<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1999
REGISTRATION NO. 333-59109
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT #2 TO
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. JAY M. KAPLOWITZ, ESQ.
SICHENZIA, ROSS & FRIEDMAN LLP GERSTEN, SAVAGE & KAPLOWITZ, LLP
135 WEST 50TH STREET, 20TH FLOOR 10 EAST 52ND STREET
NEW YORK, NEW YORK 10020 NEW YORK, NEW YORK 10022
TELEPHONE NO.: (212) 664-1200 TELEPHONE NO.: (212) 752-9700
FACSIMILE NO.: (212) 664-7329 FACSIMILE NO.: (212) 980-5192
</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. /X/
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>
Common Stock, $.001 par value per
share(2)......................... 1,150,000 $7.50 $8,625,000 $2,397.75
Underwriter's Warrant(3)........... 1 $10.00 $10.00 $(4)
Common Stock underlying
Underwriters Warrant(5).......... 100,000 $12.375 $1,237,500 $344.03
Total.............................. $9,862,510 $2,741.78(6)
</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 150,000 shares of Common Stock subject to sale upon exercise of the
Underwriter's over-allotment option.
(3) The Underwriter's Warrant is for the purchase of Common Stock.
(4) No fee due pursuant to Rule 457(g).
(5) Consists of Common Stock issuable upon the exercise of the Underwriter's
Warrant.
(6) Previously paid.
<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
8. Plan of Distribution................................. Prospectus Summary, Underwriting
9. Legal Proceedings.................................... Business
10. Directors, Executive Officers, Promoters and Control
Persons............................................ Management, Principal Stockholders and Selling
Securityholders
11. Security Ownership of Certain Beneficial Owners and
Management......................................... Principal Stockholders and Selling Securityholders
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 APRIL 15, 1999
PROSPECTUS
ABLE ENERGY, INC.
1,000,000 SHARES OF COMMON STOCK
Able Energy, Inc. (the "Company") is hereby offering to the public 1,000,000
shares of common stock, $.001 par value per share (the "Common Stock" or the
"Shares"). It is presently anticipated that the initial public offering price
per share of Common Stock will be between $7.00 and $7.50 which has been
determined by negotiations between the Company and Kashner Davidson Securities
Corp. as underwriter (the "Underwriter") and does 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 offering of
Common Stock hereby is sometimes referred to as the "Offering" herein.
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 on the Nasdaq SmallCap Market under
the symbol "ABLE" and for listing on the Boston Stock Exchange under the symbol
"ABL."
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 18.
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 Share of Common Stock................................ $ $ $
Total (3)................................................ $ $ $
</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 100,000 Shares of Common
Stock at a price per Share equal to 165% of the initial public offering
price per Share ("Underwriter's Warrant"), and (iii) a financial consulting
agreement with the Underwriter for a period of two years for an aggregate
consideration of $108,000 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
$ (or $ if the Over-Allotment Option, defined below, is
exercised in full) and the other expenses of the Offering, estimated at
$ 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 150,000 shares of Common Stock from the Company (which
include the Shareholder Shares, as defined below) 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
75,000 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 $ , $ and $ , respectively. See
"Underwriting."
The securities 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 will be made against
payment therefor at the offices of the Underwriter, 77 South Palm Avenue,
Sarasota, Florida 34236 on or about [ ], 1999.
KASHNER DAVIDSON SECURITIES CORP.
----------------
The date of this Prospectus is , 1999
<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".
FOR CALIFORNIA RESIDENTS
THE COMMON STOCK WILL BE SOLD TO CALIFORNIA RESIDENTS PURSUANT TO A LIMITED
OFFERING QUALIFICATION UNDER A SUITABILITY STANDARD OF A LIQUID NET WORTH OF NOT
LESS THAN $225,000 (A NET WORTH EXCLUSIVE OF HOME, HOME FURNISHINGS AND
AUTOMOBILES), PLUS $65,000 GROSS ANNUAL INCOME OR $500,000 LIQUID NET WORTH.
AFTER THE CLOSING OF THIS OFFERING THE UNDERWRITER MAY EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OF THE COMPANY AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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 OIL MELBOURNE,
INC. ("ABLE MELBOURNE"), AND ITS 99% INTEREST IN ABLE PROPANE, L.L.C. ("ABLE
PROPANE"). 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 1,000 FOR ONE FORWARD STOCK SPLIT
OF THE COMPANY'S COMMON STOCK TO BE EFFECTED ON OR BEFORE THE EFFECTIVE DATE.
THE COMPANY
Able Energy was incorporated on March 13, 1997 in the state of Delaware, to
act as a holding company for its operating subsidiaries: Able Oil; Able Propane;
Able Melbourne; Able Oil Company Montgomery, Inc. ("Able Montgomery") and A&O
Environmental Services, Inc. ("A&O"). In December 1998, the Company sold Able
Montgomery as its first franchise, and it also sold A&O.
The Company's operating entities are engaged in the retail distribution of,
and the provision of services relating to: (i) fuel oil, (ii) propane gas, and
(iii) natural gas through a marketing alliance with AllEnergy Marketing Company
LLC, a division of New England Electric Systems, Inc. In addition to selling
home energy products, the Company installs and repairs home heating equipment
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 1998, sales of home heating oil accounted for approximately
70% of the Company's revenues. The remaining 30% of revenues were from sales of
gasoline, diesel fuel, kerosine and propane. The Company serves approximately
25,000 home heating oil customers from three locations, of which two are located
in New Jersey and one is located in Florida.
The Company employs a focus 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 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.
3
<PAGE>
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 expand its 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,
one such franchise has 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.
THE OFFERING
<TABLE>
<S> <C>
Securities Offered................ 1,000,000 shares of Common Stock. See "Description of
Securities."
Common Stock Outstanding
Prior to Offering(1)............ 1,000,000
Common Stock to be Outstanding
After Offering(2)............... 2,000,000
Use of Proceeds................... The net proceeds to the Company from the sale of the
Shares are estimated to be approximately $5,857,000
after deducting commissions and expenses of the
Offering, which are estimated at $1,643,000. 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>
4
<PAGE>
<TABLE>
<S> <C>
Proposed Nasdaq SmallCap Symbol(3):
Common Stock...................... ABLE
Proposed Boston Stock Exchange Symbol (3):
Common Stock...................... ABL
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 1,000,000 shares of Common Stock to Timothy Harrington
as founder's stock and in exchange for all of the common stock previously
held by him in the operating subsidiaries, and also gives effect to a
1,000-for-one stock split to be completed on or before the effective date of
the Offering.
(2) Does not include (i) 100,000 shares of Common Stock which may be issued upon
exercise of the Underwriter's Warrants; (ii) 150,000 shares of Common Stock
which may be issued upon exercise of the Underwriter's Over-Allotment
Option; and (iii) 300,000 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.
5
<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, 1998 and 1997 is derived from the
audited financial statements of 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>
YEAR ENDED DECEMBER 31,
----------------------------
<S> <C> <C>
1998 1997
------------- -------------
Revenues........................................................................... $ 16,317,668 $ 16,380,992
Gross Profit....................................................................... 3,272,744 3,358,357
Income from operations............................................................. 100,745 217,588
Earnings (loss) per share(1)....................................................... .101 .218
Weighted average number of shares outstanding...................................... 1,000,000 1,000,000
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
DECEMBER 31, -----------------------------
1997 ACTUAL AS ADJUSTED(2)
------------- ------------- --------------
<S> <C> <C> <C>
Working capital(2)................................................. $ (759,116) $ (795,960) $ 5,061,040
Total assets(2)(3)................................................. 3,552,524 3,734,816 10,441,816
Long-term liabilities(3)........................................... 1,321,388 1,161,118 2,011,118
Total liabilities(3)............................................... 3,154,264 3,121,904 3,971,904
Total shareholders' equity(2)(3)................................... 398,260 612,912 6,469,912
</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 $5,857,000 from the sale by the
Company in this offering of 875,000 Units at the assumed public offering
price of $7.50 per Share.
(3) Long-term liabilities and total liabilities have been adjusted to reflect an
$850,000 increase in debt projected to be incurred for the purchase of the
Company's headquarters in Rockaway, New Jersey, which the Company currently
leases. Total assets have also been increased by $850,000, representing the
purchase of the Company's headquarters.
6
<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; SUBSTANTIAL LONG-TERM
DEBT. The Company was incorporated in March 1997 to act as a holding company
for its 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 1989 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 results
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."
7
<PAGE>
After giving effect to the proposed purchase by the Company of its facility
in Rockaway, New Jersey, as of December 31, 1998, the Company had long term
liabilities of $2,011,118. See "Capitalization" and Note 6 to the Company's
financial statements.
The Company's ability to satisfy such obligations will depend on the
Company's future operating performance, which will be affected by, among other
things, prevailing economic conditions and financial, business and other
factors, many of which are beyond the Company's control. There can be no
assurance that the Company will be able to service its indebtedness. If the
Company is unable to service its indebtedness, it will be forced to examine
alternative strategies that may include actions such as reducing or delaying
capital expenditures, restructuring or refinancing its indebtedness, or the sale
of assets or seeking additional equity and/or debt financing. There can be no
assurance that any of these strategies could be effected on satisfactory terms,
if at all. See "--Need for Additional Capital."
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 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, 1998. The loss of either supplier
would not have a material adverse effect on the Company.
The Company entered into a fuel oil storage agreement with Mieco Trading Co.
("Mieco"), whereby the Company stored 1,500,000 gallons of Number 2 Heating Oil
in the Company's facility in Rockaway, New Jersey. Pursuant to an additional
agreement with Mieco, the Company purchased all of such oil during the months of
November 1998 through March 1999. Presently, the Company does not intend to
renew its agreement, or extend this arrangement, with Mieco. Additional fuel oil
purchases are made on a daily basis on the spot market by electronic funds
transfers.
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
8
<PAGE>
requirements for the year ended December 31, 1998. 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, 1998. Each of these entities supplied approximately
50% of such requirements during such period.
Notwithstanding the agreements with Mieco, the Company has not entered into
any agreements for the supply of Number 2 Heating Oil, propane or gasoline.
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."
GROWTH DEPENDENT UPON UNSPECIFIED ACQUISITIONS. The Company's growth
strategy includes the acquisition of existing fuel distributors. The Company
expects to allocate 47.8% ($2.5 million) of the net proceeds of this Offering
for such purposes. There can be no assurance that the Company will be able to
identify new acquisition candidates or, even if a candidates is identified, that
the Company will have access to the capital necessary to consummate such
acquisitions. Shareholders will not have an opportunity to vote on any
acquisition proposed by the Company, nor will shareholders have any opportunity
to review the financial status of such acquisition candidates. 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."
BROAD DISCRETION IN APPLICATION OF PROCEEDS BY MANAGEMENT. Approximately
47.8% of the net proceeds of this Offering will be applied towards unidentified
acquisitions, 17.1% for development of new products and business lines, and
13.5% 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."
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
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,
9
<PAGE>
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."
NO ASSURANCE OF ADEQUATE INSURANCE PROTECTION. 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 expand 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 franchising activity, the Company is 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."
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
10
<PAGE>
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."
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."
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."
CONTINUING INFLUENCE OF UNDERWRITER. The Underwriter may be able to exert
continuing influence on the Company in light of the fact that it has the right
to (i) appoint a board member for a five year period; (ii) receive warrants to
purchase 100,000 shares of Common Stock, exclusive of the Over-Allotment Option;
(iii) exercise its registration rights; and (iv) act as financial consultant to
the Company for a two year period and receive a finders fee for the same period.
In light of the forgoing, the Underwriter may be, for the forseeable future, a
dominating influence, and thereafter, a factor of decreasing importance in the
market for the Common Stock.
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
11
<PAGE>
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 will use
its best efforts to acquire key-person life insurance policies on Mr. Harrington
in the amount of $3 million prior to the closing at this offering. 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 50% (46.5%
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. Assuming a public offering price of $7.50 per
share of Common Stock, purchasers of Common Stock in the Offering will incur an
immediate dilution of $4.56 per share of Common Stock in the net tangible book
value of their investment from the initial public offering price, which dilution
amounts to approximately 60% of the initial public offering price per share of
Common Stock. Investors in the Offering will pay approximately $7.50 per share
of Common Stock, as compared with an average cash price of $.48 per share of
Common Stock paid by existing stockholders. See "Dilution."
ISSUANCE OF BLANK CHECK PREFERRED STOCK. The Board of Directors will have
the authority to issue up to 10,000,000 shares of preferred stock with
designations, rights and preferences determined from time to time by the Board
of Directors. Accordingly, the Board of Directors is empowered, without
stockholder approval, to issue classes of preferred stock with voting
liquidation, conversion or other rights that could adversely effect the holders
of the Common Stock in that the issuance of such preferred stock may adversely
dilute the proportionate equity interest and voting power of such holders.
However, no such preferred stock may issued by the Company without the
Underwriter's consent for a period of 24 months following the effective date.
See "Description of Securities; Preferred Stock."
SHARES ELIGIBLE FOR FUTURE SALE. Of the 2,000,000 shares of Common Stock of
the Company to be outstanding upon completion of this Offering, 1,000,000 shares
shall be "restricted securities" 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
12
<PAGE>
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 1,000,000 shares of Common
Stock are affiliates of the Company. All of the Company's shareholders who are
affiliates 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 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 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 and
there is no assurance that a public trading market for the Company's
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<PAGE>
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 approved 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 may be
delisted from the Nasdaq SmallCap Market. In such event, trading, if any, in the
Company's Common Stock, 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.
UNDERWRITER'S INFLUENCE ON THE MARKET. A significant amount of the Common
Stock 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 Common Stock. Such market-making activity
may be discontinued at any time. The price and liquidity of the Common Stock 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 an assumed public offering prices of $7.50 per share of Common
Stock, after deducting underwriting commissions and offering expenses estimated
to be $1,643,000 to be paid by the Company, is estimated to be $5,857,000. 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 47.8%
Development of new product and business lines(2).......................... 1,000,000 17.1%
Sales & Marketing(3)...................................................... 515,000 8.8%
Terminal space(4)......................................................... 300,000 5.1%
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..................................... 792,000 13.5%
Total..................................................................... $ 5,857,000 100%
------------------- ------
------------------- ------
</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
15
<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 $489,375) 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
December 31, 1998 and as adjusted to reflect the sale of 1,000,000 shares of
Common Stock, 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>
DECEMBER 31, 1998
----------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
------------ --------------
Long-term liabilities, less current maturities(1)................................... $ 1,161,118 $ 2,011,118
------------ --------------
------------ --------------
Shareholders' equity: 10,000,000 Capital Stock, shares authorized: 1,000,000 issued
and outstanding(2); and 2,000,000 issued and outstanding as adjusted (3).......... 1 2,000
Retained earning.................................................................. 608,912 608,912
Paid in Surplus................................................................... 3,999 5,859,000
------------ --------------
Total shareholders' equity........................................................ 612,912 6,469,912
------------ --------------
------------ --------------
</TABLE>
- ------------------------
(1) Long-term liabilities have been adjusted to reflect an $850,000 increase in
debt projected to be incurred for the purchase of the Company's headquarters
in Rockaway, New Jersey, which the Company currently leases.
(2) Does not include 300,000 shares of Common Stock provided for issuance under
the Company's Stock Option Plan.
(3) Reflects the issuance of 1,000,000 shares of Common Stock by the Company in
connection with this Offering. Does not include 300,000 shares of Common
Stock provided for issuance under the Company's Stock Option Plan or
10,000,000 shares of preferred stock at $.001 per share par value, to be
authorized on or before the Effective Date.
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<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 December 31, 1998, the net tangible book value of the Company's Common
Stock was ($23,542) or ($.02) per share. Without taking into account any changes
in net tangible book value after December 31, 1998, other than to give effect to
the sale of the Shares offered hereby and the receipt of the net proceeds of
this Offering, the pro forma net tangible book value of the Company as of
December 31, 1998 would have been $5,880,542 or $2.94 per share. Consequently,
there will be an immediate increase in net tangible book value of $2.92 per
Share to the existing shareholders and an immediate substantial dilution (i.e.
the difference between the assumed offering price of $7.50 per Share and the pro
forma net tangible book value per Share after the Offering) of $4.56 or 61% to
new investors purchasing the Shares offered hereby.
The following table illustrates, as of December 31, 1998, this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per Share of Common Stock.... $ 7.50
Net tangible book value per share before Offering...... $ (.02)
Increase per Share attributable to new investors....... $ 2.92
Pro forma net tangible book value per Share after
Offering................................................. $ 2.94
---------
Dilution per Share to new investors........................ $ 4.56
---------
---------
</TABLE>
The following table summarizes, as of December 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 Shares 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................. 1,000,000 50% $ 480,760 6.0% $ 0.48
New Investors......................... 1,000,000 50% $ 7,500,000 94.0% 7.50
------------ --- ------------- ---
Total........................... 2,000,000 100% $ 7,980,760 100%
------------ --- ------------- ---
------------ --- ------------- ---
</TABLE>
- ------------------------
(1) This information does not reflect 300,000 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, 1998 and 1997 is derived from the
audited financial statements of 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"
appearing elsewhere in this Prospectus.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
<S> <C> <C>
1998 1997
------------- -------------
Total revenues..................................................................... $ 16,317,668 $ 16,380,992
Total costs and expenses........................................................... 16,208,946 16,304,931
Net income (loss).................................................................. 108,722 76,061
Net income(loss) per common share(1)............................................... .109 .076
Weighted average common shares
outstanding...................................................................... 1,000,000 1,000,000
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1998
------------ ----------------------------
<S> <C> <C> <C>
1997 ACTUAL AS ADJUSTED(2)
------------ ------------ --------------
Working capital(3)................................................... $ (761,188) $ (795,960) $ 5,061,040
Total assets(2)(3)................................................... 3,552,524 3,734,816 10,441,816
Total liabilities(2)................................................. 3,154,264 3,121,904 3,971,904
Total stockholders' equity(3)........................................ 398,260 612,912 6,469,912
</TABLE>
- ------------------------
(1) Net earnings per common share is based upon the weighted average number of
common shares outstanding for each period presented.
(2) Total liabilities have been adjusted to reflect an $850,000 increase in debt
projected to be incurred for the purchase of the Company's headquarters in
Rockaway, New Jersey, which the Company currently leases. Total assets have
also been increased by $850,000 representing the purchase of the Company's
headquarters.
(3) As adjusted to reflect net proceeds of $5,857,000 from the sale by the
Company in this offering of 1,000,000 Shares at the assumed public offering
price of $7.50 per Share.
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. With respect to
achieving market acceptance of new energy related products, the Company has
entered into a marketing agreement with AllEnergy where the Company will market
and sell natural gas to residential and commercial customers in New Jersey. The
Company will receive a commission equal to 35% of the gross profit margin for
sales generated by the Company. 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 and related entities which, in 1997, are subsidiaries of
the Company, and, as such, are the same operating entities in 1997 and 1996.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997.
Revenues for the year ended December 31, 1998 were $16,317,668, a 0.38%
decrease over the prior year's revenues of $16,308,992. The decrease in revenue
for the year ended December 1998 was due in part to lower product costs during
the second half of fiscal 1998. For example, the costs for number 2 home heating
oil averaged $0.42 per gallon for fiscal 1998 as compared to $0.59 for 1999.
Additionally, the decrease in revenues was a result of a reduction in revenues
from the sale of home heating oil. This reflects
20
<PAGE>
management's decision to stop sales of home heating oil to two wholesale
customers because of low profit margins on such sales. Management believes that
the elimination of these customers will result was an increase in overall profit
margins from sales of home heating oil. The Company did, however, experience a
78% increase in gallon sales of propane, from 215,508 gallons during fiscal 1997
to 383,678 gallons in fiscal 1999 which was the result of an increase in propane
customers.
The Company's gross profit margin for the year ended December 31, 1998 was
20.1% of sales, a decrease from the 20.5% margin for the comparable period ended
December 31, 1997. Selling General & Administration expenses ("SG&A") for the
Company decreased by 0.92% from $2,745,963 to $2,720,598 for the year ended
December 31, 1998 as compared to December 31, 1997. These changes can be
attributed, in part, to the reclassification of expenses from SG&A to cost of
goods sold to better classify such expenses. For example, during fiscal year
1997, the Company included $108,000 in insurance expense and $80,000 of fuel and
excise tax in SG&A; however, in fiscal 1998, these expenses were included in
cost of goods sold. The decrease in gross profit can also be attributed to
fluctuating costs for product during the second half of 1998 and higher costs
attributable to A&O, which was sold in December 1998. The decrease in SG&A can
also be attributed to decreased executive officers salaries, as certain officers
did not take a bonus in 1998.
Operating income for the year ended December 31, 1998 was $100,705 a
decrease of 53.7% over the Company's operating income for the previous year
ended December 31, 1997 of $217,588. This decrease in income from operations is
related to the increase in one time expenditures relating to strengthening the
Company's infrastructure. For example, in fiscal 1998, the Company established a
garage in its Newton Facility which is staffed with one full-time employee. The
Company expects that the addition of this garage will help to reduce operating
expenses related to its fleet of trucks during fiscal year 1999. Additionally,
increased costs related to A&O further decreased operating income.
Net income for the year ended December 31, 1998 was $108,722, a 42.94%
increase over the Company's net income of $76,061 for the year ending December
31, 1997. This increase in net income is primarily attributable to a $72,732
gain from the sale of Able Montgomery. Reduced interest expense further
increased net income.
Depreciation and amortization expense for the year ended December 31, 1998
was $451,441, an increase from $394,806 for the year ending December 31, 1997.
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, 1998 was $88,800, as compared to $75,636
for the year ended December 31, 1996 and reflects a full year's amortization of
the Non-Compete Agreement and customer list. Depreciation expense for the year
ended December 31, 1998 was $376,661 compared to $320,026 for the prior year.
This was due to the addition of propane cylinders and tanks, and the purchase of
additional trucks and other equipment at a cost of approximately $450,000.
Interest expense for the year ended December 31, 1998 was $169,040 as
compared to $211,133 for the year ended December 31, 1997. This decrease was due
to debt restructuring. For example, the Company reduced total debt by $235,550
during fiscal 1998. Also the Company converted certain short-term notes to long
term notes, resulting in a 1.5% lower interest rate.
During the year ended December 31, 1998, the Company sold one Freightliner
delivery truck for a total selling price of $44,000. The book value of the truck
was $20,043, resulting in a gain on sales of equipment of $23,957.
During the year ended December 31, 1998, the Company sold A&O and Able
Montgomery for an aggregate selling price of $140,000. The aggregate book value
of these subsidiaries was $121,664, resulting in a gain on sale of subsidiary of
$72,739, and excess of subsidiary losses over investment of $54,404.
21
<PAGE>
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 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 expenses 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 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.
22
<PAGE>
During the year ended December 31, 1997, the Company sold three trucks for a
total selling price of $114,490. The book value of these trucks was $42,386,
resulting in a gain on sales of equipment of $72,104. The terms of sale were
cash.
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 year ended December 31, 1998, compared to the year ended December
31, 1997, the Company's cash position decreased by $30,060 from December 31,
1997 balance of $155,904 to December 31, 1998 balance of $125,844. For the year
ended December 31, 1998, cash was generated through operations and a decrease in
inventory and an increase in customer advance payments. For the year ended
December 31, 1997, cash was generated through operations, and an increase in
customer advance payments.
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 1% above prime rate. As of December 31, 1998, $100,000 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.
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. " See Management; Employment Agreements."
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
23
<PAGE>
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 can 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.
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.
24
<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. In December 1998, the Company
sold Able Montgomery as its first franchise, and it also sold A&O.
Presently the Company's operating entities are engaged in the retail
distribution of, and the provision of services relating to, (i) fuel oil, (ii)
propane gas, and (iii) natural gas through a marketing alliance agreement with
AllEnergy Marketing Company LLC, a division of New England Electric Systems,
Inc. In addition to selling home energy products, the Company installs and
repairs home heating equipment and also markets other petroleum products to
commercial customers, including diesel fuel, gasoline and lubricants.
In fiscal year 1998, sales of home heating oil accounted for approximately
70% of the Company's revenues. The remaining 30% of revenues were from sales of
gasoline, diesel fuel, kerosine, propane, and environmental services and related
sales. The Company serves approximately 25,000 home heating oil customers from
three locations, of which two are located in New Jersey 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 24 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.
The Company employs a focus 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 marketing alliances 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 and Able Melbourne. The Company serves both residential
and commercial fuel oil accounts. The Company sells premium quality 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 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.
25
<PAGE>
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. Customers can also order deliveries of home heating oil through the
Company's Web site located at www.ableenergy.com. 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.
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 18 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. 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,
Warren, 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, 18 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 18 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
entered into an in-tank storage agreement with Mieco Trading Co., to store 1.5
million gallons of fuel oil at the Company's facility in Rockaway, New Jersey.
The Company entered into an additional agreement with Mieco whereby it purchased
all of such fuel oil from November 1998 through March 1999. Additional 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.
26
<PAGE>
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 MELBOURNE
Able Melbourne was established in July 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 1998, six of Able Melbourne's
customers, Beyel Brothers Crane Service, Beyel Marina, 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 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, at 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
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<PAGE>
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.
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 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
marketing alliance with AllEnergy, now provides natural gas service as an option
to its customers (See "Business-Expansion and Acquisitions"). 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
substantially all wholesale cost increases 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
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<PAGE>
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.
Each of the Company's divisions are seasonal. From May through September,
Able Oil experiences 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.
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 sales occur from December through
March, Florida's cooler months.
WHOLESALE SUPPLIERS
Notwithstanding the agreement between the Company and Mieco for the supply
of Number 2 Heating Oil, the Company does not have agreements or contracts for
the supply of fuel. 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 supplies of fuel equal to a month's sales 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, 1998.
Coastal Refining & Marketing, Inc., provided Able Melbourne with
approximately 99% of its diesel fuel product requirements for the year ended
December 31, 1998. Two major suppliers provided Able Melbourne with
approximately 67% and 33%, respectively, of its lubricant and related product
requirements for the year ended December 31, 1998. 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, 1998.
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.
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<PAGE>
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.
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 24 hour-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.
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<PAGE>
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 operate as a total energy
provider and has plans to expand its operations into the sale and distribution
of additional energy sources. It is anticipated that initial acquisitions will
be made in the Company's current geographic area (the Northeast United States);
however, the Company would consider acquisitions in other geographic areas if
worthwile acquisition candidates present themselves.
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 in established family businesses 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, generally, franchisees will be required to: (i) pay
to the Company an initial franchise fee, annual fees consisting of a percentage
of gross sales and/or gallons 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. In December 1998 the Company sold one of its
subsidiaries, Able Montgomery, for $140,000. The Company entered into a ten-year
franchise agreement with the purchaser of Able Montgomery whereby the purchaser
uses the Able name, the Company is the Purchaser's exclusive supplier of #2 fuel
oil through
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<PAGE>
the Company's credit facility with major suppliers and the Company assists the
purchaser with advertising and other marketing. The purchaser is required to pay
to the Company $0.04 per gallon of oil it buys from the Company. There can be no
assurance that additional franchises 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 March 1998, the Company entered into a 36 month marketing alliance
agreement (the "Marketing Agreement") with AllEnergy Marketing Company, LLC
("AllEnergy"), 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 percentage 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 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.
Currently the Company employs 44 full time employees and 13 part time employees.
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 4,000 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
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<PAGE>
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 Melbourne leases a 4,000 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.
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 on an ongoing
basis to ensure that the facility meets or exceeds all standards required by the
State
The Company experienced no spill 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.
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
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<PAGE>
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, 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................................... 31 Chief Executive Officer, Chairman of the Board and
Secretary
Christopher P. Westad................................ 45 President, Chief Financial Officer and Director
James Purcaro........................................ 37 Director (as of the Effective Date)
William F. Costa..................................... 48 Comptroller
</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 Melbourne and Able
Propane since their respective inception.
CHRISTOPHER P. WESTAD, as of the Effective Date, will serve as the
President, Chief Financial Officer 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.
WILLIAM F. COSTA, has served as the Controller of the Company since December
1998. Prior thereto, from 1997, and from 1993 to 1995, Mr. Costa was a
Management Consultant for Executive Life Insurance Company. From 1996 to 1997,
Mr. Costa was Senior Accountant for Aids Resource Foundation for Children. From
1991 to 1993, Mr. Costa was the Vice President and Controller for Executive Life
Insurance Company. Mr. Costa Received a Bachelor of Science Degree from St.
John's University of 1973 and is a Certified Public Accountant.
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 and
the Audit Committee will consist of at least two directors who are not salaried
officers of the Company. Presently, there is only one of such independent
directors; however, the Company has undertaken to appoint an additional two
independent directors. The Company has not presently identified such candidates,
but anticipates that it will appoint such candidates within 60 days from the
Effective Date in accordance with Nasdaq rules.
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
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<PAGE>
to purchase shares of the Company's Common Stock under the 1999 Stock Option
Plan will be granted and to make various other determinations with respect to
such Plan.
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.
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)........................................ 1998 103,000 -- --
Chief Executive Officer 1997 100,000 80,000 833
1996 80,000 100,000 719
</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. Such bonuses shall equal up to 5% of the Company's
earnings before taxes, depreciation and amortization ("EBITDA") for 1999,
provided the Company achieves at least $800,000 in EBITDA, 10% of EBITDA for
2,000 and 2001, provided the Company achieves at least $3,000,000 and
$5,000,000, respectively, of EBITDA in each of such years. 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.
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<PAGE>
EMPLOYEE BONUS POOL
The Company has adopted an Employee Bonus Pool, pursuant to which Management
may, at its own discretion, award employees for exemplary performance. The
Company has allocated $25,000, $40,000 and $50,000 for the years 1999, 2000 and
2001, respectively, for such purposes. Management may not, however, award
employees bonuses from the Employee Bonus Pool (i) if such bonuses would result
in negative earning before taxes for the year in which such bonuses are to be
granted, or (ii) if the Company does not have net profits in such year.
STOCK OPTION PLAN
Prior to the Effective Date the Company will adopt a Stock Option Plan (the
"1999 Plan"), pursuant to which 300,000 shares of Common Stock are reserved for
issuance.
The 1999 Plan will be administered by the board of directors, or by a
committee with at least two directors as delegated by 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 1999 Plan will be for a period of ten years. Options under the 1999 Plan
must be issued within ten years from the effective date of the 1999 Plan.
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 1999 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 the
laws of descent and distribution or a change in control of the Company, as
defined in the 1999 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 the retirement of an Optionee either pursuant to a
pension or retirement plan adopted by the Company or on the normal retirement
date prescribed from time to time by the Company, 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 1999 Plan, at the discretion of the compensation
committee or the board, may be exercised either with cash, by certified check or
bank cashier's check, Common Stock having a fair market equal to the cash
exercise price, the participant's promissory 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,
37
<PAGE>
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.
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 1999 Plan.
The 1999 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 1999 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 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 1,000,000 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, each Selling Shareholder 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(2)
- ---------------------------------------------------------- ----------------- --------------------- -------------------
<S> <C> <C> <C>
Timothy Harrington........................................ 1,000,000 100% 50%
All Executive Officers and Directors
as a Group (1 person)................................... 1,000,000 100% 50%
</TABLE>
- ------------------------
(1) Unless otherwise indicated, the address is c/o Able Energy, Inc., 344 Route
46, Rockaway, New Jersey 7866.
(2) In the event the Underwriter elects to exercise its Over-Allotment-Option,
the Underwriter has agreed to use its best efforts to allow Mr. Harrington
to sell up to an aggregate of 75,000 shares of the Company's Common Stock
held by Mr. Harrington. If the Over-Allotment Option is exercised in full,
the number of shares of Common Stock beneficially owned by Mr. Harrington,
and by all executive officers and directors, as a group, would be 950,000
shares or 43% of the Common Stock outstanding after the offering.
CERTAIN TRANSACTIONS
In March 1997, Timothy Harrington exchanged his shares in the operating
subsidiaries for 1,000 shares of the Company's Common Stock. On or before the
effective date of the Offering, the Company will effectuate a 1,000-for-1 stock
split resulting in Mr. Harrington's ownership of 1,000,000 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 who will have access to
counsel to the Company at the Company's cost.
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 2,000,000 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.
PREFERRED STOCK
The Certificate of Incorporation authorizes the issuance of 10,000,000
shares of Preferred Stock, $.001 par value per share, 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. Furthermore, no Preferred Stock may be issued by the Company unless such
issue is approved by the Company's independent directors.
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.
40
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this Offering, the Company will have 2,000,000
shares of Common Stock outstanding. In addition, the Company has reserved for
issuance 300,000 shares upon the exercise of options eligible for grant under
the 1999 Plan. Of the shares to be issued and outstanding after this Offering,
the 1,000,000 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 1,000,000 shares of Common Stock are held by
affiliates of the Company and are eligible for resale under Rule 144 and the
limitations thereunder. All 1,000,000 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 1,000,000 shares of Common
Stock, 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 Common Stock 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 $. per share of Common Stock, of which not more than
$. per share of Common Stock 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 Common Stock sold (including any Common
Stock sold pursuant to the Underwriters' Over-Allotment Option), which allowance
amounts to $225,000 assuming an Offering price of $7.50 per share of Common
Stock (or $258,750 if the Underwriter's Over-Allotment Option is exercised in
full). The Company previously paid $15,000 to Walsh Manning Securities, LLC, the
previous underwriters of the Offering, for payment of its expenses.
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 150,000 additional shares of Common Stock (up to 15% of the Common
Stock being offered) at the public offering price, less underwriting discounts
and commissions, solely to cover over-allotments, if any. In the event the
Underwriter elects to exercise its Over-Allotment-Option, 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 75,000 shares of the
Company's Common Stock held by Mr. Harrington.
41
<PAGE>
The Underwriter has informed the Company that the Underwriter will not make
sales of the Common Stock 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 100,000 shares of Common Stock,
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 165% the
Offering price per share of Common Stock. 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 underlying shares of Common Stock, 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 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 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 Underwriter has not yet exercised its right to nominate someone
the Company's Board of Directors or to 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 $108,000 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 Kashner
Davidson Securities Corp.
The public offering price of the Common Stock offered hereby have been
determined by negotiation between the Company and the Underwriter. Factors
considered in determining the offering price of the Common Stock 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.
42
<PAGE>
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 Common Stock. 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 Common Stock in connection with the Offering than they are committed to
purchase from the Company, and in such case may purchase Common Stock 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-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 Common Stock that is 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 Common Stock 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.
Certain legal matters will be passed upon for the Underwriter by Gersten,
Savage & Kaplowitz, LLP, 10 East 52nd Street, New York, New York 10022.
EXPERTS
The financial statements of the Company at December 31, 1998, and for each
of the two fiscal years in the period ended December 31, 1997 and 1998,
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
43
<PAGE>
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. At
the effective date of this Offering, the Company will be required to file
reports pursuant to the Securities Exchange Act of 1934. 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.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
<PAGE>
ABLE ENERGY, INC.
DECEMBER 31, 1998 AND 1997
C O N T E N T S
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS:
ACCOUNTANTS' REPORT.................................................................................. F-1
CONSOLIDATED BALANCE SHEET........................................................................... F-2-3
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS............................................... F-4
CONSOLIDATED STATEMENT OF CASH FLOWS................................................................. F-5-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS........................................................... F-7-19
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Shareholder
Able Energy, Inc.
Rockaway, New Jersey 07866
We have audited the accompanying consolidated balance sheet of Able Energy,
Inc. and subsidiaries for the years ended December 31, 1998 and 1997, and the
related consolidated statements of income and retained earnings, and cash flows
for the years then ended. 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, 1998 and 1997,
and the results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
Simontacchi & Company, LLP
Fairfield, New Jersey
March 26, 1999
F-1
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998 AND 1997
ASSETS
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash................................................................................ $ 125,844 $ 155,904
Accounts Receivable (Less Allowance for Doubtful Accounts of 1998 ($69,235), and
1997 ($52,584).................................................................... 658,139 647,731
Inventory........................................................................... 129,483 184,655
Notes Receivable--Current Portion................................................... 36,651 --
Miscellaneous Receivable............................................................ 13,074 11,659
Prepaid Expense..................................................................... 51,709 14,589
Prepaid Expense--Income Taxes....................................................... 93,773 --
Deferred income Tax................................................................. 21,980 16,695
Due From Officer.................................................................... 34,173 42,527
------------ ------------
TOTAL CURRENT ASSETS............................................................ 1,164,826 1,073,760
------------ ------------
PROPERTY AND EQUIPMENT:
Land................................................................................ 90,800 90,800
Building............................................................................ 150,000 150,000
Trucks.............................................................................. 1,300,046 1,478,466
Fuel Tanks.......................................................................... 487,677 329,761
Machinery and Equipment............................................................. 275,938 124,928
Leasehold Improvements.............................................................. 160,429 114,182
Cylinders........................................................................... 204,477 123,718
Office Furniture and Equipment...................................................... 9,313 79,502
------------ ------------
2,678,680 2,491,357
Less: Accumulated depreciation...................................................... 859,316 720,074
------------ ------------
NET PROPERTY AND EQUIPMENT...................................................... 1,819,364 1,771,283
------------ ------------
OTHER ASSETS:
Deposits............................................................................ 14,371 1,796
Notes Receivable--Less Current Portion.............................................. 146,885 --
Customer List, Less Amortization of 1998 ($85,650), and 1997 ($47,805).............. 485,350 543,195
Covenant Not to Compete, Less Amortization of 1998 ($81,743) and 1997 ($43,076)..... 104,020 162,490
------------ ------------
TOTAL OTHER ASSETS.............................................................. 750,626 707,481
------------ ------------
TOTAL ASSETS.................................................................... $ 3,734,816 $ 3,552,524
------------ ------------
------------ ------------
</TABLE>
See Accompanying Notes and Auditor's Report
F-2
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
BALANCE SHEET
DECEMBER 31, 1998 AND 1997
LIABILITIES & STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable.................................................................... $ 689,246 $ 496,170
Note Payable--Bank.................................................................. 100,434 277,066
Current Portion of Long-Term Debt................................................... 651,817 518,693
Covenant Not To Compete............................................................. 36,714 36,714
Accrued Expenses.................................................................... 62,244 84,140
Deposits............................................................................ -- 801
Taxes Payable....................................................................... 15,298 13,848
Customer Advance Payments........................................................... 355,983 303,194
Income Taxes Payable--Current....................................................... -- 13,190
Income Taxes Payable--Prior......................................................... 33,962 73,960
Escrow Deposits..................................................................... 15,088 15,100
------------ ------------
TOTAL CURRENT LIABILITIES......................................................... 1,960,786 1,832,876
DEFERRED INCOME TAXES................................................................. 50,601 18,825
Covenant Not To Compete: less current portion......................................... 67,308 104,020
LONG TERM DEBT: less current portion.................................................. 1,043,209 1,198,543
------------ ------------
TOTAL LIABILITIES................................................................. 3,121,904 3,154,264
------------ ------------
STOCKHOLDERS' EQUITY:
Common Stock
Authorized 10,000 Shares, Par Value $.001 per share Issued and Outstanding 1,000
shares............................................................................ 1 1
Paid in Surplus..................................................................... 3,999 6,999
Retained Earnings................................................................... 608,912 391,260
------------ ------------
TOTAL STOCKHOLDERS' EQUITY........................................................ 612,912 398,260
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................................ $ 3,734,816 $ 3,552,524
------------ ------------
------------ ------------
</TABLE>
See Accompanying Notes and Auditor's Report
F-3
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------------- --------------
<S> <C> <C>
NET SALES....................................................................... $ 16,317,668 $ 16,380,992
COST OF SALES................................................................... 13,044,924 13,022,635
--------------- --------------
GROSS PROFIT.................................................................. 3,272,744 3,358,357
--------------- --------------
EXPENSES
Selling, General and Administrative Expenses.................................. 2,720,598 2,745,963
Depreciation and Amortization Expense......................................... 451,441 394,806
--------------- --------------
Total Expenses.............................................................. 3,172,039 3,140,769
--------------- --------------
INCOME FROM OPERATIONS........................................................ 100,705 217,588
--------------- --------------
OTHER INCOME (EXPENSES):
Insurance Proceeds............................................................ 2,285
Interest Income............................................................... 12,684 4,910
Gain on Sale of Equipment..................................................... 23,957 72,104
Leasing Income................................................................ -- 26,574
Gain on Sale of Subsidiary.................................................... 72,739 --
Excess of Subsidiary Losses over Investment................................... 54,404 --
Miscellaneous Income.......................................................... 24,623 13,078
Interest Expense.............................................................. (169,040) (211,133)
--------------- --------------
Total Other Income (Expense)................................................ 19,367 (92,182)
--------------- --------------
INCOME BEFORE PROVISION FOR INCOME TAXES...................................... 120,072 125,406
PROVISION FOR INCOME TAXES...................................................... 11,350 49,345
--------------- --------------
NET INCOME.................................................................... 108,722 76,061
RETAINED EARNINGS--BEGINNING OF YEAR (RESTATED)............................... 500,190 315,199
--------------- --------------
RETAINED EARNINGS--END OF YEAR................................................ $ 608,912 $ 391,260
--------------- --------------
--------------- --------------
</TABLE>
See Accompanying Notes and Auditor's Report
F-4
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income.............................................................................. $ 108,722 $ 76,061
Adjustments to Reconcile Net Income to Cash used by Operating Activities:
Depreciation and Amortization......................................................... 451,441 394,806
Gain on Sale of Equipment............................................................. (23,957) (72,104)
Gain on Sale of Subsidiary............................................................ (72,739) --
Excess of Subsidiary Losses over Investment........................................... (54,404) --
(Increase) Decrease in:
Accounts Receivables................................................................ (10,408) (156,298)
Inventory........................................................................... 55,172 8,906
Prepaid Expenses.................................................................... (136,178) 82,091
Deposits............................................................................ (12,575) 3,975
Increase (Decrease) in:
Accounts Payable.................................................................... 193,076 199,910
Accrued Expenses.................................................................... (22,709) (319,389)
Payroll Taxes Payable............................................................... 1,450 (1,723)
Customer Advance Payments........................................................... 52,789 303,194
Income Taxes Payable................................................................ (53,188) 10,455
Deferred Income Taxes............................................................... 31,776 12,850
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES........................................... 508,268 542,734
---------- ----------
---------- ----------
</TABLE>
See Accompanying Notes and Auditor's Report
F-5
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in Stockholders' Equity--Sale of Subsidiary.................................. 105,930 --
Sale of Equipment..................................................................... 44,000 114,490
Sales of Subsidiary................................................................... 140,000 --
Purchase of Property and Equipment.................................................... (452,390) (497,609)
Sale (Purchase) of Intangibles--Subsidiary............................................ 27,515 (42,000)
Note Receivable--Sale of Equipment.................................................... (43,536) --
Reduction in Property and Equipment--Net Sale of Subsidiary........................... 8,768 --
Decrease in Shareholder's Loan........................................................ 8,354 23,692
Other Receivables..................................................................... (1,415) (11,659)
Note Receivable--Sale of Subsidiary................................................... (140,000) --
----------- ----------
NET CASH USED BY INVESTING ACTIVITIES............................................... (302,774) (413,086)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Notes Payable............................................................. 1,285,528 814,317
Decrease in Notes Payable............................................................. (1,521,082) (948,100)
----------- ----------
NET CASH USED BY FINANCING ACTIVITIES............................................... (235,554) (133,783)
----------- ----------
NET DECREASE IN CASH.................................................................... (30,060) (4,135)
Cash--Beginning of Year................................................................. 155,904 160,039
----------- ----------
Cash--End of Year....................................................................... $ 125,844 $ 155,904
----------- ----------
----------- ----------
The Company had interest cash expenditures of:.......................................... $ 169,728 $ 211,133
The Company had tax cash expenditures of:............................................... 108,188 43,680
</TABLE>
See Accompanying Notes and Auditor's Report
F-6
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
DECEMBER 31, 1998 AND 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. In December 1998, the Company sold A & O Environmental
Services, Inc. and Able Oil Company Montgomery, Inc. (See note 15).
The combination was accounted for as an exchange between entities under
common control. The assets and liabilities so transferred were accounted for at
historical cost in a manner similar to a pooling of interest accounting (See
Note 14).
Able Energy, Inc. is a holding company with no operations, the subsidiaries
which were in operation the entire year of 1997 have been presented in the
accompanying financial statements for the year ended December 31, 1997.
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 was 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.
F-7
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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. The customer list and covenant were sold in December
1998 with the sale of this subsidiaty (See Note 15).
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 $88,800 in 1998 and $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. for 1997 and future years.
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.
F-8
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
NOTE 3 INVENTORIES
<TABLE>
<CAPTION>
ITEMS 1998 1997
- ---------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
Heating Oil........................................................... $ 38,733 $ 111,262
Diesel Fuel........................................................... 9,260 13,065
Kerosene.............................................................. 2,082 965
Propane............................................................... 70 2,273
Parts and Supplies.................................................... 79,338 57,090
---------- ----------
Total............................................................... $ 129,483 $ 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 under a committed line of credit of $350,000 dated
October 23, 1997, has been amended under an agreement dated June 12, 1998 with
an expiring date of May 30, 1999 to $500,000 with interest at the rate of Prime
plus 1/2%. The line is collateralized by all personal property of Able Oil
Company, not otherwise collateralized. The loan is guaranteed by the Company and
the sole shareholder of the Company.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Credit Line Balance................................................... $ 100,434 $ 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 $10,070 (1998) and
$10,945 (1997). 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>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Notes Balance......................................................... $ 272,248 $ 403,412
</TABLE>
F-9
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 6 LONG TERM DEBT (CONTINUED)
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>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 16,017 $ 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. Note assumed by buyer in sale of
Subsidiary.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 0 $ 6,022
</TABLE>
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 with a final payment of $13,780. The Note is collateralized by a Ford
F-150 Pick-up Truck.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 16,587 $ 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>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 95,440 $ 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
Freightliner fuel oil truck.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 34,749 $ 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. Note assumed by buyer in sale of
subsidiary.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ -0- $ 18,615
</TABLE>
F-10
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 6 LONG TERM DEBT (CONTINUED)
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. Note
assumed by buyer in sale of subsidiary.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ -0- $ 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>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 28,750 $ 43,984
</TABLE>
The Company and Able Propane, LLC have a lease/purchase agreement with First
Sierra Financial, Inc. The agreement calls for 48 payments of $1,457.50,
including principal, interest and sales tax and a final purchase option payment
of $5,576.02 plus sales tax. The interest rate is approximately 8 1/2%. The
agreement is collateralized by the equipment purchase.
<TABLE>
<S> <C>
Balance Due........................................ $ 58,521
</TABLE>
Able Oil Company and Able Propane, LLC have a lease/purchase agreement with
Summit Leasing Corporation, Lease #002, collateralized by a 1998 Peterbilt Model
375 truck and a Trinity trailer. The lease and payments began August 20, 1998 at
$1,605.50 per month for 48 payments thereafter until all payments are made
through and including July 20, 2002.
<TABLE>
<S> <C>
Balance Due........................................ $ 58,229
</TABLE>
Able Oil Company and Able Propane have a lease/purchase agreement with
Summit Leasing Corporation, Lease #003, collateralized by a Freightliner truck.
The lease commenced November 10, 1998 and has 48 monthly payments of $1,286.12
until November 2002 with a final purchase option payment of $12,682.
<TABLE>
<S> <C>
Balance Due........................................ $ 62,024
</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>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Notes Balance......................................................... $ 9,181 $ 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 Notes originated on
October 1, 1996 and December 10, 1996
F-11
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 6 LONG TERM DEBT (CONTINUED)
and matures on October 1, and December 10, 2000. The Notes are collateralized by
two 1997 Freightliner Oil Trucks.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 55,445 $ 81,477
</TABLE>
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>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 296,389 $ 385,135
</TABLE>
Original 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 and
guaranteed by all the subsidiaries. The Note is guaranteed by the sole
Shareholder of the Company. This loan was refinanced for a total of $675,000 on
June 12, 1998. The current payments are $18,750 per month with interest at a
rate of prime plus 1%. The note matures in 36 months, June 2001.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 562,500 $ 415,232
</TABLE>
In June 1998 the proceeds of the term loan were used to refinance existing
term debts and to term out the portion of the borrower's then owed working
capital loan at PNC Bank.
Notes payable to AEL Leasing Co., Inc. under a master lease agreement dated
March 3, 1997. During 1997 Able Propane, LLC was advanced $133,456, with no
principal payments. AEL had extended Able Propane a line of credit of $150,000
in 1997. In June 1998 the loan was finalized at $178,920 with 36 monthly
payments of $4,970, including principal and interest, with an interest rate of
8.25%. The note is collateralized by the tanks and equipment purchased. The note
matures in June 2001.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 128,972 $ 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.
F-12
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 6 LONG TERM DEBT (CONTINUED)
Maturities on the Notes Payable subsequent to December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING PRINCIPAL
DECEMBER 31, AMOUNT
- -------------------------------------------------------------------------------- ------------
<S> <C>
1999............................................................................ $ 651,842
2000............................................................................ 636,717
2001............................................................................ 359,007
2002............................................................................ 47,484
------------
TOTAL........................................................................... $ 1,695,050
------------
------------
</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>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Covenant Balance...................................................... $ 104,020 $ 140,734
Current Liability..................................................... 36,714 36,714
---------- ----------
Due After One Year.................................................... $ 67,306 $ 104,020
---------- ----------
---------- ----------
</TABLE>
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 year was $99,310
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 1998 rent expense, $9,059
Able Oil Montgomery $480.50, per month
Total 1998 rent expense, $5,766
Able Oil Melbourne $238.50, per month
Total 1998 rent expense, $2,862
</TABLE>
F-13
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 9 RELATED PARTY TRANSACTIONS
$34,173 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. No payments were made in 1998.
<TABLE>
<S> <C>
Total Due December 31, 1997........................................ $ 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. They made payments to the Internal Revenue Service of $39,998 in 1998.
The liability of income taxes payable prior is $33,962 at December 31, 1998.
NOTE 11 INCOME TAXES
Effective January 1, 1997 the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes.
F-14
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 11 INCOME TAXES (CONTINUED)
The differences between the statutory Federal Income Tax and Income Taxes is
accounted for as follows:
<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
PERCENT OF PERCENT OF
PRETAX PRETAX
AMOUNT INCOME AMOUNT INCOME
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Statutory Federal Income Tax..................... $ 7,350 15.0% $ 34,295 34.0%
Increase resulting from State Income Tax, net of
Federal Tax benefit............................ 4,000 7.6% 15,050 5.9%
--------- ----------- --------- -----------
Income Taxes..................................... $ 11,350 22.6% $ 49,345 39.9%
--------- ----------- --------- -----------
--------- ----------- --------- -----------
Income Taxes consist of:
Current........................................ 8,250 47,215
Deferred....................................... 3,100 2,130
--------- ---------
TOTAL........................................ $ 11,350 $ 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:
<TABLE>
<CAPTION>
1998
-----------------------
TEMPORARY TAX
DIFFERENCE EFFECT
----------- ----------
<S> <C> <C>
Depreciation......................................................... $ (159,389) $ (50,601)
Allowance for Doubtful Accounts...................................... 69,235 21,980
</TABLE>
<TABLE>
<CAPTION>
1997
-----------------------
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 was $10,384 (1998) and $8,239
(1997).
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.
F-15
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 13 COMMITMENTS AND CONTINGENCIES (CONTINUED)
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 and Able Energy, Inc., et al December 31, 1997.
NOTE 14 RESTATEMENT OF FINANCIAL STATEMENTS
The following items on the December 31, 1997 financial statement have been
restated in relation to the combination of entities under common control.
<TABLE>
<CAPTION>
ORIGINALLY
STATED RESTATED
---------- ----------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET
Paid in Surplus....................................................... $ 322,198 $ 6,999
Retained Earnings..................................................... 76,061 391,260
---------- ----------
Total............................................................. $ 398,259 $ 398,259
---------- ----------
---------- ----------
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Retained Earnings--Beginning of Year $ 0 $ 315,199
---------- ----------
Retained Earnings--End of Year $ 76,061 $ 391,260
---------- ----------
---------- ----------
</TABLE>
NOTE 15 SALE OF SUBSIDIARIES
The Company sold two of their wholly owned subsidiaries, one on December 29,
1998 and one on December 31, 1998. The Statement of Income reflects the
operations of these subsidiaries for the Calendar year 1998. These subsidiaries
have been eliminated from the Balance Sheet as of December 31, 1998.
One subsidiary, Able Oil Company Montgomery, Inc. was sold for $140,000. The
note receivable is payable in 60 monthly payments of $2,940.26, including
principal and interest. The first payment was January 1, 1999 and the final
payment is December 1, 2003. As collateral to secure payment to the Company, the
buyer has pledged the stock and all of the assets of Able Oil Company
Montgomery, Inc. A UCC-1 financing statement has been filed in respect to the
collateral.
<TABLE>
<S> <C>
Note Receivable................................................... $ 140,000
Current Portion................................................... 28,000
---------
Due After One Year................................................ $ 112,000
---------
---------
</TABLE>
Included in the Statement of Income and Retained Earnings is the gain on
sale of this subsidiary of $72,739.
The Company has a ten year franchise agreement with the buyer. The buyer
will use the Able name, Able Oil Company is the exclusive supplier of #2 fuel
oil through its credit facility with major suppliers and also assists the buyer
with advertising and other marketing. The Company has a mark-up on the sale of
the product and receives a 1% royalty fee on monthly gross sales.
F-16
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 15 SALE OF SUBSIDIARIES (CONTINUED)
The Company sold all its shares in A & O Environmental Services, Inc. on
December 31, 1998 to Owl Environmental, Inc. for a selling price of $10. The
buyer by purchasing the stock of the subsidiary assumed all its assets and
liabilities. An amount of $54,404 in the Statement of Income and Retained
Earnings was recorded as the excess of subsidiary losses over investment.
All advances to the tow subsidiaries by Able Oil Company were transfered to
Able Energy, Inc. and recorded as investment in subsidiaries and these costs
were written off against the subsidiary sales.
NOTE 16 RESTATEMENT OF RETAINED EARNINGS
The opening retained earnings at January 1, 1998 have been restated to
reflect the sale of the two subsidiaries. These retained deficits which occurred
prior to January 1, 1997 and the parent subsidiary relationship were included as
retained earnings in accordance with accounting pronouncements (See Note 1).
The restatement in the Statement of Income and Retained Earnings is as
follows:
<TABLE>
<CAPTION>
ORIGINAL RESTATED INCREASE
---------- ---------- ----------
<S> <C> <C> <C>
Retained Earnings--beginning of period $ 391,260 $ 500,190 $ 108,930
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR A SOLICITATION IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF THE COMPANY OR
THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
Use of Proceeds........................................................... 15
Dividend Policy........................................................... 16
Capitalization............................................................ 17
Dilution.................................................................. 18
Selected Financial Data................................................... 19
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 20
Business.................................................................. 25
Management................................................................ 35
Principal Stockholders and Selling Securityholders........................ 39
Certain Transactions...................................................... 39
Description of Securities................................................. 40
Underwriting.............................................................. 41
Legal Matters............................................................. 43
Experts................................................................... 43
Additional Information.................................................... 43
Financial Statements...................................................... F-1
</TABLE>
UNTIL , 1999 (25 DAYS AFTER THE DATE OF THE PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
[LOGO]
ABLE ENERGY, INC.
1,000,000 SHARES OF
COMMON STOCK
---------------------
PROSPECTUS
---------------------
KASHNER DAVIDSON SECURITIES CORP.
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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................. 240,000.00
Underwriter's consulting agreement.............................. 108,000.00
Miscellaneous................................................... 31,046.61
---------
Total....................................................... 643,000.00
---------
---------
</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:
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 Specimen Common Stock Certificate***
5.1 Opinion of Sichenzia, Ross & Friedman LLP*
10.1 Form of Consulting Agreement with Underwriter*
10.2 1999 Stock Option Plan*
10.3 Lease of Company's Facility at 344 Route 46, Rockaway, New Jersey**
10.4 Form of employment agreement between the Company and Timothy Harrington, to be
executed on or before the Effective Date*
10.5 Form of employment agreement between the Company and Christopher P. Wested, to be
executed on or before the Effective Date*
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**
10.8 Marketing Alliance Agreement, dated March 1, 1998, between the Company and AllEnergy
Marketing Company, L.L.C., wherby the Company obtained the exclusive right to market
natural gas supplied by AllEnergy in specified areas**
10.9 In tank agreement between the Company and Mieco, Inc., dated May 11, 1998, for the
storage of the Mieco's petroleum products in the Company's tank facilities.**
10.10 Form of Company's Pre-Purchase Enrollment Form*
10.11 Oil Supply Agreement between the Company and Mieco, Inc., dated May 19, 1998*
10.12 Letter agreement, dated July 3, 1998, between the Company and Mieco, Inc. modifying
the Oil Supply Agreement, dated May 19, 1998, whereby the Company agreed to increase
the amount of oil purchased from Mieco**
10.13 Oil Supply Agreement between the Company and Amarada Hess Corporation, dated July 30,
1998**
10.14 Oil Supply Agreement between the Company and Bayway (TOSCO) Refining Company, dated
March 27, 1998**
10.15 Oil Supply Agreement between the Company and Koch Refining Company, L.P., dated March
17, 1998**
10.16 Fuel Purchase Agreement (Natural Gas) between the Company and Ferrellgas, dated
September 3, 1996**
10.17 Fuel Purchase Agreement (Propane) between the Company and Keystone Propane Service,
Inc., dated July 28, 1998**
10.18 Lease between the Company and Summit Leasing Corporation ("Summit"), dated December
3, 1997**
10.19 Franchise Agreement, dated December 31, 1998, between the Company and Andrew Schmidt
regarding sale of Able Oil Company Montgomery, Inc. as a franchise*
10.20 Stock Purchase Agreement, dated December 31, 1998, between the Company and Andrew
Schmidt regarding the sale of stock of Able Oil Company Montgomery, Inc. by the
Company to Mr. Schmidt*
10.21 Pledge and Security Agreement, dated December 31, 1998, between the Company and
Andrew Schmidt regarding the pledge of stock of Able Oil Company Montgomery, Inc.*
10.22 $140,000 principal amount, 9.5% Promissory Note, dated December 31, 1998, between the
Company and Andrew Schmidt regarding the sale of stock of Able Oil Company
Montgomery, Inc. by the Company to Mr. Schmidt*
10.23 Stock Sale Agreement, dated December 31, 1998, between the Company and Owl
Environmental, Inc. regarding the sale of stock of A&O Environmental Services, Inc.
by the Company to Owl Environmental, Inc.*
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**
27.1 Financial Data Schedule*
</TABLE>
- ------------------------
(*) Filed herewith
(**) Previously filed
(***) To be filed by amendment
II-3
<PAGE>
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.
(6) To provide to the Underwriter at the closing, as specified in the
underwriting agreement, certificates in such denominations and registered in
such names as required by the Underwriter to permit prompt delivery to each
purchaser.
II-4
<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 April 15, 1999.
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 April 15, 1999
Timothy Harrington Officer and Secretary
/s/ CHRISTOPHER WESTAD President and Director
- ------------------------------ April 15, 1999
Christopher Westad
/s/ WILLIAM F. COSTA Controller and Principal
- ------------------------------ Accounting Officer April 15, 1999
William F. Costa
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- --------- --------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
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 Specimen Common Stock Certificate***
5.1 Opinion of Sichenzia, Ross & Friedman LLP*
10.1 Form of Consulting Agreement with Underwriter*
10.2 1999 Stock Option Plan*
10.3 Lease of Company's Facility at 344 Route 46, Rockaway, New Jersey**
10.4 Form of employment agreement between the Company and Timothy Harrington, to be executed on or
before the Effective Date*
10.5 Form of employment agreement between the Company and Christopher P. Wested, to be executed on or
before the Effective Date*
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**
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**
10.8 Marketing Alliance Agreement, dated March 1, 1998, between the Company and AllEnergy Marketing
Company, L.L.C., wherby the Company obtained the exclusive right to market natural gas supplied by
AllEnergy in specified areas**
10.9 In tank agreement between the Company and Mieco, Inc., dated May 11, 1998, for the storage of the
Mieco's petroleum products in the Company's tank facilities.**
10.10 Form of Company's Pre-Purchase Enrollment Form*
10.11 Oil Supply Agreement between the Company and Mieco, Inc., dated May 19, 1998*
10.12 Letter agreement, dated July 3, 1998, between the Company and Mieco, Inc. modifying the Oil Supply
Agreement, dated May 19, 1998, whereby the Company agreed to increase the amount of oil purchased
from Mieco**
10.13 Oil Supply Agreement between the Company and Amarada Hess Corporation, dated July 30, 1998**
10.14 Oil Supply Agreement between the Company and Bayway (TOSCO) Refining Company, dated March 27,
1998**
10.15 Oil Supply Agreement between the Company and Koch Refining Company, L.P., dated March 17, 1998**
10.16 Fuel Purchase Agreement (Natural Gas) between the Company and Ferrellgas, dated September 3, 1996**
10.17 Fuel Purchase Agreement (Propane) between the Company and Keystone Propane Service, Inc., dated
July 28, 1998**
10.18 Lease between the Company and Summit Leasing Corporation ("Summit"), dated December 3, 1997**
10.19 Franchise Agreement, dated December 31, 1998, between the Company and Andrew Schmidt regarding sale
of Able Oil Company Montgomery, Inc. as a franchise*
10.20 Stock Purchase Agreement, dated December 31, 1998, between the Company and Andrew Schmidt regarding
the sale of stock of Able Oil Company Montgomery, Inc. by the Company to Mr. Schmidt*
10.21 Pledge and Security Agreement, dated December 31, 1998, between the Company and Andrew Schmidt
regarding the pledge of stock of Able Oil Company Montgomery, Inc.*
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
10.22 $140,000 principal amount, 9.5% Promissory Note, dated December 31, 1998, between the Company and
Andrew Schmidt regarding the sale of stock of Able Oil Company Montgomery, Inc. by the Company to
Mr. Schmidt*
10.23 Stock Sale Agreement, dated December 31, 1998, between the Company and Owl Environmental, Inc.
regarding the sale of stock of A&O Environmental Services, Inc. by the Company to Owl
Environmental, Inc.*
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**
27.1 Financial Data Schedule*
</TABLE>
- ------------------------
(*) Filed herewith
(**) Previously filed
(***) To be filed by amendment
<PAGE>
Exhibit 1.1
ABLE ENERGY, INC.
1,000,000 SHARES OF COMMON STOCK
UNDERWRITING AGREEMENT
April 13, 1999
Kashner Davidson Securities Corporation
77 South Palm Avenue
Sarasota, Florida 34326
Gentlemen:
ABLE Energy, Inc., a corporation organized under the laws of the State
of Delaware (the "Company"), hereby confirms its agreement with Kashner Davidson
Securities Corporation, ("Kashner") as the underwriter of its securities (the
"Underwriter"), as set forth below.
The Company proposes to issue and sell to the Underwriters 1,000,000
shares of the Company's common stock, $.001 par value per share (the "Common
Stock"). The shares of Common Stock being sold by the Company are referred to as
the "Firm Shares."
In addition, for the sole purpose of covering over-allotments from the
sale of the Firm Shares the Company proposes to grant to the Underwriters an
option to purchase an additional 150,000 shares of Common Stock, 75,000 of which
may be purchased directly from Timothy Harrington, the Chief Executive Officer
of the Company, (the "Firm Option Shares" or the "Option Shares"), all as
provided in Section 2(c) of this agreement (the "Agreement") and to issue to you
the Underwriter's Warrant (as defined in Section 2 hereof) to purchase certain
further additional shares of Common Stock. The Firm Shares and the Option Shares
are collectively referred to herein as either the "Shares" or the
"Securities."
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Underwriter that:
(a) A registration statement on Form SB-2 (File No.
333-59109), with respect to the Securities and the Underwriter's Warrant
Securities (as hereinafter defined), including a prospectus subject to
completion, has been filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"), and one or more amendments to that registration statement may have been
so filed. Copies of such registration statement and of each amendment heretofore
filed by the Company with the Commission
<PAGE>
have been delivered to the Underwriters. After the execution of this Agreement,
the Company will file with the Commission either (i) if the registration
statement, as it may have been amended, has been declared by the Commission to
be effective under the Act, a prospectus in the form most recently included in
that registration statement (or, if an amendment thereto shall have been filed,
in such amendment), with such changes or insertions as are required by Rule 430A
under the Act or permitted by Rule 424(b) under the Act and as have been
provided to and approved by the Underwriters prior to the execution of this
Agreement, or (ii) if that registration statement, as it may have been amended,
has not been declared by the Commission to be effective under the Act, an
amendment to that registration statement, including a form of prospectus, a copy
of which amendment has been furnished to and approved by the Underwriters prior
to the execution of this Agreement. The Company also may file a related
registration statement with the Commission pursuant to Rule 462(b) under the Act
for purposes of registering certain additional Securities, which registration
statement shall become effective upon filing with the Commission (the "Rule
462(b) Registration Statement"). As used in this Agreement, the term
"Registration Statement" means that registration statement, as amended at the
time it was or is declared effective, and any amendment thereto that was or is
thereafter declared effective, including all financial schedules and exhibits
thereto and any information omitted therefrom pursuant to Rule 430A under the
Act and included in the Prospectus (as hereinafter defined), together with any
Rule 462(b) Registration Statement; the term "Preliminary Prospectus" means each
prospectus subject to completion filed with the Registration Statement
(including the prospectus subject to completion, if any, included in the
Registration Statement at the time it was or is declared effective); and the
term "Prospectus" means the prospectus first filed with the Commission pursuant
to Rule 424(b) under the Act or, if no prospectus is so filed pursuant to Rule
424(b), the prospectus included in the Registration Statement. The Company has
caused to be delivered to the Underwriters copies of each Preliminary Prospectus
and has consented to the use of those copies for the purposes permitted by the
Act. If the Company has elected to rely on Rule 462(b) and the Rule 462(b)
Registration Statement has not been declared effective, then (i) the Company has
filed a Rule 462(b) Registration Statement in compliance with and that is
effective upon filing pursuant to Rule 462(b) and has received confirmation of
its receipt and (ii) the Company has given irrevocable instructions for
transmission of the applicable filing fee in connection with the filing of the
Rule 462(b) Registration Statement, in compliance with Rule 111 promulgated
under the Act or the Commission has received payment of such filing fee.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. When each Preliminary
Prospectus and each amendment and each supplement thereto was filed with the
Commission it (i) contained all statements required to be stated therein, in
accordance with, and complied with the requirements of, the Act and the rules
and regulations of the Commission thereunder and (ii) did not include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. When the Registration Statement was or is
declared effective, it (i) contained or will contain all statements required to
be stated therein in accordance with, and complied or will comply with the
requirements of, the Act and the rules and regulations of the Commission
thereunder and (ii) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not
2
<PAGE>
misleading. When the Prospectus and each amendment or supplement thereto is
filed with the Commission pursuant to Rule 424(b) (or, if the Prospectus or such
amendment or supplement is not required so to be filed, when the Registration
Statement containing such Prospectus or amendment or supplement thereto was or
is declared effective) and on the Firm Closing Date and any Option Closing Date
(as each such term is hereinafter defined), the Prospectus, as amended or
supplemented at any such time, (i) contained or will contain all statements
required to be stated therein in accordance with, and complied or will comply
with the requirements of, the Act and the rules and regulations of the
Commission thereunder and (ii) did not or will not include any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The foregoing provisions of this paragraph (b) do not
apply to statements or omissions made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any amendment or supplement thereto
in reliance upon and in conformity with written information furnished to the
Company by the Underwriters specifically for use therein.
(c) The Company is duly incorporated and is validly existing
as a corporation in good standing under the laws of its jurisdictions of
incorporation, and duly qualified or authorized to transact business as a
foreign corporation and is in good standing in each jurisdiction where the
ownership or leasing of its properties or the conduct of its businesses require
such qualification or authorization.
(d) The Company has full corporate power and authority, and
all necessary material authorizations, approvals, orders, licenses, certificates
and permits of and from all governmental regulatory authorities, to own or lease
its property and conduct its business as now being conducted and as proposed to
be conducted as described in the Registration Statement and the Prospectus (and,
if the Prospectus is not in existence, the most recent Preliminary Prospectus).
(e) The Company does not own, directly or indirectly, an
interest in any corporation, partnership, limited liability company, joint
venture, trust or other business entity.
(f) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). All of the issued shares of
capital stock of the Company, have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights. There are no
outstanding options, warrants or other rights granted by the Company to purchase
shares of its Common Stock or other securities, other than as described in the
Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus). The Firm Shares have been duly authorized, by all
necessary corporate action on the part of the Company and, when the Firm Shares
are issued and delivered to and paid for by the Underwriter pursuant to this
Agreement, the Firm Shares will be validly issued, fully paid, nonassessable and
free of preemptive rights and will conform to the description thereof in the
Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus). No holder of outstanding securities of the Company is
entitled as such to any preemptive or other right to subscribe for any of the
Securities, and no person is
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<PAGE>
entitled to have securities registered by the Company under the Registration
Statement or otherwise under the Act other than as described in the Prospectus
(and, if the Prospectus is not in existence, the most recent Preliminary
Prospectus).
(g) The capital stock of the Company conforms to the
description thereof contained in the Prospectus (and, if the Prospectus is not
in existence, the most recent Preliminary Prospectus).
(h) All issuances of securities of the Company have been
effected pursuant to an exemption from the registration requirements of the Act.
No compensation was paid to or on behalf of any member of the National
Association of Securities Dealers, Inc. ("NASD"), or any affiliate or employee
thereof, in connection with any such issuance.
(i) The financial statements of the Company included in the
Registration Statement and the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) fairly present the financial
position of the Company as of the dates indicated and the results of operations
of the Company for the periods specified. Such financial statements have been
prepared in accordance with accounting principles generally accepted in effect
in the United States of America, consistently applied, except to the extent that
certain footnote disclosures regarding unaudited interim periods may have been
omitted in accordance with the applicable rules of the Commission under the
Securities Exchange Act of 1934, as amended (the "1934 Act"). The financial data
set forth under the caption "Summary Financial Information" in the Prospectus
(and, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) fairly present, on the basis stated in the Prospectus (or such
Preliminary Prospectus), the information included therein.
(j) Simontacchi & Co., LLP has audited certain financial
statements of the Company and delivered their report with respect to the
financial statements included in the Registration Statement and the Prospectus
(and, if the Prospectus is not in existence, the most recent Preliminary
Prospectus), and are independent public accountants with respect to the Company
as required by the Act and the applicable rules and regulations thereunder.
(k) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus (and, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), (i) except as
otherwise contemplated therein, there has been no material adverse change in the
business, operations, condition (financial or otherwise), earnings or prospects
of the Company, whether or not arising in the ordinary course of business, (ii)
except as otherwise stated therein, there have been no transactions entered into
by the Company and no commitments made by the Company that, individually or in
the aggregate, are material with respect to the Company, (iii) there has not
been any change in the capital stock or indebtedness of the Company, and (iv)
there has been no dividend or distribution of any kind declared, paid or made by
the Company in respect of any class of its capital stock.
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<PAGE>
(l) The Company has full corporate power and authority to
enter into and perform its obligations under this Agreement and the
Underwriter's Warrant Agreement (as hereinafter defined). The execution and
delivery of this Agreement and the Underwriter's Warrant Agreement have been
duly authorized by all necessary corporate action on the part of the Company and
this Agreement and the Underwriter's Warrant Agreement have each been duly
executed and delivered by the Company and each is a valid and binding agreement
of the Company, enforceable against the Company in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other similar laws
affecting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law), and except as rights to indemnity and contribution under this Agreement
may be limited by applicable law. The issuance, offering and sale by the Company
to the Underwriters of the Securities pursuant to this Agreement or the
Underwriter's Securities pursuant to the Underwriter's Warrant Agreement, the
compliance by the Company with the provisions of this Agreement and the
Underwriter's Warrant Agreement, and the consummation of the other transactions
contemplated by this Agreement and the Underwriter's Warrant Agreement do not
(i) require the consent, approval, authorization, registration or qualification
of or with any court or governmental or regulatory authority, except such as
have been obtained or may be required under state securities or blue sky laws
and, if the registration statement filed with respect to the Securities (as
amended) is not effective under the Act as of the time of execution hereof, such
as may be required (and shall be obtained as provided in this Agreement) under
the Act, or (ii) conflict with or result in a breach or violation of, or
constitute a default under, any material contract, indenture, mortgage, deed of
trust, loan agreement, note, lease or other material agreement or instrument to
which the Company is a party or by which the Company or any of its property is
bound or subject, or the certificate of incorporation or by-laws of the Company,
or any statute or any rule, regulation, judgment, decree or order of any court
or other governmental or regulatory authority or any arbitrator applicable to
the Company.
(m) No legal or governmental proceedings are pending to which
the Company is a party or to which the property of the Company is subject, and
no such proceedings have been threatened against the Company or with respect to
any of its property, except such as are described in the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus). No
contract or other document is required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the Registration
Statement that is not described therein (and, if the Prospectus is not in
existence, in the most recent Preliminary Prospectus) or filed as required.
(n) The Company is not in (i) violation of its certificate of
incorporation, by-laws or other governing documents, (ii) violation in any
material respect of any law, statute, regulation, ordinance, rule, order,
judgment or decree of any court or any governmental or regulatory authority
applicable to it, or (iii) other than as described in the Prospectus, default in
any material respect in the performance or observance of any obligation,
agreement, covenant or condition contained in any material contract, indenture,
mortgage, deed of trust, loan agreement, note, lease or other material agreement
or instrument to which it is a party or by which it or any of its property may
be bound or subject, and no event has occurred which with notice or lapse of
time or both would constitute such
5
<PAGE>
a default.
(o) The Company currently owns or possesses adequate rights to
use all intellectual property, including all trademarks, service marks, trade
names, copyrights, inventions, know-how, trade secrets, proprietary
technologies, processes and substances, or applications or licenses therefor,
that are described in the Prospectus (and if the Prospectus is not in existence,
the most recent Preliminary Prospectus), and any other rights or interests in
items of intellectual property as are necessary for the conduct of the business
now conducted or proposed to be conducted by them as described in the Prospectus
(or, such Preliminary Prospectus), and, except as disclosed in the Prospectus
(and such Preliminary Prospectus), the Company is not aware of the granting of
any patent rights to, or the filing of applications therefor by, others, nor is
the Company aware of, nor has the Company received notice of, infringement of or
conflict with asserted rights of others with respect to any of the foregoing.
All such intellectual property rights and interests are (i) valid and
enforceable and (ii) to the best knowledge of the Company, not being infringed
by any third parties.
(p) The Company possesses adequate licenses, orders,
authorizations, approvals, certificates or permits issued by the appropriate
federal, state or foreign regulatory agencies or bodies necessary to conduct its
business as described in the Registration Statement and the Prospectus (and, if
the Prospectus is not in existence, the most recent Preliminary Prospectus),
and, except as disclosed in the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), there are no pending or, to
the best knowledge of the Company, threatened, proceedings relating to the
revocation or modification of any such license, order, authorization, approval,
certificate or permit.
(q) The Company has good and marketable title to all of the
properties and assets reflected in the Company's financial statements or as
described in the Registration Statement and the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), subject
to no lien, mortgage, pledge, charge or encumbrance of any kind, except those
reflected in such financial statements or as described in the Registration
Statement and the Prospectus (and such Preliminary Prospectus). Except as
disclosed in the Prospectus, the Company occupies its leased properties under
valid and enforceable leases conforming to the description thereof set forth in
the Registration Statement and the Prospectus (and such Preliminary Prospectus).
(r) The Company is not and does not intend to conduct its
business in a manner in which it would be an "investment company" as defined in
Section 3(a) of the Investment Company Act of 1940 (the "Investment Company
Act").
(s) The Company has obtained and delivered to the Underwriter
the agreements (the "Lock-up Agreements") with the officers, directors and
principal shareholders of the Company substantially to the effect that, among
other things, each such person will not, commencing on the date that the
Registration Statement is declared effective by the SEC (the "Effective Date")
and continuing for a period of twenty-four (24) months thereafter, without the
prior written consent of the Underwriter, directly or indirectly, publicly sell,
offer or contract to sell or grant any option to
6
<PAGE>
purchase, transfer, assign or pledge, or otherwise encumber, or dispose of any
shares of Common Stock now or hereafter owned by such person and that the
purchaser or transferee in any private sale agrees to be bound by the Lock-Up
Agreement.
(t) No labor dispute with the employees of the Company exists,
is threatened or, to the best of the Company's knowledge, is imminent that could
result in a material adverse change in the condition (financial or otherwise),
business, prospects, net worth or results of operations of the Company, except
as described in or contemplated by the Prospectus (and, if the Prospectus is not
in existence, the most recent Preliminary Prospectus).
(u) The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which it is engaged; the Company
has not been refused any insurance coverage sought or applied for; and the
Company has no reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at a
cost that would not materially and adversely affect the condition (financial or
otherwise), business, prospects, net worth or results of operations of the
Company, except as described in or contemplated by the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(v) The Underwriter's Warrant (as hereinafter defined) will
conform to the description thereof in the Registration Statement and in the
Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) and, when sold to and paid for by the Underwriter in
accordance with the Underwriter's Warrant Agreement, will have been duly
authorized and validly issued and will constitute valid and binding obligations
of the Company entitled to the benefits of the Underwriter's Warrant Agreement.
The shares of Common Stock issuable upon exercise of the Underwriter's Warrant
(the "Underwriter's Warrant Shares") have been duly authorized and reserved for
issuance upon exercise of the Underwriter's Warrant by all necessary corporate
action on the part of the Company and, when issued and delivered and paid for
upon such exercise in accordance with the terms of the Underwriter's Warrant
Agreement and the Underwriter's Warrant, respectively, will be validly issued,
fully paid, nonassessable and free of preemptive rights and will conform to the
description thereof in the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(w) No person has acted as a finder in connection with, or is
entitled to any commission, fee or other compensation or payment for services as
a finder for or for originating, or introducing the parties to, the transactions
contemplated herein and the Company will indemnify the Underwriter with respect
to any claim for finder's fees in connection herewith. Except as set forth in
the Registration Statement and the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), the Company has no
management or financial consulting agreement with anyone. No promoter, officer,
director or stockholder of the Company is, directly or indirectly, affiliated or
associated with an NASD member and no securities of the Company have been
acquired by an NASD member, except as previously disclosed in writing to the
Underwriter.
7
<PAGE>
(x) The Company has filed all federal, state, local and
foreign tax returns which are required to be filed through the date hereof, or
has received extensions thereof, and has paid all taxes shown on such returns
and all assessments received by it to the extent that the same are material and
have become due.
(y) Neither the Company nor any director, officer, agent,
employee or other person associated with or acting on behalf of the Company has,
directly or indirectly: used any corporate funds for unlawful contributions,
gifts, entertainment, or other unlawful expenses relating to political activity;
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds; violated any provision of the Foreign Corrupt Practices Act of
1977, as amended; or made any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment. No transaction has occurred between or
among the Company and any of its officers or directors or any affiliates of any
such officer or director, that is required to be described in and is not
described in the Registration Statement and the Prospectus.
(z) Neither the Company nor any of its officers, directors or
affiliates (as defined in the Regulations), has taken or will take, directly or
indirectly, prior to the completion of the Offering, any action designed to
stabilize or manipulate the price of any security of the Company, or which has
caused or resulted in, or which might in the future reasonably be expected to
cause or result in, stabilization or manipulation of the price of any security
of the Company, to facilitate the sale or resale of any of the Securities or the
Option Securities.
2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND THE UNDERWRITER'S
WARRANTS.
(a) On the basis of the representations, warranties,
agreements and covenants herein contained and subject to the terms and
conditions herein set forth, the Company agrees to issue and sell to the
Underwriter, and the Underwriter agrees, to purchase from the Company, the
number of Firm Shares as set forth opposite its name on Schedule 1 annexed
hereto, at a purchase price of $___ per share.
(b) Certificates in definitive form for the Firm Securities
that the Underwriters have agreed to purchase hereunder, and in such
denomination or denominations and registered in such name or names as the
Underwriters request upon notice to the Company at least 48 hours prior to the
Firm Closing Date, shall be delivered by or on behalf of the Company to the
Underwriter, against payment by or on behalf of the Underwriters of the purchase
prices therefor by wire transfer of immediately available funds to a bank
account specified by the Company. Such delivery of the Firm Securities shall be
made at the offices of Counsel for the Underwriter, 101 East 52nd Street, New
York, New York at 9:30 A.M., New York City time on ______, 1999, within ten (10)
business days from the Effective Date, or at such other place, time or date as
the Underwriter and the Company may agree upon, such time and date of delivery
against payment being herein referred to as the "Firm Closing Date." The Company
will make such certificates for the Firm Securities available for checking and
packaging by the Underwriter, at such offices as may be designated by
8
<PAGE>
the Underwriter, at least 24 hours prior to the Firm Closing Date. In lieu of
physical delivery, the closing may occur by "DTC" delivery.
(c) For the purpose of covering any over-allotments in
connection with the distribution and sale of the Firm Securities as contemplated
by the Prospectus, the Company hereby grants to the Underwriter an option to
purchase any or all of the Option Shares, which options are exercisable by the
Underwriter on behalf of and for the account of the Underwriter, 75,000 of which
may be purchased directly from Timothy Harrington, Chief Executive Officer of
the Company. The purchase price to be paid for any of the Option Shares shall be
the same price per share for the Firm Securities set forth above in paragraph
(a) of this Section 2. The option granted hereby may be exercised as to all or
any part of the Option Shares from time to time within 45 calendar days after
the Firm Closing Date. The Underwriter shall not be under any obligation to
purchase any of the Option Shares prior to the exercise of such option. The
Underwriter may from time to time exercise the option granted hereby by giving
notice in writing or by telephone (confirmed in writing) to the Company setting
forth the aggregate number of Option Shares as to which the Underwriter is then
exercising the option and the date and time for delivery of and payment for such
Option Shares. Any such date of delivery shall be determined by the Underwriter
but shall not be earlier than two business days or later than three business
days after such exercise of the option and, in any event, shall not be earlier
than the Firm Closing Date. The time and date set forth in such notice, or such
other time on such other date as the Underwriter and the Company may agree upon,
is herein called the "Option Closing Date" with respect to such Option Shares.
Upon exercise of the option as provided herein, the Company shall become
obligated to sell to the Underwriter, and, subject to the terms and conditions
herein set forth, the Underwriter shall become obligated to purchase from the
Company, the Option Shares as to which the Underwriter is then exercising its
option. If the option is exercised as to all or any portion of the Option
Shares, certificates in definitive form for such Option Shares, and payment
therefor, shall be delivered on the related Option Closing Date in the manner,
and upon the terms and conditions, set forth in paragraph (b) of this Section 2,
except that reference therein to the Firm Securities and the Firm Closing Date
shall be deemed, for purposes of this paragraph (c), to refer to such Option
Shares and Option Closing Date, respectively.
(d) On the Firm Closing Date, the Company will further issue
and sell to the Underwriter or, at the direction of the Underwriter, to bona
fide officers of the Underwriter, for an aggregate purchase price of $10,
warrants to purchase Common Stock (the "Underwriter's Warrant") entitling the
holders thereof to purchase an aggregate of 100,000 shares of Common Stock for a
period of four years, such period to commence on the first anniversary of the
Effective Date. The Underwriter's Warrant shall be exercisable at a price equal
to 165% of the public offering price of the Common Stock, and shall contain
terms and provisions more fully described herein below and as set forth more
particularly in the warrant agreement relating to the Underwriter's Warrant to
be executed by the Company on the Effective Date (the "Underwriter's Warrant
Agreement"), including, but not limited to, (i) customary anti-dilution
provisions in the event of stock dividends, split mergers, sales of all or
substantially all of the Company's assets, sales of stock below then prevailing
market or exercise prices and other events, and (ii) prohibitions of mergers,
consolidations or other reorganizations of or by the Company or the taking by
the Company of other action during the
9
<PAGE>
five-year period following the Effective Date unless adequate provision is made
to preserve, in substance, the rights and powers incidental to the Underwriter's
Warrant. As provided in the Underwriter's Warrant Agreement, the Underwriter may
designate that the Underwriter's Warrant be issued in varying amounts directly
to bona fide officers of the Underwriter. As further provided, no sale,
transfer, assignment, pledge or hypothecation of the Underwriter's Warrant shall
be made for a period of 12 months from the Effective Date, except (i) by
operation of law or reorganization of the Company, or (ii) to the Underwriter
and bona fide partners, officers of the Underwriter and selling group members.
3. OFFERING BY THE UNDERWRITER. The Underwriter propose to offer the
Firm Securities for sale to the public upon the terms set forth in the
Prospectus (the "Offering").
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Underwriter that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of this
Agreement, to become effective as promptly as possible. If required, the Company
will file the Prospectus and any amendment or supplement thereto with the
Commission in the manner and within the time period required by Rule 424(b)
under the Act. During any time when a prospectus relating to the Securities is
required to be delivered under the Act, the Company (i) will comply with all
requirements imposed upon it by the Act and the rules and regulations of the
Commission thereunder to the extent necessary to permit the continuance of sales
of or dealings in the Securities in accordance with the provisions hereof and of
the Prospectus, as then amended or supplemented, and (ii) will not file with the
Commission any prospectus or amendment referred to in the first sentence of
section (a) (i) hereof, any amendment or supplement to such prospectus or any
amendment to the Registration Statement as to which the Underwriter shall not
previously have been advised and furnished with a copy for a reasonable period
of time prior to the proposed filing and as to which filing the Underwriter
shall not have given its consent. The Company will prepare and file with the
Commission, in accordance with the rules and regulations of the Commission,
promptly upon request by the Underwriter or counsel to the Underwriter, any
amendments to the Registration Statement or amendments or supplements to the
Prospectus that may be necessary or advisable in connection with the
distribution of the Securities by the Underwriter, and will use its best efforts
to cause any such amendment to the Registration Statement to be declared
effective by the Commission as promptly as possible. The Company will advise the
Underwriter, promptly after receiving notice thereof, of the time when the
Registration Statement or any amendment thereto has been filed or declared
effective or the Prospectus or any amendment or supplement thereto has been
filed and will provide evidence satisfactory to the Underwriter of each such
filing or effectiveness.
(b) The Company will advise the Underwriter, promptly after
receiving notice or obtaining knowledge thereof, of (i) the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, (ii) the
10
<PAGE>
suspension of the qualification of any Securities for offering or sale in any
jurisdiction, (iii) the institution, threat or contemplation of any proceeding
for any such purpose, or (iv) any request made by the Commission for amending
the Registration Statement, for amending or supplementing the Prospectus or for
additional information. The Company will use its best efforts to prevent the
issuance of any such stop order and, if any such stop order is issued, to obtain
the withdrawal thereof as promptly as possible.
(c) The Company will, in cooperation with counsel to the
Underwriter, arrange for the qualification of the Securities for offering and
sale under the blue sky or securities laws of such jurisdictions as the
Underwriter may designate and will continue such qualifications in effect for as
long as may be necessary to complete the distribution of the Securities.
(d) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event occurs as a
result of which the Prospectus, as then amended or supplemented, would include
any 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, or if for any other
reason it is necessary at any time to amend or supplement the Prospectus to
comply with the Act or the rules or regulations of the Commission thereunder,
the Company will promptly notify the Underwriter thereof and, subject to Section
4(a) hereof, will prepare and file with the Commission, at the Company's
expense, an amendment to the Registration Statement or an amendment or
supplement to the Prospectus that corrects such statement or omission or effects
such compliance.
(e) Intentionally left blank.
(f) The Company will, without charge, provide to the
Underwriter and to counsel for the Underwriter (i) as many signed copies of the
registration statement originally filed with respect to the Securities and each
amendment thereto (in each case including exhibits thereto) as the Underwriter
may reasonably request, (ii) as many conformed copies of such registration
statement and each amendment thereto (in each case without exhibits thereto) as
the Underwriter may reasonably request, and (iii) so long as a prospectus
relating to the Securities is required to be delivered under the Act, as many
copies of each Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto as the Underwriter may reasonably request.
(g) The Company, as soon as practicable, will make generally
available to its security holders and to the Underwriter an earnings statement
of the Company that satisfies the provisions of Section 11 (a) of the Act and
Rule 158 thereunder.
(h) The Company will reserve and keep available for issuance
that maximum number of authorized but unissued shares of Common Stock which are
issuable upon exercise of any outstanding warrants and the Underwriter's Warrant
(including the underlying securities) outstanding from time to time.
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<PAGE>
(i) The Company will apply the net proceeds from the sale of
the Securities being sold by it as set forth under "Use of Proceeds" in the
Prospectus.
(j) Intentionally left blank.
(k) Prior to the Closing Date or the Option Closing Date (if
any), the Company will not, directly or indirectly, without prior written
consent of the Underwriter, issue any press release or other public announcement
or hold any press conference with respect to the Company or its activities with
respect to the Offering (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).
(l) If, at the time that the Registration Statement becomes
effective, any information shall have been omitted therefrom in reliance upon
Rule 430A under the Act, then immediately following the execution of this
Agreement, the Company will prepare, and file or transmit for filing with the
Commission in accordance with Rule 430A and Rule 424(b) under the Act, copies of
the Prospectus including the information omitted in reliance on Rule 430A, or,
if required by such Rule 430A, a post-effective amendment to the Registration
Statement (including an amended Prospectus), containing all information so
omitted.
(m) The Company will assist the Underwriter in causing the
Securities to be listed on the Nasdaq SmallCap Market on the Effective Date and
to maintain such listing thereafter.
(n) During the period of five years from the Firm Closing
Date, the Company will, as promptly as possible, not to exceed 135 days, after
each annual fiscal period render and distribute reports to its stockholders
which will include audited statements of its operations and changes of financial
position during such period and its audited balance sheet as of the end of such
period, as to which statements the Company's independent certified public
accountants shall have rendered an opinion and shall timely file all reports
required to be filed under the securities laws.
(o) During a period of three years commencing with the Firm
Closing Date, the Company will furnish to the Underwriter, at the Company's
expense, copies of all periodic and special reports furnished to stockholders of
the Company and of all information, documents and reports filed with the
Commission.
(p) The Company has appointed Continental Stock Transfer &
Trust Company as transfer agent for the Common Stock, subject to the Closing.
The Company will not change or terminate such appointment for a period of three
years from the Firm Closing Date without first obtaining the written consent of
the Underwriter. For a period of three years after the Effective Date, the
Company shall cause the transfer agent to deliver promptly to the Underwriter a
duplicate copy of the daily transfer sheets relating to trading of the
Securities. The Company shall also provide to the Underwriter, on a weekly
basis, copies of the DTC special securities positions listing report.
(q) During the period of 180 days after the date of this
Agreement, the Company
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<PAGE>
will not at any time, directly or indirectly, take any action designed to or
that will constitute, or that might reasonably be expected to cause or result
in, the stabilization of the price of the Common Stock to facilitate the sale or
resale of any of the Securities.
(r) The Company will not take any action to facilitate the
sale of any shares of Common Stock pursuant to Rule 144 under the Act if any
such sale would violate any of the terms of the Lock-up Agreements.
(s) Prior to the 120th day after the Firm Closing Date, the
Company will provide the Underwriter and their designees with four bound volumes
of the transaction documents relating to the Registration Statement and the
closing(s) hereunder, in form and substance reasonably satisfactory to the
Underwriter.
(t) The Company shall consult with the Underwriter prior to
the distribution to third parties of any financial information news releases or
other publicity regarding the Company, its business, or any terms of this
offering and the Underwriter will consult with the Company prior to the issuance
of any research report or recommendation concerning the Company's securities.
Copies of all documents that the Company or its public relations firm intend to
distribute will be provided to the Underwriter for review prior to such
distribution.
(u) The Company and the Underwriter will advise each other
immediately in writing as to any investigation, proceeding, order, event or
other circumstance, or any threat thereof, by or relating to the Commission or
any other governmental authority, that could impair or prevent the Offering.
Except as required by law or as otherwise mutually agreed in writing, neither
the Company nor the Underwriter will acquiesce in such circumstances and each
will actively defend any proceedings or orders in that connection.
(v) The Company shall first submit to the Underwriter
certificates representing the Securities for approval prior to printing, and
shall, as promptly as possible, after filing the Registration Statement with the
Commission, obtain CUSIP numbers for the Securities.
(w) The Company will prepare and file a registration statement
with the Commission pursuant to section 12 of the 1934 Act, and will use its
best efforts to have such registration statement declared effective by the
Commission on an accelerated basis on the day after the Effective Date. For this
purpose the Company shall prepare and file with the Commission a General Form of
Registration of Securities (Form 8-A or Form 10).
(x) For so long as the Securities are registered under the
1934 Act, the Company will hold an annual meeting of stockholders for the
election of directors within 180 days after the end of each of the Company's
fiscal years and within 135 days after the end of each of the Company's fiscal
years will provide the Company's stockholders with the audited financial
statements of the Company as of the end of the fiscal year just completed prior
thereto. Such financial statements shall be those required by Rule 14a-3 under
the 1934 Act and shall be included
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in an annual report pursuant to the requirements of such Rule.
(y) The Company will take all necessary and appropriate
actions to be included in Standard and Poor's Corporation Descriptions or other
equivalent manual and to maintain its listing therein for a period of five (5)
years from the Effective Date. Such application shall be made on an accelerated
basis no more than two days following the Effective Date.
(z) On or prior to the Effective Date, the Company will give
written instructions to the transfer agent for the Common Stock directing said
transfer agent to place stop-order restrictions against, and appropriate legends
advising of the Lock-Up Agreements on, the certificates representing the
securities of the Company owned by the persons who have entered into the Lock-up
Agreements.
4. EXPENSES
(a) The Company shall pay all costs and expenses incident to
the performance of its obligations under this Agreement, whether or not the
transactions contemplated hereby are consummated or this Agreement is terminated
pursuant to Section 10 hereof, including all costs and expenses incident to (i)
the preparation, printing and filing or other production of documents with
respect to the transactions, including any costs of printing the Registration
Statement originally filed with respect to the Securities and any amendment
thereto, any Preliminary Prospectus and the Prospectus and any amendment or
supplement thereto, this Agreement, the selected dealer agreement and the other
agreements and documents governing the underwriting arrangements and any blue
sky memoranda, (ii) all reasonable and necessary arrangements relating to the
delivery to the Underwriter of copies of the foregoing documents, and the costs
and expenses of the Underwriter in mailing or otherwise distributing the same
including telephone charges, duplications and other accountable expenses, (iii)
the fees and disbursements of the counsel, the accountants and any other experts
or advisors retained by the Company, (iv) the preparation, issuance and delivery
to the Underwriter of any certificates evidencing the Securities, including
transfer agent's, warrant agent's and registrar's fees or any transfer or other
taxes payable thereon, (v) the qualification of the Securities under state blue
sky or securities laws, including filing fees and fees and disbursements of
counsel relating thereto and any fees and disbursements of local counsel, if
any, retained for such purpose, (vi) the filing fees of the Commission and the
NASD relating to the Securities, (vii) the inclusion of the Securities on The
Nasdaq SmallCap Market and in the Standard and Poor's Corporation Descriptions
Manual, (viii) any "road shows" or other meetings with prospective investors in
the Securities, including transportation, accommodation, meal, conference room,
audio-visual presentation and similar expenses, but not including such expenses
for the Underwriter or their Underwriter or designees in excess of $15,000 and
(ix) the publication of "tombstone advertisements" in newspapers or other
publications selected by the Underwriter, and the manufacture of prospectus
memorabilia. In addition to the foregoing, the Company, shall reimburse the
Underwriter for its expenses on the basis of a non-accountable expense allowance
in the amount of 3.00% of the gross offering proceeds to be received by the
Company. The non-accountable expense allowance, based on the gross proceeds from
the sale of the Firm Securities, shall be
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deducted from the funds to be paid by the Underwriter in payment for the Firm
Securities, pursuant to Section 2 of this Agreement, on the Firm Closing Date.
To the extent any Option Shares are sold, any remaining non-accountable expense
allowance based on the gross proceeds from the sale of the Option Shares shall
be deducted from the funds to be paid by the Underwriter in payment for the
Option Shares, pursuant to Section 2 of this Agreement, on the Option Closing
Date. The Company warrants, represents and agrees that all such payments and
reimbursements will be promptly and fully made.
(b) Notwithstanding any other provision of this Agreement, if
the Offering is terminated in accordance with the provisions of Section 6 or
Section 10(a)(i), the Company agrees that, in addition to the Company paying its
own expenses as described in subparagraph (a) above, the Company shall reimburse
the Underwriter for its actual accountable out-of-pocket expenses (in addition
to blue sky legal fees and expenses referred to in subparagraph (a) above) net
of the $17,500 which has previously been advanced to the Underwriter, up to a
maximum of $75,000. Such expenses shall include, but are not to be limited to,
fees for the services and time of counsel for the Underwriter to the extent not
covered by clause (a) above, plus any additional expenses and fees, including,
but not limited to, travel expenses, postage expenses, duplication expenses,
long-distance telephone expenses, and other expenses incurred by the Underwriter
in connection with the proposed offering.
5. Intentionally left blank.
6. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The obligations of the
Underwriter to purchase and pay for the Firm Shares shall be subject, in the
Underwriter's sole discretion, to the accuracy of the representations and
warranties of the Company contained herein as of the date hereof and as of the
Firm Closing Date as if made on and as of the Firm Closing Date, to the accuracy
of the statements of the Company's officers made pursuant to the provisions
hereof, to the performance by the Company of its covenants and agreements
hereunder and to the following additional conditions:
(a) If the Registration Statement, as heretofore amended, has
not been declared effective as of the time of execution hereof, the Registration
Statement, as heretofore amended or as amended by an amendment thereto to be
filed prior to the Firm Closing Date, shall have been declared effective not
later than 5:30 P.M., New York City time, on the date on which the amendment to
such Registration Statement containing information regarding the initial public
offering price of the Securities has been filed with the Commission, or such
later time and date as shall have been consented to by the Underwriter; if
required, the Prospectus and any amendment or supplement thereto shall have been
filed with the Commission in the manner and within the time period required by
Rule 424(b) under the Act, 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 threatened or, to the knowledge of the
Company or the Underwriter, shall be contemplated by the Commission; and the
Company shall have complied with any request of the Commission for additional
information (to be included in the Registration Statement or the
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<PAGE>
Prospectus or otherwise).
(b) The Underwriter shall have received an opinion, dated the
Firm Closing Date, of Sichenzia, Ross & Freidman, LLP, counsel to the Company,
substantially to the effect that:
(1) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its organization and is duly qualified to transact business as a
foreign corporation and is in good standing under the laws of each other
jurisdiction in which its ownership or leasing of any properties or the conduct
of its business requires such qualification, except where the failure to be in
good standing or so qualify would not have a materially adverse effect upon the
Company;
(2) the Company has full corporate power and
authority to own or lease its property and conduct its business as it is now
being conducted and as it is proposed to be conducted, as described in the
Registration Statement and the Prospectus, and the Company has full corporate
power and authority to enter into this Agreement and the Underwriter's Warrant
Agreement and to carry out all the terms and provisions hereof and thereof to be
carried out by it;
(3) to the knowledge of such counsel, there are no
outstanding options, warrants or other rights granted by the Company to purchase
shares of its Common Stock, preferred stock or other securities other than as
described in the Prospectus; the Shares have been duly authorized and the
Underwriter's Warrant Shares have been duly reserved for issuance by all
necessary corporate action on the part of the Company and the Shares when issued
and delivered to and paid for by the Underwriter, pursuant to this Agreement,
the Underwriter's Warrant when issued and delivered and paid for in accordance
with this Agreement and the Underwriter's Warrant Agreement by the Underwriter,
and the Underwriter's Warrant Shares when issued upon payment of the exercise
price specified in the Underwriter's Warrant, will be validly issued, fully
paid, nonassessable and free of preemptive rights and will conform to the
description thereof in the Prospectus; to the knowledge of such counsel, no
holder of outstanding securities of the Company is entitled as such to any
preemptive or other right to subscribe for any of the Shares or the
Underwriter's Warrant Shares; and to the knowledge of such counsel, no person is
entitled to have securities registered by the Company under the Registration
Statement or otherwise under the Act other than as described in the Prospectus;
(4) the execution and delivery of this Agreement and
the Underwriter's Warrant Agreement have been duly authorized by all necessary
corporate action on the part of the Company and this Agreement and the
Underwriter's Warrant Agreement have been duly executed and delivered by the
Company, and each is a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and other similar laws affecting creditors' rights generally and by
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law) and except as rights to indemnity and
contribution under this Agreement and the Underwriter's Warrant Agreement may
16
<PAGE>
be limited by applicable securities laws and the public policy underlying such
laws;
(5) the Underwriter's Warrant is duly authorized and
upon payment of the purchase price therefore specified in Section 2(d) of this
Agreement will be validly issued and constitute valid and binding obligations of
the Company; and the certificates representing the Securities are in due and
proper form under law;
(6) the statements set forth in the Prospectus under
the caption "Description of Securities" insofar as those statements purport to
summarize the terms of the capital stock and warrants of the Company, provide a
fair summary of such terms; to the knowledge of such counsel, the statements set
forth in the Prospectus describing statutes and regulations and the descriptions
of the consequences to the Company under such statutes and regulations are fair
summaries of the information set forth therein and are accurate in all material
respects; to the knowledge of such counsel, the statements in the Prospectus,
insofar as those statements constitute summaries of the contracts, instruments,
leases or licenses referred to therein, constitute a fair summary in all
material respects of those contracts, instruments, leases or licenses and
include all material terms thereof, as applicable;
(7) none of (A) the execution and delivery of this
Agreement and the Underwriter's Warrant Agreement, (B) the issuance, offering
and sale by the Company to the Underwriter of the Securities pursuant to this
Agreement and the Underwriter's Warrant Shares pursuant to the Underwriter's
Warrant Agreement, or (C) the compliance by the Company with the other
provisions of this Agreement and the Underwriter's Warrant Agreement and the
consummation of the transactions contemplated hereby and thereby, to the
knowledge of such counsel (1) requires the consent, approval, authorization,
registration or qualification of or with any court or governmental authority
known to us, except such as have been obtained and such as may be required under
state blue sky or securities laws as to which we express no opinion or (2)
conflicts with or results in a breach or violation of, or constitutes a default
under, any material contract, indenture, mortgage, deed of trust, loan
agreement, note, lease or other material agreement or instrument known to such
counsel to which the Company is a party or by which the Company or any of its
property is bound or subject, or the certificate of incorporation or by-laws of
the Company, or any material statute or any judgment, decree, order, rule or
regulation of any court or other governmental or regulatory authority known to
us applicable to the Company;
(8) to the knowledge of such counsel, (A) no legal or
governmental proceedings are pending to which the Company is a party or to which
the property of the Company is subject except those arising in the ordinary
course of business and fully covered by insurance and (B) no contract or other
document is required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement that is
not described therein or filed as required;
(9) to the knowledge of such counsel, the Company
possesses adequate licenses, orders, authorizations, approvals, certificates or
permits issued by the appropriate federal,
17
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state or local regulatory agencies or bodies necessary to conduct its business
as described in the Registration Statement and the Prospectus, and, there are no
pending or threatened proceedings relating to the revocation or modification of
any such license, order, authorization, approval, certificate or permit, except
as disclosed in the Registration Statement and the Prospectus, which would have
a material adverse effect on the Company;
(10) The Company is not in violation or breach of, or
in default with respect to, any term of its certificate of incorporation or
by-laws, and to the knowledge of such counsel, the Company is not in (i)
violation in any material respect of any law, statute, regulation, ordinance,
rule, order, judgment or decree of any court or any governmental or regulatory
authority applicable to it, or (ii) default in any material respect in the
performance or observance of any obligation, agreement, covenant or condition
contained in any material contract, indenture, mortgage, deed of trust, loan
agreement, note, lease or other material agreement or instrument to which it is
a party or by which it or any of its property may be bound or subject, and no
event has occurred which with notice, lapse of time or both would constitute
such a default;
(11) the Shares have been approved for inclusion on
the Nasdaq SmallCap Market;
(12) the Registration Statement is effective under
the Act; any required filing of the Prospectus pursuant to Rule 424(b) has been
made in the manner and within the time period required by Rule 424(b); and to
our knowledge, no stop order suspending the effectiveness of the Registration
Statement or any amendment thereto has been issued, and no proceedings for that
purpose have been instituted or threatened or, to the best knowledge of such
counsel, are contemplated by the Commission;
(13) the Registration Statement originally filed with
respect to the Securities and each amendment thereto and the Prospectus (in each
case, other than the financial statements, the notes, schedules and other
financial and statistical information contained therein, as to which such
counsel need express no opinion) comply as to form in all material respects with
the applicable requirements of the Act and the rules and regulations of the
Commission thereunder; and
(14) the Company is not an "investment company" as
defined in Section 3(a) of the Investment Company Act of 1940 and, if the
Company conducts its business as set forth in the Prospectus, it will not become
an "investment company" and will not be required to register under the
Investment Company.
Such counsel also shall state in its opinion that it has
participated in the preparation of the Registration Statement and the Prospectus
and that nothing has come to its attention that has caused it to believe that
the Registration Statement, at the time it became effective (including the
information deemed to be a part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b), if applicable), contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
18
<PAGE>
misleading or that the Prospectus, as of its date or as of the Firm Closing
Date, contained an untrue statement of material fact or omitted 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.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials, copies of which certificates will
be provided to the Underwriter, and, as to matters of the laws of certain
jurisdictions, on the opinions of other counsel to the Company, which opinions
shall also be delivered to the Underwriter, in form and substance acceptable to
the Underwriter, if such other counsel expressly authorize such reliance and
counsel to the Company expressly states in their opinion that such counsel's and
the Underwriter's reliance upon such opinion is justified.
(c). A. 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 (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
in all respects to the Underwriter and Underwriter's counsel, from Simontacchi &
Co. LLP:
i. confirming that it is a independent certified
public accountant 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
financial statements of the Company and Aropi 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 Simontacchi & Co. LLP with
respect to the financial statements included in the Registration Statement;
iii. stating that, on the basis of a limited review
which included a reading of the latest available unaudited interim financial
statements of the Company, 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 (which, as to the interim financial statements included
in the Registration Statement, shall constitute a review as described in SAS No.
71, Interim Financial Statements), nothing has come to Simontacchi & Co. LLP's
attention which would lead them to believe that (A) the unaudited financial
statements 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 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, 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 December 31, 1998 consolidated balance sheet
included in the Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or,
19
<PAGE>
if there was any change or decrease, setting forth the amount of such change or
decrease, and (C) during the period from December 31, 1998 to a specified date
not more than five (5) days prior to the Effective Date, there was any decrease
(increase) in net revenues, net income (loss) or in net earnings (loss) per
common share of the Company, in each case as compared with the corresponding
period December 31, 1998 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 (increase);
iv. setting forth, at a date not later than five (5)
days prior to the Effective Date, the amount of liabilities of the Company;
v. stating that they have compared specific dollar
amounts, numbers of shares, 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. statements as to such other matters incident to
the transaction contemplated hereby as the Underwriter may request.
B. At the Firm Closing Date and the Option Closing
Date, if any, the Underwriter shall have received from Simontacchi & Co. LLP, a
letter, dated as of the Firm Closing Date or the Option Closing Date, as the
case may be, to the effect that it reaffirms that statements made in the letter
furnished pursuant to subsection A of this Section 6(c), except that the
specified date referred to shall be a date not more than five (5) days prior to
the Firm Closing Date or the Option Closing Date, as the case may be, 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
(v) of subsection A of this Section 6(c) 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 (v).
(d) The representations and warranties of the Company
contained in this Agreement shall be true and correct as if made on and as of
the Firm Closing Date; the Registration Statement shall not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein in order to make the statements therein not misleading, and the
Prospectus, as amended or supplemented as of the Firm Closing Date, shall not
include any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and the Company shall
have performed all covenants and agreements and satisfied all conditions on its
part to be performed or satisfied at or prior to the Firm Closing Date.
20
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(e) No stop order suspending the effectiveness of the
Registration Statement or any amendment thereto shall have been issued, and no
proceedings for that purpose shall have been instituted or threatened or
contemplated by the Commission.
(f) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, there shall not have
been any material adverse change, or any development involving a prospective
material adverse change, in the business, operations, condition (financial or
otherwise), earnings or prospects of the Company, except in each case as
described in or contemplated by the Prospectus (exclusive of any amendment or
supplement thereto).
(g) The Underwriter shall have received a certificate, dated
the Firm Closing Date, of the Chief Executive Officer and the Secretary of the
Company to the effect set forth in subparagraphs (d) through (f) above.
(h) The Common Stock shall be qualified in such jurisdictions
as the Underwriter may reasonably request pursuant to Section 4(c), and each
such qualification shall be in effect and not subject to any stop order or other
proceeding on the Firm Closing Date.
(i) The Company shall have executed and delivered to the
Underwriter the Underwriter's Warrant Agreement and a certificate or
certificates evidencing the Underwriter's Warrant, in each case in a form
acceptable to the Underwriter.
(i) The Underwriter shall have received Lock-up Agreements
executed by the persons listed on Schedule 2 annexed hereto.
(j) On or before the Firm Closing Date, the Underwriter and
counsel for the Underwriter shall have received such further certificates,
documents, letters or other information as they may have reasonably requested
from the Company and other security holders of the Company.
All opinions, certificates, letters and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Underwriter and counsel
for the Underwriter. The Company shall furnish to the Underwriter such conformed
copies of such opinions, certificates, letters and documents in such quantities
as the Underwriter and counsel for the Underwriter shall reasonably request.
The obligation of the Underwriter to purchase and pay for any Option
Shares shall be subject, in its discretion, to each of the foregoing conditions,
except that all references to the Firm Securities and the Firm Closing Date
shall be deemed to refer to such Option Shares and the related Option Closing
Date, respectively.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless the
Underwriter and
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each person, if any, who controls the Underwriter within the meaning of Section
15 of the Act or Section 20 of the 1934 Act against any losses, claims, damages,
or liabilities, joint or several, to which the Underwriter, or such controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon:
(1) any untrue statement or alleged untrue statement
of any material fact contained in (A) the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or any amendment
or supplement thereto, or (B) any application or other document, or any
amendment or supplement thereto, executed by the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to qualify the Securities under the Blue Sky or securities laws thereof
or filed with the Commission or any securities association or securities
exchange (each an "Application"), or
(2) the omission or alleged omission to state in such
Registration Statement or any amendment thereto, any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or any Application a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse, as incurred, the Underwriter and
such controlling person for any legal or other expenses reasonably incurred by
the Underwriter or such controlling person in connection with investigating or
defending against any loss, claim, damage, liability, action, investigation,
litigation or proceeding; PROVIDED, HOWEVER, that the Company will not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in such Registration Statement or any
amendment thereto, any Preliminary Prospectus, the Prospectus or any amendment
or supplement thereto, or any Application in reliance upon and in conformity
with written information furnished to the Company by the Underwriter,
specifically for use therein. This indemnity agreement will be in addition to
any liability which the Company may otherwise have. The Company will not,
without the prior written consent of the Underwriter, or controlling person,
settle or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which indemnification
may be sought hereunder (whether or not the Underwriter or any person who
controls the Underwriter or within the meaning of Section 15 of the Act or
Section 20 of the 1934 Act is a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of the Underwriter and each such controlling person from
all liability arising out of such claim, action, suit or proceeding.
(b) The Underwriter will indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the 1934 Act against, any losses,
claims, damages or liabilities to which the Company or any such director,
officer, or controlling person may become subject under the Act or otherwise,
but only insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
22
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Statement or any amendment thereto, any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or any Application, or (ii) the omission
or the alleged omission to state therein a material fact required to be stated
in the Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or any
Application, or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by the
Underwriter specifically for use therein; and, subject to the limitation set
forth immediately preceding this clause, will reimburse, as incurred, any legal
or other expenses reasonably incurred by the Company or any such director,
officer, or controlling person in connection with investigating or defending
against any such loss, claim, damage, liability, action investigation,
litigation or proceedings, in respect thereof. This indemnity agreement will be
in addition to any liability which the Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 7, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section 7. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such indemnified
party; PROVIDED, HOWEVER, that if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnifying party shall not have
the right to direct the defense of such action on behalf of such indemnified
party or parties and such indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof and approval by such
indemnified party of counsel appointed to defend such action, the indemnifying
party will not be liable to such indemnified party under this Section 7 for any
legal or other expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence or (ii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. After such notice from the
indemnifying party to such indemnified party, the indemnifying party will not be
liable for the costs and expenses of any settlement of such action effected by
such indemnified party without the consent of the indemnifying party.
(d) In circumstances in which the indemnity obligation
provided for in the preceding paragraphs of this Section 7 is unavailable or
insufficient to hold harmless an indemnified
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party in respect of any losses, claims, damages or liabilities (or actions in
respect thereof), each indemnifying party, in order to provide for just and
equitable contribution, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect (i)
the relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party on the other from the offering of the Securities,
or (ii) if the allocation provided by the foregoing clause (i) is not permitted
by applicable law, not only such relative benefits but also the relative fault
of the indemnifying party or parties on the one hand and the indemnified party
on the other in connection with the statements or omissions or alleged
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof). 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 proceeds from the Offering (net of
underwriting discounts and commissions but before deducting expenses) received
by the Company bear to the total underwriting discounts and commissions received
by the Underwriter. The relative fault of the parties 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 the Underwriter, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission, and the other equitable considerations
appropriate in the circumstances. The Company and the Underwriter agree that it
would not be equitable if the amount of such contribution were determined by pro
rata or per capita allocation or by any other method of allocation that does not
take into account the equitable considerations referred to in the first sentence
of this paragraph (d). Notwithstanding any other provision of this paragraph
(d), the Underwriter shall not be obligated to make contributions hereunder that
in the aggregate exceed the total public offering price of the Securities
purchased by the Underwriter under this Agreement, less the aggregate amount of
any damages that the Underwriter has otherwise been required to pay in respect
of the same or any substantially similar claim, and 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 is not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each person,
if any, who controls an Underwriter within the meaning of Section 15 of the Act
or Section 20 of the 1934 Act shall have the same rights to contribution as the
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the 1934
Act, shall have the same rights to contribution as the Company.
8. SUBSTITUTION OF UNDERWRITER.
If any Underwriter shall for any reason not permitted hereunder cancel
its obligations to purchase the Firm Securities hereunder, or shall fail to take
up and pay for the number of Firm Securities set forth opposite names in
Schedule 1 hereto upon tender of such Firm Securities in accordance with the
terms hereof, then:
(a) If the aggregate number of Firm Securities which such
Underwriter or
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<PAGE>
Underwriter agreed but failed to purchase does not exceed 10% of the total
number of Firm Securities, the other Underwriter shall be obligated to purchase
the Firm Securities which such defaulting Underwriter agreed but failed to
purchase.
(b) If any Underwriter so defaults and the agreed number of
Firm Securities with respect to which such default or defaults occurs is more
than 10% of the total number of Firm Securities, the remaining Underwriter shall
have the right to take up and pay for the Firm Securities which the defaulting
Underwriter agreed but failed to purchase. If such remaining Underwriter do not,
at the Firm Closing Date, take up and pay for the Firm Securities which the
defaulting Underwriter agreed but failed to purchase, the time for delivery of
the Firm Securities shall be extended to the next business day to allow the
remaining Underwriter the privilege of substituting within twenty-four hours
(including nonbusiness hours) another underwriter or Underwriter satisfactory to
the Company. If no such underwriter or Underwriter shall have been substituted
as aforesaid, within such twenty-four hour period, the time of delivery of the
Firm Securities may, at the option of the Company, be again extended to the next
following business day, if necessary, to allow the Company the privilege of
finding within twenty-four hours (including nonbusiness hours) another
underwriter or Underwriter to purchase the Firm Securities which the defaulting
Underwriter or Underwriter agreed but failed to purchase. If it shall be
arranged for the remaining Underwriter or substituted Underwriter to take up the
Firm Securities of the defaulting Underwriter as provided in this section, (i)
the Company or the Underwriter shall have the right to postpone the time of
delivery for a period of not more than seven business days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other document or arrangements, and the Company agrees
promptly to file any amendments to the Registration Statement or supplements to
the Prospectus which may thereby be made necessary, and (ii) the respective
numbers of Firm Securities to be purchased by the remaining Underwriter or
substituted Underwriter shall be taken as the basis of the underwriting
obligation for all purposes of this agreement.
If in the event of a default by any Underwriter and the remaining
Underwriter shall not take up and pay for all the Firm Securities agreed to be
purchased by the defaulting Underwriter or substitute another underwriter or
Underwriter as aforesaid, the Company shall not find or shall not elect to seek
another underwriter or Underwriter for such Firm Securities as aforesaid, then
this Agreement shall terminate.
If, following exercise of the option provided in Section 2(c) hereof,
any Underwriter or Underwriter shall for any reason not permitted hereunder
cancel their obligations to purchase Option Shares at the Option Closing Date,
or shall fail to take up and pay for the number of Option Shares, which it
became obligated to purchase at the Option Closing Date upon tender of such
Option Shares in accordance with the terms hereof, then the remaining
Underwriter or substituted Underwriter may take up and pay for the Option Shares
of the defaulting Underwriter in the manner provided in Section 8(b) hereof. If
the remaining Underwriter or substituted Underwriter shall not take up and pay
for all such Option Shares, the Underwriter shall be entitled to purchase the
number of Option Shares for which there is no default or, at their election, the
option shall terminate, the exercise
25
<PAGE>
thereof shall be of no effect.
As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. In the event of termination,
there shall be no liability on the part of any non-defaulting Underwriter to the
Company, provided that the provisions of this Section 8 shall not in any event
affect the liability of any defaulting Underwriter to the Company arising out of
such default.
9. SURVIVAL. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company, any of its officers
or directors and the Underwriter set forth in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement shall remain in full
force and effect, regardless of (i) any investigation made by or on behalf of
the Company, any of its officers or directors, the Underwriter or any
controlling person referred to in Section 7 hereof, and (ii) delivery of and
payment for the Securities. The respective agreements, covenants, indemnities
and other statements set forth in Sections 4 and 7 hereof shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement.
10. TERMINATION.
(a) This Agreement may be terminated with respect to the Firm
Securities or any Option Shares in the sole discretion of the Underwriter by
notice to the Company given prior to the Firm Closing Date or the related Option
Closing Date, respectively, in the event that the Company shall have failed,
refused or been unable to perform all obligations and satisfy all conditions on
its part to be performed or satisfied under Section 6 hereunder at or prior
thereto or if at or prior to the Firm Closing Date or such Option Closing Date,
respectively:
(1) the Company sustains a loss by reason of
explosion, fire, flood, accident or other calamity, which, in the opinion of the
Underwriter, substantially affects the value of the properties of the Company or
which materially interferes with the operation of the business of the Company
regardless of whether such loss shall have been insured; there shall have been
any material adverse change, or any development involving a prospective material
adverse change (including, without limitation, a change in management or control
of the Company), in the business, operations, condition (financial or
otherwise), earnings or prospects of the Company, except in each case as
described in or contemplated by the Prospectus (exclusive of any amendment or
supplement thereto);
(2) any action, suit or proceeding shall be
threatened, instituted or pending, at law or in equity, against the Company, by
any person or by any federal, state, foreign or other governmental or regulatory
commission, board or agency wherein any unfavorable result or decision could
materially adversely affect the business, operations, condition (financial or
otherwise), earnings or prospects of the Company;
(3) trading in the Common Stock shall have been
suspended by the
26
<PAGE>
Commission, the NASD or on Nasdaq, or trading in securities generally on the New
York Stock Exchange shall have been suspended or minimum or maximum prices shall
have been established on either such exchange or quotation system;
(4) a banking moratorium shall have been declared by
New York or United States authorities;
(5) there shall have been (A) an outbreak of
hostilities between the United States and any foreign power (or, in the case of
any ongoing hostilities, a material escalation thereof), (B) an outbreak of any
other insurrection or armed conflict involving the United States or (C) any
other calamity or crisis or material change in financial, political or economic
conditions, having an effect on the financial markets that, in any case referred
to in this clause (5), in the sole judgment of the Underwriter makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Securities as contemplated by the Registration Statement; and
(6) termination of this Agreement pursuant to this
Section 10 shall be without liability of any party to any other party, except as
provided in Section 5(b) and Section 7 hereof.
11. INFORMATION SUPPLIED BY THE UNDERWRITER. The statements set forth
in the first paragraph on page 41, (as to the underwriting commitment of the
Underwriter) and the fourth paragraph under the heading "Underwriting" in any
Preliminary Prospectus or the Prospectus (to the extent such statements relate
to the Underwriter) constitute the only information furnished by the Underwriter
to the Company for the purposes of Section 7(b) hereof. The Underwriter confirms
that such statements (to such extent) are correct.
12. NOTICES. All notice hereunder to or upon either party hereto shall
be deemed to have been duly given for all purposes if in writing and (i)
delivered in person or by messenger or an overnight courier service against
receipt, or (ii) sent by certified or registered mail, postage paid, return
receipt requested, or (iii) sent by telegram, facsimile, telex or similar means,
provided that a written copy thereof is sent on the same day by postage paid
first-class mail, to such party at the following address:
To the Company: ABLE Energy, Inc.
344 Route 46
Rockaway, New Jersey 07866
Attn: Timothy Harrington
27
<PAGE>
and a copy to:
Sichenzia, Ross & Freidman, LLP
135 West 50th Street, 20th Floor
New York, New York 10020
Attn: Gregory Sichenzia
To the Underwriter: Kasner Davidson Securities Corporation
77 South Palm Avenue
Sarasota, Florida 34326
or such other address as either party hereto may at any time, or from time to
time, direct by notice given to the other party in accordance with this section.
The date of giving of any such notice shall be, in the case of clause (i), the
date of the receipt; in the case of clause (ii), five business days after such
notice or demand is sent; and, in the case of clause (iii), the business day
next following the date such notice is sent.
13. AMENDMENT. Except as otherwise provided herein, no amendment of
this Agreement shall be valid or effective, unless in writing and signed by or
on behalf of the parties hereto.
14. WAIVER. No course of dealing or omission or delay on the part of
either party hereto in asserting or exercising any right hereunder shall
constitute or operate as a waiver of any such right. No waiver of any provision
hereof shall be effective, unless in writing and signed by or on behalf of the
party to be charged therewith. No waiver shall be deemed a continuing waiver or
waiver in respect of any other or subsequent breach or default, unless expressly
so stated in writing.
15. APPLICABLE LAW. This agreement shall be governed by, and
interpreted and enforced in accordance with, the laws of the State of New York
without regard to principles of choice of law or conflict of laws.
16. JURISDICTION. Each of the parties hereto hereby irrevocably
consents and submits to the exclusive jurisdiction of the Supreme Court of the
State of New York and the United States District Court for the Southern District
of New York in connection with any suit, action or other proceeding arising out
of or relating to this Agreement or the transactions contemplated hereby, waives
any objection to venue in the County of New York, State of New York, or such
District and agrees that service of any summons, complaint, notice or other
process relating to such suit, action or other proceeding may be effected in the
manner provided by clause (ii) of Section 12.
17. REMEDIES. In the event of any actual or prospective breach or
default by either party hereto, the other party shall be entitled to equitable
relief, including remedies in the nature of rescission, injunction and specific
performance. All remedies hereunder are cumulative and not exclusive, and
nothing herein shall be deemed to prohibit or limit either party from pursuing
any
28
<PAGE>
other remedy or relief available at law or in equity for such actual or
prospective breach or default, including the recovery of damages.
18. ATTORNEYS' FEES. The prevailing party in any suit, action or other
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby, shall be entitled to recover its costs and reasonable
attorneys' fees.
19. SEVERABILITY. The provisions hereof are severable and in the event
that any provision of this Agreement shall be determined to be invalid or
unenforceable in any respect by a court of competent jurisdiction, the remaining
provisions hereof shall not be affected, but shall, subject to the discretion of
such court, remain in full force and effect, and any invalid or unenforceable
provision shall be deemed, without further action on the part of the parties
hereto, amended and limited to the extent necessary to render the same valid and
enforceable.
20. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original and which together shall constitute one and
the same agreement.
21. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Underwriter, the Company and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any other person any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provisions herein contained,
this Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of such persons and for the benefit of
no other person except that (i) the indemnities of the Company contained in
Section 7 of this Agreement shall also be for the benefit of any person or
persons who control any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the 1934 Act, and (ii) the indemnities of the Underwriter
contained in Section 7 of this Agreement shall also be for the benefit of the
directors of the Company, the officers of the Company who have signed the
Registration Statement and any person or persons who control the Company within
the meaning of Section 15 of the Act or Section 20 of the 1934 Act. No purchaser
of Securities from the Underwriter shall be deemed a successor because of such
purchase.
22. TITLES AND CAPTIONS. The titles and captions of the articles and
sections of this Agreement are for convenience of reference only and do not in
any way define or interpret the intent of the parties or modify or otherwise
affect any of the provisions hereof.
23. GRAMMATICAL CONVENTIONS. Whenever the context so requires, each
pronoun or verb used herein shall be construed in the singular or the plural
sense and each capitalized term defined herein and each pronoun used herein
shall be construed in the masculine, feminine or neuter sense.
24. REFERENCES. The terms "herein," "hereto," "hereof," "hereby," and
"hereafter," and other terms of similar import, refer to this Agreement as a
whole, and not to any Article, Section or other part hereof.
29
<PAGE>
25. ENTIRE AGREEMENT. This Agreement embodies the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes any
prior agreement, commitment or arrangement relating thereto.
[SIGNATURES ON FOLLOWING PAGE]
30
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute an agreement binding the Company, and the
Underwriter.
Very truly yours,
ABLE ENERGY, INC.
BY:
--------------------------------
Name: Timothy Harrington
Title: CEO
The foregoing agreement is hereby confirmed and accepted as of the date first
above written.
KASHNER DAVIDSON SECURITIES CORPORATION
By:
--------------------------------
Name: Matthew Miester
Title: CEO
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<PAGE>
Exhibit 4.1
ABLE ENERGY, INC.
AND
KASHNER DAVIDSON SECURITIES CORPORATION
UNDERWRITER'S
WARRANT AGREEMENT
UNDERWRITER'S WARRANT AGREEMENT dated as of _________, 1999 by
and between ABLE ENERGY, INC. (the "Company") and KASHNER DAVIDSON SECURITIES
CORPORATION ("Underwriter" or "Kashner") individually ("Underwriter").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Underwriter 100,000
warrants (each a "Underwriter's Warrant") each to purchase a share of the
Company's common stock, par value $.001 per share (the "Common Stock").
WHEREAS, the Underwriter has agreed, pursuant to the underwriting
agreement (the "Underwriting Agreement") dated ______, 1999, by and between the
Underwriter and the Company, to act as the Underwriter in connection with the
Company's proposed public offering (the "Public Offering") of 1,000,000 shares
of Common Stock (the "Offering Securities"); and
WHEREAS, the Underwriter's Warrants to be issued pursuant to this
Agreement will be issued on Closing Date I (as such term is defined in the
Underwriting Agreement) by the Company to the Underwriter in consideration for,
and as part of, the Underwriter's compensation in connection with the
Underwriter's acting as the Underwriter pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the premises, the payment by the
Underwriter to the Company of Ten Dollars ($10.00), the agreements herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. GRANT. The Holder (as defined in Section 3 below) is hereby granted
the right to purchase, at any time from _________, 2000 until 5:00 p.m., New
York time, _______, 2004, up to 100,000 shares of Common Stock, at an initial
purchase price (subject to adjustment as provided in Section 8 hereof) of $____
per share of Common Stock (165% of the per share public offering price), subject
to the terms and conditions of this Agreement. The securities issuable upon
exercise of the Underwriter's Warrant are sometimes referred to herein as the
"Underwriter's Securities."
2. WARRANT CERTIFICATES. The warrant certificate (the "Underwriter's
Warrant
<PAGE>
Certificate") to be delivered pursuant to this Agreement shall be in the form
set forth in Exhibit A attached hereto and made a part hereof, with such
appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. EXERCISE OF UNDERWRITER'S WARRANT.
(a) The Underwriter's Warrant is exercisable during the term
set forth in Section 1 hereof payable by certified or cashier's check or money
order in lawful money of the United States. Upon surrender of Underwriter's
Warrant Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Purchase Price (as hereinafter defined) for the
Underwriter's Securities (and such other amounts, if any, arising pursuant to
Section 4 hereof) at the Company's principal office currently located at 344
Route 46, Rockaway, New Jersey 07866 the registered holder of a Underwriter's
Warrant Certificate ("Holder" or "Holders") shall be entitled to receive a
certificate or certificates for the Underwriter's Securities so purchased. The
purchase rights represented by each Underwriter's Warrant Certificate are
exercisable at the option of the Holder or Holders thereof, in whole or in part
as to Underwriter's Securities. The Underwriter's Warrant may be exercised to
purchase all or any part of the Underwriter's Securities represented thereby. In
the case of the purchase of less than all the Underwriter's Securities
purchasable on the exercise of the Underwriter's Warrant represented by a
Underwriter's Warrant Certificate, the Company shall cancel the Underwriter's
Warrant Certificate represented thereby upon the surrender thereof and shall
execute and deliver a new Underwriter's Warrant Certificate of like tenor for
the balance of the Underwriter's Securities purchasable thereunder.
(b) In lieu of the payment of cash upon exercise of the
Underwriter's Warrant as provided in Section 3(a), the Holder may exercise the
Underwriter's Warrant by surrendering the Underwriter's Warrant Certificate at
the principal office of the Company, accompanied by a notice stating (i) the
Holder's intent to effect such exercise by an exchange, (ii) Common Stock to be
issued upon the exchange, (iii) whether Underwriter's Warrants are to be
surrendered in connection with the exchange, and (iv) the date on which the
Holder requests that such exchange is to occur. The Purchase Price for the
Underwriter's Securities to be acquired in the exchange shall be paid by the
surrender as indicated in the notice, of Underwriter's Warrants, having a
"Value", as defined below, equal to the Purchase Price. "Value" as to each
Underwriter's Warrant shall mean the difference between the "Market Price", as
hereinafter defined, of a share of Common Stock and the then Purchase Price for
a share of Common Stock.
By way of example of the application of the formula, assume
that the Market Price of the Common Stock is $8.00, the Purchase Price of the
Underwriter's Warrant is $6.00. On such assumptions, the Value of a
Underwriter's Warrant is $2.00 ($8.00-$6.00) and therefore for each three
Underwriter's Warrants surrendered, the Holder could acquire one share of Common
Stock in the exchange. Notwithstanding the example, the Holder shall not be
limited to exchanging Underwriter's Warrants for Common Stock.
The Warrant Exchange shall take place on the date specified in the
notice or if the date the
2
<PAGE>
notice is received by the Company is later than the date specified in the
notice, on the date the notice is received by the Company.
4. ISSUANCE OF CERTIFICATES. Upon the exercise of the Underwriter's
Warrant and payment of the Purchase Price therefor, the issuance of certificates
representing the Underwriter's Securities or other securities, properties or
rights underlying such Underwriter's Warrant, shall be made forthwith (and in
any event within five (5) business days thereafter) without further charge to
the Holder thereof, and such certificates shall (subject to the provisions of
Sections 5 and 7 hereof) be issued in the name of, or in such names as may be
directed by, the Holder thereof; provided, however, that the Company shall not
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificates in a name other
than that of the Holder, and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance 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.
The Underwriter's Warrant Certificates and the certificates representing the
Underwriter's Securities or other securities, property or rights (if such
property or rights are represented by certificates) shall be executed on behalf
of the Company by the manual or facsimile signature of the then present Chairman
or Vice Chairman of the Board of Directors or President or Vice President of the
Company, attested to by the manual or facsimile signature of the then present
Secretary or Assistant Secretary or Treasurer or Assistant Treasurer of the
Company. The Underwriter's Warrant Certificates shall be dated the date of
issuance thereof by the Company upon initial issuance, transfer or exchange.
5. RESTRICTION ON TRANSFER OF UNDERWRITER'S WARRANT. The Holder of an
Underwriter's Warrant Certificate (and its Permitted Transferee, as defined
below), by its acceptance thereof, covenants and agrees that the Underwriter's
Warrant may be sold, transferred, assigned, hypothecated or otherwise disposed
of, in whole or in part, until _______, 2000 (one year following the effective
date of the Public Offering), only to officers and partners of the Underwriters,
or any Public Offering selling group member and their respective officers and
partners, ("Permitted Transferees"). Thereafter the Underwriter's Warrant may be
transferred, assigned, hypothecated or otherwise disposed of in compliance with
applicable law.
6. PURCHASE PRICE.
(a) INITIAL AND ADJUSTED PURCHASE PRICE. Except as otherwise
provided in Section 8 hereof, the initial purchase price of the Underwriter's
Securities shall be $____ per share of Common Stock (165% of the per share
public offering price). The adjusted purchase price shall be the price which
shall result from time to time from any and all adjustments of the initial
purchase price in accordance with the provisions of Section 8 hereof.
(b) PURCHASE PRICE. The term "Purchase Price" herein
shall mean the
3
<PAGE>
initial purchase price or the adjusted purchase price, depending upon the
context.
7. REGISTRATION RIGHTS.
(a) REGISTRATION UNDER THE SECURITIES ACT OF 1933 AS AMENDED
("ACT"). The Underwriter's Warrant may have not been registered under the Act.
The Underwriter's Warrant Certificates may bear the following legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act"), and may not be offered
for sale or sold except pursuant to (i) an effective registration statement
under the Act, or (ii) an opinion of counsel, if such opinion and counsel shall
be reasonably satisfactory to counsel to the issuer, that an exemption from
registration under the Act is available".
(b) DEMAND REGISTRATION. (1) At any time commencing
on the first anniversary of and expiring on the fifth anniversary of the
effective date of the Company's Registration Statement relating to the Public
Offering (the "Effective Date"), the Holders of a Majority (as hereinafter
defined) in interest of the Underwriter's Warrant, or the Majority in interest
of the Underwriter's Securities (assuming the exercise of all of the
Underwriter's Warrant) shall have the right, exercisable by written notice to
the Company, to have the Company prepare and file with the U.S. Securities and
Exchange Commission (the "Commission"), on one (1) occasion, a registration
statement on Form SB-2, S-1 or other appropriate form, and such other documents,
including a prospectus, as may be necessary in the opinion of both counsel for
the Company and counsel for the Holders, in order to comply with the provisions
of the Act, so as to permit a public offering and sale, of the Underwriter's
Securities by such Holders and any other Holders of the Underwriter's Warrant
and/or the Underwriter's Securities who notify the Company within fifteen (15)
business days after receipt of the notice described in Section 7(b)(2). The
Holders of the Underwriter's Warrant may demand registration prior to exercising
the Underwriter's Warrant, and may pay such exercise price from the proceeds of
such public offering.
(2) The Company covenants and agrees to give written notice of any
registration request under this Section 7(b) by any Holders to all other
registered Holders of the Underwriter's Warrant and the Underwriter's Securities
within ten (10) calendar days from the date of the receipt of any such
registration request.
(3) For purposes of this Agreement, the term "Majority" in reference to
the Holders of the Underwriter's Warrant or Underwriter's Securities, shall mean
in excess of fifty percent (50%) of the then outstanding Underwriter's Warrant
or Underwriter's Securities that (i) are not held by the Company, an affiliate,
officer, creditor, employee or agent thereof or any of their respective
affiliates, members of their family, persons acting as nominees or in
conjunction therewith, or (ii) have not been resold to the public pursuant to a
registration statement filed with the Commission under the Act.
4
<PAGE>
(c) PIGGYBACK REGISTRATION. (1) If, at any time within the
period commencing on the first anniversary and expiring on the sixth anniversary
of the Effective Date, the Company should file a registration statement with the
Commission under the Act (other than in connection with a merger or other
business combination transaction or pursuant to Form S-8), it will give written
notice at least twenty (20) calendar days prior to the filing of each such
registration statement to the Underwriter and to all other Holders of the
Underwriter's Warrant and/or the Underwriter's Securities of its intention to do
so. If an Underwriter or other Holders of the Underwriter's Warrant and/or the
Underwriter's Securities notify the Company within fifteen (15) calendar days
after receipt of any such notice of its or their desire to include any
Underwriter's Securities in such proposed registration statement, the Company
shall afford the Underwriter and such Holders of the Underwriter's Warrant
and/or Underwriter's Securities the opportunity to have any such Underwriter's
Securities registered under such registration statement. Notwithstanding the
provisions of this Section 7(c)(1) and the provisions of Section 7(d), the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 7(c)(1) (irrespective of whether a written
request for inclusion of any such securities shall have been made) to elect not
to file any such proposed registration statement, or to withdraw the same after
the filing but prior to the effective date thereof.
(2) If the managing underwriter of an offering to
which the above piggyback rights apply, in good faith and for valid business
reasons, objects to such rights, such objection shall preclude such inclusion.
(d) COVENANTS OF THE COMPANY WITH RESPECT TO
REGISTRATION. In connection with any registrations under Sections 7(b) and 7(c)
hereof, the Company covenants and agrees as follows:
(1) The Company shall use its best efforts
to file a registration statement within thirty (30) calendar days of receipt of
any demand therefor pursuant to Section 7(b); provided, however, that the
Company shall not be required to produce audited or unaudited financial
statements for any period prior to the date such financial statements are
required to be filed in a report on Form 10-KSB or Form 10-QSB, as the case may
be. The Company shall use its best efforts to have any registration statement
declared effective at the earliest possible time, and shall furnish each Holder
desiring to sell Underwriter's Securities such number of prospectuses as shall
reasonably be requested.
(2) The Company shall pay all costs
(excluding fees and expenses of Holders' counsel and any underwriting discounts
or selling fees, expenses or commissions), fees and expenses in connection with
any registration statement filed pursuant to Sections 7(b) and 7(c) hereof
including, without limitation, the Company's legal and accounting fees, printing
expenses, blue sky fees and expenses.
(3) The Company will use its best efforts to
qualify or register the Underwriter's Securities included in a registration
statement for offering and sale under the securities
5
<PAGE>
or blue sky laws of such states as reasonably are requested by the Holders,
provided that the Company shall not be obligated to execute or file any general
consent to service of process or to qualify as a foreign corporation to do
business under the laws of any such jurisdiction.
(4) The Company shall indemnify the Holders
of the Underwriter's Securities to be sold pursuant to any registration
statement and each person, if any, who controls such Holders within the meaning
of Section 15 of the Act or Section 20(a) of the Securities Exchange Act of 1934
(the "Exchange Act"), against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become subject
under the Act, the Exchange Act or otherwise, arising from such registration
statement, but only to the same extent and with the same effect as the
provisions pursuant to which the Company has agreed to indemnify the Underwriter
contained in Section 8 of the Underwriting Agreement.
(5) The Holders of the Underwriter's
Securities to be sold pursuant to a registration statement, and their successors
and assigns, shall indemnify the Company, its officers and directors 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, against all loss, claim, damage or
expense or liability to which they may become subject under the Act, the
Exchange Act or otherwise, arising from information furnished by or on behalf of
such Holders, or their successors or assigns, for specific inclusion in such
registration statement to the same extent and with the same effect as the
provisions contained in Section 8 of the Underwriting Agreement pursuant to
which the Underwriter has agreed to indemnify the Company.
(6) Nothing contained in this Agreement
shall be construed as requiring the Holders to exercise their Underwriter's
Warrant prior to the initial filing of any registration statement or the
effectiveness thereof, provided that such Holders have made arrangements
reasonably satisfactory to the Company to pay the exercise price from the
proceeds of such offering.
(7) The Company shall furnish to each
Underwriter for the offering, if any, such documents as such Underwriter may
reasonably require.
(8) The Company shall as soon as practicable
after the effective date of the registration statement, and in any event within
15 months thereafter, make "generally available to its security holders" (within
the meaning of Rule 158 under the Act) an earnings statement (which need not be
audited) complying with Section 11(a) of the Act and covering a period of at
least 12 consecutive months beginning after the effective date of the
registration statement.
(9) The Company shall deliver promptly to
each Holder participating in the offering requesting the correspondence
described below and any managing
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<PAGE>
Underwriter copies of all correspondence between the Commission and the Company,
its counsel or auditors with respect to the registration statement and permit
each Holder and Underwriter to do such investigation, upon reasonable advance
notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder shall reasonably request.
(10) The Company shall enter into an
underwriting agreement with the managing underwriter selected for such
underwriting by Holders holding a Majority of the Underwriter's Securities
requested to be included in such underwriting, provided, however that such
managing underwriter shall be reasonably acceptable to the Company, except that
in connection with an offering for which the Holders have piggyback rights, the
Company shall have the sole right to select the managing underwriter or
underwriters. Such underwriting agreement shall be satisfactory in form and
substance to the Company, a Majority of such Holders (in respect of a
registration under Section 7(b) only) and such managing underwriter, and shall
contain such representations, warranties and covenants by the Company and such
other terms as are customarily contained in agreements of that type. The Holders
shall be parties to any underwriting agreement relating to an underwritten sale
of their Underwriter's Securities. Such Holders shall not be required to make
any representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holders and their intended
methods of distribution.
8. ADJUSTMENTS TO PURCHASE PRICE AND NUMBER OF SECURITIES.
(a) COMPUTATION OF ADJUSTED PURCHASE PRICE. Except as
hereinafter provided, in case the Company shall at any time after the date
hereof issue or sell any shares of Common Stock (other than the issuances
referred to in Section 8(g) hereof), including shares held in the Company's
treasury, for a consideration per share less than the "Market Price" (as defined
in Section 8(a)(6) hereof) per share of Common Stock on the date immediately
prior to the issuance or sale of such shares, or without consideration, then
forthwith upon any such issuance or sale, the Purchase Price of the Common Stock
shall (until another such issuance or sale) be reduced to the price (calculated
to the nearest full cent) determined by dividing (1) the product of (a) the
Purchase Price in effect immediately before such issuance or sale and (b) the
sum of (i) the total number of shares of Common Stock outstanding immediately
prior to such issuance or sale, and (ii) the number of shares determined by
dividing (A) the aggregate consideration, if any, received by the Company upon
such sale or issuance, by (B) the Market Price, and by (2) the total number of
shares of Common Stock outstanding immediately after such issuance or sale
provided, however, that in no event shall the Purchase Price be adjusted
pursuant to this computation to an amount in excess of the Purchase Price in
effect immediately prior to such computation, except in the case of a
combination of outstanding shares of Common Stock, as provided by Section 8(c)
hereof.
For the purposes of this Section 8, the term "Purchase Price"
shall mean the Purchase
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<PAGE>
Price of the Common Stock forming a part of the Underwriter's Securities set
forth in Section 6 hereof, as adjusted from time to time pursuant to the
provisions of this Section 8.
For the purposes of any computation to be made in accordance
with this Section 8(a), the following provisions shall be applicable:
(1) In case of the issuance or sale of shares of Common Stock (or of
other securities deemed hereunder to involve the issuance or sale of shares of
Common Stock) for a consideration part or all of which shall be cash, the amount
of the cash consideration therefor shall be deemed to be the amount of cash
received by the Company for such shares (or, if shares of Common Stock are
offered by the Company for subscription, the subscription price, or, if such
securities shall be sold to Underwriters or dealers for public offering without
a subscription offering, the initial public offering price) before deducting
therefrom any compensation paid or discount allowed in the sale, underwriting or
purchase thereof by Underwriters or dealers or others performing similar
services, or any expenses incurred in connection therewith.
(2) In case of the issuance or sale (otherwise than as a dividend or
other distribution on any stock of the Company, and otherwise than on the
exercise of options, rights or warrants or the conversion or exchange of
convertible or exchangeable securities) of shares of Common Stock (or of other
securities deemed hereunder to involve the issuance or sale of shares of Common
Stock) for a consideration part or all of which shall be other than cash, the
amount of the consideration therefor other than cash shall be deemed to be the
value of such consideration as determined in good faith by the Board of
Directors of the Company.
(3) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after the opening of business on the day following the record date
for the determination of stockholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
(4) The reclassification of securities of the Company other than shares
of Common Stock into securities including shares of Common Stock shall be deemed
to involve the issuance of such shares of Common Stock for a consideration other
than cash immediately prior to the close of business on the date fixed for the
determination of security holders entitled to receive such shares, and the value
of the consideration allocable to such shares of Common Stock shall be
determined as provided in Section 8(a)(2).
(5) The number of shares of Common Stock at any one time outstanding
shall include the aggregate number of shares of Common Stock issued or issuable
(subject to readjustment upon the actual issuance thereof) upon the exercise of
options, rights or warrants and upon the conversion or exchange of convertible
or exchangeable securities.
(6) As used herein in the phrase "Market Price" at any date shall be
deemed to be the last
8
<PAGE>
reported sale price, or, in the case no such reported sale takes place on such
day, the average of the last reported sales prices for the last three (3)
trading days, in either case as officially reported by the principal 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 average closing bid price as furnished by the NASD through the
NASD Automated Quotation System ("NASDAQ") or similar organization if NASDAQ is
no longer reporting such information, or if the Common Stock is not quoted on
NASDAQ, as determined in good faith by resolution of the Board of Directors of
the Company, based on the best information available to it.
(b) OPTIONS, RIGHTS, WARRANT AND CONVERTIBLE AND
EXCHANGEABLE SECURITIES. Except in the case of the Company issuing rights to
subscribe for shares of Common Stock distributed to all the stockholders of the
Company and Holders of Underwriter's Warrant pursuant to Section 8(i) hereof, if
the Company shall at any time after the date hereof issue options, rights or
warrants to purchase shares of Common Stock, or issue any securities convertible
into or exchangeable for shares of Common Stock (other than the issuances
referred to in Section 8(g) hereof), (i) for a consideration per share less than
the Market Price (including the issuance thereof without consideration such as
by way of dividend or other distribution), or (ii) without consideration, the
Purchase Price in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable securities, as the case
may be, shall be reduced to a price determined by making a computation in
accordance with the provisions of Section 8(a) hereof, provided that:
(1) The aggregate maximum number of shares
of Common Stock issuable or that may become issuable under such options, rights
or warrants (assuming exercise in full even if not then currently exercisable or
currently exercisable in full) shall be deemed to be issued and outstanding at
the time such options, rights or warrants were issued, and for a consideration
equal to the minimum purchase price per share provided for in such options,
rights or warrants at the time of issuance, plus the consideration (determined
in the same manner as consideration received on the issue or sale of shares in
accordance with the terms of the Underwriter's Warrant), if any, received by the
Company for such options, rights or warrants; provided, however, that upon the
expiration or other termination of such options, rights or warrants, if any
thereof shall not have been exercised, the number of shares of Common Stock
deemed to be issued and outstanding pursuant to this Section 8(b)(1) (and for
the purposes of Section 8(a)(5) hereof) shall be reduced by such number of
shares as to which options, warrants and/or rights shall have expired or
terminated unexercised, and such number of shares shall no longer be deemed to
be issued and outstanding, and the Purchase Price then in effect shall forthwith
be readjusted and thereafter be the price which it would have been had
adjustment been made on the basis of the issuance only of shares actually issued
or issuable upon the exercise of those options, rights or warrants as to which
the exercise rights shall not be expired or terminated unexercised.
(2) The aggregate maximum number of shares
of Common Stock issuable upon conversion or exchange of any convertible or
exchangeable securities (assuming conversion or exchange in full even if not
then currently convertible or exchangeable in full) shall
9
<PAGE>
be deemed to be issued and outstanding at the time of issuance of such
securities, and for a consideration equal to the consideration (determined in
the same manner as consideration received on the issue or sale of shares of
Common Stock in accordance with the terms of the Underwriter's Warrant) received
by the Company for such securities, plus the minimum consideration, if any,
receivable by the Company upon the conversion or exchange thereof; provided,
however, that upon the expiration or other termination of the right to convert
or exchange such convertible or exchangeable securities (whether by reason or
redemption or otherwise), the number of shares deemed to be issued and
outstanding pursuant to this Section 8(b)(2) (and for the purpose of Section
8(a)(5) hereof) shall be reduced by such number of shares as to which the
conversion or exchange rights shall have expired or terminated unexercised, and
such number of shares shall no longer be deemed to be issued and outstanding and
the Purchase Price then in effect shall forthwith be readjusted and thereafter
be the price which it would have been had adjustment been made on the basis of
the issuance only of the shares actually issued or issuable upon the conversion
or exchange of those convertible or exchangeable securities as to which the
conversion or exchange rights shall not have expired or terminated unexercised.
(3) If any change shall occur in the price
per share provided for in any of the options, rights or warrants referred to in
Section 8(b)(1), or in the price per share at which the securities referred to
in Section 8(b)(2) are convertible or exchangeable, and if a change in the
Purchase Price has not occurred by reason of the event giving rise to the change
in the price per share of such other options, rights, warrants, or convertible
or exchangeable securities, such options, rights or warrants or conversion or
exchange rights, as the case may be, to the extent not theretofore exercised,
the shall be deemed to have expired or terminated on the date when such price
change became effective in respect of shares not theretofore issued pursuant to
the exercise or conversion or exchange thereof, and the Company shall be deemed
to have issued upon such date new options, rights or warrants or convertible or
exchangeable securities at the new price in respect of the number of shares
issuable upon the exercise of such options, rights or warrants or the conversion
or exchange of such convertible or exchangeable securities.
(c) SUBDIVISION AND COMBINATION. In case the Company
shall at any time issue any shares of Common Stock in connection with a stock
dividend in shares of Common Stock or subdivide or combine the outstanding
shares of Common Stock, the Purchase Price shall forthwith be proportionately
decreased in the case of a stock dividend or a subdivision or increased in the
case of combination.
(d) ADJUSTMENT IN NUMBER OF SECURITIES. Upon each
adjustment of the Purchase Price pursuant to the provisions of this Section 8,
the number of Underwriter's Securities issuable upon the exercise of the
Underwriter's Warrant shall be adjusted to the nearest whole share by
multiplying a number equal to the Purchase Price in effect immediately prior to
such adjustment by the number of Underwriter's Securities issuable upon exercise
of the Underwriter's Warrant immediately prior to such adjustment and dividing
the product so obtained by the adjusted Purchase Price.
(e) DEFINITION OF COMMON STOCK. For the purpose of
this Agreement, the
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<PAGE>
term "Common Stock" shall mean the class of stock designated as Common Stock in
the Certificate of Incorporation, of the Company as it may be amended as of the
date hereof.
(f) RECLASSIFICATION, MERGER OR CONSOLIDATION. The
Company will not merge, reorganize or take any other action which would
terminate the Underwriter's Warrant without first making adequate provision for
the Underwriter's Warrant. In case of any reclassification or change of the
outstanding shares of Common Stock issuable upon exercise of the outstanding
warrants (other than a change in par value to no par value, or from nor par
value to par value, or as a result of a subdivision or combination), or in case
of any consolidation of the Company with, or merger of the Company with, or
merger of the Company into, another corporation (other than a consolidation or
merger in which the Company is the continuing corporation and which does not
result in any reclassification or change of the outstanding Common Stock except
a change as a result of a subdivision or combination of such shares or a change
in par value, as aforesaid), or in the case of a sale or conveyance to another
corporation or other entity of the property of the Company as an entirety or
substantially as an entirety, the Holders of each Underwriter's Warrant then
outstanding or to be outstanding shall have the right thereafter (until the
expiration of such Underwriter's Warrant) to purchase, upon exercise of such
Underwriter's Warrant, the kind and number of shares of stock and other
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance as if the Holders were the owner of
the shares of Common Stock underlying the Underwriter's Warrant immediately
prior to any such events at a price equal to the product of (x) the number of
shares issuable upon exercise of the Underwriter's Warrant and (y) the Purchase
Price in effect immediately prior to the record date for such reclassification,
change, consolidation, merger, sale or conveyance, as if such Holders had
exercised the Underwriter's Warrant. In the event of a consolidation, merger,
sale or conveyance of property, the corporation formed by such consolidation or
merger, or acquiring such property, shall execute and deliver to the Holders a
supplemental Underwriter's warrant agreement to such effect. Such supplemental
Underwriter's warrant agreement shall provide for adjustments which shall be
identical to the adjustment provided for in this Section 8. The provisions of
this Section 8(f) shall similarly apply to successive consolidations or mergers.
(g) NO ADJUSTMENT OF PURCHASE PRICE IN CERTAIN CASES.
No adjustment of the Purchase Price shall be made:
(1) Upon the issuance or sale of (i) the
Underwriter's Warrant or the securities underlying the Underwriter's Warrant,
(ii) the securities sold pursuant to the Public Offering (including those sold
upon exercise of the Underwriter's over-allotment option), or (iii) the shares
issuable pursuant to the options, warrants, rights, stock purchase agreements or
convertible or exchangeable securities outstanding or in effect on the date
hereof as described in the prospectus relating to the Public Offering.
(2) If the amount of said adjustments shall
aggregate less than two ($.02) cents for one (1) share of Common Stock;
provided, however, that in such case any adjustment that would otherwise be
required then to be made shall be carried forward and shall be
11
<PAGE>
made at the time of and together with the next subsequent adjustment which,
together with any adjustment so carried forward, shall aggregate at least two
($.02) cents for one (1) share of Common Stock. In addition, Registered Holders
shall not be entitled to cash dividends paid by the Company prior to the
exercise of any warrant or warrants held by them.
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each
Underwriter's Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holders at the principal executive office of
the Company, for a new Underwriter's Warrant Certificate of like tenor and date
representing in the aggregate the right to purchase the same number of
Underwriter's Securities in such denominations as shall be designated by the
Holders thereof at the time of such surrender.
10. LOSS, THEFT ETC. OF CERTIFICATES Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of any Underwriter's Warrant Certificate, and, in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory
to it, and reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of the Underwriter's Warrant
Certificates, if mutilated, the Company will make and deliver a new
Underwriter's Warrant Certificate of like tenor, in lieu thereof.
11. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock upon the exercise of the Underwriter's Warrant, nor shall it be required
to issue scrip or pay cash in lieu of fractional interests; provided, however,
that if a Holder exercises all Underwriter's Warrant held of record by such
Holder the fractional interests shall be eliminated by rounding any fraction to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
12. RESERVATION AND LISTING OF SECURITIES. The Company shall
at all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Underwriter's
Warrant, such number of shares of Common Stock or other securities and
properties or rights as shall be issuable upon the exercise thereof. The Company
covenants and agrees that, upon exercise of Underwriter's Warrant and payment of
the Purchase Price therefor, all the shares of Common Stock issuable upon such
exercise shall be duly and validly issued, fully paid, non-assessable and not
subject to the preemptive rights of any stockholder. As long as the
Underwriter's Warrant shall be outstanding, the Company shall use its best
efforts to cause the Common Stock to be listed (subject to official notice of
issuance) on all securities exchanges on which the Common Stock issued to the
public in connection herewith may then be listed or quoted.
13. NOTICES TO UNDERWRITER'S WARRANT HOLDERS. Nothing
contained in this Agreement shall be construed as conferring upon the Holders
the right to vote or to consent or to receive notice as a stockholder in respect
of any meetings of stockholders for the election of directors or any other
matter, or as having any rights whatsoever as a stockholder of the Company. If,
however, at any time prior to the expiration of the Underwriter's Warrant and
their exercise, any of
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<PAGE>
the following events shall occur:
(a) the Company shall take a record of the holders of
its shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an entirety
shall be proposed; then, in any one or more of said events, the Company shall
give written notice of such event at least fifteen (15) calendar days prior to
the date fixed as a record date or the date of closing the transfer books for
the determination of the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such proposed dissolution, liquidation, winding up or sale. Such notice
shall specify such record date or the date of closing the transfer books, as the
case may be. Failure to give such notice or any defect therein shall not affect
the validity of any action taken in connection with the declaration or payment
of any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
14. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or five days after being mailed by registered or
certified mail, return receipt requested: If to the registered Holders of the
Underwriter's Warrant, to the address of such Holders as shown on the books of
the Company; or
(a) If to the Company to 344 Route 46, Rockaway, New
Jersey 07866 or to such other address as the Company may designate by notice to
the Holders, with a courtesy copy to Sichenzia, Ross & Freidman, LLP
15. SUPPLEMENTS AND AMENDMENTS. The Company and the
Underwriter may from time to time supplement or amend this Agreement without the
approval of any Holders of Underwriter's Warrant Certificates (other than the
Underwriter) in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provision in regard to matters or
questions arising hereunder which the Company and the Underwriter may deem
necessary or desirable and which the Company and the Underwriter deem shall not
adversely affect the interests of the Holders of Underwriter's Warrant
Certificates.
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<PAGE>
16. SUCCESSORS. All the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company, the
Underwriter, the Holders and their respective successors and assigns hereunder.
17. TERMINATION. This Agreement shall terminate at the close
of business on _______, 2004. Notwithstanding the foregoing, the indemnification
provisions of Section 7 shall survive such termination until the close of
business on the expiration of any applicable statue of limitations.
18. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement
and each Underwriter's Warrant Certificate issued hereunder shall be deemed to
be a contract made under the laws of the State of New York and for all purposes
shall be construed in accordance with the laws of said state without giving
effect to the rules of said state governing the conflicts of laws.
19. ENTIRE AGREEMENT; MODIFICATION. This Agreement (including
the Underwriting Agreement, to the extent portions thereof are referred to
herein) contains the entire understanding between the parties hereto with
respect to the subject matter hereof and thereof. This Agreement may not be
modified or amended except by a writing duly signed by the Company and the
Holders of a Majority in Interest of the Underwriter's Securities (for this
purpose, treating all then outstanding Underwriter's Warrants as if they had
been exercised).
20. SEVERABILITY. If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.
21. CAPTIONS. The caption headings of the Sections of this
Agreement are for convenience of reference only and are not intended, nor should
they be construed as, a part of this Agreement and shall be given no substantive
effect.
22. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company
and the Underwriter and any other registered Holders of the Underwriter's
Warrant Certificates or Underwriter's Securities any legal or equitable right,
remedy or claim under this Agreement; and this Agreement shall be for the sole
and exclusive benefit of the Company and the Underwriter and any other Holders
of the Underwriter's Warrant Certificates or Underwriter's Securities.
23. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but one and
the same instrument.
24. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the Company, the Underwriter and their respective
successors and assigns and the Holders
14
<PAGE>
from time to time of the Underwriter's Warrant Certificates or any of them.
[SIGNATURE ON FOLLOWING PAGE]
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
ABLE ENERGY, INC.
By:
-----------------------------------
Name: Timothy Harrington
KASHNER DAVIDSON SECURITIES CORP.,
By:
-----------------------------------
Name: Matthew Miester
Title: CEO
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<PAGE>
SCHEDULE A
TO
UNDERWRITER'S WARRANT AGREEMENT
BETWEEN
ABLE ENERGY, INC.
AND
KASHNER DAVIDSON SECURITIES CORPORATION
UNDERWRITER
Kashner Davidson Securities Corp.
17
<PAGE>
ABLE ENERGY, INC.
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT"), AND MAY NOT BE OFFERED FOR SALE OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR
(ii) AN OPINION OF COUNSEL, IF SUCH OPINION AND COUNSEL SHALL BE REASONABLY
SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER
THE ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE COMMENCING ___________, 2000 THROUGH
5:00 P.M., NEW YORK TIME ON __________, 2004
Warrant covering 100,000 shares of
Common Stock
No. UW-1
This Warrant Certificate certifies that Kashner Davidson
Securities Corp. or registered assigns, is the registered holder of this Warrant
to purchase initially, at any time from _________, 2000, until 5:00 p.m., New
York time on ________, 2004 (the "Expiration Date"), up to 100,000 shares of
Common Stock, $.001 par value (the "Common Stock") of ABLE Energy, Inc.
("Company") exercisable to purchase one share of Common Stock at a purchase
price of $____ per share (165% of the per share public offering price) (the
"Purchase Price"), upon the surrender of this Warrant Certificate and payment of
the applicable Purchase Price at an office or agency of the Company, but subject
to the conditions set forth herein and in the Underwriter's Warrant Agreement,
dated as of ________, 1999, by and between the Company and Kashner Davidson
Securities Corp. (the "Warrant Agreement"). Payment of the Purchase Price shall
be made by certified or cashier's check or money order payable to the order of
the Company.
No Warrant may be exercised after 5:00 p.m., New York time, on
the Expiration Date, at which time all Warrant evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
The Warrant evidenced by this Warrant Certificate is part of a
duly authorized issue of Warrants issued pursuant to the Warrant Agreement
between the Company and the Underwriter, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument
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<PAGE>
and is hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Company and the holders
(the words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrant.
The Warrant Agreement provides that upon the occurrence of
certain events the Purchase Price and the type and/or number of the Company's
securities issuable upon the exercise of this Warrant, may, subject to certain
conditions, be adjusted. In such event, the Company will, at the request of the
holder, issue a new Warrant Certificate evidencing the adjustment in the
Purchase Price and the number and/or type of securities issuable upon the
exercise of the Warrant; provided, however, that the failure of the Company to
issue such new Warrant Certificates shall not in any way change, alter, or
otherwise impair, the rights of the holder as set forth in the Warrant
Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrant shall be issued to the transferee(s) in
exchange as provided herein, without any charge except for any tax or other
governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this
certificate this ___ day of _____, 1999.
ABLE ENERGY, INC.
By:
------------------------------
Timothy Harrington
CEO
ATTEST:
By:
------------------------------
19
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED___________________________
hereby sells, assigns and transfers unto _____________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _____________________
Attorney, to transfer the within Warrant Certificate on the books of ABLE
Energy, Inc., with full power of substitution.
Dated:
---------------
Signature
----------------------
(Signature must conform in all
respects to the name of holder as specified on the face of the Warrant
Certificate.)
[Signature guarantee] ---------------------------------
(Insert Social Security or Other
Identifying Number of Holders)
20
<PAGE>
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase ______ shares of Common Stock and herewith
tenders in payment for such securities a certified or cashier's check or money
order payable to the order of ABLE Energy Inc. in the amount of $______, all in
accordance with the terms hereof. The undersigned requests that certificates for
such securities be registered in the name of ___________________________ whose
address is _____________________ and that such certificates be delivered to
_____________________________________ whose address is
- ------------------------------------------------------------.
Dated:
----------------------
Signature
----------------------
(Signature must conform in all respects to the name of holder as specified on
the face of the Warrant Certificate.)
- ----------------------
(Insert Social Security or Other
Identifying Number of Holders)
[Signature guarantee]
21
<PAGE>
Exhibit 5.1
[LETTERHEAD OF SICHENZIA, ROSS & FRIEDMAN LLP]
April 14, 1998
VIA ELECTRONIC TRANSMISSION
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: ABLE ENERGY, INC.
SEC File No. 333-59109
Ladies and Gentlemen:
We refer to the above-captioned registration statement on Form SB-2 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Act"), filed by Able Energy, Inc., a Delaware corporation (the "Company"), with
the Securities and Exchange Commission.
We have examined the originals, photocopies, certified copies or other
evidence of such records of the Company, certificates of officers of the Company
and public officials, and other documents as we have deemed relevant and
necessary as a basis for the opinion hereinafter expressed. In such examination,
we have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as certified copies or photocopies and the
authenticity of the originals of such latter documents.
Based on our examination mentioned above, we are of the opinion that the
securities being registered to be sold pursuant to the Registration Statement
are duly authorized and will be, when sold in the manner described in the
Registration Statement, legally and validly issued, and fully paid and
nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm under "Legal Matters" in
the related Prospectus. In giving the foregoing consent, we do not hereby admit
that we are in the category of persons whose consent is required under Section 7
of the Act, or the rules and regulations of the Securities and Exchange
Commission.
Very truly yours,
/s/ Sichenzia, Ross & Friedman, LLP
----------------------------------------
Sichenzia, Ross & Friedman, LLP
<PAGE>
Exhibit 10.1
ADVISORY AND INVESTMENT BANKING AGREEMENT
This Agreement is made and entered into as of the __ day of
______, 1999 by and between Kashner Davidson Securities Corporation, a Florida
corporation ("Kashner"), and ABLE Energy, Inc., a Delaware corporation (the
"Company").
In consideration of the mutual promises made herein and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. PURPOSE: The Company hereby engages Kashner for the term
specified in Paragraph 2 hereof to render consulting advice to the Company as an
investment banker relating to financial and similar matters upon the terms and
conditions set forth herein.
2. TERM: Except as otherwise specified in paragraph 4 hereof, this
Agreement shall be effective from _______, 1999 to ______, 2001.
3. DUTIES OF KASHNER: During the term of this Agreement, Kashner
shall seek out Transactions (as hereinafter defined) on behalf of the Company
and shall furnish advice to the Company in connection with any such
Transactions.
1
<PAGE>
4. COMPENSATION: In consideration for the services rendered by
Kashner to the Company pursuant to this Agreement (and in addition to the
expenses provided for in Paragraph 5 hereof), the Company shall compensate
Kashner as follows:
(a) The Company shall pay Kashner a fee of $4,500 per month
during the term of this Agreement. The sum of $108,000 shall be payable in full
on the date of this Agreement. In the event that Kashner ceases its business
operations as a financial advisor and investment banker, materially breaches or
is unable to satisfy its performance obligations hereunder, then Kashner shall
repay to the Company the pro rata unearned portion of foregoing fee, based on
the number of months for which performance was delivered and the remaining
number of months in the term.
(b) In the event that any Transaction (as hereinafter defined)
occurs during the term of this Agreement or one year thereafter, the Company
shall pay fees to Kashner as follows:
<TABLE>
<CAPTION>
CONSIDERATION FEE
------------- ---
<S> <C>
$ - 0 - to $ 1,000,000 5% of Consideration
$ 1,000,001 to $2,000,000 4% of Consideration
$ 2,000,001 to $3,000,000 3% of Consideration
$ 3,000,001 to $4,000,000 2% of Consideration
$ 4,000,001 or more 1% of the Consideration in excess of $4,000,001
</TABLE>
For the purposes of this Agreement, "Consideration" shall mean the
total market value on the day of the closing of stock, cash, assets and all
other property (real or personal) exchanged or received, directly or indirectly
by the Company or any of its security holders in connection with any
Transaction. Any co-broker or brokers retained by Kashner shall be paid by
Kashner.
2
<PAGE>
For the purposes of the Agreement, a "Transaction" shall mean (a)
any transaction originated by Kashner, other than in the ordinary course of
trade or business of the Company, whereby, directly or indirectly, control of or
a material interest in the Company or any of its businesses or any of their
respective assets, is transferred for Consideration, (b) any transaction
originated by Kashner whereby the Company acquires any other company or the
assets of any other company or an interest in any other company (an
"Acquisition") or (c) any sale or Acquisition in connection with which the
Company engages an investment banker other than Kashner and pays such investment
banker a fee in respect of such Transaction unless Kashner was unwilling waive
to so act.
In the event Kashner originates a line of credit with a lender,
the Company and Kashner will mutually agree on a satisfactory fee for such
services provided based upon reasonable and customary practice in the industry
and the terms of payment of such fee; provided, however, that in the event the
Company is introduced to a corporate partner by Kashner in connection with a
merger, acquisition or financing and a credit line develops directly as a result
of the introduction, the appropriate fee shall be the amount set forth in the
schedule above with consideration to be based upon the amount of the line of
credit. In the event Kashner introduces the Company to a joint venture partner
or customer and sales develop as a result of the introduction, the Company
agrees to pay a fee of five percent (5%) of total sales generated directly from
this introduction during the first two years following the date of the first
sale, in lieu of the fees set forth in the schedule above. Total sales shall
mean cash receipts less any applicable refunds, returns, allowances, credits and
shipping charges and monies paid by the Company by way of settlement or judgment
arising out of claims made by or threatened against the Company. Commission
payments shall be paid on the 15th day of each month following the receipt of
customers' payment. In the event any adjustments are made to the total sales
after the commission has been paid,
3
<PAGE>
the Company shall be entitled to an appropriate refund or credit against future
payments under this Agreement. All fees to be paid pursuant to this Agreement,
except as otherwise specified, are due and payable to Kashner in cash at the
closing or closings of any transaction specified in Paragraph 4 hereof. In the
event that this Agreement shall not be renewed or if terminated for any reason,
notwithstanding any such non-renewal or termination, Kashner shall be entitled
to a full fee as provided under Paragraphs 4 and 5 hereof, for any transaction
for which the discussions were initiated during the term of this Agreement and
which is consummated within a period of twelve months after non-renewal or
termination of this Agreement.
5. EXPENSES OF KASHNER: In addition to the fees payable hereunder,
and regardless of whether any transaction set forth in Paragraph 4 hereof is
proposed or consummated the Company shall reimburse Kashner for all fees and
disbursements of Kashner's counsel and Kashner's travel and reasonable
out-of-pocket expenses incurred in connection with and in direct furtherance of
the services performed by Kashner pursuant to this Agreement, including without
limitation, hotels, food and associated expenses and long-distance telephone
calls. Kashner shall obtain the consent of the Company before incurring any
expense over $1,000.
6. LIABILITY OF KASHNER:
The Company acknowledges that all opinions and advice (written or
oral) given by Kashner to the Company in connection with Kashner's engagement
are intended solely for the benefit and use of the Company in considering the
transaction to which they relate, and the Company agrees that no person or
entity other than the Company shall be entitled to make use of or rely upon the
advice of Kashner to be given hereunder, and no such opinion or advice shall be
used for any other
4
<PAGE>
purpose or reproduced, disseminated, quoted or referred to at any time, in any
manner or for any purpose, nor may the Company make any public references to
Kashner, or use Kashner's name in any annual reports or any other reports or
releases of the Company without Kashner's prior written consent.
(2) The Company acknowledges that Kashner makes no commitment
whatsoever as to making a market in the Company's securities or to recommending
or advising its clients to purchase the Company's securities, except that
Kashner has committed to make a market in the Company's securities for at least
45 days after the effective date of the Company's initial public offering.
Research reports or corporate finance reports that may be prepared by Kashner
will, when and if prepared, be done solely on the merits or judgment of analysis
of Kashner or any senior corporate finance personnel of Kashner.
7. KASHNER'S SERVICES TO OTHERS: The Company acknowledges that
Kashner's or its affiliates are in the business of providing financial services
and consulting advice to others. Nothing herein contained shall be construed to
limit or restrict Kashner in conducting such business with respect to others, or
in rendering such advice to others.
8. COMPANY INFORMATION:
(a) The Company recognizes and confirms that, in advising the
Company and in fulfilling its engagement hereunder, Kashner will use and rely on
data, material and other information furnished to Kashner by the Company. The
Company acknowledges and agrees that in performing its services under this
engagement, Kashner may rely upon the data, material and other information
5
<PAGE>
supplied by the Company without independently verifying the accuracy,
completeness or veracity of same.
(b) Except as contemplated by the terms hereof or as required by
applicable law, Kashner shall keep confidential all material non-public
information provided to it by the Company, and shall not disclose such
information to any third party, other than such of its employees and advisors as
Kashner determines to have a need to know. Upon termination of this Agreement,
at the request of the Company, Kashner shall deliver to the Company all
non-public material in its possession relating to the business affairs of the
Company.
9. INDEMNIFICATION:
The Company shall indemnify and hold Kashner and its directors,
officers, employees and agents harmless against any and all liabilities, claims,
lawsuits, including any and all awards and/or judgments to which it may become
subject under the Securities Act of 1933, as amended (the "1933 Act"), the
Securities Exchange Act of 1934, as amended (the "Act") or any other federal or
state statute, at common law or otherwise, insofar as said liabilities, claims
and lawsuits (including awards and/or judgments) arise out of or are in
connection with the services rendered by Kashner or any transactions in
connection with this Agreement, except for any liabilities, claims and lawsuits
(including awards judgments and related costs and expenses), arising out of acts
or omissions of Kashner. In addition, the Company shall also indemnify and hold
Kashner harmless against any and all reasonable costs and expenses, including
reasonable counsel fees, incurred or relating to the foregoing. If it is finally
judicially determined that the Company will not be responsible for any
liabilities, claims and lawsuits or expenses related thereto, the indemnified
party, by his or its acceptance of such amounts,
6
<PAGE>
agrees to repay the Company all amounts previously paid by the Company to the
indemnified person and will pay all costs of collection thereof, including but
not limited to reasonable attorneys' fees related thereto.
Kashner shall give the Company prompt notice of any such
liability, claim or lawsuit which Kashner contends is the subject matter of the
Company's indemnification and the Company thereupon shall be granted the right
to take any and all necessary and proper action, at its sole cost and expense,
with respect to such liability, claim and lawsuit, including the right to
settle, compromise and dispose of such liability, claim or lawsuit, excepting
therefrom any and all proceedings or hearings before any regulatory bodies
and/or authorities.
Kashner shall indemnify and hold the Company and its directors,
officers, employees and agents harmless against any and all liabilities, claims
and lawsuits, including any and all awards and/or judgments to which it may
become subject under the 1933 Act, the Act or any other federal or state
statute, at common law or otherwise, insofar as said liabilities, claims and
lawsuits (including awards and/or judgments) arise out of or are based upon
Kashner's gross negligence, useful misconduct, bad faith or any untrue statement
or alleged untrue statement of a material fact or omission at a material fact
required to be stated or necessary to make the statement provided by Kashner,
not misleading, which statement or omission was made in reliance upon
information furnished in writing to the Company by or on behalf of Kashner for
inclusion in any registration statement or prospectus or any amendment or
supplement thereto in connection with any transaction to which this Agreement
applies. In addition, Kashner shall also indemnify and hold the Company harmless
against any and all costs and expenses, including reasonable counsel fees,
incurred or relating to the foregoing.
7
<PAGE>
The Company shall give to Kashner prompt notice of any such
liability, claim or lawsuit which the Company contends is the subject matter of
Kashner's indemnification and Kashner thereupon shall be granted the right to a
take any and all necessary and proper action, at its sole cost and expense, with
respect to such liability, claim and lawsuit, including the right to settle,
compromise or dispose of such liability, claim or lawsuit, excepting therefrom
any and all proceedings or hearings before any regulatory bodies and/or
authorities.
b. In order to provide for just and equitable contribution under
the Act in any case in which (i) any person entitled to indemnification under
this Section 9 makes claim for indemnification pursuant hereto 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 this Section 10 provides for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 10, then, and in each such case, the Company and Kashner shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after any contribution from others) in such proportion taking
into consideration the relative benefits received by each party from the
offering covered by the prospectus with respect to any transactions in
connection with this Agreement (taking into account the portion of the proceeds
of the offering realized by each), the parties' relative knowledge and access to
information concerning the matter with respect to which the claim was assessed,
the opportunity to correct and prevent any statement or omission and other
equitable considerations appropriate under the circumstances; provided, however,
that notwithstanding the above in no event shall Kashner be required to
contribute any amount in excess of 10% of the public offering price of any
8
<PAGE>
securities to which such Prospectus applies; and provided, that, in any such
case, 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
was not guilty of such fraudulent misrepresentation.
Within fifteen (15) days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is to be made against another party (the "Contributing Party"), notify
the Contributing Party of the commencement thereof, but the omission so to
notify the Contributing Party will not relieve it from any liability which it
may have to any other party other than for contribution hereunder. In case any
such action, suit or proceeding is brought against any party, and such party
notifies a Contributing Party or his or its representative of the commencement
thereof within the aforesaid fifteen (15) days, the Contributing Party will be
entitled to participate therein with the notifying party and any other
Contributing Party similarly notified. Any such Contributing Party shall not be
liable to any party seeking contribution on account of any settlement of any
claim, action or proceeding effected by such party seeking contribution without
the written consent of the Contributing Party. The indemnification provisions
contained in this Section 10 are in addition to any other rights or remedies
which either party hereto may have with respect to the other or hereunder.
10. KASHNER AN INDEPENDENT CONTRACTOR : Kashner shall perform its
services hereunder as an independent contractor and not as an employee of the
Company or an affiliate thereof. It is expressly understood and agreed to by the
parties hereto that Kashner shall have no authority to act for, represent or
bind the Company or any affiliate thereof in any manner, except as may be agreed
to expressly by the Company in writing from time to time.
9
<PAGE>
11. MISCELLANEOUS:
(1) This Agreement between the Company and Kashner constitutes the
entire agreement and understanding of the parties hereto, and supersedes any and
all previous agreements and understandings, whether oral or written, between the
parties with respect to the matters set forth herein.
(2) Any notice or communication permitted or required hereunder
shall be in writing and shall be deemed sufficiently given if hand-delivered or
sent (i) postage prepaid by registered mail, return receipt requested, or (ii)
by facsimile, to the respective parties as set forth below, or to such other
address as either party may notify the other in writing:
If to the Company, to: Able Energy, Inc.
344 Route 46
Rockaway, New Jersey 07866
with a copy to: Sichenzia, Ross & Freidman
135 West 50th Street, 20th Floor
New York, New York 10020
If to Kashner, to: Kashner Davidson Securities Corporation
77 South Palm Avenue
Sarasota, Florida 34236
with a copy to: Jay M. Kaplowitz
Gersten, Savage & Kaplowitz, LLP
101 East 52nd Street
New York, New York 10022
(3) This Agreement shall be binding upon and inure to the benefit
of each of the parties hereto and their respective successors, legal
representatives and assigns.
(4) This Agreement may be executed in any number of counterparts,
each of which together shall constitute one and the same original document.
10
<PAGE>
(5) No provision of this Agreement may be amended, modified or
waived, except in a writing signed by all of the parties hereto.
(6) This Agreement shall be construed in accordance with and
governed by the laws of the State of New York, without giving effect to conflict
of law principles. The parties hereby agree that any dispute which may arise
between them arising out of or in connection with this Agreement shall be
adjudicated before a court located in New York City, and they hereby submit to
the exclusive jurisdiction of the courts of the State of New York located in New
York, New York and of the federal courts in the Southern District of New York
with respect to any action or legal proceeding commenced by any party, and
irrevocably waive any objection they now or hereafter may have respecting the
venue of any such action or proceeding brought in such a court or respecting the
fact that such court is an inconvenient forum, relating to or arising out of
this Agreement, and consent to the service of process in any such action or
legal proceeding by means of registered or certified mail, return receipt
requested, in care of the address set forth in Paragraph 11(b) hereof.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed, as of the day and year first above written.
KASHNER DAVIDSON SECURITIES CORPORATION
By:
------------------------------------
ABLE ENERGY, INC.
By:
------------------------------------
12
<PAGE>
Exhibit 10.2
1999 EMPLOYEE STOCK OPTION PLAN
1. Purposes
This 1999 Stock Option Plan (the "Plan") is intended to attract and retain the
best available personnel for positions with Able Energy, Inc. or any of its
subsidiary corporations (collectively, the "Company"), and to provide additional
incentive to such employees and others to exert their maximum efforts toward the
success of the Company. The above aims will be effectuated through the granting
of certain stock options. Under the Plan, options may be granted which are
intended to qualify as Incentive Stock Options ("ISOs") under Section 422 of the
Internal Revenue Code of 1986 (the "Code") or which are not ("Non-ISOs")
intended to qualify as Incentive Stock Options thereunder. The term "subsidiary
corporation" shall, for the purposes of the Plan, be defined in the same manner
as such term is defined in Section 424(f) of the Code and shall include a
subsidiary of any subsidiary.
2. Administration of the Plan.
(a) The Plan shall be administered by the Board of Directors of the Company (the
"Board of Directors"), as the Board of Directors may be composed from time to
time, except as provided in subparagraph (b) of this Paragraph 2. The
determinations of the Board of Directors under the Plan, including without
limitation as to the matters referred to in this Paragraph 2, shall be
conclusive. Any determination by a majority of the members of the Board of
Directors at any meeting, or by written consent in lieu of a meeting, shall be
deemed to have been made by the whole Board of Directors. Within the limits of
the express provisions of the Plan, the Board of Directors shall have the
authority, in its discretion, to take the following actions under the Plan:
(i) to determine the individuals to whom, and the time or times at which, ISOs
to purchase the Company's shares of Common Stock, par value $.001 per share
("Common Shares"), shall be granted, and the number of Common Shares to be
subject to each ISO,
(ii) to determine the individuals to whom, and the time or times at which,
Non-ISOs to purchase the Common Shares, shall be granted, and the number of
Common Shares to be subject to each Non-ISO,
(iii) to determine the terms and provisions of the respective stock option
agreements granting ISOs and Non-ISOs (which need not be identical),
(iv) to interpret the Plan,
(v) to prescribe, amend and rescind rules and regulations relating to the Plan,
and
(vi) to make all other determinations and take all other actions necessary or
advisable for the administration of the Plan. In making such determinations, the
Board of Directors may take into account the nature of the services rendered by
such individuals, their present and potential contributions to the Company's
success and such other factors as the Board of Directors, in its discretion,
shall deem relevant. An individual to whom an option has bee granted under the
Plan is referred to herein as an "Optionee."
(b) Notwithstanding anything to the contrary contained herein, the Board of
Directors may at any time, or from time to time, appoint a committee (the
"Committee") of at least two members of the Board of Directors, and delegate to
the Committee the authority of the Board of Directors to administer the Plan.
Upon such appointment and delegation, the Committee shall have all the powers,
privileges and duties of the Board of Directors, and shall be substituted for
the Board of Directors, in the administration of the Plan, except that the power
to appoint members of the Committee and to terminate, modify or amend the Plan
shall be retained by the Board of Directors. In the event that any member of the
Board of Directors is at any time not a "disinterested person", as defined in
Rule 16b-3(c)(3)(i) promulgated pursuant to the Securities Exchange Act of 1934,
the Plan shall not be administered by the Board of Directors, and may only by
<PAGE>
administered by a Committee, all the members of which are disinterested persons,
as so defined. The Board of Directors may from time to time appoint members of
the Committee in substitution for or in addition to members previously
appointed, may fill vacancies in the Committee and may discharge the Committee.
A majority of the Committee shall constitute a quorum and all determinations
shall be made by a majority of its members. Any determination reduced to writing
and signed by a majority of the members shall be fully as effective as if it had
been made by a majority vote at a meeting duly called and held. Members of the
Committee shall not be eligible to participate in this Plan.
3. Shares Subject to the Plan.
The total number of Common Shares which shall be subject to ISOs and Non-ISOs
granted under the Plan (collectively, "Options") shall be 700,000 in the
aggregate, subject to adjustment as provided in Paragraph 8. The Company shall
at all times while the Plan is in force reserve such number of Common Shares as
will be sufficient to satisfy the requirements of outstanding Options. The
Common Shares to be issued upon exercise of Options shall in whole or in part be
authorized and unissued or reacquired Common Shares. The unexercised portion of
any expired, terminated or canceled Option shall again be available for the
grant of Options under the Plan.
4. Eligibility.
(a) Subject to subparagraphs (b) and (c) of this Paragraph 4, Options may be
granted to key employees, officers, directors or consultants of the Company, as
determined by the Board of Directors.
(b) An ISO may be granted, consistent with the other terms of the Plan, to an
individual who owns (within the meaning of Sections 422(b)(6) and 424(d) of the
Code), more that ten (10%) percent of the total combined voting power or value
of all classes of stock of the Company or a subsidiary corporation (any such
person, a "Principal Stockholder") only if, at the time such ISO is granted, the
purchase price of the Common Shares subject to the ISO is an amount which equals
or exceeds one hundred ten percent (110%) of the fair market value of such
Common Shares, and such ISO by its terms is not exercisable more than five (5)
years after it is granted.
(c) A director or an officer of the Company who is not also an employee of the
Company and consultants to the Company shall be eligible to receive Non-ISOs but
shall not be eligible to receive ISOs.
(d) Nothing contained in the Plan shall be construed to limit the right to the
Board of Directors to grant an ISO and Non-ISO concurrently under a single stock
option agreement so long as each Option is clearly identified as to its status.
Furthermore, if an Option has been granted under the Plan, additional Options
may be granted from time to time to the Optionee holding such Options, and
Options may be granted from time to time to one or more employees, officers or
directors who have not previously been granted Options.
(e) To the extent that the grant of an Option results in the aggregate fair
market value (determined at the time of grant) of the Common Shares (or other
capital stock of the Company or any subsidiary) with respect to which Incentive
Stock Options are exercisable for the first time by an Optionee during any
calendar year (under all plans of the Company and subsidiary corporation) to
exceed $100,000, such Options shall be treated as a Non-ISO. The provisions of
this subparagraph (e) of Paragraph 4 shall be construed and applied in
accordance with Section 422(d) of the Code and the regulations, if any,
promulgated thereunder.
5. Terms of Options.
The term of each Option granted under the Plan shall be contained in a stock
option agreement between the Optionee and the Company and such terms shall be
determined by the Board of Directors consistent with the provisions of the Plan,
including the following:
(a) The purchase price of the Common Shares subject to each ISO shall not be
less than the fair market value (or in the case of the grant of an ISO to a
Principal Stockholder, not less that 110% of fair market value) of such Common
Shares at the time such Option is granted. Such fair market value shall be
determined by
<PAGE>
the Board of Directors and, if the Common Shares are listed on a national
securities exchange or traded on the over-the-counter market, the fair market
value shall be the mean of the highest and lowest trading prices or of the high
bid and low asked prices of the Common Shares on such exchange, or on the
over-the-counter market as reported by the NASDAQ system or the National
Quotation Bureau, Inc., as the case may be, on the day on which the ISO is
granted or, if there is no trading or bid or asked price on that day, the mean
of the highest and lowest trading or high bid and low asked prices on the most
recent day preceding the day on which the ISO is granted for which such prices
are available.
(b) The purchase price of the Common Shares subject to each Non-ISO shall not be
less than 85% of the fair market value of such Common Shares at the time such
Option is granted. Such fair market value shall be determined by the Board of
Directors in accordance with subparagraph (a) of this Paragraph 5. The purchase
price of the Common Shares subject to each Non-ISO shall be determined at the
time such Option is granted.
(c) The dates on which each Option (or portion thereof) shall be exercisable and
the conditions precedent to such exercise, if any, shall be fixed by the Board
of Directors, in its discretion, at the time such Option is granted.
(d) The expiration of each Option shall be fixed by the Board of Directors, in
its discretion, at the time such Option is granted; however, unless otherwise
determined by the Board of Directors at the time such Option is granted, an
Option shall be exercisable for ten (10) years after the date on which it was
granted (the "Grant Date"). Each Option shall be subject to earlier termination
as expressly provided in Paragraph 6 hereof or as determined by the Board of
Directors, in its discretion, at the time such Option is granted.
(e) Options shall be exercised by the delivery by the Optionee thereof to the
Company at its principal office, or at such other address as may be established
by the Board of Directors, of written notice of the number of Common Shares with
respect to which the Option is being exercised accompanied by payment in full of
the purchase price of such Common Shares. Payment for such Common Shares may be
made (as determined by the Board of Directors) (i) in cash, (ii) by certified
check or bank cashier's check payable to the order of the Company in the amount
of such purchase price, (iii) by a promissory note issued by the Optionee in
favor of the Company in the amount equal to such purchase price and payable on
terms prescribed by the Board of Directors, which provides for the payment of
interest at a fair market rate, as determined by the Board of Directors, (iv) by
delivery of capital stock to the Company having a fair market value (determined
on the date of exercise in accordance with the provisions of subparagraph (a) of
this Paragraph 5) equal to said purchase price, or (v) by any combination of the
methods of payment described in clauses (i) through (iv) above.
(f) An Optionee shall not have any of the rights of a stockholder with respect
to the Common Shares subject to his Option until such shares are issued to him
upon the exercise of his Option as provided herein.
(g) No Option shall be transferable, except by will or the laws of descent and
distribution, and any Option may be exercised during the lifetime of the
Optionee only by him. No Option granted under the Plan shall be subject to
execution, attachment or other process.
6. Death or Termination of Employment.
(a) If employment or other relationship of an Optionee with the Company shall be
terminated voluntarily by the Optionee and without the consent of the Company or
for "Cause" (as hereinafter defined), and immediately after such termination
such Optionee shall not then be employed by the Company, any Options granted to
such Optionee to the extent not theretofore exercised shall expire forthwith.
For purposes of the Plan, "Cause" shall mean "Cause" as defined in any
employment agreement ("Employment Agreement") between Optionee and the Company,
and, in the absence of an Employment Agreement or in the absence of a definition
of "Cause" in such Employment Agreement, "Cause" shall mean (i) any continued
failure by the Optionee to obey the reasonable instructions of the President or
any member of the Board of
<PAGE>
Directors, (ii) continued neglect by the Optionee of his duties and obligations
as an employee of the Company, or a failure to perform such duties and
obligations to the reasonable satisfaction of the President or the Board of
Directors, (iii) willful misconduct of the Optionee or other actions in bad
faith by the Optionee which are to the detriment of the Company, including
without limitation commission of a felony, embezzlement or misappropriation of
funds or commission of any act of fraud or (iv) a breach of any material
provision of any Employment Agreement not cured within 10 days after written
notice thereof.
(b) If such employment or other relationship shall terminate other than (i) by
reason of death, (ii) voluntarily by the optionee and without the consent of the
Company, or (iii) for Cause, and immediately after such termination such
Optionee shall not them be employed by the Company, any Options granted to such
Optionee may be exercised at any time within three months after such
termination, subject to the provisions of subparagraph (d) of this Paragraph 6.
After such three-month period, the unexercised Options shall expire. For the
purposes of the Plan, the retirement of an Optionee either pursuant to a pension
or retirement plan adopted by the Company or on the normal retirement date
prescribed from time to time by the Company, and the termination of employment
as a result of a disability (as defined in Section 22(e) (3) of the Code) shall
be deemed to be a termination of such Optionee's employment or other
relationship other than voluntarily by the Optionee or for Cause.
(c) If an Optionee dies (i) while employed by, or engaged in such other
relationship with, the Company or (ii) within three months after the termination
of his employment or other relationship other than voluntarily by the Optionee
and without the consent of the Company or for Cause, any options granted to such
Optionee may be exercised at any time within twelve months after such Optionee's
death, subject to the provisions of subparagraph (d) of this Paragraph 6. After
the three month period, the unexercised Options shall expire.
(d) An Option may not be exercised pursuant to this paragraph 6 except to the
extent that the Optionee was entitled to exercise the Option at the time of
termination of employment or Such other relationship, or death, and in any event
may not be exercised after the expiration of the earlier of (i) the term of the
option or (ii) ten (10) years from the date the Option was granted, or five (5)
years from the date an ISO was granted if the optionee was a Principal
Stockholder at that date.
7. Leave of Absence.
For purposes of the Plan, an individual who is on military or sick leave or
other bona fide leave of absence (such temporary employment by the United States
or any state d government) shall be considered as remaining in the employ of the
Company for 90 days or such longer period as shall be determined by the Board of
Directors.
8. Option Adjustments.
(a) The aggregate number and class of shares as to which Options may be granted
under the Plan, the number and class shares covered by each outstanding Option
and the exercise price per share thereof (but not the total price), and all such
Options, shall each be proportionately adjusted for any increase decrease in the
number of issued Common Shares resulting from split-up spin-off or consolidation
of shares or any like Capital adjustment or the payment of any stock dividend.
(b) Except as provided in subparagraph (c) of this Paragraph 8, upon a merger,
consolidation, acquisition of property or stock, separation, reorganization
(other than a merger or reorganization of the Company in which the holders of
Common Shares immediately prior to the merger or reorganization have the same
proportionate ownership of Common Shares in the surviving corporation
immediately after the merger or reorganization) or liquidation of the Company,
as a result of which the stockholders of the Company receive cash, stock or
other property in exchange for their Common Shares, any Option granted hereunder
shall terminate, but, provided that the Optionee shall have the right
immediately prior to any such merger, consolidation, acquisition of property or
stock, separation, reorganization or liquidation to exercise his Option in whole
or in part whether or not the vesting requirements set forth in the stock option
agreement have been satisfied.
(c) If the stockholders of the Company receive capital stock of another
corporation ("exchange Stock") in exchange for their Common Shares in any
transaction involving a merger, consolidation, acquisition of
<PAGE>
property or stock, separation or reorganization (other than a merger or
reorganization of the Company in which the holders of Common Shares immediately
prior to the merger or reorganization have the same proportionate ownership of
Common Shares in the surviving corporation immediately after the merger or
reorganization), all options granted hereunder shall terminate in accordance
with the provision of subparagraph (b) of this Paragraph 8 unless the of
Directors and the corporation issuing the Exchange Stock in their sole and
arbitrary discretion and subject to any required action by the stockholders of
the Company and such corporation, agree that all such Options granted hereunder
are converted into options to purchase shares of Exchange Stock. The amount and
price of such options shall be determined by adjusting the amount and price of
the Options granted hereunder in the same proportion as used for determining the
number of shares of Exchange Stock the holders of the Common Shares receive in
such merger, consolidation, acquisition of property or stock, separation or
reorganization. The vesting schedule set forth in the stock option agreement
shall continue to apply to the options granted for the Exchange Stock.
(d) All adjustments pursuant to this Paragraph 8 shall be made by the Board of
Directors and its determination as to what adjustments shall be made, and the
extent thereof, shall be final, binding and conclusive.
9. Further Conditions of Exercise.
(a) Unless prior to the exercise of an Option the Common Shares issuable upon
such exercise are the subject of a registration statement filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), and there is then in effect a prospectus filed
as part of such registration statement meeting the Requirements of Section
10(a)(3) of the Securities Act, the notice of exercise with respect to such
Option shall be accompanied by a representation or agreement of the individual
exercising the Option to the Company to the effect that such shares are being
acquired for investment only and not with a view to the resale or distribution
thereof, or such other, documentation as may be required by the Company, unless,
in the opinion of counsel to the Company, such representation, agreement or
documentation is not necessary to comply with the Securities Act.
(b) Anything in the Plan to the contrary notwithstanding, the Company shall not
be obligated to issue or sell any Common Shares until they have been listed on
each securities exchange on which the Common Shares may then be listed and until
and unless, in the opinion of counsel to the Company, the Company may issue such
shares pursuant to a qualification or an effective registration statement, or an
exemption from registration, under such state and federal laws, rules or
regulations as such counsel may deem applicable. The Company shall use
reasonable efforts to effect such listing, qualification and registration, as
the case may be.
10. Termination. Modification and Amendment.
(a) The Plan (but not Options previously granted under the Plan) shall terminate
ten (10) years from the earlier of the date of its adoption by the Board of
Directors or the date on which the Plan is approved by the affirmative vote of
the holders of a majority of the outstanding shares of capital stock of the
Company entitled to vote thereon, and no Option shall be granted after
termination of the Plan.
(b) The Plan may at any time be terminated and from time to time be modified or
amended by the affirmative vote of the holders of a majority of the outstanding
shares of the capital stock of the Company present, or represented, and entitled
to vote at a meeting duly held in accordance with the applicable laws of the
State of Delaware.
(c) The Board of Directors of the Company may at any time terminate the Plan or
from time to time make such modifications or amendments of the Plan as it may
deem advisable; provided, however, that the Board of Directors shall not (i)
modify or amend the Plan in any way that would disqualify any ISO issued
pursuant to the Plan as an Incentive Stock Option or (ii) without approval by
the affirmative vote of the holders of a majority of the outstanding shares of
the capital stock of the Company present, or represented, and entitled to vote
at a meeting duly held in accordance with the applicable laws of the State of
Delaware, increase (except as provided by Paragraph 8) the maximum number of
Common Shares as to which Options may be granted under the Plan or change the
class of persons eligible to Options under the Plan.
<PAGE>
(d) No termination, modification or amendment of the Plan may adversely affect
the rights conferred by any Options the consent of the Optionee thereof.
11. Effectiveness of the Plan.
The Plan shall become effective upon adoption by the Board of Directors. The
Plan shall be subject to approval by the affirmative vote of the holders of a
majority of the outstanding shares of the capital stock of the Company entitled
to vote thereon within one year following adoption of the Plan by the Board of
Directors, and all Options granted prior to such approval shall be subject
thereto. In the event such approval is withheld, the Plan and all Options which
may have been granted thereunder shall become null and void.
12. Not a Contract of Employment.
Nothing contained in the Plan or in any stock option agreement executed pursuant
hereto shall be deemed to confer upon any individual to whom an Option is or may
be granted hereunder any right to remain in the employ of, or in another
relationship with, the relationship with, the Company.
13. Miscellaneous.
(a) Nothing contained in the Plan or in any stock option agreement executed
pursuant hereto shall be deemed to confer upon any individual to whom an Option
is or may be granted hereunder any right to remain in the employ of, or other
relationship with, the Company.
(b) If an Option has been granted under the Plan, additional Options may be
granted from time to time to the Optionee, and Options may be granted from time
to time to one or more individuals who have not previously been granted options.
(c) Nothing contained in the Plan shall be construed to limit the right of the
Company to grant options otherwise than under the Plan in connection with the
acquisition of the business and assets of any corporation, firm, person or
association, including options granted to employees thereof who become employees
of the Company, nor shall the provisions of the Plan be to limit the right of
the Company to grant options Otherwise than under the Plan for other proper
corporate purposes.
(d) The Company shall have the right to require the Optionee to pay the Company
the cash amount of any taxes the Company is required to withhold in connection
with the exercise of an Option.
<PAGE>
(e) No award under this Plan shall be taken into account in determining an
Optionee's compensation for purposes of an employee benefit plan of the Company.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
in its behalf by one of its officers and sealed by its corporate seal, as of the
date set forth below, and the Employee has hereunto set his hand on or as of
said date, which date is the date such option rights were approved for grant,
with Employee by his aid execution hereof hereby representing that the residence
indicated below his (or her) name is his (or her) bona fide residence and
domicile.
<PAGE>
Exhibit 10.4
EMPLOYMENT AGREEMENT
TIMOTHY HARRINGTON
AGREEMENT, dated as of the __ day of _______, 1999, among Able Energy,
Inc., a Delaware corporation, having a place of business at 344 Route 46,
Rockaway, New Jersey 07866 (the "Company"), and Timothy Harrington, an
individual having a place of business at c/o Able Energy, Inc. 344 Route 46,
Rockaway, New Jersey 07866 (the "Executive").
WHEREAS, the Company is a holding company for five operating subsidiaries
which are principally engaged in the business of the distribution of, and the
provision of services related, fuel oil, propane gas and natural gas; and
WHEREAS, the Company proposes to conduct a public offering of its
securities (the "Offering"); and
WHEREAS, Kashner Davidson Securities Corp. (the "Underwriter") will act as
underwriter of the offering; and
WHEREAS, the Company desires to employ the Executive as its Chairman of
the Board of Directors, Chief Executive Officer and Secretary; and
WHEREAS, Executive is willing to accept such employment by the Company,
all in accordance with provisions hereinafter set forth; and
NOW, THEREFORE, in consideration of the promises and mutual
representations, covenants, and agreements set forth herein, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree effective upon the Acquisition as
follows:
1. Term: The term of this Agreement shall be for a period of five (5)
years commencing on the effective date of the Offering (the "Effective Date")
and terminating on the fifth anniversary date of the Effective Date, subject to
earlier termination as provided herein or unless extended by mutual consent of
the parties.
2. Employment: (A) Subject to the terms and conditions and for the
compensation hereinafter set forth, the Company hereby agrees to employ
Executive for and during the term of this Agreement. Executive is hereby
employed by the Company as its Chairman of the Board of Directors, Chief
Executive Officer and Secretary. The Executive's powers and duties shall be
those of an executive nature which are appropriate for a Chairman of the Board
of Directors, Chief Executive Officer and Secretary in accordance with the
Company's By-Laws; and Executive does hereby accept such employment or greater
employment as may be mutually agreed upon by the parties hereto and agrees to
devote only as much time to the affairs of the Company as Executive deems
necessary to discharge his duties to the Company during the term of this
Agreement, to the performance of his duties upon the conditions hereinafter set
forth. Executive shall report to the
<PAGE>
Board of Directors of the Company. The Company shall not require Executive to be
employed in any location other than Rockaway, New Jersey unless he consents in
writing to such location.
(B) During the term of this Agreement, Executive shall be furnished with
office space and facilities commensurate with his position and adequate for the
performance of his duties; he shall be provided with the perquisites customarily
associated with the position of Chairman of the Board of Directors, Chief
Executive Officer and Secretary of the Company.
3. Compensation:
(A) Salary: During the term of this Agreement, the Company agrees to pay
Executive, and Executive agrees to accept, an annual salary of not less than
[Two Hundred Twenty Five Thousand Dollars ($225,000)] per year, payable in
accordance with the Company's policies, for services rendered by Executive
hereunder.
(B) Bonus: As additional compensation, the Company may pay Executive a
periodic bonus. The Board of Directors will fix the bonus payable to the
Executive at the end of each year; provided such bonuses, plus all other bonuses
payable to the executive management shall not exceed, in the aggregate, a "bonus
pool." [The bonus pool shall equal up to 5% of the earnings before taxes of the
Company ("EBT") for 1999, provided the Company achieves at least $800,000 in
EBT, 10% of EBT for 2000 and 2001, provided the Company achieves at lease
$3,000,000 and $5,000,000, respectively, of EBT in each of such years.] These
agreements will not be subject to amendment during their term without the
consent of the Underwriter.
(C) Increases: The annual salary is subject to periodic increases at the
discretion of the Board of Directors with such increases to take effect no later
than on each anniversary date of this Agreement.
4. Expenses: The Company shall reimburse Executive for all reasonable and
actual business expenses incurred by him in connection with his service to the
Company, upon submission by him of appropriate vouchers and expense account
reports.
5. Benefits:
(A) Insurance: In addition to the salary and bonus to be paid to Executive
hereunder, the Company shall maintain family medical and dental insurance, life
insurance in the amount of not less than ___________ Dollars ($_________) on the
life of Executive and for which Executive shall designate the beneficiary(ies),
and long term disability insurance providing monthly disability benefits to
Executive of not less than _________ Dollars ($______). Executive and his
dependents shall be entitled to participate in such other benefits as are
extended to active executive employees of the Company and their dependents
including but not limited to pension, retirement, profit-sharing, 401(k), stock
option, bonus and incentive plans, group insurance, hospitalization, medical or
other benefits made available by the Company to its employees generally.
(B) Vacation: Executive shall be entitled to take up to four (4) weeks of
paid vacation
2
<PAGE>
annually at a time mutually convenient to the Company and Executive. Any such
vacation time not used by Executive in any one year shall accumulate to his
benefit in the succeeding years.
6. Restrictive Covenants: (A) Executive recognizes and acknowledges that
the Company, through the expenditure of considerable time and money, has
developed and will continue to develop in the future information concerning
customers, clients, marketing, business and operational methods of the Company
and its customers or clients, contracts, financial or other data, technical data
or any other confidential or proprietary information possessed, owned or used by
the Company, and that the same are confidential and proprietary, and are
"confidential information" of the Company. In consideration of his employment by
the Company hereunder, Executive agrees that he will not, without the consent of
the Board, make any disclosure of confidential information now or hereafter
possessed by the Company to any person, partnership, corporation or entity
either during or after the term hereunder, except to employees of the Company or
its subsidiaries or affiliates and to others within or without the Company, as
the Executive may deem necessary in order to conduct the Company's business and
except as may be required pursuant to any court order, judgment or decision from
any court of competent jurisdiction. The foregoing shall not apply to
information which is in the public domain on the date hereof; which, after it is
disclosed to Executive by the Company, is published or becomes part of the
public domain through no fault of Executive; which is known to Executive prior
to disclosure thereof to him by the Company as evidenced by his written records;
or, after Executive is no longer employed by the Company, which is thereafter
disclosed to Executive in good faith by a third party which is not under any
obligation of confidence or secrecy to the Company with respect to such
information at the time of disclosure to him. The provisions of this Section
shall continue in full force and effect notwithstanding any lawful termination
of Executive's employment under this Agreement for a period of one (1) year
following said termination of employment.
(B) Except in the ordinary course of his duties as Chairman of the Board
of Directors, Chief Executive Officer and Secretary, or in the furtherance of
the business of the Company, during the period from the date of this Agreement
until one (1) year following the date on which his employment with the Company
is lawfully and properly terminated, Executive will not, directly or indirectly:
(i) persuade or attempt to persuade any person or entity which is or
was a customer, client or supplier of the Company on the date on which
Executive's employment with the Company is terminated to cease doing
business with the Company, or to reduce the amount of business it does
with the Company;
(ii) solicit for himself or any other person or entity other than
the Company the business of any person or entity which is a customer or
client of the Company, or was its customer or client within six (6) months
prior to the termination of his employment by the Company, with respect to
distribution of roofing supplies and related products; or
3
<PAGE>
(iii) persuade or attempt to persuade any employee of the Company,
or any individual who was an employee of Company during the six (6) month
period prior to the lawful and proper termination of this Agreement, to
leave Company's employ, or to become employed by any person or entity
other than the Company.
(C) Executive acknowledges that the restrictive covenants (the
"Restrictive Covenants") contained in this section 6 are a condition of his
employment and are reasonable and valid in geographical and temporal scope and
in all other respects. If any court determines that any of the Restrictive
Covenants, or any part of any of the Restrictive Covenants, is invalid or
unenforceable, the remainder of the Restrictive Covenants and parts thereof
shall not thereby be affected and shall be given full effect, without regard to
the invalid portion. If any court determines that any of the Restrictive
Covenants, or any part thereof, is invalid or enforceable because of the
geographic or temporal scope of such provision, such court shall have the power
to reduce the geographic or temporal scope of such provision, as the case may
be, and, in its reduced form, such provision shall then be enforceable.
(D) If Executive breaches, or threatens to breach, any of the Restrictive
Covenants, the Company, in addition to and not in lieu of any other rights and
remedies it may have at law or in equity, shall have the right to injunctive
relief; it being acknowledged and agreed to by Executive that any such breach or
threatened breach would cause irreparable and continuing injury to the Company
and that money damages would not provide an adequate remedy to the Company.
7. Termination:
(A) Death: In the event of Executive's death ("Death") during the term of
his employment, Executive's designated beneficiary, or in the absence of such
beneficiary designation, his estate shall be entitled to payment of Executive's
salary from date of death to the expiration of one (1) year thereafter. In
addition, Executive's beneficiary and/or dependents shall be entitled, for the
same one year period to continuation, at the Company's expense, of such benefits
as are then being provided to them under Section 5(A) hereof, and any additional
benefits as may be provided to dependents of the Company's executive officers in
accordance with the terms of the Company's policies and practices. In addition,
any options granted to Executive which have not, by the terms of the options,
vested shall be deemed to have vested as of the date of his death and shall
thereafter be exercisable by Executive's beneficiary or estate for the maximum
period of time allowed for exercise thereof under the terms of the option.
(B) Disability:
4
<PAGE>
(a) In the event Executive, by reason of physical or mental incapacity,
shall be disabled ("Disability") for a period of at least six (6) consecutive
months, the Company shall have the option at any time thereafter to terminate
Employee's employment hereunder for disability. Such termination will be
effective thirty (30) days after the Board gives written notice of such
termination to Executive, unless Executive shall have returned to the
performance of his duties prior to the effective date of the notice. All
obligations of the Company hereunder shall cease upon the effectiveness of such
termination, provided that such termination shall not affect or impair any
rights Executive may have under any policy of long term disability insurance or
benefits then maintained on his behalf by the Company. In addition, for a period
of one (1) year following termination of Executive's employment for disability,
Executive and his dependents, as the case may be, shall continue to receive the
benefits set forth under subparagraph 5(A) hereof, as well as such benefits as
are extended to the Company's active executive employees and their dependents
during such period. Any options granted to the Executive which have not, by the
terms of the options, vested shall be deemed to have vested at the termination
and shall thereafter be exercisable by the Employee, his beneficiary,
conservator or estate, as applicable, for the maximum period of time allowed for
exercise thereof under the terms of the option.
(b) "Incapacity" as used herein shall mean the inability of the Executive
due to physical or mental illness, injury or disease substantially to perform
his normal duties as Chairman of the Board of Directors, Chief Executive Officer
and Secretary. Executive's salary as provided for hereunder shall continue to be
paid during any period of incapacity prior to and including the date on which
Executive's employment is terminated for disability.
(C) By The Company For Cause:
(a) The Company shall have the right, before the expiration of the term of
this Agreement, to terminate this Agreement and to discharge Executive for cause
(hereinafter "Cause"), and all compensation to Executive shall cease to accrue
upon discharge of Executive for Cause. For the purposes of this Agreement, the
term "Cause" shall mean (i) Executive's conviction of a felony; (ii) the
alcoholism or drug addiction of Executive; (iii) gross negligence or willful
misconduct of Executive in connection with his duties hereunder; (iv) the
determination by any regulatory or judicial authority (including any securities
self-regulatory organization) that Executive directly violated, before or after
the date hereof, any federal or state securities law, any rule or regulation
adopted thereunder; or (v) the continued and willful failure by Executive to
substantially and materially perform his material duties hereunder.
(b) If the Company elects to terminate Executive employment for Cause
under (C)(a) above, such termination shall be effective fifteen (15) days after
the Company gives written notice of such termination to Executive. In the event
of a termination of Executive's employment for Cause in accordance with the
provisions of 7(C)(a), the Company shall have no further obligation to the
Executive, except for the payment of all compensation and other vested benefits
which have accrued through the date of such termination and not paid and any
other benefits to which he or his dependents may be entitled by law.
5
<PAGE>
(D) By Executive for Reason:
Executive shall have the right to terminate his employment at any time for
"good reason" (herein designated and referred to as "Reason"). The term Reason
shall mean (i) the failure to elect or appoint, or re-elect or re-appoint,
Executive to, or removal or improperly attempted removal of Executive from, his
positions as Chairman of the Board of Directors or Chief Executive Officer or
superior positions with the Company, except in connection with the proper
termination of Executive's employment by reason of Cause, Death or Disability;
(ii) a reduction in Executive's overall compensation other than his
discretionary bonus under Section 3(B) above or an adverse change in the nature
or scope of the authorities, powers, functions or duties normally attached to
the Executive's position with the Company; (iii) the Company's failure or
refusal to perform any obligations required to be performed in accordance with
this Agreement after a reasonable notice and an opportunity to cure same; and
(iv) a Change in Control of the Company, as defined herein, occurs.
(E) Severance: (a) In the event Executive's employment hereunder shall be
terminated by the Executive for Reason or by the Company for other than Cause,
Death or Disability: (1) the Executive shall thereupon receive as severance pay
in a lump sum the amount of salary and bonuses which the Executive would have
received for the remaining term of this Agreement had there been no termination,
provided however, that in no event shall such lump sum payment be less than one
year's salary and bonus; and (2) the Executive's (and his dependents')
participation in any and all life, disability, medical and dental insurance
plans shall be continued, or equivalent benefits provided to him or them by the
Company, at no cost to him or them, for a period of two years from the
termination; and (3) any options granted to Executive which have not, by the
terms of the options, vested shall be deemed to have vested at the termination,
and shall thereafter be exercisable for the maximum period of time allowed for
exercise thereof under the terms of the option; and new paragraph (b) an
election by Executive to terminate his employment under the provisions of this
paragraph shall not be deemed a voluntary termination of employment of Executive
for the purpose of interrupting the provisions of any of the Company's employee
benefit plans, programs or policies.
(F) Resignation: In the event Executive resigns without Reason prior to
the expiration hereof, he shall receive any unpaid fixed salary through such
resignation date and such benefits to which he is entitled by law.
(G) Extension of Benefits: Any extension of benefits following the
termination of employment provided for herein shall be deemed to be in addition
to, and not in lieu of, any period for the continuation of benefits provided for
by law, either at the Company's, Executive or his dependents' expense.
(H) Change in Control: For purposes hereof, a Change in Control shall be
deemed to have occurred (i) if there has occurred a "change in control" as such
term is used in Item 1 (a) of
6
<PAGE>
Form 8-K promulgated under the Securities Exchange Act of 1934, as amended, at
the date hereof ("Exchange Act") or (ii) if there has occurred a change in
control as the term "control" is defined in Rule 12b-2 promulgated under the
Exchange Act.
8. Indemnification: Company hereby indemnifies and holds Executive
harmless to the extent of any and all claims, suits, proceedings, damages,
losses or liabilities incurred by Executive and arising out of any acts or
decisions done or made in the authorized scope of his employment hereunder.
Company hereby agrees to pay all expenses, including reasonable attorney's fees,
actually incurred by Executive in connection with the investigation of any such
matter, the defense of any such action, suit or proceeding and in connection
with any appeal thereon including the cost of settlements. Nothing contained
herein shall entitle Executive to indemnification by Company in excess of that
permitted under applicable law.
9. Waiver: No delay or omission to exercise any right, power or remedy
accruing to either party hereto shall impair any such right, power or remedy or
shall be construed to be a waiver of or an acquiescence to any breach hereof. No
waiver of any breach hereof shall be deemed to be a waiver of any other breach
hereof theretofore or thereafter occurring. Any waiver of any provision hereof
shall be effective only to the extent specifically set forth in the applicable
writing. All remedies afforded to either party under this Agreement, by law or
otherwise, shall be cumulative and not alternative and shall not preclude
assertion by either party of any other rights or the seeking of any other rights
or remedies against the other party.
10. Governing Law: The validity of this Agreement or of any of the
provisions hereof shall be determined under and according to the laws of the
State of New York, and this Agreement and its provisions shall be construed
according to the laws of the State of New York, without regard to the principles
of conflicts of law and the actual domiciles of the parties hereto.
11. Notices: All notices, demands or other communications required or
permitted to be given in connection with this Agreement shall be given in
writing, shall be transmitted to the appropriate party by hand delivery, by
certified mail, return receipt requested, postage prepaid or by overnight
carrier and shall be addressed to a party at such party's address shown on the
first page hereof. A party may designate by written notice given to the other
parties a new address to which any notice, demand or other communication
hereunder shall thereafter be given. Each notice, demand or other communication
transmitted in the manner described in this Section 11 shall be deemed to have
been given and received for all purposes at the time it shall have been (i)
delivered to the addressee as indicated by the return receipt (if transmitted by
mail), the affidavit of the messenger (if transmitted by hand delivery or
overnight carrier) or (ii) presented for delivery during normal business hours,
if such delivery shall not have been accepted for any reason.
12. Assignments: This Agreement shall be binding upon and inure to the
benefit of the parties and each of their respective successors, assigns, heirs
and legal representatives; provided, however, that Executive may not assign or
delegate his obligations, responsibilities and duties hereunder except as
permitted by the Company's by-laws, custom, practice, policies or the Board of
7
<PAGE>
Directors. Company may not assign this Agreement without the prior written
consent of Executive.
13. Miscellaneous: This Agreement contains the entire understanding
between the parties hereto and supersedes all other oral and written agreements
or understandings between them with respect to the subject matter hereof. No
modification or addition hereto or waiver or cancellation of any provision shall
be valid except by a writing signed by the party to be charged therewith.
14. Obligations of a Continuing Nature: It is expressly understood and
agreed that the covenants, agreements and restrictions undertaken by or imposed
on Executive and, the Company hereunder, which are stated to exist or continue
after termination of Executive's employment with the Company, shall exist and
continue irrespective of the method or circumstances of such termination for the
respective periods of time set forth herein.
15. Severability: The parties agree that if any of the covenants,
agreements or restrictions contained herein are held to be invalid by any court
of competent jurisdiction, the remainder of the other covenants, agreements
restrictions and parts thereof herein contained shall be severable so not to
invalidate any others and such other covenants, agreements, restrictions and
parts thereof shall be given full effect without regard to the invalid portion.
16. Venue: Jurisdiction: The Company and the Executive hereby agree that
any action, proceeding or claim against either of them arising out of, or
relating in any way to this Agreement shall be brought and enforced in any of
the courts of the State of New York in New York County, New York, or the United
States District Court for the Southern District of New York, and irrevocably
submit to such jurisdiction. The Company and the Executive hereby waive any
objection to such jurisdiction and that such courts represent an inconvenient
forum. Any process or summons to be served upon the Company or the Executive may
be served by transmitting a copy thereof by registered or certified mail, return
receipt requested, postage prepaid, addressed to their respective addresses set
forth in the initial paragraph of this agreement or such other address as a
party may so notify the other parties hereto in the manner provided by Section
II hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the Company and the Executive in any action, proceeding or claim.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
ABLE ENERGY, INC.
By:_____________________________________
8
<PAGE>
-------------------------------
Timothy Harrington, Executive
<PAGE>
EMPLOYMENT AGREEMENT
CHRISTOPHER P. WESTED
AGREEMENT, dated as of the __ day of , 1999, among Able Energy, Inc., a
Delaware corporation, having a place of business at 344 Route 46, Rockaway, New
Jersey 07866 (the "Company"), and Christopher P. Wested, an individual having a
place of business at c/o Able Energy, Inc. 344 Route 46, Rockaway, New Jersey
07866 (the "Executive").
WHEREAS, the Company is a holding company for five operating
subsidiaries which are principally engaged in the business of the distribution
of, and the provision of services related to , fuel oil, propane gas and natural
gas; and
WHEREAS, the Company proposes to conduct a public offering of its
securities (the AOffering@); and
WHEREAS, Kashner Davidson Securities Corp. (the AUnderwriter@) will act
as underwriter of the offering; and
WHEREAS, the Company desires to employ the Executive as its President;
and
WHEREAS, Executive is willing to accept such employment by the Company,
all in accordance with provisions hereinafter set forth; and
NOW, THEREFORE, in consideration of the promises and mutual
representations, covenants, and agreements set forth herein, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree effective upon the Acquisition as
follows:
1. TERM: The term of this Agreement shall be for a period of five (5)
years commencing on the effective date of the Offering (the AEffective Date@)
and terminating on the fifth anniversary date of the Effective Date, subject to
earlier termination as provided herein or unless extended by mutual consent of
the parties.
2. EMPLOYMENT: (A) Subject to the terms and conditions and for the
compensation hereinafter set forth, the Company hereby agrees to employ
Executive for and during the term of this Agreement. Executive is hereby
employed by the Company as its President. The Executive's powers and duties
shall be those of an executive nature which are appropriate for a President in
accordance with the Company's By-Laws; and Executive does hereby accept such
employment or greater employment as may be mutually agreed upon by the parties
hereto and agrees to devote only as much time to the affairs of the Company as
Executive deems necessary to discharge his duties to the Company during the term
of this Agreement, to the performance of his duties upon the conditions
hereinafter set forth. Executive shall report to the Board of Directors of the
Company. The Company shall not require Executive to be employed in any location
other than Rockaway, New Jersey unless he consents in writing to such location.
<PAGE>
(B) During the term of this Agreement, Executive shall be furnished with
office space and facilities commensurate with his position and adequate for the
performance of his duties; he shall be provided with the perquisites customarily
associated with the position of President of the Company.
3. Compensation:
(A) Salary: During the term of this Agreement, the Company agrees to pay
Executive, and Executive agrees to accept, an annual salary of not less than
[One Hundred Thousand Dollars ($100,000)] per year, payable in accordance with
the Company's policies, for services rendered by Executive hereunder.
(B) Bonus: As additional compensation, the Company may pay Executive a
periodic bonus. The Board of Directors will fix the bonus payable to the
Executive at the end of each year; provided such bonuses, plus all other bonuses
payable to the executive management shall not exceed, in the aggregate, a "bonus
pool." [The bonus pool shall equal up to 5% of the earnings before taxes of the
Company ("EBT") for 1999, provided the Company achieves at least $800,000 in
EBT, 10% of EBT for 2000 and 2001, provided the Company achieves at lease
$3,000,000 and $5,000,000, respectively, of EBT in each of such years.] These
agreements will not be subject to amendment during their term without the
consent of the Underwriter.
(C) Increases: The annual salary is subject to periodic increases at the
discretion of the Board of Directors with such increases to take effect no later
than on each anniversary date of this Agreement.
4. Expenses: The Company shall reimburse Executive for all reasonable and
actual business expenses incurred by him in connection with his service to the
Company, upon submission by him of appropriate vouchers and expense account
reports.
5. Benefits:
(A) Insurance: In addition to the salary and bonus to be paid to Executive
hereunder, the Company shall maintain family medical and dental insurance, life
insurance in the amount of not less than ___________ Dollars ($_________) on the
life of Executive and for which Executive shall designate the beneficiary(ies),
and long term disability insurance providing monthly disability benefits to
Executive of not less than _________ Dollars ($______). Executive and his
dependents shall be entitled to participate in such other benefits as are
extended to active executive employees of the Company and their dependents
including but not limited to pension, retirement, profit-sharing, 401(k), stock
option, bonus and incentive plans, group insurance, hospitalization, medical or
other benefits made available by the Company to its employees generally.
(B) Vacation: Executive shall be entitled to take up to four (4) weeks of
paid vacation annually at a time mutually convenient to the Company and
Executive. Any such vacation time not used by Executive in any one year shall
accumulate to his benefit in the succeeding years.
2
<PAGE>
6. Restrictive Covenants: (A) Executive recognizes and acknowledges that
the Company, through the expenditure of considerable time and money, has
developed and will continue to develop in the future information concerning
customers, clients, marketing, business and operational methods of the Company
and its customers or clients, contracts, financial or other data, technical data
or any other confidential or proprietary information possessed, owned or used by
the Company, and that the same are confidential and proprietary, and are
"confidential information" of the Company. In consideration of his employment by
the Company hereunder, Executive agrees that he will not, without the consent of
the Board, make any disclosure of confidential information now or hereafter
possessed by the Company to any person, partnership, corporation or entity
either during or after the term hereunder, except to employees of the Company or
its subsidiaries or affiliates and to others within or without the Company, as
the Executive may deem necessary in order to conduct the Company's business and
except as may be required pursuant to any court order, judgment or decision from
any court of competent jurisdiction. The foregoing shall not apply to
information which is in the public domain on the date hereof; which, after it is
disclosed to Executive by the Company, is published or becomes part of the
public domain through no fault of Executive; which is known to Executive prior
to disclosure thereof to him by the Company as evidenced by his written records;
or, after Executive is no longer employed by the Company, which is thereafter
disclosed to Executive in good faith by a third party which is not under any
obligation of confidence or secrecy to the Company with respect to such
information at the time of disclosure to him. The provisions of this Section
shall continue in full force and effect notwithstanding any lawful termination
of Executive's employment under this Agreement for a period of one (1) year
following said termination of employment.
(B) Except in the ordinary course of his duties as President, or in the
furtherance of the business of the Company, during the period from the date of
this Agreement until one (1) year following the date on which his employment
with the Company is lawfully and properly terminated, Executive will not,
directly or indirectly:
(i) persuade or attempt to persuade any person or entity which is or
was a customer, client or supplier of the Company on the date on which
Executive's employment with the Company is terminated to cease doing
business with the Company, or to reduce the amount of business it does
with the Company;
(ii) solicit for himself or any other person or entity other than
the Company the business of any person or entity which is a customer or
client of the Company, or was its customer or client within six (6) months
prior to the termination of his employment by the Company, with respect to
distribution of roofing supplies and related products; or
(iii) persuade or attempt to persuade any employee of the Company,
or any individual who was an employee of Company during the six (6) month
period prior to the lawful and proper termination of this Agreement, to
leave Company's employ, or to become employed by any person or entity
other than the Company.
(C) Executive acknowledges that the restrictive covenants (the
"Restrictive Covenants")
3
<PAGE>
contained in this section 6 are a condition of his employment and are reasonable
and valid in geographical and temporal scope and in all other respects. If any
court determines that any of the Restrictive Covenants, or any part of any of
the Restrictive Covenants, is invalid or unenforceable, the remainder of the
Restrictive Covenants and parts thereof shall not thereby be affected and shall
be given full effect, without regard to the invalid portion. If any court
determines that any of the Restrictive Covenants, or any part thereof, is
invalid or enforceable because of the geographic or temporal scope of such
provision, such court shall have the power to reduce the geographic or temporal
scope of such provision, as the case may be, and, in its reduced form, such
provision shall then be enforceable.
(D) If Executive breaches, or threatens to breach, any of the Restrictive
Covenants, the Company, in addition to and not in lieu of any other rights and
remedies it may have at law or in equity, shall have the right to injunctive
relief; it being acknowledged and agreed to by Executive that any such breach or
threatened breach would cause irreparable and continuing injury to the Company
and that money damages would not provide an adequate remedy to the Company.
7. Termination:
(A) Death: In the event of Executive's death ("Death") during the term of
his employment, Executive's designated beneficiary, or in the absence of such
beneficiary designation, his estate shall be entitled to payment of Executive's
salary from date of death to the expiration of one (1) year thereafter. In
addition, Executive's beneficiary and/or dependents shall be entitled, for the
same one year period to continuation, at the Company's expense, of such benefits
as are then being provided to them under Section 5(A) hereof, and any additional
benefits as may be provided to dependents of the Company's executive officers in
accordance with the terms of the Company's policies and practices. In addition,
any options granted to Executive which have not, by the terms of the options,
vested shall be deemed to have vested as of the date of his death and shall
thereafter be exercisable by Executive's beneficiary or estate for the maximum
period of time allowed for exercise thereof under the terms of the option.
(B) Disability:
4
<PAGE>
(a) In the event Executive, by reason of physical or mental incapacity,
shall be disabled ("Disability") for a period of at least six (6) consecutive
months, the Company shall have the option at any time thereafter to terminate
Employee's employment hereunder for disability. Such termination will be
effective thirty (30) days after the Board gives written notice of such
termination to Executive, unless Executive shall have returned to the
performance of his duties prior to the effective date of the notice. All
obligations of the Company hereunder shall cease upon the effectiveness of such
termination, provided that such termination shall not affect or impair any
rights Executive may have under any policy of long term disability insurance or
benefits then maintained on his behalf by the Company. In addition, for a period
of one (1) year following termination of Executive's employment for disability,
Executive and his dependents, as the case may be, shall continue to receive the
benefits set forth under subparagraph 5(A) hereof, as well as such benefits as
are extended to the Company's active executive employees and their dependents
during such period. Any options granted to the Executive which have not, by the
terms of the options, vested shall be deemed to have vested at the termination
and shall thereafter be exercisable by the Employee, his beneficiary,
conservator or estate, as applicable, for the maximum period of time allowed for
exercise thereof under the terms of the option.
(b) "Incapacity" as used herein shall mean the inability of the Executive
due to physical or mental illness, injury or disease substantially to perform
his normal duties as President. Executive's salary as provided for hereunder
shall continue to be paid during any period of incapacity prior to and including
the date on which Executive's employment is terminated for disability.
(C) By The Company For Cause:
(a) The Company shall have the right, before the expiration of the term of
this Agreement, to terminate this Agreement and to discharge Executive for cause
(hereinafter "Cause"), and all compensation to Executive shall cease to accrue
upon discharge of Executive for Cause. For the purposes of this Agreement, the
term "Cause" shall mean (i) Executive's conviction of a felony; (ii) the
alcoholism or drug addiction of Executive; (iii) gross negligence or willful
misconduct of Executive in connection with his duties hereunder; (iv) the
determination by any regulatory or judicial authority (including any securities
self-regulatory organization) that Executive directly violated, before or after
the date hereof, any federal or state securities law, any rule or regulation
adopted thereunder; or (v) the continued and willful failure by Executive to
substantially and materially perform his material duties hereunder.
(b) If the Company elects to terminate Executive employment for Cause
under (C)(a) above, such termination shall be effective fifteen (15) days after
the Company gives written notice of such termination to Executive. In the event
of a termination of Executive's employment for Cause in accordance with the
provisions of 7(C)(a), the Company shall have no further obligation to the
Executive, except for the payment of all compensation and other vested benefits
which have accrued through the date of such termination and not paid and any
other benefits to which he or his dependents may be entitled by law.
5
<PAGE>
(D) By Executive for Reason:
Executive shall have the right to terminate his employment at any time for
"good reason" (herein designated and referred to as "Reason"). The term Reason
shall mean (i) the failure to elect or appoint, or re-elect or re-appoint,
Executive to, or removal or improperly attempted removal of Executive from, his
positions as Chairman of the Board of Directors or Chief Executive Officer or
superior positions with the Company, except in connection with the proper
termination of Executive's employment by reason of Cause, Death or Disability;
(ii) a reduction in Executive's overall compensation other than his
discretionary bonus under Section 3(B) above or an adverse change in the nature
or scope of the authorities, powers, functions or duties normally attached to
the Executive's position with the Company; (iii) the Company's failure or
refusal to perform any obligations required to be performed in accordance with
this Agreement after a reasonable notice and an opportunity to cure same; and
(iv) a Change in Control of the Company, as defined herein, occurs.
(E) Severance: (a) In the event Executive's employment hereunder shall be
terminated by the Executive for Reason or by the Company for other than Cause,
Death or Disability: (1) the Executive shall thereupon receive as severance pay
in a lump sum the amount of salary and bonuses which the Executive would have
received for the remaining term of this Agreement had there been no termination,
provided however, that in no event shall such lump sum payment be less than one
year's salary and bonus; and (2) the Executive's (and his dependents')
participation in any and all life, disability, medical and dental insurance
plans shall be continued, or equivalent benefits provided to him or them by the
Company, at no cost to him or them, for a period of two years from the
termination; and (3) any options granted to Executive which have not, by the
terms of the options, vested shall be deemed to have vested at the termination,
and shall thereafter be exercisable for the maximum period of time allowed for
exercise thereof under the terms of the option; and new paragraph (b) an
election by Executive to terminate his employment under the provisions of this
paragraph shall not be deemed a voluntary termination of employment of Executive
for the purpose of interrupting the provisions of any of the Company's employee
benefit plans, programs or policies.
(F) Resignation: In the event Executive resigns without Reason prior to
the expiration hereof, he shall receive any unpaid fixed salary through such
resignation date and such benefits to which he is entitled by law.
(G) Extension of Benefits: Any extension of benefits following the
termination of employment provided for herein shall be deemed to be in addition
to, and not in lieu of, any period for the continuation of benefits provided for
by law, either at the Company's, Executive or his dependents' expense.
(H) Change in Control: For purposes hereof, a Change in Control shall be
deemed to have occurred (i) if there has occurred a "change in control" as such
term is used in Item 1 (a) of Form 8-K promulgated under the Securities Exchange
Act of 1934, as amended, at the date hereof
6
<PAGE>
("Exchange Act") or (ii) if there has occurred a change in control as the term
"control" is defined in Rule 12b-2 promulgated under the Exchange Act.
8. Indemnification: Company hereby indemnifies and holds Executive
harmless to the extent of any and all claims, suits, proceedings, damages,
losses or liabilities incurred by Executive and arising out of any acts or
decisions done or made in the authorized scope of his employment hereunder.
Company hereby agrees to pay all expenses, including reasonable attorney's fees,
actually incurred by Executive in connection with the investigation of any such
matter, the defense of any such action, suit or proceeding and in connection
with any appeal thereon including the cost of settlements. Nothing contained
herein shall entitle Executive to indemnification by Company in excess of that
permitted under applicable law.
9. Waiver: No delay or omission to exercise any right, power or remedy
accruing to either party hereto shall impair any such right, power or remedy or
shall be construed to be a waiver of or an acquiescence to any breach hereof. No
waiver of any breach hereof shall be deemed to be a waiver of any other breach
hereof theretofore or thereafter occurring. Any waiver of any provision hereof
shall be effective only to the extent specifically set forth in the applicable
writing. All remedies afforded to either party under this Agreement, by law or
otherwise, shall be cumulative and not alternative and shall not preclude
assertion by either party of any other rights or the seeking of any other rights
or remedies against the other party.
10. Governing Law: The validity of this Agreement or of any of the
provisions hereof shall be determined under and according to the laws of the
State of New York, and this Agreement and its provisions shall be construed
according to the laws of the State of New York, without regard to the principles
of conflicts of law and the actual domiciles of the parties hereto.
11. Notices: All notices, demands or other communications required or
permitted to be given in connection with this Agreement shall be given in
writing, shall be transmitted to the appropriate party by hand delivery, by
certified mail, return receipt requested, postage prepaid or by overnight
carrier and shall be addressed to a party at such party's address shown on the
first page hereof. A party may designate by written notice given to the other
parties a new address to which any notice, demand or other communication
hereunder shall thereafter be given. Each notice, demand or other communication
transmitted in the manner described in this Section 11 shall be deemed to have
been given and received for all purposes at the time it shall have been (i)
delivered to the addressee as indicated by the return receipt (if transmitted by
mail), the affidavit of the messenger (if transmitted by hand delivery or
overnight carrier) or (ii) presented for delivery during normal business hours,
if such delivery shall not have been accepted for any reason.
12. Assignments: This Agreement shall be binding upon and inure to the
benefit of the parties and each of their respective successors, assigns, heirs
and legal representatives; provided, however, that Executive may not assign or
delegate his obligations, responsibilities and duties hereunder except as
permitted by the Company's by-laws, custom, practice, policies or the Board of
Directors. Company may not assign this Agreement without the prior written
consent of Executive.
7
<PAGE>
13. Miscellaneous: This Agreement contains the entire understanding
between the parties hereto and supersedes all other oral and written agreements
or understandings between them with respect to the subject matter hereof. No
modification or addition hereto or waiver or cancellation of any provision shall
be valid except by a writing signed by the party to be charged therewith.
14. Obligations of a Continuing Nature: It is expressly understood and
agreed that the covenants, agreements and restrictions undertaken by or imposed
on Executive and, the Company hereunder, which are stated to exist or continue
after termination of Executive's employment with the Company, shall exist and
continue irrespective of the method or circumstances of such termination for the
respective periods of time set forth herein.
15. Severability: The parties agree that if any of the covenants,
agreements or restrictions contained herein are held to be invalid by any court
of competent jurisdiction, the remainder of the other covenants, agreements
restrictions and parts thereof herein contained shall be severable so not to
invalidate any others and such other covenants, agreements, restrictions and
parts thereof shall be given full effect without regard to the invalid portion.
16. Venue: Jurisdiction: The Company and the Executive hereby agree that
any action, proceeding or claim against either of them arising out of, or
relating in any way to this Agreement shall be brought and enforced in any of
the courts of the State of New York in New York County, New York, or the United
States District Court for the Southern District of New York, and irrevocably
submit to such jurisdiction. The Company and the Executive hereby waive any
objection to such jurisdiction and that such courts represent an inconvenient
forum. Any process or summons to be served upon the Company or the Executive may
be served by transmitting a copy thereof by registered or certified mail, return
receipt requested, postage prepaid, addressed to their respective addresses set
forth in the initial paragraph of this agreement or such other address as a
party may so notify the other parties hereto in the manner provided by Section
II hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the Company and the Executive in any action, proceeding or claim.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
ABLE ENERGY, INC.
By: ___________________________________
8
<PAGE>
________________________________________
Christopher P. Wested, Executive
9
<PAGE>
Exhibit 10.8
Exhibit A
Natural Gas Choices - It's Your Call ... making smart choices in new markets
- --------------------------------------------------------------------------------
Step 1: Shopping Around for Natural Gas - What You Need to Know
You can now choose who you buy natural gas from and you could save some
money by shopping around. All four of New Jersey's natural gas utilities are or
will be offering a limited number of customers a chance to take part in a pilot
program that will let you buy gas from the supplier of your choice.
Each program works differently. On April 1,1997, New Jersey Natural Gas
opened its pilot program to 5,000 customers. Because of customer interest, the
program will be offered to an additional 25,000 customers starting January 2,
1998. On April 1,1997, South Jersey Gas made 10,000 customers eligible in its
one-year program. On May 1, 1997 Public Service Electric & Gas offered up to
65,000 customers living in Bloomfield, Pennsauken, Piscataway and Westhampton
the chance to choose other suppliers. The Elizabethtown Gas Company's program is
under consideration by the BPU.
If you would like to know more about the local pilot program in your area,
call your local utility or the Board of Public Utilities at (800) 624-0241. If
you decide not to participate, no action is required on your part. The
information below will help you make the smart choices in the new natural gas
market.
- --------------------------------------------------------------------------------
What do you stand to gain if you participate in a pilot program? You will have a
choice of suppliers, the possibility of lower prices and a wider selection of
pricing options.
Can you save money by participating in these programs? You could. Be sure to ask
suppliers about all of the rates they offer before making your decision. Also
ask the supplier whether you will save money by buying your gas from them.
Will you need additional equipment or special meters? No. Gas suppliers will
continue to use existing equipment, pipes and meters.
How will you be billed? You may be billed separately by the supplier and your
utility or, if the supplier and your local utility have a mutual billing
arrangement, you may receive just one bill. The charge for the gas supply will
be listed separately from the charge for delivering the gas to you and from the
service charge.
How do you receive natural gas now? Today, when you turn on the burner of your
stove to cook or turn on your gas fired furnace to heat your home, you receive
the gas from your local utility. You pay for what is called "bundled" service,
that is, you pay for the gas and for having it delivered to your home. Your
utility insures that it has enough gas delivered to meet your needs. It delivers
the gas through a system of pipelines that it operates and maintains. In
addition, your utility provides you with services such as meter reading and
billing, leak repairs, safety checks and emergency services.
How will the pilot programs change the way you receive natural gas? You will be
able to buy your natural gas supply from a company other than your local gas
utility, and you will be able to negotiate prices or shop around for the best
rates rather than having the rates regulated by the Board of Public Utilities as
they are now. You will continue to receive the gas over your local utility's
pipelines. Your bundled service will be unbundled, or separated, so that you may
purchase gas separately from the supplier of your choice. Your local utility
will continue to provide safety and emergency services and other routine
services such as reading your meter. The Board will continue to set rates for
the utility's distribution costs and ensure safe, adequate and proper service by
your utility.
Are there any risks to participating in the programs? It depends. Your supplier
may give you a choice of pricing options. One option may be to purchase your gas
at a fixed percentage discount from what you pay now. Another option may be to
pay at a fixed rate year-round. A third option may be to pay at a rate that
changes in relation to market prices. The best pricing option will depend on the
market price of gas over the year. Your choice will depend on how much financial
risk you want to take and on which option best suits your needs.
What consumer protection do you have as a participant in pilot programs? All
suppliers must pass a credit worthiness test in order to do business with your
local gas utility. They must also abide by consumer protection standards
approved by the Board of Public Utilities. These standards require, for example,
that suppliers provide you with clearly written information. Should the supplier
you choose ever have a problem with supplying your gas, your local utility will
guarantee a supply.
Whom would you call if you have service problems? If you need service, have
problems with a meter, smell gas or have any safety concerns, you would call
your local utility. If you are having a problem with the bill for your supply of
gas, you would call the supplier from whom you purchase gas. If you are not
satisfied with the way that either the utility or the supplier handles your
problems, you can call customer relations at the Board of Public Utilities at
(800) 624-0241 to help you resolve the problem.
How do you go about making a decision on which gas supplier to choose? You will
need to comparison shop. Neither the utility or the Board of Public Utilities
will be able to recommend one supplier over another, but the Board's Customer
Relations Division will be able to help you ask the right questions.
Do you have to switch to a new supplier? No. You can continue to purchase gas
from your utility. You do not have to do anything at all to remain with your
current service. If you do so, the rates you pay will continue to be set by the
Board of Public Utilities.
If you enroll in a pilot program and are dissatisfied, can you return to your
local utility? Yes. There will be a minimum amount of advance notice required to
return to your local utility. You should ask supplier and your local utility
what their policy is on this before you sign up with a supplier.
<PAGE>
Natural Gas Choices - It's Your Call ... making smart choices in new markets
- --------------------------------------------------------------------------------
Step 2: Shopping Around for Natural Gas - Choosing a Supplier
If you choose to buy natural gas from a supplier other than your local utility,
your supplier will be responsible for providing your fuel. The supplier will
purchase the gas, which will be transported over existing pipelines and
delivered to your home by your natural gas utility: Elizabethtown Gas, New
Jersey Natural Gas, Public Service Electric & Gas or South Jersey Gas. The
checklist below will help you comparison shop for the supplier that has the
rates and terms that are right for you.
Choosing a Reputable Supplier
o Call your local utility or the Board of Public Utilities at (800) 624-0241
to obtain a certified list of eligible supplies.
o Ask the supplier about its history and about the customer representative's
experience.
o Ask the supplier for the name of a contact person to call if you have a
question or problem. Is there a 1-800 number?
o Be familiar with the standards the supplier must meet.
Reading the contract
o Do you understand the terms of the contract?
o What are the price and payment options?
o Can you join other customers and buy gas as a group to get a cheaper rate?
o How much money will you save? Is that guaranteed?
o How long is the contract for?
o Are there penalties for switching to another supplier or back to your
local utility?
o Are there any service guarantees?
o Are there any conditions under which the supplier would not supply gas? If
so, what are they?
o Are you or your supplier required to notify your local utility if you
decide to switch suppliers?
Paying the Bill
o Will you receive separate bills from the supplier and the utility?
o When and how often at bills issued?
o When is the payment due date? Is there a penalty for late payment?
o Whom and where do you call with billing questions?
Step 3: Shopping Around for Natural Gas - What Suppliers Must Do
If you choose to buy your natural gas from a supplier other than your local
utility, your rights as a consumer are protected. Your supplier will have to
abide by the standards below in order to do business in New Jersey.
Natural Gas Suppliers Must:
o Write their bills and contracts in clear and plain language.
o Make the terms of their contract clear and inform customers that the pilot
program may be modified at any time by the Board of Public Utilities.
o Ensure that bills contain sufficient information to allow customers to
calculate their bills.
o Estimate how much customers can save, in percentage or dollars, compared
to the local utility's price of gas.
o If they issue the bill, include the local utility's emergency telephone
number and the Board's Division of Customer Relations' toll-free telephone
number: (800) 624-0241.
o Not charge interest on the delivery portion of an overdue bill.
o Allow customers to cancel their contract without penalty within 72 hours
of signing it.
o Allow residential customers to cancel their contracts without penalty if
customers relocate outside of their local utility's service area.
o File a sample copy of their contracts, including information on how to
resolve complaints with the Board of Public Utilities.
o Give a minimum 15 day notice to residential customers and to their
customers' local utilities before stopping to supply gas. The local
utility is required to supply gas even if the supplier stops supplying
gas.
o Respond to and resolve complaints promptly.
o Comply with federal telemarketing rules which ban calling between 9pm and
8am.
- --------------------------------------------------------------------------------
It's Your Call ... Making Smart Choices in New Markets is an educational
campaign developed by the New Jersey Board of Public Utilities. As competition
enters the telephone, cable television, electric and natural gas markets in New
Jersey, the Board's will guide consumers to choose the services and rates that
are best for them. For more information, call the Board's Division of Customer
Relations at (800) 624-0241 or reach us at our web site at
http//www.njn.net/njbpu.
Board of Public Utilities, State of New Jersey
Herb Tate, President Christie Whitman
Carmen J. Armenti, Commissioner Governor
2 Gateway Center
Newark, NJ 07102
<PAGE>
ALLENERGY MARKETING COMPANY
NATURAL GAS SERVICE TERMS
1. General - These Natural Gas Service Terms and the attached Customer
Enrollment Form collectively will be referred to as the "Agreement". The
words "we", "our" and "us" shall mean AllEnergy Marketing Company, L.L.C.,
and the words "you" and "your" shall mean the customer indicated on the
Customer Enrollment Form.
2. Term - The Agreement will be in effect for an initial term of thirty-six
(36) months beginning in the next monthly NJ Natural enrollment period
following the receipt of a signed Customer Enrollment Form and concluding
thirty-six months thereafter. Following this initial term, it will
continue in effect from year to year thereafter until canceled by you or
us with sixty (60) days written notice. Any remaining balance must be paid
immediately. There will be a $150.00 fee for early cancellation.
3. Service - As soon as practicable following receipt of your Customer
Enrollment Form we will establish a natural gas transportation program for
you with NJ Natural Gas Company in accordance with their procedures. This
may require you to enter into a transportation service agreement directly
with NJ Natural Gas Company, which we will assist you in preparing.
AllEnergy will be your designated agent under the transportation service
agreement and will act on your behalf to provide coordination functions
thereunder, including but not limited to nominating, scheduling and
balancing. We will supply your full requirements for natural gas at the
facility listed on the Customer Enrollment Form on a firm basis, and we
will be responsible for any penalties imposed by the LDC for our failure
to deliver. You agree to purchase all your natural gas requirements from
us on a firm basis.
4. Price - During the term of the Agreement you will pay a fixed price per
dekatherm (sales price) for all the gas that we deliver for your account.
The sales price will be 38.5 cents per therm plus applicable NJ Natural
Gas Company transportation charge. Following the initial term the initial
sales price will remain in effect unless we send you, in writing, a new
sales price. Upon receipt of our proposed new sales price, you will have
fifteen (15) days to respond to us, in writing of your decision to accept
the new sales price or to terminate the Agreement at the expiration of its
then current term. You agree that if you do not provide us written notice
of your intent to terminate the Agreement within the allotted time period,
that our proposed price will be the sales price for the new term.
5. Payment - We will bill you each month for the actual volume of natural gas
consumed by your account. Bills are due and payable upon receipt. If you
fail to pay your bill within thirty (30) days of issuance, you will pay
accrued interest of 1.5% per month on the unpaid balance. You agree to pay
$10.00 per occurrence for all returned checks, and to reimburse us for all
costs we reasonably incur to collect past due amounts from you. Subject to
applicable regulatory requirements, we may terminate your service without
further notice if you fail to pay amounts due in a timely manner, fail to
meet our credit requirements and/or seek protection under any bankruptcy
or insolvency laws.
6. Delivery Point, Title and Taxes - We will deliver your gas supply to the
delivery point(s) designated by NJ Natural Gas Company who will then
deliver the gas to your location. Title will pass from us to you at the
delivery point. We warrant good title to the gas sold and delivered to
you. You will be responsible for all transportation and service charges
imposed by NJ Natural Gas Company relative to their delivery of your gas
to your facility. Our sales price includes all taxes that are imposed on
the gas prior to its delivery to NJ Natural Gas Company. All sales, excise
or other taxes which are imposed with respect to the sale of natural gas
to you or which are incurred after the delivery point will be billed
separately to you. If you are exempt from such taxes, you are responsible
for identifying and requesting any exemption from the collection of the
tax(s) by filing appropriate documentation with us.
7. Sale of Electric Power - In the event you receive a bona fide offer to
purchase electric power from a provider other than your electric utility
during the initial term and any subsequent terms of this Agreement, you
agree to provide us with the right, at our discretion, to provide electric
power to you under the same price and terms as such offer.
8. Assignment - You may assign this Agreement to a third party with our prior
written consent. We may assign this Agreement to a third party with your
prior written consent or to an affiliate without your consent. Any
required consents shall not be withheld unreasonably by either you or us.
9. Force Majeure - In the event that either you or us is rendered unable,
wholly or in part, to perform our obligations under this Agreement due to
events not reasonably anticipated or within either of our control, such
as, but not limited to, acts of God, government regulations, changes in
law or utility practices, etc., we agree that such non-performance shall
be excused for the duration of the event which caused it.
10. Liability - You and we agree that any liability to each other will be
limited to direct actual damages. Neither you nor we will be liable for
incidental, consequential, punitive, or indirect damages, lost profits or
lost business in tort, contract or otherwise. This limitation excludes
claims of gross negligence and/or willful misconduct.
11. Miscellaneous - This Agreement is the entire agreement and understanding
between you and us, and it supersedes any and all prior agreements or
understanding. The Agreement shall be governed under the laws of the
Commonwealth of Massachusetts. These Natural Gas Service Terms may not be
amended except by written agreement between you and us. In the event that
any portion of this Agreement is deemed invalid, void or otherwise
unenforceable by a court of law, the remaining portions of the Agreement
shall otherwise be fully enforceable.
Rev. February 6, 1998
Res
<PAGE>
- --------------------------------------------------------------------------------
Able Energy and AllEnergy Marketing
- --------------------------------------------------------------------------------
Giving you the power to control your energy costs!
Able Energy
344 Route 46
Rockaway, NJ 07866
phone (973) 983-7076
fax (973) 625-8097
Thank you for considering Able Energy and AllEnergy Marketing as your natural
gas supplier. To sign up, simply complete the Customer Enrollment Form below and
return it in the enclosed postage paid envelope, or simply fax the form to (973)
625-8097. We will take care of the rest, it's that simple.
If you have any questions or need more information, please call.
The agreement will be in effect for 36 months at a fixed price of $.385 per
therm, a saving of approximately 11.6%. The NJ Natural Gas fee to switch to
transportation gas service will be reimbursed by AllEnergy.
- --------------------------------------------------------------------------------
Please detach and return to Able Energy Company
- --------------------------------------------------------------------------------
[LOGO OF ABLE ENERGY] [LOGO OF ALLENERGY]
CUSTOMER ENROLLMENT FORM
Please enroll me in the NJ Natural Gas Company Residential Pilot Program. I
designate AllEnergy Marketing Company "AllEnergy" as my agent for the purpose of
arranging and coordinating a natural gas transportation program on my behalf
with NJ Natural Gas Company. I have read the "It's Your Call" Educational
Material developed by the Board of Public Utilities and AllEnergy Marketing
Company's "Natural Gas Service Terms." I understand and agree to those terms and
agree to participate in the New Jersey Natural Gas Pilot Program as a delivery
service customer. I also realize that this pilot program may at any time be
modified by the Board of Public Utilities.
Name ____________________________
Address _________________________ City _____________ State NJ Zip __________
NJ Natural Gas Acct.# _________________ NJ Natural Gas Metere # __________
Telephone (___) ___-_____
Print Name _________________________________ Signature ____________________
Date __________ Sales Rep Initials _____________
- --------------------------------------------------------------------------------
<PAGE>
Exhibit 10.10
ABLE OIL CO. Fax (973) 579-9315
38 Diller Avenue Newton (973) 383-7220
Newton, NJ 078 60 Blairstown (908) 362-7279
CONFIRMATION ORDER FORM
1999-2000 PLANNED GALLONS
LOCKED IN PRICE
( ) ORIGINAL CONFIRMATION ( ) REVISED CONFIRMATION
ACCT#_______________________ TYPE_______________________
NAME__________________________________________________________
ADDRESS_______________________________________________________
TOWN_____________________________ STATE_________ ZIP_______
<TABLE>
<CAPTION>
ORDER ORIGINAL ORDER REVISED
<S> <C> <C>
#GALLONS PURCHASED _______________ ___________
PRICE PER GALLON $______________ ___________
AMOUNT DUE FOR
PLANNED GALLONS $______________ $__________
PRESENT BALANCE
ON ACCOUNT $______________ $__________
TOTAL DOLLARS DUE $______________ $__________
</TABLE>
PLEASE SEND ME APPLICATION TO GO ON AUTOMATIC OIL DELIVERY YES____ NO____
Please verify the above information for accuracy, then sign and return one copy
of this form along with your payment to our office in the enclosed envelope. If
you would like to change the above gallon amount you want to order, please
indicate by filling out the second column, totaling it, and initial the new
order.
The planned price per gallon will take effect only upon our receipt of your
agreed-upon payment. Any previous balance must be paid in full prior to the
start of this plan. Any service balance due must be paid separately. This offer
can not be combined with any other offer. Thank you for your continued
patronage.
- ------------------------------ -------------------------------
CUSTOMER SIGNATURE ABLE OIL COMPANY SIGNATURE
- ------------------------------ -------------------------------
DATE DATE
<PAGE>
Exhibit 10.19
ABLE OIL COMPANY
FRANCHISE AGREEMENT
<PAGE>
TABLE OF CONTENTS
I. GRANT OF FRANCHISE................................................... 1
A. Grant.......................................................... 1
B. Site and Relocation............................................ 1
C. Territory...................................................... 1
D. Reservation of Certain Rights.................................. 2
II. TERM AND RENEWAL..................................................... 2
A. Initial Term................................................... 2
B. Renewal Term................................................... 2
C. Conditions of Renewal.......................................... 2
III. DUTIES OF ABLE OIL .................................................. 3
A. Pre-Opening Obligations........................................ 3
B. Post-Opening Obligations....................................... 3
IV. FEES................................................................. 4
A. Payments to Able Oil........................................... 4
B. Late Fees and Interest on Late Payments........................ 5
C. Definition of Gross Sales...................................... 5
D. Audits......................................................... 5
E. Reporting Procedures........................................... 5
F. Local Marketing Expenditure.................................... 5
V. DUTIES OF FRANCHISEE................................................. 5
A. Compliance with System......................................... 5
B. Procurement of Business Licenses............................... 6
C. Initial Training............................................... 6
D. Ongoing Training............................................... 6
E. Initial Inventory and Equipment................................ 6
F. Best Efforts................................................... 6
G. Compliance with Uniform Standards.............................. 6
H. Sales Targets.................................................. 7
J. Proprietary Methods............................................ 7
K. Development of the Market...................................... 7
L. Display of Proprietary Marks and Logos......................... 7
M. Noncompetition And Nondisclosure Agreements.................... 7
N. Other Requirements............................................. 7
O. Safety Standards............................................... 7
P. Working Capital................................................ 7
Q. Computer System................................................ 7
R. Answering System and Pager Service............................. 8
S. Site Approval.................................................. 8
T. Commencing and Continuing Operations........................... 8
U. Miscellaneous.................................................. 8
VI. PROPRIETARY MARKS.................................................... 8
A. Grant of License............................................... 8
B. Conditions for Use............................................. 8
C. Acknowledgment................................................. 9
<PAGE>
VII. CONFIDENTIAL MANUAL.................................................. 10
A. Compliance..................................................... 10
B. Use............................................................ 10
C. Confidentiality................................................ 10
D. Trade Secrets.................................................. 10
E. Access......................................................... 10
F. Duplication.................................................... 10
G. Able Oil's Property............................................ 10
H. Updates or Revisions........................................... 10
I. Master Set..................................................... 11
J. Replacement Fee................................................ 11
VIII. CONFIDENTIAL INFORMATION............................................. 11
A. Confidential Relationship...................................... 11
B. Obligations of Franchisee...................................... 11
C. Confidential Information Defined............................... 11
D. Protection of Information...................................... 12
E. Remedies....................................................... 12
F. Communication with Customers................................... 12
IX. ACCOUNTING, INSPECTIONS AND RECORDS.................................. 12
A. Maintenance of Books and Records............................... 12
B. Monthly Reports................................................ 12
C. Financial and Related Reporting................................ 12
D. Other Submissions.............................................. 13
E. Inspection..................................................... 13
X. ADVERTISING.......................................................... 13
A. Submission and Approval of Promotional and Marketing
Materials...................................................... 13
B. Local Marketing and Promotion Expenditure...................... 13
C. Advertising Fund............................................... 13
XI. INSURANCE............................................................ 14
A. Procurement.................................................... 14
B. Minimum Coverage............................................... 14
C. Certificates................................................... 14
D. No Relief Of Liability To Able Oil............................. 14
E. Independence of Coverage Requirements.......................... 14
F. Failure to Procure............................................. 15
G. Third Parties.................................................. 15
XII. TRANSFER OF INTEREST; OPERATION BY ABLE OIL ......................... 15
A. Transfer by Able Oil........................................... 15
B. Transfer by You................................................ 15
C. Additional Requirements - Corporate Franchisees................ 17
D. Offerings by You............................................... 17
E. Able Oil's Right of First Refusal.............................. 18
F. Transfer Upon Death, Mental Incapacity or Disability........... 18
G. Non-Waiver of Claims........................................... 18
H. Operation of the Franchised Business by Able Oil............... 18
I. Able Oil Buy Back of the Franchised Business................... 19
ii
<PAGE>
XIII. DEFAULT AND TERMINATION.............................................. 19
A. Default With No Opportunity To Cure............................ 19
B. Default With Thirty (30) Day Opportunity To Cure............... 20
C. No Right or Remedy............................................. 21
D. Default and Termination........................................ 21
E. Right to Purchase.............................................. 21
XIV. OBLIGATIONS UPON TERMINATION......................................... 21
A. Cessation of Operation......................................... 22
B. Cessation of Use of Proprietary Marks.......................... 22
C. Cancellation of Name........................................... 22
D. Able Oil's Right to Continue Operations........................ 22
E. Non-Usage of Marks............................................. 22
F. Prompt Payment Upon Default.................................... 22
G. Payment of Costs............................................... 22
H. Return of Materials............................................ 22
I. Assignment of Telephone Listings............................... 23
J. Option to Purchase............................................. 23
K. Covenant of Further Assurances................................. 23
L. Compliance with Covenants...................................... 23
M. No Further Interest............................................ 23
XV. COVENANTS............................................................ 23
A. Best Efforts................................................... 23
B. Non-Solicitation and Non-Competition........................... 23
C. Restrictive Covenants.......................................... 24
D. No Undue Hardship.............................................. 24
E. Inapplicability of Restrictions................................ 24
F. Independence of Covenants...................................... 24
G. Mission........................................................ 24
H. Modification of Covenants...................................... 24
I. Enforcement of Covenants....................................... 25
J. Injunctive Relief.............................................. 25
K. Written Agreements............................................. 25
XVI. CHANGES AND MODIFICATIONS............................................ 25
XVII. TAXES AND INDEBTEDNESS............................................... 25
A. Payment........................................................ 25
B. Dispute........................................................ 25
C. Compliance with Federal, State and Local Laws.................. 26
D. Duty to Notify................................................. 26
XVIII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION.......................... 26
A. Independent Contractor......................................... 26
B. No Liability................................................... 26
C. Identification................................................. 27
D. No False Representations....................................... 27
XIX. APPROVALS AND WAIVERS................................................ 27
iii
<PAGE>
A. Written Consent................................................ 27
B. No Waiver...................................................... 27
C. Waiver to Jury Trial........................................... 27
XX. NOTICES.............................................................. 27
XXI. RELEASE OF PRIOR CLAIMS.............................................. 28
XXII. DISCLOSURE STATEMENT AND DISCLAIMER.................................. 28
A. Compliance with Applicable Laws................................ 28
B. Receipt of Agreement........................................... 28
C. Acknowledgment................................................. 28
XXIII.ENTIRE AGREEMENT..................................................... 29
XXIV. SEVERABILITY AND CONSTRUCTION........................................ 29
A. Severability................................................... 29
B. Covenants...................................................... 29
C. Captions....................................................... 29
D. References..................................................... 30
E. Definition of "You"............................................ 30
F. Force Majeure.................................................. 30
XXV. APPLICABLE LAW....................................................... 30
A. Governing Law.................................................. 30
B. Jurisdiction and Venue......................................... 30
C. Remedy......................................................... 30
D. Injunctive Relief.............................................. 30
XXVI. ARBITRATION.......................................................... 30
XXVII. ESTOPPEL STATEMENT.................................................. 31
XXVIII. ACKNOWLEDGMENTS.................................................... 31
SCHEDULE 1 Description of the Territory
ATTACHMENT A Guaranty
ATTACHMENT B Telephone Assignment Agreement
iv
<PAGE>
EXHIBIT A
ABLE OIL COMPANY
FRANCHISE AGREEMENT
<PAGE>
ABLE OIL COMPANY
FRANCHISE AGREEMENT
THIS AGREEMENT is made and entered into this 31 day of December, 1998, by
and between Able Oil Company or its assignees, a corporation organized under the
laws of the State of New Jersey, whose principal place of business is 344 Route
46, Rockaway, New Jersey 07866 (hereinafter referred to as "Able Oil ") and
Andrew Schmidt, a ________________________, whose principal place of business is
1250 Easton Road Horsham PA (hereinafter referred to as the "you").
WITNESSETH:
WHEREAS, Able Oil has developed and owns a proprietary system (the
"System") for the operation of an Able Oil(R) business specializing in fuel oil
sales and delivery and related services, under the service mark Able Oil(R) (the
"Franchised Business");
WHEREAS, the System is identified by trade names, service marks,
trademarks, logos, emblems and indicia of origin, including the service mark
Able Oil(R) and the Able Oil logo, and any other trade names, service marks,
logos and trademarks that are now, or may hereafter be designated by Able Oil
for use in connection with the System (the "Proprietary Marks");
WHEREAS, you desire to operate a Franchised Business under the System,
using the Proprietary Marks and to obtain a license from Able Oil for that
purpose, as well as to receive the assistance provided by Able Oil in connection
therewith;
NOW, THEREFORE, the parties, in consideration of the promises,
undertakings and commitments of each party to the other set forth herein, hereby
mutually agree as follows:
I. GRANT OF FRANCHISE
A. Grant. Able Oil grants you, and you accept, upon the terms and
conditions herein contained, the nonexclusive right and personal license to
operate a Franchised Business in strict conformity with Able Oil's quality
control standards and specifications which are a material part of the System.
You accept this license and agree to perform all of obligations in connection
therewith as set forth herein.
B. Site and Relocation. You must operate the Franchised Business from a
site approved by Able Oil within the boundaries of the Territory assigned below.
You may not change the location of the Franchised Business without Able Oil's
prior written consent.
C. Territory. Subject to the terms of this Agreement, Able Oil grants you
the exclusive right and license to operate one (1) Franchised Business within
the boundaries described in Schedule 1 attached hereto (hereinafter referred to
as the "Territory"). Able Oil agrees that, provided you remain in good standing
under the terms of this Agreement, Able Oil will not itself operate, or grant to
another franchisee the right to operate, within the Territory. If, in Able Oil's
sole opinion, you are unwilling, unable or fail to meet the requisite sales
performance targets within the Territory grounds for default under Section
XIII.B. of this Agreement will exist and Able Oil may reduce the size of the
Territory or revoke the terms of exclusivity herein.
D. Reservation of Certain Rights. Able Oil reserves the right to offer,
grant and support franchises in similar and other lines of business. Able Oil
makes no representation or warranty to you that there will be any right to
participate in such franchises.
<PAGE>
II. TERM AND RENEWAL
A. Initial Term. Except as otherwise provided herein, the term of this
Agreement shall be for ten (10) years commencing on the date of execution of
this Agreement.
B. Renewal Term. You may, at your option, continue the operation and
management of the Franchised Business for an additional ten (10) year term,
subject to the conditions set forth in Section II.C.
C. Conditions of Renewal. The following conditions must be met (prior to
each renewal period, unless and to the extent expressly waived in writing by
Able Oil):
1. You must give Able Oil written notice of its election to renew
this Agreement not less than nine (9) months prior to the end of the current
term of this Agreement;
2. At least six (6) months prior to the expiration of the current
term of this Agreement, Able Oil shall have the right to give notice of all
required modifications to the nature and quality of the products and services
offered in connection with the Franchised Business, as well as your advertising,
marketing and promotional programs.
3. You must not be in default of any provision of this Agreement,
any amendment hereof or successor hereto, or any other agreement between you and
Able Oil or its subsidiaries, affiliates and suppliers. You must have
substantially complied with all of the terms and conditions of such agreements
during the terms thereof;
4. You must have satisfied all of your monetary obligations to Able
Oil and its subsidiaries, affiliates and suppliers, and must have timely met
those obligations throughout the term of this Agreement;
5. Unless waived by Able Oil, you must attend Able Oil's then
current qualification and training programs at your sole expense;
6. You and, where applicable, your shareholders, members, directors
and officers shall execute a general release, in a form prescribed by Able Oil,
of any and all claims against Able Oil and its subsidiaries and affiliates, and
their respective officers, directors, agents and employees. You will not be
required, however, to release Able Oil from violations of, or failure to comply
with, federal or state franchise registration and disclosure laws;
7. Your operation and management of the Franchised Business shall be
in full compliance with the System;
8. You must maintain, and be in good standing with, all necessary
and appropriate licenses and permits; and
9. You must pay to Able Oil a renewal fee equal to twenty-five
percent (25%) of the then current initial franchise fee charged by Able Oil.
In the event that any of the foregoing conditions to renewal have not been
met at least two (2) months prior to the expiration of the current term of this
Agreement, then Able Oil shall have no obligation to renew this Agreement and
shall give you at least thirty (30) days prior written notice of its intent not
to renew this Agreement, which notice shall set forth the reasons for such
refusal to renew.
2
<PAGE>
III. DUTIES OF ABLE OIL
A. Pre-Opening Obligations. Prior to the opening of the Franchised
Business, Able Oil will:
1. provide you with guidelines and specifications for the operation
and management of the Franchised Business which guidelines and specifications
must be adopted by you, including fuel purchasing and distribution, heating
system installation, repair and maintenance service procedures, advertising and
promotional techniques, and staffing;
2. review and approve the site you select for the Franchised
Business offices. Able Oil's review and approval of your site is not a guaranty
or warranty as to the success of the Franchised Business;
3. provide an initial training program in the establishment and
operation of the Franchised Business which must be successfully completed to
Able Oil's satisfaction;
4. loan you a single copy of the Able Oil Operations Manual (the
"Manual") as amended from time to time, which will include standards and
specifications for procedures, management, and operation of the Franchised
Business;
5. provide you a final evaluation of business systems, plans, etc.
to ensure your Franchised Business is properly set up in accordance with Able
Oil's specifications;
6. license to you the right to use the Proprietary Marks in
connection with the Franchised Business and to identify the Franchise Business
as an Able Oil distributor;
7. use its best efforts to obtain on your behalf favorable rates
obtained for insurance coverage, vehicle financing, computers or other equipment
items for the Franchised Business (subject to any eligibility requirements
established by the vendors of such products and services) and assist you with
purchasing your delivery vehicle(s);
8. establish a direct debit program with your bank (subject to
applicable banking regulations) in order to facilitate the electronic transfer
of funds from your account to Able Oil for monthly royalty and administrative
processing fees;
9. set up accounts with fuel oil depots in your Territory to enable
you to purchase fuel on Able Oil's account, for which your account will be
debited later by Able Oil;
10. arrange for licensed subcontractors to provide heating systems
maintenance, installation and repair services for your fuel delivery customers
who purchase such services through the Franchised Business; and
11. conduct advertising, marketing, promotional and grand opening
programs with the portion of the initial franchise fee allocated to the grand
opening through the first sixty days of your operations.
B. Post-Opening Obligations. Following the opening of the Franchised
Business Able Oil will:
1. provide as much general advisory assistance as it believes, in
its sole discretion, will be helpful to you in the ongoing operation,
advertising and promotion of the Franchised Business;
2. provide you with updates, revisions and amendments to the Manual;
3. provide you with a periodic newsletter to update you on current
trends in the industry and
3
<PAGE>
developments in the System;
4. continue its efforts to establish and maintain high standards of
quality, customer satisfaction and service. To that end, Able Oil will on a
periodic basis, conduct, as it deems advisable, inspections of the Franchised
Business and its operations and will evaluate the methods and the staff employed
therein;
5. coordinate and conduct periodic training programs for its network
of franchisees as it deems necessary in its sole discretion; and
6. make available at your expense certain promotional items,
including apparel, calendars, kitchen magnets, stickers and the like which bear
the Proprietary Marks for use by you in promoting the Franchised Business.
All of Able Oil's obligations under this Agreement are to you, and no other
party is entitled to rely on, enforce or obtain relief for breach of such
obligations either directly or by subrogation.
IV. FEES
A. Payments to Able Oil. In consideration of the right and license to
operate the Franchised Business granted herein, you shall pay to Able Oil the
following fees, all in U.S. dollars:
1. Initial Franchise Fee. The total initial franchise fee payable to
Able Oil by you shall be Twenty-Five Thousand Dollars ($25,000). The initial
franchise fee is payable in full upon the execution of this Agreement. The
entire initial franchise fee is deemed fully earned upon receipt by Able Oil and
is not refundable in whole or in part.
2. Royalty Fees. You must pay Able Oil a continuing nonrefundable
monthly royalty fee initially equal to one percent (1%) of monthly Gross Sales
as that term is defined herein. After the first two years of operation of your
Franchised Business, the royalty fee will increase to two percent (2%);
provided, however, that in the event that the sales volume of fuel oil for the
Franchised Business averages 1.5 million or more in the second full year of
operation or any subsequent year during the term of this Agreement, the royalty
fee shall not be increased for the next year following the achievement of that
sales volume. Subject to applicable banking regulations, Able Oil will establish
a direct debit program with your bank to allow for the electronic transfer of
the monthly royalty payment on the second business day following the end of the
month for which payment is due. If the electronic funds transfer does not occur,
the royalty fee must be received within three days after notice to you that the
automatic debit did not occur.
3. Administrative Processing Fee. In conjunction with the electronic
transfer of funds to Able Oil to cover your purchase of fuel on Able Oil's
account, Able Oil will at the same time collect a $.04 per gallon administrative
processing fee.
4. Grand Opening Fee. You must pay Able Oil a grand opening fee of
fifteen thousand dollars ($15,000) at least thirty (30) days prior to commencing
operations of your Franchised Business. Able Oil will use this amount to
coordinate a public relations campaign, purchase promotions, marketing,
advertisements, direct mail, coupons and for initial marketing expenses related
to the opening of your Franchised Business. You must participate in the Grand
Opening and Promotion campaign arranged by Able Oil during the first sixty (60)
days after opening. Any part of the grand opening fee that is not spent on
advertising for the new unit during the sixty (60) day period will be returned
to you.
5. Advertising Contribution. Able Oil may establish a national
advertising and promotional fund to generate new business for the System. In the
event that such a program is established, Able Oil may impose a
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mandatory contribution on you and every other franchisee of up to 1% of your
monthly Gross Sales.
B. Late Fees and Interest on Late Payments. Any fees not received by Able
Oil through electronic funds transfer by the fifth day of the month following
the month for which payment was due shall be considered late. Likewise, if Able
Oil at any time attempts to debit your account for payment of the royalty fee or
advertising contribution, and there are not sufficient funds in your account to
pay the fee, the fee will also be considered late.
Able Oil shall assess a late fee of Two Hundred Fifty Dollars ($250) every
month for which any payment is late, and for each subsequent month, that the
payment is late. In addition, all overdue amounts will bear interest, until
paid, at the rate of two (2) times the prime rate then being charged by the
Chase Manhattan Bank, N.A. on the date payment was due, or the highest rate
permitted by applicable state law, whichever is less (the "Default Rate").
Interest shall be calculated on a daily basis. Interest charges are
nonrefundable, and interest shall be in addition to any other remedies Able Oil
may have.
C. Definition of Gross Sales. "Gross Sales" is defined as all sales
generated through the Franchised Business including fees for any and all
services you perform, whether for cash or credit (regardless of collectability),
and billings of every kind or nature related to the Franchised Business;
provided, however, that "Gross Sales" shall not include any sales tax or other
taxes collected from your customers for transmittal to the appropriate taxing
authority.
D. Audits. Able Oil has the right to audit the books and records of the
Franchised Business. Audits will be conducted at Able Oil's expense, unless an
audit discloses an understatement in any report of two percent (2%) or more, in
which case you must pay the undisclosed or under-reported amount(s) and any and
all costs and expenses incurred by Able Oil in connection with the audit
(including, without limitation, reasonable accountants' and attorneys' fees),
together with interest on undisclosed or under-reported amount(s) at the Default
Rate. These amounts will be payable immediately upon your receipt of written
notice from Able Oil. Audit fees, costs and expenses, as well as the interest
thereon, are nonrefundable.
E. Reporting Procedures. You must maintain and preserve during the term of
this Agreement, and must preserve for the time period specified in the Manual,
full, complete and accurate books, records and accounts and all supporting
materials in accordance with Able Oil's procedures and guidelines. You are
required by this Agreement to periodically submit to Able Oil at your expense,
certain reports, records, information and data as Able Oil may reasonably
designate upon request or as specified in writing. You must also submit to Able
Oil, upon request, a copy of any of its federal and state sales or income tax
returns applicable to the Franchised Business.
F. Local Marketing Expenditure. You must spend at least three percent (3%)
of your quarterly gross sales on local marketing and promotion, in accordance
with the requirements set forth in Section X. All marketing materials must
comply with the policies and procedures established by Able Oil.
V. DUTIES OF FRANCHISEE
A. Compliance with System. You understand and acknowledge that every
detail of the appearance and operation of the Franchised Business in compliance
with the System is critical to Able Oil, you, and other franchisees operating
under the System, in order to: (1) develop and maintain high and uniform
operating standards; (2) increase the demand for the products and services sold
by franchisees; and (3) protect the Proprietary Marks and the System, as well as
Able Oil's trade secrets, reputation and goodwill.
B. Procurement of Business Licenses. You must obtain all business
licenses, registrations, permits and certifications required for the opening and
ongoing operation of the Franchised Business and shall provide to Able Oil
copies of all required licenses.
C. Initial Training. In accordance with the terms and conditions set forth
in Section III of this
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Agreement, you must complete, to Able Oil's satisfaction, Able Oil's initial
training program prior to the opening of the Franchised Business. Able Oil will
provide and pay for instruction and training materials in connection with your
attendance at the initial training program. You are responsible for any and all
other expenses incurred by you and your employees during initial training,
including the costs of entertainment, lodging, travel, meals and employee wages.
The initial training program will be conducted at Able Oil's headquarters in
Rockaway, New Jersey, your location and/or at a site to be determined by Able
Oil.
D. Ongoing Training. You must attend and complete, to Able Oil's
reasonable satisfaction, such special programs or periodic additional training
as Able Oil may require in writing from time to time. Able Oil will only provide
and pay for instruction and training materials in connection with this
additional training. You will be responsible for any and all other expenses
incurred in training, including, without limitation, the costs of meals,
entertainment, lodging, travel, and employee wages.
E. Initial Inventory and Equipment. You must purchase or lease a fuel
delivery vehicle in accordance with Able Oil guidelines (and have the Able Oil
logo applied) and purchase a full load of fuel to commence operations. You must
also purchase a set of trade tools specified in the Manual.
F. Best Efforts. The Franchised Business must be under your direct
supervision and you are required to devote your full time and effort to the
management and operation of the Franchised Business.
G. Compliance with Uniform Standards. You must operate the Franchised
Business in conformity with such uniform methods, standards and specifications
as Able Oil may from time to time prescribe to ensure that the highest degree of
quality and service is uniformly maintained. You shall conduct your business in
a manner that reflects favorably at all times on the System and the Proprietary
Marks. You must not engage in deceptive, misleading or unethical practices or
commit any other act which may have a negative impact on the reputation and
goodwill of Able Oil or any other franchisee operating under the System.
Pursuant to this ongoing responsibility, you agree:
1. To maintain in sufficient supply, as Able Oil may prescribe in
the Manual or otherwise in writing, and use at all times, supplies that conform
to Able Oil's standards and specifications, and to refrain from deviating
therefrom without Able Oil's prior written consent; and
2. To sell or offer for sale only those products and services that
meet Able Oil's uniform standards of quality and quantity which have been
expressly approved for sale in writing by Able Oil in accordance with Able Oil's
methods and techniques; and to sell or offer for sale all approved items; and
3. To refrain from any deviation from Able Oil's standards and
specifications for serving or selling such products or services; and to
discontinue selling and offering for sale any such products or services as Able
Oil may, in its sole discretion, disapprove in writing at any time; and
4. To operate the Franchised Business at a standard of excellence
consistent with the requirements set forth in the Manual, with special emphasis
on customer service;
5. To maintain all required licenses, registrations and permits in
good standing.
H. Sales Targets. In order for you to maintain your territorial
exclusivity, you must meet certain minimum fuel sales volume targets at an
average minimum margin of $.20 per gallon: 500,000 gallons within the first 12
months of operation; 750,000 gallons within the first 18 months of operation;
and 1 million gallons within the first 24 months of operation. You must maintain
a sales level of at least 1 million gallons per year beginning with the third
year in order to maintain your exclusivity to operate a Franchised Business in
the Designated Territory. If you maintain a sales level of 1.5 million gallons
in a given year or higher, your royalty fee shall not be increased for
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the subsequent year. In the event that you do not meet the minimum sales targets
described above, Able Oil may license other franchisees to operate a Franchised
Business in the Territory.
I. Purchase of Products and Services. You must purchase fuel oil, certain
equipment and certain proprietary products and services solely from approved
suppliers who have proved, to the continuing reasonable satisfaction of Able
Oil, the ability to meet Able Oil's reasonable standards and specifications for
such products and related services. These approved suppliers must meet all of
Able Oil's specifications and standards as to content, quality, appearance,
warranty, performance and serviceability and must adequately demonstrate their
capacity and facilities to supply your needs for an effective and efficient
operation of the Franchised Business as well as all Franchised Businesses
operating under Able Oil's System.
J. Proprietary Methods. Able Oil has developed certain products, services,
operational systems and management techniques and may continue to develop
additional proprietary methods and techniques for use in the operation of the
Franchised Business which are all highly confidential and which are trade
secrets of Able Oil. Because of the importance of quality control, uniformity of
product and the significance of the proprietary items to the System, it is to
the mutual benefit of the parties that Able Oil closely control the
dissemination of this proprietary information. Accordingly, you must comply and
strictly follow these techniques in the operation of the Franchised Business and
must purchase from approved sources designated by Able Oil any supplies or
materials necessary to protect and implement such techniques.
K. Development of the Market. You shall at all times use your best efforts
to promote and increase the sales and consumer recognition of the services
offered by the Franchised Business pursuant to the System and the Manual, to
effect the widest and best possible distribution of services from the Franchised
Business. You must also devote your best efforts in controlling the Franchised
Business, its managers, assistants and employees.
L. Display of Proprietary Marks and Logos. You must, at your own cost,
display Able Oil's Proprietary Marks and logos on the Franchised Business'
vehicle(s), uniforms and otherwise in the manner prescribed by Able Oil. The
color, design and location of these displays will be specified by Able Oil and
may be changed from time to time in the sole discretion of Able Oil, and you
must make these changes at your own cost.
M. Noncompetition And Nondisclosure Agreements. You and your employees,
officers, directors, shareholders and independent contractors shall sign
noncompetition or nondisclosure agreements that name Able Oil as a third-party
beneficiary to such agreements.
N. Other Requirements. You must comply with all other requirements set
forth in this Agreement, in the Manual or as Able Oil may designate from time to
time.
O. Safety Standards. You shall maintain the highest safety standards and
ratings applicable to the operation and management of the Franchised Business
and its personnel as Able Oil may reasonably require.
P. Working Capital. You shall maintain sufficient levels of working
capital for use in connection with the management and operation of the
Franchised Business.
Q. Computer System. You must purchase one of the computer systems required
by Able Oil for the operation of the Franchised Business, as specified in the
Manual. Able Oil will poll via modem all of its franchisees' computer systems in
order to compile sales data, consumer trends, costs, and other such financial
and marketing information it deems appropriate. The Franchisor may distribute
this data on a confidential basis to its franchisees. Data shall be maintained
using a Standard Chart of Accounts as provided by Able Oil.
R. Answering System and Pager Service. You must arrange for a "live"
answering service to monitor incoming calls during any time when you or your
staff are not available to receive telephone calls. Your
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answering service must be able to access you or your person on-call for
responding to customer calls by pager. You are responsible for providing pagers
and/or cellular phones for you and your employees.
S. Site Approval. You may operate from a separate home office or from a
commercial space you rent or own. Your office must be at least 200 to 400 square
feet and you must have a storage area for your fuel delivery vehicle. Able Oil
will review your office site approve the site in its sole discretion. If the
site is not approved, Able Oil will assist you in locating an acceptable
alternative site. You shall permit Able Oil's agents or representatives to enter
your office for the purpose of conducting inspections or audits, upon reasonable
notice from Able Oil and during regular business hours.
T. Commencing and Continuing Operations. You shall commence operations as
soon as possible after completion of all required training. The parties agree
that time is of the essence in commencing operation of the Franchised Business
and that if you fail to commence operations within six months after execution of
this Agreement, Able Oil may terminate this Agreement immediately. You shall use
the Franchised Business solely for the operation of the Franchised Business that
is licensed hereunder in strict accordance with the Manual; shall keep the
Franchised Business open and in normal operation for such minimum hours and days
as Able Oil may from time to time prescribe; and shall refrain at all times from
using or permitting the use of the premises of the Franchised Business for any
other purpose or activity other than as contemplated by this Agreement.
U. Miscellaneous. You shall comply with all other requirements set forth
herein or in the Manual.
VI. PROPRIETARY MARKS
A. Grant of License. Able Oil owns the exclusive world-wide right to use
and to license others to use the Proprietary Marks. Able Oil hereby grants you
the right and license to use the Proprietary Marks, including the Able Oil(R)
service mark and logo, only in connection with the operation of the Franchised
Business and the provision of services and products to your customers. Able Oil
represents, with respect to the Proprietary Marks, that: (1) Able Oil has, to
the best of the its knowledge, all right, title and interest in and to the
Proprietary Marks; (2) Able Oil has taken all steps which it deems reasonably
necessary to preserve and protect the ownership and validity of such Proprietary
Marks; and (3) Able Oil will use and license you and other franchisees to use
the Proprietary Marks only in accordance with the System and the operating
standards and quality control specifications attendant thereto which underlie
the goodwill associated with and symbolized by the Proprietary Marks.
B. Conditions for Use. With respect to your use of the Proprietary Marks
pursuant to the license granted under this Agreement:
1. You shall use only the Proprietary Marks designated by Able Oil
and shall use them only in the manner required or authorized and permitted by
Able Oil.
2. You shall use the Proprietary Marks only in connection with the
right and license to operate the Franchised Business granted hereunder.
3. During the term of this Agreement and any renewal hereof, you
shall identify yourself as a licensee and not the owner of the Proprietary Marks
and shall make any necessary filings under state law to reflect this status. In
addition, you will identify yourself as a licensee of the Proprietary Marks on
all invoices, order forms, receipts, business stationery and contracts, as well
as the display of a notice in such form and content and in such places as Able
Oil may designate in writing.
4. Your right to use the Proprietary Marks is limited to such uses
as are authorized under this Agreement or in the Manual, and any unauthorized
use shall constitute an infringement of Able Oil's rights and grounds for
termination of this Agreement.
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5. You shall not use the Proprietary Marks to incur or secure any
obligation or indebtedness.
6. You shall not use the Proprietary Marks, including Able Oil(R),
as part of your corporate or other legal name; however, you must utilize Able
Oil(R) as part of your trade name.
7. You will comply with Able Oil's instructions and all local
regulations for filing and maintaining the requisite trade name or fictitious
name registrations, and will execute any documents deemed necessary by Able Oil
or its counsel to obtain protection for the Proprietary Marks or to maintain
their continued validity and enforceability.
8. In the event that you become aware of any infringement of the
Proprietary Marks or if your use of the Proprietary Marks is challenged by a
third party, then you are obligated to immediately notify Able Oil and Able Oil
will have sole discretion to take such action as it deems appropriate. If Able
Oil fails to take action to protect the Proprietary Marks, then you must take
any action necessary to protect your interest, at your own expense. If it
becomes advisable at any time in the sole discretion of Able Oil to modify or
discontinue the use of any name or mark and/or use one or more additional or
substitute names or marks, you will be responsible for the tangible costs (such
as replacing signs and materials) of complying with this obligation. In the
event that litigation alleging that the Proprietary Marks infringe a third
party's rights is instituted or threatened against you, you must promptly notify
Able Oil and cooperate fully in defending or settling such litigation.
C. Acknowledgment. You expressly understand and acknowledge that:
1. Able Oil is the exclusive owner of all right, title and interest
in and to the Proprietary Marks and the goodwill associated with and symbolized
by them;
2. The Proprietary Marks are valid and serve to identify the System
and those who are licensed to operate a Franchised Business in accordance with
the System;
3. Your use of the Proprietary Marks pursuant to this Agreement does
not give you any ownership interest or other interest in or to the Proprietary
Marks, except the nonexclusive license granted herein;
4. Any and all goodwill arising from your use of the Proprietary
Marks and/or the System shall inure solely and exclusively to Able Oil's
benefit, and upon expiration or termination of this Agreement, no monetary
amount shall be assigned as attributable to any goodwill associated with your
use of the System or the Proprietary Marks;
5. The license and rights to use the Proprietary Marks granted to
you in this Agreement are nonexclusive, and Able Oil thus may: (a) itself use,
and grant franchises and licenses to others to use, the Proprietary Marks and
the System; (b) establish, develop and franchise other systems, different from
the System licensed to you herein, without offering or providing you any rights
in, to or under such other systems; and (c) modify or change, in whole or in
part, any aspect of the Proprietary Marks or the System, so long as your rights
thereto are in no way materially harmed thereby;
6. Able Oil reserves the right to substitute different trade names,
trademarks and service marks for use in identifying the System, the Franchised
Business and other Franchised Businesses operating under the system, all of
which shall become Proprietary Marks;
7. Able Oil will have no liability to you for any senior users that
may claim rights to the Proprietary Marks;
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8. You will not register or attempt to register the Proprietary
Marks in your name or that of any other person, firm, entity or corporation; and
9. Able Oil shall have the right to assign the Proprietary Marks,
and all of its rights and goodwill thereunder, to any person, firm, corporation
or other entity, at its sole discretion.
VII. CONFIDENTIAL MANUAL
A. Compliance. In order to protect Able Oil's reputation and goodwill and
to maintain uniform standards of operation in connection with the Proprietary
Marks, you will conduct your business in strict compliance with the operational
systems, procedures, policies, methods and requirements prescribed in the Manual
and any supplemental bulletins, notices, revisions, modifications or amendments
thereto, all of which shall be deemed a part of the Manual. One (1) copy of the
Manual will be provided to you on loan from Able Oil during the initial training
program, and you must sign a corresponding receipt therefor.
B. Use. You will immediately adopt and use the programs, services,
methods, standards, materials, policies and procedures set forth in the Manual,
as they may be modified by Able Oil from time to time. You acknowledge that Able
Oil is the owner or licensee of all proprietary rights in and to the System, and
the Manual, and any changes or supplements thereto.
C. Confidentiality. You must at all times treat the Manual, any other
instructional materials created or approved for use in the operation of the
Franchised Business and all of the information contained therein as proprietary
and confidential, and you must use all reasonable efforts to maintain such
information as confidential.
D. Trade Secrets. You acknowledge and agree that designated portions of
the Manual are "trade secrets" owned and treated as such by Able Oil.
E. Access. Able Oil's trade secrets must be accorded maximum security
consistent with your need to make frequent reference thereto. You must strictly
limit access to the Manual to employees who have a demonstrable and valid need
to know the information contained therein in order to perform their duties. You
must strictly follow any provisions in the Manual regarding the care, storage
and use of the Manual and all related proprietary information.
F. Duplication. You may not at any time, without Able Oil's prior written
consent, copy, duplicate, record or otherwise reproduce in any manner any part
of the Manual, updates, supplements or related materials, in whole or in part,
or otherwise make the same available to any unauthorized person.
G. Able Oil's Property. The Manual shall at all times remain the sole
property of Able Oil. Upon the expiration or termination of this Agreement for
any reason, you must return the Manual, and all of its supplements to Able Oil.
H. Updates or Revisions. Able Oil retains the right to prescribe additions
to, deletions from or revisions to the Manual, which you will be bound by as
soon as they are mailed or otherwise delivered to you. The Manual, and any
additions, deletions or revisions thereto, shall not alter your rights and
obligations under this Agreement.
I. Master Set. You shall at all times insure that your set of the Manual
is kept current and up-to-date, and in the event of any dispute as to the
contents of the Manual, the terms contained in the master set of the Manual
maintained by Able Oil at its headquarters shall be controlling.
J. Replacement Fee. If the Manual or any of its volumes are lost, stolen
or destroyed, you must pay
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Able Oil a nonrefundable replacement fee of Two Hundred Fifty Dollars ($250.00)
for each volume of the replacement Manual.
VIII. CONFIDENTIAL INFORMATION
A. Confidential Relationship. The relationship established between you and
Able Oil by this Agreement is one of confidence and trust and, as a result, Able
Oil will be disclosing and transmitting to you certain trade secrets and other
confidential and proprietary information concerning various aspects of your
operation of the Franchised Business, methods of operation, techniques and all
proprietary systems, procedures and materials relevant thereto pursuant to the
System and this Agreement.
B. Obligations of Franchisee. In order to preserve and protect the trade
secrets and the confidential and proprietary information (the "Confidential
Information") which are disclosed to you during the term of this Agreement, you
agree that:
1. You will treat and maintain the Confidential Information as
confidential both during the term of this Agreement and at all times thereafter;
2. You will use the Confidential Information only for your operation
of the Franchised Business under this Agreement;
3. You will disclose the Confidential Information only as necessary
to employees or agents who have a demonstrable and valid need to know the
Confidential Information and not to anyone else;
4. You will restrict disclosure of the Confidential Information to
only those employees or agents who are directly connected with the performance
of work requiring knowledge thereof and will disclose only so much of the
Confidential Information as is required to enable those employees or agents to
carry out their assigned duties;
5. You will advise your employees or agents of the confidential
nature of such information and the requirements of nondisclosure thereof; and
6. You and Able Oil will conduct a review to determine which
employees will have access to the Confidential Information and to the Manual.
You will not disclose any Confidential Information or provide access to the
Manual to such employee or agent until that person executes a nondisclosure
agreement in a form prescribed by Able Oil, acknowledging the confidential and
proprietary nature of the Confidential Information and agreeing not to disclose
the information during the course of employment or thereafter. Able Oil shall be
designated a third-party beneficiary of such nondisclosure agreements with the
right to enforce its provisions independently of from you.
C. Confidential Information Defined. Any and all information, knowledge,
know-how, systems, programs and other methods and techniques that Able Oil
designates as confidential shall be deemed Confidential Information for purposes
of this Agreement, except information which you are able to demonstrate came to
your attention prior to its disclosure by Able Oil or which, at the time of its
disclosure by Able Oil to you, had become a part of the public domain through
publication or communication by others or which, after disclosure to you by Able
Oil, becomes a part of the public domain through publication or communication by
others. It is understood and agreed that information, improvements to the System
or techniques prepared, compiled or developed by you, your employees or agents
during the term of this Agreement and relating to the Franchised Business,
whether developed separately or in conjunction with Able Oil, shall be
considered as part of the Confidential Information. You hereby grant to Able Oil
an irrevocable, worldwide, exclusive, royalty-free license, with the right to
sub-license such information, improvement or technique.
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D. Protection of Information. You acknowledge that you have knowledge of
confidential matters, trade secrets, management and training techniques,
operational, accounting, quality control procedures, pricing and marketing
programs and other methods developed by Able Oil through and in its System
which, for purposes of this Agreement, are owned by Able Oil and which are
necessary and essential to the operation of the Franchised Business, without
which information you could not efficiently, and effectively operate the same.
You further acknowledge that such Confidential Information was unknown to you
prior to negotiation for and execution of this Agreement and that the unique and
novel combination of "know how" and methods developed by Able Oil and licensed
to you for the operation of the Franchised Business are particular to Able Oil.
You must take all steps necessary, at your own expense, to protect the
Confidential Information and must not divulge the same either during or upon the
termination of this Agreement without the prior written consent of Able Oil.
E. Remedies. You acknowledge that in addition to any remedies available to
Able Oil under Section XIII of this Agreement, you agree to pay all court costs
and reasonable attorneys' fees incurred by Able Oil in obtaining specific
performance of a temporary restraining order and/or an injunction against
violation of the requirements of this Section VIII.
F. Communication with Customers. In order to maintain the high standards
of quality control throughout the System, Able Oil reserves the right to use
test customers or to communicate with your customers from time to time, without
prior notification to you, in order to determine whether the Franchised Business
is maintaining high standards of quality, integrity, safety, appearance and
customer service.
IX. ACCOUNTING, INSPECTIONS AND RECORDS
A. Maintenance of Books and Records. You must maintain during the term of
this Agreement and shall preserve for not less than seven (7) years from the
date of preparation full, complete and accurate books, records and accounts in
accordance with the System and in the form and manner prescribed by Able Oil in
the Manual or otherwise in writing.
B. Monthly Reports. Able Oil may poll via modem your computer system to
obtain any and all information deemed necessary to monitor your Franchised
Business, including Gross Sales and any other information from which the royalty
fee and required marketing expenditures are calculated. You may be required to
submit to Able Oil other monthly reports and statements of income in a form
prescribed by Able Oil in the Manual, together with such other data or
information as Able Oil may require.
C. Financial and Related Reporting. You must submit to Able Oil an annual
financial statement prepared at your own expense which shall include an income
statement and balance sheet prepared in accordance with generally accepted
accounting principles and copies of federal and state tax returns for the
Franchised Business within ninety (90) days of the completion of the fiscal year
of the Franchised Business. Each annual financial statement and tax return shall
be compiled by an independent certified public accounting firm and signed by you
or your President or Treasurer attesting that the statement is true and correct.
Able Oil also reserves the right to require you to submit to Able Oil certified
financial statements for any period or periods of any fiscal year, which shall
be certified by your accounting firm and attested to by your treasurer or chief
financial officer, where applicable. You shall also submit to Able Oil, upon
request, a copy of any of your periodic federal and state sales or income tax
returns applicable to the Franchised Business.
D. Other Submissions. You must also submit to Able Oil for review and
auditing, such other forms, and other reports and any and all other information
and data as Able Oil may reasonably designate, including quarterly accounting of
local marketing expenditures, in the form and at the times and places reasonably
required by Able Oil, upon request and as specified from time to time in the
Manual or otherwise in writing, at any time during the term of this Agreement.
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E. Inspection. Able Oil or its designated agents shall have the right at
all reasonable times to examine and copy, at its expense, the books, records,
receipts and tax returns of the Franchised Business. Able Oil shall also have
the right, at any time, to have an independent audit made of your books. If an
inspection should reveal that any payments to Able Oil have been undisclosed or
understated in any report to Able Oil then you must immediately pay to Able Oil,
upon demand, the amount undisclosed or understated plus interest calculated at
the Default Rate on a daily basis. If any inspection discloses an understatement
in any report of two percent (2%) or more, you shall, in addition to the payment
of late fees and interest thereon, reimburse Able Oil for any and all costs and
expenses connected with the inspection (including, without limitation,
reasonable accountants' and attorneys' fees). The foregoing remedies shall be in
addition to any other remedies available to Able Oil.
X. ADVERTISING
Recognizing the value of local and regional advertising, and the
importance of the standardization of advertising programs to the furtherance and
protection of the Proprietary Marks, goodwill and public image of the System,
the parties agree as follows:
A. Submission and Approval of Promotional and Marketing Materials. All
promotional and marketing materials to be used by you in any medium shall be
presented in a dignified manner and shall conform to such standards and
requirements as Able Oil may specify, from time to time, in the Manual or
otherwise. You shall submit to Able Oil for its prior written approval, samples
of all promotional and marketing materials in whatever form that you desire to
use and that have not been approved within the last year by Able Oil. Able Oil
shall notify you of Able Oil's approval or disapproval thereof within ten (10)
days from the date of receipt by Able Oil of such materials. If Able Oil does
not notify you within ten days, approval shall be deemed to have been given. You
must comply with all revisions to promotional and marketing materials that Able
Oil may require prior to approving them. You shall not use any advertising or
promotional plans or materials that have not been approved in writing by Able
Oil, and you must cease all use of any plans or materials promptly upon receipt
of notice from Able Oil. Your failure to obtain Able Oil's prior written
approval for all proposed advertising shall be deemed a default of this
Agreement in accordance with Section XIII.A hereof.
B. Local Marketing and Promotion Expenditure. You must spend quarterly at
least 3% of your Gross Sales on local marketing and promotion, in accordance
with the policies and procedures established by Able Oil for the prior approval
of all proposed marketing and promotional campaigns and materials, as specified
in Paragraph X.A. or elsewhere in this Agreement, the Manual or otherwise. You
must provide Able Oil with documentation as reasonably requested, substantiating
the expenditures for local marketing.
C. Advertising Fund. Able Oil reserves the right to establish and
administer the Able Oil Advertising Fund (the "Advertising Fund"). When the Fund
is established, you will be required to contribute to the Advertising Fund in
accordance with the provisions of Section IV of this Agreement.
XI. INSURANCE
A. Procurement. You must procure, prior to the commencement of any
operations under this Agreement, and thereafter maintain in full force and
effect during the term of this Agreement, at your sole expense, an insurance
policy or policies protecting you and Able Oil, and you and their respective
officers, directors, partners and employees, against any loss, liability,
personal injury, death, property damage or expense whatsoever from fire,
lightning, theft, vandalism, malicious mischief and the perils included in the
extended coverage endorsement, arising or occurring upon or in connection with
the Franchised Business or by reason of the operation or occupancy of the
Franchised Business, as well as such other insurance applicable to such other
special risks, if any, as Able Oil may reasonably require for its own and your
protection. You must procure such insurance and submit copies of such policies
to Able Oil prior to the commencement of business operations.
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B. Minimum Coverage. All insurance policies shall be written by an
insurance company satisfactory to Able Oil in accordance with the standards and
specifications set forth from time to time in the Manual or otherwise in
writing, and shall include, at a minimum (except as additional coverage and
higher policy limits may reasonably be specified from time to time by Able Oil
in the Manual or otherwise in writing), the following:
1. Comprehensive General Liability insurance, including vehicle,
hazardous materials, cargo and collision insurance, covering the operation of
the Franchised Business; and
2. Worker's compensation and employer's liability insurance as well
as such other insurance as may be required by statute or rule of the state in
which the Franchised Business is located and operated (or if your state does not
require such coverage, than you must obtain additional liability coverage in an
amount similar to coverage employer's liability insurance maintained by Able
Oil).
3. Business interruption insurance in amounts equal to at least the
average monthly royalties and administrative processing fees payable to Able
Oil, but in no event less than One Hundred Thousand Dollars ($100,000) annual
coverage.
The type of insurance, and the insurance amounts, are subject to change
based on inflation or future experience with claims asserted against Franchised
Business. Able Oil, in its sole discretion, may require you to obtain and pay
for additional insurance coverage. You must furnish Able Oil with certificates
of insurance, along with evidence that the premiums have been paid. You will be
liable for any costs and expenses, including attorneys' fees, incurred by Able
Oil in connection with any proceedings arising out of compliance with the
provisions of the Franchise Agreement relating to insurance. Able Oil shall be
named as an additional insured in each of your insurance policies as are
designated by Able Oil.
C. Certificates. Initially and upon each periodic policy renewal, you must
request, through your agent and/or carrier, for timely delivery to Able Oil of
certificates of insurance of all coverage required by Able Oil. Each such
certificate shall contain statements by the insurer that (i) the policy will not
be canceled or initially altered without at least thirty (30) days' prior
written notice to Able Oil and (ii) Able Oil is designated as an additional
named insured.
D. No Relief Of Liability To Able Oil. The procurement and maintenance of
such insurance shall not relieve you of any liability to Able Oil under any
indemnity requirements of this Agreement.
E. Independence of Coverage Requirements. Your obligation to obtain and
maintain the foregoing policy or policies in the amounts specified shall not be
limited in any way by reason of any insurance which may be maintained by Able
Oil, and your performance of that obligation shall not relieve you of liability
under the indemnity provision set forth in Section XVIII of this Agreement.
F. Failure to Procure. If, for any reason, you should fail to procure or
maintain the insurance required by this Agreement, as revised from time to time
for all franchisees by the Manual or otherwise in writing, Able Oil shall have
the right and authority (without, however, any obligation) to immediately
procure such insurance and to charge you for the same, which charges, together
with a reasonable fee for Able Oil's expenses in so acting, including all
attorneys' fees, shall be payable by you immediately upon notice.
G. Third Parties. You must use your best efforts to ensure that all third
parties with which you conduct business, are properly insured.
XII. TRANSFER OF INTEREST; OPERATION BY ABLE OIL
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A. Transfer by Able Oil. Able Oil shall have the right to assign this
Agreement, and all of its rights and privileges hereunder, to any person, firm,
corporation or other entity, provided that, with respect to any assignment
resulting in the subsequent performance by the assignee of the functions of Able
Oil : (1) the assignee shall, at the time of such assignment, be capable of
performing Able Oil's obligations under this Agreement, and (2) the assignee
shall expressly assume and agree to perform such obligations.
Specifically, and without limitation to the foregoing, you expressly
affirm and agree that Able Oil may sell its assets, its rights to the
Proprietary Marks and the System outright to a third party; may go public; may
engage in a private placement of some or all of its securities; may merge,
acquire other corporations, or be acquired by another corporation; may undertake
a refinancing, recapitalization, leveraged buy-out or other economic or
financial restructuring; and, with regard to any or all of the above sales,
assignments and dispositions, you expressly and specifically waive any claims,
demands or damages arising from or related to the loss of said Proprietary Marks
(or any variation thereof) and/or the loss of association with or identification
of "Able Oil Company" as the franchisor hereunder.
Nothing contained in this Agreement shall require Able Oil to remain in
the fuel oils distribution and services business or to offer similar services,
whether or not bearing Able Oil's Proprietary Marks, in the event that Able Oil
exercises its rights hereunder to assign its rights in this Agreement.
B. Transfer by You.
1. The rights and duties set forth in this Agreement are personal to
you, and Able Oil has entered into this Agreement and granted the license
hereunder in reliance on your business skill and financial capacity.
Accordingly, neither you, any immediate or remote successor to any part of your
interest in the Franchised Business, any individual, partnership, corporation or
other legal entity which directly or indirectly controls you, if you are a
corporation, nor any general partner or any limited partner (including any
corporation which controls, directly or indirectly, any general or limited
partner) if you are a partnership, shall sell, assign, transfer, convey, give
away, pledge, mortgage or otherwise encumber any direct or indirect interest in
you or in the Franchised Business without the prior written consent of Able Oil.
This right of approval shall not create any special liability or duty on the
part of Able Oil to any proposed transferee. Any purported assignment or
transfer, by operation of law or otherwise, not having the written consent of
Able Oil shall be null and void and shall constitute a material breach of this
Agreement, for which Able Oil may then terminate without opportunity to cure
pursuant to Section XIII of this Agreement.
2. If a proposed transfer, alone or together with other previous,
simultaneous or proposed transfers, would have the effect of transferring a
controlling interest in the Franchised Business, Able Oil may, in its sole
discretion, require any or all of the following as conditions of its approval:
(a) All of your accrued monetary obligations and all other
outstanding obligations to Able Oil (its subsidiaries, affiliates and suppliers)
shall be up to date, fully paid and satisfied;
(b) You shall not be in default of any provision of this
Agreement, any amendment hereof or successor hereto, any other franchise
agreement or other agreement between Able Oil and you, or its subsidiaries,
affiliates or suppliers;
(c) You and, where applicable, each of your shareholders,
partners, officers and directors shall have executed a general release under
seal, in a form satisfactory to Able Oil, of any and all claims against Able Oil
and its officers, directors, shareholders and employees in their corporate and
individual capacities, including, without limitation, claims arising under
federal, state and local laws, rules and ordinances, provided, however, that you
shall not be required to release Able Oil for violations of federal and state
franchise registration and disclosure laws;
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(d) The transferee shall enter into a written assignment,
under seal and in a form satisfactory to Able Oil, assuming and agreeing to
discharge all of your obligations under this Agreement; and, if your obligations
were guaranteed by the transferor, the transferee shall guarantee the
performance of all such obligations in writing in a form satisfactory to Able
Oil;
(e) The transferee shall demonstrate to Able Oil's
satisfaction that the transferee meets Able Oil's educational, managerial and
business standards; possesses a good moral character, business reputation and
credit rating; has the aptitude and ability to operate the Franchised Business
herein (as may be evidenced by prior related experience or otherwise); has at
least the same managerial and financial criteria required of new franchisees and
shall have sufficient equity capital to operate the Franchised Business;
(f) At Able Oil's option, the transferee shall execute
(and/or, upon Able Oil's request, shall cause all interested parties to execute)
for a term ending on the expiration date of this Agreement and with such renewal
term as may be provided by this Agreement, the standard form of Franchise
Agreement then being offered to new franchisees and such other ancillary
agreements as Able Oil may require for the Franchised Business, which agreements
shall supersede this Agreement in all respects and the terms of which agreements
may differ from the terms of this Agreement, including, without limitation, a
higher percentage royalty fee or Advertising Fund contribution, and the
implementation of additional fees;
(g) The transferee shall upgrade, at the transferee's expense,
the Franchised Business to conform to the then-current specifications then being
used in new Franchised Businesses, and shall complete the upgrading and other
requirements within the time specified by Able Oil;
(h) You will remain liable for all direct and indirect
obligations to Able Oil in connection with the Franchised Business prior to the
effective date of the transfer and shall continue to remain responsible for its
obligations of nondisclosure, noncompetition and indemnification as provided
elsewhere in this Agreement and shall execute any and all instruments reasonably
requested by Able Oil to further evidence such liability;
(i) At the transferee's expense, the transferee and its
employees shall complete any training programs then being offered to current or
new franchisees upon such terms and conditions as Able Oil may reasonably
require;
(j) The transferee shall have signed an Acknowledgment of
Receipt of all required legal documents, such as the Franchise Offering Circular
and the then current Franchise Agreement and ancillary agreements;
(k) The transferor shall pay to Able Oil a Transfer Fee equal
to twenty-five percent (25%) of the then-current initial franchise fee to cover
Able Oil's administrative expenses and other costs in connection with the
transfer, which shall be fully payable to Able Oil thirty (30) days prior to any
such transfer and nonrefundable; and
(l) The transferor must provide Able Oil with a copy of the
agreements of purchase and sale between the transferor and the transferee.
3. You may not grant a security interest in the Franchised Business
or in any of its assets unless the secured party agrees that in the event of any
default by you under any documents related to the security interest, the secured
party shall notify Able Oil of the default and Able Oil shall have the right and
option to be substituted as obligor to the secured party and to cure any default
by you. Notwithstanding the foregoing, Able Oil shall not be construed as a
guarantor or surety for you.
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4. Each of the foregoing conditions of transfer which must be met by
you and the transferee are necessary and reasonable to assure such transferee's
full performance of the obligations hereunder.
C. Additional Requirements - Corporate Franchisees. The following
requirements shall apply to you if you are a corporation, or any legal entity
other than an individual, in addition to those requirements set forth elsewhere
in this Agreement, the Manual or otherwise:
1. If you are a newly organized corporation or other legal entity,
your charter must provide that your activities are limited exclusively to
operating the Franchised Business herein. If you are an existing legal entity,
you must amend your charter document to reflect your exclusive activity as a
Franchised Business.
2. Copies of your Articles of Incorporation, Bylaws and other
governing documents, and any amendments thereto, including the resolutions of
any Board of Directors (or similar body with authority to bind you) authorizing
entry into this Agreement, shall be promptly furnished to Able Oil.
3. Each stock certificate or other certificate evidencing ownership
of the Franchised Business issued to your owners shall have conspicuously
endorsed upon its face a statement in a form satisfactory to Able Oil, such as:
"THE TRANSFER, PLEDGE OR ALIENATION OF THIS STOCK IS SUBJECT TO THE
TERMS AND RESTRICTIONS CONTAINED WITHIN THE FRANCHISE AGREEMENT
BETWEEN ABLE OIL COMPANY AND ______________."
4. You must maintain a current list of all owners of record and all
beneficial owners of any class of equity securities and shall furnish the list
to Able Oil upon request, together with the addresses and phone numbers of each
owner.
5. All of your shareholders, members or partners, whichever is
applicable, shall jointly and severally guarantee your performance hereunder and
shall bind themselves to the terms of this Agreement; provided, however, that
the requirements of this Section XII.C.5. shall not apply to a publicly-held
corporation.
D. Offerings by You. Your securities or partnership interests may be
offered to the public, by private offering or otherwise, but only with the prior
written consent of Able Oil, whether or not Able Oil's consent is required under
Section XII.B. hereof, which consent shall not be unreasonably withheld. All
materials required for such offering by federal or state law as well as any
materials to be used in any exempt offering shall be submitted to Able Oil for
review at least sixty (60) days prior to such documents being filed with any
government agency or distributed to investors. No offering shall imply (by use
of the Proprietary Marks or otherwise) that Able Oil is participating in an
underwriting, issuance or offering of your securities, and Able Oil's review of
any offering shall be limited solely to the subject of the relationship between
you and Able Oil. You and any other participants in the offering must fully
indemnify Able Oil in connection with the offering pursuant to an indemnity
agreement in form and substance satisfactory to Able Oil and its counsel. For
each proposed offering, you must pay to Able Oil a nonrefundable amount as is
necessary to reimburse Able Oil for its reasonable costs and expenses associated
with reviewing the proposed offering, including, without limitation, legal and
accounting fees. Subsequent to approval of such offering documents, you must
give Able Oil at least sixty (60) days written notice prior to the proposed
effective date of any offering or other transaction covered by this Section
XII.D.
E. Able Oil's Right of First Refusal.
1. If any party who holds an interest (as reasonably determined by
Able Oil) in you or in the
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Franchised Business desires to accept any bona fide offer from a third party to
purchase his interest, you must notify Able Oil in writing of such offer. Except
as otherwise provided herein, Able Oil shall have the right and option,
exercisable within thirty (30) days after receipt of such written notification,
to send written notice to the seller that Able Oil intends to purchase the
seller's interest on the same terms and conditions offered by the third party
less any amount of the purchase price attributable to the goodwill associated
with the Franchised Business, the Proprietary Marks or the System. Any material
change in the terms of any offer prior to closing shall constitute a new offer
subject to the same right of first refusal by Able Oil as in the case of an
initial offer. In the event that Able Oil elects to purchase the seller's
interest, closing on such purchase must occur by the later of: (a) the closing
date specified in the third party offer; or (b) within sixty (60) days from the
date of notice to the seller of Able Oil's election to purchase. Failure of Able
Oil to exercise the option afforded by this Section XII.E. shall not constitute
a waiver of any other provision of this Agreement, including all of the
requirements of this Section XII with respect to a proposed transfer.
2. In the event the consideration, terms and/or conditions offered
by a third party are such that Able Oil may not reasonably be required to
furnish the same consideration, terms and/or conditions, then Able Oil may
purchase the Franchised Business proposed to be sold for the reasonable
equivalent in cash. If the parties cannot agree, within a reasonable time, on
the reasonable equivalent in cash of the consideration, terms and/or conditions
offered by a third party, an independent appraiser shall be designated by Able
Oil, and his determination shall be final and binding.
F. Transfer Upon Death, Mental Incapacity or Disability. Upon the death,
mental incapacity or disability of you or shareholders of a corporation or a
general partner of a partnership which has been formed to own and operate the
Franchised Business, Able Oil shall consent to the transfer of said interest in
the Franchised Business and this Agreement to your spouse, heirs or relative by
blood or by marriage, or to the spouse, heirs or relative of such shareholder or
partner, whether such transfer is made by will or by operation of law, if, in
Able Oil's sole discretion and judgment, such person or persons meet Able Oil's
educational, managerial and business standards; possess a good moral character,
business reputation and credit rating; have the aptitude and ability to conduct
the Franchised Business herein; have at least the same managerial and financial
criteria required by new franchisees and have sufficient equity capital to
operate the Franchised Business. If a transfer is not approved by Able Oil, the
executor, administrator or personal representative of such person shall transfer
his interest to a third party approved by Able Oil within six (6) months after
such death, mental incapacity or disability. Such transfer shall be subject to
Able Oil's right of first refusal and to the same conditions as any inter vivos
transfer.
G. Non-Waiver of Claims. Able Oil's consent to a transfer of any interest
in the Franchised Business shall not constitute a waiver of any claims it may
have against the transferring party, and it will not be deemed a waiver of Able
Oil's right to demand exact compliance with any of the terms of this Agreement,
or any other agreement to which Able Oil and the transferee are parties, by the
transferee.
H. Operation of the Franchised Business by Able Oil. In order to prevent
any interruption of the business of the Franchised Business and any injury to
the goodwill and reputation thereof which would cause harm to the Franchised
Business and thereby depreciate the value thereof, you hereby authorize Able
Oil, and Able Oil shall have the right, but not the obligation, to operate said
Franchised Business for so long as Able Oil deems necessary and practical, and
without waiver of any other rights or remedies Able Oil may have under this
Agreement, in the event that: (i) any of your principals, shareholders or
partners is absent or incapacitated by reason of illness or death and you are
not, therefore, in the sole judgment of Able Oil, able to do the business
licensed hereunder, or (ii) any allegation or claim is made against the
Franchised Business, you or any of your principals, directors, shareholders,
partners or employees, involving or relating to misrepresentations or any
fraudulent or deceptive practice. All revenues from the operation of the
Franchised Business during such period of operation by Able Oil shall be kept in
a separate account and the expenses of the Franchised Business, including
reasonable royalty fees, advertising contributions, compensation and expenses
for Able Oil's representative, shall be charged to said account. If, as herein
provided, Able Oil elects to temporarily operate the Franchised Business on your
behalf, you hereby agree to
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indemnify and hold Able Oil harmless from any and all claims arising from the
acts and omissions of Able Oil and its representatives, and such temporary
operation shall in no way obligate Able Oil to purchase (or be construed as a
purchase of) your Franchised Business
I. Able Oil Buy Back of the Franchised Business. You will have the right
to transfer your Franchised Business back to Able Oil after two years of
operation under this Agreement. Able Oil will pay you the fair market value of
the tangible assets of the Franchised Business, as described in Section XIV.J.
below, and will pay you margin for the automatic delivery customer accounts you
have signed up.
XIII. DEFAULT AND TERMINATION
As a matter of policy, Able Oil shall make every good faith effort to
avoid terminating this Agreement without having first employed all reasonable
steps to cause you to correct and cure any default. Furthermore, the terms and
conditions regarding default and termination contained herein shall be subject
to any applicable state statutes or regulations regarding the termination of a
franchise. You may terminate this Agreement under any grounds available by law.
A. Default With No Opportunity To Cure. You shall be deemed to be in
default and Able Oil may, at its option, terminate this Agreement and all rights
granted hereunder, without affording you any opportunity to cure the default,
effective immediately upon your receipt of notice from Able Oil to you, upon the
occurrence of any of the following events:
1. You become insolvent or make a general assignment for the benefit
of creditors, or a petition in bankruptcy is filed by you or a petition is filed
against and consented to by you, or if you are adjudicated bankrupt, or a bill
in equity or other proceeding for the appointment of a receiver of you or other
custodian for your business or assets is filed and consented to by you, or if a
receiver or other custodian (permanent or temporary) of your business or assets
is appointed by any court of competent jurisdiction, or if proceedings for a
conference with a committee of creditors under any state, federal or foreign law
should be instituted by or against you, or a final judgment remains unsatisfied
or of record for thirty (30) days or longer (unless supersedeas bond is filed),
or execution is levied against your operating location or property, or suit to
foreclose any lien or mortgage against the premises or equipment is instituted
against you and not dismissed within thirty (30) days, or any substantial real
or personal property of the Franchised Business is sold after levy thereupon by
any sheriff, marshal or constable;
2. You cease to do business for two (2) or more consecutive days,
excluding holidays, or otherwise forfeit the right to do or transact business in
the jurisdiction where the Franchised Business is located; unless such failure
to do business results from the governmental exercise of the power of eminent
domain, or if, through no fault of yours, the Franchised Business is damaged or
destroyed by a disaster;
3. You make any material misrepresentation or omission in this
Agreement or any other agreement to which you and Able Oil are parties;
4. You misuse or make any unauthorized use of the Proprietary Marks,
engage in any business or market any service or products under a name or mark
which is confusingly similar to the Proprietary Marks, or otherwise materially
impair the goodwill associated with, or Able Oil's rights in, the Proprietary
Marks;
5. A threat or danger to public safety results from the operation of
the Franchised Business;
6. You are convicted of a felony or any other crime or offense that
Able Oil reasonably believes is likely to have an adverse effect on the System,
the Proprietary Marks, the goodwill associated therewith or Able Oil's interest
therein;
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7. A judgment or consent decree is entered against you, or any of
your officers, directors, shareholders or partners in any case or proceeding
involving allegations of fraud, racketeering, unfair or improper trade practices
or similar claim which is likely to have an adverse effect on the System, or the
Proprietary Marks, the goodwill associated therewith or Able Oil's interest
therein;
8. You purport to transfer any rights or obligations under this
Agreement to any third party without Able Oil's prior written consent, contrary
to any of the terms of Section XII of this Agreement;
9. You fail to comply with any of the covenants contained in Section
XV hereof;
10. Contrary to Sections VII and VIII of this Agreement, you misuse,
disclose or divulge the contents of the Manual or any other trade secrets or
Confidential Information provided to you by Able Oil;
11. You knowingly maintain false financial books or records or
submit any false statements, applications or reports to Able Oil or any assignee
of Able Oil;
12. You do not complete training or commence business operations
within sixty (60) days after completing training provided by Able Oil;
13. You willfully and repeatedly engage in a course of conduct which
constitutes a misrepresentation or a deceptive or unlawful act or practice in
connection with your sale of the services and products offered by the Franchised
Business;
14. You willfully engage in any illegal acts or any act in violation
of the mission and policies of Able Oil; or
15. You receive three (3) or more notices of default under Section
XIII.B. hereof during the term of this Agreement, whether or not such defaults
are cured after notice.
B. Default With Thirty (30) Day Opportunity To Cure. Except as provided in
Section XIII.A. of this Agreement, or as otherwise specified below, you
generally shall have thirty (30) days after receiving from Able Oil a written
notice of default within which to remedy any default described in this Section
XIII.B. and provide evidence thereof to Able Oil. If any default is not cured
within that time, or such longer period as applicable law may require, this
Agreement, at Able Oil's option, shall terminate without further notice to you
effective immediately upon the expiration of the thirty (30) day period or such
longer period as applicable law may require. You will be in default hereunder
for any failure to comply substantially with any of the requirements imposed by
this Agreement, as it may from time to time reasonably be supplemented by
updates to the Manual, or for any failure to carry out the terms of this
Agreement in good faith. Such defaults shall include, without limitation, the
occurrence of any of the following events:
1. You fail, refuse or neglect to pay promptly any monies owing to
Able Oil or its subsidiaries or affiliates or suppliers when due, or to submit
the financial information or other reports required by Able Oil under this
Agreement (this default must be cured within ten (10) days);
2. You fail to comply with or maintain any of the standards or
procedures prescribed by Able Oil in this Agreement, the Manual, any other
franchise agreement between Able Oil and you, or any other written agreements
between the parties or otherwise;
3. You fail to obtain and maintain all required licenses under state
and local law (you must attempt to cure this default within ten (10) days);
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4. You, by act or omission, permit a continued violation in
connection with the operation of the Franchised Business of any law, ordinance,
rule or regulation of a governmental agency, in the absence of a good faith
dispute over its application or legality and without promptly resorting to an
appropriate administrative or judicial forum for relief therefrom (this default
must be cured within ten (10) days);
5. You fail to comply with your duties set forth in Section V of
this Agreement or fail to perform any obligation owing to Able Oil or to observe
any covenant or agreement made by you, whether such obligation, covenant or
agreement is set forth in this Agreement or in any other agreement with Able Oil
including any other franchise agreement by and between Able Oil and you or any
entity related to Able Oil;
6. You fail to maintain and submit to Able Oil all reports required
pursuant to Section IX hereof;
7. You fail to maintain Able Oil's quality control standards with
respect to its use of the Proprietary Marks;
8. You, your partner, manager or employees fail to attend and
successfully complete any mandatory training program unless attendance is
excused or waived, in writing, by Able Oil; or
9. You fail to obtain prior written approval of any and all
advertising, marketing or promotional plans and materials in whatever form used
by you in connection with your promotion of the Franchised Business or otherwise
fail to comply with Able Oil's policies and procedures with respect to
advertising, marketing or promotion.
C. No Right or Remedy. No right or remedy herein conferred upon or
reserved to Able Oil is exclusive of any other right or remedy provided or
permitted by law or equity.
D. Default and Termination. The events of default and grounds for
termination described in this Section XIII shall be in addition to any other
grounds for termination contained elsewhere in this Agreement or otherwise.
E. Right to Purchase. In the event of termination of this Agreement for
any reason, including a default under this Section XIII, Able Oil shall have the
right and option to purchase your interest in the Franchised Business as set
forth in Paragraph XII.I above.
XIV. OBLIGATIONS UPON TERMINATION
Upon termination or expiration of this Agreement, all rights granted to
you hereunder shall forthwith terminate, and you must observe and perform the
following:
A. Cessation of Operation. You shall immediately cease to operate the
Franchised Business and shall not thereafter, directly or indirectly, represent
to the public or hold yourself out as a franchisee of Able Oil.
B. Cessation of Use of Proprietary Marks. You must immediately and
permanently cease to use, in any manner whatsoever, any equipment, format,
confidential methods, customer data base, programs, literature, procedures and
techniques associated with the System, the name Able Oil(R) and any Proprietary
Marks and distinctive trade dress, forms, slogans, uniforms, signs, symbols or
devices associated with the System. In particular, you must cease to use,
without limitation, all signs, fixtures, furniture, equipment, advertising
materials or promotional displays, uniforms, stationery, forms and any other
articles which display the Proprietary Marks or are associated with the System.
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C. Cancellation of Name. You must take such action as may be necessary to
cancel any assumed name or equivalent registration that contains the Proprietary
Marks or any other trademark, trade name or service mark of Able Oil, and you
must furnish Able Oil with evidence satisfactory to Able Oil of compliance with
this obligation within thirty (30) days after termination or expiration of this
Agreement.
D. Able Oil's Right to Continue Operations. In the event this Agreement is
terminated, Able Oil may, at its option, immediately continue to provide
services to customers of the Franchised Business and apply receipts therefrom to
debts owed to Able Oil by you. Able Oil shall have no other obligation to you in
connection with Able Oil's operation of the Franchised Business following said
termination.
E. Non-Usage of Marks. You agree, in the event you continue to operate or
subsequently begin to operate any other business, not to use any reproduction,
counterfeit, copy or colorable imitation of the Proprietary Marks or trade
dress, either in connection with such other business or the promotion thereof,
which is likely to cause confusion, mistake or deception, or which is likely to
dilute Able Oil's exclusive rights in and to the Proprietary Marks or trade
dress, and agree not to utilize any designation of origin or description or
representation which falsely suggests or represents an association or connection
with Able Oil so as to constitute unfair competition.
F. Prompt Payment Upon Default. You must promptly pay all sums owing to
Able Oil and its subsidiaries, affiliates and suppliers. In the event of
termination for any default by you, such sums shall include all damages, costs
and expenses, including reasonable attorneys' fees, incurred by Able Oil as a
result of the default, which obligation shall give rise to and remain, until
paid in full, a lien in favor of Able Oil against any and all of the personal
property, machinery, fixtures, equipment and inventory owned by you at the time
of default.
G. Payment of Costs. You must pay to Able Oil all damages, costs and
expenses, including reasonable attorneys' fees, incurred by Able Oil subsequent
to the termination or expiration of this Agreement in obtaining injunctive or
other relief for the enforcement of any provision of this Section XIV or any
other obligation under this Agreement.
H. Return of Materials. You must immediately turn over to Able Oil all
copies of all materials in your possession including the Manual, all records,
files, instructions, correspondence, customer database, brochures, agreements,
disclosure statements and any and all other materials relating to the operation
of the Franchised Business, in your possession, and all copies thereof (all of
which are acknowledged to be Able Oil's property), and shall retain no copy or
record of any of the foregoing, excepting only your copy of this Agreement, any
correspondence between the parties and any other documents which you reasonably
need for compliance with any provision of law. In addition to the foregoing, you
shall deliver to Able Oil a complete list of all persons employed by you during
the two (2) years immediately preceding termination, together with all
employment files of each employee on such list. All costs of delivering all
materials required by this Section XIV.H. shall be borne by you.
I. Assignment of Telephone Listings. You must promptly notify the
appropriate telephone company and all telephone directory listing agencies of
the termination or expiration of your right to use any telephone number and any
regular, classified or other telephone directory listings associated with any
Proprietary Marks and authorize the transfer of same to or at the direction of
Able Oil. You agree to execute updated letters of direction to any telephone
companies and telephone directory listing agencies directing termination and/or
transfer of your right to use any telephone number associated with the
Proprietary Marks, which Able Oil may hold until termination or expiration
hereof. You acknowledge that as between Able Oil and you, Able Oil has the sole
right to and interest in all telephone numbers and directory listings associated
with any Proprietary Marks. You authorize Able Oil, and hereby appoint Able Oil
and any officer of Able Oil as your attorney in fact, to direct the appropriate
telephone company and all listing agencies to transfer all such listings to Able
Oil upon termination of this Agreement.
J. Option to Purchase. Able Oil shall have the right, but not the
obligation, to purchase any or all of
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the tangible assets of the Franchised Business, including the signs, advertising
materials, promotional displays, supplies, forms, inventory, software, furniture
or other items bearing the Proprietary Marks, at your cost or fair market value,
whichever is less. In addition, Able Oil may purchase your automatic delivery
customer accounts will at their margin, in accordance with Section XII.I. If the
parties cannot agree on fair market value within a reasonable time, an
independent appraiser shall be designated by Able Oil, and the appraiser's
determination shall be final and binding. Able Oil's election to purchase
provided for herein must be exercised by written notice to you within thirty
(30) days after termination or expiration of this Agreement. If Able Oil elects
to exercise any option to purchase provided herein it shall have the right to
set off all amounts due from you under this Agreement and the cost of the
appraisal, if any, against any payment therefor.
K. Covenant of Further Assurances. You must execute any legal document
that may be necessary to effectuate the termination hereunder and shall furnish
to Able Oil, within thirty (30) days after the effective date of termination,
written evidence satisfactory to Able Oil of your compliance with the foregoing
obligations.
L. Compliance with Covenants. You must comply with all applicable
covenants contained in Section XIV of this Agreement.
M. No Further Interest. Other than as specifically set forth above, you
shall have no interest in the Franchised Business upon termination or expiration
of this Agreement.
XV. COVENANTS
A. Best Efforts. You covenant that during the term of this Agreement, and
subject to the post-termination provisions contained herein, and except as
otherwise approved in writing by Able Oil, you shall devote your full time,
energy and best efforts to the efficient and effective management, operation and
capitalization of the Franchised Business.
B. Non-Solicitation and Non-Competition. You have heretofore specifically
acknowledged that pursuant to this Agreement, you shall receive valuable
specialized training and confidential and other information regarding the
business, promotional, sales, marketing and operational methods and techniques
of Able Oil and the System. You covenant that during the term of this Agreement
and subject to the post-termination provisions contained herein, and except as
otherwise approved in writing by Able Oil, you shall not, either directly or
indirectly, for yourself or through, on behalf of or in conjunction with any
person, persons, partners or corporation or other entity:
1. Divert or attempt to divert any business or customer of the
Franchised Business to any competitor, by direct or indirect inducement or
otherwise, or do or perform, directly or indirectly, any other act injurious or
prejudicial to the goodwill associated with the Proprietary Marks and the
System;
2. Employ or seek to employ any person who is at that time employed
by Able Oil or by any other franchisee or of Able Oil, or otherwise directly or
indirectly induce such person to leave his or her employment;
3. Own, maintain, engage in, be employed by, advise, assist, invest
in, franchise, make loans to, sell significant assets to or have any interest in
any business which is the same as or substantially similar to the Franchised
Business; or
4. Sell, or offer for sale, fuel oils distribution services through
any means other than through the Franchised Business.
C. Restrictive Covenants. You covenant that, except as otherwise approved
in writing by Able Oil,
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for a continuous uninterrupted period commencing upon the termination, transfer,
expiration or non-renewal of this Agreement, regardless of the cause for
termination, and continuing for two (2) years thereafter, you will not either
directly or indirectly, for yourself or through, on behalf of or in conjunction
with any person, persons, partnership or corporation, own, maintain, engage in,
be employed by, advise, assist, invest in, franchise, make loans or sell
significant assets to, or have any interest in, any business which is the same
as or substantially similar to the Franchised Business and which is located
within a radius of thirty (30) miles of the territory of any company-owned or
operated or franchisee-operated Franchised Business which is in existence on the
date of expiration or termination of this Agreement.
If the period of time or the area specified above, should be adjudged
unreasonable in any proceeding, then the period of time will be reduced by such
number of months or the area will be reduced by the elimination of such portion
thereof, or both, so that such restrictions may be enforced in such area and for
such time as is adjudged to be reasonable.
D. No Undue Hardship. You acknowledge and agree that the covenants not to
compete set forth in this Agreement are fair and reasonable and will not impose
any undue hardship on you, or your shareholders or partners, if you are a
corporation or partnership, since you, your shareholders or partners have other
considerable skills, experience and education which afford you, your
shareholders or partners the opportunity to derive income from other endeavors.
E. Inapplicability of Restrictions. Sections XV.B.3. and XV.C. shall not
apply to the ownership by you of less than a five percent (5%) beneficial
interest in the outstanding equity securities of any publicly-held corporation.
F. Independence of Covenants. The parties agree that each of the covenants
in this Agreement shall be construed as independent of any other covenant or
provision of this Agreement. If any or all portions of the covenants in this
Section XV is held unreasonable or unenforceable by a court or agency having
valid jurisdiction in an unappealed final decision to which Able Oil is a party,
you expressly agree to be bound by any lesser covenant subsumed within the terms
of such covenant that imposes the maximum duty permitted by law, as if the
resulting covenant were separately stated in and made a part of this Agreement.
G. Mission. You agree to support Able Oil's mission and to conduct the
Franchised Business in accordance with Able Oil's operating policies and stated
principles.
H. Modification of Covenants. You understand and acknowledge that Able Oil
has the right, in its sole discretion, to reduce the scope of any covenant set
forth in this Section XV or any portion thereof, without your consent, effective
immediately upon receipt by you of written notice thereof, and you agree that
you will forthwith comply with any covenant as so modified, which shall be fully
enforceable notwithstanding the provisions of Section XXIII hereof.
I. Enforcement of Covenants. You expressly agree that the existence of any
claims you may have against Able Oil, whether or not arising from this
Agreement, shall not constitute a defense to the enforcement by Able Oil of the
covenants in this Agreement. You agree to pay all costs and expenses (including
reasonable attorneys' fees) incurred by Able Oil in connection with the
enforcement of the covenants set forth in this Agreement.
J. Injunctive Relief. You acknowledge that your violation of the covenants
not to compete contained in this Agreement would result in immediate and
irreparable injury to Able Oil for which no adequate remedy at law will be
available. Accordingly, you hereby consent to the entry of an injunction
prohibiting any conduct by you in violation of the terms of the covenants not to
compete set forth in this Agreement. You expressly agree that it may be presumed
conclusively that any violation of the terms of said covenants not to compete
was accomplished by and through your unlawful utilization of Able Oil's
confidential information, know-how, methods and procedures.
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K. Written Agreements. At Able Oil's request, you shall require and obtain
execution of covenants similar to those set forth in this Section XV (including
covenants applicable upon the termination of a person's relationship with you)
from your officers, directors, shareholders and/or members. All covenants
required by this Section XV.K. shall be in forms satisfactory to Able Oil,
including, without limitation, specific identification of Able Oil as a third
party beneficiary of such covenants with the independent right to enforce them.
Your failure to obtain execution of a covenant required by this Section XV.K.
shall constitute a default under Section XIII.B hereof.
XVI. CHANGES AND MODIFICATIONS
Able Oil may modify this Agreement only upon the execution of a written
agreement by you and Able Oil. Able Oil reserves and shall have the sole right
to make changes in the Manual, the System and the Proprietary Marks at any time
and without prior notice to you. You shall promptly alter any signs, products,
business materials or related items, at your sole cost and expense, upon receipt
of written notice of such change or modification in order to conform with Able
Oil's revised specifications. In the event that any improvement or addition to
the Manual, the System or the Proprietary Marks is developed by you, then you
agree to grant Able Oil an irrevocable, world-wide, exclusive, royalty-free
license, with the right to sublicense such improvement or addition.
You understand and agree that due to changes in competitive circumstances,
presently unforeseen changes in the needs of customers, and/or presently
unforeseen technological innovations, the System must not remain static, in
order that it best serve the interests of Able Oil, franchisees and the System.
Accordingly, you expressly understand and agree that Able Oil may from time to
time change the components of the System, including altering the programs,
services, methods, standards, forms, policies and procedures of that System;
adding to, deleting from or modifying those programs, products and services
which the Franchised Business is authorized to offer; and changing, improving or
modifying the Proprietary Marks. Subject to the other provisions of this
Agreement, you expressly agree to abide by any such modifications, changes,
additions, deletions and alterations.
XVII. TAXES AND INDEBTEDNESS
A. Payment. You must promptly pay, when due, all taxes levied or assessed
by any federal, state or local tax authority and any and all other indebtedness
incurred by you in the operation of the Franchised Business. You must pay to
Able Oil an amount equal to any sales tax, gross receipts tax or similar tax
imposed on Able Oil with respect to any payments to Able Oil required under this
Agreement, unless the tax is credited against income tax otherwise payable by
Able Oil.
B. Dispute. In the event of any bona fide dispute as to liability for
taxes assessed or other indebtedness, you may contest the validity or the amount
of the tax or indebtedness in accordance with procedures of the taxing authority
or applicable law; provided, however, in no event shall you permit a tax sale or
seizure by levy of execution or similar writ or warrant, or attachment by a
creditor, to occur against the Franchised Business.
C. Compliance with Federal, State and Local Laws. You must comply with all
federal, state, and local laws, rules and regulations, and shall timely obtain
any and all permits, registration certificates, licenses and bonds necessary for
the full and proper operation and management of the Franchised Business,
including, without limitation, a license to do business and provide services,
fictitious name registration and sales tax permits. Copies of all subsequent
inspection reports, warnings, certificates and ratings, issued by any
governmental entity during the term of this Agreement in connection with the
conduct of the Franchised Business which indicate your failure to meet or
maintain the highest governmental standards or less than full compliance by you
with any applicable law, rule or regulation, shall be forwarded to Able Oil by
you within three (3) days of your receipt thereof.
D. Duty to Notify. You must notify Able Oil in writing within three (3)
days of the commencement of any action, suit or proceeding, and of the issuance
of any order, writ, injunction, award or decree of any court,
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agency or other governmental instrumentality, which may adversely affect the
operation or financial condition of the Franchised Business. Additionally, any
and all consumer related complaints shall be answered by you within fifteen (15)
days after receipt thereof or such shorter period of time as may be provided in
said complaint. A copy of said answer shall be forwarded to Able Oil within
three (3) days of the date that said answer is forwarded to the complainant.
XVIII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
A. Independent Contractor.
1. It is understood and agreed by the parties hereto that this
Agreement does not create a fiduciary relationship between them, that you are an
independent contractor, and that nothing in this Agreement is intended to make
either party an agent, legal representative, subsidiary, joint venturer,
partner, employee or servant of the other for any purpose whatsoever.
2. During the term of this Agreement and any extensions hereof, you
will hold yourself out to the public as an independent contractor operating the
Franchised Business pursuant to a license from Able Oil and as an authorized
user of the System and the Proprietary Marks which are owned by Able Oil. You
agree to take such affirmative action as may be necessary to do so, including
exhibiting to customers a sign provided or required by Able Oil in a conspicuous
place or on any vehicle(s).
3. Able Oil shall not have the power to hire or fire your employees,
and except as herein expressly provided, Able Oil may not control or have access
to your funds or the expenditures thereof, or in any other way exercise dominion
or control over the Franchised Business.
B. No Liability. You understand and agreed that nothing in this Agreement
authorizes you to make any contract, agreement, warranty or representation on
Able Oil's behalf, or to incur any debt or other obligation in Able Oil's name,
and that Able Oil shall in no event assume liability for or be deemed liable
hereunder as a result of any such action or by reason of your act or omission in
your conduct of the Franchised Business or any claim or judgment arising
therefrom against Able Oil. You agree at all times to defend at your own cost,
and to indemnify and hold harmless to the fullest extent permitted by law, Able
Oil, its corporate parent, corporate subsidiaries, affiliates, successors,
assigns and designees of either entity, and the respective directors, officers,
employees, agents, shareholders, designees, and representatives of each (Able
Oil and all other hereinafter referred to collectively as "Indemnitees") from
all losses and expenses incurred in connection with any action, suit,
proceeding, claim, demand, investigation, or formal or informal inquiry
(regardless of whether same is reduced to judgment) or any settlement thereof
which arises out of or is based upon any of the following: your alleged
infringement or any other violation or any other alleged violation of any
patent, trademark or copyright or other proprietary right owned or controlled by
third parties; your alleged violation or breach of any contract, federal, state
or local law, regulation, ruling, standard or directive of any industry
standard; libel, slander or any other form of defamation by you; your alleged
violation or breach of any warranty, representation, agreement or obligation in
this Agreement; any acts, errors or omissions of you or any of your agents,
servants, employees, contractors, partners, proprietors, affiliates, or
representatives; latent or other defects in the Franchised Business, whether or
not discoverable by Able Oil or you; any services or products provided by you
at, from or related to the operation at the Franchised Business; any services or
products provided by any affiliated or nonaffiliated participating entity; any
action by any customer of the Franchised Business; and, any damage to the
property of any one or more of the Indemnitees, their agents or employees, or
any third person, firm or corporation.
C. Identification. You shall conspicuously identify yourself and the
Franchised Business and in all dealings with your clients, contractors,
suppliers, public officials and others, as an independent Franchisee of Able
Oil, and shall place such notice of independent ownership on all forms, business
cards, stationery, advertising, signs and other materials and in such fashion as
Able Oil may, in its sole and exclusive discretion, specify and require from
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time to time, in its Manual (as same may be amended from time to time) or
otherwise.
D. No False Representations. Except as otherwise expressly authorized by
this Agreement, neither party hereto will make any express or implied
agreements, warranties, guarantees or representations or incur any debt in the
name of or on behalf of the other party, or represent that the relationship
between Able Oil and you other than that of franchisor and franchisee. Able Oil
does not assume any liability, and will not be deemed liable, for any
agreements, representations, or warranties made by you which are not expressly
authorized under this Agreement, nor will Able Oil be obligated for any damages
to any person or property which directly or indirectly arise from or relate to
the operation of the Franchised Business franchised hereby.
XIX. APPROVALS AND WAIVERS
A. Written Consent. Whenever this Agreement requires the prior approval or
consent of Able Oil, you shall make a timely written request to Able Oil
therefor and such approval or consent shall be obtained in writing.
B. No Waiver. No failure of Able Oil to exercise any power reserved to it
by this Agreement, or to insist upon strict compliance by you with any
obligation or condition hereunder, and no custom or practice of the parties at
variance with the terms hereof, shall constitute a waiver of Able Oil's right to
demand exact compliance with any of the terms herein. Waiver by Able Oil of any
particular default by you shall not affect or impair Able Oil's rights with
respect to any subsequent default of the same, similar or different nature, nor
shall any delay, forbearance or omission of Able Oil to exercise any power or
right arising out of any breach or default by you of any of the terms,
provisions or covenants hereof affect or impair Able Oil's right to exercise the
same, nor shall such constitute a waiver by Able Oil of any right hereunder or
the right to declare any subsequent breach or default and to terminate this
Agreement prior to the expiration of its term. Subsequent acceptance by Able Oil
of any payments due to it hereunder shall not be deemed to be a waiver by Able
Oil of any preceding breach by you of any terms, covenants or conditions of this
Agreement.
C. Waiver to Jury Trial. You hereby waive any right to a jury trial with
respect to this Agreement and/or any matters arising hereunder.
XX. NOTICES
Any and all notices required or permitted under this Agreement shall be in
writing and shall be personally delivered or mailed by certified mail, return
receipt requested, or dispatched by overnight delivery envelope, to the
respective parties at the following addresses unless and until a different
address has been designated by written notice to the other party:
Notices to Franchisor: Able Oil Company
344 Route 46
Rockaway, New Jersey 07866
Attn: President
With a Copy (which shall
not constitute notice) to: Alan J. Schaeffer, Esq.
Greenberg Traurig
1300 Connecticut Avenue, N.W.
Suite 1000
Washington, D.C. 20036
Notices to Franchisee: Andrew Schmidt
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1250 Easton Rd.
Horsham, PA
With a Copy to:
-----------------------------------------
-----------------------------------------
-----------------------------------------
Any notice sent by certified mail shall be deemed to have been given at
the date and time of mailing.
XXI. RELEASE OF PRIOR CLAIMS
By executing this Agreement, you, individually and on behalf of your
heirs, legal representatives, successors and assigns, and each assignee of this
Agreement by accepting assignment of the same, hereby forever release and
discharge Able Oil and its officers, directors, employees, agents and servants,
including Able Oil's subsidiary and affiliated corporations, their respective
officers, directors, employees, agents and servants, from any and all claims
relating to or arising under any franchise agreement or any other agreement
between the parties executed prior to the date of this Agreement including any
and all claims, whether presently known or unknown, suspected or unsuspected,
arising under the franchise, securities or antitrust laws of the United States
or of any state or territory thereof.
XXII. DISCLOSURE STATEMENT AND DISCLAIMER
A. Compliance with Applicable Laws. You acknowledge, by your signature
hereto, that you received from Able Oil a Federal Trade Commission or Uniform
Franchise Offering Circular for the State in which the Franchised Business will
be located, or your place of residence, as appropriate, at least ten (10)
business days prior to the execution of this Agreement.
___ [Please initial to acknowledge that you have read and understand this
Paragraph XXII.A.]
B. Receipt of Agreement. You acknowledge that you received from Able Oil
this Agreement with all blanks filled in at least five (5) days prior to the
execution of this Agreement. You represent that you have read this Agreement in
its entirety and that you has been given the opportunity to clarify any
provisions that you did not understand and to consult with an attorney or other
professional advisor. You further represents that you understand the terms,
conditions and obligations of this Agreement and agree to be bound thereby.
___ [Please initial to acknowledge that you have read and understand this
Paragraph XXII.B.]
C. Acknowledgment. You acknowledges and accepts the following:
YOUR SUCCESS IN OPERATING A FRANCHISE IS SPECULATIVE AND WILL DEPEND
ON MANY FACTORS INCLUDING, TO A LARGE EXTENT, YOUR INDEPENDENT BUSINESS
ABILITY. THIS OFFERING IS NOT A SECURITY AS THAT TERM IS DEFINED UNDER
APPLICABLE FEDERAL AND STATE SECURITIES LAWS. THE OBLIGATION TO TRAIN,
MANAGE, PAY, RECRUIT AND SUPERVISE EMPLOYEES OF THE FRANCHISED BUSINESS
RESTS SOLELY WITH YOU. YOU HAVE NOT RELIED ON ANY WARRANTY OR
REPRESENTATION, EXPRESSED OR IMPLIED, AS TO THE POTENTIAL SUCCESS OR
PROJECTED INCOME OF THE BUSINESS VENTURE CONTEMPLATED HEREBY. NO
REPRESENTATIONS OR PROMISES HAVE BEEN MADE BY Able Oil TO INDUCE YOU TO
ENTER INTO THIS AGREEMENT EXCEPT AS SPECIFICALLY INCLUDED HEREIN. Able Oil
HAS NOT MADE ANY REPRESENTATION, WARRANTY OR GUARANTY, EXPRESS OR IMPLIED,
AS TO THE POTENTIAL REVENUES, PROFITS OR SERVICES OF THE BUSINESS VENTURE
TO YOU AND CANNOT, EXCEPT UNDER THE TERMS OF THIS AGREEMENT, EXERCISE
CONTROL OVER YOUR BUSINESS. YOU
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ACKNOWLEDGE AND AGREE THAT YOU HAVE NO KNOWLEDGE OF ANY REPRESENTATION
MADE BY Able Oil OR ITS REPRESENTATIVES OF ANY INFORMATION THAT IS
CONTRARY TO THE TERMS CONTAINED HEREIN.
___ [Please initial to acknowledge that you have read and understand this
Paragraph XXII.C.]
XXIII. ENTIRE AGREEMENT
This Agreement, the documents referred to herein and the Attachments
hereto, if any, constitute the entire, full and complete Agreement between the
parties hereto concerning the subject matter hereof, and supersede all prior
agreements with no other representations having induced you to execute this
Agreement. No amendment, change or variance from this Agreement shall be binding
on the parties hereto unless mutually agreed to by the parties and executed by
themselves or their authorized officers or agents in writing.
XXIV. SEVERABILITY AND CONSTRUCTION
A. Severability. Except as expressly provided to the contrary herein, each
section, part, term and/or provision of this Agreement shall be considered
severable, and if, for any reason, any section, part, term and/or provision
herein is determined to be invalid and contrary to, or in conflict with, any
existing or future law or regulation by a court or agency having valid
jurisdiction, such shall not impair the operation of, or have any other effect
upon, such other portions, sections, parts, terms and/or provisions of this
Agreement as may remain otherwise intelligible, and the latter shall continue to
be given full force and effect and bind the parties hereto, and said invalid
sections, parts, terms and/or provisions shall be deemed not to be a part of
this Agreement; provided, however, that if Able Oil determines that such finding
of invalidity or illegality adversely affects the basic consideration of this
Agreement, Able Oil, at its option, may terminate this Agreement.
B. Covenants. You expressly agree to be bound by any promise or covenant
imposing the maximum duty permitted by law which is subsumed within the terms of
any provision hereof, as though it were separately articulated in and made a
part of this Agreement, that may result from striking from any of the provisions
hereof any portion or portions which a court may hold to be unreasonable and
unenforceable in a final decision to which Able Oil is a party, or from reducing
the scope of any promise or covenant to the extent required to comply with such
a court order.
C. Captions. All captions in this Agreement are intended solely for the
convenience of the parties, and none of the captions shall be deemed to affect
the meaning or construction of any provision hereof.
D. References. All references herein to the masculine, neuter or singular
shall be construed to include the masculine, feminine, neuter or plural, where
applicable, and all acknowledgments, promises, covenants, agreements and
obligations herein made or undertaken by you shall be deemed jointly and
severally undertaken by all of the parties executing this Agreement in their
individual capacity on your behalf. This Agreement may be executed in one or
more originals, each of which shall be deemed an original.
E. Definition of "You". As used in this Agreement, the term "you" shall
include all persons who succeed to the interest of the original franchisee by
transfer or operation of law and shall be deemed to include not only the
individual or entity defined as the "you" in the introductory paragraph of this
Agreement, but shall also include all partners of the entity that executes this
Agreement, in the event said entity is a partnership; all shareholders, officers
and directors of the entity that executes this Agreement, in the event said
entity is a corporation; and all members of the entity that executes this
Agreement, in the event said entity is a limited liability company. By their
signatures hereto, all partners, members, shareholders, officers and directors
of the entity that signs this Agreement as franchisee acknowledge and accept the
duties and obligations imposed upon each of them, individually, by the terms of
this Agreement.
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F. Force Majeure. If, as a result of hurricane, tornado, typhoon,
flooding, lightning, blizzard and other unusually severe weather, earthquake,
avalanche, volcanic eruption, fire, riot, insurrection, war, explosion,
unavoidable calamity or other act of God (a "Force Majeure"), compliance by any
party with the terms of this Agreement is rendered impossible or would otherwise
create an undue hardship upon any party, all parties shall be excused from their
respective obligations hereunder for the duration of the Force Majeure and for a
reasonable recovery period thereafter, but otherwise this Agreement shall
continue in full force and effect.
XXV. APPLICABLE LAW
A. Governing Law. This Agreement takes effect upon its acceptance and
execution by Able Oil. This Agreement shall be interpreted and construed under
the laws of the State of New York except to the extent governed by the United
States Trademark Act of 1946 (Lanham Act, 15 U.S.C. Section 1051 et seq.).
B. Jurisdiction and Venue. Except as otherwise expressly provided by
applicable state law or regulation, the parties agree that any action brought by
either party against the other shall be brought in the State of New York in the
City of New York and the parties do hereby waive all questions of personal
jurisdiction or venue for the purpose of carrying out this provision.
C. Remedy. No right or remedy conferred upon or reserved by Able Oil or
you by this Agreement is intended and it shall not be deemed to be exclusive of
any other right or remedy provided or permitted herein, by law or at equity, but
each right or remedy shall be cumulative of every other right or remedy.
D. Injunctive Relief. Nothing herein contained shall bar Able Oil's right
to obtain injunctive relief against threatened conduct that will cause it loss
or damage under the usual equity rules, including the applicable rules for
obtaining restraining orders and preliminary injunctions.
XXVI. ARBITRATION
Except as specifically otherwise provided in this Agreement, the parties
agree that any and all disputes between them and any claim by either party that
cannot be amicably settled shall be submitted to the American Arbitration
Association (the "AAA") for arbitration under the AAA's Commercial Rules of
Arbitration. The arbitrator(s) shall be selected in accordance with standard AAA
procedure. Except as otherwise expressly provided by applicable state law or
regulation, the mediator shall hear the dispute in New York, New York or at such
other location as may be designated by Able Oil. Each party shall bear all of
its own fees, costs and attorneys' fees. The decision of the arbitration shall
be binding. You know, understand and agree that it is the intent of the parties
that any arbitration between Able Oil and you shall be of your individual claims
and that the claims subject to arbitration shall not be arbitrated on a
classwide basis.
Notwithstanding any provision contained in this Section XXVI, Able Oil
may, at its sole option, institute in a court of law or equity an action or
actions for temporary, preliminary, or permanent injunctive relief or seeking
any other equitable relief against you in addition to any other rights and
remedies provided herein. In no event shall you be entitled to make, and you
hereby waive, any claim for money damages by way of set-off, counterclaim,
defense or otherwise based upon any claim or assertion by you that Able Oil has
unreasonably withheld or unreasonably delayed any consent or approval to a
proposed act by you under any of the terms of this Franchise Agreement. Your
sole remedy for any such claim shall be an action or proceeding to enforce any
such provisions, for specific performance or declaratory judgment.
XXVII. ESTOPPEL STATEMENT
You hereby agree that from time to time, upon not less than ten (10) days'
prior request by Able Oil, you
30
<PAGE>
will deliver to Able Oil a statement in writing certifying (a) that this
Agreement is unmodified and in full force and effect (or, if there have been
modifications, that this Agreement as modified is in full force and effect and
stating the modifications); (b) the dates to which all of the royalty and other
fees have been paid; (c) that Able Oil is not in default under any provisions of
this Agreement, or, if in default, the nature thereof in detail; and (d) other
matters reasonably requested by Able Oil. Your failure to deliver such statement
within ten (10) days of request shall constitute an affirmation by you that this
Agreement is in full force and effect, free of any claims and free of any
default on Able Oil's part.
XXVIII. ACKNOWLEDGMENTS
You acknowledge that you have conducted an independent investigation of
all aspects relating to the Franchised Business and recognize that the business
venture contemplated by this Agreement involves business risks and that its
success will be largely dependent upon your skills and ability as an independent
business person or organization. You acknowledge that you have received, read
and understand this Agreement and Able Oil's Uniform Offering Circular,
including all related attachments and agreements. You acknowledge that you have
no knowledge of any representations about the Franchised Business or about Able
Oil, its franchising program or its policies made by Able Oil, its officers,
directors, shareholders, employees or agent which are contrary to statements
made in the Offering Circular or this Agreement. Able Oil has accorded you ample
time and opportunity to consult with advisors of your choosing about the
potential benefits and risks of entering into this Agreement. You understand and
accept the terms, conditions and covenants contained in this Agreement as being
reasonably necessary to maintain Able Oil's high standards of quality and
service, to maintain the uniformity of those standards at all facilities
operating pursuant to the System, and to protect and preserve the goodwill of
the Propriety Marks. ___ [Please initial to acknowledge that you have read and
understand this Paragraph XXVII]
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed, sealed and
delivered this Agreement on the day and year first above written.
ATTEST: FRANCHISOR:
Able Oil Company
By: /s/ Timothy G. Harrington
- ---------------------------- ------------------------------------------
Timothy G. Harrington, Chief Executive
Officer
WITNESS: FRANCHISEE:
By: /s/ Andrew W. Schmidt
- ---------------------------- ------------------------------------------
32
<PAGE>
ATTACHMENT A
<PAGE>
GUARANTY
In consideration of, and as an inducement to, the execution of that
certain Franchise Agreement, and any revisions, modifications and
amendments thereto, (hereinafter collectively the "Agreement") dated
Deember 31, 19 98 , by and between Able Oil Company, a New Jersey limited
corporation (hereinafter the "Franchisor") and Andrew Schmidt (hereinafter
the "Franchisee"), each of the undersigned Guarantors agrees as follows:
1. The Guarantors do hereby jointly and severally unconditionally
guaranty the full, prompt and complete performance of the Franchisee under
the terms, covenants and conditions of the Agreement, and any other
Franchise Agreement entered into between the Franchisor and the
Franchisee, its directors, officers, agents, employees or other
representatives (hereafter incorporated into and made part of all
references to the "Agreement"), including without limitation the complete
and prompt payment of all indebtedness to the Franchisor under the
Agreement. The word "indebtedness" is used herein in its most
comprehensive sense and includes without limitation any and all advances,
debts, obligations and liabilities of the Franchisee, now or hereafter
incurred, either voluntarily or involuntarily, and whether due or not due,
absolute or contingent, liquidated or unliquidated, determined or
undetermined, or whether recovery thereof may be now or hereafter barred
by any statute of limitation or is otherwise unenforceable.
2. The obligations of the Guarantors are independent of the
obligations of the Franchisee and a separate action or actions may be
brought and prosecuted against any or all of the Guarantors, whether or
not actions are brought against the Franchisee or whether the Franchisee
is joined in any such action.
3. If the Franchisee is a corporation, partnership or limited
liability company, the Franchisor shall not be obligated to inquire into
the power or authority of the Franchisee or its partners or the officers,
directors, agents, members or managers acting or purporting to act on the
Franchisee's behalf and any obligation or indebtedness made or created in
reliance upon the exercise of such power and authority shall be guaranteed
hereunder. Where the Guarantors are corporations or partnerships it shall
be conclusively presumed that the Guarantors and the partners, agents,
officers and directors acting on their behalf have the express authority
to bind such corporations or partnerships and that such corporations or
partnerships have the express power to act as the Guarantors pursuant to
this Guaranty and that such action directly promotes the business and is
in the interest of such corporations or partnerships.
4. The Franchisor, its successors and assigns, may from time to
time, without notice to the undersigned: (a) resort to the undersigned for
payment of any of the
<PAGE>
indebtedness, whether or not it or its successors have resorted to any
property securing any of the indebtedness or proceeded against any other
of the undersigned or any party primarily or secondarily liable on any of
the indebtedness; (b) release or compromise any indebtedness of any of the
undersigned hereunder or any indebtedness of any party or parties
primarily or secondarily liable on any of the indebtedness; (c) extend,
renew or credit any of the indebtedness for any period (whether or not
longer than the original period); (d) alter, amend or exchange any of the
indebtedness; or (e) give any other form of indulgence, whether under the
Agreement or otherwise.
5. The undersigned further waive presentment, demand, notice of
dishonor, protest, nonpayment and all other notices whatsoever, including
without limitation: notice of acceptance hereof; notice of all contracts
and commitments; notice of the existence or creation of any liabilities
under the Agreement and of the amount and terms thereof; and notice of all
defaults, disputes or controversies between the Franchisee and the
Franchisor resulting from the Agreement or otherwise, and the settlement,
compromise or adjustment thereof.
6. This Guaranty shall be enforceable by and against the respective
administrators, executors, successors and assigns of the Guarantors and
the death of any Guarantor shall not terminate the liability of such
Guarantor or limit the liability of the other Guarantors hereunder.
7. If more than one person has executed this Guaranty, the term "the
undersigned," as used herein shall refer to each such person, and the
liability of each of the undersigned hereunder shall be joint and several
and primary as sureties.
8. In each case where the spouse of a Franchisee has executed any
documents in connection with the granting of the Agreement, and the
Franchisee subsequently divorces from such spouse, then, in the event that
the Franchisee subsequently remarries, the new spouse of such Franchisee
must execute, and agree to be bound by the provisions of, each of the
documents previously executed by the Franchisee's original spouse.
IN WITNESS WHEREOF, each of the undersigned has executed this
Guaranty under seal effective as of the 23 day of December, 1998.
/s/ Andrew Schmidt
- -------------------------------- --------------------------------
Signature Signature of Spouse (if married)
Andrew Schmidt
- -------------------------------- --------------------------------
Printed Name Printed Name
2
<PAGE>
12/31/98
- -------------------------------- --------------------------------
Date Date
3
<PAGE>
ATTACHMENT B
4
<PAGE>
TELEPHONE ASSIGNMENT AGREEMENT
THIS TELEPHONE ASSIGNMENT AGREEMENT is made as of this 31 day of
December, 1993 by and between Andrew Schmidt (hereinafter the "Assignor")
and Able Oil Company, a New Jersey corporation (hereinafter the
"Assignee").
WITNESSETH:
WHEREAS, the Assignee has developed and owns the proprietary system
("System") for the operation of a retail business under the trademark and
logo ABLE OIL (the "Franchised Business");
WHEREAS, the Assignor has been granted a license to operate a
Franchised Business pursuant to a Franchise Agreement dated even date
herewith, in accordance with the System;
WHEREAS, in order to operate its Franchised Business, the Assignor
shall be acquiring one or more telephone numbers, telephone listings and
telephone directory advertisements; and
WHEREAS, as a condition to the execution of the Franchise Agreement,
the Assignee has required that the Assignor assign all of its right, title
and interest in its telephone numbers, telephone listings and telephone
directory advertisements to the Assignee in the event of a termination of
the Franchise Agreement;
NOW, THEREFORE, in consideration of the foregoing, the mutual
promises herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
1. Assignment. In the event of termination of the Franchise
Agreement, and in order to secure continuity and stability of the
operation of the System, the Assignor hereby sells, assigns, transfers and
conveys to the Assignee all of its rights, title and interest in and to
certain telephone numbers, telephone listings and telephone directory
advertisements pursuant to which Assignor shall operate its Franchised
Business in accordance with the terms of the Franchise Agreement;
provided, however, such Assignment shall not be effective unless and until
the Franchise Agreement is terminated in accordance with the provisions
thereof.
2. Representation and Warranties of the Assignor. The Assignor
hereby represents, warrants and covenants to the Assignee that:
<PAGE>
(a) As of the effective date of the Assignment, all of
the Assignor's obligations and indebtedness for telephone, telephone
listing services and telephone directory advertisement services shall be
paid and current;
(b) As of the date hereof, the Assignor has full power
and legal right to enter into, execute, deliver and perform this
Agreement;
(c) This Agreement is a legal and binding obligation of
the Assignor, enforceable in accordance with the terms hereof;
(d) The execution, delivery and performance of this
Assignment does not conflict with, violate, breach or constitute a default
under any contract, agreement or instrument to which the Assignor is a
party or by which the Assignor is bound, and no consent of nor approval by
any third party is required in connection herewith; and
(e) The Assignor has the specific power to assign and
transfer its right, title and interest in its telephone numbers, telephone
listings and telephone directory advertisements, and the Assignor has
obtained all necessary consents to this Assignment.
3. Miscellaneous. The validity, construction and performance
of this Assignment shall be governed by the laws of the State of New York.
All agreements, covenants, representations and warranties made herein
shall survive the execution hereof. All rights of the Assignee shall inure
to its benefit and to the benefit of its successors and assigns.
IN WITNESS WHEREOF, each of the parties have executed this
Assignment as of the day and year first written above.
"ASSIGNEE"
Able Oil Company
By: /s/ Timothy G. Harrington
-----------------------------------------
Timothy G. Harrington, President and CEO
ASSIGNOR
2
<PAGE>
By: /s/ Andrew Schmidt
-----------------------------------------
Title:
-----------------------------------------
WITNESS: FRANCHISEE:
By: /s/ Andrew W. Schmidt
- ---------------------- -----------------------------------------
3
Exhibit 10.20
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("Agreement"), dated as of December 31,
1998, by and among ABLE ENERGY COMPANY, INC., a Delaware corporation ("Able" or
"Seller"), ABLE OIL COMPANY MONTGOMERY, INC., a Pennsylvania corporation (the
"Company"), and ANDREW W. SCHMIDT, an adult individual residing in the
Commonwealth of Pennsylvania (the "Buyer"). Certain capitalized terms used
herein shall have the meaning given such terms in Section 8.11 below,
PREAMBLE
A. The Company is and has been a corporation engaged in the operation of a
heating oil and fuel distribution business serving Philadelphia and surrounding
counties in Pennsylvania (the "Business").
B. Seller owns all of the issued and outstanding shares of the capital
stock of the Company (the "Company Shares").
C. Seller wishes to sell to Buyer, and Buyer wishes to purchase from
Seller, the Company Shares, all on the terms and conditions hereinafter set
forth, and Seller or its Affiliate and the Company desire to enter into a
certain franchise agreement in connection therewith.
NOW, THEREFORE, in consideration of the mutual covenants of the parties as
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
SALE OF STOCK
Seller, in reliance upon the representations and warranties of Buyer
contained herein and on the terms and conditions herein set forth, hereby agrees
to sell, assign, transfer, convey and deliver to Buyer at the Closing all of its
right, title and interest in and to all of the Company Shares. Buyer, in
reliance upon the representations and warranties of Seller contained herein and
on the terms and conditions hereinafter set forth, hereby agrees to purchase the
Company Shares from Seller at the Closing for a purchase price as provided in
Article 2 hereof.
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<PAGE>
ARTICLE 2
CONSIDERATION AND MANNER OF PAYMENT
2.1 Purchase Price. The aggregate purchase price for the Company Shares
(the "Purchase Price") is One Hundred and Forty Thousand Dollars (U.S.$140,000)
to be paid as provided for in Section 2.2.
2.2 Payment of Purchase Price. The Purchase Price shall be paid in
accordance with a Promissory Note the (the "Note") to be executed and delivered
by Buyer at the Closing. The Note shall be in the original principal amount of
the Purchase Price and shall bear interest as set forth therein. A form of the
Note is attached hereto as Exhibit 2.2.
2.3 Pledge and Security Agreement. The Company Shares and the assets of
the Business to be purchased hereby shall be subject to a pledge (with respect
to the Company Shares) and a grant of a security interest (in the assets of the
Business) to the Seller to secure the Buyer's obligations under the Note. The
terms of the pledge shall be set forth in a Pledge and Security Agreement
("Pledge Agreement"), a form of which is attached hereto as Exhibit 2.3.
ARTICLE 3
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller and the Company (collectively, the "Seller Parties") hereby
represent and warrant to Buyer as of the Closing Date as follows:
3.1 Seller Parties Authority. The Company and the Seller each has full
corporate power, right and authority, to enter into and perform its respective
obligations under this Agreement and each of the Transaction Documents to which
each of them is a party. This Agreement and each of the Transaction Documents to
which a Seller Party is a party have been duly executed and delivered by each
Seller Party, and constitute the valid and binding obligations, enforceable
against such Seller Party in accordance with theft respective terms, except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' fights and remedies generally, and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
3.2 Organization and Qualification of the Company. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the Commonwealth of Pennsylvania, The Company has full corporate power
and authority to carry on its businesses as it is now being conducted and to own
or hold under lease the properties and assets it now owns or holds under lease.
-2-
<PAGE>
3.3 Subsidiaries. The Company does not have, directly or indirectly, any
ownership in any Person.
3.4 Articles of Incorporation, Bylaws, Officers and Directors. Complete
and correct copies of the Company's charter documents and all amendments thereof
to date, certified by the Secretary of the Commonwealth of Pennsylvania, and the
bylaws as amended to date, certified by an officer of the Company have been or
are being delivered to Buyer prior to or at the Closing. Schedule 3.4 contains a
complete and correct list of all of the officers and directors of the Company
immediately prior to the Closing.
3.5 Capital Stock. The Company has 1,000 shares of Common Stock
authorized, of which [____] shares are issued and outstanding. All of the issued
and outstanding shares of capital stock of the Company comprise the Company
Shares and are owned by the Seller.
3.6 Options, etc. Other than the Company Shares, the Company does not have
outstanding any stock or other securities convertible into or exchangeable for
shares of its capital stock or containing profit participation features, and the
Company does not have outstanding any options, warrants or rights to subscribe
for or to purchase its capital stock or any stock or securities convertible into
or exchangeable for its capital stock and there is no obligation, commitment or
agreement of any character to which any Seller Party is a party, by which the
Company is obligated to issue, deliver or sell or cause to be issued, delivered
or sold, additional shares of capital stock of the Company or obligating Company
to grant, extend, accelerate the vesting of or enter in to any such option,
warrant, equity security, call right, commitment or agreement. The Company is
not subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock or any warrants,
options or other rights to acquire its capital stock. There are no voting
agreements, voting trusts or other agreements (including, without limitation,
contractual or statutory preemptive rights or cumulative voting rights),
commitments or understandings with respect to the voting or transfer of the
capital stock of the Company.
3.7 Title to Company Shares. Seller is the beneficial and record owner of
all the outstanding Company Shares, free and clear of any Liens whatsoever,
other than any transfer restrictions that may apply under federal and state
securities laws. The Seller has good and marketable title to the Company Shares.
Upon consummation of the transactions provided for in this Agreement in
accordance with the terms hereof, Buyer will hold good and marketable title to
all of the Company Shares, free and clear of any Liens whatsoever, other than
transfer restrictions under federal and state securities laws.
3.8 Financial Statements. Seller has previously delivered to Buyer audited
consolidated financial statements of the Company for the years ended December
31, 1996, 1997 and the six months ended June 30, 1998 ("Financial Statements").
Each of the Financial Statements is complete and correct in all material
respects, is consistent with the books and records of the Company (which, in
turn, are accurate and complete in all material respects) and
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<PAGE>
fairly presents the Company's financial condition, assets and liabilities as of
their respective dates and the results of operations and cash flows for the
periods related thereto in accordance with GAAP, except that the interim
Financial Statements lack the footnote disclosure and normal recurring accruals
otherwise required by GAAP, none of which, if provided, would reflect a material
adverse change in the operations or financial condition of the Company.
3.9 Compliance with Applicable Laws. Each Seller Party is in material
compliance with all applicable laws, ordinances, statutes, rules, regulations
and orders promulgated by any federal, state or local governmental body or
agency relating to the Business and the operation of the Company.
3.10 Intellectual Property. Other than the Company's corporate name, the
Company owns no intellectual property. All such intellectual property used in
the Business is owned by and licensed from the Seller.
3.11 Transaction Not a Breach. Neither the execution and delivery of the
Transaction Documents to which each Seller Party is party, nor the fulfillment
of or compliance by each Seller Party with the terms or provisions thereof, will
result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in a violation of, the corporate charter or bylaws of
Seller or the Company, or any agreement, contract, instrument, order, judgment
or decree to which Seller or the Company is a party or by which their respective
assets are bound, or violate any provision of any applicable law, statute, rule
or regulation or any order, decree, writ or injunction of any court or
governmental entity which affects the assets or business of Seller or the
Company.
3.12 No Consents. No consent from or approval of any court, governmental
entity or any other person is necessary in connection with the execution and
performance by Seller of the Transaction Documents to which it is a party, or
the transactions contemplated thereby (and the Exhibits hereto); and the
consummation of the transactions contemplated by the Transaction Documents.
3.13 No Misrepresentation. None of the representations and warranties of
Seller set forth in this Agreement, in any of the certificates, schedules,
lists, documents, exhibits, or other instruments delivered, or to be delivered,
to Buyer by Seller, his Affiliates or representatives, as contemplated by any
provision hereof (including, without limitation, the Transaction Documents),
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained herein or therein not misleading.
ARTICLE 4
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer hereby represents and warrants to Seller as of the Closing Date as
follows:
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<PAGE>
4.1 Authority and Enforceability. Buyer is an individual resident in the
Commonwealth of Pennsylvania with full power and competency to enter into and
perform his obligations under this Agreement and each of the Transaction
Documents to which he is a party and to execute, deliver and perform his
obligations under this Agreement. This Agreement and each of the Transaction
Documents to which Buyer is a party have been duly executed and delivered by
Buyer and are the valid and binding obligations of Buyer and are enforceable
against Buyer in accordance with their respective terms. No permits, approvals
or consents of or notifications to (i) any governmental entities or (ii) any
other Persons are necessary in connection with the execution, delivery and
performance by Buyer of this Agreement and the Transaction Documents and the
consummation by Buyer of the transactions contemplated hereby or thereby.
4.2 Transaction Not a Breach. The execution, delivery and performance of
this Agreement and the Transaction Documents by Buyer will not violate or
conflict with, or result in the breach of any of the terms, conditions, or
provisions of any contract, agreement, mortgage, or other instrument or
obligation of any nature to which Buyer is a party or by which Buyer is bound.
4.3 No Misrepresentation. None of the representations and warranties of
Buyer set forth in this Agreement or in any of the certificates, schedules,
lists, documents, exhibits, or other instruments delivered, or to be delivered,
to the Seller as contemplated by any provision hereof (including, without
limitation, the Transaction Documents), contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
ARTICLE 5
CLOSING
5.1 Time and Place. The closing of the transactions that are the subject
of this Agreement (the "Closing") shall occur at the offices of the Buyer, at
10:00 a.m. on December 31, 1998 (the "Closing Date") or at such other time or
place as the parties hereto shall mutually agree.
5.2 Deliveries of the Seller. At the Closing, Seller will execute and
deliver or cause to be executed and delivered to Buyer:
(a) a non-negotiable copy of the certificates representing the
Company Shares (the originals of which shall remain in the custody of Seller
pursuant to the Pledge Agreement);
(b) Certificates of Good Standing, dated not more than five (5) days
prior to the Closing Date, with respect to the Company, issued by the Secretary
of the Commonwealth of Pennsylvania and by the Secretary of State of Delaware.
-5-
<PAGE>
(e) a Secretary's Certificate of the Company, together with a
certified copy of the Company's Certificate of Incorporation, and copies of the
Bylaws and the resolutions of the Board of Directors of the Company authorizing
the execution and delivery of this Agreement and the Transaction Documents and
the performance of the Company's obligations hereunder and thereunder, each such
item certified by the secretary of the Company as having been duly and validly
adopted and in full force and effect;
(f) the written resignation of all the officers and directors of the Company,
effective as of the Closing;
(g) all minute books, stock ledgers and similar corporate records of the
Company;
(h) a Franchise Agreement duly executed by Able;
(i) all records, customer lists, sales records, stationary, printed forms,
business records, promotional materials, purchase orders and sales records used
in the Business; and
(j) such other documents and instruments as Buyer or its counsel reasonably
shall deem necessary to consummate the transactions contemplated hereby.
5.3 Deliveries of Buyer. At the Closing, Buyer will deliver to Seller
simultaneously with the delivery of the items referred to in Section 5.2 above:
(a) the executed Note evidencing the payment obligation of the Purchase Price;
(b) a duly executed copy of the Pledge Agreement;
(c) a duly executed Franchise Agreement and any related documents in connection
therewith;
(d) two duly executed UCC-1 Financing Statements which shall be filed together
with Appendix A to the Pledge Agreement to be filed in the appropriate state or
local agencies in order to perfect Seller's security interest granted by Buyer
in and to the collateral described in Appendix A;
(e) such other documents and instruments as Buyer or its counsel reasonably
shall deem necessary to consummate the transactions contemplated hereby.
ARTICLE 6
POST-CLOSING COVENANTS
6.1 Indemnification.
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<PAGE>
6.1.1 Indemnification by Seller. From and after the Closing, Seller
agrees to indemnify, defend and save Buyer and the Company and their respective
Affiliates and Plan Affiliates, and each of their respective officers,
directors, employees, agents, Employee Benefit Plans, and fiduciaries, plan
administrators or other parties dealing with any such plans (each, a "Buyer
Indemnified Party"), forever harmless from and against, and to promptly pay to a
Buyer Indemnified Party or reimburse a Buyer Indemnified Party for, any and all
liabilities (whether contingent, fixed or unfixed, liquidated or unliquidated,
or otherwise), obligations, deficiencies, demands, claims, suits, actions, or
causes of action, assessments, losses, costs, expenses, interest, fines,
penalties, actual or punitive damages or costs or expenses of any and all
investigations, proceedings, judgments, environmental analyses, remediations,
settlements and compromises (including reasonable fees and expenses of
attorneys, accountants and other experts) (individually and collectively, the
"Losses") sustained or incurred by any Buyer Indemnified Party relating to,
resulting from, arising out of or otherwise by virtue of any of the following:
(a) any misrepresentation or breach of a representation or warranty
made herein or in the Transaction Documents by Seller or any one of or its
respective Affiliates or non-compliance with or breach by any of them of any of
the covenants or agreements contained in this Agreement or the Transaction
Documents to be performed by Seller, or any of its respective Affiliates;
(b) any violations of or obligations under any Environmental and
Safety Requirements to the extent existing or arising on or prior to the Closing
Date;
(c) any action, demand, proceeding, investigation or claim (whenever
made) by any third party (including governmental agencies) against or affecting
Buyer or the Company which, if successful, would give rise to, evidence or
demonstrate the existence of or relate to a misrepresentation or breach of any
of the representations, warranties or covenants of Seller or its Affiliates;
(d) any action, demand, proceeding, investigation or claim (whenever
made) by any third party against or affecting Buyer or the Company relating to
any personal injury or property damage caused, or alleged to be caused, by any
goods sold, delivered or serviced by the Company prior to the Closing;
(e) any assertion against the Company or Buyer of Excluded
Liabilities; or
(f) any claim for payment of fees and/or expenses as a broker or
finder in connection with the origin, negotiation, execution or consummation of
this Agreement based upon any alleged agreement between the claimant and the
Seller, or the Company.
6.1.2 Indemnification by Buyer. From and after the Closing, Buyer
and the Company, jointly and severally, agree to indemnify, defend and save
Seller and their respective Affiliates, and their respective officers,
directors, employees, trustees and agents (each, a "Seller
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<PAGE>
Indemnified Party") forever harmless from and against, and to promptly pay to a
Seller Indemnified Party or reimburse a Seller Indemnified Party for, any and
all Losses actually sustained or incurred by any Seller Indemnified Party
relating to, resulting from, arising out of or otherwise by virtue of any of the
following:
(a) any misrepresentation or breach of a representation or warranty
made herein or in the Transaction Documents by Buyer, or non-compliance with or
breach by Buyer of any of the covenants or agreements contained in this
Agreement or the Transaction Documents to be performed by Buyer or any of its
Affiliates;
(b) any action, demand, proceeding, investigation or claim (whenever
made) by any third party (including governmental agencies) against or affecting
Seller or its Affiliates which, if successful, would give rise to or evidence
the existence of or relate to a misrepresentation or breach of any of the
representations, warranties or covenants of Buyer; or
(c) any claim for payment of fees and/or expenses as a broker or
finder in connection with the origin, negotiation, execution or consummation of
this Agreement based upon any alleged agreement between the claimant and Buyer.
6.1.3 Indemnification Procedure for Third Party Claims. In the event
that subsequent to the Closing any person or entity entitled to indemnification
under this Agreement (an "Indemnified Party") asserts a claim for
indemnification or receives notice of the assertion of any claim or of the
commencement of any action or proceeding by any entity that is not a party to
this Agreement or an Affiliate of a party to this Agreement (including, but not
limited to any domestic or foreign court or governmental authority, federal,
state or local) (a "Third Party Claim") against such Indemnified Party, against
which a party to this Agreement is required to provide indemnification under
this Agreement (an "Indemnifying Party"), the Indemnified Party shall give
written notice together with a statement of any available information regarding
such claim to the Indemnifying Party within 60 days after learning of such claim
(or within such shorter time as may be necessary to give the Indemnifying Party
a reasonable opportunity to respond to such claim). The Indemnifying Party shall
have the right, upon written notice to the Indemnified Party (the "Defense
Notice") within 30 days after receipt from the Indemnified Party of notice of
such claim, which notice by the Indemnifying Party shall specify the counsel it
will appoint to defend such claim ("Defense Counsel"), to conduct at its expense
the defense against such claim in its own name, or if necessary in the name of
the Indemnified Party; provided, however, that the Indemnified Party shall have
the right to approve the Defense Counsel, which approval shall not be
unreasonably withheld, and in the event the Indemnifying Party and the
Indemnified Party cannot agree upon such counsel within ten days after the
Defense Notice is provided, then the Indemnifying Party shall propose an
alternate Defense Counsel, which shall be subject again to the Indemnified
Party's reasonable approval. If the parties still fail to agree on Defense
Counsel, then, at such time, each of the Indemnifying and Indemnified Parties
shall choose an arbitrator who, in turn shall select a third arbitrator, and the
three arbitrators shall select Defense Counsel.
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<PAGE>
(a) In the event that the Indemnifying Party shall fail to give the
Defense Notice, it shall be deemed to have elected not to conduct the defense of
the subject claim, and in such event the Indemnified Party shall have the right
to conduct such defense in good faith and to compromise and settle the claim
without prior consent of the Indemnifying Party and the Indemnifying Party will
be liable for all costs, expenses, settlement amounts or other Losses reasonably
paid or incurred in connection therewith.
(b) In the event that the Indemnifying Party does deliver a Defense
Notice and thereby elects to conduct the defense of the subject claim, the
Indemnified Party will cooperate with and make available to the Indemnifying
Party such assistance and materials as it may reasonably request, all at the
expense of the Indemnifying Party, and the Indemnified Party shall have the
right at its expense to participate in the defense assisted by counsel of its
own choosing, provided tat the Indemnified Party shall have the right to
compromise and settle the claim only with the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
(c) Without the prior written consent of the Indemnified Party, the
Indemnifying Party will not enter into any settlement of any Third Party Claim
or cease to defend against such claim, if pursuant to or as a result of such
settlement or cessation, (i) injunctive or other equitable relief would be
imposed against the Indemnified Party, or (ii) such settlement or cessation
would lead to liability or create any financial or other obligation on the part
of the Indemnified Party for which the Indemnified Party is not entitled to
indemnification hereunder.
(d) The Indemnifying Party shall not be entitled to control, and the
Indemnified Party shall be entitled to have sole control over, the defense or
settlement of any claim to the extent that claim seeks an order, injunction or
other equitable relief against the Indemnified Party which, if successful, could
materially interfere with the business, operations, assets, condition (financial
or otherwise) or prospects of the Indemnified Party (and the reasonable cost of
such defense shall constitute an amount for which the Indemnified Party is
entitled to indemnification hereunder).
(e) If a decision is made to settle a Third Party Claim, which offer
the Indemnifying Party is permitted to settle under this Section 6.1.3, and the
Indemnifying Party desires to accept and agree to such offer, the Indemnifying
Party will give written notice to the Indemnified Party to that effect. If the
Indemnified Party fails to consent to such firm offer within 15 calendar days
after its receipt of such notice, the Indemnified Party may continue to contest
or defend such Third Party Claim and, in such event, the maximum liability of
the Indemnifying Party as to such Third Party Claim will not exceed the amount
of such settlement offer, plus costs and expenses paid or incurred by the
Indemnified Party through the end of such 15-day period.
(f) Any judgment entered or settlement agreed upon in the manner
provided
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<PAGE>
herein shall be binding upon the Indemnifying Party, and shall conclusively be
deemed to be an obligation with respect to which the Indemnified Party is
entitled to prompt indemnification hereunder.
6.1.4 Failure to Give Timely Notice. A failure by an Indemnified
Party to give timely, complete or accurate notice as provided in Section 6.1.3
will not affect the rights or obligations of any party hereunder except and only
to the extent that as a result of such failure, any party entitled to receive
such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise directly and materially damaged
as a result of such failure to give timely notice.
6.1.5 Survival of Representations, Warranties and Covenants; Time
Limits on Indemnification Obligations. All representations, warranties,
covenants and agreements shall survive the execution and delivery of this
Agreement for a period of one year from the date of this Agreement
6.2 Liability for Taxes. The following provisions shall govern the
allocation of responsibility as between Buyer and Seller for certain tax matters
following the Closing Date:
(a) Allocation of Taxes. Seller shall be responsible for all Taxes
imposed on the Company or any Affiliated Group in which the Company is or was a
member for all taxable periods, or portions of taxable periods, ending on or
before the Closing Date in excess of those Taxes accrued as a liability, and
included in Company Liabilities as set forth in Schedule 2.3 (the "Seller
Taxes"). Buyer shall be responsible for all Taxes imposed on the Company for all
taxable periods, or portions of taxable periods, after the Closing Date and for
those Taxes accrued as a liability, and included in Company Liabilities as set
forth in Schedule 2.3 (the "Buyer Taxes"). Whenever in accordance with this
Section 6.2, Buyer shall be required to pay Seller the Buyer Taxes or Seller
shall he required to pay Buyer the Seller Taxes, subject to the parties' right
to dispute the amount of such Taxes with the appropriate taxing authority, such
payments shall be made the later of 10 days after requested or 10 days before
the requesting party is required to pay or cause to be paid the related Tax
liability. Where the Seller Taxes are calculated on the basis of a period which
includes the day after the Closing Date, such Seller Taxes shall be calculated
on the basis of the taxable income of the Company as though the taxable year of
the Company terminated at the close of business on day prior to the Closing
Date.
(b) Returns for Tax Periods Ending On or Before the Closing Date.
Buyer shall file (or cause to be filed) any Tax Returns of the Company for Tax
periods beginning before the Closing Date for which Tax Returns shall not have
been filed before the Closing Date. Such Tax Returns shall be prepared by Buyer
on a basis consistent with past practice to the extent such past practice is
consistent wit all federal, state, local and foreign Tax laws, rules and
regulations.
(c) Returns for Tax Periods Beginning After the Closing Date. Buyer
shall
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<PAGE>
file (or cause to be filed) any Tax Returns of the Company for Tax periods which
begin after the Closing Date.
ARTICLE 8
MISCELLANEOUS
7.1 Notices, Consents, etc. Any notices, consents or other communication
required to be sent or given hereunder by any of the parties shall in every case
be in writing and shall be deemed properly served if (a) delivered personally,
(b) sent by registered or certified mail, in all such cases with first class
postage prepaid, return receipt requested, (c) delivered by a recognized
overnight courier service, or (d) sent by facsimile transmission to the parties
at the addresses as set forth below or at such other addresses as may be
furnished in writing.
(a) If to Seller:
Able Energy Company
344 Route 46
Rockaway, New Jersey 07866
Tel: (973) 625-1012
Fax: (973) 625-8097
Attn: T. Harrington, President
with a copy to:
Alan S. Schaeffer, Esq.
Katten Muchin & Zavis
1025 Thomas Jefferson Street, NW
Suite 700, East Lobby
Washington, DC 20007
Tel: (202) 625-3791
Fax: (202) 298-7570
(b) If to Buyer:
Andrew W. Schmidt
2146 Ted-Jim Drive
Warrington, Pennsylvania 19876
Tel: 215) 918-0550
Fax: (215) 357-9205
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<PAGE>
with a copy to:
J. Daniel Brett, Esq.
68 East court Street
P.O. Box 659
Doylestown, Pennsylvania 19801
Tel: (215) ___-____
Fax: (215) ___-____
Date of service of such notice shall be (i) the date such notice is personally
delivered, (ii) three days after the date of mailing if sent by certified or
registered mail, (iii) one day after date of delivery to the overnight courier
if sent by overnight courier or (iv) the next succeeding business day after
transmission by facsimile.
7.2 Public Announcements, No party shall make any public announcement or
filing with respect to the transactions provided for herein without the prior
consent of the other parties hereto subject to applicable disclosures required
to be made by Buyer under federal securities law. To the extent reasonably
feasible, any press release or other announcement or notice regarding the
transactions contemplated by this Agreement shall be made jointly by the
parties.
7.3 Severability. The unenforceability or invalidity of any provision of
this Agreement shall not affect the enforceability or validity of any other
provision.
7.4 Amendment and Waiver. This Agreement may be amended, or any provision
of this Agreement may be waived, provided that any such amendment or waiver will
be binding on Buyer only if such amendment or waiver is set forth in a writing
executed by Buyer, and provided that any such amendment or waiver will be
binding upon Seller only if such amendment or waiver is set forth in a writing
executed by Seller. The waiver by any party hereto of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any other
breach.
7.5 Documents. Each party will execute all documents and take such other
actions as any other party may reasonably request in order to consummate the
transactions provided for herein and to accomplish the purposes of this
Agreement.
7.6 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties hereto and
delivered to the other.
7.7 Expenses. Except as paid prior to the date hereof or otherwise
specifically provided herein, each of the parties shall pay all costs and
expenses incurred or to be incurred by
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<PAGE>
it, him or her, as the case may be, in negotiating and preparing this Agreement
and in closing and carrying out the transactions contemplated by this Agreement.
7.8 Construction. This Agreement shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the laws
of the Commonwealth of Pennsylvania, without giving effect to provisions thereof
regarding conflict of laws.
7.9 Headings. The subject headings of Articles and Sections of this
Agreement are included for purposes of convenience only and shall not affect the
construction or interpretation of any of its provisions.
7.10 Assignment. This Agreement is intended to bind and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns. This Agreement will not be assignable or
delegable by any party without the prior written consent of the other parties;
provided, however, that nothing in this Agreement will limit Buyer's ability to
assign its rights or delegate its responsibilities, liabilities, and obligations
under this Agreement to any person at any time without the consent of the other
parties.
7.11 Definitions. For purposes of this Agreement, the following terms have
the meaning set forth below:
"Affiliate" means an affiliate as defined in Rule 405 under the
Securities Act of 1933, as amended, and includes any past and present Affiliate
of a Person.
"Code" means the Internal Revenue Code of 1986, as amended.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or any successor
authority) that are applicable as the date of determination, consistently
applied.
"Liens" means any claims, liens, charges, restrictions, options,
preemptive rights, mortgages, hypothecations, assessments, pledges, encumbrances
or security interests of any kind or nature whatsoever.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated association, corporation, entity or
government (whether Federal, state, county, city or otherwise, including,
without limitation, any instrumentality, division, agency or
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<PAGE>
department thereof).
"Proprietary Rights" means all patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether or not reduced
to practice); the Trademarks and all other all trademarks, service marks, trade
dress, trade names and corporate names; all registered and unregistered
statutory and common law copyrights; all registrations, applications and
renewals for any of the foregoing; all trade secrets, confidential information,
ideas, formulae, compositions, know-how, manufacturing and production processes
and techniques, research and development information, drawings, specifications,
designs, plans, improvements, proposals, technical and computer data,
documentation and software, financial, business and marketing plans, and
franchisee, customer and supplier lists and related information and all other
proprietary rights.
"Tax" means any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs, duties,
real property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax, of
any kind whatsoever, including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing; the foregoing shall include any
transferee or secondary liability for a Tax and any liability assumed by
agreement or arising as a result of being (or ceasing to be) a member of any
Affiliated Group (or being included (or required to be included) in any Tax
Return relating thereto).
"Tax Returns" means returns, declarations, reports, claims for
refund, information returns or other documents (including any related or
supporting Schedules, statements or information) filed or required to be filed
in connection with the determination, assessment or collection of any Taxes of
any party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Transaction Documents" means all agreements and instruments
contemplated by and being delivered pursuant to or in connection with this
Agreement.
7.12 Entire Agreement. This Agreement, the Preamble and all the Schedules
attached to this Agreement (all of which shall be deemed incorporated in the
Agreement and made a part hereof) set forth the entire understanding of the
parties with respect to the subject matter hereof, and shall not be modified or
affected by any offer, proposal, statement or representation, oral or written,
made by or for any party in connection with the negotiation of the terms hereof,
and may be modified only by instruments signed by all of the parties hereto.
7.13 Third Parties. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give to any person or entity, other than
the parties to this Agreement and their respective permitted successors and
assigns, any rights or remedies under or by reason
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<PAGE>
of this Agreement.
7.14 Interpretative Matters. Unless the context otherwise requires, (a)
all references to Articles, Sections or Schedules are to Articles, Sections or
Schedules in this Agreement, (b) each accounting term not otherwise defined in
this Agreement has the meaning assigned to it in accordance with GAAP, and (c)
words in the singular or plural include the singular and plural and pronouns
stated in either the masculine, the feminine or neuter gender shall include the
masculine, feminine and neuter and the term A including" shall mean by way of
example and not by way of limitation.
7.15 Knowledge. Where any representation or warranty of Seller contained
in this Agreement is expressly qualified by reference "to the knowledge of," it
refers to the knowledge of Seller and/or the directors, officers and senior
managers of the Company and its Affiliates as to the existence or absence of
facts that are the subject of such representations and warranties after
consultation with and due inquiry of all of the directors, officers and senior
managers of the Company which is assumed to have been made and acknowledged by
Seller, it being understood that Seller has not made any other independent
investigation or consulted with any outside third parties, other than the
Company's accountants and legal counsel.
7.16 No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party
hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SELLER:
/s/ Timothy G. Harrington 12/31/98
- ----------------------------------
Able Energy Company, Inc.
By: Timothy G. Harrington, President
COMPANY: BUYER:
ABLE OIL COMPANY MONTGOMERY, INC. ANDREW W. SCHMIDT
By: Timothy G. Harrington, President /s/ Andrew W. Schmidt
---------------------
12/31/98
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<PAGE>
EXHIBITS
Exhibit 2.2.3 Pledge Agreement
Exhibit 5.2-D Form of Opinion
Exhibit 5.2-H Form of Trademark License Termination Agreement
Exhibit 5.2-K Form of Release
Exhibit 7.5 Form of Lock-Up Agreement
SCHEDULES
Schedule 3.2 Certificates of Good Standing
Schedule 3.4 Officers and Directors
Schedule 3.9 Liabilities
Schedule 3.10-B Accounts Receivable
Schedule 3.10-C Accounts Payable
Schedule 3.12 Material Contracts
Schedule 3.13 Leased Real Property
Schedule 3.14 Personal Property
Schedule 3.15 Litigation
Schedule 3.17 Intellectual Property
Schedule 3.19 Conduct in Ordinary Course of Business
Schedule 3.20 Insurance Policies
Schedule 3.21 Bank Accounts
Schedule 3.22 Licenses and Permits
Schedule 3.23 Employee Benefit Plans
Schedule 3.24 Hazardous Wastes
Schedule 3.25 Salaries
Schedule 3.26 Personnel Agreements, Plans and Arrangements
Schedule 3.27 Workers Compensation
Schedule 3.29 Affiliate Transactions
??
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<PAGE>
1
(iii)
- -16-
Able Mont. SPA 7/17/98
sAble Mont. TIME \@ "M/d/yy" 7/17/98
-18-
Exhibit 10.21
PLEDGE AND SECURITY AGREEMENT
THIS AGREEMENT ("Pledge Agreement") is made and entered into on this 31st
day of December, 1998 by and between ANDREW W. SCHMIDT (the "Pledgor") and ABLE
ENERGY COMPANY, INC. (the "Pledgee").
W I T N E S S E T H:
WHEREAS, the Pledgee and the Pledgor entered into that certain Stock
Purchase Agreement (the "Stock Purchase Agreement") dated even date herewith,
whereby the Pledgee sold to Pledgor all of its stock (the "Stock") in Able Oil
Company Montgomery, Inc. (the "Company"); and
WHEREAS, as consideration for the Stock, Pledgor has made, executed and
delivered to the Pledgee that certain Promissory Note of even date herewith in
the principal amount of ONE HUNDRED AND FORTY THOUSAND DOLLARS AND 00/100
($140,000.00) (the "Note"); and
WHEREAS, in order to secure Pledgee's Indebtedness under the Promissory
Note, and as further inducement to the Pledgee to enter into the Stock Purchase
Agreement, the parties hereto each desire to enter into this Pledge Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto agree as follows:
Section I. SECURITY INTEREST. As collateral security for the full payment and
performance of Pledgee's Indebtedness under the Note (the "Indebtedness") and
the due and punctual observance of each and every covenant and condition on the
part of Pledgor to be observed or performed under this Agreement the Pledgor
hereby grants to the Pledgee a security interest in (the "Security Interest"),
and pledges to the Pledgee the Stock and all of the assets of the Company
described in Appendix A hereto (the "Collateral").
Section II. CUSTODY OF COLLATERAL.
A. Delivery of Collateral. Simultaneously with the execution and
delivery of this Agreement, the Pledger has delivered the Stock to the Pledgee
to be held subject to the terms of this Pledge Agreement. The Pledgee shall have
no right in and to the Collateral nor any right to encumber or dispose of the
Collateral except in accordance with the provisions of this Pledge Agreement.
B. Financial Statements. The Pledgor agrees that simultaneously with
the execution and delivery of this Agreement it will execute and deliver to the
Pledgee one or more UCC-1 Uniform Commercial Code financing statements with
respect to the Collateral, and additional UCC forms at any subsequent time or
from time to time, upon the written request of
<PAGE>
the Pledgee, in order to allow Pledgee to perfect its Security Interest and
protect its rights in the Collateral.
Section III. VOTING RIGHTS. So long as there shall exist no condition, event, or
act which constitutes an Event of Default as defined in the Note, the Pledgor
shall be entitled to exercise the voting power with respect to the Stock.
Section IV. COVENANTS OF PLEDGOR. So long as the Indebtedness remains unpaid the
Pledgor will perform and observe each of its covenants to the Pledgee as set
forth herein, and without limitation of the foregoing, the Pledgor, (a) will not
remove the Collateral from the Company address, without the prior written
consent of Pledgee (except in the ordinary course of business of the Company);
(b) will advise the Pledgee, in writing, immediately upon request, of any change
in the location of any Collateral; (c) will defend the Collateral against the
claims and demands of all other parties and will keep the Collateral free from
all other security interests or other encumbrances; (d) will keep accurate and
complete records concerning the Collateral and, at the Pledgee's request, will
mark any such records and the Collateral to give notice of the Security
Interest; (e) will, upon demand, forthwith deliver to Pledgee any documents
relating to the Collateral or any part thereof, and any and all other schedules,
documents and statements which the Pledgee may from time to time request; (f)
will notify the Pledgee promptly in writing of any change in the Pledgor's or
the Company's address; (g) will notify the Pledgee in writing within five days
from the date of any loss, damage or theft of the Collateral, specifying in such
notice the exact nature and amount of such loss; (h) without the Pledgee's
written consent will not make or agree to make any alteration or modification to
the Collateral or permit anything to be done that may impair the value of the
Collateral or the security intended to be afforded by this Agreement; and (i) in
connection herewith will execute and deliver to the Pledgee such financing
statements and other documents, pay all costs of filing financing statements and
other documents in all public offices requested by the Pledgee and do such other
things as the Pledgee may request to protect the Collateral and Pledgee's
Security Interest.
Section V. EVENTS OF DEFAULT. If any of the following events ("Events of
Default") shall occur and be continuing the Pledgee may, subject to any
applicable grace, cure or notice periods as set forth in the Note at its option,
by notice in writing to the Pledgor, declare all of the Indebtedness to be
immediately due and payable together with interest accrued thereon:
(a) if Pledgor defaults in the payment of any principal or interest
due under the Note;
(b) if any representation or warranty made by the Pledgor herein or
in the Stock Purchase Agreement or any other agreement entered into with Pledgee
or writing furnished in connection with or pursuant to this Agreement shall be
false;
(c) if there is any material loss, theft, substantial damage or
destruction to or of any of the Collateral or like collateral of any subsidiary
of the Pledgor, or the making of any levy, seizures, or attachment thereof or
thereon;
<PAGE>
(d) if Pledgor shall default in the performance or observance of the
Stock Purchase Agreement, the Franchise Agreement, or any other material
agreement, covenant, term or condition to which the Pledgor is a party, or
whether contained herein, in the Note, or in any other instrument or documents
evidencing or securing any of the Indebtedness;
(e) if Pledgor makes an assignment for the benefit of creditors;
(f) if Pledgor petitions or applies to any tribunal for the
appointment of a trustee or receiver for itself or of any substantial part of
its assets, or commences any proceedings relating to itself under any
insolvency, reorganization, arrangement, readjustment of debts, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect;
(g) if any such petition or application is filed, or any such
proceedings are commenced, against Pledgor, and Pledgor by any act indicates its
approval thereof, consent thereto, or acquiescence therein, or any order is
entered appointing any such trustee or receiver, or adjudicating Pledgor
bankrupt or insolvent, or approving the petition in any proceedings, and such
order remains in effect for more than 30 days; or,
(h) if any order is entered in any proceeding against Pledgor
decreeing the dissolution, winding up or split-up of that entity.
Section VI. REMEDIES. Upon the happening of any Event of Default:
(a) The Pledgee's rights with respect to the Collateral shall be
those of a Pledgee under the Pennsylvania Uniform Commercial Code as now in
effect or hereinafter amended. The Pledgee shall also have any additional rights
granted herein and in any other agreement now or hereafter in effect between
Pledgor and the Pledgee. If requested by the Pledgee, the Pledgor will
immediately assemble its Collateral and make it available to the Pledgee at a
place to be designated by the Pledgee.
(b) The Pledgee shall have the right, without notice to Pledgor, to
enter upon any premises where the Collateral may be located for the purpose of
taking possession of the Collateral.
(c) The Pledgee shall have the right, at its option, to demand,
collect and sue for all proceeds from the Collateral (either in the Pledgor's
name or the Pledgee's name at the latter's option) with the right to enforce,
compromise, settle or discharge any such proceeds. The Pledgor appoints the
Pledgee Pledgor's attorney-in-fact to endorse Pledgor's name on all checks,
commercial paper and other instruments pertaining to the proceeds, after any
Event of Default. This power of attorney, being coupled with an interest, is
irrevocable and shall not be terminated until this Agreement is discharged and
released in full by the Pledgee.
(d) The Pledgor agrees that any notice by the Pledgee of the sale or
disposition of the Collateral or any other intended action hereunder, whether
required by the Pennsylvania Uniform Commercial Code or otherwise, shall
constitute reasonable notice to the
<PAGE>
Pledgor if the notice is mailed by regular or certified mail, postage prepaid,
at least five (5) days before the action to the Pledgor's address as specified
in this Agreement or to any other address which the Pledgor has specified in
writing to the Pledgee as the address to which notices shall be given to the
Pledgor. The Pledgor further agrees that the Pledgee may be the purchaser of the
Collateral at any public or private sale.
(e) The Pledgor shall pay all costs and expenses incurred by the
Pledgee in enforcing this Agreement, realizing upon any Collateral and
collecting any Indebtedness, including reasonable attorney's fees (on the basis
of a solicitor and his or her own client) whether suit is brought or not and
whether incurred in connection with collection, trial, appeal or otherwise, and
shall be liable for any deficiencies in the event the proceeds of disposition of
the Collateral does not satisfy the Indebtedness in full.
Section V. RELEASE UPON PAYMENT IN FULL. Upon payment of the Indebtedness as
required and represented by the Note, the Pledgee shall (a) execute a
satisfaction and termination of this Pledge Agreement and the Collateral
Agreement; (b) return the Stock; (c) file any necessary UCC-3 Release and
Termination Statements; and (d) return to the Pledgor the Promissory Note marked
"Paid in Full."
Section VI. MISCELLANEOUS PROVISIONS.
(a) Any communications, requests or notices required or appropriate
to be given under this Agreement or the Collateral Agreement shall be in writing
and shall be delivered in person by commercial courier or mailed by certified
mail, return receipt requested, deposited in the United States mail postage
prepaid, addressed to the party to which the notice is intended, or sent by
facsimile transmission to the number indicated for the party to which the notice
is intended, as follows:
Pledgor: Andrew W. Schmidt
2146 Ted-Jim Drive
Warrington, Pennsylvania 19876
Telephone No.: (215) 918-0550
Facsimile: (215) 357-9205
Pledgee: Able Energy Company, Inc.
344 Route 46
Rockaway, New Jersey 07866
Telephone No.: (973) 625-1012
Notice given by personal delivery, commercial courier, or facsimile transmission
shall be deemed given when received by the party to which such notice is
intended to be given. Notice given by mail shall be deemed given three days
after it is deposited in the mails addressed as provided herein. These addresses
and facsimile numbers may be changed by notice as provided herein.
<PAGE>
(b) No failure by the Pledgee to exercise, or delay by the Pledgee
in exercising, any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. No notice to or demand on the
Pledgor in any case shall, in itself, entitle the Pledgor to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Pledgor to any other or further action in any
circumstances without notice or demand.
(c) This Agreement shall be binding upon and inure to the benefit of
the respective parties hereto and their respective successors and assigns. This
Agreement is made for the sole benefit of the Pledgor and the Pledgee and no
other person or persons shall have any benefits, rights or remedies under or by
reason of this Agreement.
(d) This Agreement constitutes the entire agreement between the
parties hereto and may not be modified or amended in any manner other than by
supplemental written agreement executed by the parties hereto.
(e) The Pledgor authorizes the Pledgee at the Pledgor's expense to
file any financing statement or other documents or statements relating to the
Collateral (without the Pledgor's signature thereon) which the Pledgee deems
appropriate, and the Pledgor appoints the Pledgee as the Pledgor's
attorney-in-fact to execute any such financing statement or statements in
Pledgor's name and to perform all other acts which the Pledgee deems appropriate
to perfect and to continue perfection of the Security Interest.
(f) The Security Interest in the Collateral shall continue after the
payment of the Indebtedness if at the time of such payment the Pledgor shall be
liable to Pledgee on any promissory note, draft, bill of exchange, or other
instrument or agreement.
(g) The Pledgor hereby irrevocably consents to any act by the
Pledgee or its agents in entering and reentering upon any premises for the
purpose of either: (1) inspecting the Collateral, which inspection in the
absence of an Event of Default shall be during normal business hours and upon
two days' notice; or (2) taking possession of the Collateral after any Event of
Default; and the Pledgor waives its rights to assert against the Pledgee or its
agents any claim based upon trespass or any similar cause of action for entering
upon any premises where the Collateral may be located.
(h) After any Event of Default, the Pledgee may notify any party
obligated to pay proceeds, of the existence of the Secured Interests and may
also direct them to make payments of all proceeds to the Pledgee.
(i) No delay or omission by the Pledgee in exercising any right
hereunder or with respect to any Indebtedness shall operate as a waiver of that
or any other right, and no single or partial exercise of any right shall
preclude the Pledgee from any other or future exercise of the right or the
exercise of any other right or remedy. The Pledgee may cure any Event of Default
by Pledgor in any reasonable manner without waiving the Event of Default so
cured and without
<PAGE>
waiving any other prior or subsequent default by Pledgor. All rights and
remedies of the Pledgee under this Agreement and under the Pennsylvania Uniform
Commercial Code shall be deemed cumulative.
(j) The Pledgee shall have no obligation to take and Pledgor shall
have the sole responsibility for taking any steps to preserve rights against all
prior parties to the Collateral.
(k) The rights and benefits of the Pledgee under this Agreement
shall, if the Pledgee agrees, inure to any party acquiring an interest in the
Indebtedness or any part thereof.
(l) At its option, Pledgee may discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on the Collateral,
and may pay for insurance on the Collateral and any such payment shall be added
to the Indebtedness. Pledgor shall reimburse Pledgee on demand for any such
payments made or expenses incurred by Pledgee.
(m) The terms "Pledgee," and "Pledgor" as used in this Agreement
include the heirs, executors, personal representatives, and successors or
assigns of those parties.
(n) This Agreement may not be modified or amended nor shall any
provision of it be waived except in a writing signed by the Pledgor and by an
authorized officer of the Pledgee.
(o) This Agreement shall be construed under the Pennsylvania Uniform
Commercial Code and any other applicable Pennsylvania laws in effect from time
to time.
(p) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the remaining
provisions.
(q) All sections and descriptive headings in this Agreement are
inserted for convenience only, and shall not affect the construction or
interpretation hereof.
(r) This Agreement is a continuing agreement which shall remain in
force and effect until all of the Indebtedness and any extensions or renewals
together with all interest thereon shall be paid in full.
(s) The Note is by this reference, made a part of, and incorporated
into this Agreement as if set out in full herein.
(t) This Agreement may be executed in counterparts, each of which
shall be an original, but all of which shall together constitute one document.
<PAGE>
IN WITNESS WHEREOF, the parties hereto caused this Agreement to be
executed as of the day and year first written above.
Pledgor: ANDREW W. SCHMIDT
/s/ Andrew W. Schmidt
----------------------------------------
Pledgee: ABLE ENERGY COMPANY, INC.
By: /s/ Timothy G. Harrington
------------------------------------
Timothy G. Harrington, President
-2-
<PAGE>
APPENDIX A
COLLATERAL OF ABLE OIL MONTGOMERY, INC.
(THE "PLEDGOR")
The collateral consists of the following described accounts receivable,
intellectual property, inventory, fixtures, furniture, equipment and contract
rights, whether now or hereafter existing, created or acquired, together with
all proceeds and products thereof in any form, and all records relating thereto
(the "Collateral"):
(a) all accounts owned by Pledgor as of the date of this Agreement
or acquired by Pledgor at any time hereafter;
(b) all inventory now owned by Pledgor or acquired by Pledgor at any
time hereafter, including, without limitation, all goods held for sale or
lease or to be furnished under contracts of service, raw materials, and
goods and materials to be used or consumed in Pledgor's business;
(c) all equipment, fixtures and furniture now owned or hereafter
acquired by Pledgor;
(d) all contract rights, general intangibles, instruments,
securities (other than securities of the Pledgor), chattel paper, notes,
drafts, acceptances, money, documents, credits and deposits (general or
special) and other assets, tangible or intangible of Pledgor now or
hereafter existing or acquired;
(e) all trademarks, tradenames, patents, copyrights and all other
forms of intellectual property now owned or hereafter developed or
acquired by Pledgor; and
(f) all proceeds, products, replacements, additions, substitutions,
renewals and accessions of any of the foregoing.
<PAGE>
Exhibit 10.22
9.5% Promissory Note
$140,000.00 (U.S.) December 31, 1998
Warrington, Pennsylvania
FOR VALUE RECEIVED, Andrew W. Schmidt, whose principal residence and
mailing address is 2146 Ted-Jim Drive, Warrington, Pennsylvania 19876 (the
"Maker"), promises to pay to the order of Able Energy Company, Inc. (the
"Holder"), a Delaware corporation, at its place of business at 344 Route 46,
Rockaway, New Jersey 07866, or such other place as the Holder may designate from
time to time hereafter, the principal sum of ONE HUNDRED AND FORTY THOUSAND
DOLLARS U.S. ($140,000) (or the amount actually advanced, if less), together
with interest at the initial rate of Nine and One-Half Percent (9.5%) per annum,
subject to adjustment as specified below, on the "Maturity Date." There shall be
no penalty for prepayment of any amount due and owing, in part or in full. In no
event shall any interest or other charges to be paid under this Promissory Note
(the "Note") exceed the maximum rate permitted by law. All amounts stated herein
shall be in U.S. dollars.
1. Payments.
(a) The Holder shall loan funds hereunder in one installment
of One Hundred and Forty Thousand Dollars ($140,000) which shall be used by the
Maker immediately to purchase all of the issued and outstanding capital stock of
Able Oil Company Montgomery, Inc. at closing.
(b) Interest shall accrue and be payable monthly in arrears
from the date hereof to the Maturity Date, which shall be 60 months from the
date hereof. Payments to Holder shall be made without deduction for any taxes,
charges or withholding tax ("Taxes") applicable to such payments. If the Maker
is required by law to deduct any Taxes from or in respect of any interest
payment, the amount payable shall be increased by the amount of such Taxes so
that after making the required deductions, the Holder shall receive an amount
equal to the amount of interest the Holder would have received had no such
deductions been made. The Maker shall make such deductions and pay the full
amount to the relevant taxing authority in accordance with applicable law.
All payments on this Note shall be applied first to
accrued interest hereon, with the balance to the payment of principal hereof.
(c) Payments of principal and interest on this Note shall be
made by certified check or bank draft sent to the Holder's address set forth
above or to such other address as the Holder may designate for such purpose from
time to time by written notice to the Maker, in such currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
<PAGE>
(d) The obligations to make the payments provided for in this
Note are absolute and unconditional and not subject to any defense, setoff
counterclaim, rescission, recoupment or adjustment whatsoever. The Maker hereby
expressly waives demand and presentment for payment, notice of nonpayment,
notice of dishonor, protest, notice of protest, bringing of suit and diligence
in taking any action to collect any amount called for hereunder, and shall be
directly and primarily liable for the payment of all sums owing and to be owing
hereon, regardless of and without any notice, diligence, act or omission with
respect to the collection of any amount called for hereunder.
2. Events of Default.
The occurrence of any of the following events shall constitute
an event of default (an "Event of Default"):
(a) A default in the payment of the principal on this
Note, when and as the same shall become due and payable;
(b) A default in the payment of any interest on this
Note, when and as the same shall become due and payable, which default shall
continue for ten (10) business days after the date fixed for the making of such
interest payment;
(c) A failure to perform or observe any term, covenant,
warranty, representation or agreement contained herein or in the pledge and
security agreement, stock purchase agreement or franchise agreement each of even
date herewith, executed by the Maker in favor of the Holder, or other obligation
of the Maker to the Holder, and continuance of such default or breach for a
period of thirty (30) days after receipt of notice from the Holder as to such
breach or after the Maker had or should have had knowledge of such breach;
(d) A final judgment or judgments for the payment of
money in excess of $10,000 in the aggregate shall be rendered by one or more
courts, administrative or arbitral tribunals or other bodies having jurisdiction
against the Maker or any subsidiary thereof and the same shall not be discharged
(or provision shall not be made for such discharge), or a stay of execution
thereof shall not be procured, within 30 days from the date of entry thereof and
the Maker or any subsidiary thereof shall not within such 30-day period, or such
longer period during which execution of the same shall have been stayed, appeal
therefrom and cause the execution thereof to be stayed during such appeal; and
(e) The entry of a decree or order by a court having
jurisdiction adjudging the Maker or any subsidiary thereof bankrupt or
insolvent, or approving a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Maker or
2
<PAGE>
any subsidiary thereof, under federal bankruptcy law, as now or hereafter
constituted, or any other applicable federal or state bankruptcy, insolvency or
other similar law, and the continuance of any such decree or order unstayed and
in effect for a period of 10 days; or the commencement by the Maker or any
subsidiary thereof of a voluntary case under federal bankruptcy law, as now or
hereafter constituted, or any other applicable federal or state bankruptcy,
insolvency, or other similar law, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under federal
bankruptcy law or any other applicable federal or state law, or the consent by
it to the filing of such petition or to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator or similar official of the Maker or
any subsidiary thereof or of any substantial part of its property, or the making
by it of an assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become due, or the
taking of corporate action by the Maker or any subsidiary thereof in furtherance
of any such action.
3. Remedies Upon Default.
(a) Upon the occurrence of an Event of Default referred to in
Section 2, the Holder, by notice in writing given to the Maker, may declare the
entire principal amount then outstanding of and the accrued interest on, this
Note to be due and payable immediately, and upon any such declaration the same
shall become and be due and payable immediately, without presentation, demand,
protest or other formalities of any kind, all of which are expressly waived by
the Maker.
(b) The Holder may institute such actions or proceedings in
law or equity as it shall deem expedient for the protection of its rights and
may prosecute and enforce its claims against all assets of the Maker, and in
connection with any such action or proceeding shall be entitled to receive from
the Maker payment of the principal amount of this Note plus accrued interest to
the Maturity Date plus reasonable expenses of collection, including, without
limitation, attorneys' fees and expenses.
4. Miscellaneous.
(a) Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by overnight delivery or courier service or
delivered (in person or by telecopy, telex or similar telecommunications
equipment) against receipt to the party to whom it is to be given, (i) if to the
Maker, at his address at 2146 Ted-Jim Drive, Warrington, Pennsylvania 19876;
(ii) if to the Holder, at its address set forth on the first page hereof; or
(iii) in either case, to such other address as the party shall have furnished in
writing in accordance with the provisions of this Section 4(a). Any notice or
other communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which
shall be deemed given
3
<PAGE>
at the time of receipt thereof. Any notice given by other means permitted by
this Section 4(a) shall be deemed given at the time of receipt thereof.
(b) Upon receipt of evidence satisfactory to the Maker of the
loss, theft, destruction or mutilation of this Note (and upon surrender of this
Note if mutilated), the Maker shall execute and deliver to the Holder a new Note
of like date, tenor and denomination.
(c) No course of dealing and no delay or omission on the part
of the Holder in exercising any right or remedy shall operate as a waiver
thereof or otherwise prejudice the Holder's rights, powers or remedies. No
right, power or remedy conferred by this Note upon the Holder shall be exclusive
of any other right, power or remedy referred to herein or now or hereafter
available at law, in equity, by statute or otherwise, and all such remedies may
be exercised singly or concurrently.
(d) This Note may be amended only by a written instrument
executed by the Maker and the Holder hereof. Any amendment shall be endorsed
upon this Note, and all future Holders shall be bound thereby.
(e) This Note shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania, without giving effect to its
principles governing conflicts of law.
(f) Any action or proceeding arising out of or relating to
this Note, any document or instrument delivered pursuant to, in connection with
or simultaneously with this Note, or a breach of this Note or any such document
or instrument shall be subject to the jurisdiction of the courts of the
Commonwealth of Pennsylvania and of any federal court located in Pennsylvania.
4
<PAGE>
IN WITNESS WHEREOF, the Maker has caused this Note to be executed
and dated the day and year first above written.
ANDREW W. SCHMIDT
/s/ Andrew W. Schmidt
------------------------------
Commonwealth of Pennsylvania }
} SS.
County of Bucks }
Personally appeared before me this 31 day of December, 1998, the
above-named Andrew W. Schmidt, to me known to be the person who executed the
foregoing Promissory Note as Maker.
[ILLEGIBLE]
------------------------
(seal) Notary Public
Commission Expiration Date:
[ILLEGIBLE]
<PAGE>
Exhibit 10.23
STOCK SALE AGREEMENT
This Stock Sale Agreement (this "Agreement") is being made this 31st
day of December, 1998, between ABLE ENERGY, INC., a Delaware corporation having
an address at 344 Route 46, Rockaway, New Jersey 07866 ("Seller") and OWL
ENVIRONMENTAL, INC. ("Buyer"), a New Jersey corporation having an address at 21
Gill Avenue, Rockaway, New Jersey 07866.
RECITALS
A. Seller owns one hundred (100) of the issued and outstanding
shares of A&O Environmental Services, Inc. (the "Corporation") representing all
of the issued and outstanding shares in the Corporation (the "Shares").
B. Buyer desires to purchase the Shares from Seller and Seller
desires to sell the Shares to Buyer upon the terms and conditions hereinafter
set forth.
C. Subsequent to the sale of the Shares, Seller will not possess,
own or have any interest in any shares of stock of the Corporation.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
1. SALE AND PURCHASE OF THE SHARES
1.1 Time and Place. The purchase and sale of the Shares (the
"Closing") shall occur at 2:00 p.m. on December 31, 1998 (the "Closing Date").
The Closing shall be held at a location mutually agreed upon by Buyer and
Seller.
1.2 Sale and Purchase. On the Closing Date, Seller shall sell,
transfer, assign and deliver the Shares to Buyer, WITHOUT RECOURSE,
REPRESENTATION OR WARRANTY OF ANY NATURE WHATSOEVER, WHETHER EXPRESSED OR
IMPLIED, except as otherwise expressly set forth in Section 2 hereof.
1.3 Purchase Price. The aggregate purchase price to be paid
for the Shares shall be TEN DOLLARS ($10.00) ("the Purchase Price").
1.4 Deliveries at Closing.
1.4.1 On the Closing Date, Seller shall deliver to Buyer
certificate(s) for the Shares duly endorsed in blank or accompanied by
appropriate instruments of transfer.
<PAGE>
1.4.2 On the Closing Date, Buyer shall deliver to Seller
the Purchase Price.
2. SELLER'S LIMITED REPRESENTATIONS AND WARRANTIES
2.1 Authority. Seller has the corporate right to sell,
transfer, and assign the Shares to Buyer pursuant to this Agreement. This
Agreement and all other documents executed by Seller in connection herewith
constitute the legal, valid and binding obligations of Seller, enforceable in
accordance with their terms.
2.2 Authorization. This Agreement, the execution and delivery
hereof by Seller and the transfer of the Shares to Buyer have been duly and
validly authorized by all necessary corporate action.
2.3 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES/ SHARES
TRANSFERRED "AS IS". EXCEPT FOR THE LIMITED REPRESENTATIONS AND WARRANTIES MADE
BY SELLER SOLELY WITH RESPECT TO THE SHARES SET FORTH IN SECTIONS 2.1, AND 2.2
ABOVE, NO WARRANTIES OR REPRESENTATIONS WHATSOEVER, EITHER EXPRESS OR IMPLIED,
HAVE BEEN MADE BY THE SELLER OR BY ANYONE ACTING ON ITS BEHALF, PARTICULARLY,
BUT WITHOUT IN ANY WAY LIMITING THE GENERALITY OF THE FOREGOING, NO WARRANTIES
OR REPRESENTATIONS HAVE BEEN MADE REGARDING (i) THE ABILITY TO TRANSFER ANY OF
THE UNDERLYING ASSETS OF THE CORPORATION TO THE BUYER THROUGH THE SALE OF THE
SHARES, (ii) ANY OF THE ASSETS'S FREEDOM FROM LIENS AND ENCUMBRANCES, IN WHOLE
OR IN PART, (iii) THE TITLE, QUALITY OR OTHER ATTRIBUTES WITH RESPECT TO ANY OF
THE ASSETS OR (iv) ANY REGULATORY REQUIREMENTS REQUIRED BY OR NECESSITATED AS A
RESULT OF THIS AGREEMENT.
THE SHARES ARE TRANSFERRED WITHOUT RECOURSE OR WARRANTY WHATSOEVER, EITHER
EXPRESS OR IMPLIED AND SUCH SHARES ARE TRANSFERRED "AS IS", EXCEPT FOR THE
LIMITED REPRESENTATIONS AND WARRANTIES MADE BY SELLER SOLELY WITH RESPECT TO THE
SHARES SET FORTH IN SECTIONS 2.1 AND 2.2 ABOVE.
3. BUYER'S REPRESENTATIONS AND WARRANTIES
3.1 Authority. Buyer has the legal right and power to enter
into this Agreement and to carry out the transactions herein contemplated. This
Agreement and all other documents executed by Buyer in connection herewith
constitute the legal, valid and binding obligations of Buyer, enforceable in
accordance with their terms.
2
<PAGE>
3.2 Authorization. This Agreement, the execution and delivery
hereof by Buyer, the payment of the Purchase Price to Seller and the performance
by Buyer of its obligations and undertakings hereunder have been duly and
validly authorized by all necessary action.
4. MISCELLANEOUS
4.1 Fees and Expenses. Each party shall bear his own fees and
expenses incurred in connection with this Agreement and the consummation of the
transactions contemplated hereby.
4.2 Entire Agreement. This Agreement and the other documents
related hereto, constitute the entire agreement of the parties hereto with
respect to the subject matter hereof.
4.3 Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, and their respective heirs,
successors, executors, administrators and assigns.
4.4 Waiver. No waiver of any provision hereof shall be
effective unless set forth by a written instrument signed by all of the parties
hereto.
4.5 Execution of Agreement. This Agreement may be signed in
counterparts, all of which shall be considered an original and together they
shall constitute one agreement.
4.6 Paragraph Headings. Paragraph headings contained in this
Agreement are for convenience of reference only and shall not be deemed a part
of this Agreement.
4.7 Notices. All notices, requests, and communications
(collectively, "Notice") under this Agreement shall be given in writing and
shall be (a) hand-delivered, proof of receipt required, or (b) mailed by first
class registered or certified mail, postage prepaid, return receipt requested,
or (c) delivered by facsimile transmission followed by first class registered or
certified mail, postage prepaid, return receipt requested, by the individuals
and addresses indicated below:
4.7.1 If to Seller:
Able Energy, Inc.
344 Route 46
Rockaway, New Jersey 07886
Attn: Timothy Harrington
3
<PAGE>
4.7.2 If to Buyer:
Kelly Excavating and Paving, Inc.
21 Gill Avenue
Rockaway, New Jersey 07866
Attn: Douglas Kelly
Any Notice provided for herein shall become effective only upon and at the time
of receipt by the party to whom it is given, unless such Notice is mailed by
certified mail, return receipt requested, in which case it shall be deemed to be
received two (2) business days after the date that it is mailed. Any party may,
by proper written Notice hereunder, to the other party, change the individual
address to which such Notice shall thereafter be sent.
4.8 Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New
Jersey.
4.9 Representation. Buyer acknowledges that Buyer has been
advised that Riker, Danzig, Scherer, Hyland & Perretti LLP has represented and
continues to represent Able Energy, Inc. in this and other business dealings,
that Buyer has, or has declined to have, Buyer's attorney review this Agreement
and advise Buyer and render advice to Buyer with respect thereto, and Buyer
waives any conflict of interest that may exist among the said firm Able Energy,
Inc and Buyer.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this agreement
the day and year first above written.
SELLER:
ABLE ENERGY, INC.
By: /s/ Timothy Harrington
----------------------------
Name: Timothy Harrington
Title: President
BUYER:
OWL ENVIRONMENTAL, INC.
By: /s/ Douglas Kelly
----------------------------
Name: Douglas Kelly
Title: President
5
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF THE COMPANY
Able Oil, Inc.
Able Propane, L.L.C.
Able Oil Melbourne, 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 report, dated March 26, 1999 in the registration Statement
on Form SB-2 and related prospectus of Able Energy, Inc. for the registration
of 1,000,000 shares of common stock.
/s/ Simontacci & Company LLP
----------------------------
Simontacci & Company LLP
April 15, 1999
Fairfield, New Jersey
<PAGE>
Exhibit 23.2
[LETTERHEAD OF SICHENZIA, ROSS & FRIEDMAN LLP]
April 14, 1998
VIA ELECTRONIC TRANSMISSION
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, CC 20549
Re: ABLE ENERGY, INC.
SEC File No. 333-59109
Ladies and Gentlemen:
We refer to the above-captioned registration statement on Form SB-2 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Act"), filed by Able Energy, Inc., a Delaware corporation (the "Company"), with
the Securities and Exchange Commission.
We have examined the originals, photocopies, certified copies or other
evidence of such records of the Company, certificates of officers of the Company
and public officials, and other documents as we have deemed relevant and
necessary as a basis for the opinion hereinafter expressed. In such examination,
we have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as certified copies or photocopies and the
authenticity of the originals of such latter documents.
Based on our examination mentioned above, we are of the opinion that the
securities being registered to be sold pursuant to the Registration Statement
are duly authorized and will be, when sold in the manner described in the
Registration Statement, legally and validly issued, and fully paid and
nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm under "Legal Matters" in
the related Prospectus. In giving the foregoing consent, we do not hereby admit
that we are in the category of persons whose consent is required under Section 7
of the Act, or the rules and regulations of the Securities and Exchange
Commission.
Very truly yours,
/s/ Sichenzia, Ross & Friedman, LLP
----------------------------------------
Sichenzia, Ross & Friedman, LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ABLE ENERGY
INC. AND SUBSIDIARIES DECEMBER 31, 1998 AND 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001065728
<NAME> ABLE ENERGY, INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 126 156
<SECURITIES> 0 0
<RECEIVABLES> 658 648
<ALLOWANCES> 69 53
<INVENTORY> 129 185
<CURRENT-ASSETS> 1,165 1,074
<PP&E> 2,679 2,491
<DEPRECIATION> 859 720
<TOTAL-ASSETS> 3,735 3,553
<CURRENT-LIABILITIES> 1,961 1,833
<BONDS> 0 0
0 0
0 0
<COMMON> 1 1
<OTHER-SE> 613 398
<TOTAL-LIABILITY-AND-EQUITY> 3,735 3,553
<SALES> 16,318 16,381
<TOTAL-REVENUES> 16,318 16,381
<CGS> 13,045 13,023
<TOTAL-COSTS> 3,172 3,141
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 17 49
<INTEREST-EXPENSE> 169 211
<INCOME-PRETAX> 120 125
<INCOME-TAX> 11 49
<INCOME-CONTINUING> 109 76
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 109 76
<EPS-PRIMARY> .109 .076
<EPS-DILUTED> .109 .076
</TABLE>
