Exhibit 10.1

 

 

Execution Copy

 

 

 

LOAN AND SECURITY AGREEMENT

 

 

By and Among

 

 

AVALON HOLDINGS CORPORATION,

AVALON RESORTS AND CLUBS, INC.,

AVALON CLUBS, INC.,

AVALON RESORTS, INC.,

AVALON GOLF AND COUNTRY CLUB, INC.,

AVALON LAKES GOLF, INC.,

AVALON COUNTRY CLUB AT SHARON, INC.,

AVALON RESORT AND SPA LLC,

THE HAVANA CIGAR SHOP, INC.,

AVALON TRAVEL, INC.

and

TBG, INC.

 

and

 

 

LAUREL CAPITAL CORPORATION

 

 

 

 

Dated as of December 20, 2016 

 

 
 

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TABLE OF CONTENTS

   

Page

ARTICLE I DEFINITIONS

1

     

1.1

Definitions. 

1

     

ARTICLE II THE 2016 LOAN

6

   

2.1

The 2016 Loan. 

6

     

ARTICLE III THE 2016 NOTE

7

   

3.1

The 2016 Note.

7

3.2

Interest.

7

3.3

Payment Terms.

7

3.4

Prepayment.

8

3.5

Late Charge.

8

3.6

Default Rate.

8

3.7

Payments.

9

     

ARTICLE IV SECURITY

9

   

4.1

Security.

9

 

 

ARTICLE V REPRESENTATIONS AND WARRANTIES

10      

5.1

Existence, Power and Authority.

10

5.2

Financial Information.

10

5.3

No Material Adverse Change.

10

5.4

Binding Obligations.

10

5.5

No Defaults or Violations.

11

5.6

Litigation.

11

5.7

Title; Access.

11

5.8

Utilities.

11

5.9

Information.

11

5.10

Zoning and Governmental Approvals.

11

5.11

Contracts.

12

5.12

Disclosure.

12

5.13

Americans with Disabilities Act.

12

5.14

Anti-Terrorism Laws.

12

5.15

Survival.

13

   

ARTICLE VI AFFIRMATIVE COVENANTS OF BORROWER

13    

6.1

Use of Proceeds.

13

6.2

Taxes and Assessments.

13

6.3

Books and Records.

13

6.4

Reimbursement.

13

6.5

Compliance with Covenants, Agreements and Laws.

14

6.6

Insurance.

14

6.7

Maintenance of Properties.

14

6.8

Litigation.

15

6.9

Judgments.

15

6.10

Financial and Reporting Requirements.

15

6.11

Fixed Charge Coverage Ratio.

15

  

 
 

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ARTICLE VII NEGATIVE COVENANTS OF BORROWERS

16    

7.1

Ownership of Materials and Personal Property.

16

7.2

Transfer of Interests.

16

7.3

Prohibition of Liens.

16

7.4

Prohibition of Indebtedness.

17

7.5

Prohibition of Acquisitions.

17

7.6

Prohibition of Loans.

17

7.7

Prohibition of Asset Purchases.

17

7.8

Transfer of Property; Release of Mortgaged Property.

17

7.9

Anti-Terrorism Laws.

17

   

ARTICLE VIII CONDITIONS OF CLOSING AND DISPOSITION OF NOTE PROCEEDS

18    

8.1

Conditions of Closing and Disposition of 2016 Note Proceeds.

18

8.2

Disposition of Proceeds of 2016 Note.

20

   

ARTICLE IX DEFAULTS AND REMEDIES

22    

9.1

Events of Default.

22

9.2

Remedies.

24

9.3

Set-Off.

24

   

ARTICLE X MISCELLANEOUS

24    

10.1

Notices.

24

10.2

Preservation of Rights.

25

10.3

Illegality.

25

10.4

Changes in Writing.

25

10.5

Entire Agreement.

25

10.6

Counterparts.

26

10.7

Successors and Assigns.

26

10.8

Interpretation.

26

10.9

Certain Waivers.

26

10.10

Indemnity.

26

10.11

Assignments and Participations.

27

10.12

Governing Law and Jurisdiction.

27

10.13

WAIVER OF JURY TRIAL.

27

 

EXHIBIT A – Form of 2016 Note

EXHIBIT B – Form of Disbursement Request

 

 
 

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LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is made as of the 30th day
of November, 2016 by and among AVALON HOLDINGS CORPORATION, an Ohio corporation
("Avalon Holdings"), AVALON RESORTS AND CLUBS, INC., an Ohio corporation
("Avalon Resorts and Clubs"), AVALON CLUBS, INC., an Ohio corporation ("Avalon
Clubs"), AVALON RESORTS, INC., an Ohio corporation ("Avalon Resorts"), AVALON
GOLF AND COUNTRY CLUB, INC., an Ohio corporation ("Avalon Golf and CC"), AVALON
LAKES GOLF, INC., an Ohio corporation ("Avalon Lakes Golf"), AVALON COUNTRY CLUB
AT SHARON, INC., a Pennsylvania corporation ("Avalon CC at Sharon"), AVALON
RESORT AND SPA, LLC, an Ohio limited liability company ("Avalon Resort and
Spa"), THE HAVANA CIGAR SHOP, INC., an Ohio corporation ("Havana"), AVALON
TRAVEL, INC. an Ohio corporation ("Avalon Travel"), and TBG, INC., an Ohio
corporation ("TBG" and, together with Avalon Holdings, Avalon Resorts and Clubs,
Avalon Clubs, Avalon Golf and CC, Avalon Lakes Golf, Avalon CC at Sharon, Avalon
Resort and Spa, Havana and Avalon Travel, the "Borrowers"), and LAUREL CAPITAL
CORPORATION, a Pennsylvania business corporation (the "Lender").

 

RECITALS:

 

A.       The Borrowers have requested that the Lender provide a term loan to the
Borrowers in the principal amount of $12,000,000 (the "2016 Loan").

 

B.       The 2016 Loan will be used by the Borrowers to finance the costs of a
project (the "2016 Project") consisting of (i) repaying and retiring the
Borrowers' existing secured line of credit from Home Savings and Loan Company of
Youngstown, Ohio (the "Existing Line of Credit"), (ii) paying the costs of
renovating and expanding the Avalon Inn and Resort facility, and (iii) paying
the transaction costs relating to the 2016 Loan.

 

C.        The Lender is willing to provide the 2016 Loan upon the terms and
conditions hereinafter set forth.

 

NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants and
agreements hereinafter set forth and intending to be legally bound hereby,
covenant and agree as follows:

 

 

ARTICLE I DEFINITIONS

 

 

1.1

Definitions.

 

In addition to words and terms defined in the Recitals or elsewhere in this
Agreement, the following terms shall have the meanings provided below:

 

"2016 Mortgages" means, together, (a) the Avalon Holdings 2016 Mortgage, (b) the
Avalon CC at Sharon Mortgage, (c) the Avalon Lakes Golf Mortgage, and (d) the
Avalon Resort and Spa Mortgage.

 

"2016 Note" means the Mortgage Note evidencing the 2016 Loan, substantially in
the form of Exhibit A attached hereto, executed and delivered by the Borrowers
to the Lender, as the same may be amended, renewed, replaced, or supplemented
from time to time.

 

 
 

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"Anti-Terrorism Laws" means any Laws relating to terrorism or money laundering,
including Executive Order No. 13224, the USA Patriot Act, the Laws comprising or
implementing the Bank Secrecy Act, and the Laws administered by the United
States Treasury Department's Office of Foreign Asset Control (as any of the
foregoing Laws may from time to time be amended, renewed, extended, or
replaced).

 

"Applicable Rate" means:

 

(a)     For the period from the Closing Date through the date immediately
preceding the Reset Date, 5.35% per annum; and (ii); and

 

(b)     For the period from the Reset Date through the Maturity Date, the
greater of (x) 5.35% per annum and (y) 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 CC at Sharon Mortgage" means the Mortgage, Security Agreement,
Assignment of Leases and Fixture Filing dated December 1, 2016 and effective as
of the date hereof, executed by Avalon CC at Sharon in favor of the Lender,
granting the Lender a mortgage lien on the Avalon CC at Sharon Mortgaged
Property as security for the 2016 Note.

 

"Avalon CC at Sharon Mortgaged Property" means the Land owned by Avalon CC at
Sharon and located at 1030 Forker Blvd., Hermitage, PA 16148-1566, as more
particularly described on Exhibit A to the Avalon CC at Sharon Mortgage, and the
other Mortgaged Property as defined in the Avalon CC at Sharon Mortgage.

 

"Avalon Holdings Mortgage" means the Mortgage, Security Agreement, Assignment of
Leases and Fixture Filing dated December 1, 2016 and effective as of the date
hereof, executed by Avalon Holdings in favor of the Lender, granting the Lender
a mortgage lien on the Avalon Holdings Mortgaged Property as security for the
2016 Note.

 

"Avalon Holdings Mortgaged Property" means the Land owned by Avalon Holdings and
located at One American Way, Warren, OH, 44484 as more particularly described on
Exhibit A to the Avalon Holdings 2016 Mortgage, and the other Mortgaged Property
as defined in the Avalon Holdings 2016 Mortgage.

 

"Avalon Lakes Golf Mortgage" means the Mortgage, Security Agreement, Assignment
of Leases and Fixture Filing dated December 1, 2016 and effective as of the date
hereof, executed by Avalon Lakes Golf in favor of the Lender, granting the
Lender a mortgage lien on the Avalon Lakes Golf Mortgaged Property as security
for the 2016 Note.

 

"Avalon Lakes Golf Mortgaged Property" means the Land owned by Avalon Lakes Golf
and located at 5 East Market Street, Warren, OH 44484, as more particularly
described on Exhibit A to the Avalon Lakes Golf Mortgage, and the other
Mortgaged Property as defined in the Avalon Lakes Golf Mortgage.

 

"Avalon Resort and Spa Mortgage" means the Mortgage, Security Agreement,
Assignment of Leases and Fixture Filing dated December 1, 2016 and effective as
of the date hereof, executed by Avalon Resort and Spa in favor of the Lender,
granting the Lender a mortgage lien on the Avalon Resort and Spa Mortgaged
Property as security for the 2016 Note.

 

 
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"Avalon Resort and Spa Mortgaged Property" means the Land owned by Avalon Resort
and Spa and located at 9519 East Market Street, Warren, OH 44484, as more
particularly described on Exhibit A to the Avalon Resort and Spa Mortgage, and
the other Mortgaged Property as defined in the Avalon Resort and Spa Mortgage.

 

"Benefit Plan" means any defined benefit or defined contribution plan, including
both single and multi-employer plans, subject to Title IV of ERISA and
established and maintained for employees of the Borrowers or any subsidiary of
the Borrowers or any ERISA Affiliate of the Borrowers.

 

"Blocked Person" has the meaning set forth in Section 5.14 hereof.

 

"Borrower Consolidated Group" means, together, the Borrowers and each other
person or entity that is consolidated with the Borrowers for financial statement
purposes.

 

"Closing Date" means December 20, 2016.

 

"Collateral" means all property of a Borrower or any other Person, real or
personal, in or upon which the Lender is granted a security interest, mortgage,
lien, pledge or encumbrance pursuant to the Loan Documents, including without
limitation the Mortgaged Property and the Personal Property.

 

"Default Rate" shall have the meaning set forth in Section 3.6 hereof.

 

"ERISA" means the Employee Retirement Income Security Act of 1074, as in effect
as of the date of this Agreement and as amended from time to time.

 

"ERISA Affiliate" means a Person that is under common control with a Borrower
within the meaning of Section 414(b) of the Code including but not limited to, a
subsidiary of a Borrower.

 

"Event of Default" shall have the meaning set forth in Section 9.1.

 

"Excess Interest" shall have the meaning set forth in Section 3.2(d) hereof.

 

"Executive Order" means the Executive Order No. 13224 on Terrorist Financing,
effective September 24, 2001, as the same has been, or shall hereafter be,
renewed, extended, amended or replaced.

 

"Financial Statements" means, for a Borrower, a balance sheet and statement of
income and cash flows prepared in accordance with GAAP (subject in the case of
interim statements to normal year-end adjustments) (a) in the case of annual
statements, examined and reported on by an independent certified public
accountant acceptable to the Lender and (b) in the case of quarterly statements,
prepared internally by such Borrower.

 

"Fixed Charge Coverage Ratio" means, for any fiscal year of the Borrowers, the
ratio of (i) the sum of Operating Cash Flow of the Borrower Consolidated Group
for such fiscal year, to (ii) the sum of Total Fixed Charges of the Borrower
Consolidated Group for such fiscal year, all as determined from the Financial
Statements of the Borrower Consolidated Group for such fiscal year delivered to
the Lender.

 

 
3

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"GAAP" means generally accepted accounting principles in the United States (as
such principles may change from time to time), which shall include the official
interpretations thereof by the Financial Accounting Standards Board, applied on
a consistent basis.

 

"Improvements" means all buildings and other improvements located on any of the
Mortgaged Property.

 

"Index Rate" means the Five (5) Year Interest Rate Swap rate, as published by
Intercontinental Exchange (ICE) Benchmark Administration. If the Index Rate is
discontinued or is no longer published as of any Reset Date, then the Lender
shall select an index or statistic which most closely approximates the
discontinued or unpublished index and such index or statistic shall replace such
discontinued or unpublished index for all purposes hereunder.

 

"Interest Payment Date" means the twentieth (20th) day of each calendar month
commencing January 20, 2017 and the Maturity Date.

 

"Land" means, collectively, the real property comprising the Mortgaged Property
as more particularly described on Exhibit A to the respective Mortgages.

 

"Late Charge" shall have the meaning set forth in Section 3.5 hereof.

 

"Law" means any law (including common law), constitution, statute, treaty,
regulation, rule, ordinance, order, injunction, writ, decree or award of any
Official Body.

 

"Line of Credit Collateral" means the accounts receivable now outstanding and
hereafter arising, and the proceeds therefrom and all of the goods, inventory
and equipment of the Borrowers, together with all present and future
attachments, accessions, replacement parts, additions, exchanges and all
products and proceeds thereof; provided that the Line of Credit Lender shall
subordinate its security interest in all equipment or other property
constituting Personal Property to the security interest granted to the Lender
hereunder.

 

"Line of Credit Lender" means the Home Savings and Loan Company of Youngstown
Ohio, or its successor or replacement lender.

 

"Line of Credit" means the $4,000,000 working capital line of credit provided to
the Borrowers and certain of their affiliates by the Line of Credit Lender.

 

"Loan Documents" means this Agreement, the 2016 Notes, the Mortgages, the
Assignments, the Guaranties, and all other indemnification agreements,
documents, instruments, certificates and agreements now or hereafter executed in
connection with the 2016 Loan, as the same may be amended, replaced, or
supplemented from time to time.

 

"Material Adverse Change" means a material adverse change in (i) the business,
operations or financial condition of the Borrowers, taken as a whole, (ii) the
ability of the Borrowers to perform any of their respective payment or other
obligations under this Agreement or any other Loan Document, (iii) the legality,
validity or enforceability of the obligations of a Borrower under this Agreement
or any other Loan Document, or (iv) the ability of the Lender to exercise its
rights and remedies with respect to, or otherwise realize upon, any collateral
for the Obligations.

 

"Material Adverse Effect" means a material and adverse effect on (i) the
business, operations or financial condition of the Borrowers, taken as a whole,
(ii) the ability of the Borrowers to perform any of their respective payment or
other obligations under this Agreement or any other Loan Document, (iii) the
legality, validity or enforceability of the obligations of a Borrower under this
Agreement or any other Loan Document, or (iv) the ability of the Lender to
exercise its rights and remedies with respect to, or otherwise realize upon, any
security for the Obligations.

 

 
4

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"Materials" shall mean all materials, supplies, chattels, fixtures, machinery,
equipment or other articles of property furnished or to be furnished in
connection with the construction of, and to be incorporated into, the renovation
and expansion of the Avalon Resort and Inn Facility.

 

"Maturity Date" means December 20, 2026.

 

"Maximum Interest Rate" shall have the meaning set forth in Section 3.2(d)
hereof. "Mortgaged Property" means, together, the Avalon Holdings Mortgaged
Property, the

Avalon CC at Sharon Mortgaged Property, the Avalon Resort and Spa Mortgaged
Property and

the Avalon Lakes Golf Mortgaged Property.

 

"Mortgages" means, together, the Avalon Holdings Mortgage, the Avalon CC at
Sharon Mortgage, the Avalon Resort and Spa Mortgage and the Avalon Lakes Golf
Mortgage.

 

"Obligations" means all repayment and other obligations of the Borrowers with
respect to the 2016 Loan under this Agreement, the 2016 Note and the other Loan
Documents.

 

"Official Body" means any government or political subdivision or any agency,
authority, bureau, central bank, board, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.

 

"Operating Cash Flow" means net income after taxes, exclusive of extraordinary
gains and losses and non-cash transactions, plus interest expense, depreciation,
and amortization (as those terms are defined in accordance with GAAP).

 

"PBGC" means the Pension Benefit Guaranty Corporation established pursuant to
Title IV of ERISA.

 

"Person" means any individual, corporation, partnership, limited liability
company, association, joint-stock company, trust, unincorporated organization,
joint venture, government or political subdivision or agency thereof, or any
other entity.

 

"Personal Property" means all of the Borrowers' furniture, fixtures and
equipment located on the Mortgaged Property, and all proceeds thereof.

 

"Potential Default" shall mean any condition, event, act or omission which, with
the giving of notice or passage of time or both, would constitute an Event of
Default.

 

"Project Fund" means the account established pursuant to Section 8.2 hereof.

 

 
5

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"Prohibited Transaction" means any transaction which is prohibited under Section
4975 of the Code or Section 406 of ERISA and not exempt under Section 4975 of
the Code or Section 408 of ERISA.

 

"Reportable Event" means any of the events set forth in Section 4043(b) of ERISA
or the regulations thereunder, except any such event as to which the provision
for thirty (30) days' notice to the PBGC is waived under applicable regulations.

 

"Required Deductions" shall have the meaning set forth in Section 3.7 hereof.
"Reset Date" means the fifth (5th) anniversary of the Closing Date.

"Subordination Agreement" means the Subordination Agreement dated as of the
Closing Date between the Lender and the Line of Credit Lender.

 

"Title Company" means Chicago Title Insurance Company.

 

"Total Fixed Charges" means the sum of interest expense, regularly scheduled
payments of principal made on long term debt and capitalized lease obligations
during the period being measured, dividends and distributions, and Unfunded
Capital Expenditures.

 

"UCC" means the Uniform Commercial Code of the state in which any Collateral is
located, as amended.

 

"Unfunded Capital Expenditures" means capital expenditures not funded by
long-term

debt.

 

"USA Patriot Act" means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
Public Law 107-56, as the same has been, or shall hereafter be, renewed,
extended, amended or replaced.

 

 

ARTICLE II THE 2016 LOAN

 

 

2.1

The 2016 Loan.

 

Subject to the terms and conditions hereinafter set forth, the Lender agrees to
make the 2016 Loan to the Borrowers. The Lender and the Borrowers acknowledge
and agree that the Lender will disburse the proceeds of 2016 Loan only for the
payment of or reimbursement for the actual costs, fees and expenses incurred by
the Borrowers in connection with the 2016 Project, with all such disbursements
to be made in accordance with the terms and conditions set forth in this
Agreement. The Borrowers hereby jointly and severally covenant and agree to
repay the 2016 Loan in accordance with the terms of the Notes and Article 3
hereof.

 

 
6

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ARTICLE III THE 2016 NOTE

 

 

 

3.1

The 2016 Note.

 

The obligation of the Borrowers to repay the 2016 Loan shall be evidenced by the
2016 Note, dated the Closing Date, in substantially the form attached hereto as
Exhibit A, in the principal amount of $12,000,000, maturing on the Maturity
Date, and bearing interest and having such other terms as are set forth in this
Article 3 and in the 2016 Note.

 

 

3.2

Interest.

 

(a)     Interest Rate. Amounts outstanding under the 2016 Note will bear
interest at the Applicable Rate in effect from time to time, subject, however,
to application of the Default Rate as provided in Section 3.6 hereof.

 

(b)     Calculation of Interest and Fees. Interest on the 2016 Note, unpaid fees
and other sums payable thereunder shall be calculated on the basis of a 360 day
year consisting of 12 thirty day months. Interest on the 2016 Note and any
unpaid fees and other sums payable hereunder shall be calculated on the basis of
a 360 day year consisting of 12 thirty day months.

 

(c)     Interest Laws. Notwithstanding any provisions to the contrary contained
in this Agreement or any other Loan Document, the Borrowers shall not be
required to pay, and the Lender shall not be permitted to collect, any amount of
interest in excess ("Excess Interest") of the maximum amount of interest
permitted by applicable Law (the "Maximum Interest Rate"). If any Excess
Interest is provided for or determined by a court of competent jurisdiction to
have been provided for in this Agreement or in any other Loan Document with
respect to the 2016 Loan, then in such event: (A) the provisions of this
subsection shall govern and control; (B) the Borrowers shall not be obligated to
pay any Excess Interest; (C) any Excess Interest that the Lender may have
received hereunder shall be, at the Lender's option, (1) applied as a credit
against the outstanding principal balance of the 2016 Loan or accrued and unpaid
interest (not to exceed the Maximum Rate, (2) refunded to the Borrowers, or (3)
any combination of the foregoing; (D) the interest rate(s) provided for herein
shall be automatically reduced to the Maximum Rate, and this Agreement and the
other Loan Documents shall be deemed to have been and shall be, reformed and
modified to reflect such reduction; and (E) the Borrowers shall not have any
action against the Lender for any damages arising out of the payment or
collection of any Excess Interest. Notwithstanding the foregoing, if for any
period of time interest on any Loan is calculated at the Maximum Rate rather
than the Applicable Rate, and thereafter such Applicable Rate becomes less than
the Maximum Rate, the rate of interest payable on such Loan shall remain at the
Maximum Rate until the Lender shall have received the amount of interest which
the Lender would have received during such period on the 2016 Loan had the rate
of interest not been limited to the Maximum Rate during such period.

 

 

3.3

Payment Terms.

 

The Borrowers hereby jointly and severally covenant and agree to repay the 2016
Loan as follows:

 

(a)     Principal and interest on the 2016 Loan shall be due and payable as
follows: (i) one hundred nineteen (119) equal monthly payments of principal and
interest based on a fifteen (15) year amortization on the twentieth (20th) day
(or in the case of February, the last day) of each calendar month commencing
January 20, 2017 and ending November 20, 2026; followed by (iii) a final payment
on the Maturity Date equal to the remaining outstanding principal of the 2016
Loan plus accrued unpaid interest and fees thereon.

 

 
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(b)     If any payment under the 2016 Note shall become due on a Saturday,
Sunday or public holiday under the laws of the Commonwealth of Pennsylvania,
such payment shall be made on the next succeeding business day and such
extension of time shall be included in computing interest in connection with
such payment. Payments received will be applied to charges, fees and expenses
(including attorneys' fees), accrued interest and principal in any order the
Lender may choose, in its sole discretion.

 

 

3.4

Prepayment.

 

(a)     Provided that no Event of Default has occurred or is continuing, the
2016 Note shall be subject to prepayment at the option of the Borrowers, upon at
least fifteen (15) days prior written notice to the Lender, in whole or in part
on any date upon payment of the principal amount of the 2016 Note to be prepaid
plus accrued unpaid interest thereon to the prepayment date (and, in the case of
a prepayment in whole of the 2016 Note, any other sums then due and payable
under the 2016 Note), plus a prepayment penalty ("Prepayment Penalty") equal to
a percentage of the principal amount of the 2016 Note being prepaid, with the
percentage determined based on the date of prepayment as set forth in the
following table:

 

Date of Prepayment

Prepayment Penalty

Between Closing Date and fifth anniversary of Closing Date

5.00%

Between fifth and seventh anniversaries of Closing Date

4.00%

Between seventh and ninth anniversaries of Closing Date

3.00%

Ninth anniversary of Closing Date and thereafter

2.00%

 

 

(b)     Any prepayments with respect to the 2016 Note shall be applied against
scheduled installment payments due on the 2016 Note in inverse order beginning
with the final scheduled installment payment.

 

 

3.5

Late Charge.

 

If the Borrowers fail to make any installment of interest or principal on a Note
within ten calendar

(10) days after such installment becomes due, in addition to making a payment of
the installment due, the Borrowers shall pay to the Lender a late charge in an
amount equal to the greater of twenty-five and 00/100 dollars ($25.00) and five
percent (5.0%) of any such overdue installment (the "Late Charge"). Any Late
Charge will be immediately due and payable. Such ten (10) day period shall not
be construed in any way to extend the due date of such payment.

 

 

3.6

Default Rate.

 

At the Lender's option, upon the occurrence of an Event of Default and during
the continuance thereof, subject to all applicable cure and grace periods, under
any of the Loan Documents and during the continuance thereof, the 2016 Note
shall bear interest at the Applicable Rate plus five percent (5.0%), or the
Maximum Interest Rate, whichever is lower (the rate applicable during the
continuance of an Event of Default is referred to hereinafter as the "Default
Rate"). The Default Rate may continue to apply whether or not judgment shall be
entered on the applicable Note.

 

 
8

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3.7

Payments.

 

All payments to be made with respect to principal, interest, fees or other
amounts due from the Borrowers under this Agreement or under the Notes are
payable at 12:00 noon (Pittsburgh, Pennsylvania time) on the day when due,
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived, and an action for the payments will accrue immediately.
All such payments must be made to the Lender at its office in U.S. Dollars and
in funds immediately available at such office, without setoff, counterclaim or
other deduction of any nature. All such payments shall be applied at the option
of the Lender to accrued and unpaid interest, outstanding principal and other
sums due under this Agreement in such order as the Lender, in its sole
discretion, shall elect. All such payments shall be made absolutely net of,
without deduction or offset, and altogether free and clear of any and all
present and future taxes, levies, deductions, charges and withholdings and all
liabilities with respect thereto, excluding income and franchise taxes imposed
on the Lender under the Laws of the United States or any state or political
subdivision thereof. If the Lender is compelled by Law to deduct any such taxes
or levies (other than such excluded taxes) or to make any such other deductions,
charges or withholdings (collectively, the "Required Deductions"), the Borrowers
will pay to the Lender an additional amount equal to the sum of (i) the
aggregate amount of all Required Deductions, and (ii) the aggregate amount of
United States, federal or state income taxes required to be paid by the Lender
in respect of the Required Deductions.

 

 

ARTICLE IV SECURITY

 

4.1     Security.

 

(a)     The Obligations shall be secured by, and each Borrower hereby grants to
the Lender, a security interest in, (i) such Borrower's Personal Property and
(ii) the Project Fund. Each Borrower hereby represents, warrants, covenants and
agrees that this Agreement constitutes a security agreement with respect to its
Personal Property and the Project Fund, and the Lender shall have all of the
rights and remedies of a secured party under the UCC, as well as all other
rights and remedies available hereunder or at law or in equity or by judicial
decision. Each Borrower hereby agrees, at such Borrower's cost and expense, to
execute and deliver and, if appropriate, to file with the appropriate filing
officer or office, such security agreements, financing statements, continuation
statements or other instruments as the Lender may request or require in order to
impose, perfect or continue the perfection of, or protect, the liens and
security interests created by this Agreement. Each Borrower also authorizes the
Lender, at any time and from time to time, to prepare and file any such
financing statements, continuation statements or other instruments without the
signature of such Borrower.

 

(b)     As further security for the Obligations, the Borrowers shall execute and
deliver, or cause to be executed and delivered to Lender, the Mortgages.

 

 
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ARTICLE V REPRESENTATIONS AND WARRANTIES

 

The Borrowers hereby jointly and severally represent and warrant to the Lender
as follows:

 

 

5.1

Existence, Power and Authority.

 

Each Borrower is a corporation (or, in the case of Avalon Resort and Spa, a
limited liability company), duly organized, validly existing and in good
standing under the laws of the State of Ohio (or, in the case of Avalon CC at
Sharon, the Commonwealth of Pennsylvania), and has the power and authority to
own and operate its assets and to conduct its business as now or proposed to be
carried on, and is duly qualified, licensed and in good standing to do business
in all jurisdictions where its ownership of property or the nature of its
business requires such qualification or licensing. Each Borrower is duly
authorized to execute and deliver the Loan Documents to which it is a party, all
necessary action to authorize the execution and delivery of the Loan Documents
by each Borrower has been properly taken, and each Borrower is duly authorized
to borrow under this Agreement and to perform all of the other terms and
provisions of the Loan Documents.

 

 

5.2

Financial Information.

 

The Borrowers have delivered or caused to be delivered to the Lender certain
financial information and Financial Statements regarding the Borrowers and the
Mortgaged Property. Such financial information and Financial Statements are
true, complete and accurate in all material respects and fairly present the
information they purport to present. Such Financial Statements have been
prepared in accordance with GAAP subject in the case of interim statements to
normal year-end adjustments and to any comments and notes acceptable to the
Lender in its sole discretion.

 

 

5.3

No Material Adverse Change.

 

Since the date of the financial information and the Financial Statements
referred to in Section 5.2 above, no Borrower has suffered any damage,
destruction or loss, and no event or condition has occurred or exists, which has
resulted or could result in a Material Adverse Change as to any Borrower or the
Mortgaged Property, or the ability of the Borrowers to perform any of their
payment or other obligations under this Agreement or any other Loan Document.

 

 

5.4

Binding Obligations.

 

Each Borrower has full power and authority to enter into the transactions
provided for in this Agreement and has been duly authorized to do so as may be
required by law, such Borrower's articles of incorporation, bylaws, certificate
of organization, operating agreement and other organizational documents, and any
agreements to which such Borrower is a party; and the Loan Documents, when
executed and delivered by such Borrower, will constitute the legal, valid and
binding obligations of such Borrower enforceable against such Borrower in
accordance with their respective terms.

 

 
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5.5

No Defaults or Violations.

 

There does not exist any Event of Default or any default or violation by the
Borrowers of or under any of the terms, conditions or obligations of: (a) any
applicable articles or certificate of incorporation or organization,
regulations, bylaws or operating agreement; (b) any material indenture,
mortgage, deed of trust, franchise, permit, contract, agreement, or other
instrument to which a Borrower is a party or by which it is bound; or (c) any
law, regulation, ruling, order, injunction, decree, condition or other
requirement applicable to or imposed upon a Borrower by any law, the action by
any court or any governmental authority or agency; and the consummation of this
Agreement and the transactions set forth herein will not result in any such
default or violation.

 

 

5.6

Litigation.

 

There are no actions, suits, proceedings or governmental investigations pending
or, to the knowledge of the Borrowers, threatened against any Borrower, which
could result in a Material Adverse Change as to such Borrower or its Mortgaged
Property, or the ability of such Borrower to perform any of its payment or other
obligations under this Agreement or any other Loan Document, and there is no
basis known to the Borrowers for any action, suit, proceeding or investigation
which could result in such a Material Adverse Change.

 

 

5.7

Title; Access.

 

Each Borrower owning any portion of the Mortgaged Property has clear and
marketable fee simple title to the Mortgaged Property owned by such Borrower,
free, clear and unencumbered, of record and in fact, except for and subject only
to those matters permitted by the terms of the applicable Mortgage. Each
Borrower has been granted all easements necessary or appropriate for use of the
Mortgaged Property owned by such Borrower. The Land is a separately subdivided
parcel or parcels under applicable laws regulating subdivision and land
development. All streets necessary for the full utilization of the Land have
been completed.

 

 

5.8

Utilities.

 

All utility services necessary for the use and operation of the Improvements for
their intended purposes, including water, storm and sanitary sewer facilities,
electric, gas, and telephone, are available at the boundaries of the Land and
are installed and operating.

 

 

5.9

Information.

 

All surveys, plat plans and similar documents furnished by the Borrowers to the
Lender are accurate and complete in all material respects as of their respective
dates.

 

 

5.10

Zoning and Governmental Approvals.

 

The development, construction, use and occupancy of the Improvements conform to
all applicable laws, all existing governmental approvals and all covenants,
conditions and restrictions contained in a deed, lease or other instrument or
agreement covering or affecting all or any portion of the Mortgaged Property.
All governmental approvals have been obtained and are valid and in full force
and effect.

 

 
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5.11

Contracts.

 

There are no contracts affecting or relating to the management or operation of
the Improvements.

 

 

5.12

Disclosure.

 

None of the Loan Documents contains or will contain any untrue statement of
material fact or omits or will omit to state a material fact necessary in order
to make the statements contained in this Agreement or the Loan Documents not
misleading. There is no fact known to the Borrowers which materially adversely
affects or, so far as the Borrowers can now reasonably foresee, might materially
adversely affect the business, assets, operations, financial condition or
results of operation of the Borrowers, taken as a whole, and which has not
otherwise been fully set forth in this Agreement or in the Loan Documents.

 

 

5.13

Americans with Disabilities Act.

 

To the best of the Borrowers' knowledge, information and belief, the
Improvements and the Mortgaged Property are in compliance with the requirements
of the Americans with Disabilities Act, and there are no pending or threatened
claims or proceedings by the U.S. Department of Justice or any third parties
against the Borrowers or any subsidiary of a Borrower arising from the Americans
with Disabilities Act.

 

 

5.14

Anti-Terrorism Laws.

 

(a)        Neither the Borrowers, nor any affiliate of a Borrower, is in
violation of any Anti-Terrorism Law or engages in or conspires to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding, or
attempts to violate, any of the prohibitions set forth in any Anti-Terrorism
Law.

 

(b)        Neither the Borrowers nor any Guarantor, nor any Affiliate of a
Borrower or any Guarantor, or respective agents acting or benefiting in any
capacity in connection with the Loan or other transactions hereunder, is any of
the following (each a "Blocked Person"):

 

(i)       A Person that is listed in the annex to, or is otherwise subject to
the provisions of, the Executive Order;

 

(ii)      A Person owned or controlled by, or acting for or on behalf of, any
Person that is listed in the annex to, or is otherwise subject to the provisions
of, the Executive Order;

 

(iii)     A Person with which the Lender is prohibited from dealing or otherwise
engaging in any transaction by any Anti-Terrorism Law;

 

(iv)    A Person that commits, threatens or conspires to commit or supports
"terrorism" as defined in the Executive Order;

 

(v)     A Person that is named as a "specially designated national" on the most
current list published by the U.S. Treasury Department Office of Foreign Asset
Control at its official website or any replacement website or other replacement
official publication of such list; or

 

 
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(vi)     A Person who is affiliated or associated with a person or entity listed
above.

  

(c)     Neither the Borrowers nor, to the knowledge of the Borrowers, any of
their respective agents acting in any capacity in connection with the 2016 Loan
or other transactions contemplated hereunder, (i) conduct any business or engage
in making or receiving any contribution of funds, goods or services to or for
the benefit of any Blocked Person, or (ii) deal in, or otherwise engage in any
transaction relating to, any property or interests in property blocked pursuant
to the Executive Order.

 

 

5.15

Survival.

 

The representations and warranties made herein and each and every other
provision of this Agreement and the other Loan Documents shall survive the
delivery thereof and shall be deemed to be made continuously until the 2016 Loan
shall have been paid in full.

 

ARTICLE VI AFFIRMATIVE COVENANTS OF BORROWER

 

The Borrowers jointly and severally covenant and agree that until the
Obligations are paid in full, the Borrowers shall comply with the following
affirmative covenants:

 

 

6.1

Use of Proceeds.

 

The Borrowers shall use the proceeds of the 2016 Loan only to pay costs of the
2016 Project.

 

 

6.2

Taxes and Assessments.

 

The Borrowers shall provide the Lender with satisfactory evidence of payment of
all real estate taxes, assessments and other impositions with respect to the
Mortgaged Property as set forth in the Mortgages.

 

 

6.3

Books and Records.

 

Each Borrower shall make available for inspection by a duly authorized
representative of the Lender any of such Borrower's books and records insofar as
they relate to such Borrower or the Mortgaged Property, at such reasonable times
as may be reasonably requested by the Lender upon reasonable prior written
notice; and furnish to the Lender, upon reasonable notice to such Borrower by
the Lender, such information regarding its business affairs and financial
condition as the Lender may reasonably request.

 

 

6.4

Reimbursement.

 

The Borrowers shall reimburse the Lender promptly for all costs and expenses
paid or incurred by the Lender in connection with the 2016 Loan, including the
cost of title insurance premiums, charges and update fees, expenses and
reasonable fees of the Lender's attorneys, survey costs, appraisal costs, flood
search costs, environmental consultant fees, lending fees, recording fees and
taxes, and all other expenses paid in connection with the preparation, closing
and administration of the proceeds of the 2016 Loan, all of which the Lender is
authorized to advance from the proceeds of the 2016 Loan or deduct from the
proceeds of any disbursement of all or any portion of the 2016 Loan.

 

 
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6.5

Compliance with Covenants, Agreements and Laws.

 

The Borrowers shall comply in all material respects with all applicable laws,
covenants and restrictions now of record affecting all or any part of the
Mortgaged Property, except for violations which are being contested by a
Borrower in good faith by appropriate proceedings. Each Borrower shall comply in
all material respects with all obligations under other contracts, instruments
and agreements to which it is a party or to which any of its properties or
assets may be subject, except for breaches which are being contested by a
Borrower in good faith by appropriate proceedings. Each Borrower shall maintain
all necessary licenses and permits needed to conduct its businesses, and shall
notify the Lender in writing of any adverse findings of any licensing authority
which cannot be corrected within thirty (30) days of such knowledge.

 

 

6.6

Insurance.

 

Each Borrower shall at its own cost and expense obtain or cause to be obtained
insurance policies naming the Lender or its designee as additional insured,
mortgagee and lender loss payee, as applicable, insuring against such risks, and
in such amounts, as are customarily insured against by entities constructing,
owning and operating facilities of like size and type, paying as the same become
due and payable, all premiums in respect thereof, including but not necessarily
limited to:

 

(a)     Fire insurance with Uniform Standard Extended Coverage Endorsements, and
vandalism and malicious mischief insurance, at all times in an amount equal to
at least 100% of the replacement cost of the Mortgaged Property owned by such
Borrower;

 

(b)     Comprehensive general liability insurance, including builders' risk
insurance during any construction period, with minimum limits of $1,000,000 per
person and $1,000,000 per occurrence, and property damage coverage with a
minimum limit of $1,000,000, with an aggregate limit of $3,000,000, together
with umbrella liability coverage in the amount of $1,000,000 per person and
$1,000,000 per occurrence;

 

(c)     Workers' compensation coverage and any other type of insurance required
by the laws of the Commonwealth of Pennsylvania or the State of Ohio, as
applicable;

 

(d)     Flood insurance, if any part of the Mortgaged Property owned by such
Borrower is located in an "area of special flood hazard," as defined in the
Flood Insurance Act of 1968, in an amount equal to the full and total
replacement cost of the Improvements to the Mortgaged Property located within
such area owned by such Borrower;

 

(e)     Business interruption insurance; and

 

(f)     Such other insurance as the Lender may reasonably require from time to
time.

 

Each policy shall provide for written notice to the Lender, or its designee, at
least thirty (30) days prior to any cancellation, nonrenewal or amendment of
such insurance. Each Borrower shall provide the Lender with certificates from
the insurers at such times as may be necessary (but in no event less than once
each year) to show that insurance is being maintained as required by this
Section 6.6.

 

 

6.7

Maintenance of Properties.

 

Each Borrower will maintain and preserve all of its properties in good order and
condition, ordinary wear and tear excepted, including but not limited to the
Mortgaged Property and the Improvements owned by such Borrower, and shall not
permit, commit or suffer any waste of any such properties, or use or permit to
be used any properties for any unlawful purpose.

 

 
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6.8

Litigation.

 

Each Borrower shall promptly notify the Lender in writing as soon as such
Borrower has any knowledge of any threatened or pending litigation or
governmental or regulatory proceeding against, or investigation of, such
Borrower, the outcome of which may have a Material Adverse Effect on such
Borrower or such Borrower's Mortgaged Property.

 

 

6.9

Judgments.

 

Each Borrower shall promptly notify the Lender in writing as soon as such
Borrower has any knowledge of any judgments entered against it in excess of
$50,000 and for which such Borrower is uninsured and has not obtained a stay of
execution within sixty (60) days after the date of such judgment.

 

 

6.10

Financial and Reporting Requirements.

 

Each Borrower shall deliver or cause to be delivered to the Lender:

 

(a)     Copies of each annual report on SEC Form 10-K filed by the Borrowers
with the Securities and Exchange Commission (the "SEC") for a fiscal year,
within five business days after the date of filing;

 

(b)     Copies of each quarterly report on SEC Form 10-Q filed by the Borrowers
with the SEC for a fiscal quarter, within five business days after the date of
filing;

 

(c)     Within 120 days after the end of each fiscal year of the Borrowers,
evidence of the payment of all real estate taxes and assessments due and payable
with respect to the Mortgaged Property owned by each Borrower and payment of all
insurance premiums with respect to the insurance policies required by this
Agreement; and

 

(d)     Such other information as may be reasonably requested by the Lender from
time to time in order to enable the Lender to evaluate the financial condition
and cash flow of the Borrowers and the Mortgaged Property.

 

 

6.11

Fixed Charge Coverage Ratio.

 

The Borrower Consolidated Group shall maintain a combined Fixed Charge Coverage
Ratio of at least 1.20, tested on an annual basis on December 31 of each year
commencing with the fiscal year of the Borrower Consolidated Group ending
December 31, 2017.

 

 
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ARTICLE VII NEGATIVE COVENANTS OF BORROWERS

 

The Borrowers jointly and severally covenant and agree that until the
Obligations are paid in full, the Borrowers shall comply with the following
negative covenants:

 

 

7.1

Ownership of Materials and Personal Property.

 

Without the Lender's prior written consent, the Borrowers shall not cause any
materials, equipment, personal property or fixtures of any kind to be purchased
or acquired for installation or use in or about the Improvements under any
conditional sales contract or security agreement or lease agreement.

 

 

7.2

Transfer of Interests.

 

None of the Borrowers shall liquidate, merge or consolidate with any person,
firm, corporation or other entity, or sell, lease, transfer or otherwise dispose
of all or any substantial part of its property or assets, whether now owned or
hereafter acquired, without the Lender's prior written consent, provided that
the Lender's consent shall not be required in the event of a merger or
consolidation of the Borrowers with each other so long as such merger or
consolidation does not involve any entity other than the Borrowers. Avalon
Holdings shall not transfer its equity ownership of any other Borrower to any
third party.

 

 

7.3

Prohibition of Liens.

 

None of the Borrowers shall create, assume, incur or suffer to exist any
mortgage, pledge, encumbrance, security interest, lien or charge of any kind
upon any of its property, now owned or hereafter acquired, or acquire or agree
to acquire any kind of property under conditional sales or other title retention
agreements (other than those reflected in the Financial Statements); provided,
however, that the foregoing restrictions shall not prevent a Borrower from:

 

(a)     Incurring liens for taxes, assessments or governmental charges or levies
which shall not at the time be due and payable or can thereafter be paid without
penalty or are being contested in good faith by appropriate proceedings
diligently conducted and with respect to which it has created adequate reserves;

 

(b)     Making pledges or deposits to secure obligations under workers'
compensation laws or similar legislation; or

 

(c)     Granting liens or security interests in favor of the Lender; or

 

(d)     Granting liens or security interests in the Line of Credit Collateral in
favor of the Line of Credit Lender.

 

 
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7.4

Prohibition of Indebtedness.

 

Without the prior written consent of the Lender, none of the Borrowers shall
create, incur, guarantee, endorse (except endorsements in the course of
collection), assume or suffer to exist any indebtedness, except (i) indebtedness
to the Lender, (ii) open account trade debt incurred in the ordinary course of
business and not past due, (iii) indebtedness of a Borrower existing on the
Closing Date that has been disclosed by such Borrower to the Lender and is
secured by assets or properties of such Borrower other than the Collateral owned
by such Borrower, or (iv) indebtedness of a Borrower incurred after the Closing
Date that is disclosed by such Borrower to the Lender at least ten (10) Business
Days prior to the date of incurrence of such indebtedness and is secured by
assets or properties of such Borrower other than the Collateral owned by such
Borrower.

 

 

7.5

Prohibition of Acquisitions.

 

None of the Borrowers shall make acquisitions of all or substantially all of the
equity, property or assets of any person, firm, corporation or other entity, or
merge, consolidate or sell substantially all of its assets, without the prior
written consent of the Lender, which shall not be unreasonably withheld,
conditioned or delayed.

 

 

7.6

Prohibition of Loans.

 

None of the Borrowers shall make or have outstanding any loans or advances to or
otherwise extend credit to any Person (including, without limitation, loans or
advances to officers, owners or affiliates), except in the ordinary course of
business. None of the Borrowers shall guaranty the indebtedness of any Person.

 

 

7.7

Prohibition of Asset Purchases.

 

Without the prior written consent of the Lender, which shall not be unreasonably
withheld, conditioned or delayed, none of the Borrowers shall acquire, sell,
lease, transfer or dispose of fixed assets during any calendar year, except in
the ordinary course of business.

 

 

7.8

Transfer of Property; Release of Mortgaged Property.

 

Without the prior written consent of the Lender, none of the Borrowers shall
sell, lease, assign, transfer or otherwise dispose of, in whole or in part, the
Collateral or any interest therein, including but not limited to any equity
interest therein, as the case may be, provided that nothing in this Section
shall prohibit a Borrower from selling any tangible Personal Property for its
current market value, transferring title to and/or possession of any tangible
Personal Property in exchange for a credit against the purchase of replacement
property, or disposing of any tangible Personal Property which in such
Borrower's reasonable judgment is obsolete, has reached the end of its useful
life or has irrevocably ceased to function.

 

 

7.9

Anti-Terrorism Laws.

 

None of the Borrowers nor any of their respective affiliates and agents shall
(i) conduct any business or engage in any transaction or dealing with any
Blocked Person, including making or receiving any contribution of funds, goods
or services to or for the benefit of any Blocked Person, (ii) deal in, or
otherwise engage in any transaction relating to, any property or interests in
property blocked pursuant to the Executive Order, or (iii) engage in or conspire
to engage in any transaction that evades or avoids, or has the purpose of
evading or avoiding, or attempts to violate, any of the prohibitions set forth
in the Executive Order, the USA Patriot Act or any other Anti-Terrorism Law. The
Borrowers shall deliver to the Lender any certification or other evidence
requested from time to time by the Lender in its sole discretion, confirming the
Borrowers' compliance with this Section.

 

 
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ARTICLE VIII CONDITIONS OF CLOSING AND DISPOSITION OF NOTE PROCEEDS

 

 

8.1

Conditions of Closing and Disposition of 2016 Note Proceeds.

 

The Lender shall not be obligated to make the 2016 Loan until the Borrowers, at
their expense, shall have fulfilled, to the Lender's satisfaction, the following
conditions:

 

(i)     Representations and Warranties. The representations and warranties of
the Borrowers contained in Article 5 hereof shall be true and correct in all
material respects.

 

(ii)     Authorizing Documents. Each Borrower shall have delivered to the Lender
a certificate executed by an officer of such Borrower, dated the Closing Date,
setting forth the company action taken by board of directors or members, as
applicable, in connection with the 2016 Loan and the authorization of the
execution, delivery and performance of the Loan Documents by such Borrower,
certifying to copies of such Borrower's organizational documents as in effect on
the Closing Date, and containing such other certifications as the Lender or its
counsel shall deem appropriate.

 

(iii)     Good Standing Certificates. Each Borrower shall have delivered to the
Lender a good standing certificate as to such Borrower issued as of a date not
more than fifteen (15) days prior to the Closing Date by the applicable office
of the state of its organization.

 

(iv)     Execution and Delivery of Loan Documents. The Loan Documents shall have
been duly executed by the Borrowers and delivered to the Lender.

 

(v)     No Liens or Encumbrances. The Mortgaged Property shall be free and clear
of all liens and encumbrances, other than those acceptable to the Lender or
otherwise permitted by this Agreement.

 

(vi)    Environmental Reports. The Borrowers shall have provided to the Lender
copies of all existing Phase I environmental reviews of the Mortgaged Property
("Environmental Reports"), which Environmental Reports shall be acceptable to
the Lender and shall show the Mortgaged Property to be free from material
environmental violations and liabilities, and completion satisfactory to the
Lender of all actions, further reports and further investigations as may be
recommended in any Environmental Report or otherwise reasonably required by the
Lender based on such Environmental Report or other disclosures made by the
Borrowers to the Lender relating to environmental matters.

 

(vii)     Transaction Costs and Expenses. On or before the Closing Date, all
reimbursable costs and expenses of the Lender pursuant to the Loan Documents
shall have been paid by the Borrowers to the Lender.

 

(viii)     No Damage or Taking. No portion of the Improvements shall have been
damaged by fire or other casualty, and no condemnation or taking of the
Mortgaged Property or the Improvements or any portion thereof shall be pending
or threatened which materially impairs the Borrowers' ability to use the
Improvements and the Mortgaged Property.

 

 
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(ix)     No Default. No Event of Default and no Potential Event of Default shall
have occurred and be continuing hereunder or under any of the other Loan
Documents.

 

(x)     Legal Opinion. The Borrowers shall have furnished a favorable written
opinion of counsel for the Borrowers, dated the Closing Date, satisfactory to
the Lender and its counsel.

 

(xi)     Legal Matters. All legal matters incident or related to the 2016 Loan
shall be in form and substance reasonably satisfactory to counsel for the
Lender.

 

(xii)     Insurance Certificates. Each Borrower shall have delivered to the
Lender a certified copy of all insurance policies, listing the Lender or its
designee as additional insured, mortgagee and lender loss payee, as applicable,
complying with the requirements of Section 6(f) hereof.

 

(xiii)     Title Insurance. Each Borrower shall have obtained one or more ALTA
lender's title insurance policies for the Mortgaged Property owned by such
Borrower from the Title Company, which policies shall provide for coverage in an
aggregate amount of $12,000,000 and shall name the Lender or its designee as
insured, and which shall insure the Lender's mortgage lien on fee simple title
to the Mortgaged Property of such Borrower, without exception for filed or
unfiled mechanics' liens or claims or for matters which an accurate survey would
disclose, subject only to such exceptions as the Lender shall approve, with such
endorsements thereto (including 100, 300, 710 and 1030).

 

(xiv)     Appraisals. Each Borrower shall have delivered to the Lender an
appraisal (USPAP/FIRREA) of the Mortgaged Property owned by such Borrower based
upon the fair market value of the Mortgaged Property owned by such Borrower,
performed by an appraiser selected by or acceptable to the Lender, with all
appraisals showing an aggregate appraised value of the Mortgaged Property of at
least $36,370,000, and otherwise in form and substance acceptable to the Lender.

 

(xv)     UCC Searches. Each Borrower shall have delivered to the Lender such UCC
searches of the State of Ohio or the Commonwealth of Pennsylvania, as
applicable, as may be required by the Lender, evidencing the Lender's first lien
priority in the Personal Property owned by such Borrower.

 

(xvi)     Leases. Each Borrower shall deliver to the Lender copies of all leases
on the Mortgaged Property owned by such Borrower, including any lease
extensions, in form and substance satisfactory to the Lender.

 

(xvii)     Licenses and Permits. Each Borrower shall have delivered to the
Lender copies of all governmental licenses, permits and other regulatory
approvals (including without limitation zoning, subdivision and related
approvals and occupancy permits) necessary for conduct by such Borrower of its
operations, and such Borrower shall not have received any notices of violation
or revocation with respect thereto. In addition, each Borrower shall have
delivered to the Lender evidence satisfactory to the Lender that each property
comprising the Mortgaged Property of such Borrower has access to all required
utilities.

 

(xviii)    Line of Credit; Subordination Agreement. The Borrowers shall have
closed on the Line of Credit with the Line of Credit Lender concurrently with
the closing of the 2016 Loan and the Lender and the Line of Credit Provider
shall have executed and delivered the Subordination Agreement.

 

 
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(xix)     Other Conditions. The Borrowers shall have complied with such other
conditions as shall be reasonably required by the Lender or its counsel.

 

 

8.2

Disposition of Proceeds of 2016 Note.

 

The proceeds of the 2016 Note shall be disbursed on the Closing Date and
transferred by the Lender to the Title Company and applied as follows:     (1)
$9,018,850 shall be applied to the refinancing of the Existing Line of Credit;
(2) $76,379.28 shall be applied to payment of the transaction costs relating to
the 2016 Loan; and (3) $2,904,770.72 shall be transferred to the bank or
financial institution holding the Project Fund for deposit into the Project
Fund. Amounts deposited in the Project Fund shall be disbursed by the Lender to
the Borrowers and paid to the Borrowers or to appropriate designated payees
solely for reimbursement for the payment of costs of the 2016 Project in
accordance with this Section 8.2.

 

Each request for disbursement of proceeds of the 2016 Note hereunder is referred
to hereinafter as a "Request", and shall be made by Avalon Resorts and Clubs, on
behalf of all of the Borrowers, pursuant to the form of Request for Disbursement
attached as Exhibit B to this Agreement, which form shall be accompanied by all
other items required by this Section 8.2.

 

(a)     Not less than ten (10) days prior to the date on which the Borrowers
wish the Lender to disburse proceeds of the 2016 Note, Avalon Resorts and Clubs
shall submit to the Lender a Request setting forth the total amount for which
such disbursement is required, broken down by categories, together with
receipted bills, bills, paid invoices, or other evidence reasonably satisfactory
to the Lender supporting each item of cost covered by such Request (including a
statement as to the retention amount, if any, applicable to such item of cost).
The Lender shall not be required to make disbursements of proceeds of the 2016
Note more frequently than once each month.

 

(b)     The Lender shall disburse the amount requested by Avalon Resorts and
Clubs in its Request by the later of (i) the date ten (10) days after receipt of
the Request or (ii) the date five (5) days after the date upon which all
conditions precedent to funding of such Request have been fulfilled. Each
Request requested thereby shall constitute a certification by Avalon Resorts and
Clubs that the representations and warranties contained herein are true and
correct on the date of such Request and Avalon Resorts and Clubs hereby
expressly acknowledges that the Lender will be specifically relying upon such
certification in making any disbursement of proceeds of the 2016 Note pursuant
to such Request.

 

(c)     Disbursements shall be credited to an account of the Borrowers
designated in writing to the Lender, or, following the occurrence and during the
continuance of an Event of Default, be paid by the Lender directly to the party
or parties who have actually supplied labor, Materials or services in connection
with the renovation and expansion of the Avalon Resort and Inn Facility or to
the party or parties to whom payment of any other Project Costs or specified in
the Request, either by separate check made payable to Person or by joint check
made payable to Avalon Resorts and Clubs and such Person, as the Lender shall
elect, in its sole discretion. No further direction or authorization for such
direct payment shall be required, it being understood that any such payment
shall be applied toward the satisfaction of the obligations of the Lender to
fund disbursements hereunder and shall be deemed an advance evidenced by the
2016 Note and secured by the Loan Documents as fully as if made to Avalon
Resorts and Clubs, regardless of the actual disposition thereof by the party or
parties to whom such payment is made. The making of any disbursement by the
Lender shall not be deemed an acceptance or approval by the Lender (for the
benefit of Avalon Resorts and Clubs or any third party) of any work performed
or improvements constructed or Materials furnished or installed in connection
with the renovation and expansion of the Avalon Resort and Inn Facility and
shall not create any privity of contract between the Lender and any third party.

 

 
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(d)     Notwithstanding any contrary provision of this Agreement, the Lender may
make disbursements of proceeds of the 2016 Note at any time or from time to
time, but shall be under no obligation to do so, (i) to satisfy any condition
hereof or to cure any Event of Default or Potential Default, (ii) to pay
interest on the 2016 Note (subject to the immediate preceding sentence), or
(iii) to pay the reasonable fees and expenses of the Lender and counsel for the
Lender. Any disbursements of proceeds of the 2016 Note made pursuant to this
subsection shall be evidenced by the 2016 Note and secured by the Loan Documents
as fully as if such disbursement had been made directly to or upon request of
the Borrowers.

 

(e)     Each advance of proceeds of the 2016 Note shall be subject to the
satisfaction by Avalon Resorts and Clubs of the conditions set forth in Section
8.1 hereof and to the satisfaction of the following terms and conditions:

 

(i)     The representations and warranties contained in Article V hereof or
contained in any other Loan Documents shall be true and correct on and as of the
date of such disbursement. By making a Request in accordance with this Section
8.2, the Borrowers shall be deemed to have certified to the Lender that all of
the representations and warranties contained in Section 5 hereof and in each of
the other Loan Documents are true and accurate on and as of the date of the
disbursement with the same effect as though such representations and warranties
had been made on and as of such date (except representations and warranties
which relate solely to an earlier date or time, which representations and
warranties shall be true and correct on and as of the specific dates or times
referred to therein), and the Borrowers shall have performed and complied with
all covenants and conditions hereof and thereof.

 

(ii)     On the date of such disbursement, no Event of Default and no Potential
Default shall have occurred and be continuing or shall exist or shall occur and
exist after giving effect to the disbursement to be made on such date.

 

(iii)     On the date of such disbursement, the Avalon Resort and Inn Facility
shall not have been materially injured or damaged by fire or other casualty and
remain unrestored, unless the proceeds of insurance are to be applied to
restoration pursuant to the Mortgages.

 

(f)     The Lender shall make the final advance with respect to the 2016 Note
only upon Request from the Borrowers, compliance with the applicable
requirements of Section 8.2(a) through (e) above, and the Lender's receipt of
the following: (i) copies of final lien releases from the general contractor and
all subcontractors with respect to the work performed in connection with the
renovation and expansion of the Avalon Resort and Inn Facility; (ii)
satisfactory evidence from Avalon Resorts and Clubs that all occupancy permits
and governmental approvals required with respect to the renovation and expansion
of the Avalon Resort and Inn Facility have been received; (iii) a certificate of
Avalon Resorts and Clubs certifying that completion of the renovation and
expansion of the Avalon Resort and Inn Facility has occurred; and (iv) an
endorsement to the Title Policy in form approved by the Lender insuring that no
encroachments exist over any building line, right of way or property boundary
lines.

 

 
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ARTICLE IX DEFAULTS AND REMEDIES

 

 

9.1

Events of Default.

 

The occurrence of any one or more of the following events (each, an "Event of
Default") shall constitute a default hereunder:

 

(a)     The Borrowers shall fail to comply with any covenant contained in this
Agreement or any of the other Loan Documents which calls for the payment of
money within ten

(10) calendar days of when such payment is due; or

 

(b)     If the Borrowers fail to keep, observe or perform any of the other
undertakings, conditions, stipulations, agreements, covenants or obligations of
the Borrowers as set forth in this Agreement, which do not have a specified
grace or cure period, and continuance of such failure for thirty (30) days after
the earlier of written notice from the Lender to the Borrowers or the date on
which the Borrowers have knowledge that such failure has occurred, or such
longer period to which the Lender may agree in the case of a default not curable
by the exercise of due diligence within such thirty (30) day period, provided
that the Borrowers shall have commenced to cure such default within such thirty
(30) day period and shall complete such cure as quickly as reasonably possible
with the exercise of due diligence; or

 

(c)     If any of the representations or warranties made by the Borrowers under
this Agreement or under any of the other Loan Documents shall be untrue in any
material respect; or

 

(d)     The Lender's security interest in any of the Collateral shall be or
become unperfected, unless as a result of an error or omission on the part of
the Lender, and such default is not cured within thirty (30) days; or

 

(e)     A Borrower shall (i) default (as principal or guarantor or other surety)
in any payment of principal of or interest on any obligation (or set of related
obligations) for borrowed money, beyond any period of grace or cure with respect
to the payment or, if any obligation (or set of related obligations) is payable
or repayable on demand, fails to pay or repay such obligation or obligations
when demanded, in each case where such payment default has a Material Adverse
Effect upon the Borrower or (ii) default in the observance of any other
covenant, term or condition contained in any agreement or instrument by which an
obligation (or set of related obligations) is or are created, secured or
evidenced, if the effect of such default is to cause, or commit the holder or
holders of such obligation or obligations (or a trustee or agent on behalf of
such holder or holders) to cause, all or part of such obligation or obligations
to become due before its or their otherwise stated maturity, and the same shall
continue for the later of thirty (30) calendar days or until all cure periods
have expired, in each case, where such default will have a Material Adverse
Effect upon the Borrower; or

 

(f)     One or more judgments for the payment of money in the aggregate amount
of $50,000 shall have been entered against a Borrower and such Borrower has
failed to discharge or stay the same; or

 

(g)     The occurrence of any default or Event of Default under any of the Loan
Documents or under any other instruments relating thereto delivered by the
Borrowers to the Lender under this Agreement, subject to any applicable grace
and cure periods; or

 

 
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(h)     A writ or warrant of attachment, garnishment, execution, distraint or
similar process shall have been issued against a Borrower or any of its
properties, and such Borrower has failed to discharge or stay the same within
sixty (60) calendar days after such issuance; or

 

(i)      The occurrence or existence of any of the following events or
conditions:

 

(i)     An event causing an involuntary termination with respect to a Benefit
Plan shall occur;

 

(ii)     Any Person shall engage in any Prohibited Transaction or Reportable
Event involving any Benefit Plan,

 

(iii)     An accumulated funding deficiency, whether or not waived, shall exist
with respect to any Benefit Plan,

 

(iv)     A Borrower or any ERISA Affiliate shall be in "Default" (as defined in
Section 4219(c)(5) of ERISA) with respect to payments due to a multi-employer
Plan resulting from a Borrower's or any ERISA Affiliate's, complete or partial
withdrawal (as described in Section 4203 or 4205 of ERISA) from such Benefit
Plan, or

 

(v)     Any other event or condition shall occur or exist with respect to a
single employer Benefit Plan;

 

provided, however, that no such event or condition shall constitute an Event of
Default if it, together with all other events or conditions at the time
existing, would not subject a Borrower to any tax, penalty, debt or liability
which, alone or in the aggregate, would have a Material Adverse Effect as to
such Borrower or the Mortgaged Property owned by such Borrower, or the ability
of such Borrower to perform any of its payment or other obligations under this
Agreement or any other Loan Document; or

 

(j)      A proceeding shall be instituted in respect of a Borrower:

 

(i)     seeking to have an order for relief entered in respect of such Borrower,
or seeking a declaration or entailing a finding that such Borrower is insolvent
or a similar declaration or finding, or seeking dissolution, winding-up, charter
revocation or forfeiture, liquidation, reorganization, arrangement, adjustment,
composition or other similar relief with respect to such Borrower, its assets or
debts under any Law relating to bankruptcy, insolvency, relief of debtors or
protection of creditors, termination of legal entities or any other similar Law
now or hereinafter in effect which shall not have been dismissed or stayed
within sixty (60) calendar days after such proceedings were instituted; or

 

(ii)     seeking appointment of a receiver, trustee, custodian, liquidator,
assignee, sequestrator or other similar official for such Borrower or for all or
any substantial part of its property which shall not have been dismissed or
stayed within sixty

(60) calendar days after such proceedings were instituted; or

 

(k)     A Borrower shall become insolvent, shall become generally unable to pay
its debts as they become due, shall voluntarily suspend transaction of its
business, shall make a general assignment for the benefit of creditors, shall
institute a proceeding described in Section 9.1(j)(i) hereof or shall consent to
any order for relief, declaration, finding or relief described in Section 9.1(j)
hereof, shall institute a proceeding described in Section 9.1(j)(ii) hereof or
shall consent to the appointment or to the taking of possession by any such
official of all or any substantial part of its property whether or not any
proceeding is instituted, dissolve, wind-up or liquidate itself or any
substantial part of its property, or shall take any action in furtherance of any
of the foregoing.

 

 
23

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9.2

Remedies.

 

Upon the occurrence of any one or more of the Events of Default, and the
continuance thereof, at the Lender's option, all obligations on the Lender's
part to make the 2016 Loan, or to make any further disbursements thereunder
shall cease and terminate, and the 2016 Loan and all sums then or thereafter due
under any and all of the Loan Documents shall thereupon become immediately due
and payable. Upon the occurrence of an Event of Default and continuance thereof,
the Lender may enforce any or all of its rights hereunder or under any other
Loan Documents, or at law or in equity.

 

 

9.3

Set-Off.

 

If the unpaid principal amount of the 2016 Note, interest accrued on the unpaid
principal amount or other amount owing by the Borrowers under this Agreement,
the 2016 Note or the other Loan Documents shall have become due and payable (at
maturity, by acceleration or otherwise), the Lender, any assignee of the Lender
and the holder of any participation in the 2016 Loan, will each have the right,
in addition to all other rights and remedies available to it, without notice to
the Borrowers, to set-off against and to appropriate and apply to such due and
payable amounts any debt owing to, and any other funds held in any manner for
the account of, the Borrowers by the Lender or by such holder including, without
limitation, all funds in all deposit accounts (whether time or demand, general
or special, provisionally credited or finally credited, or otherwise) now or in
the future maintained by the Borrowers with the Lender or such holder. The
Borrowers consent to and confirm the foregoing arrangements and confirm the
Lender's rights, such assignee's rights and such holder's rights of banker's
lien and set-off. Nothing in this Agreement will be deemed a waiver or
prohibition of or restriction on the Lender's rights, such assignee's rights or
any such holder's rights of banker's lien or set-off.

 

ARTICLE X MISCELLANEOUS

 

 

10.1

Notices.

 

All notices, demands, requests, consents, approvals and other communications
required or permitted hereunder must be in writing and will be effective upon
receipt. Such notices and other communications may be hand-delivered, sent by
facsimile transmission with confirmation of delivery and a copy sent by
first-class mail, or sent by nationally recognized overnight courier service, to
a party's address set forth below or to such other address as any party may give
to the other in writing for such purpose:

 

To the Lender:                                      Laurel Capital Corporation

6600 Brooktree Court, Suite 3000

Wexford, PA 15090-0839

Attn.: William C. Zopf, Jr.

 

 
24

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With a copy to:

 

Campbell & Levine, LLC

1700 Grant Building

Pittsburgh, PA 15219-2399

Attn: Christopher J. Rayl, Esquire

 

To the Borrowers:                               Avalon Holdings Corporation

One American Way

Warren, OH 44484

Attn: Bryan P. Saksa

Fax No.: 330-856-8480

Phone No.: 330-856-8853

 

With a copy to:

Brouse McDowell

6550 Seville Drive, Suite B

Canfield Ohio 44406

Attn: Jay M. Skolnick

Fax No.: 330-533-6198.

Phone No.: 330-533-6195

 

 

 

10.2

Preservation of Rights.

 

No delay or omission on the Lender's part to exercise any right or power arising
hereunder will impair any such right or power or be considered a waiver of any
such right or power, nor will the Lender's action or inaction impair any such
right or power. The Lender's rights and remedies hereunder are cumulative and
not exclusive of any other rights or remedies which the Lender may have under
other agreements, at law or in equity.

 

 

10.3

Illegality.

 

In case any one or more of the provisions contained in this Agreement should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.

 

 

10.4

Changes in Writing.

 

No modification, amendment or waiver of any provision of this Agreement nor
consent to any departure by the Borrowers therefrom will be effective unless
made in a writing signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on the Borrowers in any case will entitle the Borrowers to
any other or further notice or demand in the same, similar or other
circumstance.

 

 

10.5

Entire Agreement.

 

This Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.

 

 
25

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10.6

Counterparts.

 

This Agreement may be signed in any number of counterpart copies and by the
parties hereto on separate counterparts, but all such copies shall constitute
one and the same instrument. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile transmission shall be effective as delivery
of a manually executed counterpart. Any party so executing this Agreement by
facsimile transmission shall promptly deliver a manually executed counterpart,
provided that any failure to do so shall not affect the validity of the
counterpart executed by facsimile transmission.

 

 

10.7

Successors and Assigns.

 

This Agreement will be binding upon and inure to the benefit of the Borrowers
and the Lender and their respective successors and assigns; provided, however,
that the Borrowers may not assign this Agreement in whole or in part without the
Lender's prior written consent and the Lender at any time may assign this
Agreement in whole or in part.

 

 

10.8

Interpretation.

 

In this Agreement, unless the Lender and the Borrowers otherwise agree in
writing, the singular includes the plural and the plural the singular;
references to statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; the word "or"
shall be deemed to include "and/or", the words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections) or exhibits are
to those of this Agreement unless otherwise indicated; and references to
agreements and other contractual instruments shall be deemed to include all
subsequent amendments and other modifications to such instruments, but only to
the extent such amendments and other modifications are not prohibited by the
terms of this Agreement. Section headings in this Agreement are included for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose. Unless otherwise specified in this Agreement, all
accounting terms shall be interpreted and all accounting determinations shall be
made in accordance with GAAP. If this Agreement is executed by more than one
party as Borrower, the obligations of such persons or entities will be joint and
several.

 

 

10.9

Certain Waivers.

 

The Borrowers hereby relieve and discharge the Lender from any and all liability
and responsibility whatsoever, except for Lender's gross negligence, arising out
of the disbursement of proceeds of the 2016 Loan hereunder and agree and
acknowledge that the Lender does not assume any responsibility whatsoever for
the method of disbursement, the application or use of proceeds of the 2016 Loan
disbursed hereunder or as to any liens or claims whatsoever which might attach
to or be filed against the Mortgaged Property.

 

 

10.10

Indemnity.

 

The Borrowers jointly and severally agree to indemnify each of the Lender, its
directors, officers and employees and each legal entity, if any, which controls
the Lender (collectively, the "Indemnified Parties") and to hold each
Indemnified Party harmless from and against any and all claims, damages, losses,
liabilities and expenses (including all fees and charges of internal or external
counsel with whom any Indemnified Party may consult and all expenses of
litigation or preparation therefor, at trial and on appeal) which any
Indemnified Party may incur or which may be asserted against any Indemnified
Party in connection with or arising out of the matters referred to in this
Agreement or in the other Loan Documents, (including, but not limited to,
actions taken by Lender to amend or cancel any funds transfer instructions or
any decision by Lender to effect or not to effect a transfer as provided in this
Agreement, or any other action taken by Lender in good faith pursuant to its
responsibilities under this Agreement) by any person, entity or governmental
authority (including any person or entity claiming derivatively on behalf of the
Borrowers), whether (a) arising from or incurred in connection with any breach
of a representation, warranty or covenant by the Borrowers, or (b) arising out
of or resulting from any suit, action, claim, proceeding or governmental
investigation, pending or threatened, whether based on statute, regulation or
order, or tort, or contract or otherwise, before any court or governmental
authority, which arises out of or relates to this Agreement, any other Loan
Document, or the use of the proceeds of the 2016 Loan; provided, however, that
the foregoing indemnity agreement shall not apply to claims, damages, losses,
liabilities and expenses solely attributable to an Indemnified Party's gross
negligence or willful misconduct. In no event shall Lender be responsible for
any loss, claim, liability, damage, or other amount arising in any way, directly
or indirectly, from any error, failure, or delay in the performance of any of
the Lender's obligations under this Agreement caused by natural disaster, fire,
war, strike, civil unrest, error in or inoperability of communication equipment
or lines, or any other circumstances beyond the reasonable control of the
Lender. The indemnity agreement contained in this section shall survive the
termination of this Agreement, payment of any Loan and assignment of any rights
hereunder. The Borrowers may participate at their expense in the defense of any
such action or claim.

 

 
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10.11

Assignments and Participations.

 

At any time, without any notice to the Borrowers, the Lender may sell, assign,
transfer, negotiate, grant participations in, or otherwise dispose of all or any
part of the Lender's interest in the 2016 Loan. The Borrowers hereby authorize
the Lender to provide, without any notice to the Borrowers, any information
concerning the Borrowers, including information pertaining to any of the
Borrowers' or financial condition, business operations or general
creditworthiness, to any institutional provider of funds which may succeed to or
participate in all or any part of the Lender's interest in the 2016 Loan.

 

 

10.12

Governing Law and Jurisdiction.

 

This Agreement has been delivered to and accepted by the Lender and will be
deemed to be made in Pennsylvania. THIS AGREEMENT WILL BE INTERPRETED AND THE
RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE
LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. The Borrowers hereby irrevocably
consent to the exclusive jurisdiction of any state or federal court in Allegheny
County, Pennsylvania, provided that nothing contained in this Agreement will
prevent the Lender from bringing any action, enforcing any award or judgment or
exercising any rights against the Borrowers individually, against any security
or against any property of the Borrowers within any other county, state or other
foreign or domestic jurisdiction. The Lender and the Borrowers agree that the
venue provided above is the most convenient forum for both the Lender and the
Borrowers. The Borrowers waive any objection to venue and any objection based on
a more convenient forum in any action instituted under this Agreement.

 

 

10.13

WAIVER OF JURY TRIAL.

 

EACH OF THE BORROWERS AND THE LENDER IRREVOCABLY WAIVES ANY AND ALL RIGHT IT OR
THEY MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY
NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION WITH
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. EACH OF
THE BORROWERS AND THE LENDER ACKNOWLEDGE THAT THE FOREGOING WAIVER IS KNOWING
AND VOLUNTARY.

 

 
27

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10.14

No Third Party Beneficiaries.

 

This Agreement shall not confer any rights or remedies upon any Person other
than the parties hereto and their respective heirs, executors, legal personal
representatives, successors and permitted assigns.

 

Each of the Borrowers acknowledge that it has read and understands all the
provisions of this Agreement, including the waiver of jury trial, and has been
advised by counsel as necessary or appropriate.

 

[The remainder of this page intentionally left blank.]

 

 
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[Signature Page to Loan and Security Agreement]

 

WITNESS the due execution of this Loan and Security Agreement as a document
under seal, as of the date first written above.

 

BORROWERS:

 

AVALON HOLDINGS CORPORATION

 

 

By: /s/ Bryan P. Saksa                           

Name: Bryan P. Saksa

Title: Chief Financial Officer,

          Treasurer and Secretary

 

 

AVALON CLUBS, INC.

 

 

By: /s/ Bryan P. Saksa                           

Name: Bryan P. Saksa

Title:Treasurer and Secretary

   

AVALON RESORTS, INC.

 

 

By: /s/ Bryan P. Saksa                           

Name: Bryan P. Saksa

Title:Treasurer and Secretary

AVALON GOLF AND COUNTRY CLUB, INC.

 

 

By: /s/ Bryan P. Saksa                           

Name: Bryan P. Saksa

Title:Treasurer and Secretary

   

AVALON LAKES GOLF, INC.

 

 

By: /s/ Bryan P. Saksa                           

Name: Bryan P. Saksa

Title:Treasurer and Secretary

AVALON COUNTRY CLUB AT SHARON, INC.

 

 

By: /s/ Bryan P. Saksa                           

Name: Bryan P. Saksa

Title:Treasurer and Secretary

   

AVALON RESORT AND SPA, LLC

 

 

By: /s/ Bryan P. Saksa                           

Name: Bryan P. Saksa

Title:Treasurer and Secretary

THE HAVANA CIGAR SHOP, INC.

 

 

By: /s/ Bryan P. Saksa                           

Name: Bryan P. Saksa

Title:Treasurer and Secretary

   

AVALON TRAVEL, INC.

 

 

By: /s/ Bryan P. Saksa                           

Name: Bryan P. Saksa

Title: Vice President, Treasurer and Secretary

TBG, INC.

 

 

By: /s/ Bryan P. Saksa                           

Name: Bryan P. Saksa

Title: Treasurer and Secretary

     

LENDER:

 

LAUREL CAPITAL CORPORATION

 

 

By: /s/ William C. Zopf, Jr.                            

Name: William C. Zopf, Jr.

Title: Chief Executive Officer

  

 
 

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EXHIBIT A

 

Form of 2016 Note

 

 
 

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EXHIBIT B

 

Request for Disbursement

 

 

Request No.

 

Date:

 

Amount Requested

 

 

 

TO:

Laurel Capital Corporation

6600 Brooktree Court

Suite 3000, Box 839

Wexford, PA 15090

 

 

RE:

Loan and Security Agreement (the "Agreement"), dated as of December 20, 2016
among Laurel Capital Corporation ("Lender"), Avalon Holdings Corporation
("Avalon Holdings"), Avalon Lakes Golf, Inc., Avalon Resorts and Clubs, Inc.,
Avalon Clubs, Inc., Avalon Resorts, Inc., Avalon Golf and Country Club, Inc.,
Avalon Country Club at Sharon, Inc., The Avalon Resort and Spa LLC, The Havana
Cigar Shop, Inc., Avalon Travel, Inc., and TBG, Inc. (together, the "Borrowers")

 

Project known as: Avalon 2016 Project

 

Ladies and Gentlemen:

 

In accordance with the terms of the above-referenced Agreement, you are hereby
authorized and requested to make disbursement of proceeds of the Loan from the
Project Fund in the amount shown on Schedule 1 hereto for costs incurred in
connection with the renovation and expansion of the Avalon Resort and Inn
Facility ("Facility") from which funds are requested to pay each cost item
listed on Schedule 1. Attached hereto are invoices, lien releases and waivers
supporting the disbursement requested. All capitalized terms herein have the
meaning ascribed to them in the Agreement.

 

The undersigned hereby certifies, on behalf of all of the Borrowers, that:

 

 

(i)

The labor, services, and/or Materials covered hereby have been performed upon or
furnished in connection with the renovation and expansion of the Facility;

 

 

(ii)

The Loan proceeds hereby requested for construction costs will pay all sums
payable to- date for any labor, Materials, and services furnished in connection
with construction of the construction of the Facility;

 

 

(iii)

All amounts previously disbursed by you for direct construction costs for labor,
services, and/or Materials pursuant to previous Requests for Disbursement have
been paid to the parties entitled thereto, with the property designation of
contract and account for which payment was made;

 

 

(iv)

All conditions of the Agreement for the disbursement of the Loan proceeds hereby
requested have been fulfilled, and no Event of Default and Potential Event of
Default under the Agreement has occurred or exists as of the date hereof;

 

 
 

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(v)

The undersigned confirms that he/she/they are authorized to make this request on
behalf of the Borrowers; and

 

 

(vi)

The undersigned hereby requests that loan proceeds advanced under this request
be disbursed as follows:

 

 

AMOUNT:               $                           

 

 

Credit to DDA:                                                           

 

In the Name of:                                                            

 

OR

 

AMOUNT:             $                           

 

Wired to Bank:                                                           

 

ABA Routing:                                          
                            

  Further Credit to DDA:                                                Account
Name:                                                             Reference:
                                                                           

 

 

 

[Remainder of page intentionally left blank]

 

 
 

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 [Signature page to Request for Disbursement No      dated      ]

 

  

WITNESS:

 

AVALON HOLDINGS CORPORATION, as

Borrower Representative

 

By:                                                            

Name:

Title:

 

 

           

Approved this          day of                      , 20     :

 

 

LAUREL CAPITAL CORPORATION

 

 

By:                                                                

            Authorized Officer

   

  

 
 

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Schedule 1 to Request for Disbursement No.

 

 

Payee

Description

Amount