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Item 1.01
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Entry into a Material Definitive Agreement.
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On January 18, 2019, EVI Industries, Inc., a
Delaware corporation (the “Company”), entered into Stock Purchase Agreement (the “Purchase Agreement”)
with PAC Industries, Inc., a Pennsylvania corporation (the “PAC”), PAC Industries, Inc. Employee Stock Ownership Trust
(“Trust”) acting through First Bankers Trust Services, Inc., not in an individual or corporate capacity but solely
as Trustee of the Trust established in connection with the PAC Industries, Inc. Employee Stock Ownership Plan (the “Plan”)
(the Plan and the Trust referred to herein collectively as the “Seller”), Kaitlyn A. Costabile, Philip A. Costabile
II, Christina Marie Costabile, Emily M. Bradbury, Karrah D. Devlin, Sommer Costabile and Rocco J. Costabile (collectively, “Warrant
Holders”), Frank Costabile, not in his individual capacity but solely as representative of the Warrant Holders. Pursuant
to the Stock Purchase Agreement, the Company will purchase from the Seller all of the issued and outstanding shares of PAC common
stock (the “Stock Purchase”). Following the Stock Purchase, PAC will be a wholly-owned subsidiary of the Company.
Subject to certain working capital and other
adjustments, the consideration for the Stock Purchase will be equal to $12,850,000, consisting of: (a) $6,400,000 in cash, of which
$1,000,000 (the “Escrow Amount”) will be deposited in an escrow account for no less than 12 months after the date of
the closing of the Stock Purchase (subject to extension in certain circumstances), (b) such number of shares (the “Stock
Consideration”) of the Company’s common stock, par value $0.025 per share (the “Common Stock”), that is
equal to the quotient of $6,250,000 divided by the average closing price per share of the Common Stock on the NYSE American for
the 30 trading days immediately prior to the closing of the Stock Purchase as reported by the NYSE American, and (iii) $200,000
of assumed debt.
The Purchase Agreement contains representations,
warranties and covenants customary for a transaction of its size and nature. Subject to certain limitations, the Seller and the
Warrant Holders, on the one hand, and the Company, on the other hand, have agreed to indemnify each other for breaches of representations,
warranties and covenants and other specified matters. The Seller’s and the Warrant Holders’ liability, in all cases,
is limited to amounts remaining available under the Escrow Amount then remaining in the escrow account.
The Purchase Agreement contains certain termination
rights for the Company, on the one hand, and the Seller, on the other hand, including, but not limited to, (i) by mutual written
agreement; (ii) if the closing has not occurred on or before February 28, 2019; and (iii) the non-performance of any material covenant
or other agreement set forth in the Purchase Agreement after an opportunity to cure in some cases.
As a condition to the closing of the Stock Purchase,
certain key employees of PAC and the Warrant Holders will enter into a Stockholders Agreement with the Company (the “Stockholders
Agreement”), pursuant to which, among other things, certain key employees of PAC and the Warrant Holders will agree to vote
all shares of Common Stock owned by them at any time during the term of the Stockholders Agreement in accordance with the recommendations
or directions of the Company’s Board of Directors and grant to the Company and its designees, an irrevocable proxy and power
of attorney in furtherance thereof. The Stockholders Agreement will contain certain transfer restrictions with respect to the shares
of Common Stock held by certain key employees of PAC and the Warrant Holders. The Stockholders Agreement will have a term of three
years, subject to earlier termination under certain circumstances.
The Company expects the closing of the Stock
Purchase to occur within 60 days, subject to certain closing conditions, including, but not limited to, (i) the approval by the
NYSE American of the listing of the Stock Consideration to be issued at the closing of the Stock Purchase; (ii) the accuracy of
the representations and warranties of the parties; (iii) the parties’ performance and compliance in all material respects
with the agreements and covenants contained in the Purchase Agreement, and (iv) the receipt by the Trustee of a fairness opinion
that (a) the consideration to be received by the Seller in the Stock Purchase is not less than adequate consideration as that term
is defined in Section 3(18) of ERISA and (b) that the terms of the Stock Purchase and related transactions, taken as a whole, are
fair to the Seller from a financial point of view.
The foregoing description of the Purchase Agreement
is a summary and does not purport to be complete, and is subject to, and qualified in its entirety by reference to, the Purchase
Agreement, a copy of which will be filed with the Company’s next periodic report.
The Purchase Agreement contains representations
and warranties made by the parties as of specific dates and solely for their benefit. The representations and warranties reflect
negotiations between the parties and are not intended as statements of fact to be relied upon by the Company’s stockholders
or any other person or entity other than the parties to the Purchase Agreement, and in certain cases, represent allocation decisions
among the parties and are modified or qualified by correspondence or confidential disclosures made between the parties in connection
with the negotiation of the Purchase Agreement (which disclosures are not reflected in the Purchase Agreement itself, may not be
true as of any date other than the date made, or may apply standards of materiality in a way that is different from what may be
viewed as material by stockholders). Accordingly, the representations and warranties may not describe the actual state of affairs
at the date they were made or at any other time, and stockholders should not rely on them as statements of fact. Moreover, information
concerning the subject matter of the representations and warranties may change after the date of the Purchase Agreement.