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Item 1.01
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Entry into a Material Definitive Agreement.
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On June 20, 2018, EnviroStar, Inc., a Delaware
corporation (the “Company”), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”)
with Scott Equipment, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (the “Buyer”), and
John Scott Martin, Jr., the John S. Martin Family Limited Partnership, a Texas limited partnership (the “Martin Family Limited
Partnership” and collectively with John Scott Martin, Jr., the “Stockholders”), John Scott Martin, Jr. Testamentary
Trust (the “Trust”), and Scott Equipment, Inc., a Texas corporation (“Scott Equipment”, and collectively
with the Stockholders and Trust, the “Sellers”). Pursuant to the Asset Purchase Agreement, the Buyer has agreed to
acquire substantially all of the assets and assume certain liabilities of Scott Equipment (the “Transaction”).
Subject to certain working capital and other
adjustments, the consideration for the Transaction will be equal to $13,000,000, consisting of: (a) $6,500,000 in cash (the “Cash
Amount”), of which $1,900,000 (the “Escrow Amount”) will be deposited in an escrow account for no less than 18
months after the date of the closing of the Transaction (subject to extension in certain circumstances), and (b) 209,678 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 the Company’s Revolving Line of Credit.
The Asset Purchase Agreement contains representations,
warranties and covenants customary for a transaction of its size and nature. Subject to certain limitations, the Sellers, 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 the Sellers, are secured, in part, by the Escrow
Amount.
The Asset Purchase Agreement contains certain
termination rights for the Company and the Buyer, on the one hand, and the Sellers, on the other hand, including, but not limited
to, (i) by mutual written agreement; (ii) if the closing has not occurred on or before September 30, 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.
As a condition to the closing of the Transaction,
the Sellers will enter into a Stockholders Agreement with the Company (the “Stockholders Agreement”), pursuant to which,
among other things, the 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 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 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 descriptions of the Asset Purchase Agreement is
a summary, 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, and 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.