SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. 2)*
BESICORP LTD.
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(Name of Issuer)
Common Stock, $.01 par value
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(Title of Class of Securities)
086339108
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(CUSIP Number)
William J. Poltarak (212) 223-0400
Zeichner Ellman & Krause, 575 Lexington Avenue, New York, NY 10022
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 7, 1999
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(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check
the following box |_|.
Note. Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7(b) for
other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 or otherwise subject to the liabilities of that
section of the Act but shall be subject to all other provisions of the Act
(however, see the Notes).
Potential persons who are to respond to the collection of information
contained in this form are not required to respond unless the form
displays a currently valid OMB control number.
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CUSIP No.
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Michael Zinn
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
BK
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) |X|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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7 SOLE VOTING POWER
58,461
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NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY --------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 58,461
WITH --------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
58,461
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
Instructions for Cover Page
(1) Names and I.R.S. Identification Numbers of Reporting Persons -- Furnish
the full legal name of each person for whom the report is filed - i.e.,
each person required to sign the schedule itself - including each member
of a group. Do not include the name of a person required to be identified
in the report but who is not a reporting person. Reporting persons that
are entities are also requested to furnish their I.R.S. identification
numbers, although disclosure of such numbers is voluntary, not mandatory
(see "SPECIAL INSTRUCTIONS FOR COMPLYING WITH SCHEDULE 13D" below).
(2) If any of the shares beneficially owned by a reporting person are held as
a member of a group and the membership is expressly affirmed, please
check row 2(a). If the reporting person disclaims membership in a group or
describes a relationship with other persons but does not affirm the
existence of a group, please check row 2(b) [unless it is a joint filing
pursuant to Rule 13d-1(k)(1) in which case it may not be necessary to
check row 2(b)].
(3) The 3rd row is for SEC internal use; please leave blank.
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Amendment No. 2 to Schedule 13D filed by Michael Zinn (the "Reporting
Person") and dated July, 1999, and Amendment No. 1 to Schedule 13D dated July,
1999. The information contained in Schedule 13D and Amendment No. 1 to Schedule
13D is accurate as of the date of this Amendment No. 2 except as such
information may be amended or as modified in this Amendment No. 2. The
definition of terms defined in Schedule 13D and Amendment No. 1 will continue in
Amendment No. 2.
Item 3. Source and Amount of Funds
Reference is made to Item 4 for a description of the Merger and the
definition of certain other capitalized terms used in this Item 3.
Upon the effectiveness of the Merger, approximately 54,465 Shares owned by
persons other than Buyer and certain management employees of Issuer will be
converted into (i) the right to receive approximately $58.70 per Share in cash
(the "Conversion Right"), or approximately $3,197,100 in the aggregate, together
with (ii) a Deferred Payment Right for the Shares so converted.
The Reporting Person is the controlling member of Avalon Funding, LLC, a
Delaware limited liability company
<PAGE>
("Funding LLC"). Funding LLC was organized to engage in the funding activities
described in this Item.
On January 3, 2000, Funding LLC was granted a secured line of credit of up
to $10 million (the "Credit Facility") by HSBC Bank USA ("Bank"). The Reporting
Person guaranteed repayment of, and collateralized, the Credit Facility. All
advances pursuant to the Credit Facility are due not later than December 31,
2000. Bank reserves the right to decline further funding of the Credit Facility
after that date.
Funding intends to loan Buyer the funds necessary to fund the Conversion
Rights and to make the interim, preclosing loans to Issuer as required in the
Agreement. The exact terms and conditions of such loans have not yet been
determined.
The Deferred Payment Right will be funded with the proceeds of certain
activities of the Merger Survivor and as specified in the Agreement.
Item 4. Purpose of the Transaction
The Reporting Person has caused the formation of Avalon Ventures, LLC, a
Virginia limited liability company ("Avalon") and Besicorp Holdings, Ltd.
("Besicorp") and Besi Acquisition Corp. ("Acquisition"), both of which are New
York corporations (Avalon, Holdings and Acquisition are
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sometimes referred to as the "Buyer"). The Reporting Person controls Avalon,
Holdings and Acquisition and has no plan(s) pursuant to which such control would
be dissapated. Avalon, Holdings and Acquisition may be deemed to be affiliates
of the Reporting Person, although neither Avalon, Holdings or Acquisition have
the power to direct the vote of any Shares which they may hold of record or to
direct the disposition of such Shares without the approval of the reporting
person.
The Reporting Person intends to contribute the Shares he owns to Buyer in
connection with, and for the purposes of the Merger.
On October 7, 1999, Holdings, Acquisition and the Issuer entered into an
Agreement and Plan of Merger (the "Agreement"). Pursuant to the Agreement,
Acquisition will merge into the Issuer not later than December 15, 1999, or at
the discretion of any party to the Agreement, March 1, 2000 (the "Merger"); the
Issuer will survive the Merger; each shareholder of the Issuer (other than
Buyer) will receive (i) the right to receive approximately $58.70 for each Share
held, plus (ii) additional consideration in the event and to the extent that the
person surviving the merger (the "Merger Survivor") receives, in turn, certain
funds or distributions (net of certain expenses) from
3
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certain activities as specified in the Agreement (the "Deferred Payment Right".
Immediately following Merger, (i) the Reporting Person will continue to control
Issuer; and (ii) the Issuer will promptly terminate the registration of its
common stock under the Securities Exchange Act of 1934.
The consummation of the Merger is subject to contingencies, including the
adoption of the Agreement by the shareholders of the Issuer, and there is no
assurance that the Merger will be consummated.
Item 7. Material to be filed as Exhibits.
3. Credit Facility Commitment Letter.
4. Reference is made to the Issuer's Current Report on Form 8-K dated
October 7, 1999, for a true and complete copy of the Agreement.
4
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Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
January 19, 2000
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(Date)
/s/ Michael F. Zinn
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(Signature)
Michael F. Zinn
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(Name/Title)
Attention. Intentional misstatements or omissions of fact constitute federal
criminal violations (see 18 U.S.C. 1001).
5
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HSBC [LOGO]
January 3, 2000
Mr. Michael F. Zinn
Avalon Funding LLC
1151 Flatbush Road
Kingston, NY 12401-7011
Dear Michael:
We are prepared to make a credit facility available to you substantially
according to the terms and conditions outlined below:
Borrower Avalon Funding LLC ("Borrower")
Lender HSBC Bank USA ("Bank")
Amount Line of credit ("Line of Credit") in the maximum
principal amount of $10,000,000.00.
Secured Michael F. Zinn ("Guarantor")
Guarantor:
Purpose Funding for Borrower's various business
investments.
Interest Rate Each advance under the Line of Credit shall, at
the option of Borrower, bear interest at a rate
equal to LIBOR (based on a thirty to ninety day
period) plus 1.00% or the Prime Rate minus 1.00%.
As used herein, Prime Rate means the rate publicly
announced by the Bank from time to time as its
Prime Rate and is a base rate for calculating
interest on certain loans. Interest will be
payable monthly, and on the basis of a 360 day
year, for the actual number of days elapsed.
Availability Advances will be made at the sole discretion of
the Bank. LIBOR-based advances must be requested
at least two business days in advance. Each
advance request will be accompanied by a
certificate signed by Michael F. Zinn, certifying
that after such advance is made, Guarantor will be
in compliance with the financial covenants set
forth below under "Affirmative Covenants". Without
limiting the discretionary nature of the Line of
Credit,
HSBC Bank USA
347 Main Street, Poughkeepsie, NY 12601
<PAGE>
Avalon Funding LLC
January 3, 2000
Page 2
the Bank will be in a position to consider
requests for advances only if the following margin
requirements are met. Borrower shall maintain at
all times in the Pledged Accounts (as such term is
defined below under "Security and Supporting
Documents") sufficient collateral such that the
aggregate principal balance outstanding
("Principal Amount") under the Line of Credit does
not exceed 70% of the market value ("Collateral
Value") of the collateral. Notwithstanding the
foregoing, the above-referenced percentage may
exceed 70%, up to 100%, in the event of a decline
in Collateral Value due to changes in market
conditions, provided that, whenever the Principal
Amount first exceeds 80% of the Collateral Value,
any excess shall be payable within sixty (60) days
after the date that Principal Amount first
exceeded 80%.
Credit
Documentation The Line of Credit shall be evidenced by a Grid
Note substantially in the form attached hereto as
Exhibit A ("Grid Note").
Maturity Each LIBOR-based advance under the Line of Credit
shall be payable at the end of the interest period
selected by Borrower for such advance. No
LIBOR-based advance shall have a maturity date
later than December 31, 2000. All Prime Rate-based
advances shall be payable on the due date
inscribed for such advance on the Grid Note, which
due date shall not be not later than December 31,
2000.
Prepayments The Borrower may prepay at any time all or any
portion of principal advanced under the Line of
Credit provided, however, in the event of
prepayment of any LIBOR-based advance, Borrower
shall reimburse the Bank for any loss, cost or
expense which the Bank reasonably demonstrates has
resulted from such prepayment.
Security and The Pledgor will execute a Pledge Security
Supporting Agreement, an Account Control Agreement and other
Agreements documentation required by the Bank to grant the
Bank a first perfected security interest in five
investment accounts in the name of Michael F. Zinn
(account #670-21086-11, 670-21087-10,
670-21088-19, 670-21089-18 and 670-21305-16)
(collectively, "Pledged Accounts"), managed by
Salomon Smith Barney. The latter party shall be
required to execute an Account Control Agreement
in form and content acceptable to the Bank,
recognizing the Bank's security interest.
<PAGE>
Avalon Funding LLC
January 3, 2000
Page 3
Affirmative Covenants The Pledgor shall maintain at all times pledged
liquid assets ("Liquid Assets") in an amount equal
to or greater than 1.43 times the Principal Amount
and a combined net worth of at least 2 times the
maximum Principal Amount. As used herein, Liquid
Assets shall mean cash, cash equivalents and
marketable securities. At least once each calendar
quarter, and more often as required above under
"Availability", Borrower will furnish the Bank
with a certificate signed by Michael F. Zinn,
certifying compliance with the above financial
covenants. If, in connection with a request for an
advance, the amount requested would, based on the
most recent brokerage statements furnished to the
Bank, cause the Principal Amount to exceed 70% of
the Collateral Value, then Borrower will be
required to furnish updated brokerage statements
indicating availability. The Guarantor shall
furnish the Bank annual personal financial
statements in form acceptable to the Bank. The
Borrower shall furnish the Bank copies of all
federal tax returns filed with the Internal
Revenue Service within thirty (30) days of the
date such returns are filed. The Guarantor shall
cause the Bank to receive copies of all monthly
statements regarding the Pledged Accounts.
Negative Covenants The Borrower will not use any of the funds
advanced under the Line of Credit to purchase or
carry margin stock, as such term is defined in
Federal Reserve Bank Regulation U.
Indemnity Reimbursement The Pledgor agrees to reimburse the Bank on demand
with respect to any amount paid, or cost or
expense incurred, by the Bank pursuant to any
indemnity given by the Bank in any Account Control
Agreement.
The terms contained in this letter shall survive the closing of the Line of
Credit. This letter is not a commitment to lend and advances under the Line of
Credit are at the discretion of the Bank. Either the Bank or Avalon Funding LLC
may terminate this Line of Credit with respect to future advances, at any time,
upon notice to the other party. We review non-contractual Lines of Credit, such
as this, at least annually upon submission of appropriate financial information.
This Line of Credit is scheduled to be reviewed by December 31, 2000 and will
automatically expire as of that date unless renewed or extended by us in
writing.
<PAGE>
Avalon Funding LLC
January 3, 2000
Page 4
I look forward to a long and fruitful relationship between Avalon Funding LLC
(including all related parties) and HSBC Bank USA.
Sincerely,
/s/ Patrick M. Trask
Patrick M. Trask
Vice President
AGREED AND ACCEPTED
Borrower:
Avalon Funding LLC
By: /s/ Michael F. Zinn
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Michael F. Zinn, Majority Member
Guarantor:
By: /s/ Michael F. Zinn
---------------------------------------
Michael F. Zinn
<PAGE>
OPTIONAL ADVANCE TIME OR DEMAND GRID NOTE
$10,000,000.00 Poughkeepsie, New York
January 3, 2000
FOR VALUE RECEIVED, Avalon Funding, LLC (the "Borrower"), promises to pay
to HSBC Bank USA ("Bank") or order, on demand or when due as provided herein at
its 347 Main Street Office in Poughkeepsie, New York, the aggregate unpaid
principal amount of all advances made by the Bank to the Borrower from time to
time (each and "Advance" and collectively the "Advances") as evidenced by the
inscriptions made on the Schedule attached hereto ("Schedule"), together with
interest thereon at a per annum rate as provided herein. The aggregate amount of
all advances outstanding hereunder shall not at any time exceed $10,000,000.00.
As used in this Note, the following terms shall have the meanings set forth
below:
Adjusted LIBOR Rate: The LIBOR Rate plus 1.00%
Adjusted Prime Rate: The Prime Rate minus 1.00%
Business Day: Any day other than a Saturday, Sunday or other day on which
commercial banks in London and/or Poughkeepsie are authorized or required by law
to close.
LIBOR PERIOD: A period, if available to the Bank, of not less than thirty
days or more than ninety days.
LIBOR Period Request: The written request by the Borrower to the Bank for
the LIBOR Rate Advance, and including a LIBOR Period, the date of the LIBOR Rate
Advance and amount.
LIBOR Rate: Means the per annum interest rate equal to the London
Interbank Offered Rate as shown on the Dow Jones & Company's Tolerate Screen, at
approximately 11:00 AM (London time) two business days prior to the proposed
borrowing date for deposits of United States Dollars in an amount and for a
period of time comparable to the principal amount of the proposed LIBOR Rate
Advance.
LIBOR Rate Advance: Any advance bearing interest at the Adjusted LIBOR
Rate.
Prime Rate: The rate of interest publicly announced by the Bank from time
to time as its prime rate and is a base rate for calculating interest on certain
loans.
Prime Rate Advance: Any advance bearing interest at the adjusted Prime
Rate.
Prime Rate Request: The written request by the Borrower to the Bank for a
Prime Rate Advance and including the term of borrowing, date of borrowing and
amount.
Regulatory Change: After time date hereof, the introduction of any new, or
any change in existing, applicable laws, rules or regulations or in the
interpretation or administration thereof by any court or governmental authority
charged with the interpretation or administration thereof, or compliance by Bank
with any new request or directive by any such court or authority (whether or not
having the force of law).
<PAGE>
All advances, the due date thereof, interest rates and all payments of
principal made on this Note may be inscribed by the Bank on the Schedule. Each
Advance shall be payable on the earlier of the due date thereof or On Demand.
Borrower may request a Prime Rate Advance by writing in a Prime Rate
Request to the Bank not later than 1:00 PM (Eastern time) on the date of the
proposed Prime Rate Advance.
Borrower may request a LIBOR Rate Advance and LIBOR Period by writing in a
LIBOR Period Request to the Bank not later than 1:00 PM (Eastern time) on the
date of the proposed LIBOR Rate Advance. Borrower may not select a LIBOR Period
having an expiration date later than 90 days. Notwithstanding any provision
herein to the contrary any LIBOR Rate Advance shall be made in a minimum amount
of $100,000.00.
The Bank may make advances to the Borrower upon written request. Each
written request shall be conclusively presumed to have been made by a person
authorized by the Borrower to do so, and any credit by the Bank of any advance
to or for the account of the Borrower shall conclusively establish the
Borrower's obligation to repay same. The Bank shall incur no liability of any
kind to any party by reason of making an advance upon a written request.
If Borrower fails to timely select an applicable LIBOR Period for
calculation of a LIBOR Rate Advance, then the Advance shall bear interest at the
Adjusted Prime Rate and shall be deemed to be a Prime Rate Advance.
If by reason of any Regulatory Change, the Bank determines that, by reason
of circumstances affecting the London interbank market generally, adequate and
fair means do not or will not exist for determining the LIBOR Rate, (ii) by
reason of any Regulatory Change, the Bank becomes restricted in the amount which
it may hold of a category of liabilities which includes deposits by reference to
the LIBOR Rate or a category of assets which includes loans which bear interest
at a rate determined in part by reference to the LIBOR Rate, (iii) by reason of
any Regulatory Change, it shall be unlawful for the Bank to maintain a LIBOR
Rate Advance, or any portion thereof, bearing interest at the Adjusted LIBOR
Rate, (iv) in the exclusive judgment of the Bank, deposits are not available to
the Bank in the international interbank market in the requisite amounts and for
the requisite durations, (v) in the exclusive judgment of the Bank, the Adjusted
LIBOR Rate does not adequately reflect the cost to the Bank of making or
maintaining a LIBOR Rate Advance then, in any such case, any LIBOR Rate Advance
shall bear interest at the Adjusted Prime Rate. If the Bank determines that
because of a change in circumstances the Adjusted LIBOR Rate is again available
to the Borrower hereunder, the Bank will so advise the Borrower, and the
Borrower may convert the rate of interest payable hereunder to the Adjusted
LIBOR Rate at any time (provided the Adjusted LIBOR Rate is otherwise available
hereunder) by making such election in accordance with, and subject to the
conditions of, this Note.
If, at any time, any Regulatory Change: (i) shall subject the Bank to any
tax, duty or other charge with respect to this Note, except an income tax, based
upon the charging and collecting of interest hereunder at the Adjusted LIBOR
Rate, shall change the basis of taxation or payments to the Bank of the
principal of or interest on this Note; (ii) shall result in the imposition,
modification or deemed applicability of any reserve, special deposit or similar
requirements against assets of, deposits with or for the account of, or credit
extended by, the Bank; (iii) shall, because of the existence of this Note,
affect the amount of capital required or expected to be maintained by the Bank,
or any corporation controlling the Bank; or (iv) shall impose on the Bank or the
London interbank market any other condition affecting this Note or the charging
and collecting of interest hereunder at the Adjusted LIBOR Rate and the result
of any of the foregoing is, in the Bank's reasonable judgment, (a) to increase
the cost to the Bank of charging and collecting interest hereunder at the
Adjusted LIBOR Rate, or (b) to reduce the return on the Bank's capital or the
amount of any sum received or
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<PAGE>
receivable by the Bank under this Note by an amount deemed by the Bank to be
material, upon demand then, by the Bank, the Borrower agrees to pay to the Bank
such additional amount or amounts as will compensate the Bank for such increased
cost or reduction. Such payment shall be made on the first date for payment of
interest hereunder following the date of the demand by the Bank and on each such
payment date thereafter or shall be paid promptly on demand if the Borrower is
not advised of the amount of such payment prior to any such payment date.
Determinations by the Bank for purposes of this paragraph of the effect of any
Regulatory Change on its costs of make or maintaining Advances bearing interest
at the Adjusted LIBOR Rate and of the additional amounts required to compensate
the Bank in respect thereof, shall be conclusive absent manifest error in
calculation, provided that such determinations are made in good faith.
The Borrower understands and acknowledges that in connection with LIBOR
Rate Advances the Bank may enter into funding arrangements on terms and
conditions which could result in substantial losses, costs and expenses to the
Bank if LIBOR Rate Advances are prepaid on a date other than the expiration of
the selected LIBOR period. Therefore, if there is a prepayment of any LIBOR
Rate Advance on a date other than the expiration of the selected LIBOR Period
for any reasons whatsoever including, but not limited to, any payments made by
the Borrower because the holder of this Note has accelerated payment in
accordance with the terms hereof or any other document relating to the
indebtedness hereunder, then the Borrower shall pay to the Bank, as liquidated
damages and not as a penalty, a fee (the "Liquidation Fee") equal to the losses
(including but not limited to, lost profits of the Bank), costs and expenses of
the Bank in connection with such prepayment as determined by the Bank, which
payment shall be made by the Borrower to the Bank on the date on which such
prepayment is made. The calculations made by the Bank to ascertain such
Liquidation Fee shall be conclusive absent manifest error in calculation by the
Bank, provided that such calculations are made in good faith. The Bank, upon the
written request of the Borrower, shall advise the Borrower in writing of the
amount of the Liquidation Fee applicable to any such prepayment.
The Bank may elect (but shall be under no obligation) to send to the
Borrower written confirmation of the due date of each Advance, but any failure
to do so shall not relieve the Borrower of the obligation to repay the Advance
when due. Unless the Borrower shall object to such confirmation in writing
within five (5) days after receipt thereof, such confirmation shall be prima
facie evidence of the facts stated therein.
Each entry set forth on the Schedule shall be prima facie evidence of the
facts so set forth, except for any such facts as to which the Bank has sent to
the Borrower a written confirmation and the Borrower has timely objected as
provided herein. No failure by the Bank to make, and no error by the Bank in
making any inscription on the Schedule shall affect the Borrower's obligation to
repay the full principal amount advanced by the Bank to or for the account of
the Borrower, or the Borrower's obligation to pay interest thereon at the agreed
upon rate.
Before maturity, Prime Rate Advance shall bear interest at the Adjusted
Prime Rate, LIBOR Rate Advances shall earn interest at the Adjusted LIBOR Rate.
Any principal amount not paid when due (at maturity, by acceleration or
otherwise) shall bear interest thereafter until paid in full, payable on demand,
at a rate per annum equal to:
(a) For each Prime Rate Advance at a Rate equal to Prime Rate plus 3%,
and
(b) For each LIBOR Rate Advance at the rate otherwise applicable thereto
plus 3% from the time of default in payment of principal until the
end of the then current LIBOR Period therefor, and thereafter at a
rate equal to the Prime Rate plus 3%.
If any payment to be made under this Note shall be stated to be due on a
Saturday, Sunday or banking holiday, the Borrower will pay interest thereon at
the applicable rate until the date of actual receipt of such payment by the
holder of this Note.
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<PAGE>
In no event shall the interest rate on this Note exceed the maximum rate
authorized by applicable law. Any change of interest rate on this Note resulting
from a change in the Bank's Prime Rate shall be effective on the date of such
change. Interest on Advances will be calculated for each day at 1/360th of the
applicable per annum rate, which will result in a higher effective annual rate.
Accrued interest on Prime Rate Advances shall be payable monthly on the first
day of each month and on the date any Prime Rate Advance is paid in full.
Accrued interest on LIBOR Rate Advances shall likewise be payable on the first
day of each month and on the date any LIBOR Advance is paid in full.
Notwithstanding anything to the contrary contained herein, any holder of
this Note may declare all indebtedness evidenced by this Note, not payable on
demand, to be immediately due and payable whenever such holder has the right to
do so under any Security Agreement or other agreement, now or hereafter in
effect, pursuant to which payment of the indebtedness evidenced by this Note is
secured; or, irrespective of the terms or existence of any such Security
Agreement or other agreement, upon the happening of any of the following: (1)
nonpayment, when due, of the principal of, or interest on, any indebtedness
evidenced by this Note; (2) default by Borrower in the payment or performance of
any obligation, term or condition of this Note or any agreement between Borrower
and the holder hereof; (3) the filing by or against Borrower of a request or
petition for liquidation, reorganization, arrangement, adjustment of debts,
adjudication as a bankruptcy, relief as a debtor or other relief under the
bankruptcy, insolvency or similar laws of the United States or any state or
territory thereof or any foreign jurisdiction, now or hereafter in effect; (4)
the making by Borrower, of any general assignment for the benefit of creditors;
(5) the appointment of a receiver or trustee for Borrower or for any assets of
Borrower, including, without limitation the appointment of or taking possession
by a "custodian", as defined in the Federal Bankruptcy Code; (6) the occurrence
of any event described in clause (3), (4) or (5) of this paragraph with respect
to any endorser, guarantor or any other party liable for, or whose assets or any
interest thereon secures, payment of any indebtedness evidenced by this Note;
(7) nonpayment when due by Borrower of any indebtedness for borrowed money owing
to any party other than the Bank, or the occurrence of any event which could
result in acceleration of the time for payment of any such indebtedness; or (8)
if the holder hereof in good faith believes that the prospect of payment of all
or any part of the indebtedness evidenced by this Note is impaired.
NOTHING CONTAINED IN THIS NOTE OR OTHERWISE IS INTENDED, NOR SHALL
CONSTITUTE, ANY OBLIGATION OF THE BANK TO MAKE ANY ADVANCE.
No failure by the holder hereof to exercise, and no delay in exercising,
any right or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise by such holder of any right or remedy hereunder
preclude any other or further exercise thereof or the exercise of an other right
or remedy. The rights and remedies of the holder thereof as herein specified
are cumulative and not exclusive of any other rights or remedies which such
holder may otherwise have.
THE BORROWER AGREES TO PAY ALL COSTS AND EXPENSES INCURRED BY THE HOLDER
HEREOF IN ENFORCING THIS NOTE, INCLUDING, WITHOUT LIMITATION, REASONABLE
ATTORNEY'S FEES AND LEGAL EXPENSES. IF PAYMENT OF THIS NOTE IS SECURED BY
COLLATERAL, THE COLLATERAL IS SPECIFIED IN THE COLLATERAL RECORDS OF THE BANK.
THE BORROWER HEREBY WAIVES (I) DEMAND, PRESENTMENT FOR PAYMENT, NOTICE OF
DISHONOR, PROTEST AND NOTICE OF PROTEST OF THIS NOTE, AND (II) THE RIGHT OF A
JURY TRIAL. ANY NOTICE, DEMAND OR REQUEST RELATING TO ANY MATTER SET FORTH
HEREIN, OTHER THAN A REQUEST FOR BORROWING, SHALL BE IN WRITING AND SHALL E
DEEMED EFFECTIVE WHEN MAILED, POSTAGE PREPAID, BY REGISTERED OR CERTIFIED MAIL,
RETURN RECEIPT REQUESTED, TO ANY PARTY HERETO AT ITS ADDRESS HEREIN OR AT SUCH
OTHER ADDRESS OF WHICH IT SHALL HAVE NOTIFIED THE PARTY GIVING SUCH NOTICE IN
WRITING AS AFORESAID. COPIES OF ALL SUCH NOTICES, DEMANDS AND REQUESTS TO BANK
SHALL BE SENT TO BANK, AT ITS ADDRESS ABOVE STATED. IN THE CASE OF THE BORROWER,
ALL SUCH COPIES SHALL BE SENT TO THE BORROWER AT THE ADDRESS OF THE BORROWER AS
STATED HEREIN.
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<PAGE>
THIS NOTE, BEING DRAWN, EXECUTED AND DELIVERED IN THE STATE OF NEW YORK,
WHERE ALL ADVANCES AND REPAYMENTS SHALL BE MADE, SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE UNDERSIGNED AGREES
THAT ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS NOTE MAY BE
COMMENCED IN THE SUPREME COURT OF NEW YORK IN DUTCHESS COUNTY, OR IN THE
DISTRICT COURT OF THE UNITED STATES IN THE 9TH DISTRICT OF NEW YORK. THE
UNDERSIGNED WAIVES PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND
COMPLAINT COMMENCING AN ACTION OR PROCEEDING IN ANY SUCH COURT SHALL BE PROPERLY
SERVED AND SHALL CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED MAIL TO
THE ADDRESS SPECIFIED ABOVE OR OTHERWISE PROVIDED BY THE LAWS OF THE STATE OF
NEW YORK OR THE UNITED STATES.
Avalon Funding, LLC
BY: /s/ Michael F. Zinn
---------------------------------------
Michael F. Zinn, Majority Member
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