================================================================================
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<Table>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
</Table>
TEAM Mucho, Inc.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE 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: ...........................................................
================================================================================
TEAM MUCHO, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
MAY 30, 2002
AND
PROXY STATEMENT
================================================================================
IMPORTANT
PLEASE MARK, SIGN AND DATE YOUR PROXY
AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE
TEAM MUCHO, INC.
110 East Wilson Bridge Road
Columbus, Ohio 43085
(614) 848-3995
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 30, 2002
April 27, 2002
To Our Shareholders:
Notice is hereby given that the Annual Meeting of the Shareholders of TEAM
Mucho, Inc. will be held at the Radisson Worthington Hotel, located at 7007
North High Street, Worthington, Ohio, on May 30, 2002, at 10:00 a.m. (local
time), for the following purposes:
1. To elect two Class II Directors, each to serve for a three-year term
expiring at the 2005 Annual Meeting and until their successors are
duly elected and qualified.
2. To approve an amendment to our Third Amended and Restated Articles of
Incorporation changing our name to TEAM America, Inc.
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 April 15, 2002 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 our independent
public accountants will be present to answer your questions and to discuss our
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
TEAM MUCHO, INC.
110 East Wilson Bridge Road
Columbus, Ohio 43085
(614) 848-3995
------------------------------
PROXY STATEMENT
------------------------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 30, 2002
------------------------------
This proxy statement is furnished to the shareholders of TEAM Mucho,
Inc. in connection with the solicitation of proxies to be used in voting at the
annual meeting of shareholders to be held on May 30, 2002, and at any
adjournment thereof. The enclosed proxy is solicited by our board of directors.
This proxy statement, together with our annual report to shareholders for the
fiscal year ended December 29, 2001, will be first sent or given to our
shareholders on or about April 27, 2002.
The close of business on April 15, 2002 has been fixed as the date of
record for those shareholders entitled to vote at the annual meeting. Our stock
transfer books will not be closed. As of April 15, 2002, we had outstanding and
entitled to vote _________ shares of common stock, without par value, each of
which is entitled to one vote, and 123,952 shares of preferred stock, without
par value, each of which is entitled to 14.8148 votes. We have no other class of
capital stock outstanding.
The presence, in person or by proxy, of a majority of the outstanding
shares of our common stock and preferred stock 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 our 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 our Secretary 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 our articles of incorporation.
The cost of soliciting proxies and preparing the proxy materials will
be borne by us. In addition, we 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 our
directors, officers and employees without additional compensation to them. We
may engage an outside firm to distribute proxy solicitation materials to
brokers, banks and other nominees.
1
NOMINATION AND ELECTION OF DIRECTORS
The number of directors has been fixed by the board of directors at
nine. The board of directors currently is divided into three classes. Class I
currently has three members, Class II currently has two members, and Class III
currently has four members. The members of the three classes are elected to
serve for staggered terms of three years.
At the annual meeting, two Class II directors will be elected, each to
hold office for a term of three years and until a successor is elected and
qualified. Jay R. Strauss and Michael H. Thomas are nominees for election as
directors at the annual meeting, each to hold office for a term of three years
until the 2005 annual meeting of shareholders. The terms of Jose C. Blanco,
Joseph R. Mancuso and Robert G. McCreary, III expire in 2004. The terms of
Crystal Faulkner, Daniel J. Jessee, S. Cash Nickerson and James D. Robbins
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 I 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, or otherwise subject to its periodic reporting requirements. See "Security
Ownership of Certain Beneficial Owners and Management" for information regarding
such persons' holdings of our equity securities.
2
CLASS II DIRECTORS
(NOMINEES FOR TERM'S EXPIRING IN 2005)
DIRECTOR PRINCIPAL OCCUPATION
NAME AGE SINCE FOR THE PAST FIVE YEARS
- --------------------------------------------------------------------------------
Jay R. Strauss 58 2000 Our Secretary since 2001 and our
Chief Legal Officer and Vice
President 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 52 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.
- --------------------------------------------------------------------------------
3
CLASS I DIRECTORS
(TERMS EXPIRING IN 2004)
DIRECTOR PRINCIPAL OCCUPATION
NAME AGE SINCE FOR THE PAST FIVE YEARS
- --------------------------------------------------------------------------------
Jose C. Blanco 46 2000 Our Treasurer since 2001 and our
Chief Financial Officer 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 R. Mancuso 60 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.
Robert G. McCreary, III 49 2001 Founder and currently a principal
of CapitalWorks, 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.
- --------------------------------------------------------------------------------
4
CLASS III DIRECTORS
(TERMS EXPIRING IN 2003)
DIRECTOR PRINCIPAL OCCUPATION
NAME AGE SINCE FOR THE PAST FIVE YEARS
- --------------------------------------------------------------------------------
Crystal Faulkner 42 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.
Daniel J. Jessee 49 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.
S. Cash Nickerson 43 2000 Our Chairman and Chief Executive
Officer of since December 2000 and
our President since December 2001.
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. From 1995 to 1997, Mr.
Nickerson was the President and
founder of Workforce Strategies,
Inc. we acquired in 1997.
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. Mr.
Robbins serves as a director of
Huntington Preferred Capital, Inc.
and Dollar General Corporation.
- --------------------------------------------------------------------------------
5
INFORMATION CONCERNING THE BOARD OF DIRECTORS, EXECUTIVE OFFICERS,
AND PRINCIPAL SHAREHOLDERS
MEETINGS, COMMITTEES, AND COMPENSATION OF THE BOARD OF DIRECTORS
A total of 7 meetings of our board of directors were held during 2001.
Each of the directors attended 75% or more of the meetings of the directors held
while the respective director was in office. In addition, our board of directors
took action by written consent of all members on four occasions during 2001.
We have 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 our initial public
offering in December 1996. The Marketing Committee was formed on May 2, 2001.
Audit Committee. The audit committee, which consists of Messrs. Robbins
(Chairman) and Mancuso and Ms. Faulkner is charged with the responsibility of
reviewing our and our subsidiaries financial information (both external and
internal), so as to ascertain (i) that our and our subsidiaries overall audit
coverage is satisfactory and appropriate and (ii) that an adequate system of
internal financial control has been implemented and is being effectively
followed. The board of directors adopted a written charter for the audit
committee on June 8, 2000. The audit committee met seven times in 2001. See
"Report of Audit Committee."
Compensation Committee. The compensation committee, which consisted of
Messrs. Mancuso (Chairman), McCreary, and Lawrence McLernon in 2001, considers
and formulates recommendations to the board with respect to all aspects of
compensation to be paid to our executive officers 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 three times during 2001. See "Report of Compensation Committee."
Marketing Committee. The marketing committee, consisted of Messrs.
Costello, Jessee and Mancuso and Ms. Faulkner in 2001. The marketing committee
meets with management to review our marketing plan and assists management in
identifying ways in which to better market our services. The marketing committee
met one time during 2001.
Non-employee directors receive $1,500 for each board of directors and
committee meeting attended, plus out-of-pocket expenses incurred in connection
with attending meetings. The chairmen of the audit committee and compensation
committee are paid a monthly retainer of $1,000 for their services. Directors
who are employees do not receive any separate compensation for their services as
directors. Beginning in 2002, non-employee directors will also receive 10,000
stock options in exchange for serving on the board of directors and 3,500 stock
options for each committee on which they serve.
6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of common stock as of April 1, 2002, by each person known by us to own
beneficially more than five percent of our 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.
PERCENT
OF SHARES
NAME AND ADDRESS OF SHARES BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER (1) OWNED AT APRIL 1, 2002 OWNED(2)
- -------------------- ---------------------- --------
S. Cash Nickerson.............................................................. 2,199,837 (3) %
Jose C. Blanco................................................................. 205,475 (4) %
Jay R. Strauss................................................................. 195,003 (5) %
Philip Studarus................................................................ 27,800 (6) *
Jay Whitehead.................................................................. 20,000 (7) *
Crystal Faulkner............................................................... 34,000 (8) *
Daniel J. Jessee............................................................... 0 --
Joseph R. Mancuso.............................................................. 70,908 (9) *
Robert G. McCreary, III........................................................ 634,930 (10) %
James D. Robbins............................................................... 5,000 *
Michael H. Thomas.............................................................. 0 --
Kevin T. Costello.............................................................. 1,488,100 (11) %
CapitalWorks, LLC.............................................................. 634,930 (10) %
Stonehenge Opportunity Fund, LLC............................................... 3,448,733 (12) %
All Directors and Executive Officers as a group (12 persons)................... 4,881,053 (13) %
* Represents less than 1% of our 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 CapitalWorks, LLC is 1375 E. 9th
Street, Suite 610, Cleveland, Ohio 44114.
(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 April 1, 2002, or _________ shares, plus the number of
shares a person has the right to acquire within 60 days of April 1,
2002.
(3) Includes 102,000 shares as to which Mr. Nickerson has the right to
acquire beneficial ownership upon the exercise of stock options
exercisable within 60 days of April 1, 2002. Also includes 21,750
shares held in custodial accounts for the benefit of family members
over which Mr. Nickerson has voting and investment power.
(4) 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 April 1, 2002.
(5) 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 April 1, 2002.
7
(6) Includes 37,800 shares as to which Mr. Studarus has the right to
acquire beneficial ownership upon the exercise of stock options
exercisable within 60 days of April 1, 2002.
(7) Includes 20,000 shares as to which Mr. Whitehead has the right to
acquire beneficial ownership upon the exercise of stock options
exercisable within 60 days of April 1, 2002.
(8) Includes 34,000 shares as to which Ms. Faulkner has the right to
acquire beneficial ownership upon the exercise of stock options
exercisable within 60 days of April 1, 2002.
(9) Includes 18,000 shares as to which Mr. Mancuso has the right to acquire
beneficial ownership upon the exercise of stock options exercisable
within 60 days of April 1, 2002.
(10) Includes 634,930 shares held by SVP Co-Investors LLC and Short Vincent
Partners, LP. Mr. McCreary is Chairman of CapitalWorks, LLC which is
the general partner of Short Vincent Partners, LP, a limited
partnership and the managing member of SVP Co-Investors LLC, a limited
liability company. SVP Co-Investors LLC has sole voting and dispositive
power over 299,930 shares and shared voting and dispositive power over
634,390 shares.
(11) 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 855,000
shares as to which Mr. Costello has the right to acquire beneficial
ownership upon the exercise of stock options exercisable within 60 days
of April 1, 2002.
(12) 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 April 1, 2002. Also includes
1,185,185 shares issuable upon conversion of preferred stock.
(13) Includes 1,218,213 shares issuable from the exercise of stock options
exercisable within 60 days of April 1, 2002.
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............. 43 Chairman, Chief Executive Officer and President
Jose C. Blanco................ 46 Chief Financial Officer, Treasurer and a director
Jay R. Strauss................ 58 Chief Legal Officer, Vice President, Secretary and a director
Andrew Johnson................ [ ] Chief Accounting Officer
Jay Whitehead................. [ ] Executive Vice President of Sales and Service and Chief Marketing Officer
The backgrounds of each of Messrs. Nickerson, Blanco and Strauss are
set forth above.
Andrew Johnson. Mr. Johnson has served as our Chief Accounting Officer
since ____________ , 2002. Mr. Johnson has more than 15 years of diverse
financial experience, including 13 years with PricewaterhouseCoopers.
8
Jay Whitehead. Mr. Whitehead has served as our Executive Vice President
of Sales and Service Chief Marketing Officer since February 2001. Mr. Whitehead
founded the PEO companies EmployeeService.com, ABE/Nelson and Payroll Options.
Mr. Whitehead was VP Sales at TriNet, a top technology PEO. Mr. Whitehead also
had a 10-year career publishing technology magazines, including UPSIDE, PC
Magazine and Computer Reseller News.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning our
annual and long-term compensation of the chief executive officer 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
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
------------------------------------------ # STOCK
OTHER ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION GRANTED COMPENSATION
- --------------------------- ---- ----------- -------- ------------ ------- ------------
S. Cash Nickerson, Chairman, 2001 $ 332,292 $ 95,000 $370,620(2) 50,000 --
Chief Executive Officer and President(1) 2000 -- -- -- -- --
1999 -- -- -- -- --
Jose C. Blanco, Chief Financial 2001 $ 236,971 -- $ 93,308(3) 50,000 --
Officer................................. 2000 -- -- -- -- --
1999 -- -- -- -- --
--
Jay R. Strauss, Chief Legal Officer 2001 $ 178,927 $ 25,000 -- 25,000 --
and Vice President...................... 2000 -- -- -- -- --
1999 -- -- -- -- --
--
Philip Studarus, Executive Vice 2001 $ 134,807 -- $ 21,876(4) 27,800 --
President of Finance.................... 2000 -- -- -- -- --
1999 -- -- -- -- --
--
Jay Whitehead, Executive Vice 2001 $138,465 $ 10,000 $ 36,330(5) 110,000 --
President of Sales and Services and 2000 -- -- -- -- --
Chief Marketing Officer................. 1999 -- -- -- -- --
Kevin T. Costello, President and 2001 $ 376,333(7) $ 90,000 $ 20,029(8) -- $36,623(9)
Chief Operating Officer (6)............. 2000 $ 378,478(7) $135,000 $ 9,210(8) 850,000 --
1999 $ 351,550(7) $ 63,000 $ 8,703(8) -- --
9
(1) Mr. Nickerson was elected Chief Executive Officer on December 28, 2000.
Mr. Nickerson earned $0 in 1999 while employed by us as the President
of TEAM America of California, Inc.
(2) Represents additional benefits including moving expenses incurred by
Mr. Nickerson paid by us.
(3) Represents additional benefits including health care insurance premiums
and moving expenses incurred by Mr. Blanco paid by us.
(4) Represents additional benefits including moving expenses incurred by
Mr. Studarus paid by us.
(5) Represents additional benefits including moving expenses incurred by
Mr. Whitehead paid by us.
(6) Mr. Costello resigned as President and Chief Operating Officer on
December 28, 2001.
(7) Includes commissions in the amounts of $120,507 in 2001, $143,116 in
2000, and $134,704 in 1999 paid to Mr. Costello.
(8) Represents additional benefits including health care insurance premiums
paid by us for the benefit of Mr. Costello and the compensatory value
of a company provided car.
(9) Represents deferred compensation paid to Mr. Costello.
10
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning options
granted during 2001 to the Named Executives.
INDIVIDUAL GRANTS
----------------------- POTENTIAL
PERCENTAGE REALIZABLE VALUE AT
OF TOTAL ASSUMED ANNUAL RATES
OPTIONS OF STOCK PRICE
NUMBER GRANTED TO EXERCISE APPRECIATION
OF EMPLOYEES PRICE FOR OPTION TERM(1)(2)
OPTIONS IN FISCAL PER EXPIRATION ------------------------
NAME GRANTED 2001 SHARE DATE 5% 10%
- ---- ------- ---------- -------- ---------- --------- ---------
S. Cash Nickerson........... 50,000 10.2% $ 3.890 12/14/11 $ 122,320 $ 309,983
Jay R. Strauss.............. 25,000 5.1% $ 3.890 12/14/11 $ 61,160 $ 154,991
Jay Whitehead............... 100,000 20.4% $ 4.000 2/19/11 $ 251,558 $ 637,497
10,000 2.0% $ 3.890 12/14/11 $ 24,464 $ 61,997
Jose C. Blanco.............. 50,000 10.2% $ 6.750 _____/11 $ 212,252 $ 537,888
Philip Studarus............. 27,800 5.7% $ 3.500 _____/11 $ 61,191 $ 155,071
22,200 4.5% $ 4.250 _____/11 $ 59,336 $ 150,370
(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 our 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 29, 2001 by the Named
Executives.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT FISCAL YEAR-END(#) AT FISCAL YEAR-END ($)(2)
ACQUIRED ON REALIZED ----------------------------- -----------------------------
EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------ ----------- ------------- ----------- -------------
S. Cash Nickerson............ 0 0 102,000 50,000 -- --
Jay R. Strauss............... 0 0 26,455 25,000 $ 32,804 --
Jay Whitehead................ 0 0 0 110,000 -- --
Kevin T. Costello............ 0 0 855,000 45,000 -- --
Jose C. Blanco............... 0 0 95,238 50,000 $ 22,857 --
Philip Studarus.............. 0 0 27,800 22,200 $ 2,780 --
11
(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 December 2000, Mr. Blanco executed an employment agreement
with us pursuant to which he agreed to serve as Executive Vice President of
Finance and Chief Financial Officer for a period of one year and, unless
terminated in accordance with the provisions therein, on each anniversary date
of the agreement, the term thereof will be automatically extended for one
additional year. Under the terms of the agreement, Mr. Blanco received an annual
base salary which was $225,000 in 2001, plus incentive compensation in an amount
equal to 50% of his annual base salary based upon achievement of an EBITDA
objective. For the 2001 fiscal year the EBITDA objective was $6,000,000.
Subsequent EBITDA objectives will be set by the Chief Executive Officer and our
board of directors. In the event Mr. Blanco's employment is terminated for
cause, we will pay Mr. Blanco the compensation and benefits due under his
employment agreement through the date of such termination. In the event Mr.
Blanco's employment is terminated for reasons other than for cause, Mr. Blanco
is entitled to severance equal to one year's base salary. Mr. Blanco's
employment agreement contains certain non-solicitation provisions which prohibit
him from soliciting our clients or customers for his own benefit during his
employment and for a period of three years after termination of his employment.
Effective December 2000, Mr. Strauss executed an employment agreement
with us pursuant to which he agreed to serve as Executive Vice President of Law
and Human Resources and General Counsel for a period of one year and, unless
terminated in accordance with the provisions therein, on each anniversary date
of the agreement, the term thereof will be automatically extended for one
additional year. Under the terms of the agreement, Mr. Strauss received an
annual base salary which was $175,000 in 2001, plus incentive compensation in
the amount of $25,000. Mr. Strauss' employment agreement provides that his
incentive compensation shall be consistent with that awarded to other senior
officers of equivalent level within the Corporation as determined by our board
of directors. In the event Mr. Strauss' employment is terminated for cause, we
will pay Mr. Strauss the compensation and benefits due under his employment
agreement through the date of such termination. In the event Mr. Strauss'
employment is terminated for reasons other than for cause, Mr. Strauss is
entitled to severance equal to one year's base salary. Mr. Strauss' employment
agreement contains certain non-solicitation provisions which prohibit him from
soliciting our clients or customers for his own benefit during his employment
and for a period of three years after termination of his employment.
Effective February 2001, Mr. Whitehead executed an employment agreement
with us pursuant to which he agreed to serve as Executive Vice President of
Sales and Chief Marketing Officer. Mr. Whitehead's employment is "at will" so
that it may be terminated by Mr. Whitehead or by us at any time. Mr. Whitehead
received an annual base salary which was $160,000 in 2001, plus incentive
compensation in the amount of $10,000. In the event Mr. Whitehead's employment
is terminated, we will pay Mr. Whitehead the compensation and benefits due under
his employment agreement through the date of such termination. Mr. Whitehead's
employment agreement contains certain non-solicitation provisions which prohibit
him from soliciting our clients or customers for his own benefit during his
employment and for a period of one year after termination of his employment.
Effective August 2001, Mr. Studarus executed an employment agreement
with us pursuant to which he agreed to serve as Senior Vice President of Finance
for a period of one year and, unless terminated in accordance with the
provisions therein, on each anniversary date of the agreement, the term thereof
will be automatically extended for one additional year. Under the terms of the
agreement, Mr. Studarus received an annual base salary which was $150,000 in
2001, plus incentive compensation in an amount equal to 30% of his annual base
salary based upon achievement of an EBITDA objective. For the 2001 fiscal year
the EBITDA objective was $6,000,000. Subsequent EBITDA objectives will be set by
the Chief Executive Officer and our board of directors. In the event Mr.
Studarus' employment is terminated for cause, we will pay Mr. Studarus the
compensation and benefits due under his employment agreement
12
through the date of such termination. In the event Mr. Studarus' employment is
terminated for reasons other than for cause, Mr. Studarus is entitled to
severance equal to one year's base salary. Mr. Studarus' employment agreement
contains certain non-solicitation provisions which prohibit him from soliciting
our clients or customers for his own benefit during his employment and for a
period of two years after termination of his employment.
Effective December 2001, Mr. Costello executed an agreement with us
pursuant to which he agreed to terminate his employment agreement dated October
26, 1999 (the "1999 Agreement") and resign as President. Under the 1999
Agreement, upon termination other than for cause, Mr. Costello was entitled to a
lump sum severance payment equal to $750,000. In exchange for terminating the
1999 Agreement and foregoing the severance payment, we agreed to pay Mr.
Costello an amount equal to $850,000 over three years. Our agreement with Mr.
Costello contains certain non-competition and non-solicitation provisions which
prohibit him from competing with us for a period of two years from the effective
date of the agreement.
In addition, effective December 2001, Mr. Costello executed an
employment agreement with us pursuant to which he agreed to serve as an advisor
to the Chairman of the board of directors for a period of two years, unless
terminated in accordance with the provisions therein. Under the terms of the
agreement, Mr. Costello will receive an annual base salary of $50,000 in 2002.
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 non-solicitation provisions which prohibit him from
soliciting our clients or customers for his own benefit during his employment
and for a period of five years after termination of his employment.
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
we specifically incorporate this information by reference, and shall not
otherwise be deemed filed under such Acts.
13
REPORT OF COMPENSATION COMMITTEE
THE COMPENSATION COMMITTEE
The compensation committee consisted of and Messrs. McCreary, Mancuso
(Chairman) and McLernon in 2001. Mr. McLernon resigned as a member of the board
of directors effective March 7, 2002.
COMPENSATION POLICIES
Our compensation program is designed to attract and retain highly
qualified executive officers and managers and to motivate them to maximize our
earnings and shareholder returns. Our 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 our operating performance, and (ii) stock options.
Stock options are intended to encourage key employees to remain employed with us
by providing them with a long-term interest in our overall performance as
reflected by the performance of the market for our common stock.
The compensation of our executive officers, other than the Chief
Executive Officer, is established annually by the chief executive officer 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 our financial performance as a whole.
CEO COMPENSATION
Mr. Nickerson does not have an employment agreement with the
Corporation. Mr. Nickerson's compensation was set by the compensation committee
based on a number of factors, including: salaries paid to other executives in
similar positions at similar companies, Mr. Nickerson's experience, Mr.
Nickerson's past performance, the compensation committee's subjective perception
of Mr. Nickerson's performance and his historical and anticipated future
contributions to the success of the Corporation. The determination was not based
on specific objective criteria and no specific weight was given to any of the
factors considered.
The compensation committee met and agreed Mr. Nickerson's base salary
for 2001 would be $320,000. In addition, we agreed to pay Mr. Nickerson a bonus
for 2001 in the amount of $95,000. The compensation committee also agreed to
reimburse Mr. Nickerson for moving expenses he incurred relocating to central
Ohio in the amount of $333,000.
The Budget Reconciliation Act of 1993 amended the Internal Revenue Code
to add 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, we intend that compensation paid to covered employees shall be
deductible to the fullest extent permitted by law. The 1996 Incentive Stock Plan
and our 2000 Stock Option Plan, as defined and described in this proxy
statement, are intended to qualify under Section 162(m).
THE COMPENSATION COMMITTEE
Robert G. McCreary, III
Joseph Mancuso (Chairman)
14
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return of
our common stock from December 10, 1996 (the date we became a public company),
until December 29, 2001, 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 our 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 our common stock was
$12.00 per share and the closing price of the shares on the first day of trading
was $12.25.
COMPARISON OF 49 MONTH CUMULATIVE TOTAL RETURN*
AMONG TEAM MUCHO, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND A PEER GROUP
(PERFORMANCE GRAPH)
12/6/1996 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
*$100 INVESTED ON 12/6/96 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
CALENDAR YEAR ENDING DECEMBER 31.
15
REPORT OF AUDIT COMMITTEE
The audit committee consists of Messrs. Robbins (Chairman) and Mancuso
and Ms. Faulkner.
In fulfilling its responsibilities, the committee recommended to the
board, the selection of Arthur Andersen LLP ("Andersen") as our independent
public accountants for 2001.
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 our financial reporting processes and
reports, its systems of internal accounting and controls, and the independent
audit of our 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 our company
including the matters in the formal written statement required by the
Independence Standards Board Standard No. 1.
The audit committee has received certain representations from Andersen
concerning audit quality controls for the audited financial statements included
in our annual report on Form 10-K for the year ended December 29, 2001. These
representations concerned the continuity of personnel working on the audit and
the availability of national office consultation.
The audit committee discussed with our outside auditors the overall
scope and plan for their audit of our consolidated financial statements for the
year ended December 29, 2001. 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 our 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 29, 2001, were met and that our financial
reporting and audit processes 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 our annual report on Form 10-K for the year ended
December 29, 2001.
THE AUDIT COMMITTEE
Crystal Faulkner
Joseph Mancuso
James D. Robbins (Chairman)
16
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. McCreary, Mancuso and McLernon served as members of the
compensation committee in 2001. The members of the compensation committee are
not employees or former employees of our company. Mr. McLernon resigned as a
member of our board of directors effective March 7, 2002.
FEES OF THE INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL 2001
The following table shows the aggregate fees billed to us by Arthur
Andersen LLP, our independent public accountants, for services rendered during
the fiscal year ended December 29, 2001.
DESCRIPTION OF FEES AMOUNT
------------------------------------------------------------ ------
Audit Fees (1) $
Financial Information Systems Design and Implementation Fees $
All Other Fees (2) $
- --------------
(1) Includes fees for audits for fiscal 2001, financial statements and reviews
of the related quarterly financial statements.
(2) The audit committee of our 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.
CERTAIN TRANSACTIONS
Ms. Faulkner is a principal in the accounting firm of Cooney, Faulkner
& Stevens, LLC. Cooney, Faulkner & Stevens, LLC received fees for tax services
provided to us in the amount of $218,259 in fiscal 2001. In addition, Cooney,
Faulkner & Stevens, LLC has entered into our standard client agreement. We have
provided, and expect to continue to provide, professional employer organization
services to Cooney, Faulkner & Stevens, LLC upon terms and conditions no more
favorable than those generally provided to our other clients.
Stonehenge Opportunity Fund, LLC has entered into our standard client
agreement. We have provided, and expect to continue to provide, professional
employer organization services to Stonehenge Opportunity Fund, LLC upon terms
and conditions no more favorable than those generally provided to our other
clients.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and executive
officers, and persons who own more than ten percent of a registered class of our
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
our common stock with the Securities and Exchange Commission. Executive
officers, directors and greater than ten-percent shareholders are required to
furnish us with copies of all such forms they file.
17
To our knowledge, based solely on its review of the copies of such
forms received by us, and written representations from certain reporting persons
that no additional forms were required, all filing requirements applicable to
our executive officers, directors and greater than ten-percent shareholders were
complied with in 2001.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has acted as our independent certified public
accountants for 2001. 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.
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 2003 must be received by us (addressed to the
attention of the Secretary) on or before December 29, 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 our 2003 annual meeting will
be considered untimely for purposes of Rule 14a-4 and 14a-5, if notice thereof
is received by us less than 30 days prior to the date fixed for the 2003 annual
meeting.
Our Second Amended and Restated Code of 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 our Secretary at 110 East Wilson Bridge
Road, Worthington, Ohio 43085 not less than 60 or more than 90 days prior to our
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. Our 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 our
Secretary 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 our proxy
materials for a meeting of shareholders.
AMENDMENT TO OUR ARTICLES OF INCORPORATION
The board of directors has approved an amendment to our articles of
incorporation, subject to approval of the amendment by the shareholders at the
annual meeting. 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 A.
If adopted, Article One of the Third Amended and Restated Articles of
Incorporation would be: "First: The name of the Corporation shall be Team
America, Inc. (hereinafter referred to as the "Corporation")."
PURPOSE OF THE AMENDMENT TO THE ARTICLES
The amendment would change our name from "TEAM Mucho, Inc." to "TEAM
America, Inc." The "TEAM America" name has been our primary brand name for 16
years. The use of TEAM America will replace the TEAM Mucho name used in
e-commerce operations and TEAM PMSI currently used in some of our western
markets. Our objective is to eliminate the brand confusion which we have
encountered in some markets. The TEAM America name has strong brand recognition
in many markets and we intend to build upon that strength through the use of one
name for all of our operations. Our stock symbol will remain TMOS.
18
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
APPROVAL OF THE AMENDMENT TO THE THIRD 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.
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 our best interest.
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
April 27, 2002
19
Appendix A
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 America, 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;
A-1
(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;
(8) 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").
A-2
(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
A-3
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
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as-if-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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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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(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
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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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(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
A-14
(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:
A-15
(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,
A-16
(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]
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TEAM MUCHO, INC.
110 EAST WILSON BRIDGE ROAD, WORTHINGTON, OHIO 43085
----------------------------------------------------
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - MAY 30, 2002
The undersigned shareholder of TEAM Mucho, Inc. (the "Company") hereby
appoints S. Cash Nickerson and Jay R. Strauss, 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 Raddison
Worthington Hotel, located at 7007 North High Street, Worthington, Ohio, on May
30, 2002, 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 JAY R. STRAUSS AND MICHAEL H. THOMAS AS CLASS II 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 THIRD AMENDED AND RESTATED
ARTICLES OF INCORPORATION, AS DESCRIBED IN THE COMPANY'S PROXY STATEMENT.
[ ] FOR
[ ] AGAINST
3. IN THEIR DISCRETION TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING.
(Continued and to be signed on other side.)
(Continued from other side.)
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 AND 2.
The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting of Shareholders, dated April 27, 2002, 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: ______________________, 2002
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