ITEM
1
.01
Entry into a Material Definitive Agreement
On May 13, 2019, Havana Cigar Shop, Inc., a wholly owned subsidiary of Avalon Holdings Corporation, entered into a Purchase and Sale Agreement with New Castle Country Club (the “Club”) for the purchase of certain real and personal property assets associated with the Club. Havana Cigar Shop, Inc. concurrently entered into an Assignment and Assumption and Commercial Loan Modification Agreement (the “Assumption Agreement”) with Mercer County State Bank for the outstanding debt under the Club’s Commercial Mortgage (the “Commercial Mortgage”) and Demand Line of Credit, as amended (the “Demand Line of Credit”), (collectively “the Agreements”) at closing as consideration for the purchase of the real and personal property of the Club.
The total amount of outstanding debt under the Agreements assumed by Havana Cigar Shop, Inc., at closing was approximately $787,000. At closing the outstanding principal balance assumed under the Commercial Mortgage obligation and Demand Line of Credit was $653,000 and $134,000, receptively.
The $653,000 outstanding under the $950,000 Commercial Mortgage is payable in 110 equal monthly installments of $7,573 consisting of principal and interest
commencing May 21, 2019 and maturing on June 21, 2028. Borrowings under the Commercial Mortgage bear interest at a fixed rate of 5.50% until June 21, 2023 at which time the interest rate will be reset to a fixed rate equal to the greater of (a) 4.25% per annum or (b) the Prime Rate plus 0.50%.
Avalon has the right to prepay the amount outstanding under the Commercial Mortgage, 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, with no prepayment penalty.
Borrowings under the Commercial Mortgage are secured by a first lien mortgage and assignment of leases and rents on the land, building and improvements on the property and non-real estate assets owned by Havana Cigar Shop, Inc. The Commercial Mortgage also contains certain financial and other covenants, customary representations, warranties and events of default.
Under the Assumption Agreement Havana Cigar Shop, Inc. also assumed the Club’s $150,000 Commercial Demand Line of Credit of which $134,000 was outstanding at closing. Monthly payments consist of interest only on the outstanding principal balance with principal due on demand in the event of default as defined in the Commercial Demand Line of Credit agreement.
Outstanding borrowings under the Commercial Demand Line of Credit bear interest at Prime Rate plus 0.50%. At closing, the interest rate on the Commercial Demand Line of Credit was 6.00%.
Borrowings under the Commercial Demand Line of Credit are secured by a second lien mortgage and assignment of leases and rents on the land, building and improvements on the property and non-real estate assets owned by Havana Cigar Shop, Inc. The Commercial Demand Line of Credit agreement also contains certain financial and other covenants, customary representations, warranties and events of default.
The forgoing description of the Assumption Agreement, Commercial Mortgage Note and Commercial Demand Line of Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Agreements, which are filed with this report as Exhibits 10.1, 10.2, 10.3 10.4, 10.5, 10.6, 10.7 and 10.8 and is incorporated herein by reference.