SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[x] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended March 31,2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File No. 000-28789
WOM, Inc.
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(Name of small business issuer in its charter)
New York 14-1818862
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
1151 Flatbush Road
Kingston, New York 12401
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(Address of principal executive offices) Zip Code
Issuer's telephone number, including area code: (914) 336-7700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
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(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
X Yes No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year is $0.00
As of June 28, 2000, 135,886 shares of Common Stock were outstanding. The
aggregate market value of the shares held by non-affiliates of the issuer is not
determinable because the shares are not traded on any exchange or automated
quotation system.
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Item 1. Business
Capitalized terms used without being defined in the items set forth
below shall have the meanings ascribed to such terms by the "Glossary" which
appears immediately following the financial statements included in this report.
Summary - Non Operating Company
We do not have any business activities, do not intend to engage in any
business activities and accordingly we do not expect to have any future revenues
or profits. Our principal assets consist of our interests in the Bansbach
Litigation. Because we are not engaged in any business activity, these assets
are our only possible source of revenues. These assets will not generate any
revenues to us unless there is a settlement or final judgment in favor of the
plaintiff in the Bansbach Litigation. Because the Bansbach Litigation is a
shareholder derivative action brought on behalf of Old Besicorp and as a result
of the Prior Contribution Agreement and the Contribution Agreement, Old
Besicorp's assets relating to the Bansbach Litigation -- including the right to
any settlement or judgment -- have been assigned to WOM, all other proceeds of
the settlement or judgment will be delivered to WOM, not Mr. Bansbach.
On account of our very limited activities, we have no full-time
employees and no offices. We are not compensating our officers and directors,
each of whom is also an officer or director of Besicorp, for the services they
render on our behalf. Besicorp agreed in the Contribution Agreement to provide
us with the services of its employees and to allow us to use its offices free of
charge to the extent that we determine they are reasonably necessary and for so
long as we shall seek such services and the use of such offices. We have no
suppliers, no customers, and, except for our interest in the Bansbach
Litigation, we are not parties to any litigation. We have no foreign operations
and our activities are not subject to any U.S., state, foreign or local laws or
regulations (other than those generally applicable to public corporations).
Background of WOM and the Bansbach Litigation
WOM was organized in December 1999 to acquire Besicorp's interests in
the Bansbach Litigation; it was desired that WOM acquire these interests so that
Besicorp could comply with the intent of the Prior Merger Order. The Prior
Merger Order required Old Besicorp to assign to Besicorp the interests of Old
Besicorp in the Bansbach Litigation and the Lichtenberg Litigation so that the
Bansbach Litigation and the Lichtenberg Litigation could be maintained following
the Prior Merger. Besicorp organized WOM and assigned to WOM, pursuant to the
Contribution Agreement, the interest in the Bansbach Litigation that Old
Besicorp had assigned to Besicorp pursuant to the Prior Merger Order so that the
Bansbach Litigation may be maintained after the Merger. If Besicorp had not
effected the Spin- Off, consummation of the Merger would have caused the
plaintiff in the Bansbach Litigation to lose his status as a shareholder of
Besicorp, and therefore would have caused him to lose his right to prosecute the
Bansbach Litigation. The Lichtenberg Litigation was not assigned to us because
the complaint in the Lichtenberg Litigation had been dismissed.
The Bansbach Litigation is a shareholder derivative action that was
commenced in August 1997 by John Bansbach who was seeking to recover certain
legal fees and expenses paid by Old Besicorp to or on behalf of certain officers
and directors of Old Besicorp in connection with the Proceeding. The Proceeding
is an action that was brought in the United States District Court for the
Southern District of New York in connection with contributions to the 1992
election campaign of Congressman Maurice Hinchey. In connection with the
Proceeding, in June 1997, Old Besicorp and Michael F. Zinn (then the Chairman of
the Board, President and Chief Executive Officer of Old Besicorp and currently
the
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Chairman of the Board, President and Chief Executive Officer of Besicorp and
WOM), each entered a guilty plea pursuant to a plea bargain 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. As a result of such pleas, Old Besicorp 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 and was terminated before the
scheduled end of the term) of supervised release thereafter.
Old Besicorp paid certain legal expenses incurred by certain officers
and directors in connection with the Proceeding. The amounts paid by Old
Besicorp on behalf of Michael F. Zinn in connection with the Proceeding was
approximately $339,000. Old Besicorp also reimbursed him for the legal fees and
expenses (approximately $39,000) which had been incurred by third parties in
connection with the Proceeding and which had been paid by him. In addition, Old
Besicorp paid additional legal fees and disbursements of approximately $743,000
incurred in connection with the Proceeding by Old Besicorp, certain directors,
officers, and employees and their spouses who were defendants or actual or
potential witnesses in this matter.
In August 1997, after Old Besicorp and Mr. Zinn had entered their
pleas, Mr. Bansbach commenced the Bansbach Litigation. Old Besicorp was named as
a nominal defendant in this shareholder derivative action and the other named
defendants either were officers and/or directors of Old Besicorp at the time of
the alleged acts (or omissions) for which the plaintiff seeks relief or became
officers and/or directors of Old Besicorp afterwards. The plaintiff sought to
hold the defendants other than Old Besicorp liable to Old Besicorp for:
o all sums advanced to or on behalf of Michael F. Zinn
in connection with his defense of the Proceeding;
o all sums advanced to or on behalf of Michael Daley,
who at the time was the Vice- President, Chief
Financial Officer and Corporate Secretary of Old
Besicorp and was subpoenaed for information in
connection with the Proceeding;
o all legal expenses, costs and fines incurred by Old
Besicorp itself in connection with the Proceeding;
o all harm to Old Besicorp's reputation and goodwill
resulting from the Proceeding;
o punitive damages; and
o plaintiff's attorneys' fees, costs and expenses.
If Bansbach ultimately prevails on all of his claims, the Bansbach
Litigation could result in the recovery of approximately $1 million, excluding
interest and punitive damages, if any.
The trial court dismissed the action, stating that the plaintiff had
failed to make the requisite pre-suit demand upon the Old Besicorp Board and had
failed to demonstrate that such a demand would be futile. The plaintiff appealed
this decision. On February 4, 1999, the Appellate Division reversed the trial
court's dismissal and reinstated the action finding that the bare allegations of
the complaint sufficiently alleged that a pre-suit demand on the Old Besicorp
Board would have been futile. The parties to the Bansbach Litigation are
currently engaged in the discovery process.
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By this time, Old Besicorp had entered into the Prior Plan of Merger
and on March 1, 1999 Old Besicorp distributed proxy materials for a special
meeting of its shareholders to adopt the Prior Plan of Merger. The meeting was
scheduled for March 19, 1999, and it was contemplated that if the Prior Plan of
Merger was approved by Old Besicorp shareholders the Prior Merger would occur
shortly afterwards. Effectuation of the Prior Merger would adversely affect the
Bansbach Litigation and the Lichtenberg Litigation.
On March 5, 1999, James Lichtenberg and Mr. Bansbach commenced the
March Litigation by filing the March Complaint in the United States District
Court for the Southern District of New York.
The March Complaint alleged that:
o the proxy statement sent to Old Besicorp's
shareholders in connection with the meeting of Old
Besicorp's shareholders to adopt the Prior Plan of
Merger was materially misleading because it failed to
adequately disclose all available material
information regarding the effect of the Prior Merger
on the Derivative Litigation, i.e., the Bansbach
Litigation and the Lichtenberg Litigation;
o the Prior Merger was intentionally structured to
accomplish the termination of the Derivative
Litigation; and
o Old Besicorp and its directors breached their
fiduciary duty by (a) intentionally structuring the
Prior Merger so as to cause the termination of the
Derivative Litigation, (b) failing to retain
independent counsel to act on behalf of Old
Besicorp's minority shareholders, (c) failing to
retain an independent investment banker to opine on
the fairness of the Prior Merger to Old Besicorp's
minority shareholders, (d) failing to form an
independent committee to ensure that the Prior Merger
was fair to and in the best interests of Old
Besicorp's minority shareholders, and (e) providing
for a $1 million bonus to Mr. Zinn and a $500,000
bonus to Mr. Daley, which the March Complaint deemed
to be excessive and/or unwarranted compensation.
The March Complaint asserted four claims for relief: (i) a claim
against Old Besicorp and the March Director Defendants under section 14(a) of,
and Rule 14a-9 promulgated pursuant to, the Exchange Act; (ii) a claim against
the March Director Defendants under section 20(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"); (iii) a claim against the March
Director Defendants for breach of fiduciary duty; and (iv) a claim against BGI
Parent and BGI Acquisition for aiding and abetting the alleged breach of
fiduciary duty. The March Complaint sought unspecified money damages and:
o injunctive relief directing full disclosure of the
financial impact on Old Besicorp's shareholders of
the termination of the Derivative Litigation;
o full disclosure of the alleged intentional
structuring of the Prior Merger to cause the
termination of the Derivative Litigation;
o an order directing that:
(i) the Derivative Litigation be
transferred to Besicorp,
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(ii) the Prior Merger Consideration
payable to Mr. Zinn and two former
directors and executive officers of
Old Besicorp, Mr. Enowitz and Steven
I. Eisenberg, for their shares of
Old Besicorp's common stock (which
were subject to the Lichtenberg
Litigation) be held in escrow, and
(iii) certain amounts at issue in the
Bansbach Litigation be held in
escrow pending final adjudication of
the respective actions.
On March 18, 1999, the District Court entered the Prior Merger Order
which principally required Old Besicorp to assign the contingent assets and/or
liabilities comprising Old Besicorp's interests in the Derivative Litigation to
Besicorp before the Prior Merger. The Prior Contribution Agreement effected Old
Besicorp's assignment of the contingent assets and/or liabilities comprising Old
Besicorp's interests in the Derivative Litigation to Besicorp.
Besicorp filed a motion for reconsideration of the Prior Merger Order
and the District Court in June 1999 denied Besicorp's motion for reconsideration
of the Prior Merger Order. Besicorp appealed the Prior Merger Order and the
denial of reconsideration to the United States Court of Appeals for the Second
Circuit. Messrs. Lichtenberg and Bansbach moved to dismiss the appeal, in part
or in whole, based on non-substantive issues concerning the timeliness of the
appeal with respect to the Prior Merger Order and the June 1999 order denying
reconsideration of the Prior Merger Order. On February 17, 2000, the Second
Circuit issued a decision consisting of a majority opinion and a dissenting
opinion. The majority opinion granted the motion to dismiss the appeal as to the
Prior Merger Order but not as to the June 1999 order. The dissenting opinion
found that the appeal was timely as to the Prior Merger Order. Besicorp has
moved for a rehearing en banc of the decision granting, in part, the motion to
dismiss the appeal.
Certain Effects of the Transfer of Bansbach Litigation to WOM
Pursuant to the Contribution Agreement, we have been assigned the
contingent assets comprising Old Besicorp's interests in the Bansbach Litigation
that Besicorp received from Old Besicorp as a result of the Prior Merger Order.
Management believes that these contingent assets generally consist of any
recovery to which Old Besicorp would be entitled as a result of the resolution
of the Bansbach Litigation. However, we are under no obligation to prosecute the
action or to assist the plaintiff, financially or otherwise, in his prosecution
of the Bansbach Litigation and we have no intention of providing any assistance
to the plaintiff. We do, however, intend to defend ourselves from liability to
the extent we deem appropriate.
Pursuant to the Contribution Agreement, we have also assumed the
contingent liabilities comprising Old Besicorp's interests in the Bansbach
Litigation that Besicorp received from Old Besicorp as a result of the Prior
Merger Order. Management believes that these contingent liabilities generally
consist of any damages for which Old Besicorp would be liable as a result of the
resolution of the Bansbach Litigation. Therefore we intend to defend ourself
from liability to the extent we deem appropriate. Reimbursements for the costs
of defending ourself will be sought from the Escrow Fund. In addition, if we are
required to pay damages, we expect to seek the money to pay such damages from
the Escrow Fund unless such reimbursement is prohibited; if any of the other
defendants in the Bansbach Litigation are required to pay damages we anticipate
that we will indemnify them and seek the money for such indemnification from the
Escrow Fund to the extent permitted. However, there can be no assurance
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that such amounts will be available from the Escrow Fund or that WOM will be
entitled to receive any such monies from the Escrow Fund.
Since the Bansbach Litigation is a shareholder derivative action, if
damages are paid by us or any other defendant, we should be the recipient.
However, monies may be deducted for the fees and expenses of the plaintiff's
attorneys. It is likely that if we receive any amounts, these amounts will be
distributed to the holders of WOM Common Stock (except to the extent a court
otherwise orders) shortly afterward and that WOM will then be liquidated. In
addition, if at any time the Bansbach Litigation is decided in favor of the
defendants, or if the Prior Merger Order is reversed, WOM will then be
liquidated.
The Contribution Agreement
Pursuant to the Contribution Agreement, Besicorp transferred to WOM the
interests in the Bansbach Litigation it had received from Old Besicorp as a
result of the Prior Merger Order; however, WOM is required to return such
interests if a Prior Merger Order Reversal occurs. As a result of the
Contribution, WOM - not Besicorp - will be entitled to any proceeds if there is
a judgment or settlement in favor of the plaintiff; and WOM - not Besicorp -
will be liable for any damages for which the subject corporation is liable. See
" - Certain Effects of the Transfer of the Bansbach Litigation to WOM."
In addition, pursuant to the Contribution Agreement Besicorp caused the
Escrow Agreement to be amended (i) to permit us to receive up to $35,000
annually from the Escrow Fund to cover our reasonable expenses in connection
with maintaining our existence, complying with the Exchange Act and the rules
and regulations promulgated thereunder, and such other matters as may be
reasonably necessary to permit the Bansbach Litigation to continue and (ii) to
provide that the costs of the Bansbach Litigation will still be covered by the
Escrow Agreement following the Spin-Off.
Also, pursuant to the Contribution Agreement, Besicorp agreed to
provide us free of charge with the services of Besicorp's employees and the use
of its offices to the extent that we determine they are reasonably necessary and
for so long as we shall seek such services and the use of such offices.
We may also be affected, directly or indirectly, by the Indemnification
Agreement and the Escrow Agreement, inasmuch as the implementation of these
agreements may determine the amount available from the Escrow Fund to pay WOM
Costs and the ability of WOM to fund the payment of these costs. Set forth below
is a summary of the material provisions of these agreements.
The Indemnification Agreement
The Indemnification Agreement that was entered into at the time of the
Prior Merger provides that Besicorp will generally indemnify the Purchaser
Indemnitees 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:
o any inaccuracy in or breach of any representation and
warranty made by Old Besicorp in the Prior Plan of
Merger or in any closing document delivered in
connection with the Prior Plan of Merger;
o any breach by Old Besicorp of, or failure by Old
Besicorp to comply with, any of its covenants or
obligations under the Prior Plan of Merger or under
the Indemnification Agreement;
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o the existence of any liability or other obligation of
Old Besicorp as of March 22, 1999 or arising out of
or relating to the Prior Merger or any claim against
a Purchaser Indemnitee with respect to any such
liability or obligation other than certain permitted
liabilities, including, without limitation, liability
on account of taxes payable by Old Besicorp or for
which Old Besicorp is liable;
o the failure of Besicorp to pay and discharge in full
when due any of its liabilities, including liability
on account of taxes other than such permitted
liabilities;
o any claims for indemnification by current or former
officers, directors, employees, agents or consultants
of Old Besicorp;
o any third party claim (which includes 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 Old Besicorp on or prior to March 22,
1999 other than such permitted liabilities;
o any violation of, or delinquency with respect to, any
order or arbitration award or statute, or regulation
in effect on or prior to March 22, 1999 or of any
agreement of Old Besicorp with, or any license,
permit or environmental permit granted to Old
Besicorp by any federal, state or local governmental
authority to which the properties, assets, personnel
or business activities of Old Besicorp are subject
(or to which Old Besicorp is subject) as it relates
to the properties, assets, personnel or business
activities of Old Besicorp;
o certain environmental matters;
o certain matters relating to employee pension benefit
plans of Old Besicorp;
o any federal or state taxes imposed upon Old Besicorp,
or for which Old Besicorp is liable, with respect to
any taxable period or portion of a taxable period
ending on or prior to March 22, 1999 other than a
permitted liability;
o litigation against Old Besicorp pending or
threatened as of March 22, 1999; and
o any claims, investigations, proceedings, actions or
lawsuits asserted or initiated before or after March
22, 1999 arising out of or in connection with
pre-closing occurrences involving Old Besicorp.
The payment of any damages to which the Purchaser Indemnitees are
entitled pursuant to the Indemnification Agreement will first be satisfied from
the Escrow Fund, subject to the terms of the Escrow Agreement, until the Escrow
Fund has been reduced to zero and thereafter will be satisfied by Besicorp
directly. We are not a party to the Indemnification Agreement. However, even
though we have no obligations under the Indemnification Agreement and are
entitled to no benefits under the Indemnification Agreement, we are affected by
the Indemnification Agreement: to the extent that money is released from the
Escrow Fund pursuant to the Indemnification Agreement, the amount of money
available to us under the Escrow Agreement will be reduced.
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Escrow Agreement
In connection with the Prior Merger, Old Besicorp deposited $6.5
million into the Escrow Fund pursuant to the Escrow Agreement. (There is
currently approximately $5.5 million in the Escrow Fund.) The Escrow Fund
initially served to fund claims for BGI Monitoring Costs, BGI Indemnity Claims
and Litigation Costs, which included the Bansbach Litigation. Therefore, in
order to provide that the Bansbach Litigation would continue to covered by the
Escrow Fund after the Spin-Off, the Escrow Agreement was amended by the Escrow
Agreement Amendment (effective as of the Spin-Off): to provide, (i) by funding
claims for WOM Costs, that we shall be provided from the Escrow Fund with our
reasonable expenses (up to $35,000 per annum) in connection with maintaining our
existence, complying with the Exchange Act and the rules and regulations
promulgated thereunder, and such other matters as may be reasonably necessary to
permit the Bansbach Litigation to continue and (ii) that the Bansbach Litigation
will still be covered by the Escrow Agreement following the Spin-Off. In
addition, BGI Parent remains entitled to reimbursement for BGI Monitoring Costs
and BGI Indemnity Claims and Besicorp remains entitled to reimbursement for
Litigation Costs.
Therefore, reimbursement from the Escrow Fund is available for the
following:
o BGI Monitoring Costs which are BGI Parent's
out-of-pocket expenses (not to exceed $40,000 per
year) incurred if it is represented by counsel with
respect to:
(i) the Besicorp Assumed
Matters (which are certain
litigations specified in
the Indemnification
Agreement and other matters
to be prosecuted or
defended by Besicorp
pursuant to the
Indemnification Agreement)
and
(ii) the Bansbach Litigation;
o BGI Indemnity Claims which are all claims for
indemnity made by BGI Parent pursuant to the
Indemnification Agreement, including any claims of
BGI Parent with respect to the Besicorp Assumed
Matters arising from the failure of Besicorp to
diligently prosecute or defend such Besicorp Assumed
Matters, BGI Monitoring Costs and any payment of fees
and expenses of the payment agent pursuant to the
Prior Plan of Merger;
o Litigation Costs which are costs and expenses
relating to:
(i) Besicorp Assumed Matters;
(ii) litigation arising out of
or relating to any such
Besicorp Assumed Matters;
(iii) indemnification of claims
against Old Besicorp's
directors and officers
(prior to the Prior Merger)
for actions in their
official capacity preceding
the date of the Prior
Merger; and
(iv) matters arising out of or
relating to the Prior
Merger; and
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o WOM Costs which are:
(i) reasonable expenses incurred by
Besicorp or WOM in connection with
(a) the formation of WOM, (b) the
Spin-Off (including the cost of
distributing the shares of WOM's
Common Stock (including the fees and
expenses of Continental) and (c) the
preparation and filing of the
Registration Statement,
(ii) WOM's reasonable expenses (up to
$35,000 per annum) (a) to maintain
its existence, (b) to comply with
the Exchange Act and the rules and
regulations promulgated thereunder,
and (c) for such other matters as
may be reasonably necessary to
permit the Bansbach Litigation to
continue, and
(iii) WOM's costs and expenses relating to
(a) the Bansbach Litigation, and (b)
litigation arising out of or
relating to the Bansbach Litigation,
the Spin-Off and WOM's existence.
As a result of the Escrow Agreement Amendment, the Escrow Agent will
disburse Escrow Funds upon request (i) to BGI Parent, with respect to BGI
Indemnity Claims or BGI Monitoring Costs, (ii) to us, with respect to WOM Costs
and (iii) to Besicorp, with respect to Litigation Costs, unless any other party
to the Escrow Agreement objects. If a party to the Escrow Agreement objects, the
Escrow Agent will disburse such funds only in accordance with the Escrow Fund
Determination Procedure. Besicorp and WOM agreed not to unreasonably withhold
its consent to a request by BGI Parent for payment of BGI Indemnity Claims, BGI
Parent and WOM agreed not to unreasonably withhold consent for payment of
Litigation Costs and BGI Parent and Besicorp agreed not to unreasonably withhold
consent for the payment of WOM Costs.
The terms of the Escrow Agreement provide that the remaining proceeds
of the Escrow Fund will be released to Besicorp, subject to the satisfaction of
certain conditions, at any time after March 22, 2004.
Item 2. Description of Property
We do not own any real property. Pursuant to the Contribution
Agreement, Besicorp agreed to allow us to use its offices without charge. These
offices are sufficient for our requirements.
Item 3. Legal Proceedings
Other than the Bansbach Litigation, WOM is not a party to any legal
proceedings.
WOM is dependent upon the availability of funds from the Escrow Fund
for the reimbursement of the WOM Costs. WOM's ability to obtain reimbursement
for these costs may be limited to the extent Besicorp or other third parties
obtain money from the Escrow Fund thereby reducing the funds available to pay
WOM Costs. Besicorp may draw on the Escrow Fund principally to:
o satisfy its obligations pursuant to the
Indemnification Agreement whereby it agreed to
indemnify the Prior Merger Parties for damages
relating to various matters including, breaches of
the Prior Merger Agreement and substantially all of
Old Besicorp's litigation that was pending at the
time of the Prior Merger, and
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o satisfy certain other obligations relating
principally to certain lawsuits that Besicorp assumed
from Old Besicorp pursuant to the Prior Contribution
Agreement.
Other persons may also be entitled to payments from the Escrow Funds.
See "Item 1. Business Escrow Agreement". WOM believes that the approximately
$5.5 million in the Escrow Fund as of June 27, 2000 will be sufficient to pay
current and future WOM Costs.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Market for Common Equity and Related Stockholder Matters.
There is currently no existing trading market for WOM Common Stock. We
have not applied for and currently do not intend to apply for listing of the WOM
Common Stock on an Exchange. We have never declared or paid any cash dividends
on the WOM Common Stock and do not anticipate cash dividends in the foreseeable
future.
Item 6. Management's Discussion and Analysis or Plan of Operations
Forward-Looking Information
The discussion below includes or may include certain forward-looking
statements that involve risks and uncertainties that concern WOM's financial
position, 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 we believe our expectations reflected in such
forward-looking statements are based on reasonable assumptions, you are
cautioned that we cannot assure you 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:
o costs or difficulties related to our establishment as
an independent entity (including our ability to fund
our operations from the Escrow Fund);
o the time it takes to resolve the Bansbach Litigation;
and
o the outcome of the Bansbach Litigation.
These forward-looking statements speak only as of the date on which they are
made and we are not undertaking any obligation to update any forward-looking
statement to reflect events or circumstances after the date of this report. If
we do update or correct one or more forward-looking statements, you should not
conclude that we will make additional updates or corrections with respect
thereto or with respect to other forward-looking statements.
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Results of Operations
As indicated previously, we are not engaged in any business activities nor do we
intend to engage in any such activities and accordingly we do not expect to have
any future revenues or profits. Our expenses generally will be limited to the
expenses incurred in preparing documents required to be filed by public
companies, the expense of distributing materials to shareholders and the
transfer agent's fees as well as the costs associated with defending the
Bansbach Litigation. These expenses will generally be paid directly from the
Escrow Fund and will not be reflected on our financial statements. We have no
full-time employees and no offices; Besicorp agreed in the Contribution
Agreement to provide us with the services of its employees and to allow us to
use its offices free of charge to the extent that we determine they are
reasonably necessary and for so long as we shall seek such services and the use
of such offices.
WOM's principal assets consist of its interests in the Bansbach Litigation.
These contingent assets comprise Old Besicorp's interests in the Bansbach
Litigation that Besicorp received from Old Besicorp as a result of the Prior
Merger Order. We believe that these contingent assets generally consist of any
recovery to which Old Besicorp would be entitled as a result of the resolution
of the Bansbach Litigation. (However, we are under no obligation to prosecute
the action or to assist the plaintiff, financially or otherwise, in his
prosecution of the Bansbach Litigation and we have no intention of providing any
assistance to the plaintiff.) Because we are not engaged in any business
activity, these assets are our only possible source of revenues. These assets
will not generate any revenues to WOM unless there is a settlement or final
judgment in favor of the plaintiff in the Bansbach Litigation.
We have also assumed the contingent liabilities comprising Old Besicorp's
interests in the Bansbach Litigation that Besicorp received from Old Besicorp as
a result of the Prior Merger Order. We believe that these contingent liabilities
generally consist of any damages for which Old Besicorp would be liable as a
result of the resolution of the Bansbach Litigation. Therefore we intend to
defend ourself from liability to the extent we deem appropriate. Reimbursements
for the costs of defending ourself will be sought from the Escrow Fund. In
addition, if we are required to pay damages, we expect to seek the money to pay
such damages from the Escrow Fund unless the judgment prohibited such
reimbursement; if any of the other defendants in the Bansbach Litigation, are
required to pay damages we anticipate that we will indemnify them and seek the
money for such indemnification from the Escrow Fund unless either (i) the
judgment prohibited such indemnification or (ii) indemnification is
impermissible under the NYBCL. However, there can be no assurance that such
amounts will be available from the Escrow Fund or that WOM will be entitled to
receive any such monies from the Escrow Fund.
Liquidity and Capital Resources
As of March 31, 2000, we had cash of $54, which represented our initial
capitalization less bank charges. We will not attempt to incur debt or raise
capital. However, the parties to the Escrow Agreement, which was executed in
connection with the Prior Plan of Merger, have agreed (i) to permit us to
receive up to $35,000 (the "Annual Expenses") annually in reimbursements from
the Escrow Fund to cover our reasonable expenses in connection with maintaining
our existence, complying with the Exchange Act and such other matters as may be
reasonably necessary to permit the Bansbach Litigation to continue and (ii) WOM
Litigation Costs (i.e. our costs and expenses relating to (a) the Bansbach
Litigation, (b) litigation arising out of or relating to the Bansbach
Litigation, (c) the Spin-Off and (d) our existence. Therefore, the Escrow Fund
is not a source of funds to the extent we need more than $35,000 in any year
(except for WOM Litigation Costs which do not have a maximum amount).
11
<PAGE>
We believe that the Escrow Fund will be available to satisfy any claims against
WOM resulting from the Bansbach Litigation, and accordingly, we do not believe
that the assumption of the contingent liabilities will have any adverse effect
on our financial position or liquidity. While we are dependent upon our ability
to obtain money from the Escrow Fund to pay these expenses and without
reimbursements from the Escrow Fund, we will not be able to pay our obligations
as they become due and may be forced to curtail activities, we believe that
approximately $5.5 million in the Escrow Fund will be sufficient to fund the
Annual Expenses, indemnify BGI Parent, Old Besicorp and other Purchaser
Indemnities pursuant to the Indemnification Agreement and reimburse Besicorp for
its Litigation Costs.
Item 7. Financial Statements
Our financial statements are set forth at page F-1.
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
CC&C served as our independent accountants to audit our financial
statements from our organization in December 1999 until March 15, 2000. On or
about March 15, 2000, WOM dismissed CC&C as its principal outside accountant.
None of CC&C's reports on WOM's financial statements during any of the past two
years contained an adverse opinion or a disclaimer of opinion, nor was any such
report qualified or modified as to uncertainty, audit scope, or accounting
principles. The decision to change accountants was not recommended or approved
by the WOM Board. During WOM's two most recent fiscal years and all subsequent
interim periods preceding the dismissal there were no disagreements with CC&C on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreement, if not resolved
to the satisfaction of CC&C, would have caused it to make a reference to the
subject matter of the disagreement in connection with any of its reports. On
March 15, 2000, WOM engaged Urbach Kahn & Werlin P.C. as its principal
accountant to audit WOM's financial statements.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Complaint with Section 16(a) of the Exchange Act
Set forth below is certain information as to the individuals who are
expected to serve as directors and the individuals who are expected to serve as
officers of WOM following the Spin-Off.
Michael F. Zinn
Mr. Zinn, 46, has been the Chairman of the Board, President and Chief
Executive Officer of WOM since December 20, 1999, has been the President, Chief
Executive Officer and Chairman of the Board of Directors of Besicorp since
November 1998 and was the President, Chief Executive Officer and Chairman of the
Board of Directors of Old Besicorp from its founding in 1976 until March, 1999
(except from November 1997 to May 1998). In June 1997, Mr. Zinn entered guilty
pleas pursuant to a plea bargain 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 and was terminated before the
scheduled end of the term) of supervised release
12
<PAGE>
thereafter. He resigned as Chairman of the Board, Chief Executive Officer and
President of Old Besicorp in November 1997 and was reappointed to such positions
in May 1998. He is a cousin of Frederic M.
Zinn, a director and executive officer of WOM.
James E. Curtin
Mr. Curtin, 50, has been Treasurer of WOM since December, 1999 and has
been Vice President and Controller of Besicorp since November, 1998. He joined
Old Besicorp as Corporate Controller in August 1995 and was appointed an
executive officer of Old Besicorp with the title of Vice President and
Controller in November 1997. He resigned as an officer of Old Besicorp in March
1999. Prior to joining Old Besicorp, 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.
Frederic M. Zinn
Mr. Zinn, 42, has been a director and the Secretary of WOM since
December 1999 and has been Senior Vice President, General Counsel and Secretary
of Besicorp since November, 1998. He joined Old Besicorp as a temporary
executive with the title of Vice President in November 1997. He was appointed an
executive officer of Old Besicorp holding the title of Senior Vice President and
General Counsel in May 1998. He resigned as an officer of Old Besicorp in March,
1999. Prior to joining Old Besicorp, 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 WOM.
Item 10. Executive compensation
During the fiscal year ended March 31, 2000, our directors and
executive officers did not receive any compensation from us for serving in such
capacities. Pursuant to the Contribution Agreement, Besicorp has agreed to
provide the service of its employees to us without charge; Besicorp's employees
who provide services to us, including our directors and executive officers, may
receive compensation for such services from Besicorp.
We have not granted any Rights and there are no stock option,
contribution, benefit or other plans for our directors, officers or employees.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table shows the shares of WOM Common Stock owned as of
June 28, 2000 by each beneficial owner of more than 5% of the WOM Common Stock,
the current directors, the current executive officers and by all current
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.
13
<PAGE>
<TABLE>
<CAPTION>
<C>
<S> <S>
Number of Shares
Name of of Common Stock Percent of Common Stock
Beneficial Owner Beneficially Owned (1) Beneficially Owned (1)
Avalon 57,967 (2) 42.7%
Michael F. Zinn 60,967 (2) 44.9%
Frederic Zinn 1,750 1.3%
James Curtin 400 *
Harold M. Zinn 10,000 7.4%
25 South Street
Rhinebeck, NY 12572
Current directors and
executive officers as
a group (3 persons) 63,117 46.4%
</TABLE>
* 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 57,967 shares held in the name of Besicorp Holdings. Michael
F. Zinn is the Chief Executive Officer and President of Besicorp
Holdings. Avalon owns approximately 94.5% of the shares of Besicorp
Holdings' common stock and therefore can appoint and remove the
directors. The only members of Avalon are Michael F. Zinn and his wife,
Valerie Zinn, who owns a nominal interest in Avalon. Michael F. Zinn is
the sole manager of Avalon and therefore is the only person with power
to vote or dispose of Avalon's shares of Besicorp Holdings' Common
Stock.
The address for each of the individuals identified above is, except as
otherwise indicated: 1151 Flatbush Road, Kingston, New York 12401.
Item 12. Certain Relationships And Related Transactions
During the past years, we have not engaged in any transaction with our
executive officers, directors or any holders of five percent or more of our
Common Stock. Certain of our executive officers and directors may have entered
into transactions with Besicorp or Old Besicorp.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
2.1 Contribution and Distribution Agreement by and
between Besicorp and WOM(3)
3(i) Certificate of Incorporation of WOM, Inc.(1)
14
<PAGE>
3(ii) By-Laws of WOM, Inc.(3)
10.1 Indemnification Agreement dated as of March 22, 1999
by and among Besicorp Group Inc. ("BGI"), Besicorp,
BGI Acquisition LLC ("LLC") and BGI Acquisition Corp.
("BGI Acquisition")(1)
10.2 Escrow Agreement (the "Escrow Agreement") dated as of
March 22, 1999 by and among Besicorp, BGI, LLC and
BGI Acquisition.(1)
10.3 Amendment No.1 to the Escrow Agreement dated as
of February 23, 2000 by and among Besicorp, BGI, LLC
and WOM.(2)
27 Financial Data Schedule - March 31, 2000
----------------------
1 Incorporated by reference to sthe corresponding exhibit filed with the
Company's Registration Statement on Form 10-SB with the SEC on or about
January 6, 2000.
2 Incorporated by reference to the corresponding exhibit filed with the
Company's Amendment No. 1 to the Registration Statement on Form 10-SB
filed with the SEC on or about March 14, 2000.
3 Incorporated by reference to the corresponding exhibit filed with the
Company's Post-Effective Amendment No. 1 to the Registration Statement
on Form 10-SB filed with the SEC on or about April 7, 2000.
(b) Reports on Form 8-K
On March 16, 2000, WOM filed a Current Report on Form 8-K, disclosing
under Item 4 a change in WOM's independent public accountants.
On May 10, 2000, WOM filed a Current Report on Form 8-K, disclosing
under items 1, 2 and 7 of such report information regarding the effectuation of
the transactions contemplated by the Contribution Agreement and the Spin-Off.
15
<PAGE>
INDEX TO THE FINANCIAL STATEMENTS OF WOM, INC.
<TABLE>
<CAPTION>
<C>
<S>
Index to the Financial Statements of WOM, Inc............................................................ F-1
Independent Auditors' Report............................................................................. F-2
Balance Sheet as of March 31, 2000....................................................................... F-3
Statement of Operations for the period December 14, 1999 (Inception)
through March 31, 2000................................................................................... F-4
Statement of Changes in Shareholders' Equity (Deficiency) for the period
December 14, 1999 (Inception) through March 31, 2000..................................................... F-5
Statement of Cash Flows for the period December 14, 1999 (Inception)
through March 31, 2000................................................................................... F-6
Notes to Financial Statements............................................................................ F-7
</TABLE>
F-1
<PAGE>
[LOGO] Urbach Kahn & Werlin PC
Certified Public Accountants
Independent Auditor's Report
To the Board of Directors and Shareholders of WOM, Inc.
We have audited the accompanying balance sheet of WOM, Inc. as at March 31,
2000, and the related statements of operations, changes in shareholders' equity,
and cash flows for the period from inception, December 14, 1999, to March 31,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of WOM, Inc. as at March 31, 2000
and the results of its operations and its cash flows for the initial period then
ended then ended in conformity with generally accepted accounting principles.
/s/ URBACH KAHN & WERLIN PC
June 27, 2000
Albany, New York
F-2
<PAGE>
WOM, INC.
BALANCE SHEET
March 31, 2000
ASSETS
Cash $ 54
=====
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses $ 100
-----
Total Liabilities 100
Shareholders' Equity:
Common stock, $.01 par value, 250,000 shares authorized,
100 shares issued 1
Additional paid in capital 99
Accumulated deficit (146)
-----
Total Shareholders' Equity (Deficit) (46)
-----
Total Liabilities and Shareholders' Equity $ 54
=====
See accompanying notes to financial statements.
F-3
<PAGE>
WOM, INC.
STATEMENT OF OPERATIONS
For The Period December 14, 1999 (Inception) Through March 31, 2000
Costs and Expenses:
Selling, general and
administrative expenses $ 46
-----
Total Costs and Expenses 46
-----
Loss Before Income Taxes (46)
Provision for Income Taxes (100)
-----
Net Loss $ (146)
=====
See accompanying notes to financial statements.
F-4
<PAGE>
WOM, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For The Period December 14, 1999 (Inception) Through March 31, 2000
<TABLE>
<CAPTION>
<C>
<S> <S> <S> <S>
Additional Retained Earnings
Common Stock Pain-In Capital (Deficit) Total
------------ --------------- ------------------ ------
Initial Capitalization
December 14, 1999 $ 1 $ 99 $ $ 100
Net loss for the year (146) (146)
---------- ------------ ---------- -----
Balance at March 31, 2000 $ 1 $ 99 $ (146) $ (46)
========== =========== =========== ======
See accompanying notes to financial statements.
</TABLE>
F-5
<PAGE>
WOM, INC.
STATEMENT OF CASH FLOWS
For The Period December 14, 1999 (Inception) Through March 31, 2000
Operating Activities:
Net loss $ (146)
Adjustments:
Increase in accrued expenses 100
------
Net Cash Used
By Operating Activities (46)
------
Financing Activities:
Initial Capitalization 100
------
Net Cash Provided By Financing Activities 100
Increase in Cash 54
Cash Beginning 0
------
Cash Ending $ 54
Supplemental Cash Flow Information: ======
Interest paid $ 0
Income taxes paid 0
See accompanying notes to financial statements.
F-6
<PAGE>
WOM, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION
WOM, Inc. ("WOM") was incorporated in December 1999 by Besicorp Ltd.
("Besicorp"), by the contribution of $100 in exchange for 100 shares of WOM
common stock in order to effectuate a spin-off prior to the merger of Besicorp.
WOM was established in order to permit the named plaintiff in the Bansbach
Litigation to remain eligible to maintain the Bansbach Litigation (see Note 2).
NOTE 2 BANSBACH LITIGATION
The Bansbach Litigation is a shareholder derivative action that was commenced in
August 1997 by John Bansbach who was seeking to recover certain legal fees and
expenses paid by Besicorp Group Inc. ("Old Besicorp") to or on behalf of certain
officers and directors of Old Besicorp in connection with the Proceeding (as
defined below).
The Proceeding is an action that was brought in the United States District Court
for the Southern District of New York in connection with contributions to the
1992 election campaign of Congressman Maurice Hinchey. In connection with the
Proceeding, in June 1997, Old Besicorp and Michael F. Zinn (then the Chairman of
the Board, President and Chief Executive Officer of Old Besicorp and currently
the Chairman of the Board, President and Chief Executive Officer of Besicorp and
the Chairman of the Board, President and Chief Executive Officer of WOM), each
entered a guilty plea 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. As a
result of such pleas, Old Besicorp 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 and was terminated before the scheduled end of the term) of supervised
release thereafter. He resigned as Chairman of the Board, President and Chief
Executive Officer of Old Besicorp in November 1997 and was reappointed to such
positions in May 1998.
Old Besicorp paid certain legal expenses incurred by certain officers and
directors in connection with the Proceeding. As of March 31, 2000, 1999 and
1998, the amounts paid on behalf of Michael F. Zinn in connection with the
Proceeding equaled $338,517. In addition, Old Besicorp reimbursed him for the
legal fees and expenses (approximately $39,180) which had been incurred by third
parties in connection with the Proceeding and which had been paid by him. In
addition, Old Besicorp paid additional legal fees and disbursements of
approximately $742,576 incurred in connection with the Proceeding by Old
Besicorp, certain directors, officers, and employees and their spouses who were
defendants or actual or potential witnesses in this matter.
In August 1997, after Old Besicorp and Mr. Zinn had entered their pleas, Mr.
Bansbach commenced the Bansbach Litigation. Old Besicorp was named as a nominal
defendant in this shareholder derivative action and the other named defendants
either were officers and/or directors of Old Besicorp at the time of the alleged
acts (or omissions) for which the plaintiff seeks relief or became officers
and/or directors of Old Besicorp afterwards. The plaintiff sought to hold the
defendants other than Old Besicorp liable to Old Besicorp for: (a) all sums
advanced to or on behalf of Michael F. Zinn in connection with his defense of
the Proceeding; (b) all sums advanced to or on behalf of Michael Daley, who at
the time was the Vice President, Chief Financial Officer and Corporate Secretary
of Old Besicorp (and who is currently a director, Executive Vice President and
Chief Financial Officer of Besicorp) and was subpoenaed for information in
connection with the Proceeding; (c) all legal expenses, costs and fines incurred
by Old Besicorp itself in connection with
F-7
<PAGE>
the Proceeding; (d) all harm to Old Besicorp's reputation and goodwill resulting
from the Proceeding; (e) punitive damages; and (f) plaintiffs attorneys' fees,
costs and expenses. If Bansbach ultimately prevails on all of his claims, the
Bansbach Litigation could result in the recovery of approximately $1 million,
excluding interest and punitive damages.
The trial court dismissed the action, stating that the plaintiff had failed to
make the requisite pre-suit demand upon the Old Besicorp Board and had failed to
demonstrate that such a demand would be futile. The plaintiff appealed this
decision. On February 4, 1999, the Appellate Division reversed the trial court's
dismissal and reinstated the action finding that the bare allegations of the
complaint sufficiently alleged that a pre-suit demand on the Old Besicorp Board
would have been futile. The parties to the Bansbach Litigation are currently
engaged in the discovery process.
By this time, Old Besicorp had entered into an agreement to merge with another
company and to distribute certain of its businesses to Besicorp Ltd. (the "Prior
Plan of Merger") and on March 1, 1999 Old Besicorp distributed proxy materials
for a special meeting of its shareholders to adopt the Prior Plan of Merger. The
meeting was scheduled for March 19, 1999 and it was contemplated that if the
Prior Plan of Merger was approved by Old Besicorp shareholders the Prior Merger
would occur shortly afterwards. Effectuation of the Prior Merger would adversely
affect the Bansbach Litigation and the Lichtenberg Litigation.
On March 5, 1999, James Lichtenberg and Mr. Bansbach commenced litigation (the
"March Litigation") by filing a complaint (the "March Complaint"). The March
Complaint alleged that (i) the proxy statement sent to Old Besicorp's
shareholders in connection with the meeting of Old Besicorp's shareholders to
adopt the Prior Plan of Merger was materially misleading because it failed to
adequately disclose all available material information regarding the effect of
the Prior Merger on the Derivative Litigation, i.e., the Bansbach Litigation and
the Lichtenberg Litigation; (ii) the Prior Merger was intentionally structured
to accomplish the termination of the Derivative Litigation; and (iii) Old
Besicorp and its directors breached their fiduciary duty by (a) intentionally
structuring the Prior Merger so as to cause the termination of the Derivative
Litigation, (b) failing to retain independent counsel to act on behalf of Old
Besicorp's minority shareholders, (c) failing to retain an independent
investment banker to opine on the fairness of the Prior Merger to Old Besicorp's
minority shareholders, (d) failing to form an independent committee to ensure
that the Prior Merger was fair to and in the best interests of Old Besicorp's
minority shareholders, and (e) providing for a $1 million bonus to Mr. Zinn and
a $500,000 bonus to Mr. Daley, which the March Complaint deemed to be excessive
and/or unwarranted compensation.
The March Complaint sought injunctive relief directing full disclosure of the
financial impact on Old Besicorp's shareholders of the termination of the
Derivative Litigation and full disclosure of the alleged intentional structuring
of the Prior Merger to cause the termination of the Derivative Litigation. The
March Complaint also sought an order directing that the Derivative Litigation be
transferred to Besicorp, that the Prior Merger Consideration payable to Mr. Zinn
and two former directors and executive officers of Old Besicorp, Martin E.
Enowitz and Steven I. Eisenberg, for their shares of Old Besicorp's common stock
(which are subject to the Lichtenberg Litigation) be held in escrow, and that
certain amounts at issue in the Bansbach Litigation be held in escrow pending
final adjudication of the respective actions. The March Complaint also sought
unspecified money damages.
On March 18, 1999, the District Court entered an order (the "Prior Merger
Order") which required Old Besicorp to assign the contingent assets and/or
liabilities comprising Old Besicorp's interests in the Derivative Litigation to
Besicorp before the Prior Merger. The Prior Contribution Agreement effected Old
Besicorp's assignment of the contingent assets and/or liabilities comprising Old
Besicorp's interests in the Derivative Litigation to Besicorp. The Prior Merger
Order also required (i) defendants Messrs. Zinn, Eisenberg and Enowitz to take
no action to place the Prior Merger Consideration they would receive in the
Prior Merger
F-8
<PAGE>
beyond the reach of the United States courts so as to render the defendants
unable to satisfy any judgment which may be rendered in the Lichtenberg Action;
and (ii) the plaintiffs to post a bond in the amount of $100,000 within seven
days of the date of the order, which bond was posted. Besicorp filed a motion
for reconsideration of the Prior Merger Order and the District Court in June
1999 denied this motion (the "June Order"). Besicorp appealed the Prior Merger
Order and the June Order to the United States Court of Appeals for the Second
Circuit. Lichtenberg and Bansbach moved to dismiss the appeal, in part or in
whole, based on non-substantive issues concerning the timeliness of the appeal
with respect to the Prior Merger Order and the June Order. On February 17, 2000,
the Second Circuit issued a decision consisting of a majority opinion and a
dissenting opinion. The majority opinion granted the motion to dismiss the
appeal as to the Prior Merger Order but not as to the June Order. The dissenting
opinion found that the appeal was timely as to the Prior Merger Order. Besicorp
has moved for rehearing en banc of the decision granting, in part, the motion to
dismiss the appeal.
The Prior Merger Order did not provide for the occurrence following the Prior
Merger of a transaction such as the proposed merger of Besicorp Ltd. and Besi
Acquisition Corp. (the "Merger"). The effectuation of the Merger ordinarily
would adversely affect the named plaintiffs ability to maintain the Bansbach
Litigation in a manner similar to that which the Prior Merger Order had
attempted to prevent. If Besicorp did not effectuate the Spin-Off, consummation
of the Merger would cause the plaintiff in the Bansbach litigation to lose his
status as a shareholder of Besicorp, and therefore would cause him to lose his
right to prosecute the Bansbach Litigation. Besicorp believed that in order to
adhere to the intent of the Prior Merger Order, Besicorp should assign to WOM
the interests in the Bansbach Litigation that Besicorp had received from Old
Besicorp; by assigning to WOM pursuant to the Spin-Off the interests in the
Bansbach Litigation Besicorp had received from Old Besicorp pursuant to the
Prior Merger Order (subject to WOM's agreement to return such interests upon the
occurrence of a Prior Merger Order Reversal), the plaintiff should retain
standing to maintain the Bansbach Litigation. The Lichtenberg Litigation is not
being assigned to WOM because the complaint in the Lichtenberg Litigation has
been dismissed.
WOM has been assigned the contingent assets comprising Old Besicorp's interests
in the Bansbach Litigation that Besicorp received from Old Besicorp as a result
of the Prior Merger Order. WOM's management believes that these contingent
assets generally consist of any recovery to which Old Besicorp would be entitled
as a result of the resolution of the Bansbach Litigation. However, WOM is under
no obligation to prosecute the action or to assist the plaintiff, financially or
otherwise, in his prosecution of the Bansbach Litigation and WOM has no
intention of providing any assistance to the plaintiff. WOM does, however,
intend to defend itself from liability to the extent WOM deem appropriate.
WOM has also assumed the contingent liabilities comprising Old Besicorp's
interests in the Bansbach Litigation that Besicorp received from Old Besicorp as
a result of the Prior Merger Order. WOM's management believes that these
contingent liabilities generally consist of any damages for which Old Besicorp
would be liable as a result of the resolution of the Bansbach Litigation.
Therefore WOM intends to defend itself from liability to the extent it deems
appropriate. Reimbursements for the costs of defending itself will be sought
from the Escrow Fund. In addition, if WOM is required to pay damages, WOM
expects to seek the money to pay such damages from the Escrow Fund unless the
judgment prohibited such reimbursement; if any of the other defendants in the
Bansbach Litigation, are required to pay damages WOM anticipates that it will
indemnify them and seek the money for such indemnification from the Escrow Fund
unless either (i) the judgment prohibited such indemnification or (ii)
indemnification is impermissible under the NYBCL. However, there can be no
assurance that such amounts will be available from the Escrow Fund or that WOM
will be entitled to receive any such monies from the Escrow Fund.
Since the Bansbach Litigation is a shareholder derivative action, if damages are
paid by WOM or any other defendant, WOM should be the recipient. However, monies
may be deducted for the fees and expenses of
F-9
<PAGE>
the plaintiff's attorneys. It is likely that if WOM receives any amounts, these
amounts will be distributed to the holders of WOM Common Stock (except to the
extent a court otherwise orders) shortly afterward and that WOM will then be
liquidated. In addition, if at any time the Bansbach Litigation is decided in
favor of the defendants, or if the Prior Merger Order is reversed, WOM will then
be liquidated.
NOTE 3 OPERATIONS
On account of WOM's very limited activities, WOM has no full-time employees and
no offices. WOM is not compensating its officers and directors, each of whom is
also an officer or director of Besicorp, for the services they render on WOM's
behalf. Besicorp has agreed in the Contribution Agreement to provide WOM with
the services of its employees and to allow WOM to use its offices free of charge
to the extent that WOM determines is reasonably necessary and for as long as WOM
shall seek such services and the use of such offices. It is not anticipated that
the value of these services will be material. Should the value become
significant, then appropriate charges will be made. WOM has no suppliers, no
customers, and, except for WOM's interest in the Bansbach Litigation, WOM is
party to no litigation. WOM has no foreign operations and WOM's operations are
not subject to any U.S., state, foreign or local laws or regulations (other than
those generally applicable to public corporations).
NOTE 4 SUBSEQUENT EVENT
Prior to the completion of the Besicorp Ltd. merger, WOM issued, to Besicorp
Ltd. in addition to the 100 shares of WOM Common Stock held by Besicorp Ltd.,
135,786 shares of WOM Common Stock, which Besicorp Ltd. distributed on a one
share for one share basis to the shareholders of Besicorp Ltd. based on the
135,886 shares of Besicorp Ltd. common stock outstanding on April 25, 2000, the
date of the Merger.
NOTE 5 ESCROW FUND (UNAUDITED)
In connection with the Prior Merger, Old Besicorp deposited $6.5 million into
the Escrow Fund pursuant to the Escrow Agreement. The Escrow Fund initially
served to fund claims for BGI Monitoring Costs, BGI Indemnity Claims and
Litigation Costs, which included the Bansbach Litigation. Therefore, in order to
provide that the Bansbach Litigation is still covered by the Escrow Fund after
the Spin-Off, the Escrow Agreement was amended by the Escrow Agreement Amendment
(effective as of the Spin-Off): (i) to provide, by funding claims for WOM Costs,
that WOM shall be provided from the Escrow Fund with its reasonable expenses (up
to $35,000 per annum) in connection with maintaining WOM's existence, complying
with the Exchange Act and the rules and regulations promulgated thereunder, and
such other matters as may be reasonably necessary to permit the Bansbach
Litigation to continue and (ii) to provide that the Bansbach Litigation will
still be covered by the Escrow Agreement following the Spin-Off. In addition,
BGI Parent remains entitled to reimbursements for BGI Monitoring Costs and BGI
Indemnity Claims and Besicorp remains entitled to reimbursement for Litigation
Costs. As of June 27, 2000, the Escrow Fund contained approximately $5.5
million.
F-10
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GLOSSARY
Acquisition Corp. means Besi Acquisition Corp., a New York corporation and a
wholly owned subsidiary of Parent.
Avalon means Avalon Ventures, LLC, a limited liability company organized under
the laws of Virginia. The only members of Avalon are Michael F. Zinn and his
wife, Valerie Zinn, who owns a nominal interest in Avalon
Bansbach Litigation means a shareholder derivative action commenced in August
1997 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.
Besicorp means Besicorp Ltd.
Besicorp Assumed Matters means the Existing Litigation and other matters to be
prosecuted or defended by Besicorp pursuant to the Indemnification Agreement.
Besicorp Board means the Board of Directors of Besicorp.
Besicorp Common Stock means the common stock, par value $.01 per share, of
Besicorp.
Besicorp Deferred Payment Right means the right to Besicorp Deferred Payments.
Besicorp Deferred Payments mean the Deferred Payments and the Escrow Fund
Payments.
Besicorp Holdings means Besicorp Holdings, Ltd., a New York corporation.
BGI Acquisition means BGI Acquisition Corp., a wholly owned subsidiary of BGI
Parent, and a party to the Prior Plan of Merger.
BGI Indemnity Claims means all claims for indemnity made by BGI Parent pursuant
to the Indemnification Agreement, including any claims of BGI Parent with
respect to the Besicorp Assumed Matters arising from the failure of Besicorp to
diligently prosecute or defend such Besicorp Assumed Matters, BGI Monitoring
Costs and any payment of fees and expenses of the payment agent pursuant to the
Prior Plan of Merger.
BGI Monitoring Costs means BGI Parent's out-of-pocket expenses (not to exceed
$40,000 per year) incurred if it is represented by counsel with respect to the
Besicorp Assumed Matters and the Bansbach Litigation.
BGI Parent means BGI Acquisition LLC, a party to the Prior Plan of Merger.
Buyer means Parent and Acquisition Corp.
CC&C means Citrin Cooperman & Company, LLP.
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Contributed Assets mean the interests in the Bansbach Litigation that Besicorp
received pursuant to the Prior Contribution Agreement as a result of the Prior
Merger Order (subject to WOM's agreement to return such interests if a Prior
Merger Order Reversal occurs)
Contribution means the contribution of the Contributed Assets to WOM pursuant to
the Contribution Agreement.
Contribution Agreement means the Contribution and Distribution Agreement by and
between Besicorp and WOM.
Deferred Payments mean the additional cash payments, if any, to be paid by the
Surviving Corporation equal to (i) the sum of all additional amounts received by
Besicorp which are required to be paid pursuant to the Plan of Merger to the
Outside Participating Shareholders (net of corporate taxes for such amounts)
divided by (ii) the number of Outside Participating Shareholders' Shares.
Derivative Litigation means the Bansbach Litigation and the Lichtenberg
Litigation.
Distributed Businesses means Old Besicorp's photovoltaic and independent power
development businesses.
Distribution means a dividend of one share of WOM Common Stock immediately prior
to the Merger for each share of Besicorp Common Stock outstanding on such date.
Entitled Holders mean the holders of Besicorp Common Stock as of the Spin-Off
Record Date.
Escrow Agent means Robinson Brog as the escrow agent pursuant to the Escrow
Agreement.
Escrow Agreement means the escrow agreement entered into on March 22, 1999 by
Besicorp and certain other parties as amended or to be amended by the Escrow
Agreement Amendment.
Escrow Agreement Amendment means Amendment No. 1 to the Escrow Agreement,
dated as of February 23, 2000, to be effective as of the date of the Spin-Off,
by and between Besicorp, WOM and certain other parties.
Escrow Fund means monies held by the Escrow Agent pursuant to the Escrow
Agreement.
Escrow Fund Determination Procedure means the Escrow Agent's receipt of (i) the
joint written direction of BGI Parent, WOM and Besicorp to release funds from
the Escrow Fund, (ii) a written instrument representing a final and
non-appealable order with respect to the disposition of funds from the Escrow
Fund 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.
Escrow Fund Payments means additional cash payments equal to the Remaining
Proceeds being distributed by the Escrow Agent divided by the Total Shares.
Exchanges means the New York Stock Exchange, the American Stock Exchange and the
Nasdaq Stock Market, Inc.
Existing Litigation means certain litigation specified in the Indemnification
Agreement.
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Indemnification Agreement means the indemnification agreement between BGI
Parent, BGI Acquisition and Besicorp dated March 22, 1999.
Instructions mean Besicorp's irrevocable instructions to the Escrow Agent to
release the Escrow Fund Payment Distributions to the Payment Agent for
distribution to the Outside Participating Shareholders.
Lichtenberg Litigation means a shareholder derivative action commenced on March
29, 1993 in New York Supreme Court, Ulster County, entitled Lichtenberg v.
Michael F. Zinn, Steven I. Eisenberg, and Martin E. Enowitz, et al., Index No.
93-1987. This action has been dismissed.
Litigation Costs means costs and expenses relating to (i) Besicorp Assumed
Matters; and (ii) litigation arising out of or relating to any such Besicorp
Assumed Matters; (iii) indemnification of claims against Old Besicorp's
directors and officers (prior to the Prior Merger) for actions in their official
capacity preceding the date of the Prior Merger; or (iv) in connection with
matters arising out of or relating to the Prior Merger.
March Complaint means the complaint in the March Litigation.
March Director Defendants mean the Old Besicorp Board consisting of Michael F.
Zinn, Michael Daley, Melanie Norden, Gerald Habib and Richard Rosen.
March Litigation means a class action commenced on March 5, 1999, in the United
States District Court for the Southern District of New York, entitled James
Lichtenberg and John Bansbach v. Besicorp Group Inc., BGI Acquisition LLC, BGI
Acquisition Corp. et al.
Merger means the merger of Acquisition Corp. with and into Besicorp pursuant to
the Plan of Merger.
Old Besicorp means Besicorp Group Inc, which owned all of the shares of Besicorp
prior to the Prior Distribution.
Old Besicorp Board means Old Besicorp's board of directors.
Parent means Besicorp Holdings, Ltd., a New York corporation.
Payment Agent means Continental or such other person designated by the parties
prior to the Effective Date as the payment agent for the Plan of Merger.
Plan of Merger means the Amended and Restated Agreement and Plan of Merger,
dated as of November 24, 1999 by and among Besicorp, Parent and Acquisition
Corp.
Prior Assignment of the Derivative Litigation means Old Besicorp's assignment to
Besicorp of the contingent assets and/or liabilities comprising Old Besicorp's
interests in the Derivative Litigation.
Prior Contribution means Old Besicorp's distribution of the Distributed
Businesses to Besicorp.
Prior Contribution Agreement means the Contribution and Distribution Agreement
dated March 22, 1999 by and among Besicorp and Old Besicorp.
Prior Distribution means a dividend on March 22, 1999 of one share of Besicorp
Common Stock for each 25 shares of Old Besicorp's common stock outstanding on
such date.
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Prior Merger means the merger effectuated on March 22, 1999 pursuant to the
Prior Plan of Merger as a result of which Old Besicorp was acquired by BGI
Parent.
Prior Merger Consideration means the aggregate merger consideration paid
pursuant to the Prior Plan of Merger.
Prior Merger Order means the order of the Unites States District Court for the
Southern District of New York in the March Litigation issued on March 18, 1999,
which order, among other things, required Old Besicorp to assign to Besicorp the
contingent assets and liabilities comprising Old Besicorp's interests in the
Bansbach Litigation and the Lichtenberg Litigation.
Prior Merger Order Reversal means a reversal, revocation or other action,
however designated, which nullifies such part of the Prior Merger Order that
required the Prior Assignment of the Derivative Litigation so long as such
reversal, revocation or other action is subject to no further appeal.
Prior Merger Parties means BGI Acquisition, BGI Parent and Old Besicorp.
Prior Plan of Merger means the agreement and plan of merger between Old
Besicorp, BGI Acquisition and BGI Parent, as a result of which Old Besicorp was
acquired on March 22, 1999 by BGI Parent.
Prior Spin-Off means the Prior Contribution and the Prior Distribution.
Proceeding means a proceeding in the United States District Court for the
Southern District of New York, in connection with contributions to the 1992
election campaign of Congressman Maurice Hinchey.
Purchaser Indemnitees means BGI Parent, Old Besicorp and its subsidiaries and
their respective affiliates and agents.
Rights means restricted stock, options, including restricted stock options
pursuant to which restricted stock may be acquired, warrants, and other rights
to acquire shares of WOM Common Stock.
Robinson Brog means Robinson Brog Leinwand Greene Genovese & Gluck P.C.
Spin-Off means the Contribution and the Distribution effectuated immediately
prior to the Merger.
Trust means The Zinn Family Charitable Trust.
WOM means WOM, Inc., a New York corporation and wholly-owned subsidiary of
Besicorp which was distributed to the holders of Besicorp Common Stock pursuant
to the Spin-Off.
WOM Board means the Board of Directors of WOM.
WOM Common Stock means the common stock, par value $.01 per share, of WOM.
WOM Costs means (i) reasonable expenses incurred by Besicorp or WOM in
connection with (a) the formation of WOM, (b) the Spin-Off (including the cost
of distributing the shares of WOM's Common Stock (including the fees and
expenses of Continental)) and (c) the preparation and filing of the registration
statement on Form 10-SB registering the WOM Common Stock under the Securities
Exchange Act of 1934, as amended, (ii) WOM's reasonable expenses (up to $35,000
per annum) (a) to maintain its existence, (b) to comply with the Exchange Act
and the rules and regulations promulgated
G-4
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thereunder, and (c) for such other matters as may be reasonably necessary to
permit the Bansbach Litigation to continue and (iii) WOM Litigation Costs.
WOM Litigation Costs means WOM's costs and expenses relating to (a) the Bansbach
Litigation, and (b) litigation arising out of or relating to the Bansbach
Litigation, the Spin-Off and WOM's existence.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
WOM, Inc.
By: /s/ Michael F. Zinn
--------------------------
Michael F. Zinn, President
June 29, 2000
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Signature Title Date
/s/Michael F. Zinn
---------------
Michael F. Zinn Chairman of the Board, June 29, 2000
Chief Executive Officer
and President
(principal executive officer)
/s/Frederic M. Zinn
----------------
Frederic M. Zinn Executive Vice President June 29, 2000
and Director
/s/James E. Curtin
---------------
James E. Curtin Vice President, Controller June 29, 2000
(principal financial and
accounting officer)
