Item
2.01. Completion of Acquisition or Disposition of Assets.
Merger
On
September 10, 2019, Digirad Corporation (the “Company”) completed its acquisition of ATRM Holdings, Inc. (“ATRM”).
Pursuant to an Agreement and Plan of Merger, dated as of July 3, 2019 (the “Merger Agreement”), among the Company,
Digirad Acquisition Corporation, a Minnesota corporation and wholly-owned subsidiary of the Company (“Merger Sub”),
and ATRM, Merger Sub merged with and into ATRM (the “Merger”), with ATRM as the surviving company.
At
the effective time of the Merger, (i) each share of ATRM common stock converted into the right to receive three one-hundredths
(0.03) of a share of 10.0% Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share, of the Company (“Company
Preferred Stock”) and (ii) each share of ATRM 10.00% Series B Cumulative Preferred Stock, par value $0.001 per share
(“ATRM Preferred Stock”), converted into the right to receive two and one-half (2.5) shares of Company Preferred
Stock, for an approximate aggregate total of 1,622,455 shares of Company Preferred Stock. No fractional shares of Company Preferred
Stock will be issued to any ATRM shareholder in the Merger. Each ATRM shareholder who would otherwise have been entitled to receive
a fraction of a share of Company common stock in the Merger will receive one whole share of Company Preferred Stock.
This
description of the Merger is qualified in its entirety by reference to the Merger Agreement, a complete copy of which was filed
as Exhibit 2.1 to the Current Report on Form 8-K filed by the Company on July 3, 2019 and is incorporated herein by reference.
A copy of the press release, dated September 10, 2019, announcing the completion of the Merger is included as Exhibit 99.1 to
this Current Report on Form 8-K and incorporated into this Item 2.01 by reference.
Private
Placement
Immediately
prior to the closing of the Merger, we issued 300,000 shares of Company Preferred Stock in a private placement (the “Private
Placement”) to Lone Star Value Investors, LP for a price of $10 per share for total proceeds to the Company of $3 million.
The Private Placement was made pursuant to the terms of a Stock Purchase Agreement, dated as of September 10, 2019 (the “SPA”).
The Company intends to use the proceeds from the Private Placement for the repayment of debt owed by a wholly-owned subsidiary
of ATRM. Lone Star Value Investors, LP is a significant holder of the Company’s common stock and the Company Preferred Stock.
No
placement agent or other financial intermediary was engaged or compensated in connection with the Private Placement. After the
closing of the Merger and the Private Placement, the Company had outstanding approximately 1,922,455 shares of Company Preferred
Stock. However, the securities sold in the Private Placement have not been registered under the Securities Act of 1933, as amended
(the “Act”), and may not be resold absent registration under, or exemption from registration under, the Act.
In
accordance with the terms of the Private Placement, at the closing, the Company and Lone Star Value Investors, LP entered into
a Registration Rights Agreement, dated as of September 10, 2019 (the “Registration Rights Agreement”), pursuant
to which Digirad agreed to file a registration statement with the U.S. Securities and Exchange Commission (the “SEC”),
covering the resale of the shares of Company Preferred Stock issued in the Private Placement, if and upon the written request
of the Private Placement investors at any time on or before September 10, 2021. Digirad is obligated to maintain the effectiveness
of the registration statement from its effective date until the later of (a) the date on which all registrable shares covered
by the registration statement have been sold, or may be sold without volume or manner of sale restrictions under Rule 144 or (b)
the second anniversary of the closing date. Digirad agreed to use commercially reasonable efforts to have the registration statement
declared effective by the SEC as soon as possible following the filing thereof. There are no monetary penalties if the registration
statement is not filed or does not become effective on a timely basis.
In
addition, prior to the effective time of the Merger, the Company entered into an agreement with Jeffrey Eberwein, the Company’s
Chairman of the Board, pursuant to which the Company has the right to require Mr. Eberwein to acquire up to 100,000 shares of
Company Preferred Stock at a price of $10 per share for aggregate proceeds of up to $1,000,000 at any time, in the Company’s
discretion, during the 12 months following the effective time of the Merger (the “Issuance Option”).
The
foregoing descriptions of the Merger Agreement, the SPA, the Registration Rights Agreement and the Issuance Option, and the Company’s
obligations thereunder do not purport to be complete and are qualified in their entirety by reference to the full text of the
Merger Agreement, the SPA, the Registration Rights Agreement and the Issuance Option, each of which is included herewith as Exhibit
2.1, 10.1, 10.2 and 10.3, respectively, and each of which is incorporated herein by reference.
Guaranties
On
September 10, 2019, the Company entered into that certain Consent and Acknowledgement Agreement and Twelfth Amendment to Loan
Agreement, dated as of September 10, 2019, by and among Gerber Finance Inc. (“Gerber”), KBS Builders, Inc.,
ATRM and the Company (the “Guaranty”), pursuant to which the Company agreed to guarantee amounts borrowed by
certain of ATRM’s subsidiaries from Gerber. The Guaranty requires the Company to serve as an additional guarantor with the
existing guarantor, ATRM, with respect to the payment, performance and discharge of each and every obligation of payment and performance
by the borrowing subsidiaries with respect to the loans made by Gerber to them.
The
foregoing description of the Guaranty is included to provide information regarding its terms. It does not purport to be a complete
description and is qualified in its entirety by reference to the full text of the Guaranty, which is filed as Exhibit 10.4 hereto
and is incorporated herein by reference.