<PAGE>
U.S SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------
COMMISSION FILE NUMBER: 0-27842
COLMENA CORP.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
Delaware 54-1778587
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
25100 Detroit Road
Westlake, Ohio
(Address of principal executive offices) 44145
(Zip Code)
Issuers's telephone number: (216)871-5000
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which
registered
None None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 Par Value
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the
<PAGE>
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $ 0
--------
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common
equity, as of a specified date within the past 60 days. $9,824,925
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. Common Stock, $.01 par
value, outstanding as of January 29, 1998 was 6,167,700.
Documents incorporated by reference: None.
Transitional Small Business Issuer Format (check one):
Yes No X
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Business Development.
- ---------------------
Colmena Corp., a Delaware corporation, (the "Company") was originally
incorporated in the State of Virginia on July 11, 1994 under the name
Sports-Guard, Inc. ("Sports-Guard Virginia"). On July 26, 1995, Sports-Guard
Virginia reincorporated in the State of Delaware as Sports-Guard, Inc. (the
"Reincorporation"). Sports-Guard, Inc. ("Sports-Guard") was incorporated in the
State of Delaware on July 17, 1995 to act as the successor in interest to
Sports-Guard Virginia following the Reincorporation. On February 2, 1996, the
Company completed the acquisition by merger of Skate Publishing Corp., a
Delaware corporation ("Skate"). Skate had limited assets and approximately 400
shareholders of record and was acquired by the Company in order to increase its
shareholder base. Skate had no active operations at the time of the merger with
the Company.
On November 10, 1997, Norman O. Milligan, Sr. sold his controlling interest
in the Company to Invest L'Inc. Partners, LLC, a creditor and shareholder of the
Company. Concurrently with this sale, Mr. Milligan acquired certain operating
assets and assumed certain liabilities of the Company, and the Company released
the exclusive license rights to the patent for the Fielders-Guard product (which
is owned by Mr. Milligan) previously distributed by the Company.
On November 10, 1997, the Company filed a Certificate of Amendment of
Certificate of Incorporation in order to change its name from Sports-Guard, Inc.
to Colmena Corp. as well as to effect a one-for-ten reverse split of its
outstanding common stock. As a result of the reverse split, the outstanding
shares of common stock of the Company were reduced to approximately 600,000.
On November 10, 1997, the Company consummated the acquisition of RCP
Enterprises Group, LLC, an Ohio limited liability company ("RCP-Ohio"), through
the merger of RCP- Ohio with and into RCP Enterprises Group, Inc., a Delaware
corporation ("RCP-Delaware") formed as a wholly-owned subsidiary of the Company
for purposes of the acquisition. In exchange for all of the outstanding
membership interests in RCP-Ohio, the members of RCP- Ohio received an aggregate
of 3,000,000 shares of the Company's common stock. RCP- Ohio was founded in 1997
by Richard C. Peplin, Jr., the current President and controlling stockholder of
the Company.
Also on November 10, 1997, the Company consummated the acquisition of Tio
Cigars, Inc., an Ohio corporation ("Tio-Ohio"), through the merger of Tio-Ohio
with and into Tio Mariano Cigar Corp., a Delaware corporation ("Tio-Delaware")
formed as a wholly-owned subsidiary of the Company for purposes of the
acquisition. In exchange for all of the outstanding capital stock of Tio-Ohio,
the stockholders of Tio-Ohio received an aggregate of 1,310,000 shares of the
Company's common stock. Mr.Peplin was also the founder and controlling
stockholder of Tio-Ohio.
The RCP-Ohio and Tio-Ohio acquisitions were treated, for accounting
purposes, as a reverse purchase acquisition where the combined companies of
RCP-Ohio and Tio-Ohio, which were under the common control of Richard C. Peplin,
Jr., were treated as one accounting acquisition.
-1-
<PAGE>
As of the acquisition date, November 10, 1997, the Company had total assets
of approximately $29,151 and total equity (deficit) of approximately $(451,798).
As of November 10, 1997, RCP-Ohio and Tio-Ohio had combines assets of
approximately $909,216 and total shareholders' interest of approximately
$213,156.
The Company's principal executive office is located at 25100 Detroit Road,
Westlake, Ohio 44145 and its telephone number is (216) 871-5000.
Business of the Issuer.
- -----------------------
The Company was originally founded in 1994 to engage in the design and
distribution of sports-safety equipment. The Company's first product, known as
the Fielders-Guard, was a polycarbonate face guard for use primarily by
defensive players in the sports of baseball and softball. The Company was
unsuccessful in attaining market acceptance for the Fielders-Guard, and was
unable to generate any meaningful level of sales of the product. Consequently,
in connection with the recent change in control of the Company, the Company
changed its line of business.
The Company currently acts as a holding company for two wholly-owned
operating subsidiaries. RCP Enterprises Group, Inc. ("RCP") is engaged in the
marketing and distribution of long-distance telephone service calling cards, and
Tio Mariano Cigar Corp. ("Tio") is engaged in the manufacture and distribution
of premium hand-rolled cigars and has now ceased active operations. The Company
is actively pursuing the sale of Tio.
RCP Enterprises Group, Inc.
- ---------------------------
PRODUCTS AND SERVICES
The Company, through its wholly-owned subsidiary RCP, is engaged in the
creation, distribution, marketing and management of long-distance telephone
services. RCP's principal products are telephone network access products,
commonly referred to as prepaid calling cards, that allow users to access
domestic long-distance, international long-distance, and local telephone
services from any touch tone telephone in the United States.
Users purchase the phone cards for $9.95 per month through direct mail
solicitation. The customer is billed on his or her phone bill monthly until such
time as he or she decides to terminate the service. The card provides 40 minutes
per month of service in the United States. Any unused minutes at the end of the
month expire and the account is replenished with an additional 40 minutes. A
toll-free access number (1-800 or 1-888) and a unique personal identification
number ("PIN") is printed on the back of each phone card. When the toll-free
access number is entered, the user is connected to a debit or prepaid card
platform switch in the telephone network that provides interactive voice prompts
throughout the call process. After entering the PIN, the user may dial one or
more destination telephone numbers in the same manner as a normal telephone
call. The interactive voice prompts in the platform advise the user of the
minutes remaining on that card. The prepaid account balance associated with each
card is managed by the platform which automatically deducts for usage. Upon use
of all the minutes stored in the card's account for the month, the debit card
database automatically instructs the debit platform to terminate the active
status of the card. The card is automatically recharged, and the customer is
billed, every month until the customer cancels the service.
-2-
<PAGE>
The card itself contains no technology such as a chip or magnetic strip.
There are no card readers or other forms of remote special equipment required
for use of the card. The card is more analogous to a debit account in which a
fixed amount of money is first deposited and the account is then debited for
services as they are used by the person with access to the PIN number. When the
purchased account balance is depleted, it is automatically closed by the remote
debit card database computer of the calling card provider. The cards have a
thirty day expiration period. Thereafter, the card has no further commercial
value.
DISTRIBUTION AND MARKETING
According to the Telecommunications Reseller Association's Prepaid Calling
Card Council, a Washington D.C. based group founded in June 1994, prepaid phone
cards were a $12 million industry in 1992. By the year 2000, the association
predicts it will grow into a $2.5 billion industry.
RCP markets its prepaid telephone cards as a convenient alternative to
credit cards and conventional coin and collect long-distance services. Card
operations are supported by remote data base units located on special switching
platforms in the telephone network. RCP currently distributes and markets its
prepaid telephone cards through distributors primarily in the United States and
expects to be active in other major international areas by January, 1998.
RCP distributes the prepaid telephone calling cards primarily through the
United States Mail. Brand awareness is developed and promoted by the design of
the cards as well as the high level of customer service provided to the users of
the cards. RCP currently has in excess of 100,000 customers.
COMPETITION
The prepaid or debit calling card sector of the long-distance market is
highly competitive and can be significantly affected by the constant
introduction of new cards and services by industry participants. Competition in
the prepaid calling card sector of the long-distance market is based upon
pricing, customer service and perceived reliability of the prepaid telephone
calling cards. Several of RCP's competitors are substantially larger and have
greater financial, technical and marketing resources than RCP. Currently, RCP
competes with large carriers such as AT&T Corporation, MCI Communications Corp.,
Sprint Corp. and WorldCom, as well as other marketers and distributors of
long-distance calling cards, such as SmarTalk and Premiere WorldLink.
The ability of RCP to compete effectively in the prepaid calling card
sector of the long-distance market will depend upon RCP's ability to provide
highly reliable telephone cards at prices competitive with, or lower than, those
charged by its competitors, coupled with its unique sales and distribution
strategies.
RAW MATERIALS
RCP currently depends upon Coronado Telecom ("Coronado") to provide RCP
with the long-distance time that it resells to its customers. RCP purchases its
own cards and manages distribution and activation through its administrative
contractor Cherskov Technology, Inc. ("CTI") RCP uses International Telemedia
Associates as its billing and collection agent for its services. The Company's
ability to resell the phone cards depends upon whether it can continue to
maintain a favorable relationship with its providers.
-3-
<PAGE>
RCP purchases bulk minutes from Coronado, which supplies active PINs to CTI
electronically. CTI, on behalf of the RCP, purchases the mailing materials, such
as postage, and the cards.
GOVERNMENT REGULATION
According to the Telecommunications Resellers Association, individual
states and their utility commissions have different rules, but in general
services must be in the public interest, not be unduly discriminatory and
preserve or extend universal service. RCP complies with these requirements.
Tio Mariano Cigar Corp.
- -----------------------
On June 1, 1997 Tio's predecessor, Tio-Ohio, acquired all of the assets and
assumed specific liabilities of Five-Star Cigar Corp, a start-up cigar factory
owned by several of the founders of Tio-Ohio. The Company originally intended to
establish Tio as a vertically integrated cigar manufacturer, distributor and
retailer of private label, hand-rolled premium brand cigars. On February 8,
1998, the Company's management determined that the best interests of the Company
would be served by selling the operating assets of Tio to Dominican Cigar
Company, thus permitting management to focus its efforts on development of the
Company's communications business.
EMPLOYEES
The Company currently has five (5) employees, all of whom are full-time
employees.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company maintains its principal office in Westlake, Ohio. Lakewood Mfg.
Co., an entity under common control with the Company, is the owner of the
property where the Company maintains its principal office, and provides the
office space at no charge.
Tio also leases an approximately 10,000 square foot manufacturing facility
in Santo Domingo in the Dominican Republic. The factory has multiple production
stations, a humidor large enough to hold more than 300,000 cigars and a drying
room. The monthly rent for the property is $1,604.00 and the lease expires in
May, 1998.
Management believes that its current facilities will be sufficient for the
Company's purposes for the next twelve months, and that additional office or
warehouse facilities will be available in the Westlake, Ohio area when needed.
ITEM 3. LEGAL PROCEEDINGS.
There are no pending legal proceedings to which the Company or the property
of the Company are subject. In addition, no proceedings are known to be
contemplated by a governmental authority against the Company or any officer or
director of the Company.
-4-
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On October 31, 1997, a proposal was submitted to the majority shareholder
of the Company, regarding the approval of the merger of Tio-Ohio into Tio and
the merger of RCP-Ohio into RCP. The majority shareholder approved the mergers
in a Written Consent of the Sole Director and Majority Shareholder dated October
31, 1997.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Prior to July 1996, there was no trading activity in the Company's common
stock. The Company's common stock is traded in the over-the-counter market and
quoted in what are commonly referred to as on the "pink sheets", which reports
quotations by brokers or dealers in particular securities. The Company is also
quoted and listed on the NASDAQ Electronic Bulletin Board. Because of the lack
of readily available quotations and the limited trading volume frequently
associated with these securities, there is a greater risk of market volatility
of such securities than for securities traded on national exchanges. Trading in
the Company's stock was originally reported under the symbol SPGU and is now
reported under the symbol CLME.
The following table sets forth the quarterly high and low bid prices (to
the nearest $1/8) of the common stock from July 29, 1996 (the date for which
quotations are first available) through September 30, 1997. All quotations are
in pre-reverse split prices.
HIGH LOW
-------- --------
YEAR ENDED SEPTEMBER 30, 1996
First Quarter......................................... - -
Second Quarter........................................ - -
Third Quarter......................................... - -
Fourth Quarter........................................ 2-5/8 1
YEAR ENDED SEPTEMBER 30, 1997
First Quarter......................................... 3/4 1/8
Second Quarter........................................ 1/2 1/2
Third Quarter......................................... - -
Fourth Quarter........................................ - -
These quotations represent inter-dealer quotations without adjustment for
retail markups, markdowns or commissions and does not necessarily represent
actual transactions.
-5-
<PAGE>
As of , 1997, there were approximately record holders of the Company's
common stock.
Common Stock
- ------------
The authorized capital stock of the Company consists of 20,000,000 shares
of common stock, $.01 par value ("Common Stock"), of which, as of January 29,
1998, 6,167,700 shares of Common Stock were issued and outstanding and held of
record by approximately 500 persons. Each holder of shares of Common Stock is
entitled to one vote for each share held on all matters to be voted upon by the
stockholders generally. The shares do not have cumulative voting rights which
means that holders of more than 50% of the shares of Common Stock voting for the
election of directors can elect all the directors, and that in such an event the
holders of the remaining shares would not be able to elect a single director.
The approval of proposals submitted to stockholders at a meeting requires the
favorable vote of a majority of the shares voting, except in the case of certain
fundamental matters where Delaware law requires the favorable vote of at least a
majority of all outstanding shares. Shareholders are entitled to receive such
dividends as may be declared from time to time by the Board of Directors out of
funds legally available therefor, and in the event of liquidation, dissolution
or winding up of the Company to share ratably in all assets remaining after
payment of liabilities. The holders of shares of Common Stock have no
preemptive, conversion or subscription rights.
Common Stock Purchase Warrants
- ------------------------------
In connection with a 1995 private placement, warrants to purchase an
aggregate of 37,500 shares of Common Stock were issued ("Warrants"). Each
Warrant outstanding entitles the holder to purchase one (1) share of Common
Stock for an exercise price of $10.00. The Warrants are exercisable beginning
upon the date of issuance and continuing for a period of three (3) years. The
shares of Common Stock underlying the Warrants carry piggyback registration
rights which entitle the holder to elect to have his or her shares of Common
Stock issued upon exercise of the Warrants registered under the Securities Act
of 1933 in the event that the Company files a registration statement under such
act, subject to certain limitations.
Transfer Agent
- --------------
The Transfer Agent for the Company's Common Stock is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This "Management's Discussion and Analysis or Plan of Operation" should be read
in conjunction with the Company's annual audited financial statements, the notes
thereto and the other financial data included elsewhere herein and includes
forward-looking statements which involve risks and uncertainties which are based
upon the Company's beliefs, as well as assumptions made by and information
currently available to the Company. The Company's actual results may differ
materially from the results predicted by such forward- looking statements due to
various factors, including, but not limited to, those risks and uncertainties
which are discussed below.
GENERAL
Since inception (November 10, 1997), the Company has been a holding company and
currently operates two wholly-owned subsidiaries, RCP Communications Group, Inc.
("RCP") and Tio Mariano Cigar Corp. ("Tio").
RCP, a residential long-distance service reseller, has experienced continued
growth and achieved profitability during the fiscal year ending September 30,
1997. RCP had earnings before taxes of approximately $330,000 for the short
fiscal year ended September 30, 1997.
RCP acquires its customers via an agreement with the Kaplan Group, an
independent direct mail marketing organization. Data fulfillment is performed by
Cherskov Technology, Inc. ("CTI"), which is partially owned by Richard C.
Peplin, Jr., the controlling shareholder of the Company. Billing is performed by
ITA, a third party clearing house. The monthly charge of $9.95 is billed to the
customers directly on their telephone bill.
RCP currently has over 150,000 billable customers. The Company's plan of
operations for the next twelve months includes increasing RCP's customer base to
more than 300,000 customers by acquiring companies with similar operations. As
of the date of this report, RCP has a number of business opportunities which it
is looking into as potential acquisitions or investment vehicles. Currently
there are no definitive agreements on the part of any party to sell its assets
to RCP. However, RCP has entered into a letter of intent with Business
Technology Systems, Inc. ("BTS"), a computer reseller, custom software provider
and local phone service reseller, to acquire its assets.
The Company is also in the process of finalizing purchase agreements and
personnel additions which are expected to increase RCP's profitability,
transforming RCP from a reseller of long-distance service to a provider of such
services, expanding its operations in the international market and enhancing its
marketing capabilities. The Company plans to have definitive purchase agreements
in place with CTI and BLJ Communications, a competitor of RCP owned by the
principals of the Kaplan Group, in the near future.
The Company also plans to acquire and operate at least three telecommunications
switches in the United States which will be strategically positioned to serve as
international gateways to Europe, South America and Asia. In addition to this,
the Company plans to add the following services: retail phone debit card sales,
1+ long-distance service and local dial tone sales.
-6-
<PAGE>
Tio, a cigar manufacturer and wholesaler, has incurred losses of approximately
$120,000 since its inception in June 1997. These losses are a result of
developmental expenses and other factors related to the cigar industry.
Consequently, the Company has elected to divest itself of all of the Tio assets
and plans to focus all of its resources on RCP.
The Company plans to make several additions to its personnel over the course of
the next year including, but not limited to, hiring a new president for RCP with
extensive telecommunications experience, as well as a telecommunications switch
technician and code writer. Following the acquisition of BTS, the Company
intends to hire the current president of BTS who will be responsible for RCP's
international business development. Finally, the Company has entered into
several consulting agreements for the provision of direct marketing, COC switch
coordinating services and consulting services related to international sales,
joint ventures, financing and mergers and acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
The Company has generated revenues from the sale of its long distance services
and loans from shareholders. The Company expects to increase its revenues in the
near future as it divests itself of Tio and refocuses its resources on RCP's
activities. The Company expects to incur substantial administrative expenses in
the future. As of September 30, 1997, the Company's working capital was
approximately $31,000. In the absence of significant sales and profits, the
Company may seek to raise additional funds to meet its working capital needs
principally through the sale of its securities. However, there is no assurance
that the Company will be able to obtain sufficient additional funds when needed,
or that such funds, if available, will be obtainable on terms satisfactory to
the Company.
The Company believes that its present working capital is sufficient for the next
twelve months of operations. During the next twelve months, the Company
anticipates incurring approximately $ in expenditures for the acquisition of
additional businesses and equipment. However, acquisition activity will be
curtailed after months unless additional operating capital is obtained.
Currently, the Company does not anticipate any significant changes in the number
of employees.
The Company's efforts during the next twelve months will be dedicated
principally to transforming the Company from a holding company with two
dissimilar subsidiaries into a profitable, full-service, international
communications and technology company. However, there can be no assurance as to
the success of these efforts.
YEAR 2000 COMPLIANCE
The Company uses a packaged accunting software system which the Company believes
will be Year 2000 compliant in 1998. If the vendor does not have a Year 2000
compliant version ready when necessary, the Company believes they can readily
purchase replacement software. The Company is monitoring its service bureau and
vendors and expects them to be Year 2000 compliant in 1998. There can be no
assurance that the Company or vendors will meet these plans.
FINANCIAL STATEMENTS OF ACQUIRED COMPANIES
Financial statements reflecting the acquisition of RCP and Tio will be provided
in a Current Report on Form 8-K to be filed concurrently with this Report.
-7-
<PAGE>
ITEM 7. FINANCIAL STATEMENTS.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Page
----
Report of Independent Auditors............................................. 9
Balance Sheets as of September 30, 1997 and 1996........................... 10
Statements of Operations as of the Years Ended September 30, 1997
and 1996 and the Period from Inception (July 11, 1994) to September
30, 1997................................................................... 11
Statements of Stockholder's Equity (Deficit) from Inception (July 11,
1994) through September 30, 1997........................................... 12
Statements of Cash Flows for the Years Ended September 30, 1997
and 1996 and for the Period from Inception (July 11, 1994) to
September 30, 1997......................................................... 13
Notes to Financial Statements.............................................. 14
-8-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Sports-Guard, Inc.
We have audited the accompanying balance sheets of Sports-Guard, Inc. (a
development stage company) as of September 30, 1997 and 1996, and the related
statements of operations, stockholders' equity (deficit), and cash flows for the
years then ended, and for the period from inception, July 11, 1994, to September
30, 1997. 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 audits.
We conducted our audits 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 audits provide 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 Sports-Guard, Inc., as of
September 30, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended, and for the period from inception, July 11,
1994, to September 30, 1997, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has incurred net losses since its inception and has experienced
severe liquidity problems. Those conditions raise substantial doubt about the
Company's ability to continue as a going concern. In addition, as more fully
described in Note 4, the Company plans to discontinue its pursuit of
distributing the patented face guard. The financial statements do not include
any adjustments that might result from the outcome of these events.
GOODMAN & COMPANY, LLP
7301 Forest Avenue
Richmond, Virginia
January 12, 1998
-9-
<PAGE>
SPORTS-GUARD, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1997 1996
------------- -------------
ASSETS
CURRENT ASSETS
Cash $ 11 $ 22,832
Inventory 2,554 29,744
Prepaid expenses 291 75
------------- -------------
TOTAL CURRENT ASSETS 2,856 52,651
------------- -------------
Property and equipment (net of accumulated 26,295 39,640
depreciation of $4,438 and $4,724)
------------- -------------
$ 29,151 $ 92,291
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable - trade $ 145,245 $ 37,030
Accrued expenses 48,052 7,809
Accounts payable - stockholder 168,772 126,855
------------- -------------
TOTAL CURRENT LIABILITIES 362,069 171,694
------------- -------------
LONG-TERM LIABILITIES
Convertible notes 118,880 118,880
------------- -------------
TOTAL LONG-TERM LIABILITIES 118,880 118,880
------------- -------------
TOTAL LIABILITIES 480,949 290,574
------------- -------------
STOCKHOLDERS' DEFICIT
Common stock, $.01 par value,
20,000,000 shares authorized
5,981,923 and 5,854,923 shares
issued and outstanding 59,819 58,549
Additional paid-in capital 415,142 352,912
Deficit accumulated during the
development stage (926,759) (609,744)
------------- -------------
TOTAL STOCKHOLDERS' DEFICIT (451,798) (198,283)
------------- -------------
$ 29,151 $ 92,291
============= =============
The accompanying notes are an integral part of these financial statements.
-10-
<PAGE>
<TABLE>
SPORTS-GUARD, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<CAPTION>
JULY 11, 1994
YEAR ENDED YEAR ENDED (INCEPTION) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1997
------------- ------------- -------------
<S> <C> <C> <C>
SALES $ 1,495 $ - $ 1,495
COST OF SALES 317 - 317
------------- ------------- -------------
GROSS PROFIT 1,178 - 1,178
------------- ------------- -------------
EXPENSES
Advertising 143,087 - 143,087
Legal and accounting fees 73,292 28,836 119,657
Consulting fees 62,560 63,000 138,560
Executive compensation 72,000 96,000 168,000
Executive compensation - waived 24,000 - 48,000
Rent 37,088 36,167 81,714
Travel 11,896 3,944 22,680
Auto expenses 4,306 5,094 20,938
Telephone 12,209 3,193 18,491
Contracted labor 14,343 4,000 18,761
Office expenses 9,651 1,561 14,253
License and fees 10,275 10,397 20,916
Interest 6,936 27,969 34,905
Payroll taxes 5,710 3,151 8,861
Printing 5,680 - 5,680
Meals and entertainment 2,606 1,294 6,934
Testing 4,171 1,740 6,901
Depreciation 4,724 5,478 10,202
Postage 3,569 370 4,866
Supplies - - 3,027
Equipment rental 2,327 1,850 4,177
Dues and subscriptions 1,212 2,066 4,058
Insurance - - 1,344
Taxes 1,025 126 1,301
Miscellaneous 978 439 1,417
Utilities 609 161 770
Donations 100 - 125
Repairs - 88 119
Loss on disposal-equipment - 21,136 21,136
Loss on disposal-inventory - 38,455 38,455
------------- ------------- -------------
TOTAL EXPENSES 514,354 356,515 969,335
NET LOSS BEFORE EXTRAORDINARY ITEM (513,176) (356,515) (968,157)
------------- ------------- -------------
Extraordinary item-gain on forgiveness of debt - 39,500 39,500
------------- ------------- -------------
NET LOSS $ (513,176) $ (317,015) $ (928,657)
------------- ------------- -------------
LOSS PER SHARE 0.09 0.05 0.18
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-11-
<PAGE>
<TABLE>
SPORTS-GUARD, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<CAPTION>
FROM INCEPTION, JULY 11, 1994 THROUGH SEPTEMBER 30, 1997
-------------------------------------------------------------------
DEFICIT
ACCUMULATED
COMMON ADDITIONAL DURING THE
COMMON STOCK PAID-IN DEVELOPMENT
STOCK SUBSCRIPTIONS CAPITAL STAGE TOTAL
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, July 11, 1994 (inception) $ - $ - $ - $ - $ -
Common stock - issued 6,300 - - - 6,300
Syndication costs incurred as an S Corporation - - (10,576) - (10,576)
during the development stage
Net loss incurred as an S Corporation - - - (16,946) (16,946)
------------- ------------- ------------- ------------- -------------
BALANCE, SEPTEMBER 30, 1994 6,300 - (10,576) (16,946) (21,222)
Syndication costs incurred as an S Corporation - - (4,252) - (4,252)
during the development stage
Conversion of common stock previously issued to 38,220 - - (38,220) -
$.01 par value 20,000,000 shares authorized,
4,452,000 shares issued on July 18, 1995, at a rate
of 2,120 shares issued for each previous share of
common stock outstanding
Common stock subscriptions received for 170,000 units - 170,000 - - 170,000
sold at $1 per unit consisting of one share of the
Company's common stock, $.01 par value and a common
stock purchase warrant
Executive compensation waived during the Company's - - 8,000 - 8,000
tax status as an S Corporation
Net loss incurred during the development stage - - - (23,172) (23,172)
through July 24, 1995, effective date of S
Corporation termination
Reclassification of S Corporation development - - (40,118) 40,118 -
stage net loss during the development stage from
inception, July 11, 1994, through July 24,
1995, effective date of S Corporation termination
Net loss incurred as a C Corporation from July 25, 1995, - - - (58,348) (58,348)
through September 30, 1995
Executive compensation waived during the Company's tax - - 16,000 - 16,000
status as a C Corporation
------------- ------------- ------------- ------------- -------------
BALANCE, SEPTEMBER 30, 1995 $ 44,520 $ 170,000 $ (30,946) $ (96,568) $ 87,006
------------- ------------- ------------- ------------- -------------
Common stock subscriptions received for 205,000 - 205,000 - - 205,000
units sold at $1 per unit consisting of one share
of the Company's common stock, $.01 par value and
a common stock purchase warrant
Converted 375,000 units of common stock subscriptions 3,750 (375,000) 371,250 - -
to 375,000 shares of common stock with a par value
of $.01
Syndication costs incurred during the development stage - - (1,113) - (1,113)
Issued 1,027,923 shares of $.01 par value common stock 10,279 - (10,279) - -
for all of the outstanding shares of Skate Publishing
Corporation
Net loss - - - (513,176) (513,176)
Executive compensation waived - - 24,000 - 24,000
------------- ------------- ------------- ------------- -------------
BALANCE, SEPTEMBER 30, 1996 58,549 - 352,912 (609,744) (198,283)
127,000 shares of stock issued for consulting 1,270 - 62,230 - 63,500
services provided
Net loss - - - (317,015) (317,015)
------------- ------------- ------------- ------------- -------------
BALANCE, SEPTEMBER 30, 1997 $ 59,819 $ - $ 415,142 $ (926,759) $ (451,798)
============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-12-
<PAGE>
<TABLE>
SPORTS-GUARD, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<CAPTION>
JULY 11, 1994
YEAR ENDED YEAR ENDED (INCEPTION) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1997
---------------- ----------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $ (513,176) $ (317,015) $ (928,657)
Adjustments to reconcile to net cash
used in operating activities:
Depreciation 4,724 5,478 10,202
Loss on disposition-equipment - 21,136 21,136
Loss on disposition-inventory - 38,455 38,455
Stock compensation - 63,500 63,500
Waived compensation 24,000 - 48,000
Changes in:
Accounts payable 35,094 112,095 149,125
Accounts payable-stockholder - 17,842 17,842
Accrued expenses (12,394) 40,243 48,052
Organizational costs paid 16,284 - -
Inventory (29,744) (11,265) (41,009)
Prepaid expenses (75) (216) (291)
---------------- ----------------- ----------------
NET CASH USED IN OPERATING ACTIVITIES (475,287) (29,747) (573,645)
---------------- ----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of equipment (16,264) (17,149) (61,513)
Deposits 100 - -
---------------- ----------------- ----------------
NET CASH USED IN INVESTING ACTIVITIES (16,164) (17,149) (61,513)
---------------- ----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 10,000 - 10,000
Repayments of notes payable (10,000) - (10,000)
Proceeds from convertible notes 118,880 - 118,880
Common stock subscriptions (net of 203,887 - 359,059
syndication costs of $1,113, $0 and
$15,941)
Issuance of common stock - - 6,300
Borrowings from shareholder 126,280 24,075 197,940
Repayments of borrowings from shareholder (19,510) - (47,010)
---------------- ----------------- ----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 429,537 24,075 635,169
---------------- ----------------- ----------------
NET (DECREASE) INCREASE IN CASH (61,914) (22,281) 11
CASH AT BEGINNING OF PERIOD 84,746 22,832 -
---------------- ----------------- ----------------
CASH AT END OF PERIOD $ 22,832 $ 11 $ 11
================ ================= ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 6,612 $ - $ 6,612
================ ================= ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-13-
<PAGE>
SPORTS-GUARD, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
NOTE 1 - ORGANIZATION AND BUSINESS
SPORTS-GUARD, INC., (the "Company") was incorporated in Virginia in
July 1994 and reincorporated in July 1995 as a Delaware corporation. It was the
Company's plan to distribute a patented face guard to be used primarily by
defensive players in the sports of baseball and softball. As more fully
described in Note 4, the Company has refocused its business plan.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
METHOD OF ACCOUNTING
The Company uses the accrual basis of accounting in accordance with
generally accepted accounting principles for financial statement and federal
income tax purposes.
PROPERTY AND EQUIPMENT
Property and equipment includes office furniture and equipment and
equipment to be used for the manufacture of sports safety equipment.
Depreciation is computed using straight-line or accelerated methods over the
assets' expected useful lives.
INVENTORY
Inventory is accounted for at the lower of cost or market using the
first-in, first-out (FIFO) method.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due and those which
are deferred. Deferred income taxes are recognized for differences between the
basis of assets and liabilities for financial statement and income tax purposes.
These differences are measured by the average tax rates expected to apply to
taxable income in the years when these differences reverse. Changes in deferred
tax assets or liabilities are recognized in operations in the year in which they
occur. The principal types of differences between tax assets and liabilities for
financial statement and tax return purposes are start-up costs and net operating
losses. A deferred tax asset has been recognized in the amount of $178,206 and
$117,391, at September 30, 1997 and 1996, for which a valuation allowance has
been fully established. The Company has net operating losses in the amount of
$886,598 that are available to offset taxable income through 2011.
(Notes continued on next page.)
-14-
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates.
CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of temporary cash investments.
The Company places its temporary cash investments with high credit quality
financial institutions. As of September 30, 1997, the Company had no significant
concentrations of credit risk.
EARNINGS PER SHARE
Earnings per share are based on the weighted average number of shares
outstanding during the period. The weighted average number of shares outstanding
during 1997, 1996 and since inception were 5,949,912, 5,481,160, and 5,242,735,
respectively.
ADVERTISING
The Company charges the cost of advertising to expense as incurred.
NOTE 3 - INVENTORY
Inventory consisted of the following at September 30:
1997 1996
--------------- ---------------
Raw materials $ 2,554 $ 20,749
Finished goods - 8,995
--------------- ---------------
$ 2,554 $ 29,744
=============== ===============
NOTE 4 - DEVELOPMENT STAGE OPERATIONS, GOING CONCERN UNCERTAINTY
AND SUBSEQUENT EVENT
The Company is a development stage entity which planned to engage in
the manufacture, sale and distribution of sports safety equipment (see Note 12).
The Company's first product, known as the Fielders-Guard, was a polycarbonate
face guard to be used primarily, although not exclusively, by defensive players
in the sports of baseball and softball. The Company commenced its development
stage operations as a Virginia corporation on July 11, 1994, with the issuance
of 2,100 shares (3,000 shares were authorized) of $3 par value stock to its then
sole shareholder, Norman O. Milligan. For the first year of its development,
start up costs were incurred primarily for professional fees
(Notes continued on next page.)
-15-
<PAGE>
NOTE 4 - DEVELOPMENT STAGE OPERATIONS, GOING CONCERN UNCERTAINTY
AND SUBSEQUENT EVENT (CONTINUED)
associated with obtaining the financing and initial equipment necessary to
develop the molds to be used in the manufacture of the face protection products.
During this development phase, the Company was treated as an S Corporation for
income tax reporting purposes. The Company was reorganized as a Delaware
corporation on July 25, 1995. In this reorganization, one share of Sports-Guard,
Inc. (Virginia) stock was converted into 2,120 shares of Sports-Guard, Inc.
(Delaware) stock. After this reorganization, the Company was provided the
authority to issue 20,000,000 shares of common stock and, upon conversion of the
previous 2,100 Virginia shares outstanding, 4,452,000 shares of the reorganized
Company were outstanding.
Also in conjunction with the reorganization, a Confidential Private
Placement Memorandum (CPOM) was offered for the sale of 400,000 units each
consisting of one share of the Company's common stock, $.01 par value, and a
common stock purchase warrant. The purchase warrant provides for the holder of
the warrant to be eligible to purchase an additional number of shares not to
exceed 100% of the holder's original number of shares, par value $.01, for a
three-year period at the price of $1.00 per share. The CPOM required eligible
participants to enter into a subscription agreement, which after acceptance by
the Company, would result in the issuance of the appropriate shares of common
stock and stock purchase warrants. At September 30, 1995, 170,000 units had been
subscribed and fully paid. During October 1995, an additional 205,000 units were
subscribed and fully paid. The offering was concluded with the final issuance of
shares on November 10, 1995. The amount of units issued pursuant to the CPOM was
375,000, with $375,000 of capital provided to the Company. The proceeds were
used primarily to complete production of an injection mold for the
Fielders-Guard, to manufacture prototypes and inventory, for research and
development of improvements on the Fielders-Guard product, for the payment of
advertising and marketing expenses and general operating expenses. In addition,
the proceeds were used for legal and accounting fees related to initiating
Securities and Exchange Commission reporting by the Company.
On February 2, 1996, the Company issued 1,027,923 shares of its common
stock for all of the outstanding shares of Skate Publishing Corporation, a
Delaware corporation. Skate Publishing had been inactive since its formation,
had never conducted any business and had no significant assets at the time of
the merger. The estimated fair value of the net assets acquired with Skate
Publishing Corporation was used to determine the cost assigned to stock issued.
The Company acquired Skate Publishing Corporation in order to increase its
shareholder base.
The Company was unsuccessful in generating any significant level of
sales of the Fielders-Guard as a result of its initial marketing efforts.
Management concluded that the proceeds of the CPOM were not sufficient to permit
the Company to fully implement its marketing campaign or complete a roll out of
its Fielders-Guard product. Between March and June of 1996, the Company raised
gross proceeds of $118,880 from the private offering of convertible notes in
order to provide working capital for the wholesale and retail marketing of its
product and the continuation of its business. The notes have a term of two years
and are convertible into shares of the Company's common stock at the election of
the holder at a price of $1.00 per share. (see Note 10)
(Notes continued on next page.)
-16-
<PAGE>
NOTE 4 - DEVELOPMENT STAGE OPERATIONS, GOING CONCERN UNCERTAINTY
AND SUBSEQUENT EVENT (CONTINUED)
Despite the Company's continued marketing efforts, the Company achieved
only minimal sales of the Fielders-Guard during the year ended September 30,
1996. Management determined, based upon various factors, including customer
feedback, that the design of the Fielders-Guard was a significant factor in the
lack of market acceptance of the product. The Company received positive feedback
on the safety related goals of its product, but a negative response to the
actual design. As a result, since June 30, 1996, the Company developed a plan to
redesign its product in order to attempt to attain market acceptance. The
Company engaged Advanced Design Corporation of Newington, Virginia, to develop
structural improvements in the Fielders-Guard while reducing the overall size
and thickness of the polycarbonate mask and impact pads. The redesigned
Fielders-Guard has a projection for the nose area and a more open design
allowing more ventilation and easier communication between players. The
redesigned Fielders-Guard is lighter-weight and is a clear polycarbonate
injection molded mask which allows for clearer visibility of the player's face.
The Company had produced approximately 25 prototypes of the redesigned
Fielders- Guard, using a vacuum mold, for use in obtaining a preliminary
indication of market acceptance and establishing relationships with potential
dealers. The Company has received confirmation from its patent counsel that the
redesigned Fielders-Guard is protected by the existing patent for the
Fielders-Guard. The Company also entered into an agreement with Revere Mold and
Engineering of Chester, Virginia, for production of the injection mold for the
redesigned Fielders-Guard. The new injection mold cost approximately $35,000 and
was expected to be completed approximately January 15, 1997. Design and testing
issues delayed completion until the end of 1997. Management intended to engage
Reiss Corporation of Blackstone, Virginia to begin contract manufacturing of the
Fielders-Guard mask immediately following completion of the new injection mold.
The redesigned pads for the Fielders-Guard were to be produced by Rubatex
Corporation of Bedford, Virginia, using the Company's existing inventory of pads
for initial production. Product assembly and packaging services would continue
to be provided on a contract basis by Reiss Corporation.
The Company planned to conduct a private offering of Common Stock to
raise funds necessary in order to continue its operations. The Company intended
to offer an aggregate of 1,000,000 shares of its Common Stock to accredited
investors only at price of $.50 per share. From June 30, 1996 to the date of
this report, operations were funded by advances aggregating approximately
$150,000 from Norman O. Milligan, Sr., the Company's president and principal
stockholder. Mr. Milligan received $125,000 of the funds he advanced to the
Company as loans from business associates. The business associates indicated
that they desired to participate in the private offering by assigning Mr.
Milligan's loan obligations to the Company (with the result that the Company's
obligation to Mr. Milligan would be extinguished). In order to prevent dilution
to the current stockholders of the Company as a result of this new offering, Mr.
Milligan had agreed to contribute to capital a number of shares of Common Stock
held by him equal to the number of shares sold in the private offering (up to
1,000,000 shares). This offering was never consummated.
(Notes continued on next page.)
-17-
<PAGE>
In June 1997, an offer was made by an investment group to acquire all
of the stock of the Company owned by Norman O. Milligan. This offer was
documented in a "Stock Purchase Agreement" dated August 29, 1997, which was
executed by Mr. Milligan, as stockholder and officer of the Company and Invest
L'Inc. Partners, LLC on behalf of the buyers. The agreement provided, among
other provisions, for Mr. Milligan to sell his shares, less 25,000 shares
retained, to the buyer; for the mutual termination of the Patent License
Agreement and Employment Agreement (including any past due salary and benefits);
for the conversion of the previously mentioned business associates' loans and
convertible notes (see Note 10) to stock of the corporation; for the assumption
of certain operating liabilities of the Company, totaling approximately
$121,000, by Mr. Milligan; transfer of all tangible personal property of the
Company to Mr. Milligan; for the mutual release of all claims; and for Mr.
Milligan's resignation as officer and director. The closing date was October 22,
1997.
Effective October 31, 1997, the Company amended its Certificate of
Incorporation to: (a) change the name to Colmena Corp.; and (b) accomplish a
reverse stock split by changing and reclassifying each ten shares of the
Company's common stock into one share. In addition, the Company formed two
wholly-owned subsidiaries in the State of Delaware for purposes of merging with
RCP Enterprises Group, LLC, an Ohio limited liability company and Tio Cigars,
Inc., an Ohio corporation.
NOTE 5 - EMPLOYMENT AGREEMENT
The Company entered into an employment agreement with Mr. Norman
Milligan, who is also the majority stockholder and Chief Executive Officer of
the Company, for an initial period ending June 30, 2000. The agreement
automatically renews for successive one-year periods unless certain
notifications are made by either party at least sixty days prior to the
expiration date. The agreement contained basic compensation for future fiscal
years as follows:
September 30, 1998 $ 96,000
September 30, 1999 96,000
June 30, 2000 72,000
---------------
$ 264,000
===============
Mr. Milligan had waived his right to receive compensation through the
initial six- months of this agreement.
In addition, the agreement contained bonus formulas based upon the
Company's performance and customary non-taxable fringe benefits. As more fully
described in Note 4, this agreement was terminated effective October 22, 1997.
NOTE 6 - PATENT LICENSE AGREEMENT
The patents covering the protective face guards the Company planned to
provide and distribute are owned by Mr. Milligan. The Company had executed a
patent license agreement with Mr. Milligan which provided the Company with the
exclusive license to manufacture, sell, and distribute the products under the
patents for an initial term of ten years. The license agreement provided for the
payment of royalties to Mr. Milligan, such payment being waived by Mr. Milligan
while he is employed by the Company as its President. As more fully described in
Note 4, this agreement was terminated effective October 22, 1997.
(Notes continued on next page.)
-18-
<PAGE>
NOTE 7 - OTHER RELATED PARTY TRANSACTIONS
Accounts and accrued expenses payable to Mr. Milligan in the amount of
$231,602 are due on demand with no interest.(see Note 4) The amounts advanced by
Mr. Milligan to the Company during the current year totaled $24,075. These funds
were used for working capital. During 1997, no repayments were made by the
Company to Mr. Milligan. As more fully described in Note 4, the advances from
business associates included in the amount due to Mr. Milligan were converted to
stock as part of the Stock Purchase Agreement.
NOTE 8 - RISKS AND UNCERTAINTIES
The Company was formed in 1994 and has limited operating history.
Success of the face protection sports gear was dependent on the Company's
ability to achieve market acceptance for the product. The product was new and
the Company had not previously manufactured, sold or distributed this product.
The Company had not, during this period, undertaken any extensive market
research or broad test marketing to determine the nature and extent of the
market for the product. Although the Company anticipated that its full scale
operations would commence in the near term (within one year), there were no
assurances that factors outside the control of the Company would not result in
delays.
The Company obtained the rights to United States Patents issued on May
4, 1993, and December 7, 1993, under the U.S. Patent Office Number 5,206,955 and
5,267,353, for its protective face guards. The Company believed that it could
assert the Patents to prevent other persons from manufacturing, selling, or
using the product or similar products, as covered by the claims in the Patents,
in the United States. However, the Company had not yet undertaken any research
to determine whether, and cannot provide any assurances that: (1) the Patents
would be enforceable and adequate to protect the Company from the sale in the
United States, or importation into the United States from any other country, of
a competing product by another person; (2) the manufacture, sale or distribution
of the product will not infringe upon the patent or other proprietary rights of
another person in the United States; or (3) the Company will be financially
capable of prosecuting or defending any infringement action with respect to the
patents or the rights of other persons.
On April 14, 1995, the United States Patent and Trademark Office issued
a Notice of Publication of the trademark of the name "Sports-Guard" (the
"Trademark") which is owned by Mr. Milligan and licensed to the Company.
However, there can be no assurance that the Company will be financially capable
of prosecuting or defending any infringement action with respect to the
Trademark or the trademark rights of others. Neither the Company nor Mr.
Milligan has filed any applications to register the Trademark with the
Commonwealth of Virginia or any other jurisdictions.
(Notes continued on next page.)
-19-
<PAGE>
NOTE 8 - RISKS AND UNCERTAINTIES (CONTINUED)
As more fully described in Note 4, the Company is in the process of
developing a new business plan for future profitability.
NOTE 9 - LEASE AGREEMENTS
On September 21, 1995, the Company entered into a five year lease for
its principal office and warehouse facility of approximately 4,000 square feet
in Richmond, Virginia with David R. Milligan, who was at the time a director of
the Company. The lease, which had an original annual rental cost of $40,000,
including all parking, utilities, cleaning and building maintenance was schedule
to terminate on November 14, 2000. During late 1997, the Company renegotiated a
reduced annual rental rate of $18,000 by giving up approximately 2,500 square
feet of office space. As more fully described in Note 11, this lease agreement
terminated effective September 10, 1997.
On July 11, 1996, the Company entered into a 36 month operating lease
for its copier and fax machine in their principal office with the Great American
Leasing Corporation. The lease is a monthly rent of $145 and will terminate on
July 11, 1999. As more fully described in Note 4, this lease obligation was
assumed by Mr. Milligan.
NOTE 10 - CONVERTIBLE NOTES
As previously disclosed, the Company issued convertible promissory
notes in the amount of $118,880 to an accredited investor in a private offering.
The notes bear interest at the rate of 10% per annum and are due 24 months from
the date of issuance. Interest is payable on the notes quarterly and in arrears
beginning on June 30, 1996. The notes are convertible, at the option of the
holder, into the Company's $.01 par value common stock, at an initial conversion
price of $1.00 per share. The Company used the entire proceeds for working
capital purposes, including payment of advertising and marketing expenses, and
general and administrative expenses. As described in Note 4, these notes were
part of the execution of the Stock Purchase Agreement which, effective October
22, 1997, caused all but $40,000 of the outstanding amount to be converted into
Company stock.
NOTE 11 - EXTRAORDINARY ITEM
On September 10, 1997, in conjunction with the stock purchase agreement
(see Note 4), David R. Milligan, as lessor of office and distribution facilities
to the Company, executed an unconditional release agreement whereby he consented
to the assignment of the amount due to him from the Company to SPGU, a Virginia
corporation. This settlement resulted in an extraordinary gain of $39,500, net
of tax considerations.
(Notes continued on next page.)
-20-
<PAGE>
NOTE 12 - OTHER SUBSEQUENT EVENT
The Reiss Corporation has filed suit against the Company under a
warrant in debt claiming damages of $9,890. The matter was first returned on
November 12, 1997, with a scheduled trial date of March 30, 1998, in the City of
Richmond General District Court. The Company believes it has defenses and
counterclaims against Reiss which it intends to pursue.
-21-
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
Inapplicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
The directors and executive officers of the Company are as follows:
NAME AGE POSITION
Richard C. Peplin, Jr. 40 President, Treasurer and
Director
Robert S. Gigliotti 49 Secretary and Director
Leonard A. Marshall 36 Director
RICHARD C. PEPLIN, JR. is President and Chairman of the Board of Directors of
the Company and its two wholly-owned subsidiaries. From 1987 to the present, Mr.
Peplin has served as president of Lakewood Mfg. Corp., a defense contractor and
supplier of metal parts and assemblies to numerous OEM's and the U.S. Department
of Defense.
ROBERT S. GIGLIOTTI is the Secretary and a Director of the Company. Mr.
Gigliotti is a certified public accountant and serves as the Managing Tax
Partner of Perrin, Fordree & Company, P.C. in Troy, Michigan. Mr. Gigliotti
received his CPA license in 1972 and joined the firm of Perrin, Fordree &
Company, P.C. in 1976 after six years in the tax department of the Detroit
office of Arthur Andersen & Company. Mr. Gigliotti's specialties include estate
and financial planning, franchising and corporate taxation. Mr. Gigliotti
received a bachelor's degree in business from Alma College.
LEONARD A. MARSHALL is a Director of the Company. Mr. Marshall also serves as
director of Sports & Development Systems, Inc. and Over-the-Road Direct Connect,
Inc. Mr. Marshall is currently a member of the advisory board of U.S. Sports
Fan, Inc. From May 1996 to December 1997, Mr. Marshall served as a consultant to
Barron Chase Securities, a broker-dealer. Mr. Marshall played professional
football with the Washington Redskins and the New York Giants from 1983 to 1995.
Mr. Marshall received a bachelor's degree in finance from Louisiana State
University/Fairleigh-Dickinson University.
All directors serve a term of one year or until their successors have been duly
elected and qualified.
-22-
<PAGE>
Compliance with Section 16(a) of the Exchange Act
- -------------------------------------------------
Section 16(a) of the Exchange Act and the rules thereunder require the Company's
officers and directors and persons who own more than 10% of the Company's common
stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission and to furnish the Company with copies. The following
persons who were or are subject to Section 16 of the Exchange Act with respect
to the Company failed to file reports required by Section 16(a) on a timely
basis during the most recent fiscal year.
NO OF TRANSACTIONS
NAME NO. OF LATE REPORTS REPORTED LATE
- --------------------------- -------------------------- ----------------------
Norman O. Milligan, Sr. 1 1
Norman O. Milligan, Jr. 1 1
David R. Milligan 1 1
Ronald K. Milligan 1 1
Troy D. Wiseman 2 2
Richard C. Peplin, Jr. 2 2
Robert S. Gigliotti 1 1
No person subject to Section 16 of the Exchange Act failed to file a required
report.
ITEM 10. EXECUTIVE COMPENSATION.
Compensation of Officers.
- -------------------------
No executive officer of the Company was paid cash or non-cash compensation in
excess of $100,000 during the fiscal years ended September 30, 1997, 1996 and
1995 or during the period from inception to September 30, 1994. The Company had
and has no compensation plans in place and no officer has received non-cash
compensation. The following table sets forth the compensation paid by the
Company to its chief executive officer for services rendered during fiscal 1997,
1996 and 1995.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION
- ----------------------------------------------- --------- -------------- ------------ ---------------------
<S> <C> <C>
Norman O. Milligan, Sr., President............. 1997 $ 96,000 --- ---
1996 $ 72,000 --- ---
1995 $ -0- --- ---
Richard C. Peplin, Jr., President(1)........... 1997 $ -0- --- ---
----
</TABLE>
- -------------------------
(1)Mr. Peplin was the Manager of RCP Enterprises Group, LLC and the President of
Tio Cigars, Inc. from the time of their inception until November 10, 1997 when
they were acquired by the Company.
-23-
<PAGE>
Compensation of Directors.
- --------------------------
Directors receive no compensation for their services as such.
Employment Agreement.
- ---------------------
The Company has not entered into any Employment Agreements.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the ownership of
the Company's common stock, $.01 par value ("Common Stock") as of January 29,
1998, (i) by each person who is known by the Company to be the beneficial owner
of more than 5% of its Common Stock; (ii) by each of the Company's directors and
officers; and (iii) by all of the Company's directors and officers as a group:
SHAREHOLDER(1) NO. OF SHARES PERCENTAGE
- ------------------------------------------ ------------------- -------------
Richard C. Peplin, Jr. 4,081,350(2) 66.17%
Robert S. Gigliotti 100,000 1.62
Leonard A. Marshall 200,000 3.24
All officers and directors as a group (3 persons) 4,381,350 71.03%
- --------------------
(1)The addresses of these shareholders are as follows:
Richard C. Peplin, Jr.: 25100 Detroit Road, Westlake, Ohio 44145.
Robert S. Gigliotti: 901 Wilshire Drive, Suite 400, Troy, Michigan 48084
Leonard A. Marshall:21756 Marigot Drive, Boca Raton, Florida 33428
(2) Includes 937,500 shares of Common Stock held by Lakewood Manufacturing Co.,
an Ohio corporation of which Mr. Peplin is a controlling shareholder; 400,000
shares of Common Stock held by Beth M. Peplin, spouse of Mr. Peplin; and 22,500
shares of Common Stock held by Richard C. Peplin, Jr. as custodian for his
three minor children.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On November 10, 1997, Norman O. Milligan, Sr. sold his controlling interest in
the Company to Invest L'Inc. Partners, LLC, a creditor and shareholder of the
Company. Concurrently with this sale, Mr. Milligan acquired certain operating
assets and assumed certain liabilities of the Company.
On November 10, 1997, the Company consummated the acquisition of RCP-Ohio,
through the merger of RCP-Ohio with and into RCP formed as a wholly-owned
subsidiary of the Company for purposes of the acquisition. In exchange for all
of the outstanding membership interests in RCP-Ohio, the members of RCP-Ohio
received an aggregate of 3,000,000 shares of the Company's common stock.
RCP-Ohio was founded in 1997 by Richard C. Peplin, Jr., the current President
and controlling stockholder of the Company.
Also on November 10, 1997, the Company consummated the acquisition of Tio-Ohio,
through the merger of Tio-Ohio with and into Tio formed as a wholly-owned
subsidiary of the Company for purposes of the acquisition. In exchange for all
of the outstanding capital stock of Tio-Ohio, the stockholders of Tio-Ohio
received an aggregate of 1,310,000 shares of the Company's common stock. Mr.
Peplin was also the founder and controlling stockholder of Tio-Ohio.
-24-
<PAGE>
Lakewood Mfg. Co. is the owner of the property where the Company maintains its
principal office. Lakewood Mfg. Co. is an affiliate of the Company and provides
the office space at no charge.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS AND INDEX OF EXHIBITS.
Page
- ----
2.1 Merger Agreement among Sports-Guard, Inc., RCP Enterprises Group, Inc.
and RCP Enterprises Group, LLC dated October 31, 1997
2.2 Merger Agreement among Sports-Guard, Inc., Tio Mariano Cigar Corp. and
Tio Cigars, Inc. dated October 31, 1997
3.1* Certificate of Incorporation of the Company
3.2 Certificate of Amendment of Certificate of Incorporation of the Company
3.3* Bylaws of the Company
3.4 Amended and Restated Bylaws of the Company
4.1 Specimen Common Stock Certificate
4.2* (Form of) Stock Purchase Warrant
4.3** (Form of) 10% Convertible Notes
21.1 Subsidiaries of the Company
* Incorporated herein by reference to the Company's Registration
Statement on Form 10-SB filed February 23, 1996
** Incorporated herein by reference to the Company's Registration
Statement on Form 10-SB/A filed June 3, 1996.
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed by the Company during the fourth quarter of
the fiscal year ended September 30, 1997. A report on Form 8-K was filed by the
Company on December 1, 1997.
-25-
<PAGE>
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: February 24, 1998
COLMENA CORP.
By:/s/ Richard C. Peplin Jr.
------------------------------------
Richard C. Peplin, Jr., President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signature
- ---------
/s/ Richard C. Peplin Jr. President, Treasurer and Director February 24, 1998
- ---------------------------
Richard C. Peplin, Jr.
/s/ Robert S, Gigliotti Secretary and Director February 24, 1998
- ---------------------------
Robert S. Gigliotti
/s/ Leonard Marshall Director February 24, 1998
- ---------------------------
Leonard Marshall
-26-
<PAGE>
MERGER AGREEMENT
AMONG
SPORTS-GUARD, INC.
RCP ENTERPRISES GROUP, INC.
AND
RCP ENTERPRISES GROUP, LLC
<PAGE>
TABLE OF CONTENTS
Page
----
1. The Merger........................................................... 1
1.1. Effective Time............................................. 1
1.2. Conversion of Membership Interests......................... 2
1.3. Restricted Securities...................................... 2
1.4. Certificate of Incorporation............................... 3
1.5. Bylaws..................................................... 3
1.6. Dissenters' Rights......................................... 3
1.7. Directors.................................................. 3
2. Representations, Warranties and Agreements of RCP and RCP Members.... 3
2.1. Due Organization........................................... 3
2.2. Corporate Authority........................................ 4
2.4. Financial Statements....................................... 4
2.5. No Undisclosed Liabilities................................. 4
2.6. Title To Properties........................................ 4
2.7. Compliance with Laws; Litigation........................... 4
2.8. Tax Returns................................................ 5
2.9. Full Disclosure............................................ 5
2.10. Manager Action............................................. 5
2.11. Title to RCP Units......................................... 5
2.12. Continuity of Business Enterprise.......................... 5
2.13. No Intent to Sell.......................................... 5
3. Representations, Warranties and Agreements of Parent and Merger
Subsidiary.................................................................. 5
3.1. Organization of Parent and Merger Subsidiary............... 6
3.2. Corporate Authority........................................ 6
3.3. Capitalization............................................. 6
3.4. No Undisclosed Liabilities................................. 6
3.5. Compliance with the Laws; Litigation....................... 7
3.6. Tax Returns................................................ 7
3.7. Full Disclosure............................................ 7
3.8. Board Action............................................... 7
4. Action Prior to the Effective Time................................... 7
4.1. Approval of RCP Members.................................... 7
4.2. Accuracy of Representations and Warranties................. 8
4.3. Closing.................................................... 8
(i)
<PAGE>
5. Conditions Precedent to Obligation of Parent and Merger Subsidiary... 8
5.1. No Adverse Change; Corporate Action........................ 8
5.2. No Litigation.............................................. 8
5.3. Securities Laws............................................ 8
6. Conditions Precedent to Obligation of RCP............................ 8
6.1. Accuracy of Representations and Warranties; Performance
of Obligations............................................. 8
6.2. No Litigation.............................................. 9
6.3. Additional Conditions...................................... 9
7. Other Provisions..................................................... 9
7.1. Governing Law.............................................. 9
7.2. Waiver..................................................... 9
7.3. Survival................................................... 9
7.4. No Indemnification......................................... 9
8. Titles and Headings.................................................. 9
9. Notices.............................................................. 10
10. Assignment........................................................... 10
11. Counterparts......................................................... 10
12. Amendment............................................................ 10
Exhibit A - RCP Member Units Ownership
(ii)
<PAGE>
MERGER AGREEMENT
THIS MERGER AGREEMENT, made and entered into as of this 31st day of
October, 1997, by and among RCP ENTERPRISES GROUP, LLC, a limited liability
company established and governed under the laws of the State of Ohio ("RCP" or
"Target"), RCP ENTERPRISES GROUP, INC., a corporation established and governed
under the laws of the State of Delaware ("Merger Subsidiary"), Target and Merger
Subsidiary being hereinafter sometimes called the "Constituent Companies" and
Merger Subsidiary being hereinafter sometimes called the "Surviving Company",
and SPORTS-GUARD, INC., a Delaware corporation ("Parent") (Parent joining as an
additional party, not being a Constituent Company).
W I T N E S S E T H
- - - - - - - - - -
Merger Subsidiary and Target propose to merge pursuant to this Merger
Agreement (the "Merger Agreement"), which provides for the merger of Target with
and into Merger Subsidiary, with Merger Subsidiary as the surviving company (the
"Merger"), pursuant to the applicable laws of the States of Delaware and Ohio,
at the Effective Time, as defined herein, with the intent to qualify the
transactions provided for herein as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
Contemporaneously herewith, Parent has entered into a merger agreement with Tio
Cigars, Inc., an Ohio corporation ("Tio"), whereby Tio will merge with and into
a wholly-owned subsidiary of Parent, with such wholly-owned subsidiary as the
surviving corporation and in which Tio shareholders shall receive Parent shares
(the "Tio Merger"). This Merger Agreement records the representations and
warranties made by Parent, Merger Subsidiary and Target in connection with the
instant Merger, sets forth certain covenants and agreements of the parties,
provides conditions to the obligations of the parties and sets forth other
provisions relating to the Merger.
NOW, THEREFORE, Parent, Merger Subsidiary and Target in consideration of
the agreements, covenants and conditions contained herein, hereby make the
following representations and warranties, give the following covenants and agree
as follows:
A G R E E M E N T
- - - - - - - - -
1. THE MERGER. At the Effective Time (as hereinafter defined) of the
Merger, Target shall be merged with and into Merger Subsidiary by statutory
merger; the separate existence of Target shall cease and Merger Subsidiary shall
be the surviving corporation, and on the following terms and conditions:
1.1. EFFECTIVE TIME. The Merger shall be effective (the
"Effective Time") when this Merger Agreement and/or appropriate certificates of
its approval and adoption and acknowledgments shall have been filed with the
Secretary of State of Delaware.
-1-
<PAGE>
1.2. CONVERSION OF MEMBERSHIP INTERESTS. At the Effective Time,
by virtue of the Merger, and without any action on the part of the holders
thereof:
1.2.1. Each of the units of RCP membership interest ("RCP
Units") held by RCP members as described in Appendix A (the "RCP Members"),
which shall be outstanding immediately prior to the Effective Time and other
than RCP Units which are dissenting units, shall cease to be outstanding and
shall be converted into shares of common stock, $.01 par value, of Parent
("Parent Common Stock") at a ratio of Three Thousand (3,000) shares of Parent
Common Stock for each one (1) RCP Unit. The foregoing exchange ratio includes
the effect of a proposed one-for-ten reverse split of Parent Common Stock to be
effected prior to the Effective Time (i.e., an aggregate of 3,000,000 shares of
Parent Common Stock will be issued to the RCP Members). Holders of certificates
which represent the RCP Units shall thereafter have no rights as members of
Target. Except for issuance of stock by Parent in the Tio Merger, after the date
of this Merger Agreement and prior to the Effective Time, neither Parent nor
Target shall declare or pay to its shareholders and members, respectively, of
record a stock dividend or distribution upon the Parent Common Stock or the RCP
Units, as the case may be, or subdivide, split up, reclassify or combine the
Parent Common Stock or the RCP Units, as the case may be, or make any other
distribution of securities or property in respect of the Parent Common Stock or
the RCP Units, as the case may be or otherwise effect any capital
reorganization.
1.2.2. From and after the Effective Time, each holder of a
certificate theretofore representing issued and outstanding RCP Units (but not
including RCP Units which are dissenting units within the meaning of the Ohio
Limited Liability Company Act) shall, upon the surrender of such certificates to
Parent, be entitled to receive in exchange therefor a certificate or
certificates representing the number of shares of Parent Common Stock into which
the RCP Units theretofore represented by the certificate or certificates so
surrendered shall have been converted pursuant to subsection 1.2.2 above. From
and after the Effective Time, until so surrendered, each certificate theretofore
representing RCP Units (except for certificates representing dissenting units)
shall be deemed for all corporate purposes to evidence the number of shares of
Parent Common Stock into which such RCP Units shall have been converted.
1.3. RESTRICTED SECURITIES. The Parent Common Stock to be issued
in exchange for the RCP Units has not been registered under the Securities Act
of 1933, as amended, by reason of an exemption therefrom, and may not be
transferred or resold except pursuant to an effective registration statement or
exemption from registration and each certificate representing the Parent Common
Stock will be endorsed with the following legends and any legend required to be
placed thereon by applicable state securities laws:
-2-
<PAGE>
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF A CURRENT AND EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT WITH RESPECT TO SUCH SHARES, OR AN OPINION OF THE
ISSUER'S COUNSEL TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED
UNDER THE ACT."
1.4. CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of Merger Subsidiary shall continue to be the Certificate of
Incorporation of the Surviving Company immediately after the Effective Time.
1.5. BYLAWS. The Bylaws of Merger Subsidiary in effect
immediately prior to the Effective Time shall continue to be the Bylaws of the
Surviving Company immediately after the Effective Time.
1.6. DISSENTERS' RIGHTS. Parent and RCP shall take all actions
mandated by the Ohio Limited Liability Company Act to permit and satisfy the
exercise of rights of dissent and appraisal by holders of RCP Units.
1.7. DIRECTORS. The Board of Directors of the Surviving Company
at and as of the consummation of the transactions contemplated herein shall be
as set forth on Schedule 1.7 hereto.
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF RCP AND RCP MEMBERS. As
an inducement to Parent and Merger Subsidiary to enter into this Merger
Agreement and to consummate the transactions contemplated herein, RCP, and the
RCP Members as to Sections 2.11 and 2.13 only, represent and warrant to Parent
and Merger Subsidiary and agree as follows:
2.1. DUE ORGANIZATION. RCP is a limited liability company duly
organized and validly existing in good standing under the laws of the State of
Ohio, and has full corporate power and authority to own or lease its properties
and to carry on its business as now conducted. RCP is duly licensed, qualified
to do business and in good standing as a foreign corporation in each
jurisdiction in which its failure to be so licensed or qualified would have a
material adverse effect on its business taken as a whole.
-3-
<PAGE>
2.2. CORPORATE AUTHORITY. The execution, delivery and performance
by RCP of this Merger Agreement has been duly authorized and approved by its
Managers, subject to approval of the Merger contemplated herein by its members
pursuant to section 4.1 hereof, and neither the execution and delivery of this
Merger Agreement nor the consummation of the transactions contemplated hereby,
nor compliance with nor fulfillment of the terms and provisions herein, will:
(i) conflict with or result in a breach of the terms, conditions or provisions
of or constitute a default under the Articles of Organization or Operating
Agreement of RCP, any material agreement, instrument or judgment to which it is
a party or by which it is bound or any statute or regulatory provisions
affecting RCP; (ii) give any party to or with rights under any such agreement,
instrument or judgment the right to terminate, modify or otherwise change the
material rights or obligations of RCP under such agreement, instrument or
judgment; or (iii) require the approval, consent or authorization of any
Federal, state or local court, governmental authority or regulatory body, other
than in connection with or in compliance with the provisions of Sections 1705.36
through 1705.42 of the Ohio Limited Liability Company Act and Federal or state
securities or antitrust laws. RCP has, and will have at the Effective Time, full
corporate power and corporate authority to complete the merger with Merger
Subsidiary pursuant to this Merger Agreement and to do and perform all acts and
things required to be done by RCP under the Merger Agreement, subject to
compliance with the provisions of the Ohio Limited Liability Company Act and
Federal or state securities or antitrust laws.
2.3. SUBSIDIARIES. RCP has no subsidiaries and no ownership
interest in any other entities.
2.4. FINANCIAL STATEMENTS. RCP has furnished to Parent its
balance sheet as of July 31, 1997 and its statement of income for the seven
month period ended July 31, 1997 (collectively the "Financial Statements"). The
Financial Statements have been prepared in conformity with generally accepted
accounting principles consistently applied and are correct and complete in all
material respects and fairly present the financial position of RCP as of the
date of such balance sheet and the results of its operations for the period
indicated. The Financial Statements do 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 the light of the circumstances
under which they were made, not misleading.
2.5. NO UNDISCLOSED LIABILITIES. Except as set forth in the
Financial Statements, RCP has no material liabilities, fixed or contingent,
other than liabilities incurred since July 31, 1997 in the ordinary course of
business or as previously disclosed to Parent.
2.6. TITLE TO PROPERTIES. RCP has good, valid and marketable
title to all of the properties and assets reflected in the Financial Statements.
Except as set forth in the Financial Statements, all such properties and assets
are free and clear of all liens, claims, charges, security interests or other
encumbrances.
2.7. COMPLIANCE WITH LAWS; LITIGATION. RCP is not in default in
any material respect under any material agreement, lease or other document to
which it is a party, nor has RCP received written notice of or is, to the
knowledge of any executive officer of RCP, in material violation of any law or
order, writ, injunction or decree of any court or Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality and there are no material lawsuits, proceedings, claims or
governmental investigations pending or, to the knowledge of any executive
officer of RCP, threatened against RCP or against its properties or business,
nor is there any reasonable basis known to RCP for any such action and there is
no action, suit, proceeding or investigation pending, threatened or, to the
knowledge of RCP, contemplated which questions the legality, validity or
propriety of the transactions contemplated by this Merger Agreement.
-4-
<PAGE>
2.8. TAX RETURNS. RCP has (i) filed or has caused to be filed all
federal, state and local franchise, income, sales, gross receipts and all other
tax returns and statements required to be filed by RCP or on its behalf and
which were due prior to the date of this Merger Agreement (the "Tax Returns and
Statements") and (ii) paid within the time and in the manner prescribed by law
all taxes due prior to the date of this Merger Agreement. No tax assessment or
deficiency has been made against RCP nor has any notice been given of any actual
or proposed assessment or deficiency which has not been paid or for which an
adequate reserve has not been set aside.
2.9. FULL DISCLOSURE. No representation or warranty by RCP in
this Merger Agreement or any written information, documents or memoranda
furnished or to be furnished by RCP or any of its authorized representatives to
Parent or Merger Subsidiary or any of their representatives is false or
misleading in any material respect or omits to state a material fact required to
be stated therein or necessary in order to make any of the statements therein
not misleading.
2.10. MANAGER ACTION. The Managers of RCP, by requisite vote,
determined that the Merger is in the best interests of RCP and its members,
approved the Merger Agreement and recommended approval and adoption of the
Merger Agreement by the members of RCP.
2.11. TITLE TO RCP UNITS. Each RCP Member owns and holds title
to, and will at the Effective Time own and hold title to, respectively, the RCP
Units of Membership Interest (or units) now (and at Effective Time to be) owned
by him or her, as set forth in Exhibit A, free and clear of any lien, charge or
encumbrance of any kind.
2.12. CONTINUITY OF BUSINESS ENTERPRISE. RCP operates at least
one significant historic business line, or owns at least a significant portion
of its historic business assets, within the meaning of Treasury Regulation ss.
1.368-1(d) promulgated under the Internal
Revenue Code.
2.13. NO INTENT TO SELL. No RCP Member has, or at the Effective
Time will have, any present plan, intention or arrangement to sell, transfer or
otherwise in any manner dispose of any of the Parent Common Stock to be issued
to such Member pursuant to the merger.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF PARENT AND MERGER
SUBSIDIARY. As an inducement to RCP to enter into this Merger Agreement and to
consummate the transactions contemplated herein, Parent and Merger Subsidiary
hereby represent and warrant to RCP and its members and agree as follows:
-5-
<PAGE>
3.1. ORGANIZATION OF PARENT AND MERGER SUBSIDIARY. Parent is a
corporation duly incorporated and validly existing in good standing under the
laws of the State of Delaware; Merger Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and is a directly and wholly owned subsidiary of Parent; Parent and
Merger Subsidiary each has full corporate power and authority to consummate the
Merger as provided herein and Parent has full corporate power to own or lease
its properties and to carry on its business as it is currently conducted. Parent
is duly licensed, qualified to do business and in good standing as a foreign
corporation in each jurisdiction in which its failure to be so licensed or
qualified would have a material adverse effect on its business taken as a whole.
3.2. CORPORATE AUTHORITY. The execution, delivery and performance
by Parent and Merger Subsidiary of this Merger Agreement have been duly
authorized and approved by the Boards of Directors of Parent and Merger
Subsidiary, subject to the approval of the shareholders of Parent pursuant to
section 4.1, and neither the execution nor delivery of this Merger Agreement nor
the consummation of the transactions contemplated hereby, nor compliance with
nor fulfillment of the terms and provisions herein, will, (i) conflict with or
result in a breach of the terms, conditions or provisions of or constitute a
default under the Certificate of Incorporation or Bylaws of Parent, the
Certificate of Incorporation or Bylaws of Merger Subsidiary or any material
agreement, instrument or judgment to which Parent or Merger Subsidiary is a
party or by which either is bound or any statute or regulatory provisions
affecting Parent or Merger Subsidiary, (ii) give any party to or with rights
under any such agreement, instrument or judgment the right to terminate, modify
or otherwise change the material rights or obligations of Parent or Merger
Subsidiary under such agreement, instrument or judgment, or (iii) require the
approval, consent or authorization of any Federal, state or local court,
governmental authority or regulatory body, other than in connection with or in
compliance with the provisions of the Delaware General Corporation Law and
Federal or state securities or antitrust laws. Merger Subsidiary has, and will
have at the Effective Time, full corporate power and corporate authority to
merge with RCP pursuant to this Merger Agreement and Parent and Merger
Subsidiary will have at the Effective Time, full corporate power and corporate
authority to do and perform all acts and things required to be done by them
under this Merger Agreement, subject to compliance with the provisions of the
Delaware General Corporation Law and Federal or state securities or antitrust
laws.
3.3. CAPITALIZATION. The authorized capital stock of Parent
consists of 20,000,000 shares of Parent Common Stock, $.01 par value, of which
following the Merger and the Tio Merger, up to 6,167,700 shares will be issued
and outstanding. The shares of Parent Common Stock to be issued to the members
of RCP pursuant to this Merger Agreement will, when issued and delivered in
accordance with the terms of this Merger Agreement, will be validly issued,
fully paid and non-assessable, and not subject to preemptive rights.
3.4. NO UNDISCLOSED LIABILITIES. Parent has no material
undisclosed liabilities, either fixed or contingent.
-6-
<PAGE>
3.5. COMPLIANCE WITH THE LAWS; LITIGATION. Neither Parent or
Merger Subsidiary is in default in any material respect under any material
agreement, lease or other document to which it is a party, or has received
written notice of or is, to the knowledge of any executive officer of Parent or
Merger Subsidiary, in material violation of any law or order, writ, injunction
or decree of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality. There are no
material lawsuits, proceedings, claims or governmental investigations pending
or, to the knowledge of any executive officer of Parent or Merger Subsidiary,
threatened against Parent or Merger Subsidiary or against its properties or
business, nor is there any reasonable basis known to Parent or Merger Subsidiary
for any such action and there is no action, suit, proceeding or investigation
pending, threatened or, to the knowledge of Parent or Merger Subsidiary,
contemplated which questions the legality, validity or propriety of the
transactions contemplated by this Merger Agreement.
3.6. TAX RETURNS. Parent has (i) filed or has caused to be filed
all federal, state and local franchise, income, sales, gross receipts and all
other tax returns and statements required to be filed by Parent or on its behalf
and which were due prior to the date of this Merger Agreement (the "Tax Returns
and Statements") and (ii) paid within the time and in the manner prescribed by
law all taxes due prior to the date of this Merger Agreement. The Tax Returns
and Statements are true, complete and accurate in all material respects. No tax
assessment or deficiency has been made against Parent nor has any notice been
given of any actual or proposed assessment or deficiency which has not been paid
or for which an adequate reserve has not been set aside.
3.7. FULL DISCLOSURE. No representation or warranty by Parent and
Merger Subsidiary to RCP under this Merger Agreement or any of the written
information, documents or memoranda furnished or to be furnished by Parent or
any of its authorized representatives to RCP or any of its representatives is
false or misleading or omits to state a material fact required to be stated
therein or necessary in order to make any of the statements therein not
misleading.
3.8. BOARD ACTION. The Board of Directors of Parent, by requisite
vote, determined that the Merger is in the best interests of Parent and approved
the Merger Agreement.
4. ACTION PRIOR TO THE EFFECTIVE TIME. The parties covenant to take the
following action between the date hereof and the Effective Time:
4.1. APPROVAL OF RCP MEMBERS. RCP will obtain the approval of its
members for the Merger on the terms and conditions set forth in this Merger
Agreement and in connection therewith will comply fully with the applicable
provisions of the Ohio Limited Liability Company Act relating to the calling and
holding of a meeting of members or the action of members without a meeting for
such purpose.
-7-
<PAGE>
4.2. ACCURACY OF REPRESENTATIONS AND WARRANTIES. RCP and Parent
shall refrain from taking any action which would render any representation
and/or warranty contained in paragraphs 2 and 3 of this Merger Agreement
inaccurate as of the Effective Time. Parent will promptly notify RCP of any
lawsuits, claims, proceedings or investigations that may be threatened, brought,
asserted or commenced against Parent or its subsidiary or any of their officers
or directors (i) involving in any way the Merger or (ii) which might have a
material adverse impact on the business, properties or assets of Parent, taken
as a whole. RCP will promptly notify Parent of any lawsuits, claims, proceedings
or investigations that may be threatened, brought, asserted or commenced against
RCP or its officers or directors (i) involving in any way the Merger or (ii)
which might have a material adverse impact on the business, properties or assets
of RCP, taken as a whole.
4.3. CLOSING. The transactions contemplated in this Merger
Agreement shall be closed at the offices of RCP and this Merger Agreement and
Articles of Merger shall be filed promptly following such closing.
5. CONDITIONS PRECEDENT TO OBLIGATION OF PARENT AND MERGER SUBSIDIARY.
The obligation of Parent and Merger Subsidiary to effect the Merger is subject
to the satisfaction on or prior to the Effective Time of each of the following
conditions:
5.1. NO ADVERSE CHANGE; CORPORATE ACTION. No material adverse
change shall have occurred in the assets, liabilities, business, operations,
properties, prospects or condition (financial or otherwise) of RCP. RCP shall
have performed in all material respects all obligations and agreements and
complied in all material respects with all covenants and conditions contained in
this Merger Agreement to be performed and complied with by it at or prior to the
Effective Time.
5.2. NO LITIGATION. No order of any court or administrative
agency shall be in effect which restrains or prohibits the transactions
contemplated by this Merger Agreement and no suit, action, investigation,
inquiry or proceeding by any governmental body or other person or legal or
administrative proceeding shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby.
5.3. SECURITIES LAWS. Parent shall have received all necessary
permits and otherwise complied with any state Blue Sky, securities, tender offer
or take-over laws applicable to the issuance of shares of Parent Common Stock in
connection with the Merger. Parent agrees to use its best efforts promptly to
accomplish the foregoing.
6. CONDITIONS PRECEDENT TO OBLIGATION OF RCP. The obligation of RCP to
effect the Merger is subject to the fulfillment at or prior to the Effective
Time each of the following
conditions:
6.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
OBLIGATIONS. The representations and warranties of Parent and Merger Subsidiary
contained in this Merger Agreement, or in any certificate or document delivered
pursuant to the provisions hereof shall be true and correct on and as of the
Effective Time as though such representations and warranties were made at and as
of such time. Parent shall have performed in all material respects all
obligations and agreements and complied in all material respects with all
covenants and conditions contained in this Merger Agreement to be performed and
complied with by it at or prior to the Effective Time.
-8-
<PAGE>
6.2. NO LITIGATION. No order of any court or administrative
agency shall be in effect which restrains or prohibits the transactions
contemplated by this Merger Agreement and no suit, action, investigation,
inquiry or proceeding by any governmental body or other person or legal or
administrative proceeding shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby.
6.3. ADDITIONAL CONDITIONS.
(a) Parent shall have completed the Tio Merger.
(b) Parent shall have effected a one-for-ten reverse split
of the Parent Common Stock.
7. OTHER PROVISIONS.
7.1. GOVERNING LAW. This Merger Agreement shall be construed and
interpreted according to the laws of the State of Ohio, the Ohio Limited
Liability Company Act and the Ohio General Corporation Law shall be applicable
to approval of the Merger by the managers and members of RCP and to the Merger
Subsidiary and to the procedures relating to filing of the Merger Agreement and
Articles of Merger with the Secretary of State of Ohio.
7.2. WAIVER. To the extent otherwise permitted by applicable law
any party may, at its option, waive in writing any and all of the conditions
herein contained to which its obligations hereunder are subject.
7.3. SURVIVAL. The representations and warranties of RCP, Merger
Subsidiary and Parent contained herein shall survive the Effective Time.
7.4. NO INDEMNIFICATION. Except as set forth in this Merger
Agreement, there shall be no agreement, express or implied, to indemnify RCP,
Merger Subsidiary or Parent with respect to the respective covenants,
representations or warranties expressed herein.
8. TITLES AND HEADINGS. The titles and headings contained in this Merger
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Merger Agreement.
-9-
<PAGE>
9. NOTICES. All notices, requests, demands, and other communications
given, or required to be given pursuant to the terms of this Merger Agreement
shall be in writing and may be delivered in person (by hand, messenger, or other
confirmable form of delivery), or be sent by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows, or by Federal
Express or other nationally recognized overnight courier service, addressed as
follows, or by facsimile transmission, to the following respective numbers,
followed by a copy being delivered in person, by mail, or by overnight courier
as specified herein:
If to RCP: RCP Enterprises Group, LLC
Attention: Richard C. Peplin, Jr., Manager
25100 Detroit Road
Westlake, Ohio 44145
If to Parent or
Merger Subsidiary: Sports-Guard, Inc.
c/o Invest L'Inc. Partners, LLC
1901 N. Roselle Road, Suite 1030
Schaumburg, Illinois 60195
Either party may, by written notice to the other, specify a different address or
numbers for notice purposes. Any notice sent to the party to whom it is
addressed in accordance with this paragraph will be deemed to have been given
(i) when received, if personally delivered; (ii) if sent by registered or
certified mail, return receipt requested, upon the date of delivery shown on the
receipt card, or if no date is shown, the postmark thereon; (iii) if sent via
Federal Express or other nationally recognized overnight courier, one (1)
business day after deposit with such overnight courier; or (iv) if sent by
facsimile transmission, on the day on which it is sent, if receipt of
transmission is confirmed by telephone. If notice is received on a Saturday,
Sunday or legal holiday, it will be deemed to have been given and received on
the next following business day.
10. ASSIGNMENT. This Merger Agreement shall be binding upon and inure to
the benefit of the parties named herein and their respective successors and
assigns, provided that neither this Merger Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties hereto.
11. COUNTERPARTS. This Merger Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
12. AMENDMENT. This Merger Agreement may be amended by the parties
hereto at any time before or after approval hereof by the members of RCP, but
after any such approval by the members of RCP, no amendment shall be made
without further approval by the managers of RCP and the board of directors of
Merger Subsidiary and by the board of directors of Parent, if such amendment
would materially or adversely affect the members, would amend the certificate of
incorporation, or would affect the amount or kind of stock, securities or other
consideration to be exchanged under this Agreement.
-10-
<PAGE>
IN WITNESS WHEREOF, the undersigned directors, officers and managers of
the respective parties of this Merger Agreement, pursuant to authority duly
given by their respective Board of Directors and Managers, have caused this
Merger Agreement to be duly executed.
Constituent Corporations:
RCP ENTERPRISES GROUP, LLC,
an Ohio limited liability company
By:
------------------------------
Richard C. Peplin, Jr., Manager
RCP ENTERPRISES GROUP, INC.
a Delaware corporation
By:
-------------------------------
Troy D. Wiseman, President
Additional Party:
SPORTS-GUARD, INC.,
a Delaware corporation
By:
------------------------------
Troy D. Wiseman, President
-11-
<PAGE>
IN WITNESS WHEREOF, as to Sections 2.11 and 2.13 only, the undersigned RCP
Members have duly executed this Agreement.
RCP Members:
RICHARD C. PEPLIN, JR.
LAKEWOOD MFG. CO.
By:
-------------------------------
Richard C. Peplin, Jr., President
-12-
<PAGE>
EXHIBIT A
RCP MEMBERSHIP INTERESTS OWNERSHIP
Member Number of Units
- ----------------------------- ----------------------
Richard C. Peplin, Jr. 700
Lakewood Mfg. Co. 300
-13-
<PAGE>
MERGER AGREEMENT
AMONG
SPORTS-GUARD, INC.
TIO MARIANO CIGAR CORP.
AND
TIO CIGARS, INC.
<PAGE>
TABLE OF CONTENTS
Page
----
1. The Merger........................................................... 1
1.1. Effective Time............................................. 1
1.2. Conversion of Membership Interests......................... 2
1.3. Restricted Securities...................................... 2
1.4. Certificate of Incorporation............................... 3
1.5. Bylaws..................................................... 3
1.6. Dissenters' Rights......................................... 3
1.7. Directors.................................................. 3
2. Representations, Warranties and Agreements of RCP and RCP Members.... 3
2.1. Due Organization........................................... 3
2.2. Corporate Authority........................................ 4
2.3 Capitalization............................................. 4
2.4 Subsidiaries............................................... 4
2.5. No Financial Statements.................................... 4
2.6. No Undisclosed Liabilities................................. 4
2.7. Title To Properties........................................ 4
2.8. Compliance with Laws; Litigation........................... 4
2.9. Tax Returns................................................ 5
2.10. Full Disclosure............................................ 5
2.11. Board Action............................................... 5
2.12. Title to Target Shares..................................... 5
2.13. Continuity of Business Enterprise.......................... 5
2.14. No Intent to Sell.......................................... 5
3. Representations, Warranties and Agreements of Parent and Merger
Subsidiary.................................................................. 5
3.1. Organization of Parent and Merger Subsidiary............... 5
3.2. Corporate Authority........................................ 6
3.3. Capitalization............................................. 6
3.4. No Undisclosed Liabilities................................. 6
3.5. Compliance with the Laws; Litigation....................... 6
3.6. Tax Returns................................................ 7
3.7. Full Disclosure............................................ 7
3.8. Board Action............................................... 7
4. Action Prior to the Effective Time................................... 7
4.1. Approval of TIO Shareholders............................... 7
4.2. Accuracy of Representations and Warranties................. 7
4.3. Closing.................................................... 7
(i)
<PAGE>
5. Conditions Precedent to Obligation of Parent and Merger Subsidiary... 8
5.1. No Adverse Change; Corporate Action........................ 8
5.2. No Litigation.............................................. 8
5.3. Securities Laws............................................ 8
6. Conditions Precedent to Obligation of TIO............................ 8
6.1. Accuracy of Representations and Warranties; Performance
of Obligations............................................. 8
6.2. No Litigation.............................................. 8
7. Other Provisions..................................................... 8
7.1. Governing Law.............................................. 9
7.2. Waiver..................................................... 9
7.3. Survival................................................... 9
7.4. No Indemnification......................................... 9
8. Titles and Headings.................................................. 9
9. Notices.............................................................. 9
10. Assignment........................................................... 10
11. Counterparts......................................................... 10
12. Amendment............................................................ 10
Exhibit A - TIO Share Ownership
(ii)
<PAGE>
MERGER AGREEMENT
THIS MERGER AGREEMENT, made and entered into as of this 31st day of
October, 1997, by and among TIO CIGARS, INC., a corporation established and
governed under the laws of the State of Ohio ("Tio" or "Target"), TIO MARIANO
CIGAR CORP., a corporation to be established and governed under the laws of the
State of Delaware ("Merger Subsidiary"), Tio and Merger Subsidiary being
hereinafter sometimes called the "Constituent Corporations" and Merger
Subsidiary being hereinafter sometimes called the "Surviving Corporation", and
SPORTS-GUARD, INC., a Delaware corporation ("Parent") (Parent joining as an
additional party, not being a Constituent Corporation).
W I T N E S S E T H
- - - - - - - - - -
Merger Subsidiary and Target propose to merge pursuant to this Merger
Agreement (the "Merger Agreement"), which provides for the merger of Target with
and into Merger Subsidiary, with Merger Subsidiary as the surviving corporation
(the "Merger"), pursuant to the applicable laws of the States of Delaware and
Ohio, at the Effective Time, as defined herein, with the intent to qualify the
transactions provided for herein as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
Contemporaneously herewith, Parent has entered into a merger agreement with RCP
Enterprises Group, LLC, an Ohio limited liability Company ("RCP"), whereby RCP
will merger with and into a wholly-owned subsidiary of Parent, with such
wholly-owned subsidiary as the surviving corporation and in which RCP members
shall receive Parent shares (the "RCP Merger"). This Merger Agreement records
the representations and warranties made by Parent, Merger Subsidiary and Tio in
connection with the instant Merger, sets forth certain covenants and agreements
of the parties, provides conditions to the obligations of the parties and sets
forth other provisions relating to the Merger.
NOW, THEREFORE, Parent, Merger Subsidiary and Tio in consideration of
the agreements, covenants and conditions contained herein, hereby make the
following representations and warranties, give the following covenants and agree
as follows:
A G R E E M E N T
- - - - - - - - -
1. THE MERGER. At the Effective Time (as hereinafter defined) of the
Merger, Tio shall be merged with and into Merger Subsidiary by statutory merger;
the separate existence of Tio shall cease and Merger Subsidiary shall be the
surviving corporation, and on the following terms and conditions:
-1-
<PAGE>
1.1. EFFECTIVE TIME. The Merger shall be effective (the
"Effective Time") when this Merger Agreement and/or appropriate certificates of
its approval and adoption and acknowledgments shall have been filed with the
Secretary of State of Delaware.
1.2. CONVERSION OF SHARES. At the Effective Time, by virtue of
the Merger, and without any action on the part of the holders thereof:
1.2.1. Each of the shares of Tio common stock, no par
value, ("Tio Common Stock") held by Tio Shareholders, as described in Appendix A
(the "Tio Shareholders"), which shall be outstanding immediately prior to the
Effective Time (collectively "the Shares") and other than Shares which are
dissenting shares, shall cease to be outstanding and shall be converted into
shares of common stock, $.01 par value, of Parent ("Parent Common Stock") at a
ratio of one (1) share of Parent Common Stock for each two (2) shares of Tio
Common Stock, except that fractional shares shall be rounded up to the nearest
whole share. The foregoing exchange ratio includes the effect of a proposed
one-for-ten reverse split of Parent Common Stock to be effected prior to the
Effective Time (i.e., an aggregate of 1,310,000 shares of Parent Common Stock
will be issued to the Tio Shareholders). Holders of certificates which represent
the Shares shall thereafter have no rights as shareholders of Target. Except for
issuance by Parent of stock in connection with the RCP Merger, after the date of
this Merger Agreement and prior to the Effective Time, neither Parent nor Tio
shall declare or pay to its shareholders of record a stock dividend upon the
Parent Common Stock or the Tio Common Stock, as the case may be, or subdivide,
split up, reclassify or combine the Parent Common Stock or the Tio Common Stock,
as the case may be, or make any other distribution of securities or property in
respect of the Parent Common Stock or the Tio Common Stock, as the case may be
or otherwise effect any capital reorganization.
1.2.2. From and after the Effective Time, each holder of a
certificate theretofore representing issued and outstanding Shares (but not
including Shares which are dissenting shares within the meaning of the Ohio
General Corporation Law shall, upon the surrender of such certificates to
Parent, be entitled to receive in exchange therefor a certificate or
certificates representing the number of shares of Parent Common Stock into which
the Shares theretofore represented by the certificate or certificates so
surrendered shall have been converted pursuant to subsection 1.2.1 above. From
and after the Effective Time, until so surrendered, each certificate theretofore
representing Shares (except for certificates representing dissenting shares)
shall be deemed for all corporate purposes to evidence the number of shares of
Parent Common Stock into which such Shares shall have been converted.
1.3. RESTRICTED SECURITIES. The Parent Common Stock to be issued
in exchange for the Shares has not been registered under the Securities Act of
1933, as amended, by reason of an exemption therefrom, and may not be
transferred or resold except pursuant to an effective registration statement or
exemption from registration and each certificate representing the Shares will be
endorsed with the following legends and any legend required to be placed thereon
by applicable state securities laws:
-2-
<PAGE>
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF A CURRENT AND
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT WITH
RESPECT TO SUCH SHARES, OR AN OPINION OF THE ISSUER'S
COUNSEL TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED
UNDER THE ACT."
1.4. ARTICLES OF INCORPORATION. The Certificate of Incorporation
of Merger Subsidiary shall continue to be the Certificate of Incorporation of
the Surviving Corporation immediately after the Effective Time.
1.5. BYLAWS. The Bylaws of Merger Subsidiary in effect
immediately prior to the Effective Time shall continue to be the Bylaws of the
Surviving Corporation immediately after the Effective Time.
1.6. DISSENTERS' RIGHTS. Parent and Tio shall take all actions
mandated by the Ohio General Corporation Law to permit and satisfy the exercise
of rights of dissent and appraisal by holders of Tio Common Stock.
1.7. DIRECTORS. The Board of Directors of the Surviving
Corporation at and as of the consummation of the transactions contemplated
herein shall be as set forth on Schedule 1.7 hereto.
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF TIO AND TIO
SHAREHOLDERS. As an inducement to Parent and Merger Subsidiary to enter into
this Merger Agreement and to consummate the transactions contemplated herein,
Tio, and the Tio shareholders as to Sections 2.12 and 2.14 only, represent and
warrant to Parent and Merger Subsidiary and agree as follows:
2.1. DUE ORGANIZATION. Tio is a corporation duly incorporated and
validly existing in good standing under the laws of the State of Ohio, and has
full corporate power and authority to own or lease its properties and to carry
on its business as now conducted. Tio is duly licensed, qualified to do business
and in good standing as a foreign corporation in each jurisdiction in which its
failure to be so licensed or qualified would have a material adverse effect on
its business taken as a whole.
-3-
<PAGE>
2.2. CORPORATE AUTHORITY. The execution, delivery and performance
by Tio of this Merger Agreement has been duly authorized and approved by its
Board of Directors, subject to approval of the Merger contemplated herein by its
shareholders pursuant to section 4.1 hereof, and neither the execution and
delivery of this Merger Agreement nor the consummation of the transactions
contemplated hereby, nor compliance with nor fulfillment of the terms and
provisions herein, will: (i) conflict with or result in a breach of the terms,
conditions or provisions of or constitute a default under the Articles of
Incorporation or Bylaws of Tio, any material agreement, instrument or judgment
to which it is a party or by which it is bound or any statute or regulatory
provisions affecting Tio; (ii) give any party to or with rights under any such
agreement, instrument or judgment the right to terminate, modify or otherwise
change the material rights or obligations of Tio under such agreement,
instrument or judgment; or (iii) require the approval, consent or authorization
of any Federal, state or local court, governmental authority or regulatory body,
other than in connection with or in compliance with the provisions of the Ohio
General Corporation Law and Federal or state securities or antitrust laws. Tio
has, and will have at the Effective Time, full corporate power and corporate
authority to complete the merger with Merger Subsidiary pursuant to this Merger
Agreement and to do and perform all acts and things required to be done by Tio
under the Merger Agreement, subject to compliance with the provisions of the
Ohio General Corporation Law and Federal or state securities or antitrust laws.
2.3. CAPITALIZATION. As of the Effective Time, the authorized
capital stock of Tio shall consist of 3,000,000 shares of Tio Common Stock, no
par value, of which 2,620,000 shares shall be issued and outstanding (none of
which are owned beneficially or of record by Tio) as of the date of this Merger
Agreement. All of the issued and outstanding shares of Tio Common Stock are duly
and validly issued and are fully paid and non-assessable. Except as set forth on
Exhibit B, no other securities of Tio are outstanding, and Tio has not issued
nor taken any action toward issuance of any other options, warrants, conversion
privileges or other rights to purchase or acquire shares of Tio Common Stock,
whether upon exchange for or conversion of other securities or otherwise, and no
rescission or redemption rights exist with regard to existing shareholders. No
shares of Tio Common Stock will be issued between the date hereof and the
Effective Time.
2.4. SUBSIDIARIES. Tio has no subsidiaries and no ownership
interest in any other entities.
2.5. NO FINANCIAL STATEMENTS. Tio was incorporated on June 19,
1997 and has had no significant operations to date.
2.6. NO UNDISCLOSED LIABILITIES. Tio has no material liabilities,
fixed or contingent.
2.7. TITLE TO PROPERTIES. Tio has good, valid and marketable
title to all of the properties and assets. All such properties and assets are
free and clear of all liens, claims, charges, security interests or other
encumbrances.
2.8. COMPLIANCE WITH LAWS; LITIGATION. Tio is not in default in
any material respect under any material agreement, lease or other document to
which it is a party, nor has Tio received written notice of or is, to the
knowledge of any executive officer of Tio, in material violation of any law or
order, writ, injunction or decree of any court or Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality and there are no material lawsuits, proceedings, claims or
governmental investigations pending or, to the knowledge of any executive
officer of Tio, threatened against Tio or against its properties or business,
nor is there any reasonable basis known to Tio for any such action and there is
no action, suit, proceeding or investigation pending, threatened or, to the
knowledge of Tio, contemplated which questions the legality, validity or
propriety of the transactions contemplated by this Merger Agreement.
-4-
<PAGE>
2.9. TAX RETURNS. Tio has (i) filed or has caused to be filed all
federal, state and local franchise, income, sales, gross receipts and all other
tax returns and statements required to be filed by Tio or on its behalf and
which were due prior to the date of this Merger Agreement (the "Tax Returns and
Statements") and (ii) paid within the time and in the manner prescribed by law
all taxes due prior to the date of this Merger Agreement. No tax assessment or
deficiency has been made against Tio nor has any notice been given of any actual
or proposed assessment or deficiency which has not been paid or for which an
adequate reserve has not been set aside.
2.10. FULL DISCLOSURE. No representation or warranty by Tio in
this Merger Agreement or any written information, documents or memoranda
furnished or to be furnished by Tio or any of its authorized representatives to
Parent or Merger Subsidiary or any of their representatives is false or
misleading in any material respect or omits to state a material fact required to
be stated therein or necessary in order to make any of the statements therein
not misleading.
2.11. BOARD ACTION. The Board of Directors of Tio, by requisite
vote, determined that the Merger is in the best interests of Tio and its
shareholders, approved the Merger Agreement and recommended approval and
adoption of the Merger Agreement by the shareholders of Tio.
2.12. TITLE TO TARGET SHARES. Each Tio Shareholder owns and holds
title to, and will at the Effective Time own and hold title to, respectively,
the Tio Common Stock (or shares) now (and at Effective Time to be) owned by him
or her, as set forth in Exhibit A, free and clear of any lien, charge or
encumbrance of any kind.
2.13. CONTINUITY OF BUSINESS ENTERPRISE. Tio operates at least
one significant historic business line, or owns at least a significant portion
of its historic business assets, within the meaning of Treasury Regulation ss.
1.368-1(d) promulgated under the Internal
Revenue Code.
2.14. NO INTENT TO SELL. No Tio Shareholder has, or at the
Effective Time will have, any present plan, intention or arrangement to sell,
transfer or otherwise in any manner dispose of any of the Parent Common Stock to
be issued to such Shareholder pursuant to
the merger.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF PARENT AND MERGER
SUBSIDIARY. As an inducement to Tio to enter into this Merger Agreement and to
consummate the transactions contemplated herein, Parent and Merger Subsidiary
hereby represent and warrant to Tio and its shareholders and agree as follows:
3.1. ORGANIZATION OF PARENT AND MERGER SUBSIDIARY. Parent is a
corporation duly incorporated and validly existing in good standing under the
laws of the State of Delaware; Merger Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and is a directly and wholly owned subsidiary of Parent; Parent and
Merger Subsidiary each has full corporate power and authority to consummate the
Merger as provided herein and Parent has full corporate power to own or lease
its properties and to carry on its business as it is currently conducted. Parent
is duly licensed, qualified to do business and in good standing as a foreign
corporation in each jurisdiction in which its failure to be so licensed or
qualified would have a material adverse effect on its business taken as a whole.
-5-
<PAGE>
3.2. CORPORATE AUTHORITY. The execution, delivery and performance
by Parent and Merger Subsidiary of this Merger Agreement have been duly
authorized and approved by the Boards of Directors of Parent and Merger
Subsidiary, subject to the approval of the shareholders of Parent pursuant to
section 4.1, and neither the execution nor delivery of this Merger Agreement nor
the consummation of the transactions contemplated hereby, nor compliance with
nor fulfillment of the terms and provisions herein, will, (i) conflict with or
result in a breach of the terms, conditions or provisions of or constitute a
default under the Articles of Incorporation or Bylaws of Parent, the Articles of
Incorporation or Bylaws of Merger Subsidiary or any material agreement,
instrument or judgment to which Parent or Merger Subsidiary is a party or by
which either is bound or any statute or regulatory provisions affecting Parent
or Merger Subsidiary, (ii) give any party to or with rights under any such
agreement, instrument or judgment the right to terminate, modify or otherwise
change the material rights or obligations of Parent or Merger Subsidiary under
such agreement, instrument or judgment, or (iii) require the approval, consent
or authorization of any Federal, state or local court, governmental authority or
regulatory body, other than in connection with or in compliance with the
provisions of the Delaware General Corporation Law and Federal or state
securities or antitrust laws. Merger Subsidiary has, and will have at the
Effective Time, full corporate power and corporate authority to merge with Tio
pursuant to this Merger Agreement and Parent and Merger Subsidiary will have at
the Effective Time, full corporate power and corporate authority to do and
perform all acts and things required to be done by them under this Merger
Agreement, subject to compliance with the provisions of the Delaware General
Corporation Law and Federal or state securities or antitrust laws.
3.3. CAPITALIZATION. The authorized capital stock of Parent
consists of 20,000,000 shares of Parent Common Stock, $.01 par value, of which
following the Merger and the RCP Merger approximately 6,167,700 shares will be
issued and outstanding. The shares of Parent Common Stock to be issued to the
shareholders of Tio pursuant to this Merger Agreement, when issued and delivered
in accordance with the terms of this Merger Agreement, will be validly issued,
fully paid and non-assessable, and not subject to preemptive rights.
3.4. NO UNDISCLOSED LIABILITIES. Parent has no material
undisclosed liabilities, either fixed or contingent.
3.5. COMPLIANCE WITH THE LAWS; LITIGATION. Neither Parent or
Merger Subsidiary is in default in any material respect under any material
agreement, lease or other document to which it is a party, or has received
written notice of or is, to the knowledge of any executive officer of Parent or
Merger Subsidiary, in material violation of any law or order, writ, injunction
or decree of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality. There are no
material lawsuits, proceedings, claims or governmental investigations pending
or, to the knowledge of any executive officer of Parent or Merger Subsidiary,
threatened against Parent or Merger Subsidiary or against its properties or
business, nor is there any reasonable basis known to Parent or Merger Subsidiary
for any such action and there is no action, suit, proceeding or investigation
pending, threatened or, to the knowledge of Parent or Merger Subsidiary,
contemplated which questions the legality, validity or propriety of the
transactions contemplated by this Merger Agreement.
-6-
<PAGE>
3.6. TAX RETURNS. Parent has (i) filed or has caused to be filed
all federal, state and local franchise, income, sales, gross receipts and all
other tax returns and statements required to be filed by Parent or on its behalf
and which were due prior to the date of this Merger Agreement (the "Tax Returns
and Statements") and (ii) paid within the time and in the manner prescribed by
law all taxes due prior to the date of this Merger Agreement. The Tax Returns
and Statements are true, complete and accurate in all material respects. No tax
assessment or deficiency has been made against Parent nor has any notice been
given of any actual or proposed assessment or deficiency which has not been paid
or for which an adequate reserve has not been set aside.
3.7. FULL DISCLOSURE. No representation or warranty by Parent and
Merger Subsidiary to Tio under this Merger Agreement or any of the written
information, documents or memoranda furnished or to be furnished by Parent or
any of its authorized representatives to Tio or any of its representatives is
false or misleading or omits to state a material fact required to be stated
therein or necessary in order to make any of the statements therein not
misleading.
3.8. BOARD ACTION. The Board of Directors of Parent, by requisite
vote, determined that the Merger is in the best interests of Parent and approved
the Merger Agreement.
4. ACTION PRIOR TO THE EFFECTIVE TIME. The parties covenant to take the
following action between the date hereof and the Effective Time:
4.1. APPROVAL OF TIO SHAREHOLDERS. Tio will obtain the approval
of its shareholders for the Merger on the terms and conditions set forth in this
Merger Agreement and in connection therewith will comply fully with the
applicable provisions of the Florida 1989 Business Corporation Act relating to
the calling and holding of a meeting of shareholders or the action of
shareholders without a meeting for such purpose.
4.2. ACCURACY OF REPRESENTATIONS AND WARRANTIES. Tio and Parent
shall refrain from taking any action which would render any representation
and/or warranty contained in paragraphs 2 and 3 of this Merger Agreement
inaccurate as of the Effective Time. Parent will promptly notify Tio of any
lawsuits, claims, proceedings or investigations that may be threatened, brought,
asserted or commenced against Parent or its subsidiary or any of their officers
or directors (i) involving in any way the Merger or (ii) which might have a
material adverse impact on the business, properties or assets of Parent, taken
as a whole. Tio will promptly notify Parent of any lawsuits, claims, proceedings
or investigations that may be threatened, brought, asserted or commenced against
Tio or its officers or directors (i) involving in any way the Merger or (ii)
which might have a material adverse impact on the business, properties or assets
of Tio, taken as a whole.
4.3. CLOSING. The transactions contemplated in this Merger
Agreement shall be closed at the offices of Tio and this Merger Agreement and
Articles of Merger shall be filed promptly following such closing.
-7-
<PAGE>
5. CONDITIONS PRECEDENT TO OBLIGATION OF PARENT AND MERGER SUBSIDIARY.
The obligation of Parent and Merger Subsidiary to effect the Merger is subject
to the satisfaction on or prior to the Effective Time of each of the following
conditions:
5.1. NO ADVERSE CHANGE; CORPORATE ACTION. No material adverse
change shall have occurred in the assets, liabilities, business, operations,
properties, prospects or condition (financial or otherwise) of Tio. Tio shall
have performed in all material respects all obligations and agreements and
complied in all material respects with all covenants and conditions contained in
this Merger Agreement to be performed and complied with by it at or prior to the
Effective Time.
5.2. NO LITIGATION. No order of any court or administrative
agency shall be in effect which restrains or prohibits the transactions
contemplated by this Merger Agreement and no suit, action, investigation,
inquiry or proceeding by any governmental body or other person or legal or
administrative proceeding shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby.
5.3. SECURITIES LAWS. Parent shall have received all necessary
permits and otherwise complied with any state Blue Sky, securities, tender offer
or take-over laws applicable to the issuance of shares of Parent Common Stock in
connection with the Merger. Parent agrees to use its best efforts promptly to
accomplish the foregoing.
6. CONDITIONS PRECEDENT TO OBLIGATION OF TIO. The obligation of Tio to
effect the Merger is subject to the fulfillment at or prior to the Effective
Time of each of the following
conditions:
6.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
OBLIGATIONS. The representations and warranties of Parent and Merger Subsidiary
contained in this Merger Agreement, or in any certificate or document delivered
pursuant to the provisions hereof shall be true and correct on and as of the
Effective Time as though such representations and warranties were made at and as
of such time. Parent shall have performed in all material respects all
obligations and agreements and complied in all material respects with all
covenants and conditions contained in this Merger Agreement to be performed and
complied with by it at or prior to the Effective Time.
6.2. NO LITIGATION. No order of any court or administrative
agency shall be in effect which restrains or prohibits the transactions
contemplated by this Merger Agreement and no suit, action, investigation,
inquiry or proceeding by any governmental body or other person or legal or
administrative proceeding shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby.
7. OTHER PROVISIONS.
7.1. GOVERNING LAW. This Merger Agreement shall be construed and
interpreted according to the laws of the State of Ohio and the Ohio General
Corporation Law shall be applicable to approval of the Merger by the board of
directors and shareholders of Tio and to the procedures relating to filing of
the Merger Agreement with the Secretary of State of Ohio.
-8-
<PAGE>
7.2. WAIVER. To the extent otherwise permitted by applicable law
any party may, at its option, waive in writing any and all of the conditions
herein contained to which its obligations hereunder are subject.
7.3. SURVIVAL. The representations and warranties of Tio, Merger
Subsidiary and Parent shall survive the Effective Time.
7.4. NO INDEMNIFICATION. Except as set forth in this Merger
Agreement, there shall be no agreement, express or implied, to indemnify Tio,
Merger Subsidiary or Parent with respect to the respective covenants,
representations or warranties expressed herein.
8. TITLES AND HEADINGS. The titles and headings contained in this Merger
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Merger Agreement.
9. NOTICES. All notices, requests, demands, and other communications
given, or required to be given pursuant to the terms of this Merger Agreement
shall be in writing and may be delivered in person (by hand, messenger, or other
confirmable form of delivery), or be sent by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows, or by Federal
Express or other nationally recognized overnight courier service, addressed as
follows, or by facsimile transmission, to the following respective numbers,
followed by a copy being delivered in person, by mail, or by overnight courier
as specified herein:
If to Tio: Tio Cigars, Inc.
Attention: Richard C. Peplin, Jr., President
25100 Detroit Road
Westlake, Ohio 44145
If to Parent or
Merger Subsidiary: Sports-Guard, Inc.
c/o Invest L'Inc. Partners, LLC
1901 N. Roselle Road, Suite 1030
Schaumburg, Illinois 60195
Either party may, by written notice to the other, specify a different address or
numbers for notice purposes. Any notice sent to the party to whom it is
addressed in accordance with this paragraph will be deemed to have been given
(i) when received, if personally delivered; (ii) if sent by registered or
certified mail, return receipt requested, upon the date of delivery shown on the
receipt card, or if no date is shown, the postmark thereon; (iii) if sent via
Federal Express or other nationally recognized overnight courier, one (1)
business day after deposit with such overnight courier; or (iv) if sent by
facsimile transmission, on the day on which it is sent, if receipt of
transmission is confirmed by telephone. If notice is received on a Saturday,
Sunday or legal holiday, it will be deemed to have been given and received on
the next following business day.
-9-
<PAGE>
10. ASSIGNMENT. This Merger Agreement shall be binding upon and inure to
the benefit of the parties named herein and their respective successors and
assigns, provided that neither this Merger Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties hereto.
11. COUNTERPARTS. This Merger Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
12. AMENDMENT. This Merger Agreement may be amended by the parties
hereto at any time before or after approval hereof by the shareholders of Tio
and/or Parent, but after any such approval by the shareholders of Tio or Parent,
no amendment shall be made without further approval by the board of directors of
Tio and Merger Subsidiary and by the shareholders of Tio and Parent, if such
amendment would materially or adversely affect the shareholders, would amend the
articles of incorporation, or would affect the amount or kind of stock,
securities or other consideration to be exchanged under this Agreement.
IN WITNESS WHEREOF, the undersigned directors and officers of each of
the parties of this Merger Agreement, pursuant to authority duly given by their
respective Board of Directors, have caused this Merger Agreement to be duly
executed.
Constituent Corporations:
TIO CIGARS, INC.,
an Ohio corporation
By:
----------------------------
Richard C. Peplin, Jr., President
TIO MARIANO CIGAR CORP.,
a Delaware corporation
By:
---------------------------
Troy D. Wiseman, President
Additional Party:
SPORTS-GUARD, INC.,
a Delaware corporation
By:
---------------------------
Troy D. Wiseman, President
-10-
<PAGE>
IN WITNESS WHEREOF, as to Sections 2.12 and 2.14 only, the undersigned Tio
Shareholders have duly executed this Agreement.
- ----------------------------------
Richard C. Peplin, Jr., individually and
as Trustee for Richard C. Peplin, III,
Alexandria M. Peplin and Dustin A. Peplin,
UGTMA
LAKEWOOD MFG. CO.
By:
-------------------------------
Richard C. Peplin, Jr., President
- ----------------------------------
Beth M. Peplin
- ----------------------------------
Peter Accorti
- ----------------------------------
Anna Villaneuva
- ----------------------------------
Marty Gillespie
- ----------------------------------
Patrick Graham
- ----------------------------------
Jeffrey Outcult
- ----------------------------------
Mark Schweidle
- ----------------------------------
Ronald Denne
-11-
<PAGE>
EXHIBIT A
TIO SHARE OWNERSHIP
Shareholder Number of Shares
------------- ----------------
Richard C. Peplin, Jr. 800,000
Beth M. Peplin 800,000
Peter Accorti 37,500
Anna Villaneuva 350,000
Marty Gillespie 350,000
Patrick Graham 60,000
Lakewood Mfg. Co. 75,000
Jeffrey Outcult 22,500
Mark Schweidle 30,000
Ronald Denne 50,000
Richard C. Peplin, III 15,000
Alexandria M. Peplin 15,000
Dustin A. Peplin 15,000
-12-
<PAGE>
State of Delaware
Office of the Secretary of State PAGE 1
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT
COPY OF THE CERTIFICATE OF AMENDMENT OF "SPORTS-GUARD, INC.",
CHANGING ITS NAME FROM "SPORTS-GUARD, INC." TO "COLMENA CORP.",
FILED IN THIS OFFICE ON THE TENTH DAY OF NOVEMBER, A.D. 1997, AT
11:21 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO
THE NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING
[SEAL] /s/ Edward J. Freel
--------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8748392
DATE: 11-10-97
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 11:21 AM 11/10/1997
971381528-2521519
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SPORTS-GUARD, INC.
SPORTS-GUARD, INC., a corporation duly organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that:
I. The amendment to the Corporation's Certificate of Incorporation set
forth below was duly adopted in accordance with the provisions of Section 242
and has been consented to in writing by the joint Written Consent of the Sole
Director and Majority Stockholder of the Corporation dated October 31, 1997, in
accordance with Section 228 of the General Corporation law of the State of
Delaware.
II. Article I of the Corporation's Certificate of Incorporation is amended
to read in its entirety as follows:
"I. The name of this corporation is Colmena Corp."
III. Article IV of the Corporation's Certificate of Incorporation is
amended to read in its entirety as follows:
"IV. The corporation shall be authorized to issue one class of shares of
stock to be designated "Common Stock;" the total number of shares which the
corporation shall have authority to issue is Twenty Million (20,000,000) and
each share shall have $.01 par value. Each ten shares of Common Stock
outstanding on the effective date of this amendment shall be automatically
converted into one share of Common Stock and in lieu of fractional shares,
each share so converted shall be rounded up to the next highest number of full
shares of Common Stock."
IN WITNESS WHEREOF, the undersigned hereby duly executes this Certificate
of Amendment hereby declaring and certifying under penalty of perjury that this
is the act and deed of the Corporation and the facts herein stated are true,
this 31st day of October, 1997.
SPORTS-GUARD, INC.
By: /s/ Troy D. Wiseman
---------------------------
Troy D. Wiseman, President
-1-
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
COLMENA CORP.
A Delaware Corporation
ARTICLE I
OFFICE
1.1 REGISTERED OFFICE. The registered office of Colmena Corp., a
Delaware corporation (hereinafter called the "Corporation"), in the State of
Delaware shall be at 1013 Centre Drive in the City of Wilmington, County of New
Castle, and the name of the registered agent in charge thereof shall be
Corporation Service Company.
1.2 PRINCIPAL OFFICE. The principal office for the transaction of the
business of the Corporation shall be 25100 Detroit Road, Westlake, Ohio 44145.
The Board of Directors (hereinafter called the "Board") is hereby granted full
power and authority to change the principal office from one location to another.
1.3 OTHER OFFICES. The Corporation may also have an office or offices at
such other place or places, either within or without the State of Delaware, as
the Board may from time to time determine or as the business of the Corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 ANNUAL MEETINGS. Annual meetings of the stockholders of the
Corporation for the purpose of electing directors and for the transaction of
such other business as may properly come before such meetings in accordance with
Section 2.11 of these Bylaws may be held at such time, date and place as the
Board shall determine by resolution.
2.2 SPECIAL MEETINGS. A special meeting of the stockholders for the
transaction of any proper business may be called at any time by the Board, the
Chief Executive Officer (Chairman of the Board), the President or one or more
stockholders holding shares in the aggregate entitled to cast not less than ten
percent (10%) of the votes at that meeting.
2.3 PLACE OF MEETINGS. All meetings of the stockholders shall be held at
such places within or without the State of Delaware, as may from time to time be
designated by the person or persons calling the respective meeting and specified
in the respective notices or waivers of notice thereof.
-1-
<PAGE>
2.4 NOTICE OF MEETINGS.
(a) Except as otherwise required by law, written notice of each
meeting of the stockholders, whether annual or special, shall be given not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder of record entitled to vote at such meeting. If mailed, notice
is given when deposited in the United States mail, postage prepaid, directed to
the stockholder at his address as it appears on the records of the Corporation.
Except as otherwise expressly required by law, no publication of any notice of a
meeting of the stockholders shall be required. Every notice of a meeting of the
stockholders shall state the place, date and hour of the meeting, and in the
case of a special meeting, shall also state the purpose or purposes for which
the meeting is called. Notice of any meeting of stockholders shall not be
required to be given to any stockholder who shall have waived such notice and
such notice shall be deemed waived by any stockholder who shall attend such
meeting in person or by proxy, except as a stockholder who shall attend such
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. Except as otherwise expressly required by law, notice of any adjourned
meeting of the stockholders need not be given if the time and place thereof are
announced at the meeting at which the adjournment is taken.
(b) Whenever notice is required to be given to any stockholder to
whom (i) notice of two consecutive annual meetings, and all notices of meetings
or of the taking of action by written consent without a meeting to such person
during the period between such two consecutive annual meetings, or (ii) all, and
at least two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the Corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any person shall deliver to the Corporation a written notice setting
forth his then current address, the requirement that notice be given to such
person shall be reinstated. In the event that the action taken by the
Corporation is such as to require the filing of a certificate under any of the
other sections, the certificate need not state that notice was not given to
persons to whom notice was not required to be given pursuant to this section.
2.5 QUORUM. Except as provided by law, the holders of record of a
majority in voting interest of the shares of stock of the Corporation entitled
to be voted thereat, present in person or by proxy, shall constitute a quorum
for the transaction of business at any meeting of the stockholders of the
Corporation or any adjournment thereof. The stockholders present at a duly
called or held meeting at which a quorum is present may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum, and by any greater number of shares otherwise required to
take such action by applicable law or the Certificate of Incorporation. In the
absence of a quorum at any meeting or any adjournment thereof, a majority in
voting interest of the stockholders present in person or by proxy and entitled
to vote thereat or, in the absence therefrom of all the stockholders, any
officer entitled to preside at, or to act as secretary of, such meeting may
adjourn such meeting from time to time. At any such adjourned meeting at which a
quorum is present any business may be transacted which might have been
transacted at the meeting as originally called.
-2-
<PAGE>
2.6 VOTING.
(a) Each stockholder shall, at each meeting of the stockholders,
be entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 2.10 of these
Bylaws as the record date for the determination of stockholders entitled to
notice of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then
(A) at the close of business on the day next preceding the day on which notice
of the meeting shall be given or (B) if notice of the meeting shall be waived,
at the close of business on the day next preceding the day on which the meeting
shall be held.
(b) Voting shall in all cases be subject to the provisions of the
Delaware General Corporation Law and to the following provisions:
(i) Subject to Section 2.6(b)(vii), shares held by an
administrator, executor, guardian, conservator, custodian or other fiduciary may
be voted by such holder either in person or by proxy, without a transfer of such
shares into the holder's name; and shares standing in the name of a trustee may
be voted by the trustee, either in person or by proxy, but no trustee shall be
entitled to vote shares held by such trustee without a transfer of such shares
into the trustee's name.
(ii) Shares standing in the name of a receiver may be
voted by such receiver; and shares held by or under the control of a receiver
may be voted by such receiver without the transfer thereof into the receiver's
name if authority to do so is contained in the order of the court by which such
receiver was appointed.
(iii) Subject to the provisions of the Delaware General
Corporation Law, and except where otherwise agreed in writing between the
parties, a stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
(iv) Shares standing in the name of a minor may be voted
and the Corporation may treat all rights incident thereto as exercisable by the
minor, in person or by proxy, whether or not the Corporation has notice, actual
or constructive, of the non-age, unless a guardian of the minor's property has
been appointed and written notice of such appointment given to the Corporation.
(v) Shares standing in the name of another corporation,
domestic or foreign, may be voted by such officer, agent or proxyholder as the
bylaws of such other corporation may prescribe or, in the absence of such
provision, as the Board of Directors of such other corporation may determine or,
in the absence of such determination, by the chairman of the board, president or
any vice president of such other corporation, or by any other person authorized
to do so by the board, president or any vice president of such other
corporation. Shares which are purported to be executed in the name of a
corporation (whether or not any title of the person signing is indicated) shall
be presumed to be voted or the proxy executed in accordance with the provisions
of this subdivision, unless the contrary is shown.
-3-
<PAGE>
(vi) Shares of its own stock belonging to the Corporation
or to another corporation, if a majority of the shares entitled to vote in the
election of directors in such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes.
(vii) Shares held by the Corporation in a fiduciary
capacity, and shares of the Corporation held in a fiduciary capacity by any
subsidiary, shall not be entitled to vote on any matter, except to the extent
that the settlor or beneficial owner possesses and exercises a right to vote or
to give the Corporation binding instructions as to how to vote such shares.
(viii) If shares stand of record in the names of two or
more persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, husband and wife as community property, tenants by the
entirety, voting trustees, persons entitled to vote under a stockholder voting
agreement or otherwise, or if two or more persons (including proxyholders) have
the same fiduciary relationship respecting the same shares, unless the Secretary
of the Corporation is given written notice to the contrary and is furnished with
a copy of the instrument or order appointing them or creating the relationship
wherein it is so provided, their acts with respect to voting shall have the
following effect:
(A) If only one votes, such act binds all;
(B) If more than one vote, the act of the majority
so voting binds all;
(C) If more than one vote, but the vote is evenly
split on any particular matter, each fraction may vote the securities in
question proportionately. If the instrument so filed or the registration of the
shares shows that any such tenancy is held in unequal interests, a majority or
even split for the purpose of this section shall be a majority or even split in
interest.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto authorized
and delivered to the secretary of the meeting. A validly executed proxy which
does not state that it is irrevocable shall continue in full force and effect
unless revoked by the person executing it, prior to the vote pursuant thereto,
by a writing delivered to the Corporation stating that the proxy is revoked or
by a subsequent proxy executed by, or attendance at the meeting and voting in
person by the person executing the proxy; provided, however, that no such proxy
shall be valid after the expiration of three (3) years from the date of such
proxy, unless otherwise provided in the proxy. The revocability of a proxy that
states on its face that it is irrevocable shall be governed by the provisions of
the Delaware General Corporation Law.
-4-
<PAGE>
(d) At any meeting of the stockholders all matters, except as
otherwise provided in the Certificate of Incorporation, in these Bylaws or by
law, shall be decided by the vote of a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat and
thereon, a quorum being present.
(e) The vote at any meeting of the stockholders on any question
need not be written ballot, unless so directed by the chairman of the meeting;
provided, however, that any election of directors at any meeting must be
conducted by written ballot upon demand made by any stockholder or stockholders
present at the meeting before the voting begins. On a vote by ballot each ballot
shall be signed by the stockholder voting, or by his proxy, if there be such
proxy, and it shall state the number of shares voted.
2.7 ACTION WITHOUT A MEETING. Any action which is required to be taken
or which may be taken at any annual or special meeting of stockholders may be
taken without a meeting, without prior notice and without a vote, if a consent
or consents in writing, setting forth the action so taken, is signed by the
holders of outstanding shares having not less than the minimum number of votes
that would be necessary to authorize or take that action at a meeting at which
all shares entitled to vote on that action were present and voted and shall be
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
In the case of election of directors, such a consent shall be effective only if
signed by the holders of all outstanding shares entitled to vote for the
election of directors; provided, however, that a director may be elected at any
time to fill a vacancy on the Board that has not been filled by the directors,
by the written consent of the holders of a majority of the outstanding shares
entitled to vote for the election of directors. All such consents shall be filed
with the Secretary of the Corporation and shall be maintained in the corporate
records.
Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered in the manner required by this section to
the Corporation, written consents signed by a sufficient number of holders or
members to take action are delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. In the event that the action which is consented
to is such as would have required the filing of a certificate under any other
section of this title, if such action had been voted on by stockholders at a
meeting thereof, the certificate filed under such other section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written consent has been given in accordance with this
section, and that written notice has been given as provided in this section.
-5-
<PAGE>
2.8 LIST OF STOCKHOLDERS. The Secretary of the Corporation shall prepare
and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
2.9 JUDGES. If at any meeting of the stockholders a vote by written
ballot shall be taken on any question, the chairman of such meeting may appoint
a judge or judges to act with respect to such vote. Each judge so appointed
shall first subscribe an oath faithfully to execute the duties of a judge at
such meeting with strict impartiality and according to the best of his ability.
Such judges shall: (i) decide upon the qualification of the voters; (ii) report
the number of shares represented at the meeting and entitled to vote on such
question; (iii) conduct the voting and accept the votes; and (iv) when the
voting is completed, ascertain and report the number of shares voted
respectively for and against the question. Reports of judges shall be in writing
and subscribed and delivered by them to the Secretary of the Corporation. The
judges need not be stockholders of the Corporation, and any officer of the
Corporation may be a judge on any question other than a vote for or against a
proposal in which he shall have a material interest.
2.10 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board, and
which record date shall not be more than sixty (60) nor less than ten (10) days
before the date of such meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board, and which date
shall not be more than ten days after the date upon which the resolution fixing
the record date is adopted by the Board. If no record date has been fixed by the
Board, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
is required, shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the Corporation
by delivery to its registered office in the State of Delaware, its principal
place of business, or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the Board and prior action by the Board is required, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board adopts the resolution taking such prior action.
-6-
<PAGE>
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board
adopts the resolution relating thereto.
If no record is fixed by the Board, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.
2.11 STOCKHOLDER PROPOSALS AT ANNUAL MEETINGS.
(a) Business may be properly brought before an annual meeting by
a stockholder only upon the stockholder's timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than thirty (30) days nor more than sixty (60) days prior
to the meeting as originally scheduled; provided, however, that in the event
that less than forty (40) days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the tenth
(10th) day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made. For purposes of this
Section 2.11, any adjournment(s) or postponement(s) of the original meeting
shall be deemed for purposes of notice to be a continuation of the original
meeting and no business may be brought before any reconvened meeting unless such
timely notice of such business was given to the Secretary of the Corporation for
the meeting as originally scheduled. A stockholder's notice to the Secretary
shall set forth as to each matter the stockholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting, (ii) the name and record address of the stockholder
proposing such business, (iii) the class and number of shares of the Corporation
which are beneficially owned by the stockholder, and (iv) any material interest
of the stockholder in such business. Notwithstanding the foregoing, nothing in
this Section 2.11 shall be interpreted or construed to require the inclusion of
information about any such proposal in any proxy statement distributed by, at
the direction of, or on behalf of the Board.
-7-
<PAGE>
(b) The chairman of an annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Section
2.11, and if the chairman should so determine, the chairman shall so declare to
the meeting and any such business not properly brought before the meeting shall
not be transacted.
2.12 NOTICE OF STOCKHOLDER NOMINEES.
(a) Nominations of persons for election to the Board of the
Corporation shall be made only at a meeting of stockholders and only (i) by or
at the direction of the Board or (ii) by any stockholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Section 2.12. Such nominations, other
than those made by or at the direction of the Board, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than thirty (30) days
nor more than sixty (60) days prior to the meeting; provided, however, that in
the event that less than forty (40) days' notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be received not later than the close of business
on the tenth (10th) day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. For purposes of this
Section 2.12, any adjournment(s) or postponement(s) of the original meeting
shall be deemed for purposes of notice to be a continuation of the original
meeting and no nominations by a stockholder of persons to be elected directors
of the Corporation may be made at any such reconvened meeting unless pursuant to
a notice which was timely for the meeting on the date originally scheduled. Such
stockholder's notice shall set forth: (i) as to each person whom the stockholder
proposes to nominate for election or re-election as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to the Securities Exchange Act of 1934, as amended, (including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected); and (ii) as to the stockholder giving the
notice (A) the name and address, as they appear on the Corporation's books, of
such stockholder, and (B) the class and number of shares of the Corporation
which are beneficially owned by such stockholder. Notwithstanding the foregoing,
nothing in this Section 2.12 shall be interpreted or construed to require the
inclusion of information about any such nominee in any proxy statement
distributed by, at the discretion of, or on behalf of the Board.
(b) The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by this Section 2.12, and if the
chairman should so determine, the chairman shall so declare to the meeting and
the defective nomination shall be disregarded.
-8-
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
3.1 GENERAL POWERS. The property, business and affairs of the
Corporation shall be managed by or under the direction of the Board.
3.2 NUMBER AND TERM OF OFFICE. The number of directors shall be no less
than one (1) and no more than seven (7) or such other number as may be fixed by
the stockholders at any annual meeting or special meeting or by the Board at any
regular or special meeting, subject in either case to the provisions of the
Certificate of Incorporation. Directors need not be stockholders. The initial
number of directors shall be one (1). Each director shall hold office until the
next annual meeting and until a successor has been elected and qualified, or he
resigns, or he is removed in a manner consistent with these Bylaws.
3.3 ELECTION OF DIRECTORS. The directors shall be elected annually by
the stockholders of the Corporation and the persons receiving the greatest
number of votes in accordance with the system of voting established by these
Bylaws shall be the directors.
3.4 RESIGNATION AND REMOVAL OF DIRECTORS. Any director of the
Corporation may resign at any time by giving written notice to the Corporation.
Any such resignation shall take effect at the time specified therein, or, if the
time be not specified, it shall take effect immediately upon its receipt; and
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective. Any or all of the directors may be removed
with or without cause if such removal is approved by the affirmative vote of a
majority of the outstanding shares entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director before his term of office expires.
3.5 VACANCIES. Except as otherwise provided in the Certificate of
Incorporation, any vacancy in the Board, whether because of death, resignation,
disqualification, an increase in the number of directors or any other cause, may
be filled by a majority of the remaining directors, though less than a quorum.
Each director so chosen to fill a vacancy shall hold office until his successor
shall have been elected and qualified or until he shall resign or shall have
been removed in the manner hereinafter provided.
The stockholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election by
written consent shall require the consent of a majority of the outstanding
shares entitled to vote.
3.6 PLACE OF MEETING, ETC. The Board may hold any of its meetings at
such place or places within or without the State of Delaware as the Board may
from time to time by resolution designate or as shall be designated by the
person or persons calling the meeting or in the notice or a waiver of notice of
any such meeting. Directors may participate in any regular or special meeting of
the Board by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board can hear
each other, and such participation shall constitute presence in person at such
meeting.
3.7 FIRST MEETING. The Board shall meet as soon as practicable after
each annual election of directors and notice of such first meeting shall not be
required.
-9-
<PAGE>
3.8 REGULAR MEETINGS. Regular meetings of the Board may be held at such
times as the Board shall from time to time by resolution determine. If any day
fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting shall be held at the same hour and place
on the next succeeding business day not a legal holiday. Except as may be
required by law or specified herein, notice of regular meetings need not be
given.
3.9 SPECIAL MEETINGS. Special meetings of the Board shall be held
whenever called by the Chairman of the Board, the President or any two or more
directors. Except as otherwise provided by law or by these Bylaws, notice of the
time and place of each such special meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, at least five (5)
days before the day on which the meeting is to be held, or shall be sent to him
at such place by telegraph or cable or be delivered personally not less than
forty-eight (48) hours before the time at which the meeting is to be held.
Except where otherwise required by law or by these Bylaws, notice of the purpose
of a special meeting need not be given. Notice of any meeting of the Board shall
not be required to be given to any director who is present at such meeting,
except a director who shall attend such 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.
3.10 QUORUM AND MANNER OF ACTING. Except as otherwise provided in these
Bylaws, in the Certificate of Incorporation or by law, the presence of a
majority of the authorized number of directors shall be required to constitute a
quorum for the transaction of business, at any meeting of the Board, and all
matters shall be decided at any such meeting, a quorum being present, by the
affirmative votes of a majority of the directors present. A meeting at which a
quorum is initially present may continue to transact business notwithstanding
the withdrawal of directors, provided any action taken is approved by at least a
majority of the required quorum for such meeting. In the absence of a quorum, a
majority of directors present at any meeting may adjourn the same from time to
time until a quorum shall be present. Notice of an adjourned meeting need not be
given. The directors shall act only as a Board, and the individual directors
shall have no power as such.
3.11 ACTION BY CONSENT. Any action required or permitted to be taken at
any meeting of the Board or of any committee thereof may be taken without a
meeting if a written consent thereto is signed by all members of the Board or of
such committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board or committee.
3.12 COMPENSATION. The directors shall receive only such compensation
for their services as directors as may be allowed by resolution of the Board.
The Board may also provide that the Corporation shall reimburse each such
director for any expense incurred by him on account of his attendance at any
meetings of the Board or Committees of the Board. Neither the payment of such
compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
-10-
<PAGE>
3.13 COMMITTEES OF DIRECTORS.
(a) The Board may, by resolution passed by a majority of the
whole Board, designate one or more committees, each committee to consist of one
or more of the directors of the Corporation. Any such committee, to the extent
provided in the resolution of the Board and except as otherwise limited by law,
shall have and may exercise all the powers and authority of the Board in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it;
provided, however, that no such committee shall have the power or authority to
act on behalf of the Board with regard to:
(i) the approval of any action which, under the Delaware
General Corporation Law, also requires stockholders' approval or approval of the
outstanding shares;
(ii) the filling of vacancies on the Board of Directors or
in any committees;
(iii) the fixing of compensation of the directors for
serving on the Board or on any committee;
(iv) the amendment or repeal of Bylaws or the adoption of
new Bylaws;
(v) the amendment or repeal of any resolution of the Board
of Directors which by its express terms is not so amendable or repealable;
(vi) a distribution to the stockholders of the
Corporation, except at a rate or in a periodic amount or within a price range
determined by the Board of Directors; or
(vii) the appointment of any other committees of the Board
of Directors or the members thereof.
(b) Meetings and action of committees shall be governed by, and
held and taken in accordance with, the provisions of these Bylaws dealing with
the place of meetings, regular meetings, special meetings and notice, quorum,
waiver of notice, adjournment, notice of adjournment and action without meeting,
with such changes in the context of these Bylaws as are necessary to substitute
the committee and its members for the Board of Directors and its members, except
that the time or regular meetings of committees may be determined by resolutions
of the Board of Directors. Notice of special meetings of committees shall also
be given to all alternate members, who shall have the right to attend all
meetings of the committee. The Board of Directors or a committee may adopt rules
for the government of such committee not inconsistent with the provisions of
these Bylaws.
Any such committee shall keep written minutes of its meetings and report
the same to the Board at the next regular meeting of the Board. In the absence
or disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any such absent or disqualified member.
-11-
<PAGE>
3.14 OTHER COMMITTEES. The Board may, by resolution passed by a majority
of the whole Board, designate one or more committees, each committee to consist
of one or more non-employee directors and one or more other disinterested
persons, who need not be directors, for the purpose of providing advice to the
Board regarding any matter, including but not limited to the compensation of
officers and other key employees. For the purposes of this Section, a
"disinterested person" means any person having no significant interest in the
actions of the committee, as determined by the Board. Any such committee, to the
extent provided in the resolution of the Board and except as otherwise limited
by law, shall assist the Board in exercising its powers and authority in the
management of the business and affairs of the Corporation, but shall not itself
exercise such powers and authority. Any such committee shall keep written
minutes of its meetings and report the same to the Board at the next regular
meeting of the Board. In the absence or disqualification of a member of any such
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint any disinterested person to act at the meeting in the place
of any such absent or disqualified member. The compensation and reimbursement of
expenses of the members of any such committee shall be determined by resolution
passed by a majority of the whole Board. Neither the payment of such
compensation nor the reimbursement of such expenses shall be construed to
preclude any such member from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
3.15 CERTAIN TRANSACTIONS. In the absence of fraud, no contract or other
transaction between the Corporation and any other corporation, and no act of the
Corporation, shall in any way be affected or invalidated by the fact that any of
the directors of the Corporation are financially or otherwise interested in, or
are directors or officers of, such other corporations; and, in the absence of
fraud, any director, individually, or any firm of which any director may be a
member, may be a party to, or may be financially or otherwise interested in, any
contract or transaction of the Corporation; provided, in any case, that the fact
that he or such firm is so interested shall be disclosed or shall have been
known to the Board of Directors or committee. Any director of the Corporation
who is also a director or officer of any such other corporation or who is so
interested may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of the Corporation that shall authorize any
such contract, act or transaction, and may vote thereat to authorize any such
contract, act or transaction, with full force and effect as if he were not such
director or officer of such other corporation or not so interested.
-12-
<PAGE>
ARTICLE IV
OFFICERS
4.1 CORPORATE OFFICERS.
(a) The officers of the Corporation shall be a Chief Executive
Officer (Chairman of the Board), a President, one or more Vice Presidents (the
number thereof and their respective titles to be determined by the Board), a
Secretary, Chief Financial Officer (Treasurer) and such other officers as may be
appointed at the discretion of the Board in accordance with the provisions of
Section 4.1(b).
(b) In addition to the officers specified in Section 4.1(a), the
Board may appoint such other officers as the Board may deem necessary or
advisable, including one or more Assistant Secretaries and one or more Assistant
Treasurers, each of whom shall hold office for such period, have such authority
and perform such duties as the Board may from time to time determine. The Board
may delegate to any officer of the Corporation or any committee of the Board the
power to appoint, remove and prescribe the duties of any officer provided for in
this Section 4.1(b).
(c) Any number of offices may be held by the same person.
4.2 ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers of the
Corporation, except such officers as may be appointed in accordance with
Sections 4.1(b) or 4.5, shall be appointed annually by the Board at the first
meeting thereof held after the election of the Board. Each officer shall hold
office until such officer shall resign or shall be removed by the Board (either
with or without cause) or otherwise disqualified to serve, or the officer's
successor shall be appointed and qualified.
4.3 REMOVAL. Any officer of the Corporation may be removed, with or
without cause, at any time at any regular or special meeting of the Board by a
majority of the directors of the Board at the time in office or, except in the
case of an officer appointed by the Board, by any officer of the Corporation or
committee of the Board upon whom or which such power of removal may be conferred
by the Board.
4.4 RESIGNATIONS. Any officer may resign at any time by giving written
notice of his resignation to the Board, the President or the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time is not specified, upon receipt thereof by the Board,
President or Secretary, as the case may be; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
4.5 VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification or other cause may be filled for the unexpired portion
of the term thereof in the manner prescribed in these Bylaws for regular
appointments or elections to such office.
4.6 CHIEF EXECUTIVE OFFICER (CHAIRMAN OF THE BOARD). The Chief Executive
Officer (Chairman of the Board) of the Corporation shall be the chief executive
officer of the Corporation, unless otherwise determined by the Board, and shall
have, subject to the control of the Board, general and active supervision and
management over the business of the Corporation and over its several subordinate
officers, assistants, agents and employees. The Chief Executive Officer shall
preside at all meetings of the stockholders and at all meetings of the Board.
4.7 PRESIDENT. The President shall have, subject to the control of the
Board and/or the Chief Executive Officer (Chairman of the Board), general and
active supervision and management over the business of the Corporation and over
its several subordinate officers, assistants, agents and employees. The
President shall have such other powers and duties as may from time to time be
assigned to him by the Chief Executive Officer (Chairman of the Board), the
Board or as prescribed by the Bylaws. At the request of the Chief Executive
Officer (Chairman of the Board), or in the case of the absence or inability to
act of the Chief Executive Officer (Chairman of the Board) upon the request of
the Board, the President shall perform the duties of the Chief Executive Officer
(Chairman of the Board) and when so acting, shall have all the powers of, and be
subject to all the restrictions upon, the Chief Executive Officer (Chairman of
the Board).
-13-
<PAGE>
4.8 VICE PRESIDENTS. Each Vice President shall have such power and
perform such duties as the Board may from time to time prescribe. At the request
of the President, or in the case of the President's absence or inability to act
upon the request of the Board, a Vice President shall perform the duties of the
President and when so acting, shall have all the powers of, and be subject to
all the restrictions upon, the President.
4.9 CHIEF FINANCIAL OFFICER (TREASURER). The Chief Financial Officer
(Treasurer) shall supervise, have custody of, and be responsible for all funds
and securities of the Corporation. The Chief Financial Officer (Treasurer) shall
deposit all such funds in the name of the Corporation in such banks, trust
companies or other depositories as shall be selected by the Board or in
accordance with authority delegated by the Board. The Chief Financial Officer
(Treasurer) shall receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever. The Chief Financial Officer (Treasurer)
shall exercise general supervision over expenditures and disbursements made by
officers, agents and employees of the Corporation and the preparation of such
records and reports in connection therewith as may be necessary or desirable.
The Chief Financial Officer (Treasurer) shall, in general, perform all other
duties incident to the office of Chief Financial Officer (Treasurer) and such
other duties as from time to time may be assigned to the Chief Financial Officer
(Treasurer) by the Board.
4.10 SECRETARY. The Secretary shall have the duty to record the
proceedings of all meetings of the Board, of the stockholders, and of all
committees of which a secretary shall not have been appointed in one or more
books provided for that purpose. The Secretary shall see that all notices are
duly given in accordance with these Bylaws and as required by law; shall be
custodian of the seal of the Corporation and shall affix and attest the seal to
all documents to be executed on behalf of the Corporation under its seal; and,
in general, he shall perform all the duties incident to the office of Secretary
and such other duties as may from time to time be assigned to him by the Board.
4.11 COMPENSATION. The compensation of the officers of the Corporation
shall be fixed from time to time by the Board. None of such officers shall be
prevented from receiving such compensation by reason of the fact that he is also
a director of the Corporation. Nothing contained herein shall preclude any
officer from serving the Corporation, or any subsidiary corporation, in any
other capacity and receiving proper compensation therefor.
-14-
<PAGE>
ARTICLE V
CONTRACTS, CHECKS, DRAFTS,
BANK ACCOUNTS, ETC.
5.1 EXECUTION OF CONTRACTS. The Board, except as in these Bylaws
otherwise provided, may authorize any officer or officers, agent or agents, to
enter into any contract or execute any instrument in the name of and on behalf
of the Corporation, and such authority may be general or confined to specific
instances; and unless so authorized by the Board or by these Bylaws, no officer,
agent or employee shall have any power or authority to bind the Corporation by
any contract or engagement or to pledge its credit or to render it liable for
any purpose or in any account.
5.2 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for payment
of money, notes or other evidence of indebtedness, issued in the name of or
payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such person shall give such bond, if any, as the
Board may require.
5.3 DEPOSITS. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositories as the Board may select, or as may be
selected by any officer or officers, assistant or assistants, agent or agents,
or attorney or attorneys of the Corporation to whom such power shall have been
delegated by the Board. For the purpose of deposit and for the purpose of
collection for the account of the Corporation, the Chief Executive Officer,
President, any Vice President or the Chief Financial Officer, (or any other
officer or officers, assistant or assistants, agent or agents or attorney or
attorneys of the Corporation who shall from time to time be determined by the
Board), may endorse, assign and deliver checks, drafts and other orders for the
payment of money which are payable to the order of the Corporation.
5.4 GENERAL AND SPECIAL BANK ACCOUNTS. The Board may from time to time
authorize the opening and keeping of general and special bank accounts with such
banks, trust companies or other depositories as the Board may select or as may
be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
-15-
<PAGE>
ARTICLE VI
SHARES AND THEIR TRANSFER
6.1 CERTIFICATES FOR STOCK.
(a) The shares of the Corporation shall be represented by
certificates, provided that the Board may provide by resolution or resolutions
that some or all of any or all classes or series of its stock shall be
uncertificated shares. Any such resolution shall not apply to shares represented
by a certificate until such certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board, every holder of
stock represented by certificates and upon request every holder of
uncertificated shares shall be entitled to have a certificate, in such form as
the Board shall prescribe, signed by, or in the name of, the Corporation by the
Chief Executive Officer (Chairman of the Board), or the President or Vice
President, and by the Chief Financial Officer (Treasurer) or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation
representing the number of shares registered in certificate form. Any of or all
of the signatures on the certificates may be a facsimile. In case any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed upon, any such certificates, shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, such certificate
may nevertheless be issued by the Corporation with the same effect as though the
person who signed such certificate, or whose facsimile signature shall have been
placed thereupon, were such officer, transfer agent or registrar at the date of
issue.
(b) A record shall be kept of the respective names of the
persons, firms or corporations owning the stock represented by such
certificates, the number and class of shares represented by such certificates,
respectively, and the respective dates thereof, and in case of cancellation, the
respective dates of cancellation. Every certificate surrendered to the
Corporation for exchange or transfer shall be cancelled, and no new certificate
or certificates shall be issued in exchange for any existing certificate until
such existing certificate shall have been so cancelled, except in cases provided
for in Section 6.4.
6.2 TRANSFERS OF STOCK. Transfers of shares of stock of the Corporation
shall be made only on the books of the Corporation by the registered holder
thereof, or by such holder's attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.3, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
6.3 REGULATIONS. The Board may make such rules and regulations as it may
deem expedient, not inconsistent with these Bylaws, concerning the issue,
transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.
6.4 LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. In any case of
loss, theft, destruction or mutilation of any certificate of stock, another may
be issued in its place upon proof of such loss, theft, destruction or mutilation
and upon the giving of a bond of indemnity to the Corporation in such form and
in such sum as the Board may direct; provided, however, that a new certificate
may be issued without requiring any bond when, in the judgment of the Board, it
is proper to do so.
6.5 PAYMENT FOR SHARES. Certificates for shares may be issued prior to
full payment under such restrictions and for such purposes as the Board may
provide; provided, however, that on any certificate issued to represent any
partly paid shares, the total amount of the consideration to be paid therefor
and the amount paid thereon shall be stated.
-16-
<PAGE>
ARTICLE VII
INDEMNIFICATION
7.1 AUTHORIZATION FOR INDEMNIFICATION. The Corporation may indemnify, in
the manner and to the full extent permitted by law, any person (or the estate,
heirs, executors, or administrators of any person) who was or is a party to, or
is threatened to be made a party to 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 the Corporation), by reason of the
fact that such person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, 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 such action, suit or proceeding if 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, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
7.2 ADVANCE OF EXPENSES. Costs and expenses (including attorneys' fees)
incurred by or on behalf of a director or officer in defending or investigating
any action, suit, proceeding or investigation may be paid by the Corporation in
advance of the final disposition of such matter, if such director or officer
shall undertake in writing to repay any such advances in the event that it is
ultimately determined that he is not entitled to indemnification. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board deems appropriate. Notwithstanding the
foregoing, no advance shall be made by the Corporation if a determination is
reasonably and promptly made by the Board by a majority vote of a quorum of
disinterested directors, or (if such a quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs) by independent legal
counsel in a written opinion, or by the stockholders, that, based upon the facts
known to the Board or counsel at the time such determination is made, (a) the
director, officer, employee or agent acted in bad faith or deliberately breached
his duty to the Corporation or its stockholders, and (b) as a result of such
actions by the director, officer, employee or agent, it is more likely than not
that it will ultimately be determined that such director, officer, employee or
agent is not entitled to indemnification.
7.3 INSURANCE. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise or as a member of any committee or similar
body against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article or applicable law.
7.4 NON-EXCLUSIVITY. The right of indemnity and advancement of expenses
provided herein shall not be deemed exclusive of any other rights to which any
person seeking indemnification or advancement of expenses from the Corporation
may be entitled under any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office. Any agreement for
indemnification of or advancement of expenses to any director, officer, employee
or other person may provide rights of indemnification or advancement of expenses
which are broader or otherwise different from those set forth herein.
-17-
<PAGE>
ARTICLE VIII
MISCELLANEOUS
8.1 SEAL. The Board shall provide a corporate seal, which shall be in
the form of a circle and shall bear the name of the Corporation and words and
figures showing that the Corporation was incorporated in the State of Delaware
and the year of incorporation.
8.2 WAIVER OF NOTICES. Whenever notice is required to be given by these
Bylaws or the Certificate of Incorporation or by law, the person entitled to
said notice may waive such notice in writing, either before or after the time
stated therein, and such waiver shall be deemed equivalent to notice. Attendance
of a person at a meeting (whether in person or by proxy in the case of a meeting
of stockholders) shall constitute a waiver of notice of such meeting, except
when the person 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 the stockholders, directors
or members of a committee of directors need be specified in any written waiver
of notice.
8.3 AMENDMENTS. The original or other Bylaws of the Corporation may be
adopted, amended or repealed by the incorporators, by the initial directors if
they were named in the Certificate of Incorporation, or, before the Corporation
has received any payment for any of its stock, by its Board. After the
Corporation has received any payment for any of its stock, the power to adopt,
amend or repeal Bylaws shall be in the stockholders entitled to vote; provided,
however, the Corporation may, in its Certificate of Incorporation, confer the
power to adopt, amend or repeal Bylaws upon the directors. The fact that such
power has been so conferred upon the directors shall not divest the stockholders
of the power, nor limit their power to adopt, amend or repeal Bylaws.
8.4 REPRESENTATION OF OTHER CORPORATIONS. The Chief Executive Officer
(Chairman of the Board), President, any Vice President or the Secretary of this
Corporation is authorized to vote, represent and exercise on behalf of this
Corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this Corporation. The authority herein
granted to said officers to vote or represent on behalf of this Corporation any
and all shares held by this Corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
to do so by proxy or power of attorney duly executed by said officers.
8.5 STOCK PURCHASE PLANS. The Corporation may adopt and carry out a
stock purchase plan or agreement or stock option plan or agreement providing for
the issue and sale for such consideration as may be fixed of its unissued
shares, or of issued shares acquired or to be acquired, to one or more of the
employees or directors of the Corporation or of a subsidiary or to a trustee on
their behalf and for the payment for such shares in installments or at one time,
and may provide for aiding any such persons in paying for such shares by
compensation for services rendered, promissory notes, or otherwise.
-18-
<PAGE>
Any stock purchase plan or agreement or stock option plan or agreement
may include, among other features, the fixing of eligibility for participation
therein, the class and price of shares to be issued or sold under the plan or
agreement, the number of shares which may be subscribed for, the method of
payment therefor, the reservation of title until full payment therefor, the
effect of the termination of employment and option or obligation on the part of
the Corporation to repurchase the shares, the time limits of and termination of
the plan and any other matters, not in violation of applicable law, as may be
included in the plan as approved or authorized by the Board or any committee of
the Board.
8.6 CONSTRUCTION AND DEFINITIONS. Unless the context requires otherwise,
the general provisions, rules of construction and definitions in the Delaware
General Corporation Law shall govern the construction of these Bylaws. Without
limiting the generality of this provision, the singular number includes the
plural, the plural number includes the singular, and the term "person" includes
both a corporation and a natural person.
-19-
<PAGE>
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting Secretary of Colmena
Corp., a Delaware corporation; and
2. That the foregoing Amended and Restated Bylaws, comprising
twenty (20) pages, constitute the Bylaws of said Corporation as duly adopted and
approved by the sole director of said Corporation by written consent effective
as of October 31, 1997.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed the seal of said Corporation effective as of October 31, 1997.
----------------------------------
Troy D. Wiseman, Secretary
-20-
<PAGE>
COMMON STOCK COMMON STOCK
NUMBER SHARES
- ------------ ------------
CL COLMENA CORP
- ------------ ------------
Incorporated under the laws of See reverse for
the State of Delaware certain definitions
CUSIP 195196 10 0
- --------------------------------------------------------------------------------
THIS CERTIFIES THAT
SPECIMEN
IS THE RECORD HOLER OF
- --------------------------------------------------------------------------------
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE, OF
===================================COLMENA CORP.================================
transferable on the books of the Corportion by the holder hereof in person or by
duly authorized attorney upon surrender of this Certificate properly endorsed.
This Certificate is not valid until countersigned and registered by the Transfer
Agent and Registrar
WITNESS the facsimile signatures of teh duly authorized officers of the
Corporation.
Dated:
SPECIMEN SPECIMEN
Secretary President
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
1. RCP Enterprises Group, Inc., a Delaware corporation, is a wholly-owned
subsidiary of the Company.
2. Tio Mariano Cigar Corp., a Delaware corporation, is a wholly-owned
subsidiary of the Company.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 11
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 2554
<CURRENT-ASSETS> 2856
<PP&E> 30733
<DEPRECIATION> (4348)
<TOTAL-ASSETS> 29151
<CURRENT-LIABILITIES> 362069
<BONDS> 0
0
0
<COMMON> 59819
<OTHER-SE> (511617)
<TOTAL-LIABILITY-AND-EQUITY> 29151
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 356515
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27969
<INCOME-PRETAX> (356515)
<INCOME-TAX> 0
<INCOME-CONTINUING> (356515)
<DISCONTINUED> 0
<EXTRAORDINARY> 39500
<CHANGES> 0
<NET-INCOME> (317015)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
