AVALON HOLDINGS CORPORATION (NASDAQ:AWX) Files An 8-K Entry into a Material Definitive Agreement
ITEM 1.01 Entry into a Material Definitive Agreement

On December 20, 2016, Avalon Holdings Corporation and certain direct and indirect wholly owned subsidiaries (collectively “Avalon” or the “Company”) entered into a loan and security agreement (the “Loan Agreement”) with Laurel Capital Corporation which provides for a $12.0 million term loan. At closing, $9.1 million was used to pay off the existing line of credit agreement and associated accrued interest with The Home Savings and Loan Company of Youngstown, Ohio, dated May 21, 2015, as amended, and pay related transaction costs associated with the Loan Agreement. The existing line of credit agreement with The Home Savings and Loan Company of Youngstown, Ohio, was terminated in conjunction with the repayment. Remaining proceeds of $2.9 million under the Loan Agreement were deposited in a project fund account to be disbursed to Avalon following the closing date to fund costs of expanding The Avalon Inn.

The $12.0 million outstanding under the Loan Agreement is payable in 119 equal monthly installments of principal and interest, based on a fifteen (15) year maturity schedule commencing January 20, 2017. The Loan Agreement matures on December 20, 2026 at which time the final balloon payment equal to the remaining outstanding principal, interest and fees are due. Borrowings under the Loan Agreement bear interest at a fixed rate of 5.35% 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) 5.35% per annum or (b) the sum of the Index Rate on the date two (2) business days prior to the reset date and 3.95%, provided that the applicable rate shall in no event exceed 7.50% per annum.

Avalon has the right to prepay the amount outstanding under the 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 (5%) 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 are secured by certain real property and related business assets as defined in the Loan Agreement. The Loan Agreement also contains certain financial and other covenants, customary representations, warranties and events of default.

Concurrently with the Loan Agreement, Avalon entered into a new business loan agreement with The Home Savings and Loan Company of Youngstown, Ohio, (the “Line of Credit Agreement”) which provides for a line of credit of up to $4.0 million maturing on May 31, 2017. 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. No amounts were drawn under the Line of Credit Agreement at December 20, 2016.

Outstanding borrowings under the Line of Credit Agreement bear interest at Prime Rate plus .25%. At December 20, 2016, the interest rate on the Line of Credit Agreement was 4.00%.

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.

ITEM 1.02 Termination of a Material Definitive Agreement

The disclosure set forth in Item 1.01 of this report concerning termination of the existing line of credit agreement with The Home Savings and Loan Company of Youngstown, Ohio, dated May 21, 2015, as amended, is incorporated into this Item 1.02 by reference.