SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF
THE SECURITIES EXCHANGE ACT OF 1934
FIRST RESERVE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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FLORIDA 86-0740730
(STATE OR OTHER JURISDICTION OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
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1360 SOUTH DIXIE HIGHWAY, CORAL GABLES, FLORIDA 33146
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (305) 667-8871
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
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______________________________ ___________________________________
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, NO PAR VALUE
(TITLE OF CLASS)
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ITEM 1. BUSINESS
First Reserve, Inc. (the "Company") is a holding company whose primary
operations are through Esslinger-Wooten-Maxwell, Inc. ("EWM"), a wholly-owned
subsidiary, and a general real estate brokerage firm. EWM was originally founded
in 1964. Allen C. Harper and Ronald A. Shuffield, the current principals of the
Company, purchased EWM in April 1984 through First Reserve, Inc., a Florida
corporation ("First Reserve Florida"), which was established for the purpose of
acquiring EWM. They subsequently transferred their ownership in EWM to First
Reserve Florida. First Reserve Florida was a holding company that wholly-owned
EWM along with certain other related entities, including Embassy Financial
Services, Inc. ("Embassy"), a licensed residential mortgage lender that
originates loans in an agency capacity on behalf of other mortgage lenders.
HISTORY - MERGER
The Company was organized under the laws of the State of Arizona on September 7,
1993 under the name El Squared, Inc. On August 31, 1994, El Squared, Inc.
changed its name to Phoenix Financial Reporting Group, Inc. ("PFRG"). On
February 2, 1998, PFRG changed its name to First Reserve, Inc. On June 17, 1998,
the Company transferred it domicile from Arizona to Florida, effectively
becoming a Florida corporation. The Company's headquarters are located at 1360
South Dixie Highway, Coral Gables, Florida 33146. Its telephone number is (305)
667-8871 and its fax number is (305) 667-0781.
Pursuant to a Stock Purchase Agreement dated January 7, 1998, certain
shareholders of First Reserve Florida acquired 83.3% of the total common shares
(5,000,000 shares) of PFRG, a public holding company with no operations. The
PFRG shares were acquired from four different shareholders for an aggregate
purchase price of $80,000; First Reserve Florida provided funds to its
shareholders for this purchase. The remaining 1,000,000 shares of PFRG common
stock are owned by 219 shareholders that owned shares in PFRG prior to the
consummation of the Stock Purchase Agreement. By acquiring 83.3% of PFRG, the
shareholders of First Reserve Florida acquired control of PFRG.
Subsequent to the above-described acquisition, the shareholders of PFRG voted to
change the name of PFRG to First Reserve, Inc. The Company also issued
additional shares of common stock. In addition, pursuant to an Agreement of
Tax-Free Reorganization ("Exchange Merger Agreement"), the shareholders of First
Reserve Florida and the shareholders of Embassy exchanged all of their common
stock shares of First Reserve Florida and Embassy respectively for shares of the
Company's Common Stock, with the result being that First Reserve Florida and
Embassy became wholly-owned subsidiaries of PFRG. This exchange was intended to
qualify as a tax-free reorganization pursuant to Section 351 of the Internal
Revenue Code of 1986, as amended. After the completion of the share exchange,
First Reserve Florida was merged into the Company and all the assets of First
Reserve Florida became assets of the Company.
Effective May 1, 1998, EWM acquired Byrne-Rinehart & Co. ("Byrne"), a Miami,
Florida real estate
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brokerage operation. The acquisition was consummated via a merger pursuant to a
Plan of Reorganization and Merger Agreement dated as of May 1, 1998 (the "Byrne
Merger Agreement"). Pursuant to the Byrne Merger Agreement, Byrne merged with
and into EWM, with EWM being the surviving corporation. The merger was
structured as a reorganization to comply with the terms of Section 368(a)(2)(D)
of the Internal Revenue Code of 1986, as amended.
Under the terms of the merger, all of the shares of Common Stock of Byrne were
converted into and exchanged for an aggregate of 400,000 shares of common stock
of the Company and $300,000 cash. In connection with the merger, Thomas E. Byrne
was hired as President of EWM's Commercial Sales Division pursuant to a
three-year employment agreement and the sales associates of Byrne have been
retained by EWM. As of May 1, 1998, all of Byrne's pending real estate closings
are being administered by EWM and EWM is entitled to the brokerage proceeds
therefrom.
Effective September 30, 1998, EWM acquired Gerard International Realty, Inc.
("Gerard"), a Miami Beach, Florida real estate brokerage operation. The
acquisition was consummated via merger pursuant to a Plan of Reorganization and
Merger Agreement dated as of September 30, 1998 (the "Gerard Merger Agreement").
Pursuant to the Gerard Merger Agreement, Gerard merged with and into EWM, with
EWM being the surviving corporation. The merger was structured as a
reorganization to comply with the terms of Section 368(a)(2)(D) of the Internal
Revenue Code of 1986, as amended.
Under the terms of the merger, all of the shares of Common Stock of Gerard were
converted into and exchanged for up to 500,000 shares of the Company, in the
ratio of (i) 3,000 shares of the Company's Common Stock for each share of Gerard
Common Stock and (ii) 2,000 shares of the Company's Common Stock for each share
of Gerard Common Stock, which shall be subject to and released from escrow in
accordance with the terms and conditions set forth in the Merger Agreement. As
of September 30, 1998, all of Gerard's pending real estate closings are being
administered by EWM and EWM is entitled to the brokerage proceeds therefrom.
OPERATIONS
The primary operations of the Company are through Esslinger-Wooten-Maxwell,
Inc., its wholly-owned subsidiary. EWM is a Florida licensed real estate
brokerage firm with five offices, which engages approximately 400 sales
associates and support staff, in Miami-Dade and Broward Counties. In 1998, EWM
closed 2,200 real estate "sale" transactions and 600 "rental" transactions
having a gross dollar value of $733,000,000. The average home price was
$264,100.
EWM is member of the Realtor Association of Greater Miami and the Beaches, the
Realtor Association of Dade County, the Realtor Association of Greater Ft.
Lauderdale and the Florida Keys Association of Realtors. The Company offers its
services in southern Florida. EWM operates from offices located in Coral
Gables/Coconut Grove, South Miami, Miami Beach, Pinecrest/Palmetto area of
Miami-Dade County, Florida, and Plantation, Broward County Florida. EWM provides
the following services:
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* Residential Brokerage
* Commercial Brokerage
* Relocation
* Property Management and Leasing
* International Brokerage
* Business Brokerage
EWM has recently expanded into Broward County by opening an office in
Plantation. The Company believes that this expansion will allow EWM to take
advantage of the burgeoning growth in the residential real estate market in
Broward as well as the much sought after relocation transferee market.
RESIDENTIAL BROKERAGE
EWM acts as a broker or agent in residential real estate transactions. EWM
markets homes in every price range throughout Miami-Dade County, with a market
niche in luxury properties (over $500,000). The Company believes its 1998
average residential sales price of approximately $264,100 was higher than its
primary competitors. See "Business-Competition" herein.
All customers who list their property for sale with EWM must sign an Exclusive
Right of Sale Listing Agreement, which provides that EWM shall be the exclusive
sales agent for a set period of time. The Company's residential brokerage
services to sellers of real estate include:
* Pricing a property based on market knowledge and current research
* Individualized marketing program for each property
* Seller's Net Sheet, setting forth costs of sale and net profit
estimates upon closing
* Suggestions for preparing a property for sale
* Appointment options
* Inclusion of all properties in the computerized South Florida
Regional Multiple Listing System
* Pre-qualifying of potential buyers' ability to purchase
* General advice and assistance in preparing forms and attending
closing of transaction
* Negotiating the terms and conditions of the sales and purchase
contract
* Conducting "open houses" for properties
* Obtaining tenants
In exchange for these services, the customer pays to the Company a commission
which is typically fixed at 6% of the sales price, of which 3% is paid to the
"listing" broker and 3% is paid to the "selling" broker, which amounts are then
"split" between the Company and the participating sales associate.
EWM assists buyers of real estate by providing the following services:
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* Locating a property that meets personal and financial
objectives
* Showing the buyer properties
* Assistance with inspections, repairs, and obtaining
appraisals, etc.
* Negotiating the terms and conditions of the sales and purchase
contract
* Assisting the buyer in preparing for and attending closing of
transactions.
In exchange for these services, the customer pays to the Company a commission
which is also generally fixed at 6% of the sales price. This commission is
usually, with the consent of the listing broker, i.e., the seller's broker,
deducted from and payable out of, the commission payable to such listing broker.
The agreements usually executed by the customer (the buyer/seller) of
residential real estate is the form Contract for Sale and Purchase that is
approved by the Florida Association of Realtors and the Florida Bar and is
customarily used in the State of Florida. Under Florida real estate law, EWM
does not represent the Buyer or Seller directly, but rather operates as a
"transaction" broker.
COMMERCIAL BROKERAGE
EWM's commercial brokerage services provide specialized services to third
parties, including financial institutions, investors, developers and landowners.
EWM's services include but are not limited to:
* Commercial Sales and Leasing
* Property Owner Representation
* Tenant Representation
* Corporate Relocations
* Project Management
* Market Surveys
* Project Feasibilities
* Computer Financial Models
* Construction and Permanent Loan Packaging
* Land Acquisition and Assemblage
* Workouts of Challenging Properties
* Real Estate Consulting
RELOCATION
EWM has an extensive corporate relocation division, specializing in corporate
relocations. EWM is affiliated with several of the industry's largest relocation
networks. In particular, EWM maintains a Strategic Alliance Agreement with the
Cendant Mobility Relocation Network (successor to PHH Relocation Network)
("Cendant"), which the Company believes is the nation's largest relocation
organization, which provides EWM with membership in Cendant's nationwide network
of over 400 other suppliers of relocation services. Ron Shuffield, EWM's
President, served on the PHH National
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Advisory Council (predecessor to Cendant) from 1993-1996.
The South Florida area is strongly positioned for corporate relocations. The
area serves as a hub of domestic and international business. Because of the
favorable geographic location of Miami-Dade County, coupled with its trained
commercial and industrial labor force, many Fortune 500 companies have a Latin
American and Caribbean base in Miami. According to Miami-Dade County statistics
obtained from the Miami-Dade County Beacon Council (the county's economic
development council), in Coral Gables, Florida alone, the Company's main office
location, the following corporations have operations: Disney, Texaco West
Africa/Latin America, Hilton Hotel-International, Apple Computer, and IBM. In
addition, such major corporations as Burger King, Borden and Eastman Kodak have
significant South Florida operations. In order to capitalize on the growing need
to assist international executives, EWM has a division devoted solely to
assisting relocating executives.
The services that EWM provides in connection with corporate relocations
includes, but is not limited to, sales and marketing of a transferred employee's
existing properties, assisting relocated employees in finding new properties,
education and school placement counseling, rental assistance, area tours,
short-term housing, financial service assistance., mortgage prequalification,
assistance with coordination of moving personal property, and personal and
repair service professionals, including a list of pre-qualified baby sitters,
interior design consultants and home repair specialists.
A referral fee equal to 25 % to 30% of the gross listing or selling commission
received by EWM is paid to the referring party for any business referred to EWM.
All outgoing referral fees earned by EWM are split between the referring
associate and the Company. All outgoing referrals must be placed through the
Relocation Network.
PROPERTY MANAGEMENT
The Property Management Division of EWM serves as an agent for the property
owner, overseeing all facets of the leasing and management process, including
customary landlord activities.
EWM provides property management for single family homes, condominiums, and
apartment complexes. Specific property management services include:
* Collecting rent
* Accounting and bookkeeping services
* Regular property inspections
* Coordination of regular maintenance (lawn pool, service
contracts, etc.)
* Contract work (paint, repairs, etc.)
* Customer services for tenants
* Consistent owner contact
* Showing rental properties to prospective tenants.
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MARKET
The rate of home sales in Miami-Dade County, Florida for 1998 showed a marked
improvement over 1997. According to THE MIAMI HERALD, market forecasters predict
strong sales in Miami-Dade County in 1999. Analysts believe that strong consumer
confidence, low interest rates, weak inflation and gains from a surging stock
market should lead to a very strong real estate market in South Florida for
1999, with new and existing home sales to increase at a rate slightly higher
than the national average.
According to MLS data, there were 18,480 existing home sales in Miami-Dade
County in 1998, compared to 16,145 in 1997 representing a 14.4% increase in
sales for 1998.
While homes under $200,000 accounted for 82% of all homes sold in Miami-Dade
County in 1998, luxury homes continue to sell well in the region. In the past
year, EWM was involved in 97 home sale transactions through the MLS in the price
range over $500,000. This equals 14.3% of the 676 total Miami-Dade County
transactions in this price range through the MLS.
MARKETING
The Company intends to undertake an aggressive growth strategy by acquiring
local brokerage operations throughout Florida to increase market presence, sales
volume and the Company's geographic base. The Company is also contemplating the
expansion of its mortgage brokerage services, acquiring other real estate
services such as title companies or casualty insurance and establishing an
alliance of other high quality real estate and mortgage brokerage firms for
service throughout Central and Southern Florida and possibly South and Central
America.
The Company services are marketed in a variety of outlets throughout South
Florida. EWM's marketing efforts include, without limitation, advertising in all
major newspapers, full-color magazine pictorials, targeted mailings, press
releases and inclusion of all properties in the county-wide Multiple Listing
Systems. EWM targets new sellers and buyers of its properties by placing
advertisements for its properties in each Sunday's MIAMI HERALD REAL ESTATE
GUIDE. Further, EWM places a monthly pictorial centerfold and back cover of
advertising in Harmon's Real Estate Market Magazine, a magazine published
monthly and widely distributed throughout South Florida. Further, EWM mails its
"Open House Sundays" literature monthly to over 54,000 potential customers and
its "Crown Collection" quarterly mailer to approximately 25,000 potential
customers, which features homes priced in excess of $500,000. EWM provides its
associates with advertising dollar value credits, based on their property's
sales price, for use in various advertising means.
In addition to the above described traditional avenues of sales and marketing,
EWM and its executives and associates are extremely active members of the
community. EWM is a sponsor of such South Florida charities as the American Red
Cross, Miami Opera, United Way, Junior Orange Bowl, Junior Achievement, the
College Assistance Program and the local arts and crafts festivals, just to name
a few. Further, EWM is a member of all local Chambers of Commerce, and is a
trustee
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for chambers in Miami, Coral Gables, Homestead, Ft. Lauderdale, Florida and is a
member of the University of Miami Citizens Board.
COMPETITION
All of the businesses in which EWM is engaged are highly competitive, especially
residential real estate brokerage services. Many of its competitors, in
particular those who benefit by affiliated franchising organizations, have
substantially greater financial resources than the Company. Many of the
Company's competitors are also undertaking a growth strategy. While EWM has a
higher average sales price than its primary competitors, these primary
competitors close substantially more residential listings than EWM and have
substantially higher gross sales. See "Business Competition". Even though the
Company believes that its ability to specialize in higher-priced properties, the
quality of its services and its knowledge of and relative strength in the South
Florida market position itself well with its competitors, the substantial amount
of competition is expected to continue, which may have an adverse affect on the
Company and its operations.
EWM's major competitors are Coldwell Banker Real Estate, Arvida Realty Services,
and The Keyes Company Realtors. Coldwell Banker has been pursuing an aggressive
acquisition strategy. In January 1998, Coldwell Banker acquired 37 offices of
Gimelstob Realty, a South Florida realtor primarily based in Broward and Palm
Beach Counties, and Coldwell Banker has publicly stated its intent to acquire
additional brokerage operations in South Florida. Arvida Realty Services has
also made recent acquisitions, including Jeanne Baker, Inc. Realty. The
substantial trend in the real estate industry is consolidation through
acquisitions by national chains, such as Cendant, Inc. Cendant owns Century 21
Realty, ERA Realty, Coldwell Banker Realty and Cendant Relocation Services.
National chains now represent 35% of the total U.S. real estate brokerage
operations.
A comparison of EWM listing and sales activities to its principal competitors in
the residential properties brokerage business follows. The statistics
represented were obtained from the Multiple Listing Service ("MLS"), an
independent real estate data reporting entity, whose sales data represents
approximately 85% of the total sales in the Miami-Dade County, Florida area.
JANUARY 1, 1998 THRU DECEMBER 31, 1998 RANKING BY NUMBER OF
RESIDENTIAL LISTINGS CLOSED IN MIAMI-DADE COUNTY.
1. Arvida Realty Services 3,725 Transactions
2. Coldwell Banker 3,469 Transactions
3. The Keyes Company 2,081 Transactions
4. EWM 1,912 Transactions
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JANUARY 1, 1998 THRU DECEMBER 31, 1998 RANKING BY DOLLAR
VOLUME OF RESIDENTIAL LISTINGS CLOSED IN MIAMI-DADE COUNTY.
AVERAGE
GROSS SALES HOME PRICE
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1. Arvida Realty Services $652,290,000 $175,111
2. Coldwell Banker $558,677,000 $161,048
3. EWM $490,290,000 $256,427
4. The Keyes Company $235,242,000 $113,042
EWM has the highest average sales price of its competitors. Its average
residential sales price substantially exceeds the average sales prices in
Miami-Dade County. The above figures include only residential sales and do not
include sales made outside the MLS. EWM sales for 1998 including all
residential, commercial and rentals from existing operations and acquisitions
made in 1998 were approximately $733,000,000.
ECONOMIC FACTORS
The Company's operations are directly dependent on the South Florida economy in
general, and the South Florida real estate market in particular. South Florida's
real estate market has been historically cyclical. Downturns in South Florida's
economy will likely have adverse affects on the Company's business and
operations.
REGULATORY ISSUES
The operation of the Company is subject to various federal, state and local laws
and regulations. EWM is licensed by the State of Florida Department of Business
and Professional Regulation to sell real estate in the State of Florida. In
addition, each of the Company's real estate associates must be licensed with the
State of Florida Department of Business and Professional Regulation as a real
estate broker or real estate sales agent. The licenses must be updated every two
years by passing an administered examination. The Company has made, and will
continue to make, expenditures to comply with such laws and regulations. The
Company believes that it is in compliance with all material laws and
regulations. The Company does not believe that any such laws or regulations that
are currently in existence, or to the best of the Company's knowledge are
proposed or contemplated, that will have such an adverse affect on the Company's
financial condition or its operations.
The subsequent adoption or modification of state and local laws and regulations
imposing environmental controls, disclosure rules, zoning and other land use
restrictions may materially and adversely affect the marketability of real
estate, which would likely have a negative effect on the Company's financial
conditions and its operations. Additionally, there are various licensing
requirements imposed on the Company and its sales associates. While based on the
Company's experiences to date, the cost of compliance has not had, and is not
expected to have, a material effect
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on the Company, changes in laws and regulations may give rise to additional
compliance costs that could have a material adverse effect on the Company.
Further, licenses may be revoked for a variety of reasons, including the
violation of regulations and the failure to maintain certain financial
requirements. Revocation of licenses would also have material and adverse affect
on the Company and its operations.
EMPLOYEES
As of December 31, 1998, the Company employs 42 persons full time as support
staff and engages 360 persons as sales associates. Of the sales associates, 175
are based in the Coral Gables office, 85 are based in the Pinecrest/Palmetto
office, 55 are based in the South Miami office, and 45 are based in the Miami
Beach office. Of the Company's sales associates, 100 are referral associates
licensed with an affiliated company, EWM Referral Services, Inc. These
associates have an active real estate license but merely refer listings to the
Company in return for a fee. All sales associates are independent contractors
rather than employees of the Company, which is a standard structure in the real
estate brokerage industry. The Company requires that each associate sign an
Independent Contractor Status Agreement that is a Florida Association of
Realtors standard form.
All of the Company's sales associates are paid by commission solely on the basis
of closed sales transactions. Typically, the share of a total commission is
split evenly between the listing broker and the selling broker, with each broker
entitled to a commission of approximately 3% of the property sales price for
residential listings and 5% for commercial, business brokerage and rental
listings. Approximately 40% of EWM sales are "in-house," where EWM represents
both the buyer and seller and therefore receives both halves of the brokerage
commission.
REPORTS TO SECURITY HOLDERS
The Company intends to provide all of its shareholders with an annual report of
the Company's operations, including audited financial statements, for the 11
month period ended December 31, 1998.
The public may read and copy any materials that the Company has on file with the
Securities and Exchange Commission ("SEC") at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling SEC at
1-800-SEC-0330.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS:
The "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included herein should be read in conjunction with the Combined
Financial Statements of First Reserve, Inc. and subsidiaries, First Reserve
Enterprises, Inc. and Embassy Financial Services, Inc. as of January 31, 1998,
and the related notes to the Combined Financial Statements, along with the
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Consolidated Financial Statements of First Reserve, Inc. and subsidiaries as of
December 31, 1998, and the related Notes to Consolidated Financial Statements.
The Company's Financial Statements have been prepared in accordance with
generally accepted accounting principles in the United States and have been
audited by the Company's independent accountants.
The financial information in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" refers to the continuing operations of the
Company.
RESULTS OF OPERATIONS
REVENUES. The Company's revenues increased approximately 32.5% for the 11-month
period ended December 31, 1998, over those for the fiscal year ended January 31,
1998. The increase is primarily attributable to increased residential real
estate sales activity in the Company's existing market (Miami-Dade County,
Florida). Revenue increases also resulted from the Company's acquisition of two
real estate companies operating in that market. Finally, the increase is partly
attributable to the approximate 62% increase in the volume of mortgages placed
through the Company's mortgage banking operations from approximately $26,000,000
for the year ended January 31, 1998 to approximately $42,000,000 for the
11-month period ended December 31, 1998.
OPERATING EXPENSES. Operating expenses increased to approximately $15.8 million
for the 11-month period ended December 31, 1998 versus approximately $11.1
million for the year ended January 31, 1998. Operating expenses principally
increased as a result of costs incurred by the Company in connection with the
acquisition of two residential real estate companies, increases in personnel
(salaries) and marketing, and the pre-opening costs associated with the
relocation of the Company's Miami Beach office and the creation of a Broward
County sales office.
INTEREST. Interest income increased from approximately $13,000 for the year
ended January 31, 1998 to $14,000 for the 11-month period ended December 31,
1998 due to higher average daily balances of restricted cash.
PRE-TAX INCOME FROM CONTINUING OPERATIONS AND NET INCOME (LOSS). The Company had
pre-tax income from operations of approximately $1.175 million for the 11-month
period ended December 31, 1998 as compared to income of approximately $375,000
for the year ended January 31, 1998. This pre-tax profit from continuing
operations was a result of a significant increase in revenues without a
corresponding increase in overhead costs. After the application of a one-time
charge of approximately $1.2 million during the 11-month period ended December
31, 1998, the Company had a net loss of approximately $73,000. This one-time
charge was associated with the settlement of a contingent liability to a third
party. In connection with this settlement the Company paid $250,000 in cash and
executed a $950,000, non-interest bearing, promissory note with principal
payments at varying dates through 2002.
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LIQUIDITY AND CAPITAL RESOURCES
The Company generated approximately $720,000 in cash from operating activities
for the 11-month period ended December 31, 1998. This was primarily due to an
increase in the amount of commissions and management fees received as a result
of increased "closings" of principally residential real estate sales and
rentals.
Cash used for investing activities was approximately $560,000 for the 11-month
period ended December 31, 1998, primarily attributable to the purchase of
property and equipment, and the purchase of certain businesses acquired by the
Company during this period.
Cash provided from financing activities was approximately $516,000 for the
11-month period ended December 31, 1998, principally due to the proceeds
received from a private placement of the Company's common stock.
At December 31, 1998, the Company had outstanding a $950,000 obligation
(described above), and no other material indebtedness except for trade credit.
Subsequent to December 31, 1998, the Company arranged for a $500,000 revolving
line of credit from a private, unaffiliated lender for the period expiring in
October 1999. In addition, the Company has arranged for a $1.8 million
"warehouse" line of credit to fund loans to be made in connection with its
mortgage banking operations in fiscal 1999. Each "warehouse" loan will be fully
backed by a permanent loan "take-out" commitment from a national lender of
residential financing. The Company expects the availability of this borrowing
capacity to improve the profitably of this aspect of its operations due to the
favorable pricing offered by these national lenders.
At December 31, 1998, the Company had shareholder equity of approximately
$2,147,000. For the 11-month period ended December 31, 1998 the Company's net
working capital (current assets minus current liabilities) increased to $979,374
from $443,492 at January 31, 1998, primarily as a result of internally generated
funds. The Company believes its current working capital will be sufficient to
support its presently-contemplated strategy for the next 12 months.
The Company's new office in Broward County is expected to be completed by June
1, 1999. The Company anticipates that this office will increase opportunities to
substantially increase sales. The Company's temporary Broward County office has
generated an annualized volume of approximately $60,000,000 of sales through the
end of April 1999. As of April 1, 1999, the Company has acquired Columbia Title
of Florida, Inc., a 37 year old title insurance business, by assuming certain of
its liabilities in the approximate amount of $150,000. The Company believes this
title business will be profitable during 1999, and will contribute to the cash
flow of the Company's overall operations.
SEASONALITY
The Company's operations are principally based on the residential real estate
market in South Florida. These markets have historically been seasonal with
generally higher sales in the second and
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third fiscal quarters. Therefore, the results of any interim period is not
necessarily indicative of the results that might be expected during a full
fiscal year.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field and cannot distinguish 21st
century dates from 20th century dates. These date code fields will need to
distinguish 21st century dates from 20th century dates and, as a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to comply with such "Year 2000" requirements. We have made certain
adjustments to our equipment and software, including equipment purchases over
the last two years, in order to make our systems Year 2000 compliant. We have
not incurred material costs to date in this regard, and currently do not believe
the cost of additional actions will have a material effect on our results of
operations or financial condition. We currently believe that our systems are
Year 2000 compliant in all material respects; however, our current systems may
contain undetected errors or defects which with Year 2000 date functions that
may result in material costs.
Failure of our equipment, or software to operate properly with regard to the
year 2000, and thereafter, could require us to incur unanticipated expenses to
remedy any problems, which could have a material adverse effect on our business,
results of operations, and financial condition. We have not yet developed a
comprehensive contingency plan to address situations that may result if such
systems fail; the cost of developing and implementing any such plan may itself
be material. Finally, we are also subject to external forces that might
generally affect industry and commerce.
FORWARD LOOKING STATEMENTS
From time to time, we make statements about our future results in this Form
10-SB that may constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements are based on
our current expectations and the current economic environment. We caution you
that these statements are not guarantees of future performance. They involve a
number of risks and uncertainties that are difficult to predict. Our actual
results could differ materially from those expressed or implied in the
forward-looking statements. Important assumptions and other important factors
that could cause our actual results to differ materially from those in the
forward-looking statements, include, but are not limited to: (i) the continued
growth in the residential real estate market in South Florida; (ii) the general
availability of home mortgage financing at favorable rates; (iii) continued
positive economic climate in the United States; (iv) competition in our existing
lines of business; and (v) our ability to obtain and maintain working capital,
whether internally generated or from financing sources (on acceptable terms) in
order to finance our growth strategy.
13
<PAGE>
ITEM 3. PROPERTIES
The Issuer's facilities consist of five offices: (1) 11,930 square feet leased
at the Issuer's principal office at 1360 S. Dixie Highway, Coral Gables, Florida
33146; (2) 7,468 square feet leased at 12651 S. Dixie Highway, Miami, Florida
33156; (3) 5,000 square feet leased at 419 Arthur Godfrey Road, Miami Beach,
Florida 33140; (4) leased office at 6150 S.W. 76 Street, South Miami, Florida;
and (5) 6,400 square feet leased at 8500 West Broward Boulevard, Plantation,
Florida 33324.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the securities
ownership of those persons who own more than five (5%) percent of the
registrant's outstanding common stock as of the date hereof, including shares
owned by its executive officers and directors:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF PERCENT OF
TITLE OF CLASS BENEFICIAL OWNERS NO. OF SHARES CLASS (%)
-------------- ------------------- ------------- ----------
<S> <C> <C> <C>
Common Stock Thomas E. Byrne 421,000 6.22
6150 S.W. 76th Street
South Miami, FL 33143
Common stock James E, Newmeyer 337,500 4.99
1360 S. Dixie Highway
Coral Gables, FL 33146
Common Stock Allen C. Harper & 1,113,501 16.45
Carol Harper, JTWROS
1360 S. Dixie Highway
Coral Gables, FL 33146
Common Stock Ronald Shuffield 1,113,501 16.45
1360 S. Dixie Highway
Coral Gables, FL 33146
Common Stock VALORSEC 2,160,001 31.90
M. Thierry Manni
c/o Mecaplast
406 Ave Prince Hereditaire Albert
MC 98000
MONACO
Common Stock Officers and directors, as a group 4,724,503 69.80
(4 persons)
</TABLE>
14
<PAGE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The executive officers and directors of the registrant are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Allen C. Harper 52 Chairman of the Board of Directors/
Chief Executive Officer
Ronald A. Shuffield 47 President/Chief Operating Officer/Director
President of EWM
Thierry Manni 31 Director
James E. Newmeyer 50 Secretary/Treasurer and Director
President of Embassy Financial Services, Inc.
</TABLE>
MANAGEMENT
A brief description of the key management of the Company is as follows:
ALLEN C. HARPER
Since 1984 Allen C. Harper has been principally employed as the Chairman and
Chief Executive Officer and is a principal shareholder of First Reserve, Inc.,
the holding company of EWM.
Mr. Harper has more than 30 years of business experience, primarily in the areas
of real estate management and development and rail transportation. He is still
active in a variety of businesses. Mr. Harper is currently the Chairman of the
Board of Directors, Chief Executive Officer and, with his wife, the owner of
American Heritage Railways, Inc., which owns and operates The Durango &
Silverton Narrow Gauge Railroad, in southwestern Colorado. Since September 1989,
Mr. Harper has served as a Director on the Tri-County Rail Authority and has
been chairman of the board for two terms. He has also served as a director of
Florida East Coast Railway Co., a railroad company based in St. Augustine
Florida, since May of 1994.
From February 1994 to July 1998, Mr. Harper served as Chairman of the Board of
Directors and Chief Executive Officer of First American Railways, Inc. In
October 1998, First American Railways, Inc., voluntarily filed a Chapter 7
bankruptcy proceeding in the United States Bankruptcy Court for the Southern
District of Florida.
RONALD A. SHUFFIELD
Ronald A. Shuffield is the President and Chief Operating Officer of both
the Company and EWM, and a member of each entity's Board of Directors. He has
been the President of EWM since 1984. He acts as the chief operating officer and
supervises the day-to-day operations of the
15
<PAGE>
Company and EWM. Mr. Shuffield is a licensed Florida real estate broker and
certified general contractor. Mr. Shuffield has been a member of the Realtor
Association of Dade County since 1984 and has served in a variety of officer and
director positions thereon. Mr. Shuffield served on the National Advisory
Council of the PHH Relocation Network (now Cendant Mobility Servicers) from
1993-1996. Mr. Shuffield's community memberships include the Coral Gables
Chamber of Commerce (where he serves as President from 1992-93 and where he was
awarded the Robert B. Knight Outstanding Citizen of Coral Gables Award), the
Greater Miami Chamber of Commerce (where he serves on the Board of Governors)
and the Rotary Club of Coral Gables. Mr. Shuffield received a Bachelor of
Science degree in business administration from the University of Tennessee.
M. THIERRY MANNI
Mr. Manni is Chairman and International Development Director of MECAPLAST
International. MECAPLAST International is a Monegasque corporation which
manufacturers plastic parts for the automobile industry. Mr. Manni is
responsible for that company's operations in Monaco and France.
JAMES E. NEWMEYER
Mr. Newmeyer has been President of Embassy Financial Services, Inc. since 1996,
where he oversees all operations of the mortgage business. He is also
Secretary/Treasurer of the Company. Prior to joining Embassy, Mr. Newmeyer has
been an executive with numerous real estate mortgage companies for over twenty
years, including PHH Mortgage Services, Source One Mortgage Services
Corporation, MHSI/Chemical Residential Mortgage/ CenTrust Mortgage, Amerifirst
Mortgage and Southeast Mortgage Company. Mr. Newmeyer has a Bachelor of Arts
degree from Furman University and a Masters Degree from Florida International
University.
ITEM 6. EXECUTIVE COMPENSATION
COMPENSATION
The following table sets forth information about the compensation paid
or accrued by the Company to the Company's named executive officers whose
aggregate compensation exceeded $100,000, for the last three completed fiscal
years:
16
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ------------
NAME AND SECURITIES UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
------------------ ---- ------ ----- ---------------------
<S> <C> <C> <C> <C>
Allen C. Harper - Chief Executive 1998 $274,682 --- ---
Officer 1997 $324,924 --- ---
1996 $257,843 --- ---
Ronald A. Shuffield - President, 1998 $323,630 --- ---
Chief Operating Officer; 1997 $373,381 --- ---
President of Ewm 1996 $305,597 --- ---
James E. Newmeyer - Secretary, 1998 $143,092* --- ---
Treasurer; President of Embassy 1997 --- --- ---
Financial Services, Inc. 1996 --- --- ---
</TABLE>
- -------------------
Beginning April 1, 1998, through December 31, 1998.
COMPENSATION OF DIRECTORS
The Company will reimburse members of the Board of Directors for their expenses
incurred in connection with their services as directors. In addition, each
director will be paid $500 for every directors meeting they attend and $100 for
each committee meeting they attend for directors' committees of which such
director is a member.
COMPENSATION OF OFFICERS - EMPLOYMENT AGREEMENTS
The Company recently entered into employment agreements with Messrs. Harper and
Shuffield. The agreements memorialize the employment relationship that have
existed since 1984 between the respective individuals and the Company. The
agreements have an initial five year term, with an option of the employee to
extend for an additional five-year period. Mr. Shuffield's agreement provides
for his employment as President of EWM at a base salary of $320,000 per year
with a bonus of up to 7.5% of its pre-tax net income. Mr. Harper's agreement
provides for his employment as Chairman and Chief Executive Officer of EWM at a
base salary of $270,000 per year with a bonus of up to 7.5% of its pre-tax net
income. Each of the employment agreements provide that the base salary shall be
increased at least 10% per year during the term of the agreement. The Company
also pays for disability and life insurance for both Messrs. Harper and
Shuffield and provides each with full medical and health insurance coverage, a
401(K) plan and a monthly automobile allowance.
17
<PAGE>
In connection with the purchase of Byrne, EWM also entered into an employment
agreement with Thomas E. Byrne. Mr. Byrne's agreement provides for his
employment as President of EWM's Commercial Sales Division at a base salary of
$100,000 plus a commission and bonus incentives based on real estate closings.
The agreement provides for an initial term of five years.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to two First Reserve, Inc. Common Stock Purchase Warrants dated August
31, 1998 (collectively, the "Warrants"), the Company granted to VALORSEC
Vermaltungs & Treu-Anstalt, a Swiss company ("VALORSEC"), rights to purchase
Common Stock of the Company. M. Thierry Manni, a director of the Company, is a
director of VALORSEC. The first Warrant grants VALORSEC the right to purchase
500,000 shares of the Common Stock of the Company at the initial exercise price
of $3.50 per share. The second Warrant grants VALORSEC the right to purchase
500,000 shares of the Common Stock of the Company at the initial exercise price
of $3.00 per share. All Warrants may be exercised until November 30, 2004.
ITEM 8. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The Company is authorized to issue 100,000,000 shares of Common Stock, no par
value. There are 6,767,050 shares of Common Stock currently outstanding. Each
holder of Common Stock is entitled to one vote per share owned on all matters
submitted to a vote of the shareholders. Holders of Common Stock will be
entitled to receive ratably any dividends declared by the Board of Directors out
of funds legally available for dividends. If the Company is liquidated,
dissolved or wound up, holders of the Common Stock have the right to a ratable
portion of the assets remaining after payment of liabilities. All shares of
Common Stock outstanding and to be outstanding upon completion of this Offering
are and will be fully paid and non-assessable.
Holders of Common Stock have no cumulative voting rights and, therefore, the
holders of more than half of the shares voting for the election of directors can
elect all the directors. Furthermore, the Bylaws of the Company provide that
only the Board of Directors, the President shareholders holding at least 10% of
the stock of the Company may call a special shareholders' meeting, which may
prevent a shareholder or group of shareholders holding less than 10% of the
stock of the Company from calling such a meeting.
American Securities Transfer & Trust Co., Denver, Colorado, serves as the
Company's transfer agent for its Common Stock.
18
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
The registrant's Common Stock is not currently quoted on any national exchange
or other public trading market.
The registrant has not paid any dividends on its Common Stock and intends to
retain all earnings for use in its operations and to finance the development and
the expansion of its business. It does not anticipate paying any dividends on
the Common Stock in the foreseeable future. The payment of dividends is within
the discretion of the registrant's Board of Directors. Any future decision with
respect to dividends will depend on future earnings, future capital needs and
the registrant's operating and financial condition, among other factors.
ITEM 2. LEGAL PROCEEDINGS
The Company is currently not a party to any material litigation which is not
incidental to the ordinary course of its business and operations.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Pursuant to a Confidential Private Offering Memorandum dated April 6, 1998, the
Company sold 555,000 shares of Common Stock at $1.00 per share. The Company
received $555,000 in gross proceeds from this Offering. The Company paid no cash
commissions in connection with this Offering. This Offering was made pursuant to
the exemption from registration provided in Rule 504 of Regulation D as
promulgated under the Securities Act of 1933, as amended (the "1933 Act").
Effective May 1, 1998, EWM acquired Byrne-Rinehart & Co. ("Byrne"), a Miami,
Florida real estate brokerage operation. Under the terms of the merger, all of
the shares of Common Stock of Byrne were converted into and exchanged for an
aggregate of 400,000 shares of Common Stock of the Company and $300,000 cash.
This sale of the Common Stock of the Company was made pursuant to the exemption
from registration provided in Section 4(2) of the 1933 Act.
Effective September 30, 1998, EWM acquired Gerard International Realty, Inc.
("Gerard"), a Miami Beach, Florida real estate brokerage operation. Under the
terms of the merger, all of the shares of Common Stock of Gerard were converted
into and exchanged for an aggregate of up to 500,000 shares of Common Stock
(200,000 of these shares remain in escrow and may be released upon the
satisfaction of certain conditions subsequent set forth in the Gerard Merger
Agreement) of the Company. This sale of the Common Stock of the Company was made
pursuant to the exemption
19
<PAGE>
from registration provided in Section 4(2) of the 1933 Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has authority under Section 607.0850 of the Florida Business
Corporation Act to indemnify its directors and officers to the extent provided
in such statute. The Company's Bylaws provide that the Company may indemnify its
executive officers and directors to the fullest extent permitted by law either
now or hereafter.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition, each
director will be subject to liability for (a) violations of criminal laws,
unless the director had reasonable cause to believe his conduct was lawful or
had no reasonable cause to believe his conduct was unlawful; (b) deriving an
improper personal benefit from a transaction; (c) voting for or assenting to an
unlawful distribution; and (d) willful misconduct or a conscious disregard for
the best interests of the Company in a proceeding by or in the right of the
Company to procure a judgment in its favor or in a proceeding by or in the right
of a shareholder. The statute does not affect a director's responsibilities
under any other law, such as the federal securities laws.
At present, there is no pending litigation or proceeding involving a director or
officer of the Company as to which indemnification is being sought, nor is the
Company aware of any threatened litigation that may result in claim for
indemnification by any officer or director.
PART F/S
The Company's audited consolidated financial statements for the eleven month
period ended December 31, 1998, immediately follow the signature page to this
Form 10-KSB.
PART III
ITEM 1. INDEX TO EXHIBITS
3.1 Articles of Incorporation of the Company (f.k.a. El Squared,
Inc.)
3.2 Bylaws of First Reserve, Inc.
20
<PAGE>
to VALORSEC Vermaltungs & Treu-Anstalt, a Swiss company for
the right to purchase 500,000 shares of the Common Stock of
the Company at the initial exercise price of $3.00 per share.
10.1 Articles of Merger of First Reserve, Inc. (a Florida
corporation) and First Reserve, Inc. (an Arizona corporation).
10.2 Agreement and Plan of Merger dated April 1, 1998 by and
between First Reserve, Inc. (a Florida corporation) and First
Reserve, Inc. (an Arizona corporation).
10.3 Articles of Merger of Byrne-Rinehart & Co. (a Florida
corporation) and Esslinger- Wooten-Maxwell, Inc. (a Florida
corporation).
10.4 Articles of Merger of Gerard International Realty, Inc. (a
Florida corporation) and Esslinger-Wooten-Maxwell, Inc. (a
Florida corporation).
10.5 Employment Agreement dated March 5, 1998 by and between First
Reserve, Inc. and Allen C. Harper.
10.6 Employment Agreement dated March 5, 1998 by and between First
Reserve, Inc. and Ronald A. Shuffield.
23.1 Consent of McClain and Company, L.C.
23.2 Consent of McClain and Company, L.C.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
FIRST RESERVE, INC.
DATE: MAY 14, 1999 By: /S/ ALLEN C. HARPER
------------------------
Title: Chairman
By: /S/ RONALD A. SHUFFIELD
------------------------
Title: DIRECTOR
By: /S/ JAMES E. NEWMEYER
------------------------
Title: Director
22
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Officers and Directors
First Reserve, Inc. and Subsidiaries
Coral Gables, Florida
We have audited the accompanying consolidated balance sheet of First Reserve,
Inc. and Subsidiaries ("the Companies"), as of December 31, 1998, and the
related consolidated statements of income, stockholders' equity and cash flows
for the eleven-month period then ended. These financial statements are the
responsibility of the Companies' management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of First
Reserve, Inc. and Subsidiaries, as of December 31, 1998 and the consolidated
results of its operations and its cash flows for the eleven-month period then
ended in conformity with generally accepted accounting principles.
/s/ McClain & Company, L.C.
April 5, 1999
23
<PAGE>
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES
ASSETS
CURRENT ASSETS
Cash $ 1,055,160
Cash - escrow 2,447,690
Escrow liability (2,447,690)
Receivables 325,227
Prepaid expenses and other 157,079
Shareholders' loans receivable 80,000
-----------
Total current assets $1,617,466
PROPERTY AND EQUIPMENT
Furniture and fixtures 402,905
Office equipment 497,929
Leasehold improvements 74,626
-----------
975,460
Less accumulated depreciation (541,656)
-----------
Net property and equipment 433,804
OTHER ASSETS
Goodwill, net 1,156,119
Deposits and other 289,905
-----------
Total other assets 1,446,024
----------
Total assets $3,497,294
----------
The accompanying notes to the consolidated financial statements are an integral
part of this consolidated statement.
24
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 400,592
Notes payable and current maturities of
long-term debt 237,500
------------
Total current liabilities $ 638,092
LONG TERM LIABILITIES
Notes payable 712,500
-----------
Total liabilities 1,350,592
STOCKHOLDERS' EQUITY
Common stock, no par value, 100,000,000
authorized shares; 6,767,050 shares
issued and outstanding -
Paid-in capital 6,131,418
Accumulated deficit (3,984,716)
------------
Total stockholders' equity 2,146,702
-----------
Total liabilities and stockholders'
equity $ 3,497,294
===========
25
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
FOR THE ELEVEN-MONTH PERIOD ENDED DECEMBER 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES
REVENUES $ 17,026,205
OPERATING EXPENSES (15,850,578)
------------
Income from operations before income taxes 1,175,627
OTHER EXPENSES (1,248,812)
------------
Loss before income taxes (73,185)
PROVISION FOR INCOME TAXES -
------------
Net loss $ (73,185)
============
BASIC EARNINGS (LOSS) PER COMMON SHARE $ (.01)
============
The accompanying notes to the consolidated financial statements are an integral
part of this consolidated statement.
26
<PAGE>
FIRST RESERVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE ELEVEN-MONTH PERIOD ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON COMMON TOTAL
STOCK STOCK PAID IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
--------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, February 1, 1998 2,255 $ 2,255 $ 4,681,877 $(3,868,888) $ 815,244
No par value stock acquired 6,000,000 - 130 - 130
from reverse merger of
Phoenix Financial Reporting
Group, Inc. with First
Reserve, Inc. and Embassy
Financial Services, Inc.
No par value stock issued from 4,624,000 - 4,676,288 - 4,676,288
reverse merger of Phoenix
Financial Reporting Group,
Inc. with First Reserve,
Inc. and Embassy Financial
Services, Inc.
Retirement of Embassy (30) (30) (51,190) - (51,220)
Financial Services, Inc.
common stock as a result of
the reverse merger with
Phoenix Financial Reporting
Group, Inc.
Retirement of First Reserve, (2,225) (2,225) (4,630,687) - (4,632,912)
Inc. common stock as a
result of the reverse merger
with Phoenix Financial
Reporting Group, Inc.
Reverse - 2 for 1 stock split (5,311,950) - - - -
No par value stock issued from 555,000 - 555,000 - 555,000
"504" private placement
No par value stock issued from 400,000 - 400,000 - 400,000
the acquisition of
Byrne-Rhinehart & Co.
No par value stock issued from 500,000 - 500,000 - 500,000
the acquisition of Gerard
International Realty, Inc.
Distributions to Embassy - - - (42,643) (42,643)
Financial Services, Inc.
former "S" stockholders
Net loss for the 11-month
period ended December 31,
1998 - - - (73,185) (73,185)
--------- ------- ----------- ----------- -----------
BALANCE, December 31, 1998 6,767,050 $ - $ 6,131,418 $(3,984,716) $ 2,146,702
========= ======= =========== =========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of this consolidated statement.
27
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE ELEVEN-MONTH PERIOD ENDED DECEMBER 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 16,879,136
Interest received 14,029
Cash paid to suppliers and employees (15,874,354)
Settlements paid (298,812)
------------
Net cash provided by operating
activities $ 719,999
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in deposits (59,247)
Purchase of property and
equipment (219,936)
Payment for purchase of acquired
companies; net of cash received (286,291)
Net decrease in shareholders'
loans receivable 6,000
------------
Net cash used in investing activities (559,474)
CASH FLOWS FROM FINANCING ACTIVITIES:
Return of paid-in-capital 3,855
Distributions paid (42,643)
Proceeds from "504" private placement 555,000
------------
Net cash provided by financing activities 516,212
----------
Net increase in cash 676,737
CASH, February 1, 1998 378,423
----------
CASH, December 31, 1998 $1,055,160
==========
The accompanying notes to the consolidated financial statements are an integral
part of this consolidated statement.
28
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE ELEVEN-MONTH PERIOD ENDED DECEMBER 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net loss $ (73,185)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 120,469
Amortization 51,989
Loss on abandonment of property
and equipment 3,097
Increase in prepaid expenses and
other assets (286,728)
Increase in accounts receivable (122,428)
Increase in accounts and notes
(operating) payable and
accrued expenses 1,026,785
-----------
Net cash provided by operating
activities $ 719,999
===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
On April 1, 1998, First Reserve, Inc. and Embassy Financial Services, Inc.
merged with First Reserve, Inc. (Arizona) f/k/a Phoenix Financial Reporting
Group, Inc. As a result of this merger, Embassy's assets totaling $91,223 and
liabilities totaling $47,847 were recorded. In addition, First Reserve
(Arizona's) assets totaling $129 were recorded. No goodwill was recorded as a
result of this merger.
On May 1, 1998, the Company purchased all the stock of Byrne-Rhinehart & Co.
(Byrne) for $300,000 in cash and $400,000 in stock of the Company. Simultaneous
with the stock purchase, Byrne was merged into a wholly owned subsidiary of the
Company, Esslinger, Wooten and Maxwell, Inc. (EWM). As a result of this merger,
accounted for as a purchase, assets of $11,045, goodwill of $692,085, and
liabilities of $3,130 were recorded.
On September 30, 1998, the Company purchased all the stock of Gerard
International Realty, Inc. for $500,000 in stock of the Company. Simultaneous
with the stock purchase, Gerard International Realty, Inc. was merged into the
Company's wholly owned subsidiary, EWM. As a result of this merger, accounted
for as a purchase, assets of $706,490, goodwill of $458,915, and liabilities of
$665,405 were recorded.
The Company entered into a settlement with an unrelated third party in the
amount of $1,200,000. Under the terms of the agreement, the Company paid
$250,000 on the date the agreement was signed. The remaining $950,000 was
financed over four years with no interest.
The accompanying notes to the consolidated financial statements are an integral
part of this consolidated statement.
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN-MONTH PERIOD ENDED DECEMBER 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND COMBINATION The accompanying
consolidated financial statements include the accounts of First
Reserve, Inc. ("the Company") and its wholly-owned subsidiaries,
Esslinger, Wooten and Maxwell, Inc., First Reserve Realty, Inc., First
Reserve Management, Inc., First Reserve Equities, Inc., and Embassy
Financial Services, Inc. ("Embassy"). Embassy's activity as part of the
consolidated group is for the period from April 1, 1998 to December 31,
1998. For the period from January 1, 1998 to March 31, 1998, Embassy
was not a subsidiary of the Company, but was under common ownership.
Accordingly, the accounts of Embassy for this period have been combined
with the accounts of the Company and are reflected in the consolidated
statements of income, stockholders' equity and cash flows for the
eleven-month period ended December 31, 1998. All significant
intercompany accounts and transactions have been eliminated in the
consolidated financial statements.
The accounts of Embassy are for the year ended December 31, 1998.
NATURE OF OPERATIONS
The Company is primarily engaged in the brokerage and management of
residential and commercial real estate in South Florida.
Embassy is a licensed residential mortgage lender that specializes in
conventional, FHA, and VA first mortgages primarily in the South
Florida area. To date, all loans originated by Embassy have been in the
capacity of an agent on behalf of other mortgage lenders. Presently,
Embassy does not service any of the loans they originate.
REORGANIZATIONS
On April 1, 1998, the Company's Board of Directors authorized a plan of
reorganization. The reorganization involves the shareholders of First
Reserve, Inc., a Florida corporation and Embassy Financial Services,
Inc. transferring 100% of each companies' stock in exchange for
4,624,000 shares of First Reserve, Inc., f/k/a Phoenix Financial
Reporting Group, Inc., an Arizona corporation in shell form. After the
reorganization, the former shareholders of First Reserve (Florida) and
Embassy own 83.33% of First Reserve (Arizona). The two surviving
corporations are First Reserve, Inc. (Arizona) and Embassy Financial
Services, Inc. On June 17, 1998, First Reserve, Inc. (Arizona)
domesticated to Florida.
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN-MONTH PERIOD ENDED DECEMBER 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BUSINESS COMBINATIONS
On May 1, 1998, the Company acquired all the stock of Byrne-Rhinehart &
Co. (Byrne). Simultaneous with the stock purchase, Byrne merged into a
subsidiary of the Company, Esslinger-Wooten-Maxwell, Inc. (EWM) in a
business combination accounted for as a purchase. Byrne was primarily
engaged in the same activity as EWM. Under the terms of the agreement,
the shareholders of Byrne received $300,000 in cash and 400,000 shares
of common stock of First Reserve, Inc. for all the shares of stock of
Byrne. The total cost of the acquisition was approximately $732,000.
Goodwill of approximately $692,000, resulting from this transaction, is
being amortized on the straightline method over 40 years. The results
of operations for Byrne are included in the consolidated income
statement for the period from May 1, 1998 to December 31, 1998.
On September 30, 1998, the Company acquired all the stock of Gerard
International Realty, Inc. (Gerard). Simultaneous with the stock
purchase, Gerard was merged into EWM in a business combination
accounted for as a purchase. Gerard was primarily engaged in the same
activity as EWM. Under the terms of the agreement, the shareholders of
Gerard received 300,000 shares of common stock of the Company on the
date of the acquisition. An additional, 200,000 "contingent" shares of
common stock of the Company are being held in escrow pending future
gross commission income to be generated by the former shareholders of
Gerard over the next 24 months. The total cost of the acquisition was
approximately $535,000. Goodwill of approximately $459,000 resulting
from this transaction is being amortized on the straight-line method
over 40 years. The results of operations for Gerard are included in the
consolidated statement of income for the period from September 30, 1998
to December 31, 1998.
REVENUE RECOGNITION
The Company earns commissions from the sale of commercial and
residential real estate from the management of rental properties.
Revenues are recorded when the real estate sale is closed and the
management fees are earned. Embassy charges its customers for loan and
ancillary fees related to mortgages for the purchase and refinancing of
their homes. Revenues are recorded when the mortgage is "closed".
Expenses for all companies are recorded when they are incurred.
ORGANIZATIONAL COSTS
Organizational costs are amortized on the straight-line method over
five years.
CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN-MONTH PERIOD ENDED DECEMBER 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated using
straight-line and accelerated methods over the estimated useful lives
of the assets.
INCOME TAXES
Deferred income tax assets and liabilities are computed annually for
differences between the financial statements and tax bases of assets
and liabilities that will result in taxable or deductible amounts in
the future, based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the period minus the changes during
the period in deferred tax assets and liabilities.
Income taxes are provided for on all taxable income included in the
consolidated financial statements in the period in which the income is
reported for financial purposes. Accordingly, deferred income taxes
(benefits) are provided for timing differences between financial and
tax reporting. The principal items comprising these differences are the
deferred recognition of operating losses and passive losses for tax
purposes.
Embassy's income for federal income tax purposes is computed beginning
April 1, 1998, when it became a taxpaying entity for Federal income tax
purposes as a result of the reorganization. Prior to this date, Embassy
was a pass through entity and, as such, the corporate income was passed
through and ultimately taxed to Embassy's shareholders.
LONG-LIVED ASSETS
The Company reviews its long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.
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 and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN-MONTH PERIOD ENDED DECEMBER 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES
NOTE 2 - RECEIVABLES
Receivables consist primarily of open trade accounts that have not been
reduced by an allowance for doubtful accounts, as management considers
all receivables to be fully collectible.
NOTE 3 - SHAREHOLDER LOANS RECEIVABLE
These loans are due on demand, and bear no interest.
NOTE 4 - GOODWILL
The Company has accounted for the excess of the acquisition costs of
certain subsidiaries over the fair value of identifiable assets as
goodwill. This goodwill is being amortized over periods ranging from
fifteen to forty years. Goodwill is stated net of accumulated
amortization of $26,856.
NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board Statement No. 107, DISCLOSURES
ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (FAS 107) requires the
Company to disclose the fair value of financial instruments for which
it is practicable to estimate that value. FAS 107 also requires the
entity to disclose the method(s) and significant assumptions used to
estimate the fair value of financial instruments.
The following assumptions were used to estimate the fair value of each
class of financial instruments for which it is practical to estimate
that value:
CASH AND CASH EQUIVALENTS
The carrying amounts of cash and cash equivalents approximate their
fair value.
SHAREHOLDERS' LOANS RECEIVABLE
Carrying amounts of shareholders' loans receivable approximate their
fair value.
NOTES PAYABLE
The fair values of the non-interest bearing note payable is
estimated based upon the present value of future payments using the
prime rate as of December 31, 1998 or 7.75%.
The estimated fair values of the Company's financial instruments at
December 31, 1998, were as follows:
CARRYING FAIR
AMOUNT VALUE
---------- ----------
Cash and cash equivalents $1,055,160 $1,055,160
Due from shareholders $ 80,000 $ 80,000
Notes payable $ 950,000 $ 818,612
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN-MONTH PERIOD ENDED DECEMBER 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES
NOTE 6 - BUSINESS SEGMENT INFORMATION
In 1998, the Company adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION, which established standards
for reporting information about operating segments in financial
statements. Operating segments are defined as components of an
enterprise about which separate financial information is available that
is evaluated regularly by the chief operating decision maker, or
decision making group, in deciding how to allocate resources and on
assessing performance. The operating segments are managed separately
because each operating segment represents a strategic business unit
that offers different product services. The following information is
provided in accordance with the requirement of this statement.
The Company's operations are principally managed on a product services
basis and are comprised of two reportable segments: Esslinger, Wooten
and Maxwell, Inc. (EWM) and Embassy Financial Services, Inc. (Embassy).
EWM product services consists of residential and commercial real estate
brokerage. Embassy's product services have been in the capacity of an
agent for other mortgage lenders in the South Florida area,
specializing in conventional, FHA and VA mortgages. Revenue, net income
(loss) and identifiable assets for these segments are as follows:
<TABLE>
<CAPTION>
ESSLINGER, EMBASSY
WOOTEN, FINANCIAL ALL
MAXWELL, INC. SERVICES, INC. OTHERS TOTAL
------------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue $15,902,805 $1,060,938 $ 62,962 $17,026,205
Net income (loss) $ 1,100,086 $ 99,761 $(1,273,032) $ (73,185)
Identifiable assets at
year end $ 3,010,123 $ 299,037 $ 188,134 $ 3,497,294
</TABLE>
NOTE 7 - NOTES PAYABLE
At December 31, 1998, notes payable consist of the following:
Note payable to third party, non-interest bearing, payable in
annual installments of $237,500,matures July 13, 2002,
non-secured, personally guaranteed by a majority
shareholder. $950,000
Less current portion 237,500
--------
$712,500
========
34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN-MONTH PERIOD ENDED DECEMBER 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES
NOTE 7 - NOTES PAYABLE (CONTINUED)
Principal payments on notes payable for the next five years and
in the aggregate are as follows:
1999 $237,500
2000 237,500
2001 237,500
2002 237,500
2003 -
--------
$950,000
========
NOTE 8 - EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with two executives.
These agreements provide for base salaries, to be increased annually by
at least 10%, plus bonuses and benefits at the discretion of the
Company's Board of Directors. The term of the contract is five years
and it may be terminated for cause. In the event of termination without
cause, the Company is liable for all salary, payments and benefits for
the remaining term of the agreement.
EWM has entered into an employment agreement with the president of its
Commercial Sales Division. This agreement provides for base salary,
commission and bonus incentives based on real estate closings, and
additional bonus and benefits at the discretion of the Company's Board
of Directors. The term of the contract is five years and it may be
terminated for cause. In the event of termination without cause, EWM is
liable for all salary, payments and benefits for the remaining term of
the agreement.
Minimum future commitment under these employment agreements are as
follows:
1999 $ 809,025
2000 869,927
2001 936,920
2002 877,279
2003 -
----------
$3,493,151
==========
The total commitment, excluding incentives and bonuses, was $686,992
for the eleven-month period ended December 31, 1998.
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN-MONTH PERIOD ENDED DECEMBER 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES
NOTE 9 - LEASES
During 1998, the Company entered into four office lease agreements.
The first agreement was with a corporation owned by a related party.
The lease is on a month-to-month basis and calls for a monthly rental
of $5,533.
A second office lease agreement was with a related party and will
commence in 1999. The lease is for a period of ten years with an option
to renew for two successive five year terms. The lease calls for an
annual rent of $90,000, plus all applicable sales taxes, with an annual
increase in rent of three percent over the prior year's base rent.
The third office lease agreement was entered into with an unrelated
party and will commence in 1999. This lease calls for annual rent of
$94,050, plus all applicable sales taxes, with an increase in rent of
three percent over the prior year's base rent. The lease is for a term
of ten years, two months and fifteen days, with an option to renew for
two successive five year terms.
Finally, a fourth office lease agreement is on a month-to-month basis
and calls for a monthly rent of $3,439.
As a result of the merger with Byrne-Rhinehart & Co. and Gerard
International Realty, Inc., EWM assumed operating lease agreements
expiring at various dates.
Additionally, the Company had entered into several automobile, real
estate and equipment leases accounted for as operating leases.
These leases expire in various years through 2009. Minimum future lease
payments under operating leases for the next five years and in the
aggregate are as follows:
YEARS ENDING
DECEMBER 31,
1999 $ 765,534
2000 686,608
2001 372,255
2002 356,373
2003 349,952
Beyond 1,824,447
----------
$4,355,169
==========
Rent expense under these leases was approximately $614,218 for the
eleven-month period ended December 31, 1998.
36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN-MONTH PERIOD ENDED DECEMBER 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES
NOTE 10 - CONCENTRATION OF CREDIT RISK
EWM has experienced credit risk in connection with its bank accounts.
At various times during the year, EWM maintained deposits with
financial institutions in excess of amounts insured by the FDIC. The
exposure to EWM is solely dependent on daily bank balances and the
financial strength of the respective institutions.
NOTE 11 - INCOME TAXES
Provision (benefit) is made for the tax effects of timing differences
as described in Note 1, the provision for income taxes for the
eleven-month period ended December 31, 1998, is based upon current
statutory rates and is summarized as follows:
CURRENT DEFERRED TOTAL
------- -------- -----
Florida $ - $ - $ -
Federal - - -
---------- ----------- -----------
$ - $ - $ -
========== =========== ===========
Deferred tax assets have been provided for deductible temporary
differences related to net operating losses. Deferred tax liabilities
have been provided for taxable temporary differences related to
accumulated depreciation and amortization. Deferred income taxes
related to the following at December 31, 1998:
Deferred tax assets:
Net operating loss $ 463,944
Valuation allowance (456,878)
---------
Deferred tax assets after
valuation allowance $ 7,066
Deferred tax liabilities
Property and equipment (2,333)
Goodwill (4,733)
---------
Gross deferred tax liabilities (7,066)
-------
Net deferred tax asset $ -
=======
At December 31, 1998, the Company's net operating loss carryforwards
for income tax purposes amounted to approximately $2,273,372 and are
available to offset future taxable income through the year 2018.
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN-MONTH PERIOD ENDED DECEMBER 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES
NOTE 12 - PROFIT SHARING PLAN
EWM has a deferred tax savings plan which qualifies under section
401(k) of the Internal Revenue code. The plan covers all employees
having at least one year of service during which they have worked at
least 1,000 hours, provided they have attained the age of 21. The plan
allows EWM to make voluntary contributions to the plan for eligible
participants. Participants are 100% vested in their contributions to
the plan and vest in EWM's contribution as follows:
YEARS OF TOTAL SERVICE VESTING PERCENTAGE
---------------------- ------------------
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
For the eleven-month period ended December 31, 1998, employer
contributions to the plan were approximately $7,217.
NOTE 13 - SETTLEMENT AGREEMENT
On July 13, 1998, the Company entered into a settlement agreement in
the amount of $1,200,000 with an unrelated third party relating to the
sale of a property previously managed by First Reserve Equities I,
Inc., a subsidiary of the Company. $250,000 was paid on the date the
agreement was signed, while the remaining balance of $950,000 was
financed under a promissory note over four years bearing no interest.
The $1,200,000 expense from this settlement is reflected in the
consolidated statement of income under the caption OTHER EXPENSES.
NOTE 14 - STOCKHOLDERS' EQUITY
COMMON STOCK
On April 1, 1998, as a result of the reverse acquisition of First
Reserve (Florida) and Embassy with First Reserve (Arizona), a
non-operating public shell corporation. The Company increased its
paid-in capital by $130.
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN-MONTH PERIOD ENDED DECEMBER 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES
NOTE 14 - STOCKHOLDERS' EQUITY (CONTINUED)
COMMON STOCK (CONTINUED)
On April 21, 1998, the Company effected a two for one reverse stock
split. As a result of the split, every stockholder of the Company
would own one-half as many shares as before the reverse split. Prior
to the reverse split, the number of issued and outstanding shares of
common stock of the Company was 10,624,000, and after the reverse
split, the number became 5,312,050 (including fractional shares
issued). Accordingly, all numbers of common shares and per share data
for the current period presented in these financial statements have
been restated to reflect the stock split. Subsequent to the reverse
split, the Board of Directors authorized an increase of shares of
common stock of no par value from 50,000,000 to 100,000,000.
On April 6, 1998, the Company entered into a series of transactions to
recapitalize its equity pursuant to a Confidential Private Offering
Memorandum ("504"). These transactions resulted in an additional
555,000 of no par shares being issued which increased paid in capital
by $555,000. The Company incurred legal, underwriting and other fees
totaling $191,911. These costs are being amortized on the straight
line method over five years and are reflected on the December 31, 1998
balance sheet, net of accumulated amortization of $28,787, under the
caption DEPOSITS AND OTHER. Total amortization expense for the
eleven-month period ended December 31, 1998, amounted to $28,787.
WARRANTS
Effective August 31, 1998, the Company issued 1,000,000 warrants to a
majority shareholder. Each warrant is convertible into one share of
the Company's common stock and may be exercised at $3.50 per share.
The warrants are valid beginning on August 31, 1998, for a period of
five years.
NOTE 15 - EARNINGS PER SHARE
Basic earnings per share amounts are computed based on the weighted
average number of shares actually outstanding. The number of shares
used in the computation were 5,773,050. Warrants on common stock for
the eleven-month period ending December 31, 1998 were not included in
computing diluted earnings per share because their effects were
anti-dilutive.
NOTE 16 - RELATED PARTY TRANSACTIONS
For the eleven-month period ended December 31, 1998, total rent paid
to a corporation owned by a related party amounted to $44,267.
NOTE 17 - SUBSEQUENT EVENT
In March 1999, the Company entered into a stock purchase agreement to
purchase all the outstanding shares of Columbia Title of Florida,
Inc., a Florida corporation engaged in the business of closing real
estate and mortgage loan transactions, primarily in the South Florida
area. The total purchase price is $150,100, which includes $150,000 of
liabilities assumed on behalf of Columbia.
39
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Officers and Directors
First Reserve, Inc. and Subsidiaries,
First Reserve Enterprises, Inc. and
Embassy Financial Services, Inc.
Coral Gables, Florida
We have audited the accompanying combined balance sheet of First Reserve, Inc.
and Subsidiaries, First Reserve Enterprises, Inc. and Embassy Financial
Services, Inc. as of January 31, 1998, and the related combined statements of
income and retained earnings and cash flows for the year then ended. These
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the combined financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall combined financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of First
Reserve, Inc. and Subsidiaries, First Reserve Enterprises, Inc. and Embassy
Financial Services, Inc. as of January 31, 1998 and the combined results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ McClain & Company, LLP
April 20, 1998
40
<PAGE>
COMBINED BALANCE SHEET
JANUARY 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES,
FIRST RESERVE ENTERPRISES, INC. AND
EMBASSY FINANCIAL SERVICES, INC.
ASSETS
CURRENT ASSETS
Cash $ 378,516
Cash - escrow 1,784,002
Escrow liability (1,784,002)
Receivables 179,759
Prepaid expenses and other 108,195
Shareholders' loans receivable 86,000
--------------
Total current assets $ 752,470
PROPERTY AND EQUIPMENT
Furniture and fixtures 358,132
Office equipment 485,545
--------------
843,677
Less accumulated depreciation 535,333
--------------
Net property and equipment 308,344
OTHER ASSETS
Goodwill, net 21,970
Deposits and other 39,931
--------------
Total other assets 61,901
----------
Total assets $1,122,715
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 308,978
STOCKHOLDERS' EQUITY
Common stock 2,355
Paid-in capital 5,090,834
Accumulated deficit (4,279,452)
--------------
Total stockholders' equity 813,737
----------
Total liabilities and stockholders' equity $1,122,715
==========
The accompanying notes to the combined financial statement is an integral part
of this combined statement.
41
<PAGE>
COMBINED STATEMENT OF INCOME AND ACCUMULATED DEFICIT
YEAR ENDED JANUARY 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES,
FIRST RESERVE ENTERPRISES, INC. AND
EMBASSY FINANCIAL SERVICES, INC.
REVENUES $ 11,484,170
OPERATING EXPENSES 11,108,855
------------
Net income before income taxes 375,315
PROVISION FOR INCOME TAXES 2,277
------------
Net income 373,038
ACCUMULATED DEFICIT, beginning of year (4,296,806)
Dividends (355,684)
------------
ACCUMULATED DEFICIT, end of year $ (4,279,452)
============
The accompanying notes to the combined financial statement is an integral part
of this combined statement.
42
<PAGE>
COMBINED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
YEAR ENDED JANUARY 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES,
FIRST RESERVE ENTERPRISES, INC. AND
EMBASSY FINANCIAL SERVICES, INC.
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 11,428,297
Interest received 12,943
Cash paid to suppliers and employees (10,862,083)
Income taxes paid (2,277)
------------
Net cash provided by operating activities 576,880
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in shareholders loans receivable (86,000)
Purchases of property and equipment (151,495)
------------
Net cash used in investing activities (237,495)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Return of paid-in capital (12,377)
Dividends paid (152,997)
------------
Net cash used in financing activities (165,374)
------------
Net increase in cash 174,011
CASH, February 1, 1997 204,505
------------
CASH, January 31, 1998 $ 378,516
============
The accompanying notes to the combined financial statement is an integral part
of this combined statement.
43
<PAGE>
COMBINED STATEMENT OF CASH FLOWS (CONTINUED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
YEAR ENDED JANUARY 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES,
FIRST RESERVE ENTERPRISES, INC. AND
EMBASSY FINANCIAL SERVICES, INC.
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $ 373,038
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 100,922
Amortization 2,912
Loss on abandonment of property
and equipment 240
Increase in prepaid expenses and
other assets (43,754)
Increase in accounts receivable (42,930)
Increase in accounts payable and
accrued expenses 186,452
---------
Net cash provided by operating activities $ 576,880
=========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During fiscal year ended January 31, 1998, dividends of $202,687 were accrued
and not paid.
As fully described in Note 6, during fiscal year ended January 31, 1998,
preferred stock of First Reserve, Inc. totaling $3,926,792 and accrued
dividends of $693,536 were converted to 889.67 shares of $1 par value common
stock of First Reserve, Inc.
The accompanying notes to the combined financial statement is an integral part
of this combined statement.
44
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS
YEAR ENDED JANUARY 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES,
FIRST RESERVE ENTERPRISES, INC. AND
EMBASSY FINANCIAL SERVICES, INC.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying combined financial statements include the accounts of
First Reserve, Inc. (the Company) and its wholly-owned subsidiaries,
Esslinger, Wooten and Maxwell, Inc., First Reserve Realty, Inc., First
Reserve Management, Inc., and First Reserve Equities, Inc. All
significant intercompany accounts and transactions have been eliminated
in the consolidated financial statements.
PRINCIPLES OF COMBINATION
The accompanying combined financial statements include the accounts of
First Reserve, Inc., First Reserve Enterprises, Inc. and Embassy
Financial Services, Inc., all of which are under common ownership. All
significant intercompany accounts have been eliminated in the combined
financial statements.
The accounts of First Reserve Enterprises, Inc. and Embassy Financial
Services, Inc. are for the year ended December 31, 1997.
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 and the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
NATURE OF OPERATIONS
The Company is primarily engaged in the brokerage and management of
residential and commercial real estate in Miami, Florida.
First Reserve Enterprises, Inc. is an inactive corporation.
Embassy Financial Services, Inc. is a licensed residential mortgage
lender that specializes in conventional, FHA, and VA first mortgages.
To date, all loans originated by Embassy Financial Services, Inc. have
been in the capacity of an agent on behalf of other mortgage lenders.
Presently, the Company does not service any of the loans they
originate. The Company was in the development stage since its formation
on April 8, 1996 until November 1996.
See independent auditors' report.
45
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS
YEAR ENDED JANUARY 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES,
FIRST RESERVE ENTERPRISES, INC. AND
EMBASSY FINANCIAL SERVICES, INC.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ORGANIZATIONAL COSTS
Organizational costs are amortized on the straight-line method over
five years.
CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated using
straight-line and accelerated methods over the estimated useful lives
of the assets.
INCOME TAXES
Deferred income tax assets and liabilities are computed annually for
differences between the financial statements and tax bases of assets
and liabilities that will result in taxable or deductible amounts in
the future, based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the period minus the changes during
the period in deferred tax assets and liabilities.
Income taxes are provided for on all taxable income included in the
combined financial statements in the period in which the income is
reported for financial purposes. Accordingly, deferred income taxes
(benefits) are provided for timing differences between financial and
tax reporting. The principal items comprising these differences are the
deferred recognition of operating losses and passive losses for tax
purposes.
No liability for income taxes appears on the accompanying financial
statements for Embassy Financial Services, Inc. as the Company has
elected to be treated as an "S" Corporation for federal income tax
purposes. Pursuant to this election, the corporate income is taxed to
the shareholders of Embassy Financial Services, Inc.
See independent auditors' report.
46
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS
YEAR ENDED JANUARY 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES,
FIRST RESERVE ENTERPRISES, INC. AND
EMBASSY FINANCIAL SERVICES, INC.
NOTE 2 - RECEIVABLES
Receivables consist primarily of open trade accounts that have not been
reduced by an allowance for doubtful accounts, as management considers
all receivables to be fully collectible.
NOTE 3 - SHAREHOLDER LOANS RECEIVABLE
These loans are due on demand, and bear no interest.
NOTE 4 - GOODWILL
The Company has accounted for the excess of the acquisition costs of
certain subsidiaries over the fair value of identifiable assets as
goodwill. This goodwill is being amortized over fifteen-year periods.
NOTE 5 - COMMON STOCK
Common stock as of January 31, 1998 consists of the following:
First Reserve, Inc., $1 par value, 5,000 shares
authorized 2,224.67 issued and outstanding. $ 2,225
First Reserve Enterprises, Inc., $1 par value, 500 shares
authorized, 100 shares issued and
outstanding. 100
Embassy Financial Services, Inc., $.01 per value, 10,000 shares
authorized, 100 shares issued
and outstanding. 30
-------
$ 2,355
=======
NOTE 6 - PREFERRED STOCK
In January 1998, the Company entered into an agreement with its
preferred stockholders' to purchase 889.67 shares of $1 par value
common stock. In exchange for the purchase of the common stock, the
preferred stockholders surrendered their preferred stock and all rights
to accrued and unpaid dividends in relation to the preferred stock. At
January 1998, the accrued and unpaid dividends in relation to the
preferred stock amounted to $693,536.
See independent auditors' report.
47
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS
YEAR ENDED JANUARY 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES,
FIRST RESERVE ENTERPRISES, INC. AND
EMBASSY FINANCIAL SERVICES, INC.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
LEASES
The Company has entered into several automobile and real estate lease
commitments which expire in various years through 2001. The future
commitments under these leases are summarized as follows:
YEARS ENDING
JANUARY 31,
-------------
1999 $ 458,124
2000 428,368
2001 277,922
2002 12,364
2003 -
----------
$1,176,778
==========
Rent expense under these leases was approximately $527,000 for the year
ended January 31, 1998.
NOTE 8 - CONCENTRATION OF CREDIT RISK
Esslinger, Wooten & Maxwell, Inc.(EWM) has experienced credit risk in
connection with its bank accounts. At various times during the year,
EWM maintained deposits with financial institutions in excess of
amounts insured by the FDIC. The exposure to EWM is solely dependent on
daily bank balances and the financial strength of the respective
institutions.
NOTE 9 - INCOME TAXES
The provision for income taxes for the year ended January 31, 1998 is
based on current statutory rates and is summarized as follows:
CURRENT DEFERRED TOTAL
------- -------- -----
Florida $ - $ - $ -
Federal 2,277 - 2,277
------- -------- -------
$ 2,277 $ - $ 2,277
======= ======== =======
See independent auditors' report.
48
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS
YEAR ENDED JANUARY 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES,
FIRST RESERVE ENTERPRISES, INC. AND
EMBASSY FINANCIAL SERVICES, INC.
NOTE 9 - INCOME TAXES (CONTINUED)
DEFERRED PROVISION
The principal timing differences relate to net operating loss
carryforwards which resulted in deferred tax assets. These deferred
tax assets have been reduced in their entirety by valuation
allowances. A summary of the deferred tax assets and related valuation
accounts is as follows:
FEDERAL FLORIDA TOTAL
--------- --------- ---------
Deferred tax assets $ 360,595 $ 137,590 $ 498,165
Deferred tax asset -
valuation allowance (360,595) (137,590) (498,165)
--------- --------- ---------
$ - $ - $ -
========= ========= =========
As of January 31, 1998, the Company had net operating loss carryovers
of approximately $2,541,000. The carryovers expires at various dates
through 2011.
NOTE 10 - PROFIT SHARING PLAN
EWM has a deferred tax savings plan which qualifies under section 401
(k) of the Internal Revenue code. The plan covers all employees having
at least one year of service during which they have worked at least
1,000 hours, providing they have attained the age of 21. The plan
allows EWM to make voluntary contributions to the plan for eligible
participants. Participants are 100% vested in their contributions to
the plan and vest in EWM's contribution as follows:
YEARS OF TOTAL SERVICE VESTING PERCENTAGE
---------------------- ------------------
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
During the year ended January 31, 1998, employer contributions to the
plan was approximately $8,500.
See independent auditors' report.
49
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS
YEAR ENDED JANUARY 31, 1998
FIRST RESERVE, INC. AND SUBSIDIARIES,
FIRST RESERVE ENTERPRISES, INC. AND
EMBASSY FINANCIAL SERVICES, INC.
NOTE 11 - SUBSEQUENT EVENT
Subsequent to January 31, 1998, the Companies' Boards of Directors
authorized a plan of reorganization. The reorganization involves the
shareholders of First Reserve, Inc. and Embassy Financial Services,
Inc. transferring 100% of each companies' stock to First Reserve, Inc.
(Arizona) in exchange for 4,624,000 shares of First Reserve, Inc.
(Arizona). First Reserve, Inc. (Arizona) is a publicly traded company
that, prior to the reorganization, is in shell form. It is 83.33%
owned by the shareholders of First Reserve, Inc. and Embassy Financial
Services, Inc.
In addition, on April 21, 1998, the Company announced and authorized a
plan of merger with Byrne-Rinehart & Co., a real estate company
specializing in upper-end home sales. The announced merger calls for
First Reserve, Inc. (Arizona) to issue 400,000 shares of stock and
$300,000 of cash to the shareholders of Byrne-Rinehart & Co. in
exchange for all the issued and outstanding shares of Byrne-Rinehart &
Co. At this time, financial information of Byrne-Rinehart & Co. is
unavailable. This merger will allow the Company to offer a full line
of integrated real estate and financial services.
After the above planned transactions have transpired, the former
shareholders of First Reserve, Inc. and Embassy Financial Services,
Inc. will own in excess of 90% of First Reserve, Inc. (Arizona).
See independent auditor's report.
50
<PAGE>
EXHIBIT INDEX
3.1 Articles of Incorporation of the Company (f.k.a. El Squared,
Inc.)
3.2 Bylaws of First Reserve, Inc.
10.1 Articles of Merger of First Reserve, Inc. (a Florida
corporation) and First Reserve, Inc. (an Arizona corporation).
10.2 Agreement and Plan of Merger dated April 1, 1998 by and
between First Reserve, Inc. (a Florida corporation) and First
Reserve, Inc. (an Arizona corporation).
10.3 Articles of Merger of Byrne-Rinehart & Co. (a Florida
corporation) and Esslinger- Wooten-Maxwell, Inc. (a Florida
corporation).
10.4 Articles of Merger of Gerard International Realty, Inc. (a
Florida corporation) and Esslinger-Wooten-Maxwell, Inc. (a
Florida corporation).
10.5 Employment Agreement dated March 5, 1998 by and between First
Reserve, Inc. and Allen C. Harper.
10.6 Employment Agreement dated March 5, 1998 by and between First
Reserve, Inc. and Ronald A. Shuffield.
23.1 Consent of McClain and Company, L.C.
23.2 Consent of McClain and Company, L.C.
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
EL SQUARED, INC.
ARTICLE I
NAME: The name of the corporation shall be El Squared, Inc.
ARTICLE II
PURPOSE: The purpose for which this corporation is organized is the transaction
of any and all lawful business for which corporations may be incorporated under
the laws of the State of Arizona, as they may be amended from time to time.
ARTICLE III
INITIAL BUSINESS: The corporation initially intends to invest in securities of
public and private companies including but not limited to common stock,
preferred stock, loans and loans with equity features.
ARTICLE IV
AUTHORIZED CAPITAL: The corporation shall have authority to issue one hundred
million (100,000,000) shares of common stock of no par value.
ARTICLE V
STATUTORY AGENT: The name and address of the initial statutory agent of the
corporation is:
Mr. Lanny R. Lang
3536 E. Saltsage Drive
Phoenix, AZ 85044
ARTICLE VI
BOARD OF DIRECTORS: The initial Board of Directors shall consist of two (2)
persons. The number of directors shall be fixed by the by-laws. The persons who
are to serve as the members of the initial Board of Directors until the first
annual meeting of the shareholders of until successors are named are:
Mr. Lanny R. Lang
3536 E. Saltsage Drive
Phoenix, AZ 85044, and
Mr. Michael S. Williams
3710 E. Kent Drive
Phoenix, AZ 85044
<PAGE>
ARTICLE VII
INCORPORATORS: The incorporators of this corporation are:
Mr. Lanny R. Lang
3536 E. Saltsage Drive
Phoenix, AZ 85044, and
Mr. Michael S. Williams
3710 E. Kent Drive
Phoenix, AZ 85044
All powers, duties and responsibilities of the incorporators shall cease at the
time of delivery of these Articles of Incorporation to the Arizona Corporation
Commission for filing.
IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of September, 1993.
/s/ LANNY R. LANG /s/ MICHAEL S. WILLIAMS
- ------------------------------ -----------------------
Lanny R. Lang Michael S. Williams
* * * * * * * *
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
On this 6th day of September, 1993, before me, the undersigned Notary
Public, personally appeared Lanny R. Lang and Michael S. Williams, who
acknowledged that they executed the above instrument.
/s/ TINA L. MORROA
-------------------------------------------------
Notary Public My Commission Expires March 6, 1994
* * * * * * * *
I, Lanny R. Lang, having been designated to act as Statutory Agent, hereby
consent to do so until removed or resignation is submitted in accordance with
the Arizona Revised Statutes.
/s/ LANNY R. LANG
------------------------------
Lanny R. Lang
<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
EL SQUARED, INC.
Pursuant to the provisions of Section 10-061, Arizona Revised Statutes,
the undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is El Squared, Inc.
SECOND: The document attached hereto as Exhibit "A" sets forth the amendment to
the Articles of Incorporation which were adopted by the shareholders of
the Corporation at their meeting on August 30, 1994, in the manner
prescribed by law.
THIRD: The number of shares of stock outstanding at the time of such adoption
was one hundred thousand (100,000) shares and the number of shares
entitled to vote on the amendment was one hundred thousand (100,000)
shares.
FOURTH: The designation and number of outstanding shares of each class or
series entitled to vote thereon, as a class or series, was as follows:
CLASS OR SERIES NUMBER OF SHARES
--------------- ----------------
Common, no par value 100,000
FIFTH: The number of shares of each class or series entitled to vote thereon
as a class or series voted for or against such amendment, respectively,
was:
CLASS OR SERIES NUMBER FOR NUMBER AGAINST
--------------- ---------- --------------
Common, no par value 100,000 -0-
1
<PAGE>
DATED: 8-30, 1994.
EL SQUARED, INC.
By: /s/ MICHAEL S. WILLIAMS
---------------------------
President
Attest:
/s/ LANNY R. LANG
- ---------------------------------
Secretary
* * * * * * * *
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
On this 30th day of August, 1994, before me, the undersigned Notary
Public, personally appeared Lanny R. Lang and Michael S. Williams, who
acknowledged that they executed the above instrument.
/s/ CARMEN M. MILLER
---------------------------------------------
Notary Public
OFFICIAL SEAL
CARMEN M. MILLER
Notary Public - State of Arizona
MARICOPA COUNTY
My Comm. Expires Aug. 3, 1998
2
<PAGE>
EXHIBIT A
AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
EL SQUARED, INC.
1. Article I is amended to read as follows:
The name of the corporation shall be Phoenix Financial
Reporting Group, Inc.
DATED: 8-30, 1994.
EL SQUARED, INC.
By: /s/ MICHAEL S. WILLIAMS
-----------------------
President
Attest:
/s/ LANNY R. LANG
- -------------------------------
Secretary
* * * * * * * *
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
On this 30th day of August, 1994, before me, the undersigned Notary
Public, personally appeared Lanny R. Lang and Michael S. Williams, who
acknowledged that they executed the above instrument.
/s/ CARMEN M. MILLER
-----------------------------------
Notary Public
OFFICIAL SEAL
CARMEN M. MILLER
Notary Public - State of Arizona
MARICOPA COUNTY
My Comm. Expires Aug. 3, 1998
3
<PAGE>
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
PHOENIX FINANCIAL REPORTING GROUP, INC.
Pursuant to the provisions of Section 10-061, Arizona Revised Statutes,
the undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is Phoenix Financial Reporting Group, Inc.
SECOND: The document attached hereto as Exhibit "A" sets forth the amendment to
the Articles of Incorporation which were adopted by the shareholders of
the Corporation at their meeting on July 28, 1995, in the manner
prescribed by law.
THIRD: The number of shares of stock outstanding at the time of such adoption
was one hundred thousand (100,000) shares and the number of shares
entitled to vote on the amendment was one hundred thousand (100,000)
shares.
FOURTH: The designation and number of outstanding shares of each class or
series entitled to vote thereon, as a class or series, was as follows:
CLASS OR SERIES NUMBER OF SHARES
--------------- ----------------
Common, no par value 100,000
FIFTH: The number of shares of each class or series entitled to vote thereon
as a class or series voted for or against such amendment, respectively,
was:
CLASS OR SERIES NUMBER FOR NUMBER AGAINST
--------------- ---------- --------------
Common, no par value 100,000 -0-
DATED: July 28, 1995
PHOENIX FINANCIAL REPORTING GROUP, INC.
/s/ MICHAEL S. WILLIAMS
----------------------------------
Michael S. Williams, President
1
<PAGE>
Attest:
/s/ LANNY R. LANG
- ---------------------------------
Lanny R. Lang, Secretary
* * * *
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
On this 1st day of August, 1995, before me, the undersigned Notary
Public, personally appeared Lanny R. Lang and Michael S. Williams, who
acknowledged that they executed the above instrument.
/s/ CARMEN M. MILLER
-----------------------------------
Notary Public
OFFICIAL SEAL
CARMEN M. MILLER
Notary Public - State of Arizona
MARICOPA COUNTY
My Comm. Expires Aug. 3, 1998
2
<PAGE>
EXHIBIT A
AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
PHOENIX FINANCIAL REPORTING GROUP, INC.
1. Article IV is amended to read as follows:
AUTHORIZED CAPITAL: The corporation shall have the authority to issue
one hundred million (100,000,000) shares of common stock of no par
value. The Corporation shall also have the authority to issue ten
million (10,000,000) shares of preferred stock, undesignated as to par
value. The Board of Directors may divide the shares of preferred stock,
into series, and shall fix and determine the designations, preferences,
privileges, and ratify powers, if any, and the restrictions and
qualifications of the share of each series as established.
The outstanding shares of common stock, regardless of class,
shall be entitled to one vote per share and shall share equally in
dividends, whether paid in cash or by the issuance of additional shares
of common stock, declared from time to time by the board of directors.
2. The following new Articles are hereby adopted:
ARTICLE VIII
EXISTENCE: The Corporation shall have perpetual existence.
ARTICLE IX
DIRECTOR LIABILITY: To the fullest extent allowable under the Arizona
General Corporation Law, including without limitation A.R.S.
/sections/10-004 A.17 and 10-054 A.9, no director shall have personal
liability to the Corporation or its shareholders, or to any other
person or entity, for monetary damages for a breach of fiduciary duty
as a director, except where there has been:
a) a breach of the director's duty of loyalty to the Corporation or its
shareholders;
b) Acts or omissions which are not in good faith or which involve
intentional misconduct or a knowing violation of law;
3
<PAGE>
c) Authorization of the unlawful payment of a dividend or other
distribution on the Corporation's capital stock, or the unlawful
purchase of its capital stock;
d) Any transaction from which the director derived an improper personal
benefit; or
e) Any contract or other transaction involving directors' conflicts of
interest in violation of A.R.S. /section/10-041.
ARTICLE X
DISTRIBUTION FROM CAPITAL SURPLUS: The board of directors of the
Corporation may from time to time distribute on a pro rota basis to its
shareholders, out of capital surplus of the Corporation, a portion of
its assets in cash or property.
ARTICLE XI
REPURCHASE OF SHARES: The Corporation shall have the right to purchase
its own shares to the extent of unreserved and unrestricted earned and
capital surplus of the Corporation.
ARTICLE XII
INDEMNIFICATION: The Corporation shall indemnify each director,
officer, employee or agent of the Corporation:
a) to the fullest extent permissible under the provisions of A.R.S.
/section/10-005 as provided in any indemnification provisions
of any successor or amended stature,
b) as provided in the By-Laws of the Corporation, or
c) as provided in any agreement adopted pursuant to the provisions of
A.R.S. /section/10-005.
If the Arizona Corporation Law is amended to authorize further
elimination or limitation of the liability of a director, then the
liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the Arizona General
Corporation Law as so amended. Any repeal or modification of this
article shall not increase the liability of a director of the
Corporation arising out of acts or omissions occurring before the
repeal or modification becomes effective.
4
<PAGE>
DATED: July 28, 1995
PHOENIX FINANCIAL REPORTING GROUP, INC.
By: /s/ MICHAEL S. WILLIAMS
-----------------------------------
Michael S. Williams, President
Attest:
/s/ LANNY R. LANG
------------------------
Lanny R. Lang, Secretary
* * * *
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
On this 1st day of August, 1995, before me, the undersigned Notary
Public, personally appeared Lanny R. Lang and Michael S. Williams, who
acknowledged that they executed the above instrument.
/s/ CARMEN M. MILLER
-----------------------------------
Notary Public
OFFICIAL SEAL
CARMEN M. MILLER
Notary Public - State of Arizona
MARICOPA COUNTY
My Comm. Expires Aug. 3, 1998
5
<PAGE>
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
PHOENIX FINANCIAL REPORTING GROUP, INC.
FIRST: The name of the corporation is Phoenix Financial Reporting
Group, Inc. (the "Corporation").
SECOND: Article I of the Corporation's Articles of Incorporation, as
amended, is hereby amended and restated in its entirety as
follows:
ARTICLE I
The name of the corporation shall be First Reserve, Inc.
THIRD: The foregoing amendment to the Articles of Incorporation of
the Corporation was recommended by the Board of Directors of
the Corporation to the shareholders on January 13, 1998, and
approved by the shareholders of the Corporation at their
Special Meeting on January 23, 1998, in the manner prescribed
by the Arizona Revised Statutes.
FOURTH: The number of shares of stock outstanding at the time of such
adoption of the amendment to the Articles of Incorporation was
six million (6,000,000) shares and the number of shares
entitled to vote on the amendment was six million (6,000,000)
shares.
FIFTH: The designation and number of outstanding shares of each class
or series entitled to vote thereon, as a class or series, was
as follows:
CLASS OR SERIES NUMBER OF SHARES
--------------- ----------------
Common, no par value 6,000,000
SIXTH: The number of shares of each class or series entitled to vote
thereon as a class or series voting for or against such
amendment, respectively, was:
CLASS OR SERIES NUMBER FOR NUMBER AGAINST ABSENT
--------------- ---------- -------------- ------
Common, no par value 5,636,898 -0- 363,102
<PAGE>
Dated this 23rd day of January, 1998.
PHOENIX FINANCIAL REPORTING GROUP,
INC., an Arizona corporation
By:/S/RONALD A. SHUFFIELD
Ronald A. Shuffield, Secretary and Treasurer
<PAGE>
AGREEMENT OF TAX-FREE REORGANIZATION
This Agreement of Tax-Free Reorganization ("Agreement") is made and
entered into as of the 1st day of April, 1998 by and between First Reserve,
Inc., f/k/a Phoenix Financial Reporting Group, Inc., an Arizona Corporation (the
"Company"), and Allen C. Harper ("Harper"), Ronald A. Shuffield ("Shuffield"),
James E. Newmeyer ("Newmeyer"), Trenco Establishment, a corporation formed under
the laws of the country of Italy ("Trenco") and Valorsec Verwaltungs &
Treu-anstalt, a corporation formed under the laws of the country of Switzerland
("Valorsec") (collectively the "Control Group").
BACKGROUND OF THIS AGREEMENT
The Control Group collectively owns all of the equity interests in two
Florida corporations, First Reserve, Inc. ("First Reserve Florida") and Embassy
Financial Services, Inc. ("Embassy") as follows:
NAME SHARES OF FIRST RESERVE FLORIDA SHARES OF EMBASSY
---- ------------------------------- -----------------
Harper* 694 1,000
Shuffeld 609.5 1,000
Newmeyer -0- 1,000
Trenco 31 -0-
Valorsec 889.67 -0-
* owned by Allen C. Harper & Carol Harper, Joint Tenants
The Control Group wishes to contribute the above interests to the
Company in exchange for Company's issuance of new shares of the Common Stock of
the Company as follows:
NAME SHARES OF THE COMPANY
---- ---------------------
Harper 1,069,997
Shuffield 1,069,997
Newmeyer 324,314
Trenco 84,081
Valorsec 2,075,611
The parties intend the transaction to qualify as a tax free transaction
pursuant to Section 351 and/or Section 368 of the Internal Revenue Code of 1986,
as amended.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the parties agree as follows:
1. RECITAL. The above recital in the Background of this Agreement is
true and correct.
2. TRANSFER OF SHARES OF FIRST RESERVE AND EMBASSY. On the effective
date of the execution of this Agreement, the Control Group, in exchange for
issuance of new shares of the Company as reflected in the Background of this
Agreement, shall assign, transfer, convey and set over to the Company all of
their right, property and interest in the shares of First Reserve and Embassy.
3. ISSUANCE OF SHARES OF THE COMPANY. On the effective date of the
execution of this agreement, the Company, in exchange for shares of First
Reserve and Embassy reflected in the Background of this Agreement, shall issue
to the Control Group new shares of the Company as reflected in the Background of
this Agreement.
4. TAX FREE TRANSACTION. The transfers reflected in paragraphs 2 and 3
above shall not result in the recogition of any gain or loss to the Control
Group or the Company pursuant to Section 351 and/or Section 368 of the Internal
Revenue Code of 1986, as amended. Accordingly, notwithstanding anything
contained in this Agreement to the contrary, any provision of this Agreement
which has the effect of disqualifying the transfers as provided under Section
351 or Section 368, as the case may be, shall be considered null and void and of
no force and effect and the remaining portions of any such provisions in and of
this Agreement which are consistent with Section 351 or Section 368 shall remain
in effect.
5. COSTS AND EXPENSES. All actual reasonable costs incurred in the
performance of this Agreement shall be paid by the Company.
6. COOPERATION. All the parties hereto agree to fully cooperate one
with the other to effectuate the transfers and to exchange such further
documents and agreements as they deem appropriate to accomplish the transfers.
7. COMPANY REPRESENTATION. The Company represents and warrants to the
Control Group that it has full power and right to enter into this Agreement, to
issue new shares of the Company in accordance with this Agreement.
8. CAPTION AND PARAGRAPH HEADINGS. Captions and paragraph headings
contained in this Agreement are for convenience and reference only and in no way
define, describe, extend or limit the scope or intent of this Agreement or any
other provisions of this Agreement.
9. NO WAIVER. No waiver of any provisions of this Agreement shall be
effective unless it is in writing and signed by the party against whom it is
asserted and any other written
2
<PAGE>
waiver shall only be applicable to the specified instance to which it relates
and shall not be deemed to be a continuing or fixture waiver.
1O. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
11. BINDING EFFECT. This Agreement shall enure to the benefit of and
shall be binding upon the parties and their respective heirs, personal
representatives, successors and assigns.
12. GOVERNING LAW. This Agreement shall be construed and interpreted
according to the laws of the State of Florida.
13. NOTICES. Any notices required and permitted to be given under this
Agreement shall be delivered by hand, mailed by certified or registered mail,
return receipt requested, in a postage prepaid envelope or delivered by a
nationally recognized overnight delivery service and addressed as follows.
Notices shall be deemed effective only upon receipt or refusal of delivery.
If to the Company:
First Reserve, Inc.
1360 S. Dixie Highway
Coral Gables, FL 33146
If to the Control Group:
1360 S. Dixie Highway
Coral Gables, FL 33146
attn: Allen C. Harper, as representative of the Control Group
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
First Reserve, Inc., an Arizona corporation
Witnesses: f/k/a Phoenix Financial Reporting Group, Inc.
/s/ [ILLEGIBLE] By: /s/ ALLEN C. HARPER
- --------------------------- ---------------------------------
Title: Chairman CEO
- ---------------------------
/s/ [ILLEGIBLE]
- --------------------------- /s/ ALLEN C. HARPER
--------------------
Allen C. Harper
3
<PAGE>
/s/ RONALD A. SHUFFIELD
- --------------------------- -----------------------------------
Ronald A. Shuffield
- ---------------------------
/s/ JAMES E. NEWMEYER
- --------------------------- -----------------------------------
James E. Newmeyer
- ---------------------------
Trenco Establishment,
an Italian corporation
/s/ VADUZ LIECHTEYSTEIN
- --------------------------- -----------------------------------
Title: Partner
- ---------------------------
Valorsec & Verwaltungs Treu-anstalt,
a Swiss corporation
/s/ FABIO ROSSI /s/ MARCO CASPESCHA
- --------------------------- ------------------------------------------
Fabio Rossi Marcho Caspescha
Title: Director Director
- ---------------------------
4
<PAGE>
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
FIRST RESERVE, INC.
FIRST: The name of the corporation is First Reserve, Inc. (the "Corporation").
SECOND: Article IV of the Corporation's Articles of Incorporation, as amended,
is hereby amended and restated in its entirety as follows:
ARTICLE IV
AUTHORIZED CAPITAL: The corporation shall have the authority to issue One
Hundred Million (100,000,000) shares of (Common Stock of no par value. The
corporation shall also have the authority to issue ten million (10,000,000)
shares of preferred stock, undesignated as to par value. The Board of Directors
may divide the shares of preferred stock, into series, and shall fix and
determine the designations, preferences, privileges, and ratify powers, if any,
and the restrictions and qualifications of the share of each series as
established.
The outstanding shares of Common Stock, regardless of class, shall be
entitled to one vote per share and shall share equally in dividends, whether
paid in cash or by the issuance of additional shares of Common Stock, declared
from time to time by the Board of Directors.
THIRD: The foregoing amendment to the Articles of Incorporation of the
Corporation was adopted by the Board of Directors of the Corporation
without shareholder action, pursuant to ss.10-1002(4), Arizona Revised
Statutes, on April 21, 1998.
Dated this 21st day of April, 1998.
FIRST RESERVE, INC.,
an Arizona corporation
By: /s/ ALLEN C. HARPER
----------------------------------------------
Allen C. Herper, Chairman and CEO
<PAGE>
ARTICLES OF INCORPORATION
OF
FIRST RESERVE. INC.
The undersigned, acting as incorporator, signs the following Articles
of Incorporation for the purpose of forming a corporation under the laws of the
State of Florida.
ARTICLE I
The name of the corporation shall be: FIRST RESERVE, INC. (the
"Corporation")
ARTICLE II
The existence of the Corporation shall commence upon the filing of
these Articles of Incorporation by the Department of State and shall be
perpetual.
ARTICLE III
The Corporation may engage in any and all businesses and activities
permitted by the laws of the State of Florida. The Corporation shall have all of
the powers vested in a corporation organized under and existing by virtue of
such laws.
ARTICLE IV
The maximum number of shares which this Corporation is authorized to
have outstanding at any time is 100,000,000 shares of Common Stock with no par
value.
ARTICLE V
The initial registered agent and street address of the initial
registered office of the Corporation shall be:
A Z Registered Agent Corporation
2601 S. Bayshore Drive
Suite 1600
Miami, Florida 33133
ARTICLE VI
This Corporation shall have four directors initially. The names and
addresses of the initial directors of the Corporation, who shall hold office
until their successors are elected and qualified or until their earlier
resignation or removal from office are:
Allen C. Harper
1360 South Dixie Highway
Coral Gables, Florida 33146
<PAGE>
Ronald. Shuffield
1360 South Dixie Highway
Coral Gables, Florida 33146
James E. Newneyer
1360 South Dixie Highway
Coral Gables, Florida 33146
Thiery Manni
1360 South Dixie Highway
Coral Gables, Florida 33146
The number of directors may be increased or decreased from time to time
pursuant to the Bylaws of the Corporation, but shall not be less than one.
ARTICLE VII
The name and address of the Incorporator of the Corporation is:
A Z Registered Agent Corporation
2601 S. Bayshore Drive
Suite 1600
Miami, Florida 33133
ARTICLE VIII
The principal business and mailing address of the Corporation shall be:
1360 South Dixie Highway
Coral Gables, Florida 33146
EXECUTED at Miami, Florida this 10th day of June, 1998.
A Z REGISTERED AGENT CORPORATION,
Incorporator
/s/ JUSTIN T. WILSON
-------------------------------------
Justin T. Wilson,
Secretary and Treasurer
2
<PAGE>
ACCEPTANCE BY REGISTERED AGENT
Having been appointed the Registered Agent of FIRST RESERVE, INC., the
undersigned accepts such appointment and agrees to act in such capacity.
DATED this 10th day of June, 1998.
A Z REGISTERED AGENT CORPORATION,
Registered Agent
By: /s/ JUSTIN T. WILSON
-------------------------------------
Justin T. Wilson,
Secretary and Treasurer
3
EXHIBIT 3.2
BYLAWS
OF
FIRST RESERVE, INC.
<PAGE>
BYLAWS
OF
FIRST RESERVE, INC.,
A FLORIDA CORPORATION
ARTICLE I.
NAME AND OFFICES
Section A. NAME. The name of the Corporation is FIRST RESERVE,
INC., a Florida corporation.
Section B. PRINCIPAL OFFICE AND ADDITIONAL OFFICES. The
location of the registered office of the corporation shall be as stated in the
Articles of Incorporation, which location may be changed from time to time by
the board of directors. The corporation may also have offices or branches at
such other places, both within and without the State of Florida, as the board of
directors may from time to time determine or as the business of the corporation
may require.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section A. PLACE OF MEETINGS. All meetings of the shareholders
shall be held at the registered office of the corporation, or at such other
place (within or without the State of Florida) as shall be designated from time
to time by the board of directors and stated in the notice of the meeting.
Section B. ANNUAL MEETING. Annual meetings of shareholders
shall be held on the first Tuesday of the fifth month of each fiscal year of the
corporation if not a legal holiday in the state in which the meeting shall be
held, and if a legal holiday, then on the next secular day following, at such
time as determined by the board of directors, or at such other date and time as
shall be designated from time to time by the board of directors and stated in
the notice of the meeting. At the annual meeting, the shareholders shall elect a
board of directors and transact such other business as may properly be brought
before the meeting. If the annual meeting is not held on the date designated
therefor, the board of directors shall cause the meeting to be held as soon
thereafter as convenient.
Section C. SPECIAL MEETINGS. Special meetings of the
shareholders, for any purpose or purposes, unless otherwise prescribed by
statute or by the Articles of Incorporation, may be called by the chairman of
the board or president, and shall be called by the chairman of the board or
president at the request in writing of a majority of the board of directors or
at the request in writing
<PAGE>
of the holders of not less than ten percent (10%) of all the shares entitled to
vote at a meeting. Such request shall state the purpose or purposes of the
proposed meeting.
Section D. LIST OF SHAREHOLDERS. The officer or agent who has
charge of the stock transfer book for shares of the corporation shall make and
certify a complete list of the shareholders entitled to vote at a shareholders'
meeting, or any adjournment thereof. The list shall be compiled at least ten
(10) days before each meeting of shareholders if there are greater than six
shareholders of the Corporation. The list shall be arranged in alphabetical
order with each class and series and show the address of each shareholder and
the number of shares registered in the name of each shareholder. 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 shareholder who is present. See
"Fixing of Record Date", Article VI, Section E, for the method of determining
which shareholders are entitled to vote.
Section E. NOTICE OF MEETINGS. Except as may be provided by
statute, written notice of an annual or special meeting of shareholders stating
the place, date and hour of the meeting and the purpose or purposes for which
the meeting is called, shall be delivered, either personally or by first-class
mail, not less than ten (10) nor more than sixty (60) days before the date of
the meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation with postage thereon prepaid.
Section F. QUORUM. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise expressly
required by statute or by the Articles of Incorporation. All shareholders
present in person or represented by proxy at such meeting may continue to do
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum. If, however, such quorum shall not be
initially present at any meeting of shareholders, a majority of the shareholders
entitled to vote thereat shall nevertheless have power to adjourn the meeting
from time to time and to another place, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At such
adjourned meeting, at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting.
Section G. SUPER MAJORITY. When an action other than the
election of directors is to be taken by vote of the shareholders, it shall be
authorized by the affirmative vote of a majority of the shares represented at
the meeting and entitled to vote on the subject matter, unless a greater
plurality is required by express requirement of the statutes or of the Articles
of Incorporation, in which case such express provision shall govern and control
the decision of such question. "Shares represented at the meeting" shall be
determined as of the time the existence of the quorum is
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<PAGE>
determined. Except as otherwise expressly required by the Articles of
Incorporation, directors shall be elected by a plurality of the votes cast at an
election.
Section H. VOTING OF SHARES AND PROXIES. Each shareholder
shall at every meeting of the shareholders be entitled to one (1) vote in person
or by proxy for each share of the capital stock having voting power held by such
shareholder except as otherwise expressly required in the Articles of
Incorporation. A vote may be cast either orally or in writing. Each proxy shall
be in writing and signed by the shareholder or his authorized agent or
representative. A proxy is not valid after the expiration of eleven (11) months
after its date unless the person executing it specifies therein the length of
time for which it is to continue in force. Unless prohibited by law, a proxy
otherwise validly granted by telegram shall be deemed to have been signed by the
granting shareholder. All questions regarding the qualification of voters, the
validity of proxies and the acceptance or rejection of votes shall be decided by
the presiding officer of the meeting.
Section I. WAIVER OF NOTICE. Attendance of a person at a
meeting of shareholders in person or by proxy constitutes a waiver of notice of
the meeting except where the shareholder attends a meeting for the express
purpose of objecting at the beginning of the meeting to the transaction of any
business because the meeting was not lawfully called or convened.
Section J. WRITTEN CONSENT WITHOUT A MEETING. Unless otherwise
provided by the Articles of Incorporation, any action required to be taken at
any annual or special meeting of the shareholders, or any other action which may
be taken at any annual or special meeting of the shareholders may be taken
without a meeting, without prior notice, and without a vote if a consent in
writing, setting forth the action so taken, shall be signed by holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize such action at a meeting at which all shares entitled to
vote thereon were present and voted. Within 10 days after obtaining such
authorization by written consent, notice shall be given to those shareholders
who have not consented in writing. The notice shall fairly summarize the
material features of the authorized action and, if the action be a merger,
consolidation, or sale of assets for which dissenters rights are provided for by
statute, the notice shall contain a clear statement of the rights of
shareholders dissenting therefrom to be paid the fair value of their shares upon
compliance with further provisions of such statute regarding the rights of
dissenting shareholders.
ARTICLE III.
DIRECTORS
Section A. GENERAL POWERS. The business and affairs of the
corporation shall be managed by or under the direction of its board of
directors, unless otherwise provided by the Articles of Incorporation. The board
may exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the Articles of Incorporation or by these
Bylaws directed or required to be exercised or done by the shareholders.
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<PAGE>
Section B. NUMBER, ELECTION AND TERM OF OFFICE. The number of
directors which shall constitute the whole board shall be not less than one (1)
nor more than seven (7). The number of directors shall be determined from time
to time by resolution of the board of directors. In the absence of an express
determination by the board, the number of directors, until changed by the board,
shall be that number of directors elected at the most recently held annual
meeting of shareholders or, if no such meeting has been held, the number elected
by the incorporator in the initially filed Articles of Incorporation. Directors
are elected at the first annual shareholders' meeting and at each annual meeting
thereafter. Each Director shall hold office until the next annual meeting of
shareholders or until his successor is elected. Directors need not be
shareholders or officers of the corporation.
Section C. VACANCIES AND REMOVAL. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by the affirmative vote of a majority of the directors then in
office, though less than a quorum, or by a sole remaining director, or by the
shareholders, and the directors so chosen shall hold office until the next
annual election of directors by the shareholders and until their successors are
duly elected and qualified or until their resignation or removal. Any director
may be removed, with or without cause, by the shareholders at a meeting of the
shareholders called expressly for that purpose unless otherwise provided in the
Articles of Incorporation.
Section D. ANNUAL MEETING. The first board of directors shall
hold office until the first annual meeting of shareholders. Thereafter, the
first meeting of each newly elected board of directors shall be held promptly
following the annual meeting of shareholders on the date thereof. No notice of
such meeting shall be necessary to the newly elected directors in order to
legally constitute the meeting, provided a quorum shall be present. In the event
such meeting is not so held, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the board of directors. Any notice of the annual meeting need not
specify the business to be transacted or the purpose of the meeting.
Section E. PLACE OF MEETINGS. Meetings of the board of
directors shall be held at the principal office of the Corporation or at such
other place, within or without the State of Florida, as the board of directors
may from time to time determine or as shall be specified in the notice of any
such meeting. Unless otherwise restricted by the Articles of Incorporation,
members of the board of directors, or any committee designated by the board, may
participate in a meeting of the board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this section shall constitute presence in person at such meeting.
Section F. SPECIAL MEETINGS. Special meetings of the board may
be called by the chairman of the board or president on four (4) days' notice to
each director by mail or twenty-four (24) hours' notice either personally, by
telephone or by telegram; special meetings shall be called by the chairman of
the board or president in like manner and on like notice on the written request
of two
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<PAGE>
(2) directors. The notice need not specify the business to be transacted or the
purpose of the special meeting. The notice shall specify the place of the
special meeting.
Section G. QUORUM. At all meetings of the board, a majority in
the number of directors fixed pursuant to Article III, Section B of these Bylaws
shall constitute a quorum for the transaction of business. At all meetings of a
committee of the board a majority of the directors then members of the committee
in office shall constitute a quorum for the transaction of business. The act of
a majority of the members present at any meeting at which there is a quorum
shall be the act of the board of directors or the committee, unless the vote of
a larger number is specifically required by statute, by the Articles of
Incorporation, or by these Bylaws. If a quorum shall not be present at any
meeting of the board of directors or a committee, the members present thereat
may adjourn the meeting from time to time and to another place without notice
other than announcement at the meeting, until a quorum shall be present.
Section H. WRITTEN CONSENT WITHOUT A MEETING. Unless otherwise
provided by the Articles of Incorporation, any action required or permitted to
be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting, if, before or after the action, all members of
the board or committee consent thereto in writing. The written consents shall be
filed with the minutes of proceedings of the board or committee. Such consents
shall have the same effect as a vote of the board or committee for all purposes.
Section I. EXECUTIVE AND OTHER COMMITTEES. A majority of the
full board of directors may, by resolution, designate one (1) or more
committees, each committee to consist of one (1) or more of the directors of the
corporation. The board may designate one (1) or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. Any such committee, to the extent provided in the
resolution of the board, shall have and may exercise the powers of the board of
directors in the management of the business and affairs of the corporation;
provided, however, such a committee shall not have the power or authority to:
1. Approve or recommend to shareholders actions or proposals
required by statute to be approved by the shareholders.
2. Designate candidates for the office of director for
purposes of proxy solicitation or otherwise.
3. Fill vacancies on the board of directors or any committee
thereof.
4. Amend the Bylaws of the corporation.
5. Authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the board of directors.
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<PAGE>
6. Authorize or approve the issuance or sale of, or any
contract to issue or sell, shares or designate the terms of a series of a class
of shares, except that the board of directors, having acted regarding general
authorization for the issuance or sale of shares, or any contract therefor, and,
in the case of a series, the designation thereof, may, pursuant to a general
formula or method specified by the board by resolution or by adoption of a stock
option or other plan, authorize a committee to fix the terms of any contract for
the sale of the shares and to fix the terms upon which such shares may be issued
or sold, including, without limitation, the price, the rate or manner of payment
of dividends, provisions for redemption, sinking fund, conversion, and voting or
preferential rights, and provisions for other features of a class of shares, or
a series of a class of shares, with full power in such committee to adopt any
final resolution setting forth all the terms thereof and to authorize the
statement of the terms of a series for filing with the Florida Department of
State pursuant to the Florida General Corporation Act.
Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the board of
directors. A committee, and each member thereof, shall serve at the pleasure of
the board. Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
Section J. COMPENSATION. The board of directors shall have
authority to fix the compensation, including fees and reimbursement of expenses
of directors, for services to the Corporation in any capacity.
Section K. RESIGNATIONS. A director may resign by written
notice to the corporation. The resignation is effective upon its receipt by the
corporation or a subsequent time as set forth in the notice of resignation.
Section L. WAIVER OF NOTICE. Attendance of a director at a
special meeting con stitutes a waiver of notice of the meeting except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. Directors may also sign a waiver of notice before or after a special
meeting.
ARTICLE IV.
NOTICES
Section A. METHOD OF NOTICE. Whenever, under the provisions of
the statutes or of the Articles of Incorporation or of these Bylaws, written
notice is required to be given to any director, committee member or shareholder,
such notice may be given in writing by mail (registered, certified or other
first class mail) addressed to such director, shareholder or committee member at
his address as it appears on the records of the corporation, with postage
thereon prepaid. Such notice shall be deemed to be given at the time when the
same shall be deposited in a post office or official depository under the
exclusive care and custody of the United States postal service.
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<PAGE>
Section B. WAIVER OF NOTICE. Whenever any notice is required
to be given under the provision of the statutes or of the Articles of
Incorporation or of these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
shareholders, directors or a committee, need be specified in any written waiver
of notice.
ARTICLE V.
OFFICERS
Section A. NUMBER AND QUALIFICATION. The officers of the
corporation shall be chosen by the board of directors at its first meeting after
each annual meeting of shareholders. There shall be a president, a secretary and
a treasurer. The board of directors may also create and fill the offices of
chairman of the board and vice-chairman of the board, and may choose one or more
vice-presidents, one or more assistant secretaries and assistant treasurers. Any
number of offices may be held by the same person, but the board by resolution
may require that at least two persons shall be officers for purposes of
compliance with Article VI, Section A, hereof. The board of directors may from
time to time appoint such other officers and agents as it shall deem necessary
who shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the board.
Section B. COMPENSATION. The salaries of all officers of the
corporation shall be fixed by the board of directors.
Section C. REMOVAL, VACANCIES AND RESIGNATIONS. The officers
of the corporation shall hold office at the pleasure of the board of directors.
Any officer elected or appointed by the board of directors may be removed at any
time by the board of directors with or without cause whenever, in its judgment,
the best interests of the corporation will be served thereby. Any vacancy
occurring in any office of the corporation by death, resignation, removal or
otherwise shall be filled by the board of directors. An officer may resign by
written notice to the corporation. The resignation is effective upon its receipt
by the corporation or at a subsequent time specified in the notice of
resignation.
Section D. THE PRESIDENT. Unless otherwise provided by
resolution of the board of directors, the president shall be the chief executive
officer of the corporation, shall preside at all meetings of the shareholders
and the board of directors (if he shall be a member of the board), shall have
general and active management of the business and affairs of the corporation and
shall see that all orders and resolutions of the board of directors are carried
into effect. The president shall execute on behalf of the corporation, and may
affix or cause the seal to be affixed to, all instruments requiring such
execution except to the extent the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the corporation.
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<PAGE>
Section E. VICE-PRESIDENTS. The vice-presidents shall act
under the direction of the president and in the absence or disability of the
president shall perform the duties and exercise the powers of the president.
They shall perform such other duties and have such other powers as the president
or the board of directors may from time to time prescribe. The board of
directors may designate one or more executive vice-presidents or may otherwise
specify the order of seniority of the vice-presidents. The duties and powers of
the president shall descend to the vice-presidents in such specified order of
seniority.
Section F. THE SECRETARY. The secretary shall act under the
direction of the president. Subject to the direction of the president, the
secretary shall attend all meetings of the board of directors and all meetings
of the shareholders and record the proceedings. The secretary shall perform like
duties for the standing committees when required; shall give, or cause to be
given, notice of all meetings of the shareholders and special meetings of the
board of directors; and shall perform such other duties as may be prescribed by
the president or the board of directors. The secretary shall keep in safe
custody the seal of the corporation and, when authorized by the president or the
board of directors, cause it to be affixed to any instrument requiring it. The
secretary shall be responsible for maintaining the stock transfer book and
minute book of the corporation and shall be responsible for their updating.
Section G. ASSISTANT SECRETARIES. The assistant secretaries
shall act under the direction of the president. In the order of their seniority
in office, unless otherwise determined by the president or the board of
directors, they shall, in the absence of disability of the secretary, perform
the duties and exercise the powers of the secretary. They shall perform such
other duties and have such other powers as the president or the board of
directors may from time to time prescribe.
Section H. THE TREASURER. The treasurer shall act under the
direction of the president. Subject to the direction of the president, the
treasurer shall have custody of the corporate funds and securities and shall
keep full and accurate accounts of receipts and disbursements in books belonging
to the corporation and shall deposit all moneys and other valuable effects in
the name and to the credit of the corporation in such depositories as may be
designated by the board of directors. The treasurer shall disburse the funds of
the corporation as may be ordered by the president or the board of directors,
taking proper vouchers for such disbursements, and shall render to the president
and the board of directors, at its regular meetings, or when the board of
directors so requires, an account of all his transactions as treasurer and of
the financial condition of the corporation. The treasurer may affix or cause to
be affixed the seal of the corporation to documents so requiring the seal.
Section I. ASSISTANT TREASURERS. The assistant treasurers in
the order of their seniority of office, unless otherwise determined by the
president or the board of directors shall, in the absence or disability of the
treasurer, perform the duties and exercise the powers of the treasurer. They
shall perform such other duties and have such other powers as the president or
the board of directors may from time to time prescribe.
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<PAGE>
Section J. DELEGATION OF DUTIES. Whenever an officer is absent
or whenever for any reason the board of directors may deem it desirable, the
board of directors may delegate the powers and duties of an officer to any other
officer or officers or to any director or directors.
Section K. ADDITIONAL POWERS. To the extent the powers and
duties of the several officers are not provided from time to time by resolution
or other directive of the board of directors or by the president (with respect
to other officers), the officers shall have all powers and shall discharge the
duties customarily and usually held and performed by like officers of the
corporations similar in organization and business purposes to this corporation.
ARTICLE VI.
CERTIFICATES OF STOCK
AND SHAREHOLDERS OF RECORD
Section A. CERTIFICATES REPRESENTING SHARES. The shares of
stock of the corporation shall be represented by certificates signed by, or in
the name of the corporation by, the president or a vice-president and by the
secretary or an assistant secretary of the corporation. Each holder of stock in
the corporation shall be entitled to have such a certificate certifying the
number of shares owned by him in the corporation.
Section B. TRANSFER AGENTS. Any of or all the signatures on
the certificate may be a facsimile if the certificate is countersigned by a
transfer agent or registered by a registrar other than the corporation itself or
its employee. In case any officer who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer before
such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer at the date of issue. The seal of the
corporation or a facsimile thereof may, but need not, be affixed to the
certificates of stock.
Section C. LOST, DESTROYED OR MUTILATED CERTIFICATES. The
board of directors may direct a new certificate for shares to be issued in place
of any certificate theretofore issued by the corporation alleged to have been
lost or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost or destroyed. When authorizing such
issue of a new certificate, the board of directors may, in its discretion and as
a condition precedent to the issuance thereof, require the owner of such lost or
destroyed certificate, or his legal representative, to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the corporation with respect to the certificate alleged to have
been lost or destroyed.
Section D. TRANSFER OF SHARES. Upon surrender to the
corporation or the transfer agent of the corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its stock transfer book for shares of the
corporation.
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<PAGE>
Section E. FIXING OF RECORD DATE. In order that the
corporation may determine the shareholders entitled to notice of, or to vote at,
any meeting of shareholders or any adjournment thereof, or to express consent
to, or to dissent from, a proposal without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or for
the purpose of any other action, the board of directors may fix, in advance, a
date as a record date, which shall not be more than sixty (60) nor less than ten
(10) days before the date of such meeting, nor more than sixty (60) days prior
to any other action. The stock transfer books of the corporation shall not be
closed.
If no record date is fixed:
1. The record date for determining the shareholders of record
entitled to notice of, or to vote at, a meeting of shareholders shall be at the
close of business on the day on which notice is given, or, if no notice is
given, at the close of business on the day next preceding the day on which the
meeting is held; and
2. the record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of shareholders of record entitled to notice
or to vote at a meeting of shareholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
Section F. EXCLUSIVE OWNERSHIP OF SHARES. The corporation
shall be entitled to recognize the exclusive right of a person registered upon
its stock transfer book for shares of the corporation as the owner of shares for
all purposes, including voting and dividends, and shall not be bound to
recognize any equitable or other claim to interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Florida.
Section G. LIMITATION ON TRANSFER OF SHARES. If the holders of
a majority or more of the shares of Common or Preferred Stock shall enter into
an agreement restricting or limiting the sale, transfer, assignment, pledge, or
hypothecation of the shares of the corporation, and the corporation shall become
a party to such agreement, the officers and directors of the corporation shall
observe and carry out all of the terms and provisions of such agreement and
refuse to recognize any sale, transfer, assignment, pledge or hypothecation of
any or all of the shares covered by such agreement, unless it shall conform with
the provisions and terms of such agreement, provided that a copy of such
agreement shall be filed with the secretary of the corporation and be kept
available at the principal office of the corporation, and provided further, that
notice of such agreement be set forth conspicuously on the face or back of each
stock certificate.
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ARTICLE VII.
INDEMNIFICATION
The corporation shall indemnify, or advance expenses to, to
the fullest extent authorized or permitted by the Florida General Corporation
Act, any person made, or threatened to be made, a party to any action, suit or
proceeding by reason of the fact that he (i) is or was a director of the
corporation; (ii) is or was serving at the request of the corporation as a
director of another corporation; (iii) is or was an officer of the corporation,
provided that he is or was at the time a director of the corporation; or (iv) is
or was serving at the request of the corporation as an officer of another
corporation, provided that he is or was at the time a director of the
corporation or a director of such other corporation, serving at the request of
the corporation. Unless otherwise expressly prohibited by the Florida General
Corporation Act, and except as otherwise provided in the foregoing sentence, the
Board of Directors of the corporation shall have the sole and exclusive
discretion, on such terms and conditions as it shall determine, to indemnify, or
advance expenses to, any person made, or threatened to be made, a party to any
action, suit, or proceeding by reason of the fact that he is or was an officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as an officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise. No person falling within
the purview of the foregoing sentence may apply for indemnification or
advancement of expenses to any court of competent jurisdiction.
ARTICLE VIII.
GENERAL PROVISIONS
Section A. CHECKS, DRAFTS AND BANK ACCOUNTS. All checks,
drafts or demands for money and notes of the corporation shall be signed by such
officer or officers or such other person or persons as the board of directors
may from time to time designate. 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 of directors
may from time to time designate.
Section B. FISCAL YEAR. The fiscal year of the corporation
shall be fixed from time to time by resolution of the board of directors, but
shall end on December 31st of each year if not otherwise fixed by the board.
Section C. CORPORATE SEAL. The board of directors may adopt a
corporate seal for the corporation. The corporate seal shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, Florida." The
seal may be used by causing it or a facsimile thereof to be impressed or affixed
or reproduced or otherwise.
-11-
<PAGE>
Section D. CORPORATE MINUTES AND STOCK TRANSFER BOOK. The
corporation shall keep within or without the State of Florida books and records
of account and minutes of the proceedings of its shareholders, board of
directors and executive committee, if any. The corporation shall keep at its
registered office or at the office of its transfer agent within or without the
State of Florida a stock transfer book for shares of the corporation containing
the names and addresses of all shareholders, the number, class and series of
shares held by each and the dates when they respectively became holders of
record thereof. Any of such stock transfer book, books, records or minutes may
be in written form or in any other form capable of being converted into written
form within a reasonable time.
Section E. BYLAW GOVERNANCE NOT EXCLUSIVE. These Bylaws shall
govern the internal affairs of the corporation, but only to the extent they are
consistent with law and the Articles of Incorporation. Nothing contained in the
Bylaws shall, however, prevent the imposition by contract of greater voting,
notice or other requirements than those set forth in these Bylaws.
Section F. SHAREHOLDERS' AGREEMENT. Should the shareholders of
the corporation at any time enter into a Shareholders' Agreement following the
adoption of the Bylaws then, to the extent that the terms of the Shareholders'
Agreement as thereafter amended, is inconsistent with the Bylaws or the Articles
of Incorporation the terms of the Shareholders' Agreement shall govern the
internal affairs of the corporation.
ARTICLE IX.
AMENDMENTS
BYLAWS. The Bylaws may be amended or repealed, or new Bylaws
may be adopted, by action of either the shareholders or the board of directors.
The shareholders may from time to time specify particular provisions of the
Bylaws which shall not be altered or repealed by the board of directors.
-12-
EXHIBIT 10.1
ARTICLES OF MERGER
OF
FIRST RESERVE, INC.
(A FLORIDA CORPORATION)
AND
FIRST RESERVE, INC.
(AN ARIZONA CORPORATION)
Pursuant to the provisions of Section 10-1105, Arizona Statutes, these
Articles of Merger provide that:
1. First Reserve, Inc., a Florida corporation (the
"Subsidiary"), shall be merged with and into First Reserve, Inc., an Arizona
corporation (the "Parent"), which shall be the surviving corporation (the
"Surviving Corporation").
2. The address of the Surviving Corporation shall be 1360 S.
Dixie Highway, Miami, Florida 33146.
3. The name and address of the statutory agent of the
Surviving Corporation is:
Michael S. Williams
3710 E. Kent Drive
Phoenix, Arizona 85044
4. The Parent adopted an Agreement and Plan of Merger (the
"Plan"), dated as of April 1, 1998 that merges the Subsidiary into the Parent
pursuant to and in accordance with the Plan and Section 10-1104, Arizona
Statutes, which governs the merger of a subsidiary into its parent. The Board of
Directors of the Parent and the Subsidiary respectively approved the Plan.
5. Shareholder approval was not required for this transaction
in accordance with Section 10-1104A., Arizona Statutes.
6. The Plan provides that upon the effective date of these
Articles of Merger all assets and liabilities of the Subsidiary shall be assumed
by the Surviving Corporation and the share certificates representing the shares
of common stock of the Subsidiary shall be canceled.
7. The Plan shall be effectuated pursuant to Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended and shall be
effective as of the day on which these Articles of Merger are filed by the
Secretary of State of Arizona.
<PAGE>
IN WITNESS WHEREOF, these Articles of Merger have been executed on
behalf of each of the Parent and the Subsidiary by their authorized officers as
of April 1, 1998.
FIRST RESERVE, INC., a Florida corporation
By:/S/ALLEN C. HARPER
Allen C. Harper, Chief Executive Officer
FIRST RESERVE, INC., an Arizona corporation
By:/S/RONALD A. SHUFFIELD
Ronald A. Shuffield, President
-2-
EXHIBIT 10.2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated April 1, 1998 by and between FIRST
RESERVE, INC., a Florida corporation ("FRI-Florida") and FIRST RESERVE, INC., an
Arizona corporation ("FRI-Arizona").
WHEREAS, FRI-Arizona owns all of the issued and outstanding shares of
common stock of FRI-Florida, representing the only class of shares issued and
outstanding of FRI-Florida.
WHEREAS, FRI-Arizona wishes to merge its subsidiary FRI-Florida into
itself in accordance with Section lO-1104, Arizona Statutes.
WHEREAS, the Board of Directors of FRI-Arizona deems it advisable and
in the best interests of both corporations that FRI-Florida be merged into
FRI-Arizona as provided herein.
NOW, THEREFORE, it is agreed as follows:
I. As soon as practicable after this Agreement and Plan of Merger (the
"Plan") has been executed by the duly authorized officers of FRI-Florida and
FRI-Arizona, it shall be filed, along with the accompanying Articles of Merger,
in the office of the Secretary of State of Arizona. The term "Effective Date" as
used herein shall mean the date on which this Plan is feed with the Secretary of
State of Arizona.
II. On the Effective Date, FRI-Florida shall be merged into its parent,
FRI-Arizona, and the separate corporate existence of FRI-Florida shall cease.
FRI-Arizona shall be the surviving corporation, under its present name, and
shall continue to be governed by the laws of the State of Arizona. All shares
owned by FRI-Florida, as the parent of its wholly-owned subsidiaries,
Esslinger-Wooten-Maxwell, Inc. and First Reserve Realty, Inc., and shares owned
in First Reserve Enterprises, Inc. shall be transferred to FRI-Arizona, as the
surviving entity.
III. The Articles of Incorporation of FRI-Arizona in effect on the
Effective Date shall continue as the Articles of Incorporation of the surviving
corporation. The By-laws of FRI-Arizona in effect on the Effective Date shall
continue as the By-laws of the surviving corporation. The officers and directors
of FRI-Arizona in office on the Effective Date shall continue to hold their
respective positions.
IV. Each share of common stock of FRI-Florida that is issued and
outstanding on the Effective Date shall cease to be outstanding and shall be
canceled by FRI-Arizona. There are no shareholders of FRI-Florida other than
FRI-Arizona and therefore no shareholder is entitled to dissenters rights or is
required to receive notice of this Plan.
V. Each share of FRI-Arizona Common Stock that is issued and
outstanding on
-1 -
<PAGE>
the Effective Date of the merger shall not be converted or exchanged in any
manner but each such share shall continue to represent one issued and
outstanding share of FRI-Arizona, as the surviving corporation.
VI. This Plan may be abandoned or terminated prior to the filing
thereof with the Secretary of State of Arizona by resolution duly adopted by the
Board of Directors of FRI-Arizona.
VII. The parties hereby adopt this Plan which is intended to be a
reorganization pursuant to Section 368(a)(1)(A) of the Internal Revenue Code of
1986, as amended, and as a statutory merger pursuant to Section 10-1101, ET SEQ.
of Arizona Statutes. The terms of the merger shall be in accordance with the
Articles of Merger executed contemporaneously herewith, and attached and made a
part hereto.
VIII. The appropriate officers of the Parties are authorized to take
all such necessary actions to transfer contracts, information, assets or any
other property so that this Plan may be effectedpursuant ot the provisions
herewith, and in accordance with the Articles of Merger being filed
contemporaneously herewith.
IN WITNESS WHEREOF, the parties have duly executed this Agreement of
Merger as of the date first written above.
FIRST RESERVE, INC., a Florida corporation
By: /s/ ALLEN C. HARPER
----------------------------------------------
Allen C. Herper, Chief Executive Officer
FIRST RESERVE, INC., an Arizona corporation
By: /s/ RONALD A. SHUFFIELD
----------------------------------------------
Ronald A. Shuffield, President
-2-
EXHIBIT 10.3
ARTICLES OF MERGER
OF
BYRNE-RINEHART & CO.
(A FLORIDA CORPORATION)
AND
ESSLINGER-WOOTEN-MAXWELL, INC.
(A FLORIDA CORPORATION)
Pursuant to the provisions of Section 607.1105, Florida Statutes, these
Article of Merger provide that:
1. Byrne-Rinehart & Co., a Florida corporation (the "Acquiree"), shall
be merged with and into Esslinger-Wooten-Maxwell, Inc., a Florida corporation
(the "Acquiror"), which shall be the surviving corporation (the "Surviving
Corporation").
2. The merger shall become effective as of the day on which these
Articles of Merger are filed by the Secretary of State of Florida.
3. The Plan of Reorganization and Acquisition Agreement (the "Plan"),
dated as of May 1, 1998, pursuant to which the Acquiree shall be merged with and
into the Acquiror, was unanimously approved and adopted by the shareholders of
the Acquiror on May 1, 1998, and was unanimously approved by the shareholders of
the Acquiree on May ___, 1998.
4. The Plan provides that the holders of all the issued and outstanding
shares of Common Stock, par value $.10 per share, of Acquiree shall
automatically and without any action by the record owners thereof be converted
into the right to receive shares of First Reserve, Inc., an Arizona corporation
("Acquiror Parent"), in the ratio of 4,000 shares of Acquiror Parent Common
Stock for each share of Acquiree Common Stock. Fractional shares of Acquiror
Parent Common Stock shall be rounded up to the next larger whole share. Upon
tender by the shareholders of Acquiree of certificates representing their shares
of Common Stock of Acquiree, such shareholders shall receive certificates
representing their shares of Acquiror Parent Common Stock.
IN WITNESS WHEREOF, these Articles of Merger have been executed on
behalf of each of the Acquiror and the Acquiree by their authorized officers as
of May 1, 1998.
BYRNE-RINEHART & CO.,
By:/S/THOMAS E. BYRNE
Thomas E. Byrne, President
ESSLINGER-WOOTEN-MAXWELL, INC.
By:/S/RONALD A. SHUFFIELD
Ronald A. Shuffield, President
EXHIBIT 10.4
ARTICLES AND PLAN OF MERGER
OF
GERARD INTERNATIONAL REALTY, INC.
(A FLORIDA CORPORATION)
AND
ESSLINGER-WOOTEN-MAXWELL, INC.
(A FLORIDA CORPORATION)
Pursuant to the provisions of Section 607.1105, Florida Statutes, these
Article and Plan of Merger provide that:
1. Gerard International Realty, Inc., a Florida corporation (the
"Acquiree"), shall be merged with and into Esslinger-Wooten-Maxwell, Inc., a
Florida corporation (the "Acquiror"), which shall be the surviving corporation
(the "Surviving Corporation").
2. The merger shall become effective as of the day on which these
Articles of Merger are filed by the Secretary of State of Florida.
3. The Plan of Reorganization and Acquisition Agreement (the "Plan"),
dated as of ______________________, 1998, pursuant to which the Acquiree shall
be merged with and into the Acquiror, was approved and adopted by the sole
shareholder of the Acquiror on September 1, 1998, and was unanimously approved
by the shareholders of the Acquiree on ________________________, 1998.
4. The Plan provides that the holders of all the issued and outstanding
shares of Common Stock, par value $1.00 per share, of Acquiree shall
automatically and without any action by the record owners thereof be converted
into the right to receive shares of First Reserve, Inc., a Florida corporation
("Acquiror Parent"), in the ratio of 3,000 shares of Acquiror Parent Common
Stock for each share of Acquiree Common Stock. Fractional shares of Acquiror
Parent Common Stock shall be rounded up to the next larger whole share. Upon
tender by the shareholders of Acquiree of certificates representing their shares
of Common Stock of Acquiree, such shareholders shall receive certificates
representing their shares of Acquiror Parent Common Stock.
IN WITNESS WHEREOF, these Articles of Merger have been executed on
behalf of each of the Acquiror and the Acquiree by their authorized officers as
of ___________________________, 1998.
GERARD INTERNATIONAL REALTY, INC.
By:/S/NELSON GONZALEZ
Nelson Gonzalez, President
ESSLINGER-WOOTEN-MAXWELL, INC.
By:/S/RONALD A. SHUFFIELD
Ronald A. Shuffield, President
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into on this 5th day of March
1998, by and between First Reserve, Inc., an Arizona corporation (the "Company")
and Allen C. Harper ("Executive").
RECITALS
A. The Company, through Esslinger-Wooten-Maxwell, Inc.
("EWM"), its wholly- owned subsidiary, is engaged in the real estate brokerage
business.
B. The Executive has been employed as the Chairman and Chief
Executive Officer of EWM since 1984.
C. The Company and the Executive wish to memorialize their
existing relationship and provide for the Executive to continue as the Chairman
and Chief Executive Officer of EWM and to be the Chairman and Chief Executive
Officer of the Company, subject to the terms and conditions of this Agreement.
In consideration of the premises and the mutual agreements herein, the
Company and Executive hereby agree as follows:
1. EMPLOYMENT.
(a) The Company hereby employs Executive, and
Executive hereby accepts and agrees to such employment, as the Chairman and
Chief Executive Officer of the Company and the President of EWM.
(b) Executive shall have the duties and
responsibilities normally associated with the Chairman and Chief Executive
Officer of both the Company and EWM, including, but not limited to, overseeing
and managing all aspects of the Company's real estate brokerage business.
(c) Executive shall report to the Board of Directors
of the Company. While employed by the Company, Executive shall not, without the
prior written consent of the Board of Directors, render his professional
services to anyone other than the Company and will devote his full professional
time, attention, and best efforts to the business of the Company and the
fulfillment of his duties and obligations hereunder. The Executive shall also
serve on the Board of Directors of the Company.
2. TERM. The Executive shall be employed for a term of five
years from the date hereof, subject to earlier termination as provided herein.
If the Executive is still employed at the end of the first five year term, the
Executive may extend his employment for an additional five year term, at the
option of the Executive.
<PAGE>
3. COMPENSATION. For all services rendered by the Executive
pursuant to Paragraph 1 hereof, the Company shall pay to and provide for
Executive (i) a salary of $270,000 per annum, (ii) a bonus as provided at the
discretion of the Company's Board of Directors, and (iii) any additional
benefits provided herein. Executive's salary and commissions shall be paid
bi-monthly, or at such other regular intervals consistent with the normal
payroll periods for the Company's other sales representatives, and such payments
shall be subject to the usual deductions for income tax, FICA, and Medicare.
Executive's salary may be adjusted annually by the Board of Directors; provided,
however, that Executive's salary shall at no time be less than his first year
salary and shall at all times be at least 10% higher than the salary paid to the
Executive for the previous year.
4. VACATION. During the term of employment under this
Agreement, Executive shall be entitled to vacations (without deduction in
compensation or benefits) of such duration and at such time or times as may be
consistent with prevailing vacation policies of the Company, but not less than
three weeks per calendar year. Such vacation time shall be adjusted pro rata for
the number of months worked in the initial and final partial years of this
Agreement. Unused available vacation time may cumulate from one year into the
following year.
5. INSURANCE AND OTHER BENEFITS. To the extent eligible,
Executive may participate in any group disability, medical, retirement, pension
or other similar Company benefit or insurance plan which is or may become
generally available to other Executives of the Company, including participation
in a 401(k) Plan. Additionally, the Company, at its expense, shall provide the
Executive with life insurance and disability insurance, with the Executive or
his designees as the beneficiaries thereof. Any payments received by Executive
from such disability insurance or any other insurance provided herein shall not
reduce the Executive's salary hereunder.
6. EXPENSES. The Company will reimburse the Executive's
reasonable and necessary telephone, entertainment, travel and other expenses
which are incurred in the furtherance of the Company's business purposes. The
Company will also provide a monthly luxury automobile allowance.
7. DEATH OR INCAPACITY.
(a) In addition to any other rights of the Executive
pursuant to any disability policies provided to Executive by the Company, if
Executive is unable at any time during the term of this Agreement to perform his
services by reason of physical or mental illness or incapacity, he shall receive
his then regular compensation for the period then established in the Company's
policies and procedures for Executives of the Company. If Executive is unable to
consistently perform his material duties under this Agreement for any period of
90 consecutive days by reason of physical or mental illness or incapacity, the
Company may terminate this Agreement at
2
<PAGE>
any time without any further liability to Executive beyond payment of two months
of salary as a severance payment. Periods of consecutive incapacity within the
same twelve month period arising from the same mental or physical condition
which are less than 90 days each shall be cumulated and considered consecutive.
The Board of Directors of the Company shall determine in its sole discretion
whether Executive is ill or incapacitated for purposes of this Paragraph.
(b) In addition to any rights existing under any life
insurance policies provided by the Company to Executive, in the event of death
of Executive at any time during the term of this Agreement, the Company shall
pay to his surviving spouse, if any, the pro rata salary to which Executive was
entitled through the date of his death. If Executive has no surviving spouse,
then the Company shall pay the aggregate amount of such pro rata salary to
Executive's estate.
(c) In the event of death or disability of Executive
prior to the end of a fiscal year of the Company, Executive (or Executive's
estate, as the case may be) shall be entitled to a partial bonus of each year
equal to the full bonus to which he would have been entitled under Paragraph
2(b), above, if any, multiplied by a fraction the numerator of which is the
number of days in the fiscal year during which the Executive was employed by the
Company and the denominator of which is 365.
8. TERMINATION.
(a) The Company may terminate this Agreement, and the
Executive's employment hereunder, for "cause", subject to the notice and cure
provisions of paragraph 8(b) below, if at any time the Executive:
(i) commits an act of theft or
embezzlement from or fraud on the
Company;
(ii) willfully refuse to continue his
employment with the Company (except
if disabled);
(iii) materially fails to comply with the
Company's policies; or
(iv) is convicted of a felony or commits
an act of moral turpitude or
illegality that (a) brings the
reputation of the Company into
public disrepute or (b) causes the
Company to be viewed unfavorably by
the public.
Upon termination, the Company as applicable, shall have no further
liability hereunder except for salary accrued to the date of such termination
notice or the first date of willful refusal by Executive to continue his
employment, whichever the case may be.
(b) Before the Company terminates Executive it shall
give him written notice of his pending termination and give him 14 days from the
date of the notice in which to cure the reason that gave rise to his pending
termination. If in the reasonable determination of the Board of Directors
Executive has timely cured the reason, the Company shall send written
notification to
3
<PAGE>
Executive that he shall not be terminated. Otherwise, Executive shall be
forthwith terminated without further notice, his last day of employment being
the last day of his cure period.
(c) In the event the Company unilaterally terminates
this Agreement without cause prior to its expiration, the Company shall remain
liable for all salary, payments and benefits otherwise due to Executive for the
balance of the term of the Agreement.
9. SEVERANCE; CHANGE IN CONTROL.
(a) If the Company terminates the Executive for any
reason other than "for cause" as provided in paragraph 8, above, then the
Executive shall be entitled to receive severance compensation for a period of
two years (or the remainder of the Executive's term if shorter) following
termination, at a rate equal to the Executive's base salary as of the date of
termination. In addition, the Executive shall be entitled to receive all
medical, insurance and other benefits as provided hereunder for the remainder of
the term of the Agreement and the bonus payment provided in paragraph 2(b) for
the year in which the Executive was terminated.
(b) In addition, should a Change in Control (as
defined below) of the Company occur and the Executive's employment is terminated
within two years thereafter (except if "for cause" as provided in paragraph 8
above), the Executive shall be entitled to a special lump sum severance payment
equal to two years base salary and bonus, with all insurance, medical and other
benefits to be provided to the Executive for the remainder of the term of the
Agreement.
(c) As used in this Agreement, a "Change in Control"
is any of the following:
(i) the acquisition of 25% or more of the
outstanding voting stock of the Company by
any person or entity with the exception of
the Executive or Allen C. Harper;
(ii) the persons serving as directors of the
Company as of the date hereof, and those
replacements or additions subsequently
approved, cease to make up at least one-half
of the Board;
(iii) a merger, consolidation or share exchange in
which the shareholders of the Company prior
to the merger wind up owning 80% or less of
the surviving corporation; or
(iv) a complete liquidation on dissolution of the
Company or disposition of all or
substantially all of the assets of the
Company.
4
<PAGE>
10. ENTIRE AGREEMENT. This Agreement contains the entire
agreement concerning employment arrangements between the Company and Executive
and supersedes all prior written and oral understandings of the parties with
respect thereto. This Agreement may not be changed except by a writing signed by
the party against whom the enforcement of any waiver, change, extension,
modification or discharge is sought.
11. NOTICES. Any notice required or permitted to be given
under this Agreement shall be sufficient if in writing and delivered in person
or sent by certified mail to the party involved at the address shown on the
signature page, or to such other address as either party may specify to the
other in writing. The date two days after the date of mailing of such notice
shall be deemed to be the date of delivery thereof.
12. ASSIGNMENT. This Agreement shall inure to the benefit of,
and shall be binding upon, the Company, and its successors and assigns.
13. SEVERABILITY. In the event any term, paragraph or
provision of this Agreement or its application to any circumstances shall to any
extent be deemed invalid or unenforceable, the remainder of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
14. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida. Exclusive venue
for any proceedings shall be brought in Miami-Dade County, Florida only.
15. CONSULTATION OF ATTORNEYS. The Company and Executive
acknowledge that they each have had the opportunity to consult its or his
respective attorney with respect to this Agreement and that they each understand
its contents.
16. GENDER REFERENCE. Wherever appropriate, the masculine
gender may include the feminine or neuter, and the singular may include the
plural and vice versa.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first written above.
"Company"
FIRST RESERVE, INC.
Witnesses:
_______________________ By: /S/ RONALD A. SHUFFIELD
Its: President
_______________________
Address: 1360 S. Dixie Highway
Coral Gables, FL 33146
"Executive"
Witnesses:
_______________________ /S/ ALLEN C. HARPER
Allen C. Harper
_______________________ Address:
6
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into on this 5th day of March,
1998, by and between First Reserve, Inc., an Arizona corporation (the "Company")
and Ronald A. Shuffield ("Executive"). RECITALS
A. The Company, through Esslinger-Wooten-Maxwell, Inc.
("EWM"), its wholly- owned subsidiary, is engaged in the real estate brokerage
business.
B. The Executive has been employed as the President of EWM
since 1984.
C. The Company and the Executive wish to memorialize their
existing relationship and provide for the Executive to continue as the President
of EWM and to be the President of the Company, subject to the terms and
conditions of this Agreement.
In consideration of the premises and the mutual agreements herein, the
Company and Executive hereby agree as follows:
1. EMPLOYMENT.
(a) The Company hereby employs Executive, and
Executive hereby accepts and agrees to such employment, as the President of the
Company and the President of EWM.
(b) Executive shall have the duties and
responsibilities normally associated with the President of the Company and
President of EWM, including, but not limited to, overseeing and managing all
aspects of the Company's real estate brokerage business.
(c) Executive shall report to the Board of Directors
of the Company. While employed by the Company, Executive shall not, without the
prior written consent of the Board of Directors, render his professional
services to anyone other than the Company and will devote his full professional
time, attention, and best efforts to the business of the Company and the
fulfillment of his duties and obligations hereunder. The Executive shall also
serve on the Board of Directors of the Company.
2. TERM. The Executive shall be employed for a term of five
years from the date hereof, subject to earlier termination as provided herein.
If the Executive is still employed at the end of the first five year term, the
Executive may extend his employment for an additional five year term, at the
option of the Executive.
3. COMPENSATION. For all services rendered by the Executive
pursuant to Paragraph 1 hereof, the Company shall pay to and provide for
Executive (i) a salary of $320,000 per annum, (ii) a bonus as provided at the
discretion of the Company's Board of Directors, and (iii) any additional
benefits provided herein. Executive's salary and commissions shall be paid
bi-monthly, or at such other regular intervals consistent with the normal
payroll periods for the Company's other
<PAGE>
sales representatives, and such payments shall be subject to the usual
deductions for income tax, FICA, and Medicare. Executive's salary may be
adjusted annually by the Board of Directors; provided, however, that Executive's
salary shall at no time be less than his first year salary and shall at all
times be at least 10% higher than the salary paid to the Executive for the
previous year.
4. VACATION. During the term of employment under this
Agreement, Executive shall be entitled to vacations (without deduction in
compensation or benefits) of such duration and at such time or times as may be
consistent with prevailing vacation policies of the Company, but not less than
three weeks per calendar year. Such vacation time shall be adjusted pro rata for
the number of months worked in the initial and final partial years of this
Agreement. Unused available vacation time may cumulate from one year into the
following year.
5. INSURANCE AND OTHER BENEFITS. To the extent eligible,
Executive may participate in any group disability, medical, retirement, pension
or other similar Company benefit or insurance plan which is or may become
generally available to other Executives of the Company, including participation
in a 401(k) Plan. Additionally, the Company, at its expense, shall provide the
Executive with life insurance and disability insurance, with the Executive or
his designees as the beneficiaries thereof. Any payments received by Executive
from such disability insurance or any other insurance provided herein shall not
reduce the Executive's salary hereunder.
6. EXPENSES. The Company will reimburse the Executive's
reasonable and necessary telephone, entertainment, travel and other expenses
which are incurred in the furtherance of the Company's business purposes. The
Company will also provide a monthly luxury automobile allowance.
7. DEATH OR INCAPACITY.
(a) In addition to any other rights of the Executive
pursuant to any disability policies provided to Executive by the Company, if
Executive is unable at any time during the term of this Agreement to perform his
services by reason of physical or mental illness or incapacity, he shall receive
his then regular compensation for the period then established in the Company's
policies and procedures for Executives of the Company. If Executive is unable to
consistently perform his material duties under this Agreement for any period of
90 consecutive days by reason of physical or mental illness or incapacity, the
Company may terminate this Agreement at any time without any further liability
to Executive beyond payment of two months of salary as a severance payment.
Periods of consecutive incapacity within the same twelve month period arising
from the same mental or physical condition which are less than 90 days each
shall be cumulated and considered consecutive. The Board of Directors of the
Company shall determine in its sole discretion whether Executive is ill or
incapacitated for purposes of this Paragraph.
2
<PAGE>
(b) In addition to any rights existing under any life
insurance policies provided by the Company to Executive, in the event of death
of Executive at any time during the term of this Agreement, the Company shall
pay to his surviving spouse, if any, the pro rata salary to which Executive was
entitled through the date of his death. If Executive has no surviving spouse,
then the Company shall pay the aggregate amount of such pro rata salary to
Executive's estate.
(c) In the event of death or disability of Executive
prior to the end of a fiscal year of the Company, Executive (or Executive's
estate, as the case may be) shall be entitled to a partial bonus of each year
equal to the full bonus to which he would have been entitled under Paragraph
2(b), above, if any, multiplied by a fraction the numerator of which is the
number of days in the fiscal year during which the Executive was employed by the
Company and the denominator of which is 365.
8. TERMINATION.
(a) The Company may terminate this Agreement, and the
Executive's employment hereunder, for "cause", subject to the notice and cure
provisions of paragraph 8(b) below, if at any time the Executive:
(i) commits an act of theft or
embezzlement from or fraud on the
Company;
(ii) willfully refuse to continue his
employment with the Company (except
if disabled);
(iii) materially fails to comply with the
Company's policies; or
(iv) is convicted of a felony or commits
an act of moral turpitude or
illegality that (a) brings the
reputation of the Company into
public disrepute or (b) causes the
Company to be viewed unfavorably by
the public.
Upon termination, the Company as applicable, shall have no further
liability hereunder except for salary accrued to the date of such termination
notice or the first date of willful refusal by Executive to continue his
employment, whichever the case may be.
(b) Before the Company terminates Executive it shall
give him written notice of his pending termination and give him 14 days from the
date of the notice in which to cure the reason that gave rise to his pending
termination. If in the reasonable determination of the Board of Directors
Executive has timely cured the reason, the Company shall send written
notification to Executive that he shall not be terminated. Otherwise, Executive
shall be forthwith terminated without further notice, his last day of employment
being the last day of his cure period.
(c) In the event the Company unilaterally terminates
this Agreement without cause prior to its expiration, the Company shall remain
liable for all salary, payments and benefits otherwise due to Executive for the
balance of the term of the Agreement.
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9. SEVERANCE; CHANGE IN CONTROL.
(a) If the Company terminates the Executive for any
reason other than "for cause" as provided in paragraph 8, above, then the
Executive shall be entitled to receive severance compensation for a period of
two years (or the remainder of the Executive's term if shorter) following
termination, at a rate equal to the Executive's base salary as of the date of
termination. In addition, the Executive shall be entitled to receive all
medical, insurance and other benefits as provided hereunder for the remainder of
the term of the Agreement and the bonus payment provided in paragraph 2(b) for
the year in which the Executive was terminated.
(b) In addition, should a Change in Control (as
defined below) of the Company occur and the Executive's employment is terminated
within two years thereafter (except if "for cause" as provided in paragraph 8
above), the Executive shall be entitled to a special lump sum severance payment
equal to two years base salary and bonus, with all insurance, medical and other
benefits to be provided to the Executive for the remainder of the term of the
Agreement.
(c) As used in this Agreement, a "Change in Control"
is any of the following:
(i) the acquisition of 25% or more of the
outstanding voting stock of the Company by
any person or entity with the exception of
the Executive or Allen C. Harper;
(ii) the persons serving as directors of the
Company as of the date hereof, and those
replacements or additions subsequently
approved, cease to make up at least one-half
of the Board;
(iii) a merger, consolidation or share exchange in
which the shareholders of the Company prior
to the merger wind up owning 80% or less of
the surviving corporation; or
(iv) a complete liquidation on dissolution of the
Company or disposition of all or
substantially all of the assets of the
Company.
10. ENTIRE AGREEMENT. This Agreement contains the entire
agreement concerning employment arrangements between the Company and Executive
and supersedes all prior written and oral understandings of the parties with
respect thereto. This Agreement may not be changed except by a writing signed by
the party against whom the enforcement of any waiver, change, extension,
modification or discharge is sought.
11. NOTICES. Any notice required or permitted to be given
under this Agreement shall be sufficient if in writing and delivered in person
or sent by certified mail to the party involved at the address shown on the
signature page, or to such other address as either party may
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specify to the other in writing. The date two days after the date of mailing of
such notice shall be deemed to be the date of delivery thereof.
12. ASSIGNMENT. This Agreement shall inure to the benefit of,
and shall be binding upon, the Company, and its successors and assigns.
13. SEVERABILITY. In the event any term, paragraph or
provision of this Agreement or its application to any circumstances shall to any
extent be deemed invalid or unenforceable, the remainder of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
14. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida. Exclusive venue
for any proceedings shall be brought in Miami-Dade County, Florida only.
15. CONSULTATION OF ATTORNEYS. The Company and Executive
acknowledge that they each have had the opportunity to consult its or his
respective attorney with respect to this Agreement and that they each understand
its contents.
16. GENDER REFERENCE. Wherever appropriate, the masculine
gender may include the feminine or neuter, and the singular may include the
plural and vice versa.
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IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first written above.
"Company"
FIRST RESERVE, INC.
Witnesses:
_______________________ By: /S/ ALLEN C. HARPER
Its: Chairman and Chief Executive Officer
_______________________
Address: 1360 S. Dixie Highway
Coral Gables, FL 33146
"Executive"
Witnesses:
_______________________ /S/ RONALD A. SHUFFIELD
Ronald A. Shuffield
_______________________ Address: 9568 S.W. 67 Court
Miami, FL 33156
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EXHIBIT 23.1
[MCCLAIN & COMPANY, L.C. LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion of our audit of the consolidated balance sheet of
First Reserve, Inc. and Subsidiaries as of December 31, 1998, and the related
consolidated statements of income, stockholders' equity and cash flows for the
eleven-month period then ended, as part of this Form 10-SB.
/s/ McClain & Company, L.C.
- ---------------------------
McClain & Company, L.C.
Miami, Florida
May 14, 1999
EXHIBIT 23.2
[MCCLAIN & COMPANY, L.C. LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion of our audit of the combined balance sheet of
First Reserve, Inc. and Subsidiaries, First Reserve Enterprises, Inc. and
Embassy Financial Services, Inc. as of January 31, 1998, and the related
combined statements of income and retained earnings and cash flows for the
year then ended as part of this Form 10-SB.
/s/ McClain & Company, L.C.
- ---------------------------
McClain & Company, L.C.
Miami, Florida
May 14, 1999
