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Item 1.01
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Entry into a Material Definitive Agreement.
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On November 2, 2018, EnviroStar, Inc., a
Delaware corporation (the “Company”), and certain of its subsidiaries entered into a Credit Agreement (the “Credit
Agreement”) with Bank of America, N.A. (“Bank of America”), as Administrative Agent, Swingline Lender and L/C
Issuer, Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) and U.S. Bank National Association
(“U.S. Bank”), as Joint Lead Arrangers, Merrill Lynch, as Sole Bookrunner, and other lender parties thereto, whereby
the lenders agreed to make available to the Company a five-year revolving credit facility in the maximum aggregate principal amount
of up to $100 million, with an accordion feature to increase the revolving credit facility by up to $40 million for a total of
$140 million. A portion of the revolving credit facility is available for swingline loans of up to a sublimit of $5 million and
for the issuance of standby letters of credit up to a sublimit of $10 million.
The Credit Agreement replaces the Company’s
existing Credit Agreement, October 7, 2016, by and between the Company and Wells Fargo Bank, National Association, as amended (the
“Prior Credit Agreement”). The Prior Credit Agreement was terminated effective November 2, 2018.
The obligations of the Company under the
Credit Agreement are secured by substantially all of the assets of the Company and certain of its subsidiaries. The payment and
performance of all indebtedness and other obligations of Company to the lenders is guaranteed jointly and severally by certain
of the Company’s subsidiaries.
The Credit Agreement is intended to provide
funds (i) to finance Permitted Acquisitions (as defined in the Credit Agreement), (ii) for capital expenditures, (iii) to refinance
the indebtedness under the Prior Credit Agreement, (iv) to make certain Restricted Payments (as defined in the Credit Agreement),
and (v) for working capital and other general corporate purposes.
Borrowings (other than swingline loans)
under the Credit Agreement bear interest, at a rate based on (a) LIBOR plus a margin that ranges between 1.25% and 1.75% depending
on the Company’s consolidated leverage ratio, which is a ratio of consolidated funded indebtedness to consolidated earnings
before interest, taxes, depreciation and amortization (EBITDA) (the “Consolidated Leverage Ratio”) or (b) the highest
of (i) prime, (ii) the federal funds rate plus 50 basis points, and (iii) the one month LIBOR rate plus 100 basis points (such
highest rate, the “Base Rate”), plus a margin that ranges between 0.25% and 0.75% depending on the Consolidated Leverage
Ratio. Swingline loans in U.S. dollars bear interest calculated at the Base Rate plus a margin that ranges between 0.25% and 0.75%
depending on the Consolidated Leverage Ratio. Loans outstanding under the Credit Agreement may be prepaid at any time in whole
or in part without premium or penalty, other than customary LIBOR breakage costs, if any, subject to the terms and conditions contained
in the Credit Agreement. The Credit Agreement terminates and any outstanding loans under it mature on November 2, 2023.
Interest due under the revolving credit
facility (other than a swingline loan) must be paid quarterly for borrowings with an interest rate determined with reference to
the Base Rate. Interest must be paid on the last day of the interest period selected by the Company for borrowings determined with
reference to LIBOR; provided that for interest periods of longer than three months, interest is required to be paid every three
months.
The obligations of the Company under the
Credit Agreement may be accelerated upon the occurrence of an event of default under the Credit Agreement, which includes customary
events of default, including payment defaults, defaults in the performance of affirmative and negative covenants, the inaccuracy
of representations or warranties, bankruptcy and insolvency related defaults, cross defaults to material indebtedness, defaults
relating to such matters as ERISA and judgments, and a change of control default.
The Credit Agreement contains negative covenants
applicable to the Company and its subsidiaries, including financial covenants requiring the Company to comply with maximum leverage
ratios and minimum interest coverage ratios, as well as restrictions on liens, investments, indebtedness, fundamental changes,
acquisitions, dispositions of property, making specified restricted payments (including cash dividends and stock repurchases that
would result in the Company exceeding an agreed to Consolidated Leverage Ratio), transactions with affiliates, and other restrictive
covenants.
In connection with the Credit Agreement,
the Company agreed to pay a commitment fee on the revolving loan commitment calculated as a percentage of the unused amount of
the revolving loan commitment at a per annum rate of up to 0.150% (based on the Consolidated Leverage Ratio). To the extent there
are letters of credit outstanding under the Credit Agreement, the Company will pay letter of credit fees plus a fronting fee and
additional charges. The Company agreed to pay Bank of America (i) for its own account, an upfront fee, (ii) for the account of
each of the other lenders, an upfront fee, and (iii) for its own account, an annual agency fee.
The description of the Credit Agreement
does not purport to be complete and is subject to, and qualified in their entirety by reference to, the Credit Agreement, a copy
of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.