Note

Term Loan

and Line of Credit Agreements

New Term Loan Agreement

December 20, 2019,

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

$23.0

million term loan. The New Term Loan Agreement proceeds were utilized to pay off and refinance the Company’s existing term loan and commercial mortgage agreements, pay down the outstanding balance and associated interest on the Company’s line of credit agreement and pay related transaction costs. The remaining proceeds were deposited into a project fund account for which those proceeds are required to fund future costs of renovating and expanding both The Grand Resort and Avalon Field Club at New Castle.

At closing,

$10.3

million of the proceeds were used to pay off and refinance amounts outstanding under our term loan agreement with Laurel Capital Corporation, dated

December 20, 2016 (

“2016

Term Loan Agreement”),

$2.9

million of the proceeds were used to pay off and refinance amounts outstanding under our term loan agreement with Laurel Capital Corporation, dated

March 29, 2019 (

“2019

Term Loan Agreement”),

$1.7

million of the proceeds were used to pay down the outstanding balance and associated interest on our existing line of credit agreement with Home Savings Bank, dated

May 31, 2018,

as amended,

$0.6

million of the proceeds were used to pay off amounts outstanding under our commercial mortgage agreement with Mercer County State Bank, dated

May 13, 2019 (

“Commercial Mortgage”) and

$0.3

million of the proceeds were utilized to pay transaction costs. The remaining proceeds of approximately

$7.2

million were deposited into a project fund account. At

March 31, 2020

and

December 31, 2019,

loan proceeds of

$5.5

and

$7.2

million, respectively, are presented in the Condensed Consolidated Balance Sheets as “Restricted cash.”

The

2016

Term Loan Agreement,

2019

Term Loan Agreement and the Commercial Mortgage Agreement were terminated in conjunction with the New Term Loan Agreement.

The

$23.0

million outstanding under the New Term Loan Agreement is payable in

119

equal monthly installments of principal and interest

based on a

fifteen

(

) year maturity schedule which commenced

January 20, 2020

followed by

one

final balloon payment of all remaining principal, interest and fees due on the maturity date of

December 20, 2029.

Borrowings under the New Term Loan Agreement bear interest at a fixed rate of

5.00%

until the

fifth

anniversary date of the closing at which time the interest rate will be reset to a fixed rate equal to the greater of (a)

5.00%

per annum or (b) the sum of the

five

year treasury rate on the date

two

(

) business days prior to the reset date plus

3.60%,

provided that the applicable rate shall in

event exceed

7.35%

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

five

percent (

) on any prepayment in the

first

five

years;

four

percent (

) on any prepayment in the

sixth

and

seventh

year;

three

percent (

) on any prepayment in the

eighth

and

ninth

year; and

two

percent (

) 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 also contains certain financial and other covenants, customary representations, warranties and events of default. Avalon was in compliance with the New Term Loan Agreement covenants at

March 31, 2020

and

December 31, 2019.

The Company capitalized approximately

$0.4

million of debt issuance costs in connection with the New Term Loan Agreement. The Company will amortize these costs over the life of the New Term Loan Agreement. In accordance with ASU

2015

03,

Simplifying the Presentation of Debt Issuance Costs

, these costs are presented in the Condensed Consolidated Balance Sheets as a direct reduction from the carrying amount of the term loan liability.

Line of Credit Agreement

May 31, 2018,

Avalon entered into a new business loan agreement with Home Savings Bank, (the “Line of Credit Agreement”) which provides for a line of credit of up to

$5.0

million with an original maturity date of

May 31, 2020.

June 17, 2019,

the Company amended the Line of Credit Agreement to extend the maturity date to

May 31, 2021.

Under the Line of Credit Agreement, borrowings in excess of

$1.0

million are subject to a borrowing base which is calculated based off a specific level of eligible accounts receivable of the waste management business as defined in the agreement. The existing line of credit agreement with Home Savings Bank, dated

December 20, 2016,

as amended, which was entered into concurrently with the

2016

Term Loan Agreement, was terminated in conjunction with the new Line of Credit Agreement.

amounts were outstanding under the existing line of credit agreement at termination. The Company anticipates amending the Line of Credit Agreement to extend the maturity date in the

second

quarter of

2020.

December 20, 2019,

the outstanding balance of

$1.7

million under the Line of Credit Agreement was paid down with a portion of the proceeds from the New Term Loan Agreement.

amounts were drawn under the Line of Credit Agreement at

March 31, 2020

and

December 31, 2019.

Outstanding borrowings under the Line of Credit Agreement bear interest at Prime Rate plus

.25%.

March 31, 2020,

the interest rate on the Line of Credit Agreement was

3.50%.

Borrowings under the Line of Credit Agreement are secured by certain business assets of the Company including accounts receivable, inventory and equipment. The Line of Credit Agreement also contains certain financial and other covenants, customary representations, warranties and events of default. Avalon was in compliance with the line of credit agreements covenants at

March 31, 2020

and

December 31, 2019.

During the

three

months ended

March 31, 2020

and

2019,

the weighted average interest rate on outstanding borrowings was

5.00%

and

5.36%,

respectively.

Obligations under the Company’s debt agreements at

March 31, 2020

and

December 31, 2019

consist of the following (in thousands):

	March 31, 2020
	Gross Amount		Debt Issuance Costs			Net Amount
Term Loan Agreement	$	22,741	$	(405	)	$	22,336
Less current portion		1,070		(42	)		1,028
Long-term debt	$	21,671	$	(363	)	$	21,308

	December 31, 2019
	Gross Amount		Debt Issuance Costs			Net Amount
Term Loan Agreement	$	23,000	$	(415	)	$	22,585
Less current portion		1,057		(42	)		1,015
Long-term debt	$	21,943	$	(373	)	$	21,570

March 31, 2020,

future maturities of long-term debt are as follows (in thousands):

2021	$	1,070
2022		1,125
2023		1,182
2024		1,243
2025		1,306
Thereafter		16,815
Total	$	22,741