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
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
ANALYSIS OR PLAN OF
OPERATIONS."
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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
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.
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 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 dated as of March 22, 1999 by and
among Besicorp, BGI, LLC and BGI Acquisition.
10.3 Amendment No.1 to the Escrow Agreement by and among
Besicorp, BGI, LLC and WOM*
27 Financial Data Schedule - December 31, 1999
*To be filed by amendment.
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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
January 4, 2000
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Besicorp Ltd.
1151 Flatbush Road
Kingston, New York 12401
January [ ], 2000
Dear Shareholder of Besicorp Ltd.:
On or about [ ], 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 the Merger Consideration.
For each share of Besicorp Stock you own on [ ], 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 JANUARY [ ], 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 which Old
Besicorp was named as a nominal defendant and the other named defendants were
various officers and directors of Old Besicorp. 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 all of the other
conditions to the Merger have then been satisfied or waived and the Spin-Off
will occur only if 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
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of WOM Common Stock at $0.00 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 to permit WOM to receive the WOM Costs. The Bansbach Litigation is a
shareholder derivative action commenced in August 1997 in the New York Supreme
Court, Ulster County. See "Business."
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 amendment of the
Escrow Agreement pursuant to the Contribution Agreement, (iv) the cancellation
of 7,050 Substituted Management Restricted Shares and (v) 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. 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
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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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THISINFORMATION 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
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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
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Regional Offices of the SEC located at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
13th Floor, New York, New York 10048. Copies of such information may be obtained
by mail from the Public Reference Branch of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such material may also be obtained
on line at the SEC's Web site (http://www.sec.gov).
Following 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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PAGE
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 Matters......................................................................................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.
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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
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 do not believe that there is any merit
to the plaintiff's claims and have no intention of
providing any assistance to him. We do intend to
defend ourself from liability to the extent we deem
appropriate. Besicorp has appealed the Prior Merger
Order to the United States Court of Appeals for the
Second Circuit. If the Second Circuit reverses the
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Prior Merger Order before the Spin-Off, the Spin-
Off will not occur; if the Second Circuit reverses the
Prior Merger Order after the Spin-Off, WOM will be
dissolved. See "The Contribution and the Spin-Off--
The Contribution Agreement" and "Business."
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., shares of
WOM Common Stock containing restrictions on
their 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 128,932 shares of
WOM Common Stock (based on the number of
shares of Besicorp Common Stock outstanding on
December [ ], 1999 and assuming (i) the
cancellation of 7,050 Substituted Management
Restricted Shares, (ii) that no shares of Besicorp
Common Stock are issued or cancelled prior to the
Spin-Off and (iii) 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.
Therefore, under the Plan of Merger, Besicorp is
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required to effectuate the Spin-Off prior to
effectuating the Merger unless the Bansbach
Litigation is not pending at such time. 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.
Michael F. Zinn, the Chairman of Board, President
and Chief Executive Officer of Besicorp, will be the
sole director, President and Chief Executive Officer
of WOM at the time of the Spin-Off. The Spin-Off
will not be effectuated unless all of the other
conditions to the Merger have been satisfied or
waived and the Spin-Off will occur only if
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. If the
Second Circuit reverses the Prior Merger Order before
the Spin-Off, 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 beneficially own 88.5% 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 $58.83 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 [ ], 2000.
Dissenters will receive the appraised value of their
shares of Besicorp Common Stock in accordance with
the NYBCL and after compliance with all
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statutory requirements. The Buyer's shares of
Besicorp Common Stock will be cancelled. 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 beneficially own 88.5% of
Parent's common stock) and 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 47.3% of
the outstanding shares of WOM Common Stock. However,
Besicorp has agreed to furnish WOM free of charge
with the services of Besicorp's employees and
the use of Besicorp's corporate headquarters.
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 $6.5 million placed by Old
Besicorp in escrow as the Escrow Fund 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.
Since the Bansbach Litigation was covered by
the Escrow Fund prior to the Spin-Off, the Escrow
Agreement has been amended to provide that (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
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Act and the rules and regulations promulgated
thereunder, and (B) for such other matters as may
be reasonably necessary to permit the Bansbach
Litigation 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 would vary depending
upon, among other things, your particular
circumstances. You would generally 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 will most likely
receive no dividend income.
Your receipt of shares of WOM Restricted Stock is not
likely to be a taxable event unless an election
under ss.83(b) of the Code is made. However, an
ordinary income taxable event is likely to 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 current value,
but all other shares of WOM Restricted Stock will still
be restricted.
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."
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
<S>
<C>
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.
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. These assets will not generate any
revenues to WOM unless there is a settlement or final judgment in favor of the
plaintiff.
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<PAGE>
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 believe that the action is without merit. If the Bansbach Litigation
is decided in favor of the defendants, we will receive no money as a result of
the Bansbach Litigation, and 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 do not believe that there is any merit to the plaintiff's claims, 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 will dissolve if the Prior Merger Order is reversed.
Besicorp has appealed the Prior Merger Order to the United States Court
of Appeals for the Second Circuit. We are required, pursuant to the Contribution
Agreement, if the Second Circuit reverses the Prior Merger Order, to return
(once such reversal is subject to no further appeal) 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.
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 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 preparing 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.
13
<PAGE>
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).
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 other claims, it is possible (although
in the near future unlikely) that such matters will deplete all of the Escrow
Funds and therefore 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 are not likely to be able
to meet our obligations.
Since our principal shareholder and the Trust own approximately 55.0% 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 sole
director, President and Chief Executive Officer of WOM, will own, approximately
47.3% and The Zinn Family Charitable Trust will own approximately 7.8% of the
then outstanding shares of WOM Common Stock, assuming (i) the cancellation of
7,050 Substituted Management Restricted Shares, (ii) that no shares of Besicorp
Common Stock are issued or cancelled prior to the Spin-Off and (iii) 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 55.0% 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
14
<PAGE>
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.
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 a business combination with WOM at any
time, subject, to the extent required by the NYBCL, to the approval of such
transaction 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 55.0% 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
121,068 unissued and unreserved shares of WOM Common Stock (assuming that
128,932 shares of WOM Common Stock are issued in the Spin-Off). The WOM Board
can authorize, without having to obtain
15
<PAGE>
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 could not obtain any such insurance and
could not 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.
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
16
<PAGE>
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 Adjustments Pro 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 128,932
shares (pro forma) $ 1 $ 1,288(a) $ 1,289
Paid-in Capital 99 (99)(a) 0
Deficit 0 (1,189)(a) (1,189)
--- -------- -------
Total Combined Equity $ 100 $ 0 $ 100
--- -------- ------
Total Shareholders' Equity $ 100 $ 0 $ 100
--- ------- ------
Total Capitalization: $ 100 $ 0 $ 100
==== ======= ======
- -----------------------
</TABLE>
(a) Gives effect to the issuance of 128,932 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 the
effects on the historical results of the Contributed Assets of: (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. 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
17
<PAGE>
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
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
WOM was established in December 1999 in order to permit the named
plaintiff in the Bansbach Litigation to maintain the Bansbach Litigation. The
Bansbach Litigation is a shareholder derivative action that was commenced in
August 1997 by John Bansbach as a result of the Proceeding (see Note 2, Bansbach
Litigation, of the Notes to Balance Sheet of WOM, Inc.
for details of the Bansbach Litigation).
The effectuation of the Merger ordinarily would adversely affect the
Bansbach Litigation; however, by assigning Besicorp's interests in the Bansbach
Litigation to us pursuant to the Spin- Off, the named plaintiff should be able
to maintain the Bansbach Litigation. The Lichtenberg Litigation is not being
assigned because the complaint in the Lichtenberg Litigation has been dismissed.
We have been assigned Besicorp's interest in the Bansbach Litigation
that Besicorp received from Old Besicorp as a result of the Prior Merger Order.
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.
18
<PAGE>
We have also assumed the contingent liabilities comprising certain of
the interests in the Bansbach Litigation that Besicorp received from Old
Besicorp as a result of the Prior Merger Order. Therefore, we intend to defend
ourselves from liability to the extent we deem necessary. Reimbursements for the
costs of defending ourselves will be sought from the Escrow Fund. In addition,
if we, as the successor, or any of the other defendants in the Bansbach
Litigation, are required to pay damages, we expect to seek the money to pay such
damages from the Escrow Fund. However, there can be no assurance that such
amounts will be available from the Escrow Fund or that WOM will be entitled to
receive monies from the Escrow Fund. See "Risk Factors - - Risks related to our
operations" and "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 shortly afterward and that WOM
will then be liquidated.
On account of our very limited activities, we have no full-time
employees and no offices. Besicorp has agreed in the Contribution Agreement to
provide us with the services of its employees and to allow us to operate from
its corporate headquarters free of charge. We have no suppliers, no customers,
and, except for our interests in the Bansbach Litigation, we are party to no
litigation. We have no foreign operations and our operations are not subject to
any U.S., state, foreign or local laws or regulations (other than those
generally applicable to public corporations). Consequently, as a result of the
nature of our business, there is no discussion or analysis of results of
operations.
Inflation
The Company's operations are not expected to be materially affected by
inflation. In addition, since the Company is not engaged in business
internationally, it will not be subject to risks of inflation in foreign
countries.
Liquidity and Capital Resources
As of December 31, 1999, the Company had cash of $100, which
represented its initial capitalization. We will not attempt to incur debt or
raise capital. However, the parties to the Indemnification Agreement and the
Escrow Agreement, which were executed in connection with the Prior Plan of
Merger, have agreed 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 such other matters as may be
reasonably necessary to permit the Bansbach Litigation to continue. Therefore,
we are dependent upon the Escrow Fund's containing enough money to permit the
release of this money to us. However, the Escrow Fund is also used for other
matters, including (i) the indemnification of BGI Parent, Old Besicorp
19
<PAGE>
and the other Purchaser Indemnitees pursuant to the Indemnification Agreement
and (ii) the payment of Besicorp's Litigation Costs; it is possible that such
matters will deplete all of the Escrow Funds. In this event, we do not intend to
seek any financing since there is no likelihood that we would be able to obtain
any financing because we lack assets and revenues. Without additional funds
(such as the funds from the Escrow Fund), we may not be able to pay our
obligations as they become due, and may, as a result, not be able to continue in
existence. See "Capitalization," "Selected Historical and Pro Forma Financial
Data," the Financial Statements of the Contributed Assets of Besicorp Ltd. and
the Unaudited Pro Forma Financial Information. Any money obtained from the
Escrow Fund will reduce the money in the Escrow Fund that would otherwise be
provided to the holders of Besicorp Common Stock as part of the Besicorp
Deferred Payments they are entitled to receive as a result of the Merger.
However, since the Bansbach Litigation is a shareholder derivative action, we
are also the beneficiary of any settlement or judgement. See "Business."
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 its interests in the Bansbach Litigation and the Lichtenberg Litigation,
another shareholder derivative litigation, to Besicorp 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 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 sole
director, 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
20
<PAGE>
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.
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.
On March 5, 1999, James Lichtenberg and Mr. Bansbach commenced the
March Litigation by filing 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
21
<PAGE>
to retain an independent investment banker to opine on the fairness of the Prior
Merger to Old Besicorp's minority shareholders, (d) failing to form an
independent committee to ensure that the Prior Merger was fair to and in the
best interests of Old Besicorp's minority shareholders, and (e) providing for a
$1 million bonus to Mr. Zinn and a $500,000 bonus to Mr. Daley, which the March
Complaint deemed to be excessive and/or unwarranted compensation.
The March Complaint sought injunctive relief directing full disclosure
of the financial impact on Old Besicorp's shareholders of the termination of the
Derivative Litigation and full disclosure of the alleged intentional structuring
of the Prior Merger to cause the termination of the Derivative Litigation. The
March Complaint also sought an order directing that the Derivative Litigation be
transferred to Besicorp, that the Prior Merger Consideration payable to Mr. Zinn
and two former directors and executive officers of Old Besicorp, 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 has appealed the Prior Merger Order to the United States Court of
Appeals for the Second Circuit. There have been no further significant
developments in the March Litigation. Prior to the Contribution, the Bansbach
Litigation was a Besicorp Assumed Matter and Besicorp's costs were funded from
the Escrow Fund; at present WOM's costs are funded from the Escrow Fund. The
parties to the Bansbach Litigation are currently engaged in the discovery
process.
The Prior Merger Order did not expressly 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
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Prior Merger Order (subject to WOM's agreement to return such interests if the
Second Circuit reverses the Prior Merger Order), 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.
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. However, we do not believe that there is any
merit to the plaintiff's claims, 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 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. 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, as the successor to Old Besicorp, or if any of the other defendants in the
Bansbach Litigation are required to pay damages, we expect to seek the money to
pay such damages from the Escrow Fund. 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 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. Besicorp agreed in the Contribution Agreement to
provide us with the services of its employees and to allow us to use its
corporate headquarters free of charge. 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
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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 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.
Therefore, 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 sole director, 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 be the officers of WOM. The Merger will not be effectuated
unless the Spin-Off has been effectuated (unless the Prior Merger Order is
reversed prior to the Effective Date). The Spin-Off will not occur unless all of
the other conditions to the Merger have been waived or satisfied and the
Spin-Off will not occur if the Prior Merger Order is reversed before such time.
Accordingly, Besicorp contributed the Contributed Assets to us and it
is anticipated that on [ ], 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 at 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, since Besicorp has
appealed the Prior Merger Order to the United States Court of Appeals for the
Second Circuit, WOM is required to return such interests if the Second Circuit
reverses the Prior Merger Order (once such reversal is subject to no further
appeal). As a result of the Contribution, WOM is liable for the interests in the
Bansbach Litigation that Besicorp received from Old Besicorp.
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
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<PAGE>
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 with the services of Besicorp's employees and to allow us to use its
offices without charge.
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.
Shares of WOM Common Stock will be issued to 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. Pursuant to the Plan of
Merger, Parent agreed to use its best efforts to cause the holders of the 13,550
Management Restricted Shares of Besicorp Common Stock to accept Substitute
Restricted Shares of Parent's common stock in substitution for their Management
Restricted Shares. Holders of the 7,050 Management Restricted Shares agreed to
accept Substitute Restricted Shares and consequently all 7,050 Substituted
Management Restricted Shares were cancelled prior to the Spin-Off Record Date.
Therefore the 6,500 Retained Management Shares are outstanding. As a result,
128,932 shares of Besicorp Common Stock currently are issued and outstanding.
The 128,932 shares includes 1,050 Independent Directors' Restricted
Shares and 6,500 Retained 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
Retained Management 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 Retained 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, the 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.
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The shares of WOM Common Stock being issued in the Spin-Off include
4,000 shares that will be released to Mr. Enowitz on account of the 4,000
Disputed Shares 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
matters."
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.
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."
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<PAGE>
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 federal income 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 would vary depending
upon, among other things, the particular circumstances of the Entitled Holder.
An Entitled Holder would generally 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 will most
likely 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 time 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 may be subject to backup
withholding at the rate of 31% unless the Entitled Holder (i) is a corporation
or comes within other exempt categories, or (ii) provides a certified taxpayer
identification number on Form W-9 and otherwise complies with the backup
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 is not likely to be a
taxable event unless an election under ss.83(b) of the Code is made. However, an
ordinary income taxable event ordinarily would be likely to 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 current value, 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.
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
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<PAGE>
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 $58.83 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 55.0% 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
the Second Circuit reverses the Prior Merger Order, 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 was entered into at the time of the Prior
Merger. It provides that Besicorp will generally indemnify the Purchaser
Indemnitees against and from certain damages they may sustain or incur. 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,
pursuant to the terms of the Escrow Agreement to the extent available, 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.
Consequently, 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 Indemnity Claims, BGI Monitoring Costs
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 to provide, by funding
claims for WOM Costs, that (i) we shall be provided from the Escrow Fund with
our reasonable expenses (up to $35,000 per annum) in connection with maintaining
our existence, complying with the Exchange Act and the rules and regulations
promulgated thereunder, and such other matters as may be reasonably necessary to
permit the Bansbach Litigation to continue and (ii) that the Bansbach Litigation
will still be covered by the Escrow Agreement following the Spin-Off. As of
November 30, 1999, as a result of permitted releases and after giving effect to
interest income, the Escrow Fund contained approximately $6.31 million.
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 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 certain conditions have occurred including 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 to meet at least once a year to
determine whether the amount of the Escrow Fund is more than sufficient to
secure BGI Parent pursuant to the Indemnification Agreement and WOM in
connection with the Bansbach Litigation and under the
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Escrow Agreement. Amounts released to Besicorp as a result of such meetings are
also Remaining Proceeds.
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 Matters
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
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.
MANAGEMENT
Director and Executive Officers
Pursuant to the WOM Certificate and the WOM By-Laws, the WOM Board
currently consists of one director; 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 individual who is
expected to serve as sole director and the individuals who are expected to serve
as officers of WOM following the Spin- Off.
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Michael F. Zinn
Mr. Zinn, 46, has been the sole director, 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 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 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 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
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from the UCLA School of Law. He is a cousin of Michael F. Zinn, the sole
director, Chief Executive Officer and President of WOM.
Executive compensation
Prior to the Spin-Off, our business was maintained by Besicorp and the
director and executive officers were compensated by Besicorp. Our director and
executive officers will not receive any compensation from us for serving in such
capacities. However, pursuant to the Contribution Agreement, Besicorp has agreed
to provide the service of its employees to us without charges; Besicorp's
employees providing services to us, including our director 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 director, 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.
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<PAGE>
<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) 45.0% (3)
Michael F. Zinn 60,967 (4)(5) 47.3% (4)(5)
The Trust 10,000 7.8%
Frederic Zinn 1,750 1.4%
James Curtin 0 *
Current director and
executive officers as
a group (3 persons) 62,717 (5) 47.3%(5)
* Less than 1 percent.
</TABLE>
(1) Except as described below, such persons have the sole power to vote and
direct the disposition of such shares.
(2) Assumes (i) the cancellation of 7,050 Substituted Management Restricted
Shares, (ii) that no shares of Besicorp Common Stock are issued or
cancelled prior to the Spin-Off and (iii) 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."
(2) The only members of Avalon are Michael F. Zinn and his wife, Valerie
Zinn, who owns a nominal interest in Avalon.
(3) Includes 57,967 shares held in the name of Avalon.
(4) Does not include 10,000 shares owned by the Trust established by
Michael F. Zinn; Mr. Zinn disclaims beneficial ownership of these
shares. Mr. Zinn is the sole director, 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
As of March 31, 1999 and 1998, entities owned by Michael F. Zinn, owed
Besicorp and Old Besicorp $58,675 and $47,662, respectively, net of airport
usage and plane services performed by such entities on behalf of Old Besicorp.
The cost of these airport usage and plane services were recorded for Fiscal 1999
and Fiscal 1998 as $59,925 and $31,939, respectively.
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Old Besicorp and Besicorp, pursuant to applicable law and governing
documents, advanced certain legal expenses on behalf of certain officers and
directors in connection with the Proceeding, the Lichtenberg Litigation and the
Bansbach Litigation. As of March 31, 1999 and 1998, such advances on behalf of
Michael F. Zinn in connection with the Proceeding equaled $338,517. Of such sum,
Mr. Zinn 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 advanced legal fees and disbursements of approximately
$217,663 incurred in connection with the Proceeding on behalf of Old Besicorp,
certain others directors, officers, and current and former employees and their
spouses who were actual or potential witnesses in this matter.
In connection with the Lichtenberg Litigation, Old Besicorp had
advanced as of March 31, 1999 an aggregate of $829,168 in legal fees and
disbursements on behalf of Old Besicorp, Mr. Zinn and certain other former
directors and/or officers of Old Besicorp.
In connection with the Bansbach Litigation, Old Besicorp had advanced
as of March 31, 1999 an aggregate of $155,085 in legal fees and disbursements on
behalf of Old Besicorp, Mr. Zinn, and certain other directors and officers or
former directors of Old Besicorp.
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
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.
34
<PAGE>
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 held by the Buyer and by
Dissenters)) shall, 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 in the manner provided
below,
o each share of Besicorp Common Stock held by the Buyer shall be
cancelled without receipt of the Merger Consideration and
o the Dissenters shall 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 128,932
shares of WOM Common Stock outstanding assuming (i) the cancellation of 7,050
Substituted Management Restricted Shares, (ii) that no shares of Besicorp Common
Stock are issued or cancelled prior to the Spin-Off and (iii) that the 4,000
Disputed Shares are outstanding at the time of the Spin-Off.
35
<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 47.3%
and 7.8%, 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 Retained Management Restricted Shares' restrictions upon transferability
will not lapse, and
36
<PAGE>
thus such shares will not vest, upon the effectuation of the Merger. Therefore
the restrictions on transferability on the shares of WOM Restricted Stock issued
as a dividend with respect to the Retained 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
121,068 unissued and unreserved shares of WOM Common Stock, assuming (i) the
cancellation of 7,050 Substituted Management Restricted Shares, (ii) that no
shares of Besicorp Common Stock are issued or cancelled prior to the Spin-Off
and (iii) 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.
37
<PAGE>
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. 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
of our shareholders for damages
38
<PAGE>
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 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
39
<PAGE>
significant amounts of 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 128,932
shares of issued and outstanding WOM Common Stock. We estimate that we will
initially have approximately [ ] shareholders of record, based on the number of
shareholders of record of Besicorp as of [ ], 2000. Of these shares,
approximately 128,932 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.
40
<PAGE>
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.
41
<PAGE>
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-7
</TABLE>
F-1
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"), to effectuate a spin-off upon the merger of Besicorp. WOM was
established in order to permit the named plaintiff in the Bansbach Litigation 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 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.
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 sole director, 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.
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.
F-4
<PAGE>
The meeting was scheduled for March 19, 1999 and it was contemplated that if
the Prior Plan of Merger was approved by Old Besicorp shareholders the Prior
Merger would occur shortly afterwards. Effectuation of the Prior Merger would
adversely affect the Bansbach Litigation and the Lichtenberg Litigation.
On March 5, 1999, James Lichtenberg and Mr. Bansbach commenced the March
Litigation by filing the March Complaint. 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 sough 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 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 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) that plaintiffs post a bond in the amount of
$100,000 within seven days of the date of the order, which bond was posted.
Besicorp has appealed the Prior Merger Order to the United States Court of
Appeals for the Second Circuit. There have been no further significant
developments in the March Litigation. Prior to the Contribution, the Bansbach
Litigation was a Besicorp assumed Matter and Besicorp's costs were funded from
the Escrow Fund; at present WOM's costs are funded from the Escrow Fund. The
parties to the Bansbach Litigation are currently engaged in the discovery
process.
The Prior Merger Order did not expressly 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 named plaintiffs' ability to
maintain the Bansbach Litigation in the precise manner the Prior Merger Order
had attempted to prevent. If Besicorp did not effectuate the Spin-Off,
consummation of the merger would cause the named 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 if the Second Circuit reverses the Prior Merger Order),
the named plaintiff should be able to maintain the Bansbach Litigation. The
Lichtenberg Litigation is not being assigned to WOM because the complaint in the
Lichtenberg litigation has been dismissed.
F-5
<PAGE>
WOM has been assigned the contingent assets and liabilities comprising certain
of the interests in the Bansbach Litigation that Besicorp received from Old
Besicorp as a result of the Prior Merger Order. However, WOM does not believe
that there is any merit to the plaintiff=s claims, WOM is under no obligation to
prosecute the action or to assist the plaintiff, or otherwise, in his
prosecution of the Bansbach Litigation, and WOM has no intention of providing
any assistance to the plaintiff.
WOM has also assumed the contingent liabilities comprising certain of the
interests in the Bansbach Litigation that Besicorp received from Old Besicorp as
a result of the Prior Merger Order. Therefore, WOM intends to defend itself from
liability to the extent WOM deems appropriate. Reimbursements for the costs of
defending WOM will be sought from the Escrow Fund. In addition, if WOM, as the
successor to Old Besicorp, or if any of the other defendants in the Bansbach
Litigation are required to pay damages, WOM expects to seek the money to pay
such damages from the Escrow Fund. However, there can be no assurance that such
amounts will be available from the Escrow Fund or that WOM will be entitled to
receive 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
holders of WOM Common Stock shortly afterward and that WOM will then be
liquidated. In addition, if at any time the Bansbach litigation is decided in
favor of the defendants, or if the Prior Merger Order is reversed, WOM will then
be liquidated.
NOTE 3 - OPERATIONS
On account of our very limited activities, we have no full-time employees and no
offices. Besicorp has agreed to provide us with the services of its employees
and to allow us to operate from its corporate headquarters free of charge. We
have no suppliers, no customers, and, except for the Bansbach Litigation, we are
party to no litigation. We have no foreign operations and our 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
Upon completion of the Besicorp Ltd. merger, Besicorp Ltd. will declare the
distribution of one share of WOM for each share of Besicorp Ltd. common stock
outstanding (assumed to be approximately 128,932 shares).
F-6
<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 $ 1,288 (1,2) $ 1,289
Additional paid in capital 99 (99)(2) 0
Deficit 0 (1,189)(2) (1,189)
------ -------- -----
$ 100 $ 0 $ 100
====== ======== ======
</TABLE>
See accompanying notes to pro forma balance sheet.
F-7
<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 assumed outstanding shares, approximately
128,932 shares of WOM, Inc. common stock will be distributed.
(2) Excess par value of shares to be issued over capital contributed will be
charged to additional paid in capital and deficit.
(3) As the Company is expected to have only very limited activities, no
full-time employees and no offices, Besicorp Ltd. has agreed to provide the
services of its employees and to let the Company operate from its corporate
headquarters free of charge. Because these activities will have an immaterial
effect, no pro forma operations have been presented. Other expenses of the
ongoing litigation are expected to be reimbursed from the escrow fund.
F-8
<PAGE>
APPENDIX 1
Acquisition Corp. means Besi Acquisition Corp., a New York corporation and a
wholly owned subsidiary of Parent.
Avalon means Avalon Ventures, LLC, a limited liability company organized under
the laws of Virginia. The only members of Avalon are Michael F. Zinn and his
wife, Valerie Zinn, who owns a nominal interest in Avalon
Bansbach Litigation means a shareholder derivative action commenced in AugusT
1997 in the New York Supreme Court, Ulster County, entitled John Bansbach v.
Michael F. Zinn, Michael J. Daley, Gerald A. Habib, Harold Harris, Richard E.
Rosen, and Besicorp Group Inc., Index No. 97-2573.
Besicorp means Besicorp Ltd.
Besicorp Assumed Matters means the Existing Litigation and other matters to be
prosecuted or defended by Besicorp pursuant to the Indemnification Agreement.
Besicorp Board means the Board of Directors of Besicorp.
Besicorp Common Stock means the common stock, par value $.01 per share, of
Besicorp.
Besicorp Deferred Payment Right means the right to Besicorp Deferred Payments.
Besicorp Deferred Payments mean the Deferred Payments and the Escrow FunD
Payments.
Besicorp 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 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.
<PAGE>
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 the Second
Circuit reverses the Prior Merger Order) .
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.
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.
<PAGE>
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.
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 pursuant to the
Contribution Agreement.
Escrow Fund means monies held by the Escrow Agent pursuant to the Escrow
Agreement.
Escrow Fund Determination Procedure means the Escrow Agent's receipt of (i) the
joint written direction of BGI Parent, WOM and Besicorp to release funds from
the Escrow Fund, (ii) a written instrument representing a final and
non-appealable order with respect to the disposition of funds from the Escrow
Fund issued by an arbitrator or (iii) a certified copy of a final and
non-appealable judgment of a court of competent jurisdiction directing the
disbursement of such funds.
Escrow Fund Payments means additional cash payments equal to the Remaining
Proceeds being distributed by the Escrow Agent divided by the Total Shares.
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.
<PAGE>
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.
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 13,550 Restricted Shares issued to
officers, directors (except for Independent Directors) and employees.
March Complaint means the complaint in the March Litigation.
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.
<PAGE>
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.
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.
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 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.
<PAGE>
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. Besicorp has appealed the
Prior Merger Order to the United States Court of Appeals for the Second Circuit.
Prior Plan of Merger means the agreement and plan of merger between Old
Besicorp, BGI Acquisition and BGI Parent, as a result of which Old Besicorp was
acquired on March 22, 1999 by BGI Parent.
Prior Spin-Off means the Prior Contribution and the Prior Distribution.
Proceeding means a proceeding in the United States District Court for the
Southern District of New York, in connection with contributions to the 1992
election campaign of Congressman Maurice Hinchey.
Purchaser Indemnitees means BGI Parent, Old Besicorp and its subsidiaries and
their respective affiliates and agents.
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
<PAGE>
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 14,600 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.
Retained Management Restricted Shares means the 6,500 Management Restricted
Shares for which Substitute Restricted Shares are not being issued in
substitution therefor.
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.
Special Meeting means the special meeting of the shareholders of Besicorp to be
held at [ ] a.m., local time, on [ ], 2000 at [ ], 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 the 7,050 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
<PAGE>
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.
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 BL 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, (b) litigation arising out of or relating to the Bansbach
Litigation, (c) the Spin-Off and (d) 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.
<PAGE>
EXHIBITS TO FORM 10-SB
General Form for Registration
Of Securities of Small Business Issuers
Under Section 12(b) or 12(g) of
the Securities Exchange Act of 1934
----------------
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 dated as of March 22, 1999 by and
among Besicorp, BGI, LLC and BGI Acquisition.
10.3 Amendment No. 1 to the Escrow Agreement by and among
Besicorp, BGI, LLC and WOM*.
27 Financial Data Schedule - December 31, 1999
*To be filed by amendment.
Exhibit 3(i)
CERTIFICATE OF INCORPORATION
OF
WOM, INC.
UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW
The undersigned incorporator, being a natural person of at
least 18 years of age, for the purpose of forming a corporation (the
"Corporation") under the Business Corporation Law, hereby adopts the following
Certificate of Incorporation and certifies that:
FIRST: The name of the Corporation is "WOM, Inc."
SECOND: The purpose for which the Corporation is formed is to
engage in any lawful act or activity for which corporations may be organized
under the Business Corporation Law, provided that the Corporation is not formed
to engage in any act or activity requiring the consent or approval of any state
official, department, board, agency, or other body without such consent or
approval first being obtained.
THIRD: The aggregate number of shares of capital stock, which
the Corporation is authorized to issue is 250,000 shares, consisting of 250,000
shares of common stock having a par value of $.01 per share.
FOURTH: The office of the Corporation is located in the
County of Ulster, State of New York.
FIFTH: The Secretary of State of the State of New York is
designated as agent of the Corporation upon whom process against it may be
served. The post office address to which the Secretary of State shall mail a
copy of any process served upon him is: Frederic M. Zinn, Corporate Secretary,
1151 Flatbush Road, Kingston, New York 12401.
1
<PAGE>
SIXTH: Whenever the shareholders of the Corporation are
required or permitted to take any action by vote, such action may be taken
without a meeting on written consent, setting forth the action so taken, signed
by the holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted, provided that
prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those shareholders who have not
consented in writing.
SEVENTH: No director shall be personally liable to the
Corporation or any of its shareholders for damages for any breach of duty as a
director; provided, however, that the foregoing provision shall not eliminate or
limit the liability of a director if a judgment or other final adjudication
adverse to him or her establishes that his or her acts or omissions were in bad
faith or involved intentional misconduct or a knowing violation of law or that
he or she personally gained in fact a financial profit or other advantage to
which he or she was not legally entitled or that his or her acts violated
Section 719 of the New York Business Corporation Law (the "BCL"). No amendment
to or repeal of this Article SEVENTH shall apply to or have any effect on the
liability or alleged liability of any director of the Corporation for or with
respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
EIGHTH: The Corporation expressly elects not to be governed
by Section 912 of the BCL.
Dated on this 14th day of December, 1999
/s/ Frederic M. Zinn
-------------------------------
Frederic M. Zinn, Incorporator
1151 Flatbush Road
Kingston, New York 12401
Subscribed and affirmed by me as true under the penalties of perjury on December
14, 1999.
/s/ Frederic M. Zinn
-------------------------------
Frederic M. Zinn, Incorporator
1151 Flatbush Road
Kingston, New York 12401
Exhibit 10.1
INDEMNIFICATION AGREEMENT
THIS AGREEMENT (the "Indemnification Agreement") is dated March 22,
1999, by and among BGI Acquisition LLC, a Wyoming limited liability company
("Parent"), BGI Acquisition Corp., a New York corporation ("Purchaser") and
Besicorp Ltd., a New York corporation ("BL").
RECITALS
--------
A. Parent, Purchaser and Besicorp Group Inc., a New York corporation
("Besicorp") have entered into an Agreement and Plan of Merger of even date
herewith (the "Merger Agreement") pursuant to which Purchaser will merge with
and into Besicorp, the separate existence of Purchaser shall cease and Besicorp
shall continue as the surviving corporation and wholly owned subsidiary of
Parent (the "Merger").
B. It is a condition to the consummation of the Merger by the Purchaser
that prior to the Merger (i) Besicorp transfer certain of its assets and
liabilities to BL as more fully described in the Merger Agreement and (ii)
Besicorp distribute to its shareholders all of the outstanding capital stock of
BL (the "Distribution").
C. Besicorp makes certain representations, warranties, and covenants in
the Merger Agreement and in this Indemnification Agreement, all of which will
survive the Closing in accordance therewith. Parent and Purchaser desire to
provide for indemnification with respect to breaches of these representations,
warranties, and covenants, all as set forth herein.
D. BL was formerly a subsidiary of Besicorp and is deriving substantial
value and benefits from the transfer of assets to it by Besicorp and the
transactions contemplated by the Merger Agreement.
E. It is a condition to the willingness of Parent and Purchaser to
enter into the Merger Agreement and the obligations of Parent and Purchaser to
consummate the Merger that BL indemnify and hold harmless Parent and Purchaser
(and, following the Merger the Surviving Corporation and the Remaining
Subsidiaries) and their respective members, affiliates, shareholders, officers,
directors, lenders and agents, and the heirs, successors and assigns of each of
the foregoing (each a "Purchaser Indemnitee" and, collectively, the "Purchaser
Indemnitees") from Damages (as herein defined), all as provided herein.
F. BL, Parent, Purchaser and Robinson Brog Leinwand Greene Genovese &
Gluck have entered into an Escrow Agreement of even date herewith pursuant to
which Besicorp has deposited into escrow certain funds as security for the
performance by BL of its obligations pursuant to this Indemnification Agreement
(the "Escrow Agreement").
<PAGE>
AGREEMENTS
----------
Therefore, for the promises contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Definitions. Unless otherwise defined herein, terms used herein
shall have the meanings ascribed to them in the Merger Agreement. As used in
this Indemnification Agreement, the following terms shall have the following
meanings:
(a) "Damages" means all liabilities, judgments, demands,
claims, actions or causes of action, regulatory, legislative or judicial
proceedings or investigations, assessments, levies, losses, fines, penalties,
damages, costs and expenses. For the purposes of clarification, any of the
foregoing Damages incurred or suffered by the Surviving Corporation or any
Remaining Subsidiary by virtue of a state of facts which constitute an
inaccuracy in or breach of a representation and warranty or covenant by Besicorp
or the effects thereby shall (without duplication) be deemed to have been
suffered by Parent. Without limiting the generality of the foregoing, Damages
include, without limitation: (i) reasonable attorneys', arbitrators',
accountants', investigators', environmental consultants' and experts' fees and
expenses, sustained or incurred in connection with the enforcement by a
Purchaser Indemnitee of its rights and remedies under this Indemnification
Agreement, the Merger Agreement, or any agreement executed by Besicorp or its
shareholders in connection therewith, or sustained or incurred in connection
with the defense or investigation of any Third Party Claim (as herein defined);
(ii) Damages incurred in connection with Litigation (as herein defined in
Section 3(g)(viii)); and (iii) costs and expenses incurred in connection with
compliance, remediation, monitoring, site investigation or corrective action, or
any other related cost or expense required pursuant to Environmental Laws or
Environmental Permits.
(b) "Person" shall mean an individual, partnership,
corporation, limited liability company, association, joint stock company, trust,
joint venture, or unincorporated organization, or the United States of America
or any other nation, or any state or other political subdivision thereof, or any
entity with executive, legislative, judicial, regulatory or administrative
functions of government; and
(c) "Third Party Claim" shall mean any claim, action, suit,
proceeding, investigation, or like matter which is asserted or threatened by a
Person other than the parties hereto, their successors and permitted assigns,
against any Purchaser Indemnitee or to which a Purchaser Indemnitee is subject.
The Existing Litigation Matters (as defined herein) shall not be classified as
Third Party Claims.
2. General. From and after the Closing, BL shall indemnify the
Purchaser Indemnitees as provided in this Indemnification Agreement. For the
purposes of this Indemnification Agreement, Besicorp shall be deemed to have
remade all representations and
2
<PAGE>
warranties contained in the Merger Agreement and this Indemnification Agreement
at the Closing with the same effect as if originally made at the Closing.
3. BL Indemnification Obligations. BL shall indemnify, save and keep
the Purchaser Indemnitees harmless and, to the extent provided herein, defend
against and from all Damages sustained or incurred by any Purchaser Indemnitee
as a result of, or arising out of, by virtue of, or in connection with:
(a) any inaccuracy in or breach of any representation and
warranty made by Besicorp in the Merger Agreement or in any closing document
delivered in connection with the Merger Agreement;
(b) any breach by Besicorp of, or failure by Besicorp to
comply with, any of its covenants or obligations under the Merger Agreement or
under this Indemnification Agreement;
(c) the existence of any Liability or other obligation of
Besicorp or any Subsidiary as of the Closing Date or arising out of or relating
to the Merger or any claim against a Purchaser Indemnitee with respect to any
such Liability or obligation or alleged Liability or obligation other than the
Permitted Liabilities, including, without limitation, Liability on account of
Taxes payable by Besicorp or for which Besicorp is liable, either by operation
of law or pursuant to the provisions of this Indemnification Agreement, the
Merger Agreement or the other Transaction Agreements, without regard to the fact
that any indemnifiable matter described in this Section 3(c) may have been
disclosed in the Company Disclosure Schedule or in any documents included or
referred to therein or may otherwise be known to Parent or Purchaser at the date
of this Indemnification Agreement or on the Closing Date;
(d) the failure of BL or any Subsidiary to pay and discharge
in full when due any of their respective Liabilities whenever or however arising
or existing, including Liability on account of Taxes other than the Permitted
Liabilities;
(e) any claims for indemnification by current or former
officers, directors, employees, agents or consultants of Besicorp or any
Subsidiary;
(f) any Third Party Claim to the extent it arises out of or
relates to any action or inaction of, or the conduct of the business of Besicorp
or any Subsidiary on or prior to the Closing Date, including the Closing Date
other than the Permitted Liabilities;
(g) without being limited by Paragraphs (a) through (f) above
and without regard to the fact that the Company Disclosure Schedule contains
information relating to any one or more of the items referred to in this Section
3(g) or in any documents included or referred to therein or may be otherwise
known to Parent or Purchaser at the date of this Indemnification Agreement or on
the Closing Date:
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(i) any violation of, or delinquency with respect to, any
decree, order or arbitration award or law, statute, or regulation in
effect on or prior to the Closing Date of or any agreement of Besicorp
(or any Subsidiary) with, or any license, Permit or Environmental
Permit granted to Besicorp (or any Subsidiary) by any federal, state or
local governmental authority to which the properties, assets, personnel
or business activities of Besicorp (or any Subsidiary) are subject (or
to which Besicorp (or any Subsidiary) is subject as it relates to the
properties, assets, personnel or business activities of Besicorp (or
any Subsidiary)), including, without limitation, laws, statutes and
regulations relating to Environmental Laws, occupational health and
safety, building codes, zoning, equal employment opportunities, fair
employment practices and discrimination;
(ii) any generation, transportation, storage, treatment,
disposal, release or threatened release of any Hazardous Materials
occurring on or prior to the Closing Date (including without limitation
those that allegedly result in, or result in, any release or threatened
release or treatment of Hazardous Materials after the Closing Date),
regardless of when liability is asserted, at any facility of Besicorp
(or any Subsidiary), regardless of whether Besicorp (or any Subsidiary
or any agent of Besicorp or any Subsidiary) operated such facility at
the time any such activity occurred;
(iii) any discharges or releases to or from storm, ground or
surface waters or wetlands, and any air emissions or pollution, which
result from or are caused by activities, events, conditions, omissions
or occurrences caused by Besicorp (or any Subsidiary or any agent of
Besicorp or any Subsidiary) on or prior to the Closing Date;
(iv) the exposure of and resulting consequences to any
persons, including, without limitation, employees of Besicorp (or any
Subsidiary or any agent of Besicorp or any Subsidiary), due to any
Hazardous Materials created, generated, processed, released, emitted,
stored, used, handled or originating on or prior to the Closing Date at
or near a facility owned, leased or otherwise used by Besicorp (or any
Subsidiary or any agent of Besicorp or any Subsidiary) or their
predecessors in the conduct of its business;
(v) any violation or alleged violation of, or obligation
imposed by, any Environmental Law or Environmental Permit as a result
of activities, events, conditions, omissions or occurrences prior to
the Closing Date, regardless of when the violation or alleged violation
or obligation arises or is asserted;
(vi) any employee pension benefit plan (as defined by Section
3(2) of ERISA) or any employee welfare benefit plan (as defined in
Section 3(1) of ERISA) which Besicorp or its affiliates as determined
under Code Section 414(b), (c), (m) or (o) ("ERISA Affiliate") have at
any time maintained or administered on or prior to the Closing Date or
to which Besicorp or its ERISA Affiliates have at any time contributed
(including, without limitation, any liability for health continuation
requirements under Code
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Section 4980B or Part 6 of Subtitle B of Title I of ERISA with respect
to any employee of Besicorp who does not become an employee of
Purchaser and any liability arising pursuant to Title IV of ERISA for
plan termination, withdrawal or partial withdrawal from any
multiemployer plan, or any lien to enforce any Title IV liability); any
benefits accrued pursuant to any employee plan at or prior to the
Closing Date other than benefits payable under insurance policies, or
any action or failure to act, in whole or in part, at or prior to the
Closing Date with respect to any employee benefit plan;
(vii) any federal or state Taxes, whether or not based on the
income of Besicorp, imposed upon Besicorp, or for which Besicorp is
liable, with respect to any taxable period or portion of a taxable
period ending on or prior to the Closing Date other than a Permitted
Liability; or
(viii) (a) litigation against Besicorp and/or the Subsidiaries
pending or threatened as of the Closing Date; and (b) any claims,
investigations, proceedings, actions or lawsuits asserted or initiated
before or after Closing arising out of or in connection with
pre-closing occurrences involving Besicorp and/or the Subsidiaries
(collectively, the "Litigation") other than arising pursuant to a
Permitted Liability.
4. Limitations on Indemnification Obligations.
(a) Except to the extent provided in Section 4(b) below, the
Purchaser Indemnitees shall not be entitled to recover under Section 3:
(i) unless a Notice of Claim (as defined herein) (or
notice of a Third Party Claim relating to a possible claim) has been
delivered to BL, on or prior to the fifth anniversary of the Closing
Date;
(ii) to the extent the aggregate claims actually paid
by BL or any of its Subsidiaries to the Purchaser Indemnitees
thereunder exceeds the aggregate Merger Consideration;
(iii) for Damages to the extent such Damages were
expressly included in the Adjustment Amount;
(iv) with respect to consequential damages relating
to lost profits or punitive damages (other than consequential damages
or punitive damages paid or payable to, or claimed by third parties);
(v) with respect to Damages arising from time spent
by Parent or its affiliates and their respective officers and
employees, for amounts in excess of their actual out-of-pocket costs.
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(b) Notwithstanding anything to the contrary herein contained the
limitations contained in Section 4(a)(i) and (ii) shall not apply to recovery
under Section 3(a) for or in connection with any inaccuracies in or breaches of
Sections 4.2.1, 4.2.4, 4.2.5, 4.2.14, 4.2.15, 4.2.16, 4.2.17, 4.2.21 and 4.2.26
of the Merger Agreement provided, however, that in the case of recovery under
Section 3(a) in connection with a breach of a representation and warranty in
Sections 4.2.14, 4.2.15, 4.2.16, 4.2.17, 4.2.21 and 4.2.26 of the Merger
Agreement, a Notice of Claim for a claim (or possible claim) must be delivered
on or prior to expiration of the applicable statute of limitations.
5. Satisfaction of Claims of Purchaser Indemnitees. The payment of any
Damages to which the Purchaser Indemnitees are entitled pursuant to this
Indemnification Agreement shall first be satisfied from funds held in the Escrow
Account pursuant to the terms of the Escrow Agreement, to the extent available,
until the Escrow Account has been reduced to zero and thereafter shall be
satisfied by BL directly by wire transfer in immediately available funds to such
bank account or accounts as Purchaser Indemnitees shall designate by written
notice to BL.
6. Procedures for Making Claims.
(a) BL and the Purchaser Indemnitees agree that the provisions
of this Section 6 will govern any claims for indemnification under this
Indemnification Agreement which do not involve any Third Party Claim or Existing
Litigation Matters. If and when a Purchaser Indemnitee desires to assert a claim
for Damages against BL pursuant to the provisions of this Indemnification
Agreement the Purchaser Indemnitee shall deliver to BL, reasonably promptly
after its receipt of a claim or specific and affirmative awareness of a
potential claim, a certificate signed by the Purchaser Indemnitee (the "Notice
of Claim"): (i) stating the amount of Damages (to the extent then known); and,
(ii) specifying to the extent possible (A) the individual items of Damages
included in the amount so stated, (B) the date each such item is to be paid or
accrued and (C) the basis upon which Damages are claimed. BL and the Purchaser
Indemnitees shall proceed, in good faith, and using reasonable efforts, to agree
upon the amount of such Damages. If BL does not notify the Purchaser within
thirty (30) days of the giving of such Notice of Claim that it disputes such
Damages, the amount of such Damages shall be conclusively deemed a liability of
BL hereunder. If BL and Purchaser are unable to agree on the amount of such
Damages within thirty (30) days after giving the Notice of Claim then the
provisions of Section 6(b) shall become effective.
(b) Each and every controversy or claim arising out of or
relating to indemnification for Damages pursuant to Section 6(a) (and Sections 7
and 8) of this Indemnification Agreement which BL and the Purchaser Indemnitees
(the "Parties") have not resolved, shall be resolved by arbitration in
accordance with the Center for Public Resources (the "CPR") Rules for
Non-Administered Arbitration of Business Disputes by one arbitrator (who shall
not be appointed by the Parties) selected from the CPR. Judgment upon the award
rendered in such arbitration shall be final and binding upon the Parties and may
be entered in any court having jurisdiction thereof. Notice of the demand for
arbitration shall be filed in writing with the
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other party to this Indemnification Agreement and with the office of the CPR,
located in Manhattan, New York, which such demand shall set forth in the same
degree of particularity as required for complaints under the Federal Rules of
Civil Procedure the claims to be submitted to arbitration. Additionally, the
demand for arbitration shall include appropriate copies of all documents on
which the claims are based and a list of all persons who the party seeking
arbitration will call as witnesses with respect to such claims. The arbitration
shall take place in Manhattan, New York. This agreement to arbitrate may be
specifically enforced by a court of competent jurisdiction under the applicable
law of the State of New York pertaining to arbitrations.
The arbitrator shall have the authority and jurisdiction to enter any
pre-arbitration awards that would aid and assist the conduct of the arbitration
or preserve the Parties' rights with respect to the arbitration as the
arbitrator shall deem appropriate in his discretion. The award of the arbitrator
shall be in writing and it shall specify in detail the issues submitted to
arbitration and the award of the arbitrator with respect to each of the issues
so submitted.
The provisions of the Federal Rules of Civil Procedure relating to the
right of discovery in civil actions shall be applicable to such arbitration
proceedings except as modified by the terms of this Indemnification Agreement.
Within thirty (30) days after the commencement of any arbitration proceeding
under this Indemnification Agreement, each party shall file with the arbitrator
its contemplated discovery plan outlining the desired documents to be produced,
the depositions to be taken and any other discovery action sought in the
arbitration proceeding. After a hearing, the arbitrator in an interim award
shall fix the scope and content of each Party's discovery plan as the arbitrator
deems appropriate. The arbitrator shall have the authority to modify, amend or
change such interim award fixing the discovery plans of the Parties upon
application by either Party, if good cause appears for doing so.
The "Prevailing Party" as determined by the arbitrator shall be
entitled to recover from the losing party reasonable expenses, attorneys' fees
and costs incurred in connection therewith and in the enforcement or collection
of any judgment or award rendered therein. The "Prevailing Party" means the
Party determined by the arbitrator to have most nearly prevailed, even if such
Party does not prevail in all matters, or is not the Party in whose favor an
award is rendered. Included within the cost recoverable pursuant to the terms of
this Section 6(b) shall be included service of process costs, filing fees,
arbitration fees, arbitrators' fees, court and reporter costs, investigative
costs, and expert witness fees. The award pursuant to such arbitration will be
final, binding and conclusive.
7. Third Party Claims. Within fifteen (15) business days following the
receipt of notice of a Third Party Claim, and in any event within the period
necessary to respond to such pleading, if applicable, the Purchaser Indemnitee
receiving the notice of the Third Party Claim shall (i) notify BL of its
existence setting forth with reasonable specificity the facts and circumstances
by which such party has received notice, and (ii) specify the basis hereunder
upon which the Purchaser Indemnitee's claim for indemnification is asserted. The
failure to deliver the
7
<PAGE>
notice described in the preceding sentence within the time frame required shall
not relieve BL of any liability under this Indemnification Agreement except to
the extent that BL is materially prejudiced thereby. The Purchaser Indemnitee
shall, upon reasonable notice, tender the defense of a Third Party Claim to BL.
If within twenty (20) days after the date on which written notice of a Third
Party Claim has been tendered pursuant to this Section 7 BL acknowledges in
writing to the Purchaser Indemnitee its indemnification obligations as provided
in this Indemnification Agreement (without qualification or reservation of
rights) and provides evidence reasonably satisfactory (such as the existence of
available funds in the Escrow Fund (as defined in the Escrow Agreement)) to the
Purchaser Indemnitee of BL's financial ability to pay all such Third Party
Claims and related expenses then, except as hereinafter provided, the Purchaser
Indemnitee shall not, and BL shall, have the right to contest, defend, litigate
or settle such Third Party Claim. The Purchaser Indemnitee shall have the right
to be represented by counsel and to participate at its own expense in any such
contest, defense, litigation or settlement conducted by BL provided that the
Purchaser Indemnitee shall be entitled to reimbursement if BL shall lose its
right to contest, defend, litigate and settle the Third Party Claim as herein
provided. BL shall lose its right to contest, defend, litigate and settle the
Third Party Claim if in the reasonable discretion of the Purchaser Indemnitee
(i) BL shall fail to diligently contest the Third Party Claim; (ii) the Persons
historically responsible for handling a Third Party Claim are no longer actively
involved with such Third Party Claim or (iii) after taking into account the
indemnification obligations under this Indemnification Agreement it is
reasonably likely that the Purchaser Indemnitee would be obligated to bear a
larger portion of the claim, or of all claims made pursuant to this
Indemnification Agreement, than it would otherwise bear if it contested or
litigated the claim. So long as BL has not lost its right to contest, defend,
litigate and settle as herein provided, BL shall have the exclusive right to
contest and defend the Third Party Claim and shall have the right, upon
receiving the prior written approval of the Purchaser Indemnitee (which shall
not be unreasonably withheld and which shall be deemed automatically given if a
response has not been received within the twenty (20) day period following a
request for such consent), to settle any such matter, either before or after the
initiation of litigation, at such time and upon such terms as it deems fair and
reasonable and to apply funds from the Escrow Fund, to the extent available for
such purpose, in accordance with the terms of the Escrow Agreement. Expenses
(including, without limitation, attorneys' fees) incurred by BL in connection
with the foregoing shall be reimbursed to BL, to the extent available for such
purpose, in accordance with the terms of the Escrow Fund. Notwithstanding
anything to the contrary herein contained, in connection with any settlement
negotiated by BL, no Purchaser Indemnitee shall be required by BL to (and BL
shall not) (x) enter into any settlement that does not include as an
unconditional term thereof the delivery by the claimant or plaintiff to the
Purchaser Indemnitee of an unconditional release from all liability in respect
of such claim or litigation, (y) enter into any settlement that attributes by
its terms liability to the Purchaser Indemnitee or which may otherwise have an
adverse effect on the Purchaser Indemnitee's business or reputation, or (z)
consent to the entry of any judgment that does not include as a term thereof a
full dismissal of the litigation or proceeding with prejudice. No failure by BL
to acknowledge in writing its indemnification obligations under this
Indemnification Agreement shall relieve it of such obligations. If a Purchaser
Indemnitee is entitled to indemnification against a Third Party Claim, and BL
fails to accept a tender of, or assume, the
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defense of a Third Party Claim pursuant to this Section 7, or if, in accordance
with the foregoing, BL does not have the right or shall lose its right to
contest, defend, litigate and settle such a Third Party Claim, the Purchaser
Indemnitee shall have the right, without prejudice to its right of
indemnification hereunder, in its discretion exercised in good faith and upon
the advice of counsel, to contest, defend, litigate and settle such Third Party
Claim, either before or after the initiation of litigation, at such time and
upon such terms as the Purchaser Indemnitee deems fair and reasonable, provided
that written notice of its intention to settle is given to BL at least ten (10)
days prior to settlement. If, pursuant to this Section 7, the Purchaser
Indemnitee so contests, defends, litigates or settles a Third Party Claim for
which it is entitled to indemnification hereunder as hereinabove provided, the
Purchaser Indemnitee shall be reimbursed by BL for the reasonable attorneys'
fees and other expenses of defending, contesting, litigating and/or settling the
Third Party Claim which are incurred from time to time, forthwith following the
presentation to BL of itemized bills for said attorneys' fees and other expenses
provided that the Purchaser Indemnitees shall first make claim for such amounts
from the Escrow Fund, to the extent available, in accordance with the terms of
the Escrow Agreement. The Purchaser Indemnitee or BL, as the case may be, shall
furnish such information in reasonable detail as it may have with respect to a
Third Party Claim (including copies of any summons, complaint or other pleading
which may have been served on such party and any written claim, demand, invoice,
billing or other document evidencing or asserting the same) to the other party
if such other party is assuming defense of such claim, and make available all
records and other similar materials which are reasonably required in the defense
of such Third Party Claim and shall otherwise cooperate with and assist the
defending party in the defense of such Third Party Claim. Notwithstanding
anything to the contrary contained herein, each and every controversy or claim
arising out of or relating to indemnification for Damages pursuant to this
Section 7 which BL and the Purchaser Indemnitees have not resolved shall be
resolved in accordance with Section 6(b) of this Indemnification Agreement.
8. Existing Litigation Matters. Attached hereto is a schedule setting
forth certain existing litigation matters to which Besicorp or any one or more
of the Remaining Subsidiaries is a party (collectively, the "Existing Litigation
Matters"). Concurrently herewith, Besicorp has assigned to BL its right to
prosecute and to receive all settlement proceeds, awards and profits under the
Existing Litigation Matters and BL has agreed to assume the defense of the
Existing Litigation Matters. The disposition of the Existing Litigation Matters
shall be governed pursuant to the provisions of Section 7 and shall be subject
to all of the rights and obligations of Section 7 except that BL shall have the
right to contest, defend, litigate or settle such Existing Litigation Matters
(in accordance with the provisions of Section 7) without (a) acknowledging its
indemnification obligations regarding such Existing Litigation Matters or (b)
providing evidence of its ability to pay such Existing Litigation Matters and
related expenses. Notwithstanding anything to the contrary contained herein,
each and every controversy or claim arising out of or relating to
indemnification for Damages pursuant to this Section 8 which BL and the
Purchaser Indemnitees have not resolved shall be resolved in accordance with
Section 6(b) of this Indemnification Agreement.
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9. Subrogation. BL shall not be entitled to require that any action be
brought against any other Person before action is brought against it hereunder
by the Purchaser Indemnitee, but shall be subrogated to any right of action to
the extent that it has paid or successfully defended against any Third Party
Claim.
10. Fraud and Intentional Misrepresentation. Nothing contained in this
Indemnification Agreement shall limit the ability of the Purchaser Indemnitees
to pursue Damages or such other remedies, at law or in equity, resulting from
fraud or intentional misrepresentation.
11. Representations and Warranties of BL.
(a) BL represents and warrants to the Purchaser Indemnitees
that BL has full corporate power and authority to enter into and perform this
Indemnification Agreement. The execution and delivery of this Indemnification
Agreement by BL has been duly authorized and approved by all necessary corporate
action.
(b) The execution and delivery of this Indemnification
Agreement by BL will not conflict with or result in a breach of any of the
terms, conditions or provisions of BL's certificate of incorporation or by-laws
or of any statute or administrative regulation, or of any order, writ,
injunction, judgment or decree of any Governmental Entity or of any arbitration
award to which BL is a party or by which BL is bound.
12. Miscellaneous.
(a) Notices. All notices required or permitted to be given
hereunder shall be in writing and may be delivered by hand, by facsimile, by
nationally recognized private courier, or by United States mail. Notices
delivered by mail shall be deemed given three (3) business days after being
deposited in the United States mail, postage prepaid, registered or certified
mail, return receipt requested. Notices delivered by hand, by facsimile or by
nationally recognized private courier shall be deemed given on the day of
receipt (if such day is a business day or, if such day is not a business day,
the next succeeding business day); provided, however, that a notice delivered by
facsimile shall only be effective if and when confirmation is received of
receipt of the facsimile at the number provided in this Section 12(a). All
notices shall be addressed as follows:
If to BL,
addressed to
Besicorp Ltd.
1151 Flatbush Road
Kingston, New York 12401
Attention: Frederick M. Zinn, Esq.
Telecopier: (914) 336-7172
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with a copy to
Robinson Brog Leinwand Greene Genovese & Gluck P.C.
1345 Avenue of the Americas
New York, New York 10105
Attention: A. Mitchell Greene, Esq.
Telecopier: (212) 956-2164
If to Parent or Purchaser or the Surviving Corporation,
addressed to
BGI Acquisition LLC
950 Third Avenue, 23rd Floor
New York, New York 10022
Attention: Mr. James Haber, President
Telecopier: (212) 688-7908
with copies to
Altheimer & Gray
10 South Wacker Drive, Suite 4000
Chicago, Illinois 60606
Attention: Paul M. Daugerdas, Esq.
Telecopier: (312) 715-4800
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section 12(a).
(b) Non-Waiver; Remedies.
(i) All representations and warranties set forth in
this Indemnification Agreement shall survive the Closing for a period
of five (5) years following the Effective Time (and none shall merge
into any instrument of conveyance) regardless of any investigation or
lack of investigation by the parties hereto. No specific representation
and warranty shall limit the generality or applicability of a more
general representation and warranty. The failure in any one or more
instances of a party to insist upon performance of any of the terms,
covenants or conditions of this Indemnification Agreement, to exercise
any right or privilege conferred in this Indemnification Agreement, or
the waiver by said party of any breach of any of the terms, covenants
or conditions of this Indemnification Agreement, shall not be construed
as a subsequent waiver of any such terms, covenants, conditions, right
or privileges, but the same shall continue and remain in full force and
effect as if no such forbearance or waiver had occurred. No waiver
shall be
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effective unless it is in writing and signed by an authorized
representative of the waiving party.
(ii) This Indemnification Agreement sets forth the
exclusive remedies of the Purchaser Indemnitees, absent fraud or
intentional misrepresentation, with respect to the matters expressly
set forth in Section 3 hereof.
(c) Applicable Law. This Indemnification Agreement shall be
governed and controlled as to validity, enforcement, interpretation,
construction, effect and in all other respects by the internal laws of the State
of New York applicable to contracts made in that State.
(d) Binding Effect; Benefit. This Indemnification Agreement
shall inure to the benefit of and be binding upon the parties hereto, and their
successors and permitted assigns. Nothing in this Indemnification Agreement,
express or implied, is intended to confer on any person other than the parties
hereto, and their respective successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this Indemnification
Agreement.
(e) Assignability. This Indemnification Agreement shall not be
assignable by the parties without the prior written consent of the other
parties, except that at or prior to the Closing Purchaser and/or Parent may
assign their rights and delegate their duties under this Indemnification
Agreement to a subsidiary entity or to any affiliate and may assign their rights
under this Indemnification Agreement to their lenders for collateral security
purposes, and after the Closing, Purchaser and Parent may assign their
respective rights and delegate their respective duties under this
Indemnification Agreement to any third party.
(f) Amendments. This Indemnification Agreement shall not be
modified or amended except pursuant to an instrument in writing executed and
delivered on behalf of each of the parties hereto.
(g) Headings. The headings contained in this Indemnification
Agreement are for convenience of reference only and shall not affect the meaning
or interpretation of this Indemnification Agreement.
(h) Counterparts. This Indemnification Agreement may be
executed in multiple counterparts, each of which shall be deemed to be an
original, and all such counterparts shall constitute but one instrument.
(i) Further Assurances. The parties shall execute such further
documents, and perform such further acts, as may be necessary to otherwise
comply with the terms of this Indemnification Agreement, the Merger Agreement
and the other Transaction Agreements and consummate the transactions
contemplated thereby. In addition, the Purchaser Indemnitees shall, and shall
cause the Surviving Corporation to, cooperate with BL in connection with all
claims given rise to any claim for indemnification hereunder during and
including, without limitation, the
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defense of any Third Party Claim and the prosecution and defense of the Existing
Litigation Matters. In furtherance of the foregoing, the Purchaser Indemnitees
shall and shall cause the Surviving Corporation (at the expense of BL) to make
available to BL and permit BL to make copies of all records, data and other
materials and otherwise to cooperate in all respects with the prosecution and
defense of all such claims.
(j) Severability. The invalidity of any provision of this
Indemnification Agreement or a portion of a provision shall not affect the
validity of any other provision of this Indemnification Agreement or the
remaining portion of the applicable provision.
* * *
BESICORP LTD.
By: /s/ Frederic M. Zinn
--------------------
Its: Senior Vice President
BGI ACQUISITION LLC
By: /s/ James Haber
---------------
Its:
BGI ACQUISITION CORP
By: /s/ James Haber
---------------
Its:
13
Exhibit 10.2
ESCROW AGREEMENT
----------------
ESCROW AGREEMENT dated as of the 22nd day of March, 1999, by
and among:
BESICORP GROUP INC., a New York corporation, having an office
at 1151 Flatbush Road, Kingston, NY 12401 ("Besicorp", and
following the Merger, the "Surviving Corporation"); and
BESICORP LTD., a New York corporation, having an office at
1151 Flatbush Road, Kingston, NY 12401 ("BL"); and
BGI ACQUISITION CORPORATION, a New York corporation, having an
office at 950 Third Avenue, 23rd Floor, New York, NY 10022
(the "Purchaser" and following the Merger, the "Surviving
Corporation"); and
BGI ACQUISITION LLC, a Wyoming limited liability company,
having an office at 950 Third Avenue, 23rd Floor, New York, NY
10022 (the "Parent"); and
ROBINSON BROG LEINWAND GREENE GENOVESE & GLUCK P.C., having an
office at 1345 Avenue of the Americas, New York, NY 10105 (the
"Escrow Agent").
W I T N E S E T H:
-----------------
WHEREAS, Besicorp, the Purchaser and the Parent (the Purchaser and the
Parent are referred to collectively as "Buyer", and, following the Merger, shall
mean Purchaser and the Surviving Corporation) are parties to an Agreement and
Plan of Merger dated November __, 1998 (the "Merger Agreement"); and
WHEREAS, it is a condition to the effectiveness of the Merger in the
Merger Agreement that Besicorp effectuate the Distribution (as defined in the
Merger Agreement), pursuant to which BL is to assume certain assets and
liabilities of Besicorp (as more fully described in the Merger Agreement); and
WHEREAS, Buyer and BL have entered into an Indemnification Agreement of
even date herewith (the "Indemnification Agreement"), pursuant to which BL
agrees to indemnify Buyer for Damages (as defined in the Indemnification
Agreement) in connection with the items set forth therein; and
<PAGE>
WHEREAS, the Merger Agreement and the Indemnification Agreement
contemplate the execution and delivery of this Escrow Agreement in order to
escrow certain amounts for the purpose of securing certain amounts to be paid by
Buyer and BL in connection with the discharge of the parties' obligations under
the Indemnification Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Defined Terms
-------------
(a) Defined terms used herein and not defined herein shall
have the meanings ascribed to them in the Merger Agreement or the
Indemnification Agreement.
(b) "Buyer Monitoring Costs" shall mean the out-of-pocket
expenses of Buyer (including the fees and expenses of attorneys and other
professionals) incurred by Buyer in connection with its right to be represented
by counsel with respect to BL Assumed Matters (where BL is contesting,
defending, litigating, settling or otherwise controlling such matter pursuant to
Section 7 of the Indemnification Agreement). Notwithstanding any implication to
the contrary contained herein, Buyer shall not receive more than $40,000 from
the Escrow Fund with respect to Buyer Monitoring Costs in any calendar year.
(c) "BL Assumed Matters" shall mean each of the Existing
Litigation Matters and the litigation or other matters prosecuted or defended by
BL pursuant to Section 7 of the Indemnification Agreement. Following the date of
this Agreement, additional matters may become BL Assumed Matters in the manner
set forth in the Indemnification Agreement.
(d) "BL Permitted Internal Expenses" shall mean the expenses
incurred internally by BL in connection with performance of its obligations
under this Escrow Agreement or the Indemnification Agreement. BL Permitted
Internal Expenses shall be determined and billed by BL on an hourly basis based
upon BL's normal and customary billing rate charged to its customers in the
ordinary course of its business. BL shall provide Buyer and the Escrow Agent
documentation reasonably acceptable to Buyer (including billing rate information
and amounts of hours and BL Permitted Internal Expenses per BL Assumed Matter)
in connection with BL's requests for reimbursement of such BL Permitted Internal
Expenses. Notwithstanding any implication to the contrary otherwise contained
herein, BL shall not be entitled to receive payments from the Escrow Fund with
respect to BL Permitted Internal Expenses in excess of the interest actually
received from the investment of the Escrow Fund from the date hereof until the
date of such claim for BL Permitted Internal Expenses, less the sum of (x) all
amounts paid or payable to the Escrow Agent on account of Section 5(e) of this
Agreement, (y) all bank charges due pursuant to Section 2(b) of this Agreement,
and (z) any Taxes with respect to earnings on the Escrow Fund paid or payable in
accordance with Section 6(b) of this Agreement.
(e) "Litigation Costs" shall mean all costs and expenses,
except for costs and expenses which would not be permitted to be paid by a
corporation to its directors or officers under
2
<PAGE>
Sections 721 or 722 of the New York State Business Corporation Law (the "BCL
Sections"), relating to the defense, prosecution, participation in
administrative proceedings, responding to civil investigative demands or
inquiries, settlement, or payment of (i) BL Assumed Matters; (ii) litigation
arising out of or relating to any such BL Assumed Matters; (iii) indemnification
of claims against Besicorp's directors and officers (prior to the Merger) for
actions in their official capacity preceding the date of the Merger, or (iv) for
defense, prosecution, participation in administrative proceedings, responding to
civil investigative demands or inquiries, settlement, or payment of or by
parties eligible to receive indemnity pursuant to the BCL Sections in connection
with matters arising out of or relating to the Merger or the Distribution
(including, for each of items (i) to (iv) above, counsel and witness fees and
expenses including, to the extent permitted by subparagraph (d) above, BL
Permitted Internal Expenses.) Notwithstanding the foregoing sentence, to the
extent a set of facts could give rise to Litigation Costs and Buyer Indemnity
Claims (as defined herein) the provisions of the Indemnification Agreement
(including Section 7 thereof) shall apply.
2. Escrow Deposits
---------------
(a) The parties acknowledge and agree that no funds or other
assets have been deposited with the Escrow Agent as of the date hereof. Such
funding shall not occur until the occurrence of the Distribution.
(b) Simultaneously with the execution of this Agreement,
Besicorp shall deposit with the Escrow Agent the sum of six million dollars
($6,000,000) ("the Escrow Fund"). In addition, interest on the Paying Agent
account referred to in Section 2.3.8 of the Merger Agreement shall be
transferred to the Escrow Fund at the time the payment is to be made pursuant to
Section 2.3.5 thereof. The Escrow Agent agrees to hold the Escrow Fund in escrow
in accordance with the terms of this Escrow Agreement. The Escrow Funds shall be
deposited by the Escrow Agent in a separate interest bearing money market bank
account at Bankers Trust Company, New York, NY or in such other accounts or
investments as Buyer and BL jointly agree in writing. The Escrow Agent shall not
be responsible for any interest earned on the Escrow Funds, except for such
interest as is actually received. The Escrow Agent shall have no obligation to
obtain the best or otherwise seek to maximize the rate of interest earned on any
of the Escrow Funds. Any bank fees or charges or similar items in connection
with such investments shall be paid out of the Escrow Funds. Should the Merger
Agreement terminate without the occurrence of the Merger (a "Termination"), this
Agreement shall terminate and be of no further force or effect. Should the
Escrow Fund be funded at the time of a Termination, all proceeds of the Escrow
Fund shall be returned to Besicorp.
3. Disposition of the Escrow Fund
------------------------------
(a) Use of Escrow Fund. The Escrow Fund shall serve as a
source of funding claims for:
(i) (A) indemnity made by the Buyer pursuant to the
Indemnification Agreement, including any claims for Buyer Monitoring
Costs to the extent permitted under
3
<PAGE>
Section 1(b) hereof, any claims of Buyer with respect to BL Assumed
Matters arising from the failure of BL to diligently prosecute or
defend such BL Assumed Matters and any payment of fees and expenses of
the Paying Agent pursuant to Section 2.3.8 of the Merger Agreement (all
such claims described in this Section 3(a)(i), "Buyer Indemnity
Claims") and (B) amounts in connection with any Tax refund set forth on
a Return filed by Besicorp prior to the Merger to the extent such
amounts have not been received by Besicorp or the Surviving Corporation
prior to March 31, 1999 (a "Tax Refund Claim"), it being understood
however, that Buyer shall repay to the Escrow Fund amounts received
from an applicable taxing authority with respect to any Tax Refund
Claim promptly following its receipt by the Surviving Corporation; and
(ii) payment of Litigation Costs.
(b) Disbursements with respect to Buyer Indemnity Claims. If
Buyer shall request a disbursement from the Escrow Fund associated with any
Buyer Indemnity Claim or Tax Refund Claim, it shall give notice of such request
(which may include Buyer Monitoring Costs to the extent permitted under Section
1 above) executed by Buyer, to the Escrow Agent and BL, which notice shall set
forth the amount requested, the basis for such request, and reasonable
documentation to support such request (such notice being substantially in the
form of Exhibit A hereto), and shall include the Notice of Claim if the
provision of a Notice of Claim is so required under the Indemnification
Agreement. With respect to any Tax Refund Claim, the Escrow Agent shall disburse
the amount requested within 5 days of its receipt of the notice. With respect to
Buyer Indemnity Claims, in the event the Escrow Agent shall not have received a
notice of objection from BL within 30 days after delivery of such notice, the
Escrow Agent shall disburse the amount requested. In the event the Escrow Agent
shall receive a timely notice of objection from BL, it shall not disburse the
amount requested until it shall have received (i) the joint written notice of BL
and the Buyer setting forth the joint direction of such parties (such notice
being substantially in the form of Exhibit B hereto), (ii) a written instrument
representing a final and non-appealable order or similar direction with respect
to the disposition of such amount issued by the arbitrator or arbitration forum
and using the procedures referred to in Section 6(b) of the Indemnification
Agreement, or (iii) a certified copy of a final and non-appealable judgment of a
court of competent jurisdiction directing the disbursement of such funds.
Notwithstanding the foregoing, BL shall not unreasonably withhold its consent to
a request by Buyer for payment of Buyer Indemnity Claims.
(c) Disbursements with respect to BL. If BL shall request a
disbursement from the Escrow Fund with respect to Litigation Costs, it shall
give notice of such request, executed by BL, to the Escrow Agent and Buyer
through a notice in substantially the form of Exhibit C hereto) which notice
shall set forth the amount requested, the basis for such request and reasonable
documentation to support such request. BL shall give a separate notice with
respect to each item of Litigation Costs, and shall provide a notice no less
frequently than monthly with respect to each matter for which BL is then
incurring Litigation Costs. In the event the Escrow Agent shall not have
received a notice of objection from Buyer within 30 days after delivery of such
notice, the Escrow Agent shall disburse the amount requested. In the event the
Escrow Agent shall receive a timely
4
<PAGE>
notice of objection from Buyer, it shall not disburse the amount requested until
it shall have received (i) the joint written instructions of BL and the Buyer
setting forth the joint direction of such parties (such notice being
substantially in the form of Exhibit B hereto), (ii) a written instrument
representing a final and non-appealable order or similar direction with respect
to the disposition of such amount issued by the arbitrator or arbitration forum
and using the procedures referred to in Section 6(b) of the Indemnification
Agreement, or (iii) a certified copy of a final and non-appealable judgment of a
court of competent jurisdiction directing the disbursement of such funds.
Notwithstanding the foregoing, but subject to the following sentence, Buyer
shall not unreasonably withhold its consent to a request by BL for payment of
Litigation Costs, it being understood that the term "not unreasonably" as used
in this sentence shall be determined in light of all relevant factors, including
(x) the estimates of the amounts needed to complete each of the Existing
Litigation Matters previously provided to Buyer and (y) amounts then remaining
in the Escrow Fund.
4. Release of the Escrow Fund
--------------------------
(a) Release of Escrow Fund Proceeds. At any time following the
fifth anniversary of the date hereof that each of the following conditions are
fulfilled (collectively, the "Release Conditions"):
(i) all Buyer Indemnity Claims that have been set
forth in notices provided under Section 3(b) of this Agreement have
been settled and paid in accordance with the provisions of Section
3(b), no such claims remain outstanding, and that, in the reasonable
judgement of Buyer, no future Buyer Indemnity Claims are foreseeable;
(ii) all claims of BL that have been set forth in
notices provided under Section 3(c) of this Agreement have been settled
and paid in accordance with the provisions of Section 3(c), and no such
claims remain outstanding; and
(iii) each BL Assumed Matter has been settled through
either (A) a final, non-appealable judgement against the Surviving
Corporation and all Purchaser Indemnitees; or (B) a settlement or other
conclusion to the BL Assumed Matter that (x) contains a release from
all liability in favor of the Surviving Corporation and Purchaser
Indemnitees without any further obligation by the Surviving Corporation
or Purchaser Indemnitees to make any payment or incur any other
Liability or Obligation with respect to such matter, (y) does not
attribute by its terms liability to the Surviving Corporation or any
Purchaser Indemnitee and (z) if the Scheduled Matter is litigation or a
proceeding, includes as a term thereof a full dismissal of the
litigation or proceeding with prejudice.
BL may, at its option, notify the Escrow Agent and the Buyer that all of the
Release Conditions have been fulfilled. In the event the Escrow Agent shall not
have received a notice of objection from the Buyer at least ninety (90) days
after delivery of such notice, it shall be entitled to disburse all amounts then
remaining in the Escrow Fund and this Agreement shall terminate. In the event
that the Escrow Agent shall receive a timely notice of objection from the Buyer,
it shall not disburse any portion of
5
<PAGE>
the Escrow Fund and shall disburse the Escrow Fund only in accordance with the
provisions of the fourth sentence of Section 3(c) hereof.
(b) Consultations. BL and Buyer agree they will meet no less
than annually for the purpose of examining the amounts set forth in the Escrow
Fund and the amounts of Buyer Indemnity Claims and Litigation Costs expended
from the Escrow, for the purpose of determining whether the amount of the Escrow
Fund is more than sufficient to secure Buyer pursuant to the Indemnification
Agreement.
5. Escrow Agent
------------
(a) The Escrow Agent shall not be liable in any way to any
party hereto for its refusal to comply with adverse claims or demands being made
upon it and shall not be responsible for any act or failure to act on its part,
nor shall it have any liability under this Escrow Agreement, except in the case
of bad faith, willful default or gross negligence. The Escrow Agent's duties and
responsibilities, in its capacity as such, shall be limited to those expressly
set forth in this Escrow Agreement, and the Escrow Agent shall not be subject
to, or recognize, any other agreement between any or all of the parties hereto
even though reference thereto may be made herein, except to the extent that
definitions contained in the Merger Agreement or the Indemnification Agreement
and the alternative dispute resolution procedures of the Indemnification
Agreement are incorporated into this Escrow Agreement. This Escrow Agreement may
not be amended at any time in such a way as to affect the rights,
responsibilities, obligations, liabilities or fees of the Escrow Agent except
with the Escrow Agent's prior written consent, as evidenced by an instrument in
writing signed by all the parties hereto.
(b) The Escrow Agent (so long as it is Robinson Brog Leinwand
Greene Genovese & Gluck P.C.) or any member of its firm, shall be permitted to
act as counsel for BL in any dispute or question as to any matter arising out of
the Merger Agreement, the Distribution or the Transactions.
(c) The Escrow Agent may resign at any time upon ninety (90)
days written notice to Buyer and BL and in such event, shall deliver the Escrow
Funds and any interest thereon pursuant to the joint written instructions of BL
and Buyer. The parties agree to make any necessary amendments to this Agreement
to permit the successor escrow agent to assume the obligations of Escrow Agent
under this Agreement. Should the successor escrow agent not assume this
Agreement, the Escrow Agent may deposit the Escrow Fund and any such interest
with the clerk of an appropriate court in New York, New York.
(d) Each of BL and Buyer agree, jointly and separately, to
indemnify and hold harmless the Escrow Agent from and against any demands,
claims, causes of action, liabilities, costs and expenses (including outside
counsel fees and disbursements), arising out of this Escrow Agreement except for
claims which are asserted against the Escrow Agent based upon the Escrow Agent's
failure to comply with the terms and conditions of this Escrow Agreement or the
bad faith,
6
<PAGE>
gross negligence or willful misconduct of the Escrow Agent; provided however,
that (A) promptly after the receipt by the Escrow Agent of notice of any demand
or claim or the commencement of any such action, suit or proceeding, the Escrow
Agent shall notify all parties hereto in writing of the existence of such
demand, claim, action, suit or proceeding; (B) the indemnitor(s) shall be
entitled, at its own expense, to participate in and assume the defense of any
such action, suit or proceeding.
(e) The Escrow Agent shall be entitled to be compensated by BL
for its reasonable time expended and disbursements incurred in connection with
carrying out its duties hereunder.
(f) The Escrow Agent shall be entitled to rely or act upon any
notice, instrument or document believed by it to genuine and to be executed and
delivered by the proper person and shall have no obligation to verify any
statements contained in any notice, instrument or document or the accuracy or
due authorization of the execution of any notice, instrument or document. The
Escrow Agent shall be entitled to refrain from taking any action other than to
keep all cash and other payments and all other property held by it in Escrow and
to make the investments as herein provided until it shall be directed otherwise
in writing by the Buyer and BL, or as otherwise provided herein or by a final
order. The Escrow Agent shall not have any interest in the Escrow Fund, other
than possession thereof in its capacity as escrow agent hereunder.
6. Miscellaneous
-------------
(a) Any notice to be delivered hereunder shall be delivered as provided
and to the addresses as specified in Section 8.4 of the Merger Agreement. Any
notice to the Escrow Agent shall be addressed as follows: Robinson Brog Leinwand
Greene Genovese & Gluck P.C., 1345 Avenue of the Americas, New York, NY 10105,
Attention: A. Mitchell Greene, telecopier No. (212) 956- 2164. Notices shall be
deemed conclusively to have given or delivered hereunder if the same is in
writing, signed by any authorized officer, partner or member and (a) mailed, by
registered or certified mail, return receipt requested, postage prepaid; or (b)
sent via expedited courier service that regularly requires signed receipts
evidencing delivery at the addresses set forth in Section 8.4 of the Merger
Agreement;
(b) Each of BL, Besicorp, Purchaser and Parent has set forth its
federal employer identification number below. Income taxes, if any, with respect
to earnings on the Escrow Fund shall be paid from the Escrow Fund or, if no
funds are available for such purpose, shall be fairly allocated in accordance
with the Code.
(c) This Escrow Agreement set forth the entire understanding of the
parties with respect to the subject matter hereof and may not be changed orally.
This Escrow Agreement shall be governed and construed pursuant to the laws of
the state of New York, without giving effect to any principles of conflict of
laws.
(d) This Agreement shall inure to the benefit of and be binding upon
the parties hereto, and their successors and permitted assigns. Nothing in this
Agreement, express or implied, is
7
<PAGE>
intended to confer on any person other than the parties hereto, and their
respective successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
(e) This Agreement shall not be assignable by the parties without the
prior written consent of the other parties, except that at or prior to the
Closing Buyer and/or the Surviving Corporation may assign their rights and
delegate their duties under this Agreement to a subsidiary entity or to any
affiliate and may assign their rights under this Agreement to their lenders for
collateral security purposes, and after the Closing, Buyer may assign their
respective rights and delegate their respective duties under this Agreement to
any third party.
(f) The headings contained in this Agreement are for convenience of
reference only and shall not affect the meaning or interpretation of this
Agreement.
(g) This Agreement may be executed in multiple counterparts, each of
which shall be deemed to be an original, and all such counterparts shall
constitute but one instrument.
(h) The invalidity of any provision of this Agreement or a portion of a
provision shall not affect the validity of any other provision of this Agreement
or the remaining portion of the applicable provision.
*******
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the date and year first above written.
BESICORP LTD. (FEIN: _______)
By: /s/ Frederic M. Zinn
--------------------
Name: Frederic M. Zinn
Office: Senior Vice President
BESICORP GROUP INC. (FEIN: _______)
By: /s/ Frederic M. Zinn
--------------------
Name: Frederic M. Zinn
Office: Senior Vice President
BGI ACQUISITION CORP. (FEIN: _______)
By: /s/ James Haber
---------------
Name:
Office:
BGI ACQUISITION LLC (FEIN: _______)
By: /s/ James Haber
---------------
Name:
Office:
ROBINSON BROG LEINWAND GREENE
GENOVESE & GLUCK P.C.
By: /s/ Marshall E. Bernstein
-------------------------
Name: Marshall E. Bernstein
Office:
9
<PAGE>
Exhibit A
FORM OF BUYER'S DISBURSEMENT NOTICE
CERTIFICATE
This certificate is being issued pursuant to Section 3(b) of that
certain Escrow Agreement dated as of November __, 1998 by and among Besicorp
Group Inc., a New York corporation' Besicorp Ltd., a New York corporation; BGI
Acquisition Corporation, a New York corporation; BGI Acquisition LLC, a Wyoming
limited liability company; and Robinson Brog Leinwand Greene Genovese & Gluck
P.C. (the "Escrow Agreement"). Terms not defined in this certificate shall have
the meanings set forth in the Escrow Agreement. The undersigned, a duly
authorized officer of [Besicorp Group Inc./ BGI Acquisition LLC], hereby
certifies that:
1. Buyer is requesting the Escrow Agent release the amount of
$_______ of the Escrow Fund.
2. Buyer is requesting the amount in Paragraph 1 above on account of
[brief description of the claim] (the "Claim");
3. Attached hereto is documentation which supports the amount of
the Claim;
4. Attached hereto is the Notice of Claim with respect to the Claim, to
the extent the Filing of a Notice of Claim was required under the
Indemnification Agreement; and
5. A copy of this Certificate, including all attachments, has been sent
to BL in the manner set forth in the Indemnification Agreement.
IN WITNESS WHEREOF, Buyer has executed and delivered this Certificate
as of the ________day of ___________ ________.
[BESICORP GROUP INC./ BGI ACQUISITION LLC]
By:
---------------------------------------
By:
Its:
<PAGE>
Exhibit B
FORM OF JOINT DISBURSEMENT NOTICE
CERTIFICATE
This certificate is being issued pursuant to Section 3[(b/c)] of that
certain Escrow Agreement dated as of November __, 1998 by and among Besicorp
Group Inc., a New York corporation; Besicorp Ltd., a New York corporation; BGI
Acquisition Corporation, a New York corporation; BGI Acquisition LLC, a Wyoming
limited liability company; and Robinson Brog Leinwand Greene Genovese & Gluck
P.C. (the "Escrow Agreement"). Terms not defined in this certificate shall have
the meanings set forth in the Escrow Agreement. The undersigned, a duly
authorized officer of [Besicorp Group Inc./ BGI Acquisition LLC] and a duly
certified officer of BL each hereby certify that:
1. On __________, ___ _______ ___________________ filed a certificate
(a copy of which was attached to this certificate with the Escrow Agent) (the
"Disputed Certificate") with the Escrow Agent and the other parties required
under Section 3[(b/c)] of the Escrow Agreement.
2. The other party receiving the Disputed Certificate disputed an
element of the Disputed Certificate in accordance with the above provision of
the Escrow Agreement.
3. The parties hereto are now jointly requesting the Escrow Agent
release the amount of $_______ of the Escrow Fund to _____________ as the
agreed-to payment with respect to the Disputed Certificate.
IN WITNESS WHEREOF, Buyer and BL have executed and delivered this
Certificate as of the ________day of ___________ ________.
[BESICORP GROUP INC./ BGI ACQUISITION LLC]
By:
--------------------------------------
By:
Its:
BESICORP LTD.
By:
--------------------------------------
By:
Its:
<PAGE>
Exhibit C
FORM OF BL'S DISBURSEMENT NOTICE
CERTIFICATE
This certificate is being issued pursuant to Section 3(c) of that
certain Escrow Agreement dated as of November __, 1998 by and among Besicorp
Group Inc., a New York corporation; Besicorp Ltd., a New York corporation; BGI
Acquisition Corporation, a New York corporation; BGI Acquisition LLC, a Wyoming
limited liability company; and Robinson Brog Leinwand Greene Genovese & Gluck
P.C. (the "Escrow Agreement"). Terms not defined in this certificate shall have
the meanings set forth in the Escrow Agreement. The undersigned, a duly
authorized officer of BL, hereby certifies that:
1. BL is requesting the Escrow Agent release the amount of $_______ of
the Escrow Fund on account of Litigation Costs paid by BL.
2. Buyer is requesting the amount in Paragraph 1 above on account of
[brief description of the claim] (the "Claim").
3. Attached hereto is documentation which supports the amount of the
Claim.
4. BL has previously claimed the amount of $_______ with respect to the
matter for which the Litigation Costs the subject of this Certificate are being
paid.
5. The amounts being requested pursuant to this Certificate have been
used in a manner reasonably believed by BL to bring the matter for which the
Litigation Costs are being spent on to conclusion in an economically efficient
manner and as quickly as reasonably possible.
6. A copy of this Certificate, including all attachments, has been sent
to Buyer in the manner set forth in the Indemnification Agreement.
IN WITNESS WHEREOF, BL has executed and delivered this Certificate as
of the ________day of ___________ ________.
BESICORP LTD.
By:
-------------------------
By:
Its:
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<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-1-1999
<PERIOD-END> DEC-31-1999
<CASH> 100
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 100
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 100
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 99
<TOTAL-LIABILITY-AND-EQUITY> 100
<SALES> 0
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<CGS> 0
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<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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