ITEM 1.01 Entry into a Material Definitive Agreement
On August 5, 2022, Avalon Holdings Corporation ("Avalon") and certain direct and
indirect wholly owned subsidiaries entered into a loan and security agreement
(the "New Term Loan Agreement") with Laurel Capital Corporation which provided
for a $31.0 million term loan. At closing, $20.2 million of the proceeds were
used to pay off and refinance amounts outstanding and associated interest under
our term loan agreement with Laurel Capital Corporation, dated December 20, 2019
("2019 Term Loan Agreement") and $0.4 million of the proceeds were utilized to
pay transaction costs. The remaining proceeds of approximately $10.4 million
were deposited into a project fund account for which those proceeds are to fund
future costs of renovating and expanding both The Grand Resort and Avalon Field
Club at New Castle. The 2019 Term Loan Agreement was terminated in conjunction
with the New Term Loan Agreement.
The $31.0 million outstanding under the New Term Loan Agreement is payable in
119 equal monthly installments of principal and interest, based on a twenty-five
(25) year maturity schedule commencing September 5, 2022 followed by one final
balloon payment of all remaining principal, interest and fees due on the
maturity date of August 5, 2032. Upon request by Avalon, project fund proceeds
can be utilized to pay debt service. Borrowings under the New Term Loan
Agreement bear interest at a fixed rate of 6.00% until the seventh anniversary
date of the closing at which time the interest rate will be reset to a fixed
rate equal to the greater of (a) 6.00% per annum or (b) the sum of the three
year treasury rate on the date two (2) business days prior to the reset date
plus 3.40%, provided that the applicable rate shall in no event exceed 8.50% per
annum.
Avalon has the right to prepay the amount outstanding under the New Term Loan
Agreement, in whole or in part, at any time upon payment of the principal amount
of the loan to be prepaid plus accrued unpaid interest thereon to the prepayment
date, plus an applicable prepayment penalty. The prepayment penalty, expressed
as a percentage of the principal of the loan being prepaid, is six percent (6%)
on any prepayment in the first five years; four percent (4%) on any prepayment
in the sixth and seventh year; three percent (3%) on any prepayment in the
eighth and ninth year; and two percent (2%) on any prepayment in the tenth year.
Borrowings under the New Term Loan Agreement are secured by certain real
property and related business assets as defined in the agreement. The New Term
Loan Agreement contains a Fixed Charge Coverage Ratio requirement of at least
1.20 tested on an annual basis on December 31 of each year, commencing December
31, 2023. The New Term Loan also contains other nonfinancial covenants,
customary representations, warranties and events of default.
The forgoing description of the New Term Loan Agreement does not purport to be
complete and is qualified in its entirety by reference to the full text of the
New Term Loan Agreement, which is filed with this report as Exhibits 10.1, 10.2,
10.3, 10.4, 10.5, 10.6, 10.7, 10.8 and 10.9 and is incorporated herein by
reference.
ITEM 1.02 Termination of a Material Definitive Agreement
The disclosure set forth in Item 1.01 of this report concerning termination of
the 2019 Term Loan Agreement is incorporated into this Item 1.02 by reference
ITEM 9.01 Financial Statements and Exhibits
10.1 Loan and Security Agreement, dated as of August 5, 2022 between Avalon
Holdings Corporation and certain wholly owned subsidiaries, as borrowers, and
Laurel Capital Corporation, as lender.
10.2 Mortgage Note, dated as of August 5, 2022 between Avalon Holdings
Corporation and certain wholly owned subsidiaries, as borrowers, and Laurel
Capital Corporation, as lender.
10.3 Open-End Mortgage, Assignment of Leases, Security Agreement and Fixture
Filing, dated August 1, 2022 and effective as of August 5, 2022 between Avalon
Holdings Corporation, as mortgagor, and Laurel Capital Corporation, as
mortgagee.
10.4 Open-End Mortgage, Assignment of Leases, Security Agreement and Fixture
Filing, dated August 1, 2022 and effective as of August 5, 2022 between Avalon
Lakes Golf, Inc., as mortgagor, and Laurel Capital Corporation, as mortgagee.
10.5 Open-End Mortgage, Assignment of Leases, Security Agreement and Fixture
Filing, dated August 1, 2022 and effective as of August 5, 2022 between The
Avalon Resort and Spa, LLC., as mortgagor, and Laurel Capital Corporation, as
mortgagee.
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10.6 Open-End Mortgage, Assignment of Leases, Security Agreement and Fixture
Filing, dated August 1, 2022 and effective as of August 5, 2022 between Avalon
Country Club at Sharon, Inc., as mortgagor, and Laurel Capital Corporation, as
mortgagee.
10.7 Open-End Mortgage, Assignment of Leases, Security Agreement and Fixture
Filing, dated August 1, 2022 and effective as of August 5, 2022 between Avalon
Mahoning Sports Center, Inc., as mortgagor, and Laurel Capital Corporation, as
mortgagee.
10.8 Open-End Mortgage, Assignment of Leases, Security Agreement and Fixture
Filing, dated August 1, 2022 and effective as of August 5, 2022 between The
Havana Cigar Shop, Inc., D/B/A Avalon Field Club at New Castle, as mortgagor,
and Laurel Capital Corporation, as mortgagee (Parcel 1).
10.9 Open-End Mortgage, Assignment of Leases, Security Agreement and Fixture
Filing, dated August 1, 2022 and effective as of August 5, 2022 between The
Havana Cigar Shop, Inc., D/B/A Avalon Field Club at New Castle, as mortgagor,
and Laurel Capital Corporation, as mortgagee (Parcel 2).
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