<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 17, 1999
REGISTRATION NO. 333-59109
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT #3 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 $11.25 $1,125,000 $312.75
Total.............................. $9,750,010 $2,710.50(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 MAY 17, 1999
PROSPECTUS
[LOGO]
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
"AEI."
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 150% 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".
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 offers complete HVAC (heating, ventilation and
air conditioning) installation and repair, and also markets other petroleum
products to commercial customers, including diesel fuel, gasoline and
lubricants. The Company considers service and installation services to be an
integral part of its business. For example, the Company provides HVAC 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
20,000 home heating oil customers from three locations, of which two are located
in New Jersey and one is located in Florida.
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 believes
that this focused marketing strategy has been key to its success.
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 in a limited area, 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, franchisees are required to pay to the Company (i) a
$25,000 initial franchise fee; (ii) a $15,000 grand opening fee which the
Company uses to coordinate a public relations campaign and to purchase
promotional and marketing materials; (iii) a monthly fee of 1% of the
franchisees monthly gross sales; and (iv) an administrative fee equal to $.04
per gallon of fuel sold. Franchisees are granted the exclusive right and license
to operate the franchise within certain defined territory as an independent
contractor. The Company provides franchisees with guidelines and specifications
for the operations of the franchise, initial training, licenses for the use of
the Company's name, service markets and propriety marks, assistance with site
location, and advice on advertising and other promotional techniques. As of the
date of this Prospectus, one such franchise has been sold by the Company, there
can be no assurance that any additional 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 $5,889,500
after deducting commissions and expenses of the
Offering, which are estimated at $1,360,500. 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):
ABLE
Proposed Boston Stock Exchange Symbol (3):
AEI
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 no 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>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
1998 1997 1999 1998
------------- ------------- ------------- -------------
Revenues(1)............................................... $ 16,317,668 $ 16,380,992 $ 6,180,935 $ 5,504,512
Gross Profit.............................................. 3,272,744 3,358,357 1,735,758 1,353,042
Income from operations.................................... 100,745 217,588 948,965 500,624
Earnings (loss) per share(2).............................. .101 .218 .949 .501
Weighted average number of shares outstanding............. 1,000,000 1,000,000 1,000,000 1,000,000
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
MARCH 31, 1999
DECEMBER 31, -----------------------------
1997 ACTUAL AS ADJUSTED(2)
------------- ------------- --------------
<S> <C> <C> <C>
Working capital(3)................................................. $ (805,798) $ (370,600) $ 5,518,900
Total assets(3)(4)................................................. 3,739,526 4,184,751 10,924,251
Long-term liabilities(4)........................................... 1,219,309 1,118,217 1,968,217
Total liabilities(4)............................................... 3,194,643 3,083,655 3,923,655
Total shareholders' equity(3)(4)................................... 544,883 1,101,096 6,990,596
</TABLE>
- ------------------------
(1) Approximately 70% of the Company's revenues are attributable to sales of
home heating oil. In 1998, the price of crude oil was greatly depressed.
Consequently, in fiscal year 1997, the Company charged customers an average
of $.829 per gallon for home heating oil, as opposed to $.711 per gallon in
fiscal year 1998, a difference of $.118 per gallon.
(2) Net earnings per common share is based upon the weighted average number of
common shares outstanding for each period presented.
(3) As adjusted to reflect net proceeds of $5,889,500 from the sale by the
Company in this offering of 1,000,000 shares of Common Stock at the assumed
public offering price of $7.25 per Share.
(4) 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 March 31, 1999, the Company had long term
liabilities of 1,968,217. 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 47.5% ($2.8 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
47.5% of the net proceeds of this Offering will be applied towards unidentified
acquisitions, 17.0% for development of new products and business lines, and 14%
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. To date, the Company has sold only one franchise. There
can be no assurance that this franchisee or additional 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 $7.25 per
share of Common Stock, purchasers of Common Stock in the Offering will incur an
immediate dilution of $.83 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 11.4% of the initial public offering price per share of
Common Stock. Investors in the Offering will pay approximately $7.25 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 customer'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 $7.25 per share of Common
Stock, after deducting underwriting commissions and offering expenses estimated
to be $1,360,500 to be paid by the Company, is estimated to be $5,889,500. 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 47.5%
Development of new product and business lines(2).......................... 1,000,000 17.0%
Sales & Marketing(3)...................................................... 515,000 8.7%
Terminal space(4)......................................................... 300,000 5.1%
Hardware, software and installation cost of information system(5)......... 250,000 4.2%
Acquisition of real property (6).......................................... 150,000 2.5%
Addition of personnel(7).................................................. 50,000 0.8%
General Corporate and Working Capital..................................... 824,500 14.0%
Total..................................................................... $ 5,889,500 100%
------------------- ------
------------------- ------
</TABLE>
- ------------------------
(1) The Company plans to acquire certain assets or the securities of other home
energy product companies and other energy related entities. The Company has
no current plans, arrangements, commitments or understandings to acquire the
assets or the securities of other energy related entities.
(2) The net proceeds allocated to development of new product and business lines
are expected to be applied to new operating subsidiaries including, but not
limited to, a subsidiary for the Company's franchising operation, subsidiary
for the retail sale of electrical power and a subsidiary for a joint venture
for the retail sale of natural gas. See "Business."
(3) The net proceeds allocated to marketing and sales are expected to be applied
towards the promotion of the Company's service in its current markets and
expansion of the Company's markets. The proceeds are expected to be applied
to advertising, distributor incentive programs and sales person incentive
programs.
(4) The net proceeds will be allocated to the rental of additional terminal
space for the storage of home heating oil.
(5) Represents cost of the hardware, software and the installation costs
associated with the upgraded information system the Company plans to
install.
(6) Represents downpayment for purchase of the Company's headquarters currently
leased by the Company in Rockaway, New Jersey. Although no formal agreement
has been consummated, the Company is currently in negotiation to purchase
the property for an aggregate purchase price of approximately $1 million.
The purchase of this property is contingent upon the property meeting all
applicable environmental rules and regulations prior to purchase.
(7) The Company anticipates hiring additional sales and operations employees and
has allocated these net proceeds to fund these additions.
The foregoing represents the Company's estimate of the allocation of the net
proceeds of the Offering, based upon the current status of its operations and
anticipated business needs. It is possible, however, that the application of
funds will differ considerably from the estimates set forth herein due to
changes in the economic climate and/or the Company's planned business operations
or unanticipated complications, delays and expenses, as well as any potential
acquisitions that the Company may consummate, although no specific acquisition
has been identified. See "Management's Discussion and Analysis of
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<PAGE>
Financial Condition and Results of Operations." Any reallocation of the net
proceeds will be at the discretion of the Board of Directors of the Company.
Any additional net proceeds realized from the exercise of the Over-Allotment
Option (up to approximately $473,063) will be added to the Company's working
capital.
Pending application, the net proceeds will be invested principally in
short-term certificates of deposit, money market funds or other short-term
interest-bearing investments.
DIVIDEND POLICY
The Company has never paid or declared dividends on its Common Stock. The
payment of cash dividends, if any, in the future is within the discretion of the
Board of Directors and will depend upon the Company's earnings, its capital
requirements, financial condition and other relevant factors. The Company
intends, for the foreseeable future, to retain future earnings for use in the
Company's business.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1999 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>
MARCH 31, 1999
----------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
------------ --------------
Long-term liabilities, less current maturities(1)................................... $ 1,118,217 $ 1,968,217
------------ --------------
------------ --------------
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.................................................................. 1,097,096 1,097,096
Paid in Surplus................................................................... 3,999 5,891,500
------------ --------------
Total shareholders' equity........................................................ 612,912 6,990,596
------------ --------------
------------ --------------
</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 March 31, 1999, the net tangible book value of the Company's Common Stock
was $530,420 or ($.53) per share. Without taking into account any changes in net
tangible book value after March 31, 1999, 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 March 31,
1999 would have been $6,419,920 or $6.42 per share. Consequently, there will be
an immediate increase in net tangible book value of $5.89 per Share to the
existing shareholders and an immediate substantial dilution (i.e. the difference
between the assumed offering price of $7.25 per Share and the pro forma net
tangible book value per Share after the Offering) of $.83 or 11% to new
investors purchasing the Shares offered hereby.
The following table illustrates, as of March 31, 1999, this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per Share of Common Stock.... $ 7.25
Net tangible book value per share before Offering...... $ .53
Increase per Share attributable to new investors....... $ 5.89
Pro forma net tangible book value per Share after
Offering................................................. $ 6.42
---------
Dilution per Share to new investors........................ $ .83
---------
---------
</TABLE>
The following table summarizes, as of March 31, 1999, 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 6.2% $ 0.48
New Investors......................... 1,000,000 50% 7,250,000 93.8% 7.25
------------ --- ------------- ---
Total........................... 2,000,000 100% $ 7,730,760 100%
------------ --- ------------- ---
------------ --- ------------- ---
</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 for the three month period ended March 31, 1998 and 1999 are derived from
unaudited financial information provided by the Company, which in the opinion of
Management have been prepared on the same basis as the audited financial
statements and contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations for
such periods. The results of operations for the three months ended March 31,
1999, are not necessarily indicative of results to be expected for the full
fiscal year. The selected financial data set forth below should be read in
conjunction with the Company's financial statements and notes thereto and with
the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" appearing elsewhere in this Prospectus.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------- --------------------------
<S> <C> <C> <C> <C>
1998 1997 1999 1998
------------- ------------- ------------ ------------
Total revenues......................................... $ 16,317,668 $ 16,380,992 $ 6,180,935 $ 5,504,512
Total costs and expenses............................... 16,276,975 16,304,931 5,624,722 5,236,694
Net income (loss)...................................... 40,693 76,061 556,213 267,818
Net income(loss) per common share(1)................... .041 .076 0.556 0.268
Weighted average common shares
outstanding.......................................... 1,000,000 1,000,000 1,000,000 1,000,000
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1999
------------ ----------------------------
<S> <C> <C> <C> <C>
1998 1997 ACTUAL AS ADJUSTED(2)
------------ ------------ ------------ --------------
Working capital(3)..................................... $ (805,798) $ (761,188) $ (370,600) $ 5,518,900
Total assets(2)(3)..................................... 3,739,526 3,552,524 4,184,751 10,924,251
Total liabilities(2)................................... 3,194,643 3,154,264 3,083,655 3,933,655
Total stockholders' equity(3).......................... 544,883 398,260 1,101,096 6,990,596
</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 $5,889,500 from the sale by the
Company in this offering of 1,000,000 Shares at the assumed public offering
price of $7.25 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.
THREE MONTHS ENDED MARCH 31, 1999, COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1998.
The Company reported revenues of $6,180,935 for the three months ended March
31, 1999, an increase of 12.29% over the prior year's revenues of $5,504,512 for
the same three month period. This increase can be attributed to increased sales
as a result of cooler weather in the Northeast during this quarter as compared
to warmer weather experienced by the Northeast during November and December
1998; therefore, some customers who would normally receive delivery in the
fourth quarter of 1998
20
<PAGE>
instead received delivery in the first quarter of 1999. Increased revenues can
also be attributable to increased marketing efforts. Revenues for the three
months ended March 31, 1998 include $289,209 of sales made by subsidiaries which
were sold in December 1998. Had such revenues not been included in total revenue
for the three month period ended March 31, 1998, the increase in revenues from
such period to the three month period ended March 31, 1999 would have been
18.51%.
Gross profit margin, as a percentage of revenues, for the three months ended
March 31, 1999, increased to 28.37% of net revenues, representing an increase of
3.79% over a margin of 24.58% for the same quarter one year ago. The improvement
in margin is primarily a result of stable retail prices for home heating oil
with lower product cost.
Selling, General and Administrative expenses decreased by $49,796 or 6.67%
from $746,338 for the three months ended March 31, 1998 to $696,542 for the
three months ended March 31, 1999. This decrease was attributable to the sale of
two subsidiaries in December 1998 which had costs of $91,230 in the three months
ended March 31, 1998.
Operating Income for the three months ended March 31, 1999 was $948,965, an
increase of 89.56% over the Company's operating income of $500,624 for the three
months ended March 31, 1998. This increase in operating income was attributable
to stable retail prices for home heating oil and lower home heating oil product
costs paid by the Company during the last twelve months as a result of unusually
low fuel prices.
Net income for the three months ended March 31, 1999 increased by $288,395
or 107% to $556,213 as compared to the previous year. This increase in net
income is a direct result of continued sales growth and improved gross margins
(occasioned primarily by lower wholesale fuel prices), which more than offset
the investment in consumer promotions and advertising. As a percentage of net
revenues, income for the first quarter of 1999 increased to 9.0% as compared to
4.8% for the same period in the previous year. In addition to an increase in
gross margin and operating efficiencies, as described above, the Company also
profited from certain forward purchase contracts and from sales to customers
with automatic delivery contracts.
YEAR ENDED DECEMBER 31, 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 cost to the Company for number
2 home heating oil averaged $0.42 per gallon for fiscal 1998 as compared to
$0.59 for 1997. In fiscal year 1997, the Company charged customers an average of
$.829 per gallon as opposed to $.711 per gallon for number 2 home heating oil,
in fiscal year 1998. Therefore, although revenue decreased the Company was able
to increase margins on number 2 home heating oil by $.052 per gallon in fiscal
year 1998. Additionally, the decrease in revenues was a result of a reduction of
gallons sold of home heating oil. This reflects 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 in 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
21
<PAGE>
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 $40,693, a 46.50%
decrease in the Company's net income of $76,061 for the year ending December 31,
1997. This decrease in net income is primarily attributable to lower gross
profit and higher depreciation expenses due to additional tanks and other
equipment.
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 gain on sale of Able
Montgomery of $72,739 has been deferred and will be shown over 60 months as the
funds are collected. The gain on A&O is shown as excess of subsidiary losses
over investment of $54,404.
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
22
<PAGE>
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.
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,
23
<PAGE>
margins for the capped-price customer whose oil was not purchased in advance
would be lower than expected, while those customers whose oil was purchased in
advance would be unaffected. Conversely, should events occur during this period
that decrease the cost of oil below the amount anticipated, margins for the
capped-price customers whose oil was purchased in advance could be higher than
expected, while those customers whose oil was not purchased in advance would be
unaffected or higher than expected. The capped-price customers payments are
received in advance and are shown on the balance sheet as customer deposits
current liabilities.
LIQUIDITY AND CAPITAL RESOURCES
For the three month period ended March 31, 1999 compared to the three months
ended March 31, 1998, the Company's cash position decreased by $136,662 or
22.66% from the March 31, 1998 balance of $603,115 to the March 31, 1999 balance
of $466,453. For the three months ended March 31, 1999 cash was generated
through operations. For the three months ended March 31, 1998 cash was generated
through operations, net income and collections of accounts receivable.
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.
The increase in cash from December 31, 1998 to March 31, 1999 was $340,609
and from December 31, 1997 to March 31, 1998 was $447,211. This is due to the
seasonal fluctuations with greater sales and net income in the winter months.
As a result of a refinancing with its primary financial institution, the
Company has access to $500,000 of credit line funds. The Company's credit line
had been increased from $350,000 to $500,000 at 1/2% above prime and its current
outstanding credit line and other debt with the bank has been rolled into a 3
year term loan in the principal amount of $675,000 bearing interest at a rate of
approximately 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 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
24
<PAGE>
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.
YEAR 2000
Many existing computer programs use only a two digit suffix to identify a
year in the date field with an assumed prefix of "19". Consequently, this limits
those systems to dates between 1900 and 1999. If not corrected, many computer
systems and applications could fail or create erroneous results at or in
connection with applications after the year 2000.
Approximately 50% of the Company's customers receive their home heating oil
and/or propane pursuant to an automatic delivery system whereby deliveries are
scheduled by computer, based on each customer's historical consumption patterns
and prevailing weather conditions. In the event that the Company does have Year
2000 problems, failures and interruptions resulting from computing system
problems could have a material adverse effect on the Company's results of
operations.
The Company has undertaken to review the potential impact of the Year 2000
issue to its internal operations. Such assessment has included a review of the
impact of the issue on business systems and other areas. Based on the results of
the Company's review, it does not anticipate that the Year 2000 issue will
impact operations or operating results. Although the Company has determined that
all of its systems are currently Year 2000 compliant, it has undertaken to
replace its computer systems. The Company anticipates that it will have a new
computer system in place by October 1999 at a cost of approximately $50,000.
Additionally, the Company relies on its customers, suppliers, utility
service providers, financial institutions and other partners in order to
continue normal business operations. The Company has been advised by most, if
not all, of its external vendors, business associates and associated financial
institutions that they are now Year 2000 compliant. However, at this time, it is
impossible to assess the impact of the Year 2000 issue on each of these
organizations. There can be no guarantee that the systems of other unrelated
entities will be corrected on a timely basis and will not have a material
adverse effect on the Company. As the Company does not typically engage in
contracts with its vendors for the supply of energy products, it is not
dependent on any one vendor. In the event any of the Company's vendors are
affected by Year 2000 issues, management believes that it will have access to a
number of alternative vendors and management believes that such occurrence
should not have material adverse effect on the Company's business or operations.
25
<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 offers complete
HVAC (heating, ventilation and air conditioning) installation and repair 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 20,000 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 service and installation
services to be an integral part of its 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 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 believes that this focused
marketing strategy has been key to its success.
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.
26
<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 1998. 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 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.
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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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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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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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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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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 STRATEGY
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.
ACQUISITION STRATEGY
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.
FRANCHISE STRATEGY
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. In December 1998, the Company
sold Able Montgomery, one of the Company's subsidiaries, as its first franchise.
See "Business Recent Developments." Franchisees operate pursuant to a franchise
agreement which is for a ten (10) year term, and is renewable for an additional
ten year term unless terminated earlier. Franchises are granted the exclusive
right and license to operate the franchise within certain defined territory as
an independent contractor. The Company provides 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
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propriety marks, assistance with site locations, and advice on advertising and
other promotional techniques. Franchisees bear complete financial responsibility
for opening and operating the franchise, including purchasing insurance,
entering into a lease agreement, as the lessee, for the space in which the
franchise is located and purchasing or leasing fuel-oil delivery trucks and
equipment. Franchisees are required to purchase from the Company promotional
materials and energy products during the life of the franchise. Energy product
purchases are made through the Company's credit facilities with its wholesale
suppliers. Franchisees are required to pay to the Company (i) a $25,000 initial
franchise fee; (ii) a $15,000 grand opening fee which the Company uses to
coordinate a public relations campaign and to purchase promotional and marketing
materials; (iii) a monthly fee of 1% of the franchisee's monthly gross sales
(which can be waived by the Company based on franchisees' monthly sales volume);
and (iv) an administrative fee equal to $.04 per gallon of fuel sold to
franchisees. Pursuant to the franchise agreement, franchisees are required to
indemnify and hold harmless the Company from any liability, claim or judgment
arising from the franchisees business. The franchise agreement is terminable by
the Company upon certain events of default, which include, but are not limited
to, a franchisees' failure to pay monies owed to the Company, failure to
maintain certain licenses, franchisee's misuse of the Company's service or
proprietary marks or a franchisee's insolvency.
NEW PRODUCT AREA EXPANSION
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.
RECENT DEVELOPMENTS
On December 31, 1999, the Company sold two of its subsidiaries: Able
Montgomery and A&O. Able Montgomery located in Horsham, Pennsylvania, was
established in 1996 and is engaged in the retail sale and delivery of home
heating oil. Pursuant to a Stock Purchase Agreement, the Company agreed to sell
all of the outstanding shares of Able Montgomery held by the Company to an
unaffiliated third party for a purchase price of $140,000, and the purchaser
agreed to enter into a ten-year franchise agreement with the Company. As an
incentive for the purchaser to enter into the Stock Purchase Agreement and
operate Able Montgomery as a franchise, the Company agreed to waive the $25,000
franchise fee and the $15,000 grand opening fee the Company typically charges
new franchisees. See "Business--Expansion Strategy-Franchise Strategy." At the
time of the sale, Able Montgomery represented approximately 1.52% of the total
assets of the Company and approximately 1.82% of the total revenues of the
Company. The purchaser of Able Montgomery issued to the Company a promissory
note for the purchase price of Able Montgomery. Pursuant to the Stock Purchase
Agreement, the Company agreed to indemnify the purchaser in certain
circumstances, which include, any personal injury or property damage claims, or
any environmental
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violation, caused by the Company prior to the closing of the sale of Able
Montgomery. The purchaser agreed to indemnify the Company in certain
circumstances, which include, the breach of any representation or warranty made
by purchaser in the Stock Purchase Agreement or any of the other agreements
executed by the purchaser in connection with the sale of Able Montgomery.
Additionally, pursuant to the Stock Purchase Agreement, the purchaser agreed to
enter into a Pledge and Security Agreement whereby the purchaser agreed to
pledge to the Company all of the assets and outstanding shares of Able
Montgomery, and grant to the Company a security interest in all of the assets of
Able Montgomery, pending the satisfaction of the promissory note. The promissory
note is payable 60 months from the date of the note and accrues interest at a
rate of 9.5% per annum, payable to the Company in monthly installments.
A&O was established in 1995 and was engaged in the business of environmental
consulting and engineering. After assessing the potential profitability of A&O
versus its potential liabilities, Management determined that it was in the
Company's best interest to sell A&O. During the year ended December 31, 1999,
A&O experienced a loss from operations of approximately $152,000 on revenues of
$734,032. At December 31, 1999, A&O's liabilities were approximately $374,712 as
compared to assets of $221,000. From its inception through year ended December
31, 1998, the Company, through Able Oil, advanced to A&O approximately $128,442.
Pursuant to a Stock Purchase Agreement, the Company sold all of the outstanding
shares of common stock of A&O held by the Company to Owl Environmental, Inc.
("Owl"), one of A&O's subcontractors, for nominal consideration. Owl purchased
such shares "as is" without recourse or express or implied warranty from the
Company.
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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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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<PAGE>
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, plus all other bonuses payable to the
executive management of the Company, shall not exceed in the aggregate, a "bonus
pool" which 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. The employment agreements for each of Messrs.
Harrington and Wested contain a covenant not to compete whereby Messrs.
Harrington and Wested agree, for the term of the employment agreements and until
one year following the termination of the agreements, not to (i) persuade any
customer of the Company to cease or reduce the amount of business it does with
the Company; (ii) solicit the Company's customers for their own benefit; or
(iii) persuade any of the Company's employees to leave the employ of the
Company.
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<PAGE>
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.
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.
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<PAGE>
The exercise price of an option may not be less than the fair market value
per share of Common Stock on the date that the option is granted in order to
receive certain tax benefits under the Income Tax Act of United States (the
"ITA"). The exercise price of all future options will be at least 100% of the
fair market value of the Common Stock on the date of grant of the options. A
benefit equal to the amount by which the fair market value of the shares at the
time the employee acquires them exceeds the total of the amount paid for the
shares or the amount paid for the right to acquire the shares shall be deemed to
be received by the employee in the year the shares are acquired pursuant to
paragraph 7(1) of the ITA. Where the exercise price of the option is equal to
the fair market value of the shares at the time the option is granted, paragraph
110(1)(d) of the ITA allows a deduction from income equal to one quarter of the
benefit as calculated above. If the exercise price of the option is less than
the fair market value at the time it is granted, no deduction under paragraph
110(1)(d) is permitted. Options granted to any non-employees, whether directors
or consultants or otherwise will confer a tax benefit in contemplation of the
person becoming a shareholder pursuant to subsection 15(1) of the ITA.
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.
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<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 925,000
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.
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<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.
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<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 $217,500 assuming an Offering price of $7.25 per share of Common
Stock (or $250,125 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.
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<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 150% the
Offering price per share of Common Stock. The Underwriter's Warrants may not be
sold, transferred, pledged, assigned or hypothecated for a period of one year
after the date of this Prospectus, except to officers or partners 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.
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<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
45
<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.
46
<PAGE>
ABLE ENERGY, INC.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report (December 31, 1998)........................................................ F-2
FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 1998 and March 31, 1999 (Unaudited)...................... F-3 -4
Consolidated Statements of Income and Retained Earnings for the years ended December 31, 1998 and 1997
and the three months ended March 31, 1999 and March 31, 1998 (Unaudited).............................. F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1998 and 1997 and the three
months ended March 31, 1999 and 1998 (Unaudited)...................................................... F-6
Notes to Financial Statements (December 31, 1998 and 1997).............................................. F-7 -20
</TABLE>
F-1
<PAGE>
TO THE SHAREHOLDER
ABLE ENERGY, INC.
ROCKAWAY, NEW JERSEY 07866
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheet of Able Energy,
Inc. and subsidiaries as of December 31, 1998, and the related consolidated
statements of income and retained earnings, and cash flows for the years ended
December 31, 1998 and 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our 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 the
results of their operations and their cash flows for the years ended December
31, 1998 and 1997 in conformity with generally accepted accounting principles.
Fairfield, New Jersey
March 26, 1999
May 10, 1999, as to Note 17
F-2
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998 AND MARCH 31, 1999 (UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ ------------
<S> <C> <C>
(UNAUDITED)
CURRENT ASSETS:
Cash............................................................................... $ 125,844 $ 466,453
Accounts Receivable (Less Allowance for Doubtful Accounts of ($69,235) at 12/31/98
and 3/31/99...................................................................... 658,139 799,681
Inventory.......................................................................... 129,483 159,985
Notes Receivable--Current Portion.................................................. 36,651 33,733
Miscellaneous Receivable........................................................... 13,074 19,469
Prepaid Expense.................................................................... 51,709 58,283
Prepaid Expense--Income Taxes...................................................... 96,003 --
Deferred income Tax................................................................ 24,460 22,900
Due From Officer................................................................... 34,173 34,934
------------ ------------
TOTAL CURRENT ASSETS........................................................... 1,169,536 1,594,838
------------ ------------
PROPERTY AND EQUIPMENT:
Land............................................................................... 90,800 90,800
Building........................................................................... 150,000 150,000
Trucks............................................................................. 1,300,046 1,471,982
Fuel Tanks......................................................................... 487,677 547,842
Machinery and Equipment............................................................ 275,938 276,815
Leasehold Improvements............................................................. 160,429 125,360
Cylinders.......................................................................... 204,477 150,573
Office Furniture and Equipment..................................................... 9,313 10,514
------------ ------------
2,678,680 2,823,886
Less: Accumulated depreciation..................................................... 859,316 948,873
------------ ------------
NET PROPERTY AND EQUIPMENT..................................................... 1,819,364 1,875,013
------------ ------------
OTHER ASSETS:
Deposits........................................................................... 14,371 7,795
Notes Receivable--Less Current Portion............................................. 146,885 136,429
Customer List, Less Amortization of 1998 ($85,650), and 1999 ($95,167)............. 485,350 475,833
Covenant Not to Compete, Less Amortization of 1998 ($81,743) and 1997 ($90,920).... 104,020 94,843
------------ ------------
TOTAL OTHER ASSETS............................................................. 750,626 714,900
------------ ------------
TOTAL ASSETS................................................................... $3,739,526 $ 4,184,751
------------ ------------
------------ ------------
</TABLE>
See Accompanying Notes and Auditor's Report
F-3
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998 AND MARCH 31, 1999 (UNAUDITED)
LIABILITIES & STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ ------------
<S> <C> <C>
(UNAUDITED)
CURRENT LIABILITIES:
Accounts Payable................................................................... $ 689,246 $ 452,862
Note Payable--Bank................................................................. 100,434 60,871
Current Portion of Long-Term Debt.................................................. 651,817 665,424
Covenant Not To Compete............................................................ 36,714 36,713
Accrued Expenses................................................................... 62,244 34,652
Taxes Payable...................................................................... 15,298 26,401
Customer Advance Payments.......................................................... 355,983 356,520
Income Taxes Payable--Current...................................................... -- 278,487
Income Taxes Payable--Prior........................................................ 33,962 23,960
Current Portion of Deferred Income................................................. 14,548 14,548
Escrow Deposits.................................................................... 15,088 15,000
------------ ------------
TOTAL CURRENT LIABILITIES...................................................... 1,975,334 1,965,438
DEFERRED INCOME: less current portion................................................ 58,191 54,554
DEFERRED INCOME TAXES................................................................ 50,601 53,161
COVENANT NOT TO COMPETE: less current portion........................................ 67,308 58,130
LONG TERM DEBT: less current portion................................................. 1,043,209 952,372
------------ ------------
TOTAL LIABILITIES.............................................................. 3,194,643 3,083,655
------------ ------------
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 3,999
Retained Earnings.................................................................. 540,883 1,097,096
------------ ------------
TOTAL STOCKHOLDERS' EQUITY..................................................... 544,883 1,101,096
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................... $3,739,526 $ 4,184,751
------------ ------------
------------ ------------
</TABLE>
See Accompanying Notes and Auditor's Report
F-4
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 AND
THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEARS ENDED DECEMBER 31, 31,
UNAUDITED
---------------------------- --------------------------
<S> <C> <C> <C> <C>
<CAPTION>
1998 1997 1999 1998
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
NET SALES........................................... $ 16,317,668 $ 16,380,992 $ 6,180,935 $ 5,504,512
COST OF SALES....................................... 13,044,924 13,022,635 4,427,177 4,151,470
------------- ------------- ------------ ------------
GROSS PROFIT...................................... 3,272,744 3,358,357 1,753,758 1,353,042
------------- ------------- ------------ ------------
EXPENSES
Selling, General and Administrative Expenses...... 2,720,598 2,745,963 696,542 746,338
Depreciation and Amortization Expense............. 451,441 394,806 108,251 106,080
------------- ------------- ------------ ------------
TOTAL EXPENSES.................................. 3,172,039 3,140,769 804,793 852,418
------------- ------------- ------------ ------------
INCOME FROM OPERATIONS............................ 100,705 217,588 948,965 500,624
------------- ------------- ------------ ------------
OTHER INCOME (EXPENSES):
Insurance Proceeds................................ -- 2,285 -- --
Interest Income................................... 12,684 4,910 10,113 818
Gain on Sale of Equipment......................... 23,957 72,104 -- --
Leasing Income.................................... -- 26,574 -- --
Excess of Subsidiary Losses over Investment....... 54,404 -- -- --
Miscellaneous Income.............................. 24,623 13,078 4,172 4,168
Interest Expense.................................. (169,040) (211,133) (28,427) (52,092)
------------- ------------- ------------ ------------
TOTAL OTHER INCOME (EXPENSES)................... (53,372) (92,182) (14,142) (47,106)
------------- ------------- ------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES.......... 47,333 125,406 934,823 453,518
PROVISION FOR INCOME TAXES.......................... 6,640 49,345 378,610 185,700
------------- ------------- ------------ ------------
NET INCOME........................................ 40,693 76,061 556,213 267,818
RETAINED EARNINGS--BEGINNING OF YEAR (RESTATED)..... 500,190 315,199 540,883 76,061
------------- ------------- ------------ ------------
RETAINED EARNINGS--END OF YEAR...................... $ 540,883 $ 391,260 $ 1,097,096 $ 343,879
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
NET INCOME PER SHARE................................ $ .041 $ .076 $ .556 $ .268
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING....................................... 1,000,000 1,000,000 1,000,000 1,000,000
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
</TABLE>
NOTE: WEIGHTED AVERAGE SHARES HAVE BEEN RESTATED TO REFLECT THE 1,000
FOR 1 STOCK SPLIT TO BE EFFECTUATED BY THE COMPANY.
See Accompanying Notes
F-5
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 AND
THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEARS ENDED DECEMBER 31, 31,
UNAUDITED
-------------------------- ------------------------
<S> <C> <C> <C> <C>
<CAPTION>
1998 1997 1999 1998
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income.............................................. $ 40,693 $ 76,061 $ 556,213 $ 267,818
Adjustments to Reconcile Net Income to Cash used by
Operating Activities:
Depreciation and Amortization......................... 451,441 394,806 108,251 106,080
Gain on Sale of Equipment............................. (23,957) (72,104) -- --
Excess of Subsidiary Losses over Investment........... (54,404) -- -- --
(Increase) Decrease in:
Accounts Receivable................................. (10,408) (156,298) (141,542) 119,894
Inventory........................................... 55,172 8,906 (30,502) 29,468
Prepaid Expenses.................................... (140,888) 82,091 90,989 (31,041)
Deposits............................................ (12,575) 3,975 6,576 --
Increase (Decrease) in:
Accounts Payable.................................... 193,076 199,910 (236,384) 53,155
Accrued Expenses.................................... (22,709) (319,389) (27,680) 12,591
Other Taxes Payable................................. 1,450 (1,723) 11,103 (6,515)
Customer Advance Payments........................... 52,789 303,194 537 (197,545)
Income Taxes Payable................................ (53,188) 10,455 268,485 156,600
Deferred income Taxes............................... 31,776 12,850 2,560 2,300
Deferred Income......................................... -- -- (3,637) --
------------- ----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES......... 508,268 542,734 604,969 512,805
------------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in Stockholders' Equity--Sale of............. 105,930 -- -- --
Subsidiary.............................................. 44,000 114,490 -- --
Sale of Equipment..................................... 140,000 -- -- --
Sale of Subsidiary.................................... (452,390) (197,609) (145,206) (70,181)
Purchase of Property and Equipment.................... 27,515 (42,000) -- --
Sale (Purchase) of Intangibles Subsidiary
Decrease (Increase) Note Receivable--Sale of
Equipment........................................... (43,536) 23,692 6,374 --
Reduction in Property and Equipment--Net Sale of...... 8,768 -- -- --
Subsidiary............................................ 8,354 -- (761) 38,336
(Increase) Decrease in Shareholder's Loan............. (1,415) (11,659) (6,395) 4,900
Increase in Other Receivables
Decrease (Increase) in Note Receivable--Sale of....... (140,000) -- 7,000 --
------------- ----------- ----------- -----------
Subsidiary............................................ (302,774) (413,086) (138,988) (26,945)
------------- ----------- ----------- -----------
NET CASH USED BY INVESTING ACTIVITIES
</TABLE>
F-6
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 AND
THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
1998 1997 1999 1998
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES.................. 1,285,528 814,317 135,027 92,893
Increase in Notes Payable............................. (1,521,082) (948,100) (260,399) (145,542)
Decrease in Notes Payable............................. -- -- -- 14,000
------------- ----------- ----------- -----------
Loan From Employee.................................... (235,554) (133,783) (125,372) (38,649)
------------- ----------- ----------- -----------
NET CASH USED BY FINANCING ACTIVITIES............. (30,060) (4,135) 340,609 447,211
NET INCREASE (DECREASE) IN CASH......................... 155,904 160,039 125,844 155,904
------------- ----------- ----------- -----------
Cash--Beginning of Year................................. $ 125,844 $ 155,904 $ 466,453 $ 603,115
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
Cash--End of Year....................................... $ 169,728 $ 211,133 $ 28,427 $ 52,092
The Company had Interest Cash Expenditures of:.......... $ 108,188 $ 43,680 $ 10,202 $ 35,650
The Company had Tax Cash Expenditures of:
</TABLE>
See Accompanying Notes and Auditor's Report
F-7
<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-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)
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-9
<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-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 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-11
<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-12
<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-13
<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-14
<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.
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............................................ $ 4,430 15.0% $ 34,295 34.0%
Increase resulting from State Income
Tax, net of Federal Tax benefit......................................... 2,210 6.5% 15,050 5.9%
--------- --------- ----------- ---
Income Taxes............................................................ $ 6,640 21.5% $ 49,345 39.9%
--------- --------- ----------- ---
--------- --------- ----------- ---
Income Taxes consist of:
Current................................................................. 6,020 47,215
Deferred................................................................ 620 2,130
--------- --------- ----------- ---
Total................................................................... $ 6,640 $ 49,345
--------- --------- ----------- ---
--------- --------- ----------- ---
</TABLE>
F-15
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 11 INCOME TAXES (CONTINUED)
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 19,385
Gain on Sale of Subsidiary........................................... 23,615 5,075
</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.
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.
F-16
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 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 to an unrelated
third party for $140,000. The note receivable is payable in 60 monthly payments
of $2,940.26, including principal and interest. Interest is at 9.5% per annum.
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>
The gain on the sale of $72,739 is shown on the balance sheet as deferred
income. The income will be recognized on an installment basis upon collection of
the notes receivable (see Note 17).
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 will receive an Administrative
Processing Fee equal to $0.04 per gallon of fuel sold to the franchisee and a
monthly fee equal to 1% of the franchisee's monthly gross sales (which can be
waived at the discretion of the Company based on the franchisee's sales volume).
The Company agreed to waive the $25,000 Initial Franchise Fee and the $15,000
Grand Opening Fee as an incentive for the purchaser to enter into the franchise
agreement.
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
F-17
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 15 SALE OF SUBSIDIARIES (CONTINUED)
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 transferred to
Able Energy, Inc. and recorded as investment in subsidiaries and these costs
were written off against the subsidiary sales.
Summary of Assets and Liabilities and Gain on Sale of Subsidiaries sold.
<TABLE>
<CAPTION>
A & O ENVIRONMENTAL ABLE OIL
SERVICES, INC. MONTGOMERY, INC.
-------------------- ----------------
<S> <C> <C>
Current Assets............................................................ $ 214,233 $ 29,190
Equipment--Net............................................................ 35,386 17,166
Intangible Assets--Net.................................................... -- 27,340
---------- --------
Total Assets............................................................ 249,619 73,696
---------- --------
Current Liabilities....................................................... 523,953 114,968
Long Term Debt (Less Current Portion)..................................... 8,038 13,750
---------- --------
Liabilities in Excess of Assets........................................... $ (282,372) $ (55,022)
---------- --------
Total Liabilities....................................................... 531,991 128,718
---------- --------
---------- --------
Sale Price................................................................ $ 10 $ 140,000
---------- --------
Cash Investment........................................................... (128,945) (115,385)
Negative Investment in.................................................... 183,339 48,124
Subsidiaries--Prior Loss................................................ 54,394 (67,261)
---------- --------
Excess of Subsidiary Cumulative Losses.................................... $ 54,404 $ 72,739
Over Investment
Total Gain
---------- --------
---------- --------
</TABLE>
NOTE 16 PROFORM STATEMENT OF INCOME
The following shows the effect on the Statement of Income for the year ended
December 31, 1998 with the removal of the subsidiaries sold:
<TABLE>
<S> <C>
Net Income per Statement of Income and Retained Earnings........................... $ 40,693
Add: Losses on Subsidiaries sold, Net of Tax Savings
A & O Environmental Services, Inc. 97,123
Able Oil Montgomery, Inc. 11,434
Less: Excess of Subsidiary Losses over Investment
Recorded as Income............................................................... (54,404)
---------
Net Income-Removing effect of Subsidiaries Sold.................................... $ 94,846
---------
---------
</TABLE>
F-18
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 17 SUBSEQUENT EVENTS
PER SHARE INFORMATION
Per share information has been computed based on the weighted average number
of shares. The shares give effect to a 1,000 for 1 stock split to be effectuated
by the Company.
NOTES RECEIVABLE
The Company has received payment from Able Oil Montgomery, Inc. For the
months of January 1999 through March 1999 on its notes receivable of $140,000
(see Note 15). The payments totaled $8,820.78, including interest of $1,820.78.
The Statement of Income and Retained Earnings as recognized income on this
installment sales of $3,637 for the three months ended March 31, 1999.
F-19
<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................................................................ 36
Principal Stockholders and Selling Securityholders........................ 40
Certain Transactions...................................................... 40
Description of Securities................................................. 41
Underwriting.............................................................. 42
Legal Matters............................................................. 44
Experts................................................................... 44
Additional Information.................................................... 44
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................. 232,500.00
Underwriter's consulting agreement.............................. 108,000.00
Miscellaneous................................................... 31,046.61
---------
Total....................................................... 635,500.00
---------
---------
</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 May 17, 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 May 17, 1999
Timothy Harrington Officer and Secretary
/s/ CHRISTOPHER WESTAD President and Director
- ------------------------------ May 17, 1999
Christopher Westad
/s/ WILLIAM F. COSTA Controller and Principal
- ------------------------------ Accounting Officer May 17, 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
_____________, 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. 333-59 109),
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
3
<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.
4
<PAGE>
(1) 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.
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(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
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<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
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<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).
(1) 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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<PAGE>
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
14
<PAGE>
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
15
<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
<PAGE>
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
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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,
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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.
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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
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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 indenmified
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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<PAGE>
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
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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. 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.
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344 Route 46
Rockaway, New Jersey 07866
Attn:Timothy Harrington
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
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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 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.
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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.
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]
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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
30
<PAGE>
EXHIBIT 4.2
Able Energy, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
AE
SEE REVERSE SIDE FOR
CERTAIN DEFINITIONS
CUSIP 003709 10 2
This Certifies That
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK $.001 PAR
VALUE EACH OF
Able Energy, Inc.
transferable on the books of the Corporation in person or by attorney upon
surrender of this certificate duly endorsed or assigned. This certificate and
the shares represented hereby are subject to the laws of the State of Delaware,
and to the Certificate of Incorporation and Bylaws of the Corporation, as now or
hereafter amended. This certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Corporation and the Facsimile signatures of
its duly authorized officers.
Dated:
Secretary
President
Countersigned:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
Jersey City, NJ
Transfer Agent
By
Authorized Officer
1
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM as tenants in common
TEN ENT as tenants by the entireties
JT TEN as joint tenants with the right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT (Cust) Custodian (Minor)
under Uniform Gifts to Minors Act (State)
Additional abbreviations may also be used though not in the above list.
For Value received, _________ hereby sell, assign and transfer unto PLEASE
INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF
ASSIGNEE) Shares of the stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint _________________
Attorney to transfer the said Shares on the books of the within named
Corporation with full power of substitution in the premises.
Dated:
NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE
STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER, UPON REQUEST AND WITHOUT
CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES
AND LIMITATIONS OF THE SHARES OF EACH CLASS AND SERIES AUTHORIZE TO BE
ISSUED, SO FAR AS THE SAME HAVE BEEN DETERMINED, AND OF THE AUTHORITY, IF
ANY OF THE BOARD TO DIVIDE THE SHARES INTO CLASSES OR SERIES AND TO
DETERMINE AND CHANGE THE RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF
ANY CLASS OR SERIES, SUCH REQUEST MAY BE MADE TO THE SECRETARY OF THE
CORPORATION OR TO THE TRANSFER AGENT NAMED ON THIS CERTIFICATE.
THE SIGNATURE TO THE ASSIGNMENT MUST CORRESPOND TO THE NAME AS WRITTEN
UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A
COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF AN NATIONAL OR
REGIONAL OR OTHER RECOGNIZED STOCK EXCHANGE IN CONFORMANCE WITH A
SIGNATURE GUARANTEE MEDALLION PROGRAM.
2
<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,
depreciation and amortization of the Company ("EBTDA") for 1999, provided
the Company achieves at least $800,000 in EBTDA, 10% of EBTDA for 2000 and
2001, provided the Company achieves at lease $3,000,000 and $5,000,000,
respectively, of EBTDA in each of such years.] These agreements will not be
subject to amendment during their term without the consent of the Underwriter.
(C) Increases: The annual salary is subject to periodic increases at the
discretion of the Board of Directors with such increases to take effect no later
than on each anniversary date of this Agreement.
4. Expenses: The Company shall reimburse Executive for all reasonable and
actual business expenses incurred by him in connection with his service to the
Company, upon submission by him of appropriate vouchers and expense account
reports.
5. Benefits:
(A) Insurance: In addition to the salary and bonus to be paid to Executive
hereunder, the Company shall maintain family medical and dental insurance, life
insurance in the amount of not less than ___________ Dollars ($_________) 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,
depreciation and amortization of the Company ("EBTDA") for 1999, provided
the Company achieves at least $800,000 in EBTDA, 10% of EBTDA for 2000 and
2001, provided the Company achieves at lease $3,000,000 and $5,000,000,
respectively, of EBTDA in each of such years.] These agreements will not be
subject to amendment during their term without the consent of the Underwriter.
(C) Increases: The annual salary is subject to periodic increases at the
discretion of the Board of Directors with such increases to take effect no later
than on each anniversary date of this Agreement.
4. Expenses: The Company shall reimburse Executive for all reasonable and
actual business expenses incurred by him in connection with his service to the
Company, upon submission by him of appropriate vouchers and expense account
reports.
5. Benefits:
(A) Insurance: In addition to the salary and bonus to be paid to Executive
hereunder, the Company shall maintain family medical and dental insurance, life
insurance in the amount of not less than ___________ Dollars ($_________) 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 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 (May 10, 1999 as to Note 17), 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
May 17, 1999
Fairfield, New Jersey
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<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 MAR-31-1999
<CASH> 126 466
<SECURITIES> 0 0
<RECEIVABLES> 727 869
<ALLOWANCES> 69 69
<INVENTORY> 129 159
<CURRENT-ASSETS> 1,170 1,595
<PP&E> 2,679 2,824
<DEPRECIATION> 859 949
<TOTAL-ASSETS> 3,740 4,185
<CURRENT-LIABILITIES> 1,975 1,965
<BONDS> 0 0
0 0
0 0
<COMMON> 1 1
<OTHER-SE> 545 1,101
<TOTAL-LIABILITY-AND-EQUITY> 3,740 4,185
<SALES> 16,318 6,181
<TOTAL-REVENUES> 16,318 6,181
<CGS> 13,045 4,427
<TOTAL-COSTS> 3,172 805
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 16 0
<INTEREST-EXPENSE> 169 28
<INCOME-PRETAX> 48 935
<INCOME-TAX> 7 379
<INCOME-CONTINUING> 41 556
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