SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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Besicorp Group Inc.
- - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock, par value $.10 per share
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2) Aggregate number of securities to which transaction applies:
3,051,435 shares of Common Stock
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3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
$34.50 per share
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4) Proposed maximum aggregate value of transaction:
$105,274,507.50
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5) Total fee paid:
$21,055.00
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[_] Fee paid previously with preliminary materials:
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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BESICORP GROUP INC.
1151 FLATBUSH ROAD
KINGSTON, NEW YORK 12401
December ___, 1998
To Our Shareholders:
You are cordially invited to attend a Special Meeting of Shareholders
of Besicorp Group Inc. ("Besicorp") to be held at 9:00 a.m. local time on
__________, 1999 at ______________________________________.
At this important meeting, you will be asked to consider and vote upon
an Agreement and Plan of Merger (the "Plan of Merger") by and among Besicorp,
BGI Acquisition LLC ("Acquisition") and BGI Acquisition Corp., a wholly owned
subsidiary of Acquisition. If the merger contemplated by the Plan of Merger is
completed, Besicorp will be owned by Acquisition and you will receive $34.50 in
cash (subject to upward adjustment if the Base Amount (as defined in the Plan of
Merger) exceeds $105,275,000), without any interest thereon, for each share of
Besicorp Common Stock you own. The Plan of Merger is attached as Annex A to the
Proxy Statement. In addition, immediately before the merger, Besicorp will
distribute (the "Spin-Off") to its shareholders on a pro rata basis all of the
shares of common stock of Besicorp Ltd. ("Newco"), a subsidiary of Besicorp,
which will, among other things, own Besicorp's photovoltaic and independent
power plant development businesses and have assumed essentially all of
Besicorp's liabilities. An Information Statement containing information
regarding the Spin- Off and Newco will be sent to Besicorp's shareholders
immediately prior to the effectiveness of the Spin-Off. The Spin-Off does not
require your approval.
The Plan of Merger will be adopted only if the holders of at least 66
2/3% of the outstanding shares of Besicorp vote in its favor.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE
BEST INTERESTS OF, BESICORP AND ITS SHAREHOLDERS. THE BOARD OF DIRECTORS HAS
UNANIMOUSLY ADOPTED THE TERMS OF THE PLAN OF MERGER AND UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR THE ADOPTION OF THE PLAN OF MERGER.
Josephthal & Co., Inc., the financial advisor to Besicorp, has
delivered a written opinion to the Board of Directors of the Company that as of
November 20, 1998, the consideration to be received by each shareholder of
Besicorp in connection with the merger is fair from a financial point of view to
Besicorp's shareholders. You should read a copy of this opinion which is
attached as Annex B to the Proxy Statement.
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Important information regarding Besicorp and the proposed merger is
included in the enclosed Proxy Statement. You are urged to read the Proxy
Statement carefully.
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Your vote is important. Whether or not you plan to attend the Special
Meeting, please complete, sign and date your proxy card and return it in the
enclosed envelope. If you do attend, you will be entitled to vote in person, and
such vote will revoke your proxy.
Sincerely,
Michael F. Zinn
Chairman of the Board,
President and Chief Executive Officer
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BESICORP GROUP INC.
1151 FLATBUSH ROAD
KINGSTON, NEW YORK 12401
NOTICE IS HEREBY GIVEN that a special meeting of the shareholders (the
"Special Meeting") of Besicorp Group Inc., a New York corporation (the "Company"
or "Besicorp"), will be held at ______________________________________________,
New York on _________, 1999 at 9:00 a.m. (local time) to:
(i) consider and vote upon a proposal to adopt the Agreement
and Plan of Merger dated November 23, 1998, (the "Plan of Merger")(a copy of
which is attached as Annex A to the accompanying Proxy Statement), by and among
Besicorp, BGI Acquisition LLC ("Acquisition"), a Wyoming limited liability
company, and BGI Acquisition Corp. ("Merger Sub"), a New York corporation and a
wholly owned subsidiary of Acquisition, and
(ii) transact such other business as may properly be brought
before the Special Meeting or any adjournment or postponement thereof.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT
THE PLAN OF MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS
SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS ADOPTION OF THE PLAN OF MERGER.
All shareholders are cordially invited to attend the Special Meeting.
Only shareholders of record at the close of business on December 11, 1998 are
entitled to notice of and to vote at the Special Meeting or any adjournment
thereof. The affirmative vote of at least 66 2/3% of the shares of the Besicorp
Common Stock outstanding on such record date is necessary to adopt the Plan of
Merger. PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT IN
THE ENCLOSED ENVELOPE WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
Michael F. Zinn, Chairman of the Board,
President and Chief Executive Officer
Dated: December __, 1998
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BESICORP GROUP INC.
1151 FLATBUSH ROAD
KINGSTON, NEW YORK 12401
------------------
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ___________, 1999
This Proxy Statement is furnished to the holders of common stock, par
value $.10 per share ("Besicorp Common Stock"), of Besicorp Group Inc.
("Besicorp" or the "Company"), in connection with the solicitation of proxies by
the Board of Directors (the "Board") of Besicorp for use at the special meeting
of the shareholders of the Company to be held at 9:00 a.m., local time, on
__________, 1999 at _____________________________________, New York, and at any
adjournment or postponement thereof (the "Special Meeting").
The purpose of the Special Meeting is to consider and vote upon an
Agreement and Plan of Merger dated November 23, 1998, (the "Plan of Merger"), by
and among Besicorp, BGI Acquisition LLC ("Acquisition"), a Wyoming limited
liability company, and BGI Acquisition Corp. ("Merger Sub"), a New York
corporation and a wholly owned subsidiary of Acquisition. The Plan of Merger
provides that Merger Sub will be merged with and into Besicorp, with Besicorp
being the surviving corporation (the "Surviving Corporation") and wholly owned
by Acquisition (the "Merger"). If the Merger is consummated, Besicorp's
shareholders will be entitled to receive $34.50 in cash (subject to upward
adjustment if the Base Amount (as defined in the Plan of Merger, a copy of which
is annexed hereto as Annex A) exceeds $105,275,000 (the "Merger
Consideration")), without any interest thereon, for each share of Besicorp
Common Stock. It is anticipated that if there is any upward adjustment, such
adjustment will not exceed approximately $4.00 per share. There will not be a
downward adjustment to the Merger Consideration; however, no assurance can be
given that there will be any upward adjustment to the Merger Consideration.
Prior to the consummation of the Merger, Besicorp will distribute to its
shareholders on a pro rata basis all of the shares of common stock ("Newco
Common Stock") of Besicorp Ltd. ("Newco"), a subsidiary of Besicorp, which at
the time of the Spin-Off will, among other things, own Besicorp's photovoltaic
and independent power plant development businesses and have assumed essentially
all of Besicorp's liabilities (the "Spin-Off"). An Information Statement
containing information regarding the Spin-Off and Newco will be sent to
Besicorp's shareholders in conjunction with the Spin-Off. The Spin-Off does not
require approval of Besicorp's shareholders; however, the Spin-Off will not
occur unless all the conditions to the Merger have been satisfied or waived. See
"The Spin-Off."
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This Proxy Statement is dated December ___, 1998 and is, along with the
accompanying form of proxy, first being distributed to the shareholders of
Besicorp on or about such date. The Annual Report of the Company on Form 10-KSB,
and the amendment thereto, for the fiscal year ended March 31, 1998 (the "Annual
Report"), and the Quarterly Report of the Company on Form 10-QSB for the quarter
ended September 30, 1998 (the "Quarterly Report"), accompany this Proxy
Statement but are not part of the proxy soliciting materials.
AVAILABLE INFORMATION
Besicorp is required by the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), to file certain reports and documents with the Securities
and Exchange Commission (the "SEC"). These reports and documents may be
inspected and copied at the public reference facilities maintained by the SEC at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
are available for inspection and copying at the public reference facilities
maintained by the regional offices of the SEC located at 7 World Trade Center,
Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such information can
be obtained by mail from the Public Reference Section of the SEC, Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Besicorp
Common Stock is listed on the American Stock Exchange Emerging Company
Marketplace under the symbol "BGI.EC". Reports, proxy and information
statements, and other information concerning Besicorp can also be inspected at
the American Stock Exchange at 86 Trinity Place, New York, New York 10006.
The SEC maintains a World Wide Web site that contains reports and
documents regarding the Company. The address of the SEC's web site is
http:\\www.sec.gov.
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<TABLE>
<CAPTION>
<S>
<C>
TABLE OF CONTENTS
PAGE
SUMMARY..................................................................................................
The Parties.....................................................................................
The Special Meeting.............................................................................
Record Date; Quorum; Vote Required..............................................................
Background of the Merger........................................................................
Recommendation of Besicorp's Board of Directors.................................................
Opinion of Financial Advisor....................................................................
Interests of Certain Persons in the Merger......................................................
Conditions of the Merger........................................................................
Termination.....................................................................................
Effective Date; Cancellation of Stock Certificates and
Receipt of Merger Consideration ...........................................................
Dissenters' Rights..............................................................................
Certain Federal Income Tax Consequences.........................................................
Spin-Off........................................................................................
Trading Market for and Market Price of Besicorp Common Stock....................................
VOTING AT THE SPECIAL MEETING............................................................................
Introduction....................................................................................
Time, Date and Place of Meeting.................................................................
Record Date; Vote Required......................................................................
Quorum..........................................................................................
Solicitation, Revocation and Use of Proxies.....................................................
Dissenters' Rights..............................................................................
FACTORS TO BE CONSIDERED.................................................................................
Purposes and Effects of the Merger .............................................................
Background of the Merger .......................................................................
Recommendation of the Board of Directors; Fairness of the Merger ...............................
Opinion of Financial Advisor....................................................................
Interests of Certain Persons in the Merger......................................................
Certain Effects of the Merger...................................................................
Certain Federal Income Tax Consequences.........................................................
Regulatory and Other Approvals..................................................................
PLAN OF MERGER...........................................................................................
The Merger......................................................................................
Merger Consideration............................................................................
Representations and Warranties..................................................................
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Certain Covenants...............................................................................
Conduct of Business Pending the Merger.................................................
Acquisition Proposals..................................................................
Indemnification .......................................................................
Conditions to the Merger........................................................................
Termination ....................................................................................
Indemnification Agreement.......................................................................
Escrow Agreement................................................................................
Survival of Representations, Warranties and Agreements..........................................
Effect on Options, Warrants and Restricted Stock................................................
Fees and Expenses...............................................................................
BUSINESS OF THE COMPANY..................................................................................
MARKET INFORMATION REGARDING BESICORP COMMON STOCK.......................................................
THE SPIN-OFF.............................................................................................
INFORMATION REGARDING ACQUISITION AND MERGER SUB.........................................................
FEES AND EXPENSES........................................................................................
OTHER MATTERS............................................................................................
1998 ANNUAL MEETING OF STOCKHOLDERS......................................................................
INDEPENDENT PUBLIC ACCOUNTANTS...........................................................................
INCORPORATION BY REFERENCE...............................................................................
Annex A -- Plan of Merger
Annex B -- Fairness Opinion of Josephthal & Co., Ltd.
</TABLE>
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SUMMARY
The following is a summary of certain information contained in this
Proxy Statement or incorporated herein by reference. Because this is a summary,
it does not contain all the information that may be important to you. You should
read the entire Proxy Statement and its annexes carefully before you decide
whether to vote your shares in favor of the Plan of Merger. Capitalized terms
used without being defined herein shall have the meanings ascribed to such terms
by the Plan of Merger.
THE PARTIES
Besicorp Group Inc., a New York corporation ("Besicorp" or the
"Company"), has engaged in the development of independent power projects and the
development, manufacture and marketing of solar energy products and systems. The
Company's principal executive offices are located at 1151 Flatbush Road,
Kingston, New York 12401, (914) 336-7700. See "Business of the Company."
BGI Acquisition LLC ("Acquisition") is a limited liability company
organized in Wyoming. BGI Acquisition Corp. ("Merger Sub") is a New York
corporation and a wholly owned subsidiary of Acquisition. Acquisition and Merger
Sub are referred to collectively herein as "Buyer." See "Information Regarding
Acquisition and Merger Sub."
THE SPECIAL MEETING
The special meeting (the "Special Meeting") of the shareholders of
Besicorp will be held at 9:00 a.m. (local time) on ___________, 1999, at
_________________________________ New York.
The Special Meeting will be held to permit holders of shares of
Besicorp Common Stock to vote upon a proposal to adopt the Plan of Merger, a
copy of which is attached hereto as Annex A. The Plan of Merger provides for the
merger of Merger Sub with and into Besicorp. If the Plan of Merger is adopted
and the Merger consummated, each share of Besicorp Common Stock issued and
outstanding immediately prior to the Effective Date (as defined) will be
converted into the right to receive $34.50 in cash (subject to upward adjustment
if the Base Amount exceeds $105,275,000, as described herein and in the Plan of
Merger), without any interest thereon. See "Plan of Merger -- Merger
Consideration." It is anticipated that if there is any upward adjustment, such
adjustment will not exceed approximately $4.00 per share. There will not be a
downward adjustment to the Merger Consideration; however, no assurance can be
given that there will be any upward adjustment to the Merger Consideration.
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RECORD DATE; QUORUM; VOTE REQUIRED
Only holders of record of Besicorp Common Stock as of the close of
business on December 11, 1998 (the "Record Date") will be entitled to notice of
and to vote at the Special Meeting. On the Record Date, [2,969,195] shares of
Besicorp Common Stock were outstanding.
The presence, in person or by proxy, of the holders of a majority of
the shares of Besicorp Common Stock outstanding on the Record Date is required
to constitute a quorum at the Special Meeting. See "Voting at the Special
Meeting -- Quorum." Shareholders of record on the Record Date are entitled to
one vote per share on any matter which may properly come before the Special
Meeting. For the Plan of Merger to be adopted, holders of at least 66 2/3% of
the shares of Besicorp Common Stock outstanding as of the Record Date must vote
in its favor. If the shareholders do not adopt the Plan of Merger, the Merger,
in its current form, will not be consummated. See "Plan of Merger -- Conditions
to the Merger."
As of the Record Date, the executive officers and directors of Besicorp
owned an aggregate of [1,671,191] shares of Besicorp Common Stock, representing
[56.3%] of the outstanding shares of Besicorp Common Stock without giving effect
to shares (the "Conversion Shares") issuable upon exercise or conversion of
options, warrants or other outstanding rights to acquire Besicorp Common Stock
(the "Rights"). None of the Conversion Shares will be eligible to vote at the
Special Meeting. These _______ shares include _______ shares of Besicorp Common
Stock which were issued upon exercise of Rights whose exercisability was
accelerated in November 1998 to permit the holders to exercise in connection
with the Merger Rights that would otherwise not be exercisable until after the
Effective Date. See "Factors to be Considered Interests of Certain Persons in
the Merger." Accordingly, the favorable vote of only [308,273] shares (in
addition to the shares of the executive officers and directors expected to be
voted in favor of the Plan of Merger) of Besicorp Common Stock is required for
adoption of the Plan of Merger by the Besicorp shareholders. See "Voting at the
Special Meeting -- Record Date; Vote Required" and "Plan of Merger --
Termination -- Damages."
BACKGROUND OF THE MERGER
For a description of the events leading up to the adoption of the Plan
of Merger by the Board, see "Factors to be Considered" and "Business of the
Company."
RECOMMENDATION OF BESICORP'S BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF BESICORP HAS UNANIMOUSLY
DETERMINED THAT THE PLAN OF MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, BESICORP AND ITS SHAREHOLDERS. THE BOARD OF
DIRECTORS OF BESICORP UNANIMOUSLY RECOMMENDS ADOPTION OF THE
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PLAN OF MERGER BY BESICORP'S SHAREHOLDERS. For a discussion of the factors
considered by Besicorp's Board of Directors in adopting the Plan of Merger, see
"Factors to be Considered."
OPINION OF FINANCIAL ADVISOR
Josephthal & Co., Inc. ("Josephthal") has delivered to the Board of
Directors of Besicorp a written opinion dated November 20, 1998, to the effect
that, as of the date of such opinion and based upon and subject to certain
matters stated therein, the Merger Consideration (assuming that the merger
consideration is $34.50 per share) was fair, from a financial point of view, to
the holders of Besicorp Common Stock. The full text of the written opinion of
Josephthal which sets forth the assumptions made, matters considered and
limitations on the review undertaken, is attached as Annex B to this Proxy
Statement and should be read carefully in its entirety. The opinion of
Josephthal is directed to the Board of Directors of Besicorp and relates only to
the fairness of the Merger Consideration from a financial point of view, does
not address any other aspect of the Merger (including, without limitation, the
Spin-Off) or any related transactions, and does not constitute a recommendation
to any shareholder as to how such shareholder should vote his shares at the
Special Meeting. A portion of Josephthal's compensation is contingent upon
the consummation of the Merger. See "Factors to Be Considered -- Opinion of
Financial Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Michael F. Zinn, Michael J. Daley and Frederic Zinn, executive officers
of Besicorp, will be paid bonuses of $1,000,000, $500,000 and $500,000,
respectively, by Besicorp immediately preceding the consummation of the Merger.
The Board and a committee thereof have as of November 1998 taken action
(1) allowing the executive officers and directors who hold unvested Rights to
acquire Besicorp Common Stock, to exercise such Rights currently, and to permit
such persons to participate in the Spin-Off and the Merger and (2) removing the
forfeiture provisions from directors' and executive officers' restricted shares
of Besicorp Common Stock (e.g., Besicorp Common Stock that would be forfeited if
the holder thereof ceases to be employed (including service as a director) by
Besicorp upon the consummation of the Merger).
Immediately prior to the closing of the Merger (the "Closing"),
Besicorp is to deposit $6 million (the "Escrow Fund") into an escrow account
pursuant to the escrow agreement provided for by the Plan of Merger and as more
fully described herein (the "Escrow Agreement"). See "Plan of Merger - Escrow
Agreement." A portion of the Escrow Fund may be used, among other things, to
satisfy or defend certain claims made against officers and directors of
Besicorp. The Surviving Corporation's certificate of incorporation and by-laws
following the Merger will
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continue, subject to certain limitations, to provide for the indemnification of
Besicorp's officers and directors in a manner consistent with the provisions of
such charter documents as in effect at the Effective Date (as defined
hereafter). See "Plan of Merger - Certain Covenants: Indemnification." Besicorp
will, prior to the Effective Date, procure officers' and directors' liability
insurance covering certain persons including current officers and directors. The
consummation of the Merger may adversely affect certain shareholder derivative
law suits (which have previously been dismissed although such dismissals are
being appealed) pending against certain of Besicorp's officers and directors.
See "Factors to be Considered - Interests of Certain Persons in the Merger,"
"Plan of Merger - Escrow Agreement" and "Business of the Company Legal
Proceedings."
CONDITIONS TO THE MERGER
Besicorp and Buyer are only obligated to complete the Merger, if, among
other things, the Plan of Merger is adopted by the shareholders of Besicorp. The
Merger also is subject to certain other closing conditions that may be waived by
the parties, subject to applicable law and certain limitations imposed by the
Plan of Merger. Besicorp does not presently intend to waive any such conditions
although it reserves the right to do so. See "Plan of Merger -- Conditions to
the Merger."
TERMINATION
The Plan of Merger may be terminated and the Merger abandoned at any
time prior to the Effective Date by mutual written consent of Besicorp and
Buyer, or by either Besicorp or Buyer in certain other circumstances, in
accordance with the termination provisions of the Plan of Merger. Certain fees
may be payable by Besicorp to Buyer upon termination of the Plan of Merger. See
"Plan of Merger -- Termination."
EFFECTIVE DATE; CANCELLATION OF STOCK CERTIFICATES; AND RECEIPT OF
MERGER CONSIDERATION
Under the Plan of Merger, the required filing of the Certificate of
Merger is expected to be made as soon as practicable after the satisfaction or
waiver of all conditions to the Merger, including the adoption of the Plan of
Merger by the shareholders of Besicorp at the Special Meeting. The Merger will
be effective as of the date of filing of the Certificate of Merger with the
Secretary of State of the State of New York in accordance with the New York
Business Corporation Law (the "BCL") or at such later time as provided in such
Certificate of Merger (the "Effective Date") and as a result thereof the shares
of Besicorp Common Stock will be converted into the right to receive the Merger
Consideration. Promptly thereafter, Continental Stock Transfer & Trust Co.,
Besicorp's transfer agent, or such other person designated by the parties
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prior to the Effective Date as the paying agent (the "Paying Agent"), will
notify Besicorp's shareholders of the consummation of the Merger and will
provide the shareholders with, among other things, the forms of documents (the
"Letter of Transmittal") needed to exchange their shares of Besicorp Common
Stock for the Merger Consideration. DO NOT SURRENDER YOUR CERTIFICATES OF
BESICORP COMMON STOCK UNTIL YOU RECEIVE AND COMPLETE SUCH LETTER OF TRANSMITTAL.
See "Plan of Merger -- The Merger."
DISSENTERS' RIGHTS
Besicorp's shareholders will not have any right to dissent from the
Merger and demand appraisal rights in connection with the Merger because under
Section 910(1)(A)(iii) of the BCL, such rights are not available to the
shareholders of a New York corporation if the corporation's stock is listed on a
national securities exchange, as are the shares of Besicorp Common Stock.
See "Voting at the Special Meeting -- Dissenters' Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Each Besicorp shareholder will generally recognize gain or loss, for
federal income tax purposes, in an amount equal to the difference between the
amount of cash received by such shareholder for his or her shares of Besicorp
Common Stock pursuant to the Merger and the adjusted tax basis in such shares.
Further, each shareholder of Besicorp at the Effective Date may be subject to
claims of creditors (to the extent such claims are unpaid), including claims of
creditors such as taxing authorities, to the extent of the Merger Consideration
and the Newco Common Stock received by any such shareholder, by virtue of the
fact that such shareholder received the Merger Consideration and/or the Newco
Common Stock in the Spin-Off. Besicorp's shareholders should read carefully the
discussion under "Factors to Be Considered -- Certain Federal Income Tax
Consequences" and are urged to consult their own tax advisors as to the tax
consequences of the Merger to them under federal, state, local or any other
applicable law. The tax consequences of the Spin-Off will be described in the
Information Statement that will be sent to shareholders of Besicorp at or about
the Effective Date of the Merger. It is anticipated that the receipt of shares
of Newco Common Stock pursuant to the Spin-Off will be a taxable event.
SPIN-OFF
Besicorp will authorize the distribution of the Newco Common Stock (or
cash in lieu of fractional shares of Newco Common Stock) to persons who are
shareholders of Besicorp as of the record date for the Spin-Off (the "Spin-Off
Record Date"), which is expected to be the same day as the Effective Date. At
the time of the Spin-Off, Newco will own, among other things, Besicorp's
photovoltaic and independent power plant development businesses and will have
assumed essentially all of Besicorp's liabilities. The Information Statement
that will be sent to
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Besicorp shareholders in conjunction with the Spin-Off will contain information
regarding the Spin-Off and Newco. See "The Spin-Off."
TRADING MARKET FOR AND MARKET PRICE OF BESICORP COMMON STOCK
Set forth below are the high and low sales prices as reported on the
American Stock Exchange Emerging Company Marketplace ("AMEX ECM") for the
periods indicated.
Fiscal Year Ended March 31,
High Low
---------- ----------
1997 First Quarter $ 16 $ 11-3/4
Second Quarter 14-3/4 10
Third Quarter 15-1/8 11-1/4
Fourth Quarter 20-7/8 12-1/4
1998 First Quarter $ 21-1/2 $ 15-1/8
Second Quarter 40 19-7/8
Third Quarter 36-15/16 30-3/4
Fourth Quarter 35-1/2 23-5/8
1999 First Quarter $ 39-1/2 $ 26-1/16
Second Quarter 40 29-3/4
Third Quarter 36-1/4 29-7/8
(through November
20, 1998)
On November 20, 1998, the business day immediately prior to the date of
public announcement of the Board's adoption of the Plan of Merger, the last
reported sales price of the Besicorp Common Stock was $32-7/8. As of December
___, 1998, the last reported sales price of the Besicorp Common Stock was
$________. See "Market Information Regarding Besicorp Common Stock."
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VOTING AT THE SPECIAL MEETING
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Besicorp for the Special Meeting. At the
Special Meeting, the shareholders of Besicorp will consider and vote on a
proposal to adopt the Plan of Merger.
TIME, DATE AND PLACE OF MEETING
The Special Meeting will be held at 9:00 a.m. (local time) on
__________, 1999 at ____________________________________, New York.
RECORD DATE; VOTE REQUIRED
The Record Date for the determination of shareholders entitled to
notice of and to vote at the Special Meeting is December 11, 1998. Accordingly,
only shareholders of record of Besicorp at the close of business on the Record
Date have the right to receive notice of and to vote at the Special Meeting and
any postponement or adjournment thereof and each such shareholder will be
entitled to one vote for each share of Besicorp Common Stock held of record on
the Record Date. As of the Record Date, there were [2,969,195] shares of
Besicorp Common Stock outstanding.
Under the BCL, the affirmative vote of holders of at least 66 2/3% of
the shares of Besicorp Common Stock outstanding as of the Record Date is
required to adopt the Plan of Merger. Accordingly, abstentions and broker
non-votes will have the effect of votes against the Plan of Merger.
As of the Record Date, the executive officers and directors of the
Company, owned [1,671,191] shares of Besicorp Common Stock representing [56.3%]
of the outstanding shares of Besicorp Common Stock without giving effect to the
Conversion Shares issuable upon exercise or conversion of Rights. None of the
Conversion Shares will be eligible to vote at the Special Meeting. These _______
shares include _______ shares of Besicorp Common Stock which were issued upon
exercise of Rights whose exercisability was accelerated as of November 1998 to
permit the holders to exercise in connection with the Merger, Rights that would
otherwise not be exercisable until after the Effective Date. See "Factors to be
Considered - Interests of Certain Persons in the Merger." Accordingly, the
favorable vote of only [308,273] shares (in addition to the shares of the
executive officers and directors expected to be voted in favor of the Plan of
Merger) of Besicorp Common Stock is required for adoption of the Plan of Merger
by the Besicorp shareholders. See "Plan of Merger -- Termination -- Damages."
The Board of Directors of Besicorp unanimously determined on November
20, 1998, that the Plan of Merger is fair to, and in the best interests of,
Besicorp and its shareholders.
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The Board of Directors of Besicorp unanimously adopted the Plan of Merger and
recommends adoption of the Plan of Merger by Besicorp's shareholders. The Board
of Directors of Merger Sub and the board of managers of Acquisition, as the sole
shareholder of Merger Sub and on behalf of Acquisition, have adopted the Merger
and the Plan of Merger.
QUORUM
Under the BCL and the Company's by-laws, the presence in person or by
properly executed proxy of holders of a majority of the issued and outstanding
shares of Besicorp Common Stock is required to constitute a quorum at the
Special Meeting.
SOLICITATION, REVOCATION AND USE OF PROXIES
Shares of Besicorp Common Stock represented by a properly executed
proxy received by Besicorp will, unless such proxy is properly revoked prior to
the Special Meeting, be voted at the Special Meeting in accordance with the
instructions thereon. SHARES OF BESICORP COMMON STOCK REPRESENTED BY PROPERLY
EXECUTED PROXIES THAT DO NOT CONTAIN INSTRUCTIONS TO THE CONTRARY WILL BE VOTED
FOR ADOPTION OF THE PLAN OF MERGER AND IN THE DISCRETION OF THE PROXY HOLDER AS
TO ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY
ADJOURNMENT OR POSTPONEMENT THEREOF. The Board knows of no business that will be
presented for consideration at the Special Meeting other than the proposal to
adopt the Plan of Merger. If other matters should properly come before the
Special Meeting, the proxy holders will vote on such matters in accordance with
their best judgments. Proxies are being solicited hereby on behalf of the Board.
Any shareholder of record may revoke his or her proxy at any time
before it is voted by executing and delivering to the Secretary of Besicorp, at
Besicorp's principal executive offices as set forth under "Summary -- The
Parties", an instrument of revocation or a proxy bearing a later date, and by
delivering a written notice to the Secretary of Besicorp stating that the proxy
is revoked, or by voting in person at the Special Meeting.
The cost of soliciting proxies, including the cost of preparing,
assembling, printing and mailing this Proxy Statement, the Proxy and any
additional materials furnished to shareholders, will be borne by Besicorp.
Arrangements will be made with brokerage houses and other custodians, nominees
and fiduciaries to send proxies and proxy materials to the beneficial owners of
stock, and such persons may be reimbursed for their expenses. Proxies may be
solicited by directors, officers or employees of Besicorp in person or by
telephone, telegram or other means. No additional compensation will be paid for
these services other than for their out-of-pocket expenses (which it is
anticipated will be nominal) incurred in connection therewith. Besicorp has
retained ___________________ to aid in the solicitation of proxies from its
shareholders. The fee of such firm is estimated to be approximately $________,
plus reimbursement of out-of-pocket expenses.
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DISSENTERS' RIGHTS
Some states allow shareholders of corporations that are involved in a
merger to dissent from such merger, in which case, generally, a court determines
(i.e., appraises) the value of their shares which such shareholders are entitled
to receive in lieu of accepting the payment provided by the agreement or plan of
merger. Besicorp shareholders will not have this appraisal right in connection
with the Merger because, under Section 910(1)(A)(iii) of the BCL, such rights
are not available to the shareholders of a New York corporation if the
corporation's stock is listed on a national securities exchange, as are the
shares of Besicorp Common Stock.
FACTORS TO BE CONSIDERED
PURPOSES AND EFFECTS OF THE MERGER
Besicorp has ownership interests (the "Partnership Interests") in five
domestic power plants (the "Power Plants") which, pursuant to power purchase
agreements (the "Power Purchase Agreements"), provided capacity and electrical
power to Niagara Mohawk Power Corporation ("Niagara Mohawk"). The partnerships
(the "Partnerships") which own the Power Plants, Niagara Mohawk and certain
other independent power producers entered into a Master Restructuring Agreement
(the "MRA") in July 1997, which became effective on June 30, 1998, which
provided for, among other things, the termination or restructuring of the Power
Purchase Agreements. In connection therewith, Besicorp has received through
September 30, 1998, among other things, common stock of Niagara Mohawk (the
"Niagara Mohawk Common Stock") with a value of approximately $69 million at June
30, 1998 and net cash of approximately $59 million, $8 million of which is
subject to certain reserves. See "-- Background of the Merger" and "Business of
the Company." As a result of the MRA, the Partnerships no longer have customers
for the electric power and capacity generated by the Power Plants and are,
accordingly, in the process of selling the Power Plants. The proceeds of the
MRA, and the anticipated proceeds of the sale of the Power Plants, far exceed
Besicorp's requirements for its remaining businesses (i.e., the photovoltaic
business and its independent power plant development projects), but, in
management's opinion, are insufficient to guarantee that Besicorp will compete
successfully in the de-regulated merchant power business in the United States.
Therefore, Besicorp considered how best to go forward without any electric power
business and with assets it no longer needed. Besicorp concluded it would focus
primarily on the continued development and marketing of its photovoltaic
products and systems and on the development of its independent power plant
projects. This ultimately led Besicorp to decide to effectuate the spin-off of
these businesses to its shareholders pursuant to the Spin-Off and seek to
maximize the return to Besicorp's shareholders on the assets which were not to
be used in its remaining businesses. Besicorp considered
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investing all of the after-tax proceeds (the "Proceeds") from the MRA and the
Power Plant sales in the photovoltaic and independent power plant development
businesses (the "Continuing Businesses"); however, the Company concluded that
even if all of the Proceeds were invested in such Continuing Businesses they
would not provide sufficient funds to be able to guarantee that the Company
would be able to compete successfully with its larger, and better funded
competitors. Since investing the Proceeds in the Continuing Businesses would
constitute a risky investment, the Company concluded it would be preferable, and
safer from the perspective of the shareholders, not to invest the Proceeds in
the Continuing Businesses. Besicorp concluded that in light of the fact that the
Company's experience was limited to developing and managing independent power
plants and the solar power business (the "Historical Company Businesses"), in
which the Company did not want to invest the Proceeds, it would be inappropriate
to invest such Proceeds in a business new to the Company (i.e., businesses
unrelated to the Historical Company Businesses) in which the Company had no
experience. Besicorp concluded, after considering various alternatives, and
soliciting both cash and non-cash bids for the Company, that the sale of
Besicorp, for cash would be more beneficial to its shareholders than any other
viable alternative.
Accordingly, the Merger is intended to maximize the return to
Besicorp's shareholders by providing them with $34.50 in cash, subject, in
certain circumstances, to upward adjustment if the Base Amount exceeds
$105,275,000, for each share of Besicorp Common Stock they hold. As a result,
Acquisition, through Merger Sub, will acquire all of the outstanding shares of
Besicorp Common Stock. The factors leading to the decision by Besicorp to adopt
the Merger are set forth under the caption "-- Background of the Merger."
If the Merger is consummated, holders of Besicorp Common Stock will no
longer have any equity interest in Besicorp. Instead, each such shareholder will
receive, upon surrender of the certificate or certificates evidencing Besicorp
Common Stock, the Merger Consideration in exchange for each share of Besicorp
Common Stock owned immediately prior to the Effective Date. See "-- Certain
Effects of the Merger."
BACKGROUND OF THE MERGER
Besicorp has Partnership Interests in the Power Plants which, pursuant
to the Power Purchase Agreements, provided capacity and electrical power to
Niagara Mohawk. On or about October 1995, Niagara Mohawk announced its intention
to renegotiate the Power Purchase Agreements and similar agreements it had with
other independent power producers because of, among other things, its
deteriorating financial condition and competitive conditions in the electrical
power generation industry. As a result of these negotiations, in July 1997,
certain independent power producers (including the Power Plants) entered into
the MRA with Niagara Mohawk. The MRA provided for the termination or
restructuring of these power purchase agreements, including the Power Purchase
Agreements, in consideration for which the independent power producers would
receive cash or Niagara Mohawk Common Stock or a combination of both.
Recognizing that, in the aggregate, for the fiscal years ended March 31,
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1997 and 1996, all of Besicorp's net income and more than 59% of its total
revenues were derived from these Power Purchase Agreements and the Partnership
Interests and anticipating, among other things, that (i) the proceeds to be
received as a result of the MRA would substantially exceed the operating and
projected operating needs of Besicorp's remaining businesses, and (ii) after the
termination of these Power Purchase Agreements, the power generated by the Power
Plants could not be sold profitably, Besicorp, in March, 1997, retained
PaineWebber, and, after such relationship was terminated, retained Josephthal in
December, 1997, to assist Besicorp in formulating and consummating a strategy or
transaction to maximize the value of the MRA to Besicorp's shareholders and in
February 1998, the Partnerships retained Josephthal to sell the Power Plants.
On behalf of Besicorp, Josephthal contacted approximately forty
different entities to discuss their interest in pursuing some type of
transaction with Besicorp such as purchasing substantially all of its assets or
making a tender offer for all of the Besicorp Common Stock. Ultimately only
three entities other than Acquisition or its affiliates expressed serious
interest but no agreement on terms and conditions was reached with any entity.
From late August through early September 1998, Besicorp and Acquisition
exchanged proposed forms of letter of intent.
On September 10, 1998, representatives of Besicorp and Acquisition met.
At the meeting, Acquisition and Besicorp executed an agreement to the effect
that through October 10, 1998 Besicorp would not initiate, solicit or engage in
any discussion with respect to any proposals by third parties to acquire
Besicorp, and that it would pay certain of Acquisition's expenses, up to
$200,000, if, among other things, such proposals were solicited prior to such
date. The representatives also discussed the terms and conditions of the
proposed form of Plan of Merger, drafts of which had previously been circulated.
Although at the time there was no definitive agreement on the terms of
a potential transaction, Acquisition began to conduct its due diligence
investigation of Besicorp (including the entities in which it has ownership
interests) and various representatives of Acquisition visited Besicorp's
facilities on several occasions throughout September and October 1998.
On or about October 7, 1998, Acquisition's representatives delivered a
revised draft (the "October 7 Draft") of the Plan of Merger to representatives
of Besicorp.
The Board met on October 16, 1998, after having received a copy of the
October 7 Draft and certain preliminary materials prepared by Josephthal with
respect to its review of the proposed Merger and Plan of Merger. The Board
reviewed and discussed at length: (i) recent developments with respect to
Besicorp (including the proceeds received from the MRA and the terms and timing
of the contemplated power plant sales); (ii) the reasons for the Merger, the
proposed nature and amount of consideration estimated to be received by the
Besicorp shareholders in the Merger and the benefits to the Besicorp
shareholders of the Merger; (iii) the
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limited number of potential independent domestic power plant development
projects available to Besicorp; (iv) the competitive nature of the unregulated
domestic electrical generation industry and, in particular, limitations on
Besicorp's ability to compete in the deregulated domestic merchant power
industry due to its lack of size and capital; (v) the inability of the Power
Plants to generate electrical power profitably following the termination of the
Power Purchase Agreements and the characteristics of such plants; (vi) the
timing required to negotiate and effect a merger; and (vii) the businesses and
assets that Acquisition was not interested in acquiring and the possibility of
distributing such assets to Besicorp's shareholders by means of a spin-off.
Josephthal reviewed with the Board alternatives to the Merger including the
Partial Liquidation Alternative (as defined below) and the Reinvestment
Alternative (as defined below) and the Board discussed such alternatives. The
Partial Liquidation Alternative consists of liquidating the Power Plants,
distributing the cash proceeds of such liquidation and the MRA to Besicorp's
shareholders, and Besicorp's continuing to develop its photovoltaic and
independent power plant development businesses. The Reinvestment Alternative
generally consists of liquidating the Power Plants, reinvesting the proceeds of
the MRA and the proceeds of the liquidation of the Power Plants and continuing
to develop Besicorp's photovoltaic and independent power plant development
businesses. See "--Opinion of Financial Advisor." The Board did not consider
formally adopting the Plan of Merger at such time because it had been advised
that the negotiations with respect thereto were continuing.
Representatives of Besicorp and Buyer met on October 19, 1998 to
negotiate the Plan of Merger. Drafts of the Plan of Merger were circulated
thereafter from time to time through November 12, 1998, during which period the
parties and their representatives continued to negotiate the Plan of Merger.
The Board met on November 12, 1998 having previously received a revised
draft of the Plan of Merger dated October 25, 1998; contemporaneously with such
meeting, the draft of the Plan of Merger dated November 10, 1998 (the "November
10 Draft")(including the proposed forms of escrow and indemnification
agreements) was circulated to all of the members of the Board. The Board
reviewed its deliberations of October 16, 1998. The proposed terms of the Merger
and various provisions of the Plan of Merger to be executed in connection
therewith were reviewed by the Board. Josephthal presented an oral report to the
Board with respect to the analyses it performed in connection with its fairness
opinion and advised the Board that, subject to, among other things, its receipt
of the final version of the Plan of Merger and the qualifications and the
assumptions in its report, in its opinion the value of the consideration to be
received by the Besicorp shareholders in the Merger was fair from a financial
point of view. The Board then proceeded to discuss at length whether the Merger
and Plan of Merger were in the best interest of Besicorp and its shareholders
and whether the consideration to be received by the shareholders in the Merger
was fair. In connection therewith, the Board reviewed and discussed various
aspects of, and factors pertaining to, the Merger including those they discussed
on October 16, 1998 and (i) the various provisions contained in the Plan of
Merger, including the financing contingency, provisions limiting Besicorp's
ability to solicit a competitive proposal, the obligations imposed by the
indemnification agreement, conditions to the consummation of the Merger and the
termination
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provisions (including the fees payable to Buyer upon termination); (ii) that the
Merger would be structured as a cash merger whereby the shareholders of the
Company would have the right to receive cash for each outstanding share of
Besicorp Common Stock and would have no continuing interest in Besicorp or the
Surviving Corporation; (iii) the interests in the transaction of Besicorp's
executive officers and directors including the bonuses payable to such persons
in connection with the Merger; (iv) the facts that Besicorp, at Acquisition's
insistence, would have to contribute funds to be held in escrow so that the
amount of merger consideration otherwise payable to Besicorp's shareholders
would be reduced by such sum, that a portion of the Escrow Fund may be used to
satisfy Besicorp's indemnification obligations to its current executive officers
and directors, that the balance of the Escrow Funds, if any, remaining after
application of the funds for the purposes set forth in the Escrow Agreement
would not be distributed to Besicorp's shareholders but to Newco and that the
Merger Consideration receivable with respect to 100,000 shares of Besicorp
Common Stock subject to a dispute between Besicorp and a former executive
officer, to the extent it is determined that such shares belong to Besicorp (see
"Plan of the Merger -- The Merger Consideration"), would not be distributed to
Besicorp's shareholders but to Newco; (v) the tax consequences to Besicorp and
its shareholders of the Merger and the other transactions contemplated by the
Plan of Merger; (vi) the potential exposure of Besicorp's shareholders to claims
of creditors (to the extent unpaid), including tax authorities, of Besicorp if
the Merger is consummated (e.g., if a taxing authority were to contest the
Surviving Corporation's tax treatment, in light of the Merger, of the proceeds
from the MRA and the sales of the Power Plants); (vii) alternatives to the
Merger, including the Reinvestment Alternative and the Partial Liquidation
Alternative; (viii) Josephthal's oral report; and (ix) the reasons for the
Merger and the benefits to Besicorp's shareholders of the Merger. The Board did
not consider formally adopting the Plan of Merger at such time because it was
advised that negotiations were continuing with respect to the plan of merger and
certain ancillary documents.
The Board held a meeting on November 17, 1998. Contemporaneously with
such meeting, members of the Board were provided with a draft of the preliminary
proxy statement. The Board reviewed and discussed its deliberations of October
16, 1998 and November 12, 1998. The Board discussed (i) the amount to be
contributed by Besicorp to the Escrow Account and the application of the
interest payable thereon; (ii) the interests in the transaction of Besicorp's
executive officers and directors; and (iii) various provisions contained in the
plan of merger. The Board did not consider formally adopting the Plan of Merger
at such time because it was advised that negotiations were continuing with
respect to the plan of merger and certain ancillary documents.
The Board met on November 20, 1998. Prior to such meeting, members of
the Board were provided with the Plan of Merger (including the escrow agreement
and the indemnification agreement), a revised draft of the preliminary proxy
statement and the letter from a bank (the "Lender") stating its interest,
subject to the satisfaction of certain conditions, in providing the financing
required by the Buyer. The Board was also provided with Josephthal's written
report dated November 20, 1998 (the "Fairness Opinion") with respect to the
analyses it had performed. In the Fairness Opinion, Josephthal advised the Board
that, subject to the qualifications and
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assumptions in its report, in its opinion, the value of the consideration to be
received by the Besicorp shareholders in the Merger was fair from a financial
point of view. The Board reviewed with Josephthal the Fairness Opinion and the
analyses it had performed. The Board reviewed and discussed its deliberations of
October 16, 1998, November 12, 1998 and November 17, 1998. The Board then
proceeded to discuss at length whether the Merger and Plan of Merger were in the
best interest of Besicorp and its shareholders and whether the consideration to
be received by the shareholders in the Merger was fair. In connection therewith,
the Board reviewed and discussed various aspects of, and factors pertaining to
the Merger and the Plan of Merger and the transactions contemplated thereby
including the factors and conditions previously discussed at the prior Board
meetings and additional matters including (i) changes to the plan of merger,
escrow agreement and indemnification agreement from the November 10 Draft; (ii)
the compensation paid and payable to Josephthal, including the fact that a
significant portion of such compensation was contingent upon the consummation of
the Merger; (iii) that Josephthal would not be updating its Fairness Opinion;
and (iv) the general terms and conditions of the Spin-Off.
Based upon its discussions, the Board determined that in light of the
current circumstances and future prospects of Besicorp, the Merger, the Plan of
Merger and the Merger Consideration were fair to and in the best interest of
Besicorp and its shareholders. The Board unanimously adopted the Plan of Merger.
The Plan of Merger was executed on November 23, 1998.
RECOMMENDATION OF THE BOARD OF DIRECTORS; FAIRNESS OF THE MERGER
The proposed Merger and the Plan of Merger were negotiated by Besicorp
and its representatives on an arms-length basis with Acquisition, which is a
third party unaffiliated with Besicorp or any member of the Board of Directors
or management of Besicorp. The Board has unanimously determined that the Plan of
Merger is fair to, and in the best interests of, Besicorp and its shareholders,
and unanimously recommends adoption of the Plan of Merger by Besicorp's
shareholders. The Board based its recommendation on a number of factors,
including the following:
(i) The Board determined that the Merger Consideration is fair
to the Besicorp shareholders. This determination was based on the
directors' assessment of Besicorp's value considering the following
factors taken as a whole: Besicorp's current and anticipated operations
and performance, the current and anticipated opportunities in the
industries in which Besicorp competes, and the analyses and Fairness
Opinion. The after-tax proceeds of approximately $30.70 of the Merger
Consideration (without giving effect to the possibility of an upward
adjustment) as estimated by Josephthal payable with respect to each
share of Besicorp Common Stock was compared with the after-tax
proceeds, as estimated by Josephthal, of approximately $25.38 per share
from liquidating the assets and distributing the proceeds to the
shareholders.
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(ii) The Board determined that the Merger is in the best
interest of Besicorp and its shareholders. In reaching such
determination the Board reviewed and analyzed alternatives to the
Merger, including the Partial Liquidation Alternative and the
Reinvestment Alternative. The Board noted that Josephthal's analyses
indicated that the Merger would produce greater after-tax proceeds to
the shareholders than the Partial Liquidation Alternative. The Board
further noted that given the competitive nature of the industry in
which Besicorp competes, Josephthal's analysis indicated that the
consummation of the Merger and the ensuing distribution of the Merger
Consideration would produce a greater after tax return to Besicorp's
shareholders than the Reinvestment Alternative (assuming equal rates of
return, although Josephthal did not give any opinion regarding the
rates of return achievable either by shareholders or Besicorp or
whether Besicorp would be capable of finding investments offering
higher rates of returns than investments available to shareholders).
The Board noted that despite PaineWebber's seven month effort and
Josephthal's ten month effort to maximize the value of the proceeds of
the MRA and the related transactions to the Besicorp shareholders, it
had not received a combination or restructuring alternative as
favorable to Besicorp and its shareholders as the Merger. The Board
also considered some of the uncertainties and risks associated with the
Plan of Merger including the financing contingency, the possibility of
the imposition of transferee liability on Besicorp's shareholders for
unpaid creditor claims, including claims of taxing authorities, the
limitations imposed by the Plan of Merger on Besicorp's ability to
consider or engage in a business combination other than the Merger and
that Josephthal would not be issuing prior to the consummation of the
Merger any fairness opinion (other than the Fairness Opinion dated
November 20, 1998) with respect to the fairness of the Merger
Consideration to be received by the Besicorp shareholders.
In view of the wide variety of factors considered in connection with
its evaluation of the Merger, the Besicorp Board did not find it practicable to,
and did not, quantify or otherwise assign relative weights to the specific
factors considered in reaching its decisions.
OPINION OF FINANCIAL ADVISOR
Besicorp retained Josephthal to render an opinion regarding the
fairness, from a financial point of view, of the Merger Consideration. Neither
Besicorp's Board nor its management imposed any limits on Josephthal's
investigation or on the procedures followed by Josephthal in preparing and
rendering its opinion. Josephthal rendered the Fairness Opinion to the Board on
November 20, 1998 to the effect that, based upon and subject to the
considerations set forth in its opinion, as of November 20, 1998, the Merger
Consideration was fair to Besicorp's shareholders from a financial point of
view. Josephthal expressed no opinion on the Spin-Off or on Besicorp's decision
to form Newco or on the capital requirements of or availability of capital for
Newco.
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Josephthal is under no obligation to update, revise or reaffirm the Fairness
Opinion even if the value of the Besicorp Common Stock materially changes after
the date of the Fairness Opinion.
The full text of the Fairness Opinion, including the assumptions made
by Josephthal and the general procedures followed by Josephthal, is set forth in
Annex B to this Proxy Statement. Each shareholder is urged to read the Fairness
Opinion in its entirety. The Fairness Opinion addresses only the fairness of the
Merger Consideration (and assumes that the Merger Consideration is $34.50 per
share) and does not constitute a recommendation to any holder of Besicorp Common
Stock as to how the holder should vote on the proposal to adopt the Plan of
Merger.
In preparing the Fairness Opinion, Josephthal reviewed and considered
those financial and other materials that it deemed relevant, including, among
others, the following: (i) the Plan of Merger; (ii) a draft of the preliminary
proxy statement dated November 13, 1998; (iii) certain historical financial,
operating and other data that are publicly available or were furnished to
Josephthal by Besicorp, including, but not limited to: (a) financial analyses
prepared by management of Besicorp; (b) Besicorp's Form 10-KSB as of and for the
year ended March 31, 1998; (c) a draft of Besicorp's Form 10-QSB as of and for
the period ended September 30, 1998; and (d) internally generated operating
reports of Besicorp; (iv) publicly available financial, operating and stock
market data for companies engaged in businesses Josephthal deemed comparable to
Besicorp's; (v) publicly available financial, operating and stock market data
for companies in the power industry which had been involved in mergers or
acquisitions since May 1997; and (vi) such other factors as Josephthal deemed
appropriate. Josephthal also met with senior officers of Besicorp to discuss the
prospects for Besicorp's business and their estimates of future financial
performance. The Fairness Opinion is solely and necessarily based on economic,
financial and market conditions as they existed as of the date of its opinion.
As described in its opinion, Josephthal relied upon and assumed,
without any responsibility to independently verify, the accuracy and
completeness of the financial and other information provided or which was
publicly available, and did not attempt to verify independently any of this
information. Josephthal relied solely on the estimates provided to it by
Besicorp's management with respect to Besicorp's prospects and neither made nor
obtained any independent appraisals of Besicorp's properties, other assets or
facilities. With respect to certain financial information, including financial
analyses related to Besicorp's business and prospects provided to Josephthal by
Besicorp, Josephthal assumed that the financial information was reasonably
prepared based on management's best currently available estimates as to
Besicorp's future financial performance.
In evaluating the fairness of the Merger Consideration, Josephthal
performed a price volume trading history analyzing the trading pattern of
Besicorp Common Stock over the past two years. Josephthal calculated the
percentage of shares that traded below a specified price in a continuum of
prices and also calculated the percentage based on the same continuum of prices,
to the total number of shares outstanding during each period. Josephthal also
attempted to perform
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a comparable transaction analysis, but was unable to identify a set of
transactions that it believed was comparable to the Merger.
Josephthal additionally analyzed the after-tax value to the
shareholders of liquidating Besicorp's domestic power generation assets and
distributing the cash proceeds (including the after-tax proceeds of the MRA and
Besicorp's share of the estimated proceeds of the Power Plant sales which
Josephthal estimated would aggregate approximately $85.0 million)(i.e., the
Partial Liquidation Alternative) along with reinvesting the after-tax proceeds
from the MRA and the Power Plant sales in its existing businesses (i.e., the
Reinvestment Alternative) and compared the results to the Merger Consideration.
Josephthal noted that the Merger Consideration would be paid directly to the
shareholders and would not be subject to any corporate level tax and assumed
that any taxes associated with the Spin-Off paid by such shareholders would be
minimal. For purposes of evaluating the amount of cash available for
distribution or for reinvestment after the Power Plant sales, Josephthal assumed
that Besicorp would pay federal and state corporate taxes at a combined rate of
35% with respect to the MRA and the proceeds of the Power Plant sales.
Josephthal also noted that in the case of the Merger, the Besicorp shareholders
would receive shares in Newco on a pro rata basis according to their interests
in Besicorp at the Spin-Off Record Date; whereas in the Partial Liquidation and
Reinvestment Alternatives, the shareholders would continue to own shares in
Besicorp and Besicorp would not effectuate the Spin-Off. Josephthal assumed that
in the case of the Partial Liquidation Alternative and the Reinvestment
Alternative, Besicorp would incur corporate level taxes of approximately $49.0
million resulting in cash available for distribution or reinvestment of
approximately $85.0 million (as compared to an aggregate Merger Consideration of
$105.3 million). Josephthal also assumed that each shareholder would pay capital
gains taxes on receipt of a liquidating distribution or the Merger
Consideration. For analytical purposes Josephthal estimated the amount of these
taxes by assuming that each shareholder had a basis of $15.50 per share which
represented the approximate average daily closing price of Besicorp's common
stock during the period from November 30, 1993 through September 30, 1998. Based
on the number of shares outstanding (on a fully diluted basis) as of November
20, 1998 (3,051,435), Josephthal estimated that the shareholders had an
aggregate tax basis of approximately $47.3 million. Adjusting for estimated
shareholder level taxes, Josephthal estimated that the Merger would produce
after-tax proceeds to the shareholders of approximately $93.7 million ($30.70
per share) compared to approximately $77.5 million ($25.38 per share) from
liquidating the assets and distributing the proceeds to the shareholders.
Shareholders are cautioned that the actual after-tax proceeds may differ from
shareholder to shareholder since shareholders' tax basis may differ from the
basis estimated by Josephthal for purposes of its analysis. Shareholders are
urged to consult with their own tax advisors to evaluate the tax effects of the
Merger and the alternative transactions described herein. See "--Certain Federal
Income Tax Consequences" below.
In analyzing and comparing the after-tax benefits to the shareholders
of the Merger (i.e. their receiving the Merger Consideration) and the
Reinvestment Alternative (i.e. Besicorp's reinvesting the proceeds of the MRA
and the Partnerships' sales of the Power Plants), Josephthal assumed,
hypothetically that shareholders would reinvest the after-tax proceeds of the
Merger
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Consideration at rates of returns ranging from 5% to 10% per year. Josephthal
assumed further that shareholders would not receive any interim return on the
reinvested proceeds of the Merger Consideration or pay any taxes from year to
year during the five year period. Instead, Josephthal assumed that shareholders
would receive the return at the end of year five and pay tax at capital gain
rate of 20% on the appreciation. Based on these assumptions, Josephthal
projected that the Merger Consideration would increase in value to between
approximately $114 million and $139 million. Josephthal then compared the
hypothetical return earned by shareholders with (i) a Reinvestment Alternative
in which Besicorp would not incur any corporate taxes and (ii) a Reinvestment
Alternative in which Besicorp would incur federal and state corporate taxes (at
a combined rate of 35%) on the return from its investment during a five year
investment period. Josephthal noted that since Besicorp would have to pay
corporate level taxes on the after-tax proceeds from the MRA and the
Partnerships' sales of the Power Plants, the aggregate after-tax proceeds of the
Merger Consideration would be greater than the amount Besicorp would have to
invest. Assuming that Besicorp would not incur a corporate level tax, Josephthal
projected that if Besicorp earned an annual rate of return of 15% to 20%, the
proceeds would increase in value to between approximately $146 million and $179
million. Assuming that Besicorp would incur a corporate level tax, Josephthal
projected that if Besicorp earned an annual rate of 15% to 20%, the proceeds
would increase in value to between approximately $118 million and $135 million.
In each case, Josephthal assumed as part of this analysis that Besicorp would
not receive any interim return from year to year during the five-year period
and that the shareholders would pay tax at capital gain rates on any
distribution. Josephthal noted in its analysis that reinvestment would be
affected by economic and financing factors beyond Besicorp's control, including:
(i) the availability of investment opportunities within the confines of
management expertise and experience; (ii) general economic conditions and
business risks; and (iii) the demand for Besicorp's products and services.
Josephthal also noted management's opinion that the proceeds of the MRA and from
the sale of the Power Plants would be insufficient to guarantee that Besicorp
will compete successfully in the de-regulated merchant power business in the
United States.
The summary set forth above does not purport to be a complete
description of Josephthal's analyses. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. Josephthal believes that the summary and its analyses must
be considered as a whole and that selecting portions thereof, without all of its
analyses, could create an incomplete view of the processes underlying its
analyses and opinion. Josephthal based its analyses on assumptions that it
deemed reasonable, including assumptions concerning general business and
economic conditions. Josephthal's analyses are not necessarily indicative of
actual values or actual future results that might be achieved. These values may
be higher or lower than those indicated. Moreover, Josephthal's analyses are
not, and do not purport to be, appraisals or otherwise reflective of the prices
at which businesses or securities actually could be bought or sold.
Josephthal was engaged to provide financial advisory services on
December 17, 1997 and to provide a fairness opinion such as the Fairness Opinion
delivered on November 20, 1998. Under the terms of the December 17, 1997
engagement, Besicorp has paid Josephthal a total of $650,000 for services
rendered thereunder, including the rendering of a fairness opinion with respect
to the MRA. Besicorp also agreed to reimburse Josephthal for reasonable expenses
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<PAGE>
incurred by Josephthal under the December 17, 1997 engagement not to exceed
$7,500 without Besicorp's approval and to indemnify Josephthal against certain
liabilities, including liabilities under the federal securities laws. Besicorp
has also agreed to pay Josephthal a fee of $200,000 for rendering the Fairness
Opinion and, contingent upon completion of the Merger, $800,000 for services
rendered in connection with the Merger. Josephthal was also engaged by the
various Partnerships on February 24, 1998 to provide advisory services in
connection with sale of the Power Plants. Pursuant to these agreements, each
Partnership owning a Power Plant has agreed, under certain circumstances, to pay
Josephthal a fee equal to 1.5% of the aggregate consideration paid to such
Partnership from such sale.
Josephthal has advised Besicorp that the Fairness Opinion is "solely
for the benefit and use of Besicorp and its Board of Directors" and, as such,
may not be relied upon by third parties, such as Besicorp's shareholders.
Josephthal believes that under the terms of its engagement letter with Besicorp,
which is governed by New York state law, Josephthal has no legal responsibility
to any other persons, including Besicorp's shareholders, as a result of the
express disclaimers described above. Josephthal has advised the Board that it
intends to assert the disclaimer as a defense to any claims that may be brought
against it by shareholders with respect to the Fairness Opinion. However, since
no New York state court or federal court applying New York law has definitively
ruled on the availability to a financial advisor, such as Josephthal, of an
express disclaimer as a defense to shareholder liability with respect to a
fairness opinion such as the Fairness Opinion, the issue necessarily would have
to be resolved by a court of competent jurisdiction. The availability or
non-availability of such a defense will have no effect on Josephthal's rights
and responsibilities under federal securities laws, or the rights and
responsibilities of the Board under governing state law or under federal
securities laws.
Josephthal was selected to provide a fairness opinion because it is a
nationally recognized investment banking firm and is familiar with Besicorp's
operations since it was retained to assist Besicorp in formulating and
consummating a strategy or transaction to maximize the value of the MRA to
Besicorp's shareholders and to sell the Power Plants. As part of its investment
banking practice, Josephthal regularly values businesses and securities in
connection with mergers and acquisitions. In the ordinary course of business,
Josephthal actively trades the securities of Besicorp for its own account and
for the accounts of its customers, and may at any time hold a long or short
position in Besicorp's securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of the Board with respect to the
Merger, shareholders should be aware that certain members of Besicorp's
management and the Board have certain interests in the Merger that are in
addition to or different from the interests of the public shareholders. The
Board was aware of these interests and considered them, among other things, in
adopting the Plan of Merger.
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<PAGE>
If the Merger is consummated, Michael F. Zinn, Michael J. Daley and
Frederic Zinn will be paid bonuses of $1,000,000, $500,000 and $500,000,
respectively by Besicorp.
The Company has granted the options, including restricted stock options
pursuant to which restricted stock may be acquired, warrants and other rights
(collectively, "Rights") to acquire Besicorp Common Stock and issued restricted
shares of Besicorp Common Stock which were granted either pursuant to restricted
stock purchase agreements or restricted stock options that have been exercised
(collectively, the "Restricted Stock Grants") held by executive officers and
directors of Besicorp. (The Rights and Restricted Stock Grants are referred to
collectively herein as the "Entitlement"). Some of these Rights originally were
not exercisable until after the contemplated Effective Date and would have been
effectively forfeited as result of the consummation of the Merger since
originally they could only be exercised so long as the holder remained an
employee and/or director of Besicorp; originally, some of the Restricted Stock
Grants, and restricted stock issuable if restricted stock options were
exercised, would have been forfeited (e.g., because the restricted shares would
be forfeited if the holder ceased to be an employee and/or director of Besicorp)
or otherwise limited at the Effective Date; nor did the terms of all of such
Rights allow the holders to participate in the Spin-Off. The Board and a
committee thereof adjusted, as of November 1998, the provisions of the
instruments governing these Entitlements (the "Adjustment") so that (1) these
Entitlements now may, among other things, be exercised (or not forfeited or
otherwise limited) (which enables the holders to participate in the Merger) and
(2) the holders may participate in the Spin-Off as if they were holders of
record of Besicorp Common Stock as of the date of the Spin-Off. 52,240 Rights
and 21,245 Restricted Stock Grants, including 37,000 Rights and
19,200 Restricted Stock Grants held by executive officers and directors, were
so adjusted. As a result all of the Rights are now exercisable and vested, all
of the shares of Restricted Stock are no longer restricted and any shares
issuable upon the exercise of Restricted Stock Options will not be subject to
any restrictions other than the restrictions imposed by the securities laws.
Set forth below is a table describing the Rights and Restricted Stock Grants
held by executive officers and directors of Besicorp which were adjusted
pursuant to the Adjustment:
<TABLE>
<CAPTION>
<S>
<C>
Name of Executive Officer Number of Shares
or Director Subject to Entitlements Nature of Entitlements
Gerald Habib 2,500 (1) Rights
Richard Rosen 2,500 (2) Rights
Melanie Norden 5,000 (3) Rigths
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Name of Executive Officer Number of Shares
or Director Subject to Entitlements Nature of Entitlements
_________________________ __________________ ______________________
Michael F. Zinn 41,000 (4) Rights/Restricted Stock
Michael Daley 3,000 (5) Rights
Joseph P. Novarro 2,200 (6) Rigths/Restricted Stock
</TABLE>
(1) As a result of the Adjustment, Warrants to purchase 2,500 shares of
Besicorp Common Stock that were not previously exercisable became
exercisable.
(2) As a result of the Adjustment, Warrants to purchase 2,500 shares of
Besicorp Common Stock that were not previously exercisable became
exercisable.
(3) As a result of the Adjustment, Warrants to purchase 2,500 shares of
Besicorp Common Stock that were not previously exercisable became
exercisable and Options to purchase 2,500 shares of Restricted Stock
became Options to purchase 2,500 shares of unrestricted Besicorp Common
Stock.
(4) As a result of the Adjustment, Options to purchase 20,000 shares of
Besicorp Common Stock that were not previously exercisable became
exercisable and 19,000 shares of Restricted Stock became vested and
ceased to be Restricted Stock. Also includes stock options held by
Valerie Zinn, Mr. Zinn's spouse, to purchase 2,000 shares of Besicorp
Common Stock (which Options were not exercisable prior to the
Adjustment).
(5) As a result of the Adjustment, Options to purchase 3,000 shares of
Besicorp Common Stock that were not previously exercisable became
exercisable.
(6) As a result of the Adjustment, Options to purchase 2,000 shares of
Besicorp Common Stock that were not previously exercisable became
exercisable shares of Restricted Stock and 200 shares of Restricted
Stock became vested and ceased to be Restricted Stock.
In addition, Michael Zinn is the beneficial holder of 1,699,236
shares of Besicorp Common Stock. Therefore, as a result of such holdings and if
he were to exercise all of his Rights, Mr. Zinn would be entitled to receive,
assuming the Merger Consideration is not adjusted, approximately $58 million.
Other members of management beneficially hold smaller numbers of
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<PAGE>
shares of Besicorp Common Stock. See "Business of the Company -- Security
Ownership of Certain Beneficial Owners and Management."
The Plan of Merger contemplates that prior to the Effective Date,
Besicorp will procure and pay for officers' and directors' liability insurance
(the "D&O Insurance") covering certain persons, including present and former
directors, officers, employees and agents of Besicorp and its subsidiaries
(collectively, the "Covered Person"), who at the time of the execution of the
Plan of Merger were covered by Besicorp's officers' and directors' liability
insurance or will be so covered on the day of the Closing (the "Closing Date"),
with respect to acts and omissions occurring on or prior to the Closing Date.
Additionally, the Plan of Merger provides that for the lesser of six years after
the Closing Date or the period the Surviving Corporation maintains its
existence, the provisions of the Certificate of Incorporation and By-Laws of the
Surviving Corporation shall provide indemnification to the Covered Persons on
terms, in a manner, and with respect to matters, which are no less favorable
than Besicorp's Certificate of Incorporation and By-Laws, as in effect on the
date of the execution of the Plan of Merger; provided, however, that the
obligation of the Surviving Corporation to provide such indemnification is
limited to the D&O Insurance and that the provisions of the Certificate of
Incorporation and By-laws of the Surviving Corporation may be amended
accordingly. See "Plan of Merger--Indemnification." Finally, funds deposited
pursuant to the Escrow Agreement may be used to satisfy certain obligations of
Besicorp and/or the Surviving Corporation to the Covered Persons. See "Plan of
Merger -- Escrow Agreement."
Besicorp and certain of its executive officers and directors (including
former executives, officers and directors) are parties to two shareholder
derivative lawsuits. The consummation of the Merger may adversely affect the
ability to maintain such suits. If such suits are not maintained, certain of
Besicorp's executive officers and directors who are defendants in such suits,
including Michael F. Zinn, Besicorp's Chairman of the Board, President and Chief
Executive Officer, may benefit. These suits have previously been dismissed but
such dismissals have been appealed. See "Business of the Company -- Legal
Proceedings."
It is not anticipated that the Surviving Corporation will, following
the Effective Date, enter into employment or similar agreements with Besicorp's
current management. It is anticipated that the directors and executive officers
of Besicorp will serve Newco in capacities in which they currently serve
Besicorp and that they will be compensated for the services they render on
behalf of Newco. Further information regarding the compensation payable to
executive officers and directors of Newco will be set forth in the Information
Statement.
CERTAIN EFFECTS OF THE MERGER
Upon consummation of the Merger, Merger Sub will be merged with and
into Besicorp, the separate corporate existence of Merger Sub will cease, and
Besicorp will continue as the Surviving Corporation. Acquisition will own all of
the outstanding shares of common stock of
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<PAGE>
the Surviving Corporation and will be entitled to all of the benefits and
detriments resulting from that interest. After the Effective Date, the present
Besicorp shareholders 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 will automatically be converted into the right to receive the
Merger Consideration. As a result of the Merger, the Surviving Corporation will
become a wholly-owned subsidiary of Acquisition and there will cease to be any
public market for the Besicorp Common Stock, and after the Effective Date, the
Besicorp Common Stock will be delisted from the AMEX ECM. Upon such event, it is
anticipated that the Surviving Corporation will apply to the SEC for the
deregistration of the Besicorp Common Stock under the Exchange Act. As a result
of this deregistration certain provisions of the Exchange Act (including the
proxy solicitation provisions of Section 14(a), and the short swing trading
provisions of Section 16(b)), no longer will be applicable to the Surviving
Corporation.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences
relating to the Merger based on the provisions of the Internal Revenue Code of
1986, as amended (the "Code"), and applicable regulations, rulings and judicial
authority as in effect on the date of this Proxy Statement. Subsequent changes
in the law could alter the federal income tax consequences of the Merger.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON PRESENT LAW. BECAUSE
INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH SHAREHOLDER IS URGED TO CONSULT SUCH
SHAREHOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES
DISCUSSED BELOW TO SUCH SHAREHOLDER AND THE PARTICULAR TAX EFFECTS OF THE
MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.
The receipt by a shareholder of cash for shares of Besicorp Common
Stock pursuant to the Merger will be a taxable transaction for federal income
tax purposes under the Code and also may be a taxable transaction under
applicable state, local and other tax laws. The tax consequences of such receipt
may vary depending upon, among other things, the particular circumstances of the
shareholder. A shareholder will generally recognize gain or loss equal to the
difference between the amount of cash received by the shareholder pursuant to
the Merger in exchange for his or her shares and the shareholder's adjusted tax
basis in such shares. Such gain or loss generally will be capital gain or loss
if the shares are a capital asset in the hands of the shareholder and will be
long-term gain or loss if the shares have a holding period of more than one year
at the time of their conversion at the Effective Date. Long-term capital gain
recognized by an individual shareholder will be taxed at the lowest rates
applicable to capital gains if the
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<PAGE>
shareholder has held the shares of Common Stock for more than twelve months.
Certain limitations apply with respect to the deductibility of capital losses.
The receipt of cash by a shareholder pursuant to the Merger may be
subject to backup withholding at the rate of 31% unless the shareholder (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.
Claims of Besicorp's creditors, including claims of such creditors as
taxing authorities, may survive the Merger. To the extent the Escrow Fund is
insufficient to satisfy such claims, it is possible that such creditors may seek
to bring claims against persons who were shareholders of Besicorp immediately
prior the Effective Date of the Merger by asserting that such shareholders are
subject to transferee liability (i.e., imposing liability by virtue of the fact
that the Besicorp shareholders received the Merger Consideration or the Newco
Common Stock or both although such potential liability of any shareholder would
presumably be limited to the Merger Consideration or Newco Common Stock received
by such shareholder). Though management believes that it is unlikely that such
claims would be successful, successful claims may materially reduce the net
benefit received by such shareholders from the Merger Consideration and the
Spin- Off.
This tax discussion is included for general information only. This
discussion applies only to shareholders holding shares of Besicorp Common Stock
as capital assets, and to shareholders holding shares of Besicorp Common Stock
received pursuant to the exercise of employee stock options or otherwise as
compensation. This discussion does not apply to Besicorp's shareholders who are
not citizens or residents of the United States, to Besicorp's shareholders who
are tax-exempt or to other shareholders of Besicorp of special status.
Information regarding the federal income tax consequences of the Spin
Off will be set forth in the Information Statement. It is anticipated that the
receipt of shares of Newco Common Stock pursuant to the Spin-Off will be a
taxable transaction for federal income tax purposes under the Code and also may
be a taxable transaction under applicable state, local and other tax laws.
REGULATORY AND OTHER APPROVALS
Besicorp is not aware of any material governmental or regulatory
requirements to be complied with in connection with the Merger, other than
obtaining the shareholders' adoption of the Plan of Merger, and the filing of a
Certificate of Merger conforming to the requirements of the BCL with the
Secretary of State of the State of New York (and certain other governmental
authorities in the State of New York) and certain other requirements that must
be satisfied in connection with the Spin-Off.
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<PAGE>
PLAN OF MERGER
The following is a brief summary of the Plan of Merger, a copy of which
is attached as Annex A to this Proxy Statement and is incorporated herein by
reference. The statements made herein concerning such document are not
necessarily complete, and reference is made to the full text of the Plan of
Merger attached hereto as Annex A. Each such statement is qualified in its
entirety by such reference. Capitalized terms that are not otherwise defined in
this summary have the meanings set forth in the Plan of Merger.
THE MERGER
The Plan of Merger provides that, upon the terms and subject to the
satisfaction or waiver of certain conditions set forth therein, Merger Sub will
be merged with and into Besicorp, the separate corporate existence of Merger Sub
will cease and Besicorp will continue as the Surviving Corporation, provided
that it will change its name within 30 days after the Closing Date to a name
which does not include the word "Besicorp." The Merger will become effective
upon the filing of the Certificate of Merger with the Secretary of State of the
State of New York or, if later, the time specified in the Certificate of Merger
in accordance with the BCL (the "Effective Date").
Pursuant to the Plan of Merger, at the Effective Date (i) each share of
Besicorp Common Stock issued and outstanding immediately prior to the Effective
Date shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive in cash the Merger
Consideration which is described below under "--Merger Consideration," upon
surrender of the certificate evidencing such share (each, a "Certificate") in
the manner provided below and (ii) each share of Merger Sub 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.
Immediately prior to the Effective Date, Acquisition will deposit or
cause to be deposited with Continental Stock Transfer & Trust Co. or another
paying agent mutually acceptable to Besicorp and Acquisition (the "Payment
Agent"), in trust for the benefit of the holders of record of Besicorp Common
Stock immediately prior to the Effective Date, cash in an aggregate amount equal
to the Merger Consideration. As soon as practicable after the Effective Date,
the Payment Agent will mail to each holder of shares of Besicorp Common Stock as
of the Effective Date a letter of transmittal and instructions (the "Letter of
Transmittal") to effect the surrender of the Certificates in exchange for the
Merger Consideration. Each holder of Besicorp Common Stock, upon surrender to
the Payment Agent of such holder's Certificates with the Letter of Transmittal,
duly and properly executed, shall be entitled to receive the portion of the
Merger Consideration represented by the Certificate as payment of the Merger
Consideration. Until so surrendered, each Certificate shall at and after the
Effective Date be deemed to represent only the right to
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<PAGE>
receive upon surrender of such Certificate the Merger Consideration with respect
to the shares of Besicorp Common Stock represented thereby. No interest will be
paid or will accrue on the cash payable upon surrender of any Certificate.
BESICORP SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES OR INSTRUMENTS UNTIL
THEY RECEIVE A LETTER OF TRANSMITTAL OR OTHER FORM.
In addition, options and warrants to acquire shares of Besicorp Common
Stock issued pursuant to the Company's employee stock option plan or pursuant to
any other agreement outstanding at the time of the Special Meeting, whether or
not vested and exercisable, shall become vested and exercisable immediately upon
shareholder adoption of the Plan of Merger. See "--Effect on Options, Warrants
and Restricted Stock." Also, restricted shares of Besicorp Common Stock issued
pursuant to the Company's employee stock option plan or pursuant to any other
agreements outstanding at the time of the Special Meeting, shall become vested
immediately prior to the Effective Date.
If the Plan of Merger is adopted by the requisite vote of the
shareholders of Besicorp and certain other conditions to the Merger are
satisfied or waived (as more fully described below), the Closing will be held on
__________.
MERGER CONSIDERATION
Each share of Besicorp Common Stock outstanding immediately prior to
the Effective Date shall be converted into the right to receive $34.50 in cash,
plus an additional amount, which is the amount equal to (1) the quotient equal
to (a) the Base Amount (as described below) divided by (b) the number of shares
of Besicorp Common Stock outstanding as of immediately prior to the Effective
Date less (2) $34.50. If the Base Amount is less than $105,275,000, Acquisition
and Merger Sub may terminate the Plan of Merger. See "-- Conditions to the
Merger." The Base Amount is determined pursuant to the following formula:
Base Amount = Initial Amount - Adjustment Amount + (Specified Current
Liabilities x .8357).
The terms set forth in this formula have the following meanings (shareholders
are encouraged to review the Plan of Merger for the exact definition of these
terms):
Initial Amount is the sum of (a) (i) $500,000, (ii) to the extent not
received in cash, the amount of a claimed tax refund for fiscal year 1998 not to
exceed $82,387, (iii) cash and cash equivalents on hand or in accounts which are
solely owned by the Company or a Remaining Subsidiary, free of all Encumbrances
as of the Effective Date, and (iv) the product of .9975 of the closing price of
a share of Niagara Mohawk Common Stock as of the trading day immediately
preceding the Closing Date multiplied by the number of shares of Niagara Mohawk
Common Stock held by Besicorp as of the Effective Date (not to exceed 50,000
shares) less (b) to the extent not already contributed pursuant to the Escrow
Agreement, $6,000,000.
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Adjustment Amount is the sum of: (i) all Liabilities of the Company or
a Remaining Subsidiary (including the Specified Current Liabilities (as defined
below) but excluding the Excluded Liability (as defined below) and certain
intercompany liabilities) as of the Effective Date which are, in the reasonable
judgment of Acquisition both fixed and quantifiable; (ii) all liabilities,
judgments, demands, claims, actions or causes of action, regulatory, legislative
or judicial proceedings or investigations, assessments, levies, losses, fines,
penalties, damages, costs and expenses ("Damages"), and other damages, if any,
that Besicorp and Acquisition, agree may be incurred (or reasonably likely to be
incurred) by any of the parties to the Plan of Merger and any Remaining
Subsidiary as a result of the breach by Besicorp of its representations and
warranties in the Plan of Merger; and (iii) transfer, use, stamp, real estate
and other similar taxes and fees incurred by Besicorp, its Subsidiaries,
Acquisition or Merger Sub in connection with the Transactions.
Specified Current Liabilities are the Liabilities of Besicorp or any
Remaining Subsidiary (actual or accrued) for unpaid federal income taxes for the
current fiscal year based on the consolidated net income of Besicorp through the
Effective Date.
The Excluded Liability is the Liability of Besicorp or its Subsidiaries
for New York State income Taxes for Besicorp's current fiscal year.
Not later than twenty days prior to Closing, Besicorp is to prepare and
deliver to Acquisition and Merger Sub a statement (the "Statement") setting
forth in reasonable detail the components of the Base Amount. The Statement is
to prepared in accordance with the generally accepted accounting principles
applied in preparation of Besicorp's financial statements, with items to be
reflected regardless of materiality and all accruals known or contemplated for
Liabilities of Besicorp or a Remaining Subsidiary as of the Effective Date to be
reflected. Besicorp is to permit and fully cooperate with Merger Sub in
obtaining full access to Besicorp's records and its accountant's work papers for
purposes of independently verifying the components of the Base Amount and the
Additional Amount. Acquisition and Merger Sub are to notify Besicorp of their
acceptance or rejection of the Statement within five days of receipt. In the
event that Acquisition and Merger Sub reject the Statement such notice shall set
forth a schedule detailing the disputed components of the Statement. Besicorp,
Acquisition and Merger Sub are to use their reasonable best efforts to reach
agreement on such disputed components of the Statement prior to the Closing. In
the event that Besicorp, Acquisition and Merger Sub are unable to reach an
agreement on the Statement within three days prior to Closing, the Plan of
Merger will be deemed terminated.
In calculating the Merger Consideration, the parties assumed that the
100,000 shares of Besicorp Common Stock held of record by Martin Enowitz (the
"Enowitz Shares") were outstanding even though Besicorp maintains, and is a
party to a legal proceeding seeking a determination, that he is not entitled to
such shares. Because of the uncertainty with respect to the ownership of these
shares, the Plan of Merger provides that the Merger Consideration payable in
respect of such shares is to be held in escrow pending resolution of the dispute
regarding the
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ownership of these shares and the rights, if any, of Acquisition, Merger Sub or
the Surviving Corporation to such Merger Consideration will be assigned without
recourse to Newco.
REPRESENTATIONS AND WARRANTIES
The Plan of Merger contains various representations and warranties of
Besicorp as to, among other things: (i) the due organization, valid existence,
good standing and capitalization of Besicorp and/or certain subsidiaries; (ii)
the authorization of the execution and delivery of the Plan of Merger and
certain related agreements, the validity and enforceability thereof against
Besicorp, the noncontravention thereby of the organizational documents of
Besicorp or certain subsidiaries or of any material order or judgment of a
governmental entity or any agreement or obligation applicable to Besicorp or any
of its Subsidiaries and the absence of requirements for any consents, notices or
registrations ("Authorizations") to be obtained or filed by Besicorp or any of
its Affiliates in connection with consummation of the Merger; (iii) compliance
in all material respects of Besicorp's filings with the SEC under the Securities
Act of 1933, as amended, and the Exchange Act (the "SEC Documents"), and the
accuracy of certain information and financial statements of Besicorp included in
the SEC Documents; (iv) the absence of certain undisclosed liabilities; (v)
compliance with applicable laws; (vi) the absence of certain changes or events
since June 30, 1998; (vii) certain tax matters; (viii) certain intellectual
property matters; (ix) litigation involving Besicorp or certain subsidiaries;
(x) employee benefit matters; (xi) certain labor and employment matters; (xii)
certain environmental matters; and (xiii) title to property.
The Plan of Merger also contains representations and warranties of each
of Acquisition and Merger Sub as to, among other things: (i) their due
organization, valid existence, good standing and/or capitalization; (ii) due
authorization, execution and delivery of the Plan of Merger and related
agreements, the validity and enforceability thereof against such parties and the
noncontravention thereby of the organizational documents of Acquisition and
Merger Sub or other agreements to which such parties may be bound; (iii) the
absence of conflicts and defaults and the absence of the requirement for any
Authorization; (iv) the delivery to the Company of a true copy of a letter from
the Lender, stating Lender's interest, subject to the negotiation and execution
of definitive documents and the fulfillment of the conditions set forth in such
letter, in providing the Financing which, together with the equity to be
obtained by the Merger Sub, will be for an amount necessary to pay the Merger
Consideration and that the Financing will not be secured by a lien on the assets
of the Surviving Corporation; and (v) the accuracy of the information provided
in writing by Acquisition and Merger Sub for use in the Proxy Statement.
CERTAIN COVENANTS
CONDUCT OF BUSINESS PENDING THE MERGER. Besicorp, Acquisition and
Merger Sub agreed that until the Effective Date, the parties would (a) not
intentionally perform or omit to perform any act which would prevent the
performance of the Plan of Merger or would
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result in any representation or warranty being untrue in any material respect
and (b) give the other parties notice of the occurrence of any event which would
make any representation or warranty in the Plan of Merger untrue or that would
otherwise prevent the closing of the Merger. The parties further agreed to use
their best efforts to consummate expeditiously the Spin-Off, the Merger, the
sale of the Power Plants by the Partnerships and the other transactions
contemplated by the Plan of Merger (collectively, the "Transactions") provided
that no party is required by such agreement to expend funds not commercially
reasonable in relation to such transactions or to take any action that would
result in a material adverse effect with respect to such party.
Besicorp also agreed that prior to the Effective Date, it shall use its
best efforts to cause certain of its affiliates to dispose of the Power Plants
and it shall, and shall cause each Remaining Subsidiary to, carry on its
business with the objective of effecting the Spin-Off and the sales of the Power
Plants and, in all other respects with the objective of winding up the remaining
business of the Company and the Remaining Subsidiaries so that the Company and
the Remaining Subsidiaries will have no assets other than cash and cash
equivalents and the Retained Assets (as defined in the Plan of Merger) and no
Liabilities other than Permitted Liabilities (as defined in the Plan of Merger)
and certain other permissible liabilities.
Furthermore, Besicorp shall cause the Spin-Off to be effectuated
immediately prior to the Effective Date by causing, among other things, (a) the
transfer to, and assumption by Newco of all of the assets, personnel, employee
benefit plans and Liabilities of the Company (other than the Retained Assets and
Permitted Liabilities) and the Remaining Subsidiaries and the transfer to Newco
of all of the outstanding capital stock of the Distributed Subsidiaries (as such
terms are defined in the Plan of Merger); (b) the execution and delivery by
Besicorp and Newco of such agreements and arrangements which are customary in
connection with spinoffs and which provide for, among other matters, the
provision of transition and support services to Besicorp by Newco without cost
to Besicorp, and indemnification of Besicorp by Newco and its subsidiaries for
any failure of Newco to discharge and pay in full all of the Liabilities so
assumed or the failure of any Distributed Subsidiary to discharge and pay in
full its Liabilities when due; (c) the distribution to the shareholders of
Besicorp prior to the Effective Date all of the outstanding capital stock of
Newco; and (d) Besicorp and Newco to enter into the Indemnification Agreement
and the Escrow Agreement.
Besicorp also agreed that prior to the Effective Date, it shall not and
shall not permit any of the Remaining Subsidiaries (as defined in the Plan of
Merger) to: (i) amend its Certificate of Incorporation, By-Laws or other
organizational documents; (ii) make any change in its authorized capital stock;
adjust, split, combine or reclassify its capital stock; or, with certain
exceptions, issue any shares of stock, or rights to acquire capital stock or
other similar rights; (iii) incur any indebtedness for borrowed money or assume
or otherwise become responsible for the obligations of any other person; (iv)
subject to certain exceptions, sell, transfer, encumber or otherwise dispose of
any of its material properties or assets to any person; (v) make any investments
in, or contributions to capital of, or purchases of, any property or assets from
any other person; (vi) subject to certain exceptions, enter into or terminate
any material contract or agreement, or make
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any change in any of its material leases or contracts; (vii) change, with
certain exceptions, its method of accounting as in effect at December 31, 1997;
(viii) subject to certain exceptions, increase the compensation payable to any
employee, or enter into any new employment agreements with new or existing
employees; (ix) subject to certain exceptions, pay any dividend or make any
distribution (other than the Spin-Off) on its securities or purchase any of its
securities; (x) make any tax election or settle or compromise any tax liability;
and (xi) enter into any business or contract not related to the Spin-Off, Power
Facility Sales or the Merger.
Besicorp also agreed that prior to the Effective Date, it shall cause
the Distributed Subsidiaries to carry on their respective businesses only in the
ordinary course consistent with past practice and shall not and shall cause the
Distributed Subsidiaries not to create any liabilities of Besicorp or any
Remaining Subsidiary for the Liabilities of the Distributed Subsidiaries.
Pursuant to the Plan of Merger, Besicorp agreed (i) to call a meeting
of its shareholders for the purpose of voting upon adoption of the Merger; (ii)
to hold such meeting as soon as practicable following the date of the Plan of
Merger; (iii) subject to the provisions regarding Acquisition Proposals (as
defined), recommend to its shareholders the adoption of the Merger through its
Board of Directors; and (iv) to use its best efforts to obtain the adoption of
the Plan of Merger by the shareholders of the Company.
Pursuant to the Plan of Merger, Besicorp agreed to prepare and file
with the SEC this Proxy Statement and a Form 10 Registration and use its
reasonable best efforts to respond to any comments of the SEC and to cause the
Form 10 Registration to be effective. The Company has also agreed to file all
other reports and schedules (the "Company Filings") required to be filed by the
Company with the SEC.
Pursuant to the Plan of Merger, Besicorp, Merger Sub and Acquisition
agreed to timely seek all consents, approvals, permits, authorizations or
waivers (collectively, "Consents") that are required to be obtained prior to the
Effective Date from governmental entities or other third parties in connection
with the execution and delivery of the Plan of Merger and the consummation of
the transactions contemplated thereby.
ACQUISITION PROPOSALS. Pursuant to the Plan of Merger, Besicorp agreed
to cease immediately any activities or negotiations with respect to an
Acquisition Proposal (as defined below), and to not, nor to permit any
Subsidiary, to authorize or permit any of its officers, directors, employees or
representatives, to (i) solicit any Acquisition Proposal; (ii) facilitate the
making of an Acquisition Proposal; or (iii) enter into any agreement with
respect to any Acquisition Proposal; provided, however, that neither Besicorp
nor the Board is prohibited from furnishing non-public information to, or
entering into discussions with, any person with respect to any unsolicited
Acquisition Proposal if : (a) the Board determines reasonably and in good faith,
after due investigation and after consultation with and based upon the advice of
its outside financial advisor, that such Acquisition Proposal is a Superior
Proposal (as defined below); (b) the
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Board determines reasonably and in good faith, after due investigation and after
consultation with and based upon the advice of outside counsel, that the failure
to take such action would cause the Board to violate its fiduciary duties to
shareholders; and (c) Besicorp (x) provides at least two business days' notice
to Acquisition to the effect that it is taking such action and (y) receives from
such person or entity an executed confidentiality agreement.
The term "Acquisition Proposal" means any bona fide offer or proposal
with respect to a merger or similar transaction involving Besicorp or any of its
Subsidiaries or the purchase of any significant portion of the assets or capital
stock of Besicorp or any significant Subsidiary or any other business
combination involving Besicorp; and "Superior Proposal" means an Acquisition
Proposal which the Board believes in good faith, after due investigation (taking
into account, among other things, the financing terms and the likelihood of
consummation) and based upon the advice of its outside legal and financial
advisors, is more favorable to Besicorp's shareholders from a financial point of
view than the Merger (taking into account the Spin-Off).
The Board shall not (i) withdraw or modify its approval or
recommendation of the Plan of Merger, the Merger or any of the Transactions,
(ii) approve, adopt or recommend or publicly propose to approve, adopt or
recommend an Acquisition Proposal, (iii) cause Besicorp to enter into any
agreement with respect to an Acquisition Proposal, or (iv) resolve to do any of
the foregoing unless the Company receives an unsolicited Acquisition Proposal in
accordance with the Plan of Merger and the Board determines reasonably and in
good faith, after due investigation (a) based upon the advice of its outside
financial advisor that a pending Acquisition Proposal is more favorable to
Besicorp's shareholders than the Merger and the Spin-Off, taken as a whole, (b)
such Acquisition Proposal is reasonably likely to be consummated, (c) there is a
substantial probability that the approval of the Merger and the Spin-Off will
not be obtained due to the pending Acquisition Proposal, and (d) based upon the
advice of outside counsel, that the failure of the Board to withdraw or modify
its approval or recommendation of the Plan of Merger or the Merger, or approve
or recommend such Acquisition Proposal would cause the Board to violate its
fiduciary duties to its shareholders.
INDEMNIFICATION. The Plan of Merger contemplates that prior to the
Effective Date, Besicorp will procure and pay for officers' and directors'
liability insurance (the "D&O Insurance") covering certain persons, including
present and former directors, officers, employees and agents of Besicorp and its
Subsidiaries (collectively, the "Covered Persons"), who at the time of the
execution of the Plan of Merger were covered by Besicorp's officers' and
directors' liability insurance or will be so covered on the Closing Date, with
respect to actions and omissions occurring on or prior to the Closing Date.
Additionally, the Plan of Merger provides that for the lesser of six years after
the Closing Date or the period the Surviving Corporation maintains its
existence, the provisions of the Certificate of Incorporation and By-Laws of the
Surviving Corporation shall provide indemnification to the Covered Persons on
terms, in a manner, and with respect to matters, which are no less favorable
than Besicorp's Certificate of Incorporation and By-Laws, as in effect on the
date of the execution of the Plan of Merger; provided, however, that
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the obligation of the Surviving Corporation to provide such indemnification is
limited to the D&O Insurance and the Surviving Corporation's rights under the
Escrow Agreement and that the provisions of the Certificate of Incorporation and
By-laws of the Surviving Corporation may be amended accordingly.
CONDITIONS TO THE MERGER
The obligations of each of Acquisition, Merger Sub and Besicorp to
consummate the Merger are subject to the satisfaction of certain conditions
prior to the Closing Date, including: (i) the adoption of the Plan of Merger by
the requisite vote of the shareholders of Besicorp; (ii) no governmental entity
or court shall have enacted any law or regulation or order which is then in
effect and has the effect of making the Merger or any of the Transactions
illegal; and (iii) the approval of the Plan of Merger, the Merger and to the
extent necessary the Transactions, by each governmental entity whose approval is
so required. The obligation of Besicorp to consummate the Merger is subject to
the satisfaction (or waiver by Besicorp) of certain additional conditions at or
prior to the Effective Date, including: (i) the accuracy of the representations
and warranties of Acquisition and Merger Sub when made and as of the Closing
Date; (ii) the performance by Acquisition and Merger Sub of all their
obligations required in the Plan of Merger to be performed by them on or prior
to the Closing Date; and (iii) immediately prior to the Merger, Merger Sub
being, and, assuming that the representations and warranties made by Besicorp
are true and correct immediately following the effectiveness of the Merger, the
Surviving Corporation being, solvent. The obligation of Acquisition and Merger
Sub to consummate the Merger is subject to the fulfillment (or waiver by such
parties) of certain additional conditions at or prior to the Closing Date,
including: (i) the accuracy of the representations and warranties of Besicorp
when made and as of the Closing Date, except to the extent reflected in the
disclosure schedule annexed to the Plan of Merger (the "Disclosure Schedule");
(ii) the performance by Besicorp of all obligations required by the Plan of
Merger to be performed by it on or prior to the Closing Date; (iii) the absence
of any changes since June 30, 1998, after taking into account the completion of
the Transactions other than the Merger, in the condition, assets, business,
results of operations or prospects of the Company and its Subsidiaries, taken as
a whole, which has had or would reasonably be likely to have a Material Adverse
Effect on Besicorp or any Remaining Subsidiary; (iv) Merger Sub being satisfied
that the Spin-Off and the Power Facilities Sales have been completed as provided
in the Plan of Merger, and neither the Surviving Corporation nor any of the
Remaining Subsidiaries has any liability as a result of the Spin-Off or Power
Facilities Sales; (v) Merger Sub shall have received the proceeds of the
Financing; (vi) Newco shall have executed the Indemnification Agreement and the
Escrow Agreement and Besicorp shall have deposited $6,000,000 with the Escrow
Agent; (vii) the Base Amount shall be no less than $105,275,000; (viii) Besicorp
shall have received all of the Consents (as defined in the Plan of Merger) and
obtained certain releases; (ix) neither Besicorp nor its Remaining Subsidiaries
have any Liabilities other than the Permitted Liabilities and the Liabilities
taken into account in determining the Adjustment Amount; and (x) the absence of
any suit or investigation by any governmental entity seeking to enjoin the
transactions contemplated by the Plan of Merger or seeking material
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damages on account of the consummation of the transactions contemplated thereby
or imposing any condition or restriction that would be commercially unreasonable
from a financial standpoint relative to the transactions contemplated by the
Plan of Merger.
TERMINATION
Right to Terminate
The Plan of Merger may be terminated and the Merger may be abandoned at
any time prior to the Effective Date, by the mutual consent of Buyer and
Besicorp.
In addition, the parties have agreed that the Plan of Merger may be
terminated and the Merger may be abandoned by action of either Buyer or Besicorp
if (a) the Merger shall not have been consummated by 11:59 P.M. on February 15,
1999 (provided that this right shall not be available to the party whose failure
to fulfill its obligations under the Plan of Merger shall have been the cause of
the failure to consummate the Merger) or (b) upon a vote at the Meeting,
Besicorp shareholders do not adopt the Plan of Merger.
The Plan of Merger may be terminated and the Merger may be abandoned at
any time prior to the Effective Date by Buyer, if: (a) there has been a material
breach of any material agreement on the part of Besicorp which has not been
cured or adequate assurance of cure given, within ten business days following
notice of such breach from Merger Sub or either of the Indemnification Agreement
or the Escrow Agreement shall not be a valid, legal and binding agreement or
enforceable against Newco; (b) there has been a breach of a representation or
warranty of Besicorp, the Damages from which Merger Sub reasonably determines
would cause the Base Amount to be less than $105,275,000; (c) the Board shall
have (i) withdrawn or modified its approval, adoption or recommendation of the
Plan of Merger, the Merger or any of the Transactions, (ii) approved, adopted or
recommended or publicly proposed to approve or recommend an Acquisition
Proposal, (iii) caused Besicorp to enter into any agreement with respect to an
Acquisition Proposal, or (iv) resolved to do any of the foregoing unless certain
conditions are met; (d) a tender offer or exchange offer for 15% or more of the
shares of Besicorp Common Stock is commenced, and the Board fails to recommend
against acceptance of such tender offer or exchange offer within the time period
required by Section 14e-2 of the Exchange Act or any person acquires by any
means 20% or more of the outstanding shares of Besicorp Common Stock; (e)
Besicorp shall have breached any of its covenants or agreements with respect to
Acquisition Proposals; (f) there shall be pending or threatened any proceeding
seeking material damages on account of the Plan of Merger or the consummation of
the Merger or any of the other Transactions which Merger Sub determines could
reasonably be expected to result in Besicorp incurring a material amount of
damages or expenses, after taking into account applicable insurance coverage; or
(g) the Base Amount is less than $105,275,000.
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In addition, the Plan of Merger may be terminated and the Merger may be
abandoned at any time prior to the Effective Date, by Besicorp, if: (a) there
has been a material breach of any agreement therein on the part of Merger Sub
which has not been cured or adequate assurance of cure given, within ten
business days following notice of such breach from Besicorp; (b) generally,
there has been a breach of a representation or warranty of Acquisition or Merger
Sub therein which could reasonably be expected to prevent Acquisition or Merger
Sub from fulfilling its obligations under the Plan of Merger; or (c) the Board
determines to enter into and enters into a definitive agreement providing for a
Superior Proposal and, among other things, Besicorp simultaneously pays to
Merger Sub $3,500,000 (the "Termination Payment") and out-of-pocket costs and
expenses reasonably incurred and due to third parties in connection with the
Plan of Merger and the Transactions (collectively, "Covered Expenses"), up to a
maximum of $600,000.
Remedies
Notwithstanding any termination right described under "--Right to
Terminate," in the event of the nonfulfillment of any condition to a party's
closing obligations, such party may elect to do one of the following: (a)
proceed to close despite the nonfulfillment of any closing condition without
waiving any claim for any breach and without waiving any right to proceed under
the Indemnification Agreement; (b) decline to close, terminate the Plan of
Merger as described under "--Right to Terminate" and thereafter seek damages to
the extent described under "--Damages"; or (c) seek specific performance of the
obligations of the other party.
Damages
If the Plan of Merger is terminated as described under "--Rights to
Terminate," no party will have any claim against the others, except as follows:
Generally, a party terminating the Plan of Merger will retain all of
such party's legal rights if the circumstances giving rise to such termination
were (i) caused by another party's willful failure to comply with a material
covenant set forth in the Plan of Merger or (ii) that a material representation
or warranty of such other party was materially false when made and that party
knew or should have reasonably known such representation or warranty was
materially false when made.
If (x) Besicorp terminates the Plan of Merger because the Board enters
into a definitive agreement providing for a Superior Proposal in accordance with
certain specified procedures or because the Board shall have breached its
agreements with respect to (i) the withdrawal or modification of its approval or
recommendation of the Plan of Merger, the Merger or any of the Transactions,
(ii) the approval or recommendation or public proposal to approve or recommend
an Acquisition Proposal, (iii) causing Besicorp to enter into any agreement
relating to an Acquisition Proposal, or (iv) resolving to do any of the
foregoing; or (y) Buyer terminates the Plan of Merger because (a) the Board
shall have (i) withdrawn or modified its approval or recommendation of the Plan
of Merger, the Merger or any of the Transactions, (ii) approved or
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recommended or publicly proposed to approve or recommend an Acquisition
Proposal, (iii) caused Besicorp to enter into any such agreement with respect to
an Acquisition Proposal, or (iv) resolved to do any of the foregoing unless
certain conditions are met, (b) a tender offer or exchange offer for 15% or more
of the shares of Besicorp Common Stock is commenced, and the Board fails to
recommend against acceptance of such tender offer or exchange offer within the
time period required by Section 14e-2 of the Exchange Act or any person acquires
by any means 20% or more of the outstanding shares of Besicorp Common Stock or
(c) the Company shall have breached any of its covenants or agreements with
respect to Acquisition Proposals, and Acquisition and Merger Sub are ready,
willing and able to execute definitive documentation to effect the Financing or
substantially similar financing arrangements, Besicorp will pay Merger Sub the
Termination Payment and reimburse Buyer for their Covered Expenses up to a
maximum of $600,000.
If the Plan of Merger is terminated because upon a vote at the Meeting,
Besicorp shareholders do not adopt the Plan of Merger, (x) Besicorp will pay
Merger Sub, Buyer's Covered Expenses up to $600,000 and (y) if Michael F. Zinn
or his direct or indirect transferees have failed to vote in person or by proxy
at least 1,600,000 shares in favor of the Merger and any other matter presented
to shareholders in connection with the Merger, Besicorp shall pay the
Termination Payment to Merger Sub . If the Plan of Merger is terminated (x)
because, upon a vote at the Meeting, Besicorp shareholders do not adopt the Plan
of Merger or (y) by Besicorp, or Acquisition and Merger Sub because the Merger
shall not have been consummated by 11:59 P.M. on February 15, 1999 (provided
that this right shall not be available to the party whose failure to fulfill its
obligations under the Plan of Merger shall have been the cause of the failure to
consummate the Merger) and Besicorp, on or before March 31, 1999 enters into a
written agreement to effect an Acquisition Proposal with, or an Acquisition
Proposal is made by, a party other than Acquisition, Merger Sub or any of their
subsidiaries, and the Acquisition Proposal is thereafter consummated, Besicorp
will pay to Merger Sub the Termination Payment plus the amount of the Covered
Expenses to the extent not paid under the immediately preceding sentence.
If the Plan of Merger is terminated by Buyer because (a) generally
either (i) there has been a material breach of any material agreement contained
therein (with certain exceptions) on the part of Besicorp which breach has not
been cured or adequate assurance of cure given, within ten business days
following notice of such breach from Merger Sub or (ii) either of the
Indemnification Agreement or the Escrow Agreement shall not be a valid, legal
and binding agreement or enforceable against Newco, (b) there has been a breach
of a representation or warranty of Besicorp therein, the Damages from which
Merger Sub reasonably determines would cause the Base Amount to be less than
$105,275,000, (c) there shall be pending or threatened any proceeding seeking
material damages on account of the consummation of any of the Transactions which
Merger Sub determines could reasonably be expected to result in Besicorp
incurring a material amount of damages or expenses, after taking into account
applicable insurance coverage, or (d) the Base Amount is less than $105,275,000,
Besicorp shall reimburse Acquisition and Merger Sub for their Covered Expenses
up to a maximum of $600,000.
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If Merger Sub and Acquisition terminate the Plan of Merger solely as a
result of their having not received the proceeds of the Financing, Buyer shall
reimburse Besicorp for its Covered Expenses up to $600,000.
INDEMNIFICATION AGREEMENT
The Indemnification Agreement between Acquisition, Merger Sub and Newco
will be entered into at the Closing; all terms capitalized in this section
without being defined shall have the meanings given to them in the Plan of
Merger. The Indemnification Agreement provides that Newco shall indemnify, save
and keep Acquisition, Merger Sub, the Surviving Corporation and the Remaining
Subsidiaries (the "Purchaser Indemnitees") harmless and 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 Plan of Merger or in any closing document
delivered in connection with the Plan of Merger; (b) any breach by Besicorp of,
or failure by Besicorp to comply with, any of its covenants or obligations under
the Plan of Merger or under the Indemnification Agreement; (c) the existence of
any Liability or other obligation of 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 other than
the Permitted Liabilities, including, without limitation, Liability on account
of Taxes payable by Besicorp or for which Besicorp is liable; (d) the failure of
Newco or any Subsidiary to pay and discharge in full when due any of their
respective Liabilities whenever or however arising or existing, including
liability on account of Taxes other than the 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 other than the Permitted Liabilities; (g) any violation of, or delinquency
with respect to, any order or arbitration award or statute, or regulation in
effect on or prior to the 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)); (h) any generation,
transportation, storage, treatment, disposal, release or threatened release of
any Hazardous Materials occurring on or prior to the Closing Date regardless of
when liability is asserted, at any facility of Besicorp (or any Subsidiary); (i)
certain discharges or releases to or from storm, ground or surface waters or
wetlands, and any air emissions or pollution; (j) certain exposure of and
resulting consequences to any persons, including, without limitation, employees
of Besicorp (or any Subsidiary or any agent of Besicorp or any Subsidiary), due
to any Hazardous Materials used at a facility or otherwise used by Besicorp (or
any Subsidiary); (k) certain violations or alleged violation of, or obligations
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imposed by, any environmental law or environmental permit; (l) certain matters
relating to employee pension benefit plans of Besicorp or its affiliates; (m)
any federal or state taxes 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; (n) litigation
against Besicorp and/or the Subsidiaries pending or threatened as of the Closing
Date; and (o) any claims, investigations, proceedings, actions or lawsuits
asserted or initiated before or after the Closing arising out of or in
connection with pre-closing occurrences involving Besicorp and/or the
Subsidiaries.
With certain exceptions, the Purchaser Indemnitees shall not be
entitled to indemnification (i) unless a notice of a claim has been delivered to
Newco prior to the fifth anniversary of the Closing Date; (ii) to the extent the
aggregate claims actually paid by Newco or any of its Subsidiaries to the
Purchaser Indemnitees thereunder exceeds the aggregate Merger Consideration;
(iii) for Damages to the extent such Damages were expressly included in the
Adjustment Amount pursuant to the Plan of Merger; (iv) with respect to
consequential damages relating to lost profits or punitive damages (other than
consequential damages or punitive damages paid or payable to, or claimed by
third parties); and (v) with respect to Damages arising from time spent by
Acquisition or its affiliates and their respective officers and employees, for
amounts in excess of their actual out-of-pocket costs.
The payment of any Damages to which the Purchaser Indemnitees are
entitled pursuant to the Indemnification Agreement shall first be satisfied from
funds held in the Escrow Account, pursuant to the terms of the Escrow Agreement
to the extent available, until the Escrow Account has been reduced to zero and
thereafter shall be satisfied by Newco directly.
ESCROW AGREEMENT
The Escrow Agreement between Buyer, Besicorp and Newco will be entered
into at the Closing; all terms capitalized in this section without being defined
shall have the meanings given to them in the Plan of Merger. The Plan of Merger
provides that Besicorp will deposit at Closing with the Escrow Agent an
aggregate of $6,000,000 (the "Escrow Funds") to be administered under the terms
of the Escrow Agreement. The Escrow Fund serves to fund claims for (A) indemnity
made by the Buyer pursuant to the Indemnification Agreement, including any
claims of Buyer with respect to certain litigation and other matters to be
prosecuted or defended by Newco (the "Newco Assumed Matters") arising from the
failure of Newco to diligently prosecute or defend such Newco Assumed Matters,
Buyer's out-of-pocket expenses (not to exceed $40,000 per year) incurred if it
is represented by counsel with respect to the Newco Assumed Matters ("Buyer
Monitoring Costs") and any payment of fees and expenses of the Paying Agent
pursuant to the Plan of Merger (all such claims, "Buyer Indemnity Claims"); (B)
certain claims for tax refunds made by Besicorp if the refunds are not received
prior to March 31, 1999 ("Tax Return Claims") and (C) costs and expenses
relating to (i) Newco Assumed Matters; (ii) litigation arising out of or
relating to any such Newco Assumed Matters; (iii) indemnification of claims
against
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Besicorp's directors and officers (prior to the Merger) for actions in their
official capacity preceding the date of the Merger; or (iv) in connection with
matters arising out of or relating to the Merger or the Spin-Off (collectively
"Litigation Costs").
The Escrow Agent is to disburse Escrow Funds upon request to the Buyer,
with respect to Buyer Indemnity Claims, Buyer Monitoring Costs or Tax Return
Claims, and to Newco, with respect to Litigation Costs, unless the other party
objects to such disbursement. Newco may not object to the Tax Return Claims. If
a party objects, the Escrow Agent is not to disburse such funds until it
receives (i) the joint written direction of Newco and Buyer, (ii) a written
instrument representing a final and non-appealable order with respect to the
disposition of such amount issued by an arbitrator or (iii) a certified copy of
a final and non-appealable judgment of a court of competent jurisdiction
directing the disbursement of such funds (collectively, the "Escrow Fund
Determination Procedure"). Notwithstanding the foregoing, Newco is not to
unreasonably withhold its consent to a request by Buyer for payment of Buyer
Indemnity Claims and Acquisition is not to unreasonably withhold consent for
payment of Litigation Costs.
All remaining proceeds of the Escrow Fund will be released to Newco at
any time following the fifth anniversary of the date of the Escrow Agreement
that all of the following conditions have occurred and notice has been provided
by Newco to the Escrow Agent: (a) no claims are then subject to the Escrow Fund
Determination Procedure; (b) in the reasonable judgment of Buyer, no future
Buyer Indemnity Claims are foreseeable; and (c) all Newco Assumed Matters have
been finally settled through either (A) a final, non-appealable judgment against
the Surviving Corporation and all Purchaser Indemnitees; or (B) a settlement or
other conclusion to the Newco Assumed Matter that (x) contains a release from
all liability in favor of the Surviving Corporation and Purchaser Indemnitees
without any further obligation by the Surviving Corporation or Purchaser
Indemnitees to make any payment or incur any other Liability or Obligation with
respect to such matter, (y) does not attribute by its terms liability to the
Surviving Corporation or any Purchaser Indemnitee and (z) if the scheduled
matter is litigation or a proceeding, includes as a term thereof a full
dismissal of the litigation or proceeding with prejudice. Newco and Buyer also
agree they will meet no less than annually for the purpose of examining the
amounts set forth in the Escrow Fund and the amounts of Buyer Indemnity Claims
and Litigation Costs expended from the Escrow, for the purpose of determining
whether the amount of the Escrow Fund is more than sufficient to secure Buyer
pursuant to the Indemnification Agreement.
The Escrow Agreement contains additional provisions including those
regarding investment of and taxation on the Escrow Fund, outlining the Escrow
Agent's duties and responsibilities, limiting the Escrow Agent's liability
except in the case of its bad faith, willful default or gross negligence,
permitting the Escrow Agent to resign, allowing the Escrow Agent to rely upon
notices it believes genuine and duly authorized without further verification and
limiting its responsibilities with respect to interest payable on the Escrow
Funds.
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<PAGE>
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
All representations, warranties and agreements set forth in the Plan of
Merger or in any document or certificate delivered pursuant thereto shall
survive the Merger for a period of five years following the Effective Date,
subject to the terms of the Indemnification Agreement.
EFFECT ON OPTIONS, WARRANTS AND RESTRICTED STOCK
Prior to the Effective Date, Besicorp will (a) cause each outstanding
option to purchase shares of Besicorp Common Stock (each, a "Stock Option")
granted under the Besicorp Group Inc. Amended and Restated 1993 Incentive Plan
(the "1993 Plan") or pursuant to any other Stock Option plan or agreement or any
restricted agreement entered into by Besicorp with any employee or director of
Besicorp or any of its affiliates, whether or not then vested or exercisable, to
become vested and exercisable, (b) cause each outstanding warrant (each, a
"Warrant") to purchase Besicorp Common Stock to become exercisable to the extent
not currently exercisable, and (c) take such action as is necessary to cause
each holder of a Stock Option or Warrant to exercise such Stock Option or
Warrant in full including paying in cash the exercise price (it being understood
that neither Besicorp nor any Remaining Subsidiary will directly or indirectly
provide or guarantee any financing or loan arrangements) so that there are not
outstanding Stock Options or Warrants at the Effective Date.
FEES AND EXPENSES
The Plan of Merger provides generally that whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Plan of
Merger and the transactions contemplated thereby shall be paid by the party
incurring such expenses, except as described under "Termination."
BUSINESS OF THE COMPANY
Background
Historically, Besicorp has been engaged in two general lines of
business - the development of and participation in the operation and management
of independent domestic and foreign power plant projects (the "Project Segment")
and the development, marketing and manufacture of solar energy products (the
"Product Segment"). The Project Segment generally has focused on the
development, with the assistance of partners, of power plants that generate
electric power. The Product Segment had historically focused on solar energy
products and currently focuses on the development, manufacture and installation
of photovoltaic devices and systems (i.e., products that convert light directly
into electric power).
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<PAGE>
Project Segment - Recent Developments
The Company has engaged in the development of independent power plants.
The Company has developed projects jointly with partners and held its ownership
interests, generally in the form of partnership interests, through
special-purpose entities. Financing for these entities has been secured solely
by their respective assets. Through September 30, 1998, the Company had an
interest in a development initiative to build a coal fired power plant in India
and, as a result of development projects that had been completed, five completed
gas-fired, operational cogeneration plants and a sixth gas-fired cogeneration
plant that is not operational and which the Company no longer has any interest
as a result of a bankruptcy settlement. The domestic power plants developed by
the Company are "qualifying facilities" within the meaning of the federal Public
Utilities Regulatory Policies Act of 1978.
Revenues and income from the Project Segment have historically been
generated through development fees and the operations and management of these
power plants, including the sale of electrical power and capacity by these
plants to Niagara Mohawk pursuant to the Power Purchase Agreements and the
Partnership Interests. During the fiscal years ended March 31, 1998 and 1997, in
the aggregate, all of the Company's net income and at least 70% of its total
revenues were derived from the Power Purchase Agreements and the operations and
management of five power plants which supplied power and capacity to Niagara
Mohawk pursuant to the Power Purchase Agreements.
Pursuant to the terms of the MRA, the Power Purchase Agreements have
been terminated which provided a total of 323 megawatts of capacity and energy
to Niagara Mohawk. As a result of the MRA and related transactions, and the
current operations of the project partnerships, the Company has received through
September 30, 1998 (i) 4,615,770 shares of Niagara Mohawk Common Stock and (ii)
net cash of approximately $59 million, of which approximately $8 million is
reserved at the partnership level primarily in regard to ongoing obligations of
the projects. The closing price of the Niagara Mohawk Common Stock on June 30,
1998 was $14.94 per share for an aggregate value of approximately $69 million.
During the second quarter of Fiscal 1999, the Company recorded income, which is
non-recurring, of approximately $133.2 million, predominantly as a result of the
MRA and, to a minimal extent, the second quarter operating results of the
Partnerships. This amount gives effect to a write-down taken to reflect the
impaired value of two Power Plants owned by Partnerships due to the termination
of the Power Purchase Agreements. With respect to the Partnerships holding
leasehold interests in the remaining three Power Plants which supplied power and
capacity to Niagara Mohawk pursuant to the Power Purchase Agreements, this
amount reflects costs associated with the termination of those long-term leases
reduced by the expected credit to be received at disposition of the facility
based on its net realized value.
As a result of the MRA, Niagara Mohawk ceased to purchase the
electrical capacity generated by the Power Plants. Consequently, the
Partnerships are in the process of selling or
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attempting to sell all five of these Power Plants. If all five Power Plants are
sold, Besicorp would not currently be involved, directly or indirectly, in the
operation and management of any operating power plants.
The power plants are described below.
<TABLE>
<CAPTION>
<S>
<C> <C>
Company's Ownership
Name of Facility or Project Location Interest Status
__________________________ _________ ___________________ ______
Carthage Cogeneration Facility Carthage, NY 50% (1)
(58 megawatts)
South Glens Falls Cogeneration South Glen Falls, 50% (1)
Facility NY
(58 megawatts)
Natural Dam Cogeneration Gouverneur, 50% (1)
Facility NY
(49 megawatts)
Syracuse Cogeneration Facility Solvay, NY 35.715% (1)
(79 megawatts)
Beaver Falls Cogeneration Beaver Falls, NY 50.2% (1)
Facility
(79 megawatts)
Allegany Cogeneration Facility Rossberg, NY 50% (2)
(55 megawatts)
Krishnapatnam Project (3) India (3) Develop-
ment Stage
(3)
(1) The Partnerships are in the process of selling such plants. The sale or
other disposition of the Power Plants is a condition to the closing of
the Merger.
</TABLE>
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<PAGE>
(2) The Partnership that owns this plant filed for bankruptcy in November
1995. As part of a settlement of litigation involving this plant,
Besicorp has relinquished all its interests therein
(3) The partnership developing the project proposes building a coal burning
power plant near Krishnapatnam, which is located 120 miles north of
Chennae (Madras) on India's eastern cost. It is anticipated that
Besicorp's ownership interest in this project (currently 50%) would be
reduced substantially as a result of the participation of other equity
investors in this project. The ability to obtain financing for this
project is uncertain inasmuch as, among other factors, the May 1998
nuclear tests conducted by India resulted in the imposition of economic
sanctions by the United States. It is anticipated that Besicorp's
rights with respect to this project will be contributed to Newco.
Further information will be contained in the Information Statement to
be distributed to Besicorp's shareholders in connection with the
Spin-Off.
Photovoltaic Activities
Besicorp develops, designs, manufactures and distributes photovoltaic
products and systems. These products and systems include large, shelter-based
photovoltaic generator hybrid power stations, small, modular stand-alone
photovoltaic systems and solar power supply products for the wireless
electronics and telecommunications industries. Besicorp markets and sells its
photovoltaic products to original equipment manufacturers and to end-users
through dealers and distributors nationwide. Information regarding the Product
Segment will be contained in the Information Statement to be distributed to
Besicorp's shareholders in connection with the Spin- Off.
Employees
As of September 30, 1998, Besicorp had 73 employees of which 70 were
full time employees. None of these employees are represented by a union. In the
opinion of management, its relationship with its employees is good. It is
anticipated that most of such employees will be employed by Newco following the
Spin-Off.
50
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Properties
Location of Property Nature of Ownership Use of Property
Kingston, New York Owned, subject to mortgages Corporate Headquarters
(Includes land and the 8,000 in aggregate principal amount
square foot building thereon) of $584,209 at September 30,
1998 (1)
Ellenville, New York Owned, subject to mortgage Previously used by a
(Includes land and the 52,000 in principal amount of subsidiary of the Company.
square building thereon) $45,380 at September 30,
1998 (1)
Stelle, Illinois Lease, expiring April 1999, Product Segment uses as
(Lease of 2,000 square feet) for $575 per month sales office.
Kingston, New York Lease for $8,500 per month, Product Segment utilizes
(Lease of 17,000 square feet) expiring March 1999, subject 2,000 square feet for
to automatic renewal for administrative purposes and
successive six month periods balance is used for
warehousing, manufacturing
and assembly
Ultser, New York Owned Investment Purposes
(approximately 28 acres of
unimproved property)
</TABLE>
(1) It is anticipated that these obligations will be satisfied prior to the
consummation of the Merger.
The Corporate Headquarters will not be distributed to Newco but will be
retained by Besicorp and therefore belong to the Surviving Corporation following
the Merger. However, the consummation of the Merger is subject to Merger Sub's
satisfaction with the results of their environmental investigation of the
Corporate Headquarters and, as part of the Spin-Off (which also is a condition
to the consummation of the Merger), Newco is required to lease the Corporate
Headquarters from the Surviving Corporation pursuant to agreements to be entered
into as
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<PAGE>
contemplated by the Plan of Merger. See "Spin-Off." The remaining properties
will be transferred to Newco pursuant to the Contribution Agreement.
Legal Proceedings
In June 1997, Besicorp and Mr. Michael Zinn (then and currently the
Chairman of the Board, Chief Executive Officer and President of Besicorp), each
entered a guilty plea, in the United States District Court for the Southern
District of New York, to one count of causing a false statement to be made to
the Federal Election Commission and one count of filing a false tax return, all
in connection with contributions to the 1992 election campaign of Congressman
Maurice Hinchey (the "Proceeding"). As a result of such pleas, Besicorp was
fined $36,400, and Mr. Zinn was fined $36,673 and sentenced to a six-month term
of incarceration (which commenced November 1997 and has been completed), and a
two-year term of supervised release (which commenced in May 1998). He resigned
as Chairman of the Board, Chief Executive Officer and President of the Company
in November 1997 and was reappointed to such positions in May 1998.
In August 1997, John Bansbach commenced a shareholder derivative action
in the New York Supreme Court, Ulster County, entitled John Bansbach v. Michael
F. Zinn, Michael J. Daley, Gerald A. Habib, Harold Harris, Richard E. Rosen, and
Besicorp Group Inc., Index No. 97-2573 (the "Bansbach Litigation"). Besicorp is
named as a nominal defendant in this matter and the other named defendants were
officers and/or directors of Besicorp at the time of the alleged acts or
omissions for which relief is sought or became officers and/or directors
thereafter. Plaintiff sought to hold such persons liable to Besicorp for: (a)
all sums advanced to or on behalf of Mr. Zinn in connection with his defense of
the Proceeding; (b) for all sums advanced to or on behalf of Mr. Daley, who was
subpoenaed for information in connection with this matter; (c) for all legal
expenses, costs and fines incurred by Besicorp itself in connection with the
Proceedings; (d) for all harm to Besicorp's reputation and goodwill resulting
from the Proceedings; (e) for punitive damages; and (f) for plaintiff's
attorneys' fees, costs and expenses. The Court dismissed the action, stating
that the plaintiff had failed to make the requisite pre-suit demand upon the
Board and had failed to demonstrate that such a demand would be futile. The
plaintiff has appealed this decision.
On March 29, 1993 James Lichtenberg commenced a shareholder's
derivative action now pending in New York Supreme Court, Ulster County, entitled
Lichtenberg v. Michael F. Zinn, Steven I. Eisenberg, and Martin E. Enowitz, et
al. (the "Lichtenberg Litigation"). The Company is named as nominal defendant in
this shareholder's derivative action and the other defendants were Directors and
officers at the time the action was filed. The complaint alleges that the
Directors breached their fiduciary duties to the Company by, among other things,
the issuance of stock to themselves in lieu of cash compensation, allegedly for
inadequate consideration, and by the accounting treatment given to the Company's
interest in various partnerships which own and operate cogeneration facilities,
which allegedly depressed the price of the Company's stock. The
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<PAGE>
plaintiff is seeking an award of damages to the Company, including punitive
damages and interest, an accounting and the return of assets to the Company, the
appointment of independent members to the Board, the cancellation of shares
allegedly improperly granted, and the award to the plaintiff of costs and
expenses of the lawsuit including legal fees. The Court dismissed the action
based on the recommendation of the special litigation committee (comprised of
independent outside directors of the Company) that concluded that the
continuation of such litigation was not in the best interests of the Company.
The plaintiff has appealed this decision.
The consummation of the Merger may adversely affect the Bansbach
Litigation and Lichtenberg Litigation. See "Factors to be Considered - Interests
of Certain Persons in the Merger."
Besicorp is a party to a number of additional legal proceedings, the
details with respect to which, to the extent such proceedings are material to
Besicorp, may be found in the Annual Report and the Quarterly Report. Besicorp's
liabilities and rights with respect to the legal proceedings to which it is a
party are being assumed by and assigned to Newco pursuant to the Contribution
Agreement (as defined). See "Plan of Merger - Escrow Agreement" and "--
Indemnification Agreement."
Security Ownership of Certain Beneficial Owners and Management
The following table shows the shares of Besicorp Common Stock owned as
of November 30, 1998 by each current director, the five persons currently
serving as executive officers and by all present directors and executive
officers as a group. Except as otherwise provided in the footnotes to the table,
the beneficial owners have sole voting and investment power as to all
securities.
53
<PAGE>
<TABLE>
<CAPTION>
<S>
<C>
Number of Shares
Name of of Common Stock Percent of Common Stock
Beneficial Owner (1) Beneficially Owned (1)(2) Beneficially Owned (1)(2)
Michael F. Zinn 1,699,236 (3) 56.3% (3)
Gerald A. Habib 7,500 (4) *
Richard E. Rosen 7,500 (4) *
Michael J. Daley 16,755 (5) *
Joseph P. Novarro 2,200 (8) *
Melanie Norden 5,000 (6) *
James Curtin 0 (7) *
Frederic Zinn 0 (7) *
Current Directors and 1,738,191 (3), (4), (5), (6) 57.2% (3), (4), (5), (6), (8)
executive officers as
a group (8 persons)
* 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. The address for each of the
individuals identified above is:
1151 Flatbush Road, Kingston, New York 12401.
(2) Assumes exercise of all options and warrants exercisable within 60 days
of the date hereof. Certain of these options and warrants would not be
so exercisable if the Adjustment had not occurred. See "Factors to be
Considered -- Interests of Certain Persons in the Merger."
(3) Includes 45,000 shares that Mr. Zinn has the right to acquire pursuant
to Rights which are presently exercisable, 77,456 shares held in the
name of his immediate family and 2,000 shares that a member of Mr.
Zinn's immediate family has the right to acquire pursuant to options
which are presently exercisable. Mr. Zinn is the Chairman of the Board,
President and Chief Executive Officer of Besicorp.
(4) Includes 5,000 shares that Messrs. Habib and Rosen have the right to
acquire pursuant to warrants which are presently exercisable. Such
persons are directors of Besicorp.
(5) Includes 3,000 shares that Mr. Daley has the right to acquire upon
exercise of options that are currently exercisable. Mr. Daley is the
Executive Vice President, Chief Financial Officer and a director of
Besicorp.
54
<PAGE>
(6) Represents 2,500 shares that Ms. Norden has the right to acquire
pursuant to warrants which are presently exercisable and 2,500 shares
that Ms. Norden has the right to acquire pursuant to options which are
currently exercisable. She is a director of Besicorp.
(7) Messrs. J. Curtin and F. Zinn are Vice President and Controller and
Senior Vice President and General Counsel, respectively, of Besicorp.
(8) Includes 2,000 shares that Mr. Novarro has the right to acquire
pursuant to options which are currently exercisable. He is Vice
President - Project Development of the Company.
MARKET INFORMATION REGARDING BESICORP COMMON STOCK
The Company's Common Stock has been listed since 1993 on the American
Stock Exchange Emerging Company Marketplace ("AMEX ECM") under the symbol
BGI.EC.
Set forth below are the high and low sales prices as reported on the
AMEX ECM for the period indicated.
Fiscal Year Ended March 31,
High Low
---------- ----------
1997 First Quarter $ 16 $ 11-3/4
Second Quarter 14-3/4 10
Third Quarter 15-1/8 11-1/4
Fourth Quarter 20-7/8 12-1/4
1998 First Quarter $ 21-1/2 $ 15-1/8
Second Quarter 40 19-7/8
Third Quarter 36-15/16 30-3/4
Fourth Quarter 35-1/2 23-5/8
1999 First Quarter $ 39-1/2 $ 26-1/16
Second Quarter 40 29-3/4
Third Quarter 36-1/4 29-7/8
(through November
20, 1998)
On November 20, 1998, the day prior to the date of public announcement
of the Board's adoption of the Plan of Merger, the last reported sales price of
the Besicorp Common Stock was
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<PAGE>
$32-7/8. As of December ___, 1998, the last reported sales price of the Besicorp
Common Stock was $______ as reported on AMEX ECM.
There were approximately 1,730 shareholders of record of Besicorp
Common Stock as of the Record Date. The Company has never paid any cash
dividends on the Besicorp Common Stock.
THE SPIN-OFF
Background
Because Acquisition does not wish to (i) acquire Besicorp's assets
pertaining to, among other things, the photovoltaic and independent power plant
development businesses or (ii) assume substantially all of Besicorp's
liabilities, Besicorp and Acquisition determined to effect the Spin-Off. The
Contribution (as defined below) followed by the Spin-Off will separate from
Besicorp all of the businesses and assets that Acquisition does not wish to
acquire and all of the liabilities that Acquisition does not want to assume and
will enable Acquisition to acquire only the assets it desires to acquire and
will place all of Besicorp's other businesses in a separate publicly held
company, owned by the holders of Besicorp Common Stock as of the record date for
the Spin-Off (the "Spin-Off Record Date").
Although the Spin-Off will not be effected unless the Merger is adopted
by Besicorp's shareholders and all other conditions precedent have been
satisfied or waived, the Spin-Off is separate from the Merger, and the shares of
Newco Common Stock to be received by holders of Besicorp Common Stock in the
Spin-Off do not constitute a part of the Merger Consideration.
The Contribution
Prior to the Spin-Off, Besicorp will transfer or cause to be
transferred to Newco or its subsidiaries all of Besicorp's assets pertaining to
the photovoltaic and independent power plant development businesses and Besicorp
(and as a result of the Merger, the Surviving Corporation) shall retain the
Remaining Subsidiaries, all of Besicorp's rights with respect to certain
specified claims and awards, the Corporate Headquarters and the Company's cash
and securities (including the remaining proceeds of the MRA and Power Plant
sales) (the "Retained Assets") and the Excluded Liabilities, the Specified
Current Liabilities and certain specified intercompany Liabilities of Besicorp
to a Remaining Subsidiary (the "Permitted Liabilities"). At or prior to the
time of the Spin-Off, Newco will assume essentially all of the liabilities of
Besicorp and its subsidiaries other than the Permitted Liabilities
(collectively, the "Assumed Liabilities") and be assigned all of its assets
other than the Retained Assets. The transfer of these assets and the assumption
of these liabilities are referred to herein as the "Contribution." To effect
the Contribution, Besicorp and Newco will
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<PAGE>
enter into a contribution agreement (the "Contribution Agreement") whereby: (1)
Besicorp will transfer and Newco will assume all of the assets, intellectual
property, including patents, personnel, employee benefit plans and Liabilities
of Besicorp (other than the Retained Assets and Permitted Liabilities) and the
Remaining Subsidiaries; (2) Besicorp will transfer to Newco all of the
outstanding capital stock of the Distributed Subsidiaries; (3) the Remaining
Subsidiaries will withdraw as general or limited partners of the Partnerships or
assign all of their general and limited partnership interests to the Distributed
Subsidiaries; and (4) Besicorp will lease to Newco the Corporate Headquarters.
If, after the time of the Spin-Off, either Newco or Besicorp holds
assets which by the terms of the Contribution Agreement or the Plan of Merger
were intended to be assigned and transferred to, or retained by, the other
party, such party will promptly assign and transfer or cause to be assigned and
transferred such assets to the other party.
The Spin-Off
After the completion of the Contribution, and assuming the other
conditions to the consummation of the Merger have been or will be waived or
satisfied the Spin-Off will be effected by the declaration of a distribution to
each holder of record of Besicorp Common Stock as of the Spin-Off Record Date of
one share of Newco Common Stock for every 25 shares of Besicorp Common Stock
held by such holder on such date. The Spin-Off Record Date is expected to be the
same day as the Effective Date. In lieu of fractional shares, cash will be
distributed. The Newco Common Stock will be deemed to be issued to such
shareholders as of the Spin-Off Record Date. Certificates representing shares of
Newco Common Stock will be distributed contemporaneously with the Merger
Consideration. Therefore, holders of Besicorp Common Stock will generally not
receive certificates for shares of Newco Common Stock until they deliver their
certificates evidencing their Besicorp Common Stock. As a result of the Spin-
Off, the shareholders of record of Besicorp at the close of business on the
Spin-Off Record Date will own all of the outstanding shares of Newco Common
Stock.
Conditions to the Spin-Off
Besicorp will not effect the Spin-Off unless Besicorp's shareholders
adopt the Plan of Merger and all other conditions to the closing of the Merger
have been waived or satisfied.
INFORMATION REGARDING ACQUISITION AND MERGER SUB
BGI Acquisition LLC is a Wyoming limited liability company. BGI
Acquisition Corp. is a New York corporation, wholly owned by Acquisition and
recently organized in connection with the Merger. Merger Sub and Acquisition
have not carried on any activities, other than in connection with the Merger.
The principal offices of the manager of Acquisition and the principal offices of
Merger Sub are located at 950 Third Avenue, New York, New York 10022, (212) 688-
2700. Acquisition is wholly owed by Lion Gate, LLC, a limited liability company
organized under the laws of the British Virgin Islands, with administrative
offices located at P.O. Box 158, BNP House, Anley Street, St. Helier, Jersey JE4
8RB. Lion Gate, LLC is significantly engaged in the business of trading and
investments. The sole member of Lion Gate, LLC is Mr. Thamer Bin Saeed
Al-Shanfari, a citizen of the Sultanate of Oman. His postal address is P.O. Box
18, Ruwi, Post Code 112, Oman.
Until immediately prior to the time Acquisition and Merger Sub will
participate in the Merger, it is not anticipated that such entities will have
any significant assets or liabilities other than those incident to their
formation and capitalization and the transactions contemplated by the Merger. As
of the Record Date, neither Acquisition, Merger Sub nor any of their affiliates
owned any shares of Besicorp Common Stock. Prior to the Closing, and subject to
the conditions set forth in the Plan of Merger and other customary conditions,
Acquisition will be funded by debt and/or equity from the Lion Gate LLC and/or
committed lenders in the entire amount of the Merger Consideration. Such amount
will then be contributed by the Acquisition to Merger Sub as an equity capital
contribution immediately prior to the Closing.
OTHER MATTERS
As of the time of preparation of this Proxy Statement, the Board of
Directors knows of no matters that will be acted on at the Special Meeting other
than the adoption of the Plan of Merger. If any other matters are presented for
action at the Special Meeting or at any adjournment or postponement thereof, it
is intended that the proxies will be voted with respect thereto in accordance
with the best judgment and in the discretion of the persons named as proxies in
the accompanying proxy card.
ANNUAL MEETING OF SHAREHOLDERS
If the shareholders adopt the Plan of Merger, and if all other
conditions to the Merger are satisfied or waived, it is expected that the Merger
will be consummated on or about __________, 1999. The Company does not plan to
hold an annual meeting of shareholders following the Special Meeting unless the
Merger is not consummated. If the Merger is not consummated, shareholder
proposals received by the Secretary of the Company a reasonable time before
Besicorp begins to print and mail its proxy materials will be considered for
inclusion in the proxy materials for the Company's next Annual Meeting of
Shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
Besicorp's independent public accountants for the fiscal year ended
March 31, 1998 and for the current fiscal year are Citrin Cooperman & Company,
LLP. It is anticipated that
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<PAGE>
representatives of such firm will be present at the Special Meeting and that
they will be available to respond to questions from shareholders.
INCORPORATION BY REFERENCE
The following documents filed with the SEC pursuant to the Exchange Act
are incorporated by reference in this Proxy Statement: (a) Besicorp's Annual
Report on Form 10- KSB for the fiscal year ended March 31, 1998; (b) Besicorp's
Amendment to its Annual Report on Form 10-KSB/A for the fiscal year ended March
31, 1998; (c) Besicorp's Quarterly Report on Form 10-Q for the period ended June
30, 1998; (d) Besicorp's Amendment to its Quarterly Report on Form 10-Q/A for
the period ended June 30, 1998; (e) Besicorp's Quarterly Report on Form 10-Q for
the period ended September 30, 1998; (f) Besicorp's Current Report on Form 8-K
filed on April 22, 1998; (g) Besicorp's Current Report on Form 8-K filed on May
11, 1998; (h) Besicorp's Current Report on Form 8-K filed on May 22, 1998; and
(i) Besicorp's Current Report on Form 8-K filed on July 9, 1998.
All documents subsequently filed by Besicorp with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Proxy Statement and prior to the date of the Special Meeting will be deemed
incorporated by reference into this Proxy Statement and to be a part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement.
Besicorp hereby undertakes to provide without charge to each person to
whom a copy of this Proxy Statement has been delivered, upon the written or oral
request of such person to Besicorp Group Inc., 1151 Flatbush Road, Kingston, New
York 12401 (telephone 914-336-7700, ext. 104), Attention: Ms. Susan Whitaker, a
copy of any or all of the documents referred to above (other than exhibits to
such documents) which have been incorporated by reference in this Proxy
Statement.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED NOVEMBER 23, 1998
BY AND AMONG
BESICORP GROUP INC.
BGI ACQUISITION CORP.
AND
BGI ACQUISITION LLC
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<TABLE>
<CAPTION>
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Page
TABLE OF CONTENTS
Page
<C>
ARTICLE I
THE MERGER...............................................................................................1
1.1 The Merger...............................................................................1
1.2 Consummation of the Merger...............................................................1
1.3 Effects of the Merger....................................................................2
1.4 Certificate of Incorporation; Bylaws.....................................................2
1.5 Directors and Officers...................................................................2
1.6 Time and Place of Closing................................................................2
1.7 Further Assurances.......................................................................2
ARTICLE II
CONVERSION AND EXCHANGE OF SHARES........................................................................2
2.1 Conversion of Shares.....................................................................2
2.2 The Additional Amount....................................................................3
2.3 Exchange Procedures......................................................................4
2.4 Adjustment of Merger Consideration.......................................................6
2.5 Options, Warrants and Restricted Shares..................................................6
2.6 Escrow Agreement.........................................................................6
ARTICLE III
PRECLOSING TRANSACTIONS..................................................................................7
3.1 General..................................................................................7
3.2 The Distribution.........................................................................7
3.3 The Power Facility Sales.................................................................8
3.4 Further Assurances.......................................................................8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES...........................................................................8
4.1 General Statement........................................................................9
4.2 Representations and Warranties of the Company............................................9
4.2.1 Organization and Authority....................................................9
4.2.2 Authority Relative to this Agreement and Related Matters......................9
4.2.3 Required Filings.............................................................10
4.2.4 No Conflicts.................................................................10
4.2.5 Capitalization...............................................................10
4.2.6 Subsidiaries.................................................................11
4.2.7 SEC Documents................................................................11
4.2.8 Financial Statements.........................................................11
4.2.9 Liabilities..................................................................12
4.2.10 Absence of Changes or Events.................................................12
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Page
4.2.11 Status of Distribution.......................................................13
4.2.12 Ownership of Properties......................................................13
4.2.13 Tax Matters Definitions......................................................13
4.2.14 Returns......................................................................14
4.2.15 Tax Liabilities..............................................................14
4.2.16 Issues with Taxing Authorities...............................................14
4.2.17 Miscellaneous Tax Matters....................................................14
4.2.18 Permits......................................................................14
4.2.19 Contracts....................................................................15
4.2.20 Partnership Contracts........................................................16
4.2.21 ERISA Matters................................................................16
4.2.22 Labor Relations..............................................................17
4.2.23 Absence of Litigation........................................................17
4.2.24 Injunctions; Judgments.......................................................17
4.2.25 Compliance with Law..........................................................18
4.2.26 Environmental Matters........................................................18
4.2.27 Owned Real Estate............................................................18
4.2.28 Leased Premises..............................................................19
4.2.29 Intellectual Property........................................................19
4.2.30 Brokers......................................................................19
4.2.31 Fairness Opinion.............................................................19
4.2.32 Form 10 Registration, Proxy Statement and Information Statement..............19
4.2.33 Full Disclosure..............................................................20
4.3 Representations and Warranties of Parent and Purchaser..................................20
4.3.1 Organization and Authority...................................................20
4.3.2 Authority Relative to this Agreement.........................................20
4.3.3 Required Filings.............................................................20
4.3.4 No Conflicts.................................................................20
4.3.5 Capitalization...............................................................21
4.3.6 Investment Intent............................................................21
4.3.7 Financing....................................................................21
4.3.8 Proxy Statement..............................................................21
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER..................................................................21
5.1 Obligations of Each of the Parties......................................................21
5.2 Access..................................................................................22
5.3 The Company's Obligations...............................................................22
5.4 Proxy Statement; Other Regulatory Matters...............................................24
5.5 Acquisition Proposals...................................................................25
5.6 Board Action............................................................................26
5.7 Indemnification and Insurance...........................................................27
5.8 Surviving Corporation...................................................................27
5.9 Parent's Financing......................................................................27
5.10 Liabilities.............................................................................27
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5.11 Other Company Covenants.................................................................28
5.12 Parent Covenant.........................................................................28
ARTICLE VI
CONDITIONS TO CLOSING; CLOSING DELIVERIES; BASE AMOUNT..................................................28
6.1 Conditions to Each Party's Obligations..................................................28
6.2 Conditions to the Company's Obligations.................................................28
6.3 Conditions to Parent's and Purchaser's Obligations......................................29
6.4 Closing Deliveries......................................................................30
ARTICLE VII
TERMINATION/EFFECT OF TERMINATION.......................................................................31
7.1 Right to Terminate......................................................................31
7.2 Certain Effects of Termination..........................................................32
7.3 Remedies................................................................................33
7.4 Right to Damages; Expense Reimbursement.................................................33
ARTICLE VIII
MISCELLANEOUS...........................................................................................35
8.1 Survival of Representations, Warranties and Agreements..................................35
8.2 Amendment...............................................................................35
8.3 Publicity...............................................................................35
8.4 Notices.................................................................................35
8.5 Expenses; Transfer Taxes................................................................36
8.6 Entire Agreement........................................................................36
8.7 Non-Waiver..............................................................................36
8.8 Counterparts............................................................................37
8.9 Severability............................................................................37
8.10 Applicable Law..........................................................................37
8.11 Binding Effect; Benefit.................................................................37
8.12 Assignability...........................................................................37
8.13 Governmental Reporting..................................................................37
8.14 Defined Terms...........................................................................37
8.15 Headings................................................................................39
8.16 Interpretation..........................................................................39
Schedule 3.2.1 - Lease Terms
Schedule 3.2.2 - Schedule of Retained Assets and Permitted Liabilities
Exhibit A - Form of Indemnification Agreement
Exhibit B - Form of Escrow Agreement
Exhibit C - Form of Legal Opinion of Purchaser's Counsel
Exhibit D - Form of Legal Opinion of Company's Counsel
</TABLE>
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This AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into
this 23 day of November, 1998, by and among BGI Acquisition LLC, a Wyoming
limited liability company ("Parent"), BGI Acquisition Corp., a New York
corporation ("Purchaser"), and Besicorp Group Inc., a New York corporation
formed under the name Bio-Energy Systems Inc. (the "Company").
RECITALS:
A. The respective boards of directors of Purchaser and the Company and
the board of managers of Parent have each adopted a plan of merger as set forth
in this Agreement pursuant to which Purchaser will merge with and into the
Company on the terms and subject to the conditions set forth in this Agreement
(the "Merger") and the New York Business Corporation Law (the "NYBCL").
B. It is a condition to the consummation of the Merger by Purchaser
that, prior to the Merger, the Company distribute to its shareholders all of the
outstanding capital stock of Besicorp Ltd., a New York corporation ("BL") to
which the Company shall have transferred certain of its assets and liabilities,
and subsidiaries, as described herein.
C. Parent, Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
D. It is a condition to the willingness of Parent and Purchaser to
enter into this Agreement, and to Parent and Purchaser obligations hereunder
that BL enter into the Indemnification Agreement and the Escrow Agreement and
that the Escrow Agreement be funded as herein provided.
E. Capitalized terms used in this Agreement have the meaning identified
in Section 8.14 of this Agreement.
A G R E E M E N T S
Therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. On the terms and subject to the conditions set forth in
this Agreement, at the Effective Time (as defined herein, and a cross-reference
to defined terms is set forth at Section 8.14 to this Agreement), in accordance
with this Agreement and the NYBCL, Purchaser shall merge with and into the
Company, the separate existence of Purchaser shall cease and the Company shall
continue as the surviving corporation. The Company, in its capacity as the
corporation surviving the Merger, is sometimes referred to herein as the
"Surviving Corporation," and Purchaser and the Company are sometimes referred to
collectively herein as the "Constituent Corporations."
1.2 Consummation of the Merger. In order to effectuate the Merger, on
the Closing Date (as herein defined), the parties hereto will cause a
certificate of merger (the "Certificate of Merger") to be filed with the
Secretary of State of the State of New York and such counties within the state
of New York as required by Section 904 of the NYBCL, in such form as required
by, and executed in accordance with the NYBCL.
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The Merger shall be effective as of the time of filing of the Certificate
of Merger or if later, the time specified in the Certificate of Merger (the
"Effective Time") in accordance with Section 906 of the NYBCL.
1.3 Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects provided in this Agreement and as set forth in Section
906 of the NYBCL.
1.4 Certificate of Incorporation; Bylaws. At and after the Effective
Time, the Certificate of Incorporation and By-Laws of the Company, as in effect
immediately prior to the Effective Time, shall be adopted as the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and shall thereafter
continue in effect until amended as provided therein and in accordance with the
NYBCL.
1.5 Directors and Officers. At and after the Effective Time, the
directors and officers of Purchaser holding office immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation,
until their respective successors shall have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-Laws.
1.6 Time and Place of Closing. Subject to the provisions of Article VI
and Section 7.1, the transactions contemplated by this Agreement shall be
consummated (the "Closing") at 10:00 a.m., prevailing business time, at the
offices of Robinson Brog Leinwand Greene Genovese & Gluck P.C., 1345 Avenue of
the Americas, New York, NY on the day which is three (3) business days after the
first date on which each of the conditions to Closing set forth in Article VI
hereof shall have been satisfied or waived (and continue to be satisfied or
waived), or on such other date, or at such other place, as shall be agreed upon
by the parties hereto, subject to Section 7.1.2(a). The date on which the
Closing shall occur in accordance with the preceding sentence is referred to in
this Agreement as the "Closing Date."
1.7 Further Assurances. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (i) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title and interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Company or Purchaser, or (ii) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either the Company or Purchaser, all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of such
corporations, all such other acts and things as may be necessary, desirable or
proper to vest, perfect or confirm the Surviving Corporation's right, title and
interest in, to and under any of the rights, privileges, powers, franchises,
properties or assets of such corporations and otherwise to carry out the
purposes of this Agreement.
ARTICLE II
CONVERSION AND EXCHANGE OF SHARES
2.1 Conversion of Shares. At the Effective Time, by virtue of the
Merger, and without any action on the part of the holders thereof:
2.1.1 Each share of common stock, $.10 par value, of the
Company (the "Common Stock") issued and outstanding immediately prior to the
Effective Time (other than Common Shares held as treasury shares by the Company
or its Subsidiaries) shall, by virtue of the Merger and without any action on
2
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the part of the holder thereof, be converted into the right to receive in cash
the sum of $34.50 plus the Additional Amount (as herein defined) without
interest (the "Merger Consideration"). Each such share of Common Stock
outstanding immediately prior to the Effective Time shall be deemed to be no
longer outstanding and shall represent solely the right to receive the Merger
Consideration upon surrender of the certificate formerly representing the Common
Stock in accordance with the provisions of this section.
2.1.2 Each share of Common Stock issued and outstanding
immediately prior to the Effective Time which is then held as a treasury share
by the Company or is held by any of the Company's Subsidiaries immediately prior
to the Effective Time shall, by virtue of the Merger and without any action on
the part of the Company, be canceled and retired and cease to exist, without any
conversion thereof.
2.1.3 Each share of common stock, par value $.01 per share
of Purchaser outstanding immediately prior to the Effective Time shall be
converted into and exchanged into one validly issued, fully-paid and
non-assessable share of common stock, $.10 par value, of the Surviving
Corporation.
2.2 The Additional Amount. In order to provide for the
determination of the Additional Amount as of the Effective Time, the parties
agree as follows:
2.2.1 Components of the Base Amount. As used herein:
(a) The "Additional Amount" is the amount by which (1) the
quotient of the Base Amount as of the Effective Time divided by the
number of shares of Common Stock outstanding as of immediately prior to
the Effective Time exceeds (2) $34.50.
(b) the "Base Amount" is the dollar amount determined by
[A less B plus C] where
A is equal to (i) $500,000 plus (ii) to the extent
not received in cash, the amount of a claimed
tax refund for fiscal year 1998 not to exceed
$82,387, (iii) the sum of the cash and cash
equivalents on hand or in accounts which are
solely owned by the Company or a Remaining
Subsidiary (free balances only) free of all
Encumbrances as of the Effective Time, plus (iv)
the product of .9975 of the closing price of a
share of Common Stock of Niagra Mohawk
Corporation ("NIMO Stock") on the New York Stock
Exchange as of the trading day immediately
preceding the Closing Date multiplied by the
number of shares of NIMO Stock held by the
Company as of the Effective Time (not to exceed
50,000 shares) less (v), to the extent not
already contributed pursuant to the Escrow
Agreement, $6,000,000.
B is the dollar amount of the Adjustment Amount
(as defined below).
C is the product of .8357 multiplied by the
Specified Current Liabilities (as defined
below).
(c) the "Adjustment Amount" is the sum of (i) all
Liabilities of the Company or a Remaining Subsidiary as of the
Effective Time (including the Specified Current Liabilities but
excluding the Excluded Liability (as defined below) and the
intercompany Liabilities described in Section 3.2.2) which are in the
reasonable judgment of Parent both fixed and quantifiable, (ii) without
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duplication of any item in the preceding clause (i), that amount which
Parent and the Company agree, each acting reasonably, represents the
Damages (as defined in the Indemnification Agreement) and other
damages, if any, incurred or reasonably likely to be incurred by the
Company, any Remaining Subsidiary, Purchaser or Parent, directly or
indirectly as a result of, or arising out of the breach by the Company
of any of its representations or warranties under this Agreement, and
(iii) all transfer, documentary, sales, use, stamp, real estate,
registration and other similar Taxes and similar fees (including
penalties and interest) incurred by the Company, any of its
Subsidiaries, Purchaser or Parent in connection with the Transactions.
(d) the "Specified Current Liabilities" are the
Liabilities of the Company or any Remaining Subsidiary (actual or
accrued) for unpaid federal income Taxes for the current fiscal year
based on the consolidated net income of the Company through the
Effective Time.
(e) the "Excluded Liability" is the Liability of the
Company or its Subsidiaries for New York State income Taxes for the
Company's current fiscal year.
2.2.2 Determination of Base Amount. The Base Amount will
be determined from a statement of the components of the Base Amount ( the
"Statement") as provided in this Section 2.2. Not later than twenty days prior
to Closing, the Company will prepare and deliver to Parent and Purchaser the
Statement setting forth in reasonable detail the components of the Base Amount
and the calculation of the Additional Amount. The Statement will be prepared in
accordance with generally accepted accounting principles applied in preparation
of the Financial Statements, it being understood that items will be reflected
regardless of materiality and all accruals known or contemplated for Liabilities
of the Company or a Remaining Subsidiary as of the Effective Time will be
reflected. The Company will provide appropriate evidence of the components of
the Base Amount and Additional Amount and will permit, and fully cooperate with
Purchaser in obtaining full access to the Company's records and its accountant's
work papers for purposes of independently verifying the components of the Base
Amount and Additional Amount. The Statement will be certified by the Chief
Executive Officer and Chief Financial Officer of the Company on behalf of the
Company, contain an unqualified representation and warranty of such officers
that the information set forth in the Statement is true and correct and be
reviewed by the Company's regular independent auditors. Within five days of the
receipt by Parent and Purchaser of the Statement, Parent and Purchaser shall
notify the Company in writing of their acceptance or rejection of the Statement.
In the event that Parent and Purchaser reject the Statement such notice shall
set forth a schedule detailing the disputed components of the Statement. The
Company, Parent and Purchaser shall use their reasonable best efforts to reach
agreement on such disputed components of the Statement prior to the Closing. In
the event that the Company, Parent and Purchaser are unable to reach an
agreement on the Statement within three days prior to Closing this Agreement
will be deemed terminated pursuant to Section 7.1.1 hereof.
2.3 Exchange Procedures.
2.3.1 Immediately prior to the Effective Time, Parent
will deposit or cause to be deposited with Continental Stock Transfer & Trust
Co., or another paying agent mutually acceptable to Parent and the Company (the
"Paying Agent"), in trust for the holders of record of Common Stock immediately
prior to the Effective Time (the "Company Shareholders") cash in an aggregate
amount equal to the Merger Consideration (such deposit with the Paying Agent
pursuant to this paragraph is referred to as the "Payment Fund"). The Payment
Fund shall not be used for any purpose except as provided in this Agreement.
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2.3.2 As soon as practicable after the Effective Time, the
Surviving Corporation shall cause the Paying Agent to mail to each Company
Shareholder a letter of transmittal and instructions for use (the "Letter of
Transmittal") in effecting the surrender of certificates representing Common
Stock outstanding immediately prior to the Effective Time ("Certificates") in
appropriate and customary form. The Letter of Transmittal shall be in customary
form, include provisions stating that delivery shall be effected, and risk of
loss and title to such Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent, provide instructions for effecting the
surrender of such Certificates in exchange for the Merger Consideration and
provide such other provisions as Purchaser may reasonably specify (including
those provisions described in this Section 2.3). Upon surrender of a Certificate
for cancellation to the Paying Agent, together with such Letter of Transmittal,
duly and properly executed, the holder of such Certificate shall be entitled to
receive in exchange therefore the portion of the Merger Consideration
represented by the Certificate pursuant to Section 2.1.1 of this Agreement. If
the Merger Consideration (or any portion thereof) is to be delivered to any
person othe than the person in whose name the Certificate representing Common
Stock surrendered in exchange therefor is registered on the record books of the
Company, it shall be a condition to such exchange that the Certificate so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the person requesting such exchange shall pay to the Paying
Agent any transfer or other taxes required by reason of the payment of such
consideration to a person other than the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Paying Agent that
such tax has been paid or is not applicable. No interest will be paid or will
accrue on the cash payable upon surrender of any Certificate. Until surrendered
as contemplated by this Section 2.3, each Certificate shall, at and after the
Effective Time, be deemed to represent only the right to receive, upon surrender
of such Certificate, the Merger Consideration with respect to the shares of
Common Stock represented thereby.
2.3.3 At and after the Effective Time, there shall be no
transfers on the stock transfer books of the Company of the Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation, they
shall be canceled and exchanged as provided in this Section 2.3. In the event of
a transfer of ownership of shares of Common Stock which is not registered in the
transfer records of the Company, payment may be made with respect to such Common
Stock to such a transferee only if the Certificate representing such shares of
Common Stock is presented to the Paying Agent, accompanied by all documents
required to evidence and effect such transfer and evidence that any applicable
stock transfer taxes have been paid.
2.3.4 In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, upon the posting by such person of a bond in such
amount as the Surviving Corporation may reasonably direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Paying Agent will issue in respect of such lost,stolen or destroyed Certificate,
the Merger Consideration with respect to the shares of Common Stock represented
thereby.
2.3.5 Any portion of the Payment Fund which remains
unclaimed by the Company Shareholders for nine (9) months after the Effective
Time shall be delivered to the Surviving Corporation upon demand of the
Surviving Corporation, and the holders of Common Stock shall thereafter look
only to the Surviving Corporation for payment of their claim for the Merger
Consideration in respect of their Common Stock. Neither Parent, Purchaser nor
the Surviving Corporation shall be liable to any holder of Common Stock for any
such Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
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2.3.6 Purchaser or the Paying Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of a Certificate surrendered for the Merger
Consideration such amount as Purchaser or the Paying Agent is required to deduct
and withhold with respect to the making of such payment under the Internal
Revenue Code as of 1986, as amended (the "Code"), or any provision of any state
local or foreign tax law. To the extent that amounts are so deducted and
withheld, such amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of such Certificate.
2.3.7 In the case of 100,000 shares of Common Stock held
of record by Martin Enowitz or his assigns which the Company represents are the
subject of a dispute between the Company and Enowitz, appropriate provision will
be made in the Paying Agent agreement for the holding of the Merger
Consideration payable in respect of such shares in escrow pending resolution of
the dispute. Purchaser agrees that the rights of Purchaser, Parent or the
Surviving Corporation to such Merger Consideration, if any, will be assigned
without recourse to BL.
2.3.8 The fees and expenses of the Paying Agent will be
paid from earnings on the Payment Fund. To the extent earnings on the Payment
Fund are insufficient to pay such fees and expenses, such fees and expenses
shall be paid from the Escrow Fund (as defined in the Escrow Agreement) pursuant
to the Escrow Agreement. The Company and Parent and Purchaser agree that any
interest earned on the Payment Fund will be transferred to the Escrow Agent and
become part of the Escrow Fund.
2.4 Adjustment of Merger Consideration. In the event of any
reclassification, stock split, stock dividend or other general distribution of
securities, cash or other property with respect to Common Stock other than the
Distribution and related transaction (or if a record date with respect to any of
the foregoing should occur) on or after the date of this Agreement and on or
prior to the date of the Effective Time, appropriate and equitable adjustments,
if any, shall be made to the calculation of the Merger Consideration and all
references herein shall be deemed to be to the Merger Consideration as so
adjusted.
2.5 Options, Warrants and Restricted Shares. Prior to the Effective
Time, the Company will (a) cause each outstanding option to purchase Common
Stock (each, a "Stock Option") granted under the Besicorp Group, Inc. Amended
and Restated 1993 Incentive Plan (the "1993 Plan") or pursuant to any other
stock option plan or restricted agreement entered into by the Company with any
employee or director of the Company or any Subsidiary thereof, whether or not
then vested or exercisable, to become vested and exercisable, (b) cause each
outstanding warrant to purchase Common Stock (each, a "Warrant") to become
exercisable to the extent not currently exercisable, and (c) take such action as
is necessary to cause each holder of a Stock Option or Warrant to exercise such
Stock Option or Warrant in full including paying in cash the exercise price (it
being understood that neither the Company nor any Remaining Subsidiary will
directly or indirectly provide or guarantee any financing or loan arrangements
for the payment of the exercise price) so that there are no outstanding Stock
Options or Warrants at the Effective Time.
2.6 Escrow Agreement. At Closing, the Company will cause $6,000,000 in
cash to be delivered to the Escrow Agent under the Escrow Agreement.
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ARTICLE III
PRECLOSING TRANSACTIONS
3.1 General. The Company recognizes that the obligations of Parent and
Purchaser under this Agreement are subject to the completion by the Company of
each of the Distribution and the Power Facility Sales (each, as defined below).
The Company agrees to use its reasonable best efforts to effect the Distribution
and the Power Facility Sales in accordance with this Agreement.
3.2 The Distribution.
3.2.1 Actions. Promptly following the execution of this
Agreement, the Company will cause the following actions to be taken in
accordance with the requirements of applicable law, including the NYBCL, and the
Company's and its Subsidiaries' certificate of incorporation and bylaws with the
objective of effecting the spinoff to shareholders of the Company immediately
prior to the Effective Time of BL and the Distributed Subsidiaries and the
complete separation of BL and the Distributed Subsidiaries from the Company and
the Remaining Subsidiaries:
(a) the due and valid formation of BL;
(b) the transfer to, and assumption by BL of all of the
assets, personnel, employee benefit plans and Liabilities of the
Company (other than the Retained Assets and Permitted Liabilities) and
the Remaining Subsidiaries and the transfer to BL of all of the
outstanding capital stock of the Distributed Subsidiaries;
(c) the execution and delivery by the Company and BL of
such agreements and arrangements which are customary in connection with
spinoffs and which provide for, among other matters, the provision of
transition, support and administrative services (including access to,
and cooperation regarding historical financial and tax information and
knowledgeable personnel) to the Company by BL without cost to the
Company and indemnification of the Company by BL and its subsidiaries
for any failure of BL to discharge and pay in full all of the
Liabilities so assumed or the failure of any Distributed Subsidiaries
to discharge and pay in full its Liabilities when due including by
means of the Indemnification Agreement and Escrow Agreement, all on
terms reasonably acceptable to Purchaser and Parent;
(d) the withdrawal of the Remaining Subsidiaries as
general or limited partners of the Partnership or the assignment to,
and assumption by a Distributed Subsidiary of all of the general and
limited partnership interests of the Remaining Subsidiary;
(e) distribute to the shareholders of the Company
immediately prior to the Effective Time all of the outstanding capital
stock of BL with a record date to be established by the Board to be
coordinated with the Closing;
(f) the establishment of the fair market value of the
BL capital stock;
(g) provide for the assumption by BL of all Employee
Benefit Plans;
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(h) prior to consummation of the Distribution, Reina
Distributing, Inc. and BL to enter into a written lease providing for
the building and improvements located thereon at 1151 Flatbush Avenue,
Kingston, New York on the terms set forth in Schedule 3.2.1 to this
Agreement;
(i) prior to consummation of the Distribution, the Company
and BL to execute and deliver the Indemnification Agreement in the form
of Exhibit A hereto (the "Indemnification Agreement") and the Escrow
Agreement in the form of Exhibit B hereto (the "Escrow Agreement");
(j) the preparation and distribution to its stockholders
of record prior to the Effective Time of the Information Statement and
the filing and effectiveness of the Form 10 Registration all in
accordance with applicable law including the Securities Act of 1934, as
amended (the "Exchange Act"); and
(k) all other actions necessary or appropriate to effect
the distribution of BL to the shareholders of the Company.
The foregoing transactions are collectively referred to herein as the
"Distribution."
3.2.2 Defined Terms. The "Retained Assets" are those
assets listed on Schedule 3.2.2 hereto and the "Permitted Liabilities" are the
Specified Current Liabilities and Excluded Liability and the intercompany
Liabilities of the Company to a Remaining Subsidiary as identified in Schedule
3.2.2.
3.2.3 Agreements. The Company agrees to use its best
efforts to effect the Distribution in the manner contemplated hereby and to
take, or cause to be taken, all actions necessary or appropriate so that the
Distribution will be so accomplished no later than the Closing Date.
3.3 The Power Facility Sales. The Company agrees to use its best
efforts to cause the Partnerships to dispose of the Carthage Cogeneration
Facility, South Glens Falls Cogeneration Facility, Natural Dam Cogeneration
Facility, Syracuse Cogeneration Facility and Beaver Falls Cogeneration Facility
for cash and without any Liability of any Remaining Subsidiary (the "Power
Facility Sales"). The Company will consult with Purchaser on a regular basis and
keep Purchaser reasonably informed as to the status and terms of the Power
Facility Sales.
3.4 Further Assurances. If, at any time after the Effective Time, BL
shall consider or be advised that any deeds, bills of sale, assignments or
assurances or any other acts or things are necessary, desirable or proper (i) to
vest, perfect or confirm, of record or otherwise, in BL or its Subsidiaries its
right, title and interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets contributed to any of the Distributed
Subsidiaries in connection with the Distribution or (ii) otherwise carry out the
Distribution, the Surviving Corporation will upon reasonable request of BL
execute and deliver all such deeds, bills of sale, assignments and assurances
and do all such other acts and things as may be necessary, desirable or proper
to carry out the Distribution. Any expenses incurred by the Surviving
Corporation under this Section 3.4 shall be paid by BL.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
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4.1 General Statement. The parties make the representations and
warranties to each other which are set forth in this Article IV. All
representations and warranties of the Company are made subject to the exceptions
noted in the schedule delivered by the Company to Parent and Purchaser
concurrently herewith and identified by the parties as the "Company Disclosure
Schedule."
4.2 Representations and Warranties of the Company. The Company
represents and warrants to Parent and Purchaser that, except as set forth in the
Company Disclosure Schedule:
4.2.1 Organization and Authority. Each of the Company and
each Subsidiary: (i) is a corporation or partnership duly organized, validly
existing and in good standing under the laws of the State of its incorporation;
and (ii) has all necessary corporate or partnership power and authority to
conduct its business as now being conducted or as proposed to be conducted
through Closing. Each of the Company and each Remaining Subsidiary is duly
qualified as a foreign corporation and in good standing in each jurisdiction in
which the nature of its business or the nature or location of its assets require
such qualification. All of the Subsidiaries are listed in the Company Disclosure
Schedule.True and complete copies of the certificate of incorporation and bylaws
or agreement of limited partnership, as the case may be, of each of the Company
and each Subsidiary are set forth as exhibits to the Company SEC Documents or
have been made available to Purchaser. As used in this Agreement: "Subsidiary"
means any corporation, partnership, joint venture or other legal entity and of
which the Company or BL, as the case may be (either alone or through or together
with any other Subsidiary or Subsidiaries), either (A) owns, directly or
indirectly, 25% or more of the capital stock or other equity interests, the
holders of which are generally entitled to vote with respect to matters to be
voted on in such corporation, partnership, joint venture or other legal entity
or a 25% or more of the interest in the assets of the corporation, partnership,
joint venture or other legal entity upon its liquidation or (B) is otherwise a
Significant Subsidiary (as such term is defined in Section 1-02(w) of Regulation
S-X of the Securities Act of 1933, as amended (the "Securities Act"));
"Remaining Subsidiary" means each of Beta Carthage, Inc., a New York
corporation, Beta South Glen Falls, Inc., a New York corporation, Beta Natural
Dam, Inc., a New York corporation, Beta Syracuse Inc. a New York corporation,
Beta Beaver Falls Inc., a New York corporation, Beta Nova, Inc., a New York
corporation, Beta N Ltd., a New York corporation, Beta C&S Ltd., a New York
corporation, and Reina Distributing, Inc., a New Yor corporation, and the
"Distributed Subsidiaries" are BL and all other Subsidiaries of the Company now
or hereafter existing other than the Remaining Subsidiaries.
4.2.2 Authority Relative to this Agreement and Related
Matters. The Board of Directors of the Company (the "Board"), at a meeting duly
called and held has (A) determined that the Merger Agreement and Merger are fair
to, and in the best interests of, the Company and its shareholders, (B) adopted
and approved this Agreement and the Merger, and (C) resolved to submit to the
shareholders of the Company and recommend to the shareholders of the Company
that they adopt and authorize the Merger Agreement , the Merger and, if legally
required, the Distribution (collectively, the Merger, Distribution and Power
Facility Sales and with the other transactions contemplated hereby and thereby,
the "Transactions"). The Company has full corporate power and authority, subject
to shareholder adoption and authorization of with respect to the Merger
Agreement, to enter into and perform this Agreement and the other agreements to
be entered into in connection with this Agreement and the Transactions (the
"Transaction Agreements") to which it is a party. The execution and delivery of
this Agreement and each of the othe Transaction Agreements by the Company and
the performance by the Company of their respective obligations hereunder and
thereunder have been (or in the case of Transaction Agreements not yet entered
into, will be) duly authorized and approved by all requisite corporate action
other than the approval of the holders of at least two-thirds of the outstanding
shares of Common Stock voting at the Meeting with respect to the Merger and, if
legally required, the Distribution. This Agreement has been and, when executed,
each of the other Transaction Agreements will have been, duly executed and
delivered by duly authorized officers of the Company and constitutes, or will
constitute when
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so executed and delivered, a valid, legal and binding obligation of the Company
or relevant Subsidiary enforceable against it in accordance with its terms. The
affirmative vote of the holders of at least two-thirds of the outstanding shares
of Common Stock voting at the Meeting with respect to the adoption and
authorization of the Merger Agreement are the only votes of the holders of any
class or series of the Company's capital stock necessary to approve the
Transactions. None of the holders of shares of capital stock of the Company have
the right to dissent or demand appraisal of their shares under the NYBCL or
otherwise as a result of any of the Transactions.
4.2.3 Required Filings. No consent, approval or
authorization of, expiration or termination of any waiting period requirement
of, or filing, registration, qualification, declaration or designation
("Authorization") with or by, any federal, state, local or foreign court,
administrative agency, commission or other governmental authority or
instrumentality ("Governmental Entity") is required for the execution and
delivery by the Company of this Agreement or any of the other Transaction
Agreements or the consummation by any of the Company or any Subsidiary of any of
the Transactions, except for (i) the filing and recordation by the Company of
the Merger as required by the NYBCL, (ii) the filing with the United States
Securities and Exchange Commission (the "SEC") of the Proxy Statement, the Form
10 Registration and the Information Statement with respect to the Merger and
Distribution, respectively, under the Exchange Act and (iii) filings pursuant to
applicable state securities laws.
4.2.4 No Conflicts. Neither the execution and delivery
of this Agreement or the other Transaction Agreements by the Company nor the
consummation by Company of any of the Transactions, will (i) conflict with or
result in a breach of any of the terms, conditions or provisions of the
certificate, articles or other instrument of incorporation or limited
partnership or by-laws or agreement of limited partnership or other similar
instrument or of any statute, law or administrative regulation, or of any order,
writ, injunction, judgment or decree of any Governmental Entity or of any
arbitration award to which any of the Company or any Subsidiary is a party or by
which the Company or any Subsidiary is bound, or (ii) violate, conflict with,
breach, constitute a default (or give rise to an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in the
creation of any lien or other claims, equities, security interests, preemptive
rights, judgments and other encumbrances ("Encumbrance")upon any of the
properties or assets of the Company or any Subsidiary under, any written or oral
note, bond, mortgage, indenture, deed of trust, license, lease, contract,
agreement or other instrument or written or oral obligation to which Company is
a party or to which they or any of their respective properties or assets are
subject (each being an "Obligation"), except for such violations, conflicts,
breaches, defaults, terminations, accelerations or creations of liens or other
Encumbrances that do not and could not, individually or in the aggregate (x)
have a Material Adverse Effect (as defined herein) on the Company, or (y)
materially impair the ability of the Company to perform its obligations under
any Transaction Agreement. Without limiting the generality of the foregoing, the
Company is not subject to any Obligation pursuant to which timely performance of
this Agreement or any of the Transactions may be prohibited, prevented or
materially delayed. As used in this Agreement, with respect to a Person,
"Material Adverse Effect" means an effect which involves $10,000 or more on the
business, operations (or results of operations), condition (financial or
otherwise), properties, assets, liabilities, or prospects of such Person or its
Subsidiaries, and "Person" means an individual, partnership, corporation,
limited liability company, business, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Entity or other entity
of whatever nature or a group, including any pension, profit sharing or other
benefit plan or trust.
4.2.5 Capitalization. The authorized capital stock of the
Company consists solely of 5,000,000 shares of Common Stock, $0.10 par value per
share, and 7,500,000 shares of Preferred Stock, par value $1.00 per share
("Preferred Stock"). As of November 16, 1998, (i) 2,969,195 shares of Common
Stock
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were outstanding, all of which are entitled to vote as a class, (ii) 265,763
shares of Common Stock were held in the treasury of the Company, (iii) Stock
Options or Warrants with respect to 82,240 shares of Common Stock had been
granted or issued and are outstanding under the 1993 Plan and (iv) no shares of
Preferred Stock were outstanding. There are no other shares of capital stock of
the Company authorized, issued or outstanding. The number of shares of Common
Stock outstanding is subject to increase to no more than 3,051,435 shares
outstanding upon the exercise or conversion of Stock Options and Warrants which
are set forth on Schedule 4.2.5 of the Company Disclosure Schedule. All of the
outstanding shares of Common Stock have been validly issued and are fully paid
and nonassessable. Except as set forth on Schedule 4.2.5 of the Company
Disclosure Schedule, there are no subscriptions, options, stock appreciation
rights, warrants, rights (including preemptive rights), calls, convertible
securities or other agreements or commitments of any character relating to the
issued or unissued capital stock or other securities of the Company obligating
the Company to issue, or register the sale of, any securities of any kind. There
are no agreements or obligations of any kind or character to which the Company
is a party, or as to which the Company has knowledge, with respect to the voting
of Common Stock or the election of Directors to its Board ("Directors").
Schedule 4.2.5 of the Company Disclosure Schedule sets forth the name of the
holder, number of shares underlying and exercise price of each Stock Option and
Warrant outstanding on the date hereof.
4.2.6 Subsidiaries. All of the outstanding shares of
capital stock or other equity interests of each Remaining Subsidiary (i) are
validly issued, fully paid and nonassessable and free of any preemptive rights,
and (ii) except as disclosed in Schedule 4.2.6 to the Company Disclosure
Schedule, are owned of record and beneficially by the Company free and clear of
all Encumbrances. There are no outstanding subscriptions, options, stock
appreciation rights, warrants, rights (including preemptive rights), calls,
convertible securities or other agreements or commitments of any character
relating to the issued or unissued capital stock or other securities of any
Remaining Subsidiary obligating such Remaining Subsidiary to issue any
securities of any kind or which would otherwise affect the Distribution. There
are no agreements or obligations of any kind or character with respect to the
voting of shares of capital stock or the election of directors of any Remaining
Subsidiary. Schedule 4.2.6 lists (iii) each Subsidiary and the Company's direct
or indirect ownership interest in such Subsidiary and (iv each Subsidiary of
which the Company or one of its Subsidiaries is a general or limited partner
(each such Subsidiary of the Company, a "Partnership") and the Company's direct
or indirect ownership interest in such Partnership. Except for the Subsidiaries,
the Company does not have, directly or indirectly, any equity or ownership
interest, or any investment, in any Person.
4.2.7 SEC Documents. The Company has timely filed (and
has delivered to Purchaser a true and complete copy of) each report, schedule,
registration statement and definitive proxy statement required to be filed or
filed by the Company with the SEC (including, without limitation, reports
required to be filed pursuant to Section 13(d) or 13(g) of the Exchange Act)
since January 1, 1995 (the "SEC Documents"). As of their respective dates, the
SEC Documents comply in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the applicable rules
and regulations of the SEC thereunder, and none of the SEC Documents, as of
their respective dates, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The Company has corrected and updated, prior to the date
hereof, all statements in the SEC Documents which have required correction or
updating, as the case may be, and have filed all necessary amendments to the
Company SEC Documents as required by applicable law.
4.2.8 Financial Statements. Each of the consolidated
financial statements (including the notes thereto) included in the SEC Documents
(the "Financial Statements") complies, as of their respective dates, with all
applicable accounting requirements and rules and regulations of the SEC with
respect thereto,
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has been prepared in accordance with generally accepted accounting principles
("GAAP") consistently applied (except as may be indicated in the notes thereto
or, in the case of unaudited statements, as permitted by Form 10-QSB of the SEC)
and presents fairly the consolidated financial position of the Company at the
dates thereof and the consolidated results of its operations, cash flows and
changes in financial position for the periods indicated therein, subject, in the
case of interim Financial Statements, to normal, recurring year-end adjustments
which are not material individually or in the aggregate. The books, accounts and
records of the Company are, and have been, maintained in such Company's usual,
regular and ordinary manner, in accordance with generally accepted accounting
practices, and all transactions to which the Company is or has been a party are
properly reflected therein.
4.2.9 Liabilities. Neither the Company nor any Remaining
Subsidiary has any obligation or liability of any kind or nature whatsoever
(direct or indirect, matured or unmatured, absolute, accrued, contingent, known
or unknown or otherwise), whether or not required by GAAP to be provided or
reserved against on a balance sheet (all the foregoing herein collectively being
referred to as the "Liabilities"), except for:
(a) Liabilities specifically provided for or reserved
against in the balance sheet contained in the Financial Statements or
the balance sheet contained in the most recent interim financial
statement in a Company SEC Document filed prior to the date of this
Agreement (the "Interim Balance Sheet");
(b) as of the Effective Time, Permitted Liabilities and
Liabilities taken into account in determining the Adjustment Amount as
agreed to by Purchaser and Parent; and
(c) Liabilities of the Company or a Remaining Subsidiary
which have been incurred since the date of the Interim Balance Sheet,
in the ordinary course of business and consistent with past practice
which are not material.
Without limiting the generality of the foregoing, upon consummation of the
Distribution neither the Company nor any Remaining Subsidiary will have any
Liability with respect to the Liabilities of the Distributed Subsidiaries or the
business and operations of the Distributed Subsidiaries.
4.2.10 Absence of Changes or Events. Except as
specifically disclosed in the SEC Documents filed prior to the date of this
Agreement and furnished to Purchaser, since June 30, 1998: (x) neither the
Company nor any Subsidiary has suffered or been threatened with (and the Company
has no knowledge of any facts which may cause or result in) any material adverse
change in its assets, properties, liabilities, condition (financial or
otherwise) or prospects; and (y) the Company and each Subsidiary has operated
only in the usual and ordinary course of business consistent with past practice
except as contemplated by the Power Facility Sales or the Distribution. Without
limiting the generality of the foregoing, since such date, neither the Company
nor any Subsidiary has:
(a) sold, assigned, leased, exchanged, transferred or
otherwise disposed of any material portion of its assets or property,
except in the usual and ordinary course of business consistent with
past practice other than the sale of shares of common stock of Niagra
Mohawk Power Corporation ("NIMO") and the Power Facility Sales;
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(b) suffered any material casualty, damage or loss, or any
material interruption in use, of any material assets or property
(whether or not covered by insurance), on account of fire, flood, riot,
strike or other hazard or Act of God;
(c) paid, declared or set aside any dividends or other
distributions on its securities of any class or purchased or redeemed
any of its securities of any class;
(d) made any change in accounting methods or principles;
(e) with respect to the Remaining Subsidiaries, made or
committed to make capital expenditures;
(f) with respect to the Remaining Subsidiaries, increased
the compensation payable to any officer or employee except in the
ordinary course of business;
(g) with respect to the Remaining Subsidiaries, elected
any director or hired any officer or employee;
(h) borrowed any money or issued any bonds, notes,
debentures or other evidence of indebtedness;
(i) acquired by merger, consolidation or acquisition of
stock or assets any Person or business;
(j) adopted, amended or terminated any Employee Benefit
Plan (as defined herein) except as contemplated by Section 2.5; or
(k) agreed in writing or otherwise to take any of the
foregoing actions.
4.2.11 Status of Distribution. The Distribution will not
result in any federal or state income tax liability to the Company. In
connection with the Distribution, the Company (a) will have sufficient capital
so that upon completion of the Distribution, the fair market value of the assets
of the Company less the amount of its stated capital will exceed its Liabilities
and (b) is solvent and will be solvent prior to and immediately following the
consummation of the Distribution.
4.2.12 Ownership of Properties. The Company and each
Remaining Subsidiary has good and marketable title to its respective properties
and assets purported to be owned by them respectively (including all assets
reflected on the Financial Statements) free and clear of any Encumbrances,
except: (i) statutory liens for Taxes not yet due, (ii) statutory liens of
carriers, warehousemen, mechanics and materialmen incurred in the ordinary
course of business for sums not yet due; (iii) liens incurred or deposits made
in the ordinary course of business, in connection with workers' compensation and
unemployment insurance; and (iv) minor imperfections of title which do not in
the aggregate materially detract from the value or use of the asset in question.
The Company and its Subsidiaries have in effect insurance policies of the type
and with coverages which are customary for companies in the businesses in which
the Company and its Subsidiaries are engaged.
4.2.13 Tax Matters Definitions. As used in this Agreement
the following terms shall have the following meanings:
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(a) the term "Taxes" means all federal, state, local,
foreign and other net income, gross income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, lease, service,
service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs, duties
or other taxes, fees, assessments or charges of any kind whatever,
together with any interest and any penalties, additions to tax or
additional amounts with respect thereto, and the term "Tax" means any
one of the foregoing Taxes; and
(b) the term "Returns" means all returns, declarations,
reports, statements and other documents required to be filed in respect
of Taxes, and the term "Return" means any one of the foregoing Returns.
4.2.14 Returns. There have been properly completed and
filed on a timely basis and in correct form all Returns required to be filed by
the Company. As of the time of filing, the Returns correctly reflected the facts
regarding the income, business, assets, operations, activities, status or other
matters of such Company or any other information required to be shown thereon.
Except as disclosed in Section 4.2.14 to the Company Disclosure Schedule, an
extension of time within which to file any Return which has not been filed has
not been requested or granted.
4.2.15 Tax Liabilities. With respect to all amounts in
respect of Taxes imposed upon the Company, or for which the Company is or could
be liable, whether to taxing authorities (as, for example, under law) or to
other persons or entities (as, for example, under tax allocation agreements),
with respect to all taxable periods or portions of periods ending on or before
the Closing Date, all applicable tax laws and agreements have been fully
complied with, and all amounts required to be paid by any of the Company or any
of its Subsidiaries (other than the Permitted Liabilities), to taxing
authorities or others, on or before the date hereof have been paid. The unpaid
Taxes of the Company do not exceed the reserve for tax liability with respect to
the Company (excluding any reserve for deferred Taxes established to reflect
timing differences between book and tax income) set forth or included in the
Company Disclosure Schedule as adjusted for the passage of time through the
Closing Date, in accordance with the past practices of the Company.
4.2.16 Issues with Taxing Authorities. No issues have
been raised (and are currently pending) by any taxing authority in connection
with any of the Returns filed by the Company or any of its Subsidiaries. No
waivers of statutes of limitation with respect to such Returns have been given
by or requested from the Company or any of its Subsidiaries. The Company
Disclosure Schedule sets forth (i) the taxable years of each of the Company or
any of its Subsidiaries as to which the respective statutes of limitations with
respect to Taxes have not expired, and (ii) with respect to such taxable years
sets forth those years for which examinations have been completed, those years
for which examinations are presently being conducted, those years for which
examinations have not been initiated, and those years for which required Returns
have not yet been filed. No deficiencies have been asserted or assessments made
as a result of any such examinations.
4.2.17 Miscellaneous Tax Matters. Neither the Company
nor any Remaining Subsidiary (i) is a party to or bound by any tax indemnity,
tax sharing or tax allocation agreement; (ii) has agreed to make, or is required
to make, any adjustment under section 481(a) of the Code by reason of a change
in accounting method or otherwise. Neither the Company nor any Subsidiary is a
party to any agreement, contract, arrangement or plan that has resulted or would
result, separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of section 280G of the Code.
4.2.18 Permits. The Company and its Remaining
Subsidiaries hold or have received all consents, permits, authorizations,
approvals, licenses and certifications of Governmental Entities (collectively,
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the "Permits") required in connection with the ownership and operation of their
respective properties and the conduct of their respective businesses as now
being conducted, except for such consents, permits, authorizations, approvals,
licenses and certificates which if not held or received would not have a
Material Adverse Effect on the Company.
4.2.19 Contracts. Except as filed as an exhibit to the
SEC Documents, none of the Company or any Remaining Subsidiary is a party to, or
bound by, any undischarged written or oral:
(a) employment or consulting agreement which is not
terminable by the Company at will without premium or penalty or other payment;
(b) collective bargaining agreement;
(c) lease or sublease, either as lessee or sublessee,
lessor or sublessor, of real or personal property or intangibles;
(d) loan or credit agreement, pledge agreement, note,
security agreement, mortgage, debenture, indenture, factoring
agreement, credit card agreement, letter of credit or banker's
acceptance;
(e) governmental order or directive;
(f) agreement for the treatment or disposal of
hazardous materials;
(g) partnership or joint venture agreement;
(h) architect's agreement or construction contract;
(i) lease which is required by GAAP to be classified
as a capital lease;
(j) reciprocal easement or operating agreement with
respect to any parcel of the Real Estate or any of the Leased Premises;
(k) secrecy or confidentiality agreement;
(l) rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index
swap, equity or equity index option, bond option, interest rate option,
foreign exchange transaction, cap transaction, floor transaction,
collar transaction, currency swap transaction, cross- currency rate
swap transaction, currency option or any other similar transaction
(including any option with respect to any of these transactions), or
any combination of these transactions;
(m) supply or requirements contract;
(n) agreement or arrangement not specifically enumerated
above concerning or which provides for the receipt or expenditure of
any money;
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(o) agreement to indemnify or pay or advance expenses of
any Person including any officer, director, employee or agent of the
Company, any Subsidiary or any ERISA Affiliate; or
(p) agreement or arrangement by which the Company or any
Remaining Subsidiary has guaranteed or otherwise has any Liability for
any Liability of any Distributed Subsidiary.
Such agreements, leases, subleases and other instruments or arrangements
required to be disclosed in response to this Section 4.2.19, the "Contracts,"
and each a "Contract". Each Contract is in full force and binding upon the
Company and, to the Company's knowledge, the other parties thereto. None of the
Company on the one hand, nor any of the other parties thereto, on the other
hand, are in default under any Contract. No event, occurrence or condition
exists which, with the lapse of time, the giving of notice, or both, or the
happening of any further event or condition, would become a default under any
Contract by the Company, on the one hand, or the other contracting party, on the
other hand. None of the Company has released or waived any of its respective
rights under any Contract. The Company is not subject to any legal obligation to
renegotiate, nor does the Company have knowledge of a claim for a legal right to
renegotiate, any contract, loan, agreement, lease, sublease or instrument to
which it is now or has been a party.
4.2.20 Partnership Contracts. Each of the Partnerships
has settled pursuant to valid and enforceable settlement agreements all
Liabilities of each such Partnership on terms such that none of the Remaining
Subsidiaries has any Liability with respect to the Liabilities of the
Partnerships. Neither the Company nor any of the Remaining Subsidiaries has any
Liability for any of the Liabilities of any Partnership.
4.2.21 ERISA Matters.
(a) The Company, its Subsidiaries, any affiliate of the
Company or its Subsidiaries, as determined under Code Section 414(b),
(c), (m) or (o) (the "ERISA Affiliate"), severally or jointly,
maintains, administers or contributes to, and have any liability with
respect to, only those employee benefit plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), whether or not excluded from coverage under specific Titles
or Subtitles of ERISA), bonus, deferred compensation, stock purchase,
stock option, stock appreciation, severance, salary continuation,
vacation, holiday, sick leave, fringe benefit, employee discount,
personnel policy, allowances, incentives, insurance, welfare or similar
plan, program, policy or arrangement which are described in the Company
Disclosure Schedule (the "Employee Benefit Plans").
(b) None of the Company, its Subsidiaries or any ERISA
Affiliate has incurred any liability to the Pension Benefit Guaranty
Corporation ("PBGC") as a result of the voluntary or involuntary
termination of any pension plan subject to Title IV of ERISA; neither
the Company nor any ERISA Affiliate has made a complete or partial
withdrawal from a multiemployer plan, as such term is defined in
Section 3(37) of ERISA, resulting in withdrawal liability, as such term
is defined in Section 4201 of ERISA (without regard to subsequent
reduction or waiver of such liability under either Section 4207 or 4208
or ERISA); neither the Company nor any ERISA Affiliate would incur any
withdrawal liability on a complete withdrawal from any Employee Benefit
Plan as of the Closing Date, under applicable law and conditions of
each such Employee Benefit Plan without regard to any limitation,
reduction or adjustment of liability under Title IV of ERISA or any
Employee Benefit Plan provision; and neither the Company nor any ERISA
Affiliate has any contingent liability under Section 4024 of ERISA.
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(c) The aggregate present value of all accrued benefits
pursuant to each Employee Benefit Plan subject to Title IV of ERISA,
determined on the basis of current participation and projected
compensation for active participants, and including the maximum value
of all subsidized benefits, and earnings, mortality and other actuarial
assumptions set forth in the 1994 actuarial report for the Employee
Benefit Plan does not exceed the current fair market value of such
Employee Benefit Plan's assets, and except as required by Section 4980B
of the Code, neither the Company nor any ERISA Affiliate has any
obligation to provide benefits to any individual not employed by the
Company or any ERISA Affiliate.
(d) Each Employee Benefit Plan complies with and is and
has been operated in accordance with its terms and each applicable
provision of ERISA, the Code, other federal statutes, state law and the
regulations and rules thereunder. With respect to each Employee Benefit
Plan intended to qualify under Section 401(a) of the Code, a favorable
determination as to such qualification of such Employee Benefit Plan
and each amendment thereto has been made by the Internal Revenue
Service and each such Employee Benefit Plan remains qualified under the
Code and each trust funding any Employee Benefit Plan is and has been
tax-exempt. Neither the Company nor any ERISA Affiliate has failed to
make any contributions or pay any amounts required on or before the
Closing Date by the terms of any Employee Benefit Plan, collective
bargaining agreement, ERISA or any other applicable law.
4.2.22 Labor Relations. Neither the Company nor any
Remaining Subsidiary is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by the Company and there are
no known organizational campaigns, petitions or other unionization activities
seeking recognition of a collective bargaining unit. There are no strikes,
slowdowns, work stoppages or material labor relations controversies pending or,
to the knowledge of the Company, threatened between the Company or any of its
Subsidiaries, and any of their employees, and neither the Company nor any
Subsidiary has experienced any such strike, slowdown, work stoppage or material
controversy within the past three years.
4.2.23 Absence of Litigation. Except as set forth in the
SEC Documents filed prior to the date hereof, there is no litigation or
proceeding, in law or in equity, and there are no proceedings or governmental
investigations before or by any Governmental Entity, pending or, to the
Company's knowledge, threatened against the Company or any Remaining Subsidiary
or any of the officers, directors or employees of the Company or any Remaining
Subsidiary, which, if decided adversely to the Company or any Remaining
Subsidiary, officer, director or employee could have a Material Adverse Effect
on the Company or any Subsidiary or would materially impair the consummation of
any of the Transactions. There are no facts which, if known by a potential
claimant or governmental authority, would give rise to a claim or proceeding
which, if asserted or conducted with results unfavorable to the Company, would
have a Material Adverse Effect on the Company or any Remaining Subsidiary or
would materially impair the consummation of any of the Transactions. The Company
has not made any material oral or written warranties with respect to the quality
or absence of defects of its products or services which it has sold or performed
which are in force as of the date hereof, excep for those warranties which are
described in the Company Disclosure Schedule.
4.2.24 Injunctions; Judgments. Neither the Company nor
any Remaining Subsidiary is a party to, or bound by, any judgment, writ,
injunction, decree, order or arbitration award (or agreement entered into with
any Governmental Entity in connection with any administrative, judicial or
arbitration proceeding) with respect to or affecting the properties, assets,
personnel or business activities of the Company.
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4.2.25 Compliance with Law. Neither the Company nor any
Subsidiary is in violation of, in noncompliance with, or delinquent with respect
to, any judgment, writ, injunction, decree, order or arbitration award or law,
statute, or regulation of or agreement with, or any permit from, any
Governmental Entity to which the property, assets, personnel or business
activities of the Company or any of its Subsidiaries are subject, which
violation, noncompliance or delinquency could have a Material Adverse Effect on
the Company or any Remaining Subsidiary or materially impair the ability of the
Company to carry out or realize the intended benefits of the Transactions.
4.2.26 Environmental Matters. The Company and each
Subsidiary are and at all times have been, and all real property currently or
previously owned, leased, occupied, used by or under the control of the Company
or such Subsidiary, and all operations or activities of the Company or its
Subsidiaries (including those conducted on or taking place at any of such real
property) are and at all times have been, in compliance with and not subject to
any material liability or obligation under any Environmental Law or
Environmental Permit (and any monitoring agreement thereunder). The Company and
its Subsidiaries have every Environmental Permit required under Environmental
Laws for the operation of their respective businesses. As used in this
Agreement: "Environmental Laws" means all applicable federal, state or local
laws, rules, regulations, ordinances or principles of common law relating to the
generation of electricity or to the protection of health and safety, pollution,
or to environmental matters of any kind whatsoever, including with respect to
the storage, treatment, generation, transportation, spillage, use for the
generation of electricity or thermal energy, discharge, emission, leakage,
disposal or other release or threatened release of any hazardous (or otherwise
regulated under Environmental Law) material, substance or waste of any kind
whatsoever ("Hazardous Materials") and "Environmental Permits" means any
permits, licenses, notifications, certifications, consents or approvals required
under any Environmental Law from a Governmental Entity or third party. There are
no underground storage tanks on any such real property. There is no condition or
circumstance regarding the Company, any Subsidiary or their respective
businesses or any such real property or the operations or activities thereon,
which, with the passing of time or upon notice to any other party, is possible
of giving rise to a material violation of, or material liability or obligation
under, any Environmental Law or Environmental Permit. Neither the Company nor
its Subsidiaries nor any Person, the acts or omissions of which may be
attributable to, or the responsibility of, or liability to, the Company or its
Subsidiaries has, or has arranged to have, any Hazardous Materials, treated,
stored or disposed of at, or transported to, any facility or property the
remediation or cleanup of which, or the response costs related thereto, could be
attributed in any manner to, or otherwise become responsibilities of or
liabilities to, the Company or its Subsidiaries. There are no allegations,
claims, demands, citations, notices of violation, or orders of noncompliance
made against, issued to or received by the Company or its Subsidiaries within
the past (5) years relating or pursuant to any Environmental Law or
Environmental Permit except those which have been corrected or complied with to
the satisfaction of the Governmental Entity or other claimant, and no such
allegation, claim, demand, citation, notice of violation or order of
noncompliance is threatened, imminent, likely or contemplated. The Company and
its Subsidiaries have not contractually created or assumed any liabilities or
obligations or indemnifications related to Environmental Law at or related to
any real property currently or formerly owned, operated or leased by the Company
or its Subsidiaries.
4.2.27 Owned Real Estate. All of the real estate and any
interest in real estate held by the Company or any Subsidiary is identified
(including by street address and Subsidiary owner) in the Company Disclosure
Schedule as being so owned (the "Real Estate"). Each Remaining Subsidiary so
indicated as owning Real Estate has insurable title to its Real Estate, subject
only to general real estate taxes not delinquent and to Encumbrances, covenants,
conditions, restrictions and easements of record, none of which makes title to
any of such Real Estate uninsurable and none of which are violated by the
Remaining Subsidiary or interfere with such Remaining Subsidiary's use or
occupancy thereof. None of the Real Estate held by a
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Remaining Subsidiary is subject to any leases or tenancies. None of the
improvements comprising the Real Estate or the businesses conducted by any of
the Company thereon, are in violation of any use or occupancy restriction,
limitation, condition or covenant of record or any zoning or building law, code
or ordinance or public utility easement. No material expenditures are required
to be made for the repair or maintenance of any improvements on any of the Real
Estate for or with respect to any period ending on or including the Closing
Date. All taxes on any Real Estate owned by the Company or any Remaining
Subsidiaries for or with respect to any period ending on or including the
Closing Date have been paid or accrued in full.
4.2.28 Leased Premises. Neither the Company nor any
Remaining Subsidiary leases (or has any commitment to lease) any real estate.
The Distributed Subsidiaries lease (or have a commitment to lease) the premises
identified in the Company Disclosure Schedule as being so leased (the "Leased
Premises"). The Leased Premises are leased to the indicated Subsidiary pursuant
to written leases, true, correct and complete copies of which have been
delivered to Purchaser prior to the date hereof or are contained in the SEC
Documents. The improvements comprising the Leased Premises, and the businesses
conducted by the Company thereon, are not in violation of any use or occupancy
restriction, limitation, condition or covenant of record or any zoning or
building law, code or ordinance or public utility or other easements.
4.2.29 Intellectual Property. No Intellectual Property
has infringed, infringes or in any material way has damaged or damages any of
the rights, title or interests of any third party (nor has any third party given
the Company notice of any claimed infringement or damage). "Intellectual
Property" means all of the following, whether owned, used or licensed by the
Company or any Remaining Subsidiary: (i) all common law, federally registered,
state registered and foreign trademarks and service marks and all applications
for federal, state or foreign registration of trademarks or service marks, (ii)
all slogans, trade dress and trade names, (iii) all proprietary know-how and
methods, (iv) all trade secrets, (v) all federal and foreign patents and patent
applications, (vi) all copyright registrations and material unregistered
copyrights, and (vii) all computer software.
4.2.30 Brokers. No broker, finder, investment banker or
other Person (other than Josephthal & Co., whose compensation arrangement is set
forth in the Company Disclosure Schedule) is entitled to a broker's commission,
finder's fee, investment banker's fee or similar payment from the Company in
connection with the Merger.
4.2.31 Fairness Opinion. The Company has received the
written opinion of Josephthal & Co. (the "Fairness Opinion") on the date of this
Agreement to the effect that, as of the date of this Agreement, the Merger
Consideration to be received by stockholders of the Company is fair from a
financial point of view. The Company has provided a true and correct copy of the
Fairness Opinion to Purchaser. The Company is authorized by Josephthal & Co. to
include a copy of such opinion in the Proxy and Information Statement.
4.2.32 Form 10 Registration, Proxy Statement and
Information Statement. None of the information (other than information provided
by Parent and Purchaser) included or incorporated by reference in the (i) Form
10 registration statement relating to the registration under the Exchange Act of
shares of common stock of BL to be distributed to shareholders of the Company in
the Distribution (as supplemented or amended, the "Form 10 Registration"), (ii)
the proxy statement relating to the Transactions to be approved at the Meeting
(as amended or supplemented, the "Proxy Statement") and the information
statement relating to the Distribution (as supplemented or amended, the
"Information Statement") will (x) in the case of the Form 10 Registration, at
the time it becomes effective, ontain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading or (iii) in the case of the
Proxy Statement and the Information Statement, at the time of the mailing
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thereof, at the time of the Meeting and at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Form
10 Registration and the Proxy Statement and the Information Statement will each
comply as to form in all material respects with the provisions of the Exchange
Act and applicable law.
4.2.33 Full Disclosure. The representations, warranties
and statements of the Company in this Agreement or contained in any schedule,
list or document delivered pursuant to this Agreement do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein, in light of the circumstances under
which such representations, warranties and statements are made, not misleading.
The copies of all documents furnished by the Company pursuant to or in
connection with this Agreement are true, complete and correct. True, complete
and accurate copies of each document referred to in the Company Disclosure
Schedule are contained therein or have been furnished to Purchaser prior to the
date hereof.
4.3 Representations and Warranties of Parent and Purchaser. Parent and
Purchaser jointly and severally represent and warrant to the Company that:
4.3.1 Organization and Authority. Parent is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Wyoming. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York.
Each of Parent and Purchaser has all necessary corporate power and authority to
conduct its business as now being conducted.
4.3.2 Authority Relative to this Agreement. Each of
Parent and Purchaser has full corporate power and authority to enter into and
perform this Agreement and each of the other Transaction Agreements to which it
is a party. The execution and delivery of this Agreement and each of the other
Transaction Agreements by Purchaser and Parent and the performance by Purchaser
and Parent of their respective obligations hereunder or thereunder have been
duly authorized by all requisite corporate action. This Agreement has been, and
each of the other Transaction Agreements to which it is a party will be, duly
executed and delivered by duly authorized officers of Purchaser and Parent and
constitutes, or will constitute when so executed and delivered, a valid and
binding obligation of Purchaser and Parent enforceable against it in accordance
with its terms.
4.3.3 Required Filings. No Authorization is required by
or with respect to Purchaser in connection with the execution and delivery of
this Agreement or the other Transaction Agreements by Purchaser or the
consummation by Purchaser of the Transactions.
4.3.4 No Conflicts. Neither the execution and delivery
of this Agreement or any of the other Transaction Agreements by Parent or
Purchaser, nor the consummation by Parent or Purchaser of the Transactions, will
(i) conflict with or result in a breach of any of the terms or provision of the
Certificate of Incorporation or By-Laws of Purchaser, or Articles of
Organization of Parent or of any statute or administrative regulation, or of any
order, writ, injunction, judgment or decree of any court or governmental
authority or of any arbitration award to which Purchaser is a party or by which
Parent or Purchaser is bound; or (ii) violate, conflict with, breach, constitute
a default (or give rise to an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in the creation of any lien or
other Encumbrance upon any of the properties or assets of Parent or Purchaser
under, any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Parent or Purchaser is a
party or to which Parent or Purchaser or any of its
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properties or assets are subject (the "Purchaser Obligations"), except for such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens or other Encumbrances that do not and will not, individually
or in the aggregate, (x) have a Material Adverse Effect on Parent or Purchaser
or (y) materially impair Parent or Purchaser's ability to perform its
obligations under this Agreement or any of the other Transaction Agreements.
Without limiting the generality of the foregoing, Purchaser is not subject to
any Purchaser Obligation pursuant to which timely performance of this Agreement
or any of the Transactions may be prohibited, prevented or materially delayed.
4.3.5 Capitalization. The authorized capital stock of
Purchaser consists of 10,000 shares of common stock, $.01 par value, of which
1,000 shares are outstanding. All of the outstanding shares of common stock of
Purchaser are entitled to vote as a class and are owned of record by Parent.
4.3.6 Investment Intent. Each of Parent and Purchaser is
an "accredited investor" within the meaning of Rule 501(a) of Regulation D under
the Securities Act, and is acquiring the Common Stock for its own account for
investment and with no present intention of distributing or reselling such
Common Stock or any part thereof in any transaction which would constitute a
"distribution" within the meaning of the Securities Act.
4.3.7 Financing. Purchaser has delivered to the Company
a true and correct copy of a letter from a bank (the "Lender"), stating Lender's
interest in providing debt financing ("Financing") to Parent, which, together
with equity to be contributed to Purchaser will be in an amount necessary to pay
the Merger Consideration and consummate the Merger, subject to the negotiation,
preparation and execution of binding documents with respect to the Financing,
and to the fulfillment of the conditions precedent contained in such letter.
None of the Financing will be an obligation of or secured by a lien on the
assets of the Surviving Corporation. Parent and Purchaser have no present
intention to liquidate the Surviving Corporation.
4.3.8 Proxy Statement. None of the information included
in the Proxy Statement and provided by the Parent and Purchaser in writing for
use in the Proxy Statement will, at the time of the mailing thereof, at the time
of the Meeting and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 Obligations of Each of the Parties. From and after the date hereof
and until and including the Effective Time, the following shall apply with equal
force to the Company, on the one hand, and Parent and Purchaser, on the other
hand:
5.1.1 Each party shall promptly give the other party
written notice of the existence or occurrence of any event or condition which
would make any representation or warranty herein contained of either party
untrue or which might reasonably be expected to prevent the consummation of the
transactions contemplated hereby. In the case of the Company, such notice
shall include a reasonably detailed description of such event or condition,
the representation or warranty to which it relates and an estimate of the
damages, if any, associated therewith.
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5.1.2 No party shall intentionally perform any act which,
if performed, or omit to perform any act which, if omitted to be performed,
would prevent or excuse the performance of this Agreement by any party or which
would result in any representation or warranty herein of that party being untrue
in any material respect at any time after the date hereof through and including
the Closing Date as if then originally made.
5.1.3 Subject to the terms and conditions of this
Agreement, each of the parties agrees to use their best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the Transactions
and the other transactions contemplated by this Agreement as expeditiously as
reasonably practicable; provided, however, that nothing in this Section 5.1.3
shall in any event require any party to (i) expend funds which are not
commercially reasonable in relation to the transactions contemplated hereby or
(ii) take or cause to be taken, any action which would have a Material Adverse
Effect with respect to it.
5.2 Access. Subject to any restrictions under applicable law, the
Company shall continue to give to Purchaser's and Parent's respective officers,
employees, agents, attorneys, consultants and accountants reasonable access for
reasonable purposes in light of the transactions contemplated by this Agreement
during normal business hours to all of the properties, books, contracts,
documents, present and expired insurance policies, records and personnel of or
with respect to the Company or any Subsidiary and shall furnish to Parent and
Purchaser and such persons as Parent or Purchaser shall designate to the Company
such information as Purchaser or such persons may at any time and from time to
time reasonably request. It is expressly understood and agreed that all
information obtained pursuant to this Section 5.2 is subject to the terms and
conditions of the Confidentiality Letter dated September 2, 1998, executed by
Parent and Parent expressly reaffirms its obligations thereunder. Without
limiting the generality of the foregoing, the Company will permit Parent and
Purchaser to conduct a Phase I and Phase II environmental investigation with an
environmental consultant selected by Purchaser of the Real Estate held by Reina
Distributing, Inc. The Company will pay the costs of such investigation promptly
upon receipt of such consultant's billing statement.
5.3 The Company's Obligations. From and after the date hereof
and until and including the Effective Time:
5.3.1 The Company shall, and shall cause each Remaining
Subsidiary to, carry on its business with the objective of effecting
the Distribution and Power Facility Sales and, in all other respects
with the objective of winding up the remaining business of the Company
and the Remaining Subsidiaries so that the Company and the Remaining
Subsidiaries will have no assets other than cash and cash equivalents
and the Retained Assets and no Liabilities other than the Permitted
Liabilities and at Closing, Liabilities taken into account in the
calculation of the Adjustment Amount as reflected in the Statement as
finally agreed to by Purchaser. Without the prior written consent of
Purchaser, and without limiting the generality of any other provision
of this Agreement including the foregoing, the Company shall not, and
shall not permit any Remaining Subsidiary to:
(a) amend its Certificate of Incorporation,
By-Laws or other organizational documents;
(b) make any change in its authorized capital
stock; adjust, split, combine or reclassify any capital
stock; or, other than issuances of shares of Common Stock
pursuant to the valid exercise of Stock Options or
Warrants outstanding on the date hereof in accordance with
Section 2.4 of this Agreement, issue any shares of stock
of any class, or
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issue or become a party to any subscription, warrant,
rights, options, convertible securities or other
agreements or commitments of any character relating to its
issued or unissued capital stock, or other equity
securities, or grant any stock appreciation or similar
rights, or amend the terms of any Stock Option or Warrant
except as contemplated by Section 2.5;
(c) incur any indebtedness for borrowed money or
assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of
any other individual, corporation or other entity,
including the Distributed Subsidiaries;
(d) other than in connection with the Distribution
or Power Facility Sales, sell, transfer, mortgage,
encumber or otherwise dispose of any of its material
properties or assets to any individual, corporation or
other entity other than a Subsidiary, except pursuant to
contracts or agreements in force at the date of this
Agreement, the sale of the NIMO stock, or as specifically
set forth in this Agreement with respect to the
Transactions;
(e) other than in connection with the Distribution
make any (x) investments, either by purchase of stock or
securities, in (y) contributions to capital of, or (z)
purchases of any property or assets from, any other
individual, corporation or other entity;
(f) except as necessary to effect the Distribution
or eliminate a Liability of the Company or Remaining
Subsidiary (with respect to which the Company shall notify
Purchaser promptly in writing), and except for
transactions in the ordinary course of business consistent
with past practice and those transactions contemplated by
the provisions of this Agreement, enter into or terminate
any material contract or agreement, or make any change in
any of its material leases or contracts;
(g) change its method of accounting in effect at
December 31, 1997, except as may be required by changes in
GAAP upon the advice of its independent accountants;
(h) increase the compensation payable to any
employee, or enter into any new employment agreements with
new or existing employees which create other than an at
will relationship, in each case, except in the ordinary
course of business consistent with past practices other
than bonuses to officers and employees which are paid
prior to the Effective Time;
(i) pay or declare any dividend or make any
distribution (other than the Distribution) on its
securities of any class or purchase or redeem any of its
securities of any class;
(j) make any Tax election or settle or
compromise any Tax liability;
(k) fail to maintain in full force and effect
insurance coverage substantially similar to that in effect
on the date hereof; or
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(l) enter into any business or contract not
related to the Distribution, Power Facility Sales or the
Merger other than contracts which are not material and
which will be fully performed prior to the Effective Time.
5.3.2 The Company shall cause the Distributed Subsidiaries
to carry on their respective businesses only in the ordinary course
consistent with past practice and shall not and shall cause the
Distributed Subsidiaries not to create any Liabilities of the Company
or any Remaining Subsidiary for the Liabilities of the Distributed
Subsidiaries following the Effective Time.
5.3.3 The Company shall furnish to Purchaser the Company's
internal unaudited statement of condition and statement of income for
each month ending after the date of this Agreement. Such monthly
statements shall be prepared in accordance with existing practice and
shall fairly present in all material respects the consolidated
financial position and results of operation for the Company as of and
for the periods indicated therein in accordance with past practice. The
Company will advise Purchaser upon request as to the status of the
components of the Base Amount and Additional Amount and provide
reasonable evidence supporting the determination of the amount of such
components.
5.4 Proxy Statement; Other Regulatory Matters.
5.4.1 The Company will (i) call a meeting of its
shareholders (the "Meeting") for the purpose of voting upon adoption and
authorization of the Merger, (ii) hold the Meeting as soon as practicable
following the date of this Agreement, (iii) subject to Section 5.6 recommend to
its shareholders the approval of the Merger through its Board of Directors and
(iv) use its best efforts to obtain the necessary adoption and authorization of
this Agreement by the shareholders of the Company.
5.4.2 The Company will (i) as soon as practicable
following the date of this Agreement, prepare in correct and appropriate form
and file with the SEC the Form 10 Registration and a preliminary Proxy Statement
and Information Statement and (ii) use its reasonable best efforts to respond to
any comments of the SEC or its staff and to cause the Form 10 Registration to be
effective and each of the Proxy and the Information Statement to be cleared by
the SEC. The Company will notify Purchaser of the receipt of any comments from
the SEC or its staff and of any request by the SEC or its staff for amendments
or supplements to the Form 10 Registration, the Proxy or the Information
Statement or for additional information and will supply Purchaser with copies of
all correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Form 10
Registration or the Proxy Statement and Information Statement or any of the
Transactions. The Company shall give Purchaser and its counsel (who shall
provide any comments thereon as soon as practicable) the opportunity to review
the Form 10 Registration, the Proxy Statement and the Information Statement
prior to being filed with the SEC and shall give Purchaser and its counsel (who
shall provide any comments thereon as soon as practicable) the opportunity to
review all amendments and supplements to the Form 10 Registration, the Proxy and
the Information Statement and all responses to requests for additional
information and replies to comments prior to their being filed with, or sent to,
the SEC. Each of the Company and Purchaser agrees to use its reasonable best
efforts, after consultation with the other parties hereto, to respond promptly
to all such comments of and requests by the SEC. As promptly as practicable
after the Proxy Statement and the Information Statement have been cleared by the
SEC, the Company shall mail the Proxy Statement and the Information Statement,
respectively, to the stockholders of the Company. The Purchaser and the Parent
shall supply to the Company on a timely basis in connection with the preparation
of the Proxy Statement and the Information Statement all information necessary
to be included therein with respect to the Purchaser and the Parent.
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5.4.3 Each party agrees to notify the other of, and to
correct, any information contained in the Form 10 Registration, the Proxy
Statement and Information Statement furnished by such party to the other for
inclusion therein, which information shall be, at the time of furnishing, or
become, prior to the Meeting, false or misleading in any material respect. If at
any time prior to the Meeting or any adjournment thereof there shall occur any
event that should be set forth in an amendment to the Form 10 Registration Proxy
Statement or the Information Statement, the Company will prepare and mail to its
stockholders such an amendment or supplement.
5.4.4 The Company will file all reports, schedules and
definitive proxy statements (including the Proxy Statement and the Information
Statement) (the "Company Filings") required to be filed by the Company with the
SEC (including reports required by Section 13(d) or 13(g) of the Exchange Act
and will provide copies thereof to the Company promptly upon the filing thereof.
As of its respective date, the Company represents, warrants and covenants that
each the Company Filing will comply in all material respects with the
requirements of the Exchange Act and the applicable rules and regulations of the
SEC thereunder and none of the Company Filings will contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading. Upon learning of any
such false or misleading information, the Company will cause all required the
Company Filings (including the Proxy Statement and the Information Statement) to
be corrected, filed with the SEC and disseminated to holders of the Common
Stock, in each case as and to the extent required by applicable law.
5.4.5 Subject to the terms and conditions herein
provided, the Company and Parent and Purchaser will cooperate and consult with
one another in (a) determining which consents, approvals, Permits,
authorizations or waivers (collectively, "Consents") are required to be obtained
prior to the Effective Time from Governmental Entities or other third parties in
connection with the execution and delivery of this Agreement (including those
Consents with respect to those matters disclosed as a result of Section 4.2.4 of
this Agreement or with respect to any of the Transactions or the Transaction
Agreements and the consummation of the transactions contemplated hereby or
thereby, (b) preparing all Consents and all other filings, submissions and
presentations required or prudent to obtain all Consents, including by providing
to the other party drafts of such material reasonably in advance of the
anticipated filing or submission dates, and (c) timely seeking all such Consents
(it being understood that the parties will make or seek to Consents, whether
mandatory or voluntary and that each party will be responsible and pay for the
costs, penalties and expenses associated with the Consents required with respect
to it). The Company will obtain and deliver to Purchaser at or prior to Closing
originals of full and complete releases of the Company and each Remaining
Subsidiary from any and all Liabilities of the Company or such Remaining
Subsidiary (x) fo Liabilities (other than Permitted Liabilities) of any
Distributed Subsidiary (the "Third Party Releases") (y) to provide
indemnification by contract, law or otherwise to any current director, officer,
employee agent or affiliates except to the extent of the Surviving Corporation
rights under the Escrow Agreement or the D&O Insurance, the form and substance
of which shall be reasonably acceptable to Purchaser and Parent ("D&O
Releases").
5.5 Acquisition Proposals.
----------------------
5.5.1 From and after the date hereof and until and
including the Effective Time (or earlier termination of this Agreement), the
Company shall immediately cease and cause to be terminated any activities,
discussions or negotiations with respect to an Acquisition Proposal (as defined
herein), and the Company shall not, nor shall it permit any Subsidiary, or
authorize or permit any of its officers, directors or employees or holders of
more than five percent of its outstanding shares of Common Stock or any
investment banker, financial advisor, attorney, accountant or other
representative or agent of the Company or any
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Subsidiary, to, directly or indirectly, (i) solicit, initiate, or encourage
(including by way of furnishing or otherwise providing, or providing access to
nonpublic information) any Acquisition Proposal; (ii) participate in any
discussions or negotiations relating to any Acquisition Proposal (or any inquiry
relating to an Acquisition Proposal) or take any other action to facilitate any
inquiries or the making of any proposal that constitutes an Acquisition
Proposal; or (iii) enter into any letter of intent, agreement in principle or
definitive agreement with respect to any Acquisition Proposal; provided,
however, that nothing contained in this Section 5.5 shall prohibit the Company
or the Board from furnishing nonpublic information to, or entering into
discussions or negotiations with, any person or entity with respect to any
unsolicited Acquisition Proposal if (but only if): (a) the Board determines
reasonably and in good faith, after due investigation and after consultation
with and based upon the advice of its outside financial advisor, that such
Acquisition Proposal is a Superior Proposal (as defined below); (b) the Board
determines reasonably and in good faith, after due investigation and after
consultation with and based upon the advice of outside counsel, that the failure
to take such action would cause the Board to violate its fiduciary duties to
stockholders under applicable law in the context of the Transactions; and (c)
the Company (x) provides at least two business days' notice to Acquiror to the
effect that it is taking such action and (y) receives from such person or entity
an executed confidentiality agreement substantially similar to the
Confidentiality Agreement. Notwithstanding the foregoing, nothing in this
Section 5.5 will restrict the Company from effecting the Power Facility Sales as
contemplated hereby.
5.5.2 Notwithstanding anything in this Agreement to the
contrary, the Company shall promptly advise Parent orally and in writing of the
receipt by it (or by any of the other entities or persons referred to above)
after the date hereof of any Acquisition Proposal or any inquiry which could
reasonably lead to an Acquisition Proposal, the material terms and conditions of
such Acquisition Proposal or inquiry, and the identity of the person or entity
making any such Acquisition Proposal. The Company agrees that it will fully
enforce (including by way of obtaining an injunction), and not waive any
provision of, any confidentiality agreement to which it is a party.
5.5.3 For purposes of this Agreement: "Acquisition
Proposal" means any bona fide offe or proposal with respect to a merger,
consolidation, share exchange or similar transaction involving the Company or
any Subsidiary or any purchase of all or any significant portion of the assets
or capital stock of the Company or any significant Subsidiary or any other
business combination (including the acquisition of any equity interest therein)
involving the Company excluding, however, any proposal or transaction with
respect to the Power Facilities; and "Superior Proposal" means an Acquisition
Proposal which the Board believes in good faith, after due investigation (taking
into account, among other things, the financing terms and the likelihood of
consummation) and based upon the advice of its outside legal and financial
advisors, is more favorable to the Company's stockholders from a financial point
of view than the Merger (taking into account the Distribution).
5.6 Board Action. The Board shall not (i) withdraw or modify its
approval, adoption or recommendation of this Agreement, the Merger or any of the
Transactions , (ii) approve, adopt or recommend or publicly propose to approve,
adopt or recommend an Acquisition Proposal, (iii) cause the Company to enter
into any letter agreement, agreement in principle or definitive agreement with
respect to an Acquisition Proposal, or (iv) resolve to do any of the foregoing
unless the Company receives an unsolicited Acquisition Proposal in accordance
with Section 5.5 and the Board determines reasonably and in good faith, after
due investigation (a) based upon the advice of its outside financial advisor
that a pending Acquisition Proposal is more favorable to the Company
Stockholders than the Merger and the Distribution, taken as a whole, (b) such
Acquisition Proposal is reasonably likely to be consummated, (c) there is a
substantial probability that the approval of the Merger and the Distribution
will not be obtained due to the pending Acquisition Proposal, and (d) based upon
the advice of outside counsel, that the failure of the Board to withdraw or
modify its approval,
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adoption or recommendation of this Agreement or the Merger, or approve or
recommend such Acquisition Proposal would cause the Board to violate its
fiduciary duties to stockholders under applicable law in the context of the
Transactions. In such case, the Board may withdraw or modify its recommendation,
and approve and recommend such Acquisition Proposal, provided the Board provides
to Parent and Purchaser written notice of the Company's intention to accept the
Superior Proposal at least two business days prior to taking such action and, at
the end of such two business day period (x) simultaneously terminates this
Agreement, (y) concurrently causes the Company to enter into a definitive
acquisition agreement with respect to such Superior Proposal and (z)
concurrently pays to Purchaser the Termination Payment and Covered Expenses
pursuant to Section 7.4.2. Nothing contained in this Section 5.6 shall prohibit
the Company from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act; provided that
the Company does not withdraw or modify its position with respect to the Merger
or approve or recommend an Acquisition Proposal, except under the circumstances
described in the immediately preceding sentence and on two business days' notice
to Purchaser to the effect that it is taking such action.
5.7 Indemnification and Insurance.
-----------------------------
5.7.1 Purchaser and the Company agree that prior to the
Effective Time, the Company will procure and pay for officers' and directors'
liability insurance ("D&O Insurance") covering each present and former director,
officer, employee and agent of the Company and each Subsidiary and each present
and former director, officer, employee, agent or trustee of any employee benefit
plan for employees of the Company (individually, an "Indemnified Person", and
collectively, the "Indemnified Persons"), who is currently covered by the
Company's officers' and directors' liability insurance or will be so covered on
the Closing Date with respect to actions and omissions occurring on or prior to
the Closing Date (including, without limitation, any which arise out of or
relate to the transaction contemplated by this Agreement). Purchaser shall not
be required to provide or cause the Surviving Corporation to provide any such
insurance for the Indemnified Persons.
5.7.2 Purchaser and the Surviving Corporation hereby
jointly and severally agree that, for the lesser of (a) six (6) years after the
Closing Date, or (b) the period during which the Surviving Corporation maintains
its existence, the provisions of the Certificate of Incorporation and By-Laws of
the Surviving Corporation shall provide indemnification to the Indemnified
Persons on terms, in a manner, and with respect to matters, which are no less
favorable (in favor of persons indemnified) than the Company Certificate of
Incorporation and By-Laws, as in effect on the date hereof, and further agree
that such indemnification provisions shall not be modified or amended except as
required by law, unless such modification or amendment expands the rights of the
Indemnified Persons to indemnification. Notwithstanding the foregoing, it is
expressly understood and agreed that the obligation of the Surviving Corporation
to provide such indemnification is limited to the D&O Insurance and the
Surviving Corporation's rights under the Escrow Agreement and that the
provisions of the Certificate of Incorporation and By-laws of the Surviving
Corporation may be amended accordingly.
5.8 Surviving Corporation. The Surviving Corporation or its successors
will maintain its or their existence until at least March 31, 2003.
5.9 Parent's Financing. Parent will use its reasonable best
efforts to obtain the proceeds of the Financing.
5.10 Liabilities. The Company agrees to use its best efforts so that
neither the Company nor any Remaining Subsidiary will have as of the Effective
Time any Liability other than the Permitted Liabilities and Liabilities, if any,
included in the calculation of the Adjustment Amount as agreed to by Parent and
Purchaser.
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5.11 Other Company Covenants. Prior to the Effective Time, the Company
will (a) as soon as practicable, obtain from General Electric Capital
Corporation ("GECC") a release from pledge of all of the outstanding shares of
any Remaining Subsidiary which have been pledged to GECC, and (b) cause to be
paid in full at or prior to the Closing all expenses associated with the
transactions contemplated hereby including fees and expenses of investment
bankers, counsel, accountants, consultants and other advisors to the Company,
all severance, bonus and other compensation payable in connection with or as a
result of the Merger and all other expenses of the Company and each of the
Remaining Subsidiaries.
5.12 Parent Covenants. Parent agrees to cause the Surviving Corporation
to amend its Certificate of Incorporation within thirty (30) days after the
Closing Date to change the name of the Surviving Corporation to a name which
does not include the word "Besicorp". The Surviving Corporation agrees to (a)
quitclaim without recourse to BL the net proceeds of any recovery under a
derivative claim against its officers or directors and (b) file all income Tax
Returns for the current fiscal year and pay all Taxes shown to be due thereon.
ARTICLE VI
CONDITIONS TO CLOSING; CLOSING DELIVERIES; BASE AMOUNT
6.1 Conditions to Each Party's Obligations. The respective obligations
of each party to effect the transactions contemplated hereby shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
6.1.1 The Merger Agreement and, to the extent required
under the NYBCL, the Distribution shall have been adopted and authorized by th
requisite vote of the stockholders of the Company.
6.1.2 This Agreement, the Merger and (to the extent
approval thereof is necessary to consummate the Transactions) the Transactions
shall have been approved by each Governmental Entity whose approval is required
for the consummation of the Merger or such Transactions, such approvals shall
remain in full force and effect and all waiting periods relating to such
approvals shall have expired.
6.1.3 No Governmental Entity or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent)which is then in effect and
has the effect of making the Merger or any of the Transactions illegal.
6.2 Conditions to the Company's Obligations. The obligation of the
Company to consummate the transactions contemplated hereby is subject to the
fulfillment (or waiver) of all of the following conditions prior to the
Effective Time, upon the non-fulfillment (and non-waiver) of any of which this
Agreement may, at the Company's option, be terminated pursuant to and with the
effect set forth in Article VII:
6.2.1 Each and every representation and warranty made by
Parent and Purchaser shall be true and correct when made and as if originally
made on and as of the Closing Date.
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6.2.2 All obligations of Parent and Purchaser to be
performed hereunder through, and including on, the Closing Date (including,
without limitation, all obligations which Purchaser would be required to perform
at the Closing if the transaction contemplated hereby was consummated shall have
been fully performed.
6.2.3 Purchaser shall have delivered to the Company the
written opinion of Altheimer & Gray, counsel for Purchaser, dated as of the
Closing Date, in substantially the form of Exhibit C attached hereto.
6.2.4 Immediately prior to the Merger Purchaser is, and
assuming that the condition set forth in Section 6.3.1 is satisfied, immediately
following the effectiveness of the Merger the Surviving Corporation shall be,
solvent.
6.3 Conditions to Parent's and Purchaser's Obligations. The obligations
of Parent and Purchaser to consummate the transactions contemplated hereby is
subject to the fulfillment (or waiver) of all of the following conditions on or
prior to the Closing Date, upon the non-fulfillment (and non-waiver) of any of
which this Agreement may, at Purchaser's option, be terminated pursuant to and
with the effect set forth in Article VII:
6.3.1 The representations and warranties made by the
Company shall be true and correct when made and as if originally made on and as
of the Closing Date, except to the extent reflected in the Statement as finally
agreed to by Parent and Purchaser.
6.3.2 All obligations of the Company to be performed
hereunder through, and including on, the Closing Date (including, without
limitation, all obligations which the Company would be required to perform at
the Closing if the transaction contemplated hereby was consummated)shall have
been fully performed.
6.3.3 No suit, proceeding or investigation shall have been
commenced (to Purchaser's knowledge) by any Governmental Entity on any grounds
to restrain, enjoin or hinder, or seek material damages on account of, the
consummation of any of the Transactions or the other transactions contemplated
hereby.
6.3.4 The Company shall have delivered to Purchaser the
written opinion of Robinson Brog Leinwand Greene Genovese & Gluck P.C., counsel
to the Company, dated as of the Closing Date, in substantially the form of
Exhibit D attached hereto.
6.3.5 Since June 30, 1998 there shall have been no
changes, either individually or in the aggregate, taking into account the
completion of the Transactions other than the Merger, in the results of
operations, condition (financial or otherwise), properties, assets, business or
prospects of the Company or any Subsidiary which has had or would be reasonably
likely to have a Material Adverse Effect on the Company or any Remaining
Subsidiary.
6.3.6 There shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, by any Governmental Entity which imposes any condition
or restriction upon Purchaser, the Surviving Corporation or its Subsidiaries
which would in Purchaser's opinion be commercially unreasonable from a financial
standpoint relative to the transactions contemplated by this Agreement.
6.3.7 Purchaser shall be satisfied in its reasonable
discretion that each of the Distribution and the Power Facility Sales shall have
been completed as provided in this Agreement and that neither the
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Surviving Corporation nor any of the Remaining Subsidiaries has any Liability as
a result of or arising out of the Distribution or Power Facility Sales.
6.3.8 The Indemnification Agreement and the Escrow
Agreement shall have been executed and delivered by BL and shall each be valid,
legal, binding and enforceable obligations of BL, and the Company shall have
deposited $6,000,000 in cash with the Escrow Agent under the Escrow Agreement.
6.3.9 The Base Amount shall be no less than $ 105,275,000.
6.3.10 Purchaser shall have received the proceeds of the
Financing.
6.3.11 Neither the Company nor any Remaining Subsidiary
shall have any Liabilities other than the Permitted Liabilities and the
Liabilities taken into account in determining the Adjustment Amount as agreed to
by Purchaser and Parent.
6.3.12 The Company shall have received all of the Consents
and obtained the Third Party Releases and DB&O Releases (it being understood
that this condition with respect to the Third Party Releases will be satisfied
if Third Party Releases with respect to Liabilities aggregating no more than
$50,000 are not obtained).
6.3.13 The number of shares of Common Stock outstanding
immediately prior to the Effective Time does not exceed 3,051,435.
6.3.14 Purchaser shall have received the results of a
Phase I and, if reasonably requested by Purchaser, Phase II environmental
investigation of the Real Estate held by Reina Distributing, Inc. with results
satisfactory to Parent and Purchaser in their sole discretion.
6.4 Closing Deliveries.
------------------
6.4.1 At the Closing, the Company shall cause to be
executed and delivered to Parent and Purchaser all of the following:
(a) a closing certificate dated the Closing Date and
executed on behalf of the Company by a duly authorized officer of the
Company to the effect set forth in Sections 6.3.1, 6.3.2, 6.3.5, 6.3.6,
6.3.10(g), 6.3.11, 6.3.12 and 6.3.13;
(b) certified copies of such corporate records of the
Company and the Subsidiaries and copies of such other documents as
Purchaser or its counsel may reasonably have requested in connection
with the consummation of the transactions contemplated hereby;
(c) D&O Releases and resignations of all of the officers
and directors of each of the Remaining Subsidiaries and the Company in
form satisfactory to Purchaser and Parent;
(d) the Indemnification Agreement and Escrow Agreement;
and
(e) the minute books and corporate records of the Company
and the Remaining Subsidiaries and originals of the stock certificates
evidencing all of the outstanding capital stock of each of the
Remaining Subsidiaries free of all Encumbrances.
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6.4.2 At the Closing, Parent and Purchaser shall cause
to be delivered to the Company all of the following:
(a) a closing certificate dated the Closing Date and
executed on behalf of Parent and Purchaser by a duly authorized officer
of Parent and Purchaser to the effect set forth in Sections 6.2.1,
6.2.2 and 6.2.4; and
(b) certified copies of such corporate records of Parent
and Purchaser and copies of such other documents as the Company or its
counsel may reasonably have requested in connection with the
consummation of the transactions contemplated hereby.
ARTICLE VII
TERMINATION/EFFECT OF TERMINATION
7.1 Right to Terminate. Anything to the contrary herein
notwithstanding, this Agreement and the transaction contemplated hereby may be
terminated at any time prior to the Effective Time by prompt notice given in
accordance with Section 8.4:
7.1.1 by the mutual written consent of Parent and
Purchaser and the Company (with the approval of their respective Boards of
Directors);
7.1.2 by Purchaser and Parent, or the Company (with the
approval of the Board) if:
(a) the Effective Time shall not have
occurred at or before 11:59 p.m. on February 15, 1999 (the "Termination
Date"); provided, however, that the right to terminate this Agreement
under this Section 7.1.2 shall not be available to any party whose
failure to fulfill any of its obligations under this Agreement has been
the cause of the failure of the Effective Time to have occurred as of
such time; or
(b) upon a vote at the Meeting any of this Agreement
or any of the Transactions required to be adopted or authorized by the
shareholders of the Company shall fail to be adopted and authorized.
7.1.3 by Parent and Purchaser, by giving written notice
of such termination to the Company, if:
(a) there has been a material breach of any
material agreement or covenant on the part of the Company which has not
been cured or adequate assurance of cure given, in either case within
ten (10) business days following notice of such breach from Purchaser
or either of the Indemnification Agreement or the Escrow Agreement
shall not be a valid, legal and binding agreement or enforceable
against BL;
(b) there has been a breach of a
representation or warranty of the Company the Damages from which Purchaser
reasonably determines would cause the Base Amount to be less than $105,275,000;
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(c) the Board shall have taken any action
contemplated by clause (i), (ii), (iii) or (iv) of Section 5.6;
(d) a tender offer or exchange offer for 15%
or more of the shares of Common Stock of the Company is commenced, and
the Board fails to recommend against acceptance of such tender offer or
exchange offer by its stockholder within the time period required by
Section 14e-2 of the Exchange Act (the taking of no position by the
expiration of such period with respect to the acceptance of such tender
offer or exchange offer by its shareholders constituting such a
failure) or any Person acquires by any means 20% or more of the
outstanding shares of Common Stock;
(e) the Company shall have breached any of
its covenants or agreements in Section 5.5;
(f) there shall be pending or threatened any
proceeding seeking material damages on account of this Agreement or the
consummation of the Merger or any of the other Transactions which
Purchaser determines in good faith, after due investigation and
consultation with counsel representing the Company in such proceeding,
could reasonably be expected to result in the Company incurring a
material amount of damages or expenses relative to the protections to
Parent afforded by the Escrow Agreement, after taking into account
applicable insurance coverage; or
(g) the Base Amount is less than $105,275,000.
7.1.4 by the Company (with the approval of the Board ), by
giving written notice of such termination to Parent and Purchaser, if:
(a) there has been a material breach of any
agreement herein on the part of Purchaser which has not been cured or
adequate assurance of cure given, in either case within ten (10)
business days following notice of such breach from the Company;
(b) there has been a breach of a
representation or warranty of Parent or Purchaser herein which could
reasonably be expected to prevent Parent or Purchaser from fulfilling
their obligations under this Agreement and which, in the reasonable
opinion of the Company, by its nature cannot be cured within twenty
(20) days (or, if sooner, the Closing Date);
(c) if the Board determines to enter into and
enters into a definitive agreement providing for a Superior Proposal
which was obtained consistent with Section 5.5; provided, however, that
the Company shall have no right to terminate this Agreement under this
Section 7.1.4(c) unless (i) the Company has provided Purchaser with
written notice of the material terms of the Superior Proposal at least
two business days prior to such termination, and (ii) the Company
simultaneously pays to Purchaser the Termination Payment and Covered
Expenses required under Section 7.4.2.
7.2 Certain Effects of Termination. In the event of the
termination of this Agreement as provided in Section 7.1:
7.2.1 each party, if so requested by the other party, will
return promptly every document furnished to it by or on behalf of the other
party in connection with the transaction contemplated hereby, whether so
obtained before or after the execution of this Agreement, and any copies thereof
(except for copies of documents publicly available) which may have been made,
and will use reasonable efforts to cause its
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representatives and any representatives of financial institutions and investors
and others to whom such documents were furnished promptly to return such
documents and any copies thereof any of them may have made; and
7.2.2 the obligation of Purchaser under the
Confidentiality Letter referred to in Section 5.2 shall continue indefinitely
(subject to its terms) notwithstanding any termination of this Agreement.
This Section 7.2 shall survive any termination of this Agreement.
7.3 Remedies. Notwithstanding any termination right granted in Section
7.1, in the event of the nonfulfillment of any condition to a party's closing
obligations, in the alternative, such party may elect to do one of the
following:
(a) proceed to close despite the nonfulfillment of any
closing condition without waiving any claim for any breach and
specifically in the case of Parent and Purchaser without waiving any
right to proceed under the Indemnification Agreement;
(b) decline to close, terminate this Agreement as provided
in Section 7.1, and thereafter exercise the remedies provided, or seek
damages to the extent permitted in Section 7.4; or
(c) seek specific performance of the obligations of the
other party. Each party hereby agrees that, in the event of any breach
of this Agreement by such party, the remedies available to the other
party at law would be inadequate and that such party's obligations
under this Agreement may be specifically enforced.
7.4 Right to Damages; Expense Reimbursement.
---------------------------------------
7.4.1 If this Agreement is terminated in accordance with
Section 7.1, neither party will have any claim against the other, subject to the
following sentence and, if applicable, the remaining provisions of this Section
7.4. A party terminating this Agreement in accordance with Section 7.1 (other
than Section 7.1.1) will retain any and all of such party's legal and equitable
rights and remedies if, but only if, the circumstances giving rise to such
termination were (i) caused by the other party's willful failure to comply with
a material covenant set forth herein or (ii) that a material representation or
warranty of the other party was materially false when made and that party knew
or should have reasonably known such representation or warranty was materially
false when made. In either of such events, termination shall not be deemed or
construed as limiting or denying any legal or equitable right or remedy of said
party, and said party shall also be entitled to recover its costs and expenses
which are incurred in pursuing its rights and remedies (including reasonable
attorneys' fees).
7.4.2 If (x) the Company terminates this Agreement
pursuant to Section 7.1.4(c) or 5.6 or (y) Purchaser and Parent terminate this
Agreement pursuant to 7.1.3(c), (d)or (e), and Parent and Purchaser are ready,
willing and able to execute or have executed definitive documentation to effect
the Financing or substantially similar financing arrangements, with an able
financing source, the Company will (a) pay Purchaser $3,500,000 in cash
immediately upon such termination (the "Termination Payment"), by wire transfer
of same-day funds to an account designated by Purchaser and (b) reimburse Parent
and Purchaser for their out-of-pocket costs and expenses reasonably incurred and
due to third parties in connection with this Agreement and the Transactions
(including fees and disbursements of counsel, accountants, financial advisors
and consultants, commitment fees, due diligence expenses, travel costs, filing
fees, and similar fees and
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expenses, all of which shall be conclusively established by Purchaser's good
faith statement therefor) (collectively, "Covered Expenses"), up to a maximum of
$600,000, by wire transfer of same-day funds to an account designated by
Purchaser, immediately following receipt of Purchaser's statement evidencing the
Covered Expenses.
7.4.3 If this Agreement is terminated pursuant to Section
7.1.2(b), (x) the Company will pay to Purchaser immediately upon such
termination Parent and Purchaser's Covered Expenses up to a maximum of $600,000
by wire transfer of same day funds to an account designated by Purchaser and (y)
if Michael Zinn or his direct or indirect transferees have failed to vote in
person or by proxy at least 1,600,000 shares in favor of the Merger and any
other matter presented to stockholders in connection with the Merger, the
Company shall pay the Termination Payment to Purchaser immediately upon such
termination by wire transfer of same day funds to an account designated by
Purchaser. If this Agreement is terminated pursuant to (x) Section 7.1.2(b) or
(y) by the Company, or Parent and Purchaser pursuant t Section 7.1.2(a) and the
Company, on or before March 31, 1999, enters into a written agreement to effect
an Acquisition Proposal with, or an Acquisition Proposal is or has been made by,
a party other than Parent, Purchaser or any of their Subsidiaries, and the
Acquisition Proposal is thereafter consummated the Company will pay to Purchaser
the Termination Payment plus the amount of Parent's and Purchaser's Covered
Expenses (to the extent not paid under the first sentence of this Section
7.4.3). The Termination Payment contemplated by the prior sentence shall be paid
in same-day funds by wire transfer to an account designated by Purchaser
immediately prior to consummation of such Acquisition Proposal.
7.4.4 If this Agreement is terminated by Parent and
Purchaser pursuant to Section 7.1.3(a) (other than by virtue of a breach of
Sections 5.5 or 5.6), (b), (f), or (g) the Company shall reimburse Parent and
Purchaser for their Covered Expenses up to a maximum of $600,000, by wire
transfer of same-day funds to an account designated by Parent and Purchaser,
immediately following receipt of Purchaser's statement evidencing such expenses.
If this Agreement is terminated as provided in the immediately preceding
sentence and the Company, on or before March 31, 1999, enters into a written
agreement to effect an Acquisition Proposal with, or an Acquisition Proposal is
or has been made by, a party other than Parent, Purchaser or any of their
Subsidiaries, and the Acquisition Proposal is thereafter consummated the Company
will pay to Purchaser the Termination Payment plus the amount of Parent's and
Purchaser's Covered Expenses (to the extent not paid under the first sentence of
this Section 7.4.4). The Termination Payment contemplated by the prior sentence
shall be paid in same-day funds by wire transfer to an account designated by
Purchaser immediately prior to consummation of such Acquisition Proposal.
7.4.5 If Purchaser and Parent terminate this Agreement
solely as a result of the failure of the conditions set forth in to Section
6.3.10, Parent and Purchaser shall reimburse the Company for its Covered
Expenses up to $600,000 by wire transfer of same day funds to an account
designated by the Company, immediately following receipt of the Company's
statement evidencing such expenses.
7.4.6 If the Company or Parent and Purchaser fail to
promptly pay any amounts owing pursuant to this Section 7.4. when due, the
Company or Parent and Purchaser, as the case may be, shall in addition to paying
such amounts pay all costs andexpenses (including, fees and disbursements of
counsel) incurred in collecting such amounts, together with interest on such
amounts (or any unpaid portion thereof) from the date such payment was required
to be made until the date such payment is received by the Company or Parent and
Purchaser, as the case may be, at the rate of 9% per annum as in effect from
time to time during such period. This Section 7.4 shall survive the termination
of this Agreement.
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ARTICLE VIII
MISCELLANEOUS
8.1 Survival of Representations, Warranties and Agreements. All of the
representations, warranties, and agreements contained in this Agreement or in
any certificate or other document delivered pursuant to this Agreement shall
survive the Merger for a period of five years following the Effective Time,
subject to the terms of the Indemnification Agreement.
8.2 Amendment. This Agreement may be amended by the parties hereto,
with the approval of their respective Boards of Directors, at any time prior to
the Effective Time, whether before or after approval hereof by the stockholders
of the Company, but, after such approval by the stockholders of the Company, no
amendment shall be made without the further approval of such stockholders if
such amendment would violate Section 903 of the NYBCL. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.3 Publicity. Except as otherwise required by law or applicable stock
exchange rules, press releases and other publicity concerning the transactions
contemplated by this Agreement shall be made only with the prior agreement of
the Company and Purchaser.
8.4 Notices. All notices required or otherwise 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 8.4. All notices shall be addressed as follows:
If to the Company:
Besicorp Group Inc.
1151 Flatbush Road
Kingston, New York 12401
Attention: Frederic M. Zinn, Esq., General Counsel
Fax: 914-336-7172
with a copy to:
Robinson Brog Leinwand Greene Genovese & Gluck P.C.
1345 Avenue of the Americas
New York, New York 10105
Attention: A. Mitchell Greene, Esq.
Fax: (212) 956-2164
35
<PAGE>
If to Purchaser or the Surviving Corporation:
BGI Acquisition LLC
950 Third Avenue, 23rd Floor
New York, New York 10022
Attention: President
Fax: 212-688-7908
with a copy to:
Altheimer & Gray
10 South Wacker Drive, Suite 4000
Chicago, Illinois 60606
Attention: Paul M. Daugerdas, Esq.
Fax: (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 8.4.
8.5 Expenses; Transfer Taxes. Except as set forth in Section 7.4
herein, each party hereto shall bear all fees and expenses incurred by such
party in connection with, relating to or arising out of the negotiation,
preparation, execution, delivery and performance of this Agreement and the
consummation of the transaction contemplated hereby, including, without
limitation, financial advisors', attorneys', accountants' and other professional
fees and expenses.
8.6 Entire Agreement. This Agreement, the Confidentiality Agreement
referred to in Section 5.2 and the instruments to be delivered by the parties
pursuant to the provisions hereof constitute the entire agreement between the
parties and shall be binding upon and inure to the benefit of the parties hereto
and their respective legal representatives, successors and permitted assigns.
Each Exhibit and schedule (including the Company Disclosure Schedule) shall be
considered incorporated into this Agreement.
8.7 Non-Waiver. 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
Agreement, to exercise any right or privilege in this Agreement conferred, or
the waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement, shall not be construed as a subsequent waiver of
any such terms, covenants, conditions, rights or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or waiver
had occurred. No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving party.
8.8 Counterparts. 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.
8.9 Severability. The invalidity of any provision of this Agreement or
portion of a provision shall not affect the validity of any other provision of
this Agreement or the remaining portion of the applicable provision.
36
<PAGE>
8.10 Applicable Law. This 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.
8.11 Binding Effect; Benefit. This Agreement shall inure to the benefit
of and be binding upon the parties hereto, and their successors and permitted
assigns. Except as expressly provided herein, nothing in this Agreement, express
or implied, shall 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, including, without
limitation, third party beneficiary rights.
8.12 Assignability. This Agreement shall not be assignable by either
party without the prior written consent of the other party.
8.13 Governmental Reporting. Anything to the contrary in this Agreement
notwithstanding, nothing in this Agreement shall be construed to mean that a
party hereto or other person must make or file, or cooperate in the making or
filing of, any return or report to any Governmental Entity in any manner that
such person or such party reasonably believes or reasonably is advised is not in
accordance with law.
8.14 Defined Terms. The following terms are defined in the
following sections of this Agreement:
Defined Term Where Found
Acquisition Proposal 5.5.3
Additional Amount 2.2.2(a)
Adjustment Amount 6.5.2
Agreement Preamble
Authorization 4.2.3
BL Preamble
Base Amount 2.2.1(a)
Board 4.2.2
Certificate of Merger 1.2
Certificates 2.3.2
Closing 1.6
Closing Date 1.6
Code 2.3.6
Common Stock 2.1.1
Company Preamble
Company Disclosure Schedule 4.1
Company Filings 5.4.3
Company Shareholders 2.3.1
Consents 5.4.4
Constituent Corporation 1.1
Contract 4.2.19
Contracts 4.2.19
Covered Expenses 7.4.2
D&O Insurance 5.7.1
D&O Releases 5.4.5
37
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Defined Term Where Found
efined Term Where Found
Directors 4.2.5
Distributed Subsidiaries 4.2.1
Distribution 3.2.1
Effective Time 1.2
Employee Benefit Plans 4.2.21(a)
Encumbrance 4.2.4
Environmental Laws 4.2.26
Environmental Permits 4.2.26
ERISA 4.2.21(a)
ERISA Affiliate 4.2.21(b)
Escrow Agreement 3.2.1((i)
Exchange Act 3.2.1(j)
Excluded Liability 2.2.1(e)
Fairness Opinion 4.2.31
Financial Statements 4.2.8
Financing 4.3.7
Form 10 Registration 4.2.32
GAAP 4.2.8
GECC 5.11
Governmental Entity 4.2.3
Hazardous Material 4.2.26
Indemnification Agreement 3.2.1(i)
Indemnified Person 5.7.1
Indemnified Persons 5.7.1
Information Statement 4.2.32
Intellectual Property 4.2.29
Interim Balance Sheet 4.2.9(a)
Leased Premises 4.2.28
Lender 4.3.7
Letter of Transmittal 2.3.2
Liabilities 4.2.9
Material Adverse Effect 4.2.4
Meeting 5.4.1
Merger Preamble
Merger Consideration 2.1.1
1993 Plan 2.5
NIMO 4.2.10(a)
NYBCL Preamble
NYSERDA 5.4.4
Obligation 4.2.4
Parent Preamble
Partnership 4.2.6
Paying Agent 2.3.1
Payment Fund 2.3.1
PBGC 4.2.21(b)
Permits 4.2.18
38
<PAGE>
Defined Term Where Found
efined Term Where Found
Permitted Liabilities 3.2.2(b)
Person 4.2.4
Plans 2.5
Power Facility Sales 3.3
Preferred Stock 4.2.5
Proxy Statement 4.2.32
Purchaser Preamble
Purchaser Obligations 4.3.4
Real Estate 4.2.27
Remaining Subsidiary 4.2.1
Retained Assets 3.2.1(a)
Return 4.2.13(b)
Returns 4.2.13(b)
SEC 4.2.3
SEC Documents 4.2.7
Securities Act 4.2.1
Special Account 6.5.1
Specified Current Liabilities 6.5.1(b)
Statement 3.2.2
Stock Option 2.4
Subsidiary 4.2.1
Superior Proposal 5.5.3
Surviving Corporation 1.1
Tax 4.2.13(a)
Taxes 4.2.13(a)
Termination Date 7.1.2(a)
Termination Payment 7.4.2
Third Party Releases 5.4.5
Transaction Agreements 4.2.2
Transactions 4.2.2
Warrants 2.5
8.15 Headings. The headings contained in this Agreement and the
Agreement's Table of Contents are for convenience of reference only and shall
not affect the meaning or interpretation of this Agreement.
8.16 Interpretation. Whenever the term "including" is used in this
Agreement it shall mean "including, without limitation," (whether or not such
language is specifically set forth) and shall not be deemed to limit the range
of possibilities to those items specifically enumerated. All joint obligations
herein shall be deemed to be joint and several whether or not specifically so
specified.
39
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan
of Merger on the date first above written.
PARENT:
BGI ACQUISITION LLC
By: /s/ James Haber
-----------------------------------
James Haber, President of the
Sole Manager of BGI Acquisition LLC
PURCHASER:
BGI ACQUISITION CORP.
By: /s/ James Haber
-----------------------------------
James Haber
Its: President
THE COMPANY:
BESICORP GROUP, INC.
By: /s/ Michael F. Zinn
-----------------------------------
Name: Michael F. Zinn
Its: President and Chief Executive
Officer
40
<PAGE>
ANNEX B
November 20, 1998
PRIVATE AND CONFIDENTIAL
The Board of Directors
Besicorp Group Inc.
1151 Flatbush Road
Kingston, New York 12401
Dear Board Member:
Josephthal & Co. Inc. ("Josephthal") understands that BGI Acquisition
LLC ("Parent"), its wholly owned subsidiary, BGI Acquisition Corp. ("Purchaser")
and Besicorp Group, Inc. ("Besicorp") are considering a proposed transaction in
which Purchaser will merge with and into Besicorp (the "Merger") pursuant to the
Agreement and Plan of Merger presented to Besicorp's Board of Directors on
November 20, 1998 (the "Agreement") by and among Besicorp, Parent and Purchaser.
As more specifically set forth in the Agreement, and subject to the terms and
conditions thereof, each share of common stock, $0.10 par value, of Besicorp
(the "Common Shares") issued and outstanding immediately prior to the Effective
Time of the Merger (other than Common Shares held as treasury shares by Besicorp
or its subsidiaries) shall, by virtue of the Merger be converted into the right
to receive the Merger Consideration. Unless otherwise defined herein,
capitalized terms used herein shall have the meaning ascribed to such terms in
the Agreement.
Josephthal further understands that prior to the Effective Time: (i)
Besicorp will form BL for the purpose of holding substantially all of the
operating assets and all Liabilities of Besicorp and the Remaining Subsidiaries
and all the outstanding capital stock of the Subsidiaries other than the
Remaining Subsidiaries; and (ii) Besicorp will distribute to each of its
stockholders all of the outstanding capital stock of BL ("the Distribution").
Josephthal has not been involved in forming BL or the Distribution and has
not assumed any responsibility for making or obtaining an independent
evaluation or appraisal of BL's properties or other assets nor does Josephthal
opine on the capital requirements or availability of capital for BL.
You have requested our opinion as to the fairness from a financial point of
view to Besicorp and its stockholders of the consideration to be paid by
the Purchaser to the holders of Common Shares in the Merger.
In conducting our analyses and arriving at the opinion expressed
herein, we have reviewed those materials and considered those financial and
other factors that we deemed relevant under the circumstances, including, among
others, the following: (i) the Agreement; (ii) a draft of the Proxy Statement
dated November 13, 1998; (iii) certain historical financial, operating and other
data that are publicly available or were furnished to us by Besicorp including,
but not limited to: (a) financial analyses prepared by management of Besicorp;
(b) Besicorp's Form 10-KSB for the period ended and as of March 31, 1998; (c)
Besicorp's Form 10-QSB for the period ended and as of June 30, 1998; (d)
Besicorp's Draft Form 10-QSB for the period ended and as of September 30, 1998
and e) Besicorp's internally generated operating reports; (iv) publicly
available financial, operating and stock market data for companies engaged in
businesses we deemed comparable to Besicorp; (v) publicly available financial,
operating and stock market data for companies in the power industry which had
been involved in a merger or acquisition since May 1997; and (vi) such other
factors as we deemed appropriate. We have met with senior officers of Besicorp
to discuss the prospects for Besicorp's business and their estimates of future
financial performance, and such other matters as we believed relevant. Our
opinion is solely and necessarily based on economic, financial and market
conditions as they exist and can be evaluated as of the date hereof.
We assume no responsibility to update or revise our opinion upon circumstances
or events occurring after the date hereof.
In our review and analysis and in arriving at our opinion, we have
assumed and relied upon the accuracy and completeness of all of the financial
and other information provided us or publicly available and have neither
attempted independently to verify nor assumed responsibility for verifying any
of this information. We have not conducted a physical inspection of Besicorp's
properties or facilities, nor have we made or obtained or assumed any
responsibility for making or obtaining any independent evaluations or appraisals
of any of these properties or facilities. We have assumed that management's
financial analyses have been prepared on a good faith reasonable basis
reflecting the best currently available estimates and judgments of Besicorp's
management. We have also assumed that the Pre closing Transactions described in
Article III of the Agreement as well as the Conditions to Closing in Article VI
of the Agreement will be completed or satisfied as the case may be. We do not
perform legal services or render legal advice.
<PAGE>
In conducting our analysis and arriving at our opinion as expressed
herein, we have considered such financial and other factors as we have deemed
appropriate under the circumstances including, among others, the following: (i)
the historical and current financial position and results of operations of
Besicorp; (ii) the business prospects of Besicorp; (iii) the historical and
current market for the Common Shares and (iv) the nature and terms of other
acquisition transactions that we believe to be relevant. We have also taken into
account our assessment of general economic, market and financial conditions as
well as our experience in connection with similar transactions and securities
valuation generally. Our opinion necessarily is based upon conditions as they
exist and can be evaluated on the date hereof and we assume no responsibility to
update or revise our opinion based upon circumstances or events occurring after
the date hereof. In that regard, we have not considered any acquisition or
similar transaction to which Besicorp might become a party whether announced or
not, that has not closed prior to the date hereof. Our opinion is limited to the
fairness, from a financial point of view, of the Merger Consideration to be paid
to the holders of Common Shares of Besicorp in the Merger. Our opinion does not
address the Distribution or the potential trading value or trading volume of BL
nor does it address in any way Besicorp's underlying business decision to
effect the Merger, the Distribution or to form BL.
Josephthal has been retained by Besicorp to render this opinion and
provide other financial advisory services, and will receive fees for these
services. In addition, Besicorp has agreed to indemnify Josephthal for certain
liabilities arising out of our engagement. In the ordinary course of our
business, Josephthal may actively trade the Common Shares for its own account
and for the accounts of customers, and, accordingly, may at any time hold a long
or short position in these securities.
This opinion is solely for the use of the Besicorp (including its Board
of Directors) and is not to be publicly-disclosed, used, excerpted, reproduced
or disseminated, quoted or referred to at any time, in any manner or for any
purpose, without the prior written consent of Josephthal provided that Besicorp
may include this opinion as an annex to the Proxy Statement to be filed with the
Securities and Exchange Commission and delivered to the stockholders of
Besicorp. This opinion does not constitute a recommendation to any holder of
Besicorp Common Shares as to how any such stockholder should vote on any aspect
of the Merger including the Distribution, nor does this opinion address the
relative merits of the Merger, the Distribution or any other transactions or
business strategies discussed by the Board of Directors of Besicorp as
alternatives to the Merger or the decision of the Board of Directors of Besicorp
to proceed with the Merger.
Based upon and subject to the foregoing it is our opinion as investment bankers
that, as of the date hereof, the Merger Consideration to be received by the
holders of Common Shares of Besicorp in the Merger is fair from a financial
point of view.
Very truly yours,
/s/ JOSEPHTHAL & CO. INC.
-------------------------
JOSEPHTHAL & CO. INC.
<PAGE>
APPENDIX
Besicorp Group Inc.
1151 Flatbush Road
Kingston, New York 12401
-----------------------------
PROXY
For Special Meeting of Shareholders of Besicorp Group Inc. to be held on
___________, 1999
--------------------------------
This Proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints Frederic Zinn and Michael J. Daley as
Proxies, each with the power of substitution, and hereby authorizes each of them
to represent and to vote, as designated below, all the shares of common stock of
Besicorp Group Inc. held of record by the undersigned on December 11, 1998 at
the Special Meeting of Shareholders to be held on ________, 1999, or any
adjournment or postponement thereof.
1. TO ADOPT THE AGREEMENT AND PLAN OF MERGER DATED NOVEMBER 23, 1998, BY
AND AMONG BESICORP GROUP INC., BGI ACQUISITION LLC AND BGI ACQUISITION
CORP. AND THE MERGER PROVIDED FOR THEREIN.
{ } FOR { } AGAINST { } ABSTAIN
2. TO CONSIDER AND ACT UPON ANY OTHER BUSINESS AS MAY COME BEFORE THE
SPECIAL MEETING OF SHAREHOLDERS OR ANY ADJOURNMENT OR POSTPONEMENT
THEREOF.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY TO
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, THE COMPANY'S TRANSFER
AGENT.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. (IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1 and in the discretion of the named proxies with respect
to any other matter that may properly come before the meeting or any adjournment
or postponement thereof.)
--------------------------------------------
Signature
--------------------------------------------
Signature, if held jointly
Dated _____________________, 1998
Please date and sign exactly as name appears on your
stock certificate. Joint owners should each sign
personally. Trustees, custodians, executors and others
signing in a representative capacity should indicate
the capacity in which they sign.
<PAGE>
