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Item 1.01
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Entry into a Material Definitive Agreement.
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On September 8, 2017, EnviroStar, Inc., a Delaware
corporation (the “Company”), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”)
with Tri-State Technical Services, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (the “Buyer”),
and Matt Stephenson (the “Seller”) and Tri-State Technical Services, Inc., a Georgia corporation (“Tri-State”, and collectively with the Seller, the “Selling Group”). Pursuant to the Asset Purchase Agreement,
the Buyer has agreed to acquire substantially all of the assets and assume certain liabilities of Tri-State (the “Transaction”).
Subject to certain working capital and other
adjustments, the consideration for the Transaction will be equal to $16,500,000 (the “Purchase Price”) consisting of:
(i) $8,250,000 in cash (the “Cash Amount”), of which $2,100,000 (the “Escrow Amount”) will be deposited
in an escrow account for no less than 24 months after the date of the closing of the Transaction (subject to extension in certain
circumstances); and (ii) 338,115 shares (the “Stock Consideration”) of the Company’s common stock, par value
$0.025 per share (the “Common Stock”). The Company intends to fund the Cash Amount with cash on-hand and
the Company’s Revolving Line of Credit.
The Asset Purchase Agreement contains representations,
warranties and covenants customary for a transaction of this size and nature. Subject to certain limitations, the Selling Group,
on the one hand, and the Company and Buyer, on the other hand, have agreed to indemnify each other for breaches of representations,
warranties and covenants and other specified matters, and the Selling Group’s indemnification obligations are secured, in
part, by the Escrow Amount.
The Asset Purchase Agreement contains certain
termination rights for the Company and the Selling Group, including, but not limited to, (i) by mutual written agreement; (ii)
if the closing has not occurred on or before December 31, 2017; and (iii) the non-performance of any material covenant or other
agreement set forth in the Asset Purchase Agreement after an opportunity to cure in some cases.
As a condition to the closing of the
Transaction, the Seller Group, Symmetric Capital, LLC (“Symmetric I”), Symmetric Capital II,
LLC (“Symmetric II” and collectively with Symmetric I, “Symmetric”) and certain of
Symmetric’s affiliates, including Henry M. Nahmad, the Manager of Symmetric I and Symmetric II and Chief Executive
Officer of the Company, will enter into a Stockholders Agreement with the Company (the “Stockholders Agreement”),
pursuant to which, among other things, the Seller Group will agree to vote all shares of Common Stock owned by it or him 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 contact certain transfer restrictions with respect to the shares of
Common Stock held by the Seller Group. The Stockholders Agreement will also include certain tag-along provisions with respect to
certain proposed sales of Common Stock by Symmetric and its affiliates. The Stockholders Agreement will have a term of five
years, subject to earlier termination under certain circumstances.
The Company expects the closing of the Transaction
to occur within 45 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 Transaction; (ii) the accuracy of the representations
and warranties of the parties; and (iii) the parties’ performance and compliance in all material respects with the agreements
and covenants contained in the Asset Purchase Agreement.
The foregoing description of the Asset Purchase
Agreement is a summary only, does not purport to be complete, and is subject to, and qualified in its entirety by reference, to
the Asset Purchase Agreement, a copy of which is attached hereto as Exhibit 2.1 and is incorporated herein by reference. The Asset
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 Asset 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 Asset Purchase Agreement (which disclosures are
not reflected in the Asset 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 Asset Purchase Agreement.