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As filed with the Securities and Exchange Commission on August 11, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
TEAM AMERICA CORPORATION
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
Ohio 7363 31-1209872
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
110 E. Wilson Bridge Road
Worthington, Ohio 43085
(614) 848-3995
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
Kevin T. Costello
President
TEAM America Corporation
110 E. Wilson Bridge Road
Worthington, Ohio 43085
(614) 848-3995
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of Correspondence to:
Robert J. Tannous, Esq. Jay Richard Strauss, Esq.
Porter, Wright, Morris & Arthur LLP Chief Legal Officer
41 South High Street Mucho.com, Inc.
Columbus, Ohio 43215 3390 Mt. Diablo Boulevard, 2nd Floor
Telephone: (614) 227-1953 Lafayette, California 94549
Facsimile: (614) 227-2100 Telephone: (925) 299-8565
Facsimile: (925) 299-8563
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _________
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _________
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Proposed Maximum Proposed Maximum Amount of
Securities to be Amount to be Offering Price Per Aggregate Offering Registration
Registered Registered Unit(1) Price(1) Fee(1)
------------------------- ---------------------- ------------------------ ------------------------ -------------------
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Common stock, no par
value............ 5,925,925 $4.63 $27,407,404 $12,741
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 of the Securities Act of 1933. At March 31, 2000,
Mucho.com, Inc. had an accumulated capital deficit. Pursuant to Section
6(b) and Rule 457(f)(2), the registration fee was calculated based on
one-third of the aggregate par value on July 31, 2000 of 38,224,581 shares
of common stock, $.001 par value (which includes 1,599,721 shares issuable
in connection with stock options and warrants), of Mucho.com, Inc. to be
cancelled in the merger.
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TO THE SHAREHOLDERS OF TEAM AMERICA CORPORATION AND MUCHO.COM, INC.
A MERGER PROPOSAL - YOUR VOTE IS VERY IMPORTANT
TEAM America and Mucho have agreed to a merger whereby Mucho will become a
wholly owned subsidiary of TEAM America. After the merger is complete, TEAM
America will change its name to TEAM Mucho, Inc. We believe the synergies of our
two companies will enable us to combine Mucho's Internet services and delivery
capabilities with TEAM America's customer base which will create the potential
for stronger operating and financial results than either company could achieve
on its own. The board of directors of TEAM Mucho will consist of four members
nominated by TEAM America, four members nominated by Mucho, and one member
jointly nominated. Senior management of TEAM Mucho will be comprised of
executive officers of both TEAM America and Mucho.
As a result of the merger, Mucho shareholders will receive 5,925,925 shares
of TEAM America common stock, representing approximately 58% of TEAM America's
outstanding common stock, in exchange for all of the outstanding stock, options
and warrants of Mucho. Some of Mucho's founding shareholders have agreed to
place a total of 2,222,222 shares of the TEAM America common stock received by
them in the merger into escrow. The Mucho shareholders who enter into the escrow
agreement will receive the escrowed shares if the conditions to the escrow are
met. These conditions are described on page ___.
Also, in connection with the merger, TEAM America has agreed to offer to
purchase up to 50% of its outstanding common stock from its current shareholders
at $6.75 per share. This self-tender offer will expire at the close of the TEAM
America special meeting. Consummation of the tender offer is conditioned upon
the closing of the merger.
Because of the ownership by Mucho shareholders of TEAM America common
stock, following the merger, whether or not the escrowed shares are released, a
majority of TEAM Mucho's common stock will be owned by Mucho shareholders.
The boards of directors of both TEAM America and Mucho have unanimously
approved the merger and recommend that their respective shareholders vote FOR
the merger proposal. Information about the merger and the tender offer is
contained in this proxy statement/information statement/prospectus. WE URGE YOU
TO READ THESE MATERIALS, INCLUDING THE SECTION DESCRIBING RISK FACTORS RELATING
TO THE MERGER THAT BEGINS ON PAGE __.
The dates, times and places of the meetings are as follows:
For TEAM America shareholders:
________, 2000 at 10:00 a.m., local time
The Clarion Hotel
7007 North High Street
Worthington, Ohio
For Mucho shareholders:
________, 2000 at 10:00 a.m., local time
Mucho.com, Inc.
3390 Mt. Diablo Blvd., 2nd Floor
Lafayette, California
Your vote is very important, regardless of the number of shares you own.
Whether or not you plan to attend your special meeting, please vote as soon as
possible to make sure that your shares are represented at your meeting. If you
do not vote, it will have the same effect as voting against the merger.
We strongly support the combination of our companies and join with our
boards of directors in enthusiastically recommending that you vote in favor of
the merger.
Kevin T. Costello S. Cash Nickerson
President and Chief President and Chief
Executive Officer of Executive Officer
TEAM America Corporation of Mucho.com, Inc.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROXY STATEMENT/INFORMATION STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement/information statement/prospectus is dated ________, 2000
and is first being mailed to shareholders of TEAM America and Mucho on or
about ________, 2000.
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TEAM AMERICA CORPORATION
110 E. WILSON BRIDGE ROAD
WORTHINGTON, OHIO 43085
(614) 848-3995
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD , 2000
To Our Shareholders:
We are holding a special meeting of TEAM America Corporation's shareholders
on , 2000, at 10:00 a.m., local time, at the Clarion Hotel, 7007 North
High Street, Worthington, Ohio for the following purposes:
(1) To consider and vote on a proposal to adopt a merger agreement, as
amended, pursuant to which TEAM Merger Corporation, a wholly owned
subsidiary of TEAM America, will merge with and into Mucho.com, Inc.
The Mucho shareholders will collectively receive 5,925,925 shares of
TEAM America common stock in exchange for their shares of Mucho
including all outstanding Mucho options and warrants. A copy of the
merger agreement is attached as Appendix A and is described in the
accompanying proxy statement/information statement/prospectus.
(2) To consider and act upon such other matters as may properly come
before the special meeting or any adjournment of the meeting.
Adoption of the merger agreement by TEAM America's shareholders will also
constitute approval of the amendments to TEAM America's articles of
incorporation, including the increase in the number of authorized shares to
50,000,000, and the grant of an option to purchase 600,000 shares of TEAM
America common stock to Kevin T. Costello, TEAM America's President and Chief
Executive Officer, as discussed in the attached proxy statement/information
statement/prospectus.
Some of Mucho's founding shareholders have agreed to place a total of
2,222,222 shares of the TEAM America common stock received by them in the merger
into escrow. The Mucho shareholders who enter into the escrow agreement will
receive half of the escrowed shares on a pro rata basis if Stonehenge
Opportunity Fund, LLC or its affiliates, business partners or other investors
obtained or arranged by Stonehenge provide $10 million in private equity
financing on behalf of TEAM Mucho prior to December 31, 2001. If Stonehenge
provides $10 million in private equity financing, the remaining half of the
escrowed shares will be released on a pro rata basis to the Mucho shareholders
who escrowed shares, if, in any consecutive three-month period prior to December
31, 2001, TEAM Mucho's operating revenue from Mucho's Internet operations plus
incremental TEAM Mucho PEO gross margin in excess of eight percent (8%) over
TEAM America's prior year's gross margin during the same three-month period is
$2 million or greater. If Stonehenge does not raise the $10 million in private
equity financing, the Mucho shareholders who enter into the escrow agreement
will receive half of the escrowed shares on a pro rata basis if TEAM Mucho
raises $15 million in equity financing prior to December 31, 2001. The Mucho
shareholders will receive the remaining half of the escrowed shares on a pro
rata basis if Mucho earns $2 million of operating revenue from its Internet
operations in any consecutive three-month period prior to December 31, 2001,
provided that TEAM Mucho has raised $15 million in equity financing.
Also, in connection with the merger, TEAM America has agreed to offer to
purchase up to 50% of its outstanding common stock from its current shareholders
at $6.75 per share. This self-tender offer will expire at the close of the TEAM
America special meeting. Consummation of the tender offer is conditioned upon
the closing of the merger.
Information about the merger, including the merger agreement and the
repurchase of TEAM America shares from its current shareholders, is contained in
the proxy statement/information statement/prospectus. WE URGE YOU TO READ THESE
MATERIALS, INCLUDING THE SECTION DESCRIBING RISK FACTORS RELATING TO THE MERGER
THAT BEGINS ON PAGE __. Only holders of TEAM America common stock of record at
the close of business on [ ], 2000, the record date for the special meeting, are
entitled to notice of and to vote at the special meeting and any adjournments or
postponements of the special meeting. Under Ohio law, holders of TEAM America
common stock will not be entitled to dissenters' rights in connection with the
merger.
You will be most welcome at the special meeting, and we hope you can
attend. Our directors and officers and representatives of our independent public
accountants will be present to answer your questions.
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Your vote is very important, regardless of the number of shares you own.
Please vote as soon as possible to make sure that your shares are represented at
the special meeting. To vote your shares, you may complete and return the
enclosed proxy card or you may be able to submit your proxy or voting
instructions by telephone or the Internet. If you are a holder of record, you
may also cast your vote in person at the special meeting. If your shares are
held in an account at a brokerage firm or bank, you must instruct them on how to
vote your shares. If you do not vote or do not instruct your broker or bank how
to vote, it will have the same effect as voting against the merger.
By Order of the Board of Directors
Charles F. Dugan
Secretary
, 2000
PLEASE SIGN AND MAIL THE ENCLOSED PROXY
IN THE ACCOMPANYING ENVELOPE
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES
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MUCHO.COM, INC.
3390 MT. DIABLO BLVD, 2ND FLOOR
LAFAYETTE, CALIFORNIA 94549
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ________, 2000
A special meeting of the shareholders of Mucho.com, Inc. will be held at
Mucho's corporate headquarters, 3390 Mt. Diablo Blvd., 2nd Floor, Lafayette,
California, on ________________, 2000, at 10:00 a.m., local time, for the
following purposes:
1. To consider and vote on a proposal to adopt the Agreement and Plan of
Merger dated as of June 16, 2000, by and among TEAM America
Corporation, an Ohio corporation, TEAM Merger Corporation, a Nevada
corporation, and Mucho, as amended, and to approve the proposed merger
and the related transactions; and
2. To transact such other business as may properly come before the
meeting.
Mucho's board of directors has unanimously approved the merger agreement
and the merger, and recommends that the Mucho shareholders vote to adopt the
merger agreement and approve the merger and the related transactions.
Information about the merger, including the merger agreement and the
repurchase of TEAM America shares from TEAM America's current shareholders, is
contained in the proxy statement/information statement/prospectus. WE URGE YOU
TO READ THESE MATERIALS, INCLUDING THE SECTION DESCRIBING RISK FACTORS RELATING
TO THE MERGER THAT BEGINS ON PAGE___. Shareholders of record as of the close of
business on ___________2000, will be entitled to notice of and to vote at the
Mucho special meeting. Each share of common stock outstanding is entitled to one
vote. Under Nevada law, holders of Mucho common stock are entitled to
dissenters' rights in connection with the merger.
You will be most welcome at the special meeting, and we hope you can
attend. Our directors and officers and representatives of our independent public
accountants will be present to answer your questions. The affirmative vote of a
majority of the shares of Mucho common stock outstanding on the record date is
required to adopt the merger agreement and approve the merger and the related
transactions.
Your vote is very important, regardless of the number of shares you own.
Please vote as soon as possible to make sure that your shares are represented at
the special meeting. To vote your shares, you may complete and return the
enclosed proxy card. You may also cast your vote in person at the special
meeting. If you do not vote, it will have the same effect as voting against the
merger. You may revoke your proxy at any time before it is voted at the Mucho
special meeting by delivering a later-dated executed proxy, giving written
notice of revocation to the corporation secretary of Mucho, or attending the
Mucho special meeting and voting in person.
By Order of the Board of Directors
Jay R. Strauss
Secretary
___________, 2000
PLEASE SIGN AND MAIL THE ENCLOSED PROXY
IN THE ACCOMPANYING ENVELOPE
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES
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THIS PROXY STATEMENT/INFORMATION STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE
IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT TEAM AMERICA THAT IS NOT
INCLUDED OR DELIVERED WITH THIS DOCUMENT. THIS INFORMATION IS DESCRIBED IN
GREATER DETAIL IN THE SECTION OF THIS PROXY STATEMENT/INFORMATION
STATEMENT/PROSPECTUS ENTITLED "WHERE YOU CAN FIND MORE INFORMATION." IN
ADDITION, THE INFORMATION IS AVAILABLE WITHOUT CHARGE TO TEAM AMERICA'S OR
MUCHO'S SHAREHOLDERS UPON A WRITTEN OR ORAL REQUEST TO TEAM AMERICA CORPORATION,
110 E. WILSON BRIDGE RD., WORTHINGTON, OHIO 43085, ATTENTION: KEVIN T. COSTELLO,
(614) 848-3995. TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD
BE MADE BY [ ], 2000, WHICH IS FIVE DAYS BEFORE THE DATE OF THE
SPECIAL MEETING OF TEAM AMERICA'S AND MUCHO'S SHAREHOLDERS DESCRIBED IN THIS
PROXY STATEMENT/INFORMATION STATEMENT/PROSPECTUS.
TABLE OF CONTENTS
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PAGE
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Questions and Answers about the Merger............................................................................ 8
Summary ........................................................................................................ 11
The Companies................................................................................................. 11
The Structure of the Merger................................................................................... 11
The Tender Offer.............................................................................................. 11
Recommendations of the Board of Directors and Opinion of Financial Adviser.................................... 12
Dissenter's Rights............................................................................................ 12
The Escrowed Shares........................................................................................... 12
The Special Meetings.......................................................................................... 12
Board of Directors and Management Following the Merger........................................................ 13
Interests of Directors and Executive Officers in the Merger................................................... 13
Treatment of Stock Options and Restricted Stock............................................................... 13
Tax Considerations............................................................................................ 13
Accounting Treatment.......................................................................................... 13
Effective Time of the Merger; Payment for the Tendered Shares................................................. 13
Conditions to the Merger; Termination; Expenses............................................................... 14
Financing of the Tender Offer................................................................................. 15
Market Prices for Common Stock................................................................................ 15
Nasdaq Listing................................................................................................ 15
Summary of TEAM America's Selected Consolidated Financial Data................................................ 16
Summary of Mucho's Selected Financial Data.................................................................... 18
Risk Factors...................................................................................................... 19
Forward Looking Statements........................................................................................ 26
Where You Can Find More Information............................................................................... 27
The Special Meetings.............................................................................................. 29
Proxy Statement/Information Statement/Prospectus.............................................................. 29
Date, Time and Place of Special Meetings...................................................................... 29
Purpose of the Special Meetings............................................................................... 29
Shareholder Recoed Date for the Special Meetings.............................................................. 29
Vote Required for Adoption of the Merger Agreement............................................................ 29
Proxies....................................................................................................... 30
Market Price and Dividend Information............................................................................. 31
The Merger........................................................................................................ 32
General....................................................................................................... 32
Background of the Merger...................................................................................... 32
Amendments to TEAM America's Articles of Incorporation........................................................ 33
Issuance of Options to Kevin T. Costello...................................................................... 34
Directors and Officers of TEAM Mucho after the Merger......................................................... 34
TEAM America's Reasons for the Merger and Recommendation of TEAM America's Board of Directors................. 35
Opinion of Raymond James & Associates......................................................................... 36
Interests of TEAM America's Directors and Officers in the Merger.............................................. 40
Mucho's Reasons for the Merger and Recommendation of Mucho's Board of Directors............................... 40
Interests of Mucho's Directors and Officers in the Merger..................................................... 42
</TABLE>
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Comparative Per Share Information................................................................................. 43
Unaudited Pro Forma Condensed Combining Financial Data............................................................ 44
The Merger Agreement.............................................................................................. 54
Conversion of Mucho Securities; Merger Consideration.......................................................... 54
TEAM America Tender Offer..................................................................................... 55
Covenants and Conditions to Completion of the Merger.......................................................... 56
Exchange of Certificates...................................................................................... 57
Nasdaq Listing................................................................................................ 58
Expenses...................................................................................................... 58
Mucho Dissenters' Rights...................................................................................... 59
Accounting Treatment.......................................................................................... 59
Income Tax Consequences....................................................................................... 59
Resales by Affiliates......................................................................................... 61
TEAM Merger Corporation........................................................................................... 62
Mucho Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 63
Security Ownership of TEAM Mucho.................................................................................. 67
Mucho's Business.................................................................................................. 68
Comparison of Rights between Mucho and TEAM America............................................................... 69
Experts ......................................................................................................... 72
Legal Matters..................................................................................................... 72
Mucho Financial Statements........................................................................................ F-1
Appendix A - Agreement and Plan of Merger.................................................................... A-1
Appendix B - Opinion of Financial Advisor to the Board of Directors of TEAM America Corporation.............. B-1
Appendix C - Nevada Law Relating to Dissenters' Rights....................................................... C-1
Appendix D - Form of Second Amended and Restated Articles of Incorporation of TEAM America................... D-1
Appendix E - Form of Second Amended Code of Regulations of TEAM America...................................... E-1
</TABLE>
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QUESTIONS AND ANSWERS ABOUT THE MERGER AND TENDER OFFER
Q. WHY ARE TEAM AMERICA AND MUCHO PROPOSING THE MERGER AND TENDER OFFER?
A. TEAM America, like the PEO industry generally, expects to face growing
competitive threats from Internet-enabled providers of outsourced human
resources. Mucho, on the other hand, like other new economy companies, must
continue to develop effective and efficient ways to expand its member base
and to earn revenues sufficient to sustain its operations. We believe the
combination of the two companies addresses each company's needs. Mucho
offers TEAM America valuable Internet delivery capabilities and services
and TEAM America offers Mucho new members and a reliable stream of revenue.
Q. WHAT WILL MUCHO SHAREHOLDERS RECEIVE FOR THEIR MUCHO SHARES?
A. Mucho shareholders will receive a total of 5,925,925 shares of TEAM America
common stock. As of July 31, 2000, there were 38,224,581 fully diluted
shares of Mucho common stock outstanding. Consequently, Mucho shareholders
will receive approximately .155 shares of TEAM America common stock for
each share of Mucho common stock they hold. The total number of shares of
TEAM America common stock to be distributed to Mucho shareholders will not
increase even if Mucho issues additional stock or options or other
securities. If Mucho were to issue additional stock or options or other
securities, the number of TEAM America shares each existing Mucho
shareholder receives would be reduced accordingly. TEAM America will not
issue fractional shares in the merger. Mucho shareholders will receive cash
in lieu of fractional shares.
Q. WILL TEAM AMERICA SHAREHOLDERS RECEIVE ANY SHARES AS A RESULT OF THE
MERGER?
A. No. TEAM America shareholders will continue to hold the TEAM America shares
they currently own. After the merger, these shares will represent an
ownership interest in TEAM Mucho.
Q. WHO CAN TENDER THEIR TEAM AMERICA STOCK TO TEAM AMERICA?
A. TEAM America will make a tender offer in which TEAM America will offer to
purchase up to 50% of TEAM America's currently outstanding common stock
after the completion of the merger. If more than 50% of TEAM America's
currently outstanding common stock is tendered for cash, TEAM America will
purchase a total of 50% of its common stock from current TEAM America
shareholders who have tendered their shares on a pro rata basis.
Consummation of the tender offer is conditioned upon the closing of the
merger.
Q. HOW CAN I TENDER MY SHARES?
A. National City Bank will act as a disbursing agent for the tender offer and
will, if you are a TEAM America shareholder and choose to tender your TEAM
America shares, forward detailed instructions to you regarding the
surrender of your share certificates, together with a letter of
transmittal, promptly after the merger is completed. You should not submit
your certificates to National City Bank until you have received these
materials. National City Bank will pay you as promptly as practicable
following its receipt of your certificates and other required documents.
Q. WHAT DO THE ESCROWED SHARES MEAN TO ME?
A. Except for affecting the aggregate voting power of TEAM America
shareholders and Mucho shareholders in TEAM Mucho after the merger, the
escrowed shares will only affect some of Mucho's founders who have agreed
to escrow some of their TEAM Mucho shares.
Q. WHAT WILL THE NAME OF EACH COMPANY BE AFTER THE MERGER?
A. TEAM America will be renamed TEAM Mucho, Inc. Mucho.com, Inc. will remain
Mucho.com, Inc. TEAM Mucho plans, however, to continue to operate its PEO
business under the name TEAM America.
Q. WHAT RISKS SHOULD I CONSIDER?
A. You should review "Risk Factors" beginning on page ____. You should also
review the countervailing factors considered by each company's board of
directors. See "TEAM America's Reasons for the Merger and Recommendation of
the TEAM America Board of Directors" beginning on page ___ and "Mucho's
Reasons for the Merger and Recommendation of Mucho's Board of Directors"
beginning on page ___.
Q. WHAT SHAREHOLDER APPROVALS ARE NEEDED?
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A. The affirmative vote of the holders of a majority of the outstanding shares
of TEAM America's common stock and Mucho's common stock voting in person or
by proxy at the special meetings is required to approve the merger and
related transactions, provided that a quorum, which means a majority of the
shares of TEAM America's and Mucho's common stock outstanding on the record
dates, vote in person or by proxy at the special meetings.
Q. WHEN AND WHERE ARE THE SHAREHOLDER MEETINGS?
A. The TEAM America special meeting will take place on __________, 2000 at
10:00 a.m., local time, at the Clarion Hotel, 7007 North High Street,
Worthington, Ohio. The Mucho special meeting will take place on _________,
2000 at 10:00 a.m., local time, at Mucho's corporate headquarters, 3390 Mt.
Diablo Blvd., 2nd Floor, Lafayette, California.
Q. WHAT DO I NEED TO DO NOW?
A. After carefully reading and considering the information contained in this
proxy statement/information statement/prospectus, please respond by:
- completing, signing and dating your proxy card or voting instructions
and returning it in the enclosed postage paid envelope; or
- if available, by submitting your proxy or voting instructions by
telephone or through the Internet.
In order to assure that we obtain your vote, please give your proxy as
instructed even if you plan to attend the meeting in person.
Q. WHAT IF I DO NOT VOTE?
A. If you fail to respond, your shares will not count toward the quorum
necessary to conduct the vote at the special meeting, and will not be
counted as either a vote for or against the merger. This will have the
same effect as a vote against the merger.
If you respond and do not indicate how you want to vote, your proxy will be
counted as a vote in favor of the merger.
Q. CAN I CHANGE MY VOTE AFTER I HAVE DELIVERED MY PROXY?
A. Yes. You can change your vote at any time before your proxy is voted
at the special meeting. You can do this in one of four ways:
- First, you can revoke your proxy.
- Second, you can submit a new proxy bearing a later date.
If you choose either of these two methods, you must submit your notice of
revocation or your new proxy to the secretary of TEAM America or Mucho
before your special meeting. If your shares are held in an account at a
brokerage firm or bank, you should contact your brokerage firm or bank to
change your vote.
- Third, if you are a holder of record, you can attend your special
meeting and vote in person. Simply attending your special meeting,
however, will not revoke your proxy.
- Fourth, if you submit your proxy or voting instructions electronically
through the Internet or by telephone, you can change your vote by
submitting a proxy at a later date, using the same procedures, in
which case your later submitted proxy will be recorded and your
earlier proxy revoked.
Q. SHOULD MUCHO SHAREHOLDERS SEND IN THEIR STOCK CERTIFICATES NOW?
A. No. After we complete the merger, TEAM Mucho will send Mucho shareholders
written instructions to exchange their Mucho common stock for TEAM Mucho
common stock.
Q. SHOULD TEAM AMERICA SHAREHOLDERS SEND IN THEIR STOCK CERTIFICATES FOR NEW
TEAM MUCHO CERTIFICATES?
A. No. Following the merger, TEAM America shareholders may, but are not
required, to exchange their TEAM America stock certificates for TEAM Mucho
stock certificates. If you wish to exchange your TEAM America stock
certificate for a TEAM Mucho stock certificate following the merger, you
should contact National City Bank, TEAM Mucho's transfer agent, at
__________.
Q. WHEN DO YOU EXPECT THE MERGER AND TENDER OFFER TO BE COMPLETED?
A. We are working to complete the merger as quickly as possible, and expect to
do so shortly after the special meetings. We expect to complete the merger
during the fall of 2000. The tender offer will expire at the close of TEAM
America's special meeting. TEAM
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America shareholders electing to tender their TEAM America shares for cash
will be paid as soon as practicable after the merger is completed.
Q. WHO CAN HELP ANSWER MY QUESTIONS?
A. If you have any questions about the merger or how to submit your proxy, or
if you need additional copies of the proxy statement/information
statement/prospectus or the enclosed proxy card or voting instructions, you
should contact:
If you are a TEAM America shareholder:
TEAM America Corporation
110 E. Wilson Bridge Road
Worthington, Ohio 43085
(614) 848-3995
Attention: Kevin T. Costello, President and CEO
If you are a Mucho shareholder:
Mucho.com, Inc.
3390 Mt. Diablo Blvd., 2nd Floor
Lafayette, California 94549
(925) 299-2500
Attention: S. Cash Nickerson, President and CEO
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SUMMARY
This summary highlights selected information contained elsewhere in this
proxy statement/information statement/prospectus. It may not contain all of the
information that may be important to you. Before voting, you should carefully
read the entire proxy statement/information statement/prospectus, the appendices
and other documents to which this proxy statement/information
statement/prospectus refers in their entirety to fully understand the merger
agreement, tender offer and the transactions contemplated by the merger
agreement. In addition, TEAM America incorporates by reference important
business and financial information about TEAM America into this proxy
statement/information statement/prospectus. You may obtain the information
incorporated by reference into this proxy statement/information
statement/prospectus without charge by following the instructions in the section
entitled "Where You Can Find More Information."
THE COMPANIES
TEAM AMERICA CORPORATION
110 E. WILSON BRIDGE ROAD
WORTHINGTON, OHIO 43085
(614) 848-3995
WWW.TEAMAMERICA.COM
The reference to the TEAM America website address above does not constitute
incorporation by reference of the information contained on that website, so you
should not consider any information on this website to be a part of this proxy
statement/information statement/prospectus.
TEAM America is a professional employer organization that provides
outsourcing to small and medium sized businesses in the areas of human resource
administration, regulatory compliance management, employee benefits
administration, risk management services and employer liability protection,
payroll and payroll tax administration and placement services. As a result, TEAM
America relieves clients from these administrative responsibilities and
liabilities so they can focus on their core business strategies.
MUCHO.COM, INC.
3390 MT. DIABLO BLVD., 2ND FLOOR
LAFAYETTE, CALIFORNIA 94549
(925) 299-2500
WWW.MUCHO.COM
The reference to the Mucho website address above does not constitute
incorporation by reference of the information contained on that website, so you
should not consider any information on this website to be a part of this proxy
statement/information statement/prospectus.
Mucho is an online business center and community designed to save small
businesses time and money when they purchase goods and services or need sound,
reliable information. Mucho's objective is to build a community that will be the
preferred online business center for small business owners and their managers to
find business solutions, services, information, tools and products. Mucho
intends to provide content and direct links to a list of qualified vendors for
each service that will allow its customers to choose between a premium, standard
and economy service. Mucho plans to capture data on each customer as well as
receive commissions on purchases. Mucho expects to be the customizable "home
page" for its community of small business owners and decision-makers, eventually
providing vertical auctions, chat rooms, bulletin boards, and inter-member
e-mail as the community grows.
TEAM MERGER CORPORATION
110 E. WILSON BRIDGE ROAD
WORTHINGTON, OHIO 43085
(614) 848-3995
TEAM Merger Corporation is a newly formed corporation that has not, to
date, conducted any activities other than those incident to its formation, the
matters contemplated by the merger agreement and the preparation of this proxy
statement/information statement/prospectus. At the effective time, TEAM Merger
Corporation will merge with and into Mucho and Mucho will survive the merger. We
refer to TEAM Merger Corporation in this proxy statement/information
statement/prospectus as "Merger Sub."
THE STRUCTURE OF THE MERGER (SEE PAGE [ ])
To accomplish the combination of TEAM America and Mucho, TEAM America's
wholly owned subsidiary will merge with and into Mucho. As a result of the
merger, Mucho will become a wholly owned subsidiary of TEAM America. At the
effective time, TEAM America will change its name to TEAM Mucho, Inc.
THE TENDER OFFER (SEE PAGE [ ])
In connection with the merger, TEAM America has agreed to offer to purchase
up to 50% of TEAM America's outstanding common stock for $6.75 per share from
TEAM America's current shareholders. If more than 50% of TEAM America's common
stock is tendered, TEAM America will purchase 50% of TEAM America's currently
outstanding common stock on a pro rata basis from those
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<PAGE> 12
shareholders tendering shares. The tender offer will expire at the close of the
TEAM America special meeting. Consummation of the tender offer is conditioned
upon the closing of the merger.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS AND OPINION OF FINANCIAL ADVISER (SEE
PAGE [ ])
To TEAM America Shareholders: The TEAM America board of directors believes
that the merger is fair to you and in your best interests and unanimously voted
to approve the merger agreement and unanimously recommends that you vote FOR the
adoption of the merger agreement.
To Mucho Shareholders: The Mucho board of directors believes that the
merger is fair to you and in your best interests and unanimously voted to
approve the merger agreement and unanimously recommends that you vote FOR the
adoption of the merger agreement.
Opinion of TEAM America Financial Adviser: In deciding to approve the
tender offer, the TEAM America board of directors considered the opinion of its
financial adviser, Raymond James & Associates, Inc., that, as of the date of its
opinion, and subject to and based on the considerations referred to in its
opinion, the $6.75 per share to be received by shareholders tendering their
shares for cash is fair, from a financial point of view, to the shareholders
receiving such consideration. Raymond James has provided no opinion as to
whether the merger is fair, from a financial point of view, to TEAM America or
its shareholders. The full text of this opinion is attached as Appendix B to
this proxy statement/information statement/prospectus. TEAM America urges its
shareholders to read the opinion of Raymond James in its entirety.
DISSENTERS' RIGHTS (SEE PAGE [ ])
Under Ohio law, TEAM America's shareholders are not entitled to dissenters'
rights in connection with the merger.
Under Nevada law, Mucho's shareholders are entitled to dissenters' rights
in connection with the merger.
THE ESCROWED SHARES (SEE PAGE [ ])
Some of Mucho's founding shareholders have agreed to place a total of
2,222,222 shares of the TEAM America common stock received by them in the merger
into escrow. The Mucho shareholders who enter into the escrow agreement will
receive half of the escrowed shares on a pro rata basis if Stonehenge or its
affiliates, business partners or other investors obtained or arranged by
Stonehenge provide $10 million in private equity financing on behalf of TEAM
Mucho prior to December 31, 2001. If Stonehenge provides $10 million in private
equity financing, the remaining half of the escrowed shares will be released on
a pro rata basis to the Mucho shareholders who escrowed shares, if, in any
consecutive three-month period prior to December 31, 2001, TEAM Mucho's
operating revenue from Mucho's Internet operations plus incremental TEAM PEO
gross margin in excess of eight percent (8%) over TEAM America's prior year's
gross margin during the same three-month period is $2 million or greater. If
Stonehenge does not raise the $10 million in private equity financing, the Mucho
shareholders who enter into the escrow agreement will receive half of the
escrowed shares on a pro rata basis if TEAM Mucho raises $15 million in equity
financing prior to December 31, 2001. The Mucho shareholders who enter into the
escrow agreement will receive the remaining half of the escrowed shares on a pro
rata basis if Mucho earns $2 million of operating revenue from its Internet
operations in any consecutive three-month period prior to December 31, 2001,
provided that TEAM Mucho has raised $15 million in equity financing.
THE SPECIAL MEETINGS (SEE PAGE [ ])
Special Meeting of TEAM America's Shareholders. The TEAM America special
meeting will be held at the Clarion Hotel, 7007 N. High Street, Worthington,
Ohio on _________, 2000, starting at 10:00 a.m., local time.
If you are a beneficial owner of TEAM America common stock at the close of
business on ___________, 2000, which TEAM America's board of directors has
established as the record date, you are entitled to one vote for each share you
hold of record on each matter submitted to a vote of shareholders. The holders
of a majority of the outstanding shares entitled to vote at the special meeting
must be present in person or represented by proxy in order for TEAM America to
transact business. See "The Special Meetings - Shareholder Record Date for the
Special Meetings; Vote Required for Adoption of the Merger Agreement."
Adoption of the merger agreement by TEAM America's shareholders will also
constitute approval of the amendments to TEAM America's articles of
incorporation and the grant of an option to purchase 600,000 shares of TEAM
America common stock to Kevin T. Costello, TEAM America's President and Chief
Executive Officer. See "The Merger - Issuance of Options to Kevin T. Costello."
The affirmative vote of the holders of a majority of the outstanding shares
of TEAM America's common stock entitled to vote at the special meeting is
required to adopt the merger agreement.
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<PAGE> 13
Special Meeting of Mucho's Shareholders. The Mucho special meeting will be
at Mucho's corporate headquarters at 3390 Mt. Diablo Blvd., 2nd Floor,
Lafayette, California on _________, 2000, starting at 10:00 a.m., local time.
If you are a beneficial owner of Mucho's common stock at the close of
business on ___________, 2000, which Mucho's board of directors has established
as the record date, you are entitled to one vote for each share you hold of
record on each matter submitted to a vote of shareholders. The holders of a
majority of the outstanding shares entitled to vote at the special meeting must
be present in person or represented by proxy in order for Mucho to transact
business.
The affirmative vote of the holders of a majority of the outstanding shares
of Mucho common stock entitled to vote at the special meeting is required to
adopt the merger agreement.
BOARD OF DIRECTORS AND MANAGEMENT FOLLOWING THE MERGER (SEE PAGE [ ])
Immediately after the merger, TEAM Mucho's board of directors will consist
of nine persons, four nominated by TEAM America, four nominated by Mucho, and
one member jointly nominated.
Additionally, the following persons will be elected as officers of TEAM
Mucho in the following capacities:
S. Cash Nickerson Chairman and Chief Executive Officer
Kevin T. Costello President and Chief Operating Officer
Jose Blanco Chief Financial Officer
Thomas Gerlacher Chief Accounting Officer
Jay R. Strauss Chief Legal Officer
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER (SEE PAGE [ ])
Some of the directors and executive officers of TEAM America and Mucho have
interests in the merger that are different from, or are in addition to, the
interests of their company's shareholders. These interests include the potential
for positions as directors or executive officers of TEAM Mucho after the merger
and the acceleration of vesting of options or restricted stock as a result of
the merger.
TREATMENT OF STOCK OPTIONS (SEE PAGE [ ])
TEAM America. When the merger is completed, each outstanding TEAM America
option will remain outstanding.
Mucho. When the merger is completed, each outstanding Mucho stock option
will be converted into an option to purchase the number of shares of TEAM Mucho
common stock that is equal to the product of the exchange ratio multiplied by
the number of shares of Mucho common stock that would have been obtained before
the merger upon the exercise of the option, rounded to the nearest whole share.
The exercise price per share will be equal to the exercise price per share of
Mucho common stock subject to the option before the conversion divided by the
exchange ratio.
TAX CONSIDERATIONS (SEE PAGE [ ])
We anticipate that the merger will be a tax-free reorganization for U.S.
federal income tax purposes, and that Mucho shareholders will recognize no gain
or loss upon conversion of their Mucho stock into shares of TEAM Mucho common
stock, except with respect to cash received, if any, in lieu of fractional
shares. Mucho shareholders may, however, recognize income, gain or loss in
connection with the exercise of dissenters' rights. We also anticipate that TEAM
America's shareholders will not recognize income, gain or loss as a result of
the merger as none of the TEAM America shareholders will be exchanging shares of
TEAM America common stock in the merger and are not eligible to elect
dissenters' rights. However, TEAM America shareholders may recognize gain or
loss in connection with their tendering of shares in connection with the tender
offer. These conclusions are based upon advice of counsel, not upon an opinion
of counsel, and, therefore, you should consult with your own tax advisers
concerning the federal income tax consequences of the merger and tender offer,
as well as the applicable state, local, foreign or other tax consequences, based
upon your individual circumstances.
ACCOUNTING TREATMENT (SEE PAGE [ ])
We intend to account for the merger as a reverse acquisition using the
purchase method of accounting under generally accepted accounting principles and
the rules and regulations of the SEC. For accounting purposes, Mucho will be
acquiring TEAM America.
EFFECTIVE TIME OF THE MERGER; PAYMENT FOR TENDERED SHARES (SEE PAGE [ ])
The merger will become effective when we file a certificate of merger with
the Secretary of State of Nevada. We expect to file the certificate as soon as
practicable after the special meetings, subject to the adoption of the merger
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<PAGE> 14
agreement by TEAM America's and Mucho's respective shareholders at the special
meetings and satisfaction or waiver of the terms and conditions of the merger
agreement.
National City Bank will act as a disbursing agent for the tender offer and
will, if you are a TEAM America shareholder who chooses to tender your TEAM
America shares, forward detailed instructions to you regarding the surrender of
your share certificates, together with a letter of transmittal, promptly after
the merger is completed. You should not submit your certificates to National
City Bank until you have received these materials. National City Bank will pay
you as promptly as practicable following its receipt of your certificates and
other required documents. You will not receive accrued interest on the cash
payable to you upon the surrender of your certificates. YOU SHOULD NOT SEND ANY
SHARE CERTIFICATES AT THIS TIME.
CONDITIONS TO THE MERGER; TERMINATION; EXPENSES (SEE PAGE [ ])
In order for the parties to effect the merger, a number of conditions must
be met, the most significant of which are:
- shareholders who hold a majority of TEAM America's outstanding
common stock must adopt the merger agreement and approve the
merger;
- shareholders who hold a majority of Mucho's outstanding common
stock must adopt the merger agreement and approve the merger;
- the representations and warranties of TEAM America, Merger Sub
and Mucho must be true in all material respects at the merger's
effective time;
- financing for the merger and tender offer must be arranged by
Mucho;
- no provision of any applicable law and no judgment, order, decree
or injunction can be in effect that would prohibit or restrain
the completion of the merger, provided that TEAM America, Mucho
and Merger Sub shall use their reasonable best efforts to have
such judgment, order, decree or injunction vacated;
- shareholders holding not more than 5% of Mucho's outstanding
common stock will have exercised their dissenters' rights under
Nevada law;
- S. Cash Nickerson, Jose Blanco, Jay Strauss and Thomas Gerlacher
shall have each entered into an employment agreement with TEAM
Mucho; and
- key shareholders of TEAM America and Mucho shall have entered
into a voting agreement.
See "The Merger - Covenants and Conditions to Completion of the Merger."
Even if you adopt the merger agreement, we cannot assure you that the merger
will be completed.
At any time before the effective time of the merger, the board of directors
of TEAM America and Mucho may mutually terminate the merger agreement. In
addition, either TEAM America or Mucho may also terminate the merger agreement
if:
- the merger has not become effective on or before October 31,
2000, except that this date shall be extended to December 31,
2000, if necessary clearance from the SEC for this proxy
statement/information statement/prospectus exceeds 30 days;
- any court or other governmental entity has prohibited or enjoined
the merger in a final and nonappealable decision; or
- the parties fail to obtain the requisite shareholder approval for
the merger.
Mucho may terminate the merger agreement prior to the effective time if:
- TEAM America's board of directors withdraws or adversely modifies
its recommendation of the merger transaction;
- TEAM America's board of directors approves a third-party
acquisition, as described under "The Merger Agreement - Covenants
and Conditions to Completion of the Merger;"
- TEAM America breaches in any material respect its obligations
under the merger
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<PAGE> 15
agreement, including its representations and warranties; or
- Mucho approves a third-party acquisition and makes simultaneous
payment of a $1.5 million termination fee to TEAM America.
TEAM America may terminate the merger agreement before the effective time
if:
- Mucho's board of directors withdraws or adversely modifies its
recommendation of the merger transaction;
- Mucho's board of directors approves a third-party acquisition, as
described under "The Merger Agreement - Covenants and Conditions
to Completion of the Merger;"
- Mucho fails to arrange sufficient financing for the tender offer,
fractional shares in the merger and any applicable dissenters'
rights;
- Mucho fails to have operating revenue of at least $100,000 for
the quarter ended September 30, 2000;
- Mucho breaches in any material respect its obligations under the
merger agreement, including its representations and warranties;
or
- TEAM America approves a third-party acquisition and makes
simultaneous payment of a $1.5 million termination fee to Mucho.
Each of the parties will pay its own costs and expenses in connection with
the merger, but in the event that Mucho is unable to arrange financing for any
applicable cash component of the merger or tender offer and the merger agreement
is terminated, Mucho will pay or reimburse TEAM America for all reasonable
out-of-pocket expenses that TEAM America incurs in connection with the merger up
to $250,000, as more fully described under "The Merger - Expenses." The
financial printing fees of this proxy statement/information statement/prospectus
will be paid 75% by Mucho and 25% by TEAM America.
FINANCING OF THE TENDER OFFER (SEE PAGE [ ])
Mucho has agreed to arrange the financing for TEAM America's tender offer
for up to 50% of TEAM America's common stock. Mucho has agreed to obtain, by
September 15, 2000, a financing commitment letter on behalf of TEAM America
sufficient to finance the cash payments for the tender offer, fractional shares
in the merger and any applicable dissenters' rights.
MARKET PRICES FOR COMMON STOCK (SEE PAGE [ ])
TEAM America's common stock is traded on the Nasdaq SmallCap Market under
the symbol TMAM. See "Market Price and Dividend Information" for details about
the high and low sales prices per share for each quarterly period for the two
most recent fiscal years and for the first two quarters of 2000.
On June 16, 2000, the last trading day prior to the announcement of the
signing of the merger agreement, the closing price per share of TEAM America's
common stock as reported by Nasdaq was $4.00. On ___________, 2000, the last
trading day prior to printing the proxy statement/information
statement/prospectus, the closing price per share of TEAM America's common stock
as reported by Nasdaq was $______. As of June 30, 2000, there were approximately
253 holders of record of TEAM America common stock.
NASDAQ LISTING (SEE PAGE [ ])
We expect that shares of TEAM America common stock to be issued in the
merger will be listed on the Nasdaq SmallCap Market. We plan to change the
trading symbol of TEAM America to "TEMO" to correspond with the change of the
company's name to TEAM Mucho, Inc. Additionally, if TEAM Mucho qualifies, we
plan to apply to have TEAM Mucho listed on the Nasdaq National Market.
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<PAGE> 16
SUMMARY OF TEAM AMERICA SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents summary selected consolidated financial data
of TEAM America as of and for each of the fiscal years ended December 31, 1999,
1998, 1997, 1996, and 1995, respectively, and for the three months ended March
31, 2000, and March 31, 1999 (restated), respectively. This financial data
should be read in conjunction with TEAM America's historical consolidated
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" incorporated by reference into this proxy
statement/information statement/prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------- -----------------------
2000 1999 1999 1998 1997 1996 1995
(unaudited) (unaudited)
---- ---- ---- ---- ---- ---- ----
(RESTATED) (IN THOUSANDS, EXCEPT FOR PER SHARE AND STATISTICAL DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues.................................... $ 96,983 $ 90,654 $ 401,940 $ 339,958 $ 155,864 $ 95,468 $ 74,921
Direct Costs:
Salaries and wages........................ 83,750 77,198 350,736 291,615 134,532 81,262 63,502
Payroll taxes, workers' compensation
premiums, employee benefits and other... 9,277 9,923 35,482 31,576 13,013 8,763 7,594
--------- --------- --------- --------- --------- --------- ---------
Gross Profit................................ 3,956 3,533 15,722 16,767 8,319 5,443 3,825
Operating expenses:
Administrative salaries, wages, and
employment taxes........................ 2,059 1,833 7,717 7,756 4,201 2,741 2,013
Other selling, general and
administrative expenses................. 996 1,489 6,479 5,760 2,623 1,560 1,039
Depreciation and amortization............. 457 422 1,771 1,483 433 125 159
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses............. 3,512 3,744 15,967 14,999 7,257 4,426 3,211
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss)..................... 444 (211) (245) 1,768 1,062 1,017 614
Other income (expenses), net................ (30) (6) (299) 135 540 65 (77)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before taxes.................. 414 (217) (544) 1,903 1,602 1,082 537
Income tax expense (benefit)................ (263) (21) (214) (1,221) (672) (458) (247)
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)........................... $ 151 $ (238) $ (758) $ 682 $ 930 $ 624 $ 290
========= ========= ========= ========= ========= ========= ========
Earnings (loss) per common share
Basic..................................... $ 0.03 $ (0.05) $ (0.17) $ 0.14 $ 0.26 $ 0.29 $ 0.14
Diluted shares............................ $ 0.03 $ (0.05) $ (0.17) $ 0.14 $ 0.25 $ 0.29 $ 0.14
Weighted average shares outstanding
Basic..................................... 4,333 4,484 4,410 4,733 3,641 2,160 2,130
Diluted................................... 4,333 4,517 4,410 4,893 3,700 2,160 2,130
Statistical Data(1):
Average gross payroll per employee.......... $ 24,613 $ 23,805 $ 23,396 $ 23,946 $ 21,566
Worksite employees at period end............ 14,500 14,000 10,500 3,646 3,141
Clients at period end....................... 1,800 1,450 1,050 241 184
Average number of worksite employees per
client at period end...................... 8.1 9.7 10 15.1 17.1
Gross profit margin......................... 4.1% 3.9% 3.9% 4.9% 5.4% 5.7% 5.1%
</TABLE>
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<PAGE> 17
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------- -----------------------
2000 1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
(RESTATED) (IN THOUSANDS, EXCEPT FOR PER SHARE AND STATISTICAL DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital (deficit)........... $ 302 $ (703) $ (280) $ 2,055 $ 3,629 $ 13,484 $ (73)
Total Assets........................ 48,673 48,024 47,886 47,540 41,010 19,899 4,986
Long-term obligations and
redeemable preferred stock........ 708 519 642 513 512 386 364
Total shareholders' equity.......... 27,423 27,378 27,272 30,177 28,339 14,147 212
</TABLE>
(1) The statistical data is not available for the three months ended March 31,
1999 and 2000.
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<PAGE> 18
SUMMARY OF MUCHO SELECTED FINANCIAL DATA
The following table presents summary selected financial data of Mucho as of
and for the period from incorporation (July 8, 1999) to December 31, 1999, and
as of and for the three months ended March 31, 2000. This financial data should
be read in conjunction with Mucho's historical financial statements and "Mucho
Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained elsewhere in the proxy statement/information
statement/prospectus.
<TABLE>
<CAPTION>
Three months ended Period from incorporation
March 31,2000 (July 8, 1999) to
(unaudited) December 31, 1999
---------------------------------------------------
<S> <C> <C>
Statement of Operations Data:
Revenue ......................................... $ -- $ --
---------------------------------------------------
Operating expenses:
Personnel .................................. $ 1,501,753 $ 882,902
Selling, general and administrative ........ 638,286 291,048
---------------------------------------------------
Total operating expenses ................ 2,140,039 1,173,950
---------------------------------------------------
Loss from operations .................... 2,140,039 1,173,950
---------------------------------------------------
Other (income) expenses:
Interest (income) .......................... (1,793) --
Interest expense ........................... 138,601 80,545
===================================================
Total other expenses ............................ 136,808 80,545
NET (LOSS) ................................. $ (2,276,847) $ (1,254,495)
===================================================
Net (loss) per share
Basic and diluted ......................... $ (0.08) $ (0.05)
Weighted average shares outstanding
Basic and diluted ......................... 28,369,200 23,495,000
Balance Sheet Data:
Working capital (deficit) ....................... $ 264,013 $ (958,421)
Total assets .................................... $ 1,871,541 $ 292,989
Long-term obligations ........................... $ 71,891 $ 61,824
Total stockholders' equity (deficit) ............ $ 861,742 $ (803,557)
</TABLE>
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<PAGE> 19
RISK FACTORS
In addition to the other information contained in or incorporated by
reference into this proxy statement/information statement/prospectus, you should
carefully consider the following risk factors in deciding whether to vote for
the merger.
RISKS RELATED TO THE MERGER
WE MAY FAIL TO REALIZE THE ANTICIPATED BENEFITS OF THE MERGER
The success of the merger will depend, in part, on TEAM Mucho's ability to
realize the anticipated growth opportunities and synergies from combining TEAM
America and Mucho. To realize the anticipated benefits of this combination, the
management team must develop strategies and implement a business plan that will:
- effectively combine Mucho's services and Internet technology with
TEAM America's PEO services;
- successfully use the anticipated opportunities for
cross-promotion and sales of the products and services of Mucho
and TEAM America;
- successfully retain and attract key employees of TEAM Mucho,
including operating management and key technical personnel,
during the period of integration and in light of the competitive
employment market; and
- while integrating the two company's operations, maintain adequate
focus on the core businesses of each company in order to take
advantage of competitive opportunities and to respond to
competitive challenges.
If the management team is not able to develop strategies and implement a
business plan that achieves these objectives, we may not realize the anticipated
benefits of the merger. In particular, anticipated growth in revenue, earnings
before interest, taxes, depreciation, and amortization, or "EBITDA," and cash
flow may not be realized, which would have an adverse impact on TEAM Mucho and
the market price of its common stock.
THE MERGER MAY RESULT IN DISRUPTION OF TEAM AMERICA'S AND MUCHO'S EXISTING
BUSINESSES, DISTRACTION OF THEIR MANAGEMENT AND DIVERSION OF OTHER RESOURCES
The integration of TEAM America's and Mucho's businesses may divert
management time and resources from the main businesses of both companies. This
diversion of time and resources could cause the market price of TEAM America's
common stock to decrease. The new management will need to spend some of their
time integrating Mucho's and TEAM America's operations. This could cause TEAM
Mucho's business to suffer.
SOME OF TEAM AMERICA'S AND MUCHO'S DIRECTORS AND OFFICERS HAVE A CONFLICT OF
INTEREST
In considering the recommendation of TEAM America's and Mucho's board of
directors to vote for the proposal to adopt the merger agreement and approve the
merger, you should be aware that members of TEAM America's and Mucho's board of
directors and officer's of each company have interests in the merger that differ
from your interests. These interests may create potential conflicts of interests
for these directors and officers in the future. Both TEAM America's board of
directors and Mucho's board of directors were aware of each of these interests
when it considered and adopted the merger agreement.
Kevin T. Costello, TEAM America's President and Chief Executive Officer,
has been granted options to purchase up to 600,000 shares of TEAM Mucho common
stock at $3.875 per share, subject to shareholder approval. These options fully
vest upon the consummation of the merger.
S. Cash Nickerson, James C. Tharin and Jay R. Strauss, directors and
officers of Mucho, beneficially own or control an aggregate of approximately
1,448,310 shares of TEAM America common stock, including 102,000 exercisable
options held by Mr. Nickerson and 33,558 held by Mr. Tharin.
Several members of TEAM America's and Mucho's management will enter into
employment contracts with TEAM Mucho that become effective upon consummation of
the merger. This includes S. Cash Nickerson, Jose Blanco, Thomas L. Gerlacher
and Jay R. Strauss.
MUCHO SHAREHOLDERS WILL NOT KNOW THE NUMBER OF SHARES OF TEAM MUCHO THEY WILL
RECEIVE IN THE MERGER UNTIL CLOSING
The number of shares to be issued to each Mucho shareholder in the merger
will be determined at closing based on the number of diluted shares of Mucho
outstanding at closing. Since Mucho may issue additional shares of common stock
or options to purchase its common stock, we can not assure you that the number
of shares that you would be entitled to receive at the time you vote on the
transaction will be the same as the amount of shares you receive at closing.
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<PAGE> 20
MUCHO'S ISSUANCE OF ADDITIONAL EQUITY PRIOR TO THE MERGER WOULD BE DILUTIVE TO
MUCHO'S EXISTING SHAREHOLDERS
The issuance of additional equity before the merger is completed would have
a dilutive effect on Mucho's existing shareholders since the consideration
received by existing Mucho shareholders in the merger is a fixed number of
shares of TEAM America. Additional shares, options or warrants issued before the
merger will be converted, along with Mucho's current outstanding shares, options
and warrants into the same number of TEAM Mucho shares.
TEAM AMERICA'S SHAREHOLDERS WILL BE SUBSTANTIALLY DILUTED AS A RESULT OF THE
MERGER AND THE MUCHO SHAREHOLDERS WILL OWN A MAJORITY OF TEAM MUCHO'S
OUTSTANDING SHARES
TEAM America will issue 5,925,925 shares of its common stock in the merger.
As of June 30, 2000, there were 4,341,999 shares of TEAM America common stock
outstanding. Upon completion of the merger, Mucho shareholders will
collectively own a majority of TEAM Mucho's outstanding common stock. Therefore,
after the merger, the Mucho shareholders will have significant influence over
matters of the company.
THE MERGER WILL DILUTE THE EQUITY INTEREST OF THE TEAM AMERICA SHAREHOLDERS AND
WILL RESULT IN IMMEDIATE AND SUBSTANTIAL DILUTION OF TEAM AMERICA'S PER SHARE
EARNINGS AND A SUBSTANTIAL INCREASE IN TEAM AMERICA'S LOSS FROM OPERATIONS
The merger on a pro forma basis will result in immediate and substantial
dilution of earnings from $(0.17) to $(0.42) per share, or $(0.25) per share,
for the year ended December 31, 1999 and earnings from $0.03 to $(0.33) per
share, or $(0.36) per share, for the three months ended March 31, 2000.
Additionally, the merger on a pro forma basis would increase TEAM America's
income (loss) from operations from ($245,000) to $(1,356,000) for the year ended
December 31, 1999 and from $444,000 to $(1,646,000) for the three months ended
March 31, 2000. The anticipated dilution and the increase in TEAM America's loss
from operations could have a negative impact on the market price of TEAM Mucho
common stock. Analysts and investors carefully review a company's earnings per
share and often base investment decisions on a company's operating profits and
losses and per share earnings.
IF THE MERGER IS NOT COMPLETED, EITHER TEAM AMERICA OR MUCHO MAY BE REQUIRED TO
PAY THE OTHER PARTY A $1.5 MILLION TERMINATION FEE
The merger agreement provides that either TEAM America or Mucho must pay
the other party a $1.5 million termination fee if either TEAM America or Mucho
terminates the merger agreement because it approves a transaction with a
third-party.
If Mucho shareholders do not adopt the merger agreement and approve the
merger, and the merger agreement is terminated, Mucho is required to pay TEAM
America a $1.5 million termination fee.
NEITHER TEAM AMERICA NOR MUCHO HAS RECEIVED A FAIRNESS OPINION REGARDING THE
MERGER
Neither TEAM America nor Mucho has received a fairness opinion relating to
the merger. Therefore, we can not state that the merger is fair to TEAM America,
Mucho or their shareholders from a financial point of view.
MUCHO'S ISSUANCE OF ADDITIONAL EQUITY PRIOR TO THE MERGER WOULD BE DILUTIVE TO
MUCHO'S EXISTING SHAREHOLDERS
The issuance of additional equity before the merger is completed would have
a dilutive effect on Mucho's existing shareholders since the consideration
received by existing Mucho shareholders in the merger is a fixed number of
shares of TEAM America. Additional shares, options or warrants issued before the
merger will be converted, along with Mucho's current outstanding shares, options
and warrants into the same number of TEAM Mucho shares.
THE PRINCIPAL SHAREHOLDERS, OFFICERS AND DIRECTORS OF TEAM MUCHO AFTER THE
MERGER WILL OWN A CONTROLLING INTEREST IN ITS VOTING STOCK
Upon completion of the merger, TEAM Mucho's officers, directors and
shareholders with greater than 5% holdings will, in the aggregate, beneficially
own approximately [______] of its outstanding common stock. As a result, these
shareholders, acting together, will have the ability to determine the outcome of
substantially all matters submitted to its shareholders for approval, including:
- election of the board of directors;
- removal of any of the directors;
- amendment of the articles of incorporation or code of regulations; and
- adoption of measures that could delay or prevent a change in control
or impede a merger, takeover or other business combination involving
TEAM Mucho.
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These shareholders will have substantial influence over the management and
affairs of TEAM Mucho. Accordingly, this concentration of ownership may have the
effect of impeding a merger, consolidation, takeover or other business
consolidation involving TEAM Mucho, or discouraging a potential acquirer from
making a tender offer for its shares which would prevent shareholders from
realizing the benefits of the transaction, such as a purchase price premium or
significant increase in stock price.
RISKS RELATED TO MUCHO'S BUSINESS
MUCHO HAS A LIMITED OPERATING HISTORY, MAKING IT DIFFICULT TO EVALUATE AND
FORECAST ITS BUSINESS RESULTS
Mucho was incorporated in July 1999. In May 2000, Mucho launched the beta
version of its website and in June 2000, Mucho launched its website with a core
of fully functional services. This is an extremely limited operating history
upon which to evaluate Mucho's business and prospects. Mucho's potential for
future profitability must be considered in light of the risks, uncertainties,
expenses and difficulties frequently encountered by start-up companies. In
particular, Internet companies face rapidly evolving markets and technical
demands.
MUCHO HAS INCURRED LOSSES SINCE ITS INCORPORATION, AND EXPECTS TO INCUR
OPERATING LOSSES FOR THE FORESEEABLE FUTURE
Mucho has incurred net losses from operations in each quarter since its
incorporation and, as of December 31, 1999, had an accumulated deficit of
$1,254,495. Mucho expects to continue to incur losses for the foreseeable
future. To become profitable, Mucho must increase revenue substantially and
achieve and maintain positive gross margins. To increase revenue, Mucho will
need to continue to attract members and expand its service and product
offerings. If Mucho fails to achieve profitability, the business and results of
operations of TEAM Mucho could be adversely affected.
MUCHO'S NETWORK AND SOFTWARE ARE VULNERABLE TO SECURITY BREACHES AND SIMILAR
THREATS WHICH COULD RESULT IN LIABILITY AND COULD HARM MUCHO'S REPUTATION
Network infrastructure is vulnerable to computer viruses, break-ins,
network attacks and similar disruptive problems. This could result in liability
for damages, and Mucho's reputation could suffer, thus deterring potential
members from transacting business with Mucho. Security problems caused by third
parties could lead to interruptions and delays or to the cessation of service to
Mucho's members. Furthermore, inappropriate use of the network by third parties
could also jeopardize the security of confidential information stored in Mucho's
computer systems.
Mucho intends to continue to implement security measures, but cannot assure
you that the measures it implements will not be circumvented, resulting in
interruptions, delays or cessation of service to Mucho's members. Liability,
loss of members or damage to Mucho's reputation due to security breaches could
harm Mucho and adversely affect TEAM Mucho's business and results of operations.
MUCHO'S GROWTH DEPENDS ON INCREASING MEMBERSHIP AND MEMBER PURCHASING
To generate revenue, Mucho must attract new members to Mucho's website and
increase member purchasing. Currently, Mucho is using a variety of techniques to
increase its member purchasing, including entering into partnerships with trade
associations and other organizations that have a trust and confidence
relationship with their members. Many of these techniques are new and unproven,
and Mucho cannot be certain that any of them will be successful in helping Mucho
increase membership or member purchasing. If Mucho is unable to attract new
members to its website and increase member purchasing, its business will not
grow as expected.
INTENSE COMPETITION COULD IMPEDE MUCHO'S ABILITY TO GAIN MARKET SHARE AND HARM
ITS FINANCIAL RESULTS
E-commerce is rapidly evolving and intensely competitive. In addition, the
traditional non-Internet-based markets for business products and services are
also intensely competitive. Mucho competes with both traditional distribution
channels as well as other online services. Mucho's current and potential
competitors include:
- Internet sites targeting the small business market including
Onvia.com, BizBuyer.com, Digitalwork.com and Works.com;
- Internet sites targeting the consumer market that also sell to small
business customers, including Beyond.com, Buy.com and Onsale.com;
- companies such as America Online, Microsoft, NBCi and Yahoo! that
offer a broad array of Internet-related services and either offer
business-to-business e-commerce services presently or have announced
plans to introduce such services in the future; and
- traditional non-Internet-based retailers that sell business service
and products.
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All of Mucho's competitors have significantly greater market penetration
than Mucho. In addition, there are minimal barriers to entry to Mucho's market,
and new competitors could launch a competitive website offering services and
products targeted to the small business market. To compete successfully and to
gain market share, Mucho must significantly increase its membership and the
volume of services and products it sells through its website. Mucho's failure to
achieve these objectives could limit its ability to achieve profitability, which
could hurt TEAM Mucho's business and results of operations.
MUCHO'S BUSINESS MODEL IS NEW, UNPROVEN AND EVOLVING
Mucho's business model is new, unproven and continues to evolve. In
particular, Mucho's business model is based on assumptions, which may not prove
to be correct, including the following:
- a significant number of small businesses will be willing to purchase
their business services and products online; and
- a significant number of small businesses and small business service
providers will use Mucho's website to buy and sell services and
products.
If use of the Internet as a medium for business communications and commerce
does not continue to increase, demand for Mucho's services and products will be
limited and Mucho's financial results could suffer. Even if small businesses
increase their use of the Internet, the Internet infrastructure may not be able
to support the demands of this growth. If the Internet's infrastructure is not
improved or expanded to meet demand, the Internet's performance and reliability
will be degraded and consumers and businesses may slow or stop their use of the
Internet as a transaction medium.
MUCHO'S BUSINESS MAY SUFFER IF IT IS UNABLE TO HIRE AND RETAIN HIGHLY SKILLED
QUALIFIED EMPLOYEES
Mucho's future success depends in large part on its ability to identify,
hire, train and retain highly qualified sales and marketing, technical,
managerial and administrative personnel. As Mucho continues to introduce new
services, products and features on its website, and as its member base and
revenue continue to grow, Mucho will need to hire a significant number of
qualified personnel. Competition for qualified personnel, especially those with
Internet experience, is intense, and Mucho may not be able to attract, train,
assimilate or retain qualified personnel in the future. Failure to do so could
disrupt Mucho's operations and could increase Mucho's costs as it would be
required to use more expensive outside consultants, which could have a negative
impact on TEAM Mucho.
MUCHO'S EXECUTIVE OFFICERS AND KEY EMPLOYEES ARE CRITICAL TO ITS BUSINESS, AND
THESE OFFICERS AND KEY EMPLOYEES MAY NOT REMAIN WITH MUCHO IN THE FUTURE
Mucho's business and operations are substantially dependent on the
performance of its key employees, all of whom are employed on an at-will basis
and have worked together for less than two years. Mucho does not maintain "key
person" life insurance on any of its executives.
MUCHO WILL REQUIRE SIGNIFICANT ADDITIONAL CAPITAL IN THE FUTURE, WHICH MAY NOT
BE AVAILABLE ON SUITABLE TERMS, OR AT ALL
Mucho has rapidly and significantly expanded its operations since its
inception in July 1999, and it needs to continue this growth. The expansion and
development of Mucho's business will require significant additional capital,
which Mucho may be unable to obtain on suitable terms, or at all. If TEAM Mucho
is unable to obtain adequate funding on suitable terms, or at all, it may have
to delay, reduce or eliminate some or all of its marketing, co-branding
relationships, engineering efforts, general operations or any other initiatives.
If growth is not managed effectively, Mucho's revenue may not grow as expected,
and Mucho may never achieve profitability which could adversely affect TEAM
Mucho's business and results of operations.
IF MUCHO FAILS TO EXPAND ITS CURRENT TECHNOLOGY INFRASTRUCTURE, IT WILL BE
UNABLE TO ACCOMMODATE ITS ANTICIPATED GROWTH
To be successful, Mucho must continue to attract new members to its website.
Accommodating this potential growth in website traffic and member transactions
will require Mucho to continue to develop its technology infrastructure. To
maintain the necessary technological platform in the future, Mucho must continue
to expand and stabilize the performance of its web servers, improve its
transaction processing system, optimize the performance of its network servers
and ensure the stable performance of its entire network. Mucho may not be
successful in its ongoing efforts to upgrade its systems, or if it does
successfully upgrade its systems, Mucho may not do so on time and within budget.
Any system failure that causes an interruption in the service of Mucho's
website or a decrease in its responsiveness could result in reduced member
traffic and reduced revenue. Further, prolonged or ongoing performance problems
on Mucho's website could damage its reputation and result in the permanent loss
of members. Mucho has occasionally experienced system interruptions that have
made its website totally unavailable, or slowed its response time, and these
problems may occur again in the future.
MUCHO MAY NOT BE ABLE TO KEEP UP WITH RAPID TECHNOLOGICAL AND INDUSTRY CHANGES
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The Internet and e-commerce markets are characterized by rapid
technological change, frequent introductions of new or enhanced hardware and
software products, evolving industry standards and changes in customer
preferences and requirements. Mucho may not be able to keep up with any of these
or other rapid technological or market changes. To be successful, Mucho may have
to enhance its website's responsiveness, functionality and features, acquire or
license leading technologies, enhance its existing service and product
offerings, or respond to technological advances and emerging industry standards
and practices in a timely and cost effective manner. Any failure to adopt to the
rapidly changing landscape of e-commerce could adversely affect Mucho's success
and TEAM Mucho's business and results of operations.
FUTURE REGULATIONS COULD BE ENACTED THAT EITHER DIRECTLY RESTRICT MUCHO'S
BUSINESS OR INDIRECTLY IMPACT MUCHO'S BUSINESS BY LIMITING THE GROWTH OF
E-COMMERCE
As e-commerce evolves, federal, state and foreign agencies could adopt
regulations covering issues such as privacy, content and taxation of services
and products. If enacted, government regulations could limit the market for
Mucho's services and products. Although many regulations might not apply to
Mucho's business directly, laws that regulate the collection or processing of
personal or consumer information could indirectly affect Mucho's business. It is
possible that legislation could expose companies involved in e-commerce to
liability, which could limit the growth of e-commerce generally. Legislation
could hinder the growth in Internet use and decrease its acceptance as a medium
for communication and commerce.
RISKS RELATED TO TEAM AMERICA'S BUSINESS
IF GOVERNMENT REGULATIONS REGARDING PEOS ARE IMPLEMENTED, OR IF CURRENT
REGULATIONS ARE CHANGED, TEAM AMERICA'S BUSINESS COULD BE HARMED
Because many of the laws related to the employment relationship were
enacted prior to the development of professional employer organizations and
other staffing businesses, many of these laws do not specifically address the
obligations and responsibilities of non-traditional employers. TEAM America's
operations are affected by numerous federal, state and local laws and
regulations relating to labor, tax, insurance and employment matters. By
entering into an employment relationship with employees who work at client
locations, TEAM America assumes obligations and responsibilities of an employer
under these laws. Uncertainties arising under the Internal Revenue Code of 1986,
include, but are not limited to, the qualified tax status and favorable tax
status of certain benefit plans provided by TEAM America and other alternative
employers. The unfavorable resolution of these unsettled issues could have a
material adverse effect on results of operations and financial condition.
While many states do not explicitly regulate PEOs, approximately one-third
of the states, but not Ohio, have enacted laws that have licensing or
registration requirements for PEOs, and several additional states, including
Ohio, are considering such laws. Such laws vary from state to state but
generally provide for the monitoring of the fiscal responsibility of PEOs and
specify the employer responsibilities assumed by PEOs. There can be no assurance
that TEAM America will be able to comply with any such regulations which may be
imposed upon it in the future, and TEAM America's inability to comply with any
such regulations could have a material adverse effect on its results of
operations and financial condition.
In addition, there can be no assurance that existing laws and regulations
which are not currently applicable to TEAM America will not be interpreted more
broadly in the future to apply to TEAM America's existing activities or that new
laws and regulations will not be enacted with respect to TEAM America's
activities. Either of these changes could have a material adverse effect on TEAM
America's business, financial condition, results of operations and liquidity.
IF THE IRS DETERMINES THAT TEAM AMERICA IS NOT AN "EMPLOYER," TEAM AMERICA'S
401(K) PLAN COULD BE REVOKED AND ITS CAFETERIA PLAN MAY LOSE FAVORABLE TAX
TREATMENT
If the IRS concludes that PEOs are not "employers" of certain worksite
employees for purposes of the Internal Revenue Code, then the tax qualified
status of TEAM America's 401(k) plan could be revoked and TEAM America's
cafeteria plan may lose its favorable tax status. The loss of qualified status
for the 401(k) plan and the cafeteria plan could increase TEAM America's
administrative expenses, increase client dissatisfaction and adversely affect
the ability to attract and retain clients and worksite employees, and, thereby,
materially adversely affect TEAM America's financial condition and results of
operations. TEAM America is unable to predict the impact that the foregoing
could have on its administrative expenses, and whether its resulting liability
exposure, if any, will relate to past or future operations. Accordingly, TEAM
America is unable to make a meaningful estimate of the amount, if any, of such
liability exposure.
TEAM AMERICA INTENDS TO GROW ITS EXISTING BUSINESS AND IF IT IS UNABLE TO MANAGE
THIS GROWTH, ITS BUSINESS AND RESULTS OF OPERATIONS COULD BE HARMED
TEAM America intends to continue its internal growth and to pursue an
acquisition strategy. Such growth may place a significant strain on management,
financial, operating and technical resources. TEAM America has limited
acquisition experience, and growth
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through acquisition involves substantial risks, including the risk of improper
valuation of the acquired business and the risks inherent in integrating
businesses with TEAM America's operations. There can be no assurance that
suitable acquisition candidates will be available, that TEAM America will be
able to acquire or profitably manage such additional companies, or that future
acquisitions will produce returns that justify the investment or that are
comparable to past returns. In addition, TEAM America may compete for
acquisition and expansion opportunities with companies that have significantly
greater resources than it has. There can be no assurance that management skills
and systems currently in place will be adequate to implement a strategy of
growth through acquisitions and through increased market penetration in Ohio and
other existing markets. The failure to manage growth effectively, or to
implement its strategy, could have a material adverse effect on TEAM America's
results of operations and financial condition.
TEAM AMERICA BEARS THE RISK OF NONPAYMENT FROM ITS CLIENTS
To the extent that any client experiences financial difficulty, or is
otherwise unable to meet its obligations as they become due, TEAM America's
financial condition and results of operations could be adversely affected. For
work performed prior to the termination of a client agreement, TEAM America may
be obligated, as an employer, to pay the gross salaries and wages of the
client's worksite employees and the related employment taxes and workers'
compensation costs, whether or not TEAM America's client pays TEAM America on a
timely basis, or at all. Although TEAM America historically has not incurred
significant bad debt expense, in each payroll period it has a nominal number of
clients who fail to make timely payment prior to delivery of the payroll.
IF TEAM AMERICA'S WORKERS' COMPENSATION AND UNEMPLOYMENT COSTS RISE, TEAM
AMERICA'S RESULTS OF OPERATIONS AND BUSINESS MAY SUFFER
TEAM America's workers' compensation and unemployment costs could increase
as a result of many factors, including increases in the rates charged by the
applicable states and private insurance companies and changes in the applicable
laws and regulations. Although TEAM America believes that historically it
profited from such services, its results of operations and financial condition
could be materially adversely affected in the event that its actual workers'
compensation and unemployment costs exceed those billed to its clients.
TEAM AMERICA'S CLIENT AGREEMENTS ARE SHORT TERM IN NATURE AND IF A SIGNIFICANT
NUMBER OF CLIENTS DO NOT RENEW THEIR CONTRACTS, TEAM AMERICA'S BUSINESS MAY
SUFFER
TEAM America's standard client agreement provides for successive one-year
terms, subject to termination by TEAM America or by the client at any time upon
30 days' prior written notice. A significant number of terminations by clients
could have a material adverse effect on TEAM America's financial condition,
results of operations and liquidity.
TEAM AMERICA MAY BE LIABLE FOR ACTIONS OF WORKSITE EMPLOYEES OR CLIENTS AND TEAM
AMERICA'S INSURANCE POLICIES MAY NOT BE SUFFICIENT TO COVER SUCH LIABILITIES
TEAM America's client agreement establishes a contractual division of
responsibilities between TEAM America and each client for various human resource
matters, including compliance with and liability under various governmental laws
and regulations. However, TEAM America may be subject to liability for
violations of these or other laws despite these contractual provisions, even if
it does not participate in such violations. Although such client agreements
generally provide that the client indemnify TEAM America for any liability
attributable to the client's failure to comply with its contractual obligations
and to the requirements imposed by law, TEAM America may not be able to collect
on such a contractual indemnification claim, and thus may be responsible for
satisfying such liabilities. In addition, worksite employees may be deemed to be
TEAM America's agents, subjecting TEAM America to liability for the actions of
such worksite employees.
As an employer, TEAM America, from time to time, may be subject in the
ordinary course of its business to a wide variety of employment-related claims
such as claims for injuries, wrongful death, harassment, discrimination, wage
and hours violations and other matters. Although TEAM America carries $2 million
of general liability insurance and carries employment practices liability
insurance in the amount of $10 million, with a $250,000 deductible, there can be
no assurance that any such insurance carried by TEAM America or its providers
will be sufficient to cover any judgments, settlements or costs relating to any
present or future claims, suits or complaints. There also can be no assurance
that sufficient insurance will be available to TEAM America's providers or TEAM
America in the future and, if available, on satisfactory terms. If the insurance
carried by TEAM America or its providers is not sufficient to cover any
judgments, settlements or costs relating to any present or future claims, suits
or complaints, then TEAM America's business and financial condition could be
materially adversely affected.
AVAILABILITY OF SIGNIFICANT AMOUNTS OF TEAM AMERICA'S COMMON STOCK FOR SALE IN
THE FUTURE COULD ADVERSELY AFFECT TEAM AMERICA'S STOCK PRICE
At June 30, 2000, TEAM America had 4,341,999 shares of common stock
outstanding. Of these shares, 2,210,791 shares are held by nonaffiliates and are
freely tradable without restriction or further registration under the Securities
Act of 1933 or eligible for resale under an exemption from registration. The
holders of the remaining 2,122,208 shares are entitled to resell them only
pursuant to a registration statement under the Securities Act of 1933 or an
applicable exemption from registration thereunder.
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Sales of substantial amounts of these shares in the public market or the
prospect of such sales could adversely affect the market price of TEAM America's
common stock.
ANTI-TAKEOVER PROVISIONS IN TEAM AMERICA'S ARTICLES OF INCORPORATION AND CODE OF
REGULATIONS MAKE A CHANGE IN CONTROL OF TEAM AMERICA MORE DIFFICULT
The provisions of TEAM America's articles of incorporation and code of
regulations and of the Ohio Revised Code, together or separately, could
discourage potential acquisition proposals, delay or prevent a change in control
and limit the price that certain investors might be willing to pay in the future
for TEAM America's common stock. Among other things, these provisions:
- require certain supermajority votes;
- establish certain advance notice procedures for nomination of
candidates for election as directors and for shareholders proposals to
be considered at shareholders' meetings; and
- divide the board of directors into two classes of directors serving
staggered two-year terms.
Pursuant to TEAM America's articles of incorporation, the board of
directors has authority to issue up to 1,000,000 preferred shares without
further shareholder approval. Such preferred shares could have dividend,
liquidation, conversion, voting and other rights and privileges that are
superior or senior to TEAM America's common stock. Issuance of preferred shares
could result in the dilution of the voting power of TEAM America's common stock,
adversely affecting holders of TEAM America's common stock in the event of its
liquidation or delay, and defer or prevent a change in control. In certain
circumstances, such issuance could have the effect of decreasing the market
price of TEAM America's common stock.
In addition, the Ohio Revised Code contains provisions that require
shareholder approval of any proposed "control share acquisition" of any Ohio
corporation at any of three ownership thresholds: 20%, 33 1/3% and 50%. The Ohio
Revised Code also contains provisions that restrict certain business
combinations and other transactions between an Ohio corporation and interested
shareholders.
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FORWARD-LOOKING STATEMENTS
This proxy statement/information statement/prospectus contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements often, although not always, include words or phrases
like "will likely result," "expect," "will continue," "anticipate," "estimate,"
"intend," "plan," "project," "outlook," or similar expressions. We have based
these forward-looking statements on our current expectations and assumptions
about future events. These forward-looking statements are subject to various
risks and uncertainties that could cause actual results to differ materially
from those statements. These risks and uncertainties include those set forth
under "Risk Factors." The forward-looking statements contained in this proxy
statement/information statement/prospectus include statements about the
following:
- our ability to integrate TEAM America's and Mucho's businesses and
operations; and
- the anticipated growth and growth strategies of TEAM America, Mucho
and TEAM Mucho.
For additional information that could cause actual results to differ
materially from those described in the forward-looking statements, please see
TEAM America's quarterly results on Form 10-Q and the annual report on Form 10-K
that TEAM America has filed with the SEC.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this proxy statement/information statement/prospectus might
not occur.
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WHERE YOU CAN FIND MORE INFORMATION
TEAM America must comply with the informational requirements of the
Securities Exchange Act of 1934 and its rules and regulations. Under the
Exchange Act, TEAM America must file reports, proxy statements, and other
information with the Securities and Exchange Commission. Copies of these
reports, proxy statements, and other information can be inspected and copied at:
Public Reference Room
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
or at the public reference facilities of the regional offices of the Commission
at:
500 West Madison Street or 7 World Trade Center
Suite 1400 Suite 1300
Chicago, Illinois 60661-2511 New York, New York 10048-1102
You may obtain information on the operation of the Public Conference Room
by calling the SEC at 1-800-SEC-0330. You may also obtain copies of TEAM
America's materials by mail at prescribed rates from the Public Reference Room
at the address noted above. Finally, you may obtain these materials
electronically by accessing the SEC's home page on the Internet at
HTTP://WWW.SEC.GOV.
TEAM America's common stock is listed on the Nasdaq SmallCap Market.
Therefore, reports and other information concerning TEAM America should be
available for inspection and copying at the offices of the Nasdaq Stock Market
at:
1735 K Street, N.W.
Washington, D.C. 20006-1504.
All information contained in this proxy statement/information
statement/prospectus with respect to TEAM America and Merger Sub, was supplied
by TEAM America and all information with respect to Mucho was supplied by Mucho.
Neither TEAM America nor Mucho can warrant the accuracy or completeness of the
information relating to the other party.
The SEC allows TEAM America to "incorporate by reference" information from
other documents that TEAM America files with the SEC, which means that TEAM
America can disclose important information to you by referring you to those
documents. The information incorporated by reference is considered to be part of
this proxy statement/information statement/prospectus, and information TEAM
America later files with the SEC will automatically update and supersede this
information. TEAM America incorporates by reference its:
- Annual Report on Form 10-K for the fiscal year ended December 31, 1999
(filed April 14, 2000);
- Proxy Statement for the Annual Meeting of Shareholders held on August
18, 2000 (filed July 20, 2000);
- Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2000 (filed May 18, 2000);
- the description of common stock, contained in the registration
statement on Form 8-A filed with the SEC pursuant to Section 12 of the
Securities Exchange Act of 1934 and all amendments thereto and reports
filed for the purpose of updating this description;
- Current Reports on Form 8-K dated April 13, 2000 (filed on April 14,
2000), dated April 20, 2000 (filed on April 20, 2000), and dated June
21, 2000 (filed on June 21, 2000 and amended on June 29, 2000); and
- any future filings TEAM America makes with the SEC under Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act.
You may request a copy of these filings, at no cost, by writing or
telephoning TEAM America at 110 E. Wilson Bridge Road, Worthington, Ohio 43085,
Attention: Kevin T. Costello, telephone (614) 848-3995.
TEAM America filed with the SEC a registration statement on Form S-4 under
the Securities Act of 1933, covering the shares offered by this proxy
statement/information statement/prospectus. This proxy statement/information
statement/prospectus, which constitutes a part of the registration statement,
does not contain all the information in the registration statement and exhibits
thereto, certain portions of which we have omitted from this proxy
statement/information statement/prospectus as permitted by the SEC's rules and
regulations. You may obtain copies of the registration statement and its
amendments (including the omitted portions), including exhibits, from the SEC
upon payment of prescribed rates or on the Internet at http:www.sec.gov. For
further information about TEAM America's common stock, we refer you to the
registration statement and the exhibits thereto. Statements contained in this
proxy statement/information statement/prospectus or the registration statement
relating to the contents of any contract or other document TEAM
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America filed as an exhibit to the registration statement are only summaries of
those documents and are not necessarily complete. Therefore, we qualify each of
these statements by reference to the full text of those contracts and documents
TEAM America has filed with the SEC.
You should rely only on the information or representations provided in this
proxy statement/information statement/prospectus or incorporated herein by
reference. TEAM America has not authorized anyone else to provide you with
different information. TEAM America will not offer the shares of its common
stock in any state where the offer is not permitted. You should not assume that
the information in this proxy statement/information statement/prospectus,
including information incorporated herein by reference, is accurate as of any
date other than the date on the cover page.
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THE SPECIAL MEETINGS
PROXY STATEMENT/INFORMATION STATEMENT/PROSPECTUS
This proxy statement/information statement/prospectus is being furnished to
you in connection with the solicitation of proxies by each of TEAM America's and
Mucho's board of directors in connection with the proposed merger.
This proxy statement/information statement/prospectus is first being
furnished to shareholders of TEAM America and Mucho on or about ________, 2000.
DATE, TIME AND PLACE OF THE SPECIAL MEETINGS
The special meetings are scheduled to be held as follows:
For TEAM America shareholders: For Mucho shareholders:
__________, 2000 __________, 2000
10:00 a.m., local time 10:00 a.m., local time
Clarion Hotel Mucho.com, Inc.
7007 N. High Street 3390 Mt. Diablo Blvd.
Worthington, Ohio Lafayette, California
PURPOSE OF THE SPECIAL MEETINGS
The special meetings are being held so that shareholders of each of TEAM
America and Mucho may consider and vote upon a proposal to adopt the merger
agreement between TEAM America and Mucho pursuant to which Merger Sub will merge
with and into Mucho with Mucho surviving the merger. Mucho will then be a wholly
owned subsidiary of TEAM America, and TEAM America will be renamed TEAM Mucho,
Inc. Adoption of the merger agreement by TEAM America's shareholders will also
constitute approval of the merger, the tender offer, the amendments to TEAM
America's articles of incorporation and the approval of the grant of an option
to purchase 600,000 shares of TEAM America common stock to Mr. Costello.
Adoption of the merger agreement by Mucho's shareholders will also constitute
approval of the merger and the other transactions contemplated by the merger
agreement.
If the shareholders of TEAM America and Mucho adopt the merger agreement,
upon completion of the merger:
- each outstanding share of TEAM America common stock will remain
outstanding; and
- each outstanding share of Mucho common stock will be converted into
shares of TEAM America common stock as more fully described in "The
Merger Agreement - Conversion of Mucho Shares; Merger Consideration."
SHAREHOLDER RECORD DATE FOR THE SPECIAL MEETINGS
TEAM America. TEAM America's board of directors has fixed the close of
business on _______, 2000 as the record date for determination of TEAM America
shareholders entitled to notice of and to vote at the special meeting. On the
record date, there were __________ shares of TEAM America common stock
outstanding, held by approximately ________ holders of record.
Mucho. Mucho's board of directors has fixed the close of business on
________, 2000 as the record date for determination of Mucho shareholders
entitled to notice of and to vote at the Mucho special meeting. On the record
date, there were __________ shares of Mucho common stock outstanding, held by
approximately ________ holders of record.
VOTE REQUIRED FOR ADOPTION OF THE MERGER AGREEMENT
TEAM America. A majority of the outstanding shares of TEAM America common
stock must be represented, either in person or by proxy, to constitute a quorum
at the TEAM America special meeting. The affirmative vote of the holders of a
majority of the shares of TEAM America's common stock outstanding as of the
record date is required to adopt the merger agreement. At the TEAM America
special meeting, each share of TEAM America common stock is entitled to one vote
on all matters properly submitted to the TEAM America shareholders.
As of the record date, TEAM America directors and executive officers and
their affiliates owned approximately _____% of the outstanding shares of TEAM
America.
Mucho. A majority of the outstanding shares of Mucho common stock must be
represented, either in person or by proxy, to constitute a quorum at the Mucho
special meeting. The affirmative vote of the holders of a majority of the shares
of Mucho's common stock
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outstanding as of the record date is required to adopt the merger agreement. At
the Mucho special meeting, each share of Mucho common stock is entitled to one
vote on all matters properly submitted to the Mucho shareholders.
As of the record date, Mucho directors and executive officers and their
affiliates owned approximately _____% of the outstanding shares of Mucho.
PROXIES
All shares of TEAM America common stock represented by properly executed
proxies or voting instructions received before or at the TEAM America special
meeting and all shares of Mucho common stock represented by properly executed
proxies or voting instructions received before or at the Mucho special meeting
will, unless the proxies or voting instructions are revoked, be voted in
accordance with the instructions indicated on those proxies or voting
instructions. If no instructions are indicated on a properly executed proxy card
or voting instruction, the shares will be voted FOR adoption of the merger
agreement. You are urged to mark the box on the proxy card to indicate how to
vote your shares.
If a properly executed proxy card or voting instruction is returned and the
shareholder has abstained from voting on adoption of the merger agreement, the
TEAM America common stock or Mucho common stock represented by the proxy or
voting instruction will be considered present at the special meeting for
purposes of determining a quorum, but will not be considered to have been voted
in favor of adoption of the merger agreement. If your shares are held in an
account at a brokerage firm or bank, you must instruct them on how to vote your
shares. If an executed proxy card is returned by a broker or bank holding shares
which indicates that the broker or bank does not have discretionary authority to
vote on adoption of the merger agreement, the shares will be considered present
at the meeting for purposes of determining the presence of a quorum, but will
not be considered to have been voted in favor of adoption of the merger
agreement. Your broker or bank will vote your shares only if you provide
instructions on how to vote by following the instructions provided to you by
your broker.
Because adoption of the merger agreement requires the affirmative vote of
at least a majority of the shares of TEAM America's common stock and Mucho's
common stock outstanding on the record date, abstentions, failures to vote and
broker non-votes will have the same effect as a vote against adoption of the
merger agreement.
The TEAM America special meeting or the Mucho special meeting may be
adjourned or postponed, including by their respective chairmen, in order to
permit further solicitation of proxies. No proxy voted against the proposal to
adopt the merger agreement will be voted on any proposal to adjourn or postpone
the special meeting that is submitted to the shareholders for a vote.
Neither TEAM America nor Mucho expects that any matter other than the
adoption of the merger agreement and the approval of the merger and related
transactions will be brought before their respective special meetings. If,
however, other matters are properly presented, the persons named as proxies will
vote in accordance with their judgment with respect to those matters, unless
authority to do so is withheld on the proxy card.
A shareholder may revoke his or her proxy at any time before it is voted
by:
- notifying in writing the Corporate Secretary of TEAM America at 110 E.
Wilson Bridge Road, Worthington, Ohio 43085, if you are TEAM America
shareholder, or the Secretary of Mucho at 3390 Mt. Diablo Blvd., 2nd
Floor, Lafayette, California, if you are a Mucho shareholder;
- granting a subsequently dated proxy; or
- appearing in person and voting at the special meeting if you are a
holder of record.
Attendance at the special meeting will not in and of itself constitute
revocation of a proxy.
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MARKET PRICE AND DIVIDEND INFORMATION
TEAM America's common stock was quoted on the Nasdaq National Market under
the symbol "TMAM" from the commencement of its initial public offering on
December 10, 1996 until October 1, 1999, when its common stock began trading on
the Nasdaq SmallCap Market. The following table sets forth, for the periods
indicated, the high and low sales prices for TEAM America's common stock, as
reported on the Nasdaq National Market and the Nasdaq SmallCap Market.
<TABLE>
<CAPTION>
CALENDAR PERIOD COMMON STOCK PRICE
--------------- ------------------
HIGH LOW
<S> <C> <C>
Fiscal 1998:
First Quarter........................................................................ $ 17.50 $ 9.50
Second Quarter....................................................................... $ 14.00 $ 10.00
Third Quarter........................................................................ $ 10.44 $ 5.00
Fourth Quarter....................................................................... $ 7.50 $ 4.13
Fiscal 1999:
First Quarter........................................................................ $ 6.50 $ 4.00
Second Quarter....................................................................... $ 5.38 $ 4.13
Third Quarter........................................................................ $ 6.88 $ 4.00
Fourth Quarter....................................................................... $ 7.25 $ 5.25
Fiscal 2000:
First Quarter........................................................................ $ 7.13 $ 5.63
Second Quarter....................................................................... $ 6.66 $ 3.13
Third Quarter (through August 4, 2000)............................................... $ 5.00 $ 4.13
</TABLE>
As of August 4, 2000, the number of record holders of TEAM America common
stock, was 254. The closing sales price of the common stock on August __, 2000,
was $______.
TEAM America has not paid any cash dividends to holders of its common stock
and does not anticipate paying any cash dividends in the foreseeable future, but
intends instead to retain future earnings for reinvestment in its business. The
payment of any future dividends would be at the discretion of TEAM America's
board of directors and would depend upon, among other things, its future
earnings, operations, capital requirements, general financial condition and
general business conditions.
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THE MERGER
GENERAL
Each of the TEAM America board of directors and the Mucho board of
directors is using this proxy statement/information statement/prospectus to
solicit proxies from the holders of its common stock for use at the TEAM America
special meeting or the Mucho special meeting, as the case may be. See "The
Special Meetings."
TEAM America and Mucho have agreed to combine companies pursuant to the
terms of a merger agreement. The merger agreement provides that Mucho and Merger
Sub will merge and that Mucho will be the surviving corporation. As a result of
the merger, Mucho will become a wholly owned subsidiary of TEAM America. Upon
the effectiveness of the merger, TEAM shall be renamed "TEAM Mucho, Inc."
Pursuant to the terms of the merger agreement, holders of Mucho common stock
will receive a total of 5,925,925 shares of TEAM America common stock
representing approximately 58% of TEAM America's outstanding common stock after
the merger. Some of Mucho's founding stockholders have agreed to place a total
of 2,222,222 shares of TEAM America common stock received by them as merger
consideration into escrow. The shares will be released from escrow only upon the
achievement of specific performance goals by the combined company. See "The
Merger Agreement - Conversion of Mucho Shares; Merger Consideration."
In connection with the merger, TEAM America will offer to purchase up to
50% of its outstanding common stock from its current shareholders for $6.75 per
share.
We expect that the merger will provide significant benefits to both
companies. TEAM America, like the PEO industry generally, expects to face
growing competitive threats from Internet-enabled providers of outsourced human
resources. These Internet-enabled providers offer "unbundled" human resource
services that permit clients to choose from a variety of services in a cost
efficient manner over the Internet. Mucho, on the other hand, like other new
economy companies, must continue to develop effective and efficient ways to
expand its member base and to earn revenues sufficient to sustain its
operations. We believe the combination of the two companies addresses each
company's needs. Mucho offers TEAM America valuable Internet delivery
capabilities and services and TEAM America offers Mucho new members and a
reliable stream of revenue.
TEAM America's most valuable resources are its community of clients,
worksite employees and their families. TEAM America has an estimated community
of 1,800 small businesses, 16,000 worksite employees and 48,000 family members
of worksite employees. These relationships provide a valuable commercial
opportunity for Mucho's e-commerce portal and the approximately 100 Mucho
vendors.
Mucho is developing relationships with banks for whom Mucho can develop a
private label portal. These banks serve many small business customers, many of
whom are candidates for PEO and human resource outsourcing services.
Consequently, the banks and their customers provide an opportunity for TEAM
America's human resource outsourcing business.
The management teams of TEAM America and Mucho compliment each other. TEAM
America has 15 years of experience operating a PEO and solving human resource
outsource issues. It has developed a strong operating team and has developed a
PEO management system, TEAM Direct. Mucho has expertise in marketing, finance
and strong Internet development expertise. The two companies expect to combine
this talent and these skills to take advantage of the new economy and compete
effectively in the changing world of business process outsourcing.
BACKGROUND OF THE MERGER
On July 27, 1999, a group of investors led by S. Cash Nickerson, a director
and officer of TEAM America and the chief executive officer of Mucho, sent a
letter to Kevin T. Costello, TEAM America's president and chief executive
officer, offering to purchase all of the outstanding TEAM America common stock
for $6.00 per share payable in cash or shares of Mucho common stock. On July 28,
1999, TEAM America's stock price reached a 52 week low of $3.38 per share. Mr.
Nickerson recused himself as a board member for any discussions related to the
offer. Mr. Nickerson filed a Schedule 13D with the SEC on July 28, 1999
disclosing his intention to acquire TEAM America.
The July 27, 1999 offer from Mucho expired on August 26, 1999 and was
replaced by an increased offer of $7.25 per share on August 27, 1999. TEAM
America's board of directors met on July 28, 1999, August 11, 1999 and August
16, 1999 to discuss the Mucho offer and an unrelated offer TEAM America received
from Global Employment Solutions, Inc.
Mr. Nickerson subsequently entered into an agreement with Global Employment
Solutions pursuant to which Mr. Nickerson withdrew his offer to purchase TEAM
America and Global Employment Solutions offered to purchase all of TEAM
America's outstanding common stock. Under the agreement, Mr. Nickerson was to
receive a stake in Global Employment Solutions.
Global Employment Solutions and TEAM America entered into a memorandum of
understanding on September 23, 1999, pursuant to which Global Employment
Solutions was to purchase all of TEAM America's outstanding common stock for
$7.75 per share, except for
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750,000 shares of TEAM America common stock held by members of TEAM America's
management, including Kevin T. Costello and S. Cash Nickerson, which were to be
converted into shares of preferred stock of Global Employment Holdings, Inc.,
Global Employment Solutions parent company. On February 7, TEAM America and
Global Employment Solutions entered into a definitive merger agreement. Prior to
the closing of the merger, TEAM America had an audit adjustment of $2.4 million
for the year ended December 31, 1999. On April 10, 2000, Global Employment
Solutions terminated the merger agreement.
On April 11, 2000, Mr. Nickerson and other executive officers and directors
of Mucho discussed the strategic advantages of combining with TEAM America.
These perceived advantages included the synergies to be realized by combining
the two companies, the ability to cross-sell the products and services offered
by Mucho to TEAM America's clients and the ability to web enable TEAM America
and other PEOs that might be acquired following the combination. On April 12,
2000, Mr. Nickerson contacted Mr. Costello to discuss a possible acquisition of
TEAM America by Mucho. Also on April 12, Mr. Nickerson had telephone
conversations with TEAM America's investment advisor, Raymond James to discuss
the same issues. On April 13, 2000, Mucho sent an offer to purchase all of TEAM
America's common stock for $6.75 per share payable in stock or cash, to Mr.
Costello and TEAM America's investment advisor.
On April 14, 2000, Mr. Nickerson, Jose Blanco, Mucho's chief financial
officer, and Jay Strauss, Mucho's chief legal officer, met with their legal
advisors to discuss the structure of an acquisition of TEAM America. The
discussion centered upon a merger transaction in which Mucho would acquire TEAM
America. Also on April 14, 2000, Mr. Nickerson and Mucho's legal advisors and
TEAM America and its legal advisors had a telephonic meeting in which the
structure of a possible transaction was discussed. TEAM America's board of
directors had telephonic meetings on April 4 and April 9, 2000 to discuss and
approve the preliminary terms of a transaction. On April 19, 2000, TEAM America
and Mucho executed a letter of intent pursuant to which the two parties agreed
to pursue a business combination. While a structure was not established in the
letter of intent, a purchase price of $6.75 per share was agreed upon and the
fact that TEAM America's shareholders would be able to continue their ownership
interests in TEAM America if they desired. On April 24, 2000 the parties
executed a confidentiality agreement.
On April 27, 2000, Mucho presented TEAM with a draft Agreement and Plan of
Merger. On May 2, 2000, legal representatives of both TEAM America and Mucho met
to negotiate the terms of the merger agreement, including the structure of the
merger and a valuation of Mucho. The following week, TEAM America sent its legal
representatives to Mucho to perform due diligence on Mucho. From May 3, 2000 to
May 26, 2000, representatives of TEAM America and Mucho held a series of
telephonic meetings during which the parties negotiated the terms of the merger
agreement. Specifically, the negotiations centered upon the valuation of Mucho,
the most advantageous structure of a merger and the conditions to the merger.
TEAM America's board of directors met telephonically on May 9, May 11, May 15
and May 18, 2000 to discuss the progress of due diligence, the negotiations and
the transaction generally.
On May 26, 2000, Mr. Nickerson, Mr. Blanco and Mucho's legal advisors met
with Mr. Costello, William Johnston, chairman of the board of directors of TEAM
America, and TEAM America's legal advisors at which time TEAM America made
several new proposals regarding the transaction. These proposals included
placing shares to be issued to Mucho shareholders into escrow, the composition
of the board of directors after the merger and the fixing of the number of
shares to be granted in a merger. Over the next few weeks, Mucho and its
representatives and TEAM America and its representatives had numerous additional
telephonic meetings and exchanged revised drafts of the merger agreement. During
the period between May 26, 2000 and June 16, 2000, the TEAM America board of
directors met telephonically on two different occasions to discuss the progress
of the transaction. On June 16, 2000, the merger agreement was executed by
representatives of both TEAM America and Mucho. The TEAM America board of
directors and the Mucho board of directors each, independently and unanimously,
approved the merger agreement and in the case of TEAM America the related
amendment to its amended articles of incorporation and recommended that their
shareholders vote to adopt the merger agreement and approve the merger and
related proposals.
On July 13, 2000, representatives of TEAM America and Mucho met to discuss
the merger and related issues. As a result of those meetings and subsequent
discussions regarding the transaction, the parties agreed to amend the merger
agreement to reflect a change to the escrowed shares. TEAM America's and Mucho's
board of directors each, independently and unanimously, approved the first
amendment to the merger agreement, and the amendment was executed on August 9,
2000.
AMENDMENT TO TEAM AMERICA'S ARTICLES OF INCORPORATION
In connection with the merger, TEAM America and Mucho have agreed to amend
TEAM America's articles of incorporation and code of regulations. The form of
amended articles of incorporation of TEAM America is set forth as Appendix D to
the proxy statement/information statement/prospectus. The form of the amended
code of regulations of TEAM America is set forth as Appendix E to the proxy
statement/information statement/prospectus.
Adoption of the merger agreement and approval of the merger will constitute
approval of the amendments to TEAM America's articles of incorporation and code
of regulations.
TEAM America's articles of incorporation are being amended as follows:
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- TEAM America's name will be changed to TEAM Mucho, Inc.; and
- the number of authorized shares of TEAM America stock will be
increased from 10,000,000 to 50,000,000.
TEAM America's code of regulations will be amended as:
- the number of directors of TEAM Mucho will be increased to nine; and
- the duties of the chief executive officer and the president will be
revised.
ISSUANCE OF OPTIONS TO KEVIN T. COSTELLO
In connection with the merger, TEAM America's board of directors granted
Kevin T. Costello, TEAM America's president and chief executive officer, an
option to purchase up to 600,000 shares of TEAM America common stock, subject to
shareholder approval. The options vest upon the closing of the merger and have
an exercise price of $3.875.
Adoption of the merger agreement and approval of the merger will also
constitute approval of the grant of the 600,000 options to Mr. Costello.
DIRECTORS AND EXECUTIVE OFFICERS OF TEAM MUCHO AFTER THE MERGER
TEAM Mucho's board of directors and executive officers will consist of the
following persons upon completion of the merger:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
S. Cash Nickerson 41 Chairman and Chief Executive Officer
Kevin T. Costello 51 President, Chief Operating Officer and a Director
Jose Blanco 44 Chief Financial and a Director
Thomas L. Gerlacher 57 Chief Accounting Officer
Jay R. Strauss 56 Chief Legal Officer and a Director
Crystal Faulkner 40 Director
William W. Johnston 54 Director
Joseph Mancuso 59 Director
</TABLE>
S. Cash Nickerson has served as Chairman of the board of directors and
Chief Executive Officer of Mucho since its incorporation in July 1999. In August
1998, Mr. Nickerson formed the law firm of Strauss Nickerson LLP with partner
Jay R. Strauss and remained with the firm until July 2000. Mr. Nickerson was a
member of the TEAM America board of directors from October 1997 to September
1999 and has served as a consultant to TEAM America since August 1998. From
September 1997 to August 1998, Mr. Nickerson served as President of TEAM America
of California, a wholly owned subsidiary of TEAM America and also as Executive
Vice President of Corporate Development of TEAM America. From May 1995 to
September 1997, Mr. Nickerson was the President and founder of Workforce
Strategies, Inc. Mr. Nickerson sold Workforce Strategies to TEAM America in
September 1997.
Kevin T. Costello has been a director of TEAM America since 1992, President
since 1998 and Chief Executive Officer since 1999. Mr. Costello served as Senior
Vice President of Operations and Chief Operating Officer of TEAM America from
1993 to 1998. From 1991 to 1993, Mr. Costello served as Vice President of Sales
and Marketing of TEAM America.
Jose Blanco has served as Chief Financial Officer of Mucho since July 1999.
Since September 1996, Mr. Blanco has served on the faculty of St. Mary's
College, Moraga, California, as an Assistant Professor of Finance in the MBA and
Executive MBA programs. 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. From September 1993 to August
1994, Mr. Blanco attended the University of Utah, where he received a Master of
Science in Economics. From June 1987 to August 1993, Mr. Blanco served as
regional vice president for financial services for American International Group.
Thomas L. Gerlacher was appointed Vice President of Finance, Treasurer and
Chief Financial Officer of TEAM America in March 2000. Mr. Gerlacher was Vice
President of Finance for United Magazine Company from July 1998 to February 1999
and Chief Financial Officer of United Magazine Company from December 1993 to
July 1998.
Jay R. Strauss has served as Chief Legal Officer and director of Mucho
since its incorporation in July 1999. In August 1998, Mr. Strauss formed the law
firm of Strauss Nickerson LLP with partner S. Cash Nickerson. From 1990 to
August 1998, Mr. Strauss practiced law with the firm of Foley, McIntosh, Frey,
Claytor and Strauss. Mr. Strauss has served as a member of the Lafayette,
California City Council since 1997 and is currently the Mayor of Lafayette.
Crystal Faulkner has been a director of TEAM America since 1997. Since
1999, Ms. Faulkner has been a principal in the accounting firm of Cooney,
Faulkner & Stevens, LLC. From 1991 to 1999, Ms. Faulkner was a principal in the
accounting firm of Rippe & Kingston, Cincinnati, Ohio.
William W. Johnston has been a director of TEAM America since 1990 and
served as Secretary of TEAM America from 1990 to 1998 and as general counsel to
TEAM America since 1989. Mr. Johnston was named Chairman of the Board of TEAM
America in 1999. From 1982 to 1990, Mr. Johnston was a partner in the law firm
of Crabbe, Brown, Jones, Potts and Schmidt located in Columbus, Ohio. Mr.
Johnston currently practices law in his own firm located in Worthington, Ohio.
From 1976 to 1982, Mr. Johnston was the Chairman of the Ohio Industrial
Commission.
Joseph R. Mancuso is the founder and, since 1977, the Chief Executive
Officer of the CEO Club, Inc., as well as the Center for Entrepreneurial
Management, Inc. Since 1978, Mr. Mancuso has served as the Chairman of the
Management Department at Worcester Polytechnic Institute in Massachusetts. He
received a degree in electrical engineering from WPI in 1963 and a Masters of
Business Administration from Harvard Business School in 1965. Mr. Mancuso has
also earned a Ph.D. in Educational Administration from Boston University in
1975. He has also written or edited 24 books relating to business management. He
has been a director of Mucho since March 2000.
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<PAGE> 35
TEAM AMERICA'S REASONS FOR THE MERGER AND RECOMMENDATION OF TEAM AMERICA'S BOARD
OF DIRECTORS
TEAM America's board of directors has unanimously approved the merger
agreement. The board believes that the terms of the merger and the related
tender offer are fair to TEAM America's shareholders and in the best interests
of TEAM America and its shareholders and, therefore, recommends that you vote
"FOR" the adoption of the merger agreement and approval of the merger and
related proposals. Adoption of the merger agreement will also constitute
approval of amendments to TEAM America's articles of incorporation and the
issuance of 600,000 options to Mr. Costello. The board of directors based their
recommendation on the following factors:
- TEAM America's assets, obligations, operations, earnings and prospects
and those of the industry in which TEAM America competes, including
management's concern regarding TEAM America's ability to maintain
historical rates of growth and profit margins;
- market prices of TEAM America's common stock have generally been below
the $6.75 tender offer price during the last year, recent
pre-announcement trading activity in TEAM America common stock has
been limited, which in turn limits the attractiveness of its stock to
new investors, and the fact that the tender offer consideration to be
paid to the shareholders represents a premium over $3.63, the per
share closing sale price of TEAM America's common stock on June 15,
2000, the day prior to the board's approval of the merger, and a
premium of $0.52 over the per share book value of TEAM America's
common stock on March 31, 2000;
- an analysis of the professional employer organization industry
generally;
- the results of the board of director's market solicitation conducted
by Raymond James, TEAM America's financial advisors, to determine
whether there were other strategic alternatives for TEAM America;
- the solicitation by Raymond James of strategic alternatives for TEAM
America, including seeking out other online business centers and PEOs
to acquire TEAM America;
- the written opinion of Raymond James, financial advisors to the board,
dated June 30, 2000, that, as of June 15, 2000, and based on the
considerations set forth in the opinion, the payment of $6.75 per
share to the holders of TEAM America's common stock who tender their
shares in the tender offer is fair from a financial point of view to
TEAM America's shareholders who tender their shares. See "Opinion of
TEAM America's Financial Advisor;"
- the board of directors' valuation of Mucho at $40 million, as a result
of the directors' extensive arm's length negotiations with Mucho and
the assistance of Raymond James, its financial adviser;
- the fact that TEAM America would remain a public entity after the
merger was completed;
- the terms of the escrow agreement which require the escrow of
2,222,222 shares of TEAM America common stock until specified
performance goals are met by Mucho following the merger;
- the fact that options granted to current TEAM America employees would
continue to remain outstanding;
- the fact that Mucho's obligation to complete the merger is subject to
its arranging of financing for the tender offer; and
- the fact that approval of the merger agreement requires the
affirmative vote of a majority of TEAM America's outstanding shares
entitled to vote thereon.
TEAM America's board of directors also considered a variety of potential
risks and detriments in its consideration of the merger agreement, including the
following:
- Mucho has a limited operating history;
- the fact that Mucho had no revenue through March 31, 2000;
- the fact that the merger would lead to new management of TEAM America;
- the fact that TEAM America did not receive a fairness opinion from a
financial advisor as to the fairness, from a financial point of view,
of the merger to TEAM America and its shareholders; and
- the fact that 600,000 options granted to Mr. Costello would vest upon
the completion of the merger.
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<PAGE> 36
The board of directors did not attempt to determine the liquidation value
of TEAM America because they believed that such a measure of asset value is not
relevant in determining the value of TEAM America as a going concern.
The board of directors was aware that some directors and members of
management have interests in the merger that are separate from the interests of
the shareholders of TEAM America generally. See "The Merger - Interests of TEAM
America's Directors and Officers in the Merger." On balance, the board viewed
such interests as neutral to their determination because of their belief that
such interests are customary and reasonable under all of the circumstances.
The foregoing discussion of the information and factors considered by the
board of directors is not meant to be exhaustive, but includes the principal
factors considered by the board. The board of directors did not specifically
adopt the conclusions of the opinion of its financial advisors. The fairness
opinion relating to the consideration to be paid to shareholders tendering their
shares was only one of many factors considered by the board in their evaluation
of the merger.
In light of the variety of factors considered by the board of directors,
the board did not quantify or otherwise attempt to assign relative weights to
the specific factors considered in making its determination. However, in the
view of the board of directors, the potentially negative factors they considered
were not sufficient, either individually or collectively, to outweigh the
positive factors relating to the merger. Consequently, after considering all of
the factors set forth above, together with an analysis of the presentations of
management and TEAM America's legal and financial advisors, the board determined
that the terms and conditions of the merger are fair and in the best interest of
TEAM America and its shareholders.
OPINION OF RAYMOND JAMES & ASSOCIATES
On June 15, 2000, Raymond James & Associates, Inc. indicated its intention
to deliver a written opinion to the board of directors of Team America that, as
of such date, the cash consideration offered to TEAM America's shareholders in
the tender offer, as provided for in the merger agreement, is fair from a
financial point of view to such shareholders. On June 30, 2000, Raymond James
rendered its written opinion that, as of June 15, 2000, the cash consideration
offered to TEAM America's shareholders in the tender offer, as provided for in
the merger agreement, is fair, from a financial point of view, to such
shareholders.
The full text of the written opinion of Raymond James, dated June 30, 2000,
which sets forth assumptions made, matters considered and limits on the scope of
review undertaken, is attached as Appendix B to this proxy statement/information
statement/prospectus and is incorporated by reference herein. TEAM America's
shareholders are urged to read this opinion in its entirety. Raymond James'
opinion, which is addressed to TEAM America's board of directors, is directed
only to the fairness, from a financial point of view, of the cash consideration
offered to TEAM America's shareholder in the tender offer, as provided for in
the merger agreement and does not constitute a recommendation to any shareholder
of TEAM America as to whether such shareholder should tender their shares and
does not address any other aspect of the transactions provided for in the merger
agreement. Raymond James neither determined nor recommended to TEAM America's
board of directors the amount of such consideration. Raymond James consents to
the summarization of its opinion in, and attachment of its opinion to, this
proxy statement/information statement/prospectus. The summary of the opinion of
Raymond James set forth in this tender offer is qualified in its entirety by
reference to the full text of such opinion.
In connection with Raymond James' review of the proposed merger and the
preparation of its opinion, Raymond James has, among other things:
- reviewed TEAM America's annual report on Form 10-K, as filed with the
Securities and Exchange Commission on April 14, 2000, TEAM America's
quarterly reports on Forms 10-Q, as filed with the Securities and
Exchange Commission on May 18, 2000, November 12, 1999, August 16,
1999 and May 13, 1999, and certain other publicly available financial
information of TEAM America;
- reviewed certain non-public information prepared by the management of
TEAM America, including financial statements, financial projections,
and other financial and operating data concerning TEAM America;
- discussed the past and current operations and financial condition and
the prospects of TEAM America with senior executives of TEAM America;
- reviewed publicly available financial and stock market data with
respect to certain other companies in TEAM America's line of business
that Raymond James believed to be generally comparable to that of TEAM
America;
- reviewed the historical market prices of TEAM America's common stock;
- reviewed the financial terms and conditions stated in a draft of the
merger agreement dated June 16, 2000;
- reviewed a draft of the proxy statement/information
statement/prospectus to be filed in connection with the merger;
36
<PAGE> 37
- compared the cash consideration of the tender offer with the financial
terms of certain other transactions which Raymond James believes to be
generally comparable to the merger, including a comparison of the
premium paid for the common stock of TEAM America relative to the
premium paid over approximately the last fifteen months for other
public companies with enterprise values that Raymond James believes to
be comparable; and
- conducted other financial analyses, studies, and investigations, and
considered other information as Raymond James deemed necessary or
appropriate.
In conducting its investigation and analyses and in arriving at its
opinion, Raymond James took into account such accepted financial and investment
banking procedures and considerations as it deemed relevant, including a review
of (i) historical and projected revenues, operating earnings, net income and
capitalization of TEAM America and certain other publicly held companies in
businesses it believed to be comparable to TEAM America; (ii) the current and
projected financial position and results of operations of TEAM America; and
(iii) the general condition of the securities markets.
As described in its opinion Raymond James relied upon and assumed the
accuracy and completeness of all information supplied or otherwise made
available to Raymond James by TEAM America or any party and did not attempt to
verify independently any such information. Furthermore, Raymond James did not
make or receive any independent evaluation or appraisal of any of the assets or
liabilities (contingent or otherwise) of TEAM America, nor has Raymond James
been furnished with any such evaluation or appraisal. Raymond James assumed that
the financial forecasts, estimates, projections and other information with
respect to TEAM America examined by Raymond James have been reasonably prepared
in good faith on bases reflecting the best currently available estimates and
judgments of the management of TEAM America, and Raymond James relied upon each
party to advise it promptly if any such information previously provided to or
discussed with Raymond James became inaccurate or was required to be updated
during the period of its review. In addition, Raymond James has assumed the
merger will be consummated substantially in accordance with the terms set forth
in the agreement.
Raymond James' opinion was based on economic, market, and other conditions
as in effect on, and the information available to it as of, the date of its
opinion, and Raymond James has undertaken no obligation to reevaluate its
opinion.
Raymond James provided its advisory services and opinion for the
information and assistance of the board in connection with its consideration of
the merger. Raymond James provided assistance to the board in valuation and
negotiating financial terms of the merger, but rendered no opinion as to the
fairness of the merger. Raymond James' opinion does not constitute a
recommendation as to how one should vote on the merger.
The following is a summary of the financial analyses performed by Raymond
James in connection with the preparation of its opinion:
Selected Companies Analysis for TEAM America
Raymond James reviewed financial information, ratios and public market
multiples relating to TEAM America and compared them to corresponding financial
information, ratios and public market multiples for the following four publicly
traded corporations: Employee Solutions; Staff Leasing, Inc.; Teamstaff, Inc.;
and Barret Business Services, Inc. Raymond James chose the TEAM America
comparison companies because they were publicly traded companies with operations
that, for the purposes of this analysis, may be considered similar to TEAM
America.
In its analysis, Raymond James used closing market prices on June 14, 2000
and other publicly available information. Raymond James calculated the total
enterprise value to gross revenue, total enterprise value to EBITDA, total
enterprise value to EBIT; and equity market value to net income multiples of
TEAM America and the TEAM America comparison companies for twelve months ending
on March 31, 2000 and calendar years 2000 and 2001. The estimates of 2000 and
2001 gross revenue, EBITDA, EBIT, and net income were based on research
published by Raymond James or other investment firms for the TEAM America
comparison companies, if available, and management estimates for TEAM America.
The following table lists the minimum, mean, median, and maximum total
enterprise value to gross revenue, total enterprise value to EBITDA, and total
enterprise value to EBIT multiples and the equity market value to net income
multiples for the TEAM America comparison companies for the twelve months ending
on March 31, 2000, calendar year 2000, and calendar year 2001, as compared to
the same set of multiples for TEAM America implied by a $6.75 per share purchase
price. With respect to the projected information in the table, limited data
points are available regarding projected multiples due to limited research
coverage, and in some cases negative projected net income and EBITDA, of the
TEAM America comparison companies.
37
<PAGE> 38
Multiples of TEAM America Comparison Companies Versus TEAM America Multiples
Implied by $6.75 per Share Offer
<TABLE>
<CAPTION>
Total Enterprise Value Market Value Multiples
------------------------------------------------------------------------------- ------------------------------------
TTM at 3/31/00 CY 2000 CY 2001 TTM at 3/31/00 CY 2000 CY 2001
------------------------ ------------------------ ----------------------- -------------- ------- -------
Gross Gross Gross Net Net Net
Revenue EBITDA EBIT Revenue EBITDA EBIT Revenue EBITDA EBIT Income Income Income
------- ------ ---- ------- ------ ---- ------- ------ ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Minimum 0.03 2.6 3.5 0.03 4.5 5.8 0.02 4.0 5.1 5.1 7.9 6.8
Mean 0.16 9.9 13.3 0.09 12.7 5.8 0.08 4.7 9.2 27.1 7.9 11.2
Median 0.14 4.8 6.2 0.09 12.7 5.8 0.08 4.7 9.2 8.5 7.9 11.2
Maximum 0.35 22.3 30.2 0.15 20.9 5.8 0.13 5.4 13.3 67.8 7.9 15.5
TMAM 0.09 16.6 89.7 0.09 8.2 13.8 0.08 6.6 9.8 NM 30.3 19.4
</TABLE>
The table below depicts the implied valuation of shares of TEAM America's
common stock based on the mean multiple of the TEAM America comparison companies
across various metrics.
Implied Valuation Based on the Mean Multiple of the TEAM America Comparison
Companies
<TABLE>
<CAPTION>
Implied Equity Implied Price
Total Enterprise Value Multiples: Value ($MM) Per Share ($)
----------- -------------
<S> <C> <C>
TTM Gross Revenue 64.2 12.59
TTM EBITDA 19.5 3.83
TTM EBIT 3.0 0.60
CY 2000 Gross Revenue 32.7 6.42
CY 2000 EBITDA 54.8 10.74
CY 2000 EBIT 13.2 2.58
CY 2001 Gross Revenue 33.0 6.47
CY 2001 EBITDA 23.7 4.64
CY 2001 EBIT 32.0 6.27
Market Value Multiples:
TTM Net Income NM NM
CY 2000 Net Income 9.0 1.76
CY 2001 Net Income 19.8 3.88
Offer Price 34.4 6.75
</TABLE>
Precedent Transaction Analysis
Raymond James analyzed information relating to the following four
transactions in the professional employer organization industry occurring
between January 22, 1999 and June 14, 2000:
- Digital Solutions, Inc./TeamStaff, Inc.
- Automatic Data Processing, Inc./The Vincam Group, Inc.
- Selective Insurance Group/Modern Employers, Inc.
- Investor Group (Fidelity Ventures Limited, AFLAC Incorporated, and
Patricoff & Co. Ventures Incorporated)/Novacare Employee Solutions,
Inc.
The following table lists the minimum, mean, median, and maximum price paid
in these selected transactions as compared to the comparable calculations for
the cash consideration offered in the tender offer.
38
<PAGE> 39
Comparison of Multiples of Precedent Transactions to Multiples Implied by
Current Offer
<TABLE>
<CAPTION>
Total Enterprise Value/ Price/
Trailing Twelve Month Trailing
Gross Twelve Month
Revenue EBITDA EBIT Earnings
------- ------ ---- --------
<S> <C> <C> <C> <C>
Minimum 0.05 3.5 4.6 8.4
Mean 0.13 10.5 12.6 23.3
Median 0.13 8.6 9.1 16.2
Maximum 0.24 19.3 24.1 45.4
Offer Price 0.09 16.6 89.7 NM
</TABLE>
Discounted Cash Flow Analysis
Raymond James performed a discounted cash flow analysis using TEAM
America's management projections. Raymond James calculated a range of net
present values of free cash flows for the years 2000 through 2004 using discount
rates ranging from 13.5% to 17.5%. Raymond James derived the weighted average
cost of capital using the capital asset pricing model to estimate the cost of
equity and disclosures in the financial statements regarding TEAM America's cost
of debt. Raymond James adjusted the derived weighted average cost of capital to
give effect to the illiquid nature of TEAM stock, both in terms of the size of
the float and the historic average daily trading volume compared to other
publicly traded equity securities. Raymond James calculated a range of TEAM
America's terminal values in the year 2004 based on EBITDA multiples ranging
from 3.5x to 5.5x. Raymond James used EBITDA multiples ranging from 3.5x to 5.5x
based on the comparable trading range of the TEAM America Comparison Companies
and the uncertainties inherent in forward estimates of earnings. Raymond James
then discounted these terminal values to present value using discount rates
ranging from 13.5% to 17.5%. The per share values of TEAM America common stock
implied by this analysis ranged from $3.19 to $5.77, as compared to the cash
consideration offered in the tender offer of $6.75.
Price Premiums Analysis
Raymond James analyzed the cash consideration of the tender offer relative
to prices observed in the public trading market for the common stock of TEAM
America. The price premium offered by the tender offer was compared to price
premiums paid for other public companies with enterprise valuations ranging from
$10 million to $30 million over the period from March 1, 1999 to June 1, 2000.
By "price premium," Raymond James refers to the premium of the offer price over
the market price immediately prior to the announcement of a sale transaction.
The table below lists the minimum, mean, median, and maximum price paid for the
29 selected transactions relative to the premium implied by the $6.75 offered in
the tender offer.
Price Premiums for Transactions Involving Public Targets with Enterprise
Valuations Ranging from $10 Million to $30 Million
<TABLE>
<CAPTION>
Premium Over the Closing Price Prior to Announcement
----------------------------------------------------
1 Day 1 Week 4 Weeks
----- ------ -------
<S> <C> <C> <C>
Minimum -58.6% -9.7% -1.1%
Mean 39.3% 52.0% 50.8%
Median 32.0% 38.0% 42.9%
Maximum 170.0% 246.0% 170.0%
Offer Price 74.2% 75.6% 68.8%
</TABLE>
Opinion of Raymond James
39
<PAGE> 40
On June 30, 2000, Raymond James rendered its written opinion that, as of
June 15, 2000 and based upon and subject to various qualifications and
assumptions described with respect to its opinion, the cash consideration
offered to TEAM America's shareholders in the tender offer, as provided for in
the merger agreement, is fair from a financial point of view to TEAM America's
shareholders.
The summary set forth above does not purport to be a complete description
of the analyses of data underlying Raymond James' opinion or its presentation to
TEAM America's board of directors. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to a partial analysis or
summary description. Raymond James believes that its analyses must be considered
as a whole and that selecting portions of its analyses, without considering the
analyses taken as a whole, would create an incomplete view of the process
underlying the analyses set forth in its opinion. In addition, Raymond James
considered the results of such analyses and did not assign relative weights to
any of the analyses, so the ranges of valuations resulting from any particular
analysis described above should not be taken to be Raymond James' view of the
actual value of TEAM America.
In performing its analyses, Raymond James made numerous assumptions with
respect to industry performance, general business, economic and regulatory
conditions and other matters, many of which are beyond the control of the
Company. The analyses performed by Raymond James are not necessarily indicative
of actual values, trading values or actual future results which might be
achieved, all of which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of
Raymond James' analysis of the fairness, from a financial point of view, of the
cash consideration offered to TEAM America's shareholders in the tender offer,
as provided for in the Merger Agreement, and were provided to the Company's
board of directors. The analyses do not purport to be appraisals or to reflect
the prices at which businesses or securities might be sold. In addition, as
described above, the opinion of Raymond James was one of many factors taken into
consideration by TEAM America's board of directors in making its determination
to approve the merger. Consequently, the analyses described above should not be
viewed as determinative of TEAM America's board of directors' or TEAM America's
management's opinion with respect to the value of TEAM America. TEAM America
placed no limits on the scope of the analysis performed, or opinion expressed,
by Raymond James.
In connection with the merger, TEAM America contracted with Raymond James
to provide external investment banking services, pursuant to which TEAM America
requested that Raymond James provide the fairness opinion summarized herein.
TEAM America's board of directors retained Raymond James because of Raymond
James' qualifications, expertise, and reputation. Raymond James is actively
involved in the investment banking business and regularly undertakes the
valuation of investment securities in connection with public offerings, private
placements, business combinations and similar transactions. Through negotiation,
TEAM America and Raymond James determined that TEAM America would pay Raymond
James a fee upon the consummation of the Transaction, which fee is contingent
upon the value of the Transaction. Raymond James' fee will be approximately
$691,000, inclusive of $150,000 for the fairness opinion. In the ordinary course
of business, Raymond James may trade in the securities of TEAM America for its
own account and for the accounts of our customers and, accordingly, at any time
hold a long or short position in such securities.
INTERESTS OF TEAM AMERICA'S DIRECTORS AND OFFICERS IN THE MERGER
In considering the recommendation of the TEAM America board of directors
with respect to the merger agreement, TEAM America's shareholders should be
aware that some of the directors and members of management have interests in the
merger that are different from, or in addition to, the interests of the TEAM
America shareholders generally. A description of these interests are set forth
below. TEAM America's board of directors was aware of these interests and
considered them, among other things, in approving the merger.
As a condition to closing, Thomas L. Gerlacher will enter into an
employment contract with TEAM Mucho.
The merger agreement grants TEAM America the right to nominate four members
to the TEAM Mucho board of directors. Mucho will have the right to nominate four
members of the board of directors of TEAM Mucho and TEAM America and Mucho will
jointly nominate one member to the TEAM Mucho board of directors. Kevin T.
Costello, William W. Johnston, Crystal Faulkner and __________ will be nominated
by TEAM America to serve after the merger on the TEAM Mucho board of directors.
In addition, key shareholders of both TEAM America and Mucho have entered into a
voting agreement which allows each of the TEAM America key shareholders, as a
group, and the Mucho key shareholders, as a group, to select persons to be
nominated as directors at each TEAM Mucho annual meeting through the 2004 annual
meeting. The voting agreement further requires that the members of each group of
key shareholders vote for the other group's nominees.
Kevin T. Costello, TEAM America's President and Chief Executive Officer,
was granted an option to purchase 600,000 shares of TEAM America common stock.
These options vest upon consummation of the merger. See "The Merger - Issuance
of Options to Kevin T. Costello.
MUCHO'S REASONS FOR THE MERGER AND RECOMMENDATION OF MUCHO'S BOARD OF DIRECTORS
The Mucho board of directors unanimously determined that the merger
agreement is advisable and in the best interests of Mucho and the Mucho
shareholders and recommends adoption of the merger agreement to the Mucho
shareholders.
40
<PAGE> 41
In evaluating the merger, the Mucho board of directors consulted with its
management and gave careful consideration to a number of factors which supported
the board of directors' determinations, including the following:
- the various alternatives to the merger, including an initial public
offering of stock, and the risks associated with those alternatives;
- the expected operational synergies resulting from the merger of Mucho
and TEAM America;
- the ability of TEAM Mucho to cross-sell Mucho's services to each of
TEAM America's current clients and their worksite employees;
- the number of TEAM America customers Mucho may be able to establish as
Mucho members after the merger;
- the fact that Mucho's shareholders would have the opportunity to
participate in the potential for growth of TEAM Mucho after the
merger, as the merger is expected to result in a combined company with
greater resources to develop and market Mucho's services;
- the shares of TEAM America's common stock that Mucho's shareholders
will receive in the merger will be publicly tradable, and will provide
Mucho shareholders greater liquidity;
- the risk that Mucho would not be able to raise sufficient capital to
continue its current business operations without the merger;
- the fact that the merger is expected to be a tax-free reorganization
for federal income tax purposes;
- Mucho's ability to terminate the merger agreement if the Mucho board
of directors were presented with a superior offer, upon the payment of
a termination fee of $1,500,000 to TEAM America, as well as other
scenarios under which termination is possible, with or without
termination fees; and
- the Mucho board of directors' review of the terms and conditions of
the merger agreement. In particular, the board of directors considered
the events triggering payment of the termination fee and the
limitations on Mucho's ability to negotiate an alternative transaction
with other companies, and the potential effect these provisions would
have on Mucho receiving alternative proposals which could be superior
to the merger.
The Mucho board of directors also considered a variety of risks and other
potentially negative factors in its consideration of the merger agreement and
the merger, including the following:
- the risk that the benefits sought to be achieved by the merger will
not be realized;
- the possibility that TEAM America will not continue to increase its
revenues after the merger;
- the possibility that up to 50% of TEAM America's current shareholders
could tender their stock for cash, causing TEAM Mucho to have a
greater amount of debt than expected;
- the possibility of a disruption in management associated with the
merger and the challenges and costs of integrating the operations of
the companies;
- the possibility that new investors will be less likely to invest in
Mucho until the merger is complete;
- the possible unwillingness of TEAM America clients to use Mucho
services;
- the possibility that the voting agreement required by the merger
agreement will limit investor interest in TEAM Mucho;
- the potential loss of revenues and business opportunities for TEAM
America as a result of confusion in the marketplace after announcement
of the merger, or possible adverse reactions by existing or
prospective TEAM America customers.
- the dilutive effect of issuing additional Mucho securities prior to
the closing of the merger;
- the fact that Mucho's obligation to pay a termination fee to TEAM
America in specified circumstances might deter other parties from
proposing an alternative transaction that might be more advantageous
to Mucho shareholders;
- TEAM America's ability to terminate the merger agreement if the TEAM
America board of directors were presented with a superior offer, upon
the payment of a termination fee of $1,500,000 to Mucho, as well as
other scenarios under which termination by TEAM America is possible,
with or without termination fees; and
41
<PAGE> 42
- other applicable risks described in this joint proxy
statement/information statement/prospectus under "Risk Factors,"
starting on page ___.
The foregoing discussion of the information and factors considered and
given weight by the Mucho board of directors is not intended to be exhaustive
but summarizes the material factors considered. The Mucho board of directors did
not assign any relative or specific weights to the various factors considered.
Instead, the Mucho board of directors conducted an overall analysis of the
factors described above. In considering the factors described above, the
individual directors may have given different weight to different factors.
FOR THE REASONS DISCUSSED ABOVE, THE MUCHO BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED AND DEEMED ADVISABLE AND IN THE BEST INTERESTS OF THE MUCHO
SHAREHOLDERS THE MERGER AGREEMENT AND THE MERGER, AND UNANIMOUSLY RECOMMENDS
THAT THE MUCHO SHAREHOLDERS VOTE FOR APPROVAL OF THE ADOPTION OF THE MERGER
AGREEMENT AND THE APPROVAL OF THE MERGER.
INTERESTS OF MUCHO DIRECTORS AND OFFICERS IN THE MERGER
In considering the recommendation of the Mucho board of directors with
respect to the merger agreement, Mucho shareholders should be aware that certain
members of Mucho's management and board of directors may have interests in the
merger that are different from, or in addition to, the interests of Mucho
shareholders generally, and which may create potential conflicts of interest.
The Mucho board of directors was aware of, and considered, the interests of its
directors and officers when it approved the merger agreement, as amended, the
merger and the related transactions.
Mucho Option Plan And Warrants
In the merger agreement, Mucho and TEAM America agreed to take such action
as may be necessary to cause each unexpired and unexercised option and warrant
to purchase shares of Mucho common stock to be automatically converted into an
option or warrant to purchase a number of shares of TEAM Mucho common stock
equal to the number of shares of Mucho common stock subject to the Mucho option
or warrant multiplied by the exchange ratio. The exercise price per share of the
converted options or warrants will be equal to the exercise price of the Mucho
option or warrant divided by the exchange ratio. Each option or warrant, as
converted, will otherwise be subject to the same terms and conditions as the
corresponding Mucho option or warrant. Unless the applicable option agreement
evidencing the Mucho option specifically requires the acceleration of vesting of
such Mucho option upon the merger, the Mucho board of directors will not
accelerate the vesting of any Mucho options as a result of or in connection with
the merger.
Joseph Ryan, Michael Welden, Tom Anderson, Bryan Harms and Joseph Knotek
hold options to acquire an aggregate of 241,875 shares of Mucho common stock.
Ownership Of TEAM America common stock
Some directors and executive officers of Mucho, and their affiliates or
family members, own shares of TEAM America common stock. Steven Cash Nickerson,
James C. Tharin and Jay R. Strauss and their affiliates or family members
beneficially, own or control an aggregate of approximately 1,448,310 shares of
TEAM America common stock including 102,000 exercisable options held by Mr.
Nickerson and 33,558 held by Mr. Tharin.
Directors And Executive Officers
The merger agreement grants Mucho the right to nominate four members to the
TEAM Mucho board of directors. TEAM America will have the right to nominate four
members of the board of directors of TEAM Mucho and Mucho and TEAM America will
jointly nominate one member to the TEAM Mucho board of directors. S. Cash
Nickerson, Jose Blanco, Jay R. Strauss and Joseph Mancuso, will be nominated by
Mucho to serve after the merger on the TEAM Mucho board of directors. In
addition, key shareholders of both TEAM America and Mucho have entered into a
voting agreement which allows each of the TEAM America key shareholders, as a
group, and the Mucho key shareholders, as a group, to select persons to be
nominated as directors at each TEAM Mucho annual meeting through the 2004
annual meeting. The voting agreement further requires that the members of each
group of key shareholders vote for the other group's nominees.
The merger agreement states that the following individuals will be elected
to the office set opposite their name after the merger is consummated:
S. Cash Nickerson Chairman of the Board of Directors and Chief
Executive Officer
Jose Blanco Chief Financial Officer
Jay R. Strauss Chief Legal Officer
42
<PAGE> 43
COMPARATIVE PER SHARE INFORMATION
The following table presents historical and unaudited pro forma per share
data for TEAM America and Mucho. This information is qualified in its entirety
by the historical financial statements and accompanying notes for TEAM America
and for Mucho contained or incorporated by reference in this proxy
statement/information statement/prospectus. You should read this table in
conjunction with those statements and notes.
You should also read the following unaudited pro forma financial
information in conjunction with TEAM America's and Mucho's unaudited pro forma
financial statements and accompanying notes included in this proxy
statement/information statement/prospectus. For more information, please refer
to the section of this proxy statement/information statement/prospectus entitled
"Unaudited Pro Forma Condensed Combining Financial Information."
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED MARCH
DECEMBER 31, 1999 31, 2000
----------------- --------
(In thousands, except for per share data)
<S> <C> <C>
TEAM AMERICA HISTORICAL
Net Income (Loss) $ (238) $ 151
Cash Dividends Declared -- --
Book Value per Share 6.23 6.27
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 MARCH 31, 2000
----------------- --------------
<S> <C> <C>
MUCHO HISTORICAL
Net Income (Loss) $(1,254) $(2,277)
Cash Dividends Declared -- --
Book Value per Share (0.03) 0.02
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED MARCH
DECEMBER 31, 1999 31, 2000
----------------- --------
<S> <C> <C>
TEAM AMERICA/MUCHO PRO FORMA COMBINED
Net Income (Loss) $(2,320) $(1,994)
Cash Dividends Declared -- --
Book Value per Share N/A 2.68
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED MARCH
DECEMBER 31, 1999 31, 2000
----------------- --------
<S> <C> <C>
EQUIVALENT MUCHO PRO FORMA
COMBINED
Net Income (Loss) Mucho $(1,254) $(2,277)
Cash Dividends Declared -- --
Book Value (0.34) 0.26
</TABLE>
43
<PAGE> 44
UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL DATA
The following tables present selected pro forma condensed combined
statements of operations and balance sheet of TEAM America and Mucho. The
information is presented as if the merger had occurred on January 1, 1999 for
the statements of operations and on March 31, 2000 for the balance sheet. The
pro forma data assumes that the merger is effected by the exchange of 0.155 of a
share of TEAM America common stock for each share of Mucho common stock, whereby
an aggregate of 5,925,925 shares (including 2,222,222 contingently issuable
shares) of TEAM America common stock are issued or reserved in exchange for all
outstanding Mucho common stock, options and warrants. Based on the outstanding
Mucho stock, options and warrants at July 31, 2000, it is currently estimated
that of the 5,925,925 TEAM America shares available, 5,676,853 would be issued
(including 2,222,222 contingently issuable shares) and 249,072 would be
registered for future issuance for outstanding Mucho options and warrants.
Because it appears likely the Mucho shareholders will own a majority of the
outstanding shares of TEAM America common stock upon completion of the
transaction, the merger will be accounted for as a reverse acquisition.
Accordingly, for accounting purposes, TEAM America will be treated as the
acquired company and Mucho will be considered to be the acquiring company. The
purchase price will be allocated to the assets and liabilities assumed of TEAM
America based on their estimated fair market values at the acquisition date.
TEAM America's financial position and results of operations will not be included
in Mucho's consolidated financial statements prior to the date the merger is
consummated.
Under reverse acquisition accounting, the purchase price of TEAM America is
based on the fair market value of TEAM America common stock, except for the
portion of TEAM America controlled by the Mucho control group, for which the
historical cost carryover basis is used. For purposes of presentation in these
pro forma financial statements, the fair market value of TEAM America common
stock is $4.50 per share, which was the average price of TEAM America common
stock from July 31, 2000 to August 4, 2000, and the historical cost carryover
basis is $6.08 per share. The merger consideration includes 0.155 of a share of
TEAM America common stock for each share of Mucho common stock. However, this
includes the 2,222,222 of contingently issuable shares. After adjusting for the
contingently issuable shares, the exchange ratio is 0.0969 TEAM America shares
per Mucho share. This adjusted exchange ratio was utilized for purposes of
computing pro forma net loss per share. This exchange ratio will not be adjusted
in the event of any increase or decrease in the market price of TEAM America
common stock. The number of shares of TEAM America common stock to be registered
is fixed at 5,925,925. To the extent Mucho issues additional shares of common
stock, options, or warrants prior to the consummation of the merger, TEAM
America will still issue or reserve 5,925,925 shares of common stock, and the
exchange ratio will be adjusted accordingly. The ultimate fair market value used
to account for this transaction will be based upon the closing price of TEAM
America common stock at the consummation of this merger. Because of the tender
offer, whereby TEAM America will purchase up to 50% of the outstanding shares of
its pre-merger common stock at $6.75 per share at the consummation of the
merger, it is anticipated that the ultimate fair market value utilized for the
application of purchase accounting will be approximately $6.75 per share. These
pro forma financial statements include footnote information, which describe the
impact this expected increase in the trading price of TEAM America common stock
will have on the application of purchase accounting.
The pro forma condensed combined financial data are intended for
information purposes, and do not purport to represent what the combined entity's
results of continuing operations or financial position would actually have been
had the transaction in fact occurred at an earlier date, or project the results
for any future date or period.
44
<PAGE> 45
TEAM America and Mucho
Pro Forma Condensed Combining Balance Sheet
As of March 31, 2000
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
AS ADJUSTED
HISTORICAL
TEAM
HISTORICAL TEAM SUPPLEMENTAL AMERICA HISTORICAL PRO FORMA COMBINED
AMERICA (a) ADJUSTMENT CORPORATION MUCHO (b) ADJUSTMENTS PRO FORMA
--------------- ------------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.......................................... $ 4,111 $ (100)(c) $ 4,011 $ 1,121 $ $ 5,132
Trade A/R, net................................ 15,497 15,497 -- (98)(l) 15,399
Deferred income tax assets.................... 246 246 -- 246
Prepaid expenses and other.................... 990 990 81 1,071
-------- ----------- -------- -------- -------- --------
Total current assets............... 20,844 (100) 20,744 1,202 (98) 21,848
-------- ----------- -------- -------- -------- --------
Property and equipment, net................... 1,517 1,517 661 2,178
Intangible assets, primarily goodwill, net.... 25,415 25,415 -- (3,119)(d) 22,296
Other, net.................................... 897 100 (c) 997 9 1,006
-------- ----------- -------- -------- -------- --------
Total assets....................... $ 48,673 $ -- $ 48,673 $ 1,872 $ (3,217) $ 47,328
======== =========== ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities........................... $ 20,542 $ $ 20,542 $ 938 $ (98)(l) $ 21,382
Long-term debt and capital lease obligations.. -- 7,425 (c) 7,425 72 7,497
Other long-term liabilities................... 708 708 -- 708
-------- ----------- -------- -------- -------- --------
Total liabilities.................. $ 21,250 $ 7,425 $ 28,675 $ 1,010 $ (98) $ 29,587
-------- ----------- -------- -------- -------- --------
</TABLE>
(Continued on next page)
45
<PAGE> 46
TEAM America and Mucho
Pro Forma Condensed Combining Balance Sheet (Continued)
As of March 31, 2000
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
AS ADJUSTED
HISTORICAL
TEAM
HISTORICAL TEAM SUPPLEMENTAL AMERICA HISTORICAL PRO FORMA
AMERICA(a) ADJUSTMENT CORPORATION MUCHO ADJUSTMENTS
--------------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY
Common stock and additional paid-in capital...... $ 28,755 $ $ 28,755 $ 4,543 $ (3,119)(d)
1,634 (e)
375 (i)
(84)(e)
(10,307)(e)
Subscription receivable.......................... (150)
Retained earnings (accumulated deficit).......... 1,634 1,634 (3,531) (1,634)(e)
(375)(i)
Excess purchase price............................ (84) (84) 84 (e)
Less treasury stock.............................. (2,882) (7,425)(c) (10,307) 10,307 (e)
-------- ------------ ---------- --------- ----------
Total stockholders' equity............ 27,423 (7,425) 19,998 862 (3,119)
-------- ------------ ---------- --------- ----------
Total liabilities and stockholders'
equity.............................. $ 48,673 $ - $ 48,673 $ 1,872 $ (3,217)
======== ============ ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
COMBINED
PRO FORMA
---------
<S> <C>
STOCKHOLDERS' EQUITY
Common stock and additional paid-in capital...... $ 21,797
Subscription receivable.......................... (150)
Retained earnings (accumulated deficit).......... (3,906)
Excess purchase price............................ -
Less treasury stock.............................. -
----------
Total stockholders' equity............ 17,741
----------
Total liabilities and stockholders'
equity.............................. $ 47,328
==========
</TABLE>
46
<PAGE> 47
TEAM America and Mucho
Pro Forma Condensed Combining Statement of Operations
For the Three Month Period Ended March 31, 2000
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA COMBINED
TEAM AMERICA (a) MUCHO (b) ADJUSTMENTS PRO FORMA
---------------- ----------- --------------- ------------
<S> <C> <C> <C> <C>
Revenues................................................ $ 96,983 $(716)(l) $ 96,267
------------ --------------- ------------
Direct costs:
Salaries and wages................................... 83,750 (644)(l) 83,106
Payroll taxes, workers' compensation premiums,
employee benefits and other........................ 9,277 (72)(l) 9,205
------------ ----------- --------------- ------------
Total direct costs........................ 93,027 (716) 92,311
------------ --------------- ------------
Gross profit.............................. 3,956 3,956
Expenses:
Administrative salaries, wages and employment taxes.. 2,059 1,502 3,561
Other selling, general and administrative expenses... 996 502 1,498
Depreciation and amortization........................ 457 136 (39)(f) 554
------------ ----------- --------------- ------------
Total operating expenses.................. 3,512 2,140 (39) 5,613
------------ ----------- --------------- ------------
Income (loss) from operations............. 444 (2,140) 39 (1,657)
</TABLE>
(Continued on next page)
47
<PAGE> 48
TEAM America and Mucho
Pro Forma Condensed Combining Statement of Operations (Continued)
For the Three Months Period Ended March 31, 2000
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA COMBINED
TEAM AMERICA (a) MUCHO (b) ADJUSTMENTS PRO FORMA
---------------- ------------- -------------- ----------
<S> <C> <C> <C> <C>
Other income (expense), net:
Interest income (expense), net.................. (30) (137) (170)(g) (337)
Other, net......................................
--------------- ------------- -------------- ----------
Other income (expense), net.......... (30) (137) (170) (337)
--------------- ------------- -------------- ----------
Income (loss) before income taxes.... 414 (2,277) (131) (1,994)
Income tax expense................................. (263) 263 (h) -
--------------- ------------- -------------- ----------
Net income (loss).................................. 151 (2,277) 132 (1,994)
=============== ============= ============== ==========
Earnings (loss) per share:
Basic........................................... 0.03 (0.08) (0.33)
Diluted......................................... 0.03 (0.08) (0.33)
Weighted average shares outstanding:
Basic........................................... 4,333 28,369 1,649(j) 5,982
Diluted......................................... 4,333 28,369 1,649(j) 5,982
</TABLE>
48
<PAGE> 49
TEAM America and Mucho
Pro Forma Condensed Combining Statement of Operations
For the Year Ended December 31, 1999
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA COMBINED
TEAM AMERICA (a) MUCHO (b) ADJUSTMENTS PRO FORMA
--------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
Revenues...................................................... $ 401,940 $(539)(1) $ 401,401
Direct costs:
Salaries and wages......................................... 350,736 (489)(1) 350,247
Payroll taxes, workers' compensation premiums, employee
benefits and other....................................... 35,482 (50)(l) 35,432
--------------- ------------- -------------- ------------
Total direct costs.............................. 386,218 (539) 385,679
--------------- ------------- -------------- ------------
Gross profit................................... 15,722 15,722
Expenses:
Administrative salaries, wages and employment taxes....... 7,717 594 8,311
Other selling, general and administrative expenses........ 6,079 271 6,350
Depreciation and amortization............................. 1,771 20 (156)(f) 1,635
In process development costs.............................. 289 289
Merger termination costs.................................. 400 400
--------------- ------------- -------------- ------------
Total operating expenses....................... 15,967 1,174 (156) 16,985
--------------- ------------- -------------- ------------
Income (loss) from operations.................. (245) (1,174) 156 (1,263)
</TABLE>
(Continued on next page)
49
<PAGE> 50
TEAM America and Mucho
Pro Forma Condensed Combining Statement of Operations (Continued)
For the Year Ended December 31, 1999
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA COMBINED
TEAM AMERICA (a) MUCHO (b) ADJUSTMENTS PRO FORMA
--------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Other income (expense), net:
Interest income (expense), net................. (114) (80) (678)(g) (872)
Other, net..................................... (185) (185)
--------------- ------------- --------------- -----------
Other income (expense), net......... (299) (80) (678) (1,057)
--------------- ------------- --------------- -----------
Income (loss) before income taxes... (544) (1,254) (522) (2,320)
Income tax expense................................ (214) 214 (h) -
--------------- ------------- --------------- -----------
Net loss.......................................... (758) (1,254) (308) (2,320)
=============== ============= =============== ===========
Loss per share:
Basic.......................................... (0.17) (0.05) (0.42)
Diluted........................................ (0.17) (0.05) (0.42)
Weighted average shares outstanding:
Basic.......................................... 4,410 23,495 1,177 (j) 5,587
Diluted........................................ 4,410 23,495 1,177 (j) 5,587
</TABLE>
50
<PAGE> 51
\ TEAM America and Mucho
Notes to Combining Statements
March 31, 2000
a. Reflects the historical financial position of TEAM America at the
applicable date.
b. Reflects the historical financial position of Mucho at the applicable
date.
c. TEAM America has made a tender offer to purchase up to 50% of the total
outstanding shares of common stock simultaneous with the closing of the merger
for $6.75 per share. Management of TEAM America currently estimates that
approximately 25% of the outstanding shares (approximately 1.1 million shares)
will be tendered. TEAM America plans to fund this treasury stock transaction
through debt financing as described in note g. Because this transaction will be
consummated as a part of the closing of the merger, it is being reflected as a
supplemental adjustment to the historical financial statements in these pro
forma financial statements.
d. These pro forma adjustments reflect the allocation to the assets and
liabilities of TEAM America of the difference between the carryover value of
TEAM America and TEAM America's book value (the "adjustment to equity"). The
carryover value of TEAM America is assumed to be the sum of the fair market
value of the outstanding TEAM America common stock not controlled by the
Mucho control group, plus the book value of the TEAM America common stock
controlled by the Mucho control group. TEAM America's book value is assumed
to be its historical stockholders' equity adjusted by the estimated shares
repurchased related to the tender offer and the estimated transaction fees of
$100,000 which are assumed to have been incurred by TEAM America and Mucho prior
to the merger.
<TABLE>
<CAPTION>
TEAM America's market value: (000's)
---------------------------- -------
<S> <C> <C> <C>
Shares of TEAM America common stock outstanding at
March 31, 2000............................................................ 4,374,463
Shares assumed to be repurchased in relation to the tender
offer (see note c)........................................................ (1,100,000)
-----------
As adjusted TEAM America common stock shares outstanding.................. 3,274,463
Shares of TEAM America common stock controlled by the
Mucho control group..................................................... (1,296,044)
-----------
As adjusted shares of TEAM America common stock not controlled by
the Mucho control group..................................................... 1,978,419
Market price per share of TEAM America common stock........................... $ 4.50
-----------
Market value of TEAM America common stock outstanding, not
controlled by the Mucho control group..................................... $ 8,903
Shares of TEAM America common stock controlled by the Mucho
control group............................................................... 1,296,044
Book value per share of TEAM America common stock, as adjusted for shares
repurchased related to tender offer and for assumed transaction fees........ $ 6.08
-----------
Book value of TEAM America common stock outstanding, controlled
by the Mucho control group.................................................. 7,876
-----------
TEAM America's carryover value................................................ 16,779
</TABLE>
51
<PAGE> 52
<TABLE>
<S> <C> <C>
TEAM America's book value:
March 31, 2000 stockholders' equity 27,423,000
Treasury stock assumed to be purchased in tender offer (7,425,000)
(see note c)
Assumed transaction fees (100,000)
-----------
TEAM America's adjusted book value 19,898
-----------
Adjustment to equity $ (3,119)
===========
</TABLE>
In accordance with purchase accounting, the assets and liabilities of TEAM
America are adjusted to fair market value. However, TEAM America's
management believes that, except for goodwill, the historical carrying
values of its assets and liabilities approximates their fair value. As a
result, the adjustment to equity is reflected as an adjustment to goodwill.
<TABLE>
<S> <C>
Goodwill - previously recorded 25,415
Goodwill - related to the merger between TEAM America and
Mucho 22,296
-----------
Adjustment to equity $ (3,119)
===========
</TABLE>
The goodwill recorded as a result of these allocations will be amortized
over a 20-year life. In determining the estimated useful life, management
considered the nature, competitive position, and historical and expected
future operating income of the combined company. After the transaction, the
combined company will continually review whether subsequent events and
circumstances have occurred that indicate the remaining goodwill should be
reviewed for possible impairment. The combined company will use projections
to assess whether future operating income on a non-discounted basis (before
goodwill amortization) is likely to exceed the goodwill amortization over
the remaining life of the goodwill, to determine whether a write-down of
goodwill to recoverable value is appropriate.
The ultimate allocation of the purchase price to the net assets acquired,
goodwill, other intangible assets, and liabilities assumed is subject to
final determination of their respective fair values. This final allocation
will be based upon the results of appraisals and other studies that will be
performed upon the consummation of the merger. TEAM America's management
believes the above preliminary allocations of the purchase price are
reasonable and will not materially change upon completion of the appraisals
and other studies (other than the expected changes in the stock price which
will impact goodwill).
The calculation of the adjustment to equity in these pro forma financial
statements assumed a fair value of $4.50 per share for TEAM America common
stock (average price of TEAM America common stock from July 31, 2000 to
August 4, 2000). Because of the tender offer (see note c), it is
anticipated that TEAM America common stock will trade at or near $6.75 per
share at the date of the closing of the merger. Had $6.75 per share been
used to calculate the adjustment to equity, additional goodwill of
$4,451,000 would have been recorded. As a result of this additional
goodwill and the related additional amortization, the net loss would have
increased as follows:
<TABLE>
<CAPTION>
as shown adjusted
-------- --------
<S> <C> <C>
Pro forma quarter ended March 31, 2000 (1,994) (2,050)
Pro forma year ended December 31, 1999 (2,320) (2,542)
</TABLE>
52
<PAGE> 53
e. These pro forma adjustments eliminate TEAM America's historical retained
earnings, excess purchase price, and treasury stock.
f. These pro forma adjustments adjust historical goodwill amortization for the
change resulting from the application of purchase accounting to the assets
and liabilities of TEAM America and the resulting change in goodwill.
g. These pro forma adjustments reflect the interest expense associated with the
borrowings for the TEAM America shares issued in the tender offer (see note
c), as if the borrowings had occurred at January 1, 1999. The interest
expense has been computed on an assumption that borrowings under the new
credit facility will bear interest at a rate of 9% and that debt issuance
costs of $100,000 are amortized over 10 years.
h. These pro forma adjustments represent the estimated income tax effect of the
pro forma adjustments, excluding goodwill expense which has not been and
will not be deductible for tax purposes, using an incremental income tax
rate of 40%. It also reflects the impact of offsetting Mucho historical
taxable losses against TEAM America historical taxable income.
i. These adjustments represent the impact to the balance sheet of the issuance
of options for 600,000 shares of TEAM America common stock at an exercise
price of $3.875 per share to an officer of TEAM America. The grant of the
options is contingent upon the consummation of the merger and shareholder
approval. The options are vested immediately. As a result of the issuance of
these options, the post acquisition merged company will record a
nonrecurring charge to compensation expense for the difference between the
fair value of TEAM America stock at the date of the approval of the options
and the exercise price of $3.875 per share. These pro formas have calculated
the compensation expense assuming a fair market value of $4.50 for TEAM
America stock. However, because of the tender offer (see note c), it is
anticipated that at the time of approval of the options, TEAM America common
stock will be trading at a price near $6.75 per share. If the pro forma
calculation had assumed a price of $6.75, the total charge would have
increased from $375,000 to $1,725,000, pro forma common stock and additional
paid in capital would have increased from $21,797,000 to $23,147,000, and
retained deficit would have increased from $3,906,000 to $5,256,000. The
issuance of these options does not impact the earnings per share
calculations as they are anti-dilutive.
j. These pro forma adjustments reflect the conversion of Mucho historical
common stock outstanding to TEAM America equivalent shares assuming an
exchange ratio of 0.0969. They also reflect the reduction in TEAM America
historical shares outstanding resulting from the treasury stock buyback (see
note c - estimated to be approximately 1,100,000 shares).
<TABLE>
<CAPTION>
March 31, 2000 December 31, 2000
(000's) (000's)
------- -------
<S> <C> <C>
Historical weighted average Mucho
shares outstanding 28,369 23,495
Exchange ratio x0.0969 x0.0969
------- -------
Equivalent TEAM America shares 2,749 2,277
Less: assumed tender offer shares
(see note c) (1,110) (1,110)
------- -------
Pro forma adjusted to weighted
average shares 1,649 1,177
</TABLE>
k. As part of this transaction, 2,222,222 shares of contingently issuable TEAM
America common stock will also be issued to the shareholders of Mucho.
Contingent shares will be released upon the combined company meeting the
terms of the contingency as described elsewhere in this document. The
release of these shares will be treated as a stock dividend for accounting
purposes.
l. These pro forma adjustments reflect the elimination of intercompany
transactions related to professional employer organization services provided
by TEAM America to Mucho.
53
<PAGE> 54
THE MERGER AGREEMENT
The following is a summary of the material provisions of the merger
agreement, a copy of which is attached as Appendix A to this proxy
statement/information statement/prospectus. This summary is qualified in its
entirety by reference to the merger agreement. We urge you to read the merger
agreement carefully.
The merger agreement provides that, following its adoption by TEAM
America's shareholders and Mucho's shareholders and the satisfaction or waiver
of the other conditions to the merger, Merger Sub will merge with and into
Mucho. Mucho will continue as the surviving corporation of the merger, and
become TEAM America's wholly owned subsidiary, and Merger Sub will cease to
exist. As a result of the merger, TEAM America will change its name to TEAM
Mucho, Inc.
The merger will become effective after Merger Sub and Mucho file a
certificate of merger with the Secretary of State of Nevada, as required under
applicable Nevada law. We expect that this will occur in the fall of 2000.
CONVERSION OF MUCHO SHARES; MERGER CONSIDERATION
In the merger, all issued and outstanding securities of Mucho, including
outstanding shares of Mucho common stock and outstanding warrants and options,
will convert into the right to corresponding securities of TEAM America common
stock, as determined under the merger agreement. The number of shares of TEAM
America common stock that we will issue to Mucho's shareholders in exchange for
all the outstanding Mucho common stock, warrants and options will equal
5,925,925 diluted shares of TEAM America common stock.
Each outstanding share of Mucho stock will be converted into TEAM America
shares using an exchange ratio. This exchange ratio is calculated by dividing
5,925,925 by the number of diluted shares of Mucho common stock, options and
warrants at the effective time of the merger. The number of diluted shares of
Mucho common stock, options and warrants to be exchanged for shares of TEAM
America common stock will include:
- all issued and outstanding shares of Mucho common stock;
- all outstanding shares of other classes of Mucho voting
capital stock, including, but not limited to, shares of Mucho
preferred stock, giving effect to the conversion of such
capital stock;
- all warrants, whether vested or unvested, contingent or
otherwise, giving effect to the exercise of such warrants;
- all stock options, whether vested or unvested, contingent or
otherwise, giving effect to the exercise of such options;
- all other derivative securities of any kind or nature, whether
vested or unvested, contingent or otherwise, giving effect to
the exercise or conversion of such derivative securities; and
- any other debt or equity securities, whether vested or
unvested, contingent or otherwise, convertible into shares of
Mucho capital stock, giving effect to the conversion of such
debt or equity.
The following table sets forth the exchange ratio and number of shares of
TEAM Mucho common stock that a Mucho shareholder would receive based upon the
number of diluted shares of Mucho common stock assuming that such shareholder
owned 100,000 shares of Mucho common stock:
54
<PAGE> 55
<TABLE>
<CAPTION>
Number of diluted shares Number of TEAM Mucho
common shares of Mucho shares received
common stock Exchange Ratio in the merger
------------ -------------- -------------
<S> <C> <C> <C>
38,000,000 .1559 15,590
38,500,000 .1539 15,390
39,000,000 .1519 15,190
40,000,000 .1481 14,810
40,500,000 .1463 14,630
41,000,000 .1445 14,450
</TABLE>
As of July 31, 2000, the number of diluted shares of Mucho common stock was
38,224,581.
Some of Mucho's founding shareholders have agreed to place a total of
2,222,222 shares of the TEAM America common stock received by them in the merger
into escrow. The Mucho shareholders who enter into the escrow agreement will
receive half of the escrowed shares on a pro rata basis if Stonehenge or its
affiliates, business partners or other investors obtained or arranged by
Stonehenge provide $10 million in private equity financing on behalf of TEAM
Mucho prior to December 31, 2001. If Stonehenge provides $10 million in private
equity financing, the remaining half of the escrowed shares will be released on
a pro rata basis to the Mucho shareholders who escrowed shares, if, in any
consecutive three month period prior to December 31, 2001, TEAM Mucho's
operating revenue from Mucho's Internet operations plus incremental TEAM PEO
gross margin in excess of eight percent (8%) over TEAM America's prior year's
gross margin during the same three-month period is $2 million or greater. If
Stonehenge does not raise the $10 million in private equity financing, the Mucho
shareholders who enter into the escrow agreement will receive half of the
escrowed shares on a pro rata basis if TEAM Mucho raises $15 million in equity
financing prior to December 31, 2001. The Mucho shareholders who enter into the
escrow agreement will receive the remaining half of the escrowed shares on a pro
rata basis if Mucho earns $2 million of operating revenue from its Internet
operations in any consecutive three-month period prior to December 31, 2001,
provided that TEAM Mucho has raised $15 million in equity financing.
If any escrowed shares are not released in accordance with the two
requirements set forth above, then those shares will be returned to TEAM Mucho
and cancelled on January 1, 2002. If, however, prior to January 1, 2002, there
shall have been a change of control of TEAM Mucho, the TEAM Mucho's board of
directors shall immediately authorize the total release of the escrowed shares;
provided, that, at the time the change in control occurs, the transaction which
caused the change in control was consummated for TEAM Mucho common stock at a
price in excess of $6.75 per share.
No fractional shares of TEAM America common stock will be issued to Mucho
shareholders. Instead, each Mucho shareholder otherwise entitled to receive a
fractional share, after taking into account all Mucho Certificates registered in
the name of such holder, will receive its cash value, as calculated according to
the merger agreement. Mucho shareholders will not receive interest with respect
to any of these cash payments.
When the merger is completed, TEAM Mucho will assume the obligations of all
warrants and options to purchase Mucho common stock that have not been exercised
or cancelled prior to the effective time of the merger. At the effective time,
these warrants and options will convert into warrants and options to purchase
TEAM Mucho common stock and will continue to have the same terms and conditions
set forth in the applicable Mucho warrant or option agreement in effect before
the merger, except that:
- Mucho options and warrants will be or become exercisable for
the number of whole shares of TEAM Mucho common stock equal to
the number of Mucho shares of common stock issuable upon the
exercise of the Mucho options and warrants immediately before
the merger multiplied by the exchange ratio; and
- the per share exercise price for shares issuable upon the
exercise of the converted Mucho options and warrants will be
equal to the per share exercise price immediately before the
merger divided by the exchange ratio, rounded to the nearest
whole cent.
All unvested common stock, warrants, and options to purchase Mucho common
stock that are outstanding immediately before the effective time will
automatically convert into unvested stock, warrants, and options to purchase
TEAM Mucho common stock. Mucho stock that is restricted or subject to forfeiture
or other condition, once converted into shares of TEAM Mucho stock, warrants and
options, will contain the same restrictions and conditions.
TEAM AMERICA TENDER OFFER
55
<PAGE> 56
In conjunction with the merger, TEAM America will offer to purchase up to
50% of its outstanding common stock at a purchase price of $6.75 per share from
its current shareholders, if (i) a majority of its common stock is voted in
favor of the merger and the related transactions; and (ii) no more than 50% of
the outstanding shares of TEAM America's common stock are tendered for cash.
Notwithstanding the above, if more than 50% of the outstanding shares of TEAM
America common stock are tendered, TEAM America will accept the tendered shares
on a pro rata basis. The offer to purchase TEAM America shares of common stock
will expire at the close of TEAM America's special meeting and payments for the
tendered shares will be made after the completion of the merger.
Immediately after the merger, (i) Mucho shall irrevocably deposit or cause
to be deposited or make an irrevocable line of credit, in form reasonably
acceptable to TEAM America, available to National City Bank, as agent for the
holders of TEAM America's common stock tendered for $6.75 per share, in the
amount necessary to pay for the tendered shares and (ii) TEAM America will
accept the tendered shares in exchange for cash. Each holder of a certificate or
certificates representing tendered shares must surrender such certificate or
certificates to National City Bank within 10 business days after the merger
becomes effective to receive the payment of cash for the tendered shares on such
holder's behalf.
Upon receiving a surrendered certificate or certificates, National City
Bank will promptly distribute to each person who tenders their shares a
registered check in the amount of $6.75 per tendered share. Holders of shares
that have been tendered will cease to have any rights with respect to such
tendered shares, other than the right to receive $6.75 per share as provided in
the merger agreement.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF TEAM
AMERICA AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING
SHARES PURSUANT TO THE TENDER OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE TENDER OFFER
OTHER THAN THOSE CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR
MADE, SUCH RECOMMENDATION AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY TEAM AMERICA OR MUCHO.
COVENANTS AND CONDITIONS TO COMPLETION OF THE MERGER
The merger agreement contains covenants that TEAM America, Merger Sub
and Mucho have made in connection with the merger. These covenants relate to:
- the conduct of TEAM America's business and that of its
subsidiaries before the completion of the merger;
- the conduct of Mucho's business before the completion of the
merger;
- the preparation and filing of a registration statement with
the Securities and Exchange Commission; and
- other customary covenants for agreements of this type.
In addition, each of TEAM America, Mucho and Merger Sub have made
representations and warranties about matters including their respective assets,
liabilities, financial statements, and authority to enter into the merger. These
representations and warranties are customary in this type of transaction.
The merger agreement also contains conditions that TEAM America, Merger
Sub, and Mucho each must satisfy before any of them are obligated to complete
the merger. These conditions may be amended or waived prior to the time the
merger becomes effective if such amendment or waiver is in writing and signed by
both TEAM America and Mucho in the case of an amendment or, in the case of a
waiver, by the party against whom the waiver is to be effective. There shall be
no amendment that requires further approval by the shareholders of TEAM America
or Mucho, as the case may be, unless further shareholder approval is required by
law. These conditions require that:
- Mucho and TEAM America obtain adoption of the merger agreement
and approval of the merger from their shareholders;
- the expiration or early termination of any applicable waiting
period under the Hart-Scott-Rodino Act;
56
<PAGE> 57
- no legal injunction, order or decree be in effect that would
prevent completion of the merger or tender offer as
contemplated by the parties in the merger agreement;
- S. Cash Nickerson, Jose Blanco, Thomas Gerlacher and Jay
Strauss shall have each entered into employment agreements
with TEAM Mucho;
- key shareholders of TEAM America and Mucho shall have entered
into a voting agreement;
- the SEC shall have declared effective the Form S-4
Registration Statement regarding the merger; and
- holders of not more than 5% of Mucho's outstanding stock
notify Mucho in accordance with Nevada law of their intention
to assert dissenters' rights.
In addition, the merger agreement provides conditions under which TEAM
America or Mucho may terminate the merger agreement, several of which are
customary in this type of transaction. The merger agreement also allows for
termination under the following circumstances:
- If either TEAM America or Mucho receive a bona fide proposal
to acquire, directly or indirectly, more than 50% of the then
outstanding shares of such company's respective common stock
for consideration of cash and/or securities on terms that the
board of directors of the company receiving such superior
proposal determines in its good faith judgment to be more
favorable to the holders of that company's common stock than
the transactions provided for in the merger agreement, then
the board of directors of such company may withdraw its
recommendation of the transactions, including the merger,
contemplated in the merger agreement, provided that the party
receiving the superior proposal provides written notice to the
other party to the merger agreement of such proposal and such
other company does not, within seven business days of receipt
of such notice, make an offer at least as favorable as the
superior proposal.
- If the merger has not been consummated by October 31, 2000,
provided that the party seeking to exercise such right is not
then in breach in any material respect of its obligations
under the merger agreement and, provided further, that the
termination date shall be extended to December 31, 2000 in the
event that the necessary clearance from the SEC for this proxy
statement/information statement/prospectus exceeds 30 days.
If either TEAM America or Mucho approves a bona fide offer to acquire more
than 50% of their company's then outstanding common stock, the company that
approves the offer will owe a $1.5 million termination fee to the other company.
In addition, if the Mucho shareholders do not approve the merger, TEAM America
may receive a $1.5 million termination fee.
EXCHANGE OF CERTIFICATES
When the merger is completed, Mucho common stock will automatically convert
into the right to receive shares of TEAM Mucho common stock. Therefore, Mucho
shareholders will need to exchange their old Mucho stock certificates for TEAM
Mucho stock certificates as a result of the merger. The new stock certificates
will be issued in the name of TEAM Mucho to reflect TEAM America's name change
after the merger.
TEAM America's transfer agent, National City Bank, will deliver to Mucho's
shareholders of record a letter of transmittal and instructions to facilitate
the exchange of certificates. A Mucho shareholder who surrenders his or her
certificate to National City Bank, together with a duly executed letter of
transmittal and, for those Mucho shareholders who, in accordance with the merger
agreement, are required to place a portion of their shares in escrow, a copy of
the escrow agreement signed by the shareholder, will receive, in exchange
therefor:
- a certificate representing that number of TEAM Mucho common
stock that the shareholder is entitled to receive, less, in
the case of those Mucho shareholders required to place a
portion of their shares in escrow, any shares placed in escrow
in accordance with the merger agreement; and
- when applicable, a check representing cash in lieu of any
fractional shares.
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If a certificate representing shares of Mucho stock has been lost, stolen
or destroyed, the shareholder must submit to National City Bank an affidavit in
a form that TEAM Mucho and National City Bank have approved. Upon receipt of a
properly executed affidavit, National City Bank will deem the lost, stolen or
destroyed certificate to be cancelled. As a condition to issuing a new stock
certificate, however, TEAM Mucho may require the holder of any lost, stolen or
destroyed certificate to provide it with a bond in any amount as it may direct.
MUCHO SHAREHOLDERS SHOULD NOT SUBMIT ANY STOCK CERTIFICATES NOW, BUT RATHER
SHOULD ONLY SUBMIT STOCK CERTIFICATES UPON RECEIPT OF, AND TOGETHER WITH, THE
LETTER OF TRANSMITTAL AND ACCOMPANYING INSTRUCTIONS, AS WELL AS, WHEN
APPLICABLE, AN EXECUTED COPY OF THE ESCROW AGREEMENT.
NASDAQ LISTING
We expect that shares of TEAM America common stock to be issued in the
merger will be listed on the Nasdaq SmallCap Market as TEAM Mucho stock after
the name change. TEAM America has filed a listing application with Nasdaq
covering these shares. Upon consummation of the merger, TEAM Mucho will attempt
to change its ticker symbol to "TEMO" from the present ticker symbol, "TMAM."
EXPENSES
Generally, TEAM America and Mucho will each pay its own transaction costs
and expenses in connection with the merger. If Mucho is unable to arrange
financing for any applicable cash component of the merger or tender offer
consideration, Mucho will pay or reimburse TEAM America for all reasonable
out-of-pocket costs, fees and expenses incurred by TEAM America in connection
with the merger up to $250,000. TEAM America will pay any fees owed to Raymond
James in connection with the merger. Filing fees relating to the Hart-Scott
Rodino Act, if any, will be shared equally by TEAM and Mucho. Financial printing
fees incurred in connection with the printing of this proxy
statement/information statement/prospectus will be paid 75% by Mucho and 25% by
TEAM America. Any SEC filing fees, NASD fees, Nasdaq fees and Blue Sky fees
relating to the merger will be paid by Mucho. Any SEC filing fees, NASD fees,
Nasdaq fees and Blue Sky fees relating to the tender offer will be paid by TEAM
America.
MUCHO DISSENTERS' RIGHTS
Mucho shareholders are entitled to dissenters rights in the merger. A copy
of the statute is attached to this proxy statement/information
statement/prospectus as Appendix D. Mucho shareholders who are considering
exercising dissenters' rights should review the statute carefully, particularly
the steps required to perfect dissenters' rights. No provision under Nevada law
provides a shareholder the right to later withdraw and demand payment if the
shareholder does not comply with the statutory requirements. Set forth below is
a summary of the steps to be taken by a holder of record to exercise the right
to dissent. This summary should be read in conjunction with the full text of the
attached statute.
To exercise your right to dissent:
- before the vote is taken, you must deliver written notice to
the Mucho secretary stating that you intend to demand payment
for your shares if the merger with TEAM America is completed;
and
- you must NOT vote your shares in favor of the merger either by
proxy or in person.
If you send written notice of your intent to dissent before the vote on the
merger, Mucho must send you a written dissenters' notice within 10 days after
the merger is effective telling you:
- where your demand for payment must be sent and where your
stock certificates must be deposited;
- what happens if you own shares but do not have the stock
certificate; and
- the date by which Mucho must receive the demand form, which
must be between 30 and 60 days after notice delivery,
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and providing you:
- a form to demand payment setting forth the date by which you
must have acquired beneficial ownership of your shares in
order to dissent (a date prior to the public announcement of
the merger); and
- a copy of the statute.
YOUR FAILURE TO DEMAND PAYMENT IN THE PROPER FORM OR DEPOSIT YOUR
CERTIFICATES AS DESCRIBED IN THE DISSENTERS' NOTICE WILL TERMINATE YOUR RIGHT TO
RECEIVE PAYMENT FOR YOUR MUCHO SHARES. YOUR RIGHTS AS A MUCHO SHAREHOLDER WILL
CONTINUE UNTIL THOSE RIGHTS ARE CANCELED OR MODIFIED BY THE COMPLETION OF THE
MERGER.
Within 30 days of receipt of a properly executed demand for payment, Mucho
must pay you what it determines to be the fair market value plus interest for
your shares. Payment must be accompanied by specific financial records of Mucho,
a statement of Mucho's fair value estimate, including how interest was
calculated, information regarding your right to challenge the fair value
estimate, and copies of relevant portions of the Nevada Revised Statutes.
Within 30 days from the receipt of the fair value payment, you may notify
Mucho in writing of your own fair value estimate and demand the difference.
Failure to demand the difference within 30 days of receipt of payment terminates
your right to challenge Mucho's calculation of fair value.
If you and Mucho cannot agree on fair market value within 60 days after
Mucho receives a shareholder demand, Mucho must commence legal action seeking
court determination of fair market value. If Mucho fails to commence a legal
action within the 60 day period, it must pay each dissenter whose demand remains
unsettled the amount they demanded. Proceedings instituted by Mucho will be in
Washoe County, Nevada. Costs of legal action will be assessed against Mucho,
unless the court finds that the dissenters acted arbitrarily, in which case
costs will be equitably distributed. Attorneys' and expert fees may be divided
in the court's discretion among the parties.
ACCOUNTING TREATMENT
We intend to account for the merger as a reverse acquisition using the
purchase method of accounting under generally accepted accounting principles and
the rules and regulations of the SEC. For accounting purposes, Mucho will be
acquiring TEAM America.
INCOME TAX CONSEQUENCES
The following discussion summarizes all material U.S. federal income tax
consequences of the merger and tender offer to TEAM America and Mucho
shareholders. This discussion does not address all aspects of U.S. federal
income taxation that may be relevant to particular shareholders, and does not
apply to shareholders whom
- are not U.S. citizens or residents;
- will acquire TEAM Mucho common stock through the exercise or
termination of employee stock options or otherwise as
compensation; or
- are broker-dealers, retirement plans, tax-exempt entities,
financial institutions or insurance companies.
This discussion also does not address the applicability of any foreign,
state, local or other tax laws. The discussion assumes that Mucho shareholders
and TEAM America shareholders hold their respective stock as capital assets
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended. The following discussion is based on currently existing provisions of
the United States tax laws, existing and proposed regulations thereunder, and
current administrative rulings and court decisions. The discussion is not
binding on the Internal Revenue Service and no tax rulings will be sought or be
obtained in connection with the merger or the tender offer. There can be no
assurance that the Internal Revenue Service will agree with the tax consequences
of the merger or the tender offer described below. All of the tax discussion in
this proxy statement/information statement/prospectus is subject to change as a
result of changes in the U.S. tax laws, which could impact the continuing
validity of the this tax discussion.
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THESE CONCLUSIONS ARE BASED UPON ADVICE OF MUCHO'S COUNSEL AND TEAM
AMERICA'S COUNSEL. NEITHER MUCHO'S COUNSEL NOR TEAM AMERICA'S COUNSEL ARE
DELIVERING AN OPINION WITH RESPECT TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER OR THE TENDER OFFER. TEAM AMERICA AND MUCHO SHAREHOLDERS' SHOULD,
THEREFORE, CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES
TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF FOREIGN, STATE,
LOCAL AND OTHER TAX LAWS.
The merger will be a tax-free reorganization under Section 368 of the Code
and will have the following U.S. federal income tax consequences to Mucho
shareholders:
- Mucho shareholders will recognize no gain or loss upon the
conversion of their Mucho shares into shares of TEAM Mucho
common stock, except that they will recognize a gain or loss
on their receipt of cash, if any, in lieu of fractional
shares. Any recognized gain or loss will be capital gain or
loss equal to the difference between the cash received and the
portion of the Mucho shareholder's basis in the Mucho stock
allocable to the fractional share;
- the tax basis of shares of TEAM Mucho common stock received by
a Mucho shareholder will be the same as the shareholder's
basis in Mucho shares converted in the merger, reduced by any
amount allocable to a fractional share interest for which cash
is received;
- the holding period for the shares of TEAM Mucho common stock
received in the merger will include the holding period of the
Mucho shares converted in the merger; and
- Mucho shareholders will recognize gain or loss for U.S. income
tax purposes in connection with the exercise of dissenters'
rights.
Payments made in lieu of issuance of fractional shares of TEAM Mucho common
stock may be subject to information reporting to the Internal Revenue Service
and a backup withholding tax. Backup withholding will not apply, however, to a
payment to a Mucho shareholder or his or her payee that completes and signs the
substitute Form W-9 that will be included as part of the transmittal letter or
otherwise proves to TEAM Mucho and the exchange agent that they are exempt from
backup withholding.
The merger should not result in any U.S. federal income tax consequences to
the TEAM America shareholders as the TEAM America shareholders will not be
exchanging any of their shares in the merger nor receiving any consideration for
their shares in the merger. Furthermore, TEAM America shareholders are not
entitled to exercise dissenter's rights with respect to the merger.
A TEAM America shareholder participating in the tender offer will be
treated either as having sold shares of TEAM America common stock or as having
received a dividend distribution from TEAM America.
A TEAM America shareholder whose TEAM America shares are tendered pursuant
to the tender offer will be treated as having sold such shares if, under Section
302 of the Code, the sale
- results in a "complete termination" of all of such
shareholder's equity interest in TEAM America;
- is a "substantially disproportionate" redemption with respect
to such shareholder; or
- is "not essentially equivalent to a dividend" with respect to
such shareholder.
In applying each of the Section 302 tests, a TEAM America shareholder will be
treated as owning TEAM America shares actually or constructively owned by
certain related individuals and entities.
The receipt of cash by a TEAM America shareholder in the tender offer will
result in a "complete termination" of the shareholder's interest if either (i)
all of the TEAM America shares that are actually and constructively owned by the
shareholder are sold pursuant to the tender offer or (ii) all of the TEAM
America shares actually owned by the shareholder are sold pursuant to the tender
offer and the shareholder is eligible to waive, and effectively waives, the
attribution of any TEAM America shares constructively owned by the shareholder
in accordance with the procedures described in the Internal
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Revenue Code. A sale of TEAM America shares will be "substantially
disproportionate" with respect to a TEAM America shareholder if the percentage
of the then outstanding TEAM America shares actually and constructively owned by
such shareholder immediately after the sale of the shareholder's shares pursuant
to the tender offer is less than 80% of the percentage of the TEAM America
shares actually and constructively owned by such shareholder immediately before
the tender offer (treating shares sold pursuant to the tender offer as
outstanding). A TEAM America shareholder will satisfy the "not essentially
equivalent to a dividend" test if the reduction in such shareholder's
proportionate interest in TEAM America constitutes a meaningful reduction"
given such shareholder's particular facts and circumstances.
For purposes of applying the tests under code section 302, a TEAM America
shareholder should treat the TEAM America shares issued to the Mucho
shareholders pursuant to the merger as outstanding TEAM America shares.
If a TEAM America shareholder is treated as having sold his or her shares
in the tender offer, such shareholder will recognize capital gain or loss equal
to the difference between the amount of cash received and such shareholder's
adjusted tax basis in the shares sold to TEAM America.
If a TEAM America shareholder who participates in the tender offer is not
treated as having sold his or her shares, such shareholder will be treated as
receiving a dividend to the extent of such shareholder's ratable share of the
TEAM America earnings and profits. Such a dividend may be included in the
shareholder's gross income as ordinary income without reduction for the adjusted
tax basis of the shares sold. In such event, the shareholder's adjusted tax
basis in his or her TEAM America shares sold in the tender offer generally will
be added to such shareholder's adjusted tax basis in the TEAM America shares not
sold in the tender offer. To the extent, if any, that the cash received by a
TEAM America shareholder exceeds such shareholder's ratable share of TEAM
America's earnings and profits, it will be treated first as a tax-free return of
such shareholder's adjusted tax basis in the shares and thereafter as capital
gain.
Any cash proceeds received by a TEAM America shareholder tendering their
shares may be subject to information reporting to the Internal Revenue Service
and a backup withholding tax. Backup withholding will not apply, however, to a
payment to a TEAM America shareholder or his or her payee that completes and
signs the substitute Form W-9 that will be included as part of the transmittal
letter or otherwise proves to TEAM America and the exchange agent that they are
exempt from backup withholding.
RESALES BY AFFILIATES
Shareholders who are deemed "affiliates" of Mucho under Rule 145 of the
Securities Act will only be permitted to transfer their shares of TEAM America
common stock issued in the merger under the following circumstances:
- pursuant to an effective registration statement under the
Securities Act;
- in compliance with Rule 145; or
- pursuant to an exemption from the registration requirements of
the Securities Act.
TEAM America will place appropriate legends on the certificates of its
common stock to be received by affiliates of Mucho. TEAM America may also issue
stop transfer instructions to its transfer agent, National City Bank, reflecting
the resale restrictions on Mucho affiliates stated above. The merger agreement
requires affiliates of Mucho to deliver a written agreement to TEAM America
stating that they will not sell, transfer, or dispose of their shares of our
common stock received in the merger except in accordance with the above
restrictions.
In addition to these restrictions, the directors, executive officers and
key shareholders will enter into stock restriction agreements with TEAM Mucho
which further inhibits their ability to resell TEAM America common stock. This
agreement limits each of these Mucho shareholders to the sale of a maximum of
__% of their TEAM America common stock, including from their exercise of Mucho
stock options converted to TEAM America stock options, during each __________
period following the closing date of the merger.
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TEAM MERGER CORPORATION
TEAM Merger Corporation was incorporated in Nevada in June 2000 and is a
wholly owned subsidiary of TEAM America formed for the purpose of facilitating
the merger. At the effective time, Merger Sub will be merged with and into
Mucho, Mucho will survive the merger, and the separate existence of Merger Sub
will cease.
Currently the sole director of Merger Sub is Kevin T. Costello. Mr.
Costello is also the President and Chief Executive Officer of TEAM America.
The current executive officers of Merger Sub are as follows:
<TABLE>
<S> <C>
Kevin T. Costello President
Thomas L. Gerlacher Vice President and Treasurer
Charles Dugan Secretary
</TABLE>
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MUCHO MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Mucho is a business-to-business e-marketplace, or online business center,
for small business owners and decision makers. Since July 1999, Mucho has
allocated the majority of its resources to developing a unique and proprietary
site architecture, building infrastructure, establishing a core set of service
and product offerings, and acquiring new members. Improvements to Mucho's
technology include development of functional features on its website, expansion
of its web server traffic capacity, development of its underlying databases and
creation of accurate and comprehensive management reporting capabilities.
Mucho's site was beta launched in April 2000 and definitively launched in June
2000.
Results of Operations
In view of the rapidly changing nature of Mucho's business and its limited
operating history, Mucho believes that a historical comparison of revenue and
operating results is not necessarily meaningful and should not be relied upon as
an indication of future performance. This is particularly true for Mucho and
other companies that operate in new and rapidly evolving markets. As a result,
Mucho's prospects should be considered in light of the risks, expenses and
difficulties encountered by companies in Mucho's state of development,
particularly early-stage companies in new and rapidly evolving markets.
The following table sets forth Mucho's statement of operations data for the
period from incorporation, July 8, 1999, through December 31, 1999, and the
first quarter of 2000. The financial data for December 31, 1999 are derived from
Mucho's audited financial statements, which, in the opinion of Mucho's
independent auditors, include all the necessary information for a fair
presentation of such information in accordance with generally accepted
accounting principles. The financial data for March 31, 2000 are derived from
Mucho's unaudited financial statements, which, in the opinion of management,
include all the necessary information for a fair presentation of such
information in accordance with generally accepted accounting principles. The
results of operations for any quarter should not be deemed indicative of the
results of operations for any future period.
Statement of Operations Data
<TABLE>
<CAPTION>
Three months ended Period from inception
March 31,2000 (July 8, 1999) to
(unaudited) December 31, 1999
----------- -----------------
<S> <C> <C>
Revenue $ -- $ --
----------- -----------
Operating expenses:
Personnel $ 1,501,753 $ 882,902
Selling, general and administrative 638,286 291,048
Total operating expenses 2,140,039 1,173,950
----------- -----------
Loss from operations 2,140,039 1,173,950
----------- -----------
Other (income) expenses:
Interest (income) (1,793) --
Interest expense 138,601 80,545
Total other expenses 136,808 80,545
NET (LOSS) $(2,276,847) $(1,254,495)
=========== ===========
</TABLE>
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Plan To Derive Revenue
No revenue was generated for the period from incorporation, July 8, 1999,
to December 31, 1999, and the quarter ending March 31, 2000. Mucho generated no
fees from the sale of sponsorships and partnerships to strategic vendors during
the period from incorporation through March 31, 2000. Product revenue is,
however, expected to be derived from commissions and fees from the approximately
100 contracted vendors who pay Mucho a commission or fee depending on the nature
of the purchase made online by Mucho's customers. Revenue is reported as the net
amount paid to Mucho by the vendor with respect to the product or service
purchased.
Orders with the vendors are initiated directly by Mucho members through
Mucho's site. Vendors consummate purchases with members and separately pay Mucho
commissions or fees. Mucho requires that all vendors be web enabled and be
capable of transacting business with customers on the web. Mucho also requires
that each vendor be national in scope and service Mucho's customers in the
continental U.S. Mucho does not have minimum commitments or guaranteed pricing
with any vendors nor does Mucho have minimum commitments or guaranteed pricing
with any of its suppliers. Mucho's agreements are generally cancelable at any
time by either party.
Another of Mucho's strategies to derive revenues is to encourage its
members to utilize the services it offers, such as online accounting, tax
preparation, and sales force management. Because of the relatively smaller cost
of goods sold associated with these services, which are primarily commission
based, they carry significantly higher margins. As a result, if Mucho is
successful in this strategy, it anticipates that gross margin from service
revenue will account for a greater portion of total gross margin in the future.
Mucho's Costs and Expenses
Mucho expects to obtain members and drive traffic to its website in part by
offering its members attractive and important services that can improve members'
business productivity and competitive prices on products that small businesses
often purchase on a repeat basis. Mucho believes the combination of its service
and product offerings, as well as its news, information and tools, will support
its efforts to retain and attract members in the future.
A substantial proportion of Mucho's total operating expenses of $1,173,950
for the period ended December 31, 1999, and $2,140,039 for the first quarter of
2000, related to the technical development of Mucho's site. Mucho believes its
success will depend on developing an attractive and easy-to-navigate website
that provides a high level of utility to small business owners and decision
makers. In an effort to maintain the cost of member acquisition at manageable
levels, Mucho has entered into agreements with several associations and
established business relationships with several small community banks and with
organizations that include small business owners. The agreements and business
relationships provide Mucho access to the organizations' customer base and the
organizations receive a share of Mucho's commissions from vendors' sales to
those customer bases. Mucho has incurred net losses and negative operating cash
flow in each quarterly period since its incorporation, and, as of December 31,
1999, its accumulated deficit was $1,254,495. For the quarter ending March 31,
2000 its operating loss was $2,276,847.
Non-cash Stock-based Compensation
The Mucho.com, Inc. 2000 Stock Option Plan was adopted by the Mucho's board
of directors in December 1999. In the first quarter of 2000, Mucho granted to
employees options to purchase an aggregate of 213,750 shares of common stock at
an exercise price of $.05 per share. At the time of the grant the fair market
value of Mucho's stock was valued at $.40 per share and, accordingly, in the
three-month period ended March 31, 2000, Mucho recorded employee compensation
expense of $74,813. This charge represents the difference between the deemed
fair market value of Mucho common stock for accounting purposes and the exercise
price of the options. The expense has been recognized in the current period
since the grant was for services performed before the date of grant.
In February 2000, Mucho issued common stock valued at $200,000 for
directors' services to be performed during the year 2000. In the first quarter
of 2000, Mucho recorded $50,000 as directors compensation expense and recorded
$150,000 as a subscription receivable. In each of the remaining three quarters
of 2000, Mucho will record $50,000 of the subscription receivable as directors'
compensation expense.
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In January 2000, Mucho issued common stock valued at $241,000 as bonus
compensation, and this amount was recorded as employee compensation bonus
expense in the quarter ended March 31, 2000. Also during the three months ended
March 31, 2000, Mucho issued common stock valued at $200,000 in partial payment
of bonus employee compensation related to equity funds raised for Mucho. Mucho
recorded this amount as employee compensation bonus expense during that quarter.
During the three month period ended March 31, 2000, Mucho issued common
stock valued at approximately $39,000 to non-employees for services and
equipment, and approximately $27,000 was recorded as expense and $12,000 as
fixed assets during the period.
Sales and Marketing
Mucho has developed several relationships with national trade and
professional associations and has established an alliance to market the online
business center to community banks across the U.S. This, coupled with Mucho's
efforts to market to TEAM America's small business customers and the employees
of small businesses, provides Mucho with several channels of distribution.
Also, Mucho has entered into contracts with approximately 100 vendors that
are able to sell valuable products and services online and provide nationwide
customer service to Mucho's members. Mucho intends to widen the number of
vendors as the demand for new products and services increases.
Technology and Development
Technical and product development expense relates to the development and
enhancement of Mucho's e-marketplace. These expenses include related employee
compensation and third-party contract development costs. Technical and
development costs have increased each quarter since incorporation primarily due
to increased staffing and associated costs related to development of Mucho's
e-marketplace platform. Mucho expects its technical and product development
expense to increase in absolute dollars as it continues to enhance and add
features and services to its e-marketplace platform.
General and Administrative
General and administrative expense consists primarily of compensation for
personnel, fees for outside professional advisors and general overhead and
facilities cost. General and administrative costs have increased primarily as a
result of personnel additions and the costs related to the development of
Mucho's e-marketplace platform. Mucho expects its general and administrative
development expense to remain stable and perhaps decrease in absolute dollars as
Mucho takes advantage of synergies after the merger between Mucho and TEAM
America is completed.
Non-cash charges
Non-cash charges consist of stock-based compensation expense pursuant to
the grant of stock options, interest expense on the issuance of warrants,
various expenses related to the issuance of common stock for services rendered,
strategic marketing equity instruments expense and other equity expenses.
Stock-based compensation expense consists of expenses related to employee stock
option grants issued with exercise prices lower than the deemed fair value of
the underlying shares at the time of the grant.
Other equity expense consists of warrants granted with respect to services
rendered or financing provided to Mucho. These expenses are based on the
estimated fair value of the warrants as determined by the Black-Scholes option
pricing model and the provisions of EITF 96-18. Non-cash charges increased over
the fiscal year ending December 31, 1999 and the first quarter of 2000.
In September 1999, in relation to a $500,000 loan, Mucho issued a warrant
to acquire up to 467,500 shares of Mucho common stock at no cost. Interest
expense of $60,938 was recorded at December 31, 1999 in connection with the
warrant, and when the warrant was exercised in March 2000, a further charge for
interest expense of $126,563 was recorded.
In March 2000, as additional consideration for a loan made to Mucho, Mucho
issued warrants to acquire up to 150,236 shares of common stock at a price of
$.40 per share for up to 10 years. Interest expense associated with the warrants
is based on the estimated fair value of the warrants as determined using the
minimum value option-pricing model assuming the
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following weighted average assumptions: average risk-free interest rate of 6%;
volatility of 0%; dividend of $0; and an expected life of 10 years. Using these
assumptions the fair value of the warrant on the date of grant is zero.
Interest Income and Expense
Interest income is derived from earnings from Mucho's short-term
investments. Interest expense results from activities under Mucho's capital
leasing activities, loans from stockholders and bank fees.
Liquidity and Capital Resources
Mucho has historically satisfied its cash requirements primarily through
private equity and debt financing transactions. Through December 31, 1999, Mucho
raised cumulative equity proceeds of $390,000. In the first quarter of 2000
Mucho raised an additional $3,210,539 of equity funding. As of December 31,
1999, and March 31, 2000, Mucho had cash and cash equivalents of $74,301 and
$1,121,193, respectively, and working capital of ($948,421) and $261,013,
respectively.
Net cash used for operating activities totaled $733,939 in 1999 and
$983,391 in the first quarter of 2000. Net cash used for investing activities
totaled $134,619 in 1999 and $609,258 for the first quarter of 2000. Mucho has
substantial investments in computer equipment and software.
Net cash provided by financing activities was $942,859 in 1999 and
$2,639,541 for the first quarter of 2000, primarily from the sale of common
stock.
Mucho expects that existing cash and cash equivalents and current cash from
operations will not be adequate to fund Mucho's long-term working capital needs.
In addition to increasing revenue and cash from operations, Mucho is continuing
its capital-raising efforts through the sale of equity. However, there is no
guarantee that Mucho will generate sufficient cash from operations or raise
sufficient capital to meet its working capital requirements.
Mucho does not expect significant growth in its operating costs for the
foreseeable future as Mucho seeks to integrate its business with Team America's
human resource product offering. Mucho does, however, intend to emphasize its
strategy to obtain members through alliances and co-marketing relationships with
organizations and firms with large aggregations of small business customers or
members. Mucho believes that it will better serve the small business community
by leveraging the established "trust and confidence" relationships of existing
organizations with its customers and/or members which Mucho expects will lead to
a quick adoption of Mucho's wide variety of business products and services over
the web.
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<PAGE> 67
SECURITY OWNERSHIP OF TEAM MUCHO
The following table sets forth information regarding the beneficial
ownership of TEAM America common stock as of June 30, 2000 and TEAM Mucho stock
after the merger by each person who will be a director or executive officer of
TEAM Mucho after the merger and by all directors and officers of TEAM Mucho
after the merger as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHARES BENEFICIALLY SHARES BENEFICIALLY
BENEFICIAL OWNER (1) OWNED BEFORE THE MERGER (2) OWNED AFTER THE MERGER (2)
-------------------- --------------------------- --------------------------
<S> <C> <C>
Kevin T. Costello............................................. 593,600 (3) 1,193,600(3)(4)
Thomas A. Gerlacher........................................... 0 0
Crystal Faulkner.............................................. 3,500 (5) 3,500 (5)
William W. Johnston........................................... 12,660 (6) 12,660 (6)
S. Cash Nickerson............................................. 1,383,044 (7) 3,835,919 (7)
Jose Blanco................................................... 0 139,500
Jay R. Strauss................................................ 16,708 260,833
Joseph Mancuso................................................ 0 77,500
All directors and executive officers of TEAM Mucho
as a group (___ persons)................................. [ ] [ ]
</TABLE>
(1) The address of Messrs. Costello, Gerlacher, Dugan, Johnston and Swartz
and Ms. Faulkner is 110 East Wilson Bridge Road, Worthington, Ohio
43085. The address for Messrs. Nickerson, Blanco, Strauss and Mancuso
is 3390 Mt. Diablo Blvd., 2nd Floor, Lafayette, California 94549
(2) Beneficial ownership is determined in accordance with the rules of the
SEC which generally attribute ownership of securities to persons who
possess sole or shared voting power and/or investment power with
respect to those shares.
(3) Includes 28,200 shares owned of record by Mr. Costello of which he has
the sole voting and investment power and 273,200 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 in which Mr. Costello contributed 100,000 shares, Mr.
Schilg contributed 100,000 shares and Mr. Dugan contributed 32,200
shares as limited partners. Also includes 60,000 shares as to which
Mr. Costello has the right to acquire beneficial ownership upon the
exercise of stock options exercisable within 60 days of June 30, 2000.
(4) Includes 600,000 shares that vest upon the closing of the merger.
(5) Includes 2,000 shares as to which Ms. Faulkner has the right to acquire
beneficial ownership upon the exercise of stock options exercisable
within 60 days of June 30, 2000.
(6) Includes 12,360 shares as to which Mr. Johnston has the right to
acquire beneficial ownership upon the exercise of stock options
exercisable within 60 days of June 30, 2000.
(7) 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 June 30, 2000. Also includes 727,773
shares that are owned by Byron and Terry McCurdy that Mr. Nickerson has
an option to purchase and 200,000 shares held by a private TEAM America
shareholder from whom Mr. Nickerson has received a fully revocable
proxy to vote on all matters in connection with any transaction
involving the acquisition of a majority of our common stock. The
information in this note was taken, in part, from a Schedule 13 D/A
filed with the SEC by Mr. Nickerson on April 21, 2000.
67
<PAGE> 68
MUCHO'S BUSINESS
Mucho is an online business center and community designed to save small
businesses time and money when they purchase goods and services or need sound,
reliable information. Mucho's objective is to build a community that will be the
preferred online business center for small business owners and their managers to
find business solutions, services, information, tools and products. Mucho
intends to provide content and direct links to a list of qualified vendors for
each service that will allow its customers to choose between a premium, standard
and economy service. Mucho plans to capture data on each customer as well as
receive commissions on purchases. Mucho expects to be the customizable "home
page" for its community of small business owners and decision-makers, eventually
providing vertical auctions, chat rooms, bulletin boards, and inter-member
e-mail as the community grows.
THE MARKETPLACE
Mucho's market is businesses in the United States with 5 to 500 employees.
Mucho's target audience is the business owner and the managers and staff that
research, recommend and/or make the purchase decisions for the products and
services Mucho offers. This audience is Mucho's "community." Mucho hopes to
aggregate high-quality tools, information, products and services to make its
Internet website the single source for its community's business solutions.
The small business market is highly fragmented and expanding rapidly. There
are currently more than 23 million small businesses in the United States,
according to the Small Business Administration. Many of these small businesses
are beginning to utilize the Internet. Cahners In-Stat Group reports by the end
of 2000, 43 million small business employees will be able to log on to the
Internet with projected growth to 59 million by 2003. The rapid expansion of
small businesses and the ability of the Internet to unite this highly fragmented
market segment represent a potentially huge market opportunity for
business-to-business e-commerce. Forrester Research estimates
business-to-business revenues will grow to $2.3 trillion by 2003 while the
International Data Corporation estimates that small business online spending is
currently growing 100 percent or more per year.
Mucho currently features approximately 100 national product and service
providers in 66 categories organized within the following Mucho departments:
Management, Administration, Human Resources, Finance, Retirement, Insurance,
Sales, Marketing, Shipping, Information Technology, Communications and Retail
Sales.
Mucho's service vendor partners range from organizations like Outward
Bound, which focuses on improving employee teamwork, to AT&T, which delivers
long distance calling plans to businesses. On the product side, Mucho provides a
marketplace where a small business operator can purchase a wide variety of
products, from an IBM computer to high quality office furniture.
MUCHO RELATED PARTY TRANSACTIONS
The law firm of Strauss Nickerson, LLP, of which Jay R. Strauss and S.
Cash Nickerson were partners, received $120,000 in legal and consulting fees
from TEAM America in 1999. The firm was dissolved effective July 1, 1999.
68
<PAGE> 69
COMPARISON OF RIGHTS BETWEEN MUCHO AND TEAM AMERICA
The following summary compares certain rights of the holders of TEAM
America common stock to the rights of the holders of Mucho common stock. The
rights of holders of Mucho common stock are currently principally governed by
Nevada law, the articles of incorporation of Mucho and the bylaws of Mucho. Upon
completion of the merger, the Mucho shareholders will become shareholders of
TEAM Mucho common stock and their rights will be principally governed by Ohio
law, the TEAM Mucho articles of incorporation, which are attached as Appendix E,
and the code of regulations of TEAM Mucho, which are attached as Appendix F.
TEAM Mucho's articles of incorporation and code of regulations will be
substantially the same as TEAM America's current documents, except as noted
below.
The statements in this section regarding TEAM America's articles of
incorporation and code of regulations, and Mucho's articles of incorporation and
bylaws are brief summaries. This summary is not a complete statement of all
differences between the rights of the holders of TEAM America common stock and
Mucho common stock and is qualified by the full text of each document and Ohio
and Nevada law. For more information on how you can obtain copies of the
complete documents, see "Where You Can Find More Information."
Authorized Capital
TEAM America's authorized capital currently consists of 9 million shares
of common stock, no par value, and 1 million shares of preferred stock, no par
value. The preferred stock is designated as 500,000 Class A Voting Preferred
Shares and 500,000 Class B Nonvoting Preferred Shares. If the TEAM America
shareholders approve the amendment of TEAM America's articles of incorporation,
the number of authorized shares of TEAM America common stock will be increased
to 50,000,000. As of July 7, 2000, there were 4,341,999 shares of TEAM America
common stock issued and outstanding and no shares of TEAM America preferred
stock issued and outstanding.
Mucho's authorized capital currents consists of 100,000,000 shares of
common stock, $.001 par value. As of July 31, 2000, 36,624,860 shares of Mucho
common stock were issued and outstanding.
Directors
TEAM America's code of regulations provide that the number of directors
which constitute the whole board of directors will not be fewer than three or
more than fifteen, as fixed by a vote of 75% of the shares entitled to vote at
any annual meeting or special meeting called for the purpose of electing
directors or by resolution adopted by affirmative vote of a majority of the
directors then in office. If the number of directors is six or more but less
than nine, the directors are to be classified into two classes. If the number of
directors is nine or more, the directors are to be classified into three
classes. Each director holds office for the term for which he or she is elected
and qualified or until his or her earlier death, resignation, disqualification,
or removal. The TEAM America board of directors is currently fixed at eight
directors. There are expected to be three vacancies on the board after TEAM
America's annual meeting of shareholders on August 18, 2000.
TEAM America's code of regulations provide that shareholder nominations for
election as directors must 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 timely. To be timely, the
shareholder's notice must be delivered to or mailed and received by the
Secretary of TEAM America not less than 60 or more than 90 days prior to TEAM
America's annual meeting; provided, however, that in the event that less than 75
days notice or prior public disclosure of the date of the meeting is given or
made to shareholders, notice by the shareholder must be 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 to be timely. A shareholder's notice of director nominations must contain
information required by the code of regulations and must be accompanied by the
written consent of each proposed nominee to serve as a director of TEAM America,
if elected.
Mucho's bylaws provide that the number of directors which shall constitute
the whole board of directors may be fixed from time to time by the affirmative
vote of a majority of the directors and shall not have less than one or more
than fifteen directors. The Mucho board of directors is currently fixed at five.
Removal
69
<PAGE> 70
TEAM America directors may be removed by the affirmative vote of the
holders of 75% of the shares then entitled to vote for the election of
directors, but only for cause. Cause will exist if a director is adjudged
incompetent, has been convicted of a felony or is found liable for negligence or
misconduct in the performance of his or her duty to TEAM America in a matter of
substantial importance to TEAM America.
Mucho directors may be removed by the vote or written statement of holders
of two-thirds of the outstanding shares of Mucho.
Notices
TEAM America shareholders are entitled to receive written notice of every
annual and special meeting at least seven days before the meeting. The notice is
to contain the time, place and purpose of the meeting.
Mucho shareholders are entitled to receive written notice of meetings not
less than ten nor more than sixty days before the meeting. The notice is to
contain the time, place and purpose of the meeting.
Anti-takeover Provisions
TEAM America's code of regulations state that if, as of the record date for
the determination of the shareholders entitled to vote on the matter, a person
owns or controls, directly or indirectly, 20% or more of the outstanding shares
entitled to vote, then an affirmative vote of the holders of 75% of the
outstanding shares will be required to approve some fundamental corporate
transactions, including a merger, that have not been previously approved by the
TEAM America board of directors.
Indemnification of Officers and Directors
TEAM America's code of regulations state that TEAM America shall indemnify
any director or officer or any former director or officer of TEAM America or any
person who is or has served at the request of TEAM America as a director,
officer, trustee, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him in connection with any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
other than an action by or in the right of TEAM America, to which he was, is or
is threatened to be made a party by reason of the fact that he is or was such
director, officer, trustee, employee or agent, provided it is determined that he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of TEAM America and that, with respect to any
criminal action or proceeding, he had no reasonable cause to believe his conduct
was unlawful.
The determination of good faith shall be made (i) by a majority vote of a
quorum consisting of directors of TEAM America who were not and are not parties
to or threatened with any such action, suit or proceeding, (ii) if such a quorum
is not obtainable or if a majority vote of a quorum of disinterested directors
so directs, in a written opinion by independent legal counsel other than an
attorney or a firm having associated with it an attorney who has been retained
by or who has performed services for TEAM America or any person to be
indemnified within the past five years, (iii) by the shareholders or (iv) by the
court of common pleas or the court in which such action, suit or proceeding was
brought.
Mucho's bylaws state that every person who was or is a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or a person for whom he is the legal representative is or
was a director or officer of Mucho is or was serving at the request of Mucho or
for its benefit as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissible under
the general corporation law of the State of Nevada against all expenses,
liability and loss (including attorney's fees, judgments, fines and amounts paid
or to be paid in settlement) reasonably incurred or suffered by him in
connection therewith.
Amendments
TEAM America's code of regulations state that the code of regulations may
be altered, changed or amended in any respect or superseded by a new code of
regulations in whole or in part, by the affirmative vote of the holders of
record of shares entitling them to exercise a majority of voting power of TEAM
America at an annual or special meeting called for such purpose, or without a
meeting by the written consent of the holders of record of shares entitling them
to exercise two-thirds of
70
<PAGE> 71
the voting power. Some provisions may not be altered, changed or amended in any
respect or superseded by a new code of regulations in whole or in part except by
the affirmative vote of shareholders holding 75% or more of the outstanding
shares entitled to vote if such alteration, change or amendment is not approved
by at least three-fourths of the directors. In addition, specific provisions of
the articles of incorporation may not be altered, amended, superseded or
replaced unless the action is approved by the affirmative vote of at least 75%
of the shares entitled to vote for the election of directors.
The Mucho bylaws state that the bylaws may be amended by a majority vote of
all the stock issued and outstanding and entitled to vote for the election of
directors of Mucho, provided notice of the intention to amend the bylaws shall
have been contained in the notice of the meeting. In addition, the board of
directors by a majority vote of the whole board at any meeting may amend the
bylaws, including bylaws adopted by the shareholders, but the shareholders may
from time to time specify particular provisions of the bylaws which shall not be
amended by the board of directors.
71
<PAGE> 72
EXPERTS
The consolidated financial statements and schedules of TEAM America
incorporated by reference in this proxy statement/information
statement/prospectus have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
The consolidated financial statements of Mucho included in this proxy
statement/information statement/prospectus have been audited by Stonefield
Josephson, Inc., independent public accountants, as indicated in their report
with respect thereto, and are included in this proxy statement/information
statement/prospectus in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.
LEGAL MATTERS
TEAM America has engaged Porter, Wright, Morris & Arthur LLP to assist TEAM
America with legal matters concerning the merger. Partners of Porter, Wright,
Morris & Arthur LLP who participated in the preparation of this proxy
statement/information statement/prospectus beneficially own no shares of TEAM
America common stock.
Mucho has engaged Jenner & Block to assist Mucho with legal matters
concerning the merger. As of June 30, 2000, Messrs. Craig R. Culbertson and
Theodore R. Tetzlaff, partners of Jenner & Block, own 55,983 and 133,333 shares
of Mucho common stock, respectively. In addition, Jenner & Block owns 225,000
shares of Mucho common stock.
72
<PAGE> 73
INDEPENDENT AUDITORS' REPORT
Board of Directors
Mucho.Com, Inc.
Lafayette, California
We have audited the accompanying balance sheet of Mucho.Com, Inc., (a
development stage enterprise) as of December 31, 1999, and the related
statements of operations, stockholders' deficit and cash flows for the period
from inception of operations on July 8, 1999 to December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mucho.Com, Inc. as of December
31, 1999, and the results of its operations and its cash flows for the period
from inception of operations on July 8, 1999 to December 31, 1999 in conformity
with generally accepted accounting principles.
/s/ Stonefield Josephson, Inc.
STONEFIELD JOSEPHSON, INC.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
July 26, 2000
F-1
<PAGE> 74
Mucho.com, Inc.
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
March 31,2000 December 31,
ASSETS (unaudited) 1999
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,121,193 $ 74,301
Short-term investment - restricted 50,163 --
Other receivables 30,565 2,000
----------- -----------
Total current assets 1,201,921 76,301
PROPERTY AND EQUIPMENT, net 660,620 207,188
OTHER ASSET 9,000 9,500
----------- -----------
Total assets $ 1,871,541 $ 292,989
=========== ===========
LIABILITIES AND STOCKHOLDERS'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 658,163 $ 338,166
Accrued liabilities 237,845 103,337
Loans payable to stockholders -- 561,108
Capital lease obligations - current portion 41,900 32,111
----------- -----------
Total current liabilities 937,908 1,034,722
Capital lease obligations, less current portion 71,891 61,824
----------- -----------
Total liabilities 1,009,799 1,096,546
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, 100,000,000 shares authorized,
34,570,675 $.001 par value shares
and 24,375,000 no par value shares issued and
and outstanding at March 31, 2000 and
December 31, 1999, respectively 34,571 450,938
Additional paid-in capital 4,508,513 --
Subscription receivable (150,000) --
Deficit accumulated during development stage (3,531,342) (1,254,495)
----------- -----------
Total stockholders' equity (deficit) 861,742 (803,557)
----------- -----------
$ 1,871,541 $ 292,989
=========== ===========
</TABLE>
See accompanying independent auditors' report and notes to financial statements.
F-2
<PAGE> 75
MUCHO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months Period Period
ended from inception from inception
March 31,2000 (July 8,1999) to (July 8,1999) to
(unaudited) December 31,1999 March 31,2000 *
<S> <C> <C> <C>
Increase (decrease) in cash and cash equivalent
Cash flows provided by (used for) operating activities:
Net (loss) $(2,276,847) $(1,254,495) $(3,531,342)
Adjustments to reconcile net loss
to net cash used in
operating activities:
Depreciation and amortization 135,909 20,115 156,024
Interest expense on issuance of warrants 126,563 60,938 187,501
Issuance of common stock for services 530,231 -- 530,231
Compensation expense on grant of stock options 74,813 -- 74,813
Changes in assets and liabilities:
Other receivables (28,565) (2,000) (30,565)
Accounts payable 319,997 338,166 658,163
Accrued liabilities 134,508 103,337 237,845
----------- ----------- -----------
Net cash used for operating activities (983,391) (733,939) (1,717,330)
Cash flows provided by (used for) investing activities:
Purchase of property and equipment (559,095) (124,619) (683,714)
Change in other asset -- (10,000) (10,000)
Short-term investment - restricted (50,163) -- (50,163)
----------- ----------- -----------
Net cash used for investing activities (609,258) (134,619) (743,877)
Cash flow provided by (used for) financing activities:
Proceeds from issuance of common stock 3,210,539 390,000 3,600,539
Proceeds from loans payable to stockholders (561,108) 561,108 --
Payment on capital lease obligations (9,890) (8,249) (18,139)
----------- ----------- -----------
Net cash provided by financing activities 2,639,541 942,859 3,582,400
Net increase in cash 1,046,892 74,301 1,121,193
Cash at beginning of period 74,301 -- --
----------- ----------- -----------
Cash at end of period $ 1,121,193 $ 74,301 $ 1,121,193
=========== =========== ===========
Supplemental schedule of noncash investing and financing activities:
Assets acquired under capital leases $ 29,746 $ 102,183 $ 131,929
=========== =========== ===========
Shares issued for services $ 530,231 $ -- $ 530,231
=========== =========== ===========
Interest expense on issuance of warrants $ 126,563 $ 60,938 $ 187,501
=========== =========== ===========
Compensation expense on grant of stock options $ 74,813 $ -- $ 74,813
=========== =========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 30,162 $ -- $ 30,162
=========== =========== ===========
Income tax paid $ 800 $ -- $ 800
=========== =========== ===========
</TABLE>
*Audited from inception (July 8, 1999) to December 31, 1999 and unaudited from
January 1, 2000 to March 31, 2000
See accompanying independent auditors' report and notes to financial statements.
F-3
<PAGE> 76
MUCHO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Deficit
accumulated Total
Common stock Additional during stockholders'
paid-in Subscription development equity
Shares Amount capital receivable stage (deficit)
<S> <C> <C> <C> <C> <C> <C>
Balance at July 8, 1999 (inception) -- $ -- $ -- $ -- $ --
Issuance of common stock 24,375,000 390,000 390,000
Issuance of warrants 60,938 60,938
Net (loss) for the period $(1,254,495) (1,254,495)
-----------------------------------------------------------------------------------
Balance at December 31, 1999 24,375,000 450,938 -- -- (1,254,495) (803,557)
Issuance of common stock for private
placement 8,495,097 3,210,539 3,210,539
Issuance of common stock for services 1,700,578 680,231 680,231
Subscription receivable (150,000) (150,000)
Issuance of warrants 126,563 126,563
Grant of non-qualified stock options 74,813 74,813
Par value of $.001 per share declared (4,307,137) 4,307,137 --
Net (loss) for the period (2,276,847) (2,276,847)
-----------------------------------------------------------------------------------
Balance at March 31, 2000 (unaudited) 34,570,675 $ 34,571 $4,508,513 $(150,000) $(3,531,342) $ 861,742
===================================================================================
</TABLE>
See accompanying independent auditors' report and notes to financial statements.
F-4
<PAGE> 77
MUCHO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended Period from inception Period from inception
March 31,2000 (July 8, 1999) to (July 8, 1999) to
(unaudited) December 31, 1999 March 31, 2000*
----------- ----------------- ---------------
<S> <C> <C> <C>
Revenue $ -- $ -- $ --
Operating expenses:
Personnel $ 1,501,753 $ 882,902 $ 2,384,655
Selling, general and administrative 638,286 291,048 929,334
----------------------------------------------------------
Total operating expenses 2,140,039 1,173,950 3,313,989
==========================================================
Loss from operations 2,140,039 1,173,950 3,313,989
==========================================================
Other (income) expenses:
Interest (income) (1,793) -- (1,793)
Interest expense 138,601 80,545 219,146
----------------------------------------------------------
Total other expenses 136,808 80,545 217,353
==========================================================
NET (LOSS) $ (2,276,847) $ (1,254,495) $ (3,531,342)
==========================================================
Net (loss) per share
Basic and diluted $ (0.08) $ (0.05) $ (0.14)
Weighted average shares outstanding
Basic and diluted 28,369,200 23,495,000 25,147,664
</TABLE>
*Audited from inception (July 8, 1999) to December 31,1999, and unaudited from
January 1, 2000 to March 31, 2000.
See accompanying independent auditors' report and notes to financial statements.
F-5
<PAGE> 78
MUCHO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND MARCH 31, 2000 (UNAUDITED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Mucho.com, Inc., a development stage company, (the "Company") originally
incorporated as Muchocode.com, Inc., was incorporated on July 8, 1999 in the
State of Nevada. In September 1999, the Company changed its name to Mucho.com,
Inc. The Company is an online business center offering products and services for
small and growing companies. The Company's customers are being acquired by a
marketing campaign directed at and partnerships with national professional and
business associations with large memberships. The Company offers its customers
multiple vendors in each of its sixty-six product and service categories, with
each vendor being a leader in its market category. Through the Company's
website, customers can order products and services most commonly used by small
businesses as well as have access to research and other resources and advice.
A summary of significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:
Use of estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, as
well as revenues and expenses during the period. Actual results could differ
from those estimates.
Cash and cash equivalents
For purposes of the statement of cash flow, cash equivalents include all highly
liquid debt instruments with original maturities of three months or less which
are not securing any corporate obligations.
Property and Equipment
Depreciation and amortization are provided for in amounts sufficient to relate
the cost of depreciable assets to operations over their estimated service lives.
The straight-line method of depreciation is followed for substantially all
property and equipment. Estimated service life for equipment, capital leases,
furniture and fixtures is 3 years. Leasehold improvements are amortized over the
lesser of the term of the related lease or the estimated useful life of the
improvement.
F-6
<PAGE> 79
MUCHO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND MARCH 31, 2000 (UNAUDITED)
Income Taxes
Income taxes are accounted for using the asset and liability approach for
financial reporting. The Company recognized deferred tax liabilities and assets
for the expected future tax consequences of temporary differences between the
financial statement carrying amount and the tax basis of assets and liabilities.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized.
Stock-based compensation and awards
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation ("SFAS 123") for all
stock-based compensation to employees and directors. Under the provisions of
this standard employee and director stock-based compensation expense is measured
using either the intrinsic-value method as prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), or
the fair value method described in SFAS 123. Companies choosing the
intrinsic-value method are required to disclose the proforma impact of the fair
value method on net income. The Company has elected to account for stock-based
compensation and awards under the provisions of APB 25. Under APB 25,
compensation cost for stock options is measured as the excess, if any, of the
fair value of the underlying common stock on the date of grant over the exercise
price of the option. The company is required to implement the provisions of SFAS
123 for stock-based awards to those other than employees and directors.
Stock-based compensation and award expense for all equity instruments is
recognized on an accelerated basis based on the related vesting periods.
Comprehensive Income
The company's comprehensive income consisted of a net loss from operations.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consists principally of cash investments. At times cash balances
held at financial institutions were in excess of federally insured limits. The
company's cash investment policies limit investments to short-term, low risk
instruments.
Fair Value of Financial Instruments
The Company's financial instruments principally consist of cash, short-term
investments, other receivables, accounts payable, loans payable to stockholders
and capital lease obligations as
F-7
<PAGE> 80
MUCHO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND MARCH 31, 2000 (UNAUDITED)
defined by Statement of Financial Accounting Standards No. 107, "Disclosures
About Fair Value of Financial Instruments." The carrying value of cash,
short-term investments, other receivables, accounts payable and loans payable to
stockholders approximate their fair value due to the short-term nature of these
instruments. The carrying value of the capital lease obligations approximates
its fair market value based on current market rates for such debt.
Net Loss Per Common Share
Company has adopted Statement of Financial Accounting Standard No. 128,
Earnings Per Share ("SFAS No. 128"), which is effective for annual and
interim financial statements issued for periods ending after December 15,
1997. SFAS No. 128 was issued to simplify the standards for calculating
earnings per share ("EPS") previously in APB No. 15, Earnings per Share.
SFAS No. 128 replaces the presentation of basic primary EPS with a
presentation of basic EPS. The new rules also require dual presentation of
basic and diluted EPS on the face of the statement of operations.
For the three months ended March 31, 2000 and the period from inception (July 8,
1999) to December 31, 1999 and for the period from inception (July 8, 1999) to
March 31, 2000, the per share data is based on the weighted average number of
common and common equivalent shares outstanding, and are calculated in
accordance with Staff Accounting Bulletin of the Securities and Exchange
Commission (SAB) No. 98 whereby common stock, options or warrants to purchase
common stock or other potentially dilutive instruments issued for nominal
consideration must be reflected in basic and dilutive per share calculations for
all periods in a manner similar to a stock split, even if anti-dilutive.
Accordingly, in computing basic earnings per share, nominal issuances of common
stock are reflected in a manner similar to a stock split or dividend. In
computing diluted earnings per share, nominal issuances of common stock and
potential common stock are reflected in a manner similar to a stock split or
dividend.
Interim Financial Statements (Unaudited)
The accompanying unaudited financial statements for the interim period ended
March 31, 2000 have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Regulation SX. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000.
F-8
<PAGE> 81
MUCHO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND MARCH 31, 2000 (UNAUDITED)
Product Development Costs
Product development costs include expenses incurred by the Company to maintain,
monitor and manage the Company's website. The Company expenses all costs
incurred that relate to the planning and post implementation phases of
development. Costs incurred in the development phase are capitalized and
recognized over the product's estimated useful life if the product is expected
to have a useful life beyond one year. As of December 31, 1999, and March 31,
2000, no costs have been capitalized.
Advertising
The Company expenses advertising costs as incurred. Advertising expense for the
period ended December 31, 1999 and March 31, 2000 was $3,739 and $ 6,811,
respectively.
NOTE B - CONTINUING OPERATIONS
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. The Company financed its 1999 operations through
issuance of common stock and borrowings and has continued to issue common stock
to finance its year 2000 operations. From January 1, 2000 through July 26, 2000,
the Company raised approximately $5.5 million. The Company continues to consider
equity alternatives to raise the funds required to continue operations in the
future. The Company's continued existence is ultimately dependent upon its
ability to raise additional equity or debt financing, the success of future
operations and/or the successful completion of the merger discussed in Note K.
NOTE B - SHORT-TERM INVESTMENTS
The Company's short-term investment consists of a time deposit pledged as
collateral for a stand-by letter of credit issued to guarantee the Company's
performance under the terms of its capital equipment lease.
F-9
<PAGE> 82
MUCHO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND MARCH 31, 2000 (UNAUDITED)
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(unaudited)
-------- --------
<S> <C> <C>
Capital leases $131,929 $102,183
Computer equipment 145,715 46,933
Software 484,953 35,425
Furniture and fixtures 45,365 34,580
Leasehold improvements 7,682 7,682
-------- --------
815,644 226,803
Less accumulated depreciation
and amortization 155,024 19,615
-------- --------
$660,620 $207,188
======== ========
</TABLE>
Depreciation and amortization expense for the three months ended March 31, 2000
and for the period from inception (July 8, 1999) to December 31, 1999, amounts
to $135,909 and $20,115, respectively.
NOTE D - LOANS PAYABLE TO STOCKHOLDERS AND WARRANTS
Two stockholders' made loans to the Company, both of which accrue interest at 9%
per year. A $500,000 loan is due on December 31, 1999 and the other loan is due
on demand. In connection with the $500,000 loan, warrants were issued to acquire
up to 468,750 shares of common stock at no cost. At December 31, 1999, the
Company recorded interest expense of $60,938 related to the issuance of this
warrant. In March 2000, the Company paid cash of $276,541, issued 1,093,750
shares of common stock, and recorded additional interest expense of $126, 563 in
exchange for the $500,000 note and warrants.
The demand loan was repaid in March 2000. As additional consideration for the
loan the Company issued warrants to acquire up to 150,236 shares of common stock
at $.40 per share. The warrants are exercisable within a ten-year period.
F-10
<PAGE> 83
MUCHO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND MARCH 31, 2000 (UNAUDITED)
NOTE E - COMMITMENTS AND CONTINGENCIES
Commitments
The Company leased office space under a short-term operating lease. The lease
was non-cancelable and expired in June 2000. In June 2000, the Company leased
new office space for $14,250 a month. The lease will expire on December 31,
2001.
Rent expense was $16,237 for the period from inception (July 8, 1999) to
December 31, 1999, and $1,815 for the three months ended March 31, 2000.
The Company also has certain equipment under capital leases. The cost of assets
acquired under capital leases was $102,183 and $131,929 at December 31, 1999 and
March 31, 2000, respectively. Accumulated depreciation on these assets was
$8,248 and $ 13,117 at December 31, 1999 and March 31, 2000, respectfully.
Future minimum commitments under capital leases are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(Unaudited)
-------- --------
<S> <C> <C>
2000 $ 39,930 $ 41,431
2001 52,036 40,229
2002 40,265 28,457
2003 2,332 --
-------- --------
Total minimum lease payment 134,563 110,117
Less: amount representing
interest 20,772 16,182
-------- --------
$113,791 $ 93,935
======== ========
</TABLE>
Future minimum commitments under non-cancelable operating leases as of
December 31, 1999 are $3,630 and as of March 31, 2000 are $1,815.
Contingencies
The Company is involved in litigation and other legal matters which have arisen
in the normal course of business. Although the ultimate outcome of these matters
is not currently determinable, management does not expect that they will have a
material adverse effect on the Company's financial position, results of
operations or cash flows.
F-11
<PAGE> 84
MUCHO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND MARCH 31, 2000 (UNAUDITED)
NOTE F: INCOME TAXES
No provision for income taxes for the period ended December 31, 1999 and March
31, 2000, has been provided for, other than State minimum tax, due to an
operating loss in both periods.
At December 31, 1999 and March 31, 2000, deferred tax assets approximated
$473,000 and $1,412,500, respectively, consisted primarily of a net operating
loss carryforward. All such assets are fully reserved due to the uncertainty of
their future utilization.
At December 31, 1999, federal and state net operating loss carryforwards total
approximately $1.2 million. Federal loss carryforwards expire in 2019 and
California loss carryforwards expire in 2007.
NOTE G: COMMON STOCK
At December 31, 1999, there were 25,000 shares of common shares authorized for
issuance. On February 1, 2000, the Company's Board of Directors authorized an
immediate 2,500 for 1 stock split, increased the authorized shares to
100,000,000, and declared that each share shall have a par value of $.001. The
accompanying financial statements reflected a retroactive adjustment for this
stock split.
NOTE H: STOCK OPTIONS
In January 2000, the Company's Board of Directors adopted the "Mucho.com, Inc.
2000 Stock Option Plan" (the "ISOP"). The ISOP provides for the granting, at the
discretion of the Board of Directors or a Committee ("Committee") selected by
the Board of Directors of: (a) options that are intended to qualify as incentive
stock options, within the meaning of Section 422 of the Internal Revenue Code of
1986 (the "Code"), as amended, to employees and (b) options not intended to so
qualify to employees, officers, consultants and directors. The total number of
shares of common stock for which options may be granted under the ISOP is
2,000,000. At March 31, 2000, 1,786,250 shares remain available for future
grants.
The exercise price of all stock options granted under the ISOP is determined by
the Board of Directors or the Committee at the time of grant. The maximum term
of each option granted under the ISOP is 10 years from the date of grant.
Options shall become exercisable at such times and in such installments as the
Board of Directors or Committee shall provide in the terms of each individual
option.
The exercise price of all of the options under the ISOP will generally be
determined based upon the fair market value of the
F-12
<PAGE> 85
MUCHO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND MARCH 31, 2000 (UNAUDITED)
Company's common stock on the date of grant. Generally, the options vest equally
over a period of four years and expire five to ten years from the date of grant.
For the three months ended March 31, 2000, options were granted under the ISOP
to purchase a total of 213,750 shares at $0.05 per share. At the time those
options were granted the fair market value of the Company's stock was $.40 per
share, and accordingly the Company has recorded compensation expense of $74,813
in the quarter ended March 31, 2000. Proforma information regarding net income
and earnings per share as if the Company had accounted for its employee stock
options under the fair value method of such pronouncements has not been
presented as the amounts are not materially different.
At March 31, 2000, the weighted average remaining contractual life of the
options outstanding, under the ISOP, was approximately 5 years. No options were
exercised, forfeited or expired during the three months ended March 31, 2000. At
that date all options remained outstanding and none of the outstanding options
were exercisable.
NOTE J - RELATED PARTIES
Certain officers and members of the Board of Directors of the Company are
stockholders or principals of firms from which Mucho.com contracted for legal
services and the co-employment of essentially all the staff of the Company
during 1999 and the three months ended March 31, 2000. During the period from
inception, July 9, 1999, through December 31, 1999 and three months ended March
31,2000, charges for legal services and staff leasing to such related firms
totaled $676,175 and $761,705, respectfully. At December 31, 1999, and March 31,
2000, the Company has accounts payable totaling $194,880 and $98,186,
respectfully, owing to these related companies.
NOTE K - SUBSEQUENT EVENT
On June 19, 2000, the Company entered into a Definitive Agreement and Plan of
Merger with TEAM America Corporation ("TEAM America"), a Professional Employer
Organization (PEO). In connection with the merger, TEAM America will issue
approximately 5.9 million shares of its common stock in exchange for all of the
Company's common stock, warrants and options, of which approximately 2 million
shares will be held in escrow contingent upon the Company meeting certain equity
financing and revenues before December 31, 2001. TEAM America stockholders who
choose to opt out of their holdings will receive $6.75 per share in cash through
a self-tender offer for up to 50% of TEAM American's outstanding common stock.
The merger will be subject to certain
F-13
<PAGE> 86
MUCHO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND MARCH 31, 2000 (UNAUDITED)
conditions, including regulatory and stockholder approvals of both companies.
Upon consummation of the merger, TEAM America will change its name to TEAM
Mucho, Inc.
F-14
<PAGE> 87
<PAGE> 88
<PAGE> 89
<PAGE> 90
Appendix A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
TEAM AMERICA CORPORATION
TEAM MERGER CORPORATION
AND
MUCHO.COM, INC.
June 16, 2000
App. A-1
<PAGE> 91
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
ARTICLE I DEFINITIONS ................................................................................ 1
Section 1.1 Certain Definitions............................................................. 1
Section 1.2 Terms Generally................................................................. 7
ARTICLE II THE MERGER AND RELATED TRANSACTIONS............................................................... 7
Section 2.1 The Merger...................................................................... 7
Section 2.2 Conversion of Mucho Common Stock................................................ 8
Section 2.3 Conversion of Merger Sub Common Stock........................................... 9
Section 2.4 Exchange of Certificates........................................................ 9
Section 2.5 Dissenting Shares............................................................... 11
Section 2.6 Stock Options and Warrants...................................................... 11
Section 2.7 Escrow Shares................................................................... 12
Section 2.8 The Closing..................................................................... 13
ARTICLE III TEAM TENDER OFFER ................................................................................ 13
Section 3.1 TEAM Tender Offer............................................................... 13
ARTICLE IV PROXY MATERIALS ................................................................................ 15
ARTICLE V REPRESENTATIONS AND WARRANTIES OF TEAM............................................................ 15
Section 5.1 Corporate Existence and Power................................................... 15
Section 5.2 Corporate Authorization......................................................... 15
Section 5.3 Governmental Authorization...................................................... 16
Section 5.4 Non-Contravention............................................................... 16
Section 5.5 Capitalization.................................................................. 16
Section 5.6 Reports and Financial Statements................................................ 17
Section 5.7 Disclosure Documents............................................................ 17
Section 5.8 Absence of Certain Changes or Events............................................ 18
Section 5.9 No Undisclosed Material Liabilities............................................. 21
Section 5.10 Litigation...................................................................... 21
Section 5.11 Taxes........................................................................... 21
Section 5.12 ERISA........................................................................... 23
Section 5.13 Labor Matters................................................................... 24
Section 5.14 Compliance with Laws and Court Orders........................................... 24
Section 5.15 Finders' Fees................................................................... 24
Section 5.16 Environmental Matters........................................................... 25
Section 5.17 Subsidiaries.................................................................... 26
Section 5.18 Insurance....................................................................... 26
Section 5.19 Certain Business Practices...................................................... 26
</TABLE>
App. A-2
<PAGE> 92
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
Section 5.20 Customers....................................................................... 26
Section 5.21 Contracts....................................................................... 27
Section 5.22 Disclosure...................................................................... 28
Section 5.23 Intellectual Property........................................................... 28
Section 5.24 Related Party Transactions...................................................... 29
Section 5.25 Assets.......................................................................... 29
Section 5.26 Ohio Corporate Law Section 1704.02.............................................. 30
ARTICLE V-A REPRESENTATIONS AND WARRANTIES OF MERGER SUB...................................................... 30
Section 5.1A Corporate Existence and Power................................................... 30
Section 5.2A Corporate Authorization......................................................... 30
Section 5.3A Governmental Authorization...................................................... 30
Section 5.4A Non-Contravention............................................................... 31
Section 5.5A Litigation...................................................................... 31
Section 5.6A Capitalization.................................................................. 31
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF MUCHO........................................................... 31
Section 6.1 Corporate Existence and Power................................................... 31
Section 6.2 Corporate Authorization......................................................... 32
Section 6.3 Governmental Authorization...................................................... 32
Section 6.4 Non-Contravention............................................................... 32
Section 6.5 Capitalization.................................................................. 33
Section 6.6 Disclosure Documents............................................................ 33
Section 6.7 Absence of Certain Changes or Events............................................ 34
Section 6.8 No Undisclosed Material Liabilities............................................. 36
Section 6.9 Litigation...................................................................... 36
Section 6.10 Taxes........................................................................... 36
Section 6.11 ERISA........................................................................... 37
Section 6.12 Labor Matters................................................................... 37
Section 6.13 Compliance with Laws and Court Orders........................................... 38
Section 6.14 Finders' Fees................................................................... 38
Section 6.15 Environmental Matters........................................................... 38
Section 6.16 Subsidiaries.................................................................... 39
Section 6.17 Insurance....................................................................... 39
Section 6.18 Certain Business Practices...................................................... 39
Section 6.19 Contracts....................................................................... 40
Section 6.20 Disclosure...................................................................... 41
Section 6.21 Intellectual Property........................................................... 41
Section 6.22 Related Party Transactions...................................................... 42
Section 6.23 Assets.......................................................................... 42
Section 6.24 Financial Statements............................................................ 42
Section 6.25 Stock Options .................................................................. 43
Section 6.26 Nevada Corporate Law............................................................ 43
</TABLE>
App. A-3
<PAGE> 93
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
Section 6.27 Offering Memorandum............................................................. 43
ARTICLE VII COVENANTS OF TEAM ........................................................................... 43
Section 7.1 Conduct of TEAM and its Subsidiaries............................................ 43
Section 7.2 Shareholder Meeting; Proxy Material; Tender Offer............................... 46
Section 7.3 Access to Information; Right of Inspection...................................... 46
Section 7.4 Other Potential Acquirers....................................................... 46
Section 7.5 Shareholder Agreements.......................................................... 47
Section 7.6 Termination of Voting Agreement................................................. 48
ARTICLE VIII CONDITIONS OF MUCHO............................................................................... 48
Section 8.1 Conduct of Mucho................................................................ 48
Section 8.2 Shareholder Meeting; Proxy Material............................................. 50
Section 8.3 Access to Information; Right of Inspection...................................... 50
Section 8.4 Mucho Superior Proposal......................................................... 50
Section 8.5 Shareholder Agreements.......................................................... 51
Section 8.6 Financing Commitment............................................................ 51
ARTICLE IX COVENANTS OF TEAM, MERGER SUB AND MUCHO........................................................... 51
Section 9.1 Reasonable Best Effort.......................................................... 51
Section 9.2 Certain Filings................................................................. 51
Section 9.3 Public Announcements............................................................ 52
Section 9.4 Notices of Certain Events....................................................... 53
Section 9.5 Compliance with the Securities and Exchange Act................................. 53
ARTICLE X CONDITIONS TO THE MERGERS......................................................................... 54
Section 10.1 Conditions to TEAM's and Merger Sub's Obligations to Effect
the Merger...................................................................... 54
Section 10.2 Conditions to Mucho's and Obligations to Effect the Merger...................... 55
ARTICLE XI TERMINATION ................................................................................ 57
Section 11.1 Termination..................................................................... 57
Section 11.2 Termination Fee................................................................. 58
Section 11.3 Effect of Termination........................................................... 59
ARTICLE XII MISCELLANEOUS ................................................................................ 59
Section 12.1 Notices......................................................................... 59
Section 12.2 Survival of Representations and Warranties...................................... 60
Section 12.3 Amendments; No Waivers.......................................................... 60
Section 12.4 Expenses........................................................................ 60
Section 12.5 Transfer Taxes.................................................................. 61
Section 12.6 Successors and Assigns.......................................................... 61
Section 12.7 Governing Law................................................................... 61
</TABLE>
App. A-4
<PAGE> 94
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
Section 12.8 Counterparts; Effectiveness..................................................... 61
Section 12.9 Severability.................................................................... 61
Section 12.10 Costello Employment Agreement................................................... 61
Section 12.11 Remedies........................................................................ 61
Section 12.12 Specific Performance............................................................ 62
Section 12.13 Entire Agreement; No Third-Party Beneficiaries.................................. 62
EXHIBITS
Exhibit 2.1(d) Form of Certificate of Incorporation of Surviving Corporation
Exhibit 2.1(e) Form of By-Laws of Surviving Corporation
Exhibit 2.1(g) Form of Amended and Restated Certificate of Incorporation for TEAM
Exhibit 2.1(h) Form of Amended and Restated Code of Regulations of TEAM
Exhibit 2.7(a) List of Mucho Stockholders for Escrow Agreement
Exhibit 7.5 List of TEAM Stockholders Executing Shareholder Agreements
Exhibit 8.5 List of Mucho Stockholders Executing Shareholder Agreements
Exhibit 10.1(i) Form of Opinion of Mucho's Counsel
Exhibit 10.2(i) Form of Opinion of TEAM's Counsel
</TABLE>
App. A-5
<PAGE> 95
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of
June 16, 2000 by and among TEAM America Corporation, an Ohio corporation
("TEAM"), Team Merger Corporation, a Nevada corporation ("Merger Sub"), and
Mucho.com, Inc., a Nevada corporation ("Mucho") (individually, each is a
"Party", and collectively, the "Parties").
RECITALS
WHEREAS, the Parties desire to enter into a merger transaction pursuant
to which Merger Sub will merge with and into Mucho, and Mucho will become a
wholly owned subsidiary of TEAM.
WHEREAS, TEAM intends to offer to repurchase up to 50% of its
outstanding common stock for $6.75 per share in connection with the Merger (the
"Tender Offer").
WHEREAS, the Parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"), and to cause the merger described herein
and the tender offer described herein to qualify as a tax-free reorganization
under the appropriate subsections of Section 368 of the Code.
WHEREAS, the Parties desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
described herein and also to prescribe certain conditions to the transactions
described herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
Parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Definitions. For purposes of this Agreement, the following
terms shall have the respective meanings set forth below:
"Affiliate Agreement" shall have the meaning set forth in Section 9.5.
"Agreement" shall mean this Agreement and Plan of Merger.
"Closing" shall have the meaning set forth in Section 2.8.
App. A-6
<PAGE> 96
"Closing Date" shall have the meaning set forth in Section 2.8.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" shall mean the Confidentiality Agreement,
dated as of April 20. 2000, by and between Mucho and TEAM.
"Diluted Share Number" shall have the meaning set forth in Section
2.2(c).
"Disbursing Agent" shall have the meaning set forth in Section 2.4(h).
"Disclosure Letter" shall have the meaning set forth in the preamble to
Article V.
"Effective Time" shall have the meaning set forth in Section 2.1(b).
"Environmental Laws" shall mean any and all applicable federal, state,
local and foreign statutes, Laws, regulations, ordinances, rules, judgments,
orders, decrees, codes, injunctions, Permits, relating to human health, natural
resources, or the environment or to Releases of Hazardous Substances or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances or the
notification, clean-up or other remediation thereof, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act
of 1976, 42 U.S.C. Section 6901 et seq., the Emergency Planning and Community
Right to Know Act, 42 U.S.C. Section 11001 et seq., the Clean Air Act, 42 U.S.C.
Section 7401 et seq., the Federal Water Pollution Control Act, 33 U.S.C. Section
1251 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.,
the Safe Drinking Water Act, 42 U.S.C. Section 300F et seq., and the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq., each as
amended.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Escrow Amount" shall have the meaning set forth in Section 2.7(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Agent" shall mean National City Bank.
"Exchange Ratio" shall have the meaning set forth in Section 2.2(c).
"Expenses" shall have the meaning set forth in Section 11.2(b).
App. A-7
<PAGE> 97
"GAAP" shall mean generally accepted accounting principles, as in
effect in the United States, from time to time.
"Governmental Authority" shall mean any agency, public or regulatory
authority, instrumentality, department, commission, court, ministry, tribunal or
board of any government, whether foreign or domestic and whether national,
federal, tribal, provincial, state, regional, local or municipal.
"Hazardous Substances" shall mean any wastes, substances, radiation, or
materials (whether solids, liquids or gases) (i) which are hazardous, toxic,
infectious, explosive, radioactive, carcinogenic, or mutagenic; (ii) which are
defined as "hazardous materials," "hazardous wastes," "hazardous substances,"
"wastes" or other similar designations in any Environmental Laws; (iii) without
limitation, which contain asbestos and asbestos-containing materials, lead-based
paints, urea-formaldehyde foam insulation, and petroleum or petroleum products
(including, without limitation, crude oil or any fraction thereof); or (iv)
which pose a hazard to human health and safety, natural resources, or the
environment.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Joint Statement" shall have the meaning set forth in Section 5.7.
"Law" shall mean statutes, common laws, rules, ordinances, regulations,
codes, licensing requirements, orders, judgments, injunctions, decrees,
licenses, agreements, settlements, governmental guidelines or interpretations,
Permits, rules and by-laws of a Governmental Authority.
"Lien" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset.
"Material Adverse Effect" shall mean any events, acts, conditions or
occurrences, whether individually or in the aggregate, that have a material
adverse effect on: (i) the business, financial condition, results of operations,
prospects, assets or liabilities of Mucho or TEAM (together with their
Subsidiaries, taken as a whole); (ii) the legality of this Agreement or its
enforceability against a Party to this Agreement; or (iii) the ability of a
Party to perform its obligations and to consummate the transactions under this
Agreement. An adverse change in the market price or trading volume of TEAM
Common Stock or the fair market value of Mucho Common Stock shall not be deemed,
by itself, to constitute a Material Adverse Effect.
"Merger" shall have the meaning set forth in Section 2.1(a).
"Merger Consideration" shall have the meaning set forth in Section
2.2(c).
"Merger Sub" shall mean TEAM Merger Corporation, a Nevada corporation.
"Mucho" shall mean Mucho.com, Inc., a Nevada corporation.
App. A-8
<PAGE> 98
"Mucho Balance Sheet" shall mean the audited consolidated balance sheet
of Mucho as of December 31, 1999 (and any notes thereto).
"Mucho Balance Sheet Date" shall mean December 31, 1999.
"Mucho Certificates" shall have the meaning set forth in Section
2.4(d).
"Mucho Common Stock" shall mean Mucho's common stock, par value $.001
per share.
"Mucho Contracts" shall have the meaning set forth in Section 6.19(a).
"Mucho Insurance Policies" shall have the meaning set forth in Section
6.17.
"Mucho Intellectual Property Rights" shall have the meaning set forth
in Section 6.21(a).
"Mucho Interim Balance Sheet Date" shall mean March 31, 2000.
"Mucho Proceeding" shall have the meaning set forth in Section 6.9.
"Mucho Property" shall have the meaning set forth in Section 6.23(b).
"Mucho Options" shall have the meaning set forth in Section 2.6(a).
"Mucho Related Parties" shall have the meaning set forth in Section
6.22.
"Mucho Securities" shall have the meaning set forth in Section 6.5(b).
"Mucho Shareholder Meeting" shall have the meaning set forth in Section
8.2.
"Mucho Superior Proposal" shall have the meaning set forth in Section
8.4(b).
"Nevada Corporate Law" shall mean the Nevada general corporation law,
as amended.
"Notice of Mucho Superior Proposal" shall have the meaning set forth in
Section 8.4(a).
"Notice of Superior Proposal" shall have the meaning set forth in
Section 7.4(b).
"Ohio Corporate Law" shall mean the Ohio general corporation law,
currently Chapter 1701 of the Ohio Revised Code, as amended.
"Party" shall mean either TEAM, Merger Sub or Mucho, as the case may
be.
App. A-9
<PAGE> 99
"PEO" means a Professional Employer Organization.
"PEO Form Contract" shall have the meaning set forth in Section
5.21(c).
"PEO Laws" means any Laws regulating PEOs in any state in which TEAM
does business.
"Permits" shall mean any licenses, franchises, permits, certificates,
consents, approvals or other similar authorizations affecting, or relating in
any way to, the assets or business of TEAM or Mucho, as the case may be.
"Permitted Investments" shall have the meaning set forth in Section
3.4(b).
"Person" shall mean any individual, corporation, limited liability
company, partnership, association, trust or any other entity or organization,
including any government or political subdivision or any agency or
instrumentality thereof.
"Release" means any emission, spill, seepage, leak, escape, leaching,
discharge, injection, pumping, dumping, disposal, or release of Hazardous
Substances into or upon the environment, including the air, soil, surface water,
groundwater, the sewer, septic system, storm drain, publicly owned treatment
works, or waste treatment, storage, or disposal systems.
"RJA" shall mean Raymond James & Associates, Inc.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Subsidiary" shall mean any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other Persons performing similar functions
are at the time directly or indirectly owned by a separate Person.
"Superior Proposal" shall have the meaning set forth in Section 7.4(c).
"Surviving Corporation" shall mean the surviving company after the
merger of Merger Sub into Mucho.
"Surviving Corporation Common Stock" shall mean the Surviving
Corporation's common stock, par value $.001.
"Surviving Corporation Option" shall have the meaning set forth in
Section 2.6(a).
App. A-10
<PAGE> 100
"Tax" or "Taxes" shall mean (A) all taxes, charges, fees, duties,
levies, penalties or other assessments, including, without limitation, income,
gross receipts, excise, real and personal property, sales, use, transfer,
license, payroll, withholding, social security, franchise, unemployment
insurance, workers' compensation, employer health tax or other taxes, fees,
assessments or charges of any kind whatsoever, imposed by any Governmental
Authority and shall include any interest, penalties or additions to tax
attributable to any of the foregoing, (B) any liability for payment of amounts
described in clause (A) whether as a result of transferee liability, of being a
member of an affiliated, consolidated, combined or unitary group for any period,
or otherwise through operation of Law, and (C) any liability for the payment of
amounts described in clauses (A) or (B) as a result of any tax sharing
agreement, tax allocation agreement, tax indemnity agreement, or other agreement
that includes indemnification for any tax liability.
"Tax Return" shall mean all returns, declarations, reports, forms,
estimates, information returns, statements or other documents (including any
related or supporting information) filed or required to be filed with or
supplied to any Governmental Authority in connection with any Taxes.
"TEAM" shall mean TEAM America Corporation, an Ohio Corporation.
"TEAM 1999 Balance Sheet" shall mean the consolidated balance sheet of
TEAM as of December 31, 1999 (and the notes thereto) set forth in TEAM's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999.
"TEAM Balance Sheet Date" shall mean March 31, 2000.
"TEAM Contracts" shall have the meaning set forth in Section 5.21(a).
"TEAM Common Stock" shall mean the capital stock of TEAM designated as
common stock, no par value.
"TEAM Benefit Arrangements" shall have the meaning set forth in Section
5.12(a).
"TEAM Employee Plans" shall have the meaning set forth in Section
5.12(a).
"TEAM Insurance Policies" shall have the meaning set forth in Section
5.18.
"TEAM Intellectual Property Rights" shall have the meaning set forth in
Section 5.23(a).
"TEAM Interim Balance Sheet" shall mean the consolidated balance sheet
of TEAM as of March 31, 2000 (and the notes thereto) set forth in TEAM's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.
"TEAM Interim Balance Sheet Date" shall mean March 31, 2000.
App. A-11
<PAGE> 101
"TEAM Options" shall mean options granted by TEAM.
"TEAM Pension Plans" shall have the meaning set forth in Section
5.12(a).
"TEAM Proceeding" shall have the meaning set forth in Section 5.10.
"TEAM Property" shall have the meaning set forth in Section 5.25(b).
"TEAM Related Parties" shall have the meaning set forth in Section
5.24.
"TEAM SEC Reports" shall have the meaning set forth in Section 5.6(a).
"TEAM Securities" shall have the meaning set forth in Section 5.5(b).
"TEAM Shareholder Meeting" shall have the meaning set forth in Section
7.2(a).
"Tender Offer" shall have the meaning set forth in the recitals.
"Termination Fee" shall have the meaning set forth in Section 11.2(a).
"Transfer Taxes" shall have the meaning set forth in Section 12.5.
Section 1.2 Terms Generally. The definitions in Section 1.1 shall apply equally
to both the singular and plural forms of the terms defined. Whenever the context
may require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include," "includes" and "including" shall be deemed to
be followed by the phrase "without limitation" even if not followed actually by
such phrase unless the context expressly provides otherwise. All references
herein to Sections, paragraphs and Exhibits and Schedules shall be deemed
references to Sections or paragraphs of, or Exhibits or Schedules to, this
Agreement, unless the context shall otherwise require. Unless otherwise
expressly defined, terms defined in this Agreement shall have the same meanings
when used in any Exhibit or Schedule and terms defined in any Exhibit or
Schedule shall have the same meanings when used in this Agreement or in any
other Exhibit or Schedule. The words "herein," "hereof," "hereto" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular provision of this Agreement.
App. A-12
<PAGE> 102
ARTICLE II
THE MERGER AND RELATED TRANSACTIONS
Section 2.1 The Merger.
(a) At the Effective Time, Merger Sub shall be merged with and into Mucho in
accordance with the Nevada Corporate Law and this Agreement (the "Merger"). Upon
consummation of the Merger, the separate existence of Merger Sub shall cease,
and Mucho shall be the surviving corporation (the "Surviving Corporation") and
shall be a wholly owned subsidiary of TEAM.
(b) The Merger shall become effective at such time as a certificate of merger,
in a form mutually acceptable to Merger Sub and Mucho, is filed with the
Secretary of State of Nevada in accordance with Nevada Corporate Law or such
later time as may be agreed by TEAM and Mucho and specified in the certificate
of merger (the "Effective Time").
(c) As of the Effective Time, the Surviving Corporation shall be renamed
Mucho.com Services, Inc.
(d) The certificate of incorporation of the Surviving Corporation as of the
Effective Time shall be substantially as set forth on Exhibit 2.1(d) from and
after the Effective Time, until thereafter amended in accordance with its terms
and as provided by the appropriate state law.
(e) The by-laws of the Surviving Corporation as of the Effective Time shall be
substantially as set forth on Exhibit 2.1(e) from and after the Effective Time,
and thereafter may be amended in accordance with their terms and as provided by
the certificate of incorporation of the Surviving Corporation and as provided by
the appropriate state law.
(f) As of the Effective Time, TEAM shall be renamed Mucho.com, Inc.
(g) The code of regulations of TEAM as of the Effective Time shall be
substantially as set forth on Exhibit 2.1(g) from and after the Effective Time,
until thereafter amended in accordance with its terms and as provided by the
appropriate state law.
(h) The certificate of incorporation of TEAM as of the Effective Time shall be
substantially as set forth on Exhibit 2.1(h) from and after the Effective Time,
until thereafter amended in accordance with its terms and as provided by the
appropriate state law.
(i) TEAM and Mucho will each elect four members of TEAM's board of directors,
and TEAM and Mucho will jointly select one additional member of the board of
TEAM. TEAM's board of directors shall be classified into three classes (with at
least one TEAM and Mucho director in each class), and the directors shall serve
in accordance with the code of regulations of TEAM until their respective
successors are duly elected or appointed and qualified.
App. A-13
<PAGE> 103
(j) The chairman of the board of directors and the chief executive officer of
TEAM shall be S. Cash Nickerson. The president and chief operating officer of
TEAM shall be Kevin T. Costello. Mr. Nickerson and Mr. Costello shall each have
direct reporting obligations to the TEAM board of directors. The chief financial
officer of TEAM shall be Jose Blanco. The chief accounting officer of TEAM shall
be Tom Gerlacher. The president and chief operating officer of internet
operations of the Surviving Corporation shall be David Waal. The chief legal
counsel of TEAM shall be Jay R. Strauss. Jay Strauss and William Johnston,
TEAM's general counsel, will share legal responsibilities for TEAM. Each officer
will serve in accordance with the code of regulations of TEAM.
Section 2.2 Conversion of Mucho Common Stock. At the Effective Time, pursuant to
this Agreement and by virtue of the Merger and without any action on the part of
TEAM, Merger Sub, or Mucho (or any holder of TEAM Common Stock or Mucho Common
Stock):
(a) Other than any shares of Mucho Common Stock to be canceled pursuant to
Section 2.2(b), each share of Mucho Common Stock issued and outstanding
immediately prior to the Effective Time shall be cancelled and converted into
the right to receive the number of shares of TEAM Common Stock determined by
multiplying the number of shares of Mucho Common Stock by the Exchange Ratio (as
determined below).
(b) Each share of Mucho Common Stock held in the treasury of Mucho immediately
prior to the Effective Time shall be canceled without any conversion thereof and
no payment or distribution shall be made with respect thereto.
(c) The "Exchange Ratio" shall equal the Merger Consideration (as defined below)
divided by the Diluted Share Number as defined in clause (2) below:
(1) Subject to the provisions of Section 2.7 below, the
aggregate number of shares of TEAM Common Stock to be issued to holders of Mucho
Securities (which when issued will be validly issued, fully-paid and
non-assessable) in exchange for all the outstanding Mucho Common Stock, warrants
and options will equal 5,925,925 diluted shares of TEAM Common Stock (the
"Merger Consideration").
(2) At the Effective Time, the number of diluted shares of
Mucho Common Stock outstanding (collectively, the "Diluted Share Number") will
include (i) all issued and outstanding shares of Mucho Common Stock; (ii) all
outstanding shares of other classes of Mucho voting capital stock, including,
but not limited to, shares of Mucho preferred stock, giving effect to the
conversion of such capital stock; (iii) all warrants, whether vested or
unvested, contingent or otherwise, giving effect to the exercise of such
warrants; (iv) all stock options, whether vested or unvested, or contingent or
otherwise, giving effect to the exercise of such options; (v) all other
derivative securities of any kind or nature, whether vested or unvested,
contingent or otherwise, giving effect to the exercise or conversion of such
derivative securities; and (vi) any other debt or equity securities, whether
vested or unvested, contingent
App. A-14
<PAGE> 104
or otherwise, convertible into shares of Mucho capital stock, giving effect to
the conversion of such debt or equity. Section 2.3 Conversion of Merger Sub
Common Stock. At the Effective Time, each share of common stock, $0.001 par
value, of Merger Sub that is issued and outstanding immediately prior to the
Effective Time shall remain outstanding and, by virtue of the Merger,
automatically and without the need for any action on the part of the holder
thereof, shall be converted into and become one (1) validly issued, fully paid
and nonassessable share of common stock of the Surviving Corporation.
Section 2.4 Exchange of Certificates.
(a) From and after the Effective Time, subject to the provisions of Section 2.7
below, each holder of a stock certificate which immediately prior to the
Effective Time represented issued and outstanding shares of Mucho Common Stock
(other than shares described in Section 2.2(b)) shall be entitled to receive in
exchange therefor, upon surrender thereof National City Bank, as exchange agent
(the "Exchange Agent"), a stock certificate or stock certificates representing
the number of whole shares of TEAM's Common Stock to which such holder is
entitled pursuant to Section 2.2(a) and any cash in lieu of a fractional share,
as contemplated by Section 2.4(i). Notwithstanding any other provision of this
Agreement, (i) until holders or transferees of stock certificates formerly
representing shares of Mucho Common Stock have surrendered them for exchange, as
provided herein, no payment for fractional shares shall be made, and (ii)
without regard to when such stock certificates formerly representing shares of
Mucho Common Stock are surrendered for exchange as provided herein, no interest
shall be paid on any payment for fractional shares. Upon surrender of a stock
certificate which immediately prior to the Effective Time represented issued and
outstanding shares of Mucho Common Stock (other than shares described in Section
2.2(b)) there shall be paid to the holder of such stock certificate (at the time
of surrender) the amount of any cash payable in lieu of a fractional share of
the Surviving Corporation's Common Stock to which such holder is entitled
pursuant to Section 2.4(i).
(b) If any certificate for shares of the Surviving Corporation Common Stock is
to be issued in a name other than that in which the certificate formerly
representing shares of Mucho Common Stock surrendered in exchange therefor is
registered in Mucho's transfer records, it shall be a condition of such exchange
that the Person requesting such exchange shall pay any applicable transfer or
other Taxes required by reason of such issuance.
(c) As soon as practicable after the Effective Time, TEAM shall make available
to the Exchange Agent the certificates representing shares of TEAM's Common
Stock required to effect the exchanges referred to in paragraph (a) above and
cash for payment of any fractional shares referred to in Section 2.4(i).
(d) Promptly following the Effective Time, the Exchange Agent shall mail to each
record holder of a Mucho Common Stock certificate or certificates that
immediately prior to the Effective Time represented issued and outstanding
shares of Mucho Common Stock (other than shares described in Section 2.2(b),
Section 2.5 and Section 2.7) (the "Mucho Certificates") (i) a letter of
transmittal (which shall specify that
App. A-15
<PAGE> 105
delivery shall be effected, and risk of loss and title to the Mucho Certificates
shall pass, only upon actual delivery of the Mucho Certificates to the Exchange
Agent) and (ii) instructions for use in effecting the surrender of the Mucho
Certificates in exchange for certificates representing shares of TEAM Common
Stock. Upon surrender of Mucho Certificates for cancellation to the Exchange
Agent, together with a duly executed letter of transmittal and such other
documents as the Exchange Agent shall reasonably require, the holder of such
Mucho Certificates shall be entitled to receive in exchange therefor a
certificate or certificates representing that number of whole shares of TEAM
Common Stock (other than the shares held in escrow pursuant to Section 2.7) into
which the shares of Mucho Common Stock formerly represented by the Mucho
Certificates so surrendered shall have been converted into the right to receive
pursuant to the provisions of Section 2.2(a), or any cash paid in lieu of a
fractional share, and the Mucho Certificates so surrendered shall be canceled.
(e) In the event any Mucho Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Mucho Certificate to be lost, stolen or destroyed, TEAM shall issue in
exchange for such lost, stolen or destroyed Mucho Certificate TEAM Common Stock
deliverable in respect thereof determined in accordance with this Article II.
When authorizing such issuance in exchange therefor, the board of directors of
TEAM may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Mucho Certificate
to give TEAM such indemnity as it may reasonably direct as protection against
any claim that may be made against TEAM with respect to the Mucho Certificate
alleged to have been lost, stolen or destroyed.
(f) After the Effective Time, there shall be no further transfers on the stock
transfer books of TEAM of the shares of Mucho that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, certificates
representing shares of Mucho Common Stock are presented to TEAM, they shall be
cancelled and exchanged for the consideration provided for, and in accordance
with the procedures set forth, in this Article II.
(g) From and after the Effective Time, the holders of shares of Mucho Common
Stock outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such shares of Mucho Common Stock, other than the
right to receive the Merger Consideration as provided in this Agreement.
(h) Prior to the Effective Time, Mucho shall irrevocably deposit or cause to be
deposited or make an irrevocable line of credit reasonably acceptable to TEAM
available to National City Bank (the "Disbursing Agent") as agent for the
holders of Mucho Common Stock, entitled to cash in lieu of fractional shares in
the aggregate amount required to pay such portion of the Merger Consideration to
be paid in cash in lieu of fractional shares. Pending distribution pursuant to
Section 2.4(i) hereof, such cash deposited with the Disbursing Agent shall be
held in trust for the benefit of such holders and such cash shall not be used
for any other purposes.
(i) Notwithstanding any other provision of this Agreement, no fractional shares
and no certificates or scrip for fractional shares of TEAM Common Stock shall be
issued in connection with the Merger. In lieu of any such fractional shares,
each holder of shares of Mucho Common Stock who would otherwise have
App. A-16
<PAGE> 106
been entitled to receive a fraction of a share of the Surviving Corporation
Common Stock upon surrender of Mucho Certificates for exchange pursuant to this
Article II (after taking into account all Mucho Certificates registered in the
name of such holder), shall be entitled to receive from the Exchange Agent a
cash payment equal to such fraction multiplied by $6.75.
Section 2.5 Dissenting Shares.
(a) Notwithstanding Section 2.2, a holder of shares of Mucho Common Stock
entitled to vote on the Merger is entitled to dissent from the Merger in
accordance with Section 92A.380 of the Nevada Corporation Law. In the event
holders of more than 5% of the outstanding Mucho Common Stock exercise their
right to dissent from the Merger, this Agreement may be terminated by either
TEAM or Mucho and any or all of the transactions contemplated herein may be
abandoned, subject to the terms of Article XI.
(b) A holder of shares of TEAM Common Stock entitled to vote on the Merger shall
have only the dissenter's rights granted by Ohio Corporate Law. Any holder of
TEAM Common Stock who becomes entitled to payment for such TEAM Common Stock
pursuant to Section 1701.84 of Ohio Corporate Law shall receive payment therefor
from TEAM in accordance with Ohio Corporate Law; provided, however, that if any
such holder of Dissenting Shares (i) shall have failed to establish his
entitlement to relief as a dissenting shareholder as provided in Section 1701.85
of Ohio Corporate Law or failed to comply with the requirements for dissenting
shareholders set forth therein, (ii) shall have effectively withdrawn his demand
for relief as a dissenting shareholder with respect to such shares or lost his
right to relief as a dissenting Shareholder and payment for his shares under
Section 1701.85 of Ohio Corporate Law, or (iii) shall have failed to file a
complaint with the appropriate court seeking relief as to determination of the
value of all such holder's shares within the time provided in Section 1701.85 of
Ohio Corporate Law, such holder shall forfeit the right to relief as a
dissenting shareholder with respect to such shares of TEAM Common Stock. TEAM
shall provide Mucho prompt notice of any demands received by TEAM for relief as
a dissenting shareholder and Mucho shall have the right to participate in all
negotiations and proceedings with respect to such demands. TEAM shall not,
except with the prior written consent of Mucho, make any payment with respect
to, or settle or offer to settle, any such demands.
Section 2.6 Stock Options and Warrants.
(a) Prior to the Effective Time, Mucho and TEAM shall take such action as may be
necessary to cause each unexpired and unexercised option and warrant to purchase
shares of Mucho Common Stock (each a "Mucho Option") to be automatically
converted at the Effective Time into an option or warrant (each a "Surviving
Corporation Option") which will be (i) to purchase a number of shares of TEAM
Common Stock equal to the number of shares of Mucho Common Stock that could have
been purchased under the Mucho Option multiplied by the Exchange Ratio, at a
price per share of TEAM Common Stock equal to the option exercise price
determined pursuant to the Mucho Option divided by the Exchange Ratio and (ii)
otherwise subject to the same terms and conditions as the Mucho Option; provided
that unless the applicable agreement evidencing the Mucho Option requires the
acceleration of vesting of such Mucho Option upon a Merger, the Mucho board of
directors will not accelerate the vesting of any Mucho Option
App. A-17
<PAGE> 107
as a result of or in connection with the Merger. The date of grant of a
substituted Surviving Corporation Option shall be the date on which the
corresponding Mucho Option was granted. At the Effective Time, all references in
the Mucho Options to Mucho shall be deemed to refer to TEAM. TEAM shall assume
all of Mucho's obligations with respect to Mucho Options as so amended and
shall, from and after the Effective Time, make available for issuance upon
exercise of Mucho Options all shares of TEAM Common Stock covered thereby and,
at or within a reasonable time after the Effective Time, file a registration
statement on Form S-8 to cover the additional shares of TEAM Common Stock
subject to TEAM Options granted in exchange for Mucho Options. Following the
Effective Time, TEAM will use all reasonable efforts to maintain the
effectiveness of TEAM's registration statement on Form S-8 for so long as any of
the converted Mucho Options remain outstanding and unexercised.
(b) As soon as practicable after the Effective Time, TEAM shall deliver to the
holders of Mucho Options immediately prior to the Effective Time appropriate
notices (i) setting forth such holders' rights pursuant to the respective Mucho
Options, and (ii) stating Mucho Options have been converted into TEAM Options as
contemplated herein and have been assumed by TEAM and shall continue in effect
on the same terms and conditions (subject to the adjustments required by this
Section to give effect to the Merger).
(c) The holders of Mucho Options immediately prior to the Effective Time, and
their respective legal representatives and heirs, shall be deemed third-party
beneficiaries of this Section 2.6.
Section 2.7 Escrow of Stock.
(a) Prior to the Effective Time, Mucho shall cause each holder of Mucho Common
Stock listed on Exhibit 2.7(a) to enter into an escrow agreement (acceptable to
TEAM and Mucho) pursuant to which each such holder of Mucho Common Stock shall,
immediately after the Effective Time, exchange their Mucho Common Stock for TEAM
Common Stock and shall escrow the number of shares of TEAM Common Stock set
forth in Exhibit 2.7(a). The total number of shares of TEAM Common Stock placed
in escrow shall be 2,222,222 (the "Escrow Amount"). Under the terms of the
escrow agreement, each shareholder whose shares are held in escrow shall have no
right, title and interest in such shares unless and until the shares are
released from the escrow.
(b) The Escrow Amount shall remain in escrow until the board of directors of
TEAM authorizes the Escrow Amount to be released on a pro rata basis to the
shareholders listed on Exhibit 2.7(a). The TEAM board of directors shall
authorize the release of the Escrow Amount as follows: (i) one-half of the
Escrow Amount shall be released immediately after TEAM raises $15 million in
equity financing from any source by December 31, 2001, and (ii) one-half of the
total Escrow Amount shall be released immediately after the Surviving
Corporation earns $2 million in operating revenue from its internet operations
in any consecutive three-month period prior to December 31, 2001; provided, that
the requirements of subsection (i) above have also been met. Any Escrow Amount
not released as described in this Section 2.7(b) shall be returned to TEAM and
cancelled on January 1, 2002. In such event, none of the Mucho Shareholders
shall have any further right to the Escrow Amount or any other consideration in
connection with the Merger.
App. A-18
<PAGE> 108
(c) Notwithstanding any of the terms of this Section 2.7, in the event of a
change in control of TEAM, the board of directors of TEAM shall immediately
authorize the total release of the Escrow Amount; provided, that, at the time
the change in control occurs, the transaction which caused the change in control
was consummated for TEAM Common Stock at a price in excess of $6.75 per share.
Section 2.8 The Closing. The closing (the "Closing") of the Merger contemplated
by this Agreement shall take place at a location mutually agreeable to Mucho,
TEAM, and Merger Sub. The date on which the Closing occurs is referred to in
this Agreement as the "Closing Date."
ARTICLE III
TEAM TENDER OFFER
Section 3.1 TEAM Tender Offer.
(a) In conjunction with the Joint Statement, TEAM shall offer to purchase up to
50% of TEAM's outstanding Common Stock immediately after the Effective Time for
$6.75 per share, subject to the rules of the Exchange Act (including Rule 13e-4)
and any other Laws or provisions of this Agreement, if (i) a majority of the
TEAM Common Stock is voted in favor of the Merger and the related transactions;
and (ii) no more than 50% of the outstanding shares of TEAM Common Stock are
tendered for cash. Notwithstanding the foregoing, if more than 50% of the
outstanding shares of TEAM Common Stock are tendered, TEAM shall accept the
tendered securities on a pro rata basis.
(b) If immediately after the Effective Time a majority of TEAM Common Stock is
voted in favor of the Merger and the related transactions, the Surviving
Corporation shall (i) irrevocably deposit or cause to be deposited or make an
irrevocable line of credit (reasonably acceptable to TEAM) available to the
Disbursing Agent, as agent for holders of TEAM Common Stock tendered for $6.75
per share ("Tendered Shares"), in the amount necessary to pay for the Tendered
Shares, and (ii) accept the Tendered Shares in exchange for cash. Pending
distribution pursuant to this Section 3.1(b) of the cash deposited with the
Disbursing Agent, if any, such cash shall be held in trust for the benefit of
the holders of Tendered Shares and such cash shall not be used for any other
purposes; provided that TEAM may direct the Disbursing Agent to invest such
cash, provided that such investments (i) shall be obligations of or guaranteed
by the United States of America, in commercial paper obligations receiving the
highest rating from either Moody's Investors Services, Inc. or Standard & Poor's
Corporation, or in certificates of deposit, bank repurchase agreements or
bankers acceptances of domestic commercial banks with capital exceeding
$250,000,000 (collectively "Permitted Investments") or in money market funds
which are invested solely in Permitted Investments, and (ii) shall have
maturities that will not prevent or delay payments to be made pursuant to this
Section 3.1(b). Each holder of a certificate or certificates representing
Tendered Shares must surrender such certificate or certificates to the
Disbursing Agent, as agent for such holder of Tendered Shares, to effect the
payment of cash for the Tendered Shares on such holder's behalf within 10
business days after the Effective Time.
App. A-19
<PAGE> 109
(c) When a holder of Tendered Shares surrenders a certificate or certificates to
the Disbursing Agent representing Tendered Shares, the Disbursing Agent shall
promptly distribute to the Person in whose name such certificate shall have been
registered a check in the amount of $6.75 per Tendered Share.
(d) If payment is to be made to a Person other than the registered holder of the
Tendered Shares represented by the certificate or certificates surrendered in
exchange therefor, it shall be a condition to such payment that the certificate
or certificates so surrendered shall be properly endorsed and otherwise be in
proper form for transfer as determined by the Disbursing Agent and that the
Person requesting such payment shall pay to the Disbursing Agent any transfer or
other Taxes required as a result of such payment to a Person other than the
registered holder of such Tendered Shares or establish to the satisfaction of
the Disbursing Agent that such Tax has been paid or is not payable.
(e) After the Effective Time, there shall be no further transfers on the stock
transfer books of TEAM of the Tendered Shares that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, certificates
representing Tendered Shares are presented to TEAM, they shall be canceled and
exchanged for the consideration provided for, and in accordance with the
procedures set forth, in this Article III.
(f) From and after the Effective Time, the holders of Tendered Shares shall
cease to have any rights with respect to such Tendered Shares, other than the
right to receive $6.75 per share as provided in this Agreement.
(g) In the event that any Tendered Share certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Tendered Share certificate to be lost, stolen or destroyed and, if
required by TEAM, the posting by such holder of a bond in such reasonable amount
as TEAM may direct as indemnity against any claim that may be made against it
with respect to such Tendered Share certificate, the Disbursing Agent will issue
in exchange for such lost, stolen or destroyed Tendered Share certificate a
check in the amount of $6.75 per share Tendered Share.
App. A-20
<PAGE> 110
ARTICLE IV
PROXY MATERIALS
In connection with the TEAM Shareholder Meeting and the Mucho
Stockholder Meeting, TEAM and Mucho shall jointly prepare and file with the SEC
a Joint Statement (as defined below) relating to the transactions contemplated
by this Agreement, including the Merger and the Tender Offer and the
registration of the sale of TEAM Common Stock to Mucho, and shall use their
individual reasonable best efforts to cause the Joint Statement to be declared
effective by the SEC as soon as reasonably practicable.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TEAM
TEAM represents and warrants to Mucho that except as set forth in the
corresponding sections or subsections of the disclosure letter delivered to
Mucho by TEAM concurrently with entering into this Agreement (the "Disclosure
Letter"):
Section 5.1 Corporate Existence and Power. Section 5.1 of the Disclosure Letter
lists each Subsidiary of TEAM and the number of shares and percentage of such
Subsidiary's outstanding equity interest owned by TEAM or any other party.
Section 5.1 of the Disclosure Letter also lists, for each of TEAM and its
Subsidiaries, its jurisdiction of incorporation and the states in which it is
qualified to do business. Each of TEAM and its Subsidiaries is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers required to carry on
its business as now conducted. Each of TEAM and its Subsidiaries is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified could not, individually
or in the aggregate, be reasonably expected to have a Material Adverse Effect on
TEAM. TEAM has heretofore delivered to Mucho true and complete copies of the
currently effective articles of incorporation and code of regulations or similar
organizational documents of TEAM and each of its Subsidiaries (as the same may
be amended and restated as of the date hereof).
Section 5.2 Corporate Authorization. The execution, delivery and performance by
TEAM of this Agreement and the consummation by TEAM of the transactions
contemplated hereby (i) are within TEAM's corporate powers and (ii) except for
the adoption of this Agreement by the affirmative vote of a majority in voting
interests of the outstanding shares of TEAM Common Stock, have been duly
authorized by all necessary corporate and shareholder action. This Agreement has
been duly and validly executed and delivered by TEAM and constitutes a valid,
legal and binding agreement of TEAM enforceable against TEAM in accordance with
its terms, except (i) as rights to indemnity hereunder may be limited by federal
or state securities Laws or the public policies embodied therein, (ii) as such
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar Laws affecting the enforcement of creditors' rights
generally, and (iii) as the remedy of specific performance and other forms of
injunctive relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
App. A-21
<PAGE> 111
Section 5.3 Governmental Authorization. The execution, delivery and performance
by TEAM of this Agreement and the consummation of the Merger and the Tender
Offer require no action by or in respect of, or filing with, any Governmental
Authority other than (i) the filing of a certificate of merger in respect of the
Merger in accordance with Nevada Corporate Law; (ii) compliance with any
applicable requirements of the HSR Act; (iii) compliance with the applicable
requirements of the Exchange Act; (iv) compliance with the applicable
requirements of the Securities Act; (v) compliance with any applicable foreign
or state securities or Blue Sky Laws; (vi) the filing of appropriate documents
with the relevant authorities of the jurisdictions in which TEAM is qualified to
do business; and (vii) such other items that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on TEAM.
Section 5.4 Non-Contravention. Other than as set forth in Section 5.4 of the
Disclosure Letter, the execution, delivery and performance by TEAM of this
Agreement and the consummation by TEAM of the transactions contemplated hereby
do not and will not (i) contravene or conflict with the articles of
incorporation, by-laws, code of regulations or similar organizational documents
of TEAM or any of its Subsidiaries, (ii) to TEAM's knowledge, contravene or
conflict with or constitute a violation of any provision of any Law, regulation,
judgment, writ, injunction, order or decree of any court or Governmental
Authority binding upon or applicable to TEAM or any of its Subsidiaries or any
of their respective properties or assets, (iii) to TEAM's knowledge, constitute
a default under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of TEAM or any of its Subsidiaries or to
a loss of any benefit to which TEAM or any of its Subsidiaries is entitled under
any provision of any agreement, contract or other instrument binding upon TEAM
or any of its Subsidiaries, or (iv) to TEAM's knowledge, result in the creation
or imposition of any Lien on any asset of TEAM or any of its Subsidiaries,
except, in the case of clauses (ii), (iii) and (iv), for any such violation,
failure to obtain any such consent or other action, default, right, loss or Lien
that could not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on TEAM.
Section 5.5 Capitalization.
(a) The authorized capital stock of TEAM consists of 10,000,000 shares of common
stock and 1,000,000 shares of preferred stock with 500,000 shares designated
Class A Voting Preferred Stock and 500,000 shares designated Class B Voting
Preferred Stock. As of June 15, 2000, there were 4,332,999 shares of common
stock and no shares of preferred stock issued and outstanding. As of June 15,
2000, there were outstanding TEAM Options to purchase an aggregate of ________
shares of TEAM Common Stock (of which TEAM Options to purchase (i) an aggregate
of __________ shares of TEAM Common Stock were vested and exercisable, (ii) an
aggregate of 357,318 shares of TEAM Common Stock were granted pursuant to a
qualified stock option plan and (iii) an aggregate of 649,972 shares of TEAM
Common Stock were granted but not pursuant to a qualified stock option plan).
Section 5.5 of the Disclosure Letter sets forth a complete list of options and
warrants specifying the characteristics of the security, the exercise price,
vesting schedule, and conditions for vesting and exercise. All outstanding
shares of capital stock of TEAM have been duly authorized and validly issued and
are fully paid and nonassessable.
App. A-22
<PAGE> 112
(b) Except as set forth in this Section 5.5 and except for changes resulting
from the exercise of TEAM Options outstanding since March 31, 2000, there are
(i) no other outstanding shares of capital stock or other voting securities of
TEAM or any of its Subsidiaries, (ii) no securities of TEAM or its Subsidiaries
convertible into or exchangeable for shares of capital stock or voting
securities of TEAM or its Subsidiaries, (iii) no options or other rights to
acquire from TEAM or its Subsidiaries, or obligations of TEAM or its
Subsidiaries to issue, any shares of capital stock, voting securities or
securities convertible into or exchangeable for shares of capital stock or
voting securities of TEAM, and (iv) no equity equivalent interests in the
ownership or earnings of TEAM or its Subsidiaries or other similar rights (the
items in clauses (b)(i), (ii), (iii) and (iv) being referred to collectively as
"TEAM Securities"). Except as set forth on Section 5.5 of the Disclosure Letter,
there are no outstanding obligations of TEAM or any Subsidiary to repurchase,
redeem or otherwise acquire TEAM Securities. Except as set forth on Section 5.5
of the Disclosure Letter, there are no shareholder agreements, voting trusts or
other agreements or understandings to which TEAM or any of its Subsidiaries is a
party or by which it is bound relating to the voting or registration of any
shares of capital stock of TEAM or any of its Subsidiaries or any preemptive
rights with respect thereto.
Section 5.6 Reports and Financial Statements.
(a) TEAM has timely filed with the SEC all forms, reports, schedules, statements
and other documents required to be filed by it under the Securities Act or the
Exchange Act (such documents, as supplemented or amended since the time of
filing, the "TEAM SEC Reports"). As of their respective dates, the TEAM SEC
Reports, including without limitation, any financial statements or schedules
included or incorporated by reference therein, at the time filed (and, in the
case of registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively) (i) complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act and (ii) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited consolidated interim financial statements included or incorporated by
reference in the TEAM SEC Reports (including any related notes and schedules)
fairly present, in all material respects, the financial position of TEAM and its
consolidated Subsidiaries as of the dates thereof and the results of their
operations and their cash flows for the periods set forth therein, in each case
in accordance with past practice and GAAP consistently applied during the
periods involved (except as otherwise disclosed in the notes thereto and
subject, where appropriate, to normal year-end adjustments that would not be
material in amount or effect).
(b) TEAM has heretofore made available or promptly will make available to Mucho
a complete and correct copy of any amendments or modifications to any TEAM SEC
Reports filed prior to the date hereof which are required to be filed with the
SEC but have not yet been filed with the SEC.
Section 5.7 Disclosure Documents. The proxy statement/information
statement/prospectus and any additional materials to be filed with the SEC or
presented to shareholders (the "Joint Statement") in
App. A-23
<PAGE> 113
connection with the Merger, the Tender Offer and related transactions will not,
at the date it is first mailed to TEAM's shareholders, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Joint Statement
will comply as to form in all material respects with the requirements of the
Exchange Act. No representation is made by TEAM with respect to statements made
in the Joint Statement based on information supplied by Mucho for inclusion
therein.
Section 5.8 Absence of Certain Changes or Events.
(a) Since the TEAM Balance Sheet Date, and except as discussed in the TEAM SEC
Reports or as disclosed in Section 5.8 of the Disclosure Letter, the business of
TEAM and its Subsidiaries has been conducted in all material respects in the
ordinary course consistent with past practice, neither TEAM nor any of its
Subsidiaries has engaged in any transaction or series of related transactions
material to TEAM and its Subsidiaries taken as a whole other than in the
ordinary course consistent with past practice, and there has not been any event,
occurrence or development, alone or taken together with all other existing
facts, that, individually or in the aggregate, has had, or could reasonably be
expected to have, a Material Adverse Effect on TEAM, including, but not limited
to, the loss of a significant number of clients or work site employees.
(b) Without limiting the generality of the foregoing Section 5.8(a), since the
TEAM Interim Balance Sheet Date and except as disclosed in the TEAM SEC Reports
or Section 5.8 of the Disclosure Letter, there has not been:
(i) any damage, destruction or loss to any of the assets or properties of
TEAM or any of its Subsidiaries that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on TEAM;
(ii) any declaration, setting aside or payment of any dividend or
distribution or capital return in respect of any shares of TEAM's
capital stock or any redemption, purchase or other acquisition by TEAM
or any of its Subsidiaries of any shares of TEAM's capital stock or any
repurchase, redemption or other purchase by TEAM or any of its
Subsidiaries of any outstanding shares of capital stock or other
securities of, or other ownership interests in, TEAM or any of its
Subsidiaries, or any amendment of any material term of any outstanding
security of TEAM or any of its Subsidiaries;
(iii) any sale, assignment, transfer, lease or other disposition or agreement
to sell, assign, transfer, lease or otherwise dispose of any of the
assets of TEAM or any of its Subsidiaries for consideration in the
aggregate in excess of $200,000 or other than in the ordinary course of
business consistent with past practices;
App. A-24
<PAGE> 114
(iv) any acquisition (by merger, consolidation, or acquisition of stock or
assets) by TEAM or any of its Subsidiaries of any corporation,
partnership or other business organization or division thereof or any
equity interest therein;
(v) any loans or advances to any Person in excess of $200,000 in the
aggregate;
(vi) any incurrence of or guarantee with respect to any indebtedness for
borrowed money by TEAM or any of its Subsidiaries other than pursuant
to TEAM's existing credit facilities in the ordinary course of business
or any creation or assumption by TEAM or any of its Subsidiaries of any
material Lien on any material asset;
(vii) any material change in any method of accounting or accounting practice
or Tax or Tax practice used by TEAM or any of its Subsidiaries, other
than such changes required by a change in Law or GAAP;
(viii) except as permitted pursuant to Section 7.1(e) of this Agreement, (A)
any employment, deferred compensation, severance or similar agreement
entered into or amended by TEAM or any of its Subsidiaries and any
employee, in each case other than sales commission agreements and
product promotional agreements entered into in the ordinary course of
business consistent with past practice, (B) any increase in the
compensation payable or to become payable by TEAM or any of its
Subsidiaries to any of their respective directors or officers or
generally applicable to all or any category of TEAM's or its
Subsidiaries' employees, (C) any increase in the coverage or benefits
available under any vacation pay, company awards, salary continuation
or disability, sick leave, deferred compensation, bonus or other
incentive compensation, insurance, pension or other employee benefit
plan, payment or arrangement made to, for or with any of the directors
or officers of TEAM and its Subsidiaries or generally applicable to all
or any category of TEAM's or its Subsidiaries' employees or (D)
severance pay arrangements made to, for or with such directors,
officers or employees other than, in the case of (B) and (C) above,
increases in the ordinary course of business consistent with past
practice and that in the aggregate have not resulted in a material
increase in the benefits or compensation expense of TEAM or any of its
Subsidiaries;
(ix) any revaluing in any material respect of any of the assets of TEAM or
any of its Subsidiaries, including without limitation writing down the
value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business;
(x) any loan, advance or capital contribution made by TEAM or any of its
Subsidiaries to, or investment in, any Person other than loans,
advances or capital contributions, or investments of TEAM made in the
ordinary course of business consistent with past practices;
(xi) any change, amendment or formal notice to TEAM with respect to any
insurance policy or program of TEAM or any new insurance policy;
App. A-25
<PAGE> 115
(xii) any agreement to take any actions specified in this Section 5.8(b),
except for this Agreement; or
(xiii) any adverse change in TEAM's or any of its Subsidiaries' worker's
compensation experience.
Section 5.9 No Undisclosed Material Liabilities. There are no liabilities of
TEAM or any of its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, which would be
required by GAAP to be reflected on a consolidated balance sheet of TEAM
(including the notes thereto), other than liabilities and obligations which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on TEAM, and other than:
(i) liabilities disclosed in TEAM SEC Reports filed prior to the date
hereof;
(ii) actual trade payables incurred in the ordinary course of business
consistent with past practices;
(iii) liabilities incurred to perform this Agreement; and
(iv) those set forth in Section 5.9 of the Disclosure Letter.
Section 5.10 Litigation. Except as set forth in TEAM SEC Reports filed prior to
the date hereof and Section 5.10 to the Disclosure Letter, (a) there is no
action, suit, investigation or proceeding pending against, or, to the knowledge
of TEAM, threatened against or affecting, TEAM or any of its Subsidiaries or
their respective properties before any court or arbitrator or any Governmental
Authority (a "TEAM Proceeding") and (b) to the knowledge of TEAM, there is no
basis for any such TEAM Proceeding.
Section 5.11 Taxes.
(a) Except as set forth on Section 5.11 to the Disclosure Letter, TEAM and
each of its Subsidiaries:
(i) has timely filed all material Tax Returns that it was required to file
and has paid or caused to be paid all Taxes required to be paid by it
(including, but not limited to, any such Taxes shown due on any Tax
Return). The accrual for current Taxes payable in the latest financial
statements included or incorporated by reference in the TEAM SEC
Reports is substantially adequate to cover all Taxes attributable to
periods or portions thereof ending on the date of such financial
statements, and no Taxes attributable to periods following the date of
such financial statements have been incurred other than in the ordinary
course of business;
(ii) has filed or caused to be filed in a timely and proper manner (within
any applicable extension periods) all Tax Returns required to be filed
by it with the appropriate taxing authority in all jurisdictions in
which such Tax Returns are required to be filed, and all Tax Returns
filed by TEAM and each of its Subsidiaries are true and correct in all
material respects; and
App. A-26
<PAGE> 116
(iii) has not requested or caused to be requested any extension of time
within which to file any material Tax Return, which Tax Return has not
since been filed.
(b) TEAM has delivered to Mucho true, correct and complete copies of all federal
Tax Returns filed by or on behalf of TEAM or any of its Subsidiaries for any tax
periods ending on or after December 31, 1995.
(c) Except as set forth in Section 5.11 to the Disclosure Letter:
(i) TEAM has not been notified by the Internal Revenue Service or any other
taxing authority that any material dispute or claims have been raised
by the Internal Revenue Service or any other taxing authority in
connection with any Tax Return filed by or on behalf of TEAM;
(ii) there are no pending Tax audits and no waivers of statutes of
limitations have been given or requested;
(iii) no tax Liens have been filed against TEAM or any of its Subsidiaries,
except for tax Liens for current Taxes not yet due and payable for
which adequate reserves have been provided in the latest balance sheet
of TEAM;
(iv) no material unresolved deficiencies or additions to Taxes have been
proposed, asserted, or assessed against TEAM or any of its
Subsidiaries;
(v) none of TEAM or any Subsidiary has received notice within the last
three years from any taxing authority in a jurisdiction in which TEAM
does not file Tax Returns that TEAM is or may be subject to taxation by
that jurisdiction;
(vi) TEAM and each Subsidiary has withheld and paid all Taxes required to be
withheld and paid in connection with amounts paid or owing to any
employee;
(vii) none of TEAM or any of its Subsidiaries is a party to a Tax sharing,
Tax allocation or similar agreement and is not bound by any closing
agreement, offer in compromise or other agreement with any Tax
authority;
(viii) except in accordance with past practice, none of TEAM or any Subsidiary
has taken any action that would have the effect of deferring any
taxable income of TEAM or any Subsidiary from any taxable period or
portion thereof ending before the Effective Time to any period
following the Effective Time. None of TEAM or any Subsidiary is
required to include in its income any adjustment pursuant to Section
481 of the Code following the Effective Time; and
(ix) there is no contract, agreement, plan or arrangement covering any
employee or former employee of TEAM or any of its affiliates that,
individually or collectively, could give rise to the payment of any
amount that would not be deductible pursuant to the terms of Section
280G of the Code or that
App. A-27
<PAGE> 117
could obligate TEAM to make any payments that will not be fully deductible by
virtue of Section 162(m) of the Code.
Section 5.12 ERISA.
(a) Section 5.12(a) of the Disclosure Letter sets forth a list identifying each
"Employee Benefit Plan" (as defined in Section 3(3) of ERISA), material benefit
arrangement, plan, or policy, including without limitation, (i) each deferred
compensation plan, (ii) each equity compensation plan, (iii) each plan or
arrangement providing severance benefits ("TEAM Benefit Arrangements") which (x)
is subject to any provision of ERISA or (y) is maintained, administered or
contributed to by TEAM or any affiliate (as defined below) within the last ten
years, under which TEAM or any Subsidiary has any liability ("TEAM Employee
Plans"). The most recent copies of such plans (and, if applicable, related trust
agreements) and all amendments thereto have been delivered to Mucho together
with (A) the most recent annual reports (Form 5500 including applicable
schedules and financial reports) or ERISA alternative compliance statements
prepared in connection with any such plan and (B) the most recent actuarial
valuation report prepared in connection with any such plan. For purposes of this
Section 5.12, "affiliate" of any Person means any other Person which, together
with such Person, would be treated as a single employer under Section 414 of the
Code. TEAM Employee Plans which individually or collectively would constitute an
"employee pension benefit plan" as defined in Section 3(2) of ERISA (the "TEAM
Pension Plans") are identified as such in the list referred to above.
(b) Neither TEAM nor any of its affiliates maintains or contributes to or has
maintained or contributed to within the last five years a TEAM Pension Plan
subject to Title IV of ERISA or Section 412 of the Code. Nothing done or omitted
to be done and no transaction or holding of any asset under or in connection
with any TEAM Employee Plan has or will make TEAM or any Subsidiary, any officer
or director of TEAM or any Subsidiary subject to any liability under Title I of
ERISA or liable for any Tax pursuant to Section 4975 of the Code that could
reasonably be expected to have a Material Adverse Effect on TEAM.
(c) Each TEAM Employee Plan which is intended to be qualified under Section
401(a) of the Code has received a determination letter from the Internal Revenue
Service to the effect that such TEAM Employee Plan is so qualified and no
amendments have been adopted since the receipt of such determination letter that
would result in the revocation of such letter. TEAM has delivered to Mucho
copies of the most recent Internal Revenue Service determination letters with
respect to each such TEAM Employee Plan. Nothing has occurred since the date of
the most recent Internal Revenue Service determination letters that would
adversely affect the Tax-qualified status of any TEAM Employee Plan. Each TEAM
Employee Plan has been maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the Code, which are applicable to such
TEAM Employee Plan other than any non-compliance which could not reasonably be
expected to have a Material Adverse Effect on TEAM.
(d) Except as set forth on Section 5.12(d) of the Disclosure Letter, there has
been no amendment to, written interpretation or announcement (whether or not
written) by TEAM or any of its affiliates relating
App. A-28
<PAGE> 118
to, or change in employee participation or coverage under, any TEAM Employee
Plan or TEAM Benefit Arrangement which would increase materially the expense of
maintaining such TEAM Employee Plan or TEAM Benefit Arrangement above the level
of the expense incurred in respect thereof for the fiscal year ended on the TEAM
Balance Sheet Date.
(e) Except as disclosed on Section 5.12(e) of the Disclosure Letter, none of
TEAM or any Subsidiary is a party to or subject to (i) any employment contract
or arrangement providing for annual future compensation of $100,000 or more with
any officer, consultant, director or employee, or that have a remaining term in
excess of one year or are not cancelable (without material penalty, cost or
other liability) within one year; (ii) any severance agreements, programs and
policies with or relating to its employees except programs and policies required
to be maintained by Law; or (iii) any plans, programs, agreements and other
arrangements with or relating to its employees which contain change in control
provisions. TEAM has delivered to Mucho copies (or descriptions in detail
reasonably satisfactory to Mucho) of all such agreements, plans, programs and
other arrangements.
(f) Except as disclosed in Section 5.12(f) of the Disclosure Letter, there will
be no payment, accrual of additional benefits, acceleration of payments or
vesting in any benefit under any TEAM Employee Plan or similar agreement or
arrangement disclosed in this Agreement solely by reason of TEAM's entering into
this Agreement or in connection with the transactions contemplated by this
Agreement.
Section 5.13 Labor Matters. There are no strikes, slowdowns, work stoppages,
lockouts, union organizational campaigns or other protected concerted activity
under the National Labor Relations Act or, to the knowledge of TEAM, threats
thereof, by or with respect to any employees of TEAM or any of its Subsidiaries
which could reasonably be expected to have a Material Adverse Effect on TEAM.
There are no controversies pending or, to the knowledge of TEAM, threatened
between TEAM or any of its Subsidiaries and any of their respective employees,
customers or clients, which controversies have or could reasonably be expected
to have a Material Adverse Effect on TEAM. Neither TEAM nor any of its
Subsidiaries is a party to any collective bargaining agreement or other labor
union contract applicable to Persons employed by TEAM or its Subsidiaries except
as disclosed in Section 5.13 of the Disclosure Letter. There are no pending or,
to the knowledge of TEAM, threatened charges or complaints against TEAM or its
Subsidiaries by the National Labor Relations board or any comparable state
agency.
Section 5.14 Compliance with Laws and Court Orders. Except as set forth on
Section 5.14 of the Disclosure Letter, neither TEAM nor its Subsidiaries is in
violation of, nor has it since January 1, 1997 violated, and to the knowledge of
TEAM, nothing is under investigation with respect to or has been threatened to
be charged with or given notice of any violation of, any applicable Law,
including but not limited to PEO Laws, except for possible violations that have
not had and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on TEAM. This Section does not relate to
matters with respect to Taxes or Environmental Laws which are exclusively the
subject of Sections 5.11 and 5.16, respectively.
App. A-29
<PAGE> 119
Section 5.15 Finders' Fees. With the exception of fees payable to RJA, there is
no investment banker, broker, finder or other intermediary which has been
retained by, or is authorized to act on behalf of, TEAM or any of its
Subsidiaries which might be entitled to any fee or commission from TEAM or any
of its affiliates upon consummation of the transactions contemplated by this
Agreement.
Section 5.16 Environmental Matters.
(a) Except as set forth in the TEAM SEC Reports or on Section 5.16 of the
Disclosure Letter:
(i) TEAM and each Subsidiary is and has at all times been in compliance in
all material respects with all Environmental Laws;
(ii) except in accordance with Permits, there has been no Release of
Hazardous Substances at any real property that is or was owned or
operated by TEAM during the period of such ownership or operation
except for Releases which could not reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect on
TEAM;
(iii) no notice, demand, request for information, citation, summons,
complaint or order has been received by, or, to the knowledge of TEAM,
is pending or threatened by any Person against, TEAM or any Subsidiary
nor has any penalty been assessed against TEAM or any Subsidiary with
respect to any alleged violation of any Environmental Law;
(iv) none of TEAM or any Subsidiary has disposed or arranged for the
disposal of Hazardous Substances on any third party property that has
resulted in or may reasonably be expected to result in material
liability to TEAM or any Subsidiary under any Environmental Law; and
(v) no underground tanks, asbestos-containing material or polychlorinated
biphenyls are or have been located on real property that is owned or
operated by TEAM or any Subsidiary nor were any underground tanks,
asbestos-containing material or polychlorinated biphenyls located on
real property formerly owned or operated by TEAM or any Subsidiary
during the period of TEAM's or such Subsidiary's ownership or
operations of such real property, or to the knowledge of TEAM, prior to
the period of TEAM's or such Subsidiary's ownership or operations of
such real property.
(b) There are no material Permits issued pursuant to or required under any
Environmental Law which require the consent, notification, approval or other
action of any Person to remain in full force and effect following consummation
of the transactions contemplated hereby. A true and complete list of all
material Permits issued pursuant to or required under Environmental Laws is set
forth in Section 5.16 of the Disclosure Letter attached hereto.
(c) There has been no written report of any environmental investigation, study,
audit, test, review or other analysis conducted of which TEAM has knowledge and
has in its possession or control relating to
App. A-30
<PAGE> 120
the business of TEAM or any real property that is owned or operated by TEAM or
any Subsidiary which has not been delivered to Mucho. (d) None of TEAM or any
Subsidiary has agreed to assume, undertake or provide indemnification for any
liability of any other Person under any Environmental Law, including any
obligation for corrective or remedial action.
Section 5.17 Subsidiaries. Except as set forth in Section 5.17 of the Disclosure
Letter, all the outstanding shares of capital stock of each Subsidiary have been
validly issued, are fully paid and nonassessable and are owned by TEAM free and
clear of all Liens or any other limitation or restriction. Except for the
capital stock of the Subsidiaries, TEAM does not own directly or indirectly, any
capital stock or other ownership interest in any other Person.
Section 5.18 Insurance. Each of TEAM and its Subsidiaries maintains insurance
policies (the "TEAM Insurance Policies") against all risks of a character and in
such amounts as are usually insured against by similarly situated companies in
the same or similar businesses. Section 5.18 of the Disclosure Letter sets forth
the type, deductible, coverage limits and term for each of the TEAM Insurance
Policies, and all of the information on Section 5.18 of the Disclosure Letter
with respect to each Insurance Policy is complete and accurate in all material
respects. Each TEAM Insurance Policy is in full force and effect and is valid,
outstanding and enforceable, and all premiums due thereon have been paid in
full. None of the TEAM Insurance Policies will terminate or lapse (or be
affected in any other materially adverse manner) by reason of the transactions
contemplated by this Agreement. Each of TEAM and its Subsidiaries has complied
in all material respects with the provisions of each TEAM Insurance Policy under
which it is the insured party. No insurer under any TEAM Insurance Policy has
canceled or generally disclaimed liability under any such policy or, to TEAM's
knowledge, indicated any intent to do so or not to renew any such policy. All
material claims under the TEAM Insurance Policies have been filed in a timely
fashion. Section 5.18 of the Disclosure Letter also sets forth all health
insurance and worker's compensation policies, and self-insurance funds or
similar arrangements with which TEAM or any of its Subsidiaries has been
associated within the last five years.
Section 5.19 Certain Business Practices. None of TEAM, any of its Subsidiaries
or any directors, officers, agents or employees of TEAM or any of its
Subsidiaries has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment. Neither TEAM nor any of its Subsidiaries has
participated in any boycotts.
Section 5.20 Customers. The documents and information supplied by TEAM to Mucho
or any of Mucho's representatives in connection with this Agreement with respect
to relationships and volumes of business done with its significant customers are
complete and accurate in all material respects. During the last 12 months, none
of TEAM or any Subsidiary has received any notices of termination or material
alteration of
App. A-31
<PAGE> 121
a contract or business relationship, or written threats of any such action from
any of the ten largest customers of TEAM and its Subsidiaries. Section 5.20 of
the Disclosure Letter contains a list of the five largest customers of TEAM and
its Subsidiaries.
Section 5.21 Contracts.
(a) Section 5.21 of the Disclosure Letter contains a complete and accurate list
of all contracts (written or oral), undertakings, commitments or agreements
(other than contracts, undertakings, commitments or agreements for employee
benefit matters set forth in Section 5.12 of the Disclosure Letter and real
property leases set forth in Section 5.25 of the Disclosure Letter) of the
following categories to which TEAM or any of its Subsidiaries is a party or by
which any of them is bound (collectively, and together with the contracts,
undertakings, commitments or agreements for employee benefit matters set forth
in Section 5.12 of the Disclosure Letter and the real property leases set forth
in Section 5.25 of the Disclosure Letter, the "TEAM Contracts"):
(i) Contracts requiring annual expenditures by or liabilities of TEAM or
its Subsidiaries in excess of $50,000 which have a remaining term in
excess of 90 days or are not cancelable (without material penalty, cost
or other liability) within 90 days;
(ii) promissory notes, loans, agreements, indentures, evidences of
indebtedness or other instruments relating to the lending of money,
whether as borrower, lender or guarantor, in excess of $50,000;
(iii) Contracts containing covenants limiting the freedom of TEAM or any of
its Subsidiaries to engage in any line of business or compete with any
Person, in any product line or line of business, or operate at any
location;
(iv) material joint venture or partnership agreements or material joint
development or similar agreements pursuant to which any third party has
been entitled or is reasonably expected to be entitled to share in
profits or losses of TEAM or its Subsidiaries;
(v) Contracts with any Governmental Authority which have a remaining term
in excess of one year or are not cancelable (without material penalty,
cost or other liability) within one year;
(vi) other material contracts or commitments in which TEAM or any of its
Subsidiaries has granted exclusive marketing rights relating to any
product or service, any group of products or services or any territory;
(vii) to the knowledge of TEAM, as of the date hereof, any other contracts
the performance of which could be reasonably expected to require
expenditures by TEAM or any of its Subsidiaries in excess of $50,000;
and
(viii) Contracts which are otherwise material to TEAM and its Subsidiaries.
App. A-32
<PAGE> 122
(b) Except as set forth in Section 5.21 of the Disclosure Letter, true and
complete copies of the written TEAM Contracts and descriptions of material
verbal contracts, if any, have been delivered to Mucho. Each of the TEAM
Contracts is a valid and binding obligation of TEAM and, to TEAM's knowledge
without any investigation, the other parties thereto, enforceable against TEAM
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, moratorium, reorganization, arrangement or similar Laws
affecting creditors' rights generally and by general principles of equity. To
the knowledge of TEAM, except for the execution of this Agreement and the
consummation of the transactions contemplated hereby and thereby, no event has
occurred which would, on notice or lapse of time or both, entitle the holder of
any indebtedness issued pursuant to a TEAM Contract set forth in Section 5.21 of
the Disclosure Letter in response to Section 5.21(a)(ii) to accelerate, or which
does accelerate, the maturity of any such indebtedness.
(c) Section 5.21(a) of the Disclosure Letter sets forth TEAM's and its
Subsidiaries' standard form Contractual Service Agreement (the "PEO Form
Contract") used by TEAM and its Subsidiaries for each of its PEO customers.
Section 5.21(c) of the Disclosure Letter also sets forth a copy of each PEO
Contract executed by TEAM or any Subsidiary and any customer with over 50
employees that has been modified from the PEO Form Contract.
(d) Neither TEAM nor any of its Subsidiaries is in breach, default or violation
(and no event has occurred or not occurred through TEAM's action or inaction or,
to the knowledge of TEAM, through the action or inaction of any third parties,
which with notice or the lapse of time or both would constitute a breach,
default or violation) of any term, condition or provision of any TEAM Contract
to which TEAM or any of its Subsidiaries is now a party or by which any of them
or any of their respective properties or assets may be bound, except for
violations, breaches or defaults that, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on TEAM.
Section 5.22 Disclosure. None of the representations or warranties made by TEAM
herein or in any exhibit or attachment hereto, including the Disclosure Letter,
or in any certificate furnished by TEAM pursuant to this Agreement, or in the
TEAM SEC Reports, when all such documents are read together in their entirety,
contains or will contain at the Effective Time any untrue statement of a
material fact, or omits or will omit at the Effective Time to state any material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances under which made, not misleading.
Section 5.23 Intellectual Property.
(a) Each of TEAM and its Subsidiaries owns or possesses adequate licenses or
other valid rights to use all of TEAM's existing United States and foreign
patents, trademarks, trade names, service marks, copyrights, trade secrets and
applications therefor ("TEAM Intellectual Property Rights") except where the
failure to own or possess valid rights to use such TEAM Intellectual Property
Rights could not reasonably be expected to have a Material Adverse Effect on
TEAM.
App. A-33
<PAGE> 123
(b) The validity of TEAM Intellectual Property Rights and the title thereto of
TEAM or any Subsidiary, as the case may be, is not being questioned in any
pending litigation proceeding to which TEAM or any Subsidiary is a party nor, to
the knowledge of TEAM, is any such litigation proceeding threatened. Except as
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on TEAM and except as set forth in Section 5.23 of the
Disclosure Letter, the conduct of the business of TEAM and its Subsidiaries as
now conducted does not, to the knowledge of TEAM, infringe any valid patents,
trademarks, trade names, service marks or copyrights of others, and the
consummation of the transactions completed by this Agreement will not result in
the loss or impairment of any TEAM Intellectual Property Rights.
Section 5.24 Related Party Transactions. Except as set forth in the TEAM SEC
Reports or Section 5.24 of the Disclosure Letter, (a) no beneficial owner of 5%
or more of TEAM's outstanding capital stock, or (b) officer or director of TEAM
(or any immediate family member of such officer or director) or (c) any Person
(other than TEAM) in which any such beneficial owner, officer or director owns
any beneficial interest (other than a publicly held corporation whose stock is
traded on a national securities exchange or in the over-the-counter market and
less than 1% of the stock of which is beneficially owned by all such Persons)
(collectively, "TEAM Related Parties") has any interest in: (i) any material
contract, arrangement or understanding with, or relating to, the business or
operations of, TEAM or any of its Subsidiaries; (ii) any material loan,
arrangement, understanding, agreement or contract for or relating to
indebtedness of TEAM or any of its Subsidiaries, or (iii) any property (real,
personal or mixed), tangible or intangible, used in the business or operations
of TEAM or any of its Subsidiaries. Following the Effective Time, except for
obligations set forth in this Agreement, neither TEAM nor any of its
Subsidiaries will have any material obligations to any TEAM Related Party except
for (x) accrued salary for such TEAM Related Party for the pay period commencing
immediately prior to the Effective Time and (y) the obligations set forth in the
TEAM SEC Reports and Section 5.24 of the Disclosure Letter.
Section 5.25 Assets.
(a) The assets and properties of TEAM and its Subsidiaries, considered as a
whole, constitute all of the material assets and properties which are reasonably
required for the business and operations of TEAM and its Subsidiaries as
presently conducted. TEAM and its Subsidiaries have good and marketable title to
or a valid leasehold estate in all material personal properties and assets
reflected on TEAM's Balance Sheet at the TEAM Balance Sheet Date (except for
properties or assets subsequently sold in the ordinary course of business
consistent with past practice).
(b) Section 5.25 of the Disclosure Letter sets forth (i) a complete and accurate
list of each improved and unimproved real property (each, a "TEAM Property")
owned or leased by TEAM or any of its Subsidiaries, and the current use of such
TEAM Property and indicating whether the TEAM Property is owned or leased, (ii)
a complete and accurate list of all leases pursuant to which TEAM or any of its
Subsidiaries lease personal property and (iii) with respect to each lease for
TEAM Property, the term (including renewal options) and current fixed rent.
App. A-34
<PAGE> 124
(c) Except as set forth in Section 5.25 of the Disclosure Letter, there are no
pending or, to the knowledge of TEAM, threatened condemnation or similar
proceedings relating to any of the TEAM Properties of TEAM and its Subsidiaries,
except for such proceedings which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on TEAM.
Section 5.26 Ohio Corporate Law Section 1704.02. TEAM has heretofore delivered
to Mucho a complete and correct copy of the resolutions of the board of
directors of TEAM to the effect that pursuant to 1704.02(A) of the Ohio
Corporate Law, the restrictions contained in Section 1704.02 of Ohio Corporate
Law are and shall be inapplicable to the Merger, the Tender Offer and the
transactions contemplated by this Agreement, as it may be amended from time to
time.
ARTICLE V-A
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Merger Sub represents and warrants to Mucho that:
Section 5.1A Corporate Existence and Power. Merger Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of Nevada and
has all corporate powers to execute and deliver this Agreement and to consummate
the Merger and the transactions contemplated hereby. Since the date of its
incorporation, Merger Sub has not engaged in any activities other than in
connection with or as contemplated by this Agreement.
Section 5.2A Corporate Authorization. The execution, delivery and performance by
Merger Sub of this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby are within the corporate powers of Merger Sub
and have been duly authorized by all necessary corporate and Shareholder action.
This Agreement constitutes a valid and binding agreement of Merger Sub.
Section 5.3A Governmental Authorization. The execution, delivery and performance
Merger Sub of this Agreement and the consummation of the transactions
contemplated by this Agreement require no action by or in respect of, or filing
with, any Governmental Authority other than (a) the filing of a certificate of
merger in accordance with the applicable terms of Nevada Corporate Law, (b)
compliance with any applicable requirements of the HSR Act; (c) compliance with
the applicable requirements of the Exchange Act; (d) compliance with the
applicable requirements of the Securities Act; (e) compliance with any
applicable foreign or state securities or Blue Sky Laws; and (f) such other
items the failure of which to be obtained could not reasonably be expected to
have a Material Adverse Effect.
Section 5.4A Non-Contravention. The execution, delivery and performance Merger
of this Agreement and the consummation by Merger Sub of the transactions
contemplated hereby do not and will not (a) contravene or conflict with the
articles of incorporation or by-laws or similar organizational documents of
Merger Sub, (b) to Merger Sub's knowledge, contravene, conflict with or
constitute a violation of any provision of Law, regulation, judgment, order or
decree binding upon Merger Sub or (c) to Merger Sub's
App. A-35
<PAGE> 125
knowledge, constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Merger Sub or to a
loss of any benefit to which Merger Sub is entitled under any agreement,
contract or other instrument binding upon Merger Sub.
Section 5.5A Litigation. There is no action, suit or proceeding, claim,
arbitration or investigation against Merger Sub pending or, to Merger Sub's
knowledge, threatened against Merger Sub or any of its properties, assets or
rights before any Governmental Authority which could reasonably be expected to
prevent Merger Sub from consummating the transactions contemplated by this
Agreement, and to the knowledge of Merger Sub, there is no basis for any such
Proceeding.
Section 5.6A Capitalization. As of the date hereof, the authorized shares of
Merger Sub consists of [500] shares of common stock with par value $0.001 per
share of which as of the date hereof there were [250] outstanding shares. All
outstanding capital stock of Merger Sub and TEAM has been duly authorized and
validly issued and are fully paid and nonassessable.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF MUCHO
Mucho represents and warrants to TEAM and Merger Sub that except as set
forth in the corresponding sections or subsections of the Disclosure Letter
delivered to TEAM by Mucho concurrently with entering into this Agreement:
Section 6.1 Corporate Existence and Power. Section 6.1 of the Disclosure Letter
lists each Subsidiary of Mucho and the number of shares and percentage of such
Subsidiary's outstanding equity interest owned by Mucho. Section 6.1 of the
Disclosure Letter also lists, for each of Mucho and its Subsidiaries, its
jurisdiction of incorporation and the states in which it is qualified to do
business. Mucho is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers required to carry on its business as now conducted. Mucho is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified could not, individually
or in the aggregate, be reasonably expected to have a Material Adverse Effect on
Mucho. Mucho has heretofore delivered or made available to TEAM true and
complete copies of the currently effective articles of incorporation and bylaws
or similar organizational documents of Mucho (as the same may be amended and
restated as of the date hereof).
Section 6.2 Corporate Authorization. The execution, delivery and performance by
Mucho, of this Agreement and the consummation by Mucho of the transactions
contemplated hereby (i) are within Mucho's corporate powers and (ii) except for
the adoption of this Agreement and approval of the Merger by the affirmative
vote of the majority of the voting interests of the outstanding shares of Mucho
Common Stock, have been authorized by all necessary corporate action and
stockholder action. This Agreement has
App. A-36
<PAGE> 126
been duly and validly executed and delivered by Mucho and constitutes a valid,
legal and binding agreement of Mucho enforceable against Mucho in accordance
with its terms, except (i) as rights to indemnity hereunder may be limited by
federal or state securities Laws or the public policies embodied therein, (ii)
as such enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar Laws affecting the enforcement of creditors' rights
generally, and (iii) as the remedy of specific performance and other forms of
injunctive relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
Section 6.3 Governmental Authorization. The execution, delivery and performance
by Mucho of this Agreement and the consummation of the Merger by Mucho require
no action by or in respect of, or filing with, any Governmental Authority other
than (i) the filing of a certificate of merger in respect of the Merger in
accordance with and Nevada Corporate Law; (ii) compliance with any applicable
requirements of the HSR Act; (iii) compliance with the applicable requirements
of the Exchange Act; (iv) compliance with the applicable requirements of the
Securities Act; (v) compliance with any applicable foreign or state securities
or Blue Sky Laws; (vi) the filing of appropriate documents with the relevant
authorities of the jurisdictions in which Mucho is qualified to do business; and
(vii) such other items that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Mucho.
Section 6.4 Non-Contravention. Other than as set forth in Section 6.4 of the
Disclosure Letter, the execution, delivery and performance by Mucho of this
Agreement and the consummation by Mucho of the transactions contemplated hereby
do not and will not (i) contravene or conflict with the articles of
incorporation, by-laws or similar organizational documents of Mucho, (ii) to
Mucho's knowledge contravene or conflict with or constitute a violation of any
provision of any Law, regulation, judgment, writ, injunction, order or decree of
any court or Governmental Authority binding upon or applicable to Mucho or its
properties or assets, (iii) to Mucho's knowledge constitute a default under or
give rise to a right of termination, cancellation or acceleration of any right
or obligation of Mucho or to a loss of any benefit to which Mucho is entitled
under any provision of any agreement, contract or other instrument binding upon
Mucho or any of its Subsidiaries, or (iv) to Mucho's knowledge result in the
creation or imposition of any Lien on any asset of Mucho or any of its
Subsidiaries, except, in the case of clauses (ii), (iii) and (iv), for any such
violation, failure to obtain any such consent or other action, default, right,
loss or Lien that could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Mucho.
App. A-37
<PAGE> 127
Section 6.5 Capitalization.
(a) The authorized capital stock of Mucho consists of ________ shares of Mucho
Common Stock. As of June 15, 2000, there were _________ shares of common stock
issued and outstanding. As of June 15, 2000, there were outstanding Mucho
Options to purchase an aggregate of _________ shares of Mucho Common Stock (of
which an aggregate of _______ shares of Mucho Common Stock were vested and
exercisable). Section 6.5 of the Disclosure Letter sets forth a complete list of
options and warrants specifying the characteristics of the security, the
exercise price, vesting schedule, and conditions for vesting and exercise. All
outstanding shares of capital stock of Mucho have been duly authorized and
validly issued and are fully paid and nonassessable.
(b) Except as set forth in this Section 6.5, there are (i) no outstanding shares
of capital stock or other voting securities of Mucho or any of its Subsidiaries,
(ii) no securities of Mucho convertible into or exchangeable for shares of
capital stock or voting securities of Mucho, (iii) no options or other rights to
acquire from Mucho or obligations of Mucho to issue, any shares of capital
stock, voting securities or securities convertible into or exchangeable for
shares of capital stock or voting securities of Mucho, and (iv) no equity
equivalent interests in the ownership or earnings of Mucho or its Subsidiaries
or other similar rights (the items in clauses (b)(i), (ii), (iii) and (iv) being
referred to collectively as "Mucho Securities"). Except as set forth on Section
6.5 of the Disclosure Letter, there are no outstanding obligations of Mucho or
any Subsidiary to repurchase, redeem or otherwise acquire any Mucho Securities.
Except as set forth on Section 6.5 of the Disclosure Letter, there are no
stockholder agreements, voting trusts or other agreements or understandings to
which Mucho or any of its Subsidiaries is a party or by which it is bound
relating to the voting or registration of any shares of capital stock of Mucho
or any of its Subsidiaries or any preemptive rights with respect thereto.
Section 6.6 Disclosure Documents. The Joint Statement to be filed with the SEC
in connection with the Merger, the Tender Offer and the related transactions
will not, at the date it is first mailed to Mucho's stockholders, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Joint
Statement will comply as to form in all material respects with the requirements
of the Exchange Act. No representation is made by Mucho with respect to
statements made in the Joint Statement based on information supplied by TEAM for
inclusion therein.
App. A-38
<PAGE> 128
Section 6.7 Absence of Certain Changes or Events.
(a) Since the Mucho Balance Sheet Date, and except as disclosed in Section 6.7
of the Disclosure Letter, the business of Mucho has been conducted in all
material respects in the ordinary course, Mucho has not, other than ongoing
efforts to raise capital and financing which are disclosed on Section 6.7 of the
Disclosure Letter, engaged in any transaction, or series of related transactions
material to Mucho and its Subsidiaries taken as a whole other than in the
ordinary course, and there has not been any event, occurrence or development,
alone or taken together with all other existing facts, that, individually or in
the aggregate, has had, or could reasonably be expected to have, a Material
Adverse Effect on Mucho.
(b) Without limiting the generality of the foregoing Section 6.7(a), since the
Mucho Balance Sheet Date and except as disclosed in Section 6.7 of the
Disclosure Letter, there has not been:
(i) any damage, destruction or loss to any of the assets or properties of
Mucho or any of its Subsidiaries that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect;
(ii) any declaration, setting aside or payment of any dividend or
distribution or capital return in respect of any shares of Mucho's
capital stock or any redemption, purchase or other acquisition by Mucho
or any of its Subsidiaries of any shares of Mucho's capital stock or
any repurchase, redemption or other purchase by Mucho or any of its
Subsidiaries of any outstanding shares of capital stock or other
securities of, or other ownership interests in, Mucho or any of its
Subsidiaries, or any amendment of any material term of any outstanding
security of Mucho or any of its Subsidiaries that individually or in
the aggregate could reasonably be expected to have a Material Adverse
Effect;
(iii) any sale, assignment, transfer, lease or other disposition or agreement
to sell, assign, transfer, lease or otherwise dispose of any of the
assets of Mucho or any of its Subsidiaries that individually or in the
aggregate could reasonably be expected to have a Material Adverse
Effect;
(iv) any acquisition (by merger, consolidation, or acquisition of stock or
assets) by Mucho or any of its Subsidiaries of any corporation,
partnership or other business organization or division thereof or any
equity interest therein that individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect;
(v) any loans or advances to any Person in excess of $10,000 or that
individually or in the aggregate could reasonably be expected to have a
Material Adverse Effect;
(vi) any incurrence of or guarantee with respect to any indebtedness for
borrowed money by Mucho or any of its Subsidiaries other than pursuant
to existing credit facilities in the ordinary course of business or any
creation or assumption by Mucho or any of its Subsidiaries of any
material Lien on
App. A-39
<PAGE> 129
any material asset that individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect;
(vii) any material change in any method of accounting or accounting practice
or tax or tax practice used by Mucho or any of its subsidiaries, other
than such changes required by a change in law or GAAP;
(viii) (A) any employment, deferred compensation, severance or similar
agreement entered into or amended by Mucho or any of its Subsidiaries
and any employee, in each case other than sales commission agreements
and product promotional agreements entered into in the ordinary course
of business consistent with past business practices, (B) any increase
in the compensation payable or to become payable by Mucho or any of its
Subsidiaries to any of its directors or officers or generally
applicable to all or any category of Mucho's or any of its
Subsidiaries' employees, (C) any increase in the coverage or benefits
available under any vacation pay, company awards, salary continuation
or disability, sick leave, deferred compensation, bonus or other
incentive compensation, insurance, pension or other employee benefit
plan, payment or arrangement made to, for or with any of the directors
or officers of Mucho or any of its Subsidiaries or generally applicable
to all or any category of Mucho's or its Subsidiaries' employees or (D)
severance pay arrangements made to, for or with such directors,
officers or employees other than, in the case of (B) and (C) above,
increases in the ordinary course of business consistent with past
business practices and that in the aggregate have not resulted in a
material increase in the benefits or compensation expense of Mucho or
any of its Subsidiaries;
(ix) any revaluing in any respect of any of the assets of Mucho or any of
its Subsidiaries, including without limitation writing down the value
of inventory or writing off notes or accounts receivable other than in
the ordinary course of business that individually or in the aggregate
could reasonably be expected to have a Material Adverse Effect;
(x) any loan, advance or capital contribution made by Mucho or any of its
Subsidiaries to, or investment in, any Person other than loans,
advances or capital contributions, or investments of Mucho made in the
ordinary course of business that individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect;
(xi) any change, amendment or formal notice to Mucho with respect to any
insurance policy or program of Mucho or any new insurance policy that
individually or in the aggregate could reasonably be expected to have a
Material Adverse Effect;
(xii) any agreement to take any actions specified in this Section 6.7(b),
except for this Agreement; or
(xiii) any adverse change in Mucho's or any of its Subsidiaries' worker's
compensation experience that individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect.
App. A-40
<PAGE> 130
Section 6.8 No Undisclosed Material Liabilities. There are no material
liabilities of Mucho or any of its Subsidiaries whether accrued, contingent,
absolute, determined, determinable or otherwise, which would be required by GAAP
to be reflected on the Mucho Balance Sheet (including the notes thereto), other
than liabilities and obligations which, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on Mucho, and other
than:
(i) liabilities incurred to perform this Agreement; and
(ii) those set forth in Section 6.8 of the Disclosure Letter.
Section 6.9 Litigation. Except as set forth in Section 6.9 to the Disclosure
Letter, (a) there is no action, suit, investigation or proceeding pending
against, or, to the knowledge of Mucho, threatened against or affecting, Mucho
or any of its Subsidiaries' or their respective properties before any court or
arbitrator or any Governmental Authority (a "Mucho Proceeding") and (b) to the
knowledge of Mucho, there is no basis for any such Mucho Proceeding.
Section 6.10 Taxes.
(a) Except as set forth on Section 6.10 to the Disclosure Letter, Mucho and
each of its Subsidiaries:
(i) has filed all material Tax Returns that it was required to file and has
paid or caused to be paid all Taxes required to be paid by it
(including, but not limited to, any such Taxes shown due on any Tax
Return);
(ii) has filed or caused to be filed (within any applicable extension
periods) all Tax Returns required to be filed by it with the
appropriate taxing authority in all jurisdictions in which such Tax
Returns are required to be filed, and all Tax Returns filed by Mucho
and each of its Subsidiaries are true and correct in all material
respects; and
(iii) has not requested or caused to be requested any extension of time
within which to file any material Tax Return, which Tax Return has not
since been filed.
(b) Mucho has delivered to TEAM true, correct and complete copies of all federal
Tax Returns filed by or on behalf of Mucho or any of its Subsidiaries for any
tax periods ending since the incorporation of Mucho.
(c) Except as set forth in Section 6.10 to the Disclosure Letter:
(i) Mucho has not been notified by the Internal Revenue Service or any
other taxing authority that any material dispute or claims have been
raised by the Internal Revenue Service or any other taxing authority in
connection with any Tax Return filed by or on behalf of Mucho;
App. A-41
<PAGE> 131
(ii) there are no pending Tax audits and no waivers of statutes of
limitations have been given or requested;
(iii) no Tax Liens have been filed against Mucho or any of its Subsidiaries,
except for Tax Liens for current Taxes not yet due and payable for
which adequate reserves have been provided in the latest balance sheet
of Mucho;
(iv) no material unresolved deficiencies or additions to Taxes have been
proposed, asserted, or assessed against Mucho;
(v) none of Mucho or any of its Subsidiaries has received notice from any
taxing authority in a jurisdiction in which Mucho does not file Tax
Returns that Mucho is or may be subject to taxation by that
jurisdiction;
(vi) Mucho and each Subsidiary has withheld and paid all material Taxes
required to be withheld and paid in connection with amounts paid or
owing to any employee;
(vii) none of Mucho or any of its Subsidiaries is a party to a Tax sharing,
Tax allocation or similar agreement and is not bound by any closing
agreement, offer in compromise or other agreement with any Tax
authority;
(viii) except in accordance with past practice, none of Mucho or any of its
Subsidiaries has taken any action that would have the effect of
deferring any taxable income of Mucho or any Subsidiary from any
taxable period or portion thereof ending before the Effective Time to
any period following the Effective Time. None of Mucho or any of its
Subsidiaries is required to include in its income any adjustment
pursuant to Section 481 of the Code following the Effective Time; and
(ix) there is no contract, agreement, plan or arrangement covering any
employee or former employee of Mucho or any of its affiliates that,
individually or collectively, could give rise to the payment of any
amount that would not be deductible pursuant to the terms of Section
280G of the Code or that could obligate Mucho to make any payments that
will not be fully deductible by virtue of Section 162(m) of the Code.
Section 6.11 ERISA. Mucho does not contribute to or maintain any Employee
Benefit Plan (as defined in Section 3(3) of ERISA), material benefit
arrangement, plan, or policy, including without limitation, (i) a deferred
compensation plan, (ii) a material equity compensation plan, or (iii) benefit
arrangements which are subject to any provision of ERISA or are maintained,
administered or contributed to by Mucho or any affiliate under which Mucho has
any liability.
Section 6.12 Labor Matters. There are no strikes, slowdowns, work stoppages,
lockouts, union organizational campaigns or other protected concerted activity
under the National Labor Relations Act or, to the knowledge of Mucho, threats
thereof, by or with respect to any employees of Mucho which could
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reasonably be expected to have a Material Adverse Effect on Mucho. There are no
controversies pending or, to the knowledge of Mucho, threatened between Mucho
and any of its employees, customers or clients, which controversies have or
could reasonably be expected to have a Material Adverse Effect on Mucho. Mucho
is not a party to any collective bargaining agreement or other labor union
contract applicable to Persons employed by Mucho. There are no pending or, to
the knowledge of Mucho, threatened charges or complaints against Mucho by the
National Labor Relations Board or any comparable state agency.
Section 6.13 Compliance with Laws and Court Orders. Neither Mucho nor its
Subsidiaries is in violation of, and to the knowledge of Mucho, nothing is under
investigation with respect to or has been threatened to be charged with or given
notice of any violation of, any applicable Law, except for possible violations
that have not had and could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Mucho. This Section does not
relate to matters with respect to Taxes or Environmental Laws which are
exclusively the subject of Sections 6.10 and 6.15, respectively.
Section 6.14 Finders' Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by, or is authorized to act on behalf
of, Mucho or any of its Subsidiaries which might be entitled to any fee or
commission from the Mucho or any of its affiliates upon consummation of the
transactions contemplated by this Agreement.
Section 6.15 Environmental Matters.
(a) Except as set forth in Section 6.15 of the Disclosure Letter:
(i) Mucho and each Subsidiary is and has at all times been in compliance in
all material respects with all Environmental Laws;
(ii) except in accordance with Permits, there has been no Release of
Hazardous Substances at any real property that is or was owned or
operated by Mucho during the period of such ownership or operation
except for Releases which could not reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect on
Mucho;
(iii) no notice, demand, request for information, citation, summons,
complaint or order has been received by, or, to the knowledge of Mucho,
is pending or threatened by any Person against, Mucho or any Subsidiary
nor has any penalty been assessed against Mucho or any Subsidiary with
respect to any alleged violation of any Environmental Law;
(iv) none of Mucho or any Subsidiary has disposed or arranged for the
disposal of Hazardous Substances on any third party property that has
resulted in or may reasonably be expected to result in material
liability to Mucho or any Subsidiary under any Environmental Law; and
(v) no underground tanks, asbestos-containing material or polychlorinated
biphenyls are or have been located on real property that is owned or
operated by Mucho or any Subsidiary nor were any
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underground tanks, asbestos-containing material or polychlorinated
biphenyls located on real property formerly owned or operated by Mucho
or any Subsidiary during the period of Mucho's or such Subsidiary's
ownership or operations of such real property, or to the knowledge of
Mucho, prior to the period of Mucho's or such Subsidiary's ownership or
operations of such real property.
(b) There are no material Permits issued pursuant to or required under any
Environmental Law which require the consent, notification, approval or other
action of any Person to remain in full force and effect following consummation
of the transactions contemplated hereby. A true and complete list of all
material Permits issued pursuant to or required under Environmental Laws is set
forth in Section 6.15 of the Disclosure Letter attached hereto.
(c) There has been no written report of any environmental investigation, study,
audit, test, review or other analysis conducted of which Mucho has knowledge
relating to the business of Mucho or any real property that is owned or operated
by Mucho.
(d) Mucho has not agreed to assume, undertake or provide indemnification for any
liability of any other Person under any Environmental Law, including any
obligation for corrective or remedial action.
Section 6.16 Subsidiaries. Except as set forth in Section 6.16 of the Disclosure
Letter, all the outstanding shares of capital stock of each Subsidiary have been
validly issued, are fully paid and nonassessable and are owned by Mucho free and
clear of all Liens or any other limitation or restriction. Except for the
capital stock of the Subsidiaries, Mucho does not own directly or indirectly,
any capital stock or other ownership interest in any other Person. The
outstanding capitalization of each Subsidiary is set forth on Section 7.1 of the
Disclosure Letter.
Section 6.17 Insurance. Section 6.17 of the Disclosure Letter sets forth the
type, deductible, coverage limits and term for each insurance policy Mucho
maintains (the "Mucho Insurance Policies"), and all of the information on
Section 6.17 of the Disclosure Letter with respect to each Insurance Policy is
complete and accurate in all material respects. Each Mucho Insurance Policy is
in full force and effect and is valid, outstanding and enforceable, and all
premiums due thereon have been paid in full. None of the Mucho Insurance
Policies will terminate or lapse (or be affected in any other materially adverse
manner) by reason of the transactions contemplated by this Agreement. Mucho has
complied in all material respects with the provisions of each Mucho Insurance
Policy under which it is the insured party. No insurer under any Mucho Insurance
Policy has canceled or generally disclaimed liability under any such policy or,
to Mucho's knowledge, indicated any intent to do so or not to renew any such
policy. All material claims under the Mucho Insurance Policies have been filed
in a timely fashion. Section 6.17 of the Disclosure Letter also sets forth all
health insurance and worker's compensation policies, and self-insurance funds or
similar arrangements with which Mucho has been associated.
Section 6.18 Certain Business Practices. None of Mucho or any of its
Subsidiaries, or any directors, officers, agents or employees of Mucho or any of
its Subsidiaries has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political activity, (ii)
made any
App. A-44
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unlawful payment to foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns or violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended, or (iii) made any other
unlawful payment. Neither Mucho nor any of its Subsidiaries has participated in
any boycotts.
Section 6.19 Contracts.
(a) Section 6.19 of the Disclosure Letter contains a complete and accurate list
of all contracts (written or oral), undertakings, commitments or agreements
(other than contracts, undertakings, commitments or agreements for employee
benefit matters set forth in Section 6.11 of the Disclosure Letter and real
property leases set forth in Section 6.23 of the Disclosure Letter) of the
following categories to which Mucho or any of its Subsidiaries is a party or by
which any of them is bound as of the date hereof (collectively, and together
with the contracts, undertakings, commitments or agreements for employee benefit
matters and the real property leases set forth in Section 6.23 of the Disclosure
Letter, the "Mucho Contracts"):
(i) Contracts requiring annual expenditures by or liabilities of Mucho or
its Subsidiaries in excess of $50,000 which have a remaining term in
excess of 90 days or are not cancelable (without material penalty, cost
or other liability) within 90 days;
(ii) promissory notes, loans, agreements, indentures, evidences of
indebtedness or other instruments relating to the lending of money,
whether as borrower, lender or guarantor, in excess of $50,000;
(iii) Contracts containing covenants limiting the freedom of Mucho or its
Subsidiaries to engage in any line of business or compete with any
Person, in any product line or line of business, or operate at any
location;
(iv) material joint venture or partnership agreements or material joint
development or similar agreements pursuant to which any third party has
been entitled or is reasonably expected to be entitled to share in
profits or losses of Mucho or its Subsidiaries;
(v) Contracts with any Governmental Authority which have a remaining term
in excess of one year or are not cancelable (without material penalty,
cost or other liability) within one year;
(vi) other material Mucho Contracts or commitments in which Mucho or any of
its Subsidiaries has granted exclusive marketing rights relating to any
product or service, any group of products or services or any territory;
(vii) to the knowledge of Mucho, as of the date hereof, any other Mucho
Contract the performance of which could be reasonably expected to
require expenditures by Mucho or any of its Subsidiaries in excess of
$50,000; and
(viii) Mucho Contracts which are otherwise material to Mucho and its
Subsidiaries.
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<PAGE> 135
(b) Except as set forth in Section 6.19 of the Disclosure Letter, true and
complete copies of the written Mucho Contracts and descriptions of verbal
material Mucho Contracts, if any, have been made available to TEAM. Each of the
Mucho Contracts is a valid and binding obligation of Mucho and, to Mucho's
knowledge without any investigation, the other parties thereto, enforceable
against Mucho in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, moratorium, reorganization, arrangement or similar
Laws affecting creditors' rights generally and by general principles of equity.
To the knowledge of Mucho, except for the execution of this Agreement and the
consummation of the transactions contemplated hereby and thereby, no event has
occurred which would, on notice or lapse of time or both, entitle the holder of
any indebtedness issued pursuant to a Mucho Contract set forth in Section 7.19
of the Disclosure Letter in response to Section 6.19(a)(ii) to accelerate, or
which does accelerate, the maturity of any such indebtedness.
(c) Neither Mucho nor any of its Subsidiaries is in breach, default or violation
(and no event has occurred or not occurred through Mucho's action or inaction
or, to the knowledge of Mucho, through the action or inaction of any third
parties, which with notice or the lapse of time or both would constitute a
breach, default or violation) of any term, condition or provision of any Mucho
Contract to which Mucho or any of its Subsidiaries is now a party or by which
any of them or any of their respective properties or assets may be bound, except
for violations, breaches or defaults that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
Section 6.20 Disclosure. None of the representations or warranties made by Mucho
herein or in any exhibit or attachment hereto, including the Disclosure Letter,
or in any certificate furnished by Mucho pursuant to this Agreement, when all
such documents are read together in their entirety, contains or will contain at
the Effective Time any untrue statement of a material fact, or omits or will
omit at the Effective Time to state any material fact necessary in order to make
the statements contained herein or therein, in light of the circumstances under
which made, not misleading.
Section 6.21 Intellectual Property.
(a) Each of Mucho and its Subsidiaries owns or possesses adequate licenses or
other valid rights to use all of Mucho's existing United States and foreign
patents, trademarks, trade names, service marks, copyrights, trade secrets and
applications therefor (the "Mucho Intellectual Property Rights") except where
the failure to own or possess valid rights to use such Mucho Intellectual
Property Rights could not reasonably be expected to have a Material Adverse
Effect on Mucho.
(b) The validity of the Mucho Intellectual Property Rights and the title thereto
of Mucho or any Subsidiary, as the case may be, is not being questioned in any
pending litigation proceeding to which Mucho or any Subsidiary is a party nor,
to the knowledge of Mucho, is any such litigation proceeding threatened. Except
as could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Mucho and except as set forth in Section 6.21 of the
Disclosure Letter, the conduct of the business of Mucho and its Subsidiaries as
now conducted does not, to the knowledge of Mucho,
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<PAGE> 136
infringe any valid patents, trademarks, trade names, service marks or copyrights
of others, and the consummation of the transactions completed by this Agreement
will not result in the loss or impairment of any Mucho Intellectual Property
Rights.
Section 6.22 Related Party Transactions. Except as set forth in Section 6.22 of
the Disclosure Letter, (a) no beneficial owner of 5% or more of the Mucho's
outstanding capital stock, or (b) officer or director of Mucho (or any immediate
family member of such officer or director) or (c) any Person (other than Mucho)
in which any such beneficial owner, officer or director owns any beneficial
interest (other than a publicly held corporation whose stock is traded on a
national securities exchange or in the over-the-counter market and less than 1%
of the stock of which is beneficially owned by all such Persons) (collectively,
"Mucho Related Parties") has any interest in: (i) any material contract,
arrangement or understanding with, or relating to, the business or operations
of, Mucho or any of its Subsidiaries; (ii) any material loan, arrangement,
understanding, agreement or contract for or relating to indebtedness of Mucho or
any of its Subsidiaries, or (iii) any property (real, personal or mixed),
tangible or intangible, used in the business or operations of Mucho or any of
its Subsidiaries. Following the Effective Time, except for obligations set forth
in this Agreement, neither Mucho nor any of its Subsidiaries will have any
material obligations to any Mucho Related Party except for (x) accrued salary
for such Mucho Related Party for the pay period commencing immediately prior to
the Effective Time and (y) the obligations set forth in Section 6.22 of the
Disclosure Letter.
Section 6.23 Assets.
(a) Except as disclosed in Section 6.23 of the Disclosure Letter, the assets and
properties of Mucho, considered as a whole, constitute all of the material
assets and properties which are reasonably required for the business and
operations of Mucho as presently conducted. Mucho has good and marketable title
to or a valid leasehold estate in all material personal properties and assets
reflected on Mucho's Balance Sheet (except for properties or assets subsequently
sold in the ordinary course of business).
(b) Section 6.23 of the Disclosure Letter sets forth (i) a complete and accurate
list of each improved and unimproved real property (each, a "Mucho Property")
owned or leased by Mucho, and the current use of such Mucho Property and
indicating whether the Mucho Property is owned or leased, (ii) a complete and
accurate list of all leases pursuant to which Mucho leases personal property and
(iii) with respect to each lease for Mucho Property, the term (including renewal
options) and current fixed rent.
(c) Except as set forth in Section 6.23 of the Disclosure Letter, there are no
pending or, to the knowledge of Mucho, threatened condemnation or similar
proceedings relating to any of the Properties of Mucho, except for such
proceedings which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Mucho.
Section 6.24 Financial Statements. The Mucho Balance Sheet and the audited Mucho
statement of operations which will be provided to TEAM within 30 days after the
date of this Agreement and the Mucho Interim Balance Sheet and the Mucho interim
statement of operations for the quarter ended March
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<PAGE> 137
31, 2000 fairly present, in all material respects, the financial position of
Mucho as of the dates thereof and the results of their operations and their cash
flows for the periods set forth therein, in each case in accordance with GAAP
consistently applied during the periods involved (except as otherwise disclosed
in the notes thereto and subject, where appropriate, to normal adjustments). The
Mucho Balance Sheet and the audited Mucho statement of operations will not be
materially different from the unaudited versions of such financial statements
previously provided to TEAM.
Section 6.25 Stock Options. Schedule 6.25 sets forth a complete and accurate
list of Mucho's qualified and non-qualified stock options, and accurately sets
forth the grant date and exercise price for such options. Each of the options
were duly granted under the terms of the Mucho.com 2000 Stock Option Plan (the
"Mucho Option Plan"). The Mucho Option Plan was duly adopted by the Mucho board
of directors and the Mucho Shareholders. The Mucho qualified options were issued
and have remained in compliance with Section 422 of the Code.
Section 6.26 Nevada Corporate Law. Mucho has heretofore made available to TEAM a
complete and correct copy of the resolutions of the board of directors of Mucho
that have been adopted in accordance with Nevada Corporate Law and that
authorize the Merger and the transactions contemplated by this Agreement.
Section 6.27 Offering Memoranda. In connection with its securities offerings
since its incorporation, Mucho has (i) complied in all material respects with
the applicable requirements of the Securities Act, the Exchange Act, and the
blue sky laws and (ii) the offering memoranda in connection with such offerings
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading as of the date on which the offering memorandum was dated.
ARTICLE VII
COVENANTS OF TEAM
Section 7.1 Conduct of TEAM and its Subsidiaries. Except for matters set forth
in Section 7.1 of the Disclosure Letter or as otherwise expressly contemplated
by or specifically provided in this Agreement, without the prior written consent
of Mucho (which shall not be unreasonably withheld) from the date hereof to the
Effective Time, TEAM shall, and shall cause each of its Subsidiaries to, carry
on its business in the ordinary and usual course of business and consistent with
past practice and shall use its reasonable best efforts to (i) preserve intact
its present business organization, (ii) maintain in effect all material federal,
state and local Permits that are required for TEAM or any of its Subsidiaries to
carry on its business, (iii) keep available the services of its key officers and
key employees and (iv) maintain satisfactory relationships with its customers,
lenders, suppliers and others having material business relationships with it.
Without limiting the generality of the foregoing, and except for matters set
forth in Section 7.1 of the Disclosure Letter attached hereto or as otherwise
expressly contemplated by or specifically provided in this
App. A-48
<PAGE> 138
Agreement, without the prior written consent of Mucho (which shall not be
unreasonably withheld), prior to the Effective Time, TEAM shall not and shall
not permit its Subsidiaries to:
(a) adopt any change in its respective articles of incorporation or bylaws or
comparable organizational documents except that TEAM shall increase its
authorized capital from 10,000,000 shares of common stock to 20,000,000 shares
of common stock;
(b) except pursuant to existing agreements or arrangements set forth in Section
7.1 of the Disclosure Letter, (i) acquire (by merger, consolidation, acquisition
of stock or assets, joint venture or otherwise of a direct or indirect ownership
interest or investment) any corporation, partnership or other business
organization or division thereof, or sell, lease or otherwise dispose of a
material amount of assets (excluding sales of inventory or other assets in the
ordinary course of business) or securities; (ii) waive, release, grant, or
transfer any rights of material value; (iii) modify or change in any material
respect any material Permit; (iv) incur, assume or prepay any indebtedness for
borrowed money except in the ordinary course of business, consistent with past
practice; (v) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for any indebtedness
for borrowed money or trade payables of any other Person other than a Subsidiary
in the ordinary course of business consistent with past practice; (vi) make any
loans, advances or capital contributions to, or investments in, any other Person
other than a Subsidiary in the ordinary course of business consistent with past
practice; (vii) authorize any capital expenditure or expenditures not in the
ordinary course of business that have not been authorized and approved prior to
the date hereof which (A) individually is in excess of $100,000 or (B) in the
aggregate are in excess of $200,000; (viii) pledge or otherwise encumber shares
of capital stock of TEAM or any of its Subsidiaries; (ix) mortgage or pledge any
of its material assets, tangible or intangible, or create or suffer to exist any
material Lien thereupon; (x) enter into any contract or agreement other than in
the ordinary course of business consistent with past practice that would be
material to TEAM and its Subsidiaries, taken as a whole, or (xi) amend, modify
or waive in any material respects any right under any material contract of TEAM
or any of its Subsidiaries;
(c) take any action that would result in any representation and warranty of TEAM
hereunder becoming untrue in any material respect as of the Effective Time;
(d) split, combine or reclassify any shares, declare, set aside or pay any
dividend (including, without limitation, an extraordinary dividend) or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of TEAM Securities or redeem, repurchase or otherwise acquire or offer
to redeem, repurchase, or otherwise acquire any TEAM Securities (except for the
Tender Offer);
(e) adopt or amend any bonus, profit sharing, compensation, severance,
termination, stock option, pension, retirement, deferred compensation,
employment or employee benefit plan, agreement, trust, plan, fund or other
arrangement for the benefit and welfare of any director, officer or employee, or
increase in any manner the compensation or fringe benefits of any director,
officer or any class of employees (or support any portion thereof) or pay any
benefit not required by any existing plan or arrangement (including, without
limitation, the granting of stock options or stock appreciation rights or the
removal of existing
App. A-49
<PAGE> 139
restrictions in any benefit plans or agreements) (collectively, the "TEAM
Benefits"); provided, however, that (i) this Section 7.1(e) shall not prohibit
increasing TEAM Benefits in the ordinary course of business, consistent with
past practice and which, in the aggregate, do not result in a material increase
in expenses relating to TEAM Benefits of TEAM or any of its Subsidiaries, and
(ii) since Mr. Costello will serve as President and Chief Operating Officer of
TEAM after the Merger, at any time prior to the Merger, the TEAM board of
directors, in its sole discretion, may (y) grant any type of securities,
including, but not limited to, options, warrants, phantom stock, other
derivative securities or restricted stock, to Kevin T. Costello, so long as such
grant does not make Mr. Costello the holder of record in his own name of more
than 10% of TEAM's fully diluted common stock after the Merger, or (z) authorize
and pay any cash compensation or other incentives to Mr. Costello;
(f) except as required by applicable Law or GAAP, revalue in any material
respect any of its assets, including writing down the value of inventory in any
material manner or write-off of notes or accounts receivable in any material
manner;
(g) except for payments of up to $250,000 owed to Global Employment Solutions,
Inc. or its affiliates, pay, discharge or satisfy any material claims,
liabilities or obligations (whether absolute, accrued, asserted or unasserted,
contingent or otherwise) other than the payment, discharge or satisfaction in
the ordinary course of business, consistent with past practices, or as otherwise
required by the terms thereof;
(h) make any material Tax election or settle or compromise any material Tax
liability;
(i) make any change in accounting methods, principles or practices materially
affecting the reported consolidated assets, liabilities or results of operations
of TEAM, except insofar as may have been required by a change in GAAP, other
than in the ordinary course of business;
(j) authorize for issuance, issue, sell, deliver or agree or commit to issue,
sell or deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any TEAM Securities
(except bank loans) or equity equivalents;
(k) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of TEAM
or any of its Subsidiaries (other than the transactions described herein);
(l) alter through merger, liquidation, reorganization, restructuring or any
other fashion the corporate structure of ownership of any Subsidiary; or
(m) agree or commit to do any of the foregoing.
Section 7.2 Shareholder Meeting; Proxy Material; Tender Offer.
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(a) TEAM shall cause a meeting of its shareholders (the "TEAM Shareholder
Meeting") to be duly called and held as soon as reasonably practicable for the
purpose of voting on the adoption of this Agreement, the approval of the Merger
and to increase the number of authorized shares of TEAM Common Stock. In
connection with such meeting, TEAM (i) will together with Mucho prepare and file
with the SEC, will use its reasonable best efforts to have declared effective by
the SEC, and will thereafter mail to its shareholders as promptly as
practicable, the Joint Statement and all other proxy materials for such meeting,
(ii) will use its reasonable best efforts to obtain the necessary vote for
adoption by its shareholders of this Agreement, the increase in authorized
shares and the approval of the Merger and shall take all other actions necessary
or, in the reasonable opinion of Mucho, advisable to secure any vote of
shareholders required by Ohio Corporate Law and/or Nevada Corporate Law, as
applicable, to effect such transactions and, (iii) will otherwise comply with
all legal requirements applicable to such shareholders meeting. Subject to
Section 7.4(b), TEAM and TEAM's board of directors shall recommend the Merger to
its shareholders.
(b) TEAM shall take all necessary actions to assure that the Tender Offer
complies in all respects with Ohio Corporate Law and the Exchange Act.
Section 7.3 Access to Information; Right of Inspection. From the date hereof
until the Effective Time, TEAM will give Mucho, their counsel, financial
advisors, auditors and other authorized representatives full access to the
offices, properties, books and records of TEAM (so long as such access does not
unreasonably interfere with the operations of TEAM), will furnish to Mucho,
their counsel, financial advisors, auditors and other authorized representatives
such financial and operating data and other information as such Persons may
reasonably request and will instruct TEAM's employees, counsel and financial
advisors to cooperate with Mucho in its investigation of the business of TEAM;
provided, however, that any information provided to Mucho pursuant to this
Section 7.3 shall be subject to the Confidentiality Agreement.
Section 7.4 Other Potential Acquirers.
(a) Neither TEAM nor any of its officers, directors, employees, representatives,
agents or affiliates shall, nor shall TEAM authorize or permit any of its
respective officers, directors, employees, representatives, agents or affiliates
to, directly or indirectly, encourage, solicit or engage in discussions or
negotiations with or provide any non-public information to any Person or group
(other than Mucho or its affiliates or any designees of Mucho or its affiliates)
concerning any proposal or agreement to acquire directly or indirectly, for
consideration consisting of cash and/or securities more than 50% of the then
outstanding shares of TEAM Common Stock, substantially all of TEAM's assets or
any material asset of TEAM; provided, however, that nothing herein shall prevent
the board of directors of TEAM from (i) taking and disclosing to TEAM's
shareholders a position contemplated by Rules 14d-9 and 14e-2 promulgated under
the Exchange Act with regard to any tender or exchange offer; and (ii)
conducting such "due diligence" inquiries (which shall be in writing to the
extent possible) in response to any such proposal as the board of directors of
TEAM determines in its good faith judgment, after consultation with and based,
among other things, upon the advice of legal counsel, may be required in order
to comply with its fiduciary
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<PAGE> 141
duties. TEAM shall immediately notify Mucho in the event it receives any such
proposal or inquiry, including the terms and conditions thereof and the identity
of the party submitting such proposal, and shall promptly update Mucho of the
status and any material developments concerning the same, including furnishing
copies of any such written inquiries.
(b) Except as set forth in this Section 7.4(b), the board of directors of TEAM
shall not withdraw its recommendation of the transactions (including the Merger)
contemplated hereby or approve or recommend, or cause TEAM to enter into any
agreement with respect to any proposal to acquire, directly or indirectly for
consideration consisting of cash and/or securities, more than 50% of the then
outstanding shares of TEAM Common Stock, substantially all of TEAM's assets, or
any material asset of TEAM. If the board of directors of TEAM by a majority,
disinterested vote determines in its good faith judgment after consultation with
and based, among other things, upon the advice of legal counsel, that it is
required to do so in order to comply with its fiduciary duties, the board of
directors of TEAM may withdraw its recommendation of the transactions
contemplated hereby or approve or recommend a Superior Proposal (as defined
below), but in each case only (i) after providing written notice to Mucho (a
"Notice of Superior Proposal") advising Mucho that the board of directors of
TEAM has received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the Person making such
Superior Proposal and (ii) if Mucho does not, within seven business days of
Mucho's receipt of the Notice of Superior Proposal, make an offer that the board
of directors of TEAM by a majority disinterested vote determines in its good
faith judgment to be at least as favorable to TEAM's shareholders as such
Superior Proposal; provided, however, that TEAM shall not be entitled to enter
into any agreement with respect to a Superior Proposal unless and until this
Agreement is terminated by its terms pursuant to Article XI. Any disclosure that
the board of directors of TEAM may be compelled to make in order to comply with
its fiduciary duties or Rule 14d-9 or 14e-2 will not constitute a violation of
this Agreement, provided that such disclosure states that no action will be
taken by the board of directors of TEAM in violation of this Section 7.4(b).
(c) For purposes of this Agreement, a "Superior Proposal" means any bona fide
proposal to acquire directly or indirectly for consideration consisting of cash
and/or securities more than 50% of the then outstanding shares of TEAM Common
Stock, substantially all of TEAM's assets or any material asset of TEAM on terms
that the board of directors of TEAM by a majority disinterested vote determines
in its good faith judgment (after receipt of a written opinion of a financial
advisor of nationally recognized reputation consistent with such determination)
to be more favorable to holders of TEAM Common Stock than the transactions
provided in this Agreement.
Section 7.5 Shareholder Agreements. TEAM shall use its reasonable best efforts
to cause each holder of TEAM Common Stock listed on Exhibit 7.5 hereto to enter
into an agreement or agreements pursuant to which such holder will agree (i) to
vote for the transactions described herein, (ii) not to sell or otherwise
transfer any shares of TEAM Common Stock prior to the Effective Time, (iii) not
to sell or otherwise transfer any shares of TEAM Common Stock for a period of up
to one year after the Effective Time.
App. A-52
<PAGE> 142
Section 7.6 Termination of Voting Agreement. Prior to the Effective Time, TEAM
shall cause that certain voting agreement dated as of January 1, 1999 by and
among S. Cash Nickerson, Kevin T. Costello, Byron McCurdy, Terry McCurdy and
Richard Schilg to be terminated.
ARTICLE VIII
COVENANTS OF MUCHO
Section 8.1 Conduct of Mucho. Except for matters set forth in Section 8.1 of the
Disclosure Letter or as otherwise expressly contemplated by or specifically
provided in this Agreement, without the prior written consent of TEAM (which
shall not be unreasonably withheld) from the date hereof to the Effective Time,
Mucho shall carry on its business and shall use its reasonable best efforts to
(i) preserve intact its present business organization, (ii) maintain in effect
all material federal, state and local Permits (if any) that are required for
Mucho to carry on its business, (iii) keep available the services of its key
officers and key employees and (iv) maintain satisfactory relationships with its
customers, lenders, suppliers and others having material business relationships
with it. Without limiting the generality of the foregoing, and except for
matters set forth in Section 8.1 of the Disclosure Letter or as otherwise
expressly contemplated by or specifically provided in this Agreement, without
the prior written consent of TEAM (which shall not be unreasonably withheld),
prior to the Effective Time, Mucho shall not:
(a) adopt any material change in its articles of incorporation or by-laws
(except as may be necessary to raise additional capital for Mucho's ongoing
operations) or comparable organizational documents;
(b) except pursuant to existing agreements or arrangements set forth on Section
8.1 of the Disclosure Letter, (i) acquire (by merger, consolidation, acquisition
of stock or assets, joint venture or otherwise of a direct or indirect ownership
interest or investment) any corporation, partnership or other business
organization or division thereof, or sell, lease or otherwise dispose of a
material amount of assets (excluding sales of inventory or other assets in the
ordinary course of business) if such action could reasonably be expected to have
a Material Adverse Effect; (ii) waive, release, grant, or transfer any rights of
material value if such action could reasonably be expected to have a Material
Adverse Effect; (iii) modify or change in any material respect any material
Permit if such action could reasonably be expected to have a Material Adverse
Effect; (iv) incur, assume or prepay any indebtedness for borrowed money except
in the ordinary course of business if such action could reasonably be expected
to have a Material Adverse Effect; (v) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
any indebtedness for borrowed money or trade payables of any other Person other
than a Subsidiary in the ordinary course of business if such action could
reasonably be expected to have a Material Adverse Effect; (vi) make any loans,
advances or capital contributions to, or investments in, any other Person other
than in the ordinary course of business if such action could reasonably be
expected to have a Material Adverse Effect; (vii) authorize any capital
expenditure or expenditures not in the ordinary course of business that have not
been authorized and approved prior to the date hereof which (A) individually is
in excess of $50,000 or (B) in the aggregate are in excess of $100,000 if such
action could reasonably be expected to have a Material Adverse Effect; (viii)
pledge or otherwise
App. A-53
<PAGE> 143
encumber shares of capital stock of Mucho or any of its Subsidiaries if such
action could reasonably be expected to have a Material Adverse Effect; or (ix)
mortgage or pledge any of its material assets, tangible or intangible, or create
or suffer to exist any material Lien thereupon if such action could reasonably
be expected to have a Material Adverse Effect;
(c) take any action that would result in any representation and warranty of
Mucho hereunder becoming untrue in any material respects as of the Effective
Time;
(d) split, combine or reclassify any shares of, declare, set aside or pay any
dividend (including, without limitation, an extraordinary dividend), or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of Mucho Securities or redeem, repurchase or otherwise acquire or offer
to redeem, repurchase, or otherwise acquire any Mucho Securities if such action
could reasonably be expected to have a Material Adverse Effect;
(e) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of Mucho
or its Subsidiaries (other than the Merger) if such action could reasonably be
expected to have a Material Adverse Effect;
(f) except as required by applicable Law, Mucho's historic accounting practices
or GAAP revalue in any material respect any of its assets, including writing
down the value of inventory in any material manner or write-off of notes or
accounts receivable in any material manner if such action could reasonably be
expected to have a Material Adverse Effect;
(g) pay, discharge or satisfy any material claims, liabilities or obligations
(whether absolute, accrued, asserted or unasserted, contingent or otherwise)
other than the payment, discharge or satisfaction in the ordinary course of
business, or as otherwise required by the terms thereof if such action could
reasonably be expected to have a Material Adverse Effect;
(h) make any material Tax election or settle or compromise any material Tax
liability if such action could reasonably be expected to have a Material Adverse
Effect;
(i) make any change in accounting methods, principles or practices materially
affecting the reported consolidated assets, liabilities or results of operations
of Mucho, except insofar as may have been required by a change in Mucho's
historic accounting principles or GAAP;
(j) agree or commit to do any of the foregoing if such action could reasonably
be expected to have a Material Adverse Effect.
Section 8.2 Stockholder Meeting; Proxy Material. Mucho shall cause a meeting of
its stockholders (the "Mucho Stockholder Meeting") to be duly called and held as
soon as reasonably practicable for the purpose of voting on the adoption of this
Agreement and the approval of the Merger and the related transactions. In
connection with such meeting, Mucho (i) will together with TEAM prepare and file
with the SEC, will use
App. A-54
<PAGE> 144
its reasonable best efforts to have declared effective by the SEC and will
thereafter mail to its stockholders as promptly as practicable, the Joint
Statement and all other proxy materials, (ii) will use its reasonable best
efforts to obtain the necessary vote for adoption by its stockholders of this
Agreement and the approval of the Merger and the related transactions and shall
take all other action necessary or, in the reasonable opinion of TEAM, advisable
to secure any vote of stockholders required by Nevada Corporate Law and/or Ohio
Corporate Law, as applicable, and (iii) will otherwise comply with all legal
requirements applicable to such stockholders meeting. Subject to their fiduciary
duties, Mucho and Mucho's board of directors shall recommend the Merger to its
stockholders.
Section 8.3 Access to Information; Right of Inspection. From the date hereof
until the Effective Time, Mucho will give TEAM, their counsel, financial
advisors, auditors and other authorized representatives full access to the
offices, properties, books and records of Mucho (so long as such access does not
unreasonably interfere with the operations of Mucho), will furnish to TEAM,
their counsel, financial advisors, auditors and other authorized representatives
such financial and operating data and other information as such Persons may
reasonably request and will instruct Mucho's employees, counsel and financial
advisors to cooperate with TEAM in its investigation of the business of Mucho;
provided that any information provided to TEAM pursuant to this Section 8.3
shall be subject to the Confidentiality Agreement.
Section 8.4 Mucho Superior Proposal.
(a) Except as set forth in this Section 8.4(a), the board of directors of Mucho
shall not withdraw its recommendation of the transactions contemplated hereby or
approve or recommend, or cause Mucho to enter into any agreement with respect to
any proposal to acquire, directly or indirectly, for consideration consisting of
cash and/or securities more than 50% of the then outstanding shares of Mucho
Common Stock, substantially all of Mucho's assets, or any material asset of
Mucho. If the board of directors of Mucho by a majority vote determines to do
so, the board of directors of Mucho may withdraw its recommendation of the
transactions contemplated hereby or approve or recommend a Mucho Superior
Proposal (as defined below), but in each case only after providing written
notice to TEAM (a "Notice of Mucho Superior Proposal") advising TEAM that the
board of directors of Mucho has received a Mucho Superior Proposal; provided,
however, that Mucho shall not be entitled to enter into any agreement with
respect to a Mucho Superior Proposal unless and until this Agreement is
terminated by its terms pursuant to Article XI.
(b) For purposes of this Agreement, a "Mucho Superior Proposal" means any bona
fide proposal to acquire directly or indirectly for consideration consisting of
cash and/or securities more than 50% of the then outstanding shares of Mucho
Common Stock, substantially all of Mucho's assets or any material asset of Mucho
on terms that the board of directors of Mucho by a majority vote determines in
its good faith judgment to be more favorable to holders of Mucho Common Stock
than the transactions provided in this Agreement.
Section 8.5 Shareholder Agreements. Mucho shall use its reasonable best efforts
to cause each holder of Mucho Common Stock listed on Exhibit 8.5 to enter into
an agreement pursuant to which such holder will
App. A-55
<PAGE> 145
agree not to sell or otherwise transfer any shares of TEAM Common Stock for a
period of up to one year after the Effective Time.
Section 8.6 Financing Commitment. At least thirty days prior to the Effective
Time but no later than September 15, 2000, Mucho shall have received a
"financing commitment letter" on behalf of TEAM evidencing a commitment to
provide to TEAM sufficient financing to pay the cash for fractional shares,
dissenters rights (if any) and the Tender Shares.
ARTICLE IX
COVENANTS OF TEAM, MERGER SUB AND MUCHO
The Parties hereto agree that:
Section 9.1 Reasonable Best Efforts. Subject to the terms and conditions of this
Agreement, each Party will use its reasonable best efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable Laws and regulations to consummate the
transactions contemplated by this Agreement as soon as practicable. Each Party
shall also refrain from taking, directly or indirectly, any action which would
impair such party's ability to consummate the transactions contemplated hereby.
Without limiting the foregoing, TEAM shall use its reasonable best efforts to
(i) take all actions necessary so that no state takeover statute or similar
statute or regulation is or becomes applicable to the Merger or any of the other
transactions contemplated by this Agreement and (ii) if any state takeover
statute or similar statute or regulation becomes applicable to any of the
foregoing, take all action necessary so that the transactions contemplated by
this Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on the transactions contemplated by this Agreement.
Section 9.2 Certain Filings.
(a) Each Party shall cooperate with one another (i) in determining whether any
action by or in respect of, or filing with, any Governmental Authority is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (ii) in
seeking any such actions, consent approvals or waivers or making any such
filings, furnishing information required in connection therewith or with the
Joint Statement and seeking to obtain any such actions, consents, approvals or
waivers.
(b) Each Party shall (i) use their respective reasonable best efforts to take or
cause to be taken, (A) all actions necessary, proper or advisable by such Party
with respect to the prompt preparation and filing with the SEC of the Joint
Statement and any other information to be filed with the SEC, (B) such actions
as may be required to have the Joint Statement declared effective by the SEC, as
promptly as practicable, and (C) such actions as may be required to be taken
under the Exchange Act and state securities or applicable Blue
App. A-56
<PAGE> 146
Sky Laws, and (ii) promptly prepare and file all necessary documentation, effect
all necessary applications, notices, petitions and filings, and use all
reasonable efforts to obtain all necessary Permits, consents, approvals and
authorizations of Governmental Authorities (including, without limitation, any
filing under the HSR Act or any other applicable antitrust Law or regulation).
(c) TEAM agrees to provide and will cause its Subsidiaries and its and their
respective officers, employees and advisors to provide, (i) prior to the
Effective Date, all documents that Mucho may reasonably request relating to the
existence of TEAM and the authority of TEAM to enter into this Agreement, all in
form and substance reasonably satisfactory to Mucho and (ii) all necessary
cooperation in connection with the arrangement of any financing to be
consummated contemporaneous with or at or after the Effective Time in respect of
the transactions contemplated by this Agreement, including (x) participation in
meetings and due diligence sessions, (y) furnishing information required to be
included in disclosure and other related documents and (z) the execution and
delivery of any commitment letters, underwriting or placement agreements, pledge
and security documents, other definitive financing documents, or other requested
certificates or documents, including a certificate of the chief financial
officer of TEAM with respect to solvency matters, comfort letters of accountants
and legal opinions, as such legal opinions may be specifically requested by
Mucho in this Agreement; provided, however, that the form and substance of any
of the material documents referred to in clause (y) and the terms and conditions
of any of the material agreements and other documents referred to in clause (z)
shall be substantially consistent with the terms and conditions of the financing
required to satisfy the condition precedent set forth in Section 8.6.
(d) TEAM and Mucho shall use their best respective efforts to cause, at or
before the Effective Time, the authorization of the listing of the TEAM Common
Stock to be issued in the Merger on the Nasdaq SmallCap Market ("Nasdaq") upon
the official notice of the issuance of the shares of TEAM Common Stock in
connection with the completion of the transactions described herein. The parties
will also use their best respective efforts to cause TEAM's trading symbol on
Nasdaq be changed to "MUCH."
Section 9.3 Public Announcements. TEAM and Mucho will consult with each other
before issuing any press release or making any public statement with respect to
this Agreement and the transactions contemplated hereby (other than following a
change, if any, of the recommendations of the board of directors of TEAM or
Mucho), and except for any press release or public statement as may be required
by applicable Law or any listing agreement with Nasdaq, will not issue any such
press release or make any such public statement prior to such consultation.
Section 9.4 Notices of Certain Events. Each of the Parties hereto shall promptly
notify the other Party of:
(i) the receipt by such Party of any notice or other communication from any
Person alleging that the consent of such Person is or may be required
in connection with any of the transactions contemplated by this
Agreement;
(ii) the receipt by such Party of any notice or other communication from any
Governmental Authority in connection with any of the transactions
contemplated by this Agreement; and
App. A-57
<PAGE> 147
(iii) any actions, suits, claims, investigations or proceedings commenced or,
to the best of such Party's knowledge threatened against, or affecting
such Party which, if pending on the date of this Agreement, would have
been required to have been disclosed pursuant to this Agreement or
which relate to the consummation of the transactions contemplated by
this Agreement.
Section 9.5 Compliance with the Securities Act and Exchange Act. Mucho shall
cause each of its principal executive officers and directors, and will use its
reasonable best efforts to cause other Persons who are "affiliates" (as that
term is used in paragraphs (c) and (d) of Rule 145 under the Securities Act) of
TEAM or Mucho (collectively, the "145 Affiliates"), to deliver to TEAM on or
prior to the Effective Time a written agreement in form and substance reasonably
satisfactory to Mucho and TEAM (an "Affiliate Agreement") to the effect that
such person will not offer to sell, sell or otherwise dispose of any shares of
TEAM Common Stock issued in connection with the Merger, except, pursuant to an
effective registration statement or in compliance with Rule 145, as amended from
time to time, or in a transaction which, in the opinion of legal counsel
reasonably satisfactory to TEAM, is exempt from the registration requirements of
the Securities Act. In addition, TEAM shall cause all certificates for TEAM
Common Stock to be received by the 145 Affiliates to bear a legend substantially
similar to the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT (A) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE ACT AND IN
COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF ANY STATE WITH
RESPECT THERETO, (B) IN ACCORDANCE WITH RULE 145(d) UNDER THE
ACT, OR (C) IN ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE.
ARTICLE X
CONDITIONS TO THE MERGERS
Section 10.1 Conditions to TEAM's and Merger Sub's Obligation to Effect the
Merger. The obligation of TEAM and Merger Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) This Agreement shall have been adopted and the Merger shall have been
approved and the increase in authorized TEAM common stock shall have been
approved by the requisite vote of the shareholders of
App. A-58
<PAGE> 148
TEAM in accordance with the applicable law and in accordance with the applicable
listing requirements of Nasdaq;
(b) Mucho shall have arranged financing on behalf of TEAM, in a form reasonably
satisfactory to Mucho and TEAM, which shall be sufficient for TEAM to pay cash
for fractional shares, dissenters rights (if any) and Tender Shares;
(c) Any applicable waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated;
(d) The Joint Statement shall have been declared effective in accordance with
the provisions of the Securities Act, and no stop order suspending such
effectiveness shall have been issued and remain in effect and no proceeding for
that purpose shall have been instituted, or to the knowledge of TEAM no such
proceeding shall have been threatened, by the SEC or any state regulatory
authorities;
(e) No Governmental Authority of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which materially restricts,
prevents or prohibits consummation of the Merger or the Tender Offer or any
transaction contemplated by this Agreement (it being understood that the Parties
hereto hereby agree to use their reasonable best efforts to cause any such
decree, judgment, injunction or other order to be vacated or lifted as promptly
as possible);
(f) No action shall have been taken, and no statute, rule or regulation shall
have been enacted, by any state or federal government or governmental agency in
the United States which would prevent the consummation of the Merger or the
Tender Offer and the transactions contemplated hereby or make the consummation
of the Merger or Tender Offer and the transactions contemplated hereby illegal;
(g) All governmental waivers, consents, orders and approvals legally required
for the consummation of the Merger and the Tender Offer and the transactions
contemplated hereby shall have been obtained and be in effect at the Effective
Time, except where the failure to obtain the same would not be reasonably likely
to have a Material Adverse Effect;
(h) Each of the representations and warranties of Mucho contained in this
Agreement shall be true and correct in all material respects as of the Effective
Time;
(i) TEAM shall have received an opinion from Mucho's counsel dated as of the
Closing Date, substantially in the form attached hereto as Exhibit 10.1(i);
(j) Byron and Terry McCurdy shall have released TEAM, its officers and directors
from any and all liabilities and claims they may have against TEAM;
App. A-59
<PAGE> 149
(k) Mucho shall have operating revenues of at least $100,000 for the quarter
ended September 30, 2000;
(l) TEAM shall have received an opinion from Mucho's counsel dated as of the
Closing Date, in form and substance acceptable to TEAM regarding the Mucho
Option Plan's compliance with Sections 422 and 162(m) of the Code;
(m) the key stockholders of Mucho shall have entered into the Voting Agreement
in form and substance acceptable to TEAM, Mucho, and the key Mucho stockholders;
(n) the directors, executive officers and key stockholders of Mucho shall have
entered into Lock-up Agreements with TEAM in form and substance acceptable to
TEAM, Mucho and the Mucho directors, executive officers and key stockholders;
(o) TEAM shall have completed its due diligence review of Mucho's and its
subsidiaries' technology, and shall be satisfied, in its sole discretion, that
such review has not disclosed any material, adverse facts, problems or
conditions; provided, that, if TEAM does not notify Mucho in writing of any
facts, problems, or conditions in connection with Mucho's and its subsidiaries'
technology within 20 business days after receipt of Arthur Anderson's final
report and analysis of such technology, then the condition to closing set forth
in this Section 10.1(o) shall be deemed to have been waived by TEAM; and
(p) S. Cash Nickerson, Jose Blanco, Jay Strauss, William Johnston, Thomas
Gerlacher and David Waal shall have entered into employment agreements with TEAM
in form and substance acceptable to both TEAM and Mucho.
Section 10.2 Conditions to Mucho's Obligation to Effect the Merger. The
respective obligations of Mucho to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions:
(a) This Agreement shall have been adopted and the Merger approved by the
requisite vote of the stockholders of Mucho in accordance with applicable law;
(b) Mucho shall have arranged financing on behalf of TEAM, in a form reasonably
satisfactory to Mucho and TEAM, which shall be sufficient for TEAM to pay cash
for fractional shares, dissenters rights (if any) and Tender Shares;
(c) any applicable waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated;
(d) the Joint Statement shall have been declared effective in accordance with
the provisions of the Securities Act, and no stop order suspending such
effectiveness shall have been issued and remain in effect
App. A-60
<PAGE> 150
and no proceeding for that purpose shall have been instituted, or to the
knowledge of Mucho no such proceeding shall have been threatened, by the SEC or
any state regulatory authorities;
(e) no Governmental Authority of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which materially restricts,
prevents or prohibits consummation of the Merger or any transaction contemplated
by this Agreement (it being understood that the Parties hereto hereby agree to
use their reasonable best efforts to cause any such decree, judgment, injunction
or other order to be vacated or lifted as promptly as possible);
(f) no action shall have been taken, and no statute, rule or regulation shall
have been enacted, by any state or federal government or governmental agency in
the United States which would prevent the consummation of the Merger or the
Tender Offer or make the consummation of the Merger or Tender Offer illegal;
(g) all governmental waivers, consents, orders and approvals legally required
for the consummation of the Merger or the Tender Offer and the transactions
contemplated hereby shall have been obtained and be in effect at the Effective
Time, except where the failure to obtain the same would not be reasonably likely
to have a Material Adverse Effect;
(h) each of the representations and warranties of TEAM and Merger Sub shall be
true and correct in all materials respects as of the Effective Time;
(i) Mucho shall have received an opinion of TEAM's counsel dated as of the
Closing Date, substantially in the form attached hereto as Exhibit 10.2(i);
(j) Richard Schilg shall have executed an agreement with TEAM releasing TEAM,
its officers and directors from any liability arising out of any claim he may
have against TEAM;
(k) the key stockholders of TEAM shall have entered into the Voting Agreement in
form and substance acceptable to TEAM, Mucho, and the key TEAM stockholders;
(l) the directors, executive officers and key stockholders of Mucho shall have
entered into Lock-up Agreements with TEAM in form and substance acceptable to
TEAM, Mucho and the Mucho directors, executive officers and key stockholders;
App. A-61
<PAGE> 151
(m) S. Cash Nickerson, Jose Blanco, Jay Strauss, William Johnston, Thomas
Gerlacher and David Waal shall have entered into employment agreements with TEAM
in form and substance acceptable to both TEAM and Mucho.
ARTICLE XI
TERMINATION
Section 11.1 Termination. This Agreement may be terminated and any or all of the
transactions may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the shareholders of TEAM
and/or Mucho):
(a) By mutual written consent of TEAM on the one hand and Mucho on the other
hand;
(b) By either TEAM or Mucho, if the Merger has not been consummated by October
31, 2000 (which date shall be extended until December 31, 2000 in the event that
the necessary clearance from the SEC for the Joint Statement exceeds 30 days),
provided that the Party seeking to exercise such right is not then in breach in
any material respect of any of its obligations under this Agreement;
(c) By either TEAM or Mucho, if Mucho (in the case of termination by TEAM) or
TEAM (in the case of termination by Mucho) shall have breached in any material
respect any of its covenants or obligations under this Agreement or any
representation or warranty of Mucho (in the case of termination by TEAM) or of
TEAM (in the case of termination by Mucho) shall have been incorrect in any
material respect when made or at any time prior to the Effective Time (unless
such breach is capable of cure, and in such case the breaching Party shall not
have cured such breach within 15 days after the receipt of written notice of
such breach from the non-breaching Party);
(d) By either TEAM or Mucho, if any court of competent jurisdiction in the
United States or other Governmental Authority shall have issued a final order,
decree or ruling, or taken any other final action restraining, enjoining or
otherwise prohibiting the transactions and such order, decree, ruling or other
action is or shall have become nonappealable;
(e) By Mucho if (i) prior to the consummation of the transactions, the board of
directors of TEAM shall have withdrawn, or modified or changed in a manner
adverse to Mucho, its approval or recommendation of this Agreement or the
transactions or shall have approved a Superior Proposal; or (ii) if TEAM, or any
of TEAM's officers, directors, employees, representatives, agents or affiliates,
shall take any of the actions described in the first sentence of Section 7.4(a)
hereof; or
(f) By TEAM if TEAM has approved a Superior Proposal in accordance with Section
7.4(b), provided TEAM has complied with all provisions thereof, including the
notice provisions therein, and TEAM makes simultaneous payment of the
Termination Fee to Mucho.
App. A-62
<PAGE> 152
(g) By Mucho if Mucho has approved a Mucho Superior Proposal in accordance with
Section 8.4, provided Mucho has complied with all provisions therein, including
the notice provisions therein, and Mucho makes simultaneous payment of the
Termination Fee to TEAM.
(h) By either TEAM or Mucho, if, at a duly held shareholders meeting of Mucho or
any adjournment thereof, this Agreement or the transactions contemplated herein
shall not have been approved by the requisite vote of the stockholders of Mucho;
(i) By either TEAM or Mucho, if, at a duly held shareholders meeting of TEAM or
any adjournment thereof, this Agreement or the transactions contemplated herein
shall not have been approved by requisite vote of the shareholders of TEAM; or
(j) By TEAM if Mucho has not obtained adequate financing as detailed in Section
10.1(b) above by September 15, 2000.
The Party desiring to terminate this Agreement pursuant to Sections 11.1(b)
through (j) shall give written notice of such termination to the other Party in
accordance with Section this 11.1.
Section 11.2 Termination Fee.
(a) Notwithstanding any other provision of this Agreement, if this Agreement is
terminated pursuant to Section 11.1(f), then TEAM shall within 5 business days
of such termination pay to Mucho a break-up fee of $1,500,000 (the "Termination
Fee"). If this Agreement is terminated pursuant to Sections 11.1(g) or 11.1(h),
then Mucho shall within 5 business days of such termination pay to TEAM the
Termination Fee. The Parties hereto agree that the Termination Fee is not a
penalty, but rather is liquidated damages in a reasonable amount that will
compensate TEAM or Mucho (as the case may be) for the costs incurred, efforts
expended and opportunities foregone while negotiating this Agreement and in
reliance on this Agreement and on the expectation of the consummation of the
transactions contemplated hereby, which amount would otherwise be impossible to
calculate with precision.
(b) In the event that Mucho is unable to obtain financing on behalf of TEAM, in
a form reasonably satisfactory to Mucho and TEAM, which is sufficient for TEAM
to pay the cash component (if any) of the Merger Consideration or the Tender
offer, including Tendered Shares and fractional shares (where appropriate), and
such failure is not the direct or indirect result of any action or omission of
TEAM, and TEAM, therefore, exercises its right not to consummate the
transactions contemplated hereby, Mucho shall pay, or reimburse TEAM upon
submission of one or more statements therefor, accompanied by reasonable
supporting documentation, for the amount of all reasonable out of pocket costs,
fees and expenses reasonably incurred by TEAM or on its behalf arising out of,
in connection with, or related to this Agreement and the consummation of all
transactions contemplated by this Agreement (the "Expenses"); provided, however,
that Mucho's obligation to reimburse TEAM for its Expenses shall not exceed
$250,000 in the aggregate.
App. A-63
<PAGE> 153
Section 11.3 Effect of Termination. If this Agreement is terminated pursuant to
Section 11.1, this Agreement shall become void and of no effect with no
liability on the part of any Party hereto except to the extent that such
termination results from a material breach by a party of any representation,
warranty or covenant contained in this Agreement. Notwithstanding the foregoing,
the agreements contained in the last proviso of Section 7.3 and Sections 11.2,
11.3, 12.4, 12.7, and 12.11 shall survive the termination hereof.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given, if to TEAM and Mucho, to:
Mucho.com Inc.
3717 Mt. Diablo Blvd.
Suite 100
Lafayette, CA 94549
Attention: S. Cash Nickerson
Telephone: 925-299-8565
Facsimile: 925-299-8503
with a copy to:
Jenner & Block
One IBM Plaza
Chicago, Illinois 60611
Attention: Craig R. Culbertson
Telephone: (312 222-9350
Facsimile: (312) 527-0484
TEAM America Corporation
110 East Wilson Bridge Road
Worthington, Ohio 43085-2344
Attention: Kevin Costello
Telephone: (614) 848-3995
Facsimile: (614) 848-7639
App. A-64
<PAGE> 154
with a copy to:
Porter, Wright, Morris & Arthur LLP
41 South High Street, 28th Floor
Columbus, Ohio 43215
Attention: Robert J. Tannous
Telephone: (614) 227-1953
Facsimile: (614) 227-2100
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be in writing and shall be deemed to have been duly
given (i) on the date of service if served personally on the party to whom
notice is to be given, (ii) on the next business day following delivery to a
nationally-recognized overnight courier service for next-day delivery to the
party to whom notice is given and properly addressed, and (iii) if given by
facsimile, when such facsimile is transmitted to the facsimile number specified
in this Section and the appropriate facsimile confirmation is received, unless
such transmission occurs after normal business hours, in which case such notice
shall be deemed by have been given on the next business day.
Section 12.2 Survival of Representations and Warranties. Except for the
representation and warranty set forth in Sections 6.25, the representations and
warranties contained herein and in any certificate or other writing delivered
pursuant hereto shall survive until (but not beyond) the Effective Time. The
representation and warranty set forth in Section 6.25 shall survive for a period
of four years after the Effective Date. This Section 12.2 shall not limit any
covenant or agreement of the Parties which by its terms contemplates performance
after the Effective Time.
Section 12.3 Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived prior to the
Effective Time if, and only if, such amendment or waiver is in writing and
signed by both TEAM and Mucho in the case of an amendment or in the case of a
waiver, by the Party against whom the waiver is to be effective; provided that
after the adoption of this Agreement by the Shareholders of TEAM and Mucho,
there shall be no amendment that requires further approval by the Shareholders
of TEAM or Mucho, as the case may be, unless further Shareholder approval is
required by law.
(b) No failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by Law.
Section 12.4 Expenses. Except as provided in this Section 12.4, all transaction
costs and expenses incurred in connection with this Agreement shall be paid by
the Party incurring such cost or expense. Any fees owed to RJA in connection
with the Agreement shall be paid by TEAM. Any filing fees incurred in
App. A-65
<PAGE> 155
connection with the HSR Act shall be shared equally by Mucho and TEAM. Any
financial printing fees incurred in connection with the Joint Statement shall be
paid 75% by Mucho and 25% by TEAM. Any SEC filing fees, NASD fees, Nasdaq fees
and any Blue Sky fees relating to the Merger shall be paid by Mucho, and any SEC
filing fees, NASD fees, Nasdaq fees and Blue Sky fees relating to the Tender
Offer shall be paid by TEAM.
Section 12.5 Transfer Taxes. All capital stock transfer, real estate transfer,
documentary, stamp, recording and other similar Taxes (including interest,
penalties and additions to any such Taxes) ("Transfer Taxes") incurred in
connection with the transactions contemplated by this Agreement shall be paid by
the Surviving Corporation.
Section 12.6 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the Parties hereto and their respective
successors and assigns, provided that no Party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other Parties hereto.
Section 12.7 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF DELAWARE.
Section 12.8 Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each Party hereto shall have received
counterparts hereof signed by all of the Parties hereto.
Section 12.9 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any Law, or public policy,
all other conditions and provisions of this Agreement shall nevertheless remain
in full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any Party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
Section 12.10 Costello Employment Agreement. Except for the change in Kevin
Costello's title to President and Chief Operating Officer of TEAM after the
Merger, the Parties agree and acknowledge that TEAM will continue to honor Mr.
Costello's existing employment agreement and compensation and incentive
arrangements following the Merger and that such employment agreement and
compensation and incentive arrangements will remain in full force and effect.
Section 12.11 Remedies. Nothing in this Agreement shall be construed to limit a
Parties' remedies at law or in equity under this Agreement, with the exception
of the remedies provided for termination of this
App. A-66
<PAGE> 156
Agreement pursuant to sections 11.1(f), (g) or (h) if the Termination Fee is
paid in accordance with Section 11.2(a) of this Agreement.
Section 12.12 Specific Performance. The Parties hereby acknowledge and agree
that the failure of any party to perform its agreements and covenants hereunder,
including its failure to take all actions as are necessary on its part to the
consummation of the Merger and/or the Tender Offer, will cause irreparable
injury to the other Party, for which damages, even if available, will not be an
adequate remedy. Accordingly, each Party hereby consents to the issuance of
injunctive relief by any court of competent jurisdiction to compel performance
of such Party's obligations and to the granting by any court of the remedy of
specific performance of its obligations hereunder.
Section 12.13 Entire Agreement; No Third-Party Beneficiaries. This Agreement,
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement.
App. A-67
<PAGE> 157
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
TEAM:
TEAM AMERICA CORPORATION
By: /s/ Kevin T. Costello
-----------------------------
Name: Kevin T. Costello
Title: President
MERGER SUB:
TEAM MERGER CORPORATION
By: /s/ Kevin T. Costello
-----------------------------
Name: Kevin T. Costello
Title: President
MUCHO:
MUCHO.COM, INC.
By: /s/ S. Cash Nickerson
-----------------------------
Name: S. Cash Nickerson
Title: Chief Executive Officer
App. A-68
<PAGE> 158
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This first amendment (the "Amendment") to the Agreement and Plan of Merger
is entered into on this ______ day of August 2000, by and among TEAM America
Corporation ("TEAM"), TEAM Merger Corporation ("Merger Sub") and Mucho.com, Inc.
("Mucho").
RECITALS
A. The parties hereto (the "Parties") are the Parties to that certain
Agreement and Plan of Merger, dated as of June 16, 2000 (the "Merger
Agreement"), by and among TEAM, Merger Sub and Mucho.
B. The Parties now wish to amend the Merger Agreement to provide for
certain changes to the terms of the escrowed shares in the agreement.
NOW, THEREFORE, on the terms and subject to the conditions herein set
forth, the Parties, intending to be bound, hereby agree as follows:
Section 1. Definitions. Unless otherwise defined herein, capitalized
terms used herein have the respective meanings set out in the Merger Agreement.
Section 2. Amendment of the Merger Agreement. Section 2.7(b) of the
Merger Agreement is hereby deleted in its entirety, and the following is
inserted in place thereof:
(b) The Escrow Amount shall remain in escrow until the board
of directors of TEAM authorizes the Escrow Amount to be released on a pro rata
basis to the shareholders listed on Exhibit 2.7(a). Any Escrow Amount not
released as described in this Section 2.7(b) shall be returned to TEAM and
cancelled on January 1, 2002. In such event, none of the Mucho Shareholders
shall have any further right to the Escrow Amount or any other consideration in
connection with the Merger. The TEAM board of directors shall authorize the
release of the Escrow Amount as follows:
(1) If TEAM secures financing from Stonehenge
Opportunity Fund, LLC or its affiliates, business partners or other investors
obtained or arranged by it in accordance with the term sheet dated July 28, 2000
("Stonehenge"), (i) one-half of the Escrow Amount shall be released immediately
after TEAM raises $10 million in equity financing from Stonehenge, provided that
TEAM raises such equity financing on or before December 31, 2001; and (ii)
one-half of the total Escrow Amount shall be released immediately after the
Surviving Corporation earns $2 million in operating revenue in any consecutive
three-month period ending on or before December 31, 2001; provided that the
requirements of subsection (1)(i) above have also been met. For purposes of
determining the operating revenue solely under subsection (1)(ii) above,
operating revenue will include the operating revenue from the Surviving
Corporation's
App. A-69
<PAGE> 159
internet operations plus incremental TEAM PEO gross margin during the relevant
consecutive three-month period in excess of TEAM's currently projected eight
percent (8%) increase over the prior year's gross margin.
(2) If TEAM secures financing from a source other than
Stonehenge, (i) one-half of the Escrow Amount shall be released immediately
after TEAM raises $15 million in equity financing from any source other than
Stonehenge, provided that TEAM raises such equity financing on or before
December 31, 2001, and (ii) one-half of the total Escrow Amount shall be
released immediately after the Surviving Corporation earns $2 million in
operating revenue from its internet operations in any consecutive three-month
period ending on or before December 31, 2001; provided, that the requirements of
subsection (2)(i) above have also been met.
Section 3. Effect. Except as amended hereby, the Merger Agreement shall
remain in full force and effect in all respects.
Section 4. Representations. Each of the parties hereto represents to the
others that (i) the execution, delivery and performance of this Amendment are
within its corporate powers, (ii) except for the adoption of this Amendment by
the affirmative vote of a majority in voting interests of the outstanding shares
of the companies, this Amendment has been duly authorized by all necessary
corporate action, and (iii) this Amendment has been duly and validly executed
and delivered.
Section 5. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
Section 6. Governing Law. THIS AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF DELAWARE.
App. A-70
<PAGE> 160
IN WITNESS WHEREOF, the Amendment has been duly executed by the Parties
hereto on the day and year first above written.
TEAM AMERICA CORPORATION
By : /s/ Kevin T. Costello
---------------------------------
Kevin T. Costello
President
TEAM MERGER CORPORATION
By : /s/ Kevin T. Costello
---------------------------------
Kevin T. Costello
President
MUCHO.COM, INC.
By : /s/ S. Cash Nickerson
---------------------------------
S. Cash Nickerson
Chief Executive Officer
App. A-71
<PAGE> 161
June 30, 2000 APPENDIX B
Board of Directors
TEAM America Corporation
110 East Wilson Bridge Road
Worthington, OH 43085
Members of the Board:
We understand that TEAM America Corporation ("TEAM America") is
contemplating a transaction whereby TEAM Merger Corporation, a Nevada
Corporation newly formed and organized by TEAM America will merge with and into
Mucho.com, Inc. ("Mucho") and Mucho will become a wholly owned subsidiary of
TEAM America (the "Transaction") pursuant to the terms of an Agreement and Plan
of Merger and the exhibits and schedules thereto the ("Merger Agreement").
Pursuant to the Transaction, TEAM America will offer to purchase up to 50% of
TEAM America's outstanding common stock, no par value (the "Common Stock"), for
$6.75 per share (the "Cash Consideration"). The terms and conditions of the
Transaction are more fully set forth in the Merger Agreement.
You have requested our opinion as to whether the Cash Consideration is
fair, from a financial point of view, to those holders of the Common Stock who
will receive such Cash Consideration (the "Holders").
In connection with our review of the proposed Transaction and the
preparation of our opinion herein, we have, among other things:
1. reviewed TEAM America's annual report on Form 10-K, as filed with
the Securities and Exchange Commission on April 14, 2000, TEAM
America's quarterly reports on Forms 10-Q, as filed with the
Securities and Exchange Commission on May 18, 2000, November 12,
1999, August 16, 1999 and May 13, 1999, and certain other publicly
available financial information of Team America;
2. reviewed certain non-public information prepared by the management
of TEAM America, including financial statements, financial
projections, and other financial and operating data concerning TEAM
America;
3. discussed the past and current operations and financial condition
and the prospects of TEAM America with senior executives of TEAM
America;
4. reviewed publicly available financial and stock market data with
respect to certain other companies in TEAM America's line of
business that we believe to be generally comparable to that of TEAM
America;
5. reviewed the historical market prices of the Common Stock;
App. B-1
<PAGE> 162
TEAM America Corporation
June 30, 2000
Page 2 of 3
6. compared the financial terms of the Transaction with the financial
terms of certain other transactions which we believe to be generally
comparable to the Transaction;
7. reviewed the financial terms and conditions as stated in a draft of
the Merger Agreement dated June 15, 2000;
8. reviewed a draft of the proxy statement to be filed in connection
with the Transaction; and
9. conducted other financial analyses, studies, and investigations, and
considered other information as we deemed necessary or appropriate.
In connection with our review, we have not assumed any responsibility for
independent verification for any of the information reviewed by us for the
purpose of this opinion and have relied on its being complete and accurate in
all material respects. In addition, we have not made or received any independent
evaluation or appraisal of any of the assets or liabilities (contingent or
otherwise) of TEAM America, nor have we been furnished with any such evaluation
or appraisal. With respect to the financial projections and other information
and data provided to or otherwise reviewed by or discussed with us, we have
assumed, at your direction, that such projections and other information and data
have been reasonably prepared in good faith on bases reflecting the best
currently available estimates and judgments of management, and we have relied
upon each party to advise us promptly if any such information previously
provided to or discussed with us became inaccurate or was required to be updated
during the period of our review. In addition, we have assumed the Transaction
will be consummated substantially in accordance with the terms set forth in the
draft of the Merger Agreement.
Our opinion is necessarily based on the economic, market, financial and
other circumstances and conditions existing and disclosed to us on June 15,
2000, and any material change in such circumstances or conditions would require
a reevaluation of this opinion, which we are under no obligation to undertake.
We express no opinion as to the underlying business decision to effect the
Transaction, the structure or tax consequences of the Merger Agreement, or the
availability or advisability of any alternatives to the Transaction. We did not
structure the Transaction or negotiate the final terms of the Transaction. Our
opinion is limited to the fairness, from a financial point of view, of the Cash
Consideration to be received by the Holders who will receive such Cash
Consideration pursuant to the Merger Agreement. We express no opinion with
respect to any other reasons, legal, business, or otherwise, that may support
the decision of the Board of Directors to approve, or in TEAM America's decision
to consummate, the Transaction.
In conducting our investigation and analyses and in arriving at our
opinion expressed herein, we have taken into account such accepted financial and
investment banking procedures and considerations as we have deemed relevant,
including the review of (i) historical and projected revenues, operating
earnings, net income and capitalization of TEAM America and certain other
publicly held companies in businesses we believe to be comparable to TEAM
App. B-2
<PAGE> 163
TEAM America Corporation
June 30, 2000
Page 3 of 3
America; (ii) the current and projected financial position and results of
operations of TEAM America; (iii) the historical market prices and trading
activity of the Common Stock; (iv) financial and operating information
concerning selected business combinations which we deemed comparable in whole or
in part; and (v) the general condition of the securities markets.
Raymond James & Associates, Inc. ("Raymond James") is actively involved in
the investment banking business and regularly undertakes the valuation of
investment securities in connection with public offerings, private placements,
business combinations and similar transactions. In the past, Roney & Co., prior
to being acquired by Raymond James, has performed certain investment banking
services for TEAM America and has received customary fees for such services.
Raymond James has acted as financial advisor to the Board of Directors of TEAM
America in connection with the Transaction and will receive a fee upon the
consummation thereof, which fee is contingent upon the value of the Transaction.
In the ordinary course of business, Raymond James may trade in the securities of
TEAM America for its own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of TEAM America in evaluating the proposed Transaction and does not
constitute a recommendation to any shareholder of TEAM America regarding how
such shareholder should vote on the proposed Transaction. This opinion is not to
be quoted or referred to, in whole or in part, without the prior written consent
of Raymond James, which will not be unreasonably withheld. We have consented to
the inclusion of this letter in its entirety in the proxy statement to be filed
by TEAM America with the Securities and Exchange Commission in connection with
the Transaction.
In arriving at this opinion, Raymond James did not attribute any
particular weight to any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, Raymond James believes that its analyses must be considered
as a whole and that selecting portions of its analyses, without considering all
analyses, would create an incomplete view of the process underlying this
opinion.
Based upon and subject to the foregoing, it is our opinion that, as of
June 15, 2000, the Cash Consideration to be received by the Holders who will
receive such Cash Consideration pursuant to the Merger Agreement is fair, from a
financial point of view, to such Holders. We are not expressing any opinion as
to the fairness of the transaction with respect to any shareholder that is
required to or elects to retain his or her shares of the Common Stock instead of
receiving the Cash Consideration in exchange for such shareholder's shares of
the Common Stock.
Respectfully submitted,
RAYMOND JAMES & ASSOCIATES, INC.
App. B-3
<PAGE> 164
APPENDIX C
NEVADA REVISED STATUTES
RIGHTS OF DISSENTING OWNERS
NRS 92A.300 Definitions. As used in NRS 92A.300 to 92A.500, inclusive,
unless the context otherwise requires, the words and terms defined in NRS
92A.305 to 92A.335, inclusive, have the meanings ascribed to them in those
sections.
(Added to NRS by 1995, 2086)
NRS 92A.305 "Beneficial stockholder" defined. "Beneficial stockholder"
means a person who is a beneficial owner of shares held in a voting trust or
by a nominee as the stockholder of record.
(Added to NRS by 1995, 2087)
NRS 92A.310 "Corporate action" defined. "Corporate action" means the
action of a domestic corporation.
(Added to NRS by 1995, 2087)
NRS 92A.315 "Dissenter" defined. "Dissenter" means a stockholder who is
entitled to dissent from a domestic corporation's action under NRS 92A.380 and
who exercises that right when and in the manner required by NRS 92A.400 to
92A.480, inclusive.
(Added to NRS by 1995, 2087; A 1999, 1631)
NRS 92A.320 "Fair value" defined. "Fair value," with respect to a
dissenter's shares, means the value of the shares immediately before the
effectuation of the corporate action to which he objects, excluding any
appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable.
(Added to NRS by 1995, 2087)
NRS 92A.325 "Stockholder" defined. "Stockholder" means a stockholder
of record or a beneficial stockholder of a domestic corporation.
(Added to NRS by 1995, 2087)
NRS 92A.330 "Stockholder of record" defined. "Stockholder of record" means
the person in whose name shares are registered in the records of a domestic
corporation or the beneficial owner of shares to the extent of the rights
granted by a nominee's certificate on file with the domestic corporation.
(Added to NRS by 1995, 2087)
NRS 92A.335 "Subject corporation" defined. "Subject corporation" means the
domestic corporation which is the issuer of the shares held by a dissenter
before the corporate action creating the dissenter's rights becomes effective or
the surviving or acquiring entity of that issuer after the corporate action
becomes effective.
(Added to NRS by 1995, 2087)
NRS 92A.340 Computation of interest. Interest payable pursuant to NRS
92A.300 to 92A.500, inclusive, must be computed from the effective date of the
action until the date of payment, at the average rate currently paid by the
entity on its principal bank loans or, if it has no bank loans, at a rate that
is fair and equitable under all of the circumstances.
(Added to NRS by 1995, 2087)
NRS 92A.350 Rights of dissenting partner of domestic limited partnership. A
partnership agreement of a domestic limited partnership or, unless otherwise
provided in the partnership agreement, an agreement of merger or exchange, may
provide that contractual rights with respect to the partnership interest of a
dissenting general or limited partner of a domestic limited partnership are
available for any class or group of partnership interests in connection with any
merger or exchange in which the domestic limited partnership is a constituent
entity.
(Added to NRS by 1995, 2088)
App. C-1
<PAGE> 165
NRS 92A.360 Rights of dissenting member of domestic limited-liability
company. The articles of organization or operating agreement of a domestic
limited-liability company or, unless otherwise provided in the articles of
organization or operating agreement, an agreement of merger or exchange, may
provide that contractual rights with respect to the interest of a dissenting
member are available in connection with any merger or exchange in which the
domestic limited-liability company is a constituent entity.
(Added to NRS by 1995, 2088)
NRS 92A.370 Rights of dissenting member of domestic nonprofit corporation.
1. Except as otherwise provided in subsection 2, and unless otherwise
provided in the articles or bylaws, any member of any constituent domestic
nonprofit corporation who voted against the merger may, without prior notice,
but within 30 days after the effective date of the merger, resign from
membership and is thereby excused from all contractual obligations to the
constituent or surviving corporations which did not occur before his resignation
and is thereby entitled to those rights, if any, which would have existed if
there had been no merger and the membership had been terminated or the member
had been expelled.
2. Unless otherwise provided in its articles of incorporation or bylaws, no
member of a domestic nonprofit corporation, including, but not limited to, a
cooperative corporation, which supplies services described in chapter 704 of NRS
to its members only, and no person who is a member of a domestic nonprofit
corporation as a condition of or by reason of the ownership of an interest in
real property, may resign and dissent pursuant to subsection 1.
(Added to NRS by 1995, 2088)
NRS 92A.380 Right of stockholder to dissent from certain corporate
actions and to obtain payment for shares.
1. Except as otherwise provided in NRS 92A.370 and 92A.390, a stockholder
is entitled to dissent from, and obtain payment of the fair value of his shares
in the event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the domestic corporation is a
party:
(1) If approval by the stockholders is required for the merger by NRS
92A.120 to 92A.160, inclusive, or the articles of incorporation and he is
entitled to vote on the merger; or
(2) If the domestic corporation is a subsidiary and is merged with its
parent under NRS 92A.180.
(b) Consummation of a plan of exchange to which the domestic corporation is
a party as the corporation whose subject owner's interests will be acquired, if
he is entitled to vote on the plan.
(c) Any corporate action taken pursuant to a vote of the stockholders to
the event that the articles of incorporation, bylaws or a resolution of the
board of directors provides that voting or nonvoting stockholders are entitled
to dissent and obtain payment for their shares.
2. A stockholder who is entitled to dissent and obtain payment under NRS
92A.300 to 92A.500, inclusive, may not challenge the corporate action creating
his entitlement unless the action is unlawful or fraudulent with respect to him
or the domestic corporation.
(Added to NRS by 1995, 2087)
NRS 92A.390 Limitations on right of dissent: Stockholders of certain
classes or series; action of stockholders not required for plan of merger.
1. There is no right of dissent with respect to a plan of merger or
exchange in favor of stockholders of any class or series which, at the record
App. C-2
<PAGE> 166
date fixed to determine the stockholders entitled to receive notice of and to
vote at the meeting at which the plan of merger or exchange is to be acted on,
were either listed on a national securities exchange, included in the national
market system by the National Association of Securities Dealers, Inc., or held
by at least 2,000 stockholders of record, unless:
(a) The articles of incorporation of the corporation issuing the shares
provide otherwise; or
(b) The holders of the class or series are required under the plan of
merger or exchange to accept for the shares anything except:
(1) Cash, owner's interests or owner's interests and cash in lieu of
fractional owner's interests of:
(I) The surviving or acquiring entity; or
(II) Any other entity which, at the effective date of the plan of merger or
exchange, were either listed on a national securities exchange, included in the
national market system by the National Association of Securities Dealers, Inc.,
or held of record by a least 2,000 holders of owner's interests of record; or
(2) A combination of cash and owner's interests of the kind described in
sub-subparagraphs (I) and (II) of subparagraph (1) of paragraph (b).
2. There is no right of dissent for any holders of stock of the surviving
domestic corporation if the plan of merger does not require action of the
stockholders of the surviving domestic corporation under NRS 92A.130.
(Added to NRS by 1995, 2088)
NRS 92A.400 Limitations on right of dissent: Assertion as to portions only
to shares registered to stockholder; assertion by beneficial stockholder.
1. A stockholder of record may assert dissenter's rights as to fewer than
all of the shares registered in his name only if he dissents with respect to all
shares beneficially owned by any one person and notifies the subject corporation
in writing of the name and address of each person on whose behalf he asserts
dissenter's rights. The rights of a partial dissenter under this subsection are
determined as if the shares as to which he dissents and his other shares were
registered in the names of different stockholders.
2. A beneficial stockholder may assert dissenter's rights as to shares held
on his behalf only if:
(a) He submits to the subject corporation the written consent of the
stockholder of record to the dissent not later than the time the beneficial
stockholder asserts dissenter's rights; and
(b) He does so with respect to all shares of which he is the beneficial
stockholder or over which he has power to direct the vote.
(Added to NRS by 1995, 2089)
NRS 92A.410 Notification of stockholders regarding right of dissent.
1. If a proposed corporate action creating dissenters' rights is submitted
to a vote at a stockholders' meeting, the notice of the meeting must state that
stockholders are or may be entitled to assert dissenters' rights under NRS
92A.300 to 92A.500, inclusive, and be accompanied by a copy of those sections.
2. If the corporate action creating dissenters' rights is taken by written
consent of the stockholders or without a vote of the stockholders, the domestic
corporation shall notify in writing all stockholders entitled to assert
dissenters' rights that the action was taken and send them the dissenter's
notice described in NRS 92A.430.
(Added to NRS by 1995, 2089; A 1997, 730)
App. C-3
<PAGE> 167
NRS 92A.420 Prerequisites to demand for payment for shares.
1. If a proposed corporate action creating dissenters' rights is submitted
to a vote at a stockholders' meeting, a stockholder who wishes to assert
dissenter's rights:
(a) Must deliver to the subject corporation, before the vote is taken,
written notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(b) Must not vote his shares in favor of the proposed action.
2. A stockholder who does not satisfy the requirements of subsection 1 and
NRS 92A.400 is not entitled to payment for his shares under this chapter.
(Added to NRS by 1995, 2089; 1999, 1631)
NRS 92A.430 Dissenter's notice: Delivery to stockholders entitled to assert
rights; contents.
1. If a proposed corporate action creating dissenters' rights is authorized
at a stockholders' meeting, the subject corporation shall deliver a written
dissenter's notice to all stockholders who satisfied the requirements to
assert those rights.
2. The dissenter's notice must be sent no later than 10 days after the
effectuation of the corporate action, and must:
(a) State where the demand for payment must be sent and where and when
certificates, if any, for shares must be deposited;
(b) Inform the holders of shares not represented by certificates to what
extent the transfer of the shares will be restricted after the demand for
payment is received;
(c) Supply a form for demanding payment that includes the date of the first
announcement to the news media or to the stockholders of the terms of the
proposed action and requires that the person asserting dissenter's rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
(d) Set a date by which the subject corporation must receive the demand for
payment, which may not be less than 30 nor more than 60 days after the date the
notice is delivered; and
(e) Be accompanied by a copy of NRS 92A.300 to 92A.500, inclusive. (Added
to NRS by 1995, 2089)
NRS 92A.440 Demand for payment and deposit of certificates; retention of
rights of stockholder.
1. A stockholder to whom a dissenter's notice is sent must:
(a) Demand payment;
(b) Certify whether he acquired beneficial ownership of the shares before
the date required to be set forth in the dissenter's notice for this
certification; and
(c) Deposit his certificates, if any, in accordance with the terms of the
notice.
2. The stockholder who demands payment and deposits his certificates, if
any, before the proposed corporate action is taken retains all other rights of a
stockholder until those rights are canceled or modified by the taking of the
proposed corporate action.
3. The stockholder who does not demand payment or deposit his
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certificates where required, each by the date set forth in the dissenter's
notice, is not entitled to payment for his shares under this chapter.
(Added to NRS by 1995, 2090; A 1997, 730)
NRS 92A.450 Uncertificated shares: Authority to restrict transfer after
demand for payment; retention of rights of stockholder.
1. The subject corporation may restrict the transfer of shares not
represented by a certificate from the date the demand for their payment is
received.
2. The person for whom dissenter's rights are asserted as to shares not
represented by a certificate retains all other rights of a stockholder until
those rights are canceled or modified by the taking of the proposed corporate
action.
(Added to NRS by 1995, 2090)
NRS 92A.460 Payment for shares: General requirements.
1. Except as otherwise provided in NRS 92A.470, within 30 days after
receipt of a demand for payment, the subject corporation shall pay each
dissenter who complied with NRS 92A.440 the amount the subject corporation
estimates to be the fair value of his shares, plus accrued interest. The
obligation of the subject corporation under this subsection may be enforced by
the district court:
(a) Of the county where the corporation's registered office is located; or
(b) At the election of any dissenter residing or having its registered
office in this state, of the county where the dissenter resides or has its
registered office. The court shall dispose of the complaint promptly.
2. The payment must be accompanied by:
(a) The subject corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, a statement of income
for that year, a statement of changes in the stockholders' equity for that year
and the latest available interim financial statements, if any;
(b) A statement of the subject corporation's estimate of the fair value of
the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's rights to demand payment under NRS
92A.480; and
(e) A copy of NRS 92A.300 to 92A.500, inclusive.
(Added to NRS by 1995, 2090)
NRS 92A.470 Payment for shares: Shares acquired on or after date of
dissenter's notice.
1. A subject corporation may elect to withhold payment from a dissenter
unless he was the beneficial owner of the shares before the date set forth in
the dissenter's notice as the date of the first announcement to the news media
or to the stockholders of the terms of the proposed action.
2. To the extent the subject corporation elects to withhold payment, after
taking the proposed action, it shall estimate the fair value of the shares, plus
accrued interest, and shall offer to pay this amount to each dissenter who
agrees to accept it in full satisfaction of his demand. The subject corporation
shall send with its offer a statement of its estimate of the fair value of the
shares, an explanation of how the interest was calculated, and a statement of
the dissenters' right to demand payment pursuant to NRS 92A.480.
(Added to NRS by 1995, 2091)
App. C-5
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NRS 92A.480 Dissenter's estimate of fair value: Notification of subject
corporation; demand for payment of estimate.
1. A dissenter may notify the subject corporation in writing of his own
estimate of the fair value of his shares and the amount of interest due, and
demand payment of his estimate, less any payment pursuant to NRS 92A.460, or
reject the offer pursuant to NRS 92A.470 and demand payment of the fair value of
his shares and interest due, if he believes that the amount paid pursuant to NRS
92A.460 or offered pursuant to NRS 92A.470 is less than the fair value of his
shares or that the interest due is incorrectly calculated.
2. A dissenter waives his right to demand payment pursuant to this section
unless he notifies the subject corporation of his demand in writing within 30
days after the subject corporation made or offered payment for his shares.
(Added to NRS by 1995, 2091)
NRS 92A.490 Legal proceeding to determine fair value: Duties of subject
corporation; powers of court; rights of dissenter.
1. If a demand for payment remains unsettled, the subject corporation shall
commence a proceeding within 60 days after receiving the demand and petition the
court to determine the fair value of the shares and accrued interest. If the
subject corporation does not commence the proceeding within the 60-day period,
it shall pay each dissenter whose demand remains unsettled the amount demanded.
2. A subject corporation shall commence the proceeding in the district
court of the county where its registered office is located. If the subject
corporation is a foreign entity without a resident agent in the state, it shall
commence the proceeding in the county where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
entity was located.
3. The subject corporation shall make all dissenters, whether or not
residents of Nevada, whose demands remain unsettled, parties to the proceeding
as in an action against their shares. All parties must be served with a copy of
the petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
4. The jurisdiction of the court in which the proceeding is commenced under
subsection 2 is plenary and exclusive. The court may appoint one or more persons
as appraisers to receive evidence and recommend a decision on the question of
fair value. The appraisers have the powers described in the order appointing
them, or any amendment thereto. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
5. Each dissenter who is made a party to the proceeding is entitled to a
judgment:
(a) For the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the subject corporation; or
(b) For the fair value, plus accrued interest, of his after-acquired shares
for which the subject corporation elected to withhold payment pursuant to
NRS 92A.470.
(Added to NRS by 1995, 2091)
NRS 92A.500 Legal proceeding to determine fair value: Assessment of costs
and fees.
1. The court in a proceeding to determine fair value shall determine all of
the costs of the proceeding, including the reasonable compensation and expenses
of any appraisers appointed by the court. The court shall assess the costs
against the subject corporation, except that the court may assess costs against
all or some of the dissenters, in amounts the court finds equitable, to
App. C-6
<PAGE> 170
the extent the court finds the dissenters acted arbitrarily, vexatiously or not
in good faith in demanding payment.
2. The court may also assess the fees and expenses of the counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the subject corporation and in favor of all dissenters if the
court finds the subject corporation did not substantially comply with the
requirements of NRS 92A.300 to 92A.500, inclusive; or
(b) Against either the subject corporation or a dissenter in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously or not in good faith with
respect to the rights provided by NRS 92A.300 to 92A.500, inclusive.
3. If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the subject corporation, the
court may award to those counsel reasonable fees to be paid out of the amounts
awarded to the dissenters who were benefited.
4. In a proceeding commenced pursuant to NRS 92A.460, the court may assess
the costs against the subject corporation, except that the court may assess
costs against all or some of the dissenters who are parties to the proceeding,
in amounts the court finds equitable, to the extent the court finds that such
parties did not act in good faith in instituting the proceeding.
5. This section does not preclude any party in a proceeding commenced
pursuant to NRS 92A.460 or 92A.490 from applying the provisions of N.R.C.P. 68
or NRS 17.115.
(Added to NRS by 1995, 2092)
App. C-7
<PAGE> 171
APPENDIX D
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
TEAM AMERICA CORPORATION
These Second Amended and Restated Articles of Incorporation supersede the
Articles of Incorporation of the Corporation heretofore in effect.
FIRST: The name of the Corporation shall be TEAM Mucho, Inc.
(hereinafter referred to as the "Corporation").
SECOND: The place in the State of Ohio where the principal office of
the Corporation will be located is the City of Worthington in Franklin
County.
THIRD: The purpose for which the Corporation is formed is to engage in any
lawful act or activity for which corporations may be formed under Chapter 1701
of the Ohio Revised Code, as now in effect or hereafter amended.
FOURTH: The amount of total authorized capital which the Corporation shall
have authority to issue is Fifty Million (50,000,000) shares, consisting of
Forty Five Million (45,000,000) Common Shares, without par value (the "Common
Shares"), and Five Million (5,000,000) Preferred Shares, without par value,
consisting of Two Million Five Hundred Thousand (2,500,000) Class A Voting
Preferred Shares (the "Class A Preferred Shares") and Two Million Five Hundred
Thousand (2,500,000) Class B Nonvoting Preferred Shares (the "Class B Preferred
Shares").
(A) EXPRESS TERMS OF THE COMMON SHARES
The Common Shares shall be subject to the terms of the Class A
Preferred Shares and the Class B Preferred Shares (collectively, the "Preferred
Shares") and the express terms of any series thereof. Each Common Share shall be
equal to every other Common Share and the holders thereof shall be entitled to
one vote for each Common Share on all questions presented to the shareholders.
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
App. D-1
<PAGE> 172
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;
and
(10) 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 (B).
Class A Preferred Shares 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. Except as otherwise provided herein or by law,
the holders of 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. During any period in which dividends on the Class A Preferred
Shares are cumulatively in arrears in the amount of six (6) or more full
quarterly dividends, the holders of the Class A Preferred Shares, voting
together as a class with the holders of any other class or series of Preferred
Shares who are similarly entitled to vote, will have the right to elect two (2)
directors, which two (2) directorships shall be in addition to that number of
directors then
App. D-2
<PAGE> 173
determined as constituting the number of members of the Board of Directors
pursuant to the Regulations 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 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;
and
App. D-3
<PAGE> 174
(10) 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).
No Class B Preferred Shares shall be entitled to voting rights
except to the extent described below. During any period in which dividends on
the Class B Preferred Shares are cumulatively in arrears in the amount of six
(6) or more full quarterly dividends, the holders of the Class B Preferred
Shares, voting together as a class with the holders of any other class or series
of Preferred Shares who are similarly entitled to vote, will have the right to
elect two (2) directors, which two (2) directorships shall be in addition to
that number of directors then determined as constituting the number of members
of the Board of Directors pursuant to the Regulations of the Corporation. 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 Second 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.
App. D-4
<PAGE> 175
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 Second 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:
(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 Second 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.
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<PAGE> 176
(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,
(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 Second Amended and Restated Articles of
Incorporation in the manner prescribed by the Ohio General Corporation Law.
However, the provisions set forth in article
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<PAGE> 177
EIGHTH, Article TENTH and this Article ELEVENTH of these Second 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 Second Amended and Restated Articles of
Incorporation are granted subject to the reservation set forth in this Article
ELEVENTH.
App. D-7
<PAGE> 178
APPENDIX E
SECOND AMENDED CODE OF REGULATIONS
OF
TEAM MUCHO, INC.
ARTICLE I
MEETING OF SHAREHOLDERS
SECTION 1.01. ANNUAL MEETING.
The annual meeting of shareholders of the Corporation shall be held at
such time and on such business day as the directors may determine each year. The
annual meeting shall be held at the principal office of the Corporation or at
such other place within or without the State of Ohio as the directors may
determine. The directors shall be elected thereat and such other business
transacted as may be specified in the notice of the meeting.
SECTION 1.02. SPECIAL MEETINGS.
Special meetings of the shareholders may be called at any time by the
President, a Vice President or by a majority of the directors acting with or
without a meeting, or by shareholders holding 50% or more of the outstanding
shares entitled to vote thereat. Such meetings may be held within or without the
State of Ohio at such time and place as may be specified in the notice thereof.
SECTION 1.03. NOTICE OF MEETINGS.
Written notice of every annual or special meeting of the shareholders
stating the time, place and purposes thereof shall be given to each shareholder
entitled to vote thereat and to each shareholder entitled to notice as provided
by law, in person or by mailing the same to his last address appearing on the
records of the Corporation at least seven (7) days before the meeting. Any
shareholder may waive notice of any meeting, and, by attendance at any meeting
without protesting the lack of proper notice, shall be deemed to have waived
notice thereof.
SECTION 1.04. PERSONS BECOMING ENTITLED BY OPERATION OF LAW OR TRANSFER.
Every person who, by operation of law, transfer or any other means
whatsoever, shall become entitled to any shares, shall be bound by every notice
in respect of such share or shares which prior to the entering of his name and
address on the records of the Corporation shall have been duly given to the
person from whom he derives his title to such shares.
SECTION 1.05. QUORUM AND ADJOURNMENTS.
Except as may be otherwise required by law or by the Corporation's
Articles of Incorporation, the holders of shares entitling them to exercise a
majority of the voting power of the Corporation shall constitute a quorum;
provided that any meeting duly called, whether a quorum is present or otherwise,
may, by vote of the holders of a majority of the voting shares represented
thereat, adjourn from time to time, in which case no further notice of the
adjourned meeting need be given.
SECTION 1.06. ORGANIZATION OF MEETINGS.
The Board of Directors will designate a chairman for each meeting of
shareholders. The chairman will call the meeting to order and act as chairman of
the meeting. In the absence of such a chairman, the highest ranking officer of
the Corporation who is present at the meeting will act as chairman of the
meeting.
App. E-1
<PAGE> 179
The chairman of the meeting will appoint the secretary of the meeting, an
inspector or inspectors of elections for the meeting and such other
functionaries as the chairman deems necessary or appropriate.
Any proposal to be brought before any meeting of shareholders by any
shareholder must be submitted in writing to the Secretary of the Corporation at
least thirty (30) days prior to the date fixed for the meeting at which it is
intended that such proposal is to be presented.
SECTION 1.07. CONDUCT OF BUSINESS.
The chairman of the meeting will determine the order of business and
procedures at the meeting, including without limitation the manner of voting and
the conduct of discussion.
SECTION 1.08.
At meetings of the shareholders, any shareholder of record entitled to
vote thereat may be represented and may vote by a proxy or proxies appointed by
an instrument in writing signed by such shareholder, but such instrument shall
be filed with the secretary of the meeting before the person holding such proxy
shall be allowed to vote thereunder. No proxy shall be valid after the
expiration of eleven months after the date of its execution, unless the
shareholder executing it shall have specified therein the length of time it is
to continue in force.
ARTICLE II
DIRECTORS
SECTION 2.01. AUTHORITY AND QUALIFICATIONS.
Except where the law, the Articles or these Regulations otherwise provide,
all authority of the Corporation shall be vested in and exercised by its
directors. Directors need not be shareholders of the Corporation.
SECTION 2.02. NUMBER.
Upon adoption of these Regulations, the number of directors initially
shall be fixed at nine (9). Thereafter, the number of directors may be
determined by the vote of the holders of 75% of the shares entitled to vote
thereon at any annual meeting or special meeting called for the purpose of
electing directors or by resolution adopted by affirmative vote of a majority of
the directors then in office; provided that the number of directors shall in no
event be fewer than three (3) nor more than fifteen (15). When so fixed, such
number shall continue to be the authorized number of directors until changed by
the shareholders or directors.
SECTION 2.03. NOMINATION.
Only persons who are nominated in accordance with the following procedures
shall be eligible for election as directors of the Corporation. Nominations of
persons for election as directors of the Corporation may be made at a meeting of
shareholders by or at the direction of the directors, by any person or committee
appointed by the directors or by any shareholder of the Corporation entitled to
vote for the election of directors who complies with the notice procedures set
forth in this Section 2.03. Such nominations, other than those made by or at the
direction of the directors, shall be made pursuant to timely notice in writing
to the Secretary of the Corporation. To be timely, a shareholder's notice shall
be delivered to or mailed and received at the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90) days prior
to the meeting; provided, however, that in the event that less than seventy-five
(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 fifteenth (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. Such shareholder's notice shall
set forth (1) as to each person who is not an incumbent director whom the
shareholder proposes to nominate for election as a director, (i) the name, age,
business address and residence address of such person; (ii) the principal
occupation or employment of such person; (iii) the class and number of shares,
if any, of the Corporation which are beneficially owned by such person; and (iv)
any other information relating to such person that is required to be disclosed
in solicitations for proxies for election
App. E-2
<PAGE> 180
of directors pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended; and (2) as to the shareholder giving the notice, (A) the name
and record address of such shareholder and (B) the class and number of shares,
if any, of the Corporation which are beneficially owned by such shareholder.
Such notice shall be accompanied by the written consent of each proposed nominee
to serve as a director of the Corporation, if elected. No person shall be
eligible for election as a director of the corporation unless nominated in
accordance with the procedures set forth in this Section 2.03. The chairman of a
meeting of shareholders shall, if the facts warrant, determine and declare to
the meeting that a nomination was not made in accordance with the provisions of
this Section 2.03; and if he should so determine, the defective nomination shall
be disregarded.
SECTION 2.04. CLASSIFICATION. TERM OF OFFICE AND ELECTION OF DIRECTORS.
The directors will be classified into three (3) classes, "Class 1," "Class
2" and "Class 3," respectively. If the number of directors determined in
accordance with the provisions of Section 2.02 of these Regulations is six (6)
or more but less than nine (9), then the directors will be classified into two
classes, designated "Class 1" and "Class 2," respectively. The number of
directors constituting each class will, as nearly as possible, be equal.
However, if the number of directors constituting the whole Board of Directors is
not evenly divisible by the number of classes of directors, then the number of
directors constituting each class will be such that (i) the difference between
the number of directors constituting each class is not greater than one, (ii)
the number of Class 3 directors, if any, is greater than or equal to the number
of Class 2 directors and the number of Class 1 directors, and (iii) the number
of Class 2 directors is greater than or equal to the number of Class 1
directors. As of the effective date of these regulations, (a) the term of office
of each Class 1 director will expire at the annual meeting in 2001, (b) the term
of office of each Class 2 director will expire at the annual meeting in 2002,
and (c) the term of office of each Class 3 director will expire at the annual
meeting in 2003. Each director will hold office for the term for which he is
elected or appointed and until his successor is elected and qualified or until
his earlier death, resignation, disqualification or removal. Election of
directors shall be by ballot whenever requested by any person entitled to vote
at the meeting but unless so requested such election may be conducted in any way
approved at such meeting. Notwithstanding anything herein to the contrary, if
the number of directors determined in accordance with the provisions of Section
2.02 of these Regulations is less than six (6), then the directors will not be
classified and the directors shall hold office until the annual meeting of the
shareholders meet following their election and until their respective successors
are elected, or until their earlier resignation, death or removal from office.
SECTION 2.05. INCREASE OR DECREASE IN THE NUMBER OF DIRECTORS.
Whenever the number of directors constituting the whole Board of Directors
is increased between annual meetings, a majority of the directors then in office
may appoint the new director or directors. The term of office of such new
director or directors will be for the balance of the terms of the directors of
the class to which such new director is appointed and until his successor is
elected and qualified or until his earlier death, resignation, disqualification
or removal.
Any decrease in the number of directors constituting the whole Board of
Directors will not become effective until the expiration of the term or terms of
the directors of each class affected by the decrease. However, a decrease in the
number of directors constituting the whole Board of Directors may become
effective at any time to the extent that there are vacancies on the Board of
Directors which are being eliminated by the decrease.
SECTION 2.06. VACANCIES.
Whenever any vacancy shall occur among the directors, the remaining
directors shall constitute the directors of the Corporation until such vacancy
is filled or until the number of directors is changed as provided in Section
2.02 hereof. Except in cases where a director is removed as provided by law and
his successor is elected by the shareholders, the remaining directors may, by a
vote of a majority of their number, fill any vacancy for the unexpired term.
SECTION 2.07. REMOVAL OF A DIRECTOR.
A director may be removed by holders of 75% of the shares then entitled to
vote for the election of directors, but only for cause.
App. E-3
<PAGE> 181
Except as otherwise required or provided for by law, cause to remove a
director will be construed to exist only if the director whose removal is
proposed (a) has been adjudged incompetent, (b) has been convicted of a felony
by a court of competent jurisdiction and such conviction is no longer subject to
direct appeal or (c) has been adjudged by a court of competent jurisdiction to
be liable for negligence or misconduct in the performance of his duty to the
Corporation in a matter of substantial importance to the Corporation and such
adjudication is no longer subject to direct appeal.
SECTION 2.08. QUORUM AND ADJOURNMENTS.
A majority of the directors in office at the time shall constitute a
quorum, provided that any meeting duly called, whether a quorum is present or
otherwise, may, by vote of a majority of the directors present, adjourn from
time to time and place to place within or without the State of Ohio, in which
case no further notice of the adjourned meeting need be given. At any meeting at
which a quorum is present, all questions and business shall be determined by the
affirmative vote of not less than a majority of the directors present, except as
is otherwise authorized by Section 1701.60(A)(1) of the Ohio Revised Code.
SECTION 2.09. ORGANIZATION MEETING.
Immediately after each annual meeting of the shareholders at which
directors are elected, or each special meeting held in lieu thereof, the
directors, if a quorum thereof is present, shall hold an organization meeting at
the same place or at such other time and place as may be fixed by the
shareholders at such meeting, for the purpose of electing officers and
transacting any other business. Notice of such meeting need not be given. In the
event that for any reason such organization meeting is not held at such time, a
special meeting for such purpose shall be held as soon thereafter as
practicable.
SECTION 2.10. REGULAR MEETINGS.
Regular meetings of the directors may be held at such times and places
within or without the State of Ohio as may be provided for in resolutions
adopted by the directors and upon such notice, if any, as shall be so provided
for.
SECTION 2.11. SPECIAL MEETINGS.
Special meetings of the directors may be held at any time within or
without the State of Ohio upon call by the President, the Chief Executive
Officer or by any two directors. Notice of each such meeting shall be given to
each director by letter or telegram or in person, either orally or
telephonically, not less than forty-eight (48) hours prior to such meeting. Any
director may waive notice of any meeting, and, by attendance at any meeting
without protesting the lack of proper notice, shall be deemed to have waived
notice thereof. Unless otherwise limited in the notice thereof, any business may
be transacted at any organization, regular or special meeting.
SECTION 2.12. COMPENSATION.
The directors are authorized to fix a reasonable salary for directors or a
reasonable fee for attendance at any meeting of the directors, Compensation
Committee, Audit Committee or other committees elected under Section 3.01
hereof, or any combination of salary and attendance fee. In addition to such
compensation provided for directors, they shall be reimbursed for any expenses
incurred by them in traveling to and from such meetings.
App. E-4
<PAGE> 182
ARTICLE III
COMMITTEES
SECTION 3.01. MEMBERSHIP.
The Board of Directors by majority vote of the whole board shall designate
the following standing committees: a Compensation Committee and an Audit
Committee. The Compensation Committee and the Audit Committee will each be
comprised of three members determined by the Board of Directors in its
discretion.
The Board of Directors in its discretion shall determine whether to
designate additional committees and the composition of all the committees that
it so designates.
SECTION 3.02. QUORUM.
The majority of the authorized number of directors that comprises a
standing committee shall constitute a quorum of that committee. No alternate
members of committees shall be designated.
SECTION 3.03. AUTHORITY.
To the extent provided in the resolution of the Board of Directors
establishing such committee, a committee shall have and may exercise the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation; provided, however, no committee may be empowered to
declare dividends, elect or rename officers, fill vacancies among the directors
or repeal or amend any resolution adopted by the Board of Directors.
SECTION 3.04. VOTE.
Each committee shall act by vote of a majority of a quorum of the
directors that comprise that committee.
SECTION 3.05. MEETINGS.
(i) Meetings of standing committees shall be held at such time as the
committee or person calling the meeting shall fix. Regular meetings for the
following year shall be scheduled at the first meeting of a year.
(ii) Meetings of standing committee shall be held at such place within or
without the State of Ohio as shall be fixed by the committee or person calling
the meeting.
(iii) No call shall be required for regular meetings for which the time
and place have been fixed. Special meetings may be called by or at the direction
of any committee member or by any officer instructed by any committee member.
(iv) No notice shall be required for regular meetings for which the time
and place have been fixed. Written notice of the time, place and purpose shall
be given for special meetings at least seventy-two (72) hours in advance to each
committee member with a copy to the Secretary. Written notice shall be sent to
each committee member by United States mail postage prepaid, overnight delivery
service or telecopier transmission and shall be effective upon receipt. Notice
shall be sent to the respective addresses designated in writing by the
respective committee members or, in the absence of such designation, to the last
known addresses. Notice need not be given to any committee member who submits a
written waiver of notice signed by him before or after the time for the meeting
stated therein. Attendance of any such person at a meeting shall constitute a
waiver of notice of such meeting, except when he attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of a committee need be specified in any written
waiver of notice, provided, however, that a waiver of notice shall be effective
only with respect to the purpose stated in the notice of the meeting.
App. E-5
<PAGE> 183
(v) One committee member may adjourn a meeting to another time and place.
The quorum and voting provisions herein stated shall not be construed as
conflicting with any provisions of Chapter 1701 of the Ohio Revised Code, the
Articles of Incorporation and these Regulations which govern action of
disinterested directors.
(vi) A committee member, in the exercise of his fiduciary duty to the
Corporation, shall disqualify himself from a vote of a committee with respect to
a transaction in which a potential conflict of interest exists between the
committee member and the Corporation.
SECTION 3.06. REPORTS.
The chairman of each committee shall make a report on its activities at
each meeting of the Board of Directors.
ARTICLE IV
OFFICERS
SECTION 4.01. OFFICERS DESIGNATED.
The directors, at their organization meeting or at a special meeting held
in lieu thereof, shall elect a Chairman of the Board, a President, a Secretary,
a Treasurer and, in their discretion, one or more Vice Presidents, a General
Manager, an Assistant Secretary or Secretaries, an Assistant Treasurer or
Treasurers and such other officers as the directors may see fit. The President
and the Chairman of the Board shall be, and the other officers may, but need not
be, chosen from among the directors. Any two or more of such offices other than
that of President and Vice President, Secretary and Assistant Secretary or
Treasurer and Assistant Treasurer, may be held by the same person, but no
officer shall execute, acknowledge or verify any instrument in more than one
capacity.
SECTION 4.02. TENURE OF OFFICE.
The officers of the Corporation shall hold office until the next
organization meeting of the directors and until their successors are chosen and
qualify, except in case of resignation, death or removal. The directors may
remove any officer at any time with or without cause by a majority vote of the
directors in office at the time. A vacancy, however created, in any office may
be filled by election by the directors.
SECTION 4.03. CHAIRMAN OF THE BOARD.
The Chairman of the Board, if any, shall preside at meetings of the
directors and shall have such other powers and duties as may be prescribed by
the directors.
SECTION 4.04. CHIEF EXECUTIVE OFFICER.
The Chief Executive Officer shall report to the board of directors and
shall have the powers and duties as may be prescribed by the directors.
SECTION 4.05. PRESIDENT.
The President shall report to the board of directors and have the powers
and duties as may be prescribed by the directors.
SECTION 4.06. VICE PRESIDENTS.
The Vice Presidents shall have such powers and duties as may be prescribed
by the directors or as may be delegated by the President or the Chief Executive
Officer. In case of the absence or disability of the President or when
circumstances prevent the President from acting, the Vice Presidents, in the
order designated by the directors, shall perform the duties of the President,
and in such case, the power of the Vice Presidents to execute all authorized
deeds, mortgages, bonds, contracts and other obligations in the name of the
Corporation, shall be coordinate with
App. E-6
<PAGE> 184
like powers of the President. In case the President and such Vice Presidents are
absent or unable to perform their duties, the directors may appoint a President
pro tempore. The directors may designate one or more Vice Presidents as Senior
Vice Presidents.
SECTION 4.07. SECRETARY.
The Secretary shall attend and keep the minutes of all meetings of the
shareholders and of the directors. He shall keep such books as may be required
by the directors, shall give all notices of meetings of shareholders and
directors, provided, however, that any persons calling such meetings may, at
their option, give such notice. He shall have such other powers and duties as
may be prescribed by the directors.
SECTION 4.08. TREASURER.
The Treasurer shall receive and have in charge all money, bills, notes,
bonds, stocks in other corporations and similar property belonging to the
Corporation and shall do with the same as shall be ordered by the directors. He
shall keep accurate financial accounts and hold the same open for inspection and
examination of the directors. On the expiration of his term of office, he shall
turn over to his successor or the directors all property, books, papers and
money of the Corporation in his hands. He shall have such other powers and
duties as may be prescribed by the directors.
SECTION 4.09. OTHER OFFICERS.
The Assistant Secretaries, Assistant Treasurers, if any, and the other
officers, if any, shall have such powers and duties as the directors may
prescribe.
SECTION 4.10. DELEGATION OF DUTIES.
The directors are authorized to delegate the duties of any officers to any
other officer and generally to control the actions of the officers and to
require the performance of duties in addition to those mentioned herein.
SECTION 4.11. COMPENSATION.
The directors are authorized to determine or to provide the method of
determining the compensation of all officers.
SECTION 4.12. BOND.
Any officer or employee, if required by the directors, shall give bond in
such sum and with such security as the directors may require for the faithful
performance of his duties.
SECTION 4.13. SIGNING CHECKS AND OTHER INSTRUMENTS.
The directors are authorized to determine or provide the method of
determining how checks, notes, bills of exchange and similar instruments shall
be signed, countersigned or endorsed.
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 5.01. INDEMNIFICATION.
(a) The Corporation shall indemnify any director or officer or any former
director or officer of the Corporation or any person who is or has served at the
request of the Corporation as a director, officer, trustee, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement, actually and reasonably incurred by him in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal,
App. E-7
<PAGE> 185
administrative or investigative, other than an action by or in the right of the
Corporation, to which he was, is or is threatened to be made a party by reason
of the fact that he is or was such director, officer, trustee, employee or agent
provided it is determined in the manner set forth in paragraph (c) of this
section that he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Corporation and that, with
respect to any criminal action or proceeding, he had no reasonable cause to
believe his conduct was unlawful.
(b) In the case of any threatened, pending or completed action or suit by
or in the right of the Corporation, the Corporation shall indemnify each person
indicated in paragraph (a) of this section against expenses, including
attorneys' fees, actually and reasonably incurred in connection with the defense
or settlement thereof, provided it is determined in the manner set forth in
paragraph (c) of this section that he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court of common pleas or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court of common pleas or such other court
shall deem proper.
(c) The determinations referred to in paragraphs (a) and (b) of this
section shall be made (i) by a majority vote of a quorum consisting of directors
of the Corporation who were not and are not parties to or threatened with any
such action, suit or proceeding, (ii) if such a quorum is not obtainable or if a
majority vote of a quorum of disinterested directors so directs, in a written
opinion by independent legal counsel other than an attorney or a firm having
associated with it an attorney who has been retained by or who has performed
services for the Corporation or any person to be indemnified within the past
five years, (iii) by the shareholders or (iv) by the court of common pleas or
the court in which such action, suit or proceeding was brought.
(d) Expenses, including attorneys' fees, incurred by a director in
defending any action, suit or proceeding referred to in paragraphs (a) and (b)
of this section, shall be paid by the Corporation as they are incurred, in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director in which he agrees to do both
of the following: (i) repay such amount if it is proved by clear and convincing
evidence in a court of competent jurisdiction that his action or failure to act
involved an act or omission undertaken with deliberate intent to cause injury to
the Corporation or undertaken with reckless disregard for the best interests of
the Corporation; and (ii) reasonably cooperate with the Corporation concerning
the action, suit or proceeding.
(e) Expenses, including attorneys' fees, incurred by a director, officer
or trustee in defending any action, suit or proceeding referred to in paragraphs
(a) and (b) of this section may be paid by the Corporation as they are incurred,
in advance of the final disposition of such action, suit or proceeding as
authorized by the directors in the specific case upon receipt of an undertaking
by or on behalf of the director, officer or trustee to repay such amount, if it
ultimately is determined that he is not entitled to be indemnified by the
Corporation.
(f) The indemnification provided by this section shall not be deemed
exclusive (i) of any other rights to which those seeking indemnification may be
entitled under the Articles of Incorporation, these Regulations, any agreement,
any insurance purchased by the Corporation, vote of shareholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office or (ii) of the
power of the Corporation to indemnify any person who is or was an employee or
agent of the Corporation or of another corporation, joint venture, trust or
other enterprise which he is serving or has served at the request of the
Corporation, to the same extent and in the same situations and subject to the
same determinations as are hereinabove set forth with respect to a director,
officer or trustee. As used in this paragraph (e), references to the
"Corporation" include all constituent corporations in a consolidation or merger
in which the Corporation or a predecessor to the Corporation by consolidation or
merger was involved. The indemnification provided by this section shall continue
as to a person who has ceased to be a director, officer or trustee and shall
inure to the benefit of the heirs, executors and administrators of such person.
App. E-8
<PAGE> 186
ARTICLE VI
PROVISIONS IN ARTICLES OF INCORPORATION
SECTION 6.01.
These Regulations are at all times subject to the provisions of the
Articles of Incorporation of the Corporation (including in such term whenever
used in these Regulations, amendments thereto).
ARTICLE VII
RESTRICTIONS ON TRANSFER OF SHARES
SECTION 7.01. STOCK CERTIFICATES.
The shares of stock of the Corporation shall be represented by
certificates signed by the President or a Vice President and by a second officer
who may be the Treasurer, an Assistant Treasurer, the Secretary, or an Assistant
Secretary of the Corporation, certifying the number of shares evidenced thereby.
The signatures of the officers of the Corporation upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent or by a
registrar other than the Corporation itself or its employee. In case any officer
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer at
the date of issue. Each certificate shall set forth additional material as is
required by law.
SECTION 7.02. TRANSFERS.
The Corporation reserves the right to refuse to transfer any shares on its
records unless and until it receives a satisfactory opinion letter from an
attorney for the transferee of such shares that such transfer will not violate
the Securities Act of 1933, as amended, or the regulations thereunder, the Ohio
Securities Act or the regulations thereunder, or any other applicable law or
regulation.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. AMENDMENTS.
These Regulations may be altered, changed or amended in any respect or
superseded by new Regulations in whole or in part, by the affirmative vote of
the holders of record of shares entitling them to exercise a majority of the
voting power of the Corporation at an annual or special meeting called for such
purpose, or without a meeting by the written consent of the holders of record of
shares entitling them to exercise two-thirds of the voting power with respect
thereto; provided, however, that, notwithstanding anything herein this Section
8.01 to the contrary, the provisions of Sections 1.02, 1.06, 2.02, 2.03, 2.04,
2.07 and this Section 8.01 may not be altered, changed or amended in any
respect, or superseded by new Regulations in whole or in part except by the
affirmative vote of shareholders holding 75% or more of the outstanding shares
entitled to vote thereat if such alteration, change or amendment is not approved
by at least three-fourths of the directors. In case of adoption of any
Regulation or amendment by such written consent, the Secretary shall enter the
same in the corporate records and mail a copy thereof to each shareholder who
would have been entitled to vote thereon and did not participate in the adoption
thereof.
SECTION 8.02. RECORD DATES.
For any lawful purpose, including, without limitation, the determination
of the shareholders who are entitled to: (i) receive notice of or to vote at a
meeting of shareholders; (ii) receive payment of any dividend or distribution;
(iii) receive or exercise rights of purchase of or subscription for, or exchange
or conversion of, shares or other securities, subject to contract rights with
respect thereto; or (iv) participate in the execution of written consents,
waivers, or releases, the directors may fix a record date, which shall not be a
date earlier than the date on which the record date is fixed and, in the cases
provided for in clauses (i), (ii) and (iii) above, shall not be more than sixty
(60) nor fewer than ten (10) days preceding the date of the meeting of the
shareholders, or the date fixed for the payment of any dividend or distribution,
or the date fixed for the
App. E-9
<PAGE> 187
receipt or the exercise of rights, as the case may be, unless the Articles of
Incorporation specify a shorter or longer period for such purpose.
SECTION 8.03. FISCAL YEAR.
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
App. E-10
<PAGE> 188
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized by Section 1701.13(E) of the Ohio Revised Code, Article V
of the Company's Code of Regulations ("Article V") provides that directors and
officers of the Company may, under certain circumstances, be indemnified against
expenses (including attorneys' fees) and other liabilities actually and
reasonably incurred by them as a result of any suit brought against them in
their capacity as a director or officer, if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful. Article V also
provides that directors and officers may also be indemnified against expenses
(including attorneys' fees) incurred by them in connection with a derivative
suit if they acted in good faith and in a manner they reasonably believed to be
in or not opposed to the best interests of the Company, except that no
indemnification may be made without court approval if such person was adjudged
liable to the Company.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of June 16,
2000, among the Company, TEAM Merger Corporation and
Mucho.com, Inc. (Attached as Appendix A to the proxy
statement/information statement/prospectus that is
part of this Registration Statement.)
2.2 Amendment to Agreement and Plan of Merger, dated as
of August 9, 2000, among the Company, TEAM Merger
Corporation and Mucho.com, Inc. (Attached as Appendix
A to the proxy statement/information
statement/prospectus that is part of this
Registration Statement.)
3.1 Amended Articles of Incorporation of the Company(1)
3.2 Amended Code of Regulations of the Company(1)
3.3 Form of Second Amended and Restated Articles of
Incorporation of the Company (Attached as Appendix D
to the proxy statement/information
statement/prospectus that is part of this
Registration Statement.)
3.4 Form of Second Amended Code of Regulations of the
Company (Attached as Appendix E to the proxy
statement/information statement/prospectus that is
part of this Registration Statement.)
5.1 Opinion of Porter, Wright, Morris & Arthur LLP as to
the legality of the securities being registered.
*10.1 Company's 1996 Incentive Stock Plan(1)
*10.2 Executive employment agreement between the Company
and Mr. Kevin T. Costello (Previously filed as Exhibit
10.2 to Form 10-K filed April 14, 2000, and
incorporated by reference herein.)
10.3 Lease for Cascade Corporate Center dated June 22,
1990 between EastGroup Properties and the Company, as
amended(1)
21.1 Subsidiaries of the Registrant (Previously filed as
Exhibit 21.1 to Form 10-K filed April 14, 2000, and
incorporated by reference herein.)
</TABLE>
II-1
<PAGE> 189
<TABLE>
<S> <C>
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Stonefield Josephson, Inc.
24.1 Power of Attorney
</TABLE>
(1) Included as an exhibit to the registrant's Registration Statement on Form
S-1, as amended (File No. 333-13913), and incorporated herein by
reference.
* Management contract or compensation plan or arrangement.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
The registrant undertakes that every prospectus (i) that is filed
pursuant to the immediately preceding paragraph, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE> 190
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Worthington, State of
Ohio, on August 11, 2000.
TEAM AMERICA CORPORATION
By: /s/Thomas L. Gerlacher
---------------------------------------
Thomas Gerlacher, Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ KEVIN T. COSTELLO President and Chief Executive Officer August 11, 2000
-------------------------- Executive Officer and Director
Kevin T. Costello (Principal Executive Officer)
/s/ THOMAS L. GERLACHER Vice President of Finance, Chief August 11, 2000
-------------------------- Financial Officer and Treasurer
Thomas L. Gerlacher (Principal Financial Officer)
* WILLIAM W. JOHNSTON Chairman of the Board August 11, 2000
--------------------------
William W. Johnston
Director August 11, 2000
--------------------------
Charles F. Dugan II
* CRYSTAL FAULKNER Director August 11, 2000
--------------------------
Crystal Faulkner
* M. R. SWARTZ Director August 11, 2000
--------------------------
M. R. Swartz
</TABLE>
* By: /s/ KEVIN T. COSTELLO
------------------------------
Kevin T. Costello, attorney-in-fact
for each of the persons indicated
II-3
