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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUES UNDER SECTION 12(B)
OR 12(G) OF THE SECURITIES ACT OF 1934
FULL POWER GROUP, INC.
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(Name of Small Business Issuer in Its Charter)
FLORIDA 34-1856165
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
14650 DETROIT AVENUE, SUITE 313, LAKEWOOD, OHIO 44107
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(Address of Principal Executive Offices) (Zip Code)
(216) 227-9835
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(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
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Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.001 PER SHARE
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(Title of Class)
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TABLE OF CONTENTS
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PART I .........................................................................................................4
Item 1. Description of Business.........................................................................4
General Description and Development of Business.................................................4
Principal Products and Services.................................................................6
Distribution Methods............................................................................6
Status of Publicly Announced New Products or Services...........................................6
Markets and Competition.........................................................................6
Marketing Licenses in California................................................................8
Principal Suppliers.............................................................................9
Dependence on Customers........................................................................10
Patents and Trademarks.........................................................................10
Government Regulation..........................................................................10
Research and Development.......................................................................12
Compliance with Environmental Laws.............................................................12
Employees......................................................................................12
Item 2. Management Discussion and Analysis or Plan of Operation........................................12
Introduction...................................................................................12
Forward-Looking Statements.....................................................................13
Nine Months Ended September 30, 1999 Compared to
Nine Months Ended September 30, 1998..................................................14
Potential Fluctuations in Quarterly Results....................................................16
Liquidity and Capital Resources................................................................16
Item 3. Description of Property........................................................................17
Item 4. Security Ownership of Certain Beneficial Owners and Management.................................17
Item 5. Directors, Executive Officers, Promoters and Control Persons...................................18
Item 6. Executive Compensation.........................................................................19
Compensation Table.............................................................................19
Compensation of Directors......................................................................20
Employment Contracts and Change-in-Control Arrangements........................................20
Item 7. Certain Relationships and Related Transactions.................................................20
Item 8. Description of Securities......................................................................21
Common Stock...................................................................................21
Preferred Stock................................................................................22
PART II ........................................................................................................23
Item 1. Market Price of and Dividends on the Company's Common Equity
and Other Shareholder Matters.........................................................23
Market Information.............................................................................23
Price Range of Common Stock....................................................................23
Number of Shareholders.........................................................................24
Dividends......................................................................................24
Item 2. Legal Proceedings..............................................................................24
Item 3. Changes in and Disagreements with Accountants..................................................25
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Item 4. Recent Sales of Unregistered Securities........................................................25
Item 5. Indemnification of Directors and Officers......................................................27
PART F/S ........................................................................................................28
Audited Consolidated Financial Statements as at December 31, 1998.......................................29
Unaudited Consolidated Financial Statements as at September 30, 1999....................................40
PART III ........................................................................................................51
Items 1 and 2. Index to and Description of Exhibits....................................................51
SIGNATURES.......................................................................................................53
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PART I
Full Power Group, Inc. (the "Company"), a development stage company,
has elected to file this Form 10-SB registration statement on a voluntary basis
in order to become a reporting company under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The primary purpose for this registration
is to maintain the Company's trading status on the Over-the-Counter Bulletin
Board ("OTCBB") maintained by the National Association of Securities Dealers,
Inc. ("NASD"). Under current NASD rules, a company must be a reporting company
under the Exchange Act in order to remain listed on the OTCBB. See "Market
Information" in Part II, Item 1 below.
This registration statement contains forward-looking statements
including statements regarding, among other things, the plans and objectives of
the Company for future operations and anticipated trends in the Company's
business. These forward-looking statements are subject to a number of risks and
uncertainties that are beyond the Company's control. Actual results could differ
materially from these forward-looking statements as described under
"Forward-Looking Statements" in Part I, Item 2 below.
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL DESCRIPTION AND DEVELOPMENT OF BUSINESS.
The Company is a "startup" or "development stage company" that has
been formed to take advantage of the current trend toward deregulation of power
industries in various states across the nation. The Company is still in the
development stage and has not yet commenced any significant business operations.
The Company was incorporated under the laws of the State of
Florida in May 1997 under the name "Worldwide Dental Distribution Corp." The
Company was originally formed to engage in the business of purchasing and
distributing dental equipment. However, the Company never developed or commenced
operations in that business. The Company's charter was administratively
dissolved by the State of Florida in September 1999 due to an inadvertent
failure to file its annual report for 1998. The Company intends to take all
necessary action to have its corporate charter reinstated as soon as
practicable.
Full Power Corporation, an Ohio corporation ("FPC"), was
incorporated under the laws of the State of Ohio in February 1998. FPC was
formed to take advantage of potentially profitable opportunities presented by
the restructuring of the nation's electric utility industry and breakup of the
franchise monopoly system that has been in effect for over 80 years. Just as
deregulation in the natural gas and telecommunications industries created
opportunity for entry level companies, there is now an unfolding market for
power and related services.
Originally, FPC intended to take advantage of California Assembly
Bill 1890, which deregulated California's electric utility industry and permits
California residents and businesses to choose their own electrical utility
service providers, which may be either the utilities that generate the
electricity or resellers of that electricity that are registered with the
California Public Utilities
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Commission ("CPUC"). FPC obtained a license as a registered electrical service
provider ("ESP") with the CPUC (registration no. 1308), which permits it to
provide electric service to electric customers within California under the
provisions of that state's laws and regulatory orders issued by the CPUC.
However, for the reasons described below under the caption "Markets and
Competition," the Company has elected not to commence business operations in the
State of California at this time.
In September 1998, FPC acquired for cash approximately 88% of the
outstanding shares of common stock of the Company. At that time, the Company
entered into a share exchange agreement with all of the shareholders of FPC,
pursuant to which the shareholders of FPC exchanged all of the outstanding
shares of common stock of FPC for 3,600,000 newly issued shares of common stock
of the Company. As a result of the share exchange, the shareholders of FPC
became the controlling shareholders of the Company, owning approximately 88% of
the Company's outstanding common stock, and FPC became a wholly-owned subsidiary
of the Company. The Company intends to conduct its operations exclusively
through FPC and possibly other subsidiaries to be formed or acquired in the
future.
In April 1999, the Company caused its wholly-owned subsidiary,
FPC, to enter into a line of credit and pledge agreement with All Power
Corporation, a New York corporation ("All Power"), and Mr. John O'Brien, the
sole shareholder of All Power. Under the terms of the line of credit and pledge
agreement, the Company agreed to make available to All Power a line of credit
facility in the aggregate principal sum of $250,000. All Power intends to use
the funds to develop and commence operations as an independent power provider in
the State of New York.
In July 1999, FPC obtained a license to act as a Wholesale
Electric Power & Energy Transactions Maker from the Federal Energy Regulatory
Commission ("FERC") (docket no. ER99- 2540-000). The FERC license will allow FPC
to purchase power from sources in any jurisdiction.
In October 1999, FPC has filed an application with the
Commonwealth of Pennsylvania to operate as an electric generation supplier in
that state, which application is currently pending.
The success of the Company's business will be largely dependent on
the continued deregulation of the power industry and on its ability to raise the
capital needed to commence business operations. Currently, only a few states
permit the sale of power by independent providers other than public utility
companies. By obtaining the FERC license to purchase and sell wholesale power,
the Company has positioned itself to be able to sell power to residents and
business in states other than California and Pennsylvania that adopt
deregulation legislation. The Company is actively exploring the possibility of
selling power to residents in other states that have or are in the process of
deregulating their power industries, such as Illinois, Ohio, Pennsylvania and
New York.
The primary sources of the Company's revenues are expected to be
from the resale of energy purchased on a wholesale basis, from the sale of other
products and services to its customers and from the licensing of marketing
territories to unaffiliated marketing companies.
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PRINCIPAL PRODUCTS AND SERVICES.
As of the date of this registration statement, the Company has no
operations and no customers. However, as its principal products, the Company
plans to purchase natural gas and electricity on a wholesale basis and resell it
to customers in deregulated states at rates competitive with rates traditionally
charged by large public utility companies.
Currently, public utility companies charge most power consumers
the same rate for power throughout the billing cycle regardless of the actual
cost of the power to the utility company. The Company plans to develop a power
rate structure that will vary according the actual cost of the power to the
Company. The Company believes that its alternative power pricing schedule will
be attractive to frugal consumers and may save them money on their power bills.
In marketing power to customers, the Company also plans to offer a
comprehensive package of products and services to earn additional revenue. These
bundled products may combine electrical and/or natural gas service with
telecommunication services, Internet access and web page support services, home
and business security and/or appliance warranties.
DISTRIBUTION METHODS.
The Company has not begun marketing any products or services to
consumers. The Company plans to market the products and services it is
developing through commissioned sales personnel that work exclusively for the
Company and through independent marketing organizations that will operate under
guidelines to be established by the Company.
In addition, the Company intends to advertise its products and
services through a variety of media, such as commercials on radio and
television, direct mail, facsimile broadcasts and newspaper advertisements, to
differentiate it from competitors and to create general consumer awareness. The
Company also plans to develop and maintain a strong Internet presence. The
Company may also promote the sale of its products and services through the use
of joint ventures, marketing licenses, endorsements and cooperative agreements.
STATUS OF PUBLICLY ANNOUNCED NEW PRODUCTS OR SERVICES.
The only publicly announced product or service that has not been
completed is an Internet software application to assist the Company in providing
the public with real-time quotes of power rates. All work on the design and
implementation of the Internet software application has been temporarily
terminated due to lack of funding. The Company intends to resume work on the
Internet software application as soon as the Company is able to raise sufficient
capital.
MARKETS AND COMPETITION.
The Company believes that, as energy consumers in California and
other states acquire the ability to choose their own energy service providers
and a truly competitive marketplace emerges, a percentage of those consumers
will choose to select a provider different from their current
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provider. However, much depends on the methods chosen by the individual states
to restructure their energy delivery and purchase systems and on what regulatory
controls and restrictions they put in place.
With the advent of energy markets opening across the United
States, competition will be extensive in each of the geographical areas that the
Company elects to serve. The markets for the Company's customers can be divided
into three major segments: (1) large industrial customers; (2) small to
medium-sized commercial customers; and (3) residential customers. While the
Company intends to eventually target all customers, it plans to concentrate on
small to medium-sized commercial customers.
At present, the power market in the State of California is not yet
truly accessible to the Company. The CPUC is in the process of implementing a
four-year transition period to the new competitive market created by
California's deregulatory legislation. The goal of the transition period is to
make the industry fully competitive by 2002. It has become increasingly apparent
that, while the enabling legislation and regulatory process have begun the
restructuring of the existing monopoly utilities in California, technological
difficulties and resistance on the part of the monopoly utilities to move
expeditiously will preclude actual entry into the market for most ESPs,
including the Company, until the end of this transition period. To date, most
ESPs have not been successful in acquiring customers or generating sales because
they are unable to compete with the large utility distribution companies on
pricing. As of July 31, 1999, according to the CPUC's Energy Division, of the
301 registered ESPs in California, 32 (including the Company) were still active
and 269 were either inactive, had been suspended or had their registrations
canceled. Furthermore, of the 32 active ESPs, only 12 were actually providing
residential or small commercial service.
If and when the Company decides it can compete in the California
power market, the Company would be competing for customers with such large
public utility companies as San Diego Gas and Electric, Southern California
Edison, Pacific Gas & Electric, Southern California Water Company, Pacificorp,
Sierra Pacific Power and Kirkwood Gas and Electric Company as well as various
other ESPs. The Company estimates that San Diego Gas and Electric, Southern
California Edison and Pacific Gas & Electric provide power to approximately 75%
of the power consumers in the State of California.
In the Commonwealth of Pennsylvania, the Company believes it will
encounter intense competition from large public utility companies and other
electric generation suppliers operating in that state, including Total Gas &
Electricity, Inc., ECONergy PA, Exelon Energy, Metromedia Energy, Inc.,
Utility.com, PowerChoice, PSEG Energy Technologies, ACN Energy, Inc. and NYSEG
Solutions, Inc.
In the event that it decides to enter the markets of other
deregulated states in the future, the Company expects its major competitors to
be affiliates of large public utility companies. As is expected to be the case
in all states where the Company chooses to conduct business, most of the
Company's competitors will have longer operating histories, greater name
recognition, larger installed customer bases and substantially greater
financial, technical, and marketing resources than
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the Company. There can be no assurance that the Company will be able to compete
successfully in any particular state.
While the Company's strategic business plan has been researched
and thought out, there is no assurance that the plan, or the Company's products
or services, will be accepted in or by the marketplace nor that, if it is
accepted, demand will be sufficient to make the Company profitable. The Company
cannot project with any certainty the outcome of its operations, and there are
no assurances that the Company will operate profitably in either the near or
long term.
The Company will also be competing for highly qualified technical
and managerial personnel. There can be no assurance that the Company will be
able to compete successfully in recruiting qualified personnel.
In addition, local, national, and international economic
conditions may have a substantial adverse affect on the efforts of the Company.
The Company cannot guarantee against the possible eventuality of any potential
adverse economic conditions.
MARKETING LICENSES IN CALIFORNIA.
In October 1998, the Company entered into a marketing license
agreement with an unaffiliated company, Courant Consulting, Inc. ("Courant"),
pursuant to which Courant agreed to make payments to the Company in
consideration for an exclusive license to market the Company's power in certain
geographic territories in the State of California. Under the marketing license
agreement, Courant had the right to sublicense its right to market the Company's
power to other persons. In consideration of the marketing license agreement,
Courant agreed to pay the Company a license fee in the total amount of
$2,325,000.
Courant subsequently entered into sublicense agreements with eight
limited liability partnerships (collectively, the "Partnerships") that were not
affiliated with the Company. In the sublicense agreements, Courant granted each
Partnership the exclusive right to market power on behalf of the Company in one
of twelve geographic areas in the State of California. The Partnerships agreed
to use their best efforts to obtain customers for the Company in their
designated geographical areas. In return, each Partnership was entitled to
receive one-half of the net income derived by the Company from the sales
developed by that Partnership.
In June 1999, the principal of Courant suffered an unexpected
serious illness that rendered him totally disabled and resulted in the cessation
of Courant's business. Thereafter, the Company terminated the marketing license
agreement and agreed that Courant would not be responsible for the payment of
the remaining $1,311,076 balance of the license fee.
Most if not all of the Partnerships have been unable to raise the
capital necessary to finance their operations in marketing the Company's
products and services to consumers in the State of California. As a result of
this problem, the unexpected termination of the Company's license agreement with
Courant and the inability of the Company and the Partnerships to compete with
the larger utility companies in California during the transition phase of the
CPUC's deregulation plan,
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the Company offered to repurchase the territorial marketing rights sublicensed
by Courant and certain other cash assets from the Partnerships in exchange for
shares, and warrants to purchase shares, of common stock of the Company that are
subject to a two year restriction on transfer. As of the date of this
registration statement, the Company has entered into asset purchase agreements
with four of the Partnerships and is in various stages of negotiation with four
additional Partnerships. See Part II, Item 4 under the caption "Recent Sales of
Unregistered Securities."
PRINCIPAL SUPPLIERS.
The FERC license obtained by the Company will enable it to
purchase power on a wholesale basis in any jurisdiction. When its customer base
expands sufficiently in any particular market, the Company expects to issue a
Request for Proposal ("RFP") to a small number of well known highly regarded
companies who perform bulk purchasing functions and supply industry services.
These companies are expected to have strong reputations and market presence in
their respective fields, consistent with the Company intended strategy of
partnering with industry leaders.
If the Company is successful in raising sufficient capital to
commence operations in California, the Company expects that its principal
suppliers of power in that state will be San Diego Gas and Electric, Southern
California Gas Company, Pacific Gas & Electric and Automated Power Exchange,
Inc. The Company already has agreements with each of those sources of supply.
The Company has also engaged UtiliSource to provide billing, collections and
metering services for the Company in the State of California.
If and when the Company commences operations in other states that
have deregulated or are deregulating their power markets, the Company plans to
enter into such supply agreements as it needs with power suppliers in those
states. However, there can be no assurance that the Company will be able to
enter into arrangements with any such suppliers on terms that are economically
advantageous to the Company or its customers.
The Company will be substantially dependent upon generators of
electricity and suppliers of natural gas to provide adequate amounts of
electricity and natural gas on a timely basis and at favorable terms. There can
be no assurance that such suppliers will have sufficient electricity or natural
gas to satisfy customer needs during any period of increased demand, or that the
Company will not be subject to the risk of price fluctuations.
Although the Company believes that good relations with power
suppliers can be established, the loss of the services of any such supplier or
substantial price increases by such supplier, in the absence of readily
available alternative sources of supply, would have a material adverse effect on
the Company. While the Company intends to contract in advance for its wholesale
supplies at a known price, any failure or delay by such suppliers in providing
electricity or natural gas to the Company on favorable terms could also
adversely affect the Company's operating margins and the Company's ability to
deliver its services on a timely and competitive basis.
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DEPENDENCE ON CUSTOMERS.
At the present time, the Company does not have any customers. As
soon as the Company raises sufficient capital to commence purchasing power, the
Company will require a large customer base to remain operational and be
profitable.
PATENTS AND TRADEMARKS.
The Company filed an application with the United States Office of
Patents and Trademarks (the "PTO") for a "Full Power" service mark. In June
1999, the Company's application was denied by the PTO, and the Company is
contemplating an appeal. No assurance can be given that the Company will be
successful in obtaining the service mark or any other any trademarks or service
marks, or that such marks, if obtained, will afford the Company any protection
or competitive advantages.
The Company intends to operate under the trade name "All Power
Corporation" in the Commonwealth of Pennsylvania.
The Company has not applied for any patents and does not intend to
do so in the foreseeable future.
GOVERNMENT REGULATION.
The power industry is subject to a variety of federal, state and
local laws, regulations and ordinances. The trend in governmental regulation of
the power market is toward less government interference and increased
competition. This trend is evidenced by the following:
- In 1978, Congress enacted laws that allowed new entities to
acquire generation facilities and to sell electricity to
utilities. This was intended to accelerate commercial use of
decentralized, small-scale power production, co-generation
and energy conservation.
- In May 1986, the FERC approved the first of a new type of
buyers and sellers of electricity, known as power marketers.
- In 1992, the Congress further strengthened competition by
allowing utilities and other generators mandatory access to
the transmission facilities of other utilities in order to
foster the wholesale electricity trade.
- As a natural result of the gradual deregulation in the
generation segment of the electric industry, the FERC, as
the governmental entity established to oversee the energy
markets, authorized entities to buy and sell electricity on
a wholesale basis.
- At the federal level, the National Energy Policy Act of 1993
was designed to increase competition in the wholesale
electric generation market by easing regulatory
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restrictions on producers of wholesale power and by
authorizing the FERC to mandate access to electric
transmission systems by wholesale power generators.
- On April 24, 1996, the FERC began to accomplish this goal by
issuing Orders 888 and 889, which encourage further
wholesale competition.
- As of June 30, 1996, 44 states and the District of Columbia
(representing more than 88% of the nation's regulatory
commissions) had started activities related to retail
competition in the power industry in one form or another.
- More recently, various legislative proposals on electric
power restructuring have been introduced into the U.S. House
of Representatives and the U.S. Senate. At least five bills
were introduced in the 105th Congress, First Session, that
attempted to mandate the deregulation of the electric
industry on the state level; however, none of these bills
passed in committee. Thus far in 1999, both the federal
administration and members of both houses of Congress have
initiated legislation regarding deregulation and
restructuring of the electric industry. Fueled by different
agendas, none of the efforts have yet to produce enabling
legislation. No prediction can be made as to whether any of
these bills, or any future proposed bills to deregulate the
electric industry, will become law or, if they become law,
what their final form or effect will be.
- Since enabling federal legislation has been slow in coming,
each of the states has been investigating restructuring and
eventual deregulation of the regulated electric companies
within its borders. At this time, the following 21 states
have enacted restructuring legislation: Arizona, Arkansas,
California, Connecticut, Delaware, Illinois, Main, Maryland,
Massachusetts, Montana, Nevada, New Hampshire, New Jersey,
New Mexico, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode
Island, Texas and Virginia. It is important to note that
while they have enacted legislation, not all of these states
have moved directly into the regulatory scope of program
development, certification, consumer protection and
coordinated electric grid development. Also at this time,
the following three states have issued comprehensive
regulatory orders, but have not taken legislative action:
Michigan, New York and Vermont. The remaining 26 states have
not yet taken any action beyond some level of legislative or
regulatory investigation.
The Company is subject to a wide variety of federal and state laws
and regulations. The Company is currently subject to regulation by both the
FERC, which regulates the sale and marketing of power at the national level, and
the CPUC, which regulates energy service providers in the State of California.
The Company has also applied for a license to sell power in the Commonwealth of
Pennsylvania, but that application is currently pending.
In the event that the Company elects to apply for licenses to sell
power in other states that permit the sale of power by independent providers
other than public utility companies, the activities
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of the Company in those states would be subject to regulation by the applicable
state regulatory authorities.
The Company is also subject to various government regulations
applicable to businesses in general, including but not limited to those
regarding advertising.
RESEARCH AND DEVELOPMENT.
The Company initially developed its target marketing and
segmentation through the use of consultants that have successfully conducted
database research for other ESP firms. The Company is continuing to evaluate on
an ongoing basis the potential for conducting business in various states that
have or are in the process of deregulating their power industries.
The Company has also expended funds for the development of an
Internet software application to assist the Company in providing the public with
real-time quotes of power rates. See "Status of Publicly Announced New Products
or Services" above.
COMPLIANCE WITH ENVIRONMENTAL LAWS.
As a marketer of electricity and natural gas, the Company would
not assume any of the responsibilities associated with environmental compliance
laws or regulations. The Company may, indirectly, be impacted by the cost of
environmental compliance by some of the power plants from which it purchases
power, but the Company intends to retain the ability to seek other power sources
if a power source is found to have substantial environmental problems.
EMPLOYEES.
Full Power currently has three full time employees. Consultants
and specialized professional support in the legal, financial, and computer
operations are retained contractually as needed.
In March 1998, the Company engaged Dealer Support Group, Inc.
("DSG") to provide consulting services to the executive officers of the Company
and FPC. In consideration of the services performed by DSG, the Company pays DSG
a consulting fee of $8,000 per month. The term of the engagement is for a period
of three years. DSG is owned and operated by Harvey Trifler.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
INTRODUCTION.
The Company is a "startup" or "development stage company" with no
operating history or revenues on which to base an evaluation of its business and
prospects. To date, the Company has not purchased or sold any power or other
services. In addition, the Company has no significant tangible assets or
financial resources. The Company has operated at a net loss to date and will, in
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all likelihood, continue to sustain operating expenses without corresponding
revenues, at least until it is able to commence business operations.
The Company's prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stage of development, particularly companies in new and rapidly evolving markets
such as the deregulated energy markets. Such risks for the Company include, but
are not limited to, an evolving and unpredictable business model and the
management of growth. To address these risks, the Company must, among other
things, secure and increase its customer base, implement and successfully
execute its business and marketing strategy, continue to develop and upgrade its
technology, provide superior customer service, respond to competitive
developments, and attract, retain and motivate qualified personnel. The
Company's future profitability depends in large measure on consumer acceptance
of the Company as an attractive alternative to its competitors as a supplier of
electricity, natural gas and/or other bundled products and services.
In addition, there can be no assurance that the Company will be
able to supply energy service at a reasonable cost, that the Company will be
able to price its services competitively or, if priced competitively, that the
Company will be able to achieve margins sufficient to allow it to achieve
profitability. The Company believes that its success will depend in large part
on its ability to (1) extend its brand position, (2) provide its customers with
value, and (3) achieve sufficient sales volume to realize economies of scale.
Accordingly, the Company needs to invest heavily in marketing and
promotion, technology and operating infrastructure development and personnel.
The Company also needs to offer attractive pricing programs, which will reduce
its gross margins. Because the Company must have relatively low gross margins to
be competitive, achieving profitability given planned investment levels depends
upon the Company's ability to generate and sustain substantially increased
revenue levels. As a result, the Company believes that it will incur substantial
operating losses for the foreseeable future, and that the rate at which such
losses will be incurred may increase significantly from current levels. There
can be no assurance that the Company will ever be profitable.
FORWARD-LOOKING STATEMENTS.
This registration statement contains forward-looking statements.
Forward-looking statements are statements other than historical information or
statements of current condition. When used in this registration statement, words
such as "anticipate," "believe," "estimate," "except" and, depending on the
context, "will" and similar expressions are intended to identify forward-looking
statements.
The forward-looking statements in this registration statement
relate to the plans and objectives of the Company for future operations and are
based on management's beliefs as well as assumptions made by, and information
currently available to, management. In light of the risks and uncertainties
inherent in all future projections, the inclusion of the forward-looking
statements should not be regarded as a representation by the Company or any
other person that the objectives
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and plans of the Company will be achieved. Many factors could cause the
Company's actual results to differ materially from those in the forward-looking
statements, including but not limited to the following:
- the fact that the Company is a "start-up" or "development
stage" company with an uncertain ability to develop into a
successful or profitable business;
- uncertainties in the newly-deregulated markets for energy in
various states and regulatory requirements affecting the
Company's ability to conduct business in those markets;
- the Company's ability to form strategic relationships with
energy suppliers, distributors and sales and marketing
companies;
- the Company's failure to develop, distribute and administer
competitive products and services in a timely,
cost-effective manner;
- the Company's ability to convince large numbers of consumers
to purchase electricity, natural gas and/or other bundled
services through the Company;
- the ability of the Company to maintain and manage rapid
growth of its operations and marketing efforts;
- business conditions and competition in the industry;
- the Company's ability to finance its proposed activities and
expansion through the sale of stock or otherwise; and
- the costs of defending litigation and the risk of
unanticipated material adverse outcomes in such litigation,
including investigations pending before the Securities and
Exchange Commission and certain state regulators.
If any of these risks or uncertainties materialize, or if
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, believed, estimated or expected. The foregoing list of
important factors is not exhaustive should be read in conjunction with other
cautionary statements in this registration statement. The Company undertakes no
obligation to update forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998.
REVENUES. The primary sources and potential sources of revenue for
the Company will be the sale of power. Revenues are recognized as earned. The
Company has not yet earned any revenue from the sale of power or any other
products or services, and needs capital to purchase
-14-
<PAGE>
power and to implement its marketing program. Revenues for the nine month period
ended September 30, 1999 were $348,750 as compared to no revenue for the nine
period ended September 30, 1998. The increase in revenues was due to the receipt
of license fees relating to the California market. The Company did not have any
sales of power during this period. The Company is a development stage company
and comparisons and trends at this time may not be a meaningful indication of
the Company's business prospects. In 1998, the Company was primarily focused on
establishing itself as an ESP in California.
EXPENSES AND INCOME OR LOSS. The Company's expenses are
generally comprised of selling expenses, and general and administrative
costs. Expenses were $426,863 for the nine month period ending September 30,
1999 as compared to $1,153,001 for the nine month period ending September 30,
1998. Substantially higher expenses in the nine months ended September 30,
1998 primarily resulted from greater expenditures by the Company to establish
its capability to be an ESP in California, including but not limited to the
costs of obtaining the necessary regulatory licenses and establishing the
marketing license for the California market. The net loss for the nine month
period ended September 30, 1999 was $71,590 compared to net income of
$1,153,001 for the nine month period ended September 30, 1998. The
substantial decrease in net loss primarily reflects an increase in revenue to
the Company from marketing license fees and decreases in selling, general and
administrative expenses.
STATEMENT OF CASH FLOWS. The Company's statement of cash flows for
the nine months ended September 30, 1999 reflects that operating activities
during that period utilized cash of $320,550 as compared to $17,118 of cash
utilized during the comparable nine month period in 1998. The increase in the
use of cash flows from operating activities during the nine months ended
September 30, 1999 resulted from the reduction of cash funds realized from
deferred license fees compared to the nine month period ended September 30,
1998. The cash provided by financing activities for the nine months ended
September 30, 1999 was $479,327 compared to $57,000 provided by financing
activities for the nine months ended September 30, 1998. The cash used by
investing activities for the nine months ended September 30, 1999 was $125,000
compared to no cash used or provided by investing activities for the nine months
ended September 30, 1998. The higher utilization of cash for investing during
1999 versus 1998 primarily reflects a loan made to the Company's president.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses consist primarily of costs associated with finance and accounting,
human resources, management compensation, consulting fees, legal expenses, and
office operations. General and administrative expenses during the nine months
ended September 30, 1999 were $52,476 compared to $943,677 during the nine
months ended September 30, 1998. These expenses decreased substantially for the
nine months ended September 30, 1999 compared to the nine months ended September
30, 1998 primarily because of a substantial decrease in legal and other
professional services expenses incurred in connection with the California
marketing license and in establishing the Company's general operations. The
Company expects general and administrative expenses to increase in future
periods as the Company's operations expand.
-15-
<PAGE>
INCOME TAXES. No provision for federal or state income taxes has
been recorded as the Company has incurred net operating losses during all
reporting periods.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS.
As a result of the Company's lack of an operating history and the
emerging nature of the market in which it competes, the Company is unable to
accurately forecast its revenues. The Company's current and future expense
levels are based largely on its investment plans and estimates of future
revenues. Sales and operating results generally depend on the volume of, timing
of and ability to fulfill orders received, which are difficult to forecast. The
Company may be unable to adjust spending in a timely manner to compensate for
any unexpected shortfall in revenues. Accordingly, any significant shortfall in
revenues in relation to the Company's planned expenditures would have an
immediate adverse effect on the Company's business, prospects, financial
condition and results of operations. Further, as a strategic response to changes
in the competitive environment, the Company may from time to time make certain
pricing, service or marketing decisions that could have a material adverse
effect on its business, prospects, financial condition and results of
operations. Due to these factors, the Company is still a development stage
company, and the market price of the Company's common stock would likely be
materially and adversely affected.
LIQUIDITY AND CAPITAL RESOURCES.
The Company is considered to be in the development stage as
defined in the Statement of Financial Accounting Standards ("FASB") No.7. The
Company does not have adequate capital to fund its business and needs to raise
additional capital or financing to purchase power and to implement any marketing
programs. As noted in the notes to the Company's financial statements, the
Company may not be able to continue as a going concern if it does not obtain
additional funds. Management believes it will be able to satisfy its cash
requirements through a combination of debt financing and/or sales of equity
through private placements during the next twelve months. However, there can be
no assurance that the Company will be able to raise the financing required.
The Company's operating activities used net cash for the nine
months ended September 30, 1999 of $320,550 as compared to $17,118 of cash
utilized during the nine months ended September 30, 1998.
The Company's financing activities have primarily consisted of the
private sale of shares of its common stock. From January 1, 1998 through
September 30, 1999, the Company raised $544,477 through such sales of common
stock.
As of September 30, 1999 and September 30, 1998, the Company had
cash and cash equivalents of approximately $33,777 and $39,882, respectively,
and negative working capital at September 30, 1999 of $194,813 compared to
positive working capital of $95,610 at September 30, 1998.
The Company does not expect to make any significant purchases of
tangible assets or any significant changes in the number of its employees in the
next twelve months.
-16-
<PAGE>
ITEM 3. DESCRIPTION OF PROPERTY
The Company owns no real property or other assets of significance other
than the federal and state licenses referred to above.
The Company is headquartered at 14650 Detroit Avenue, Suite 313,
Lakewood, Ohio. The Company leases this property, which consists of
approximately 150 square feet, under a lease entered into in September 1999 for
one year at a monthly rent of $225 plus a pro rata share of building operating
expenses. The Company also entered into a one year lease in June 1999 for
approximately 500 square feet of office space located at 4155 East Jewell
Avenue, Suite 805, Denver, Colorado, for its operations office, at a monthly
rent of $759.58. The Company does not consider either of these leases to be
material.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table includes, as of October 26, 1999, stock ownership
for each shareholder known by the Company to be the beneficial owner of more
than 5% of the outstanding shares of the Company's common stock, each director,
executive officer and all directors and executive officers of the Company
as a group. Unless otherwise indicated, the Company believes that all persons
named in the table have sole voting and investment power with respect to all
shares of common stock beneficially owned by them. None of the Company's
preferred stock is outstanding.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNER PERCENTAGE (1)
- --------------------- -------------------------------------------- ------------------------ ----------------
<S> <C> <C> <C>
Common Stock George N. Falsone, Director, Chief 3,813,500(2) 39.9%
Executive Officer and President, c/o
Full Power Group, Inc., 14650
Detroit Avenue, Suite 313,
Lakewood, Ohio 44107
Common Stock Donald M. Johnson, Director and 100,000 *
Chief Operating Officer, c/o Full
Power Group, Inc., 14650 Detroit
Avenue, Suite 313, Lakewood,
Ohio 44107
Common Stock Richard C. O'Rourke, Director, 50,000 *
Chief Financial Officer, Treasurer
and Secretary, c/o Full Power
Group, Inc., 14650 Detroit Avenue,
Suite 313, Lakewood, Ohio 44107
Common Stock Wirecomm Consulting Ltd., P.O. 1,414,100(3) 13.7%
Box 544, 1 Britannia Place, Bath
Street, St. Helier, Jersey JE2 4SU
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNER PERCENTAGE (1)
- --------------------- -------------------------------------------- ------------------------ ----------------
<S> <C> <C> <C>
Common Stock Harvey Trifler (4) 393,000(5) *
c/o Dealer Support Group, Inc.
2130 Waters Edge Drive
Westlake, Ohio 44145
Common Stock All executive officers and 3,976,500 41.6%
directors as a group
</TABLE>
- --------------------------
* Less than 5%.
(1) Percentages are based on the total number of outstanding shares of
common stock, which includes 3,600,000 shares held by FPC. Those shares
may not be voted by FPC because it is a subsidiary of the Company.
(2) Includes 380,000 shares of common stock that are subject to an option
to purchase that Mr. Falsone granted to Mr. Trifler on December 22,
1998. See footnote 5 to this table.
(3) Includes 1,000,000 shares of common stock that Wirecomm Consulting Ltd.
has the right to purchase under the terms of a subscription agreement
dated September 25, 1999, of which, as of the date of this
registration, 250,000 shares of common stock have been purchased by
Wirecomm Consulting Ltd. under the subscription agreement. See Part I,
Item 7 under the caption "Certain Relationships and Related
Transactions" and Part II, Item 4 under the caption "Recent Sales of
Unregistered Securities."
(4) Mr. Trifler serves as a consultant to the Company and FPC pursuant to
consulting agreement between the Company and DSG dated as of March 1,
1998. Mr. Trifler is the President and owner of DSG. See Part I, Item 1
under the caption "Employees."
(5) Includes 380,000 shares of common stock subject to an option to
purchase granted by Mr. Falsone to Mr. Trifler on December 22, 1998.
See Part I, Item 6 under the caption "Stock Option, Long-Term
Incentive and Pension Plans."
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table lists the officers and directors of the
Company as of November 1, 1999:
<TABLE>
<CAPTION>
NAME AGE TITLE TERM OF SERVICE
- ---------------------------- ------- -------------------------------------------- ----------------------------
<S> <C> <C> <C>
George N. Falsone 65 Director, Chief Executive Officer August 1998-Present
and President
Donald M. Johnson 55 Director and Chief Operating August 1998-Present
Officer
Richard C. O'Rourke 55 Director, Chief Financial Officer, August 1998-Present
Treasurer and Secretary
-18-
<PAGE>
<CAPTION>
NAME AGE TITLE TERM OF SERVICE
- ---------------------------- ------- -------------------------------------------- ----------------------------
<S> <C> <C> <C>
Harvey Trifler* 66 Consultant August 1998-Present
</TABLE>
* Mr. Trifler serves as a consultant to the Company and FPC pursuant to
consulting agreement between the Company and DSG. dated as of March 1,
1998. Mr. Trifler is the President and owner of DSG.
GEORGE N. FALSONE has been director, Chief Executive Officer and
President of the Company since August 1998. From December 1986 to November 1997,
Mr. Falsone served as Vice President of Cableviews Magazine, Inc., a company
engaged in the production, marketing and distribution of Cableviews Magazine.
Prior to that time, Mr. Falsone served as marketing director of George R. Klein
News Company, a company engaged in marketing and distribution of magazines,
books and newspapers.
DONALD M. JOHNSON has been director and Chief Operating Officer of
the Company, since August 1998. Mr. Johnson has experience in the Public
Utilities industry spanning over thirty years, with the last twenty years in
management positions. From 1975 through 1978, Mr. Johnson served as Commercial
and Industrial Supervisor for S.E. Denver Metro, a division of Public Service
Co. of Colorado, a company engaged in the generation, marketing and distribution
of electricity and natural gas. From 1978 to 1987, Mr. Johnson served as
Consumer Service Manager for Public Service Co. of Colorado. In 1987, Mr.
Johnson was promoted to Director of Economic Development, a position he held
until leaving Public Service Co. in May 1995. From May 1995 through June 1998,
Mr. Johnson owned and operated DMJ & Associates, a marketing and management
company.
RICHARD C. O'ROURKE has been director, Chief Financial Officer,
Treasurer and Secretary of the Company since August 1998. Since 1978, Mr.
O'Rourke has also been the owner of O'Rourke & Associates, an accounting firm
specializing in tax preparation, consulting and internal auditing. Prior to that
time, Mr. O'Rourke held several supervisory and managerial accounting and
auditing positions with SCM Corporation, Lamson & Sessions, Reliance Electric
and ITT. Mr. O'Rourke is a certified Public Accountant and Certified Internal
Auditor.
HARVEY TRIFLER has served as a consultant to the Company and FPC
since March 1, 1998. Since January 1998, Mr. Trifler has owned and operated DSG,
a consulting company providing management services to companies operating in the
telecommunication and utility industry. From 1993 to 1998, Mr. Trifler owned and
operated Voice Data Communications, Inc., a company engaged in the assembly and
sale of mobile radio systems.
ITEM 6. EXECUTIVE COMPENSATION
COMPENSATION TABLE.
The following table summarizes the compensation paid by the
Company, in the last three fiscal years, to the Company's Chief Executive
Officer and President. No other Named Executive
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<PAGE>
Officer or consultant of the Company has received any compensation from the
Company in excess of $100,000 since the inception of the Company.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
SHARES OF
ANNUAL COMPENSATION RESTRICTED STOCK
NAME AND POSITION STOCK UNDERLYING OTHER
WITH THE COMPANY YEAR SALARY BONUS AWARD(S) UOPTIONS COMPENSATION
- -------------------------- ------ ---------- ------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
George N. Falsone, 1997 -- -- -- -- --
Chief Executive Officer 1998 $10,000 -- -- -- --
and President 1999 $11,000 -- -- -- --
</TABLE>
STOCK OPTION, LONG-TERM INCENTIVE AND PENSION PLANS.
On December 22, 1998, Mr. Falsone, Chief Executive Officer and
President of the Company, granted an option to purchase 380,000 shares of
common stock owned by him to Mr. Trifler, a consultant to the Company, for
$0.20 per share.
The Company does not maintain a stock option plan or any long-term
incentive or pension plans for its employees.
COMPENSATION OF DIRECTORS.
Directors are not compensated for their services to the Company.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS.
The Company has not entered into any employment contracts or
change-in-control agreements with its executive officers or other employees.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1998, the Company loaned Mr. Falsone, its Chief
Executive Officer and President, $100,000 to purchase 380,000 shares of common
stock of the Company. The demand note issued by Mr. Falsone to the Company
carries an interest rate of 6% per annum and is collateralized by the 380,000
shares of common stock.
In June and September 1999, the Company also loaned Mr. Falsone
$50,000 and $75,000, respectively, to purchase a total of 33,500 shares of
common stock of the Company. The demand notes issued by Mr. Falsone to the
Company carry interest rate of 6% per annum and are secured by the 33,500 shares
of common stock.
In August and September 1999, the Company loaned Mr. Trifler,
consultant to the Company and FPC, $30,000 and $9,000, respectively, to purchase
a total of 13,000 shares of
-20-
<PAGE>
common stock of the Company. The demand notes issued by Mr. Trifler to the
Company carry interest rate of 6% and are collateralized by the 13,000 shares
of common stock.
The Company maintains a note receivable from All Power, issued
under the terms of a line of credit and pledge agreement between All Power
and the Company. Under the terms of a line of credit and pledge agreement,
All Power has the right to borrow up to $250,000 from the Company. The note
carries a variable interest rate of prime plus 2%, payable monthly in
arrears, and is collateralized by 1,000,000 shares of the capital stock of
All Power owned by its sole shareholder, Mr. John O'Brien. As of September
30, 1999, the principal balance due under the note was $248,000. The note is
due and payable in April 2001.
In August 1998, the Company entered into a subscription
agreement with Wirecomm Consulting Ltd. ("Wirecomm"), whereby the Company
granted Wirecomm the right to purchase up to 200,000 shares of the Company's
common stock under Rule 504 of Regulation D promulgated under the Securities
Act of 1933, as amended (the "Securities Act"), at a purchase price of $0.20
per share. In September 1998, Wirecomm exercised its purchase rights under
the subscription agreement and acquired 200,000 shares of the Company's
common stock for a total purchase price of $40,000.
The Company entered into a second subscription agreement with
Wirecomm in August 1998, whereby the Company granted Wirecomm the right to
purchase up to 800,000 shares of the its common stock under Rule 504 of
Regulation D promulgated under the Securities Act at a purchase price of
$0.20 per share. In February 1999, Wirecomm exercised its purchase rights
under this subscription agreement and acquired 800,000 shares of the
Company's common stock for a total purchase price of $160,000.
In September 1998, the Company entered into a third
subscription agreement with Wirecomm, whereby Wirecomm was granted the right
to purchase up to 1,000,000 shares of common stock of the Company at a price
per share of $0.40. On August 26, 1999, the Company agreed to extend the
termination date of the subscription agreement to December 31, 1999. As of
the date of this registration statement, Wirecomm had purchased 250,000
shares of the Company's common stock under this subscription agreement for a
total purchase price of $100,000.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of (1)
50,000,000 shares of common stock, par value $0.001 per share, of which
9,563,063 shares were outstanding as of October 26, 1999, and (2) 100,000
shares of preferred stock, par value $100.00 per share, none of which are
issued or outstanding.
COMMON STOCK.
Subject to the rights of the holders of any preferred stock
that the Company may issue in the future, each holder of common stock on the
applicable record date is entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor.
Upon liquidation or dissolution of the Company, each holder of common stock
will be entitled to share pro
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<PAGE>
rata in any distribution of the Company's assets after the payment of all
debts and other liabilities, subject to the rights of the holders of any
outstanding preferred stock. Each holder of common stock is entitled to one
vote per share owned of record on the applicable record date on all matters
presented to a vote of the holders of common stock, including election of
directors. The holders of common stock have no cumulative voting rights and,
therefore, the holders of a majority of the shares voting for the election of
directors can elect all of the directors of the Company. The holders of
common stock have no preemptive rights to purchase or subscribe for any stock
or other securities and there are no conversion rights or redemption or
sinking fund provisions with respect to the common stock. All outstanding
shares of common stock have been duly issued, fully paid for and are
nonassessable.
PREFERRED STOCK.
The Company's Board of Directors has the authority (without
action by the shareholders) to issue shares of authorized and unissued
preferred stock in one or more series, to designate the number of shares
constituting any series, and to fix, by resolution, the preferences, rights,
privileges, restrictions and other rights thereof, including voting rights,
liquidation preferences, dividend rights and conversion and redemption rights
of such series subject to rights of the holders of any previously issued and
outstanding preferred stock. Under certain circumstances, the Company could
issue the preferred stock as a method of discouraging, delaying or preventing
a change in control of the Company. The Company has no currently intention to
issue any shares of preferred stock.
-22-
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS
MARKET INFORMATION.
The Company's common stock is currently quoted on the OTCBB.
The Company is subject to the NASD's new eligibility requirement for
continued quotation on the OTCBB. The NASD new eligibility rules provide that
no issuer may be quoted on the OTCBB unless it is require to make current
filings pursuant to Section 13 or 15(d) of the Exchange Act. In order to be
required to make filings pursuant to Section 13 or 15(d) of the Exchange Act,
the Company must register its common stock under the Exchange Act by filing
this registration statement. To comply with the NASD's eligibility
requirements, the Securities and Exchange Commission must come to a position
of no further comments on the Company's Form 10-SB before December 1, 1999.
In the event that the Company is unable to comply with the NASD's eligibility
requirements on or before December 1, 1999, the OTCBB may delist of Company's
common stock.
PRICE RANGE OF COMMON STOCK.
The Company's common stock is quoted on the OTCBB under the
symbol "FPGR." The following table sets forth all available high and low bid
information for the Company's common stock on the OTCBB for each full quarter
in 1997, 1998 and 1999. The OTCBB quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commissions, and may not represent
actual transactions.
<TABLE>
<CAPTION>
Quarter Ended 1997 1998 1999
High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C>
First Quarter - - * * $4.93750 $1.62500
Second Quarter - - $0.31250 $0.18750 $4.50000 $3.00000
Third Quarter - - * * $3.00000 $1.25000
Fourth Quarter - - $4.09375 $0.50000 - -
</TABLE>
* There was insufficient information to generate a report for the first and
third quarters of 1998.
The Company obtained the foregoing bid information from The
NASDAQ Stock Market, Inc.
-23-
<PAGE>
NUMBER OF SHAREHOLDERS.
As of October 26, 1999, there were approximately 98
shareholders of record of the Company's common stock.
DIVIDENDS.
The Company has never paid dividends on its common stock and
anticipates that all earnings, if any, in the foreseeable future will be
retained to finance the growth and development of its business. Any future
dividends will depend on the earnings, capital requirements and financial
condition of the Company, and on such other factors as the Company's Board of
Directors may consider relevant.
ITEM 2. LEGAL PROCEEDINGS
In October 1998, the Company responded to a formal request by the
Office of the Attorney General of the State of Maryland for information
concerning the alleged sale of unregistered securities by the Company in the
State of Maryland. As of the date of this registration statement, there have
been no additional requests for information concerning the Company by the
Office of the Attorney General of the State of Maryland. The Company has
denied selling any unregistered securities in the State of Maryland, and in
the opinion of management, this investigation will not have a material
adverse effect on the Company.
On February 23, 1999, the Company and Mr. Falsone, Chief Executive
Officer and President, were named as a party in an administrative proceeding
before the Pennsylvania Securities Commission of the Commonwealth of
Pennsylvania, captioned IN THE MATTER OF L.A. POWER & LIGHT, L.L.P., ET AL.,
Docket No. 9808-02. The complaint alleged that Reliable Electric & Power, LLP
("Reliable"), one of the Partnerships formed to raise capital to purchase a
marketing license to sell power for the Company in the State of California,
illegally sold unregistered security interests in that Partnership in the
Commonwealth of Pennsylvania and that certain partners of Reliable had
misstated facts concerning the success and risk of the investment. The
complaint further alleged that the Company and Mr. Falsone were promoters of
Reliable and, as such, caused Reliable to make the allegedly illegal sales.
On February 23, 1999, the Pennsylvania Securities Commission ordered the
Company and Mr. Falsone to cease and desist from selling any partnership
interests in the Commonwealth of Pennsylvania. No monetary damages were
sought by the Commonwealth of Pennsylvania. On March 22, 1999, the Company
and Mr. Falsone filed a Request for Recission of the Order to Cease and
Desist on the grounds that the Company is not an affiliate of Reliable and is
not involved in the sale or marketing of securities or investment
opportunities in the Commonwealth of Pennsylvania. The Company has been
informed by the Pennsylvania Securities Commission that a tentative
settlement of the matter has been reached with the other parties named in the
Order which will result in the recission of the cease and desist order. In
the opinion of management, the outcome of this administrative proceeding will
not have a material adverse effect on the Company.
-24-
<PAGE>
On June 10 1999, the Company was issued a subpoena pursuant to a
formal order of investigation issued by the Securities and Exchange
Commission IN THE MATTER OF TWENTY FIRST CENTURY POWER, LLC (HO-3355) and IN
THE MATTER OF CERTAIN INTERNET OFFERINGS II (HO 3534). Mr. Falsone, Chief
Executive Officer and President, and Mr. Johnson, Chief Executive Operating
Officer, were also issued subpoenas and ordered to provide testimony pursuant
to the above-described formal orders of investigation issued by the
Securities and Exchange Commission. Because this matter is still in the
investigatory phase, the Company does not know yet know whether the
Commission intends to make any claims or charges against the Company or any
of its officers.
On September 16, 1999, the Company was named in an administrative
order to cease and desist issued by the Secretary of State of the State of
Wyoming in the matter captioned IN THE MATTER OF SAN DIEGO POWER AND LIGHT,
LLP, ET AL., Case No. 99-09. The cease and desist order alleged that the
Company had engaged in the illegal sale of unregistered securities in the
State of Wyoming. In November 1999, the Company responded to a formal request
for a written statement and production of documents from the State of
Wyoming. As of the date of this registration statement, there have been no
additional requests for information. The Company has denied selling any
unregistered securities in the State of Wyoming, and is contemplating an
appeal. In the opinion of management, this matter will not have a material
adverse effect on the Company.
On October 4, 1999, the Company responded to a formal request by the
State Securities Board of the State of Texas for information concerning the
alleged sale of unregistered securities by the Company in the State of Texas.
As of the date of this registration statement, there have been no additional
requests for information concerning the Company by the State Securities Board
of the State of Texas. The Company has denied selling any unregistered
securities in the State of Texas, and in the opinion of management, this
investigation will not have a material adverse effect on the Company.
From time to time, the Company is involved in other legal matters
that are incidental to its operations. In the opinion of management, the
ultimate resolution of these matters is not anticipated to have a material
adverse effect on the Company's financial condition or results of operations.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On June 11, 1997, the Company commenced a private placement of its
common stock under Rule 504 of Regulation D promulgated under the Securities
Act at a price of $0.20 per share. The Company completed this offering in
June 1998, with proceeds of $ 17,550 for 87,750 shares of common stock. No
commission fees or other selling expenses were paid in connection with this
offering.
On August 25, 1998, the Company entered into a subscription
agreement with Wirecomm, whereby the Company granted Wirecomm the right to
purchase up to 200,000 shares of the
-25-
<PAGE>
Company's common stock under Rule 504 of Regulation D promulgated under the
Securities Act at a purchase price of $0.20 per share. Is September 1998,
Wirecomm exercised its right under the subscription agreement and the Company
issued 200,000 shares of its common stock to Wirecomm for a total purchase
price of $40,000.
On August 25, 1998, the Company entered into a second subscription
agreement with Wirecomm, whereby the Company granted Wirecomm the right to
purchase up to 800,000 shares of the Company's common stock under Rule 504 of
Regulation D promulgated under the Securities Act at a purchase price of
$0.20 per share. In February 1999, Wirecomm exercised its right under the
subscription agreement and the Company issued 800,000 shares of its common
stock to Wirecomm for a total purchase price of $160,000.
On September 25, 1998, the Company entered into a third subscription
agreement with Wirecomm, whereby for a period of one year from the date of
the agreement the Company granted Wirecomm the right to purchase up to
1,000,000 shares of the Company's common stock under Rule 504 of Regulation D
promulgated under the Securities Act at a purchase price of $0.40 per share.
On August 26, 1999, the parties agreed to extend the termination date of the
subscription agreement to December 31, 1999. As of the date of this
registration statement, Wirecomm has partially exercised its rights under the
subscription agreement and the Company has issued 250,000 shares of common
stock to Wirecomm for a total purchase price of $100,000.
In approximately December 1998, the Company commenced a private
placement of its common stock under Rule 504 of Regulation D promulgated
under the Securities Act. The Company terminated this offering in April 1999.
The Company did not sell any shares of common stock in this offering.
On February 3, 1999, the Company sold 1,000 shares of its common
stock under Section 4(2) of the Securities Act to a private investor for a
total purchase price of $2,000.
On March 23 and April 27 , 1999, the Company issued a total of
20,000 shares of its common stock to each of Richard M. Bloch, W.L. Pritchard
& Co. and Michael J. McFadden under Section 701 of the Securities Act as
consideration for services they provided to the Company and FPC under an
advisory board agreement. Under the terms of that agreement, Messrs. McFadden
and Block and W.L. Pritchard & Co. provided consulting services to the
Company and FPC with respect to the development and operation of the
Company's business plan. The advisory board agreement was terminated as a
result of the Company's inability to raise the capital necessary to finance
its operations.
On August 30, 1999, the Company issued 162,500 shares of its common
stock and a warrant to purchase an additional 16,250 shares of its common
stock to Southern California Power Partners, LLP in reliance upon Section
4(2) of the Securities Act. Pursuant to an asset purchase agreement, dated
August 18, 1999, the Company agreed to issue the stock at a price of $4.00
per share in exchange for that Partnership's marketing license to sell power
on behalf of the Company in the State of California and approximately
$100,000 in cash. The Partnership is restricted from
-26-
<PAGE>
transferring the stock or warrant to any person (including its partners) for
period of two years. See Part I, Item 1 under the caption "Marketing Licenses
in California."
On August 30, 1999, the Company issued 107,813 shares of its common
stock and a warrant to purchase an additional 10,781 shares of its common
stock to Capital Electric & Light, LLP in reliance upon Section 4(2) of the
Securities Act. Pursuant to an asset purchase agreement, dated August 19,
1999, the Company agreed to issue the stock at a price of $4.00 per share in
exchange for that Partnership's marketing license to sell power on behalf of
the Company in the State of California and approximately $60,000 in cash
assets. The Partnership is restricted from transferring the stock or warrant
to any person (including its partners) for period of two years. See Part I,
Item 1 under the caption "Marketing Licenses in California."
On September 1, 1999, the Company issued 345,000 shares of its
common stock and a warrant to purchase an additional 34,500 shares of its
common stock to San Jose Power and Electric, LLP in reliance upon Section
4(2) of the Securities Act. Pursuant to an asset purchase agreement, dated
September 13, 1999, the Company agreed to issue the stock at a price of $4.00
per share in exchange for that Partnership's marketing license to sell power
on behalf of the Company in the State of California and approximately
$175,000 in cash assets. The Partnership is restricted from transferring the
stock or warrant to any person (including its partners) for period of two
years. See Part I, Item 1 under the caption "Marketing Licenses in
California."
On November 8, 1999, the Company issued 465,063 shares of its common
stock and a warrant to purchase an additional 46,506 shares of its common
stock to Community Electric & Power, LLP in reliance upon Section 4(2) of the
Securities Act. Pursuant to an asset purchase agreement, dated November 5,
1999, the Company agreed to issue the stock at a price of $4.00 per share in
exchange for that Partnership's marketing license to sell power on behalf of
the Company in the State of California and approximately $250,000 in cash
assets. The Partnership is restricted from transferring the stock or warrant
to any person (including its partners) for period of two years. See Part I,
Item 1 under the caption "Marketing Licenses in California."
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation provide that, to the
fullest extent permitted by Florida General Corporation Law, no director or
officer of the Company shall be personally liable to the Company or its
shareholders for damages for breach of any duty owed to the Company or its
shareholders. In addition, the Company shall have the power to indemnify any
director or officer of the Company against any contingency or peril as may be
determined to be in the best interest of the Company, and in conjunction
therewith, to procure, at the Company's expense, policies of insurance.
-27-
<PAGE>
PART F/S
The following are the audited consolidated financial statements for
the Company for the year ended December 31, 1998 and the unaudited interim
consolidated financial statements for the Company for the nine month period
ended September 30, 1999.
-28-
<PAGE>
CONTE CO., CPA, INC.
A Professional Corporation
4322 S. Cleveland-Massillon Road
Norton, Ohio 44203-5718
330.825.3535 o Fax: 330.825.0055
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Full Power Group, Inc.
We have audited the accompanying consolidated balance sheet of Full Power
Group, Inc., a development stage company, as of December 31, 1998 and the
related consolidated statements of income, cash flows and shareholders'
equity for the year ended December 31, 1998. These consolidated financial
statements are the responsibility of Full Power Group, Inc. management. Our
responsibility is to express an opinion on these consolidated 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Full
Power Group, Inc. as of December 31, 1998, and the results of their
operations and their cash flows in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that Full
Power Group, Inc. will continue as a going concern. As discussed in Note 11
to the financial statements, Full Power Group, Inc. has suffered recurring
losses from operations that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters
are also described in Note 11. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Conte Co., CPA, Inc.
Norton, Ohio
May 27, 1999
-29-
<PAGE>
FULL POWER GROUP, INC.
(A Development Stage Company)
Consolidated Balance Sheet
December 31, 1998
<TABLE>
<S> <C>
CURRENT ASSETS
Licensing Fees Receivable $ 1,381,038
Accrued Interest Receivable 500
Prepaid Insurance 12,458
Minority Interest (813)
-----------
Total Current Assets $ 1,393,183
-----------
Total Assets $ 1,393,183
-----------
CURRENT LIABILITIES
Accrued Payroll Taxes $ 60
Cash-Checking Overdraft 29,550
Deferred License Sales-Current 530,100
-----------
Total Current Liabilities 559,710
-----------
Long-Term Liabilities
Deferred License Sales 1,678,650
-----------
TOTAL LONG-TERM LIABILITIES 1,678,650
-----------
Total Liabilities 2,238,360
-----------
CAPITAL
Common Stock, $.001 par value, 50,000,000
shares authorized -- 7,887,750 shares issued
and outstanding in 1998 7,888
Paid In Capital 57,262
Deficit Accumulated During the Development
Stage (806,727)
-----------
(741,577)
Less: Common Stock of the parent held
by a subsidiary-- 3,600,000 shares (3,600)
Less: Subscription Receivable from Stockholder (100,000)
-----------
Total Stockholders' Equity (845,177)
-----------
Total Liabilities & Capital $ 1,393,183
-----------
</TABLE>
See Notes to Financial Statements
-30-
<PAGE>
FULL POWER GROUP, INC.
(A Development Stage Company)
Consolidated Income Statement
For the Twelve Months Ended December 31, 1998
<TABLE>
<S> <C>
Revenues
License Sales $ 116,250
--------------
Total Revenues 116,250
Selling, General & Administrative
Expenses 914,596
--------------
Income (Loss) from Operations (798,346)
--------------
Other Income (Expense)
Interest Income 500
--------------
Total Other Income 500
--------------
Income (Loss) before Income Taxes (797,846)
Income Taxes 0
--------------
Net Income (Loss) $ (797,846)
--------------
Weighted Average Common Shares Outstanding 4,154,416
--------------
Net Income (Loss) per Share $ (0.19)
--------------
Diluted Shares of Common Stock Outstanding 6,147,750
--------------
Diluted Earnings (Loss) per Share $ (0.13)
--------------
</TABLE>
See Notes to Financial Statements
-31-
<PAGE>
FULL POWER GROUP, INC.
(A Development Stage Company)
Consolidated Statement of Stockholders Equity
December 31, 1998
<TABLE>
<CAPTION>
Common Stock
Additional of Parent
Shares of Common Paid-In Held by
Common Stock Stock Capital Subsidiary
------------ ------- -------- -----------
<S> <C> <C> <C> <C>
Balance of WWD at July 31, 1998 4,087,750 $4,088 $17,462
(Date of Acquisition)
August 25, 1998--Issued 200,000 shares of WWD 200,000 200 39,800
September 19, 1998--WWD issued 3,600,000 3,600,000 3600
additional shares of Common Stock
September 19, 1998--7-31-98 purchase ($3,600)
of 3,600,000 put into Treasury Stock
Loan to George Falsone on November 28, 1998,
collateral, 380,000 shares of Common Stock
1998 Accumulated Deficit
------------ ------- -------- -----------
Balance at December 31, 1998 7,887,750 $7,888 $57,262 ($3,600)
------------ ------- -------- -----------
</TABLE>
<TABLE>
<CAPTION>
Subscription Deficit
Receivable Accumulated
from During
Stockholder Development Stage Total
----------- ----------------- ------------
<S> <C> <C> <C>
Balance of WWD at July 31, 1998 ($8,881) $ 12,669
(Date of Acquisition)
August 25, 1998--Issued 200,000 shares of WWD 40,000
September 19, 1998--WWD issued 3,600,000 3,600
additional shares of Common Stock
September 19, 1998--7-31-98 purchase (3,600)
of 3,600,000 put into Treasury Stock
Loan to George Falsone on November 28, 1998,
collateral, 380,000 shares of Common Stock ($100,000) (100,000)
1998 Accumulated Deficit (797,846) (797,846)
----------- ----------------- ------------
Balance at December 31, 1998 ($100,000) ($806,727) ($845,177)
----------- ----------------- ------------
</TABLE>
See Notes to Financial Statements
-32-
<PAGE>
FULL POWER GROUP, INC.
(A Development Stage Company)
Consolidated Statement of Cash Flows
For the Twelve Months Ended December 31, 1998
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
Net Loss ($ 797,846)
-----------
Adjustments to reconcile net income to net cash used by Operating
Activities:
Decrease (increase) in Notes Receivable (100,500)
Decrease (Increase) in Prepaid Assets (12,458)
Decrease (Increase) in Minority Interest 813
Decrease (Increase) in Accounts Receivable (1,381,038)
(Decrease) Increase in Deferred Sales Revenue 2,208,750
(Decrease) Increase in Accrued Payroll Liability 60
(Decrease) Increase in Cash Overdraft 29,550
-----------
Total Adjustments 745,177
-----------
Net Cash Used by Operating Activities (52,669)
-----------
Cash Flows from Financing Activities:
Contribution to Capital 52,377
Repurchase of Stock (3,600)
Issuance of Common Stock 3,892
-----------
Net Cash Provided in Financing Activities 52,669
-----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (0)
-----------
BEGINNING CASH BALANCE 0
-----------
ENDING CASH BALANCE $ 0
-----------
</TABLE>
See Notes to Financial Statements
-33-
<PAGE>
FULL POWER GROUP, INC.
(Formerly Known as Worldwide Dental Distr. Corp.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by Full Power Group, Inc. are set
forth below:
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Full Power Group, Inc. (hereafter referred to as the "Company"), a Florida
Corporation and its wholly owned subsidiary, Full Power Corporation
(hereafter referred to as "FPC"). Intercompany transactions and balances have
been eliminated in the consolidated financial statements.
NATURE OF OPERATIONS
Full Power Group, Inc. and its wholly owned subsidiary, Full Power Corp.,
were organized to be principally engaged in the sale of deregulated
electricity and natural gas opened via government deregulation of utilities.
Additionally, the Company has begun generating sales agreements for the
distribution of electricity, though supply contracts have yet to be secured.
The Company is, therefore, considered a development stage enterprise under
Financial Accounting Standard 7 (FAS 7), which defines a company to be in its
development stage if it is devoting substantially all of its efforts to
establishing a new business and the company's planned principal operations
have not commenced.
On July, 28, 1998, FPC entered into a stock purchase agreement with Worldwide
Dental Distr. Corp. (WWD), a Florida Corporation, whereby Full Power Corp.,
as purchaser, acquired 3,600,000 shares of common stock of Worldwide Dental
Distr. Corp. (WWD) at $0.001 per share par value, in exchange for $150,000.
Statement of Financial Accounting Standards No. 131, Disclosures about
segments of a Business Enterprise and Related Information, requires certain
segment reporting to be presented based on management reporting. The
Company's reportable segments are as follows:
Licensed Electric Sales
<TABLE>
<CAPTION>
Company State Sales Deferred Sales Revenue
------- ----- ----- ----------------------
<S> <C> <C> <C>
Courant Consulting California $116,250 $2,208,750
-------- ----------
</TABLE>
-34-
<PAGE>
FULL POWER GROUP, INC.
(Formerly Known as Worldwide Dental Distr. Corp.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998
NOTE 1 -- Continued
CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, the Company considers all
highly liquid investments with an original maturity of three months or less
to be cash equivalents. The Company maintains its cash accounts in a
commercial bank. Accounts are guaranteed by the Federal Deposit Insurance
Corporation (FDIC) up to $100,000.
REVENUE AND EXPENSE RECOGNITION
The Company recognizes revenue from sales of sublicense contracts, net of a
deferred sales revenue account. These sales are made in the agreement that
the Company is to give its best efforts to continuously, diligently, and
effectively obtain electric power supply through the Company's suppliers, in
sufficient quantities to satisfy current and reasonably projected customer
demand. Therefore, revenues are recognized over the life of the sales
agreement on a percentage basis with the remaining balance in the deferred
revenue account. Expenses are recognized in the period in which they are
incurred.
USE OF ESTIMATES
In preparing the Company's financial statements, management is required to
make estimates and assumptions that effect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
NOTE 2 -- NOTES RECEIVABLE
The Company maintains several notes receivable from individuals, including
one for $100,000 from its president, George Falsone. An interest rate of 6%
per annum is charged and the note is collateralized by 380,000 shares of
common stock of the Company. This loan is reflected on the Balance Sheet as a
reduction of Stockholders' Equity.
-35-
<PAGE>
FULL POWER GROUP, INC.
(Formerly Known as Worldwide Dental Distr. Corp.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998
NOTE 3 -- LICENSING FEES RECEIVABLE
The Company had entered into a Master License Agreement in October of 1998
with Courant Consulting, Inc., the licensee, for the purpose of selling
electric power to retail customers for commercial, industrial, and
residential consumption in California. For consideration, the Company granted
to the licensee certain exclusive rights and licenses to advertise, promote,
and procure contracts in the name of the Company for commercial, industrial,
and residential customers.
Consideration paid by licensee to the Company consists of a Master License
Fee in the amount of $968,750 for five sublicenses that were granted at a
price of $193,750 each. There were also seven additional sublicenses granted
which amounted to $1,356,250. This brings total sublicense agreements to
$2,325,000. This amount is fully payable by the licensee to the Company no
later than September, 2000. During 1998, $943,962 of the balance due had been
paid to the Company. This leaves a License Fees Receivable balance of
($2,325,000-$943,962)$1,381,038. An additional $398,484 was paid during the
first five months of 1999, leaving a balance due of $982,554 at May 21, 1999.
There is no assurance that all of this remaining balance due will be
collected.
NOTE 4 -- LEASES
The Company has entered into several non-cancelable leaseholds for office
space. Annual lease requirements for 1999 are $10,700.00, with the leases
expiring on December 31, 1999.
NOTE 5 -- COMMON STOCK
As of December 31, 1998, the Company is authorized to Issue 50,000,000 shares
of its $0.001 par value stock, of that amount, 7,887,750 shares were issued
and outstanding as of December 31, 1998.
Subsequent to December 31, 1998 and at April of 1999 the Company's Board of
Directors authorized that the aggregate number of shares of all classes of
stock that the Company is authorized to issue be 60,000,000 shares,
consisting of:
- - 50,000,000 shares of Common Stock, $0.001 par value per share
- - 10,000,000 shares of Preferred Stock, $100.00 par value per share
-36-
<PAGE>
FULL POWER GROUP, INC.
(Formerly Known as Worldwide Dental Distr. Corp.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998
NOTE 6 -- INCOME TAXES
Income taxes are provided based on earnings reported for financial statement
purposes pursuant to the provisions of Statement of Financial Accounting
Standards No. 109 (SFAS 109).
SFAS 109 uses the asset and liability method to account for income taxes
which requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between tax basis
and financial reporting basis of assets and liabilities. There was no income
tax expense for the year ended December 31, 1998 due to a net operating loss
of $797,846.
NOTE 7 -- RELATED PARTY TRANSACTIONS
The Company has various related party transactions involving its Common
Stock. There are 60,000 shares of common stock of the Company owned equally
by three members of the Advisory Board who maintain a consulting contract
with the Company. See Note 2 for a related party transaction of a note
receivable collateralized by common stock.
NOTE 8 -- SUBSEQUENT EVENTS
Subsequent to the balance sheet date, the stock option agreement between the
Company and Wirecomm Consulting, LTD established on September 25, 1998 was
exercised in January of 1999. In the transaction, Wirecomm purchased 800,000
newly issued shares of $.001 par value Full Power Group, Inc. common stock
for $0.20 per share. This completed this subscription agreement.
There is one additional Stock Option Agreement that remains outstanding as of
May, 1999. On September 25, 1998 the Company entered into an subscription
offer for Wirecomm Consulting, LTD to purchase 1,000,000 shares of the
Company, $.001 par value common stock at a price of $0.40 per share.
In March and April of 1999, 60,000 new shares of the Company were issued to
three individuals on the Advisory Board per their agreement.
As of May 11, 1999, there are a total of 8,727,750 shares issued, 3,600,000
of which are treated as though held in treasury since they are held by the
subsidiary.
-37-
<PAGE>
FULL POWER GROUP, INC.
(Formerly Known as Worldwide Dental Distr. Corp.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998
NOTE 8 -- Continued
In April of 1999, the Company announced the completion of a joint venture
between All Power Corp. (APC), a New York corporation, and the Company. This
agreement provides for subsequent funding and includes the option for the
Company to acquire APC as a wholly owned subsidiary at a future date.
NOTE 9 -- CONTINGENCIES
The Company was named in an administrative proceeding before the Pennsylvania
Securities Commission. The Company has filed a Request for Recission of the
Order against it. No monetary damages are sought in these proceedings, and in
the opinion of management, this lawsuit will not have a material adverse
effect on the Company.
NOTE 10 -- GOODWILL
To record the subsidiary in the consolidated financial statements, there was
$144,482.64 of Goodwill recorded on the Balance Sheet. Per management, the
goodwill had no continuing value. Thus, all of the Goodwill was immediately
expensed in 1998 and currently has no balance on the financial statements.
NOTE 11 -- GOING CONCERN
As the Company continues to implement its business plan during its
development stage, there exists the possibility that present and planned
sources of cash flow will not be adequate to support the Company's increased
needs with respect to cash and cash flow burdens. In addition, there exists
the possibility that present and planned sources of revenue will either not
be sufficient enough or be uncollectible to the point that operations may
cease to exist. Currently, management is pursuing additional sources of
capital infusion, as well as additional sales.
-38-
<PAGE>
FULL POWER GROUP, INC.
(Formerly Known as Worldwide Dental Distr. Corp.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998
NOTE 12 -- PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
The following summarized pro forma (unaudited) information assumes the
acquisition of WWD by FPC had occurred on January 1, 1998. Thus, the combined
operations of both entities since that date are as follows:
<TABLE>
<S> <C>
Net Sales $ 116,250
---------
Income (Loss) Before Extraordinary Items ($813,546)
---------
Net Income (Loss) ($813,546)
---------
Earnings (Loss) Per Share:
Basic -- 4,153,572 Shares ($ 0.20)
---------
Diluted -- 6,147,750 Shares ($ 0.13)
---------
</TABLE>
NOTE 13 -- YEAR 2000 COMPLIANCE
Per management, the Company has begun taking steps to assure that their computer
and information systems will be Year 2000 (Y2K) compliant. Due to the correction
of areas susceptible to Y2K errors in the Company's operating technology, there
is no reason to believe that there will be any substantial problems or material
losses resulting from year 2000 difficulties.
-39-
<PAGE>
FULL POWER GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
<PAGE>
FULL POWER GROUP, INC.
(A Development Stage Company)
Consolidated Balance Sheet
September 30, 1999
<TABLE>
<S> <C>
CURRENT ASSETS
Cash $ 33,777
Accrued Interest Receivable 6,523
Notes Receivable 287,000
Prepaid Insurance 5,924
Prepaid Bond 2,063
---------
Total Current Assets 335,287
---------
OTHER ASSETS
Deposits 760
Less: Minority Interest (813)
Total Assets 335,234
---------
CURRENT LIABILITIES
Deferred License Sales--Current 530,100
---------
Total Current Liabilities 530,100
---------
LONG TERM LIABILITIES
Deferred License Sales--Long Term 367,574
---------
Total Liabilities 897,674
---------
</TABLE>
UNAUDITED
-41-
<PAGE>
FULL POWER GROUP, INC.
(A Development Stage Company)
Consolidated Balance Sheet -- Continued
September 30, 1999
<TABLE>
<S> <C>
CAPITAL
Common Stock, $.001 par value,
50,000,000 shares authorized,
9,503,063 shares issued and outstanding 9,503
Paid In Capital 534,974
Deficit Accumulated during the
Development Stage (878,317)
---------
Subtotal Capital (333,840)
Less: Common Stock of the parent held
by a subsidiary--3,600,000 Shares (3,600)
Less: Subscription Receivable from
Stockholder (100,000)
Less: Note Receivable from
Stockholder (125,000)
---------
Total Stockholders' Equity (562,440)
Total Liabilities & Capital $ 335,234
---------
</TABLE>
UNAUDITED
-42-
<PAGE>
FULL POWER GROUP, INC.
(A Development Stage Company)
Consolidated Income Statement
For the Nine Months Ended September 30, 1999
And the Nine Months Ended September 30, 1998
<TABLE>
<CAPTION>
9/30/99 9/30/98
<S> <C> <C>
Revenues:
License Sales $ 348,750 $ 0
----------- -----------
Total Revenues 348,750 0
Selling, General & Administrative
Expenses 426,863 (1,153,001)
----------- -----------
Income (Loss) from Operations (78,113) (1,153,001)
----------- -----------
Other Income (Expense):
Interest Income 6,523 0
----------- -----------
Total Other Income 6,523 0
----------- -----------
Income (Loss) Before Income Taxes (71,590) (1,153,001)
----------- -----------
Income Taxes 0 0
----------- -----------
Net Income $ (71,590) $(1,153,001)
----------- -----------
</TABLE>
UNAUDITED
-43-
<PAGE>
FULL POWER GROUP, INC.
(A Development Stage Company)
Consolidated Statement of Cash Flows
For the Nine Months Ended September 30, 1999
And the Nine Months Ended September 30, 1998
<TABLE>
<CAPTION>
9/30/99 9/30/98
<S> <C> <C>
Cash Flows from Operating Activities
Net Loss ($71,590) ($1,153,001)
Adjustments to Reconcile Net Income to
Net Cash Used by Operating Activities:
Decrease (increase) in Notes Receivable (287,000) (56,000)
Decrease (increase) in Accrued Interest (6,023) 0
Decrease (increase) in Prepaid Assets 4,471 0
Decrease (increase) in Licensing Fees Rec. 1,381,038 0
Decrease (increase )in Other Assets (760) (25,000)
Increase(decrease) in Deferred License
Sales (1,311,076) 1,216,612
Increase (decrease) in Accrued Payroll
Liability (60) 271
Increase (decrease) in Cash Overdraft (29,550) 0
----------- -----------
Total Adjustments (248,960) 1,135,883
Net Cash Used by Operating Activities (320,550) (17,118)
----------- -----------
Cash Flow From Investing Activities:
Increase in Note Receivable-Stockholder (125,000) 0
----------- -----------
Issuance of Common Stock
Net Cash Used by Investing Activities (125,000) 0
----------- -----------
Cash Flows from Financing Activities:
Contribution to Capital 478,327 49,112
Issuance of Common Stock 1,000 7,888
Net Cash Provided in Financing
Activities 479,327 57,000
----------- -----------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 33,777 39,882
----------- -----------
ENDING CASH BALANCE $ 33,777 $ 39,882
----------- -----------
</TABLE>
UNAUDITED
-44-
<PAGE>
FULL POWER GROUP, INC.
(A Development Stage Company)
Schedule I--Selling, General and Administrative Expenses
For the Nine Months Ended September 30, 1999 and September 30, 1998
<TABLE>
<CAPTION>
9/30/99 9/30/98
<S> <C> <C>
Wages $ 8,270 $ 6,455
Officers Compensation 81,900 32,500
Marketing 20,716 44,769
Travel Expense 13,306 28,191
Payroll Taxes 8,485 0
Professional Services 139,851 845,276
Legal Services 5,100 95,296
Accounting Services 52,476 3,105
Communications 23,429 5,142
Insurance 14,942 9,907
Rents-Office & Equipment 17,052 29,232
Other Expenses 31,336 58,270
---------- ----------
Total $ 426,863 $1,153,001
---------- ----------
</TABLE>
UNAUDITED
-45-
<PAGE>
FULL POWER GROUP, INC.
(Formerly Known as Worldwide Dental Distribution Corp.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
September 30, 1999
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by Full Power Group Inc. are set
forth below:
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of Full
Power Group, Inc. (hereafter referred to as the "Company"), a Florida
Corporation and its wholly owned subsidiary, Full Power Corporation (hereafter
referred to as "FPC"). Intercompany transactions and balances have been
eliminated in the consolidated financial statements.
NATURE OF OPERATIONS
The Company and its wholly owned subsidiary, FPC, were organized to be
principally engaged in the sale of deregulated electricity and natural gas
opened via government deregulation of utilities. Supply contracts for the
distribution of electricity and natural gas, however, have yet to be secured.
The Company is considered a development stage enterprise under Financial
Accounting Standard 7 (FAS 7), which defines a company to be in its development
stage if it is devoting substantially all of its efforts to establishing a new
business and the company's planned principal operations have not commenced.
On July 28, 1998, FPC entered into a stock purchase agreement with Worldwide
Dental Distribution Corp. ("WWD"), a Florida Corporation, whereby FPC, as
purchaser, acquired 3,600,000 shares of common stock of WWD at $0.001 per share
par value, in exchange for $150,000.
CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, the Company considers all highly
liquid investments with an original maturity of three months or less to be cash
equivalents. The Company maintains its cash accounts in a commercial bank.
Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up
to $100,000.
-46-
<PAGE>
FULL POWER GROUP, INC.
(Formerly Known as Worldwide Dental Distribution Corp.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
September 30, 1999
NOTE 1 -- Continued
REVENUE AND EXPENSE RECOGNITION
The Company recognizes revenue from sales of sublicense contracts, net of a
deferred sales revenue account. These sales are made in the agreement that the
Company is to give its best efforts to continuously, diligently, and effectively
obtain energy supplies through the Company's suppliers, in sufficient quantities
to satisfy current and reasonably projected customer demand. Therefore, revenues
are recognized over the life of the sales agreement on a percentage basis with
the remaining balance in the deferred revenue account. (See Note 3 below for
additional information.) Expenses are recognized in the period in which they are
incurred.
USE OF ESTIMATES
In preparing the Company's financial statements, management is required to make
estimates and assumptions that effect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
NOTE 2 -- NOTES RECEIVABLE
The Company maintains several notes receivable from individuals, including one
for $100,000 from its Chief Executive Officer and President, George N. Falsone,
which carries an interest rate of 6% per annum and is collateralized by 380,000
shares of common stock of the Company. This loan is reflected on the Balance
Sheet as a reduction of Stockholders' Equity under the caption "Subscription
Receivable from Stockholder."
The Company also maintains two additional note receivables from Mr. Falsone
totaling $125,000, which carry interest rate of 6% and are collateralized by the
33,500 shares of common stock of the Company. These loan are reflected on the
Balance Sheet as reductions of Stockholders' Equity under the caption "Note
Receivable from Stockholder."
The Company maintains a note receivable from Mr. Harvey Trifler, a consultant to
the Company, for $39,000. The note carries an interest rate of 6% per annum and
is collateralized by 13,000 shares of common stock of the Company.
-47-
<PAGE>
FULL POWER GROUP, INC.
(Formerly Known as Worldwide Dental Distribution Corp.)
(A Development Stage Company)
Notes to Consolidated Financial Statements -- Continued
September 30, 1999
NOTE 2 -- Continued
The Company maintains a note receivable from All Power Corporation, a New York
corporation ("All Power"), pursuant to Line of Credit Agreement. Under the terms
of the Line of Credit Agreement, All Power has the right to borrow up to
$250,000 from the Company at an interest rate based of prime plus 2. The note is
collateralized by all of the All Power capital stock owned by its principal
shareholder, Mr. John O'Brien. As of September 30, 1999 the principal balance of
the note was $248,000. This note is reflected in Notes Receivable.
NOTE 3 -- DEFERRED LICENSE SALES
The Company entered into a Master License Agreement in October of 1998 with
Courant Consulting, Inc. ("Courant"), pursuant to which Courant agreed to make
payments to the Company in consideration for an exclusive license to market the
Company's power in certain geographical territories in the State of California.
In consideration of the exclusive license, Courant agreed to pay to the Company
a license fee of $2,325,000. As of September 30, 1999 a total of $1,311,076 of
the fee balance was outstanding. In June 1999, the Master License Agreement was
terminated and the parties agreed that Courant would not be responsible for the
remaining outstanding fee balance. Therefore, receivables totaling $1,013,924
and corresponding deferred license sales are no longer reflected on the
financial statements.
Prior payments on the Master License Fee are being recognized over the life of
the original agreement at a rate of $38,750 per month. The unrecognized balance
($897,674) of these payments are reflected in Deferred License Sales.
NOTE 4 -- LEASES
The Company has entered into several non-cancelable leaseholds for office space.
Annual lease requirements for 1999 are $13,524 with the leases expiring in May
and August 2000.
NOTE 5 -- COMMON STOCK
As of September 30, 1999 the Company is authorized to issue 50,000,000 shares of
its $0.001 par value stock. Of that amount, 9,503,063 were issued and
outstanding as of September 30, 1999.
-48-
<PAGE>
FULL POWER GROUP, INC.
(Formerly Known as Worldwide Dental Distribution Corp.)
(A Development Stage Company)
Notes to Consolidated Financial Statements -- Continued
September 30, 1999
NOTE 5 -- Continued
In April of 1999 the Company's Board of Directors authorized that the Company is
also authorized to issue 10,000,000 shares of Preferred Stock at $100.00 par
value per share. None of that stock has been issued.
In September 1999 the Company issued warrants to sublicensees (see Note 3) which
allow sublicensees to purchase common stock of the company at a price of $4.00
per share. A total of 61,531 shares may be purchased via the warrants. The
warrants expire three years from the date of issuance.
NOTE 6 -- INCOME TAXES
Income taxes are provided based on earnings reported for financial statement
purposes pursuant to the provisions of Statement of Financial Accounting
Standards No. 109 (SFAS 109).
SFAS 109 uses the asset and liability method to account for income taxes which
requires the recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between tax basis and financial
reporting basis of assets and liabilities. There was no income tax expenses
reported for the period ended September 30, 1999 due to a net operating loss of
$71,590.
NOTE 7 -- RELATED PARTY TRANSACTIONS
The Company has various related party transactions involving its Common Stock.
There are 60,000 shares of common stock of the Company owned equally by three
members of an Advisory Board who had a consulting contract with the Company.
This consulting contract has since been terminated. Also, see Note 2 for related
party transactions involving notes receivable.
NOTE 8 -- SUBSEQUENT EVENTS
There is one Stock Option Agreement that remained outstanding. On September 25,
1998 the Company entered into a subscription offer for Wirecomm Consulting, LTD
to purchase 1,000,000 shares of the Company's $.001 par value common stock at a
price of $0.40 per share. As of October 22, 1999 Wirecomm had purchased 212,145
shares under this agreement, 58,125 of which were purchased subsequent September
30, 1999.
-49-
<PAGE>
FULL POWER GROUP, INC.
(Formerly Known as Worldwide Dental Distribution Corp.)
(A Development Stage Company)
Notes to Consolidated Financial Statements -- Continued
September 30, 1999
NOTE 9 -- CONTINGENCIES
The Company has received and is in the process of responding to a subpoena from
the Securities and Exchange Commission relating to an investigation of
Twenty-First Power, LLC. and certain offers of securities over the Internet.
Although the Company does not believe that it has ever offered or sold any of
its securities over the Internet there can be no assurance that the Commission
will not issue an order prohibiting any further offers or sales of the Company's
securities pending the outcome of the investigation.
The Company was named in an administrative proceeding before the Pennsylvania
Securities Commission. The Company has filed a Request for Recission of the
Order against it. No monetary damages are sought in these proceedings, and in
the opinion of management, this lawsuit will not have a material adverse effect
on the Company.
NOTE 10 -- GOODWILL
To record the subsidiary in the consolidated financial statements, there was
$144,483 of Goodwill recorded on the Balance Sheet. Per management, the good
will had no continuing value. Thus, all of the Goodwill was immediately expensed
in 1998 and currently has no balance on the financial statements.
NOTE 11 -- GOING CONCERN
As the Company continues to implement its business plan during its development
stage, there exists the possibility that present and planned sources of cash
flow will not be adequate to support the Company's increased needs with respect
to cash and cash flow burdens. In addition, there exists the possibility that
present and planned source's of revenue will either not be sufficient enough or
be uncollectible to the point that operations may cease to exist. Currently,
management is pursuing additional sources of capital infusion, as well as
additional sales.
NOTE 12 -- YEAR 2000 COMPLIANCE
The Company has begun taking steps to assure that their computer information
systems will be Year 2000 (Y2K) compliant. Due to the correction of areas
susceptible to Y2K errors in the Company's operating technology, there is no
reason to believe that there will be any substantial problems or material losses
resulting from year 2000 difficulties.
-50-
<PAGE>
PART III
ITEMS 1 AND 2. INDEX TO AND DESCRIPTION OF EXHIBITS
The following documents are filed as part of this registration
statement:
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
- -------- ----------------------
<S> <C>
2.1 Articles of Incorporation of the Company, as amended
2.2 Bylaws of the Company
3.1 Specimen certificate for shares of Common Stock of the Company
3.2 Subscription Agreement between Wirecomm Consulting Ltd. and the
Company dated September 25, 1998, as amended on August 25, 1999
3.3 Form of Asset Purchase Agreement by and among the Company and each
of Southern California Power Partners, LLP, Capital Electric &
Light, LLP, San Jose Power and Electric, LLP and Community Electric
& Power, LLP (omitting certain exhibits setting forth the Articles
of Incorporation of the Company filed herewith as Exhibit 2.1, the
Bylaws of the Company filed herewith as Exhibit 2.2, the form of the
Warrant filed herewith as Exhibit 3.4 and the financial statements
of the Company, which the Company undertakes to furnish
supplementally to the Commission upon request)
3.4 Form of Warrant issued by the Company to each of Southern California
Power Partners, LLP, Capital Electric & Light, LLP, San Jose Power
and Electric, LLP and Community Electric & Power, LLP
6.1 Automated Power Exchange Agreement, dated April 9, 1998, between FPC
and Automated Power Exchange, Inc.
6.2 Energy Service Provider Agreement between San Diego Gas and Electric
and FPC dated April 9, 1998
6.3 Energy Service Provider Agreement between Southern California Edison
and FPC dated April 20, 1998
6.4 Energy Service Agreement between Pacific Gas and Electric Company
and FPC dated May 7, 1998
6.5 Letter of Engagement between FPC and UtiliSource dated March 26,
1998
6.6 Promissory Note in the amount of $100,000, dated November 18, 1998,
issued by George N. Falsone to the Company
6.7 Promissory Note in the amount of $75,000, dated June 2, 1999, issued
by George N. Falsone to the Company
6.8 Promissory Note in the amount of $50,000, dated September 8, 1999,
issued by George N. Falsone to the Company
-51-
<PAGE>
<CAPTION>
Exhibit
No. Description of Exhibit
- -------- ----------------------
<S> <C>
6.9 Promissory Note in the amount of $30,000, dated August 30,
1999, issued by Harvey Trifler to the Company
6.10 Promissory Note in the amount of $9,000, dated September 7,
1999, issued by Harvey Trifler to the Company
6.11 Consulting Agreement between FPC and Dealer Support Group,
Inc. dated March 1, 1998
6.12 Master License Agreement between FPC and Courant Consulting,
Inc. dated October 6, 1998
6.13 Form of Sublicense Agreement between Courant Consulting, Inc.
and each of certain Partnerships
6.14 Line of Credit Agreement between FPC and All Power Corporation
dated April 1, 1999 (including Line of Credit Note)
6.15 Pledge Agreement between FPC and All Power Corporation dated
April 1, 1999
27 Financial Data Schedule
</TABLE>
-52-
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated: November 17, 1999 FULL POWER GROUP, INC.
By: /s/ George N. Falsone
--------------------------------------------
Name: George N. Falsone
Title: Chief Executive Officer and President
-53-
<PAGE>
ARTICLES OF INCORPORATION
OF
WORLDWIDE DENTAL DISTRIBUTION CORP.
The undersigned, desiring to form a corporation (the "Corporation")
under the laws of Florida, hereby adopts the following Articles of
Incorporation:
ARTICLE I
CORPORATE NAME
The name of the Corporation is WORLDWIDE DENTAL DISTRIBUTION CORP.
ARTICLE II
PURPOSE
The Corporation shall be organized for any and all purposes authorized
under the laws of the state of Florida.
ARTICLE III
PERIOD OF EXISTENCE
The period during which the Corporation shall continue is perpetual.
ARTICLE IV
SHARES
The capital stock of this corporation shall consist of 50,000,000 shares
of common stock, $.001 par value.
ARTICLE V
PLACE OF BUSINESS
The initial address of the principal place of business of this
corporation in the State of Florida shall be 202 Riverview, Longwood, FL
32779. The Board of Directors may at any time and from time to time move the
principal office of this corporation.
ARTICLE VI
DIRECTORS AND OFFICERS
The business of this corporation shall be managed by its Board of
Directors. The number of such directors shall be not be less than one (1)
and, subject to such minimum may be increased or decreased from time to time
in the manner provided in the By-Laws. The number of persons constituting the
initial Board of Directors shall be 1. The Board of
1
<PAGE>
Directors shall be elected by the Stockholders of the corporation at such
time and in such manner as provided in the By-Laws. The name and addresses of
the initial Board of Directors and officers are as follows:
Anthony Derick President/Director
202 Riverview
Longwood, FL 32779
ARTICLE VII
DENIAL OF PREEMPTIVE RIGHTS
No shareholder shall have any right to acquire shares or other
securities of the Corporation except to the extent such right may be granted
by an amendment to these Articles of Incorporation or by a resolution of the
board of Directors.
ARTICLE VIII
AMENDMENT OF BYLAWS
Anything in these Articles of Incorporation, the Bylaws, or the Florida
Corporation Act notwithstanding, bylaws shall not be adopted, modified,
amended or repealed by the shareholders of the Corporation except upon the
affirmative vote of a simple majority vote of the holders of all the issued
and outstanding shares of the corporation entitled to vote thereon.
ARTICLE IX
SHAREHOLDERS
9.1. INSPECTION OF BOOKS. The board of directors shall make reasonable
rules to determine at what times and places and under what conditions the
books of the Corporation shall be open to inspection by shareholders or a
duly appointed representative of a shareholder.
9.2. CONTROL SHARE ACQUISITION. The provisions relating to any control
share acquisition as contained in Florida Statutes now, or hereinafter
amended, and any successor provision shall not apply to the Corporation.
9.3. QUORUM. The holders of shares entitled to one-third of the votes
at a meeting of shareholder's shall constitute a quorum.
9.4. REQUIRED VOTE. Acts of shareholders shall require the approval of
holders of 50.01% of the outstanding votes of shareholders.
2
<PAGE>
ARTICLE X
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
To the fullest extent permitted by law, no director or officer of the
Corporation shall be personally liable to the Corporation or its shareholders
for damages for breach of any duty owed to the Corporation or its
shareholders. In addition, the Corporation shall have the power, in its
By-Laws or in any resolution of its stockholders or directors, to undertake
to indemnify the officers and directors of this corporation against any
contingency or peril as may be determined to be in the best interests of this
corporation, and in conjunction therewith, to procure, at this corporation's
expense, policies of insurance.
ARTICLE XI
SUBSCRIBER
The name and address of the person signing these Articles of
Incorporation as subscriber is:
Eric P. Littman
8th Floor
1428 Brickell Avenue
Miami, FL 33131
ARTICLE XII
CONTRACTS
No contract or other transaction between this corporation and any
person, firm or corporation shall be affected by the fact that any officer or
director of this corporation is such other party or is, or at some time in
the future becomes, an officer, director or partner of such other contracting
party, or has now or hereafter a direct or indirect interest in such contract.
ARTICLE XIII
RESIDENT AGENT
The name and address of the initial resident agent of this corporation
is:
Eric P. Littman
1428 Brickell Avenue
8th Floor
Miami, FL 33131
3
<PAGE>
IN WITNESS WHEREOF, I have hereunto subscribed to and executed these
Articles of Incorporation this on May 7, 1997.
/s/ Eric P. Littman
---------------------------------
Eric P. Littman, Subscriber
Subscribed and Sworn on May 7, 1997
Before me:
/s/ Isabel J. Canters
- -------------------------------------
Isabel Canters, Notary Public
My Commission Expires [SEAL]
4
<PAGE>
CERTIFICATE DESIGNATING PLACE OF BUSINESS OR
DOMICILE FOR SERVICE OF PROCESS WITHIN THIS STATE
NAMING THE AGENT UPON WHOM PROCESS MAY BE SERVED
Having been named to accept service of process for WORLDWIDE DENTAL
DISTRIBUTION CORP. at the place designated in the Articles of Incorporation,
the undersigned is familiar with and accepts the obligations of that position
pursuant to F.S. 607.0501(3).
/s/ Eric P. Littman
----------------------
Eric P. Littman
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
WORLDWIDE DENTAL DISTRIBUTION CORP.
I, George N. Falsone, President of the above named Florida
corporation for profit, do hereby certify that, in an action by the
shareholders without a meeting taken in accordance with Section 607.394 of
the Florida General Corporation Act, the following Amendment to the Articles
of Incorporation was adopted to supersede and take the place of Article I of
the Articles of Incorporation:
ARTICLE I
CORPORATE NAME
The name of the Corporation is FULL POWER GROUP, INC.
IN WITNESS WHEREOF, the above named officer, acting for and on
behalf of the corporation, has hereto subscribed his name as of this 15th day
of September, 1998.
/s/ George N. Falsone
-------------------
George N. Falsone
President
<PAGE>
ARTICLE OF AMENDMENT OF THE
ARTICLES OF INCORPORATION OF
FULL POWER GROUP, INC.
Full Power Group, Inc., a corporation organized and existing under the
laws of the State of Florida (the "Corporation"), hereby certifies as
follows:
1. The name of the Corporation is Full Power Group, Inc.
2. The amendment to the Corporation's Articles of Incorporation set
forth on Exhibit A attached hereto was duly adopted in accordance with
Section 607.394 of the Florida General Corporation Act, on April 8, 1999. The
amendment was adopted by a majority vote of the shareholders.
3. This Amended Article of Incorporation shall be effective upon filing
with the Secretary of State of Florida.
IN WITNESS WHEREOF, the undersigned officers of the Corporation have
hereunto set their hands on this 14th day of April, 1999.
----
/s/ George N. Falsone
------------------------------
George N. Falsone, President
/s/ Richard C. O'Rourke
------------------------------
Richard C. O'Rourke, Secretary
[STAMP]
<PAGE>
EXHIBIT A TO THE
ARTICLE OF AMENDMENT OF THE
ARTICLES OF INCORPORATION OF
FULL POWER GROUP, INC.
ARTICLE IV of the Article of Incorporation of Full Power Group, Inc.
shall be deleted in its entirety and the following ARTICLE IV shall be
substituted in its place:
"ARTICLE IV
CAPITAL STRUCTURE
4.1 AUTHORIZED CAPITAL STOCK. The aggregate number of shares of all
classes of stock that the Corporation is authorized to issue is 60,000,000
shares, consisting of:
(a) 50,000,000 shares of Common Stock, $0.001 par value per share
(the "Common Stock"); and
(b) 10,000,000 shares of Preferred Stock, $0.001 par value per
share (the "Preferred Stock").
4.2 COMMON STOCK
(a) VOTING RIGHTS. Except as may otherwise be provided by this
Articles of Incorporation or by the Florida General Corporation Act, (i) all
rights to vote and all voting power shall be vested exclusively in the
holders of the Common Stock and (ii) each holder of Common Stock shall be
entitled to one vote for each share held of record on the applicable record
date on all matters presented for a vote of the shareholders of the
Corporation, including, without limitation, the election of directors.
(b) DIVIDENDS. Subject to the rights of the Preferred Stock,
dividends may be paid on the Common Stock as and when declared by the Board
of Directors out of any funds of the Corporation legally available for
payment thereof.
(c) LIQUIDATING DISTRIBUTIONS. Upon any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, or upon
any sale or conveyance of all or substantially all of the assets of the
Corporation, after payment or provision for payment of all the liabilities of
the Corporation and the expenses of liquidation, and subject to the rights of
the holders of Preferred Stock, if any, the remaining assets of the
Corporation available for distribution shall be distributed to the holders of
the Common Stock. For the purpose of this Section 4.2(c), a merger or
consolidation with or into any other company, a share exchange or the sale or
conveyance of all or any part of the assets of the Corporation (which shall
not in fact result in a liquidation of the Corporation and the distribution
of assets to its shareholders) shall not be deemed to be a liquidation,
dissolution or winding up of the Corporation.
<PAGE>
4.3 PREFERRED STOCK.
(a) DESIGNATIONS BY BOARD OF DIRECTORS. The Preferred Stock
may be issued from time to time in one or more classes or series with such
voting rights, full or limited, or without voting rights, and with such
designations, preferences and relative, participating, optional or special
rights and qualifications, limitations or restrictions as are stated herein
and as shall be stated and expressed in the resolution or resolutions
providing for the issue of such stock adopted by the Board of Directors as
hereinafter prescribed.
(b) TERMS OF THE PREFERRED STOCK. Subject to the rights of the
holders of the Common Stock, authority is hereby expressly granted to and vested
in the Board of Directors or any designated committee thereof to authorize the
issuance of the Preferred Stock from time to time in one or more classes or
series, to determine and take necessary proceedings to fully effectuate the
issuance and redemption of any such Preferred Stock and, with respect to each
class or series of Preferred Stock, to fix and state from time to time, by
resolution or resolutions providing for the issuance thereof, the following:
(i) the number of shares to constitute the class or
series and the designations thereof;
(ii) whether the class or series is to have voting
rights, full or limited, or to be without voting rights;
(iii) the preferences and relative, participating,
optional or special rights, if any, and qualifications, limitations or
restrictions thereof, if any, of the class or series;
(iv) whether the shares of the class or series will be
redeemable and, if redeemable, the redemption price or prices and the
time or times at which, and the terms and conditions upon which, such
shares will be redeemable and the manner of redemption;
(v) whether the shares of the class or series will be
subject to the operation of retirement or sinking funds to be applied to
the purchase or redemption of such shares for retirement and, if such
retirement or sinking funds are to be established, the annual amount
thereof and the terms and conditions relative to the operation thereof;
(vi) the dividend rate, whether dividends are payable in
cash, stock or otherwise, the conditions upon which and the times when
such dividends are payable, the preference or relation to the payment of
dividends on any other class or series of stock, whether or not such
dividends will be cumulative or noncumulative and, if cumulative, the
date or dates from which such dividends will accumulate;
2
<PAGE>
(vii) the preferences, if any, and the amounts thereof
that the holders of the class or series will be entitled to receive upon
the voluntary or involuntary dissolution, liquidation or winding up of,
or upon any distribution of the assets of, the Corporation;
(viii) whether the shares of the class or series will be
convertible into, or exchangeable for, the shares of any other class or
classes, or of any other series of the same or any other class or
classes, of stock of the Corporation and the conversion price or prices,
or ratio or ratios, or rate or rates, at which such conversion or
exchange may be made, with such adjustments, if any, as shall be
expressed or provided for in such resolution or resolutions; and
(ix) such other special rights and protective provisions
with respect to the class or series as the Board of Directors or any
designated committee thereof may deem advisable.
The shares of each class or series of Preferred Stock may
vary from the shares of any other class or series thereof in any or all of the
foregoing respects. The Board of Directors or any designated committee thereof
may from time to time increase the number of shares of Preferred Stock
designated for any existing class or series by a resolution adding to such class
or series authorized but unissued shares of Preferred Stock not designated for
any other class or series thereof. The Board of Directors or any designated
committee thereof may from time to time decrease the number of shares of
Preferred Stock designated for any existing class or series by a resolution
subtracting from such class or series any unissued shares of Preferred Stock
designated for such class or series, and the shares so subtracted shall become
authorized, unissued and undesignated shares of Preferred Stock."
3
<PAGE>
BY-LAWS
OF
WORLDWIDE DENTAL DISTRIBUTION CORP.
ARTICLE I. MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of
this corporation shall be held on the 30th day of June of each year or at
such other time and place designated by the Board of Directors of the
corporation. Business transacted at the annual meeting shall include the
election of directors of the corporation. If the designated day shall fall on
a Sunday or a legal holiday, then the meeting shall be held on the first
business day thereafter.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders shall
be held when directed by the President or the Board of Directors, or when
requested in writing by the holders of not less than 10% of all shares
entitled to vote at the meeting. A meeting requested by shareholders shall be
called for a date not less than 3 nor more than 30 days after the request is
made, unless the shareholders requesting the meeting designate a later date.
The call for the meeting shall be issued by the Secretary, unless the
President, Board of Directors, or shareholders requesting the meeting shall
designate another person to do so.
SECTION 3. PLACE. Meetings of shareholders shall be held at the
principal place of business of the corporation or at such other place as may
be designated by the Board of
1
<PAGE>
Directors.
SECTION 4. NOTICE. Written notice stating the place, day and hour of
the meeting and in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than 3 nor more than
30 days before the meeting, either personally or by first class mail, or by
the direction of the President, the Secretary or the officer or persons
calling the meeting to each shareholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail addressed to the shareholder at his
address as it appears on the stock transfer books of the corporation, with
postage thereon prepaid.
SECTION 5. NOTICE OF ADJOURNED MEETING. When a meeting is adjourned to
another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the
adjourned meeting any business may be transacted that might have been
transacted on the original date of the meeting. If, however, after the
adjournment the Board of Directors fixes a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given as provided in this
Article to each shareholder of record on a new record date entitled to vote
at such meeting.
SECTION 6. SHAREHOLDER QUORUM AND VOTING. A majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a
quorum at a meeting of shareholders. If a quorum is present, the affirmative
vote of a majority of the shares represented at the meeting and entitled to
vote on the subject matter shall be the act of the shareholders unless
otherwise provided by law.
SECTION 7. VOTING OF SHARES. Each outstanding share shall be entitled
to one vote
2
<PAGE>
on each matter submitted to a vote at a meeting of shareholders.
SECTION 8. PROXIES. A shareholder may vote either in person or by proxy
executed in writing by the shareholder or his duly authorized
attorney-in-fact. No proxy shall be valid after the duration of 11 months
from the date thereof unless otherwise provided in the proxy.
SECTION 9. ACTION BY SHAREHOLDERS WITHOUT A MEETING. Any action
required by law or authorized by these by-laws or the Articles of
Incorporation of this corporation or taken or to be taken at any annual or
special meeting of shareholders, or any action which may be taken at any
annual or special meeting of shareholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting
forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
ARTICLE II. DIRECTORS
SECTION 1. FUNCTION. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall
be managed under the direction of, the Board of Directors.
SECTION 2. QUALIFICATION. Directors need not be residents of this state
or shareholders of this corporation.
SECTION 3. COMPENSATION. The Board of Directors shall have authority to
fix the compensation of directors.
SECTION 4. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall
3
<PAGE>
be presumed to have assented to the action taken unless he votes against such
action or abstains from voting in respect thereto because of an asserted
conflict of interest.
SECTION 5. NUMBER. This corporation shall have a minimum of 1 director
but no more than 7.
SECTION 6. ELECTION AND TERM. Each person named in the Articles of
Incorporation as a member of the initial Board of Directors shall hold office
until the first annual meeting of shareholders, and until his successor shall
have been elected and qualified or until his earlier resignation, removal
from office or death. At the first annual meeting of shareholders and at each
annual meeting thereafter the shareholders shall elect directors to hold
office until the next succeeding annual meeting. Each director shall hold
office for a term for which he is elected and until his successor shall have
been elected and qualified or until his earlier resignation, removal from
office or death.
SECTION 7. VACANCIES. Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
Directors, may be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum of the Board of Directors. A
director elected to fill a vacancy shall hold office only until the next
election of directors by the shareholders.
SECTION 8. REMOVAL OF DIRECTORS. At a meeting of shareholders called
expressly for that purpose, any director or the entire Board of Directors may
be removed, with or without cause, by a vote of the holders of a majority of
the shares then entitled to vote at an election of directors.
SECTION 9. QUORUM AND VOTING. A majority of the number of directors
fixed by these by-laws shall constitute a quorum for the transaction of
business. The act of a majority of
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<PAGE>
the directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors.
SECTION 10. EXECUTIVE AND OTHER COMMITTEES. The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, may
designate from among its members an executive committee and one or more other
committees each of which, to the extent provided in such resolution shall
have and may exercise all the authority of the Board of Directors, except as
is provided by law.
SECTION 11. PLACE OF MEETING. Regular and special meetings of the Board
of Directors shall be held at the principal place of business of the
corporation or as otherwise determined by the Directors.
SECTION 12. TIME, NOTICE AND CALL OF MEETINGS. Regular meetings of the
Board of Directors shall be held without notice on the first Monday of the
calendar month two (2) months following the end of the corporation's fiscal,
or if the said first Monday is a legal holiday, then on the next business
day. Written notice of the time and place of special meetings of the Board of
Directors shall be given to each director by either personal delivery,
telegram or cablegram at least three (3) days before the meeting or by notice
mailed to the director at least 3 days before the meeting.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the
meeting, the time of the meeting, or the manner in which it has been called
or convened, except when a director states, at the beginning of the meeting,
any objection to the transaction of business because the meeting is not
lawfully
5
<PAGE>
called or convened.
Neither the business to be transacted at, nor the purpose, of any
regular or special meeting of the Board of Directors need be specified in the
notice of waiver of notice of such meeting. A majority of the directors
present, whether or not a quorum exists, may adjourn any meeting of the Board
of Directors to another time and place. Notice of any such adjourned meeting
shall be given to the directors who were not present at the time of the
adjournment, and unless the time and place of the adjourned meeting are
announced at the time of the adjournment, to the other directors. Meetings of
the Board of Directors may be called by the chairman of the board, by the
president of the corporation or by any two directors.
Members of the Board of Directors may participate in a meeting of such
board by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each
other at the same time. Participation by such means shall constitute presence
at a meeting.
SECTION 13. ACTION WITHOUT A MEETING. Any action, required to be taken
at a meeting of the Board of Directors, or any action which may be taken at a
meeting of the Board of Directors or a committee thereof, may be taken
without a meeting if a consent in writing, setting forth the action so to be
taken, is signed by such number of the directors, or such number of the
members of the committee, as the case may be, as would constitute the
requisite majority thereof for the taking of such actions, is filed in the
minutes of the proceedings of the board or of the committee. Such actions
shall then be deemed taken with the same force and effect as though taken at
a meeting of such board or committee whereat all members were present and
voting throughout and those who signed such
6
<PAGE>
action shall have voted in the affirmative and all others shall have voted in
the negative. For informational purposes, a copy of such signed actions shall
be mailed to all members of the board or committee who did not sign said
action, provided however, that the failure to mail said notices shall in no
way prejudice the actions of the board or committee.
ARTICLE III. OFFICERS
SECTION 1. OFFICERS. The officers of this corporation shall consist of
a president, a secretary and a treasurer, each of whom shall be elected by
the Board of Directors. Such other officers and assistant officers and agents
as may be deemed necessary may be elected or appointed by the Board of
Directors from time to time. Any two or more offices may be held by the same
person.
SECTION 2. DUTIES. The officers of this corporation shall have the
following duties:
The President shall be the chief executive officer of the
corporation, shall have general and active management of the business and
affairs of the corporation subject to the directions of the Board of
Directors, and shall preside at all meetings of the shareholders and Board of
Directors.
The Secretary shall have custody of, and maintain, all of the
corporate records except the financial records; shall record the minutes of
all meetings of the shareholders and Board of directors, send all notices of
all meetings and perform such other duties as may be prescribed by the Board
of Directors or the President.
The Treasurer shall have custody of all corporate funds and
financial records, shall keep full and accurate accounts of receipts and
disbursements and render accounts thereof at the annual meetings of
shareholders and whenever else required by the Board
7
<PAGE>
of Directors or the President, and shall perform such other duties as may be
prescribed by the Board of Directors or the President.
SECTION 3. REMOVAL OF OFFICERS. An officer or agent elected or
appointed by the Board of Directors may be removed by the board whenever in
its judgment the best interests of the corporation will be served thereby.
Any vacancy in any office may be filed by the Board of Directors.
ARTICLE IV. STOCK CERTIFICATES
SECTION 1. ISSUANCE. Every holder of shares in this corporation shall
be entitled to have a certificate representing all shares to which he is
entitled. No certificate shall be issued for any share until such share is
fully paid.
SECTION 2. FORM. Certificates representing shares in this corporation
shall be signed by the President or Vice President and the Secretary or an
Assistant Secretary and may be sealed with the seal of this corporation or a
facsimile thereof.
SECTION 3. TRANSFER OF STOCK. The corporation shall register a stock
certificate presented to it for transfer it the certificate is properly
endorsed by the holder of record or by his duly authorized attorney.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. If the shareholder
shall claim to have lost or destroyed a certificate of shares issued by the
corporation, a new certificate shall be issued upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed, and, at the discretion of the Board of Directors,
upon the deposit of a bond or other indemnity in such amount and with such
sureties, if any, as the board may reasonably require.
8
<PAGE>
ARTICLE V. BOOKS AND RECORDS
SECTION 1. BOOKS AND RECORDS. This corporation shall keep correct and
complete books and records of account and shall keep minutes of the
proceedings of its shareholders, Board of Directors and committee of
directors.
This corporation shall keep at its registered office, or principal place
of business a record of its shareholders, giving the names and addresses of
all shareholders and the number of the shares held by each.
Any books, records and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
SECTION 2. SHAREHOLDERS' INSPECTION RIGHTS. Any person who shall have
been a holder of record of shares of voting trust certificates therefor at
least six months immediately preceding his demand or shall be the holder of
record of, or the holder of record of voting trust certificates for, at least
five percent of the outstanding shares of the corporation, upon written
demand stating the purpose thereof, shall have the right to examine, in
person or by agent or attorney, at any reasonable time or times, for any
proper purpose its relevant books and records of accounts, minutes and
records of shareholders and to make extracts therefrom.
SECTION 3. FINANCIAL INFORMATION. Not later than four months after the
close of each fiscal year, this corporation shall prepare a balance sheet
showing in reasonable detail the financial condition of the corporation as of
the close of its fiscal year, and a profit and loss statement showing the
results of the operations of the corporation during the fiscal year.
Upon the written request of any shareholder or holder of voting trust
certificates for shares of the corporation, the corporation shall mail to
each shareholder or holder of voting
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<PAGE>
trust certificates a copy of the most recent such balance sheet and profit
and loss statement. The balance sheets and profit and loss statements shall
be filed in the registered office of the corporation in this state, shall be
kept for at least five years, and shall be subject to inspection during
business hours by any shareholder or holder of voting trust certificates, in
person or by agent.
ARTICLE VI. DIVIDENDS
The Board of Directors of this corporation may, from time to time,
declare and the corporation may pay dividends on its shares in cash,
property or its own shares, except when the corporation is insolvent or when
the payment thereof would render the corporation insolvent subject to the
provisions of the Florida Statutes.
ARTICLE VII. CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be in
circular form.
ARTICLE VIII. AMENDMENT
These by-laws may be altered, amended or repealed, and new by-laws may
be adopted by the a majority vote of the directors of the corporation.
10
<PAGE>
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
CUSIP NO. 359679 10 7
NUMBER SHARES
FULL POWER GROUP, INC.
AUTHORIZED COMMON STOCK: 50,000,000 SHARES - PAR VALUE $.001
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
- Shares of FULL POWER GROUP, INC. Common Stock -
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This
Certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
[SEAL]
/s/ Richard C. O'Rourke /s/ George N. Falsone
---------------------- --------------------
SECRETARY PRESIDENT
<PAGE>
SUBSCRIPTION AGREEMENT
Agreement, made this 25th day of September, 1998, by and between WORLD
WIDE DENTAL DISTRIBUTION CORP., a Florida corporation (the "Company"), and
WIRECOMM CONSULTING LTD., a Jersey Isle corporation (the "Subscriber").
In consideration of the mutual promises and covenants herein contained,
the parties hereto agree as follows:
ARTICLE I
SUBSCRIPTION
1.01 SUBSCRIPTION OFFER. Subject to the terms and conditions hereof
and to acceptance by the Company, Subscriber hereby offers to purchase 1,000,000
shares of Common Stock (the "Securities") at a price of $0.40 per share, for a
total purchase price of $400,000. The purchase price is payable within 365 days
following the date of execution hereof (the "Due Date"); however, Subscriber may
make partial payments prior to the Due Date. In the event the entire purchase
price is not paid by the Due Date, the Company shall issue to Subscriber, at
$0.40 per share, a number of shares equal to the amount of the purchase price
actually received from Subscriber pursuant to this Agreement divided by $0.40,
and Subscriber's right to acquire any additional Securities shall cease.
1.02 ACCEPTANCE OF SUBSCRIPTION. Any sale of Securities to
Subscriber shall not be deemed to occur until Subscriber's offer is accepted
in writing by the Company. Subscriber shall not have any recourse against
the Company if a purchase offer is rejected in whole or in part. The Company
shall reasonably notify Subscriber in writing of the acceptance of a purchase
offer. If the purchase offer is accepted, the Company will confirm in
writing Subscriber's purchase of the Securities. If the purchase offer is
rejected, the Company will promptly return to Subscriber, without deduction
or interest, all of the subscription price, together with all executed
documents tendered by Subscriber.
1.03 RESTRICTIONS ON SECURITIES. The Securities have not been
registered under the Securities Act of 1933, as amended (the "Act"), or any
applicable state securities laws and are being issued pursuant to Section 4(2)
of the Act and/or Rule 504 of Regulation D promulgated by the Securities and
Exchange Commission under the Act.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.01 STATUS OF SUBSCRIBER. Each individual shareholder of the
Subscriber is at least 21 years of age.
2.02 ACCESS TO INFORMATION. Because of Subscriber's preexisting
business or personal relationship with the Company or with the officers and
directors of the Company, or by reason of the business or financial
experience of Subscriber or its professional advisors who are unaffiliated
with and who are not compensated by the Company, or any affiliate thereof,
Subscriber has the capacity to protect its own interests in connection with
the offer and sale of the Securities. Subscriber has had access to all
material and relevant information necessary to enable Subscriber to make an
informed investment decision. All data requested by Subscriber from the
Company or its representatives concerning the business and financial
condition of the Company and the terms and conditions of the offering has
been furnished to Subscriber's satisfaction. Subscriber has had the
opportunity to ask questions of and receive answers from the Company
concerning the terms and conditions of this offering, and to obtain from the
Company any additional information which the Company possesses or can acquire
without unreasonable effort or expense that is necessary to verify the
accuracy of the information it has received.
Subscriber represents that it has received and retained the Company's
Offering Memorandum dated August 12, 1998 (the "Offering Memorandum"), and that
it has carefully read and understood all documents contained therein.
<PAGE>
2.03 UNDERSTANDING OF INVESTMENT RISKS. Subscriber understands that
there is no market for the Securities and no assurance that a market will
develop, and that realization of the objectives of the Company is subject to
significant economic and business risks.
2.04 UNDERSTANDING OF NATURE OF SECURITIES. Subscriber understands
that:
(a) the Securities have not been registered under the Act or any state
securities laws;
(b) the Securities cannot be sold or transferred for value without
registration under the Act and applicable state laws or exemption therefrom;
(c) only the Company can register the Securities under the Act and
applicable state securities laws;
(d) the Company has not made any representations to Subscriber that
the Company will register the Securities under the Act or any applicable
state securities laws or with respect to compliance with any exemption
therefrom; and
(e) there may be stringent conditions for Subscriber's obtaining an
exemption for the resale of the Securities under the Act and any applicable
state securities laws.
2.05 INVESTMENT INTENT. Subscriber represents and warrants that:
(a) Subscriber is acquiring the Securities for the Subscriber's own
account and not for or on behalf of any other person;
(b) Subscriber is acquiring the Securities for investment and not for
distribution or with the intent to divide Subscriber's participation with others
or of reselling or otherwise distributing the Securities;
(c) neither Subscriber nor anyone acting on Subscriber's behalf has
paid any commission or other remuneration to any person in connection with the
purchase of the Securities; and
(d) Subscriber will not sell the Securities without registration under
the Act and any applicable state securities laws or exemption therefrom.
2.06 RESIDENCE OF SUBSCRIBER. The residence of Subscriber set forth
below is the true and correct residence of Subscriber and it has no present
intention of becoming a resident or domiciliary of any other state, country or
jurisdiction.
2.07 FURTHER ASSURANCES. Subscriber will execute and deliver to the
Company any document, or do any other act or thing, which the Company may
reasonably request in connection with the acquisition of the Securities.
2.08 NON-DISCLOSURE. Subscriber has not distributed any written
materials furnished to Subscriber by the Company to anyone other than the
Subscriber's professional advisors.
2.09 ABILITY TO BEAR ECONOMIC RISK. Subscriber is able to bear the
economic risk of an investment in the Securities and to maintain its investment
in the Securities for an indefinite period of time, and, further, could bear a
total loss of the investment and such loss would not materially affect its
operations.
2
<PAGE>
2.10 AUTHORITY:
(a) Subscriber has enclosed with this Agreement appropriate evidence of
the authority of the individual executing this Agreement to act on its behalf
(i.e., a certified corporate resolution authorizing the signature and a copy
of the articles of incorporation).
(b) The individual executing this Subscription Agreement on behalf of
Subscriber has the full power and authority to do so and to make the
representations and warranties made herein on Subscriber's behalf and this
investment in the Company has been affirmatively authorized by Subscriber's
board of directors and is not prohibited by the governing documents of the
Subscriber.
ARTICLE III
MISCELLANEOUS PROVISIONS
3.01 CAPTIONS AND HEADINGS. The Article and Section headings throughout
this Agreement are for convenience of reference only and shall in no way be
deemed to define, limit or add to any provision of this Agreement.
3.02 ENTIRE AGREEMENT; AMENDMENT. This Agreement states the entire
agreement and understanding of the parties and shall supersede all prior
agreements and understandings. No amendment of the Agreement shall be made
without the express written consent of the parties.
3.03 SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect any other provision hereof,
which shall be construed in all respects as if such invalid or unenforceable
provision were omitted.
3.04 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
3.05 NOTICES. All notices, requests, demands, consents, and other
communications hereunder shall be transmitted in writing and shall be deemed
to have been duly given when hand delivered or sent by certified mail,
postage prepaid, with return receipt requested, addressed to the parties as
follows: to the Company, Attn: George N. Falsone, 14650 Detroit Avenue, Suite
313, Lakewood, Ohio, 44107, and to Subscriber, at the address indicated
below. Any party may change its address for purposes of this Section by
giving notice as provided herein.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
"Company"
World Wide Dental Distribution Corp.
By: /s/ George N. Falsone
----------------------------------
George N. Falsone, President
3
<PAGE>
"Subscriber"
Name(s) exactly as you wish
your interest in the Company
to be registered WIRECOMM CONSULTING LTD.,
a Jersey Isle corporation
/s/ Paul A. Jackson
----------------------------------
Signature
PAUL A. JACKSON
----------------------------------
Print Name
Director
----------------------------------
Title
P.O. Box 544
Mailing Address ----------------------------------
1 Britannia Place
----------------------------------
Bath Street
----------------------------------
St. Helier
----------------------------------
Jersey JE2 4SU
Contact Telephone Number(s) (1) 00 44 1534 280111
-------------------------------
(2)
-------------------------------
Tax Identification Number N/A
----------------------------------
4
<PAGE>
FIRST AMENDMENT TO
SUBSCRIPTION AGREEMENT
THIS FIRST AMENDMENT TO SUBSCRIPTION AGREEMENT ("Amendment") is made and
entered into as of this 26th day of August, 1999, by and between FULL POWER
GROUP, INC., a Florida corporation (f/k/a World Wide Dental
Distribution Corp.) (the "Company"), and WIRECOMM CONSULTING LTD., a Jersey
Isle corporation ("Subscriber").
WHEREAS, the Company and Subscriber entered into that certain
Subscription Agreement dated the 25th day of September, 1998 (the
"Subscription Agreement"), pursuant to which the Subscriber offered to
purchase up to 1,000,000 shares of the common stock, $0.001 par value per
share, of the Company (the "Securities") at a price of $0.40 per share,
subject to the Company's right to accept or reject Subscriber's offer to
purchase the Securities;
WHEREAS, the purchase price of the Securities was payable by the
Subscriber within 365 days of the execution of the Subscription Agreement
(the "Due Date"); and
WHEREAS, the Subscriber and the Company have agreed to extend the Due
Date to December 31, 1999.
NOW THEREFORE, the Company and the Subscriber hereby agree as follows:
The parties hereby amend the Subscription Agreement by deleting the
second sentence of Section 1.01 in its entirety and by substituting in its
place the following:
"The purchase price is payable on or before December 31, 1999 (the
"Due Date"): however, Subscriber may make partial payments prior to
the Due Date."
All other provisions of the Subscription Agreement shall continue in
full force and effect. This Amendment shall be governed by and construed in
accordance with the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment as of the date first above written.
FULL POWER GROUP, INC.
(f/k/a World Wide Dental Distribution Corp.)
By: /s/ George N. Falsone
----------------------------------
George N. Falsone, President
WIRECOMM CONSULTING LTD.
By: /s/ Paul A. Jackson
---------------------------------
Paul A. Jackson, Director
<PAGE>
FORM OF ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("AGREEMENT") is made and entered into as
of this _____ day of __________, 1999, by and between FULL POWER GROUP, INC., a
Florida corporation ("BUYER") having its principal place of business at 14650
Detroit Avenue, Suite 313, Lakewood, Ohio 44107, and _________________________,
a(n) ______________________ ("SELLER") having its principal place of business at
____________________________.
In consideration of the mutual promises hereinafter set forth and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions
set forth in this Agreement:
(a) Seller agrees to sell, transfer, convey and assign to
Buyer, and Buyer agrees to purchase and acquire from Seller, on the Closing Date
(as defined below), all of Seller's right, title and interest in and to all of
the assets and properties of Seller described on attached SCHEDULE 1
(collectively, the "PURCHASED ASSETS"), free and clear of all liens and
encumbrances whatsoever.
(b) As consideration for the sale of the Purchased Assets,
Buyer agrees to issue the following securities to Seller on the Closing Date
(collectively, the "RESTRICTED SECURITIES"):
(i) ________ shares of common stock, $0.001 par value
per share ("COMMON STOCK"), of Buyer (collectively, the "SHARES");
and
(ii) a warrant to purchase up to _______ shares of Common
Stock from Buyer at an exercise price of $4.00 per share, which
warrant shall be in the form attached as EXHIBIT A (the
"WARRANT").
(c) The date of such sale and purchase of Restricted Securities
shall be the date hereof (the "CLOSING DATE"). Upon execution of this
Agreement, Seller shall deliver the following to Buyer or its designated
representative:
(i) the full amount of cash and cash equivalents
included in the Purchased Assets (which shall not be less than
$________), in the form of cash, a certified check or money order
made payable to the order of Buyer, or a wire transfer of
immediately available funds to an account designated by Buyer;
(ii) a completed and executed general assignment and bill
of sale in the form attached as EXHIBIT B (the "ASSIGNMENT"); and
(iii) a copy of the written resolutions of Seller
evidencing approval of the transactions described in this
Agreement by each of the partners of Seller in accordance with the
partnership agreement of Seller, which resolutions shall be
<PAGE>
certified by the managing partners of Seller and shall be in form
and substance acceptable to Buyer (the "CERTIFIED RESOLUTIONS").
(d) As promptly as practicable following the Closing Date,
Buyer shall deliver to Seller the Warrant and a certificate evidencing the
Shares included in the Restricted Securities; provided that Buyer shall have no
obligation to issue such instruments to Seller unless and until all of the
conditions to closing set forth in Section 2 hereof have been satisfied. Buyer
will bear all expenses in connection with the preparation, issuance and delivery
of the instruments representing the Restricted Securities.
(e) All deliveries, payments and other transactions and
documents relating to the Closing shall be interdependent and none shall be
effective unless and until all are effective. Seller shall, at the reasonable
request of Buyer from time to time and at any time, whether on or after the
Closing Date, and without further consideration, execute and deliver such
assignments, transfers, assumptions, conveyances, powers of attorney, receipts,
acknowledgments, acceptances and assurances as may be reasonably necessary to
procure for Buyer, and its transferees, successors and assigns, or for aiding
and assisting in collecting and reducing to possession, any and all of the
Purchased Assets or otherwise to satisfy and perform the obligations of Seller
hereunder.
(f) Buyer shall not assume or be liable or responsible for any
obligation or liability of Seller of any kind or nature whatsoever (other than
those specifically described in the Lease Assignment). Seller shall pay,
satisfy and perform all of its obligations, whether fixed, contingent, known or
unknown and whether existing as of the Closing Date or arising thereafter, or
that may affect the Purchased Assets in any way. Notwithstanding any other
provision of this Agreement, the obligations of Seller pursuant to this Section
shall survive the Closing and consummation of the transactions contemplated by
this Agreement.
2. CONDITIONS TO CLOSING. Buyer shall have no obligation to purchase
the Purchased Assets or issue the Restricted Securities unless each of the
following conditions have been satisfied (or waived by Buyer in its sole
discretion) on or prior to the Closing Date:
(a) The amount of cash and cash equivalents included in the
Purchased Assets shall not be less than $________ on the Closing Date.
(b) Seller shall have delivered all of the cash and cash
equivalents included in the Purchased Assets (which shall not be less than
$_________) to Buyer as provided in Section 1(c)(i) hereof.
(c) Seller shall have delivered executed original copies of the
Assignment and the Certified Resolutions to Buyer.
(d) The board of directors of Buyer (the "BOARD") shall have
approved the transactions described in this Agreement.
- 2 -
<PAGE>
(e) No action, suit, claim or other proceeding shall have been
instituted or threatened or demand made against any party seeking to restrain,
enjoin or otherwise prohibit or to obtain damages with respect to the
consummation of the transactions described herein, no court, arbitrator or other
forum of competent jurisdiction shall have issued any judgment, decree,
injunction or order or taken any other action restraining, enjoining or
otherwise prohibiting the transactions described herein.
3. PROVISION OF CERTAIN INFORMATION ABOUT BUYER. Seller acknowledges
that, prior to the date hereof, Buyer has provided Seller with copies of the
following information concerning Buyer: (i) the Articles of Incorporation of
Buyer (the "ARTICLES OF INCORPORATION," a copy of which is attached as
EXHIBIT C); (ii) the Bylaws of Buyer (the "BYLAWS," a copy of which is attached
as EXHIBIT D); (iii) Buyer's consolidated financial statements for the year
ended December 31, 1998 (the "FINANCIAL STATEMENTS," copies of which are
attached as EXHIBIT E).
4. SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Seller
represents and warrants, and covenants and agrees with Buyer, on behalf of
itself and each of its partners that:
(a) Seller is a limited liability partnership duly organized,
validly existing and in good standing under the laws of the State of
____________. Seller has all necessary power and authority to make, execute and
deliver this Agreement and all other agreements and documents to be executed and
delivered by it pursuant to this Agreement without the need for the consent of
any other person or entity; and Seller has taken all necessary actions required
to be taken to authorize it to execute and deliver this Agreement and such other
agreements, and to perform all of its obligations, undertakings and agreements
to be observed and performed by it hereunder and thereunder. This Agreement and
such other agreements have been duly authorized by each partner of Seller, have
been duly executed and delivered by Seller and constitute the legal, valid and
binding obligations of Seller, enforceable against it in accordance with the
respective terms hereof.
(b) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated by this Agreement, by Seller
will constitute a violation of, or be in conflict with, or result in a
cancellation of, or constitute a default under, or create (or cause the
acceleration of the maturity of) any debt, obligation or liability affecting, or
result in the creation or imposition of any security interest, lien, or other
encumbrance upon any of the Purchased Assets under: (i) the partnership
agreement or other governing documents of Seller; (ii) any applicable judgment,
decree, order, regulation or rule of any court or governmental authority;
(iii) any applicable statute or law; or (iv) any contract, agreement, indenture,
lease or other commitment to which Seller is a party or by which it or any of
its assets are bound.
(c) No consent of, or notice to, any governmental authority or
any other third person or entity is required to be obtained or given by Seller
in connection with the execution, delivery or performance of this Agreement or
any other agreement or document to be executed, delivered or performed hereunder
by Seller.
(d) Except as described in EXHIBIT F, there are no lawsuits,
proceedings, actions, claims or governmental investigations pending or, to the
knowledge of Seller, threatened against
- 3 -
<PAGE>
Seller or against or involving any of the Purchased Assets. There are no
unsatisfied judgments against Seller.
(e) Seller is the sole owner of and has good and valid title to
all of the Purchased Assets, and upon the consummation of the transaction
contemplated by this Agreement, Buyer will take the Purchased Assets free and
clear of all mortgages, liens, pledges, charges, security interests,
encumbrances or other third party interests of any kind whatsoever.
(f) No broker or finder has acted on behalf of Seller in
connection with this Agreement or the transactions contemplated herein, and
Seller agrees to indemnify Buyer and its affiliates from and against any and all
claims or demands for commissions or other compensation by any broker, finder or
similar agent claiming to have been employed by or on behalf of Seller.
5. DESCRIPTION OF BUYER'S CAPITAL STOCK. The following summary
description of the capital stock of Buyer is as of the Closing Date, does not
purport to be complete, does not take into account the issuance of the
Restricted Securities subscribed for herein, and is qualified in its entirety by
reference to the Articles of Incorporation and the Bylaws.
(a) As of April 23, 1999, the total number of shares of all
classes of stock that Buyer was authorized to issue was 60,000,000 shares
(collectively, the "STOCK"), consisting of:
(i) 50,000,000 shares of Common Stock, of which
8,727,750 shares were issued and 5,127,750 shares were outstanding; and
(ii) 10,000,000 shares of preferred stock, $100.00 par
value per share (the "PREFERRED STOCK"), none of which were designated by
the Board or were presently issued or outstanding.
(b) All shares of Common Stock are identical and entitle the
holders thereof to the same powers, preferences and rights. However, the Common
Stock is junior to the Preferred Stock and is subject to all the powers, rights,
privileges, preferences and priorities of the Preferred Stock as set forth in
the Articles of Incorporation and any designations of the terms of the Preferred
Stock that are approved by the Board from time to time.
(c) The holders of shares of Common Stock have full voting
rights and powers with respect to any matter requiring the vote or approval of
Buyer's shareholders, except as may otherwise be set forth in the Articles of
Incorporation. Each holder of Common Stock is entitled to one vote for each
share held of record by such holder.
(d) Subject to the terms and conditions set forth in the
Articles of Incorporation, Buyer may pay dividends on the Preferred Stock and
the Common Stock only as and when declared by the Board out of any funds of
Buyer legally available for the payment thereof.
(e) Subject to the terms and conditions set forth in the
Articles of Incorporation, in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of Buyer, after
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<PAGE>
any required distributions to creditors of Buyer and the holders of any shares
of Preferred Stock then outstanding, the remaining assets and funds of the
Corporation shall be distributed to the holders of Common Stock according to
their respective shares.
(f) No holder of any of the shares of Stock currently has any
preemptive rights to purchase or subscribe for any unissued Stock of any class
or any additional shares of any class to be issued by reason of any increase of
the authorized Stock of any class, or bonds, certificates of indebtedness,
debentures or other securities convertible into shares of Stock, or carrying any
rights to purchase Stock of any class, whether such securities shall be issued
for cash, property or any other lawful consideration. As such, the holders of
the Common Stock do not have the right to purchase a portion of such securities
sufficient to enable such holders to maintain their respective percentage
interests of the outstanding Common Stock.
(g) Seller acknowledges that Buyer and its employees, agents,
attorneys and affiliates are relying on the truth and accuracy of the
representations and warranties of Seller contained in this Agreement.
6. RESTRICTION ON TRANSFER OF RESTRICTED SECURITIES. Seller agrees
not to sell, exchange, deliver, assign, pledge, mortgage, hypothecate, encumber,
make a gift of or otherwise transfer or dispose of any of the Restricted
Securities (including, without limitation, the shares issuable upon exercise of
the Warrant), or any beneficial or other interest therein, whether voluntarily,
involuntarily or by operation of law, for a period of two years after the
Closing Date (the "RESTRICTED PERIOD").
7. RIGHT TO ACQUIRE ADDITIONAL SECURITIES. In the event that, upon
expiration of the Restricted Period, the aggregate market value of the
Restricted Securities (as determined by the closing price of the Common Stock on
NASDAQ's Over-the-Counter-Bulletin Board Service averaged over the 30 day period
immediately preceding the date upon which the Restricted Period expires) is less
than $2,000,000, Buyer shall, upon Seller's written request, issue to Seller
such additional shares of its Common Stock as are needed so that the market
value of all shares of Common Stock issued to Seller under this Agreement (as
determined by the method previously described) equals $2,000,000.
8. SELLER'S INVESTMENT REPRESENTATIONS AND WARRANTIES. In connection
with its acquisition of the Restricted Securities, Seller represents and
warrants, and covenants and agrees with Buyer, on behalf of itself and each of
its partners that:
(a) SELLER: (i) IS AWARE THAT THERE IS NO PUBLIC MARKET FOR
THE RESTRICTED SECURITIES; (ii) CAN AFFORD TO HOLD THE RESTRICTED SECURITIES FOR
AN INDEFINITE PERIOD AND TO SUFFER THE COMPLETE LOSS OF ITS INVESTMENT IN THE
RESTRICTED SECURITIES; (iii) UNDERSTANDS THE RISKS RELATED TO ITS ACQUISITION OF
THE RESTRICTED SECURITIES; (iv) ACKNOWLEDGES THAT IT EITHER HAS SUFFICIENT
KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS TO BE CAPABLE OF
EVALUATING THE MERITS AND RISKS OF ACQUIRING THE RESTRICTED SECURITIES, OR HAS
HAD THE OPPORTUNITY TO CONSULT WITH ITS INVESTMENT, TAX AND OTHER PROFESSIONAL
ADVISORS IN EVALUATING THE MERITS AND RISKS OF ACQUIRING THE RESTRICTED
SECURITIES; (v) HAS MADE A THOROUGH INVESTIGATION OF THE AFFAIRS AND PROSPECTS
- 5 -
<PAGE>
OF BUYER; (vi) HAS HAD THE OPPORTUNITY TO ASK QUESTIONS OF OFFICERS OF BUYER AND
TO OBTAIN (AND HAS RECEIVED TO ITS SATISFACTION) SUCH INFORMATION ABOUT THE
BUSINESS AND FINANCIAL CONDITION OF BUYER AS SELLER HAS REASONABLY REQUESTED;
AND (vii) IS AWARE OF THE FACT THAT NO FEDERAL OR STATE AGENCY HAS MADE ANY
FINDING OR DETERMINATION AS TO THE FAIRNESS OF ANY OF THE RESTRICTED SECURITIES
FOR INVESTMENT OR HAS MADE ANY RECOMMENDATION OR ENDORSEMENT OF ANY OF THE
RESTRICTED SECURITIES FOR INVESTMENT.
(b) SELLER'S INVESTMENT IN THE RESTRICTED SECURITIES INVOLVES A
HIGH DEGREE OF RISK, AND SELLER IS AWARE OF THE POSSIBILITY THAT IT COULD LOSE
ITS ENTIRE INVESTMENT. SELLER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE
RISK FACTORS ATTACHED HERETO AS EXHIBIT F.
(c) SELLER HAS REVIEWED, AND HAS HAD THE OPPORTUNITY TO ASK
QUESTIONS OF OFFICERS OF BUYER AND ITS INVESTMENT, TAX AND OTHER PROFESSIONAL
ADVISORS CONCERNING THIS AGREEMENT, THE ARTICLES OF INCORPORATION, THE BYLAWS
AND THE FINANCIAL STATEMENTS.
(d) SELLER IS SUBSCRIBING FOR THE RESTRICTED SECURITIES FOR
INVESTMENT FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, THE DISTRIBUTION OR OTHER DISPOSITION THEREOF. SELLER HAS NO
PRESENT PLAN OF SELLING, TRANSFERRING OR DISTRIBUTING ANY OF THE RESTRICTED
SECURITIES TO ANY OF ITS PARTNERS OR ANY OTHER PERSON OR ENTITY.
(e) Seller will not, directly or indirectly, offer, transfer,
sell, pledge, hypothecate or otherwise dispose of any Restricted Securities (or
solicit any offers to buy, purchase or otherwise acquire or take a pledge of any
Restricted Securities), except in compliance with the Securities Act of 1933, as
amended (the "SECURITIES ACT"), the rules and regulations promulgated
thereunder, applicable state securities laws. No person or entity has any
interest, beneficial or otherwise, in the Restricted Securities to be issued to
Seller hereunder.
(f) Seller has been advised that: (i) the Restricted
Securities are not registered under the Securities Act in reliance upon the
exemption set forth in Section 4(2) of the Securities Act and that Buyer has no
obligation to effectuate any such registration; (ii) the Restricted Securities
must be held indefinitely and Seller must continue to bear the economic risk of
the investment in the Restricted Securities unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available; (iii) this Agreement imposes an absolute restriction on any sale or
transfer of the Restricted Securities during the Restricted Period as provided
in Section 6 hereof; (iv) Rule 144 promulgated under the Securities Act ("RULE
144") may not be available with respect to the sale of any of the securities of
Buyer, and Buyer has no obligation nor any intention to make Rule 144 available;
(v) when and if any of the Restricted Securities may be disposed of following
the Restricted Period without registration in reliance on Rule 144, the amounts
which may be disposed of may be limited in accordance with the terms and
conditions of Rule 144; (vi) if the exemption provided by Rule 144 is not
available, public sale without registration after the Restricted Period will
require compliance with Regulation D (or some other exemption) promulgated under
the Securities Act; (vii) restrictive legends in the form attached as EXHIBIT G
will be placed on the certificates representing the Restricted Securities;
(viii) a notation will be made in the
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<PAGE>
appropriate records of Buyer indicating that the Restricted Securities are
subject to restrictions on transfer; and (ix) appropriate stop-transfer
restrictions will be issued to Buyer's transfer agent with respect to the
Restricted Securities.
9. EXPENSES. All expenses incurred by Buyer and its affiliates in
connection with the authorization, preparation, execution and performance of
this Agreement and the transactions contemplated hereby, including without
limitation, all fees and expenses of their counsel, agents and representatives,
shall be paid by Buyer or such affiliates, as appropriate. All expenses
incurred by Seller in connection with the authorization, preparation, execution
and performance of this Agreement and the transactions contemplated hereby,
including without limitation, all fees and expenses of its counsel, agents and
representatives, shall be paid by Seller.
10. ASSIGNMENT; BENEFIT AND BURDEN. No party may assign any of its
rights or obligations hereunder without the prior written consent of the other
party. This Agreement shall be binding upon and inure to the benefit of and be
enforceable by and against each party and its respective successors and
permitted assigns.
11. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the domestic substantive laws of the State of Ohio without
giving effect to any choice or conflict of laws provision or rule that would
cause the application of the domestic substantive laws of any other state.
12. VENUE; SUBMISSION TO JURISDICTION. For the purpose of any action
or proceeding instituted with respect to this Agreement, each party hereby
irrevocably submits to the jurisdiction of any state or federal court having
subject matter jurisdiction and located in Cleveland, Ohio. Each party also
irrevocably consents to the service or process out of said courts by mailing a
copy thereof, by certified mail, postage prepaid, to such party at its address
set forth in the preamble hereof, and each party hereby agrees that such
service, to the fullest extent permitted by law (i) shall be deemed in every
respect effective service of process upon such party in any such suit, action or
proceeding and (ii) shall be taken and held to be valid personal service upon
and personal delivery to such party. Each party irrevocably waives, to the
fullest extent permitted by law, any objection that such party may have or
hereafter have to the laying of the venue of any such suit, action or proceeding
brought in any such court located in Cleveland, Ohio and any claim that any such
suit, action or proceeding brought in such a court has been brought in an
inconvenient forum.
13. AMENDMENT. This Agreement cannot be changed orally, and may only
be amended by an instrument in writing signed by the party against whom
enforcement of such change is sought.
14. NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement is
intended nor will it be construed to give any person or entity any right, remedy
or claim under or in respect of this Agreement or any provisions hereof.
15. INTEGRATION. This Agreement, the Warrant and the Assignment set
forth all of the promises, agreements, conditions, understandings, warranties
and representations among the parties hereto with respect to the subject matter
hereof and thereof, and supersede and are intended to be an
- 7 -
<PAGE>
integration of any and all prior agreements or understandings, oral or written,
with respect to the subject matter hereof and thereof.
16. EXECUTION IN COUNTERPARTS. This Agreement may be executed by any
one or more of the parties hereto in any number of counterparts, each of which
will be deemed to be an original, but all such counterparts will together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
Buyer: FULL POWER GROUP, INC.
By:
----------------------------------
George N. Falsone, President
BY SIGNING THIS AGREEMENT, SELLER ACKNOWLEDGES THAT IT HAS CAREFULLY REVIEWED
THIS AGREEMENT AND FULLY UNDERSTANDS, AND HAS HAD THE OPPORTUNITY TO CONSULT
WITH ITS INVESTMENT, TAX AND OTHER PROFESSIONAL ADVISORS ABOUT, THE RISKS AND
BENEFITS OF INVESTING IN THE RESTRICTED SECURITIES.
Seller:
-------------------------------------
By:
----------------------------------
Printed Name:
------------------------
Title: Managing Partner
and
Printed Name:
------------------------
Title: Managing Partner
and
Printed Name:
------------------------
Title: Managing Partner
- 8 -
<PAGE>
SCHEDULE 1
PURCHASED ASSETS
1. All cash in hand or on deposit and other cash equivalents owned by Seller
on the Closing Date.
2. All right, title and interest of Seller in and under the Sublicense
Agreement between Courant Consulting, Inc. and Seller dated October 6,
1998.
<PAGE>
EXHIBIT A
FORM OF AWARRANT
<PAGE>
EXHIBIT A TO WARRANT
FULL POWER GROUP, INC.
NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the Warrant
("WARRANT") issued by Full Power Group, Inc. (the "COMPANY") to ____________ on
__________, 1999, into shares of Common Stock, par value $0.001 per share
("COMMON STOCK"), of the Company, according to the conditions hereof, as of the
date written below. All capitalized terms used herein without definition shall
have the meanings assigned to them in the Warrant. If Warrant Shares are to be
issued in the name of a person other than the Holder, then the Holder shall pay
all transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as may be reasonably requested by the Company in
accordance with the Warrant. No fee will be charged to the Holder for any
exercise, except for such transfer taxes, if any.
--------------------------------------------
Date to Effect Exercise
--------------------------------------------
Number of Warrant Shares to be Issued (must
be at least ____)
--------------------------------------------
Aggregate Exercise Price (must be at least
$________)
--------------------------------------------
Signature of the Holder
--------------------------------------------
Printed Name (exactly as it is to appear on
the Warrant Shares)
--------------------------------------------
Address of the Holder
<PAGE>
EXHIBIT B
FORM OF ASSIGNMENT
GENERAL ASSIGNMENT AND BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS that _________________________ ("SELLER")
does by these presents hereby grant, bargain, sell, convey, transfer, assign,
set over and deliver unto FULL POWER GROUP, INC., a Florida corporation
("BUYER"), pursuant to the terms of that certain Asset Purchase Agreement by and
between Buyer and Seller of even date herewith (which, together with the
schedules and exhibits thereto, is hereinafter referred to as the "PURCHASE
AGREEMENT"), all of Seller's right, title and interest in and to the "PURCHASED
ASSETS" (as such term is defined in Section 1(a) of the Purchase Agreement)
owned or otherwise held by Seller, consisting of the following:
1. All cash in hand or on deposit and other cash equivalents
owned by Seller on the date hereof.
2. All right, title and interest of Seller in and under the
Sublicense Agreement between Courant Consulting, Inc. and
Seller dated October 6, 1998 (the "LICENSE").
TO HAVE AND TO HOLD unto Buyer, its successors and assigns forever all of
the Purchased Assets.
Seller has good and valid title to the Purchased Assets, and has the full
right to sell, transfer, convey, assign and deliver the Purchased Assets to
Buyer free and clear of all liens and encumbrances whatsoever.
Seller hereby assigns, and Buyer hereby assumes, all of Seller's rights,
duties and obligations under the License, including, without limitation, any and
all claims it may have against Courant Consulting, Inc. or Full Power
Corporation with respect to the License.
This instrument is made, executed and delivered for and upon the
consideration provided in the Purchase Agreement. Capitalized terms not
otherwise defined herein have the meanings assigned to them in the Purchase
Agreement. This instrument is not intended to and does not change or in any
manner increase the obligations of Seller under the Purchase Agreement relating
to the representations and warranties of Seller contained therein. This
instrument shall inure to the benefit of and be binding upon Buyer and Seller
and their respective successors and assigns. The validity and effect of this
instrument shall be governed by and construed and enforced in accordance with
the laws of the State of Ohio, without regard to conflicts of law principles.
<PAGE>
IN WITNESS WHEREOF, Seller has caused this instrument to be signed in its
name by its duly authorized managing members as of this _____ day of __________,
1999.
-------------------------------------
By:
----------------------------------
Printed Name:
------------------------
Title: Managing Partner
and
----------------------------------
Printed Name:
------------------------
Title: Managing Partner
and
----------------------------------
Printed Name:
------------------------
Title: Managing Partner
Full Power Corporation, an Ohio corporation and wholly-owned subsidiary
of Buyer, hereby consents to the sale and assignment of the Sublicense Agreement
between Courant Consulting, Inc. and Seller dated October 6, 1998 to Buyer as
required by Section 4.11 thereof.
FULL POWER CORPORATION
By:
----------------------------------
George N. Falsone, President
<PAGE>
EXHIBIT C
ARTICLES OF INCORPORATION OF BUYER
<PAGE>
EXHIBIT D
BYLAWS OF BUYER
<PAGE>
EXHIBIT E
FINANCIAL STATEMENTS OF BUYER
<PAGE>
EXHIBIT F
RISK FACTORS
THE RESTRICTED SECURITIES INVOLVE SIGNIFICANT RISKS AND ARE NOT INTENDED
AS A COMPLETE INVESTMENT PROGRAM -- THEY ARE A SUITABLE INVESTMENT ONLY IF
SELLER CAN BEAR THE RISK OF LOSING ITS ENTIRE INVESTMENT AND CAN PROVIDE FOR ITS
NEEDS AND CONTINGENCIES WITHOUT RESPECT TO THIS INVESTMENT. IN ADDITION TO
GENERAL INVESTMENT RISKS, SELLER SHOULD CONSIDER THE FOLLOWING FACTORS IN
EVALUATING ITS INVESTMENT:
LIMITATIONS ON TRADING
The Restricted Securities may not be sold or otherwise transferred unless
sold or transferred in accordance with applicable state securities laws.
Buyer's Common Stock is currently quoted on NASDAQ's Over-the-Counter-Bulletin
Board Service ("OTCBB") under the trading symbol "FPGR," but there can be no
assurance that an active trading market in Buyer's Common Stock will continue.
Because of the recent changes in the NASDAQ listing rules, as of July
1999, market makers will not be permitted to quote the Common Stock on the OTCBB
unless Buyer files appropriate financial information and other required
information with the Securities and Exchange Commission (the "COMMISSION").
Although Buyer presently intends to start making these filings with the
Commission, Buyer may, in its sole discretion, elect not to make such filings
with the Commission, or may not be able to do so, in which event the Common
Stock will cease to be quoted on the OTCBB. If the Common Stock is not quoted
on the OTCBB, there will not be a public market for the Common Stock and,
therefore, Seller may have to maintain its investment in the Common Stock for an
indefinite period of time.
LIMITED OPERATING HISTORY
Buyer is a holding company that currently conducts business exclusively
through its wholly-owned subsidiary, Full Power Corporation, an Ohio corporation
("FPC"), which was originally organized in 1998 to take advantage of the
deregulation of the electrical service industry in the State of California.
FPC operates as an electrical service provider ("ESP") registered with
the California Public Utilities Commission (ESP No. 1308). Although FPC is
licensed to do so, FPC has yet to sell any electricity to residential and small
commercial consumers in the State of California and does not anticipate doing so
before the end of the year 2000. There can be no assurance that FPC will ever
conduct business as an ESP in the State of California.
FPC has evaluated and continues to evaluate the opportunities to become a
seller of electricity, natural gas and related services in other states,
primarily on the East Coast, that have or are developing energy deregulation
programs. FPC is in the final stages of preparing to file an application to
provide electric service in the State of Pennsylvania. FPC has also filed an
application
<PAGE>
to buy and sell electricity as a wholesale broker with the Federal Energy
Regulatory Commission ("FERC"), which it expects to be approved by July 1999.
However, there can be no assurance that any of these applications will be
approved.
Pursuant to a loan agreement with All Power Corp., a New York corporation
("All Power"), FPC will have the right to acquire all of the outstanding common
stock of All Power in the event that All Power defaults on its obligation to
repay the loan. All Power was organized in March 1999 and intends to engage in
the business of selling electricity and natural gas in the State of New York.
Although All Power is licensed to do so, All Power has yet to sell any
electricity and has just begun to market natural gas to consumers in the State
of New York. There can be no assurance that FPC will acquire the stock of All
Power or that All Power will be successful in conducting business in the State
of New York or any other states.
In short, Buyer has little operating and financial history upon which
prospective investors can base an evaluation of the likely future performance of
Buyer. Further, there can be no assurances that Buyer will experience growth in
revenues in the future, or if there is growth in revenues, that such growth will
be sustainable.
DEPENDENCE ON SALES AND MARKETING ARRANGEMENTS
Buyer believes that its growth strategy is dependent upon its ability to
create and maintain strategic relationships with suppliers of electricity and
natural gas as well as sales and marketing companies. There can be no assurance
that any such relationships will be formed, or if formed, that they will prove
successful or profitable for Buyer.
INTENSE COMPETITION
Buyer encounters intense competition in all aspects of its business as a
provider of electrical and natural gas service. Buyer competes directly with
other providers of such services, a significant number of which have greater
capital and other resources and may have greater operating efficiencies than
Buyer does. In addition to competition from other providers, Buyer competes
directly with utility distribution companies ("UDCs") in the State of California
such as Pacific Gas and Electric, San Diego Gas and Electric and Southern
California Edison, as well as investor-owned utilities, rural electric
cooperatives and municipal operations in other states, all of which have
established reputations and long standing relationships with electrical
consumers in their respective service territories.
Buyer's success in each state where it chooses to operate will depend on
its ability to provide electricity and/or natural gas to customers there at
prices competitive with or lower than the competition and on its ability to
market ancillary products and services to those customers. If Buyer fails to
provide competitive pricing or obtain sufficient amounts of electricity and/or
natural gas for its customers, the sales and marketing companies may market
Buyer's services less aggressively, which could adversely affect Buyer's ability
to successfully compete in the future.
ACCEPTANCE BY THE PUBLIC OF NON-UTILITY SERVICE PROVIDERS
<PAGE>
The success of Buyer is substantially dependent upon its ability to
encourage consumers or their representatives to purchase electricity and/or
natural gas from non-utility electrical or natural gas service providers, such
as Buyer. The inability of Buyer to convince such consumers to purchase
electricity and/or natural gas from Buyer, whether as a result of Buyer's
inability to offer electricity and/or natural gas at competitive prices, or any
other reason, will adversely affect Buyer's results of operations.
ABILITY TO MAINTAIN AND MANAGE RAPID EXPANSION
As part of its growth strategy, Buyer intends to (i) expand sales
capabilities through more aggressive marketing, (ii) recruit new employees
specializing in the marketing and sale of electricity and/or natural gas and
related services, and (iii) pursue strategic acquisitions of complementary
businesses. Buyer's growth may cause a significant strain on its management,
and operational, financial and other resources of Buyer. Buyer's ability to
manage its growth effectively will require it to improve its operational and
marketing systems. These demands will require the addition of new management
personnel and the development of additional expertise by existing management.
The failure of Buyer's management team to effectively manage growth, should it
occur, could have a material adverse impact on Buyer's results of operations and
financial results.
DEPENDENCE ON KEY PERSONNEL
Buyer's success depends to a significant extent upon the performance of
its senior management team, including George N. Falsone, President and Chief
Executive Officer, Donald Johnson, Vice President and Chief Operating Officer
and Richard O'Rourke, Secretary and Treasurer. The loss of services of any of
Buyer's executive officers could have an adverse impact on Buyer. In addition,
Buyer's future success also depends on its continuing ability to identify, hire,
train and retain highly qualified management and marketing personnel.
Competition for qualified management and marketing personnel is intense and
there can be no assurance that Buyer will be able to hire and retain sufficient
personnel.
REGULATORY CONCERNS
Buyer's business, and the electrical and natural gas industries
generally, is subject to regulation at both the federal and state levels. As a
result of deregulation, Buyer has fewer federal and state laws and regulations
to comply with than has traditionally been the case. However, Buyer
continuously reviews its procedures and policies for compliance with laws and
regulations applicable to its operations and believes that it is in substantial
compliance with all such material laws and regulations. Furthermore, while the
costs of compliance with such laws and regulations have not been material to
Buyer, there can be no assurance that such costs will not become more
significant to Buyer in the future. In addition, the failure to comply with any
of the laws or regulations imposed upon Buyer could result in fines or the
suspension or revocation of its license to sell electricity or natural gas,
which could have a material adverse impact upon Buyer.
<PAGE>
VOLATILITY OF STOCK PRICE
Trading of relatively small blocks of Buyer's Common Stock can have a
significant impact on the price at which the stock is traded. In addition,
significant fluctuations in the price and volume of stocks traded on OTCBB could
adversely affect the market price of the Common Stock of Buyer without regard to
the operating performance of Buyer. Buyer also believes that fluctuations in
financial results of Buyer's operations, announcements by Buyer or its
competitors or changes in securities analysts' recommendations may cause the
market price for Buyer's Common Stock to fluctuate, perhaps substantially.
These factors, as well as general economic conditions, such as recessions or
high interest rates, may have a material adverse affect on the market price of
Buyer's Common Stock.
DETERMINATION OF PRICE OF RESTRICTED SECURITIES
Buyer has arbitrarily established the price of the Restricted Securities,
and such price is not necessarily related to asset value, net worth or other
established criteria of value. No outside consultants or investment bankers
were engaged to render an opinion on the price for the Common Stock or the
fairness from a financial point of view of such price per share.
SEC INVESTIGATION
Buyer has received and is in the process of responding to a subpoena from
the Commission relating to an investigation of Twenty-First Century Power, LLC
and certain offers of securities over the Internet. Although Buyer does not
believe that it has ever offered or sold any of its securities over the
Internet, there can be no assurance that the Commission will not issue an order
prohibiting any further offers or sales of Buyer's securities pending the
outcome of the investigation.
UNAUDITED FINANCIALS
Any unaudited consolidated financial statements of Buyer are subject to
revision upon review by Buyer's independent accountants. Seller will be relying
upon management with respect to the accuracy and adequacy of all information of
a financial nature included any such unaudited financial statements.
<PAGE>
EXHIBIT G
FORM OF RESTRICTIVE LEGENDS
THE SECURITIES EVIDENCED HEREBY WERE ISSUED WITHOUT REGISTRATION PURSUANT TO
SECTION 4(2) OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT. THE ISSUER MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES EVIDENCED HEREBY ARE ALSO SUBJECT TO A TWO YEAR RESTRICTION ON
TRANSFER AS PROVIDED IN THAT CERTAIN ASSET PURCHASE AGREEMENT, DATED __________,
1999, BETWEEN THE ISSUER AND THE HOLDER. THE ISSUER WILL PROVIDE A COPY OF SUCH
AGREEMENT TO THE HOLDER UPON WRITTEN REQUEST.
<PAGE>
FORM OF WARRANT
THE SECURITIES EVIDENCED HEREBY WERE ISSUED WITHOUT REGISTRATION PURSUANT TO
SECTION 4(2) OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT. THE ISSUER MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT
THIS WARRANT ("WARRANT"), dated __________, 1999, is issued by FULL POWER
GROUP, INC., a Florida corporation (the "COMPANY"), to _________________________
(together with any other registered holder of this Warrant, the "HOLDER").
WHEREAS, in that certain Asset Purchase Agreement, of even date herewith,
between the Company and the Holder (as amended from time to time, the "PURCHASE
AGREEMENT," the terms and conditions of which are incorporated herein by
reference), the Company agreed to issue, and the Holder agreed to acquire, this
Warrant to purchase the number of shares of the Common Stock, par value $0.001
per share ("COMMON STOCK"), of the Company set forth in Section 1(a) hereof
(collectively, the "WARRANT SHARES");
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained and of other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, it
is hereby agreed as follows:
1. EXERCISE OF THE WARRANT.
(a) NUMBER OF WARRANT SHARES OBTAINABLE; EXERCISE PRICE. The
Holder shall be entitled to receive _______ Warrant Shares upon exercise in full
of this Warrant and payment of the exercise price of $4.00 per Warrant Share
(the "EXERCISE PRICE") during the exercise period described in Section 1(b)
below. Any partial exercise of this Warrant shall be for no less than ______
Warrant Shares at a minimum aggregate Exercise Price of $_________.
<PAGE>
(b) EXERCISE BY THE HOLDER. Upon the terms and subject to the
conditions set forth herein, the Holder shall have the right, which may be
exercised in whole or in part on or after the Closing Date but in no event later
than the third anniversary of the date hereof (the "EXPIRATION DATE"), to
receive from the Company the number of fully paid and nonassessable Warrant
Shares that the Holder may at the time be entitled to receive on exercise of
this Warrant; provided that such exercise does not cause a violation of any
applicable law or regulation. This Warrant shall expire and be of no further
force and effect on and after the Expiration Date.
The Holder shall effect exercises by surrendering this
Warrant and the form of exercise notice in the form attached hereto as EXHIBIT A
(collectively, the "EXERCISE NOTICE"), to the Company in the manner set forth in
Section 5 hereof. Each Exercise Notice shall specify the aggregate Exercise
Price and the date on which such exercise is to be effected (the "EXERCISE
DATE"). Subject to Section 1(c) hereof, each Exercise Notice, once given, shall
be irrevocable.
(c) DELIVERIES BY THE COMPANY. As soon as practicable
following the receipt by the Company of the Exercise Notice and aggregate
Exercise Price, the Company will deliver to the Holder a certificate or
certificates representing the number of Warrant Shares being acquired upon the
exercise of this Warrant. Such certificate or certificates shall bear any
restrictive legends required by law.
(d) CANCELLATION; INSPECTION RIGHTS. Upon exercise in full of
this Warrant, the Holder shall return this Warrant to the Company, which shall
cancel and dispose of it in accordance with applicable law. The Company shall
keep copies of this Warrant and any notices given or received hereunder
available for inspection by the Holder during normal business hours at its
office.
(e) TRANSFER RESTRICTIONS. This Warrant and the Warrant Shares
issuable hereunder are subject to the restriction on transfer set forth in
Section 6 of the Purchase Agreement. In addition, this Warrant may be
transferred only if such transfer is, in the opinion of the Company, in
compliance with or exempt from the registration requirements of the Securities
Act of 1933, as amended (the "SECURITIES ACT"). Prior to due presentment to the
Company for transfer of this Warrant, the Company and any agent of the Company
may treat the person in whose name this Warrant are duly registered on the
records of the Company as the owner hereof for the purpose of receiving payment
as herein provided and for all other purposes, and neither the Company nor any
such agent shall be affected by notice to the contrary. This Warrant shall be
transferable or assignable only through an appropriate entry in the records of
the Company.
(f) COVENANT OF THE HOLDER. The Holder and any subsequent
transferee pursuant to the terms of this Warrant covenant not to exercise this
Warrant except in compliance with the terms of this Warrant.
2. PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes (if any) attributable to the issuance of Warrant Shares upon the exercise
of this Warrant; provided, however, that the Company shall not be required to
pay any tax or taxes which may be payable in respect of any transfer involved in
the registration of any certificates for Warrant Shares in a name other than
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<PAGE>
that of the Holder, and the Company shall not be required to issue or deliver
the certificates for Warrant Shares unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid. The Holder shall be responsible for all other tax liability
that may arise as a result of holding or transferring this Warrant or receiving
the Warrant Shares under this Warrant.
3. REPLACEMENT OF WARRANT. In case this Warrant shall be mutilated,
lost, stolen or destroyed, the Company may in its discretion issue in exchange
and substitution for and upon cancellation of such mutilated Warrant, or in lieu
of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant and indemnity, if
requested, satisfactory to it. Applicants for a substitute Warrant also shall
comply with such other reasonable regulations and pay such other reasonable
charges as the Company may prescribe.
4. RESERVATION OF WARRANT SHARES. The Company will at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock or its authorized and issued Common
Stock held in its treasury, for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon exercise of this Warrant, the maximum
number of Warrant Shares that may then be deliverable upon the exercise of this
Warrant.
5. NOTICES. All notices or other communications hereunder shall be
sent to the applicable party at its address set forth in the Purchase Agreement.
6. MISCELLANEOUS.
(a) This Warrant shall be binding on and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
(b) Nothing in this Warrant shall be construed to give to any
person or entity other than the Company, the Holder and any registered holder of
Warrant Shares any legal or equitable right, remedy or cause under this Warrant;
but this Warrant shall be for the sole and exclusive benefit of the Company, the
Holder and any other registered holder of Warrant Shares.
(c) This Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of Ohio without
regard to the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affecting or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
FULL POWER GROUP, INC.
By:
-----------------------------------------
Name: George N. Falsone
Title: President
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<PAGE>
AUTOMATED POWER EXCHANGE
SERVICE AND PARTICIPATION AGREEMENT
THIS AUTOMATED POWER EXCHANGE SERVICE AND PARTICIPATION AGREEMENT
("Service Agreement") is made and entered into this 9 day of April, 1998 by
and between Automated Power Exchange, Inc., a California corporation ("APX"),
and Full Power Corporation, a OHIO Corporation ("Participant"). APX and the
Participant are sometimes referred to herein individually as a "Party" and
collectively as the "Parties."
WHEREAS:
A. APX operates information exchanges in which Participants are able to buy
and sell electricity at APX Market Prices.
B. APX also serves as a Scheduling Coordinator with the California
Independent System Operator Corporation for Generating Units and Loads
that are registered with APX by Participants.
C. The Participant desires to enter into this Service Agreement in order
to be able to utilize the APX Services from time to time in accordance
with the terms hereof.
NOW, THEREFORE, in consideration of the covenants and conditions set
forth herein, the Parties agree and intend to be bound as follows:
1. DEFINITIONS AND INTERPRETATION
1.1. DEFINITIONS. Except as otherwise defined herein,
initially-capitalized terms used in this Service Agreement have
the meanings set forth in Section 2.1 of the Automated Power
Exchange Terms and Conditions of Service, together with any
appendices or attachments thereto, as amended or modified from
time to time ("APX Terms").
1.2. INTERPRETATION. The rules of interpretation set forth in Section
2.2 of the APX Terms shall apply to this Service Agreement.
2. USE OF APX SERVICES
2.1. Upon execution of this Service Agreement and satisfaction of the
conditions of eligibility set forth in Section 3 of the APX
Terms, the Participant shall be eligible to use the APX Services.
2.2. This Service Agreement does not obligate the Participant to use
any APX Service.
3. TERMS AND CONDITIONS OF SERVICE
3.1. The APX Terms are incorporated herein and made a part of this
Service Agreement.
3.2. APX and the Participant agree that:
3.2.1. The APX Terms, this Service Agreement, and any rules,
regulations or orders duly promulgated from time to time
by APX shall govern the Participant's use of any APX
Service;
<PAGE>
3.2.2. APX and the Participant will abide by the APX Terms and
any rules, regulations and orders duly promulgated by APX
in respect of all matters relating to the Participant's
use of any APX Service; and
3.2.3. The Participant's eligibility to use the APX Services is
at all times subject to the APX Terms and any rules,
regulations and orders duly promulgated by APX, and may be
revoked in accordance with the APX Terms.
3.3. APX may amend or modify the APX Terms from time to time in
accordance with the procedures set forth in Section 13 of the APX
Terms. Any such amendment or modification shall be binding upon
the Participant in accordance with Section 13 of the APX Terms.
4. TERM AND TERMINATION
4.1. This Service Agreement shall become effective on the date set
forth in the introductory paragraph and shall remain in effect
unless terminated in accordance with the provisions set forth in
Section 15 of the APX Terms.
5. REPRESENTATIONS AND WARRANTIES
5.1. Each Party represents and warrants to the other Party the
following:
5.1.1. AUTHORITY. The execution, delivery and performance by
each Party of this Service Agreement are within the
Party's powers, have been duly authorized by all
necessary corporate or other action, and do not and will
not violate the terms or conditions in the Party's
governing documents, any material contract to which the
Party is a party, or any applicable Laws.
5.1.2. BINDING OBLIGATIONS. This Service Agreement constitutes
the legal, valid and binding obligations or each Party,
enforceable against the Party in accordance with its
terms, except as enforceability may be limited by
applicable bankruptcy or similar laws affecting the
enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
6. TRANSFER AND ASSIGNMENT.
6.1. Neither Party shall assign any of its rights nor delegate any of
its obligations under this Service Agreement without the prior
written consent of the other Party, which consent shall not be
withheld or delayed unreasonably. Any prohibited assignment or
delegation shall be void.
7. ELECTRONIC CONTRACTING
7.1. All submitted applications, schedules, bids, confirmations,
changes to information on file with APX, notices and other
communications conducted via electronic transfer, including
without limitation, direct computer link, bulletin board, e-mail,
facsimile or any other means established by APX, shall invoke
the same legal rights, responsibilities, obligations and other
implications set forth in the APX Terms as if executed in written
format.
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<PAGE>
8. MISCELLANEOUS.
8.1. NOTICES. Except as otherwise specified herein or in the APX Terms,
notices provided under the terms of this Service Agreement shall
be in writing and transmitted by mail, overnight courier, or
facsimile. Notices to APX shall be addressed to:
Automated Power Exchange, Inc.
26340 Alexander Place
Los Altos Hills, CA 94022
Attention: Contracts Department
Phone: (650) 949-1672 Fax: (650) 949-2859
E-mail: [email protected]
Notices to the Participant shall be addressed to the representative
at the address specified in Appendix I of this Service Agreement.
8.2. ENTIRE AGREEMENT. This Service Agreement and all attachments
hereto, and the APX Terms embody the entire agreement and
understanding of the Parties; and supersede all prior or
contemporaneous agreements and understandings of the Parties,
verbal or written, relating to the subject matter hereof.
8.3. GOVERNING LAWS. This Service Agreement shall be governed by, and
construed in accordance with, the laws of the State of California,
irrespective of choice of law rules.
8.4. INDEPENDENT PARTIES. Nothing in this Service Agreement shall be
construed or represented as creating a partnership, trust,
fiduciary or any similar relationship among the Parties. Except as
set forth in the APX Terms, no Party is authorized to act on behalf
of the other Party and none shall be considered the agent of the
other.
8.5. NO THIRD-PARTY BENEFICIARIES. This Service Agreement is made and
entered into for the sole protection and legal benefit of the
Parties and their permitted successors and assigns, and no other
person shall be a direct or indirect legal beneficiary of, or have
any direct or indirect cause of action or claim in connection with,
this Service Agreement.
8.6. AMENDMENT. This Service Agreement is subject to modification by a
modification of the APX Terms. In all other respects, this Service
Agreement shall only be modified or amended by a written instrument
executed by the Parties and shall not be modified by course of
performance or any usage of trade.
8.7. SEVERABILITY. The illegality or unenforceability of any provision
of this Service Agreement or any instrument or agreement required
hereunder shall not in any way affect or impair the legality or
enforceability of the remaining provisions of this Service
Agreement or any instrument or agreement required hereunder.
8.8. COUNTERPARTS. This Service Agreement may be executed in any number
of separate counterparts, which shall be deemed to constitute one
instrument.
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<PAGE>
The authorized representatives of the Parties have executed this
Service Agreement as of the date first set forth above.
AUTOMATED POWER EXCHANGE FULL POWER CORPORATION
BY: /s/ Jack Ellis BY: /s/George N. Falsone
--------------------- ---------------------
TITLE: EXECUTIVE V.P. TITLE: PRESIDENT
------------------ ------------------
DATE: 4/15/98 DATE: 4-9-98
------------------- -------------------
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<PAGE>
APPENDIX I
NAME OF THE PARTICIPANT: GEORGE N. FALSONE
----------------------------
REPRESENTATIVE: FULL POWER CORPORATION
----------------------------
----------------------------
ADDRESS: 14650 DETROIT AVENUE, SUITE 313
----------------------------
LAKEWOOD, OH 44107
----------------------------
----------------------------
E-MAIL ADDRESS:
----------------------------
TELEPHONE NUMBER: 216-227-9835
----------------------------
FACSIMILE NUMBER: 216-226-7737
----------------------------
<PAGE>
APPENDIX C
FORM SETTLEMENT ACCOUNT AGREEMENT
This Settlement Account Agreement (as amended, modified or supplemented
from time to time, this "Agreement") is entered into as of this 9 day of
April, 1998, by and among AUTOMATED POWER EXCHANGE, INC., a California
corporation ("APX"), BANKERS TRUST COMPANY, a New York state chartered bank
(the "Depository and Clearing Agent") and the person which executes this
Agreement on the signature page hereto as the "Participant".
RECITALS
A. APX and the Participant are parties to that certain Automated Power
Exchange Service and Participation Agreement dated as of April 9, 1998 (the
"Service Agreement"). Pursuant to the Service Agreement, APX and the
Participant are bound by the Automated Power Exchange Terms and Conditions of
Service, effective as of December 19, 1997 (as such terms and conditions may
be amended, modified or supplemented from time to time, the "APX Terms").
Capitalized terms used herein without definition shall have the meanings
assigned thereto in the APX Terms.
B. The APX Terms require that a Settlement Account be established and
maintained with the Depository and Clearing Agent, into which account the
Participant shall fund, on or before the applicable Payment Due Date, all
payments required to be made under the APX Terms on such Payment Due Date.
C. APX, the Depository and Clearing Agent and the Participant (each, a
"Party" and collectively, the "Parties") each intend and agree that the
Participant shall relinquish all of its right, title and interest in and to
funds deposited in the Settlement Account, with the intended result that upon
the occurrence of any Insolvency Proceeding relating to the Participant, the
Settlement Account will not be subject to the automatic stay pursuant to
Section 362 of Title 11, United States Code (the "Bankruptcy Code").
D. The Depository and Clearing Agent has agreed to provide certain
services as agent for and on behalf of APX in connection with the Settlement
Account as more fully set forth in this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and the mutual promises
and covenants hereinafter set forth, APX, the Depository and Clearing Agent
and the Participant each agree as follows:
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1. DEFINITIONS
"SETTLEMENT ACCOUNT" means the account maintained by the Depository
and Clearing Agent in the name of APX for the purpose of tracking the funds
on deposit from time to time which support the Participant's obligations to
pay all outstanding liabilities under the APX Terms on each Payment Due Date.
2. DUTIES OF PARTIES
2.1 APPOINTMENT. APX hereby appoints the Depository and Clearing
Agent to act as its agent for the purpose of maintaining the Settlement
Account, and the Depository and Clearing Agent hereby accepts such
appointment. The Participant hereby acknowledges and agrees to such
appointment.
2.2 DEPOSIT OF FUNDS. The Participant shall from time to time
deliver to the Depository and Clearing Agent funds for deposit in the
Settlement Account. The Depository and Clearing Agent agrees to deposit any
such funds in the Settlement Account, and thereafter to hold such funds as
bailee and agent exclusively for APX. Upon any such deposit of funds by the
Participant, the Participant shall relinquish all of its right, title and
interest to such funds.
2.3 ACCOUNT BOOKS AND RECORDS; STATEMENTS. The Depository and
Clearing Agent shall maintain books and records identifying all of the funds
on deposit from time to time in the Settlement Account. Not less frequently
than once each calendar month, the Depository and Clearing Agent shall
provide APX with a statement showing the activity in the Settlement Account
during the preceding calendar month, including any interest credit made
pursuant to Section 2.4. APX shall make available to the Participant the
information contained in such statement.
2.4 INTEREST CREDIT. The Settlement Account shall be maintained as
a separate account, which shall bear interest at the rate negotiated from
time to time between APX and the Depository and Clearing Agent. On the tenth
Business Day of each month, a credit shall be made to the Settlement Account
in an amount equal to the interest earned on funds deposited in the
Settlement Account more than one Business Day prior to transfer of such funds
out of the Settlement Account, including pursuant to Section 2.5 or Section
2.7. Not less frequently than annually, APX shall direct the Depository and
Clearing Agent to distribute to the Participant, to the extent that
sufficient funds remain in the Settlement Account, an amount equal to the
interest credits made pursuant to Section 2.4 with respect to funds remaining
on deposit in the Settlement Account for more than one Business Day.
2.5 WITHDRAWALS FROM THE SETTLEMENT ACCOUNT. The Parties agree
that on each Payment Due Date, the Depository and Clearing Agent shall
withdraw funds from the Settlement Account in an amount equal to the
Participant's obligations due on such date, and the Depository and Clearing
Agent shall deposit such funds in the Clearing Account. Except as otherwise
agreed by APX and the Participant or as otherwise
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provided in Section 2.4 above or Section 2.6 below, no Party may initiate any
withdrawals from the Settlement Account.
2.6 REFUND OF BALANCE IN THE SETTLEMENT ACCOUNT. At the request
of the Participant in connection with any overfunding of the Settlement Account
(in an amount in excess of the amount expected to be due on the next Payment
Due Date) or if the Participant is no longer a Participant in the APX Markets
and no longer has any remaining liabilities under the APX Terms, APX shall
direct the Depository and Clearing Agent to distribute to the Participant all
or any portion of the balance reflected in the Settlement Account. Upon
receipt of such funds by the Participant, APX shall automatically and without
further action by any Party relinquish all of its right, title and interest
in and to such funds. Any security interest which attached with respect to
such funds pursuant to Section 3 shall automatically terminate upon receipt
of such funds by the Participant without further action by any Party.
3. SECURITY INTEREST.
The Parties each intend and agree that the Participant shall
relinquish all of its right, title and interest in and to funds deposited in
the Settlement Account, with the intended result that upon the occurrence of
any Insolvency Proceeding relating to the Participant, the Settlement Account
will not be subject to the automatic stay pursuant to the Bankruptcy Code.
Notwithstanding the foregoing (and in the event that the Participant is
determined to have any right, title or interest in the Settlement Account),
the Participant hereby grants to APX a security interest in any right, title
or interest of the Participant in and to funds deposited and on deposit from
time to time in the Settlement Account, together with all proceeds thereof,
to secure its obligations under the Service Agreement and the APX Terms,
including its obligations to other Participants and the ISO, and to secure
its obligations under any other agreement to which the Participant and APX
are party. The Depository and Clearing Agent acknowledges the grant of such
security interest, and agrees to accept instructions with respect to the
Settlement Account from APX only (and not from the Participant).
4. INDEMNIFICATION OF THE DEPOSITORY AND CLEARING AGENT.
4.1 INDEMNIFICATION. Each Participant agrees to indemnify and
hold harmless the Depository and Clearing Agent from and against any and all
loss, liability, cost, damage and expense, including, without limitation,
reasonable attorneys' fees which the Depository and Clearing Agent may suffer
or incur by reason of any action, claim or proceeding brought against the
Depository and Clearing Agent arising out of or relating in any way to this
Agreement or any transaction to which this Agreement relates unless such
action, claim or proceeding is the result of gross negligence or willful
misconduct by the Depository and Clearing Agent.
4.2 NO DUTY TO DEFEND. The Depository and Clearing Agent shall
be under no duty to institute or defend any type of proceeding which may
arise regarding this Agreement.
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5. DUTIES LIMITED.
The Depository and Clearing Agent undertakes for the benefit of APX
and the Participant to perform only the duties expressly set forth in this
Agreement and such other responsibilities incidental to the performance of
its service as contemplated herein. The Participant acknowledges and agrees
that APX and the Depository and Clearing Agent are party to certain other
agreements relating to the APX Markets, that the Participant has no rights or
obligations under any such other agreement, and that it is not an intended
third party beneficiary of any such agreement.
6. THE DEPOSITORY AND CLEARING AGENT FEES.
The Depository and Clearing Agent shall be entitled to compensation
for its services under this Agreement in accordance with the fee schedule
negotiated from time to time by APX and the Depository and Clearing Agent.
The APX Terms provide that the Participant shall be responsible to deposit
funds for payment of such fees to the Settlement Account on or before each
Payment Due Date.
7. FEDERAL POWER AGENCIES. [Include only if the Participant is a Federal
Power Agency.]
7.1 LIMITATION OF LIABILITY. Claims against the United States
under this Agreement are subject in all respects to applicable acts of
Congress and to regulations of the Secretary of Energy established thereunder,
including but not limited to the statutory limitations on the liability of
the United States under the Federal Tort Claims Act, the Tucker Act and the
Equal Access to Justice Act.
7.2 APPROPRIATIONS. Notwithstanding anything else herein to
the contrary, where the obligations of this Agreement extend beyond the
current fiscal year, participation by the United States is contingent upon
Congress making the necessary appropriation for expenditures by the United
States after such current year shall have expired. In case such
appropriations necessary to carry out obligations of the United States under
this Agreement are not made, the Participants release the United States from
all liability due to the failure of Congress to make such appropriation. The
provisions of this Section 7.2 are not intended to release any claims against
the United States that may be made under the Federal Tort Claims Act, the Tucker
Act or the Equal Access to Justice Act.
7.3 PRIVATIZATION. The provisions of this Section VII shall not
apply to any governmental or quasi-governmental agency that is privatized or
otherwise ceases to by owned by the United States.
8. EFFECTIVE DATE; TERM; RESIGNATION AND REPLACEMENT OF THE DEPOSITORY
AND CLEARING AGENT.
8.1 EFFECTIVE DATE. The Agreement shall become effective upon
the execution and delivery of a counterpart hereof by each Party hereto.
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8.2 TERM. This Agreement shall remain in full force and effect
unless and until the Participant is no longer a Participant in the APX Markets
and no longer has any remaining liabilities under the APX Terms.
8.3 RESIGNATION BY THE DEPOSITORY AND CLEARING AGENT. The
Depository and Clearing Agent may resign at any time upon not less than thirty
(30) days prior written notice to the Participant and APX.
8.4 REPLACEMENT OF THE DEPOSITORY AND CLEARING AGENT. Under
certain circumstances as separately agreed between APX and the Depository and
Clearing Agent, APX has the right to replace the Depository and Clearing Agent.
If APX exercises such right, APX shall name a new Depository and Clearing Agent
which shall perform the functions of the Depository and Clearing Agent
hereunder.
8.5 SUCCESSOR DEPOSITORY AND CLEARING AGENT(S). Any successor
to the Depository and Clearing Agent shall have capital and surplus in excess of
$250,000,000. Any resignation or replacement pursuant to Section 8.3 or Section
8.4 shall become effective upon the appointment of a successor to such Party by
APX, and the delivery by the resigning Depository and Clearing Agent to its
successor all funds on deposit in the Settlement Account.
9. MISCELLANEOUS.
9.1 COMPLIANCE WITH LAWS, RULES AND REGULATIONS.
Notwithstanding anything in this Agreement to the contrary, the Depository and
Clearing Agent shall refrain from any action which, in its reasonable judgment,
or in the judgment of APX of which the Depository and Clearing Agent has written
notice, would violate any law, rule or regulation of any governmental body or
agency having jurisdiction over APX or the Participant.
9.2 AMENDMENTS. This Agreement shall not be modified or
amended without the consent of each Party, which consent must be evidenced by an
instrument in writing executed by each Party, or by their respective successors
or permitted assigns.
9.3 SEVERABILITY. In the event that any one or more of the
provisions of this Agreement shall for any reason be held to be unenforceable in
any respect, such unenforceability shall not affect any other provision of this
Agreement that can be given effect without the unenforceable provision, and this
Agreement shall be construed as if such unenforceable provision or provisions
had never been contained herein.
9.4 APX TERMS. In the event of any inconsistency between this
Agreement and the Service Agreement and/or the APX Terms, as between APX and the
Participant, the provisions of the Service Agreement and/or the APX Terms (the
case may be) shall govern the rights and obligations of such Parties.
9.5 CUMULATIVE REMEDIES. The remedies provided under this
Agreement shall be cumulative and not exclusive, and the election of one remedy
shall not preclude pursuit of other remedies.
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9.6 ENFORCEMENT AND WAIVER. Any waiver of any provision of
this Agreement must be in writing and will not be implied by any usage of
trade, course of dealing or course of performance. Any delay or failure of a
Party to exercise, or any partial exercise of, such Party's rights and
remedies under this Agreement shall not operate to limit or otherwise affect
such rights or remedies. Any waiver of performance hereunder shall be limited
to the specific performance waived and shall not, unless otherwise expressly
stated in writing, constitute a continuous waiver or a waiver of future
performance.
9.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the Parties hereto and their respective
successors and permitted assigns (including any successor to the Depository and
Clearing Agent pursuant to Section 8). Except as contemplated by Section 8, no
Party shall assign or delegate any of its rights or obligations under this
Agreement without the prior written consent of the other Parties and any such
attempted assignment or delegation shall be void and of no force or effect.
9.8 INDEPENDENT PARTIES. Nothing in this Agreement shall be
construed or represented as creating a partnership, trust, fiduciary or any
similar relationship between or among the parties hereto. Except as expressly
set forth herein, no Party is authorized to act on behalf of the other Party and
none shall be considered the agent of the other.
9.9 NOTICES. Notices or consents of any kind required or
permitted under this Agreement shall be in writing and shall be deemed duly
delivered if delivered in person or if mailed by certified mail, return receipt
requested, telegraph, postage prepaid, or by Fax Transmission with receipt
retained by sender, to the appropriate Party as follows:
If to the Depository and Clearing Agent:
Bankers Trust Company
One Bankers Trust Plaza
New York, New York 10015
Phone: (212) 250-8566
Fax: (212) 669-0882
If to APX:
Automated Power Exchange, Inc.
26340 Alexander Place
Los Altos Hills, California 94022
Phone: (650) 949-1672
Fax: (650) 949-2859
If to the Participant: To the address on the
signature page of this Agreement.
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Any Party from time to time may change its address for the purpose of notices to
that Party by giving a similar notice specifying a new address.
9.10 FURTHER ASSURANCES. Each Party shall do all necessary
acts and make, execute, and deliver such written instruments as shall from time
to time be reasonably required to carry out the terms of this Agreement.
9.11 TIME IS OF THE ESSENCE. Each Party hereby expressly
acknowledges that time is of the essence in the performance of its respective
obligations under this Agreement.
9.12 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, IRRESPECTIVE OF
CHOICE OF LAW RULES THAT DIRECT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION. Any legal action or proceeding with respect to this Agreement must
be brought in the courts of the State of California or of the United States for
the Northern District of California. By execution and delivery of this
Agreement, each Party consents, for itself and in respect of its property, to
the exclusive jurisdiction of those courts. Each Party irrevocably waives any
objection, including any objection to the laying of venue or based on the
grounds of FORUM NON CONVENIENS, which it may now or hereafter have to the
bringing of any action or proceeding in such jurisdiction in respect of this
Agreement or any document related thereto.
9.13 CROSS DEFAULT. Any default under this Agreement by APX or
the Participant shall be considered a default of the APX Terms and the
Settlement Account Agreement and shall entitle APX and/or the Participant, as
applicable, to exercise the rights as are available herein and therein.
9.14 SURVIVAL OF RIGHTS. Any provisions of this Agreement
which contemplates performance or observance subsequent to termination shall
survive any such termination and shall continue in full force and effect.
9.15 HEADINGS. Section headings and subheadings contained in
this Agreement are for ease of reference only and shall not affect the
substantive interpretation of this Agreement.
9.16 CONSTRUCTION. No provision of this Agreement shall be
construed or interpreted for or against APX because APX drafted or caused its
legal representative to draft the provision.
9.17 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, each of APX, the Depository and Clearing Agent,
and the Participant has caused this Agreement to be executed by its duly
authorized officer as of this 21 day of April, 1998.
- ----------------------------------------------------------------------------
APX: AUTOMATED POWER EXCHANGE, INC.
By: /s/ Jack Ellis
-------------------
Name: Jack Ellis
Title: Vice President
- ----------------------------------------------------------------------------
DEPOSITORY AND CLEARING AGENT: BANKER TRUST COMPANY
By: /s/ Charles J. May
--------------------
Name: Charles J. May
Title: VP
- ----------------------------------------------------------------------------
PARTICIPANT: Full Power Corporation
By: /s/ George N. Falsone
------------------------
Name: George N. Falsone
Title: PRESIDENT
Address of Participant:
14650 Detroit Rd. Ste 313
Lakewood, OH 44107
Telephone: (216) 227-9835
Telecopy: (216) 226-7737
- ----------------------------------------------------------------------------
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<PAGE>
APPENDIX D
FORM MONETARY RESERVE ACCOUNT AGREEMENT
This Monetary Reserve Account Agreement (as amended, modified or
supplemented from time to time, this "Agreement") is entered into as of this
9 day of April, 1998, by and among AUTOMATED POWER EXCHANGE, INC., a
California Corporation ("APX"), BANKERS TRUST COMPANY, a New York state
chartered bank (the "Depository and Clearing Agent") and the person which
executes this Agreement on the signature page hereto as the "Participant".
RECITALS
A. APX and the Participant are parties to that certain Automated
Power Exchange Service and Participation Agreement dated as of April 9, 1998
(the "Service Agreement"). Pursuant to the Service Agreement, APX and the
Participant are bound by the Automated Power Exchange Terms and Conditions of
Service, effective as of December 19, 1997 (as such terms and conditions may
be amended, modified or supplemented from time to time, the "APX Terms").
Capitalized terms used herein without definition shall have the meanings
assigned thereto in the APX Terms.
B. The APX Terms require that the Participant establish a Monetary
Reserve Facility in an amount sufficient to cover its Net Exposure. The
Participant desires to establish a Monetary Reserve Account (as defined
below) to satisfy its obligations under the APX Terms to maintain a Monetary
Reserve Facility.
C. APX, the Depository and Clearing Agent and the Participant
(each, a "Party" and collectively, the "Parties") each intend and agree that
the Participant shall relinquish all of its right, title and interest in and
to funds deposited in the Monetary Reserve Account, with the intended result
that upon the occurrence of any Insolvency Proceeding relating to the
Participant, the Monetary Reserve Account will not be subject to the
automatic stay pursuant to Section 362 of Title 11, United Stated Code (the
"Bankruptcy Code").
D. The Depository and Clearing Agent has agreed to provide certain
services as agent for and on behalf of APX in connection with the Monetary
Reserve Account as more fully set forth in the Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants hereinafter set forth, APX, the Depository and
Clearing Agent and the Participant each agree as follows:
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<PAGE>
1. DEFINITIONS.
"MONETARY RESERVE ACCOUNT" means the account maintained by the
Depository and Clearing Agent in the name of APX for the purpose of tracking
the funds on deposit from time to time which contribute to (or correspond to)
the Participant's requirement to maintain a Monetary Reserve Facility.
2. DUTIES OF PARTIES.
2.1 APPOINTMENT. APX hereby appoints the Depository and
Clearing Agent to act as its agent for the purpose of maintaining the
Monetary Reserve Account, and the Depository and Clearing Agent hereby
accepts such appointment. The Participant hereby acknowledges and agrees to
such appointment.
2.2 DEPOSIT OF FUNDS. The Participant shall from time to time
deliver to the Depository and Clearing Agent Federal wire funds for deposit
in the Monetary Reserve Account. The Depository and Clearing Agent agrees to
deposit any such funds in the Monetary Reserve Account, and thereafter to
hold such funds as bailee and agent exclusively for APX. Upon any such
deposit of funds by the Participant, the Participant shall relinquish all of
its right, title and interest to such funds.
2.3 ACCOUNT BOOKS AND RECORDS; STATEMENTS. The Depository and
Clearing Agent shall maintain books and records identifying all of the funds
on deposit from time to time in the Monetary Reserve Account. Not less
frequently than once each calendar month, the Depository and Clearing Agent
shall provide APX with a statement showing the activity in the Monetary
Reserve Account during the preceding calendar month, including any interest
credit made pursuant to Section 2.4. APX shall make available to the
Participant the information contained in such statement.
2.4 INTEREST CREDIT. The Monetary Reserve shall be maintained
as a separate account which shall bear interest at the rate negotiated from
time to time between APX and the Depository and Clearing Agent. For purposes
of the amount required to be maintained by the Participant as a Monetary
Reserve Facility, on the tenth Business Day of each month, the Participant
shall receive a credit in an amount equal to the interest earned on funds on
deposit from time to time during the preceding calendar month Monetary
Reserve Account. From and after such date, subject to Section 2.5, the
Monetary Reserve Account shall include the amount of such interest credit as
funds on deposit in the Monetary Reserve Account. Not less frequently than
annually, APX shall direct the Depository and Clearing Agent to distribute to
the Participant, to the extent that sufficient funds remain in the Monetary
Reserve Account (and provided that after any such withdrawal the Participant
would be in compliance with its requirement to maintain a Monetary Reserve
Facility), an amount equal to the interest earned on funds held on deposit in
the Monetary Reserve Account.
2.5 WITHDRAWALS FROM THE MONETARY RESERVE ACCOUNT. The Parties
agree that the funds held on deposit in the Monetary Reserve Account shall be
withdrawn by the Depository and Clearing Agent if and in the event that
sufficient funds are not on
D-2
<PAGE>
deposit in the Participant's Settlement Account by any Payment Due Date. In
such case, APX shall initiate a draw on the Monetary Reserve Account or on
any other Monetary Reserve Facility maintained by the Participant in an
amount sufficient to discharge the Participant's obligations. IF THE
PARTICIPANT MAINTAINS MORE THAN ONE FORM OF A MONETARY RESERVE FACILITY, THE
DETERMINATION OF WHICH MONETARY RESERVE FACILITY OR FACILITIES WILL BE DRAWN
IN THE EVENT THAT SUFFICIENT FUNDS ARE NOT ON DEPOSIT IN THE PARTICIPANT'S
SETTLEMENT ACCOUNT BY ANY PAYMENT DUE DATE WILL BE MADE BY APX IN IT'S SOLE
AND ABSOLUTE DISCRETION. Except as otherwise agreed by APX and the
Participant or as otherwise provided in Section 2.4 above or Section 2.6
below, APX shall not initiate any withdrawals from the Monetary Reserve
Account.
2.6 REFUND OF DEPOSIT. Upon the request of the Participant, if
the Participant is no longer a Participant in the APX Markets and no longer
has any remaining liabilities under the APX Terms, or if the Participant has
provided a different form of Monetary Reserve Facility, APX shall direct the
Depository and Clearing Agent to distribute to the Participant the balance
reflected in the Monetary Reserve Account, and upon receipt of such funds by
the Participant, APX shall automatically and without further action by any
Party relinquish all of its right, title and interest in and to such funds.
Any security interest which attached with respect to such funds pursuant to
Section 3 shall automatically terminate upon receipt of such funds by the
Participant without further action by any Party.
2.7 ISO OBLIGATIONS. The Participant acknowledges and agrees
that funds on deposit from time to time in the Monetary Reserve Account may
be used by APX to satisfy certain requirements imposed on APX by the ISO.
3. SECURITY INTEREST.
The Parties each intend and agree that the Participant shall
relinquish all of its right, title and interest in and to funds deposited in
the Monetary Reserve Account, with the intended result that upon the
occurrence of any Insolvency Proceeding relating to the Participant, the
Monetary Reserve Account will not be subject to the automatic stay pursuant
to the Bankruptcy Code. Notwithstanding the foregoing (and in the event that
the Participant is determined to have any right, title or interest in the
Monetary Reserve Account), the Participant hereby grants to APX a security
interest in any right, title or interest of the Participant in and to funds
deposited and on deposit from time to time in the Monetary Reserve Account,
together with all proceeds thereof, to secure its obligations under the
Service Agreement and the APX Terms, including its obligations to other
Participants and the ISO, and to secure its obligations under any other
agreement to which the Participant and APX are party. The Depository and
Clearing Agent acknowledges the grant of such security interest, and agrees
to accept instructions with respect to the Monetary Reserve Account from APX
only (and not from the Participant).
D-3
<PAGE>
4. INDEMNIFICATION OF THE DEPOSITORY AND CLEARING AGENT.
4.1 INDEMNIFICATION. Each Participant agrees to indemnify and hold
harmless the Depository and Clearing Agent from and against any and all loss,
liability, cost, damage and expense, including, without limitation,
reasonable attorneys' fees which the Depository and Clearing Agent may suffer
or incur by reason of any action, claim or proceeding brought against the
Depository and Clearing Agent arising out of or relating in any way to this
Agreement or any transaction to which this Agreement relates unless such
action, claim or proceeding is the result of gross negligence or willful
misconduct by the Depository and Clearing Agent.
4.2 NO DUTY TO DEFEND. The Depository and Clearing Agent shall be
under no duty to institute or defend any type of proceeding which may arise
regarding this Agreement.
5. DUTIES LIMITED.
The Depository and Clearing Agent undertakes for the benefit of APX
and the Participant to perform only the duties expressly set forth in this
Agreement and such other responsibilities incidental to the performance of
its service as contemplated herein. The Participant acknowledges and agrees
that APX and the Depository and Clearing Agent are party to certain other
agreements related to the APX Markets, that the Participant has no rights or
obligations under any such other agreement, and that it is not an intended
third party beneficiary of any such agreement.
6. THE DEPOSITORY AND CLEARING AGENT FEES.
The Depository and Clearing Agent shall be entitled to compensation
for its services under this Agreement in accordance with the fee schedule
negotiated from time to time by APX and the Depository and Clearing Agent.
The APX Terms provide that the Participant shall be responsible to deposit
funds for the payment of such fees to the Settlement Account on or before
each Payment Due Date.
7. FEDERAL POWER AGENCIES. [Include only if the Participant is a Federal
Power Agency.]
7.1 LIMITATION OF LIABILITY. Claims against the United States under
this Agreement are subject in all respect to applicable acts of Congress and
to regulations of the Secretary of Energy established thereunder, including
but not limited to the statutory limitations on the liability of the United
States under the Federal Tort Claims Act, the Tucker Act and the Equal Access
to Justice Act.
7.2 APPROPRIATIONS. Notwithstanding anything else herein to the
contrary, where the obligations of this Agreement extend beyond the current
fiscal year, participation by the United States is contingent upon Congress
making the necessary appropriation for expenditures by the United States
after such current year shall have expired. In case such appropriations
necessary to carry out obligations of the United States under this Agreement
are not made, the Participants release the United States from
D-4
<PAGE>
all liability due to the failure of Congress to make such appropriation. The
provisions of this Section 7.2 are not intended to release any claims against
the United States that may be made under the Federal Tort Claims Act, the
Tucker Act or the Equal Access to Justice Act.
7.3 PRIVATIZATION. The provisions of this Section VII shall not apply
to any governmental or quasi-governmental agency that is privatized or
otherwise ceases to be owned by the United States.
8. EFFECTIVE DATE; TERM; RESIGNATION AND REPLACEMENT OF THE DEPOSITORY
AND CLEARING AGENT.
8.1 EFFECTIVE DATE. The Agreement shall become effective upon the
execution and delivery of a counterpart hereof by each Party hereto.
8.2 TERM. This Agreement shall remain in full force and effect unless
and until the Participant is no longer a Participant in the APX Markets and
no longer has any remaining liabilities under the APX Terms.
8.3 RESIGNATION BY THE DEPOSITORY AND CLEARING AGENT. The Depository
and Clearing Agent may resign at any time upon not less than thirty (30) days
prior written notice to the Participant and APX.
8.4 REPLACEMENT OF THE DEPOSITORY AND CLEARING AGENT. Under certain
circumstances as separately agreed between APX and the Depository and
Clearing Agent, APX has the right to replace the Depository and Clearing
Agent. If APX exercises such right, APX shall name a new Depository and
Clearing Agent which shall perform the functions of the Depository and
Clearing Agent hereunder.
8.5 SUCCESSOR DEPOSITORY AND CLEARING AGENT(S). Any successor to the
Depository and Clearing Agent shall have capital and surplus in excess of
$250,000,000. Any resignation or replacement pursuant to Section 8.3 or
Section 8.4 shall become effective upon the appointment of a successor to
such Party by APX, and the delivery by the resigning Depository and Clearing
Agent to its successor all funds on deposit in the Monetary Reserve Account.
9. MISCELLANEOUS.
9.1 COMPLIANCE WITH LAWS, RULES AND REGULATIONS. Notwithstanding
anything in this Agreement to the contrary, the Depository and Clearing Agent
shall refrain from any action which, in its reasonable judgment, or in the
judgment of APX of which the Depository and Clearing Agent has written
notice, would violate any law, rule or regulation of any governmental body or
agency having jurisdiction over APX or the Participant.
9.2 AMENDMENTS. This Agreement shall not be modified or amended
without the consent of each Party, which consent must be evidenced by an
instrument in writing executed by each Party, or by their respective
successors or permitted assigns.
D-5
<PAGE>
9.3 SEVERABILITY. In the event that any one or more of the provisions
of this Agreement shall for any reason be held to be unenforceable in any
respect, such unenforceability shall not affect any other provision of this
Agreement that can be given effect without the unenforceable provision, and
this Agreement shall be construed as if such unenforceable provision or
provisions had never been contained herein.
9.4 APX TERMS. In the event of any inconsistency between this
Agreement and the Service Agreement and/or the APX Terms, as between APX and
the Participant, the provisions of the Service Agreement and/or the APX Terms
(the case may be) shall govern the rights and obligations of such Parties.
9.5 CUMULATIVE REMEDIES. The remedies provided under this Agreement
shall be cumulative and not exclusive, and the election of one remedy shall
not preclude pursuit of other remedies.
9.6 ENFORCEMENT AND WAIVER. Any waiver of any provision of this
Agreement must be in writing and will not be implied by any usage of trade,
course of dealing or course of performance. Any delay or failure of a Party
to exercise, or any partial exercise of, such Party's rights and remedies
under this Agreement shall not operate to limit or otherwise affect such
rights or remedies. Any waiver of performance hereunder shall be limited to
the specific performance waived and shall not, unless otherwise expressly
stated in writing, constitute a continuous waiver or a waiver of future
performance.
9.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the Parties hereto and their respective
successors and permitted assigns (including any successor to the Depository
and Clearing Agent pursuant to Section 8). Except as contemplated by Section
8, no Party shall assign or delegate any of its rights or obligations under
this Agreement without the prior written consent of the other Parties, and
any such attempted assignment or delegation shall be void and of no force or
effect.
9.8 INDEPENDENT PARTIES. Nothing in this Agreement shall be construed
or represented as creating a partnership, trust, fiduciary or any similar
relationship between or among the parties hereto. Except as expressly set
forth herein, no Party is authorized to act on behalf of the other Party and
none shall be considered the agent of the other.
9.9 NOTICES. Notices or consents of any kind required or permitted
under this Agreement shall be in writing and shall be deemed duly delivered
if delivered in person or if mailed by certified mail, return receipt
requested, telegraph, postage prepaid, or by Fax Transmission with receipt
retained by sender, to the appropriate Party as follows:
D-6
<PAGE>
If to the Depository and Clearing Agent:
Bankers Trust Company
One Bankers Trust Plaza
New York, New York 10015
Phone: (212) 250-8566
Fax: (212) 669-0882
If to APX:
Automated Power Exchange, Inc.
26340 Alexander Place
Los Altos Hills, California 94022
Phone: (650) 949-1672
Fax: (650) 949-2859
If to the Participant: To the address on the signature page of
this Agreement.
Any Party from time to time may change its address for the purpose of notices to
that Party by giving a similar notice specifying a new address.
9.10 FURTHER ASSURANCES. Each Party shall do all necessary acts and
make, execute, and deliver such written instruments as shall from time to time
be reasonably required to carry out the terms of this Agreement.
9.11 TIME IS OF THE ESSENCE. Each Party hereby expressly acknowledges
that time is of the essence in the performance of its respective obligations
under this Agreement.
9.12 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, IRRESPECTIVE OF CHOICE OF
LAW RULES THAT DIRECT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION. Any
legal action or proceeding with respect to this Agreement must be brought in the
courts of the State of California or of the United States for the Northern
District of California. By execution and delivery of this Agreement, each Party
consents, for itself and in respect of its property, to the exclusive
jurisdiction of those courts. Each Party irrevocably waives any objection,
including any objection to the laying of venue or based on the grounds of FORUM
NON CONVENIENS, which it may now or hereafter have to the bringing of any action
or proceeding in such jurisdiction in respect to this Agreement or any document
related thereto.
9.13 CROSS DEFAULT. Any default under this Agreement by APX or the
Participant shall be considered a default of the APX Terms and the Settlement
Account Agreement and shall entitle APX and/or the Participant, as applicable,
to exercise the rights as are available herein and therein.
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<PAGE>
9.14 SURVIVAL OF RIGHTS. Any provisions of this Agreement which
contemplates performance or observance subsequent to termination shall survive
any such termination and shall continue in full force and effect.
9.15 HEADINGS. Section headings and subheadings contained in this
Agreement are for ease of reference only and shall not affect the substantive
interpretation of this Agreement.
9.16 CONSTRUCTION. No provision of this Agreement shall be construed or
interpreted for or against APX because APX drafted or caused its legal
representative to draft the provision.
9.17 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.
D-8
<PAGE>
IN WITNESS WHEREOF, each of APX, the Depository and Clearing Agent, and
the Participant has caused this Agreement to be executed by its duly authorized
officer as of this 21st day of April, 1998.
- --------------------------------------------------------------------------------
APX: AUTOMATED POWER EXCHANGE, INC.
By: /s/ Jack Ellis
------------------------------------
Name: Jack Ellis
---------------------------------
Title: Vice President
--------------------------------
- --------------------------------------------------------------------------------
DEPOSITORY AND CLEARING AGENT: BANKERS TRUST COMPANY
By: /s/ Charles J. May
------------------------------------
Name: Charles J. May
---------------------------------
Title: Vice President
--------------------------------
- --------------------------------------------------------------------------------
PARTICIPANT: FULL POWER CORPORATION
By: /s/ George N. Falsone
------------------------------------
Name: George N. Falsone
---------------------------------
Title: President
--------------------------------
ADDRESS OF PARTICIPANT:
14650 Detroit Rd Ste. 313
---------------------------------------
Lakewood, OH 44107
---------------------------------------
---------------------------------------
Telephone: (216) 227-9855
----------------------------
Telecopy: (216) 226-7737
-----------------------------
- --------------------------------------------------------------------------------
D-9
<PAGE>
ENERGY SERVICE PROVIDER
(ESP)
SERVICE AGREEMENT
<PAGE>
[LOGO] -----------------------------------
ENERGY SERVICE PROVIDER (ESP)
SERVICE AGREEMENT
-----------------------------------
Agreement Number: 54
This Energy Service Provider Service Agreement (this "Agreement") is made and
entered into as of this 9 day of April (month), 1998 (year), by and between
FULL POWER CORPORATION (ESP Name), a CORPORATION (type of entity) organized
and existing under the laws of the state of OHIO and San Diego Gas & Electric
Company (SDG&E), a corporation organized and existing under the laws of the
state of California. From time to time, ESP and UDC shall be individually
referred to herein as a "Party" and collectively as the "Parties."
SECTION 1: GENERAL DESCRIPTION OF AGREEMENT
1.1 This Agreement is a legally binding contract. The Parties
named in this Agreement are bound by the terms set forth herein
and otherwise incorporated herein by reference. This Agreement
shall govern the business relationship between the Parties
hereto by which ESP shall offer electrical energy services,
including, but not limited to, account maintenance and billing
services, electrical meter installation, meter reading services
and/or any other services that may be approved by the
California Public Utilities Commission ("CPUC") in Direct
Access transactions with customers in UDC's service territory
("Direct Access Services"). Each Party, by agreeing to
undertake specific activities and responsibilities for or on
behalf of customers, acknowledges that each Party shall relieve
and discharge the other Party of the responsibility for said
activities and responsibilities with respect to those
customers. Except where explicitly defined herein (including
Attachment A hereto) the definitions controlling this Agreement
are contained in UDC's applicable rules or in the relevant
direct access tariff.
1.2 The form of this Agreement has been developed as part of the
CPUC regulatory process, was intended to conform to CPUC
directions, was filed and approved by the CPUC for use between
UDC and ESPs and may not be waived, altered, amended or
modified, except as provided herein or in the relevant direct
access tariff, or as may otherwise be authorized by the CPUC.
1
<PAGE>
[LOGO] ---------------------------------
ENERGY SERVICE PROVIDER (ESP)
SERVICE AGREEMENT
---------------------------------
SECTION 2: REPRESENTATIONS
2.1 Each Party represents that it is and shall remain in compliance
with all applicable laws and tariffs, including applicable CPUC
requirements.
2.2 Each person executing this Agreement for the respective Parties
expressly represents and warrants that he or she has authority
to bind the entity on whose behalf this Agreement is executed.
2.3 Each Party represents that (a) it has the full power and
authority to execute and deliver this Agreement and to perform
its terms and conditions; (b) the execution, delivery and
performance of this Agreement have been duly authorized by all
necessary corporate or other action by such Party; and (c) this
agreement constitutes such Party's legal, valid and binding
obligation, enforceable against such Party in accordance with
its terms.
2.4 Each Party shall (a) exercise all reasonable care, diligence
and good faith in the performance of its duties pursuant to
this Agreement; and (b) carry out its duties in accordance with
applicable recognized professional standards in accordance with
the requirements of this Agreement.
SECTION 3: TERM OF SERVICE
The term of this Agreement shall commence on the date of
execution by both Parties hereto (the "Effective Date") and
shall terminate on the earlier of (a) the date ESP informs UDC
that it is no longer operating as an ESP in the UDC's service
territory; (b) the earlier termination pursuant to Section 4
hereof; or (c) the effective date of a new ESP Service
Agreement between the Parties hereto. Notwithstanding the
Effective Date of this Agreement, the ESP acknowledges that it
may only offer Direct Access Services to customers effective
January 1, 1998, or such other date as may be directed by the
CPUC for commencement of such services by ESPs, and only after
it has complied with all provisions of this Agreement and UDC's
applicable tariffs.
SECTION 4: EVENTS OF DEFAULT AND REMEDY FOR DEFAULT
4.1 An Event of Default under this Agreement shall include either
Party's material breach of any provision of this Agreement,
including those incorporated by reference herein, and failure
to cure such breach within thirty (30) calendar days of
receipt of written notice thereof from the non-defaulting
Party; or such other period
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<PAGE>
[LOGO] -----------------------------------
ENERGY SERVICE PROVIDER (ESP)
SERVICE AGREEMENT
-----------------------------------
as may be provided by this Agreement or the relevant direct
access tariff.
4.2 In the event of such an Event of Default, the non-defaulting
Party shall be entitled (a) to exercise any and all remedies
available under the relevant direct access tariff: (b) to the
extent not inconsistent with the relevant direct access
tariff, to exercise any and all remedies provided for by law
or in equity; and (c) in the event of a material Event of
Default, to terminate this Agreement upon written notice to
the other Party, which shall be effective upon the receipt
thereof.
4.3 Breach by any Party hereto of any provision of the relevant
direct access tariff shall be governed by applicable
provisions contained therein and each Party will retain all
rights granted thereunder.
SECTION 5: BILLING, METERING AND PAYMENT
5.1 Billing options and metering services which are available to
ESP shall be as described in the relevant direct access tariff,
as stated in UDC's Electric Rule 25. Billing and metering
options applicable to a particular customer shall be
designated in the Direct Access Service Request submitted by
the ESP for such customer.
5.2 UDC will bill and the ESP agrees to pay UDC for all services
and products provided by UDC in accordance with the terms
and conditions set forth in the relevant direct access tariff,
as stated in UDC's Electric Rule 25. Any services provided by
the ESP to the UDC shall be by separate agreement between the
Parties and are not a subject of this Agreement.
SECTION 6: LIMITATION OF LIABILITY
Each Party's liability to the other Party for any loss, cost,
claim, injury, liability, or expense, including reasonable
attorneys' fees, relating to or arising from any act or
omission in its performance of this Agreement, shall be
limited to the amount of direct damage actually incurred,
except as provided for in this Section. In no event shall
either Party be liable to the other Party for any indirect,
special, consequential, or punitive damages of any kind
whatsoever, whether in contract, tort or strict liability,
except in the event of an action covered by the
Indemnification provisions of Section 7 of this Agreement, in
which event this Section 6 shall not be applicable.
3
<PAGE>
[LOGO] -----------------------------------
ENERGY SERVICE PROVIDER (ESP)
SERVICE AGREEMENT
-----------------------------------
SECTION 7: INDEMNIFICATION
7.1 To the fullest extent permitted by law, and subject to the
limitations set forth in Section 6 of this Agreement, each
Party (the "Indemnified Party") shall indemnify and hold
harmless the other Party, and its current and future direct
and indirect parent companies, affiliates and their
shareholders, officers, directors, employees, agents, servants
and assigns (collectively, the "Indemnified Party") and at
the Indemnified Party's option, the Indemnifying Party shall
defend the Indemnified Party from and against any and all
claims and/or liabilities for losses, expenses, damage to
property, injury to or death of any person, including, but not
limited to, the Indemnified Party's employees and its
affiliates' employees, subcontractors and subcontractors'
employees, or any other liability incurred by the Indemnified
Party, including reasonable expenses, legal and otherwise,
which shall include reasonable attorneys' fees, caused wholly
or in part by any negligent, grossly negligent or willful act or
omission by the Indemnifying Party, its officers, directors,
employees, agents or assigns arising out of this Agreement,
except to the extent caused wholly or in part by any negligent,
grossly negligent or willful act or omission of the
Indemnified Party.
7.2 If any claim covered by Section 7.1 is brought against the
Indemnified Party, then the Indemnifying Party shall be
entitled to participate in, and unless in the opinion of
counsel for the Indemnified Party a conflict of interest
between the Parties may exist with respect to such claim,
assume the defense of such claim, with counsel reasonably
acceptable to the Indemnified Party. If the Indemnifying Party
does not assume the defense of the Indemnified Party, or if a
conflict precludes the Indemnifying Party from assuming the
defense, then the Indemnifying Party shall reimburse the
Indemnified Party on a monthly basis for the Indemnified
Party's defense through separate counsel of the Indemnified
Party's choice. Even if the Indemnifying Party assumes the
defense of the Indemnified Party with acceptable counsel, the
Indemnified Party, at its sole option, may participate in the
defense, at its own expense, with counsel of its own choice
without relieving the Indemnifying Party of any of its
obligations hereunder. In no event shall either Party be
liable to the other Party for any indirect, special,
consequential, or punitive damages of any kind whatsoever,
whether in contract, tort or strict liability.
7.3 The Indemnifying Party's obligation to indemnify under this
Section 7 shall survive termination of this Agreement, and
shall not be limited in any way by any limitation on the
amount or type of damages, compensation or benefits payable by
or for the Indemnifying Party under any statutory scheme,
including, without limitation, under any Worker's Compensation
Acts, Disability Benefit Acts or other Employee Benefit Acts.
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SECTION 8: ASSIGNMENT AND DELEGATION
8.1 Neither Party to this Agreement shall assign any of its rights
or obligations under this Agreement, except with the prior
written consent of the other Party, which consent shall not be
unreasonably withheld or delayed. No assignment of this
Agreement shall relieve the assigning Party of any of its
obligations under this Agreement until such obligations have
been assumed by the assignee. When duly assigned in accordance
with the foregoing, this Agreement shall be binding upon and
shall inure to the benefit of the assignee and the assignor
shall be relieved of its rights and obligations. Any
assignment in violation of this Section 8 shall be void.
8.2 Notwithstanding the provisions of this Section 8, either Party
may subcontract its duties under this Agreement to a
subcontractor, provided that the subcontracting Party shall
remain fully responsible as a principal and not as a guarantor
for performance of any subcontracted duties, shall serve as the
point of contact between its subcontractor and the other Party,
and shall provide the other Party with thirty (30) calendar
days' prior written notice of any such subcontracting, which
notice shall include such information about the subcontractor
as the other Party shall reasonably require, and provided
further that each Party may subcontract its obligation to
provide Metering or Meter Reading Services under this Agreement
only to subcontractors who have complied with all certification
or registration requirements described in applicable law, CPUC
rules and the relevant direct access tariff. If either Party
subcontracts any of its duties hereunder, it shall cause its
subcontractors to perform in a manner which is in conformity
with that Party's obligations under this Agreement.
SECTION 9: INDEPENDENT CONTRACTORS
Each Party shall perform its obligations under this Agreement
(including any obligations performed by a Party's designees as
permitted under Section 8 of this Agreement) as an independent
contractor.
SECTION 10: ENTIRE AGREEMENT
This Agreement consists of, in its entirety, this Energy
Service Provider Service Agreement and all attachments hereto,
all Direct Access Service Requests submitted pursuant to this
Agreement and the relevant direct access tariff. This
Agreement supersedes all other agreements or understandings,
written or oral, between the Parties related to the subject
matter hereof. This Agreement may be modified from time to
time only by an instrument in writing, signed by both Parties.
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SECTION 11: NONDISCLOSURE
11.1 Neither Party may disclose any Confidential Information
obtained pursuant to this Agreement to any third party,
including affiliates of such Party, without the express prior
written consent of the other Party. As used herein, the term
"Confidential Information" shall include, but not be limited
to, all business, financial, and commercial information
pertaining to the Parties, customers of either or both Parties,
suppliers for either Party, personnel of either Party, any
trade secrets, and other information of a similar nature,
whether written or in intangible form that is marked
proprietary or confidential with the appropriate owner's name.
Confidential Information shall not include information known to
either Party prior to obtaining the same from the other Party,
information in the public domain, or information obtained by a
Party from a third party who did not, directly or indirectly,
receive the same from the other Party to this Agreement or from
a party who was under an obligation of confidentiality to
the other Party to this Agreement or information developed by
either Party independent of any Confidential Information. The
receiving Party shall use the higher of the standard of care
that the receiving Party uses to preserve its own confidential
information or a reasonable standard of care to prevent
unauthorized use or disclosure of such Confidential
Information. Each receiving Party shall, upon termination of
this Agreement or at any time upon the request of the
disclosing Party, promptly return or destroy all Confidential
Information of the disclosing Party then in its possession.
11.2 Notwithstanding the preceding, Confidential Information may be
disclosed to any governmental, judicial or regulatory authority
requiring such Confidential Information pursuant to any
applicable law, regulation, ruling, or order, provided that:
(a) such Confidential Information is submitted under any
applicable provision, if any, for confidential treatment by
such governmental, judicial or regulatory authority; and (b)
prior to such disclosure, the other Party is given prompt
notice of the disclosure requirement so that it may take
whatever action it deems appropriate, including intervention in
any proceeding and the seeking of any injunction to prohibit
such disclosure.
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SECTION 12: ENFORCEABILITY
If any provision of this Agreement or the application thereof, is
to any extent held invalid or unenforceable, the remainder of this
Agreement and the application thereof, other than those provisions
which have been held invalid or unenforceable, shall not be
affected and shall continue in full force and effect and shall be
enforceable to the fullest extent permitted by law or in equity.
SECTION 13: NOTICES
13.1 Except as otherwise provided in this Agreement, any notices under
this Agreement shall be in writing and shall be effective upon
delivery if delivered by (a) hand; (b) U.S. Mail, first class
postage pre-paid, or (c) facsimile, with confirmation of receipt
to the Parties as follows:
IF THE NOTICE IS TO ESP:
Contact Name: GEORGE N. FALSONE
--------------------------------------------------------
Business Address: 14650 DETROIT AVENUE, SUITE 313
--------------------------------------------------
LAKEWOOD, OH 44107
--------------------------------------------------
Facsimile: 216-226-7737
-----------------------------------------------------------
IF THE NOTICE IS TO UDC:
Contact Name: MICHAEL A. GUNZELMAN
--------------------------------------------------------
Business Address: 8326 CENTURY PARK COURT, SUITE 6204
----------------------------------------------------
SAN DIEGO, CA 92123-1576
----------------------------------------------------
Facsimile: (619) 654-1794
----------------------------------------------------
13.2 Each Party shall be entitled to specify as its proper address any
other address in the United States upon written notice to the
other Party.
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13.3 Each Party shall designate on Attachment A the person(s) to be
contacted with respect to specific operational matters relating to
Direct Access service. Each Party shall be entitled to specify any
change to such person(s) upon written notice to the other Party.
SECTION 14: TIME OF ESSENCE
The Parties expressly agree that time is of the essence for all
portions of this Agreement.
SECTION 15: DISPUTE RESOLUTION
15.1 The form of this Agreement has been filed with and approved by the
CPUC as part of the UDC's applicable tariffs. Except as provided
in Section 15.2 and 15.3, any dispute arising between the Parties
relating to interpretation of the provisions of this Agreement or
to the performance of the UDC's obligations hereunder (including
the performance of Billing Services, Metering Services and MDMA
Services by the UDC) shall be reduced to writing and referred to
the Parties' representatives identified on Attachment A for
resolution. Should such a dispute arise, the parties shall be
required to meet and confer in an effort to resolve their
dispute. Pending resolution, the Parties shall proceed diligently
with the performance of their respective obligations under this
Agreement, except if this Agreement has been terminated under
Section 4.2. If the Parties fail to reach an agreement within a
reasonable period of time, the matter shall, upon demand of either
Party, be submitted to resolution before the CPUC in accordance
with the CPUC's rules, regulations and procedures applicable to
resolution of such disputes.
15.2 Any dispute arising between the Parties relating to interpretation
of the provisions of this Agreement or to the performance of the
ESP's obligations hereunder (including the performance of Billing
Services, Metering Services and MDMA Services by the ESP) shall be
reduced to writing and referred to the Parties' representatives
identified on Attachment A for resolution. Should such a dispute
arise, the parties shall be required to meet and confer in an
effort to resolve their dispute. Pending resolution, the Parties
shall proceed diligently with the performance of their respective
obligations under this Agreement, except if this Agreement has
been terminated under Section 4.2. If the Parties fail to reach an
agreement within a reasonable period of time, the parties may
mutually agree to pursue mediation or arbitration to resolve such
issues.
15.3 Notwithstanding the provisions of Paragraph 15.1 and 15.2 above:
(a) all disputes
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between the Parties relating to the payment by the ESP of any UDC
fees or charges shall be subject to the provisions of the UDC's
applicable tariffs governing disputes over customer bills; (b) all
disputes between the Parties regarding Competition Transition
Charges payable by direct access customers or the ESP on behalf of
such customers shall be subject to the provisions of the UDC's
applicable tariffs; and (c) the UDC may pursue available remedies
for unauthorized electrical use by the ESP in a court of competent
jurisdiction.
15.4 If the dispute involves a request for damages, parties are
notified that the Commission has no authority to award damages. To
resolve such issues, the parties may mutually agree to pursue
mediation or arbitration to resolve such issues, or if no
agreement is reached, to pursue other legal remedies that are
available to the parties.
SECTION 16: APPLICABLE LAW AND VENUE
This Agreement shall be interpreted, governed by and construed in
accordance with the laws of the State of California, and shall
exclude any choice of law rules that direct the application of the
laws of another jurisdiction, irrespective of the place of
execution or of the order in which the signatures of the parties
are affixed or of the place or places of performance. Except for
matters and disputes with respect to which the CPUC is the sole
proper venue for dispute resolution pursuant to applicable law or
this Agreement, the federal and state courts located in San Diego
County, California shall constitute the sole proper venue for
resolution of any matter or dispute hereunder, and the Parties
submit to the exclusive jurisdiction of such courts with respect
to such matters and disputes.
SECTION 17: FORCE MAJEURE
Neither party shall be liable for any delay or failure in the
performance of any part of this Agreement (other than obligations
to pay money) due to any event of force majeure or other cause
beyond its reasonable control, including but not limited to,
unusually severe weather, flood, fire, lightning, epidemic,
quarantine restriction, war, sabotage, act of a public enemy,
earthquake, insurrection, riot, civil disturbance, strike, work
stoppage caused by jurisdictional and similar disputes, restraint
by court order or public authority, or action or non-action by or
inability to obtain authorization or approval from any
governmental authority, or any combination of these causes, which
by the exercise of due diligence and foresight such Party could
not reasonably have been expected to avoid and which by the
exercise of due diligence is unable to overcome. It is agreed that
upon the Party so
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affected giving written notice and reasonably full particulars of
such force majeure to the other Party within a reasonable time
after the cause relied on, then the obligations of the Party, so
far as they are affected by the event of force majeure, shall be
suspended during the continuation of such inability and
circumstance and shall, so far as possible, be remedied with all
reasonable dispatch. In the event of force majeure, as
described herein, both Parties shall take all reasonable steps to
comply with this Agreement and UDC's applicable tariffs despite
occurrence of a force majeure event.
SECTION 18: UNAUTHORIZED USE OF ENERGY (ENERGY THEFT)
18.1 The ESP represents and warrants that for each of its Customers,
and at all times during which it provides Direct Access services
as an Energy Service Provider, the ESP shall completely,
accurately, and in a timely manner account for each of its
Customer's loads with a duly authorized Scheduling Coordinator.
Load data not accounted for in this manner may provide grounds for
termination of this Agreement. For verification purposes only, the
UDC shall have complete access to the identity of the Scheduling
Coordinator and the load data provided to it by the ESP. Such
information is to remain confidential, and shall not be disclosed
to any unauthorized person.
18.2 The UDC shall notify the ESP immediately and the ESP shall notify
the UDC immediately of any suspected unauthorized energy use. The
Parties agree to preserve any evidence of unauthorized energy use.
Once unauthorized energy use is suspected, the UDC, in its sole
discretion, may take any or all of the actions permitted under
UDC's applicable tariffs.
SECTION 19: NOT A JOINT VENTURE
Unless specifically stated in this Agreement to be otherwise, the
duties, obligations, and liabilities of the Parties are intended
to be several and not joint or collective. Nothing contained in
this Agreement shall ever be construed to create an association,
trust, partnership or joint venture or to impose a trust or
partnership duty, obligation, or liability on or with regard to
either Party. Each Party shall be liable individually and
severally for its own obligations under this Agreement.
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SECTION 20: CONFLICTS BETWEEN THIS AGREEMENT AND THE RELEVANT DIRECT ACCESS
TARIFF
Should a conflict exist or develop between the provisions of this
Agreement and the relevant direct access tariff, as approved by
the CPUC, the provisions of the relevant direct access tariff
shall prevail.
SECTION 21: AMENDMENTS OR MODIFICATIONS
21.1 Except as provided in Section 21.2, no amendment or modification
shall be made to this Agreement, in whole or in part, except by an
instrument in writing executed by authorized representatives of
the Parties, and no amendment or modification shall be made by
course of performance, course of dealing or usage of trade.
21.2 This Agreement may be subject to such changes or modifications as
the CPUC may from time to time direct or necessitate in the
exercise of its jurisdiction, and the Parties may amend the
Agreement to conform to changes directed or necessitated by the
CPUC. In the event the Parties are unable to agree on the required
changes or modifications to this Agreement, their dispute shall be
resolved in accordance with the provisions of Section 15 hereof
or, in the alternative, ESP may elect to terminate this Agreement
upon written notice to UDC, which shall be effective upon the
receipt thereof. UDC retains the right to unilaterally file with
the CPUC, pursuant to the CPUC's rules and regulations, an
application for a change in UDC's rates, charges, classification,
service or rules, or any agreement relating thereto.
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SECTION 22: BILLING OPTIONS OFFERED TO END-USE CUSTOMERS BY ESP
Check which billing options (as described in the relevant
direct access tariff) ESP intends to provide its Customers
under this Agreement.
X CONSOLIDATED BILLING BY UDC. (if ESP is selecting this
----- billing option, indicate the primary method for
notifying UDC of ESP charges)
X EDI
----
Other electronic exchange
----
----- CONSOLIDATED BILLING BY THE ESP. If ESP is selecting
this billing option, (a) ESP must submit a credit
application on the form supplied by UDC; and (b) indicate
the primary method for notifying ESP of UDC Charges
(CHECK ONE):
Paper
----
Diskette
----
EDI
----
Other electronic exchange
----
----- SEPARATE UDC AND ESP BILLS.
ESP may change these elections from time to time in compliance
with the relevant direct access tariff upon prior written
notice to UDC. The Direct Access Service Request for each
Direct Access customer will specify which billing option will
apply to that customer. If ESP specifies in any DASR any billing
option that has not been checked above, the DASR will be rejected.
SECTION 23: METER OPTIONS OFFERED TO END-USE CUSTOMERS BY ESP
PLEASE INDICATE WHICH METER OPTIONS (AS DESCRIBED IN UDC'S
APPLICABLE TARIFFS) THE ESP WILL OFFER FOR SOME OR ALL CUSTOMERS
SERVED UNDER THIS AGREEMENT:
ESP will provide Hourly Meters.
------
ESP will offer Hourly Meter Installation
------ Services.
ESP will offer Hourly Meter Reading Services.
------
ESP may change these elections from time to time in
compliance with the relevant
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direct access tariff upon prior written notice to
UDC. The Direct Access Service Request for each
Direct Access customer will specify which metering
option will apply to that Customer. If ESP
specifies in any Direct Access Service Request any
metering option that has not been checked above, the
DASR will be rejected.
SECTION 24: AUDITS
24.1 The UDC and the ESP shall each retain such specific records as
may be required to support the accuracy of meter data provided
in their respective consolidated billings. When either Party
reasonably believes that errors related to metering or billing
activity may have occurred, a Party may request the production
of such documents as may be required to verify the accuracy of
such metering and consolidated billing. Such documents shall
be provided within ten (10) business days of such request. In
the event the requesting Party, upon review of such documents,
continues to believe that the other Party's duty to accurately
meter and provide consolidated billing for usage has been
breached, the requesting Party may direct that an audit be
conducted. The UDC and the ESP shall designate their own
employee representative or their contracted representative to
audit the other party's records.
24.2 Any such audit shall be undertaken by the UDC, the ESP, or
their contracted representative at reasonable times without
interference with the audited Party's business operations, and
in compliance with the audited Party's security procedures.
UDC and the ESP agree to cooperate fully with any such audit.
24.3 Specific records to support the accuracy of meter data provided
in the consolidated billings may require examination of billing
and metering support documentation maintained by
subcontractors. UDC and the ESP shall include a similar
clause in their agreements with their subcontractors reserving
the right to designate their own employee representative, or
their contracted representative to audit records related to
consolidated billing to Direct Access Customers.
24.4 The auditing Party will notify the audited Party in writing of
any exception taken as a result of an audit. The audited Party
shall refund the amount of any undisputed exception to the
auditing Party within ten (10) days. If the audited Party
fails to make such payment, the audited Party agrees to pay
interest, accruing monthly, at a rate equal to the prime rate
plus two percent (2%) of Bank of America NT&SA, San Francisco,
or any successor institution, in effect from time to time, but
not to exceed the maximum contract rate permitted by the
applicable usury laws of the State of California. Interest will
be computed from the date of written notification of exceptions
to the date the audited Party reimburses the auditing Party for
any exception. The cost of such audit shall be
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paid by the auditing Party; provided, however, that in the event
an audit verifies overcharges of five percent (5%) or more, then
the audited Party shall reimburse the auditing Party for the cost
of the audit.
24.5 This right to audit shall extend for a period of three (3)
years following the date of final payment under this Agreement.
Each party and each subcontractor shall retain all necessary
records and documentation for the entire length of this audit
period.
SECTION 25: MISCELLANEOUS
25.1 Unless otherwise stated in this Agreement: (a) any reference in
this Agreement to a section, subsection, attachment or similar
term refers to the provisions of this Agreement; (b) a
reference to a section includes that section and all its
subsections; and (c) the words "include," "includes," and
"including" when used in this Agreement shall be deemed in each
case to be followed by the words "without limitation." The
Parties agree that the normal rule of construction to the
effect that any ambiguities are to be resolved against the
drafting Party shall not be employed in the interpretation of
this Agreement.
25.2 The provisions of this Agreement are for the benefit of the
Parties and not for any other person or third party
beneficiary. The provisions of this Agreement shall not impart
rights enforceable by any person, firm or organization other
than a Party or a successor or assignee of a Party to this
Agreement.
25.3 The descriptive headings of the various sections of this
Agreement have been inserted for convenience of reference only
and shall in no way define, modify or restrict any of the terms
and provisions thereof.
25.4 Any waiver at any time by either Party of its rights with
respect to a default under this Agreement, or with respect to
any other matter arising in connection with this Agreement,
shall not be deemed a waiver with respect to any other or
subsequent default or matter and no waiver shall
be considered effective unless in writing.
25.5 Each Party shall be responsible for paying its own attorneys'
fees and other costs associated with this Agreement, except as
provided in Sections 6 and 7 hereof. If a dispute exists
hereunder, the prevailing Party, as determined by the CPUC, or
as may otherwise be determined by the dispute resolution
procedure contained in Section 15 hereof, if used, or by a
court of law, shall be entitled to reasonable attorneys' fees
and costs.
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25.6 To the extent that the CPUC has a right under then-current law
to audit either Party's compliance with this Agreement or other
legal or regulatory requirements pertaining to Direct Access
transactions, that Party shall cooperate with such audits.
Nothing in this Section shall be construed as an admission by
either Party with respect to the right of the CPUC to conduct
such audits or the scope thereof.
25.7 Except as otherwise provided in this Agreement, all rights of
termination, cancellation or other remedies in this Agreement
are cumulative. Use of any remedy shall not preclude any other
remedy in this Agreement.
- ------------------------------------------------------------------------------
The Parties have executed this Agreement on the dates indicated
below, to be effective upon the later date.
On Behalf of ESP On Behalf of UDC
---------------- ----------------
By: /s/ George N. Falsone By: /s/ Michael A. Gunzelma
------------------------ --------------------------
Name: George N. Falsone Name: Michael A. Gunzelma
Title: PRESIDENT Title: Account Executive
Date: 4-9-98 Date: 4-27-98
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ATTACHMENT A
A. DEFINITIONS:
BILLING SERVICES - The consolidated billing services described in the
relevant direct access tariff which are provided by the UDC and/or ESP.
CONSOLIDATED ESP BILL - The consolidated bill prepared and presented by ESP
to an end-use customer which includes the customer's ESP Charges and UDC
Charges.
CONSOLIDATED UDC BILL - The consolidated bill prepared and presented by UDC
to an end-use customer which includes the Customer's ESP Charges and UDC
Charges.
DIRECT ACCESS CUSTOMERS - An end-use customer located within UDC's service
territory who purchases Direct Access Services through the ESP.
ESP CHARGES - Charges for Direct Access Services provided by the ESP.
METERING SERVICES - The meter installation, maintenance and related services
described in the relevant direct access tariff which are provided by the UDC
and/or ESP.
METER READING SERVICES - The meter reading and related services described in
the relevant direct access tariff which are provided by the UDC and/or ESP.
UDC CHARGES - Charges (a) for services provided by UDC; or (b) which are
energy-related and which are approved by the CPUC or the Federal Energy
Regulatory Commission (including any Competition Transition Charges or Fixed
Transition Amount Charges owing to UDC or its affiliates, as those terms are
defined under the California Public Utilities Code). Fixed Transition Amount
Charges are also referred to as Trust Transfer Amount (TTA) Charges.
- ------------------------------------------------------------------------------
B. CONTACT PERSONS (SECTION 13.3):
1. BILLING SERVICES
UDC Contact: Shirley Troxel (619) 654-8385
ESP Contact: George N. Falsone
2. METERING AND METER READING SERVICES
UDC Contact: Steve Grady (619) 654-8242
ESP Contact: George N. Falsone
C. PARTIES' REPRESENTATIVES (SECTION 15.1):
UDC Representative: Michael Schneider (619) 654-1705
ESP Representative: George N. Falsone
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SOUTHERN CALIFORNIA EDISON COMPANY
ENERGY SERVICE PROVIDER SERVICE AGREEMENT
Agreement Number:
---------------
This Energy Service Provider Service Agreement (this "Agreement")
is made and entered into as of this 20th day of April, 1998 by and
between "Full Power Corporation" ("ESP"), a corporation organized
and existing under the laws of the state of Ohio and Southern
California Edison Company ("Edison"), a corporation organized and
existing under the laws of the State of California. From time to
time, ESP and Edison shall be individually referred to herein as a
"Party" and collectively as the "Parties."
SECTION 1: GENERAL DESCRIPTION OF AGREEMENT
1.1 This Agreement is a legally binding contract. The Parties named in
this Agreement are bound by the terms set forth herein and
otherwise incorporated herein by reference. This Agreement shall
govern the business relationship between the Parties hereto by
which ESP shall offer electrical energy services, including, but
not limited to, account maintenance and billing services,
electrical meter installation, meter reading services and/or any
other services that may be approved by the California Public
Utilities Commission ("CPUC") in Direct Access transactions with
customers in Edison's service territory ("Direct Access
Services"). Each Party, by agreeing to undertake specific
activities and responsibilities for or on behalf of customers,
acknowledges that each Party shall relieve and discharge the other
Party of the responsibility for said activities and
responsibilities with respect to those customers. Except where
explicitly defined herein (including Attachment A hereto) the
definitions controlling this Agreement are contained in Edison's
applicable rules or in the relevant direct access tariff (Edison
Rule 22).
1.2 The form of this Agreement has been developed as part of the CPUC
regulatory process, was intended to conform to CPUC directions,
was filed and approved by the CPUC for use between Edison and
ESPs and may not be waived, altered, amended or modified, except
as provided herein or in the relevant direct access tariff, or as
may otherwise be authorized by the CPUC.
SECTION 2: REPRESENTATIONS
2.1 Each Party represents that it is and shall remain in compliance
with all applicable laws and tariffs, including applicable CPUC
requirements.
2.2 Each person executing this Agreement for the respective Parties
expressly represents and warrants that he or she has authority to
bind the entity on whose behalf this Agreement is executed.
2.3 Each Party represents that (a) it has the full power and authority
to execute and deliver this Agreement and to perform its terms and
conditions; (b) the execution, delivery and performance of this
Agreement have been duly authorized by all necessary corporate or
other action by such Party; and (c) this Agreement constitutes
such Party's legal, valid and binding obligation, enforceable
against such Party in accordance with its terms.
2.4 Each Party shall (a) exercise all reasonable care, diligence and
good faith in the performance of its duties pursuant to this
Agreement; and (b) carry out its duties in accordance with
applicable recognized professional standards in accordance with
the requirements of this Agreement.
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SOUTHERN CALIFORNIA EDISON COMPANY
ENERGY SERVICE PROVIDER SERVICE AGREEMENT
SECTION 3: TERM OF SERVICE
The term of this Agreement shall commence on the date of execution
by both Parties hereto (the "Effective Date") and shall terminate
on the earlier of (a) the date ESP informs Edison that it is no
longer operating as an ESP in Edison's service territory; (b) the
earlier termination pursuant to Section 4 hereof; or (c) the
effective date of a new ESP Service Agreement between the Parties
hereto. Notwithstanding the Effective Date of this Agreement, the
ESP acknowledges that it may only offer Direct Access Services to
customers effective January 1, 1998, or such other date as may be
directed by the CPUC for commencement of such services by ESPs,
and only after it has complied with all provisions of this
Agreement and Edison's applicable tariffs.
SECTION 4: EVENTS OF DEFAULT AND REMEDY FOR DEFAULT
4.1 An Event of Default under this Agreement shall include either
Party's material breach of any provision of this Agreement,
including those incorporated by reference herein, and failure to
cure such breach within thirty (30) calendar days of receipt of
written notice thereof from the non-defaulting Party; or such
other period as may be provided by this Agreement or the relevant
direct access tariff.
4.2 In the event of such an Event of Default, the non-defaulting Party
shall be entitled (a) to exercise any and all remedies available
under the relevant direct access tariff; (b) to the extent not
inconsistent with the relevant direct access tariff, to exercise
any and all remedies provided for by law or in equity; and (c) in
the event of a material Event of Default, to terminate this
Agreement upon written notice to the other Party, which shall be
effective upon the receipt thereof.
4.3 Breach by any Party hereto of any provision of the relevant direct
access tariff shall be governed by applicable provisions contained
therein and each Party will retain all rights granted thereunder.
SECTION 5: BILLING, METERING AND PAYMENT
5.1 Billing option and metering services which are available to ESP
shall be as described in the relevant direct access tariff.
Billing and metering options applicable to a particular customer
shall be designated in the Direct Access Service Request submitted
by the ESP for such customer.
5.2 Edison will bill and ESP agrees to pay Edison for all services and
products provided by Edison in accordance with the terms and
conditions set forth in the relevant direct access tariff. Any
services provided by the ESP to Edison shall be by separate
agreement between the Parties and are not a subject of this
Agreement.
SECTION 6: LIMITATION OF LIABILITY
Each Party's liability to the other Party for any loss, cost,
claim, injury, liability, or expense, including reasonable
attorneys' fees, relating to or arising from any act or omission
in its performance of this Agreement, shall be limited to the
amount of direct damage actually incurred, except as provided
for in this Section. In no event shall either Party be liable to
the other Party for any indirect, special, consequential, or
punitive damages of any kind whatsoever, whether in contract,
tort or strict liability, except in the event of an action covered
by the indemnification provisions of Section 7 of this Agreement,
in which event this Section 6 shall not be applicable.
2
<PAGE>
SOUTHERN CALIFORNIA EDISON COMPANY
ENERGY SERVICE PROVIDER SERVICE AGREEMENT
SECTION 7: INDEMNIFICATION
7.1 To the fullest extent permitted by law, and subject to the
limitations set forth in Section 6 of this Agreement, each Party
(the "Indemnifying Party") shall indemnify and hold harmless the
other Party, and its current and future direct and indirect
parent companies, affiliates and their shareholders, officers,
directors, employees, agents, servants and assigns (collectively,
the "Indemnified Party") and at the Indemnified Party's option,
the Indemnifying Party shall defend the Indemnified Party from
and against any and all claims and/or liabilities for losses,
expenses, damage to property, injury to or death of any person,
including, but not limited to, the Indemnified Party's employees
and its affiliates' employees, subcontractors and subcontractors'
employees, or any other liability incurred the Indemnified Party,
including reasonable expenses, legal and otherwise, which shall
include reasonable attorneys' fees, caused wholly or in part by
any negligent, grossly negligent or willful act or omission by
the Indemnifying Party, its officers, directors, employees,
agents or assigns arising out of this Agreement, except to the
extent caused wholly or in part by any negligent, grossly
negligent or willful act or omission of the Indemnified Party.
7.2 If any claim covered by Section 7.1 is brought against the
Indemnified Party, then the Indemnified Party shall be entitled
to participate in, and unless in the opinion of counsel for the
Indemnified Party a conflict of interest between the Parties may
exist with respect to such claim, assume the defense of such
claim, with counsel reasonably acceptable to the Indemnified
Party. If the Indemnifying Party does not assume the defense of
the Indemnified Party, or if a conflict precludes the
Indemnifying Party from assuming the defense, then the
Indemnifying Party shall reimburse the Indemnified Party on
a monthly basis for the Indemnified Party's defense through
separate counsel of the Indemnified Party's choice. Even if
the Indemnifying Party assumes the defense of the Indemnified
Party with acceptable counsel, the Indemnified Party, at its
sole option, may participate in the defense, at its own
expense, with counsel of its own choice without relieving
the Indemnifying Party of any of its obligations hereunder.
In no event shall either Party be liable to the other Party
for any indirect, special, consequential, or punitive damages
of any kind whatsoever, whether in contract, tort or strict
liability.
7.3 The Indemnifying Party's obligation to indemnify under this
Section 7 shall survive termination of this Agreement, and shall
not be limited in any way by any limitation on the amount or type
of damages, compensation or benefits payable by or for the
Indemnifying Party under any statutory scheme, including,
without limitation, under any Workers Compensation Acts,
Disability Benefit Acts or other Employee Benefit Acts.
SECTION 8: ASSIGNMENT AND DELEGATION
8.1 Neither Party to this Agreement shall assign any of its rights
or obligations under this Agreement, except with the prior
written consent of the other Party, which consent shall not be
unreasonably withheld or delayed. No assignment of this
Agreement shall relieve the assigning Party of any of its
obligations under this Agreement until such obligations have
been assumed by the assignee. When duly assigned in accordance
with the foregoing, this Agreement shall be binding upon and
shall inure to the benefit of the assignee and the assignor
shall be relieved of its rights and obligations. Any assignment
in violation of this Section 8 shall be void.
3
<PAGE>
SOUTHERN CALIFORNIA EDISON COMPANY
ENERGY SERVICE PROVIDER SERVICE AGREEMENT
8.2 Notwithstanding the provisions of this Section 8, either Party
may subcontract its duties under this Agreement to a
subcontractor, provided that the subcontracting Party shall
remain fully responsible as a principal and not as a guarantor
for performance of any subcontracted duties, shall serve as the
point of contact between its subcontractor and the other Party,
and shall provide the other Party with thirty (30) calendar days'
prior written notice of any such subcontracting, which notice
shall include such information about the subcontractor as the
other Party shall reasonably require, and provided further that
each Party may subcontract its obligation to provide Metering or
Meter Reading Services under this Agreement only to
subcontractors who have complied with all certification or
registration requirements described in applicable law, CPUC
rules and the relevant direct access tariff. If either Party
subcontracts any of its duties hereunder, it shall cause its
subcontractors to perform in a manner which is in conformity
with that Party's obligations under this Agreement.
SECTION 9: INDEPENDENT CONTRACTORS
Each Party shall perform its obligations under this Agreement
(including any obligations performed by a Party's designees as
permitted under Section 8 of this Agreement) as an independent
contractor.
SECTION 10: ENTIRE AGREEMENT
This Agreement consists of, in its entirety, this Energy Service
Provider Service Agreement and all attachments hereto, all Direct
Access Service Requests submitted pursuant to this Agreement
and the relevant direct access tariff. This Agreement supersedes
all other agreements or understandings, written or oral,
between the Parties related to the subject matter hereof. This
Agreement may be modified from time to time only by an
instrument in writing, signed by both Parties.
SECTION 11: NONDISCLOSURE
11.1 Neither Party may disclose any Confidential Information obtained
pursuant to this Agreement to any third party, including
affiliates of such Party, without the express prior written
consent of the other Party. As used herein, the term
"Confidential Information" shall include, but not be limited
to, all business, financial, and commercial information
pertaining to the Parties, customers of either or both Parties,
suppliers for either Party, personnel of either Party, any trade
secrets, and other information of a similar nature, whether
written or in intangible form that is marked proprietary or
confidential with the appropriate owner's name. Confidential
Information shall not include information known to either Party
prior to obtaining the same from the other Party, information in
the public domain, or information obtained by a Party from a
third party who did not, directly or indirectly, receive the
same from the other Party to this Agreement or from a party who
was under an obligation of confidentiality to the other Party
to this Agreement or information developed by either Party
independent of any Confidential Information. The receiving Party
shall use the higher of the standard of care that the receiving
Party uses to preserve its own confidential information or a
reasonable standard of care to prevent unauthorized use or
disclosure of such Confidential Information. Each receiving
Party shall, upon termination of this Agreement or at any time
upon the request of the disclosing Party, promptly return or
destroy all Confidential Information of the disclosing Party
then in its possession.
4
<PAGE>
SOUTHERN CALIFORNIA EDISON COMPANY
ENERGY SERVICE PROVIDER SERVICE AGREEMENT
11.2 Notwithstanding the preceding, Confidential Information may
be disclosed to any governmental, judicial or regulatory
authority requiring such Confidential Information pursuant
to any applicable law, regulation, ruling, or order,
provided that: (a) such Confidential Information is
submitted under any applicable provision, if any, for
confidential treatment by such governmental, judicial or
regulatory authority; and (b) prior to such disclosure, the
other Party is given prompt notice of the disclosure
requirement so that it may take whatever action it deems
appropriate, including intervention in any proceeding and
the seeking of any injunction to prohibit such disclosure.
SECTION 12: ENFORCEABILITY
If any provision of this Agreement or the application
thereof, is to any extent held invalid or unenforceable, the
remainder of this Agreement and the application thereof,
other than those provisions which have been held invalid or
unenforceable, shall not be affected and shall continue in
full force and effect and shall be enforceable to the
fullest extent permitted by law or in equity.
SECTION 13: NOTICES
13.1 Except as otherwise provided in this Agreement, any notices
under this Agreement shall be in writing and shall be
effective upon delivery if delivered by (a) hand; (b) U.S.
Mail, first class postage pre-paid, or (c) facsimile, with
confirmation of receipt to the Parties as follows:
IF THE NOTICE IS TO ESP:
Contact Name: George N. Falsone
----------------------------------
Business Address: 14650 Detroit Ave., Suite 313
------------------------------
Lakewood, OH 44107
- -----------------------------------------------
Facsimile: 216-226-7737
-------------------------------------
IF THE NOTICE IS TO EDISON:
Contact Name: Denise K. Grant
Business Address: 125 Elm Ave, 4th Floor
Long Beach, CA 90802
Facsimile: (562) 491-3798
13.2 Each Party shall be entitled to specify as its proper
address any other address in the United States upon written
notice to the other Party.
13.3 Each Party shall designate on Attachment A the person(s) to
be contacted with respect to specific operational matters
relating to Direct Access service. Each Party shall be
entitled to specify any change to such person(s) upon
written notice to the other Party.
SECTION 14: TIME OF ESSENCE
The Parties expressly agree that time is of the essence for
all portions of this Agreement.
5
<PAGE>
SOUTHERN CALIFORNIA EDISON COMPANY
ENERGY SERVICE PROVIDER SERVICE AGREEMENT
SECTION 15: DISPUTE RESOLUTION
15.1 The form of this Agreement has been filed with and approved
by the CPUC as part of Edison's applicable tariffs. Except
as provided in Section 15.2 and 15.3, any dispute arising
between the Parties relating to interpretation of the
provisions of this Agreement or to the performance of
Edison's obligations hereunder (including the performance of
Billing Services, Metering Services and MDMA Services by
Edison), shall be reduced to writing and referred to the
Parties' representatives identified on Attachment A for
resolution. Should such a dispute arise, the Parties shall
be required to meet and confer in an effort to resolve their
dispute. Pending resolution, the Parties shall proceed
diligently with the performance of their respective
obligations under this Agreement, except if this Agreement
has been terminated under Section 4.2. If the Parties fail
to reach an agreement within a reasonable period of time,
the matter shall, upon demand of either Party, be submitted
to resolution before the CPUC in accordance with the CPUC's
rules, regulations and procedures applicable to resolution
of such disputes.
15.2 Any dispute arising between the Parties relating to
interpretation of the provisions of this Agreement or to the
performance of the ESP's obligations hereunder (including
the performance of Billing Services, Metering Services and
MDMA Services by the ESP) shall be reduced to writing and
referred to the Parties' representatives identified on
Attachment A for resolution. Should such a dispute arise,
the Parties shall be required to meet and confer in an
effort to resolve their dispute. Pending resolution, the
Parties shall proceed diligently with the performance of
their respective obligations under this Agreement, except if
this Agreement has been terminated under Section 4.2. If
the Parties fail to reach an agreement within a reasonable
period of time, the Parties may mutually agree to pursue
mediation or arbitration to resolve such issues.
15.3 Notwithstanding the provisions of Paragraph 15.1 and 15.2
above: (a) all disputes between the Parties relating to the
payment by the ESP of any Edison fees or charges shall be
subject to the provisions of Edison's applicable tariffs
governing disputes over customer bills; (b) all disputes
between the Parties regarding Competition Transition Charges
payable by direct access customers or the ESP on behalf of
such customers shall be subject to the provisions of
Edison's applicable tariffs; and (c) Edison may pursue
available remedies for unauthorized electrical use by the
ESP in a court of competent jurisdiction.
15.4 If the dispute involves a request for damages, Parties are
notified that the Commission has no authority to award
damages. To resolve such issues, the Parties may mutually
agree to pursue mediation or arbitration to resolve such
issues, or if no agreement is reached, to pursue other legal
remedies that are available to the Parties.
SECTION 16: APPLICABLE LAW AND VENUE
This Agreement shall be interpreted, governed by and
construed in accordance with the laws of the State of
California, and shall exclude any choice of law rules that
direct the application of the laws of another jurisdiction,
irrespective of the place of execution or of the order in
which the signatures of the Parties are affixed or of the
place or places of performance. Except for matters and
disputes with respect to which the CPUC is the sole proper
venue for dispute resolution pursuant to applicable law or
this Agreement, the federal and state courts located in Los
Angeles County, California shall constitute the sole proper
venue for resolution of any matter or dispute hereunder, and
the Parties submit to the exclusive jurisdiction of such
courts with respect to such matters and disputes.
6
<PAGE>
SOUTHERN CALIFORNIA EDISON COMPANY
ENERGY SERVICE PROVIDER SERVICE AGREEMENT
SECTION 17: FORCE MAJEURE
Neither Party shall be liable for any delay or failure in the
performance of any part of this Agreement (other than
obligations to pay money) due to any event of force majeure or
other cause beyond its reasonable control, including but not
limited to, unusually severe weather, flood, fire, lightning,
epidemic, quarantine restriction, war, sabotage, act of a
public enemy, earthquake, insurrection, riot, civil
disturbance, strike, work stoppage caused by jurisdictional and
similar disputes, restraint by court order or public authority,
or action or non-action by or inability to obtain authorization
or approval from any governmental authority, or any combination
of these causes, which by the exercise of due diligence and
foresight such Party could not reasonably have been expected to
avoid and which by the exercise of due diligence is unable to
overcome. It is agreed that upon the Party so affected giving
written notice and reasonably full particulars of such force
majeure to the other Party within a reasonable time after the
cause relied on, then the obligations of the Party, so far as
they are affected by the event of force majeure, shall be
suspended during the continuation of such inability and
circumstance and shall, so far as possible, be remedied with
all reasonable dispatch. In the event of force majeure, as
described herein, both Parties shall take all reasonable steps
to comply with this Agreement and Edison's applicable tariffs
despite occurrence of a force majeure event.
SECTION 18: UNAUTHORIZED USE OF ENERGY (ENERGY THEFT)
18.1 The ESP represents and warrants that for each of its Customers,
and at all times during which it provides Direct Access services
as an Energy Service Provider, the ESP shall completely,
accurately, and in a timely manner account for each of its
Customer's loads with a duly authorized Scheduling Coordinator.
Load data not accounted for in this manner may provide grounds
for termination of this Agreement. For verification purposes
only, Edison shall have complete access to the identity of the
Scheduling Coordinator and the load data provided to it by the
ESP. Such information is to remain confidential, and shall not
be disclosed to any unauthorized person.
18.2 Edison shall notify the ESP immediately and the ESP shall
notify Edison immediately of any suspected unauthorized energy
use. The Parties agree to preserve any evidence of
unauthorized energy use. Once unauthorized energy use is
suspected, Edison, in its sole discretion, may take any or all
of the actions permitted under Edison's applicable tariffs.
SECTION 19: NOT A JOINT VENTURE
Unless specifically stated in this Agreement to be otherwise,
the duties, obligations, and liabilities of the Parties are
intended to be several and not joint or collective. Nothing
contained in this Agreement shall ever be construed to create
an association, trust, partnership or joint venture or to
impose a trust or partnership duty, obligation, or liability on
or with regard to either Party. Each Party shall be liable
individually and severally for its own obligations under this
Agreement.
SECTION 20: CONFLICTS BETWEEN THIS AGREEMENT AND THE RELEVANT DIRECT ACCESS
TARIFF
Should a conflict exist or develop between the provisions of
this Agreement and the relevant direct access tariff, as
approved by the CPUC, the provisions of the relevant direct
access tariff shall prevail.
7
<PAGE>
SOUTHERN CALIFORNIA EDISON COMPANY
ENERGY SERVICE PROVIDER SERVICE AGREEMENT
SECTION 21: AMENDMENTS OR MODIFICATIONS
21.1 Except as provided in Section 21.2, no amendment or
modification shall be made to this Agreement, in whole or in
part, except by an instrument in writing executed by authorized
representatives of the Parties, and no amendment or
modification shall be made by course of performance, course of
dealing or usage of trade.
21.2 This Agreement may be subject to such changes or modifications
as the CPUC may from time to time direct or necessitate in the
exercise of its jurisdiction, and the Parties may amend the
Agreement to conform to changes directed or necessitated by the
CPUC. In the event the Parties are unable to agree on the
required changes or modifications to this Agreement, their
dispute shall be resolved in accordance with the provisions of
Section 15 hereof or, in the alternative, ESP may elect to
terminate this Agreement upon written notice to Edison, which
shall be effective upon the receipt thereof. Edison retains
the right to unilaterally file with the CPUC, pursuant to the
CPUC's rules and regulations, an application for a change in
Edison's rates, charges, classification, service or rules, or
any agreement relating thereto.
SECTION 22: BILLING OPTIONS OFFERED TO END-USE CUSTOMERS BY ESP
Check which billing options (as described in the relevant
direct access tariff) ESP intends to provide its Customers
under this Agreement.
/X/ CONSOLIDATED EDISON BILLING. If ESP is selecting this
--- billing option, indicate the primary method for notifying
Edison of ESP charges (check one):
/X/ EDI
---
___ Other electronic exchange
___ CONSOLIDATED ESP BILLING. If ESP is selecting this billing
option, (a) ESP must submit a credit application on the
form supplied by Edison; and (b) indicate the primary
method for notifying ESP of Edison Charges (check one):
___ Paper
___ Diskette
___ EDI
___ Other electronic exchange
___ SEPARATE EDISON AND ESP BILLS.
ESP may change these elections from time to time in compliance
with the relevant direct access tariff upon prior written
notice to Edison. The Direct Access Service Request ("DASR")
for each Direct Access customer will specify which billing
option will apply to that customer. If ESP specifies in any
DASR any billing option that has not been checked above, the
DASR will be rejected.
8
<PAGE>
SOUTHERN CALIFORNIA EDISON COMPANY
ENERGY SERVICE PROVIDER SERVICE AGREEMENT
SECTION 23: METER OPTIONS OFFERED TO END-USE CUSTOMERS BY ESP
Please indicate which meter options (as described in Edison's
applicable tariffs) the ESP will offer for some or all Customers
served under this Agreement.
____ ESP will provide Hourly Meters.
____ ESP will offer Hourly Meter Installation Services.
____ ESP will offer Hourly Meter Reading Services.
ESP may change these elections from time to time in compliance
with the relevant direct access tariff upon prior written notice
to Edison. The Direct Access Service Request for each Direct
Access customer will specify which metering option will apply to
that Customer. If ESP specifies in any Direct Access Service
Request any metering option that has not been checked above, the
DASR will be rejected.
SECTION 24: AUDITS
24.1 Edison and the ESP shall each retain such specific records as
may be required to support the accuracy of meter data provided
in their respective consolidated billings. When either Party
reasonably believes that errors related to metering or billing
activity may have occurred, a Party may request the production
of such documents as may be required to verify the accuracy of
such metering and consolidated billing. Such documents shall be
provided within ten (10) business days of such request. In the
event the requesting Party, upon review of such documents,
continues to believe that the other Party's duty to accurately
meter and provide consolidated billing for usage has been
breached, the requesting Party may direct that an audit be
conducted. Edison and the ESP shall designate their own employee
representative or their contracted representative to audit the
other party's records.
24.2 Any such audit shall be undertaken by Edison, the ESP, or their
contracted representative at reasonable times without
interference with the audited Party's business operations, and
in compliance with the audited Party's security procedures.
Edison and the ESP agree to cooperate fully with any such audit.
24.3 Specific records to support the accuracy of meter data
provided in the consolidated billings may require examination of
billing and metering support documentation maintained by
subcontractors. Edison and the ESP shall include a similar clause
in their agreements with their subcontractors reserving the right
to designate their own employee representative, or their
contracted representative to audit records related to
consolidated billing to Direct Access Customers.
9
<PAGE>
SOUTHERN CALIFORNIA EDISON COMPANY
ENERGY SERVICE PROVIDER SERVICE AGREEMENT
24.4 The auditing Party will notify the audited Party in writing of
any exception taken as a result of an audit. The audited Party
shall refund the amount of any undisputed exception to the
auditing Party within ten (10) days. If the audited Party fails
to make such payment, the audited Party agrees to pay interest,
accruing monthly, at a rate equal to the prime rate plus two
percent (2%) of Bank of America NT&SA, San Francisco, or any
successor institution, in effect from time to time, but not to
exceed the maximum contract rate permitted by the applicable
usury laws of the State of California. Interest will be computed
from the date of written notification of exceptions to the date
the audited Party reimburses the auditing Party for any
exception. The cost of such audit shall be paid by the auditing
Party; provided, however, that in the event an audit verifies
overcharges of five percent (5%) or more, then the audited Party
shall reimburse the auditing Party for the cost of the audit.
24.5 This right to audit shall extend for a period of three (3) years
following the date of final payment under this Agreement. Each
Party and each subcontractor shall retain all necessary records
and documentation for the entire length of this audit period.
SECTION 25: MISCELLANEOUS
25.1 Unless otherwise stated in this Agreement: (a) any reference in
this Agreement to a section, subsection, attachment or similar
term refers to the provisions of this Agreement; (b) a reference
to a section includes that section and all its subsections; and
(c) the words "include," "includes," and "including" when used
in this Agreement shall be deemed in each case to be followed by
the words "without limitation." The Parties agree that the normal
rule of construction to the effect that any ambiguities are to be
resolved against the drafting Party shall not be employed in the
interpretation of this Agreement.
25.2 The provisions of this Agreement are for the benefit of the
Parties and not for any other person or third party beneficiary.
The provisions of this Agreement shall not impart rights
enforceable by any person, firm or organization other than a
Party or a successor or assignee of a Party to this Agreement.
25.3 The descriptive headings of the various sections of this
Agreement have been inserted for convenience of reference only
and shall in no way define, modify or restrict any of the terms
and provisions thereof.
25.4 Any waiver at any time by either Party of its rights with
respect to a default under this Agreement, or with respect to
any other matter arising in connection with this Agreement, shall
not be deemed a waiver with respect to any other or subsequent
default or matter and no waiver shall be considered effective
unless in writing.
25.5 Each Party shall be responsible for paying its own attorneys'
fees and other costs associated with this Agreement, except as
provided in Sections 6 and 7 hereof. If a dispute exists
hereunder, the prevailing Party, as determined by the CPUC, or
as may otherwise be determined by the dispute resolution
procedure contained in Section 15 hereof, if used, or by a court
of law, shall be entitled to reasonable attorneys' fees and
costs.
10
<PAGE>
SOUTHERN CALIFORNIA EDISON COMPANY
ENERGY SERVICE PROVIDER SERVICE AGREEMENT
25.6 To the extent that the CPUC has a right under then-
current law to audit either Party's compliance with
this Agreement or other legal or regulatory requirements
pertaining to Direct Access transactions, that Party shall
cooperate with such audits. Nothing in this Section shall
be construed as an admission by either Party with respect to
the right of the CPUC to conduct such audits or the scope
thereof.
25.7 Except as otherwise provided in this Agreement, all rights
of termination, cancellation or other remedies in this
Agreement are cumulative. Use of any remedy shall not
preclude any other remedy in this Agreement.
- ------------------------------------------------------------------------------
The Parties have executed this Agreement on the dates indicated
below, to be effective upon the later date.
ON BEHALF OF ESP ON BEHALF OF EDISON
By: /s/ George N. Falsone By: /s/ Pamela A. Bass
--------------------------- -----------------------------
Name: George N. Falsone Name: Pamela A. Bass
------------------------- -------------------------
Title: PRESIDENT Title: Vice President, Customer
------------------------ Solutions Bus. Unit
--------------------------
Date: 4-9-98 Date: 5/14/98
------------------------- --------------------------
[SEAL]
11
<PAGE>
SOUTHERN CALIFORNIA EDISON COMPANY
ENERGY SERVICE PROVIDER SERVICE AGREEMENT
ATTACHMENT A
A. DEFINITIONS:
BILLING SERVICES - The consolidated billing services described in the
relevant direct access tariff which are provided by Edison and/or
ESP.
CONSOLIDATED ESP BILL - The consolidated bill prepared and presented by ESP
to an end-use customer which includes the customers ESP Charges and
Edison Charges.
CONSOLIDATED EDISON BILL - The consolidated bill prepared and presented by
Edison to an end-use customer which includes the Customers ESP Charges and
Edison Charges.
DIRECT ACCESS CUSTOMERS - An end-use customer located within Edison's service
territory who purchases Direct Access Services through the ESP.
ESP CHARGES - Charges for Direct Access Services provided by the ESP.
METERING SERVICES - The meter installation, maintenance and related services
described in the relevant direct access tariff which are provided by Edison
and/or ESP.
METER READING SERVICES - The meter reading and related services described in
the relevant direct access tariff which are provided by Edison and/or ESP.
EDISON CHARGES - Charges (a) for services provided by Edison; or (b) which
are energy-related and which are approved by the CPUC or the Federal Energy
Regulatory Commission (including any Competition Transition Charges or Fixed
Transition Amount Charges owing to Edison or its affiliates, as those terms
are defined under the California Public Utilities Code). Fixed Transition
Amount Charges are also referred to as Trust Transfer Amount (TTA) Charges.
- ------------------------------------------------------------------------------
B. CONTACT PERSONS (SECTION 13.3):
1. BILLING SERVICES
Edison Contact Jim Navarette (626) 633-3155
--------------------------------------------
ESP Contact George N. Falsone (216) 227-9835
--------------------------------------------
2. METERING AND METER READING SERVICES
Edison Contact Dave Bernaudo, metering (562) 903-3122
------------------------------------------
Ron Schaeter, meter reading (805) 945-9323
ESP Contact George N. Falsone (216) 227-9835
--------------------------------------------
C. PARTIES' REPRESENTATIVES (SECTION 15.1):
Edison Representative: Denise K. Grant
------------------------------------
ESP Representative: George N. Falsone (216) 227-9835
----------------------------------------
A-1
<PAGE>
Pacific Gas and Electric Company
[LOGO] ENERGY SERVICE PROVIDER (ESP) SERVICE
AGREEMENT
This Energy Service Provider (ESP) Service Agreement (this "Agreement") is made
and entered into as of this 9th day of May, 1998, by and between "Full Power
Corporation" ("ESP"), a corporation organized and existing under the laws of the
state of Ohio, and "Pacific Gas and Electric Company" ("PG&E"), a corporation
organized and existing under the laws of the state of California. From time to
time, ESP and PG&E shall be individually referred to herein as a "Party" and
collectively as the "Parties."
SECTION 1: GENERAL DESCRIPTION OF AGREEMENT
1.1 This Agreement is a legally binding contract. The Parties named in
this Agreement are bound by the terms set forth herein and
otherwise incorporated herein by reference. This Agreement shall
govern the business relationship between the Parties hereto by
which ESP shall offer electrical energy services, including, but
not limited to, account maintenance and billing services,
electrical meter installation, meter reading services and/or any
other services that may be approved by the California Public
Utilities Commission ("CPUC") in Direct Access transactions with
customers in PG&E's service territory ("Direct Access Services").
Each Party, by agreeing to undertake specific activities and
responsibilities for or on behalf of customers, acknowledges that
each Party shall relieve and discharge the other Party of the
responsibility for said activities and responsibilities with
respect to those customers. Except where explicitly defined herein
(including Attachment A hereto) the definitions controlling this
Agreement are contained in PG&E's applicable rules or in the
relevant direct access tariff.
1.2 The form of this Agreement has been developed as part of the CPUC
regulatory process, was intended to conform to CPUC directions,
was filed and approved by the CPUC for use between PG&E and ESPs
and may not be waived, altered, amended or modified, except as
provided herein or in the relevant direct access tariff, or as may
otherwise be authorized by the CPUC.
SECTION 2: REPRESENTATIONS
2.1 Each Party represents that it is and shall remain in compliance
with all applicable laws and tariffs, including applicable CPUC
requirements.
2.2 Each person executing this Agreement for the respective Parties
expressly represents and warrants that he or she has authority to
bind the entity on whose behalf this Agreement is executed.
Form No. 79-948
Page 1 of 15
Tariffs & Compliance
October 30, 1997
<PAGE>
2.3 Each Party represents that (a) it has the full power and authority
to execute and deliver this Agreement and to perform its terms and
conditions; (b) the execution, delivery and performance of this
Agreement have been duly authorized by all necessary corporate or
other action by such Party; and (c) this agreement constitutes
such Party's legal, valid and binding obligation, enforceable
against such Party in accordance with its terms.
2.4 Each Party shall (a) exercise all reasonable care, diligence and
good faith in the performance of its duties pursuant to this
Agreement; and (b) carry out its duties in accordance with
applicable recognized professional standards in accordance with
the requirements of this Agreement.
SECTION 3: TERM OF SERVICE
The term of this Agreement shall commence on the date of execution
by both Parties hereto (the "Effective Date") and shall terminate
on the earlier of (a) the date ESP informs PG&E that it is no
longer operating as and ESP in PG&E's service territory; (b) the
earlier termination pursuant to Section 4 hereof; or (c) the
effective date of a new ESP Service Agreement between the Parties
hereto. Notwithstanding the Effective Date of this Agreement, the
ESP acknowledges that it may only offer Direct Access Services to
customers effective January 1, 1998, or such other date as may be
directed by the CPUC for commencement of such services by ESPs,
and only after it has complied with all provisions of this
Agreement and PG&E's applicable tariffs.
SECTION 4: EVENTS OF DEFAULT AND REMEDY FOR DEFAULT
4.1 An Event of Default under this Agreement shall include either
Party's material breach of any provision of this Agreement,
including those incorporated by reference herein, and failure to
cure such breach within thirty (30) calendar days of receipt of
written notice thereof from the non-defaulting Party; or such
other period as may be provided by this Agreement or PG&E's direct
access tariff.
4.2 In the event of such an Event of Default, the non-defaulting Party
shall be entitled (a) to exercise any and all remedies available
under PG&E's direct access tariff; (b) to the extent not
inconsistent with PG&E's direct access tariff, to exercise any and
all remedies provided for by law or in equity; and (c) in the
event of a material Event of Default, to terminate this Agreement
upon written notice to the other Party, which shall be effective
upon the receipt thereof.
4.3 Breach by any Party hereto of any provision of PG&E's direct
access tariff shall be governed by applicable provisions contained
therein and each Party will retain all rights granted thereunder.
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<PAGE>
SECTION 5: BILLING, METERING AND PAYMENT
5.1 Billing options and metering services which are available to
ESP shall be as described in PG&E's direct access tariff, as
stated in PG&E's Electric Rule 22. Billing and metering
options applicable to a particular customer shall be designated
in the Direct Access Service Request submitted by the ESP for
such customer.
5.2 PG&E will bill and the ESP agrees to pay PG&E for all services
and products provided by PG&E in accordance with the terms and
conditions set forth in PG&E's direct access tariff, as stated
in PG&E's Electric Rule 22 and PG&E's rate schedules. Any
services provided by the ESP to PG&E shall be by separate
agreement between the Parties and are not a subject of this
Agreement.
SECTION 6: LIMITATION OF LIABILITY
Each Party's liability to the other Party for any loss, cost,
claim, injury, liability, or expense, including reasonable
attorneys' fees, relating to or arising from any act or
omission in its performance of this Agreement, shall be
limited to the amount of direct damage actually incurred,
except as provided for in this Section. In no event shall
either Party be liable to the other Party for any indirect,
special, consequential, or punitive damages of any kind
whatsoever, whether in contract, tort or strict liability,
except in the event of an action covered by the
indemnification provisions of Section 7 of this Agreement, in
which event this Section 6 shall not be applicable.
SECTION 7: INDEMNIFICATION
7.1 To the fullest extent permitted by law, and subject to the
limitations set forth in Section 6 of this Agreement, each
Party (the "Indemnifying Party") shall indemnify and hold
harmless the other Party, and its current and future direct
and indirect parent companies, affiliates and their
shareholders, officers, directors, employees, agents, servants
and assigns (collectively, the "Indemnified Party") and at the
Indemnified Party's option, the Indemnifying Party shall
defend the Indemnified Party from and against any and all
claims and/or liabilities for losses, expenses, damage to
property, injury to or death of any person, including, but not
limited to, the Indemnified Party's employees and its
affiliates' employees, subcontractors and subcontractors'
employees, or any other liability incurred by the Indemnified
Party, including reasonable expenses, legal and otherwise,
which shall include reasonable attorneys' fees, caused wholly
or in part by any negligent, grossly negligent or willful act
or omission by the Indemnifying Party, its officers,
directors, employees, agents or assigns arising out of this
Agreement, except to the extent caused wholly or in part by any
negligent, grossly negligent or willful act or omission of the
Indemnified Party.
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7.2 If any claim covered by Section 7.1 is brought against the
Indemnified Party, then the Indemnifying Party shall be
entitled to participate in, and unless in the opinion of
counsel for the Indemnified Party a conflict of interest
between the Parties may exist with respect to such claim, assume
the defense of such claim, with counsel reasonably acceptable to
the Indemnified Party. If the Indemnifying Party does not
assume the defense of the Indemnified Party, or if a conflict
precludes the Indemnifying Party from assuming the defense,
then the Indemnifying Party shall reimburse the Indemnified
Party on a monthly basis for the Indemnified Party's defense
through separate counsel of the Indemnified Party's choice.
Even if the Indemnifying Party assumes the defense of the
Indemnified Party with acceptable counsel, the Indemnified
Party, at its sole option, may participate in the defense, at
its own expense, with counsel of its own choice without
relieving the Indemnifying Party of any of its obligations
hereunder. In no event shall either Party be liable to the
other Party for any indirect, special, consequential, or
punitive damages of any kind whatsoever, whether in contract,
tort or strict liability.
7.3 The Indemnifying Party's obligation to indemnify under this
Section 7 shall survive termination of this Agreement, and
shall not be limited in any way by any limitation on the
amount or type of damages, compensation or benefits payable by
or for the Indemnifying Party under any statutory scheme,
including, without limitation, under any Workers Compensation
Acts, Disability Benefit Acts or other Employee Benefit Acts.
SECTION 8: ASSIGNMENT AND DELEGATION
8.1 Neither Party to this Agreement shall assign any of its rights
or obligations under this Agreement, except with the prior
written consent of the other Party, which consent shall not be
unreasonably withheld or delayed. No assignment of this
Agreement shall relieve the assigning Party of any of its
obligations under this Agreement until such obligations have
been assumed by the assignee. When duly assigned in
accordance with the foregoing, this Agreement shall be binding
upon and shall inure to the benefit of the assignee and the
assignor shall be relieved of its rights and obligations. Any
assignment in violation of this Section 8 shall be void.
8.2 Notwithstanding the provisions of this Section 8, either
Party may subcontract its duties under this Agreement to a
subcontractor, provided that the subcontracting Party shall
remain fully responsible as a principal and not as a guarantor
for performance of any subcontracted duties, shall serve as
the point of contact between its subcontractor and the other
Party, and shall provide the other Party with thirty (30)
calendar days' prior written notice of any such subcontracting,
which notice shall include such information about the
subcontractor as the other Party shall reasonably require, and
provided further that each Party may subcontract its obligation
to provide Metering or Meter Reading Services under this
Agreement only to subcontractors who have complied with all
certification or registration requirements described in
applicable law, CPUC rules and PG&E's
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<PAGE>
direct access tariff. If either Party subcontracts any of its
duties hereunder, it shall cause its subcontractors to perform
in a manner which is in conformity with that Party's obligations
under this Agreement.
SECTION 9: INDEPENDENT CONTRACTORS
Each Party shall perform its obligations under this Agreement
(including any obligations performed by a Party's designees as
permitted under Section 8 of this Agreement) as an independent
contractor.
SECTION 10: ENTIRE AGREEMENT
This Agreement consists of, in its entirety, this Energy Service
Provider Service Agreement and all attachments hereto, all
Direct Access Service Requests submitted pursuant to this
Agreement and PG&E's direct access tariff. This Agreement
supersedes all other agreements or understandings, written or
oral, between the Parties related to the subject matter hereof.
This Agreement may be modified from time to time only by an
instrument in writing, signed by both Parties.
SECTION 11: NONDISCLOSURE
11.1 Neither Party may disclose any Confidential Information obtained
pursuant to this Agreement to any third party, including
affiliates of such Party, without the express prior written
consent of the other Party. As used herein, the term
"Confidential Information" shall include, but not be limited to,
all business, financial, and commercial information pertaining
to the Parties, customers of either or both Parties, suppliers
for either Party, personnel of either Party, any trade secrets,
and other information of a similar nature, whether written or in
intangible form that is marked proprietary or confidential with
the appropriate owner's name. Confidential information shall not
include information known to either Party prior to obtaining the
same from the other Party, information in the public domain, or
information obtained by a Party from a third party who did not,
directly or indirectly, receive the same from the other Party to
this Agreement or from a party who was under an obligation of
confidentiality to the other Party to this Agreement or
information developed by either Party independent of any
Confidential Information. The receiving Party shall use the
higher of the standard of care that the receiving Party uses to
preserve its own confidential information or a reasonable
standard of care to prevent unauthorized use or disclosure of
such Confidential Information. Each receiving Party shall, upon
termination of this Agreement or at any time upon the request of
the disclosing Party, promptly return or destroy all
Confidential Information of the disclosing Party then in its
possession.
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11.2 Notwithstanding the preceding, Confidential Information may be
disclosed to any governmental, judicial or regulatory authority
requiring such Confidential Information pursuant to any
applicable law, regulation, ruling, or order, provided that (a)
such Confidential Information is submitted under any applicable
provision, if any, for confidential treatment by such
governmental, judicial or regulatory authority; and (b) prior to
such disclosure, the other Party is given prompt notice of the
disclosure requirement so that it may take whatever action it
deems appropriate, including intervention in any proceeding and
the seeking of any injunction to prohibit such disclosure.
SECTION 12: ENFORCEABILITY
If any provision of this Agreement or the application thereof is
to any extent held invalid or unenforceable, the remainder of
this Agreement and the application thereof, other than those
provisions which have been held invalid or unenforceable, shall
not be affected and shall continue in full force and effect and
shall be enforceable to the fullest extent permitted by law or
in equity.
SECTION 13: NOTICES
13.1 Except as otherwise provided in this Agreement, any notices
under this Agreement shall be in writing and shall be effective
upon delivery if delivered by (a) hand; (b) U.S. Mail, first
class postage pre-paid, or (c) facsimile, with confirmation of
receipt to the Parties as follows:
IF THE NOTICE IS TO ESP:
Contact Name:
---------------------------------------------------
Business Address:
-----------------------------------------------
-----------------------------------------------------------------
Facsimile:
------------------------------------------------------
IF THE NOTICE IS TO PG&E:
CONTACT NAME: Director of ESP Relations
BUSINESS ADDRESS:
Account Services Department
Mail Code H 28 B
P.O. Box 770000
SAN FRANCISCO, CA 94177
Form No. 79-948
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<PAGE>
13.2 Each Party shall be entitled to specify as its proper address
any other address in the United States upon written notice to the
other Party.
13.3 Each Party shall designate on Attachment A the person(s) to be
contacted with respect to specific operational matters relating
to Direct Access service. Each Party shall be entitled to
specify any change to such person(s) upon written notice to the
other Party.
SECTION 14: TIME OF ESSENCE
The Parties expressly agree that time is of the essence for all
portions of this Agreement.
SECTION 15: DISPUTE RESOLUTION
15.1 The form of this Agreement has been filed with and approved by
the CPUC as part of PG&E's applicable tariffs. Except as
provided in Section 15.2 and 15.3, any dispute arising between
the Parties relating to interpretation of the provisions of this
Agreement or to the performance of PG&E's obligations hereunder
(including the performance of Billing Services, Metering
Services and MDMA Services by PG&E) shall be reduced to writing
and referred to the Parties' representatives identified on
Attachment A for resolution. Should such a dispute arise, the
parties shall be required to meet and confer in an effort to
resolve their dispute. Pending resolution, the Parties shall
proceed diligently with the performance of their respective
obligations under this Agreement, except if this Agreement has
been terminated under Section 4.2. If the Parties fail to reach
an agreement within a reasonable period of time, the matter
shall, upon demand of either Party, be submitted to resolution
before the CPUC in accordance with the CPUC's rules, regulations
and procedures applicable to resolution of such disputes.
15.2 Any dispute arising between the Parties relating to
interpretation of the provisions of this Agreement or to the
performance of the ESP's obligations hereunder (including the
performance of Billing Services, Metering Services and MDMA
Services by the ESP) shall be reduced to writing and referred to
the Parties' representatives identified on Attachment A for
resolution. Should such a dispute arise, the parties shall be
required to meet and confer in an effort to resolve their
dispute. Pending resolution, the Parties shall proceed
diligently with the performance of their respective obligations
under this Agreement, except if this Agreement has been
terminated under Section 4.2. If the Parties fail to reach an
agreement within a reasonable period of time, the parties may
mutually agree to pursue mediation or arbitration to resolve
such issues.
15.3 Notwithstanding the provisions of Paragraph 15.1 and 15.2 above:
(a) all disputes between the Parties relating to the payment by
the ESP of any PG&E fees or
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<PAGE>
charges shall be subject to the provisions of PG&E's applicable
tariffs governing disputes over customer bills; (b) all disputes
between the Parties regarding Competition Transition Charges
payable by direct access customers or the ESP on behalf of such
customers shall be subject to the provisions of PG&E's
applicable tariffs; and (c) PG&E may pursue available remedies
for unauthorized electrical use by the ESP in a court of
competent jurisdiction.
15.4 If the dispute involves a request for damages, parties are
notified that the Commission has no authority to award damages.
To resolve such issues, the parties may mutually agree to pursue
mediation or arbitration to resolve such issues, or if no
agreement is reached, to pursue other legal remedies that are
available to the parties.
SECTION 16: APPLICABLE LAW AND VENUE
This Agreement shall be interpreted, governed by and construed
in accordance with the laws of the State of California, and
shall exclude any choice of law rules that direct the
application of the laws of another jurisdiction, irrespective of
the place of execution or of the order in which the signatures
of the parties are affixed or of the place or places of
performance. Except for matters and disputes with respect to
which the CPUC is the sole proper venue for dispute resolution
pursuant to applicable law or this Agreement, the federal and
state courts located in San Francisco County, California shall
constitute the sole proper venue for resolution of any matter or
dispute hereunder, and the Parties submit to the exclusive
jurisdiction of such courts with respect to such matters and
disputes.
SECTION 17: FORCE MAJEURE
Neither Party shall be liable for any delay or failure in the
performance of any part of this Agreement (other than
obligations to pay money) due to any event of force majeure or
other cause beyond its reasonable control, including but not
limited to, unusually severe weather, flood, fire, lightning,
epidemic, quarantine restriction, war, sabotage, act of a public
enemy, earthquake, insurrection, riot, civil disturbance,
strike, work stoppage caused by jurisdictional and similar
disputes, restraint by court order or public authority, or
action or non-action by or inability to obtain authorization or
approval from any governmental authority, or any combination of
these causes which by the exercise of due diligence and
foresight such Party could not reasonably have been expected to
avoid and which by the exercise of due diligence is unable to
overcome. It is agreed that upon the Party so affected giving
written notice and reasonably full particulars of such force
majeure to the other Party within a reasonable time after the
cause relied on, then the obligations of the Party, so far as
they are affected by the event of force majeure, shall be
suspended during the continuation of such inability and
circumstance and shall, so far as possible, be remedied with all
reasonable dispatch. In the event of force majeure, as described
herein, both Parties shall take all reasonable steps to comply
with this Agreement
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and PG&E's applicable tariffs despite occurrence of a force
majeure event.
SECTION 18: UNAUTHORIZED USE OF ENERGY (ENERGY THEFT)
18.1 The ESP represents and warrants that for each of its Customers,
and at all times during which it provides Direct Access services
as an Energy Service Provider, the ESP shall completely,
accurately, and in a timely manner account for each of its
Customer's loads with a duly authorized Scheduling Coordinator.
Load data not accounted for in this manner may provide grounds
for termination of this Agreement. For verification purposes
only, PG&E shall have complete access to the identity of the
Scheduling Coordinator and the load data provided to it by the
ESP. Such information is to remain confidential, and shall not
be disclosed to any unauthorized person.
18.2 PG&E shall notify the ESP immediately and the ESP shall notify
PG&E immediately of any suspected unauthorized energy use. The
Parties agree to preserve any evidence of unauthorized energy
use. Once unauthorized energy use is suspected, PG&E, in its
sole discretion, may take any or all of the actions permitted
under PG&E's applicable tariffs.
SECTION 19: NOT A JOINT VENTURE
Unless specifically stated in this Agreement to be otherwise,
the duties, obligations, and liabilities of the Parties are
intended to be several and not joint or collective. Nothing
contained in this Agreement shall ever be construed to create an
association, trust, partnership or joint venture or to impose a
trust or partnership duty, obligation, or liability on or with
regard to either Party. Each Party shall be liable individually
and severally for its own obligations under this Agreement.
SECTION 20: CONFLICTS BETWEEN THIS AGREEMENT AND PG&E'S DIRECT ACCESS TARIFF
Should a conflict exist or develop between the provisions of
this Agreement and PG&E's direct access tariff, as approved by
the CPUC, the provisions of PG&E's direct access tariff shall
prevail.
SECTION 21: AMENDMENTS OR MODIFICATIONS
21.1 Except as provided in Section 21.2, no amendment or modification
shall be made to this Agreement, in whole or in part, except by
an instrument in writing executed by authorized representatives
of the Parties, and no amendment or modification shall be made
by course of performance, course of dealing or usage of trade.
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21.2 This Agreement may be subject to such changes or modifications
as the CPUC may from time to time direct or necessitate in the
exercise of its jurisdiction, and the Parties may amend the
Agreement to conform to changes directed or necessitated by the
CPUC. In the event the Parties are unable to agree on the
required changes or modifications to this Agreement, their
dispute shall be resolved in accordance with the provisions of
Section 15 hereof or, in the alternative, ESP may elect to
terminate this Agreement upon written notice to PG&E, which
shall be effective upon the receipt thereof. PG&E retains the
right to unilaterally file with the CPUC, pursuant to the CPUC's
rules and regulations, an application for a change in PG&E's
rates, charges, classification, service or rules, or any
agreement relating thereto.
SECTION 22: BILLING OPTIONS OFFERED TO END-USE CUSTOMERS BY ESP
Check which billing options (as described in PG&E's direct
access tariff) ESP intends to provide its Customers under this
Agreement.
X CONSOLIDATED BILLING BY PG&E.
-------
CONSOLIDATED BILLING BY THE ESP.
-------
SEPARATE PG&E AND ESP BILLS.
-------
ESP may change these elections from time to time in compliance
with the relevant direct access tariff upon prior written notice
to PG&E. The Direct Access Service Request (DASR) for each
Direct Access customer will specify which billing option will
apply to that customer. If ESP specifies in any DASR any billing
option that has not been checked above, the DASR will be
rejected.
SECTION 23: METER OPTIONS OFFERED TO END-USE CUSTOMERS BY ESP
Check which meter options (as described in PG&E's direct access
tariff) ESP will offer for some or all of its Customers served
under this Agreement.
ESP will provide Hourly Meters.
-------
ESP will offer Hourly Meter Installation Services.
-------
ESP will offer Hourly Meter Reading Services.
-------
ESP may change these elections from time to time in compliance
with PG&E's direct access tariff upon prior written notice to
PG&E. The Direct Access Service Request (DASR) for each Direct
Access customer will specify which metering option will apply to
that Customer. If ESP specifies in any Direct
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<PAGE>
Access Service Request any metering option that has not been checked above,
the DASR will be rejected.
SECTION 24: AUDITS
24.1 PG&E and the ESP shall each retain such specific records as may be
required to support the accuracy of meter data provided in their
respective consolidated billings. When either Party reasonably
believes that errors related to metering or billing activity may
have occurred, a Party may request the production of such
documents as may be required to verify the accuracy of such
metering and consolidated billing. Such documents shall be
provided within ten (10) business days of such request. In the
event the requesting Party upon review of such documents,
continues to believe that the other Party's duty to accurately
meter and provide consolidated billing for usage has been
breached, the requesting Party may direct that an audit be
conducted. PG&E and the ESP shall designate their own employee
representative or their contracted representative to audit the
other party's records.
24.2 Any such audit shall be undertaken by PG&E, the ESP, or their
contracted representative at reasonable times without interference
with the audited Party's business operations, and in compliance
with the audited Party's security procedures. PG&E and the ESP
agree to cooperate fully with any such audit.
24.3 Specific records to support the accuracy of meter data provided in
the consolidated billings may require examination of billing and
metering support documentation maintained by subcontractors. PG&E
and the ESP shall include a similar clause in their agreements
with their subcontractors reserving the right to designate their
own employee representative, or their contracted representative to
audit records related to consolidated billing to Direct Access
Customers.
24.4 The auditing Party will notify the audited Party in writing of any
exception taken as a result of an audit. The audited Party shall
refund the amount of any undisputed exception to the auditing
Party within ten (10) days. If the audited Party fails to make
such payment, the audited Party agrees to pay interest, accruing
monthly, at a rate equal to the prime rate plus two percent (2%)
of Bank of America MT&SA, San Francisco, or any successor
institution, in effect from time to time, but not to exceed the
maximum contract rate permitted by the applicable usury laws of
the State of California. Interest will be computed from the date
of written notification of exceptions to the date the audited
Party reimburses the auditing Party for any exception. The cost of
such audit shall be paid by the auditing Party; provided, however,
that in the event an audit verifies overcharges of five percent
(5%) or more, then the audited Party shall
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<PAGE>
reimburse the auditing Party for the cost of the audit.
24.5 This right to audit shall extend for a period of three (3) years
following the date of final payment under this Agreement. Each
party and each subcontractor shall retain all necessary records
and documentation for the entire length of this audit period.
SECTION 25: MISCELLANEOUS
25.1 Unless otherwise stated in this Agreement: (a) any reference in
this Agreement to a section, subsection, attachment or similar
term refers to the provisions of this Agreement; (b) a reference
to a section includes that section and all its subsections; and
(c) the words "include," "includes," and "including" when used in
this Agreement shall be deemed in each case to be followed by the
words "without limitation." The Parties agree that the normal rule
of construction to the effect that any ambiguities are to be
resolved against the drafting Party shall not be employed in the
interpretation of this Agreement.
25.2 The provisions of this Agreement are for the benefit of the
Parties and not for any other person or third party beneficiary.
The provisions of this Agreement shall not impart rights
enforceable by any person, firm or organization other than a Party
or a successor or assignee of a Party to this Agreement.
25.3 The descriptive headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall in
no way define, modify or restrict any of the terms and provisions
thereof.
25.4 Any waiver at any time by either Party of its rights with respect
to a default under this Agreement, or with respect to any other
matter arising in connection with this Agreement, shall not be
deemed a waiver with respect to any other or subsequent default or
matter and no waiver shall be considered effective unless in
writing.
25.5 Each Party shall be responsible for paying its own attorneys' fees
and other costs associated with this Agreement, except as provided
in Sections 6 and 7 hereof. If a dispute exists hereunder, the
prevailing Party, as determined by the CPUC, or as may otherwise
be determined by the dispute resolution procedure contained in
Section 15 hereof, if used, or by a court of law, shall be
entitled to reasonable attorneys' fees and costs.
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25.6 To the extent that the CPUC has a right under then-current law
to audit either Party's compliance with this Agreement or other
legal or regulatory requirements pertaining to the Direct
Access transactions, that Party shall cooperate with such
audits. Nothing in this Section shall be construed as an
admission by either Party with respect to the right of the CPUC
to conduct such audits or the scope thereof.
25.7 Except as otherwise provided in this Agreement, all rights of
termination, cancellation or other remedies in this Agreement
are cumulative. Use of any remedy shall not preclude any other
remedy in this Agreement.
The Parties have executed this Agreement on the dates indicated below, to
be effective upon the later date.
ON BEHALF OF ESP ON BEHALF OF PG&E
By: /s/ George N. Falsone By: /s/ Albert F. Torres
------------------------------ ------------------------------
Name: George N. Falsone Name: Albert F. Torres
------------------------------ ------------------------------
Title: PRESIDENT Title: MANAGER, ACCOUNT SERVICES
--------------------------- ---------------------------
Date: 4/28/98 Date: 5/7/98
---------------------------- ----------------------------
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ATTACHMENT A
A. DEFINITIONS:
BILLING SERVICES - The consolidated billing services described in PG&E's
direct access tariff which are provided by PG&E and/or ESP.
CONSOLIDATED ESP BILL - The consolidated bill prepared and presented by ESP
to an end-use customer which includes the customer's ESP Charges and PG&E
Charges.
CONSOLIDATED PG&E BILL - The consolidated bill prepared and presented by PG&E
to an end-use customer which includes the Customer's ESP Charges and PG&E
Charges.
DIRECT ACCESS CUSTOMER - An end-use customer located within PG&E's service
territory who purchases Direct Access Services through the ESP.
ESP CHARGES - Charges for Direct Access Services provided by the ESP.
METERING SERVICES - The meter installation, maintenance and related services
described in PG&E's direct access tariff which are provided by PG&E and/or
ESP.
METER READING SERVICES - The meter reading and related services described in
PG&E's direct access tariff which are provided by PG&E and/or ESP.
PG&E CHARGES - Charges (a) for services provided by PG&E; or (b) which are
energy-related and which are approved by the CPUC or the Federal Energy
Regulatory Commission (including any Competition Transition Charges or
Fixed Transition Amount Charges owing to PG&E or its affiliates, as those
terms are defined under the California Public Utilities Code). Fixed
Transition Amount Charges are also referred to as Trust Transfer Amount
(TTA) Charges.
B. CONTACT PERSONS (SECTION 13.3):
1. BILLING SERVICES
PG&E Contact:
ESP Billing 415/972-5825
---------------------------------------------------
ESP
Contact:
---------------------------------------------------
2. METERING AND METER READING SERVICES
PG&E Contact:
ESP Metering Event Group 415/972-5363
---------------------------------------------------
ESP
Contact:
---------------------------------------------------
Appendix A
Form No. 79-948
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<PAGE>
C. PARTIES' REPRESENTATIVES (SECTION 15.1):
PG&E REPRESENTATIVE:
Manager of Account Services
Account Services Department
Mail Code H 28 B
P.O. Box 770000
SAN FRANCISCO, CA 94177
ESP REPRESENTATIVE:
------------------------------------------
CONTACT NAME
------------------------------------------
BUSINESS ADDRESS
----------------------------------------
--------------------------------------------------------
Appendix A
Form No. 79-948
Page 2 of 2
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October 30, 1997
<PAGE>
UTILISOURCE
2913 Saturn Street, Suite G
Brea, California 92821
Telephone (714) 996-6775
Facsimile (714) 524-1084
March 26, 1998
George Falsone
Full Power Corporation
14650 Detroit Ave.
Lakewood, Ohio 44107
Re: Letter of Engagement
Dear George:
Pursuant to the agreements reached in the meeting between representatives of
Full Power Corp. and UtiliSource on Tuesday morning March 17, 1998,
UtiliSource makes the following proposal to you.
It is understood that Full Power Corporation has filed an ESP registration
with the California Public Utilities Commission (CPUC) and that the issuance
of a registration number is believed imminent.
Accordingly, UtiliSource will provide the following services for the
respectively stated compensation:
1) Upon receipt by UtiliSource of this Letter of Engagement co-signed by
you, UtiliSource will begin preparations to accomplish the following tasks on
behalf of Full Power Corporation. An initial payment of $25,000.00 will be
due at that time.
2) UtiliSource will negotiate and complete all necessary contracts and
related forms necessary to obtain approval from all three participating
regulated utilities in California for Full Power Corp. to be authorized to
procure customers and deliver power in their respective service areas. A
payment of $25,000.00 will be due at this time.
3) UtiliSource will negotiate and complete all necessary contracts and
related forms necessary to obtain an ISO qualified Schedule Coordinator for
Full Power Corporation. UtiliSource will also configure the Full Power
customer data base, making it ready to begin processing new customers; and
complete testing of the data base's interface with all three utility
companies' data systems, making it ready to begin submitting Direct Access
Service Requests (DASRs) to the regulated utility companies. A payment of
$25,000.00 will be due at this time.
4) UtiliSource will consult for and review all Full Power Corp. customer
contract forms and procedures for CPUC compliance; and will complete all CPUC
submissions requirements pursuant to PUC Section 394(a), thereby assuring
that Full Power Corp. is in compliance with California law and CPUC tariffs
and regulations regarding the marketing of power in California. UtiliSource
will provide initial pro-forma contracts and other necessary documents to
Full Power for this purpose. A payment of $25,000.00 will be due at this time.
It is understood that Full Power will provide all cash deposits or other
forms of credit required to accomplish the foregoing as well as the purchase
of energy and related services discussed below.
<PAGE>
It is the objective of UtiliSource and Full Power to achieve the foregoing
within 30 days of the signing of this Engagement Letter. It is understood
that Full Power Corp. will provide an executive officer with signature
authority readily available to UtiliSource in Brea California.
A designee of Full Power will have access to Sales Manuals and Sales Training
materials for development of such programs for Full Power Corp. Should Full
Power begin marketing to customers that require independent verification of
their consent to purchase power from Full Power, UtiliSource will arrange for
Full Power to complete an agreement with such IVA firm. Should Full Power
desire to procure customers requiring interval meters, UtiliSource will
arrange for Full Power to complete an agreement with a qualified meter
provisioner. Full Power will offer only those energy discount programs and
sell only to those classes of customers, respectively, as UtiliSource is
currently servicing.
When Full Power Corp. or its affiliates, begins processing customers,
UtiliSource will split revenues with Full Power (including its affiliates)
consistent with the formula set forth in Exhibit 'A' hereto. For this
compensation, UtiliSource will perform all of the "back office" functions for
Full Power on an on-going basis. These include all functions from initial
customer data base input, DASR processing, load profiling, energy purchasing
(on Full Power's credit facility), billing, customer service, accounting and
remittances of earnings to Full Power and/or its affiliates.
We realize this letter cannot cover all aspects of our anticipated
relationship; however, the on-going compensation incentivises all parties to
perform their respective duties.
The parties hereto agree that the terms and conditions of this agreement are
to remain confidential information. The business and methods of operation of
Full Power Corp. are understood to include information of a confidential and
proprietary nature. UtiliSource shall maintain all information regarding the
business and methods of operation of Full Power Corp. in the strictest of
confidence and shall not disclose such information to any third party except
as may be required by law.
If this letter meets with your approval please sign where indicated below,
and return one copy with an original signature and the initial deposit of
$25,000.00
Very Truly Yours,
Approved: /s/ George N. Falsone
------------------------------------
Martin Sielen On Behalf of Full Power Corporation
<PAGE>
EXHIBIT 'A'
COMPENSATION SHARING
FULL POWER CORP. - UTILISOURCE
1. NET EARNINGS FROM SALE OF POWER. UtiliSource shall receive an amount
equal to fifty percent (50%) of the dollar amount represented by the
"percentage of savings" retained by Full Power Corp. per the end user
contracts, and 50% of any net profits on other Services provided customers by
Full Power Corp., all as set forth in the end user contracts procured by Full
Power Corp. or its affiliates, subject only to collection of amounts owed
Full Power Corp. and/or its affiliates, per each respective customer, per
respective billing cycle. Such compensation will continue for so long as Full
Power Corp. or any affiliate shall provide Services to customer.
Notwithstanding the foregoing, anytime UtiliSource has been compensated for
contracts pursuant to paragraph 2. of this Exhibit 'A', no further amounts
are due on any provision of Services or collection of moneys from customer.
2. SALE OF CONTRACTS. UtiliSource shall receive an amount equal to twenty
five percent (25%) of the dollar amount received by Full Power Corp. or its
affiliates for the contracts sold that were procured by Full Power Corp. or
its affiliates. Anytime UtiliSource has been compensated for contracts
pursuant to this paragraph, no further compensation of any kind is ever due
UtiliSource for such contracts.
<PAGE>
PROMISSORY NOTE AND SECURITY AGREEMENT
$100,000.00 November 18, 1998
FOR VALUE RECEIVED, George N. Falsone ("Obligor"), promises to pay to
the order of Full Power Group, Inc., a Florida corporation (together with its
successors and assigns, the "Company"), the principal sum of One Hundred
Thousand Dollars ($100,000.00) (the "Principal"), plus interest on the unpaid
balance at the rate of six percent (6%) per annum from the date hereof, on
the terms and conditions set forth below:
1. PAYMENT OF PRINCIPAL.
1.1 The Obligor shall pay the Principal and all accrued and unpaid
interest thereon at any time upon written request by the Company.
1.2 Notwithstanding the foregoing, Obligor may prepay all or any
portion of the Note at any time, without premium or penalty.
1.3 All payments due under this Note shall be delivered to the
Company at its executive offices in Lakewood, Ohio, or at such other place as
may be designated in writing by the Company from time to time.
2. SECURITY INTEREST AND PLEDGE OF SHARES.
2.1 This Note represents the purchase price paid for 380,000 shares
of common stock, par value $0.001 per share, of the Company (the "Shares")
purchased pursuant to that certain Stock Option Purchase Agreement (the
"Option Agreement"), dated September 27, 1998, between Anthony Derrick and
Obligor (as assignee of the Company).
2.2 As security for payment of the Principal and accrued and unpaid
interest thereon, Obligor hereby irrevocably assigns and pledges to the
Company all of the Shares and any other shares of stock of the Company that
Obligor becomes entitled to receive directly as a result of Obligor's
ownership of the Shares (collectively, the "Pledged Shares"). The Company
shall be entitled to retain possession of the Pledged Shares until this Note
is paid in full.
2.3 For as long as any portion of this Note remains unpaid, Obligor
shall not be entitled to sell, make a gift of, encumber or otherwise transfer
the Pledged Shares or any interest therein; provided that Obligor shall have
the right to vote and exercise all other rights incident to the ownership of
the Pledged Shares (including, without limitation, the right to receive
dividends and any other distributions on the Pledged Shares) for as long as
Obligor is not in default under this Note.
1 of 2
<PAGE>
3. NO RECOURSE. Obligor shall have no personal liability or obligation
to the Company under this Note. The Company shall look solely to the Pledged
Shares for the payment of all amounts owed hereunder.
4. CERTAIN WAIVERS. Obligor hereby waives diligence, presentment,
protest and demand and notice of protest, demand, dishonor and nonpayment of
this Note, and expressly agrees that this Note, or any payment hereunder, may
be extended from time to time and that Company may accept security for this
Note or release security for this Note, all without in any way affecting the
liability of Obligor hereunder.
5. GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of Ohio, without regard to conflict of
laws principles.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed
at Cleveland, Ohio as of the date first set forth above.
/s/ GEORGE N. FALSONE
-----------------------------------------
GEORGE N. FALSONE
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<PAGE>
PROMISSORY NOTE
$75,000 JUNE 2, 1999
FOR VALUE RECEIVED TO THE UNDERSIGNED, GEORGE N. FALSONE ("MAKER"),
PROMISES TO PAY TO THE ORDER OF FULL POWER GROUP, INC. ("PAYEE"), THE
PRINCIPAL AMOUNT OF SEVENTY FIVE THOUSAND DOLLARS ($75,000.00) WITH INTEREST
AT THE RATE OF SIX PERCENT (6%) PER ANNUM DUE AND PAYABLE AS FOLLOWS:
NOTE SECURED BY FULL POWER GROUP STOCK AND TO BE PAID ON THE SALE OF THE
STOCK.
ALL PAYMENTS OF PRINCIPAL AND INTEREST SHALL BE MADE TO THE PAYEE _________
OR AT SUCH OTHER ADDRESS AS MAY BE SPECIFIED IN WRITING TO THE MAKER BY THE
HOLDER HEREOF.
ANY HOLDER HEREOF WITHOUT NOTICE TO ANYONE MAY DECLARE THE ENTIRE DEBT
DUE AFTER TEN DAYS CONTINUOUS DEFAULT IN THE PAYMENT OF ANY INSTALLMENT OF
PRINCIPAL OR INTEREST OR IN THE PERFORMANCE OR OBSERVANCE OF ANY COVENANT OR
CONDITION CONTAINED IN THE MORTGAGE SECURING THIS NOTE. UPON SUCH DECLARATION
THE ENTIRE DEBT SHALL BE IMMEDIATELY DUE AND PAYABLE.
OVERDUE INSTALLMENTS OF INTEREST AND PRINCIPAL SHALL BEAR INTEREST AT
THE RATE OF 6% PER ANNUM, PAYABLE QUARTERLY.
THE PROVISIONS OF THIS NOTE SHALL BE GOVERNED BY THE PROVISIONS OF, AND
SHALL BE INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO.
MAKER:
BY: /s/ George N. Falsone
-------------------------
<PAGE>
PROMISSORY NOTE
$50,000 September 8, 1999
FOR VALUE RECEIVED TO THE UNDERSIGNED, GEORGE N. FALSONE ("MAKER"),
PROMISES TO PAY TO THE ORDER OF FULL POWER GROUP, INC. ("PAYEE"), THE
PRINCIPAL AMOUNT OF FIFTY THOUSAND DOLLARS ($50,000.00) WITH INTEREST AT THE
RATE OF SIX PERCENT (6%) PER ANNUM DUE AND PAYABLE AS FOLLOWS:
NOTE SECURED BY FULL POWER GROUP STOCK AND TO BE PAID ON THE SALE OF THE
STOCK.
ALL PAYMENTS OF PRINCIPAL AND INTEREST SHALL BE MADE TO THE PAYEE _______,
OR AT SUCH OTHER ADDRESS AS MAY BE SPECIFIED IN WRITING TO THE MAKER BY THE
HOLDER HEREOF.
ANY HOLDER HEREOF WITHOUT NOTICE TO ANYONE MAY DECLARE THE ENTIRE DEBT
DUE AFTER TEN DAYS CONTINUOUS DEFAULT IN THE PAYMENT OF ANY INSTALLMENT OF
PRINCIPAL OR INTEREST OR IN THE PERFORMANCE OR OBSERVANCE OF ANY COVENANT OR
CONDITION CONTAINED IN THE MORTGAGE SECURING THIS NOTE. UPON SUCH
DECLARATION THE ENTIRE DEBT SHALL BE IMMEDIATELY DUE AND PAYABLE.
OVERDUE INSTALLMENTS OF INTEREST AND PRINCIPAL SHALL BEAR INTEREST AT A
RATE OF 6% PER ANNUM, PAYABLE QUARTERLY.
THE PROVISIONS OF THIS NOTE SHALL BE GOVERNED BY THE PROVISIONS OF, AND
SHALL BE INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO.
MAKER:
BY: /S/ GEORGE N. FALSONE
--------------------------------
<PAGE>
PROMISSORY NOTE
$30,000.00 August 30, 1999
FOR VALUE RECEIVED TO THE UNDERSIGNED, HARVEY TRIFLER ("MAKER"),
PROMISES TO PAY TO THE ORDER OF FULL POWER GROUP, INC. ("PAYEE"), THE
PRINCIPAL AMOUNT OF THIRTY THOUSAND DOLLARS ($30,000.00) WITH INTEREST AT THE
RATE OF 6 PERCENT (6%) PER ANNUM DUE AND PAYABLE AS FOLLOWS:
NOTE SECURED BY FULL POWER GROUP STOCK TO BE PAID ON THE SALE OF THE
STOCK.
ALL PAYMENTS OF PRINCIPAL AND INTEREST SHALL BE MADE TO THE PAYEE
________OR AT SUCH OTHER ADDRESS AS MAY BE SPECIFIED IN WRITING TO THE MAKER
BY THE HOLDER HEREOF.
ANY HOLDER HEREOF WITHOUT NOTICE TO ANYONE MAY DECLARE THE ENTIRE DEBT
DUE AFTER TEN DAYS CONTINUOUS DEFAULT IN THE PAYMENT OF ANY INSTALLMENT OF
PRINCIPAL OR INTEREST OR IN THE PERFORMANCE OR OBSERVANCE OF ANY COVENANT OR
CONDITION CONTAINED IN THE MORTGAGE SECURING THIS NOTE. UPON SUCH
DECLARATION THE ENTIRE DEBT SHALL BE IMMEDIATELY DUE AND PAYABLE.
OVERDUE INSTALLMENTS OF INTEREST AND PRINCIPAL SHALL BEAR INTEREST AT
THE RATE OF 6% PER ANNUM, PAYABLE QUARTERLY.
THE PROVISIONS OF THIS NOTE SHALL BE GOVERNED BY THE PROVISIONS OF, AND
SHALL BE INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO.
MAKER:
BY: /s/ Harvey Trifler
-----------------------------------
<PAGE>
PROMISSORY NOTE
$ 9,000.00 SEPT 7, 1999
FOR VALUE RECEIVED TO THE UNDERSIGNED, HARVEY TRIFLER ("MAKER"),
PROMISES TO PAY TO THE ORDER OF FULL POWER GROUP, INC. ("PAYEE"), THE PRINCIPAL
AMOUNT OF NINE THOUSAND DOLLARS ($9,000.00) WITH INTEREST AT THE RATE OF 6
PERCENT ( %) PER ANNUM DUE AND PAYABLE AS FOLLOWS:
NOTE IS SECURED BY FULL POWER GROUP STOCK TO BE PAID ON THE SALE OF THE
STOCK.
ALL PAYMENTS OF PRINCIPAL AND INTEREST SHALL BE MADE TO THE PAYEE ____
OR AT SUCH OTHER ADDRESS AS MAY BE SPECIFIED IN WRITING TO THE MAKER BY THE
HOLDER HEREOF.
ANY HOLDER HEREOF WITHOUT NOTICE TO ANYONE MAY DECLARE THE ENTIRE DEBT
DUE AFTER TEN DAYS CONTINUOUS DEFAULT IN THE PAYMENT OF ANY INSTALLMENT OF
PRINCIPAL OR INTEREST OR IN THE PERFORMANCE OR OBSERVANCE OF ANY CONVENANT OR
CONDITION CONTAINED IN THE MORTGAGE SECURING THIS NOTE. UPON SUCH DECLARATION
THE ENTIRE DEBT SHALL BE IMMEDIATELY DUE AND PAYABLE.
OVERDUE INSTALLMENTS OF INTEREST AND PRINCIPAL SHALL BEAR INTEREST AT
THE RATE OF 6% PER ANNUM, PAYABLE QUARTERLY.
THE PROVISIONS OF THIS NOTE SHALL BE GOVERNED BY THE PROVISIONS OF, AND
SHALL BE INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO.
MAKER:
BY: /s/ Harvey Trifler
------------------------
<PAGE>
CONSULTING AGREEMENT
BETWEEN
FULL POWER CORPORATION
AND
DEALER SUPPORT GROUP
THIS CONSULTING AGREEMENT (the "Agreement") is made and is effective as
of March 1, 1998, by and between FULL POWER CORPORATION, an Ohio Corporation
("FPC"), and DEALER SUPPORT GROUP ("DSG"), with reference to the following
facts:
RECITALS:
A. FPC intends to engage in the business of an energy service
provider.
B. DSG has considerable knowledge, skill, experience and expertise in
the field of utility deregulation.
C. FPC wishes to obtain the services of DSG to assist FPC with the
location, selection and negotiation of contracts with qualified
entities necessary for the development of FPC as a qualified
energy service provider upon the terms and conditions set forth
herein.
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual covenants and conditions hereinafter set forth, the parties hereto
agree as follows:
1. INDEPENDENT CONTRACTOR RELATIONSHIP
1.1 ENGAGEMENT. FPC hereby engages DSG and DSG hereby accepts
engagement by FPC, subject to all of the terms and conditions set
forth in this Agreement, during the term specified in Section 3,
below, of this Agreement.
1.2 RELATIONSHIP CREATED. For purposes of this Agreement, the
relationship created between DSG and FPC shall be that of
independent contractor, and not that of employer/employee,
principal/agent, partner, joint ventures, vendor/vender, or
otherwise. It is understood that each party to this Agreement is
placing its trust and confidence in the other to perform all
duties contained herein and to act in each other's best interests
and thus create a reciprocal confidential relationship.
1.
<PAGE>
2. DUTIES OF DSG
2.1 GENERAL DUTIES. DSG shall do and perform all services, acts or
things necessary or advisable to assist FPC in locating,
negotiating and developing contracts with qualified entities to
assist FPC in becoming a licensed energy service provider. If in
due course it should become necessary, DSG will assist FPC in its
daily operation and maintain a liason between all corporate
personnel and contractual entities.
2.2 DEVOTION OF TIME. DSG shall devote such productive time, ability,
and attention to the business of FPC as DSG shall determine in its
sole discretion. DSG shall have the right, in its sole and
absolute discretion, to designate the individual employee or
employees of DSG who will render services on behalf of DSG
pursuant to this Agreement and DSG shall have the right, at any
time, to change or substitute such employee or employees. FPC
shall neither have nor exercise any control or direction
whatsoever over the employees, agents or subcontractors of DSG.
During the term hereof, DSG may devote time to other business,
interests, investments and activities, provided however, that DSG
shall not conduct any activities in connection with the energy
service provider business for or on behalf of itself or any other
person.
3. TERM AND TERMINATION
3.1 TERM. The term of this Agreement shall be for a period of three
(3) years, commencing as of the effective date of this Agreement,
unless sooner terminated pursuant to the provisions of this
Section 3.
3.2 TERMINATION. FPC may terminate this Agreement with or without
cause at any time upon ten (10) days written notice to the other
party.
4. COMPENSATION OF DSG
4.1 As compensation for the services to be rendered by DSG hereunder,
DSG shall receive a consulting fee of no less than Eight-Thousand
Dollars ($8,000.00) per month. Should FPC proceed to become a
successful energy service provider and possibly a public company,
DSG will be further compensated with an amount of stock to be
mutually agreed upon by both parties.
2.
<PAGE>
5. RELATIONSHIP OF PARTIES
5.1 DSG'S EXPENSES. During the term of this Agreement, DSG shall
be an independent contractor with respect to FPC. Accordingly,
DSG shall bear all of its own expenses in performing its
services pursuant to this Agreement, including automobile,
office, entertainment, taxes, insurance and legal and
accounting expenses. FPC shall bear the expenses of telephone,
postage and express mail.
5.2 WAIVER OF BENEFITS. DSG shall not be entitled to any of the
benefits provided by FPC to its employees, and DSG specifically
waives, and agrees to indemnify FPC against any claim
including, without limitation, health or life insurance,
vacation pay, sick pay, retirement or pension benefits, Social
Security contributions, workers' compensation insurance, state
disability insurance, F.I.C.A or F.U.T.A. tax payments,
reimbursement of business related expenses, welfare and pension
benefits and obligations of FPC under the Employee Retirement
Income Security Act of 1974, or other benefits of any kind
customarily afforded to an employee. DSG acknowledges that it
is aware of its obligations to pay payroll, employment, income,
license, franchise and other taxes, and DSG agrees to pay all
such taxes as required by law with respect to the employees of
DSG and to indemnify and hold harmless FPC from and against any
claim, expense, loss, liability or damage relating thereto.
6. GENERAL PROVISIONS
6.1 SEVERABILITY. The invalidity of any provision of this
Agreement, as determined by a court of competent jurisdiction,
shall in no way affect the validity of any other provision
hereof.
6.2 WAIVERS AND CONSENT. No waiver of any provision hereof shall
be deemed a waiver of any other provision hereof, or of any
subsequent breach of the same or any other provision. Consent
to or approval by either party of any action shall not be
deemed to render unnecessary the obtaining of such party's
consent to or approval of any subsequent acts.
6.3 ENTIRE AGREEMENT AMENDMENT. This Agreement constitutes the
entire agreement between the parties pertaining to the subject
matter contained herein and supersides all prior negotiations,
agreements, statements of understanding, presentations, and
proposals of the parties. No supplement, modification, or
3.
<PAGE>
amendment to this Agreement shall be binding unless executed in
writing by DSG and FPC.
6.4 NOTICES. Any written notice, demand, request, or other
communication required or permitted to be given hereunder shall
be in writing and may be served personally or by telecopier.
6.5 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with the laws of Ohio.
6.6 SURVIVAL OF PROVISIONS. Each of the covenants, agreements,
representations and warranties contained herein shall, to the
extent applicable, survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
consisting of 4 pages, including this page, as of the date set forth above.
DSG: DEALER SUPPORT GROUP, INC.
By: /s/ Harvey Trifler
-------------------------
Harvey Trifler, President
FPC: FULL POWER CORPORATION, AN OHIO CORP
By: /s/ George N. Falsone
-------------------------
George N. Falsone, President
4.
<PAGE>
MASTER LICENSE AGREEMENT
THIS MASTER LICENSE AGREEMENT (the "Agreement") is made and entered into
this 6th day of October, 1998 (the "Effective Date") by and between Full Power
Corporation, an Ohio corporation, with its principal office located at 14650
Detroit Avenue, Suite 313, Lakewood, Ohio 44107 (hereinafter "FPC") and Courant
Consulting, Inc., a California corporation, with principal offices located at
7770 Regents Road, Suite 127, San Diego, CA 92122, (hereinafter "Licensee") for
the purpose of establishing a master licensing arrangement between them.
RECITALS
FPC is in the business of selling electric power to retail consumers for
commercial, industrial and residential consumption in California. FPC has
entered into seven (7) License Agreements with third parties pursuant to which
FPC has granted licenses in various locations in California (the locations are
listed on Schedule A hereto). The licenses granted permit the Licensee to
market electric power under the name "Full Power Corporation" in the agreed
upon territory.
FPC has recently completed a reverse merger with Full Power Group, Inc., a
Florida corporation and as a result FPC is now wholly owned by Full Power Group,
Inc. Full Power Group, Inc. is a publicly traded company. FPC has determined
that it no longer wants to directly pursue establishment of licensees, but
instead wants to concentrate its business on the sale of electric power.
Licensee has experience in the establishment of licensing arrangements.
Licensee desires to become the Master Licensee of FPC in California. Licensee
intends to grant sublicenses for the benefit of FPC in certain parts of the
Territory.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants,
conditions and warranties which appear below, and intending to be legally bound
thereby, the parties hereby agree as follows:
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<PAGE>
ARTICLE I
DEFINITIONS
1.1 "Contract" means an authorized end user contract for the purchase of
electric power for retail consumption;
1.2 "Customer" means a person or entity who has executed a Contract procured
through the efforts of Licensee for the delivery of Services in the
Territory;
1.3 "License Marks" means "Full Power Corporation-TM-" and such other service
marks, trade names and trade marks of FPC as FPC may hereinafter grant to
Licensee written permission to use;
1.4 "Proprietary Information" means the information described in Section 10.1
of this Agreement;
1.5 "Services" means electric power and any ancillary services related to the
delivery of electric power provided by or through FPC and/or Licensee;
1.6 "Territory" means the Territory as described on Schedule B, attached
hereto.
ARTICLE II
GRANT OF LICENSE
2.1 LICENSE
For the consideration herein provided and subject to the terms and
conditions set forth herein, FPC hereby grants to the Licensee and the Licensee
hereby accepts the exclusive right and license to:
2.1.1 The License Marks in the Territory in accordance with the provisions
of this Agreement.
2.1.2 Advertise, promote and procure, within the Territory, signed
Contracts in the name of FPC from commercial, industrial and
residential Customers for the delivery of Services to such
Customers within the Territory, including master metered
properties.
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<PAGE>
2.1.3 Licensee shall have the right to grant sublicenses, but only with
the prior written consent of Licensor, which consent shall
not be unreasonably withheld; provided however, that each
sublicensee shall be required to assume the obligations of
Licensee to FPC pursuant to this Agreement.
2.2 USE OF LICENSE MARKS
Licensee agrees that it will use the License Marks only in the Territory
and only for the purpose of marketing and selling the Services. So long as
this Agreement is in effect, Licensee shall not market or sell the Services
under any trade name, trade mark, service mark, grant or symbol other than the
License Marks without the written permission of FPC.
ARTICLE III
OBLIGATIONS OF FPC
3.1 DELIVERY OF ELECTRICAL POWER
During the term of this Agreement, FPC shall use its best efforts to
continuously, diligently and effectively obtain electric power supply through
FPC's suppliers, in sufficient quantities to satisfy current and reasonably
projected Customer demand.
3.2 LICENSES
FPC shall remain registered and qualified with the California Public
Utilities Commission for any and all activities related to the provision of
electrical power as contemplated by this Agreement in the State of California.
3.3 SALES MATERIAL AND PROMOTIONAL ASSISTANCE
During the term of this Agreement, FPC shall, at its own expense:
3.3.1 Provide the Licensee a sales manual which shall include, but not
be limited to, information concerning the marketing and sale
of electric power within the Territory, applicable rates and
Contracts for the procurement of Customers. FPC shall also make
available, from time to time, updates to the sales manual as it
deems necessary or appropriate.
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<PAGE>
3.3.2 provide or make available to Licensee information concerning the
Services and assistance in advertising the Services. Assistance
may include brochures, stationery, sales scripts, rate sheets
and suggested cover letters that FPC may have available or
provide to Licensee from time to time. Licensee agrees to
maintain a fax machine and corresponding telephone twenty four
(24) hours a day to facilitate communications with FPC.
3.3.3 Provide representatives to assist in answering potential Customer
questions.
3.3.4 Provide representatives to assist in presentations to significant
potential Customers.
3.3.5 Provide representatives who shall provide either verbal or written
assurances, as necessary to any Customer or potential Customer
confirming that Licensee is authorized to obtain executed
Contracts for the provision of the Services on behalf of and
under the authority of FPC.
3.4 SERVICE ADMINISTRATION
During the term of this Agreement, FPC shall, at its own expense:
3.4.1 Maintain a toll free number during normal business hours for
inquiries by Customers.
3.4.2 Send a copy of the fully executed Contract, as well as a
confirmation letter to each Customer, not later than ten
(10) working days after confirmation of the Customer's
electric commodity consumption date from their Local
Utility Distribution Company and Contract acceptance by
FPC.
3.4.3 Expeditiously process Direct Access Requests for each Customer
with respect to their Local Utility Distribution Company.
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<PAGE>
ARTICLE IV
PAYMENTS
4.1 PURCHASE OF LICENSE
In consideration of the licenses granted hereunder, Licensee shall pay
to FPC a fee in the amount of $968,750 (the "Master License Fee"). The
Master License Fee shall be payable in five (5) equal installments of
$193,750. Each installment shall be payable upon the grant of a sublicense
by the Licensee; provided however that the full amount of the Master License
shall be paid on or before September 1, 2000. In the event Licensee grants
more than five (5) sublicenses pursuant to this Agreement, upon the grant of
each additional sublicense, Licensee shall pay to Licensor the sum of
$193,750. FPC has entered into seven (7) Agreements with third parties
within the Territory granted to Licensee (the "Previously Granted Licenses").
In the case of six (6) such Previously Granted Licenses, the Licensees have
not paid FPC the full license fee. In each such case, FPC has agreed that in
the event the Licensee does not pay the full license fee, FPC will still
grant the license and in exchange, will accept an equity interest in the
Licensee. As a condition of the grant of this Master License, Licensee
herein shall assume FPC's obligation under previously granted licenses to
accept an equity interest in any Licensee that does not pay the full license
fee to FPC. Licensee herein shall become entitled to all license fees
payable from the Licenses under the Previously Granted Licenses from the date
of this Agreement forward; provided however, the Licensee herein shall pay to
FPC one-half of all license fees payable under Previously Granted Licenses.
Licensee shall pay FPC the one-half of all license fees payable under
Previously Granted Licenses as collected, but in no event, including the
failure to collect such license fees, no later than September 1, 2000.
4.2 COMPENSATION TO LICENSEE
The Contracts to be procured by Licensee will provide that a percentage
of the savings realized by the Customer, by switching from its current
electric provider to FPC, will be retained by the Customer and a percentage
of such savings will accrue to the benefit of FPC. In the case of a
residential customer, 50% of such savings will accrue to the benefit of the
Customer and 50% of such savings will accrue to the benefit of FPC. Licensee
shall receive compensation of 50% of the percentage of savings which accrues
to FPC from the Contracts procured by Licensee. In addition, Licensee shall
receive 50% of any net profits on other services provided by FPC to
residential customers procured by Licensee. In the case of commercial,
industrial and multiple dwelling unit customers, 70% of such savings will
accrue to the
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benefit of the customer and 30% of such savings will accrue to the benefit of
FPC. Licensee shall receive 50% of the percentage of savings which accrues to
FPC from the contracts procured by Licensee for commercial, industrial and
multiple dwelling unit customers. In addition, Licensee shall receive 50% of
any net profits on other services provided by FPC to commercial, industrial and
multiple dwelling unit customers procured by Licensee. The foregoing
compensation to Licensee is subject to collection of amounts owed FPC for each
customer billing cycle. Such compensation shall continue for so long as FPC or
any affiliate of FPC shall provide services to the customer.
4.3 OWNERSHIP OF AND SALE OF CONTRACT
All Contracts and any and all rights thereunder shall be the sole and
exclusive property of FPC. In the event FPC shall sell any or all of the
Contracts, Licensee shall receive an amount equal to 50% of the amount received
by FPC for the Contracts sold that were procured by Licensee. Where the
Contracts are part of a larger sale, such value shall be apportioned according
to the purchaser's valuation process and such valuation process shall be final
and binding on Licensee. In the event Licensee is compensated for the sale of
Contracts pursuant to this paragraph, no further compensation of any kind is
due Licensee under 4.2.
4.4 PAYMENT TO LICENSEE
FPC shall calculate amounts due Licensee as of the last day of each
calendar month net of any amount that may be due from Licensee to FPC and shall
remit such amount to Licensee no later than the tenth working day of the
succeeding calendar month by such means as may be mutually agreed and as may be
changed from time to time among Licensee and FPC. At or before the time of
payment, FPC shall provide to Licensee re-billing and collection data for each
Customer procured by Licensee.
4.5 BOOKS AND RECORDS
FPC shall maintain books and records of Customer billings and collections
as reasonably necessary to document and substantiate the determination of
amounts due to Licensee. Licensee may from time to time not to exceed four (4)
times per calendar year and upon ten (10) days prior written notice inspect the
books and records at the place of business of FPC during normal business hours.
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4.6 BILLING AND COLLECTION
FPC shall arrange for or provide meter reading and billing services for
all Customers, including the exercise of reasonable efforts to collect all sums
due from Customers for the provision of Services according to FPC's Contracts;
provided, however, that FPC shall not be obligated to expend funds or institute
legal proceedings to collect sums due from customers. FPC may, in its sole
discretion, delegate its billing and collection obligations under this Section
to any third party. FPC shall:
4.6.1 Bill all Customers no less frequently than a sixty (60) day
average billing cycle.
4.6.2 Be responsible for resolving billing disputes when they are the
result of a bill produced by FPC, their affiliate or a third
party billing company.
4.6.3 Subject to applicable law, take prompt action to discontinue
Service to Customers who are delinquent in their payments.
Where reasonably possible, FPC will notify Licensee in
advance of any discontinuance in Service due to delinquency
in payment.
ARTICLE V
OBLIGATIONS OF LICENSEE
5.1 SALES AND MARKETING
During the term of this Agreement, Licensee shall, at its own expense,
use its best efforts to continuously, diligently and effectively:
5.1.1 Subject to applicable law, utilize methods customarily employed
for the selling of Services within the Territory and in
accordance with the terms and conditions of this Agreement
and the sales material provided to Licensee by FPC.
5.1.2 Administer to all Customer inquiries and orders promptly and
efficiently.
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5.1.3 Ensure that all sales material and documents used in connection
with sales of the Services are marked with such copyright,
trade mark or other notices, proprietary legends or
restrictions as FPC may reasonably require.
5.1.4 Obtain the prior written approval from FPC for any advertisement
that references or mentions FPC or any provider of electric
power to FPC known to Licensee.
5.2 CONTRACTS
During the term of this Agreement, Licensee shall procure Contracts for
the Services within the Territory and in doing so shall:
5.2.1 Utilize FPC's Contracts and other ancillary documents; as may be
modified from time to time.
5.2.2 Submit, or have Customers submit, the original of the properly
executed Contract and all appropriate ancillary forms and
documents according to procedures established by FPC, as
expeditiously as possible.
5.2.3 Use its best efforts to ensure that the person signing the
Contract on behalf of a Customer is duly authorized to do so.
5.2.4 Bring to the attention of FPC any instance where another
individual or entity is obtaining or attempting to obtain the
cooperation of a Customer to cancel or breach their Contract
with FPC.
5.3 NEGATIVE COVENANTS
During the term of this Agreement, Licensee shall not:
5.3.1 Make any material misrepresentation of fact or omit to state any
material fact or engage in any deceptive business practice in
connection with the sales, marketing, advertisement or
promotion of the Services.
5.3.2 Modify any term or condition in the Contract without the prior
written consent of FPC.
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5.3.3 Collect any money from a Customer in Licensee's own name or
any name other than FPC.
ARTICLE VI
TERM AND TERMINATION
6.1 TERM
This Agreement shall become effective upon the Effective Date and shall
remain in effect for a period of five (5) years thereafter, unless sooner
terminated pursuant to the provisions of this Agreement. This Agreement
shall automatically and without notice renew thereafter for successive
periods of one (1) year, or as otherwise agreed by the parties. This
Agreement shall be terminable by either party at the end of the initial term
or then current renewal term upon written notice give thirty (30) days prior
to the end of the initial term or then current term.
6.2 REGULATORY APPROVAL
This Agreement shall terminate automatically and without liability or
further obligation on the part of either party to the other if, by final
order, FPC is denied or loses any necessary authority to provide the Services
in the Territory, or if authority is suspended or not renewed. In the event
of the occurrences described in the immediately preceding sentence, FPC shall
incur no liability to Licensee as the result of the occurrence of such events.
Licensee shall be entitled to all payments under and in accordance with
Sections 4.2, 4.3 and 4.4 (if applicable), subject to collection of monies by
FPC.
6.3 TERMINATION BY LICENSEE
Licensee may terminate this Agreement, without cause, upon ninety (90)
days prior written notice to FPC. Licensee agrees that it shall have no
claim for refund of fees paid under Section 4.1 in the event of termination
under this Section.
6.4 EVENT OF DEFAULT AND TERMINATION FOR CAUSE
The following shall constitute an event of default hereunder:
6.4.1 The violation by either party hereto of any material term or
provision of this Agreement and the failure of either party
hereto to perform its material obligations hereunder for a
period of thirty (30) days from the date of written notice
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thereof to the other party.
6.4.2 Any failure of the Licensee to abide by the terms of Sections
8.1 or 10.1.
6.4.3 The failure of FPC to pay any amounts due to Licensee in
accordance with the terms of this Agreement.
6.4.4 There shall occur any of the following actions with respect to
either the Licensee or FPC:
i. It shall be adjudged bankrupt or insolvent or make an
assignment for the benefit of creditors, or a
temporary or permanent receiver shall be appointed to
administer its affairs
ii. Proceedings for its reorganization shall be instituted.
iii. It shall take any action to dissolve or terminate its
existence.
iv. It shall sell all or substantially all of its assets.
v. Licensee shall attempt to assign this Agreement or any
right hereunder without obtaining the written consent
of FPC other, or shall suffer such assignment by
operation of law.
Upon the occurrence of an Event of Default as defined herein, the
non-defaulting party shall have the right to terminate this Agreement upon
thirty (30) days advance written notice to the other party.
6.5 ALTERNATIVE REMEDIES
The remedies set forth herein are cumulative and in addition to and not
exclusive or a limitation of other remedies available at law or in equity.
6.6 RIGHTS AND OBLIGATIONS UPON TERMINATION
FPC and Licensee hereby agree that upon any termination of this
Agreement, they shall be subject to the following rights and obligations:
6.6.1 The compensation provisions in this Agreement shall survive
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termination, regardless of the nature of the termination.
6.6.2 Licensee shall promptly return to FPC all Proprietary Information
and promotional materials and shall cease all advertising,
promotion and sales of the Services in the name of FPC and
shall refrain from making any representation, public or
otherwise, which could imply that there is any continuing
relationship between FPC and Licensee. Licensee shall
immediately cease use of all of FPC's trade marks, service
marks, trade names, logos and materials and those of any of
FPC's suppliers and affiliates.
6.6.3 Sections 3.4.1, 4.2, 4.3, 4.4, 4.5, 4.6 and 9.3 shall survive this
Agreement.
ARTICLE VII
OWNERSHIP AND USE OF LICENSE MARKS
7.1 OWNERSHIP OF LICENSE MARKS
The License Marks and all other trade names, trade marks and service
marks now or hereafter owned or employed by FPC, or used in their business
operations, and any good will resulting from the use thereof shall remain the
sole and exclusive property of FPC.
7.2 PROTECTION OF LICENSE MARKS
Licensee agrees that upon the request of FPC, it shall ensure that
whenever License Marks are used by Licensee, they shall be accompanied by a
statement satisfactory to FPC that they are marks or names used by Licensee
with the permission of FPC. Licensee further agrees not to do or permit to be
done any act which would (i) jeopardize, invalidate or remove any
registration of the License Marks and other registered trade names, trade
marks or service marks of FPC; or (ii) prejudice the right or title of FPC in
the License Marks and any other trade names, trade marks or service marks of
FPC.
7.3 INFRINGEMENT OF LICENSE MARKS
FPC represents and warrants that it has no knowledge of any instance of
infringement of any of the License Marks. Licensee agrees to keep FPC at all
times fully advised of any actual or threatened infringement of the License
Marks that comes to its attention.
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7.4 DISCONTINUANCE OF USE OF LICENSE MARKS
Licensee shall immediately discontinue any use of the License Marks upon
termination of this Agreement.
ARTICLE VIII
ADVERTISING
8.1 ADVERTISING STANDARDS
FPC has established standards for all advertising, promotional and
training materials used or distributed by Licensee which relate to the
Services. Licensee shall provide to FPC, for its prior review and written
approval, all promotional, advertising and other materials or activity using
or displaying FPC's name or the Services, or referring to Licensee as a
Licensee of FPC.
8.2 COOPERATIVE FUND
FPC and Licensee, together with all other Licensees of FPC, agree to
jointly establish an advertising fund in such amounts as may be agreed upon
from time to time, subject to policies and procedures established by FPC, in
its discretion. The funding for such advertising may be payable from gross
revenues generated from FPC's Licensees and sales of the Services.
ARTICLE IX
AUTHORITY AND INDEMNIFICATION
9.1 AUTHORITY OF LICENSEE
This Agreement does not constitute Licensee as FPC's general or special
agent and does not (i) create a joint venture or apply to confer any status,
power or authority upon Licensee other than is expressly set forth herein; or
(ii) give Licensee the right to enter into a Contract on FPC's account or to
bind FPC, other than as expressly set forth herein.
9.2 LICENSEE'S EMPLOYEES
All persons employed by Licensee are and will remain the employees and
agents of Licensee and are not and will not become employees or agents of
FPC. Licensee shall be solely responsible for the acts and omissions of its
employees and agents, shall have responsibility for their supervision,
direction, control and will ensure their compliance with this Master License
Agreement.
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9.3 INDEMNIFICATION
Notwithstanding any of the provisions of this Agreement which may be
construed to the contrary, Licensee shall indemnify FPC, its officers,
directors, stockholders, employees, agents, attorneys and representatives and
hold them harmless from and against any and all claims, actual damages,
consequential damages, liabilities and expenses, including reasonable attorneys'
fees, occasioned by any act or omission of Licensee, its partners, employees,
agents or representatives relating to the performance of its obligations
hereunder.
ARTICLE X
CONFIDENTIALITY
10.1 PROPRIETARY INFORMATION
During the term of this Agreement and for a period of two (2) years
thereafter, Licensee shall retain in confidence and shall require its partners,
employees, consultants, representatives and agents to retain in confidence the
Proprietary Information of FPC described below. The parties agree that such
Proprietary Information constitutes trade secrets of FPC and that the disclosure
thereof in contravention of this Agreement will constitute an unfair trade
practice. Proprietary Information means information relating to the business
and operations of FPC, its affiliates, clients and consultants, including, but
not limited to, all technical, marketing and financial information relating
thereto, any information relating to the pricing methods, processes, financial
data, lists, apparatus, statistics, programs, research, development or related
future business activities or operations or the results of the provision of
Services performed by Licensee under this Agreement. Licensee shall take
effective precautions, contractual and otherwise, reasonably calculated to
prevent unauthorized disclosure or misuse of Proprietary Information by any of
its partners, employees, or by any other person having access to such
information.
10.2 EXCLUSION OF PROPRIETARY INFORMATION
Proprietary Information shall not be deemed to include information which
is (i) already known to recipient (other than as a result of breach of this
Agreement, or any other confidentiality agreement between a party to this
Agreement and a third party); (ii) publicly known (or becomes publicly known)
without the fault or negligence of the recipient; (iii) approved for release by
written authorization of FPC; or (iv) required to be disclosed by law; provided
however, that in the event of such a proposed disclosure, Licensee shall give
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Commercial Arbitration Rules of the American Arbitration Association, with any
such arbitration to be held in Cleveland, Ohio, and judgment upon any award
rendered by the Arbitrator(s) may be entered in any Court having jurisdiction
thereof.
11.8 SAVINGS CLAUSE
If any term, covenant or condition of this Agreement or the application
thereof to any person or circumstance shall to any extent be invalid or
unenforceable, the remainder of this Agreement or the application of such term,
covenant or condition to persons or circumstances other than those to which it
is held invalid or unenforceable, shall not be affected thereby and each term,
covenant or condition of this Agreement shall be valid and be enforced to the
fullest extent permitted by law. All obligations and duties which by their
nature extend beyond the expiration of this Agreement shall survive and remain
in effect beyond any expiration or termination.
11.9 APPLICABLE LAW
This Agreement shall be governed by the laws of the State of Ohio,
without choice of law principles.
11.10 CAPTIONS AND SECTIONS
Captions contained herein are inserted only as a matter of convenience
and in no way define, limit or extend the scope of intent of any provision
hereof. Use of the term "Section" shall include the entire subject section and
all its subsections where the context requires.
11.11 INDEPENDENT BUSINESS JUDGMENT
The parties hereby acknowledge and agree that Licensee is an independent
business sufficiently sophisticated to exercise and is exercising its own
business judgment. The parties hereby further acknowledge and agree that FPC
has made no recommendations or representations regarding any aspect of
Licensee's business including, but not limited to, any representations with
regard to Licensee's profits therefrom.
11.12 WAIVER
Failure or delay on the part of either party to exercise any right, power
or privilege hereunder shall not operate as a waiver thereof. A waiver of one
obligation hereunder shall not operate as a waiver of any other obligation. A
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waiver of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
11.13 EXECUTION
This Agreement may be executed in counterparts and each of such
counterparts shall, for all purposes, be deemed to be an original but
altogether only one Agreement.
IN WITNESS WHEREOF, the parties have caused this Master License Agreement to
be executed by their duly authorized officers as of the date first set forth
above.
FULL POWER CORPORATION
By: George W. Falsone
-------------------------
Its: President
------------------------
Date: 10/6/98
-----------------------
COURANT CONSULTING, INC.
By: S. Dworkin
-------------------------
Its: President
------------------------
Date: 10/07/98
-----------------------
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FPC not less than ten (10) days prior written notice before such disclosure
is made.
10.3 DISCLOSURE OF TERMS OF AGREEMENT
Neither party hereto shall disclose the terms and conditions of this
Agreement to any person or entity without the prior written consent of the
other party, except that this Agreement shall be provided to any Sublicensee.
ARTICLE XI
MISCELLANEOUS
11.1 REPRESENTATIONS AND WARRANTIES
Each party hereby makes the following representations and warranties,
which representations and warranties shall survive the execution hereof and
the consummation of the transactions herein contemplated:
11.1.1 In the case of FPC, it is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its corporation, and in the case of the
Licensee, it is a corporation duly organized and validly
existing under the laws of the jurisdiction of its
incorporation.
11.1.2 It has full power and authority to execute and perform this
Agreement.
11.1.3 The individuals executing this Agreement have the full power
and authority to bind their respective entities to the terms
hereof and have been properly authorized to do so.
11.1.4 This Agreement is enforceable against each party in
accordance with its terms.
11.1.5 Licensee represents and warrants that it shall cooperate in
good faith with FPC to accomplish the purposes of this
Master License Agreement.
11.2 FORCE MAJEURE
Neither party shall be liable to the other for any delay or failure to
perform hereunder, which delay or failure is due to causes beyond the control
of said party, including, but not limited to: (i) acts of God; (ii) acts of
the
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public enemy; (iii) acts of the United States of America, or any State,
territory or political subdivision thereof or of the District of Columbia;
(iv) fires, floods, epidemics, quarantine restrictions; or (v) strikes or
freight embargoes.
11.3 ACKNOWLEDGEMENT OF LICENSEE STATUS
Licensee acknowledges that it is a Licensee of FPC. Licensee agrees
to execute any document reasonably requested by FPC acknowledging Licensee's
status as a Licensee of FPC.
11.4 SUCCESSION
This Master License Agreement shall be binding upon and inure to the
benefit of the parties and their respective permitted successors and assigns.
11.5 NOTICES
All notices pursuant to this Agreement shall be in writing and shall
be sent by overnight delivery:
If to FPC, to: Full Power Corporation
14650 Detroit Avenue, Suite 313
Lakewood, Ohio 44107
Attention: George N. Falsone
If to Licensee, to: Courant Consulting, Inc.
7770 Regents Road, Suite 127
San Diego, CA 92122
Attention: Samuel Dworkin
11.6 INTEGRATION
This Agreement represents the entire agreement and understanding
between FPC and Licensee as to the subject matter hereof. No waiver,
alteration or modification of any of the provisions of this Agreement shall
be binding unless in writing and signed by a duly authorized representative
of the party against which enforcement of such waiver, alteration or
modification is sought.
11.7 ARBITRATION
Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, shall be settled by arbitration in accordance with the
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SCHEDULE "A"
LIST OF LICENSES GRANTED
1. EPSA # 1
2. EPSA # 2
3. EPSA # 3
4. EPSA # 5
5. EPSA # 8
6. EPSA # 11
7. EPSA # 12
<PAGE>
SCHEDULE "B"
TERRITORY
The State of California, with the exception of the Licensee listed on
Schedule A.
1. EPSA # 4
2. EPSA # 6
3. EPSA # 7
4. EPSA # 9
5. EPSA # 10
<PAGE>
FORM OF
SUBLICENSE AGREEMENT
THIS SUBLICENSE AGREEMENT (the "Agreement") is made and entered into
this ___ day of _________, ____ (the "Effective Date") by and between Courant
Consulting, Inc., a California corporation with its principal offices located
at 7770 Regents Road, Suite 127, San Diego, CA 92122 (hereinafter "Courant")
and ________________________________________________________________________
____________________________________________________________________________
____________________ (hereinafter "Sublicensee") for the purpose of
establishing a sublicense arrangement between them.
RECITALS
Full Power Corporation, an Ohio corporation with its principal office
located 14650 Detroit Avenue, Suite 313, Lakewood, Ohio 44107 (hereinafter
"FPC") is in the business of selling electric power to retail consumers for
commercial, industrial and residential consumption in California. FPC
possesses all licenses necessary for the sale of electric power to California
consumers.
Courant has entered into a Master License Agreement with FPC pursuant to
which Courant has acquired the exclusive right to certain License Marks and
the right to market certain Services of FPC in the State of California. In
accordance with the terms of the Master License Agreement between FPC and
Courant, Courant has the right to grant and sell sublicenses in the State of
California.
Sublicensee has applied to Courant to become the exclusive Sublicensee
in the Territory described on Schedule A attached hereto (the "Territory").
Courant has agreed to grant such a sublicense to Sublicensee pursuant to the
terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants,
conditions and warranties which appear below, and intending to be legally
bound thereby, the parties hereby agree as follows:
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ARTICLE I
GRANT OF LICENSE
1.1 LICENSE
For the consideration herein provided and subject to the terms and
conditions set forth herein, Courant hereby grants to Sublicensee and
Sublicensee hereby accepts the exclusive right and license to:
A. The License Marks in the Territory in accordance with the provisions
of this Agreement.
B. Advertise, promote and procure, within the Territory, signed
Contracts in the name of FPC from commercial, industrial and residential
Customers for the delivery of Services to such Customers within the
Territory, including master metered properties.
ARTICLE II
PAYMENT
2.1 LICENSE FEE
In consideration of the Sublicense granted hereunder, Sublicensee shall
pay to Courant a one time fee in the amount of $________ and __________ (__)
non-voting units of interest in Sublicensee. Payment shall be made in
accordance with the terms of an escrow agreement between the Sublicensee,
Courant, the Recruiter and the Escrow Agent (the "Escrow Agreement").
2.2 COMPENSATION TO SUBLICENSEE
The Contracts to be procured by Sublicensee will provide that a
percentage of the savings realized by the Customer, by switching from its
current electrical provider to FPC, will be retained by the Customer and a
percentage of such savings will accrue to the benefit of FPC. In the case of
a residential customer, fifty percent (50%) of such savings will accrue to
the benefit of the Customer and 50% of such savings will accrue to the
benefit of FPC. Sublicensee shall receive compensation of 50% of the
percentage of the savings which accrues to FPC from the Contracts procured by
Sublicensee. In addition, Sublicensee shall receive 50% of the net profits of
any other services provided by FPC to residential customers procured by
Sublicensee. In the case of commercial, industrial and multiple dwelling unit
customers, 70% of such savings will accrue to the benefit of the Customer and
30% of such savings will accrue to the benefit of FPC. Sublicensee shall
receive 50%
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of the percentage of savings which accrues to FPC from the Contracts procured
by Sublicensee for commercial, industrial and multiple dwelling unit
customers. In addition, sublicensee shall receive 50% of any net profits of
other services provided by FPC to commercial, industrial and multiple
dwelling unit customers procured by sublicensee. The foregoing compensation
to Sublicensee is subject to collection of amounts owed FPC for each customer
billing cycle. Such compensation shall continue for so long as FPC or any
affiliate of FPC shall provide Services to Customer.
2.3 OWNERSHIP OF AND SALE OF CONTRACT
All Contracts and any and all rights thereunder shall be the sole and
exclusive property of FPC. In the event FPC shall sell any or all of the
Contracts, Sublicensee shall receive an amount equal to 50% of the amount
received by FPC for the Contracts sold that were procured by Sublicensee.
Where the Contracts are part of a larger sale, such value shall be
apportioned according to the purchaser's valuation process and such valuation
process shall be final and binding on Sublicensee. In the event Sublicensee
is compensated for the sale of Contracts pursuant to this paragraph, no
further compensation of any kind is due Licensee under Paragraph 2.2.
ARTICLE III
ASSIGNMENT, ASSUMPTION AND CONSENT
3.1 ASSIGNMENT
Courant hereby assigns all of its rights, title and interest in and
under the Master License Agreement in the Territory only, to the Sublicensee.
Except as to the Recitals, Paragraphs 1.6, 2.1.3, 4.1, 4.2, 11.1, 11.3 and
11.5 of the Master License Agreement (the "Excluded Terms"), all terms,
conditions and provisions of the Master License Agreement are deemed to be
terms, conditions and provisions of this Sublicense Agreement as if the same
were fully set forth in this Sublicense Agreement. The Master License
Agreement is attached to the Sublicense Agreement as Schedule B and except as
to the Excluded Terms is deemed a part of this Sublicense Agreement. Except
as to the Excluded Terms which are not deemed part of this Sublicense
Agreement, (i) each and every place the word "Licensee" appears in the Master
License Agreement shall be deemed to read, "Sublicensee" and (ii) the word
"Territory" shall mean the Territory as defined on Schedule A to this
Agreement, for purposes of this Sublicense Agreement.
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3.2 ASSUMPTION
In the Territory only, and except as to the Excluded Terms, Sublicensee
hereby assumes all of Courant's rights, titles, interests, and obligations
under the Master License Agreement. Sublicensee acknowledges and agrees that
except as to the Excluded Terms, each and every term, condition and provision
of the Master License Agreement is hereby deemed to be a term, condition and
provision of this Sublicense Agreement as if the same were fully set forth in
this Sublicense Agreement. Sublicensee acknowledges and agrees that except as
to the Excluded Terms, (i) each and every place where "Licensee" appears in
the Master License Agreement shall be deemed to read, "Sublicensee" and (ii)
the word "Territory" shall mean the Territory as defined on Schedule A to
this Agreement.
3.3 CONSENT
By virtue of its signature below, FPC hereby consents to the grant of
the Sublicense herein, the assignment of the Master License Agreement in the
Territory only to the Sublicensee and the assumption by Sublicensee, in the
Territory only, of Courant's rights, titles, interests, and obligations under
the Master License Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 REPRESENTATIONS AND WARRANTIES
Each party hereby makes the following representations and warranties,
which representations and warranties shall survive the execution hereof and
the consummation of the transactions herein contemplated:
4.1.1 In the case of Courant, it is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its corporation, and in the case of the
Sublicensee, it is a ____________ duly organized and validly
existing under the laws of the jurisdiction of its
organization.
4.1.2 It has full power and authority to execute and perform this
Agreement.
4.1.3 The individuals executing this Agreement have the full power and
authority to bind their respective entities to the terms
hereof and have been properly authorized to do so.
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4.1.4 This Agreement is enforceable against each party in accordance
with its terms.
4.1.5 Sublicensee represents and warrants that it shall cooperate in
good faith with FPC to accomplish the purposes of the Master
License Agreement and this Agreement.
4.2 SUCCESSION
This Sublicense Agreement shall be binding upon and inure to the benefit
of the parties and their respective permitted successors and assigns.
4.3 NOTICES
All notices pursuant to this Agreement shall be in writing and shall be
sent by overnight delivery:
If to Courant to: COURANT CONSULTING, INC.
7770 REGENTS ROAD, SUITE 127
SAN DIEGO, CA 92122
ATTN: SAMUEL DWORKIN
If to Sublicensee to:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
4.4 INTEGRATION
This Agreement, together with Schedules A and B, represents the entire
agreement and understanding by the parties as to subject matter hereof. No
waiver, alteration or modification of any of the provisions of this Agreement
shall be binding unless in writing and signed by a duly authorized
representative of the party against which enforcement of such waiver,
alteration or modification is sought.
4.5 ARBITRATION
Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, with
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any such arbitration to be held in Cleveland, Ohio, and judgment upon any
award rendered by the Arbitrator(s) may be entered in any Court having
jurisdiction thereof.
4.6 SAVING CLAUSE
If any term, covenant or condition of this Agreement or the application
thereof to any person or circumstance shall to any extent be invalid or
unenforceable, the remainder of this Agreement or the application of such
term, covenant or condition to persons or circumstances other than those to
which it is held invalid or unenforceable, shall not be affected thereby and
each term, covenant or condition of this Agreement shall be valid and be
enforced to the fullest extent permitted by law. All obligations and duties
which by their nature extend beyond the expiration of this Agreement shall
survive and remain in effect beyond any expiration or termination.
4.7 APPLICABLE LAW
This Agreement shall be governed by the laws of the State of Ohio.
4.8 CAPTIONS AND SECTIONS
Captions contained herein are inserted only as a matter of convenience
and in no way define, limit or extend the scope of intent of any provision
hereof. Use of the term "Section" shall include the entire subject of the
section and all its subsections where the context requires.
4.9 INDEPENDENT BUSINESS JUDGMENT
The parties hereby acknowledge and agree that the Sublicensee is an
independent business sufficiently sophisticated to exercise and is exercising
its own business judgment. The parties hereby further acknowledge and agree
that Courant has made no recommendations or representations regarding any
aspect of Sublicensee's business including, but not limited to, any
representations with regard to Sublicensee's profits therefrom.
4.10 EXECUTION
This Agreement may be executed in counterparts and each of such
counterparts shall, for all purposes, be deemed to be an original but
altogether only one Agreement.
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4.11 NON-ASSIGNMENT
Licensee may not assign this Sublicense Agreement without the prior
written consent of FPC, which written consent shall be in the sole and absolute
discretion of FPC.
IN WITNESS WHEREOF, the parties have caused this Sublicense Agreement to be
executed by their duly authorized officers as of the date first set forth above.
COURANT CONSULTING, INC.
By:
----------------------------
Date: Its:
------------------------------ ---------------------------
SUBLICENSEE:
-------------------------------
By:
----------------------------
Date: Its:
------------------------------- ---------------------------
Pursuant to Section 3.3 of this Sublicense Agreement, Full Power Corporation, by
its duly authorized officers, has executed this Agreement.
FULL POWER CORPORATION
By:
----------------------------
Date: Its:
------------------------------ ---------------------------
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SCHEDULE "A"
TERRITORY
EPSA #6
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*EPSA-6
**ESTIMATED AMOUNT OF DOLLARS SPENT ON ELECTRICITY
[SAN DIEGO COUNTY MAP]
TOTAL POPULATION 2.5 MILLION
TOTAL HOUSEHOLDS 887,719
TOTAL RESIDENTIAL ACCOUNTS 930,277
TOTAL RESIDENTIAL REVENUES $480 MILLION
TOTAL COMMERCIAL/INDUSTRIAL ACCOUNTS 129,048
TOTAL COMMERCIAL/INDUSTRIAL REVENUE $888 MILLION
[LEGEND]
<PAGE>
SCHEDULE "B"
MASTER LICENSE AGREEMENT
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MASTER LICENSE AGREEMENT
THIS MASTER LICENSE AGREEMENT (the "Agreement") is made and entered into
this 6th day of October, 1998 (the "Effective Date") by and between Full
Power Corporation, an Ohio corporation, with its principal office located at
14650 Detroit Avenue, Suite 313, Lakewood, Ohio 44107 (hereinafter "FPC") and
Courant Consulting, Inc., a California corporation, with principal offices
located at 7770 Regents Road, Suite 127, San Diego, CA 92122, (hereinafter
"Licensee") for the purpose of establishing a master licensing arrangement
between them.
RECITALS
FPC is in the business of selling electric power to retail consumers for
commercial, industrial and residential consumption in California. FPC has
entered into seven (7) License Agreements with third parties pursuant to
which FPC has granted licenses in various locations in California (the
locations are listed on Schedule A hereto). The licenses granted permit the
Licensee to market electric power under the name "Full Power Corporation" in
the agreed upon territory.
FPC has recently completed a reverse merger with Full Power Group, Inc.,
a Florida corporation and as a result FPC is now wholly owned by Full Power
Group, Inc. Full Power Group, Inc. is a publicly traded company. FPC has
determined that it no longer wants to directly pursue establishment of
licensees, but instead wants to concentrate its business on the sale of
electric power.
Licensee has experience in the establishment of licensing arrangements.
Licensee desires to become the Master Licensee of FPC in California.
Licensee intends to grant sublicenses for the benefit of FPC in certain parts
of the Territory.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants,
conditions and warranties which appear below, and intending to be legally
bound thereby, the parties hereby agree as follows:
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ARTICLE 1
DEFINITIONS
1.1 "Contract" means an authorized end user contract for the purchase of
electric power for retail consumption;
1.2 "Customer" means a person or entity who has executed a Contract procured
through the efforts of Licensee for the delivery of Services in the
Territory;
1.3 "License Marks" means "Full Power Corporation-TM-" and such other
service marks, trade names and trade marks of FPC as FPC may hereinafter
grant to Licensee written permission to use;
1.4 "Proprietary Information" means the information described in Section
10.1 of this Agreement;
1.5 "Services" means electric power and any ancillary services related to
the delivery of electric power provided by or through FPC and/or Licensee;
1.6 "Territory" means the Territory as described on Schedule B, attached
hereto.
ARTICLE II
GRANT OF LICENSE
2.1 LICENSE
For the consideration herein provided and subject to the terms and
conditions set forth herein, FPC hereby grants to the Licensee and the
Licensee hereby accepts the exclusive right and license to:
2.1.1 The License Marks in the Territory in accordance with the
provisions of this Agreement.
2.1.2 Advertise, promote and procure, within the Territory, signed
Contracts in the name of FPC from commercial, industrial and
residential Customers for the delivery of Services to such
Customers within the Territory, including master metered properties.
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2.1.3 Licensee shall have the right to grant sublicenses, but only with
the prior written consent of Licensor, which consent shall
not be unreasonably withheld; provided however, that each
sublicensee shall be required to assume the obligations of
Licensee to FPC pursuant to this Agreement.
2.2 USE OF LICENSE MARKS
Licensee agrees that it will use the License Marks only in the Territory
and only for the purpose of marketing and selling the Services. So long as
this Agreement is in effect, Licensee shall not market or sell the Services
under any trade name, trade mark, service mark, grant or symbol other than
the License Marks without the written permission of FPC.
ARTICLE III
OBLIGATIONS OF FPC
3.1 DELIVERY OF ELECTRICAL POWER
During the term of this Agreement, FPC shall use its best efforts to
continuously, diligently and effectively obtain electric power supply through
FPC's suppliers, in sufficient quantities to satisfy current and reasonably
projected Customer demand.
3.2 LICENSES
FPC shall remain registered and qualified with the California Public
Utilities Commission for any and all activities related to the provision of
electrical power as contemplated by this Agreement in the State of California.
3.3 SALES MATERIAL AND PROMOTIONAL ASSISTANCE
During the term of this Agreement, FPC shall, at its own expense:
3.3.1 Provide the Licensee a sales manual which shall include, but not
be limited to, information concerning the marketing and sale
of electric power within the Territory, applicable rates and
Contracts for the procurement of Customers. FPC shall also
make available, from time to time, updates to the sales
manual as it deems necessary or appropriate.
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3.3.2 provide or make available to Licensee information concerning the
Services and assistance in advertising the Services.
Assistance may include brochures, stationery, sales scripts,
rate sheets and suggested cover letters that FPC may have
available or provide to Licensee from time to time. Licensee
agrees to maintain a fax machine and corresponding telephone
twenty four (24) hours a day to facilitate communications with
FPC.
3.3.3 Provide representatives to assist in answering potential Customer
questions.
3.3.4 Provide representatives to assist in presentations to significant
potential Customers.
3.3.5 Provide representatives who shall provide either verbal or written
assurances, as necessary to any Customer or potential Customer
confirming that Licensee is authorized to obtain executed
Contracts for the provision of the Services on behalf of and
under the authority of FPC.
3.4 SERVICE ADMINISTRATION
During the term of this Agreement, FPC shall, at its own expense:
3.4.1 Maintain a toll free number during normal business hours for
inquiries by Customers.
3.4.2 Send a copy of the fully executed Contract, as well as a
confirmation letter to each Customer, not later than ten (10)
working days after confirmation of the Customer's electric
commodity consumption data from their Local Utility
Distribution Company and Contract acceptance by FPC.
3.4.3 Expeditiously process Direct Access Requests for each Customer
with respect to their Local Utility Distribution Company.
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ARTICLE IV
PAYMENTS
4.1 PURCHASE OF LICENSE
In consideration of the licenses granted hereunder, Licensee shall pay
to FPC a fee in the amount of $968,750 (the "Master License Fee"). The Master
License Fee shall be payable in five (5) equal installments of $193,750. Each
installment shall be payable upon the grant of a sublicense by the Licensee;
provided however that the full amount of the Master License shall be paid on
or before September 1, 2000. In the event Licensee grants more than five (5)
sublicenses pursuant to this Agreement, upon the grant of each additional
sublicense, Licensee shall pay to Licensor the sum of $193,750. FPC has
entered into seven (7) Agreements with third parties within the Territory
granted to Licensee (the "Previously Granted Licenses"). In the case of six
(6) such Previously Granted Licenses, the Licensees have not paid FPC the full
license fee. In each such case, FPC has agreed that in the event the Licensee
does not pay the full license fee, FPC will still grant the license and in
exchange, will accept an equity interest in the Licensee. As a condition of
the grant of this Master License, Licensee herein shall assume FPC's
obligation under previously granted licenses to accept an equity interest in
any Licensee that does not pay the full license fee to FPC. Licensee herein
shall become entitled to all license fees payable from the Licensees under
the Previously Granted Licenses from the date of this Agreement forward;
provided however, the Licensee herein shall pay to FPC one-half of all
license fees payable under Previously Granted Licenses. Licensee shall pay
FPC the one-half of all license fees payable under Previously Granted
Licenses as collected, but in no event, including the failure to collect such
license fees, no later than September 1, 2000.
4.2 COMPENSATION TO LICENSEE
The Contracts to be procured by Licensee will provide that a
percentage of the savings realized by the Customer, by switching from its
current electric provider to FPC, will be retained by the Customer and a
percentage of such savings will accrue to the benefit of FPC. In the case of
a residential customer, 50% of such savings will accrue to the benefit of the
Customer and 50% of such savings will accrue to the benefit of FPC. Licensee
shall receive compensation of 50% of the percentage of savings which accrues
to FPC from the Contracts procured by Licensee. In addition, Licensee shall
receive 50% of any net profits on other services provided by FPC to
residential customers procured by Licensee. In the case of commercial,
industrial and multiple dwelling unit customers, 70% of such savings will
accrue to the
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benefit of the customer and 30% of such savings will accrue to the benefit of
FPC. Licensee shall receive 50% of the percentage of savings which accrues to
FPC from the contracts procured by Licensee for commercial, industrial and
multiple dwelling unit customers. In addition, Licensee shall receive 50% of
any net profits on other services provided by FPC to commercial, industrial
and multiple dwelling unit customers procured by Licensee. The foregoing
compensation to Licensee is subject to collection of amounts owed FPC for
each customer billing cycle. Such compensation shall continue for so long as
FPC or any affiliate of FPC shall provide services to the customer.
4.3 OWNERSHIP OF AND SALE OF CONTRACT
All Contracts and any and all rights thereunder shall be the sole and
exclusive property of FPC. In the event FPC shall sell any or all of the
Contracts, Licensee shall receive an amount equal to 50% of the amount
received by FPC for the Contracts sold that were procured by Licensee. Where
the Contracts are part of a larger sale, such value shall be apportioned
according to the purchaser's valuation process and such valuation process
shall be final and binding on Licensee. In the event Licensee is compensated
for the sale of Contracts pursuant to this paragraph, no further compensation
of any kind is due Licensee under PARA 4.2.
4.4 PAYMENT TO LICENSEE
FPC shall calculate amounts due Licensee as of the last day of each
calendar month net of any amount that may be due from Licensee to FPC and
shall remit such amount to Licensee no later than the tenth working day of
the succeeding calendar month by such means as may be mutually agreed and as
may be changed from time to time among Licensee and FPC. At or before the
time of payment, FPC shall provide to Licensee re-billing and collection data
for each Customer procured by Licensee.
4.5 BOOKS AND RECORDS
FPC shall maintain books and records of Customer billings and
collections as reasonably necessary to document and substantiate the
determination of amounts due to Licensee. Licensee may from time to time not
to exceed four (4) times per calendar year and upon ten (10) days prior
written notice inspect the books and records at the place of business of FPC
during normal business hours.
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4.6 BILLING AND COLLECTION
FPC shall arrange for or provide meter reading and billing services
for all Customers, including the exercise of reasonable efforts to collect
all sums due from Customers for the provision of Services according to FPC's
Contracts; provided, however, that FPC shall not be obligated to expend funds
or institute legal proceedings to collect sums due from customers. FPC may,
in its sole discretion, delegate its billing and collection obligations under
this Section to any third party. FPC shall:
4.6.1 Bill all Customers no less frequently than a sixty (60) day
average billing cycle.
4.6.2 Be responsible for resolving billing disputes when they are
the result of a bill produced by FPC, their affiliate or
a third party billing company.
4.6.3 Subject to applicable law, take prompt action to discontinue
Service to Customers who are delinquent in their payments.
Where reasonably possible, FPC will notify Licensee in
advance of any discontinuance in Service due to
delinquency in payment.
ARTICLE V
OBLIGATIONS OF LICENSEE
5.1 SALES AND MARKETING
During the term of this Agreement, Licensee shall, at its own expense,
use its best efforts to continuously, diligently and effectively:
5.1.1 Subject to applicable law, utilize methods customarily
employed for the selling of Services within the Territory
and in accordance with the terms and conditions of this
Agreement and the sales material provided to Licensee by
FPC.
5.1.2 Administer to all Customer inquires and orders promptly and
efficiently.
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5.1.3 Ensure that all sales material and documents used in
connection with sales of the Services are marked with
such copyright, trade mark or other notices, proprietary
legends or restrictions as FPC may reasonably require.
5.1.4 Obtain the prior written approval from FPC for any
advertisement that references or mentions FPC or any
provider of electric power to FPC known to Licensee.
5.2 CONTRACTS
During the term of this Agreement, Licensee shall procure Contracts
for the Services within the Territory and in doing so shall:
5.2.1 Utilize FPC's Contracts and other ancillary documents, as may
be modified from time to time.
5.2.2 Submit, or have Customers submit, the original of the properly
executed Contract and all appropriate ancillary forms and
documents according to procedures established by FPC, as
expeditiously as possible.
5.2.3 Use its best efforts to ensure that the person signing the
Contract on behalf of a Customer is duly authorized to
do so.
5.2.4 Bring to the attention of FPC any instance where another
individual or entity is obtaining or attempting to obtain
the cooperation of a Customer to cancel or breach their
Contract with FPC.
5.3 NEGATIVE COVENANTS
During the term of this Agreement, Licensee shall not:
5.3.1 Make any material misrepresentation of fact or omit to state
any material fact or engage in any deceptive business
practice in connection with the sales, marketing,
advertisement or promotion of the Services.
5.3.2 Modify any term or condition in the Contract without the prior
written consent of FPC.
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5.3.3 Collect any money from a Customer in Licensee's own name or
any name other than FPC.
ARTICLE VI
TERM AND TERMINATION
6.1 TERM
This Agreement shall become effective upon the Effective Date and
shall remain in effect for a period of five (5) years thereafter, unless
sooner terminated pursuant to the provisions of this Agreement. This
Agreement shall automatically and without notice renew thereafter for
successive periods of one (1) year, or as otherwise agreed by the parties.
This Agreement shall be terminable by either party at the end of the initial
term or then current renewal term upon written notice give thirty (30) days
prior to the end of the initial term or then current term.
6.2 REGULATORY APPROVAL
This Agreement shall terminate automatically and without liability or
further obligation on the part of either party to the other if, by final
order, FPC is denied or loses any necessary authority to provide the Services
in the Territory, or if authority is suspended or not renewed. In the event
of the occurrences described in the immediately preceding sentence, FPC shall
incur no liability to Licensee as the result of the occurrence of such
events. Licensee shall be entitled to all payments under and in accordance
with Sections 4.2, 4.3 and 4.4 (if applicable), subject to collection of
monies by FPC.
6.3 TERMINATION BY LICENSEE
Licensee may terminate this Agreement, without cause, upon ninety (90)
days prior written notice to FPC. Licensee agrees that it shall have no claim
for refund of fees paid under Section 4.1 in the event of termination under
this Section.
6.4 EVENT OF DEFAULT AND TERMINATION FOR CAUSE
The following shall constitute an event of default hereunder:
6.4.1 The violation by either party hereto of any material term or
provision of this Agreement and the failure of either
party hereto to perform its material obligations
hereunder for a period of thirty (30) days from the date
of written notice
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thereof to the other party.
6.4.2 Any failure of the Licensee to abide by the terms of Sections
8.1 or 10.1.
6.4.3 The failure of FPC to pay any amounts due to Licensee in
accordance with the terms of this Agreement.
6.4.4 There shall occur any of the following actions with respect to
either the Licensee or FPC:
i. It shall be adjudged bankrupt or insolvent or make
an assignment for the benefit of creditors, or a
temporary or permanent receiver shall be appointed
to administer its affairs
ii. Proceedings for its reorganization shall be
instituted.
iii. It shall take any action to dissolve or terminate
its existence.
iv. It shall sell all or substantially all of its
assets.
v. Licensee shall attempt to assign this Agreement or
any right hereunder without obtaining the written
consent of FPC other, or shall suffer such
assignment by operation of law.
Upon the occurrence of an Event of Default as defined herein, the
non-defaulting party shall have the right to terminate this Agreement upon
thirty (30) days advance written notice to the other party.
6.5 ALTERNATIVE REMEDIES
The remedies set forth herein are cumulative and in addition to and
not exclusive or a limitation of other remedies available at law or in equity.
6.6 RIGHTS AND OBLIGATIONS UPON TERMINATION
FPC and Licensee hereby agree that upon any termination of this
Agreement, they shall be subject to the following rights and obligations:
6.6.1 The compensation provisions in this Agreement shall survive
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termination, regardless of the nature of the termination.
6.6.2 Licensee shall promptly return to FPC all Proprietary Information
and promotional materials and shall cease all advertising,
promotion and sales of the Services in the name of FPC and shall
refrain from making any representation, public or otherwise,
which could imply that there is any continuing relationship
between FPC and Licensee. Licensee shall immediately cease use of
all of FPC's trade marks, service marks, trade names, logos and
materials and those of any of FPC's suppliers and affiliates.
6.6.3. Sections 3.4.1, 4.2, 4.3, 4.4, 4.5, 4.6 and 9.3 shall survive this
Agreement.
ARTICLE VII
OWNERSHIP AND USE OF LICENSE MARKS
7.1 OWNERSHIP OF LICENSE MARKS
The License Marks and all other trade names, trade marks and service
marks now or hereafter owned or employed by FPC, or used in their business
operations, and any good will resulting from the use thereof shall remain the
sole and exclusive property of FPC.
7.2 PROTECTION OF LICENSE MARKS
Licensee agrees that upon the request of FPC, it shall ensure that whenever
License Marks are used by Licensee, they shall be accompanied by a statement
satisfactory to FPC that they are marks or names used by Licensee with the
permission of FPC. Licensee further agrees not to do or permit to be done any
act which would (i) jeopardize, invalidate or remove any registration of the
License Marks and other registered trade names, trade marks or service marks of
FPC; or (ii) prejudice the right or title of FPC in the License Marks and any
other trade names, trade marks or service marks of FPC.
7.3. INFRINGEMENT OF LICENSE MARKS
FPC represents and warrants that it has no knowledge of any instance of
infringement of any of the License Marks. Licensee agrees to keep FPC at all
times fully advised of any actual or threatened infringement of the License
Marks that comes to its attention.
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7.4 DISCONTINUANCE OF USE OF LICENSE MARKS
Licensee shall immediately discontinue any use of the License Marks upon
termination of this Agreement.
ARTICLE VIII
ADVERTISING
8.1 ADVERTISING STANDARDS
FPC has established standards for all advertising, promotional and training
materials used or distributed by Licensee which relate to the Services. Licensee
shall provide to FPC, for its prior review and written approval, all
promotional, advertising and other materials or activity using or displaying
FPC's name or the Services, or referring to Licensee as a Licensee of FPC.
8.2 COOPERATIVE FUND
FPC and Licensee, together with all other Licensees of FPC, agree to
jointly establish an advertising fund in such amounts as may be agreed upon from
time to time, subject to policies and procedures established by FPC, in its
discretion. The funding for such advertising may be payable from gross revenues
generated from FPC's Licensees and sales of the Services.
ARTICLE IX
AUTHORITY AND INDEMNIFICATION
9.1 AUTHORITY OF LICENSEE
This Agreement does not constitute Licensee as FPC's general or special
agent and does not (i) create a joint venture or apply to confer any status,
power or authority upon Licensee other than is expressly set forth herein; or
(ii) give Licensee the right to enter into a Contract on FPC's account or to
bind FPC, other than as expressly set forth herein.
9.2 LICENSEE'S EMPLOYEES
All persons employed by Licensee are and will remain the employees and
agents of Licensee and are not and will not become employees or agents of FPC.
Licensee shall be solely responsible for the acts and omissions of its employees
and agents, shall have responsibility for their supervision, direction, control
and will ensure their compliance with this Master License Agreement.
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9.3 INDEMNIFICATION
Notwithstanding any of the provisions of this Agreement which may be
construed to the contrary, Licensee shall indemnify FPC, its officers,
directors, stockholders, employees, agents, attorneys and representatives and
hold them harmless from and against any and all claims, actual damages,
consequential damages, liabilities and expenses, including reasonable
attorneys' fees, occasioned by any act or omission of Licensee, its partners,
employees, agents or representatives relating to the performance of its
obligations hereunder.
ARTICLE X
CONFIDENTIALITY
10.1 PROPRIETARY INFORMATION
During the term of this Agreement and for a period of two (2) years
thereafter, Licensee shall retain in confidence and shall require its partners,
employees, consultants, representatives and agents to retain in confidence the
Proprietary Information of FPC described below. The parties agree that such
Proprietary Information constitutes trade secrets of FPC and that the disclosure
thereof in contravention of this Agreement will constitute an unfair trade
practice. Proprietary Information means information relating to the business and
operations of FPC, its affiliates, clients and consultants, including, but not
limited to, all technical, marketing and financial information relating thereto,
any information relating to the pricing methods, processes, financial data,
lists, apparatus, statistics, programs, research, development or related future
business activities or operations or the results of the provision of Services
performed by Licensee under this Agreement. Licensee shall take effective
precautions, contractual and otherwise, reasonably calculated to prevent
unauthorized disclosure or misuse of Proprietary Information by any of its
partners, employees, or by any other person having access to such information.
10.2 EXCLUSION OF PROPRIETARY INFORMATION
Proprietary Information shall not be deemed to include information which is
(i) already known to recipient (other than as a result of breach of this
Agreement, or any other confidentiality agreement between a party to this
Agreement and a third party); (ii) publicly known (or becomes publicly known)
without the fault or negligence of the recipient; (iii) approved for release by
written authorization of FPC; or (iv) required to be disclosed by law; provided
however, that in the event of such a proposed disclosure, Licensee shall give
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FPC not less than ten (10) days prior written notice before such disclosure is
made.
10.3 DISCLOSURE OF TERMS OF AGREEMENT
Neither party hereto shall disclose the terms and conditions of this
Agreement to any person or entity without the prior written consent of the other
party, except that this Agreement shall be provided to any Sublicensee.
ARTICLE XI
MISCELLANEOUS
11.1 REPRESENTATIONS AND WARRANTIES
Each party hereby makes the following representations and warranties,
which representations and warranties shall survive the execution hereof and the
consummation of the transactions herein contemplated:
11.1.1 In the case of FPC, it is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its corporation, and in the case of the
Licensee, it is a corporation duly organized and validly
existing under the laws of the jurisdiction of its
incorporation.
11.1.2 It has full power and authority to execute and perform this
Agreement.
11.1.3 The individuals executing this Agreement have the full power
and authority to bind their respective entities to the terms
hereof and have been properly authorized to do so.
11.1.4 This Agreement is enforceable against each party in accordance
with its terms.
11.1.5 Licensee represents and warrants that it shall cooperate in
good faith with FPC to accomplish the purposes of this Master
License Agreement.
11.2 FORCE MAJEURE
Neither party shall be liable to the other for any delay or failure to
perform hereunder, which delay or failure is due to causes beyond the control of
said party, including, but not limited to: (i) acts of God; (ii) acts of the
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public enemy; (iii) acts of the United States of America, or any State,
territory or political subdivision thereof or of the District of Columbia; (iv)
fires, floods, epidemics, quarantine restrictions; or (v) strikes or freight
embargoes.
11.3 ACKNOWLEDGEMENT OF LICENSEE STATUS
Licensee acknowledges that it is a Licensee of FPC. Licensee agrees to
execute any document reasonably requested by FPC acknowledging Licensee's status
as a Licensee of FPC.
11.4 SUCCESSION
This Master License Agreement shall be binding upon and inure to the
benefit of the parties and their respective permitted successors and assigns.
11.5 NOTICES
All notices pursuant to this Agreement shall be in writing and shall be
sent by overnight delivery:
If to FPC, to: Full Power Corporation
14650 Detroit Avenue, Suite 313
Lakewood, Ohio 44107
Attention: George N. Falsone
If to Licensee, to: Courant Consulting, Inc.
7770 Regents Road, Suite 127
San Diego, CA 92122
Attention: Samuel Dworkin
11.6 INTEGRATION
This Agreement represents the entire agreement and understanding between
FPC and Licensee as to the subject matter hereof. No waiver, alteration or
modification of any of the provisions of this Agreement shall be binding unless
in writing and signed by a duly authorized representative of the party against
which enforcement of such waiver, alteration or modification is sought.
11.7 ARBITRATION
Any controversy or claim arising out of or relating to this Agreement, or
the breach thereof, shall be settled by arbitration in accordance with the
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Commercial Arbitration Rules of the American Arbitration Association, with any
such arbitration to be held in Cleveland, Ohio, and judgment upon any award
rendered by the Arbitrator(s) may be entered in any Court having jurisdiction
thereof.
11.8 SAVINGS CLAUSE
If any term, covenant or condition of this Agreement or the application
thereof to any person or circumstance shall to any extent be invalid or
unenforceable, the remainder of this Agreement or the application of such term,
covenant or condition to persons or circumstances other than those to which it
is held invalid or unenforceable, shall not be affected thereby and each term,
covenant or condition of this Agreement shall be valid and be enforced to the
fullest extent permitted by law. All obligations and duties which by their
nature extend beyond the expiration of this Agreement shall survive and
remain in effect beyond any expiration or termination.
11.9 APPLICABLE LAW
This Agreement shall be governed by the laws of the State of Ohio,
without choice of law principles.
11.10 CAPTIONS AND SECTIONS
Captions contained herein are inserted only as a matter of convenience
and in no way define, limit or extend the scope of intent of any provision
hereof. Use of the term "Section" shall include the entire subject section and
all its subsections where the context requires.
11.11 INDEPENDENT BUSINESS JUDGMENT
The parties hereby acknowledge and agree that Licensee is an independent
business sufficiently sophisticated to exercise and is exercising its own
business judgment. The parties hereby further acknowledge and agree that FPC has
made no recommendations or representations regarding any aspect of Licensee's
business including, but not limited to, any representations with regard to
Licensee's profits therefrom.
11.12 WAIVER
Failure or delay on the part of either party to exercise any right, power
or privilege hereunder shall not operate as a waiver thereof. A waiver of one
obligation hereunder shall not operate as a waiver of any other obligation. A
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waiver of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
11.13 EXECUTION
This Agreement may be executed in counterparts and each of such
counterparts shall, for all purposes, be deemed to be an original but altogether
only one Agreement.
IN WITNESS WHEREOF, the parties have caused this Master License Agreement to be
executed by their duly authorized officers as of the date first set forth above.
FULL POWER CORPORATION
By: /s/ George N. Falsone
-----------------------------------
Its: President
----------------------------------
Date: 10/6/98
---------------------------------
COURANT CONSULTING, INC.
By: /s/ S. Dworkin
-----------------------------------
Its: President
----------------------------------
Date: 10/7/98
---------------------------------
17 of 17
<PAGE>
SCHEDULE "A"
LIST OF LICENSES GRANTED
1. EPSA # 1
2. EPSA # 2
3. EPSA # 3
4. EPSA # 5
5. EPSA # 8
6. EPSA # 11
7. EPSA # 12
<PAGE>
SCHEDULE "B"
TERRITORY
The State of California, with the exception of the Licenses listed on
Schedule A.
1. EPSA # 4
2. EPSA # 6
3. EPSA # 7
4. EPSA # 9
5. EPSA # 10
<PAGE>
LINE OF CREDIT AGREEMENT
------------------------
THIS LINE OF CREDIT AGREEMENT (this "Agreement") made and entered into
effective as of April 1, 1999, by and among All Power Corp., a New York
corporation (the "Borrower") and Full Power Corporation, an Ohio corporation
(the "Lender").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Borrower has requested the Lender to make available to the
Borrower a line of credit facility in the aggregate principal sum of $250,000;
WHEREAS, the Lender has agreed to make such line of credit facility
available to the Borrower, subject to the terms and on the conditions set
forth in this Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants herein
contained, and for Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agrees as follows:
SECTION 1. DEFINITIONS.
------------
In addition to the capitalized terms defined elsewhere in this
Agreement, the following capitalized terms shall have the meanings set forth
below:
"ADVANCE" shall mean an advance to Borrower under Section 2.1 of this
Agreement.
"APPLICABLE MARGIN" shall mean two percent (2.0%) per annum.
"BUSINESS DAY" shall mean a day other than a Saturday, Sunday, or a
legal holiday on which banks are authorized or required to be closed in
Cleveland, Ohio.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 5.
"INTEREST PERIOD" shall mean one calendar month.
"LINE OF CREDIT" shall have the meaning provided in Section 2.1
"LINE OF CREDIT NOTE" shall mean the Promissory Note in the form of
Exhibit A attached hereto as completed, executed and delivered by the
Borrower to the Lender pursuant to the terms of this Agreement.
"LOAN DOCUMENTS" shall mean this Agreement, the Line of Credit Note, and
any other instrument or agreement now or hereafter executed by the Borrower
in connection with the Line of Credit.
<PAGE>
"NOTICE OF BORROWING" shall have the meaning provided in Section 2.3.
"PRIME RATE" shall mean the rate which Bank of America publicly
announces from time to time to be its prime lending rate, as in effect from
time to time.
"SECURITY DOCUMENTS" means the Pledge Agreement between John O'Brien,
the principal shareholder of the Borrower, and the Lender, and any other
documents which may be reasonably requested from time to time by the Lender
as necessary to perfect its security interest.
"TERMINATION DATE" shall mean April___, 2001, or any subsequent date to
which the Lender has agreed in writing, in its sole discretion, to extend the
Line of Credit hereunder, or such earlier date on which the Line of Credit is
terminated pursuant to Section 5.
SECTION 2. CREDIT FACILITY.
----------------
2.1 LINE OF CREDIT. From time to time, from the date hereof through
and until the Termination Date, the Lender agrees to make Advances to the
Borrower which shall not exceed the aggregate principal amount of $250,000 at
any one time outstanding to the Borrower. Prior to the Termination Date, the
Borrower may borrow, repay, and borrow again in its discretion pursuant to
the terms hereof within the limits of this Agreement. All Advances shall be
evidenced by a single Line of Credit Note substantially in the form of
Exhibit A made by the Borrower, payable to the Lender in the original
principal amount of $250,000, dated the date hereof and maturing on the
Termination Date.
2.2 INTEREST. Interest shall accrue on the unpaid principal amount of
each Advance outstanding hereunder at a rate equal to the Prime Rate plus the
Applicable Margin; provided, however, that if the Borrower fails to pay (i)
any principal amount at maturity, or (ii) any interest on outstanding
Advances within five (5) days after the same has become due and payable, then
in either such case to the fullest extent permitted by law, interest shall
accrue on such unpaid principal amount or unpaid interest at a rate equal to
the Prime Rate plus an additional four percent (4%) per annum. Interest shall
be payable monthly in arrears on the last calendar day of each month, and on
the Termination Date. Interest shall be computed on the basis of the actual
number of days elapsed in a year of 365 days or 366 days, as the case may be.
2.3 METHOD OF BORROWING. The Borrowers shall give the Lender written
or telephonic notice (promptly confirmed in writing) of any requested
Advance under the Line of Credit (a "Notice of Borrowing") specifying (i)
the amount of the Advance, and (ii) the date the proposed Advance is to be
made which shall be a Business Day shall be no sooner than five (5) business
days from the day the Notice of Borrowing is received by the Lender. The
Lender shall be entitled to rely on any telephonic Notice of Borrowing that
it believes in good faith to have been given by a duly authorized officer or
agent of the Borrower. Subject to the terms of this
2
<PAGE>
Agreement, the Lender shall make the amount of such Advance to the Borrower
on the requested date or as soon thereafter as practicable.
2.4 PREPAYMENT OF ADVANCES. The Borrower shall have the right to
prepay Advances in whole at any time, or in part from time to time, without
premium or penalty, but with accrued interest on the principal amount prepaid
to the date of such prepayment.
2.5 SECURITY. The Line of Credit Note shall be entitled to the
benefits of shares of stock of the Borrower granted as collateral pursuant to
a Pledge Agreement to be entered into by John O'Brien, the principal
shareholder of the Borrower in favor of the Lender substantially in the form
of Exhibit B.
SECTION 3. CONDITIONS OF LENDING.
The obligations of the Lender to make to Borrower an Advance hereunder
shall be subject to the prior satisfaction the following conditions:
3.1 DELIVERY OF NOTE AND SECURITY DOCUMENTS. The Borrower shall have
executed and delivered to the Lender the Loan Documents and John O'Brien
shall have executed and delivered to the Lender the Security Documents in
form and substance satisfactory to Lender.
3.2 REPRESENTATIONS AND WARRANTIES. At the time of each Advance
hereunder, the representations and warranties set forth herein shall be true
and correct in all material respects with the same effect as though such
representations and warranties have been made on and as of the date hereof.
3.3 NO DEFAULT. At the time of each Advance hereunder, the Borrower
and John O'Brien as applicable shall have performed and complied with all
agreements and conditions contained herein and in the Security Documents
required to be performed and complied with by the Borrower and John O'Brien
and no Event of Default shall have occurred in this Agreement or the Security
Documents nor any event which with the lapse of time, giving of Notice or
both would constitute a default hereunder or under the Security Documents. At
the time of each Advance hereunder, Borrower shall be in compliance with all
terms and conditions or any agreements and documents evidencing any
indebtedness or debt obligation of the Borrower and no Event of Default shall
have occurred nor any event which with the lapse of time, giving of notice
or both would constitute an Event of Default under the agreement or documents
evidencing any other indebtedness or debt obligation of the Borrower.
3
<PAGE>
SECTION 4. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Lender as follows:
4.1 ORGANIZATION, POWERS, ETC. The Borrower is duly organized,
validly existing and in good standing under the laws of the State of New
York, with full power and authority to own its properties and to carry on its
business as presently conducted. The Borrower is qualified to do business and
is in good standing in every jurisdiction where failure to so qualify and be
in good standing would have a material adverse effect on the financial
condition or operations of the Borrower.
4.2 ORGANIZATIONAL AUTHORITY. The execution, delivery and performance
of this Agreement and the Line of Credit Note have each been duly authorized
by all requisite corporate action.
4.3 NO BREACH OF AGREEMENTS. The execution, delivery and performance
of this Agreement and the Line of Credit Note and the borrowing hereunder,
will not violate or constitute a material breach under the organizational
documents of the Borrower, nor any indenture, agreement, or other instrument
to which the Borrower is a party or by which the Borrower or its properties
are bound.
4.4 EXECUTION AND DELIVERY. This Agreement and the Line of Credit
Note have been duly executed and delivered by the Borrower, constitute legal,
valid and binding obligations of the Borrower enforceable in accordance with
their respective express terms.
4.5 NO DEFAULT. No Event of Default or default has occurred and
Borrower is not in breach of or in default under any Agreement to which it is
a party or by which it is bound.
4.6 NO ENCUMBRANCES. To the knowledge of the Borrower, there is no
mortgage, charge, pledge, lien or other encumbrance over all or any of the
property granted as collateral pursuant to the Pledge Agreement, except as
disclosed in the Pledge Agreement and there is no subsisting agreement to
create any such mortgage, charge, pledge, lien or encumbrance.
4.7 TAXES. The Borrower is not in default in the payment of any due
and payable taxes.
4.8 NO LITIGATION. The Borrower is not engaged in any significant
litigation or arbitration proceedings and is not aware of any facts likely to
give rise to any significant litigation or arbitration proceedings.
4.9 STOCK MATTERS. The Borrower has issued all outstanding 1,000,000
shares of $.0001 par value common stock, all of which is issued in the name
of John O'Brien. Borrower has no agreement, arrangement or understanding
calling for the issuance of additional shares
4
<PAGE>
of its capital stock. Without the express written consent of the Lender,
Borrower shall not issue or enter into any agreement, arrangement or
understanding for the issuance of any of its capital stock.
SECTION 5. EVENTS OF DEFAULT.
5.1 Any one or more of the following shall constitute an Event of
Default hereunder:
(a) The Borrower shall fail to pay when due any principal portion of
the Line of Credit Note, or shall fail to pay any interest due under the Line
of Credit Note within five (5) days after receipt of notice from the Lender
of the amount of interest accrued and payable under the terms of the Line of
Credit Note;
(b) Any representation or warranty given or deemed to be given or
repeated by the Borrower or in accordance with this Agreement, is found to be
incorrect on the particular date that it was so given or deemed to be given
or repeated;
(c) The Borrower shall (i) file a petition under any applicable
insolvency, debtor relief, or reorganization statute, including without
limitation, the Federal Bankruptcy Code; (ii) be subject to an involuntary
petition under any applicable insolvency, debtor relief or reorganization
statute, including without limitation, the Federal Bankruptcy Code, which is
not dismissed within sixty (60) days of its filing; (iii) appoint or consent
to the appointment of any receiver, conservator, liquidating agent or
committee in any insolvency, readjustment of debts, marshaling of assets or
liabilities, or similar proceedings of or relating to the Borrower or any
substantial portion of the Borrower's assets; or (iv) take any corporate
action for the purpose of effecting any of he foregoing;
(d) The amount or balance of any debt of other indebtedness of the
Borrower not being paid when due, becoming payable prior to its date of
maturity date by reason of default or by reason of any demand for immediate
payment by any person or persons entitled to the benefit thereof or any
creditor of the Borrower becoming entitled to declare any such debt or
indebtedness due and payable prior to its date of maturity for any reason; and
(e) The Borrower ceasing or threatening to cease to carry on all or a
substantial part of its operations without the prior written approval of the
Lender.
5.2 Upon the occurrence of any Event of Default as provided herein,
the Lender may, without further notice or demand, terminate all obligations
of the Lender to the Borrower hereunder, declare the Line of Credit Note
(including principal, interest, reasonable attorneys fees and other costs of
collection if collected by legal action or through an attorney-at-law) to be
immediately due and payable. In such event, the Lender shall be entitled to
exercise its rights and remedies under this Agreement, the Line of Credit
Note and the Security
5
<PAGE>
Documents or otherwise available by agreement or under law, all of which
remedies shall be cumulative and may be exercised concurrently.
SECTION 6. MISCELLANEOUS.
6.1 NOTICES. All notices provided for hereunder shall be in writing
and unless otherwise directed, if to the Lender, delivered by hand or mailed
by first class mail, postage prepaid, addressed to the Lender at its offices
at 14650 Detroit Avenue, Suite 363, Lakewood, Ohio 44101, Attention: George
Falsone, and if to the Borrower, delivered by hand or sent by first class
mail, postage prepaid, addressed to the Borrower at _____________________,
Attention: John O'Brien. The foregoing addresses shall be subject to change,
provided that the party wishing to change such address notifies the other
party of such address change in a notice duly delivered or sent pursuant to
this Section 6.1 at least ten (10) days prior to the effective date of such
address change.
6.2 NON-WAIVER. No delay or failure on the part of the lender in the
exercise of any power or right shall operate as a waiver thereof, or as an
acquiescence in any default, nor shall any single or partial exercise of any
power or right preclude any other or future exercise thereof or the exercise
of any other power or right. No acceptance of payments past the maturity date
thereof shall constitute a novation or waiver of the terms hereof.
6.3 GOVERNING LAW, ETC. THIS AGREEMENT, THE LINE OF CREDIT NOTE AND
THE SECURITY DOCUMENTS SHALL BE GOVERNED IN ALL RESPECT BY THE LAWS OF THE
STATE OF OHIO.
6.4 TIME. Time is of the essence hereunder.
6.5 DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
6.6 EXECUTION. This Agreement may be executed in any number of
counterparts, and all such counterparts taken together shall be deemed to
constitute an original.
6.7 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof, and
any prior agreement, whether written or oral, between the parties hereto is
superseded hereby.
6.8 ASSIGNMENT. Borrower may not assign its right or obligations
under this Agreement without the prior written consent of the Lender, which
consent may be withheld in the sole discretion of the Lender. Lender may
assign its right hereunder to any affiliated party of the Lender.
6
<PAGE>
6.9 SEVERABILITY. In case any one provision contained in this
agreement, in the Line of Credit Note or the Security Documents shall be
invalid, illegal or unenforceable in any respect, the legality, validity, or
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered under seal the day and year first above written.
BORROWER:
ALL POWER CORP.
a New York corporation
By: John O'Brien
------------------------------
Name: John O'Brien
Title: President
Attest: /s/ David Neifeld
--------------------------
Name: David Neifeld
Title: Secretary
LENDER:
FULL POWER CORPORATION
an Ohio corporation
/s/ George Falsone
---------------------------------
Name: George Falsone
Title: President
By: Richard C. O'Rourke
------------------------------
Name: Richard C. O'Rourke
Title: Secretary
7
<PAGE>
EXHIBIT A
LINE OF CREDIT NOTE
April __, 1999 $250,000.00
All Power Corp., a New York corporation (the "Borrower") promises to pay
to Full Power Corporation, an Ohio corporation (the "Lender") the principal
amount of $250,000.00, or such lesser amount as may be advanced by the Lender to
the Borrower in accordance with the terms of the Line of Credit Agreement
between the Borrower and Lender on April ___, 2001 or such earlier date as is
permitted or provided for in the Line of Credit Agreement, with interest
(computed on the basis of the actual number of days elapsed in a year of 365
days or 366 days, as the case may be) on the unpaid balance of such principal
amount at a rate equal to the Prime Rate at which the Bank of America publicly
announces from time to time to be its Prime Lending Rate, plus two (2)
percentage points. Interest shall be payable monthly in arrears on the last
calendar day of each month. All payments shall first be applied to interest and
any other costs which may be due and payable from Borrower to Lender and lastly,
to principal. Payments of principal and interest shall be made in lawful money
of the United States of America at the principal office of Full Power
Corporation at 14650 Detroit Avenue, Suite 313, Lakewood, Ohio 44107, or such
other office as Lender shall have designated by written notice to the Borrower
as provided in the Line of Credit Agreement.
The Lender is entitled to the benefits of the Line of Credit Agreement
and may enforce agreements of the Borrower contained therein and exercise the
remedies provided for thereby or otherwise made available with respect thereto.
Capitalized terms are not otherwise defined herein shall have the respective
meanings attributed to such terms in the Line of Credit Agreement.
This Line of Credit Note is entitled to the benefits of certain shares of
stock of Borrower owned by John O'Brien held by the Lender under the Pledge
Agreement.
The Borrower shall have the right to prepay, in whole or in part, from
time to time, without premium or penalty, any accrued interest or outstanding
principal.
This Note is assignable by the Lender to an affiliate of the Lender.
This Note is made and delivered in Ohio and shall be governed by and
construed and enforced in accordance with the laws of the State of Ohio.
ALL POWER CORP.
a New York corporation
By: John O' Brien
-------------------------
John O'Brien
Its President
<PAGE>
PLEDGE AGREEMENT
DATED AS OF APRIL 1, 1999
by
JOHN O'BRIEN
to
FULL POWER CORPORATION
AN OHIO CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS.............................................. 1
SECTION 2. SECURITY FOR OBLIGATIONS................................. 2
SECTION 3. DEFINITION OF STOCK, ETC................................. 2
SECTION 4. PLEDGE OF STOCK, ETC..................................... 3
4.1 Pledge..................................................... 3
4.2 Subsequently Acquired Stock................................ 3
SECTION 5. TRANSFER OF COLLATERAL, ETC., BY PLEDGOR................. 3
5.1 No Dispositions............................................ 3
SECTION 6. CERTAIN RIGHTS IN RESPECT OF PLEDGED STOCK............... 3
6.1 Voting..................................................... 3
6.2 Dividends and Other Distributions.......................... 4
SECTION 7. REMEDIES IN CASE OF EVENT OF DEFAULT..................... 4
SECTION 8. ATTORNEY-IN-FACT......................................... 7
SECTION 9. PLEDGOR'S OBLIGATIONS ABSOLUTE WAIVER.................... 7
SECTION 10. FURTHER REPRESENTATIONS, WARRANTIES AND COVENANTS
OF PLEDGOR.............................................. 9
SECTION 11. FURTHER ASSURANCES...................................... 10
SECTION 12. TERMINATION; RELEASE.................................... 10
SECTION 13. NOTICES................................................. 11
SECTION 14. MISCELLANEOUS........................................... 11
</TABLE>
<PAGE>
THIS PLEDGE AGREEMENT, dated as of April 1, 1999 as supplemented, amended
or otherwise modified from time to time as permitted hereby, ("this
Agreement"), made by JOHN O'BRIEN, an individual ("Pledgor") to FULL POWER
CORPORATION, an Ohio corporation ("Pledgee") for the benefit of All Power
Corp. ("Beneficiary").
RECITALS:
A. The Pledgor is the principal shareholder of All Power Corp., a New
York Corporation. All Power Corp. has entered into a Line of Credit Agreement
dated as of April __, 1999 as supplemented, amended or otherwise modified from
time to time (the "Line of Credit Agreement") with the Pledgee providing,
subject to the terms and conditions thereof, for the issuance of a line of
credit in favor of All Power Corp. of up to $250,000.00. In connection with the
Line of Credit Agreement, All Power Corp. has executed a Line of Credit Note in
the principal amount of $250,000.00 (the "Note") in favor of the Pledgee.
B. Pursuant to the terms of the Line of Credit Agreement and the demand
of the Pledgee, the Pledgor shall execute and deliver this Agreement in favor
the Pledgee.
C. As security for the Line of Credit Agreement and All Power Corp.'s
prompt and faithful performance of its obligations under the Line of Credit
Agreement and Note, Pledgor agrees to pledge to Pledgee and grant to Pledgee a
security interest in and lien on certain property herein specified.
NOW, THEREFORE, in consideration of the aforesaid premises and the mutual
terms and covenants herein contained, Pledgor and Pledgee agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following terms have
the meanings specified below (terms defined in the singular to have a
correlative meaning when used in the plural and vice versa):
"BENEFICIARY" shall have the meaning set forth in the introductory
paragraph.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or any
other day on which commercial banks are required or authorized by law or
regulation to be closed in Cleveland, Ohio.
"COLLATERAL" shall have the meaning set forth in Section 4.1.
"DEFAULT" shall mean an Event of Default or an event which with notice or
lapse of time or both would become an Event of Default.
"EVENT OF DEFAULT" shall have the meaning set forth in the Line of Credit
Agreement.
1
<PAGE>
"LIEN" shall mean any mortgage, pledge, hypothecation, security assignment,
deposit arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever including, without limitation, any conditional sale or other
title retention agreement and any capital lease having substantially the same
economic effect as any of the foregoing.
"LINE OF CREDIT AGREEMENT" shall have the meaning set forth in Recital A.
"NOTE" shall have the meaning set forth in Recital A.
"OBLIGATIONS" shall have the meaning set forth in Section 2.
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"PLEDGED STOCK" shall have the meaning set forth in Section 4.1.
"PLEDGEE" shall have the meaning set forth in the introductory paragraph.
"PLEDGOR" shall have the meaning set forth in the introductory paragraph.
"STOCK" shall have the meaning set forth in Section 3.
"TERMINATION DATE" shall have the meaning set forth in Section 12.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement is made by Pledgor
for the benefit of Pledgee to secure the prompt payment in full when and as
due of every obligation and liability of Beneficiary to Pledgee including,
but not limited to the due and punctual payment when due and as due of the
principal and interest on the Note in accordance with its terms and the terms
of the Line of Credit Agreement and all other amounts payable (including,
without limitation, indemnities, fees, costs, expenses and interest thereon)
under the Line of Credit Agreement (collectively, the "Obligations").
SECTION 3. DEFINITION OF STOCK, ETC. As used herein, the term "Stock"
shall mean 1,000,000 shares of $.001 par value common stock ("Stock") of the
Beneficiary. Pledgor represents and warrants that, on the date hereof, (a)
Pledgor is the sole beneficial owner and the holder of record of all of the
Stock and (b) Pledgor owns no stock or securities of Beneficiary, other than
the Stock identified on Annex A.
2
<PAGE>
SECTION 4. PLEDGE OF STOCK, ETC.
4.1 PLEDGE. In order to secure the Obligations, Pledgor hereby pledges
with Pledgee, and hereby assigns, transfers, hypothecates, mortgages and sets
over to Pledgee and grants to Pledgee a security interest in, all Stock
evidenced by the certificates identified on Annex A (the "Pledged Stock")
together with all such certificates evidencing such Stock and together with
all income and profits thereof, all cash, securities and other property at
any time and from time to time distributed thereon, all other proceeds
thereof and all rights and privileges pertaining thereto (all such Pledged
Stock, certificates, income, profits, distributions, proceeds, rights and
privileges being herein collectively called the "Collateral"). Concurrently
with its execution and delivery of this Agreement, Pledgor has delivered to
Pledgee all certificates evidencing the Pledged Stock accompanied by undated
stock powers duly executed by Pledgor in blank.
4.2 SUBSEQUENTLY ACQUIRED STOCK. If Pledgor shall acquire (by
purchase, stock dividend or otherwise) any additional Stock at any time or
from time to time after the date hereof, Pledgor shall (a) hold the same as
the Pledgee's agent, in trust for Pledgee, and will forthwith pledge and
deposit such Stock as security with Pledgee and deliver to Pledgee
certificates or instruments therefor, accompanied by undated stock powers
duly executed by Pledgor, and all of such Stock shall thereafter constitute
Pledged Stock under this Agreement, to the same extent as if such Stock had
been owned by Pledgor on the date hereof and described in Annex A and
originally pledged hereunder, and shall be held by Pledgee pursuant hereto as
part of the Collateral, and (b) enter into such documents and instruments and
take such further action as Pledgee may reasonably request to confirm the
pledge of such Stock hereunder and carry out the intent of this Section 4.2.
SECTION 5. TRANSFER OF COLLATERAL BY PLEDGOR.
5.1 NO DISPOSITIONS. Pledgor will not (a) sell or otherwise dispose
of, grant any option with respect to, or (except pursuant to this Agreement)
mortgage, pledge or otherwise encumber any of the Collateral or (b) file or
suffer to be on file, or authorize or permit to be filed or to be on file, in
any jurisdiction in the United States any financing statement or like
instrument with respect to the Collateral in which Pledgee is not named as
the sole secured party.
SECTION 6. CERTAIN RIGHTS IN RESPECT OF PLEDGED STOCK.
6.1 VOTING. Unless and until an Event of Default shall have occurred
and be continuing, Pledgor shall have the right to exercise all voting,
consensual and other powers of ownership pertaining to the Pledged Stock,
PROVIDED that, Pledgor will not vote the Pledged Stock or grant any consent,
waiver or ratification or take any other action in respect thereof in any
manner which would violate or be inconsistent with any of the terms of this
Agreement, the Note, or the Line of Credit Agreement, or which would have the
effect of impairing the
3
<PAGE>
position or interests of Pledgee. All such rights of Pledgor to exercise
voting, consensual and other powers of ownership shall cease in case an Event
of Default shall occur and be continuing. At any time upon the occurrence and
during the continuance of an Event of Default, (i) Pledgee may cause any or
all of the Pledged Stock (or any other Collateral) to be registered in, or
transferred into, its name or the name of its nominee or nominees, without
notice to Pledgor and (ii) the Pledgor, upon request of Pledgee, will convert
all Pledged Stock in bearer form identified in such request to registered
form.
6.2 DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event of Default
shall have occurred and be continuing, all cash dividends payable in respect
of the Pledged Stock shall be paid to Pledgor, PROVIDED that, whether or not
an Event of Default shall have occurred or be continuing, all cash dividends
and other distributions payable in respect of the Pledged Stock which
constitute in whole or in part an extraordinary, liquidating or other
distribution in return of capital shall be paid to Pledgee and retained by it
as part of the Collateral. Notwithstanding the foregoing, Pledgee shall in
any event also be entitled to receive directly, and to retain as part of the
Collateral (and Pledgor shall promptly deliver to Pledgee):
(a) all other or additional stock or securities or property (other
than cash permitted to be retained by Pledgor in accordance with the first
sentence of this Section 6.2) paid or distributed by way of dividend or
otherwise in respect of the Pledged Stock;
(b) all other or additional stock or securities or property
(including cash) paid or distributed in respect of the Pledged Stock by
way of stock-split, spin-off, split-up, revision, reclassification,
combination of shares or other corporate rearrangement; and
(c) all other or additional stock or other securities or property
(including cash) which may be paid or distributed in respect of the
Collateral by reason of any consolidation, merger, exchange of stock,
conveyance of assets, liquidation or other corporate reorganization.
All dividends, distributions or other payments in respect of the
Collateral which are received by Pledgor contrary to the provisions of this
Section 6.2 or of Section 7 below shall be received in trust for the benefit
of Pledgee, shall be segregated from other property or funds of Pledgor, and
shall be forthwith paid over and delivered to Pledgee as Collateral in the
same form as so received (with any necessary endorsements).
SECTION 7. REMEDIES IN CASE OF EVENT OF DEFAULT.
(a) In case an Event of Default shall have occurred and be
continuing, Pledgee shall be entitled to exercise all of the rights,
powers and remedies (whether vested in it by this Agreement, by law, in
equity, by statute or otherwise) for the protection and enforcement of its
rights in respect of the Collateral, and Pledgee shall
4
<PAGE>
be entitled, without limitation, to exercise the following rights:
(i) to receive all amounts payable in respect of the Collateral
otherwise payable under Section 6.2 to Pledgor and to receive all
dividends and other distributions payable in respect of the Collateral
under said Section;
(ii) to have and exercise all of the rights and remedies with
respect to the Collateral of a secured party under the Uniform Commercial
Code (whether or not said Code is in effect in the jurisdiction where
such rights and remedies are asserted) and such additional rights and
remedies to which a secured party is entitled under the laws in effect
in any jurisdiction where any rights and remedies hereunder may be
asserted, including, without limitation, the right, to the maximum extent
permitted by law, to exercise all voting, consensual and other powers of
ownership pertaining to the Collateral (whether or not transferred into
the name of Pledgee) as if Pledgee were the sole and absolute owner
thereof (and Pledgor agrees to take all such action as may be appropriate
to give effect to such right, and hereby irrevocably constitutes and
appoints Pledgee the proxy and attorney-in-fact of Pledgor, with full
power of substitution, from and after the occurrence and during the
continuance of an Event of Default, to exercise all such voting,
consensual and other powers of ownership);
(iii) to transfer all or any part of the Collateral into Pledgee's
name or the name of its nominee or nominees, without notice to Pledgor;
(vi) in its name or in the name of Pledgor or otherwise, to
demand, sue for, collect or receive any money or property at any time
payable or receivable on account of or in exchange for any of the
Collateral; and
(v) at any time or from time to time, upon ten Business Days'
prior written notice to Pledgor (which notice Pledgor hereby agrees to be
commercially reasonable) of the time and place with respect to the
Collateral or any part thereof that shall then be or shall thereafter
come into the possession, custody or control of Pledgee or any of its
agents, to sell, lease, assign and deliver, or grant options to purchase,
or otherwise dispose of all or any part of such Collateral, at such place
or places as Pledgee may determine, and for cash or on credit or for
future delivery (without thereby assuming any credit risk), at public or
private sale, without demand of performance or notice of intention to
effect any such disposition or of the time or place thereof (except such
notice as is required above), it being agreed that the purchaser, lessee,
assignee or recipient of any or all of the Collateral so disposed of at
any public sale (or, to the extent permitted by law, at any private
sale) may thereafter hold the same absolutely, free from any claim or
right of whatsoever kind, including
5
<PAGE>
any right or equity of redemption (statutory or otherwise), of Pledgor
and any obligation to see to the application of any part of the purchase
money paid therefor or any liability for the misapplication or
non-application thereof; and Pledgee may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from
time to time by announcement at the time and place fixed for such sale,
and such sale may be made at any time or place to which the same may be
so adjourned.
Pledgee will not in any event be liable for failure to collect or realize
upon any or all of the collateral or for any delay in so doing, except in the
case of gross negligence or willful misconduct; nor shall it be under any
obligation to take any action whatsoever with regard thereto.
Pledgor recognizes that, by reason of certain prohibitions contained in the
Securities Act of 1933, as amended and applicable securities laws of other
jurisdictions, Pledgee may be compelled, with respect to any sale of all or
any part of the Collateral, to limit purchasers to those who will agree,
among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. Pledgor
acknowledges that any such private sale may be at prices and on terms less
favorable to Pledgee than those obtainable through a public sale without such
restrictions, and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner and that Pledgee shall have no obligation to engage in public sales
and no obligation to delay the sale of any Collateral for the period of time
necessary to permit the issuer thereof to register it for public sale. Pledgee
shall not incur any liability to Pledgor as a result of the sale of the
Collateral, or any part thereof, at any such private sale conducted in a
commercially reasonable manner without gross negligence or willful
misconduct. Pledgor hereby waives any and all claims against Pledgee arising
by reason of the fact that the price at which the Collateral may have been
sold at such a private sale was less than the price that might have been
obtained at a public sale or was less than the aggregate amount of the
Obligations, even if Pledgee accepts the first offer received and does not
offer the Collateral to more than one offeree.
Each right, power and remedy of Pledgee provided for in this Agreement, the
Note, or the Line of Credit Agreement, or now existing or hereafter available
at law or in equity or by statute or otherwise, shall be cumulative and
concurrent and shall be in addition to every other such right, power or
remedy. The exercise or beginning of the exercise by Pledgee of any one or
more of such rights, powers or remedies shall not preclude the simultaneous
or later exercise by Pledgee of all such other rights, powers or remedies,
and no course of dealing or failure or delay on the part of Pledgee in
exercising any such right, power or remedy shall operate as a waiver thereof
or otherwise prejudice the rights, powers or remedies of Pledgee.
6
<PAGE>
(b) Pledgee may be a purchaser of the Collateral, or any part
thereof, at any sale thereof pursuant to the provisions hereof, whether
upon foreclosure or by power of sale or otherwise, and may bid for and
acquire all or any part of the Collateral and in lieu of paying cash
therefor may make settlement for the purchase price by crediting upon
the Obligations the net sales price after deducting therefrom the costs
and expenses of such sale.
SECTION 8. ATTORNEY-IN-FACT. Without limiting any rights or powers
granted by this Agreement to Pledgee while no Event of Default has occurred
and is continuing, upon the occurrence and during the continuance of any
Event of Default, Pledgor hereby irrevocably constitutes and appoints Pledgee
and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority and
stead of Pledgor without notice or assent thereof, and in the name of Pledgor
or in its own name, for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instruments that Pledgee
may reasonably deem necessary or appropriate to accomplish the purposes
hereof. Without limiting the generality of the foregoing, so long as Pledgee
shall be entitled under this Agreement to make collections in respect of the
Collateral, Pledgee shall have the right and power to receive, endorse and
collect all checks made payable to or to the order of Pledgor representing
any dividend, payment or other distribution in respect of the Collateral or
any part thereof and to give full discharge for the same.
SECTION 9. PLEDGOR'S OBLIGATIONS ABSOLUTE WAIVER.
(a) To the fullest extent permitted by applicable law, the
obligations of Pledgor under this Agreement shall be absolute and
unconditional, shall not be subject to any counterclaim, set-off,
deduction or defense based on any claim Pledgor may have against
Pledgee. Beneficiary or any other Person, or based upon any claim
Beneficiary may have against Pledgee or any other Person, and shall
remain in full force and effect without regard to, and shall not be
released, suspended, abated, deferred, reduced, discharged, terminated
or otherwise affected by any circumstance or occurrence whatsoever
(other than indefeasible prior payment, performance and satisfaction in
full of the obligations in accordance with the terms of the Line of
Credit Agreement), whether or not Pledgor or any other Person shall have
any knowledge or notice thereof, including, without limitation:
(i) any renewal, extension, amendment or modification of or
addition or supplement to or deletion from the Note, this
Agreement, the Line of Credit Agreement, or any other instrument or
agreement applicable to Pledgor or Beneficiary, or any assignment,
transfer or other disposition of any thereof;
(ii) any failure on the part of Pledgor, Beneficiary or any
other
7
<PAGE>
Person, to perform or comply with any term of any such instrument or
agreement;
(iii) any waiver, consent, extension, indulgence or other
action or inaction (including, without limitation, any lack of
diligence or failure to mitigate damages) under or in respect of
any such instrument or agreement or any obligation or liability of
Pledgor, Beneficiary or any other Person, or any exercise or
non-exercise of any right, power or remedy under or in respect of
any such instrument or agreement or any such obligation or
liability;
(iv) any furnishing of any additional security to Pledgee or
its assignee or any acceptance thereof or any release of any
Collateral or other security by Pledgee or its assignee;
(v) any limitation on any Person's liability or obligations
under any such instrument or agreement or any such obligation or
liability or any termination, cancellation, frustration, invalidity
or unenforceability, in whole or in part, of any such instrument or
agreement or any such obligation or liability or any term of any
thereof;
(vi) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition, arrangement or other
similar proceeding relating to Pledgor, Beneficiary, or any of
their respective properties or assets, or any such proceeding by,
among or on behalf of their respective creditors, as such, or any
proceeding for the voluntary liquidation or dissolution or other
winding up of Beneficiary, whether or not involving insolvency or
bankruptcy proceedings, or any assignment for the benefit of their
respective creditors, or any other marshalling of their respective
assets, or any action taken by any trustee, receiver or the like or
by any court in any such proceeding;
(vii) any change in the ownership of all or any part of the
capital stock of Beneficiary;
(viii) any assignment, transfer or other disposition, in whole
or in part, by Pledgor of its interest in any Collateral; or
(ix) any other circumstance or occurrence, whether similar or
dissimilar to any of the foregoing.
(b) Pledgor unconditionally waives, to the fullest extent permitted
by applicable law, (i) notice of any of the matters referred to in
Section 9(a); (ii) all notices required by statute, rule or law or
otherwise to preserve any rights against Pledgor hereunder including,
without limitation, any demand, proof or
8
<PAGE>
notice of non-payment of any principal of or interest on the Note, and
any notice of any failure on the part of Beneficiary to perform or
comply with any term of the Note or the Line of Credit Agreement;
(iii) any right to the enforcement, assertion or exercise of any
right, power or remedy under or in respect of any such agreement or
instrument; and (iv) any requirement that any other Person be joined
as a party to any proceedings for the enforcement of any term of any
such agreement or instrument. Pledgor hereby unconditionally waives
and releases, to the fullest extent permitted by applicable law, any
right or equity of redemption (statutory or otherwise) with respect to
the Collateral, whether before or after sale hereunder, and all
rights, if any, of marshalling the Collateral and any other security
for the Obligations or otherwise.
SECTION 10. FURTHER REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR.
Pledgor represents and warrants for the benefit of Pledgee that:
(a) on the date hereof, Pledgor has good and marketable title to the
Stock evidenced by the certificates identified on Annex A. No Lien now
exists upon the Collateral and no Lien will exist upon the Collateral at
any time after the date hereof (and no-right or option to acquire any of
the Collateral exists in favor of any Person), except for the pledge
in favor of Pledgee created or provided for in this Agreement, which
pledge constitutes a valid and enforceable first priority pledge and
perfected security interest in and to the Collateral, subject to no prior
Lien or to any agreement purporting to grant to any third party a Lien on
the Collateral.
(b) All of the shares of the Pledged Stock are, and all other Stock
hereafter acquired by Pledgor will be (from and after the issuance
thereof), duly authorized, validly issued, fully paid and non-assessable
and none of such Pledged Stock or other Stock is or will be subject to any
restriction on the transfer thereof, pursuant to the charter or By-Laws of
the Beneficiary when issuing such Stock or any contract or agreement (other
than any such restriction contained in this Agreement or the Line of Credit
Agreement) by which Beneficiary or any of its respective properties may be
bound, or otherwise. An appropriate notation has been placed on the stock
ledger or other books and records of Beneficiary (and, in the case of any
Stock hereafter acquired by Pledgor, will be so placed on the stock ledger
or other books and records of Beneficiary the stock of which is pledged
hereunder) in order to reflect the pledge in favor of Pledgee created or
provided for in this Agreement.
(c) Pledgor has full power, authority and legal right to pledge all
of the Pledged Stock pursuant to this Agreement.
(d) This Agreement has been duly executed and delivered by Pledgor
and constitutes the legal, valid and binding obligation of Pledgor
enforceable in accordance with its terms.
9
<PAGE>
(e) Pledgor will appear in and defend any action or proceeding that
may affect its title to or Pledgee's interest in the Collateral.
(f) Pledgor will give prompt notice to Pledgee of the occurrence of
any Default or Event of Default.
SECTION 11. FURTHER ASSURANCES. In furtherance of the pledge pursuant to
Section 4, Pledgor will:
(a) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or appropriate (in the reasonable judgment of Pledgee) to
create, preserve, perfect or validate the pledge contemplated by this
Agreement or to enable Pledgee to exercise and enforce its rights, powers
and remedies hereunder with respect to such pledge (including, without
limitation, upon the occurrence and during the continuance of an Event of
Default, causing any or all of the Collateral to be registered in or
transferred of record into the name of Pledgee or its nominee) or otherwise
further to effectuate the purposes of this Agreement and to carry out the
terms hereof; and
(b) cause all certificates for the Pledged Stock to include such
legends as may be necessary or advisable to give proper notice of the
provisions of this Agreement and safeguard the rights of Pledgee
hereunder.
Pledgor hereby authorizes Pledgee to file financing statements and
amendments thereto relative to all or any part of the Collateral without the
signature of Pledgor where permitted by law, and agrees to do such further acts
and things and to execute and deliver to Pledgee such additional conveyances,
assignments, agreements and instruments as Pledgee may reasonably require or
deem advisable to carry into effect the purposes of this Agreement or to further
assure and confirm unto Pledgee its rights, powers and remedies hereunder.
SECTION 12. TERMINATION: RELEASE. After the Termination Date (as
defined below), this Agreement shall terminate (except as hereinafter
provided), and Pledgee, at the request and expense of Pledgor, will execute
and deliver to Pledgor a proper instrument or instruments acknowledging the
satisfaction and termination of this Agreement, and will duly assign,
transfer and deliver to Pledgor (without recourse and without any
representation or warranty of any kind by Pledgee) such of the Collateral as
may be at the time in the possession of Pledgee and as has not theretofore
been sold or otherwise applied or released pursuant to this Agreement,
together with any moneys at the time held by Pledgee hereunder. As used in
this Agreement, "Termination Date" shall mean the date upon which the Note is
no longer outstanding, and when all Obligations have been indefeasibly paid
and satisfied in full in accordance with the terms of the Note and Line of
Credit Agreement and when Pledgee is satisfied that it is entitled to retain
all funds so paid.
10
<PAGE>
SECTION 13. NOTICES. All notices and other communications provided for
in this Agreement shall be in writing and delivered by hand or mailed, first
class postage prepaid, return receipt requested or sent by overnight courier, or
by confirmed telefax transmission (confirmed by hand delivered, mailed or
overnight courier copy) addressed (a) if to Pledgor at ________________________
or at such other address as Pledgor shall have designated by notice to Pledgee,
or (b) if to Pledgee at __________________________ with a copy to: Dill, Dill,
Carr, Stonbraker & Hutchings, P.C., 455 Sherman Street, Suite 300, Denver, CO
80203 or at such other address as Pledgee shall have designated by notice to
Pledgor.
SECTION 14. MISCELLANEOUS. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF OHIO. The
terms of this Agreement may be waived, altered or amended only by an
instrument in writing duly executed by the party against which enforcement of
such waiver, alteration or amendment is sought. Any such waiver, alteration
or amendment shall be binding upon Pledgor and Pledgee. This Agreement shall
be assignable and shall be binding upon and inure to the benefit of and be
enforceable by Pledgor and Pledgee and their respective successors and
assigns. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect any of the terms hereof. Unless
otherwise specified, any reference in this Agreement to a particular section
or other subdivision, or a particular annex, shall be considered a reference
to that section or other subdivision of, or to that annex to, this Agreement.
This Agreement may be executed in any number of counterparts, each of which
shall be an original and all of which, taken together, shall constitute one
and the same instrument, and any of the parties hereto may execute this
Agreement by signing any such counterpart. If any provision hereof is
invalid and unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, the other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in favor of
Pledgee in order to carry out the intentions of the parties hereto as nearly
as may be possible, and the invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdictions.
(The remainder of this page is intentionally left blank.)
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
By: /s/ John O'Brien
-------------------------
John O'Brien
FULL POWER CORPORATION
an Ohio corporation
By: /s/ George Falsone
-------------------------
Name: George Falsone
Title: President
Notwithstanding anything in this entire agreement, John O'Brien shall not
be liable personally or otherwise, in any way, shape or form as a guarantor of
the loan other than with regard to his stock in All Power Corp.
Agreed and accepted
/s/ John O'Brien
----------------------------
12
<PAGE>
ANNEX A
to
Pledge Agreement
PLEDGED STOCK
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Name of Issuer Certificate Number Number and Class Percentage of
of Shares Outstanding Shares
of Each of Class of
Capital Stock
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
All Power Corp. 1 1,000,000 Common 100%
- -------------------------------------------------------------------------------------------
</TABLE>
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,393,183
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,393,183
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,393,183
<CURRENT-LIABILITIES> 559,710
<BONDS> 1,678,650
0
0
<COMMON> 7,888
<OTHER-SE> (853,065)
<TOTAL-LIABILITY-AND-EQUITY> 1,393,183
<SALES> 0
<TOTAL-REVENUES> 116,750
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 914,596
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (797,846)
<INCOME-TAX> 0
<INCOME-CONTINUING> (797,846)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (797,846)
<EPS-BASIC> (.19)
<EPS-DILUTED> (.13)
</TABLE>
