|
Item 1.01
|
Entry into a Material Definitive Agreement.
|
Acquisition of Maine Facilities
Oxford
On March 27, 2019, 56 Mechanic
Falls Road, LLC (“56 Mechanic”) entered into a Purchase and Sale Agreement (the “Oxford Purchase
Agreement”) with RJF – Keiser Real Estate, LLC (“RJF”), pursuant to which 56 Mechanic will purchase
certain real property and related improvements and personal property (including buildings, fixtures, and other improvements
on the land, and all machinery and equipment and other personal property, if any, owned by the RJF and located on the
property) located in Oxford, Maine (the “Oxford Facility”) from RJF (the “Oxford Transaction”). 56
Mechanic is a wholly-owned indirect subsidiary of Digirad Corporation (“Digirad” or the “Company”),
formed for the purpose of acquiring and holding the Oxford Facility. The Oxford Purchase Agreement contains representations,
warranties and covenants of RJF and 56 Mechanic that are customary for a transaction of this nature. The completion of the
Oxford Transaction is subject to due diligence and other customary closing conditions. Assuming the satisfaction or waiver of
the closing conditions, the Oxford Transaction is expected to close on or before April 26, 2019. The purchase price of the
Oxford Facility is $1.2 million (the “Oxford Purchase Price”), of which $100,000 was paid as a deposit and is
held in escrow. The Oxford Purchase Price is subject to adjustment for taxes and other charges and assessments.
Waterford
On April 3, 2019, 947 Waterford
Road, LLC (“947 Waterford”) entered into a Purchase and Sale Agreement (the “Waterford Purchase Agreement”)
with KBS Builders, Inc. (“KBS”), pursuant to which 947 Waterford purchased certain real property and related improvements
(including buildings) located in Waterford, Maine (the “Waterford Facility”) from KBS, and acquired the Waterford Facility.
The Waterford Purchase Agreement contains representations, warranties and
covenants of KBS
and 947 Waterford that are customary for a transaction of this nature. The purchase price of the Waterford Facility is $990,000,
subject to adjustment for taxes and other charges and assessments.
947 Waterford is a wholly-owned indirect
subsidiary of Digirad, formed for the purpose of acquiring and holding the Waterford Facility. KBS is a wholly owned subsidiary
of ATRM Holdings, Inc. (“ATRM”). As previously disclosed, the Company and ATRM are party to a joint venture for the
purpose of providing the service of purchasing and selling building materials and related goods to KBS. Jeffrey E. Eberwein, the
Chairman of our board of directors, is also the Chairman of the board of directors of ATRM. See Item 8.01 (Other Events) for additional
information regarding Mr. Eberwein, which is incorporated into this Item 1.01 by reference.
Paris
On April 3, 2019, 300 Park Street,
LLC (“300 Park”) entered into a Purchase and Sale Agreement (the “Park Purchase Agreement”) with KBS,
pursuant to which 300 Park purchased certain real property and related improvements and personal property (including buildings,
machinery and equipment) located in Paris, Maine (the “Park Facility”) from KBS, and acquired the Park Facility.
300 Park is a wholly-owned indirect subsidiary
of Digirad, formed for the purpose of acquiring and holding the Park Facility. The Park Purchase Agreement contains representations,
warranties and covenants of KBS and 300 Park that are customary for a transaction of this nature.
The
purchase price of the
Park Facility
is $2.9 million, subject to adjustment for taxes
and other charges and assessments.
Lease of Maine Facilities
On April 3, 2019, KBS entered into
a separate lease agreement with each of 947 Waterford (the “Waterford Lease”) and 300 Park (the “Park Lease”).
The Waterford Lease has an initial term of 120 months, which is subject to extension. The base rental payments associated with
the initial term under the Waterford Lease are estimated to be between $1.2 million and $1.3 million in the aggregate. The Park
Lease has an initial term of 120 months, which is subject to extension. The base rental payments associated with the initial term
under the Park Lease are estimated to be between $3.3 million and $3.6 million in the aggregate. ATRM has unconditionally guaranteed
the performance of all obligations under the Waterford Lease and Park Lease to be performed by 947 Waterford and 300 Park, including,
without limitation, the payment of all required rent. On April 3, 2019, KBS signed a lease with 56 Mechanic (the “Oxford
Lease”), which will be effective upon the closing of the Oxford Transaction. The Oxford Lease has an initial term of 120
months, which is subject to extension. The base rental payments associated with the initial term under the Oxford Lease are estimated
to be between $1.4 million and $1.6 million in the aggregate. ATRM has unconditionally guaranteed the performance of all obligations
under the Oxford Lease to be performed by 56 Mechanic, including, without limitation, the payment of all required rent. The Oxford,
Waterford and Paris Facilities are being acquired as part of the Company’s previously disclosed strategy of becoming a multi-industry
holding company.
Financing
On
March 29, 2019, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) by and among certain
subsidiaries of the Company identified on the signature pages thereof, as borrowers (collectively, the “Borrowers”);
the Company, as guarantor; and Sterling National Bank, a national banking association, as lender (“SNB”).
The
Loan Agreement is a five-year credit facility (maturing in March 2024) with a maximum credit amount of $20,000,000 for both revolving
loans and outstanding letter of credit obligations (the “SNB Credit Facility”). Under the SNB Credit Facility, Borrowers
can request the issuance of letters of credit in an aggregate amount not to exceed $500,000 at any one time outstanding.
At
the Borrowers’ option, the SNB Credit Facility will bear interest at either (i) an Floating LIBOR Rate,
as defined in the Loan Agreement, PLUS a margin of 2.50% per annum; or (ii) an Fixed LIBOR Rate, as defined in the Loan
Agreement, PLUS a margin of 2.25% per annum.
The
Company used a portion of the financing made available under the SNB Credit Facility to refinance and terminate, effective as of
March 29, 2019, its credit facility with Comerica Bank, a Texas banking association (“Comerica”), under that
certain
Revolving Credit Agreement, dated June 21, 2017, by and between the Company and Comerica (the “Comerica Credit Agreement”).
The Loan Agreement includes certain representations,
warranties of Borrowers, as well as events of default and certain affirmative and negative covenants by the Borrowers that are
customary for loan agreements of this type. These covenants include restrictions on borrowings, investments and dispositions by
Borrowers, as well as limitations on the Borrowers’ ability to make certain distributions. Upon the occurrence and during
the continuation of an event of default under the Loan Agreement, SNB may, among other things, declare the loans and all other
obligations under the Loan Agreement immediately due and payable and increase the interest rate at which loans and obligations
under the Loan Agreement bear interest. The SNB Credit Facility is secured by a first-priority security interest in substantially
all of the assets of the Company and the Borrowers and a pledge of all shares of the Borrowers.
The foregoing descriptions of the Oxford
Purchase Agreement, the Waterford Purchase Agreement, the Park Purchase Agreement, the Waterford Lease, the Park Lease and the
Loan Agreement (collectively, the “Agreements”) do not purport to be complete and are qualified in their entirety by
reference to the Agreements, copies of which are filed as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5 and 10.6 respectively, to this
Current Report on Form 8-K and incorporated into this Item 1.01 by reference.