AMENDMENT NO. 1
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
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WOM, Inc.
(Name of Small Business Issuer in its charter)
New York 14-1818862
(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
each class is to be registered
None None
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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 effectuated 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
WOM, INC.
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
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Item
No. Item Caption Location in Information Statement
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PART I
1. Business "SUMMARY;" "BUSINESS;" "RISK
FACTORS;" "THE CONTRIBUTION AND
THE SPIN-OFF;" "RELATIONSHIP
BETWEEN WOM AND BESICORP
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
HISTORICAL AND PRO FORMA
FINANCIAL DATA;" and
"MANAGEMENT'S DISCUSSION AND
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ANALYSIS OR PLAN OF
OPERATIONS."
3. Properties "BUSINESS."
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;"
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 WOM
AND BESICORP AFTER THE SPIN-
OFF;" "THE MERGER;" and "CERTAIN
RELATIONSHIPS AND RELATED
TRANSACTIONS."
8. 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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PART II
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1. Market for Common
Equity and Related
Stockholder Matters "SUMMARY;" "RISK FACTORS;"
"DESCRIPTION OF THE CAPITAL
STOCK;" "LISTING AND TRADING
OF WOM COMMON STOCK" AND
"DIVIDEND POLICY."
2. Legal Proceedings "BUSINESS."
5. Indemnification of Directors
and Officers "LIABILITY AND INDEMNIFICATION
OF DIRECTORS AND OFFICERS."
PART F/S
F/S. Financial Statements "CAPITALIZATION;" "SELECTED
HISTORICAL AND PRO FORMA
FINANCIAL DATA" and
Financial Statements Beginning
on Page F-1.
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INFORMATION NOT INCLUDED IN INFORMATION STATEMENT
PART II
Item 3 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
Item 4 Recent Sales of Unregistered Securities.
Following the organization of WOM, Inc. ("WOM"), on December 14,
1999, Besicorp Ltd. ("Besicorp") contributed $100 to WOM for 100 shares of WOM's
common stock that WOM 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, Besicorp became the sole shareholder of WOM. Besicorp remains the
sole shareholder and it is expected that it will
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remain the sole shareholder until the consummation of the Spin-Off, at which
time all of the shares of WOM's common stock issued to Besicorp (including any
additional shares issued to Besicorp subsequent to the date hereof) will be
distributed on a pro rata basis to the holders of Besicorp's common stock
pursuant to the Spin-Off.
PART III
Item 1 Exhibits.
The following documents are filed as exhibits hereto:
Exhibit No. Description
- ----------- ------------
2.1 Contribution and Distribution Agreement by and
between Besicorp and WOM*.
3(i) Certificate of Incorporation of WOM, Inc.**
3(ii) By-Laws of WOM, Inc.*
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")**
10.2 Escrow Agreement (the "Escrow Agreement") dated as of
March 22, 1999 by and among Besicorp, BGI, LLC and
BGI Acquisition.**
10.3 Amendment No.1 to the Escrow Agreement dated as of
February 23, 2000 by and among Besicorp, BGI, LLC and
WOM*
27 Financial Data Schedule - December 31, 1999**
* To be filed by amendment.
** Previously filed
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SIGNATURES
Pursuant to the requirement of 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.
WOM, Inc.
By: /s/ Michael F. Zinn
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Name: Michael F. Zinn
Title: President and Chief Executive Officer
March 14, 2000
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Besicorp Ltd.
1151 Flatbush Road
Kingston, New York 12401
April [ ], 2000
Dear Shareholder of Besicorp Ltd.:
On or about April [ ], 2000, under a plan (the "Spin-Off") approved by
Besicorp's Board of Directors, Besicorp's contingent assets and liabilities
comprising the Bansbach Litigation will become a separate independent company -
WOM, Inc. - and all of the shares of WOM's Common Stock (the "WOM Stock") will
be issued to Besicorp's shareholders on a pro rata basis as a stock dividend.
The Spin-Off will not affect your ownership of Besicorp's Common Stock
("Besicorp Stock"). Shortly after the Spin-Off, Besicorp will merge with Besi
Acquisition Corp. (the "Merger") and your shares of Besicorp Stock will be
converted into merger consideration.
For each share of Besicorp Stock you own on April [ ], 2000, you
will become an owner of one share of WOM Stock.
WOM will engage in only one activity: maintaining an existence so that
the Bansbach Litigation may be maintained after the Merger. It is expected that
WOM will be managed by certain of Besicorp's current executive officers and will
be located in Besicorp's current headquarters. The enclosed Information
Statement contains details on the Spin-Off and WOM, Inc.
Following the Spin-Off, you will receive certificates for your shares
of WOM Stock from Besicorp's transfer agent, Continental Trust & Stock Transfer
Company.
The Information Statement provides you with information explaining how
you should calculate the tax basis for your shares of Besicorp and WOM Stock.
We urge you to read the enclosed information statement carefully. For
questions relating to the issuance or trading of shares of WOM Stock, please
call Continental Trust & Stock Transfer Company, at 212-509-4000 x 535. For
other questions addressed to Besicorp or WOM, please contact Susan Whitaker at
Besicorp at 914-336-7700, ext. 104.
Sincerely,
Michael F. Zinn Michael F. Zinn
Chairman of the Board, President and Chief Executive
President and Chief Executive Officer Officer
Besicorp Ltd. WOM, Inc.
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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 OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PRELIMINARY INFORMATION STATEMENT
SUBJECT TO COMPLETION, DATED MARCH [ ], 2000
WOM, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
We are furnishing you with this Information Statement in
connection with Besicorp's distribution of all of the outstanding shares of WOM
Common Stock of WOM, Inc., a New York corporation and wholly owned subsidiary of
Besicorp, to the holders of record of shares of Besicorp Common Stock as of the
Spin-Off Record Date. These shares will be distributed immediately prior to the
Merger. You will receive one share of WOM Common Stock for each share of
Besicorp Common Stock you own. You will not pay for the shares of WOM Common
Stock you will receive in the Spin-Off. CERTAIN CAPITALIZED TERMS USED IN THIS
INFORMATION STATEMENT ARE DEFINED IN APPENDIX 1 HERETO.
WOM was formed in December 1999 for the purpose of effectuating the
Spin-Off, which Besicorp is effectuating solely in order to comply with the
intent of the Prior Merger Order (which resulted in the assignment of the
Bansbach Litigation by Old Besicorp to Besicorp so that the Bansbach Litigation
could be maintained following the Prior Merger). The Bansbach Litigation is a
shareholder derivative action that was commenced in August 1997 in the New York
Supreme Court, Ulster County, in which Old Besicorp was named as a nominal
defendant and the other named defendants were various officers and directors of
Old Besicorp. See "Business." The Plan of Merger by and among Besicorp and the
Buyer requires Besicorp to effectuate the Spin-Off before effectuating the
Merger unless the Bansbach Litigation is not pending at such time. Therefore
Besicorp will effectuate the Spin-Off only if (i) all of the other conditions to
the Merger have then been satisfied or waived and (ii) the Bansbach Litigation
is then pending. Your receipt of shares of WOM Common Stock ordinarily would be
a taxable event for you; however, since Besicorp is valuing the shares of WOM
Common Stock at $0.00
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per share, you will most likely receive no dividend income. See "Material
Federal Income Tax Consequences."
Prior to the Spin-Off Record Date, (i) Besicorp contributed to
WOM the interests in the Bansbach Litigation that Besicorp had received from Old
Besicorp as a result of the Prior Merger Order, and (ii) the Escrow Agreement
was amended by the Escrow Agreement Amendment to permit WOM to receive
reimbursement for WOM Costs.
We are assuming in this Preliminary Information Statement that
the following events have occurred: (i) the execution of the Contribution
Agreement, (ii) the effectuation of the Contribution, (iii) the execution of the
Escrow Agreement Amendment and (iv) the adoption of the Plan of Merger by
Besicorp's shareholders. However, at the time of this Preliminary Information
Statement such events have not occurred. Nonetheless we expect these events to
occur prior to the finalization and distribution of the Information Statement.
In addition we are assuming that none of the Management Restricted Shares have
been or will be cancelled prior to the Spin-Off. See "The Contribution and the
Spin-Off" and "Relationship Between WOM and Besicorp after the Spin-Off."
There is currently no public trading market for the shares of
WOM Common Stock. We have no intention of taking any action to make it possible
to trade shares of WOM Common Stock. WOM has not applied for listing of the WOM
Common Stock on any Exchange and the WOM Common Stock does not meet the stated
listing requirements of any Exchange. Accordingly, it is not anticipated that a
regular trading market will develop in the WOM Common Stock. See "Listing and
Trading of WOM Common Stock."
In reviewing this Information Statement, you should carefully
consider the matters described under the caption "RISK FACTORS" commencing on
page [ ].
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THIS INFORMATION STATEMENT SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY
STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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NO SHAREHOLDER APPROVAL IS REQUIRED OR SOUGHT IN CONNECTION
WITH THE SPIN-OFF. EACH SHAREHOLDER OF BESICORP AT THE SPIN-OFF
RECORD DATE WILL AUTOMATICALLY BE ENTITLED TO RECEIVE SHARES OF
WOM COMMON STOCK IN THE SPIN-OFF. WE ARE NOT ASKING YOU FOR A
PROXY, YOU SHOULD NOT SEND US A PROXY AND YOU ARE NOT REQUESTED
TO TAKE ANY ACTION WITH RESPECT TO YOUR SHARES.
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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 _________, 2000.
THIS INFORMATION STATEMENT IS BEING FURNISHED SOLELY TO
PROVIDE INFORMATION TO SHAREHOLDERS OF BESICORP WHO WILL RECEIVE
SHARES OF WOM 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 WOM OR BESICORP. EXCEPT AS OTHERWISE
INDICATED, THE INFORMATION CONTAINED IN THIS INFORMATION STATEMENT
IS BELIEVED TO BE ACCURATE AS OF [ ], 2000. CHANGES MAY
OCCUR AFTER THAT DATE, AND NEITHER WOM NOR BESICORP WILL UPDATE
THE INFORMATION CONTAINED HEREIN EXCEPT IN THE NORMAL COURSE OF
THEIR RESPECTIVE PUBLIC DISCLOSURES.
ADDITIONAL INFORMATION
WOM has filed with the SEC a Registration Statement on Form
10-SB under the Exchange Act with respect to the shares of WOM Common Stock to
be received by the holders of Besicorp 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 only summaries and are not necessarily complete. For complete
information regarding these matters, you should review the applicable exhibit or
schedule to the Registration Statement. The Registration Statement and the
exhibits and schedules thereto filed by WOM 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
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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 the effectiveness of the Registration Statement and
the consummation of the Spin-Off, WOM 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 unless such filings are not
required. In addition, WOM will be required to provide annual reports containing
audited financial statements to its shareholders in connection with its annual
meetings of shareholders unless an exception is available for WOM (and WOM will
see if such an exception is available to it). WOM does not intend to hold
shareholder meetings except to the extent it is required to do so. After the
Spin-Off, such reports, proxy statements and other information will be available
for inspection and copying at the 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
WOM'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 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 (i)
costs or difficulties related to our establishment as an independent entity
(including our ability to fund our operations from the Escrow Fund); (ii) the
time it takes to resolve the Bansbach Litigation; and (iii) the outcome of the
Bansbach Litigation. Such 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 Information Statement. 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.
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.
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TABLE OF CONTENTS
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SUMMARY .........................................................................................................9
WOM, Inc.................................................................................................9
THE SPIN-OFF AND THE MERGER..............................................................................9
RISK FACTORS.....................................................................................................13
Risks related to our operations.........................................................................13
Risks related to the Distribution.......................................................................17
CAPITALIZATION...................................................................................................18
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA.................................................................19
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.......................................................20
BUSINESS ........................................................................................................20
THE CONTRIBUTION AND THE SPIN-OFF................................................................................23
Introduction............................................................................................23
The Contribution Agreement..............................................................................23
The terms of the Spin-Off...............................................................................24
Procedure for receiving shares of WOM Common Stock......................................................24
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.........................................................................25
RELATIONSHIP BETWEEN WOM AND BESICORP AFTER THE SPIN-OFF.........................................................27
The Indemnification Agreement...........................................................................27
Escrow Agreement........................................................................................29
Additional Legal Proceedings............................................................................31
MANAGEMENT.......................................................................................................31
Directors and Executive Officers........................................................................31
Executive compensation..................................................................................32
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT..........................................................................................33
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................................................................35
THE MERGER.......................................................................................................36
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DESCRIPTION OF THE CAPITAL STOCK.................................................................................37
Authorized Capital Stock................................................................................37
Common Stock............................................................................................37
Certain effects of authorized and unissued stock........................................................38
DESCRIPTION OF CERTAIN STATUTORY, CHARTER AND BY-LAW PROVISIONS..................................................38
New York Anti-Takeover Law..............................................................................38
Number of Directors; Removal; Vacancies.................................................................39
Shareholder action by written consent; Special Meetings.................................................39
Amendment of By-Law Provisions..........................................................................39
Transfer Agent and Registrar............................................................................39
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS..........................................................39
LISTING AND TRADING OF WOM COMMON STOCK..........................................................................40
EXPENSES OF THE SPIN-OFF.........................................................................................41
INDEPENDENT ACCOUNTANTS..........................................................................................41
DIVIDEND POLICY..................................................................................................42
INDEX TO THE FINANCIAL STATEMENTS OF WOM, INC...................................................................F-1
APPENDIX 1 -- Certain Defined Terms................................................................................
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SUMMARY
We summarize below information contained elsewhere in this
Information Statement. Because this is a summary, it does not contain all the
information that may be important to you. Certain capitalized terms used in this
summary are defined in Appendix 1 hereto. SHAREHOLDERS ARE URGED TO READ
CAREFULLY THIS INFORMATION STATEMENT IN ITS ENTIRETY.
WOM, INC.
After the Spin-Off, WOM will be an independent, publicly held
company which will hold the interests in the Bansbach Litigation that Besicorp
received from Old Besicorp pursuant to the Contribution Agreement as a result of
the Prior Merger Order. We will engage in only one activity: maintaining an
existence so that the Bansbach Litigation may be maintained after the Merger.
See "The Contribution and the Spin-Off." We use Besicorp's executive offices;
therefore we are located at 1151 Flatbush Road, Kingston, New York, and our
telephone number is (914) 336-7700.
THE SPIN-OFF AND THE MERGER
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DISTRIBUTING CORPORATION Besicorp Ltd. ("Besicorp"). References to
Besicorp include its subsidiaries, except where the
context otherwise requires.
DISTRIBUTED CORPORATION WOM, Inc. ("WOM").
OVERVIEW OF WOM Pursuant to the Contribution Agreement by and
between Besicorp and WOM, we hold the interests
in the Bansbach Litigation that Besicorp received
from Old Besicorp pursuant to the Prior
Contribution Agreement as a result of the Prior
Merger Order. In addition, we are entitled to receive
repayment of WOM Costs from the Escrow Fund
from time to time. We will engage in only one
activity: maintaining an existence so that the
Bansbach Litigation may be maintained after the
Merger. However, we have no intention of
providing any assistance to him. We do intend to
defend yourself from liability to the extent we deem
appropriate. If a Prior Merger Order Reversal
occurs before the Spin-Off, the Spin-Off will not
occur; if a Prior Merger Order Reversal occurs after
the Spin-Off, WOM will be dissolved. See "The
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Contribution and the Spin-Off--The Contribution
Agreement" and "Business."
Michael F. Zinn, the Chairman of Board,
President and Chief Executive Officer of
Besicorp, will be the Chairman of the Board,
President and Chief Executive Officer of WOM at
the time of the Spin- Off.
DISTRIBUTION RATIO You will receive one share of WOM Common Stock
for each share, including Dissenters' Shares, of
Besicorp Common Stock (other than Restricted
Shares of Besicorp Common Stock) you own as of
the Spin-Off Record Date. If you hold Restricted
Shares of Besicorp Common Stock, you will receive
one share of WOM Restricted Stock (i.e., a share of
WOM Common Stock containing restrictions on its
transferability) for each Restricted Share you own as
of the Spin-Off Record Date. See "The
Contribution and the Spin-Off--Terms of the Spin-
Off."
SPIN-OFF RECORD DATE The Spin-Off will be consummated on the Spin-Off
Record Date. The Spin-Off Record Date is expected
to be the same day as the Effective Date. Therefore,
the holders of Besicorp Common Stock on the Spin-
Off Record Date will become the shareholders of
WOM. See "The Contribution and the Spin-Off--
Terms of the Spin-Off."
SHARES TO BE DISTRIBUTED Assumed to be approximately 135,886 shares of
WOM Common Stock (based on the number of
shares of Besicorp Common Stock outstanding on
April [ ], 2000 and assuming (i) that no shares of
Besicorp Common Stock are issued or cancelled
prior to the Spin-Off and (ii) that the 4,000 Disputed
Shares are outstanding at the time of the Spin-Off ).
See "The Contribution and the Spin-Off--Terms of
the Spin-Off."
OVERVIEW OF THE SPIN-OFF The Spin-Off is being effectuated solely in order
to comply with the intent of the Prior Merger
Order which required Old Besicorp to assign
to Besicorp
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the contingent assets and/or liabilities
comprising Old Besicorp's interests in
the Bansbach Litigation; the Bansbach
Litigation is a shareholder derivative
action, so that if there is a recovery
Old Besicorp, as the corporation subject
to the litigation, and not the named
plaintiff, will be the recipient of the
recovery. If the Bansbach Litigation is
maintained and if the plaintiff in such
litigation prevails, approximately $1 million
might be recoverable, excluding interest and
punitive damages.
The only shareholder of the Surviving Corporation
following the Merger will be Parent. Consequently,
consummation of the Merger ordinarily would cause
the plaintiff in the Bansbach Litigation to lose
his status as a shareholder of Besicorp, and
therefore ordinarily would cause him to lose his
right to prosecute the Bansbach Litigation. Therefore,
in order to avoid terminating the Bansbach
Litigation as a result of the Merger, Besicorp
decided to effect the Spin-Off and to assign
to WOM the interests in the Bansbach Litigation
(i.e., the contingent assets and/or liabilities)
that Besicorp has received from Old Besicorp as
a result of the Prior Merger Order.
Management believes that these contingent assets
that have been assigned generally consist of
any recovery to which Old Besicorp is entitled and
these contingent liabilities generally consist of
any damages for which Old Besicorp is liable upon
the resolution of the Bansbach Litigation.
The Contribution followed by the Distribution will
separate from Besicorp all of the interests in the
Bansbach Litigation that Besicorp had received from
Old Besicorp as a result of the Prior Merger Order.
Thereafter, WOM and not Besicorp will be entitled
to any proceeds if there is a judgment or settlement
in favor of the plaintiff; and WOM and not Besicorp
will be liable for any damages for which Old
Besicorp, as the subject corporation, is
liable. WOM and the other defendants will be liable
for such damages, but they will undoubtedly seek
reimbursement from the Escrow Fund unless either
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(i) the judgment prohibited such reimbursement
or (ii) in the case of the defendants (other
than WOM) indemnification is impermissible under
the NYBCL.
The Spin-Off will be effectuated only if
(i) all of the other conditions to
the Merger have been satisfied or waived
and (ii) the Prior Merger Order is still
in effect. Besicorp has appealed the
Prior Merger Order to the United States
Court of Appeals for the Second Circuit
for a hearing en banc. If the Second
Circuit en banc reverses the Prior
Merger Order before the Spin-Off and
such reversal is subject to no further
appeal, the Spin-Off will not be effectuated.
See "The Contribution and the Spin- Off--Terms
of the Spin-Off."
OVERVIEW OF THE MERGER In the Merger, Acquisition Corp. will be merged
with and into Besicorp; Besicorp will be the
Surviving Corporation and will become a wholly
owned subsidiary of Parent. Mr. Zinn and members
of his immediate family indirectly own 100% of
Parent's common stock. At the Effective Date of the
Merger, the Outside Participating Shareholders'
Shares (i.e., each issued and outstanding share of
Besicorp Common Stock other than the shares held
by the Buyer and Dissenters) will be converted into
the right to receive the Merger Consideration which
consists of (i) the Cash Merger Consideration of at
least $58.87 in cash, subject to adjustment in certain
circumstances and (ii) the right to Besicorp Deferred
Payments in certain circumstances which are set
forth in the Plan of Merger and described in the
proxy statement of Besicorp dated March [ ],
2000.
Dissenters will receive the appraised value of
their shares of Besicorp Common Stock in
accordance with the NYBCL and after compliance
with all statutory requirements. The
Buyer's shares of Besicorp Common Stock will
be cancelled.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
<S>
<C>
The consummation of the Merger is subject to the
satisfaction or waiver of various conditions. See
"The Merger" and "Relationship between WOM and
Besicorp after the Spin-Off."
RELATIONSHIP WITH BESICORP After the Merger, Besicorp and WOM will become
AFTER THE MERGER separately owned companies. Besicorp will be
owned by Parent (and Mr. Zinn and members
of his immediate family indirectly own 100%
of Parent's common stock); WOM will be owned
by the Entitled Holders (i.e., the holders
of Besicorp Common Stock as of the Spin-Off
Record Date), including Michael F. Zinn
who will own approximately 44.9% of the
outstanding shares of WOM Common Stock.
However, although Besicorp and WOM will be
separately owned Besicorp has agreed
to furnish WOM free of charge with the
services of Besicorp's employees and
the use of Besicorp's corporate
headquarters to the extent that WOM
determines is reasonably necessary and
for as long as WOM shall seek such
services and the use of such space. Michael
F. Zinn will be one of the two
directors of WOM, President and Chief Executive
Officer.
Besicorp is a party to the Indemnification Agreement
which obligates Besicorp to indemnify BGI Parent,
Old Besicorp and certain other Purchaser Indemnitees
from damages they suffer arising out of, among other
things, Old Besicorp's breach of representations and
warranties set forth in the Prior Plan of Merger and
certain liabilities, taxes and litigation of Old
Besicorp. Besicorp is also a party to the Escrow
Agreement which governs the funds placed by Old
Besicorp in escrow as the Escrow Fund (which
amount to approximately $6.10 million as of March 7,
2000) to, among other things, (a) satisfy Besicorp's
obligations under the Indemnification Agreement and
(b) provide for the payment of, among other things,
certain litigation and related costs.
</TABLE>
11
<TABLE>
<CAPTION>
<S>
<C>
Since Besicorp's costs with respect to the Bansbach
Litigation were covered by the Escrow Fund prior
to the Spin-Off, the Escrow Agreement has been
amended, pursuant to the Escrow Agreement Amendment,
to provide that effective as of the consummation of
the Spin-Off (i) we shall be reimbursed from the
Escrow Fund for our reasonable expenses (up to
$35,000 per annum) (A) to maintain our existence,
comply with the Exchange Act and the rules and
regulations promulgated thereunder, and (B) for
such other matters as may be reasonably necessary to
permit the Bansbach itigation to continue and
(ii) the costs of the Bansbach Litigation will
still be covered by the Escrow Agreement following
the Spin-Off. See "Relationship between WOM and Besicorp
after the Spin-Off."
FEDERAL INCOME TAX Your receipt of shares of WOM Common Stock
CONSEQUENCES (other than WOM Restricted Stock) would
ordinarily be a taxable event for you. The tax
consequences of such receipt vary depending
upon, among other things, your particular
circumstances. You will receive dividend income
equal to the value of the shares of WOM Common
Stock you receive pursuant to the Spin-Off;
however, since Besicorp is valuing the
shares of WOM Common Stock at $0.00 per share,
you should receive no dividend income.
Your receipt of shares of WOM Restricted Stock will
not be a taxable event unless an election under
ss.83(b) of the Code is made. However, an ordinary
income taxable event will occur for you upon the
vesting of such shares of WOM Restricted Stock based
upon the value of the WOM Restricted Stock at the
time of vesting. Shares of WOM Restricted Stock issued
on account of the 1,050 Independent Directors'
Restricted Shares will no longer be restricted after
the Merger, and thus will be subject to tax currently
based upon the value of their shares at the time of
the Merger, but all other shares of WOM Restricted
Stock will still be restricted.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
<S>
<C>
You should read carefully the discussion under
"Material Federal Income Tax Consequences" and you
are urged to consult your tax advisors as to the
tax consequences of the Merger to you under
federal, state, local or any other applicable law.
We have not obtained an opinion of counsel with
respect to the disclosure set forth above and under
"Material Federal Income Tax Consequences."
DISTRIBUTION AGENT, Continental Stock Transfer & Trust Company will
TRANSFER AGENT AND serve as the Distribution Agent for the Spin-Off and
REGISTRAR as the transfer agent and registrar for the WOM
Common Stock.
DISTRIBUTION OF Besicorp will deliver to Continental shares
STOCK CERTIFICATES of WOM Common Stock representing 100% of the
outstanding shares of WOM Common Stock for
distribution to the Entitled Holders. Following the
Merger, Continental will distribute WOM Stock
Certificates to all Entitled Holders. See "The
Contribution and the Spin-Off--Terms of the Spin-
Off."
TRADING MARKET Currently, there is no public trading market for
WOM Common Stock and we do not anticipate that
any such market will develop. We have no intention
of taking any action to make it possible to trade
shares of WOM Common Stock. We have not
applied and do not intend to apply for listing of the
WOM Common Stock on any Exchange and the
WOM Common Stock does not meet the stated
listing requirements of any Exchange. Trading, if
any, in WOM Common Stock will take place only in
the over-the-counter market. See "Listing and
Trading of WOM Common Stock."
</TABLE>
RISK FACTORS
Any investment in shares of WOM Common Stock involves a high degree of
risk. You should consider carefully the following information about these risks,
together with the other information contained in this Information Statement,
before you decide to buy or sell WOM Common Stock.
13
<PAGE>
Risks related to our operations
We have no business activities and therefore expect to have no revenues or
profits.
We do not have any business activities and accordingly we do not expect
to have any future revenues or profits. WOM's principal assets consist of its
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 WOM unless there is a settlement or final
judgment in favor of the plaintiff in the Bansbach Litigation. If there is a
settlement or judgment in favor of the plaintiff, the named plaintiff will be
entitled to collect the reimbursement of certain expenses. 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.
If the Bansbach Litigation is decided in favor of the defendants, we will never
receive any revenues and you will receive no dividends or distributions.
The Bansbach Litigation is our only possible source of revenues.
However, we do intend to defend ourself from liability to the extent we deem
appropriate. . If the Bansbach Litigation is decided in favor of the defendants,
neither the defendants nor anyone else will be required to pay any damages to
WOM and therefore we will receive no money as a result of the Bansbach
Litigation. As there is no likelihood that we will receive any other revenues
(because we are not engaged in any business activities), you will not receive
anything of value from us.
We will not assist in the prosecution of the Bansbach Litigation.
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. However, we do intend to defend ourself from liability to the extent
we deem appropriate.
We will dissolve if the Prior Merger Order is reversed.
If a Prior Merger Order Reversal occurs, we are required, pursuant to
the Contribution Agreement, to return to Besicorp the interests in the Bansbach
Litigation that Besicorp received from Old Besicorp pursuant to the Prior
Contribution Agreement as a result of the Prior Merger Order; in this case we
would have no assets and we would dissolve. See "The Contribution and the
Spin-Off--The Contribution Agreement" and "Business."
14
<PAGE>
We have no cash, and have no expectations of having any revenues and therefore
to pay expenses we are totally dependent upon obtaining reimbursements from the
Escrow Fund.
We have no cash, do not expect to have any revenues and do not
anticipate obtaining any financing. There is no likelihood that we would be able
to obtain any financing (without a guarantee from Mr. Zinn, which guarantee he
is unwilling to provide) from unrelated third parties because we lack assets and
revenues. We will have certain expenses, including franchise taxes, the costs
related to preparing documents required to be filed by public companies
(including the legal fees and the cost of preparing audited annual financials),
the expense of distributing materials to shareholders and the transfer agent's
fees as well as the costs associated with defending the Bansbach Litigation. We
are dependent upon our ability to obtain money from the Escrow Fund to pay these
expenses. 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,
including our preparation of documents required to be filed by public companies.
See "Capitalization," "Management's Discussion and Analysis or Plan of
Operations," "Selected Historical and Pro Forma Financial Data," the Financial
Statements of WOM, Inc. and the Unaudited Pro Forma Financial Information.
We are only entitled to reimbursement from the Escrow Fund in certain
circumstances; if we need money for any reason other than the reasons set forth
in the Escrow Agreement, or if we cannot or do not receive reimbursement from
the Escrow Fund, we may not be able to obtain the necessary money.
We have no revenues, we have less than $100 in cash and cash
equivalents, expect no revenue and 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 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.
WOM's 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)
WOM's 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). It is not a source of funds to the extent
any of the parties to the Escrow Agreement asserts that the expenses were
unreasonable. Also, it is not a source of funds to the extent expenses do not
relate to maintaining our existence, complying with the Exchange Act or
permitting the Bansbach Litigation to continue. In addition, we are dependent
upon the Escrow Fund's containing enough money to permit the release of these
reimbursements to us. However, because the Escrow Fund is also available to
satisfy Besicorp's Litigation Costs and other matters, it is possible (although
unlikely) that such matters will deplete all of the Escrow Funds; if the Escrow
Fund is depleted we will be unable to obtain reimbursement. See "Relationship
15
<PAGE>
between WOM and Besicorp after the Spin-Off -- Escrow Agreement." To the extent
we cannot obtain reimbursement from the Escrow Fund we are not likely to be able
to meet our obligations.
Since our principal shareholder and the Trust own approximately 52.2% of our
shares, they can elect and remove all of our directors and exercise significant
control over us and can sell or liquidate WOM.
We estimate that after the Spin-Off, Michael F. Zinn, the Chairman of
the Board, President and Chief Executive Officer of WOM, will own indirectly
approximately 44.9% and The Zinn Family Charitable Trust will own approximately
7.4% of the then outstanding shares of WOM Common Stock, assuming (i) that no
shares of Besicorp Common Stock are issued or cancelled prior to the Spin-Off
and (ii) that the 4,000 Disputed Shares are outstanding at the time of the
Spin-Off. The holders of more than 50% of the outstanding shares of WOM Common
Stock generally will be able to elect all of the members of the WOM Board.
Consequently, as Mr. Zinn and the Trust will hold approximately 52.2% of the
outstanding shares, if they were to vote their shares in the same manner they
will be able to elect (and remove) the member(s) of the WOM Board and exercise
substantial influence over the outcome of any issues which may be subject to a
vote of our shareholders and our policies and direction. See "Description of the
Capital Stock--Common Stock." In addition, if a prospective purchaser reached an
agreement with Mr. Zinn and the Trust to purchase their shares of WOM Common
Stock and to acquire WOM, their shares of WOM Common Stock would be sufficient
to guarantee shareholder approval of the transaction by which such purchaser
would acquire WOM. In addition, under the NYBCL they can authorize the
dissolution of WOM at any time and for any reason or for no reason at all.
We eliminated certain potential obstacles that may have hindered shareholders
with large holdings from engaging in certain business transactions with us.
Generally, New York corporations are subject to the provisions of
Section 912 of the NYBCL 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. Therefore,
ordinarily, Mr. Zinn, as the beneficial owner of more than 20% of the WOM Common
Stock, would not be able to engage in certain business combinations with WOM 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 those business
combinations unless the business combination were approved by the holders of a
majority of the outstanding voting stock not beneficially owned by Mr. Zinn.
16
<PAGE>
However, the WOM Certificate provides that Section 912 does not apply to WOM.
Therefore, Mr. Zinn, and any other person who qualifies as an Interested
Shareholder, will be able to engage in business combinations with WOM at any
time, subject, to the extent required by the NYBCL (other than in Section 912),
to the approval of such transactions by the WOM Board and/or our shareholders.
See "Description of Certain Statutory, Charter and By-Law Provisions."
No take-over is likely to succeed without our principal shareholder's
assistance.
Because Mr. Zinn and the Trust will own approximately 52.2% of the
outstanding WOM Common Stock after the completion of the Spin-Off, it is likely
that as an initial matter any prospective purchaser would seek their consent
before purchasing shares of WOM Common Stock.
Additional shares can be issued by the Company to Mr. Zinn and/or the Trust and
then if we receive any money as a result of the Bansbach Litigation, their share
of the proceeds will increase.
There will be, after the completion of the Spin-Off, approximately
114,118 unissued and unreserved shares of WOM Common Stock (assuming that
135,886 shares of WOM Common Stock are issued in the Spin-Off). The WOM Board
can authorize, without having to obtain approval of the shareholders, the
issuance of such shares. Consequently, Mr. Zinn, acting in his capacity as the
sole member of the WOM Board, could cause WOM to issue those additional shares
to Mr. Zinn and his affiliates, for nominal consideration or otherwise. As a
result, if we then received any money as a result of the Bansbach Litigation,
the amount of money that we would be able to distribute to shareholders other
than Mr. Zinn and his affiliates would decrease while the amount of money that
Mr. Zinn and his affiliates would receive would increase.
We do not have any officers' or directors' liability insurance which will make
it difficult to attract officers and directors.
We do not have any officers' or directors' insurance, we do not intend to try to
obtain any such insurance, probably we could neither obtain any such insurance
nor pay for such insurance. Because we do not have any such insurance, because
we have only negligible cash with which to indemnify officers and directors and
because the Escrow Fund is not likely to provide the means of indemnifying our
officers and directors, it will be very difficult for us to attract officers or
directors.
Risks related to the Distribution
There has been no prior public market for our stock and it is probable that no
market will develop.
17
<PAGE>
There is currently no existing trading market for WOM Common Stock. We
have not applied and currently we do not intend to apply for the listing of WOM
Common Stock on any Exchange. Accordingly, it is unlikely that a trading market
will develop for the WOM Common Stock. As a result you will probably be unable
to sell your shares of WOM Common Stock. See "Listing and Trading of WOM Common
Stock."
We do not intend to pay cash dividends.
WOM has never declared or paid any cash dividends on the WOM Common
Stock and does not anticipate paying any cash dividends in the immediate future.
See "Dividend Policy."
CAPITALIZATION
The following table sets forth the unaudited capitalization of WOM as
at December 31, 1999 on a historical basis and as at December 31, 1999 on a pro
forma basis.
This table should be read in conjunction with the Financial Statements
of WOM, Inc. and notes thereto, the Unaudited Pro Forma 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 WOM in the future or as it
would have been had the Spin-Off occurred on December 31, 1999.
<TABLE>
<CAPTION>
<S>
<C> <C> <C>
Historical Pro
---------- Adjustments Forma
----------- -----
Long-Term Debt:
Total Long-Term Debt $ 0 $ -- $ 0
=== === =
Shareholders' Equity:
Common Stock-authorized 250,000
shares, $.01 par value, issued and
outstanding 100 shares (historical);
issued and outstanding 135,886
shares (pro forma) $ 1 $1,358(a) $1,359
Paid-in Capital 99 (99)(a) 0
Deficit 0 (1,259)(a) (1,259)
--- ----- -------
Total Combined Equity $100 $ 0 $ 100
--- ----- ------
Total Shareholders' Equity $100 $ 0 $ 100
--- ----- ------
Total Capitalization: $100 $ 0 $ 100
=== ===== ======
- -----------------------
</TABLE>
18
<PAGE>
(a) Gives effect to the issuance of 135,886 shares of WOM Common Stock.
See "Unaudited Pro Forma Financial Information."
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth certain historical financial data for
the Contributed Assets as at December 31, 1999. The historical financial data
was derived from the Financial Statements of WOM, Inc. included elsewhere in
this Information Statement.
The summary pro forma balance sheet at December 31, 1999 reflects: (i)
the transfer to WOM of the interests in the Bansbach Litigation that Besicorp
received from Old Besicorp pursuant to the Prior Contribution Agreement as a
result of the Prior Merger Order; and (ii) the distribution of the shares of WOM
Common Stock to the Entitled Holders assuming that these transactions were
consummated at December 31, 1999. 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 Contributed Assets had the transactions reflected in the data actually been
consummated on the dates assumed and is not necessarily indicative of WOM's
future performance as an independent entity. The pro forma adjustments, as
described in the Notes to the Unaudited Pro Forma Balance Sheet are based on
available information and upon certain assumptions that we believe 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 Financial Statements of WOM, Inc. and notes thereto and the Unaudited Pro
Forma Financial Information and notes thereto included elsewhere in this
Information Statement.
Balance Sheet Data (in thousands)
Pro Forma
December 31, 1999 December 31, 1999
----------------- -----------------
(unaudited)
Net working capital $.1 $.1
Total Assets .1 .1
Long-term debt - -
Shareholders' Equity .1 .1
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
WOM was established in December 1999 to 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 (a shareholder derivative litigation which is described below under
"Relationship Between WOM and Besicorp After the Spin-Off -- Additional Legal
Proceedings"), so that the Bansbach Litigation and the Lichtenberg Litigation
could be maintained following the Prior Merger. Besicorp established WOM and
assigned to WOM 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 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. The Lichtenberg Litigation is not being assigned to us because the
complaint in the Lichtenberg Litigation has been dismissed. The Bansbach
Litigation is a shareholder derivative action that was commenced in August 1997
by John Bansbach in connection with the Proceeding.
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 ourself from liability to the extent we deem appropriate.
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 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. See "Relationship Between WOM and
Besicorp after the Spin-Off -- The Escrow Agreement."
20
<PAGE>
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.
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 party
to no 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).
Liquidity and Capital Resources
As of December 31, 1999, we had cash of $100, which represented our initial
capitalization. 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). It is not a source of funds to the extent any of the
parties to the Escrow Agreement asserts that the expenses were unreasonable.
Also, it is not a source of funds to the extent of expenses unrelated to
maintaining our existence, complying with the Exchange Act or permitting the
Bansbach Litigation to continue. In addition, we are dependent upon the Escrow
Fund's containing enough money to permit the release of these reimbursements to
us. However, because the Escrow Fund is also available to satisfy Besicorp's
Litigation Costs and other matters, it is possible that such matters will
deplete all of the Escrow Funds. If the Escrow Fund is depleted, we will be
unable to obtain reimbursement. See "Relationship between WOM and Besicorp after
the Spin-Off -- Escrow Agreement." To the extent we cannot obtain reimbursement
from the Escrow Fund we would be unable to meet our obligations.
21
<PAGE>
Because management believes that the Escrow Fund will be available to satisfy
any claims against WOM resulting from the Bansbach Litigation, we do not believe
that the assumption of such contingent liabilities will have any adverse effect
on our financial position or liquidity. Management also believes that the Escrow
Fund, the amount of which was pproximately $6,104,869 at March 7, 2000, 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.
BUSINESS
WOM was established in December 1999 solely to 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 (a shareholder derivative litigation which is
described below under "Relationship Between WOM and Besicorp After the Spin-Off
- -- Additional Legal Proceedings"), so that the Bansbach Litigation and the
Lichtenberg Litigation could be maintained following the Prior Merger. Besicorp
established WOM and assigned to WOM 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 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. The Lichtenberg Litigation is not being assigned to us because the
complaint in the Lichtenberg Litigation has 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 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 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 recently 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.
22
<PAGE>
Old Besicorp paid certain legal expenses incurred by certain officers
and directors in connection with the Proceeding. As of March 31, 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. The officers and directors
agreed to repay amounts paid by Old Besicorp on their behalf in certain
circumstances. See "Certain Relationships and Related Transactions."
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 the Proceeding; (d) all
harm to Old Besicorp's reputation and goodwill resulting from the Proceeding;
(e) punitive damages; and (f) 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.
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.
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.
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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
(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 two
Derivative Litigations, 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 asserted four claims for relief: (i) a claim
against 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 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 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, 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 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 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 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 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.
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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 intends to move for rehearing en banc of the
decision granting, in part, the motion to dismiss the appeal.
Prior to the Spin-Off, the Bansbach Litigation was a Besicorp Assumed
Matter and Besicorp's costs were funded from the Escrow Fund; following the
Spin-Off WOM's costs will be funded from the Escrow Fund. The parties to the
Bansbach Litigation are currently engaged in the discovery process.
The Prior Merger Order did not provide for the occurrence following the
Prior Merger of a transaction such as the Merger. The effectuation of the Merger
ordinarily would adversely affect the plaintiff's 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 us because the complaint in the Lichtenberg Litigation has
been dismissed. See "Relationship Between WOM and Besicorp After the Spin-Off --
Additional Legal Proceedings."
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 ourself from liability to the extent we deem appropriate.
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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 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. See "Relationship Between WOM
and Besicorp after the Spin-Off -- The Escrow Agreement."
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.
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 party to no 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).
THE CONTRIBUTION AND THE SPIN-OFF
Introduction
The only shareholder of the Surviving Corporation following the Merger
will be Parent. Consummation of the Merger ordinarily would cause the plaintiff
in the Bansbach Litigation to lose his status as a shareholder of Besicorp, and
therefore ordinarily would cause him to lose his right to prosecute the Bansbach
Litigation. If the Bansbach Litigation were not maintained certain of Besicorp's
executive officers and directors who are defendants in the Bansbach Litigation,
including Michael F. Zinn, Besicorp's Chairman of the Board, President and Chief
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Executive Officer, would benefit and certain potential Besicorp Deferred
Payments that holders of Besicorp Common Stock will receive as part of the
Merger Consideration effectively would be eliminated. However, if the Bansbach
Litigation were maintained and if the plaintiff in such litigation prevailed,
approximately $1 million might be recoverable, excluding interest and punitive
damages, if any, and since the Bansbach Litigation is a shareholder derivative
action, the beneficiary of any such recovery should be the subject corporation
(i.e., Besicorp prior to the Spin-Off and WOM after the Spin-Off). Therefore,
in order to avoid terminating the Bansbach Litigation as a result of the Merger,
Besicorp decided to effect the Spin-Off.
Besicorp formed WOM in December 1999 to effectuate the Spin-Off which
is a condition to the consummation of the Merger (unless the Bansbach Litigation
is not pending immediately prior to the Effective Date). Mr. Zinn, the Chairman
of the Board, President and Chief Executive Officer of Besicorp, will be the
Chairman of the Board, President and Chief Executive Officer of WOM at the time
of the Spin-Off and certain of the officers of Besicorp prior to the Merger will
serve WOM in the capacities in which they currently serve Besicorp, but they
will not be compensated for the services they render on behalf of WOM. The
Merger will not be effectuated unless the Spin-Off has been effectuated (unless
a Prior Merger Order Reversal occurs prior to the Effective Date). The Spin-Off
will not occur if (i) any of the other conditions to the Merger has not been
waived or satisfied or (ii) a Prior Merger Order Reversal occurs before such
time.
Accordingly, Besicorp and WOM entered into the Contribution Agreement
pursuant to which Besicorp contributed the Contributed Assets to us and it is
anticipated that on April [
], 2000, the Besicorp Board will declare the Distribution of one share of WOM
for each share of Besicorp Common Stock outstanding on the Spin-Off Record Date.
The Distribution will be payable to the holders of record of Besicorp Common
Stock at the close of business on the Spin- Off Record Date. No shares of WOM
Common Stock will be issued with respect to shares of Besicorp Common Stock held
in treasury. If all of the conditions to the Closing have been waived or
satisfied, the Spin-Off will occur on the Effective Date and therefore the
Effective Date will be the Spin-Off Record Date.
The Contribution Agreement
Prior to the Spin-Off, 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 Reversaal occurs. As a result of
the Contribution, WOM and not Besicorp will be entitled to any proceeds if there
is a judgment or settlement in favor of the plaintiff; and WOM and not Besicorp
will be liable for any damages for which the subject corporation is liable. If
the Bansbach Litigation is maintained and if the plaintiff in such litigation
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prevails, approximately $1 million might be recoverable, excluding interest and
punitive damages, if any, by WOM. 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.
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. See "Relationship between WOM and
Besicorp after the Spin-Off -- the Escrow Agreement."
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.
The terms of the Spin-Off
As a result of the Spin-Off, on the Spin-Off Record Date Besicorp shall
distribute all of the outstanding shares of WOM Common Stock to the Entitled
Holders, assuming that all of the other conditions to the consummation of the
Merger have been waived or satisfied and that the Bansbach Litigation is pending
at such time. The Spin-Off Record Date is expected to be the same day as the day
the Merger is effectuated. The Spin-Off will be effectuated at this time and
each Entitled Holder will receive one share of WOM Common Stock for each share
of Besicorp Common Stock held by such shareholder on such date. Therefore, the
holders of Besicorp Common Stock on the Spin-Off Record Date will become the
shareholders of WOM and Besicorp will cease to own any shares of WOM.
135,886 shares of Besicorp Common Stock currently are issued and
outstanding. Shares of WOM Common Stock will be issued to holders of all shares
outstanding on the Spin-Off Record Date, including the Buyer and Dissenters.
However, shares will not be issued with respect to shares of Besicorp Common
Stock which are cancelled prior to the Spin-Off Record Date.
The 135,886 shares includes 1,050 Independent Directors' Restricted
Shares and 13,550 Management Restricted Shares. If these shares are outstanding
at the Spin-Off Record Date, the holders will receive one share of WOM
Restricted Stock for each Independent Directors' Restricted Share or Management
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Restricted Share. Shares of WOM Restricted Stock are shares of WOM Common Stock
subject to the same restrictions upon transferability as the Independent
Directors' Restricted Shares or Management Restricted Shares for which they were
issued. Since the Independent Directors' Restricted Shares' restrictions upon
transferability will lapse, and thus such shares will vest, upon the
effectuation of the Merger, their shares of WOM Restricted Stock also will vest
upon the effectuation of the Merger, which is likely to occur on the same day as
the Spin-Off. However, all other shares of WOM Restricted Stock will still be
restricted.
The shares of WOM Common Stock being issued in the Spin-Off include
4,000 shares that are being issued to Mr. Enowitz on account of the 4,000
Disputed Shares. These 4,000 shares will be released to Mr. Enowitz if it is
determined that the 100,000 Enowitz Shares of Old Besicorp's common stock were
outstanding at the time of the Prior Spin-Off. See "Relationship between WOM
and Besicorp after the Spin-Off -- Additional Legal Proceedings."
Procedure for receiving shares of WOM Common Stock
On the Spin-Off Record Date, Besicorp will deliver to Continental
shares of WOM Common Stock representing 100% of the outstanding shares of WOM
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 effectuated).
Continental will distribute WOM Stock Certificates to all Entitled Holders
following the Spin-Off. No consideration will be paid by the holders of Besicorp
Common Stock for the shares of WOM Common Stock to be received by them in the
Spin-Off.
Shareholders of Besicorp 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 535). After the Effective Date,
shareholders of WOM with inquiries relating to the Spin-Off or their investment
in WOM should contact WOM, Inc., 1151 Flatbush Road, Kingston, New York,
(telephone 914-336-7700 x 104), Attention: Susan
Whitaker.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences relating to the Spin-Off based on the provisions of 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 MATERIAL FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE
INCLUDED FOR GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON PRESENT LAW.
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BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, YOU ARE URGED TO CONSULT WITH YOUR
TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO YOU
AND THE PARTICULAR TAX EFFECTS OF THE SPIN-OFF, INCLUDING THE APPLICATION AND
EFFECT OF STATE, LOCAL AND OTHER TAX LAWS. WE HAVE NOT OBTAINED AN OPINION OF
COUNSEL WITH RESPECT TO THE DISCLOSURE SET FORTH UNDER THE CAPTION "MATERIAL
FEDERAL INCOME TAX CONSEQUENCES."
The receipt by an Entitled Holder of shares of WOM Common Stock (other
than WOM Restricted Stock) pursuant to the Spin-Off ordinarily would be a
taxable transaction for federalincome tax purposes under the Code and also
ordinarily may be a taxable transaction under applicable state, local and
other tax laws. The tax consequences of such receipt ordinarily vary depending
upon, among other things, the particular circumstances of the Entitled Holder.
An Entitled Holder will receive dividend income equal to the value of such
shares of WOM Common Stock received by such Entitled Holder pursuant to the Spin
- -Off. In the opinion of Management, the current value of WOM Common Stock
is contingent and speculative. Thus, Besicorp is valuing the shares of WOM
Common Stock at $0.00 per share. Based on this valuation, the Entitled Holder
should receive no dividend income. However, if it were to be ultimately
determined that the WOM Common Stock had a positive value at the time of the
Spin-Off, the result would be ordinary income as of the tim of the Spin-Off,
plus interest and possibly penalties.
The receipt of shares of WOM Common Stock (other than WOM Restricted
Stock) by an Entitled Holder pursuant to the Spin-Off is 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
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.
The receipt of shares of WOM Restricted Stock will not be a taxable
event unless an election under ss.83(b) of the Code is made. However, an
ordinary income taxable event ordinarily will occur for the holders of the
shares of WOM Restricted Stock upon the vesting of such WOM Restricted Stock
based upon the value of the WOM Restricted Stock at the time of vesting. Shares
of WOM Restricted Stock issued on account of the 1,050 Independent Directors'
Restricted Shares will no longer be restricted after the Merger which is likely
to occur on the same day as the Spin-Off, and thus will be subject to tax
currently based upon the value of their shares at the time of the Merger, but
all other shares of WOM Restricted Stock will still be restricted.
The tax basis in a share of WOM Common Stock will generally be equal to
the dividend income received by the holder of such share.
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This tax discussion does not apply to Entitled Holders who are not
citizens or residents of the United States, to Entitled Holders who are
tax-exempt or to other Entitled Holders of special status.
RELATIONSHIP BETWEEN WOM AND BESICORP AFTER THE SPIN-OFF
Pursuant to the Plan of Merger, Acquisition Corp. will be merged with and into
Besicorp; Besicorp will be the Surviving Corporation and will be wholly owned by
Parent. Parent will be entitled to all the benefits and detriments resulting
from its ownership interest in the Surviving Corporation. If the Merger is
effectuated, Besicorp's shareholders of record immediately prior to the Merger
(other than the Buyer and Dissenters) will be entitled to receive the Merger
Consideration consisting of at least $58.87 in cash and a Besicorp Deferred
Payment Right for each share of Besicorp Common Stock. After the Effective Date,
the holders of Besicorp Common Stock will no longer have any equity interest in
Besicorp or any right to vote on corporate matters; instead, the outstanding
shares of Besicorp Common Stock (other than the shares of the Buyer and
Dissenters) automatically will be converted into the right to receive the Merger
Consideration.
After the Spin-Off and the Merger, Besicorp and WOM will become
separately owned companies. Besicorp will be owned by Parent and WOM will be
owned by the Entitled Holders (including Mr. Zinn and the Trust who will own
approximately 52.2% of the then outstanding shares of WOM Common Stock). Prior
to the Spin-Off, Besicorp and WOM entered into the Contribution Agreement (which
is discussed above under "The Contribution and the Spin-Off -- The Contribution
Agreement") which governs various matters and ongoing relationships between
Besicorp and us. We have agreed pursuant to the Contribution Agreement that if a
Prior Merger Order Reversal occurs, we shall return to Besicorp the interests in
the Bansbach Litigation that Besicorp received from the Old Besicorp pursuant to
the Prior Contribution Agreement as a result of the Prior Merger Order. Also,
pursuant to the Contribution Agreement Besicorp agreed to provide us with the
services of Besicorp's employees and to allow us to use its offices without
charge. In addition, pursuant to the Contribution Agreement, Besicorp agreed to
cause the Escrow Agreement to be amended so that we may obtain certain monies
from the Escrow Fund. Consequently, the Indemnification Agreement and the Escrow
Agreement govern various matters between Old Besicorp, Besicorp, BGI Parent and
us.
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
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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;
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;
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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.
With certain exceptions, the Purchaser Indemnitees are not entitled to
indemnification:
o unless a notice of a claim has been delivered to
Besicorp prior to March 22, 2004;
o to the extent the aggregate claims actually paid by
Besicorp or any of its subsidiaries to the Purchaser
Indemnitees exceeds the aggregate Prior Merger
Consideration;
o for damages to the extent such damages were
expressly included in the adjustment amount pursuant
to the Prior Plan of Merger;
o 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
o with respect to damages arising from time spent by
BGI Parent or its affiliates and their respective
officers and employees, for amounts in excess of
their actual out-of-pocket costs.
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. 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 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) 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 reimbursement for BGI Monitoring
Costs and BGI Indemnity Claims and Besicorp remains entitled to reimbursement
for Litigation Costs.
Therefore reimbursement 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
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
34
<PAGE>
(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.
For a description of Besicorp's principal pending legal proceedings
that may give rise to Litigation Costs, see "--Additional Legal Proceedings." As
of March 7, 2000, as a result of permitted releases aggregating approximately
$583,065 and after giving effect to interest income aggregating approximately
$187,394, the Escrow Fund contained approximately $6.10 million.
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 (and prior to the Spin-Off,
to Besicorp), with respect to WOM Costs (if the Spin- Off occurs) 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, if any, will be released to Besicorp at any time after March
22, 2004 provided that all of the following conditions have occurred and notice
has been provided by Besicorp to the Escrow Agent:
o no claims are then subject to the Escrow Fund
Determination Procedure (i.e., all requests for
reimbursements by BGI, Besicorp and WOM have been
resolved and have been paid, including with respect
to the Bansbach Litigation);
o in the reasonable judgment of BGI Parent, no future
BGI Indemnity Claims are foreseeable;
o all Besicorp Assumed Matters have been finally
settled through either:
(1) a final, non-appealable judgment against
Besicorp and all Purchaser Indemnitees; or
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<PAGE>
(2) a settlement or other conclusion to the
Besicorp Assumed Matter that (x) contains a
release from all liability in favor of
Besicorp and Purchaser Indemnitees without
any further obligation by Besicorp 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 Besicorp
or any Purchaser Indemnitee and (z) if the
scheduled matter is a litigation or a
proceeding, includes as a term thereof a
full dismissal of the litigation or
proceeding with prejudice; and
o the final settlement of the Bansbach Litigation
through either:
(1) a final, non-appealable judgment against
Besicorp, WOM and all Purchaser Indemnitees;
or
(2) a settlement or other conclusion to the
Bansbach Litigation that (x) includes a
release from all liability in favor of WOM
without any further obligation by WOM 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 WOM and (z) includes as a term
thereof a full dismissal of the litigation
with prejudice.
BGI Parent, WOM and Besicorp also agreed that representatives of all three
companies will meet at least once a year to determine whether the amount of the
Escrow Fund is more than sufficient to (i) secure BGI Parent pursuant to the
Indemnification Agreement and (ii) secure WOM (if the Escrow Agreement Amendment
becomes effective) in connection with the Bansbach Litigation and under the
Escrow Agreement. If all three unanimously agree that the Escrow Fund includes
excess amounts, such amounts will be released to Besicorp and there will be a
Besicorp Deferred Payment. The representatives of BGI Parent, Besicorp and WOM,
who will be the only persons present, will each represent the interests of their
corporation and their shareholders. There is no provision requiring anyone to
provide additional money to the Escrow Fund if the Escrow Fund is depleted.
Any money we obtain from the Escrow Fund will reduce the money in the
Escrow Fund that would otherwise be contributed to the Outside Participating
Shareholders pursuant to the Plan of Merger as part of the Besicorp Deferred
Payments.
Additional Legal Proceedings
Besicorp, pursuant to the Prior Contribution Agreement, agreed to
assume all liabilities of Old Besicorp, other than certain specified liabilities
(relating to certain taxes, intercompany liabilities and merger costs) which
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were retained by Old Besicorp. In addition, in connection with the Prior Plan of
Merger, Besicorp entered into the Indemnification Agreement whereby Besicorp
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.
See " -- Indemnification Agreement." Contemporaneously with the closing of the
Prior Merger, Old Besicorp deposited $6.5 million in the Escrow Fund to fund the
indemnification obligation arising out of the Indemnification Agreement. See "
- -- Escrow Agreement."
In December 1998, Alan Fenster commenced an action in the New York
Supreme Court, New York County, against Old Besicorp, BGI Parent, BGI
Acquisition, Josephthal and each of the members of the Old Besicorp Board. In
the complaint Mr. Fenster indicated that he is seeking class certification. The
complaint alleged that the Prior Merger Consideration is inadequate and less
than Old Besicorp's intrinsic value, that in adopting the Prior Plan of Merger
the Old Besicorp Board had been unduly influenced by Michael F. Zinn, and that
the Old Besicorp Board breached its fiduciary duty to its shareholders. The
complaint also alleged that Mr. Zinn and the other members of the Old Besicorp
Board would receive the following allegedly unlawful additional consideration
that the remaining shareholders would not receive: (i) the Escrow Fund, that,
according to the complaint, has been established primarily to benefit them,
(ii) the acceleration of certain of Old Besicorp's stock options and warrants
and (iii) bonuses for certain members of senior management. Mr. Fenster is
seeking, among other things, unspecified compensatory damages and an order
that the defendants take appropriate measures to maximize shareholder value. Old
Besicorp filed a motion for summary judgment to dismiss the complaint on the
grounds that plaintiff's alleged claims cannot be asserted in a class action,
but rather must be alleged in a shareholder derivative action subject to various
preconditions and other requirements. Oral arguments of the summary judgment
motion were presented on June 22, 1999. The Court dismissed the action with
prejudice in February 2000. This matter was assumed by Besicorp pursuant to
the Prior Contribution Agreement. Therefore, the action is a Besicorp Assumed
Matter and Besicorp's costs are funded from the Escrow Fund.
In December 1998, an action was commenced in the New York Supreme
Court, Westchester County, entitled Energy Investment Research Inc. v. Besicorp
Group, Inc., Index No. 98/19707. The complaint alleged, among other things, that
Old Besicorp is obligated to pay EIR 1.5% of all net cash and/or securities
received by Old Besicorp from its general partnership interests in the Carthage
and South Glen Falls Partnerships. EIR seeks, among other things, a declaratory
judgment that it is entitled to 1.5% of the distributions from the MRA and has
asked for payments in excess of $750,000. Old Besicorp answered this complaint,
denied all of the material allegations and asserted certain affirmative
defenses. The parties are currently engaged in discovery. EIR filed a mandatory
Chapter 7 petition in the U.S. Bankruptcy Court for the Southern District of New
York on or about August 2, 1999. EIR's claims will be heard in an adversary
proceeding in the bankruptcy case. Besicorp's management anticipates that
discovery in the adversary proceeding will commence shortly. This matter was
assumed by Besicorp pursuant to the Prior Contribution Agreement. Therefore, the
action is a Besicorp Assumed Matter and Besicorp's costs are funded from the
Escrow Fund.
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<PAGE>
On March 29, 1993 James Lichtenberg commenced the Lichtenberg
Litigation in the New York State Supreme Court, Ulster County. Old Besicorp was
named as a nominal defendant in this shareholder derivative action and the other
defendants were directors and officers of Old Besicorp at the time the action
was filed. The complaint alleged that the directors breached their fiduciary
duties to Old Besicorp 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 Old Besicorp's interest in various
partnerships which owned and operated cogeneration facilities, which allegedly
depressed the price of Old Besicorp's common stock. The plaintiff sought an
award of damages to Old Besicorp, including punitive damages and interest, an
accounting and the return of assets to Old Besicorp, the appointment of
independent members to the Old Besicorp Board, the cancellation of shares
allegedly improperly granted, and the award to the plaintiff of costs and
expenses of the lawsuit including fees. If Mr. Lichtenberg ultimately had
prevailed on all of his claims, the Lichtenberg Litigation could have resulted
in the recovery by Besicorp of approximately $44.5 million. This matter was
assumed by Besicorp pursuant to the Prior Contribution Agreement. Therefore, the
action was a Besicorp Assumed Matter and Besicorp's costs are funded from the
Escrow Fund.
The Supreme Court dismissed the Lichtenberg Litigation based on the
judicial deference accorded under the business judgment rule to the
recommendations of a corporation's properly constituted special litigation
committee. The Old Besicorp Board's special litigation committee (comprised of
independent outside directors of Old Besicorp) concluded that the continuation
of the Lichtenberg litigation was not in the best interests of Old Besicorp. The
dismissal of the complaint was unanimously affirmed in April 1999 by the
Appellate Division, Third Department. The plaintiff's motion in the Appellate
Division, Third Department seeking leave to appeal to the Court of Appeals, New
York's highest appellate court, was unanimously denied. A further motion in the
New York Court of Appeals for leave to appeal the dismissal of the complaint to
that court was denied on November 18, 1999. Lichtenberg has exhausted all
possibilities for appellate review and the dismissal of the complaint
constitutes a final judgment on the merits.
On November 8, 1990 S.N.C. commenced an action in New York Supreme
Court, New York County, against Old Besicorp, and certain of the Partnerships
and their affiliates and an unaffiliated contractor. The complaint alleged that
S.N.C. was awarded the contracts to construct two power plants and that the
contracts were subsequently awarded to the unaffiliated contractor in breach of
S.N.C.'s contract. S.N.C. 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. Any
liability arising out of this litigation would be first satisfied by funds that
were placed in escrow in May 1999 as a reserve for potential liabilities of
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<PAGE>
certain partnerships that are being or have been liquidated. [If the funds in
that escrow account are not sufficient, Besicorp would have recourse to the
Escrow Fund.]
On September 27, 1999, Besicorp commenced the RICO Action in the
Supreme Court of the State of New York, Ulster County. The RICO Action arises
out of an alleged conspiracy by the defendants, who consist of two former
employees and several shareholders, including the named plaintiff in the
Lichtenberg Litigation, to unlawfully exert or obtain control over Old Besicorp
and all its assets. Besicorp believes that the defendants, as part of their
scheme to acquire control over Old Besicorp, conspired to foment federal and
civil litigation, including the Lichtenberg Litigation, against Old Besicorp
through a continuous and ongoing campaign of false statements and accusations of
wrongdoing made to governmental agencies. The complaint alleges that at the
annual Old Besicorp shareholders' meeting held on September 27, 1995, the
defendants attempted to pressure Old Besicorp's management to provide them with
control over Old Besicorp's Board of Directors. Besicorp also believes that the
defendants published false and misleading information over the Internet in order
to further their objectives of destabilizing Old Besicorp and acquiring control.
The complaint alleges that as a result of the defendants' conduct, Old Besicorp
suffered damages including legal fees associated with responding to groundless
accusations, injury to its ability to obtain capital, injury to its ability to
build and grow in accordance with its business plans and injury to its
reputation. The RICO Action asserts claims Aunder RICO for treble damages and
claims under New York State law including tortious interference with prospective
business advantage, business disparagement, prima facie tort, conspiracy, and
breach of contract. Besicorp's expenses connected to this matter are being
funded with monies from the Escrow Fund and any recovery, if any, will lead to
a Besicorp Deferred Payment. The RICO Action has just commenced and therefore
no assurances can be given as to when it will be resolved, what amounts will
be funded from the Escrow Fund, whether Besicorp will prevail, and, if so, what
damages it will recover.
Old Besicorp is a party to a legal proceeding in New York Supreme
Court, Ulster County, that was commenced on June 20, 1995, seeking a
determination that Mr. Enowitz, a former director and executive officer of Old
Besicorp, is not entitled to the 100,000 Enowitz Shares of Old Besicorp's common
stock. Old Besicorp believes that such shares were forfeited when he left the
employ of Old Besicorp prior to the scheduled vesting dates with respect to such
shares and that, as a result, he was obligated to resell the shares to Old
Besicorp. Mr. Enowitz asserts, among other things, that such vesting schedule
was not applicable to him because he was disabled. Old Besicorp, among other
things, disputes Mr. Enowitz's allegation that he was disabled. If the Enowitz
Shares were not forfeited, Mr. Enowitz would be entitled to 4,000 shares of
Besicorp Common Stock (i.e., the Disputed Shares) as a result of the prior
Spin-Off.
The shares of WOM Common Stock being issued in the Spin-Off include
4,000 shares that will be released to Mr. Enowitz with respect to the 4,000
Disputed Shares if it is determined that the Enowitz Shares were outstanding at
the time of the Prior Spin-Off. If it is determined that Mr. Enowitz was not
then entitled to the Enowitz Shares, the 4,000 shares of WOM Common Stock will
be cancelled (which will increase the equity interest of each holder of WOM
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<PAGE>
Common Stock on a pro rata basis); otherwise the shares will be released to Mr.
Enowitz. There can be no assurance as to when this dispute will be resolved or
whether it will be in Mr. Enowitz's favor.
Other than as discussed above and in "Business," Besicorp is party to
various legal matters in the ordinary course of business, the outcome of which
Besicorp does not believe will materially affect its operations. However,
Besicorp may incur substantial legal fees and other expenses in connection with
these matters. Besicorp's liabilities and rights with respect to the legal
proceedings that were assumed pursuant to the Prior Contribution Agreement will
be funded by the Escrow Fund. Besicorp is responsible for all expenses with
respect to proceedings that were not assumed pursuant to the Prior Contribution
Agreement.
Any money Besicorp obtains from the Escrow Fund in connection with its
legal proceedings will reduce the money in the Escrow Fund that would otherwise
be available to WOM for the reimbursement of WOM Costs. See "--Escrow Agreement"
and "--Indemnification Agreement."
MANAGEMENT
Directors and Executive Officers
Pursuant to the WOM Certificate and the WOM By-Laws, the WOM Board
currently consists of two directors; however, the WOM Board is authorized to
change the number of directors from time to time. Mr. Zinn currently is the sole
member of the WOM Board and will serve in such capacity until his successor is
elected and qualified or his earlier resignation or removal.
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). Prior to the founding of Old Besicorp,
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 pursuant
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<PAGE>
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 recently terminated before the scheduled end of
the term) of supervised release 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, an 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.
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Executive compensation
Prior to the Spin-Off, our business was maintained by Besicorp and the
directors and executive officers were compensated by Besicorp. Our directors and
executive officers will 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 charges; Besicorp's employees
who provide services to us, including our directors and executive officers, may
receive compensation for such services from Besicorp. No individuals will be
full time employees of WOM. We do not intend to enter into any written
employment agreements.
We have not granted any Rights and there are no stock option,
contribution, benefit or other plans for our directors, officers or employees.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table shows the shares of WOM Common Stock expected to be
owned as of the Spin-Off by each beneficial owner of more than 5% of the WOM
Common Stock upon completion of the Spin-Off, 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.
<TABLE>
<CAPTION>
<S>
<C> <C>
Number of Shares
Name of of Common Stock Percent of Common Stock
Beneficial Owner Beneficially Owned (1) Beneficially Owned (1) (2)
Avalon 57,967 (3) 42.7% (3)
Michael F. Zinn 70,967 (4)(5) 52.2% (4)(5)
The Trust 10,000 7.4%
Frederic Zinn 1,750 1.3%
James Curtin 400 *
Current directors and
executive officers as
a group (3 persons) 73,117 (5) 53.8%(5)
</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.
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(2) Assumes (i) that no shares of Besicorp Common Stock are issued or
cancelled prior to the Spin-Off and (ii) that the 4,000 Disputed Shares
are outstanding at the time of the Spin- Off. See "The Contribution and
the Spin-Off -- Terms of the Spin-Off."
(3) Michael F. Zinn is one of the two directors of Besicorp Holdings and is
its Chief Executive Officer and President. 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.
(4) Includes 57,967 shares held in the name of Besicorp Holdings.
(5) Includes 10,000 shares owned by the Trust established by Michael F.
Zinn; Mr. Zinn disclaims beneficial ownership of these shares. Mr. Zinn
is the Chairman of the Board, President and Chief Executive Officer of
WOM.
The address for each of the individuals identified above is: 1151
Flatbush Road, Kingston, New York 12401.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Airport Enterprises, which are owned by Michael F. Zinn, own and
operate an airport where Besicorp's plane is maintained. Besicorp provides the
administrative services required in connection with the operation of the airport
and Airport Enterprises maintains Besicorp's plane and provides Besicorp with
the use of the airport. Airport Enterprises owed Besicorp (as of March 31, 1999)
and Old Besicorp (as of March 31, 1998) $58,675 and $47,662, respectively, net
of Airport Services performed by Airport Enterprises on behalf of Besicorp and
Old Besicorp. The cost of these Airport Services were recorded for Fiscal 1999
and Fiscal 1998 as $59,925 and $31,939, respectively. These sums do not bear
interest. There is no specified date for the repayment of such indebtedness as
Besicorp, on an annual basis, offsets against the amount owed to it by Airport
Enterprises, the amount it owes to Airport Enterprises.
Old Besicorp paid legal expenses incurred by it and certain directors,
officers, employees and their spouses in connection with the Proceeding the
Lichtenberg Litigation and the Bansbach Litigation. In part, such payments
constituted, pursuant to applicable law and governing documents, advances by Old
Besicorp of certain legal expenses on behalf of certain officers and directors
in connection with these matters. These officers and directors are obligated to
repay amounts paid by Old Besicorp on their behalf in certain circumstances.
As of March 31, 1999 and 1998, such advances on behalf of Michael F.
Zinn in connection with the Proceeding equaled $338,517. Of such sum, Mr. Zinn
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agreed to reimburse $186,000 to Old Besicorp, subject to a determination as to
whether such reimbursement is required by the NYBCL, and as of December 31,
1998, he had reimbursed $45,000 to Old Besicorp. In January 1999, after the
receipt of a report from independent legal counsel addressing the propriety
under the NYBCL and Old Besicorp's by-laws of indemnifying Mr. Zinn, a committee
of the Old Besicorp Board (composed of independent directors) determined that
Mr. Zinn was entitled to full indemnification with respect to the Proceeding.
This committee (i) authorized the repayment to Mr. Zinn of the $36,673 fine he
had paid and the refund of $45,000 he had previously reimbursed Old Besicorp;
(ii) acknowledged that Mr. Zinn had no further obligations with respect to the
remaining $141,000 (of the $186,000) Mr. Zinn had, subject to a determination as
the propriety of indemnification, agreed to reimburse Old Besicorp; and (iii)
authorized the reimbursement of Mr. Zinn 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. All such reimbursements were
made during the fourth quarter of Fiscal 1999 and any related receivables were
written off and charged to expenses during that period. In addition, Old
Besicorp made additional payments of legal fees and disbursements of
approximately $497,000 in connection with the Proceeding on behalf of directors,
officers and employees (and spouses) of Old Besicorp (including certain amounts
incurred on behalf of Old Besicorp) who were defendants or actual or potential
witnesses in this matter.
In connection with the Lichtenberg Litigation, Old Besicorp had made
payments as of March 31, 1999 of approximately $829,168 in the aggregate in
legal fees and disbursements on behalf of Old Besicorp, Mr. Zinn and other
directors and/or officers of Old Besicorp.
In connection with the Bansbach Litigation, Old Besicorp had made
payments as of March 31, 1999 of approximately $155,085 in the aggregate in
legal fees and disbursements on behalf of Old Besicorp, Mr. Zinn, and other
directors and officers of Old Besicorp.
Neither Besicorp nor WOM has advanced any monies with respect to the
Proceeding, the Lichtenberg Litigation or Bansbach Litigation. If there is a
final judgment adverse to the defendants in the Bansbach Litigation, Mr. Zinn
may be required to repay his advances in connection with the Proceeding, and it
is possible that certain individuals would be required to reimburse Old Besicorp
for certain of its payments. As a result of the Prior Contribution Agreement and
the Contribution Agreement, the right to receive such repayments and
reimbursements has been assigned to WOM and thus we would be the recipient.
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 (unless the Bansbach Litigation is not pending),
Acquisition Corp. will be merged with and into Besicorp, the separate corporate
existence of Acquisition Corp. will cease and Besicorp will continue as the
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Surviving Corporation. The Merger will become effective upon the Effective Date,
which is the date of the filing of the Certificate of Merger with the Secretary
of State of the State of New York or, if later, the date specified in the
Certificate of Merger in accordance with the NYBCL. 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
o each share of Acquisition Corp.'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 Parent will own all of the
stock of the Surviving Corporation),
o each Outside Participating Shareholders' Share (i.e., each
share of Besicorp Common Stock issued and outstanding on the
Effective Date (other than shares then held by the Buyer and
by Dissenters)) will, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into
the right to receive the Merger Consideration upon surrender
of his Besicorp Stock Certificates;
o each share of Besicorp Common Stock held by the Buyer will be
cancelled without receipt of the Merger Consideration and
o the Dissenters will be entitled to the appraised value of
their shares of Besicorp Common Stock.
DESCRIPTION OF THE CAPITAL STOCK
The summary of the terms of the stock of WOM set forth below does not
purport to be complete and is subject to and qualified in its entirety by
reference to the WOM Certificate and the WOM By-Laws.
Authorized Capital Stock
Under the WOM Certificate, the total number of shares of all classes of
stock that we have authority to issue is 250,000 shares, all of which are shares
of WOM Common Stock. After giving effect to the distribution of the shares of
WOM Common Stock pursuant to the Spin-Off, there will be approximately 135,886
shares of WOM Common Stock outstanding assuming (i) that no shares of Besicorp
Common Stock are issued or cancelled prior to the Spin-Off and (ii) that the
4,000 Disputed Shares are outstanding at the time of the Spin-Off.
45
<PAGE>
Common Stock
Holders of WOM 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, the holders of such shares
will possess all of our voting power. The WOM Certificate does not provide for
cumulative voting for the election of directors. Thus, under the NYBCL, the
holders of more than one-half of the outstanding shares of WOM Common Stock will
be able to elect all of the members of the WOM Board and holders of the
remaining shares will not be able to elect any director. Subsequent to the
completion of the Spin- Off, Mr. Zinn and the Trust will own approximately 44.9%
and 7.4%, respectively, of the then outstanding shares of WOM Common Stock and,
if they were to vote their shares in the same manner, will be able to elect all
of the members of the WOM Board and exercise substantial influence over the
outcome of any issues which may be subject to a vote of our shareholders.
Holders of shares of WOM 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 WOM Board and to share ratably in our
assets legally available for distribution to our shareholders in the event of
our liquidation, dissolution or winding up. We do not currently anticipate
paying cash dividends in the foreseeable future. See "Dividend Policy."
The outstanding shares of WOM Common Stock are, and the shares of WOM
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
NYBCL) nonassessable. Holders of WOM Common Stock will have no preemptive
rights. Under Section 630 of the NYBCL, our ten largest shareholders are
personally liable for unpaid wages and debts to our employees unless our 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. We do not currently intend to have our capital stock so
listed or quoted. However, we have no employees and Besicorp has agreed to
provide us without charge with the services of its employees.
Shares of WOM Restricted Stock will be issued to holders of Restricted
Shares. Shares of WOM Restricted Stock are shares of WOM Common Stock. However,
shares of WOM Restricted Stock are subject to the same restrictions upon
transferability as the Restricted Shares for which they were issued. Therefore,
shares of WOM Restricted Stock will be held in escrow by Besicorp along with the
Restricted Shares. When a Restricted Share vests or is forfeit, the share of WOM
Restricted Stock issued as a dividend will vest or be forfeit. The Independent
Directors' Restricted Shares' restrictions upon transferability will lapse, and
thus such shares will vest, upon the effectuation of the Merger. Therefore the
shares of WOM Restricted Stock issued as a dividend with respect to the
Independent Directors' Restricted Shares also will vest upon the effectuation of
the Merger, which is likely to occur on the same day as the Spin-Off. However,
the Management Restricted Shares' restrictions upon transferability will not
lapse, and thus such shares will not vest, upon the effectuation of the Merger.
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Therefore the restrictions on transferability on the shares of WOM Restricted
Stock issued as a dividend with respect to the Management Restricted Shares will
continue after the Merger.
Certain effects of authorized and unissued stock
There will be, after the completion of the Spin-Off, approximately
114,118 unissued and unreserved shares of WOM Common Stock, assuming (i) that no
shares of Besicorp Common Stock are issued or cancelled prior to the Spin-Off
and (ii) that the 4,000 Disputed Shares are outstanding at the time of the
Spin-Off. 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. They may be granted to officers and
employees in lieu of compensation. They may be issued to Mr. Zinn and his
affiliates. The WOM Board could authorize, without having to obtain approval of
the shareholders, any such issuance. Such issuances would reduce the share of
the Bansbach Litigation proceeds if any, that the current shareholders would
receive (except to the extent they receive such shares of WOM Common Stock). We
do not currently intend to issue additional shares of WOM Common 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 NYBCL for so long as they have a class of securities registered under
Section 12 of the Exchange Act and continue to be organized as corporations
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. We, as
permitted by the NYBCL, have elected in the WOM Certificate to opt out of this
section of the NYBCL with the result that the restrictions on business
combinations do not apply to us.
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Number of Directors; Removal; Vacancies
The WOM By-Laws provides that initially there shall be one director and
thereafter the number of directors shall be determined from time to time by the
majority of the WOM Board. At present WOM has two directors. The WOM By-Laws
provide that the WOM Board shall have the right to fill vacancies, including
vacancies created by expansion of the WOM Board, except for vacancies resulting
from the removal of a WOM director by the shareholders.
The WOM Certificate provides that our directors may be removed with or
without cause by our shareholders by the affirmative vote of the holders of at
least a majority of the voting stock. In addition, our directors may be removed
with cause by the WOM Board.
Shareholder action by written consent; Special Meetings
The WOM Certificate provides that any action required or permitted to
be taken by our shareholders at a duly called meeting of our shareholders 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 our shareholders may be called by the WOM Board or
our president and shall be called by our president or secretary after receipt of
the written request of a majority of the WOM Board or shareholders owning a
majority of the issued and outstanding shares of WOM Common Stock.
Amendment of By-Law Provisions
The WOM By-Laws provide that either the shareholders or, with certain
limitations, the WOM Board may adopt, amend, or repeal any provision of the WOM
By-Laws.
Transfer Agent and Registrar
The transfer agent and registrar for WOM Common Stock will be
Continental Stock Transfer & Trust Company, which also is the Distribution Agent
for the Spin-Off, the paying agent with respect to the Merger Consideration and
the escrow agent for the Enowitz Shares and the Disputed Shares.
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the NYBCL, the WOM Certificate provides (in the WOM
Certificate Provision) that no director shall be personally liable to us or any
48
<PAGE>
of our 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 profit or other advantage to which he or she was not legally entitled
or that his or her acts violated Section 719 of the NYBCL. No amendment to or
repeal of the WOM Certificate Provision shall apply to or have any effect on the
liability or alleged liability of any of our directors 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. 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 WOM 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 our 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.
We do not maintain any officers or directors liability insurance.
LISTING AND TRADING OF WOM COMMON STOCK
There is currently no existing trading market for WOM Common Stock. We
have no intention of taking any action to make it possible to trade shares of
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 and the WOM Common Stock does
not meet the listing requirements of any Exchange. WOM 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. We 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, if
any, prevailing from time to time. Nevertheless, sales of significant amounts of
49
<PAGE>
WOM Common Stock in the public market, or the perception that such sales may
occur, may adversely affect prevailing market prices.
The shares of WOM Common Stock to be received by holders of Besicorp
Common Stock in the Spin-Off will be freely transferable, unless (i) a holder is
deemed to be an "affiliate" of WOM under the Securities Act or (ii) the holder's
shares of Besicorp 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 WOM Common Stock issued in
the Spin-Off. Persons who may be deemed our affiliates after the Spin-Off
generally include individuals or entities that control, are controlled by, or
are under common control with us and may include certain of our officers and
directors. Persons who are our affiliates and holders of "restricted stock" will
be permitted to sell their shares of WOM 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, we will have approximately 135,886
shares of issued and outstanding WOM Common Stock. We estimate that we will
initially have approximately 340 shareholders of record, based on the number of
shareholders of record of Besicorp as of March 6, 2000. Of these shares,
approximately 135,886 will be freely tradable without restriction or further
registration under the Securities Act, except that any shares held by our
affiliates may generally only be sold in compliance with the limitations of Rule
144. The remaining shares of WOM Common Stock will be restricted shares within
the meaning of Rule 144 under the Securities Act. We have not agreed to register
any of these shares under the Securities Act for sale by the holders thereof.
EXPENSES OF THE SPIN-OFF
Besicorp shall pay all of the costing and expenses of the Spin-Off
incurred on, before or following the Spin-Off Record Date, including the cost of
preparing the Registration Statement and distributing this Information Statement
and shall seek reimbursement for such costs and expenses form the Escrow Fund.
See "Relationship between WOM and Besicorp after the Spin- Off -- Escrow
Agreement."
INDEPENDENT ACCOUNTANTS
The WOM Board has appointed CC&C as our independent accountants to
audit our financial statements for Fiscal 2000. CC&C has audited the financial
statements that appear in this Information Statement and has served as
Besicorp's auditors throughout the periods covered by the financial statements
included in this Information Statement.
50
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DIVIDEND POLICY
We have never declared or paid any cash dividends on the WOM Common
Stock and do not anticipate cash dividends in the foreseeable future. The
declaration and payment of dividends is at the discretion of the WOM Board and
will be subject to our financial results and the availability of surplus funds
to pay dividends. The NYBCL prohibits us from paying dividends or otherwise
distributing funds to our shareholders, except out of legally available funds.
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INDEX TO THE FINANCIAL STATEMENTS OF WOM, INC.
<TABLE>
<CAPTION>
<S>
<C>
Index to the Financial Statements of WOM, Inc........................................................... F-1
Independent Auditors' Report............................................................................ F-2
Balance Sheet as of December 31, 1999................................................................... F-3
Notes to Financial Statements........................................................................... F-4
Unaudited Pro Forma Financial Information............................................................... F-9
</TABLE>
F-1
<PAGE>
CITRIN COOPERMAN & COMPANY, LLP
Certified Public Accountants
529 Fifth Avenue, Tenth Floor
New York, NY 10017
212-697-1000
Independent Auditors' Report
TO THE SHAREHOLDER OF WOM, INC.
We have audited the accompanying balance sheet of WOM, Inc. as of December 31,
1999. This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement 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 balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing accounting
principles used and significant estimates made by management, as well as
evaluating the overall balance sheet presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of WOM, Inc., as of December 31, 1999,
in conformity with generally accepted accounting principles.
/s/ Citrin Cooperman & Company, LLP
CITRIN COOPERMAN & COMPANY, LLP
December 31, 1999
New York, New York
F-2
<PAGE>
WOM, INC.
BALANCE SHEET
December 31, 1999
ASSETS
Cash $ 100
---
STOCKHOLDER'S EQUITY
Common stock, $.01 par value,
250,000 shares authorized,
100 shares issued $ 1
Additional paid in capital 99
---
$ 100
===
See accompanying notes to balance sheet.
F-3
<PAGE>
WOM, INC.
NOTES TO BALANCE SHEET
NOTE 1 ORGANIZATION
WOM, Inc. ("WOM") was incorporated in December 1999 by Besicorp Ltd.
("Besicorp"), by the contribution of $100 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 recently 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, 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. The officers and directors agreed to repay
amounts paid by Old Besicorp on their behalf in certain circumstances.
F-4
<PAGE>
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 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.
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 two Derivative Litigations, 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
F-5
<PAGE>
$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 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 intends to move for rehearing en banc of the decision
granting, in part, the motion to dismiss the appeal.
Prior to the Spin-Off, the Bansbach Litigation was a Besicorp Assumed Matter and
Besicorp's costs were funded from the Escrow Fund; following the Spin-Off WOM's
costs will be funded from the Escrow Fund. The parties to the Bansbach
Litigation are currently engaged in the discovery process.
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
F-6
<PAGE>
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 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.
F-7
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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 CAPITAL STOCK
Prior to the completion of the Besicorp Ltd. merger, WOM will issue, to Besicorp
Ltd. to the extent necessary and in addition to the 100 shares of WOM Common
Stock currently outstanding and held by Besicorp Ltd., the number of shares of
WOM Common Stock necessary so that Besicorp Ltd. can distribute one share of WOM
Common Stock for each share of Besicorp Ltd. common stock outstanding (assumed
to be approximately 135,882 shares).
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 March 7, 2000, as a result of permitted releases aggregating
approximately $583,065 and after giving effect to interest income aggregating
approximately $187,394, the Escrow Fund contained approximately $6.10 million.
F-8
<PAGE>
WOM, INC.
PRO FORMA BALANCE SHEET
December 31, 1999
<TABLE>
<CAPTION>
<S>
<C> <C> <C>
Historical Adjustments Pro Forma
ASSETS ----------- ----------- ---------
------
Cash $ 100 $ 0 $ 100
--- --- ---
$ 100 $ 0 $ 100
=== === ===
STOCKHOLDER'S EQUITY
Common stock $ 1 $1,358 (1,2) $ 1,359
Additional paid in capital 99 (99) (2) 0
Deficit 0 (1,259) (2) (1,259)
--- ----- ------
$ 100 $ 0 $ 100
=== ===== ======
</TABLE>
See accompanying notes to pro forma balance sheet.
F-9
<PAGE>
WOM, INC.
NOTES TO PRO FORMA BALANCE SHEET
December 31, 1999
(1) Upon the merger of the parent company, Besicorp Ltd. will declare the
distribution of one share of WOM, Inc. for each share of Besicorp Ltd.
common stock outstanding. Based on the number of outstanding shares at
December 31, 1999, approximately 135,882 shares of WOM, Inc. common stock
will be distributed. The outstanding shares reconciles with the outstanding
shares of Bisicorp Ltd. at December 31, 1999 as follows:
Outstanding shares at December 31, 1999 136,382
Less: Treasury Stock at December 31, 1999 (400)
Less: Share forfeited with respect to employee
stock grants after December 31, 1999 (100)
-------
135,882
=======
(2) Excess par value of shares to be issued over capital contributed will be
charged to additional paid in capital and deficit.
(3) WOM is expected to have only very limited activities, no full-time employees
and no offices. WOM is not compensating its officers and director,
each of whom is also an officer or director of Besicorp, for the services they
render on WOM's behalf. Besicorp Ltd. has agreed in the Contribution Agreement
to provide WOM with the services of its employees and to permit the Company to
operate from its corporate headquarters 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 space. Because these activities will have an
immaterial effect, no proforma operations have been presented. Other expenses of
the ongoing litigation are expected to be reimbursed from the Escrow Fund.
(4) The accounting for this transfer of assets and liabilities represents a
reorganization of companies under common control and, accordingly, all assets
and liabilites will be reflected at their historical cost basis.
F-10
<PAGE>
APPENDIX 1
Acquisition Corp. means Besi Acquisition Corp., a New York corporation and a
wholly owned subsidiary of Parent.
Airport Enterprises mean entities owned by Michael F. Zinn that own and operate
the airport where Besicorp's plane is maintained.
Airport Services mean airport usage and plane services performed by Airport
Enterprises on behalf of Besicorp and Old Besicorp.
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.
Besicorp Stock Certificates mean the certificates evidencing ownership of shares
of Besicorp Common Stock.
BGI Acquisition means BGI Acquisition Corp., a wholly owned subsidiary of BGI
Parent.
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
<PAGE>
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.
Buyer means Parent and Acquisition Corp.
Cash Merger Consideration means $8 million divided by the Total Shares.
CC&C means Citrin Cooperman & Company, LLP.
Certificate of Merger means a certificate of merger executed by Besicorp and
Acquisition Corp.
Closing means the consummation of the transactions contemplated by the Plan of
Merger.
Code means the Internal Revenue Code of 1986, as amended.
Continental means Continental Stock Transfer & Trust Co., the transfer agent for
Besicorp and WOM.
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 to be
dated the date of the Spin-Off 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.
2
<PAGE>
Disputed Shares means the 4,000 shares of Besicorp Common Stock held in the name
of Martin Enowitz but are being held in escrow pending resolution of the dispute
regarding the ownership of these shares.
Dissenter means any shareholder of Besicorp who wishes to object to the Merger
and complies with the procedures set forth in Sections 623 and 910 of the NYBCL.
Dissenters' Shares means the shares of Besicorp Common Stock held by Dissenters
on the Spin- Off Record Date.
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.
Distribution Agent means Continental as the distribution agent for the Spin-Off.
Effective Date means the date of filing of the Certificate of Merger with the
Secretary of State of the State of New York in accordance with the NYBCL or at
such later time as provided in such Certificate of Merger.
EIR means Energy Investment Research Inc.
Enowitz Shares means 100,000 shares of Old Besicorp's common stock held of
record by Martin Enowitz.
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
3
<PAGE>
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.
Exchange Act means the Securities Exchange Act of 1934, as amended.
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.
Fiscal 1998 means the year ended March 31, 1998.
Fiscal 1999 means the year ended March 31, 1999.
Fiscal 2000 means the year ending March 31, 2000.
Incentive Plan means Besicorp's 1999 Incentive Plan.
Indemnification Agreement means the indemnification agreement between BGI
Parent, BGI Acquisition and Besicorp dated March 22, 1999.
Independent Directors mean the directors of Besicorp who are not employees of
Besicorp.
Independent Directors' Restricted Shares mean the 1,050 Restricted Shares issued
to Independent Directors.
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.
Interested Shareholder means any person that is the beneficial owner of 20% or
more of the then-outstanding voting stock of an entity.
Letter of Transmittal means the documents needed to exchange shares of Besicorp
Common Stock for the Merger Consideration.
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.
4
<PAGE>
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.
Management Restricted Shares means the 13,450 Restricted Shares issued to
officers, directors (except for Independent Directors) and employees.
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.
Merger Consideration means the Cash Merger Consideration and the Besicorp
Deferred Payment Right to be received as the result of the conversion of one
share of Besicorp Common Stock pursuant to the Merger.
MRA means the Master Restructuring Agreement between (i) the partnerships which
owned the five domestic power plants, in which Old Besicorp formerly held
ownership interests, which provided capacity and electrical power to Niagara
Mohawk Power Corporation, (ii) Niagara Mohawk Power Corporation and (iii)
certain other independent power producers.
NYBCL means the New York Business Corporation Law.
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.
Outside Participating Shareholders means the Outside Shareholders, except for
the Dissenters.
Outside Participating Shareholders' Shares means the number of shares of
Besicorp Common Stock held of record immediately before the Effective Date by
the Outside Participating Shareholders.
5
<PAGE>
Outside Shareholders means Besicorp's shareholders, except for the Buyer.
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.
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.
6
<PAGE>
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.
Registration Statement means a registration statement on Form 10-SB (as it may
be amended or supplemented) under the Exchange Act with respect to the shares of
WOM Common Stock.
Remaining Proceeds means (i) the proceeds of the Escrow Fund, if any, released
to Besicorp or pursuant to the Instructions 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 Besicorp to
the Escrow Agent: (a) no claims are then subject to the Escrow Fund
Determination Procedure; (b) in the reasonable judgment of BGI Parent, no future
BGI Indemnity Claims are foreseeable; and (c) all Besicorp Assumed Matters and
the Bansbach Litigation have been finally settled through either (A) a final,
non-appealable judgment against Old Besicorp and all Purchaser Indemnitees; (B)
a settlement or other conclusion to each such Besicorp Assumed Matter that (x)
contains a release from all liability in favor of Old Besicorp and Purchaser
Indemnitees without any further obligation by Old Besicorp 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 Old
Besicorp or any Purchaser Indemnitee and (z) if the scheduled matter is a
litigation or a proceeding, includes as a term thereof a full dismissal of the
litigation or proceeding with prejudice or (C) a settlement or other conclusion
to the Bansbach Litigation that (x) contains a release from all liability in
favor of WOM without any further obligation by WOM 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 WOM and (z) includes as a term thereof a
full dismissal of the litigation or proceeding with prejudice; and (ii) amounts
released from the Escrow Fund to Besicorp or pursuant to the Instructions
pursuant to a determination that the amount of the Escrow Fund is more than
sufficient to secure BGI Parent pursuant to the Indemnification Agreement.
Restricted Shares means the 14,500 shares of Besicorp Common Stock subject to
restrictions upon transferability which have been issued to directors, officers
and employees of Besicorp pursuant to the Incentive Plan.
RICO means the Racketeer Influenced and Corrupt Organizations Act.
RICO Action means an action Besicorp commenced on September 27, 1999 in th
Supreme Court of the State of New York, Ulster County, entitled Besicorp, Ltd.,
plaintiff, against Alan R. Kahn, James Lichtenberg, Vee Hockmeyer, Paul
Vannucci, Andrew Jurun, Paul Shaheen, Debra
7
<PAGE>
Berenda and John Does 1 through 5, defendants.
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.
SEC means the Securities and Exchange Commission.
Securities Act means the Securities Act of 1933, as amended.
S.N.C. means S.N.C., Ltd.
Special Meeting means the special meeting of the shareholders of Besicorp to be
held at 9:00 a.m., local time, on April 7, 2000 at the offices of Robinson Brog,
1345 Avenue of the Americas, New York, NY 10105, and at any adjournment or
postponement thereof.
Spin-Off means the Contribution and the Distribution to be effectuated
immediately prior to the Merger.
Spin-Off Record Date means the date that all conditions to the effectuation of
the Merger, including (i) the shareholders' adopting of the Plan of Merger by
the Requisite Vote at the Special Meeting and (ii) the Contribution, have been
or will be waived or satisfied.
Substitute Restricted Shares means shares of common stock of Parent containing
restrictions similar to the restrictions upon the Management Restricted Shares
to be provided in substitution for the Management Restricted Shares.
Substituted Management Restricted Shares means Management Restricted Shares
which have been cancelled as the result of the issuance of Substitute Restricted
Shares in substitution therefor prior to the Effective Date.
Surviving Corporation means the surviving corporation of the Merger.
Total Shares means the sum of (i) the number of shares of Besicorp Common Stock
issued and outstanding immediately prior to the Effective Date (other than those
shares held as treasury shares by Besicorp) plus (ii) the number of Substituted
Management Restricted Shares.
Trust means The Zinn Family Charitable Trust.
WOM means WOM, Inc., a New York corporation and wholly-owned subsidiary of
Besicorp which will be distributed to the holders of Besicorp Common Stock
pursuant to the Spin-Off.
8
<PAGE>
WOM Board means the Board of Directors of WOM.
WOM By-laws mean the By-laws of WOM in effect on the date of this Information
Statement.
WOM Certificate means the Certificate of Incorporation of WOM, as amended on or
before the date of this Information Statement.
WOM Certificate Provision means the provision in the WOM Certificate that
provides that no director shall be personally liable to WOM 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
profit or other advantage to which he or she was not legally entitled or that
his or her acts violated Section 719 of the NYBCL.
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, (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
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.
WOM Restricted Stock means the shares of WOM Common Stock issued to the holders
of Restricted Shares pursuant to the Spin-Off, which shares are subject to the
same restrictions upon transferability as the Restricted Shares.
WOM Stock Certificates mean the certificates evidencing ownership of shares of
WOM Common Stock.
9
<PAGE>
EXHIBITS TO
AMENDMENT NO. 1
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
----------------
WOM, INC.
<PAGE>
INDEX OF EXHIBITS
2.1 Contribution and Distribution Agreement by and
between Besicorp and WOM*.
3(i) Certificate of Incorporation of WOM**
3(ii) By-Laws of WOM*
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")**
10.2 Escrow Agreement (the "Escrow Agreement") dated as of
March 22, 1999 by and among Besicorp, BGI, LLC and
BGI Acquisition.**
10.3 Amendment No. 1 to the Escrow Agreement dated as of
February 23, 2000 by and among Besicorp, BGI, LLC
and WOM.
27 Financial Data Schedule - December 31, 1999**
* To be filed by amendment.
** Filed previously
This AMENDMENT NO. 1 (THIS "AMENDMENT") TO THE ESCROW
AGREEMENT is entered into this 23rd day of February, 2000, by and among BGI
Acquisition LLC, a Wyoming limited liability company ("Parent"), Besicorp Ltd.,
a New York corporation ("BL"), Besicorp Group Inc., a New York corporation
("Besicorp"), WOM, Inc.("WOM"), a New York corporation, and Robinson Brog
Leinwand Greene Genovese & Gluck P.C. (the "Escrow Agent").
RECITALS:
A. Parent, BL, Besicorp, Escrow Agent and BGI Acquisition Corporation
("Acquisition"), a New York corporation, are parties to an Escrow Agreement
dated as of March 22, 1999 (the "Initial Escrow Agreement" and, as amended by
this Amendment, the "Escrow Agreement").
B. Parent, Acquisition and Besicorp are parties to an Agreement and
Plan of Merger (as amended, the "Plan of Merger") whereby Acquisition merged
into Besicorp.
C. BL has entered into an Amended and Restated Agreement and Plan of
Merger which contemplates, among other things, that BL will contribute to WOM
the interests in the Bansbach Litigation (as defined below) that BL received
pursuant to the Contribution Agreement by and between BL and Besicorp dated
March 22, 1999 and will distribute all of the shares of WOM's common stock to
BL's shareholders (the "BL Spin-Off").
D. It is a condition to the BL Spin-Off that the parties hereto amend
the Initial Escrow Agreement to permit the Escrow Agent to provide money from
the Escrow Fund to WOM and BL in certain situations.
E. Capitalized terms used in this Amendment without definition herein
have the meanings ascribed to them by the Initial Escrow Agreement.
A G R E E M E N T S
Therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. The first sentence of Section 1(b) of the Initial Escrow Agreement
is hereby amended to read in its entirety as follows:
"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 and the Bansbach
<PAGE>
Litigation (where BL is contesting, defending, litigating, settling or otherwise
controlling such matter pursuant to Section 7 of the Indemnification Agreement
or WOM is contesting, defending, litigating, settling or otherwise controlling
such matter as a result of the BL Spin-Off).
2. Section 1 of the Initial Escrow Agreement Plan is hereby amended by
inserting Sections 1(f), 1(g), 1(h), 1(i) and 1(j) as follows:
(f) "WOM Permitted Expenses" shall mean the reasonable
expenses
(A) incurred by BL or WOM in connection with (i) the formation of WOM,
(ii) the BL Spin-Off (including the cost of distributing the shares of
WOM's Common Stock (including the fees and expenses of Continental
Stock Transfer & Trust Co. ("Continental")), and (iii) the preparation
and filing of a registration statement on Form 10-SB, and all
amendments thereto, with respect to WOM's Common Stock, and
(B) incurred by WOM in connection with (i) maintaining WOM's existence
(including the fees and expenses of Continental or any other registrar
and transfer agent for WOM's common stock), (ii) compliance by WOM with
the Securities Exchange Act of 1934 and the rules and regulations
promulgated thereunder, and (iii) such other matters as may be
reasonably necessary to permit the Bansbach Litigation to continue;
provided, however that WOM shall not be permitted to receive payments
in excess of $35,000 per annum with respect to WOM Permitted Expenses
described in this clause (B) which are incurred in any 12 month period
commencing after the consummation of the BL Spin-Off;
provided that neither BL nor WOM shall be entitled to reimbursement for the cost
or value of the services and facilities provided by BL to WOM pursuant to the
WOM Contribution Agreement. BL or WOM, as applicable, shall provide Buyer and
the Escrow Agent documentation reasonably acceptable to Buyer (including billing
rate information and amounts of hours) in connection with requests by BL or WOM
as applicable, for reimbursement of such WOM Permitted Expenses.
(g) "WOM 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 BCL Sections relating to the
defense, prosecution, participation in administrative proceedings, responding to
civil investigative demands or inquiries, settlement, or payment of (i) the
Bansbach Litigation; and (ii) litigation arising out of or relating to the
Bansbach Litigation, the Spin-Off and WOM's existence (including, for each of
items (i) through (iv) above, counsel and witness fees and expenses).
Notwithstanding the foregoing sentence, to the extent a set of facts could give
rise to WOM Litigation Costs and Buyer Indemnity Claims (as defined herein) the
provisions of the Indemnification Agreement (including Section 7 thereof) shall
apply (with the substitution of WOM for BL, as appropriate).
2
<PAGE>
(h) "Bansbach Litigation" shall mean the 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.
(i) "BL Spin-Off" shall mean BL's contribution to WOM of the
interests in the Bansbach Litigation that BL received pursuant to the
Contribution Agreement by and between BL and Besicorp dated March 22, 1999 and
BL's distributing all of the shares of WOM's common stock to BL's shareholders.
(j) "WOM Contribution Agreement" shall mean the Contribution
Agreement by and between WOM and BL to effectuate the BL Spin-Off.
3. The fourth sentence of Section 2 (b) of the Initial Escrow Agreement
is hereby amended to read in its entirety as follows:
The Escrow Funds shall be deposited by the Escrow Agent in a separate
interest bearing money market bank account at HSBC Bank USA or in such other
accounts or investments as Buyer, BL and WOM jointly agree in writing.
4. Section 3 of the Initial Escrow Agreement is hereby amended to
read in its entirety as follows:
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 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, any claims of Buyer with respect to the Bansbach
Litigation arising from the failure of WOM to diligently prosecute or defend the
Bansbach Litigation 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
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<PAGE>
(ii) payment of Litigation Costs, WOM Permitted Expenses and
WOM 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, BL and WOM, 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 or WOM 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 or WOM, it shall not
disburse the amount requested until it shall have received (i) the joint written
notice of BL, WOM 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 and WOM 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, WOM 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 or WOM 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 Buyer or
WOM, it shall not disburse the amount requested until it shall have received (i)
the joint written instructions of BL, WOM 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 and WOM 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
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<PAGE>
previously provided to Buyer and WOM and (y) amounts then remaining in the
Escrow Fund.
(d) Disbursements with respect to WOM Permitted Expenses and
WOM Litigation Costs. If BL or WOM shall request a disbursement from the Escrow
Fund with respect to WOM Permitted Expenses or WOM Litigation Costs it shall
give notice of such request executed by BL or WOM, as the case may be (the
"Requesting Party"), to WOM (if BL is the Requesting Party or BL (if WOM is the
Requesting Party) (such receipient, the "Non-Requesting Party"), the Escrow
Agent and Buyer, through a notice substantially in the form of Exhibit D hereto,
which shall set forth the amount requested, the basis for such request, and
reasonable documentation to support such request. The Requesting Party shall
give a separate notice with respect to each item of WOM Permitted Expenses and
WOM Litigation Costs, and shall provide a notice no less frequently than
quarterly. In the event the Escrow Agent shall not have received a notice of
objection from Buyer or the Non-Requesting Party 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 Buyer or
the Non-Requesting Party, it shall not disburse the amount requested until it
shall have received (i) the joint written instructions of BL, WOM, and the Buyer
setting forth the joint direction of such parties (such notice being
substantially in the form of Exhibit E 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, Buyer and the Non-Requesting Party, shall not
unreasonably withhold their consent to a request by a Requesting Party for
payment of WOM Permitted Expenses and WOM 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) a current estimate of the amounts
needed to complete the Bansbach Litigation and (y) amounts then remaining in the
Escrow Fund.
5. Section 4 of the Initial Escrow Agreement is hereby amended to read
in its entirety as follows:
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"):
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(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 all claims of BL and WOM that have
been set forth in notices provided under Section 3(d) of this Agreement
have been settled and paid in accordance with the provisions of Section
3(d) and no such claims remain outstanding; and
(iii) each BL Assumed Matter and the Bansbach
Litigation have been settled through either (A) a final, non-appealable
judgement against the Surviving Corporation and all Purchaser
Indemnitees or, in the case of the Bansbach Litigation, WOM; (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 or (C) a
settlement or other conclusion to the Bansbach Litigation that (x)
contains a release from all liability in favor of WOM without any
further obligation by WOM 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 WOM and (z) includes as a term
thereof a full dismissal of the litigation or proceeding with
prejudice.
BL may, at its option, notify the Escrow Agent, WOM 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 or WOM 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 or WOM, it shall not disburse any portion of the Escrow Fund and shall
disburse the Escrow Fund only in accordance with the provisions of the fourth
sentence of Section 3(c) or 3(d) hereof, as applicable.
(b) Consultations. BL , WOM 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, WOM Permitted Expense,
WOM Litigation Costs 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 and WOM in
connection with the Bansbach Litigation and hereunder.
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<PAGE>
6. Section 5 of the Initial Escrow Agreement is hereby amended to
read in its entirety as follows:
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 and WOM in any dispute or question as to any matter
arising out of the Merger Agreement, the Distribution, the Transactions, the BL
Spin-Off or the merger pursuant to the Amended and Restated Agreement and Plan
of Merger dated as of November 24, 1999 by and among BL and certain other
parties.
(c) The Escrow Agent may resign at any time upon ninety (90)
days written notice to Buyer, WOM and BL and in such event, shall deliver the
Escrow Funds and any interest thereon pursuant to the joint written instructions
of BL, WOM 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, WOM 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, 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; and (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.
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(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, BL and WOM, 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.
7. Section 6 (a) of the Initial Escrow Agreement is hereby amended to
read in its entirety as follows:
(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. Any notice to WOM
shall be addressed as follows: WOM, Inc, 1151 Flatbush Road, Kingston, New York
12401, Attention: Frederic Zinn, telecopier No. (914) 336-7172. 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;
8. Exhibit B to the Initial Escrow Agreement is hereby amended to read
in its entirety as set forth in Exhibit 1 hereto.
9. Exhibits D and E (as set forth in Exhibit 2 hereto) are hereby
inserted following Exhibit C to the Initial Escrow Agreement.
10. Addition of WOM as a Party. The parties hereto agree that WOM shall
henceforth be deemed to be a party to the Escrow Agreement and shall be entitled
to the rights and privileges and subject to the duties and obligations set forth
in the Escrow Agreement which are applicable to WOM.
11. Effective Date. This Amendment shall be effective at such time as
the distribution of all of the shares of WOM to BL's shareholders pursuant to
the BL Spin-Off is effectuated. Until such time the Initial Escrow Agreement
shall remain in full force and effect as if the parties hereto had not entered
into this Amendment.
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<PAGE>
12. Effect of Amendment. Except as amended by this Amendment, the
Initial Escrow Agreement shall remain in full force and effect. This Amendment
shall not constitute a waiver or amendment of any provision of the Initial
Escrow Agreement not referred to herein.
13. Entire Agreement. This Amendment, the Initial Escrow Agreement, and
the instruments to be delivered by the parties pursuant to the provisions of
this Amendment and the Initial Escrow Agreement constitute the entire Escrow
Agreement between the parties and shall be binding upon and inure to the benefit
of the parties hereto and their respective legal representatives, successors and
permitted assigns.
14. Applicable Law. This Amendment 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.
15. Assignability. This Amendment shall not be assignable by either
party without the prior written consent of the other party.
16. Counterparts. This Amendment 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.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment on the
date first above written.
BESICORP LTD.
By: /s/Frederic M. Zinn
----------------
Name: Frederic M. Zinn
Office: Senior Vice President
BESICORP GROUP INC.
By: /s/James Haber
-----------
Name: James Haber
Office: President
BGI ACQUISITION LLC
By: /s/James Haber
-----------
Name: James Haber
Office: President
WOM, INC.
By: /s/Frederic M. Zin
Name: Frederic M. Zinn
Office:
Senior Vice President
ROBINSON BROG LEINWAND GREENE
GENOVESE & GLUCK P.C.
By: /s/A. Mitchell Greene
------------------
Name: A. Mitchell Greene
Office: Partner
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<PAGE>
Exhibit 1
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 March 22, 1999 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. (as amended by Amendment No. 1 dated as of February
23, 2000, 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], a duly
certified officer of WOM 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.
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<PAGE>
IN WITNESS WHEREOF, Buyer, WOM and BL have executed and delivered this
Certificate as of the ________day of ___________ ________.
[BESICORP GROUP INC./ BGI ACQUISITION LLC]
By:
_________________________________
By:
Its:
WOM, INC.
________________________________
By:
By:
Its:
BESICORP LTD.
By:_________________________________
By:
Its:
<PAGE>
Exhibit D Exhibit 2
FORM OF BL'S/WOM DISBURSEMENT NOTICE
CERTIFICATE
This certificate is being issued pursuant to Section 3(d) of that
certain Escrow Agreement dated as of March 22, 1999 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. (as amended by Amendment No. 1 dated as of February 23, 2000, 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 LTD./WOM, Inc.] (the "Requesting Party"), hereby certifies that:
1. The Requesting Party is requesting the Escrow Agent release the
amount of $_______ of the Escrow Fund on account of WOM Litigation Costs and WOM
Permitted Expenses paid by the Requesting Party.
2. The Requesting Party 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. The Requesting Party has previously claimed the amount of $_______
with respect to the matter for which the WOM Litigation Costs or WOM Permitted
Expenses 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 the Requesting Party to bring the matter
for which the WOM Litigation Costs or WOM Permitted Expenses 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, the Requesting Party has executed and delivered
this Certificate as of the ________day of ___________ ________.
[BESICORP LTD./WOM, Inc.]
By:_________________________
By:
Its:
<PAGE>
Exhibit E
FORM OF JOINT DISBURSEMENT NOTICE
CERTIFICATE
This certificate is being issued pursuant to Section 3(d) of that
certain Escrow Agreement dated as of March 22, 1999 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. (as amended by Amendment No. 1 dated as of February 23, 2000, 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], a duly certified officer of Besicorp
Ltd. and a duly certified officer of WOM, Inc. 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(d) 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, BL and WOM 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>
WOM, Inc.
By:________________________
By:
Its:
