<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 14, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ABLE ENERGY, INC.
(Name of Small Business Issuer as specified in its charter)
------------------------------
<TABLE>
<S> <C> <C>
DELAWARE 5983 22-3520840
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
</TABLE>
344 ROUTE 46
ROCKAWAY, NJ 07866
(973) 625-1012
(Address and telephone number of principal executive offices)
------------------------------
TIMOTHY HARRINGTON, CHIEF EXECUTIVE OFFICER
ABLE ENERGY, INC.
344 ROUTE 46
ROCKAWAY, NJ 07866
(973) 625-1012
(Name, address and telephone number of agent for service)
------------------------------
COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
GREGORY SICHENZIA, ESQ. VICTOR DIGIOIA, ESQ.
SICHENZIA, ROSS & FRIEDMAN LLP BRIAN DAUGHNEY, ESQ.
135 WEST 50TH STREET, 20TH FLOOR GOLDSTEIN & DIGIOIA LLP
NEW YORK, NEW YORK 10020 369 LEXINGTON AVENUE
TELEPHONE NO.: (212) 664-1200 NEW YORK, NY 10017
FACSIMILE NO.: (212) 664-7329 TELEPHONE NO.: (212) 599-3322
FACSIMILE NO.: (212) 557-0295
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE AND
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
MAXIMUM
MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER SECURITY(1) PRICE(1) FEE
<S> <C> <C> <C> <C>
Units, each consisting of two
shares of Common Stock, $.001 par
value per share and one
Redeemable Common Stock Purchase
Warrant(2)....................... 1,006,250 $8.25 $8,301,562.50 $2,448.96
Common Stock underlying Units(3)... 2,012,500 -- -- --
Common Stock purchase warrants
underlying Units(4).............. 1,006,250 -- -- --
Common Stock underlying
warrants(5)...................... 1,006,250 $5.00 $5,031,250.00 $1,484.22
Underwriter's Warrant(6)........... 1 $10.00 $10.00 $(7)
Underwriter's Units(8)............. 87,500 $12.375 $1,082,812.50 $319.43
Common Stock underlying
Underwriters Units(9)............ 175,000 -- -- --
Common Stock purchase warrants
underlying Underwriters
Units(10)........................ 87,500 $7.50 $656,250 $193.59
Common Stock underlying
Underwriters Unit Warrants(11)... 150,000 -- -- --
Total.............................. 5,531,251 $43.125 $15,071,884 $4,446.20
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(a) of the Securities Act of 1933, as amended.
(2) Includes 131,250 Units subject to sale upon exercise of the Underwriter's
over-allotment option.
(3) Includes 262,500 shares of Common Stock subject to sale upon exercise of the
Underwriter's over-allotment option.
(4) Includes 131,250 common stock purchase warrants subject to sale upon
exercise of the Underwriter's over-allotment option.
(5) Issuable upon exercise of the Warrants, together with such indeterminate
number of securities as may be issuable by reason of anti-dilution
provisions contained therein.
(6) The Underwriter's Warrant is for the purchase of Units.
(7) No fee due pursuant to Rule 457(g).
(8) Consists of Units issuable upon the exercise of the Underwriter's Warrant.
(9) Consists of Common Stock included in the Units issuable upon the exercise of
the Underwriter's Warrant.
(10) Consists of Common Stock purchase warrants included in the Units issuable
upon the exercise of the Underwriter's Warrant.
(11) Consists of Common Stock issuable upon exercise of the Warrants included in
the Units issuable upon the exercise of the Underwriter's Warrant, together
with such indeterminate number of securities as may be issuable by reason of
anti-dilution provisions contained therein.
<PAGE>
ABLE ENERGY, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM SB-2 ITEM NUMBER AND CAPTION CAPTIONS IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Front of Registration Statement and Outside Front
Cover of Prospectus................................ Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus...................................... Cover Page, Inside Cover Page, Outside Back Page
3. Summary Information and Risk Factors................. Prospectus Summary, Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Cover Page, Underwriting
6. Dilution............................................. Dilution
7. Selling Securityholders.............................. Principal Stockholders and Selling Securityholders;
Alternate Pages for Selling Securityholder
Prospectus
8. Plan of Distribution................................. Prospectus Summary, Underwriting
9. Legal Proceedings.................................... Business
10. Directors, Executive Officers, Promoters and Control
Persons............................................ Management, Principal Stockholders
11. Security Ownership of Certain Beneficial Owners and
Management......................................... Principal Stockholders
12. Description of Securities............................ Description of Securities
13. Interest of Named Experts and Counsel................ *
14. Disclosure of Commission Position on Indemnification
for Securities Act
Liabilities........................................ Management
15. Organization Within Last Five Years.................. Prospectus Summary, Business
16. Description of Business.............................. Prospectus Summary, Business
17. Management's Discussion and Analysis or Plan of
Operation.......................................... Management's Discussion and Analysis of Financial
Condition and Results of Operations
18. Description of Property.............................. Business
19. Certain Relationships and Related
Transactions....................................... Certain Transactions
20. Market for Common Equity and RelatedShareholder
Matters............................................ Front Cover Page, Description of Securities
21. Executive Compensation............................... Management
22. Financial Statements................................. Financial Statements
23. Changes in and Disagreements with Accounts on
Accounting and Financial Disclosure................ *
</TABLE>
- ------------------------
* Not Applicable
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 14, 1998
PROSPECTUS
ABLE ENERGY, INC.
875,000 UNITS CONSISTING OF 1,750,000 SHARES OF COMMON STOCK
AND 875,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS.
Able Energy, Inc. (the "Company") is hereby offering to the public 875,000
units ("Units") consisting of 1,750,000 shares of common stock, $.001 par value
per share (the "Common Stock or the "Shares") and 875,000 Class A redeemable
common stock purchase warrants ("Warrants"). The initial public offering price
of the Units is $8.25 and has been determined by negotiations between the
Company and Walsh Manning Securities, LLC as underwriter (the "Underwriter") and
do not necessarily bear any direct relationship to the Company's assets,
earnings, book value per share or other generally accepted criteria of value.
For a discussion of the factors considered in determining the offering price see
"Underwriting." The Common Stock and the Warrants will be immediately separately
transferable. The Units, Common Stock and Warrants are sometimes referred to as
the "Securities. The offering of the Units hereby is sometimes referred to as
the "Offering" herein.
Each Warrant entitles the holder to purchase one share of Common Stock at an
exercise price of $5.00 per share, subject to adjustment in certain events,
during the four year period commencing one year from the date of this Prospectus
(the "Effective Date"). The Warrants are subject to redemption by the Company at
$.10 per Warrant, at any time commencing one year from the Effective Date (or
earlier with the consent of the Underwriters) and prior to their expiration, on
not less than 30 days' written notice to the holders of the Warrants, provided
the closing bid price per share of Common Stock if traded on the NASDAQ SmallCap
Market, or the last sales price per share if listed on the Nasdaq National
Market or a national exchange has been at least 200% ($10.00 per share) of the
then current Warrant exercise price, for a period of 10 consecutive business
days ending on the third day prior to the date upon which the notice of
redemption is given. The Warrants shall be exercisable until the close of
business on the date preceding the date fixed for redemption. See "Description
of Securities--Warrants."
Prior to the Offering, there has been no public market for the Company's
securities and there can be no assurance that a market will develop in the
future or that if developed, it will be sustained. The Company is applying for
listing and quotation of the Common Stock and Warrants on the Nasdaq SmallCap
Market under the symbols "ABLE" and "ABLEW", respectively, and for listing on
the Boston Stock Exchange under the symbols "ABL" and "ABLW", respectively. No
separate securities for the Units will be issued. The Units will not be listed
for trading on either the Nasdaq SmallCap Market or the Boston Stock Exchange,
and no separate trading market will exist for the Units.
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK AND IMMEDIATE AND SUBSTANTIAL DILUTION. SEE "RISK FACTORS" COMMENCING ON
PAGE 7 AND "DILUTION" ON PAGE 14.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) THE COMPANY(2)
<S> <C> <C> <C>
Per Unit................................................. $8.25 $.825 $7.425
Total (3)................................................ $7,218,750 $721,875 $6,496,875
</TABLE>
(1) Does not include additional consideration to be received by the Underwriter
in the form of (i) a non-accountable expense allowance equal to 3% of the
gross offering proceeds, (ii) any value attributable to the Underwriter's
Warrant entitling the Underwriter to purchase up to 87,500 Units at a price
per Unit equal to 150% of the initial public offering price per Unit
("Underwriter's Warrant"), and (iii) a financial consulting agreement with
the Underwriter for a period of two years for an aggregate consideration of
$166,000 payable in full on the closing of the Offering. In addition, the
Company has agreed to indemnify the Underwriter against certain liabilities
under the Securities Act of 1933, as amended (the "Act"). See
"Underwriting".
(2) After deducting discounts and commission payable to the Underwriter, but
before payment of the Underwriter's non-accountable expense allowance of
$216,562.5 (or $259,921.8 if the over-allotment option, defined below, is
exercised in full) and the other expenses of the Offering, estimated at
$461,562.50 payable by the Company. See "Underwriting."
(3) The Company has granted the Underwriter an option, exercisable for 45 days
after the effective date of the Offering (the "Effective Date") to purchase
up to an additional 131,250 Units consisting of 262,500 shares of Common
Stock from the Company (which include the Shareholder Shares, as defined
below) and 131,250 Warrants upon the same terms and conditions set forth
above, solely for the purpose of covering over-allotments, if any (the
"Over-Allotment Option"). In the event that the over-allotment option is
exercised by the Underwriter , the Underwriter has agreed to use its best
efforts to allow Timothy Harrington, the Chief Executive Officer of the
Company, to sell up to an aggregate of 50,000 shares of the Company's Common
Stock held by Mr. Harrington (the "Shareholder Shares"). All references and
calculations concerning the exercise of the Over-Allotment Option assume the
sale of the Shareholder Shares. If the Over-Allotment Option is exercised in
full, the total Price to the Public, Underwriting Discounts and Commissions,
Proceeds to the Company will be $8,301,562.5, $830,156.25 and $7,250,648.44
respectively. See "Underwriting."
Units being offered by this Prospectus are being offered by the Underwriter
on a "firm commitment" basis, when, as and if delivered to and accepted by the
Underwriter, subject to prior sale, and other conditions and legal matters. The
Underwriter reserves the right to withdraw, cancel or modify the Offering and to
reject orders, in whole or in part. It is expected that delivery of the
certificates representing the Common Stock and Warrants will be made against
payment therefor at the offices of the Underwriter, 90 Broad Street, New York,
New York 10004 on or about [ ], 1998.
WALSH MANNING SECURITIES, LLC
----------------
The date of this Prospectus is , 1998
<PAGE>
------------------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY, INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE THEIR
MARKET PRICE, PURCHASES OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT
POSITION IN THE COMMON STOCK MAINTAINED BY THE UNDERWRITER AND THE IMPOSITION OF
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
(INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE
CONTEXT OTHERWISE REQUIRES, THE TERM "COMPANY" REFERS TO ABLE ENERGY, INC. AND
ITS WHOLLY-OWNED SUBSIDIARIES ABLE OIL, INC. ("ABLE OIL"), ABLE PROPANE, L.L.C.
("ABLE PROPANE"), ABLE OIL MELBOURNE, INC. ("ABLE MELBOURNE"), ABLE OIL COMPANY
MONTGOMERY ("ABLE MONTGOMERY") AND A & O ENVIRONMENTAL SERVICES, INC. ("A&O").
EXCEPT AS OTHERWISE INDICATED HEREIN, THE INFORMATION CONTAINED IN THIS
PROSPECTUS GIVES NO EFFECT TO THE ISSUANCE OR EXERCISE OF (I) THE OVER-ALLOTMENT
OPTION, (II) THE UNDERWRITER'S WARRANT, AND (III) OPTIONS ISSUABLE UNDER THE
COMPANY'S STOCK OPTION PLAN. ALL PER SHARE INFORMATION IN THIS PROSPECTUS HAS
BEEN ADJUSTED TO REFLECT A ONE FOR 2,000 FORWARD STOCK SPLIT OF THE COMPANY'S
COMMON STOCK EFFECTED IN [ ] 1998.
THE COMPANY
Able Energy was incorporated on March 13, 1997 in the state of Delaware, to
act as a holding company for five operating subsidiaries: Able Oil; Able
Propane; Able Melbourne; Able Montgomery and A&O.
The Company's operating entities are engaged in the retail distribution of,
and the provision of services relating to, fuel oil, propane gas and natural gas
through a joint venture with AllEnergy LLC, a division of New England Electric
Systems, Inc. In addition to selling home energy products, the Company installs
and repairs home heating equipment, provides environmental services for
residential and commercial customers and also markets other petroleum products
to commercial customers, including diesel fuel, gasoline and lubricants. The
Company considers the provision of service and installation services to be an
integral part of its basic fuel oil business. For example, the Company provides
home heating equipment repair service to its customers on a twenty-four
hours-a-day, seven-days-a-week basis, generally within two hours of request.
Except in isolated instances, the Company does not provide service to any person
who is not a customer.
In fiscal year 1997, sales of home heating oil accounted for approximately
68% of the Company's revenues. The remaining 32% of revenues were from sales of
gasoline, diesel fuel, kerosine, propane, and environmental services and related
sales. For the three month period ended March 31, 1998, sales of home heating
oil accounted for 69% of the Company's revenues. The Company serves
approximately 25,000 home heating oil customers from four locations, of which
two are located in New Jersey, one is located in Pennsylvania and one is located
in Florida.
The Company employs a dynamic marketing strategy which the Company believes
has been the key to its success. The Company believes that it is able to obtain
new customers and maintain existing customers by offering its unique concept of
full service home energy products at discount prices, providing quick response
refueling and repair operations, providing automatic deliveries to customers by
monitoring historical use and weather patterns, and by providing customers a
variety of payment options. The Company regularly provides various service
incentives to obtain and retain customers. The Company aggressively promotes its
service through a variety of direct marketing media, including mail and
telemarketing campaigns, by providing discounts to customers who refer new
customers to the Company, and through an array of advertising, including
television advertisements and billboards, which aim to increase brand name
recognition.
The Company intends to use a substantial portion of the proceeds of this
offering to expand its operations. The Company's strategy to expand its
operations includes (i) the acquisition of select operators in the Company's
present markets as well as other markets; (ii) capturing market share from
competitors through increased advertising and other means; (iii) diversifying
its products; (iv) diversifying its customer base; and (iv) replicating its
marketing and service formula in new geographic areas either directly or
3
<PAGE>
through franchise arrangements. The Company may also enter into joint ventures
with other entities in product areas different than the Company's current
product mix.
The Company believes that it has established, albeit on a limited scale, a
brand name and a reputation for quality, volume and service. The Company
believes that it may be able to create a franchise operation to capitalize and
expand on its brand name recognition. The Company intends to operate its
franchise operations pursuant to franchise agreements with franchisees. Under
these franchise agreements, it is anticipated that franchisees will be required
to: (i) pay to the Company an initial franchise fee, annual fees of
approximately 5% of the franchisees gross sales, plus $.04 per gallon of fuel
sold; (ii) purchase insurance; (iii) purchase from the Company promotional
materials and energy products during the life of the franchise. In return, the
Company will provide franchisees with source of fuel supply, guidelines and
specifications for the operations of the franchise, initial training, licenses
for the use of other promotional techniques. As of the date of this prospectus,
no such franchises have been sold by the Company and there can be no assurance
that any will be sold in the future.
The Company believes that recent and anticipated deregulation of public
utility companies in the Company's markets has created a window of opportunity
for the Company to expand into new product areas, particularly the retail sale
of electricity and natural gas. The Company believes it can capitalize on these
opportunities through joint ventures with companies which have previously been
successful in such areas although there can be no assurance that the Company's
expansion into the retail sale of electricity and natural gas will be
successful.
The Company's principal offices are located at 344 Route 46, Rockaway, NJ
07866 and its telephone number is (973) 625-1012.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered................ 875,000 Units consisting of 1,750,000 shares of Common
Stock and 875,000 Warrants. The Common Stock and the
Warrants comprising the Units will be separately
transferable immediately upon issuance. See "Description
of Securities."
Description of Warrants
Exercise of Warrants............ Subject to redemption by the Company, the Warrants may
be exercised at any time during the four year period
commencing one year from the date of this prospectus at
an exercise price of $5.00 per share.
Redemption of Warrants............ The Warrants are redeemable by the Company commencing 12
months from the date of this prospectus, or earlier with
the consent of the Underwriter, at $.10 per Warrant, on
not less than 30 days prior written notice, provided
that the last sale price of the Common Stock is at least
$10.00 for at least 20 consecutive trading days ending
on the third day prior to the date of the Company's
notice of redemption, and provided further that the
underlying shares of common stock are subject to a
current registration statement allowing the resale
thereof. See "Description of Securities".
Common Stock Outstanding
Prior to Offering(1)............ 2,025,000
Common Stock to be Outstanding
After Offering(2)............... 3,775,000
Warrants Outstanding Prior to the
Offering........................ 0
Warrants to be outstanding After
the Offering.................... 875,000
Use of Proceeds................... The net proceeds to the Company from the sale of the
Securities are estimated to be approximately $5,818,750
after deducting commissions and expenses of the
Offering, which are estimated at $1,400,000. The Company
intends to use the net proceeds of this Offering for
acquisitions, new products and business lines, sales and
marketing, addition of new terminal space, computer
hardware and software and installation, purchase of real
property, hiring of additional personnel, and for
working capital and general corporate purposes. See "Use
of Proceeds."
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Proposed Nasdaq SmallCap Symbol(3):
Common Stock...................... ABLE
Warrants.......................... ABLEW
Proposed Boston Stock Exchange Symbol (3):
Common Stock...................... ABL
Warrants.......................... ABLW
Risk Factors...................... The securities offered hereby are speculative, involve a
high degree of risk and immediate substantial dilution,
and should be considered only by investors who can
afford to sustain a loss of their entire investment. See
"Risk Factors" and "Dilution."
</TABLE>
- ------------------------
(1) Reflects issuance of 2,000,000 shares of Common Stock to Timothy Harrington
as founders stock and in exchange for all of the common stock previously
held by him in the operating subsidiaries, and 25,000 issued to Sichenzia,
Ross & Friedman LLP, legal counsel to the Company.
(2) Does not include (i) 175,000 shares of Common Stock and 87,500 Warrants
which may be issued upon exercise of the Underwriter's Warrants; (ii)
262,500 shares of Common Stock and 131,250 Warrants which may be issued upon
exercise of the Underwriter's over-allotment option; and (iii) 375,000
shares of Common Stock reserved for issuance under the Company's Stock
Option Plan of which options to purchase shares have been issued as of
the date hereof. See "Management," "Description of Securities" and
"Underwriting."
(3) Notwithstanding listing on the Boston Stock Exchange and Nasdaq SmallCap
Market, there can be no assurance that an active trading market for the
Company's securities will develop or, if developed, will be sustained.
6
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table sets forth summary historical financial data and other
operation information of the Company. The selected historical financial data in
the table for the years ended December 31, 1997 and 1996 is derived from the
audited financial statements of the Company. The selected financial data set
forth for the three month period ended March 31, 1997 and 1998 are derived from
unaudited financial information provided by the Company. The selected financial
data set forth below should be read in conjunction with the Company's financial
statements and notes thereto and with the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
STATEMENT OF INCOME DATA:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------- --------------------------
<S> <C> <C> <C> <C>
1997 1996 1998 1997
------------- ------------- ------------ ------------
Revenues............................................... $ 16,499,943 $ 12,981,457 $ 5,504,512 $ 5,342,650
Gross Profit........................................... 3,358,357 2,408,707 1,353,042 1,209,632
Income from operations................................. 217,588 256,411 500,624 329,921
Earnings (loss) per share(1)........................... .109 .127 .250 .165
Weighted average number of shares outstanding.......... 2,025,000 2,025,000 2,025,000 2,025,000
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
MARCH 31, 1998
DECEMBER 31, -----------------------------
1997 ACTUAL AS ADJUSTED(2)
------------- ------------- --------------
<S> <C> <C> <C>
Working capital.................................................... $ (761,188) $ (510,431) $ 5,308,319
Total assets....................................................... 3,552,524 3,802,279 9,621,029
Long-term liabilities.............................................. 1,321,388 1,271,115 1,271,115
Total liabilities.................................................. 3,154,264 3,136,201 3,136,201
Total shareholders' equity......................................... 398,260 666,078 6,486,827
</TABLE>
- ------------------------
(1) Net earnings per common share is based upon the weighted average number of
common shares outstanding for each period presented.
(2) As adjusted to reflect net proceeds of $5,818,750 from the sale by the
Company in this offering of 875,000 Units at the assumed public offering
price of $8.25 per Unit.
7
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS, IN
ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH INVESTMENTS IN THE SECURITIES OFFERED HEREBY. THIS PROSPECTUS CONTAINS
CERTAIN FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET
FORTH BELOW AND ELSEWHERE IN THIS PROSPECTUS. AN INVESTMENT IN THE SECURITIES
OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
This Prospectus contains certain forward-looking statements, including among
other things: (i) anticipated trends in the Company's financial condition and
results of operations; and (ii) the Company's business strategy for managing and
expanding its operations. These forward-looking statements are based largely on
the Company's current expectations and are subject to a number of risks and
uncertainties. Actual results could differ materially from these forward-looking
statements. In addition to other risks described elsewhere in this "Risk
Factors" discussion, important factors to consider in evaluating such
forward-looking statements include (i) changes in external competitive market
factors or trends in the Company's results of operation; (ii) unanticipated
working capital or other cash requirements; (iii) changes in the Company's
business strategy or an inability to execute its competitive factors that may
prevent the Company from competing successfully in the marketplace. In light of
these risks and uncertainties, many of which are described in greater detail
elsewhere in this "Risk Factors" discussion, there can be no assurance that the
events predicted in forward-looking statements contained in this Prospectus
will, in fact, transpire.
LIMITED OPERATING HISTORY; MANAGEMENT OF GROWTH. The Company was
incorporated in March 1997 to act as a holding company for its five operating
subsidiaries. Although the Company has only been in operation for a limited
time, Able Oil, the Company's major operating subsidiary, has been in business
since 1987 and currently accounts for approximately 87% of the Company's total
revenue. The Company's remaining subsidiaries were each established within the
past three years and, accordingly, have limited operating histories upon which
evaluation of its prospects can be made. There can be no assurance that the
subsidiaries, other than Able Oil, will generate substantial revenues or attain
profitable operations.
The Company plans to continue to pursue an aggressive growth strategy
through its operating subsidiaries, and anticipates significant change in its
business activities and operations. The Company's growth has required, and will
continue to require, increased investment in management personnel, financial and
management systems and controls and facilities. The Company's past expansion has
placed, and any future expansion would place, significant demands on the
Company's administrative, operational, financial and other resources. The
Company intends to continue to expand its business and operations, including
entry into new markets, that will place additional strain on the Company's
management and operations. The Company's future operating results will depend,
in part, on its ability to continue to broaden the Company's senior management
group and administrative infrastructure, and its ability to attract, hire and
retain skilled employees. The Company's success will also depend on the ability
of its officers and key employees to continue to implement and improve the
Company's operational and financial control systems and to expand, train and
manage its employee base. In addition, the Company's future operating result
will depend on its ability to expand its sales and marketing capabilities and
expand its customer support operations commensurate with its growth, should such
growth occur. If the Company's revenues do not increase in proportion to its
operating expenses, the Company's management systems do not expand to meet
increasing demands, the Company fails to attract, assimilate and retain
qualified personnel, or the Company's management otherwise fails to manage the
Company's expansion effectively, there would be a material adverse effect on the
Company's business, financial condition and operating results. See "Business."
SEASONAL FACTORS. To date substantially all of the Company's revenues and
income have been derived from the home heating oil business. The Company's home
heating oil business is seasonal, as a substantial
8
<PAGE>
portion of its business is conducted during the fall and winter months. Weather
patterns during the winter months can have a material adverse impact on its
revenues. Although temperature levels for the heating season have been
relatively stable over time, variations can occur from time to time, and warmer
than normal winter weather will adversely effect the results of the Company's
fuel oil operations. See "Business--Fundamental Characteristics of the Company's
Business--Seasonality."
FUEL PRICING: EFFECT ON PROFITABILITY. Gasoline, Heating Oil and Diesel
Fuel are commodities and, as such, their wholesale prices are subject to changes
in supply or other market conditions over which the Company has no control.
While, in the past, the Company has been able to pass on any increases in
commodities prices to its customers, there can be no assurance that the Company
may be able to fully pass on future increases in the wholesale prices of these
commodities to its customers and still be competitive. Additionally,
approximately 5% of the Company's total sales are made to customers pursuant to
an agreement which pre-establishes the maximum sales price of fuel oil over a
twelve-month period. Such prices are renegotiated in April of each year and the
Company has historically purchased fuel oil for these customers in advance and
at a fixed cost. Should the Company be unable to make such advance purchases of
fuel oil, any future increase in wholesale fuel oil prices could have an adverse
affect on the Company. Because the Company sells fuel to its customers at fixed
amounts over its wholesale cost, the Company's gross profit as a percentage of
gross revenue may not fluctuate as a result of changes in the wholesale prices
of these goods. The Company does not engage in derivatives or futures trading to
hedge fuel price movements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
DEPENDENCE UPON SUPPLY OF PETROLEUM PRODUCTS. Five major suppliers provide
the Company with its inventory requirements. One supplier Bayway Tosco Refining
Corp., located in Linden, New Jersey, provided approximately 30%, and Sun Oil
Company provided approximately 30%, of the Company's total Number 2 Heating Oil
requirements for the year ended December 31, 1997. For the three month period
ended March 31, 1998, Bayway Tosco Refining Corp., provided approximately 30%
and SunOil Company provided approximately 30% of such oil. The loss of either
supplier would not have a material adverse effect on the Company.
Two major suppliers provide the Company with its propane product
requirements. Each of Ferrellgas Partners, L.P. and Propane Power, Inc. provided
the Company with approximately 50% of its propane requirements for the year
ended December 31, 1997. The loss of either supplier could have a material
adverse effect on Able Propane.
The Company met substantially all of its gasoline and diesel product
requirements through Bayway Tosco Refining Corp. and Petron Oil Corporation for
the year ended December 31, 1997. Each of these entities supplied approximately
50% of such requirements during such period.
Management believes that if the Company's supply of any of the foregoing
products was interrupted, the Company would be able to secure adequate supplies
from other sources without a material disruption in its operations. However,
there can be no assurance that adequate supplies of such petroleum products will
be readily available in the future. See "Business--Fundamental Characteristics
of the Company's Business--Wholesale Suppliers."
GOVERNMENT REGULATION. Federal, state and local laws, particularly laws
relating to the protection of the environment and worker safety, can materially
affect the Company's operations. The transportation of fuel oil, diesel fuel,
propane and gasoline is subject to regulation by various federal, state and
local agencies, including the U.S. Department of Transportation ("DOT"). These
regulatory authorities have broad powers and the Company is subject to
regulatory and legislative changes that can effect the economies of the industry
by requiring changes in operating practices or influencing demand for, and the
cost of providing, its services. Additionally, the Company is subject to random
DOT inspections. Any material violation of DOT rules or the Hazardous Materials
Transportation Act may result in citations
9
<PAGE>
and/or fines upon the Company. In addition, the Company depends on the supply of
petroleum products from the oil and gas industry and, therefore, is affected by
changing taxes, price controls and other laws and regulations relating to the
oil and gas industry generally. The Company cannot determine the extent to which
future operations and earnings may be affected by new legislation, new
regulations or changes in existing regulations. See "Business--Government
Regulation."
POTENTIAL ENVIRONMENTAL LIABILITY. The Company's operations are subject to
all of the operating hazards and risks that are normally incidental to handling,
storing, transporting and delivering fuel oils, gasoline, diesel and propane,
which are classified as hazardous materials. The Company faces potential
liability for, among other things, fuel spills, gas leaks and negligence in
performing environmental clean-ups for its customers. Specifically, the Company
maintains fuel storage facilities on sites owned or leased by the Company, and
could incur significant liability to third parties or governmental entities for
damages, clean-up costs and/or penalties in the event of certain discharges into
the environment. Such liability can be extreme and could have a material adverse
effect on the Company's financial condition or results of operations.
Although the Company believes that it is in compliance with existing laws
and regulations, there can be no assurance that substantial costs for compliance
will not be incurred in the future. Any substantial violations of these rules
and regulations could have an adverse affect upon the Company's operations.
Moreover, it is possible that other developments, such as more stringent
environmental laws, regulations and enforcement policies thereunder, could
result in additional, presently unquantifiable, costs or liabilities to the
Company. See "Business--Environmental Considerations."
RISKS NOT COVERED BY INSURANCE. The Company maintains insurance policies in
such amounts and with coverage and deductibles as the Company' management
("Management") believes are reasonable and prudent. There can be no assurance,
however, that such insurance will be adequate to protect the Company from
liabilities and expenses that may arise from claims for personal and property
damage arising in the ordinary course of business or that such levels of
insurance will be maintained by the Company or will be available at economic
prices.
FRANCHISING. The Company intends to commence franchise arrangements to
expand its operations and revenue base. The Company's future growth may be
dependent upon new franchisees and the manner in which they operate and develop
their Able Energy locations to promote and develop the Company's concept and its
reputation for quality and value. Although the Company has established criteria
to evaluate prospective franchisees it has not yet had success attracting
franchisees, and there can be no assurance that franchisees will have the
business abilities or access to financial resources necessary to open Able
Energy locations or operate such locations in their franchise areas in a manner
consistent with the Company's concepts and standards. In addition, because the
Company believes that a potential franchisee's total estimated investment
relating to an Able Energy location is generally low, the Company may be more
likely to attract franchisees with limited franchise experience and limited
financial resources.
As a result of its intended franchising activity, the Company will be
subject to Federal Trade Commission ("FTC") regulation and various state laws
that govern the offer, sale and termination of, and refusal to renew,
franchises. Several state laws also regulate substantive aspects of the
franchisor-franchisee relationship. The FTC requires the Company to furnish
prospective franchisees a franchise offering circular containing prescribed
information. A number of states in which the Company might consider franchising
also regulate the sale of franchises and require registration of the franchise
offering circular with state authorities. Substantive state laws that regulate
the franchisor-franchisee relationship presently exist in substantial number of
states, and bills have been introduced in Congress from time to time which would
provide for federal regulation of the franchisor-franchisee relationship in
certain respects. The state laws often limit, among other things, the duration
and scope of non-competition provisions and the ability of a franchisor to
terminate or refuse to renew a franchise. See "Business-- Franchises and
Government Regulation."
10
<PAGE>
TRADEMARKS AND SERVICE MARKS. The Company believes that its trademarks and
service marks have significant value and are important to the marketing of its
products and services, especially if the Company is successful in implementing
its franchise program. There can be no assurance, however, that the Company's
proprietary marks do not or will not violate the proprietary rights of others,
that the Company's marks would be upheld if challenged or that the Company would
not be prevented from using its marks, any of which could have an adverse effect
on the Company. In addition, there can be no assurance that the Company will
have the financial resources necessary to enforce or defend its trademarks and
service marks against infringement. See "Business--Patents and Trademarks."
COMPETITION FROM ALTERNATE ENERGY SOURCES. The Company is engaged primarily
in the retail home heating business and competes for customers with suppliers of
alternate energy products, principally natural gas and electricity. While the
Company is now marketing regulated natural gas, every year, a small percentage
of the Company's oil customers convert to other home heating sources, primarily
natural gas. In addition, the Company may lose additional customers due to
conversions during periods in which the cost of its services exceeds the cost of
alternative energy sources. See "Business--Conversion to Natural Gas and
Competition."
COMPETITION FOR NEW CUSTOMERS. The Company's business is highly
competitive. In addition to competition from alternative energy sources, the
Company competes with distributors offering a broad range of services and
prices, from full service distributors similar to the Company, to those offering
delivery only. Competition with other companies in the retail home heating
industry is based primarily on customer service and price. Longstanding customer
relationships are typical in the industry. Many companies, including the
Company, deliver fuel to their customers based upon weather conditions and
historical consumption patterns without the customers making an affirmative
purchase decision each time fuel is needed. In addition, most companies,
including the Company, provide equipment repair service on a 24 hour a day
basis, which tends to build customer loyalty. The Company competes against
companies that may have greater financial resources than the Company. As a
result, the Company may experience difficulty in acquiring new retail customers
due to existing relationships between potential customers and other retail home
heating distributors. See "Business--Competition."
ABSENCE OF WRITTEN AGREEMENTS. Approximately 50% of the Company's customers
do not have written agreements with the Company and can terminate services at
any time, for any reason. Although the Company has never experienced a
significant loss of its customers, if the Company were to experience a high rate
of terminations, the Company's business and financial condition could be
adversely affected. See "Business--Retail Propane Distribution."
RELIANCE ON MAJOR CUSTOMERS. Able Melbourne had five major customers in
fiscal year 1997. These customers accounted for 11,7%, 12.3%, 8.9%, 6.1% and
5.9% of Able Melbourne's total sales in fiscal year 1997 and 14.5%, 12.1%,
11.5%, 5.6% and 4.4% of total sales for the three months ended March 31, 1998.
The loss of these customers could have a material adverse affect on the
financial condition of the Able Melbourne. While the loss of any of the above
customers is likely to have an adverse affect on the financial condition of the
individual operating subsidiary, it is not likely to impact the Company's
overall financial condition. See "Business--Retail Fuel Oil--Able Melbourne."
RISKS ASSOCIATED WITH EXPANSION INTO NEW MARKETS. A significant element of
the Company's future growth strategy involves the expansion of the Company's
business into new geographic and product markets. Expansion of the Company's
operations depend, among other things, the success of the Company's marketing
strategy in new markets, successfully establishing and operating new locations,
hiring and retaining qualified management and other personnel, and obtaining
adequate financing for vehicle and site purchases and working capital purposes.
See "Business--Expansion."
GROWTH DEPENDENT UPON ACQUISITIONS. The Company's growth strategy includes
the acquisition of existing fuel distributors. There can be no assurance that
the Company will be able to identify new
11
<PAGE>
acquisition candidates or, even if a candidates is identified, that the Company
will have access to the capital necessary to consummate such acquisitions.
Furthermore, the acquisition of additional companies involve a number of
additional risks. These risks include the diversion of Management's attention
from the operations of the Company, possible difficulties with the assimilation
of personnel and operations of acquired companies, the amortization of acquired
intangible assets, and the potential loss of key employees of acquired
companies. The future success of the Company's business will depend upon the
Company's ability to manage its growth through acquisitions. See
"Business--Expansion--Acquisitions."
NEED FOR ADDITIONAL FINANCING. The Company believes that the proceeds of
the Offering, together with revenues from operations and capital available from
the Company's line of credit, will be sufficient to finance the Company's
working capital requirements for the foreseeable future following the completion
of the Offering. In addition, a part of the Company's growth strategy is to
expand its operations through the acquisition of existing fuel distributors. The
continued operation and expansion of the Company's business may be dependent
upon its ability to obtain additional financing to acquire new and existing
entities. There can be no assurance that additional financing will be available
on terms acceptable to the Company, or at all. In the event that the Company is
unable to obtain such additional financing as it becomes necessary, the Company
may not be able to achieve all of its business plans. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
DEPENDENCE ON KEY PERSONNEL. The Company's future success will depend, to a
significant extent, on the efforts of key management personnel, including
Timothy Harrington, the Company's Chairman and Chief Executive Officer. The
Company will enter into employment agreements with Timothy Harrington and
Christopher Westad prior to the effective date of the Registration Statement.
The loss of one or more of these key employees could have a material adverse
effect on the Company's business. The Company anticipates acquiring key-person
life insurance policies on its executive officers. In addition, the Company
believes that its future success will depend in large part upon its continued
ability to attract and retain highly qualified management, technical and sales
personnel. There can be no assurance that the Company will be able to attract
and retain the qualified personnel necessary for its business. See "Management."
CONTROL BY EXISTING STOCKHOLDERS. Upon the completion of this Offering, the
Company's management will collectively beneficially own approximately 52.9%
(48.8% if the Underwriter's Over-Allotment Option is exercised in full) of the
Company's outstanding Common Stock. Because of their beneficial stock ownership,
these stockholders will be in a position to continue to elect the majority
members of the Board of Directors and decide matters requiring stockholder
approval. See "Principal Stockholders."
NO PRIOR PUBLIC MARKET. Prior to this Offering, there has been no public
market for the Securities. Accordingly, there can be no assurance that an active
trading market will develop and be sustained upon the completion of this
Offering. The initial public offering price of the Securities has been
determined by negotiations between the Company and the Underwriter and does not
necessarily bear any relation to the Company's asset value, earnings or other
objective criteria. See "Underwriting." The stock market has, from time to time,
experienced extreme price and volume fluctuations which often have been
unrelated to the operating performance of particular companies. Although it has
no obligation to do so, the Underwriter intends to engage in market-making
activities or solicited brokerage activities with respect to the purchase or
sale of the Securities on the Nasdaq SmallCap Market. However, no assurance can
be given that the Underwriter will continue to participate as a market-maker in
the securities of the Company or that other broker-dealers will make a market in
such securities which may adversely impact the liquidity of the securities.
Regulatory developments and economic and other external factors, as well as
period-to-period fluctuations in financial results, may also have a significant
impact on the market price of such securities. See "Description of Securities."
IMMEDIATE AND SUBSTANTIAL DILUTION. This Offering involves an immediate and
substantial dilution to investors. Purchasers of Units in the Offering will
incur an immediate dilution of $2.34 per share of Common Stock in the net
tangible book value of their investment from the initial public offering price,
12
<PAGE>
which dilution amounts to approximately 60% of the initial public offering price
per share of Common Stock. Investors in the Offering will pay $4.00 per share of
Common Stock, as compared with an average cash price of $.24 per share of Common
Stock paid by existing stockholders. See "Dilution."
BROAD DISCRETION IN APPLICATION OF PROCEEDS BY MANAGEMENT. Approximately
49.8% of the net proceeds of this Offering will be applied towards unidentified
acquisitions, 16.6% for development of new products and business lines, and
32.22% of the net proceeds of this Offering will be applied to working capital
and general corporate purposes. Accordingly, Management will have broad
discretion over the use of proceeds. See "Use of Proceeds."
SHARES ELIGIBLE FOR FUTURE SALE. Of the 3,775,000 shares of Common Stock of
the Company to be outstanding upon completion of this Offering, 2,025,000 shares
shall be "restricted securities," of which 2,000,000 shares are owned by
"affiliates" of the Company (assuming none of the Shareholder Shares are sold in
the Over-Allotment), as those terms are defined in Rule 144 promulgated under
the Act. Absent registration under the Act, the sale of such shares is subject
to Rule 144, as promulgated under the Act. All of the "restricted securities"
are eligible for resale under Rule 144. In general, under Rule 144, subject to
the satisfaction of certain other conditions, a person, including an affiliate
of the Company, who has beneficially owned restricted shares of Common Stock for
at least one year is permitted to sell in a brokerage transaction, within any
three-month period, a number of shares that does not exceed the greater of 1% of
the total number of outstanding shares of the same class, or if the Common Stock
is quoted on Nasdaq or a stock exchange, the average weekly trading volume
during the four calendar weeks preceding the sale. Rule 144 also permits a
person who presently is not and who has not been an affiliate of the Company for
at least three months immediately preceding the sale and who has beneficially
owned the shares of Common Stock for at least two years to sell such shares
without regard to any of the volume limitations as described above. Holders of
2,000,000 shares of Common Stock are affiliates of the Company. All of the
Company's shareholders who are affiliates, and legal counsel to the Company, who
own 25,000 shares of Common Stock of the Company, have agreed not to sell or
otherwise dispose of any of their shares of Common Stock now owned or issuable
upon the exercise of any option for a period of 24 months from the Effective
Date, without the prior written consent of the Underwriter. No prediction can be
made as to the effect, if any, that sales of shares of Common Stock or the
availability of such shares for sale will have on the market prices of the
Company's securities prevailing from time to time. The possibility that
substantial amounts of Common Stock may be sold under Rule 144 into the public
market may adversely affect prevailing market prices for the Common Stock and
could impair the Company's ability to raise capital in the future through the
sale of equity securities. See "Shares Eligible for Future Sale."
NO DIVIDENDS AND NONE ANTICIPATED. To date, no dividends have been declared
or paid on the Common Stock, and the Company does not anticipate declaring or
paying any dividends in the foreseeable future, but rather intends to reinvest
profits, if any, in its business. Investors should, therefore, be aware that it
is unlikely that any dividends will be paid on the Common Stock in the
foreseeable future. See "Dividends."
POSSIBLE ADVERSE EFFECT OF PENNY STOCK REGULATIONS ON THE LIQUIDITY OF THE
COMPANY'S SECURITIES. The Company intends to apply for listing of the Common
Stock and Warrants on the Nasdaq SmallCap Market and the Boston Stock Exchange.
In the absence of the Common Stock being quoted on Nasdaq and if the Common
Stock is not listed on another exchange, trading in the Common Stock would be
covered by Rule 15g-9 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") if the Common Stock is a "penny stock." Under such
rule, broker-dealers who recommend such securities to persons other than
established customers and accredited investors must make a special written
suitability determination for the purchaser and receive the purchaser's written
agreement to a transaction prior to sale. Securities are exempt from this rule
if the market price is at least $5.00 per share.
The Commission adopted regulations that generally define a penny stock to be
any equity security that has a market price of less than $5.00 per share,
subject to certain exceptions. Such exceptions include an
13
<PAGE>
equity security listed on Nasdaq, and an equity security issued by an issuer
that has (i) net tangible assets of at least $2,000,000, if such issuer has been
in continuous operation for three years, (ii) net tangible assets of at least
$5,000,000, if such issuer has been in continuous operation for less than three
years, or (iii) average revenue of at least $6,000,000 for the preceding three
years. Unless an exception is available, the regulations require the delivery,
prior to any transaction involving a penny stock, of a disclosure schedule
explaining the penny stock market and the risks associated therewith.
If the Company's securities were to become subject to the regulations
applicable to penny stocks, the market liquidity for the securities would be
severely affected, limiting the ability of broker-dealers to sell the securities
and the ability of purchasers in this Offering to sell their securities in the
secondary market. There can be no assurance that trading in the securities will
not be subject to these or other regulations that would adversely affect the
market for such securities.
NASDAQ ELIGIBILITY AND MAINTENANCE REQUIREMENTS; POSSIBLE DELISTING OF
COMMON STOCK FROM NASDAQ SMALLCAP MARKET. Prior to this Offering, there has
been no established public trading market for the Company's Common Stock or
Warrants and there is no assurance that a public trading market for the
Company's securities will develop after the completion of this Offering. If a
trading market does in fact develop for the securities offered hereby, there can
be no assurance that it will be sustained.
The Commission has recently approved new rules imposing criteria for listing
of securities on the Nasdaq SmallCap Market, including standards for maintenance
of such listing. In order to qualify for initial quotation of securities on the
Nasdaq SmallCap Market, an issuer, among other things, must have at least
$4,000,000 in net tangible assets, $5,000,000 in market value of the public
float and a minimum bid price of $4.00 per share. For continued listing, an
issuer, among other things, must have $2,000,000 in net tangible assets,
$1,000,000 in market value of securities in the public float and a minimum bid
price of $1.00 per share. If the Company is unable to satisfy the Nasdaq
SmallCap Market's maintenance criteria in the future, its Common Stock and
Warrants may be delisted from the Nasdaq SmallCap Market. In such event,
trading, if any, in the Company's Common Stock or Warrants, would thereafter be
conducted in the over-the-counter market in the so-called "pink sheets" or the
NASD's "Electronic Bulletin Board." As a consequence of such delisting, an
investor would likely find it more difficult to dispose of, or to obtain
quotations as to, the price of the Company's Common Stock or Warrants.
UNDERWRITER'S INFLUENCE ON THE MARKET. A significant amount of the Units,
Common Stock and Warrants offered may be sold to customers of the Underwriter.
Such customers subsequently may engage in transactions for the sale or purchase
of such securities and may otherwise effect transactions in such securities. If
they participate in the market, the Underwriter may exert substantial influence
on the market, if one develops, for the Units, Common Stock and Warrants. Such
market-making activity may be discontinued at any time. The price and liquidity
of the Units, Common Stock and Warrants may be significantly affected by the
degree, if any, of the Underwriter's participation in such market. See
"Underwriting."
YEAR 2000 EFFECT. While the Company believes that its own operating systems
are year 2000 compliant, there can be no assurance until such time that all
systems will then function adequately. Approximately 50% of the Company's
customers receive their home heating oil pursuant to an automatic delivery
system whereby deliveries are scheduled by computer, based on each computer's
historical consumption patterns and prevailing weather conditions. In the event
that the Company does have Year 2000 problems, failures and interruptions
resulting from the computing system problems could have a material adverse
effect on the Company's results of operations. There can be no assurance that
the Year 2000 issue can be resolved prior to the upcoming change in the century.
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<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of securities
offered hereby at public offering prices of $8.25 per share of Unit, after
deducting underwriting commissions and offering expenses estimated to be
$1,400,000 to be paid by the Company, is estimated to be $5,818,750. The Company
expects to apply the net proceeds of the Offering as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF NET
APPLICATION OF PROCEEDS APPROXIMATE AMOUNT PROCEEDS
- -------------------------------------------------------------------------- ------------------- -----------------
<S> <C> <C>
Acquisitions of home energy product companies, and other energy related
entities (1)............................................................ $ 2,800,000 48%
Development of new product and business lines(2).......................... 1,000,000 17%
Sales & Marketing(3)...................................................... 515,000 9%
Terminal space(4)......................................................... 300,000 5.2%
Hardware, software and installation cost of information system(5)......... 250,000 4.3%
Acquisition of real property (6).......................................... 150,000 2.6%
Addition of personnel(7).................................................. 50,000 0.9%
General Corporate and Working Capital..................................... 753,750 13%
Total..................................................................... $ 5,818,750 100%
------------------- -----
------------------- -----
</TABLE>
- ------------------------
(1) The Company plans to acquire certain assets or the securities of other home
energy product companies and other energy related entities.
(2) The net proceeds allocated to development of new product and business lines
are expected to be applied to new operating subsidiaries including, but not
limited to, a subsidiary for the Company's franchising operation, subsidiary
for the retail sale of electrical power and a subsidiary for a joint venture
for the retail sale of natural gas. See "Business."
(3) The net proceeds allocated to marketing and sales are expected to be applied
towards the promotion of the Company's service in its current markets and
expansion of the Company's markets. The proceeds are expected to be applied
to advertising, distributor incentive programs and sales person incentive
programs.
(4) The net proceeds will be allocated to the rental of additional terminal
space for the storage of home heating oil.
(5) Represents cost of the hardware, software and the installation costs
associated with the upgraded information system the Company plans to
install.
(6) Represents downpayment for purchase of the Company's headquarters currently
leased by the Company in Rockaway, New Jersey. Although no formal agreement
has been consummated, the Company is currently in negotiation to purchase
the property for an aggregate purchase price of approximately $1 million.
The purchase of this property is contingent upon the property meeting all
applicable environmental rules and regulations prior to purchase.
(7) The Company anticipates hiring additional sales and operations employees and
has allocated these net proceeds to fund these additions.
The foregoing represents the Company's estimate of the allocation of the net
proceeds of the Offering, based upon the current status of its operations and
anticipated business needs. It is possible, however, that the application of
funds will differ considerably from the estimates set forth herein due to
changes in the economic climate and/or the Company's planned business operations
or unanticipated complications, delays and expenses, as well as any potential
acquisitions that the Company may consummate, although no specific acquisition
has been identified. See "Management's Discussion and Analysis of
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<PAGE>
Financial Condition and Results of Operations." Any reallocation of the net
proceeds will be at the discretion of the Board of Directors of the Company.
Any additional net proceeds realized from the exercise of the Over-Allotment
Option (up to approximately $753,774) will be added to the Company's working
capital.
Pending application, the net proceeds will be invested principally in
short-term certificates of deposit, money market funds or other short-term
interest-bearing investments.
DIVIDEND POLICY
The Company has never paid or declared dividends on its Common Stock. The
payment of cash dividends, if any, in the future is within the discretion of the
Board of Directors and will depend upon the Company's earnings, its capital
requirements, financial condition and other relevant factors. The Company
intends, for the foreseeable future, to retain future earnings for use in the
Company's business.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1998 and as adjusted to reflect the sale of 875,000 Units, offered hereby.
The information provided below should be read in conjunction with the Financial
Statements and the other financial information included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
------------ --------------
Long-term liabilities, less current maturities...................................... $ 1,271,115 $ 1,271,115
------------ --------------
------------ --------------
Shareholders' equity: 20,000,000 Capital Stock, shares authorized: 2,025,000 issued
and outstanding(1); and 3,775,000 issued and outstanding as adjusted (2).......... 1 3,775
Retained earning.................................................................. 343,879 343,879
Paid in Surplus................................................................... 322,198 6,139,173
------------ --------------
Total shareholders' equity........................................................ 666,078 6,486,827
------------ --------------
------------ --------------
</TABLE>
- ------------------------
(1) Does not include 375,000 shares of Common Stock provided for issuance under
the Company's Stock Option Plan.
(2) Reflects the issuance of 1,750,000 shares of Common Stock by the Company in
connection with this Offering. Does not include 375,000 shares of Common
Stock provided for issuance under the Company's Stock Option Plan.
17
<PAGE>
DILUTION
Dilution represents the difference between the initial public offering price
paid by the purchasers in the Offering and the net tangible book value per share
immediately after completion of the Offering. Net tangible book value per Share
represents the amount of the Company's total assets minus the amount of its
liabilities and intangible assets divided by the number of shares outstanding.
As of March 31, 1998, the net tangible book value of the Company's Common Stock
was ($18,745) or ($.01) per share. Without taking into account any changes in
net tangible book value after December 31, 1997, other than to give effect to
the sale of the Units offered hereby and the receipt of the net proceeds of this
Offering, the pro forma net tangible book value of the Company as of March 31,
1998 would have been $5,800,005 or $1.54 per share. Consequently, there will be
an immediate increase in net tangible book value of $1.55 per Share to the
existing shareholders and an immediate substantial dilution (i.e. the difference
between the assumed offering price of $4.00 per share (the Warrants which are
being offered as part of the Unit have been given as assumed offering price of
$.25 per Warrant) and the pro forma net tangible book value per Share after the
Offering) of $2.46 or 61% to new investors purchasing the Shares offered hereby.
The following table illustrates, as of March 31, 1998, this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per Share of Common Stock.... $ 4.00
Net tangible book value per share before Offering...... $ (.01)
Increase per Share attributable to new investors....... $ 1.55
Pro forma net tangible book value per Share after
Offering................................................. $ 1.54
---------
Dilution per Share to new investors........................ $ 2.46
---------
---------
</TABLE>
The following table summarizes, as of March 31, 1998, the total number of
shares of Common Stock purchased from the Company, the total consideration paid,
and the average price per share paid by the existing shareholders and by new
investors who purchase Units pursuant to this Offering.
<TABLE>
<CAPTION>
PERCENTAGE
SHARES PERCENTAGE AGGREGATE OF TOTAL AVERAGE PRICE
PURCHASED(1) OF TOTAL SHARES CONSIDERATION CONSIDERATION PER SHARE
------------ ----------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Existing Shareholders................. 2,025,000 52.9% $ 480,760 6.4% $ 0.24
New Investors......................... 1,750,000 47.1% $ 7,000,000 93.6% 4.00
------------ --- ------------- ---
Total........................... 3,775,000 100% $ 7,480,760 100%
------------ --- ------------- ---
------------ --- ------------- ---
</TABLE>
- ------------------------
(1) This information does not reflect 375,000 Shares that may be issued under
the Company's Stock Option Plan.
18
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data and other
operation information of the Company. The selected historical financial data in
the table for the years ended December 31, 1997 and 1996 is derived from the
audited financial statements of the Company. The selected financial data set
forth for the three month period ended March 31, 1997 and 1998 are derived from
unaudited financial information provided by the Company, which in the opinion of
Management have been prepared on the same basis as the audited financial
statements and contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations for
such periods. The results of operations for the three months ended March 31,
1998, are not necessarily indicative of results to be expected for the full
fiscal year. The selected financial data set forth below should be read in
conjunction with the Company's financial statements and notes thereto and with
the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" appearing elsewhere in this Prospectus.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------- --------------------------
<S> <C> <C> <C> <C>
1996 1997 1998 1997
------------- ------------- ------------ ------------
Total revenues......................................... $ 12,981,457 $ 16,380,992 $ 5,504,512 $ 5,342,650
Total costs and expenses............................... 12,753,861 16,304,931 5,236,694 5,180,266
Net income (loss)...................................... 227,596 76,061 267,818 162,384
Net income(loss) per common share(1)................... .1124 .038 .1339 .0812
Weighted average common shares
outstanding(2)....................................... 2,025,000 2,025,000 2,025,000 2,025,000
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1998
-------------------------- ----------------------------
<S> <C> <C> <C> <C>
1996 1997 ACTUAL AS ADJUSTED(2)
------------ ------------ ------------ --------------
Working capital......................................... $ (662,036) $ (761,188) $ (510,431) $ 5,308,319
Total assets............................................ 3,403,950 3,552,524 3,802,279 9,621,029
Total liabilities....................................... 3,082,751 3,154,264 3,136,201 3,136,201
Total stockholders' equity.............................. 321,199 398,260 666,078 6,486,827
</TABLE>
- ------------------------
(1) Net earnings per common share is based upon the weighted average number of
common shares outstanding for each period presented.
(2) As adjusted to reflect net proceeds of $5,818,750 from the sale by the
Company in this offering of 875,000 Units at the assumed public offering
price of $8.25 per Unit.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The statements contained in this Prospectus that are not historical are
forward looking statements, including statements regarding the Company's
expectations, intentions, beliefs or strategies regarding the future. Forward
looking statements include the Company's statements regarding liquidity,
anticipated cash needs and availability and anticipated expense levels. All
forward looking statements included in this prospectus are based on information
available to the Company on the date hereof and the Company assumes no
obligation to update any such forward looking statements. It is important to
note that the Company's actual results could differ materially from those in
such forward looking statements. Among the factors that could cause actual
results to differ materially are the factors detailed in the risks discussed in
the " Risk Factors" section included in this Prospectus at page 8.
The home heating and home energy market is highly competitive and
fragmented, in both the heating oil and alternative energy markets, and consists
of suppliers most of whom are larger and with greater resources than the
Company. The diverse distribution channels in which the Company markets its
products involve different competitive factors, and the ability to provide
specialized customer services at discounted prices is important to mass market
the Company's products. See "Business -- Competition".
The Company's future success as a retailer of energy related products will
be influenced by several factors including the ability of the Company to
efficiently meet customer demand and develop a larger customer base,
management's ability to evaluate the public's home energy requirements and to
achieve market acceptance of new energy related products. Further factors
impacting the Company's operations are increases in expenses associated with
continued sales growth, the ability of the Company to control costs, to offer
products with satisfactory profit margins and the ability to develop and manage
the introduction of new products and competition. Quality control as well as
customer satisfaction are also essential to the Company's success.
REVENUE RECOGNITION
Sales of fuel oil and heating equipment are recognized at the time of
delivery of the product to the customer and sales of equipment are recognized at
the time of installation. Revenue from repairs and maintenance service is
recognized upon completion of the service. Payments received from customers for
heating equipment service contracts are deferred and amortized into income over
the terms of the respective service contracts, on a straightline basis, which
generally do not exceed one year.
RESULTS OF OPERATIONS
Since the Company was only incorporated in March 1997, the financial data
for the fiscal year ended December 31, 1996 represents solely the results of
operations of Able Oil. All but one of the Company's other operating
subsidiaries were established in the later half of 1996 and would not have had a
material effect on the revenue or income of the Company for 1996 if presented on
a consolidated basis.
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31,
1997.
The Company reported revenues of $5,504,512 for the three months ended March
31, 1998 , an increase of 3.03 % over the prior year's revenues of $5,342,650
for the same three month period. This modest increase can be attributed to the
unusually warm winter in the Northeast occasioned by the abnormal Pacific
weather pattern. This hampered the Company's selling efforts and resulted in the
Company not meeting its projections of 20% growth in this period. The modest
growth the Company did experience in this period was attributable to an increase
in sales by the Propane and Environmental subsidiaries of approximately
$150,000, as well as to increased advertising and an increased customer base.
20
<PAGE>
Gross profit margin, as a percentage of revenues, for the three months ended
March 31, 1998, increased to 24.58% of net revenues, representing an increase of
1.94% over a margin of 22.64% for the same quarter one year ago. The improvement
in margin is primarily a result of lower product costs.
Selling, General and Administrative expenses decreased by $34,707 or 4.44%
from $781,045 for the three months ended March 31, 1997 to $746,338 for the
three months ended March 31, 1998. This decrease was primarily attributable to
enhanced operational efficiency. Total costs and expenses moderately increased
by $56,428, in the three months ended March 31, 1998.
Operating Income for the three months ended March 31, 1998 was $500,624; an
increase of 51.74% over the Company's income of $329,921 for the three months
ended March 31, 1997. There was an increase in gross margin resulting mainly
from lower product cost to the Company during the last twelve months because of
unusually low fuel prices and, in part, from operating efficiencies.
Net Income for the three months ended March 31, 1998 increased by $105,434
or 65% to $267,818 as compared to the previous year. This increase in net income
is a direct result of continued sales growth and improved gross margins
(occasioned primarily by lower wholesale fuel prices), which more than offset
the investment in consumer promotions and advertising. As a percent of net
revenues, income for the first quarter of 1998 increased to 4.8% as compared to
3.0% for the same period in the previous year. In addition to an increase in
gross margin and operating efficiencies, as described above, the Company also
profited from certain forward purchase contracts and from sales to customers
with automatic delivery contracts.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996.
The financial data for the fiscal year ending December 31, 1996, represents
the operations of Able Oil Company and related entities. Pursuant to Regulation
S-B these entities in aggregate were considered the predecessor of Able Energy,
Inc. and Subsidiaries. in order to have a proper comparison of Fiscal 1996 and
1997, the December 31, 1996 financial statements were retroactively restated to
include Able Oil Company and related entities.
Revenues for the year ended December 31, 1997 were $16,308,992, a 25.6%
increase over the prior year revenues of $12,981,457. The increase in revenue
for the year ended December 1997 was due in part to the October 1996 acquisition
of Connell's Fuel Co., in Newton, New Jersey. The Company also increased its
customer base through intensive marketing and advertising promotions offering
the Company's full home heating services at discounted prices. In addition, the
revenue for 1997 reflects the added revenue of the Company's affiliates, Able
Propane, A&O Environmental, Able Melbourne and Able Montgomery. Although these
affiliates were established in or about July 1996, the revenue generated by
these entities is most apparent in the financial statements for the subsequent
twelve month period ended December 31, 1997.
The Company's gross profit margin for the year ended December 31, 1997 was
20.5% of sales, an improvement over the 18.5% margin for the comparable period
ended December 31, 1996. This positive change can be attributed to a 4.2%
decrease in the cost of inventory sold.
Selling General & Administration for the Company increased by 45.3% from
$1,889,905 to $2,745,963 for the year ended December 31, 1997 as compared to
December 31, 1996. This increase is attributable to the acquisition of Connell's
Fuel in Newton, New Jersey which incurred expenses of $828,622, as well as the
start-up costs associated with the establishment of Able Propane and Able
Montgomery which were in operation for a full year in 1997.
Operating income for the year ended December 31, 1997 was $217,588 a
decrease of 15.1% over the Company's operating income for the previous year
ended December 31, 1996 of $256,411. This decrease in income from operations is
directly related to the organizational and start-up costs associated with the
addition of the aforementioned start-up entities, which had an operating loss of
$181,389. Further costs
21
<PAGE>
were incurred in establishing the Company's franchising program, as well as
investments in the Company's infrastructure.
Net income for the year ended December 31, 1997 was $76,061 as compared to
$227,596 for the year ending December 31, 1996. This decrease in net income is
primarily attributable to the additions of the start-up entities, in addition,
to a lessor extent, the acquisition of Connell's Fuel Co., which increased
Selling General and Administrative expenses.
Amortization relates to the amortization of customer lists, being amortized
over 15 years and a Non-Compete Agreement amortized over 5 years, per the
agreement. These relate to the acquisition of Connell's Fuel Co. in October
1996. The amortization of the customer list is a non-cash expense. The
amortization expense for the year ended December 31, 1997 was $74,780, as
compared to $12,463 for two months in the year ended December 31, 1996.
Depreciation expense for the year ended December 31, 1997 was $320,026 which
is a 28.1% increase over the prior year's $249,928. This was due to the October
1996 acquisition of Connell's Fuel Co., and a full year of the above referenced
start -up companies which resulted in an aggregate expense of $69,934, and the
purchase of additional trucks and other equipment.
Interest expense for the year ended December 31, 1997 was $211,133 as
compared to $80,586 for the year ended December 31, 1996. This increase was due
to the October 1996 acquisition of Connell's Fuel Co. and the costs associated
with the start-up entities.
CONCENTRATION OF REVENUE WITH GUARANTEED MAXIMUM PRICE CUSTOMERS
Approximately 5% of the Company's heating oil volume is sold to individual
customers under an agreement pre-establishing the maximum sales price of oil
over a twelve month period. The maximum price at which oil is sold to these
capped-price customers is renegotiated in each Spring to reflect the current
market conditions. The Company currently enters into forward purchase contract
for a substantial majority of the oil it sells to these capped-price customers
in advance and at a fixed cost. Should events occur after a capped-sales price
is established that increases the cost of oil above the amount anticipated,
margins for the capped-price customer whose oil was not purchased in advance
would be lower than expected, while those customers whose oil was purchased in
advance would be unaffected. Conversely, should events occur during this period
that decrease the cost of oil below the amount anticipated, margins for the
capped-price customers whose oil was purchased in advance could be higher than
expected, while those customers whose oil was not purchased in advance would be
unaffected or higher than expected. The capped-price customers payments are
received in advance and are shown on the balance sheet as customer deposits
current liabilities.
LIQUIDITY AND CAPITAL RESOURCES
For the three month period ended March 31, 1998 compared to the three months
ended March 31, 1997, the Company's cash position increased by $53,208 or 9.7%
from March 31, 1997 balance of $549,907 to March 31, 1998 balance of $603,115.
For the three months ended March 31, 1998 cash was generated through operations,
an increase in net income and collection of accounts receivables. For the three
months ended March 31, 1997 cash was generated through operations, net income
and an increase in notes payable.
For the year ended December 31, 1997 compared to the year ended December 31,
1996 cash increased $9,062 (6.2%), from $146,842 at December 31, 1996 to
$155,904 at December 31, 1997. For the year ended December 31, 1997 cash was
generated through operations, principally from customer advance payments and net
income. For the year ended December 31, 1996 cash was generated through
operations and net income. In 1996, there was an increase in borrowings which
were used principally in the acquisition of a fuel company in October 1996.
22
<PAGE>
The increase in cash from December 31, 1997 to March 31, 1998 was $447,211
and from December 31, 1996 to March 31, 1998 was $403,065. This is due to the
seasonal fluctuations with greater sales and net income in the winter months.
As a result of a refinancing with its primary financial institution, the
Company has access to $500,000 of credit line funds. The Company's credit line
had been increased from $350,000 to $500,000 at 1/2% above prime and its current
outstanding credit line and other debt with the bank has been rolled into a 3
year term loan in the principal amount of $675,000 bearing interest at a rate of
approximately 8 1/2% per annum. As of July 2, 1998, $200,000 of this line had
been used by the Company.
The Company will receive net proceeds from this Offering in an amount
estimated to be $5,818,750. The Company believes that the net proceeds of the
Offering, coupled with the refinancing and income from operations, will fulfill
the Company's working capital needs for the next 24 months. As the Company
continues to grow, bank borrowings, or other debt placements and equity
offerings may be considered, in part, or in combination, as the situation
warrants.
SEASONALITY
The Company's operations are subject to seasonal fluctuations with a
majority of the Company's business occurring in the late Fall and Winter months.
Approximately 70% of the Company's revenues are earned and received from October
through March, and the overwhelming majority of such revenues are derived from
the sale of home heating oil. However, the seasonality of the Company's business
is offset, in part, by the increase in revenues from the sale of diesel and
gasoline fuels during the spring and summer months due to the increased use of
automobiles and construction apparatus.
From May through September, Able Oil and Able Montgomery experience
considerable reduction of retail heating oil sales. Similarly, Able Propane can
experience up to 80% decrease in heating related propane sales during the months
of April to September, which is offset somewhat by an increase of pool heating
and cooking fuel.
A & O's revenues coincide with home sales in the northeastern United States.
Since most home sales occur between March and November, demand for tank testing,
tank replacement, and Phase I site surveys performed in connection with home
sales increases during this period.
Over 90% of Able Melbourne's revenues are derived from the sale of diesel
fuel for construction vehicles, and commercial and recreational sea-going
vessels during Florida fishing season, which begins in April and ends in
November. Only a small percentage of Able Melbourne's revenues are derived from
the sale of home heating fuel. Most of these sale occur from December through
March, Florida's cooler months.
23
<PAGE>
BUSINESS
GENERAL
Able Energy was incorporated on March 13, 1997 in the state of Delaware, to
act as a holding company for five operating subsidiaries: Able Oil; Able
Propane; Able Melbourne; Able Montgomery and A&O.
The Company's operating entities are engaged in the retail distribution of,
and the provision of services relating to, fuel oil, propane gas and natural gas
through a joint venture with AllEnergy LLC, a division of New England Electric
Systems, Inc. In addition to selling home energy products, the Company installs
and repairs home heating equipment, provides environmental services for
residential and commercial customers and also markets other petroleum products
to commercial customers, including diesel fuel, gasoline and lubricants.
In fiscal year 1997, sales of home heating oil accounted for approximately
68% of the Company's revenues. The remaining 32% of revenues were from sales of
gasoline, diesel fuel, kerosine, propane, and environmental services and related
sales. For the three month period ended March 31, 1998, sales of home heating
oil accounted for 69% of the Company's revenues. The Company serves
approximately 25,000 home heating oil customers from four locations, of which
two are located in New Jersey, one is located in Pennsylvania and one is located
in Florida.
The Company also provides installation and repair of heating equipment as a
service to its customers. The Company considers the provision of service and
installation services to be an integral part of its basic fuel oil business.
Accordingly, the Company regularly provides various service incentives to obtain
and retain customers. The Company provides home heating equipment repair service
on a twenty-four hour-a-day, seven days-a-week basis, generally within two hours
of request. Except in isolated instances, the Company does not provide service
to any person who is not a customer.
The Company employs a dynamic marketing strategy which the Company believes
has been the key to its success. The Company believes that it is able to obtain
new customers and maintain existing customers by offering its concept of full
service home energy products at discount prices, providing quick response
refueling and repair operations, providing automatic deliveries to customers by
monitoring historical use and weather patterns, and by providing customers a
variety of payment options. The Company regularly provides various service
incentives to obtain and retain customers. The Company aggressively promotes its
service through a variety of direct marketing media, including mail and
telemarketing campaigns, by providing discounts to customers who refer new
customers to the Company, and through an array of advertising, including
television advertisements and billboards, which aim to increase brand name
recognition.
The Company intends to use a substantial portion of the proceeds of this
offering to expand its operations. The Company's strategy to expand its
operations includes (i) the acquisition of select operators in the Company's
present markets as well as other markets; (ii) capturing market share from
competitors through increased advertising and other means; (iii) diversifying
its products; (iv) diversifying its customer base; and (iv) replicating its
marketing and service formula in new geographic areas either directly or through
franchise arrangements. The Company may also enter into joint ventures with
other entities in product areas different than the Company's current product
mix.
RETAIL FUEL OIL
The Company's retail fuel oil distribution business is conducted through its
subsidiaries Able Oil, Able Melbourne and Able Montgomery. The Company serves
both residential and commercial fuel oil accounts. The Company sells premium
home heating oil to its residential customers offering delivery seven days a
week. To its commercial customers, in addition to selling home heating oil, the
Company sells diesel fuel, gasoline and kerosene. The Company also provides an
oil burner service that is available 24 hours a day for
24
<PAGE>
the maintenance, repair and installation of oil burners. These services are
performed on an as needed basis. Customers are not required to enter into
service contracts to utilize the Company's service department.
Approximately 50% of the Company's customers receive their home heating oil
pursuant to an automatic delivery system without the customer having to make an
affirmative purchase decision. These deliveries are scheduled by computer, based
on each customer's historical consumption patterns and prevailing weather
conditions. The Company delivers home heating oil approximately six times each
year to the average customer. The Company's bills customers promptly upon
delivery or receives payment upon delivery. The Company's customers can pay for
fuel deliveries with cash or with their credit card. Customer may also apply for
an Able Oil credit card offered through Beneficial Finance Company which permits
the customer to pay his or her balance within 60 days of purchase without
accruing finance charges. The Company receives its payment from credit card
companies within two days, less a processing charge of 2% of the payment amount.
Approximately 1,500 customers have the Able Oil credit card.
In addition, approximately 5% of the Company's total sales are made to
customers pursuant to an agreement which pre-establishes the maximum annual
sales price of fuel oil and is paid by customers over a ten month period in
equal monthly installments. Such prices are renegotiated in April of each year
and the Company has historically purchased fuel oil for these customers in
advance and at a fixed cost.
The Company delivers fuel with its own fleet of 17 custom fuel oil trucks
and four owner-operator fuel oil delivery trucks. The Company's fuel trucks have
fuel capacities ranging from 3,000 to 8,000 gallons. Each vehicle is assigned to
a specific delivery route, and services between 4 and 40 customer locations per
day depending on market density and customers' fuel requirements. The Company
also operates seven Company owned service vans and four owner-operated service
vans, which are equipped with state of the art diagnostic equipment necessary to
repair and/or install heating equipment. One Company owned van is equipped to
perform environmental testing of underground tanks for its customers. The number
of customers each van serves mostly depends upon the number of service calls
received on any given day.
ABLE OIL
Able Oil was established in 1989 and is the Company's largest subsidiary,
accounting for approximately 87% of the Company's total revenues in 1997. Able
Oil is located in Rockaway, New Jersey, and serves just under 22,000 oil
customer accounts throughout northern New Jersey, mostly in Morris, Sussex,
Warran, Passaic and Essex counties, from its distribution locations in Rockaway
and Newton, New Jersey. Of these accounts, approximately 90% are residential
customers and 10% are commercial customers.
Generally, 17 of the Company's fuel oil trucks are reserved for use by Able
Oil, of which nine trucks operate from the Rockaway facility and six trucks
operate from the Newton facility. In addition, Able Oil utilizes the services of
four owner-operated trucks. Each owner operator is under contract; they are
responsible for all of the vehicle operating expenses including insurance
coverage. All of the trucks have the Company's logo on them.
Able Oil's 17 fuel oil delivery trucks, and the four owner-operator trucks,
acquire fuel inventory at the Company's facilities in Rockaway and Newton.
Dispatch of fuel oil trucks is conducted at both the Rockaway and Newton
facilities. Billing is conducted from Able Oil's corporate headquarters in
Rockaway.
The Rockaway and Newton facilities have the capacity to store 1.5 million
gallons and 200,000 gallons of fuel, respectively. During seasons where demand
for heating oil is higher, or when wholesale oil prices are favorable, a
slightly larger inventory is kept on hand. However, Management generally
believes that short inventory life and high inventory turnover enables the
Company to rapidly respond to changes in market prices. Thus, Management employs
"just in time" inventory practices and rarely stores fuel to capacity levels.
However, in June of 1998, oil prices have reached a historic low and the Company
has entered into an in-tank storage agreement with Miako Trading Co., an oil
storage facility, to fill all
25
<PAGE>
available storage at the Miako facility (i.e. 1.5 million gallons). Currently,
fuel oil purchases are made daily on the spot market using electronic funds
transfers. Able Oil carts its fuel purchases from wholesale purchase sites to
the Rockaway and Newton facilities with two tractor-trailer tankers owned by the
Company, and by two owner-operated tractor-trailer tankers that are used on an
as needed basis. These two owner-operated tankers are under contract and bear
the Able logo or name.
Able Oil's oil burner service operates exclusively out of the Newton
facility. Able Oil dispatches a total of eleven service vans, four of which are
subcontracted from owner-operators.
ABLE MONTGOMERY
Able Montgomery was established in July 1996 as part of the Company's
strategy to expand into nearby markets. Able Montgomery is located in Horsham,
Pennsylvania, and serves approximately 1,200 fuel oil accounts in Montgomery and
Bucks counties. In 1997, revenues generated by Able Montgomery accounted for
approximately 3% of the Company's total revenues. Able Montgomery provides 24
hour oil burner service for its customers through a subcontracting agreement it
has with Home Comfort Mechanical, Inc.
Able Montgomery serves its customers with one fuel delivery truck with the
capacity to store 3,000 gallons of fuel oil. Because it has no storage capacity,
Able Montgomery purchases oil on the spot market at local facilities which is
paid by electronic fund transfers from the Company's headquarters in Rockaway,
NJ. The only fuel oil inventory maintained by Able Montgomery is what is stored
in its fuel oil truck.
ABLE MELBOURNE
Able Melbourne was established in July of 1996, and is located in Cape
Canaveral Florida. Presently, revenues from Able Melbourne account for
approximately 5.3% of the Company's total revenues. Able Melbourne is engaged
primarily in the sale of diesel fuel for commercial fleet fueling and other
on-road vehicles, and dyed diesel fuel, which is used for off-road vehicles and
purposes, including commercial and recreational fishing vessels, heating oil and
generator fuel. Additionally, a small portion of Able Melbourne's revenues are
generated from the sale of home heating oil, lubricants and lubricant products.
Able Melbourne serves approximately 300 customer accounts in Brevard County,
Florida, primarily in the Cape Canaveral Area. In 1997, six of Able Melbourne's
customers, Beyel Brothers Crane Service, Beyel Marind, Diamond Royale, Frank-lin
Excavating, Inc., CG Reed, S&S Seafood and ABC Landclearing Development,
individually, accounted for more than five percent of Able Melbourne's annual
revenues.
Able Melbourne delivers fuel with two fuel delivery trucks which are capable
of storing 6,000 gallons of fuel in aggregate. Because Able Melbourne's peak
season is at the opposite time of the year than the rest of the Company, during
this season, Able Melbourne uses one of Able Oil's trucks to meet its demand.
Currently, Able Melbourne does not have facilities to store fuel oil beyond what
is held on its trucks, and thus, purchases fuel inventory from local refineries.
However, since Able Melbourne is located only three miles from port storage, the
lack of inventory capacity is not material to the Company's operations or
revenue.
RETAIL PROPANE DISTRIBUTION
The Company is engaged in the retail distribution of liquid propane gas and
propane equipment, and provides services related thereto through its subsidiary
Able Propane. Able Propane, based in Rockaway, New Jersey, was established 1996
as part of the Company's efforts to increase market penetration through
diversification. Able Propane serves approximately 1,100 accounts, the majority
of which are located in northern New Jersey.
Although propane can be used for virtually all household and business
utility applications, of Able Propane's customers, approximately 60% use propane
for hot water heating and cooking; approximately
26
<PAGE>
10% use propane for pool heating; and approximately 30% use propane for home
heating. Although burned as a gas, propane is transported as a liquid and stored
in tanks that vaporize the liquid for use. Able Propane provides its customers
with such tanks at no charge, and by doing so, remains such customer's exclusive
supplier of propane. Able Propane employs a delivery system similar to the
Company's retail oil distribution business, whereby customers receive propane
deliveries pursuant to an automatic delivery system without the customer having
to make an affirmative purchase decision. These deliveries are scheduled by
computer, based on each customer's historical consumption patterns and
prevailing weather conditions.
With an increased marketing effort, the Company believes that Able Propane
has the opportunity to gain a larger share of the New Jersey energy market by
converting electricity and fuel oil users to propane, and by encouraging owners
of newly-constructed buildings to select propane as their buildings' energy
source. The Company also believes that the use of propane as an alternate fuel
for cars, trucks and public transportation to meet clean air requirements, poses
a great opportunity for future growth.
Able Propane's base of operations is located in Rockaway, New Jersey, near
the Company's headquarters. Currently, Able Propane has no propane storage
facilities, and its only investment in propane inventory is what can be stored
on its one propane delivery truck. The delivery truck has the capacity to
deliver 3,000 gallons of propane, and can service approximately 35 customers per
day. Able Propane purchases wholesale propane on the spot market at local
facilities. The Company is considering plans to lease or build a facility that
would enable Able Propane to store approximately 30,000 gallons of propane.
ENVIRONMENTAL CONSULTING AND ENGINEERING
The Company engages in the business of environmental consulting and
engineering through its subsidiary, A & O. A & O, located in Rockaway, New
Jersey, was established in 1995 to capitalize on opportunities created by
increased environmental regulation in the commercial and industrial real estate
market. The Company believes A & O complements the business activities of its
other operating subsidiaries.
A & O specializes in fuel tank testing and remediation. Its services include
primarily: (i) tank testing which includes any tank which stores any kind of
hazardous material through a number of methods, including automated precision
testing, perimeter soil testing, tracer tight tank testing, and petro-tite
testing; (ii) tank installation, cleaning and removal; (iii) Phase I
(evaluation) and Phase II (remediation) assessments; (iv) soil and water
sampling, removal and disposal; and (v) full remediation service for home
heating, gasoline and diesel tanks.
A & O's operations and dispatch are conducted through Company's headquarters
in Rockaway. A & O owns one service van specially equipped with high-tech tools
necessary for on-site environmental testing and evaluation, one dump truck and
trailer, one backhoe, two utility vehicles and one pump-out tank truck to
conduct oil removal, excavation and tank installation operations.
FUNDAMENTAL CHARACTERISTICS OF THE COMPANY'S BUSINESS
UNAFFECTED BY GENERAL ECONOMY
The Company's business is relatively unaffected by business cycles. Because
fuel oil, propane and gasoline are such basic necessities, variations in the
amount purchased as a result of general economic conditions are limited.
CUSTOMER STABILITY
The Company has a relatively stable customer base due to the tendency of
homeowners to remain with their traditional distributors. In addition, a
majority of the home buyers tend to remain with the previous owner's
distributor. As a result, the Company's customer base each year includes most
customers
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<PAGE>
retained from the prior year, or home buyers who have purchased from such
customers. Like many other companies in the industry, the Company delivers fuel
oil and propane to each of its customers an average of approximately six times
during the year, depending upon weather conditions and historical consumption
patterns. Most of the Company's customers receive their deliveries pursuant to
an automatic delivery system, without the customer having to make an affirmative
purchase decision each time home heating oil or propane is needed. In addition,
the Company provides home heating equipment repair service on a
seven-days-a-week basis.
No single customer accounts for 10% or more of the Company's consolidated
revenues.
CONVERSION TO NATURAL GAS
The rate of conversion from the use of home heating oil to natural gas is
primarily affected by the relative prices of the two products, and the cost of
replacing oil fired heating systems with one that uses natural gas. The Company
believes that approximately 1% of its customer base annually converts from home
heating oil to natural gas. Even when natural gas had a significant price
advantage over home heating oil, such as in 1980 and 1981 when there were
government controls on natural gas prices or during the Persian Gulf Crisis in
1990 and 1991, the Company's customers converted to natural gas at only a 2%
annual rate. During the latter part of 1991 and through 1995, natural gas
conversions have returned to their 1% historical annual rate as the prices for
the two products have been at parity.
In an effort to insulate itself against natural gas conversions and as part
of the Company's efforts to expand its product line, the Company, pursuant to a
joint venture with AllEnergy Marketing Company, L.L.C. ("AllEnergy"), now
provides natural gas service as an option to its customers (See Business-
Expansion-Energy Joint Ventures). AllEnergy is a subsidiary of New England
Electric Systems, Inc. ("NEES"), a utility company listed on the New York Stock
Exchange. Recently, the New Jersey Board of Public Utilities deregulated the
sale and supply of natural gas to residential and commercial customers. Natural
gas customers can now choose from different providers of natural gas. Natural
gas providers, such as the Company, will deliver the gas through the existing
network of underground gas pipes owed and maintained by the local gas utility.
OIL PRICE VOLATILITY
Although prices of energy sources have been volatile, historically, this has
not affected the performance of the Company because it has been able to pass any
wholesale cost increase along to its customers. While fluctuations in wholesale
prices have not significantly affected demand to date, it is possible that
significant wholesale price increase could have the effect of encouraging
conservation of energy resources. If demand was reduced and the Company was
unable to increase its gross profit margin or reduce its operating expenses, the
effect of such decrease in demand would be a reduction of net income.
SEASONALITY
The Company's business is directly related to the heating needs of its
customers. Accordingly, the weather can have a material effect on the Company's
sales in any particular year. Generally, however, the temperatures in the past
thirty years have been relatively stable, and as a result, have not had a
significant impact on the Company's performance, except on a short-term basis.
In 1997 "El Nino" caused one of the warmest winters on record which impacted
home heating oil sales during the 1997-1998 winter.
Approximately 70% of the Company's revenues are earned and received from
October through March, and the overwhelming majority of such revenues are
derived from the sale of home heating oil. During the spring and summer months,
revenues from the sale of diesel and gasoline fuels increase due to the
increased use of automobiles and construction apparatus.
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<PAGE>
Each of the Company's divisions are seasonal. From May through September,
Able Oil and Able Montgomery experience considerable reduction of retail heating
oil sales.
Able Propane can experience up to 80% decrease in heating related propane
sales during the months of April to September, which is offset somewhat by an
increase of pool heating and cooking fuel.
A & O's revenues coincide with home sales in the northeastern United States.
Since most home sales occur between March and November, demand for tank testing,
tank replacement, and Phase I site surveys performed in connection with home
sales increases during this period.
Over 90% of Able Melbourne's revenues are derived from the sale of diesel
fuel for construction vehicles, and commercial and recreational sea-going
vessels during Florida fishing season, which begins in April and ends in
November. Only a small percentage of Able Melbourne's revenues are derived from
the sale of home heating fuel. Most of these sale occur from December through
March, Florida's cooler months.
WHOLESALE SUPPLIERS
The Company purchases its fuel on the spot market. The Company satisfies its
inventory requirements with nine different suppliers, the majority of which have
significant domestic fuel sources, and many of which have been suppliers to the
Company for over 5 years. The Company's current suppliers are Ameranda Hess
Corporation, Bayway Refining Co., Petron Oil Corporation, Star Enterprises,
Louis Dreyfus Energy, Koch Industries, Co., Valero Marketing and Supply Co., and
Sun Co., Inc. (R&M). The Company monitors the market each day and determines
when to purchase its oil inventory and from whom. As of June 1998, the Company
began storing one month supplies of fuel because of unusually low fuel prices.
Two of these suppliers provided Able Oil with approximately 60% of its
heating oil requirements for the year ended December 31, 1997.
Sun Oil Company provided Able Montgomery with approximately 100% of its
heating oil requirements for the year ended December 31, 1997. Coastal Refining
& Marketing, Inc., provided Able Melbourne with approximately 99% of its diesel
fuel product requirements for the year ended December 31, 1997. Two major
suppliers provided Able Melbourne with 67% and 33%, respectively, of its
lubricant and related product requirements for the year ended December 31, 1997.
Two major suppliers, Ferrellgas Partners, L.P. and Propane Power, provided Able
Propane with approximately 50% each, of its propane requirements for the year
ended December 31, 1997.
Management believes that if the Company's supply of any of the foregoing
products was interrupted, the Company would be able to secure adequate supplies
from other sources without a material disruption in its operations. However,
there can be no assurance that adequate supplies of such products will be
readily available in the future.
TRUCK PURCHASES AND MAINTENANCE
The Company presently orders and purchases its fuel oil trucks from two
companies which manufacture trucks suitable for the Company's operations. The
Company has the option to purchase or lease standard equipment fuel trucks. The
typical configuration of the Company's fuel trucks is a Freightliner with a
3,000 gallon multi-compartment aluminum tank, a vapor recovery system and a
device that records fuel flow from the storage compartments. Each truck carries
the Company's registered logo emblazoned on its side.
Service and environmental testing vehicles are standard commercial vans
which are obtained from a number of sources. These vehicles also carry the
Company logo.
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<PAGE>
Generally, the Company relies upon equipment warranties, fixed fee service
contracts and on-site repairs for the maintenance of the Company's fleet of
vehicles. To date, the Company has not experienced significant downtime on the
any of its fuel trucks.
COMPETITION
The Company's business is highly competitive. In addition to competition
from alternative energy sources, the Company competes with distributors offering
a broad range of services and prices, from full service distributors similar to
the Company, to those offering delivery only. Competition with other companies
in the propane industry is based primarily on customer service and price.
Longstanding customer relationships are typical in the retail home heating oil
and propane industry. Many companies in the industry, including the Company,
deliver fuel oil or propane to their customers based upon weather conditions and
historical consumption patterns without the customers having to make an
affirmative purchase decision each time fuel oil or propane is needed. In
addition, most companies, including the Company, provide equipment repair
service on a twenty-four hours-a-day basis, which tends to build customer
loyalty. As a result, the Company may experience difficulty in acquiring new
retail customers due to existing relationships between potential customers and
other fuel oil or propane distributors.
MARKETING
The Company employs a dynamic marketing strategy which the Company believes
has been the key to its success. The Company believes that it is able to obtain
new customers and maintain existing customers by offering its full service home
energy products at discount prices, providing quick response refueling and
repair operations, providing automatic deliveries to customers by monitoring
historical use and weather patterns, and by providing customers a variety of
payment options. To expand its customer base and aggressively promote its
service, the Company engages in direct marketing campaigns, advertises regularly
and encourages referrals.
The Company has successfully expanded its customer base by employing a
variety of direct marketing tactics, including telemarketing campaigns, mass and
direct mailings, and by distributing hand-bills and promotional items, such as
refrigerator magnets, sweatshirts and hats. Additionally, the Company's delivery
personnel is an integral part of the Company's direct marketing activities.
While in the field, drivers isolate potential new customers by taking note of
where the Company is not servicing accounts, and act as salespersons for the
Company. The Company offers its drivers an incentive payment of $.0025 per
gallon of oil delivered to new customers obtained by the driver, plus $20 for
each new automatic delivery customer and $10 for each conversion of an existing
customer to automatic delivery.
The Company uses advertising campaigns to increase brand recognition and
expand its customer base, including radio and television advertisements,
billboards, and newsprint and telephone directory advertisements. Additionally,
the Company utilizes its fleet of fuel delivery trucks and service vans as
moving advertisements by emblazoning them with the Company's logo.
Historically, referrals have been an important part of the Company's efforts
to expand its business and the Company offers incentives to customers who refer
business. Customers who refer business receive either $30 or 25 gallons of
heating oil at no charge for each new customer referred. The Company also
encourages civic and religious organizations to refer business to the Company.
As an incentive, the Company pays such organizations a donation for each of its
members who become customers and a stipend based upon the members' fuel
consumption.
EXPANSION AND ACQUISITIONS
Currently, the majority of the Company's revenues are generated from the
Company's retail fuel oil division. While the Company intends to expand its
retail fuel oil operations, the Company goal is to
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<PAGE>
operate as a total energy provider and has plans to expand its operations into
the sale and distribution of additional energy sources.
The Company intends to use a substantial portion of the proceeds of this
offering to expand its operations. The Company's strategy to expand its
operations includes (i) the acquisition of select operators in the Company's
present markets as well as other markets; (ii) capturing market share from
competitors through increased advertising and other means; (iii) diversifying
its products; (iv) diversifying its customer base; and (iv) replicating its
marketing and service formula in new geographic areas either directly or through
franchise arrangements. The Company may also enter into joint ventures with
other entities in product areas different than the Company's current product
mix.
The Company has developed a strategy to capture market share and diversify
its customer base and product line through the acquisition and integration of
businesses in the Company's existing markets or in new markets. The Company
believes that many of the proprietors of businesses which compete with the
Company's operating divisions are of retirement age and may be receptive to
selling their operations. Another potential source of acquisitions are companies
which are owned by entrepreneurs who find expansion within the petroleum
products industry difficult, either operationally or financially, or who have
other investment opportunities.
More specifically, the Company intends to acquire two types of distributors.
The first type are relatively small distributors which management believes could
be easily integrated into the Company's operations. Management believes that
such distributors could benefit from significant economies of scale created by
the centralization of purchasing, marketing, credit, data processing and other
administrative functions. The second type of distributor consists of larger,
stand-alone businesses which could not be integrated but would most likely be
located in new markets or distribute product lines not offered by the Company.
The Company expects that acquisitions of these businesses would provide not only
attractive investment returns, but also provide hubs for future expansion.
The Company also intends to diversify its customer base and expand its
operations by replicating its marketing formula in new geographic areas by
franchising its delivery system and techniques. The Company will operate its
franchise operations pursuant to franchise agreements with franchisees. Under
these franchise agreements, franchisees will be required to: (i) pay to the
Company a $40,000 initial franchise fee, annual fees of approximately 5% of the
franchisees gross sales, plus $.04 per gallon of fuel sold; (ii) purchase
insurance; (iii) purchase from the Company promotional materials and energy
products during the life of the franchise. In return, the Company will provide
franchisees with guidelines and specifications for the operations of the
franchise, initial training, licenses for the use of the Company's name, service
marks and propriety marks, assistance with site location, and advice on
advertising and other promotional techniques. As of the date of this prospectus,
no such franchises have been sold by the Company and there can be no assurance
that any will be sold in the future. See "Business---Franchises."
The Company believes that recent and anticipated deregulation of public
utility companies in the Company's markets has created a window of opportunity
for the Company to expand into new product areas, particularly the retail sale
of electricity and natural gas. The Company believes it can capitalize on these
opportunities through joint ventures with companies which have previously been
successful in such areas although there can be no assurance that the Company's
expansion into the retail sale of electricity and natural gas will be
successful.
In April 1998, the Company entered into a marketing alliance agreement (the
"Marketing Agreement") with AllEnergy, LLC, a limited liability company
organized under the laws of the state of Massachusetts. Under the Marketing
Agreement, the Company will market and sell natural gas to residential and
commercial customers in New Jersey. The Company will receive from AllEnergy a
commission equal to 35% of the gross profit margin for sales generated by the
Company. Also, pursuant to the Marketing Agreement, should the New Jersey Board
of Public Utilities approve a program for the retail sale of electricity, the
Company has the option to market and sell electrical service under similar
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<PAGE>
terms and conditions. There can be no assurance that the Company will generate
or receive any revenues from this agreement. The agreement does not have any
minimum purchase requirements and may be terminated by either party at any time.
EMPLOYEES
From October through March, the Company's peak season, the Company employs
approximately 63 persons. From April through September, the Company employs
approximately 44 persons. Currently, there are no organized labor unions
representing any of the employees of Company or any of its related companies.
PATENTS AND TRADEMARKS
Able Oil owns the exclusive right and license to use, and to license others
to use, the proprietary marks, including the service mark "Able Oil
- -Registered Trademark-" (and design) ("Proprietary Marks"). The "Able Oil
- -Registered Trademark-" service mark and design was registered under Classes 37
and 39 of the Principal Register of the U.S. Patent & Trademark Office ("USPTO")
on April 30, 1996 (registration No. 1,971,758). In addition, Able Oil
established certain common law rights to the Proprietary Marks through its
continuous, exclusive and extensive public use and advertising. The Proprietary
Marks are not registered in any state.
Presently there is no effective determination by the USPTO, Trademark Trial
and Appeal Board, the trademark administrator of any state, or court regarding
the Proprietary Marks, nor is there any pending interference, opposition or
cancellation proceeding or any pending litigation involving the Proprietary
Marks or the trade names, logotypes, or other commercial symbols of Able Oil.
There are no agreements currently in effect that significantly limit the rights
of Able Oil to use or license the use of the Proprietary Marks.
PROPERTIES AND FACILITIES
The Company's corporate headquarters are located in a 4000 square foot
facility in Rockaway, New Jersey. This facility accommodates the Company's
corporate, administrative, marketing and sales personnel as well as truck yard
space and oil storage space for Able Oil. The lease expires July 31, 1999 and
the annual rent is $14,400 plus $.01 per gallon of throughput at the facility up
to 10,000,000 gallons. After throughput exceeds 10,000,000 gallons the rent is
calculated as $.007 per gallon of throughput. The Company is currently in
negotiations with the owner to purchase the property. While the landlord has
agreed to indemnify the Company from environmental violations prior to the
Company's occupancy, the Company is responsible for maintaining the facilities
in compliance with all environmental rules and laws. The Company also owns two
buildings, totaling 4,512 square feet, consisting of wood frame facilities
located at 38 Diller Avenue, Newton, New Jersey that serves as a supply depot,
storage area administrative offices and service facility.
Able Montgomery leases a 275 square foot facility that serves as a storage
facility and administrative offices located at 1250 Easton Road, Horsham Road,
Pennsylvania, and is governed by a lease with annual rent of $5,576.04. The
Company does not store fuel oil at this location with the exception of what is
kept in the delivery trucks. The office is conveniently located within three
miles of the wholesale supplier. The Company is responsible for maintaining the
facilities in compliance with all environmental rules and regulations.
Able Melbourne leases a 4000 square foot concrete and aluminum facility that
serves as a storage facility, a service facility and administrative offices,
located at 735 Snapper Road, Cape Canaveral, Florida and is governed by an oral,
month-to-month lease with annual rent of $2,862. The Company does not store fuel
oil at this location with the exception of that which is kept in the delivery
trucks. This facility is conveniently located within three miles of its
wholesale supplier. The Company is responsible for maintaining the facilities in
compliance with all environmental rules and laws.
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Able Propane leases a 619 square foot facility, located at 318 Route 46,
Dover, New Jersey, which houses its administrative offices. No propane is stored
at this facility. The lease expires September 14, 1999, and the annual rent is
$8,851.80 for the period of September 14, 1997 to September 14, 1998, and
$9,736.80 for the period of September 15, 1998 to September 14, 1999. In
addition, the Company must pay 20.89% of the costs of refuse collection, common
area maintenance and insurance. The Company is responsible for maintaining the
facilities in compliance with all environmental rules and laws. The Company
intends to relocate the propane division to the Company's existing facilities in
Rockaway, New Jersey that will house not only administrative offices but also
service and supply facilities.
ENVIRONMENTAL CONSIDERATIONS AND REGULATION
The Company has implemented environmental programs and policies designed to
avoid potential liability under applicable environmental laws. The Company has
not incurred any significant environmental compliance cost, and compliance with
environmental regulations has not had a material effect on the Company's
operating or financial condition. This is primarily due to the Company's general
policies of not owning or operating fuel oil terminals and of closely monitoring
its compliance with all environmental laws. In the future, the Company does not
expect environmental compliance to have a material effect on its operations and
financial condition. The Company's policy for determining the timing and amount
of any environmental cost is to reflect an expense as and when the cost becomes
probable and reasonably capable of estimation.
On January 31, 1997, Able Oil submitted to the New Jersey Department of
Environmental Protection a revised Discharge Prevention Containment and
Countermeasure plan ("DPCC") and Discharge, Cleanup and Removal plan ("DCR") for
the facility at 344 Route 46 East in Rockaway, New Jersey. The State of New
Jersey requires companies which operate fuel storage facilities to prepare such
plans, as proof that such companies are capable of, and have planned for, an
event that might be deemed by the State to be hazardous to the environment. In
addition to these plans, Able Oil has this facility monitored by A & O
Environmental on an ongoing basis to ensure that the facility meets or exceeds
all standards required by the State
Aside from minor normal spills associated with fueling trucks and filling
trucks for delivery, the Company experienced no events that would warrant
investigation by state or other environmental regulatory agencies. All locations
are prepared to deal with such an event should one occur. Additionally, A & O
would be utilized to clean any spills or contamination that an operating
subsidiary could not handle by themselves.
GOVERNMENT REGULATIONS
Numerous federal, state and local laws, including those relating to
protection of the environment and worker safety, effect the Company's
operations. The transportation of fuel oil, diesel fuel, propane and gasoline is
subject to regulation by various federal, state and local agencies including the
U.S. Department of Transportation ("DOT"). These regulatory authorities have
broad powers, and the Company is subject to regulatory and legislative changes
that can effect the economies of the industry by requiring changes in operating
practices or influencing demand for, and the cost of providing, its services.
The regulations provide that, among other things, the Company's drivers must
possess a commercial driver's licence with a hazardous materials endorsement.
The Company is also subject to the rules and regulations concerning Hazardous
Materials Transportation Act. For example, the Company's drivers and their
equipment must comply with the DOT's pre-trip inspection rules, documentation
regulations concerning hazardous materials (i.e. certificates of shipments which
describe the type, and amount of product transported), and limitations on the
amount of fuel transported, as well as driver time limitations. Additionally,
the Company is subject to DOT inspections that occur at random intervals. Any
material violation of DOT rules or the Hazardous Materials Transportation Act
may result in citations and/or fines upon the Company. In addition, the Company
depends upon the supply of petroleum products from the oil and gas industry and,
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therefore, is affected by changing taxes, price controls and other laws and
regulations relating to the oil and gas industry generally. The Company cannot
determine the extent to which future operations and earnings may be affected by
new legislation, new regulations and changes in existing regulations.
The technical requirements of these laws and regulations are becoming
increasingly expensive, complex and stringent. These laws may impose penalties
or sanctions for damages to natural resources or threats to public health and
safety. Such laws and regulations may also expose the Company to liability for
the conduct or conditions caused by others, or for acts of the Company that were
in compliance with all applicable laws at the time such acts were performed.
Sanctions for noncompliance may include revocation of permits, corrective action
orders, administrative or civil penalties and criminal prosecution. Certain
environmental laws provide for joint and several liabilities for remediation of
spills and releases of hazardous substances. In addition, companies may be
subject to claims alleging personal injury or property damages as a result of
alleged exposure to hazardous substances, as well as damage to natural
resources.
Although the Company believes that it is in compliance with existing laws
and regulations and carries adequate insurance coverage for environmental and
other liabilities, there can be no assurance that substantial costs for
compliance will not be incurred in the future or that the insurance coverage in
place will be adequate to cover future liabilities. There could be an adverse
affect upon the Company's operations if there were any substantial violations of
these rules and regulations. Moreover, it is possible that other developments,
such as more stringent environmental laws, regulations and enforcement policies
thereunder, could result in additional, presently unquantifiable, costs or
liabilities to the Company.
LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceeding that could
have a material adverse effect on the results of operations or the financial
condition of the Company. From time to time, the Company may become a party to
litigation incidental to its business. There can be no assurance that any future
legal proceedings will not have a material adverse affect on the Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the Directors
and Executive Officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Timothy Harrington................................... 30 Chief Executive Officer, Chairman of the Board and
Secretary
Christopher P. Westad................................ 44 President, Chief Financial Officer and Director
James Purcaro........................................ 36 Director (as of the Effective Date)
</TABLE>
Set forth below is a biographical description of each director and executive
officer of the Company based on information supplied by each of them.
TIMOTHY HARRINGTON, as of the Effective Date of the Offering, will serve as
the Company's Chief Executive Officer, Chairman of the Board, and Secretary. In
1989, Mr. Harrington founded Able Oil Company, Inc., and since that time, has
served as Able Oil's President, Chief Executive Officer and Chairman of the
Board. Mr. Harrington has also served as the Chief Executive Officer and
Chairman of the Board of Directors of Able Energy, Able Montgomery, Able
Melbourne, Able Propane and A & O since their respective inception.
CHRISTOPHER P. WESTAD, as of the Effective Date, will serve as the President
and a Director of the Company.. Since September 1996, Mr. Westad has served as
the President of Able Energy and Able Propane. From 1991 through 1996, Mr.
Westad was a market Manager for Ferrellgas Partners, L.P., a company engaged in
the retail distribution of liquefied petroleum gas. From 1977 through 1991, Mr.
Westad served in a number of management positions with RJR Nabisco. In 1975, Mr.
Westad received a Bachelor of Arts in Business and Public Management from Long
Island University--Southampton.
JAMES PURCARO, has agreed to serve as a director following the completion of
the offering. Since 1986, Mr. Purcaro has served as the president and chief
executive officer of Kingsland Trade Print Group, Inc., a commercial printing
company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors intends to establish a Compensation Committee and an
Audit Committee on or before the Effective Date.
The Compensation Committee will consist of at least two directors who are
not salaried officers of the Company. The purpose of the Compensation Committee
is to review the Company's compensation of its executives, to make
determinations relative thereto and to submit recommendations to the Board of
Directors with respect thereto. The Compensation Committee will also select the
persons to whom options to purchase shares of the Company's Common Stock under
the 1998 Stock Option Plan will be granted and to make various other
determinations with respect to such Plan.
The Audit Committee will consist of at least two independent Directors. The
purpose of the Audit Committee is to provide general oversight of audit, legal
compliance and potential conflict of interest matters.
COMPENSATION OF DIRECTORS
The Company has not paid compensation to any director for acting in such
capacity. The Company is currently reviewing its policy on compensation of
outside directors and may pay outside directors in the future.
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EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by the Company during each of the last two fiscal years to the Company's
Chief Executive Officer and to each of the Company's executive officers who
earned in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------------------
OTHER
SALARY ANNUAL COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) BONUS ($) ($)
- ------------------------------------------------------------- --------- --------- ----------- -----------------------
<S> <C> <C> <C> <C>
Timothy Harrington(1)........................................ 1997 100,000 80,000 833
Chief Executive Officer 1996 80,000 100,000 719
1995 80,000 50,000 380
</TABLE>
- ------------------------
(1) Reflects total compensation received from the Company's operating
subsidiaries.
EMPLOYMENT AGREEMENTS
On the Effective Date, Timothy Harrington and Christopher P. Westad will
enter into three year employment agreements with the Company. Timothy Harrington
will be retained as Chief Executive Officer of the Company at an annual salary
of $225,000. Christopher Westad will be retained as President of the Company at
an annual salary of $100,000. Each of the Messrs. Harrington and Westad are
entitled to bonuses pursuant to their employment agreements if the Company meets
certain financial targets based on sales, profitability and good management
goals as predetermined by the Board of Directors or compensation committee and
other subjective criteria as determined by the Board of Directors or
compensation committee. The employment agreements shall also provide for
reimbursement of reasonable business expenses. Timothy Harrington shall also
receive additional compensation including Company automobile, insurance and
retirement savings matched contributions by the Company and such other
perquisites as are customary.
In the event that there is a change in control of the Company, through an
acquisition where any person acquires more than 50% of the shares of the
Company, a consolidation or merger with another corporation resulting in at
least 50% of the voting shares of the surviving corporation being controlled by
a new acquirer or the sale directly or otherwise of all of the assets of the
Company to a third party in a non-distress situation, then the Company shall pay
to Timothy Harrington a lump sum payment equal to one year's salary.
STOCK OPTION PLAN
The Company has adopted a Stock Option Plan (the "1998 Plan"), pursuant to
which 375,000 shares of Common Stock are reserved for issuance.
The 1998 Plan will be administered by the compensation committee or the
board of directors, who determine among other things, those individuals who
shall receive options, the time period during which the options may be partially
or fully exercised, the number of shares of Common Stock issuable upon the
exercise of the options and the option exercise price.
The 1998 Plan will be for a period for ten years. Options may be granted to
officers, directors, consultants, key employees, advisors and similar parties
who provide their skills and expertise to the Company. Options granted under the
1998 Plan may be exercisable for up to ten years, may require vesting, and shall
be at an exercise price all as determined by the board. Options will be
non-transferable except to an option holder's personal holding company or
registered retirement savings plan and except by
36
<PAGE>
the laws of descent and distribution or a change in control of the Company, as
defined in the 1998 Plan, and are exercisable only by the participant during his
or her lifetime. Change in control includes (i) the sale of substantially all of
the assets of the Company and merger or consolidation with another, or (ii) a
majority of the board changes other than by election by the shareholders
pursuant to board solicitation or by vacancies filled by the board caused by
death or resignation of such person.
If a participant ceases affiliation with the Company by reason of death,
permanent disability or retirement at or after age 70, the option remains
exercisable for three months from such occurrence but not beyond the option's
expiration date. Other termination gives the participant three months to
exercise, except for termination for cause which results in immediate
termination of the option.
Options granted under the 1998 Plan, at the discretion of the compensation
committee or the board, may be exercised either with cash, Common Stock having a
fair market equal to the cash exercise price, the participant's personal
recourse note, or with an assignment to the Company of sufficient proceeds from
the sale of the Common Stock acquired upon exercise of the Options with an
authorization to the broker or selling agent to pay that amount to the Company,
or any combination of the above.
The exercise price of an option may not be less than the fair market value
per share of Common Stock on the date that the option is granted in order to
receive certain tax benefits under the Income Tax Act of United States (the
"ITA"). The exercise price of all future options will be at least 100% of the
fair market value of the Common Stock on the date of grant of the options. A
benefit equal to the amount by which the fair market value of the shares at the
time the employee acquires them exceeds the total of the amount paid for the
shares or the amount paid for the right to acquire the shares shall be deemed to
be received by the employee in the year the shares are acquired pursuant to
paragraph 7(1) of the ITA. Where the exercise price of the option is equal to
the fair market value of the shares at the time the option is granted, paragraph
110(1)(d) of the ITA allows a deduction from income equal to one quarter of the
benefit as calculated above. If the exercise price of the option is less than
the fair market value at the time it is granted, no deduction under paragraph
110(1)(d) is permitted. Options granted to any non-employees, whether directors
or consultants or otherwise will confer a tax benefit in contemplation of the
person becoming a shareholder pursuant to subsection 15(1) of the ITA.
Options under the 1998 Plan must be issued within ten years from the
effective date of the 1998 Plan.
Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed by the Company become available again for issuance under
the 1998 Plan.
The 1998 Plan may be terminated or amended at any time by the board of
directors, except that the number of shares of Common Stock reserved for
issuance upon the exercise of options granted under the 1998 Plan may not be
increased without the consent of the shareholders of the Company.
INDEMNIFICATION OF DIRECTORS
The Company's Certificate of Incorporation eliminates, to the fullest extent
permitted by law, the liability of its directors to the Company and its
stockholders for monetary damages for breach of the directors' fiduciary duty.
This provision is intended to afford the Company's directors the benefit of the
Delaware General Corporation Law, which provides that directors of Delaware
corporations may be relieved of monetary liability for breach of their fiduciary
duty of care, except under certain circumstances involving breach of a
director's duty of loyalty, acts or omissions not in good faith or involving
intentional misconduct or a knowing violation of law or any transaction from
which the director derived an improper personal benefit.
The By-laws of the Company provide that the Company shall indemnify to the
fullest extent permitted by Delaware law directors and officers (and former
officers and directors) of the Company. Such indemnification includes all costs
and expenses and charges reasonably incurred in connection with the defense of
any civil, criminal or administrative action or proceeding to which such person
is made a party
37
<PAGE>
by reason of being or having been an officer or director of the Company if such
person was substantially successful on the merits in his or her defense of the
action and he or she acted honestly and in good faith with a view to the best
interests of the Company, and if a criminal or administrative action that is
enforced by a monetary penalty, such person had reasonable grounds to believe
his or her conduct was lawful.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against certain liabilities in connection with
this Offering, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
and the Underwriter pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses,
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person or by the Underwriter in connection with
the securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
38
<PAGE>
PRINCIPAL STOCKHOLDERS AND SELLING SECURITYHOLDERS
The following table sets forth certain information, as of the date hereof,
and as adjusted to give effect to the sale of 1,750,000 Shares of Common Stock
by the Company with respect to the beneficial ownership of the Common Stock by
each beneficial owner of more than 5% of the outstanding shares thereof, by each
director, each nominee to become a director and each executive named in the
Summary Compensation Table and by all executive officers, directors and nominees
to become directors of the Company as a group, both before and after giving
effect to the Offering.
PERCENTAGE OF OUTSTANDING COMMON STOCK BENEFICIALLY OWNED
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
BENEFICIALLY PERCENT OWNERSHIP AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED BEFORE OFFERING OFFERING
- --------------------------------------------------------------- ----------------- ----------------- ---------------
<S> <C> <C> <C>
Timothy Harrington............................................. 2,000,000 98.7% 52.2%
All Executive Officers and Directors
as a Group (1 person)........................................ 2,000,000 98.7% 52.2%
</TABLE>
- ------------------------
(1) Unless otherwise indicated, the address is c/o Able Energy, Inc., 344 Route
46, Rockaway, New Jersey 7866.
CERTAIN TRANSACTIONS
In March 1997, Timothy Harrington received 1,000 shares of the Company's
Common Stock in consideration for his active participation in the founding of
the Company. On or before the effective date of the Offering, Mr. Harrington
will contribute all of the common stock held by him in the operating
subsidiaries to the Company. In addition, the Company will effectuate a
1-for-2,000 stock split resulting in Mr. Harrington's ownership of 2,000,000
shares of the Company's Common Stock.
All future transactions and loans between the Company and its officers,
directors and 5% shareholders will be on terms no less favorable than could be
obtained from unaffiliated third parties and will be approved by a majority of
the independent, disinterested directors of the Company.
39
<PAGE>
DESCRIPTION OF SECURITIES
The total authorized capital stock of the Company consists of 20,000,000
shares of Common Stock, $.001 par value, and 10,000,000 shares of Preferred
Stock, $.001 par value per share. The following descriptions contain all
material terms and features of the Securities of the Company, are qualified in
all respects by reference to the Certificate of Incorporation and By-laws of the
Company, copies of which are filed as Exhibits to the Registration Statement of
which this Prospectus is a part.
COMMON STOCK
The Company is authorized to issue 20,000,000 shares of Common Stock, $.001
par value per share, of which as of the date of this Prospectus 2,025,000 shares
of Common Stock are outstanding, not including the shares of Common Stock
offered herein.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. Holders of Common
Stock are entitled to receive ratably dividends as may be declared by the board
of directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, holders of the Common
Stock are entitled to share ratably in all assets remaining, if any, after
payment of liabilities. Holders of Common Stock have no preemptive rights and
have no rights to convert their Common Stock into any other securities.
CLASS A REDEEMABLE WARRANTS
Warrants will be issued as part of the Unit pursuant to a Warrant Agreement
between the Company and Continental Stock Transfer & Trust Company (the
"Transfer and Warrant Agent") and will be in registered form. The Company has
authorized the issuance of Warrants to purchase an aggregate of 875,000 shares
of Common Stock (exclusive of 131,250 Warrants issuable upon exercise of the
Underwriters' Over-Allotment Option and 87,500 Warrants underlying the
Underwriters' Warrants). Each Warrant entitles its holder to purchase, at any
time from the date of this Prospectus through the fifth anniversary date of this
Prospectus, one share of Common Stock at an exercise price of $5.00 per share,
subject to adjustment in accordance with the anti-dilution and other provisions
referred to below.
The Warrants offered hereby are not exercisable unless, at the time of
exercise, (i) there is a current prospectus relating to the Common Stock
issuable upon the exercise of the Warrants under an effective registration
statement filed with the Securities and Exchange Commission, and (ii) such
Common Stock is then qualified for sale or exempt therefrom under applicable
state securities laws in the jurisdiction in which the various holders of
Warrants reside.
The Warrants may be redeemed by the Company at any time commencing one year
from the date of this Prospectus (or earlier with the prior written consent of
the Underwriter) and prior to their expiration, at a redemption price of $.10
per Warrant, on not less than 30 days' prior written notice to the holders of
such Warrants, provided that the last sales price of the Common Stock on NASDAQ
is at least 200% ($10.00 per share, subject to adjustment) of the exercise price
of the Warrants for a period of 20 consecutive trading days ending on the third
day prior to the date the notice of redemption is given. Holders of Warrants
shall have exercise rights until the close of the business day preceding the
date fixed for redemption. The exercise price of the Warrants should in no event
be regarded as an indication of any future market price of the securities
offered hereby.
The exercise price and the number of shares of Common Stock purchasable upon
the exercise of the Warrants are subject to adjustment upon the occurrence of
certain events, including stock dividends, stock splits, combinations or
reclassification of the Common Stock. The Warrants do not confer upon holders
any voting or any other rights as stockholders of the Company.
Subject to the rules and regulations of the NASD, the Underwriter shall be
entitled to act as the warrant solicitation agent for the solicitation of the
Warrants for a period of five years after the date
40
<PAGE>
hereof, commencing one year after the date hereof and receive a warrant
solicitation fee of five percent (5%) of the exercise price for each Warrant
exercised during the period commencing one year after the date hereof.
The Company is required to have a current Registration Statement on file
with the Commission and to effect appropriate qualifications under the laws and
regulations of the states in which the holders of Warrants reside in order to
comply with applicable laws in connection with the exercise of Warrants and the
sale of the Common Stock issued upon such exercise. The Company, therefore, will
be required to file post-effective amendments to its Registration Statement when
subsequent events require such amendments in order to continue the registration
of the Common Stock underlying the Warrants and to take appropriate action under
state securities laws. There can be no assurance that the Company will be able
to keep its Registration Statement current or to effect appropriate action under
applicable state securities laws. Its failure to do so may restrict the ability
of the Warrant holders to exercise the Warrants and resell or otherwise dispose
of the underlying Common Stock, whether pursuant to redemption of the Warrants
or otherwise.
PREFERRED STOCK
The Certificate of Incorporation authorizes the issuance of 5,000,000 shares
of Preferred Stock with designations, rights and preferences determined from
time to time by its Board of Directors. Accordingly, the Company's Board of
Directors is empowered, without stockholder approval, to issue classes of
Preferred Stock with voting, liquidation, conversion, or other rights that could
adversely affect the rights of the holders of the Common Stock. Although the
Company has no present intention to issue any shares of its Preferred Stock
there can be no assurance that it will not do so in the future. No Preferred
Stock may be issued by the Company without the Underwriter's consent for a
period of 24 months following the Effective Date.
CERTAIN ANTI-TAKEOVER DEVICES
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which restricts certain transactions and business
combinations between a corporation and an "Interested Stockholder" owning 15% or
more of the corporation's outstanding voting stock for a periods of three years
from the date the stockholder becomes an Interested Stockholder. Subject to
certain exceptions, unless the transaction is approved by the Board of Directors
and the holders of at least 66-2/3% of the outstanding voting stock of the
corporation (excluding shares held by the Interested Stockholder), Section 203
prohibits significant business transactions such as a merger with, disposition
of assets to, or receipt of disproportionate financial benefits by the
Interested Stockholder, or any other transaction that would increase the
Interested Stockholder's proportionate ownership of any class or series of the
corporation's stock. The statutory ban does not apply if, upon consummation of
the transaction in which any person becomes an Interested Stockholder, the
Interested Stockholder owns at least 85% of the outstanding voting stock of the
corporation (excluding shares held by persons who are both directors and
officers or by certain stock plans).
TRANSFER AGENT AND REGISTRAR
Continental Transfer & Trust Company has been appointed as the transfer
agent and registrar for the Company's Common Stock. Its address is 2 Broadway,
New York, New York 10004 and its telephone number is (212) 509-4000.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this Offering, the Company will have 3,750,000
shares of Common Stock outstanding. In addition, the Company has reserved for
issuance 375,000 shares upon the exercise of options eligible for grant under
the 1998 Plan. Of the shares to be issued and outstanding after this
41
<PAGE>
Offering, the 1,750,000 Shares offered hereby (plus any additional Shares sold
upon exercise of the Over-Allotment Option) will be freely tradeable without
restriction or further registration under the Act, except for any shares
purchased or held by an "affiliate" of the Company (in general, a person who has
a control relationship with the Company) which will be subject to the
limitations of Rule 144 adopted under the Act ("Rule 144"). In general, under
Rule 144, subject to the satisfaction of certain other conditions, a person,
including an affiliate of the Company, who has beneficially owned restricted
shares of Common Stock for at least one year is permitted to sell in a brokerage
transaction, within any three-month period, a number of shares that does not
exceed the greater of 1% of the total number of outstanding shares of the same
class, or if the Common Stock is quoted on Nasdaq or a stock exchange, the
average weekly trading volume during the four calendar weeks preceding the sale.
Rule 144 also permits a person who presently is not and who has not been an
affiliate of the Company for at least three months immediately preceding the
sale and who has beneficially owned the shares of Common Stock for at least two
years to sell such shares without regard to any of the volume limitations as
described above. The remaining 2,025,000 shares of Common Stock are "restricted
securities" as that term is defined under Rule 144, and may not be sold unless
registered under the Act or exempted therefrom. Of such shares, 2,000,000 shares
of Common Stock outstanding are eligible for resale under Rule 144 on March 1,
1999, and 25,000 shares would be eligible for resale under Rule 144 on or about
August 1999. All 2,025,000 such shares are subject to a 24 month lock up during
which such shares may not be sold without the prior written consent of the
Underwriter.
Sales of the Company's Common Stock by certain of the present stockholders
in the future, under Rule 144, may have a depressive effect on the price of the
Company's Common Stock.
UNDERWRITING
The Company has agreed to sell, and the Underwriter has agreed, subject to
the time and conditions of the Underwriting Agreement, to purchase from the
Company on a firm commitment basis, an aggregate of 875,000 Units, at the
initial public offering price less the underwriting discounts and commissions
set forth on the cover page of this Prospectus. The Underwriter has advised the
Company that it proposes to offer the Units to the public at the public offering
price set forth on the cover page of this Prospectus and that they may allow to
selected dealers who are members of the NASD, concessions of not in excess of
$. Unit, of which not more than $. per Unit may be re-allowed to
certain other dealers who are members of the National Association of Securities
Dealers, Inc. After completion of the public offering, the public prices,
concessions and reallowances may be changed by the Underwriter.
The Underwriting Agreement further provides that the Underwriter will
receive from the Company a non-accountable expense allowance of 3% of the
aggregate public offering price of the Units sold (including any Units sold
pursuant to the Underwriters' Over-Allotment Option), which allowance amounts to
$216,562.50 (or $249,046.87 if the Underwriter's Over-Allotment Option is
exercised in full).
The Company has granted to the Underwriter the Over-Allotment Option, which
is exercisable for a period of 45 days after the Closing, to purchase up to an
aggregate of 168,750 additional Units (up to 15% of the Units being offered) at
the public offering price, less underwriting discounts and commissions, solely
to cover over-allotments, if any.
The Underwriter has informed the Company that the Underwriter will not make
sales of the Units offered by this Prospectus to accounts over which they
exercise discretionary authority.
The Company has agreed to sell to the Underwriter at a price of $.0001 per
warrant, Underwriter's Warrants to purchase 87,500 Units, exclusive of the
Over-Allotment Option. The Underwriter's Warrants will be nonexercisable for one
year after the date of this Prospectus. Thereafter, for a period of four years,
the Underwriter's Warrants will be exercisable at $12.375 per Unit. The
Underwriter's Warrants are not transferable for a period of one year after the
date of this Prospectus, except to officers and stockholders of the Underwriter
and to members of the selling group and their officers and partners. The Company
has agreed to file, during the five (5) year period commencing on the date of
this Prospectus, on one occasion at the Company's cost, at the request of the
holders of a majority of the Underwriter's Warrants and the
42
<PAGE>
underlying shares of Common Stock and Warrants, and to use its best efforts to
cause to become effective, a post-effective amendment to the Registration
Statement or a new registration statement under the Securities Act, as required
to permit the public sale of Common Stock and Warrants issued or issuable upon
exercise of the Underwriter's Warrants. In addition, the Company has agreed to
give advance notice to holders of the Underwriter's Warrants of its intention to
file certain registration statements commencing on the date of this Prospectus
and ending seven (7) years after the date of this prospectus, and in such case,
holders of such Underwriter's Warrants or underlying shares of Common Stock
shall have the right to require the Company to include all or part of such
shares of Common Stock and Warrants underlying such Underwriter's Warrants in
such registration statement at the Company's expense.
For the life of the Underwriter's Warrants, the holders thereof are given,
at nominal costs, the opportunity to profit from a rise in the market price of
the Company's securities with a resulting dilution in the interest of other
shareholders. Further, the holders may be expected to exercise the Underwriters'
Option at a time when the Company would in all likelihood be able to obtain
equity capital on terms more favorable than those provided in the Underwriters'
Option.
The Company has agreed that upon closing of this Offering, it will for a
period of not less than five years, to nominate and support the election of one
designee of the Underwriter as a member of the Board of Directors or
alternatively to have the Underwriter designate an advisor to the Board of
Directors.
The Company has agreed to retain the Underwriter as a financial consultant
for a period of two years to commence on the closing of this Offering, at a fee
of $166,000 all of which shall be payable in advance on the closing of the
Offering. Pursuant to this agreement, the Underwriter will be obligated to
provide general financial advisory services to the Company on an "as needed"
basis with respect to possible future financing or acquisitions by the Company
and related matters. The agreement does not require the Underwriter to provide
any minimum number of hours of consulting services to the Company. The agreement
further provides that the Underwriter may act as a finder for certain business
transactions. Under this arrangement, the Company shall pay the Underwriter a
fee equal to 5% of the first $1 million, 4% of the next $1 million, 3% of the
next $1 million, 2% of the next $1 million, and 1% thereafter of the
consideration involved in any non-financing related transactions (including
mergers, acquisitions, joint ventures and other business transactions)
consummated by the Company with a party introduced to the Company by Walsh.
The public offering price of the Units offered hereby and the exercise price
of the Warrants, have been determined by negotiation between the Company and the
Underwriter. Factors considered in determining the offering price of the Units
offered hereby included the business in which the Company is engaged, the
Company's financial condition, an assessment of the Company's management, the
general condition of the securities markets and the demand for similar
securities of comparable companies.
Except for certain circumstances provided for in the Underwriting Agreement,
the Company has agreed, for a period of one year from the date of this
Prospectus not to issue any shares of Common Stock, warrants or any options or
other rights to purchase Common Stock without the prior written consent of the
Underwriter.
In connection with this Offering, the Underwriter and selling group members
and their respective affiliates may engage in transactions that stabilize,
maintain or otherwise affect the market price of the Units, Common Stock and
Warrants. Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M, pursuant to which such persons may bid
for or purchase Common Stock for the purpose of stabilizing the market price.
The Underwriter also may create a short position for the account of the
Underwriter by selling more Units in connection with the Offering than they are
committed to purchase from the Company, and in such case may purchase Units,
Common Stock or Warrants in the open market following completion of the Offering
to cover all or a portion of such short position. The Underwriter may also cover
all or a portion of such short position by exercising the Over-
43
<PAGE>
Allotment Option. In addition, the Underwriter may impose "penalty bids" under
contractual arrangements with the Underwriter whereby it may reclaim from an
Underwriter (or dealer participating in the Offering) for the account of other
Underwriter, the selling concession with respect to Units that are distributed
in the Offering but subsequently purchased for the account of the Underwriter in
the open market. Any of the transactions described in this paragraph may result
in the maintenance of the price of the Units, Common Stock and Warrants at a
level above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph is required, and, if they are
undertaken they may be discontinued at any time.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against certain liabilities in connection with
this Offering, including liabilities under the Securities Act.
The foregoing is a summary of the material terms of the Underwriting
Agreement, the Underwriter's Warrant Agreement and the Consulting Agreement.
Reference is made to the copies of the Underwriting Agreement, the Underwriter's
Warrant Agreement and the Consulting Agreement, which are filed as exhibits to
the Registration Statement of which this Prospectus forms a part.
LEGAL MATTERS
Certain legal matters in connection with the Offering will be passed upon
for the Company by its counsel, Sichenzia, Ross & Friedman LLP, 135 West 50th
Street, 20th Floor, New York, New York, 10020. Sichenzia, Ross & Friedman LLP
has been issued 25,000 shares of Common Stock of the Company for past legal
services.
Certain legal matters will be passed upon for the Underwriter by Goldstein &
DiGioia LLP, 369 Lexington Avenue, New York, New York 10017.
EXPERTS
The financial statements of the Company at December 31, 1997, and for each
of the two fiscal years in the period ended December 31, 1997 and 1996,
appearing in this Prospectus and Registration Statement have been audited by
Simontacchi & Co. LLP, Certified Public Accountants, as set forth in their
reports thereon appearing elsewhere herein and in the Registration Statement,
and are included in reliance upon such reports given upon the authority of such
firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement under the
Act with respect to the Securities offered hereby. This Prospectus omits certain
information contained in the Registration Statement and the exhibits thereto,
and reference is made to the Registration Statement and the exhibits thereto for
further information with respect to the Company and the Securities offered
hereby. Each such statement is qualified in its entirety by such reference. The
Registration Statement, including exhibits and schedules filed therewith, may be
inspected without charge at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, Suite 1300, New York, New York 10048, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such materials may be obtained from the Public Reference Section of the
Commission, Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and its public reference facilities in New York, New York and Chicago,
Illinois upon payment of the prescribed fees. Electronic registration statements
filed through the Electronic Data Gathering, Analysis, and Retrieval System are
publicly available through the Commission's Website (http://www.sec.gov).
Following the Effective Date hereof, the Company intends to be a reporting
company under the Securities Exchange Act of 1934, as amended.
44
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report (December 31, 1997)........................................................ F-2
Accountants' Compilation Report (March 31, 1998)........................................................ F-3
FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 1997 and March 31, 1998 (Unaudited)...................... F 4-5
Consolidated Statements of Income and Retained Earnings for the years ended December 31, 1997 and 1996
(Restated) and the three months ended March 31, 1997 and March 31, 1998 (Unaudited)................... F-6
Consolidated Statements of Cash Flows for the years ended December 31, 1997 and 1996 (Restated) and the
three months ended March 31, 1998 and 1997 (Unaudited)................................................ F-7
Notes to Financial Statements (December 31, 1997)....................................................... F 8-14
</TABLE>
F-1
<PAGE>
To The Shareholder
Able Energy, Inc.
Rockaway, New Jersey 07866
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheet of Able Energy,
Inc. and subsidiaries as of December 31, 1997, and the related consolidated
statements of income and retained earnings, and cash flows for the period ended
December 31, 1997 and 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our audit the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Able Energy, Inc. and subsidiaries as of December 31, 1997, and the
results of their operations and their cash flows for the period ended December
31, 1997 and 1996 in conformity with generally accepted accounting principles.
Simontacchi & Company, LLP
Fairfield, New Jersey
March 5, 1998, as to 1997
July 7, 1998 as to 1996 retroactively restated
F-2
<PAGE>
To The Shareholder of
Able Energy, Inc.
Rockaway, New Jersey 07866
We have compiled the accompanying consolidated balance sheet of Able Energy,
Inc. as of March 31, 1998, and the related consolidated statements of income and
retained earnings and cash flows for the three months then ended, in accordance
with Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any form of assurance on them.
Management has elected to omit substantially all of the disclosures required
by generally accepted accounting principles. If the omitted disclosures were
included in the financial statements, they might influence the user's
conclusions about the Company's financial position, results of operations and
cash flows. Accordingly, these financial statements and schedules are not
designed for those who are not informed about such matters.
May 21, 1998
Fairfield, New Jersey
F-3
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997 AND MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ------------
<S> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash............................................................................... $ 155,904 $ 603,115
Accounts Receivable (Less Allowance for Doubtful Accounts of $52,584 at December
31, 1997 and March 31, 1998)..................................................... 647,731 527,837
Inventory.......................................................................... 184,655 155,187
Prepaid Expense.................................................................... 14,589 45,630
Due From Officers.................................................................. 42,527 4,191
Due From Employees................................................................. -- 2,000
Other Receivables.................................................................. 9,587 --
Prepaid Income Taxes............................................................... 16,695 16,695
------------ ------------
TOTAL CURRENT ASSETS............................................................. 1,071,688 1,354,655
------------ ------------
PROPERTY AND EQUIPMENT:
Land............................................................................... 90,800 90,800
Building........................................................................... 150,000 157,367
Trucks............................................................................. 1,478,466 1,499,808
Fuel Tanks......................................................................... 329,761 356,860
Machinery and Equipment............................................................ 124,928 118,860
Leasehold Improvements............................................................. 114,182 124,092
Cylinders.......................................................................... 123,718 141,957
Computers and Office Equipment..................................................... 79,502 81,005
------------ ------------
2,491,357 2,570,749
Less: Accumulated depreciation..................................................... (720,074) (814,503)
------------ ------------
NET PROPERTY AND EQUIPMENT....................................................... 1,771,283 1,756,246
------------ ------------
OTHER ASSETS:
Deposit............................................................................ 1,796 1,796
Customer List (Less Amortization of $47,805 and $57,655 at December 31, 1997 and
March 31, 1998, respectively).................................................... 543,195 533,345
Covenant Not to Compete (Less Amortization of $43,076 and $52,254 at December 31,
1997 and March 31, 1998, respectively)........................................... 162,490 151,478
Note Receivable.................................................................... 2,072 4,759
------------ ------------
TOTAL OTHER ASSETS............................................................... 709,553 691,378
------------ ------------
TOTAL ASSETS..................................................................... $3,552,524 $ 3,802,279
------------ ------------
------------ ------------
See Accompanying Notes
</TABLE>
F-4
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997 AND MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable................................................................... $ 496,170 $ 549,325
Note Payable--Bank................................................................. 277,066 315,733
Current Portion of Long-Term Debt.................................................. 518,693 483,010
Covenant Not To Compete............................................................ 36,714 33,654
Accrued Expenses................................................................... 84,140 96,731
Deposits........................................................................... 801 801
Taxes Payable...................................................................... 13,848 7,333
Customer Advance Payments.......................................................... 303,194 105,649
Income Taxes Payable--Current...................................................... 13,190 169,790
Income Taxes Payable--Prior........................................................ 73,960 73,960
Escrow Deposits.................................................................... 15,100 15,100
Due to Employee.................................................................... -- 14,000
------------ ------------
TOTAL CURRENT LIABILITIES........................................................ 1,832,876 1,865,086
DEFERRED INCOME TAXES................................................................ 18,825 21,125
COVENANT NOT TO COMPETE: less current portion........................................ 104,020 97,902
LONG TERM DEBT: less current portion................................................. 1,198,543 1,152,088
------------ ------------
TOTAL LIABILITIES................................................................ 3,154,264 3,136,201
------------ ------------
STOCKHOLDERS' EQUITY:
Common Stock
Authorized 10,000 Shares, Par Value $.001 per share Issued and Outstanding 1,000
shares........................................................................... 1 1
Paid in Surplus.................................................................... 322,198 322,198
Retained Earnings.................................................................. 76,061 343,879
------------ ------------
TOTAL STOCKHOLDERS' EQUITY....................................................... 398,260 666,078
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....................................... $3,552,524 $ 3,802,279
------------ ------------
------------ ------------
</TABLE>
See Accompanying Notes
F-5
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996(RESTATED) AND
THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEARS ENDED DECEMBER 31, 31,
---------------------------- --------------------------
<S> <C> <C> <C> <C>
RESTATED
1997 1996 1998 1997
------------- ------------- ------------ ------------
<CAPTION>
UNAUDITED
<S> <C> <C> <C> <C>
NET SALES............................................ $ 16,380,992 $ 12,981,457 $ 5,504,512 $ 5,342,650
COST OF SALES........................................ 13,022,635 10,572,750 4,151,470 4,133,018
------------- ------------- ------------ ------------
GROSS PROFIT....................................... 3,358,357 2,408,707 1,353,042 1,209,632
------------- ------------- ------------ ------------
EXPENSES
Selling, General and Administrative
Expenses......................................... 2,745,963 1,889,905 746,338 781,045
------------- ------------- ------------ ------------
Depreciation and Amortization Expense.............. 394,806 262,391 106,080 98,666
------------- ------------- ------------ ------------
TOTAL EXPENSES................................... 3,140,769 2,152,296 852,418 879,711
INCOME FROM OPERATIONS 217,588 256,411 500,624 329,921
OTHER INCOME (EXPENSES):.............................
Insurance Proceeds................................. 2,285 34,086 -- --
Interest Income.................................... 4,910 17,906 818 --
Gain on Sale of Equipment.......................... 72,104 -- -- --
Leasing Income..................................... 26,574 -- -- --
Miscellaneous Income............................... 13,078 6,328 4,168 1,300
------------- ------------- ------------ ------------
Interest Expense................................... (211,133) (80,586) (52,092) (48,814)
------------- ------------- ------------ ------------
TOTAL OTHER INCOME (EXPENSES).................... (92,182) (22,266) (47,106) (47,514)
INCOME BEFORE PROVISION FOR INCOME TAXES 125,406 234,145 453,518 282,407
------------- ------------- ------------ ------------
PROVISION FOR INCOME TAXES........................... 49,345 6,549 185,700 120,023
NET INCOME......................................... 76,061 227,596 267,818 162,384
------------- ------------- ------------ ------------
RETAINED EARNINGS--BEGINNING OF YEAR................. 0 87,603 76,061 0
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
RETAINED EARNINGS--END OF YEAR $ 76,061 $ 315,199 $ 343,879 $ 162,384
</TABLE>
NOTE: THE DECEMBER 31, 1996 STATEMENT OF INCOME AND RETAINED EARNINGS HAS BEEN
RETROACTIVELY RESTATED TO REFLECT THE OPERATIONS OF ABLE OIL COMPANY AND
RELATED ENTITIES. ABLE ENERGY, INC. WAS INCORPORATED MARCH 13, 1997 AND
ACQUIRED THE STOCK OF ABLE OIL COMPANY AND RELATED ENTITIES.
See Accompanying Notes
F-6
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (RESTATED) AND
THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
31,
YEARS ENDED DECEMBER 31, UNAUDITED
-------------------------- ------------------------
<S> <C> <C> <C> <C>
RESTATED
1997 1996 1998 1997
----------- ------------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income............................................... $ 76,061 $ 227,596 $ 267,818 $ 162,384
Adjustments to Reconcile Net Income to Cash used by
Operating Activities:
Depreciation and Amortization.......................... 394,806 262,391 106,080 98,666
Gain on Sale of Equipment.............................. (72,104) -- -- --
(Increase) Decrease in:
Accounts Receivable.................................. (156,298) (279,255) 119,894 (132,052)
Inventory............................................ 8,906 (71,773) 29,468 30,460
Prepaid Expenses..................................... 82,091 (113,375) (31,041) 67,529
Deposits............................................. 3,975 (5,771) -- 5,100
Increase (Decrease) in:
Accounts Payable..................................... 199,910 24,200 53,155 127,235
Accrued Expenses..................................... (319,389) 312,478 12,591 (350,762)
Other Taxes Payable.................................. (1,723) (43,391) (6,515) (8,241)
Customer Advance Payments............................ 303,194 -- (197,545) 158,500
Income Taxes Payable................................. 10,455 2,735 156,600 118,760
Deferred income Taxes................................ 12,850 4,387 2,300 2,900
Escrow Deposit....................................... -- 15,100 -- (100)
----------- ------------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES.......... 542,734 335,322 512,805 280,379
----------- ------------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of Equipment........................................ 114,490 -- -- --
Purchase of Property and Equipment....................... (497,609) (1,144,074) (70,181) (124,416)
Purchase of Intangibles.................................. (42,000) (754,567) -- --
Decrease in Shareholder's Loan........................... 23,692 2,632 38,336 67,463
Other Receivables........................................ (11,659) -- 4,900 (10,257)
----------- ------------- ----------- -----------
NET CASH USED BY INVESTING ACTIVITIES.............. (413,086) (1,896,009) (26,945) (67,210)
----------- ------------- ----------- -----------
Cash Flows From Financing Activities.......................
Increase in Notes Payable................................ 814,317 1,946,850 92,893 221,431
Decrease in Notes Payable................................ (948,100) (260,082) (145,542) (31,535)
Loan From Employee....................................... -- -- 14,000 --
----------- ------------- ----------- -----------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES... (133,783) 1,686,768 (38,649) 189,896
----------- ------------- ----------- -----------
NET INCREASE (DECREASE) IN CASH............................ (4,135) 126,081 447,211 403,065
Cash--Beginning of Year.................................... 160,039 33,958 155,904 146,842
----------- ------------- ----------- -----------
Cash--End of Year.......................................... $ 155,904 $ 160,039 $ 603,115 $ 549,907
----------- ------------- ----------- -----------
----------- ------------- ----------- -----------
The Company had Interest Cash Expenditures of:............. $ 211,133 $ 80,586 $ 52,092 $ 48,814
The Company had Tax Cash Expenditures of:.................. $ 43,680 $ -- $ 35,650 $ --
</TABLE>
NOTE: THE DECEMBER 31, 1996 STATEMENT OF CASH FLOWS HAS BEEN RETROACTIVELY
RESTATED TO REFLECT THE OPERATIONS OF ABLE OIL COMPANY AND RELATED
ENTITIES. ABLE ENERGY, INC. WAS INCORPORATED MARCH 13, 1997 AND ACQUIRED
THE STOCK OF ABLE OIL COMPANY AND RELATED ENTIEIES.
See Accompanying Notes
F-7
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
DECEMBER 31, 1997
NOTE 1 BASIS OF PRESENTATION
Able Energy, Inc. was incorporated in the state of Delaware on March 13,
1997. Mr. Timothy Harrington exchanged his stock in the following companies:
Able Oil Company (a New Jersey corporation), Able Oil Company Montgomery, Inc.
(a Pennsylvania corporation), A & O Environmental Services, Inc. (a New Jersey
corporation), Able Oil Melbourne, Inc. (a Florida corporation) and his 99%
interest in Able Propane, LLC for 1,000 shares of Able Energy, Inc.and became
the sole shareholder.
Able Energy, Inc. is a holding company with no operations, the subsidiaries
which were in operation the entire year of 1997 are being presented in the
accompanying financial statements.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Able Oil Company, Able Montgomery and Able Melbourne are full service oil
companies that market and distribute home heating oil, diesel fuel and kerosene
to residential and commercial customers operating in the northern New Jersey,
Montgomery, Pennsylvania and Melbourne, Florida. A & O Environmental Services
provides environment cleanup and related services in New Jersey and parts of
Pennsylvania and New York. Able Propane, which was incorporated in July 1996,
installs propane tanks which are owned by the company and sells propane for
heating and cooking. Able Propane has been in the start-up phase of operation
through 1997.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements included the accounts of Able Energy,
Inc. and its subsidiaries. The minority interest of 1% in Able Propane, LLC is
so immaterial and has not been shown separately. All material intercompany
balances and transactions were eliminated in consolidation.
INVENTORIES
Inventories are valued at the lower of cost (first in, first out method) or
market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided by using the straight-line method based upon the
estimated useful lives of the assets (5 to 40 years).
For income tax basis, depreciation is calculated by a combination of the
straight-line and modified accelerated cost recovery systems established by the
Tax Reform Act of 1986.
Expenditures for maintenance and repairs are charged to expense as incurred
whereas expenditures for renewals and betterments are capitalized.
The cost and related accumulated depreciation of assets sold or otherwise
disposed of during the period are removed from the accounts. Any gain or loss is
reflected in the year of disposal.
F-8
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1997
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
Intangibles were amortized as follows:
Customer Lists of $571,000 and Covenant Not To Compete of $183,567 related
to the Connell's Fuel Oil Company acquisition on October 28, 1996, by Able Oil
Company are being amortized over a straight-line period of 15 and 5 years,
respectively.
Customer lists of $20,000 and Covenant Not To Compete of $22,000 related to
the McGuigan acquisition on November 6, 1997, by Able Oil Company Montgomery,
Inc. are being amortized over a straight line period of 15 and 3 years,
respectively.
For income tax basis, the Customer Lists and the Covenant Not To Compete are
being amortized over a straight-line method of 15 years as per the Tax Reform
Act of 1993.
Amortization expense was $75,245 in 1997.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Although these estimates are based on management's knowledge
of current events and actions it may undertake in the future, they may
ultimately differ from actual results.
INCOME TAXES
Effective January 1, 1997, all the subsidiaries, which were S-Corporations,
terminated their S-Corporation elections. The subsidiaries will be filing a
consolidated tax return with Able Energy, Inc.
Effective January 1, 1997, the company has elected to provide for income
taxes based on the provisions of Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes", which requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in
the financial statements and tax returns in different years. Under this method,
deferred income tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
CONCENTRATIONS OF CREDIT RISK
The Company performs on-going credit evaluations of its customers' financial
conditions and requires no collateral from its customers.
Financial instruments which potentially subject the Company to
concentrations of credit risk consists of checking accounts with a financial
institution in excess of insured limits. The Company does not anticipate
non-performance by the financial institution.
F-9
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1997
NOTE 3 INVENTORIES
<TABLE>
<CAPTION>
ITEMS DECEMBER 31, 1997
- --------------------------------------------------------------------------- -----------------
<S> <C>
Heating Oil................................................................ $ 111,262
Diesel Fuel................................................................ 13,065
Kerosene................................................................... 965
Propane.................................................................... 2,273
Parts and Supplies......................................................... 57,090
--------
Total.................................................................... $ 184,655
--------
--------
</TABLE>
NOTE 4 ESCROW DEPOSIT
The Escrow Deposit of $15,000 consists of $10,000 for removing contaminated
soil and 55-gallon drums containing waste; and for grading the soil at the site
of the Real Property. The remaining $5,000 is for any unpaid tax liability that
may be owed to the State of New Jersey Division of Taxation. This was deposited
in conjunction with the purchase by Able Oil Company of Connell's Fuel Oil
Company in Newton, New Jersey on October 28, 1996.
NOTE 5 NOTE PAYABLE--BANK
Note Payable to PNC Bank (Credit Line) at an interest rate of Prime plus
1/2%. The Credit Line originated on October 28, 1996 and matures on October 15,
1998. The Credit Line is collateralized by all personal property of the Able Oil
Company. The Credit Line is guaranteed by the sole Shareholder of the Company.
<TABLE>
<S> <C>
Credit Line Balance............................................... $ 277,066
</TABLE>
NOTE 6 LONG TERM DEBT
Notes Payable to Orix Credit Alliance, Inc. at a range of interest rates
from 9.00% to 11.25% with an average monthly payment of $3,132.35. The earliest
of theses Notes; originated on October 1, 1993 and the last Note matures on
August 24, 2001. The Notes are collateralized by various fuel oil trucks.
<TABLE>
<S> <C>
Notes Balance..................................................... $ 403,412
</TABLE>
Note Payable to Chrysler Financial at an interest rate of 8.5% with a
monthly payment of $612.91. The Note originated on May 16, 1996 and matures on
May 17, 2001. This Note is collateralized by a 1996 Jeep Grand Cherokee.
<TABLE>
<S> <C>
Note Balance....................................................... $ 21,284
</TABLE>
Note Payable to PNC Bank at an interest rate of 8.3% with a monthly payment
of $356.87. The note originated on May 28, 1995 and matures on May 28, 1999. The
Note is secured by a 1995 Dodge Truck.
<TABLE>
<S> <C>
Note Balance........................................................ $ 6,022
</TABLE>
F-10
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1997
NOTE 6 LONG TERM DEBT (CONTINUED)
Note Payable to World Omni at an interest rate of 8.869% with a monthly
payment of $234.99. The Note originated November 21, 1997 and matures December
21, 2000. The Note is collateralized by a Ford F-150 Pick-up Truck.
<TABLE>
<S> <C>
Note Balance....................................................... $ 17,873
</TABLE>
Note Payable to Orix Leasing Corp. At an interest rate of 9.111% with a
monthly payment of $4,846. The Note originated on March 19, 1997 and matures on
March 19, 2001. The Note is collateralized by 254 propane cylinders and 2
propane delivery trucks.
<TABLE>
<S> <C>
Note Balance...................................................... $ 124,883
</TABLE>
Note Payable to Summit Leasing Corp. At an interest rate of 8.50% with a
monthly payment of $1,124.52. The Note originated on November 10, 1997 and
matures on November 10, 2001. The Notes are collateralized by a 1998 Freightline
fuel oil truck.
<TABLE>
<S> <C>
Note Balance....................................................... $ 44,011
</TABLE>
Note Payable to Case Credit at an interest rate of 7.9% with a monthly
payment of $1,157.83. The Note originated on May 20, 1995 and matures May 20,
1999. The Note is Collateralized by a backhoe.
<TABLE>
<S> <C>
Note Balance....................................................... $ 18,615
</TABLE>
Note Payable to Valley National Bank at an interest rate of 8.25% with a
monthly payment of $296.79. The Note originated on June 6, 1995 and matures on
June 6, 1999. The Note is collateralized by a 1995 Ford pick-up truck.
<TABLE>
<S> <C>
Note Balance........................................................ $ 4,958
</TABLE>
Note Payable to PNC Bank with a monthly payment of $1,250 plus interest at
1%, plus Prime. The Note originated on November 6, 1997 and matures October 30,
2000. Proceeds of the Note were used to buy two oil trucks, a customer list and
to fund a non-compete payout to the seller of these assets.
<TABLE>
<S> <C>
Note Balance....................................................... $ 43,984
</TABLE>
Notes Payable to Ford Credit at interest rates of 9.5% with an average
monthly payment of $430.47. The Notes originated on October 27, 1995 and mature
on November 17, 1999. The Notes are collateralized by two 1995 Ford Vans.
<TABLE>
<S> <C>
Notes Balance...................................................... $ 16,894
</TABLE>
Notes Payable to Greentree Consumer Discount Company at an interest rate of
8.95% with an average monthly payment of $1,322.37. The Note originated on
October 1, 1996 and December 10, 1996 and matures on October 1, and December 10,
2000. The Notes are collateralized by two 1997 Freightliner Oil Trucks.
<TABLE>
<S> <C>
Note Balance....................................................... $ 81,477
</TABLE>
F-11
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1997
NOTE 6 LONG TERM DEBT (CONTINUED)
Note Payable to Connell's Fuel Oil Company at an interest rate of 8.5% with
a monthly payment of $9,839.82. The Note originated on October 28, 1996 and
matures on November 1, 2001. The Note is collateralized by the real property and
the improvements at 38 Diller Avenue, Newton, New Jersey. The Note is guaranteed
by the sole Shareholder of the Company.
<TABLE>
<S> <C>
Note Balance...................................................... $ 385,135
</TABLE>
Note Payable to PNC Bank at an interest rate of Prime plus 1% with a monthly
principal payment of $12,212.70. The Note originated on October 28, 1996. The
Note is collateralized by all personal property of the Company. The Note is
guaranteed by the sole Shareholder of the Company.
<TABLE>
<S> <C>
Note Balance...................................................... $ 415,232
</TABLE>
Line of Credit to American Equipment Leasing with a maximum credit
availability of $150,000. At December 31, 1997 the Company had not yet commenced
repaying the line of credit, which totaled $133,456. It is anticipated that the
Company will start repaying the line of credit in May of 1998 with a monthly
payment of $4,775. The Note bears interest at approximately Prime plus 1.25%.
<TABLE>
<S> <C>
Note Balance...................................................... $ 133,456
</TABLE>
The Note and Credit Line payable to PNC Bank contains certain financial
covenants as described in the agreement with the bank. The Company has either
met or received a written waiver from PNC Bank on these financial covenants.
Maturities on the Notes Payable subsequent to December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING PRINCIPAL
DECEMBER 31, AMOUNT
- -------------------------------------------------------------------------------- ------------
<S> <C>
1998............................................................................ $ 518,693
1999............................................................................ 520,490
2000............................................................................ 503,671
2001............................................................................ 174,382
------------
$ 1,717,236
------------
------------
</TABLE>
NOTE 7 COVENANT NOT TO COMPETE
On October 28, 1996, a Covenant Not To Compete was originated by the Able
Oil Company, Connell's Fuel Oil Company and William Toriello. The Covenant is to
last 5 years from the date of inception with a monthly installment of $3,059.44
starting December 1, 1996.
<TABLE>
<S> <C>
Covenant Balance.................................................. $ 140,734
Current Liability................................................. 36,714
---------
Due After One Year................................................ $ 104,020
---------
---------
</TABLE>
F-12
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1997
NOTE 8 OPERATING LEASES
Able Oil Company has an operating lease for its Rockaway, New Jersey
premises through August 30, 1999. The lease provides for a monthly payment of
$1,200 plus a one cent per gallon throughput, as per a monthly rack meter
reading.
Rent Expense for the current period was.....................................
$101,510
Estimated future rents are $14,400 per year, plus the one cent per gallon
through- put charges per the monthly rack meter readings.
The following summarizes the month to month operating leases for the other
subsidiaries:
<TABLE>
<S> <C>
Able Propane, LLC...................... $737.65, plus an escalation on
expenses
Total 1997 rent expense, $9,493
Able Oil Montgomery.................... $454.67, per month
Total 1997 rent expense, $5,525
Able Oil Melbourne..................... $238.50, per month
Total 1997 rent expense, $2,624
</TABLE>
NOTE 9 RELATED PARTY TRANSACTIONS
$45,527 is due from the sole Shareholder of the Company. This amount is
evidenced by a Note bearing interest at a rate of 8 1/2% between the sole
Shareholder and the Company.
NOTE 10 INCOME TAXES PAYABLE--PRIOR
Able Oil Company's tax returns have been examined by the Internal Revenue
Service for the years ending December 31, 1992, 1993, 1994 and 1995. The Company
has been assessed the following liabilities including interest and penalties:
<TABLE>
<S> <C>
1992 and 1993...................................................... $ 52,005
PAID............................................................. (5,000)
1994 and 1995...................................................... 6,805
---------
TOTAL DUE........................................................ $ 53,810
---------
---------
</TABLE>
The State of New Jersey, Division of Taxation has billed the Company based
upon information received from the Internal Revenue Service for the years 1992
and 1993, approximately $20,150. The above amounts are included on the balance
sheet in Income Taxes Payable--Prior.
<TABLE>
<S> <C>
Total.............................................................. $ 73,960
---------
---------
</TABLE>
The above assessed income taxes resulted for years prior to the formation of
Able Energy, Inc. and has been charged to Able Oil Company's prior retained
earnings.
F-13
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1997
NOTE 11 INCOME TAXES
Effective January 1, 1997 the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes.
The differences between the statutory Federal Income Tax and Income Taxes is
accounted for as follows:
<TABLE>
<CAPTION>
PERCENT OF
PRETAX
AMOUNT INCOME
--------- -------------
<S> <C> <C>
Statutory Federal Income Tax...................................................... $ 34,295 34.0%
Increase resulting from State Income Tax, net of Federal Tax benefit.............. 15,050 5.9%
--------- ---
Income Taxes...................................................................... 49,345 39.9%
--------- ---
--------- ---
Income Taxes consist of:
Current......................................................................... 47,215
Deferred........................................................................ 2,130
---------
TOTAL......................................................................... $ 49,345
---------
---------
</TABLE>
The types of temporary differences between the tax bases of assets and
liabilities and their financial reporting amounts that give rise to a
significant portion of the deferred tax liability and deferred tax asset and
their approximate tax effects are as follows at December 31, 1997.
<TABLE>
<CAPTION>
TEMPORARY TAX
DIFFERENCE EFFECT
---------- ----------
<S> <C> <C>
Depreciation.................................................................... $ (59,314) $ (18,825)
Allowance for Doubtful Accounts................................................. 52,584 16,695
</TABLE>
NOTE 12 PROFIT SHARING PLAN
Effective January 1, 1997, Able Oil Company established a Qualified Profit
Sharing Plan under Internal Revenue Code Section 401-K. The Company matches 25%
of qualified employee contributions. The expense for 1997 was $8,239.
NOTE 13 COMMITMENTS AND CONTINGENCIES
The Company is subject to laws and regulations relating to the protection of
the environment. While it is not possible to quantify with certainty the
potential impact of actions regarding environmental matters, in the opinion of
management, compliance with the present environmental protection laws will not
have a material adverse effect on the financial condition, competitive position,
or capital expenditures of the Company.
Able Oil Company has been examined by the Internal Revenue Service through
the year ended December 31, 1995 (see Note 10). The only open year for Able Oil
Company is December 31, 1996.
F-14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The by-laws of the Company provide that the Company shall indemnify
directors and officers of the Company. The pertinent section of Delaware
Corporation Law regarding indemnification of officers and directors is set forth
below. In addition, upon effectiveness of this registration statement,
management intends to obtain officers and directors liability insurance.
See the second and third paragraphs of Item 28 below for information
regarding the position of the Securities and Exchange Commission (the
"Commission") with respect to the effect of any indemnification for liabilities
arising under the Securities Act of 1933, as amended (the "Securities Act").
Section 102(b) (7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any brach of the director's duty of loyalty to the
corporatin or its shareholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
payments of unlawful dividends or unlawful stock repurchase or redemption, or
(iv) for any transaction from which the director derived an improper personal
benefit. The Company's Certificate of Incorpration contains such a provision.
The Company's Certificate of Incorporation provides, pursuant to the
authority granted by Seciton 145 of the Delaware General Corporation Law, that
the Company indemnify directors and officers against expenses (including
attorneys' fees) judgments, fines and suits or proceedings, whther civil,
criminal, administrative or investigative, if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. Whle the statue provides
that it is not exclusive of other indemnification that may be granted by a
corporation's charter, by-laws, disinterested director vote, shareholder vote,
agreement or otherwise, neither the Company's Certificate of Incorporation nor
Bylaws nor any other agreement contains additional indemnification provisions.
(1) INDEMNIFICATION OF DIRECTORS--A corporation may indemnify a director or
officer of the corporation, a former director or officer of the corporation or a
person who acts or acted at the corporation's request as a director or officer
of a body corporate of which the corporation is or was a shareholder or
creditor, and his or her heirs and legal representatives, against all costs,
charges and expenses, including an amount paid to settle an action or satisfy a
judgment, reasonably incurred by him or her in respect of any civil, criminal or
administrative action or proceeding to which he or she is a party by reason of
being or having been a director or officer of such corporation or body
corporate, if,
(a) he or she acted honestly and in good faith with a view to the best
interests of the corporation; and
(b) in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, he or she has reasonable grounds for
believing that his or her conduct was lawful.
II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with the
issuance and distribution of the securities offered hereby.
<TABLE>
<S> <C>
SEC registration fee............................................ $4,446.20
NASD registration fee........................................... 2,007.19
Nasdaq SmallCap Market listing fee.............................. 15,000.00
Boston Stock Exchange listing fee............................... 7,500.00
Printing and engraving.......................................... 55,000.00
Accountants' fees and expenses.................................. 25,000.00
Legal fees...................................................... 100,000.00
Transfer agent's and warrant agent's fees and expenses.......... 5,000.00
Blue Sky fees and expenses...................................... 50,000.00
Underwriter's non-accountable expense allowance................. 216,562.50
Underwriter's consulting agreement.............................. 166,000.00
Miscellaneous................................................... 31,609.11
---------
Total....................................................... 678,125
---------
---------
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In the past three years the Company has issued securities to a limited
number of persons as described below. Except as indicated, there were no
underwriters involved in the transactions and there were no underwriting
discounts or commissions paid in connection therewith:
On or prior to the effective date, the Company will issue an aggregate of
25,000 shares of its common stock to Sichenzia, Ross & Friedman LLP in
consideration for legal services rendered during the previous twelve months.
In March 1997, Timothy Harrington received 1,000 shares of the Company's
Common Stock in consideration for his active participation in the founding of
the Company.
ITEM 27. EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Articles of Incorporation of Registrant
3.2 By-Laws of Registrant
4.1 Form of Underwriters' Purchase Option
4.2 Form of Warrant Agreement between the Company and Continental Stock Transfer & Trust
Company
4.3 Specimen Common Stock Certificate*
4.4 Specimen Redeemable Common Stock Purchase Warrant*
5.1 Opinion of Sichenzia, Ross & Friedman LLP*
10.1 Form of Consulting Agreement with Underwriter
10.2 1998 Stock Option Plan*
10.3 Lease of Company's Facility at 344 Route 46, Rockaway, New Jersey
10.4 Employment Agreement with Timothy Harrington*
10.5 Employment Agreement with Christopher Westad*
10.6 $600,000 Revolving Credit Facility and $350,000 Line of Credit with PNC Bank, National
Association dated October 23, 1996, and amendment thereto, dated June 12, 1998,
extending the Line of Credit to $500,000
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.7 $675,000 Term Loan Agreement dated June 11, 1998 by and between the Company and PNC
Bank, National Association and exhibits thereto, including Pledge Agreement by and
between Timothy Harrington and PNC Bank, Guaranty and Suretyship Agreement by and
between the Company and PNC Bank, and Pledge Agreement by and between the Company and
PNC Bank
21.1 List of Subsidiaries of Registrant
23.1 Consent of Simontacchi & Company LLP, the Company's Independent Auditors
23.2 Consent of Sichenzia, Ross & Friedman LLP (incorporated in to Exhibit 5.1)*
23.3 Consent of James Purcaro to act as Director as of the Effective Date of the
Registration Statement
</TABLE>
- ------------------------
(*) To be filed by amendment
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to any charter provision, by-law, contract arrangements,
statute, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the small business issuer in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the small business issuer
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement: (i) To include
any Prospectus required by section 10(a)(3) of the Act; (ii) To reflect in
the Prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in
the information set forth in the registration statement; (iii) To include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the Offering of
such securities at that time shall be deemed to be the initial bona fide
Offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.
(4) For determining any liability under the Act, treat the information
omitted from the form of Prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of Prospectus
filed by the small business issuer under Rule 424(b)(1), or (4) or 497(h),
under the Act as part of this registration statement as of the time the
Commission declared it effective.
(5) For determining any liability under the Act, treat each
post-effective amendment that contains a form of Prospectus as a new
registration statement at that time as the initial bona fide Offering of
those securities.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Act, the Registrant certifies that it
has reasonable grounds to believe that it meets all of the requirement for
filing on Form SB-2 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the State of New
Jersey on July 14, 1998.
ABLE ENERGY, INC.
/s/ TIMOTHY HARRINGTON /s/ CHRISTOPHER WESTAD
------------------------------ -----------------------------------
Timothy Harrington, Chief Christopher Westad, President
Executive Officer
By: By:
Pursuant to the requirements of the Act, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
We, the undersigned officers and directors of ABLE ENERGY, INC. hereby
severally constitute and appoint Timothy Harrington and Christopher Westad, our
true and lawful attorneys-in-fact and agents with full power of substitution for
us and in our stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and all
documents relating thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing necessary or advisable
to be done in and about the premises, as fully to all intents and purposes as
they might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitutes, may lawfully do or cause to
be done by virtue hereof.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ TIMOTHY HARRINGTON Chairman of the Board of
- ------------------------------ Directors, Chief Executive July 14, 1998
Timothy Harrington Officer and Secretary
/s/ CHRISTOPHER WESTAD President, Chief Financial
- ------------------------------ Officer and Director July 14, 1998
Christopher Westad
II-4
<PAGE>
Exhibit 1.1
875,000 Units, each Unit Consisting of
Two (2) Shares of Common Stock and
One (1) Class A Redeemable
Common Stock Purchase Warrant
of
ABLE ENERGY, INC.
UNDERWRITING AGREEMENT
----------------------
New York, New York
June , 1998
Walsh Manning Securities, Inc.
90 Broad Street
New York, New York 10004
Ladies and Gentlemen:
Able Energy, Inc., a Delaware corporation (the "Company"), confirms its
agreement with Walsh Manning Securities, Inc. ("Walsh Manning)", with respect to
the sale by the Company and the purchase by the Underwriter, of 875,000 units
("Units"), each Unit consisting of two (2) shares (the "Shares") of the
Company's common stock, par value $.01 per share ("Common Stock"), and one (1)
Class A Redeemable Common Stock Purchase Warrant (the "Redeemable Warrants"),
each of which Redeemable Warrants entitles the holder thereof to purchase one
share of Common Stock at an exercise price of $5.00 per share pursuant to a
warrant agreement (the "Warrant Agreement") between the Company and the warrant
agent, set forth in Schedule I annexed hereto, and with respect to the grant by
the Company to the Underwriter of the option described in SECTION 2(b) hereof to
purchase all or any part of 131,250 additional Units for the purpose of covering
over-allotments, if any. The aforesaid 875,000 Units, 1,750,000 Shares and
<PAGE>
875,000 Redeemable Warrants (the "Firm Securities") and together with all or any
part of the Units, Shares and Redeemable Warrants subject to the overallotment
option described in SECTION 2(b) hereof (the "Overallotment Securities") are
hereinafter collectively referred to as the "Securities." The Company also
proposes to issue and sell to the Underwriter, an option (the "Unit Purchase
Option") pursuant to the Underwriter's Unit Purchase Option Agreement (the
"Underwriter's Unit Purchase Option Agreement") for the purchase of an aggregate
of 131,250 additional Units consisting of 262,500 Shares (the "Underwriter's
Unit Shares") and 131,250 Common Stock Purchase Warrants (the "Underwriter's
Unit Warrants"). The shares of Common Stock issuable upon exercise of the
Redeemable Warrants and the Underwriter's Unit Warrants are hereinafter
sometimes referred to as the "Warrant Shares." The Shares, the Redeemable
Warrants, the Unit Purchase Option, Underwriters' Unit Shares, Underwriters'
Unit Warrants, and the Warrant Shares are more fully described in the
Registration Statement (as defined in Subsection 1(a) hereof) and the Prospectus
(as defined in Subsection 1(a) hereof) referred to below. Unless the context
otherwise requires, all references to the "Company" shall include all
subsidiaries and entities acquired by the Company on or prior to the Closing
Date (defined in Subsection 2(c) hereof). All representations, warranties and
opinions of counsel shall cover any such subsidiaries and acquired entities.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to and agrees with the Underwriter as of the date hereof, and as of
the Closing Date and any Overallotment Closing Date (as defined in Subsection
2(c) hereof), if any, as follows:
(a) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement, and an amendment or amendments
thereto, on Form SB-2 (No. 333- ) including any related preliminary
prospectus ("Preliminary Prospectus"), for the registration of the Securities
under the Securities Act of 1933, as amended (the "Act"), which registration
statement and any amendment or amendments have been prepared by the Company in
conformity with the requirements of the Act and the rules and regulations of the
Commission under the Act. Following execution of this Agreement, the Company
will promptly file (i) if the Registration has been declared effective by the
Commission, (A) a Term Sheet (as defined in the Rules and Regulations) (as
hereinafter defined) pursuant to Rule 434 under the Act or (B) a Prospectus
under Rules 430A and/or 424(b) under the Act, in either case in form
satisfactory to the Underwriter or (ii) in the event the Registration Statement
has not been declared effective, a further amendment to said registration
statement in the form heretofore delivered to the Underwriter and will not,
before the registration statement becomes effective, file any other amendment
thereto unless the Underwriter shall have consented thereto after having been
furnished with a copy thereof. Except as the context may otherwise require, such
registration statement, as amended, on file with the Commission at the time the
registration statement becomes effective (including the prospectus, financial
statements, schedules, exhibits and all other documents filed as a part thereof
and all information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430A of the Rules and Regulations)(as hereinafter
defined), is hereinafter called the "Registration Statement" and the form of
prospectus in the form first filed with the Commission pursuant to Rule 424(b)
of the Rules and Regulations, is hereinafter called the "Prospectus." For
purposes hereof, "Rules and
2
<PAGE>
Regulations" mean the rules and regulations adopted by the Commission under
either the Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary Prospectus,
the Registration Statement or Prospectus or any part thereof and no proceedings
for a stop order have been instituted or are pending or, to the best knowledge
of the Company, threatened. Each of the Preliminary Prospectus, the Registration
Statement and Prospectus at the time of filing thereof conformed in all material
respects with the requirements of the Act and the Rules and Regulations, and
neither the Preliminary Prospectus, the Registration Statement or Prospectus at
the time of filing thereof contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein and necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except that this representation and warranty does not
apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company with respect to the
Underwriter by or on behalf of the Underwriter expressly for use in such
Preliminary Prospectus, Registration Statement or Prospectus.
(c) When the Registration Statement becomes effective and at all times
subsequent thereto up to the Closing Date and each Overallotment Closing Date
(as hereinafter defined) and during such longer period as the Prospectus may be
required to be delivered in connection with sales by the Underwriter or a
dealer, the Registration Statement and the Prospectus will contain all material
statements which are required to be stated therein in compliance with the Act
and the Rules and Regulations, and will in all material respects conform to the
requirements of the Act and the Rules and Regulations; neither the Registration
Statement, nor any amendment thereto, at the time the Registration Statement or
such amendment is declared effective under the Act, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, not misleading, and
the Prospectus at the time the Registration Statement becomes effective, at the
Closing Date and at any Overallotment Closing Date, will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that this representation and
warranty does not apply to statements made or statements omitted in reliance
upon and in conformity with information supplied to the Company in writing by or
on behalf of the Underwriter expressly for use in the Registration Statement or
Prospectus or any amendment thereof or supplement thereto.
(d) The Company has been duly organized and is now, and at the Closing
Date and any Overallotment Closing Date will be, validly existing as a
corporation in good standing under the laws of the State of Delaware. The
Company does not own, directly or indirectly, an interest in any corporation,
partnership, trust, joint venture or other business entity except for its wholly
owned subsidiaries ______, ________ and (the subsidiaries). The Company and
each subsidiary is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of its
properties or the character of its
3
<PAGE>
operations require such qualification or licensing, except where the failure to
so qualify would not have a material adverse effect on the Company. The Company
and each subsidiary has all requisite power and authority (corporate and other),
and has obtained any and all necessary applications, approvals, orders,
licenses, certificates, franchises and permits of and from all governmental or
regulatory officials and bodies (including, without limitation, those having
jurisdiction over environmental or similar matters), to own or lease its
properties and conduct its business as described in the Prospectus; the Company
and each subsidiary is and has been doing business in material compliance with
all such authorizations, approvals, orders, licenses, certificates, franchises
and permits and all federal, state, local and foreign laws, rules and
regulations except where the failure to comply would not have a material adverse
effect upon the Company; neitherand the Company nor any subsidiary has not
received any written notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license, certificate,
franchise, or permit which, singly or in the aggregate, if the subject of an
unfavorable decision ruling or finding, would materially and adversely affect
the condition, financial or otherwise, or the earnings, business affairs,
position, prospects, value, operation, properties, business or results of
operation of the Company. The disclosures, if any, in the Registration
Statement concerning the effects of federal, state, local, and foreign laws,
rules and regulations on the business of the of the Company and each subsidiary
as currently conducted and as contemplated are correct in all material respects
and do not omit to state a material fact necessary to make the statements
contained therein not misleading in light of the circumstances in which they
were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under the caption "Capitalization"
and will have the adjusted capitalization set forth therein on the Closing Date
and the Overallotment Closing Date, if any, based upon the assumptions set forth
therein, and the Company is not a party to or bound by any instrument, agreement
or other arrangement providing for the Company to issue any capital stock,
rights, warrants, options or other securities, except for this Agreement and as
otherwise described in the Prospectus. The Shares, Redeemable Warrants, the Unit
Purchase Option, Underwriter' Unit Shares, the Underwriter's Unit Warrants, and
the Warrant Shares and all other securities issued or issuable by the Company
conform or, when issued and paid for, will conform in all respects to all
statements with respect thereto contained in the Registration Statement and the
Prospectus. All issued and outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and non-assessable; the holders
thereof have no rights of rescission with respect thereto, and are not subject
to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company, or similar contractual rights granted by the
Company. The Securities, the Unit Purchase Option , the Underwriters' Unit
Shares, and the Underwriter's Unit Warrants to be issued and sold by the Company
hereunder, and the Warrant Shares issuable upon exercise of the Redeemable
Warrants and the Underwriter's Unit Warrants and payment therefor, are not and
will not be subject to any preemptive or other similar rights of any
stockholder, have been duly authorized and, when issued, paid for and delivered
in accordance with the terms hereof and thereof, will be validly issued, fully
paid and non-assessable and will conform to the descriptions thereof contained
in the Prospectus; the
4
<PAGE>
holders thereof will not be subject to any liability solely as such holders; all
corporate action required to be taken for the authorization, issue and sale of
the Securities, the Unit Purchase Option, the Underwriters' Unit Shares, and the
Underwriter's Unit Warrants, and the Warrant Shares has been duly and validly
taken; and the certificates representing the Securities, the Underwriter's Unit
Warrants, and the Warrant Shares will be in due and proper form. Upon the
issuance and delivery pursuant to the terms hereof of the Securities to be sold
to the Underwriter by the Company hereunder, the Underwriter will acquire good
and marketable title to such Securities free and clear of any lien, charge,
claim, encumbrance, pledge, security interest, defect or other restriction or
equity of any kind whatsoever.
(f) The financial statements of the Company, together with the related
notes and schedules thereto, included in the Registration Statement, the
Preliminary Prospectus and the Prospectus fairly present the financial position
and the results of operations of the Company at the respective dates and for the
respective periods to which they apply; and such financial statements have been
prepared in conformity with generally accepted accounting principles and the
Rules and Regulations, consistently applied throughout the periods involved.
There has been no material adverse change or development involving a prospective
change in the condition, financial or otherwise, or in the earnings, business
affairs, position, prospects, value, operation, properties, business, or results
of operation of the Company, whether or not arising in the ordinary course of
business, since the dates of the financial statements included in the
Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company, conform
in all material respects to the descriptions thereof contained in the
Registration Statement and in the Prospectus.
(g) ___________________, whose report is filed with the Commission as
a part of the Registration Statement, is an independent certified public
accountant as required by the Act and the Rules and Regulations.
(h) The Company (i) has paid all federal, state, local, and foreign
taxes for which it is liable, including, but not limited to, withholding taxes
and taxes payable under Chapters 21 through 24 of the Internal Revenue Code of
1986 (the "Code"), (ii) has furnished all tax and information returns it is
required to furnish pursuant to the Code, and has established reasonable
reserves for such taxes which are not due and payable, and (iii) does not have
knowledge of any tax deficiency or claims outstanding, proposed or assessed
against it.
(i) The Company maintains insurance, which is in full force and
effect, of the types and in the amounts which it reasonably believes to be
adequate for its business, including, but not limited to, personal injury and
product liability insurance covering all personal and real property owned or
leased by the Company against fire, theft, damage and all risks customarily
issued against.
(j) Except as disclosed in the Prospectus, there is no action, suit,
proceeding, inquiry, investigation, litigation or governmental proceeding
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or
5
<PAGE>
threatened against (or circumstances that may give rise to the same), or
involving the properties or business of the Company which: (i) questions the
validity of the capital stock of the Company or this Agreement or of any action
taken or to be taken by the Company pursuant to or in connection with this
Agreement; (ii) is required to be disclosed in the Registration Statement which
is not so disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all respects); or (iii) might materially
affect the condition, financial or otherwise, or the earnings, business affairs,
position, prospects, value, operation, properties, business or results of
operations of the Company.
(k) The Company has full legal right, power and authority to enter
into this Agreement, the Underwriter's Unit Purchase Option Agreement and the
Warrant Agreement and to consummate the transactions provided for in such
agreements; and this Agreement, the Underwriter's Unit Purchase Option Agreement
and the Warrant Agreement have each been duly and properly authorized, executed
and delivered by the Company. Each of this Agreement, the Underwriter's Unit
Purchase Option Agreement or the Warrant Agreement, constitutes a legally valid
and binding agreement of the Company, subject to due authorization, execution
and delivery by the Underwriter and/or the Underwriter, enforceable against the
Company in accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law). Neither the Company's execution or delivery of this
Agreement, the Underwriters' Unit Purchase Option Agreement, and the Warrant
Agreement, its performance hereunder and thereunder, its consummation of the
transactions contemplated herein and therein, nor the conduct of its business as
described in the Registration Statement, the Prospectus, and any amendments or
supplements thereto, conflicts with or will conflict with or results or will
result in any breach or violation of any of the terms or provisions of, or
constitutes or will constitute a default under, or result in the creation or
imposition of any lien, charge, claim, encumbrance, pledge, security interest
defect or other restriction or equity of any kind whatsoever upon, any property
or assets (tangible or intangible) of the Company pursuant to the terms of: (i)
the Articles of Incorporation or By-Laws of the Company; (ii) any license,
contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other agreement or
instrument to which the Company is a party or by which the Company is bound or
to which any of its properties or assets (tangible or intangible) is or may be
subject; or (iii) any statute, judgment, decree, order, rule or regulation
applicable to the Company of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company or any of its
activities or properties.
(l) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Securities pursuant to the
Prospectus and the Registration Statement, the performance of this Agreement and
the transactions contemplated hereby, except such as have
6
<PAGE>
been or may be obtained under the Act or may be required under state securities
or Blue Sky laws in connection with (i) the Underwriter's purchase and
distribution of the Firm Securities and Overallotment Securities to be sold by
the Company hereunder; or (ii) the issuance and delivery of the Unit Purchase
Option, the Underwriter's Unit Shares, the Underwriter's Unit Warrants, the
Redeemable Warrants or the Warrant Shares.
(m) All executed agreements or copies of executed agreements filed as
exhibits to the Registration Statement to which the Company is a party or by
which the Company may be bound or to which any of its assets, properties or
businesses may be subject have been duly and validly authorized, executed and
delivered by the Company, and constitute legally valid and binding agreements of
the Company, enforceable against it in accordance with its respective terms.
The descriptions contained in the Registration Statement of contracts and other
documents are accurate in all material respects and fairly present the
information required to be shown with respect thereto by the Rules and
Regulations and there are no material contracts or other documents which are
required by the Act or the Rules and Regulations to be described in the
Registration Statement or filed as exhibits to the Registration Statement which
are not described or filed as required, and the exhibits which have been filed
are complete and correct copies of the documents of which they purport to be
copies.
(n) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, the Company has not: (i) issued
any securities or incurred any liability or obligation, direct or contingent,
for borrowed money in any material amount; (ii) entered into any transaction
other than in the ordinary course of business; (iii) declared or paid any
dividend or made any other distribution on or in respect of its capital stock;
or (iv) made any changes in capital stock, material changes in debt (long or
short term) or liabilities other than in the ordinary course of business,
material changes in or affecting the general affairs, management, financial
operations, stockholders equity or results of operations of the Company.
(o) No default exists in the due performance and observance of any
material term, covenant or condition of any license, contract, indenture,
mortgage, installment sales agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement, or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party or by which any of
the Company may be bound or to which any of its property or assets (tangible or
intangible) of the Company is subject or affected except where such default does
not, and will not, have a material adverse effect upon the Company.
(p) The Company has generally enjoyed a satisfactory employer-employee
relationship with its employees and is in compliance in all material respects
with all federal, state, local, and foreign laws and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours.
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(q) Since its inception, the Company has not incurred any liability
arising under or as a result of the application of the provisions of the Act.
(r)The Company does not presently maintain, sponsor or contribute to,
and never has maintained, sponsored or contributed to, any program or
arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan " or a "multiemployer plan" as such terms are defined in Sections
3(2), 3(1) and 3(37) respectively of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") ("ERISA Plans"). The Company does not maintain or
contribute, now or at any time previously, to a defined benefit plan, as defined
in Section 3(35) of ERISA.
(s) The Company is not in violation in any material respect of any
domestic or foreign laws, ordinances or governmental rules or regulations to
which it is subject.
(t) No holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company
exercisable for or convertible or exchangeable for securities of the Company
have the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the Company
within eighteen (18) months of the date hereof or to require the Company to file
a registration statement under the Act during such eighteen (18) month period,
except such registration rights as have been waived or disclosed in the
Prospectus.
(u) Neither the Company, nor, to the Company's best knowledge, any of
its employees, directors, stockholders or affiliates (within the meaning of the
Rules and Regulations) has taken, directly or indirectly, any action designed to
or which has constituted or which might reasonably be expected to cause or
result in, under the Exchange Act, or otherwise, stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Securities or otherwise.
(v) Except as described in the Prospectus, to the best of the
Company's knowledge, none of the patents, patent applications, trademarks,
service marks, trade names and copyrights, or licenses and rights to the
foregoing presently owned or held by the Company is in dispute or are in any
conflict with the right of any other person or entity within the Company's
current area of operations nor has the Company received notice of any of the
foregoing. To the best of the Company's knowledge, the Company: (i) owns or
has the right to use, free and clear of all liens, charges, claims,
encumbrances, pledges, security interests, defects or other restrictions or
equities of any kind whatsoever, all patents, trademarks, service marks, trade
names and copyrights, technology and licenses and rights with respect to the
foregoing, used in the conduct of its business as now conducted or proposed to
be conducted without infringing upon or otherwise acting adversely to the right
or claimed right of any person, corporation or other entity under or with
respect to any of the foregoing; and (ii) except as set forth in the Prospectus,
is not obligated or under any liability whatsoever to make any payments by way
of royalties, fees or otherwise to any owner or licensee of, or other claimant
to, any patent, trademark, service mark trade name, copyright, know-how,
technology or other
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intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise.
(w) To the best of its knowledge, the Company owns and has the
unrestricted right to use all material trade secrets, trade-marks, trade names,
know-how (including all other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), inventions, designs,
processes, works of authorship, computer programs and technical data and
information (collectively herein "Intellectual Property") required for or
incident to the development, manufacture, operation and sale of all products and
services sold or proposed to be sold by the Company, free and clear of and
without violating any right, lien, or claim of others, including without
limitation, former employers of its employees; provided, however, that the
possibility exists that other persons or entities, completely independently of
the Company, or employees or agents, could have developed trade secrets or items
of technical information similar or identical to those of the Company.
(x) The Company has taken reasonable security measures to protect the
secrecy, confidentiality and value of all the Intellectual Property material to
its operations.
(y) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property owned
or leased by it free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects, or other restrictions or equities of any
kind whatsoever, other than those referred to in the Prospectus and liens for
taxes or assessments not yet due and payable.
(aa) The Company has obtained duly executed legally binding and
enforceable agreements pursuant to which each of the Company's officers and
directors and any person or entity owning the Company's securities has agreed
not to, directly or indirectly, offer to sell, sell, grant any option for the
sale of, assign, transfer, pledge, hypothecate or otherwise encumber any of
their shares of Common Stock or other securities of the Company (either pursuant
to Rule 144 of the Rules and Regulations or otherwise) or dispose of any
beneficial interest therein for a period of not less than 21 months following
the effective date of the Registration Statement without the prior written
consent of the Underwriter. The Company will cause the Transfer Agent, as
defined below, to mark an appropriate legend on the face of stock certificates
representing all of such shares of Common Stock and other securities of the
Company.
(bb) Except as disclosed in the Prospectus, the Company has not
incurred any liability and there are no arrangements or understandings for
services in the nature of a finder's or origination fee with respect to the sale
of the Securities or any other arrangements, agreements, understandings,
payments or issuances with respect to the Company or any of its officers,
directors, employees or affiliates that may adversely affect the Underwriters'
compensation, as determined by the National Association of Securities Dealers,
Inc. ("NASD").
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(cc) The Firm Securities have been approved for quotation on the
Nasdaq National Market of the SmallCap Market, Inc. subject to official notice
of issuance.
(dd) Neither the Company nor any of its respective officers,
employees, agents or any other person acting on behalf of the Company, has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which: (a) might subject the Company, or any other such person to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign); (b) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company;
and (c) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. The Company's internal
accounting controls are sufficient to cause the Company to comply with the
Foreign Corrupt Practices Act of 1977, as amended.
(ee) Except as set forth in the Prospectus, no officer, director or
stockholder of the Company, or any "affiliate" or "associate" (as these terms
are defined in Rule 405 promulgated under the Rules and Regulations) of any such
person or entity or the Company, has or has had, either directly or indirectly,
(i) an interest in any person or entity which (A) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company, or (B) purchases from or sells or furnishes to the Company any
goods or services, except with respect to the beneficial ownership of not more
than 1% of the outstanding shares of capital stock of any publicly-held entity;
or (ii) a beneficial interest in any contract or agreement to which the Company
is a party or by which it may be bound or affected. Except as set forth in the
Prospectus under "Certain Transactions", there are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company, and
any officer, director, or principal stockholder of the Company, or any affiliate
or associate of any such person or entity.
(ff) Any certificate signed by any officer of the Company and
delivered to the Underwriter or to the Underwriters' counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
(gg) The Company has entered into employment agreements with Timothy
Harrington and Christopher Westad as described in the Prospectus. The Company
has obtained a key-man life insurance policy in the amount of not less than
$3,000,000 on the life of Mr. Harrington, which policy is owned by the Company
and names the Company as the sole beneficiary thereunder.
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<PAGE>
(hh) No securities of the Company have been sold by the Company in
the last year, except as disclosed in Part II of the Registration Statement.
(ii) The minute books of the Company have been made available to
Underwriter's Counsel and contain a complete summary of all meetings and actions
of the Board of Directors and Stockholders of the Company since the date of its
incorporation.
(jj) Except as disclosed in writing to the Underwriter, no officer, or
director or stockholder of the Company has any affiliation or association with
any member of the NASD.
2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND AGREEMENT TO
ISSUE UNDERWRITERS' UNIT PURCHASE OPTION.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to the Underwriter, and the Underwriter,
agrees to purchase from the Company at the price per Unit as set forth below.
(b) In addition, on the basis of the representations, warranties,
covenants and agreements, herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriter to purchase up to an additional 131,250 Units, each Unit consisting
of two (2) Shares and one (1) Redeemable Warrant at the prices per Unit set
forth below; provided, however, that with respect to such additional Units, the
Underwriter shall obtain such Units by exercising its option to purchase up to
50,000 Shares from Mr. Timothy Harrington and by the Company providing up to
65,625 Redeemable Warrants. The option granted hereby will expire 45 days
after the date of this Agreement, and may be exercised in whole or in part from
time to time only for the purpose of covering over-allotments which may be made
in connection with the offering and distribution of the Firm Securities upon
notice by the Underwriter to the Company setting forth the number of
Overallotment Securities as to which the Underwriter are then exercising the
option and the time and date of payment and delivery for such Overallotment
Securities. Any such time and date of delivery shall be determined by the
Underwriter, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Date, as defined
in paragraph (c) below, unless otherwise agreed to between the Underwriter and
the Company. Nothing herein contained shall obligate the Underwriter to make
any over-allotments. No Overallotment Securities shall be delivered unless the
Firm Securities shall be simultaneously delivered or shall theretofore have been
delivered as herein provided.
(c) Payment of the purchase price for, and delivery of certificates
for, the Firm Securities shall be made at the offices of Walsh Manning,
Underwriter, 90 Broad Street, New York, New York 10004, or at such other place
as shall be agreed upon by the Underwriter Securities, Inc. and the Company.
Such delivery and payment shall be made at 10:00 a.m. (New York City time) on
_____ __, 1998 or at such other time and date as shall be designated by the
Underwriter but not less than three (3) nor more than five (5) business days
after the
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<PAGE>
effective date of the Registration Statement (such time and date of payment and
delivery being hereafter called "Closing Date"). In addition, in the event that
any or all of the Overallotment Securities are purchased by the Underwriter,
payment of the purchase price for, and delivery of certificates for such Option
Securities shall be made at the above-mentioned office or at such other place
and at such time (such time and date of payment and delivery being hereinafter
called "Overallotment Closing Date") as shall be agreed upon by the Underwriter
and the Company on each Overallotment Closing Date as specified in the notice
from the Underwriter to the Company. Delivery of the certificates for the Firm
Securities and the Overallotment Securities, if any, shall be made to the
Underwriter against payment by the Underwriter of the purchase price for the
Firm Securities and the Overallotment Securities, if any, to the order of the
Company as the case may be by certified check in New York Clearing House funds,
certificates for the Firm Securities and the Overallotment Securities, if any,
shall be in definitive, fully registered form, shall bear no restrictive legends
and shall be in such denominations and registered in such names as the
Underwriter may request in writing at least two (2) business days prior to
Closing Date or the relevant Overallotment Closing Date, as the case may be.
The certificates for the Firm Securities and the Overallotment Securities, if
any, shall be made available to the Underwriter at the above-mentioned office or
such other place as the Underwriter may designate for inspection, checking and
packaging no later than 9:30 a.m. on the last business day prior to Closing Date
or the relevant Overallotment Closing Date, as the case may be.
The purchase price of the Units to be paid by the Underwriter, to the
Company for the Units purchased under Clauses (a) and (b) above will be $
per Unit (which price is net of the Underwriters' discount and commissions).
The Company shall not be obligated to sell any Securities hereunder unless all
Firm Securities to be sold by the Company are purchased hereunder. The Company
agrees to issue and sell 875,000 Units to the Underwriter in accordance
herewith.
(d) On the Closing Date, the Company shall issue and sell to the
Underwriter, the Underwriter's Unit Purchase Option at a purchase price of
$87.50 which Unit Purchase Option shall entitle the holders thereof to purchase
an aggregate of 87,500 Units. The Underwriter's Unit Purchase Option shall be
exercisable for a period of four (4) years commencing one (1) year from the
effective date of the Registration Statement at an initial exercise price equal
to one hundred fifty percent (150%) of the initial public offering price of the
Units. The Underwriter's Unit Purchase Option Agreement and form of Unit
Purchase Option Certificate shall be substantially in the form filed as an
Exhibit to the Registration Statement. Payment for the Underwriter's Unit
Purchase Option shall be made on the Closing Date. The Company has reserved and
shall continue to reserve a sufficient number of Shares for issuance upon
exercise of the Underwriter's Unit Purchase Option and the Underwriter's Unit
Warrants contained in the Underwriter's Unit Purchase Option.
3. PUBLIC OFFERING OF THE SECURITIES. As soon after the Registration
Statement becomes effective and as the Underwriter deem advisable, but in no
event more than five (5) business days after such effective date, the
Underwriter shall make a public offering of the
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<PAGE>
Securities (other than to residents of or in any jurisdiction in which
qualification of the Securities is required and has not become effective) at the
price and upon the other terms set forth in the Prospectus and otherwise in
compliance with the Rules and Regulations. The Underwriter may allow such
concessions and discounts upon sales to other dealers as set forth in the
Prospectus. The Underwriter may from time to time increase or decrease the
public offering price after distribution of the Securities has been completed to
such extent as the Underwriter, in its sole discretion deems advisable.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Underwriter as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Exchange Act (i)
before termination of the offering of the Securities by the Underwriter which
the Underwriter shall not previously have been advised and furnished with a
copy, or (ii) to which the Underwriter shall have objected or (iii) which is not
in compliance with the Act, the Exchange Act or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Underwriter and confirm by notice in writing: (i)
when the Registration Statement, as amended, becomes effective, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective; (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution or proceeding for that purpose; (iii) of the issuance by any state
securities commission of any proceedings for the suspension of the qualification
of the Securities for offering or sale in any jurisdiction or of the initiation,
or the threatening, of any proceeding for that purpose; (iv) of the receipt of
any comments from the Commission; and (v) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information. If the Commission or any state
securities commission or regulatory authority shall enter a stop order or
suspend such qualification at any time, the Company will make every reasonable
effort to obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Underwriter) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the Underwriter pursuant to
Rule 424(b)(4)) not later than the Commission's close of business on the earlier
of (i) the second business day following the execution and delivery of this
Agreement and (ii) the fifth business day after the effective date of the
Registration Statement.
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<PAGE>
(d) The Company will give the Underwriter notice of its intention to
file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriter in connection with the offering of the Securities which differs from
the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
will furnish the Underwriter with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file any such prospectus to which the Underwriter or Goldstein
& DiGioia, LLP ("Underwriter's Counsel"), shall reasonably object.
(e) The Company shall cooperate in good faith with the Underwriter,
and Underwriters' Counsel, at or prior to the time the Registration Statement
becomes effective, in endeavoring to qualify the Securities for offering and
sale under the securities laws of such jurisdictions as the Underwriter may
reasonably designate, and shall cooperate with the Underwriter and Underwriters'
Counsel in the making of such applications, and filing such documents and shall
furnish such information as may be required for such purpose; PROVIDED, HOWEVER,
the Company shall not be required to qualify as a foreign corporation or file a
general consent to service of process in any such jurisdiction. In each
jurisdiction where such qualification shall be effected, the Company will,
unless the Underwriter agree that such action is not at the time necessary or
advisable, use all reasonable efforts to file and make such statements or
reports at such times as are or may reasonably be required by the laws of such
jurisdiction to continue such qualification.
(f) During the time when the Prospectus is required to be delivered
under the Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when the Prospectus
relating to the Securities is required to be delivered under the Act, any event
shall have occurred as a result of which, in the opinion of counsel for the
Company or Underwriter's Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Underwriter promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act, each such amendment or supplement to be
reasonably satisfactory to Underwriter's Counsel, and the Company will furnish
to the Underwriter a reasonable number of copies of such amendment or
supplement.
(g) As soon as practicable, but in any event not later than 45 days
after the end of the 12-month period commencing on the day after the end of the
fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the
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event that the end of such fiscal quarter is the end of the Company's fiscal
year), the Company shall make generally available to its security holders, in
the manner specified in Rule 158(b) of the Rules and Regulations, and to the
Underwriter, an earnings statement which will be in such form and detail
required by, and will otherwise comply with, the provisions of Section 11(a) of
the Act and Rule 158(a) of the Rules and Regulations, which statement need not
be audited unless required by the Act, covering a period of at least 12
consecutive months after the effective date of the Registration Statement.
(h) During a period of three (3) years after the date hereof and
provided that the Company is required to file reports with the Commission under
Section 12 of the Exchange Act, the Company will furnish to its stockholders, as
soon as practicable, annual reports (including financial statements audited by
independent public accountants), and will deliver to the Underwriter:
(i) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(ii) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the NASD or any
securities exchange;
(iii) every press release and every material news item or
article of interest to the financial community in respect of the Company and any
future subsidiaries or their affairs which was released or prepared by the
Company;
(iv) any additional information of a public nature concerning the
Company and any future subsidiaries or their respective businesses which the
Underwriter may reasonably request;
(v) a copy of any Schedule 13D, 13G, 14D-1, 13E-3 or 13E-4
received or filed by the Company from time to time.
During such three-year period, if the Company has active subsidiaries, the
foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(i) For as long as the Company is required to file reports with the
Commission under Section 12 of the Exchange Act, the Company will maintain a
Transfer Agent and Warrant Agent, which may be the same entity, and, if
necessary under the jurisdiction of incorporation of the Company, a Registrar
(which may be the same entity as the Transfer and Warrant Agent) for its Common
Stock and Redeemable Warrants.
(j) The Company will furnish to the Underwriter or pursuant to the
Underwriter's direction, without charge, at such place as the Underwriter may
designate, copies of each
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Preliminary Prospectus, the Registration Statement and any pre-effective or
post-effective amendments thereto (two of which copies will be signed and will
include all financial statements and exhibits), the Prospectus, and all
amendments and supplements thereto, including any prospectus prepared after the
effective date of the Registration Statement, in each case as soon as available
and in such quantities as the Underwriter may reasonably request.
(k) Neither the Company, nor its officers or directors, nor affiliates
of any of them (within the meaning of the Rules and Regulations) will take,
directly or indirectly, any action designed to, or which might in the future
reasonably be expected to cause or result in, stabilization or manipulation of
the price of any securities of the Company.
(l) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the provisions, set forth under the
caption "Use of Proceeds" in the Prospectus. No portion of the net proceeds
will be used directly or indirectly to acquire any securities issued by the
Company.
(m) The Company shall timely file all such reports, forms or other
documents as may be required (including but not limited to a Form SR as may be
required pursuant to Rule 463 under the Act) from time to time, under the Act,
the Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Rules and Regulations.
(n) The Company shall furnish to the Underwriter as early as
practicable prior to each of the date hereof, the Closing Date and each
Overallotment Closing Date, if any, but no later than two (2) full business days
prior thereto, a copy of the latest available unaudited consolidated interim
financial statements of the Company (which in no event shall be as of a date
more than forty-five (45) days prior to the date of the Registration Statement)
which have been read by the Company's independent public accountants, as stated
in their letters to be furnished pursuant to SECTION 6(k) hereof.
(o) For a period of three (3) years from the Closing Date, the Company
shall furnish to the Underwriter at the Company's sole expense, (i) daily
consolidated transfer sheets relating to the Securities upon the Underwriter's
reasonable request; (ii) a list of holders of Securities upon the Underwriter's
reasonable request; (iii) a list of, if any, the securities positions of
participants in the Depository Trust Company upon the Underwriter's reasonable
request.
(p) For a period of five (5) years after the effective date of the
Registration Statement, the Company shall use its best efforts to cause one (1)
individual selected by the Underwriter to be elected to the Board of Directors
of the Company (the "Board"), if requested by the Underwriter and provided such
individual is reasonably acceptable to and approved by the Company.
Alternatively, the Underwriter shall be entitled to appoint an individual who
shall be permitted to attend all meetings of the Board and to receive all
notices and other
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correspondence and communications sent by the Company to members of the Board.
The Company shall reimburse the Underwriter's designee for his or her
out-of-pocket expenses reasonably incurred and authorized in advance by the
Company in connection with his or her attendance of the Board meetings. To the
extent permitted by law, the Company agrees to indemnify and hold the designee
(as a director or observer) and the Underwriter harmless against any and all
claims, actions, awards and judgements arising out of his or her service as a
director or an observer and the Company shall maintain a liability insurance
policy in an amount of not less than $5,000,000 affording coverage for the
action of its officer and directors, to include such designee and the
Underwriter as an insured under such policy.
(q) For a period equal to the lesser of (i) five (5) years from the
date hereof, or (ii) the sale to the public of the Warrant Shares, the Company
will not take any action or actions which may prevent or disqualify the
Company's use of Forms S-1 or, if applicable, S-2 and S-3 (or other appropriate
form) for the registration under the Act of the Warrant Shares.
(r) For a period of five (5) years from the date hereof, use its best
efforts at its cost and expense to maintain the listing of the Securities on the
Nasdaq SmallCap Market.
(s) (i) As soon as practicable, but in no event more than 5 business
days before the effective date of the Registration Statement, file a Form 8-A
with the Commission providing for the registration under the Exchange Act of the
Securities.
(t) Following the Effective Date of the Registration Statement and for
a period of two (2) years thereafter, the Company shall, at its sole cost and
expense, prepare and file such blue sky trading applications with such
jurisdictions as the Underwriter may reasonably request after consultation with
the Company, and on the Underwriter's request, furnish the Underwriter with a
secondary trading survey prepared by securities counsel to the Company.
(u) The Company shall not amend or alter any term of any written
employment agreement between the Company and any executive officer, during the
term of such written employment agreement, in a manner more favorable to such
employee, without the express written consent of the Underwriter.
(v) Until the completion of the distribution of the Securities, the
Company shall not without the prior written consent of the Underwriter and
Underwriters' Counsel, which consent shall not be unreasonably withheld, issue,
directly or indirectly, any press release or other communication or hold any
press conference with respect to the Company or its activities or the offering
contemplated hereby, other than trade releases issued in the ordinary course of
the Company's business consistent with past practices with respect to the
Company's operations.
(w) Commencing one (1) year from the date hereof, upon the exercise of
any Redeemable Warrant, the exercise of which was solicited by the Underwriter
in accordance with the applicable rules and regulations of the NASD prevailing
at the time of such solicitation (including Rule 2710(c)(6)(B)(xi) thereof, the
Company shall pay to the Underwriter a fee of 5%
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of the aggregate exercise price of such Warrant (provided that the Underwriter
has been designated by the Warrantholder as having solicited the Redeemable
Warrant) within five (5) business days of such exercise and receipt of the
exercise price. The Company further agrees that it will not solicit the
exercise of any Warrant other than through the Underwriter, unless either: (i)
the Underwriter cannot legally solicit the exercise of the Redeemable Warrants
at the time of such solicitation; (ii) the Underwriter declines, in writing, to
solicit the exercise of the Warrants within five (5) business days of such a
written request by the Company; or (iii) the Underwriter consents to the
solicitation of the exercise of the Warrants by the Company or another entity.
(x) The Company will use its best efforts to maintain its registration
under the Exchange Act in effect for a period of five (5) years from the Closing
Date.
(y) On the Closing Date, the Company and the Underwriter shall enter
into a financial consulting agreement, in the form filed as an Exhibit to the
Registration Statement, pursuant to which the Underwriter will provide financial
consulting services to the Company for a two (2) year period for an aggregate
fee of $166,000, all of which will be paid on the Closing Date (the "Financial
Consulting Agreement").
(z) For a period of 24 months commencing on the Closing Date, except
with the written consent of the Underwriter, which consent shall not be
unreasonably withheld, the Company will not issue or sell, directly or
indirectly, any shares of its capital stock, or sell or grant options, or
warrants or rights to purchase any shares of its capital stock, except pursuant
to (i) this Agreement, (ii) the Unit Purchase Option and the Underwriters' Unit
Warrants, (iii) warrants and options of the Company heretofore issued and
described in the Prospectus, and (iv) the grant of options and the issuance of
shares issued upon exercise of options issued or to be issued under the
Company's 1998 Stock Option Plan as contemplated by the Prospectus ("Stock
Option Plan") up to the maximum number of options per year and in the aggregate
permitted in such as described in the Stock Option Plan on the date hereof;
except that, during such period, the Company may issue securities in connection
with an acquisition, merger or similar transaction, provided that such
securities are not publicly registered and the acquirer of the securities is not
granted registration rights with respect thereto which are effective prior to 24
months after the Closing Date. Except as discussed in the Prospectus, prior to
the Closing Date, the Company will not issue any options or warrants without the
prior written consent of the Underwriter.
(aa) The Company will not file any registration statement relating to
the offer or sale of any of the Company's securities, including any registration
statement on Form S-8, during the 18 months following the Closing Date without
the Underwriter's prior written consent which consent shall not be unreasonably
withheld. The Company shal not issue any securities pursuant to Regulation S for
a period of two (2) years following the effective date.
(bb) Subsequent to the dates as of which information is given in the
Registration Statement and Prospectus and prior to the Closing Dates, except as
disclosed in or contemplated
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by the Registration Statement and Prospectus, (i) the Company will not have
incurred any liabilities or obligations, direct or contingent, or entered into
any material transactions other than in the ordinary course of business; (ii)
there shall not have been any change in the capital stock, funded debt (other
than regular repayments of principal and interest on existing indebtedness) or
other securities of the Company, any material adverse change in the condition
(financial or other), business, operations, income, net worth or properties,
including any material loss or damage to the properties of the Company (whether
or not such loss is insured against), which could materially adversely affect
the condition (financial or other), business, operations, income, net worth or
properties of the Company; and (iii) the Company shall not pay or declare any
dividend or other distribution on its Common Stock or its other securities or
redeem or repurchase any of its Common Stock or other securities.
(cc) Except as disclosed in or contemplated by the Registration
Statement and Prospectus, the Company, for a period of 24 months following the
Closing Date, shall not redeem any of its securities, and shall not pay any
dividends or make any other cash distribution in respect of its securities in
excess of the amount of the Company's current or retained earnings derived after
the Closing Date without obtaining the Underwriter's prior written consent,
which consent shall not be unreasonably withheld. The Underwriter shall either
approve or disapprove such contemplated redemption of securities or dividend
payment or distribution within seven (7) business days from the date the
Underwriter receives written notice of the Company's proposal with respect
thereto; a failure of the Underwriter to respond within the seven (7) business
day period shall be deemed approval of the transaction.
(dd) The Company maintains and will continue to maintain a system of
internal accounting controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary in order to
permit preparation of financial statements in accordance with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
5. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay on each of Closing Date and the
Overallotment Closing Date (to the extent not paid at the Closing Date) all its
expenses and fees (other than fees of Underwriters' Counsel, except as provided
in (iv) below) incident to the performance of the obligations of the Company
under this Agreement, including, without limitation: (i) the fees and expenses
of accountants and counsel for the Company; (ii) all costs and expenses incurred
in connection with the preparation, duplication, printing and filing of the
Registration Statement and the Prospectus and any amendments and supplements
thereto and the printing, mailing and delivery of this Agreement, the Selected
Dealer Agreements and related documents, including the cost of all copies
thereof and of the Preliminary Prospectuses and of the Prospectus and any
amendments thereof or supplements thereto supplied to the Underwriter
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in quantities as hereinabove stated; (iii) the printing, engraving, issuance and
delivery of the Securities including any transfer or other taxes payable
thereon; (iv) disbursements and fees of Underwriter's Counsel in connection with
the qualification of the Securities under state or foreign securities or "Blue
Sky" laws and determination of the status of such securities under legal
investment laws, including the costs of printing and mailing the "Preliminary
Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal
Investments Survey," if any, which Underwriters' Counsel fees (exclusive of
filing fees and disbursements) shall equal $30,000 and of which $10,000 has
previously been paid; (v) advertising costs and expenses, including but not
limited to costs and expenses in connection with one information meeting held in
New York, New York, one tombstone advertisement five (5) bound volumes and
prospectus memorabilia; (vi) fees and expenses of the transfer agent; (vii) the
fees payable to the NASD; and (viii) the fees and expenses incurred in
connection with the listing of the Securities on the Nasdaq SmallCap Market and
all fees and expenses payable to the Underwriter shall be payable at the Closing
Date or Overallotment Closing Date, as applicable. The Underwriter shall be
responsible for all of its own mailing and delivery costs and costs of counsel.
(b) If this Agreement is terminated by the Underwriter in accordance
with the provisions of SECTION 6, SECTION 10(a) or SECTION 12, the Company shall
reimburse and indemnify the Underwriter for up to $75,000 out-of-pocket actual
expenses reasonably incurred in connection with the transactions contemplated
hereby including the fees and disbursements of counsel for the Underwriter of
which the Underwriter acknowledges $10,000 has been paid prior to the date
hereof.
(c) The Company further agrees that, in addition to the expenses
payable pursuant to subsection (a) of this SECTION 5, it will pay to the
Underwriter a non-accountable expense allowance equal to three percent (3%) of
the gross proceeds received by the Company from the sale of the Firm Securities
$30,000 of which has been paid to date to the Underwriter. The Company will pay
the remainder of the non-accountable expense allowance on the Closing Date by
certified or bank cashier's check or, at the election of the Underwriter, by
deduction from the proceeds of the offering contemplated herein. In the event
the Underwriter elects to exercise the over-allotment option described in
Section 2(b) hereof, the Company further agrees to pay to the Underwriter on the
Overallotment Closing Date (by certified or bank cashier's check or, at the
Underwriter's election, by deduction from the proceeds of the offering) a
non-accountable expense allowance equal to three percent (3%) of the gross
proceeds received by the Company from the sale of the Overallotment Securities.
6. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The obligations of the
Underwriter hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the Closing Date and
each Overallotment Closing Date, if any, as if they had been made on and as of
the Closing Date or each Overallotment Closing Date, as the case may be; the
accuracy on and as of the Closing Date or Overallotment Closing Date, if any, of
the statements of officers of the Company made pursuant to the provisions
hereof; and the performance by the Company on and as of the Closing Date and
each Overallotment Closing Date, if any, of each of its covenants and
obligations hereunder and to the following further conditions:
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<PAGE>
(a) The Registration Statement shall have become effective not later
than 5:00 P.M., New York time, on the date of this Agreement or such later date
and time as shall be consented to in writing by the Underwriter, and, at Closing
Date and each Overallotment Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated to the knowledge of the Company by the Commission and any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Underwriters' Counsel. If the
Company has elected to rely upon Rule 430A of the Rules and Regulations, the
price of the Securities and any price-related information previously omitted
from the effective Registration Statement pursuant to such Rule 430A shall have
been transmitted to the Commission for filing pursuant to Rule 424(b) of the
Rules and Regulations within the prescribed time period, and prior to Closing
Date the Company shall have provided evidence satisfactory to the Underwriter of
such timely filing, or a post-effective amendment providing such information
shall have been promptly filed and declared effective in accordance with the
requirements of Rule 430A of the Rules and Regulations.
(b) The Underwriter shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Underwriter's opinion, and the opinion of its counsel is
material or omits to state a fact which, in the Underwriter's opinion, is
material and is required to be stated therein or is necessary to make the
statements therein not misleading, or that the Prospectus, or any supplement
thereto, contains an untrue statement of fact which, in the Underwriter's
reasonable opinion, or the opinion of its counsel is material, or omits to state
a fact which, in the Underwriter's reasonable opinion, is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) At the Closing Date, and the Overallotment Closing Date the
Underwriter shall have received the favorable opinion of Sichenzia, Ross &
Friedman LLP, counsel to the Company, dated the Closing Date, or Overallotment
Closing Date, as the case may be, addressed to the Underwriter and in form and
substance satisfactory to Underwriter's Counsel, to the effect that:
(e) The Company: (A) has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Delaware with
full corporate power and authority to own and operate its properties and to
carry on its business as set forth in the Registration Statement and Prospectus;
(B) to the best of counsel's knowledge, the Company is duly licensed or
qualified as a foreign corporation in all jurisdictions in which by reason of
maintaining an office in such jurisdiction or by owning or leasing real property
in such jurisdiction it is required to be so licensed or qualified except where
failure to be so qualified or licensed would have no material adverse effect;
and (C) to the best of counsel's knowledge, the Company has not received any
written notice of proceedings relating to the revocation or modification of any
such license or qualification which revocation or modification would have a
material adverse effect upon the Company.
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<PAGE>
(ii) The Registration Statement, each Preliminary Prospectus
that has been circulated and the Prospectus and any post-effective amendments or
supplements thereto (other than the financial statements, schedules and other
financial and statistical data included therein, as to which no opinion need be
rendered) comply as to form in all material respects with the requirements of
the Act and Regulations and the conditions for use of a registration statement
on Form SB-2 have been satisfied by the Company. Such counsel shall state that
such counsel has participated in conferences with officers and other
Underwriters of the Company, Underwriters of the independent public accountants
for the Company and Underwriters of the Underwriter at which the contents of the
Registration Statement, the Prospectus and related matters were discussed and,
although such counsel is not passing upon and does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus, on the basis of the foregoing, no facts
have come to the attention of such counsel which lead them to believe that
either the Registration Statement or any amendment thereto at the time such
Registration Statement or amendment became effective or the Prospectus as of the
date of such opinion contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or to make the
statements therein in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no opinion with
respect to the financial statements and schedules and other financial and
statistical data included in the Registration Statement or Prospectus or with
respect to statements or omissions made therein in reliance upon information
furnished in writing to the Company on behalf of Underwriter expressly for use
in the Registration Statement or the Prospectus).
(iii) Except as described in the Prospectus, the Company does not
own an interest of a character required to be disclosed in the Registration
Statement in any corporation, partnership, joint venture, trust or other
business entity;
(iv) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus as of the date indicated therein,
under "Capitalization". The Units, Shares, Redeemable Warrants, the Unit
Purchase Option, the Underwriter's Unit Warrants, the Bridge Warrants and the
Warrant Shares conform or upon issuance will conform in all material respects to
all statements with respect thereto contained in the Registration Statement and
the Prospectus. All issued and outstanding securities of the Company have been
duly authorized and validly issued and all shares of capital stock are fully
paid and non-assessable; the holders thereof, are not, except by reason of their
own conduct or acts, subject to personal liability by reason of being such
holders, and none of such securities were issued in violation of the preemptive
rights of any holder of any security of the Company. The Securities to be sold
by the Company hereunder, the Unit Purchase Option to be sold by the Company
under the Underwriter's Unit Purchase Option Agreement and Underwriters' Unit
Warrant and the Warrant Shares are not subject to any preemptive or other
similar rights of any stockholder, have been duly authorized and, when issued,
paid for and delivered in accordance with the terms hereof, will be validly
issued, fully paid and non-assessable and conform or upon issuance will conform
to the description thereof contained in the Prospectus; that, the holders of the
Common Stock shall not be personally liable for the payment of the Company's
debts solely by reason of
22
<PAGE>
being such holders except as they may be liable by reason of their own conduct
or acts; and that the certificates representing the Units, Shares, Redeemable
Warrants, Unit Purchase Option, the Underwriter's Unit Shares, and the
Underwriters' Unit Warrants are in due and proper legal form.
(v) The issuance of the Shares, Redeemable Warrants and the
Warrant Shares have been duly authorized and when issued and paid for in
accordance with this Agreement and the Warrant Agreement, respectively, will be
validly issued, fully paid and non-assessable securities of the Company. The
holders of the Securities when issued and paid for, will not be subject to
personal liability by reason of being such holders. The Securities are not and
will not be subject to the preemptive or similar contractual rights of any
shareholder of the Company. All corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and validly
taken. The certificates, if any, representing the Units, Shares and Redeemable
Warrants are in due and proper form. Upon delivery of the Shares to the
Underwriter against payment therefor as provided for in this Agreement, the
Underwriter (assuming they are bona fide purchasers within the meaning of the
Uniform Commercial Code) will acquire good title to the Units, free and clear of
all liens, encumbrances, equities, security interests and claims.
(v) The Registration Statement is effective under the Act, and,
if applicable, filing of all pricing information has been timely made in the
appropriate form under Rule 430A, and, no stop order suspending the
effectiveness of the Registration Statement has been issued and to the best of
such counsel's knowledge, no proceedings for that purpose have been instituted
or are pending or threatened or contemplated under the Act;
(vi) To the best of such counsel's knowledge, (A) there are no
material contracts or other documents required to be described in the
Registration Statement and the Prospectus and filed as exhibits to the
Registration Statement other than those described in the Registration Statement
and the Prospectus and filed as exhibits thereto, and (B) the descriptions in
the Registration Statement and the Prospectus and any supplement or amendment
thereto regarding such material contracts or other documents to which the
Company is a party or by which it is bound, are accurate in all material
respects and fairly represent the information required to be shown by Form SB-2
and the Rules and Regulations;
(vii) This Agreement, the Underwriter's Unit Purchase Option
Agreement, the Warrant Agreement, and the Financial Consulting Agreement have
each been duly and validly authorized, executed and delivered by the Company,
and assuming that it is a valid and binding agreement of the Underwriter, as the
case may be, constitutes a legal, valid and binding agreement of the Company
enforceable as against the Company in accordance with its respective terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors rights and the application of
equitable principles in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law or pursuant to public
policy).
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(ix) Neither the execution or delivery by the Company of this
Agreement, the Underwriter's Unit Purchase Option Agreement, the Financial
Consulting Agreement, and the Warrant Agreement, nor its performance hereunder
or thereunder, nor its consummation of the transactions contemplated herein or
therein, nor the conduct of its business as described in the Registration
Statement, the Prospectus, and any amendments or supplements thereto, nor the
issuance of the Securities conflicts with or will conflict with or results or
will result in any material breach or violation of any of the terms or
provisions of, or constitutes or will constitute a material default under, or
result in the creation imposition of any material lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity of
any kind whatsoever upon, any property or assets (tangible or intangible) of the
Company except to the extent such event will not have a material adverse effect
upon the Company pursuant to the terms of, (A) the Certificate of Incorporation
or By-Laws of the Company, (B) any indenture, mortgage, deed of trust, voting
trust agreement, stockholders agreement, note, loan or credit agreement or any
other agreement or instrument that is material to the Company to which the
Company is a party or by which it is bound or to which its properties or assets
(tangible or intangible) are subject, or any indebtedness, or (C) except to the
extent it would not have a material adverse effect on the Company, any statute,
judgment, decree, order, rule or regulation applicable to the Company (except
with respect to environmental laws which are expressly excluded from such
counsel's opinion) or any arbitrator, court, regulatory body or administrative
agency or other governmental agency or body, having jurisdiction over the
Company or any of its respective activities or properties.
(x) No consent, approval, authorization or order, and no filing
with, any court, regulatory body, government agency or other body (other than
such as may be required under state securities laws, as to which no opinion need
be rendered) is required in connection with the issuance by the Company of the
Securities pursuant to the Prospectus and the Registration Statement, the
performance of this Agreement, the Underwriters' Unit Purchase Option Warrant
Agreement, the Financial Consulting Agreement and the Warrant Agreement by the
Company, and the taking of any action by the Company contemplated hereby or
thereby, which has not been obtained;
(xi) Except as described in the Prospectus, the Company is not in
breach of, or in default under, any material term or provision of any indenture,
mortgage, installment sale agreement, deed of trust, lease, voting trust
agreement, stockholders' agreement, note, loan or credit agreement or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party or by which the
Company may be bound or to which any of the property or assets (tangible or
intangible) of the Company is subject or affected; and the Company is not in
violation of any material term or provision of its Certificate of Incorporation
or By-Laws or in violation of any material franchise, license, permit, judgment,
decree, order, statute, rule or regulation material to the Company business;
(xii) The statements in the Prospectus under the captions "THE
COMPANY," "BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS,"
24
<PAGE>
"CERTAIN TRANSACTIONS," "DESCRIPTION OF CAPITAL STOCK," and "SHARES ELIGIBLE FOR
FUTURE SALE" have been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules or regulations or
legal conclusions, are correct in all material respects;
(xiii) To the best of such counsel's knowledge, except as
described in the Prospectus, no person, corporation, trust, partnership,
association or other entity holding securities of the Company has the
contractual right to include and/or register any securities of the Company in
the Registration Statement, require the Company to file any registration
statement or, if filed, to include any security in such registration statement
for eighteen months from the date hereof;
(xiv) the Securities, (and underlying shares of Common Stock) are
eligible for listing on the Nasdaq National Market.
In rendering such opinion, such counsel may rely, (A) as to matters
involving the application of laws other than the laws of the United States, the
corporate laws of Delaware and New York and jurisdictions in which they are
admitted, to the extent such counsel deems proper and to the extent specified in
such opinion, if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to Underwriter's Counsel) of other counsel reasonably
acceptable to Underwriter's Counsel, familiar with the applicable laws of such
other jurisdictions, and (B) as to matters of fact, to the extent they deem
proper, on certificates and written statements of responsible officers of the
Company and certificates or other written statements of officers of departments
of various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company; PROVIDED, that copies of any such
statements or certificates shall be delivered to Underwriters' Counsel if
requested. The opinion of such counsel for the Company shall state that the
opinion of any such other counsel is in form satisfactory to such counsel and,
in their opinion, the Underwriter and they are justified in relying thereon.
(e) At each Overallotment Closing Date, if any, the Underwriter shall
have received the favorable opinion of counsel to the Company, each dated the
Overallotment Closing Date, addressed to the Underwriter and in form and
substance satisfactory to Underwriter's Counsel confirming as of Overallotment
Closing Date the statements made by such firm, in their opinion, delivered on
the Closing Date.
(f) On or prior to each of the Closing Date and the Overallotment
Closing Date, Underwriter's Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require and request for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this SECTION 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions herein contained.
(g) Prior to the Closing Date and each Overallotment Closing Date, if
any: (i) there shall have been no material adverse change nor development
involving a prospective
25
<PAGE>
change in the condition, financial or otherwise, prospects or the business
activities of the Company, whether or not in the ordinary course of business,
from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the
Company, from the latest date as of which the financial condition of the Company
is set forth in the Registration Statement and Prospectus which is materially
adverse to the Company; (iii) the Company shall not be in material default under
any provision of any instrument relating to any outstanding indebtedness for
money borrowed; (iv) no material amount of the assets of the Company shall have
been pledged or mortgaged, except as set forth in the Registration Statement and
Prospectus; (v) no action, suit or proceeding, at law or in equity, shall have
been pending or to its knowledge threatened against the Company, or affecting
any of its properties or businesses before or by any court or federal, state or
foreign commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially adversely affect the business,
operations, prospects or financial condition or income of the Company, except as
set forth in the Registration Statement and Prospectus; and (vi) no stop order
shall have been issued under the Act and no proceedings therefor shall have been
initiated, threatened or contemplated by the Commission.
(h) At the Closing Date and each Overallotment Closing Date, if any,
the Underwriter shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Overallotment Closing Date, as
the case may be, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are, in all material respects, true and correct, as if made on and as
of the Closing Date or the Overallotment Closing Date, as the case may be, and
the Company has complied with all agreements and covenants and satisfied all
conditions contained in this Agreement on its part to be performed or satisfied
at or prior to such Closing Date or Overallotment Closing Date, as the case may
be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that purpose have
been instituted or are pending or, to the best of each of such person's
knowledge, are contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus and, if any,
each amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and neither the
Preliminary Prospectus or any supplement thereto included any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements
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<PAGE>
therein, in light of the circumstances under which they were made, not
misleading except to the extent any such material fact may be corrected in the
Final Prospectus; and
(iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus and except as
otherwise contemplated therein: (A) the Company has not incurred up to and
including the Closing Date or the Overallotment Closing Date, as the case may
be, other than in the ordinary course of its business, any material liabilities
or obligations, direct or contingent; (B) the Company has not paid or declared
any dividends or other distributions on its capital stock; (C) the Company has
not entered into any material transactions not in the ordinary course of
business; (D) there has not been any change in the capital stock or any increase
in long-term debt or any increase in the short-term borrowings (other than any
increase in the short-term borrowings in the ordinary course of business) of the
Company; (E) the Company has not sustained any material loss or damage to its
property or assets, whether or not insured; (F) there is no litigation which is
pending or threatened against the Company which is required to be set forth in
an amended or supplemented Prospectus which has not been set forth;
(v) Neither the Company nor any of its officers or affiliates
shall have taken, and the Company, its officers and affiliates will not take,
directly or indirectly, any action designed to, or which might reasonably be
expected to, cause or result in the stabilization or manipulation of the price
of the Company's securities to facilitate the sale or resale of the Shares.
References to the Registration Statement and the Prospectus in this
subsection (i) are to such documents as amended and supplemented at the date of
such certificate.
(i) By the Closing Date, the Underwriter shall have received clearance
from NASD as to the amount of compensation allowable or payable to the
Underwriter, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Underwriter shall have
received a letter, dated such date, addressed to the Underwriter in form and
substance satisfactory in all respects (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) to the
Underwriter, from :
(i) confirming that they are independent public accountants with
respect to the Company within the meaning of the Act and the applicable Rules
and Regulations;
(ii) stating that it is their opinion that the combined financial
statements and supporting schedules of the Company included in the Registration
Statement comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations thereunder and
that the Underwriter may rely upon the opinion of Edward Isaacs & Company, LLP
with respect to the financial statements and supporting schedules included in
the Registration Statement;
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<PAGE>
(iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim combined financial
statements of the Company (with an indication of the date of the latest
available unaudited interim combined financial statements), a reading of the
latest available minutes of the stockholders and board of directors and the
various committees of the boards of directors of the Company, consultations with
officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries, nothing has
come to their attention which would lead them to believe that (A) the unaudited
combined financial statements and supporting schedules of the Company included
in the Registration Statement do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the Rules and
Regulations or are not fairly presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited combined financial statements of the Company included in the
Registration Statement, or (B) at a specified date not more than five (5) days
prior to the effective date of the Registration Statement, there has been any
change in the capital stock or long-term debt of the Company, or any decrease in
the stockholders' equity or net current assets or net assets of the Company as
compared with amounts shown in the financial statements included in the
Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any change or decrease, setting forth
the amount of such change or decrease, and (C) during the period from
_____________________ to a specified date not more than five (5) days prior to
the effective date of the Registration Statement, there was any decrease in net
revenues, net earnings or increase in net earnings per common share of the
Company, in each case as compared with the corresponding period beginning
________________ other than as set forth in or contemplated by the Registration
Statement, or, if there was any such decrease, setting forth the amount of such
decrease;
(iv) setting forth, at a date not later than five (5) days prior
to the date of the Registration Statement, the amount of liabilities of the
Company (including a breakdown of commercial paper and notes payable to banks);
(v) stating that they have compared specific dollar amounts,
numbers of Securities, percentages of revenues and earnings, statements and
other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting records,
including work sheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement; and
(vi) stating that they have not during the immediately preceding
five (5) year period brought to the attention of the Company's management any
"weakness", as defined in Statement of Auditing Standard No. 60 "Communication
of Internal Control Structure Related Matters Noted in an Audit, " in the
Company's internal controls;
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<PAGE>
(vii) stating that they have in addition carried out certain
specified procedures, not constituting an audit, with respect to certain pro
forma financial information which is included in the Registration Statement and
the Prospectus and that nothing has come to their attention as a result of such
procedures that caused them to believe such unaudited pro forma financial
information does not comply in form in all material respects with the applicable
accounting requirements of Rule ll-02 of Regulation S-X or that the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of that information; and
(viii) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriter may reasonably request.
(k) At the Closing Date and each Overallotment Closing Date, the
Underwriter shall have received from , a letter,
dated as of the Closing Date, or Overallotment Closing Date, as the case may be,
to the effect that they reaffirm that statements made in the letter furnished
pursuant to SUBSECTION (j) of this Section, except that the specified date
referred to shall be a date not more than five days prior to Closing Date and,
if the Company has elected to rely on Rule 430A of the Rules and Regulations, to
the further effect that they have carried out procedures as specified in clause
(iii) of subsection (j) of this Section with respect to certain amounts,
percentages and financial information as specified by the Underwriter and deemed
to be a part of the Registration Statement pursuant to Rule 430A(b) and have
found such amounts, percentages and financial information to be in agreement
with the records specified in such clause (iii).
(l) On each of Closing Date and Overallotment Closing Date, if any,
there shall have been duly tendered to the Underwriter for its account the
appropriate number of Securities against payment therefore.
(m) No order suspending the sale of the Securities in any jurisdiction
designated by the Underwriter pursuant to subsection (e) of SECTION 4 hereof
shall have been issued on either the Closing Date or the Overallotment Closing
Date, if any, and no proceedings for that purpose shall have been instituted or
to its knowledge or that of the Company shall be contemplated.
If any condition to the Underwriter's obligations hereunder to be fulfilled
prior to or at the Closing Date or the relevant Overallotment Closing Date, as
the case may be, is not so fulfilled, the Underwriter may terminate this
Agreement or, if the Underwriter so elect, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Underwriter, including specifically each person who may be substituted for an
Underwriter as provided in SECTION 11 hereof) and each person, if any, who
controls the Underwriter ("controlling person") within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions in
respect
29
<PAGE>
thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which such Underwriter or such controlling person may become
subject under the Act, the Exchange Act or any other statute or at common law or
otherwise or under the laws of foreign countries arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained
(i) in any Preliminary Prospectus, except that the indemnification contained in
this paragraph with respect to any preliminary prospectus shall not inure to the
benefit of the Underwriter or to the benefit of any person controlling the
Underwriter on account of any loss, claim, damage, liability or expense arising
from the sale of the Firm Securities by the Underwriter to any person if a copy
of the Prospectus, as amended or supplemented, shall not have been delivered or
sent to such person within the time required by the Act, and the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in such Preliminary Prospectus was corrected in the
Prospectus, as amended and supplemented, and such correction would have
eliminated the loss, claim, damage, liability or expense), the Registration
Statement or the Prospectus (as from time to time amended and supplemented);
(ii) in any post-effective amendment or amendments or any new registration
statement and prospectus in which is included Securities of the Company issued
or issuable upon exercise of the Underwriters' Unit Purchase Option; or (iii) in
any application or other document or written communication (in this SECTION 8
collectively called "application") executed by the Company or based upon written
information furnished by the Company in any jurisdiction in order to qualify the
Securities under the securities laws thereof or filed with the Commission, any
state securities commission or agency, Nasdaq Stock Market, Inc. or any other
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of the Prospectus, in the light of the circumstances
under which they were made), unless in any case above such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment thereof or supplement thereto, in any
post-effective amendment, new registration statement or prospectus or in any
application, as the case may be.
The indemnity agreement in this subsection (a) shall be in addition to any
liability which the Company may have at common law or otherwise.
(b) The Underwriter agrees to indemnify and hold harmless the Company,
each of its directors, each of its officers who has signed the Registration
Statement, and each other person, if any, who controls the Company within the
meaning of the Act to the same extent as the foregoing indemnity from the
Company to the Underwriter but only with respect to statements or omissions, if
any, made in any Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment thereof or supplement thereto in any post-effective
amendment, new registration statement or prospectus, or in any application made
in reliance upon, and in strict conformity with, written information furnished
to the Company with respect to the Underwriter by such Underwriter expressly for
use in such Preliminary Prospectus, the
30
<PAGE>
Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any post-effective amendment, new registration statement or
prospectus, or in any such application, provided that such written information
or omissions only pertain to disclosures in the Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto, in any post-effective amendment, new registration statement or
prospectus or in any such application, provided, further, that the liability of
each Underwriter to the Company shall be limited to the amount of the net
proceeds of the Offering received by the Company. The Company acknowledges that
the statements with respect to the public offering of the Firm Securities set
forth under the heading "Underwriting" and the stabilization legend and the last
paragraph of the cover page in the Prospectus have been furnished by the
Underwriter expressly for use therein and any information furnished by or on
behalf of the Underwriter filed in any jurisdiction in order to qualify the
Securities under State Securities laws or filed with the Commission, the NASD or
any securities exchange constitute the only information furnished in writing by
or on behalf of the Underwriter for inclusion in the Prospectus and the
Underwriter hereby confirm that such statements and information are true and
correct and shall be on each Closing Date and Overallotment Closing Date.
(c) Promptly after receipt by an indemnified party under this SECTION
7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this SECTION 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the foregoing
the indemnified party or parties shall have the right to employ its or their own
counsel in any such case but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action at the expense of the indemnifying
party, (ii) the indemnifying parties shall not have employed counsel reasonably
satisfactory to such indemnified party to have charge of the defense of such
action within a reasonable time after notice of commencement of the action, or
(iii) such indemnifying party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses of one additional counsel shall be borne by
the indemnifying parties. In no event shall the indemnifying parties be liable
for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction
31
<PAGE>
arising out of the same general allegations or circumstances. Anything in this
SECTION 7 to the contrary notwithstanding, an indemnifying party shall not be
liable for any settlement of any claim or action effected without its written
consent; PROVIDED HOWEVER, that such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in any
case in which (i) an indemnified party makes claim for indemnification pursuant
to this SECTION 7, but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this SECTION 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Securities or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations. In any case where the Company
is the contributing party and the Underwriter is the indemnified party the
relative benefits received by the Company on the one hand, and the Underwriter,
on the other, shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Securities (before deducting expenses) bear to
the total underwriting discounts and commissions received by the Underwriter
hereunder, in each case as set forth in the table on the Cover Page of the
Prospectus. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, expenses or liabilities (or actions
in respect thereof) referred to above in this subdivision (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (d), the Underwriter shall
not be required to contribute any amount in excess of the amount of the net
proceeds of the Offering received by the Company. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this SECTION 7, each person, if
any, who controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
32
<PAGE>
proceeding against such party in respect to which a claim for contribution may
be made against another party or parties under this subparagraph (d), notify
such party or parties from whom contribution may be sought, but the omission so
to notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subparagraph (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution agreement
set forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the indemnity agreements contained
in Section 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Underwriter, the
Company, or any controlling person, and shall survive termination of this
Agreement or the issuance and delivery of the Securities to the Underwriter for
a period of the latter of two (2) years or the applicable statute of
limitations.
9. EFFECTIVE DATE.
This Agreement shall become effective at _____ a.m., New York
City time, on the next full business day following the date hereof, or at such
earlier time after the Registration Statement becomes effective as the
Underwriter, in their discretion, shall release the Securities for the sale to
the public, PROVIDED, HOWEVER that the provisions of SECTIONS 5, 7 and 10 of
this Agreement shall at all times be effective. For purposes of this Section 9,
the Securities to be purchased hereunder shall be deemed to have been so
released upon the earlier of dispatch by the Underwriter of telegrams to
securities dealers releasing such Securities for offering or the release by the
Underwriter for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. TERMINATION.
(a) The Underwriter shall have the right to terminate this
Agreement: (i) if any calamitous domestic or international event or act or
occurrence has materially disrupted, or in the Underwriters' opinion will in the
immediate future materially disrupt general securities markets in the United
States; or (ii) if trading on the New York Stock Exchange, the American Stock
Exchange, or in the over-the-counter market shall have been suspended or minimum
or maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required on the over-the-counter market by
the NASD or by order of the Commission or any other government authority having
jurisdiction; or (iii) if the United States shall have become involved in a war
or major hostilities; or (iv) if a banking moratorium has been declared by a New
York State or federal authority; or (v) if a moratorium in foreign
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<PAGE>
exchange trading has been declared; or if the Company shall have sustained a
material loss, whether or not insured, by reason of fire, flood, accident or
other calamity; or (vii) if there shall have been such material adverse change
in the conditions or prospects of the Company, involving a change not
contemplated by the Registration Statement, or (viii) if there shall have been
such material adverse general market conditions as in the Underwriter's
reasonable judgment would make it inadvisable to proceed with the offering, sale
and/or delivery of the Securities.
(b) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to SECTIONS 9 and 10 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
SECTION 5 shall not be in any way affected by such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
11. DEFAULT BY THE COMPANY. If the Company shall fail at the Closing
Date or any Overallotment Closing Date, as applicable, to sell and deliver the
number of Securities which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Option Securities to be purchased on an Overallotment Closing Date, the
Underwriter may at the Underwriter's option, by notice from the Underwriter to
the Company, terminate the Underwriter's obligations to purchase Securities
from the Company on such date) without any liability on the part of any
non-defaulting party other than pursuant to SECTION 5 and SECTION 7 hereof. No
action taken pursuant to this Section shall relieve the Company from liability,
if any, in respect of such default.
12. NOTICES. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriter shall be directed to the
Underwriter at Walsh Manning Securities, Inc., 90 Broad Street, New York, New
York 10004, with a copy to Goldstein & DiGioia, LLP 369 Lexington Avenue, New
York, New York 10017, Attention: Victor J. DiGioia, Esq. Notices to the Company
shall be directed to the Company at
, Attention: Timothy Harrington, with a copy to the Law Offices of
Sichenzia, Ross & Friedman LLP, 135 West 50th Street, 20th New York, New York
10020, Attention: Greg Sichenzia, Esq.
13. PARTIES. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriter, the Company and the controlling persons,
directors and officers referred to in SECTION 7 hereof, and their respective
successors, legal Underwriters and assigns, and their respective heirs and legal
Underwriters and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provisions herein contained. No purchaser of Securities from
any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
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14. CONSTRUCTION. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
16. WAIVER. The waiver by either party of the breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach.
17. ASSIGNMENT. Except as otherwise provided within this Agreement,
neither party hereto may transfer or assign this Agreement without prior written
consent of the other party.
18. TITLES AND CAPTIONS. All article, section and paragraph titles
or captions contained in this Agreement are for convenience only and shall not
be deemed part of the context nor affect the interpretation of this Agreement.
19. PRONOUNS AND PLURALS. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the Person or Persons may require.
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<PAGE>
20. ENTIRE AGREEMENT. This Agreement contains the entire
understanding between and among the parties and supersedes any prior
understandings and agreements among them respecting the subject matter of this
Agreement.
If the foregoing correctly sets forth the understanding between the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
ABLE ENERGY, INC.
By:
-------------------------------
Name:
Title:
Confirmed and accepted as of the date first above written.
WALSH MANNING SECURITIES, INC.
By:
---------------------------
Name:
Title:
36
<PAGE>
SCHEDULE I
Warrant Agent - Continental Stock Transfer & Trust Company
37
<PAGE>
State of Delaware
PAGE 1
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF 'ABLE ENERGY, INC.', FILED IN THIS OFFICE ON THE THIRTEENTH DAY
OF MARCH, A.D. 1997, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
---------------------------------------
[SEAL] Edward J. Freel, Secretary of State
AUTHENTICATION: 8372189
DATE: 03-13-97
<PAGE>
CERTIFICATE OF INCORPORATION
OF
ABLE ENERGY, INC.
----------------------------
FIRST. The name of this corporation shall be:
ABLE ENERGY, INC.
SECOND. Its registered office in the State of Delaware is to be located at
1013 Centre Road, in the City of Wilmington, County of New Castle and its
registered agent at such address is CORPORATION SERVICE COMPANY.
THIRD. The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which this corporation is
authorized to issue is:
Ten Thousand (10,000) shares with a par value of ($0.001), amounting to Ten
Dollars ($10).
FIFTH. The name and address of the incorporator is as follows:
Debbie Carll
Corporation Service Company
1013 Centre Road
Wilmington, DE 19805
SIXTH. The Board of Directors shall have the power to adopt, amend or
repeal the by-laws.
<PAGE>
SEVENTH. No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law, (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article Seventh
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
IN WITNESS WHEREOF, the undersigned, being the incorporator hereinbefore
named, has executed, signed and acknowledged this certificate of incorporation
this thirteenth day of March, A.D., 1997.
/s/ Debbie Carll
-------------------------
Debbie Carll
Incorporator
<PAGE>
ACTION OF SOLE INCORPORATOR
ABLE ENERGY, INC.
---------------------------
The undersigned, without a meeting, being the sole incorporator of the
Corporation, does hereby elect the persons listed below to serve as directors of
the corporation until the first annual meeting of shareholders and until their
successors are elected and qualify:
TIMOTHY HARRINGTON
/s/ Debbie Carll
------------------------------
Debbie Carll
Incorporator
Dated: March 13, 1997
<PAGE>
BY-LAWS
OF
ABLE ENERGY, INC.
(a Delaware corporation)
****************
ARTICLE I
OFFICES
1.1 Registered Office: The registered office of ABLE ENERGY, INC. (the
"Corporation") shall be established and maintained at 1013 Centre Road, in the
City of Wilmington, County of New Castle, and Corporation Service Company shall
be the registered agent of the Corporation at such address.
1.2. Other Offices: The Corporation may have other offices, either within
or without the State of Delaware, at such place or places as the Board of
Directors may from time to time appoint or the business of the Corporation may
require, provided, however, that the Corporation's books and records shall be
maintained at such place within the continental United States as the Board of
Directors shall from time to time designate.
ARTICLE II
STOCKHOLDERS
2.1. Place of Stockholders' Meetings: All meetings of the stockholders of
the Corporation shall be held at such place or places, within or outside the
State of Delaware as may be fixed by the Board of Directors from time to time or
as shall be specified in the respective notices thereof.
2.2. Date and Hour of Annual Meetings of Stockholders: An annual meeting
of stockholders shall be held each year within five months after the close of
the fiscal year of the Corporation.
2.3. Purpose of Annual Meetings: At each annual meeting, the stockholders
shall elect the members of the Board of Directors for the succeeding year. At
any such annual meeting any further proper business may be transacted.
2.4. Special Meetings of Stockholders: Special meetings of the
stockholders or of any class or series thereof entitled to vote may be called by
the President or by the Chairman of the Board of Directors, or at the request in
writing by stockholders of record owning at least fifty (50%) percent of the
issued and outstanding voting shares of common stock of the Corporation.
<PAGE>
2.5. Notice of Meetings of Stockholders: Except as otherwise expressly
required or permitted by law, not less than ten days nor more than sixty days
before the date of every stockholders' meeting the Secretary shall give to each
stockholder of record entitled to vote at much meeting, written notice, served
personally by mail or by telegram, stating the place, date and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called, such notice, if mailed shall be deemed to be given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address for notices to such stockholder as it appears on the
records of the Corporation.
2.6. Quorum of Stockholders: (a) Unless otherwise provided by the
Certificate of Incorporation or by law, at any meeting of the stockholders, the
presence in person or by proxy of stockholders entitled to cast a majority of
the votes thereat shall constitute a quorum. The withdrawal of any shareholder
after the commencement of a meeting shall have no effect on the existence of a
quorum, after a quorum has been established at such meeting.
(b) At any meeting of the stockholders at which a quorum shall be
present, a majority of voting stockholders, present in person or by proxy, may
adjourn the meeting from time to time without notice other than announcement at
the meeting. In the absence of a quorum, the officer presiding thereat shall
have power to adjourn the meeting from time to time until a quorum shall be
present. Notice of any adjourned meeting, other than announcement at the
meeting, shall not be required to be given except as provided in paragraph (d)
below and except where expressly required by law.
(c) At any adjourned session at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting
originally called but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof, unless a new record date is fixed by the Board of Directors.
(d) If an adjournment is for more than thirty days, or 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 stockholder of record entitled to
vote at the meeting.
2.7. Chairman and Secretary of Meeting: The President shall preside at
meetings of the stockholders. The Secretary shall act as secretary of the
meeting or if he is not present, then the presiding officer may appoint a person
to act as secretary of the meeting.
2.8. Voting by Stockholders: Except as may be otherwise provided by the
Certificate of Incorporation or these by-laws, at every meeting of the
stockholders each stockholder shall be entitled to one vote for each share of
voting stock standing in his name on the books of the Corporation on the record
dare for the meeting. Except as otherwise provided by these by-laws, all
elections and questions shall be decided by the vote of a majority in interest
of the stockholders present in person or represented by proxy and entitled to
vote at the meeting.
-2-
<PAGE>
2.9. Proxies: Any stockholder entitled to vote at any meeting of
stockholders may vote either in person or by proxy. Every proxy shall be in
writing, subscribed by the stockholder or his duly authorized attorney-in-fact,
but need not be dated, sealed, witnessed or acknowledged.
2.10. Inspectors: The election of directors and any other vote by ballot
at any meeting of the stockholders shall be supervised by as least two
inspectors. Such inspectors may be appointed by the presiding officer before or
at the meeting; or if one or both inspectors so appointed shall refuse to serve
or shall not be present, such appointment shall be made by the officer presiding
as the meeting.
2.11. List of Stockholders: (a) At least ten days before every meeting of
stockholders, the Secretary shall prepare and make a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of cash stockholder and the number of shares registered
in the name of each stockholder.
(b) During ordinary business hours, for a period of at least ten
days prior to the meeting, such list shall be open to examination by any
stockholder for any purpose germane to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or if not so specified, at the place where the meeting is
to be held.
(c) The list shall also be produced and kept at the time and place
of the meeting during the whole time of the meeting, and it may be inspected by
any stockholder who is present.
(d) The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
Section 2.11 or the books of the Corporation, or to vote in person or by proxy
at any meeting of stockholders.
2.12. Procedure at Stockholders Meetings: Except as otherwise provided by
these by-laws or any resolutions adopted by the stockholders or Board of
Directors, the order of business and all other matters of procedure at every
meeting of stockholders shall be determined by the presiding officer.
2.13. Action By Consent Without Meeting: Unless otherwise provided by the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting, 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 the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
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<PAGE>
ARTICLE III
DIRECTORS
3.1 Powers of Directors: The property, business and affairs of the
Corporation shall be managed by its Board of Directors which may exercise all
the powers of the Corporation except such as are by the law of the State of
Delaware or the Certificate of Incorporation or these by-laws required to be
exercised or done by the stockholders.
3.2 Number, Method of Election, Terms of Office of Directors: The number
of directors which shall constitute the Board of Directors shall be not less
than one (1) and not more than eight (2) unless and until otherwise determined
by a vote of a majority of the entire Board of Directors. Each Director shall
hold office until the next annual meeting of stockholders and until his
successor is elected and qualified, provided, however, that a director may
resign at any time. Directors need not be stockholders.
3.3. Vacancies on Board of Directors; Removal: (a) Any director may resign
his office at any time by delivering his resignation in writing to the Chairman
of the Board or to the President. It will take effect at the time specified
therein or, if no time is specified, it will be effective at the time of its
receipt by the Corporation. The acceptance of a resignation shall not be
necessary to make it effective, unless expressly so provided in the resignation.
(b) Any vacancy in the authorized number of directors may be filled
by majority vote of the stockholders and any director so chosen shall hold
office until the next annual election of directors by the stockholders and until
his successor is duly elected and qualified or until his earlier resignation or
removal.
(c) Any director may be removed with or without cause at any time by
the majority vote of the stockholders given at a special meeting of the
stockholders called for that purpose.
3.4. Meeting of the Board of Directors: (a) The Board of Directors may
hold their meetings, both regular and special, either within or outside the
State of Delaware.
(b) Regular meetings of the Board of Directors may be held at such
time and place as shall from time to time be determined by resolution of the
Board of Directors. No notice of such regular meetings shall be required. If the
date designated for any regular meeting be a legal holiday, then the meeting
shall be held on the next day which is not a legal holiday.
(c) The first meeting of each newly elected Board of Directors shall
be held immediately following the annual meeting of the stockholders for the
election of officers and the transaction of such other business as may come
before it. If such meeting is held at the place of the stockholders' meeting, no
notice thereof shall be required.
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<PAGE>
(d) Special meetings of the Board of Directors shall be held
whenever called by direction of the Chairman of the Board or the President or at
the written request of any one director.
(e) The Secretary shall give notice to each director of any special
meeting of the Board of Directors by mailing the same at least three days before
the meeting or by telegraphing, telexing, or delivering the same not later than
the day before the meeting.
Unless required by law, such notice need not include a statement of
the business to be transacted at, or the purpose of, any such meeting. Any and
all business may be transacted at any meeting of the Board of Directors. No
notice of any adjourned meeting need be given. No notice to or waiver by any
director shall be required with respect to any meeting at which the director is
present.
3.5. Quorum and Action: Unless provided otherwise by law or by the
Certificate of Incorporation or these by-laws, a majority of the Directors shall
constitute a quorum for the transaction of business; but if there shall be less
than a quorum at any meeting of the Board, a majority of those present may
adjourn the meeting from time to time. The vote of a majority of the Directors
present at any meeting at which a quorum is present shall be necessary to
constitute the act of the Board of Directors.
3.6. Presiding Officer and Secretary of the Meeting: The President, or, in
his absence a member of the Board of Directors selected by the members present,
shall preside at meetings of the Board. The Secretary shall act as secretary of
the meeting, but in his absence the presiding officer may appoint a secretary of
the meeting.
3.7. Action by Consent Without Meeting: 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 all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes or proceedings of the Board or committee.
3.8. Action by Telephonic Conference: Members of the Board of Directors,
or any committee designated by such board, may participate in a meeting of such
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 such a meeting shall constitute presence in
person at such meeting.
3.9. Committees: The Board of Directors shall, by resolution or
resolutions passed by a majority of Directors, designate one or more committees,
each of such committees to consist of one or more Directors of the Corporation,
for such purposes as the Board shall determine. The Board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of such committee.
3.10. Compensation of Directors: Directors shall receive such reasonable
compensation for their service on the Board of Directors or any committees
thereof, whether in the form of salary or a fixed fee for attendance at
meetings, or both, with expenses, if any, as
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the Board or Directors may from time to time determine. Nothing herein contained
shall be construed to preclude any Director from serving in any other capacity
and receiving compensation therefor.
ARTICLE IV
OFFICERS
4.1. Officers, Title, Elections, Terms: (a) The elected officers of the
Corporation shall be a President, a Treasurer and a Secretary, and such other
officers as the Board of Directors shall deem advisable. The officers shall be
elected by the Board of Directors at its annual meeting following the annual
meeting of the stockholders, to serve at the pleasure of the Board or otherwise
as shall be specified by the Board at the time of such election and until their
successors are elected and qualified.
(b) The Board of Directors may elect or appoint at any time, and
from time to time, additional officers or agents with such duties as it may deem
necessary or desirable. Such additional officers shall serve at the pleasure of
the Board or otherwise as shall be specified by the Board at the time of such
election or appointment. Two or more offices may be held by the same person.
(c) Any vacancy in any office may be filled for the unexpired
portion of the term by the Board of Directors.
(d) Any officer may resign his office at any time. Such resignation
shall be made in writing and shall take effect at the time specified therein or,
if no time has been specified, at the time of its receipt by the Corporation.
The acceptance of a resignation shall not be necessary to make it effective,
unless expressly so provided in the resignation.
(e) The salaries of all officers of the Corporation shall be fixed
by the Board of Directors.
4.2. Removal of Elected Officers: Any elected officer may be removed at
any time, either with or without cause, by resolution adopted at any regular or
special meeting of the Board of Directors by a majority of the Directors then in
office.
4.3. Duties: (a) President: The President shall be the principal executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall supervise and control all the business and affairs of the
Corporation. He shall, when present, preside at all meetings of the stockholders
and of the Board of Directors. He shall see that all orders and resolutions of
the Board of Directors are carried into effect (unless any such order or
resolution shall provide otherwise), and in general shall perform all duties
incident to the office of president and such other duties as may be prescribed
by the Board of Directors from time to time.
(b) Treasurer: The Treasurer shall (1) have charge and custody of
and be responsible for all funds and securities of the Corporation; (2) receive
and give
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receipts for moneys due and payable to the Corporation from any source
whatsoever; (3) deposit all such moneys in the name of the Corporation in such
banks, trust companies, or other depositories as shall be selected by resolution
of the Board of Directors; and (4) in general perform all duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the President or by the Board of Directors. He shall, if required by
the Board of Directors, give a bond for the faithful discharge of his duties in
such sum and with such surety or sureties as the Board of Directors shall
determine.
(c) Secretary: The Secretary shall (1) keep the minutes of the
meetings of the stockholders, the Board of Directors, and all committees, if
any, of which a secretary shall not have been appointed, in one or more books
provided for that purpose; (2) see that all notices are duly given in accordance
with the provisions of those by-laws and as required by law; (3) be custodian of
the corporate records and of the seal of the Corporation and see that the seal
of the Corporation is affixed to all documents, the execution of which on behalf
of the Corporation under its seal, is duly authorized; (4) keep a register of
the post office address of each stockholder which shall be furnished to the
Secretary by such stockholder; (5) have general charge of stock transfer books
of the Corporation; and (6) in general perform all duties incident to the office
of secretary and such other duties as from time to time may be assigned to him
by the President or by the Board of Directors.
ARTICLE V
CAPITAL STOCK
5.1. Stock Certificates: (a) Every holder of stock in the Corporation
shall be entitled to have a certificate signed by, or in the name of, the
Corporation by the President and by the Treasurer or the Secretary, certifying
the number of shares owned by him.
(b) If such certificate is countersigned by a transfer agent other
than the Corporation or its employee, or by a registrar other than the
Corporation or its employee, the signatures of the officers of the Corporation
may be facsimiles, and, if permitted by law, any other signature may be a
facsimile.
(c) 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 limed by the Corporation with the same
effect as if he were such officer at the date of issue.
(d) Certificates of stock shall be issued in such form not
inconsistent with the Certificate of Incorporation as shall be approved by the
Board of Directors, and shall be numbered arid registered in the order in which
they were issued.
(e) All certificates surrendered to the Corporation shall be
canceled with the date of cancellation, and shall be retained by the Secretary,
together with the powers of attorney to transfer and the assignments of the
shares represented by
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such certificates, for such period of time as shall be prescribed from time to
time by resolution of the Board of Directors.
5.2. Record Ownership: A record of the name and address of the holder of
such certificate, the number of shares represented thereby and the date of issue
thereof shall be made on the Corporation's books. The Corporation shall be
entitled to treat the holder of any share of stock as the holder in fact
thereof, and accordingly shall not be bound to recognize any equitable or other
claim to or interest in any share on the part of any other person, whether or
not it shall have express or other notice thereof except as required by law.
5.3. Transfer of Record Ownership: Transfers of stock shall be made on the
books of the Corporation only by direction of the person named in the
certificate or his attorney, lawfully constituted in writing, and only upon the
surrender of the certificate therefor and a written assignment of the shares
evidenced thereby. Whenever any transfer of stock shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of the
transfer if, when the certificates are presented to the Corporation for
transfer, both the transferor and the transferee request the Corporation to do
so.
5.4. Lost, Stolen or Destroyed Certificates: Certificates representing
shares of the stock of the Corporation shall be issued in place of any
certificate alleged to have been lost, stolen or destroyed in such manner and on
such terms and conditions as the Board of Directors from time to time may
authorize.
5.5. Transfer Agent; Registrar; Rules Respecting Certificates: The
Corporation may maintain one or more transfer offices or agencies where stock of
the Corporation shall be transferable. The Corporation may also maintain one or
more registry offices where such stock shall be registered. The Board of
Directors may make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of stock certificates.
5.6. Fixing Record Date for Determination of Stockholders Record: The
Board of Directors may fix, in advance, a date as the record date for the
purpose of determining stockholders entitled to notice of, or to vote at, any
meeting of the stockholders or any adjournment thereof, or the stockholders
entitled to receive payment of any dividend or other distribution or the
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or to express consent to corporate
motion in writing without a meeting, or in order to make a determination of the
stockholders for the purpose of any other lawful action. Such record date in any
case shall be not more than sixty days nor less than ten days before the date of
a meeting of the stockholders, nor more than sixty days prior to any other
action requiring such determination of the stockholders. A determination of
stockholders of record entitled to notice or to vote at a meeting of
stockholders 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.
5.7. Dividends: Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the Corporation as and when they
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<PAGE>
deem expedient. Before declaring any dividend there may be set apart out of any
funds of the Corporation available for dividends, such sum or sums as the Board
of Directors from time to time in their discretion deem proper for working
capital or as a reserve fund to meet contingencies or for equalizing dividends
or for such other purposes as the Board of Directors shall deem conducive to the
interests of the Corporation.
ARTICLE VI
SECURITIES HELD BY THE CORPORATION
6.1. Voting: Unless the Board of Directors shall otherwise order, the
President, the Secretary or the Treasurer shall have full power and authority,
on behalf of the Corporation, to attend, act and vote at any meeting of the
stockholders of any corporation in which the Corporation may hold stock and at
such meeting to exercise any or all rights and powers incident to the ownership
of such stock, and to execute on behalf of the Corporation a proxy or proxies
empowering another or others to act as aforesaid. The Board of Directors from
time to time may confer like powers upon any other person or persons.
6.2. General Authorization to Transfer Securities Held by the Corporation
(a) Any of the following officers, to wit: the President and the
Treasurer shall be, and they hereby are, authorized and empowered to transfer,
convert, endorse, sell, assign, set over and deliver any and all shares of
stock, bonds, debentures, notes, subscription warrants, stock purchase warrants,
evidence of indebtedness, or other securities now or hereafter standing in the
name of or owned by the Corporation, and to make, execute and deliver, under the
seal of the Corporation, any and all written instruments of assignment and
transfer necessary or proper to effectuate the authority hereby conferred.
(b) Whenever there shall be annexed to any instrument of assignment
and transfer executed pursuant to and in accordance with the foregoing paragraph
(a), a certificate of the Secretary of the Corporation in office at the date of
such certificate setting forth the provision of this Section 6.2 and stating
that they are in full force and effect and setting forth the names of persons
who are then officers of the Corporation, then all persons so whom such
instrument and annexed certificate shall thereafter come, shall be entitled,
without further inquiry or investigation and regardless of the date of such
certificate, to assume and to act in reliance upon the assumption that the
shares of stock or other securities named in such instrument were theretofore
duly and properly transferred, endorsed, sold, assigned, set over and delivered
by the Corporation, and that with respect to such securities the authority of
these provisions of the by-laws and of such officers is still in full force and
effect.
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ARTICLE VII
MISCELLANEOUS
7.1. Signatories: All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed by such office or officers or such other person or
persons as the Board of Directors may from time to time designate.
7.2. Seal: The seal of the Corporation shall be in such form and shall
have such content as the Board of Directors shall from time to time determine.
7.3. Notice and Waiver of Notice: Whenever any notice of the time, place
or purpose of any meeting of the stockholders, directors or a committee is
required to be given under the law of the State of Delaware, the Certificate of
Incorporation or these by-laws, a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the holding
thereof, or actual attendance at the meeting in person or, in the came of any
stockholder, by his attorney-in-fact, shall be deemed equivalent to the giving
of such notice to such persons.
7.4. Indemnify: The Corporation shall indemnify its directors, officers
and employees to the fullest extent allowed by law, provided, however, that it
shall be within the discretion of the Board of Directors whether to advance any
funds in advance of disposition of any action, suit or proceeding, and provided
further that nothing in this section 7.4 shall be deemed to obviate the
necessity of the Board of Directors to make any determination that
indemnification of the director, officer or employee is proper under the
circumstances because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of Section 145 of the Delaware General Corporation Law.
7.5 Fiscal Year: Except as from time to time otherwise determined by the
Board of Directors, the fiscal year of the Corporation shall end on December 31.
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<PAGE>
Exhibit 4.1
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE
SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
PURSUANT TO A REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (REGISTRATION NO
). HOWEVER, NEITHER THE WARRANTS NOR SUCH SECURITIES CAN BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) A POST-EFFECTIVE
AMENDMENT TO SUCH REGISTRATION STATEMENT, (ii) A SEPARATE
REGISTRATION STATEMENT UNDER SUCH ACT, OR (iii) AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS
DESCRIBED HEREIN.
ABLE ENERGY, INC.
Warrant for the Purchase of Units
---------------------------------
Each Unit Consisting of One Share of Common Stock
and One Warrant
No. UW- 87,500 Units
THIS CERTIFIES that, for receipt in hand of $87.50 and other value
received, WALSH MANNING SECURITIES, LLC, 90 Broad Street, New York, New York
10004 (hereinafter referred to as the "Holder" or "Underwriter") is entitled to
subscribe for and purchase from ABLE ENERGY, INC., a Delaware corporation (the
"Company"), upon the terms and conditions set forth herein, at any time or from
time to time after , 1998 and before 5:00 P.M. on ,
2000, New York time (the "Exercise Period"), 87,500 Units (the "Units"), each
Unit consisting of two fully paid and nonassessable shares (the "Unit Shares")
of the Company's Common Stock, par value $.001 per share ("Common Stock"), and
one Common Stock Purchase Warrant ("Unit Warrant"), at a price of $_____ per
Unit, (the "Unit Price") [150% of IPO price]. This Warrant may not be sold,
transferred, assigned or hypothecated, until , 1998 except that it
may be transferred in whole or in part, to (i) one or more officers or partners
of Walsh Manning Securities, LLC. The term the "Holder" as used herein shall
include any transferee to whom this Warrant has been transferred in accordance
with the above. As used herein the term "this Warrant" shall mean and include
this Warrant and any Warrant or Warrants hereafter issued as a consequence of
the exercise or transfer of this Warrant in whole or part.
<PAGE>
Each Unit Warrant shall entitle the holder thereof to purchase one
share of Common Stock (the shares of Common Stock issuable upon exercise of the
Underwriter's Unit Warrants being collectively referred to as the "Warrant
Shares"). Each Underwriter's Unit Warrant shall be identical in all respect to
the Warrants (the "Public Warrants"), issued pursuant to the Warrant Agreement,
dated as of (the "Warrant Agreement"), between the Company and Continental Stock
Transfer and Trust Company, as Warrant Agent; provided, however, the exercise
price of the Underwriter's Unit Warrants shall be 120% of the exercise price of
the Public Warrants; provided, further that, prior to the registration and sale
thereof pursuant to the provisions of paragraph 9 hereof, the Underwriter's Unit
Warrants shall not be subject to redemption by the Company under any
circumstances.
1. TERMS OF EXERCISE. (a) This Warrant may be exercised during the
Exercise Period as to the whole or any lesser number of whole Units, by the
surrender of this Warrant (with the election at the end hereof duly executed) to
the Company at its office at 344 Route 46, Rockaway, New Jersey 07866, or such
other place as is designated in writing by the Company, together with a
certified or bank cashier's check payable to the order of the Company in an
amount equal to the Exercise Price multiplied by the number of Units for which
this Warrant is being exercised.
(b) CASHLESS EXERCISE. At any time during the Warrant Exercise
Term, the Holder may, at its option, exchange the Warrants represented by such
Holder's Warrant Certificate, in whole or in part (a "Warrant Exchange"), into
the number of fully paid and non-assessable Warrant Units determined in
accordance with this Section 3.2, by surrendering such Warrant certificate at
the principal office of the Company or at the office of its transfer agent,
accompanied by a notice stating such Holder's intent to effect such exchange,
the number of Warrants (the "Total Unit Number") to be exchanged and the date on
which the Holder requests that such Warrant Exchange occur (the "Notice of
Exchange"). The Warrant Exchange shall take place on the date specified in the
Notice of Exchange, or, if later, the date the Notice of Exchange is received by
the Company (the "Exchange Date").The Notice of Exchange may be delivered to the
Company by the Holder by mail, overnight courier or by telecopier. Certificates
for the Warrant Units issuable upon such Warrant Exchange and, if applicable, a
new Warrant Certificate of like tenor evidencing the balance of the Warrant
Units remaining subject to the Holder's Warrant certificate, shall be issued as
of the Exchange Date and delivered to the Holder within three (3) days following
the Exchange Date. In connection with any Warrant Exchange, the Holder's
Warrant certificate shall represent the right to subscribe for and acquire the
number of Warrant Units (rounded to the next highest integer) equal to (A) the
Total Unit Number less (B) the number of Warrant Units equal to the quotient
obtained by dividing (i) the product of the Total Unit Number and the then
current Exercise Price per
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Warrant Unit by (ii) the current Unit Market Price (as hereafter defined).
(c) For purposes of this Warrant, the term "Current Market
Price" at any date shall be deemed to be: (i) the average of the daily closing
prices of the Common Stock or the Public Warrants, as the case may be, for the
20 consecutive trading days immediately preceding such date in reported sales
price, or (ii) in case no such reported sale takes place on such date, the last
sales price, regular way in either case as reported on the principal national
securities exchange on which the Common Stock or the Public Warrants, as the
case may be, is listed or admitted trading, or (iii) if the Common Stock or the
Public Warrants, as the case may be, is not listed or admitted to trading on any
national securities exchange, the average of the closing bid and asked prices
regular way for the Common Stock or the Public Warrants, as the case may be, on
the Nasdaq National Market System or Nasdaq SmallCap Market of the Nasdaq Stock
Market, Inc. (together referred to as "Nasdaq") or (iv) if the Common Stock or
the Public Warrants, as the case may be, is not listed or admitted for trading
on any national securities exchange and is not reported on NASDAQ or any similar
organization, the average of the closing bid and asked prices in the
over-the-counter market as furnished by the National Quotation Bureau, Inc. or
if no such quotation is available, the fair market value as determined by the
Board of Directors in good faith.
2. DELIVERY OF CERTIFICATES TO REGISTERED HOLDER. Upon each
exercise of this Warrant, the Holder shall be deemed to be the holder of record
of the Unit Shares and Underwriter's Unit Warrants issuable upon such exercise
notwithstanding that the transfer books of the Company shall then be closed or
certificates representing such Unit Shares or Underwriter's Unit Warrants shall
not then have been actually delivered to the Holder. As soon as practicable
after each such exercise of this Warrant, the Company shall issue and deliver to
the Holder a certificate or certificates for the Unit Shares and a certificate
or certificates for the Underwriter's Unit Warrants registered in the name of
the Holder or its designee. If this Warrant should be exercised in part only,
the Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the right of the Holder to purchase the balance
of the Units (or portions thereof) subject to purchase hereunder.
3. WARRANT REGISTER. Any Unit Warrants issued upon the transfer or
exercise in part of this Warrant (together with this Warrant, the "Warrants")
shall be numbered and shall be registered in a Warrant Register as they are
issued. The Company shall be entitled to treat the registered holder of any
Warrant on the Warrant Register as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other person, and shall
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<PAGE>
not be liable for any registration or transfer of Warrants which are registered
or to be registered in the name of a fiduciary or the nominee of a fiduciary
unless made with the actual knowledge that a fiduciary or nominee is committing
a breach of trust in requesting such registration or participation therein
amounts to bad faith. The Warrants shall be transferable only on the books of
the Company upon delivery thereof duly endorsed by the Holder or by his duly
authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. In all cases of transfer by an
attorney, executor, administrator, guardian or other legal representative, duly
authenticated evidence of his or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new Warrant or Warrants to
the option of the Holder thereof, for another Warrant, or other Warrants of
different denominations, of like tenor and representing in the aggregate the
right to purchase a like number of Units (or portions thereof) upon surrender to
the Company or its duly authorized agent. Notwithstanding the foregoing, the
Company shall have no obligation to cause Warrants to be transferred on its
books to any person if, in the opinion of counsel to the Company, such transfer
does not comply with the provisions of the Securities Act of 1933, as amended
(the "Act"), and the rules and regulations thereunder.
4. RESERVATION OF COMMON STOCK. The Company shall at all times
reserve and keep available out of its authorized and unissued Common Stock,
solely for the purpose of providing for the exercise of this Warrant and the
Underwriter's Unit Warrants, such number of shares of Common Stock as shall,
from time to time, be sufficient therefor. The Company covenants that all
shares of Common Stock issuable upon exercise of this Warrant and the
Underwriter's Unit Warrants when paid for in accordance with the respective
terms thereof, shall be validly issued, fully paid and nonassessable by the
Company.
5. ANTI-DILUTION; ADJUSTMENTS TO EXERCISE PRICE.
(a) Upon the occurrence of any event (an "Event") as a result of
which an adjustment is made to the exercise price (the "Public Exercise Price")
of any of the Public Warrants, the number of Unit Shares issuable thereafter
upon exercise of this Warrant shall be adjusted to equal the number of Unit
Shares issuable prior to such Event multiplied by a fraction, the numerator of
which shall be the Public Exercise Price in effect prior to such Event and the
denominator of which shall be the Public Exercise Price subsequent to such
Event.
(b) Whenever there shall be an adjustment as provided in this
paragraph 5, the Company shall promptly cause written notice thereof to be sent
by registered mail, postage prepaid, to the Holder, at its principal office,
which notice shall be accompanied by an officer's certificate setting forth the
number
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<PAGE>
of Unit Shares issuable as part of each Unit and the exercise price and the
number of Warrant Shares purchasable upon the exercise of the Underwriter's Unit
Warrants after such adjustment and setting forth a brief statement of the facts
requiring such adjustment and the computation thereof, which officer's
certificate shall be conclusive evidence of the correctness of any such
adjustment absent manifest error.
(c) All calculations under this paragraph 5 shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be.
(d) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the exercise
of Warrants. If any fraction of a share would be issuable on the exercise of
any Warrant (or specified portions thereof), the Company shall purchase such
fraction for an amount in cash equal to the same fraction of the Current Market
Price of such share of Common Stock on the date of exercise of the Warrant.
6. REORGANIZATION/RECLASSIFICATION. (a) In case of any
consolidation with or merger of the Company with or into another corporation
(other than a merger or consolidation in which the Company is the surviving or
continuing corporation), or in case of any sale, lease or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, such successor, leasing or purchasing corporation, as the case may be,
shall (i) execute with the holder an agreement providing that the holder shall
have the right thereafter to receive upon exercise of this Warrant solely the
kind and amount of shares of stock and other securities, property, cash or any
combination thereof receivable upon such consolidation, merger, sale, lease or
conveyance by a holder of the number of shares of Common Stock and the
Underwriter's Unit Warrants for which this Warrant might have been exercised
immediately prior to such consolidation, merger, sale, lease or conveyance, and
(ii) make effective provision in order to effect such agreement. Such agreement
shall provide for adjustment which shall be as nearly equivalent as practicable
to the adjustments in paragraph 5.
(b) In case of any reclassification or change of the shares of
Common Stock issuable upon exercise of this Warrant (other than a change in par
value or from par value to no par value, or as a result of a subdivision or
combination, but including any change in the shares into two or more classes or
series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from par value to no par value, or as a result of
a
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subdivision or combination, but including any change in the shares into two or
more classes or series of shares), the Holder shall have the right thereafter to
receive upon exercise of this Warrant solely the kind and amount of shares of
stock and other securities, property, cash or any combination thereof receivable
upon such reclassification, change, consolidation or merger by a holder of the
number of shares of Common Stock and the Underwriter's Unit Warrants for which
this Warrant might have been exercised immediately prior to such
reclassification, change, consolidation or merger. Thereafter, appropriate
provision shall be made for adjustments which shall be as nearly equivalent as
practicable to the adjustments in paragraph 5 above.
(c) The above provisions of this paragraph 6 shall similarly
apply to successive reclassifications and changes of shares of Common Stock and
to successive consolidations, mergers, sales, leases or conveyances similar to
those described in paragraphs 6(a) and (b).
7. NOTICE OF DIVIDENDS/DISTRIBUTIONS. In case at any time the
Company shall propose:
(a) to pay any dividend or make any distribution on shares of
Common Stock in shares of Common Stock or make any other distribution (other
than regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common Stock;
or
(b) to issue any rights, warrants or other securities to all
holders of Common Stock or Public Warrants entitling them to purchase any
additional shares of Common Stock or any other rights, warrants or other
securities; or
(c) to effect any reclassification or change or outstanding
shares of Common Stock, or any consolidation, merger, sale, lease or conveyance
of property, described in paragraph 6; or
(d) to effect any liquidation, dissolution, or winding-up of the
Company; or
(e) to take any other action which would cause an adjustment to
the Public Exercise Price;
than, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least 15
days prior to: (i) the date as of which the holders of record of shares of
Common Stock to be entitled to receive any such dividend, distribution, rights,
warrants or other securities are to be determined; (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of
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property, liquidation, dissolution, or winding-up is expected to become
effective, and the date as of which it is expected that holders of record of
shares of Common Stock or Public Warrants, as the case may be, shall be entitled
to exchange their shares or warrants for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up; or (iii) the date of such action which would require
an adjustment to the Public Exercise Price.
8. PAYMENT OF TAXES. The issuance of any shares of Common Stock or
Warrants or other securities upon the exercise of this Warrant, and the delivery
of certificates or other instruments representing such shares of Common Stock,
Warrants or other securities, shall be made without charge to the Holder for any
tax or other charge in respect of such issuance. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the Holder and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid
or is not due and payable.
9. REGISTRATION RIGHTS. (a) If, at any time after ________,
1998, and before ________, 2005 [7 years from Effective Date], the Company shall
file a registration statement (other than on Form S-8, or any successor form)
with the Securities and Exchange Commission (the "Commission") while Unit Shares
or Underwriter's Unit Warrants are available for purchase upon exercise of this
Warrant or while any Unit Shares, Underwriter's Unit Warrants or Warrant Shares
(which have not been so registered) are outstanding, the Company shall give the
Holder and all the then registered holders of such Unit Shares, Underwriter's
Unit Warrants or Warrant Shares at least 30 days prior written notice of the
filing of such registration statement. If requested by the Holder or by any
such holder in writing within 20 days after receipt of any such notice, the
Company shall, at the Company's sole expense (other than the fees and
disbursements of counsel for the Holder or such holder and the underwriting
discounts, if any, payable in respect of the Warrants, Units, Unit Shares,
Underwriter's Unit Warrants and Warrant Shares sold by the Holder or any such
holder), register or qualify the Units, the Unit Shares, Underwriter's Unit
Warrants and Warrant Shares (collectively, the "Underwriter's Securities") of
the Holder or any such holders who shall have made such request concurrently
with the registration covering such other securities, all to the extent
requisite to permit the public offering and sale of the Underwriter's Securities
through the facilities of all appropriate securities exchanges and the
over-the-counter market, and will use its best efforts through its officers,
directors, auditors and counsel to cause such
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registration statement to become effective as promptly as practicable.
Notwithstanding the foregoing, if the managing underwriter of any such offering
shall advise the Company in writing that, in its opinion, the distribution of
all or a portion of the Underwriter's Securities requested to be included in the
registration concurrently with the securities being registered by the Company
would materially adversely affect the distribution of such securities by the
Company for its own account, then the Holder or any such holder who shall have
requested registration of his or its Underwriter's Securities shall delay the
offering and sale of such Underwriter's securities (or the portions thereof so
designated by such managing underwriter) for such period, not to exceed 90 days,
as the managing underwriter shall request, provided that no such delay shall be
required as to any Underwriter's Securities if any securities of the Company are
included in such registration statement for the account of any person other than
the Company and the Holder or any such holder unless the securities included in
such registration statement for such other person shall have been reduced pro
rata to the reduction of the Underwriter's Securities which were requested to be
included in such registration.
(b) If at any time after ________, 1998 and before ________,
2003 [5 years from Effective Date], the Company shall receive a written request
from holders of Underwriter's Securities who, in the aggregate, own (or upon
exercise of all Warrants and Underwriter's Unit Warrants, will own) a majority
of the total number of shares of Common Stock issued or issuable upon exercise
of the Warrants and the Underwriter's Unit Warrants, the Company shall, as
promptly as practicable, prepare and file with the Commission a registration
statement sufficient to permit the public offering and sale of the Underwriter's
Securities through the facilities of all appropriate securities exchanges and
the over-the-counter market, and will use its best efforts through its officers,
directors, auditors and counsel to cause such registration statement to become
effective as promptly as practicable; PROVIDED, HOWEVER, that the Company shall
only be obligated to file one such registration statement for which all expenses
incurred in connection with such registration (other than the fees and
disbursements of counsel for the Holder or such holders and underwriting
discounts, if any, payable in respect of the Underwriter's Securities sold by
the Holder or any such holder) shall be borne by the Company and one additional
such registration statement for which all such expenses shall be paid by the
Holder and such holders.
(c) In the event of a registration pursuant to the provisions of
this paragraph 9, the Company shall use its best efforts to cause the
Underwriter's Securities so registered to be registered or qualified for sale
under the securities or blue sky laws of such jurisdictions as the Holder or
such holders may reasonably request; PROVIDED, HOWEVER, that the Company shall
not
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<PAGE>
be required to qualify to do business in any state by reason of this paragraph
9(c) in which it is not otherwise required to qualify to do business.
(d) The Company shall keep effective any registration or
qualification contemplated by this paragraph 9 and shall from time to time amend
or supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document and communication for such period of
time as shall be required to permit the Holder or such holders to complete the
offer and sale of the Underwriter's Securities covered thereby. The Company
shall in no event be required to keep any such registration or qualification
effect for a period in excess of nine months from the date on which the Holder
and such holders are first free to sell such Underwriter's Securities; PROVIDED,
HOWEVER, that if the Company is required to keep any such registration or
qualification in effect with respect to securities other than the Underwriter's
Securities beyond such period, the Company shall keep such registration or
qualification in effect as it relates to the Underwriter's Securities for so
long as such registration or qualification remains or is required to remain in
effect in respect of such other securities.
(e) In the event of a registration pursuant to the provisions of
this paragraph 9, the Company shall furnish to each holder of any Underwriter's
Securities included therein such amendment and supplement thereto (in each case,
including all exhibits), such reasonable number of copies of each prospectus
contained in such registration statement and each supplement or amendment
thereto (including each preliminary prospectus), all of which shall conform to
the requirements of the Act and the rules and regulations thereunder, and such
other documents, as the Holder or such holders may reasonable request in order
to facilitate the disposition of the Underwriter's Securities included in such
registration.
(f) In the event of a registration pursuant to the provisions
this paragraph 9, the Company shall furnish to each holder of any Underwriter's
Securities so registered with an opinion of its counsel (reasonably acceptable
to the Holder) to the effect that (i) the registration statement has become
effective under the Act and no order suspending the effectiveness of the
registration statement, preventing or suspending the use of the registration
statement, any preliminary prospectus, any final prospectus, or any amendment or
supplement thereto has been issued, nor has the Securities and Exchange
Commission or any securities of blue sky authority of any jurisdiction
instituted or threatened to institute any proceedings with respect to such an
order, (ii) the registration statement and each prospectus forming a part
thereof (including each preliminary prospectus), and any amendment or supplement
thereto, complies as to form with the Act and the rules and regulations
thereunder, and (iii) such counsel has no knowledge
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<PAGE>
or reason to know of any material misstatement or omission in such registration
statement or any prospectus, as amended or supplemented. Such opinion shall
also state the jurisdictions in which the Underwriter's Securities have been
registered or qualified for sale pursuant to the provisions of paragraph 9(c).
(g) The Company agrees that until all the Underwriter's
Securities have been sold under a registration statement or pursuant to Rule 144
under the Act, it shall keep current in filing all reports, statements and other
materials required to be filed with the Commission to permit holders of the
Underwriter's Securities to sell such securities under Rule 144.
10. INDEMNIFICATION. (a) Subject to the conditions set forth
below, the Company agrees to indemnify and hold harmless the Holder, any holder
of any of the Underwriter's Securities, their officers, directors, partners,
employees, agents and counsel, and each person, if any, who controls any such
person within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all loss, liability, charge, claim, damage and expense
whatsoever (which shall include, for all purposes of this paragraph 10, but not
be limited to, reasonable attorneys' fees and any and all expense whatsoever
reasonably incurred, and any and all amounts paid in settlement of any claim or
litigation), as and when incurred, arising out of, based upon, or in connection
with (i) any untrue statement or alleged untrue statement of a material fact
contained (A) in any registration statement, preliminary prospectus or final
prospectus (as from time to time amended and supplemented), or any amendment or
supplement thereto, or (B) in any application or other document or communication
(in this paragraph 10 collectively called an "application") executed by or on
behalf of the Company filed in any jurisdiction in order to register or qualify
any of the Underwriter's Securities under the securities or blue sky laws
thereof or filed with the Commission or any securities exchange; or any omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, unless such statement
or omission was made in reliance upon and in conformity with written information
furnished to the Company with respect to the Holder or any holder of any of the
Underwriter's Securities by or on behalf of such preliminary prospectus, or
final prospectus, or any amendment or supplement thereto, or in any application,
as the case may be, or (ii) any breach of any representation, warranty, covenant
or agreement of the Company to indemnify shall be in addition to any liability
the Company may otherwise have, including liabilities arising under this
Warrant.
If any action is brought against the Holder or any holder of any of
the Underwriter's Securities or any of its officers, directors, partners,
employees, agents or counsel, or any controlling persons of such person (an
"indemnified party") in
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respect of which indemnity may be sought against the Company pursuant to the
foregoing paragraph, such indemnified party or parties shall promptly notify the
Company in writing of the institution of such action (but the failure so to
notify shall not relieve the Company from any liability it may have other than
pursuant to this paragraph 10(a)) and the Company shall promptly assume the
defense of such action, including the employment of counsel (reasonably
satisfactory to such indemnified party or parties) and payment of expenses.
Such indemnified party or parties shall have the right to employ its or their
own counsel in any such case, but the fees and expenses of such counsel shall be
at the expense of such indemnified party or parties unless the employment of
such counsel shall have been authorized in writing by the Company in connection
with the defense of such action or the Company shall not have promptly employed
counsel reasonably satisfactory to such indemnified party or parties to have
charge of the defense of such action or such indemnified party or parties shall
have reasonably concluded that there may be one or more legal defenses available
to it or them or to other indemnified parties which are different from or
addition to those available to the Company, if any of which events the
reasonable fees and expenses of such counsel shall be borne by the Company and
the Company shall not have the right to direct the defense of such action on
behalf of the indemnified party or parties. Anything in this paragraph 10(a) to
the contrary notwithstanding, the Company shall not be liable for any settlement
of any such claim or action effected without its written consent.
(b) The Holder and any other holder of Underwriter's Securities
and such other holder agrees to indemnify and hold harmless the Company, each
director of the Company, each officer of the Company who shall have signed any
registration statement covering Underwriter's Securities held by the Holder and
such other holder and each other person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, to
the same extent as the foregoing indemnity from the Company to the Holder and
such other holder in paragraph 10(a), but only with respect to statements or
omissions, if any, made in any registration statement, preliminary prospectus,
or final prospectus (as from time to time amended and supplemented), or any
amendment or supplement thereto, or in any application, in reliance upon and in
conformity with written information furnished to the Company with respect to the
Holder or such other holder by or on behalf of the Holder or such other holder
expressly for inclusion in any such registration statement, preliminary
prospectus, or final prospectus, or any amendment or supplement thereto, or in
any application, as the case may be. If any action shall be brought against the
Company or any other person so indemnified based on any such registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any application, and in respect of which indemnity may
be sought against the Holder pursuant to this
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paragraph 10(b), the Holder and such other holder shall have the rights and
duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the indemnified parties,
by the provisions of paragraph 10(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to paragraph 10(a)
or 10(b) (subject to the limitations thereof) but is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement and any controlling person of the Company), as one
entity, and the Holder and any holder of any of the Underwriter's Securities
included in such registration in the aggregate (including for this purpose any
contribution by or on behalf of an indemnified party), as a second entity, shall
contribute to the losses, liabilities, claims, damages and expenses whatsoever
to which any of them may be subject, on the basis of relevant equitable
considerations such as the relative fault of the Company and the Holder or any
such holder in connection with the facts which resulted in such losses,
liabilities, claims, damages and expenses. The relative fault, in the case of
an untrue statement, alleged untrue statement, omission or alleged omission,
shall be determined by, among other things, whether such statement, alleged
statement, omission or alleged omission relates to information supplied by the
Company, by the Holder or by any holder of Underwriter's Securities included in
such registration, and the parties relative intent, knowledge, access to
information and opportunity to correct or prevent such statement, alleged
statement, omission or alleged omission. The Company and the Holder agree that
it would be unjust and inequitable if the respective obligations of the Company
and the Holder or any such other holder of the Underwriter's Securities for
contribution were determined by pro rata or per capital allocation of the
aggregate losses, liabilities, claim, damages and expenses (even if the Holder
and the other indemnified parties were treated as one entity for such purpose)
or by any other method of allocation that does not reflect the equitable
considerations referred to in this paragraph 19(c). No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. For purposes of this paragraph 10(c), each
person, if any, who controls the Holder or any holder of any of the
Underwriter's Securities within the meaning of section 15 of the Act or Section
20(a) of the Exchange Act and each officer, director, partner, employee, agent
and
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counsel of each such person, shall have the same rights to contribution as such
person and each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and each officer,
director, partner, employee, agent and counsel of each such person, shall have
the same rights to contribution as such person and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, each officer of the Company who shall have signed any
such registration statement, and each director of the Company shall have the
same rights to contribution as the Company, subject in each case to the
provisions of this paragraph 10(c). Anything in this paragraph 10(c) to the
contrary notwithstanding, no party shall be liable for contribution with respect
to the settlement of any claim or action effected without its written consent.
This paragraph 10(c) is intended to supersede any right to contribution under
the Act, the Exchange Act or otherwise.
11. LEGEND. The securities issued upon exercise of the Warrants
shall be subject to a stop transfer order and the certificate or certificates
evidencing any such securities shall bear the following legend:
"THE SHARES [OR OTHER SECURITIES] REPRESENTED BY THIS
CERTIFICATE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, PURSUANT TO A REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. HOWEVER, SUCH
SHARES [OR OTHER SECURITIES] CANNOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO SUCH
REGISTRATION STATEMENT, (ii) A SEPARATE REGISTRATION
STATEMENT UNDER SUCH ACT, OR (iii) AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT."
12. LOST CERTIFICATES. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of any Warrant (and upon
surrender of any Warrant if mutilated), and upon reimbursement of the Company's
reasonable incidental expenses, the Company shall execute and deliver to the
Holder thereof a new Warrant of like date, tenor and denomination.
13. NO RIGHTS AS SHAREHOLDER. The Holder of any Warrant shall not
have, solely on account of such status, any rights of a
shareholder of the Company, either at law or in equity, or to any notice of
meetings of stockholders or of any other proceedings of the Company, except as
provided in this Warrant.
14. NOTICES.
All notices, requests, consents and other communications
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hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered holder of this Warrant, to the address
of such holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Paragraph
1(a) of this Warrant; or
(c) If to the Holder, to the address set forth on the first page
of this Warrant.
15. GOVERNING LAW. This Warrant shall be construed in accordance
with the laws of the State of New York, without giving effect to conflict of
laws.
Dated: ___________ __, 1998
ABLE ENERGY, INC.
By
------------------------------
Name:
Title:
[Seal]
- ------------------------------
Secretary
<PAGE>
Exhibit 4.2
WARRANT AGREEMENT dated as of ________, 1998 between Able Energy,
Inc., a Delaware corporation, having its principal place of business at 344
Route 46, Rockaway, New Jersey 07866 (the "Company") and Continental Stock
Transfer & Trust Company, a New York corporation, having its principal place of
business at 2 Broadway, New York, New York 10004 (the "Warrant Agent").
W I T N E S S E T H :
WHEREAS, the Company proposes to issue and sell to the public in an
initial public offering (the "IPO") up to 875,000 units ("Units"), each Unit
consisting of two (2) shares of the Company's Common Stock, par value $.001 per
share ("Shares"), and one Redeemable Class A Common Stock Purchase Warrant (the
"Public Warrants") (plus an additional 131,250 Units to cover overallotments);
WHEREAS, the Company also proposes to issue and sell to Walsh Manning
Securities, Inc. (the "Underwriter") in the IPO an option ("Underwriters' Unit
Option") to purchase 87,500 Units, each Unit consisting of two (2) shares of
Common Stock and one Common Stock Purchase Warrant (the "Underwriter Warrants"
and together with the Public Warrants sometimes hereinafter referred to as the
"Warrants");
WHEREAS, the Warrants shall be evidenced by certificates substantially
in the form of Exhibit A annexed hereto (the "Warrant Certificate"), each
Warrant entitling the holder thereof to purchase one share of Common Stock;
WHEREAS, the Warrants will have an exercise price of $5.00 per share
of Common Stock, subject to certain adjustments (the "Exercise Price"), and
except for the Underwriters' Warrants, will be exercisable commencing on the
date hereof ("First Exercise Date") until a date which is the third anniversary
thereof ("Last Exercise Date"), unless extended by the Company, and, except for
the Underwriter's Warrants, will be exercisable during any period of time fixed
for that Warrant's redemption in a Redemption Notice (hereinafter defined in
Section 2.03), which period of time will terminate on a stated Redemption Date
(hereinafter defined in Section 2.03);
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act in connection with the
issuance, registration, transfer, exchange and replacement of the Warrant
Certificates and exercise of the Warrants; and
WHEREAS, the Company and the Warrant Agent desire to set forth in this
Agreement the terms and conditions upon which the Warrant Certificates shall be
issued, transferred, exchanged and placed and the Warrants exercised, and to
provide for the rights of the holders of the Warrants;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, and the
respective undertakings herein below set forth, the Company and the Warrant
Agent agree as follows:
ARTICLE I
ISSUANCE AND EXECUTION OF WARRANTS
SECTION 1.01. The Company hereby appoints the Warrant Agent to act on
behalf of the Company in accordance with the terms and conditions herein set
forth, and the Warrant Agent hereby accepts such appointment and agrees to
perform the same in accordance with
such provisions.
SECTION 1.02. The Warrant Certificates for the Warrants shall be issued in
registered form only. The text of the Warrant Certificate, including the form of
assignment and subscription printed on the reverse side thereof, shall be
substantially in the form of Exhibit A annexed hereto, which text is hereby
incorporated in this Agreement by reference as though fully set forth herein and
to whose terms and conditions the Company and the Warrant Agent hereby agree.
Each Warrant Certificate shall evidence the right, subject to the provisions of
this Agreement and of such Warrant Certificate, to purchase the number of
validly issued, fully paid and non-assessable shares of Common Stock, as that
term is defined in Section 1.05 of this Agreement, stated therein, free of
preemptive rights, subject to adjustment as provided in Article III of this
Agreement.
SECTION 1.03. Upon the written order of the Company, signed by the
President or any Vice President, and the Secretary, Treasurer, Assistant
Secretary or Assistant Treasurer of the Company, the Warrant Agent shall issue
and register Warrants in the names and denominations specified in that order,
and will countersign and deliver Warrant Certificates evidencing the same in
accordance with that order. Each Warrant Certificate shall be dated the date of
its countersignature. Each Warrant Certificate shall be executed on behalf of
the Company by the manual or facsimile signature of the President of the
Company, under its corporate seal, affixed or facsimile, attested by the manual
or facsimile signature of the Secretary of the Company and shall be
countersigned manually by the Warrant Agent. The Warrant Certificates shall not
be valid for any purpose unless so countersigned. In case any officer whose
facsimile signature has been placed upon any Warrant Certificate shall have
ceased to be such before such Warrant Certificate is issued, it may be issued
with the same effect as if such officer had not ceased to be such on the date of
issuance.
SECTION l.04. Except as otherwise expressly stated herein, all terms used
in the Warrant Certificate have the meanings provided in this Agreement.
SECTION l.05. As used herein, the term "Common Stock" shall mean the
aggregate number of shares that the Company, by its Certificate of
Incorporation, as from time to time
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amended, is authorized to issue, which are not limited by its Certificate of
Incorporation to a fixed sum or percentage of the book value in respect of the
rights of the holders thereof to participate in dividends or in distribution of
assets upon the voluntary or involuntary liquidation, dissolution, or winding up
the Company.
SECTION 1.06. The Warrant Agent understands and agrees that the Public
Warrants are being issued together with shares of Common Stock as constituting
Units in the IPO and that the Shares and the Public Warrants are detachable and
may be traded separately, immediately upon the Effective Date.
ARTICLE II
WARRANT PRICE, DURATION AND EXERCISE OF WARRANTS,
CALL OF WARRANTS AND TRADING OF WARRANT
SECTION 2.01. (a) Each Warrant shall entitle the person in whose name at
the time the Warrant shall be registered upon the books to be maintained by the
Warrant Agent for that purpose (the Warrant Holder"), subject to the provisions
of the Warrant Certificates and of this Agreement, to purchase from the Company
any time on or after the First Exercise Date but at or before the Last Exercise
Date, the number of shares of Common Stock stated therein, as adjusted, at the
Warrant Price in effect at such date, payable in full at the time of purchase in
the manner provided in Section 2.02 of this agreement.
(b) Each Warrant shall be exercisable in accordance with the terms
herein and in the Warrant Certificate which, among other things, contains
certain terms as to the Warrant Price.
SECTION 2.02. (a) The Warrant Holder may exercise a Warrant,in whole or in
part, by surrender of the Warrant Certificate, with the form of subscription
thereon duly executed by the Warrant Agent at its corporate office, together
with the Warrant Price for each share of Common Stock to be purchased in lawful
money of the United States, or by certified check, bank draft, or postal or
express money order payable in United States Dollars to the order of the
Company.
(b) Upon receipt of a Warrant Certificate with the form of election to
purchase thereon duly executed and accompanied by payment of the aggregate
Warrant Price for the shares of Common Stock for which the Warrant is then being
exercised, the Warrant Agent shall requisition from the transfer agent
certificates for the total number of the shares of Common Stock, for which the
Warrant is being exercised in such names and denominations as are required for
delivery to the Warrant Holder, and the Warrant Agent shall thereupon deliver
such certificates to or in accordance with the instructions of the Warrant
Holder. The Company
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covenants and agrees that it has duly authorized and directed its transfer agent
(and will authorize and direct all its future transfer agents) to comply with
all such requests of the Warrant Agent.
(c) In case any Warrant Holder shall exercise his Warrant with respect
to less than all of the shares of Common Stock that may be purchased under the
Warrant, a new Warrant Certificate for be balance shall be countersigned and
delivered to or upon the order of the Warrant Holder.
(d) The Company covenants and agrees that it will pay when due and
payable any and all issue, transfer and other taxes which may be payable in
respect to the issuance of Warrants, or the issuance of any shares of Common
Stock upon the exercise of Warrants. However, neither the Company nor the
Warrant Agent shall be required to issue or deliver any Warrant Certificate or
shares of Common Stock in a name other than that of the Warrant Holder at the
time of surrender if any tax is payable in respect of such transfer until the
person requesting the same has paid to the Company the amount of such tax or has
established to the Company's satisfaction that such tax has been paid or shall
not be due and payable. In the event that any transfer tax is due and payable,
the Warrant Agent shall be under no obligation to issue or deliver any Warrant
Certificate or shares of Common Stock in a name other than that of the Warrant
Holder until the Company has notified the Warrant Agent that the transfer tax,
if any, has been paid, or in the alternative, that no transfer tax is due and
payable by reason of an exemption.
(e) The Warrant Agent shall account promptly to the Company with
respect to Warrants exercised and concurrently account to the Company for all
moneys received by the Warrant Agent for the purchase of shares of Common Stock
upon the exercise of Warrants.
(f) The Warrant Agent covenants and agrees that upon the exercise of
any of the Warrants, the Warrant Agent shall provide written notice to the
Company and to the Underwriter at its office at 90 Broad Street, New York, NY
10004, the expense of which notice shall be borne by the Company. Each notice
shall contain the name of the exercising Warrant Holder, the number of shares of
Common Stock that the Warrant Holder has elected to purchase, the purchase price
paid on a per share basis and the cumulative number of Warrants exercised by all
of the Warrant Holders as of the date of the transaction which is the subject of
the aforesaid notice. Such notice shall be made on the date of the exercise of
the Warrant. Nothing contained herein shall be construed so as to prevent the
Warrant Agent from providing the information required in this Section 2.02 (f)
in a consolidated or tabular form, provided that all other provisions of this
Section are complied with.
(g) The Warrant Agent covenants and agrees that it shall provide a
list of each and every holder of the Warrants to the Company and the Underwriter
at such time or from time to time as shall be required by the Company or the
Underwriter, but in no event shall such a list be provided less frequently than
once per annum at a date as shall be determined by the
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Company.
SECTION 2.03. (a) Commencing on ______, 1999, the Company may, subject to
the conditions set forth herein, redeem all, but not less than all, the Public
Warrants then outstanding at a redemption price of $.10 per Public Warrant upon
not less than thirty (30) days prior written notice (the "Redemption Notice") to
the holders thereof that the average closing price of the Common Stock for the
10 consecutive trading days ending three (3) days prior to the date of the
Redemption Notice is at least 200% of the current Exercise Price, subject to
adjustment for stock dividends, stock splits and other anti-dilution provisions
as provided for under Article III herein. For purposes of this Section 2.03,
"closing price" at any date shall be deemed to be: (i) the last sale price
regular way as reported on the principal national securities exchange on which
the Common Stock is listed or admitted to trading, or (ii) if the Common Stock
is not listed or admitted to trading on any national securities exchange, the
average of the closing bid and asked prices regular way for the Common Stock as
reported by the Nasdaq National Market or Nasdaq SmallCap Market of the Nasdaq
Stock Market, Inc. ("NASDAQ") or (iii) if the Common Stock is not listed or
admitted for trading on any national securities exchange, and is not reported by
NASDAQ, the average of the closing bid and asked prices in the over-the-counter
market as furnished by the National Quotation Bureau, Inc. or if no such
quotation is available, the fair market value of the Common Stock as determined
in good faith by the Board of Directors of the Company. The Redemption Notice
shall be deemed effective upon mailing and the time of mailing is the "Effective
Date of The Notice". The Redemption Notice shall state a redemption date not
less than thirty (30) days from the Effective Date of the Notice (the
"Redemption Date"). No Redemption Notice shall be mailed unless all funds
necessary to pay for redemption of all Warrants then outstanding shall have
first been set aside by the Company in trust with the Warrant Agent for the
benefit of all Public Warrant Holders so as to be and continue to be available
therefor. The redemption price to be paid to the Public Warrant Holders will be
$.10 for each share of the Common Stock of the Company to which the Warrant
Holder would then be entitled upon exercise of the Public Warrant being
redeemed, as adjusted from time to time as provided herein (the "Redemption
Price"). In the event the number of shares of Common Stock issuable upon
exercise of the Public Warrant being redeemed are adjusted pursuant to Article
III hereof, then upon each such adjustment the Redemption Price will be adjusted
by multiplying the Redemption Price in effect immediately prior to such
adjustment by a fraction, the numerator of which is the number of shares of
Common Stock issuable upon exercise of the Warrant being redeemed immediately
prior to such adjustment and the denominator of which is the number of shares of
Common Stock issuable upon exercise of such Public Warrant being redeemed
immediately after such adjustment. The Public Warrants may only be redeemed if
the Company has in effect a current Registration Statement or post-effective
amendment covering the shares underlying the Public Warrants and allowing the
resale of the shares by the holders thereof. The Public Warrant Holders may
exercise their Public Warrants between the Effective Date of The Notice and the
Redemption Date, such exercise being effective if done in accordance with
Section 2.02 (a), and if the Warrant Certificate, with form of election to
purchase duly executed and the Warrant Price, as applicable for such Public
Warrant subject to redemption for each share of Common Stock to be purchased is
actually received by the Warrant Agent at its office located at 2 Broadway New
York, New
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York 10004, no later than 5:00 P.M. New York Time on the Redemption Date.
(b) If any Public Warrant Holder does not wish to exercise any Public
Warrant being redeemed, the Warrant Holder should mail such Public Warrant to
the Warrant Agent at its office located at 2 Broadway New York, New York 10004,
after receiving the Redemption Notice required by this Section. If such
Redemption Notice shall have been so mailed, and if on or before the Effective
Date of the Notice all funds necessary to pay for redemption of all Public
Warrants then outstanding shall have been set aside by the Company in trust with
the Warrant Agent for the benefit of all Public Warrant Holders so as to be and
continue to be available therefor, then, on and after said Redemption Date,
notwithstanding that any Public Warrant subject to redemption shall not have
been surrendered for redemption, the obligation evidenced by all Public Warrants
not surrendered for redemption or effectively exercised shall be deemed no
longer outstanding, and all rights with respect thereto shall forthwith cease
and terminate, except only the right of the holder of each Public Warrant
subject to redemption to receive the Redemption Price for each share of Common
Stock to which he would be entitled if he exercised the Public Warrant upon
receiving the Redemption Notice of the Public Warrant subject to redemption held
by the Holder hereof.
(c) Notwithstanding anything contained in this Article II, the
Underwriter's Warrants shall not be eligible for redemption by the Company.
ARTICLE III
ADJUSTMENT OF SHARES OF COMMON STOCK PURCHASABLE
AND OF WARRANT PRICE
SECTION 3.01. In case the Company shall at any time after the date of this
Agreement (i) declare a dividend on the outstanding Common Stock in shares of
its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine
the outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock by reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then, in each case, the Warrant
Price, and the number and kind of shares of Common Stock receivable upon
exercise, in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination, or reclassification shall be
proportionately adjusted so that the holder of any Warrant exercised after such
time shall be entitled to receive the aggregate number and kind of shares which
if such warrant had been exercised immediately prior to such time, he would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination, or reclassification. Such adjustment shall
be made successively whenever any event listed above shall occur.
SECTION 3.02. In case the Company shall issue rights, options, or warrants
to holders of Common Stock entitling them to subscribe for or purchase Common
Stock (or securities convertible into or exchangeable for Common Stock) at a
price per share (or having a conversion
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price per share, if a security convertible into or exchangeable for Common
Stock) less than the "current market price" (as defined in Section 3.04 hereof)
per share of Common Stock on the record date established for the issuance of
such rights, options or warrants, then, in such case, the Warrant Price shall be
adjusted by multiplying the Warrant Price in effect on the record date of such
issuance by a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding on record date for such issuance plus the number of
shares of Common Stock which the aggregate offering price of the total number of
shares of Common Stock so to be issued (or the aggregate initial conversion
price of the convertible securities to be issued or sold) would purchase at such
"current market price" and of which the denominator shall be the number of
shares of Common Stock outstanding on the record date for such issuance plus the
number of additional shares of Common Stock to be issued (or into which the
convertible or exchangeable securities to be issued or sold are initially
convertible or exchangeable). Such adjustment shall become effective at the
close of business on such record date; provided, however, that, to the extent
the shares of Common Stock (or securities convertible to or exchangeable for
shares of Common Stock) are not delivered, the Warrant Price shall be readjusted
after the expiration of such rights, options, or warrants (but only with respect
to Warrants exercised after such expiration), to the Warrant Price which would
then be in effect had the adjustments made upon the issuance of such rights or
warrants been made upon the basis of delivery of only the number of shares of
Common Stock or securities convertible into or exchangeable for shares of Common
Stock) actually issued. In case any subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the board of
directors of the Company, whose determination shall be conclusive absent
manifest error. Shares of Common Stock owned by or held for the account of the
Company or any majority-owned subsidiary shall not be deemed outstanding for the
purpose of any such computation.
Notwithstanding the foregoing, no adjustment in the Warrant Price or the
number of shares of Common Stock issuable upon exercise of the Warrants shall be
made upon (i) the issuance of options (or upon exercise thereof) by the Company
pursuant to its 1998 Stock Option Plan or (ii) the issuance of the Underwriter's
Warrants.
SECTION 3.03. In case the Company shall distribute to holders of Common
Stock (including any such distribution made to the stockholders of the Company
in connection with a consolidation or merger in which the Company is the
continuing corporation) evidences of its indebtedness or assets (other then cash
dividends distributions and dividends payable in shares of Common Stock),
subscription rights, options, or warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock (excluding those referred to in Section 3.02 hereof), then, in each case,
the Warrant price shall be adjusted by multiplying the Warrant Price in effect
immediately prior to the record date for the determination of stockholders
entitled to receive such distribution by a fraction of which the numerator shall
be the "current market price" per share of Common Stock on such record date,
less the fair market value (as determined in good faith by the board of
directors of the Company, whose determination shall be conclusive absent
manifest error) of the portion of the evidences of indebtedness or assets so to
be distributed, or
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of such subscription rights, options, or warrants, convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock, applicable to the share, and of which the denominator shall be such
"current market price" per share of Common Stock. Such adjustment shall be made
whenever any such distribution is made, and shall become effective on the date
of such distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution.
SECTION 3.04. For the purpose of any computation under sections 3.02 and
3.03 hereof, the "current market price" per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices for the 20
consecutive trading days ending three (3) days prior to such date. The closing
price for each day shall be the last reported sales price regular way or, in
case no such reported sale takes place on such day, the closing bid price
regular way, in either case on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if the Common Stock
is not listed or admitted to trading on any national securities exchange, the
highest reported bid price as furnished by NASDAQ. If on any such date the
Common Stock is not quoted on NASDAQ or any such organization, the closing price
shall be deemed to be the average of the closing bid and asked prices in the
over-the-counter market as reported by the National Quotation Bureau or if no
such quotation is available, the fair value of the Common Stock on such date, as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error.
SECTION 3.05. No adjustment in the Warrant Price shall be required if such
adjustment is less than $.01; provided, however, that any adjustments which by
reason of this Section 3.05 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Article III shall be made to the nearest cent or to the nearest one-thousandth
of a share, as the case may be.
SECTION 3.06. In any case in which this Article III shall require that an
adjustment in the Warrant Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the holder of any Warrant exercised after such record date,
the shares, if any, issuable upon such exercise over and above the shares, if
any, issuable upon such exercise on the basis of the Warrant Price in effect
prior to such adjustment; provided, however, that the Company shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.
SECTION 3.07. Upon each adjustment of the Warrant Price as a result of the
calculations made in Section 3.01, 3.02, or 3.03 hereof, each Warrant
outstanding prior to the making of the adjustment in the Warrant Price shall
thereafter evidence the right to purchase, at the adjusted Warrant Price, that
number of shares (calculated to the nearest thousandth) obtained by dividing (A)
the product obtained by multiplying the number of shares purchasable upon
exercise of a Warrant prior to adjustment of the number of shares by the Warrant
Price in effect prior to adjustment of the Warrant Price by (B) the Warrant
Price in effect after such
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adjustment of the Warrant Price.
SECTION 3.08. In case of any capital reorganization of the Company, or of
any reclassification of the Common Stock (other than a reclassification of the
Common Stock referred to in Section 3.01 hereof), or in the case of the
consolidation of the Company with or the merger of the Company into any other
corporation or of the sale, transfer, or lease of the properties and assets of
the Company as, or substantially as, an entirety to any other corporation or
other entity, each Warrant shall after such capital reorganization,
reclassification of Common Stock, consolidation, merger, sale, transfer, or
lease, be exercisable, on the same terms and conditions specified in this
Agreement, for the number of shares of stock or other securities, assets, or
cash to which a holder of the number of shares purchasable (at the time of such
capital reorganization, reclassification of Common Stock, consolidation, merger,
sale, transfer, or lease) upon exercise of such Warrant would have been entitled
upon such capital reorganization, reclassification of Common Stock,
consolidation, merger, sale, transfer, or lease; and in any such case, if
necessary, the provisions set forth in this Article III with respect to the
rights and interests thereafter of the holders of the Warrants shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock other securities, assets, or cash thereafter deliverable
on the exercise of the Warrants. The subdivision or combination of shares of
Common Stock at any time outstanding into a greater or lesser number of shares
shall not be deemed to be a reclassification of the Common Stock for the
purposes of this subsection. The Company shall not effect any such
consolidation, merger, transfer, or lease, unless prior to or simultaneously
with the consummation thereof, the successor corporation (if other than the
Company) resulting from such consolidation or merger or the Corporation
purchasing, receiving, or leasing such assets or other appropriate corporation
or entity shall expressly assume, by written instrument in form satisfactory to
the Underwriter and duly executed and delivered to each holder of a Warrant, the
obligation to deliver to the holder of each Warrant such shares of stock,
securities, or assets as, in accordance with the foregoing provisions, such
holders may be entitled to purchase and to perform the other obligations of the
Company under this Agreement.
SECTION 3.09. The Company may make such reductions in the Warrant Price, in
addition to those required by this Article III, as it shall, in it sole
discretion, determine to be advisable.
ARTICLE IV
OTHER PROVISIONS RELATING TO RIGHTS OF
WARRANT HOLDERS
SECTION 4.01. No Warrant Holder, as such shall be entitled to vote or
receive dividends or be deemed the holder of shares of Common Stock for any
purposes, nor shall anything contained in any Warrant Certificate be construed
to confer upon any Warrant holder, as such, any of the rights of a shareholder
of the Company or any right to vote, give or withhold consent to any action by
the Company, whether upon any recapitalization, issue of stock,
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reclassification of stock, consolidation, merger, conveyance or otherwise,
receive dividends or subscription rights, or otherwise, until in connection with
the exercise of any Warrant, such Warrant shall have been surrendered and the
purchase price or the shares of Common Stock for which such Warrant is being
exercised shall have been received by the Warrant Agent; provided, however, that
any such surrender and payment on any date when the stock transfer books of the
Company shall be closed shall constitute the person or persons in whose name or
names the certificate or certificates for those shares of Common Stock are to be
issued as the record holder or holders thereof for all purposes at the opening
of business on the next succeeding day on which such stock transfer books are
open and the Warrant surrendered shall not be deemed to have been exercised, in
whole or in part, as the case maybe, until such next succeeding day on which
stock transfer books are open.
SECTION 4.02. The Company covenants and agrees that it shall
contemporaneously provide to all Warrant Holders of record any publication,
mailing or notice of an event which it shall provide to all of its shareholders
of record and which event shall result in the adjustment to the Warrant Price as
provided in Article III hereof. For purposes of this Section 4.02, the Warrant
Holders of record shall be those Warrant Holders who are of record on a date
even with the date chosen by the Company for the purpose of determining the
shareholders of record who shall be entitled to receive such publication,
mailing or notice.
SECTION 4.03. If any Warrant Certificate is lost, stolen, mutilated or
destroyed, the Company and the Warrant Agent may, on such terms as to indemnity
or otherwise as they may in their discretion reasonably impose, which shall, in
the case of a mutilated Warrant Certificate, include the surrender thereof,
issue a new Warrant Certificate of like denomination and tenor as, and in
substitution for, the Warrant Certificate so lost, stolen mutilated or
destroyed.
SECTION 4.04. (a) The Company covenants and agrees that at all times it
shall reserve and keep available for the exercise of outstanding Warrants such
number of authorized shares of Common Stock and the aggregate number and kind of
any other securities which the Warrants are exercisable for, pursuant to the
provisions of Article III hereof, as are sufficient to permit the exercise in
full of such Warrants and that it will make available to the Warrant Agent from
time to time a number of duly executed certificates representing shares of
Common Stock and other securities, sufficient therefor.
(b) The Company shall use its best efforts to secure the listing, upon
official notice of issuance, of the shares of Common Stock issuable upon
exercise of Warrants upon any securities exchange or NASDAQ upon which the
Common Stock becomes listed.
(c) The Company covenants that all shares of Common Stock issued on
exercise of Warrants shall be validly issued, fully paid, non-assessable and
free of preemptive rights.
(d) The Company has filed a Registration Statement on Form SB-2
(Registration No. __________) for the registration of, among other things, the
sale of the Warrants and the shares of Common Stock issuable upon exercise
thereof under the Securities Act of 1933, as
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amended (the "Act"). The Company shall use its best efforts to secure the
effectiveness of the Registration Statement under the Act, and to register or
qualify such Warrants and shares of Common Stock under the laws of any states in
which the sale of the Warrants and shares of Common Stock was registered or
qualified at the time of the IPO and shall use its reasonable good faith efforts
to register and qualify such Warrants and shares of Common Stock in such
additional states and jurisdictions as may be appropriate. The Company further
agrees to use its best efforts maintain the effectiveness of such Registration
Statement and such state qualifications, as aforesaid, by the filing of any and
all amendments to the Registration Statement and such state qualifications as
may be required from time to time under the Act or the laws of the various
states until the expiration or termination of all the Warrants in accordance
herewith.
(e) The Company will furnish to the Warrant Agent, upon request, an
opinion of counsel satisfactory to the Warrant Agent the effect that (i) a
Registration Statement under the Act is then in effect with respect to the
Warrants and shares of Common Stock issuable upon the exercise of the Warrants
and that the prospectus included therein complies as to form in all material
respects, (except as to financial statements, including schedules, and other
accounting and financial data, as to which such counsel need express no
opinion), with the requirements of the Act and the rules and regulations of the
Commission thereunder; or (ii) a Registration Statement under the Act with
respect to said shares of Common Stock is not required. In the event that said
opinion states that such a Registration Statement is in effect, the Company will
from time to time furnish the Warrant Agent with current prospectuses meeting
the requirements of the Act and such rules and regulations in sufficient
quantity to permit the Warrant Agent to deliver a prospectus ("Prospectus") to
each Warrant Holder upon exercise thereof. The Company further agrees to pay all
fees, costs and expenses in connection with the preparation and delivery to the
Warrant Agent of the foregoing opinions and Prospectuses and the above mentioned
registrations and other actions, and to immediately notify the Warrant Agent in
the event that (i) the Commission shall have issued or threatened to issue any
order preventing or suspending the use of any Prospectus; (ii) at any time any
Prospectus shall contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading; or (iii) for any reason it shall be necessary
to amend or supplement any Prospectus in order to comply with the Act.
SECTION 4.05. If the number of shares purchasable upon the exercise of each
Warrant is adjusted pursuant to Section 3.07 hereof, the Company shall not be
required to issue fractions of shares upon exercise of the Warrants or to
distribute share certificates which evidence fractional shares. In lieu of
fractional shares, there shall be paid to the registered holders of Warrant
Certificates at the time such Warrants are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of a
share. For purposes of this Section 4.05, the current market value of a share
issuable upon the exercise of a Warrant shall be the closing price of a share of
Common Stock, as determined pursuant to the second and third sentences of
Section 3.04, for the trading day immediately prior to the date of such
exercise.
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ARTICLE V
TREATMENT OF WARRANT HOLDERS
SECTION 5.01. Prior to due presentment for registration of transfer of any
Warrant, the Company and the Warrant Agent may deem and treat the Warrant Holder
as the absolute owner of such warrant, notwithstanding any notation of ownership
or other writing thereon, for the purpose of any exercise thereof and for all
other purposes, and neither the Company nor the Warrant Agent shall be affected
by any notice to the contrary.
ARTICLE VI
CONCERNING THE WARRANT AGENT
AND OTHER MATTERS
SECTION 6.01. The Company will from time to time promptly pay, subject to
the provisions of Section 2.02 (d) of this Agreement, all taxes and charges that
may be imposed upon the Company or the Warrant Agent in respect of the issuance
or delivery of shares of Common Stock upon the exercise of Warrants.
SECTION 6.02. (a) The Warrant Agent may resign and be discharged from its
duties under this Agreement upon sixty (60) days notice in writing, mailed to
the Company by registered or certified mail, and to each Warrant Holder. The
Company may remove the Warrant Agent or any successor warrant agent upon sixty
(60) days notice in writing, mailed to the Warrant Agent or successor Warrant
Agent, as the case may be, by registered or certified mail, and to each Warrant
Holder; provided, however, the Company shall appoint a new Warrant Agent as
hereinafter provided and such removal shall not become effective until a
successor Warrant Agent has been appointed and has accepted such appointment. If
the Warrant Agent shall resign or shall otherwise become capable of acting, the
Company shall appoint a successor to the Warrant Agent. If the Company shall
fail to make such appointment within a period of sixty (60) days after it has
been notified in writing of such resignation or incapability by the Warrant
Agent by a Warrant Holder, who shall, with such notice, submit his Warrant
Certificate for inspection by the Company, then any Warrant Holder may apply to
any court of competent jurisdiction or the appointment of a successor to the
Warrant Agent. Any successor Warrant Agent, whether appointed by the Company or
by such a court shall be a registered transfer agent, bank or trust company,
subject to the terms and conditions of this Section 6.02, in good standing and
incorporated under the laws of any State of the United States, having its
principal office in the United States of America. After appointment, the
successor Warrant Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed. The former Warrant Agent shall deliver and transfer to the
successor Warrant Agent any property at the time held by it hereunder and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Failure to give any notice provided for in this Section, however,
or any defect therein, shall not
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affect the legality or validity of the resignation or removal of the Warrant
Agent or the appointment of the successor Warrant Agent, as the case may be.
(b) Any corporation into which the Warrant Agent may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Warrant Agent, shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto. In case at
the time such successor to the Warrant Agent shall succeed to the agency created
by this Agreement, any of the Warrant Certificates shall have been countersigned
but not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent and deliver such Warrant
Certificates so countersigned, and in case at that time any of the Warrant
Certificates shall not have been countersigned, any successor to the Warrant
Agent may countersign such Warrant Certificate in its own name or in the name of
the successor Warrant Agent; and in all such cases such Warrant Certificates
shall have the full force provided in the Warrant Certificates and this
Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignature under this prior
name and deliver Warrant Certificates so countersigned; and in case at that time
any of the Warrant Certificates shall not have been countersigned, the Warrant
Agent may countersign such Warrant Certificates either in its prior name or in
its changed name; and in all such cases such Warrant Certificates shall have the
full force provided in the Warrant Certificates and in this Agreement.
SECTION 6.03. The Company agrees to pay the Warrant Agent the sum of
$_________ for all services rendered by it hereunder. The Company also agrees
to indemnify the Warrant Agent for, and to hold it harmless against, any loss,
liability or expense, incurred without gross negligence, willful misconduct or
bad faith on the part of the Warrant Agent, arising out of or in connection with
the acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the premises.
SECTION 6.04. The Company covenants and agrees that it shall, at the
Company's expense, provide to the Warrant Agent copies of its current
prospectus, if any, in such quantity as to enable the Warrant Agent to deliver
one copy of such current prospectus to such Warrant Holder who shall exercise
his rights under a Warrant. Notwithstanding anything else contained in this
Section 6.04, the Company shall not be obligated to provide copies of its
current prospectus for the purpose of allowing the Warrant Agent to deliver such
copies to any Warrant Holder who delivers all of his redeemable warrants for
redemption pursuant to Section 2.03 or who shall notice the Company of his
intent to permit redemption of all of his Warrants pursuant to Section 2.03
herein or to any person who shall hold any Warrant subject to the terms of this
Agreement after the earlier of the Redemption Date or the Last Exercise Date of
the Warrants.
SECTION 6.05. The Warrant Agent undertakes the duties and obligations
imposed by
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this Agreement upon the following terms and conditions, by all of which the
Company and the holders of Warrant certificates, by their acceptance thereof,
shall be bound:
(a) Whenever in the performance of its duties under this Agreement the
Warrant Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, that fact or matter, unless other evidence in respect thereof be
herein specifically prescribed, may be deemed to be conclusively proved and
established by a certificate signed by the President or the Secretary of the
Company and delivered to the Warrant Agent. That certificate shall be full
authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon that
certificate.
(b) The Warrant Agent shall be liable hereunder only for its own
negligence, willful misconduct or bad faith.
(c) The Warrant Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this agreement or in the Warrant
Certificates, except its countersignature thereof, or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(d) The Warrant Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof, except
the due execution hereof by the Warrant Agent, or in respect of the validity or
execution of any Warrant Certificate, except its countersignature thereof; nor
shall it be responsible for any Warrant Certificate; nor shall it be responsible
for the adjustment of the Warrant Price or the making of any change in the
number of shares of Common Stock required under the provisions of Article III of
this Agreement or responsible for the manner, method or amount of any such
change or the ascertaining of the existence of facts that would require any such
adjustment or change except with respect to the exercise of Warrant
Certificates after actual notice of any adjustment of the Warrant Price; nor
shall it by any act under this Agreement be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock to
be issued pursuant to this Agreement or any Warrant Certificate or as to whether
any share of Common Stock will when issued be validly issued, fully paid,
non-assessable and free of preemptive rights.
(e) The Warrant Agent and any shareholder, director, officer or
employee of the Warrant Agent may buy, sell or deal in any of the Warrant
Certificates or other securities of the Company to retain a pecuniary interest
in any transaction in which the Company may be interested or contract with or
lend money to or otherwise act as fully and freely as though it was not Warrant
Agent or subject to this Agreement. Nothing herein shall preclude
the Warrant Agent from acting in any other capacity for the Company or for any
other legal entity.
(f) The Warrant Agent is hereby authorized and directed to accept
instructions
14
<PAGE>
with respect to the performance of its duties hereunder from any officer or
assistant officer of the Company, and to apply to any such officer or assistant
officer for advice or instructions in connection with its duties, and shall not
be liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officer or
assistant officer.
(g) The Warrant Agent may consult with its counsel or other counsel
satisfactory to it, including counsel for the Company, and the opinion of such
counsel shall be full and complete authorization and protection in respect of
any action taken, offered, or omitted by it hereunder in good faith and in
accordance with the opinion of such counsel.
(h) The Warrant Agent shall incur no liability to the Company or to
any holder of any Warrant for any action taken by it in reliance upon any
Warrant Certificate or certificate for Common Stock, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed, and where necessary, certified or
acknowledged, by the proper person or persons.
SECTION 6.06. The Warrant Agent may, without the consent or concurrence of
the Warrant Holders, by supplemental agreement or otherwise, concur with the
Company in making any changes or corrections in this Agreement that (i) it shall
have been advised by counsel, who may be counsel for the Company, are required
to cure any ambiguity or to correct any defective or inconsistent provision or
clerical omission or mistake or manifest error herein contained, or (ii) as
provided in Section 3.09, the Company deems necessary of advisable and which
shall not be inconsistent with the provisions of the Warrant Certificates,
provided such changes or corrections do not adversely affect the privileges or
immunities of the Warrant Holders.
SECTION 6.07. All the covenants and provisions of this Agreement by or for
the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective
successors and assigns hereunder.
SECTION 6.08. Forthwith upon the appointment after the date thereof of any
transfer agent for the Common Stock, or of any subsequent transfer agent for the
Common Stock, the Company will file with the Warrant Agent a statement setting
forth the name and address of such transfer agent.
SECTION 6.09. Notice or demand pursuant to this Agreement to be given or
made by the Warrant Agent or by any Warrant Holder to or on the Company shall be
sufficiently given or made and effective on the third business day after posting
thereof, unless otherwise provided in this Agreement, if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing by
the Company with the Warrant Agent) as follows:
Able Energy, Inc.
344 Route 46
15
<PAGE>
Rockaway, NJ 07866
Attn: Timothy Harrington, Chief Executive Officer
notice or demand pursuant to this Agreement to be given or made by the Company
or any Warrant Holder to or on the Warrant Agent shall be sufficiently given or
made and effective on the third business day after posting thereof, unless
otherwise provided in this Agreement, if sent by first-class mail, postage
prepaid, addressed until another address is filed in writing by the Warrant
Agent with the Company) as follows:
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
Attn: Compliance Department
notice or demand pursuant to this Agreement to be given or made by the Company
or the Warrant Agent to or on the Underwriter shall be sufficiently given or
made and effective on the third business day after posting thereof, unless
otherwise provided in this Agreement, if sent by first-class mail, postage
prepaid, addressed until another address is filed in writing by the Underwriter
with the Company) as follows:
Walsh Manning Securities, Inc.
90 Broad Street
New York, NY 10004
Attn: Theodore Burns
notice or demand pursuant to this Agreement to be given or made by the Company
or the Warrant Agent to or on any Warrant Holder shall be sufficiently given or
made and effective on the third business day after posting thereof, unless
otherwise provided in this Agreement, if sent by first-class mail, postage
prepaid, addressed to such Warrant Holder at his last known address as it shall
appear in the records of the Company, if such notice shall be given by the
Company, or, if such notice shall be given by the Warrant Agent, as it shall
appear on the register maintained by the Warrant Agent.
A copy of any Notice or demand given or made pursuant to this Agreement on
the Warrant Agent, Company or Underwriter shall be promptly forwarded by the
recipient thereof to each of the Company, Warrant Agent or Underwriter who shall
not have received or made such demand or notice.
SECTION 6.10. The validity, interpretation and performance of this
Agreement and the Warrants shall be governed by the law of the State of New
York. (b) The Company and the Placement Agent: (a) agree that any legal suit,
action or proceeding arising out of or relating to this Agreement shall be
instituted exclusively in New York State Supreme Court, County of New York, or
in the United States District Court for the Southern District of New York, (b)
waive any objection which they may have now or hereafter to the venue of any
such suit, action or
16
<PAGE>
proceeding, and (c) irrevocably consent to the jurisdiction of the New York
State Supreme Court, County of New York and the United States District Court for
the Southern District of New York in any such suit, action or procedure. Each
of the Company and the Placement Agent further agrees to accept and acknowledge
service of any and all process which may be served in any suit, action or
proceeding in the New York State Supreme Court for the Southern District of New
York, and agree that service of process upon them mailed by certified mail to
their respective addresses shall be deemed in every respect effective service of
process in any such suit, action or proceeding. In the event of litigation
between the parties arising hereunder, the prevailing party shall be entitled to
costs and reasonable attorney's fees.
SECTION 6.11. Nothing in this Agreement shall be construed to give to any
person or corporation other than the parties hereto and the Warrant Holders any
right, remedy or claim under promise or agreement hereof. All covenants,
conditions, stipulations, promises and agreements contained in this Agreement
shall be for the sole and exclusive benefit of the Company and the Warrant Agent
and their successors and of the Warrant Holders, and their heirs,
representatives, successors, assigns and transferees.
SECTION 6.12. A copy of this Agreement shall be available for inspection by
any Warrant Holder during the regular business hours and at the corporate office
of the Warrant Agent in New York, New York, at which time the Warrant Agent may
require any Warrant Holder to submit his Warrant Certificate for inspection by
it.
SECTION 6.13. This Agreement shall terminate on the Last Exercise Date, or
such earlier date upon which all Warrants have been exercised or redeemed,
except that the Warrant Agent shall account to the Company pursuant to Section
2.02 (e) of this Agreement for all cash held by it. The provisions of Section
6.03 and 6.04 of this Agreement shall survive such termination.
SECTION 6.14. The Article headings in this Agreement are for
convenience only and are not part of this Agreement and shall not
affect the interpretation thereof.
SECTION 6.15. This Agreement may be executed in any number counterparts,
each of which is so executed shall be deemed to be an original, and all such
counterparts shall together constitute but one and the same agreement.
ATTEST: ABLE ENERGY, INC.
BY:
-------------------------------------------
Timothy Harrington, Chief Executive Officer
CONTINENTAL STOCK TRANSFER & TRUST CO.
BY:
-------------------------------------------
Name:
Title:
17
<PAGE>
Exhibit 10.1
WALSH MANNING SECURITIES, INC.
90 BROAD STREET
NEW YORK, NY 10004
________, 1998
Able Energy Inc.
344 Route 46
Rockaway, NJ 07866
Attention: Timothy Harrington, Chief Executive Officer
Gentlemen:
This letter, when executed by the parties hereto, will constitute an
agreement between Able Energy, Inc. (the "Company") and Walsh Manning
Securities, Inc. ("Walsh") pursuant to which the Company agrees to retain Walsh
and Walsh agrees to be retained by the Company under the terms and conditions
set forth below.
1. The Company hereby retains Walsh to perform consulting services
related to corporate finance and other financial services matters, and Walsh
hereby accepts such retention. In this regard, subject to the terms set forth
below, Walsh shall furnish to the Company advice and recommendations with
respect to such aspects of the business and affairs of the Company as the
Company shall, from time to time, reasonably request upon reasonable notice. In
addition, Walsh shall hold itself ready to assist the Company in evaluating and
negotiating particular contracts or transactions, if requested to do so by the
Company, upon reasonable notice.
2. As compensation for the services described in paragraph 1 above,
the Company shall pay to Walsh a fee of $166,000, for the full term of 24
months, payable in full in advance on the date hereof. In addition to its
compensation hereunder, the Company will reimburse Walsh for any and all
reasonable expenses incurred by Walsh in the performance of its duties
hereunder, and Walsh shall account for such expenses to the Company. Such
reimbursement shall accumulate and be paid monthly. Nothing contained herein
shall prohibit Walsh from receiving any additional compensation under paragraphs
3 and 4 herein or otherwise.
<PAGE>
3. In addition, Walsh shall hold itself ready to assist the Company
in evaluating and negotiating particular contracts or transactions, if requested
to do so by the Company, upon reasonable notice, and will undertake such
evaluations and negotiations upon prior written agreement as to additional
compensation to be paid by the Company to Walsh with respect to such evaluations
and negotiations.
4. The Company and Walsh further acknowledge and agree that Walsh
may act as a finder or financial consultant in various business transactions in
which the Company may be involved, such as mergers, acquisitions or joint
ventures. The Company hereby agrees that if in the event Walsh shall first
introduce to the Company another party or entity, and that as a result of such
introduction, a transaction is consummated, the Company shall pay to Walsh a fee
equal to five percent of the first $1 million, four percent of the next $1
million, three percent of the next $1 million, two percent of the next $1
million and one percent thereafter of the consideration involved in
non-financing related transactions (including mergers, acquisitions, joint
ventures and other business transactions) consummated by the Company with a
party introduced to the Company by Walsh. Such fee shall be paid in cash at the
closing of the transaction to which it relates, and shall be payable whether or
not the transaction involves stock, or a combination of stock and cash, or is
made on the installment sale basis. In addition, if the Company shall, within
12 months immediately following the termination of this Agreement, consummate a
transaction with any party first introduced by Walsh to the Company prior to
such termination, the Company shall pay to Walsh a fee with respect to such
transaction calculated in accordance with this paragraph.
5. All obligations of Walsh contained herein shall be subject to
Walsh's reasonable availability for such performance, in view of the nature of
the requested service and the amount of notice received. Walsh shall devote
such time and effort to the performance of its duties hereunder as Walsh shall
determine is reasonably necessary for such performance. Walsh may look to such
others for such factual information, investment recommendations, economic advice
and/or research, upon which to base its advice to the Company hereunder, as it
shall deem appropriate. The Company shall furnish to Walsh all information
relevant to the performance by Walsh of its obligations under this Agreement, or
particular projects as to which Walsh is acting as advisor, which will permit
Walsh to know all facts material to the advice to be rendered, and all material
or information reasonably requested by Walsh. In the event that the Company
fails or refuses to furnish any such material or information reasonably
requested by Walsh, and thus prevents or impedes Walsh's performance hereunder,
any inability of Walsh to perform shall not be a breach of its obligations
hereunder.
<PAGE>
6. Nothing contained in this Agreement shall limit or restrict the
right of Walsh or of any partner, employee, agent or representative of Walsh, to
be a partner, director, officer, employee, agent or representative of, or to
engage in, any other business, whether of a similar nature or not, nor to limit
or restrict the right of Walsh to render services of any kind to any other
corporation, firm, individual or association.
7. Walsh will hold in confidence any confidential information which
the Company provides to Walsh pursuant to this Agreement unless the Company
gives Walsh permission in writing to disclose such confidential information to a
specific third party. In addition, all confidential information which the
Company provided to Walsh in connection with its initial public offering shall
be considered confidential information for purposes of this Agreement.
Notwithstanding the foregoing, Walsh shall not be required to maintain
confidentiality with respect to information (i) which is or becomes part of the
public domain; (ii) of which it had independent knowledge prior to disclosure;
(iii) which comes into the possession of Walsh in the normal and routine course
of its own business from and through independent non-confidential sources; or
(iv) which is required to be disclosed by Walsh by governmental requirements.
If Walsh is requested or required (by oral questions, interrogatories, requests
for information or document subpoenas, civil investigative demands, or similar
process) to disclose any confidential information supplied to it by the Company,
or the existence of other negotiations in the course of its dealings with the
Company or its representatives, Walsh shall, unless prohibited by law, promptly
notify the Company of such request(s) so that the Company may seek an
appropriate protective order.
8. The Company agrees to indemnify and hold harmless Walsh, its
partners, employees, agents, representatives and controlling persons (and the
officers, directors, employees, agents, representatives and controlling persons
of each of them) from and against any and all losses, claims, damages,
liabilities, costs and expenses (and all actions, suits, proceedings or claims
in respect thereof) and any legal or other expenses in giving testimony or
furnishing documents in response to a subpoena or otherwise (including, without
limitation, the cost of investigating, preparing or defending any such action,
suit, proceeding or claim, whether or not in connection with any action, suit,
proceeding or claim in which Walsh is a party), as and when incurred, directly
or indirectly, caused by, relating to, based upon or arising out of Walsh's
service pursuant to this Agreement. The Company further agrees that Walsh shall
incur no liability to the Company or any other party on account of this
Agreement or any acts or omissions arising out of or related to the actions of
Walsh relating to this Agreement or the performance or failure to perform any
services under this Agreement except for Walsh's intentional or willful
misconduct. This paragraph shall survive the termination of this Agreement.
<PAGE>
9. This Agreement may not be transferred, assigned or delegated by
any of the parties hereto without the prior written consent of the other party
hereto.
10. The failure or neglect of the parties hereto to insist, in any
one or more instances, upon the strict performance of any of the terms or
conditions of this Agreement, or their waiver of strict performance of any of
the terms or conditions of this Agreement, shall not be construed as a waiver or
relinquishment in the future of such term or condition, but the same shall
continue in full force and effect.
11. This Agreement is for a term of twenty-four (24) months and may
not be terminated by the Company. This Agreement may be terminated by Walsh at
any time upon 30 days' notice; provided Walsh shall repay any portion of their
fee which was not earned on the effective date of such termination ($7,500
multiplied by the number of months remaining in this agreement). Paragraphs 4,
7 and 8 shall survive the expiration or termination of this Agreement under all
circumstances.
12. Any notices hereunder shall be sent to the Company and to Walsh
at their respective addresses set forth above. Any notice shall be given by
registered or certified mail, postage prepaid, and shall be deemed to have been
given when deposited in the United States mail. Either party may designate any
other address to which notice shall be given, by giving written notice to the
other of such change of address in the manner herein provided.
13. This Agreement has been made in the State of New York and shall
be construed and governed in accordance with the laws thereof without giving
effect to principles governing conflicts of law.
14. This Agreement contains the entire agreement between the parties,
may not be altered or modified, except in writing and signed by the party to be
charged thereby, and supersedes any and all previous agreements between the
parties relating to the subject matter hereof.
15. This Agreement shall be binding upon the parties hereto, the
indemnified parties referred to in Section 7, and their respective heirs,
administrators, successors and permitted assigns.
4
<PAGE>
If you are in agreement with the foregoing, please execute two copies
of this letter in the space provided below and return them to the undersigned.
Very truly yours,
WALSH MANNING SECURITIES, INC.
By:
---------------------------------
An Authorized Representative
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST ABOVE WRITTEN
ABLE ENERGY, INC.
By:
-----------------------------
Timothy Harrington
Chief Executive Officer
5
<PAGE>
This Lease Agreement, made the day of 1994,
Between
Landlord
CHARLES BIRDSALL
residing or located at R.D. 1, Box 153B, New Ringgold, PA 17960 in the
of in the County of and
State of , herein designated as the LandLord,
And
Tenant
ABLE OIL, INC.
about to reside at or located at 344 Route
46 in the Township of Rockaway, in the County of Morris and State of New Jersey,
herein designated as the Tenant;
Premises
Witnesseth that, the Landlord does hereby lease to the Tenant and the
Tenant does hereby rent from the Landlord, the following described premises:
Lot 19, Block 84, the Tax Map of the Township of Rockaway commonly known as 344
Route 46, Rockaway, New Jersey consisting of two buildings, a portion of which
is to be used by the Tenant, the long bay parking garage in the first building,
and the parking area around the premises, the lower portion of the rear
building, and storage of fuel in the fuel tanks.
Term
for a term of commencing on 19 , and ending
on 19 to be used and occupied only and for no other purpose than
Use
storage and delivery of fuel oils, storage of vehicles and office space.
Upon the following Conditions and Covenants:
1st: The Tenant covenants and agrees to pay to the Landlord, as rent for
and during the term hereof, the sum of in
the following manner:
Payment of Rent
ONE THOUSAND TWO HUNDRED DOLLARS AND 00/100 ($1,200.00) per month plus 1(cent)
per gallon for the use of the tank facilities and rack.* Landlord and tenant
further agree that for any sub-parking on the premises the parties shall split
the rental fee 50/50. *l(cent) per gallon through put, as per monthly rack meter
reading.
Repairs and Care
2nd: The Tenant has examined the premises and has entered into this lease
without any representation on the part of the Landlord as to the condition
thereof. The Tenant shall take good care of the promises and shall at the
Tenant's own cost and expense, make all repairs, including painting and
decorating, and shall maintain the premises in good condition and state of
repair, and at the end or other expiration of the term hereof, shall deliver up
the rented premises in good order and condition, wear and tear from a reasonable
use thereof, and damage by the elements not resulting from the neglect or fault
of the Tenant, excepted. The Tenant shall neither encumber nor obstruct the
sidewalks, driveways, yards, entrances, hallways and stairs, but shall keep and
maintain the same in a clean condition, free from debris, trash, refuse, snow
and ice. See Rider attached.
Compliance with Laws etc.
3rd: The Tenant shall promptly comply with all laws, ordinances, rules,
regulations, requirements and directives of the Federal, State and Municipal
Governments or Public Authorities and of all their departments, bureaus, and
subdivisions, applicable to and affecting the said premises, their use and
occupancy, for the correction, prevention and abatement of nuisances, violations
or other grievances in, upon or connected with the said premises, during the
term hereof; and shall promptly comply with all orders, regulations,
requirements and directives of the Board of Fire Underwriters or similar
authority and of any insurance companies which have issued or are about to issue
policies of insurance covering the said premises and its contents, for the
prevention of fire or other casualty, damage or injury, at the Tenant's own cost
and expense.
Assignment
4th: The Tenant shall not assign, mortgage or hypothecate this lease, nor
sublet or sublease the premises or any part thereof; nor occupy or use the
leased premises or any part thereof, nor permit or suffer the same to be
occupied or used for any purposes other that as herein limited, nor for any
purpose deemed unlawful, disreputable, or extra hazardous, on account of fire or
other casualty. The landlord shall not unreasonably withhold his consent to any
subletting of said premises.
Alterations Improvements
5th: No alterations, additions, or improvements shall be made, and no
climate regulating, air conditioning, cooling, heating or sprinkler systems,
television or radio antennaes, heavy equipment, apparatus and fixtures, shall be
installed in or attached to the leased premises, without the written consent of
the Landlord. Unless otherwise provided herein, all such alterations, additions
or improvements and systems, when made, installed in or attached to the said
premises, shall belong to and become the property of the Landlord and shall be
surrendered with the premises and as part thereof upon the expiration or sooner
termination of this lease, without hindrance, molestation or injury.
Fire and other Casualty
6th: In case of fire or other casualty, the Tenant shall give immediate
notice to the Landlord. If the premises shall be partially damaged by fire, the
elements or other casualty, the Landlord shall repair the same as speedily as
practicable, but the Tenant's obligation to pay the rent hereunder shall not
cease. If, in the opinion of the Landlord, the premises be so extensively and
substantially damaged as to render them untenantable, then the rent shall cease
until such time as the premises shall be made tenantable by the Landlord. In no
event, however, shall the provisions of this clause become effective or be
applicable, if the fire or other casualty and damage shall be the result of the
carelessness, negligence or improper conduct of the Tenant or the Tenant's
agents, employees, guests, licensees, invitees, subtenants, assignees or
successors. In such case, the Tenant's liability for the payment of the rent and
the performance of all the covenants, conditions and terms hereof on the
Tenant's part to be performed shall continue and the Tenant shall be liable to
the Landlord for the damage and loss suffered by the Landlord. If the Tenant
shall have been insured against any of the risks herein covered, then the
proceeds of such insurance shall be paid over to the Landlord to the extent of
the Landlord's costs and expenses to make the repairs hereunder, and such
insurance carriers shall have no recourse against the Landlord for
reimbursement.
Inspection and Repair
7th: The Tenant agrees that the Landlord and the Landlord's agents,
employees or other representatives, shall have the right to enter into and upon
the said premises or any part thereof, at all reasonable hours, for the purpose
of examining the same or making such repairs or alterations therein as may be
necessary for the safety and preservation thereof. This clause shall not be
deemed to be a covenant by the Landlord nor be construed to create an obligation
on the part of the Landlord to make such inspection or repairs.
Right to Exhibit
8th: The Tenant agrees to permit the Landlord and the Landlord's agents,
employees or other representatives to show the premises to persons wishing to
rent or purchase the same, and Tenant agrees that on and after 3 months next
preceding the expiration of the term hereof, the Landlord or the Landlord's
agents, employees or other representatives shall have the right to place notices
on the front of said premises or any part thereof, offering the premises for
rent or for sale; and the Tenant hereby agrees to permit the same to remain
thereon without hindrance or molestation.
<PAGE>
Glass, etc. Damage Repairs
[ILLEGIBLE] of or any damage to the glass in the leased premises, or the
destruction or damage of any kind whatsoever to the said premises, caused by the
carelessness, negligence or improper conduct on the part of the Tenant or the
Tenant's [ILLEGIBLE] employees, guests licensees, invitees, subtenants,
assignees or successors, the Tenant shall repair the said damage [ILLEGIBLE]
replace or restore any destroyed parts of the premises, as [ILLEGIBLE] as
possible, at the Tenant's own cost and expense.
Signs
10th: The Tenant shall not place nor allow to be placed any signs of any
kind whatsoever, upon, in or about the said premises or any part thereof, except
of a design and structure and in or at such places as may be indicated and
consented to by the Landlord in writing. In case the Landlord or the Landlord's
agents, employees or representatives shall deem it necessary to remove any such
signs in order to paint or make any repairs, alternations or improvements in or
upon said premises or any part thereof, they may be so removed, but shall be
replaced at the Landlord's expense when the said repairs, alterations or
improvements shall have been completed. Any signs permitted by the Landlord
shall at all times conform with all municipal ordinances or other laws and
regulations applicable thereto.
Non-Liability of Landlord
11th: The Landlord shall not be liable for any damage or injury which may
be sustained by the Tenant or any other person, as a consequence of the failure,
breakage, leakage or obstruction of the water, plumbing, steam, sewer, waster or
soil pipes, roof, drains, leaders, gutters, valleys, downsprouts or the like or
of the electrical, gas, power, conveyor, refrigeration, sprinkler,
airconditioning or heating systems, elevators or hoisting equipment; or by
reason of the elements; or resulting from the carelessness, negligence or
improper conduct on the part of any other Tenant or of the Landlord or the
Landlord's or this or any other Tenant's agents, employees, guests, licensees,
invitees, subtenants, assignees or successors; or attributable to any
interference with, interruption of or failure, beyond the control of the
landlord, of any services to be furnished or supplied by the Landlord.
Mortgage Priority
Security
13th: The Tenant has this day deposited with the Landlord the sum of
_______ as security for the payment of the rent hereunder and the full and
faithful performance by the Tenant of the convenants and conditions on the part
of the Tenant to be performed. Said sum shall be returned to the Tenant, without
interest, after the expiration of the term hereof, provided that the Tenant has
fully and faithfully performed all such convenants and conditions and is not in
arrears in rent. During the term hereof, the Landlord may, if the Landlord so
elects, have recourse to such security, to make good any default by the Tenant,
in which event the Tenant shall, on demand, promptly restore said security to
its original amount. Liability to repay said security to the Tenant shall run
with the reversion and title to said premises, whether any change in ownership
thereof be by voluntary alienation or as the result of judicial sale,
foreclosure or other proceedings, or the exercise of a right of taking or entry
by any mortgagee. The Landlord shall assign or transfer said security, for the
benefit of the Tenant, to any subsequent owner or holder of the reversion or
little to said premises, in which case the assignee shall become liable for the
repayment thereof as herein provided, and the assignor shall be deemed to be
released by the Tenant from all liability to return such security. This
provision shall be applicable to every alienation or change in title and shall
in no wise be deemed to permit the Landlord to retain the security after
termination of the Landlord's ownership of the reversion or title. The Tenant
shall not mortgage, encumber or assign said security without the written consent
of the Landlord.
Increase of Insurance Rates
14th: If for any reason it shall be impossible to obtain fire and other
hazard insurance on the buildings and improvements on the leased premises, in an
amount and in the form and in insurance companies acceptable to the Landlord,
the Landlord may, if the Landlord so elects at any time thereafter, terminate
this lease and the term hereof, upon giving to the Tenant fifteen days notice in
writing of the Landlord's intention so to do, and upon the giving of such
notice, this lease and the term thereof shall terminate. If by reason of the use
to which the premises are put by the Tenant or character of or the manner in
which the Tenant's business is carried on, the insurance rates for fire and
other hazards shall be increased, the Tenant shall upon demand, pay to the
Landlord, as rent, the amounts by which the premiums for such insurance are
increased. Such payment shall be paid with the next installment of rent but in
no case later than one month after such demand, whichever occurs sooner.
Utilities
15th: The Tenant shall pay when due all rents or charges for water or
other utilities used by the Tenant, which are or may be assessed or imposed upon
the leased premises or which are or may be charged to the Landlord by the
suppliers thereof during the term hereof, and if not paid, such rents or charges
shall be added to and become payable as additional rent with the installment of
rent next due or within 30 days of demand therefor, whichever occurs sooner.
Condemnation Eminent Domain
16th: If the land and premises leased herein, or of which the leased
premises are a part, or any portion thereof, shall be taken under eminent domain
or condemnation proceedings, or if suit or other action shall be instituted for
the taking or condemnation thereof, or if in lieu of any formal condemnation
proceedings or actions, the Landlord shall grant an option to purchase and or
shall sell and convey the said premises or any portion thereof, to the
governmental or other public authority, agency, body or public utility, seeking
to take said land and premises or any portion thereof, then this lease, at the
option of the Landlord, shall terminate, and the term hereof shall end as of
such date as the Landlord shall fix by notice in writing; and the Tenant shall
have no claim or right to claim or be entitled to any portion of any amount
which may be awarded as damages or paid as the result of such condemnation
proceedings or paid as the purchase price for such option sale or conveyance in
lieu of formal condemnation proceedings; and all rights of the tenant to
damages, if any, are hereby assigned to the Landlord. The Tenant agrees to
execute and deliver any instruments, at the expense of the Landlord, as may be
deemed necessary or required to expedite any condemnation proceedings or to
effectuate a proper transfer of title to such governmental or other public
authority, agency, body or public utility seeking to take or acquire the said
lands and premises or any portion thereof. The Tenant covenants and agrees to
vacate the said premises, remove all the Tenant's personal property therefrom
and deliver up peaceable possession thereof to the Landlord or to such other
party designated by the Landlord in the aforementioned notice. Failure by the
Tenant to comply with any provisions in this clause shall subject the Tenant to
such costs, expenses, damages and losses as the Landlord may incur by reason of
the Tenant's breach hereof.
Remedies upon Tenant's Default
17th: If there should occur any default on the part of the Tenant in the
performance of any conditions and convenants herein contained, or if during the
term hereof the premises or any part thereof shall be or become abandoned or
deserted, vacated or vacant, or should the Tenant be evicted by summary
proceedings or otherwise, the Landlord, in addition to any other remedies herein
contained or as may be permitted by law, may either by force or otherwise,
without being liable for prosecution therefor, or for damages, re-enter the said
premises and the same have and again possess and enjoy; and as agent for the
Tenant or otherwise, re-let the premises and receive the rents therefor and
apply the same, first to the payment of such expenses, reasonable attorney fees
and costs, as the Landlord may have been put to in re-entering and repossessing
the same Tenant shall remain liable for such rents as may be in arrears and also
the rents as may accrue subsequent to the re-entry by the Landlord, to the
extent of the difference between the rents reserved hereunder and the rents, if
any, received by the Landlord during the remainder of the unexpired term hereof,
after deducting the aforementioned expenses, fees and costs; the same to be paid
as such deficiencies arise and are ascertained each month.
Termination of Default
18th: Upon the occurrence of any of the contingencies set forth in the
preceding clause, or should the Tenant be adjudicated a bankrupt, insolvent or
placed in receivership, or should proceedings be instituted by or against the
Tenant for the estate of the Tenant hereunder shall pass to another by virtue of
any court proceedings, writ of execution, levy, sale, or by operation of law,
the Landlord may, if the Landlord so elects, at any time thereafter, terminate
this lease and the term hereof, upon giving to the Tenant or to any trustee,
receiver, assignee or other person in charge of or acting as custodian of the
assets or property of the Tenant, five days notice in writing, of the Landlord's
intention so to do. Upon the giving of such notice, this lease and the term
hereof shall end on the date fixed in such notice as if the said date was the
date originally fixed in this lease for the expiration hereof; and the Landlord
shall have the right to remove all persons, goals, fixtures and chattels
therefrom, by force or otherwise, without liability for damages.
Removal of Tenant's Property
19th: Any equipment, fixtures, goods or other property of the Tenant, not
removed by the Tenant upon the termination of this lease, or upon any quitting,
vacating or abandonment of the premises by the Tenant, or upon the Tenant's
eviction, shall be considered as abandoned and the Landlord shall have the
right, without any notice to the Tenant, to sell or otherwise dispose of the
same, at the expense of the Tenant, and shall not be accountable to the Tenant
for any part of the proceeds of such sale, if any.
Reimbursement of Landlord
20th: If the Tenant shall fail or refuse to comply with and perform any
conditions and covenants of the within lease, the Landlord may, if the Landlord
so elects, carry out and perform such conditions and convenants, at the cost and
expense of the Tenant, and the said cost and expense shall be payable on demand,
or at the option of the Landlord shall be added to the installment of rent due
immediately thereafter but in no case later than one month after such demand,
whichever occurs sooner, and shall be due and payable as such. This remedy shall
be in addition to such other remedies as the Landlord may have hereunder by
reason of the breach by the Tenant of any of the covenants and conditions in
this lease contained.
Non-Performance by Landlord
21st: This lease and the obligation of the Tenant to pay the rent
hereunder and to comply with the covenants and conditions hereof, shall not be
affected, curtailed, impaired or excused, because of the Landlord's inability to
supply any service or material called for herein, by reason of any rule, order,
regulation or preemption by any governmental entity, authority, department,
agency or subdivision or for any delay which may arise by reason of negotiations
for the adjustment of any fire or other casualty loss or because of strikes or
other labor trouble or for any cause beyond the control of the Landlord.
Validity of Lease
22nd: The terms, conditions, covenants and provisions of this lease shall
be deemed to be severable. If any clause of provision herein contained shall be
adjudged to be invalid or unenforceable by a court of competent jurisdiction or
by operation of any applicable law, it shall not affect the validity of any
other clause or provision herein, but such other clauses or provisions shall
remain, in full force and effect.
Non-Waiver by Landlord
[ILLEGIBLE] remedies, options and elections of the Landlord, expressed
herein, are cumulative, and the failure of the Landlord to enforce strict
performance by the Tenant of the conditions and convenants of this lease or to
exercise any electic option or to resort or have recourse to any remedy herein
contained or the acceptance by the Landlord of any installment [ILLEGIBLE] after
any breach by the Tenant, in any one or more [ILLEGIBLE] shall not be construed
or deemed to be a waiver or a [ILLEGIBLE] for the future by the Landlord of any
such [ILLEGIBLE] and covenants, options, elections or remedies, but the same
shall continue in full force and effect.
Notices
24th: All notices, required under the terms of this lease shall be given
and shall be complete by mailing such notices by certified or registered mail,
return receipt requested, to the address of the parties as shown at the head of
this lease, or to such other address as may be designated in writing, which
notice of change of address shall be given in the same manner.
Title and Quiet Enjoyment
25th: The Landlord covenants and represents that the Landlord is the owner
of the premises herein leased and has the right and authority to enter into,
execute and deliver this lease; and does further covenant that the Tenant on
paying the rent and performing the conditions and covenants herein contained,
shall and may peaceably and quietly have, hold and enjoy the leased premises for
the term aforementioned.
Entire Contract
26th: This lease contains the entire contract between the parties. No
representative, agent or employee of the Landlord has been authorized to make
any representations or promises with reference to the within letting or to vary,
alter or modify the terms hereof. No additions, changes or modifications,
renewals or extension hereof, shall be binding unless reduced to writing and
signed by the Landlord and the Tenant.
Conformation with Laws and Regulations
The Landlord may pursue the relief or remedy sought in any invalid clause,
by conforming the said clause with the provisions of the statues or the
regulations of any governmental agency in such case made and provided as if the
particular provisions of the applicable statutes or regulations were set forth
herein at length.
In all references herein to any parties, persons, entities or corporations
the use of any particular gender or the plural or singular number is intended to
include the appropriate gender or number as the text of the within instrument
may require. All the terms, convenants and conditions herein contained shall be
for and shall inure to the benefit of and shall bind the respective parties
hereto, and their heirs, executors, administrators, personal or legal
representatives, successors and assigns.
In Witness Whereof, the parties hereto have hereunto set their hands and
seals, or caused these presents to be signed by their proper corporate officers
and their proper corporate seal to be hereto affixed, the day and year first
above written.
Signed, Sealed and Delivered
in the presence of
or Attested by ----------------------------
CHARLES BIRDSALL Landlord
- ----------------------------
-----------------------------
ABLE OIL, INC. Tenant
TIMOTHY HARRINGTON, President
<PAGE>
RIDER TO CONTRACT
BETWEEN CHARLES BIRDSALL AND ABLE OIL, INC.
1. In reference to repairs to the premises, the Landlord and Tenant agree that
the Tenant shall paint the 600,000 gallon tanks and the cost of such painting
and repair will be split 50/50 with the Landlord.
2. Landlord agrees to be responsible for maintaining the tanks and the tank
equipment. The remaining portion of the existing property shall be maintained by
the Tenant. All repairs necessary for the tanks and the tank equipment shall be
the responsibility and paid for by the Landlord.
3. It is understood that the Tenant shall allow a certain amount of parking for
the existing tenants at the rear building specifically for the employees of said
Tenant. The Tenant herein shall be responsible for maintaining and paying for
all electrical, heat, and water, and other utilities used on the premises.
Tenant shall make arrangements with any other tenants for a pro rata share of
the expense of the utilities. Tenant agrees to maintain the property and remove
the snow when necessary.
4. A clarification of the actual space to be used by the Tenant shall be the
lover portion of the rear building, the long bay garage in the front building,
all the property except the parking at the front building required by the
tenants of the front building and all other available parking except for the
existing tenant at the rear building for their secretaries and other help for
said Tenant.
5. When Tenant takes possession of the premises, Tenant shall be deemed to have
accepted the premises as being satisfactory and in good condition as of the date
of such possession, except for the latent defects, minor details of
construction, decoration, and the mechanical adjustment, and any items set forth
on an environmental report to be supplied to the Tenant. Tenant is accepting the
premises subject to the existence of said environmental report and it is agreed
between the parties that the Tenant shall not be responsible for any of the
prior contamination or hazardous substances that are existing presently at the
premises. The parties acknowledge that the property has been used as a fuel oil
storage area for a number of years and the responsibility for any spillage or
other problems associated with the use of this property prior to the occupancy
of the Tenant are acknowledged by the Landlord and it is agreed that the Tenant
in no way is responsible for the existence of said pollutants, spills, or other
environmental contamination.
6. Tenant shall take good care of the premises throughout the term and maintain
and preserve same in the condition delivered to Tenant on the commencement date,
except for normal wear and tear. The Tenant shall not injure, deface, or commit
waste of the premises. Landlord shall be responsible for all structural
<PAGE>
-2-
repairs and shall maintain, repair, and replace all plumbing, heating, air
conditioning, electrical and mechanical fixtures when required, and maintain and
make repairs to the parking area, and the exterior of the buildings. If any
structural repair or other repair or placement is required as a result of
negligence, carelessness, omission, improper conduct or alteration by the Tenant
or Tenant's visitors, Landlord shall make such repairs, but Tenant shall
reimburse Landlord, upon demand for the cost thereof. As previously mentioned,
the Landlord shall be responsible for the fuel oil tanks and equipment related
thereto located on the premises.
7. Supplementing the provisions previously set forth concerning the "hazardous
substance", or "hazardous waste", or "hazardous chemical", as such terms are
defined in the Environmental Clean-Up Responsibility Act of the State of New
Jersey (ECRA), the Spill Compensation and Control Act of the State of New Jersey
(The Spill Act), or the Comprehensive Environmental Responsibility Compensation
Liability Act of the United States, (The Compensation Act), it is understood
that all previously hazardous substances brought, kept or stored within the
premises or any portion thereof, and the operation of business upon the premises
or any portion thereof which has involved the generation, manufacture, refining,
transportation, treatment, storage, handling or disposal of hazardous substance,
hazardous waste or hazardous chemicals, above or below ground, or which would or
could result in the Landlord or the premises or any portion thereof being
subject to the provisions of ECRA, The Spill Act, and/or The Compensation Act
which will all be the responsibility of the Landlord. It is acknowledged
between the parties, however, that the Tenant's business shall be the storage
and transportation delivery of fuel oil. Landlord hereby agrees to immediately
provide to Tenant a copy of any correspondence, report, notice, order, findings,
declaration or other document relating to the Landlord's present obligations
under said Acts. The obligation of the Landlord under this Section shall survive
any termination of this Lease and the Tenant shall not be responsible for the
presently existing situation.
8. Landlord covenants and agrees that, upon the performance by Tenant of all of
the covenants, agreements, and provisions hereof on Tenant's part to be kept and
performed, Tenant shall have, hold, and enjoy the premises subject to the terms
of this Lease, including, but not limited to, the provisions previously
provided, however, at no diminution or abatement of the rent, additional rent or
other payment to Landlord shall be claimed by or allowed to Tenant for
inconvenience or discomfort arising from the making of any repairs or
improvements to the premises or the property, nor for any space taken to comply
with any law, ordinance, or order of any governmental authority, except as
provided for herein. The Tenant's rights hereunder are and shall be subject to
the existing state of title to the property and future easements affecting the
property, including, by way of illustration and not limitation, easements for
storm and sanitary sewers, drainages, ditches, and public utilities, and to all
existing and future real estate taxes, provided that the same will
<PAGE>
-3-
not render the premises unfit for the Tenant's use as a general commercial
office, storage of fuel oils, and parking and delivery, and transportation of
fuel oils.
9. If any term or provision of this Lease or the application thereof to any
person or circumstances shall, to any extent, be invalid or unenforceable, the
remainder of this Lease, or the application of such term or provision to persons
or circumstances other than those to which it is held invalid or unenforceable,
shall not be affected thereby and all other terms and provisions of this Lease
shall be valid and enforced to the fullest extent permitted by law.
10. Subject to any orders, laws, rules and/or shall regulations promulgated by
any governmental authority, Tenant shall be entitled to have access to the
premises 24 hours per day, seven days a week.
<PAGE>
[LETTERHEAD OF PNC BANK]
October 23, 1996
Mr. Timothy Harrington, President
Able Oil Company, Inc.
344 Route 46 East
Rockaway, NJ 07866
Re: $600,000.00 Reducing Revolving Credit Facility
$350,000.00 Line of Credit
Dear Mr. Harrington:
PNC BANK, NATIONAL ASSOCIATION (the "Bank") is pleased to advise you that we
have approved a $600,000.00 Reducing Revolving Credit facility and a $350,000.00
Line of Credit (the "Credit Facilities") to Able Oil Company, Inc. (the
"Borrower"). The Credit Facilities are described in the Summary of Terms and
Conditions that is attached to and made a part of this letter (the "Summary")
The Bank looks forward to working with you towards the closing of the Credit
Facilities.
Although the Bank has approved the Credit Facilities, the Bank's obligations are
subject to several conditions. First, the Borrower must accept this letter as
provided below, and must comply with all the other conditions of this letter and
the Summary. Alter receiving the Borrower's acceptance, the definitive Loan
Documents can be prepared. The Bank's obligations are conditioned on the Loan
Documents being signed and delivered to the Bank in a form that is satisfactory
to the Bank. This letter is also issued subject to the statutory and other
requirements by which the Bank is governed. Finally, the Bank's obligations
under this letter are subject to the condition that no material adverse change
occurs in the business, assets, operations, financial condition or business
prospects of the Borrower or any guarantor, or with respect to any of the
collateral for the Credit Facilities.
The Bank will not be responsible or liable for any damages, consequential or
otherwise, that may be incurred or alleged by any person or entity, including
the Borrower, as a result of this commitment letter.
This letter is for the Borrower's benefit only, and no other person may obtain
any rights under this letter or be entitled to rely or claim reliance on this
letter's terms and conditions. This letter may not be assigned by the Borrower,
and none of the Borrower's rights under this letter may be transferred, without
the Bank's prior written consent
The Borrower agrees to indemnify the Bank (and its directors, officers,
employees, agents and controlling persons) against any and all claims, losses,
damages, liabilities, costs and expenses (including, for example, fees and
expenses of counsel and expert witnesses) which may be incurred by any of them
in connection with any investigation, litigation or other proceeding relating to
the Credit Facilities or this letter, or the proposed use of proceeds of the
Credit Facilities, except for their own
<PAGE>
Able Oil Company, Inc.
October 23, 1996
Page 2
gross negligence or willful misconduct. The Borrower's indemnification
obligations are in addition to any other liability it may otherwise have, and
shall survive the termination of this letter.
This letter is issued in reliance on the information provided to the Bank by the
Borrower in connection with the Borrower's request for the Credit Facilities and
in any supporting documents and material. The Bank may cancel this letter if
there is any misrepresentation or material inaccuracy in that information or any
failure to include material information with the loan request. The Bank's
willingness to provide the Credit Facilities is subject to its satisfaction with
the business, assets, operations, condition and prospects of the Borrower and
with the results of such other or further due diligence as the Bank believes
appropriate If the Bank's continuing review discloses information (whether or
not previously disclosed to the Bank) which would likely have a material adverse
effect on the business, assets, operations, condition or prospects of the
Borrower, then the Bank, in its sole discretion, may decline to provide the
Credit Facilities.
This letter is for the Borrower's confidential use only. It may not be disclosed
by the Borrower without the Banks prior written consent to any person (including
any financial institution) other than your accountants, attorneys and other
advisors, and then only in connection with the transactions contemplated by this
letter and on a confidential basis.
The Borrower and the Bank irrevocably waive any and all rights they may have to
a trial by jury in any action, proceeding or claim of any nature arising out of
this letter and the transactions contemplated hereby and acknowledge that the
foregoing waiver is knowing and voluntary.
All out-of-pocket costs and expenses of the Bank will be paid by the Borrower
from time to time upon demand, including, for example, fees and expenses of
legal counsel, and lien searches, recording and filing fees and taxes, incurred
by the Bank in connection with the preparation, negotiation and delivery of this
letter and the Loan Documents. Because the Bank will incur these expenses even
if the Credit Facilities are not consummated for any reason, the Borrower's
expense reimbursement agreement is unconditional.
WE HEREBY ADVISE YOU THAT THE INTERESTS OF THE BORROWER AND THE BANK ARE OR MAY
BE DIFFERENT AND MAY CONFLICT. THE BANK'S ATTORNEY REPRESENTS ONLY THE BANK AND
NOT THE BORROWER. THE BORROWER IS, THEREFORE, ADVISED TO EMPLOY AN ATTORNEY OF
THE BORROWER'S CHOICE LICENSED TO PRACTICE LAW IN NEW JERSEY TO REPRESENT THE
INTERESTS or THE BORROWER.
This letter is governed by the laws of New Jersey. No modification or waiver of
any of the terms of this letter will be valid and binding unless agreed to in
writing by the Rank. When accepted, this letter
<PAGE>
Able Oil Company, Inc.
October 23, 1996
Page 3
will constitute the entire agreement between the Bank and the Borrower
concerning the Credit Facilities, and shall replace all prior understandings,
statements, negotiations and written materials relating to the Credit
Facilities.
To accept the terms of the Credit Facilities and this letter, please sign the
enclosed copy of this letter and return it to me by October 24, 1996. If this
letter is accepted, the Loan Documents must be signed by November 15, 1996, or
this letter will terminate and the Bank will have no liability or further
obligation.
We appreciate this opportunity to provide financial services to you, and look
forward to your acceptance of this letter.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
/s/ Frederic Angelo
Frederic Angelo
Vice President
FJA/sw
With the intent to be legally bound, the above terms and conditions are hereby
agreed to and accepted.
Able Oil Company, Inc.
By: Date:
------------------------------- ---------------------------------
Timothy Harrington, President
<PAGE>
Able Oil Company, Inc.
October 23, 1996
Page 4
With the intent to be legally bound, the above terms and conditions are hereby
agreed to and accepted.
Acknowledgement of Guarantors
Able Oil Montgomery, Inc.
By: Date:
------------------------------- ---------------------------------
Able Oil Melbourne, Inc.
By: Date:
------------------------------- ---------------------------------
A & 0 Environmental Services, Inc.
By: Date:
------------------------------- ---------------------------------
Able Propane, LLC
By: Date:
------------------------------- ---------------------------------
By: Date:
------------------------------- ---------------------------------
Timothy Harrington, Individually
<PAGE>
TERM SHEET
Borrower: Able Oil Company, Inc. (the "Borrower").
Bank: PNC Bank, National Association (the "Bank")
Credit Facilities: A) $600,000 reducing revolving credit for the purpose of
acquiring the assets of Northwest Petroleum and C.B.
Fuel Company, Inc.( the "seller") In no event will the
loan exceed one half of the purchase price.
B) $350,000 Line of Credit for seasonal working capital.
Amortization: A) Beginning one (1) month following the closing date, the
available amount under the revolving credit will be
reduced each month by one/forty eighth (1/48th) of the
initial amount of the loan.
B) At maturity, 6/30/97,
Interest Rates: A) The Bank's Prime Rate plus I % floating.
B) The Bank's Prime Rate plus 1/2% floating.
Commitment Fee: A) One (1) percent at closing.
B) None.
Guaranty: o Joint and several guarantees of Timothy Harrington, Able Oil
Montgomery, Inc., Able Oil Melbourne, Inc., A & 0
Environmental Services, Inc., and Able Propane, LLC.
o Cross corporate of affiliates and subsidiaries.
Collateral: o First security interest in all assets of the Borrower,
affiliates, and subsidiaries including but not limited to
accounts receivable, inventory, customer list and equipment
except for equipment and real property acquired with
purchase money notes.
Prepayment: o Voluntary prepayment premium of the available amount of the
revolving credit of 3% in year one and 2% in year two.
<PAGE>
Depository: o The Borrower will maintain its primary depository
relationship with PNC Bank. The bank will be authorized and
directed, with demand or notice, to charge and withdraw all
amounts that shall become due the Bank.
Cross-Default: o A default in any loan shall constitute a default in any
other loan from the Bank or its affiliates to the Borrower.
Conditions
Precedent: o Receipt and satisfactory review of Phase 1 Environmental
Evaluation of the property to be acquired.
o Satisfactory review of Purchase Agreement between Connel's
Fuel Oil Trading As Northwest Petroleum (the "Seller") and
C.B. Fuel Company, Inc. (the "Shareholder"), and Able Oil
Company Inc. (the "buyer").
o No material change in the Purchase Agreement between
Connel's Fuel Oil Trading As Northwest Petroleum (the
"Seller") and C.B. Fuel Company, Inc. (the "Shareholder")
and Able Oil Company Inc. (the "buyer").
o Evidence of property, casualty and liability insurance
including pollution liability insurance satisfactory to the
Bank.
o Financial statements of the Sellers for their most recent
two (2) fiscal years.
o Proforma balance sheet of the Borrower as of the end of the
most recent fiscal quarter giving effect to the acquisition.
o No pending legal action which could have a material impact
on the Borrower.
o PNC BANK's continued satisfaction with the financial
standing of the Borrower.
Covenants and
Conditions: o Minimum Debt Service Ratio (defined as pretax profit plus
interest expense plus depreciation and amortization divided
by mandatory principal and interest payments for all debt
plus capital
2
<PAGE>
expenditures) of 1.5:1. This ratio will be calculated
quarterly for the preceding twelve (12) months.
o Maximum Total funded Debt to Tangible Net Worth plus
subordinated debt (tangible net worth to include customer
list) of 3.0:1 at 12/31/96 and thereafter, and 2.5:1 at
9/30/97 and thereafter.
o Maintain minimum Tangible Net Worth to include customer list
of Northwest plus subordinated debt, of $500,000 until
9/30/97, and $700,000 at 10/1/97 and thereafter.
o Inventory and accounts receivable excluding accounts with
invoices unpaid in excess of 60 days past due will not be
less than 125% in the aggregate of amounts drawn on the
working capital line.
o Loans and advances to affiliates, subsidiaries, and to
officers in excess of $250,000., are to be deducted in a
calculation of net worth. No other debt permitted except the
seller's note and equipment purchases financed with purchase
money notes.
o No other liens permitted on assets pledged to PNC Bank.
o A thirty (30) day continuous annual clean-up of the Working
Capital Line of Credit.
o An annual budget to be provided to the Bank by December 1st
of each year.
o Within sixty (60) days after closing the Borrower is to
engage its certified public accountants to evaluate the
Borrower's accounting procedures, systems, and controls and
to report their findings and recommendations in writing with
a copy to the Bank. To the extent material changes are
recommended and as the Bank may reasonably request, the
company will take prompt action to employ or modify
accounting procedures, systems, and controls.
Cross Default/
Cross
Collateral: o A default under any loan shall constitute a default under
any other loan from the Bank and/or its affiliates to the
Borrower and/or any
3
<PAGE>
of the Guarantors. A default under any other loan from the
Bank and/or its affiliates to the Borrower and/or any of the
Guarantors shall constitute a default under this loan.
o The collateral for this loan will serve as collateral for
any loans now existing with the Bank, or hereinafter
incurred by The Borrower, and/or any of the Guarantors. The
collateral for any other loan now existing or hereinafter
incurred by the Borrower and/or any of the Guarantors will
serve as collateral for this loan.
Ownership: o Timothy Harrington will continue to own 100% interest in the
Borrower and shall not voluntarily transfer any interest to
a third party.
Life Insurance: o Within 90 days from the date hereof Borrower shall provide
to Bank an assignment of a life insurance policy on the life
of Timothy Harrington in an amount not less than $500,000.
Financial
Reporting: o Annual financial statements reviewed by a certified public
accountant satisfactory to the Bank within ninety (90) days
of the end of the fiscal year. Tax returns are to be
submitted within 120 days.
Quarterly balance sheet and profit and loss statement
prepared by a certified public accountant within sixty (60)
days of the end of each quarter.
o Accounts receivable aging as of the end of each quarter
submitted within sixty (60) days of quarter end. Each
review, report, compilation, tax return, or other document
which is the result of professional services provided by an
accountant shall be accompanied by a written statement
signed by the accountant, in form satisfactory to the Bank,
that the accountant acknowledges that the Bank will rely on
the review, report, compilation, tax return, or other
document and that Borrower knows of the intended reliance by
Bank.
Expenses: o All out-of-pocket expenses shall be paid by the Borrower.
Documentation: o Loan Documents in form and substance satisfactory to the
Bank and Bank Counsel must be executed and delivered
containing representations, warranties, covenants,
indemnities, conditions to
4
<PAGE>
lending, events of default and other provisions as are
appropriate in the Bank's opinion and specified by the Bank.
The Borrower's counsel shall deliver an opinion to the Bank
at closing addressing such matters relating to the Borrower
and this transaction as the Bank may request, and
satisfactory to the Bank and Bank Counsel as to form and
substance.
5
<PAGE>
[LETTERHEAD OF PNC BANK]
Amendment to Loan Documents
THIS AMENDMENT TO LOAN DOCUMENTS (this "Amendment") is made as of June
12th, 99, by and between ABLE OIL COMPANY (the "Borrower"), and PNC BANK,
NATIONAL ASSOCIATION (the "Bank").
WITNESSETH:
WHEREAS, the Borrower has executed and delivered to the Bank (or a
predecessor which is now known by the Bank's name as set forth above), one or
more promissory notes, letter agreements, loan agreements, security agreements,
mortgages, pledge agreements, assignments and other agreements, instruments,
certificates and documents more fully described on Exhibit A attached hereto and
made a part hereof (collectively, the "Loan Documents") which evidence or secure
some or all of the Borrower's obligations to the Bank for one or more loans or
other extension of credit (the "Obligations"); and
WHEREAS, the Borrower and the Bank desire to amend the Loan Documents as
provided for below;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and intending to be legally bound hereby, the parties hereto agree as follows:
1. Each of the Loan Documents is amended as set forth in Exhibit A. Any
and all references to any Loan Document in any other Loan Document shall be
deemed to refer to such Loan Document as amended hereby. Any initially
capitalized terms used in this Amendment without definition shall have the
meanings assigned to those terms in the Loan Documents.
2. This Amendment is deemed incorporated into each of the Loan Documents.
To the extent that any term or provision of this Amendment is or may be deemed
expressly inconsistent with any term or provision in any Loan Document, the
terms and provisions hereof shall control.
3. The Borrower hereby represents and warrants that (a) all of its
representations and warranties in the Loan Documents are true and correct, (b)
no default or Event of Default exists under any Loan Document, and (c) this
Amendment has been duly authorized, executed and delivered and constitutes its
legal, valid and binding obligation, enforceable in accordance with its terms.
3. The Borrower hereby confirms that any collateral for the Obligations,
including but not limited to liens, security interests, mortgages, and pledges
granted by the Borrower or third parties (if applicable), shall continue
unimpaired and in full force and effect.
4. This Amendment may be signed in any number of counterpart copies and by
the parties hereto on separate counterparts,but all such copies shall constitute
one and the same instrument.
5. This Amendment will be binding upon and inure to the benefit of the
Borrower and the Bank and their respective heirs, executors, administrators,
successors and assigns.
6. Except as amended hereby, the terms and provisions of the Loan
Documents remain unchanged and in full force and effect. Except as expressly
provided herein, this Amendment shall not constitute an amendment, waiver,
consent or release with respect to any provision of any Loan Document, a waiver
of any default or Event of Default thereunder, or a waiver or release of any of
the Bank's rights and remedies (all of which are hereby reserved). The Borrower
expressly ratifies and confirms the waiver of jury trial provision (if
applicable).
WITNESS the due execution hereof as a document under seal, as of the date
first written above.
<PAGE>
[CORPORATE SEAL] ABLE OIL COMPANY
Attest: /s/ Christopher P. Westad By: /s/ Timothy Harrington
----------------------------- -----------------------------
Print Name: Christopher P. Westad Print Name: Timothy Harrington
------------------------ --------------------
Title: President Title: CEO
------------------------------ -------------------------
PNC BANK, NATIONAL ASSOCIATION
Attest: By: /s/ J. Richard Bishop
----------------------------- -----------------------------
Print Name:
------------------------ Print Name: J. Richard Bishop
Title:
------------------------------ Title: Vice President
<PAGE>
CONSENT OF GUARANTOR
The undersigned guarantor hereby consents to the provisions of the
foregoing Amendment and confirms and agrees that the undersigned's obligations
under the Guaranty and Suretyship Agreement dated October 28, 1997 (the
"Guaranty"), relating to some or all of the Obligations mentioned in the
foregoing Amendment shall be unimpaired by the Amendment and that the
undersigned has no defenses or set offs against the Bank, its officers,
directors, employees, agents or attorneys with respect to the Guaranty and that
all of the terms, conditions and covenants in the Guaranty remain unaltered and
in full force and effect and are hereby ratified and confirmed. The undersigned
hereby certifies that the representations and warranties made in the Guaranty
are true and correct. The undersigned hereby ratifies and confirms the waiver of
jury trial provision (if applicable) combined in the Guaranty.
WITNESS the due execution hereto as a document under seal, as of June 12th, 98,
intending to be legally bound hereby.
ABLE OIL MONTGOMERY, INC.
By: /s/ Timothy Harrington
-------------------------
(SEAL)
Title: CEO
----------------------
A & O ENVIRONMENTAL SERVICES, INC.
By: /s/ Timothy Harrington
-------------------------
(SEAL)
Title: CEO
----------------------
ABLE OIL MELBOURNE, INC.
By: /s/ Timothy Harrington
-------------------------
(SEAL)
Title: CEO
----------------------
<PAGE>
ABLE PROPANE, LLC
By: /s/ Timothy Harrington
-------------------------
(SEAL)
Title: CEO
----------------------
ABLE ENERGY, INC.
By: /s/ Timothy Harrington
-------------------------
(SEAL)
Title: CEO
----------------------
/s/ Timothy Harrington
- -----------------------------
Timothy Harrington
<PAGE>
EXHIBIT A
AMENDMENT TO LOAN DOCUMENTS
1 Letter Agreement dated October 20, 1997 (the "Letter").
2 Committed Line of Credit Note in the amount of $350,000 dated October 23,
1997 (the "Note").
B. The Loan Documents are hereby amended as follows:
1. The Letter is amended as follows:
(a) The Expiration Date is amended to mean "May 30, 1999 or such later
date as may be designated by the Bank by written notice from the Bank to
the Borrower."
(b). The Amount of the Committed Line of Credit is increased from $350,000
to $500,000.
(c) The Following corporation is added as a required guarantor: Able
Energy, Inc. Said Guarantor shall be required to pledge all of the shares
of Able Oil Company and the ownership interest, through Membership
Certificates, in the Limited Liability Company known as Able Propane, LLC.
(d) Timothy Harrington shall be required to pledge all of the shares of
Able Energy, Inc.
(e) The Representations and Warranties Section of the Letter Agreement is
deemed amended to add a new subsection as follows:
The Borrower has reviewed the areas within its business and operation which
could be adversely affected by, and has developed or is developing a program to
address on a timely basis the risk that certain computer applications used by
the Borrower may be unable to recognize and perform properly date-sensitive
functions involving dates prior to and after December 31, 1999 (the "Year 2000
Problem"). The Year 2000 Problem will not result, and is not reasonably expected
to result, in any material adverse effect on the business, properties, assets,
financial condition, results of operations or prospects of the Borrower, or the
ability of the Borrower to duly and punctually pay or perform its obligations
hereunder and under the other Loan Documents.
2. The Note is amended as follows:
(a) The Expiration Date is deemed amended to mean "May 30, 1999, or such
later date as may be designated by the Bank by written notice from the
Bank to the Borrower."
(b) The Amount of the Facility is increased from $350,000 to $500,000.
<PAGE>
[LETTERHEAD OF PNC BANK]
June 11, 1998
Mr. Timothy Harrington
Able Oil Company
344 Route 46 East
Rockaway, New Jersey 07366
Re: $675,000 Term Loan
Dear Mr. Harrington:
We are pleased to inform you that PNC Bank, National Association (the "Bank"),
has approved your request for a term loan to ABLE OIL COMPANY (the "Borrower").
We look forward to this opportunity to help you meet the financing needs of your
business. As your primary bank, we want to supply all your banking needs.
All the details regarding your loan are outlined in the following sections of
this letter. If these terms are satisfactory, please follow the instructions for
proceeding with your loan provided at the end of this letter.
1. Type of Facility and Use of Proceeds. This is a term loan in the amount of
$675,000 (the "Term Loan"). The proceeds of the Term Loan shall be used to
refinance existing term debt and to term out a portion of the Borrower's
working capital facility outstanding at PNC Bank.
2. Interest Rate. Interest on the unpaid balance of the Term Loan will be
charged at a rate per annum which is at all times equal to the sum of the
rate of interest publicly announced by the Bank from time to time as its
prime rate (the "Prime Rate") plus one percent (1%) OR fixed at 225 basis
points over the Bank's fully absorbed cost of funds rate. The Borrower
will have the option to enter into an interest rate protection agreement
for the Facility. The agreement can be structured as swaps, caps, collars
or other types of financial instruments which hedge the Borrower's
exposure to interest rate fluctuations.
3. Repayment. The principal amount of the Term Loan shall be paid in
consecutive monthly installments over three years. Interest shall be paid
in arrears at the same time as the principal installments. Interest will
be due and payable on a monthly basis, and will be computed on the basis
of a year of 360 days and paid on the actual number of days elapsed.
<PAGE>
4. Note. The obligation of the Borrower to repay the Term Loan shall be
evidenced by a promissory note (the "Note") in form and content
satisfactory to the Bank. If the Borrower elects the fixed rate option,
the Note will also contain a prepayment cost recovery provision requiring
a payment to the Bank equal to the losses incurred by the Bank as a result
of said prepayment.
5. Security. The Borrower must cause the following to be executed and
delivered to the Bank in form and content satisfactory to the Bank as
security for the Term Loan:
(X) a guaranty and suretyship agreement, under which Timothy Harrington;
Able Energy, Inc.; Able Oil Melbourne, Inc.; Able Oil Montgomery,
Inc.; Able Propane, LLC and A & O Environmental Services, Inc.
(individually or collectively, the "Guarantor") will unconditionally
jointly and severally guarantee the due and punctual payment of all
indebtedness owed to the Bank by the Borrower.
(X) a security agreement granting the Bank a first priority perfected
lien on the existing and future accounts, inventory, equipment,
general intangibles, chattel paper, documents and instruments of
Able Oil Melbourne, Inc.; Able Oil Montgomery, Inc.; Able Propane,
LLC and A & O Environmental Services, Inc. (the "Guarantor").
(X) a pledge agreement by Able Energy, Inc. granting the Bank a first
priority perfected lien on ten shares of the stock of Able Oil
Company and on the Membership Certificates evidencing the ownership
interest as a Member of Able Propane, LLC all of which are owned by
Able Energy, Inc.
(X) a pledge agreement by Timothy Harrington granting the Bank a first
priority perfected lien on 1,000 shares of the stock of Able Energy,
Inc.
(X) an assignment to the Bank of a life insurance policy in the face
amount of $500,000 inuring the life of Timothy Harrington.
Hazard insurance must be maintained on inventory and equipment in such
amounts and with such coverages as are acceptable to the Bank, containing
a standard lender loss payable or mortgagee clause in favor of the Bank.
6. Covenants. Unless compliance is waived in writing by the Bank or until
payment in full of the Term Loan:
(a) The Borrower will promptly submit to the Bank such information
relating to the Borrower's affairs (including but not limited to
annual financial statements and tax
<PAGE>
returns for the Borrower and any guarantor) or any security for the
Term Loan as the Bank may reasonably request.
(b) The Borrower will not make or permit any change in the nature of its
business as carried on as of the date of this letter or in its
senior management or equity ownership.
(c) The Borrower and the Guarantor will comply with the financial and
other covenants included in Exhibit "A" hereto.
7. Representations and Warranties. To induce the Bank to extend the Term
Loan, the Borrower represents and warrants as follows:
(a) The Borrower's latest financial statements provided to the Bank are
true, complete and accurate in all material respects and fairly
present the financial condition, assets and liabilities, whether
accrued, absolute, contingent or otherwise and the results of the
Borrower's operations for the period specified therein. The
Borrower's financial statements have been prepared in accordance
with generally accepted accounting principles consistently applied
from period to period subject in the case of interim statements to
normal year-end adjustments. Since the date of the latest financial
statements provided to the Bank, the Borrower has not suffered any
damage, destruction or loss which has materially adversely affected
its business, assets, operations, financial condition or result of
operations.
(b) There are no actions, suits, proceedings or governmental
investigations pending or, to the knowledge of the Borrower,
threatened against the Borrower which could result in a material
adverse change in its business, assets, operations, financial
condition or results of operations and there is no basis known to
the Borrower or its officers, directors or shareholders for any such
action, suit, proceedings or investigation.
(c) The Borrower has filed all returns and reports that are required to
be filed by it in connection with any federal, state or local tax,
duty or charge levied, assessed or imposed upon the Borrower or its
property, including unemployment, social security and similar taxes
and all of such taxes have been either paid or adequate reserve or
other provision has been made therefor.
(d) The Borrower is duly organized, validly existing and in good
standing under the laws of the state of its incorporation or
organization and has the power and authority to own and operate its
assets and to conduct its business in all jurisdictions where its
<PAGE>
ownership of property or the nature of its business requires such
qualification or licensing.
(e) The Borrower has full power and authority to enter into the
transactions provided for in this Letter Agreement and has been duly
authorized to do so by all necessary and appropriate action and when
executed and delivered by the Borrower, this Letter Agreement and
the other loan documents executed and delivered pursuant hereto will
constitute the legal, valid and binding obligations of the Borrower
enforceable in accordance with their terms.
(f) There does not exist any default or violation by the Borrower of or
under any of the terms, conditions or obligations of: (i) its
organizational documents; (ii) any indenture, mortgage, deed of
trust, franchise, permit, contract, agreement, or other instrument
to which it is a party or by which it is bound; or (iii) any law,
regulation, ruling, order, injunction, decree, condition or other
requirement applicable to or imposed upon the Borrower by any law or
by any governmental authority, court or agency.
(g) Year 2000. The Borrower and its Subsidiaries have reviewed the areas
within their business and operations which could be adversely
affected by, and have developed or are developing a program to
address on a timely basis, the risk that certain computer
applications used by the Borrower or its Subsidiaries (or any of
their respective material suppliers, customers or vendors) may be
unable to recognize and perform properly date-sensitive functions
involving dates prior to and after December 31, 1999 (the "Year 2000
Problem"). The Year 2000 Problem will not result, and is not
reasonably expected to result, in any material adverse effect on the
business, properties, assets, financial condition, results of
operations or prospects of the Borrower or its subsidiaries, or the
ability of the Borrower or its subsidiaries to duly and punctually
pay or perform its obligations hereunder and under the other Loan
Documents.
Material Adverse Change shall mean any set of circumstances or
events which (a) has or could reasonably be expected to have any
material adverse effect whatsoever upon the validity or
enforceability of this Agreement or any other Loan Document, (b) is
or could reasonably be expected to be material and adverse to the
business, properties, assets, financial condition, results of
operations or prospects of the Loan Parties taken as a whole, (c)
impairs materially or could reasonably be expected to impair
materially the ability of the Loan Parties taken as a whole to duly
and punctually pay or perform its indebtedness, or (d) impairs
materially or could reasonably be expected to impair materially the
ability of the Bank, to the extent permitted, to enforce its legal
remedies pursuant to this Agreement or any other Loan Document.
<PAGE>
8. Fees. The Borrower will reimburse the Bank for the Bank's out-of-pocket
expenses incurred or to be incurred in conducting UCC, title and other
public record searches, and in filing and recording documents in the
public records to perfect the Bank's liens and security interests.
9. Depository. The Borrower will maintain at the Bank the Borrower's primary
depository accounts.
10. Additional Provisions. Before the disbursement of the Term Loan, the
Borrower agrees to sign and deliver to the Bank the Note and other
required documents and such other instruments and documents as the Bank
may reasonably request, such as certified resolutions, incumbency
certificates or other evidence of authority.
Prior to execution of the final documents, the Bank may terminate this letter if
a material adverse change occurs with respect to the Borrower, any guarantor,
any collateral for the Term Loan or any other person or entity connected in any
way with the Term Loan, or if the Borrower fails to comply with any of the terms
and conditions of this letter, or if the Bank reasonably determines that any of
the conditions cannot be met.
This letter is governed by the laws of New Jersey. No modification or waiver of
any of the terms of this letter will be valid and binding unless agreed to in
writing by the Bank. When accepted, this letter and the other documents
described herein will constitute the entire agreement between the Bank and the
Borrower concerning the Term Loan, and shall replace all prior understandings,
statements, negotiations and written materials relating to the Term Loan.
To accept these terms, please sign the enclosed copy of this letter as set forth
below and return it to the Bank within ten (10) days from the date of this
letter. If accepted, the final documents must be executed within ten (10) days
from the date of this letter, or this letter may be terminated at the Bank's
option without liability or further obligation of the Bank.
<PAGE>
Thank you for giving PNC Bank this opportunity to work with your business. We
look forward to other ways in which we may be of service to your business or to
you personally.
Sincerely,
PNC BANK, NATIONAL ASSOCIATION
/s/ J. Richard Bishop
J. Richard Bishop
Vice President
JRB/ch
Enclosure
<PAGE>
ACCEPTANCE
With the intent to be legally bound hereby, the above terms and conditions are
hereby agreed to and accepted this day 12 of June, 98.
BORROWER:
ABLE OIL COMPANY
By: /s/ Timothy Harrington
-------------------------
(SEAL)
Title: CEO
----------------------
GUARANTOR:
ABLE OIL MONTGOMERY, INC.
By: /s/ Timothy Harrington
-------------------------
(SEAL)
Title: CEO
----------------------
A & O ENVIRONMENTAL SERVICES, INC.
By: /s/ Timothy Harrington
-------------------------
(SEAL)
Title: CEO
----------------------
<PAGE>
ABLE OIL MELBOURNE, INC.
By: /s/ Timothy Harrington
-------------------------
(SEAL)
Title: CEO
----------------------
ABLE PROPANE, LLC
By: /s/ Timothy Harrington
-------------------------
(SEAL)
Title: CEO
----------------------
ABLE ENERGY, INC.
By: /s/ Timothy Harrington
-------------------------
(SEAL)
Title: CEO
----------------------
/s/ Timothy Harrington
- -----------------------------
Timothy Harrington
<PAGE>
EXHIBIT A
FINANCIAL REPORTING COVENANTS:
(X) The Borrower will deliver to the Bank:
(X) Financial Statements for each fiscal quarter, except the fourth
quarter, within forty-five (45) days after the quarter end, together with
year-to-date and comparative figures for the corresponding periods of the
prior year, certified as true and correct by its chief financial officer.
(X) With each delivery of Financial Statements, the Borrower's chief
financial officer shall also deliver a certificate as to the Borrower's
compliance with the financial covenants for the period then ended and
whether any Event of Default (as defined in the Note) exists, and, if so,
the nature thereof and the corrective measures the Borrower proposes to
take.
(X) The Guarantor, Able Energy, Inc., will deliver to the Bank:
(X) Financial Statements for its fiscal year, within one hundred twenty (120)
days after fiscal year end, audited and certified without qualification by
a certified public accountant acceptable to the Bank.
(X) With each delivery of Financial Statements, the Guarantor's chief
financial officer shall also deliver a certificate as to the Borrower's
compliance with the financial covenants for the period then ended and
whether any Event of Default (as defined in the Note) exists, and, if so,
the nature thereof and the corrective measures the Borrower proposes to
take.
(X) The Corporate Guarantors will deliver to the Bank:
(X) Financial Statements for each fiscal quarter, except the fourth quarter,
within forty-five (45) days after the quarter end, together with
year-to-date and comparative figures for the corresponding periods of the
prior year, certified as true and correct by its chief financial officer.
(X) With each delivery of Financial Statements, the Guarantor's chief
financial office shall also deliver a certificate as to the Borrowers
compliance with the financial covenants for the period then ended and
whether any Event of Default (as defined in the Note) exists, and, if so,
the nature thereof and the corrective measures the Borrower proposes to
take.
<PAGE>
(X) The individual Guarantor will deliver to the Bank:
(X) Personal financial statement concurrent with submission of Borrower's fiscal
financial statement and federal income tax returns for each calendar year within
fifteen (15) days of filing.
"Financial Statements" means the consolidated and consolidating balance sheet
and statements of income and cash flows prepared in accordance with generally
accepted accounting principles in effect from time to time ("GAAP") applied on a
consistent basis (subject in the case of interim statements to normal year-end
adjustments).
<PAGE>
FINANCIAL COVENANTS:
(X) The Borrower will maintain at all times a minimum Net Worth of $750,000.
"Net Worth" to include the value of customer list minus any amounts due from
officer and affiliated company(s) in excess of $250,000.
(X) Maximum leverage: total debt divided by the adjusted tangible net worth
(defined above) plus subordinated debt shall not exceed a ratio of 4 to 1.
(X) Minimum debt service coverage ratio (expenses before interest, taxes,
depreciation and amortization minus dividends minus capital expenditures divided
by current portion of long term debt plus interest) shall not be less than 1.5
to 1.
NEGATIVE COVENANTS:
(X) The Borrower will not create, assume, incur or suffer to exist any mortgage,
pledge, encumbrance, security interest, lien or charge of any kind upon any of
its property, now owned or hereafter acquired, which is pledged to Bank as
security for repayment of this Note or any other obligation from Borrower to
Bank, except for a subordinated security interest in favor of Connell's Fuel Oil
t/a Northwest Petroleum, C.B. Fuel Co., Inc. and William Toriello given in
connection with the Borrower's acquisition of Northwest Petroleum.
(X) The Borrower will not create, incur, guarantee, endorse (except endorsements
in the course of collection), assume or suffer to exist any indebtedness, except
(i) indebtedness to the Bank, (ii) the note to Connell's Fuel Oil t/a Northwest
Petroleum, or (iii) equipment purchases financed with purchase money notes.
(X) The Borrower will not make or permit any change in the nature of its
business as carried on as of the date of this Note or in its senior management,
and Timothy Harrington shall continue to own a 100% interest in Able Energy,
Inc. which shall continue to own 100% interest in the Borrower and all corporate
Guarantors.
<PAGE>
PNC BANK
Term / Time Note
$675,000.00 June 12, 1998
FOR VALUE RECEIVED, ABLE OIL COMPANY (the "Borrower"), with an address at 344
Route 46 East, Rockaway, New Jersey 07866, promises to pay to the order of PNC
BANK, NATIONAL ASSOCIATION (the "Bank"), in lawful money of the United States of
America in immediately available funds at its offices located at One Garret
Mountain Plaza, West Paterson, New Jersey 07424, or at such other location as
the Bank may designate from time to time, the principal sum of SIX HUNDRED
SEVENTY-FIVE THOUSAND DOLLARS ($675,000.00), together with interest accruing on
the outstanding principal balance from the date hereof as provided below:
1. Rate of Interest. Amounts outstanding under this Note will bear interest as
follows (check one):
___ A. A rate per annum ("Floating Rate") which is at all times one
percentage points (1%) in excess of the Prime Rate.
X B. 225 basis points over the Bank's fully absorbed cost of funds
- --- ("Fixed Rate").
___ C. A rate per annum ("Floating Rate") which is at all times
_____________ percentage points (____%) in excess of the Prime Rate;
provided, that Borrower shall have the option, from time to time, to
covert from the Floating Rate and fix the interest at a rate per
annum offered by the Bank in its sole discretion ("Fixed Rate") for
a term of not less than _______ ("Fixed Rate") each as agreed upon
in writing between the Borrower and the Bank. At the end of any
Fixed Rate Period, interest shall revert to the Floating Rate,
unless and until the Borrower and the Bank agree to another Fixed
Rate and Fixed Rate Period.
Interest will be calculated on the basis of a year of 360 days for the actual
number of days in each interest period. As used herein, "Prime Rate" shall mean
the rate publicly announced by the Bank from time to time as its prime rate. The
Prime Rate is not tied to any external rate or index and does not necessarily
reflect the lowest rate of interest actually charged by the Bank to any
particular class or category of customers. If and when the Prime Rate changes,
the Floating Rate will change automatically without notice to the Borrower,
effective on the date of any such change. In no event will the rate of interest
hereunder exceed the maximum rate allowed by law.
2. Payment Terms. Principal and interest will be payable as provided below
(check one):
___ A. Level Payments: Payments of principal together with interest in the
amount of $____ SHALL BE DUE AND payable commencing on ______ ____,
____, and continuing on the ____ day of each ____ thereafter until
the indebtedness evidenced hereby has been paid in full. Any
outstanding principal and accrued interest shall be due and payable
in full on ______ ____, ____. The Borrower acknowledges that the
level payment amount is calculated on the assumption that each
periodic payment will be made on the date when due, and if there is
any variation in the actual payment dates, there may be an
additional amount due upon maturity of this Note. The Borrower
agrees and acknowledges that any amortization schedule which may
have been provided to Borrower is only an estimate, and is
superseded by the terms of this Note regarding the accrual and
payment of interest.
X B. Fixed Principal Payment Plus Interest: Principal shall be due and
- --- payable in thirty-six (36) equal consecutive monthly installments in
the amount of $18,750.00 each, commencing on ______ ____, ____, and
continuing on the ________ day of each month thereafter to and
including ______ ____, ____, and a final installment of $18,750.00
on ______ ____, ____. Interest shall be payable at the same times as
the principal payments. Any outstanding principal and accrued
interest shall be due and payable in full on ______ ____, ____.
___ C. Interest Only With Principal At Maturity: Interest shall be due and
payable commencing on ______ ____, ____, and continuing on the _____
day of each _____ thereafter until ______ ____, ____, on which date
all outstanding principal and accrued interest shall be due and
payable in full.
___ D. For Floating Rate Loans with Option to Convert to Fixed Rate:
Commencing on ______ ____, ____, principal and interest shall be
paid as follows: (1) While the Floating Rate is in effect, principal
shall be payable in consecutive equal monthly installments of
$______ each. Interest shall be payable at the same times as the
principal payments. (2) During any Fixed Rate Period, principal and
interest shall be payable in equal monthly installments in an amount
sufficient to amortize the face amount of this Note over a ____ year
term. (3) The balances of principal and interest shall be due and
payable on ______ ____, ____.
If any payment under this Note shall become due on a Saturday, Sunday or public
holiday under the laws of the State where the Bank's office indicated above is
located, such payment shall be made on the next succeeding business day and such
extension of time shall be included in computing interest in connection with
such payment. The Borrower hereby authorizes the Bank to charge the Borrower's
deposit account at the Bank for any payment when due hereunder. Payments
received will be applied to charges, fees and expenses (including attorneys'
fees), accrued interest and principal in any order the Bank may choose, in its
sole discretion.
3. Late Payments; Default Rate. If the Borrower fails to make any payment of
principal, interest or other amount coming due pursuant to the provisions of
this Note within ten (10) calendar days of the date due and payable, the
Borrower also shall pay to the Bank a late charge equal to the lesser of five
percent (5%) of the amount of such payment or $N/A. Such ten (10) day period
shall not be construed in any way to extend the due date of any such payment.
The late charge is imposed for the purpose of defraying the Bank's expenses
incident to the handling of delinquent payments and is in addition to, and not
in lieu of, the exercise by the Bank of any rights and remedies hereunder, under
the other Loan Documents or under applicable laws, and any fees and expenses of
any agents or attorneys which the Bank may employ. Upon maturity, whether by
acceleration, demand or otherwise, and at the option of the Bank upon the
occurrence of any Event of Default (as hereinafter defined) and during the
continuance thereof, this Note shall bear interest at a rate per annum (based on
a year of 360 days and actual days elapsed) which shall be five percentage
points (5%) in excess of the interest rate in effect from time to time under
this Note but not more than the maximum rate allowed by law (the "Default
Rate"). The Default Rate shall continue to apply whether or not judgment shall
be entered on this Note.
4. Prepayment. If this Note bears interest at the Floating Rate, the
indebtedness may be prepaid in whole or in part at any time without penalty. If
this Note bears interest at a Fixed Rate, notwithstanding anything contained
herein to the contrary, upon any prepayment by or on behalf of the Borrower
(whether voluntary, on default or otherwise), the Bank may require, if it so
elects, the Borrower to pay the Bank as compensation for the cost of being
prepared to
<PAGE>
Borrower to pay the Bank as compensation for the cost of being prepared to
advance fixed rate funds hereunder an amount equal to the Cost of Prepayment.
"Cost of Prepayment" means an amount equal to the present value, if positive, of
the product of (a) the difference between (i) the yield, on the beginning date
of the applicable interest period, of a U.S. Treasury obligation with a maturity
similar to the applicable interest period minus (ii) the yield on the prepayment
date, of a U.S. Treasury obligation with a maturity similar to the remaining
maturity of the applicable interest period, and (b) the principal amount to be
prepaid, and (c) the number of years, including fractional years, from the
prepayment date to the end of the applicable interest period. The yield on any
U.S. Treasury obligation shall be determined by reference to Federal Reserve
Statistical Release H.15(519) "Selected Interest Rates". For purposes of making
present value calculations, the yield to maturity of a similar maturity U.S.
Treasury obligation on the prepayment date shall be deemed the discount rate.
The Cost of Prepayment shall also apply to any payments made after acceleration
of the maturity of this Note while a Fixed Rate is in effect.
5. Other Loan Documents. This Note is issued in connection with a Letter
Agreement of even date, the terms of which are incorporated herein by reference
(the "Loan Documents"), and is secured by the property described in the Loan
Documents (if any) and by such other collateral as previously may have been or
may in the future be granted to the Bank to secure this Note.
6. Events of Default. The occurrence of any of the following events will be
deemed to be an "Event of default" under this Note: (i) the nonpayment of any
principal, interest or other indebtedness under this Note when due; (ii) the
occurrence of any event of default or default and the lapse of any notice or
cure period under any Loan Document or any other debt, liability or obligation
to the Bank of any Obligor, (iii) the filing by or against any Obligor of any
proceeding in bankruptcy, receivership, insolvency, reorganization, liquidation,
conservatorship or similar proceeding (and, in the case of any such proceeding
instituted against any Obligor, such proceeding is not dismissed or stayed
within thirty (30) days of the commencement thereof); (iv) any assignment by any
Obligor for the benefit of creditors, or any levy, garnishment, attachment or
similar proceeding is instituted against any property of any Obligor held by or
deposited with the Bank; (v) a default with respect to any other indebtedness of
any Obligor for borrowed money, if the effect of such default is to cause or
permit the acceleration of such debt; (vi) the commencement of any foreclosure
or forfeiture proceeding, execution or attachment against any collateral
securing the obligations of any Obligor to the Bank; (vii) the entry of a final
judgment against any Obligor and the failure of such Obligor to discharge the
judgment within ten (10) days of the entry thereof; (viii) in the event that
this Note or any guarantee executed by any Guarantor is secured, the failure of
any Obligor to provide the Bank with additional collateral if in the opinion of
the Bank at any time or times, the market value of any of the collateral
securing this Note or any guarantee has depreciated; (ix) any material adverse
change in the business, assets, operations, financial condition or results of
operations of any Obligor; (x) the Borrower ceases doing business as a going
concern; (xi) the revocation or attempted revocation, in whole or in part, of
any guarantee by any Guarantor; (xii) the death or legal incompetency of any
individual Obligor or, if any Obligor is a partnership, the death or legal
incompetency of any individual general partner; (xiii) any representation or
warranty made by any Obligor to the Bank in any Loan Document, or any other
documents now or in the future securing the obligations of any Obligor to the
bank, is false, erroneous or misleading in any material respect; or (xiv) the
failure of any Obligor to observe or perform any covenant or other agreement
with the Bank contained in any Loan Document or any other documents now or in
the future securing the obligations of any Obligor to the Bank. As used herein,
the term "Obligor" means any Borrower and any Guarantor, and the term
"Guarantor" means any guarantor of the obligations of the Borrower to the Bank
existing on the date of this Note or arising in the future.
Upon the occurrence of an Event of Default: (a) the Bank shall be under no
further obligation to make advances hereunder; (b) if an Event of Default
specified in clause (iii) or (iv) above shall occur, the outstanding principal
balance and accrued interest hereunder together with any additional amounts
payable hereunder shall be immediately due and payable without demand or notice
of any kind; (c) if any other Event of Default shall occur, the outstanding
principal balance and accrued interest hereunder together with any additional
amounts payable hereunder, at the option of the Bank and without demand or
notice of any kind, may be accelerated and become immediately due and payable ,
(d) at the option of the Bank, this Note will bear interest at the Default Rate
from the date of the occurrence of the Event of default; and (e) the Bank may
exercise from time to time any of the rights and remedies available to the Bank
under the Loan Documents or under applicable law.
7. Right of Setoff. In additional to all liens upon and rights of setoff against
the money, securities or other property of the Borrower given to the Bank by
law, the Bank shall have, with respect to the Borrower's obligations to the Bank
under this Note and to the extent permitted by law, a contractual possessory
security interest in and a contractual right of setoff against, and the Borrower
hereby assigns, conveys, delivers, pledges and transfers to the Bank all of the
Borrower's right, title and interest in and to, all deposits, moneys, securities
and other property of the Borrower now or hereafter in the possession of or on
deposit with, or in transit to, the Bank whether held in a general or special
account or deposit, whether held jointly with someone else, or whether held for
safekeeping or otherwise, excluding, however, all IRA, Keogh, and trust
accounts. Every such security interest and right of setoff may be exercised
without demand upon or notice to the Borrower. Every such right of setoff shall
be deemed to have been exercised immediately upon the occurrence of an Event of
Default hereunder without any action of the Bank, although the Bank may enter
such setoff on its books and records at a later time.
8. Miscellaneous. No delay or omission of the Bank to exercise any right or
power arising hereunder shall impair any such right or power or be considered to
be a waiver of any such right or power, nor shall the Bank's action or inaction
impair any such right or power. The Borrower agrees to pay on demand, to the
extent permitted by law, all costs and expenses incurred by the Bank in the
enforcement of its rights in this Note and in any security therefor, including
without limitation reasonable fees and expenses of the Bank's counsel. If any
provision of this Note is found to be invalid by a court, all the other
provisions of this Note will remain in full force and effect. The Borrower and
all other makers and indorsers of this Note hereby forever waive presentment,
protest, notice of dishonor and notice of non-payment. The Borrower also waives
all defenses based on suretyship or impairment of collateral. If this Note is
executed by more than one Borrower, the obligations of such persons or entities
hereunder will be joint and several. This Note shall bind the Borrower and its
heirs, executors, administrators, successors and assigns of the Borrower, and
the benefits hereof shall inure to the benefit of the Bank and its successors
and assigns.
This Note has been delivered to and accepted by the Bank and will be deemed to
be made in the State where the Bank's office indicated above is located. THIS
NOTE WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE BANK AND THE
BORROWER DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE THE BANK'S
OFFICE INDICATED ABOVE IS LOCATED, EXCLUDING ITS CONFLICT OF LAWS RULES. The
Borrower hereby irrevocably consents to the exclusive jurisdiction of any state
or federal court for the county or judicial district where the Bank's office
indicated above is located, and consents that all service of process be sent by
nationally recognized overnight courier service directed to the Borrower at the
Borrower's address set forth herein and service so made will be deemed to be
completed on the business day after deposit with such courier; provided that
nothing contained in this Note will prevent the Bank from bringing any action,
enforcing any award or judgment or exercising any rights against the Borrower
individually, against any security or against any property of the Borrower
within any other county, state or other foreign or domestic jurisdiction. The
Borrower acknowledges and agrees that the venue provided above is the most
convenient forum for both the Bank and the Borrower. The Borrower waives any
objection to venue and any objection based on a more convenient forum in any
action instituted under this Note.
9. Additional Provisions.
<PAGE>
10. WAIVER OF JURY TRIAL. THE BORROWER IRREVOCABLY WAIVES ANY AND ALL RIGHTS THE
BORROWER MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY
NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS
NOTE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE BORROWER
ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
The Borrower acknowledges that it has read and understood all the provisions of
this Note, including the waiver of jury trail, and has been advised by counsel
as necessary or appropriate.
WITNESS the due execution hereof as a document under seal, as of the date first
written above, with the intent to be legally bound hereby.
[CORPORATE SEAL] ABLE OIL COMPANY
Attest: /s/ Christopher P. Westad By: /s/ Timothy Harrington
-------------------------- ----------------------------
Name: Christopher P. Westad Name: Timothy Harrington
-------------------------- --------------------------
Title: President Title: CEO
-------------------------- -------------------------
<PAGE>
PLEDGE AGREEMENT
(Stocks, Bonds and Commercial Paper)
THIS PLEDGE AGREEMENT, dated as of this 12 day of June, 1998, is made by
Timothy Harrington (the "Pledgor"), with an address at 531 Green Pond Road,
Rockaway, New Jersey 07866, in favor of PNC BANK, NATIONAL ASSOCIATION (the
"Secured Party"), with an address at One Garret Mountain Plaza, West Paterson,
New Jersey 07424.
Pledge. In order to induce the Secured Party to extend the
Obligations (as defined below), the Pledgor hereby grants a security interest in
and pledges to the Secured Party, and to all other direct or indirect
subsidiaries of PNC Bank Corp., all of the Pledgor's right, title and interest
in and to the investment property and other assets described in Exhibit A
attached hereto and made a part hereof, and all security entitlements of the
Pledgor with respect thereto, whether now owned or hereafter acquired, together
with all additions, substitutions, replacements and proceeds and all income,
interest, dividends and other distributions thereon (the "Collateral"). If the
Collateral includes certificated securities, documents or instruments, such
certificates are herewith delivered to the Secured Party accompanied by duly
executed blank stock or bond powers or assignments as applicable. The Pledgor
hereby authorizes the transfer of possession of all certificates, instruments,
documents and other evidence of the Collateral to the Secured Party.
1 Obligations Secured. The Collateral secures payment of all loans,
advances, debts, liabilities, obligations, covenants and duties owing to the
Secured Party or to any other direct or indirect subsidiary of PNC Bank Corp.
from the Pledgor and from ABLE OIL COMPANY (the "Borrower"), of any kind or
nature, present or future (including, without limitation, any interest accruing
thereon after maturity, or after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding relating
to the Pledgor or the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether or not evidenced
by any note, guaranty or other instrument, whether arising under any agreement,
instrument or document, whether or not for the payment of money, whether arising
by reason of an extension of credit, opening of a letter of credit, loan,
equipment lease or guarantee, under any interest or currency swap, future,
option or other similar agreement, or in any other manner, whether arising out
of overdrafts on deposit or other accounts or electronic funds transfers
(whether through automated clearing houses or otherwise) or out of the Secured
Party's non-receipt of or inability to collect funds or otherwise not being made
whole in connection with depository transfer check or other similar
arrangements, whether direct or indirect (including those acquired by assignment
or participation), absolute or contingent, joint or several, due or to become
due, now existing or hereafter arising, and any amendments, extensions, renewals
or increases and all costs and expenses of the Secured Party incurred in the
documentation, negotiation, modification, enforcement, collection or otherwise
in connection with any of the foregoing, including reasonable attorneys' fees
and expenses (collectively, the "Obligations").
1
<PAGE>
2 Representations and Warranties. The Pledgor represents and warrants to
the Secured Party as follows:
1 There are no restrictions on the pledge or transfer of any of the
Collateral, other than restrictions referenced on the face of any certificates
evidencing the Collateral.
2 The Pledgor is the legal owner of the Collateral, which is
registered in the name of the Pledgor, the Custodian (as hereinafter defined) or
a nominee.
3 The Collateral is free and clear of any security interests,
pledges, liens, encumbrances, charges, agreements, claims or other arrangements
or restrictions of any kind, except as referenced in Section 3.1 above; and the
Pledgor will not incur, create, assume or permit to exist any pledge, security
interest, lein, charge or other encumbrance of any nature whatsoever on any of
the Collateral or assign, pledge or otherwise encumber any right to receive
income from the Collateral.
4 The Pledgor has the right to transfer the Collateral free of any
encumbrances and the Pledgor will defend the Pledgor's title to the Collateral
against the claims of all persons, and any registration with, or consent or
approval of, or other action by, any federal, state or other governmental
authority or regulatory body which was or is necessary for the validity of the
pledge of and grant of the security interest in the Collateral has been
obtained.
5 The pledge of and grant of the security interest in the Collateral
is effective to vest in the Secured Party a valid and perfected first priority
security interest, superior to the rights of any other person, in and to the
Collateral as set forth herein.
3 Covenants.
1 Unless otherwise agreed in writing between the Pledgor and the
Secured Party, the Pledgor agrees to maintain Collateral having a Minimum Margin
Value of at least $N/A or the outstanding amount of the Obligations, whichever
is higher, and to provide additional Collateral to the Secured Party immediately
upon the Secured Party's request if the Minimum Margin Value is not maintained.
"Minimum Margin Value" shall be calculated by multiplying the market value of
the Collateral times the Secured Party's margin requirements for the type of
Collateral as set forth on Exhibit A or as otherwise agreed in writing.
2 If all or part of the Collateral constitutes "margin stock" within the
meaning of Regulation U of the Federal Reserve Board, the Pledgor agrees to
execute and deliver Form U-1 to the Secured Party and, unless otherwise agreed
in writing between the Pledgor and the Secured Party, no part of the proceeds of
the Obligations may be used to purchase or carry margin stock.
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<PAGE>
4 Default.
1 If any of the following occur (each an "Event of Default"): (i)
any Event of Default (as defined in any of the Obligations), (ii) any default
under any of the Obligations that does not have a defined set of "Events of
Default" and the lapse of any notice or cure period provided in such Obligations
with respect to such default, (iii) demand by the Secured Party under any of the
Obligations that have a demand feature, (iv) the failure by the Pledgor to
perform any of its obligations hereunder; (v) the falsity, inaccuracy or
material breach by the Pledgor of any written warranty, representation or
statement made or finished to the Secured Party by or on behalf of the Pledgor,
(vi) the failure of the Secured Party to have a perfected first priority
security interest in the Collateral, or (vii) the termination or breach of the
notification and control agreement referred to in Section 8 below, then the
Secured Party is authorized in its discretion to declare any or all of the
Obligations to be immediately due and payable without demand or notice, which
are expressly waived, and may exercise any one or more of the rights and
remedies granted pursuant to this Pledge Agreement or given to a secured party
under the Uniform Commercial Code of the applicable state, as it may be amended
from time to time, or otherwise at law or in equity, including without
limitation the right to sell or otherwise dispose of any or all of the
Collateral at public or private sale, with or without advertisement thereof,
upon such terms and conditions as it may deem advisable and at such prices as it
may deem best.
2 (a) At any bona fide public sale, and to the extent permitted by
law, at any private sale, the Secured Party shall be free to purchase all or any
part of the Collateral, free of any right or equity of redemption in the Pledgor
or Borrower, which right or equity is hereby waived and released. Any such sale
may be on cash or credit. The Secured Party shall be authorized at any such sale
(if it deems it advisable to do so) to restrict the prospective bidders or
purchasers to persons who will represent and agree that they are purchasing the
Collateral for their own account in compliance with Regulation D) of the
Securities Act of 1933 or any other applicable exemption available under such
Act. The Secured Party will not be obligated to make any sale if it determines
not to do so, regardless of the fact that notice of the sale may have been
given. The Secured Party may adjourn any sale and sell at the time and place to
which the sale is adjourned. If the Collateral is customarily sold on a
recognized market or threatens to decline speedily in value, the Secured Party
may sell such Collateral at any time without giving prior notice to the Pledgor.
Whenever notice is otherwise required by law to be sent by the Secured Party to
the Pledgor of any sale or other disposition of the Collateral, five (5) days
written notice sent to the Pledgor at its address specified above will be
reasonable.
1 The Pledgor recognizes that the Secured Party may be unable to
effect or cause to be effected a public sale of the Collateral by reason of
certain prohibitions contained in the Securities Act of 1933, as amended (the
"Act"), so that the Secured Party may be compelled to resort to one or more
private sales to a restricted group of purchasers who will be obligated to
agree, among other things, to acquire the Collateral for their own account, for
investment and without a view to the distribution or resale thereof. The Pledgor
understands that private sales so made may be at prices and on other terms less
favorable to the seller than if the Collateral were
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<PAGE>
sold at public sales, and agrees that the Secured Party has no obligation to
delay or agree to delay the sale of any of the Collateral for the period of time
necessary to permit the issuer of the securities which are part of the
Collateral (even if the issuer would agree), to register such securities for
sale under the Act. The Pledgor agrees that private sales made under the
foregoing circumstances shall be deemed to have been made in a commercially
reasonable manner.
3 The net proceeds arising from the disposition of the Collateral
after deducting expenses incurred by the Secured Party will be applied to the
Obligations in the order determined by the Secured Party. If any excess remains
after the discharge of all of the Obligations, the same will be paid to the
Pledgor. If after exhausting all of the Collateral there is a deficiency, the
Pledgor or, if the Pledgor is not borrowing from the Secured Party or providing
a guaranty of the Borrower's obligations, the Borrower will be liable therefor
to the Secured Party; provided, however, that nothing contained herein will
obligate the Secured Party to proceed against the Borrower or any other party
obligated under the Obligations or against any other collateral for the
Obligations prior to proceeding against the Collateral.
4 If any demand is made at any time upon the Secured Party for the
repayment or recovery of any amount received by it in payment or on account of
any of the Obligations from the disposition of the Collateral and if the Secured
Party repays all or any part of such amount, the Pledgor or, if the Pledgor is
not borrowing from the Secured Party or providing a guaranty of the Borrower's
obligations, the Borrower will be and remain liable for the amounts so repaid or
recovered to the same extent as if never originally received by the Secured
Party.
5 Voting Rights and Transfer. Prior to the occurrence of an Event of
Default, the Pledgor will have the right to exercise all voting rights with
respect to the Collateral. At any time after the occurrence of an Event of
Default, the Secured Party may transfer any or all of the Collateral into its
name or that of its nominee and may exercise all voting rights with respect to
the Collateral, but no such transfer shall constitute a taking of such
Collateral in satisfaction of any or all of the Obligations unless the Secured
Party expressly so indicates by written notice to the Pledgor.
6 Dividends, Interest and Premiums. The Pledger will have the right to
receive all cash dividends, interest and premiums declared and paid on the
Collateral prior to the occurrence of any Event of Default. In the event any
additional shares are issued to the Pledgor as a stock dividend or in lieu of
interest on any of the Collateral, as a result of any split of any of the
Collateral, by reclassification or otherwise, any certificates evidencing any
such additional shares will be immediately delivered to the Secured Party and
such shares will be subject to this Pledge Agreement and a part of the
Collateral to the same extent as the original Collateral. At any time after the
occurrence of an Event of Default, the Secured Party shall be entitled to
receive all cash or stock dividends, interest and premiums declared or paid on
the Collateral, all of which shall be subject to the Secured Party's rights
under Section 5 above.
A-4
<PAGE>
7 Securities Account. If the Collateral includes securities or any other
financial or other asset maintained in a securities account, then the Pledgor
agrees to cause the securities intermediary on whose books and records the
ownership interest of the Pledgor in the Collateral appears (the "Custodian") to
execute and deliver, contemporaneously herewith, a notification and control
agreement satisfactory to the Secured Party in order to perfect and protect the
Secured Party's security interest in the Collateral.
8 Further Assurances. At any time and from time to time, upon demand of
the Secured Party, the Pledgor will give, execute, file and record any notice,
financing statement, continuation statement, instrument, document or agreement
that the Secured Party may consider necessary or desirable to create, preserve,
continue, perfect or validate any security interest granted hereunder or to
enable the Secured Party to exercise or enforce its rights hereunder with
respect to such security interest. Without limiting the generality of the
foregoing, the Pledgor hereby irrevocably appoints the Secured Party as the
Pledgor's attorney-in-fact to do all acts and things in the Pledgor's name that
the Secured Party may deem necessary or desirable. This power of attorney is
coupled with an interest with full power of substitution and is irrevocable. The
Secured Party is authorized to file financing statements, continuation
statements and other documents under the Uniform Commercial Code relating to the
Collateral without the Pledgor's signature, naming the Pledgor as debtor and the
Secured Party as secured party.
9 Notices. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder must be in writing and will be
effective upon receipt if delivered personally to the Pledgor or the Secured
Party, or if sent by facsimile transmission with confirmation of delivery, or by
nationally recognized overnight courier service, to the address set forth above
or to such other address as either the Pledgor or the Secured Party may give to
the other in writing for such purpose.
10 Preservation of Rights. (a) No delay or omission on the Secured Party's
part to exercise any right or power arising hereunder will impair any such right
or power or be considered a waiver of any such right or power, nor will the
Secured Party's action or inaction impair any such right or power. The Secured
Party's rights and remedies hereunder are cumulative and not exclusive of any
other rights or remedies which the Secured Party may have under other
agreements, at law or in equity.
(b) The Secured Party may, at any time and from time to time,
without notice to or the consent of the Pledgor or the Borrower, and without
impairing or releasing, discharging or modifying the Pledgor's liabilities
hereunder, (i) change the manner, place, time or terms of payment or performance
of or interest rates on, or other terms relating to, any of the Obligations;
(ii) renew, substitute, modify, amend or alter, or grant consents or waivers
relating to any of the Obligations, any other pledge or security agreements, or
any security for any Obligations; (iii) apply any and all payments by whomever
paid or however realized including any proceeds of any collateral, to any
Obligations of the Pledgor or the Borrower in such order, manner and amount as
the Secured Party may determine in its sole discretion; (iv) deal with any
A-5
<PAGE>
other person with respect to any Obligations in such manner as the Secured Party
deems appropriate in its sole discretion; (v) substitute, exchange or release
any security or guaranty; or (vi) take such actions and exercise such remedies
hereunder as provided herein.
11 Illegality. In case any one or more of the provisions contained in this
Pledge Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
12 Changes In Writing. No modification, amendment or waiver of any
provision of this Pledge Agreement nor consent to any departure by the Pledgor
therefrom will be effective unless made in a writing signed by the Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on the
Pledgor in any case will entitle the Pledgor to any other or further notice or
demand in the same, similar or other circumstance.
13 Entire Agreement. This Pledge Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the Pledgor and the Secured Party with respect to the subject matter hereof.
14 Successors and Assigns. This Pledge Agreement will be binding upon and
inure to the benefit of the Pledgor and the Secured Party and their respective
heirs, executors, administrators, successors and assigns; provided, however,
that the Pledgor may not assign this Pledge Agreement in whole or in part
without the Secured Party's prior written consent and the Secured Party at any
time may assign this Pledge Agreement in whole or in part.
15 Interpretation. In this Pledge Agreement, unless the Secured Party and
the Pledgor otherwise agree in writing, the singular includes the plural and the
plural the singular; references to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute referred
to; the word "or" shall be deemed to include "and/or", the words "including",
"includes" and "include" shall be deemed to be followed by the words "without
limitation." Section headings in this Pledge Agreement are included for
convenience of reference only and shall not constitute a part of this Pledge
Agreement for any other purpose. If this Pledge Agreement is executed by more
than one party as Pledgor, the obligations of such persons or entities will be
joint and several.
16 Indemnity. The Pledgor agrees to indemnify each of the Secured Party,
its directors, officers and employees and each legal entity, if any, who
controls the Secured Party (the "Indemnified Parties") and to hold each
Indemnified Party harmless from and against any and all claims, damages, losses,
liabilities and expenses (including all fees of counsel with whom any
Indemnified Party may consult and all expenses of litigation or preparation
therefor) which any Indemnified Party may incur or which may be asserted against
any Indemnified Party as a result
A-6
<PAGE>
of the execution of or performance under this Pledge Agreement; provided,
however, that the foregoing indemnity agreement shall not apply to claims,
damages, losses, liabilities and expenses solely attributable to an Indemnified
Party's gross negligence or willful misconduct. The indemnity agreement
contained in this Section shall survive the termination of this Pledge
Agreement. The Pledgor may participate at its expense in the defense of any such
claim.
17 Governing Law and Jurisdiction. This fledge Agreement has been
delivered to and accepted by the Secured Party and will be deemed to be made in
the State where the Secured Party's office indicated above is located. THIS
PLEDGE AGREEMENT WILL RE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE
PLEDGOR AND THE SECURED PARTY DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
STATE WHERE THE SECURED PARTY'S OFFICE INDICATED ABOVE IS LOCATED, EXCLUDING ITS
CONFLICT OF LAWS RULES. The Pledgor hereby irrevocably consents to the exclusive
jurisdiction of any state or federal court for the county or judicial district
where the Secured Party's office indicated above is located; provided that
nothing contained in this Pledge Agreement will prevent the Secured Party from
bringing any action, enforcing any award or judgment or exercising any rights
against the Pledgor individually, against any security or against any property
of the Pledgor within any other county, state or other foreign or domestic
jurisdiction. The Pledgor acknowledges and agrees that the venue provided above
is the most convenient forum for both the Secured Party and the Pledgor. The
Pledgor waives any objection to venue and any objection based on a more
convenient forum in any action instituted under this Pledge Agreement.
18 WAIVER OF JURY TRIAL. THE PLEDGOR IRREVOCABLY WAIVES ANY AND ALL RIGHT
THE PLEDGOR MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF
ANY NATURE RELATING TO THIS PLEDGE AGREEMENT, ANY DOCUMENTS EXECUTED IN
CONNECTION WITH THIS PLEDGE AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF
SUCH DOCUMENTS. THE PLEDGOR ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING
AND VOLUNTARY.
The Pledgor acknowledges that it has read and understood all the provisions of
this Pledge Agreement, including the waiver of jury trial, and has been advised
by counsel as necessary or appropriate.
WITNESS the due execution hereof as a document under seal, as of the date first
written above.
WITNESS/ATTEST:
/s/ Christopher P. Westad By: /s/ Timothy Harrington
- --------------------------------- -------------------------------
(SEAL)
Print Name: Christopher P. Westad Print Name: Timothy Harrington
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<PAGE>
EXHIBIT A TO PLEDGE AGREEMENT
(CERTIFICATED SECURITIES)
The specific assets listed below are pledged as collateral and are restricted
from trading and withdrawals. The Secured Party's written approval is required
prior to any trading or withdrawals of such assets.
Quantity Description of Securities Certificate Number(s)
- -------- ------------------------- ---------------------
1,000 shares Able Energy, Inc.
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<PAGE>
GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT (this "Guaranty") is made and
entered into as of this 12 day of June, 1998 by ABLE ENERGY, INC. (the
"Guarantor"), with an address at 344 Route 46 East, Rockaway, New Jersey 07866,
in consideration of the extension of credit by PNC BANK, NATIONAL ASSOCIATION
(the "Bank"), with an address at One Garret Mountain Plaza, West Paterson, New
Jersey 07424, to ABLE OIL COMPANY (the "Borrower"), and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged.
1. Guaranty of Obligations. The Guarantor hereby guarantees, and becomes
surety for, the prompt payment and performance of all loans, advances, debts,
liabilities, obligations, covenants and duties owing by the Borrower to the Bank
of any kind or nature, present or future, whether or not evidenced by any note,
guaranty or other instrument, whether arising under any agreement, instrument or
document, whether or not for the payment of money, whether arising by reason of
an extension of credit, opening of a letter of credit, loan or guarantee or in
any other manner, whether arising out of overdrafts on deposit or other accounts
or electronic funds transfers (whether through automatic clearing houses or
otherwise) or out of the Bank's non-receipt of or inability to collect funds or
otherwise not being made whole in connection with depository transfer check or
other similar arrangements, whether direct or indirect (including those acquired
by assignment or participation), absolute or contingent, joint or several, due
or to become due, now existing or hereafter arising, and any amendments,
extensions, renewals or increases and all costs and expenses of the Bank
incurred in the documentation, negotiation, modification, enforcement,
collection or otherwise in connection with any of the foregoing, including
reasonable attorneys' fees and expenses (collectively, the "Obligation"). If
the Borrower defaults under any such Obligations, the Guarantor will pay the
amount due to the Bank.
2. Nature of Guaranty; Waivers. This is a guaranty of payment and not of
collection and the Bank shall not be required, as a condition of the Guarantor's
liability, to make any demand upon or to pursue any of its rights against the
Borrower, or to pursue any rights which may be available to it with respect to
any other person who may be liable for the payment of the Obligations.
This is an absolute, unconditional, irrevocable and continuing guaranty
and will remain in full force and effect until all of the Obligations have been
indefeasibly paid in full, and the Bank has terminated this Guaranty. This
Guaranty will not be affected by any surrender, exchange, acceptance, compromise
or release by the Bank of any other party, or any other guaranty or any security
held by it for any of the Obligations, by any failure of the Bank to take any
steps to perfect or maintain its lien or security interest in or to preserve its
rights to any security or other collateral for any of the Obligations or any
guaranty, or by any irregularity, unenforceability or invalidity of any of the
Obligations or any part thereof or any security or other guaranty thereof. The
Guarantor's obligations hereunder shall not be affected, modified or impaired by
any counterclaim, set-off, deduction or defense based upon any claim the
Guarantor may have against the Borrower or the Bank, except payment or
performance of the Obligations.
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Notice of acceptance of this Guaranty, notice of extensions of credit to
the Borrower from time to time, notice of default, diligence, presentment,
notice of dishonor, protest, demand for payment, and any defense based upon the
Bank's failure to comply with the notice requirements of the applicable version
of Uniform Commercial Code ss. 9-504 are hereby waived.
The Bank at any time and from time to time, without notice to or the
consent of the Guarantor, and without impairing or releasing, discharging or
modifying the Guarantor's liabilities hereunder, may (a) change the manner,
place, time or terms of payment or performance of or interest rates on, or other
terms relating to, any of the Obligations; (b) renew, substitute, modify, amend
or alter, or grant consents or waivers relating to any of the Obligations, any
other guaranties, or any security for any Obligations or guaranties; (c) apply
any and all payments by whomever paid or however realized including any proceed,
of any collateral, to any Obligations of the Borrower in such order, manner and
amount as the Bank may determine in its sole discretion; (d) deal with any other
person with respect to any Obligations in such manner as the Bank deems
appropriate in its sole discretion; (e) substitute, exchange or release any
security or guaranty; or (f) take such actions and exercise such remedies
hereunder as provided herein.
3. Repayments or Recovery from the Bank. If any demand is made at any time
upon the Bank for the repayment or recovery of any amount received by it in
payment or on account of any of the Obligations and if the Bank repays all or
any part of such amount by reason of any judgment, decree or order of any court
or administrative body or by reason of any settlement or compromise of any such
demand, the Guarantor will be and remain liable hereunder for the amount so
repaid or recovered to the same extent as if such amount had never been received
originally by the Bank. The provisions of this section will be and remain
effective notwithstanding any contrary action which may have been taken by the
Guarantor in reliance upon such payment, and any such contrary action so taken
will be without prejudice to the Bank's rights hereunder and will be deemed to
have been conditioned upon such payment having become final and irrevocable.
4. Enforceability of Obligations. No modification, limitation or discharge
of the Obligations arising out of or by virtue of any bankruptcy, reorganization
or similar proceeding for relief of debtors under federal or state law will
affect, modify, limit or discharge the Guarantor's liability in any manner
whatsoever and this Guaranty will remain and continue in the full force and
effect and will be enforceable against the Guarantor to the same extent and with
the same force and effect as if any such proceeding had not been instituted. The
Guarantor waives all rights and benefits which might accrue to it by reason of
any such proceeding and will be liable to the full extent hereunder,
irrespective of any modification, limitation or discharge of the liability of
the Borrower that may result from any such proceeding. The Guarantor expressly
waives the effect of any statute of limitations or other limitations on any
actions under this Guaranty.
5. Events of Default. If any of the following occur (each an "Event of
Default"): (i) any Event of Default (as defined in any of the Obligations); (ii)
any default under any of the Obligations that does not have a defined set of
"Events of Default" and the lapse of any notice or cure period
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provided in such Obligations with respect to such default; (iii) demand by the
Bank under any of the Obligations that have a demand feature; (iv) the failure
by the Guarantor to perform any of its obligations hereunder; (v) the falsity,
inaccuracy or material breach by the Guarantor of any written warranty,
representation or statement made or furnished to the Bank by or on behalf of the
Guarantor; or (vi) the termination or attempted termination of this Guaranty,
then the Guarantor will, on the demand of the Bank, immediately deposit with the
Bank in U.S. dollars all amounts due or to become due under the Obligations and
the Bank will use such funds to repay the Obligations. Upon the occurrence of
any Event of Default the Bank in its discretion may exercise with respect to any
collateral any one or more of the rights and remedies provided a secured party
under the applicable version of the Uniform Commercial Code.
6. Right of Setoff. In addition to all liens upon and rights of setoff
against the money, securities or other property of the Guarantor given to the
Bank by law, the Bank shall have, with respect to the Guarantor's obligations to
the Bank under this Guaranty and to the extent permitted by law, a contractual
possessory security interest in and a contractual right of setoff against, and
the Guarantor hereby assigns, conveys, delivers, pledges and transfers to the
Bank all of the Guarantor's right, title and interest in and to, all deposits,
moneys, securities and other property of the Guarantor now or hereafter in the
possession of or on deposit with, or in transit to, the Bank whether held in a
general or special account or deposit, whether held jointly with someone else,
or whether held for safekeeping or otherwise, excluding, however, all IRA,
Keogh, and trust accounts. Every such security interest and right of setoff may
be exercised without demand upon or notice to the Guarantor. Every such right of
setoff shall be deemed to have occurred immediately upon the occurrence of an
Event of Default hereunder without any action of the Bank, although the Bank may
enter such setoff on its books and records at a later time.
7. Costs. To the extent that the Bank incurs any costs or expenses in
protecting or enforcing its rights under the Obligations or this Guaranty,
including reasonable attorneys' fees and the costs and expenses of litigation,
such costs and expenses will be due on demand, will be included in the
Obligations and will bear interest from the incurring or payment thereof at the
Default Rate (as defined in any of the Obligations).
8. Postponement of Subrogation. Until the Obligations are indefeasibly
paid in fill the Guarantor postpones and subordinates in favor of the Bank any
and all rights which the Guarantor may have to (a) assert any claim against the
Borrower based on subrogation rights with respect to payments made hereunder,
and (b) any realization on any property of the Borrower, including participation
in any marshalling of the Borrower's assets.
9. Notices. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder must be in writing and will be
affective upon receipt if delivered personally, or if sent by facsimile
transmission with confirmation of delivery, or by nationally recognized
overnight courier service, to the addresses for the Bank and the Guarantor set
forth above or to such other address as one may give to the other in writing for
such purpose.
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10. Preservation of Rights. No delay or omission on the Bank's part to
exercise any right or power arising hereunder will impair any such right or
power or be considered a waiver of any such right or power, nor will the Bank's
action or inaction impair any such right or power. The Bank's rights and
remedies hereunder are cumulative and not exclusive of any other rights or
remedies which the Bank may have under other agreements, at law or in equity.
The Bank may proceed in any order against the Borrower, the Guarantor or any
other obligor of, or collateral securing, the Obligations.
11. Illegality. In case any one or more of the provisions contained in
this Guaranty should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
12. Changes in Writing. No modification, amendment or waiver of any
provision of this Guaranty nor consent to any departure by the Guarantor
therefrom will be effective unless made in a writing signed by the Bank, and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. No notice to or demand on the Guarantor in any
case will entitle the Guarantor to any other or further notice or demand in the
same, similar or other circumstance.
13. Entire Agreement. This Guaranty (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the Guarantor and the Bank with respect to the subject matter.
14. Successors and Assigns. This Guaranty will be binding upon and inure
to the benefit of the Guarantor and the Bank and their respective heirs,
executors, administrators, successors and assigns; provided, however, that the
Guarantor may not assign this Guaranty in whole or in part without the Bank's
prior written consent and the Bank at any time may assign this Guaranty in whole
or in part.
15. Interpretation. In this Guaranty, unless the Bank and the Guarantor
otherwise agree in writing, the singular includes the plural and the plural the
singular; references to statutes are to be construed as including all statutory
provisions consolidating, amending or replacing the statute referred to; the
word "or" shall be deemed to include "and/or", the words "including", "includes"
and "include" shall be deemed to be followed by the words "without limitation";
and references to sections or exhibits are to those of this Guaranty unless
otherwise indicated. Section headings in this Guaranty are included for
convenience of reference only and shall not constitute a part of this Guaranty
for any other purpose. If this Guaranty is executed by more than one party as
Guarantor, the obligations of such persons or entities will be joint and
several.
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16. Indemnity. The Guarantor agrees to indemnify each of the Bank, its
directors, officers and employees and each legal entity, if any, who controls
the Bank (the "Indemnified Parties") and to hold each Indemnified Party harmless
from and against any and all claims, damages, losses, liabilities and expenses
(including all fees of counsel with whom any Indemnified Party may consult and
all expenses of litigation or preparation therefor) which any Indemnified Party
may incur or which may be asserted against any Indemnified Party as a result of
the execution of or performance under this Guaranty; provided, however, that the
foregoing indemnity agreement shall not apply to claims, damages, losses,
liabilities and expenses solely attributable to an Indemnified Party's gross
negligence or willful misconduct. The indemnity agreement contained in this
Section shall survive the termination of this Guaranty. The Guarantor may
participate at its expense in the defense of any such claim.
17. Governing Law and Jurisdiction. This Guaranty has been delivered to
and accepted by the Bank and will be deemed to be made in the State where the
Bank's office indicated above is located. THIS GUARANTY WILL BE INTERPRETED AND
THE RIGHTS AND LIABILITIES OF THE BANK AND THE GUARANTOR DETERMINED IN
ACCORDANCE WITH THE LAWS OF THE STATE WHERE THE BANK'S OFFICE INDICATED ABOVE IS
LOCATED, EXCLUDING ITS CONFLICT OF LAWS RULES. The Guarantor hereby irrevocably
consents to the exclusive jurisdiction of any state or federal court for the
county or judicial district where the Bank's office indicated above is located,
and consents that all service of process be sent by nationally recognized
overnight courier service directed to the Guarantor at the Guarantor's address
set forth herein and service so made will be deemed to be completed on the
business day after deposit with such courier; provided that nothing contained in
this Guaranty will prevent the Bank from bringing any action, enforcing any
award or judgment or exercising any rights against the Guarantor individually,
against any security or against any property of the Guarantor within any other
county, state or other foreign or domestic jurisdiction. The Guarantor
acknowledges and agrees that the venue provided above is the most convenient
forum for both the Bank and the Guarantor. The Guarantor waives any objection to
venue and any objection based on a more convenient forum in any action
instituted under this Guaranty.
18. Equal Credit Opportunity Act. If the Guarantor is not an "applicant
for credit" under Section 202.2(e) of the Equal Credit Opportunity Act of 1974
("ECOA"), the Guarantor acknowledges that (i) this Guaranty has been executed to
provide credit support for the Obligations, and (ii) the Guarantor was not
required to execute this Guaranty in violation of Section 202.7(d) of the ECOA.
19. Waiver of Jury Trial. THE GUARANTOR IRREVOCABLY WAIVES ANY AND ALL
RIGHT THE GUARANTOR MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
CLAIM OF ANY NATURE RELATING TO THIS GUARANTY, ANY DOCUMENTS EXECUTED IN
CONNECTION WITH THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH
DOCUMENTS. THE GUARANTOR ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND
VOLUNTARY.
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The Guarantor acknowledges that it has read and understood all the
provisions of this Guaranty, including the waiver of jury trial, and has been
advised by counsel as necessary or appropriate.
WITNESS the due execution hereof as a document under seal, as of the date
first written above, with the intent to be legally bound hereby.
[CORPORATE SEAL] ABLE ENERGY, INC.
Attest: /s/ Christopher P. Westad Attest: /s/ Timothy Harrington
-------------------------- --------------------------
Print Name: CHRISTOPHER P. WESTAD Print Name: Timothy Harrington
---------------------- ----------------------
Title: PRESIDENT Title: CEO
--------------------------- ---------------------------
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<PAGE>
PLEDGE AGREEMENT
(Stocks, Bonds and Commercial Paper)
THIS PLEDGE AGREEMENT, dated as of this 12 day of July, 1998, is made by
Able Energy, Inc. (the "Pledgor"), with an address at 344 Route 46 East,
Rockaway, New Jersey 07866, in favor of PNC BANK, NATIONAL ASSOCIATION (the
"Secured Party"), with an address at One Garret Mountain Plaza, West Paterson,
New Jersey 07424.
Pledge. In order to induce the Secured Party to extend the
Obligations (as defined below), the Pledgor hereby grants a security interest in
and pledges to the Secured Party, and to all other direct or indirect
subsidiaries of PNC Bank Corp., all of the Pledgor's right, title and interest
in and to the investment property and other assets described in Exhibit A
attached hereto and made a part hereof, and all security entitlements of the
Pledgor with respect thereto, whether now owned or hereafter acquired, together
with all additions, substitutions, replacements and proceeds and all income,
interest, dividends and other distributions thereon (the "Collateral"). If the
Collateral includes certificated securities, documents or instruments, such
certificates are herewith delivered to the Secured Party accompanied by duly
executed blank stock or bond powers or assignments as applicable. The Pledgor
hereby authorizes the transfer of possession of all certificates, instruments,
documents and other evidence of the Collateral to the Secured Party.
1 Obligations Secured. The Collateral secures payment of all loans,
advances, debts, liabilities, obligations, covenants and duties owing to the
Secured Party or to any other direct or indirect subsidiary of PNC Bank Corp.
from the Pledgor and from ABLE OIL COMPANY (the "Borrower"), of any kind or
nature, present or future (including, without limitation, any interest accruing
thereon after maturity, or after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding relating
to the Pledgor or the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether or not evidenced
by any note, guaranty or other instrument, whether arising under any agreement,
instrument or document, whether or not for the payment of money, whether arising
by reason of an extension of credit, opening of a letter of credit, loan,
equipment lease or guarantee, under any interest or currency swap, future,
option or other similar agreement, or in any other manner, whether arising out
of overdrafts on deposit or other accounts or electronic funds transfers
(whether through automated clearing houses or otherwise) or out of the Secured
Party's non-receipt of or inability to collect funds or otherwise not being made
whole in connection with depository transfer check or other similar
arrangements, whether direct or indirect (including those acquired by assignment
or participation), absolute or contingent, joint or several, due or to become
due, now existing or hereafter arising, and any amendments, extensions, renewals
or increases and all costs and expenses of the Secured Party incurred in the
documentation, negotiation, modification, enforcement, collection or otherwise
in connection with any of the foregoing, including reasonable attorneys' fees
and expenses (collectively, the "Obligations").
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2 Representations and Warranties. The Pledgor represents and warrants to
the Secured Party as follows:
1 There are no restrictions on the pledge or transfer of any of the
Collateral, other than restrictions referenced on the face of any certificates
evidencing the Collateral.
2 The Pledgor is the legal owner of the Collateral, which is
registered in the name of the Pledgor, the Custodian (as hereinafter defined) or
a nominee.
3 The Collateral is free and clear of any security interests,
pledges, liens, encumbrances, charges, agreements, claims or other arrangements
or restrictions of any kind, except as referenced in Section 3.1 above; and the
Pledgor will not incur, create, assume or permit to exist any pledge, security
interest, lien, charge or other encumbrance of any nature whatsoever on any of
the Collateral or assign, pledge or otherwise encumber any right to receive
income from the Collateral.
4 The Pledgor has the right to transfer the Collateral free of any
encumbrances and the Pledgor will defend the Pledgor's title to the Collateral
against the claims of all persons, and any registration with, or consent or
approval of, or other action by, any federal, state or other governmental
authority or regulatory body which was or is necessary for the validity of the
pledge of and grant of the security interest in the Collateral has been
obtained.
5 The pledge of and grant of the security interest in the Collateral
is effective to vest in the Secured Party a valid and perfected first priority
security interest, superior to the rights of any other person, in and to the
Collateral as set forth herein.
3 Covenants.
1 Unless otherwise agreed in writing between the Pledgor and the
Secured Party, the Pledgor agrees to maintain Collateral having a Minimum Margin
Value of at least $ N/A or the outstanding amount of the Obligations, whichever
is higher, and to provide additional Collateral to the Secured Party immediately
upon the Secured Party's request if the Minimum Margin Value is not maintained.
"Minimum Margin Value" shall be calculated by multiplying the market value of
the Collateral times the Secured Party's margin requirements for the type of
Collateral as set forth on Exhibit A or as otherwise agreed in writing.
2 If all or part of the Collateral constitutes "margin stock" within
the meaning of Regulation U of the Federal Reserve Board, the Pledgor agrees to
execute and deliver Form U-1 to the Secured Party and, unless otherwise agreed
in writing between the Pledgor and the Secured Party, no part of the proceeds of
the Obligations may be used to purchase or carry margin stock.
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4 Default.
1 If any of the following occur (each an "Event of Default"): (i)
any Event of Default (as defined in any of the Obligations), (ii) any default
under any of the Obligations that does not have a defined set of "Events of
Default" and the lapse of any notice or cure period provided in such Obligations
with respect to such default, (iii) demand by the Secured Party under any of the
Obligations that have a demand feature, (iv) the failure by the Pledgor to
perform any of its obligations hereunder, (v) the falsity, inaccuracy or
material breach by the Pledgor of any written warranty, representation or
statement made or furnished to the Secured Party by or on behalf of the Pledgor,
(vi) the failure of the Secured Party to have a perfected first priority
security interest in the Collateral, or (vii) the termination or breach of the
notification and control agreement referred to in Section 8 below, then the
Secured Party is authorized in its discretion to declare any or all of the
Obligations to be immediately due and payable without demand or notice, which
are expressly waived, and may exercise any one or more of the rights and
remedies granted pursuant to this Pledge Agreement or given to a secured party
under the Uniform Commercial Code of the applicable state, as it may be amended
from time to time, or otherwise at law or in equity, including without
limitation the right to sell or otherwise dispose of any or all of the
Collateral at public or private sale, with or without advertisement thereof,
upon such terms and conditions as it may deem advisable and at such prices as it
may deem best.
2 (a) At any bona fide public sale, and to the extent permitted by
law, at any private sale, the Secured Party shall be free to purchase all or any
part of the Collateral, free of any right or equity of redemption in the Pledgor
or Borrower, which right or equity is hereby waived and released. Any such sale
may be on cash or credit. The Secured Party shall be authorized at any such sale
(if it deems it advisable to do so) to restrict the prospective bidders or
purchasers to persons who will represent and agree that they are purchasing the
Collateral for their own account in compliance with Regulation D of the
Securities Act of 1933 or any other applicable exemption available under such
Act. The Secured Party will not be obligated to make any sale if it determines
not to do so, regardless of the fact that notice of the sale may have been
given. The Secured Party may adjourn any sale and sell at the time at place to
which the sale is adjourned. If the Collateral is customarily sold on a
recognized market or threatens to decline speedily in value, the Secured Party
may sell such Collateral at any time without giving prior notice to the Pledgor.
Whenever notice is otherwise required by law to be sent by the Secured Party to
the Pledgor of any sale or other disposition of the Collateral, five (5) days
written notice sent to the Pledgor at its address specified above will be
reasonable.
1 The Pledgor recognizes that the Secured Party may be unable
to effect or cause to be effected a public sale of the Collateral by reason of
certain prohibitions contained in the Securities Act of 1933, as amended (the
"Act"), so that the Secured Party may be compelled to resort to one or more
private sales to a restricted group of purchasers who will be obligated to
agree, among other things, to acquire the Collateral for their own account, for
investment and without a view to the distribution or resale thereof. The Pledgor
understands that private sales so
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made may be at prices and on other terms less favorable to the seller than if
the Collateral were sold at public sales, and agrees that the Secured Party has
no obligation to delay or agree to delay the sale of any of the Collateral for
the period of time necessary to permit the issuer of the securities which are
part of the Collateral (even if the issuer would agree), to register such
securities for sale under the Act. The Pledgor agrees that private sales made
under the foregoing circumstances shall be deemed to have been made in a
commercially reasonable manner.
3 The net proceeds arising from the disposition of the Collateral
after deducting expenses incurred by the Secured Party will be applied to the
Obligations in the order determined by the Secured Party. If any excess remains
after the discharge of all of the Obligations, the same will be paid to the
Pledgor. If after exhausting all of the Collateral there is a deficiency, the
Pledgor or, if the Pledgor is not borrowing from the Secured Party or providing
a guaranty of the Borrower's obligations, the Borrower will be liable therefor
to the Secured Party; provided, however, that nothing contained herein will
obligate the Secured Party to proceed against the Borrower or any other party
obligated under the Obligations or against any other collateral for the
Obligations prior to proceeding against the Collateral.
4 If any demand is made at any time upon the Secured Party for the
repayment or recovery of any amount received by it in payment or on account of
any of the Obligations from the disposition of the Collateral and if the Secured
Party repays all or any part of such amount, the Pledgor or, if the Pledgor is
not borrowing from the Secured Party or providing a guaranty of the Borrower's
obligations, the Borrower will be and remain liable for the amounts so repaid or
recovered to the same extent as if never originally received by the Secured
Party.
5 Voting Rights and Transfer. Prior to the occurrence of an Event of
Default, the Pledgor will have the right to exercise all voting rights with
respect to the Collateral. At any time after the occurrence of an Event of
Default, the Secured Party may transfer any or all of the Collateral into its
name or that of its nominee and may exercise all voting rights with respect to
the Collateral, but no such transfer shall constitute a taking of such
Collateral in satisfaction of any or all of the Obligations unless the Secured
Party expressly so indicates by written notice to the Pledgor.
6 Dividends, Interest and Premiums. The Pledgor will have the right to
receive all cash dividends, interest and premiums declared and paid on the
Collateral prior to the occurrence of any Event of Default. In the event any
additional shares are issued to the Pledgor as a stock dividend or in lieu of
interest on any of the Collateral, as a result of any split of any of the
Collateral, by reclassification or otherwise, any certificates evidencing any
such additional shares will be immediately delivered to the Secured Party and
such shares will be subject to this Pledge Agreement and a part of the
Collateral to the same extent as the original Collateral. At any time after the
occurrence of an Event of Default, the Secured Party shall be entitled to
receive all cash or stock dividends, interest and premiums declared or paid on
the Collateral, all of which shall be subject to the Secured Party's rights
under Section 5 above.
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7 Securities Account. If the Collateral includes securities or any other
financial or other asset maintained in a securities account, then the Pledgor
agrees to cause the securities intermediary on whose books and records the
ownership interest of the Pledgor in the Collateral appears (the "Custodian") to
execute and deliver, contemporaneously herewith, a notification and control
agreement satisfactory to the Secured Party in order to perfect and protect the
Secured Party's security Interest in the Collateral.
8 Further Assurances. At any time and from time to time, upon demand of
the Secured Party, the Pledgor will give, execute, file and record any notice,
financing statement, continuation statement, instrument, document or agreement
that the Secured Party may consider necessary or desirable to create, preserve,
continue, perfect or validate any security interest granted hereunder or to
enable the Secured Party to exercise or enforce its rights hereunder with
respect to such security interest. Without limiting the generality of the
foregoing, the Pledgor hereby irrevocably appoints the Secured Party as the
Pledgor's attorney-in-fact to do all acts and things in the Pledgor's name that
the Secured Party may deem necessary or desirable. This power of attorney is
coupled with an interest with full power of substitution and is irrevocable. The
Secured Party is authorized to file financing statements, continuation
statements and other documents under the Uniform Commercial Code relating to the
Collateral without the Pledgor's signature, naming the Pledgor as debtor and the
Secured Party as secured party.
9 Notices. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder must be in writing and will be
effective upon receipt if delivered personally to the Pledgor or the Secured
Party, or if sent by facsimile transmission with confirmation of delivery, or by
nationally recognized overnight courier service, to the address set forth above
or to such other address as either the Pledgor or the Secured Party may give to
the other in writing for such purpose.
10 Preservation of Rights. (a) No delay or omission on the Secured Party's
part to exercise any right or power arising hereunder will impair any such right
or power or be considered a waiver of any such right or power, nor will the
Secured Party's action or inaction impair any such right or power. The Secured
Party's rights and remedies hereunder are cumulative and not exclusive of any
other rights or remedies which the Secured Party may have under other
agreements, at law or in equity.
(b) The Secured Party may, at any time and from time to time,
without notice to or the consent of the Pledgor or the Borrower, and without
impairing or releasing, discharging or modifying the Pledgor's liabilities
hereunder, (i) change the manner, place, time or terms of payment or performance
of or interest rates on, or other terms relating to, any of the Obligations;
(ii) renew, substitute, modify, amend or alter, or grant consents or waivers
relating to any of the Obligations, any other pledge or security agreements, or
any security for any Obligations; (iii) apply any and all payments by whomever
paid or however realized including any proceeds of any collateral, to any
Obligations of the Pledgor or the Borrower in such order, manner and amount as
the Secured Party may determine in its sole discretion; (iv) deal with any
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other person with respect to any Obligations in such manner as the Secured Party
deems appropriate in its sole discretion; (v) substitute, exchange or release
any security or guaranty; or (vi) take such actions and exercise such remedies
hereunder as provided herein.
11 Illegality. In case any one or more of the provisions contained in this
Pledge Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
12 Changes in Writing. No modification, amendment or waiver of any
provision of this Pledge Agreement nor consent to any departure by the Pledgor
therefrom will be effective unless made in a writing signed by the Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on the
Pledgor in any case will entitle the Pledgor to any other or further notice or
demand in the same, similar or other circumstance.
13 Entire Agreement. This Pledge Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the Pledgor and the Secured Party with respect to the subject matter hereof.
14 Successors and Assigns. This Pledge Agreement will be binding upon and
inure to the benefit of the Pledgor and the Secured Party and their respective
heirs, executors, administrators, successors and assigns; provided, however,
that the Pledgor may not assign this Pledge Agreement in whole or in part
without the Secured Party's prior written consent and the Secured Party at any
time may assign this Pledge Agreement in whole or in part.
15 Interpretation. In this Pledge Agreement, unless the Secured Party and
the Pledgor otherwise agree in writing, the singular includes the plural and the
plural the singular; references to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute referred
to; the word "or" shall be deemed to include "and/or", the words "including",
"includes" and "include" shall be deemed to be followed by the words "without
limitation." Section headings in this Pledge Agreement are included for
convenience of reference only and shall not constitute a part of this Pledge
Agreement for any other purpose. If this Pledge Agreement is executed by more
than one party as Pledgor, the obligations of such persons or entities will be
joint and several.
16 Indemnity. The Pledgor agrees to indemnify each of the Secured Party,
its directors, officers and employees and each legal entity, if any, who
controls the Secured Party (the "Indemnified Parties") and to hold each
Indemnified Party harmless from and against any and all claims, damages, losses,
liabilities and expenses (including all fees of counsel with whom any
Indemnified Party may consult and all expenses of litigation or preparation
therefor) which any Indemnified Party may incur or which may be asserted against
any Indemnified Party as a result
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of the execution of or performance under this Pledge Agreement; provided,
however, that the foregoing indemnity agreement shall not apply to claims,
damages, losses, liabilities and expenses solely attributable to an Indemnified
Party's gross negligence or willful misconduct. The indemnity agreement
contained in this Section shall survive the termination of this Pledge
Agreement. The Pledgor may participate at its expense in the defense of any such
claim.
17 Governing Law and Jurisdiction. This Pledge Agreement has been
delivered to and accepted by the Secured Party and will be deemed to be made in
the State where the Secured Party's office indicated above is located. THIS
PLEDGE AGREEMENT WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE
PLEDGOR AND THE SECURED PARTY DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
STATE WHERE THE SECURED PARTY'S OFFICE INDICATED ABOVE IS LOCATED, EXCLUDING ITS
CONFLICT OF LAWS RULES. The Pledgor hereby irrevocably consents to the exclusive
jurisdiction of any state or federal court for the county or judicial district
where the Secured Party's office indicated above is located; provided that
nothing contained in this Pledge Agreement will prevent the Secured Party from
bringing any action, enforcing any award or judgment or exercising any rights
against the Pledgor individually, against any security or against any property
of the Pledgor within any other county, state or other foreign or domestic
jurisdiction. The Pledgor acknowledges and agrees that the venue provided above
is the most convenient forum for both the Secured Party and the Pledgor. The
Pledgor waives any objection to venue and any objection based on a more
convenient forum in any action instituted under this Pledge Agreement.
18 WAIVER OF JURY TRIAL. THE PLEDGOR IRREVOCABLY WAIVES ANY AND ALL RIGHT
THE PLEDGOR MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF
ANY NATURE RELATING TO THIS PLEDGE AGREEMENT, ANY DOCUMENTS EXECUTED IN
CONNECTION WITH THIS PLEDGE AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF
SUCH DOCUMENTS. THE PLEDGOR ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING
AND VOLUNTARY.
The Pledgor acknowledge that it has read and understood all the provisions of
this Pledge Agreement, including the waiver of jury trial, and has been advised
by counsel as necessary or appropriate.
WITNESS the due execution hereof as a document under seal, as of the date first
written above.
WITNESS/ATTEST: ABLE ENERGY, INC.
/s/ Christopher P. Westad By: /s/ Timothy Harrington
- ---------------------------------- ------------------------------
(SEAL)
Print Name: CHRISTOPHER P. WESTAD Print Name: TIMOTHY HARRINGTON
---------------------- ----------------------
Title: CEO
---------------------------
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EXHIBIT A TO PLEDGE AGREEMENT
(CERTIFICATED SECURITIES)
The specific assets listed below are pledged as collateral and are restricted
from trading and withdrawals. The Secured Party's written approval is required
prior to any trading or withdrawals of such assets.
Quantity Description of Securities Certificate Number(s)
- -------- ------------------------- ---------------------
10 shares Able Oil Company
99% membership interest Able Propane, LLC
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Exhibit 21.1
SUBSIDIARIES OF THE COMPANY
- ---------------------------
Able Oil, Inc.
Able Propane, L.L.C.
Able Oil Melbourne, Inc.
Able Oil Company Montgomery
A&O Environmental Services, Inc.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the Caption "Experts" and
to the use of our reports dated July 1, 1998, April 15, in the registration
Statement on Form SB-2 and related prospectus of Able Energy, Inc. for the
registration of 875,000 of its units, each unit consisting of two shares of
common stock and one common stock purchase warrant.
/s/ Simontacci & Company LLP
-------------------------------
Simontacci & Company LLP
July 14, 1998
Fairfield, New Jersey
<PAGE>
Exhibit 23.3
CONSENT OF JAMES PURCARO
I, James Purcaro, do hereby acknowledge that I have been duly appointed
and have, in turn, agreed to serve on the Board of Directors of Able Energy,
Inc. (the "Company") commencing on the effective date of an initial public
offering of the Company's securities. And further, I hereby consent to the
reference of my name under the "Management" caption in the Company's
Registration Statement on Form SB-2 and related prospectus filed in
connection with the Company's initial public offering.
/s/ James Purcaro
-------------------------------
James Purcaro
July 10, 1998
