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Item 1.01
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Entry into a Material Definitive Agreement.
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On December 8, 2017, EnviroStar, Inc., a Delaware
corporation (the “Company”), entered into (i) an Asset Purchase Agreement (the “Zuf Asset Purchase Agreement”)
with AAdvantage Laundry Systems, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (the “Buyer”),
and Zuf Management LLC, a Texas limited liability company, Michael Zuffinetti, Ryan C. Smith (collectively with Zuf Management
LLC and Michael Zuffinetti, the “Zuf Sellers”) and Zuf Acquisitions I LLC, a Texas limited liability company d/b/a/
AAdvantage Laundry Systems ( “Zuf”); and (ii) an Asset Purchase Agreement (the “Sky-Rent Asset Purchase Agreement,”
and collectively with the Zuf Asset Purchase Agreement, the “Asset Purchase Agreements”), with the Buyer, and Sky-Rent
Management LLC, a Texas limited liability company, Michael Zuffinetti, Teri Zuffinetti (collectively with Sky-Rent Management LLC
and Michael Zuffinetti, the “Sky-Rent Sellers”), and Sky-Rent, LP, a Texas limited partnership (“Sky-Rent”).
Pursuant to the Zuf Asset Purchase Agreement, the Buyer has agreed to acquire substantially all of the assets and assume certain
liabilities of Zuf (the “Zuf Transaction”) and pursuant to the Sky-Rent Asset Purchase Agreement, the Buyer has agreed
to acquire substantially all of the assets and assume certain liabilities of Sky-Rent (the “Sky-Rent Transaction,”
and collectively with the Zuf Transaction, the “Transactions”).
Subject to certain working capital and other
adjustments, (i) the consideration for the Zuf Transaction will be equal to $11,000,000, consisting of: (a) $6,000,000 in cash (the
“Zuf Cash Amount”), of which $1,000,000 (the “Zuf Escrow Amount”) will be deposited in an escrow account
for no less than 18 months after the date of the closing of the Zuf Transaction (subject to extension in certain circumstances),
and (b) 225,410 shares (the “Zuf Stock Consideration”) of the Company’s common stock, par value $0.025 per share
(the “Common Stock”); and (ii) the consideration for the Sky-Rent Transaction will be equal to $6,000,000, consisting
of: (a) $3,000,000 in cash (the “Sky-Rent Cash Amount”), of which $500,000 (the “Sky-Rent Escrow Amount”
and collectively with the Zuf Escrow Amount, the “Escrow Amount”) will be deposited in an escrow account for no less
than 18 months after the date of the closing of the Sky-Rent Transaction (subject to extension in certain circumstances), and (b)
122,950 shares (the “Sky-Rent Stock Consideration,” and collectively, with the Zuf Stock Consideration, the “Stock
Consideration”). The Company intends to fund the Zuf Cash Amount and the Sky-Rent Cash Amount with
the Company’s Revolving Line of Credit.
Each of the Zuf Asset Purchase Agreement and
the Sky-Rent Asset Purchase Agreement contains representations, warranties and covenants customary for a transaction of its size
and nature. Subject to certain limitations, Zuf and the Zuf Sellers, and Sky-Rent and the Sky-Rent Sellers, as the case may be,
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 indemnification obligations of Zuf and the Zuf Sellers, and Sky-Rent
and the Sky-Rent Sellers, as the case may be, are secured, in part, by the Zuf Escrow Amount or Sky-Rent Escrow Amount, as the
case may be.
Each of the Zuf Asset Purchase Agreement and
the Sky-Rent Asset Purchase Agreement, as the case may be, contains certain termination rights for the Company and the Buyer, on
the one hand, and Zuf and the Zuf Sellers and Sky-Rent and the Sky-Rent Sellers, as the case may
be, on the other hand, including,
but not limited to, (i) by mutual written agreement; (ii) if the closing has not occurred on or before March 31, 2018; 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.
In connection with the Asset Purchase Agreements,
the Company and the Buyer, on the one hand, and Zuf, the Zuf Sellers, Sky-Rent and the Sky-Rent Sellers, on the other hand, entered
into a letter agreement, dated December 8, 2017 (the “Letter Agreement”), pursuant to which, among other things, (i)
the Company and the Buyer are entitled to use the Sky-Rent Escrow Amount to satisfy any claims and offsets against the Zuf and
the Zuf Sellers under the Zuf Asset Purchase Agreement, (ii) the Company and the Buyer are entitled to use the Zuf Escrow Amount
to satisfy any claims and offsets against Sky-Rent and the Sky-Rent Sellers under the Sky-Rent Asset Purchase Agreement, and (iii)
the minimum working capital and minimum cash under the Asset Purchase Agreements will be determined on an aggregate basis.
As a condition to the closing of the Transactions,
the Zuf Sellers and the Sky-Rent Sellers will enter into a Stockholders Agreement with the Company (the “Stockholders Agreement”),
pursuant to which, among other things, the Zuf Sellers and the Sky-Rent Sellers 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 the Zuf
Sellers and the Sky-Rent Sellers. The Stockholders Agreement will have a term of five years, subject to earlier termination under
certain circumstances.
The Company expects the closing of the Transactions
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 Transactions; (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 Agreements.
The foregoing descriptions of the Zuf Asset
Purchase Agreement, the Sky-Rent Asset Purchase Agreement and the Letter Agreement are summaries, and do not purport to be complete,
and are subject to, and qualified in their entirety by reference to, the Zuf Asset Purchase Agreement, the Sky-Rent Asset Purchase
Agreement and the Letter Agreement, copies of which are attached hereto as Exhibit 2.1(a), Exhibit 2.1(b) and Exhibit 2.3(c), respectively,
and are incorporated herein by reference. Each of the Zuf Asset Purchase Agreement and the Sky-Rent Asset Purchase Agreement, as
the case may be, 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 Zuf Asset Purchase Agreement
and the Sky-Rent Asset Purchase Agreement, as the case may be, 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 Zuf Asset Purchase Agreement and the Sky-Rent Asset Purchase Agreement, as the case may be (which disclosures are not reflected
in the Zuf Asset Purchase Agreement and the Sky-Rent Asset Purchase Agreement, as the case may be, 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 Zuf Asset Purchase Agreement
and the Sky-Rent Asset Purchase Agreement, as the case may be.