Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
On May 21, 2020, EVI Industries, Inc. (the "Company") and certain of its
subsidiaries received loans totaling approximately $6.9 million in principal
amount (collectively, the "PPP Loans," and each loan, a "PPP Loan") from Fifth
Third Bank, N.A. (the "Lender") under the Paycheck Protection Program ("PPP")
established under the Coronavirus Aid, Relief, and Economic Security Act (the
"CARES Act"). The subsidiaries of the Company which received PPP Loans are
AAdvantage Laundry Systems, Inc., Industrial Laundry Services, Inc., Martin Ray
Laundry Systems, Inc., PAC Industries, Inc., Steiner-Atlantic Corp., Scott
Equipment, Inc., Skyline Equipment, Inc., Tri-State Technical Services, Inc.,
Washington Automated LLC, Western State Design, Inc., and Worldwide Laundry,
Inc. (collectively with the Company, the "Borrowers").
Each PPP Loan is evidenced by a promissory note dated May 21, 2020 (each, a
"Promissory Note") issued by the applicable Borrower to the Lender. The term of
each PPP Loan is two years. The interest rate on each PPP Loan is 1.00%, which
will be deferred for the first six months of the term of the PPP Loan. Pursuant
to the terms of the CARES Act, the proceeds of each PPP Loan may be used for
payroll costs, rent or utility costs. The Promissory Note evidencing each PPP
Loan is in the Lender's standard form for loans made by it under the PPP and
contains customary events of default relating to, among other things, payment
defaults and breaches of representations and warranties or other provisions of
the Promissory Note. The occurrence of an event of default may result in a claim
for the immediate repayment of all amounts outstanding under the applicable PPP
Loan, collection of all other amounts owing from the respective Borrower and
filing suit and obtaining judgment against the respective Borrower. Each PPP
Loan may be prepaid in whole or in part at any time without penalty.
Under the terms of the CARES Act, each Borrower can apply for and be granted
forgiveness for all or a portion of the PPP Loan. Such forgiveness will be
determined, subject to limitations, based on the use of loan proceeds in
accordance with the terms of the CARES Act, as described above, during the
8-week period after loan origination and the maintenance or achievement of
certain employee levels. Any forgiveness of a PPP Loan will be subject to
approval by the Lender and the U.S. Small Business Administration, which is
administering the PPP under the CARES Act. While the Company expects that the
PPP Loans will be used for qualifying expenses and that application will be made
for forgiveness of the PPP Loans in accordance with the terms of the CARES Act
(and such use and application is required by the Consent described below), no
assurance is provided that any or all of the PPP Loans will be forgiven in whole
or in part.
In connection with the receipt of the PPP Loans, the Company received the
consent (the "Consent") of Bank of America, N.A., U.S. Bank National
Association, and Fifth Third Bank pursuant to the Company's previously disclosed
Credit Agreement dated November 2, 2018 (the "Credit Agreement"). The Consent
also temporarily modifies the consolidated leverage ratio required to be
maintained pursuant to the Credit Agreement and excludes the PPP Loans for
purposes of calculating the consolidated leverage ratio for use in determining
the applicable rate of interest under the Credit Agreement. In addition, the
Consent contains certain representations, warranties and agreements of the
Company, including, without limitation, to use the proceeds of the PPP Loan only
for permitted expenses under the CARES Act, to apply for forgiveness of the PPP
Loans within 30 days after the last day of the eight-week period following loan
origination (or such later date as permitted by the CARES Act), and to maintain
all records required to be submitted in connection with the forgiveness of the
PPP Loans. The breach of any such representations, warranties or agreements will
constitute a default under the Credit Agreement, subject to any applicable cure
periods or provisions thereof.
Reference is made to the risk factors and cautionary note regarding forward
looking statements, including the risks and uncertainties with respect thereto,
related to the PPP Loans set forth in the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2020, filed with the Securities and
Exchange Commission on May 11, 2020.
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