FORM 10-SB
GENERAL FORM FOR REGISTRATION
OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of
the Securities Exchange Act of 1934
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Besicorp Ltd.
(Name of Small Business Issuer in its charter)
New York 14-1809375
(State or other jurisdiction (I.R.S. Employer)
of incorporation or Identification No.)
organization
1151 Flatbush Road
Kingston, New York 12401
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(914) 336-7700
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Securities to be registered under Section 12(b) of the Act:
None
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.01 par value
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EXPLANATORY NOTE
This Registration Statement has been prepared on a prospective basis on the
assumption that, among other things, the Spin-Off (as defined in the Information
Statement which is a part of this Registration Statement) and the related
transactions contemplated to occur prior to or contemporaneously with the
Spin-Off will be consummated as contemplated by the Information Statement. There
can be no assurance, however, that any or all of such transactions will occur or
will occur as so contemplated. Any significant modifications or variations in
the transactions contemplated will be reflected in an amendment or supplement to
this Registration Statement.
CROSS REFERENCE
BESICORP LTD.
INFORMATION INCLUDED IN INFORMATION STATEMENT AND INCORPORATED IN
FORM 10-SB BY REFERENCE
CROSS REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10-SB
Item
No. Item Caption Location in Information Statement
- - --- ------------ ---------------------------------
1. Business "SUMMARY;" "BUSINESS;" "RISK FACTORS;"
"THE CONTRIBUTION AND THE SPIN-OFF;"
"RELATIONSHIP BETWEEN NEWCO AND OLDCO
AFTER THE SPIN-OFF;" "THE MERGER;" and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS."
2. Management's Discussion
and Analysis "BUSINESS;" "RISK FACTORS;"
"CAPITALIZATION;" "SELECTED UNAUDITED
COMBINED FINANCIAL STATEMENTS;" and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS."
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3. Properties "BUSINESS-Properties;" and "RELATIONSHIP
BETWEEN NEWCO AND OLDCO AFTER THE
SPIN-OFF-Additional Matters."
4. Security Ownership of
Certain Beneficial Owners
and Management "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT;" and
"RISK FACTORS."
5. Directors and Executive
Officers "MANAGEMENT--Directors and Executive
Officers;" "BUSINESS- Legal
Proceedings;" and "RISK FACTORS."
6. Executive Compensation "MANAGEMENT--Executive Compensation;"
and "RISK FACTORS."
7. Certain Relationships and
Related Transactions "SUMMARY;" "RISK FACTORS;" "THE
CONTRIBUTION AND THE SPIN-OFF;"
"RELATIONSHIP BETWEEN NEWCO AND OLDCO
AFTER THE SPIN-OFF;" "THE MERGER;" and
"CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."
8. Legal Proceedings "BUSINESS - Legal Proceedings."
9. Market for Common
Equity and Related
Stockholder Matters "SUMMARY;" "RISK FACTORS;"
"DESCRIPTION OF THE CAPITAL STOCK;"
"LISTING AND TRADING OF NEWCO COMMON
STOCK" AND "DIVIDEND POLICY."
11. Description of Registrant's
Securities "RISK FACTORS;" "DESCRIPTION OF THE
CAPITAL STOCK;" "DIVIDEND POLICY;" and
"DESCRIPTION OF CERTAIN STATUTORY,
CHARTER AND BY-LAW PROVISIONS."
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12. Indemnification of Directors
and Officers "LIABILITY AND INDEMNIFICATION OF
DIRECTORS AND OFFICERS."
13. Financial Statements "CAPITALIZATION;" "SELECTED HISTORICAL
AND PRO FORMA FINANCIAL DATA" and
Financial Statements Beginning on Page
F-1.
15. Financial Statements and
Exhibits.
(a) List of Financial
Statements "INDEX TO THE COMBINED FINANCIAL
STATEMENTS OF THE DISTRUBUTED BUSINESSES
OF BESICORP GROUP INC."
INFORMATION NOT INCLUDED IN INFORMATION STATEMENT
Item 10. Recent Sales of Unregistered Securities.
Following the organization of Newco, on November 20, 1998, Oldco
contributed $[ ] to Newco for [ ] shares of Newco Common Stock that Newco issued
under Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act") without registration under the Securities Act. As a result, Oldco became
the sole shareholder of Newco. Oldco remains the sole shareholder and it is
expected that it will remain the sole shareholder until the consummation of the
Spin-Off, at which time all of the shares of Newco issued to Oldco will be
distributed on a pro rata basis to the holders of Oldco Common Stock pursuant to
the Spin-Off.
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Item 15. Financial Statements and Exhibits.
(b) Exhibits The following documents are filed as exhibits hereto:
Exhibit No. Description
2.1 Contribution and Distribution Agreement by and between Besicorp Ltd.
(the "Company") and Besicorp Group Inc. ("BGI")*.
*To be filed by amendment
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3(i) Certificate of Incorporation of Besicorp Ltd.
3(ii) By-Laws of Besicorp Ltd.
10.1 Form of Indemnification Agreement by and among the Company, BGI
Acquisition LLC ("LLC") and BGI Acquisition Corp. ("Acquisition")
10.2 Form of Escrow Agreement by and among the Company, BGI, LLC and
Acquisition.
10.3 Lease of Corporate Headquarters by and between the Company and BGI*.
21.1 List of Subsidiaries*.
27 Financial Data Schedule - 6 Months ended September 30, 1998
27.1 Financial Data Schedule - 6 Months ended September 30, 1997
27.2 Financial Data Schedule - Year ended March 31, 1998
27.3 Financial Data Schedule - Year ended March 31, 1997
*To be filed by amendment.
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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
BESICORP LTD.
By: /s/ Michael F. Zinn
--------------------------------------
Name: Michael F. Zinn
Title: Chairman of The Board,
Chief Executive Officer and President
December 23, 1998
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT ON FORM 10-SB RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THIS INFORMATION STATEMENT SHALL
NOT CONSTITUTE AN OFFER TO SELL NOR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PRELIMINARY INFORMATION STATEMENT
SUBJECT TO COMPLETION, DATED DECEMBER 23, 1998
BESICORP LTD.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
This Information Statement is being furnished to shareholders of Besicorp
Group Inc., a New York corporation ("Oldco"), in connection with the
distribution by Oldco of all of the outstanding shares of common stock, par
value $.01 per share ("Newco Common Stock"), of Besicorp Ltd. ("Newco"), a New
York corporation and wholly owned subsidiary of Oldco, to the holders of record
of shares of common stock of Oldco ("Oldco Common Stock") as of the date (the
"Spin-Off Record Date") of, and immediately prior to, the consummation of the
Merger (as hereinafter defined), on the basis of one share of Newco Common Stock
for every 25 shares of Oldco Common Stock (the "Spin-Off"). No consideration
will be paid by the holders of Oldco Common Stock for the shares of Newco Common
Stock to be received by them in the Spin-Off. Fractional shares of Newco Common
Stock will not be issued and in lieu thereof, holders of Oldco Common Stock will
receive $[ ] in cash for each one twenty-fifth (1/25th) of a share of Newco
Common Stock.
Newco was formed in November 1998 for the purpose of effecting the
Spin-Off. The completion of the Spin-Off is a condition to the consummation of
the merger (the "Merger") provided for in the Agreement and Plan of Merger dated
November 23, 1998 (the "Plan of Merger"), by and among BGI Acquisition LLC
("Acquisition"), BGI Acquisition Corp. a wholly owned subsidiary of Acquisition
("Merger Sub"), and Oldco. The Spin-Of will be effected only if all of the other
conditions to the Merger, including approval of the Plan of Merger by the
shareholders of Oldco, have then been satisfied or waived. The receipt of the
shares of Newco Common Stock (and cash in lieu of fractional shares) will be a
taxable event to the recipients thereof. See "Certain Federal Income Tax
Consequences."
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Prior to the Spin-Off Record Date, Oldco contributed to Newco Oldco's
assets pertaining to, among other things, Oldco's photovoltaic and independent
power plant development businesses and Newco assumed essentially all of Oldco's
liabilities and obligations. Newco also indemnified Acquisition, Merger Sub and
Oldco, as the entity surviving the Merger (the "Surviving Corporation"), against
any damages they suffer arising out of, among other things, Oldco's acts or
omissions prior to the Merger. This Preliminary Information Statement uses the
past tense to refer to certain events such as the Contribution (as hereinafter
defined) and the adoption of the Plan of Merger by Oldco's shareholders, even
though at the time of this Preliminary Information Statement such events had not
occurred, since they will have occurred prior to the finalization and
distribution of the Information Statement. See "The Contribution and the
Spin-Off" and "Relationship Between Newco and Oldco after the Spin-Off."
There is currently no public trading market for the shares of Newco Common
Stock. Newco has not applied for listing of the Newco Common Stock on the New
York Stock Exchange, Inc., the American Stock Exchange or the Nasdaq Stock
Market, Inc. (each, an "Exchange") because it does not meet the listing
requirements of any Exchange. Accordingly, it is not anticipated that a regular
trading market will develop in the Newco Common Stock. See "Risk
Factors--Absence of Trading Market" and "Listing and Trading of Newco Common
Stock."
In reviewing this Information Statement, you should carefully consider the
matters described under the caption "RISK FACTORS."
----------------------
NO SHAREHOLDER APPROVAL IS REQUIRED OR SOUGHT IN CONNECTION
WITH THE SPIN-OFF. EACH SHAREHOLDER OF OLDCO WILL
AUTOMATICALLY BE ENTITLED TO RECEIVE A CERTIFICATE EVIDENCING
NEWCO COMMON STOCK (OR CASH IN LIEU OF FRACTIONAL SHARES OF
NEWCO COMMON STOCK) RECEIVED IN THE SPIN-OFF. WE ARE NOT ASKING
YOU FOR A PROXY, YOU ARE NOT REQUESTED TO SEND US A PROXY AND YOU
ARE NOT REQUESTED TO TAKE ANY ACTION WITH RESPECT TO YOUR SHARES.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS INFORMATION STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
The date of this Information Statement is _________, 1999.
THIS INFORMATION STATEMENT IS BEING FURNISHED SOLELY TO PROVIDE INFORMATION
TO SHAREHOLDERS OF OLDCO WHO WILL RECEIVE SHARES OF NEWCO COMMON STOCK IN THE
SPIN-OFF. IT IS NOT, AND IS NOT INTENDED TO BE CONSTRUED AS, AN INDUCEMENT OR
ENCOURAGEMENT TO BUY OR SELL ANY SECURITIES OF NEWCO OR OLDCO. EXCEPT AS
OTHERWISE INDICATED, THE INFORMATION CONTAINED IN THIS INFORMATION STATEMENT IS
BELIEVED TO BE ACCURATE AS OF [ ], 1999. CHANGES MAY OCCUR AFTER THAT DATE, AND
NEITHER NEWCO NOR OLDCO WILL UPDATE THE INFORMATION CONTAINED HEREIN EXCEPT IN
THE NORMAL COURSE OF THEIR RESPECTIVE PUBLIC DISCLOSURES.
ADDITIONAL INFORMATION
Newco has filed with the Securities and Exchange Commission (the "SEC") a
registration statement on Form 10-SB (such registration statement, as it may be
amended or supplemented, the "Registration Statement") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), with respect to the
shares of Newco Common Stock to be received by the holders of Oldco Common Stock
in the Spin-Off. This Information Statement does not contain all of the
information which is set forth in the Registration Statement and the exhibits
and schedules thereto. Statements in this Information Statement as to the
contents of any contract, agreement or other document are summaries only and are
not necessarily complete. For complete information as to these matters, refer to
the applicable exhibit or schedule to the Registration Statement. The
Registration Statement and the exhibits and schedules thereto filed by Newco
with the SEC may be inspected and copied at the SEC's public reference
facilities at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as at the Regional Offices of the SEC located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such information may be obtained by mail from the Public Reference
Branch of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such material may also be obtained on line at the SEC's Web
site (http://www.sec.gov).
Following effectiveness of the Registration Statement and consummation of
the Spin-Off, Newco will be required to comply with the reporting requirements
of the Exchange Act and will file reports, proxy statements and other
information with the SEC. Additionally, Newco will be required to provide annual
reports containing audited financial statements to its shareholders in
connection with its annual meetings of shareholders. After the Spin-Off, such
reports, proxy statements and other information will be available for inspection
and copying at the
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public reference facilities of the SEC and may be obtained by mail or over the
Internet from the SEC, as described above.
FORWARD-LOOKING STATEMENTS
This Information Statement includes or may include certain forward-looking
statements that involve risks and uncertainties that concern Newco's financial
position, business strategy, budgets, projected costs and plans and objectives
of management for future operations as well as other statements including words
such as "anticipate," "believe," "plan," "estimate," "expect," "intend," and
other similar expressions. Although Newco believes its expectations reflected in
such forward-looking statements are based on reasonable assumptions,
shareholders are cautioned that no assurance can be given that such expectations
will prove correct and that actual results and developments may differ
materially from those conveyed in such forward-looking statements. Important
factors that could cause actual results to differ materially from the
expectations reflected in the forward-looking statements herein include general
economic, business and market conditions in the various geographic regions and
countries in which Newco engages in its business activities, including
fluctuations in the value of local currencies; costs or difficulties related to
the establishment of Newco as an independent entity (including its ability to
obtain financing and the costs thereof); and increased competitive and/or
customer pressures in the businesses in which it competes. Such forward-looking
statements speak only as of the date on which they are made and Newco does not
undertake any obligation to update any forward-looking statement to reflect
events or circumstances after the date of this Information Statement. If Newco
does update or correct one or more forward-looking statements, shareholders and
others should not conclude that Newco will make additional updates or
corrections with respect thereto or with respect to other forward-looking
statements.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS INFORMATION STATEMENT, AND, IF
SO GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED.
4
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY.........................................................................
Newco..................................................................
The Spin-Off and the Merger............................................
RISK FACTORS....................................................................
CAPITALIZATION..................................................................
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA................................
BUSINESS........................................................................
Photovoltaic Activities................................................
Power Development Activities...........................................
Intellectual Property..................................................
Employees..............................................................
Properties.............................................................
Legal Proceedings .....................................................
THE CONTRIBUTION AND THE SPIN-OFF...............................................
Introduction...........................................................
Contribution Agreement.................................................
Terms of the Spin-Off..................................................
Procedure for receiving certificates for shares of Newco Common Stock..
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.........................................
RELATIONSHIP BETWEEN NEWCO AND OLDCO AFTER THE SPIN-OFF.........................
Indemnification Agreement..............................................
Escrow Agreement.......................................................
Additional Matters.....................................................
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS......................
Results of Operations for the Six Months Ended
September 30, 1998 and 1997 and for the
Fiscal Years Ended March 31, 1998 and 1997........................
Inflation..............................................................
Liquidity and Capital Resources........................................
Year 2000..............................................................
</TABLE>
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<TABLE>
<S> <C>
MANAGEMENT......................................................................
Directors and Executive Officers.......................................
Executive Compensation.................................................
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.............................................................
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................................
DESCRIPTION OF THE CAPITAL STOCK................................................
THE MERGER......................................................................
DESCRIPTION OF CERTAIN STATUTORY, CHARTER AND BY-LAW
PROVISIONS.............................................................
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS.........................
LISTING AND TRADING OF NEWCO COMMON STOCK.......................................
EXPENSES OF THE SPIN-OFF........................................................
INDEPENDENT ACCOUNTANTS.........................................................
DIVIDEND POLICY.................................................................
INDEX TO THE COMBINED FINANCIAL STATEMENTS OF THE
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC. ......................... F-1
</TABLE>
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SUMMARY
The following is a summary of the information contained elsewhere in this
Information Statement. This summary does not purport to be complete and is
qualified in its entirety by, and is subject to, the more detailed information
and financial statements, including the notes thereto, set forth elsewhere in
this Information Statement. Unless otherwise defined herein, capitalized terms
used in this summary shall have the respective meanings ascribed to them
elsewhere in this Information Statement. SHAREHOLDERS ARE URGED TO READ
CAREFULLY THIS INFORMATION STATEMENT IN ITS ENTIRETY. Unless the context
indicates otherwise, all references to "Oldco," "Oldco's activities," the
"Company" or to the "Company's" activities, results of operations or financial
condition prior to the date of the Contribution (as defined below) refer to
Oldco and its subsidiaries and to the activities, results of operations or
financial condition of Oldco and its subsidiaries, and all references to
"Newco," "Newco's activities," the "Company" or to the "Company's" activities,
results of operations or financial condition subsequent to the date of the
Contribution refer to Newco and its subsidiaries and to the activities, results
of operations or financial condition of Newco and its subsidiaries.
NEWCO
Upon completion of the Spin-Off, the assets relating to Oldco's
photovoltaic and independent power plant development businesses and essentially
all of Oldco's liabilities will have been transferred to Newco, which will then
be an independent, publicly held company engaged in the photovoltaic and
independent power plant development businesses. See "The Contribution and the
Spin-Off." Newco's principal executive offices are located at 1151 Flatbush
Road, Kingston, New York, and its telephone number is (914) 336-7700.
THE SPIN-OFF AND THE MERGER
DISTRIBUTING CORPORATION Besicorp Group Inc. ("Oldco"). References to Oldco
include its subsidiaries, except where the context
otherwise requires.
DISTRIBUTED CORPORATION Besicorp Ltd. ("Newco"), which, pursuant to the
Contribution and Distribution Agreement (the
"Contribution Agreement") by and between Oldco and
Newco holds the Contributed Assets (as defined)
and has assumed essentially all of the liabilities
of Oldco (the "Contribution"). See "The
Contribution and the Spin-Off--The Contribution
Agreement." Newco is engaged in the development,
assembly, manufacture and marketing of
photovoltaic systems and products and the
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development of independent power plant projects.
See "Business."
DISTRIBUTION RATIO One share of Newco Common Stock for every 25
shares of Oldco Common Stock owned as of the
Spin-Off Record Date. No fractional shares of
Newco Common Stock will be issued. Holders of
Oldco Common Stock entitled to receive Newco
Common Stock will in lieu of fractional shares
(but not whole shares) of Newco Common Stock
receive $______ in cash for each one twenty-fifth
(1/25th) of a share of Newco Common Stock and will
receive, in addition, such number of whole shares
of Newco Common Stock as to which they are
entitled. As a result, shareholders of Oldco
owning less than 25 shares of Oldco Common Stock
will receive cash but will not receive any Newco
Common Stock. See "The Contribution and the
Spin-Off--Terms of the Spin-Off."
SHARES TO BE DISTRIBUTED Assumed to be approximately 122,057 shares of
Newco Common Stock (based on the number of
shares of Oldco Common Stock outstanding on
December 22, 1998, after giving effect to the
exercise of all outstanding options, warrants
and other rights to purchase Oldco Common Stock
and assuming no cancellation of shares as a
result of fractional shares being converted into
cash. The number of shares of Newco Common Stock
to be cancelled as a result of the conversion of
fractional shares into cash will be less than
[2,000]. See "The Contribution and the
Spin-Off--Terms of the Spin- Off."
FEDERAL INCOME TAX
CONSEQUENCES The receipt of the shares of Newco Common Stock
(and cash in lieu of fractional shares) will be a
taxable event to the recipients thereof. See
"Certain Federal Income Tax Consequences."
TRADING MARKET Currently, there is no public trading market for
Newco Common Stock and it is not anticipated that
any such market will develop. Newco has not
applied and does not intend to apply for listing
of the Newco Common Stock on any Exchange because
it does not meet the listing requirements thereof.
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Trading, if any, in Newco Common Stock will take
place only in the over-the-counter market. See
"Listing and Trading of Newco Common Stock."
OVERVIEW OF NEWCO Newco is engaged in the photovoltaic and
independent power plant development businesses.
See "Business."
OVERVIEW OF THE SPIN-OFF Under the terms of the Plan of Merger, Oldco is
required to effect the Spin-Off prior to the
consummation of the Merger. The Contribution
followed by the Spin-Off will separate from Oldco
essentially all of Oldco's liabilities and certain
of Oldco's assets (in particular, those relating
to the photovoltaic and independent power plant
development businesses) and enable Acquisition to
acquire only the Retained Assets (as hereinafter
defined) and assume the Retained Liabilities (as
hereinafter defined) in the Merger; the Spin-Off
will leave Oldco's photovoltaic and independent
power plant development businesses as a separate
publicly held company (Newco), owned by the
holders of the Oldco Common Stock as of the
Spin-Off Record Date. The directors and officers
of Oldco will be the directors and officers of
Newco at the time of the Spin-Off. The Spin-Off
will not be completed unless all of the other
conditions to the Merger have been satisfied or
waived. See "The Contribution and the
Spin-Off--Terms of the Spin-Off."
OVERVIEW OF THE MERGER In the Merger, Merger Sub will be merged with and
into Oldco (which only owns the Retained Assets
and the Retained Liabilities), with Oldco being
the surviving corporation (the "Surviving
Corporation") and becoming a wholly owned
subsidiary of Acquisition. The Surviving
Corporation will change its name within 30 days
after the date of the consummation of the
transactions contemplated by the Plan of Merger
(the "Merger Closing Date") to a name which does
not include the word "Besicorp." At the effective
date of the Merger (the "Effective Date"), each
issued and outstanding share of Oldco Common Stock
will be converted into the right to
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receive $34.50, subject to upward (but not
downward) adjustment in certain circumstances
("the "Merger Consideration"). The holders of
Oldco Common Stock immediately prior to the
Effective Date will receive letters of transmittal
requesting that they surrender their Oldco share
certificates. Upon surrender, such holders will
receive the Merger Consideration applicable to the
Oldco Common Stock evidenced by such certificates.
The consummation of the Merger is subject to the
satisfaction or waiver of various conditions. See
"The Merger" and "Relationship Between Newco And
Oldco After The Spin-Off."
RELATIONSHIP WITH OLDCO
AFTER THE MERGER
After the Merger, Oldco and Newco will become
separately owned and managed companies. Oldco
will be owned by Acquisition and Newco will be
owned by the holders of Oldco Common Stock as of
the Spin-Off Record Date (the "Entitled
Holders"). Immediately prior to the closing
pursuant to the Plan of Merger (the "Merger
Closing"), one or more of Oldco, Newco, Merger
Sub, and Acquisition will enter into the
following agreements governing various matters
and ongoing relationships between Acquisition,
the Surviving Corporation and Newco following
the Spin-Off and the Merger: (i) the
Indemnification Agreement (the "Indemnification
Agreement"), which obligates Newco to indemnify
Merger Sub, Acquisition; the Surviving
Corporation, and certain other parties from any
damage they suffer arising out of, among other
things, Oldco's breach of representations and
warranties set forth in the Plan of Merger and
certain liabilities, taxes and litigation of
Oldco other than the Retained Liabilities, and
(ii) the Escrow Agreement (the "Escrow
Agreement"), which governs the $6,000,000 placed
by Oldco in escrow (the "Escrow Fund") to, among
other things, (a) satisfy Newco's obligations
under the Indemnification Agreement and (b)
provide for the payment of, among other things,
certain litigation and related costs. Following
the fifth anniversary of the
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Merger Closing Date and the satisfaction of
certain conditions, the remainder of the Escrow
Fund, if any, will be released to Newco. See
"Relationship Between Newco and Oldco After the
Spin-Off."
DISTRIBUTION AGENT,
TRANSFER AGENT AND
REGISTRAR Continental Stock Transfer & Trust Company
("Continental") will serve as the distribution
agent (the "Distribution Agent") for the Spin-Off
and as the transfer agent and registrar for the
Newco Common Stock and is the paying agent
responsible for disbursing the Merger
Consideration.
SPIN-OFF RECORD DATE The Spin-Off Record Date is expected to be the
same day as the Effective Date. The Spin-Off will
be effectuated at that time. Therefore, the
holders of Oldco Common Stock on the Spin-Off
Record Date (other than those Entitled Holders
holding fewer than 25 shares of Oldco Common
Stock) will become the shareholders of Newco. See
"The Contribution and the Spin-off--Terms of the
Spin- Off."
DISTRIBUTION OF
SHARE CERTIFICATES Oldco will deliver to the Distribution Agent
shares of Newco Common Stock representing 100% of
the outstanding shares of Newco Common Stock for
distribution to the Entitled Holders. The
Distribution Agent will distribute to all Entitled
Holders a letter of transmittal requesting the
delivery of their certificates evidencing shares
of Oldco Common Stock in order to receive the
Merger Consideration. The letter of transmittal
will be accompanied by a letter informing such
Entitled Holders about the occurrence of the
Spin-Off and that certificates evidencing their
shares of Newco Common Stock and/or cash in lieu
of fractional shares (as well as the Merger
Consideration) will be distributed upon the
Distribution Agent's receipt of their certificates
evidencing shares of Oldco Common Stock. Upon
receipt of each such certificate, the Distribution
Agent will distribute to the Entitled Holder
delivering such certificate both
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the Merger Consideration and the certificate
evidencing shares (and/or cash in lieu of
fractional shares) of Newco Common Stock relating
thereto as promptly as practicable. PLEASE DO NOT
SEND IN YOUR OLDCO SHARE CERTIFICATES AT THIS
TIME. See "The Contribution and the
Spin-Off--Terms of the Spin-Off."
RISK FACTORS
History of Losses. For the six months ended September 30, 1998, and the
years ended March 31, 1998 ("Fiscal 1998 ") and March 31, 1997 ("Fiscal 1997"),
those parts of Oldco being distributed to Newco pursuant to the Contribution
(the "Distributed Businesses") had losses on an historical basis of $(2.8
million), $(7.4 million) and $(4.8 million), respectively, on total revenues of
$2.3 million, $4.3 million and $5 million, respectively, and on a pro-forma
basis had losses of $(2.8 million) and $(7.4 million) for the six months ended
September 30, 1998 and the year ended March 31, 1998, respectively. Gross
margins with respect to Oldco's product sales (principally photovoltaic
products) were 5% and 9% for the six months ended September 30, 1998 and 1997,
respectively, and (2)% and 4% for the years ended March 31, 1998 and 1997,
respectively. The narrow gross profit margins are due, in part, to the
competitive nature of the photovoltaic business which results in part from the
fact that many of the Company's photovoltaic products are treated in the
marketplace as commodities. No assurance can be given that gross margins will
improve or that Newco will ever be profitable. See "Management's Discussion and
Analysis or Plan of Operations", "Selected Historical and Pro Forma Financial
Data," the Combined Financial Statements of the Distributed Businesses of
Besicorp Group Inc. and the Unaudited Pro Forma Combined Financial Information.
Immediate Cash and Capital Requirements; Insufficient Working Capital;
Going Concern Qualification. At September 30, 1998 and March 31, 1998, the
Distributed Businesses had working capital on a historical basis of
approximately $959,000 and approximately $486,000, respectively, and on a
pro-forma basis the Distributed Businesses had working capital of approximately
$2 million at September 30, 1998. Management estimates that the funds available
to Newco are only sufficient to allow Newco to continue operations for two (2)
to four (4) months from the date of this Information Statement. Without
additional funds, Newco may not be able to pay its obligations as they become
due. The failure of Newco to obtain additional funds would materially adversely
affect Newco and could require it to curtail operations. The report of Newco's
independent certified public accountants is qualified with respect to Newco's
ability to continue in existence. Newco is exploring different methods of
securing the financing required to continue operations though no assurance can
be given that such financing will be available or that it will not be dilutive
to Newco's shareholders. See "Capitalization", "Management's Discussion and
Analysis or Plan of Operations", "Selected Historical and Pro Forma Financial
Data," the Combined Financial Statements of the Distributed Businesses of
Besicorp Group Inc. and the Unaudited Pro Forma Combined Financial Information.
12
<PAGE>
Litigation Claims; Claims of Creditors of Oldco. Newco has assumed all the
liabilities and obligations arising out of legal proceedings to which Oldco is
party except for certain litigation specified in the Indemnification Agreement
(the "Existing Litigation"). Therefore Newco is liable for substantially all
awards of damages, if any, in any such actions brought against Oldco. See "Legal
Proceedings." Claims of Oldco's creditors may survive the Merger. To the extent
the Escrow Funds are insufficient to satisfy such claims, such creditors may
seek to bring claims against Newco as Newco has assumed essentially all of the
liabilities and obligations of Oldco. It is possible that such creditors of
Oldco, including taxing authorities, may seek to bring claim against persons who
were shareholders of Oldco at the Effective Date by asserting that such
shareholders are subject to transferee liability (i.e., imposing liability by
virtue of the fact that Oldco's shareholders received the Merger Consideration
or Newco Common Stock or both although such liability of any shareholder would
presumably be limited to the Merger Consideration and Newco Common Stock
received by such shareholder). Though management believes that it is unlikely
that such claims would be successful, successful claims may materially reduce
the net benefit received by such shareholders from the Merger Consideration and
the Spin-Off. See "Certain Federal Income Tax Consequences" and "Relationship
between Oldco and Newco After the Spin-Off--The Indemnification Agreement."
Control by Principal Shareholder. After the Spin-Off, Mr. Michael F. Zinn,
the Chairman of the Board, President and Chief Executive Officer of Newco, will
own approximately 55.7% of the then-outstanding shares of Newco Common Stock.
(It is estimated that after giving effect to the elimination of fractional
shares of Newco Common Stock, that Mr. Zinn will not own more than 58% of the
Newco Common Stock). Holders of Newco Common Stock will be entitled to one vote
per share on all matters voted on generally by the shareholders, including the
election of directors, and, initially, the holders of such shares will possess
all of Newco's voting power. The Certificate of Incorporation of Newco (the
"Newco Certificate") does not provide for cumulative voting for the election of
directors. Thus, the holders of more than 50% of the outstanding shares of Newco
Common Stock generally will be able to elect all the directors of Newco then
standing for election and holders of the remaining shares will not be able to
elect any director. Consequently, as Mr. Zinn will hold more than 50% of the
outstanding shares, he will be able to elect (and remove) all of the members of
Newco's Board of Directors (the "Newco Board") and exercise substantial
influence over the outcome of any issues which may be subject to a vote of
Newco's shareholders and the policies and direction of Newco. See "Description
of the Capital Stock--Common Stock"
Ability of principal shareholder to sell Newco. Mr. Michael F. Zinn will
own approximately 55.7% of the outstanding Newco Common Stock after the
Spin-Off. Consequently, if a prospective purchaser were to reach an agreement
with Mr. Zinn to purchase his stock (the "Zinn Stock") and acquire Newco, the
Zinn Stock would be sufficient to guarantee shareholder approval of the
transaction by which such purchaser would acquire Newco.
Ability to engage in Interested Party Transactions. Generally, New York
corporations are subject to the provisions of Section 912 of the New York
Business Corporation
13
<PAGE>
Law (the "BCL") if they have a class of securities registered under Section 12
of the Exchange Act. Section 912 provides, with certain exceptions, that a New
York corporation shall not engage in a "business combination" (e.g., merger,
consolidation, recapitalization or disposition of stock or assets) with any
"interested shareholder" for a period of five years from the date that such
person first became an interested shareholder. After the end of such five year
period, generally the interested shareholder may engage in a business
combination only if (a) the business combination is approved by the holders of a
majority of the outstanding voting stock not beneficially owned by such
interested shareholder or (b) the business combination meets certain valuation
and consideration requirements for the stock of such corporation. An "interested
shareholder" is defined as any person that is the beneficial owner of 20% or
more of the then-outstanding voting stock. Therefore, ordinarily, Mr. Michael F.
Zinn, as the beneficial owner of more than 20% of the Newco Common Stock, would
not be able to engage in a business combination with Newco for five years after
the Spin-Off Record Date. Moreover, after the end of such five year period,
ordinarily he would not be able to engage in a business combination unless the
business combination were approved by the holders of a majority of the
outstanding voting stock not beneficially owned by Mr. Zinn. However, the Newco
Certificate provides that Section 912 does not apply to Newco. Therefore, Mr.
Zinn or any other person who qualifies as an "interested shareholder" would be
able to engage in a business combination with Newco at any time, subject, to the
extent required by the BCL, to the approval of such transaction by the Newco
Board and/or the shareholders of Newco. See "Description of Certain Statutory,
Charter and By-Law Provisions."
Absence of likelihood that shareholders will be able to profit from a
hostile takeover. Frequently prospective purchasers of companies offer
substantial premiums to shareholders who agree to tender their shares so that
the prospective purchaser may effectuate a change of control of a company. Mr.
Zinn will own 55.7% of the outstanding Newco Common Stock after the completion
of the Spin-Off. Consequently no one will be able to acquire control of Newco
without first reaching an agreement with Mr. Zinn. In addition, even though
neither the Newco Certificate nor the By-Laws of Newco (the "Newco By-Laws")
contain any provisions intended to discourage non-negotiated takeover attempts,
there will be, after the completion of the Spin-Off, approximately 4.88 million
unissued and unreserved shares of Newco Common Stock and one million unissued
and unreserved shares of Newco's Preferred Stock, par value $.01 per share (the
"Newco Preferred Stock"). One of the effects of the existence of unissued and
unreserved shares of Newco Common Stock and Newco Preferred Stock may be to
enable the Newco Board to discourage an attempt to change control of Newco and
thereby to protect the continuity of Newco's management. If, in the due exercise
of its fiduciary duties, the Newco Board determined that an attempt to change
control of Newco was not in Newco's best interest, the Newco Board could
authorize, without having to obtain approval of the shareholders, the issuance
of such shares in one or more transactions that might prevent or render more
difficult the completion of such attempt. See "Description of the Capital
Stock--Certain Effects of Authorized and Unissued Stock."
14
<PAGE>
Competition. The photovoltaic and power project markets in which Newco
operates are highly competitive. Many of Newco's competitors have greater
financial, marketing, manufacturing and distribution resources than those of
Newco. There can be no assurance that Newco will be able to compete successfully
in any of these businesses. See "Business."
Technological Change and Product Development. New photovoltaic energy
products are constantly developed. Newco believes that its future success will
depend on its ability to develop on a timely basis technologically advanced
products that meet the requirements of its customers. There can be no assurance
that Newco will have sufficient resources to make such investments, that Newco
will be able to make the technological advances necessary to remain competitive,
that Newco will be able to successfully market its new products, if any, or that
a new product, standard or technology will not emerge which could render its
existing products obsolete. See "Business."
Risks Inherent in Foreign Operations. Newco's foreign independent power
plant initiatives are subject to the risks generally attendant to foreign
operations (and in particular, risks attendant to foreign operations in less
developed countries), including compliance with and unexpected changes in
foreign regulatory requirements, trade barriers, currency control regulations,
fluctuations in exchange rates, political and economic instability, the
potential for expropriation, local economic conditions, and difficulties in
staffing and managing foreign operations. Further, commercial and corporate laws
in these markets are still significantly less developed than comparable laws in
industrialized countries and are subject to change, including extensive
revisions, preemption by local laws or administrative regulations or new
regimes. The uncertainties associated with the existing and future laws and
regulations in Newco's markets may have an adverse effect on Newco's ability to
conduct its business and to generate profits.
Possible Inability to Control Newco's Partners. Newco anticipates that its
power plant development initiatives will be conducted with one or more partners.
Newco may not be able to influence the management of the partnerships in which
it has or may acquire interests and may be limited with respect to its ability
to control the operations, strategies and financial decisions of the entity
developing the power plant or any partnership in which it acquires an ownership
interest. Any significant disagreements among the partners could have a material
adverse effect on such venture. Moreover, the equity interests of Newco in these
partnerships generally would not be freely transferable. Therefore, there can be
no assurance of Newco's ability to realize economic benefits through the sale of
its interests in these ventures.
Reliance on Limited Suppliers and Customers. Newco relies principally on
one supplier, with which it does not have a supply agreement, for certain
photovoltaic supplies. While management believes alternative sources of supply
are available, no assurance can be given that these supplies will continue to be
available on terms currently available and the inability to obtain such supplies
from alternative suppliers on similar terms could have an adverse effect on
Newco's operations. During the six months ended September 30, 1998, Fiscal 1998
and Fiscal 1997, sales to the same customer accounted for 10%, 14% and 23%,
respectively, of sales of photovoltaic
15
<PAGE>
products. The loss of such customer could have an adverse effect on Newco's
operations. See "Business."
Dependence of Photovoltaic Business on Dealers and Distributors. Newco
conducts much of its sales with respect to its photovoltaic business through
dealers and distributors. Such dealers and distributors are not subject to
minimum purchase requirements, may sell competing products, and may discontinue
marketing Newco's products without notice. The loss of, or a significant
reduction in sales volume through, one or more of Newco's dealers or
distributors could have a material adverse effect on Newco's operations. See
"Business."
Environmental Matters. Newco has agreed to indemnify the Surviving
Corporation and Acquisition with respect to environmental claims against Oldco,
which was subject to various foreign, federal, state and local environmental
laws and regulations. Under certain circumstances, such environmental laws and
regulations may also impose joint and several liability for investigation and
remediation of contamination at locations owned or operated by Newco, Oldco or
their predecessors, or at locations at which wastes or other contamination
attributable to Newco, Oldco or their predecessors have come to be located.
Newco can give no assurance that such liability at facilities Newco currently
owns or operates, or at other locations, will not arise or be asserted against
Newco or entities for which it may be responsible. Such other locations could
include, for example, facilities formerly owned or operated by Newco or by
Oldco, including the power plants owned by Oldco or its affiliates. See
"Business."
Dependence on Senior Management and Employees. Newco's future performance
will depend, in part, upon the efforts and abilities of Newco's senior
management and employees. The loss of service of one or more of these persons
could have an adverse effect on Newco's business and development. Newco has not
entered and does not intend to enter into employment agreements with any of
these persons and does not maintain key-man life insurance on the life of any
person other than a $3 million policy on the life of Michael F. Zinn, its
Chairman of the Board, President and Chief Executive Officer. Because of Newco's
limited financial resources, Newco may be unable to compensate management and
employees at the levels prevailing at Oldco and accordingly, may be unable to
retain employees critical to its success. See "Management."
Liability of Ten Largest Shareholders for Unpaid Wages. Under Section 630
of the BCL, unless the Newco Common Stock is regularly quoted on an
over-the-counter market, the ten largest shareholders of Newco will be
personally liable for unpaid wages and debts to Newco's employees. See
"Description of the Capital Stock--Common Stock."
Absence of Trading Market. There is currently no existing trading market
for Newco Common Stock. Newco has not applied and currently does not intend to
apply for listing of Newco Common Stock on any Exchange because it does not meet
the listing requirements of any Exchange. Newco Common Stock may be traded on
the OTC Electronic Bulletin Board, a screen-based trading system operated by the
National Association of Securities Dealers, Inc.
16
<PAGE>
Securities traded on the OTC Electronic Bulletin Board are, for the most part,
thinly traded and subject to special regulations not imposed on securities
listed or traded on any Exchange. Accordingly, no assurance can be given that a
trading market (liquid or illiquid) will develop for the Newco Common Stock. If
a trading market does not develop or is not maintained, holders of the Newco
Common Stock may experience difficulty in reselling shares of the Newco Common
Stock or may be unable to sell them at all. If a market for the Newco Common
Stock develops, any such market may be discontinued at any time. If a public
trading market develops for the Newco Common Stock, future trading prices of
such securities will depend on many factors including, among other things,
prevailing interest rates, Newco's results of operations and the market for
similar securities. There can be no assurance as to the price at which Newco
Common Stock will trade. See "Listing and Trading of Newco Common Stock."
Limited Relevance of Historical Financial Information. The historical
financial information included in this Information Statement may not necessarily
reflect the results of operations, financial position and cash flows of Newco in
the future or the results of operations, financial position and cash flows had
Newco operated as a separate stand-alone entity during the periods presented.
The financial information included herein (i) reflects operations relating to
solar thermal products which were discontinued in Fiscal 1998 and (ii) does not
reflect any changes that may occur in the funding and operations of Newco as a
result of the Spin-Off. See "Selected Historical and Pro Forma Financial Data"
and "Management's Discussion and Analysis or Plan of Operations."
Ability to issue shares of Preferred Stock which would have an adverse
impact on holders of Newco Common Stock. The Newco Board is authorized to issue
shares of Newco Preferred Stock. The issuance of Newco Preferred Stock could
decrease the assets and amount of earnings, if any, available for distribution
to the holders of the Newco Common Stock or could adversely affect the rights
and powers, including voting rights, of the holders of Newco Common Stock. See
"Description of the Capital Stock--Preferred Stock."
Absence of Dividends. Newco has never declared or paid any cash dividends
on the Newco Common Stock and does not anticipate paying any cash dividends in
the immediate future. See "Dividend Policy."
Risk of Low-Priced Stocks. The Newco Common Stock may be treated as a
"penny stock" under the Exchange Act. The Exchange Act and the rules applicable
to penny stocks generally impose additional sales practice and disclosure
requirements upon broker-dealers who sell such securities to persons other than
certain "accredited investors" (generally, institutions with assets in excess of
$5,000,000 or individuals with net worth in excess of $1,000,000 or annual
income exceeding $200,000, or $300,000 jointly with spouse) or in transactions
not recommended by the broker-dealer. For transactions covered by the penny
stock rules, the broker-dealer must make a suitability determination for each
purchaser and receive the purchaser's written agreement prior to the sale. In
addition, the broker-dealer must make certain mandated disclosures in penny
stock transactions, including the actual sale or purchase price and
17
<PAGE>
actual bid and offer quotations, the compensation to be received by the
broker-dealer and certain associated persons, and deliver certain disclosures
required by the SEC. Consequently, the penny stock rules may affect the ability
of broker-dealers to make a market in or trade Newco's shares and thus may also
affect the ability of purchasers of shares to resell these shares in the public
markets. See "Listing and Trading of Newco Common Stock."
Shares Eligible for Future Sale; Possible Adverse Effect on Future Market
Prices. The Spin-Off will involve the distribution to holders of Oldco Common
Stock of an aggregate of approximately 122,057 shares of Newco Common Stock,
representing all of the outstanding shares of Newco Common Stock. It is expected
that substantially all of these shares (other than the Zinn Stock) will be
eligible for immediate resale in the public market. Sales of substantial amounts
of Newco Common Stock, or the perception that such sales could occur, may
adversely affect prevailing market prices, if any, for the Newco Common Stock.
CAPITALIZATION
The following table sets forth the unaudited capitalization of Newco as at
September 30, 1998 on a historical basis and as at September 30, 1998 on a pro
forma basis. The unaudited pro forma capitalization reflects the distribution to
Newco from Oldco of cash of $1,000,000 and the satisfaction of all debt except
debt issued in connection with Oldco's acquisition of a subsidiary, which
subsidiary has been distributed to Newco.
This table should be read in conjunction with the Combined Financial
Statements of the Distributed Businesses of Besicorp Group Inc. and notes
thereto, the Unaudited Pro Forma Combined Financial Information and "Selected
Historical and Pro Forma Financial Data" and notes thereto included elsewhere
herein. The unaudited pro forma information set forth below does not necessarily
reflect the capitalization of Newco in the future or as it would have been had
the Spin-Off occurred on September 30, 1998.
18
<PAGE>
<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Long-Term Debt:
Current Maturities of Long-Term Debt $ 65,317 $ (45,317) (a) $ 20,000
Long-Term Debt 178,839 (51,818) (a) 127,021
----------- ----------- -----------
Total Long-Term Debt $ 244,156 $ (97,135) (a) $ 147,021
Shareholders' Equity:
Common Stock-authorized 5,000,000
shares, $.01 par value, issued and
outstanding 122,057 shares $ -- $ 1,221 (b) $ 1,221
Preferred Stock-authorized and
unissued, 1,000,000 shares --
Paid-in Capital 2,829,784 2,829,784
Total Combined Equity 1,733,870 101,000 (c) 0
97,135 (a)
1,000,000 (c)
(2,932,005)(c)
----------- ----------- -----------
Total Shareholders' Equity $ 1,733,870 $ 1,097,135 $ 2,831,005
----------- ----------- -----------
Total Capitalization: $ 1,978,026 $ 1,000,000 $ 2,978,026
=========== =========== ===========
</TABLE>
- - ----------
(a) Represents settlement of debts prior to the Spin-Off.
(b) Represents the issuance of 122,057 shares of Besicorp Ltd. Common Stock.
(c) Represents the distribution by Oldco of $1 million in cash, the settlement
of debts prior to the Spin-Off, and the reclassification of the combined
equity in excess of par value to paid in capital.
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth certain historical combined financial data
for the Distributed Businesses for Fiscal 1997 and Fiscal 1998 and the six month
periods ended September 30, 1997 and 1998. The historical combined financial
data for Fiscal 1997 and 1998 (audited), and the six months ended September 30,
1997 and 1998 (unaudited), were derived from the Combined Financial Statements
of the Distributed Businesses of Besicorp Group Inc. included elsewhere herein.
In the opinion of management, the historical combined financial data of the
Distributed Businesses for the six months ended September 30, 1997 and 1998
include all adjusting entries (consisting only of normal recurring adjustments)
necessary to present fairly the information set forth therein. The historical
combined financial data are not necessarily indicative of the results of
operations for any future period. Furthermore, the results of operations for the
six months ended
19
<PAGE>
September 30, 1997 and 1998 should not be regarded as indicative of the results
that may be expected for the full year.
The summary pro forma combined income statement data for Fiscal 1998 and
the six months ended September 30, 1998, and the summary pro forma balance sheet
at March 31, 1998, reflect the effects on the historical results of the
Distributed Businesses of: (i) the transfer to Newco of substantially all of the
assets and liabilities of the Distributed Businesses; (ii) the leasing of the
corporate headquarters from Oldco; (iii) the repayment of $97,135 of Newco debt
by Oldco prior to the Spin-Off; (iv) distribution of the shares of Newco Common
Stock to the Entitled Holders; (v) the transfer to Newco of $1,000,000; and (vi)
the addition of expenses expected to be incurred by Newco when operating as a
stand-alone business. The accounting for this transfer of assets and liabilities
represents a reorganization of companies under common control and, accordingly,
all assets and liabilities will be reflected at their historical cost basis.
The summary pro forma combined financial data set forth below is not
necessarily indicative of the results of the operations or financial position of
the Distributed Businesses had the transactions reflected therein actually been
consummated on the dates assumed and is not necessarily indicative of Newco's
future performance as an independent entity. The pro forma adjustments, as
described in the Notes to the Unaudited Pro Forma Combined Balance Sheet and
Notes to the Unaudited Pro Forma Combined Statements of Operations are based on
available information and upon certain assumptions that management believes are
reasonable. The summary pro forma combined financial data should be read in
conjunction with "Management's Discussion and Analysis or Plan of Operation,"
the Combined Financial Statements of the Distributed Businesses of Besicorp
Group Inc. and notes thereto and the Unaudited Pro Forma Combined Financial
Information and notes thereto included elsewhere herein.
20
<PAGE>
Income Statement Data
<TABLE>
<CAPTION>
(In Millions, Except Per Share Amounts)
---------------------------------------
Year Ended March 31, Six Months Ended September 30,
-------------------- ------------------------------
1998 1997 Pro Forma 1998 1998 1997
---- ---- -------------- ---------------------- ----
(Unaudited) Historical Pro Forma (Unaudited)
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenues $4.3 $5.0 $4.3 $2.3 $2.3 $2.4
Costs and Expenses 15.4 12.3 15.5 6.6 6.6 5.8
Net loss (7.4) (4.8) (7.4) (2.8) (2.8) (2.2)
Pro forma Per Share
Data (Unaudited)
Net loss ($60.83) ($23.29)
======= =======
</TABLE>
Balance Sheet Data
<TABLE>
<CAPTION>
Pro Forma
March 31, 1998 September 30, 1998 September 30, 1998
-------------- ------------------ ------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Net working capital $.5 $1.0 $2.0
Total Assets 4.4 3.5 4.5
Long-term debt 3.2 -- --
Combined Equity (.5) 1.7 2.8
</TABLE>
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
This narrative discusses the financial results of the Distributed
Businesses. These financial results include the results obtained from the
Company's operations relating to solar thermal and heat transfer products which
historically the Company combined with the photovoltaic operations. However, the
Company discontinued the sale of solar thermal and heat transfer products,
effective March 31, 1998, and therefore Newco will not, on an on-going basis, be
in the business of selling solar thermal and heat transfer products. The Company
has not generated any revenue from its power development activities. Through
Fiscal 1998, costs with respect to such activities are reflected as deferred
costs. Subsequent to Fiscal 1998, such costs were written off and are included
in Selling, General and Administrative Expenses ("SG&A") for the six months
ended September 30, 1998. See Notes 1 and 3 of the Notes to the Combined
Financial Statements of the Distributed Businesses of Besicorp Group Inc.
RESULTS OF OPERATIONS
Six months ended September 30, 1998 compared with six months ended
September 30, 1997 and Fiscal 1998 compared with Fiscal 1997.
Product Sales
Revenues from product sales during the six months ended September 30, 1998,
decreased by $182,976 (or 8%) to $2,085,690 from $2,268,666 for the six months
ended September 30, 1997. Fiscal 1998 revenues from product sales decreased by
$636,575 (or 14%) to $3,838,351 from $4,474,926 for Fiscal 1997. The decrease in
revenues for both periods is due primarily to a decrease in sales of solar
thermal and heat transfer products of $765,134 for the six months ended
September 30, 1998 and $836,372 for Fiscal 1998. For the six months ended
September 30, 1998, this decrease is primarily due to Newco's decision to
discontinue those product lines. Factors contributing to the decrease in product
sales during Fiscal 1998 include increasingly competitive pricing activity for
solar thermal and heat transfer products and to the Company's discontinuance of
the non-agricultural portion of its heat transfer product line during the third
quarter of Fiscal 1997. These decreases were partially offset by increases
during the six months ended September 30, 1998 and Fiscal 1998 of $582,158 (or
40%) and $199,797 (or 8%), respectively, in sales of photovoltaic products from
the corresponding prior periods. Sales of photovoltaic products were $2,053,507
and $1,471,349, respectively, for the six months ended September 30, 1998 and
1997. For Fiscal Years 1998 and 1997, sales of photovoltaic products were
$2,730,545 and $2,530,748, respectively.
22
<PAGE>
Other Revenues
Other revenues for the six months ended September 30, 1998 increased by
$111,580 (or 96%) to $227,321 from $115,741 during the corresponding period in
the prior year. Other revenues for Fiscal 1998 increased by $115,232 (or 37%) to
$426,154 from $310,922 for Fiscal 1997. The increase in both periods was
primarily due to revenue received from the New York State Energy Research and
Development Authority. See Note 11 of the Notes to the Combined Financial
Statements of the Distributed Businesses of Besicorp Group Inc.
Interest and Other Investment Income
Interest and other investment income during the six months ended September
30, 1998 decreased by $4,907 (or 27%) to $13,204 from $18,111 for the six months
ended September 30, 1997. Interest and other investment income during Fiscal
1998 decreased by $7,194 (or 17%) to $35,482 from $42,676 for Fiscal 1997. The
decrease in both periods is due primarily to the lower principal balances on
notes receivable.
Other Income
Other income for the Fiscal 1998 and Fiscal 1997 was $5,566 and $168,568,
respectively. The amount recorded in Fiscal 1997 reflects income of $150,000
earned from the settlement of a complaint against a competitor.
Cost of Product Sales
The cost of product sales for the six months ended September 30, 1998 and
1997 was $1,981,867 and $2,073,899, respectively, or 95% and 91% of the revenues
attributable to product sales for the respective periods. The cost of product
sales for Fiscal 1998 and Fiscal 1997 was $3,932,201 and $4,299,848,
respectively, or 102% and 96% of the revenues attributable to product sales for
the relevant period. The increase in the cost of sales percentage for the six
months ended September 30, 1998 from the corresponding period in the prior year
is due primarily to the discontinuance of the solar thermal and heat transfer
product lines which, historically, had lower costs of sales than the
photovoltaic products. The increase in Fiscal 1998 from Fiscal 1997 is due
primarily to increasingly competitive pricing of solar thermal and heat transfer
products and the discontinuance of the non-agricultural and heat transfer
product line discussed above. The increase in the cost of sales percentage was
partially offset by the improved efficiencies achieved in the photovoltaic
product manufacturing process. The cost of the sales of photovoltaic products
for the six months ended September 30, 1998 and 1997 was $1,906,911 and
$1,429,743, respectively, or 93% and 97% of the revenues attributable to
photovoltaic product sales for the relevant period. The cost of the sales of
photovoltaic products for Fiscal
23
<PAGE>
1998 and Fiscal 1997 was $2,725,263 and $2,549,282, respectively, or 100% and
101% of the revenues attributable to photovoltaic product sales for the relevant
period.
Selling, General and Administrative Expenses
SG&A during the six months ended September 30, 1998, increased by $948,560
or 27% to $4,489,298 from $3,540,738 for the six months ended September 30,
1997. SG&A during Fiscal 1998 increased by $959,853 or 13% to $8,536,780 from
$7,576,927 for Fiscal 1997. SG&A includes remuneration of executives and
development staff, but not employees involved in the production of Newco's
products.
The increase in the six-month period is primarily due to the write-off of
project costs previously deferred of $1,402,085, which was offset by the
decrease in SG&A associated with discontinuance of the Company's solar thermal
and heat transfer product lines, the reclassification of certain labor charges
from SG&A to cost of product sales and the decrease in professional fees.
The increase in Fiscal 1998 is primarily due to the write-off of project
costs previously deferred of $519,293, a judgment of $126,750 paid in connection
with the resolution of certain litigation, the write-down of property of
$141,468 to its net realizable value in connection with the discontinuance of
the Company's solar thermal and heat transfer technology product lines,
increased Board of Directors' compensation and related expenses of $241,529, and
increased compensation expense of $535,652 resulting from several additional
members of management, and additional sales and marketing support staff in the
photovoltaic business. These increases were partially offset by decreased
professional fees.
Interest Expense
Interest expense for the six months ended September 30, 1998 decreased by
$73,648 to $92,193 compared to $165,841 for the six months ended September 30,
1997. The decrease in interest expense is due primarily to the Company's
repayment of $3 million the Company borrowed from Stewart and Stevenson
Services, Inc. (the "S&S Loan").
Interest expense for Fiscal 1998 increased by $159,036 to $451,178 from
$292,142 in Fiscal 1997. The increase is due primarily to interest expense of
$115,585 incurred in connection with a judgment related to the settlement of
certain litigation and to higher interest payments resulting from increased
borrowing under the S&S Loan.
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<PAGE>
Other Expense
Other expense increased during Fiscal 1998 to $2,508,214 from $92,316
for Fiscal 1997, due primarily to the Company's decision to reserve for the
possible uncollectibility of a loan of $2,500,000 (the "KBA Loan"). See Notes 4
and 10 of Notes to the Combined Financial Statements of the Distributed
Businesses of Besicorp Group Inc.
Credit for Income Taxes
During the six-month period ended September 30, 1998, the credit for income
taxes increased by $290,200 to $1,437,500 from $1,147,300 for the same period
the previous year. During Fiscal 1998, the credit for income taxes increased by
$1,307,200 to $3,765,900 from $2,458,700 for Fiscal 1997. The credit for income
taxes in all periods represents the allocated benefits to Newco of the losses
which Oldco was able to use in filing its consolidated tax returns.
Net Loss
The Company's net loss for the six months ended September 30, 1998
increased by $581,731 to $2,808,450 from the net loss of $2,226,719 for the six
months ended September 30, 1997. The Company's net loss for Fiscal 1998
increased by $2,541,579 to $7,357,020 from the net loss of $4,815,441 for Fiscal
1997. The factors contributing to the increases in net loss are discussed above.
INFLATION
The Company's operations have not been, nor in the near term are expected
to be, materially affected by inflation. However, if the Company develops
business opportunities internationally, it may become subject to risks of
inflation in the foreign countries in which it operates.
LIQUIDITY AND CAPITAL RESOURCES
During the six month ended September 30, 1998, the Company's working
capital on an historical basis increased by $473,242 from $485,737 at March 31,
1998, to $958,979. On a pro forma basis, the Company had working capital of
$2,004,266 at September 30, 1998, which was $1,045,287 greater than the
historical working capital at such date. The higher pro forma amount is due
primarily to cash of $1 million contributed by Oldco to Newco and to the
satisfaction by Oldco prior to the Spin-Off on behalf of Newco of debt
obligations of $97,135. The Company has sufficient funds to continue operations
for only approximately two (2) to four (4) months from the date of this
Information Statement. Other than the possible receipt of approximately $1
million to $1.5 million from the sale of certain pollution control emission
credits in or after May
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<PAGE>
1999, as to which no assurance can be given, the Company does not have any
definitive arrangements with respect to its operating or financing needs. After
the expiration of such two (2) to four (4) month period, without additional
funds, Newco may not be able to pay its obligations as they become due, and the
failure of Newco to obtain additional funds would materially adversely affect
Newco and could require it to curtail operations. Newco is in the process of
developing a business plan to reduce operating costs and improve results to aid
in the
securing of the necessary financing to continue operations. No assurance can be
given that such a plan will have such effects or that such financing will be
available.
During the six months ended September 30, 1998, cash of $1,805,364 was used
by operating activities primarily as a result of to the net loss for the period
of $2,085,450, partially offset by non-cash items, primarily comprised of the
write-off of project costs previously deferred. During the fiscal year ended
March 31, 1998, cash of $4,430,005 was used by operating activities primarily as
a result of the net loss of $7,357,020 for the period, partially offset by
non-cash items, primarily comprised of the reserve of $2,500,000 for the
uncollectibility of the KBA Loan.
During the six months ended September 30, 1998, cash of $2,051,789 was
provided by financing activities, due primarily cash transactions with Oldco,
which were partially offset by the repayment of borrowings. For Fiscal 1998,
cash of $4,739,878 was provided by financing activities, primarily due to cash
transactions with Oldco.
During the six months ended September 30, 1998 and Fiscal 1998, the
Company's investing activities used cash of $291,571 and $264,552, respectively.
The cash in both periods was used to acquire property, plant and equipment.
The Company has no significant capital commitments for Fiscal 1999 other
than those which may arise in the ordinary course of business.
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<PAGE>
Year 2000
Many existing computer systems and software applications use two digits,
rather than four, to record years, i.e., "98" instead of "1998." Unless
modified, such systems will not properly record or interpret years after 1999,
which could lead to business disruptions. This is known as the Year 2000 issue.
Newco relies on computer hardware, software and related technology
primarily in its internal operations, such as billing and accounting. During
Fiscal 1998, Oldco formed a Year 2000 Management Committee to address the
potential financial and business consequences of Year 2000 and to direct the
implementation of appropriate solutions, including hardware and software
upgrades. Newco has formed a Year 2000 Management Committee consisting of the
same individuals to assume the functions of Oldco's committee. Newco expects to
complete such upgrade purchases during 1998 with testing to be done during 1999.
Newco is also communicating with its vendors, suppliers and customers to
both monitor and encourage their respective remedial efforts regarding the Year
2000 issue. Failure by vendors and suppliers to successfully address the issue
could result in delays in various products and services becoming available to
Newco. Failure by customers could disrupt their ability to maximize their use of
Newco's products and services. There can be no assurance that failure of systems
of third parties on which Newco's systems and operations rely to be Year 2000
compliant will not have a material adverse effect on Newco's business, operating
results or financial condition.
Except for capital expenditures associated with computer hardware and
software upgrades which are planned for Fiscal 1999 and which may be partially
Year 2000-related, Newco does not anticipate that the incremental expenses
related to the Year 2000 issue for Fiscal 1999 will be significant. Such
incremental expenses incurred during Fiscal 1998 by Oldco were not significant.
BUSINESS
Newco specializes in the development, assembly, manufacture, marketing and
resale of photovoltaic products and systems ("Photovoltaic Activities") and the
development of power plant projects ("Power Development Activities"). Newco was
organized in New York in 1998 to allow for the consummation of the Merger by
distributing the Distributed Businesses to Newco thereby permitting Acquisition
to acquire only the Retained Assets and assume only the Retained Liabilities.
Consequently, even though Newco was only organized recently, it is the successor
to businesses that have been in operation for more than six years and the
following description contains historical information about the subsidiaries of
Newco when they were subsidiaries of Oldco.
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<PAGE>
Photovoltaic Activities
Systems that convert sunlight directly into electricity are called
photovoltaic systems. The fundamental element of a photovoltaic system is the
semiconductor device, or cell, which generates a variable electric current that
is directly proportionate to the quantity of sunlight energy absorbed. Solar
cells are electrically interconnected to form a module unit in which the cell
groupings are formatted to achieve desired electrical power specifications, such
as voltage and current. The solar module is the power-generating component of a
complete photovoltaic system. Complete systems consist of one or more solar
modules; controllers to monitor, regulate and control the electric output; and,
in most systems, batteries to store the energy generated by the solar modules.
Occasionally, backup generators or invertors, which convert DC electric power to
AC power, are included as integral components of a system.
The market for photovoltaic products and systems is primarily directed
towards those electric power applications where access to utility power is
relatively expensive, inconvenient or not available. Electric power systems that
use photovoltaic technology include communications systems (e.g., satellite
earth stations, microwave relay stations, roadside emergency telephones and
cellular network repeater stations), power systems for remote areas (e.g.,
forests and parks and rural areas) and remote monitoring systems that are used
in production, consumption and the collection of scientific data (e.g., monitor
remote gas pipelines and weather stations).
The Company develops, assembles, markets and distributes photovoltaic
modules, power systems and related products for a variety of applications. The
Company has developed solar power supply products for the portable computer,
wireless electronics and telecommunications industries, solar power accessories
for motor vehicles, electric boats and telemetry, as well as a polymer
encapsulation production processes for photovoltaic modules that can be
integrated into other products for consumer, commercial and industrial use. In
addition, the Company markets and sells prepackaged solar electric power
products and systems, system components, and system accessories ranging from
small battery chargers, to water pumping kits, to outdoor lighting, to portable
power generators, to PV power stations.
In addition to utilizing the Company's resources, products are developed
using government grants, industry funded projects, and technology demonstration
contracts to the extent practicable. In connection therewith, the Company has
entered into various funding and development arrangements with NYSERDA. These
arrangements generally require the Company to develop, manufacture, test and
deliver various types of photovoltaic products (e.g., solar powered telephone
power supply systems, skid mounted photovoltaic systems, controllers and
photovoltaic home systems) in consideration for which NYSERDA reimburses the
Company with respect to a negotiated percentage of the development cost of such
product. Funds advanced by NYSERDA are recorded for financial statement purposes
as "other revenues" at the time of receipt and such advances are to be repaid,
depending on the project, from revenues or profits, if
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<PAGE>
any, derived from the products developed under these agreements. See Note 11 of
Notes to Combined Financial Statements of the Distributed Businesses of Besicorp
Group.
Sales and Distribution
In addition to direct sales to original equipment manufacturers, industrial
companies and governmental agencies, the Company markets and sells products
through dealers and distributors nationwide. At September 30, 1998,
approximately 135 solar energy dealers and distributors, predominantly located
in North America, offered Newco's products. The Company also employs an in-house
sales and customer support staff responsible for generating sales and assuring
customer satisfaction. The distribution market is also supported by the Company
through a catalog maintained by the Company to provide information about sizing
and installation of remote solar energy systems.
Customers and Backlog
The Company fills orders from inventory and draws from its inventory to
fabricate and manufacture custom orders; therefore, backlog is generally filled
within the following quarter. Certain sales may be drop-shipped from
manufacturers' locations. Backlog of orders was $464,205, $274,260 and $382,410
as at September 30, 1998, March 31, 1998 and March 31, 1997, respectively.
Customers for the Company's products include original equipment manufacturers,
governmental agencies and consumers. During the six-month period ended September
30, 1998, and the years ended March 31, 1998 and 1997, sales to the same
customer accounted for approximately 10%, 14% and 23%, respectively, of
photovoltaic activities sales.
Competition
The Company competes with approximately ten businesses engaged in the
distribution of photovoltaic products, of which four have larger market share
than the Company. The Company believes that the market is highly fragmented for
value-added solar electric products and systems. The major competitive factors
are product price, service, technical capability and delivery.
Power Development Activities
The Company, in conjunction with one or more partners, develops independent
power projects. The Company generally holds its ownership interests in the form
of partnership interests, through special-purpose entities. Usually, financing
for these entities is secured solely by their respective assets.
At present, the Company has an interest in a development project to build a
coal fired power plant near the village of Krishnapatnam located 120 miles north
of Chennai (Madras) on India's eastern coast. BBI Power Inc., ("BBI") the
project company developing the power plant
29
<PAGE>
near Krishnapatnam, is 50% owned by the Company and 50% owned by Chesapeake
Power Investments Co. However, it is likely that, due to the size of the project
and the amount of debt and equity capital necessary to be raised, the Company's
ownership interest will be reduced substantially as the result of the
participation of equity investors. Capital construction costs are currently
estimated to be approximately $700 million. Approval of an agency of the Indian
government is also required before the project can proceed. The May 1998 nuclear
tests conducted by India have resulted in the imposition of economic sanctions
by the United States, though such sanctions have been waived through October
1999. The ability to obtain project financing may be adversely affected by these
sanctions. Even if such sanctions are eliminated or the waiver thereof is
extended indefinitely, no assurance can be given that financing will be
obtained, that the project will be completed, or, if it is completed, that the
project will prove profitable.
The Company is always considering new power projects, both domestically and
internationally, and with entities that have served as the Company's partners in
past development projects and with entities that have never been partners of the
Company in any of its projects. As of the date hereof, such possible initiatives
are being discussed with several companies and the Company and prospective
partners had entered into letters of intent with respect to trying to develop
initiatives in Brazil and Mexico. The Company entered into a Master Project
Agreement with MPR Associates Inc. which calls for equal sharing in development
fees and ownership interest in all projects developed in Brazil by such parties.
No assurance can be given that any such letter of intent or the Master Project
Agreement will result in the development of any projects, or that if any
projects are developed, they will prove profitable.
The Company anticipates that projects would be developed with partners and
the Company would hold its ownership interests, primarily in the form of
partnership interests, through special-purpose entities formed to be the legal
owners of the projects. Interests in projects may also be acquired during
various stages of their development. Projects are expected to generate income
from the operation of the facilities; however, in early years of operation, the
partnership may incur significant book losses, and partners will not recognize
income until such time as the operating income of the projects exceeds
accumulated losses.
The developers prepare financial models of the project, document the
project and arrange appropriate development capital and construction and
long-term financing. In addition, developers negotiate power purchase
agreements, permitting arrangements, engineering and construction contracts and
financial participation and risk sharing agreements.
Construction, operation, engineering, and design of a project are
contracted to third parties. When development is substantially complete, the
projects typically obtain construction financing which is replaced with
long-term debt and/or equity financing when the construction is completed. To
the maximum extent possible, financing is arranged on a limited- recourse basis,
so that repayment is limited to the revenues generated by the particular
project(s) being financed. Except to the extent that a developer provides bridge
or other financing to a project, the debt of
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<PAGE>
the partnership is collateralized solely by the assets of the project(s),
without guarantees of repayment by the developer.
The Company would expect to earn development fees by taking an active role
in the early stage development of each project. Development fees are generally
paid from the proceeds of the project loans and are capitalized as part of the
cost of the project. The amounts and timing of such payments of development fees
are subject to negotiations with the parties to the transaction and represent
fees for services provided to the project. Other potential sources of revenues
and cash flows are income and distributions from project operations and
management fees for coordinating and overseeing partnership activities during
the construction and operating phases of the projects. There can be no assurance
that the Company will develop any power projects or that it will earn
development fees on new project opportunities.
Foreign Regulatory Compliance and Other Risks of International Operations
As a result of a decline in opportunity in the independent power industry
in the United States, the Company's present strategy is to emphasize foreign
project development (though the Company intends to pursue appropriate domestic
projects as and when they become available). The Company's business, therefore,
is subject to the risks of international operations, including compliance with
and unexpected changes in foreign regulatory requirements, trade barriers,
currency control regulations, fluctuations in exchange rates, political
instability, the potential for expropriation, local economic conditions, and
difficulties in staffing and managing foreign operations.
Projects overseas require considerable capital. Funding for international
projects may be obtained from various sources, including the private sector
(both domestic and international), government sponsors, e.g., United States
Trade and Development Agency, United States Agency for International
Development, the Export-Import Bank of the United States, the Overseas Private
Investment Corporation and commercial banks. Obtaining such funding often is
more time consuming than obtaining funding for domestic projects. There can be
no assurance that Newco will be able to secure sufficient funding in connection
with any international development project. Nor can there be any assurance that
Newco will be successful in international project development. Neither Newco nor
Oldco has ever consummated a financing for an international project development.
Suppliers
The Company purchases solar electric modules from several large
manufacturers, of which Siemens Solar Industries of Camarillo, California is the
principal supplier. The Company does not have any supply agreements with its
suppliers but does not anticipate any limitation on its ability to purchase
materials for its business. The Company is not currently dependant on any
principal suppliers for its power plant initiatives.
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Research and Development
Expenditures for photovoltaic research and development were $310,215 for
the six months ended September 30, 1998, $697,182 in Fiscal 1998 and $646,817 in
Fiscal 1997. These expenses include personnel expenses of $114,433 for the six
months ended September 30, 1998, $330,428 in Fiscal 1998 and $301,055 in Fiscal
1997. Of the total amounts, expenses attributable to the Company's agreements
with NYSERDA were $169,788 in the six months ended September 30, 1998, $520,950
in Fiscal 1998 and $414,307 in Fiscal 1997. No assurance can be given that funds
for research and development will be available to the Company from internal or
external sources and the failure to obtain such funds may have an adverse effect
on the Company's operations.
Intellectual Property
While Newco does own certain intellectual property rights (e.g., patents,
trademarks and trade secrets), management does not believe that these rights are
essential to Newco's current operations.
Government Regulation and Environmental Matters
The development and manufacture of photovoltaic products are not subject to
U.S., state, foreign and local statutes and regulations (other than statutes and
regulations generally applicable to the development and manufacture of
products).
The operations of the Company are also subject to various U.S., state,
foreign and local laws and regulations with respect to environmental matters,
including air and water quality and underground fuel storage tanks, and other
regulations intended to protect public health and the environment. Compliance by
the Company with such laws and regulations has not had a material adverse effect
upon the Company, and the Company believes it is in material compliance with all
such applicable laws and regulations. Based upon current laws and regulations
and the interpretations thereof, the Company has no reason to believe that the
costs of future environmental compliance would be likely to materially adversely
impact its business, results of operations, cash flows or financial position.
Employees
As of the time of the Spin-Off, Newco had approximately 72 full-time and
three part-time employees. None of these employees are represented by a union.
In the opinion of management, its relationship with its employees is
satisfactory.
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Properties
Newco owns or leases the properties identified below. Management believes
that these facilities are suitable and adequate for its current operations.
<TABLE>
Location of Property Nature of Ownership Use of Property
- - -------------------- ------------------- ---------------
<S> <C> <C>
Kingston, New York Leased from the Surviving Newco's corporate
(Includes land and the 8,000 Corporation headquarters (the "Corporate
square foot building thereon) Headquarters")
Ellenville, New York Owned by Newco Previously used by a
(Includes land and the 52,000 subsidiary of the Company.
square foot building thereon)
Stelle, Illinois Lease, expiring April 1999, Photovoltaic Activities uses
(Lease of 2,000 square feet) for $575 per month as sales office.
Kingston, New York Lease for $8,500 per month, Photovoltaic Activities
(Lease of 17,000 square feet) expiring March 1999, subject utilizes 2,000 square feet for
to automatic renewal for administrative purposes and
successive six month periods balance is used for
warehousing, manufacturing
and assembly
Ulster, New York Owned by Newco Investment purposes
(approximately 28 acres of
unimproved property)
</TABLE>
The Corporate Headquarters was not distributed to Newco in the
Contribution. Instead, it was retained by Oldco and therefore belongs to the
Surviving Corporation following the Merger. Newco is leasing the Corporate
Headquarters from the Surviving Corporation as contemplated by the Plan of
Merger. See "The Contribution and the Spin-Off " and "Relationship between Newco
and Oldco after the Spin-Off." The other properties have been transferred to
Newco pursuant to the Contribution Agreement.
While Newco is not in the business of investing in real estate, as a result
of the Contribution it owns 28 acres of unimproved property which it holds
primarily for the possibility
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<PAGE>
of realizing a capital gain. Newco has no policies regarding or restricting
investments in real estate.
Legal Proceedings
In the Contribution Agreement, Newco agreed to assume certain liabilities
of Oldco, including those relating to litigation (other than the Existing
Litigation). See "The Contribution and the Spin-Off--The Contribution
Agreement." Consequently, Newco is liable for all damages, if any, and expenses
in connection with the following matters and is entitled to the benefits, if
any, of such matters.
In June 1997, Oldco and Mr. Michael F. Zinn (then and currently the
Chairman of the Board, Chief Executive Officer and President of Oldco and
currently the Chairman of the Board, Chief Executive Officer and President of
Newco), each entered a guilty plea, in the United States District Court for the
Southern District of New York, to one count of causing a false statement to be
made to the Federal Election Commission and one count of filing a false tax
return, all in connection with contributions to the 1992 election campaign of
Congressman Maurice Hinchey (the "Proceeding"). As a result of such pleas, Oldco
was fined $36,400, and Mr. Zinn was fined $36,673 and sentenced to a six-month
term of incarceration (which commenced in November 1997 and has been completed),
and a two-year term (which commenced in May 1998) of supervised release
thereafter. He resigned as Chairman of the Board, Chief Executive Officer and
President of Oldco in November 1997 and was reappointed to such positions in May
1998.
In August 1997, John Bansbach commenced a shareholder derivative action in
the New York Supreme Court, Ulster County, entitled John Bansbach v. Michael F.
Zinn, Michael J. Daley, Gerald A. Habib, Harold Harris, Richard E. Rosen, and
Besicorp Group Inc., Index No. 97-2573 (the "Bansbach Litigation"). Oldco was
named as a nominal defendant in this matter and the other named defendants
either were officers and/or directors of Oldco at the time of the alleged acts
or omissions for which relief is sought or became officers and/or directors of
Oldco thereafter. The plaintiff sought to hold such persons liable to Oldco: (a)
for all sums advanced to or on behalf of Mr. Michael F. Zinn in connection with
his defense of the Proceeding; (b) for all sums advanced to or on behalf of Mr.
Michael Daley, who was subpoenaed for information in connection with this
matter; (c) for all legal expenses, costs and fines incurred by Oldco itself in
connection with the Proceeding; (d) for all harm to Oldco's reputation and
goodwill resulting from the Proceeding; (e) for punitive damages; and (f) for
plaintiff's attorneys' fees, costs and expenses. The court dismissed the action,
stating that the plaintiff had failed to make the requisite pre-suit demand upon
Oldco's Board of Directors (the "Oldco Board") and had failed to demonstrate
that such a demand would be futile. The plaintiff has appealed this decision.
On March 29, 1993 James Lichtenberg commenced a shareholder's derivative
action now pending in New York Supreme Court, Ulster County, entitled
Lichtenberg v. Michael F. Zinn, Steven I. Eisenberg, and Martin E. Enowitz, et
al. (the "Lichtenberg Litigation"). Oldco is named as nominal defendant in this
shareholder's derivative action and the other defendants were
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<PAGE>
directors and officers of Oldco at the time the action was filed. The complaint
alleges that the directors breached their fiduciary duties to Oldco by, among
other things, the issuance of stock to themselves in lieu of cash compensation,
allegedly for inadequate consideration, and by the accounting treatment given to
Oldco's interest in various partnerships which own and operate cogeneration
facilities, which allegedly depressed the price of Oldco's stock. The plaintiff
is seeking an award of damages to Oldco, including punitive damages and
interest, an accounting and the return of assets to Oldco, the appointment of
independent members to the board of directors, the cancellation of shares
allegedly improperly granted, and the award to the plaintiff of costs and
expenses of the lawsuit including legal fees. The Court dismissed this action
based on the recommendation of the special litigation committee (comprised of
independent outside directors of Oldco) that concluded that a continuation of
such litigation was not in the best interests of Oldco. The plaintiff has
appealed this decision.
The plaintiffs in the Bansbach Litigation and Lichtenberg Litigation may
not able to maintain their actions as shareholder derivative suits if the Merger
is consummated.
On November 8, 1990 SNC., Ltd. ("SNC") commenced an action in New York
Supreme Court, New York County, against Oldco, and certain of its partners and
their affiliates and an unaffiliated contractor (the "Contractor"). The
complaint alleges that SNC was awarded the contracts to construct two power
plants and that the contracts were subsequently awarded to the Contractor in
breach of SNC's contract. SNC seeks an award of compensatory damages in an
undetermined amount in excess of $680,000 and punitive damages. The Court
granted the defendants' motion for summary judgment in part but denied the
motion insofar as it sought dismissal of plaintiff's claims for: (1) breach of
preliminary agreement to negotiate in good faith; (2) unjust enrichment/quantum
meruit; (3) promissory estoppel; and (4) fraud and negligent misrepresentation.
The Court's decision was upheld by the Appellate Court. The case is proceeding
through the litigation process in the Supreme Court, New York County. Management
believes that there are meritorious defenses to this action.
Oldco is a party to a legal proceeding in New York Supreme Court, Ulter
County, that was commenced on June 20, 1995, seeking a determination that Martin
Enowitz ("Enowitz"), a former director and executive officer of Oldco, is not
entitled to 100,000 shares of Oldco Common Stock held of record by him (the
"Enowitz Shares"). The Company believes that such shares were forfeited when he
left the employ of the Company prior to the scheduled vesting dates with respect
to such shares and that, as a result, he was obligated to resell the shares to
the Company. (Enowitz asserts, among other things, that such vesting schedule
was not applicable to him because he was disabled. Oldco, among other things,
disputes Enowitz's allegation that he was disabled.) Because of the uncertainty
with respect to the ownership of these shares, the Plan of Merger provides that
the Merger Consideration payable in respect of such shares is to be held in
escrow pending resolution of the dispute regarding the ownership of these shares
and the rights, if any, of Acquisition, Merger Sub or the Surviving Corporation
to such Merger Consideration are being assigned without recourse to Newco. The
Merger Consideration for such shares amounts to approximately $3,450,000,
subject to upward (but not downward) adjustment
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<PAGE>
as provided in the Plan of Merger. If it is determined that Mr. Enowitz was not
entitled to the Enowitz Shares, Newco will receive such monies less the
Company's cost (estimated to be less than $100,000) for repurchasing such
shares.
Other than as discussed above, Newco is party to various legal matters in
the ordinary course of business, the outcome of which Newco does not believe
will materially affect its operations. However, Newco may incur substantial
legal fees and other expenses in connection with these matters.
THE CONTRIBUTION AND THE SPIN-OFF
Introduction
Because Acquisition neither wishes to (i) acquire Oldco's assets pertaining
to, among other things, the photovoltaic and independent power plant development
businesses nor (ii) assume, with certain limited exceptions, any of Oldco's
liabilities, Oldco and Acquisition decided to effect the Spin-Off. The
Contribution (as defined below) followed by the Spin-Off will separate from
Oldco liabilities Acquisition does not want to assume and all of the businesses
and assets that Acquisition does not wish to acquire. This will enable
Acquisition to acquire only the assets it desires to acquire and will leave
Oldco's photovoltaic and independent power plant development businesses as a
separate publicly held company, owned by the holders of Oldco Common Stock as of
the Spin-Off Record Date.
Oldco formed Newco in November 1998 to effect the Spin-Off which, in turn,
is a condition to the consummation of the Merger. Following the Spin-Off, Newco
will focus on the photovoltaic and independent power plant development
businesses and Oldco will merge with Merger Sub. The Contribution followed by
the Spin-Off will separate all of Oldco's businesses other than those relating
to the Retained Assets from Oldco and enable Acquisition to acquire only the
Retained Assets and the Retained Liabilities in the Merger; the Spin-Off will
leave the Distributed Businesses as a separate publicly held company (Newco),
owned by the Entitled Holders. The directors and officers of Oldco prior to the
Merger will be the directors and officers of Newco at the time of the Spin-Off.
The Merger will not be consummated unless the Spin-Off has been completed. The
Spin-Off will not occur unless all other conditions to the Merger have been
waived or satisfied.
Therefore, on ________, 1999, the Board declared the Spin-Off payable to
the holders of record of Oldco Common Stock at the close of business on the
Spin-Off Record Date of one share of Newco for every 25 shares of Oldco Common
Stock outstanding on the Spin-Off Record Date (with cash being paid in lieu of
fractional shares). No shares of Newco Common Stock will be issued with respect
to shares of Oldco Common Stock held in treasury. If all of the conditions to
the Merger Closing have been waived or satisfied, the Spin-Off will occur at the
Effective Date.
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<PAGE>
Shareholders of Oldco with questions concerning procedural issues related
to the Spin-Off may call the Distribution Agent, Continental Stock Transfer and
Trust Co., at [(212) 509-4000 (x [ ]) Attention: [ ]. After the Effective Date,
shareholders of Newco with inquiries relating to the Spin-Off or their
investment in Newco should contact Besicorp Ltd., 1151 Flatbush Road, Kingston,
New York, (telephone 914- 336-7700 x 104), Attention: Susan Whitaker).
The Contribution Agreement
Prior to the Spin-Off, pursuant to the Contribution Agreement, Oldco
transferred or caused to be transferred to Newco the shares and other ownership
interests of its subsidiaries and affiliates (collectively, subsidiaries and
affiliates are referred to as "Subsidiaries") other than certain specified
Subsidiaries (such transferred Subsidiaries are referred to as the "Distributed
Subsidiaries" and the retained Subsidiaries are referred to as the "Retained
Subsidiaries") and all of Oldco's assets pertaining to the photovoltaic and
power plant development businesses and all other businesses not related to the
Retained Assets (collectively, the "Contributed Assets"). Also pursuant to the
Contribution Agreement, Newco assumed all of the liabilities of Oldco and its
subsidiaries other than (i) the liabilities of Oldco and any Retained Subsidiary
(actual or accrued) for unpaid federal income taxes for Fiscal 1999 based on the
consolidated net income of Oldco through the Effective Date (the "Specified
Current Liabilities"), (ii) the liabilities of Oldco or its subsidiaries for New
York State income taxes for Fiscal 1999 (the "Excluded Liability") and (iii)
certain intercompany liabilities (collectively such assumed liabilities are
referred to as the "Assumed Liabilities" and the other liabilities are referred
to as the "Retained Liabilities"). The transfer of the Distributed Subsidiaries
and the Contributed Assets and the assumption of the Assumed Liabilities is
referred to herein as the "Contribution." As a result of the Contribution, Newco
is liable for the Assumed Liabilities and owns all of the personnel and employee
benefit plans of Oldco and the Retained Subsidiaries, and the assets formerly
owned by Oldco or its subsidiaries, other than its cash (except for $1 million
which Oldco contributed to Newco), securities (including the shares of Niagara
Mohawk Stock), the Corporate Headquarters (which it is leasing to Newco) and
certain other assets (collectively, the "Retained Assets"), and Oldco owns the
Retained Subsidiaries and the Retained Assets and remains liable for the
Retained Liabilities. If, after the time of the Spin-Off, either Newco or Oldco
holds assets which by the terms of the Contribution Agreement or the Plan of
Merger were intended to be assigned and transferred to, or retained by, the
other party, such party will promptly assign and transfer or cause to be
assigned and transferred such assets to the other party.
In addition, Oldco has agreed to place $6,000,000 in an Escrow Fund prior
to the consummation of the Merger. Amounts, if any, not needed to provide
indemnification pursuant to the Indemnification Agreement or to make certain
payments will be released to Newco after the fifth anniversary of the Merger
Closing Date so long as certain conditions have been fulfilled. See
"Relationship Between Newco And Oldco After The Merger." Moreover, the Plan of
Merger provides that the Merger Consideration payable in respect of the Enowitz
Shares is to be held in
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escrow by the Distribution Agent pending resolution of the dispute regarding the
ownership of these shares and the rights, if any, of Acquisition, Merger Sub and
the Surviving Corporation to such Merger Consideration are being assigned
without recourse to Newco. The Merger Consideration for such shares amounts to
approximately $3,450,000, subject to upward (but not downward) adjustment as
provided in the Plan of Merger. If it is determined that Mr. Enowitz was not
entitled to the Enowitz Shares, Newco will receive such monies less the
Company's cost (estimated to be less than $100,000) for repurchasing such
shares. See "Business--Legal Proceedings."
The Terms of the Spin-Off
As a result of the Spin-Off, on the Spin-Off Record Date, Oldco shall
distribute all of the outstanding shares of Newco Common Stock (and/or cash, in
lieu of the issuance of fractional shares of Newco Common Stock) to the Entitled
Holders, assuming that all of the conditions to the consummation of the Merger
have been waived or satisfied. The Spin-Off Record Date is expected to be the
same day as the Merger is consummated. The Spin-Off will be effectuated at this
time and each Entitled Holder will receive one (1) share of Newco Common Stock
for every twenty-five (25) shares of Oldco Common Stock held by such shareholder
on such date. No fractional shares of Newco Common Stock will be issued.
Entitled Holders will in lieu of fractional shares (but not whole shares) of
Newco Common Stock receive $______ in cash for each one twenty-fifth (1/25th) of
a share of Newco Common Stock and will receive, in addition, such number of
whole shares of Newco Common Stock as to which they are entitled. As a result,
shareholders of Oldco who own fewer than 25 shares of Oldco Common Stock will
receive cash but will not receive any Newco Common Stock. Therefore, the holders
of Oldco Common Stock on the Spin-Off Record Date will become the shareholders
of Newco and Oldco will cease to own any shares of Newco.
Procedure for receiving certificates for shares of Newco Common Stock
On the Spin-Off Record Date, Oldco will deliver to the Distribution Agent
shares of Newco Common Stock representing 100% of the outstanding shares of
Newco Common Stock for distribution to the Entitled Holders. The Spin-Off Record
Date will also be the Effective Date (i.e. the date when the Merger is
consummated). The Distribution Agent will distribute to all Entitled Holders
following the consummation of the Merger a letter of transmittal for the
delivery of their certificates representing shares of Oldco Common Stock in
order to receive the Merger Consideration. See "The Merger." The letter of
transmittal will be accompanied by a letter informing the Entitled Holders about
the occurrence of the Spin-Off, and telling them that certificates for their
shares of Newco Common Stock have been issued to them and will be distributed
upon the Distribution Agent's receipt of their certificates evidencing shares of
Oldco Common Stock. Upon receipt of each such certificate for shares of Oldco
Common Stock, the Distribution Agent will distribute to the Entitled Holders
delivering such certificate both the Merger Consideration and the certificate
for shares of Newco Common Stock relating to such delivered shares of Oldco
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Common Stock as promptly as practicable. No fractional shares of Newco Common
Stock will be issued. Entitled Holders will in lieu of fractional shares (but
not whole shares) of Newco Common Stock receive $______ in cash for each one
twenty-fifth (1/25th) of a share of Newco Common Stock and will receive, in
addition, such number of whole shares of Newco Common Stock as to which they are
entitled. As a result, shareholders of Oldco who own fewer than 25 shares of
Oldco Common Stock will receive cash but will not receive any Newco Common
Stock. No consideration will be paid by the holders of Oldco Common Stock for
the shares of Newco Common Stock to be received by them in the Spin-Off.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences
relating to the Spin-Off based on the provisions of the Internal Revenue Code of
1986, as amended (the "Code"), and applicable regulations, rulings and judicial
authority as in effect on the date of this Information Statement. Subsequent
changes in the law could alter the federal income tax consequences of the
Spin-Off.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON PRESENT LAW. BECAUSE
INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH SHAREHOLDER IS URGED TO CONSULT WITH
SUCH SHAREHOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES
DISCUSSED BELOW TO SUCH SHAREHOLDER AND THE PARTICULAR TAX EFFECTS OF THE
SPIN-OFF, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX
LAWS.
The receipt by an Entitled Holder of shares of Newco Common Stock and/or
cash in lieu of fractional shares of such stock pursuant to the Spin-Off will be
a taxable transaction for federal income tax purposes under the Code and also
may be a taxable transaction under applicable state, local and other tax laws.
The tax consequences of such receipt may vary depending upon, among other
things, the particular circumstances of the Entitled Holder. An Entitled Holder
will generally receive dividend income equal to the value of the shares of Newco
Common Stock (which is $[ ] per share of Newco Common Stock) or the amount of
cash or both received by such Entitled Holder pursuant to the Spin-Off.
The receipt of shares of Newco Common Stock and/or cash by an Entitled
Holder pursuant to the Spin-Off may be subject to backup withholding at the rate
of 31% unless the Entitled Holder (i) is a corporation or comes within other
exempt categories, or (ii) provides a certified taxpayer identification number
on Form W-9 and otherwise complies with the backup
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withholding rules. Backup withholding is not an additional tax; any amounts so
withheld may be credited against the federal income tax liability of the
shareholder subject to the withholding.
Claims of Oldco's creditors, including claims of such creditors as taxing
authorities, may survive the Spin-Off and the Merger. To the extent the Escrow
Fund is insufficient to satisfy such claims, it is possible that such creditors
may seek to bring claims against persons who were shareholders of Oldco
immediately prior the Effective Date of the Merger by asserting that such
shareholders are subject to transferee liability (i.e., imposing liability by
virtue of the fact that the Entitled Holders received the Newco Common Stock
(and/or cash in lieu of fractional shares of Newco Common Stock) or the Merger
Consideration or both although such potential liability of any Entitled Holder
would presumably be limited to the Newco Common Stock (and/or cash in lieu of
fractional shares of Newco Common Stock) or Merger Consideration received by
such Entitled Holder). Though management believes that it is unlikely that such
claims would be successful, successful claims may materially reduce the net
benefit received by such Entitled Holders from the Spin-Off and the Merger
Consideration.
This tax discussion is included for general information only. This
discussion does not apply to Oldco's shareholders who are not citizens or
residents of the United States, to Oldco's shareholders who are tax-exempt or to
other shareholders of Oldco of special status.
RELATIONSHIP BETWEEN NEWCO AND OLDCO AFTER THE SPIN-OFF
Pursuant to the Plan of Merger, Merger Sub will be merged with and into
Oldco, with Oldco being the Surviving Corporation and wholly owned by
Acquisition. Acquisition will be entitled to all the benefits and detriments
resulting from its ownership interest in the Surviving Corporation. If the
Merger is consummated, Oldco's shareholders will be entitled to receive $34.50
in cash for each share of Oldco Common Stock, subject to upward (but not
downward) adjustment. After the Effective Date, the holders of Oldco Common
Stock as of the Effective Date will no longer have any equity interest in Oldco
or any right to vote on corporate matters; instead, the outstanding shares of
Oldco Common Stock will automatically be converted into the right to receive the
Merger Consideration.
After the Spin-Off and the Merger, Oldco and Newco will become separately
owned and managed companies. Oldco will be owned by Acquisition and Newco will
be owned by the Entitled Holders (other than those Entitled Holders holding
fewer than 25 shares of Oldco Common Stock). At the closing of the Merger,
various parties will enter into the Indemnification Agreement and the Escrow
Agreement governing various matters and ongoing relationships between
Acquisition, the Surviving Corporation and Newco following the Spin-Off and the
Merger.
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The Indemnification Agreement
The Indemnification Agreement between Acquisition, Merger Sub and Newco
will be entered into at the Merger Closing. The Indemnification Agreement
provides that Newco shall indemnify, save and keep Acquisition and Merger Sub
(collectively, the "Buyer"), the Surviving Corporation and the Retained
Subsidiaries and their respective affiliates and agents (the "Purchaser
Indemnitees") harmless and defend against and from all liabilities, judgments,
demands, claims, actions or causes of action, regulatory, legislative or
judicial proceedings or investigations, assessments, levies, losses, fines,
penalties, damages, costs and expenses ("Damages") sustained or incurred by any
Purchaser Indemnitee as a result of, or arising out of, by virtue of, or in
connection with:
(a) any inaccuracy in or breach of any representation and warranty made by
Oldco in the Plan of Merger or in any closing document delivered in connection
with the Plan of Merger; (b) any breach by Oldco of, or failure by Oldco to
comply with, any of its covenants or obligations under the Plan of Merger or
under the Indemnification Agreement; (c) the existence of any liability or other
obligation of Oldco or any Subsidiary as of the Merger Closing Date or arising
out of or relating to the Merger or any claim against a Purchaser Indemnitee
with respect to any such liability or obligation or alleged liability or
obligation other than the Retained Liabilities, including, without limitation,
liability on account of taxes payable by Oldco or for which Oldco is liable; (d)
the failure of Newco or any Subsidiary to pay and discharge in full when due any
of their respective liabilities whenever or however arising or existing,
including liability on account of taxes other than the Retained Liabilities; (e)
any claims for indemnification by current or former officers, directors,
employees, agents or consultants of Oldco or any Subsidiary; (f) any third party
claim (which excludes the Existing Litigation) to the extent it arises out of or
relates to any action or inaction of, or the conduct of the business of Oldco or
any Subsidiary on or prior to the Merger Closing Date other than the Retained
Liabilities; (g) any violation of, or delinquency with respect to, any order or
arbitration award or statute, or regulation in effect on or prior to the Merger
Closing Date of or any agreement of Oldco (or any Subsidiary) with, or any
license, permit or environmental permit granted to Oldco (or any Subsidiary) by
any federal, state or local governmental authority to which the properties,
assets, personnel or business activities of Oldco (or any Subsidiary) are
subject (or to which Oldco (or any Subsidiary) is subject as it relates to the
properties, assets, personnel or business activities of Oldco (or any
Subsidiary)); (h) any generation, transportation, storage, treatment, disposal,
release or threatened release of any hazardous materials occurring on or prior
to the Merger Closing Date regardless of when liability is asserted, at any
facility of Oldco (or any Subsidiary); (i) certain discharges or releases to or
from storm, ground or surface waters or wetlands, and any air emissions or
pollution; (j) certain exposure of and resulting consequences to any persons,
including, without limitation, employees of Oldco (or any Subsidiary or any
agent of Oldco or any Subsidiary), due to any hazardous materials used at a
facility or otherwise used by Oldco (or any Subsidiary); (k) certain violations
or alleged violation of, or obligations imposed by, any environmental law or
environmental permit; (l) certain matters relating to employee pension benefit
plans of Oldco or its affiliates; (m) any federal or state taxes imposed upon
Oldco, or for which Oldco is liable, with respect to any
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taxable period or portion of a taxable period ending on or prior to the Merger
Closing Date other than a Retained Liability; (n) litigation against Oldco
and/or the Subsidiaries pending or threatened as of the Merger Closing Date; and
(o) any claims, investigations, proceedings, actions or lawsuits asserted or
initiated before or after the Merger Closing arising out of or in connection
with pre-closing occurrences involving Oldco and/or the Subsidiaries.
With certain exceptions, the Purchaser Indemnitees shall not be entitled to
indemnification (i) unless a notice of a claim has been delivered to Newco prior
to the fifth anniversary of the Merger Closing Date; (ii) to the extent the
aggregate claims actually paid by Newco or any of its Subsidiaries to the
Purchaser Indemnitees thereunder exceeds the aggregate Merger Consideration;
(iii) for Damages to the extent such Damages were expressly included in the
Adjustment Amount (as defined below) pursuant to the Plan of Merger; (iv) with
respect to consequential damages relating to lost profits or punitive damages
(other than consequential damages or punitive damages paid or payable to, or
claimed by third parties); and (v) with respect to Damages arising from time
spent by Acquisition or its affiliates and their respective officers and
employees, for amounts in excess of their actual out-of-pocket costs.
The Adjustment Amount is the sum of: (i) all liabilities of Oldco or a
Retained Subsidiary (including the Specified Current Liabilities but excluding
the Excluded Liability and certain intercompany liabilities) as of the Effective
Date which are both fixed and quantifiable; (ii) all Damages and other damages,
if any, that Oldco and Acquisition agree may be incurred (or reasonably likely
to be incurred) by any of the parties to the Plan of Merger and any Retained
Subsidiary as a result of the breach by Oldco of its representations and
warranties in the Plan of Merger; and (iii) transfer, use, stamp, real estate
and other similar taxes and fees incurred by Oldco, its Subsidiaries,
Acquisition or Merger Sub in connection with the transactions contemplated by
the Plan of Merger.
The payment of any Damages to which the Purchaser Indemnitees are entitled
pursuant to the Indemnification Agreement shall first be satisfied from funds
held in the Escrow Account, pursuant to the terms of the Escrow Agreement to the
extent available, until the Escrow Account has been reduced to zero and
thereafter shall be satisfied by Newco directly.
The Escrow Agreement
The Plan of Merger provides that Oldco will deposit with the Escrow Agent
an aggregate of $6,000,000 (the "Escrow Funds") to be administered under the
terms of the Escrow Agreement by and among Oldco, Newco, Acquisition and Merger
Sub. The Escrow Agreement will be entered into at the Merger Closing. The Escrow
Fund serves to fund claims for (A) indemnity made by the Buyer pursuant to the
Indemnification Agreement, including any claims of Buyer with respect to the
Existing Litigation and other matters to be prosecuted or defended by Newco (the
"Newco Assumed Matters") arising from the failure of Newco to diligently
prosecute or defend such Newco Assumed Matters, Buyer's out-of-pocket expenses
(not to exceed $40,000 per year) incurred if it is represented by counsel with
respect to the Newco Assumed Matters
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("Buyer Monitoring Costs") and any payment of fees and expenses of Continental,
acting as the paying agent (the "Paying Agent") pursuant to the Plan of Merger
(all such claims, "Buyer Indemnity Claims"); (B) certain claims for tax refunds
made by Oldco if the refunds are not received prior to March 31, 1999 ("Tax
Return Claims") and (C) costs and expenses relating to (i) Newco Assumed
Matters; (ii) litigation arising out of or relating to any such Newco Assumed
Matters; (iii) indemnification of claims against Oldco's directors and officers
(prior to the Merger) for actions in their official capacity preceding the date
of the Merger; or (iv) in connection with matters arising out of or relating to
the Merger or the Spin-Off (collectively "Litigation Costs").
The Escrow Agent is to disburse Escrow Funds upon request to the Buyer,
with respect to Buyer Indemnity Claims, Buyer Monitoring Costs or Tax Return
Claims, and to Newco, with respect to Litigation Costs, unless the other party
objects to such disbursement. Newco may not object to the Tax Return Claims. If
a party objects, the Escrow Agent is not to disburse such funds until it
receives (i) the joint written direction of Newco and Buyer, (ii) a written
instrument representing a final and non-appealable order with respect to the
disposition of such amount issued by an arbitrator or (iii) a certified copy of
a final and non-appealable judgment of a court of competent jurisdiction
directing the disbursement of such funds (collectively, the "Escrow Fund
Determination Procedure"). Notwithstanding the foregoing, Newco is not to
unreasonably withhold its consent to a request by Buyer for payment of Buyer
Indemnity Claims and Acquisition is not to unreasonably withhold consent for
payment of Litigation Costs.
All remaining proceeds of the Escrow Fund, if any, will be released to
Newco at any time following the fifth anniversary of the date of the Escrow
Agreement provided that all of the following conditions have occurred and notice
has been provided by Newco to the Escrow Agent: (a) no claims are then subject
to the Escrow Fund Determination Procedure; (b) in the reasonable judgment of
Buyer, no future Buyer Indemnity Claims are foreseeable; and (c) all Newco
Assumed Matters have been finally settled through either (A) a final,
non-appealable judgment against the Surviving Corporation and all Purchaser
Indemnitees; or (B) a settlement or other conclusion to the Newco Assumed Matter
that (x) contains a release from all liability in favor of the Surviving
Corporation and Purchaser Indemnitees without any further obligation by the
Surviving Corporation or Purchaser Indemnitees to make any payment or incur any
other liability or obligation with respect to such matter, (y) does not
attribute by its terms liability to the Surviving Corporation or any Purchaser
Indemnitee and (z) if the scheduled matter is litigation or a proceeding,
includes as a term thereof a full dismissal of the litigation or proceeding with
prejudice. Newco and Buyer also agree they will meet no less than annually for
the purpose of examining the amounts set forth in the Escrow Fund and the
amounts of Buyer Indemnity Claims and Litigation Costs expended from the Escrow
Fund, for the purpose of determining whether the amount of the Escrow Fund is
more than sufficient to secure Buyer pursuant to the Indemnification Agreement.
The Escrow Agreement contains additional provisions including those
regarding investment of and taxation on the Escrow Fund, outlining the Escrow
Agent's duties and responsibilities, limiting the Escrow Agent's liability
except in the case of its bad faith, willful
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default or gross negligence, permitting the Escrow Agent to resign, allowing the
Escrow Agent to rely upon notices it believes genuine and duly authorized
without further verification and limiting its responsibilities with respect to
interest payable on the Escrow Funds.
Additional Matters
The Merger Consideration receivable with respect to the Enowitz Shares will
be placed in escrow with Continental Stock Transfer & Trust Co. Oldco maintains,
and is party to a legal proceeding seeking a determination that Mr. Enowitz, the
holder of record of these shares, is not entitled to them. Because of the
uncertainty with respect to these shares, the Plan of Merger provides that the
Merger Consideration payable in respect of such shares is to be held in escrow
pending resolution of the dispute regarding the ownership of these shares and
the rights, if any, of Acquisition, Merger Sub and the Surviving Corporation to
such Merger Consideration are being assigned without recourse to Newco. The
Merger Consideration for such shares amounts to approximately $3,450,000,
subject to upward (but not downward) adjustment as provided in the Plan of
Merger. If it is determined that Mr. Enowitz was not entitled to the Enowitz
Shares, Newco will receive such monies less the Company's costs (estimated to be
less than $100,000) to repurchase such shares. There can be no assurance as to
when this dispute will be resolved or whether it will be resolved to the
satisfaction of Newco. See "Business--Legal Proceedings."
In addition, pursuant to the Plan of Merger, Newco is renting the Corporate
Headquarters from the Surviving Corporation for $8,500 per month for the first
18 months and thereafter for $12,500 per month pursuant to a five year lease.
Newco has the option to purchase the premises after the twelfth month and before
the eighteenth month for $450,000 and the Surviving Corporation has the right
commencing with the 37th month of the lease to require Newco to purchase the
premises for $400,000.
MANAGEMENT
Directors and Executive Officers
Pursuant to the Newco Certificate and the Newco By-Laws, the Newco Board
will consist of the number of directors duly authorized from time to time by the
Newco Board. Following the Spin-Off , the Newco Board will consist initially of
the five individuals who currently comprise the board of directors of Oldco (the
"Oldco Board"). Directors will initially serve until the next annual meeting of
shareholders, currently expected to be held in July 1999 and are expected to
stand for re-election at that time.
Set forth below is certain information as to the individuals who are
expected to serve as directors and executives of Newco and their terms as
members of the Newco Board.
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Michael F. Zinn
Mr. Zinn, 45, has been the Chairman of the Board of Directors, President
and Chief Executive Officer of Newco since November, 1998, is the President,
Chief Executive Officer and Chairman of the Board of Directors of Oldco and has
guided Oldco since its founding in 1976. Prior to founding Oldco, Mr. Zinn was
director of a federally funded biomass-to-energy project. Prior to the above
appointment, Mr. Zinn was employed in energy engineering. He has been awarded
six U.S. patents. In June 1997, Mr. Zinn entered guilty pleas to two felony
counts in the United States District Court for the Southern District of New York
in connection with the Proceeding. Mr. Zinn was fined $36,673 and sentenced to a
six month term of incarceration (which commenced in November 1997 and has been
completed) and a two year term (which commenced in May 1998) of supervised
release thereafter. He resigned as Chairman of the Board, Chief Executive
Officer and President of Oldco in November 1997 and was reappointed to such
positions in May 1998. He is a cousin of Frederic Zinn, an executive officer of
Newco.
Gerald A. Habib
Mr. Habib, 52, has been a director of Newco since November, 1998 and has
been a director of Oldco since May 1994. In 1993 Mr. Habib founded The Berkshire
Group, a Shokan, NY investment banking and consulting concern that provides
business development and merger and acquisition services to clients in the
chemical industry and has served as its president since that time. From 1986 to
1990 he served as director of planning and development for NL Chemicals, a
multinational specialty chemical company. Mr. Habib also served as a vice
president for Elitine Corporation, a technology licensing company, and as a
business manager and manager of planning for Olin Chemicals. Since May 1995, Mr.
Habib has also served as vice president of a specialty chemicals company. Mr.
Habib holds a B.S. in Chemical Engineering from City University of New York and
an MBA from New York University. Mr. Habib is a director of Polymer Solutions,
Inc., a Canadian-based manufacturer of advanced polymer-based products for the
coatings and adhesives industry.
Richard E. Rosen
Mr. Rosen, 51, has been a director of Newco since November, 1998 and has
been a director of Oldco since May 1994. Mr. Rosen is a District Manager with
Adaytum Software Corporation, a Minneapolis, Minnesota based developer and
marketer of strategic planning software. From 1993 to 1997, Mr. Rosen was the
founder and President of Plato Software, Inc. of Saugerties, New York, a
software development company engaged in marketing accounting software. From 1991
to 1993, Mr. Rosen owned and operated Rosebud Consulting Services, which
provided analysis, development, and implementation of computer software systems
to medium-sized businesses. Mr. Rosen holds a BA in Social Sciences from the
University of North Carolina.
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Melanie Norden
Ms. Norden, 51, has been a director of Newco since November, 1998 and has
been a director of Oldco since February 1998. In 1988, Ms. Norden founded
BENCHMARKS, a full service consulting firm, providing consultation, management
and planning services in fundraising, organizational development, conference and
event planning and evaluation; volunteer, board and staff training; and public
relations and marketing. Ms. Norden holds a BA from the State University of New
York at Binghamton and completed an MA Program at Manhattanville College in
Purchase, New York.
Michael J. Daley
Mr. Daley, 43, has been a director and the Executive Vice President and
Chief Financial Officer of Newco since November, 1998. He joined Oldco as
Financial Manager in August 1987 and was appointed Vice President, Finance &
Administration in May 1989, Corporate Secretary in April 1991, Chief Financial
Officer in September 1994, and Director, Chief Executive Officer and President
in November 1997. Concurrent with Mr. Zinn's reappointment as Chief Executive
Officer and President in May 1998, Mr. Daley was appointed Executive Vice
President and continues to serve as Chief Financial Officer. Mr. Daley holds a
B.S. in Accounting from St. Francis College of Brooklyn, NY.
Joseph P. Novarro
Mr. Novarro, 56, has been Vice President, Project Development of Newco
since November, 1998. He joined Oldco in 1994 as Technical Manager and was
appointed Vice President, Project Development in February 1997. In November
1997, Mr. Novarro was appointed an executive officer of Oldco retaining the same
title. Prior to joining Oldco, Mr. Novarro was the Engineer/Project Manager at
Kamine Development Corp. Before that he held various management positions during
a 25-year career at Long Island Lighting Company. Mr. Novarro holds a B.S. in
Electrical Engineering from Manhattan College and completed his postgraduate
studies at the Oak Ridge School of Reactor Technology.
James E. Curtin
Mr. Curtin, 49, has been Vice President and Controller of Newco since
November, 1998. He joined Oldco as Corporate Controller in August 1995 and was
appointed an executive officer of Oldco with the title of Vice President and
Controller in November 1997. Prior to joining Oldco, Mr. Curtin was Director of
Financial Reporting for ENSERCH Engineers and Constructors from 1994 to 1995,
and held several financial management positions with Ebasco Services,
Incorporated, an engineering, construction and consulting firm, from 1981 to
1994. Mr. Curtin holds a BBA in Accounting Practice from Pace University.
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Frederic M. Zinn
Mr. Zinn, 41, has been Senior Vice President, General Counsel and
Secretary of Newco since November, 1998. He joined Oldco as a temporary
executive with the title of Vice President in November 1997. He was appointed an
executive officer of Oldco holding the title of Senior Vice President and
General Counsel in May 1998. Prior to joining Oldco, Mr. Zinn was the President
of Zinn & LeBovic, a Professional Law Corporation, from 1992 to 1997. Before
that, Mr. Zinn was General Counsel at JTE Real Estate Group, Inc. from 1989 to
1992; Associate Attorney at Palmieri, Tyler, Weiner, Wilhelm & Waldron from 1986
to 1988; and Associate Attorney at Hart, King & Coldren from 1982 to 1986. Mr.
Zinn received a BA in Economics from the University of California at Davis and a
JD from the UCLA School of Law. He is a cousin of Michael F. Zinn, the Chairman
of the Board, Chief Executive Officer and President of Newco.
Executive compensation
Prior to the Spin-Off, Newco's businesses were operated by Oldco. The
following table and narrative describe the compensation paid by Oldco in fiscal
years ended March 31, 1998, 1997 and 1996, to Oldco's two Chief Executive
Officers (one of whom will serve Newco as Chief Executive Officer and the other
as an executive officer) and two other individuals whose Oldco salary and bonus
in Fiscal 1998 exceeded $100,000 (referred to collectively with the Chief
Executive Officers as the "Named Executive Officers") who are the only executive
officers of Newco whose salary and bonus from Oldco in Fiscal 1998 exceeded
$100,000. Such amounts do not necessarily reflect the compensation such Named
Executive Officers will receive following the Spin-Off. The compensation to be
paid to the executives of Newco has not been determined, though it is
anticipated that such compensation will be less than that paid to executives of
Oldco and that individuals serving Newco in the same capacity in which they
served Oldco will not receive the same compensation as they received in the
past. Accordingly, Newco may be unable to retain employees critical to its
success. Newco does not intend to enter into any written employment agreement
with any of its employees.
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<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Name and Annual Compensation Securities
Principal --------------------------- Underlying All Other
Position (1) Year Salary ($) Bonus ($) Options Compensation ($)
----------- ---- ---------- --------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Michael F. Zinn (2) 1998 229,249 586,250 (3) 3,400 (4)
CEO and President 1997 350,794 293,792 14,750 (4)(5)
1996 350,000 250,000 39,000 (6) 14,620 (4)(5)
Michael J. Daley (2) 1998 148,459 111,033 4,900 (4)
Executive Vice 1997 91,462 21,000 1,300 (4)
President & CFO 1996 85,000 15,000 3,000 1,000 (4)
Joseph P. Novarro 1998 98,654 35,000 2,445 (4)
Vice President, 1997 78,152 25,000 1,782 (4)
Project 1996 69,500 21,500 520 (4)
Development
</TABLE>
- - ----------
(1) Information regarding two former executive officers of Oldco who are not
executive officers or otherwise employed by Newco is omitted.
(2) During Fiscal 1998, Mr. Zinn served Oldco as CEO for the period April 1
through November 11, 1997; Mr. Daley served as CEO of Oldco from November
11, 1997 through March 31, 1998.
(3) Includes bonus of $280,000 which was earned by Mr. Zinn in Fiscal 1997 and
paid in Fiscal 1998.
(4) Includes Oldco's matching contribution to its qualified 401(k) Plan to the
named individuals as follows: for Fiscal 1998: Mr. Zinn, $3,400; Mr. Daley,
$4,900; and Mr. Novarro, $2,445; for Fiscal 1997: Mr. Zinn, $4,750; Mr.
Daley, $1,300; and Mr. Novarro, $1,782; for Fiscal 1996: Mr. Zinn, $4,620;
Mr. Daley, $1,000; and Mr. Novarro, $520.
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(5) Includes premiums of $10,000 paid by Oldco on life insurance policies for
Mr. Zinn in each of Fiscal 1997 and 1996.
(6) In January 1996 Mr. Zinn was granted options under Oldco's Amended and
Restated 1993 Incentive Plan (the "1993 Plan") to purchase 19,000
restricted shares of Oldco Common Stock at $7.00 per share. All options
were exercised by Mr. Zinn, and the restrictions on the shares which were
scheduled to lapse in January 2001, lapsed in connection with the Merger.
At March 31, 1998, the 19,000 shares of Oldco Common Stock held by Mr. Zinn
as a result of the exercise of these options had a net value of $418,000
based upon a market value of $551,000, less the purchase price of $133,000.
Director's Compensation
The compensation to be paid to the members of the Board of Directors of
Newco has not been determined, though it is anticipated that such compensation
will be less than that paid to the Oldco directors. Directors of Oldco who were
also employees of Oldco were not paid any fees or compensation for their
services as members of Oldco's Board of Directors or any committee thereof.
Directors who were not employees of Oldco received an annual retainer of $20,000
and received per diem fees for each board or committee meeting attended at the
rate of $1,000 for each full-day meeting and $500 for each half-day meeting.
Each committee chairman received an additional $3,000 annual stipend. Oldco's
outside directors were also reimbursed for reasonable expenses relating to their
duties.
Stock Options
Under the 1993 Plan up to 1,000,000 shares of Oldco Common Stock could have
been issued to officers, directors, employees and consultants of Oldco. Awards
under this plan may be in the form of stock options, stock appreciation rights
("SARs"), dividend payment rights and options to purchase restricted stock.
During Fiscal 1998, options to acquire 7,500 shares were granted to the Outside
Directors under this Plan. No options were awarded during Fiscal 1998 to the
Named Executive Officers. Newco has no stock option, stock incentive, pension or
other employee plans with respect to its stock but may adopt such plans in the
future.
The following table provides information related to options and warrants to
acquire shares of Oldco Common Stock exercised by the Named Executive Officers
during Fiscal 1998 and the number and value of options and warrants held by them
at fiscal year end. All of such options and warrants are exercisable in
connection with the Spin-Off and the Merger and it is anticipated that all of
them will be exercised prior to the Spin-Off. The Company does not have any
outstanding SARs.
49
<PAGE>
Aggregated Option/Warrant Exercises in Last fiscal Year
and fiscal Year-end Option/Warrant Values
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Number of Unexercised In-the-Money
Shares of Oldco Options/Warrants Options/Warrants
Common Stock at FY-End at FY-End
Acquired Exercisable/ Exercisable/
Name on Exercise Value Realized Unexercisable Unexercisable
- - ---- ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Michael F. Zinn 0 $0 25,000/0 $ 678,125/$0
Michael J. Daley 0 0 9,500/3,000 224,875/78,000
Joseph P. 0 0 0/2,000 0/52,000
Novarro
</TABLE>
Defined Contribution Plan
After the Effective Date, Newco will assume sponsorship of Oldco's 401(k)
plan (the "401(k) Plan"), which is designed to comply with the requirements of
Sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended (the
"Code"), which govern tax qualification and cash or deferred arrangements. All
employees of Newco who work in the United States or are U.S. citizens, including
the Named Executive Officers, will, subject to the terms thereof, be eligible to
participate in the 401(k) Plan.
An eligible employee may elect to make before tax contributions to the
401(k) plan of up to 15% of total compensation up to a maximum of $10,000.
Special rules imposed by the Code may require lower limitations for the Named
Executive Officers and other highly compensated employees. Newco will make
matching contributions on the employees' before-tax contributions equal to 50%
of an employee's total before-tax contributions up to 5% of such employee's base
salary, bonus and overtime.
Amounts contributed to the 401(k) Plan will be invested by the trustee
(pursuant to participant direction) in one or more investment funds. It is
contemplated that initially there will be six funds offering a variety of
investment options.
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<PAGE>
All of an employee's before-tax contributions will be 100% vested from the
time they are made. Each contribution made by Newco will be fully vested once an
employee has had five years of service (at the rate of 20% per full year of
service, including service with Oldco). Upon termination of employment,
retirement, disability or death, the employee will be entitled to a distribution
of his or her entire vested plan account.
The individual accounts of Oldco's employees held under the 401(k) Plan
were transferred to the Newco 401(k) Plan as of the date of the Contribution.
See "Relationship Between Newco and Oldco After The Spin-Off."
Other Benefit Plans
Newco expects to maintain employee group health, life, long term disability
and other plans in which the Executive Officers will be eligible to participate
on the same terms as other salaried employees.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table shows the shares of Newco Common Stock expected to be
owned as of the Spin-Off by each beneficial owner of more than 5% of the Newco
Common Stock upon completion of the Spin-Off, each current director, the Named
Executive Officers and by all present directors and executive officers as a
group. Except as otherwise provided in the footnotes to the table, the
beneficial owners have sole voting and investment power as to all securities.
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<PAGE>
Number of Shares
Name of of Common Stock Percent of Common Stock
Beneficial Owner Beneficially Owned (1) Beneficially Owned (1)
Michael F. Zinn 67,969 (2) 55.7% (2)
Gerald A. Habib 300 *
Richard E. Rosen 300 *
Michael J. Daley 670 *
Joseph P. Novarro 88 *
Melanie Norden 200 *
Current Directors and
executive officers as
a group (8 persons) 69,527 57.0%
* Less than 1 percent.
(1) Except as described below, such persons have the sole power to vote and
direct the disposition of such shares.
(2) Includes 3,178 shares held in the name of members of his immediate family.
It is estimated that after giving effect to the elimination of fractional
shares of Newco Common Stock, Mr. Zinn will beneficially own not more than
58% of the Newco Common Stock.
The address for each of the individuals identified above is: 1151 Flatbush
Road, Kingston, New York 12401.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of March 31, 1998 and 1997, entities owned by Michael F. Zinn, owed
Oldco $47,662 and $37,005, respectively, net of airport usage and plane services
(the "Services") performed by such entities on behalf of Oldco. The cost of
these Services were recorded for Fiscal 1998 and Fiscal 1997 as $31,939 and
$90,621, respectively. These entities satisfied their obligations to Oldco prior
to the Spin-Off. Mr. Zinn is the Chairman of the Board, President and Chief
Executive Officer of Newco and served in an identical capacity at Oldco.
Oldco, pursuant to applicable law and governing documents, had advanced
certain legal expenses on behalf of certain officers and directors in connection
with the Proceeding, the Lichtenberg Litigation and the Bansbach Litigation.
As of March 31, 1998 and 1997, such advances on behalf of Mr. Michael F.
Zinn in connection with the Proceeding were an aggregate of $338,517 and
$208,250, respectively. Of
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<PAGE>
such sum, Mr. Zinn has agreed to reimburse Oldco $186,000, subject to a
determination as to whether such reimbursement is required by the BCL, and as of
September 30, 1998, had reimbursed Oldco $45,000. The $141,000 balance does not
bear interest. In addition, Oldco had advanced legal fees and disbursements of
approximately $217,663 incurred in connection with such proceeding on behalf of
certain directors, officers, and current and former employees and their spouses
who were actual or potential witnesses in this matter. Oldco assigned its right
to reimbursement, if any, to Newco pursuant to the Contribution Agreement.
In connection with the Lichtenberg Litigation, Oldco had advanced as of
March 31, 1998 an aggregate of $731,579 in legal fees and disbursements on
behalf of Oldco and Messrs. Zinn, Eisenberg and Enowitz (directors and officers
or former directors and/or officers of Oldco).
In connection with the Bansbach Litigation, Oldco had advanced as of March
31, 1998 an aggregate of $136,994 in legal fees and disbursements on behalf of
Oldco and Messrs. Zinn, Daley, Habib, Harris and Rosen (director and officers or
former directors of Oldco).
With regard to the legal actions described above, Oldco, in accordance with
applicable law and to the extent required, has received executed undertakings
from each indemnified party for whom legal costs have been advanced. Oldco
assigned its right to reimbursement to Newco pursuant to the Contribution
Agreement.
THE MERGER
The Plan of Merger provides that, upon the terms and subject to the
satisfaction or waiver of numerous conditions set forth therein, including the
effectuation of the Spin-Off, Merger Sub will be merged with and into Oldco
(which, as a result of the Spin-Off, will then be comprised principally of cash,
Niagara Mohawk Stock, the Corporate Headquarters and the other Retained Assets
and the Retained Liabilities), the separate corporate existence of Merger Sub
will cease and Oldco will continue as the Surviving Corporation, provided that
it will change its name within 30 days after the Merger Closing Date to a name
which does not include the word "Besicorp." The Merger will become effective
upon the filing of the Certificate of Merger with the Secretary of State of the
State of New York or, if later, the time specified in the Certificate of Merger
in accordance with the BCL (the "Effective Date"). The Spin-Off Record Date is
expected to be the same day as the Effective Date.
Pursuant to the Plan of Merger, at the Effective Date (i) each share of
Merger Sub's Common Stock issued and outstanding immediately prior to the
Effective Date will be converted into and become one validly issued, fully paid
and nonassessable share of common stock of the Surviving Corporation (with the
result that Acquisition will own all of the stock of the Surviving Corporation)
and (ii) each share of Oldco Common Stock issued and outstanding on the
Effective Date shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into the right to receive in cash $34.50,
subject to upward (but not downward)
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<PAGE>
adjustment in certain circumstances (the "Merger Consideration") upon surrender
of the certificate evidencing such share (each, an "Oldco Certificate") in the
manner provided below. Because the Spin-Off Record Date shall be the Effective
Date, the holders of Oldco Certificates on the Effective Date shall be entitled
to both Merger Consideration (pursuant to the Merger) and shares of Newco Common
Stock (pursuant to the Spin-Off).
Immediately prior to the Effective Date, Acquisition will deposit or cause
to be deposited with Continental, in trust for the benefit of the holders of
record of Oldco Common Stock immediately prior to the Effective Date, cash in an
aggregate amount equal to the Merger Consideration. As soon as practicable after
the Effective Date, Continental will mail to each holder of shares of Oldco
Common Stock as of the Effective Date a letter of transmittal and instructions
(the "Letter of Transmittal") to effect the surrender of the Oldco Certificates
in exchange for the Merger Consideration. The Letter of Transmittal will be
accompanied by a letter informing the holders about the occurrence of the
Spin-Off and telling them that certificates evidencing their shares of Newco
Common Stock (as well as the Merger Consideration) will be distributed upon
Continental's receipt of their Oldco Stock Certificates.
Each holder of Oldco Common Stock, upon surrender to Continental of such
holder's Oldco Certificates with the Letter of Transmittal, duly and properly
executed, shall be entitled to receive the portion of the Merger Consideration
represented by the Oldco Certificate as payment of the Merger Consideration.
Continental will then distribute to such holder both the Merger Consideration
and the certificate evidencing such shares (and/or cash in lieu of fractional
shares) of Newco Common Stock relating thereto as promptly as possible. Until so
surrendered, each Oldco Certificate shall at and after the Effective Date be
deemed to represent only the right to receive upon surrender of such Oldco
Certificate the Merger Consideration with respect to the shares of Oldco Common
Stock represented thereby.
DESCRIPTION OF THE CAPITAL STOCK
The summary of the terms of the stock of Newco set forth below does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Newco Certificate and the Newco By-Laws.
Authorized Capital Stock
Under the Newco Certificate, the total number of shares of all classes of
stock that Newco has authority to issue is 6,000,000 shares, of which 5,000,000
are shares of Newco Common Stock and 1,000,000 are shares of Newco Preferred
Stock. After giving effect to the distribution of the shares of Newco Common
Stock pursuant to the Spin-Off, there will be approximately 122,057 shares of
Newco Common Stock outstanding and no shares of Preferred Stock outstanding.
54
<PAGE>
Common Stock
Holders of Newco Common Stock will be entitled to one vote per share on all
matters voted on generally by the shareholders, including the election of
directors, and, except as otherwise required by law or except as provided with
respect to any series of Newco Preferred Stock, the holders of such shares will
possess all voting power. The Newco Certificate does not provide for cumulative
voting for the election of directors. Thus, under the BCL, the holders of more
than one-half of the outstanding shares of Newco Common Stock generally will be
able to elect all the directors of Newco then standing for election and holders
of the remaining shares will not be able to elect any director. Subsequent to
the completion of the Spin-Off, Mr. Michael F. Zinn will own approximately 55.7%
of the then outstanding shares of Newco Common Stock and will be able to elect
all of the members of the Newco Board and exercise substantial influence over
the outcome of any issues which may be subject to a vote of Newco's
shareholders. See "Risk Factors--Control by Principal Shareholder."
Subject to any preferential rights of any series of Newco Preferred Stock,
holders of shares of Newco Common Stock will be entitled to receive dividends on
such stock out of assets legally available for distribution when, as and if
authorized and declared by the Newco Board and to share ratably in the assets of
Newco legally available for distribution to its shareholders in the event of its
liquidation, dissolution or winding up. Newco does not presently anticipate
paying cash dividends in the foreseeable future. See "Dividend Policy."
Holders of Newco Common stock will have no preferences, preemptive,
conversion or exchange rights.
The outstanding shares of Newco Common Stock are, and the shares of Newco
Common Stock being distributed pursuant to the Spin-Off will be, when issued,
fully paid for and (subject to any liability imposed by Section 630 of the BCL)
nonassessable. Under Section 630 of the BCL, the ten largest shareholders of
Newco are personally liable for unpaid wages and debts to Newco's employees
unless Newco's capital stock is listed on a national securities exchange or
regularly quoted in an over-the-counter market by one or more members of a
national or an affiliated securities association. Newco does not currently
intend to have its capital stock so listed or quoted. See "Risk
Factors--Liability of 10 Largest Shareholders."
Preferred Stock
The Newco Board is authorized to issue shares of Newco Preferred Stock, in
one or more series or classes, and to fix for each such series voting powers and
such preferences and relative, participating, optional or other special rights
and such qualifications, limitations or restrictions as are permitted by the BCL
and the Newco Certificate. The issuance of Newco Preferred Stock could decrease
the amount of earnings and assets available for distribution to the holders of
the Newco Common Stock or could adversely affect the rights and powers,
including voting rights, of the holders of the Newco Common Stock.
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<PAGE>
Certain Effects of Authorized and Unissued Stock
There will be, after the completion of the Spin-Off, approximately
4,877,943 unissued and unreserved shares of Newco Common Stock and 1,000,000
unissued and unreserved shares of Newco Preferred Stock. These additional shares
may be issued for a variety of corporate purposes, including future public or
private offerings to raise additional capital or facilitate acquisitions. One of
the effects of the existence of unissued and unreserved shares of Newco Common
Stock and Newco Preferred Stock may be to enable the Newco Board to discourage
an attempt to change control of Newco and thereby to protect the continuity of
Newco's management. If , in the due exercise of its fiduciary duties, the Newco
Board determined that an attempt to change control of Newco was not in Newco's
best interest, the Newco Board could authorize, without having to obtain
approval of the shareholders, the issuance of such shares in one or more
transactions that might prevent or render more difficult the completion of such
attempt. In certain circumstances, such issuance could have the effect of
decreasing the market price of the Newco Common Stock. In addition, the issuance
of shares of Preferred Stock, whether or not related to any attempt to effect
such a change, may adversely affect the rights of the holders of shares of Newco
Common Stock. The Company does not presently intend to issue additional shares
of Newco Common Stock or Newco Preferred Stock.
DESCRIPTION OF CERTAIN STATUTORY, CHARTER AND BY-LAW PROVISIONS
New York Anti-Takeover Law
New York corporations are subject to the provisions of Section 912 of the
BCL for so long as they have a class of securities registered under Section 12
of the Exchange Act and continues to be organized as a corporation under the
laws of the State of New York. Section 912 provides, with certain exceptions,
that a New York corporation shall not engage in a "business combination" (e.g.,
merger, consolidation, recapitalization or disposition of stock or assets) with
any "interested shareholder" for a period of five years from the date that such
person first became an interested shareholder unless the transaction resulting
in a person becoming an interested shareholder or the business combination was
approved by the Board of Directors of such corporation prior to that person
becoming an interested shareholder. After the end of such five year period,
generally the interested shareholder may engage in a business combination only
if (a) the business combination is approved by the holders of a majority of the
outstanding voting stock not beneficially owned by such interested shareholder
or (b) the business combination meets certain valuation and consideration
requirements for the stock of such corporation. Newco, as permitted by the BCL,
has elected in the Newco Certificate, to opt out of this section of the BCL with
the result that the restrictions on business combinations do not apply to Newco.
An "interested shareholder" is defined as any person that is the beneficial
owner of 20% or more of the then-outstanding voting stock.
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<PAGE>
Number of Directors; Removal; Vacancies
The Newco By-Laws provides that the number of Directors shall be determined
from time to time by majority of the Newco Board. The Newco By-Laws provide that
the Newco Board shall have the right to fill vacancies, including vacancies
created by expansion of the Newco Board, except for vacancies resulting from the
removal of a Newco Director by the shareholders.
The Newco Certificate provides that Newco Directors may be removed with or
without cause by the shareholders by the affirmative vote of the holders of at
least a majority of the voting stock. In addition, Newco Directors may be
removed with cause by the Newco Board.
Shareholder Action by Written Consent; Special Meetings
The Newco Certificate provides that any action required or permitted to be
taken by the shareholders of Newco at a duly called meeting of shareholders of
Newco may be effected by any consent in writing of such shareholders, signed by
the holders of outstanding shares 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.
Special meetings of shareholders of Newco may be called by the Newco Board
or the president of Newco and shall be called by the president or secretary of
Newco after receipt of the written request of a majority of the Newco Board or
shareholders owning a majority of the shares issued and outstanding.
Amendment of By-Law Provisions
The Newco By-Laws provides that either the shareholders or, with certain
limitations, the Newco Board may adopt, amend, or repeal any provision of the
Newco By-Laws.
Transfer Agent and Registrar
The transfer agent and registrar for Newco Common Stock will be Continental
Stock Transfer & Trust Company, which also is the Distribution Agent for the
Spin-Off and the paying agent with respect to the Merger Consideration.
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the BCL, the Newco Certificate provides (the "Newco
Certificate Provision") that no director shall be personally liable to Newco or
any of its shareholders for damages for any breach of duty as a director unless
a judgment or other final adjudication adverse to him or her establishes that
his or her acts or omissions were in bad faith or involved intentional
misconduct or a knowing violation of law or that he or she personally gained in
fact a financial
57
<PAGE>
profit or other advantage to which he or she was not legally entitled or that
his or her acts violated Section 719 of the BCL. No amendment to or repeal of
the Newco Certificate Provision shall apply to or have any effect on the
liability or alleged liability of any director of Newco for or with respect to
any acts or omissions of such director occurring prior to such amendment or
repeal.
This provision is intended to afford directors protection, and limit their
potential liability, from suits alleging a breach of the duty of care by a
director. Newco believes this provision will assist it in maintaining and
securing the services of directors who are not employees of Newco. As a result
of the inclusion of such provision, shareholders may be unable to recover
monetary damages against directors for actions taken by them that constitute
negligence or gross negligence or that are in violation of their fiduciary
duties, although it may be possible to obtain injunctive or other equitable
relief with respect to such actions. If equitable remedies are found not to be
available to shareholders for any particular case, shareholders may not have any
effective remedy against the challenged conduct.
The Newco By-laws also provide that directors and officers shall be
indemnified against liabilities arising from their service as directors or
officers to the fullest extent permitted by law, which generally requires that
the individual have acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to Newco's best interests, provided that no
indemnification may be made to or on behalf of any director or officer if a
judgment or other final adjudication adverse to him or her established that his
or her acts were committed in bad faith or were the result of active and
deliberate dishonesty and were material to the cause of action so adjudicated,
or that he or she personally gained in fact a financial profit or other
advantage to which he or she was not legally entitled.
Newco maintains officer's and director's liability insurance with policy
limits of $2 million (and an additional $2 million in excess coverage) insuring
its officers and directors against certain liabilities and expenses incurred by
them in their capacities as such, and insuring Newco under certain
circumstances, in the event that indemnification payments are made by Newco to
such officers and directors.
LISTING AND TRADING OF NEWCO COMMON STOCK
There is currently no existing trading market for Newco Common Stock. Newco
has not applied and currently does not intend to apply for listing of the Newco
Common Stock on an Exchange because it does not meet the listing requirements of
any Exchange. Newco Common Stock may be traded on the OTC Electronic Bulletin
Board, a screen-based trading system operated by the National Association of
Securities Dealers, Inc. Securities traded on the OTC Electronic Bulletin Board
are, for the most part, thinly traded and subject to special regulations not
imposed on securities listed or traded on NASDAQ or on a national securities
exchange. The Newco Common Stock may be defined as a "penny stock" under the
Exchange Act. The
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Exchange Act and such penny stock rules generally impose additional sales
practice and disclosure requirements upon broker-dealers who sell Newco's
securities to persons other than certain "accredited investors" (generally,
institutions with assets in excess of $5,000,000 or individuals with net worth
in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 jointly
with spouse) or in transactions not recommended by the broker-dealer. For
transactions covered by the penny stock rules, the broker-dealer must make a
suitability determination for each purchaser and receive the purchaser's written
agreement prior to the sale. In addition, the broker-dealer must make certain
mandated disclosures in penny stock transactions, including the actual sale or
purchase price and actual bid and offer quotations, the compensation to be
received by the broker-dealer and certain associated persons, and deliver
certain disclosures required by the SEC. Newco can make no predictions as to the
effect, if any, that sales of shares or the availability of shares for sale will
have on the market price prevailing from time to time. Nevertheless, sales of
significant amounts of Newco Common Stock in the public market, or the
perception that such sales may occur, may adversely affect prevailing market
prices and could impair Newco's future ability to raise capital through the sale
of its equity securities.
The shares of Newco Common Stock to be received by holders of Oldco Common
Stock in the Spin-Off will be freely transferable, unless (i) a holder is deemed
to be an "affiliate" of Newco under the Securities Act of 1933, as amended (the
"Securities Act") or (ii) the holder's shares of Oldco Common Stock were
"restricted stock" (i.e. contained a legend indicated that they were restricted
under the Securities Act), in which case the same restrictions would apply to
shares of Newco Common Stock issued in the Spin-Off. Persons who may be deemed
affiliates of Newco after the Spin-Off generally include individuals or entities
that control, are controlled by, or are under common control with Newco and may
include certain of Newco's officers and directors. Persons who are affiliates of
Newco and holders of "restricted stock" will be permitted to sell their shares
of Newco Common Stock only pursuant to an effective registration statement under
the Securities Act or an exemption from the registration requirements of the
Securities Act, such as exemptions afforded by Section 4(2) of the Securities
Act or Rule 144 thereunder.
Upon completion of the Spin-Off, Newco will have approximately 122,057
shares of Newco Common Stock outstanding (assuming the exercise of all
outstanding options and warrants to purchase Oldco Common Stock prior to the
Spin-Off Record Date and assuming no cancellation of shares as a result of
fractional shares being converted into cash.) Newco estimates that it will
initially have approximately [ ] shareholders of record, based on the number of
shareholders of record of Newco as of [ ], 1999. Of these shares, approximately
[ ] will be freely tradable without restriction or further registration under
the Securities Act, except that any shares held by affiliates of Newco, may
generally only be sold in compliance with the limitations of Rule 144. The
remaining shares of Newco Common Stock will be restricted shares within the
meaning of Rule 144 under the Securities Act. Newco has not agreed to register
any of these shares under the Securities Act for sale by the holders thereof.
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EXPENSES OF THE SPIN-OFF
Oldco shall pay all of the costs and expenses of the Spin-Off incurred on
or prior to the Spin-Off Record Date, including the cost of providing the cash
to be paid to Entitled Holders in lieu of fractional shares of Newco Common
Stock, the preparation of the Registration Statement and the distribution of
this Information Statement. Except as otherwise provided in the Contribution
Agreement or in any other agreement entered into in connection with the
Spin-Off, Newco shall bear all of the other costs and expenses of the Spin-Off.
INDEPENDENT ACCOUNTANTS
The Newco Board has appointed Citrin Cooperman & Company, LLP ("CC&C") as
the Company's independent accountants to audit Newco's financial statements for
its 1999 fiscal year. CC&C has audited the financial statements that appear in
this Information Statement and has served as Oldco's auditors throughout the
periods covered by the financial statements included in this Information
Statement.
DIVIDEND POLICY
Newco has never declared or paid any cash dividends on the Newco Common
Stock and does not anticipate cash dividends in the foreseeable future. The
declaration and payment of dividends is at the discretion of the Newco Board and
will be subject to Newco's financial results and the availability of surplus
funds to pay dividends. The BCL prohibits Newco from paying dividends or
otherwise distributing funds to its shareholders, except out of legally
available funds. The declaration of dividends and the amount thereof will depend
on a number of factors, including Newco's financial condition, capital
requirements, funds from operations, future business prospects and such other
factors as the Newco Board may deem relevant, as well as contractual and
statutory restrictions on the Company's ability to pay dividends. Newco may in
the future enter into loan or other agreements or issue debt securities or
preferred stock that restrict the payment of dividends.
60
<PAGE>
INDEX TO THE COMBINED FINANCIAL STATEMENTS OF THE
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
Index to the Combined Financial Statements of the
Distributed Businesses of Besicorp Group Inc. .................. F-1
Independent Auditors' Report............................................. F-2
Combined Balance Sheet as of September 30, 1998 (Unaudited),
and March 31, 1998.............................................. F-3
Combined Statement of Operations and Combined Equity
for the Six Months Ended September 30, 1998 and 1997
(Unaudited) and the Years Ended March 31, 1998 and 1997......... F-5
Combined Statement of Cash Flows for the Six Months
Ended September 30, 1998 and 1997 (Unaudited)
and the Years Ended 1998 and 1997............................... F-6
Notes to Combined Financial Statements................................... F-7
Unaudited Pro Forma Combined Financial Information....................... F-15
F-1
<PAGE>
CITRIN COOPERMAN & COMPANY, LLP
Certified Public Accountants
529 Fifth Avenue, Tenth Floor
New York, NY 10017
212-697-1000
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
BESICORP GROUP INC.
Independent Auditor's Report
We have audited the accompanying combined balance sheet of the Distributed
Businesses of Besicorp Group Inc. as at March 31, 1998 and the related combined
statements of operations and combined equity and cash flows for the two years
then ended. These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits 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 accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the aforementioned combined financial statements present fairly,
in all material respects, the financial position of the Distributed Businesses
of Besicorp Group Inc. as at March 31, 1998 and the results of their operations
and their cash flows for the two years then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Distributed Businesses of Besicorp Group Inc. will continue as a going concern.
As discussed in Note 12 to the financial statements, the Distributed Businesses
of Besicorp Group Inc. have suffered recurring losses from operations and have
had substantial financial support from the former parent company that raise
substantial doubt about its ability to continue as a going concern without such
support. Management's plans in regard to these matters are also described in
Note 12. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Citrin Cooperman & Company, LLP
CITRIN COOPERMAN & COMPANY, LLP
June 23, 1998
New York, New York
F-2
<PAGE>
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS September 30, March 31,
1998 1998
---------- ----------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 59,239 $ 104,385
Trade accounts receivable (less allowance for doubtful
accounts of $21,000 at March 31, 1998, and
$66,929 at September 30, 1998) 591,407 366,079
Due from affiliates 61,035 47,662
Current portion of long-term notes receivable:
Others (includes interest of $8,316 at March 31, 1998,
and $12,298 at September 30, 1998) 124,649 102,054
Inventories 1,241,658 944,013
Other current assets 283,052 477,918
---------- ----------
Total Current Assets 2,361,040 2,042,111
---------- ----------
Property, Plant and Equipment:
Land and improvements 151,356 151,356
Buildings and improvements 557,736 550,659
Machinery and equipment 1,509,948 1,226,115
Furniture and fixtures 247,363 246,702
---------- ----------
2,466,403 2,174,832
Less: accumulated depreciation and amortization 1,508,297 1,393,685
---------- ----------
Net Property, Plant and Equipment 958,106 781,147
---------- ----------
Other Assets:
Patents and trademarks, less accumulated
amortization of $1,691 at March 30, 1998
and $1,973 at September 30, 1998 8,391 7,823
Long-term notes receivable:
Affiliate - net of allowance of $555,376 0 0
Others - net of allowance of $1,944,624 92,181 129,886
Deferred costs 0 1,316,693
Other assets 56,443 95,063
---------- ----------
Total Other Assets 157,015 1,549,465
---------- ----------
TOTAL ASSETS $3,476,161 $4,372,723
========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-3
<PAGE>
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
COMBINED BALANCE SHEET
LIABILITIES AND COMBINED EQUITY
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
------------ -----------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued expenses $ 1,078,763 $ 1,232,050
Current portion of long-term debt 65,317 70,740
Current portion of accrued reserve and warranty expense 144,769 152,891
Taxes other than income taxes 113,212 100,693
----------- -----------
Total Current Liabilities 1,402,061 1,556,374
Long-Term Accrued Reserve and Warranty Expense 161,391 152,402
Long-Term Debt 178,839 3,202,600
----------- -----------
Total Liabilities 1,742,291 4,911,376
Combined Equity 1,733,870 (538,653)
----------- -----------
TOTAL LIABILITIES AND COMBINED EQUITY $ 3,476,161 $ 4,372,723
=========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-4
<PAGE>
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
COMBINED STATEMENT OF OPERATIONS AND COMBINED EQUITY
<TABLE>
<CAPTION>
Years Ended March 31, Six Months Ended September 30,
--------------------- ------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 3,838,351 $ 4,474,926 $ 2,085,690 $ 2,268,666
Other revenues 426,154 310,922 227,321 115,741
Interest and other investment income 35,482 42,676 13,204 18,111
Other income 5,566 158,568 0 4,179
------------ ------------ ------------ ------------
Total Revenues 4,305,553 4,987,092 2,326,215 2,406,697
------------ ------------ ------------ ------------
Costs and Expenses:
Cost of product sales 3,932,301 4,299,848 1,981,867 2,073,899
Selling, general and
administrative expenses 8,536,780 7,576,927 4,489,298 3,540,738
Interest expense 451,178 292,142 92,193 165,841
Other expense 2,508,214 92,316 8,807 238
------------ ------------ ------------ ------------
Total Costs and Expenses 15,428,473 12,261,233 6,572,165 5,780,716
------------ ------------ ------------ ------------
Loss Before Income Taxes (11,122,920) (7,274,141) (4,245,950) (3,374,019)
Credit for Income Taxes 3,765,900 2,458,700 1,437,500 1,147,300
------------ ------------ ------------ ------------
Net Loss (7,357,020) (4,815,441) (2,808,450) (2,226,719)
Combined Equity -- Beginning 1,978,778 2,670,711 (538,653) 1,978,778
Net Transactions with Oldco 4,839,589 4,123,508 5,080,973 2,746,344
------------ ------------ ------------ ------------
Combined Equity -- Ending $ (538,653) $ 1,978,778 $ 1,733,870 $ 2,498,403
============ ============ ============ ============
</TABLE>
See accompanying notes to combined financial statements.
F-5
<PAGE>
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended March 31, Six Months Ended September 30,
--------------------- ------------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Operating Activities:
Net loss $(7,357,020) $(4,815,441) $(2,808,450) $(2,226,719)
Adjustments to reconcile net loss to
net cash used by operating activities:
Amortization of discounts on notes (2,196) (2,196) (1,098) (1,098)
Provision for uncollectibles 2,481,654 0 45,929 0
Realized and unrealized (gains)/losses 52,618 0 0 0
Depreciation and amortization 393,456 351,180 114,894 120,904
Changes in assets and liabilities:
Accounts and notes receivable 315,277 (15,113) (268,422) 73,302
Inventories 236,252 78,925 (297,645) 118,133
Accounts payable and accrued expenses (507,272) 495,555 (153,287) (120,071)
Taxes payable (1,393) 37,083 12,519 (1,784)
Other assets and liabilities, net (41,381) (486,213) 1,550,196 (322,778)
----------- ----------- ----------- -----------
Net Cash Used
By Operating Activities (4,430,005) (4,356,220) (1,805,364) (2,360,111)
----------- ----------- ----------- -----------
Financing Activities:
Increase in borrowings 0 500,000 0 122,000
Repayment of borrowings (99,711) (82,559) (3,029,184) (158,751)
Net transactions with Oldco 4,839,589 4,123,508 5,080,973 2,746,344
----------- ----------- ----------- -----------
Net Cash Provided
By Financing Activities 4,739,878 4,540,949 2,051,789 2,709,593
----------- ----------- ----------- -----------
Investing Activities:
Acquisition of property, plant and equipment (264,552) (136,493) (291,571) (174,238)
----------- ----------- ----------- -----------
Net Cash Used By Investing
Activities (264,552) (136,493) (291,571) (174,238)
----------- ----------- ----------- -----------
Increase (Decrease) in Cash 45,321 48,236 (45,146) 175,244
Cash Beginning 59,064 10,828 104,385 59,064
----------- ----------- ----------- -----------
Cash Ending $ 104,385 $ 59,064 $ 59,239 $ 234,308
=========== =========== =========== ===========
Supplemental Cash Flow Information:
Interest paid $ 445,601 $ 358,325 $ 131,617 $ 145,908
Additions to property, plant, and
equipment which were financed
and not included above $ 66,375 $ 0 $ 0 $ 66,375
</TABLE>
See accompanying notes to combined financial statements.
F-6
<PAGE>
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Besicorp Group Inc. ("Oldco") is party to an Agreement and Plan of Merger dated
November 23, 1998 (the "Plan of Merger") among Oldco, BGI Acquisition LLC
("Acquisition") and BGI Acquisition Corp. ("Merger Sub"), a wholly owned
subsidiary of Acquisition. Pursuant to the Plan of Merger, Merger Sub will be
merged into Oldco which will thereafter be a wholly owned subsidiary of
Acquisition (the "Merger"). Since Acquisition does not want to acquire certain
assets or assume certain liaiblities of Oldco, it is a condition precedent to
the Merger that Oldco, prior to the Merger, spin-off its photovoltaic and
independent power development businesses (the "Distributed Businesses") to its
shareholders. Therefore, Oldco formed Besicorp Ltd. ("Newco") to assume the
operations of the Distributed Businesses by having Oldco assign to Newco all of
its assets relating to the Distributed Businesses and substantially all of
Oldco's other assets (other than Oldco's cash, securities, certain subsidiaries
(the "Retained Subsidiaries") and the corporate headquarters and certain other
assets), and by having Newco assume substantially all of Oldco's liabilities
other than (i) the liabilities of Oldco and any Retained Subsidiary (actual or
accrued) for unpaid federal income taxes for Oldco's 1999 fiscal year based on
the consolidated net income of Oldco through the effective date of the Merger,
(ii) the liabilities of Oldco or its subsidiaries for New York State income
taxes for the 1999 fiscal year, and (iii) certain intercompany liabilities. On
November 20, 1998, the Board of Directors adopted the Plan of Merger which
contemplates that Oldco will effect such a contribution and distribute all of
Newco's stock. Therefore, following the contribution, Oldco will distribute 100%
of Newco's common stock (the "Distribution"), and Newco will become a separate,
publicly held company.
Assets and liabilities will be transferred to Newco at Oldco's historical cost.
The historical actions of Oldco's Distributed Businesses, including Newco's
accounting policies, are attributable to Newco. The financial results in these
financial statements are not necessarily indicative of the results that would
have occurred if Newco had been an independent public company during the periods
presented or of future results of Newco. See unaudited Pro Forma Combined
Financial Statements found at page F-15 of this Information Statement for
discussion of the effect of the Distribution on Newco.
Amounts shown as net transactions with Oldco represent the net effect of cash
generated or used by the Distributed Businesses and transferred to or from
Oldco.
The unaudited Combined Balance Sheet at September 30, 1998, the unaudited
Combined Statement of Operations and Combined Equity for the six months ended
September 30, 1998 and September 30, 1997, and the unaudited Combined Statement
of Cash Flows for the six months ended September 30, 1998 and September 30, 1997
have not been audited, but have been prepared in conformity with generally
accepted accounting principles as applied in Newco's audited consolidated
financial statements for the year ended March 31, 1998. In the opinion of
management, this information includes all material adjustments, of a normal and
recurring nature, necessary for a fair presentation. The results for the six
months periods are not necessarily indicative of the results expected for the
full year.
Business
Newco fabricates, manufactures, markets and distributes photovoltaic products
and systems and develops independent power projects.
Use of Estimates
Management uses estimates in preparing the consolidated financial statements, in
conformity with generally accepted accounting principles. Significant estimates
include collectibility of accounts receivable, warranty costs, profitability on
long-term contracts, as well as recoverability of long-term assets and residual
values. Newco regularly assesses these estimates and, while actual results may
differ from these estimates, management does not anticipate a material
difference in its actual results versus estimates in the near term.
F-7
<PAGE>
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Inventories
Inventories are carried at the lower of cost (first-in, first-out method) or
market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation on such assets is
computed on a straight-line basis at rates adequate to allocate the cost over
their expected useful lives from 3 years to 39 years.
Patents and Trademarks
Costs of patents ($9,879 at September 30, 1998 and $9,029 at March 31, 1997) are
capitalized and amortized on a straight-line basis over the remaining useful
life of the patent of up to 17 years. Trademark costs ($485 at March 31, 1998
and $485 at September 30, 1998) are capitalized and amortized on a straight-line
basis over the estimated useful life of 35 years. During the year ended March
31, 1998, $690,467 of patent and trademark costs were written off upon the
discontinuance of the related product lines.
Deferred Costs
Consists of engineering and legal fees, licenses and permits, site testing, bids
and other charges, including salaries and employee expenses, incurred by Newco
in developing projects. These costs are deferred until the date the project
construction financing is arranged and then expensed against development fees
received, or, in some cases, such costs are reimbursed periodically or at the
time of closing. When in the opinion of management it is determined that a
project will not be completed, the deferred costs are expensed.
Impairment of Long-Lived Assets
Newco adopted the provisions of Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," as of April 1, 1996. The Statement
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairments whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Adoption of this Statement
did not have an impact on Newco's financial position or results of operations.
Product Warranties
Warranty expense for Newco's product sales is provided on the basis of
management's estimate of the future costs to be incurred under product
warranties presently in force. Adjustments to revenue or expense are reflected
in the period in which revisions to such estimates are deemed appropriate.
Revenue Recognition
Revenues on product sales are recognized at the time of shipment of goods.
Research and Development
Research and development costs are expensed when incurred.
Statement of Cash Flows
For purposes of the combined statement of cash flows, Newco considers temporary
investments with a maturity of three months or less when purchased to be cash
equivalents. There were no cash equivalents in any of the periods presented.
F-8
<PAGE>
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentration of Credit Risk
Financial instruments which potentially subject Newco to concentrations of
credit risk consist principally of cash and trade receivables. Newco places its
cash and investments with high credit qualified financial institutions and, by
policy, limits the amount of credit exposure to any one financial institution.
Concentrations of credit risk with respect to trade receivables are limited due
to the large number of customers comprising Newco's customer base, and their
dispersion across many different industries and regions. During the year ended
March 31, 1998, one customer accounted for approximately 14% of product sales.
During the year ended March 31, 1997, sales to one customer accounted for
approximately 23% of product sales.
NOTE 2 - INVENTORIES
Inventories consist of the following:
March 31, 1998 September 30, 1998
-------------- ------------------
(Unaudited)
Assembly parts $298,239 $397,331
Finished goods 645,774 844,327
-------- ----------
$944,013 $1,241,658
======== ==========
NOTE 3 - DEFERRED COSTS
Deferred and reimbursable costs at September 30, 1998 and March 31, 1998 were as
follows:
<TABLE>
<CAPTION>
Internal Costs
-------------- Third
Payroll Expenses Party Costs Total
------- -------- ----------- -----
<S> <C> <C> <C> <C>
Balance March 31, 1997 $917,671 $267,947 $295,110 $1,480,728
Additions 259,335 34,706 388,238 682,279
Expensed (634,631) (85,142) (64,335) (784,108)
Reimbursements (58,825) -- (3,381) (62,206)
-------- -------- -------- ----------
Balance March 31, 1998 483,550 217,511 615,632 1,316,693
Additions 75,504 11,851 43,716 131,071
Write-offs (513,375) (229,362) (659,348) (1,402,085)
Reimbursements (45,679) (45,679)
-------- -------- -------- -----------
Balance September 30, 1998 $0 $0 $0 $0
======== ======= ======== ==========
</TABLE>
Newco decided to write-off all deferred costs during the second quarter of
Fiscal 1999 due to the uncertain nature of the development of the projects and
the current trend in accounting regarding non-deferral of development expenses.
F-9
<PAGE>
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 4 - NOTES RECEIVABLE
Long-term notes receivable consist of the following:
<TABLE>
<CAPTION>
March 31, 1998 September 30, 1998
-------------- ------------------
<S> <C> <C>
Due from affiliate (net of allowance of
$555,376 at March 31, 1998 and
September 30, 1998 (a) $0 $0
======= =======
Due from others:
- - - Greenhouse (net of allowance of
$1,944,624 at March 31, 1998
and September 30, 1998 (a) $0 $0
- - - 9% notes receivable due from limited
partnerships, receivable in annual
installments through December, 2001 (b) 223,623 204,541
Less current portion - net of interest (93,737) (112,360)
----------- -------
TOTAL $129,886 $92,181
======== =======
</TABLE>
(a) In connection with a project (the "Project"), Newco advanced an aggregate of
$2,500,000 (see Note 6(d)) of which, at March 31, 1998, $1,944,624 and $555,376
was owed to Newco by, respectively, an affiliated partnership and an unrelated
company ("Allegany"). During Fiscal 1998, Newco reserved the full amount of such
loan due to the uncertainty with respect to the collectibility thereof and did
not in Fiscal 1998 and the six months ended September 30, 1998 record any
interest income with respect to such advances. See Note 10.
(b) Newco contracted to design, build, and operate energy systems with limited
partnerships. Under the terms of the agreements with these partnerships, the
partnerships provided the Company with cash initial payments and issued
long-term notes. Additional interest on these notes were inputed at the rate of
2% per annum to yield an effective rate of 11% per annum on substantially all of
the long-term notes.
NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses were comprised of the following:
March 31, 1998
--------------
Trade accounts payable $ 465,584
Accrued interest expense 39,421
Accrued legal fees 308,281
Accrued salaries 134,640
Due to affiliate 56,624
Deposits and other payables 227,500
----------
$1,232,050
==========
F-10
<PAGE>
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 6 - LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consists of the following: March 31, 1998 September 30, 1998
-------------- ------------------
<S> <C> <C>
- Installment loans at 0% to 10.54% maturing through
September 2000 (a) $ 75,639 $ 52,815
- Mortgage loan payable in monthly installments of
$1,060 plus interest at prime plus 1.5% to March 1998
and prime plus .5% thereafter through March 2001 (b, c) 50,680 44,320
- Obligation on SunWize asset acquisition (e) 147,021 147,021
- Working capital loan (d) 3,000,000 0
---------- --------
Total 3,273,340 244,156
Less: Current maturities 70,740 65,317
---------- --------
$3,202,600 $178,839
========== ========
</TABLE>
Long-term debt maturities at March 31, 1998, including current maturities, are
as follows:
March 31, 1998
--------------
1999 $70,740
2000 58,302
2001 44,758
2002 32,520
2003 20,000
Thereafter 3,047,020
----------
$3,273,340
==========
Subsequent to the Spin-Off, the only remaining debt would be the SunWize
Acquisition obligation.
a. Collateral for the installment loans consists of automobiles, machinery and
equipment, computer equipment and furniture and fixtures with a net book value
of $60,468 at March 31, 1998. It is expected that all these loans will be repaid
prior to the Spin-Off.
b. Collateralized by mortgages on land and/or buildings owned by the Company
with a net book value of $232,968 at March 31, 1998. It is expected that these
mortgages will be repaid prior to the Spin-Off.
c. As a part of his guarantees of the Newco's debts of $50,680 at March 31,
1998, the majority shareholder has a security interest in various assets,
patents and personal property owned by Newco. This mortgage will be repaid prior
to the Spin-Off.
F-11
<PAGE>
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 6 - LONG-TERM DEBT (CONTINUED)
d. On June 1, 1992, the Company and its partnership co-developer entered into a
loan agreement with Stewart & Stevenson Services, Inc. to borrow up to
$3,000,000 each for working capital. Interest on advances under the agreement
are payable quarterly in arrears at the rate of 2% above prime. The loan
requires payments of interest only during the initial term. Principal is to be
repaid based on termination dates of operating and maintenance contracts on
certain projects with an initial term of six years that may be extended an
additional six years. Loans are secured by cash flows of certain of the
partnerships in the event of default. During Fiscal 1993 and 1994 the Company
borrowed $2,500,000 under the agreement to fund development activities of one of
the partnerships (see Note 4), and, in February 1997, borrowed the remaining
$500,000 available under the loan agreement. The loan was repaid in full in July
1998.
e. Obligation payable on the acquisition of SunWize assets, payable on an annual
basis as a percentage of gross margins of the SunWize division. $19,878 was paid
in Fiscal 1998. $6,381 was paid in Fiscal 1997.
NOTE 7 - INCOME TAXES
The credits for income taxes for all periods presented represents the allocated
benefits of the respective losses which Oldco was able to use in filing its
consolidated tax returns.
NOTE 8 - RELATED PARTIES
Amounts due from affiliates at September 30, 1998 and March 31, 1998 relate to
receivables from companies owned by the majority shareholder which provide
certain services to Newco for airport usage, plane services and engineering
consulting services totaling $31,939 for the years ended March 31, 1998.
Included in other current assets at March 31, 1998 is a receivable of $164,211
($144,000 at September 30, 1998) from the President of Newco representing
primarily the balance due on $186,000 of legal fees which the President has
agreed, subject to a determination that such repayment is not required, to
reimburse to Newco.
NOTE 9 - SUPPLEMENTARY INCOME STATEMENT INFORMATION
Year Ended
1998
----------
Advertising costs $142,154
Research and development expenses(1) 697,182
Warranty expense 53,701
Amortization of patents and trademarks 40,632
Maintenance and repairs 84,903
Taxes other than payroll and income taxes 57,721
(1) Since Fiscal 1994 Newco has expanded its efforts in technology development,
particularly solar electric products. Expenditures for research and development
for the last three years were $697,182, in Fiscal 1998. Personnel expenses,
comprising the largest portion of these amounts, were $330,428 in Fiscal 1998.
Of the total amounts, expenses attributable to Newco's agreements with the New
York State Energy Research and Development Authority were $520,950 in Fiscal
1998.
F-12
<PAGE>
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 10 - LEGAL PROCEEDINGS
In June 1997, Oldco and its Chairman, Chief Executive Officer and President,
Michael F. Zinn, each entered guilty pleas to two felony counts in United States
District Court for the Southern District of New York, White Plains, New York.
Each entered a guilty plea to one count of causing a false statement to be made
to the Federal Election Commission ("FEC") and one count of filing a false tax
return, both in connection with contributions to the 1992 election campaign of
Congressman Maurice Hinchey. Both Oldco and Mr. Zinn were fined approximately
$36,000 and Mr. Zinn was sentenced to a six-month term of incarceration, which
was completed on May 8, 1998.
The St. Francis Hospital cogeneration facility was shut down by the management
of the hospital, and Newco initiated a lawsuit against the third-party turn-key
operator, Tecogen, Inc., for failing to complete its obligations under the
contract prior to this action by the hospital. During Fiscal 1998 the court
ruled that Newco was liable to Tecogen, Inc. for final payment of the purchase
price, and Newco paid a judgment in the net amount of $126,750 plus interest of
$115,585.
In March 1993 a shareholder derivative suit was filed against the Company and
the Company's directors which alleges, among other charges, that the directors
acted improperly in issuing Company shares to themselves for little or no
consideration. The plaintiff is seeking award of damages to the Company,
including punitive damages and interest, an accounting and the return of assets
to the Company, the appointment of independent members to the Board of
Directors, the cancellation of allegedly improperly granted shares, and the
award to the plaintiff of costs and expenses of the lawsuit including legal
fees. The defendants have denied the allegations of the complaint. The Board of
Directors of the Company formed a Special Litigation Committee ("SLC") comprised
of independent, outside directors to investigate the allegations made in the
action and determine if continued prosecution of the action is in the best
interest of the Company. After an extensive investigation of the allegations
made in the complaint, the SLC issued a resolution dated March 28, 1995 finding
that the continued prosecution of the derivative action was not in the best
interest of the Company. In a decision issued December 19, 1997, the Court
granted the Company's motion for summary judgment based upon the recommendation
of the SLC, and dismissed the derivative action in all respects. The plaintiff
has filed a notice of appeal. Management is of the opinion that meritorious
defenses to the suit have been asserted and that the outcome of the action will
have no material adverse impact on the Company.
Newco, through partnership interests, was involved in the construction of a
cogeneration facility and an associated greenhouse. Various legal proceedings
have arisen from these facilities due to construction problems, breaches of
contract and bankruptcies so that neither facility is presently being operated.
The Company entered into a settlement with respect to such proceedings in which
it relinquished its interest in such facilities and its claim against the other
parties except for one administrative claim and in which it was released from
all claims against it (except for a claim that may be made by Allegany, which
claim is not currently pending).
NOTE 11 - COMMITMENTS AND CONTINGENCIES
At March 31, 1998, Newco has no significant minimum annual rental commitments
under non-cancelable operating leases for equipment and office space. Newco has
two leases for office and warehouse space. One lease calls for monthly rental of
$575 for a period of 12 months ending April 1998. The second lease originally
was for ten years at $150,000 per year commencing December 15, 1994, with Newco
having the annual right to terminate the lease during the first seven years of
the lease term. Effective September 1, 1995 this lease was renegotiated based
upon a reduction of rented space from 25,000 square feet to 17,000 square feet.
The term of this lease was for an initial period of six months, commencing on
October 1, 1995 and ending on March 31, 1996. The term automatically renews for
successive periods of six months each. After December 31, 1996, either party may
terminate the lease at any time by giving the other party at least ninety days
notice in writing. The annual rent from September 1, 1995 forward is $102,000,
which will be adjusted in future periods based on the Consumer Price Index. Rent
expense on all operating leases for the year ended March 31, 1998 was $155,197.
F-13
<PAGE>
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 11 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Since March 1994 Newco has been entering into cost-sharing agreements with the
New York State Energy Research and Development Authority ("NYSERDA") with
completion dates extending through April 2001. The agreements provide for
payment to Newco by NYSERDA of $1,442,237 (approximately $800,000 has been
earned through March 31, 1998) for funding and development of photovoltaic
projects with estimated costs of $2,963,235. Funds advanced by NYSERDA are to be
repaid from revenues on sales of products developed under the agreements, if
any.
Newco has a 401(k) plan covering substantially all full-time employees for which
the Company makes matching contributions as defined. The Company's expenses
under the plan for the year ended March 31, 1998 were $72,692.
As part of the Plan of Merger , the corporate headquarters will be retained by
Oldco and be leased to Newco. Rentals under the five year lease will be $8,500
per month for the first 18 months and, thereafter, $12,500 per month. Newco will
have the option to purchase the premises at any time after the twelfth month of
the lease term and prior to the eighteenth month of the lease term at a cash
purchase price equal to $450,000. Besicorp will have the option to require Newco
to purchase the premises at any time after the thirty-sixth month of the lease
term at a cash purchase price equal to $400,000.
In addition, as a part of the Plan of Merger, there is (i) an indemnification
agreement which obligates Newco to indemnify the purchaser from any damages they
suffer arising out of, among other things, Oldco's breach of representations and
warranties set forth in the Plan of Merger and certain liabilities, taxes and
litigation of Oldco and (ii) an escrow agreement governing the $6,000,000 to be
placed in escrow to satisfy Newco's obligations under the indemnification
agreement and provides for payment of, among other things, certain litigation
and related costs.
NOTE 12 - GOING CONCERN
The Distributed Businesses have suffered recurring losses from operations and
have had substantial financial support from Oldco, which raises substantial
doubt about Newco's ability to continue as a going concern without such support.
Newco is in the process of developing a business plan to reduce operating costs
and improve results to aid in the securing of the necessary financing to
continue operations. No assurance can be given that such a plan will have such
effects or that such financing will be available.
F-14
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Balance Sheet of the Distributed
Businesses as of September 30, 1998, and the Unaudited Pro Forma Combined
Statements of Operations for the year ended March 31, 1998, and the six months
ended September 30, 1998, have been prepared to reflect the effects on the
historical results of the Distributed Businesses of: (i) the transfer to Newco
of substantially all of the assets and liabilities of the Distributed
Businesses; (ii) the leasing of the corporate headquarters from Oldco; (iii) the
repayment of $97,135 of Newco debt by Oldco prior to the Spin-Off; (iv)
distribution of the shares of Newco Common Stock to the Oldco shareholders as of
the record date for the Spin-Off; (v) the transfer to Newco of $1,000,000; and
(v) the addition of expenses expected to be incurred by Newco when operating as
a stand-alone business. The accounting for this transfer of assets and
liabilities represents a reorganization of companies under common control and,
accordingly, all assets and liabilities will be reflected at their historical
cost basis.
The Unaudited Pro Forma Combined Balance Sheet has been prepared as if the
transactions occurred on September 30, 1998; the Unaudited Pro Forma Combined
Statements of Operations have been prepared as if the transactions occurred on
April 1, 1997. The pro forma financial information set forth below is unaudited
and not necessarily indicative of the results that would actually have occurred
if the transactions had been consummated as of September 30, 1998, or April 1,
1997, or the results which may be obtained in the future.
The pro forma adjustments, as described in the Notes to the Unaudited Pro Forma
Combined Balance Sheet and Notes to the Unaudited Pro Forma Combined Statements
of Operations are based on available information and upon certain assumptions
that management believes are reasonable. The Unaudited Pro Forma Combined
Financial Information should be read in conjunction with the Distributed
Businesses historical financial statements, including the related notes thereto.
F-15
<PAGE>
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, 1998
-------------------------------------------------
ASSETS Historical Adjustments Pro Forma
----------- ----------- -----------
Current Assets:
<S> <C> <C> <C>
Cash $ 59,239 $ 1,000,000 (1) $ 1,059,239
Trade accounts receivable (less allowance for doubtful
accounts of $66,929) 591,407 591,407
Due from affiliates 61,035 61,035
Current portion of long-term notes receivable:
Others (includes interest of $12,298) 124,649 124,649
Inventories 1,241,658 1,241,658
Other current assets 283,052 283,052
----------- ----------- -----------
Total Current Assets 2,361,040 1,000,000 3,361,040
----------- ----------- -----------
Net Property, Plant and Equipment 958,106 0 958,106
----------- ----------- -----------
Other Assets 157,015 0 157,015
----------- ----------- -----------
TOTAL ASSETS $ 3,476,161 $ 1,000,000 $ 4,476,161
=========== =========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,078,763 $ 0 $ 1,078,763
Current portion of long-term debt 65,317 (45,317)(2) 20,000
Current portion of accrued reserve and warranty expense 144,769 0 144,769
Taxes other than income taxes 113,212 0 113,212
----------- ----------- -----------
Total Current Liabilities 1,402,061 (45,317) 1,356,744
Long-Term Accrued Reserve and Warranty Expense 161,391 0 161,391
Long-Term Debt 178,839 (51,818)(2) 127,021
----------- ----------- -----------
Total Liabilities 1,742,291 (97,135) 1,645,156
----------- ----------- -----------
Shareholder's Equity:
Common Stock 0 1,221 (4) 1,221
Paid-In Capital 0 2,829,784 (4) 2,829,784
Combined Equity 1,733,870 101,000 (3) 0
97,135 (2)
1,000,000 (1)
(2,932,005)(4)
----------- ----------- -----------
Total Shareholder's Equity 1,733,870 1,097,135 2,831,005
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 3,476,161 $ 1,000,000 $ 4,476,161
=========== =========== ===========
</TABLE>
Notes:
(1) Cash transfer by Oldco
(2) Debt repayments by Oldco
(3) Represents the effects of pro forma adjustments
(4) Represents the issuance of 122,057 shares of $.01 par value common stock to
Oldco shareholders and reclassification of the combined equity in excess of
par value to paid in capital.
F-16
<PAGE>
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended September 30, 1998
-------------------------------------------------------------
Historical Adjustments Pro Forma
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Product sales $ 2,085,690 $ $ 2,085,690
Other revenues 227,321 227,321
Interest and other investment income 13,204 13,204
Other income 0 0
----------- ----------- -----------
Total Revenues 2,326,215 2,326,215
----------- ----------- -----------
Costs and Expenses:
Cost of product sales 1,981,867 1,981,867
Selling, general and
administrative expenses 4,489,298 51,000(1) 4,540,298
Interest expense (2) 92,193 92,193
Other expense 8,807 8,807
----------- ----------- -----------
Total Costs and Expenses 6,572,165 51,000 6,623,165
----------- ----------- -----------
Loss Before Income Taxes (4,245,950) (51,000) (4,296,950)
Credit for Income Taxes 1,437,500 17,300(3) 1,454,800
----------- ----------- -----------
Net Loss $(2,808,450) $ (33,700) $(2,842,150)
=========== =========== ===========
Pro Forma Loss Per Common Share $ (23.29)(4)
===========
<CAPTION>
Year Ended March 31, 1998
--------------------------------------------------------------
Historical Adjustments Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Product sales $ 3,838,351 $ 0 $ 3,838,351
Other revenues 426,154 426,154
Interest and other investment income 35,482 35,482
Other income 5,566 5,566
------------ ------------ ------------
Total Revenues 4,305,553 0 4,305,553
------------ ------------ ------------
Costs and Expenses:
Cost of product sales 3,932,301 3,932,301
Selling, general and
administrative expenses 8,536,780 102,000 (1) 8,638,780
Interest expense (2) 451,178 451,178
Other expense 2,508,214 2,508,214
------------ ------------ ------------
Total Costs and Expenses 15,428,473 102,000 15,530,473
------------ ------------ ------------
Loss Before Income Taxes (11,122,920) (102,000) (11,224,920)
Credit for Income Taxes 3,765,900 34,700 (3) 3,800,600
------------ ------------ ------------
Net Loss $ (7,357,020) $ (67,300) $ (7,424,320)
============ ============ ============
Pro Forma Loss Per Common Share $ (60.83)(4)
============
</TABLE>
Notes:
(1) Represents additional costs of renting corporate headquarters from Oldco.
(2) Interest savings on repaid debt not adjusted, as additional debt would be
incurred to operate in the future the impact of which can not be
calculated.
(3) Represents tax effect of pro forma adjustments.
(4) Pro forma loss per share is computed base on 122,057 shares being issued.
F-17
<PAGE>
EXHIBITS TO FORM 10-SB
General Form for Registration
Of Securities of Small Business Issuers
Under Section 12(b) or 12(g) of
the Securities Exchange Act of 1934
----------------
BESICORP LTD.
<PAGE>
INDEX OF EXHIBITS
2.1 Contribution and Distribution Agreement by and between Besicorp Ltd.
(The "Company") and Besicorp Group Inc. ("BGI")*.
3(i) Certificate of Incorporation of Besicorp Ltd.
3(ii) By-Laws of Besicorp Ltd.
10.1 Form of Indemnification Agreement by and among the Company, BGI
Acquisition LLC ("LLC") and BGI Acquisition Corp. ("Acquisition")
10.2 Form of Escrow Agreement by and among the Company, BGI, LLC and
Acquisition.
10.3 Lease of Corporate Headquarters by and between the Company and BGI*.
21.1 List of Subsidiaries*.
27 Financial Data Schedule - 6 Months ended September 30, 1998
27.1 Financial Data Schedule - 6 Months ended September 30, 1997
27.2 Financial Data Schedule - Year ended March 31, 1998
27.3 Financial Data Schedule - Year ended March 31, 1997
* To be filed by amendment.
Exhibit 3.(i)
CERTIFICATE OF INCORPORATION
OF
BESICORP LTD.
UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW
The undersigned incorporator, being a natural person of at least 18 years
of age, for the purpose of forming a corporation (the "Corporation") under the
Business Corporation Law, hereby adopts the following Certificate of
Incorporation and certifies that:
FIRST: The name of the Corporation is "Besicorp Ltd."
SECOND: The purpose for which the Corporation is formed is to engage in any
lawful act or activity for which corporations may be organized under the
Business Corporation Law, provided that the Corporation is not formed to engage
in any act or activity requiring the consent or approval of any state official,
department, board, agency, or other body without such consent or approval first
being obtained.
THIRD: (a) The aggregate number of shares of capital stock, which the
Corporation is authorized to issue is 6,000,000 shares, consisting of 5,000,000
shares of common stock having a par value of $.01 per share, and 1,000,000
shares of preferred stock having a par value of $.01 per share.
(b) The Board of Directors of the Corporation is authorized, subject to
limitations prescribed by law and the provisions of this Certificate of
Incorporation, to provide for the issuance of the preferred stock in series, and
by filing a certificate pursuant to the Business Corporation Law, to establish
the number of shares to be included in each such series, and to fix the
designation, relative rights, preferences and limitations of the shares of each
such series. The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
(i) The number of shares constituting that series and the distinctive
designation of that series;
(ii) Whether the holders of shares of that series shall be entitled to
receive dividends and, if so, the rates of such dividends, the conditions
under which and the times such dividends may be declared or paid, any
preference of any such dividends to, and the relation to, the dividends
payable on any other class or classes of stock or any other series of the
same class and whether dividends shall be cumulative or non-cumulative and,
if cumulative, from which date or dates;
1
<PAGE>
(iii) Whether the holders of shares of that series shall have voting
rights in addition to the voting rights provided by law and, if so, the
terms and conditions of exercise of such voting rights;
(iv) Whether shares of that series shall be convertible into or
exchangeable for shares of any other class, or any series of the same or
any other class, and, if so, the terms and conditions thereof, including
the date or dates when such shares shall be convertible into or
exchangeable for shares of any other class, or any series of the same or
any other class, the price or prices of or the rate or rates at which
shares of such series shall be so convertible or exchangeable, and any
adjustments which shall be made, and the circumstances in which any such
adjustments shall be made, in such conversion or exchange prices or rates;
(v) Whether the shares of the series shall be redeemable, and, if so,
the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable and the amount per share
payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(vi) Whether the shares of that series shall be subject to the
operation of a retirement or sinking fund and, if so subject, the extent to
and the manner in which it shall be applied to the purchase or redemption
of the shares of that series, and the terms and provisions relative to the
operation thereof;
(vii) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation and any presence of any such rights to, and the relation to,
the rights in respect thereto of any class or classes of stock or any other
series of the same class; and
(viii) Any other relative rights, preferences and limitations of that
series.
FOURTH: The office of the Corporation is located in the County of Ulster,
State of New York.
FIFTH: The Secretary of State of the State of New York is designated as
agent of the Corporation upon whom process against it may be served. The post
office address to which the Secretary of State shall mail a copy of any process
served upon him is: c/o National Register Agents, Inc., 440 9th Avenue, 5th
Floor, New York, New York 10001.
SIXTH: Whenever the shareholders of the Corporation are required or
permitted to take any action by vote, such action may be taken without a meeting
on written consent, setting forth the action so taken, signed by the holders of
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize or take such action at a
2
<PAGE>
meeting at which all shares entitled to vote thereon were present and voted,
provided that prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
shareholders who have not consented in writing.
SEVENTH: No director shall be personally liable to the Corporation or any
of its shareholders for damages for any breach of duty as a director; provided,
however, that the foregoing provision shall not eliminate or limit the liability
of a director if a judgment or other final adjudication adverse to him or her
establishes that his or her acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law or that he or she
personally gained in fact a financial profit or other advantage to which he or
she was not legally entitled or that his or her acts violated Section 719 of the
New York Business Corporation Law (the "BCL"). No amendment to or repeal of this
Article SEVENTH shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment or repeal.
EIGHTH: The Corporation expressly elects not to be governed by Section 912
of the BCL.
Dated on this 16th day of November, 1998
/s/Joyce DePietro
-----------------------------------
Joyce DePietro, Incorporator
c/o Besicorp Group Inc.
1151 Flatbush Road
Kingston, New York 12401
Subscribed and affirmed by me as true under the penalties of perjury on November
16, 1998.
/s/Joyce DePietro
-----------------------------------
Joyce DePietro, Incorporator
c/o Besicorp Group Inc.
1151 Flatbush Road
Kingston, New York 12401
3
Exhibit 3.(ii)
BY-LAWS
of
BESICORP LTD.
ARTICLE I - OFFICES
The principal office of Besicorp Ltd. (the "Corporation") shall be at such
place within or without the State of New York as the Board of Directors of the
Corporation (the "Board") may from time to time determine; the Corporation may
also have offices at such other places within or without the State of New York
as the Board may from time to time determine or the business of the Corporation
may require.
ARTICLE II - SHAREHOLDERS
1. PLACE OF MEETINGS.
Meetings of shareholders shall be held at the principal office of the
Corporation or at such other place within or without the State of New York as
the Board shall authorize.
2. ANNUAL MEETING.
The annual meeting of the shareholders for the election of directors and
for the transaction of such other business as may properly come before the
meeting shall be held on such date and hour as the Board shall determine.
3. SPECIAL MEETINGS.
Special meetings of the shareholders may be called by the Board or by the
President and shall be called by the President or the Secretary at the request
in writing of a majority of the Board or at the request in writing of
shareholders owning a majority in amount of the shares issued and outstanding.
Such request shall state the purpose or purposes of the proposed meeting.
Business transacted at a special meeting shall be confined to the purposes
stated in the notice. Such meeting shall be held on such date and at such place
and hour as shall be designated in the notice thereof.
4. FIXING RECORD DATE.
For the purpose of determining the shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or to express
consent to or dissent from any proposal without a meeting, or for the purpose of
determining shareholders entitled to receive payment of any
1
<PAGE>
dividend or other distribution or the allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other action, the Board shall fix, in advance, a date
as the record date for any such determination of shareholders. A determination
of shareholders entitled to notice of or to vote at a meeting of the
shareholders shall apply to any adjournment of the meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting. Such date
shall not be more than sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. If no record date
is fixed it shall be determined in accordance with the provisions of law.
5. NOTICE OF MEETINGS OF SHAREHOLDERS.
Written notice of each meeting of shareholders shall state the purpose or
purposes for which the meeting is called, the place, date and hour of the
meeting and, unless it is the annual meeting of shareholders, shall indicate
that it is being issued by or at the direction of the person or persons calling
the meeting. Except as otherwise expressly required by these By-laws, notice
shall be given either personally or by mail to each shareholder entitled to vote
at such meeting, not less than ten nor more than sixty days before the date of
the meeting. If action is proposed to be taken that might entitle shareholders
to payment for their shares, the notice shall include a statement of that
purpose and to that effect. If mailed, the notice is given when deposited in the
United States mail, with postage thereon prepaid, directed to the shareholder at
his address as it appears on the record of shareholders, or, if he shall have
filed with the Secretary a written request that notices to him be mailed to some
other address, then directed to him at such other address. Notice of any
adjourned meeting of the shareholders shall not be required to be given if the
time and place thereof are announced at the meeting at which the adjournment is
taken and a new record date for the adjourned meeting is not thereafter fixed.
6. WAIVERS.
Notice of meeting need not be given to any shareholder who signs a waiver
of notice, in person or by proxy, whether before or after the meeting. The
attendance of any shareholder at a meeting, in person or by proxy, without
protesting prior to the conclusion of the meeting the lack of notice of such
meeting, shall constitute a waiver of notice by him.
7. QUORUM OF SHAREHOLDERS.
Except as otherwise expressly required by law or the certificate of
incorporation of the Corporation, as amended from time to time (the "Certificate
of Incorporation"), if shareholders holding of record a majority of the shares
of stock of the Corporation entitled to be voted shall be present in person or
by proxy, a quorum for the transaction of business at any meeting of the
shareholders shall exist, provided that when a specified item of business is
required to be voted on
2
<PAGE>
by a class or classes, the holders of a majority of the shares of such class or
classes shall constitute a quorum for the transaction of such specified item of
business.
When a quorum is once present to organize a meeting, it is not broken by
the subsequent withdrawal of any shareholders.
In the absence of a quorum at any such meeting or any adjournment or
adjournments thereof, a majority in voting interest of those present in person
or by proxy and entitled to vote thereat may adjourn such meeting from time to
time until shareholders holding the amount of stock requisite for a quorum shall
be present in person or by proxy. At any such adjourned meeting at which a
quorum is present any business may be transacted which might have been
transacted at the meeting as originally called.
8. PROXIES.
Every shareholder entitled to vote at a meeting of shareholders or to
express consent or dissent without a meeting may authorize another person or
persons to act for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact. No
proxy shall be valid after expiration of eleven months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the shareholder executing it, except as otherwise provided by law.
9. QUALIFICATION OF VOTERS.
Except as otherwise provided in the Certificate of Incorporation, each
shareholder shall, at each meeting of the shareholders, be entitled to one vote,
in person or by proxy, for each share of stock of the Corporation which has
voting power on the matter in question and which is held by him and registered
in his name on the stock record of the Corporation.
10. ORGANIZATION OF MEETINGS.
At each meeting of the shareholders, one of the following shall act as
chairman of the meeting and preside thereat in the following order of
precedence:
(a) the Chairman of the Board, if there is one;
(b) the President;
(c) the Executive Vice President;
3
<PAGE>
(d) any other Vice President; or
(e) any other officer or a shareholder of record designated by a
majority in voting interest of the shareholders present in person or by
proxy and entitled to vote thereat.
The Secretary of the Corporation or, if he shall be absent from or
presiding over the meeting, the Assistant Secretary designated by the Secretary
or the Board, or if both the Secretary and the Assistant Secretaries be absent
from or presiding over the meeting the person whom the chairman of the meeting
shall appoint, shall act as secretary of the meeting and keep the minutes
thereof.
11. ORDER OF BUSINESS.
The order of business at each meeting of the shareholders shall be
determined by the chairman of the meeting, but such order of business may be
changed by a majority in voting interest of those present in person or by proxy
at such meeting and entitled to vote thereat.
12. VOTE OF SHAREHOLDERS.
Except as otherwise required by statute or by the Certificate of
Incorporation:
(a) directors shall be elected by a plurality of the votes cast at a
meeting of shareholders by the holders of shares entitled to vote in the
election; and
(b) all other corporate action shall be authorized by a majority of
the votes cast.
13. INSPECTORS.
Either the Board or, in the absence of a designation of inspectors by the
Board, the chairman of the meeting may, in its or his discretion, appoint one or
more inspectors, who need not be shareholders, who shall receive and take charge
of ballots and proxies and decide all questions relating to the qualification of
those asserting the right to vote and the validity of ballots and proxies. In
the event of the failure or refusal to serve of any inspector designated by the
Board, the chairman of the meeting shall appoint an inspector to act in place of
each such inspector designated by the Board.
14. WRITTEN CONSENT OF SHAREHOLDERS.
Any action that may be taken by vote may be taken without a meeting on
written consent, setting forth the action so taken, signed by the holders of all
the outstanding shares entitled to vote thereon or signed by such lesser number
of holders as may be provided for in the Certificate of Incorporation.
4
<PAGE>
ARTICLE III - DIRECTORS
1. GENERAL POWERS.
The property, business, affairs and policies of the Corporation shall be
managed by or under the direction of the Board.
2. NUMBER & TERM.
The number of directors of the Corporation shall be fixed by the Board, and
may be increased or decreased from time to time by a majority vote of the then
number of directors, provided that such number of directors shall comply with
the requirements of applicable law. Such number of directors, as fixed by the
Board, is sometimes referred to as the "Entire Board." Directors shall be
elected by a plurality vote at the annual meeting of shareholders or at any
meeting of shareholders held in lieu of such annual meeting, which meeting, for
the purposes of these By-laws, shall deemed the annual meeting, so long as a
quorum is present, and at such meeting each director shall be elected to serve
until the next annual meeting and until his successor shall be elected and shall
qualify, or until his earlier death, resignation or renewal. No decrease in the
number of directors shall become effective if the tenure of any director then in
office would be terminated thereby.
3. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the Board for any reason except the removal
of directors by vote of the shareholders may be filled by a vote of a majority
of the directors then in office, although less than a quorum exists, or the sole
remaining director, unless otherwise provided in the Certificate of
Incorporation. Vacancies occurring by reason of the removal of directors by vote
of the shareholders shall be filled by vote of the shareholders unless otherwise
provided in the Certificate of Incorporation. A director elected to fill a
vacancy caused by resignation, death or removal shall be elected to hold office
for the unexpired term of his predecessor.
4. REMOVAL OF DIRECTORS.
Any director may be removed at any time for cause or without cause by vote
of the holders of record of a majority in voting interest of shares then
entitled to vote at an election of directors at a duly constituted meeting of
shareholders. The vacancy in the Board caused by any such removal may be filled
by the shareholders at such meeting or subsequently at another duty constituted
meeting of shareholders. Any director may also be removed at any time for cause
by vote of a majority of the Board.
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5. RESIGNATION.
A director may resign at any time by giving written notice to the Board,
the President or the Secretary of the Corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the Board
or such officer, and the acceptance of the resignation shall not be necessary to
make it effective.
6. QUORUM OF DIRECTORS, ACTION BY THE BOARD.
Except as otherwise expressly required by these By-laws or by law, a
majority of the Entire Board and a majority of the members of any committee
shall be present in person at any meeting thereof in order to constitute a
quorum for the transaction of business at such meeting; the vote of a majority
of the directors present at any such meeting at which a quorum is present shall
be necessary for the passage of any resolution or for an act to be the act of
the Board or such committee. In the absence of a quorum, a majority of the
directors present thereat may adjourn such meeting from time to time until a
quorum shall be present thereat. Notice of any adjourned meeting need not be
given.
7. PLACE AND TIME OF BOARD MEETINGS.
(a) Regular meetings of the Board or any committee thereof shall be held at
such times and places or places as the Board or the committee may from time to
time determine. Special meetings of the Board or any committee thereof shall be
held at such times and places as the callers thereof may determine. Meetings may
be held at the office of the Corporation or at other places, either within or
without the State of New York.
(b) Any one or more members of the Board or any committee thereof, may
participate in a meeting of the Board or such committee, by means of a
conference, telephone or other communications equipment allowing all persons
participating in the meeting to hear each other at the same time and
participation by such means shall constitute presence in the meeting for all
purposes of these By-laws.
8. MEETINGS.
(a) Annual Meetings. As soon as practicable after each annual meeting
of shareholders and election of directors, the Board shall meet for the purpose
of organization, the election of officers and the transaction of other business.
(b) Regular Meetings. Regular meetings of the Board or any committee
thereof shall be held as the Board or such committee shall from time to time
determine.
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(c) Special Meetings. Special meetings of the Board may be called by order
of the President and shall be called by order of the President or Secretary on
request of two or more of the directors then in office.
9. NOTICE OF MEETINGS OF THE BOARD, ADJOURNMENT.
(a) No notice of regular meetings of the Board or of any committee thereof
need be given. The President or the Secretary shall give one day prior notice to
each director of the time and place of each annual or special meeting of the
Board or adjournment thereof or adjournment of a regular meeting. Such notice
shall be given to each director in person or by telephone, telegraph or fax or
by ordinary mail post marked at least three days' prior to the annual or special
meeting and sent to such director at his residence or usual business address.
Notice of a meeting need not be given to any director who submits a waiver of
notice whether before or after the meeting or who attends the meeting without
protesting prior thereto or at its commencement, the lack of notice to him.
Notice of any special meeting need not specify the purpose or purposes of such
meeting and may be waived by any director by written waiver or by personal
attendance thereat.
(b) Any meeting of the Board or any committee thereof shall be a legal
meeting without any notice thereof having been given if a quorum shall be
present and all the directors then in office either shall be present thereat or
shall execute waivers of notice.
(c) A majority of the directors present, whether or not a quorum is
present, may adjourn any meeting to another time and place. Notice of the
adjournment shall be given to all directors who were absent at the time of the
adjournment and, unless such time and place are announced at the meeting, to the
other directors.
10. ORGANIZATION OF MEETINGS.
At each meeting of the Board, one of the following shall act as chairman of
the meeting and preside thereat in the following order of precedence:
(a) the Chairman of the Board, if there is one; or
(b) the President, if a director; or
(c) any director chosen by a majority of the directors present
thereat.
The chairman of the meeting shall appoint a person present at each meeting
to act as secretary of such meeting and keep the minutes thereof. The order of
business at each meeting of the Board shall be determined by the chairman of
such meeting.
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11. COMMITTEES OF DIRECTORS.
(a) The Board may, by resolution or resolutions adopted by a majority of
the Entire Board, designate, from among its members, one or more committees
which, to the extent provided in said resolution or resolutions, shall, except
as otherwise provided by statute, have and may exercise the powers of the Board
in the management of the business and affairs of the Corporation, and may have
power to authorize the seal of the Corporation to be affixed to all papers which
may require it. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the Board.
(b) The Board may by resolution designate Directors to act as alternate
members of a committee to replace absent members at meetings of the committees.
The committees shall report all proceedings to the Board and to the President as
required from time to time.
12. COMPENSATION.
Each director who is not an employee of the Corporation, in consideration
of his serving as a director, may receive from the Corporation such amount per
annum and such fees and expenses incurred for attendance at meetings of the
Board or of the committee, or both, as the Board may from time to time
determine. Nothing contained in this Section shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor.
13. WRITTEN CONSENTS.
Unless otherwise restricted by the Certificate of Incorporation, any action
required to be taken by the Board or any committee thereof may be taken without
a meeting if all members of the Board or such committee consent in writing to
the adoption of the resolution authorizing the action. The resolution and
written consents thereto by the members of the Board or such committee shall be
filed with the minutes of the proceedings of the Board or such committee.
ARTICLE IV - OFFICERS
1. OFFICES, ELECTION, TERM.
(a) Unless otherwise provided for in the certificate of incorporation, the
officers shall be a President, one or more Vice-Presidents, a Secretary and a
Treasurer, and such other officers as the Board determine from time to time, who
shall have such duties, powers and functions as hereinafter provided. Each such
officer shall be elected by the Board. Two or more offices may be held by the
same person except no one person shall hold both the offices of President and
Secretary. The Board
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may elect or appoint (and may authorize the President to appoint) such other
officers (including one or more Vice Presidents, Assistant Vice Presidents,
Assistant Secretaries and Assistant Treasurers) as it deems necessary who shall
have such authority and shall perform such duties as the Board, or the
President, may from time to time prescribe.
(b) All officers shall be elected or appointed to hold office until the
meeting of the Board following the next annual meeting of shareholders.
(c) Each officer shall hold office for the term for which he is elected or
appointed and until his successor has been elected or appointed and qualified or
until his earlier death, resignation or removal.
2. REMOVAL, RESIGNATION, SALARY, ETC.
(a) Any officer may resign at any time by giving written notice of his
resignation to the President or the Secretary of the Corporation. Any such
resignation shall take effect at the time specified therein or when received by
the President or Secretary, as shall be determined by the Board.
(b) Any officer, agent or employee may be removed, with or without cause,
at any time by the Board or by the officer who appointed him.
(c) A vacancy in any office may be filled for the unexpired portion of
the term in the same manner as provided in these By-laws for the election or
appointment to such office.
(d) The salaries of all officers shall be fixed by the Board.
3. PRESIDENT.
The President shall be the chief executive officer of the Corporation, and,
subject to the control of the Board, shall have the management, general
direction and supervision over the business and affairs of the Corporation. The
President shall, if present, preside at all meetings of shareholders and of the
Board, and shall also have the powers and duties delegated to him by these
By-laws and such other powers and duties as the Board may from time to time
determine.
4. VICE-PRESIDENTS.
During the absence or disability of the President, the Vice-President, or
if there are more than one, the Executive Vice-President, shall have all the
powers and functions of the President. Each Vice-President shall perform such
other duties as the Board shall prescribe.
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5. SECRETARY.
The Secretary shall:
(a) attend all meetings of the shareholders and of the Board and any
committees, if any, thereof;
(b) record all votes and minutes of all meetings in a book to be kept
for that purpose;
(c) give or cause to be given notice of all meetings of shareholders
and of special meetings of the Board;
(d) keep in safe custody the seal of the Corporation and, when
authorized by the Board, affix it or cause it to be affixed to any
instrument when the same has been signed on behalf of the Corporation by a
duly authorized officer;
(e) when required, prepare or cause to be prepared and available at
each meeting of shareholders a certified list in alphabetical order of the
names of shareholders entitled to vote thereat, indicating the number of
shares of each respective class held by each;
(f) keep all the documents and records of the Corporation as required
by law or otherwise in a proper and safe manner and be custodian of all
contracts, deeds, documents and other corporate papers, records (except
accounting records) and indicia of title to properties (other than
securities) owned by the Corporation as shall not be committed to the
custody of another officer by the Board or by the President;
(g) perform all duties and have all powers incident to the office of
Secretary and perform such other duties as shall be assigned to him by the
Board or the President.
6. ASSISTANT SECRETARIES.
During the absence or disability of the Secretary, the Assistant Secretary,
or if there are more than one, the one so designated by the Secretary or by the
Board, shall exercise all the powers and functions of the Secretary.
7. TREASURER.
The Treasuer shall:
(a) have the custody of the corporate funds and securities;
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(b) keep full and accurate accounts of receipts and disbursements in
the corporate books;
(c) deposit all money and other valuables in the name and to the
credit of the Corporation in such depositories as may be designated by the
Board;
(d) disburse the funds of the Corporation as may be ordered or
authorized by the Board and preserve proper vouchers for such
disbursements;
(e) render to the President and Board at the regular meetings of the
Board, or whenever they require it, an account of all his transactions as
Treasuer and of the financial condition of the Corporation;
(f) render a full financial report at the annual meeting of the
shareholders if so requested;
(g) be furnished by all corporate officers and agents at his request,
with such reports and statements as he may require as to all financial
transactions of the Corporation;
(h) perform such other duties as are given to him by these By-laws or
as from time to time are assigned to him by the Board or the President.
8. ASSISTANT TREASURER.
During the absence or disability of the Treasuer, the Assistant Treasuer,
or if there are more than one, the one so designated by the Treasuer or by the
Board, shall have all the powers and functions of the Treasuer.
9. SURETIES AND BONDS.
In case the Board shall so require, any officer or agent of the Corporation
shall execute to the Corporation a bond in such sum and with such surety or
sureties as the Board may direct, conditioned upon the faithful performance of
his duties to the Corporation and including responsibility for negligence and
for the accounting for all property, funds or securities of the Corporation
which may come into his hands.
ARTICLE V - WAIVER OF NOTICES
Whenever notice is required to be given by the Certificate of
Incorporation, by these By-laws or by law, a waiver thereof in writing, signed
by the person entitled to such notice, or by an attorney thereunto authorized,
shall be deemed equivalent to notice, whether given before or after the time
specified therein. Attendance of a person at a meeting shall constitute a waiver
of notice of such
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meeting, except where the person attends the meeting for the express purpose of
objecting, prior to the conclusion of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
ARTICLE VI - CERTIFICATES FOR SHARES
1. CERTIFICATES.
Every owner of stock of the Corporation shall be entitled to have a
certificate certifying the number of shares owned by him in the Corporation and
designating the class of stock to which such shares belong, which shall
otherwise be in such form as the Board shall prescribe. Each such certificate
shall be signed by the President or a Vice President and by the Treasuer or the
Secretary of the Corporation. Any of or all such signatures may be facsimiles.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may nevertheless be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue. Every
certificate surrendered to the Corporation for exchange or transfer shall be
canceled and a new certificate or certificates shall not be issued in exchange
for any existing certificate until such existing certificate shall have been so
canceled, except in cases provided for in Section 3 of this Article.
2. STOCK RECORD.
A stock record in one or more counterparts shall be kept of the name of the
person, firm or corporation owning the stock represented by each certificate for
stock of the Corporation issued, the number of shares represented by each such
certificate, the date thereof and, in the case of cancellation, the date of
cancellation.
3. LOST OR DESTROYED CERTIFICATES.
The Board may direct a new certificate or certificates be issued in place
of any certificate or certificates theretofore issued by the Corporation,
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
Board may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or give the Corporation a bond in such sum and with such
surety or sureties as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
4. TRANSFERS OF SHARES.
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(a) Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered on
the transfer book of the Corporation which shall be kept at its principal
office.
(b) Registration of transfer of shares of the Corporation shall be made
only on the books of the Corporation by the registered holder thereof, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
the Secretary, and on the surrender of the certificate or certificates for such
shares properly endorsed or accompanied by a stock power duly executed. The
Corporation shall be entitled to treat the holder of record of any shares as the
holder in fact thereof and, accordingly, shall not be bound to recognize, any
equitable or other claim to or interest in such share on the part of any other
person whether or not it shall have express or other notice thereof, except as
expressly provided by the laws of New York.
5. REGULATIONS.
The Board may make such rules and regulations as it may deem expedient, not
inconsistent with these By-laws, concerning the issue, transfer and registration
of certificates for stock of the Corporation.
ARTICLE VII - DIVIDENDS
Subject to the provisions of the Certificate of Incorporation and to
applicable law, dividends on the outstanding shares of the Corporation may be
declared in such amounts and at such time or times as the Board may determine.
Dividends may be paid in cash, in property or in shares or other securities of
the Corporation or another corporation.
ARTICLE VIII - CORPORATE SEAL
The Board shall provide a corporate seal which shall bear the full name of
the Corporation and the year and state of its incorporation. The seal may be
used by causing it to be impressed directly on the instrument or writing to be
sealed, or upon adhesive substance affixed thereto. The seal on the certificates
for shares or on any corporate obligation for the payment of money may be a
facsimile, engraved or printed.
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ARTICLE IX - EXECUTION AND DELIVERY OF DOCUMENTS;
DEPOSITS; PROXIES; BOOKS AND RECORDS
1. EXECUTION AND DELIVERY OF DOCUMENTS; DELEGATION.
The Board shall designate the officers, employees and agents of the
Corporation who shall have power to sign, countersign, execute, verify,
acknowledge and deliver deeds, contracts, mortgages, bonds, debentures, checks,
drafts and other orders for the payment of money and other instruments and
documents for and in the name of the Corporation and may authorize such
officers, employees and agents to delegate such power (including authority to
redelegate) by written instrument to other officers, employees or agents of the
Corporation.
2. DEPOSITS.
All funds of the Corporation not otherwise employed shall be deposited from
time to time to the credit of the Corporation or otherwise as the Board, the
President or any other officer of the Corporation to whom power in that respect
shall have been delegated by the Board or these By-laws shall select.
3. PROXIES IN RESPECT OF STOCK OR OTHER SECURITIES OF OTHER CORPORATIONS.
The President or any officer of the Corporation designated by the Board
shall have the authority from time to time to appoint and instruct an agent or
agents of the Corporation to exercise, in the name and on behalf of the
Corporation, the powers and rights which the Corporation may have as the holder
of stock or other securities in any other corporation, to vote or consent in
respect of such stock or securities and to execute or cause to be executed in
the name and on behalf of the Corporation and under its corporate seal or
otherwise, such written proxies, powers of attorney or other instruments as he
may deem necessary or proper in order that the Corporation may exercise such
powers and rights.
4. BOOKS AND RECORDS.
The books and records of the Corporation may be kept at such places within
or without the State of New York as the Board may from time to time determine.
ARTICLE X - FISCAL YEAR
The Board shall determine the fiscal year of the Corporation.
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ARTICLE XI - REFERENCES TO CERTIFICATE OF INCORPORATION
Reference to the Certificate of Incorporation in these By-laws shall
include all amendments thereto or changes thereof unless specifically excepted.
ARTICLE XII - BY-LAW CHANGES
1. AMENDMENT, REPEAL, AND ADOPTION.
Except as otherwise provided in the Certificate of Incorporation, the
By-laws may be amended, repealed or adopted by vote of the holders of the shares
at the time entitled to vote in the election of any directors. By-laws may also
be amended, repealed or adopted by the Board except as otherwise provided in the
Certificate of Incorporation, as prohibited by law and to the extent the By-laws
indicate that any By-law may only be amended, repealed or adopted by the
shareholders; provided that this Article may only be amended by the shareholders
of the Corporation.
2. ELECTION OF DIRECTORS.
If any By-law regulating an impending election of directors is adopted,
amended or repealed by the Board, there shall be set forth in the notice of the
next meeting of shareholders for the election of directors the By-law so
adopted, amended or repealed, together with a concise statement of the changes
made.
ARTICLE XIII - INDEMNIFICATION
1. INDEMNIFICATION.
(a) The Corporation shall indemnify any person made, or threatened to be
made, a party to an action or proceeding (other than one by or in the right of
the Corporation to procure a judgment in its favor), whether civil or criminal,
including an action by or in the right of any other corporation of any type of
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, which any director or officer of the
Corporation served in any capacity at the request of the Corporation, by reason
of the fact that he, his testator or intestate, was a director or officer of the
Corporation, or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such director or officer acted, in good
faith, for a purpose which he reasonably believed to be in, or, in the case of
service for any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, the best interests of
the Corporation and, in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful.
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(b) The termination of any such civil or criminal action or proceeding by
judgment, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not in itself create a presumption that any such director or
officer did not act, in good faith, for a purpose which he reasonably believed
to be in, or, in the case of service for any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
not opposed to, the best interests of the Corporation or that he had reasonable
cause to believe that his conduct was unlawful.
(c) A Corporation shall indemnify any person made, or threatened to be
made, a party to an action by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he, his testator or intestate,
is or was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director or officer of any other corporation of
any type or kind, domestic or foreign, of any partnership, joint venture, trust,
employee benefit plan or other enterprise, against amounts paid in settlement
and reasonable expenses, including attorneys' fees, actually and necessarily
incurred by him in connection with the defense or settlement of such action, or
in connection with an appeal therein, if such director or officer acted, in good
faith, for a purpose which he reasonably believed to be in, or, in the case of
service for any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, the best interests of
the Corporation, except that no indemnification under this paragraph shall be
made in respect of (1) a threatened action, or a pending action which is settled
or otherwise disposed of, or (2) any claim, issue or matter as to which such
person shall have been adjudged to be liable to the Corporation, unless and only
to the extent that the court in which the action was brought, or, if no action
was brought, any court of competent jurisdiction, determines upon application
that, in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for such portion of the settlement amount and
expenses as the court deems proper.
(d) The indemnification conferred in this Section 1 also shall include the
right to be paid by the Corporation (and such successor) the expenses (including
attorneys' fees) incurred in the defense of or other involvement in any such
proceeding in advance of its final disposition; provided, however, that, if and
to the extent the BCL requires, the payment of such expenses (including
attorneys' fees) incurred by a director or officer in advance of the final
disposition of a proceeding shall be made only upon delivery to the Corporation
of an undertaking by or on behalf of such director or officer to repay all
amounts so paid in advance if and to the extent it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Section 1 or otherwise; and provided further, that, such expenses incurred
by other employees and agents may be so paid in advance upon such terms and
conditions, if any, as the Board deems appropriate. Any repeal or modification
of this Section 1 by the shareholders of the Corporation shall not adversely
affect any right or protection of any person under this Section 1 existing
immediately prior to the time at which such repeal or modification becomes
effective.
2. RIGHT OF CLAIMANT TO BRING ACTION AGAINST THE CORPORATION.
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If a claim under Section 1 of this Article XIII is not paid in full by
the Corporation within sixty (60) days after a written claim has been received
by the Corporation, the claimant may at any time thereafter bring an action
against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such action. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
connection with any proceeding in advance of its final disposition where the
required undertaking, if any is required, has been tendered to the Corporation)
that the claimant has not met the standards of conduct which make it permissible
under the BCL for the Corporation to indemnify the claimant for the amount
claimed or is otherwise not entitled to indemnification under Section 1 of this
Article XIII but the burden of proving such defense shall be on the Corporation.
The failure of the Corporation (in the manner provided under the BCL) to have
made a determination prior to or after the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the BCL shall not be a
defense to the action or create a presumption that the claimant has not met the
applicable standard of conduct. Unless otherwise specified in an agreement with
the claimant, an actual determination by the Corporation (in the manner provided
under the BCL) after the commencement of such action that the claimant has not
met such applicable standard of conduct shall not be a defense to the action,
but shall create a presumption that the claimant has not met the applicable
standard of conduct. Any repeal or modification of this Section 2 by the
shareholders of he Corporation shall not adversely affect any right or
protection of any person under this Section 2 existing immediately prior to the
time at which such repeal or modification becomes effective.
3. NON-EXCLUSIVITY.
The rights to indemnification and advance payment of expenses provided by
Section 1 of this Article XIII shall not be deemed exclusive of any other rights
to which those seeking indemnification and advance payment of expenses may be
entitled including under any By-law, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.
4. SURVIVAL OF INDEMNIFICATION.
The indemnification and advance payment of expenses and rights thereto
provided by, or granted pursuant to, Section 1 of this Article XIII shall,
unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be director, officer, employee, partner or agent and shall
inure to the benefit of the personal representatives, heirs, executors and
administrators of such person.
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5. INSURANCE.
The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, partner (limited or general) or agent of another
corporation or of a partnership, joint venture, limited liability company,
trust, employee benefit plan or other enterprise, against any liability asserted
against such person or incurred by such person in any such capacity, or arising
out of such person's status as such, and related expenses, whether or not the
Corporation would have the power to indemnify such person against such liability
under the provisions of the BCL.
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Exhibit 10.1
INDEMNIFICATION AGREEMENT
THIS AGREEMENT (the "Indemnification Agreement") is dated ___________,
1999, by and among BGI Acquisition LLC, a Wyoming limited liability company
("Parent"), BGI Acquisition Corp., a New York corporation ("Purchaser") and
Besicorp Ltd., a New York corporation ("BL").
RECITALS
A. Parent, Purchaser and Besicorp Group Inc., a New York corporation
("Besicorp") have entered into an Agreement and Plan of Merger of even date
herewith (the "Merger Agreement") pursuant to which Purchaser will merge with
and into Besicorp, the separate existence of Purchaser shall cease and Besicorp
shall continue as the surviving corporation and wholly owned subsidiary of
Parent (the "Merger").
B. It is a condition to the consummation of the Merger by the Purchaser
that prior to the Merger (i) Besicorp transfer certain of its assets and
liabilities to BL as more fully described in the Merger Agreement and (ii)
Besicorp distribute to its shareholders all of the outstanding capital stock of
BL (the "Distribution").
C. Besicorp makes certain representations, warranties, and covenants in the
Merger Agreement and in this Indemnification Agreement, all of which will
survive the Closing in accordance therewith. Parent and Purchaser desire to
provide for indemnification with respect to breaches of these representations,
warranties, and covenants, all as set forth herein.
D. BL was formerly a subsidiary of Besicorp and is deriving substantial
value and benefits from the transfer of assets to it by Besicorp and the
transactions contemplated by the Merger Agreement.
E. It is a condition to the willingness of Parent and Purchaser to enter
into the Merger Agreement and the obligations of Parent and Purchaser to
consummate the Merger that BL indemnify and hold harmless Parent and Purchaser
(and, following the Merger the Surviving Corporation and the Remaining
Subsidiaries) and their respective members, affiliates, shareholders, officers,
directors, lenders and agents, and the heirs, successors and assigns of each of
the foregoing (each a "Purchaser Indemnitee" and, collectively, the "Purchaser
Indemnitees") from Damages (as herein defined), all as provided herein.
F. BL, Parent, Purchaser and Robinson Brog Leinwand Greene Genovese & Gluck
have entered into an Escrow Agreement of even date herewith pursuant to which
Besicorp has deposited into escrow certain funds as security for the performance
by BL of its obligations pursuant to this Indemnification Agreement (the "Escrow
Agreement").
AGREEMENTS
Therefore, for the promises contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Definitions. Unless otherwise defined herein, terms used herein shall
have the meanings ascribed to them in the Merger Agreement. As used in this
Indemnification Agreement, the following terms shall have the following
meanings:
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(a) "Damages" means all liabilities, judgments, demands, claims,
actions or causes of action, regulatory, legislative or judicial
proceedings or investigations, assessments, levies, losses, fines,
penalties, damages, costs and expenses. For the purposes of clarification,
any of the foregoing Damages incurred or suffered by the Surviving
Corporation or any Remaining Subsidiary by virtue of a state of facts which
constitute an inaccuracy in or breach of a representation and warranty or
covenant by Besicorp or the effects thereby shall (without duplication) be
deemed to have been suffered by Parent. Without limiting the generality of
the foregoing, Damages include, without limitation: (i) reasonable
attorneys', arbitrators', accountants', investigators', environmental
consultants' and experts' fees and expenses, sustained or incurred in
connection with the enforcement by a Purchaser Indemnitee of its rights and
remedies under this Indemnification Agreement, the Merger Agreement, or any
agreement executed by Besicorp or its shareholders in connection therewith,
or sustained or incurred in connection with the defense or investigation of
any Third Party Claim (as herein defined); (ii) Damages incurred in
connection with Litigation (as herein defined in Section 3(g)(viii)); and
(iii) costs and expenses incurred in connection with compliance,
remediation, monitoring, site investigation or corrective action, or any
other related cost or expense required pursuant to Environmental Laws or
Environmental Permits.
(b) "Person" shall mean an individual, partnership, corporation,
limited liability company, association, joint stock company, trust, joint
venture, or unincorporated organization, or the United States of America or
any other nation, or any state or other political subdivision thereof, or
any entity with executive, legislative, judicial, regulatory or
administrative functions of government; and
(c) "Third Party Claim" shall mean any claim, action, suit,
proceeding, investigation, or like matter which is asserted or threatened
by a Person other than the parties hereto, their successors and permitted
assigns, against any Purchaser Indemnitee or to which a Purchaser
Indemnitee is subject. The Existing Litigation Matters (as defined herein)
shall not be classified as Third Party Claims.
2. General. From and after the Closing, BL shall indemnify the Purchaser
Indemnitees as provided in this Indemnification Agreement. For the purposes of
this Indemnification Agreement, Besicorp shall be deemed to have remade all
representations and warranties contained in the Merger Agreement and this
Indemnification Agreement at the Closing with the same effect as if originally
made at the Closing.
3. BL Indemnification Obligations. BL shall indemnify, save and keep the
Purchaser Indemnitees harmless and, to the extent provided herein, defend
against and from all Damages sustained or incurred by any Purchaser Indemnitee
as a result of, or arising out of, by virtue of, or in connection with:
(a) any inaccuracy in or breach of any representation and warranty
made by Besicorp in the Merger Agreement or in any closing document
delivered in connection with the Merger Agreement;
(b) any breach by Besicorp of, or failure by Besicorp to comply with,
any of its covenants or obligations under the Merger Agreement or under
this Indemnification Agreement;
(c) the existence of any Liability or other obligation of Besicorp or
any Subsidiary as of the Closing Date or arising out of or relating to the
Merger or any claim against a Purchaser Indemnitee with respect to any such
Liability or obligation or alleged Liability or obligation other than the
Permitted Liabilities, including, without limitation, Liability on account
of Taxes payable by Besicorp or for which Besicorp is liable, either by
operation of law or pursuant to the provisions of this Indemnification
Agreement, the Merger Agreement or the other Transaction Agreements,
without regard to the fact that any indemnifiable
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matter described in this Section 3(c) may have been disclosed in the Company
Disclosure Schedule or in any documents included or referred to therein or may
otherwise be known to Parent or Purchaser at the date of this Indemnification
Agreement or on the Closing Date;
(d) the failure of BL or any Subsidiary to pay and discharge in full
when due any of their respective Liabilities whenever or however arising or
existing, including Liability on account of Taxes other than the Permitted
Liabilities;
(e) any claims for indemnification by current or former officers,
directors, employees, agents or consultants of Besicorp or any Subsidiary;
(f) any Third Party Claim to the extent it arises out of or relates to
any action or inaction of, or the conduct of the business of Besicorp or
any Subsidiary on or prior to the Closing Date, including the Closing Date
other than the Permitted Liabilities;
(g) without being limited by Paragraphs (a) through (f) above and
without regard to the fact that the Company Disclosure Schedule contains
information relating to any one or more of the items referred to in this
Section 3(g) or in any documents included or referred to therein or may be
otherwise known to Parent or Purchaser at the date of this Indemnification
Agreement or on the Closing Date:
(i) any violation of, or delinquency with respect to, any decree,
order or arbitration award or law, statute, or regulation in effect on
or prior to the Closing Date of or any agreement of Besicorp (or any
Subsidiary) with, or any license, Permit or Environmental Permit
granted to Besicorp (or any Subsidiary) by any federal, state or local
governmental authority to which the properties, assets, personnel or
business activities of Besicorp (or any Subsidiary) are subject (or to
which Besicorp (or any Subsidiary) is subject as it relates to the
properties, assets, personnel or business activities of Besicorp (or
any Subsidiary)), including, without limitation, laws, statutes and
regulations relating to Environmental Laws, occupational health and
safety, building codes, zoning, equal employment opportunities, fair
employment practices and discrimination;
(ii) any generation, transportation, storage, treatment,
disposal, release or threatened release of any Hazardous Materials
occurring on or prior to the Closing Date (including without
limitation those that allegedly result in, or result in, any release
or threatened release or treatment of Hazardous Materials after the
Closing Date), regardless of when liability is asserted, at any
facility of Besicorp (or any Subsidiary), regardless of whether
Besicorp (or any Subsidiary or any agent of Besicorp or any
Subsidiary) operated such facility at the time any such activity
occurred;
(iii) any discharges or releases to or from storm, ground or
surface waters or wetlands, and any air emissions or pollution, which
result from or are caused by activities, events, conditions, omissions
or occurrences caused by Besicorp (or any Subsidiary or any agent of
Besicorp or any Subsidiary) on or prior to the Closing Date;
(iv) the exposure of and resulting consequences to any persons,
including, without limitation, employees of Besicorp (or any
Subsidiary or any agent of Besicorp or any Subsidiary), due to any
Hazardous Materials created, generated, processed, released, emitted,
stored, used, handled or originating on or prior to the Closing Date
at or near a facility owned, leased or otherwise
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used by Besicorp (or any Subsidiary or any agent of Besicorp or any
Subsidiary) or their predecessors in the conduct of its business;
(v) any violation or alleged violation of, or obligation imposed
by, any Environmental Law or Environmental Permit as a result of
activities, events, conditions, omissions or occurrences prior to the
Closing Date, regardless of when the violation or alleged violation or
obligation arises or is asserted;
(vi) any employee pension benefit plan (as defined by Section
3(2) of ERISA) or any employee welfare benefit plan (as defined in
Section 3(1) of ERISA) which Besicorp or its affiliates as determined
under Code Section 414(b), (c), (m) or (o) ("ERISA Affiliate") have at
any time maintained or administered on or prior to the Closing Date or
to which Besicorp or its ERISA Affiliates have at any time contributed
(including, without limitation, any liability for health continuation
requirements under Code Section 4980B or Part 6 of Subtitle B of Title
I of ERISA with respect to any employee of Besicorp who does not
become an employee of Purchaser and any liability arising pursuant to
Title IV of ERISA for plan termination, withdrawal or partial
withdrawal from any multiemployer plan, or any lien to enforce any
Title IV liability); any benefits accrued pursuant to any employee
plan at or prior to the Closing Date other than benefits payable under
insurance policies, or any action or failure to act, in whole or in
part, at or prior to the Closing Date with respect to any employee
benefit plan;
(vii) any federal or state Taxes, whether or not based on the
income of Besicorp, imposed upon Besicorp, or for which Besicorp is
liable, with respect to any taxable period or portion of a taxable
period ending on or prior to the Closing Date other than a Permitted
Liability; or
(viii) (a) litigation against Besicorp and/or the Subsidiaries
pending or threatened as of the Closing Date; and (b) any claims,
investigations, proceedings, actions or lawsuits asserted or initiated
before or after Closing arising out of or in connection with
pre-closing occurrences involving Besicorp and/or the Subsidiaries
(collectively, the "Litigation") other than arising pursuant to a
Permitted Liability.
4. Limitations on Indemnification Obligations.
(a) Except to the extent provided in Section 4(b) below, the Purchaser
Indemnitees shall not be entitled to recover under Section 3:
(i) unless a Notice of Claim (as defined herein) (or notice of a Third
Party Claim relating to a possible claim) has been delivered to BL, on or
prior to the fifth anniversary of the Closing Date;
(ii) to the extent the aggregate claims actually paid by BL or any of
its Subsidiaries to the Purchaser Indemnitees thereunder exceeds the
aggregate Merger Consideration;
(iii) for Damages to the extent such Damages were expressly included
in the Adjustment Amount;
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(iv) with respect to consequential damages relating to lost profits or
punitive damages (other than consequential damages or punitive damages paid
or payable to, or claimed by third parties);
(v) with respect to Damages arising from time spent by Parent or its
affiliates and their respective officers and employees, for amounts in
excess of their actual out-of-pocket costs.
(b) Notwithstanding anything to the contrary herein contained the
limitations contained in Section 4(a)(i) and (ii) shall not apply to recovery
under Section 3(a) for or in connection with any inaccuracies in or breaches of
Sections 4.2.1, 4.2.4, 4.2.5, 4.2.14, 4.2.15, 4.2.16, 4.2.17, 4.2.21 and 4.2.26
of the Merger Agreement provided, however, that in the case of recovery under
Section 3(a) in connection with a breach of a representation and warranty in
Sections 4.2.14, 4.2.15, 4.2.16, 4.2.17, 4.2.21 and 4.2.26 of the Merger
Agreement, a Notice of Claim for a claim (or possible claim) must be delivered
on or prior to expiration of the applicable statute of limitations.
5. Satisfaction of Claims of Purchaser Indemnitees. The payment of any
Damages to which the Purchaser Indemnitees are entitled pursuant to this
Indemnification Agreement shall first be satisfied from funds held in the Escrow
Account pursuant to the terms of the Escrow Agreement, to the extent available,
until the Escrow Account has been reduced to zero and thereafter shall be
satisfied by BL directly by wire transfer in immediately available funds to such
bank account or accounts as Purchaser Indemnitees shall designate by written
notice to BL.
6. Procedures for Making Claims.
(a) BL and the Purchaser Indemnitees agree that the provisions of this
Section 6 will govern any claims for indemnification under this Indemnification
Agreement which do not involve any Third Party Claim or Existing Litigation
Matters. If and when a Purchaser Indemnitee desires to assert a claim for
Damages against BL pursuant to the provisions of this Indemnification Agreement
the Purchaser Indemnitee shall deliver to BL, reasonably promptly after its
receipt of a claim or specific and affirmative awareness of a potential claim, a
certificate signed by the Purchaser Indemnitee (the "Notice of Claim"): (i)
stating the amount of Damages (to the extent then known); and, (ii) specifying
to the extent possible (A) the individual items of Damages included in the
amount so stated, (B) the date each such item is to be paid or accrued and (C)
the basis upon which Damages are claimed. BL and the Purchaser Indemnitees shall
proceed, in good faith, and using reasonable efforts, to agree upon the amount
of such Damages. If BL does not notify the Purchaser within thirty (30) days of
the giving of such Notice of Claim that it disputes such Damages, the amount of
such Damages shall be conclusively deemed a liability of BL hereunder. If BL and
Purchaser are unable to agree on the amount of such Damages within thirty (30)
days after giving the Notice of Claim then the provisions of Section 6(b) shall
become effective.
(b) Each and every controversy or claim arising out of or relating to
indemnification for Damages pursuant to Section 6(a) (and Sections 7 and 8) of
this Indemnification Agreement which BL and the Purchaser Indemnitees (the
"Parties") have not resolved, shall be resolved by arbitration in accordance
with the Center for Public Resources (the "CPR") Rules for Non-Administered
Arbitration of Business Disputes by one arbitrator (who shall not be appointed
by the Parties) selected from the CPR. Judgment upon the award rendered in such
arbitration shall be final and binding upon the Parties and may be entered in
any court having jurisdiction thereof. Notice of the demand for arbitration
shall be filed in writing with the other party to this Indemnification Agreement
and with the office of the CPR, located in Manhattan, New
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York, which such demand shall set forth in the same degree of particularity as
required for complaints under the Federal Rules of Civil Procedure the claims to
be submitted to arbitration. Additionally, the demand for arbitration shall
include appropriate copies of all documents on which the claims are based and a
list of all persons who the party seeking arbitration will call as witnesses
with respect to such claims. The arbitration shall take place in Manhattan, New
York. This agreement to arbitrate may be specifically enforced by a court of
competent jurisdiction under the applicable law of the State of New York
pertaining to arbitrations.
The arbitrator shall have the authority and jurisdiction to enter any
pre-arbitration awards that would aid and assist the conduct of the arbitration
or preserve the Parties' rights with respect to the arbitration as the
arbitrator shall deem appropriate in his discretion. The award of the arbitrator
shall be in writing and it shall specify in detail the issues submitted to
arbitration and the award of the arbitrator with respect to each of the issues
so submitted.
The provisions of the Federal Rules of Civil Procedure relating to the
right of discovery in civil actions shall be applicable to such arbitration
proceedings except as modified by the terms of this Indemnification Agreement.
Within thirty (30) days after the commencement of any arbitration proceeding
under this Indemnification Agreement, each party shall file with the arbitrator
its contemplated discovery plan outlining the desired documents to be produced,
the depositions to be taken and any other discovery action sought in the
arbitration proceeding. After a hearing, the arbitrator in an interim award
shall fix the scope and content of each Party's discovery plan as the arbitrator
deems appropriate. The arbitrator shall have the authority to modify, amend or
change such interim award fixing the discovery plans of the Parties upon
application by either Party, if good cause appears for doing so.
The "Prevailing Party" as determined by the arbitrator shall be entitled to
recover from the losing party reasonable expenses, attorneys' fees and costs
incurred in connection therewith and in the enforcement or collection of any
judgment or award rendered therein. The "Prevailing Party" means the Party
determined by the arbitrator to have most nearly prevailed, even if such Party
does not prevail in all matters, or is not the Party in whose favor an award is
rendered. Included within the cost recoverable pursuant to the terms of this
Section 6(b) shall be included service of process costs, filing fees,
arbitration fees, arbitrators' fees, court and reporter costs, investigative
costs, and expert witness fees. The award pursuant to such arbitration will be
final, binding and conclusive.
7. Third Party Claims. Within fifteen (15) business days following the
receipt of notice of a Third Party Claim, and in any event within the period
necessary to respond to such pleading, if applicable, the Purchaser Indemnitee
receiving the notice of the Third Party Claim shall (i) notify BL of its
existence setting forth with reasonable specificity the facts and circumstances
by which such party has received notice, and (ii) specify the basis hereunder
upon which the Purchaser Indemnitee's claim for indemnification is asserted. The
failure to deliver the notice described in the preceding sentence within the
time frame required shall not relieve BL of any liability under this
Indemnification Agreement except to the extent that BL is materially prejudiced
thereby. The Purchaser Indemnitee shall, upon reasonable notice, tender the
defense of a Third Party Claim to BL. If within twenty (20) days after the date
on which written notice of a Third Party Claim has been tendered pursuant to
this Section 7 BL acknowledges in writing to the Purchaser Indemnitee its
indemnification obligations as provided in this Indemnification Agreement
(without qualification or reservation of rights) and provides evidence
reasonably satisfactory (such as the existence of available funds in the Escrow
Fund (as defined in the Escrow Agreement)) to the Purchaser Indemnitee of BL's
financial ability to pay all such Third Party Claims and related expenses then,
except as hereinafter provided, the Purchaser Indemnitee shall not, and BL
shall, have the right to contest, defend, litigate or settle such Third
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Party Claim. The Purchaser Indemnitee shall have the right to be represented by
counsel and to participate at its own expense in any such contest, defense,
litigation or settlement conducted by BL provided that the Purchaser Indemnitee
shall be entitled to reimbursement if BL shall lose its right to contest,
defend, litigate and settle the Third Party Claim as herein provided. BL shall
lose its right to contest, defend, litigate and settle the Third Party Claim if
in the reasonable discretion of the Purchaser Indemnitee (i) BL shall fail to
diligently contest the Third Party Claim; (ii) the Persons historically
responsible for handling a Third Party Claim are no longer actively involved
with such Third Party Claim or (iii) after taking into account the
indemnification obligations under this Indemnification Agreement it is
reasonably likely that the Purchaser Indemnitee would be obligated to bear a
larger portion of the claim, or of all claims made pursuant to this
Indemnification Agreement, than it would otherwise bear if it contested or
litigated the claim. So long as BL has not lost its right to contest, defend,
litigate and settle as herein provided, BL shall have the exclusive right to
contest and defend the Third Party Claim and shall have the right, upon
receiving the prior written approval of the Purchaser Indemnitee (which shall
not be unreasonably withheld and which shall be deemed automatically given if a
response has not been received within the twenty (20) day period following a
request for such consent), to settle any such matter, either before or after the
initiation of litigation, at such time and upon such terms as it deems fair and
reasonable and to apply funds from the Escrow Fund, to the extent available for
such purpose, in accordance with the terms of the Escrow Agreement. Expenses
(including, without limitation, attorneys' fees) incurred by BL in connection
with the foregoing shall be reimbursed to BL, to the extent available for such
purpose, in accordance with the terms of the Escrow Fund. Notwithstanding
anything to the contrary herein contained, in connection with any settlement
negotiated by BL, no Purchaser Indemnitee shall be required by BL to (and BL
shall not) (x) enter into any settlement that does not include as an
unconditional term thereof the delivery by the claimant or plaintiff to the
Purchaser Indemnitee of an unconditional release from all liability in respect
of such claim or litigation, (y) enter into any settlement that attributes by
its terms liability to the Purchaser Indemnitee or which may otherwise have an
adverse effect on the Purchaser Indemnitee's business or reputation, or (z)
consent to the entry of any judgment that does not include as a term thereof a
full dismissal of the litigation or proceeding with prejudice. No failure by BL
to acknowledge in writing its indemnification obligations under this
Indemnification Agreement shall relieve it of such obligations. If a Purchaser
Indemnitee is entitled to indemnification against a Third Party Claim, and BL
fails to accept a tender of, or assume, the defense of a Third Party Claim
pursuant to this Section 7, or if, in accordance with the foregoing, BL does not
have the right or shall lose its right to contest, defend, litigate and settle
such a Third Party Claim, the Purchaser Indemnitee shall have the right, without
prejudice to its right of indemnification hereunder, in its discretion exercised
in good faith and upon the advice of counsel, to contest, defend, litigate and
settle such Third Party Claim, either before or after the initiation of
litigation, at such time and upon such terms as the Purchaser Indemnitee deems
fair and reasonable, provided that written notice of its intention to settle is
given to BL at least ten (10) days prior to settlement. If, pursuant to this
Section 7, the Purchaser Indemnitee so contests, defends, litigates or settles a
Third Party Claim for which it is entitled to indemnification hereunder as
hereinabove provided, the Purchaser Indemnitee shall be reimbursed by BL for the
reasonable attorneys' fees and other expenses of defending, contesting,
litigating and/or settling the Third Party Claim which are incurred from time to
time, forthwith following the presentation to BL of itemized bills for said
attorneys' fees and other expenses provided that the Purchaser Indemnitees shall
first make claim for such amounts from the Escrow Fund, to the extent available,
in accordance with the terms of the Escrow Agreement. The Purchaser Indemnitee
or BL, as the case may be, shall furnish such information in reasonable detail
as it may have with respect to a Third Party Claim (including copies of any
summons, complaint or other pleading which may have been served on such party
and any written claim, demand, invoice, billing or other document evidencing or
asserting the same) to the other party if such other party is assuming defense
of such claim, and make available all records and other similar materials which
are reasonably required in the defense of such Third Party Claim and shall
otherwise
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cooperate with and assist the defending party in the defense of such Third Party
Claim. Notwithstanding anything to the contrary contained herein, each and every
controversy or claim arising out of or relating to indemnification for Damages
pursuant to this Section 7 which BL and the Purchaser Indemnitees have not
resolved shall be resolved in accordance with Section 6(b) of this
Indemnification Agreement.
8. Existing Litigation Matters. Attached hereto is a schedule setting forth
certain existing litigation matters to which Besicorp or any one or more of the
Remaining Subsidiaries is a party (collectively, the "Existing Litigation
Matters"). Concurrently herewith, Besicorp has assigned to BL its right to
prosecute and to receive all settlement proceeds, awards and profits under the
Existing Litigation Matters and BL has agreed to assume the defense of the
Existing Litigation Matters. The disposition of the Existing Litigation Matters
shall be governed pursuant to the provisions of Section 7 and shall be subject
to all of the rights and obligations of Section 7 except that BL shall have the
right to contest, defend, litigate or settle such Existing Litigation Matters
(in accordance with the provisions of Section 7) without (a) acknowledging its
indemnification obligations regarding such Existing Litigation Matters or (b)
providing evidence of its ability to pay such Existing Litigation Matters and
related expenses. Notwithstanding anything to the contrary contained herein,
each and every controversy or claim arising out of or relating to
indemnification for Damages pursuant to this Section 8 which BL and the
Purchaser Indemnitees have not resolved shall be resolved in accordance with
Section 6(b) of this Indemnification Agreement.
9. Subrogation. BL shall not be entitled to require that any action be
brought against any other Person before action is brought against it hereunder
by the Purchaser Indemnitee, but shall be subrogated to any right of action to
the extent that it has paid or successfully defended against any Third Party
Claim.
10. Fraud and Intentional Misrepresentation. Nothing contained in this
Indemnification Agreement shall limit the ability of the Purchaser Indemnitees
to pursue Damages or such other remedies, at law or in equity, resulting from
fraud or intentional misrepresentation.
11. Representations and Warranties of BL.
(a) BL represents and warrants to the Purchaser Indemnitees that BL has
full corporate power and authority to enter into and perform this
Indemnification Agreement. The execution and delivery of this Indemnification
Agreement by BL has been duly authorized and approved by all necessary corporate
action.
(b) The execution and delivery of this Indemnification Agreement by BL will
not conflict with or result in a breach of any of the terms, conditions or
provisions of BL's certificate of incorporation or by-laws or of any statute or
administrative regulation, or of any order, writ, injunction, judgment or decree
of any Governmental Entity or of any arbitration award to which BL is a party or
by which BL is bound.
12. Miscellaneous.
(a) Notices. All notices required or permitted to be given hereunder shall
be in writing and may be delivered by hand, by facsimile, by nationally
recognized private courier, or by United States mail. Notices delivered by mail
shall be deemed given three (3) business days after being deposited in the
United States mail, postage prepaid, registered or certified mail, return
receipt requested. Notices delivered by hand, by facsimile or by nationally
recognized private courier shall be deemed given on the day of receipt
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(if such day is a business day or, if such day is not a business day, the next
succeeding business day); provided, however, that a notice delivered by
facsimile shall only be effective if and when confirmation is received of
receipt of the facsimile at the number provided in this Section 12(a). All
notices shall be addressed as follows:
If to BL,
addressed to
Besicorp Ltd.
1151 Flatbush Road
Kingston, New York 12401
Attention: Frederick M. Zinn, Esq.
Telecopier: (914) 336-7172
with a copy to
Robinson Brog Leinwand Greene Genovese & Gluck P.C.
1345 Avenue of the Americas
New York, New York 10105
Attention: A. Mitchell Greene, Esq.
Telecopier: (212) 956-2164
If to Parent or Purchaser or the Surviving Corporation,
addressed to
BGI Acquisition LLC
950 Third Avenue, 23rd Floor
New York, New York 10022
Attention: Mr. James Haber, President
Telecopier: (212) 688-7908
with copies to
Altheimer & Gray
10 South Wacker Drive, Suite 4000
Chicago, Illinois 60606
Attention: Paul M. Daugerdas, Esq.
Telecopier: (312) 715-4800
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section 12(a).
(b) Non-Waiver; Remedies.
(i) All representations and warranties set forth in this
Indemnification Agreement shall survive the Closing for a period of five
(5) years following the Effective Time (and none shall merge into any
instrument of conveyance) regardless of any investigation or lack of
investigation by the parties hereto. No specific representation and
warranty shall limit the generality or applicability of a more general
representation and warranty. The failure in any one or more
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instances of a party to insist upon performance of any of the terms,
covenants or conditions of this Indemnification Agreement, to exercise any
right or privilege conferred in this Indemnification Agreement, or the
waiver by said party of any breach of any of the terms, covenants or
conditions of this Indemnification Agreement, shall not be construed as a
subsequent waiver of any such terms, covenants, conditions, right or
privileges, but the same shall continue and remain in full force and effect
as if no such forbearance or waiver had occurred. No waiver shall be
effective unless it is in writing and signed by an authorized
representative of the waiving party.
(ii) This Indemnification Agreement sets forth the exclusive remedies
of the Purchaser Indemnitees, absent fraud or intentional
misrepresentation, with respect to the matters expressly set forth in
Section 3 hereof.
(c) Applicable Law. This Indemnification Agreement shall be governed and
controlled as to validity, enforcement, interpretation, construction, effect and
in all other respects by the internal laws of the State of New York applicable
to contracts made in that State.
(d) Binding Effect; Benefit. This Indemnification Agreement shall inure to
the benefit of and be binding upon the parties hereto, and their successors and
permitted assigns. Nothing in this Indemnification Agreement, express or
implied, is intended to confer on any person other than the parties hereto, and
their respective successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Indemnification Agreement.
(e) Assignability. This Indemnification Agreement shall not be assignable
by the parties without the prior written consent of the other parties, except
that at or prior to the Closing Purchaser and/or Parent may assign their rights
and delegate their duties under this Indemnification Agreement to a subsidiary
entity or to any affiliate and may assign their rights under this
Indemnification Agreement to their lenders for collateral security purposes, and
after the Closing, Purchaser and Parent may assign their respective rights and
delegate their respective duties under this Indemnification Agreement to any
third party.
(f) Amendments. This Indemnification Agreement shall not be modified or
amended except pursuant to an instrument in writing executed and delivered on
behalf of each of the parties hereto.
(g) Headings. The headings contained in this Indemnification Agreement are
for convenience of reference only and shall not affect the meaning or
interpretation of this Indemnification Agreement.
(h) Counterparts. This Indemnification Agreement may be executed in
multiple counterparts, each of which shall be deemed to be an original, and all
such counterparts shall constitute but one instrument.
(i) Further Assurances. The parties shall execute such further documents,
and perform such further acts, as may be necessary to otherwise comply with the
terms of this Indemnification Agreement, the Merger Agreement and the other
Transaction Agreements and consummate the transactions contemplated thereby. In
addition, the Purchaser Indemnitees shall, and shall cause the Surviving
Corporation to, cooperate with BL in connection with all claims given rise to
any claim for indemnification hereunder during and including, without
limitation, the defense of any Third Party Claim and the prosecution and defense
of the Existing Litigation Matters. In furtherance of the foregoing, the
Purchaser Indemnitees shall and shall cause
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the Surviving Corporation (at the expense of BL) to make available to BL and
permit BL to make copies of all records, data and other materials and otherwise
to cooperate in all respects with the prosecution and defense of all such
claims.
(j) Severability. The invalidity of any provision of this Indemnification
Agreement or a portion of a provision shall not affect the validity of any other
provision of this Indemnification Agreement or the remaining portion of the
applicable provision.
* * *
BESICORP LTD.
By: _________________________________
Its: _________________________________
BGI ACQUISITION LLC
By: _________________________________
Its: _________________________________
BGI ACQUISITION CORP
By: _________________________________
Its: _________________________________
11
Exhibit 10.2
ESCROW AGREEMENT
ESCROW AGREEMENT dated as of the __ day of ____________, 199_, by and
among:
BESICORP GROUP INC., a New York corporation, having an office at 1151
Flatbush Road, Kingston, NY 12401 ("Besicorp", and following the Merger,
the "Surviving Corporation"); and
BESICORP LTD., a New York corporation, having an office at 1151 Flatbush
Road, Kingston, NY 12401 ("BL"); and
BGI ACQUISITION CORPORATION, a New York corporation, having an office at
950 Third Avenue, 23rd Floor, New York, NY 10022 (the "Purchaser" and
following the Merger, the "Surviving Corporation"); and
BGI ACQUISITION LLC, a Wyoming limited liability company, having an office
at 950 Third Avenue, 23rd Floor, New York, NY 10022 (the "Parent"); and
ROBINSON BROG LEINWAND GREENE GENOVESE & GLUCK P.C., having an office at
1345 Avenue of the Americas, New York, NY 10105 (the "Escrow Agent").
W I T N E S E T H:
WHEREAS, Besicorp, the Purchaser and the Parent (the Purchaser and the
Parent are referred to collectively as "Buyer", and, following the Merger, shall
mean Purchaser and the Surviving Corporation) are parties to an Agreement and
Plan of Merger dated November __, 1998 (the "Merger Agreement"); and
WHEREAS, it is a condition to the effectiveness of the Merger in the Merger
Agreement that Besicorp effectuate the Distribution (as defined in the Merger
Agreement), pursuant to which BL is to assume certain assets and liabilities of
Besicorp (as more fully described in the Merger Agreement); and
WHEREAS, Buyer and BL have entered into an Indemnification Agreement of
even date herewith (the "Indemnification Agreement"), pursuant to which BL
agrees to indemnify Buyer for Damages (as defined in the Indemnification
Agreement) in connection with the items set forth therein; and
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<PAGE>
WHEREAS, the Merger Agreement and the Indemnification Agreement
contemplate the execution and delivery of this Escrow Agreement in order to
escrow certain amounts for the purpose of securing certain amounts to be paid by
Buyer and BL in connection with the discharge of the parties' obligations under
the Indemnification Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Defined Terms
(a) Defined terms used herein and not defined herein shall have the
meanings ascribed to them in the Merger Agreement or the Indemnification
Agreement.
(b) "Buyer Monitoring Costs" shall mean the out-of-pocket expenses of Buyer
(including the fees and expenses of attorneys and other professionals) incurred
by Buyer in connection with its right to be represented by counsel with respect
to BL Assumed Matters (where BL is contesting, defending, litigating, settling
or otherwise controlling such matter pursuant to Section 7 of the
Indemnification Agreement). Notwithstanding any implication to the contrary
contained herein, Buyer shall not receive more than $40,000 from the Escrow Fund
with respect to Buyer Monitoring Costs in any calendar year.
(c) "BL Assumed Matters" shall mean each of the Existing Litigation Matters
and the litigation or other matters prosecuted or defended by BL pursuant to
Section 7 of the Indemnification Agreement. Following the date of this
Agreement, additional matters may become BL Assumed Matters in the manner set
forth in the Indemnification Agreement.
(d) "BL Permitted Internal Expenses" shall mean the expenses incurred
internally by BL in connection with performance of its obligations under this
Escrow Agreement or the Indemnification Agreement. BL Permitted Internal
Expenses shall be determined and billed by BL on an hourly basis based upon BL's
normal and customary billing rate charged to its customers in the ordinary
course of its business. BL shall provide Buyer and the Escrow Agent
documentation reasonably acceptable to Buyer (including billing rate information
and amounts of hours and BL Permitted Internal Expenses per BL Assumed Matter)
in connection with BL's requests for reimbursement of such BL Permitted Internal
Expenses. Notwithstanding any implication to the contrary otherwise contained
herein, BL shall not be entitled to receive payments from the Escrow Fund with
respect to BL Permitted Internal Expenses in excess of the interest actually
received from the investment of the Escrow Fund from the date hereof until the
date of such claim for BL Permitted Internal Expenses, less the sum of (x) all
amounts paid or payable to the Escrow Agent on account of Section 5(e) of this
Agreement, (y) all bank charges due pursuant to Section 2(b) of this Agreement,
and (z) any Taxes with respect to earnings on the Escrow Fund paid or payable in
accordance with Section 6(b) of this Agreement.
(e) "Litigation Costs" shall mean all costs and expenses, except for costs
and expenses which would not be permitted to be paid by a corporation to its
directors or officers under
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<PAGE>
Sections 721 or 722 of the New York State Business Corporation Law (the "BCL
Sections"), relating to the defense, prosecution, participation in
administrative proceedings, responding to civil investigative demands or
inquiries, settlement, or payment of (i) BL Assumed Matters; (ii) litigation
arising out of or relating to any such BL Assumed Matters; (iii) indemnification
of claims against Besicorp's directors and officers (prior to the Merger) for
actions in their official capacity preceding the date of the Merger, or (iv) for
defense, prosecution, participation in administrative proceedings, responding to
civil investigative demands or inquiries, settlement, or payment of or by
parties eligible to receive indemnity pursuant to the BCL Sections in connection
with matters arising out of or relating to the Merger or the Distribution
(including, for each of items (i) to (iv) above, counsel and witness fees and
expenses including, to the extent permitted by subparagraph (d) above, BL
Permitted Internal Expenses.) Notwithstanding the foregoing sentence, to the
extent a set of facts could give rise to Litigation Costs and Buyer Indemnity
Claims (as defined herein) the provisions of the Indemnification Agreement
(including Section 7 thereof) shall apply.
2. Escrow Deposits
(a) The parties acknowledge and agree that no funds or other assets have
been deposited with the Escrow Agent as of the date hereof. Such funding shall
not occur until the occurrence of the Distribution.
(b) Simultaneously with the execution of this Agreement, Besicorp shall
deposit with the Escrow Agent the sum of six million dollars ($6,000,000) ("the
Escrow Fund"). In addition, interest on the Paying Agent account referred to in
Section 2.3.8 of the Merger Agreement shall be transferred to the Escrow Fund at
the time the payment is to be made pursuant to Section 2.3.5 thereof. The Escrow
Agent agrees to hold the Escrow Fund in escrow in accordance with the terms of
this Escrow Agreement. The Escrow Funds shall be deposited by the Escrow Agent
in a separate interest bearing money market bank account at Bankers Trust
Company, New York, NY or in such other accounts or investments as Buyer and BL
jointly agree in writing. The Escrow Agent shall not be responsible for any
interest earned on the Escrow Funds, except for such interest as is actually
received. The Escrow Agent shall have no obligation to obtain the best or
otherwise seek to maximize the rate of interest earned on any of the Escrow
Funds. Any bank fees or charges or similar items in connection with such
investments shall be paid out of the Escrow Funds. Should the Merger Agreement
terminate without the occurrence of the Merger (a "Termination"), this Agreement
shall terminate and be of no further force or effect. Should the Escrow Fund be
funded at the time of a Termination, all proceeds of the Escrow Fund shall be
returned to Besicorp.
3. Disposition of the Escrow Fund
(a) Use of Escrow Fund. The Escrow Fund shall serve as a source of funding
claims for:
(i) (A) indemnity made by the Buyer pursuant to the Indemnification
Agreement, including any claims for Buyer Monitoring Costs to the extent
permitted under
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<PAGE>
Section 1(b) hereof, any claims of Buyer with respect to BL Assumed Matters
arising from the failure of BL to diligently prosecute or defend such BL
Assumed Matters and any payment of fees and expenses of the Paying Agent
pursuant to Section 2.3.8 of the Merger Agreement (all such claims
described in this Section 3(a)(i), "Buyer Indemnity Claims") and (B)
amounts in connection with any Tax refund set forth on a Return filed by
Besicorp prior to the Merger to the extent such amounts have not been
received by Besicorp or the Surviving Corporation prior to March 31, 1999
(a "Tax Refund Claim"), it being understood however, that Buyer shall repay
to the Escrow Fund amounts received from an applicable taxing authority
with respect to any Tax Refund Claim promptly following its receipt by the
Surviving Corporation; and
(ii) payment of Litigation Costs.
(b) Disbursements with respect to Buyer Indemnity Claims. If Buyer shall
request a disbursement from the Escrow Fund associated with any Buyer Indemnity
Claim or Tax Refund Claim, it shall give notice of such request (which may
include Buyer Monitoring Costs to the extent permitted under Section 1 above)
executed by Buyer, to the Escrow Agent and BL, which notice shall set forth the
amount requested, the basis for such request, and reasonable documentation to
support such request (such notice being substantially in the form of Exhibit A
hereto), and shall include the Notice of Claim if the provision of a Notice of
Claim is so required under the Indemnification Agreement. With respect to any
Tax Refund Claim, the Escrow Agent shall disburse the amount requested within 5
days of its receipt of the notice. With respect to Buyer Indemnity Claims, in
the event the Escrow Agent shall not have received a notice of objection from BL
within 30 days after delivery of such notice, the Escrow Agent shall disburse
the amount requested. In the event the Escrow Agent shall receive a timely
notice of objection from BL, it shall not disburse the amount requested until it
shall have received (i) the joint written notice of BL and the Buyer setting
forth the joint direction of such parties (such notice being substantially in
the form of Exhibit B hereto), (ii) a written instrument representing a final
and non-appealable order or similar direction with respect to the disposition of
such amount issued by the arbitrator or arbitration forum and using the
procedures referred to in Section 6(b) of the Indemnification Agreement, or
(iii) a certified copy of a final and non-appealable judgment of a court of
competent jurisdiction directing the disbursement of such funds. Notwithstanding
the foregoing, BL shall not unreasonably withhold its consent to a request by
Buyer for payment of Buyer Indemnity Claims.
(c) Disbursements with respect to BL. If BL shall request a disbursement
from the Escrow Fund with respect to Litigation Costs, it shall give notice of
such request, executed by BL, to the Escrow Agent and Buyer through a notice in
substantially the form of Exhibit C hereto) which notice shall set forth the
amount requested, the basis for such request and reasonable documentation to
support such request. BL shall give a separate notice with respect to each item
of Litigation Costs, and shall provide a notice no less frequently than monthly
with respect to each matter for which BL is then incurring Litigation Costs. In
the event the Escrow Agent shall not have received a notice of objection from
Buyer within 30 days after delivery of such notice, the Escrow Agent shall
disburse the amount requested. In the event the Escrow Agent shall receive a
timely
-4-
<PAGE>
notice of objection from Buyer, it shall not disburse the amount requested until
it shall have received (i) the joint written instructions of BL and the Buyer
setting forth the joint direction of such parties (such notice being
substantially in the form of Exhibit B hereto), (ii) a written instrument
representing a final and non-appealable order or similar direction with respect
to the disposition of such amount issued by the arbitrator or arbitration forum
and using the procedures referred to in Section 6(b) of the Indemnification
Agreement, or (iii) a certified copy of a final and non-appealable judgment of a
court of competent jurisdiction directing the disbursement of such funds.
Notwithstanding the foregoing, but subject to the following sentence, Buyer
shall not unreasonably withhold its consent to a request by BL for payment of
Litigation Costs, it being understood that the term "not unreasonably" as used
in this sentence shall be determined in light of all relevant factors, including
(x) the estimates of the amounts needed to complete each of the Existing
Litigation Matters previously provided to Buyer and (y) amounts then remaining
in the Escrow Fund.
4. Release of the Escrow Fund
(a) Release of Escrow Fund Proceeds. At any time following the fifth
anniversary of the date hereof that each of the following conditions are
fulfilled (collectively, the "Release Conditions"):
(i) all Buyer Indemnity Claims that have been set forth in notices
provided under Section 3(b) of this Agreement have been settled and paid in
accordance with the provisions of Section 3(b), no such claims remain
outstanding, and that, in the reasonable judgement of Buyer, no future
Buyer Indemnity Claims are foreseeable;
(ii) all claims of BL that have been set forth in notices provided
under Section 3(c) of this Agreement have been settled and paid in
accordance with the provisions of Section 3(c), and no such claims remain
outstanding; and
(iii) each BL Assumed Matter has been settled through either (A) a
final, non-appealable judgement against the Surviving Corporation and all
Purchaser Indemnitees; or (B) a settlement or other conclusion to the BL
Assumed Matter that (x) contains a release from all liability in favor of
the Surviving Corporation and Purchaser Indemnitees without any further
obligation by the Surviving Corporation or Purchaser Indemnitees to make
any payment or incur any other Liability or Obligation with respect to such
matter, (y) does not attribute by its terms liability to the Surviving
Corporation or any Purchaser Indemnitee and (z) if the Scheduled Matter is
litigation or a proceeding, includes as a term thereof a full dismissal of
the litigation or proceeding with prejudice.
BL may, at its option, notify the Escrow Agent and the Buyer that all of the
Release Conditions have been fulfilled. In the event the Escrow Agent shall not
have received a notice of objection from the Buyer at least ninety (90) days
after delivery of such notice, it shall be entitled to disburse all amounts then
remaining in the Escrow Fund and this Agreement shall terminate. In the event
that the Escrow Agent shall receive a timely notice of objection from the Buyer,
it shall not disburse any portion of
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<PAGE>
the Escrow Fund and shall disburse the Escrow Fund only in accordance with the
provisions of the fourth sentence of Section 3(c) hereof.
(b) Consultations. BL and Buyer agree they will meet no less than annually
for the purpose of examining the amounts set forth in the Escrow Fund and the
amounts of Buyer Indemnity Claims and Litigation Costs expended from the Escrow,
for the purpose of determining whether the amount of the Escrow Fund is more
than sufficient to secure Buyer pursuant to the Indemnification Agreement.
5. Escrow Agent
(a) The Escrow Agent shall not be liable in any way to any party hereto for
its refusal to comply with adverse claims or demands being made upon it and
shall not be responsible for any act or failure to act on its part, nor shall it
have any liability under this Escrow Agreement, except in the case of bad faith,
willful default or gross negligence. The Escrow Agent's duties and
responsibilities, in its capacity as such, shall be limited to those expressly
set forth in this Escrow Agreement, and the Escrow Agent shall not be subject
to, or recognize, any other agreement between any or all of the parties hereto
even though reference thereto may be made herein, except to the extent that
definitions contained in the Merger Agreement or the Indemnification Agreement
and the alternative dispute resolution procedures of the Indemnification
Agreement are incorporated into this Escrow Agreement. This Escrow Agreement may
not be amended at any time in such a way as to affect the rights,
responsibilities, obligations, liabilities or fees of the Escrow Agent except
with the Escrow Agent's prior written consent, as evidenced by an instrument in
writing signed by all the parties hereto.
(b) The Escrow Agent (so long as it is Robinson Brog Leinwand Greene
Genovese & Gluck P.C.) or any member of its firm, shall be permitted to act as
counsel for BL in any dispute or question as to any matter arising out of the
Merger Agreement, the Distribution or the Transactions.
(c) The Escrow Agent may resign at any time upon ninety (90) days written
notice to Buyer and BL and in such event, shall deliver the Escrow Funds and any
interest thereon pursuant to the joint written instructions of BL and Buyer. The
parties agree to make any necessary amendments to this Agreement to permit the
successor escrow agent to assume the obligations of Escrow Agent under this
Agreement. Should the successor escrow agent not assume this Agreement, the
Escrow Agent may deposit the Escrow Fund and any such interest with the clerk of
an appropriate court in New York, New York.
(d) Each of BL and Buyer agree, jointly and separately, to indemnify and
hold harmless the Escrow Agent from and against any demands, claims, causes of
action, liabilities, costs and expenses (including outside counsel fees and
disbursements), arising out of this Escrow Agreement except for claims which are
asserted against the Escrow Agent based upon the Escrow Agent's failure to
comply with the terms and conditions of this Escrow Agreement or the bad faith,
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<PAGE>
gross negligence or willful misconduct of the Escrow Agent; provided however,
that (A) promptly after the receipt by the Escrow Agent of notice of any demand
or claim or the commencement of any such action, suit or proceeding, the Escrow
Agent shall notify all parties hereto in writing of the existence of such
demand, claim, action, suit or proceeding; (B) the indemnitor(s) shall be
entitled, at its own expense, to participate in and assume the defense of any
such action, suit or proceeding.
(e) The Escrow Agent shall be entitled to be compensated by BL for its
reasonable time expended and disbursements incurred in connection with carrying
out its duties hereunder.
(f) The Escrow Agent shall be entitled to rely or act upon any notice,
instrument or document believed by it to genuine and to be executed and
delivered by the proper person and shall have no obligation to verify any
statements contained in any notice, instrument or document or the accuracy or
due authorization of the execution of any notice, instrument or document. The
Escrow Agent shall be entitled to refrain from taking any action other than to
keep all cash and other payments and all other property held by it in Escrow and
to make the investments as herein provided until it shall be directed otherwise
in writing by the Buyer and BL, or as otherwise provided herein or by a final
order. The Escrow Agent shall not have any interest in the Escrow Fund, other
than possession thereof in its capacity as escrow agent hereunder.
6. Miscellaneous
(a) Any notice to be delivered hereunder shall be delivered as provided and
to the addresses as specified in Section 8.4 of the Merger Agreement. Any notice
to the Escrow Agent shall be addressed as follows: Robinson Brog Leinwand Greene
Genovese & Gluck P.C., 1345 Avenue of the Americas, New York, NY 10105,
Attention: A. Mitchell Greene, telecopier No. (212) 956- 2164. Notices shall be
deemed conclusively to have given or delivered hereunder if the same is in
writing, signed by any authorized officer, partner or member and (a) mailed, by
registered or certified mail, return receipt requested, postage prepaid; or (b)
sent via expedited courier service that regularly requires signed receipts
evidencing delivery at the addresses set forth in Section 8.4 of the Merger
Agreement;
(b) Each of BL, Besicorp, Purchaser and Parent has set forth its federal
employer identification number below. Income taxes, if any, with respect to
earnings on the Escrow Fund shall be paid from the Escrow Fund or, if no funds
are available for such purpose, shall be fairly allocated in accordance with the
Code.
(c) This Escrow Agreement set forth the entire understanding of the parties
with respect to the subject matter hereof and may not be changed orally. This
Escrow Agreement shall be governed and construed pursuant to the laws of the
state of New York, without giving effect to any principles of conflict of laws.
(d) This Agreement shall inure to the benefit of and be binding upon the
parties hereto, and their successors and permitted assigns. Nothing in this
Agreement, express or implied, is
-7-
<PAGE>
intended to confer on any person other than the parties hereto, and their
respective successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
(e) This Agreement shall not be assignable by the parties without the prior
written consent of the other parties, except that at or prior to the Closing
Buyer and/or the Surviving Corporation may assign their rights and delegate
their duties under this Agreement to a subsidiary entity or to any affiliate and
may assign their rights under this Agreement to their lenders for collateral
security purposes, and after the Closing, Buyer may assign their respective
rights and delegate their respective duties under this Agreement to any third
party.
(f) The headings contained in this Agreement are for convenience of
reference only and shall not affect the meaning or interpretation of this
Agreement.
(g) This Agreement may be executed in multiple counterparts, each of which
shall be deemed to be an original, and all such counterparts shall constitute
but one instrument.
(h) The invalidity of any provision of this Agreement or a portion of a
provision shall not affect the validity of any other provision of this Agreement
or the remaining portion of the applicable provision.
*******
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
as of the date and year first above written.
BESICORP LTD. (FEIN: _______)
By: ________________________________________
Name:
Office:
BESICORP GROUP INC. (FEIN: _______)
By: ________________________________________
Name:
Office:
BGI ACQUISITION CORP. (FEIN: _______)
By: ________________________________________
Name:
Office:
BGI ACQUISITION LLC (FEIN: _______)
By: ________________________________________
Name:
Office:
ROBINSON BROG LEINWAND GREENE
GENOVESE & GLUCK P.C.
By: ________________________________________
Name:
Office:
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<PAGE>
Exhibit A
FORM OF BUYER'S DISBURSEMENT NOTICE
CERTIFICATE
This certificate is being issued pursuant to Section 3(b) of that certain
Escrow Agreement dated as of November __, 1998 by and among Besicorp Group Inc.,
a New York corporation' Besicorp Ltd., a New York corporation; BGI Acquisition
Corporation, a New York corporation; BGI Acquisition LLC, a Wyoming limited
liability company; and Robinson Brog Leinwand Greene Genovese & Gluck P.C. (the
"Escrow Agreement"). Terms not defined in this certificate shall have the
meanings set forth in the Escrow Agreement. The undersigned, a duly authorized
officer of [Besicorp Group Inc./ BGI Acquisition LLC], hereby certifies that:
1. Buyer is requesting the Escrow Agent release the amount of $_______ of
the Escrow Fund.
2. Buyer is requesting the amount in Paragraph 1 above on account of
[brief description of the claim] (the "Claim");
3. Attached hereto is documentation which supports the amount of the Claim;
4. Attached hereto is the Notice of Claim with respect to the Claim, to the
extent the Filing of a Notice of Claim was required under the Indemnification
Agreement; and
5. A copy of this Certificate, including all attachments, has been sent
to BL in the manner set forth in the Indemnification Agreement.
IN WITNESS WHEREOF, Buyer has executed and delivered this Certificate as of
the ________day of ___________ ________.
[BESICORP GROUP INC./ BGI ACQUISITION LLC]
By: _____________________________________
By:
Its:
<PAGE>
Exhibit B
FORM OF JOINT DISBURSEMENT NOTICE
CERTIFICATE
This certificate is being issued pursuant to Section 3[(b/c)] of that
certain Escrow Agreement dated as of November __, 1998 by and among Besicorp
Group Inc., a New York corporation; Besicorp Ltd., a New York corporation; BGI
Acquisition Corporation, a New York corporation; BGI Acquisition LLC, a Wyoming
limited liability company; and Robinson Brog Leinwand Greene Genovese & Gluck
P.C. (the "Escrow Agreement"). Terms not defined in this certificate shall have
the meanings set forth in the Escrow Agreement. The undersigned, a duly
authorized officer of [Besicorp Group Inc./ BGI Acquisition LLC] and a duly
certified officer of BL each hereby certify that:
1. On __________, ___ _______ ___________________ filed a certificate (a
copy of which was attached to this certificate with the Escrow Agent) (the
"Disputed Certificate") with the Escrow Agent and the other parties required
under Section 3[(b/c)] of the Escrow Agreement.
2. The other party receiving the Disputed Certificate disputed an element
of the Disputed Certificate in accordance with the above provision of the Escrow
Agreement.
3. The parties hereto are now jointly requesting the Escrow Agent release
the amount of $_______ of the Escrow Fund to _____________ as the agreed-to
payment with respect to the Disputed Certificate.
IN WITNESS WHEREOF, Buyer and BL have executed and delivered this
Certificate as of the ________day of ___________ ________.
[BESICORP GROUP INC./ BGI ACQUISITION LLC]
By: _____________________________________
By:
Its:
BESICORP LTD.
By: _____________________________________
By:
Its:
<PAGE>
Exhibit C
FORM OF BL'S DISBURSEMENT NOTICE
CERTIFICATE
This certificate is being issued pursuant to Section 3(c) of that certain
Escrow Agreement dated as of November __, 1998 by and among Besicorp Group Inc.,
a New York corporation; Besicorp Ltd., a New York corporation; BGI Acquisition
Corporation, a New York corporation; BGI Acquisition LLC, a Wyoming limited
liability company; and Robinson Brog Leinwand Greene Genovese & Gluck P.C. (the
"Escrow Agreement"). Terms not defined in this certificate shall have the
meanings set forth in the Escrow Agreement. The undersigned, a duly authorized
officer of BL, hereby certifies that:
1. BL is requesting the Escrow Agent release the amount of $_______ of the
Escrow Fund on account of Litigation Costs paid by BL.
2. Buyer is requesting the amount in Paragraph 1 above on account of [brief
description of the claim] (the "Claim").
3. Attached hereto is documentation which supports the amount of the Claim.
4. BL has previously claimed the amount of $_______ with respect to the
matter for which the Litigation Costs the subject of this Certificate are being
paid.
5. The amounts being requested pursuant to this Certificate have been used
in a manner reasonably believed by BL to bring the matter for which the
Litigation Costs are being spent on to conclusion in an economically efficient
manner and as quickly as reasonably possible.
6. A copy of this Certificate, including all attachments, has been sent to
Buyer in the manner set forth in the Indemnification Agreement.
IN WITNESS WHEREOF, BL has executed and delivered this Certificate as of
the ________day of ___________ ________.
BESICORP LTD.
By: _____________________________________
By:
Its:
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<PERIOD-END> SEP-30-1998
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<ALLOWANCES> 66,929
<INVENTORY> 1,241,658
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<PP&E> 2,466,403
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<INCOME-PRETAX> (4,245,950)
<INCOME-TAX> (1,437,500)
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,808,450)
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<TABLE> <S> <C>
<ARTICLE> 5
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<PERIOD-TYPE> 6-MOS
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<PERIOD-END> SEP-30-1997
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<SALES> 2,268,666
<TOTAL-REVENUES> 2,406,697
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<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 165,841
<INCOME-PRETAX> (3,374,019)
<INCOME-TAX> (1,147,300)
<INCOME-CONTINUING> (2,226,719)
<DISCONTINUED> 0
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<TABLE> <S> <C>
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<PERIOD-TYPE> YEAR
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<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 104,385
<SECURITIES> 0
<RECEIVABLES> 387,079
<ALLOWANCES> 21,000
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