss were partners.
FEES OF THE INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL 2001
The following table shows the aggregate fees billed to the Corporation
by Arthur Andersen LLP, the Corporation's independent public accountants, for
services rendered during the fiscal year ended December 31, 2000.
DESCRIPTION OF FEES AMOUNT
--------------------------------------------------------------------- -------------------------
Audit Fees (1) $281,700
Financial Information Systems Design and Implementation Fees $ 0
All Other Fees (2) $ 82,150
- --------------
(1) Includes fees for audits for fiscal 2000, financial statements and
reviews of the related quarterly financial statements.
(2) The Audit Committee of the Corporation's Board of Directors has
considered whether the rendering of such non-audit services by Arthur
Andersen LLP is compatible with maintaining the principal accountant's
independence.
AMENDMENT TO THE CORPORATION'S SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
The Board of Directors has approved an amendment to the Corporation's
Second Amended and Restated Articles of Incorporation (the "Articles"), subject
to approval of the amendment by the shareholders at the Annual Meeting. First,
the amendment will allow the holders of the Series 2000 9.75% Cumulative
Convertible Redeemable Class A Preferred Stock (the "Preferred Shares") voting
as a separate class, to elect two directors to the Corporation's Board of
Directors. Second, the amendment will eliminate the redemption provisions of the
Preferred Shares. Approval of these amendments requires the affirmative vote of
the majority of holders of the Corporation's Common Stock and of Preferred
Shares each voting separately as a class. The following summary does not purport
to be complete and is qualified in its entirety by the terms of the Third
Amended and Restated Articles of Incorporation which is attached hereto as
Appendix B.
PURPOSE OF THE AMENDMENTS TO THE ARTICLES
Under the Purchase Agreement signed December 28, 2000 among the
Corporation and the holders of the Preferred Shares, the Corporation agreed,
subject to shareholder approval, to permit the holders of the Preferred Shares
to nominate and elect, voting as a separate class, two members of the Board of
Directors.
Effective January 1, 2001, the holders of the Preferred Shares agreed
to eliminate the mandatory redemption feature of the Preferred Shares. In
exchange for such amendment, the Corporation agreed to have a qualified offering
of its securities prior to June 28, 2004. A qualified offering is a
firm-commitment underwritten public offering for the sale of common shares with
offering proceeds of at least $30 million and proceeds to the holders of the
Preferred Shares of not less than $10 million (if elected by the holders of the
Preferred Shares) and post-money valuation of at least $150 million. If a
qualified offering has not occurred prior to June 28, 2004, the Company will be
in default of the agreement. The parties have agreed that in the event of a
default, the holders of the Preferred Shares would be able to receive, as
liquidated damages, an amount equal to the liquidation preference of the shares
at the time the payment is made, plus costs and expenses associated with
collecting the same, or actual damages, whichever is greater.
The affirmative vote of a majority of the Common Stock and a majority
of the Preferred Shares voting as separate classes present in person or
represented by proxy at the Annual Meeting is required to adopt the amendment to
the Articles of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
APPROVAL OF THE AMENDMENT TO THE SECOND AMENDED AND RESTATED ARTICLES OF
INCORPORATION. UNLESS A CONTRARY CHOICE IS SPECIFIED, PROXIES SOLICITED BY THE
BOARD OF DIRECTORS WILL BE VOTED FOR APPROVAL OF THE AMENDMENT.
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CERTAIN TRANSACTIONS
For a discussion of certain business relationships and transactions
between the Corporation and Mr. Johnston and Ms. Faulkner, see "Compensation
Committee Interlocks and Insider Participation."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Corporation's directors
and executive officers, and persons who own more than ten percent of a
registered class of the Corporation's equity securities, to file initial
statements of beneficial ownership (Form 3), and statements of changes in
beneficial ownership (Forms 4 and 5), of shares of Common Stock of the
Corporation with the Securities and Exchange Commission. Executive officers,
directors and greater than ten-percent shareholders are required to furnish the
Corporation with copies of all such forms they file.
To the Corporation's knowledge, based solely on its review of the
copies of such forms received by it, and written representations from certain
reporting persons that no additional forms were required, all filing
requirements applicable to its executive officers, directors and greater than
ten-percent shareholders were complied with in fiscal 2000.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has acted as independent certified public
accountants of the Corporation for fiscal 2000. Arthur Andersen LLP is expected
to have a representative present at the Annual Meeting who may make a statement,
if desired, and will be available to answer appropriate questions. Arthur
Andersen LLP has also been retained by the Corporation as its independent
certified public accountants for fiscal 2001.
SHAREHOLDER PROPOSALS
Each year the Board of Directors submits its nominations for election
of directors at the Annual Meeting of Shareholders. Other proposals may be
submitted by the Board of Directors or the shareholders for inclusion in the
Proxy Statement for action at the Annual Meeting. Any proposal submitted by a
shareholder for inclusion in the Proxy Statement for the Annual Meeting of
Shareholders to be held in 2002 must be received by the Corporation (addressed
to the attention of the Secretary) on or before January 31, 2002. To be
submitted at the meeting, any such proposal must be a proper subject for
shareholder action under the laws of the State of Ohio, and must otherwise
conform to applicable requirements of the Proxy Rules of the Securities and
Exchange Commission. Any shareholder proposal submitted outside the processes of
Rule 14a-8 under the Securities Exchange Act of 1934 for presentation at the
Corporation's 2002 annual meeting will be considered untimely for purposes of
Rue 14a-4 and 14a-5, if notice thereof is received by the Corporation after
April 14, 2002. To be submitted at the meeting, any such proposal must be a
proper subject for shareholder action under the laws of the State of Ohio.
The Corporation's Second Amended and Restated Code of Regulations (the
"Regulations") provide that shareholder nominations for election as Directors
may be made in compliance with certain advance notice, informational and other
applicable requirements. In order to be considered, a shareholder's notice of
Director nomination must be delivered to or mailed and received by the Secretary
of the Corporation at 110 East Wilson Bridge Road, Worthington, Ohio 43085 not
less than 60 or more than 90 days prior to the Corporation's Annual Meeting;
provided, however, that in the event that less than 75 days notice or prior
public disclosure of the date of the meeting is given or made to shareholders,
notice by the shareholder to be timely must be so received not later than the
close of business on the 15th day following the earlier of the day on which such
notice of the date of the meeting was mailed or such public disclosure was made.
The Corporation's Annual Meeting will generally be held in May of each year. A
shareholder's notice of Director nominations must contain certain information
required by the Regulations and must be accompanied by the written consent of
each proposed nominee to serve as a Director of the Corporation, if elected.
Copies of the Regulations are available upon request made to the Secretary of
the Corporation at the above address. The requirements described above do not
supersede the requirements or conditions established by the Securities and
Exchange Commission for shareholder proposals to be included in the
Corporation's proxy materials for a meeting of shareholders.
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OTHER MATTERS
As of the date of this proxy statement, the Board of Directors knows of
no other business that will come before the Annual Meeting. Should any other
matter requiring the vote of the shareholders arise, the enclosed proxy confers
upon the proxy holders discretionary authority to vote the same in respect to
the resolution of such other matters as they, in their best judgment, believe to
be in the best interest of the Corporation.
Shareholders are urged to forward their proxies without delay. A prompt
response will be greatly appreciated.
By Order of the Board of Directors
S. Cash Nickerson
Chairman of the Board of Directors
August 22, 2001
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Appendix A
TEAM AMERICA CORPORATION, A COMPANY LISTED ON NASDAQ
AUDIT COMMITTEE CHARTER
As Adopted on June 8, 2000
This Charter sets forth the role and responsibilities of the Audit Committee of
the Board of Directors of the Company in its financial reporting system. The
Audit Committee generally oversees and monitors management's and the outside
auditors' participation in the financial reporting process. The outside auditor
for the Company is ultimately accountable to the Board and Audit Committee, as
representatives of the shareholders. The Board and the Audit Committee have the
ultimate authority and responsibility to select, evaluate and, where
appropriate, replace the outside auditor (or to nominate the outside auditor
proposed for shareholder approval in any proxy statement).
Responsibilities
- ----------------
The Audit Committee is appointed by the Board to assist the Board in, among
other things:
(1) monitoring the integrity of the financial statements of the Company, (2)
requiring that the outside auditor submits on a periodic basis, but at least
annually, to the Audit Committee a formal written statement delineating all
relationships between the outside auditor and the Company, consistent with
Independence Standards Board Standard No. 1, and actively engaging in a dialogue
with the outside auditor with respect to any disclosed relationships or services
that may impact the objectivity and independence of the outside auditor and for
taking, or recommending that the Board of Directors take, appropriate action, to
oversee the independence of the outside auditor, (3) reviewing and assessing the
adequacy of this Charter, at least annually, (4) making such reports as are
required by the Securities and Exchange Commission and (5) reviewing
recommendations to the Board with respect to the selection, evaluation, and
where appropriate, replacement of the Company's outside auditor. The Audit
Committee shall have such other responsibilities as are required by the NASDAQ
and the Securities and Exchange Commission.
Membership Requirements
- -----------------------
The Audit Committee shall consist of at least three members. Each member of the
Audit Committee shall meet the independence standards and financial literacy
requirements as established from time to time by the NASDAQ. Under NASDAQ rules,
one Audit Committee member may be "not independent" so long as he/she is (1) not
a current employee, (2) not an immediate family member of a current employee,
and (3) the Board determines that membership on the Audit Committee by that
individual is required by the best interests of the corporation and its
shareholders and this is disclosed in the next proxy statement along with the
reasons for the Board's determination. The members of the Audit Committee are
appointed by the Board. The Audit Committee members shall select a Chair, who
shall be an "Independent Director," as defined in the listing standards of the
NASDAQ Stock Market.
Authority
- ---------
The Audit Committee shall have the authority to retain special legal,
accounting, or other consultants to advise the Committee with respect to its
responsibilities and authority hereunder and to retain professionals and
advisors to assist the Audit Committee in maintaining or improving its financial
literacy, and incur any expenses related to any of the foregoing. The Audit
Committee may require any officer or employee of the Company or the Company's
internal or outside counsel or outside auditor to attend a meeting of the
Committee or to meet with any members of, or consultants to, the Audit
Committee. The Audit Committee may not, however, knowingly cause the Company's
counsel to make any disclosure in a manner that would cause a loss of the
attorney-client privilege or a waiver of the work product doctrine.
A-1
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Processes
- ---------
The Audit Committee, in fulfilling its responsibilities and in the exercise of
its authority, during each of the periods indicated, shall:
A. QUARTERLY
1. Maintain minutes of its meetings (which may, if needed to protect
privilege, be confidential) and make regular reports to the Board.
2. Review with management and the outside auditor the financial statement
review completed by the outside auditor prior to the release of
quarterly earnings.
3. Review an analysis prepared by management and the outside auditor of
significant financial reporting issues and judgments made in connection
with the preparation of the Company's financial statements.
4. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor
and control such exposures.
B. ANNUALLY
1. Review the annual audited financial statements with management,
including major issues regarding accounting and auditing principles and
practices as well as the adequacy of internal controls that could
significantly affect the Company's financial statements.
2. Discuss with the outside auditor the matters required to be discussed
by Statement on Auditing Standards No. 61, as amended, relating to the
conduct of the audit.
3. Prepare the Audit Committee Report as required by the rules of the
Securities and Exchange Commission, to be included in the Company's
annual proxy statement, stating whether:
(a) The Audit Committee reviewed and discussed the audited financial
statements with management;
(b) The Audit Committee discussed with the outside auditor the matters
required to be discussed by SAS 61, as may be modified or supplemented;
(c) The Audit Committee received the written disclosures and the letter
from the outside auditor required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1,
INDEPENDENCE DISCUSSIONS WITH AUDIT COMMITTEES), as may be modified or
supplemented, and has discussed with the outside auditor the outside
auditor's independence; and
(d) Based on the review and discussions referred to in paragraphs (a)
through (c) above, whether the Audit Committee recommended to the Board
of Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-K for the last fiscal year for
filing with the Commission.
4. Provide the Board with such individual information and assurances as
are reasonably necessary to assure that each member of the Audit
Committee is an Independent Director.
5. Obtain from the outside auditor assurance that Section 10A of the
Private Securities Litigation Reform Act of 1995 has not been
implicated.
6. Meet with the outside auditor prior to the audit to review the planning
and staffing of the audit.
A-2
22
7. Obtain reports from management, the Company's senior internal auditing
executive (if any), and the outside auditor, that the Company's
subsidiary/foreign affiliated entities are in conformity with
applicable legal requirements and the Company's Code of Business
Conduct.
8. Review with the outside auditor any problems or difficulties the
outside auditor may have encountered and any management letter provided
by the outside auditor, and the Company's response to that letter. Such
review should include:
(a) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or
access to required information.
(b) Any changes required in the planned scope of any internal
audit.
(c) The internal audit department, if one exists,
responsibilities, budget and staffing.
9. Advise the Board with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations and with the
Company's Code of Business Conduct.
10. Review with the Company's inside General Counsel (if applicable) and
principal outside Counsel those legal matters that may have a material
impact on the financial statements, the Company's compliance policies
and any material reports or inquiries received from regulators or
governmental agencies.
11. Meet at least annually with the chief financial officer, any senior
internal auditing executive and the outside auditor in separate
executive sessions.
12. Review major changes to the Company's auditing and accounting
principles and practices as suggested by the outside auditor, any
internal auditors or management.
13. Approve the fees to be paid to the outside auditor.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditor. Nor is it the duty of
the Audit Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditor, or to assure compliance with
laws and regulations and the Company's Code of Business Conduct.
A-3
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Appendix B
THIRD AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
TEAM MUCHO, INC.
These Third Amended and Restated Articles of Incorporation supersede
the Articles of Incorporation of the Corporation heretofore in effect.
FIRST: The name of the Corporation shall be TEAM Mucho, Inc.
(hereinafter referred to as the "Corporation").
SECOND: The place in the State of Ohio where the principal office of
the Corporation will be located is the City of Worthington in Franklin County.
THIRD: The purpose for which the Corporation is formed is to engage in
any lawful act or activity for which corporations may be formed under Chapter
1701 of the Ohio Revised Code, as now in effect or hereafter amended.
FOURTH: The amount of total authorized capital which the Corporation
shall have authority to issue is Fifty Million (50,000,000) shares, consisting
of Forty Five Million (45,000,000) Common Shares, without par value (the "Common
Shares"), and Five Million (5,000,000) Preferred Shares, without par value,
consisting of Two Million Five Hundred Thousand (2,500,000) Class A Voting
Preferred Shares (the "Class A Preferred Shares") and Two Million Five Hundred
Thousand (2,500,000) Class B Nonvoting Preferred Shares (the "Class B Preferred
Shares").
(A) EXPRESS TERMS OF THE COMMON SHARES
The Common Shares shall be subject to the terms of the Class A
Preferred Shares and the Class B Preferred Shares (collectively, the "Preferred
Shares") and the express terms of any series thereof. Subject to any rights to
receive dividends to which the holders of the outstanding Preferred Shares may
be entitled, the holders of Common Shares shall be entitled to receive
dividends, if and when declared, payable from time to time by order of the Board
of Directors from funds legally available therefor.
(B) EXPRESS TERMS OF THE CLASS A PREFERRED SHARES
The Class A Preferred Shares may be issued from time to time
in one or more series. All Class A Preferred Shares shall be of equal rank and
shall be identical, except in respect of the matters that may be fixed by the
Board of Directors as hereinafter provided, and each share of each series shall
be identical with all other shares of such series, except as to the date from
which dividends are cumulative. Subject to the provisions of this paragraph (B),
which provisions shall apply to all Class A Preferred Shares, the Board of
Directors hereby is authorized to cause such shares to be issued in one or more
series and with respect to each such series prior to the issuance thereof to
fix:
(1) the designation of the series, which may be by
distinguishing number, letter or title;
B-1
24
(2) the number of shares of the series, which number the
Board of Directors may from time to time (except
where otherwise provided in the creation of the
series) increase or decrease (but not below the
number of shares thereof then outstanding);
(3) the dividend rate of the series;
(4) the dates of payment of dividends and the dates from
which dividends of the series shall be cumulative;
(5) the redemption rights and price or prices for shares
of the series;
(6) sinking fund requirements, if any, for the purchase
or redemption of shares of the series;
(7) the liquidation price payable on shares of the series
in the event of any liquidation, dissolution or
winding up of affairs of the Corporation;
(8) whether the shares of the series shall be convertible
into Common Shares, and, if so, the conversion price
or prices, any adjustments thereof, and all other
terms and conditions upon which such conversion may
be made;
(9) restrictions on the issuance of shares of any class
or series;
(10) special voting rights, if any, associated with the
series, which may be full, limited, or denied, except
as otherwise required by law; and
(11) such other terms as the Board of Directors may by law
from time to time be permitted to fix or change.
The Board of Directors is authorized to adopt from time to
time amendments to these Second Amended and Restated Articles of Incorporation
fixing or changing, with respect to each such series, the matters described in
the preceding clauses (1) to (11) of this paragraph (B).
Except as otherwise provided herein, by law or by the terms of
one or more amendments adopted by the Board of Directors as provided in the
immediately preceding paragraph, (i) Class A Preferred shall entitle the holder
thereof to one vote for each Class A Preferred Share on all matters submitted to
a vote of the shareholders of the Corporation, and (ii) the holders of the Class
A Preferred Shares and the holders of Common Shares shall vote together as one
class on all matters submitted to a vote of shareholders of the Corporation. The
approval of holders of a majority of the outstanding Class A Preferred Shares
voted together as a class shall be required in order to amend these Second
Amended and Restated Articles of Incorporation of the Corporation to affect
adversely the rights of the holders of the Class A Preferred Shares or to take
any action that would result in the creation of or an increase in the number of
authorized shares senior or superior with respect to dividends or upon
liquidation to the Class A Preferred Shares.
(C) EXPRESS TERMS OF THE SERIES 2000 9.75% CUMULATIVE
CONVERTIBLE REDEEMABLE CLASS A PREFERRED SHARES
Section 1. USE OF DEFINED TERMS. Certain terms used in this paragraph
(C) are defined in Section 9 of this paragraph (C). Unless otherwise expressly
provided or unless the context otherwise requires, such defined terms shall have
the meaning specified in Section 9.
Section 2. NUMBER; DESIGNATION; RANK.
(a) NUMBER; DESIGNATION. 125,000 of the Class A Voting
Preferred Shares, without par value, of the Corporation shall
constitute a series designated as "Series 2000 9.75% Cumulative
Convertible Redeemable Class A Preferred Shares" (the "Series A
Shares").
B-2
25
(b) RANK. The Series A Shares shall, with respect to dividend
rights and rights on liquidation, dissolution or winding up, rank
senior to the Common Shares and to any other class or series of
preferred shares issued prior to, on or after the Issue Date.
Section 3. VOTING RIGHTS.
(a) GENERAL MATTERS. Except as provided herein and as
otherwise required by law, the Series A Shares shall vote together with
the Common Shares as a single class and each outstanding Series A Share
shall have a number of votes equal to the number of Common Shares
issuable upon conversion of the Series A Shares (with any fractional
share determined on an aggregate conversion basis being rounded down to
the nearest whole share) as of the record date for determination of
shareholders entitled to vote on such matters or, if no such record
date is established, as of the date such vote is taken or any written
consent of shareholders is solicited.
(b) The holders of the Series A Shares shall have the right,
voting as a separate class, to nominate and elect two members to the
Corporation's Board of Directors. In the case of any vacancy in the
office of a director occurring among the directors elected by the
Series A Shares pursuant to Section 3(a) above, the remaining director
so elected by the holders of the Series A Shares may elect a successor
to hold office for the remainder of the unexpired term of the director
whose place has become vacant. Any director who shall have been elected
by the holders of the Series A Shares or pursuant to the preceding
sentence may be removed during the aforesaid term of office, whether
with or without cause, only by the affirmative vote of the holders of a
majority of the Series A Shares.
Section 4. DIVIDENDS.
(a) PAYMENT OF DIVIDENDS. The holders of Series A Shares, in
preference to the holders of Common Shares and of any shares of other
Capital Stock of the Corporation as to payment of dividends, shall be
entitled to receive, when, as and if declared by the Board of
Directors, out of the assets of the Corporation legally available
therefor, distributions in the form of cumulative cash dividends at an
annual rate per share equal to 9.75% of the Liquidation Preference from
and after the respective dates of issuance of applicable Series A
Shares, as long as Series A Shares remain outstanding. Dividends shall
(i) be computed on the basis of the Liquidation Preference; (ii) accrue
and be payable quarterly, in arrears, on March 31, June 30, September
30 and December 31 (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), except that if any Quarterly
Dividend Payment Date is not a Business Day then the Quarterly Dividend
Payment Date shall be on the first immediately succeeding Business Day,
commencing on the first Quarterly Dividend Payment Date following the
respective dates of issuance of applicable Series A Shares; and (iii)
be payable in cash; provided, however, that, at the election of the
Corporation, any and all dividends which accrue during the period
ending on December 31, 2002 are permitted to be payable in the form of
Series A Shares which, for such purpose, shall be valued at an amount
equal to the product of $100 multiplied by a fraction, the numerator of
which is the Conversion Price then in effect and the denominator of
which is $6.75.
(b) ACCRUAL OF DIVIDENDS; DEFAULT DIVIDENDS. Dividends payable
pursuant to Section 4(a) of this paragraph (C) shall begin to accrue
and be cumulative from the respective dates of issuance of applicable
Series A Shares, whether or not declared on a daily basis. The amount
of dividends so payable shall be determined on the basis of twelve
30-day months and a 360-day year. Upon the occurrence of an "Event of
Default", as defined in the Purchase Agreement, both of the following
consequences shall result: (i) dividends on the Series A Shares shall
thereafter accrue at an annual rate per share of 20.00% of the
Liquidation Preference (the "Extraordinary Default Dividend Rate") and
(ii) the holders of record of the Series A Shares on the date of such
occurrence shall be entitled to an extraordinary special dividend in an
amount equal to (A) the amount of dividends which would have accrued on
the Series A Shares had the rate specified in Section 4(a) been
"20.00%", rather than "9.75%", less (B) the amount of dividends
theretofore accrued on the Series A Shares (the "Extraordinary Default
Special Dividend.") Series A Shares on which accrued dividends are not
paid within ten (10) days of any Quarterly Dividend Payment Date shall
thereafter accrue dividends on the Liquidation Preference at an annual
rate per share equal to the sum of the otherwise applicable dividend
rate plus four hundred (400) basis points (the "Default Dividend Rate")
until
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all accrued and unpaid dividends are paid in full and shall be payable
at any time as of which funds legally available therefor are available
to the Corporation (without reference to any regular Quarterly Dividend
Payment Date) to the holders of record on such date, not exceeding
thirty (30) days preceding the payment thereof, as may be fixed by the
Board of Directors. Dividends paid on Series A Shares (including any
dividends payable at the Default Dividend Rate, any dividends payable
at the Extraordinary Default Dividend Rate and any Extraordinary
Default Special Dividends (such dividends, "Default Dividends")) in an
amount less than the total amount of such dividends at the time accrued
and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. All
references herein to "unpaid dividends" shall be deemed to include any
unpaid Default Dividends.
(c) RESTRICTED PAYMENTS. So long as any Series A Shares are
outstanding, the Corporation shall not declare, pay or set apart for
payment any dividend on any Common Shares or other shares of Capital
Stock of the Corporation or make any payment on account of, or set
apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any Common Shares or other
shares of Capital Stock of the Corporation or any warrants, rights,
calls or options exercisable for or convertible into any Common Shares
or other shares of Capital Stock of the Corporation, or make any
distribution in respect thereof, either directly or indirectly, whether
in cash, obligations or shares of the Corporation or other property,
and shall not permit any person directly or indirectly controlled by
the Corporation to purchase or redeem any of the Common Shares or other
shares of Capital Stock of the Corporation or any warrants, rights,
calls or options exercisable for or convertible into any Common Shares
or other shares of Capital Stock of the Corporation, unless all accrued
and unpaid dividends on the Series A Shares shall have been paid.
(d) DIVIDENDS ON COMMON SHARES. So long as any Series A Shares
remain outstanding, if the Corporation pays a dividend in cash,
securities or other property on Common Shares then at the same time the
Corporation shall declare and pay a dividend on shares of Series A
Shares in the amount of dividends that would be paid with respect to
Series A Shares if such shares were converted into Common Shares on the
record date for such dividends (or if no record date is established, at
the date such dividend is declared).
Section 5. LIQUIDATION PREFERENCE.
(a) Each holder of Series A Shares shall have the right, at
any time and from to time, to convert all or any of the Series A Shares
owned by such holder into Common Shares at the Conversion Rate for such
holder described in Section 6(b), below. If any holder of Series A
Shares converts any or all such Series A Shares into Common Shares, the
provisions of this Section 5 shall not apply to those Series A Shares
which have been converted by such holder into Common Shares.
(b) Upon any liquidation, dissolution or winding up of the
Corporation including a merger, reorganization or other transaction in
which the shareholders of the Corporation prior to the transaction do
not retain a majority of the Voting Power of the surviving entity or a
sale of all or substantially all of the Corporation's assets, either
voluntary or involuntary, after payment or provision for payment of the
debts and other liabilities of the Corporation, including the payment
of all fees, taxes and other expenses incidental thereto, and to the
extent that the Series A Shares have not, at the election of the
holders thereof, been converted to Common Shares, the holders of Series
A Shares shall be entitled to receive (assuming the holders of the
Series A Shares elect not to convert the Series A Shares into Common
Shares) in preference to the holders of the Common Shares, an amount
equal to the sum of (i) the original amount paid for such shares, plus
(ii) the aggregate amount at which Series A Shares paid as dividends on
the Series A Shares as permitted under Section 4(a) of this paragraph
(C) were valued when paid, in accordance with the proviso to said
Section 4(a), plus (iii) all declared or accrued but unpaid dividends
on the Series A Shares (the "Liquidation Preference").
(c) After payment of the Liquidation Preference shall have
been made in full or funds necessary for such payment shall have been
set aside by the Corporation in trust so as to be available for such
payment, the remaining proceeds, if any, shall be distributed on a
pro-rata basis to the holders of the Fully-Diluted Common Shares,
treating all rights, options or warrants to subscribe for or to
purchase Common Shares or any securities convertible into or
exchangeable for Common Shares on an as-if-
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converted or as-exercised basis with respect to the number of Common
Shares Deemed Outstanding (as defined in Section 6(c) below).
(d) Whenever the distribution provided for in this Section 5
shall be payable in property other than cash, the value of such
distribution shall be the fair market value of such property as
determined in good faith by the Board of Directors of the Corporation;
provided, however, that unless the holders of a majority of the Series
A Shares then outstanding, voting as a single class, consent to a
distribution pursuant to this Section 5 in property, all distributions
pursuant to this Section 5 shall be made in cash.
(e) For purposes of this Section 5, a liquidation, dissolution
or winding up of the Corporation shall be deemed to be occasioned by,
and to include (i) a Change of Control or (ii) a Disposition, unless
the holders of a majority of the Series A Shares then outstanding elect
by written notice to the Corporation that such Change of Control or
Disposition, as applicable, shall not be deemed a liquidation,
dissolution or winding up of the Corporation.
Section 6. CONVERSION.
(a) OPTIONAL AND AUTOMATIC. Any holder of Series A Shares
shall have the right, at any time and from to time, to convert all or
any such Series A Shares into Common Shares at the Conversion Rate (as
defined in Section 6(b) below). When Series A Shares are converted into
Common Shares, the holders of such Series A Shares so converted shall
be immediately entitled to an amount equal to all declared but unpaid
dividends thereon, if any, payable, at the option of such holders, (i)
in cash or (ii) in Common Shares, the number of which shall equal the
amount of all declared but unpaid dividends, if any, on the Series A
Shares so converted divided by the Conversion Price (as defined in
Section 6(b) below) then in effect. Such payment must accompany the
certificate or certificates representing the Common Shares issued upon
such conversion.
To exercise the conversion rights granted under this Section
6, the holder of Series A Shares shall surrender the certificate
representing such shares at the principal office of the Corporation, or
at such other office of the Corporation specified for such purpose,
together with written notice to the Corporation of the number of Series
A Shares which the holder elects to convert, and written instructions
regarding the registration and delivery of certificates for the Common
Shares to which the holder of Series A Shares is entitled. The
conversion notice shall also contain such representations as may
reasonably be required by the Corporation to the effect that the shares
to be received upon conversion are not being acquired and will not be
transferred in any way that might violate the then applicable
securities laws. The person entitled to receive Common Shares issuable
upon conversion shall be deemed to have become the holder of record of
such shares at the close of business on the date which the holder of
such Series A Shares delivered the conversion notice to the
Corporation. If any certificate representing Series A Shares shall have
been converted in part, the holder shall be entitled to a new
certificate representing the Series A Shares not converted. All
certificates issued upon the exercise or occurrence of the conversion
shall contain a legend governing restrictions upon such shares imposed
by law or agreement of the holder or the holder's predecessors.
Fractional shares shall not be permitted; any fractional
shares shall be rounded to the nearest whole number (with one-half
rounded upward).
The Corporation shall notify each holder of Series A Shares at
least sixty (60) days prior to the anticipated effective date of a
registration statement filed by the Corporation under the Securities
Act covering a Qualified Offering. Upon the closing of, but effective
immediately prior to, the first sale in a Qualified Offering, the
outstanding Series A Shares shall automatically be converted into
Common Shares at the Conversion Rate. Such conversion shall be
automatic, without need for any further action by the holders of Series
A Shares and regardless of whether the certificates representing such
shares are surrendered to the Corporation or its transfer agent;
provided, however, that the Corporation shall not be obligated to issue
certificates evidencing the Common Shares issuable upon such conversion
unless certificates evidencing such Series A Shares so converted are
surrendered to the Corporation. In the event the Corporation withdraws
its initial registration statement before the closing of the first sale
in a Qualified
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Offering, the converted outstanding Series A Shares shall automatically
revert to the Series A Shares each holder owned before the effective
date of a Qualified Offering.
(b) CONVERSION RATE.
(i) GENERAL PROVISIONS. The Series A Shares held by
each individual holder shall convert into Common Shares at a
conversion rate (the "Conversion Rate") determined by dividing
the Liquidation Preference amount by the "Conversion Price"
which shall initially be set at $6.75 per Common Share. To
prevent dilution of the conversion rights granted under this
Section 6, the Conversion Rate for each individual holder of
Series A Shares shall be subject to adjustment for the
issuance of any shares of Capital Stock or options or other
similar rights ("Issuance") at a purchase price less than the
Conversion Price as the same may be adjusted from time to time
as hereinafter provided.
(ii) EARNINGS-BASED ADJUSTMENT OF CONVERSION PRICE.
The Conversion Price otherwise in effect shall be subject to
an additional adjustment in accordance with this Section
6(b)(ii).
(1) Effective January 1, 2004, the
Conversion Price otherwise then in effect shall be
adjusted downwards if the Per Share Formula Amount is
less than $8.25 per Common Share (the "Target
Price"), in accordance with the following
calculation: the Conversion Price otherwise then in
effect shall be reduced to an amount equal to the
product of .818 multiplied by the Per Share Formula
Amount; provided, however, that such downward
adjustment, in and of itself, shall in no event
reduce the Conversion Price to an amount lower than
$5.00 per Common Share (the "Floor Amount"); provided
further, however, that, if and to the extent that
adjustments are made to the Conversion Price under
Sections 6(d), 6(e) and/or 6(g) hereof, then
proportionate corresponding changes shall be made to
the Target Price and the Floor Amount.
(2) As used in this Section 6(b)(ii), the
phrase "Per Share Formula Amount" means an amount
determined in accordance with the following formula:
Per Share Formula Amount=((EBITDA x 8) - I + C)/FDCS
Where:
"EBITDA" means the sum of (A) the
Corporation's and its subsidiaries' net
income for the twelve (12) month period
ending on December 31, 2003 (excluding
tax-adjusted gains or losses from the sale
of capital assets and tax-adjusted gains or
losses arising from extraordinary or
non-operating items of income or expense),
plus (B) interest and income tax expenses
and depreciation and amortization deducted
in determining net income for such period,
all determined on a consolidated basis and
in accordance with U.S. generally accepted
accounting principles consistently applied
("GAAP").
"I" means the total Indebtedness of
the Corporation and its subsidiaries as of
December 31, 2003. "Indebtedness" shall
mean, without duplication and determined on
a consolidated basis: (A) all obligations of
the Corporation or any of its subsidiaries
for borrowed money and all obligations of
the Corporation or any of its subsidiaries
evidenced by bonds, debentures, notes or
similar instruments; (B) all obligations of
the Corporation or any of its subsidiaries
as lessee under leases which have been or
should be, in accordance with GAAP, recorded
as capitalized lease liabilities; (C)
whether or not so included as liabilities in
accordance with GAAP, all obligations of the
Corporation or any of its subsidiaries to
pay the deferred purchase price of
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property or services, and indebtedness
secured by a lien on property owned or being
purchased by the Corporation or any of its
subsidiaries (including indebtedness arising
under conditional sales or other title
retention agreements), whether or not such
indebtedness shall have been assumed by the
Corporation or any of its subsidiaries or is
limited in recourse; and (D) the following,
to the extent required to be recorded as a
liability in accordance with GAAP and U.S.
generally accepted auditing standards, (1)
indebtedness of others secured by a lien on
any asset of the Corporation or any of its
subsidiaries, whether or not such
Indebtedness is assumed by the Corporation
or any of its subsidiaries, (2) indebtedness
of others guaranteed directly or indirectly
by the Corporation or any of its
subsidiaries or as to which the Corporation
or any of its subsidiaries has an obligation
substantially the economic equivalent of a
guarantee and (3) all contingent liabilities
of the Corporation or any of its
subsidiaries in respect of any of the
foregoing.
"C" means cash and cash equivalents
held by the Corporation and its subsidiaries
as of December 31, 2003, less the amount of
payments received from customers in respect
of payrolls (including salaries, wages,
taxes, benefit costs and other amounts
related to such payrolls) not yet paid by
the Corporation or its subsidiaries as of
December 31, 2003.
"FDCS" means the number of
Fully-Diluted Common Shares as of December
31, 2003.
(3) As soon as may be practicable after
December 31, 2003, but not later than March 1, 2004,
the Corporation shall deliver to each holder of
Series A Shares the audited consolidated statements
of income, changes in financial position (cash flow)
and changes in shareholders' equity for the
Corporation in respect of the twelve (12) month
period ending on December 31, 2003, and a
consolidated statement of financial condition as of
December 31, 2003, together with a statement signed
by the chief financial officer of the Corporation
setting forth in reasonable detail the Corporation's
calculation of the Per Share Formula Value. If within
thirty (30) days after delivery of such statements
the holders of a majority of the Series A Shares then
outstanding shall not have given written notice to
the Corporation disputing such statements, such
calculation of the Per Share Formula Value shall be
final and binding on the Corporation and on the
holders of the Series A Shares. In the event that
holders of a majority of the Series A Shares then
outstanding give the Corporation such notice of
dispute within such thirty (30) day period, the
Corporation and such holders shall use their best
efforts to settle the dispute within thirty (30) days
after the giving of such notice. Any dispute
unresolved after such thirty (30) day period shall be
submitted to a national public accounting firm
satisfactory to the Corporation and such holders or,
in the absence of agreement on such firm, to a panel
of three (3) public accounting firms, one designated
by the Corporation, one designated by such holders
and one jointly designated by the two other firms.
The decision of such accounting firm or a majority of
the accounting firms comprising such panel, as the
case may be, with respect to such dispute shall be
final and binding on the Corporation and on the
holders of the Series A Shares.
(c) ADJUSTMENT FOR DILUTIVE SALES. If and whenever on or
after the Issue Date the Corporation issues or sells any Common Shares
for consideration per share less than the Conversion Price in effect
for any holder of Series A Shares immediately prior to the time of such
issue or sale (a "Dilutive Sale"), then forthwith upon the occurrence
of any such Dilutive Sale such holder's Conversion Price will be
reduced so that such holder's Conversion Price in effect immediately
following the Dilutive Sale will equal the quotient derived by dividing
(i) the sum of (1) the product derived by multiplying such holder's
Conversion Price in effect immediately prior to such Dilutive Sale by
the number of Common Shares Deemed Outstanding immediately prior to
such Dilutive Sale, plus (2) the consideration, if any, received by the
Corporation pursuant to such Dilutive Sale, by (ii) the number of
Common Shares Deemed Outstanding
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immediately after such Dilutive Sale. Notwithstanding the foregoing,
the following shall not constitute a Dilutive Sale: (v) the issuance by
the Corporation of Common Shares resulting from the exercise of
existing qualified and nonqualified incentive share options granted as
of December 28, 2000 and an additional amount of Common Shares, not
exceeding 100,000, resulting from the grant or exercise of additional
qualified and nonqualified incentive share options granted pursuant to
a share option plan approved by the board of directors of the
Corporation to Corporation employees other than Kevin T. Costello, S.
Cash Nickerson, Jose Blanco and Jay R. Strauss; (w) the issuance or
exercise of the Warrant; (x) the exercise by the holders of Series A
Shares of their respective conversion rights into Common Shares; (y)
the issuance by the Corporation of Common Shares in connection with the
merger, combination or consolidation of the Corporation with any other
Person, or the acquisition of the assets or capital stock of any other
Person, so long as and only to the extent that, in any such case, such
transaction, including specifically and without limitation the issuance
by the Corporation of such Common Shares, shall have been approved in
writing by the holders of a majority of the Series A Shares then
outstanding; and (z) an issuance approved in writing by the holders of
a majority of the Series A Shares then outstanding. Any such holder
may, in such holder's sole discretion, refuse to grant any such
approval, or condition any such approval upon payment or money or other
acts or concessions by the Corporation.
For purposes of determining the adjusted Conversion Price
pursuant to this Section 6(c), each of the following events (excluding
the issuance of the Warrant) shall be deemed to be an issuance and sale
of Common Shares by the Corporation and the "Common Shares Deemed
Outstanding" shall be that number of Common Shares actually issued and
outstanding plus the number of Common Shares deemed outstanding as a
result of the following events:
(i) ISSUANCE OF RIGHTS, OPTIONS OR WARRANTS. Except
as otherwise provided for in this Section 6(c), if (1) the
Corporation in any manner grants any rights, options or
warrants to subscribe for or to purchase Common Shares or any
securities convertible into or exchangeable for Common Shares
(such rights, options or warrants referred to herein as
"Options" and such convertible or exchangeable shares of
Capital Stock or securities referred to herein as "Convertible
Securities"), and (2) the Price Per Share issuable upon the
exercise of such Options, or upon conversion or exchange of
such Convertible Securities is less than the Conversion Price
for any holder of Series A Shares in effect immediately prior
to the time of the granting of such Options, THEN (A) the
total maximum amount of such Common Shares issuable upon the
exercise of such Options or upon conversion or exchange of the
total maximum number of Convertible Securities issuable upon
the exercise of such Options will be deemed to be Common
Shares issued and sold by the Corporation, (B) the
consideration received pursuant to the Dilutive Sale will
equal the Price Per Share multiplied by the number of Common
Shares so deemed issued and sold by the Corporation and (C)
the number of Common Shares so deemed issued and sold by the
Corporation shall be included in the Common Shares Deemed
Outstanding. For purposes of this Section 6(c)(i), the "Price
Per Share" will be determined by dividing (1) the total
amount, if any, received or receivable by the Corporation as
consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable
to the Corporation upon exercise of all such Options, plus in
the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the
issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (2) the total maximum
number of Common Shares issuable upon the exercise of such
Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such
Options. No further adjustment of the Conversion Price will be
made when Convertible Securities are actually issued upon the
exercise of such Options or when Common Shares are actually
issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. Except as
provided for in this Section 6(c), if (1) the Corporation in
any manner issues or sells any Convertible Securities and (2)
the Price Per Share issuable upon such conversion or exchange
is less than the Conversion Price for any holder of Series A
Shares in effect immediately prior to the time of such issue
or sale, THEN (A) the maximum number of Common Shares issuable
upon conversion or exchange of such Convertible Securities
will be deemed to be Common Shares issued and sold by the
Corporation, (B) the
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consideration received pursuant to the Dilutive Sale will
equal the Price Per Share multiplied by the number of Common
Shares so deemed issued and sold by the Corporation and (C)
the number of Common Shares so deemed issued and sold by the
Corporation shall be included in the Common Shares Deemed
Outstanding. For the purpose of this Section 6(c)(ii), the
"Price Per Share" will be determined by dividing (1) the total
amount received or receivable by the Corporation as
consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (2) the total maximum
number of Common Shares issuable upon the conversion or
exchange of all such Convertible Securities. No further
adjustment of the Conversion Price for any holder will be made
when Common Shares are actually issued upon the conversion or
exchange of such Convertible Securities, and if any such issue
or sale of such Convertible Securities is made upon exercise
of any Options for which adjustments to the Conversion Price
for such holder had been or are to be made pursuant to Section
6(c)(i) above, no further adjustment of the Conversion Price
for such holder will be made by reason of such issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If
at any time there is a change in (1) the purchase price
provided for in any Options, (2) the additional consideration,
if any, payable upon the conversion or exchange of any
Convertible Securities, or (3) the rate at which any
Convertible Securities are convertible into or exchangeable
for Common Shares, then the Conversion Price for any holder of
Series A Shares in effect at the time of such change will be
readjusted to the Conversion Price which would have been in
effect for such holder had those Options or Convertible
Securities still outstanding at the time of such change
provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be,
at the time such Options or Convertible Securities were
initially granted, issued or sold; provided that if such
adjustment would result in an increase of the Conversion Price
then in effect, such adjustment will not be effective until
thirty (30) days after written notice thereof has been given
by the Corporation to all holders of the Series A Shares; and
provided further that under no circumstances shall the
Conversion Price be so increased to an amount greater than the
lesser of (A) $6.75 or (B) the Conversion Price which would
have been in effect but for the issuance of such Options or
Convertible Securities.
(iv) CALCULATION OF CONSIDERATION RECEIVED. If any
Common Share, Option or Convertible Security is issued or sold
or deemed to have been issued or sold for cash, the
consideration received therefor or the Price Per Share, as the
case may be, will be deemed to be the net amount received or
to be received, respectively, by the Corporation therefor. In
case any Common Shares, Options or Convertible Securities are
issued or sold for a consideration other than cash, the amount
of the consideration other than cash received by the
Corporation or the non-cash portion of the Price Per Share, as
the case may be, will be the fair market value of such
consideration received or to be received; except where such
consideration consists of securities, in which case the amount
of consideration received or to be received, respectively, by
the Corporation will be the Market Price thereof as of the
date of receipt. If any Common Shares, Options or Convertible
Securities are issued in connection with any merger in which
the Corporation is the surviving corporation, the amount of
consideration therefor will be deemed to be the fair market
value of such portion of the net assets and business of the
non-surviving corporation as is attributable to such Common
Shares, Options or Convertible Securities, as the case may be.
The fair market value of any consideration other than cash and
securities will be determined jointly by the Board of
Directors of the Corporation and the holders of a majority of
the outstanding Series A Shares. If such parties are unable to
reach agreement within a reasonable period of time, the fair
market value of such consideration will be determined by an
independent appraiser jointly selected by the Board of
Directors of the Corporation and the holders of a majority of
the outstanding Series A Shares.
(v) INTEGRATED TRANSACTIONS. In case any Option is
issued in connection with the issuance or sale of other
securities of the Corporation, together comprising one
integrated
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transaction in which no specific consideration is allocated to
such Option by the parties thereto, the Option will be deemed
to have been issued for a total consideration of $1.00.
(vi) TREASURY SHARES. The number of Common Shares
Deemed Outstanding at any given time shall not include shares
of Capital Stock owned or held by or for the account of the
Corporation, and the Disposition of any shares so owned or
held shall be considered an issuance or sale of Common Shares
by the Corporation.
(vii) RECORD DATE. If the Corporation takes a record
of the holders of Common Shares for the purpose of entitling
them (1) to receive a dividend or other distribution payable
in Common Shares, Options or in Convertible Securities or (2)
to subscribe for or purchase Common Shares, Options or
Convertible Securities, then such record date will be deemed
to be the date of the issuance or sale of the Common Shares
deemed to have been issued or sold upon the declaration of
such dividend or upon the making of such other distribution or
the date of the granting of such right of subscription or
purchase, as the case may be.
(d) SUBDIVISION OR COMBINATION OF COMMON SHARES. If the
Corporation at any time (i) subdivides (by any share split, share
dividend, recapitalization or otherwise) one or more classes of its
outstanding Common Shares into a greater number of shares, or (ii)
combines (by reverse share split or otherwise) one or more classes of
its outstanding Common Shares into a smaller number of shares, the
Conversion Rate for each holder of Series A Shares shall be adjusted
such that the number of Common Shares otherwise issuable upon the
conversion of a Series A Share owned by such holder shall,
simultaneously with the happening of such event, be multiplied by a
fraction, the numerator of which shall be the number of Common Shares
outstanding immediately after such event and the denominator of which
shall be the number of Common Shares outstanding immediately prior to
such event. Further, the Conversion Price for each holder of Series A
Shares shall, simultaneously with the happening of such event, be
multiplied by the reciprocal of such fraction.
(e) RECAPITALIZATION, MERGER, ETC. In the event of (i) any
recapitalization, reorganization or reclassification of the outstanding
Capital Stock of the Corporation or (ii) the merger, combination or
consolidation of the Corporation with, or the sale of all or
substantially all of the assets of the Corporation to, or the
acquisition of the Capital Stock of the Corporation having a majority
of the Voting Power of the Corporation by, any other person or entity
or group of affiliated persons or entities, where, in connection with
such event, the holders of Common Shares will be entitled to receive
shares of Capital Stock, securities, cash or other property with
respect to or in exchange for such Common Shares, then, as a condition
of such transaction, lawful and adequate provision (in form and
substance reasonably satisfactory to the holders of a majority of the
Series A Shares then outstanding, voting as a single class) shall be
made whereby each holder of Series A Shares shall thereafter have the
right to receive, upon the basis and upon the terms and conditions
specified herein and in lieu of the Common Shares of the Corporation
immediately theretofore receivable upon the conversion of such Series A
Shares, such shares of Capital Stock, securities, cash or other
property as may be issuable or payable with respect to or in exchange
for the number of Common Shares immediately theretofore so receivable,
and in any such case, appropriate provision shall be made with respect
to the rights and interests of each such holder such that the
provisions hereof (including, without limitation, provisions for the
adjustment of the Conversion Rate and the Conversion Price for each
such holder) shall thereafter be applicable, as nearly as may be, in
relation to any shares of Capital Stock, securities, cash or other
property thereafter deliverable upon the exercise of such conversion
rights (including an immediate adjustment, by reason of a
consolidation, merger or sale of shares of Capital Stock, if the value
so reflected is less than the Conversion Price for each holder in
effect immediately prior to such consolidation, merger or sale of
shares of Capital Stock). In the event of a merger or consolidation of
the Corporation as a result of which a greater or lesser number of
shares of Capital Stock of the surviving company are issuable to
holders of Common Shares of the Corporation outstanding immediately
prior to such merger or consolidation, the Conversion Price for each
holder in effect immediately prior to, such merger or consolidation
shall be adjusted in the same manner as though there were a subdivision
or combination of the outstanding Common Shares of the Corporation. The
Corporation shall not effect any of the transactions contemplated by
clause (ii), above, unless, prior to the consummation thereof, the
other person or entity or group of affiliated persons or entities who
are party to
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33
such transaction shall assume, by written instrument (in form and
substance reasonably satisfactory to the holders of a majority of the
Series A Shares then outstanding, voting as a single class), executed
and mailed by first class mail, postage prepaid, to each holder of
Series A Shares at the last address of such holder as shown on the
records of the Corporation, the obligation to deliver to such holders
such shares of Capital Stock, securities, cash or other property as, in
accordance with the foregoing provisions, such holder may be entitled
to receive.
(f) RESERVATION OF SHARES. The Corporation shall at all times
reserve and keep available out of its authorized but unissued Common
Shares, solely for the purpose of issuance upon the conversion of the
Series A Shares, such number of Common Shares issuable upon the
conversion of all outstanding Series A Shares based upon the Conversion
Rate for each holder of Series A Shares then in effect. All Common
Shares which are so issuable shall, when issued, be duly and validly
issued, fully paid and nonassessable and free from all taxes (other
than taxes assessable on or against such holder), liens and charges.
The Corporation shall take all such actions as may be necessary to
assure that all such Common Shares may be so issued without violation
of any applicable law or governmental regulation applicable to the
Corporation or generally applicable to transactions of such type or any
requirements of any domestic securities exchange upon which Common
Shares may be listed (except for official notice of issuance which
shall be immediately delivered by the Corporation upon each such
issuance).
(g) OTHER ADJUSTMENTS. If the Corporation's Board of Directors
determines in good faith that any event of the type contemplated but
not expressly provided for by the provisions of this Section 6 has
occurred, then the Corporation's Board of Directors shall make an
appropriate adjustment in the Conversion Rate and the Conversion Price
for each holder of Series A Shares to protect the rights of each such
holder of Series A Shares. Nevertheless, no adjustment made pursuant to
this Subsection (g) shall have the effect of decreasing the number of
Common Shares issuable upon the conversion of each Series A Shares or
increasing the Conversion Price thereof.
(h) NOTICE OF ADJUSTMENT. Upon the happening of any event
requiring an adjustment or change in the Conversion Rate and the
Conversion Price for each holder of Series A Shares, the Corporation at
its expense shall promptly compute such adjustment or change in
accordance with the terms of this Section 6 and shall promptly give
written notice to each such holder of Series A Shares, which notice
shall (i) explain the facts upon which such adjustment or change is
based, (ii) state the adjusted Conversion Rate for such holder as well
as the adjusted Conversion Price for such holder and (iii) set forth in
reasonable detail the methods of calculation.
(i) ROUNDING; DE MINIMUS ADJUSTMENTS. Except as otherwise
provided herein, all calculations made under this Section 6 shall be
made to the nearest one-hundredth, and no adjustment to the Conversion
Price for any holder of Series A Shares (and thereby the Conversion
Rate for such holder) shall be made if such adjustment would result in
a change in the Conversion Price of less than $.01.
(j) REDUCTION OF AUTHORIZED SERIES A SHARES. Upon the
conversion of Series A Shares into Common Shares, each such Series A
Share shall be canceled, retired and eliminated from the authorized
Capital Stock of the Corporation, and the number of Series A Shares
authorized under this paragraph (C) shall be reduced by the number of
Series A Shares so canceled, retired and eliminated. The President,
Chief Executive Officer or any Vice President and the Secretary or any
Assistant Secretary of the Corporation are hereby authorized and
directed on behalf of the Corporation to file such documents from time
to time as may be necessary to reduce the authorized number of Series A
Shares accordingly.
Section 7. [RESERVED]
Section 8. PREEMPTIVE RIGHTS.
(a) Except as provided below, no holder of any series or class
of Capital Stock of the Corporation shall have any preemptive rights to
subscribe for or to purchase any series or class of Capital Stock of
the Corporation, whether now or hereafter authorized.
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34
(b) Except for (i) the issuance by the Corporation of Common
Shares resulting from the exercise of existing qualified and
nonqualified incentive share options granted as of December 28, 2000
and an additional amount of Common Shares, not exceeding 100,000,
resulting from the grant or exercise of additional qualified and
nonqualified incentive share options granted pursuant to a share option
plan approved by the board of directors of the Corporation to
Corporation employees other than Kevin T. Costello, S. Cash Nickerson,
Jose Blanco and Jay R. Strauss; (ii) the issuance of Common Shares upon
exercise of the Warrant; (iii) the issuance by the Corporation of
Common Shares in connection with the merger, combination or
consolidation of the Corporation with any other Person, or the
acquisition of the assets or capital stock of any other Person, so long
as and only to the extent that, in any such case, such transaction,
including specifically and without limitation the issuance by the
Corporation of such Common Shares, shall have been approved in writing
by the holders of a majority of the Series A Shares then outstanding;
or (iv) the issuance of Common Shares upon the exercise by the holders
of Series A Shares of their respective conversion rights into Common
Shares, the Corporation shall give written notice (the "Notice of
Issuance") to the holders of Series A Shares if at any time it desires
to issue and sell or transfer any shares of Capital Stock or any notes,
debentures, bonds or other securities convertible into or carrying
options or warrants to purchase shares of the Corporation's Capital
Stock (the "Issued Shares"). The Notice of Issuance shall set forth a
description of the proposed issuance and sale or transfer, including
the name of the proposed transferees, a description of the Issued
Shares, the number of Issued Shares to be sold or transferred, the
purchase price or consideration and any other conditions of the
issuance and sale or transfer. For a period of twenty (20) days
following receipt of such Notice of Issuance, each of the holders of
Series A Shares shall have the right to purchase that number of Issued
Shares from the Corporation on the same terms and conditions and for
the price or consideration designated in the Notice of Issuance equal
to the product of (i) the percentage of the Fully-Diluted Common Shares
deemed owned by such holder as calculated on an as-if-converted or
as-exercised basis (ii) multiplied by the total number of Issued Shares
to be sold or transferred (the "Preemptive Right"). Notice of each of
such holders' intention to exercise his, her or its respective
Preemptive Right shall be evidenced by a writing signed by such holder
and delivered to the Corporation prior to the end of the twenty (20)
day period following receipt of the Notice of Issuance. For a period of
ten (10) days following expiration of the initial twenty (20) day
period following receipt of Notice of Issuance each holder of Series A
Shares who has exercised its or his Preemptive Right for the maximum
amount of Issued Shares such holder was eligible to purchase shall have
the right to purchase on a pro rata basis any remaining Issued Shares
not purchased during such initial twenty (20) day period.
(c) Excluding shares of Capital Stock purchased by the holders
of Series A Shares pursuant to their preemptive rights under this
Section 8, the Corporation shall have the right to issue and sell or
transfer the Issued Shares designated in the Notice of Issuance to the
proposed transferees on the same terms and conditions and for the price
or consideration designated therein within sixty (60) days from the
expiration of the period during which the holders of Series A Shares
had the option to exercise their Preemptive Right.
(d) The rights granted in this Section 8 shall terminate
immediately prior to the closing of a Qualified Offering.
Section 9. DEFINITIONS.
(a) "Business Day" means any day other than a Saturday, a
Sunday or a day on which banking institutions in the City of Columbus,
Ohio are authorized by law, regulation or executive order to remain
closed.
(b) "Capital Stock" of any Person means any and all shares,
interests, participations, profit sharing interests or other
equivalents (however designated) of corporate stock (including each
class of common shares and preferred shares) or partnership or
membership interests of such Person.
(c) "Change of Control" means, except pursuant to a Qualified
Offering, (i) an event or series of events by which any Person or group
of Persons, other than the Purchasers, shall, as a result of a tender
or exchange offer, open market purchases, privately negotiated
purchases, merger, consolidation or
B-12
35
otherwise, have become the beneficial owner (within the meaning of Rule
13d-3 of the Securities Exchange Act of 1934, as amended), of fifty
percent (50%) or more of the Voting Power of the Corporation, (ii) the
Corporation is merged with or into another entity with the effect that
immediately after such transaction the equity owners of the Corporation
immediately prior to such transaction hold less than a majority of the
combined Voting Power of the Person surviving the transaction, (iii)
the direct or indirect sale, lease, exchange or other transfer of all
or substantially all of the assets of the Corporation and its
subsidiaries to any Person or group of Persons, or (iv) the resignation
or termination of any individual holding the position of Chief
Executive Officer, Chief Operating Officer or Chief Financial Officer
of the Corporation unless within ninety (90) days after the Corporation
is notified of such individual's intent to resign, a plan of
successorship shall have been approved by the Compensation Committee of
the Board of Directors, and within one hundred eighty (180) days after
the Corporation is notified of such individual's intent to resign, a
successor approved by the Compensation Committee of the Board of
Directors shall have been appointed.
(d) "Common Shares" means the common shares of the
Corporation, without par value, at any time outstanding.
(e) "Corporation" means TEAM Mucho, Inc., an Ohio corporation,
together with its successors and assigns.
(f) "Disposition" means the sale, lease, conveyance, transfer
or other disposition (other than the grant of a security interest) in
any single transaction or series of related transactions of all or
substantially all of the Capital Stock or assets of the Corporation and
its subsidiaries.
(g) "Fully-Diluted Common Shares" means, as of any date of
determination, all Common Shares outstanding plus the maximum number of
Common Shares issuable in respect of rights, options or warrants to
subscribe for or to purchase Common Shares or any securities
convertible into or exchangeable for Common Shares (whether or not the
right to convert, exchange or exercise are at the time exercisable).
(h) "Issue Date" means December 28, 2000.
(i) "Market Price" of any security means the average of the
closing prices of such security's sales on all securities exchanges on
which such security may at the time be listed, or, if there has been no
sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on the primary exchange on which such security
is listed at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices
quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on
any day such security is not quoted in the NASDAQ System, the average
of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in all such cases
averaged over a period of forty-one (41) days consisting of the day as
of which "Market Price" is being determined and the forty (40)
consecutive Business Days prior to such day, or if on any such day such
security is not listed or quoted the Market Price of such security
shall be determined on the same basis as any consideration other than
cash is determined hereunder.
(j) "Person" means any individual, corporation, limited
liability company, partnership, joint venture, association, joint stock
company, trust, unincorporated organization, governmental authority or
any other form of entity.
(k) "Purchase Agreement" means that certain Securities
Purchase Agreement, dated the Issue Date, among the Corporation and the
Purchasers, as amended, restated, supplemented or otherwise modified
from time to time.
(l) "Purchasers" means, collectively, Stonehenge Opportunity
Fund, LLC, a Delaware limited liability company, and Provident
Financial Group, Inc., an Ohio corporation, together with their
respective successors and assigns.
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36
(m) "Qualified Offering" means the consummation of a
firm-commitment underwritten secondary public equity offering pursuant
to an effective registration statement under the Securities Act
covering the offer and sale of Common Shares to the public resulting in
aggregate offering proceeds to the Corporation of not less than
$30,000,000 (before underwriter's discount), of which at least
$10,000,000 of such proceeds are received by the holders of the Series
A Shares (or such amount is available to be received and is declined by
the holders of the Series A Shares), and post-money valuation (offering
price multiplied by Fully-Diluted Common Shares) of at least
$150,000,000.
(n) "Securities Act" means the Securities Act of 1933, as
amended.
(o) "Voting Power" means with respect to any entity, the power
to vote for or designate members of the board of directors, the manager
or a similar person or group, whether exercised by virtue of the record
ownership of securities, under a close corporation or similar agreement
or under an irrevocable proxy.
(p) "Warrants" means the warrants initially issued to the
Purchasers on the Issue Date for the purchase of, in the aggregate,
1,481,481 Common Shares, as modified, supplemented or amended.
(D) EXPRESS TERMS OF CLASS B PREFERRED SHARES
The shares of Class B Preferred Shares may be issued from time
to time in one or more series. All shares of Class B Preferred Shares shall be
of equal rank and shall be identical, except in respect of the matters that may
be fixed by the Board of Directors as hereinafter provided, and each share of
each series shall be identical with all other shares of such series, except as
to the date from which dividends are cumulative. Subject to the provisions of
this paragraph (C), which provisions shall apply to all Class B Preferred
Shares, the Board of Directors hereby is authorized to cause such shares to be
issued in one or more series and with respect to each such series prior to the
issuance thereof to fix:
(1) the designation of the series, which may be by
distinguishing number, letter or title;
(2) the number of shares of the series, which number the
Board of Directors may from time to time (except
where otherwise provided in the creation of the
series) increase or decrease (but not below the
number of shares thereof then outstanding);
(3) the dividend rate of the series;
(4) the dates of payment of dividends and the dates from
which dividends of the series shall be cumulative;
(5) the redemption rights and price or prices for shares
of the series;
(6) sinking fund requirements, if any, for the purchase
or redemption of shares of the series;
(7) the liquidation price payable on shares of the series
in the event of any liquidation, dissolution or
winding up of affairs of the Corporation;
(8) whether the shares of the series shall be convertible
into Common Shares, and, if so, the conversion price
or prices, any adjustments thereof, and all other
terms and conditions upon which such conversion may
be made;
(9) restrictions on the issuance of shares of any class
or series;
(10) special voting rights, if any, associated with the
series, which may be full, limited, or denied, except
as otherwise required by law; and
B-14
37
(11) such other terms as the Board of Directors may by law
from time to time be permitted to fix or change.
The Board of Directors is authorized to adopt from time to
time amendments to these Second Amended and Restated Articles of Incorporation
fixing or changing, with respect to each such series, the matters described in
the preceding clauses (1) to (10) of this paragraph (C).
Except as otherwise provided herein, by law or by the terms of
one or more amendments adopted by the Board of Directors as provided in the
immediately preceding paragraph, no Class B Preferred Shares shall be entitled
to voting rights. The approval of holders of a majority of the outstanding Class
B Preferred Shares voted together as a class shall be required in order to amend
these Second Amended and Restated Articles of Incorporation of the Corporation
to affect adversely the rights of the holders of the Class B Preferred Shares or
to take any action that would result in the creation of or an increase in the
number of authorized shares senior superior with respect to dividends or upon
liquidation to the Class B Preferred Shares.
FIFTH: Without derogation from any other power to purchase shares of
the Corporation, the Corporation by action of its directors may purchase
outstanding shares of any class of the Corporation to the extent not prohibited
by law.
SIXTH: No holder of shares of any class of the Corporation shall, as
such holder, have any preemptive or preferential right to purchase or subscribe
to any shares of any class of the Corporation, whether now or hereafter
authorized, whether unissued or in the treasury, or to purchase any obligations
convertible into shares of any class of the Corporation, which at any time may
be proposed to be issued by the Corporation or subjected to rights or options to
purchase granted by the Corporation.
SEVENTH: Except as otherwise provided in these Third Amended and
Restated Articles of Incorporation or the Regulations of the Corporation as they
may be amended from time to time, the holders of a majority of the Corporation's
outstanding voting shares, a majority of a particular class of such shares, or a
majority of each class of such shares are authorized to take any action which,
but for this Article SEVENTH, would require the vote or other action of the
holders of more than a majority of such shares, of a particular class of such
shares, or of each class of such shares.
EIGHTH: No holder of shares of any class of the Corporation shall have
the right to cumulate his voting power in the election of the Board of Directors
and the right to cumulative voting described in Ohio Revised Code Section
1701.55 is hereby specifically denied to the holders of shares of any class of
the Corporation.
NINTH: The Corporation may create and issue, whether or not in
connection with the issue and sale of any shares or other securities of the
Corporation, rights or options entitling the holders thereof to purchase from
the Corporation any shares of any class or classes to the extent such shares are
authorized by these Third Amended and Restated Articles of Incorporation, such
rights or options to be evidenced by or in such instrument or instruments as
shall be approved by the Board of Directors. The terms upon which any such
shares may be purchased upon the exercise of any such right or option, including
without limitation the time or times (which may be limited or unlimited in
duration) at or within which, and the price or prices at which, any such shares
may be purchased, shall be such as shall be determined as set forth or
incorporated by reference in a resolution adopted by the Board of Directors
providing for the creation and issue of such rights or options.
TENTH: (A) If, as of the record date for the determination of the
shareholders entitled to vote thereon or consent thereto, any Prior Holder (as
hereinafter defined) owns or controls, directly or indirectly, 20% or more of
the outstanding shares of the Corporation entitled to vote, then the affirmative
vote of the holders of shares representing at least 75% of the shares of the
Corporation entitled to vote for the election of directors, voting as a class,
will be required, except as otherwise expressly provided in paragraph (B) of
this Article TENTH, in order for any of the following actions or transactions to
be effected by the Corporation, or approved by the Corporation as shareholder of
any subsidiary of the Corporation:
B-15
38
(1) any merger or consolidation of the Corporation or any of
its subsidiaries with or into such Prior Holder or any of its affiliates,
subsidiaries or associates;
(2) any merger or consolidation of the Corporation with or
into any subsidiary of the Corporation, except a merger with a subsidiary of the
Corporation in which the Corporation is the surviving corporation, or a
subsidiary of the Corporation is the surviving corporation and, following such
merger, the certificate or articles of incorporation of such subsidiary contains
provisions substantially the same in substance as those in Article EIGHTH, this
Article TENTH and Article ELEVENTH of these Third Amended and Restated Articles
of Incorporation;
(3) any sale, lease, exchange or other disposition of all or
any substantial part of the assets of the Corporation or any of its subsidiaries
to or with such Prior Holder or any of its affiliates, subsidiaries or
associates;
(4) any issuance or delivery of any voting securities of the
Corporation or any of its subsidiaries to such Prior Holder or any of its
affiliates, subsidiaries or associates in exchange for cash, other assets or
securities, or a combination thereof; or
(5) any dissolution of the Corporation.
(B) The vote of shareholders specified in paragraph (A) of
this Article TENTH will be required for any action or transaction described in
such paragraph if the Board of Directors of the Corporation has approved the
action or transaction before direct or indirect ownership or control of 20% or
more of the outstanding shares of the Corporation entitled to vote is acquired
by the Prior Holder.
(C) For the purpose of this Article TENTH and for guidance to
the Board of Directors for the purpose of paragraph (D) hereof:
(1) "Prior Holder" means any corporation, person or entity
other than the Corporation or any of its subsidiaries;
(2) a Prior Holder will be deemed to "own" or "control,"
directly or indirectly, any outstanding shares of stock of the Corporation (a)
which it has the right to acquire pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise, or (b) which are owned, directly or indirectly (including shares
deemed owned through application of clause (a) above), by any other corporation,
person or other entity which is its subsidiary, affiliate or associate or with
which it or any of its subsidiaries, affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of shares of the Corporation (or, with or without such an agreement or
understanding, acts in concert);
(3) "outstanding shares of the Corporation entitled to vote"
and "voting securities" mean such shares as are entitled to vote in the election
of directors, considered as one class;
(4) "subsidiary" means any corporation of which another
corporation owns, directly or indirectly, 50% or more of the voting shares;
(5) an "associate" and an "affiliate" have the same meanings
as set forth in the General Rules and Regulations under the Securities Exchange
Act of 1934; and
(6) "substantial part of the assets" means assets then having
a fair market value, in the aggregate, of more than $5,000,000.
(D) The Board of Directors of the Corporation will have the
power and duty to determine for the purposes of this Article TENTH, on the basis
of information then known to the Board of Directors, the following:
(1) who constitutes a Prior Holder,
B-16
39
(2) whether any Prior Holder owns or controls, directly or
indirectly, 20% or more of the outstanding shares of the Corporation entitled to
vote, and what entities are its subsidiaries, affiliates or associates, and
(3) whether any proposed sale, lease, exchange or other
disposition involves a substantial part of the assets of the Corporation or any
of its subsidiaries. Any such determination by the Board will be conclusive and
binding for all purposes.
ELEVENTH: The Corporation reserves the right to amend or repeal any
provision contained in these Third Amended and Restated Articles of
Incorporation in the manner prescribed by the Ohio General Corporation Law.
However, the provisions set forth in article EIGHTH, Article TENTH and this
Article ELEVENTH of these Third Amended and Restated Articles of Incorporation
may not be altered, amended, superseded or repealed in any respect, unless such
action is approved by the affirmative vote of the holders of shares representing
at least 75% of the shares of the Corporation entitled to vote for the election
of directors, voting as a class. All rights conferred in these Third Amended and
Restated Articles of Incorporation are granted subject to the reservation set
forth in this Article ELEVENTH.
TWELTH: These Amended Articles of Incorporation take the place of and
supersede the existing Articles of Incorporation as heretofore amended.
[End of Articles]
B-17
40
TEAM MUCHO, INC.
110 EAST WILSON BRIDGE ROAD, WORTHINGTON, OHIO 43085
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- SEPTEMBER 20, 2001
The undersigned shareholder of TEAM Mucho, Inc. (the "Company") hereby
appoints S. Cash Nickerson and Kevin T. Costello, or either one of them, as
attorneys and proxies with full power of substitution to each, to vote all
shares of Common Stock of the Company which the undersigned is entitled to vote
at the Annual Meeting of Shareholders of the Company to be held at the Clarion
Hotel, located at 7007 North High Street, Worthington, Ohio, on Thursday,
September 20, 2001, at 10:00 a.m., local time, and at any adjournment or
adjournments thereof, with all of the powers such undersigned shareholder would
have if personally present, for the following purposes:
1. ELECTION OF JOSE BLANCO, WILLIAM W. JOHNSTON, JOSEPH MANCUSO AND ROBERT G.
MCCREARY, III AS CLASS I DIRECTORS.
[ ] FOR [ ] WITHHOLD AUTHORITY FOR EACH NOMINEE
(INSTRUCTION: TO WITHHOLD AUTHORITY FOR A SPECIFIC NOMINEE, WRITE THAT
NOMINEE'S NAME HERE):
-----------------------------------------------------------------------------
2. APPROVE AND ADOPT THE AMENDMENT TO THE COMPANY'S SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION, AS DESCRIBED IN THE COMPANY'S PROXY STATEMENT.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, and to be dated and signed, on the other side)
(Continued from the other side)
3. IN THEIR DISCRETION TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING.
THIS PROXY, WHEN EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2 AND 3.
The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting of Shareholders, dated August 22, 2001, the Proxy Statement and the
Annual Report of the Company furnished therewith. Any proxy heretofore given to
vote said shares is hereby revoked.
PLEASE SIGN AND DATE THIS
PROXY BELOW AND RETURN IN THE
ENCLOSED ENVELOPE.
-----------------------------
Signed Dated
-----------------------------
Signed Dated
Proxy Card