ATRM Holdings, Inc. (Form: 10-K, Received: 09/22/2017 17:35:01)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X]

Annual Report Pursuant to Section 13 or 15( d ) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2016

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15( d ) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 001-36318

ATRM Holdings, inc.

(Exact name of registrant as specified in its charter)

Minnesota

(State of incorporation)

41-1439182

(I.R.S. employer identification no.)

5215 Gershwin Avenue N.

Oakdale, Minnesota

(Address of principal executive offices)

55128

(Zip code)

Registrant’s telephone number, including area code: (651) 704-1800

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: common stock, par value $0.001 per share

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [ ] No [X]

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

Yes [ ] No [X]

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes [ ] No [X]

As of June 30, 2016, the aggregate market value of the common stock of the registrant (based upon the closing price of the common stock at that date as reported by OTC Markets Group, Inc.), excluding outstanding shares beneficially owned by directors and executive officers, was $2,186,431.

As of September 22, 2017, there were 2,396,219 shares outstanding of the registrant’s common stock.

TABLE OF CONTENTS

PART I
ITEM 1.	BUSINESS	1
ITEM 1A.	RISK FACTORS	5
ITEM 2.	PROPERTIES	10
ITEM 3.	LEGAL PROCEEDINGS	10
ITEM 4.	MINE SAFETY DISCLOSURES	11
PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	12
ITEM 6.	SELECTED FINANCIAL DATA	12
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	13
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	22
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	22
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	22
ITEM 9A.	CONTROLS AND PROCEDURES	22
ITEM 9B.	OTHER INFORMATION	23
PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	24
ITEM 11.	EXECUTIVE COMPENSATION	27
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	30
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	32
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	33
PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	34

PART I

Unless the context otherwise requires, references in this Annual Report on Form 10-K (this “Form 10-K”) to (i) “ATRM,” the “Company,” “we,” “us” and “our,” refer to ATRM Holdings, Inc. and its consolidated subsidiaries, (ii) “KBS” refer to our modular housing business operated by our wholly-owned subsidiary KBS Builders, Inc. and (iii) “EBGL” refer to our Minnesota-based operations including Glenbrook Building Supply, Inc. (“Glenbrook”), a retail supplier of lumber and other building supplies, and EdgeBuilder, Inc.(“EdgeBuilder”), a manufacturer of structural wall panels, permanent wood foundation systems and other engineered wood products.

Forward-Looking Statements

This Form 10-K may contain “forward-looking statements,” as such term is used within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not based on historical fact and involve assessments of certain risks, developments, and uncertainties in our business looking to the future. Such forward-looking statements can be identified by the use of terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “intend,” “continue,” or “believe,” or the negatives or other variations of these terms or comparable terminology. Forward-looking statements may include projections, forecasts, or estimates of future performance and developments. These forward-looking statements are based upon assumptions and assessments that we believe to be reasonable as of the date of this report. Whether those assumptions and assessments will be realized will be determined by future factors, developments, and events, which are difficult to predict and may be beyond our control. Actual results, factors, developments, and events may differ materially from those we assumed and assessed. Risks, uncertainties, contingencies, and developments, including those discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and those identified in “Risk Factors” in this report, could cause our future operating results to differ materially from those set forth in any forward-looking statement. There can be no assurance that any such forward-looking statement, projection, forecast or estimate contained can be realized or that actual returns, results, or business prospects will not differ materially from those set forth in any forward-looking statement. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments.

ITEM 1. BUSINESS.

Overview

Through our wholly-owned subsidiaries, KBS, Glenbrook and EdgeBuilder, we manufacture modular buildings for commercial and residential applications in production facilities located in South Paris and Waterford, Maine, operate a retail lumber yard located in Oakdale, Minnesota, and manufacture structural wall panels, permanent wood foundation systems and other engineered wood products for use in construction of residential and commercial buildings in a production facility located in Prescott, Wisconsin. Our common stock, par value $0.001 per share, trades on the OTC Pink marketplace of the OTC Markets Group, Inc. under the symbol “ATRM.”

Products and Strategy

KBS Builders, Inc. (KBS)

KBS is a Maine-based manufacturer that started business in 2001 as a manufacturer of modular homes. In 2008, KBS began manufacturing commercial modular multi-family housing units. In subsequent years, KBS expanded its product offerings to include a variety of commercial buildings including apartments, condominiums, townhouses, dormitories, hospitals, office buildings, and other structures. The structures are built inside our climate-controlled factories and transported to the site where they are set, assembled and secured on the foundation. Electrical, plumbing, and HVAC systems are inspected and tested in the factory, prior to transportation to the site, to ensure the modules meet all local building codes and quality requirements. Modular construction has gained increased acceptance and is a preferred method of building by many architects and general contractors. The advantages of modular construction include: modules are constructed in a climate-controlled environment; weather conditions usually do not interrupt or delay construction; the building is protected from weather, reducing the risk of mold due to materials absorbing moisture from rain or snow; reduced site work; improved safety and security; reduced vandalism and attrition, as the building is immediately secured; and a significant reduction in overall project time.

The KBS competitive strategy is to offer top quality products for both commercial and residential buildings with a focus on customization to suit the project requirements, provide value with our engineering and design expertise, and meet the timeframe needed by the customer. Our production strategy is to maintain and grow the resources necessary to build a variety of commercial and residential buildings. We attempt to utilize the most efficient methods of manufacturing and high-quality materials in all of our projects. Our sales team works to attract new architects and contractors in New England who need the flexibility that KBS offers.

Glenbrook Building Supply, Inc. and EdgeBuilder, Inc. (EBGL)

Glenbrook is a retail supplier of lumber, windows, doors, cabinets, drywall, roofing, decking and other building materials and conducts its operations in Oakdale, Minnesota. EdgeBuilder is a manufacturer of structural wall panels, permanent wood foundation systems and other engineered wood products and conducts its operations in Prescott, Wisconsin. Glenbrook and EdgeBuilder are managed by a single management team and operated as a single company. EdgeBuilder manufactures its wall panels and permanent wood foundation systems in a climate-controlled factory and transports them by flat-bed trucks to the customer building location where they are lifted by crane and assembled and erected on site. Panelized construction, especially in large-scale projects, is becoming increasingly popular because wall panels can be constructed ahead of time and stored until needed, they can reduce overall site construction time and the on-site assembly can be performed with smaller crews. Additionally, because the wall panels are constructed in a controlled indoor environment: weather conditions do not usually interrupt or delay construction; the building and materials are not exposed to the weather as they are during a traditional build; there is improved safety and security; and the wall panels are manufactured with higher quality and greater precision than a traditional on-site build.

The Glenbrook competitive strategy is to provide top-quality building materials and unmatched service and attention to detail to building professionals, as well as homeowners. In addition, Glenbrook provides highly personalized service, knowledgeable salespeople and attention to detail that the larger, big-box chain home stores do not provide. The EdgeBuilder competitive strategy is to offer a superior product unique to the project’s requirements, provide value with our engineering and design expertise, and meet the timeframe needed by the customer, while staying cost-competitive. EdgeBuilder’s production strategy is to utilize automation and the most efficient methods of manufacturing and high-quality materials in all of its projects.

Customers

Our customers include residential home builders, general contractors, owners/developers of commercial buildings, and individual retail customers. With regards to KBS, since 2014, we have pursued a strategy of moving away from very large, complex commercial projects to focus on single-family residential homes and smaller commercial projects, which has helped to further diversify our customer base and limit our exposure to any one customer or project. However, we continue to rely on a limited number of customers for a substantial percentage of our net sales. One customer, a residential home builder in the New England area, accounted for approximately 11% and 9% of our total net sales in 2016 and 2015, respectively.

Competition

KBS is a regional manufacturer of modular housing units. KBS’s market is the New England states (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont). Several modular manufacturers are located in these New England states and in nearby Pennsylvania. Some competitors have manufacturing locations in Canada and ship their products to the United States. KBS’s competitors include Maple Leaf Homes (Canada), Pennwest Homes, Champion Home Builders, Muncy Homes, Professional Building Systems, Ritz-Craft Homes, Commodore Corporation and Simplex Homes.

EBGL is a regional manufacturer of engineered structural wall panels and permanent wood foundation systems, and also has a local retail business. EBGL’s market is primarily the Upper Midwest States (Iowa, Minnesota, Missouri, North Dakota, Oklahoma, South Dakota, and Wisconsin). EBGL’s competitors include Precision Company, Component Manufacturing Company, Schweiter Building Supply and Construction Company, Marshall Truss, and Frana Construction. EBGL’s retail building supply business competes on a more local level against both small, local lumber yards, regional building supply companies and, to a certain degree, the “big box” stores such as Home Depot and Lowe’s.

Manufacturing and Supplies

KBS’s manufacturing operations are based in Maine. KBS owns two manufacturing plants; a 90,000 square foot facility in South Paris, Maine, and a 60,000 square foot facility in Waterford, Maine. Lumber and supplies for both facilities are purchased from our main location in South Paris. Residential homes and commercial buildings are manufactured in these climate controlled facilities. We emphasize quality and conformance to all the local building codes where the home or building will be located. Independent building code inspectors are on site almost daily inspecting every stage of the manufacturing process.

EBGL’s manufacturing operations are located in Prescott, Wisconsin. EdgeBuilder leases a 34,000 square foot manufacturing plant where it manufactures wall panels and permanent wood foundation systems. EBGL’s retail operations are located in Oakdale, Minnesota. Glenbrook leases 30,000 square feet of commercial space where it operates its retail building supply business.

Both KBS’s and EBGL’s major material components are dimensional lumber and wood sheet products, which include plywood and oriented strand board. Lumber costs are subject to market fluctuations. Some of our required construction materials are only available through limited local sources in New England, Wisconsin and Minnesota. However, we can source such items from other parts of the country if a local supplier is unable to provide the material. We do not maintain long-term agreements with our suppliers and we purchase all of the materials used in our products through individual purchase orders. We keep a limited inventory of most commonly used materials on hand at our locations.

Sales and Marketing

In fiscal year 2016, sales of residential homes and commercial structures represented approximately 79% and 21%, respectively, of total net sales. In 2016, all sales were shipped within the United States.

KBS markets its modular homes products through direct sales people and through a network of independent dealers, builders, and contractors in New England. KBS’s direct sales organization is responsible for all commercial building projects, and works with developers, architects, owners, and general contractors to establish the scope of work, terms of payment, and general requirements for each project. KBS’s sales people also work with independent dealers, builders, and contractors to accurately configure and place orders for residential homes for their end customers. KBS’s network of independent dealers and contractors do not work with it exclusively, although many have KBS model homes on display at their retail centers. KBS does not assign exclusive territories to its independent dealers and contractors, but they tend to sell in areas of New England where they will not be competing against another KBS dealer or contractor.

EBGL markets its engineered structural wall panels and permanent wood foundation systems through direct sales people and a network of builders, contractors and developers in the Upper Midwest states. EBGL’s direct sales organization is responsible for both residential and commercial projects and it works with general contractors, developers and builders to provide bids and quotes for specific projects.

Our marketing efforts include participation in industry trade shows and production of product literature and sales support tools. These efforts are designed to generate sales leads for our independent builders and dealers, and direct salespeople.

Seasonality

Although modular and wall panel construction in our factories eliminates many of the weather-related challenges encountered with site-built construction, our operations can still be impacted by weather and other seasonal factors. Weather can cause delays in site preparation, including delays in building the foundation for a commercial project or residential home, access to building sites and customer delays in setting wall panels due to weather conditions and temperature. Additionally, sales demand, especially for residential homes, generally weakens in the winter months, particularly in the northeast region of the United States. As a result, both KBS and EBGL experience some seasonality. At KBS, the third quarter typically is the strongest demand period and the first quarter typically is the lowest demand period during the year. Although EBGL experiences some seasonality, it is less pronounced than KBS. EBGL’s fluctuations in business are impacted more by the timing of its large wall panel projects. At EBGL, the first quarter typically is the strongest demand period and the third quarter typically is the lowest demand period during the year.

Environmental

Our operations are subject to various federal, state, provincial and local laws, rules and regulations. We are subject to environmental laws, rules and regulations that limit discharges into the environment, establish standards for the handling, generation, emission, release, discharge, treatment, storage and disposal of hazardous materials, substances and wastes, and require cleanup of contaminated soil and groundwater. These laws, ordinances and regulations are complex, change frequently and have tended to become more stringent over time. Many of them provide for substantial fines and penalties, orders (including orders to cease operations) and criminal sanctions for violations. They may also impose liability for property damage and personal injury stemming from the presence of, or exposure to, hazardous substances. In addition, certain of our operations require us to obtain, maintain compliance with, and periodically renew permits.

Employees

As of December 31, 2016 we had 183 employees. Of our 183 employees, 126 serve in manufacturing, 23 in sales, marketing, and customer service, and 34 in general administration and finance. None of our employees are represented by a labor union or are subject to any collective bargaining agreement and we believe that our employee relations are satisfactory.

Additional Information

We were incorporated in Minnesota in December 1982 as “Aetrium Incorporated.” Effective December 5, 2014, our name was changed to “ATRM Holdings, Inc.” Our corporate executive offices are located at 5215 Gershwin Avenue N., Oakdale, Minnesota 55128. Our telephone number is (651) 704-1800. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available, free of charge, on our website at www.atrmholdings.com , as soon as reasonably practicable after we electronically file this material with, or furnish it to, the U.S. Securities and Exchange Commission (the “SEC”). Reports and other information we file with the SEC may also be viewed at the SEC’s website at www.sec.gov or viewed or obtained at the SEC Public Reference Room at 100 F Street, N.E., Washington, DC 20549. Our website is not intended to be a part of, nor are we incorporating it by reference into, this Form 10-K.

ITEM 1A.

RISK FACTORS.

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information contained in this Form 10-K, including our consolidated financial statements and notes thereto, before deciding whether to invest in our common stock. Additional risks and uncertainties that we are unaware of may become important factors that affect us. If any of these risks actually occur, our business, financial condition or operating results may suffer, the trading price of our common stock could decline, and you may lose all or part of your investment.

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

We have a history of operating losses and substantial indebtedness. Future cash flows from operations and financings may not be sufficient to enable us to meet our obligations under our indebtedness, which likely would have a material adverse effect on our business, financial condition, and results of operations.

We have incurred significant operating losses in recent years and, as of December 31, 2016, we had an accumulated deficit of approximately $80 million. There can be no assurance that we will generate sufficient revenue in the future to cover our expenses and achieve profitability on a consistent basis or at all.

We have issued various unsecured promissory notes to finance our acquisitions of KBS and EBGL and to provide for our general working capital needs. As of December 31, 2016, we had outstanding debt totaling approximately $19.2 million. Our debt included a total of approximately $3.4 million principal outstanding under our credit facilities with Gerber Finance Inc. (“Gerber Finance”), as well as a total of approximately $11.0 million principal outstanding under unsecured promissory notes issued to Lone Star Value Investors, LP (“LSVI”) and Lone Star Value Co-Invest I, LP (“LSV Co-Invest I”), as well as other obligations. Additionally, subsequent to December 31, 2016, the Company issued an unsecured promissory note to LSV Co-Invest I in the principal amount of $0.5 million. See “Financial Condition, Liquidity and Capital Resources” in Part II, Item 7 and Note 2 to the Notes to Consolidated Financial Statements set forth in Part IV, Item 15, “Financial Statements of Registrant” of this Form 10-K for additional information regarding our outstanding debt. Since December 31, 2016, we have paid off a certain amount of our debt and have incurred additional debt, as further described in Note 25 to the Notes to Consolidated Financial Statements set forth in Part IV, Item 15, “Financial Statements of Registrant” of this Form 10-K.

There can be no assurance that our existing cash reserves, together with funds generated by our operations and any future financings, will be sufficient to satisfy our debt payment obligations. Our inability to generate funds or obtain financing sufficient to satisfy our debt payment obligations may result in our debt obligations being accelerated by our lenders, which would likely have a material adverse effect on our business, financial condition and results of operations. Given these uncertainties, there can be no assurance that our existing cash reserves will be sufficient to avoid liquidity issues and/or fund operations beyond this fiscal year.

We may need additional financing and our ability to obtain such financing may be limited.

We may need additional financing in order to satisfy our debt payment obligations and effectively execute our business plan, which may include strategic acquisitions. There is no assurance that we will be able to obtain such additional financing, or that if available, it will be available to us on acceptable terms. Our existing loan agreements with Gerber Finance contain negative covenants limiting our ability to obtain additional debt financing without the consent of Gerber Finance. Due to our history of operating losses, existing debt payment obligations and the restrictions under the Gerber Finance loan agreements, our ability to obtain such additional financing may be limited.

The Gerber Finance loan agreements contain certain covenants that restrict our ability to engage in certain transactions and may impair our ability to respond to changing business and economic conditions.

Our loan agreements with Gerber Finance contain certain affirmative and negative covenants, including financial covenants requiring us to maintain a minimum leverage ratio at fiscal year end and not to incur a net annual post-tax loss in any fiscal year during the term of the loan agreement. These covenants also include restrictions on our abilities to take certain actions without the consent of Gerber Finance, and may limit our ability to respond to changing business and economic conditions. These restrictions include, among other things, limitations on the ability of the borrowers to take the following actions: merge, consolidate, acquire or invest in another company; incur additional debt; enter into transactions with affiliates; engage in other businesses; sell, transfer or otherwise dispose of assets; and make certain payments, including dividends or distributions to ATRM.

Our inability to comply with the financial covenants under our loan agreements with Gerber Finance could have a material adverse effect on our financial condition.

As discussed above, our loan agreements with Gerber Finance contains certain affirmative and negative covenants. At the applicable test dates, we were not in compliance with the following financial covenants: (i) a requirement for KBS to maintain a minimum leverage ratio of 7:1 for the fiscal year ended December 31, 2016, as its actual leverage ratio for such period was negatvie; (ii) a requirement for KBS not to incur a net annual post-tax loss in any fiscal year of the loan agreements, as KBS’s net annual post-tax loss for the fiscal year ended December 31, 2016 was $3.2 million; and (iii) a requirement to deliver the Company’s fiscal year-end financial statements, reviewed by an independent certified accounting firm acceptable to Gerber, within 105 days from the fiscal year ended December 31, 2016. In August 2017, Gerber Finance provided us with a waiver for these events. Based upon information available to us as of September 22, 2017, we believe we will be in compliance with the financial covenant requiring no net annual post-tax loss for KBS at future test dates. However, it is likely that we will not be in compliance with the minimum leverage ratio covenant as of the next future test date. If we fail to comply with any financial covenant under our loan agreements with Gerber Finance going forward, under certain circumstances after a cure period, Gerber Finance may demand the repayment of the credit facilities amounts outstanding and any unpaid interest thereon, which could have a material adverse effect on our financial condition.

There can be no assurances as to the amount of earn-out payments we will receive from the transfer of our test handler product line to Boston Semi Automation LLC.

On April 22, 2014, we entered into an Agreement (the “BSA Agreement”) with Boston Semi Equipment LLC (“BSE”) and Boston Semi Automation LLC (“BSA”), a wholly owned subsidiary of BSE, pursuant to which we transferred our assets and certain liabilities related to our business of designing, manufacturing, marketing and servicing equipment used in the handling of integrated circuits (“test handler product line”) to BSA. Since such date, our ability to generate revenue from the transferred business is limited to the earn-out payments we will receive under the terms of the BSA Agreement. Under the terms of the BSA Agreement, no earn-out payments will be earned after December 31, 2018. There can be no assurances of BSA’s ability to continue to generate revenue from the transferred business or of the amount of earn-outs that we will receive under such agreement.

We are dependent on our senior management team and other key employees.

Our success depends, to a significant extent, on our senior management team and other key employees and the ability of other personnel or new hires to effectively replace key employees who may retire or resign. Failure to retain our leadership team and attract and retain new leadership and other important personnel could lead to ineffective management and operations, which could materially and adversely affect our business and operating results.

The cyclical and seasonal nature of the housing industry causes our revenues and operating results to fluctuate, and we expect this cyclicality and seasonality to continue in the future.

The housing industry is highly cyclical and seasonal. It is influenced by many national and regional factors, including the availability of financing for homebuyers and developers, consumer confidence, interest rates, demographic and employment trends, income levels, housing demand, general economic conditions (including inflation and recessions), and the availability of suitable home sites. As a result of the foregoing factors, our revenues and operating results have been volatile, and we expect this volatility to continue in the future. Unfavorable changes in any of the above factors or other issues that may arise could have an adverse effect on our revenue and earnings.

Although modular and wall panel construction in our factories eliminates many of the weather-related challenges encountered with site-built construction, our operations can still be impacted by weather and other seasonal factors. Weather can cause delays in site preparation, including delays in building the foundation for a commercial project or residential home, access to building sites and customer delays in setting modules or wall panels due to weather conditions and temperature. Additionally, sales demand, especially for residential homes, generally weakens in the winter months, particularly in the northeast region of the United States. As a result, both KBS and EBGL experience some seasonality. At KBS, the third quarter typically is the strongest demand period and the first quarter typically is the lowest demand period during the year. Although EBGL experiences some seasonality, it is less pronounced than KBS. EBGL’s fluctuations in business are impacted more by the timing of its large wall panel projects. At EBGL, the first quarter typically is the strongest demand period and the third quarter typically is the lowest demand period during the year.

Our operating results could be adversely affected by changes in the cost and availability of raw materials.

Prices and availability of raw materials used to manufacture our products can change significantly due to fluctuations in supply and demand. Additionally, availability of the raw materials used to manufacture our products may be limited at times resulting in higher prices and/or the need to find alternative suppliers. Both KBS’s and EBGL’s major material components are dimensional lumber and wood sheet products, which include plywood and oriented strand board. Lumber costs are subject to market fluctuations. Furthermore, the cost of raw materials may also be influenced by transportation costs. It is not certain that any price increases can be passed on to our customers without affecting demand or that limited availability of materials will not impact our production capabilities. The state of the financial and housing markets may also impact our suppliers and affect the availability or pricing of materials. Our inability to raise the price of our products in response to increases in prices of raw materials or to maintain a proper supply of raw materials could have an adverse effect on our revenue and earnings.

We have material weaknesses in our internal control over financial reporting and concluded that our disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2016.

As disclosed in Part II, Item 9A “Controls and Procedures” of this Form 10-K, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures and our internal control over financial reporting were not effective as of December 31, 2016 due to material weaknesses in our internal control over financial reporting related to inadequate accounting processes and internal control procedures. Our failure to successfully remediate these material weaknesses could cause us to fail to meet our reporting obligations and to produce timely and reliable financial information. Additionally, such failure could cause investors to lose confidence in our public disclosures, which could have a negative impact on our stock price. For a discussion of these material weaknesses and our remediation efforts, please see Part II, Item 9A “Controls and Procedures” of this Form 10-K.

We have a few customers that account for a significant portion of our revenues, and the loss of these customers, or decrease in their demand for our products, could have a material adverse effect on our results.

We rely on a limited number of customers for a substantial percentage of our net sales and accounts receivable. One customer, a residential home builder in the New England area, accounted for 11% and 9% of our total net sales in 2016 and 2015, respectively. A reduction, delay, or cancellation of orders from one or more of these significant customers, or the loss of one or more of these customers, would likely have an adverse impact on our operating results.

If KBS is unable to maintain or establish its relationships with independent dealers and contractors who sell its homes, KBS revenue could decline.

KBS sells residential homes through a network of independent dealers and contractors. As is common in the modular home industry, KBS’s independent dealers may also sell homes produced by competing manufacturers and can cancel their relationships with KBS on short notice. In addition, these dealers may not remain financially solvent, as they are subject to industry, economic, demographic and seasonal trends similar to those faced by KBS. If KBS is not able to maintain good relationships with its dealers and contractors or establish relationships with new solvent dealers or contractors, KBS’s revenue could decline.

Due to the nature of our business, many of our expenses are fixed costs and if there are decreases in demand for our products, it may adversely affect our operating results.

Many of our expenses, particularly those relating to properties, capital equipment, and certain manufacturing overhead items, are fixed in the short term. Reduced demand for our products causes our fixed production costs to be allocated across reduced production volumes, which adversely affects our gross margins and profitability.

Certain actions taken in connection with reducing operating costs may have a negative impact on our business.

In the event of a housing downturn and a decline in our revenues, we may implement cost reduction actions such as temporary factory shutdowns, workforce reductions, pay freezes and reductions, and reductions in other expenditures. In doing so, we will attempt to maintain the necessary infrastructures to allow us to take full advantage of subsequent improvements in market conditions. However, there can be no assurance that reductions we may make in personnel and expenditure levels and the loss of the capabilities of personnel we have terminated or may terminate will not inhibit us in the timely ramp up of production in response to improving market conditions.

Due to the nature of the work we perform, we may be subject to significant liability claims and disputes.

We engage in services that can result in substantial injury or damages that may expose us to legal proceedings, investigations and disputes. For example, in the ordinary course of our business, we may be involved in legal disputes regarding personal injury and wrongful death claims, employee or labor disputes, professional liability claims, and general commercial disputes, as well as other claims. An unfavorable legal ruling against us could result in substantial monetary damages. Although we have adopted a range of insurance, risk management, safety, and risk avoidance programs designed to reduce potential liabilities, there can be no assurance that such programs will protect us fully from all risks and liabilities. If we sustain liabilities that exceed our insurance coverage or for which we are not insured, it could have a material adverse impact on our results of operations and financial condition.

RISKS RELATED TO OUR SECURITIES

There is a limited market for our common stock.

Our common stock is currently quoted on the OTC Pink market of the OTC Markets Group, Inc. under the symbol “ATRM.” Trading of securities on this quotation service is generally limited and is effected on a less regular basis than on exchanges such as NASDAQ. The average daily trading volume in our common stock during the fiscal year 2016 was approximately 1,000 shares per day. We cannot provide assurances that a more active trading market will develop or be sustained. As a result of low trading volume in our common stock, the purchase or sale of a relatively small number of securities could result in significant price fluctuations and it may be difficult for holders to sell their securities without depressing the market price for such securities.

Our ability to use net operating loss carryforwards to offset future taxable income for U.S. income tax purposes may be limited.

As of December 31, 2016, we had federal net operating loss carryforwards (“NOLs”) of approximately $97 million and state NOLs of approximately $34 million. Our ability to use NOLs to offset future taxable income will depend on the amount of taxable income we generate in future periods and whether we become subject to annual limitations on the amount of taxable income that may be offset by our NOLs.

Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), imposes an annual limitation on the amount of taxable income that may be offset by a corporation’s NOLs if the corporation experiences an “ownership change” as defined in Section 382 of the Code. An ownership change occurs when the corporation’s “5-percent shareholders” (as defined in Section 382 of the Code) collectively increase their ownership in the corporation by more than 50 percentage points (by value) over a rolling three-year period. Additionally, various states have similar limitations on the use of state NOLs following an ownership change.

Our Amended and Restated Articles of Incorporation include provisions designed to protect the tax benefits of our NOLs by generally restricting any direct or indirect transfers of our common stock that increase the direct or indirect ownership of our common stock by any person from less than 4.99% to 4.99% or more, or increase the percentage of our common stock owned directly or indirectly by a person owning or deemed to own 4.99% or more of our common stock. Any direct or indirect transfer attempted in violation of these transfer restrictions will be void as of the date of the prohibited transfer as to the purported transferee. These restrictions will expire on December 5, 2017.

Although this measure is intended to reduce the likelihood of an ownership change, we cannot assure you that it will prevent all transfers of our common stock that could result in such an ownership change. Further, this measure could make it more difficult for a third party to acquire, or could discourage a third party from acquiring, ATRM or a large block of our common stock, which may adversely affect the marketability, and depress the market price, of our common stock. In addition, this measure could delay or frustrate the removal of incumbent directors and could make more difficult a merger, tender offer or proxy contest involving us, or impede an attempt to acquire a significant or controlling interest in us, even if such events might be beneficial to us and our shareholders.

The concentration of our stock ownership may limit individual stockholder ability to influence corporate matters.

As of September 22, 2017, Jeffrey E. Eberwein, our Chairman of the Board, may be deemed to beneficially own 1,087,885 shares of our common stock, including 1,067,885 shares of our common stock owned directly by LSVI, constituting approximately 45.4% of our outstanding shares. As a result, Mr. Eberwein and LSVI are able to exercise significant influence with respect to all matters submitted to our stockholders for approval, as well as our management and affairs. For example, they will exercise significant influence with respect to the election of directors and approval of any merger, consolidation, sale of all or substantially all of our assets or other business combination or reorganization. This concentration of voting power could delay or prevent an acquisition of us on terms that other stockholders may desire. The interests of such stockholders may not always coincide with your interests or the interests of other stockholders, and such stockholders may act in a manner that advances their best interests and not necessarily those of other stockholders, and might affect the prevailing market price for our securities.

ITEM 2.

PROPERTIES.

Our corporate executive offices are located at a leased facility (approximately 30,000 square feet) in Oakdale, Minnesota, a suburb of St. Paul, where EBGL also conducts its sales, marketing and administrative activities and Glenbrook conducts its retail operations. EdgeBuilder conducts its wall panel manufacturing activities at a leased facility (approximately 34,000 square feet) in Prescott, Wisconsin. KBS conducts its modular building manufacturing, sales, marketing and service activities at facilities we own in South Paris, Maine (90,000 square feet) and Waterford, Maine (60,000 square feet). We consider our present facilities to be sufficient for our current operations.

ITEM 3.

LEGAL PROCEEDINGS.

The Company is and may become involved in various lawsuits as well as other certain legal proceedings that arise in the ordinary course of business. Information regarding certain material proceedings is provided below.

UTHE Technology Corporation v. Aetrium Incorporated

Since December 1993, an action brought by UTHE Technology Corporation (“UTHE”) against ATRM and its then sales manager for Southeast Asia (“Sales Manager”), asserting federal securities claims, a RICO claim, and certain state law claims, had been stayed in the United States District Court for the Northern District of California. UTHE’s claims were based on its allegations that four former employees of a Singapore company, which UTHE formerly owned, conspired to and did divert business from the subsidiary, and in turn UTHE, and directed that business to themselves and a secret company they had formed, which forced UTHE to sell its subsidiary shares to the former employee defendants at a distressed price. The complaint alleged that ATRM and the Sales Manager participated in the conspiracy carried out by the former employee defendants. In December 1993, the case was dismissed as to the former employee defendants because of a contract requiring UTHE and them to arbitrate their claims in Singapore. The District Court stayed the case against ATRM and the Sales Manager pending the resolution of arbitration in Singapore involving UTHE and three of the former employee defendants, but not involving ATRM or the Sales Manager. ATRM received notice in March 2012 that awards were made in the Singapore arbitration against one or more of the former employee defendants who were parties to the arbitration. In June 2012, UTHE filed a motion to reopen the case against ATRM and the Sales Manager and to lift the stay, which the court granted. On September 13, 2013, the court entered final judgment dismissing all remaining claims UTHE asserted against ATRM in the litigation. On September 23, 2013, UTHE appealed the district court judgment to the United States Court of Appeal for the Ninth Circuit only as to the dismissal of UTHE’s RICO claim. The appeal was argued in a court hearing on November 19, 2015. On December 11, 2015, the Court of Appeal issued an order reversing the district court’s grant of summary judgment of UTHE’s RICO claim and remanded the case back to the district court for further proceedings. On April 20, 2016, the district court stayed the case pending a decision in the Supreme Court case RJR Nabisco, Inc. v. The European Community , No. 15-138. A decision in the RJR Nabisco case was issued on June 20, 2016. On July 14, 2016, ATRM filed a motion for summary judgment in the district court seeking dismissal in light of the RJR Nabisco decision. On August 26, 2016, the district court granted ATRM’s motion for summary judgment and dismissed the case. On September 16, 2016, UTHE filed its appeal to the Ninth Circuit of the district court’s grant of summary judgment and dismissal. The parties completed the appellate briefing on February 13, 2017. The appellate court will set a date (currently expected to be in December 2017) for hearing oral arguments, after which the court will render its decision on the appeal. We continue to believe that the claims asserted in this matter do not have any merit and intend to vigorously defend the action.

KBE Building Corporation v. KBS Builders, Inc., and ATRM Holdings, Inc., et al.

At the time of the KBS acquisition in April 2014, KBS purchased receivables for a construction project known as the Nelton Court Housing Project (“Nelton Court”) in Hartford, CT, and also performed certain “punch-list” and warranty work. Modular units for the Nelton Court project were supplied by KBS Building Systems, Inc. (“KBS-BSI”) pursuant to a contract with KBE Building Corporation (“KBE”). KBE has asserted claims against KBS-BSI, KBS and ATRM arising out of alleged delays, and for the repair of certain alleged defects in the modular units supplied to the project. KBE’s claim seeks an unspecified amount of damages. The action has been transferred to the complex litigation docket of the Hartford Superior Court. The Court has set a trial date for February 2018, but that date will likely be continued because all of the parties have participated in mediation and settlement negotiations are ongoing, so no depositions have yet been conducted. We continue to believe that the claims asserted in this matter do not have any merit although our carriers agreed to participate in a mediation given the cost of defense. If the case is not settled, we intend to vigorously defend the action.

ITEM 4.

MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our common stock is currently quoted on the OTC Pink market of the OTC Markets Group, Inc. under the symbol “ATRM.” The following table sets forth the high and low bid prices per share of our common stock as quoted on the OTCQX market of the OTC Markets Group, Inc. for the period October 29, 2015 through December 31, 2016, and the high and low closing sale prices per share of our common stock as quoted on the NASDAQ Capital Market for the period January 1, 2015 through October 28, 2015. These prices do not include adjustments for retail mark-ups, markdowns or commissions.

	Price Range
	Low		High
Year ended December 31, 2016
First Quarter	$	2.02		3.03
Second Quarter	$	1.95		2.79
Third Quarter	$	0.70		2.30
Fourth Quarter	$	1.02		2.25
Year ended December 31, 2015
First Quarter	$	2.65		4.00
Second Quarter	$	2.42		4.95
Third Quarter	$	2.69		4.76
Fourth Quarter	$	1.75		3.35

Holders

As of September 22, 2017, we had approximately 60 shareholders of record of our common stock.

Dividends

We have never paid cash dividends on our common stock. We currently intend to retain any earnings for use in our operations and do not anticipate paying cash dividends in the foreseeable future.

ITEM 6.

SELECTED FINANCIAL DATA.

Not applicable.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

The following discussion and analysis should be read in conjunction with our consolidated financial statements, and the notes thereto, and other financial information appearing elsewhere in this Form 10-K. All figures in the following discussion are presented on a consolidated basis. All dollar amounts and percentages presented herein have been rounded to approximate values.

Overview

Through our wholly-owned subsidiaries, KBS, Glenbrook and EdgeBuilder, we manufacture modular buildings for commercial and residential applications in two production facilities located in South Paris and Waterford, Maine, operate a retail lumber yard located in Oakdale, Minnesota, and manufacture structural wall panels, permanent wood foundation systems and other engineered wood products for use in construction of residential and commercial buildings in a production facility located in Prescott, Wisconsin.

Results of Operations

Selected consolidated statement of operations data for the years ended December 31, 2016 and 2015 were as follows (dollars in thousands):

	2016					2015

Net sales	$	28,156		100.0	%	$	25,632		100.0	%

Cost of sales		26,589		94.4			25,982		101.4
Selling, general and administrative		4,648		18.5			5,083		19.8
Goodwill impairment charge		1,733		6.2			—		—
Total costs and expenses		32,970		117.1			31,065		121.2

Loss from continuing operations	$	(4,814	)	(17.1	)%	$	(5,433	)	(21.2	)%

Net Sales

Our net sales by product line and as a percentage of total sales for the years ended December 31, 2016 and 2015 were as follows (dollars in thousands):

	2016				2015
Residential Homes	$	22,225	79	%	$	19,358	76	%
Commercial Structures		5,931	21	%		6,274	24	%
Total	$	28,156	100	%	$	25,632	100	%

Net sales were approximately $28.2 million in 2016 compared to approximately $25.6 million in 2015. Fiscal year 2016 net sales included three months of EBGL sales of approximately $3.5 million. KBS’s net sales decreased by approximately $0.9 million from $25.6 million in 2015 to approximately $24.7 million in 2016. This decrease in net sales for KBS primarily is attributable to a decrease in sales of commercial structures as compared to the prior year. For fiscal year 2016, sales for residential homes and commercial structures represented 79% and 21% of total net sales, respectively compared with 76% and 24% of total net sales, respectively, in 2015. This reflects the overall strategy at KBS to focus on expanding its residential homes business and continue to be selective in the commercial projects it pursues. In addition to this shift from commercial projects to residential projects, as part of its overall strategic plan, KBS has reduced the amount of site work (including on-site plumbing, electrical, heating, air conditioning, etc.) provided on its commercial projects due to the low margins typically associated with such work and the difficulty in collecting retainage associated with such site work. This is part of KBS’s overall strategic plan to focus on KBS’s core competency of manufacturing high-quality, custom modular buildings and to have the work required at commercial building sites be performed by the customer’s general contractor whenever possible. Accordingly, site work revenue was reduced to less than $0.5 million in 2016 as compared to $0.9 million in 2015.

Cost of Sales

Cost of sales amounted to approximately $26.6 million in 2016 compared to approximately $26.0 million in 2015. Cost of sales for 2016 included approximately $3.0 million of cost of sales for EBGL. Cost of sales for KBS amounted to approximately $23.6 million in 2016 compared to approximately $26.0 million in 2015, representing a decrease of approximately $2.4 million. The decrease in cost of sales for KBS in 2016 reflects the overall reduction in net sales. However, the primary drivers of the overall decrease in cost of sales are the direct result of the Company’s concerted effort to find more profitable work and avoid the costly site work it had performed in the past on large commercial projects, as well as improvements in project pricing and ongoing cost control measures.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses were approximately $4.6 million in 2016 compared to approximately $5.1 million in 2015, a decrease of approximately $0.5 million. The decrease in SG&A expense in 2016 compared to 2015 is primarily attributable to the $0.4 million non-recurring restructuring charge that KBS recorded in September 2015, primarily related to severance costs and other costs related to the restructuring of KBS’s operations. The Company continues to look for additional ways to reduce its overall costs and these cost control measures have successfully kept costs in line with the prior year despite overall rising costs in areas such as health insurance.

Goodwill Impairment Charge

We completed a goodwill impairment assessment as of September 30, 2016, and determined that the value of the KBS goodwill was zero versus the carrying value of the KBS goodwill of $1.7 million as of that date. Accordingly, we recorded a goodwill impairment charge in the amount of approximately $1.7 million in fiscal year 2016. We completed a goodwill impairment assessment at September 30, 2015 and determined that no impairment was indicated at that date. While the Company continues to implement its strategic plans for change at KBS and these changes are beginning to materialize in KBS’s operating results, KBS’s performance has lagged behind management’s expectations and we have been unable to fully perform to our projected levels of revenue and net income. Despite improving operating results, actual results have continued to fall short of expectations. Until we can perform to the levels of our expectations, we determined that it was prudent to adjust our projections in our impairment analysis to reflect the historical shortfalls in operating results.

Interest Expense

Interest expense was approximately $1.7 million in 2016 compared with $1.4 million in 2015. The increase resulted from higher average debt balances in 2016 to fund our working capital needs. Interest expense is primarily related to the debt we incurred to finance the KBS acquisition in April 2014 and the EBGL acquisition in October 2016 and additional borrowings necessary to support our general working capital needs as described further in “Liquidity and Capital Resources” below and in Note 15 to the Notes to Consolidated Financial Statements set forth in Part IV, Item 15, “Financial Statements of Registrant” of this Form 10-K.

Change in Fair Value of Contingent Earn-Outs

We assess the fair value of contingent earn-outs at the end of each quarter. The contingent earn-out included in our consolidated balance sheets at December 31, 2016 and December 31, 2015 is related to the transfer of our test handler product line to BSA in April 2014. Change in fair value of contingent earn-outs in 2016 represented a net decrease of approximately $27,000 in the fair value of this earn-out as a result of our assessments to fair value. For fiscal year 2015, the change in fair value of contingent earn-outs amounted to a net decrease of approximately $191,000.

Settlement Gain

In April 2015, we asserted certain indemnification and other claims against the sellers of KBS pursuant to an asset purchase agreement executed in April 2014. On June 26, 2015, we entered into a settlement agreement with the sellers related to such claims. The settlement agreement provided for, among other things, a reduction in the principal amount of the unsecured promissory note issued to the primary seller of KBS from $5.5 million to $2.5 million and the forgiveness of all then-accrued interest related to the note. We recorded a gain of approximately $3.7 million in 2015 related to the settlement. There was no such gain recorded in 2016.

Income Taxes

Since 2009, we have maintained a valuation allowance to fully reserve our net deferred tax assets. We expect to continue to maintain a full valuation allowance until we determine that we can sustain a level of profitability that demonstrates our ability to realize these assets. To the extent we determine that the realization of some or all of these benefits is more likely than not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed. Such a reversal would be recorded as an income tax benefit and, for some portion related to deductions for stock option exercises, an increase in shareholders’ equity. We recorded income tax expense of $7,900 and $6,000 in fiscal years 2016 and 2015, respectively, which represented deferred income tax expense associated with taxable differences related to our indefinite-lived intangible assets which are omitted from the calculation of our valuation allowance due to the unpredictability of the reversal of these differences.

Financial Condition, Liquidity and Capital Resources

As of December 31, 2016, cash and cash equivalents were approximately $1.2 million compared with $0.6 million as of December 31, 2015. In addition, as of December 31, 2016, restricted cash was approximately $150,000. The Company had no restricted cash as of December 31, 2015. As of December 31, 2016, our accumulated deficit was approximately $80.2 million compared with $73.7 million as of December 31, 2015.

Cash flows used in operating activities . In 2016, cash flows used in operating activities was approximately $2.8 million, consisting primarily of our net loss of approximately $6.5 million, partially offset by approximately $3.1 million in non-cash expenses and approximately $0.6 million in working capital changes. Non-cash expenses included the goodwill impairment charge of $1.7 million, depreciation and amortization of $0.8 million, paid-in-kind (“PIK”) interest expense of $0.5 million, and share-based compensation expense of $0.1 million, partially offset by net bad debt recoveries of $0.1 million. Working capital changes generating cash included a decrease in inventories of approximately $0.7 million partially related to the decrease in production levels in the fourth quarter of 2016 and the temporary shut-down of the Waterford plant, as well as KBS’s concerted effort to keep inventory levels at an appropriate level and utilize a purchasing process to limit the amount of unnecessary on-hand inventory. Trade accounts payable increased approximately $0.2 million and accrued compensation increased by approximately $0.3 million, which were partially offset by an increase of $0.5 million increase in cost and estimated profit in excess of billings due to the completed and partially completed buildings yet to be billed as of December 31, 2016 as compared to 2015. In 2015, cash flows used in operating activities was approximately $5.0 million, consisting primarily of our net loss of approximately $7.0 million (excluding a $3.7 million non-cash settlement gain), partially offset by approximately $1.5 million in non-cash expenses and approximately $0.5 million in working capital changes. Non-cash expenses included depreciation and amortization of $0.6 million, share-based compensation expense of $0.2 million, bad debt charges of $0.5 million, inventory write-downs of $0.1 million, and changes in the fair value of contingent earn-outs of $0.2 million. Working capital changes generating cash included decreases of approximately $1.3 million in costs and estimated profit in excess of billings and $0.6 million in inventories and an increase of $0.5 million in billings in excess of costs and estimated profit, partially offset by a $0.2 million increase in accounts receivable and a decrease of approximately $1.6 million in accounts payable. The $1.3 million decrease in costs and estimated profit in excess of billings reflected the completion of a large commercial project that was in process at December 31, 2014. The decrease in inventories was primarily attributed to reduced commercial sales and production levels in the fourth quarter of 2015 compared with the fourth quarter of 2014. The increase in billings in excess of costs and estimated profit included approximately $0.4 million of billings at December 31, 2015 related to modules for a commercial project that was delivered in February 2016. The decrease in accounts payable resulted primarily from reduced production levels in the fourth quarter of 2015 compared with the fourth quarter of 2014, mainly due to lower commercial project sales.

Cash flows (used in) generated by investing activities . In 2016, cash flows used in investing activities was approximately $2.6 million, consisting primarily of the purchase of EBGL in October 2016 for approximately $3.0 million. This was partially offset by $0.3 million in earn-out payments received from BSA related to the transfer of our test handler product line to BSA in 2014. In 2015, cash flows generated by investing activities was approximately $1.2 million, consisting primarily of royalty payments received from BSA related to the transfer of our test handler product line to BSA in 2014.

Cash flows generated by financing activities . In 2016, cash flows generated by financing activities was approximately $6.2 million which included proceeds from the issuance of long-term debt of $5.0 million related to the EBGL acquisition loan of $3.0 million and $2.0 million of new promissory notes issued to LSV Co-Invest I, and net borrowings on the revolving lines of credit of approximately $3.8 million, partially offset by the principal payments made on our long-term debt of approximately $2.1 million and the payment of deferred financing costs of approximately $0.4 million. In 2015, cash flows generated by financing activities was approximately $2.4 million, which included approximately $2.9 million of net proceeds from a common stock rights offering completed in September 2015 in which we sold 1,019,746 shares of our common stock, and approximately $1.0 million received from the sale of a promissory note to LSVI to provide for our general working capital needs as described below and in Note 15 to our Notes to Consolidated Financial Statements, partially offset by approximately $1.6 million of debt payments.

Historically, we have supported our capital expenditure and working capital needs with cash generated from operations, debt financings and our existing cash and cash equivalents. We acknowledge that the Company continues to face a challenging operating environment and while we continue to focus on improving our overall profitability, we reported an operating loss for 2016. We have incurred significant operating losses in recent years, and, as of December 31, 2016, we had an accumulated deficit of approximately $80 million. Working capital has remained negative over the past several years. Cash used in operating activities, while improved over 2015, remains negative, which has required us to generate funds from investing and financing activities. Beginning in 2013, we implemented several strategic initiatives intended to stabilize the Company and return us to profitability, including the sale of our Reliability Test Products (“RTP”) product line in July 2013 and our test handler product line in April 2014. Also in April 2014, we acquired KBS because we believed there was significant growth opportunity in the modular housing industry. Additionally, in October 2016, we acquired EBGL because we believed there was significant growth opportunity in the structural wall panel, permanent wood foundation systems and local building supply business. These acquisitions provide ATRM with the potential to return to profitability. However, there can be no assurance that KBS or EBGL will generate sufficient revenue in the future to cover our expenses and allow us to achieve profitability, on a consistent basis or at all.

We have issued various promissory notes to finance our acquisitions of KBS and EBGL and to provide for over general working capital needs. As of December 31, 2016, we had outstanding debt totaling approximately $19.2 million. Our debt included (i) $2.4 million principal outstanding on KBS’s $4.0 million revolving credit facility under a loan and security agreement with Gerber Finance (the “KBS Loan Agreement”), $1.2 million principal outstanding on EBGL’s $3.0 million revolving credit facility under a loan and security agreement with Gerber Finance (the “EBGL Loan Agreement”) and $3.0 million principal outstanding under a loan and security agreement with Gerber Finance used to finance the acquisition of EBGL (the “Acquisition Loan Agreement”), (ii) $4.3 million principal amount of unsecured promissory notes issued to LSVI and $6.8 million principal amount of unsecured promissory notes issued to LSV Co-Invest I, with interest payable semiannually and any unpaid principal and interest is due on April 1, 2019, and (iii) $0.7 million principal amount outstanding under an unsecured promissory note issued to the primary seller of KBS, payable in monthly installments of $100,000, inclusive of interest, through July 1, 2017. We also have obligations to make $1.0 million in deferred cash payments to the sellers of EBGL, payable in quarterly installments of $250,000, inclusive of interest, through October 1, 2017. Jeffrey E. Eberwein, our Chairman of the Board, is the manager of Lone Star Value Investors GP, LLC (“LSVGP”), the general partner of LSVI and LSV Co-Invest I, and sole member of Lone Star Value Management, LLC (“LSVM”), the investment manager of LSVI.

On February 23, 2016, we entered into the KBS Loan Agreement with Gerber Finance providing KBS with a credit facility with borrowing availability of up to $4.0 million, based on a formula tied to eligible accounts receivable, inventory, equipment and real estate of the borrowers. On that date, we made an initial draw of approximately $2.6 million. The initial term of the KBS Loan Agreement expires on February 22, 2018, but extends automatically for additional one-year periods unless a party provides prior written notice of termination. The KBS Loan Agreement contains certain affirmative and negative covenants, including financial covenants requiring us to maintain a minimum leverage ratio at fiscal year end and not to incur a net annual post-tax loss in any fiscal year during the term of the KBS Loan Agreement. The borrowers’ obligations under the KBS Loan Agreement are secured by all of their property and assets and are guaranteed by the Company. Our obligations under our unsecured promissory notes are subordinate to the borrower’s obligations under the KBS Loan Agreement, pursuant to the terms of subordination agreements we entered into with Gerber Finance and the holders of our unsecured promissory notes as a condition to the extension of credit to the borrowers under the KBS Loan Agreement. At December 31, 2016, the outstanding balance on the KBS Loan Agreement was approximately $2.4 million.

On August 12, 2016, the Company, LSVI and LSV Co-Invest I amended the LSVI and LSV Co-Invest I unsecured promissory notes allowing the Company, at its sole option, to elect to make any interest payment in paid-in-kind interest (“PIK Interest”) at an annual rate of 12% (versus the 10% interest rate applied to cash payments) for that period. The Company elected the PIK Interest option for the six-month period ended June 30, 2016. Accordingly, interest for the six months ended June 30, 2016, totaling $534,000 (calculated at the PIK Interest rate of 12%), was added to the balance of the LSVI and LSV Co-Invest I unsecured promissory notes.

On October 4, 2016, concurrently with the closing of the EBGL acquisition, we entered into the EBGL Loan Agreement with Gerber Finance providing EBGL with a working capital line of credit of up to $3.0 million. Availability under the EBGL Loan Agreement was based on a formula tied to the borrowers’ eligible accounts receivable, inventory and equipment, and borrowings bore interest at the prime rate plus 2.75%, with interest payable monthly and the outstanding principal balance payable upon expiration of the term of the EBGL Loan Agreement. Initially, availability under the EBGL Loan Agreement was limited to $1.0 million, which amount could be increased to up to $3.0 million in increments of $500,000 upon the request of the borrowers and in the discretion of Gerber Finance. The initial term of the EBGL Loan Agreement was set to expire on October 3, 2018, but extending automatically for additional one-year periods unless a party provided prior written notice of termination. The borrowers’ obligations under the EBGL Loan Agreement were secured by all of their property and assets and were guaranteed by the Company and its other subsidiaries. At December 31, 2016, the outstanding balance on the EBGL Loan Agreement was approximately $1.0 million.

Additionally, on October 4, 2016, concurrently with the closing of the EBGL acquisition, we entered into the Acquisition Loan Agreement with Gerber Finance providing EBGL with $3.0 million in financing for the acquisition. Borrowings under the Acquisition Loan Agreement bear interest at the prime rate plus 3.00%, with interest payable monthly and the outstanding principal balance payable upon expiration of the term of the Acquisition Loan Agreement. The initial term of the Acquisition Loan Agreement expires on December 31, 2018, but extends automatically for additional one-year periods unless a party provides prior written notice of termination. The borrowers’ obligations under the Acquisition Loan Agreement are secured by all of their property and assets and are guaranteed by the Company and its other subsidiaries. At December 31, 2016, the outstanding balance on the Acquisition Loan Agreement was $3.0 million.

In addition, on October 4, 2016, we entered into a securities purchase agreement with LSV Co-Invest I, pursuant to which we issued to LSV Co-Invest I an unsecured promissory note made by the Company in the principal amount of $2.0 million in exchange for $2.0 million in cash, to provide additional working capital for ATRM.

At the applicable test dates, we were not in compliance with the following financial covenants: (i) a requirement for KBS to maintain a minimum leverage ratio of 7:1 for the fiscal year ended December 31, 2016, as its actual leverage ratio for such period was negative; (ii) a requirement for KBS not to incur a net annual post-tax loss in any fiscal year of the loan agreements, as KBS’s net annual post-tax loss for the fiscal year ended December 31, 2016 was $3.2 million; and (iii) a requirement to deliver the Company’s fiscal year-end financial statements reviewed by an independent certified accounting firm acceptable to Gerber, within 105 days from the fiscal year ended December 31, 2016. In August 2017, Gerber Finance provided us with a waiver for these events. Based upon information available to us as of September 13, 2017, we believe we will be in compliance with the financial covenant requiring no net annual post-tax loss for KBS at future test dates. However, it is likely that we will not be in compliance with the minimum leverage ratio covenant as of the next future test date. If we fail to comply with any financial covenant under our loan agreements with Gerber Finance going forward, under certain circumstances after a cure period, Gerber Finance may demand the repayment of the credit facilities amount outstanding and any unpaid interest thereon.

On June 30, 2017, EBGL entered into a Revolving Credit Loan Agreement (the “Premier Loan Agreement”) with Premier Bank (“Premier”) providing EBGL with a working capital line of credit of up to $3.0 million. The Premier Loan Agreement replaced the EBGL Loan Agreement, which was terminated on the same date. Availability under the Premier Loan Agreement is based on a formula tied to EBGL’s eligible accounts receivable, inventory and equipment, and borrowings bear interest at the prime rate plus 1.50%, with interest payable monthly and the outstanding principal balance payable upon expiration of the term of the Premier Loan Agreement. The Premier Loan Agreement also provides for certain fees payable to Premier during its term. The initial term of the Premier Loan Agreement expires on June 30, 2018, but may be extended from time to time at our request, subject to approval by Premier. EBGL’s obligations under the Premier Loan Agreement are secured by all of their inventory, equipment, accounts and other intangibles, fixtures and all proceeds of the foregoing.

On June 30, 2017, we entered into an amendment to the asset purchase agreement, dated as of October 4, 2016 (as amended, the “EBGL APA”), providing for our acquisition of EBGL. Under this amendment, EBGL and the sellers of EBGL replaced EBGL’s obligations to pay certain deferred and contingent earn-out payments thereunder with set monthly payments totaling $1.8 million, payable in the amount of $100,000 per month (with an initial $200,000 payment made in July 2017).

During 2015, 2016 and into 2017, we implemented several strategic initiatives, effected certain actions and continue to consider additional actions to improve the Company’s overall profitability and increase cash flows, including:

	·	KBS’s strategic shift away from large commercial projects with significant site work to focus on its core competency of manufacturing modular buildings;
	·	KBS’s efforts to improve operating efficiencies, including reconfiguring the South Paris factory to increase production, investments in automated equipment to reduce labor costs, implementing lean manufacturing techniques, and elimination of duplicate overhead costs through the shut-down of the Waterford factory;
	·	Reduction in KBS workforce including manufacturing, sales, engineering and front-office staff;
	·	KBS is exploring opportunities to monetize the Waterford facility, including a potential sale or lease to a third party;
	·	In July 2017, KBS made the final payment due to the primary seller of KBS, freeing up $100,000 per month of cash flows to be used for operations;
	·	In October 2016, the Company acquired the EBGL businesses, which we believe will generate net income and positive cash flows for the Company;
	·	As disclosed in Note 15 to the Consolidated Financial Statements set forth in Part IV, Item 15, “Financial Statements of Registrant” of this Form 10-K, we amended certain of our debt agreements to allow the Company to pay interest in-kind on approximately $11 million of our debt, reducing strain on current cash flows;
	·	In 2017, we instituted a lumber hedging program for EBGL to assist in preserving existing margins against the potential large fluctuations in lumber raw material prices;
	·	As disclosed above and in Note 25 to the Notes to the Consolidated Financial Statements set forth in Part IV, Item 15, “Financial Statements of Registrant” of this Form 10-K, we refinanced one line of credit and certain debt agreements to obtain more favorable lending and payment terms and reduced total fees paid under these agreements; and
	·	We continue to look for opportunities to refinance our debt on more favorable terms.

Our historical operating results indicate substantial doubt exists related to the Company’s ability to continue as a going concern. We believe that the actions discussed have already occurred or are probable of occurring, and mitigate the substantial doubt raised by our historical operating results, as well as satisfy our estimated liquidity needs for the 12 months from the issuance of the consolidated financial statements. However, we cannot predict, with certainty, the outcome of our actions to generate liquidity, including the availability of additional debt financing, or whether such actions would generate the expected liquidity as currently planned.

If we continue to experience operating losses, and we are not able to generate additional liquidity through the mechanisms described above or through some combination of other actions, while not expected, we may not be able to continue operations. Additionally, a failure to generate additional liquidity could negatively impact our access to inventory or services that are important to the operation of our business. In addition, these losses could further trigger violations of covenants under our debt agreements, resulting in accelerated payment of these loans.

There can be no assurance that our existing cash reserves, together with funds generated by our operations and any future financings, will be sufficient to satisfy our debt payment obligations, to avoid liquidity issues and/or fund operations beyond this fiscal year. Our inability to generate funds from our operations and/or obtain financing sufficient to satisfy our payment obligations may result in our obligations being accelerated by our lenders, which would likely have a material adverse effect on our business, financial condition and results of operations. Given these uncertainties, there can be no assurance that our existing cash reserves will be sufficient to avoid liquidity issues and/or fund operations beyond this fiscal year.

We intend to pursue new financing at the parent level to replace a portion of our existing debt and to provide for our general working capital needs. There can be no assurance we will be successful in obtaining such new financing, on terms favorable to us or at all. Until such time as we obtain additional financing, we may be dependent on LSVI and LSV Co-Invest I, or other third parties, to provide for our general working capital needs. Although not a binding commitment, LSVM has advised us of its present intention to continue to financially support the Company in the event that additional financing is required. In 2014, 2015, 2016, and to date in 2017, LSVM has provided financial support in the form of financing through various debt agreements disclosed in Note 15 to the Notes to Consolidated Financial Statements set forth in Part IV, Item 15, “Financial Statements of Registrant” of this Form 10-K. Based on the previous commitments, management believes that additional financing may be provided by LSVM or its affiliates, if necessary, in the future.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of December 31, 2016 or 2015.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the critical accounting policies that require the most significant judgments and estimates used in the preparation of our consolidated financial statements are those related to revenue recognition, accounts receivable, inventories, business combinations, impairment of goodwill and indefinite-lived assets, impairment of long-lived assets with finite lives, contingent earn-outs, warranty obligations, self-insurance costs and income taxes.

Revenue Recognition

KBS manufactures both single-family residential homes as well as commercial structures. Commercial structures, which include multi-unit residential buildings such as apartment buildings, condominiums, townhouses, and dormitories as well as commercial structures such as hospitals and office buildings are manufactured to customer specifications and may take up to several months to complete. Since mid-2014, most of KBS’s commercial contracts provide that it only manufactures, delivers and sets the modular units on the foundation, with little or no final on-site work required of KBS (which includes on-site electrical, plumbing or heating and air conditioning services). Generally, KBS’s contracts for residential homes do not include site work, which is typically performed by independent builders, and the homes are generally delivered and set on the foundation within a few days after being manufactured.

EdgeBuilder manufactures structural wall panels and permanent wood foundations pursuant to commercial construction contracts. These wall panels and wood foundation systems are manufactured in EdgeBuilder’s factory and delivered to its customers’ construction sites in accordance with the contractual delivery schedule. Many of EdgeBuilder’s wall panel construction contracts span multiple months.

We recognize revenue for modular units and site work, as well as structural wall panels and wood foundations, using the percentage of completion method. Percentage of completion is determined using a units-of-production methodology based on modules or panels delivered in accordance with the terms of the contract and cost-to-cost method with cost determined based on costs incurred to date related to each contract. Sales tax billed to customers is excluded from revenue. Transportation and freight billed to customers is recorded as revenue and the related costs are included in cost of sales. The current asset “Costs and estimated profit in excess of billings” represents revenues recognized in excess of amounts billed and the current liability “Billings in excess of costs and estimated profit” represents billings in excess of revenues recognized.

Application of the cost-to-cost percentage of completion method of accounting requires the use of estimates of costs to be incurred in completing our performance under a contract. The cost estimating process is based on the knowledge and experience of management and involves making significant judgments. Changes in contract performance, change orders, estimated profitability, final contract settlements and other factors may result in changes to estimated and actual costs and profit. The effects of such changes are recognized in the period in which the revisions are determined. In situations where the estimated cost to complete a contract indicates a loss will be incurred, the entire loss is recorded in the period in which it is estimated.

Glenbrook is a retail supplier of lumber and other building supplies. We recognize revenue from Glenbrook’s retail sales at the point of sale.

Accounts Receivable

We maintain an allowance for doubtful accounts that reflects our estimate of losses that may result from the uncollectability of accounts receivable. Our allowance for doubtful accounts is based on an analysis of individual accounts for which we have information indicating the customer may not be able to pay amounts owed to us. In these cases, based on the available facts and circumstances, we estimate the amount that will be collected from such customers. We also evaluate the collectability of our accounts receivable in the aggregate based on factors such as the aging of receivable amounts, customer concentrations, historical experience, and current economic trends and conditions. Individual accounts are written off against the allowance if and when the account is determined to be uncollectible. We adjust our allowance for doubtful accounts when additional information is received that impacts the amount reserved. If circumstances change, our estimates of the recoverability of accounts receivable could be reduced or increased by a material amount. Such a change in estimated recoverability would be accounted for in the period in which the facts that give rise to the change become known.

Inventories

Inventories consist primarily of lumber and other commodity-type building materials and are valued at the lower of cost or market, with cost determined on a first-in, first-out basis. Materials purchased and costs incurred for specific contracts are recorded in cost of sales when the related contract revenue is recognized. We adjust our inventories for excess and obsolete items by reducing their carrying values to estimated net realizable value based upon assumptions about future product demand.

Business Combinations

We account for business combinations under the acquisition method of accounting. The purchase price of an acquired business is allocated to the acquired tangible and intangible assets and the assumed liabilities on the basis of their respective fair values on the date of acquisition. Any excess of the purchase price over the fair value of the separately identifiable acquired assets and assumed liabilities is allocated to goodwill. The valuation of acquired assets and assumed liabilities requires significant judgments and is subject to revision as additional information about the fair value of assets and liabilities becomes available. Additional information, which existed as of the acquisition date but at that time was unknown to us, may become known during the remainder of the measurement period, a period not to exceed 12 months from the acquisition date. Adjustments in the purchase price allocation may result in a change in the amount allocated to goodwill. All acquisition-related costs are expensed as incurred.

Impairment of Goodwill and Indefinite-Lived Intangible Assets

Goodwill and other intangible assets with indefinite lives, such as trademarks, are assessed annually in order to determine whether their carrying value exceeds their fair value. In addition, they are tested on an interim basis if an event occurs or circumstances change between annual tests that would more likely than not reduce their fair value below carrying value. If we determine the fair value of goodwill or other indefinite-lived intangible assets is less than their carrying value, an impairment loss is recognized. Impairment losses, if any, are reflected in operating income or loss in the period incurred. The Company performs its annual tests of goodwill and trademarks during the second quarter of each fiscal year.

Impairment of Long-Lived Assets with Finite Lives

Long-lived assets held and used by us which have finite lives, including property, plant and equipment and purchased intangible assets, are assessed for impairment whenever an event or change in circumstances indicates that the carrying value of the asset may not be fully recoverable. Recoverability is determined based on an estimate of undiscounted future cash flows resulting from the use of an asset and its eventual disposition. An impairment loss is measured by comparing the fair value of the asset to its carrying value. If we determine the fair value of an asset is less than the carrying value, an impairment loss is incurred. Impairment losses, if any, are reflected in operating income or loss in our consolidated statements of operations during the period incurred. We did not record any impairment charges related to long-lived assets with finite lives during 2016 or 2015.

Contingent Earn-Outs

We record contingent earn-outs received in business divestitures and contingent earn-outs given in acquisitions at estimated fair value and re-assess the fair value quarterly. Adjustments to fair value are recorded in current period earnings. We determine the fair value of contingent earn-out consideration (both receivable and payable) using discounted cash flow techniques based on all information available to us at the time, including estimates, assumptions and judgments we believe to be reasonable under the circumstances. Actual amounts realized or paid may differ from those estimated.

Warranty Obligations

We accrue estimated warranty costs in the period that the related revenue is recognized. Our warranty cost estimates and warranty accrual requirements are determined based upon historical warranty experience and costs incurred in addressing product quality issues. Should product quality or cost factors differ from our estimates, adjustments to our warranty accrual may be required.

Self-Insurance Costs

We maintain a self-insurance program for a portion of our employee health care costs. Self-insurance costs are accrued based on actual reported claims plus an estimate of claims incurred but not yet reported. The portion of the accrual related to unreported claims is estimated based on an analysis of historical claims experience and other assumptions. Accruals for such costs could be significantly impacted if future events and claims differ from these assumptions.

Income Taxes

We record income tax expense (benefit) based on our estimate of the effective tax rates for the jurisdictions in which we do business. We record the benefit we will derive in future accounting periods from tax losses and credits and deductible temporary differences as “deferred tax assets.” If, based on all available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized, we record a valuation allowance to reduce the carrying value of our deferred tax assets to the estimated realizable amount. If the valuation allowance is increased, we record additional income tax expense in the period the valuation allowance is increased. If the valuation allowance is reduced, we record an income tax benefit. Since 2009, we have maintained a valuation allowance to fully reserve our deferred tax assets. We make significant estimates and judgments in determining our income tax provision, deferred tax assets and valuation allowance recorded against our deferred tax assets. Actual results may differ significantly from those reflected in management estimates and could result in adjustments that have a material impact on our results of operations.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The information required by this Item is included in our consolidated financial statements and the report of our independent registered public accounting firm, which are included in this Form 10-K beginning on page F-1. The index to this report and the consolidated financial statements is included in Item 15(a)(1) below.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, our chief executive officer and our chief financial officer conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on their evaluation of our disclosure controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of December 31, 2016, to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is (a) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow for timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Our management, with oversight by the Company’s Board of Directors (the “Board”), is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control — Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management, including our chief executive officer and chief financial officer, concluded that our internal control over financial reporting was not effective as of December 31, 2016.

Description of Material Weaknesses

As discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations above and in the Notes to Consolidated Financial Statements set forth in Part IV, Item 15, “Financial Statements of Registrant” of this Form 10-K, in April 2014 we acquired the assets and assumed certain liabilities related to the operations of KBS and subsequently, in October 2016, we acquired certain assets related to the operations of EBGL. Prior to the acquisitions, the KBS and EBGL operations were privately-owned businesses with very limited administrative and accounting resources, outdated accounting software and generally weak accounting processes and internal control procedures. Specifically, material weaknesses existed in KBS’s and EBGL’s financial reporting processes with respect to (1) control over accounts payable cut-offs, (2) inventory accounting, (3) contract accounting and (4) inadequate segregation of duties in certain accounting processes, including the payroll, cash receipts and disbursements processes and management of user access rights in our accounting system, partly as a result of our limited size and accounting staff.

Remediation of Material Weaknesses

We are working to remediate these material weaknesses. Since the April 2014 acquisition of KBS, we have implemented organizational changes to strengthen the accounting and other administrative functions at KBS and improvements in processes, procedures and controls, including in the areas of payroll processing, contract accounting, proper transaction cutoffs, inventory controls, financial reporting and management oversight. In January 2016, we installed a new management information system at KBS that we believe, when fully implemented, will significantly improve our reporting and controls. At EBGL, we are in the process of implementing improvements in internal processes, procedures and controls and establishing regular reporting and routine management oversight. EBGL is in the process of upgrading its financial management information system which is expected to be fully operational by the end of 2017. The upgrade of the old system, which was over 20 years old, will significantly improve EBGL’s financial reporting capabilities and provide enhanced controls.

Although significant progress has been made in improving the controls at KBS, additional time is required to fully develop adequate processes, procedures and controls and to determine whether such processes and controls are effective. At EBGL, the improvements are at an early state, so we expect it will take significant additional time to fully develop and implement an adequate system of internal controls. We will continue to work to improve such processes, procedures and controls, and will disclose in future periods the progress we have made in our efforts to remediate these material weaknesses.

Changes in Internal Control Over Financial Reporting

As a result of the control deficiencies at KBS and EBGL discussed above, we determined that we have material weaknesses in our internal control over financial reporting. We are working to remediate these material weaknesses as discussed above.

ITEM 9B.

OTHER INFORMATION.

None.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Directors and Executive Officers

The following table sets forth certain information regarding our directors and executive officers:

Name	Age	Position

Jeffrey E. Eberwein	47	Chairman of the Board

Daniel M. Koch	63	President, Chief Executive Officer and Director

Stephen A. Clark	49	Chief Financial Officer, Treasurer and Secretary

Morgan P. Hanlon	52	Director

Alfred John Knapp, Jr.	66	Director

Galen Vetter	65	Director

Jeffrey E. Eberwein joined our Board in January 2013 and became Chairman in November 2013. In addition to his service to the Company, he has 25 years of Wall Street experience and is CEO of Lone Star Value Management, LLC (referred to herein as LSVM), a U.S. registered investment company. Prior to founding LSVM in January 2013, Mr. Eberwein was a Portfolio Manager at Soros Fund Management from January 2009 to December 2011 and Viking Global Investors from March 2005 to September 2008. Mr. Eberwein serves as Chairman of the board of three other public companies: Digirad Corporation (NASDAQ: DRAD), a medical imaging Company; Ameri Holdings, Inc. (OTC: AMRH), an IT services company; and Hudson Global Inc. (NASDAQ: HSON), a global recruitment company. In addition, Mr. Eberwein serves as the executive director of Novation Companies, Inc. (OTC: NOVC), a healthcare staffing company. Mr. Eberwein served on the boards of Crossroads Systems, Inc. (OTC: CRDS), a data storage company, from April 2013 to May 2016; The Goldfield Corporation (NYSE:GV), a company in the electrical construction industry, from May 2012 to May 2013; On Track Innovations Ltd. (NASDAQ: OTIV), a smart card company, from December 2012 to December 2014; and NTS, Inc. (previously listed NYSE: NTS), a broadband services and telecommunications company, from December 2012 until its sale to a private equity firm in June 2014. Previously, Mr. Eberwein also served on the board of Hope for New York, a charitable organization dedicated to serving the poor in New York City, from 2011 to 2014, where he was the Treasurer and on its Executive Committee. Mr. Eberwein earned an Masters of Business Administration from The Wharton School, University of Pennsylvania, and a Bachelor of Business Administration degree with High Honors from The University of Texas at Austin. The Board believes that Mr. Eberwein’s qualifications to serve on the Board include his expertise in finance and experience in the investment community.

Daniel M. Koch has served as our President and Chief Executive Officer and on our Board since November 2013. Previously, Mr. Koch served as our vice president – marketing since October 2012. From September 2010 to September 2012, Mr. Koch served as a Senior Account Manager for Delta Design – Rasco, a manufacturer of test handlers. From March 1991 to August 2010, Mr. Koch served as our vice president – worldwide sales. From March 1990 to March 1991, Mr. Koch served as the vice president of sales of Summation, Inc., a company involved with the testing of PC boards. From December 1973 to March 1990, Mr. Koch served in various sales positions and most recently as vice president of sales of Micro Component Technology, Inc. Mr. Koch’s extensive experience in sales and general management and knowledge of our products, our markets and our customers is invaluable to our Board.

Stephen A. Clark has served as our Chief Financial Officer since September 2016, and previously served as our Interim Chief Financial Officer since joining the Company in June 2016. Mr. Clark has over 25 years of business, accounting and finance experience. Prior to joining the Company, Mr. Clark worked as a consultant for several companies in a variety of industries. Mr. Clark previously served as Vice President and Controller of Leaf River Energy Center, LLC, a natural gas storage company, from March 2013 to August 2014. Prior to that, from May 2002 to March 2013, Mr. Clark served as Executive Director of Finance of Long Island Power Authority, a $3 billion electric utility company servicing Long Island, New York. Mr. Clark began his career at PricewaterhouseCoopers, a certified public accounting firm, working in the Audit and Business Advisory Services group and the Transaction Services group from September 1990 to June 2000. Mr. Clark is a certified public accountant (inactive) and holds a Bachelor of Science in Accounting from Syracuse University and a Masters of Business Administration from Fairfield University.

Morgan P. Hanlon has served on our Board since April 2014. Mr. Hanlon is the founder and since 2006 has served as the Managing Member of Casey Real Estate Investment, LLC, Casey Property Management, LLC and PhilMor Real Estate Investments, LLC, which acquire, own and operate commercial real estate, primarily in the self-storage and multi-family sectors. Previously, Mr. Hanlon held investment banking positions with Wells Fargo Securities and Morgan Stanley. Mr. Hanlon earned a Bachelor of Science from the United States Military Academy at West Point and an Masters of Business Administration from the University of Pennsylvania, Wharton Graduate School of Business. Mr. Hanlon brings to the Board financial and investment expertise and experience, as well as business analysis acumen and advanced financial literacy.

Alfred John Knapp, Jr. has served on our Board since April 2014 and previously served on our Board from January 2013 to March 2013. Mr. Knapp has served as the President, Chief Executive Officer and principal shareholder of Andover Group, Inc. since 1978. Andover’s two main business lines are real estate development and investment management. He also is a Partner at CCM Opportunistic Partners, an investment fund that invests with emerging managers. Previously, Mr. Knapp served as the Chief Executive Officer and a director of ICO, Inc., a resin processor, from October 2005 to April 2010, when ICO was acquired by A. Schulman, Inc. Since 2015, Mr. Knapp has served as a director for Vaalco Energy, Inc. (NYSE: EGY), a petroleum and natural gas exploration and production company, where he is chairman of the audit committee. Previously, he has served as a director of On Track Innovations Ltd. (NASDAQ: OTIV), a company principally engaged in the design and development of cashless payment solutions, December 2012 through December 2016. Mr. Knapp is a Chartered Financial Analyst and has served as a trustee of Annunciation Orthodox School in Houston, and is currently a trustee of the Armand Bayou Nature Center. Mr. Knapp is an honors graduate of Williams College. Mr. Knapp’s extensive corporate and business strategy experience makes him a valuable asset to the Board.

Galen Vetter joined our Board in January 2013. He is currently a private investor and professional corporate director. In his career, Mr. Vetter served as president of Rust Consulting, Inc. (December 2008 to May 2012), as global chief financial officer of Franklin Templeton Investment Funds (April 2004 to November 2008) and in numerous roles at McGladrey (June 1973 to March 2004). In addition to our Board, Mr. Vetter currently serves as a member on the Advisory Board of Directors of Land O’Lakes and serves on the board of Alerus Financial and Hill Capital Corporation. Previously, he served on the board of Crossroads Systems, Inc. (OTC: CRDS). Mr. Vetter is a licensed certified public accountant (inactive). Mr. Vetter is a member of the National Association of Corporate Directors, including being Board Leadership Fellow certified. Mr. Vetter received his Bachelor of Science degree from the University of Northern Iowa. Mr. Vetter brings to our Board diverse management experience including financial, analytical, information management, strategy and team development. In addition to Mr. Vetter’s extensive financial experience, our Board benefits from Mr. Vetter’s enterprise risk management and international business experience.

Code of Ethics

We have adopted a Code of Business Conduct and Ethics (the “Code of Ethics”), which covers a wide range of business practices and procedures and is intended to ensure to the greatest extent possible that our business is conducted in a consistently legal and ethical manner. The Code of Ethics is consistent with how we have always conducted our business and applies to all of our directors, officers and other employees, including our principal executive officer and principal financial and accounting officer. A copy of the Code of Ethics is publicly available in the “About Us – Governance” section of our website at www.atrmholdings.com . We intend to promptly disclose on our website any grant of waivers from or amendments to a provision of the Code of Ethics following such amendment or waiver.

Board Committees

Our Board has three standing committees to assist it with its responsibilities. These committees are described below.

Audit Committee. The primary purpose of the Audit Committee is to oversee the accounting and financial reporting processes of the Company and the audits of the consolidated financial statements of the Company. The Audit Committee is also charged with the review and approval of all related party transactions involving the Company. The current members of the Audit Committee are Messrs. Hanlon, Knapp and Vetter. Mr. Vetter currently serves as Chairman of the Audit Committee. The Board has determined that all members of the Audit Committee are audit committee financial experts, as defined by the SEC rules, based on their past business experience and financial certifications. The Audit Committee charter is posted in the “About Us – Governance” section of our website at www.atrmholdings.com .

Compensation Committee. The duties and responsibilities of the Compensation Committee include, among other things, reviewing and approving the Company’s general compensation policies, setting compensation levels for the Company’s executive officers, setting the terms of and grants of awards under share-based incentive plans and retaining and terminating executive compensation consultants. The current members of the Compensation Committee are Messrs. Hanlon, Knapp and Vetter. Mr. Knapp currently serves as Chairman of the Compensation Committee. The Compensation Committee charter is posted in the “About Us – Governance” section of our website at www.atrmholdings.com .

Nomination and Corporate Governance Committee. The duties and responsibilities of the Nomination and Corporate Governance Committee include, among other things, assisting the Board in identifying individuals qualified to become Board members and recommending director nominees for the next annual meeting of shareholders, and taking a leadership role in shaping the corporate governance of the Company. The current members of the Nomination and Corporate Governance Committee are Messrs. Hanlon, Knapp and Vetter. Mr. Hanlon currently serves as Chairman of the Nomination and Corporate Governance Committee. The Nomination and Corporate Governance Committee charter is posted in the “About Us – Governance” section of our website at www.atrmholdings.com .

Involvement in Certain Legal Proceedings

LSVM and our director Jeffrey Eberwein are each subject to a SEC administrative order, dated February 14, 2017 (Securities Exchange Act Release No. 80038), relating to alleged violations of Section 13(d) of the Exchange Act and the rules promulgated thereunder, including failing to disclose the members of a stockholder group, and further allegations that Mr. Eberwein violated Section 16(a) of the Exchange Act and the rules promulgated thereunder, including failing to timely file initial statements of beneficial ownership on Form 3 and changes thereto on Form 4. Without admitting or denying any violations, (i) LSVM agreed to cease and desist from committing or causing any violations of Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2 promulgated thereunder, and paid a civil penalty of $120,000 to the SEC and (ii) Mr. Eberwein agreed to cease and desist from committing or causing any violations of (x) Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2 promulgated thereunder and (y) Section 16(a) of the Exchange Act and Rules 16a-2 and 16a-3 promulgated thereunder, and paid a civil penalty to the SEC in the amount of $90,000.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, executive officers and holders of more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in the ownership of common stock and other equity securities of the Company. Such persons are required to furnish us with copies of all Section 16(a) filings.

Based solely upon a review of the copies of the forms furnished to us, we believe that our directors, officers and holders of more than 10% of our common stock complied with all applicable filing requirements during the 2016 fiscal year.

ITEM 11. EXECUTIVE COMPENSATION.

Summary Compensation Table

The following table sets forth the cash and non-cash compensation for the fiscal years ended December 31, 2016 and December 31, 2015 earned by our named executive officers:

Name and Principal Position	Year		Salary ($)		Stock Awards ($) ⁽¹⁾			Total ($)
Daniel M. Koch		2016		240,000		14,500	⁽²⁾		254,500
President and Chief Executive Officer		2015		193,435		44,800	⁽³⁾		238,235

Stephen A. Clark ⁽⁴⁾		2016		107,917		14,500	⁽²⁾		122,417
Chief Financial Officer, Treasurer and Secretary		2015		—		—			—

Paul H. Askegaard ⁽⁵⁾		2016		180,000		14,500	⁽²⁾		194,500
Former Chief Financial Officer		2015		162,396		44,800	⁽³⁾		197,196

(1)	The fair value of these stock awards was computed in accordance with methods allowed under FASB ASC Topic 718, “Compensation - Stock Compensation.”

(2)	Represents the grant date fair value of a restricted stock grant of 10,000 shares of common stock awarded on October 19, 2016. These shares vest on October 19, 2017.

(3)	Represents the grant date fair value of a restricted stock grant of 10,000 shares of common stock awarded on June 5, 2015. These shares vested on June 5, 2016.

(4)	Mr. Clark’s employment with the Company commenced on June 1, 2016 as the Company’s Interim Chief Financial Officer. He was appointed as the Company’s Chief Financial Officer effective as of September 7, 2016.

(5)	Mr. Askegaard retired from his position as Chief Financial Officer effective June 1, 2016. He remained working with the Company and its subsidiaries in other capacities for a transition period.

Employment Agreements

Each of the Company’s current executive officers, Messrs. Koch and Clark, is an employee “at will” and does not have an employment agreement with the Company. Mr. Askegaard also was an employee “at will” and did not have an employment agreement with the Company.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth equity incentive plan awards for each named executive officer outstanding as of the end of our last completed fiscal year:

	Option Awards									Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable			Number of Securities Underlying Unexercised Options (#) Unexercisable		Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($) ⁽⁵⁾
Daniel M. Koch		5,500	⁽¹⁾		—		6.10		11/1/2017
										10,000	⁽⁴⁾		17,000

Stephen A. Clark		—			—		—		—	10,000	⁽⁴⁾		17,000

Paul H. Askegaard		5,500	⁽²⁾		—		7.75		3/19/2017
		2,500	⁽³⁾		—		5.20		11/20/2017
										10,000	⁽⁴⁾		17,000

(1)	The stock option was granted on November 1, 2012 and became fully exercisable effective March 13, 2013 as a result of an agreement we entered into with an activist shareholder group that triggered an accelerated vesting provision in Mr. Koch’s change of control agreement.

(2)	The stock option was granted on March 19, 2012 and became fully exercisable effective March 13, 2013 as a result of an agreement we entered into with an activist shareholder group that triggered an accelerated vesting provision in Mr. Askegaard’s change of control agreement.

(3)	The stock option was granted on November 20, 2012 and became fully exercisable effective March 13, 2013 as a result of an agreement we entered into with an activist shareholder group that triggered an accelerated vesting provision in Mr. Askegaard’s change of control agreement.

(4)	Represents the unvested portion of a restricted stock grant that was awarded on October 19, 2016 under the 2014 Incentive Plan. These shares will vest on October 19, 2017.

(5)	Based on the closing share price on December 30, 2016 of $1.70.

Potential Payments Upon Termination or Change-in-Control

We are party to a Change of Control Agreement (a “Change of Control Agreement”) with Mr. Koch providing for severance pay and other benefits in the event of a change of control. The Change of Control Agreement provides for severance payments of two times the executive’s annual base salary in the event the executive’s employment is terminated, either voluntarily with “good reason” or involuntarily, during the two-year period following a change of control. The severance payments are to be made over 24 months following the date of employment termination according to our regular payroll practices and policies. An executive receiving severance payments is also entitled to reimbursement of the employer portion of group medical and group dental premiums under COBRA continuation coverage. The Change of Control Agreement also provides for immediate vesting of all of the executive’s unvested options outstanding upon a change of control.

For purposes of the Change of Control Agreement, a change of control is deemed to occur upon:

	●	the sale or other transfer of all or substantially all of our assets;

	●	the approval by our shareholders of a liquidation or dissolution of the Company;

	●	any person, other than a bona fide underwriter, becoming the owner of more than 40% of our outstanding shares of common stock;

	●	a merger, consolidation or exchange involving the Company, but only if our shareholders prior to such transaction own less than 65% of the combined voting power of the surviving or acquiring entity following the transaction; or

	●	the “continuity” members of our Board, being the incumbent members of our Board as of the end of 2012 and future members of our Board who were approved by at least a majority of our continuity members, ceasing to constitute at least a majority of the Board.

Compensation of Non-Employee Directors

For our fiscal year ended December 31, 2016 there was no cash or non-cash compensation awarded to our directors, other than our named executive officers.

At the present time, our directors receive no cash compensation for their services as members of the Board, although their out-of-pocket expenses incurred on our behalf are reimbursed.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth information with respect to the beneficial ownership of our common stock as of September 22, 2017, by:

	●	each person, or group of affiliated persons, known to us to beneficially own more than 5% of our outstanding common stock;
	●	each of our directors and named executive officers; and
	●	all of our directors and executive officers as a group.

The amounts and percentages of common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. The information relating to our 5% beneficial owners is based on information we received from such holders. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares voting power, which includes the power to vote or direct the voting of a security, or investment power, which includes the power to dispose of or to direct the disposition of a security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest. Except as otherwise set forth below, the address of the persons listed below is c/o ATRM Holdings, Inc., 5215 Gershwin Avenue N., Oakdale, Minnesota 55128, and each of the persons listed has, to our knowledge, sole voting and investment power with respect to the indicated shares of common stock.

Name of Beneficial Owner	Number of Shares of Common Stock			Percentage of Outstanding Common Stock ⁽¹⁾
5% or Greater Shareholders
Lone Star Value Investors, LP		1,067,885	⁽²⁾		44.6	%

Directors and Named Executive Officers
Jeffrey E. Eberwein		1,087,885	⁽³⁾		45.4	%
Daniel M. Koch		29,010	⁽⁴⁾		1.2	%
Stephen A. Clark		10,000	⁽⁵⁾		*
Morgan P. Hanlon		10,000			*
Alfred John Knapp, Jr.		10,000			*
Galen Vetter		20,185			*
Paul H. Askegaard		33,000	⁽⁶⁾		1.4	%
All executive officers and directors as a group (seven persons) ⁽⁷⁾		1,200,080	⁽⁷⁾		49.8	%

* Represents holdings of less than 1% of shares outstanding.

(1)

The applicable percentage of ownership for each beneficial owner is based on 2,396,219 shares of common stock outstanding as of September 22, 2017. Shares of our common stock issuable upon exercise of options, warrants or other rights or the conversion of other convertible securities beneficially owned that are exercisable or convertible within 60 days are deemed outstanding for the purpose of computing the percentage ownership of the person holding such securities and rights and all executive officers and directors as a group.

	(2)	Represents 1,067,885 shares of common stock owned directly by LSVI. LSVGP as the general partner of LSVI, LSVM as the investment manager of LSVI, and Jeffrey E. Eberwein as the manager of LSVGP and sole member of LSVM, may be deemed the beneficial owner of the securities owned by LSVI. LSVGP, LSVM and Mr. Eberwein disclaim beneficial ownership of such securities, except to the extent of his or its pecuniary interest therein. The principal business address of LSVI is 53 Forest Avenue, 1 ^st Floor, Old Greenwich, Connecticut 06870.

	(3)	Represents 10,000 shares of common stock owned directly by Mr. Eberwein, 1,067,885 shares of common stock owned directly by LSVI, and 10,000 shares of common stock held in an account managed by LSVM (“Separately Managed Account I”). LSVGP as the general partner of LSVI, LSVM as the investment manager of LSVI, and Jeffrey E. Eberwein as the manager of LSVGP and sole member of LSVM, may be deemed the beneficial owner of the securities owned by LSVI. LSVM as the investment manager of Separately Managed Account I, and Mr. Eberwein as the sole member of LSVM, may be deemed the beneficial owner of the securities held in Separately Managed Account I. Mr. Eberwein disclaims beneficial ownership of such securities, except to the extent of his pecuniary interest therein.

	(4)	Includes 10,000 restricted shares of common stock and 5,500 shares of common stock issuable upon exercise of options.

	(5)	Represents 10,000 restricted shares of common stock.

	(6)	Includes 10,000 restricted shares of common stock and 8,000 shares of common stock issuable upon exercise of options.

	(7)	Includes 30,000 restricted shares of common stock and 13,500 shares of common stock issuable upon exercise of options.

Securities Authorized for Issuance under Equity Compensation Plans

The following table summarizes information about our equity compensation plans as of December 31, 2016:

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights			Weighted average exercise price of outstanding options, warrants and rights			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
Equity compensation plans approved by security holders ⁽¹⁾		27,500	⁽²⁾	$	6.88	⁽³⁾		310,000	⁽⁴⁾

Equity compensation plans not approved by security holders		—			—			—

Total		27,500		$	6.88			310,000

	(1)	These equity compensation plans consist of our 2003 Stock Incentive Plan and our 2014 Incentive Plan. Our 2003 Stock Incentive Plan expired on February 28, 2013.

	(2)	Represents options to purchase 27,500 shares of common stock issued under our 2003 Stock Incentive Plan.

	(3)	Represents the weighted-average exercise price of the outstanding options issued under our 2003 Stock Incentive Plan.

	(4)	Represents 310,000 shares of common stock available for issuance under our 2014 Incentive Plan.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Related Person Transactions and Certain Relationships

Jeffrey E. Eberwein and Lone Star Value

As of December 31, 2016, we had outstanding the following unsecured promissory notes made for the benefit of LSVI and LSV Co-Invest I:

	●	$4.3 million principal amount outstanding under an unsecured promissory note, dated April 1, 2014, issued to LSVI;
	●	$2.7 million principal amount outstanding under an unsecured promissory note, dated July 21, 2014, issued to LSV Co-Invest I;
	●	$2.1 million principal amount outstanding under an unsecured promissory note, dated September 19, 2014, issued to LSV Co-Invest I; and
	●	$2.0 million principal amount outstanding under an unsecured promissory note, dated October 4, 2016, issued to LSV Co-Invest I.

Additionally, we issued a $1.0 million unsecured promissory note to LSVI on February 25, 2015, which was repaid on September 21, 2015, and a $0.5 million unsecured promissory note to LSV Co-Invest I on March 31, 2017, which remains outstanding. ATRM’s issuance of each of the promissory notes to LSVI and LSV Co-Invest I was approved by a Special Committee of our Board consisting solely of independent directors.

Interest on these notes is payable semiannually and any unpaid principal and interest is due on April 1, 2019. On August 12, 2016, the Company, LSVI and LSV Co-Invest I amended the then-existing notes to allow the Company, at its sole option, to elect to make any interest payment in PIK Interest at an effective rate of 12% per annum (versus the 10% interest rate applied to cash payments) for that period. The subsequently issued notes provide for PIK Interest payment options, subject to certain conditions, at an effective rate of 12% per annum. During 2016, the Company elected to exercise the PIK Interest option for the six-month interest period ended June 30, 2016, which resulted in $534,000 of PIK Interest being added to the principal balance of the LSVI and LSV Co-Invest I promissory notes. Subsequent to December 31, 2016, the Company elected the PIK Interest option for the six-month interest period ended December 31, 2016 and the six-month interest period ended June 30, 2017, which resulted in an additional $1.3 million of PIK Interest being added to the principal balance of the promissory notes.

Subsequent to December 31, 2016, on March 31, 2017, ATRM entered into an additional Securities Purchase Agreement with LSV Co-Invest I. Pursuant to this agreement, LSV Co-Invest I purchased for $0.5 million in cash, an unsecured promissory note dated March 31, 2017, made by ATRM in the principal amount of $0.5 million. The note bears interest at 10.0% per annum, with interest payable semiannually in January and July; provided, however, LSV Co-Invest I may elect to receive any PIK Interest at an annual rate of 12.0%, so long as any such interest payment is made either (x) entirely in PIK Interest or (y) 50% cash and 50% PIK Interest. Except for the principal amount and the PIK Interest feature, the terms of this promissory note are identical to the terms of the previous LSV Co-Invest I promissory notes and the LSVI Promissory Note.

We are party to a Registration Rights Agreement (the “Registration Rights Agreement”) with LSVI, providing LSVI with certain demand and piggyback registration rights, effective at any time after July 30, 2014, with respect to 107,297 shares of common stock issued upon the conversion of a convertible promissory note held by LSVI in 2014.

Although not a binding commitment, LSVM has advised us of its present intention to continue to financially support the Company as it pursues new financing as discussed in more detail in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K.

LSVI and LSV Co-Invest I are party to subordination agreements with ATRM and Gerber Finance pursuant to which LSVI and LSV Co-Invest I agreed to subordinate the obligations of ATRM under their unsecured promissory notes to the obligations of the borrowers to Gerber Finance. Additionally, as a condition to the Premier Loan Agreement, Mr. Eberwein entered into a guaranty in favor of Premier Bank, absolutely and unconditionally guaranteeing all of the borrowers’ obligations.

Procedures for Review and Approval of Transactions with Related Parties

All transactions between us and any of our officers, directors, director nominees, principal shareholders or their immediate family members are required to be reviewed and approved by the Audit Committee. Such policy and procedures are set forth in the Audit Committee charter.

Director Independence

The Board has determined that all of our non-employee directors other than Mr. Eberwein are independent within the meaning of the SEC rules. The Board has also determined that all directors serving on the Audit Committee, the Compensation Committee, and the Nomination and Corporate Governance Committee are independent within the meaning of SEC rules with respect to membership on each such committee.

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES.

Audit and Non-Audit Fees

The following table presents aggregate fees billed for professional services rendered by Boulay PLLP, our independent registered public accounting firm, for fiscal years 2016 and 2015. There were no other professional services rendered or fees billed by Boulay PLLP for fiscal years 2016 and 2015.

Services Rendered	2016		2015
Audit Fees ⁽¹⁾	$	179,429	$	113,000
Audit-Related Fees ⁽²⁾		2,075		1,220
Tax Fees ⁽³⁾		18,130		32,438
All Other Fees ⁽⁴⁾		114,092		37,841

	(1)	These fees include the audits of our annual consolidated financial statements for fiscal years 2016 and 2015 and the reviews of our consolidated financial statements included in our Quarterly Reports on Form 10-Q and 10-Q/A for fiscal years 2016 and 2015.

	(2)	These fees are related to consultations regarding revenue recognition in 2015.

	(3)	These fees are related to the preparation of our 2015 and 2014 federal and state income tax returns and consultations regarding Section 382 of the Code.

	(4)	These fees are related to the audits of the historical financial statements of an acquired business.

Pre-Approval Policies and Procedures

All services provided by our independent registered public accounting firms are subject to pre-approval by our Audit Committee. The Audit Committee has authorized each of its members to approve services by our independent registered public accounting firms in the event there is a need for such approval prior to the next full Audit Committee meeting. The Audit Committee has also adopted policies and procedures that are detailed as to the particular service and that do not include delegation of the Audit Committee’s responsibilities to management under which management may engage our independent registered public accounting firm to render audit or non-audit services. Any interim approval given by an Audit Committee member and any such engagement by management must be reported to the Audit Committee no later than its next scheduled meeting. Before granting any approval, the Audit Committee (or a committee member if applicable) gives due consideration to whether approval of the proposed service will have a detrimental impact on the independence of the independent registered public accounting firm. The full Audit Committee pre-approved all services provided by Boulay PLLP in fiscal year 2016.

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES .

1. Financial Statements of Registrant.

The following Consolidated Financial Statements of ATRM Holdings, Inc. and the Independent Registered Public Accounting Firm’s Report thereon are included herein:

Description		Page(s)

Reports of Independent Registered Public Accounting Firm		F-1

Consolidated Financial Statements:

Consolidated Statements of Operations		F-2

Consolidated Balance Sheets		F-3

Consolidated Statements of Changes in Shareholders’ Deficit		F-4

Consolidated Statements of Cash Flows		F-5

Notes to Consolidated Financial Statements		F-6 – F-35

2. Financial Statement Schedule of Registrant.

None.

3. Exhibits.

The exhibits to this Form 10-K are listed in the Exhibit Index of this Form 10-K.

If you are one of our shareholders and you want a copy of any of the exhibits listed or referred to in the Exhibit Index, we will furnish it to you at a reasonable cost upon your written request sent to ATRM Holdings, Inc., 5215 Gershwin Avenue N., Oakdale, Minnesota 55128, Attn.: Shareholder Relations.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and
Stockholders of ATRM Holdings Inc.

We have audited the accompanying consolidated balance sheets of ATRM Holdings, Inc. as of December 31, 2016 and 2015, and the related consolidated statements of operations, shareholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2016. ATRM Holdings, Inc.’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ATRM Holdings, Inc. as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

/s/ Boulay PLLP
Minneapolis, Minnesota
September 15, 2017

F- 1

ATRM Holdings, Inc.

Consolidated Statements of Operations

Year Ended December 31,	2016			2015
Net sales	$	28,156,111		$	25,631,527
Costs and expenses:
Cost of sales		26,588,700			25,982,130
Selling, general and administrative expenses		4,648,483			5,082,415
Goodwill impairment charge		1,732,804			—
Total costs and expenses		32,969,987			31,064,545
Operating Loss		(4,813,876	)		(5,433,018	)
Other income (expense):
Interest expense, net		(1,675,676	)		(1,396,542	)
Change in fair value of contingent earn-outs		(26,878	)		(190,681	)
Settlement gain		—			3,686,628
Loss before income taxes		(6,516,430	)		(3,333,613	)
Income tax expense		(7,900	)		(6,000	)
Net loss	$	(6,524,330	)	$	(3,339,613	)

Net loss per share – basic and diluted	$	(2.88	)	$	(2.26	)

Weighted average common shares outstanding
– basic and diluted		2,264,798			1,479,825

The accompanying notes are an integral part of the consolidated financial statements.

F- 2

ATRM Holdings, Inc.

Consolidated Balance Sheets

December 31,	2016			2015
ASSETS
Current assets:
Cash and cash equivalents	$	1,246,696		$	624,070
Restricted cash		150,000			—
Accounts receivable, net of allowance for doubtful accounts of $96,000 and $370,000 at December 31, 2016 and 2015, respectively		2,603,549			2,562,999
Costs and estimated profit in excess of billings		1,045,045			471,539
Inventories		1,404,445			1,241,074
Fair value of contingent earn-out receivable, current		359,000			329,000
Other current assets		237,896			173,028
Total current assets		7,046,631			5,401,710

Property, plant and equipment:
Land		857,700			857,700
Buildings and improvements		2,795,151			2,787,089
Equipment		1,507,809			1,342,001
Less: accumulated depreciation and amortization		(767,545	)		(534,500	)
Property, plant and equipment, net		4,393,115			4,452,290

Fair value of contingent earn-out receivable, noncurrent		202,000			548,000
Goodwill		3,019,637			1,732,804
Intangible assets, net		2,116,651			1,355,001
Total assets	$	16,778,034		$	13,489,805

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Notes payable	$	3,419,924		$	—
Current portion of long-term debt		1,675,149			1,104,614
Trade accounts payable		3,776,330			3,490,842
Billings in excess of costs and estimated profit		652,150			764,517
Accrued compensation		406,620			104,023
Fair value of contingent earn-out payable		966,721			—
Other accrued liabilities		2,264,303			1,985,169
Total current liabilities		13,161,197			7,449,165

Long-term debt, less current portion		14,068,511			10,251,822
Deferred income taxes		18,900			13,000

Commitments and contingencies (see Notes 16 and 17)

Shareholders’ deficit:
Common stock, $.001 par value; 3,000,000 shares authorized; 2,366,219 and 2,206,219 shares issued and outstanding at December 31, 2016 and 2015, respectively		2,366			2,206
Additional paid-in capital		69,702,342			69,424,564
Accumulated deficit		(80,175,282	)		(73,650,952	)
Total shareholders’ deficit		(10,470,574	)		(4,224,182	)
Total liabilities and shareholders’ deficit	$	16,778,034		$	13,489,805

The accompanying notes are an integral part of the consolidated financial statements.

F- 3

ATRM Holdings, Inc.

Consolidated Statements of Changes in Shareholders’ Deficit

	Common Stock				Additional		Accumulated			Total Shareholders’
	Shares		Amount		Paid-in Capital		Deficit			Deficit
Balance, December 31, 2014	1,186,473	$	1,186	$	66,335,511	$	(70,311,339	)	$	(3,974,642	)
Sale of common stock	1,019,746		1,020		2,935,506		—			2,936,526
Share-based compensation expense	—		—		153,547		—			153,547
Net loss	—		—		—		(3,339,613	)		(3,339,613	)
Balance, December 31, 2015	2,206,219		2,206		69,424,564		(73,650,952	)		(4,224,182	)
Share-based compensation expense	60,000		60		128,878		—			128,938
Issuance of stock – EBGL acquisition	100,000		100		148,900		—			149,000
Net loss	—		—		—		(6,524,330	)		(6,524,330	)
Balance, December 31, 2016	2,366,219	$	2,366	$	69,702,342	$	(80,175,282	)	$	(10,470,574	)

The accompanying notes are an integral part of the consolidated financial statements.

F- 4

ATRM Holdings, Inc.

Consolidated Statements of Cash Flows

Year Ended December 31,	2016			2015
Cash flows from operating activities:
Net loss	$	(6,524,330	)	$	(3,339,613	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		633,026			649,728
Amortization expense, deferred financing costs		126,290			—
Share-based compensation expense		128,938			153,547
Provision for (recovery of) bad debts		(66,844	)		481,921
Write-down of inventories		—			86,016
Settlement gain		—			(3,686,628	)
Facility expense accrual credit		—			(53,834	)
Loss on sale of equipment		24,832			9,168
Deferred income taxes		5,900			13,000
Change in fair value of contingent earn-out receivable		3,631			190,681
Goodwill impairment charge		1,732,804			—
Change in fair value of contingent earn-out payable		23,247			—
Imputed interest on seller deferred payment obligations		22,865			—
Paid-in-kind (PIK) interest		534,000			—
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable		26,294			(241,404	)
Costs and estimated profit in excess of billings		(480,152	)		1,319,237
Inventories		734,272			609,226
Other current assets		(61,891	)		(55,994	)
Trade accounts payable		230,488			(1,637,513	)
Billings in excess of costs and estimated profit		(143,203	)		476,935
Accrued compensation		262,349			20,041
Other accrued liabilities		(40,805	)		7,567
Net cash used in operating activities		(2,828,289	)		(4,997,919	)
Cash flows from investing activities:
Proceeds from earn-out consideration		312,369			1,232,319
Purchase of property and equipment		(72,453	)		(50,943	)
Proceeds from sale of equipment		109,000			13,187
Purchase of business, net of cash acquired		(2,959,752	)		—
Net cash (used in) provided by investing activities		(2,610,836	)		1,194,563
Cash flows from financing activities:
Net proceeds from sale of common stock		—			2,936,526
Proceeds from issuance of long-term debt		5,000,000			1,059,025
Proceeds from revolving lines of credit		27,844,341			—
Principal repayments on revolving lines of credit		(24,090,129	)		—
Principal payments on long-term debt		(2,110,453	)		(1,563,974	)
Payment of deferred financing costs		(432,008	)		—
Net cash provided by financing activities		6,211,751			2,431,577
Net increase (decrease) in cash, cash equivalents and restricted cash		772,626			(1,371,779	)
Cash, cash equivalents and restricted cash at beginning of year		624,070			1,995,849
Cash, cash equivalents and restricted cash at end of year	$	1,396,696		$	624,070

Supplemental cash flow information:
Cash paid for interest expense	$	857,061		$	1,104,642
Deferred financing costs recorded in accounts payable		55,000			—
Acquisition of equipment - financed by note payable		26,430			—
Settlement agreement:
- reduction of note payable to seller		—			3,225,783
- forgiveness of accrued interest		—			460,845
Promissory note payable to EBGL Sellers issued as partial consideration for purchase of business		940,812			—
Contingent earn-out payable to EBGL Sellers as partial consideration for purchase of business		943,474			—
Accrued purchase price adjustment paid to EBGL Sellers in January 2017		218,447			—
Issuance of restricted stock to EBGL Sellers as partial consideration for purchase of business		149,000			—

Assets acquired and liabilities assumed in connection with purchase of business:
Costs and estimated profit in excess of billings	$	93,354		$	—
Inventories		897,643			—
Other current assets		2,977			—
Property, plant and equipment		289,450			—
Goodwill		3,019,637			—
Intangible assets		1,081,000			—
Billings in excess of costs and estimated profit		(30,836	)		—
Accrued compensation		(40,248	)		—
Accrued liabilities		(101,492	)		—
Purchase price	$	5,211,485		$	—

The accompanying notes are an integral part of the consolidated financial statements.

F- 5

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

NOTE 1: BUSINESS DESCRIPTION

Unless the context otherwise requires, references in the Notes to Consolidated Financial Statements to (i) “ATRM,” the “Company,” “we,” “us” and “our,” refer to ATRM Holdings, Inc. and its consolidated subsidiaries, (ii) “KBS” refers to our modular housing manufacturing business operated by our wholly-owned subsidiary KBS Builders, Inc. and (iii) “EBGL” refers to our Minnesota-based operations including Glenbrook Building Supply, Inc. (“Glenbrook”), a retail supplier of lumber and other building supplies, and EdgeBuilder, Inc. (“EdgeBuilder”), a manufacturer of structural wall panels, permanent wood foundation systems and other engineered wood products.

Through our wholly-owned subsidiaries, KBS, Glenbrook and EdgeBuilder, we manufacture modular buildings for commercial and residential applications in production facilities located in South Paris and Waterford, Maine, operate a retail lumber yard located in Oakdale, Minnesota, and manufacture structural wall panels, permanent wood foundation systems and other engineered wood products for use in construction of commercial and residential buildings in a production facility located in Prescott, Wisconsin.

Our previous wholly-owned subsidiary, Maine Modular Haulers, Inc. (“MMH”) was used to provide transportation, logistics and other related services for the transportation of KBS’s completed modular buildings. In 2016, the Company decided that the shipping of KBS’s modular buildings could be done more efficiently and more economically on an outsourced basis. Under the outsourced model, KBS now directly coordinates the transportation and logistics of the delivery of its modular buildings and contracts with third-party hauling companies to transport the modules. As part of the decision to move to an outsourced transportation model, we disposed of MMH’s trucks to an unrelated third party and the frames (trailers) were transferred (at book value) to KBS from MMH. MMH was officially dissolved on March 21, 2017.

The Company’s corporate headquarters is located at the Glenbrook location in Oakdale, Minnesota, a suburb of St. Paul.

NOTE 2: FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

We acknowledge that the Company continues to face a challenging operating environment and while we continue to focus on improving our overall profitability, we reported an operating loss for 2016. We have incurred significant operating losses in recent years and, as of December 31, 2016, we had an accumulated deficit of approximately $80 million. Working capital has remained negative over the past several years. Cash used in operating activities, while improved over 2015, remains negative, which has required us to generate funds from investing and financing activities. At December 31, 2016, we had outstanding debt of approximately $19.2 million.

We have issued various promissory notes to finance our acquisitions of KBS and EBGL and to provide for our general working capital needs. As of December 31, 2016, we had outstanding debt totaling approximately $19.2 million. Our debt included (i) $2.4 million principal outstanding on KBS’s $4.0 million revolving credit facility under a loan and security agreement with Gerber Finance Inc. (“Gerber Finance”) (the “KBS Loan Agreement”), $1.2 million principal outstanding on EBGL’s $3.0 million revolving credit facility under a loan and security agreement with Gerber Finance (the “EBGL Loan Agreement”) and $3.0 million principal outstanding under a loan and security agreement with Gerber Finance used to finance the acquisition of EBGL (the “Acquisition Loan Agreement”), (ii) $4.3 million principal amount of unsecured promissory notes issued to Lone Star Value Investors, LP (“LSVI”) and $6.8 million principal amount of unsecured promissory notes issued to Lone Star Value Co-Invest I, LP (“LSV Co-Invest I”), with interest payable semiannually and any unpaid principal and interest is due on April 1, 2019, and (iii) $0.7 million principal amount outstanding under an unsecured promissory note issued to the primary sellers of KBS, payable in monthly installments of $100,000, inclusive of interest, through July 1, 2017. We also have obligations to make $1.0 million in deferred cash payments to the sellers of EBGL, payable in quarterly installments of $250,000, inclusive of interest, through October 1, 2017. Jeffrey E. Eberwein, our Chairman of the Board, is the manager of Lone Star Value Investors GP, LLC (“LSVGP”), the general partner of LSVI and LSV Co-Invest I, and sole member of Lone Star Value Management, LLC (“LSVM”), the investment manager of LSVI.

F- 6

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

On February 23, 2016, we entered into a loan and security agreement (the “KBS Loan Agreement”) with Gerber Finance providing KBS with a credit facility with borrowing availability of up to $4.0 million, based on a formula tied to eligible accounts receivable, inventory, equipment and real estate of the borrowers. On that date, we made an initial draw of approximately $2.6 million. The initial term of the KBS Loan Agreement expires on February 22, 2018, but extends automatically for additional one-year periods unless a party provides prior written notice of termination. The KBS Loan Agreement contains certain affirmative and negative covenants, including financial covenants requiring us to maintain a minimum leverage ratio at fiscal year end and not to incur a net annual post-tax loss in any fiscal year during the term of the KBS Loan Agreement. The borrowers’ obligations under the KBS Loan Agreement are secured by all of their property and assets and are guaranteed by the Company. Our obligations under our unsecured promissory notes are subordinate to the borrowers’ obligations under the KBS Loan Agreement, pursuant to the terms of subordination agreements we entered into with Gerber Finance and the holders of our unsecured promissory notes as a condition to the extension of credit to the borrowers under the KBS Loan Agreement. At December 31, 2016, the outstanding balance on the KBS Loan Agreement was approximately $2.4 million.

F- 7

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

During 2015, 2016, and into 2017, we implemented several strategic initiatives, effected certain actions and continue to consider additional actions to improve the Company’s overall profitability and increase cash flows, including:

	●	KBS’s strategic shift away from large commercial projects with significant site work to focus on its core competency of manufacturing modular buildings;
	●	KBS’s efforts to improve operating efficiencies, including reconfiguring the South Paris factory to increase production, investments in automated equipment to reduce labor costs, implementing lean manufacturing techniques, and elimination of duplicate overhead costs through the shut-down of the Waterford factory;
	●	Reduction in KBS workforce including manufacturing, sales, engineering and front-office staff;
	●	KBS is exploring opportunities to monetize the Waterford facility, including a potential sale or lease to a third party;
	●	In July 2017, KBS made the final payment due to the primary seller of KBS, freeing up $100,000 per month of cash flows to be used for operations;
	●	In October 2016, the Company acquired the EBGL businesses, which we believe will generate net income and positive cash flows for the Company;
	●	As disclosed in Note 15, we amended certain of our debt agreements to allow the Company to pay interest in-kind on approximately $11 million of our debt, reducing strain on current cash flows;
	●	In 2017, we instituted a lumber hedging program for EBGL to assist in preserving existing margins against the potential large fluctuations in lumber raw material prices;
	●	As disclosed in Note 25, we refinanced one line of credit and certain debt agreements to obtain more favorable lending and payment terms and reduced total fees paid under these agreements; and
	●	We continue to look for opportunities to refinance our debt on more favorable terms.

F- 8

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

Our historical operating results indicate substantial doubt exists related to the Company’s ability to continue as a going concern. We believe that the actions discussed, have already occurred or are probable of occurring, and mitigate the substantial doubt raised by our historical operating results, as well as satisfy our estimated liquidity needs for the 12 months from the issuance of the consolidated financial statements. However, we cannot predict, with certainty, the outcome of our actions to generate liquidity, including the availability of additional debt financing, or whether such actions would generate the expected liquidity as currently planned.

There can be no assurance that our existing cash reserves, together with funds generated by our operations and any future financings, will be sufficient to satisfy our debt payment obligations, to avoid liquidity issues and/or fund operations beyond this fiscal year. Our inability to generate funds from our operations and/or obtain financing sufficient to satisfy our payment obligations may result in our obligations being accelerated by our lenders, which would likely have a material adverse effect on our business, financial condition and results of operations. Given these uncertainties, there can be no assurance that our existing cash reserves will be sufficient to avoid liquidity issues and/or fund operations beyond this fiscal year.

Although not a binding commitment, LSVM has advised us of its present intention to continue to financially support the Company in the event that additional financing is required. In 2014, 2015, and 2016, LSVM has provided financial support in the form financing through various debt agreements disclosed in Note 15. Based on the previous commitments, management believes that additional financing may be provided by LSVM or its affiliates, if necessary, in the future.

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation Policy: The consolidated financial statements include the accounts of ATRM Holdings, Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates: The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Significant estimates include those related to revenue recognition (including estimates of costs and profit under the percentage of completion method of accounting), customer rebates, allowance for doubtful accounts; asset lives used in computing depreciation and amortization; valuation of inventories, contingent consideration, goodwill, intangible assets and other long-lived assets, deferred income taxes, warranty obligations, health insurance expense accruals and accruals for contingencies, including legal matters. Such estimates require significant judgment. At the time they are made, such estimates are believed to be reasonable when considered in conjunction with our consolidated financial position and results of operations taken as a whole. However, actual results could differ from those estimates and such differences may be material to the consolidated financial statements.

F- 9

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

Cash and Cash Equivalents and Restricted Cash: At times, we may invest a portion of our cash reserves in cash equivalents, which are highly liquid investments with a maturity of three months or less when purchased. Our cash and cash equivalents included cash equivalents of $0 and $9,313 at December 31, 2016 and 2015, respectively, and the remainder consisted of deposits in checking accounts. We may maintain our cash and cash equivalents in accounts that, at times, may exceed the insurance limits of the Federal Deposit Insurance Corporation. Restricted cash represents amounts the Company has on deposit with Gerber Finance from time-to-time as additional collateral to support borrowing under the KBS revolving line of credit facility.

Accounts Receivable and Allowance for Doubtful Accounts: Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is our best estimate of losses that may result from uncollectable accounts receivable. We determine the allowance based on an analysis of individual accounts and an evaluation of the collectability of our accounts receivable in the aggregate based on factors such as the aging of receivable amounts, customer concentrations, historical experience, and current economic trends and conditions. Account balances are charged off against the allowance when we believe it is probable the receivable will not be recovered. We do not have any off-balance sheet credit exposure related to our customers.

Inventories: Inventories consist primarily of lumber and other commodity-type building materials and are valued at the lower of cost or market, with cost determined on a first-in, first-out basis. Materials purchased and costs incurred for specific contracts are recorded in cost of sales when the related contract revenue is recognized. We adjust our inventories for excess and obsolete items by reducing their carrying values to estimated net realizable value based upon assumptions about future product demand.

Customer Rebate Program: KBS has a rebate program for some builders based on sales volume. Rebates are recorded as a reduction of net sales in our consolidated statements of operations. The rebate liability is included in other accrued liabilities in our consolidated balance sheet. Rebates earned by builders amounted to approximately $564,000 and $400,000 for the years ended December 31, 2016 and 2015, respectively.

Property, Plant and Equipment: Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Estimated useful lives are as follows: buildings and improvements - 30 years; machinery and equipment - 3 to 7 years. When assets are sold or retired, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is recorded. Maintenance and repairs are expensed as incurred and major improvements are capitalized. Depreciation and amortization of property, plant and equipment amounted to approximately $314,000 and $317,000 for the years ended December 31, 2016 and 2015, respectively.

Impairment of Goodwill and Indefinite-Lived Intangible Assets: Goodwill and other intangible assets with indefinite lives, such as trademarks, are assessed annually in order to determine whether their carrying value exceeds their fair value. In addition, they are tested on an interim basis if an event occurs or circumstances change between annual tests that would more likely than not reduce their fair value below carrying value. If we determine the fair value of goodwill or other indefinite-lived intangible assets is less than their carrying value, an impairment loss is recognized. Impairment losses, if any, are reflected in operating income or loss in the period incurred. The Company performs its annual tests of goodwill and trademarks during the second quarter of each fiscal year. We recorded a goodwill impairment charge of approximately $1.7 million related to the KBS goodwill in 2016. See Notes 7 and 10.

F- 10

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

Impairment of Long-Lived Assets with Finite Lives: Long-lived assets held and used by us which have finite lives, including fixed assets and purchased intangible assets, are assessed for impairment whenever an event or change in circumstances indicates that the carrying value of the asset may not be fully recoverable. Recoverability is determined based on an estimate of undiscounted future cash flows resulting from the use of an asset and its eventual disposition. An impairment loss is measured by comparing the fair value of the asset to its carrying value. If we determine the fair value of an asset is less than the carrying value, an impairment loss is incurred. Impairment losses, if any, are reflected in operating income or loss in the period incurred. We did not record any impairment charges related to long-lived assets with finite lives during 2016 or 2015.

Revenue Recognition: KBS manufactures both single-family residential homes as well as commercial structures. Commercial structures, which include multi-unit residential buildings such as apartment buildings, condominiums, townhouses, and dormitories as well as commercial structures such as hospitals and office buildings are manufactured to customer specifications and may take up to several months to complete. Commercial contracts provide that it manufactures, delivers and sets the modular units on the foundation with little or no final on-site work required (which includes on-site electrical, plumbing or heating and air conditioning services). Generally, KBS’s contracts for residential homes do not include site work, which is typically performed by independent builders, and the homes are generally delivered and set on the foundation within a few days after being manufactured.

We recognize revenue for modular units and site work, as well as structural wall panels and wood foundations, using the percentage of completion method. Percentage of completion is determined using a units-of-production methodology based on modules delivered in accordance with the terms of the contract and cost-to-cost method with cost determined based on costs incurred to date related to each wall panel (EBGL) contract. Sales tax billed to customers is excluded from revenue. Transportation and freight billed to customers is recorded as revenue and the related costs are included in cost of sales. The current asset “Costs and estimated profit in excess of billings” represents revenues recognized in excess of amounts billed and the current liability “Billings in excess of costs and estimated profit” represents billings in excess of revenues recognized.

Glenbrook is a retail supplier of lumber and other building supplies. Retail sales at Glenbrook are recognized at the point of sale. Returns on retail sales are generally not material and are recognized at the point of return.

F- 11

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

Warranty Costs: KBS provides a limited warranty on its residential homes that covers substantial defects in materials or workmanship for a period of 12 months after delivery to the owner. EBGL provides a limited warranty on the sale of its wood foundation products that covers leaks resulting from defects in workmanship for a period of twenty-five years. Estimated warranty costs are accrued in the period that the related revenue is recognized. Accrued warranty costs are included in the caption “Other accrued liabilities” in our consolidated balance sheet. See Note 13.

Self-Insurance Costs: We maintain a self-insurance program for a portion of our employee health care costs. Self-insurance costs are accrued based on actual reported claims plus an estimate of claims incurred but not yet reported. The portion of the accrual related to unreported claims is estimated based on an analysis of historical claims experience and other assumptions. Accruals for such costs could be significantly impacted if future events and claims differ from these assumptions. Accrued health insurance costs are included in the caption “Other accrued liabilities” in our consolidated balance sheet. See Note 13.

Income Taxes: We record income tax expense or benefit based on our estimate of the effective tax rates for the jurisdictions in which we do business. Deferred tax assets are recognized for deductible temporary differences and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. We assess our income tax positions for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting dates. For those tax positions where it is more likely than not that a tax benefit will be sustained, we record the largest amount of tax benefit with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recorded. Interest expense associated with income taxes, if any, is classified as income tax expense. See Note 22 for additional information regarding income taxes.

Income (Loss) Per Common Share: Basic income (loss) per common share is computed by dividing income (loss) by the weighted-average number of common shares outstanding during each period. Diluted income per share is computed by dividing income by the weighted-average number of common shares and common equivalent shares using the treasury stock method. Common equivalent shares include shares issuable upon the assumed exercise of stock options, vesting of restricted shares, and the conversion of convertible securities. For periods that include a loss, the computation of diluted loss per share excludes the impact of common equivalent shares because they would be antidilutive and diluted loss per share is therefore the same as basic loss per share.

Business Combinations: We account for business combinations under the acquisition method of accounting. The purchase price of an acquired business is allocated to the acquired tangible and intangible assets and the assumed liabilities on the basis of their respective fair values on the date of acquisition. Any excess of the purchase price over the fair value of the separately identifiable acquired assets and assumed liabilities is allocated to goodwill. The valuation of acquired assets and assumed liabilities requires significant judgments and is subject to revision as additional information about the fair value of assets and liabilities becomes available. Additional information, which existed as of the acquisition date but at that time was unknown to us, may become known during the remainder of the measurement period, a period not to exceed 12 months from the acquisition date. Adjustments in the purchase price allocation may result in a change in the amount allocated to goodwill. All acquisition-related costs are expensed as incurred.

F- 12

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

Share-Based Compensation: We measure and recognize share-based compensation using the fair value method. See Note 19 for additional information regarding share-based compensation and our stock-based compensation plans.

Fair Value Measurements: We measure fair value for financial reporting purposes based on a framework that prioritizes the inputs used to measure fair value for three broad categories of financial assets and liabilities as follows:

	●	Level 1 – Quoted prices in active markets for identical assets or liabilities.
	●	Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
	●	Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

The carrying amounts of our cash equivalents, restricted cash, accounts receivable, costs in excess of billings and estimated profit, other current assets, trade accounts payable, billings in excess of costs and estimated profit and accrued expenses at December 31, 2016 and 2015 approximate fair value due to the short-term maturities of these instruments.

Contingent Earn-outs: We record contingent earn-outs received in business divestitures and contingent earn-outs given in acquisitions at their estimated fair values. Adjustments to fair value are recorded in current period earnings. We determine the fair value of contingent earn-out consideration (both receivable and payable) using discounted cash flow techniques based on all information available to us at the time, including estimates, assumptions and judgments we believe to be reasonable under the circumstances. Actual amounts realized or paid may differ from those estimated.

NOTE 4: RECENTLY ISSUED AND ADOPTED ACCOUNTING PROUNOUNCEMENTS

In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern, which amended Going Concern (Topic 205) of the Accounting Standards Codification. This amendment provided guidance in generally accepted accounting principles about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related disclosures. The Company has complied with this standard as of January 1, 2016.

In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). The amendments in this guidance require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. In August 2015, the FASB issued ASU No. 2015-15, Interest – Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements , which allows for the presentation of debt issuance costs related to line-of-credit arrangements as either a direct deduction from the carrying amount of the debt liability in accordance with ASU 2015-03, or as an asset with subsequent amortization of the debt issuance costs ratably over the term of the arrangement. The Company has complied with this standard as of January 1, 2016.

F- 13

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

In November 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash . The new guidance will require amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company has complied with this standard as of January 1, 2016.

In May 2014, the FASB issued ASU No. 2014-09, which amended Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”) . The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. With respect to public entities, ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early application is not permitted. The Company is currently evaluating the impact the adoption of this guidance will have on its consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, which amended Inventory (Topic 330) Related to Simplifying the Measurement of Inventory of the Accounting Standards Codification. The amended guidance applies to all inventory except that which is measured using last-in, first-out (LIFO) or the retail inventory method. Inventory measured using first-in, first-out (FIFO) or average cost is included in the new amendments. Inventory within the scope of the new guidance should be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments will take effect for the Company for fiscal years beginning after December 15, 2016. The new guidance should be applied prospectively, and earlier application is permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740 ) : Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”). ASU 2015-17 was issued to simplify the presentation of deferred income taxes. The amendments in this guidance require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. ASU 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842 ) (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in its balance sheet a liability to make lease payments and an asset representing its right to use the underlying asset for the lease term. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.

F- 14

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows , which amended Statement of Cash Flows (Topic 230) of the Accounting Standards Codification. The new guidance clarifies how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments will be effective for the Company for annual and interim periods beginning after December 15, 2018 with early adoption permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.

NOTE 5: BUSINESS COMBINATION

On October 4, 2016, the Company acquired certain assets of EdgeBuilder Wall Panels, Inc. and Glenbrook Lumber & Supply, Inc. (collectively, the “ EBGL Sellers”) through the Company’s newly-formed wholly-owned subsidiaries EdgeBuilder and Glenbrook, respectively, pursuant to the terms of an Asset Purchase Agreement, dated as of the same date (the “Purchase Agreement”), by and among the Company, EdgeBuilder, Glenbrook, the EBGL Sellers and the individual owners of the EBGL Sellers (the “EBGL Acquisition”). The Company operates the businesses of EdgeBuilder and Glenbrook on a combined basis, and such businesses are referred to on a combined basis as EBGL. EBGL’s business activities include selling lumber and building supplies and manufacturing and selling prefabricated wall panels for commercial and residential construction applications and permanent wood foundation systems for residential buildings. We acquired EBGL because we believe that there is significant growth opportunity in the structural wall panel, permanent wood foundation systems and local building supply businesses. We believe that the acquisition of EBGL, along with the acquisition of KBS in 2014, provide ATRM with the potential to return to profitability.

Consideration for the EBGL Acquisition totaled approximately $5.2 million and included (i) $3.0 million in cash paid at closing and $1.0 million of deferred payments payable to the EBGL Sellers in four equal installments on the first day of each of the next four fiscal quarters beginning January 1, 2017, (ii) 100,000 shares of the Company’s common stock, (iii) a potential earn-out payment of up to $1.0 million based upon the amount by which EBGL’s gross profit over the 12 months commencing October 1, 2016 exceeds a specified target and (iv) the assumption of certain liabilities of the EBGL Sellers related to the purchased assets. The cash portion of the purchase price was subject to a post-closing adjustment based on the amount of inventory and pre-paid expenses included in the purchased assets. Such price adjustment resulted in a $0.2 million increase in the purchase price, which amount was paid by the Company to the EBGL Sellers in January 2017. The shares issued as part of the purchase price are subject to transfer restrictions for 12 months following the closing. The Purchase Agreement provided that the potential earn-out payment tied to EBGL’s future gross profit would be calculated based on the EBGL Sellers’ historical accounting practices. The EBGL Sellers’ historical accounting practices were not fully compliant with accounting principles generally accepted in the United States of America (“GAAP”) including not following contract accounting rules for their large long-term wall panel contracts, differences in classification of certain costs which under GAAP would be considered costs-of-goods-sold (which were included below gross profit) and certain costs which were accounted for on a cash versus accrual basis of accounting. The purchase price and the allocation of the purchase price were as follows (in thousands):

Purchase price:
Cash paid at closing	$	2,960
Fair value of deferred payments owing to EBGL Sellers		941
Fair value of contingent earn-out liability		943
ATRM common stock (100,000 shares at $1.49 per share)		149
Purchase price adjustment – paid in January 2017		218
Total purchase price	$	5,211

F- 15

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

Allocation of purchase price:
Assets acquired:
Inventories	$	898
Costs and estimated profit in excess of billings		93
Prepaid expenses		3
Equipment (1)		289
Goodwill (2)		3,020
Customer relationships (2)(3)		677
Tradenames (2)		104
Purchased backlog (2)(3)		300
Total assets acquired		5,384

Liabilities assumed:
Billings in excess of costs and estimated profits		(31	)
Accrued compensation		(40	)
Accrued other liabilities		(102	)
Total liabilities assumed		(173	)

Net assets acquired	$	5,211

	(1)	The fair value of equipment was determined based primarily on an independent appraisal.

	(2)	Goodwill and tradenames are considered indefinite-lived assets and are not subject to future amortization, but will be tested for impairment at least annually. Goodwill is comprised primarily of manufacturing processes and knowhow, assembled workforce and other intangible assets that do not qualify for separate recognition. The full amount of goodwill is expected to be deductible for tax purposes.

	(3)	The amortization period for customer relationships is six years. Purchased backlog will be amortized over the period that the related contracts are completed, which is expected to be less than one year.

On June 30, 2017, as described in Note 25, we entered into an agreement to amend the Purchase Agreement in which the parties agreed to replace the three remaining installments of the deferred payments to the EBGL Sellers ($0.75 million) and the contingent earn-out payment ($1.0 million) with set monthly payments totaling $1.8 million, payable in an initial $200,000 payment made on or about July 3, 2017 and 16 monthly installments beginning August 1, 2017 and ending on December 1, 2018.

F- 16

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

EBGL’s results are included in our consolidated statement of operations since October 4, 2016, the date of the EBGL Acquisition. The following unaudited pro forma financial information presents the combined results of ATRM and EdgeBuilder Wall Panels, Inc. and Glenbrook Lumber & Supply, Inc. for the years ended December 31, 2016 and 2015 as if the EBGL Acquisition had occurred on January 1, 2015 (in thousands):

	2016			2015
Pro forma net sales	$	40,589		$	39,690
Pro forma net loss		(5,880	)		(3,448	)
Pro forma loss per share – basic and diluted		(2.51	)		(2.18	)

The above unaudited pro forma financial information is not necessarily indicative of what our consolidated results of operations actually would have been or what results may be expected in the future.

We incurred expenses for professional fees associated with the EBGL acquisition of approximately $0.2 million in fiscal year 2016. These costs are included in the caption “Selling, general and administrative expenses” in our consolidated statement of operations.

NOTE 6: CONTINGENT EARN-OUT RECEIVABLE

The BSA Agreement provides that BSA will pay to ATRM a royalty on all revenue related to the test handler product line through December 31, 2018. Royalties earned are subject to certain qualifications and adjustments. The royalty percentage was 12% as of the quarter ended December 31, 2015 and decreases 0.75% each quarter thereafter. Royalty payments are due 60 days after the end of each calendar quarter. We received payments totaling approximately $0.3 million and $1.3 million at December 31, 2016 and 2015, respectively. The contingent earn-out receivable totaled approximately $0.6 million and $0.9 million at December 31, 2016 and 2015, respectively.

NOTE 7: FAIR VALUE MEASUREMENTS

Financial assets and liabilities reported at fair value on a recurring basis include the following (in thousands):

December 31,	2016			2015
Contingent earn-out receivable (based on Level 3 inputs):
Current portion	$	359		$	329
Noncurrent portion		202			548
Total	$	561		$	877

Contingent earn-out payable (based on Level 3 inputs)	$	(967	)	$	—

F- 17

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

The following table summarizes the activity for our Level 3 assets and liabilities measured on a recurring basis (in thousands):

	Earn-Out Receivable (1)			Earn-Out Payable (2)

Balance at December 31, 2014	$	2,300		$	—
Subtract – decreases based on re-assessments (included in earnings)		(191	)		—
Settlements		(1,232	)		—
Balance at December 31, 2015		877			—
Add – fair value of earn-out liability at closing of EBGL Acquisition		—			(943	)
Subtract – net decrease based on re-assessments (included in earnings)		(4	)		—
Add – net increase based on re-assessments (included in earnings)		—			(24	)
Settlements		(312	)		—
Balance at December 31, 2016	$	561		$	(967	)

	(1)	Earn-out receivable related to the transfer of our test handler product line in 2014 (see Note 6).

	(2)	Earn-out payable related to the EBGL Acquisition in 2016 (see Note 5).

Quantitative information about Level 3 fair value assets and liabilities measured on a recurring basis at December 31, 2016 is summarized in the table below:

Fair Value Asset/Liability	Valuation Technique	Unobservable Input	Amount
Contingent earn-out receivable	Discounted cash flow	Estimated revenue for remaining royalty period Performance weighted average Discount rate	$11 million 60% to 125% 10 percent

Contingent earn-out payable	Discounted cash flow	Estimated gross profit for earn-out period Discount rate	$3.4 million 10 percent

Quantitative information about Level 3 fair value assets measured on a recurring basis at December 31, 2015 is summarized in the table below:

Fair Value Asset		Valuation Technique		Unobservable Input		Amount
Contingent earn-out receivable related to transfer of test handler product line		Discounted cash flow		Estimated revenue for remaining royalty period Performance weighted average Discount rate		$14 million 60% to 125% 10 percent

F- 18

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

Financial assets reported at fair value on a nonrecurring basis include the following (in thousands):

Year ended December 31,	2016
	Fair Value (Level 3)		Total Gains and (Losses)

Goodwill related to KBS acquisition (1)	$	—	$	( 1,733	)

(1)

We recorded a goodwill impairment charge of approximately $1.7 million in year 2016 in connection with the write-off of the remaining goodwill related to the KBS acquisition (see Note 10).

The following table summarizes the activity for our Level 3 assets measured on a nonrecurring basis (in thousands):

	KBS Goodwill (1)

Balance at December 31, 2015	$	1,733
Subtract – KBS goodwill impairment recorded at June 30, 2016 (included in earnings)		(1,733	)
Balance at December 31, 2016	$	—

(1)

For more information regarding Goodwill, see Note 10.

NOTE 8: ACCOUNTS RECEIVABLE

Accounts receivable are comprised of the following (in thousands):

December 31,	2016			2015
Contract billings	$	2,330		$	2,586
Retainage		370			347
Subtotal		2,700			2,933
Less - allowance for doubtful accounts		(96	)		(370	)
Accounts receivable, net	$	2,604		$	2,563

Retainage balances are expected to be collected within the next twelve months.

NOTE 9: INVENTORIES

Inventories are comprised of the following (in thousands):

December 31,	2016		2015
Raw materials	$	1,404	$	1,120
Finished goods		—		121
Total inventories	$	1,404	$	1,241

F- 19

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

In fiscal year 2015, KBS wrote down two residential home models to their estimated net realizable values. The related charge of approximately $86,000 is included in cost of sales in our consolidated statement of operations for the year ended December 31, 2015.

NOTE 10: GOODWILL AND INTANGIBLE ASSETS, NET

Intangible assets are comprised of the following (in thousands):

	December 31, 2016							December 31, 2015
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Value		Gross Carrying Amount		Accumulated Amortization			Net Carrying Value
Indefinite-lived intangible assets:
Goodwill	$	3,020	$	—		$	3,020	$	1,733	$	—		$	1,733
Trademarks		394		—			394		290		—			290
Total		3,414		—			3,414		2,023		—			2,023

Finite-lived intangible assets:
Customer relationships		2,097		(586	)		1,511		1,420		(355	)		1,065
Purchased backlog		1,290		(1,078	)		212		990		(990	)		—
Total		3,387		(1,664	)		1,723		2,410		(1,345	)		1,065

Total intangible assets	$	6,801	$	(1,664	)	$	5,137	$	4,433	$	(1,345	)	$	3,088

The following table summarizes the activity for Goodwill (in thousands):

	Goodwill

Balance at December 31, 2015	$	1,733
Subtract – KBS goodwill impairment recorded at June 30, 2016 (included in earnings)		(1,733	)
Add – goodwill recorded on October 4, 2016 in connection with the EBGL Acquisition		3,020
Balance at December 31, 2016	$	3,020

Since the acquisition of KBS in 2014, KBS’s operating results lagged behind management’s expectations. Despite the implementation of its strategic plans for change at KBS, which have begun to materialize in KBS’s overall operating results, KBS continues to underperform our projected levels of net revenue and net income. Accordingly, we completed a goodwill impairment assessment as of September 30, 2016 and determined that the carrying value of the KBS goodwill exceeded the fair value by $1.7 million at that date. Accordingly, we recorded a goodwill impairment charge of approximately $1.7 million in 2016.

F- 20

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

Amortization expense amounted to approximately $319,000 and $333,000 in 2016 and 2015, respectively. Estimated amortization of purchased intangible assets is as follows over the next five years (in thousands):

2017	$	527
2018		316
2019		316
2020		316
2021		163
Thereafter		85
Total	$	1,723

NOTE 11: UNCOMPLETED CONSTRUCTION CONTRACTS

The status of uncompleted construction contracts is summarized below (in thousands):

December 31,	2016			2015
Costs incurred on uncompleted contracts	$	6,575		$	1,155
Inventory purchased for specific contracts		837			1,819
Estimated profit		1,150			142
Sub-total		8,562			3,116
Less billings to date		(8,169	)		(3,409	)
Total	$	393		$	(293	)

Included in the following balance sheet captions:
Costs and estimated profit in excess of billings	$	1,045		$	472
Billings in excess of costs and estimated profit		(652	)		(765	)
Total	$	393		$	(293	)

The Company has approximately $10.7 million of work under contract remaining to be recognized at December 31, 2016.

NOTE 12: TRADE ACCOUNTS PAYABLE RETAINAGE

Trade accounts payable of approximately $3.8 million at December 31, 2016 included retainage amounts due to subcontractors totaling approximately $0.4 million. Trade accounts payable of approximately $3.5 million at December 31, 2015 included retainage amounts due to subcontractors totaling approximately $0.5 million. Retainage balances at December 31, 2016 are expected to be settled within the next twelve months.

NOTE 13: OTHER ACCRUED LIABILITIES

Other accrued liabilities are comprised of the following (in thousands):

December 31,	2016		2015
Accrued interest expense	$	637	$	502
Accrued sales taxes		739		562
Accrued severance and related costs		—		331
Accrued health insurance costs		96		133
Accrued sales rebates		327		402
Accrued warranty		49		39
Other		416		16
Total other accrued liabilities	$	2,264	$	1,985

F- 21

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

In connection with a restructuring of our KBS operations during the third quarter of 2015, we terminated six employees, including two former KBS officers. Pursuant to employment agreements, we recorded a severance charge of approximately $421,000 in 2015 related to this restructuring. The severance amounts are payable in weekly installments through October 2016. The severance charge is included in “Selling, general and administrative expenses” in our consolidated statement of operations for the year ended December 31, 2015.

The following table summarizes product warranty expense accruals and settlements for the two years ended December 31, 2016 (in thousands):

	Accrual balance at beginning of year		Accruals for warranties		Settlements made			Accrual balance at end of year
2016	$	39	$	116	$	(106	)	$	49
2015		78		58		(97	)		39

NOTE 14: NOTES PAYABLE

As of December 31, 2016, we had outstanding notes payable of approximately $3.4 million. Our notes payable included (i) $2.4 million principal outstanding on KBS’s $4.0 million revolving credit facility under a loan and security agreement with Gerber Finance (the “KBS Loan Agreement”) and (ii) $1.2 million principal outstanding on EBGL’s $3.0 million revolving credit facility under a loan and security agreement with Gerber Finance (the “EBGL Loan Agreement”).

On February 23, 2016, ATRM and KBS entered into the KBS Loan Agreement with Gerber Finance, providing KBS with a revolving line of credit with borrowing availability of up to $4.0 million. The initial term of the KBS Loan Agreement expires on February 22, 2018, but extends automatically for additional one-year periods unless a party provides prior written notice of termination. Availability under the line of credit is based on a formula tied to KBS’s eligible accounts receivable, inventory, equipment and real estate. Borrowings bear interest at the prime rate plus 2.75%, with interest payable monthly. The outstanding principal balance is payable upon expiration of the term of the KBS Loan Agreement. The KBS Loan Agreement also provides for certain fees payable to Gerber Finance during its term, including a 1.5% annual facilities fee and a 0.10% monthly collateral monitoring fee. KBS’s obligations under the KBS Loan Agreement are secured by all of its property and assets and are guaranteed by ATRM. Unsecured promissory notes issued by KBS and ATRM are subordinate to KBS’s obligations under the KBS Loan Agreement. The KBS Loan Agreement contains representations, warranties, affirmative and negative covenants, events of default and other provisions customary for financings of this type. Financial covenants require that KBS maintains a maximum leverage ratio (as defined in the KBS Loan Agreement) of 7:1 at December 31, 2016, and that KBS not incur a net annual post-tax loss in any fiscal year during the term of the KBS Loan Agreement. We incurred approximately $230,000 of costs associated with the KBS Loan Agreement which we are amortizing ratably over the term of the loan. At December 31, 2016, the outstanding balance on the KBS Loan Agreement was approximately $2.6 million, which after an offset of approximately $0.2 million of unamortized deferred cost of issuance, nets to approximately $2.4 million.

On October 4, 2016, concurrently with the closing of the EBGL Acquisition, we entered into the EBGL Loan Agreement with Gerber Finance providing EBGL with a working capital line of credit of up to $3.0 million. Availability under the EBGL Loan Agreement was based on a formula tied to the borrowers’ eligible accounts receivable, inventory and equipment, and borrowings bore interest at the prime rate plus 2.75%, with interest payable monthly and the outstanding principal balance payable upon expiration of the term of the EBGL Loan Agreement. Initially, availability under the EBGL Loan Agreement was limited to $1.0 million, which amount could be increased to up to $3.0 million in increments of $500,000 upon the request of the borrowers and in the discretion of Gerber Finance. The initial term of the EBGL Loan Agreement was set to expire on October 3, 2018, but extending automatically for additional one-year periods unless a party provided prior written notice of termination. The borrowers’ obligations under the EBGL Loan Agreement were secured by all of their property and assets and were guaranteed by the Company and its other subsidiaries. We incurred approximately $257,000 of costs associated with the EBGL Loan Agreement which we are amortizing ratably over the term of the loan. At December 31, 2016, the outstanding balance on the EBGL Loan Agreement was approximately $1.2 million, which after an offset of approximately $0.2 million of unamortized deferred cost of issuance, nets to approximately $1.0 million.

F- 22

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

At the applicable test dates, we were not in compliance with the following financial covenants: (i) a requirement for KBS to maintain a minimum leverage ratio of 7:1; (ii) a requirement for KBS not to incur a net annual post-tax loss in any fiscal year of the loan agreements; and (iii) a requirement to deliver the Company’s fiscal year-end financial statements reviewed by an independent certified accounting firm acceptable to Gerber within 105 days from the fiscal year ended December 31, 2016. In August 2017, Gerber Finance provided us with a waiver for these events. Based upon information available to us as of September 13, 2017, we believe we will be in compliance with the financial covenant requiring no net annual post-tax loss for KBS at future test dates. However, it is likely that we will not be in compliance with the minimum leverage ratio covenant as of the next future test date. If we fail to comply with any financial covenant under our loan agreements with Gerber Finance going forward, under certain circumstances after a cure period, Gerber Finance may demand the repayment of the credit facilities amount outstanding and any unpaid interest thereon.

NOTE 15: LONG-TERM DEBT

Long-term debt is comprised of the following (in thousands):

December 31,	2016			2015
LSVI Promissory Note payable to related party, unsecured, interest of 10% per annum (12% per annum PIK interest) payable semi-annually in July and January, with any unpaid principal and interest due on April 1, 2019 (1)	$	4,261		$	5,000

Promissory notes payable to LSV Co-Invest I, a related party, unsecured, interest of 10% per annum (12% per annum PIK interest) payable semi-annually in July and January, with any unpaid principal and interest due on April 1, 2019 (2)		6,773			4,500

Promissory note payable to KBS sellers, unsecured, interest imputed at 9.5% (3)		678			1,757

Installment payment agreement, 8.0% interest, payable in monthly installments of $1,199 through September 2020 (4)		46			56

Notes payable, secured by equipment, interest rates from 6.6% to 9.5%, with varying maturity dates through September 2018		22			44

Promissory note payable to Gerber Finance, secured, interest at the current prime rate plus 3.0% payable monthly with any unpaid principal and interest due on December 31, 2018 (5)		3,000			—

Deferred payments to EBGL Sellers, interest imputed at 10.0% (6)		964			—

Total long-term debt		15,744			11,357
Current portion		(1,675	)		(1,105	)
Noncurrent portion	$	14,069		$	10,252

F- 23

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

	(1)	In order to finance the KBS acquisition and to provide general working capital, on April 1, 2014, we entered into a Securities Purchase Agreement with LSVI pursuant to which it purchased for $6.5 million in cash, an unsecured promissory note made by ATRM in the principal amount of $6.0 million (the “LSVI Promissory Note”), bearing interest at 10.0% per annum principal and interest due on April 1, 2019. ATRM may prepay the LSVI Promissory Note at any time after a specified amount of advance notice to LSVI. On December 30, 2014, we made a principal payment of $1.0 million on the LSVI Promissory Note. On February 25, 2016, we made a principal payment of $1.0 million on the LSVI Promissory Note.

	(2)	In order to provide additional working capital to ATRM, we entered into two Securities Purchase Agreements with LSV Co-Invest I pursuant to which it purchased unsecured promissory notes made by ATRM. Each of the notes bears interest at 10.0% per annum (12% per annum PIK Interest), with interest payable semiannually in January and July and any unpaid principal and interest is due on April 1, 2019. Except for the principal amounts, the terms of these promissory notes are identical to the terms of the LSVI Promissory Note. The promissory notes issued to LSV Co-Invest I are listed below:

	●	$2.5 million promissory note dated July 21, 2014
	●	$2.0 million promissory note dated September 19, 2014
	●	$2.0 million promissory note dated October 4, 2016

	(3)	Promissory note payable to the principal seller of KBS, payable in monthly installments of $100,000 through July 2017. Interest imputed at 9.5% (see below).

	(4)	Agreement to finance the purchase of software license rights and consulting services related to the implementation of enterprise management information system.

	(5)	Acquisition Loan with Gerber Finance with a principal amount of $3.0 million, the proceeds of which were used to finance the EBGL Acquisition in October 2016. Borrowings under this loan bear interest at the prime rate plus 3.0%, with interest payable monthly and the outstanding principal payable upon the expiration of the term of the agreement; initially December 31, 2018, but extends automatically for additional one-year periods unless a party provides prior written notice of termination (see Note 2).

	(6)	Deferred Payments to the EBGL Sellers under the Purchase Agreement, payable in quarterly installments of $250,000 on January 1, 2017, April 1, 2017, July 1, 2017 and October 1, 2017. Interest imputed at 10.0% (see Note 2).

F- 24

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

We received a waiver from LSVI and LSV Co-Invest I with respect to our interest payments under the LSVI and LSV Co-Invest I promissory notes due on July 5, 2016, totaling approximately $445,000, permitting us to make these payments at any time on or before August 31, 2016. On August 12, 2016, the Company and LSVI and LSV Co-Invest I amended the LSVI and LSV Co-Invest I promissory notes allowing the Company, at its sole option, to elect to make any interest payment in PIK Interest at an effective rate of 12% per annum (versus the 10% interest rate applied to cash payments) for that period. For the six-month interest periods ended June 30, 2016 and December 31, 2016, the Company elected the PIK Interest option. As a result, interest expense for the twelve months ended December 31, 2016, includes PIK Interest related to the LSVI and LSV Co-Invest I promissory $1.1 million (calculated at the PIK Interest rate of 12% per annum). The balance of the LSVI and LSV Co-Invest I promissory notes at December 31, 2016 includes approximately $0.5 million of PIK Interest.

As partial consideration for the KBS acquisition in April 2014, we issued an unsecured promissory note to the primary seller of KBS in the principal amount of $5.5 million. We were unable to repay the note on its maturity date, December 1, 2014. In April 2015, we asserted certain indemnification and other claims against the sellers of KBS and on June 26, 2015 we entered into a settlement agreement with the sellers related to such claims. The settlement agreement provided for, among other things, the amendment and restatement of the original note to reduce the principal amount from $5.5 million to $2.5 million and the forgiveness of all then-accrued interest related to the original note. The revised principal amount is payable in monthly installments of $100,000 on the first business day of each month, inclusive of imputed interest, beginning on July 1, 2015 and through July 1, 2017. The amended and restated note does not accrue interest unless it is in default, in which case the annual interest rate would be 10%. We recorded a gain of approximately $3.7 million in fiscal year 2015 related to the settlement, which consisted of the following (in thousands):

Reduction of principal (including adjustment for imputed interest at 9.5%)	$	3,226
Forgiveness of interest accrued to the date of settlement		461
Gain on settlement agreement	$	3,687

The principal balance of the amended and restated unsecured promissory note issued to the primary seller of KBS was $678,413 ($700,000 less imputed interest of $21,587) and $1,757,292 ($1,900,000 less imputed interest of $142,708) at December 31, 2016 and 2015, respectively, and is included in Long-Term Debt.

The Company is party to a Registration Rights Agreement (the “Registration Rights Agreement”) with LSVI, providing LSVI with certain demand and piggyback registration rights, effective at any time after July 30, 2014, with respect to the 107,297 shares of our common stock issued upon the conversion of a convertible promissory note held by LSVI in 2014.

As of December 31, 2016, LSVI owned 1,067,885 shares of our common stock, or approximately 45.1% of our outstanding shares, including 900,000 shares purchased in a common stock rights offering we completed in September 2015. Jeffrey E. Eberwein, ATRM’s Chairman of the Board, is the manager of LSVGP, the general partner of LSVI and LSV Co-Invest I, and sole member of LSVM, the investment manager of LSVI. LSVI was granted a waiver under our Tax Benefits Preservation Plan to permit the purchase of shares in the rights offering.

F- 25

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

ATRM’s entry into the securities purchase agreements with LSVI and LSV Co-Invest I was approved by a Special Committee of our Board consisting solely of independent directors.

Future maturities of long-term debt are summarized below:

2017	$	1,675
2018		3,012
2019		11,047
2020		10
Total long-term debt	$	15,744

NOTE 16: LEGAL PROCEEDINGS

UTHE Technology Corporation v. Aetrium Incorporated

F- 26

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

KBE Building Corporation v. KBS Builders, Inc., and ATRM Holdings, Inc., et al.

From time to time, in the ordinary course of ATRM’s business, it is party to various other disputes, claims and legal proceedings. In the opinion of management, based on information available at this time, such disputes, claims and proceedings will not have a material effect on ATRM’s consolidated financial statements.

NOTE 17: LEASES AND RENT EXPENSE

EBGL leases its facilities in Oakdale, Minnesota and Prescott, Wisconsin. These facilities are being leased from limited liability companies controlled by two owners of the EBGL Sellers who are shareholders of ATRM. Neither shareholder is a director nor an officer of ATRM, and, to our knowledge, does not own more than five percent of our common stock. These lease agreements provide for monthly base rents totaling $22,135 as of December 31, 2016 and expire on September 30, 2021, with an option to renew for an additional five-year period. As of December 31, 2016, future minimum lease payments under operating leases were as follows (in thousands):

2017	$	266
2018		266
2019		267
2020		272
2021		207
Total minimum lease payments	$	1,278

We previously leased a facility in North St. Paul, Minnesota pursuant to a lease agreement that was terminated on May 1, 2015. The facility is owned by a limited liability company controlled by a shareholder of ATRM. The shareholder is neither a director nor an officer of ATRM, and, to our knowledge, does not own more than five percent of our common stock.

F- 27

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

Rent expense, including facility and various short-term equipment operating leases, was as follows (in thousands):

Year ended December 31,	2016		2015
Paid to companies controlled by shareholder	$	85	$	94
Paid to others		15		22
Total rent expense	$	100	$	116

We subleased a portion of the North St. Paul facility and provided administrative services to BSA and another subcontract until the lease, subleases and administrative agreements were terminated effective May 1, 2015. We received payments totaling approximately $131,000 in 2015, for such sublease rent and administrative services. Such payments are not reflected in the table above.

NOTE 18: COMMON STOCK RIGHTS OFFERING

On September 18, 2015, pursuant to a rights offering to our existing shareholders, we sold 1,019,746 shares of our common stock at $3.00 per share, which included 900,000 shares sold to LSVI, our largest shareholder. Net proceeds from the offering amounted to $2,936,526, reflecting gross proceeds of $3,059,238 less $122,712 of offering-related expenses.

NOTE 19: STOCK INCENTIVE PLANS AND SHARE-BASED COMPENSATION

ATRM uses the fair value method to measure and recognize share-based compensation. We determine the fair value of stock options on the grant date using the Black-Scholes option valuation model. We determine the fair value of restricted stock awards based on the quoted market price of our common stock on the grant date. We recognize the compensation expense for stock options and restricted stock awards on a straight-line basis over the vesting period of the applicable awards.

2014 Incentive Plan

Our 2014 Incentive Plan (the “2014 Plan”) was approved by the Board on October 9, 2014 and became effective on December 4, 2014 upon approval by shareholders. The 2014 Plan is administered by the Compensation Committee of the Board. The purpose of the 2014 Plan is to provide employees, consultants and Board members the opportunity to acquire an equity interest in the Company through the issuance of various stock-based awards such as stock options and restricted stock. On November 17, 2016, at the 2016 Annual Meeting of Shareholders, the shareholders approved an amendment to the 2014 Plan which increased the number of shares of the Company’s common stock authorized and reserved for issuances thereunder to 400,000 shares.

On June 5, 2015, ATRM granted restricted stock awards for a total of 60,000 shares of the Company’s common stock to its directors and Chief Financial Officer. The shares vested one year after the grant date. The fair value of the awards was determined to be $4.48 per share, the closing price of our common stock on the grant date. Compensation expense related to these grants amounted to approximately $115,000 and $154,000 for the years ended December 31, 2016 and 2015, respectively, and is included in the caption “Selling, general and administrative expenses” in our consolidated statement of operations.

F- 28

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

On October 19, 2016, ATRM granted restricted stock awards for a total of 30,000 shares of the Company’s common stock to its Chief Executive Officer, Chief Financial Officer and former Chief Financial Officer (10,000 shares each). The shares vest one year after the grant date. The fair value of the awards was determined to be $2.25 per share, the closing price of our common stock on the grant date. Compensation expense related to these grants amounted to approximately $14,000 for the year ended December 31, 2016, and is included in the caption “Selling, general and administrative expenses” in our consolidated statement of operations. The remaining compensation expense of approximately $54,000 will be recognized on a straight-line basis through October 19, 2017, subject to forfeitures.

2003 Stock Incentive Plan

A stock incentive plan approved by our shareholders and adopted in 2003 (the “2003 Plan”) terminated in 2013. Stock options granted under the 2003 Plan continue to be exercisable according to their individual terms. The following table summarizes stock option activity under the 2003 Plan for the year ended December 31, 2016:

	Number Of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contract Term	Aggregate Intrinsic Value (in thousands)
Outstanding, January 1, 2016		27,500	$	6.88
Expired		—
Outstanding, December 31, 2016		27,500	$	6.88	0.5 years	$	0

Exercisable, December 31, 2016		27,500	$	6.88	0.5 years	$	0

All stock options outstanding at December 31 , 2016 are nonqualified options which expire at varying dates through November 2017. The aggregate intrinsic values in the table above are zero because the option exercise prices for all outstanding options exceeded ATRM’s closing stock price on December 31 , 2016.

NOTE 20: TAX BENEFIT PRESERVATION PLAN / PREFERRED STOCK RIGHTS

As of December 31, 2016, ATRM had federal net operating loss carryforwards (“NOLs”) of approximately $97 million and state NOLs of approximately $34 million. Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), imposes an annual limitation on the amount of taxable income that may be offset by a corporation’s NOLs if the corporation experiences an “ownership change” as defined in Section 382 of the Code. An ownership change occurs when the corporation’s “5-percent shareholders” (as defined in Section 382 of the Code) collectively increase their ownership in the corporation by more than 50 percentage points (by value) over a rolling three-year period. Additionally, various states have similar limitations on the use of state NOLs following an ownership change.

On February 13, 2014, to protect the tax benefits of ATRM’s NOLs, the Board adopted a Tax Benefit Preservation Plan (the “Rights Plan”) that generally was designed to deter any person from acquiring shares of ATRM’s common stock if the acquisition would result in such person beneficially owning 4.99% or more of the common stock without the approval of the Board.

F- 29

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

In connection with the adoption of the Rights Plan, on February 13, 2014, the Board authorized and declared a dividend distribution of one right for each outstanding share of ATRM’s common stock to stockholders of record as of the close of business on February 24, 2014. Each right entitled the registered holder to purchase from the Company one one-thousandth of a share of Series B Participating Preferred Stock, par value $0.001 per share, of the Company at an exercise price of $30.00 per one one-thousandth of a Preferred Share, subject to adjustment.

Subject to certain exceptions specified in the Rights Plan, the rights were to separate from ATRM’s common stock and become exercisable following (i) the 10 ^th business day (or such later date as may be determined by the Board) after the public announcement that an acquiring person had acquired beneficial ownership of 4.99% or more of ATRM’s common stock or (ii) the 10 ^th business day (or such later date as may be determined by the Board) after a person or group announced a tender or exchange offer that would have resulted in ownership by a person or group of 4.99% or more of ATRM’s common stock.

Additionally, at any time after the date on which an acquiring person beneficially owned 4.99% or more, but less than 50%, of ATRM’s common stock, the Board was permitted to exchange the rights (except for rights that were voided due to their beneficial ownership by an acquiring person or group), in whole or in part, for shares of ATRM’s common stock at an exchange ratio of one share per right (subject to adjustment), or in certain circumstances, cash or other securities of the Company having a value approximately equal to one share.

The operation of the Rights Plan could have caused substantial dilution to a person or group that acquired 4.99% or more of the Company’s common stock on terms not approved by the Board.

The adoption of the Rights Plan had no impact on the Company’s consolidated financial statements for fiscal years 2016 or 2015. No rights were exercisable at December 31, 2016. The Rights Plan expired on February 13, 2017.

NOTE 21: EMPLOYEE SAVINGS 401(k) PLAN

ATRM has a 401(k) employee savings plan, which covers full-time ATRM employees who are at least 21 years of age. Contributions to the savings plan are at the discretion of management. No contributions were made to the plan in fiscal years 2016 or 2015.

NOTE 22: INCOME TAXES

A reconciliation of income tax expense (benefit) computed using the federal statutory rate to the income tax expense (benefit) in our consolidated statements of operations is as follows (in thousands):

Year ended December 31,	2016			2015
Tax benefit computed at federal statutory rate	$	(2,216	)	$	(1,133	)

State taxes, net of federal benefit		(156	)		(127	)
Increase valuation allowance		2,048			735
State NOL expiration/write-off		321			39
Adjustment to income tax accruals		5			423
State research credit expiration		3			65
Non-deductible expenses		3			3
Other, net		—			1
Total income tax expense	$	8		$	6

F- 30

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

Deferred tax assets (liabilities) are comprised of the following (in thousands):

December 31,	2016			2015
Accounts receivable	$	36		$	141
Employee compensation and benefits		100			91
Contingent consideration		(169	)		(268	)
Amortization		1,305			1,089
Deferred acquisition costs		245			265
NOL and tax credit carryforwards		34,807			32,895
Warranty accrual		18			15
Severance accrual		—			97
Other, net		60			34
Deferred tax assets (liabilities), net	$	36,402		$	34,359
Less valuation allowance		(36,421	)		(34,372	)
Net deferred tax assets (liabilities)	$	(19	)	$	(13	)

We record the benefit we will derive in future accounting periods from tax losses and credits and deductible temporary differences as “deferred tax assets.” We record a valuation allowance to reduce the carrying value of our net deferred tax assets if, based on all available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Since 2009, we have maintained a valuation allowance to fully reserve our deferred tax assets. We recorded a full valuation allowance in 2009 because we determined there was not sufficient positive evidence regarding our potential for future profits to outweigh the negative evidence of our three-year cumulative loss position at that time. We expect to continue to maintain a full valuation allowance until we determine that we can sustain a level of profitability that demonstrates our ability to realize these assets. To the extent we determine that the realization of some or all of these benefits is more likely than not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed. Such a reversal would be recorded as an income tax benefit and, for some portion related to deductions for stock option exercises, an increase in shareholders’ equity.

ATRM has federal NOLs of approximately $97 million that will begin to expire in 2020 if not utilized. We also have state NOLs of approximately $34 million that will expire at various times, beginning in 2017, if not utilized. We also have federal and state research tax credit carryforwards of approximately $1.3 million that will expire at various times, beginning in 2017, if not utilized. The utilization of NOLs and research tax credit carryforwards may be subject to changes in tax regulations and/or to annual limitations as a result of changes in ownership that may already have occurred or future changes in ownership pursuant to the requirements of Section 382 of the Code. Such limitations could result in the expiration of NOL and tax credit carryforwards before utilization.

F- 31

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

Our federal and state operating loss carryforwards include windfall tax deductions from stock option exercises. The amount of windfall tax benefit recognized in additional paid-in capital is limited to the amount of benefit realized currently in income taxes payable. As of December 31, 2016, ATRM had suspended additional paid-in capital credits of $1.3 million related to windfall tax deductions. Upon realization of the NOLs from such windfall tax deductions, we would record a benefit of up to $1.3 million in additional paid-in capital.

We assessed our income tax positions at December 31, 2016 and 2015 for all years subject to examination and determined that our unrecognized tax positions were immaterial at those dates.

ATRM is subject to income tax examinations in the U.S. federal and certain state jurisdictions. Our 2013 and 2012 federal income tax returns were reviewed by the Internal Revenue Service during fiscal years 2015 and 2014, respectively, and resulted in no adjustments. Federal tax returns are subject to review for fiscal years 2014 through 2016 and state income tax returns are subject to review for fiscal years 2012 through 2016.

NOTE 23: PRODUCT LINE, GEOGRAPHIC, SIGNIFICANT CUSTOMER AND CONCENTRATION OF CREDIT RISK DATA

The following table sets forth the various components of net sales by product line as a percentage of total net sales:

Year ended December 31,	2016			2015
Residential homes		79	%		76	%
Commercial structures		21	%		24	%
Total		100	%		100	%

All of our long-lived assets are located in the United States. All of our sales based on product shipment destination were within the United States.

Sales to customers comprising more than 10% of our total net sales and corresponding accounts receivable concentration information for such customers is summarized below:

	Percent of total sales for year ended December 31,						Percent of total accounts receivable as of December 31,
	2016			2015			2016			2015
Residential Customers
Customer A		10.7	%		*			*			12.0	%
Customer B		*			*			11.8	%		*

Commercial Customers
Customer C		*			14.7	%		*			*
Customer D		*			*			*			26.9	%
Customer E		*			*			27.0	%		*

* Percent was less than 10% of the total.

F- 32

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

NOTE 24: OPERATING SEGMENTS

Prior to the EBGL Acquisition in October 2016, the Company’s operating results reflected the operating results of KBS, along with certain corporate overhead and corporate borrowing activity. Since the October 2016 EBGL Acquisition, the Company manages and organizes its business in two distinct reportable segments: (i) modular building manufacturing and (ii) structural wall panel and wood foundation manufacturing, including building supply retail operations. The modular building manufacturing segment, through KBS (including MMH), manufactures modular buildings for both single-family residential homes and larger, commercial building projects. The structural wall panel and wood foundation manufacturing segment (which also includes the building supply retail operations), manufactures structural wall panels for both residential and commercial projects as well as permanent wood foundation systems for residential homes, through the EdgeBuilder subsidiary, in addition to operating a local building supply retail operation through the Glenbrook subsidiary. The Company also has corporate level activities and expenditures which are not considered a reportable segment.

Each segments’ accounting policies are the same as those described in the summary of significant accounting policies (Note 3). There are no intersegment sales.

The Company’s reportable business segments are strategic business units that offer different products and services. Each segment is managed separately because they have different manufacturing processes and market to different customer bases, in geographically different markets.

The following table presents certain financial information regarding each reportable segment as of and for the year ended December 31, 2016:

	Modular Home Manufacturing		Structural Wall Panel Manufacturing		Total

Segment net sales	$	24,654,447	$	3,501,664	$	28,156,111
Depreciation and amortization expense		501,920		131,106		633,026
Segment goodwill impairment expense		1,732,804		—		1,732,804
Interest expense, net		408,912		120,012		528,924
Segment net loss		3,503,268		155,074		3,658,342
Total segment assets		8,007,031		7,126,033		15,133,064
Expenditures for segment assets		50,726		21,727		72,453

Reconciliation of Segment Information

Revenues

Total net sales for reportable segments	$	28,156,111
Other net sales		—
Consolidated net sales	$	28,156,111

Net loss

Total net loss for reportable segments	$	3,658,342
Other net sales		—
Unallocated amounts:
Other corporate expenses		1,707,705
Interest expense		1,146,752
Change in fair value of contingent earn-out		3,631
Provision for income taxes		7,900
Consolidated net loss	$	6,524,330

F- 33

Assets

Total assets for reportable segments	$	15,133,064
Other assets		1,644,970
Consolidated assets	$	16,778,034

Other Significant Adjustments	Segment Totals		Adjustments		Consolidated Totals

Depreciation and amortization expense	$	633,026	$	—	$	633,026
Segment goodwill impairment expense	$	1,732,804	$	—	$	1,732,804
Interest expense	$	528,924	$	1,146,752	$	1,675,676

The reconciling item to adjust interest expense is the amount of interest incurred by the Company at the parent level, but not allocated to the operating segments. The other adjustments reflect amounts incurred at the parent not allocated to the operating segments. None of the other adjustments are considered significant.

NOTE 25: SUBSEQUENT EVENTS

On March 31, 2017, ATRM entered into an additional Securities Purchase Agreement with LSV Co-Invest I. Pursuant to this agreement, LSV Co-Invest I purchased for $0.5 million in cash, an unsecured promissory note dated March 31, 2017, made by ATRM in the principal amount of $0.5 million. The note bears interest at 10.0% per annum, with interest payable semiannually in January and July; provided, however, LSV Co-Invest I may elect to receive any PIK Interest at an annual rate of 12.0%, so long as any such interest payment is made either (x) entirely in PIK Interest or (y) 50% cash and 50% PIK Interest. Except for the principal amount and the PIK Interest feature, the terms of this promissory note are identical to the terms of the previous LSV Co-Invest I promissory notes and the LSVI Promissory Note.

F- 34

ATRM Holdings, Inc.

Notes to Consolidated Financial Statements

The Premier Loan Agreement contains representations, warranties, affirmative and negative covenants, events of default and other provisions customary for financings of this type. The occurrence of any event of default under the Premier Loan Agreement may result in the obligations of EBGL becoming immediately due and payable.

As a condition to closing the Premier Loan Agreement, each of the Company and Jeffrey E. Eberwein, a director of the Company, executed a guaranty, dated as of the same date, in favor of Premier, absolutely and unconditionally guaranteeing all of EBGL’s obligations under the Premier Loan Agreement.

On June 30, 2017, the Company entered into a Second Agreement of Amendment to Loan and Security Agreement to amend the Acquisition Loan Agreement to waive certain covenants and to make certain amendments in connection with the termination of the EBGL Loan Agreement and refinancing under the Premier Loan Agreement.

As discussed in Note 5, the Company entered into an Asset Purchase Agreement, dated as of October 4, 2016 (as amended, the “EBGL APA”), by and among the Company, EBGL, the EBGL Sellers and the individual owners of the EBGL Sellers, providing for the EBGL Acquisition. On June 30, 2017, the parties entered into an Amendment to Asset Purchase Agreement to amend the EBGL APA to replace EBGL’s obligations to pay certain deferred payments to the EBGL Sellers ($0.75 million) and the contingent earn-out payment ($1.0 million) thereunder with set monthly payments totaling $1.8 million, payable with an initial $200,000 payment made on or about July 3, 2017 and 16 monthly installments beginning August 1, 2017 and ending on December 1, 2018.

On June 30, 2017, the parties to the KBS Loan Agreement entered into a Third Agreement of Amendment to Loan and Security Agreement providing for increased availability under the KBS Loan Agreement to KBS under certain circumstances, and certain other changes, as well as a waiver of certain covenants.

On July 20, 2017, the parties to the KBS Loan Agreement entered into a Fourth Agreement of Amendment to Loan and Security Agreement providing for increased availability under the KBS Loan Agreement to KBS for new equipment additions, as well as a waiver for certain covenants.

In connection with EBGL’s entry into the Premier Loan Agreement, and on the same date, EBGL repaid in full all of their obligations under and terminated the EBGL Loan Agreement. Pursuant to the termination of the EBGL Loan Agreement, all obligations of the Company in favor Gerber in connection with the EBGL Loan Agreement were extinguished.

F- 35

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ATRM Holdings, Inc.

Date: September 22, 2017	By:	/s/ Daniel M. Koch
		Daniel M. Koch
		President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on by the following persons on behalf of the registrant and in the capacities indicated.

Signature	Title	Date

/s/ Daniel M. Koch	President, Chief Executive Officer and Director	September 22, 2017
Daniel M. Koch	(Principal Executive Officer)

/s/ Stephen A. Clark	Chief Financial Officer	September 22, 2017
Stephen A. Clark	(Principal Financial and Accounting Officer)

/s/ Jeffrey E. Eberwein	Chairman of the Board	September 22, 2017
Jeffrey E. Eberwein

/s/ Morgan P. Hanlon	Director	September 22, 2017
Morgan P. Hanlon

/s/ Alfred John Knapp, Jr.	Director	September 22, 2017
Alfred John Knapp, Jr.

/s/ Galen Vetter	Director	September 22, 2017
Galen Vetter

EXHIBIT INDEX

Exhibit No.		Description

2.1		Asset Purchase Agreement, dated as of December 28, 2006, by and among ATRM Holdings, Inc. (f/k/a Aetrium Corporation. Aetrium-Web Technology, Inc. and WEB Technology, Inc. (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on January 5, 2007).

2.2		Asset Purchase Agreement, dated as of July 31, 2013, by and between ATRM Holdings, Inc. (f/k/a Aetrium Incorporated) and Cascade Microtech, Inc. (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed with the SEC on August 1, 2013).

2.3		Asset Purchase Agreement, dated as of April 2, 2014, by and among ATRM Holdings, Inc. (f/k/a Aetrium Incorporated), KBS Builders, Inc., KBS Building Systems, Inc., Maine Modular Haulers, LLC, All-Set, LLC (d/b/a KBS Homes), Paris Holdings, LLC, and Robert H. Farnham, Jr. (incorporated by reference to Exhibit 2.1 to our Quarterly Report on Form 10-Q filed with the SEC on May 14, 2014).

2.4+		Agreement, dated as of April 22, 2014, by and among ATRM Holdings, Inc. (f/k/a Aetrium Incorporated), Boston Semi Automation LLC and Boston Semi Equipment LLC (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed with the SEC on April 25, 2014).

2.5+*		Asset Purchase Agreement, dated as of October 4, 2016, by and among ATRM Holdings, Inc., EdgeBuilder, Inc., Glenbrook Building Supply, Inc., EdgeBuilder Wall Panels, Inc., Glenbrook Lumber & Supply, Inc. and certain individual owners.

3.1		Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed with the SEC on December 8, 2014).

3.2		Certificate of Designation of Series A Junior Participating Preferred Stock of ATRM Holdings, Inc. (f/k/a Aetrium Incorporated) (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed with the SEC on February 14, 2014).

3.3		Bylaws, as amended through October 20, 2009 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed with the SEC on October 22, 2009).

3.4		Bylaw amendments effective November 20, 2012 (incorporated by reference to Exhibit 3.4 to our Annual Report on Form 10-K filed with the SEC on March 26, 2013).

3.5		Bylaw amendment effective January 31, 2013 (incorporated by reference to Exhibit 3.5 to our Annual Report on Form 10-K filed with the SEC on March 26, 2013).

4.1*		Specimen Form of Common Stock Certificate.

4.2		Tax Benefit Preservation Plan, dated as of February 13, 2014, by and between ATRM Holdings, Inc. (f/k/a Aetrium Incorporated) and Computershare Trust Company, N.A., (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on February 14, 2014).

4.3		Promissory Note, dated April 1, 2014, made by ATRM Holdings, Inc. (f/k/a Aetrium Incorporated) for the benefit of Lone Star Value Investors, LP (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed with the SEC on May 14, 2014).

4.4		Promissory Note, dated July 21, 2014, made by ATRM Holdings, Inc. (f/k/a Aetrium Incorporated) for the benefit of Lone Star Value Co-Invest I, LP (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on July 25, 2014).

4.5		Promissory Note, dated September 19, 2014, made by ATRM Holdings, Inc. (f/k/a Aetrium Incorporated) for the benefit of Lone Star Value Co-Invest I, LP (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on September 22, 2014).

4.6		Promissory Note, dated February 25, 2015, made by ATRM Holdings, Inc. for the benefit of Lone Star Value Investors, LP (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on February 27, 2015).

4.7		Amendment No. 1 to Promissory Note dated April 1, 2014 for the benefit of Lone Star Value Investors, LP, dated August 12, 2016 (incorporated by reference to Exhibit 4.1 to our Quarterly Report on Form 10-Q filed with the SEC on November 15, 2016).

4.8		Amendment No. 1 to Promissory Notes, dated July 21, 2014 and September 19, 2014 for the benefit of Lone Star Value Co-Invest I, LP, dated August 12, 2016 (incorporated by reference to Exhibit 4.2 to our Quarterly Report on Form 10-Q filed with the SEC on November 15, 2016).

4.9		Promissory Note dated October 4, 2016, made by ATRM Holdings, Inc. for the benefit of Lone Star Value Co-Invest I, LP (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on October 11, 2016).

4.10		Amended and Restated Promissory Note dated June 26, 2015, made by KBS Builders, Inc. for the benefit of Modular Fun 1, Inc. (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on June 29, 2015).

10.1 †		2003 Stock Incentive Plan (incorporated by reference to Exhibit 10.18 to our Annual Report on Form 10-K filed with the SEC on March 28, 2003).

10.2 †		2014 Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on November 23, 2016).

10.3 †		Form of Change of Control Agreement (incorporated by reference to Exhibit 10.19 to our Annual Report on Form 10-K filed with the SEC on March 30, 2004).

10.4 †		Form of Amendments to Change of Control Agreement (incorporated by reference to Exhibit 10.18 to our Annual Report on Form 10-K filed with the SEC on March 31, 2008).

10.5 †		Form of Amendment to Change of Control Agreement (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on February 6, 2013).

10.6		Registration Rights Agreement, dated as of May 9, 2014, by and between ATRM Holdings, Inc. (f/k/a Aetrium Incorporated) and Lone Star Value Investors, LP (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on May 15, 2014).

10.7		Securities Purchase Agreement, dated as of April 1, 2014, by and between ATRM Holdings, Inc. (f/k/a Aetrium Incorporated) and Lone Star Value Investors, LP (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on May 14, 2014).

10.8		Securities Purchase Agreement, dated as of July 21, 2014, by and between ATRM Holdings, Inc. (f/k/a Aetrium Incorporated) and Lone Star Value Co-Invest I, LP (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on July 25, 2014).

10.9		Securities Purchase Agreement, dated as of September 19, 2014, by and between ATRM Holdings, Inc. (f/k/a Aetrium Incorporated) and Lone Star Value Co-Invest I, LP (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on September 22, 2014).

10.10		Securities Purchase Agreement, dated as of February 25, 2015, by and between ATRM Holdings, Inc. (f/k/a Aetrium Incorporated) and Lone Star Value Investors, LP (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on February 27, 2015).

10.11		Securities Purchase Agreement, dated as of October 4, 2016, by and between ATRM Holdings, Inc. and Lone Star Value Co-Invest I, LP (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on October 11, 2016).

10.12		Agreement, dated as of June 26, 2015, by and among ATRM Holdings, Inc., KBS Builders, Inc., Modular Fun I, Inc., Modular Fun III, LLC, Modular Fun II, LLC, All-Set, LLC. Paris Holdings, LLC, and Robert H. Farnham, Jr. (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on June 29, 2015).

10.13		Loan and Security Agreement, dated as of February 23, 2016, by and among Gerber Finance Inc., KBS Builders, Inc., Maine Modular Haulers, Inc., and ATRM Holdings, Inc. (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on May 16, 2016).

10.14*		Loan and Security Agreement (Letter of Credit Loan), dated as of October 4, 2016, by and among ATRM Holdings, Inc., EdgeBuilder, Inc., Glenbrook Building Supply, Inc., KBS Builders, Inc., Maine Modular Haulers, Inc. and Gerber Finance Inc.

10.15*		Loan and Security Agreement (Acquisition Loan), dated as of October 4, 2016, by and among ATRM Holdings, Inc., EdgeBuilder, Inc., Glenbrook Building Supply, Inc., KBS Builders, Inc., Maine Modular Haulers, Inc. and Gerber Finance Inc.

21.1 *		Subsidiaries of the Company

23.1*		Consent of Boulay PLLP

31.1*		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer and Principal Financial Offer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase

101.LAB*		XBRL Taxonomy Extension Label Linkbase

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase

101.DEF*		XBRL Taxonomy Extension Definition Linkbase

* Filed herewith.

† Management contract or a compensatory plan or arrangement.

+ Filed with confidential portions omitted pursuant to a request for confidential treatment. The omitted portions have been separately filed with the SEC.

Exhibit 2.5

EXECUTION VERSION

ASSET PURCHASE AGREEMENT

BY AND AMONG

ATRM HOLDINGS, INC.,

EDGEBUILDER, INC.,

Glenbrook Building Supply, Inc.,

EDGEBUILDER WALL PANELS, INC.,

GLENBROOK LUMBER & SUPPLY, INC.

AND

THE INDIVIDUALS LISTED ON THE SIGNATURE PAGE HERETO

Dated as of October 4, 2016

Table of Contents

(continued)

	Page

ARTICLE I DEFINITIONS	1
1.1 Certain Definitions	1
ARTICLE II SALE AND PURCHASE OF ASSETS	8
2.1 Sale and Purchase of the Assets	8
2.2 Excluded Assets	10
2.3 Assumed Liabilities	10
2.4 Excluded Liabilities	10
2.5 Non-Assignable Assets	11
ARTICLE III CONSIDERATION	12
3.1 Consideration	12
3.2 Earn-out	12
3.3 Purchase Price Adjustment	13
3.4 Purchase Price Allocation	14
ARTICLE IV CLOSING	15
4.1 Closing	15
4.2 Deliverables	15
ARTICLE V REPRESENTATIONS AND WARRANTIES RELATING TO THE SELLERS AND THE BUSINESSES	15
5.1 Organization and Good Standing	15
5.2 Authorization of Agreement	15
5.3 Conflicts; Consents of Third Parties	16
5.4 Capitalization	16
5.5 Subsidiaries	17
5.6 Financial Information	17
5.7 Undisclosed Liabilities	17
5.8 Absence of Certain Developments	17
5.9 Taxes	17
5.10 Real Property	20
5.11 Tangible Personal Property; Title to and Sufficiency of Assets	21
5.12 Intellectual Property	22
5.13 Material Contracts	24
5.14 Employee Benefits Plans	24

5.15 Labor	25
5.16 Legal Proceedings	25
5.17 Compliance with Laws; Permits	26
5.18 Environmental Matters	26
5.19 Suppliers and Customers	27
5.20 Warranty Claims	28
5.21 Financial Advisors	28
5.22 Accounts Receivable; Bank Accounts	28
5.23 Books and Records	28
5.24 Transactions With Related Parties	28
5.25 Full Disclosure	29
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER	29
6.1 Organization and Good Standing	29
6.2 Authorization of Agreement	29
6.3 Conflicts; Consents of Third Parties	29
6.4 Litigation	30
6.5 Due and Valid Issuance	30
6.6 Financial Information	30
6.7 SEC Reports	30
6.8 Financial Advisors	30
ARTICLE VII COVENANTS	31
7.1 Further Assurances	31
7.2 Transfer Restrictions	31
7.3 Board Observer Rights	32
7.4 Incentive Compensation	32
7.5 Confidentiality	32
7.6 Preservation of Records	32
7.7 Publicity	32
7.8 Collection of Receivables	32
7.9 Tax Matters	33
7.10 Name Change	33
7.11 Non-Competition	33

ARTICLE VIII INDEMNIFICATION	35
8.1 Survival	35
8.2 Indemnification by the Sellers	36
8.3 Indemnification by Purchaser	37
8.4 Indemnification Procedures	37
8.5 Additional Indemnification Provisions	39
8.6 Tax Treatment of Indemnity Payments	40
8.7 Exclusive Remedy	40
ARTICLE IX MISCELLANEOUS	40
9.1 Expenses	40
9.2 Submission to Jurisdiction; Consent to Service of Process	41
9.3 Entire Agreement; Amendments and Waivers	41
9.4 Governing Law	41
9.5 Notices	41
9.6 Severability	42
9.7 Binding Effect; No Third-Party Beneficiaries; Assignment	43
9.8 Specific Performance	43
9.9 Counterparts	43

iii

Schedules

Schedule 2.1	Purchased Assets
Schedule 2.2	Excluded Assets
Schedule 2.3	Assumed Liabilities
Schedule 5.3	Required Consents
Schedule 5.6	Financial Statements
Schedule 5.10	Real Property
Schedule 5.11	Tangible Personal Property
Schedule 5.12	Intellectual Property
Schedule 5.13	Material Contracts
Schedule 5.14	Employee Benefits Plans
Schedule 5.16	Legal Proceedings
Schedule 5.17	Permits
Schedule 5.19	Suppliers and Customers
Schedule 5.22	Bank Accounts
Schedule 5.24	Transactions With Related Parties

Exhibits

Exhibit A – Seller Purchase Price Allotment

Exhibit B – Form of Bill of Sale and Assignment

Exhibit C – Form of Assignment and Assumption Agreement

Exhibit D – Form of Trademark Assignment

Exhibit E – Form of Copyright Assignment

Exhibit F – Form of Domain Name Assignment

Exhibit G – Form of Miscellaneous Assignment

Exhibit H – Security Agreement

Exhibit I – Allocation Statement

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”), dated as of October 4, 2016 (the “ Closing Date ”), is made by and among ATRM Holdings, Inc., a Minnesota corporation (“ ATRM ”), EdgeBuilder, Inc., a Delaware corporation (“ EB Purchaser ”), Glenbrook Building Supply, Inc., a Delaware corporation (“ GL Purchaser ”, and together with EB Purchaser, each, a “ Purchaser ” and, collectively, the “ Purchasers ”), EdgeBuilder Wall Panels, Inc., a Minnesota corporation (“ EdgeBuilder ”), Glenbrook Lumber & Supply, Inc., a Minnesota corporation (“ Glenbrook ”, and together with EdgeBuilder, each, a “ Seller ” and, collectively, the “ Sellers ”), and the individuals listed on the signature page hereto (each, a “ Principal ” and, collectively, the “ Principals ”).

W I T N E S S E T H:

WHEREAS, EdgeBuilder is engaged in the business of manufacturing prefabricated wood wall panels and other manufactured wood products and Glenbrook is engaged in the business of supplying lumber and other building materials and supplies to general contractors and building professionals (each, a “ Business ” and, collectively, the “ Businesses ”);

WHEREAS, the Principals are the direct owners of all of the issued and outstanding equity interests in the Sellers;

WHEREAS, the Purchasers are wholly-owned subsidiaries of ATRM; and

WHEREAS, EdgeBuilder desires to sell to EB Purchaser, and Glenbrook desires to sell to GL Purchaser, their respective portion of the Purchased Assets (as defined below), including their respective Business, and EB Purchaser desires to acquire the same from EdgeBuilder, and GL Purchaser desires to acquire the same from Glenbrook, upon the terms and subject to the conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and agreements hereinafter contained, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1 Certain Definitions .

(a) For purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.1 :

“ Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, and the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.

“ Books and Records ” means all books and records of, or related to, each Business, wherever situated, including books, ledgers, files, reports, certificates, documents, plans, operating records, data, manuals, price lists, mailing lists, email lists, lists of customers, directories, sales and promotional materials, purchasing materials, inventory records, personnel records, research, design and product and/or services development files, accounting records and all related documentation, in each case, irrespective of the media in which such books and records are stored.

“ Business Day ” means any day of the year on which national banking institutions in St. Paul, Minnesota are open to the public for conducting business and are not required or authorized to close (for avoidance of doubt, excluding weekends).

“ Code ” means the Internal Revenue Code of 1986, as amended, together with the rules and regulations promulgated thereunder.

“ Contract ” means any written or oral agreement, contract, purchase or sale order, license, indenture, note, mortgage, guarantee, bond, lease, commitment, easement, right of way, arrangement or understanding.

“ Environment ” means soil, land surface or subsurface strata, surface waters (including navigable waters, ocean waters, streams, ponds, drainage basins, and wetlands), groundwater, drinking water supply, stream sediments, ambient air (including the air within buildings and natural or man-made structures above or below ground), plant and animal life, and any other environmental medium or natural resource.

“ Environmental Law ” means any Law, and any Order or binding agreement with any Governmental Body relating to (i) pollution (or the cleanup thereof) or the generation, manufacturing, processing, production, use, treatment, transportation, storage, handling, recycling, reclamation, disposal, or remediation of any Hazardous Substance or the Release of Hazardous Substances, or protection, preservation or restoration of the Environment, (ii) solid, gaseous or liquid waste generation, handling, treatment, storage, disposal or transportation, (iii) human health and safety with respect to exposures to and management of Hazardous Substances, or (iv) occupational health and safety. The term “Environmental Law” includes, without limitation, the following (including their implanting regulations and any state analogs): the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq. and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq.

“ Environmental Permits ” means all Permits required under or issued pursuant to any Environmental Law.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, together with the rules and regulations promulgated thereunder.

“ Expenses ” means any and all notices, actions, suits, proceedings, claims, demands, assessments, judgments, awards, settlements, costs, charges, interest, penalties, fees (including reasonable investigation fees) and expenses, including reasonable attorneys’ and other professionals’ fees and disbursements.

“ GAAP ” means generally accepted accounting principles in the United States of America in effect from time to time, applied consistently with past practice.

“ Governmental Body ” means any government or governmental or regulatory body thereof, or political subdivision thereof, whether federal, state, local or foreign, or any agency, instrumentality or authority thereof, or any court or arbitrator (public or private).

“ Hazardous Substance ” means any substance presently listed, defined, designated or classified as hazardous, toxic, radioactive, or dangerous, or otherwise regulated, under any Environmental Law. Hazardous Substance includes any substance to which exposure is regulated by any Governmental Body or any Environmental Law including any toxic waste, pollutant, contaminant, hazardous substance, toxic substance, hazardous waste, special waste, industrial substance or petroleum or any derivative or byproduct thereof, radon, radioactive material, asbestos, or asbestos containing material, urea formaldehyde, foam insulation or polychlorinated biphenyls.

“ Indemnification Claim ” means any claim in respect of which payment may be sought under Article VIII of this Agreement.

“ Intellectual Property ” means all of the following in any jurisdiction throughout the world: (i) all patents (including, without limitation, utility patents, design patents, industrial designs, plant patents, inventors’ certificates and utility models), patent applications (including docketed patent disclosures awaiting filing, reissues, divisions, continuations, continuations-in-part and extensions), and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof (collectively, “ Patents ”); (ii) all trademarks, service marks, trade names, service names, brand names, trade dress rights, logos, slogans, Internet domain names and individual, corporate, business and product names, together with all translations, adaptations, derivations, and combinations thereof, together with the goodwill associated with any of the foregoing, and all applications, registrations and renewals thereof (collectively, “ Marks ”); (iii) all copyrightable works, all copyrights and applications, registrations and renewals therefor, works of authorship and mask work rights (collectively, “ Copyrights ”); (iv) all trade secrets and confidential business information (including ideas, research and development, knowhow, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, lists of past and present customers, pricing and cost information, and business and marketing plans and proposals); (v) all Internet domain names, websites and social media accounts (including but not limited to Facebook, Twitter, Instagram, Tumblr, and Linkedin), together with login and password information, and rights in the telephone numbers, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith; (vi) all Software (including source code, executable code, data, databases, and related documentation) and Technology; (vii) all advertising and promotional materials; (viii) all other proprietary rights; and (ix) all copies and tangible embodiments of any of the foregoing in any form or medium whatsoever.

“ IRS ” means the Internal Revenue Service.

“ Key Employees ” means Scott Jachow, Erik Soderland and Michael Klefstad.

“ Knowledge of the Sellers ” means (i) the actual knowledge of any Principal or any of the Key Employees and (ii) the knowledge that any Principal or any of the Key Employees, after reasonable investigation, would have obtained in the conduct of their business.

“ Law ” means all foreign, federal, state and local laws, common law, statutes, codes, ordinances, rules, regulations, resolutions and Orders.

“ Legal Proceeding ” means any judicial, administrative or arbitral action, notice, suit, claim, inquiry, investigation or proceeding (public or private) by or before a Governmental Body, Taxing Authority or arbitrator.

“ Liability ” means any debt, liability or obligation (whether direct or indirect, absolute or contingent, accrued or unaccrued, know or unknown, liquidated or unliquidated, or due or to become due) and including all costs and expenses relating thereto.

“ Lien ” means any lien, encumbrance, pledge, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal, easement, title defect, servitude, covenant, transfer restriction, encroachment, reservation, municipal bond, irregularities of title, or any other restriction or limitation of any kind.

“ Material Adverse Effect ” means such facts, circumstances, events, or changes that are, individually or in the aggregate, materially adverse to the (i) the business, assets, prospects, properties, results of operations, condition (financial or otherwise) or performance of any Seller, any Business or the Purchased Assets or (ii) the ability of any Seller to consummate any of the transactions contemplated by this Agreement, but shall not include (x) any change affecting economic or financial conditions generally or (y) any change affecting any Seller’s industry as a whole, provided such change does not disproportionately affect such Seller.

“ Order ” means any order, injunction, judgment, decree, determination, ruling, writ, assessment or arbitration or other award of a Governmental Body.

“ Ordinary Course of Business ” means the ordinary and usual course of business of each Seller related to its respective Business and consistent with past practices and applicable Law.

“ Permits ” means any approvals, authorizations, consents, licenses, permits, certificates, waivers and similar rights obtained, or required to be obtained, from a Governmental Body.

“ Permitted Exceptions ” means statutory Liens for current Taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings, provided an appropriate reserve is established therefor.

“ Person ” means any individual, corporation, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Body or other entity.

“ Pre-Closing Tax Period ” means any Tax period ending on or before the Closing Date.

“ Prior Real Property ” means all interests in real property formerly owned by any Seller or any of its predecessors (together with all buildings, structures and other improvements and fixtures located on or under such real property and all easements, rights and other appurtenances to such real property) and (ii) all property formerly leased, occupied or operated by any Seller or any of its predecessors.

“ Release ” means any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing, dumping, dispersal or leaching of a Hazardous Substance into the Environment, including the abandonment or discarding of barrels, containers, and other receptacles containing Hazardous Substances, or as otherwise defined under Environmental Laws.

“ Schedules ” means the disclosure schedules of the Sellers and the Purchasers, as applicable, accompanying this Agreement.

“ Seller IP ” means the Intellectual Property used by any of the Sellers, or necessary for use, in the conduct of any Business as currently conducted and as currently contemplated to be conducted.

“ Seller Tax ” means any Tax, if and to the extent that any Seller is or may be potentially liable under applicable Law, under contract or on any other grounds (including, but not limited to, as a transferee or successor, under Code Section 6901 or Treasury Regulation Section 1.1502-6, as a result of any Tax sharing or other agreement, or by operation of law) for any such Tax).

“ Seller Tax Return ” means any return, election, declaration, report, schedule, information return, document, information, opinion, statement, or any amendment to any of the foregoing (including, without limitation, any consolidated, combined or unitary return) filed or required to be filed with any Taxing Authority, if, in any manner or to any extent, relating to or inclusive of the Seller or any Seller Tax.

“ Side Letter ” means that certain side letter dated the date hereof by and among the Sellers, the Principals and ATRM.

“ Software ” means any and all (i) computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, (ii) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (iii) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing, screens, user interfaces, report formats, firmware, development tools, templates, menus, buttons and icons, and (iv) all documentation including user manuals and other training documentation related to any of the foregoing.

“ Straddle Period ” means any Tax period beginning before the Closing Date and ending after the Closing Date.

“ Subsidiary ” means any Person of which a majority of the outstanding voting securities or other voting equity interests are owned, directly or indirectly, by any Seller or with respect to which any Seller, directly or indirectly, has the power to elect a majority of such Person’s board of directors or similar governing body or otherwise to direct the business and policies of such Person.

“ Tax Return ” means any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Taxing Authority in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Law relating to any Tax.

“ Taxes ” means (i) all federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments, including, without limitation, all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, customs duties, fees, assessments and charges of any kind whatsoever, (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any Taxing Authority in connection with any item described in clause (i), and (iii) any transferee liability in respect of any items described in clauses (i) and/or (ii).

“ Taxing Authority ” means any (i) nation, state, county, city, town, village, district, or other jurisdiction of any nature, (ii) federal, state, local, municipal, foreign, or other government, (iii) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal), (iv) multi-national organization or body, or (v) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.

“ Technology ” means, collectively, all trade secrets, designs, formulae, algorithms, procedures, methods, techniques, ideas, know-how, research and development, technical data, programs, subroutines, tools, materials, specifications, processes, inventions (whether patentable or unpatentable and whether or not reduced to practice), apparatus, creations, improvements and other similar materials, and all recordings, graphs, drawings, reports, analyses, and other works of authorship, and other tangible embodiments of the foregoing, in any form, whether or not specifically listed herein, and all related technology used by any Seller in connection with, or that relate to, any Business.

“ Transaction Documents ” means (i) this Agreement, (ii) the bill of sale with respect to the Purchased Assets, in the form attached hereto as Exhibit B , (iii) the assignment and assumption agreement with respect to the Assumed Liabilities, in the form attached hereto as Exhibit C , (iv) the trademark assignment, in the form attached hereto as Exhibit D , (v) the copyright assignment, in the form attached hereto as Exhibit E , (vi) the domain name assignment, in the form attached hereto as Exhibit F , (vii) the miscellaneous assignment, in the form attached hereto as Exhibit G , (viii) the Side Letter, (ix) each Seller’s income tax withholding form, in the form provided previously to the Purchasers, (x) the Certification of Non-Foreign Status (a/k/a FIRPTA Affidavit), in the form previously provided to the Purchasers, (xi) the security agreement (the “ Security Agreement ”) attached hereto as Exhibit H , (xii) any other document or instrument to be executed and delivered on or prior to the Closing in connection with the transactions contemplated by this Agreement or any of the other Transaction Documents, as reasonably requested by Purchaser, and (xiii) any Schedule, Annex or Exhibit to any of the foregoing.

(b) Other Definitional and Interpretive Matters . Unless otherwise expressly provided, for purposes of this Agreement, the following rules of interpretation shall apply:

(i) Calculation of Time Period . When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day.

(ii) Dollars . Any reference in this Agreement to $ shall mean U.S. dollars.

(iii) Exhibits/Schedules . The Exhibits and Schedules to this Agreement are hereby incorporated and made a part hereof and are an integral part of this Agreement. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Schedule or Exhibit but not otherwise defined therein shall be defined as set forth in this Agreement. The specific disclosures set forth in the Schedules shall be organized to correspond to a specific section reference in this Agreement to which the qualifying and correspondingly numbered disclosure relates, together with appropriate cross references when disclosure is applicable to other sections of this Agreement, and any disclosure set forth in one section of the Schedules shall not apply to, and shall not be deemed to be disclosed for purposes of, any other section of the Schedules without a specific cross-reference to such other section to which such disclosure is also applicable .

(iv) Gender and Number . Any reference in this Agreement to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa.

(v) Headings . Thope provision of a Table of Contents, the division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement. All references in this Agreement to any “ Section ” are to the corresponding Section of this Agreement unless otherwise specified.

(vi) Herein . The words “ herein ,” “ hereinafter ,” “ hereof ,” and “ hereunder ” used herein refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires.

(vii) Including . The word “including” or any variation thereof means “ including, without limitation ” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.

(viii) Made Available . An item shall be considered “made available” to the Purchasers, to the extent such phrase appears in this Agreement, only if such item has been provided in writing to the Purchasers.

(ix) Reflected On or Set Forth In . An item arising with respect to a specific representation or warranty shall be deemed to be “ reflected on ” or “ set forth in ” a balance sheet or financial statements or information, to the extent any such phrase appears in such representation or warranty, if (A) there is a reserve, accrual or other similar item underlying a number on such balance sheet or financial statements or information that relate to the subject matter of such representation, (B) such item is otherwise specifically set forth on the balance sheet or financial statements or information or (C) such item is reflected on the balance sheet or financial statements or information and is specifically set forth in the notes thereto.

(c) The parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

ARTICLE II

SALE AND PURCHASE OF ASSETS

2.1 Sale and Purchase of the Assets . Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, each of EdgeBuilder and Glenbrook shall sell, assign, transfer, convey and deliver to each of EB Purchaser and GL Purchaser, respectively, and each of EB Purchaser and GL Purchaser shall purchase and acquire from each of EdgeBuilder and Glenbrook, respectively, free and clear of all Liens other than Permitted Exceptions, all right, title and interest of each Seller in and to all of its properties, assets, Contracts and rights, of every kind and description and wherever located, related to, used in or intended for use in connection with any Business as currently conducted or currently contemplated to be conducted, other than the Excluded Assets (as defined below) (collectively, the “ Purchased Assets ”), including without limitation the following:

(a) all fixed assets, including, without limitation, all furniture, fixtures, equipment, machinery, tools, vehicles, office equipment, supplies, computers, telephones and other tangible personal property wherever located, including, without limitation, those set forth on Schedule 2.1(a) ;

(b) all inventory, stock in trade, merchandise, goods, supplies and other products, raw materials, work in progress, finished products, supply and packaging items, promotional materials and similar items, wherever located, including, without limitation, those set forth on Schedule 2.1(b) ;

(d) all Contracts set forth on Schedule 2.1(d) (the “ Assumed Contracts ”) and all customer deposits and prepayments associated with any Assumed Contracts (the “ Customer Deposits ”), including, without limitation, those Customer Deposits set forth on Schedule 2.1(d) ;

(e) all rights under or pursuant to all representations, warranties, guarantees and indemnities made by any third party related to any Purchased Assets;

(f) all insurance proceeds, condemnation proceeds or rights, transferable or assignable claims for insurance proceeds, and any other claims, deposits (including security deposits), prepayments, prepaid assets, prepaid expenses, prepaid revenues, refunds, causes of action, rights of recovery, rights of setoff and rights of recoupment (including any such item related to the payment of Taxes);

(g) all of the goodwill and going concern value relating to any Business or any of the Purchased Assets;

(h) all of the Seller IP, including but not limited to all of the right, title and interest in and to the names EdgeBuilder Wall Panels and Glenbrook Lumber & Supply, and all derivations and abbreviations thereof; and

(i) all other intangible and tangible assets, including, without limitation, all Books and Records, computer hardware, Software and electronic data, all supplier information, lists and correspondence, all customer information, lists and correspondence, all licensee information, lists and correspondence, equipment logs, operating guides and manuals, all sales records, all research, statistical, production, marketing and promotional materials, records, files, reports and other documents and data, all business post office boxes and business telephone listings, all research results and other know-how, and all other materials, records, files and data, in whatever form contained.

2.2 Excluded Assets . Except as otherwise set forth in Section 2.1 , from and after the Closing, the Sellers shall retain all of their respective, existing right, title and interest in and to (a) all cash and cash equivalents, (b) all Contracts that are not Assumed Contracts, (c) all receivables arising from the operation of the Business prior to the Closing, (d) any Seller Benefit Plan and the assets attributable thereto and (e) all assets, rights, privileges, interests, licenses and properties set forth on Schedule 2.2 (collectively, the “ Excluded Assets ”).

2.3 Assumed Liabilities . Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, the Purchasers shall assume and pay, honor, perform and discharge when due only the following liabilities (collectively, the “ Assumed Liabilities ”) and no others:

(a) all executory obligations under the Assumed Contracts (i) arising after the Closing, (ii) not related to, or arising out of, any breach of any Assumed Contract occurring or existing prior to the Closing, and (iii) not related to, or arising out of, any fact, event, act, omission, circumstance or condition occurring or existing prior to the Closing; and

(b) the paid time off amounts of the Sellers’ employees listed on Schedule 2.3 (the “ Assumed PTO ”).

2.4 Excluded Liabilities . Notwithstanding anything to the contrary in this Agreement, the Purchasers shall not assume or in any way be responsible for, and the Sellers shall remain obligated to pay, honor, perform and discharge, all of the respective Liabilities of the Sellers (other than the Assumed Liabilities) (collectively, the “ Excluded Liabilities ”), including, without limitation:

(a) any Liabilities arising out of or relating to any Seller’s ownership, use or operation of any Business and the Purchased Assets, in each case prior to the Closing arising by operation of law under any common law or statutory doctrine (other than the Assumed Liabilities);

(b) any Liabilities based upon, relating to, arising under or with respect to the Excluded Assets or the ownership, operation or use of any businesses of any Seller or any of its Affiliates, other than the Businesses, whether before, at or after the Closing;

(d) any Liabilities directly or indirectly arising out of or related to any breach of Contract occurring or existing prior to the Closing;

(e) any liabilities or obligations for (i) Taxes relating to the Businesses, the Purchased Assets or the Assumed Liabilities for the Pre-Closing Tax Period, (ii) Taxes relating to the Businesses, the Purchased Assets or the Assumed Liabilities for the portion of any Straddle Period ending on and including the Closing Date and (iii) any other Taxes of any Seller or any of its equity holders or Affiliates relating to any Business;

(f) any Liabilities of any Seller based upon, relating to, or arising under or with respect to (i) any Seller Benefit Plan, (ii) the employment or termination of employment of (x) any employee of any Seller employed by the Purchasers following the Closing with respect to periods on or prior to the Closing and (y) any current or former employee, consultant, independent contractor, leased employee or other agent who is not employed by the Purchasers following the Closing at any time, and (iii) workers’ compensation claims, unemployment insurance premiums or any claims arising under any federal, state or local tax withholding, employment, labor or discrimination Laws of (x) any employee employed by the Purchasers following the Closing which relate to events occurring on or prior to the Closing and (y) any current or former employee, consultant, independent contractor, leased employee or other agent who is not employed by the Purchasers following the Closing which relate to events occurring at any time;

(g) any Liability based upon, arising under or with respect to any Environmental Law, including any Liability of any Seller in any way pertaining to or arising from the acts, omissions or strict liability of any predecessor of any Seller;

(h) any Liability based upon, arising under or with respect to any matter disclosed or required to be disclosed in Schedule 5.16 (Legal Proceedings) ; and

(i) any Liability based upon, arising under or with respect to any warranty given or sold by any Seller, regardless of whether any warranty claim has been made to date.

2.5 Non-Assignable Assets . Notwithstanding anything in this Agreement to the contrary, to the extent that the assignment of any Assumed Contract or the transfer of any property or asset (including but not limited to any Permit) requires the consent of any other Person, or shall be subject to any option by any other Person by virtue of a request for permission to assign or transfer, or by reason of or pursuant to any transfer to the Purchasers, this Agreement shall not constitute an agreement to assign any such Assumed Contract, property or asset or any claim or right or any benefit arising thereunder or resulting therefrom if any such attempted assignment would constitute a default thereunder or in any way adversely affect the rights of the Purchasers thereunder. If consent to the assignment or transfer of any such Assumed Contract, property or asset is not obtained, or if an attempted assignment thereof would be ineffective or would affect the rights of the Purchasers thereunder, then, at the Purchasers’ request, the Sellers shall cooperate with the Purchasers in any reasonable arrangement designed to provide to the Purchasers the benefits under such Assumed Contracts, properties and assets, including without limitation, enforcement for the account of the Purchasers of any and all rights of any Seller against the other party thereto arising out of the breach or cancellation thereof by such party or otherwise; provided that such cooperation by the Sellers shall not cause the applicable Seller to violate any terms of such Assumed Contract; provided , further , that the Purchasers shall assume all of the post-Closing liabilities of the applicable Seller under such Assumed Contracts (other than Excluded Liabilities) to the extent to which the Purchasers receives the post-Closing benefits thereof.

ARTICLE III

CONSIDERATION

3.1 Consideration .

(a) The aggregate consideration for the Purchased Assets shall consist of the following, subject to adjustment pursuant to Section 3.4 (together, the “ Purchase Price ”): (i) Three Million Dollars ($3,000,000) less the amount of Assumed PTO in cash (the “ Closing Payment ”); (ii) a total of One Million Dollars ($1,000,000) in deferred cash payments (the “ Deferred Payments ”); (iii) the Earn-out Amount (as defined below), if any; and (iv) One Hundred Thousand (100,000) shares (the “ Shares ”) of ATRM’s common stock, par value $0.001 per share (the “ Equity Payment ”); plus the Purchasers’ assumption of the Assumed Liabilities.

(b) The Purchase Price shall be paid as follows: (i) at the Closing, the Purchasers shall (A) pay to each Seller its allotted Closing Payment by wire transfer of immediately available United States funds into such accounts of the Sellers as shall have been designated by the Sellers in writing to the Purchasers at least two (2) Business Days in advance of the Closing Date and (B) issue to each Seller its allotted Shares which comprise the Equity Payment; (ii) the Purchasers shall pay the Deferred Payments in four equal payments of Two Hundred Fifty Thousand Dollars ($250,000) in cash on January 1, 2017, April 1, 2017, July 1, 2017 and October 1, 2017, by wire transfer of immediately available United States funds into such accounts of the Sellers as shall have been designated by the Sellers in writing to the Purchasers at least two (2) Business Days in advance of the applicable payment date; and (iii) the Earn-out Amount, if any, shall be paid in accordance with Section 3.3 . Each Seller’s allotted portion of the Purchase Price is set forth opposite such Seller’s name on Exhibit A hereto.

(c) Additionally, at the Closing, the Sellers shall pay to the Purchasers by check the Sellers’ good faith determination of the amount of the Customer Deposits as of the Closing (the “ Customer Deposits Payment ”). The Sellers and the Purchasers agree to cooperate fully with each other after the Closing to determine the actual amount of the Customer Deposits as of the Closing (the “ Closing Customer Deposits ”) promptly following the Closing. If the Customer Deposits Payment exceeded the Closing Customer Deposits, the Purchasers shall pay the difference to the Sellers in cash, or if the Closing Customer Deposits exceeded the Customer Deposits Payment, the Sellers shall pay the difference to the Purchasers in cash. Any such payment shall be made promptly following the determination of the amount thereof.

3.2 Earn-out .

(a) For the twelve (12) month period commencing October 1, 2016, and ending twelve (12) calendar months later (the “ Earn-out Period ”), the Sellers will be entitled to an amount equal to the product of (x) the percentage obtained by dividing the Gross Profit (as defined below) achieved by the Businesses during the Earn-out Period by $3,400,000 (the “ Gross Profit Target ”), multiplied by (y) $1,000,000 (the “ Earn-out Amount ”); provided , however , (i) if the percentage under clause (x) above is less than 65%, no Earn-out Amount will be due, and (ii) the maximum Earn-out Amount payable is $1,000,000. For example, if the Gross Profit achieved by the Businesses for the Earn-out Period is $3,060,000, then the Sellers would receive an Earn-out Amount of $900,000 (90% of $1,000,000), but if the Gross Profit achieved by the Businesses for the Earn-out Period is less than $2,210,000, no Earn-out Amount will be due. Additionally, the Purchasers shall pay to the Sellers interest on the Earn-out Amount at an annualized rate of five percent (5%) from the Closing Date through the date of payment of the Earn-out Amount in accordance with Section 3.3(c) .

(b) For purposes of the calculation of the Earn-out Amount, “ Gross Profit ” means Sales less Cost of Goods Sold (each as determined in accordance with the Sellers’ historical accounting practices).

(c) The payment of the Earn-out Amount and any interest thereon, if any, shall be made in cash in immediately available funds, less any amount offset under Section 8.5(e) , within forty-five (45) days after the completion of the calendar month in which the Earn-out Period ends. The Earn-out Amount and any interest thereon, if any, will be paid in accordance with the percentages set forth opposite each Seller’s name in the column titled “Earn-out Percentage” on Exhibit A hereto. On or prior to the date of such payment, the Purchasers also shall provide to the Sellers a statement setting forth in reasonable detail the Purchasers’ calculation of the Gross Profit achieved by the Businesses for the Earn-out Period and the Earn-out Amount and interest thereon (the “ Earn-out Statement ”). For thirty (30) days after the date of delivery of the Earn-out Statement, the Sellers and their accountants will be given reasonable access to inspect and make copies of the Purchasers’ relevant books and records during reasonable business hours for the purpose of verifying the Earn-Out Statement.

(d) The Businesses will be operated as separate legal entities (separate from ATRM and its existing subsidiaries, including KBS Builders, Inc.) through the end of the Earn-out Period. Except for the immediately preceding sentence, this Agreement shall not impose any restrictions on the operation of the Businesses after the Closing Date; provided, that the Purchasers shall not, directly or indirectly, take any actions in bad faith that would have the purpose of reducing the Earn-out Amount. The Purchasers will operate the Businesses in good faith.

(e) The parties hereto understand and agree that, while payment of the Earn-out Amount shall be secured under the terms of the Security Agreement, (i) the contingent rights to receive the Earn-out Amount shall not be represented by any form of certificate or other instrument, are not transferable, except by operation of Laws relating to descent and distribution, divorce and community property, and do not constitute an equity or ownership interest in the Purchasers and (ii) the Sellers shall not have any rights as securityholders of the Purchasers as a result of their contingent right to receive the Earn-out Amount hereunder.

3.3 Purchase Price Adjustment .

(a) Within sixty (60) days after the Closing, the Sellers shall deliver to the Purchasers a pro forma balance sheet prepared as of the Closing Date (the “ Pro Forma Balance Sheet ”). The Pro Forma Balance Sheet shall (i) be prepared from, and be in accordance with, the books and records of the Sellers, (ii) be prepared consistent with the Sellers’ historical accounting practices and (iii) present fairly in all material respects the financial position of the Sellers as of the Closing Date. Additionally, the Pro Forma Balance Sheet shall identify each item of the Sellers’ inventory and prepaid expenses included in the Purchased Assets (the “ Inventory and Prepaid Expenses ”) and the Sellers’ good faith determination of the fair value of each such item as of the Closing Date.

(b) The Purchasers shall give written notice to the Sellers of any objection to the Sellers’ determination of Inventory and Prepaid Expenses set forth in the Pro Forma Balance Sheet (the “ Objection Notice ”) within thirty (30) days after the Purchasers’ receipt of the Pro Forma Balance Sheet. The Objection Notice shall specify in reasonable detail the items of Inventory and Prepaid Expenses to which the Purchasers object and shall provide a summary of reasons for such objections. In the event the Purchasers do not deliver the Objection Notice within such thirty (30) day period, the Sellers’ determination of Inventory and Prepaid Expenses as set forth in the Pro Forma Balance Sheet shall be deemed to be final and binding on the Purchasers.

(c) The Sellers and the Purchasers shall use good faith efforts to resolve any dispute involving any matter set forth in the Objection Notice. If the parties are unable to resolve any dispute involving any matter set forth in the Objection Notice within thirty (30) days after receipt by the Sellers thereof, such dispute shall be referred for decision to a nationally recognized independent accounting firm chosen by the Purchasers and reasonably acceptable to the Sellers (the “ Accounting Firm ”) to decide the dispute within thirty (30) days of such referral. The scope of the Accounting Firm’s engagement shall be limited to the resolution of the disputed items described in the Objection Notice that the Sellers and the Purchasers are unable to resolve, and the recalculation, if any, of the sum of the Inventory and Prepaid Expenses as of the Closing Date in light of such resolution. The decision by the Accounting Firm with respect to such disputed items shall be final and binding on the Sellers and the Purchasers and shall be based upon a review of any relevant books and records or other documents requested by the Accounting Firm. The cost of retaining the Accounting Firm shall be borne equally by the Sellers and the Purchasers.

(d) If the sum of the Inventory and Prepaid Expenses as of the Closing Date, as finally determined, exceeds $700,000, then the Purchasers shall pay the difference to the Sellers, in accordance with the percentages set forth opposite each Seller’s name in the column titled “IPE Percentage” on Exhibit A hereto, within fifteen (15) days after its final determination by wire transfer of immediately available United States funds into such accounts as shall have been designated by the Sellers in writing to the Purchasers.

(e) If the sum of the Inventory and Prepaid Expenses as of the Closing Date, as finally determined, is less than $700,000, then the Sellers shall pay the difference to the Purchasers within fifteen (15) days after its final determination by wire transfer of immediately available United States funds into such account or accounts as shall have been designated by the Purchasers in writing to the Sellers. At the Purchasers’ discretion, the Purchasers may accept payment for all or a portion of such amount by deducting such amount from the amount of the Deferred Payments or the Earn-out Amount payable by the Purchasers to the Sellers.

3.4 Purchase Price Allocation . The Purchasers and Sellers have prepared and agreed to the schedule attached hereto as Exhibit I (the “ Allocation Statement ”) allocating the consideration payable to the Sellers among the Purchased Assets in accordance with Section 1060 of the Code and the Treasury Regulations promulgated thereunder (the “ Allocation ”). The Purchasers and the Sellers shall report, act and file Tax Returns (including, but not limited to, IRS Form 8594) in all respects and for all purposes consistent with the Allocation. None of the Purchasers or the Sellers shall take any position (whether in audits, tax returns, or otherwise) that is inconsistent with the Allocation unless required to do so by applicable Law.

ARTICLE IV

CLOSING

4.1 Closing . On the terms and subject to the conditions set forth in this Agreement, the closing of the sale and purchase of the Purchased Assets provided for in Section 2.1 hereof and the assumption of the Assumed Liabilities provided for in Section 2.3 hereof (the “ Closing ”) shall take place remotely via the exchange of electronic copies of documents, and shall be deemed to have taken place simultaneously with the execution and delivery of this Agreement and the satisfaction of the obligations of the parties under Section 4.2 .

4.2 Deliverables . At the Closing:

(a) each of the Sellers shall have executed and delivered to the Purchasers, and the Purchasers shall have executed and delivered to the Sellers, each of the Transaction Documents to which it is a party;

(b) the Sellers shall have delivered to the Purchasers (i) the Books and Records, (ii) the Required Consents (as defined below), (iii) evidence, satisfactory to the Purchasers, of the repayment of all of the Sellers’ existing indebtedness and the release of all Liens upon any of the Purchased Assets, and (iv) evidence, satisfactory to the Purchasers, of the termination of the Real Property Leases;

ARTICLE V

REPRESENTATIONS AND WARRANTIES
RELATING TO THE SELLERS AND THE BUSINESSES

The Sellers hereby jointly and severally represent and warrant to the Purchasers as follows:

5.1 Organization and Good Standing . Each Seller is duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it was organized and has all requisite power and authority to own, lease and operate its properties and assets and carry on its business. Each Seller is duly qualified or authorized to do business and is in good standing under the Laws of each jurisdiction in which it owns, leases or operates its properties and assets and each other jurisdiction in which the conduct of its business or the ownership of its properties and assets requires such qualification or authorization. Each Seller has made available to the Purchasers a true and complete copy of the certificate or articles of incorporation, organization or formation (as applicable) of such Seller, as currently in effect, certified as of a recent date by the Secretary of State of the jurisdiction in which it was organized, and a true and complete copy of the bylaws of such Seller, as currently in effect.

5.2 Authorization of Agreement . Each Seller has all requisite power and authority to execute and deliver this Agreement and each other Transaction Document to be executed by it in connection with the consummation of the transactions contemplated by this Agreement (collectively, the “ Seller Documents ”), to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Seller Documents, the performance of each Seller’s obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all requisite action on the part of each Seller. This Agreement and each of the Seller Documents has been duly and validly executed and delivered by each Seller, and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) constitutes the legal, valid and binding obligation of each Seller, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

5.3 Conflicts; Consents of Third Parties .

(a) Except as set forth on Schedule 5.3(a) (the “ Required Consents ”), none of the execution or delivery by any Seller of this Agreement or any of the other Seller Documents, the consummation of any of the transactions contemplated hereby or thereby, or compliance by any Seller with any of the provisions hereof or thereof does or will conflict with, or result in any violation of, or constitute a breach of or a default (with or without notice or lapse of time, or both) under, or result in the loss of any benefit under, or permit the acceleration of any obligation under, or give rise to a right of termination, modification or cancellation under, or result in the creation of any Lien, other than Permitted Exceptions, upon any of the Purchased Assets under, any provision of (i) the certificate or articles of incorporation, organization or formation, bylaws or comparable organizational or governing documents of any Seller; (ii) any Assumed Contract or Permit listed on Schedule 5.17 to which a Business or any Seller is a party or by which any Seller or any of the Purchased Assets is bound; (iii) any Order of any Governmental Body applicable to a Business or any Seller or by which any Seller or any of the Purchased Assets is bound; or (iv) any applicable Law.

(b) No consent, waiver, approval, Order, Permit or authorization of, or declaration, registration or filing with, or notification to, any Person or Governmental Body is required on the part of any Seller in connection with the execution, delivery or performance of this Agreement or any of the other Seller Documents, the compliance by any Seller with any of the provisions hereof or thereof, or the consummation of any of the transactions contemplated hereby or thereby.

5.4 Capitalization .

(a) The Principals are the direct owners of all of the issued and outstanding equity interests in the Sellers (the “ Interests ”). The Interests are free and clear of any and all Liens.

(b) Except as set forth in this Agreement: (i) no person has any right to purchase any capital stock, membership interest, capital interest, profits interest, economic interest, voting rights, or ownership of any Seller or any of the Interests; (ii) other than the Interests, there are no outstanding shares of capital stock, membership interests, capital interests, profits interests, economic interests, voting rights or other ownership interests in any Seller, and no options, warrants, rights, calls or commitments with respect thereto; and (iii) there are no contracts, arrangements, commitments or restrictions relating to the transfer, sale or purchase of any of the Interests.

5.5 Subsidiaries . None of the Sellers has any Subsidiaries, and none of the Sellers owns, directly or indirectly, any equity interest in any other Person.

5.6 Financial Information .

(a) The financial statements provided by the Sellers to the Purchasers and attached to Schedule 5.6 (the “ Financial Statements ”) are copied from the books and records of the Sellers kept in the Ordinary Course of Business and are true, complete and correct in all respects. Except as set forth in the notes thereto, the absence of footnote disclosure and normal year-end adjustments on any interim Financial Statements and as disclosed in Schedule 5.6 , each of the Financial Statements (i) has been prepared from, and is in accordance with, the books and records of the Sellers, (ii) has been prepared in accordance with the Sellers’ historical accounting practices and (iii) presents fairly in all material respects the financial position, results of operations and cash flows of the Sellers as at the dates and for the periods indicated therein. For the purposes hereof, the balance sheet of the Sellers as at July 31, 2016 is referred to as the “ Balance Sheet ” and July 31, 2016 is referred to as the “ Balance Sheet Date ”. The Sellers make no representation as to the future viability or profitability of any Business.

(b) The Sellers have made available to the Purchasers and Schedule 5.6 sets forth a current forecast (the “ Seller Forecast ”) estimating the Sellers’ revenues, capital expenditures and expenses for the fiscal years ending December 31, 2016 and 2017. The estimates contained in the Seller Forecast have been prepared in good faith and represent the Sellers’ reasonable best estimate of the matters set forth therein as of the Closing Date.

5.7 Undisclosed Liabilities . None of the Sellers has any Liabilities of any kind or nature, except for Liabilities (i) set forth in the Financial Statements and (ii) incurred in the Ordinary Course of Business after the Balance Sheet Date that, both individually and in the aggregate, involve amounts of less than $10,000.

5.8 Absence of Certain Developments . Since January 1, 2016, (i) each Seller has conducted the Businesses only in the Ordinary Course of Business, (ii) there has not been any event, change, occurrence or circumstance that, individually or in the aggregate, has had, or would reasonably be expected to have, a Material Adverse Effect, and (iii) there has not been any uninsured damage, destruction, loss or casualty to any property or assets of any Business or any Seller.

5.9 Taxes .

(a) Each Seller has:

(i) duly and timely filed, or caused to be filed, in accordance with applicable Law all Seller Tax Returns required to be filed by or with respect to each Seller, each of which is true, correct and complete,

(ii) duly and timely paid in full, or caused to be paid in full, all Seller Taxes due and payable with respect to each Seller on or prior to the Closing Date, and

(iii) with respect to each Seller, properly accrued on its books and records a provision for the payment of all Seller Taxes that are due, are claimed to be due, or may or will become due with respect to any Pre-Closing Period or the portion ending on the Closing Date of any Straddle Period.

(b) No extension of time to file a Seller Tax Return, which Seller Tax Return has not since been filed in accordance with applicable Law, has been filed. There is no power of attorney in effect with respect or relating to any Seller Tax or Seller Tax Return.

(c) No Seller Tax Return has ever been filed, and no Seller Tax has ever been determined, on a consolidated, combined, unitary or other similar basis (including, but not limited to, a consolidated federal income Tax return). There is no actual or potential theory or circumstance (including, but not limited to, as a transferee or successor, under Code Section 6901 or Treasury Regulation Section 1.1502-6, as result of a Tax sharing agreement or other contract or by operation of law) under which any Seller is or may be liable for any Tax determined, in whole or in part, by taking into account any income, sale, asset of or any activity conducted by any other Person.

(d) Each Seller has complied in all respects with all applicable Law relating to the deposit, collection, withholding, payment or remittance of any Tax (including, but not limited to, Code Section 3402).

(e) There is no lien for any Tax upon any asset or property of any Seller (except for any statutory lien for any Tax not yet due).

(f) No Legal Proceeding is pending, or to the Knowledge of the Sellers, threatened or proposed with regard to any Seller Tax or Seller Tax Return. To the Knowledge of the Sellers, no event or circumstance results in any significant risk that any such Legal Proceeding will occur.

(g) The statute of limitations relating to any Seller Tax or any Seller Tax Return has never been modified, extended or waived, nor to the Knowledge of the Sellers, has any request been made in writing for any such modification, extension or waiver.

(h) Any assessment, deficiency, adjustment or other similar item relating to any Seller Tax or Seller Tax Return has been reported to all Taxing Authorities in accordance with applicable Law.

(i) No jurisdiction where no Seller Tax Return has been filed or no Seller Tax has been paid has made or, to the Knowledge of the Sellers, threatened to make a claim for the payment of any Seller Tax or the filing of any Seller Tax Return.

(j) No Seller is a party to any agreement with any Taxing Authority (including, but not limited to, any closing agreement within the meaning of Code Section 7121 or any analogous provision of applicable Law). No private letter or other ruling or determination from any Taxing Authority relating to any Seller Tax or Seller Tax Return has ever been requested or received.

(k) No Seller is nor has ever been a beneficiary or otherwise participated in any reportable transaction within the meaning of Treasury Regulation Section 1.6011-4(b)(1).

(l) None of the Purchased Assets or the Assumed Liabilities is a contract, agreement or other arrangement that (i) results or could result in any amount that is not deductible under Code Section 162, Code Section 280G, Code Section 404 or any similar provision of applicable Law, or (ii) is or could become subject to Code Section 409A or any similar provision of applicable Law.

(m) None of the Purchased Assets is “tax-exempt bond-financed property” or “tax-exempt use property,” within the meaning of Code Section 168(h) or any similar provision of applicable Law.

(n) None of the Purchased Assets is (i) required to be treated as being owned by any other Person pursuant to any provision of applicable Law (including, but not limited to, the “safe harbor” leasing provisions of Code Section 168(f)(8), as in effect prior to the repeal of those “safe harbor” leasing provisions), (ii) subject to Code Section 168(g)(1)(A), or (iii) subject to a disqualified leaseback or long-term lease agreement as defined in Code Section 467.

(o) No Seller is a party to any joint venture, partnership or other agreement, contract or arrangement (whether written or oral) which could be treated as a partnership for federal income tax purposes, other than a partnership that is wholly-owned, directly or indirectly, by the Sellers.

(p) Each Seller (i) does not have, and has never had, a permanent establishment in any country outside the United States and is not, and has never been, subject to Tax in a jurisdiction outside the United States, (ii) has never entered into a gain recognition agreement pursuant to Treasury Regulation Section 1.367(a)-8, and (iii) has never transferred an intangible the transfer of which would be subject to the rules of Code Section 367(d).

(q) No Seller is or has ever been a passive foreign investment company within the meaning of Code Section 1297. No Seller owns, directly or indirectly, any equity interest in any Person that is or has ever been a passive foreign investment company within the meaning of Code Section 1297.

(r) No Subsidiary or any other Person in which any Seller owns, directly or indirectly, any equity interest has any item of income which could constitute subpart F income within the meaning of Code Section 952 for the period commencing on the first day of any Straddle Period and ending at the close of business on the Closing Date.

(s) No Subsidiary or any other Person in which any Seller owns, directly or indirectly, any equity interest holds assets that constitute U.S. property within the meaning of Code Section 956.

5.10 Real Property .

(a) The Sellers do not own any real property. Schedule 5.10(a) contains a true and correct description of all leases, licenses, permits, subleases, and occupancy agreements or arrangements, together with any amendments thereto effective as of immediately prior to the Closing (the “ Real Property Leases ”), with respect to all real property used, occupied or held for use in connection with any Business (the “ Leased Real Property ”). Effective as of the Closing, each of such Real Property Leases has been terminated in accordance with its terms, and the Sellers do not have any rights or obligations with respect to the Leased Real Property. True, complete and accurate copies of the Real Property Leases and evidence of their termination have been delivered to the Purchasers. Except as set forth on Schedule 5.10(a) , no Person has assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered its interest under any Real Property Lease, or subleased all or any part of the space demised thereby, or granted any right to the possession, use, occupancy or enjoyment of any Leased Real Property. No option has been exercised under any of such Real Property Leases, except options whose exercise has been evidenced by a written document, a true, complete and accurate copy of which has been delivered to the Purchasers with the corresponding Real Property Lease. Neither the Sellers nor, to the Knowledge of the Sellers, any of the other parties to any of the Real Property Leases is in default under any of the Real Property Leases, and no amount due under any of the Real Property Leases remains unpaid, no controversy, claim, dispute or disagreement exists between any of the parties to any of the Real Property Leases, and no event has occurred which with the passage of time or giving of notice, or both, would constitute a default under any of the Real Property Leases.

(b) The Leased Real Property constitutes all of the land, buildings, structures, improvements, fixtures and other interests and rights in real property that are used or occupied by the Sellers in connection with the Businesses. The Leased Real Property has access to public roads and to all utilities necessary for the operation of the Businesses as now conducted and proposed to be conducted. There is no pending or, to the Knowledge of the Sellers, threatened condemnation of any part of the Leased Real Property by any Governmental Body. The Sellers have not received any notice from any utility company or municipality of any fact or condition which could result in the discontinuation of presently available or otherwise necessary sewer, water, electric, gas telephone or other utilities or services for the Leased Real Property. All public utilities required for the operation of the Leased Real Property and necessary for the conduct of the Businesses are installed and operating, and all installation and connection charges, to the Knowledge of the Sellers, are paid in full. Effective as of immediately prior to the Closing, the Sellers are in sole possession of the Leased Real Property.

(c) To the Knowledge of the Sellers, there are no encroachments upon any of the parcels comprising the Leased Real Property (other than such encroachments as would not affect the usability of the Leased Real Property) and no portion of any improvement encroaches upon any property not included within the Leased Real Property or upon the area of any easement affecting the Leased Real Property.

(d) To the Knowledge of the Sellers, the Leased Real Property and fixtures and improvements thereon are in good operating condition without structural defects. All mechanical and other building systems located on the Leased Real Property are (i) in good operating condition, and no condition exists requiring material repairs, alterations or corrections, and (ii) suitable, sufficient and appropriate in all respects for their current and contemplated uses. None of the improvements located on the Leased Real Property or uses being made of the Leased Real Property constitute a legal non-conforming use or otherwise require any special dispensation, variance or special permit under any Law.

(e) To the Knowledge of the Sellers, the Leased Real Property is not subject to zoning, use or building code restrictions that would prohibit, and no state of facts exists with respect to the Leased Real Property that would prevent, the continued leasing or use of such Leased Real Property in the Businesses as now conducted or proposed to be conducted. Without limiting the foregoing, to the Knowledge of the Sellers, there is no pending or proposed Legal Proceeding to change or redefine the zoning classification of all or any portion of any of the Leased Real Property.

5.11 Tangible Personal Property; Title to and Sufficiency of Assets . Schedule 5.11 sets forth all leases of personal property to which any Seller is a party and used or held for use in connection with the Businesses (“ Personal Property Leases ”) and all personal property owned by any Seller having a book value in excess of $5,000. True, complete and accurate copies of the Personal Property Leases, or if any Personal Property Leases are not in writing, true, complete and accurate descriptions thereof, have been delivered to the Purchasers. Each of such Personal Property Leases is in full force and effect and is valid, binding and enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing. None of the Sellers has received any written notice of any default or any event that with notice or lapse of time, or both, would constitute a default, by any Seller under any of the Personal Property Leases. The Sellers have good, valid and marketable title to all of the Purchased Assets, including, without limitation, all assets related to, used in, or intended for use in, the conduct of any Business or reflected in the Financial Statements and all assets purchased by any Seller since the Balance Sheet Date (except for assets reflected in the Financial Statements or acquired since the Balance Sheet Date that have been sold or otherwise disposed of in the Ordinary Course of Business), free and clear of all Liens (other than Permitted Exceptions). All tangible personal property owned by any Seller or subject to Personal Property Leases is in good operating condition and repair, ordinary wear and tear excepted, and is suitable and adequate for the uses for which it is intended or is being used. The Purchased Assets (i) include all tangible and intangible assets, properties and rights necessary to conduct each Business following the Closing Date in the same manner as it is currently conducted, and as it is currently contemplated to be conducted, and (ii) constitute all of the tangible and intangible assets, properties and rights of the Sellers other than the Excluded Assets. Neither any Principal nor any of his Affiliates owns any asset or property related to, used in or intended for use in connection with any Business; provided , however , that, for the avoidance of doubt, to the extent any Principal or any of his Affiliates does own any such asset or property, then such asset or property is included in the Purchased Assets (except as otherwise set forth on Schedule 2.2(a) ) and the representations and warranties in this Article V that apply to (x) the Sellers shall also be deemed to apply to each Principal and his Affiliates with respect to such asset or property or (y) the Purchased Assets shall also be deemed to apply to such asset or property.

5.12 Intellectual Property .

(a) Schedule 5.12(a) identifies all Intellectual Property (other than widely available, commercial off-the-shelf third-party Software licensed to any of the Sellers on a non-exclusive basis) licensed to any of the Sellers (the “ Licensed Intellectual Property ”). The Sellers are in full compliance with all terms and conditions of any Contract, license or sub-license with respect to any Licensed Intellectual Property and none of the Sellers is in breach or default of any Contract, license or sub-license in respect of any Licensed Intellectual Property which could result in the termination of any such Contract, license or sub-license. With respect to each item of Licensed Intellectual Property, the license, agreement or permission covering such Licensed Intellectual Property (each a “ License Agreement ”) is and, following the consummation of the contemplated transaction will be, legal, valid, binding and enforceable by the Sellers or the Purchasers, as applicable, against all other parties thereto, and in full force and effect on identical terms following the consummation of the contemplated transactions, provided the licensors in each such License Agreement comply with the terms and conditions of the License Agreement.

(b) The Sellers do not have any Patents or applications therefore, or pending applications for registration of Marks, or registered Copyrights or applications for registration of Copyrights. Schedule 5.12(b) identifies all Intellectual Property owned by the Sellers (the “ Owned Intellectual Property ”), including all: (i) registered and unregistered Marks (excluding Internet domain names); (iii) unregistered Copyrights; (iv) registered Internet domain names; (v) trade names; and (vi) social media pages. Without limiting the generality of the foregoing, all assignments from Persons necessary or appropriate to vest ownership in the Sellers of any Owned Intellectual Property have been obtained and recorded. To the Knowledge of the Sellers, all of the other rights within the Seller IP are valid and subsisting. None of the Sellers is subject to any Order that restricts or impairs the use of any Owned Intellectual Property as currently used in a Business.

(c) The Owned Intellectual Property and the Licensed Intellectual Property include all Intellectual Property used in any Business and there are no other items of Intellectual Property that are used in any Business. Neither the execution, delivery or performance of this Agreement or any of the other Transaction Documents nor the consummation of any of the transactions contemplated hereby or thereby will result in the release, disclosure or delivery of any Owned Intellectual Property or Licensed Intellectual Property, by or to any escrow agent or other Person, or in the grant, assignment or transfer to any other Person of any license or other right to any Owned Intellectual Property or Licensed Intellectual Property, or in the termination or modification of (or right to terminate or modify) any Owned Intellectual Property or Licensed Intellectual Property.

(d) Schedule 5.12(d) identifies each Contract pursuant to which any Person has been granted any license by any Seller under, or otherwise has received or acquired from, any Seller any right (whether or not currently exercisable) or interest in, including the right to use, any Owned Intellectual Property, including through non-assertion, settlement or similar agreements or otherwise. Subject to the foregoing Contracts, the Sellers own all right, title and interest in and to the Owned Intellectual Property, and have the right to use the Licensed Intellectual Property (subject, in each case, to any applicable license to one or more Sellers covering such Licensed Intellectual Property), free and clear of all Liens. The Sellers have the sole and exclusive right to bring actions for infringement or unauthorized use of all of the Owned Intellectual Property.

(e) The Sellers have taken commercially reasonable steps to maintain the confidentiality of its confidential or proprietary information.

(f) No current or former member, stockholder, officer, consultant, manager, employee or vendor of any Seller has any ownership claim, ownership right (whether or not currently exercisable) or ownership interest in or to any Owned Intellectual Property.

(g) The Sellers have taken commercially reasonable steps to protect the Owned Intellectual Property. No Seller has received any opinion of counsel (whether internal or external, written or oral) relating to the patentability, infringement, validity or enforceability of any Owned Intellectual Property. To the Knowledge of the Sellers, during the past five (5) years, no Person has infringed, misappropriated or otherwise violated, and no Person is currently infringing, misappropriating or otherwise violating, any Owned Intellectual Property or rights of any Seller in any Licensed Intellectual Property.

(h) To the Knowledge of the Sellers, no Seller has infringed, misappropriated or otherwise violated, or is currently infringing, misappropriating or otherwise violating, any Intellectual Property right of any other Person; no Legal Proceeding alleging any such infringement, misappropriation or violation is pending or, to the Knowledge of the Sellers, threatened against any Seller; and the use of the Owned Intellectual Property and of the Licensed Intellectual Property, if used in any Business in accordance with the terms of the applicable licenses and in the manner currently used, will not infringe, misappropriate or violate any (x) Law existing prior to the Closing or (y) right of any Person.

(i) No Legal Proceeding is pending or, to the Knowledge of the Sellers, threatened against any Seller (i) based upon, challenging or seeking to deny or restrict the use by any Seller of any of the Owned Intellectual Property or Licensed Intellectual Property or challenging the validity, enforceability or effectiveness thereof; (ii) alleging that any Seller has infringed, misappropriated or otherwise violated, or is currently infringing, misappropriating or otherwise violating, any Intellectual Property right of any other Person; or (iii) alleging that any of the licenses listed on Schedule 5.12(a) conflicts with the terms of any third-party license or any other agreement. No Seller has received any written correspondence or opinion relating to potential infringement, misappropriation or violation (i) by any Seller of any Intellectual Property of any Person or (ii) by any Person of any of the Owned Intellectual Property or the Licensed Intellectual Property.

(j) For the avoidance of doubt, the foregoing representations and warranties apply with respect to the United States and each foreign jurisdiction in which any Business is conducted in any manner or in which any Seller or any licensee thereof uses, or holds for use, any Seller IP.

5.13 Material Contracts .

(a) Schedule 5.13(a) sets forth a true, correct and complete list of all Contracts (or, in the case of oral Contracts, written summaries thereof) to which any Seller is a party or by which any Seller, or any of their assets or properties, is bound that (i) involve payments or receipts by any Seller in any year in excess of $25,000, (ii) evidence or relate to indebtedness or Liens, (iii) evidence or relate to any employment, agency, distribution, dealer or sales relationship, (iv) contain an obligation of confidentiality with respect to information furnished by any Seller to a third party or received by any Seller from a third party, were not entered into in the Ordinary Course of Business and are currently in effect, (v) are not terminable without penalty by less than 30 days’ notice (other than as a result of a breach or a bankruptcy event), (vi) limit or restrict any Seller from engaging in, or the conduct of, any Business in any manner, (vii) constitute a license, sub-license, sponsorship, marketing or joint venture Contract or (viii) are otherwise material to any Seller or any Business (collectively, the “ Material Contracts ”).

(b) (i) Each Material Contract is a valid, binding and enforceable obligation of the Seller party thereto and, to the Knowledge of the Sellers, of the other party or parties thereto, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and general principles of equity (regardless of whether considered in a proceeding at law or in equity), and (ii) each Material Contract is in full force and effect.

(c) (i) Neither any Seller nor any other party thereto is in breach of or default under any term of any Material Contract and (ii) no event has occurred that with notice or lapse of time, or both, would constitute a breach of or a default by any Seller or any other party under any Material Contract.

(d) None of the Sellers has received written notice of termination, cancellation or non-renewal that is currently in effect with respect to any Material Contract and, to the Knowledge of the Sellers, no other party to a Material Contract plans to terminate, cancel or not renew any such Material Contract.

5.14 Employee Benefits Plans .

(a) Schedule 5.14(a) lists each “employee benefit plan” (as defined in Section 3(3) of ERISA) and any other employee plan, program, policy, practices, procedure, arrangement or agreement maintained, contributed to or required to be contributed to by any Seller (each, a “ Seller Benefit Plan ”). Each Seller Benefit Plan has been administered in accordance with its terms. The Sellers and the Seller Benefit Plans are, and have been operated, in compliance with the applicable provisions of ERISA, the Code and other applicable Laws.

(b) All Seller Benefit Plans that are “employee pension plans” (as defined in Section 3(3) of ERISA) that are intended to be tax qualified under Section 401(a) of the Code (each, a “ Seller Pension Plan ”) are so qualified. No event has occurred since the date of the most recent determination letter or application therefor relating to any such Seller Pension Plan that would adversely affect the qualification of such Seller Pension Plan.

(c) All contributions, premiums and benefit payments under or in connection with the Seller Benefit Plans that are required to have been made as of the date hereof in accordance with the terms of the Seller Benefit Plans have been timely made or have been reflected in the Financial Statements. No Seller Pension Plan has an “accumulated funding deficiency” (as such term is defined in Section 302 of ERISA or Section 412 of the Code), whether or not waived. The net fair market value of the assets of any Seller Benefit Plan that is subject to Title IV of ERISA equals or exceeds the actuarial accrued liabilities of such Seller Benefit Plan.

(d) No Seller Benefit Plan provides post-retirement medical, life insurance or other benefits promised, provided or otherwise due now or in the future to current, former or retired employees other than as required by Section 4980B(f) of the Code.

(e) No amount required to be paid or payable to or with respect to any employee or other service provider of any Seller in connection with the transactions contemplated hereby (either solely as a result thereof or as a result of such transactions in conjunction with any other event) will be an “excess parachute payment” within the meaning of Section 280G of the Code.

5.15 Labor .

(a) (i) Each Seller is in compliance, in all material respects, with all applicable Laws regarding employment and employment practices, including, without limitation, all applicable Laws regarding terms and conditions of employment, health and safety, wages and hours, child labor, immigration, employment discrimination, equal employment opportunity, affirmative action, plant closures and layoffs, workers’ compensation, labor relations, disability rights or benefits, employee leave issues, worker classification, and unemployment insurance, (ii) since January 1, 2013, no Seller has received written notice of the intent of any Governmental Body responsible for the enforcement of any such Laws to conduct an investigation with respect to or relating to any such Laws, or written notice that such investigation is in progress, and (iii) no Seller is a party to, or otherwise bound by, any Order relating to employees or employment practices.

(b) No Seller is a party to or bound by any collective bargaining agreement or similar agreement with any labor organization or is negotiating any such agreement. There are no (i) pending unfair labor practice or other labor or employment charges, complaints, grievances, arbitration proceedings or other Legal Proceedings against any Seller nor, to the Knowledge of the Sellers, is any such charge, complaint, grievance, proceeding or other Legal Proceeding threatened, (ii) labor strikes, disputes, slowdowns, work stoppages or lockouts that have occurred within the past three (3) years or that are pending or, to the Knowledge of the Sellers, threatened against any Seller, and (iii) to the Knowledge of the Sellers, attempts by any employees of any Seller to unionize or collectively bargain with any Seller. None of the Sellers has engaged in any unfair labor practice.

5.16 Legal Proceedings . There are no Legal Proceedings pending or, to the Knowledge of the Sellers, threatened against any Business, any Seller or any of the Purchased Assets, nor are any of the foregoing subject to any Order. There are no Legal Proceedings pending or, to the Knowledge of the Sellers, threatened that are reasonably likely to prohibit or limit the ability of any Seller to enter into this Agreement or any of the other Seller Documents, to consummate any of the transactions contemplated hereby or thereby or to perform any of its obligations hereunder or thereunder.

5.17 Compliance with Laws; Permits .

(a) The Sellers are in compliance, in all material respects, with all Laws applicable to any of the Purchased Assets, any Business and its operations. No Seller has received written notice of the violation of any such Laws.

(b) Schedule 5.17 sets forth a true, correct and complete list of all Permits held by each Seller. Each Seller has all Permits that are required for the operation of each Business as currently conducted and as currently contemplated to be conducted. All Permits are valid, binding and in full force and effect. None of the Sellers is in default or violation (and no event has occurred which, with notice or the lapse of time, or both, would constitute a default or violation) of any term, condition or provision of any such Permit.

5.18 Environmental Matters .

(a) (i) To the Knowledge of the Sellers, the operations of the Sellers are in compliance with and have complied with all applicable Environmental Laws.

(ii) To the Knowledge of the Sellers, the Sellers have obtained and are in compliance with all Permits (each of which is listed on Schedule 5.17 ) and Asbestos Management Plans required by Environmental Laws, and necessary, for the current operation or use of the Businesses and the Purchased Assets, and for any Permits that may expire prior to Closing, the Sellers have filed any renewal applications required by Environmental Laws to ensure the Permits will remain in full force and effect up until and after Closing.

(b) To the Knowledge of the Sellers, there has been no Release of Hazardous Materials by Sellers or any of their predecessors at any location and there are no environmental conditions or circumstances, including, without limitation, the presence or Release of any Hazardous Substance, on any Leased Real Property, any Prior Real Property, or any property to which any Hazardous Substances or waste generated by operations or use of any of its assets by any Seller or its predecessors was transported or disposed of, (i) relating to, arising out of, or resulting from failure by any Seller to comply with, any applicable Environmental Law or Environmental Permit, or from a Release or threatened Release of any Hazardous Substance into the Environment or (ii) which require cleanup or remediation by any Seller or its predecessors pursuant to any Environmental Law (collectively, “ Environmental Conditions ”).

(c) To the Knowledge of the Sellers, neither any of the Sellers nor any of their predecessors has designed, manufactured, sold, marketed, installed or distributed products or other items containing asbestos, urea formaldehyde or polychlorinated biphenyls (“ PCBs ”).

(d) None of the Sellers has Liability under any Environmental Law, nor are they responsible for or have they assumed any Liability of any other Person under any Environmental Law, whether by Contract, Real Property Lease, settlement or other written and legally binding arrangement between or among the Sellers or any of their predecessors in interest, and any other Person, or by operation of Law or otherwise. No valid and subsisting Lien arising under or pursuant to any applicable Environmental Law exists against Seller or any of the Leased Real Property, the Businesses or Purchased Assets.

(e) None of the Sellers has received any written information request or other communication from a Governmental Body and there are no Legal Proceedings pending or, to the Knowledge of the Sellers, threatened, against any Seller or its predecessors relating to any violation, or alleged violation of, or Liability under, any Environmental Law or relating in any way to any Environmental Law, Hazardous Substance or any Environmental Permit or other authorization of any Governmental Body required under any Environmental Law, including, without limitation, (i) any and all claims by Governmental Bodies for enforcement, investigation, cleanup, removal, response, corrective, remedial, monitoring, or other actions, damages, fines or penalties pursuant to any applicable Environmental Law, and (ii) any and all claims by any one or more Persons seeking damages, contribution, indemnification, cost recovery, compensation, injunctive or other relief resulting from a Release of any Hazardous Substance or arising from alleged injury or threat of injury to health, safety, property, natural resources or the Environment (collectively, “ Environmental Claims ”).

(f) To the Knowledge of the Sellers, there has not been any underground or aboveground storage tank or other underground storage receptacle or related piping, or any impoundment or other disposal area, in each case containing any Hazardous Substance located on, at, or under any Leased Real Property or any Prior Real Property, and no asbestos or PCBs have been used or disposed of, or have been located at, on, or under any such property, except in compliance with Environmental Laws.

(g) The Sellers have provided to the Purchasers and its authorized representatives true and complete copies of all records and files, Permits, Orders, environmental audits, reports, Contracts and other material environmental documents, studies, analysis, tests and monitoring in the possession or control of any Seller concerning the existence of any Hazardous Substance or any other environmental concern at any Leased Real Property or Prior Real Property or relating to the Businesses or Purchased Assets or concerning compliance by any Seller with, or Liability under, any Environmental Law.

(h) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will require any notification, registration, reporting, filing, investigation or remediation under any Environmental Law..

5.19 Suppliers and Customers . Except as set forth on Schedule 5.19 , no supplier that accounted for more than five percent (5%) of the annual purchases of any Seller in the aggregate since January 1, 2014, no customer that accounted for more than five percent (5%) of the annual sales of any Seller in the aggregate since January 1, 2014, and no other supplier or customer material to any Business or any Seller (including, but not limited to, any supplier who is a sole available source of supply of any product or service), has terminated or threatened to terminate its relationship with any Seller, nor has it during the preceding twelve (12) months decreased or delayed materially or threatened to decrease or delay materially, its services or supplies to any Seller or its usage of the services or products of any Seller, and to the Knowledge of the Sellers, there is no state of facts or event which could reasonably be expected to form the basis for such a decrease or delay. To the Knowledge of the Sellers, the consummation of the transactions contemplated by the Transaction Documents will not adversely affect the business relationship heretofore maintained by the Sellers with any of their suppliers or customers. No Seller is required to provide any bonding or any other financial security arrangements in connection with any transactions with any customers or suppliers.

5.20 Warranty Claims . There have been no product or service warranty claims made by customers of any Seller since January 1, 2011 that exceed $10,000 individually. There have been no product or service recalls by any Seller since January 1, 2011.

5.21 Financial Advisors . No Person has acted, directly or indirectly, as a broker, finder or financial advisor for any of the Sellers in connection with the transactions contemplated by this Agreement and no Person is entitled to any fee or commission or like payment from the Purchasers in respect thereof.

5.22 Accounts Receivable; Bank Accounts .

(a) The accounts receivable of each Seller shown in the Financial Statements, provided by the Sellers pursuant to Section 5.6 (including an accounts receivable aging schedule for each Business dated as of July 31, 2016), or thereafter acquired by it, have arisen or will arise from the sale of goods or services in bona fide transactions to Persons not Affiliated with any of the Sellers and have been collected or, to the Knowledge of the Sellers, are collectible, in amounts not less than the amounts thereof carried on the books of the Sellers, except to the extent of the allowance for doubtful accounts shown in such Financial Statements.

(b) Schedule 5.22(b) sets forth the names of all banks or other financial institutions with which any Seller maintains any account or safe deposit box and identifies each such account and safe deposit box, together with the names of all Persons authorized to draw therefrom or to have access thereto.

5.23 Books and Records . The books of account and other Books and Records of the Sellers, all of which have been made available to the Purchasers prior to the Closing Date, are complete and accurate and have been maintained in accordance with sound business practice and applicable requirements of Law, except as noted therein. The Sellers maintain a system of internal accounting controls designed to provide reasonable assurance that (a) transactions are executed with management’s general or specific authorization, (b) transactions are recorded as necessary to permit preparation of financial statements of the Sellers and to maintain accountability for assets, and (c) access to assets of the Sellers is permitted only in accordance with management’s authorization.

5.24 Transactions With Related Parties . Except as set forth on Schedule 5.24 , neither any current or former stockholder or member of any Seller (including, but not limited to, any Principal), nor any Affiliate of such Person, is currently a party to any transaction with any Business or any Seller, including, without limitation, any Contract providing for the employment of, furnishing of services by, rental of assets from or to, or otherwise requiring payments to, any such Person. None of the Purchased Assets include any Contract with, or obligation to provide any benefit to, any Principal or any of his Affiliates.

5.25 Full Disclosure . All facts of importance to the business, operations, prospects, condition (financial or otherwise), assets or Liabilities of the Businesses or each Seller have been accurately and completely disclosed to the Purchasers in this Agreement. No representation or warranty by any Seller in this Agreement, and no document furnished or to be furnished to the Purchasers pursuant to this Agreement, or in connection herewith or with the transactions contemplated hereby, contains or will contain any untrue or misleading statement of material fact or omits or will omit any material fact necessary to make the statements contained herein or therein, in light of the circumstances under which made, not misleading.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF PURCHASER

The Purchasers hereby jointly and severally represent and warrant to the Sellers as follows:

6.1 Organization and Good Standing . Each Purchaser is a corporation duly incorporated, validly existing and in good standing under the Laws of the jurisdiction in which it was organized and has all requisite corporate power and authority to own, lease and operate its properties and assets and carry on its business.

6.2 Authorization of Agreement . Each Purchaser has all requisite corporate power and authority to execute and deliver this Agreement and each other Transaction Document to be executed by it in connection with the consummation of the transactions contemplated by this Agreement (the “ Purchaser Documents ”), to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by each Purchaser of this Agreement and the Purchaser Documents, the performance of each Purchaser’s obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of each Purchaser. This Agreement and each of the Purchaser Documents has been duly and validly executed and delivered by each Purchaser, and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) constitutes the legal, valid and binding obligation of each Purchaser, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

6.3 Conflicts; Consents of Third Parties .

(a) None of the execution or delivery by any Purchaser of this Agreement or any of the other Purchaser Documents, the consummation of any of the transactions contemplated hereby or thereby, or compliance by any Purchaser with any of the provisions hereof or thereof does or will conflict with, or result in any violation of, or constitute a breach of or a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, modification or cancellation under, or result in the creation of any Lien, other than Permitted Exceptions, upon any of the properties or assets of any Purchaser under, any provision of (i) the certificate of incorporation, bylaws or comparable organizational or governing documents of any Purchaser; (ii) any Contract or Permit to which any Purchaser is a party or by which any Purchaser or any of its properties or assets is bound; (iii) any Order of any Governmental Body applicable to any Purchaser or by which any Purchaser or any of its properties or assets is bound; or (iv) any applicable Law.

(b) No consent, waiver, approval, Order, Permit or authorization of, or declaration, registration or filing with, or notification to, any Person or Governmental Body is required on the part of any Purchaser in connection with the execution, delivery or performance of this Agreement or any of the other Purchaser Documents, the compliance by the Purchaser with any of the provisions hereof or thereof, or the consummation of any of the transactions contemplated hereby or thereby.

6.4 Litigation . There are no Legal Proceedings pending or, to the knowledge of any Purchaser, threatened that are reasonably likely to prohibit or limit the ability of any Purchaser to enter into this Agreement or any of the other Purchaser Documents, to consummate any of the transactions contemplated hereby or thereby or to perform any of its obligations hereunder or thereunder.

6.5 Due and Valid Issuance . The Shares have been duly authorized and, when issued, delivered and paid for at the Closing in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable.

6.6 Financial Information . ATRM’s consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the Securities and Exchange Commission (“ SEC ”) on March 30, 2016, (i) is true, complete and correct in all respects, (ii) was prepared on a consistent basis throughout the periods indicated, and (iii) in all material respects, present fairly the financial condition of the business of the Sellers insofar as may be presented by such data, as of the dates and during the periods indicated therein.

6.7 SEC Reports . ATRM has filed or furnished all forms, documents and reports required to be filed or furnished prior to the date of this Agreement by it with the SEC since December 31, 2015 (the “ SEC Documents ”). As of their respective dates, or, if amended, as of the date of the last such amendment, the SEC Documents complied in all material respects with the requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, as the case may be, and none of the SEC Documents contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

6.8 Financial Advisors . Except for Oberon Securities, LLC, no Person has acted, directly or indirectly, as a broker, finder or financial advisor for any Purchaser in connection with the transactions contemplated by this Agreement. No Person is entitled to any fee or commission or like payment from any Seller in respect thereof. Any fees due to Oberon Securities, LLC shall be the responsibility of the Purchasers.

ARTICLE VII

COVENANTS

7.1 Further Assurances .

(a) At any time or from time to time after the Closing, at the request of the Purchasers and without further consideration, each Seller agrees to execute and deliver to the Purchasers any further documents or instruments and perform any further acts that may reasonably be deemed necessary, appropriate or advisable by the Purchasers to vest, record, perfect, support and/or confirm the rights herein conveyed, or intended so to be, with respect to any of the Purchased Assets. Nothing herein shall be deemed a waiver by the Purchasers of their right to receive at the Closing an effective assignment of such rights by the Sellers as otherwise set forth in this Agreement.

(b) After the Closing, at the request of the Purchasers and without further consideration, each Seller agrees to use its reasonable best efforts to assist the Purchasers in hiring those former employees of the Sellers specified by the Purchasers.

7.2 Transfer Restrictions .

(a) No Seller shall, voluntarily or involuntarily, directly or indirectly, sell, assign, donate, hypothecate, pledge, encumber, grant a security interest in or in any other manner transfer, any Shares, in whole or in part, or any other right or interest therein (each such action, a “ Transfer ”), for twelve (12) months following the Closing Date, except upon ATRM’s prior written consent.

(b) Any attempt to Transfer any Shares that is not in accordance with this Section 7.2 shall be null and void and ATRM agrees that it will not cause, permit or give any effect to any Transfer of any Shares to be made on its books and records unless such Transfer has been made in accordance with this Section 7.2 .

“The sale, transfer, hypothecation, assignment, pledge, encumbrance or other disposition of these shares of common stock of ATRM Holdings, Inc. are restricted by and are subject to all of the terms, conditions and provisions of that certain Asset Purchase Agreement, dated as of October 4, 2016, as amended from time to time, by and among ATRM Holdings, Inc., EdgeBuilder, Inc. , Glenbrook Building Supply, Inc. , EdgeBuilder Wall Panels, Inc., Glenbrook Lumber & Supply, Inc. and individuals listed on the signature page thereof, which agreement is on file at the principal office of ATRM Holdings, Inc.”

7.3 Board Observer Rights . Promptly following the Closing, ATRM and the Principals will enter into an agreement pursuant to which Eugene F. Heger will serve as an observer to ATRM’s Board of Directors until the end of the Earn-out Period.

7.4 Incentive Compensation . The Purchasers shall establish and maintain for the General Manager, Controller and Sales Manager of each Business incentive programs directed at achieving the Gross Profit Target.

7.5 Confidentiality . Each Seller acknowledges that it and its Affiliates possess and may continue to possess after the Closing knowledge of confidential and valuable business information relating to any Business not generally known by or available to the public and agrees, and shall cause its Affiliates, at all times (a) to keep confidential all such information, (b) not to use such confidential information on its own behalf (except in connection with the transactions contemplated hereby) or on behalf of any other Person, other than the Purchasers or the Purchasers’ Affiliates, and (c) not to disclose such confidential information to any third party (other than to the Sellers’ counsel, accountants and other advisors in connection with the transactions contemplated hereby) without the Purchasers’ prior written approval; provided , however , that none of the Sellers shall have any such obligations with respect to confidential information that has become a matter of public knowledge or has been or is hereafter publicly disclosed, in any case other than by or through any Seller.

7.6 Preservation of Records . Each Seller and each Purchaser agrees that it shall, and shall cause its Affiliates to, preserve and keep any records held by it relating to any Business for a period of seven (7) years from the Closing Date and shall make such records and personnel available to the other parties hereto as may be reasonably necessary in connection with, among other things, any insurance claim, Legal Proceeding, Tax audit or investigation by any Governmental Body. Any such records held by the Purchasers shall be located at 5215 Gershwin Ave. N., Oakdale, MN 55128, unless and until the Purchasers no longer use such location in connection with any Business, and if the Purchasers moves such records from such location they shall provide prompt written notice of the new location of such records to the Sellers.

7.7 Publicity . None of the Sellers or any of their respective Affiliates shall issue any press release or public announcement concerning this Agreement or any of the transactions contemplated hereby or make any other public disclosure containing the terms of this Agreement. None of the Purchasers, ATRM or any of their respective Affiliates shall issue any press release or public announcement concerning this Agreement or any of the transactions contemplated hereby or make any other public disclosure containing the terms of this Agreement without obtaining the prior approval of Eugene F. Heger as to the form of such press release or announcement, which approval will not be unreasonably withheld or delayed, unless, in the judgment of ATRM, disclosure is otherwise required by applicable Law or by the applicable rules of any stock exchange on which ATRM or any of its Affiliates lists securities. The parties acknowledge that ATRM will be required to make filings with the Securities and Exchange Commission disclosing the terms of this Agreement and the transactions contemplated thereby.

7.8 Collection of Receivables . Following the Closing, the Purchasers shall have the right and authority to collect all receivables arising from the operation of the Business, both prior to and following the Closing, and shall have the right to endorse with the name of any Seller, as applicable, any checks received on account of any such receivable. The Purchasers will transfer and deliver to the Sellers, as promptly as practicable but no less than on a weekly basis (with collections made in a given week transferred by the Friday of the following week), any cash or other property which any of them may receive in respect of any such receivables arising from the operation of the Business prior to the Closing (“ Seller Receivables ”); provided, however, any check made payable to any of the Sellers on account of any receivable wholly payable to such Seller shall be delivered to such Seller within no more than three (3) Business Days following the Purchasers’ receipt thereof. Additionally, the Purchasers shall deliver to the Sellers within fifteen (15) Business Days following the end of each calendar month in which payment for any Seller Receivables was received by the Sellers a schedule of all payments received from the applicable customers related to the Seller Receivables. The Purchasers and the Sellers shall work together in good faith to resolve any disputes regarding the receipt of payments on account of any Seller Receivables. Further, the Purchasers and the Sellers agree to use their reasonable best efforts to cooperate in notifying customers, or prior customers, of each Business to make all payments in connection with such Business directly to the applicable Purchaser and shall otherwise direct correspondence and inquiries relating to such Business to the applicable Purchaser.

7.9 Tax Matters .

(a) The Sellers shall pay, when due, all transfer, documentary, sales, use, stamp, registration and other similar Taxes, and all conveyance fees, recording charges and other fees and charges (including any penalties and interest) incurred in connection with the consummation of any of the transactions contemplated by this Agreement and shall, at their own expense, file all necessary Tax Returns and other documentation with respect to such Taxes, fees and charges.

(b) Following the Closing, the Sellers and the Purchasers shall, as reasonably requested by the other: (i) assist the other party in preparing any Tax Returns relating to any Business which such other party is responsible for preparing and filing; (ii) cooperate fully in preparing for any Tax audit of, or dispute with, any Taxing Authority regarding, and any Legal Proceeding relating to, liability for Taxes, in the preparation or conduct of any Legal Proceeding or investigation of claims, and in connection with the preparation of financial statements or other documents to be filed with any Taxing Authority, in each case with respect to any Business; and (iii) make available to the other party, as reasonably requested, and to any Taxing Authority all information, records, and documents relating to Taxes relating to any Business.

7.10 Name Change . On or promptly after the Closing Date, the Sellers shall amend their respective certificate or articles of organization or formation to change their names to names that do not, and each Seller agrees, on behalf of itself and its Affiliates, from and after the Closing, not to, use all or any portion of the names EdgeBuilder Wall Panels, Glenbrook Lumber & Supply, any name similar thereto, or any abbreviated version of the foregoing, anywhere in the world for any purpose, without the prior written consent of the Purchasers.

7.11 Non-Competition . As a material inducement to the Purchasers’ consummation of the transactions contemplated by this Agreement and the other Transaction Documents, including, without limitation, Purchasers’ acquisition of the goodwill associated with the Businesses, each Seller and each Principal agrees as follows:

(a) Each Seller, Eugene F. Heger and Gary Mulcahy (each, a “ Restricted Party ” and, collectively, the “ Restricted Parties ”) shall not, during the period commencing on the Closing Date and ending on the later of (x) the five (5) year anniversary of the Closing Date and (y) the five (5) year anniversary of the termination of such Person’s employment with or service to the Purchasers (the “ Restricted Period ”) (computed by excluding from such period any time during which such Person or its respective Affiliates is found by a court of competent jurisdiction to have been in violation of any provision of this Section 7.11(a) ), directly or indirectly, for themselves or on behalf of or in conjunction with any other Person, engage in, invest in or otherwise participate in (whether as an owner, employee, officer, director, manager, independent contractor, agent, partner, advisor, or otherwise) any business that competes with any Business in Connecticut, Illinois, Iowa, Maine, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New York, North Dakota, Pennsylvania, Rhode Island, South Dakota, Vermont or Wisconsin, or at any time following the Closing Date, other than to the extent required in its capacity as an employee of any Purchaser, make any use of any Seller IP. Notwithstanding the foregoing, this covenant shall not be deemed to prohibit the acquisition as an investment of not more than five percent (5%) of the capital stock of a competing business whose stock is traded on a national securities exchange or market, or over-the-counter.

(b) Each Restricted Party shall not, during the Restricted Period (computed by excluding from such period any time during which such Person or its respective Affiliates is found by a court of competent jurisdiction to have been in violation of any provision of this Section 7.11(b) ), directly or indirectly, solicit or accept business from any customer or prospective customer of the Sellers with whom it had any contact in the twenty-four (24) month period prior to the Closing Date with respect to any products or services sold by any Business as of the Closing Date. Michael Klefstad shall not, during the period commencing on the Closing Date and ending on the one (1) year anniversary of the termination of his employment with or service to the Purchasers (computed by excluding from such period any time during which such Person or his Affiliates is found by a court of competent jurisdiction to have been in violation of any provision of this Section 7.11(b) ), directly or indirectly, (i) solicit, sell or render services to any customer or prospective customer of any Purchaser with whom he worked or had regular contact, or on whose account he worked, at any time during his employment with any Seller or any Purchaser, or (ii) cause or attempt to cause any customer of any Purchaser to divert, terminate, limit or in any manner modify or fail to enter into any actual or potential business relationship with any Purchaser; provided, however, these restrictions shall not apply if Mr. Klefstad is terminated by the Purchasers other than for Cause. For purposes of this Section 7.11(b) , “Cause” shall mean that Mr. Klefstad: (A) pleads “guilty” or “no contest” to or is indicted for or convicted of a felony under federal or state law or as a crime under federal or state law; (B) in carrying out his duties, engages in conduct that constitutes gross negligence or willful misconduct; (C) materially fails to perform the responsibilities of his position; (D) engages in misconduct that causes material harm to the reputation of the Company; or (E) materially breaches any written policy of the Company; provided that for subsections (C) through (E), if the breach reasonably may be cured, Mr. Klefstad has been given at least thirty (30) days after his receipt of written notice of such breach from a Purchaser to cure such breach.

(c) Each Seller and each Principal shall not, during the Restricted Period (computed by excluding from such period any time during which such Person or its respective Affiliates is found by a court of competent jurisdiction to have been in violation of any provision of this Section 7.11(c) ), directly or indirectly, solicit, hire (or assist or encourage any other Person to solicit or hire) or otherwise interfere with the employment relationship of any Person who is employed by any Seller immediately prior to the execution of this Agreement or employed by the Purchasers or any of their Affiliates during the operation of this provision. For the avoidance of doubt, an employee shall not be deemed to have been solicited or as a result hired for employment solely as a result of a general public advertisement or other such general solicitation of employment.

(d) Each Principal agrees that the foregoing covenants are reasonable with respect to their duration, geographic area and scope, to protect, among other things, the Purchasers’ acquisition of the goodwill associated with the Businesses. If a judicial or arbitral determination is made that any provision of this Section 7.11 constitutes an unreasonable or otherwise unenforceable restriction against any of the Principals or their respective Affiliates, then the provisions of this Section 7.11 shall be rendered void only to the extent such judicial or arbitral determination finds such provisions to be unenforceable. In that regard, any judicial or arbitral authority construing this Section 7.11 shall be empowered to sever any prohibited business activity, time period or geographical area from the coverage of any such agreements and to apply the remaining provisions of this Section 7.11 to the remaining business activities, time periods and/or geographical areas not so severed. Moreover, in the event that any provision, or the application thereof, of this Section 7.11 is determined not to be specifically enforceable, the Purchasers shall nevertheless be entitled to recover monetary damages as a result of the breach of such agreement.

(e) Each Principal acknowledges that it has carefully read and considered the provisions of this Section 7.11 . Each Principal acknowledges that it has received and will receive sufficient consideration and other benefits to justify the restrictions in this Section 7.11 . Each Principal also acknowledges and understands that these restrictions are reasonably necessary to protect interests of the Purchasers and their Affiliates, including, without limitation, protection of the goodwill acquired, and each Principal acknowledges that such restrictions will not prevent it from conducting businesses that are not included in the restricted business set forth in this Section 7.11 during the periods covered by the restrictive covenants set forth in this Section 7.11 . Each Principal also acknowledges that the transactions contemplated by this Agreement constitute full and adequate consideration for the execution and enforceability of the restrictions set forth in this Section 7.11 .

ARTICLE VIII

INDEMNIFICATION

8.1 Survival . The representations and warranties of the parties contained in this Agreement shall survive for eighteen (18) months after the Closing Date. Notwithstanding the foregoing, if a written claim or written notice is given under this Article VIII with respect to any representation or warranty prior to the expiration of the applicable survival period, the claim with respect to such representation or warranty shall continue until such claim is finally resolved.

8.2 Indemnification by the Sellers . Subject to Section 8.5 hereof, the Sellers, jointly and severally, hereby agree to reimburse, defend, indemnify and hold harmless the Purchasers and their Affiliates and their respective directors, officers, employees, stockholders, members, managers, partners, agents, attorneys, representatives, successors and permitted assigns (collectively, the “ Purchaser Indemnified Parties ”) from and against any and all losses, Liabilities, fines, damages, Taxes and Expenses (individually, a “ Loss ” and, collectively, “ Losses ”) relating to, based upon, resulting from or arising out of:

(a) any inaccuracy or breach of any of the representations or warranties made by any Seller in this Agreement or any of the other Transaction Documents;

(b) any breach of or failure to perform any covenant or agreement made by any Seller in this Agreement or any of the other Transaction Documents;

(c) the ownership, use or operation of any of the assets or properties of any Seller (including any of the Purchased Assets) or any Business prior to the Closing;

(d) any of the Excluded Assets or Excluded Liabilities;

(e) any and all Taxes (i) relating to any Pre-Closing Tax Period with respect to any Seller, any Business or any of the Purchased Assets, (ii) relating to the portion of any Straddle Period ending on and including the Closing Date with respect to any Seller, any Business or any of the Purchased Assets, or (iii) in connection with the execution and delivery of this Agreement or the consummation of any of the transactions contemplated hereby (including, without limitation, all transfer, documentary, sales, use, stamp, registration and other similar Taxes, and all conveyance fees, recording charges and other fees and charges (including any penalties and interest));

(f) any Environmental Claim or the investigation, remediation or correction of any Environmental Condition caused by, relating to or arising out of (i) any condition prior to the Closing at the Leased Real Property or any property previously owned, leased or operated by any Seller or any of its respective predecessors in interest, as applicable; and (ii) the operations prior to the Closing of any Seller or any of its respective predecessors in interest, as applicable, including arising out of the disposal, migration, Release or threatened Release of any Hazardous Substance owned, controlled or possessed by any Seller or any of its respective predecessors in interest, as applicable;

(g) any failure of any Seller or any of its respective predecessors in interest, as applicable, to comply with any Environmental Law prior to the Closing, including the installation of any pollution control equipment or other equipment to bring any of their Businesses or Purchased Assets into compliance with all Environmental Laws;

(h) any Liability arising under any Environmental Law assumed by any Seller or any of its respective predecessors in interest, as applicable, prior to the Closing pursuant to the terms of any Contract, Real Property Lease, settlement or other written and legally binding arrangement between or among any Seller or any of its respective predecessors in interest, as applicable, and any other Person; or

(i) any matter disclosed or required to be disclosed in Schedule 5.16 (Litigation) .

The foregoing agreement to indemnify shall not include any Loss solely resulting from a Purchaser Indemnified Party’s willful misconduct. If amounts are currently due and payable pursuant to a Deferred Payment or Earn-out Amount at the time of an Indemnification Claim, the Purchasers shall first satisfy such Indemnification Claim by offsetting the amount of such Deferred Payment or Earn-out Amount by the amount of the Indemnification Claim before seeking contribution from any other resources or assets of any Seller. If a Deferred Payment or Earn-out Amount are not due or payable at the time of the Indemnification Claim, or to the extent that the Indemnification Claim amount exceeds the amount of a Deferred Payment or Earn-out Amount, the Purchasers shall not be restricted with respect the satisfaction of such Indemnification Claim.

8.3 Indemnification by Purchaser . Subject to Section 8.5 hereof, the Purchasers hereby agree to reimburse, defend, indemnify and hold harmless the Sellers and their respective directors, officers, employees, stockholders, members, managers, partners, agents, attorneys, representatives, successors and permitted assigns (collectively, the “ Seller Indemnified Parties ”) from and against any and all Losses relating to, based upon, resulting from or arising out of:

(a) any inaccuracy or breach of any of the representations or warranties made by any Purchaser in this Agreement or any of the other Transaction Documents;

(b) any breach of or failure to perform any covenant or agreement made by any Purchaser in this Agreement or any of the other Transaction Documents;

(c) the ownership, use or operation of any of the Purchased Assets (but not the Excluded Assets) or any Business after the Closing, other than the Excluded Liabilities; or

(d) any of the Assumed Liabilities.

The foregoing agreement to indemnify shall not include any Loss solely resulting from a Seller Indemnified Party’s willful misconduct.

8.4 Indemnification Procedures .

(a) In the event that any Legal Proceedings shall be instituted, or that any claim shall be asserted, by any Person not party to this Agreement in respect of an Indemnification Claim, the party seeking indemnification (the “ Indemnified Party ”) shall promptly cause written notice of the assertion of any Indemnification Claim of which it has knowledge that is covered by this indemnity to be delivered to the party from whom indemnification is sought (the “ Indemnifying Party ”); provided that no delay on the part of the Indemnified Party in giving any such notice shall relieve the Indemnifying Party of any indemnification obligation hereunder unless (and then solely to the extent that) the Indemnifying Party is materially prejudiced by such delay. The Indemnifying Party shall have the right, at its sole option and expense, to be represented by counsel of its choice, which must be reasonably satisfactory to the Indemnified Party, and to defend against any Indemnification Claim and if the Indemnifying Party elects to defend against any Indemnification Claim, it shall within twenty (20) Business Days (or sooner, if the nature of the Indemnification Claim so requires) (the “ Dispute Period ”) notify the Indemnified Party of its intent to do so. If the Indemnifying Party does not elect within the Dispute Period to defend against any Indemnification Claim, the Indemnified Party may defend against such Indemnification Claim. If the Indemnifying Party elects to defend against any Indemnification Claim, (i) the Indemnifying Party shall use its commercially reasonable efforts to defend and protect the interests of the Indemnified Party with respect to such Indemnification Claim, (ii) the Indemnified Party, prior to or during the period in which the Indemnifying Party assumes the defense of such matter, may take such reasonable actions as the Indemnified Party deems necessary to preserve any and all rights with respect to such matter, without such actions being construed as a waiver of the Indemnified Party’s rights to defense and indemnification pursuant to this Agreement, (iii) the Indemnifying Party shall be deemed to have agreed that it shall indemnify the Indemnified Party for such Indemnification Claim pursuant to the provisions of this Article VIII and (iv) the Indemnified Party may participate, at his or its own expense, in the defense of such Indemnification Claim; provided , however , that such Indemnified Party shall be entitled to participate in any such defense with separate counsel at the expense of the Indemnifying Party if (A) so requested by the Indemnifying Party to participate or (B) based upon the advice of counsel to the Indemnified Party, a conflict or potential conflict exists between the Indemnified Party and the Indemnifying Party, or there are defenses available to the Indemnified Party that are different from or in addition to those available to the Indemnifying Party, that would make such separate representation advisable; and provided , further , that the Indemnifying Party shall not be required to pay for more than one firm of counsel (in addition to local counsel) for all Indemnified Parties in connection with an Indemnification Claim. The parties hereto agree to cooperate fully with each other in connection with the defense, negotiation or settlement of any such Indemnification Claim. Notwithstanding anything in this Section 8.4 to the contrary, the Indemnifying Party shall not, without the prior written consent of the Indemnified Party, settle or compromise, or permit a default or consent to entry of any judgment with respect to, any Indemnification Claim (each, a “ Settlement ”) unless (i) the claimant and such Indemnifying Party provide to such Indemnified Party an unqualified release from all Liability in respect of the Indemnification Claim, (ii) such Settlement does not impose any Liabilities on the Indemnified Party, and (iii) with respect to any non-monetary provision of such Settlement, such provisions would not, in the Indemnified Party’s reasonable judgment, have or be reasonably expected to have any adverse effect on the business, assets, properties, condition (financial or otherwise), results of operations or prospects of the Indemnified Party.

(b) If the Indemnifying Party does not undertake within the Dispute Period to defend against an Indemnification Claim, then the Indemnifying Party shall have the right to participate in any such defense at its sole cost and expense, but, in such case, the Indemnified Party shall control the investigation and defense and may settle or take any other actions the Indemnified Party deems reasonably advisable without in any way waiving or otherwise affecting the Indemnified Party’s rights to indemnification pursuant to this Agreement.

(c) In the event that an Indemnified Party should have an Indemnification Claim against the Indemnifying Party hereunder which it determines to assert, but which does not involve a Legal Proceeding or claim by a third party, the Indemnified Party shall send written notice to the Indemnifying Party describing in reasonable detail the nature of such Indemnification Claim and the Indemnified Party’s estimate of the amount of Losses attributable to such Indemnification Claim. The Indemnifying Party shall have twenty (20) Business Days from the date such claim notice is delivered during which to notify the Indemnified Party in writing of any good faith objections it has to the Indemnified Party’s notice or Indemnification Claim, setting forth in reasonable detail each of the Indemnifying Party’s objections thereto. If the Indemnifying Party does not deliver such written notice of objection within such twenty (20) Business Day period, the Indemnifying Party shall be deemed to have accepted responsibility for the prompt payment of the Indemnified Party’s Indemnification Claim, and shall have no further right to contest the validity of such Indemnification Claim. If the Indemnifying Party does deliver such written notice of objection within such twenty (20) Business Day period, the Indemnifying Party and the Indemnified Party shall attempt in good faith to resolve any such dispute within thirty (30) days of the delivery by the Indemnifying Party of such written notice of objection, and if not resolved in such thirty (30) day period, may be resolved through Legal Proceedings brought by either party or by such other means as such parties mutually agree.

(d) If the Sellers do not deliver a written notice of objection to a Purchaser Indemnified Party with respect to an Indemnification Claim in accordance with Section 8.4(c) , or an Indemnification Claim of a Purchaser Indemnified Party has been finally resolved by a Law of a Governmental Body with respect to which all appeals have been determined or rights to appeal have expired, by a Settlement or by agreement of such Purchaser Indemnified Party and any of the Sellers (in any such case, a “ Resolution ”), the amount of Losses incurred by such Purchaser Indemnified Party with respect to such Indemnification Claim shall be the joint and several obligations of the Sellers and shall be paid to such Purchaser Indemnified Party promptly following such Resolution.

8.5 Additional Indemnification Provisions .

(a) Any Indemnification Claim to be made by a Purchaser or a Seller, as the case may be, shall be made on or prior to the expiration of the applicable survival period set forth in Section 8.1 , except as otherwise provided therein.

(b) Other than with respect to the representations and warranties (i) set forth in Sections 5.1 (Organization and Good Standing) , 5.2 (Authorization of Agreement) , 5.4 (Capitalization) , Section 5.9 (Taxes) , 5.21 (Financial Advisors) , 6.1 (Organization and Good Standing) , 6.2 (Authorization of Agreement) , 6.8 (Financial Advisors) and the third sentence of Section 5.11 (Tangible Personal Property; Title to and Sufficiency of Assets) , or (ii) the inaccuracy or breach of which is the result of fraud, on or prior to the Closing, to which the Indemnity Threshold (as defined below) shall not apply, none of the Purchaser Indemnified Parties or Seller Indemnified Parties shall be permitted to recover any Losses under Section 8.2(a) or Section 8.3(a) , respectively, unless and until the aggregate amount of Losses under such Section considered together exceeds $25,000 (the “ Indemnity Threshold ”), whereupon the Purchaser Indemnified Parties or Seller Indemnified Parties, as applicable, shall be entitled to indemnification hereunder for all such Losses in excess of the Indemnity Threshold.

(c) In no event shall the total indemnification to be paid under Section 8.2 for Losses arising with respect to all matters exceed the Purchase Price, with the exception of indemnification for (x) any inaccuracy or breach of any of the representations and warranties as a result of fraud and (y) any inaccuracy or breach of any of the representations and warranties under Sections 5.9 (Taxes) , 5.18 (Environmental Matters) and 5.21 (Financial Advisors) to which no such limit shall apply and to which there shall be no limit on the ability to pursue all legal remedies.

(d) The right of the Indemnified Parties to indemnification or to assert or recover on any Indemnification Claim shall not be affected by any investigation conducted, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement, with respect to the accuracy or performance of, or compliance with, any of the representations, warranties, covenants or agreements set forth in this Agreement or any of the other Transaction Documents. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or agreement, shall not affect the right to indemnification or other remedy based on any such representation, warranty, covenant or agreement.

(e) Subject to the provisions set forth in this Article VIII , the Purchasers and the Sellers hereby acknowledge and agree that the Deferred Payments and the Earn-out Amount shall be available to compensate the Purchaser Indemnified Parties for any Losses incurred or sustained by such parties and subject to set-off for any such Losses; provided , however , that the payment of the Deferred Payments and the Earn-out Amount shall not serve as a bar to recovery by the Purchaser Indemnified Parties from the Sellers of any indemnifiable Losses and the Purchaser Indemnified Parties shall be entitled to look directly to the Sellers for any Losses in excess of the Deferred Payments and the Earn-out Amount.

8.6 Tax Treatment of Indemnity Payments . The Sellers and the Purchasers agree to treat any indemnity payment made pursuant to this Article VIII as an adjustment to the consideration for the Purchased Assets for federal, state, local and foreign income tax purposes.

8.7 Exclusive Remedy . The sole and exclusive remedy for any breach of or inaccuracy, or alleged breach of or inaccuracy, of any representation or warranty in this Agreement shall be indemnification in accordance with this Article VIII , except with respect to any claim based upon fraud or willful misrepresentation or misconduct by any Purchaser or any Seller.

ARTICLE IX

MISCELLANEOUS

9.1 Expenses . Except as otherwise expressly provided in this Agreement, each Purchaser and each Seller shall bear its own Expenses incurred in connection with the negotiation, preparation and execution of this Agreement and each other Transaction Document and the consummation of the transactions contemplated hereby and thereby, including all fees and disbursements of counsel, accountants, investment bankers and other advisors retained by such party.

9.2 Submission to Jurisdiction; Consent to Service of Process .

(a) The parties hereto hereby irrevocably submit to the exclusive jurisdiction of any federal or state court located within the State of Minnesota over any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby and each party hereby irrevocably agrees that all claims in respect of such dispute or any suit, action proceeding related thereto shall be heard and determined in such courts. The parties hereby irrevocably waive, to the fullest extent permitted by applicable Law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.

(b) Each of the parties hereto hereby consents to process being served by any party to this Agreement in any suit, action or proceeding by delivery of a copy thereof in accordance with the provisions of Section 9.5 .

9.3 Entire Agreement; Amendments and Waivers . This Agreement (including the schedules and exhibits hereto) and the Transaction Documents represent the entire understanding and agreement among the parties hereto with respect to the subject matter hereof. This Agreement can be amended, supplemented or changed, and any provision hereof can be waived, only by written instrument making specific reference to this Agreement signed by the party against whom enforcement of any such amendment, supplement, modification or waiver is sought. No action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.

9.4 Governing Law . This Agreement shall be governed by and construed in accordance with the Laws of the State of Minnesota applicable to contracts made and performed in such State, without reference to conflict of law rules that would require the application of the Laws of another jurisdiction.

9.5 Notices . All notices and other communications under this Agreement shall be in writing and shall be deemed given (a) when delivered personally by hand (with written confirmation of receipt), (b) when sent by facsimile (with written confirmation of transmission) or (c) one (1) Business Day following the day sent by overnight courier (with written confirmation of receipt), in each case at the following addresses and facsimile numbers (or to such other address or facsimile number as a party may have specified by notice given to the other party(ies) pursuant to this provision):

If to the Sellers or the Principals to:

Gary T. Mulcahy, Sr.
3050 Echo Lake Avenue
Mahtomedi, Minnesota 55115
Phone: (651) 747-4250
Facsimile: (651) 770-3418

With copies to (which shall not constitute notice) to:

Eugene F. Heger
1637 W. Plymouth Ave.
Broken Arrow, OK 74012
Phone: (651) 747-6909

Leonard, O’Brien, Spencer, Gale & Sayre, Ltd.
100 South Fifth Street, Suite 2500
Minneapolis, Minnesota 55402
Attention: Grover C. Sayre, III
Phone: (612) 332-1030
Facsimile: (612) 332-2740

If to the Purchasers or ATRM, to:

c/o ATRM Holdings, Inc.
3050 Echo Lake Avenue, Suite 300
Mahtomedi, Minnesota 55115
Attention: Dan Koch
Phone: (651) 704-1800

With a copy (which shall not constitute notice) to:

Olshan Frome Wolosky LLP
1325 Avenue of the Americas
New York, New York 10019
Attention: Adam W Finerman, Esq.
Phone: (212) 451-2300
Facsimile: (212) 451-2222

9.6 Severability . If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. Except as otherwise expressly provided for in this Agreement, nothing contained in any representation or warranty, or the fact that any representation or warranty may or may not be more specific than any other representation or warranty, shall in any way limit or restrict the scope, applicability or meaning of any other representation or warranty contained in this Agreement.

9.7 Binding Effect; No Third-Party Beneficiaries; Assignment . This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any Person not a party to this Agreement, except as otherwise contemplated by Sections 8.2 and 8.3 . No assignment of this Agreement or of any rights or obligations hereunder may be made by any Seller or any Purchaser, directly or indirectly (by operation of law or otherwise), without the prior written consent of the other parties hereto, and any attempted assignment without the required consents shall be void; provided , however , that any Purchaser may assign its rights, interests and obligations hereunder to any Affiliate; provided , further , that no assignment of any obligations hereunder shall relieve the parties hereto of any such obligations. Upon any such permitted assignment, the references in this Agreement to the Purchasers shall also apply to any such assignee unless the context otherwise requires.

9.8 Specific Performance . The parties acknowledge and agree that any breach of this Agreement would give rise to irreparable harm for which monetary damages would not be an adequate remedy. The Sellers and the Purchasers accordingly agree that the non-breaching party shall be entitled, in addition to any other remedies available under applicable Law or this Agreement, to enforce the terms of this Agreement by decree of specific performance without the necessity of proving the inadequacy of monetary damages as a remedy and to obtain injunctive relief against any breach or threatened breach of this Agreement, without the requirement to post bond or other security.

9.9 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original copy of this Agreement and all of which, when taken together, shall be deemed to constitute one and the same agreement, and photostatic, .pdf or facsimile copies of fully-executed counterparts of this Agreement shall be given the same effect as originals.

** REMAINDER OF PAGE INTENTIONALLY LEFT BLANK **

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly executed on its behalf as of the date first written above.

	PURCHASERS:

	ATRM HOLDINGS, INC.

	By:	/s/ Dan Koch
	Name:	Dan Koch
	Title:	Chief Executive Officer

	EdgeBuilder, Inc.

	By:	/s/ Dan Koch
	Name:	Dan Koch
	Title:	Chief Executive Officer

	Glenbrook Building Supply, Inc.

	By:	/s/ Dan Koch
	Name:	Dan Koch
	Title:	Chief Executive Officer

	SELLERS:

	EDGEBUILDER WALL PANELS, INC.

	By:	/s/ Eugene F. Heger
	Name:	Eugene F. Heger
	Title:	President

	GLENBROOK LUMBER & SUPPLY, INC.

	By:	/s/ Eugene F. Heger
	Name:	Eugene F. Heger
	Title:	President

	PRINCIPALS:

	/s/ EUGENE F. Heger
	EUGENE F. Heger

	/s/ Gary Mulcahy
	Gary Mulcahy

	/s/ MiCHAEL Klefstad
	MiCHAEL Klefstad

Exhibit A

	Closing		Deferred		Equity		Earn-out			IPE
Seller	Payments ⁽¹⁾		Payments ⁽²⁾		Payment ⁽³⁾		Percentage			Percentage
EdgeBuilder Wall Panels, Inc.	$	1,479,876.23	$	500,000.00		50,000 shares		50.0	%		50.0	%
Glenbrook Lumber & Supply, Inc.	$	1,479,876.23	$	500,000.00		50,000 shares		50.0	%		50.0	%

TOTAL	$	2,959,752.45	$	1,000,000		100,000 shares		100.0	%		100.0	%

(1) $3,000,000.00 less the amount of Assumed PTO ($40,247.55)

(2) Payable in four payments

(3) To be issued in accordance with instructions of each Seller

A- 1

Exhibit 4.1

Exhibit 10.14

LOAN AND SECURITY AGREEMENT

BETWEEN

GERBER FINANCE INC.

as Lender

EDGEBUILDER, INC. and

GLENBROOK BUILDING SUPPLY, INC.,

as Borrowers and Credit Parties

and

ATRM HOLDINGS, INC.

KBS BUILDERS, INC., and

MAINE MODULAR HAULERS, INC.

as Guarantors and Credit Parties

Dated: October 4, 2016

Table of Contents

I.	DEFINITIONS	1

	1.1 General Definitions.	1

	1.2 Accounting Terms.	17

	1.3 Other Terms.	17

II.	LOANS	18

	2.1 Revolving Credit Advances.	18

III.	REPAYMENT	19

	3.1 Repayment of the Revolving Credit Advances.	19

IV.	PROCEDURES	20

	4.1 Procedure for Revolving Credit Advances.	20

V.	INTEREST AND FEES	20

	5.1 Interest and Fees.	20

VI.	CONDITIONS PRECEDENT	22

	6.1 Conditions Precedent to Initial Loans.	22

	6.2 Conditions Precedent to each Loan.	22

	6.3 Conditions Precedent to Increase of Maximum Revolving Amount.	23

VII.	REPRESENTATIONS, WARRANTIES AND COVENANTS	23

	7.1 Corporate Existence; Compliance with Law.	23

	7.2 Names; Organizational Information; Collateral Locations.	24

	7.3 Power; Authorization; Enforceable Obligations.	24

	7.4 Financial Statements and Projections; Books and Records.	24

	7.5 Material Adverse Change.	25

	7.6 Real Estate; Property.	25

Table of Contents

	7.7 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.	25

	7.8 Government Regulation; Margin Regulations.	25

	7.9 Taxes; Charges.	26

	7.10 Payment of Obligations.	26

	7.11 ERISA.	26

	7.12 Litigation.	27

	7.13 Intellectual Property.	27

	7.14 Full Disclosure.	27

	7.15 Hazardous Materials.	27

	7.16 Insurance.	28

	7.17 Deposit and Disbursement Accounts.	28

	7.18 Accounts.	28

	7.19 Conduct of Business.	29

	7.20 Further Assurances.	29

VIII.	FINANCIAL REPORTS; FINANCIAL COVENANTS	29

	8.1 Reports and Notices.	29

	8.2 Financial Covenants.	31

	8.3 Other Reports and Information.	31

	8.4 Good Standing Certificates.	31

IX.	NEGATIVE COVENANTS	31

X.	SECURITY INTEREST	32

	10.1 Grant of Security Interest.	32

	10.2 Lender’s Rights.	35

	10.3 Lender’s Appointment as Attorney-in-Fact.	36

iii

Table of Contents

	10.4 Grant of License to Use Intellectual Property Collateral.	36

	10.5 Terminations; Amendments Not Authorized.	37

	10.6 Inspections.	37

XI.	TERM	37

	11.1 Term of Agreement.	37

	11.2 Termination of Lien.	38

XII.	EVENTS OF DEFAULT	38

	12.1 Events of Default.	38

	12.2 Lender Remedies.	40

	12.3 Waivers.	42

	12.4 Proceeds.	42

XIII.	MISCELLANEOUS	42

	13.1 No Waiver; Cumulative Remedies.	42

	13.2 Amendments and Waivers.	42

	13.3 Expenses; Indemnity.	42

	13.4 Borrowing Agency Provisions.	43

	13.5 Guaranty.	44

	13.6 Waivers.	45

	13.7 Benefit of Guaranty.	45

	13.8 Subordination of Subrogation.	45

	13.9 Election of Remedies.	45

	13.10 Liability Cumulative.	46

	13.11 Waiver of Subrogation.	46

	13.12 Further Assurances.	46

	13.13 Successors and Assigns.	46

Table of Contents

	13.14 Descriptive Headings.	46

	13.15 Notices.	47

	13.16 Severability.	47

	13.17 Entire Agreement; Counterparts.	47

	13.18 SUBMISSION TO JURISDICTION.	47

	13.19 WAIVER OF TRIAL BY JURY, CERTAIN DAMAGES AND SETOFFS.	48

	13.20 GOVERNING LAW.	48

	13.21 Reinstatement.	49

INDEX OF EXHIBITS AND SCHEDULES

Schedule I	-	General Terms for Letter of Credit
Schedule II	-	Conditions Precedent
Schedule III	-	Financial Covenants
Schedule IV	-	Cash Management
Schedule V	-	Addresses for Notices

Attachment A

Fees, Charges and Commissions

Exhibit A	-	Form of Note
Exhibit B	-	Form of Monthly Statement Report
Exhibit C	-	Form of Borrowing Base Certificate
Exhibit D	-	Form of Certificate of Compliance
Exhibit E	-	Form of Power of Attorney
Exhibit F	-	Form of Accountant’s Letter
Exhibit G	-	Form of Officer’s Certificate
Exhibit H	-	Form of Account Debtor Notification Letter
Exhibit I	-	Form of Intellectual Property Security Agreement

Disclosure Schedule 7.2	-	Names, Organizational Information
		and Collateral Locations
Disclosure Schedule 7.6	-	Real Estate
Disclosure Schedule 7.7	-	Ventures, Subsidiaries and Affiliates
Disclosure Schedule 7.9	-	Taxes
Disclosure Schedule 7.12	-	Litigation
Disclosure Schedule 7.13	-	Intellectual Property
Disclosure Schedule 7.15	-	Environmental Matters
Disclosure Schedule 7.16	-	Insurance
Disclosure Schedule 7.17	-	Deposit and Disbursement Accounts
Disclosure Schedule 9(b)	-	Indebtedness
Disclosure Schedule 9(e)	-	Permitted Liens

LOAN AND SECURITY AGREEMENT

This Loan and Security Agreement is made as of October 4, 2016 by and among GERBER FINANCE INC. , a New York corporation (“ Lender ”), EDGEBUILDER, INC. , a Delaware corporation, and GLENBROOK BUILDING SUPPLY, INC. , a Delaware corporation (individually, “ Initial Borrower ”) and, collectively, if more than one, the “ Initial Borrowers ”), and together with each other Person which, on or subsequent to the Closing Date, agrees in writing to become a “Borrower” hereunder, herein called, individually, a “ Borrower ” and, collectively, jointly and severally, the “ Borrowers ,” and pending the inclusion by written agreement of any other such Person, besides each Initial Borrower, as a “Borrower” hereunder, all references herein to “Borrowers,” “each Borrower,” the “applicable Borrower,” “such Borrower” or any similar variations thereof (whether singular or plural) shall all mean and refer to the Initial Borrower or each one of them collectively) and any other Credit Party executing or becoming a party to this Agreement, including but not limited to ATRM HOLDINGS, INC ., a Minnesota corporation, KBS BUILDERS, INC. , a Delaware corporation, and MAINE MODULAR HAULERS, INC. , a Delaware corporation, each as a guarantor, “ Guarantor ”.

BACKGROUND

Borrowers have requested that Lender make loans and advances available to Borrowers; and

Lender has agreed to make such loans and advances to Borrowers on the terms and conditions set forth in this Agreement and any amendment thereto.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and the mutual covenants and undertakings and terms and conditions contained herein, the parties hereto agree as follows:

I.	DEFINITIONS

1.1 General Definitions. When used in this Agreement, the following terms shall have the following meanings: “Account Debtor” means any Person who is or may become obligated with respect to, or on account of, an Account, Chattel Paper or General Intangibles (including a Payment Intangible).

“Accounts” means all “accounts”, as such term is defined in the UCC, now owned or hereafter acquired by any Person.

“Accounts Availability” means the amount of Revolving Credit Advances against Eligible Accounts Lender may from time to time make available to a Borrower up to eighty percent (80%) of the net face amount of such Borrower’s Eligible Accounts.

“Affiliate” means with respect to any Person (i) each other Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, ten percent (10%) or more of the Stock having ordinary voting power for the election of directors of such Person; (ii) each other Person that controls, is controlled by or is under common control with such Person or any Affiliate of such Person; or (iii) each of such Person’s officers, directors, joint venturers and partners. For the purpose of this definition, “control” of a Person means the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise.

“Agreement” means this Agreement including all appendices, exhibits or schedules attached or otherwise identified thereto, restatements and modifications and supplements thereto, and any appendices, exhibits or schedules to any of the foregoing, each as in effect at the time such reference becomes operative; provided, that except as specifically set forth in this Agreement, any reference to the Disclosure Schedules to this Agreement shall be deemed a reference to the Disclosure Schedules as in effect on the Closing Date or in a written amendment thereto executed by Borrowers and Lender.

“Books and Records” means all books, records, board minutes, contracts, licenses, insurance policies, environmental audits, business plans, files, computer files, computer discs and other data and software storage and media devices, accounting books and records, financial statements (actual and pro forma), filings with Governmental Authorities and any and all records and instruments relating to, or otherwise necessary or helpful in the collection of or realization upon, the Collateral or any Borrower’s business.

“Borrowing Base” means at any time with respect to Borrowers, an amount equal to the sum at such time of:

(a) Accounts Availability; plus

(b) Inventory Availability; plus

(d) the Reserves, including without limitation, the amount of Letter of Credit Obligations.

“Borrowing Base Certificate” means a certificate in the form of Exhibit C.

“Borrowing Representative” means Glenbrook Building Supply, Inc.

“Business Day” means a day on which Lender is open for business and that is not a Saturday, a Sunday or other day on which banks are required or permitted to be closed in the State of New York.

“Capital Expenditures” means all payments or accruals (including obligations under capital leases) for any fixed assets or improvements or for replacements, substitutions or additions thereto, that have a useful life of more than one year and that are required to be capitalized under GAAP.

“Cash Collateral Account” has the meaning assigned to it in Schedule I.

“Change of Control” means, with respect to any Person on or after the Closing Date, any change in the (i) composition of such Person’s Stockholders as of the Closing Date shall occur which would result in any Stockholder or group acquiring 49.9% or more of any class of Stock of such Person, or that any Person (or group of Persons acting in concert) shall otherwise acquire, directly or indirectly (including through Affiliates), the power to elect a majority of the board of directors or managers of such Person or otherwise direct the management or affairs of such Person by obtaining proxies, entering into voting agreements or trusts, acquiring securities or otherwise, which definition shall not apply with respect to the ownership or control of ATRM Holdings, Inc. by either Lone Star Value Investors, LP or Lone Star Value Co-Invest I, LP; or (ii) majority of the board of directors of ATRM Holdings, Inc. as of the Closing Date having the right to vote or if Daniel M. Koch is no longer employed by a Corporate Credit Party.

“Charges” means all federal, state, county, city, municipal, local, foreign or other governmental taxes (including taxes owed to PBGC at the time due and payable), levies, customs or other duties, assessments, charges, liens, and all additional charges, interest, penalties, expenses, claims or encumbrances relating to the foregoing upon or relating to (i) the Collateral, (ii) the Obligations, (iii) the employees, payroll, income or gross receipts of a Credit Party, (iv) the ownership or use of any assets by a Credit Party, or (v) any other aspect of a Credit Party’s business.

“Chattel Paper” means all “chattel paper,” as such term is defined in the UCC, now owned or hereafter acquired by any Person.

“Closing Date” means the Business Day on which the conditions precedent set forth in Article VI have been satisfied or specifically waived in writing by Lender, and the initial Loans has been made.

“Collateral” has the meaning assigned to it in Section 10.1.

“Collateral Account” means an account in Lender’s name under the dominion and control of Lender maintained at a financial institution acceptable to Lender into which all cash, checks, notes, drafts and other similar items relating to or constituting Proceeds of or payments made in respect of any Collateral shall be deposited.

“Contract Rate” means an interest rate per annum equal to the sum of (i) the Prime Rate plus (ii) two and three-quarters percent (2.75%).

“Contracts” means all the contracts, undertakings, or agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which any Person may now or hereafter have any right, title or interest, including any agreement relating to the terms of payment or the terms of performance of any Account.

“Contractual Obligation” means as to any Person, any provision of any security issued by such Person or of any agreement, instrument, or other undertaking to which such Person is a party or by which it or any of its property is bound.

“Corporate Credit Party” means each Credit Party and Guarantor which is not a natural Person.

“Credit Documents” means this Agreement, the Note, each Guaranty, each Power of Attorney, each Life Insurance Assignment, each Subordination Agreement, each Intercreditor Agreement, each Intellectual Property Security Agreement, and all other documents, instruments and agreements now or hereafter executed and/or delivered in connection herewith or therewith and/or as any or all of the foregoing documents, instruments, and agreements may now or hereafter be amended.

“Credit Parties” means each Borrower and each other Person (other than Lender) that is or may become a party to this Agreement or any other Credit Document, including but not limited to ATRM Holdings, Inc., a Minnesota corporation, KBS Builders, Inc., a Delaware corporation, and Maine Modular Haulers, Inc., a Delaware corporation.

“Default” means any act or event which, with the giving of notice or passage of time or both, would unless cured or waived become an Event of Default.

“Default Rate” means the sum of (a) the interest rate or fee in effect from time to time as respects each Loan and (b) five percent (5%).

“Deposit Accounts” means all “deposit accounts” as such term is defined in the UCC, now or hereafter held in the name of any Person.

“Disbursement Accounts” has the meaning set forth in Schedule IV.

“Disclosure Schedules” means the Disclosure Schedules prepared by Borrowers and denominated as Disclosure Schedules 7.2 through 9(e) in the Index of Exhibits and Schedules to this Agreement.

“Documents” means all “documents,” as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever located, including all bills of lading, dock warrants, dock receipts, warehouse receipts, and other documents of title, whether negotiable or non-negotiable.

“Eligible Accounts” means and includes each Account of each Borrower which conforms to the following criteria: (a) shipment of the merchandise or the rendition of services has been completed; (b) merchandise or services shall not have been repossessed, returned, rejected or disputed by the Account Debtor and there shall not have been asserted any offset, defense or counterclaim; (c) continues to be in full conformity with the representations and warranties made by any Borrower to Lender with respect thereto; (d) Lender is, and continues to be, satisfied with the credit standing of the Account Debtor in relation to the amount of credit extended; (e) there are no facts existing or threatened which are likely to result in any adverse change in an Account Debtor’s financial condition; (f) is documented by an invoice in a form approved by Lender and shall not be unpaid more than ninety (90) days from invoice date; (g) less than thirty-three percent (33%) of the unpaid amount of invoices due from such Account Debtor remain unpaid more than ninety (90) days from invoice date; (h) is not evidenced by chattel paper or an instrument of any kind with respect to or in payment of the Account unless such instrument is duly endorsed to and in possession of Lender or represents a check in payment of an Account; (i) if the Account Debtor is located outside of the United States, the goods which gave rise to such Account were shipped after receipt by a Borrower from or on behalf of the Account Debtor of an irrevocable letter of credit, or the subject of credit insurance assigned and delivered to Lender and confirmed by a financial institution acceptable to Lender and is in form, amount, and substance acceptable to Lender, payable in the full amount of the Account in United States dollars at a place of payment located within the United States; (j) Lender has a first priority perfected Lien in such Account and such Account is not subject to any other Lien other than Permitted Liens; (k) does not arise out of transactions with any employee, officer, agent, director, stockholder or Affiliate of a Borrower or Credit Party; (l) is payable to a Borrower; (m) does not arise with respect to goods which are delivered on a cash-on-delivery basis, credit card sale, or placed on consignment, guaranteed sale or other terms by reason of which the payment by the Account Debtor may be conditional; (n) is not an obligation of an Account Debtor that has suspended business, made a general assignment for the benefit of creditors, is unable to pay its debts as they become due or as to which a petition has been filed (voluntary or involuntary) under any law relating to bankruptcy, insolvency, reorganization or relief of debtors; (o) does not arise out of a bill and hold sale prior to shipment (p) does not arise out of a sale to any Person to which any Borrower is indebted, unless the amount of such indebtedness, and any anticipated indebtedness, is deducted in determining the face amount of such Account; (q) is net of any returns, discounts, claims, credits and allowances; (r) if the Account arises out of contracts between a Borrower and the United States, any state, or any department, agency or instrumentality of any of them, such Borrower has so notified Lender, in writing, prior to the creation of such Account, and, if Lender so requests, there has been compliance with any governmental notice or approval requirements, including compliance with the Federal Assignment of Claims Act; (s) is a good and valid account representing an undisputed bona fide indebtedness incurred by the Account Debtor therein named, for a fixed sum as set forth in the invoice relating thereto with respect to an unconditional sale and delivery upon the stated terms of goods sold by a Borrower, or work, labor and/or services (and not a sample) rendered by a Borrower; (t) the total unpaid Accounts from such Account Debtor does not exceed twenty percent (20%) of all Eligible Accounts but only the excess above twenty percent (20%) shall be excluded from Eligible Accounts ; (u) does not arise out of progress billings prior to completion of the order; (v) such Borrower’s right to payment is absolute and not contingent upon the fulfillment of any condition whatsoever; (w) a Borrower is able to bring suit and enforce its remedies against the Account Debtor through judicial process; (x) does not represent interest payments, late or finance charges or service charges owing to Borrower; (y) represents a contractual relationship which is current and ongoing as determined by Lender unless credit insurance is assigned and delivered to Lender and confirmed by a financial institution acceptable to Lender and is in form, amount, and substance acceptable to Lender, payable in the full amount of the Account in United States dollars at a place of payment located within the United States for any such Account which Lender determines in it is sole discretion is significant and no longer current and ongoing; and (z) is otherwise satisfactory to Lender as determined in good faith by Lender in the reasonable exercise of its discretion.

“Eligible Equipment” means Equipment owned by Borrower which is subject to the Lien in favor of Lender, is subject to no other Liens whatsoever (other than Permitted Liens), is supported by an acceptable appraisal in form and substance satisfactory to Lender (other than for Equipment purchased after the Closing Date which shall be deemed to be appraised at the purchase price thereof provided that Borrower submits proof of purchase which is otherwise satisfactory to Lender in its sole discretion), and which Lender in its sole discretion deems eligible for borrowing purposes.

“Eligible Inventory” means Inventory owned by a Borrower which Lender, in its sole and absolute discretion, determines: (a) is subject to a first priority perfected Lien in favor of Lender and is subject to no other Liens whatsoever other than Permitted Liens; (b) is located on premises owned or operated by a Borrower; (c) is located on premises in the United States with respect to which Lender has received a landlord, mortgagee or warehouse agreement acceptable in form and substance to Lender; (d) is not in transit; (e) is not covered by a negotiable document of title, unless such document and evidence of acceptable insurance covering such Inventory has been delivered to Lender; (f) is in good condition and meets all standards imposed by any governmental agency, or department or division thereof having regulatory Governmental Authority over such Inventory, its use or sale including the Federal Fair Labor Standards Act of 1938 as amended, and all rules, regulations and orders thereunder; (g) is currently either usable or saleable in the normal course of a Borrower’s business; (h) is not placed by a Borrower on consignment or held by a Borrower on consignment from another Person; (i) is in conformity with the representations and warranties made by a Borrower to Lender with respect thereto; (j) is not subject to any licensing, patent, royalty, trademark, trade name or copyright agreement with any third parties; (k) does not require the consent of any Person for the completion of manufacture, sale or other disposition of such Inventory by Lender following an Event of Default and such completion, manufacture or sale does not constitute a breach or default under any contract or agreement to which a Borrower is a party or to which such Inventory is or may be subject; (l) is not work-in-process, special order, or raw materials; (m) is covered by casualty insurance acceptable to Lender; (n) is not obsolete, defective or slow moving inventory; (o) is not packing or sample inventory; (p) not to be ineligible for any other reason; and (q) is reported to Lender pursuant to Section 8.1 hereof by means of financial reporting systems acceptable to Lender not later than the commencement of the first fiscal quarter of each Borrower’s 2017 Fiscal Year unless Lender in its sole discretion elects (as an alternative) to conduct an appraisal of Inventory at the cost and expense of Borrower and the results of such appraisal are satisfactory to Lender.

“Environmental Laws” means all federal, state and local laws, statutes, ordinances and regulations, now or hereafter in effect, and in each case as amended or supplemented from time to time, and any applicable judicial or administrative interpretation thereof relating to the regulation and protection of human health, safety, the environment and natural resources (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation).

“Environmental Liabilities” means all liabilities, obligations, responsibilities, remedial actions, removal costs, losses, damages of whatever nature, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants and costs of investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim, suit, action or demand of whatever nature by any Person, and which relate to any health or safety condition regulated under any Environmental Law, environmental permits or in connection with any Release, threatened Release, or the presence of a Hazardous Material.

“Equipment” means all “equipment” as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever located.

“Equipment Availability” means the amount of Revolving Credit Advances against Eligible Equipment Lender may from time to time make available to Borrowers up to seventy percent (70%) of the appraised net forced liquidation value as determined by an appraiser acceptable to Lender of Borrowers’ Eligible Equipment.

“ERISA” means the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time, and any regulations promulgated thereunder.

“ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the IRC or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(b) of the IRC or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by any Credit Party of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by any Credit Party from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or to appoint a trustee to administer any Plan; (f) the incurrence by any Credit Party of any liability with respect to any withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by any Credit Party of any notice, or the receipt by any Multiemployer Plan from any Credit Party of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

“Event of Default” has the meaning set forth in Section 12.1.

“Financial Statements” means income statement, balance sheet and statement of cash flows of each Corporate Credit Party, internally prepared for each Fiscal Month, and Fiscal Year, and for ATRM Holdings, Inc., for each Fiscal Year audited (with a supporting schedule for the other Corporate Credit Parties) and certified by an independent certified accounting firm acceptable to Lender (as of Closing Date Boulay PLLP shall be deemed acceptable to Lender) each prepared in accordance with GAAP and in accordance with this Agreement.

“Fiscal Month” means any of the monthly accounting periods of each Credit Party.

“Fiscal Year” means the 12 month period of each Credit Party ending December 31 of each year. Subsequent changes of the fiscal year of each Credit Party shall not change the term “Fiscal Year” unless Lender shall consent in writing to such change.

“Fixtures” means all “fixtures” as such term is defined in the UCC, now owned or hereafter acquired by any Person.

“GAAP” means generally accepted accounting principles, practices and procedures in effect from time to time in the United States of America.

“General Intangibles” means all “general intangibles” as such term is defined in the UCC, now owned or hereafter acquired by any Person including all right, title and interest which such Person may now or hereafter have in or under any Contract, all Payment Intangibles, customer lists, Licenses, Intellectual Property, interests in partnerships, joint ventures and other business associations, permits, proprietary or confidential information, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how, Software, data bases, data, skill, expertise, experience, processes, models, drawings, materials, Books and Records, Goodwill (including the Goodwill associated with any Intellectual Property), all rights and claims in or under insurance policies (including insurance for fire, damage, loss, and casualty, whether covering personal property, real property, tangible rights or intangible rights, all liability, life, key-person, and business interruption insurance, and all unearned premiums), uncertificated securities, choses in action, deposit accounts, rights to receive tax refunds and other payments, rights to receive dividends, distributions, cash Instruments and other property in respect of or in exchange for pledged Stock and Investment Property, and rights of indemnification.

“Goods” means all “goods”, as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever located, including embedded software to the extent included in “goods” as defined in the UCC.

“Goodwill” means all goodwill, trade secrets, proprietary or confidential information, technical information, procedures, formulae, quality control standards, designs, operating and training manuals, customer lists, and distribution agreements now owned or hereafter acquired by any Person.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Guaranteed Indebtedness” means, as to any Person, any obligation of such Person guaranteeing any indebtedness, lease, dividend, or other obligation (“primary obligations”) of any other Person (the “primary obligor”) in any manner, including any obligation or arrangement of such guaranteeing Person (whether or not contingent): (i) to purchase or repurchase any such primary obligation; (ii) to advance or supply funds (a) for the purchase or payment of any such primary obligation or (b) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition of the primary obligor; (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation; or (iv) to indemnify the owner of such primary obligation against loss in respect thereof.

“Guarantor” means each Person which executes a guaranty or a support, put or other similar agreement in favor of Lender in connection with the transactions contemplated by this Agreement, including but not limited to ATRM Holdings, Inc., a Minnesota corporation, KBS Builders, Inc., a Delaware corporation, and Maine Modular Haulers, Inc., a Delaware corporation.

“Guaranty” means any agreement to perform all or any portion of the Obligations on behalf of any Borrower, in favor of, and in form and substance satisfactory to, Lender, together with all amendments, modifications and supplements thereto, and shall refer to such Guaranty as the same may be in effect at the time such reference becomes operative.

“Hazardous Material” means any substance, material or waste which is regulated by or forms the basis of liability now or hereafter under, any Environmental Laws, including any material or substance which is (a) defined as a “solid waste,” “hazardous waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste,” “restricted hazardous waste,” “pollutant,” “contaminant,” “hazardous constituent,” “special waste,” “toxic substance” or other similar term or phrase under any Environmental Laws, (b) petroleum or any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB’s), or any radioactive substance.

“Hazardous Waste” has the meaning ascribed to such term in the Resource Conservation and Recovery Act (42 U.S.C. §§ 6901 et. seq.).

“Indebtedness” of any Person means: (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (including reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers’ acceptances, whether or not matured, but not including obligations to trade creditors incurred in the ordinary course of business and not more than 60 days past due); (ii) all obligations evidenced by notes, bonds, debentures or similar instruments; (iii) all indebtedness created or arising under any conditional sale or other title retention agreements with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); (iv) all obligations under capital leases; (v) all Guaranteed Indebtedness; (vi) all Indebtedness referred to in clauses (i), (ii), (iii), (iv) or (v) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; (vii) the Obligations; and (viii) all liabilities under Title III of ERISA.

“Indemnified Person” has the meaning given to such term in Section 13.3(b).

“Instruments” means all “instruments”, as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever located, including all certificated securities and all notes and other evidences of indebtedness, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper.

“Intellectual Property” means any and all Licenses, patents, patent registrations, copyrights, copyright registrations, trademarks, trademark registrations, trade secrets, domain names, website addresses and customer lists.

“Intellectual Property Security Agreement” means the Intellectual Property Security Agreement in the form of Exhibit I made in favor of Lender by each applicable Credit Party.

“Intercreditor Agreement” means any intercreditor and subordination agreement accepted by Lender from time to time.

“Inventory” means all “inventory”, as such term is defined in the UCC, now or hereafter owned or acquired by any Person, wherever located.

“Inventory Availability” means the amount of Revolving Credit Advances against Eligible Inventory Lender may from time to time make available to Borrowers up to the lesser of (a) up to fifty percent (50%) of the value of Borrowers’ Eligible Inventory and if the financial reporting systems for Inventory required by Section 8.1 hereof are not acceptable to Lender by the commencement of the first fiscal quarter of each Borrower’s 2017 Fiscal Year, reducing to up to thirty percent (30%) of the value of Borrower’s Eligible Inventory (calculated on the basis of the lower of cost or market, on a first-in first-out basis) or (b) commencing ninety (90) days after the Closing Date, seventy five percent (75%) of the amount of Accounts Availability; provided, however, that Inventory is reported to Lender pursuant to Section 8.1 hereof by means of financial reporting systems acceptable to Lender not later than the commencement of the first fiscal quarter of each Borrower’s 2017 Fiscal Year unless Lender in its sole discretion elects (as an alternative) to conduct an appraisal of Inventory at the cost and expense of Borrower and the results of such appraisal are satisfactory to Lender..

“Investment Property” means all “investment property”, as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever located.

“IRC” and “IRS” means respectively, the Internal Revenue Code of 1986 and the Internal Revenue Service, and any successors thereto.

“ISP” means the International Standby Practices, International Chamber of Commerce Publication No. 590, as the same may be amended from time to time.

“LC Issuer” shall mean a commercial bank or other financial institution selected by Lender, in is discretion, to issue Letters of Credit pursuant to this Agreement.

“Lender” has the meaning set forth in the preamble to this Agreement and if Lender shall decide to assign or syndicate any of the Obligations such term shall include such assignee or such other members of the syndicate.

“Letter of Credit” and “ L/C ” means a letter of credit issued by an LC Issuer for Lender’s account, at the request of Borrowing Representative and on behalf of a Borrower containing terms and conditions satisfactory to Lender, which letter of credit may either be a commercial letter of credit or standby letter of credit.

“Letter of Credit Fee” has the meaning set forth in Schedule I.

“Letter of Credit Obligations” means all outstanding obligations (including all duty, freight, taxes, costs, insurance and any other charges and expenses) incurred by Lender, whether direct or indirect, contingent or otherwise, due or not due, in connection with the issuance or guarantee, by Lender or another, of Letters of Credit or Letters of Guaranty, all as further set forth in Schedule I.

“Letter-of-Credit Rights” has the meaning given to “letter-of-credit rights” as such term is defined in the UCC, now owned or hereafter acquired by any Person, including rights to payment or performance under a letter of credit, whether or not such Person, as beneficiary, has demanded or is at the time entitled to demand payment or performance.

“Letters of Guaranty” and “L/G ” means a letter of guaranty issued by Lender for the account of a Borrower guarantying payment of the purchase price of the goods financed thereby, containing terms and conditions satisfactory to Lender.

“License” means any rights under any written agreement now or hereafter acquired by any Person to use any trademark, trademark registration, copyright, copyright registration or invention for which a patent is in existence or other license of rights or interests now held or hereafter acquired by any Person.

“Lien” means any mortgage, security deed or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, security interest, charge, claim or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever, including any lease or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing or recording, or agreement to give, any financing statement or recordable instrument under the UCC or comparable real or personal property law of any jurisdiction.

“Life Insurance Assignment” means an Assignment of Life Insurance Policy as Collateral to be executed by the owner and the beneficiary thereof, in form and substance satisfactory to Lender, granting Lender a Lien on the Life Insurance Policy to secure payment of the Obligations.

“Life Insurance Policy” means the life insurance policy maintained by any Credit Party upon the life of Matthew Mosher with the death benefit thereunder of at least $4,000,000 in the aggregate on new or existing policies.

“Litigation” means any claim, lawsuit, litigation, investigation or proceeding of or before any arbitrator or Governmental Authority.

“Loans” means the Revolving Credit Advances and all extensions of credit hereunder or under any Credit Document, including Letter of Credit Obligations.

“ Margin Stock ” has the meaning set forth in Section 7.8.

“Material Adverse Effect” means a material adverse effect on (a) the condition, operations, assets, business or prospects of any Credit Party, (b) any Credit Party’s ability to pay or perform the Obligations in accordance with the terms hereof or any Credit Document, (c) the value of the Collateral, the Liens on the Collateral or the priority of any such Lien or (d) the practical realization of the benefits of Lender’s rights and remedies under this Agreement and the Credit Documents.

“Maturity Date” means October 3, 2018.

“Maximum Legal Rate” shall have the meaning given to such term in Section 5.1(a)(iv).

“Maximum Revolving Amount” means ONE MILLION DOLLARS ($1,000,000) but which may be increased to THREE MILLION DOLLARS ($3,000,000) in increments of not more than Five Hundred Dollars ($500,000) in the sole discretion of Lender upon satisfaction of each condition precedent in Section 6.3 hereof.

“Minimum Actionable Amount” means TWENTY FIVE THOUSAND DOLLARS ($25,000).

“Minimum Average Monthly Loan Amount” means fifty percent (50%) of the Maximum Revolving Amount.

“Multiemployer Plan” means a “multiemployer plan,” as defined in Section 4001(a) (3) of ERISA, to which any Credit Party is making, is obligated to make, has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them.

“Note” means the promissory note of Borrowers executed in favor of Lender substantially in the form of Exhibit A.

“Obligations” means all obligations under any Guaranty and all Loans, and any Guaranty, Loans or Obligations defined in any other agreement executed by any Credit Party now existing or hereafter arising, all advances, debts, liabilities, obligations, covenants and duties owing by any Credit Party to Lender (or any corporation that directly or indirectly controls or is controlled by or is under common control with Lender) of every kind and description (whether or not evidenced by any note or other instrument and whether or not for the payment of money or the performance or non-performance of any act), direct or indirect, absolute or contingent, due or to become due, contractual or tortious, liquidated or unliquidated, whether existing by operation of law or otherwise now existing or hereafter arising including any debt, liability or obligation owing from any Credit Party to others which Lender may have obtained by assignment or otherwise and further including all interest (including interest accruing at the then applicable rate provided in this Agreement after the maturity of the Loans and interest accruing at the then applicable rate provided in this Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), fees, charges or any other payments any Credit Party is required to make or pay by law or otherwise arising under or as a result of this Agreement or any other Credit Document, or otherwise together with all reasonable expenses and reasonable attorneys’ fees chargeable to any Credit Party’s account or incurred by Lender in connection with any Credit Party’s account whether provided for herein or in any Credit Document.

“Pass Thru Distributions” mean dividends declared and paid by a Credit Party to its Stockholders, or which could have been declared and paid by a Credit Party, in an amount not to exceed the Pass Thru Tax Liabilities.

“Pass Thru Tax Liabilities” means the amount of state and federal income tax paid or to be paid by a Credit Party’s Stockholders on taxable income earned by such Credit Party and attributable to the Stockholder as a result of such Credit Party’s status as a disregarded entity for tax purposes, assuming the highest marginal income tax rate for federal and state (for the state or states in which any Stockholder is liable for income taxes with respect to such income) income tax purposes, after taking into account any deduction for state income taxes in calculating the federal income tax liability and all other deductions, credits, deferrals and other reductions available to Stockholders from or through a Credit Party.

“Payment Intangible” has the meaning give to the term “payment intangible” in the UCC and in any event shall include, a General Intangible under which the Account Debtor’s principal obligation is a monetary obligation.

“Payment Office” means 488 Madison Avenue, Suite 800, New York, New York 10022 or such other place as Lender may from time to time designate in writing.

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

“Permitted Liens” means the following Liens: (i) Liens for taxes or assessments or other governmental Charges or levies, either not yet due and payable or to the extent that nonpayment thereof is permitted by the terms of Section 7.10; (ii) pledges or deposits securing obligations under worker’s compensation, unemployment insurance, social security or public liability laws or similar legislation; (iii) pledges or deposits securing bids, tenders, contracts (other than contracts for the payment of money) or leases to which any Credit Party is a party as lessee made in the ordinary course of business; (iv) deposits securing public or statutory obligations of any Credit Party; (v) inchoate and unperfected workers’, mechanics’, or similar liens arising in the ordinary course of business so long as such Liens attach only to Equipment, fixtures or real estate; (vi) carriers’, warehousemen’s, suppliers’ or other similar possessory liens arising in the ordinary course of business and securing indebtedness not yet due and payable in an outstanding aggregate amount not in excess of the Minimum Actionable Amount at any time so long as such Liens attach only to Inventory; (vii) deposits of money securing, or in lieu of, surety, appeal or customs bonds in proceedings to which any Credit Party is a party; (viii) zoning restrictions, easements, licenses, or other restrictions on the use of real property or other minor irregularities in title (including leasehold title) thereto, so long as the same do not materially impair the use, value, or marketability of such real estate; (ix) Purchase Money Liens securing Purchase Money Indebtedness (or rent) to the extent permitted under Article IX(b); (x) Liens in existence on the Closing Date as disclosed on Disclosure Schedule 9(e) provided that no such Lien is spread to cover additional property after the Closing Date and the amount of Indebtedness secured thereby is not increased; and (xi) Liens in favor of Lender securing the Obligations.

“Person” means any individual, sole proprietorship, partnership, limited liability partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof), and shall include such Person’s successors and assigns.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title III of ERISA or Section 412 of the IRC or Section 302 of ERISA, and in respect of which a Credit Party is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Prime Rate” means the “prime rate” which from time to time published in the “Money Rates” column of The Wall Street Journal (Eastern Edition, New York Metro); provided, however, if the Money Rates column of The Wall Street Journal (Eastern Edition, New York Metro) ceases to be published or otherwise does not designate a “prime rate” as of a Business Day, Lender has the right to obtain such information from a similar business publication of its selection. The Prime Rate shall be increased or decreased as the case may be for each increase or decrease in the Prime Rate in an amount equal to such increase or decrease in the Prime Rate; each change to be effective as of the day of the change in such rate.

“Proceeds” means “proceeds”, as such term is defined in the UCC and, in any event, shall include: (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to any Credit Party or any other Person from time to time with respect to any Collateral; (b) any and all payments (in any form whatsoever) made or due and payable to a Credit Party from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of any Collateral by any governmental body, governmental authority, bureau or agency (or any person acting under color of governmental authority); (c) any claim of a Credit Party against third parties (i) for past, present or future infringement of any Intellectual Property or (ii) for past, present or future infringement or dilution of any trademark or trademark license or for injury to the goodwill associated with any trademark, trademark registration or trademark licensed under any trademark License; (d) any recoveries by a Credit Party against third parties with respect to any litigation or dispute concerning any Collateral, including claims arising out of the loss or nonconformity of, interference with the use of, defects in, or infringement of rights in, or damage to, Collateral; (e) all amounts collected on, or distributed on account of, other Collateral, including dividends, interest, distributions and Instruments with respect to Investment Property and pledged Stock; and (f) any and all other amounts , rights to payment or other property acquired upon the sale, lease, license, exchange or other disposition of Collateral and all rights arising out of Collateral.

“Projections” means as of any date the balance sheet, statements of income and cash flow for Corporate Credit Parties and Subsidiaries (including forecasted Capital Expenditures) (a) by month for the next Fiscal Year, and (b) by year for the following three Fiscal Years, in each case prepared in a manner consistent with GAAP and accompanied by senior management’s discussion and analysis of such plan.

“Purchase Money Indebtedness” means (a) any Indebtedness incurred for the payment of all or any part of the purchase price of any fixed asset, (b) any Indebtedness incurred for the sole purpose of financing or refinancing all or any part of the purchase price of any fixed asset, and (c) any renewals, extensions or refinancings thereof (but not any increases in the principal amounts thereof outstanding at that time).

“Purchase Money Lien” means any Lien upon any fixed assets which secures the Purchase Money Indebtedness related thereto but only if such Lien shall at all times be confined solely to the asset the purchase price of which was financed or refinanced through the incurrence of the Purchase Money Indebtedness secured by such Lien and only if such Lien secures only such Purchase Money Indebtedness.

“Real Estate” means (i) the real property and the improvements thereon located at (i) 5215 Gershwin Avenue North, Oakdale, MN 55128, (ii) 5250 Glenbrook Avenue North, Oakdale, MN 55128, (iii) 845 Dexter Street, Prescott, WI 54021 and (iv) 1607 Pine Street, Prescott, WI 54021 and on which the Borrowers operate their business and upon which the Collateral and Books and Records relating thereto are located.

“Release” means, as to any Person, any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Materials in the indoor or outdoor environment by such Person, including the movement of Hazardous Materials through or in the air, soil, surface water, ground water or property.

“Requirement of Law” means as to any Person, the Certificate or Articles of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case binding upon such Person or any of its property or to which such Person or any of its property is subject.

“Reserves” means reserves established by Lender from time to time in its good faith credit judgment, including to protect Lender’s interest in the Collateral, to protect Lender against possible non-payment of Accounts for any reason by Account Debtors, to protect against the diminution in value of any Collateral, to protect Lender against the possible non-payment of any Obligations, to protect Lender for any unpaid taxes, to protect Lender in respect of any state of facts that could constitute a Default or Event of Default and to protect Lender for any Letter of Credit Obligations.

“Restricted Payment” means: (i) the declaration or payment of any dividend or the incurrence of any liability to make any other payment or distribution of cash or other property or assets on or in respect of Credit Party’s Stock; (ii) any payment or distribution made in respect of any Subordinated Debt of any Credit Party in violation of any subordination or other agreement made in favor of Lender; (iii) any payment on account of the purchase, redemption, defeasance or other retirement of any Credit Party’s Stock or Indebtedness or any other payment or distribution made in respect of any thereof, either directly or indirectly, other than payment of Indebtedness to trade creditors incurred in the ordinary course of business consistent with past practice as disclosed to Lender in writing; or (iv) any payment, loan, contribution, or other transfer of funds or other property to any Stockholder of such Person which is not expressly and specifically permitted in this Agreement; provided, that no payment to Lender shall constitute a Restricted Payment.

“Revolving Credit Advances” shall have the meaning given to such term in Section 2.1(a).

“Software” means all “software” as such term is defined in the UCC, including all computer programs and all supporting information provided in connection with a transaction related to any program.

“Stock” means all certificated and uncertificated shares, options, warrants, membership interests, general or limited partnership interests, participation or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity whether voting or nonvoting, including common stock, preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934).

“Stockholder” means each holder of Stock of Borrower.

“Subordinated Debt” means any note, document, instrument or agreement now or any time hereafter executed and/or delivered by any Credit Party with or in favor of any Subordinated Lender which evidences the principal, interest and other amounts owed by a Credit Party to such Subordinated Lender.

“Subordinated Lender” means collectively, any Person who enters into a Subordination Agreement with Lender with respect to amounts owed by any Credit Party to such Subordinated Lender, including but not limited to Lone Star Value Investors, LP and/or Lone Star Value Co-Invest I, LP, EdgeBuilder Wall Panels, Inc. and Glenbrook Lumber & Supply, Inc.

“Subordination Agreement” means collectively, all subordination agreements accepted by Lender from time to time with respect to Indebtedness of any Credit Party.

“Subsidiary” means, with respect to any Person, (i) any corporation of which an aggregate of more than 50% of the outstanding Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock of any other class or classes of such corporation has or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of 50% or more of such Stock whether by proxy, agreement, operation of law or otherwise, and (ii) any partnership or limited liability company in which such Person or one or more Subsidiaries of such Person has an equity interest (whether in the form of voting or participation in profits or capital contribution) of more than 50% or of which any such Person is a general partner or manager or may exercise the powers of a general partner or manager.

“Supporting Obligations” means all “supporting obligations” as such term is defined in the UCC, including Letter-of-Credit Rights or secondary obligations that supports the payment or performance of Accounts, Chattel Paper, Documents, General Intangibles, Instruments, or Investment Property.

“Tangible Net Worth” shall mean, with respect to any Person, at any date, the total assets (excluding any intangible assets and loans made to any officer, director, shareholder or employee of such Person) minus the total liabilities (excluding Subordinated Debt), in each case, of such Person at such date determined in accordance with GAAP.

“Term” means the Closing Date through the Maturity Date subject to acceleration upon the occurrence of an Event of Default hereunder or other termination hereunder.

“Termination Date” means the date on which all Obligations under this Agreement are indefeasibly paid in full, in cash (other than amounts in respect of Letter of Credit Obligations if any, then outstanding, provided that a Borrower has funded such amounts in cash in full into the Cash Collateral Account), and no Borrower shall have any further right to borrow any moneys or obtain other Loans or financial accommodations under this Agreement.

“Transaction Documents” means the aggregate of the documents as executed and delivered to the satisfaction of Lender whereby the Borrowers have purchased and acquired title to all assets and property free and clear of any Lien pursuant to the Asset Purchase Agreement dated as of even date executed by Borrowers, Glenbrook Lumber & Supply, Inc., a Minnesota corporation and EdgeBuilder Wall Panels, Inc., a Minnesota corporation.

“UCC” means the Uniform Commercial Code as the same may, from time be in effect in the State of New York; provided, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Lender’s Lien on any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions of this Agreement relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions; provided further, that to the extent that UCC is used to define any term herein or in any Credit Document and such term is defined differently in different Articles or Divisions of the UCC, the definition of such term contained in Article or Division 9 shall govern.

“Uniform Customs” means with respect to a documentary Letter of Credit the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time and with respect to a standby Letter of Credit, the International Standby Practices, ISP.

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title III of ERISA.

1.2 Accounting Terms. Any accounting terms used in this Agreement which are not specifically defined shall have the meanings customarily given them in accordance with GAAP and all financial computations shall be computed, unless specifically provided herein, in accordance with GAAP consistently applied.

1.3 Other Terms. All other terms used in this Agreement and defined in the UCC, shall have the meaning given therein unless otherwise defined herein.

1.4 Rules of Construction. All Schedules, Addenda and Exhibits hereto or expressly identified to this Agreement are incorporated herein by reference and taken together with this Agreement constitute but a single agreement. The words “herein”, hereof” and “hereunder” or other words of similar import refer to this Agreement as a whole, including the Exhibits and Schedules thereto, as the same may be from time to time amended, modified, restated or supplemented, and not to any particular section, subsection or clause contained in this Agreement. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter. The term “or” is not exclusive. The term “including” (or any form thereof) shall not be limiting or exclusive. All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations. All references in this Agreement or in the Schedules to this Agreement to sections, schedules, disclosure schedules, exhibits, and attachments shall refer to the corresponding sections, schedules, disclosure schedules, exhibits, and attachments of or to this Agreement. All references to any instruments or agreements, including references to any of this Agreement or any of the other Credit Documents shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof.

II.

LOANS

2.1 Revolving Credit Advances.

(a) Subject to the terms and conditions set forth herein and in the Credit Documents, Lender may, in its sole discretion, make revolving credit advances (the “Revolving Credit Advances”) to Borrowers from time to time during the Term which, in the aggregate at any time outstanding together with all outstanding Letter of Credit Obligations, will not exceed the lesser of (x) the Maximum Revolving Amount or (y) an amount equal to the Borrowing Base for working capital needs of the Borrowers.

(b) Notwithstanding the limitations set forth above, Lender retains the right to lend Borrowers from time to time such amounts in excess of such limitations as Lender may determine in its sole discretion.

(c) Each Borrower acknowledges that the exercise of Lender’s discretionary rights hereunder may result during the Term in one or more increases or decreases in the advance percentages used in determining Accounts Availability, Inventory Availability, and Equipment Availability, and each Borrower hereby consents to any such increases or decreases which may limit or restrict advances requested by Borrower.

(d) If any Borrower does not pay any interest, fees, costs or charges to Lender when due, Borrowers shall thereby be deemed to have requested, and Lender is hereby authorized at its discretion to make and charge to any Borrower’s account, a Revolving Credit Advance as of such date in an amount equal to such unpaid interest, fees, costs or charges.

(e) If any Credit Party at any time fails to perform or observe any of the covenants contained in this Agreement or any other Credit Document, Lender may, but need not, perform or observe such covenant on behalf and in the name, place and stead of such Credit Party (or, at Lender’s option, in Lender’s name) and may, but need not, take any and all other actions which Lender may deem necessary to cure or correct such failure (including the payment of taxes, the satisfaction of Liens, the performance of obligations owed to Account Debtors, lessors or other obligors, the procurement and maintenance of insurance, the execution of assignments, security agreements and financing statements, and the endorsement of instruments). The amount of all monies expended and all costs and expenses (including attorneys’ fees and legal expenses) incurred by Lender in connection with or as a result of the performance or observance of such agreements or the taking of such action by Lender shall be charged to any Borrower’s account as a Revolving Credit Advance and added to the Obligations. To facilitate Lender’s performance or observance of such covenants of Credit Parties, each Credit Party hereby irrevocably appoints Lender, or Lender’s delegate, acting alone, as such Credit Party’s attorney in fact (which appointment is coupled with an interest) with the right (but not the duty) from time to time to create, prepare, complete, execute, deliver, endorse or file in the name and on behalf of such Credit Party any and all instruments, documents, assignments, security agreements, financing statements, applications for insurance and other agreements and writings required to be obtained, executed delivered or endorsed by such Credit Party.

(f) Lender is authorized by Borrowers to record on its books or records the date, principal amount, amount and date of all payments of principal of and interest on each Loan, and the outstanding principal balance of the Loans and such recordation shall constitute prima facie evidence as to all such information contained therein. Lender shall provide Borrowing Representative on a monthly basis with a statement and accounting of such recordations but any failure on the part of Lender to keep such recordation (or any errors therein) or to send a statement thereof to Borrowing Representative shall not limit or otherwise affect the obligation of any Borrower to repay (with applicable interest) any Loans. Except to the extent that Borrowing Representative shall, within thirty (30) days after such statement and accounting is sent, notify Lender in writing of any objection any Borrower may have thereto (stating with particularity the basis for such objection), such statement and accounting shall be deemed final, binding and conclusive upon Borrowers, absent manifest error. The Loans made by Lender will be evidenced by a Note. Each Borrower will execute the Note simultaneously with the execution of this Agreement.

(g) During the Term, each Borrower may borrow, prepay and reborrow Revolving Credit Advances, all in accordance with the terms and conditions hereof.

(h) Subject to the terms and conditions of this Agreement including Schedule I, Borrowing Representative on behalf of each Borrower may request and Lender may agree to incur Letter of Credit Obligations.

III.

REPAYMENT

3.1 Repayment of the Revolving Credit Advances. Borrowers shall be required to (a) make a mandatory repayment hereunder at any time that the aggregate outstanding principal balance of the Revolving Credit Advances made by Lender to Borrowers hereunder is in excess of the Borrowing Base and/or Maximum Revolving Amount, in an amount equal to such excess, and (b) repay on the expiration of the Term (i) the then aggregate outstanding principal balance of Revolving Credit Advances made by Lender to Borrowers hereunder together with accrued and unpaid interest, fees and charges and (ii) all other amounts owed Lender under this Agreement and the Credit Documents. Any payments of principal, interest, fees or any other amounts payable hereunder or under any Credit Document shall be made prior to 12:00 noon (New York time) on the due date thereof in immediately available funds.

IV.	PROCEDURES

4.1 Procedure for Revolving Credit Advances. Borrowing Representative on behalf of each Borrower may by written or telephonic notice request a borrowing of Revolving Credit Advances prior to 11:00 a.m. (New York time) on the Business Day of its request to incur, on that day, a Revolving Credit Advance. All Revolving Credit Advances shall be disbursed from whichever office or other place Lender may designate from time to time and, together with any and all other Obligations of Borrowers to Lender, shall be charged to Borrowers’ account on Lender’s books. The proceeds of each Revolving Credit Advance made by Lender shall be made available to Borrowers on the Business Day so requested by way of credit to the applicable Borrower’s operating account maintained with such bank as Borrowing Representative designated to Lender. Any and all Obligations due and owing hereunder may be charged to Borrowers’ account and shall constitute Revolving Credit Advances.

V.	INTEREST AND FEES

5.1 Interest and Fees.

(a) Interest.

(i) Except as modified by Section 5.1(a)(iii) below, Borrowers shall pay interest on the unpaid principal balance of the Loans for each day they are outstanding at the Contract Rate.

(ii) Interest and fees shall be computed on the basis of actual days elapsed in a year of 360 days. Interest shall be payable in arrears on the last day of each month and upon termination of this Agreement, or, at Lender’s option, Lender may charge Borrowers’ account for said interest.

(iii) Effective upon the occurrence of any Event of Default and for so long as any Event of Default shall be continuing, the Contract Rate and the Letter of Credit Fee shall automatically be increased to the Default Rate, and all outstanding Obligations, including unpaid interest and Letter of Credit Fees, shall continue to accrue interest from the date of such Event of Default at the Default Rate applicable to such Obligations.

(iv) Notwithstanding the foregoing, in no event shall the aggregate interest exceed the maximum rate permitted under any applicable law or regulation, as in effect from time to time (the “Maximum Legal Rate”) and if any provision of this Agreement or Credit Document is in contravention of any such law or regulation, interest payable under this Agreement and each Credit Document shall be computed on the basis of the Maximum Legal Rate (so that such interest will not exceed the Maximum Legal Rate) and once the amount of interest payable hereunder or under the Credit Documents is less than the Maximum Legal Rate, Lender shall not reduce interest payable hereunder or any Credit Document below the amount computed based upon the Maximum Legal Rate until the aggregate amount of interest paid equals the amount of interest which would have been payable if the Maximum Legal Rate had not been imposed.

(v) Borrowers shall pay principal, interest and all other amounts payable hereunder, or under any Credit Document, without any deduction whatsoever, including any deduction for any set-off or counterclaim.

(b) Fees.

(i) Minimum Loan Fee. In the event the average closing daily unpaid balances of all Loans hereunder during any calendar month is less than the Minimum Average Monthly Loan Amount, Borrowers shall pay to Lender a minimum loan fee at a rate per annum equal to the Contract Rate on the amount by which the Minimum Average Monthly Loan Amount exceeds such average closing daily unpaid balances. Such fee shall be charged to Borrower’s account on the first day of each month with respect to the prior month.

(ii) Facility Fee. Borrowers hereby agree to pay Lender a facility fee in an amount equal to one and one-half percent (1.50%) of the Maximum Revolving Amount on the Closing Date and on each anniversary of the Closing Date which occurs prior to the Maturity Date. The facility fee for the period ending on the Maturity Date shall be deemed fully earned on the Closing Date and shall be payable by a charge to Borrower’s account upon the earlier of each anniversary of the Closing Date or the termination of this Agreement for any reason.

(iii) Collateral Monitoring Fee. Borrowers shall pay Lender a monthly collateral monitoring fee in an amount equal to 0.10% of the Maximum Revolving Amount per month, payable on the Closing Date and on the first day of each month thereafter until the Maturity Date. The Collateral Monitoring Fee for each month ending prior to the Maturity Date shall be deemed fully earned on the Closing Date and shall be payable by a charge to Borrower’s account upon the earlier of the first day of each month during the Term or the termination of this Agreement for any reason.

(iv) Field Examination Fee. Upon Lender’s performance of any collateral monitoring and/or verification including any field examination, collateral analysis or other business analysis, the need for which is to be determined by Lender and which monitoring is undertaken by Lender or for Lender’s benefit, an amount equal to the established rate by Lender from time to time which rate on the Closing Date is $950 per day for each person employed to perform such monitoring together with all costs, disbursements and expenses incurred by Lender and the person performing such collateral monitoring and/or verification shall be charged to Borrowers’ account; provided, however, so long as no Event of Default has occurred and is continuing, the number of such examinations shall be limited to no more than two (2) per year. Nothing herein shall prohibit Lender from conducting more than two (2) such examinations per year in the absence of an Event of Default which is not continuing so long as Lender shall incur the cost thereof.

(v) Collection Fees. For purposes of determining the balance of the Loans outstanding, Lender will credit (conditional upon final collection) all such payments to Borrowers’ account upon receipt by Lender of good funds in dollars of the United States of America in Lender’s account, provided, however, for purposes of computing interest on the Obligations, Lender will credit (conditional upon final collection) all such payments to Borrowers’ account three (3) Business Days after receipt by Lender of good funds in dollars of the United States of America in Lender’s account. Any amount received by Lender after 12:00 noon (New York time) on any Business Day shall be deemed received on the next Business Day.

(vi) Overline/Overadvance Fees. Under circumstances where any Borrower requests and Lender approves Revolving Credit Advances which would exceed the Maximum Revolving Amount and/or the Borrowing Base, Lender may impose fees in connection therewith. Such fees shall include (i) a monthly fee in the amount of two and one-half percent (2.50%) of the greater of (A) the highest amount by which the amount of Revolving Credit Advances during such month exceeds the Borrowing Base and (B) if any, the amount approved by Lender for such Revolving Credit Advance in excess of the Borrowing Base for such month and (ii) two and one-half percent (2.50%) of the greater of (A) the highest amount by which the Revolving Credit Advances during such month exceeds the Maximum Revolving Amount and (B) if any, the amount approved by Lender for such Revolving Credit Advances in excess of the Maximum Revolving Amount for such month. Such fees shall be payable on the first day of each month with respect to the preceding calendar month.

(vii) Wire/Check Fee. For each wire transfer or check issued by Lender, on behalf of a Borrower, Borrowers shall pay Lender Lender’s standard fee for such service which fee is $45 as of the Closing Date.

VI.	CONDITIONS PRECEDENT

6.1 Conditions Precedent to Initial Loans. Without limitation of the discretionary nature of each Loan hereunder, the initial Loan to be made by Lender shall be subject to the fulfillment (to the satisfaction of Lender) of each of the conditions precedent set forth on Schedule II.

6.2 Conditions Precedent to each Loan. Without limitation of the discretionary nature of each Loan hereunder, each of the Loans (including the initial Loan) to be made by Lender shall be subject to the fulfillment (to the satisfaction of Lender) of each of the following conditions as of the date of each Loan:

(a) Lender shall have received a Request for Loan for such Loan in form and in substance satisfactory to Lender;

(b) The representations and warranties set forth in this Agreement and in the other Credit Documents, shall be true and correct in all material respects on and as of the date of such Loan with the same effect as though made on and as of such date, except to the extent that any such representation or warranty is expressly stated to relate to a specific earlier date, in which case, such representation and warranty shall be true and correct as of such earlier date;

(c) No Default or Event of Default shall have occurred and be continuing at the time of and after giving effect to such Loan;

(d) Lender shall have received all fees due and payable on or prior to such date; and

(e) All legal matters incident to such Loan shall be satisfactory to Lender and its counsel.

6.3 Conditions Precedent to Increase of Maximum Revolving Amount. In the sole discretion of Lender, the Maximum Revolving Amount may be increased as provided in the definition thereof at such time(s) and for such periods as Lender may determine following written request by Borrower, upon Lender’s satisfaction in its sole discretion with each of the following:

(a) Each of the conditions precedent in Sections 6.1 and 6.2 hereof have been satisfied and performed; and

(b) The Borrowers have met or exceeded Projections and budget provided by Borrowers; and

(d) Lender has determined there is sufficient Collateral and Availability as herein defined to support such increase(s).

Any consent or approval by Lender to any such request shall be in a writing signed by Lender in the form and delivery required hereby.

VII.

REPRESENTATIONS, WARRANTIES AND COVENANTS

To induce Lender to enter into this Agreement and to make the Loans, each Credit Party represents and warrants (each of which representations and warranties shall survive the execution and delivery of this Agreement), and promises to and agrees with Lender until the Termination Date as follows:

7.1 Corporate Existence; Compliance with Law. Each Corporate Credit Party: (a) is, as of the Closing Date, and will continue to be (i) a corporation or limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, (ii) duly qualified to do business and in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect, and (iii) in compliance with all Requirements of Law and Contractual Obligations, except to the extent failure to comply therewith could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and (b) has and will continue to have (i) the requisite power and authority and the legal right to execute, deliver and perform its obligations under the Credit Documents, and to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease, and to conduct its business as now, heretofore or proposed to be conducted, and (ii) all licenses, permits, franchises, rights, powers, consents or approvals from or by all Persons or Governmental Authorities having jurisdiction over Borrowers which are necessary or appropriate for the conduct of its business, except to the extent failure to have any such licenses, permits, franchises, rights, powers, consents or approvals could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

7.2 Names; Organizational Information; Collateral Locations. Disclosure Schedule 7.2 sets forth each Corporate Credit Party’s name as it appears in official filing in the state of its incorporation or other organization, the type of entity of each Corporate Credit Party, the state of each Corporate Credit Party’s incorporation or organization and organizational identification number issued by each Corporate Credit Party’s state of incorporation or organization or a statement that no such number has been issued. The location of each Corporate Credit Party’s chief executive office, corporate offices, warehouses, other locations of Collateral and locations where records with respect to Collateral are kept (including in each case the county of such locations) are as set forth in Disclosure Schedule 7.2 and, except as set forth in such Disclosure Schedule, such locations have not changed during the preceding twelve months. With respect to each of the premises identified in Disclosure Schedule 7.2 on or prior to the Closing Date a bailee, landlord or mortgagee agreement acceptable to Lender has been obtained. As of the Closing Date, during the prior five years, except as set forth in Disclosure Schedule 7.2, no Corporate Credit Party shall have been known as or conducted business in any other name (including trade names).

7.3 Power; Authorization; Enforceable Obligations. The execution, delivery and performance by each Credit Party of the Credit Documents to which it is a party, and the creation of all Liens provided for herein and therein: (a) are and will continue to be within such Credit Party’s power and authority; (b) have been and will continue to be duly authorized by all necessary or proper action; (c) are not and will not be in violation of any Requirement of Law or Contractual Obligation of such Credit Party; (d) do not and will not result in the creation or imposition of any Lien (other than Permitted Liens) upon any of the Collateral; and (e) do not and will not require the consent or approval of any Governmental Authority or any other Person. As of the Closing Date, each Credit Document shall have been duly executed and delivered on behalf of each Credit Party, and each such Credit Document upon such execution and delivery shall be and will continue to be a legal, valid and binding obligation of each Credit Party, enforceable against it in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency and other similar laws affecting creditors’ rights generally.

7.4 Financial Statements and Projections; Books and Records.

(a) The Financial Statements delivered by each Credit Party to Lender for its most recently ended Fiscal Year and Fiscal Quarter, are true, correct and complete and reflect fairly and accurately the financial condition of such Credit Party as of the date of each such Financial Statement in accordance with GAAP. The Projections most recently delivered by each Corporate Credit Party to Lender have been prepared in good faith, with care and diligence and use assumptions that are reasonable under the circumstances at the time such Projections were prepared and as of the date delivered to Lender and all such assumptions are disclosed in the Projections.

(b) Each Corporate Credit Party shall keep adequate Books and Records with respect to the Collateral and its business activities in which proper entries, reflecting all financial transactions, and payments and credits received on, and all other dealings with, the Collateral, will be made in accordance with GAAP and all Requirements of Law and on a basis consistent with the Financial Statements.

7.5 Material Adverse Change. Between the date of each Credit Party’s most recent Financial Statements delivered to Lender and the Closing Date: (a) no Credit Party has incurred any obligations, contingent or non-contingent liabilities, or liabilities for Charges, long-term leases or unusual forward or long-term commitments which are not reflected in the Projections delivered on the Closing Date and which could, alone or in the aggregate, reasonably be expected to have a Material Adverse Effect; (b) there has been no material deviation from such Projections; and (c) no events have occurred which alone or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect. No Requirement of Law or Contractual Obligation of any Credit Party has or have had or could reasonably be expected to have a Material Adverse Effect. No Credit Party is in default, and to each Credit Party’s knowledge no third party is in default, under or with respect to any of its Contractual Obligations, which alone or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect.

7.6 Real Estate; Property. The Real Estate listed in Disclosure Schedule 7.6 constitutes all of the real property owned, leased, or used by each Credit Party in its business, and no Corporate Credit Party will execute any material agreement or contract in respect of such real estate after the date of this Agreement without giving Lender prompt prior written notice thereof. Each Corporate Credit Party holds and will continue to hold good and marketable fee simple title to all of its owned real estate, and good and marketable title to all of its other properties and assets, and valid and insurable leasehold interests in all of its leases (both as lessor and lessee, sublessee or assignee), and none of the properties and assets of any Corporate Credit Party are or will be subject to any Liens, except Permitted Liens.

7.7 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness. Except as set forth in Disclosure Schedule 7.7, as of the Closing Date, no Corporate Credit Party has any Subsidiaries, is not engaged in any joint venture or partnership with any other Person, or is an Affiliate of any other Person. All of the issued and outstanding Stock of each Corporate Credit Party (including all rights to purchase, options, warrants or similar rights or agreements pursuant to which any Corporate Credit Party may be required to issue, sell, repurchase or redeem any of its Stock) as of the Closing Date is owned by each of the Stockholders (and in the amounts) set forth on Disclosure Schedule 7.7 or is disclosed on such Schedule 7.7 as issued by a public company. All outstanding Indebtedness of each Corporate Credit Party as of the Closing Date is described in Disclosure Schedule 9(b).

7.8 Government Regulation; Margin Regulations. No Credit Party is subject to or regulated under or any federal or state statute, rule or regulation that restricts or limits any Credit Party’s ability to incur Indebtedness, pledge its assets, or to perform its obligations under the Credit Documents. The making of a Loan, the application of the proceeds and repayment thereof, and the consummation of the transactions contemplated by the Credit Documents do not and will not violate any Requirement of Law. No Credit Party is engaged, nor will it engage in the business of extending credit for the purpose of “purchasing” or “carrying” any “margin security” as such terms are defined in Regulation U of the Federal Reserve Board as now and hereafter in effect (such securities being referred to herein as “Margin Stock”). No Credit Party owns Margin Stock, and none of the proceeds of any Loan or other extensions of credit under any Credit Document will be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock or reducing or retiring any Indebtedness which was originally incurred to purchase or carry any Margin Stock. No Credit Party will take or permit to be taken any action which might cause any Credit Document to violate any regulation of the Federal Reserve Board.

7.9 Taxes; Charges. Except as disclosed on Disclosure Schedule 7.9 all tax returns, reports and statements required by any Governmental Authority to be filed by each Credit Party have, as of the Closing Date, been filed and will, until the Termination Date, be filed with the appropriate Governmental Authority and no tax Lien has been filed against each Credit Party or any of each Credit Party’s property. Proper and accurate amounts have been and will be withheld by each Credit Party from its employees for all periods in complete compliance with all Requirements of Law and such withholdings have and will be timely paid to the appropriate Governmental Authorities. Disclosure Schedule 7.9 sets forth as of the Closing Date those taxable years for which each Credit Party’s tax returns are currently being audited by the IRS or any other applicable Governmental Authority and any assessments or threatened assessments in connection with such audit, or otherwise currently outstanding. Except as described on Disclosure Schedule 7.9, no Credit Party nor its respective predecessors are liable for any Charges: (a) under any agreement (including any tax sharing agreements or agreement extending the period of assessment of any Charges) or (b) to any Credit Party’s knowledge, as a transferee. As of the Closing Date, no Credit Party has agreed or been requested to make any adjustment under IRC Section 481(a), by reason of a change in accounting method or otherwise, which could reasonably be expected to have a Material Adverse Effect.

7.10 Payment of Obligations. Each Credit Party will pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all of its Charges and other obligations of whatever nature, except payments to vendors or suppliers in the ordinary course of business consistent with past practice as disclosed to Lender in writing or where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of such Credit Party and none of the Collateral is or could reasonably be expected to become subject to any Lien or forfeiture or loss as a result of such contest.

7.11 ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other existing ERISA Events, could reasonably be expected to result in a liability of any Corporate Credit Party of more than the Minimum Actionable Amount. The present value of all accumulated benefit obligations of any Corporate Credit Party under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent Financial Statements reflecting such amounts, exceed the fair market value of the assets of such Plan by more than the Minimum Actionable Amount, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Account Standards No. 87) did not, as of the date of the most recent Financial Statements reflecting such amounts, exceed the fair market value of the assets of such underfunded Plans by more than the Minimum Actionable Amount. No Corporate Credit Party has incurred or reasonably expects to incur any Withdrawal Liability in excess of the Minimum Actionable Amount.

7.12 Litigation. No Litigation is pending or, to the knowledge of any Credit Party, threatened by or against any Credit Party or against any Credit Party’s properties or revenues (a) with respect to any of the Credit Documents or any of the transactions contemplated hereby or thereby, or (b) which could reasonably be expected to have a Material Adverse Effect. Except as set forth on Disclosure Schedule 7.12, as of the Closing Date there is no Litigation pending or, to the best knowledge of any Credit Party, threatened against any Credit Party which seeks damages in excess of the Minimum Actionable Amount or injunctive relief or alleges criminal misconduct of any Credit Party. Each Credit Party shall notify Lender in writing within five (5) Business Days of learning of the existence, threat or commencement of any Litigation against any Credit Party or any Plan or any allegation of criminal misconduct against any Credit Party.

7.13 Intellectual Property. As of the Closing Date, all material Intellectual Property owned or used by each Corporate Credit Party is listed, together with application or registration numbers, where applicable, in Disclosure Schedule 7.13. Each Corporate Credit Party is the sole legal and beneficial owner, or is licensed on commercial terms to use, all Intellectual Property necessary to conduct its business as currently conducted except for such Intellectual Property the failure of which to own or license could not reasonably be expected to have a Material Adverse Effect. Each Corporate Credit Party will maintain and establish the patenting and registration of all Intellectual Property with the United States Patent and Trademark Office, the United States Copyright Office, or other appropriate Governmental Authority of all new Intellectual Property where applicable and notify Lender in writing five (5) Business Days prior to filing any such new patent or registration. With respect to Intellectual Property licensed by each Corporate Credit Party, an agreement acceptable to Lender from the licensor of such Intellectual Property will be obtained permitting Lender to use such Intellectual Property or sell the Goods containing such Intellectual Property following the occurrence of a Default. No Credit Party is aware of any infringement on the Intellectual Property of any third party in the carrying on of its business in the normal course.

7.14 Full Disclosure. No information contained in any Credit Document, the Financial Statements or any written statement furnished by or on behalf of any Credit Party under any Credit Document, or to induce Lender to execute the Credit Documents, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made.

7.15 Hazardous Materials. Except as set forth on Disclosure Schedule 7.15, as of the Closing Date, (a) each Real Estate is maintained free of contamination from any Hazardous Material, (b) no Credit Party is subject to any Environmental Liabilities or, to any Credit Party’s knowledge, potential Environmental Liabilities, in excess of the Minimum Actionable Amount in the aggregate, (c) no notice has been received by any Credit Party identifying it as a “potentially responsible party” or requesting information under CERCLA or analogous state statutes, and to the knowledge of any Credit Party, there are no facts, circumstances or conditions that may result in such Credit Party being identified as a “potentially responsible party” under CERCLA or analogous state statutes; and (d) each Credit Party has provided to Lender copies of all existing environmental reports, reviews and audits and all written information pertaining to actual or potential Environmental Liabilities, in each case relating to any Credit Party. Each Credit Party: (i) shall comply in all material respects with all applicable Environmental Laws and environmental permits; (ii) shall notify Lender in writing within seven days if and when it becomes aware of any Release, on, at, in, under, above, to, from or about any of its Real Estate; and (iii) shall promptly forward to Lender a copy of any order, notice, permit, application, or any communication or report received by it or any Credit Party in connection with any such Release.

7.16 Insurance. As of the Closing Date, Disclosure Schedule 7.16 lists all insurance of any nature maintained for current occurrences by Borrowers, as well as a summary of the terms of such insurance. Each Corporate Credit Party shall deliver to Lender certified copies and endorsements to all of its (a) “All Risk” and business interruption insurance policies naming Lender as lender loss payee, and (b) general liability and other liability policies naming Lender as an additional insured. All policies of insurance on real and personal property will contain an endorsement, in form and substance acceptable to Lender, showing loss payable to Lender (Form 438 BFU or equivalent) and extra expense and business interruption endorsements. Such endorsement, or an independent instrument furnished to Lender, will provide that the insurance companies will give Lender at least thirty (30) days prior written notice before any such policy or policies of insurance shall be altered or canceled and that no act or default of any Corporate Credit Party or any other Person shall affect the right of Lender to recover under such policy or policies of insurance in case of loss or damage. Each Borrower shall direct all present and future insurers under its “All Risk” policies of insurance to pay all proceeds payable thereunder directly to Lender. If any insurance proceeds are paid by check, draft or other instrument payable to any Corporate Credit Party and Lender jointly, Lender may endorse each Corporate Credit Party’s name thereon and do such other things as Lender may deem advisable to reduce the same to cash. Lender reserves the right at any time, upon review of any Corporate Credit Party’s risk profile, to require additional forms and limits of insurance. Each Corporate Credit Party shall, on each anniversary of the Closing Date and from time to time at Lender’s request, deliver to Lender a report by a reputable insurance broker, satisfactory to Lender, with respect to such Person’s insurance policies.

7.17 Deposit and Disbursement Accounts. Disclosure Schedule 7.17 lists all banks and other financial institutions at which each Credit Party, maintains deposits and/or other accounts and correctly identifies the name, address and telephone number of each such depository, the name in which the account is held, a description of the purpose of the account, and the complete account number.

7.18 Accounts. No Corporate Credit Party has made, nor will any Credit Party make, any agreement with any Account Debtor for any extension of time for the payment of any Account, any compromise or settlement for less than the full amount thereof, any release of any Account Debtor from liability therefor, or any deduction therefrom except a discount or allowance for prompt or early payment allowed by a Corporate Credit Party and such other compromises or settlements in the ordinary course of its business consistent with historical practice and as previously disclosed to Lender in writing. With respect to the Accounts pledged as collateral pursuant to any Credit Document (a) the amounts shown on all invoices, statements and reports which may be delivered to the Lender with respect thereto are actually and absolutely owing to a Credit Party as indicated thereon and are not in any way contingent; (b) no payments have been or shall be made thereon except payments immediately delivered to Lender as required hereunder; and (c) to each Corporate Credit Party’s knowledge all Account Debtors have the capacity to contract. As of the date of each Borrowing Base Certificate delivered to Lender, each Account listed thereon as an Eligible Account shall be an Eligible Account and all Inventory listed thereon as Eligible Inventory shall be Eligible Inventory. Each Borrower shall notify Lender promptly and in any event within the earlier of (a) five (5) Business Days after obtaining knowledge thereof or (b) in the next submitted borrowing base certificate, (i) of any event or circumstance that to any Borrower’s knowledge would cause Lender to consider any then existing Account or Inventory as no longer constituting an Eligible Account or Eligible Inventory, as the case may be; (ii) of any material delay in any Borrower’s performance of any of its obligations to any Account Debtor; (iii) of any assertion by an Account Debtor of any material claims, offsets or counterclaims; (iv) of any allowances, credits and/or monies granted by any Borrower to any Account Debtor; (v) of all material adverse information relating to the financial condition of an Account Debtor; (vi) of any material return of goods; and (vii) of any loss, damage or destruction of any of the Collateral.

7.19 Conduct of Business. Each Corporate Credit Party (a) shall conduct its business substantially as now conducted or as otherwise permitted hereunder, and (b) shall at all times maintain, preserve and protect all of the Collateral and each Corporate Credit Party’s other property, used or useful in the conduct of its business and keep the same in good repair, working order and condition and make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices.

7.20 Further Assurances. At any time and from time to time, upon the written request of Lender and at the sole expense of Credit Parties, each Credit Party shall promptly and duly execute and deliver any and all such further instruments and documents and take such further action as Lender may reasonably deem desirable (a) to obtain the full benefits of this Agreement and the other Credit Documents, (b) to protect, preserve and maintain Lender’s rights in any Collateral, or (c) to enable Lender to exercise all or any of the rights and powers herein granted.

VIII.

FINANCIAL REPORTS; FINANCIAL COVENANTS

8.1 Reports and Notices. From the Closing Date until the Termination Date, each Credit Party shall deliver to Lender:

(a) within twenty (20) days following the end of each Fiscal Month (but within thirty (30) days following the end of the initial Fiscal Month hereunder), a Monthly Statement Report of each Corporate Credit Party other than ATRM Holdings, Inc., in the form of Exhibit B as of the last day of the previous Fiscal Month;

(b) within twenty (20) days following the end of each Fiscal Month (but within thirty (30) days following the end of the initial Fiscal Month hereunder), the Financial Statements for such Fiscal Month of each Corporate Credit Party other than ATRM Holdings, Inc., which statements will show comparative results for prior Fiscal Month commencing for the Fiscal Month of November, 2017 in the current and prior Fiscal Years, which statements will present results with each Affiliate (not including any stockholders of ATRM Holdings, Inc.) on an unconsolidated basis and is accompanied by a certification in the form of Exhibit D by the Chief Executive Officer or Chief Financial Officer that such Financial Statements are complete and correct, that there was no Default (or specifying those Defaults of which he or she was aware), and showing in reasonable detail the calculations used in determining compliance with the financial covenants hereunder; each such monthly report shall also report on the status (and attach applicable copies of) of all contractual relationships with significant Accounts of Borrower as determined by Lender in order to verify current and ongoing relationships.

(c) within one hundred and five (105) days following the close of each Fiscal Year, the Financial Statements of ATRM Holdings, Inc. (with a supporting schedule for the other Corporate Credit Parties) for such Fiscal Year of each Corporate Credit Party, audited and certified by an independent certified accounting firm acceptable to Lender, (as of Closing Date Boulay PLLP shall be deemed acceptable to Lender) which shall provide both comparisons to the prior Fiscal Year and be on a consolidating basis with each Affiliate, (not including any stockholders of ATRM Holdings, Inc.) and shall be accompanied by (i) a statement in reasonable detail showing the calculations used in determining compliance with the financial covenants hereunder, (ii) a report from such accountants to the effect that in connection with their audit examination nothing has come to their attention to cause them to believe that a Default has occurred or specifying those Defaults of which they are aware, and (iii) any management letter that may be issued;

(d) at least thirty (30) days before the beginning of each Fiscal Year of each Borrower, the Projections, each in reasonable detail, representing such Borrower’s good faith Projections and certified by such Borrower’s President or Chief Financial Officer as being the most accurate Projections available and identical to the Projections used by such Borrower for internal planning purposes, together with such supporting schedules and information as Lender may in its discretion require;

(e) together with each request for a Loan (but in no event later than the third (3 ^rd ) Business Day of each month) and at such intervals as Lender may request a Borrowing Base Certificate as of the last day of the immediately preceding Fiscal Month, or more current date if available, detailing ineligible Accounts and Inventory, certified as true and correct by the President or Chief Financial Officer of each Borrower;

(f) together with each request for a Loan (but in no event later than the third (3 ^rd ) Business Day of each month) and at such other intervals as Lender may require: (i) copies of all entries to the sales journal and the cash receipt journal; (ii) copies of all credit memos; and (iii) copies of all invoices in excess of five thousand dollars ($5,000), together with proof of delivery, in each case as and for the immediately preceding Fiscal Month;

(g) promptly following Lender’s request, receivable schedules, copies of invoices to Account Debtors, shipping documents, delivery receipts and such other material, reports, records or information as Lender may request;

(h) promptly upon their distribution, copies of all financial statements, reports and proxy statements which any Corporate Credit Party shall have sent to its stockholders, promptly after the sending or filing thereof, copies of all regular and periodic reports which any Borrower shall file with the Securities and Exchange Commission or any national securities exchange; and

(i) each Borrower will cause each Guarantor to comply with the financial reporting requirements set forth in their respective Guaranties.

8.2 Financial Covenants. No Credit Party shall breach any of the financial covenants set forth in Schedule III.

8.3 Other Reports and Information. Each Credit Party shall advise Lender promptly, in reasonable detail, of: (a) any Lien, other than Permitted Liens, attaching to or asserted against any of the Collateral or any occurrence causing a material loss or decline in value of any Collateral and the estimated (or actual, if available) amount of such loss or decline; (b) any material change in the composition of the Collateral; and (c) the occurrence of any Default, Event of Default or other event which has had or could reasonably be expected to have a Material Adverse Effect. Each Corporate Credit Party shall, upon request of Lender, furnish to Lender such other reports and information in connection with the affairs, business, financial condition, operations, prospects or management of such Corporate Credit Party or the Collateral as Lender may request, all in reasonable detail. If any internally prepared financial information, including that required under Section 8.1 is unsatisfactory in any manner to Lender, Lender may request that the Borrower’s independent certified accountants review the same.

8.4 Good Standing Certificates. Together with the delivery of the Financial Statements referred to in Section 8.1(c), each Corporate Credit Party shall provide to Lender a certificate of good standing from its state of incorporation or organization.

IX.

NEGATIVE COVENANTS

Each Corporate Credit Party covenants and agrees that, without Lender’s prior written consent, from the Closing Date until the Termination Date, such Corporate Credit Party shall not, directly or indirectly, by operation of law or otherwise:

(a) form any Subsidiary or merge with, consolidate with, acquire all or substantially all of the assets or capital stock of, or otherwise combine with or make any investment in or, except as provided in clause 9(c) below, loan or advance to, any Person;

(b) cancel any debt owing to it or create, incur, assume or permit to exist any Indebtedness, except: (i) the Obligations, (ii) Indebtedness existing as of the Closing Date set forth on Disclosure Schedule 9(b), (iii) deferred taxes, (iv) by endorsement of instruments or items of payment for deposit to the general account of Borrower, (v) for Guaranteed Indebtedness incurred for the benefit of a Borrower if the primary obligation is permitted by this Agreement; (vi) additional Indebtedness (including Purchase Money Indebtedness) incurred after the Closing Date in an aggregate outstanding amount for Credit Parties not exceeding the Minimum Actionable Amount; and (vii) Indebtedness to trade creditors in the ordinary course of business consistent with past practice and as disclosed to Lender in writing;

(c) enter into any lending, borrowing or other commercial transaction with any of its employees, directors or Affiliates (including upstreaming and downstreaming of cash and intercompany loan and advances) other than loans or advances to employees in the ordinary course of business in an aggregate outstanding amount not exceeding the Minimum Actionable Amount;

(d) make any changes in any of its business objectives, purposes, or operations which could reasonably be expected to adversely affect repayment of the Obligations or could reasonably be expected to have a Material Adverse Effect or engage in any business other than that presently engaged in or proposed to be engaged in the Projections delivered to Lender on the Closing Date or amend its charter or by-laws or other organizational documents;

(e) create or permit any Lien on any of its properties or assets, except for Permitted Liens;

(f) sell, transfer, issue, convey, assign or otherwise dispose of any of its assets or properties, including its Accounts or any shares of its Stock or engage in any sale-leaseback, synthetic lease or similar transaction (provided, that the foregoing shall not prohibit the sale of Inventory or obsolete or unnecessary Equipment in the ordinary course of its business);

(g) change its name, state of incorporation or organization, chief executive office, corporate offices, warehouses or other Collateral locations, or location of its records concerning the Collateral, or acquire, lease or use any real estate after the Closing Date without such Credit Party, in each instance, giving thirty (30) days prior written notice thereof to Lender and taking all actions deemed necessary or appropriate by Lender to continuously protect and perfect Lender’s Liens upon the Collateral or store or hold any assets of another Person;

(h) establish any depository or other bank account of any kind with any financial institution (other than the accounts set forth on Disclosure Schedule 7.17) without Lender’s prior written consent and then only after such Credit Party has implemented agreements with such bank or other institution and Lender acceptable to Lender; or

(i) make or permit any Restricted Payment other than (i) interest and principal, when due without acceleration or modification of the amortization as in effect on the Closing Date, under Indebtedness (not including Subordinated Debt, payments of which shall be permitted only in accordance with the terms of the relevant Subordination Agreement made in favor of Lender) described in Disclosure Schedule 9(b) or otherwise permitted under Article IX(b)(vi) and Schedule III (ii) so long as (x) the tax status of such Credit Party is a pass thru or disregarded entity within the meaning of the Internal Revenue Code of 1986, as amended, (y) no Default or Event of Default shall have occurred and be continuing and (z) after first providing such supporting documentation as Lender may request (including the personal state and federal tax returns of each Stockholder), such Credit Party may pay Pass Thru Distributions not exceeding Pass Thru Tax Liabilities (payments to Stockholders as hereby permitted shall be made only so as to be available when the tax is due, including in respect of estimated tax payments).

X.	SECURITY INTEREST

10.1 Grant of Security Interest.

(a) As collateral security for the prompt and complete payment and performance of all of the Obligations, each Corporate Credit Party other than ATRM Holdings, Inc., executing this Agreement hereby grants to the Lender a security interest in and Lien upon all of its property and assets, whether real or personal, tangible or intangible, and whether now owned or hereafter acquired, or in which it now has or at any time in the future may acquire any right, title, or interest, including all of the following property in which it now has or at any time in the future may acquire any right, title or interest: all Accounts; all Deposit Accounts and all funds on deposit therein; all cash and cash equivalents; all commodity contracts; all investments, Stock and Investment Property; all Inventory; all Equipment; all Goods; all Chattel Paper, all Documents; all Instruments; all Books and Records; all General Intangibles; all Supporting Obligations; all Letter-of-Credit Rights; all commercial tort claims and to the extent not otherwise included, all Proceeds and products of all and any of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing, but excluding in all events Hazardous Waste (all of the foregoing, together with any other collateral pledged to the Lender pursuant to any other Credit Document, collectively, the “Collateral”).

(b) Each Corporate Credit Party other than ATRM Holdings, Inc., executing this Agreement and Lender agree that this Agreement creates, and is intended to create, valid and continuing Liens upon the Collateral in favor of Lender. Each Corporate Credit Party other than ATRM Holdings, Inc., represents, warrants and promises to Lender that: (i) such Corporate Credit Party other than ATRM Holdings, Inc., is the sole owner of each item of the Collateral upon which it purports to grant a Lien pursuant to the Credit Documents, and has good and marketable title thereto free and clear of any and all Liens or claims of others, other than Permitted Liens; (ii) the security interests granted pursuant to this Agreement will constitute valid perfected security interests in all of the Collateral in favor of Lender as security for the prompt and complete payment and performance of the Obligations, enforceable in accordance with the terms hereof against any and all creditors of and purchasers from such Corporate Credit Party other than ATRM Holdings, Inc., (other than purchasers of Inventory in the ordinary course of business) and such security interests are prior to all other Liens on the Collateral in existence on the date hereof except for Permitted Liens which have priority by operation of law; and (iii) no effective security agreement, financing statement, equivalent security or Lien instrument or continuation statement covering all or any part of the Collateral is or will be on file or of record in any public office, except those relating to Permitted Liens. Such Corporate Credit Party other than ATRM Holdings, Inc., executing this Agreement promises to defend the right, title and interest of Lender in and to the Collateral against the claims and demands of all Persons whomsoever, and each Corporate Credit Party other than ATRM Holdings, Inc., shall take such actions, including (x) the prompt delivery of all negotiable Documents, original Instruments, Chattel Paper and certificated Stock owned by such Corporate Credit Party other than ATRM Holdings, Inc., to Lender, (y) notification of Lender’s interest in Collateral at Lender’s request, and (z) the institution of litigation against third parties as shall be prudent in order to protect and preserve such Corporate Credit Party’s other than ATRM Holdings, Inc., and Lender’s respective and several interests in the Collateral. Each Corporate Credit Party other than ATRM Holdings, Inc., executing this Agreement shall mark its Books and Records pertaining to the Collateral to evidence the Credit Documents and the Liens granted under the Credit Documents. All Chattel Paper shall be marked with the following legend: “This writing and the obligations evidenced or secured hereby are subject to the security interest of Gerber Finance Inc.”

(c) Each Corporate Credit Party other than ATRM Holdings, Inc., executing this Agreement shall obtain or use its best efforts to obtain waivers or subordinations of Liens from landlords and mortgagees, and each Corporate Credit Party other than ATRM Holdings, Inc., shall in all instances obtain signed acknowledgments of Lender’s Liens from bailees having possession of such Corporate Credit Party’s other than ATRM Holdings, Inc., Goods that they hold for the benefit of Lender.

(d) Each Corporate Credit Party other than ATRM Holdings, Inc., executing this Agreement shall obtain authenticated control letters from each issuer of uncertificated securities, securities intermediary, or commodities intermediary issuing or holding any financial assets or commodities to or for such Corporate Credit Party other than ATRM Holdings, Inc.

(e) Each Corporate Credit Party other than ATRM Holdings, Inc., executing this Agreement shall establish and maintain the cash management system described in Schedule IV. All payments in respect of the Collateral, shall be made to or deposited in the Collateral Account.

(f) Each Corporate Credit Party other than ATRM Holdings, Inc., executing this Agreement shall promptly, and in any event within two (2) Business Days after becoming a beneficiary under a letter of credit, notify Lender thereof and enter into a tri-party agreement with Lender and the issuer and/or confirmation bank with respect to Letter-of-Credit Rights assigning such Letter-of-Credit Rights to Lender and directing all payments thereunder to Lender, all in form and substance reasonably satisfactory to Lender.

(g) Each Corporate Credit Party other than ATRM Holdings, Inc., executing this Agreement shall take all steps necessary to grant Lender control of all electronic chattel paper in accordance with the UCC and all “transferable records” as defined in each of the Uniform Electronic Transactions Act and the Electronic Signatures in Global and National Commerce Act.

(h) Each Corporate Credit Party other than ATRM Holdings, Inc., executing this Agreement hereby irrevocably authorizes Lender at any time and from time to time to file in any filing office in any Uniform Commercial UCC jurisdiction any initial financing statements and amendments thereto that (i) indicate the Collateral (x) as all assets of such Corporate Credit Party other than ATRM Holdings, Inc., or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC or such jurisdiction, or (y) as being of an equal or lesser scope or with greater detail, and (ii) contain any other information required by Part 5 of Article 9 of the UCC or the filing office for acceptance of any financing statement or amendment, including whether each Corporate Credit Party other than ATRM Holdings, Inc., is an organization, the type of organization and any organization identification number issued to such Corporate Credit Party other than ATRM Holdings, Inc., and in the case of a financing statement filed as a fixture filing or indicating Collateral as as-extracted collateral or timber to be cut, a sufficient description of real property to which the Collateral relates. Each Corporate Credit Party other than ATRM Holdings, Inc., agrees to furnish any such information to Lender promptly upon request. Each Corporate Credit Party other than ATRM Holdings, Inc., also ratifies its authorization for Lender to have filed any initial financing statements or amendments thereto if filed prior to the date hereof.

(i) Each Corporate Credit Party other than ATRM Holdings, Inc., shall promptly, and in any event within the earlier of (i) five (5) Business Days after the same is acquired by it, or (ii) the next submitted borrowing base certificate, notify Lender of any commercial tort claim (as defined in the UCC) acquired by it and unless otherwise consented by Lender, each Corporate Credit Party other than ATRM Holdings, Inc., shall enter into a supplement to this Agreement, granting to Lender a Lien in such commercial tort claim.

(j) It is the intent of each Corporate Credit Party other than ATRM Holdings, Inc., and Lender that none of the Collateral is or shall be regarded as Fixtures and each Corporate Credit Party other than ATRM Holdings, Inc., represents and warrants that it has not made and is not bound by any lease or other agreement that is inconsistent with such intent. Nevertheless, if the Collateral or any part thereof is or is to become attached or affixed to any real estate, each Corporate Credit Party other than ATRM Holdings, Inc., will, upon request, furnish Lender with a disclaimer or subordination in form satisfactory to Lender of their interests in the Collateral from all Persons having an interest in the real estate to which the Collateral is attached or affixed, together with the names and addresses of the record owners of, and all other persons having interest in, and a general description of, such real estate.

10.2 Lender’s Rights.

(a) Lender may, (i) at any time in Lender’s own name or in the name of each Corporate Credit Party other than ATRM Holdings, Inc., communicate with Account Debtors, parties to Contracts, and obligors in respect of Instruments, Chattel Paper or other Collateral to verify to Lender’s satisfaction, the existence, amount and terms of any such Accounts, Contracts, Instruments or Chattel Paper or other Collateral, and (ii) at any time and without prior notice to any such Corporate Credit Party other than ATRM Holdings, Inc., notify Account Debtors, parties to Contracts, and obligors in respect of Chattel Paper, Instruments, or other Collateral that the Collateral has been assigned to Lender and that payments shall be made directly to Lender. Upon the request of Lender, each Corporate Credit Party other than ATRM Holdings, Inc., shall so notify such Account Debtors, parties to Contracts, and obligors in respect of Instruments, Chattel Paper or other Collateral. Each Corporate Credit Party other than ATRM Holdings, Inc., hereby constitutes Lender or Lender’s designee such Corporate Credit Party’s other than ATRM Holdings, Inc., attorney with power to endorse such Corporate Credit Party’s other than ATRM Holdings, Inc., name upon any notes, acceptance drafts, money orders or other evidences of payment or Collateral.

(b) Each Corporate Credit Party other than ATRM Holdings, Inc., shall remain liable under each Contract, Instrument and License to observe and perform all the conditions and obligations to be observed and performed by it thereunder, and Lender shall have no obligation or liability whatsoever to any Person under any Contract, Instrument or License (between any Borrower and any Person other than Lender) by reason of or arising out of the execution, delivery or performance of this Agreement, and Lender shall not be required or obligated in any manner (i) to perform or fulfill any of the obligations of Borrower, (ii) to make any payment or inquiry, or (iii) to take any action of any kind to collect, compromise or enforce any performance or the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times under or pursuant to any Contract, Instrument or License.

(c) Each Corporate Credit Party other than ATRM Holdings, Inc., shall, with respect to each owned, leased, or controlled property (including public warehouses), during normal business hours and upon reasonable advance notice (unless a Default or Event of Default shall have occurred and be continuing, in which event no notice shall be required and Lender shall have access at any and all times): (i) provide access to such property to Lender and any of its officers, employees and agents, as frequently as Lender determines to be appropriate; (ii) permit Lender and any of its officers, employees and agents to inspect, audit and make extracts and copies (or take originals if reasonably necessary) from all of such Corporate Credit Party’s other than ATRM Holdings, Inc., Books and Records; and (iii) permit Lender to inspect, review, evaluate and make physical verifications and appraisals of the Inventory and other Collateral in any manner and through any medium that Lender considers advisable, and each Corporate Credit Party other than ATRM Holdings, Inc., agrees to render to Lender, at Borrowers’ cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto.

(d) After the occurrence and during the continuance of a Default or Event of Default, each Corporate Credit Party other than ATRM Holdings, Inc., at its own expense, shall cause the certified public accountant then engaged by any Borrower to prepare and deliver to Lender at any time and from time to time, promptly upon Lender’s request, the following reports: (i) a reconciliation of all Accounts; (ii) an aging of all Accounts; (iii) trial balances; and (iv) test verifications of such Accounts as Lender may request. Each Corporate Credit Party other than ATRM Holdings, Inc., at its own expense, shall cause its certified independent public accountants to deliver to Lender the results of any physical verifications of all or any portion of the Inventory made or observed by such accountants when and if such verification is conducted. Lender shall be permitted to observe and consult with such Corporate Credit Party’s other than ATRM Holdings, Inc., accountants in the performance of these tasks.

10.3 Lender’s Appointment as Attorney-in-Fact. On the Closing Date, each Corporate Credit Party other than ATRM Holdings, Inc., shall execute and deliver a Power of Attorney in the form attached as Exhibit E. The power of attorney granted pursuant to the Power of Attorney and all powers granted under any Credit Document are powers coupled with an interest and shall be irrevocable until the Termination Date. The powers conferred on Lender under the Power of Attorney are solely to protect Lender’s interests in the Collateral and shall not impose any duty upon it to exercise any such powers. Lender agrees, except for the powers granted in clause (h) of the Power of Attorney, not to exercise any power or authority granted under the Power of Attorney unless an Event of Default has occurred and is continuing. Each Corporate Credit Party other than ATRM Holdings, Inc., authorizes Lender to file any financing or continuation statement without their signature to the extent permitted by applicable law. NONE OF LENDER OR ITS AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO ANY GRANTOR FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.

10.4 Grant of License to Use Intellectual Property Collateral. Each Corporate Credit Party other than ATRM Holdings, Inc., hereby grants to Lender an irrevocable, non-exclusive license (exercisable upon the occurrence and during the continuance of an Event of Default) without payment of royalty or other compensation to any such Corporate Credit Party other than ATRM Holdings, Inc., to use, transfer, license or sublicense any Intellectual Property now owned, licensed to, or hereafter acquired by any such Corporate Credit Party other than ATRM Holdings, Inc., and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof, and represents, promises and agrees that any such license or sublicense is not and will not be in conflict with the contractual or commercial rights of any third Person; provided, that such license will terminate on the Termination Date.

10.5 Terminations; Amendments Not Authorized. Each Corporate Credit Party other than ATRM Holdings, Inc., executing this Agreement acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement without the prior written consent of Lender and agrees that it will not do so without the prior written consent of Lender, subject to Borrower’s rights under Section 9-509(d)(2) of the UCC.

10.6 Inspections. At all times during normal business hours and absent the occurrence of a Default or an Event of Default upon reasonable notice to Borrowing Representative, Lender shall have the right to (a) have access to, visit, inspect, review, evaluate and make physical verification and appraisals of each Credit Party’s properties and the Collateral, (b) inspect, examine and copy (or take originals if necessary) and make extracts from such Credit Party’s Books and Records, including management letters prepared by independent accountants, and (c) discuss with each Credit Party’s principal officers, and independent accountants, each Credit Party’s business, assets, liabilities, financial condition, results of operations and business prospects. Each Credit Party will deliver to Lender any instrument necessary for Lender to obtain records from any service bureau maintaining records for such Credit Party.

XI.

TERM

11.1 Term of Agreement. Any obligation of Lender to make Loans and extend their financial accommodations under this Agreement or any Credit Document shall continue in full force and effect until the expiration of the Term. The termination of the Agreement shall not affect any of Lender’s rights hereunder or any Credit Document and the provisions hereof and thereof shall continue to be fully operative until all transactions entered into, rights or interests created and the Obligations have been disposed of, concluded or liquidated. The Maturity Date shall be automatically extended for successive periods of one (1) year each unless (a) Borrowing Representative shall have provided Lender with a written notice of termination, at least sixty (60) days prior to the expiration of the Maturity Date or any renewal of the Maturity Date or (b) Lender provides written notice of termination to Borrowing Representative at least sixty (60) days prior to the expiration of the Maturity Date or any renewal of the Maturity Date. Notwithstanding the foregoing, Lender shall release its security interests at any time after thirty (30) days notice upon payment to it of all Obligations if each Credit Party shall have (i) provided Lender with an executed release of any and all claims which Credit Parties may have or thereafter have under this Agreement and/or any Credit Document and (ii) paid to Lender an amount equal to (A) the monthly interest on the Minimum Average Monthly Loan Amount calculated based on the interest rate in effect on the date of such payment multiplied by (B) the difference between (I) the number of full months from the Closing Date until the Maturity Date and (II) the number of full months which have elapsed from the Closing Date until the payment of the fee hereunder. In addition, Borrowers shall pay to Lender the Collateral Monitoring Fee for each month from the date of repayment until the Maturity Date. These fees shall also be due and payable to Lender upon termination of this Agreement by Lender after the occurrence of an Event of Default.

11.2 Termination of Lien. The Liens and rights granted to Lender hereunder and any Credit Documents and the financing statements filed in connection herewith or therewith shall continue in full force and effect, notwithstanding the termination of this Agreement or the fact that Borrowers’ account may from time to time be temporarily in a zero or credit position, until (a) all of the Obligations have been paid or performed in full after the termination of this Agreement or each Credit Party has furnished Lender with an indemnification satisfactory to Lender with respect thereto and (b) each Credit Party has an executed release of any and all claims which such Credit Party may have or thereafter have under this Agreement or any other Credit Document. Accordingly, each Credit Party waives any rights which it may have under the UCC to demand the filing of termination statements with respect to the Collateral, and Lender shall not be required to send such termination statements to any Credit Party, or to file them with any filing office, unless and until this Agreement and the Credit Documents shall have been terminated in accordance with their terms and all Obligations paid in full in immediately available funds.

XII.	EVENTS OF DEFAULT

12.1 Events of Default. If any one or more of the following events (each, an “Event of Default”) shall occur and be continuing:

(a) any Borrower shall fail to pay the principal of or interest on any Loan or any fees or other Obligations when and as the same shall become due and payable (whether at maturity, by acceleration or otherwise); or

(b) any representation or warranty made or deemed made in or in connection with this Agreement or any other Credit Document or as an inducement to enter into this Agreement or any other Credit Document or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument or agreement furnished in connection with or pursuant to this Agreement or any other Credit Document shall prove to have been false or misleading in any material respect when made, deemed to be made or furnished; or

(c) (i) any Borrower or any other Credit Party shall fail or neglect to perform, keep or observe any of the covenants, promises, agreements, requirements, conditions or other terms or provisions contained in any Credit Document or in Article II, Sections 7.1, 7.3, 7.16, 7.17, 7.18, 7.19, 8.2 and Article IX of this Agreement; or (ii) any Borrower or any other Credit Party shall fail or neglect to perform, keep or observe any of the other covenants, promises, agreements, requirements, conditions or other terms or provisions contained in this Agreement (other than those set forth in the Sections referred to in clause (i) immediately above) or any of the other Credit Documents, regardless of whether such breach involves a covenant, promise, agreement, condition, requirement, term or provision with respect to a Credit Party that has not signed this Agreement, and such breach is not remediable or, if remediable, continues unremedied for a period of five (5) Business Days after the earlier to occur of (x) the date on which such breach is known or reasonably should have become known to any officer of any Borrower or such Credit Party and (y) the date on which Lender shall have notified any Borrower or such other Credit Party of such breach; or

(d) this Agreement or any other Credit Document shall not be for any reason, or shall be asserted by any Credit Party or other Person not to be, in full force and effect in all material respects in accordance with its terms or the Lien granted or intended to be granted to Lender pursuant to this Agreement or any other Credit Document shall cease to be a valid and perfected Lien having the first priority (or a lesser priority if expressly permitted in this Agreement or another Credit Document); or

(e) any judgment shall be rendered against any Credit Party or there shall be any attachment or execution against any of the assets or properties of any Credit Party, and such judgment, attachment or execution remains unpaid, unstayed or undismissed for a period of fourteen (14) days from the date of such judgment; or

(f) any Credit Party shall be dissolved or shall generally not pay, or shall be generally unable to pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted or a petition shall be filed by or against any Credit Party seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property; or any Credit Party shall take any action to authorize any of the actions set forth above in this clause (f); or

(g) any Credit Party shall (i) fail to pay any principal or interest, regardless of amount, due in respect of Indebtedness when and as the same shall become due and payable or (ii) fail to observe or perform any other term, covenant, condition or agreement contained in any agreements or instruments evidencing or governing any Indebtedness if the effect of any failure referred to in this clause (ii) is to cause, or to permit the holder or holders of such indebtedness or a trustee on its or their behalf to cause, such indebtedness to become due prior to its stated maturity; or

(h) the occurrence of a Change of Control in or with respect to any Corporate Credit Party; or

(i) there shall be commenced against any Credit Party any Litigation seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which remains unstayed or undismissed for thirty (30) consecutive days; or any Credit Party shall have concealed, removed or permitted to be concealed or removed, any part of its property with intent to hinder, delay or defraud any of its creditors or made or suffered a transfer of any of its property or the incurring of an obligation which may be fraudulent under any bankruptcy, fraudulent transfer or other similar law; or

(j) any other event shall have occurred which has had or could reasonably be expected to have a Material Adverse Effect; or

(k) an ERISA Event shall have occurred that, in the opinion of the Lender, when taken together with all other ERISA Events that have occurred and are then continuing, could reasonably be expected to result in liability of any Credit Party in an aggregate amount exceeding the Minimum Actionable Amount; the indictment or threatened indictment of any Credit Party, any officer of any Credit Party or any Guarantor under any criminal statute, or commencement or threatened commencement of criminal or civil proceeding against any Credit Party, any officer of any Credit Party or any Guarantor pursuant to which statute or proceeding penalties or remedies sought or available include forfeiture of any of the property of any Credit Party; or

(l) any Credit Party or other Person shall take or participate in any action which would be prohibited under the provisions of any Credit Document, or there shall occur an Event of Default or breach under the provisions of any Credit Document or with respect to any of the Obligations, or any Credit Party shall make any payment on the Subordinated Debt that any Person was not entitled to receive under the provisions of the applicable Subordination Agreement or Intercreditor Agreement; or

(m) the Life Insurance Policy shall be terminated, by any Credit Party or otherwise; or the Life Insurance Policy shall be scheduled to terminate within thirty (30) days and such Credit Party shall not have delivered a satisfactory renewal thereof to Lender; or any Credit Party shall fail to pay any premium on the Life Insurance Policy when due; or shall take any other action that impairs the value of the Life Insurance Policy; or

(n) a breach or event of default under any of the Transaction Documents, or a claim of indemnification thereunder, in each case which results or would reasonably be expected to result in the cancellation or rescission of any material Transaction Documents;

then, and in any such event and at any time thereafter, if such or any other Event of Default shall then be continuing, Lender in its sole discretion may declare any or all of the Obligations to be due and payable, and the same shall immediately become due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived; provided, however, that if there shall occur an Event of Default under paragraph (f) above, then any and all of the Obligations shall be immediately due and payable without any necessary action or notice by Lender. An Event of Default as defined herein shall also be an Event of Default under any other Credit Document or any other Obligations now existing or hereafter arising.

12.2 Lender Remedies.

(a) In addition to the rights and remedies set forth in Section 12.1, if any Event of Default shall have occurred and be continuing, Lender may, without notice, take any one or more of the following actions: (i) require that all Letter of Credit Obligations be fully cash collateralized pursuant to Schedule I; or (ii) exercise any rights and remedies provided to Lender under the Credit Documents or at law or equity, including all remedies provided under the UCC.

(b) Without limiting the generality of the foregoing, each Credit Party expressly agrees that upon the occurrence of any Event of Default, Lender may take any action necessary to collect, receive, assemble, process, appropriate and realize upon the Collateral, or any part thereof, or appoint a third party to do so and may forthwith sell, lease, assign, give an option or options to purchase or otherwise dispose of and deliver said Collateral (or contract to do so), or any part thereof, in one or more parcels at public or private sale or sales, at any exchange at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. Lender shall have the right upon any such public sale, to the extent permitted by law, to purchase for the benefit of Lender the whole or any part of said Collateral so sold, free of any right of equity of redemption, which right each Credit Party hereby releases. Such sales may be adjourned or continued from time to time with or without notice. Lender shall have the right to conduct such sales on any Corporate Credit Party’s premises or elsewhere and shall have the right to use any Corporate Credit Party’s premises without rent or other charge for such sales or other action with respect to the Collateral for such time as Lender deems necessary or advisable.

(c) Upon the occurrence and during the continuance of an Event of Default and at Lender’s request, each Credit Party further agrees to assemble the Collateral and make it available to Lender at places which Lender shall reasonably select, whether at its premises or elsewhere. Until Lender is able to effect a sale, lease, or other disposition of the Collateral, Lender shall have the right to complete, assemble, use or operate the Collateral or any part thereof, to the extent that Lender deems appropriate, for the purpose of preserving such Collateral or its value or for any other purpose. Lender shall have no obligation to any Credit Party to maintain or preserve the rights of any Credit Party as against third parties with respect to any Collateral while such Collateral is in the possession of Lender. Lender may, if it so elects, seek the appointment of a receiver or keeper to take possession of any Collateral and to enforce any of Lender’s remedies with respect thereto without prior notice or hearing. To the maximum extent permitted by applicable law, each Credit Party waives all claims, damages, and demands against Lender, its Affiliates, agents, and the officers and employees of any of them arising out of the repossession, retention or sale of any Collateral except such as are determined in a final judgment by a court of competent jurisdiction to have arisen solely out of the gross negligence or willful misconduct of such Person. Each Credit Party agrees that ten (10) days prior notice by Lender to each Credit Party of the time and place of any public sale or of the time after which a private sale may take place is reasonable notification of such matters. Each Credit Party shall remain liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all amounts to which Lender is entitled.

(d) Lender’s rights and remedies under this Agreement shall be cumulative and nonexclusive of any other rights and remedies which Lender may have under any other Credit Document or at law or in equity. Recourse to the Collateral shall not be required. All provisions of this Agreement are intended to be subject to all applicable mandatory provisions of law that may be controlling and to be limited, to the extent necessary, so that they do not render this Agreement invalid or unenforceable, in whole or in part.

12.3 Waivers. Except as otherwise provided for in this Agreement and to the fullest extent permitted by applicable law, each Credit Party waives: (a) presentment, demand and protest, and notice of presentment, dishonor, intent to accelerate, acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all Credit Documents, the Notes or any other notes, commercial paper, Accounts, Contracts, Documents, Instruments, Chattel Paper and guaranties at any time held by Lender on which any Credit Party may in any way be liable, and hereby ratifies and confirms whatever Lender may do in this regard; (b) all rights to notice and a hearing prior to Lender’s taking possession or control of, or to Lender’s replevy, attachment or levy upon, any Collateral or any bond or security which might be required by any court prior to allowing Lender to exercise any of its remedies; and (c) the benefit of all valuation, appraisal and exemption laws. Each Credit Party acknowledges that it has been advised by counsel of its choices and decisions with respect to this Agreement, the other Credit Documents and the transactions evidenced hereby and thereby.

12.4 Proceeds. The Proceeds of any sale, disposition or other realization upon any Collateral shall be applied by Lender upon receipt to the Obligations in such order as Lender may deem advisable in its sole discretion (including the cash collateralization of any Letter of Credit Obligations), and after the indefeasible payment and satisfaction in full in cash of all of the Obligations, and after the payment by Lender of any other amount required by any provision of law, including the UCC (but only after Lender has received what Lender considers reasonable proof of a subordinate party’s security interest), the surplus, if any, shall be paid to Borrowers or their representatives or to whomsoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct.

XIII.

MISCELLANEOUS

13.1 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of Lender, any right, remedy, power or privilege under this Agreement or any other Credit Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. No notice to or demand on any Credit Party in any case shall, of itself, entitle it to any other or further notice or demand in similar or other circumstances. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

13.2 Amendments and Waivers. No amendment, modification or waiver of or with respect to any provision of this Agreement or any other Credit Document shall in any event be effective unless it shall be in writing and signed by Lender and each Credit Party, and then such amendment, modification, waiver or consent shall be effective only in the specific instance and for the purpose for which given.

13.3 Expenses; Indemnity.

(a) Each Credit Party agrees to, jointly and severally, pay or reimburse Lender for all costs and expenses (including, without limitation, the fees and expenses of all counsel, advisors, consultants and auditors) incurred by Lender in connection with: (i) the review, preparation, negotiation, execution, delivery, performance and enforcement of this Agreement and the other Credit Documents, any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated shall be consummated); (ii) the enforcement or protection of Lender’s rights in connection with this Agreement and the other Credit Documents or in connection with the Loans; (iii) any services rendered by any third-party service providers whose fees are payable pursuant to Section 5.1(b) of this Agreement, (iv) any advice in connection with the administration of the Loans or the rights under this Agreement or the other Credit Documents; (iv) any litigation, dispute, suit, proceeding or action (whether instituted by or between any combination of Lender, any Credit Party or any other Person), and an appeal or review thereof, in any way relating to the Collateral, this Agreement, any other Credit Document, or any action taken or any other agreements to be executed or delivered in connection therewith, whether as a party, witness or otherwise; and (v) any effort (x) to monitor the Loans, (y) to evaluate, observe or assess any Borrower or any other Credit Party or the affairs of such Person, and (z) to verify, protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of the Collateral. In addition to the foregoing, each Credit Party agrees to pay Lender a fee of $1,000 for each amendment, modification, supplement or restatement of any Credit Document entered into by Lender and the Credit Parties. Each Credit Party further agrees, jointly and severally, to indemnify Lender from and agrees to hold it harmless against any documentary taxes, assessments or charges made by any governmental authority by reason of the execution and delivery of this Agreement or any of the other Credit Documents.

(b) Each Credit Party agrees to, jointly and severally, indemnify Lender, the LC Issuers, their correspondents and each of their respective directors, shareholders, officers, employees and agents (each, an “Indemnified Person”) against, and agrees to hold each Indemnified Person harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnified Person arising out of, in any way connected with or as a result of (i) the use of any of the proceeds of any Loan or the use of any Loan, (ii) the goods or transactions financed by the Loans, (iii) this Agreement, any other Credit Document or any other document contemplated hereby or thereby, the performance by the parties hereto or thereto of their respective obligations hereunder and thereunder or the consummation of the transactions contemplated hereby and thereby, or (iv) any claim, litigation, investigation or proceedings relating to any of the foregoing, whether or not any Indemnified Person is a party thereto; provided, however, that such indemnity shall not, as to any Indemnified Person, apply to any such losses, claims, damages, liabilities or related expenses to the extent that they result from the gross negligence or willful misconduct of Lender.

(c) The provisions of this Section 13.3 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement and the repayment of the Loans. All amounts due under this Section 13.3 shall be payable on written demand therefor.

13.4 Borrowing Agency Provisions. If and to the extent that at any time or from time to time there are multiple Borrowers, then.

(a) Each Borrower acknowledges that, together with each other Borrower, it is part of an affiliated common enterprise in which any loans or other financial accommodations extended to any one Borrower will result in direct and substantial economic benefit to each other Borrower, and each Borrower will likewise benefit from the economies of scale associated with the Borrowers, as a group, applying for credit or other financial accommodations on a collective basis.

(b) Each Borrower hereby irrevocably designates Borrowing Representative to be its attorney and agent and in such capacity to borrow, sign and endorse notes, and execute and deliver all instruments, documents, writings and further assurances now or hereafter required hereunder, on behalf of such Borrower or Borrowers, and hereby authorizes Lender to pay over or credit all loan proceeds hereunder in accordance with the request of Borrowing Representative.

(c) The handling of this credit facility as a co-borrowing facility with a Borrowing Representative in the manner set forth in this Agreement is solely as an accommodation to Borrowers and at their request. Lender shall not incur liability to Borrowers as a result thereof. To induce Lender to do so and in consideration thereof, each Borrower, jointly and severally, hereby indemnifies Lender and holds Lender harmless from and against any and all liabilities, expenses, losses, damages and claims of damage or injury asserted against Lender or any issuer by any Person arising from or incurred by reason of the handling of the financing arrangements of Borrowers as provided herein, reliance by Lender on any request or instruction from Borrowing Representative or any other action taken by Lender with respect to this Section except due to willful misconduct or gross negligence by the indemnified party.

(d) All Obligations shall be joint and several, and each Borrower shall make payment upon the maturity of the Obligations by acceleration or otherwise, and such obligation and liability on the part of each Borrower shall in no way be affected by any extensions, renewals and forbearance granted by Lender to any Borrower, failure of Lender to give any Borrower notice of borrowing or any other notice, any failure of Lender to pursue or preserve its rights against any Borrower, the release by Lender of any Collateral now or thereafter acquired from any Borrower, and such agreement by each Borrower to pay upon any notice issued pursuant thereto is unconditional and unaffected by prior recourse by Lender to the other Borrowers or any Collateral for such Borrower’s Obligations or the lack thereof.

13.5 Guaranty. Each Corporate Credit Party hereby absolutely and unconditionally guarantees to Lender and its successors and assigns the full and prompt payment (whether at stated maturity, by acceleration or otherwise) and performance of all Obligations owed or hereafter owing to Lender by each Corporate Credit Party. Each Corporate Credit Party agrees that its guaranty obligation hereunder is a continuing guaranty of payment and performance and not of collection, and that its obligations shall be absolute and unconditional, irrespective of, and unaffected by:

(a) the genuineness, validity, regularity, enforceability or any future amendment of, or change in, this Agreement, any other Credit Documents;

(b) the absence of any action to enforce this Agreement (including this Section 13.5) or any other Credit Document or the waiver or consent by Lender with respect to any of the provisions hereof or thereof;

(c) the existence, value or condition of, or failure to perfect its Lien against, any security for the Obligations or any action, or the absence of any action, by Lender in respect thereof (including the release of any such security);

(d) the insolvency of any Credit Party; or

(e) any other action or circumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor,

it being agreed by each Credit Party that its obligations shall not be discharged until the payment and performance, in full, of the Obligations has occurred. Each Credit Party shall be regarded, and shall be in the same position, as principal debtor with respect to the Obligations guaranteed hereunder.

13.6 Waivers. Each Corporate Credit Party expressly waives all rights it may have now or in the future under any statute, or at common law, or at law or in equity, or otherwise, to compel Lender to marshal assets or to proceed in respect of the Obligations guaranteed hereunder against any other Corporate Credit Party, any other party or against any security for the payment and performance of the Obligations before proceeding against, or as a condition to proceeding against, such Credit Party. It is agreed among each Credit Party and Lender that the foregoing waivers are of the essence of the transactions contemplated by this Agreement and the other Credit Documents and that, but for the provisions of this Section 13.6 and such waivers, Lender would decline to enter into this Agreement.

13.7 Benefit of Guaranty. Each Credit Party agrees that the provisions of Section 13.5 are for the benefit of Lender and its successors, transferees, endorsees and assigns, and nothing herein contained shall impair, as between any other Credit Party and Lender, the obligations of such other Credit Party under this Agreement or the other Credit Documents.

13.8 Subordination of Subrogation. Notwithstanding anything to the contrary in this Agreement or in any other Credit Documents, each Credit Party hereby expressly and irrevocably subordinates to payment of the Obligations any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off and any and all defenses available to a surety, guarantor or accommodation co-obligor until the Obligations are indefeasibly paid in full in cash. Each Credit Party acknowledges and agrees that this waiver is intended to benefit Lender and shall not limit or otherwise affect such Credit Party’s liability hereunder or the enforceability of Section 13.5.

13.9 Election of Remedies. If Lender may, under applicable law, proceed to realize its benefits under this Agreement or any other Credit Document giving Lender a Lien upon any Collateral, whether owned by any Borrower or by any other Person, either by judicial foreclosure or by non-judicial sale or enforcement, Lender may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under Section 13.5. If, in the exercise of any of its rights and remedies, Lender shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against any Credit Party or any other Person, whether because of any applicable laws pertaining to “election of remedies” or the like, each Credit Party hereby consents to such action by Lender and waives any claim based upon such action, even if such action by Lender shall result in a full or partial loss of any rights of subrogation which such Credit Party might otherwise have had but for such action by Lender. Any election of remedies that results in the denial or impairment of the right of Lender to seek a deficiency judgment against any Credit Party shall not impair any other Credit Party’s obligation to pay the full amount of the Obligations. In the event Lender shall bid at any foreclosure or trustee’s sale or at any private sale permitted by law, this Agreement or any other Credit Document, Lender may bid all or less than the amount of the Obligations and the amount of such bid need not be paid by Lender but may be credited against the Obligations. The amount of the successful bid at any such sale, whether Lender or any other party is the successful bidder, shall be conclusively deemed to be the fair market value of the Collateral and the difference between such bid amount and the remaining balance of the Obligations shall be conclusively deemed to be the amount of the Obligations guaranteed under Section 13.5 notwithstanding that any present or future law or court decision or ruling may have the effect of reducing the amount of any deficiency claim to which Lender might otherwise be entitled but for such bidding at any such sale.

13.10 Liability Cumulative. The liability of Credit Parties under Section 13.5 is in addition to and shall be cumulative with all liabilities of each Credit Party to Lender under this Agreement and the other Credit Documents or in respect of any Obligations or obligation of the other Credit Parties, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary.

13.11 Waiver of Subrogation. Each Borrower expressly waives any and all rights of subrogation, reimbursement, indemnity, exoneration, contribution of any other claim which such Borrower may now or hereafter have against the other Borrowers or other Person directly or contingently liable for the Obligations hereunder, or against or with respect to the other Borrowers’ property (including, without limitation, any property which is Collateral for the Obligations), arising from the existence or performance of this Agreement, until termination of this Agreement and repayment in full of the Obligations.

13.12 Further Assurances. Each Credit Party will take, or cause to be taken, all such further actions and execute, or cause to be executed, all such further documents and instruments as Lender may at any time reasonably request or determine to be necessary or advisable to further carry out and consummate the transactions contemplated by this Agreement and the other Credit Documents.

13.13 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of each Borrower and its successors and to the benefit of Lender and its successors and assigns. The rights and obligations of each Credit Party under this Agreement shall not be assigned or delegated without the prior written consent of Lender, and any purported assignment or delegation without such consent shall be null and void. Lender reserves the right at any time to create and sell participations in the Loans and the Credit Documents and to sell, transfer or assign any or all of its rights in the Loans and under the Credit Documents.

13.14 Descriptive Headings. The descriptive headings of the various provisions of this Agreement are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.

13.15 Notices. Except as otherwise provided herein, whenever any notice, demand, request or other communication shall or may be given to or served upon any party by any other party, or whenever any party desires to give or serve upon any other party any communication with respect to this Agreement, each such communication shall be in writing and shall be deemed to have been validly served, given or delivered (a) upon the earlier of actual receipt and three (3) days after deposit in the United States Mail, registered or certified mail, return receipt requested, with proper postage prepaid, (b) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or United States Mail as otherwise provided in this Section 13.15, (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid or (d) when hand-delivered, all of which shall be addressed to the party to be notified and sent to the address or facsimile number indicated in Schedule V or to such other address (or facsimile number) as may be substituted by notice given as herein provided. Failure or delay in delivering copies of any such communication to any Person (other than Borrowing Representative or Lender) designated in Schedule V to receive copies shall in no way adversely affect the effectiveness of communication.

13.16 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

13.17 Entire Agreement; Counterparts. This Agreement and the other Credit Documents represent the agreement of Credit Parties and Lender with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by any Borrower or Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Credit Documents. Nothing in this Agreement or in the other Credit Documents, express or implied, is intended to confer upon any party, other than the parties hereto and thereto, any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Credit Documents. This Agreement may be signed in any number of counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. Any signature delivered by a party via facsimile or electronic transmission shall be deemed to be an original signature hereto.

13.18 SUBMISSION TO JURISDICTION. EACH CREDIT PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY: (a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING, DIRECTLY OR INDIRECTLY, RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; (b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN SCHEDULE V TO THIS AGREEMENT OR AT SUCH OTHER ADDRESS OF WHICH LENDER SHALL HAVE BEEN NOTIFIED PURSUANT TO SECTION 13.16; AND (d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.

13.19 WAIVER OF TRIAL BY JURY, CERTAIN DAMAGES AND SETOFFS. IN ANY LEGAL ACTION OR PROCEEDING, DIRECTLY OR INDIRECTLY, RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR ANY DOCUMENT, INSTRUMENT OR AGREEMENT DELIVERED PURSUANT HERETO OR THERETO, (A) EACH OF EACH CREDIT PARTY AND LENDER HEREBY, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO TRIAL BY JURY IN CONNECTION WITH ANY SUCH LEGAL ACTION OR PROCEEDING, (B) EACH OF EACH CREDIT PARTY AND LENDER HEREBY, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, ACTUAL DAMAGES AND (C) EACH CREDIT PARTY HEREBY, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO INTERPOSE ANY NON-COMPULSORY SETOFF, RECOUPMENT, COUNTERCLAIM OR CROSS-CLAIM IN CONNECTION WITH ANY SUCH LEGAL ACTION OR PROCEEDING. EACH BORROWER AGREES THAT THIS SECTION 13.19 IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES THAT LENDER WOULD NOT EXTEND TO ANY BORROWER ANY LOANS HEREUNDER IF THIS SECTION 13.19 WERE NOT PART OF THIS AGREEMENT.

13.20 GOVERNING LAW . THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.

13.21 Reinstatement. This Agreement shall continue to be effective, or be reinstated, as the case may be, if at any time payment of all or any part of the Obligations is rescinded or must otherwise be returned or restored by Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Credit Party, or otherwise, all as though such payments had not been made.

[Signature Page Follows]

IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year first above written.

	EDGEBUILDER, INC.

	By:	/s/ Daniel M. Koch
		Daniel M. Koch
		President

	GLENBROOK BUILDING SUPPLY, INC.

	By:	/s/ Daniel M. Koch
		Daniel M. Koch
		President

	KBS BUILDERS, INC.

	By:	/s/ Daniel M. Koch
		Daniel M. Koch
		President

	MAINE MODULAR HAULERS, INC.

	By:	/s/ Daniel M. Koch
		Daniel M. Koch
		President

	ATRM HOLDINGS, INC.

	By:	/s/ Daniel M. Koch
		Daniel M. Koch
		President

[ Signatures continued on next page ]

SIGNATURE PAGE TO

LOAN AGREEMENT

[ continuation of signatures ]

	GERBER FINANCE INC.

	By:	/s/ Jennifer Palmer
		Jennifer Palmer
		President

SIGNATURE PAGE TO

LOAN AGREEMENT

SCHEDULE I

GENERAL TERMS FOR LETTERS OF CREDIT

1. Lender may, subject to the terms and conditions hereinafter set forth, incur Letter of Credit Obligations in respect of the issuance of Letters of Credit issued on terms acceptable to Lender and supporting obligations of a Borrower incurred in the ordinary course of such Borrower’s business, in order to support the payment of such Borrower’s inventory purchase obligations, insurance premiums, or utility or other operating expenses and obligations, as Borrowing Representative, on behalf of such Borrower, shall request by written notice to Lender that is received by Lender not less than five (5) Business Days prior to the requested date of issuance of any such Letter of Credit; provided, that: (a) that the aggregate amount of all Letter of Credit Obligations at any one time outstanding (whether or not then due and payable) shall not exceed $1,000,000 (notwithstanding the number of Credit Documents or Obligations), and (b) no Letter of Credit shall have an expiry date which is later than the Termination Date or one year following the date of issuance thereof. The applicable Borrower will enter into an application and agreement for such Letter of Credit with the LC Issuer selected by Lender. The LC Issuer shall be determined by Lender in its sole discretion.

2. The notice to be provided to Lender requesting that Lender incur Letter of Credit Obligations shall be in the form of a Letter of Credit application in the form customarily employed by the LC Issuer, together with a written request by a Borrower and the LC Issuer that Lender approve such Borrower’s application. Upon receipt of such notice Lender shall establish a reserve against the Borrowing Base in the amount of 100% of the face amount of the Letter of Credit Obligation to be incurred. Approval by Lender in the written form agreed upon between Lender and the LC Issuer (a) will authorize the LC Issuer to issue the requested Letter of Credit and (b) will conclusively establish the existence of the Letter of Credit Obligation as of the date of such approval.

3. Each Letter of Credit shall be subject to the Uniform Commercial Customs and, to the extent not inconsistent therewith, the laws of the State of New York.

4. Each payment by the LC Issuer or Lender pursuant to a Letter of Credit shall be deemed to be a Revolving Credit Advance on the date of such payment in a principal amount equal to the amount so paid. Each Borrower shall be obligated to reimburse Lender for each payment made under or in respect of any Letter of Credit (including, the payment of principal, fees and interest on any Revolving Credit Advance made pursuant to the immediately preceding sentence and any payment made by Lender in reimbursement of any payment made under a Letter of Credit by an LC Issuer together with such other amounts that become due pursuant to this Agreement or other instrument.

5. The obligations of each Borrower under this Schedule shall be absolute, unconditional and irrevocable under any and all circumstances and shall be paid strictly in accordance with this Agreement irrespective of: (a) any lack of validity or enforceability of any Letter of Credit or of any demand, application, reimbursement agreement or other agreement or instrument relating thereto (collectively, the “Related Documents”); (b) the existence of any claim, setoff, defense or other right that any Borrower or any other Person may at any time have against the beneficiary under any Letter of Credit, Lender, the LC Issuer, any of their correspondents or any other Person; (c) any improper or erroneous or mistaken payment by any LC Issuer or Lender under any Letter of Credit; (d) any supplement or waiver of or any consent to depart from the terms of any Letter of Credit or Related Document; and (e) any other circumstance or event whatsoever, whether or not similar to any of the foregoing.

6. In the event Lender or the LC Issuer receives some but not all of the documents against which a drawing under a Letter of Credit may be made and, at a Borrower’s request, Lender or the LC Issuer delivers such documents to a Borrower, against trust receipt or otherwise, prior to the presentation of the related draft, each Borrower agrees to pay to Lender on demand the amount of any claim made against Lender or the LC Issuer by reason thereof and authorizes Lender and the LC Issuer to pay or accept (as the case may be) such draft when it is presented regardless of whether such draft or any document which may accompany it complies with the terms of the relevant Letter of Credit.

7. Except insofar as instructions may be given to Lender by each Borrower in writing expressly to the contrary with regard to, and prior to the opening of, any Letter of Credit, each Borrower agrees that Lender, the LC Issuer and any of their correspondents may: (a) receive and accept as “bills of lading” under any Letter of Credit any documents issued or purporting to be issued by or on behalf of any carrier which acknowledges receipt of goods for transportation or otherwise, whatever the specific provisions of such documents, for which purpose the “on board” date of each such document shall be deemed the date of shipment of the goods mentioned therein; (b) accept as documents of insurance either insurance policies or insurance certificates; (c) receive and accept as sufficient and controlling the description of the property contained in the invoice, and receive and accept bills of lading, insurance and other documents, however variant in description from that contained in the invoice; (d) receive and accept bills of lading containing stamped, written or typewritten provisions thereon, whether or not signed or initialed, and assume conclusively that the same were placed with authority on any bill of lading at the time of its signing and issuance by the steamship company or carrier or any agent thereof; (e) honor drafts, instruments or demands related to part shipments under any Letter of Credit; (f) accept or pay any draft dated on or before the expiration of any time limit expressed in any Letter of Credit, regardless of when drawn and whether or when negotiated, provided that the other required documents are dated on or prior to the expiration date of such Letter of Credit; and (g) accept documents of any character which comply with the provisions, definitions, interpretations and practices contained in the Uniform Customs or which comply with the laws or regulations in force in, or the customs or usages of, the place of shipment or negotiation.

8. Neither Lender nor any LC Issuer nor any of their correspondents shall be responsible for: (a) the use which may be made of any Letter of Credit, or any acts or omissions in connection therewith; (b) the existence, character, quality, quantity, condition, packing, value or delivery of the goods purporting to be represented by documents; (c) any difference in character, quality, quantity, condition or value of the goods from that expressed in the documents; (d) the validity, sufficiency or genuineness of documents, or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged; (e) the time, place, manner or order in which shipment is made; (f) any partial or incomplete shipment or failure or omission to ship any or all of the goods referred to in any Letter of Credit; (g) the character, adequacy, validity or genuineness of any insurance, the solvency or responsibility of any insurer or any other risk connected with insurance; (h) any deviation from instructions, delay, default or fraud by the shipper or anyone else in connection with goods or the shipping thereof; (i) the solvency, responsibility or relationship to the goods of any party issuing any documents in connection with the goods; (j) any delay in arrival or failure to arrive of either the goods or any of the documents relating thereto; (k) any delay in giving or failure to give notice of arrival or any other notice; (l) any breach of contract between the shippers or vendors and the consignees or buyers; (m) compliance with or circumstances resulting from any laws, customs and regulations which may be effective in countries of negotiation or payment of any Letter of Credit; (n) any failure of any draft, instrument or demand to bear any reference or adequate reference to the related Letter of Credit, any failure of documents to accompany any draft, instrument or demand at negotiation or any failure of any Person to note the amount of any draft, instrument or demand on the reverse of the related Letter of Credit or to surrender or take up such Letter of Credit or to send forward documents apart from drafts, in each case as required by the terms of the related Letter of Credit, any of which requirements, if contained in any Letter of Credit, may be waived by Lender or the LC Issuer; (o) any errors, omissions, interruptions or delays in transmission or delivery of any message, by mail, telex, cable, telegraph, wireless or otherwise, whether or not they be in cipher; (p) any failure of any document to conform to, or be presented under, the Letter of Credit in any instance where any Borrower or its agent, upon request, has received documents and/or goods represented thereby; or (q) any refusal by Lender, the LC Issuer or any of their correspondents to pay or honor drafts drawn or purportedly drawn under any Letter of Credit because of any applicable law, decree or edict, legal or illegal, of any governmental agency now or hereafter in force, or for any other matter beyond Lender’s control. Nor shall Lender be responsible for any act, error, omission, neglect or default under the terms of any Letter of Credit or any Related Documents or otherwise, or for any insolvency or failure in business, of the LC Issuer or any of the correspondents of Lender or the LC Issuer. None of the foregoing shall affect, impair, or prevent the vesting of any of Lender’s rights or powers hereunder, or any Borrower’s obligations hereunder. In furtherance of and extension of and not in limitation of the specific provisions hereinabove set forth, each Borrower agrees that any action taken, and any action or omission, by Lender, the LC Issuer or any of their correspondents, in the absence of bad faith on its part, under or in connection with any Letter of Credit or the related drafts, instruments or demands, documents or goods shall be binding on such Borrower and shall not put Lender, the LC Issuer or any of their correspondents under any resulting liability to Lender.

9. Each Borrower agrees to procure promptly any necessary import and export and other licenses for the import or export or shipping of the goods or payment therefor, to comply with all foreign and domestic governmental regulations in regard to the shipment of the goods or the financing thereof, to furnish such certificates in that respect as Lender may at any time require, to keep the goods adequately covered by insurance satisfactory in all respects to Lender, with companies satisfactory to Lender, and to assign the policies and/or certificates of insurance to Lender, or to make the loss or adjustment, if any, payable to Lender, at Lender’s option, and to furnish Lender promptly on demand with evidence of acceptance by the insurers of such assignment.

10. Each Borrower hereby certifies, covenants and agrees that no shipments will be made or other transactions undertaken under any Letter of Credit in violation of the laws of the United States, any applicable foreign law or the applicable regulations of any United States or foreign governmental agency or authority.

11. In furtherance of and not in limitation of the provisions of this Agreement, as security for the Obligations, each Borrower hereby grants to Lender a security interest in, and recognizes and admits Lender’s ownership in and unqualified right to the possession and disposal of, (a) all goods shipped under, pursuant to or in connection with each Letter of Credit or related in any way to any Letter of Credit, (b) any and all documents of title, bills of lading, shipping documents, warehouse receipts, securities, chattel paper, policies and/or certificates of insurance and other documents and instruments of any kind and nature in any way accompanying, related to or arising out of any credit and the goods related thereto and to any drafts, instruments, demands or acceptances drawn or made or purportedly drawn or made thereunder (whether or not such goods, documents or other items specified above be released to a Borrower, or upon a Borrower’s order, on trust or bailee receipt or otherwise), (c) any and all accounts, accounts receivable, contract rights, inventory, general intangibles, claims, credits, monies, demands and patent and trademark rights related to or arising out of any such Letter of Credit or the goods; (d) all monies on account with Lender or any party acting on Lender’s behalf, and (e) to the extent not otherwise included, all proceeds of any and all of the foregoing. Each Borrower represents, warrants, covenants and agrees that upon delivery of any goods financed by the Letter of Credits to a Borrower such goods shall be the exclusive property of such Borrower, subject only to a Lien in favor of Lender. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of an Event of Default, any deposit or other sums at any time properly credited by or due from Lender for the account of Borrowers may be applied by Lender by way of set-off to the payment of any of the Obligations without any notice to any Borrower.

12. In the event that any Letter of Credit Obligations, whether or not then due or payable, shall for any reason be outstanding on the Termination Date, each Borrower will either (a) cause the underlying Letter of Credit to be returned and canceled and each corresponding Letter of Credit Obligation to be terminated, or (b) pay to Lender, in immediately available funds, an amount equal to 105% of the maximum amount then available to be drawn under all Letters of Credit in favor of Borrowers not so returned and canceled to be held by Lender as cash collateral in an account under the exclusive dominion and control of Lender (the “Cash Collateral Account”).

13. In connection with all Letters of Credit, each Borrower, hereby appoints Lender, or its designee, as its attorney, with full power and authority (i) to sign and/or endorse such Borrower’s name upon any warehouse or other receipts, letter of credit applications and acceptances; (ii) to sign such Borrower’s name on bills of lading; (iii) to clear Inventory through the United States of America Customs Department (“Customs”) in the name of such Borrower or Lender or Lender’s designee, and to sign and deliver to Customs officials powers of attorney in the name of such Borrower for such purpose; (iv) to complete in the name of Lender, or Lender’s designee, any order, sale or transaction, obtain the necessary documents in connection therewith, and collect the proceeds thereof; (v) to clear and resolve any questions of non-compliance of documents; (vi) to give any instructions as to acceptance or rejection of any documents or goods; (vii) to execute any and all applications for steamship or airways guarantees, indemnities or delivery orders; (viii) to grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances, or documents; and (ix) to agree to any amendments, renewals, extensions, modifications, changes or cancellation of any of the terms or conditions of any of the applications, Letters of Credit, drafts or acceptances; all in Lender’s sole name, and the LC Issuer shall be entitled to comply with and honor any and all such documents or instruments executed by or received solely from Lender; all without notice to or consent from Borrower. Neither Lender nor its attorneys will be liable for any acts or omissions nor for any error of judgment or mistakes of fact or law, except for Lender’s or its attorney’s gross (not mere) negligence or willful misconduct. This power, being coupled with an interest, is irrevocable as long as any Letters of Credit remain outstanding.

14. In the event Lender shall incur any Letter of Credit Obligation, Borrowers agree to pay Lender the fees, charges and commissions set for on Attachment A to this Schedule A and shall reimburse Lender for all fees and charges paid by lender on account of any Letter of Credit or Letter of Credit Obligations to the LC Issuer.

ATTACHMENT A

LETTERS OF CREDIT

FEES, CHARGES AND COMMISSIONS

LC Issuer - Bank Charges:
Wire Transfer	$75
Issuance of Check	$45
Letter of Credit:
Issuance	$125
Amendment/Discrepancy	$150
Cable/Telex Notification	$120
Courier	$50
Air Freight Release:
Steamship Guarantee	$50
Payment Commission (Sight & Time)	0.3% or $150 min.
Processing Fee	$40 per invoice
Cancellation Fee	$125
Acceptance Time Payment	2.5% per annum or $175 min.
Stand-by Letter of Credit:
Issuance	$250
Commission Fee	1.5% per annum or $300 min.
Amendment/Discrepancy	$175
Cable/Telex Notification	$120
Courier	$50
Lender Charges (per billing):
Courier Service (if used)	$50 for domestic / $75 min. for overseas
Petties	$20 - $45
Telephone	$17.50 - $35
Fax	$25 - $50

SCHEDULE II

CONDITIONS PRECEDENT

The following items must be received by Lender in form and substance satisfactory to Lender on or prior to the date of the initial Loan Lender:

1. this Agreement duly executed by each Credit Party;

2. the Note duly executed by each Borrower;

3. INTENTIONALLY OMITTED;

4. acknowledgement copies of proper financing statements (Form UCC-l) duly filed under the UCC in all jurisdictions as may be necessary or, in the opinion of Lender, desirable to perfect Lender’s Lien on the Collateral;

5. certified copies of UCC, tax lien and judgment searches, or other evidence satisfactory to Lender, listing all effective financing statements which name each Credit Party (under present name, any previous name or any trade or doing business name) as debtor and covering all jurisdictions requested by Lender, together with copies of such other financing statements;

6. duly executed Intellectual Property Security Agreement from each Credit Party which owns Intellectual Property;

7. evidence of the completion of all other recordings and filings (including UCC-3 termination statements and other Lien release documentation) as may be necessary or, in the opinion of and at the request of Lender, desirable to perfect Lender’s Lien on the Collateral and ensure such Collateral is free and clear of other Liens;

8. Powers of Attorney duly executed by each Corporate Credit Party except ATRM Holdings, Inc.;

9. INTENTIONALLY OMITTED.

10. INTENTIONALLY OMITTED.

11. duly executed originals of a Request for Loan, dated the Closing Date, with respect to the initial Revolving Credit Advance to be requested by Borrowing Representative on the Closing Date;

12. duly executed originals of a letter of direction from Borrowing Representative addressed to Lender, with respect to the disbursement on the Closing Date of the proceeds of the initial Loan;

13. for each Corporate Credit Party, such Person’s (a) charter and all amendments thereto, (b) good standing certificates (including verification of tax status where available as part of a good standing certificate) in its state of incorporation and (c) good standing certificates (including verification of tax status where available as part of a good standing certificate) and certificates of qualification to conduct business in each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, each dated a recent date prior to the Closing Date and certified by the applicable Secretary of State or other authorized Governmental Authority;

14. a certificate of an officer of each Corporate Credit Party in the form of Exhibit G together with copies of: (a) such Person’s bylaws or operating agreement, together with all amendments thereto and (b) resolutions of such Person’s Board of Directors and stockholders, as applicable, approving and authorizing the execution, delivery and performance of the Credit Documents to which such Person is a party and the transactions to be consummated in connection therewith, each certified as of the Closing Date by such Person’s corporate secretary or an assistant secretary as being in full force and effect without any modification or amendment;

15. for each Corporate Credit Party, signature and incumbency certificates of the officers of each such Person executing any of the Credit Documents, certified as of the Closing Date by such Person’s corporate secretary or an assistant secretary as being true, accurate, correct and complete;

16. evidence satisfactory to Lender that, as of the Closing Date, Cash Management Systems complying with Schedule IV the Agreement have been established and are currently being maintained in the manner set forth in such Schedule IV , together with copies of a duly executed blocked account and lock box agreements, reasonably satisfactory to Lender, with the banks as required by Schedule IV ;

17. INTENTIONALLY OMITTED.

18. a letter from the Credit Parties to their independent auditors in the form of Exhibit F authorizing the independent certified public accountants of the Credit Parties to communicate with Lender;

19. duly executed originals of account debtor notification letters in the form of Exhibit H executed in blank by each Corporate Credit Party other than ATRM Holdings, Inc.;

20. unless otherwise agreed to in writing by lender, warehouse waivers, landlord waivers and consents, bailee letters and mortgagee agreements of all Borrowers’ leased or owned locations where Collateral is held;

21. INTENTIONALLY OMITTED;

22. any and all Subordination and/or Intercreditor Agreements as Lender shall have deemed necessary or appropriate with respect to any Indebtedness of any Credit Party;

23. INTENTIONALLY OMITTED;

24. Lender shall have received appraisals as to all Equipment owned by each Credit Party, each of which shall be in form and substance reasonably satisfactory to Lender, which receipt Lender hereby acknowledges;

25. the Financial Statements, Projections and other materials requested by Lender certified by each Borrower’s Chief Financial Officer;

26. such other certificates, documents and agreements respecting any Credit Party as Lender may, in its sole discretion, request;

27. Execution, delivery and closing of acquisition financing for Borrower set forth in proposal letter dated July 7, 2016; and

28. Execution, delivery and closing of the Transaction Documents.

SCHEDULE III

FINANCIAL COVENANTS

1. Tangible Net Worth . Credit Parties shall not permit at any Fiscal Year End Tangible Net Worth (a) to exceed -$1,800,000 for ATRM Holdings, Inc. for Fiscal Year End 2016 or to be less than an amount greater than -0- for ATRM Holdings, Inc. at any Fiscal Year End thereafter; or (b) to be less than -$800,000 for each Borrower at Fiscal Year End 2016 or to be less than $200,000 for each Borrower at any Fiscal Year End thereafter.

2. Distributions . No distributions, transfers or subordinated debt payments to any Stockholder or Affiliate of any Credit Party or any other Person without Lender’s prior written consent or as otherwise permitted in the Subordination Agreement.

3. Earn-out . No payments to sellers nor payment of Earn-out Amount pursuant to Transaction Documents except from not more than Seventy-five (75%) percent of Free Cash Flow of each Borrower (subject to terms of Subordination Agreement); “Free Cash Flow” being defined as earnings before interest, taxes and depreciation less cash, less interest, less taxes, less other cash expenses, and less non-financed Capital Expenditures.

4. Debt Service Coverage . Credit Parties shall maintain for each Borrower a Debt Service Coverage Ratio of greater than 1:1 for Fiscal Year End 2016 and 2017, and greater than 1.25:1 for each Fiscal Year End thereafter. “Debt Service Coverage Ratio” is defined as each Borrower’s Operating Cash Flow (its net income plus depreciation and amortization, plus interest expense plus other non-cash items) divided by principal, interest, lease payments, subordinated debt payments and Earn-out payments due EdgeBuilder Wall Panels, Inc./Glenbrook Lumber & Supply, Inc.

SCHEDULE IV

CASH MANAGEMENT

Each Borrower agrees to establish, and to maintain, until the Termination Date, the cash management system described below:

1. Commencing on the Closing Date and until the Termination Date, Borrowers will irrevocably direct all present and future Account Debtors and other Persons obligated to make payments constituting Collateral to make such payments directly to either the Collateral Account or to Borrowers at 488 Madison Avenue, Suite 800, New York, NY 10022. All of Borrowers’ invoices, account statements and other written or oral communications directing, instructing, demanding or requesting payment of any Account of Borrowers or any other amount constituting Collateral shall conspicuously direct that all payments be made to the Collateral Account or to Borrowers at 488 Madison Avenue, Suite 800, New York, NY 10022 and shall include the preceding address or the address for the Collateral Account. If, notwithstanding the instructions to Account Debtors to make payments to the Collateral Account or to Borrowers at 488 Madison Avenue, Suite 800, New York, NY 10022, Borrowers receive any payments, Borrowers shall immediately deposit such payments into the Collateral Account or immediately forward to Lender. Until so deposited, Borrowers shall hold all such payments in trust for and as the property of Lender and shall not commingle such payments with any of its other funds or property.

2. Each Borrower may maintain, in its name, accounts (the “Disbursement Accounts”) at a bank or banks acceptable to Lender into which Lender shall, from time to time, deposit proceeds of Loans for use solely in accordance with the terms of this Agreement. All of the Disbursement Accounts are listed on Disclosure Schedule 7.17.

SCHEDULE V

ADDRESSES FOR NOTICES

Lender’s Address:

Name:	Gerber Finance Inc.
Address:	488 Madison Avenue, Suite 800
	New York, New York 10022
Attention:	Gerald L. Joseph
Telephone:	(212) 888-3833
Facsimile:	(212) 888-1637

Each Borrower’s, Credit Party’s and Borrowing Representative’s Address:

Name:	KBS Builders, Inc.
	Maine Modular Haulers, Inc.
Address:	300 Park Street
	South Park, Maine 04281
Attention:	Dan Koch
Telephone:	(651) 704-1800

Name:	ATRM Holdings, Inc.
Address:	3050 Echo Lake Avenue, Suite 300
	Mahtomedi, Minnesota 55155
Attention:	Dan Koch
Telephone:	(651) 704-1800

Name:	Glenbrook Building Supply, Inc.
	EdgeBuilder, Inc.
Address:	5215 Gershwin Avenue North
	Oakdale, Minnesota 55128
Attention:	Dan Koch
Telephone:	(651) 704-1800

STATE OF	____________________)
	) ss.:
COUNTY OF	____________________)

On the _____ day of ____________, 2016, before me personally appeared _____________________, who acknowledged under oath, to my satisfaction, that he is an authorized signatory of EdgeBuilder, Inc., a Delaware corporation, named in the within instrument/document and is authorized to sign the within instrument/document on its behalf, and as such authorized signatory, signed, sealed and delivered this instrument/document as the voluntary act and deed of EdgeBuilder, Inc., made by virtue of its authority documents.

STATE OF	____________________)
	) ss.:
COUNTY OF	____________________)

On the _____ day of ____________, 2016, before me personally appeared _____________________, who acknowledged under oath, to my satisfaction, that he is an authorized signatory of Glenbrook Building Supply, Inc., a Delaware corporation, named in the within instrument/document and is authorized to sign the within instrument/document on its behalf, and as such authorized signatory, signed, sealed and delivered this instrument/document as the voluntary act and deed of Glenbrook Building Supply, Inc., made by virtue of its authority documents.

STATE OF	____________________)
	) ss.:
COUNTY OF	____________________)

On the _____ day of ____________, 2016, before me personally appeared _____________________, who acknowledged under oath, to my satisfaction, that he is an authorized signatory of ATRM Holdings, Inc., a Minnesota corporation, named in the within instrument/document and is authorized to sign the within instrument/document on its behalf, and as such authorized signatory, signed, sealed and delivered this instrument/document as the voluntary act and deed of ATRM Holdings, Inc., made by virtue of its authority documents.

STATE OF	____________________)
	) ss.:
COUNTY OF	____________________)

On the _____ day of ____________, 2016, before me personally appeared _____________________, who acknowledged under oath, to my satisfaction, that he is an authorized signatory of KBS Builders, Inc., a Delaware corporation, named in the within instrument/document and is authorized to sign the within instrument/document on its behalf, and as such authorized signatory, signed, sealed and delivered this instrument/document as the voluntary act and deed of KBS Builders, Inc., made by virtue of its authority documents.

STATE OF	____________________)
	) ss.:
COUNTY OF	____________________)

On the _____ day of ____________, 2016, before me personally appeared _____________________, who acknowledged under oath, to my satisfaction, that he is an authorized signatory of Maine Modular Haulers, Inc., a Delaware corporation, named in the within instrument/document and is authorized to sign the within instrument/document on its behalf, and as such authorized signatory, signed, sealed and delivered this instrument/document as the voluntary act and deed of Maine Modular Haulers, Inc., made by virtue of its authority documents.

Exhibit 10.15

LOAN AND SECURITY AGREEMENT

BETWEEN

GERBER FINANCE INC.

as Lender

EDGEBUILDER, INC. and

GLENBROOK BUILDING SUPPLY, INC.,

as Borrowers and Credit Parties

and

ATRM HOLDINGS, INC.

KBS BUILDERS, INC. and

MAINE MODULAR HAULERS, INC.,

as Guarantors and Credit Parties

Dated: October 4, 2016

Table of Contents

		Page

I.	DEFINITIONS	1
	1.1 General Definitions.	1
	1.2 Accounting Terms.	15
	1.3 Other Terms.	15
	1.4 Rules of Construction.	15
II.	LOANS	16
	2.1 Revolving Credit Advances.	16
	3.1 Repayment of the Revolving Credit Advances.	17
IV.	PROCEDURES	17
	4.1 Procedure for Revolving Credit Advances.	17
V.	INTEREST AND FEES	18
	5.1 Interest and Fees.	18
VI.	CONDITIONS PRECEDENT	20
	6.1 Conditions Precedent to Initial Loans.	20
	6.2 Conditions Precedent to each Loan.	20
VII.	REPRESENTATIONS, WARRANTIES AND COVENANTS	21
	7.1 Corporate Existence; Compliance with Law.	21
	7.2 Names; Organizational Information; Collateral Locations.	21
	7.3 Power; Authorization; Enforceable Obligations.	21
	7.4 Financial Statements and Projections; Books and Records.	22
	7.5 Material Adverse Change.	22
	7.6 Real Estate; Property.	22
	7.7 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.	23

	7.8 Government Regulation; Margin Regulations.	23
	7.9 Taxes; Charges.	23
	7.10 Payment of Obligations.	24
	7.11 ERISA.	24
	7.12 Litigation.	24
	7.13 Intellectual Property.	24
	7.14 Full Disclosure.	25
	7.15 Hazardous Materials.	25
	7.16 Insurance.	25
	7.17 Deposit and Disbursement Accounts.	26
	7.18 Accounts.	26
	7.19 Conduct of Business.	26
	7.20 Further Assurances.	26
VIII.	FINANCIAL REPORTS; FINANCIAL COVENANTS	26
	8.1 Reports and Notices.	26
	8.2 Financial Covenants.	28
	8.3 Other Reports and Information.	28
	8.4 Good Standing Certificates.	28
IX.	NEGATIVE COVENANTS	29
X.	SECURITY INTEREST	30
	10.1 Grant of Security Interest.	30
	10.2 Lender’s Rights.	33
	10.3 Lender’s Appointment as Attorney-in-Fact.	34
	10.4 Grant of License to Use Intellectual Property Collateral.	34
	10.5 Terminations; Amendments Not Authorized.	34

	10.6 Inspections.	35
XI.	TERM	35
	11.1 Term of Agreement.	35
	11.2 Termination of Lien.	35
XII.	EVENTS OF DEFAULT	36
	12.1 Events of Default.	36
	12.2 Lender Remedies.	38
	12.3 Waivers.	39
	12.4 Proceeds.	39
XIII.	MISCELLANEOUS	40
	13.1 No Waiver; Cumulative Remedies.	40
	13.2 Amendments and Waivers.	40
	13.3 Expenses; Indemnity.	40
	13.4 Borrowing Agency Provisions.	41
	13.5 Guaranty.	42
	13.6 Waivers.	42
	13.7 Benefit of Guaranty.	43
	13.8 Subordination of Subrogation.	43
	13.9 Election of Remedies.	43
	13.10 Liability Cumulative.	44
	13.11 Waiver of Subrogation.	44
	13.12 Further Assurances.	44
	13.13 Successors and Assigns.	44
	13.14 Descriptive Headings.	44
	13.15 Notices.	44
	13.16 Severability.	45
	13.17 Entire Agreement; Counterparts.	45
	13.18 Submission to Jurisdiction.	45
	13.19 Waiver of Trial by Jury, Certain Damages and Setoffs.	45
	13.20 Governing Law.	46
	13.21 Reinstatement.	46

iii

INDEX OF EXHIBITS AND SCHEDULES

Schedule I	-	General Terms for Letter of Credit
Schedule II	-	Conditions Precedent
Schedule III	-	Financial Covenants
Schedule IV	-	Cash Management
Schedule V	-	Addresses for Notices

Attachment A	-	Fees, Charges and Commissions

Exhibit A	-	Form of Note
Exhibit B	-	Form of Monthly Statement Report
Exhibit C	-	Form of Borrowing Base Certificate
Exhibit D	-	Form of Certificate of Compliance
Exhibit E	-	Form of Power of Attorney
Exhibit F	-	Form of Accountant’s Letter
Exhibit G	-	Form of Officer’s Certificate
Exhibit H	-	Form of Account Debtor Notification Letter
Exhibit I	-	Form of Intellectual Property Security Agreement

Disclosure Schedule 7.2	-	Names, Organizational Information and Collateral Locations
Disclosure Schedule 7.6	-	Real Estate
Disclosure Schedule 7.7	-	Ventures, Subsidiaries and Affiliates
Disclosure Schedule 7.9	-	Taxes
Disclosure Schedule 7.12	-	Litigation
Disclosure Schedule 7.13	-	Intellectual Property
Disclosure Schedule 7.15	-	Environmental Matters
Disclosure Schedule 7.16	-	Insurance
Disclosure Schedule 7.17	-	Deposit and Disbursement Accounts
Disclosure Schedule 9(b)	-	Indebtedness
Disclosure Schedule 9(e)	-	Permitted Liens

LOAN AND SECURITY AGREEMENT

BACKGROUND

Borrowers have requested that Lender make loans and advances available to Borrowers; and

Lender has agreed to make such loans and advances to Borrowers on the terms and conditions set forth in this Agreement and any amendment thereto.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and the mutual covenants and undertakings and terms and conditions contained herein, the parties hereto agree as follows:

I. DEFINITIONS

1.1 General Definitions . When used in this Agreement, the following terms shall have the following meanings:“ Account Debtor ” means any Person who is or may become obligated with respect to, or on account of, an Account, Chattel Paper or General Intangibles (including a Payment Intangible).

“ Accounts ” means all “accounts”, as such term is defined in the UCC, now owned or hereafter acquired by any Person.

“ Affiliate ” means with respect to any Person (i) each other Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, ten percent (10%) or more of the Stock having ordinary voting power for the election of directors of such Person; (ii) each other Person that controls, is controlled by or is under common control with such Person or any Affiliate of such Person; or (iii) each of such Person’s officers, directors, joint venturers and partners. For the purpose of this definition, “ control ” of a Person means the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise.

“ Agreement ” means this Agreement including all appendices, exhibits or schedules attached or otherwise identified thereto, restatements and modifications and supplements thereto, and any appendices, exhibits or schedules to any of the foregoing, each as in effect at the time such reference becomes operative; provided, that except as specifically set forth in this Agreement, any reference to the Disclosure Schedules to this Agreement shall be deemed a reference to the Disclosure Schedules as in effect on the Closing Date or in a written amendment thereto executed by Borrowers and Lender.

“ Availability ” means the amount of Revolving Credit Advances against Cash Collateral Lender may from time to time make available to a Borrower in the aggregate up to ninety percent (90%) of the value of the Cash Collateral provided that the value of the Cash Collateral is not less than $3,300,000.

“ Books and Records ” means all books, records, board minutes, contracts, licenses, insurance policies, environmental audits, business plans, files, computer files, computer discs and other data and software storage and media devices, accounting books and records, financial statements (actual and pro forma), filings with Governmental Authorities and any and all records and instruments relating to, or otherwise necessary or helpful in the collection of or realization upon, the Collateral or any Borrower’s business.

“ Borrowing Base ” means at any time with respect to Borrowers, an amount equal to the sum at such time of:

(a) Availability; minus

(b) the Reserves, including without limitation, the amount of Letter of Credit Obligations.

“ Borrowing Base Certificate ” means a certificate in the form of Exhibit C .

“ Borrowing Representative ” means Glenbrook Building Supply, Inc.

“ Business Day ” means a day on which Lender is open for business and that is not a Saturday, a Sunday or other day on which banks are required or permitted to be closed in the State of New York.

“ Capital Expenditures ” means all payments or accruals (including obligations under capital leases) for any fixed assets or improvements or for replacements, substitutions or additions thereto, that have a useful life of more than one year and that are required to be capitalized under GAAP.

“ Cash Collateral ” means that money deposited by Lone Star Value Investors, LP into a deposit account located at MUFG UNION BANK, N.A. pledged as Collateral to Lender pursuant to the Pledge and Security Agreement and perfected in favor of Lender by a control agreement acceptable to Lender, both of even date-

“ Change of Control ” means, with respect to any Person on or after the Closing Date, any change in the (i) composition of such Person’s Stockholders as of the Closing Date shall occur which would result in any Stockholder or group acquiring 49.9% or more of any class of Stock of such Person, or that any Person (or group of Persons acting in concert) shall otherwise acquire, directly or indirectly (including through Affiliates), the power to elect a majority of the board of directors or managers of such Person or otherwise direct the management or affairs of such Person by obtaining proxies, entering into voting agreements or trusts, acquiring securities or otherwise, which definition shall not apply with respect to the ownership or control of ATRM Holdings, Inc. by either Lone Star Value Investors, LP or Lone Star Value Co-Invest I, LP; or (ii) majority of the board of directors of ATRM Holdings, Inc., as of the Closing Date having the right to vote or if Daniel M. Koch is no longer employed by a Corporate Credit Party.

“ Charges ” means all federal, state, county, city, municipal, local, foreign or other governmental taxes (including taxes owed to PBGC at the time due and payable), levies, customs or other duties, assessments, charges, liens, and all additional charges, interest, penalties, expenses, claims or encumbrances relating to the foregoing upon or relating to (i) the Collateral, (ii) the Obligations, (iii) the employees, payroll, income or gross receipts of a Credit Party, (iv) the ownership or use of any assets by a Credit Party, or (v) any other aspect of a Credit Party’s business.

“ Chattel Paper ” means all “chattel paper,” as such term is defined in the UCC, now owned or hereafter acquired by any Person.

“ Closing Date ” means the Business Day on which the conditions precedent set forth in Article VI have been satisfied or specifically waived in writing by Lender, and the initial Loans has been made.

“ Collateral ” has the meaning assigned to it in Section 10.1.

“ Collateral Account ” means an account in Lender’s name under the dominion and control of Lender maintained at a financial institution acceptable to Lender into which all cash, checks, notes, drafts and other similar items relating to or constituting Proceeds of or payments made in respect of any Collateral shall be deposited.

“ Contract Rate ” means an interest rate per annum equal to the sum of (i) the Prime Rate plus (ii) three percent (3.0%).

“ Contracts ” means all the contracts, undertakings, or agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which any Person may now or hereafter have any right, title or interest, including any agreement relating to the terms of payment or the terms of performance of any Account.

“ Contractual Obligation ” means as to any Person, any provision of any security issued by such Person or of any agreement, instrument, or other undertaking to which such Person is a party or by which it or any of its property is bound.

“ Corporate Credit Party ” means each Credit Party and Guarantor which is not a natural Person.

“ Credit Documents ” means this Agreement, the Note, each Guaranty, each Power of Attorney, each Pledge and Security Agreement (and related control agreement), each Life Insurance Assignment, each Subordination Agreement, each Intercreditor Agreement, each Intellectual Property Security Agreement and all other documents, instruments and agreements now or hereafter executed and/or delivered in connection herewith or therewith and/or as any or all of the foregoing documents, instruments, and agreements may now or hereafter be amended.

“ Credit Parties ” means each Borrower and each other Person (other than Lender) that is or may become a party to this Agreement or any other Credit Document, including but not limited to ATRM Holdings, Inc., a Minnesota corporation, KBS Builders, Inc., a Delaware corporation, and Maine Modular Haulers, Inc., a Delaware corporation.

“ Default ” means any act or event which, with the giving of notice or passage of time or both, would unless cured or waived become an Event of Default.

“ Default Rate ” means the sum of (a) the interest rate or fee in effect from time to time as respects each Loan and (b) five percent (5%).

“ Deposit Accounts ” means all “deposit accounts” as such term is defined in the UCC, now or hereafter held in the name of any Person.

“ Disbursement Accounts ” has the meaning set forth in Schedule IV .

“ Disclosure Schedules ” means the Disclosure Schedules prepared by Borrowers and denominated as Disclosure Schedules 7.2 through 9(e) in the Index of Exhibits and Schedules to this Agreement.

“ Documents ” means all “documents,” as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever located, including all bills of lading, dock warrants, dock receipts, warehouse receipts, and other documents of title, whether negotiable or non-negotiable.

“ Environmental Laws ” means all federal, state and local laws, statutes, ordinances and regulations, now or hereafter in effect, and in each case as amended or supplemented from time to time, and any applicable judicial or administrative interpretation thereof relating to the regulation and protection of human health, safety, the environment and natural resources (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation).

“ Environmental Liabilities ” means all liabilities, obligations, responsibilities, remedial actions, removal costs, losses, damages of whatever nature, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants and costs of investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim, suit, action or demand of whatever nature by any Person, and which relate to any health or safety condition regulated under any Environmental Law, environmental permits or in connection with any Release, threatened Release, or the presence of a Hazardous Material.

“ Equipment ” means all “equipment” as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever located.

“ ERISA ” means the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time, and any regulations promulgated thereunder.

“ ERISA Event ” shall mean (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the IRC or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(b) of the IRC or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by any Credit Party of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by any Credit Party from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or to appoint a trustee to administer any Plan; (f) the incurrence by any Credit Party of any liability with respect to any withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by any Credit Party of any notice, or the receipt by any Multiemployer Plan from any Credit Party of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

“ Event of Default ” has the meaning set forth in Section 12.1.

“ Financial Statements ” means income statement, balance sheet and statement of cash flows of each Corporate Credit Party, internally prepared for each Fiscal Month, and Fiscal Year, and for ATRM Holdings, Inc., for each Fiscal Year audited (with a supporting schedule for the other Corporate Credit Parties) and certified by an independent certified accounting firm acceptable to Lender (as of Closing Date Boulay PLLP shall be deemed acceptable to Lender) each prepared in accordance with GAAP and in accordance with this Agreement.

“ Fiscal Month ” means any of the monthly accounting periods of each Credit Party.

“ Fiscal Year ” means the 12 month period of each Credit Party ending December 31 of each year. Subsequent changes of the fiscal year of each Credit Party shall not change the term “Fiscal Year” unless Lender shall consent in writing to such change.

“ Fixtures ” means all “fixtures” as such term is defined in the UCC, now owned or hereafter acquired by any Person.

“ GAAP ” means generally accepted accounting principles, practices and procedures in effect from time to time in the United States of America.

“ General Intangibles ” means all “general intangibles” as such term is defined in the UCC, now owned or hereafter acquired by any Person including all right, title and interest which such Person may now or hereafter have in or under any Contract, all Payment Intangibles, customer lists, Licenses, Intellectual Property, interests in partnerships, joint ventures and other business associations, permits, proprietary or confidential information, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how, Software, data bases, data, skill, expertise, experience, processes, models, drawings, materials, Books and Records, Goodwill (including the Goodwill associated with any Intellectual Property), all rights and claims in or under insurance policies (including insurance for fire, damage, loss, and casualty, whether covering personal property, real property, tangible rights or intangible rights, all liability, life, key-person, and business interruption insurance, and all unearned premiums), uncertificated securities, choses in action, deposit accounts, rights to receive tax refunds and other payments, rights to receive dividends, distributions, cash Instruments and other property in respect of or in exchange for pledged Stock and Investment Property, and rights of indemnification.

“ Goods ” means all “goods”, as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever located, including embedded software to the extent included in “goods” as defined in the UCC.

“ Goodwill ” means all goodwill, trade secrets, proprietary or confidential information, technical information, procedures, formulae, quality control standards, designs, operating and training manuals, customer lists, and distribution agreements now owned or hereafter acquired by any Person.

“ Governmental Authority ” means any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“ Guaranteed Indebtedness ” means, as to any Person, any obligation of such Person guaranteeing any indebtedness, lease, dividend, or other obligation (“primary obligations”) of any other Person (the “primary obligor”) in any manner, including any obligation or arrangement of such guaranteeing Person (whether or not contingent): (i) to purchase or repurchase any such primary obligation; (ii) to advance or supply funds (a) for the purchase or payment of any such primary obligation or (b) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition of the primary obligor; (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation; or (iv) to indemnify the owner of such primary obligation against loss in respect thereof.

“ Guarantor ” means each Person which executes a guaranty or a support, put or other similar agreement in favor of Lender in connection with the transactions contemplated by this Agreement, including but not limited to ATRM Holdings, Inc., a Minnesota corporation, KBS Builders, Inc., a Delaware corporation, and Maine Modular Haulers, Inc., a Delaware corporation.

“ Guaranty ” means any agreement to perform all or any portion of the Obligations on behalf of any Borrower, in favor of, and in form and substance satisfactory to, Lender, together with all amendments, modifications and supplements thereto, and shall refer to such Guaranty as the same may be in effect at the time such reference becomes operative.

“ Hazardous Material ” means any substance, material or waste which is regulated by or forms the basis of liability now or hereafter under, any Environmental Laws, including any material or substance which is (a) defined as a “solid waste,” “hazardous waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste,” “restricted hazardous waste,” “pollutant,” “contaminant,” “hazardous constituent,” “special waste,” “toxic substance” or other similar term or phrase under any Environmental Laws, (b) petroleum or any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB’s), or any radioactive substance.

“ Hazardous Waste ” has the meaning ascribed to such term in the Resource Conservation and Recovery Act (42 U.S.C. §§ 6901 et. seq.).

“ Indebtedness ” of any Person means: (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (including reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers’ acceptances, whether or not matured, but not including obligations to trade creditors incurred in the ordinary course of business and not more than 60 days past due); (ii) all obligations evidenced by notes, bonds, debentures or similar instruments; (iii) all indebtedness created or arising under any conditional sale or other title retention agreements with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); (iv) all obligations under capital leases; (v) all Guaranteed Indebtedness; (vi) all Indebtedness referred to in clauses (i), (ii), (iii), (iv) or (v) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; (vii) the Obligations; and (viii) all liabilities under Title III of ERISA.

“ Indemnified Person ” has the meaning given to such term in Section 13.3(b).

“ Instruments ” means all “instruments”, as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever located, including all certificated securities and all notes and other evidences of indebtedness, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper.

“ Intellectual Property ” means any and all Licenses, patents, patent registrations, copyrights, copyright registrations, trademarks, trademark registrations, trade secrets, domain names, website addresses and customer lists.

“ Intellectual Property Security Agreement ” means the Intellectual Property Security Agreement in the form of Exhibit I made in favor of Lender by each applicable Credit Party.

“ Intercreditor Agreement ” means any intercreditor and subordination agreement accepted by Lender from time to time.

“ Inventory ” means all “inventory”, as such term is defined in the UCC, now or hereafter owned or acquired by any Person, wherever located.

“Investment Property ” means all “investment property”, as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever located.

“ IRC ” and “ IRS ” means respectively, the Internal Revenue Code of 1986 and the Internal Revenue Service, and any successors thereto.

“ ISP ” means the International Standby Practices, International Chamber of Commerce Publication No. 590, as the same may be amended from time to time.

“ LC Issuer ” shall mean a commercial bank or other financial institution selected by Lender, in is discretion, to issue Letters of Credit pursuant to this Agreement.

“ Lender ” has the meaning set forth in the preamble to this Agreement and if Lender shall decide to assign or syndicate any of the Obligations such term shall include such assignee or such other members of the syndicate.

“ Letter of Credit ” and “ L/C ” means a letter of credit issued by an LC Issuer for Lender’s account, at the request of Borrowing Representative and on behalf of a Borrower containing terms and conditions satisfactory to Lender, which letter of credit may either be a commercial letter of credit or standby letter of credit.

“ Letter of Credit Fee ” has the meaning set forth in Schedule I .

“ Letter of Credit Obligations ” means all outstanding obligations (including all duty, freight, taxes, costs, insurance and any other charges and expenses) incurred by Lender, whether direct or indirect, contingent or otherwise, due or not due, in connection with the issuance or guarantee, by Lender or another, of Letters of Credit or Letters of Guaranty, all as further set forth in Schedule I .

“ Letter-of-Credit Rights ” has the meaning given to “letter-of-credit rights” as such term is defined in the UCC, now owned or hereafter acquired by any Person, including rights to payment or performance under a letter of credit, whether or not such Person, as beneficiary, has demanded or is at the time entitled to demand payment or performance.

“ Letters of Guaranty ” and “ L/G ” means a letter of guaranty issued by Lender for the account of a Borrower guarantying payment of the purchase price of the goods financed thereby, containing terms and conditions satisfactory to Lender.

“ License ” means any rights under any written agreement now or hereafter acquired by any Person to use any trademark, trademark registration, copyright, copyright registration or invention for which a patent is in existence or other license of rights or interests now held or hereafter acquired by any Person.

“ Lien ” means any mortgage, security deed or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, security interest, charge, claim or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever, including any lease or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing or recording, or agreement to give, any financing statement or recordable instrument under the UCC or comparable real or personal property law of any jurisdiction.

“ Life Insurance Assignment ” means an Assignment of Life Insurance Policy as Collateral to be executed by the owner and the beneficiary thereof, in form and substance satisfactory to Lender, granting Lender a Lien on the Life Insurance Policy to secure payment of the Obligations.

“ Life Insurance Policy ” means the life insurance policy maintained by any Credit Party upon the life of Matthew Mosher with the death benefit thereunder of at least $4,000,000 in the aggregate on new or existing policies.

“ Litigation ” means any claim, lawsuit, litigation, investigation or proceeding of or before any arbitrator or Governmental Authority.

“ Loans ” means the Revolving Credit Advances and all extensions of credit hereunder or under any Credit Document, including Letter of Credit Obligations.

“ Margin Stock ” has the meaning set forth in Section 7.8 .

“ Material Adverse Effect ” means a material adverse effect on (a) the condition, operations, assets, business or prospects of any Credit Party, (b) any Credit Party’s ability to pay or perform the Obligations in accordance with the terms hereof or any Credit Document, (c) the value of the Collateral, the Liens on the Collateral or the priority of any such Lien or (d) the practical realization of the benefits of Lender’s rights and remedies under this Agreement and the Credit Documents.

“ Maturity Date ” means December 31, 2018.

“ Maximum Legal Rate ” shall have the meaning given to such term in Section 5.1(a)(iv).

“ Maximum Revolving Amount ” means THREE MILLION DOLLARS ($3,000,000).

“ Minimum Actionable Amount ” means TWENTY FIVE THOUSAND DOLLARS ($25,000).

“ Minimum Average Monthly Loan Amount ” means fifty percent (50%) of the Maximum Revolving Amount.

“ Multiemployer Plan ” means a “multiemployer plan,” as defined in Section 4001(a) (3) of ERISA, to which any Credit Party is making, is obligated to make, has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them.

“ Note ” means the promissory note of Borrowers executed in favor of Lender substantially in the form of Exhibit A .

“ Obligations ” means all obligations under any Guaranty and all Loans, and any Guaranty, Loans or Obligations defined in any other agreement executed by any Credit Party now existing or hereafter arising, all advances, debts, liabilities, obligations, covenants and duties owing by any Credit Party to Lender (or any corporation that directly or indirectly controls or is controlled by or is under common control with Lender) of every kind and description (whether or not evidenced by any note or other instrument and whether or not for the payment of money or the performance or non-performance of any act), direct or indirect, absolute or contingent, due or to become due, contractual or tortious, liquidated or unliquidated, whether existing by operation of law or otherwise now existing or hereafter arising including any debt, liability or obligation owing from any Credit Party to others which Lender may have obtained by assignment or otherwise and further including all interest (including interest accruing at the then applicable rate provided in this Agreement after the maturity of the Loans and interest accruing at the then applicable rate provided in this Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), fees, charges or any other payments any Credit Party is required to make or pay by law or otherwise arising under or as a result of this Agreement or any other Credit Document, or otherwise together with all reasonable expenses and reasonable attorneys’ fees chargeable to any Credit Party’s account or incurred by Lender in connection with any Credit Party’s account whether provided for herein or in any Credit Document.

“ Pass Thru Distributions ” mean dividends declared and paid by a Credit Party to its Stockholders, or which could have been declared and paid by a Credit Party, in an amount not to exceed the Pass Thru Tax Liabilities.

“ Pass Thru Tax Liabilities ” means the amount of state and federal income tax paid or to be paid by a Credit Party’s Stockholders on taxable income earned by such Credit Party and attributable to the Stockholder as a result of such Credit Party’s status as a disregarded entity for tax purposes, assuming the highest marginal income tax rate for federal and state (for the state or states in which any Stockholder is liable for income taxes with respect to such income) income tax purposes, after taking into account any deduction for state income taxes in calculating the federal income tax liability and all other deductions, credits, deferrals and other reductions available to Stockholders from or through a Credit Party.

“ Payment Intangible ” has the meaning give to the term “payment intangible” in the UCC and in any event shall include, a General Intangible under which the Account Debtor’s principal obligation is a monetary obligation.

“ Payment Office ” means 488 Madison Avenue, Suite 800, New York, New York 10022 or such other place as Lender may from time to time designate in writing.

“ PBGC ” means the Pension Benefit Guaranty Corporation or any successor thereto.

“ Permitted Liens ” means the following Liens: (i) Liens for taxes or assessments or other governmental Charges or levies, either not yet due and payable or to the extent that nonpayment thereof is permitted by the terms of Section 7.10 ; (ii) pledges or deposits securing obligations under worker’s compensation, unemployment insurance, social security or public liability laws or similar legislation; (iii) pledges or deposits securing bids, tenders, contracts (other than contracts for the payment of money) or leases to which any Credit Party is a party as lessee made in the ordinary course of business; (iv) deposits securing public or statutory obligations of any Credit Party; (v) inchoate and unperfected workers’, mechanics’, or similar liens arising in the ordinary course of business so long as such Liens attach only to Equipment, fixtures or real estate; (vi) carriers’, warehousemen’s, suppliers’ or other similar possessory liens arising in the ordinary course of business and securing indebtedness not yet due and payable in an outstanding aggregate amount not in excess of the Minimum Actionable Amount at any time so long as such Liens attach only to Inventory; (vii) deposits of money securing, or in lieu of, surety, appeal or customs bonds in proceedings to which any Credit Party is a party; (viii) zoning restrictions, easements, licenses, or other restrictions on the use of real property or other minor irregularities in title (including leasehold title) thereto, so long as the same do not materially impair the use, value, or marketability of such real estate; (ix) Purchase Money Liens securing Purchase Money Indebtedness (or rent) to the extent permitted under Article IX(b) ; (x) Liens in existence on the Closing Date as disclosed on Disclosure Schedule 9(e) provided that no such Lien is spread to cover additional property after the Closing Date and the amount of Indebtedness secured thereby is not increased; and (xi) Liens in favor of Lender securing the Obligations.

“ Person ” means any individual, sole proprietorship, partnership, limited liability partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof), and shall include such Person’s successors and assigns.

“ Plan ” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title III of ERISA or Section 412 of the IRC or Section 302 of ERISA, and in respect of which a Credit Party is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“ Pledge and Security Agreement ” means the pledge and security agreement (and related control agreement) of money in U.S. Dollars of not less than $3,300,000 at all times pursuant to which Lender has a first and only perfected security interest in the Cash Collateral.

“ Prime Rate ” means the “prime rate” which from time to time published in the “Money Rates” column of The Wall Street Journal (Eastern Edition, New York Metro); provided, however, if the Money Rates column of The Wall Street Journal (Eastern Edition, New York Metro) ceases to be published or otherwise does not designate a “prime rate” as of a Business Day, Lender has the right to obtain such information from a similar business publication of its selection. The Prime Rate shall be increased or decreased as the case may be for each increase or decrease in the Prime Rate in an amount equal to such increase or decrease in the Prime Rate; each change to be effective as of the day of the change in such rate.

“ Proceeds ” means “proceeds”, as such term is defined in the UCC and, in any event, shall include: (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to any Credit Party or any other Person from time to time with respect to any Collateral; (b) any and all payments (in any form whatsoever) made or due and payable to a Credit Party from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of any Collateral by any governmental body, governmental authority, bureau or agency (or any person acting under color of governmental authority); (c) any claim of a Credit Party against third parties (i) for past, present or future infringement of any Intellectual Property or (ii) for past, present or future infringement or dilution of any trademark or trademark license or for injury to the goodwill associated with any trademark, trademark registration or trademark licensed under any trademark License; (d) any recoveries by a Credit Party against third parties with respect to any litigation or dispute concerning any Collateral, including claims arising out of the loss or nonconformity of, interference with the use of, defects in, or infringement of rights in, or damage to, Collateral; (e) all amounts collected on, or distributed on account of, other Collateral, including dividends, interest, distributions and Instruments with respect to Investment Property and pledged Stock; and (f) any and all other amounts , rights to payment or other property acquired upon the sale, lease, license, exchange or other disposition of Collateral and all rights arising out of Collateral.

“ Projections ” means as of any date the balance sheet, statements of income and cash flow for Corporate Credit Parties and Subsidiaries (including forecasted Capital Expenditures) (a) by month for the next Fiscal Year, and (b) by year for the following three Fiscal Years, in each case prepared in a manner consistent with GAAP and accompanied by senior management’s discussion and analysis of such plan.

“ Purchase Money Indebtedness ” means (a) any Indebtedness incurred for the payment of all or any part of the purchase price of any fixed asset, (b) any Indebtedness incurred for the sole purpose of financing or refinancing all or any part of the purchase price of any fixed asset, and (c) any renewals, extensions or refinancings thereof (but not any increases in the principal amounts thereof outstanding at that time).

“ Purchase Money Lien ” means any Lien upon any fixed assets which secures the Purchase Money Indebtedness related thereto but only if such Lien shall at all times be confined solely to the asset the purchase price of which was financed or refinanced through the incurrence of the Purchase Money Indebtedness secured by such Lien and only if such Lien secures only such Purchase Money Indebtedness.

“ Real Estate ” means (i) the real property and the improvements thereon located at 5215 Gershwin Avenue North, Oakdale, MN 55128, (ii) 5250 Glenbrook Avenue North, Oakdale, MN 55128, (iii) 845 Dexter Street, Prescott, WI 54021 and (iv) 1607 Pine Street, Prescott, WI 54021, and on which the Borrowers operate their business and upon which the Collateral and Books and Records relating thereto are located.

“ Release ” means, as to any Person, any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Materials in the indoor or outdoor environment by such Person, including the movement of Hazardous Materials through or in the air, soil, surface water, ground water or property.

“ Requirement of Law ” means as to any Person, the Certificate or Articles of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case binding upon such Person or any of its property or to which such Person or any of its property is subject.

“ Reserves ” means reserves established by Lender from time to time in its good faith credit judgment, including to protect Lender’s interest in the Collateral, to protect Lender against possible non-payment of Accounts for any reason by Account Debtors, to protect against the diminution in value of any Collateral, to protect Lender against the possible non-payment of any Obligations, to protect Lender for any unpaid taxes, to protect Lender in respect of any state of facts that could constitute a Default or Event of Default and to protect Lender for any Letter of Credit Obligations.

“ Restricted Payment ” means: (i) the declaration or payment of any dividend or the incurrence of any liability to make any other payment or distribution of cash or other property or assets on or in respect of Credit Party’s Stock; (ii) any payment or distribution made in respect of any Subordinated Debt of any Credit Party in violation of any subordination or other agreement made in favor of Lender; (iii) any payment on account of the purchase, redemption, defeasance or other retirement of any Credit Party’s Stock or Indebtedness or any other payment or distribution made in respect of any thereof, either directly or indirectly, other than payment of Indebtedness to trade creditors incurred in the ordinary course of business consistent with past practice as disclosed to Lender in writing; or (iv) any payment, loan, contribution, or other transfer of funds or other property to any Stockholder of such Person which is not expressly and specifically permitted in this Agreement; provided, that no payment to Lender shall constitute a Restricted Payment.

“ Revolving Credit Advances ” shall have the meaning given to such term in Section 2.1(a).

“ Software ” means all “software” as such term is defined in the UCC, including all computer programs and all supporting information provided in connection with a transaction related to any program.

“ Stock ” means all certificated and uncertificated shares, options, warrants, membership interests, general or limited partnership interests, participation or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity whether voting or nonvoting, including common stock, preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934).

“ Stockholder ” means each holder of Stock of Borrower.

“ Subordinated Debt ” means any note, document, instrument or agreement now or any time hereafter executed and/or delivered by any Credit Party with or in favor of any Subordinated Lender which evidences the principal, interest and other amounts owed by a Credit Party to such Subordinated Lender.

“ Subordinated Lender ” means collectively, any Person who enters into a Subordination Agreement with Lender with respect to amounts owed by any Credit Party to such Subordinated Lender, including but not limited to Lone Star Value Investors, LP and/or Lone Star Value Co-Invest I, LP, EdgeBuilder Wall Panels, Inc. and Glenbrook Lumber & Supply, Inc.

“ Subordination Agreement ” means collectively, all subordination agreements accepted by Lender from time to time with respect to Indebtedness of any Credit Party.

“ Subsidiary ” means, with respect to any Person, (i) any corporation of which an aggregate of more than 50% of the outstanding Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock of any other class or classes of such corporation has or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of 50% or more of such Stock whether by proxy, agreement, operation of law or otherwise, and (ii) any partnership or limited liability company in which such Person or one or more Subsidiaries of such Person has an equity interest (whether in the form of voting or participation in profits or capital contribution) of more than 50% or of which any such Person is a general partner or manager or may exercise the powers of a general partner or manager.

“ Supporting Obligations ” means all “supporting obligations” as such term is defined in the UCC, including Letter-of-Credit Rights or secondary obligations that supports the payment or performance of Accounts, Chattel Paper, Documents, General Intangibles, Instruments, or Investment Property.

“ Tangible Net Worth ” shall mean, with respect to any Person, at any date, the total assets (excluding any intangible assets and loans made to any officer, director, shareholder or employee of such Person) minus the total liabilities (excluding Subordinated Debt), in each case, of such Person at such date determined in accordance with GAAP.

“ Term ” means the Closing Date through the Maturity Date subject to acceleration upon the occurrence of an Event of Default hereunder or other termination hereunder.

“ Termination Date ” means the date on which all Obligations under this Agreement are indefeasibly paid in full, in cash (other than amounts in respect of Letter of Credit Obligations if any, then outstanding, provided that a Borrower has funded such amounts in cash in full into the Cash Collateral Account), and no Borrower shall have any further right to borrow any moneys or obtain other Loans or financial accommodations under this Agreement.

“ Transaction Documents ” means the aggregate of the documents as executed and delivered to the satisfaction of Lender whereby the Borrowers have purchased and acquired title to all assets and property free and clear of any Lien pursuant to the Asset Purchase Agreement of even date executed by Borrowers, Glenbrook Lumber & Supply, Inc., a Minnesota corporation and EdgeBuilder Wall Panels, Inc., a Minnesota corporation.

“ UCC ” means the Uniform Commercial Code as the same may, from time be in effect in the State of New York; provided, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Lender’s Lien on any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions of this Agreement relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions; provided further, that to the extent that UCC is used to define any term herein or in any Credit Document and such term is defined differently in different Articles or Divisions of the UCC, the definition of such term contained in Article or Division 9 shall govern.

“ Uniform Customs ” means with respect to a documentary Letter of Credit the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time and with respect to a standby Letter of Credit, the International Standby Practices, ISP.

“ Withdrawal Liability ” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title III of ERISA.

1.2 Accounting Terms . Any accounting terms used in this Agreement which are not specifically defined shall have the meanings customarily given them in accordance with GAAP and all financial computations shall be computed, unless specifically provided herein, in accordance with GAAP consistently applied.

1.3 Other Terms . All other terms used in this Agreement and defined in the UCC, shall have the meaning given therein unless otherwise defined herein.

1.4 Rules of Construction . All Schedules, Addenda and Exhibits hereto or expressly identified to this Agreement are incorporated herein by reference and taken together with this Agreement constitute but a single agreement. The words “herein”, hereof” and “hereunder” or other words of similar import refer to this Agreement as a whole, including the Exhibits and Schedules thereto, as the same may be from time to time amended, modified, restated or supplemented, and not to any particular section, subsection or clause contained in this Agreement. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter. The term “or” is not exclusive. The term “including” (or any form thereof) shall not be limiting or exclusive. All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations. All references in this Agreement or in the Schedules to this Agreement to sections, schedules, disclosure schedules, exhibits, and attachments shall refer to the corresponding sections, schedules, disclosure schedules, exhibits, and attachments of or to this Agreement. All references to any instruments or agreements, including references to any of this Agreement or any of the other Credit Documents shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof.

II. LOANS

2.1 Revolving Credit Advances .

(a) Subject to the terms and conditions set forth herein and in the Credit Documents, Lender may, in its sole discretion, make revolving credit advances (the “ Revolving Credit Advances ”) to Borrowers from time to time during the Term which, in the aggregate at any time outstanding together with all outstanding Letter of Credit Obligations, will not exceed the lesser of (x) the Maximum Revolving Amount or (y) an amount equal to the Borrowing Base to finance the purchase of assets by the Borrowers pursuant to the Transaction Documents.

(c) Each Borrower acknowledges that the exercise of Lender’s discretionary rights hereunder may result during the Term in one or more increases or decreases in the advance percentages used in determining Availability and each Borrower hereby consents to any such increases or decreases which may limit or restrict advances requested by Borrower.

(g) During the Term, each Borrower may borrow, prepay and reborrow Revolving Credit Advances, all in accordance with the terms and conditions hereof.

(h) Subject to the terms and conditions of this Agreement including Schedule I , Borrowing Representative on behalf of each Borrower may request and Lender may agree to incur Letter of Credit Obligations.

III. REPAYMENT

3.1 Repayment of the Revolving Credit Advances . Borrowers shall be required to (a) make a mandatory repayment hereunder at any time that the aggregate outstanding principal balance of the Revolving Credit Advances made by Lender to Borrowers hereunder is in excess of the Borrowing Base and/or Maximum Revolving Amount, in an amount equal to such excess, and (b) repay on the expiration of the Term (i) the then aggregate outstanding principal balance of Revolving Credit Advances made by Lender to Borrowers hereunder together with accrued and unpaid interest, fees and charges and (ii) all other amounts owed Lender under this Agreement and the Credit Documents. Any payments of principal, interest, fees or any other amounts payable hereunder or under any Credit Document shall be made prior to 12:00 noon (New York time) on the due date thereof in immediately available funds.

IV. PROCEDURES

4.1 Procedure for Revolving Credit Advances . Borrowing Representative on behalf of each Borrower may by written or telephonic notice request a borrowing of Revolving Credit Advances prior to 11:00 a.m. (New York time) on the Business Day of its request to incur, on that day, a Revolving Credit Advance. All Revolving Credit Advances shall be disbursed from whichever office or other place Lender may designate from time to time and, together with any and all other Obligations of Borrowers to Lender, shall be charged to Borrowers’ account on Lender’s books. The proceeds of each Revolving Credit Advance made by Lender shall be made available to Borrowers on the Business Day so requested by way of credit to the applicable Borrower’s operating account maintained with such bank as Borrowing Representative designated to Lender. Any and all Obligations due and owing hereunder may be charged to Borrowers’ account and shall constitute Revolving Credit Advances.

V. INTEREST AND FEES

5.1 Interest and Fees .

(a) Interest .

(i) Except as modified by Section 5.1(a)(iii) below, Borrowers shall pay interest on the unpaid principal balance of the Loans for each day they are outstanding at the Contract Rate.

(iv) Notwithstanding the foregoing, in no event shall the aggregate interest exceed the maximum rate permitted under any applicable law or regulation, as in effect from time to time (the “ Maximum Legal Rate ”) and if any provision of this Agreement or Credit Document is in contravention of any such law or regulation, interest payable under this Agreement and each Credit Document shall be computed on the basis of the Maximum Legal Rate (so that such interest will not exceed the Maximum Legal Rate) and once the amount of interest payable hereunder or under the Credit Documents is less than the Maximum Legal Rate, Lender shall not reduce interest payable hereunder or any Credit Document below the amount computed based upon the Maximum Legal Rate until the aggregate amount of interest paid equals the amount of interest which would have been payable if the Maximum Legal Rate had not been imposed.

(b) Fees .

(i) Minimum Loan Fee . In the event the average closing daily unpaid balances of all Loans hereunder during any calendar month is less than the Minimum Average Monthly Loan Amount, Borrowers shall pay to Lender a minimum loan fee at a rate per annum equal to the Contract Rate on the amount by which the Minimum Average Monthly Loan Amount exceeds such average closing daily unpaid balances. Such fee shall be charged to Borrower’s account on the first day of each month with respect to the prior month.

(ii) Facility Fee . Borrowers hereby agree to pay Lender a facility fee in an amount equal to two percent (2.0%) of the Maximum Revolving Amount on the Closing Date and on each anniversary of the Closing Date which occurs prior to the Maturity Date. The facility fee for the period ending on the Maturity Date shall be deemed fully earned on the Closing Date and shall be payable by a charge to Borrower’s account upon the earlier of each anniversary of the Closing Date or the termination of this Agreement for any reason. The facility fee shall be prorated for the period between the second anniversary of the Closing Date and the Maturity Date unless extended pursuant hereto

(iii) Collateral Monitoring Fee . Borrowers shall pay Lender a monthly collateral monitoring fee in an amount equal to 0.10% of the Maximum Revolving Amount per month, payable on the Closing Date and on the first day of each month thereafter until the Maturity Date. The Collateral Monitoring Fee for each month ending prior to the Maturity Date shall be deemed fully earned on the Closing Date and shall be payable by a charge to Borrower’s account upon the earlier of the first day of each month during the Term or the termination of this Agreement for any reason.

(iv) Field Examination Fee . Upon Lender’s performance of any collateral monitoring and/or verification including any field examination, collateral analysis or other business analysis, the need for which is to be determined by Lender and which monitoring is undertaken by Lender or for Lender’s benefit, an amount equal to the established rate by Lender from time to time which rate on the Closing Date is $950 per day for each person employed to perform such monitoring together with all costs, disbursements and expenses incurred by Lender and the person performing such collateral monitoring and/or verification shall be charged to Borrowers’ account ; provided, however, so long as no Event of Default has occurred and is continuing, the number of such examinations shall be limited to no more than two (2) per year. Nothing herein shall prohibit Lender from conducting more than two (2) such examinations per year in the absence of an Event of Default which is not continuing so long as Lender shall incur the cost thereof.

(v) Collection Fees . For purposes of determining the balance of the Loans outstanding, Lender will credit (conditional upon final collection) all such payments to Borrowers’ account upon receipt by Lender of good funds in dollars of the United States of America in Lender’s account, provided, however, for purposes of computing interest on the Obligations, Lender will credit (conditional upon final collection) all such payments to Borrowers’ account three (3) Business Days after receipt by Lender of good funds in dollars of the United States of America in Lender’s account. Any amount received by Lender after 12:00 noon (New York time) on any Business Day shall be deemed received on the next Business Day.

(vi) Overline/Overadvance Fee s. Under circumstances where any Borrower requests and Lender approves Revolving Credit Advances which would exceed the Maximum Revolving Amount and/or the Borrowing Base, Lender may impose fees in connection therewith. Such fees shall include (i) a monthly fee in the amount of two and one-half percent (2.50%) of the greater of (A) the highest amount by which the amount of Revolving Credit Advances during such month exceeds the Borrowing Base and (B) if any, the amount approved by Lender for such Revolving Credit Advance in excess of the Borrowing Base for such month and (ii) two and one-half percent (2.50%) of the greater of (A) the highest amount by which the Revolving Credit Advances during such month exceeds the Maximum Revolving Amount and (B) if any, the amount approved by Lender for such Revolving Credit Advances in excess of the Maximum Revolving Amount for such month. Such fees shall be payable on the first day of each month with respect to the preceding calendar month.

VI. CONDITIONS PRECEDENT

6.1 Conditions Precedent to Initial Loans . Without limitation of the discretionary nature of each Loan hereunder, the initial Loan to be made by Lender shall be subject to the fulfillment (to the satisfaction of Lender) of each of the conditions precedent set forth on Schedule II .

6.2 Conditions Precedent to each Loan . Without limitation of the discretionary nature of each Loan hereunder, each of the Loans (including the initial Loan) to be made by Lender shall be subject to the fulfillment (to the satisfaction of Lender) of each of the following conditions as of the date of each Loan:

(a) Lender shall have received a Request for Loan for such Loan in form and in substance satisfactory to Lender;

(c) No Default or Event of Default shall have occurred and be continuing at the time of and after giving effect to such Loan;

(d) Lender shall have received all fees due and payable on or prior to such date; and

(e) All legal matters incident to such Loan shall be satisfactory to Lender and its counsel.

VII. REPRESENTATIONS, WARRANTIES AND COVENANTS

7.1 Corporate Existence; Compliance with Law . Each Corporate Credit Party: (a) is, as of the Closing Date, and will continue to be (i) a corporation or limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, (ii) duly qualified to do business and in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect, and (iii) in compliance with all Requirements of Law and Contractual Obligations, except to the extent failure to comply therewith could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and (b) has and will continue to have (i) the requisite power and authority and the legal right to execute, deliver and perform its obligations under the Credit Documents, and to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease, and to conduct its business as now, heretofore or proposed to be conducted, and (ii) all licenses, permits, franchises, rights, powers, consents or approvals from or by all Persons or Governmental Authorities having jurisdiction over Borrowers which are necessary or appropriate for the conduct of its business, except to the extent failure to have any such licenses, permits, franchises, rights, powers, consents or approvals could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

7.2 Names; Organizational Information; Collateral Locations . Disclosure Schedule 7.2 sets forth each Corporate Credit Party’s name as it appears in official filing in the state of its incorporation or other organization, the type of entity of each Corporate Credit Party, the state of each Corporate Credit Party’s incorporation or organization and organizational identification number issued by each Corporate Credit Party’s state of incorporation or organization or a statement that no such number has been issued. The location of each Corporate Credit Party’s chief executive office, corporate offices, warehouses, other locations of Collateral and locations where records with respect to Collateral are kept (including in each case the county of such locations) are as set forth in Disclosure Schedule 7.2 and, except as set forth in such Disclosure Schedule, such locations have not changed during the preceding twelve months. With respect to each of the premises identified in Disclosure Schedule 7.2 on or prior to the Closing Date a bailee, landlord or mortgagee agreement acceptable to Lender has been obtained. As of the Closing Date, during the prior five years, except as set forth in Disclosure Schedule 7.2 , no Corporate Credit Party shall have been known as or conducted business in any other name (including trade names).

7.3 Power; Authorization; Enforceable Obligations . The execution, delivery and performance by each Credit Party of the Credit Documents to which it is a party, and the creation of all Liens provided for herein and therein: (a) are and will continue to be within such Credit Party’s power and authority; (b) have been and will continue to be duly authorized by all necessary or proper action; (c) are not and will not be in violation of any Requirement of Law or Contractual Obligation of such Credit Party; (d) do not and will not result in the creation or imposition of any Lien (other than Permitted Liens) upon any of the Collateral; and (e) do not and will not require the consent or approval of any Governmental Authority or any other Person. As of the Closing Date, each Credit Document shall have been duly executed and delivered on behalf of each Credit Party, and each such Credit Document upon such execution and delivery shall be and will continue to be a legal, valid and binding obligation of each Credit Party, enforceable against it in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency and other similar laws affecting creditors’ rights generally.

7.4 Financial Statements and Projections; Books and Records .

7.5 Material Adverse Change . Between the date of each Credit Party’s most recent Financial Statements delivered to Lender and the Closing Date: (a) no Credit Party has incurred any obligations, contingent or non-contingent liabilities, or liabilities for Charges, long-term leases or unusual forward or long-term commitments which are not reflected in the Projections delivered on the Closing Date and which could, alone or in the aggregate, reasonably be expected to have a Material Adverse Effect; (b) there has been no material deviation from such Projections; and (c) no events have occurred which alone or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect. No Requirement of Law or Contractual Obligation of any Credit Party has or have had or could reasonably be expected to have a Material Adverse Effect. No Credit Party is in default, and to each Credit Party’s knowledge no third party is in default, under or with respect to any of its Contractual Obligations, which alone or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect.

7.6 Real Estate; Property . The Real Estate listed in Disclosure Schedule 7.6 constitutes all of the real property owned, leased, or used by each Credit Party in its business, and no Corporate Credit Party will execute any material agreement or contract in respect of such real estate after the date of this Agreement without giving Lender prompt prior written notice thereof. Each Corporate Credit Party holds and will continue to hold good and marketable fee simple title to all of its owned real estate, and good and marketable title to all of its other properties and assets, and valid and insurable leasehold interests in all of its leases (both as lessor and lessee, sublessee or assignee), and none of the properties and assets of any Corporate Credit Party are or will be subject to any Liens, except Permitted Liens.

7.7 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness . Except as set forth in Disclosure Schedule 7.7 , as of the Closing Date, no Corporate Credit Party has any Subsidiaries, is not engaged in any joint venture or partnership with any other Person, or is an Affiliate of any other Person. All of the issued and outstanding Stock of each Corporate Credit Party (including all rights to purchase, options, warrants or similar rights or agreements pursuant to which any Corporate Credit Party may be required to issue, sell, repurchase or redeem any of its Stock) as of the Closing Date is owned by each of the Stockholders (and in the amounts) set forth on Disclosure Schedule 7.7 or is disclosed on such Schedule 7.7 as issued by a public company. All outstanding Indebtedness of each Corporate Credit Party as of the Closing Date is described in Disclosure Schedule 9(b) .

7.8 Government Regulation; Margin Regulations . No Credit Party is subject to or regulated under or any federal or state statute, rule or regulation that restricts or limits any Credit Party’s ability to incur Indebtedness, pledge its assets, or to perform its obligations under the Credit Documents. The making of a Loan, the application of the proceeds and repayment thereof, and the consummation of the transactions contemplated by the Credit Documents do not and will not violate any Requirement of Law. No Credit Party is engaged, nor will it engage in the business of extending credit for the purpose of “purchasing” or “carrying” any “margin security” as such terms are defined in Regulation U of the Federal Reserve Board as now and hereafter in effect (such securities being referred to herein as “ Margin Stock ”). No Credit Party owns Margin Stock, and none of the proceeds of any Loan or other extensions of credit under any Credit Document will be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock or reducing or retiring any Indebtedness which was originally incurred to purchase or carry any Margin Stock. No Credit Party will take or permit to be taken any action which might cause any Credit Document to violate any regulation of the Federal Reserve Board.

7.9 Taxes; Charges . Except as disclosed on Disclosure Schedule 7.9 all tax returns, reports and statements required by any Governmental Authority to be filed by each Credit Party have, as of the Closing Date, been filed and will, until the Termination Date, be filed with the appropriate Governmental Authority and no tax Lien has been filed against each Credit Party or any of each Credit Party’s property. Proper and accurate amounts have been and will be withheld by each Credit Party from its employees for all periods in complete compliance with all Requirements of Law and such withholdings have and will be timely paid to the appropriate Governmental Authorities. Disclosure Schedule 7.9 sets forth as of the Closing Date those taxable years for which each Credit Party’s tax returns are currently being audited by the IRS or any other applicable Governmental Authority and any assessments or threatened assessments in connection with such audit, or otherwise currently outstanding. Except as described on Disclosure Schedule 7.9 , no Credit Party nor its respective predecessors are liable for any Charges: (a) under any agreement (including any tax sharing agreements or agreement extending the period of assessment of any Charges) or (b) to any Credit Party’s knowledge, as a transferee. As of the Closing Date, no Credit Party has agreed or been requested to make any adjustment under IRC Section 481(a), by reason of a change in accounting method or otherwise, which could reasonably be expected to have a Material Adverse Effect.

7.10 Payment of Obligations . Each Credit Party will pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all of its Charges and other obligations of whatever nature, except payments to vendors or suppliers in the ordinary course of business consistent with past practice as disclosed to Lender in writing or where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of such Credit Party and none of the Collateral is or could reasonably be expected to become subject to any Lien or forfeiture or loss as a result of such contest.

7.11 ERISA . No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other existing ERISA Events, could reasonably be expected to result in a liability of any Corporate Credit Party of more than the Minimum Actionable Amount. The present value of all accumulated benefit obligations of any Corporate Credit Party under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent Financial Statements reflecting such amounts, exceed the fair market value of the assets of such Plan by more than the Minimum Actionable Amount, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Account Standards No. 87) did not, as of the date of the most recent Financial Statements reflecting such amounts, exceed the fair market value of the assets of such underfunded Plans by more than the Minimum Actionable Amount. No Corporate Credit Party has incurred or reasonably expects to incur any Withdrawal Liability in excess of the Minimum Actionable Amount.

7.12 Litigation . No Litigation is pending or, to the knowledge of any Credit Party, threatened by or against any Credit Party or against any Credit Party’s properties or revenues (a) with respect to any of the Credit Documents or any of the transactions contemplated hereby or thereby, or (b) which could reasonably be expected to have a Material Adverse Effect. Except as set forth on Disclosure Schedule 7.12 , as of the Closing Date there is no Litigation pending or, to the best knowledge of any Credit Party, threatened against any Credit Party which seeks damages in excess of the Minimum Actionable Amount or injunctive relief or alleges criminal misconduct of any Credit Party. Each Credit Party shall notify Lender in writing within five (5) Business Days of learning of the existence, threat or commencement of any Litigation against any Credit Party or any Plan or any allegation of criminal misconduct against any Credit Party.

7.13 Intellectual Property . As of the Closing Date, all material Intellectual Property owned or used by each Corporate Credit Party is listed, together with application or registration numbers, where applicable, (including but not limited to that acquired pursuant to the Transaction Documents) in Disclosure Schedule 7.13 . Each Corporate Credit Party is the sole legal and beneficial owner, or is licensed on commercial terms to use, all Intellectual Property necessary to conduct its business as currently conducted except for such Intellectual Property the failure of which to own or license could not reasonably be expected to have a Material Adverse Effect. Each Corporate Credit Party will maintain and establish the patenting and registration of all Intellectual Property with the United States Patent and Trademark Office, the United States Copyright Office, or other appropriate Governmental Authority of all new Intellectual Property where applicable and notify Lender in writing five (5) Business Days prior to filing any such new patent or registration. With respect to Intellectual Property licensed by each Corporate Credit Party, an agreement acceptable to Lender from the licensor of such Intellectual Property will be obtained permitting Lender to use such Intellectual Property or sell the Goods containing such Intellectual Property following the occurrence of a Default. No Credit Party is aware of any infringement on the Intellectual Property of any third party in the carrying on of its business in the normal course.

7.14 Full Disclosure . No information contained in any Credit Document, the Financial Statements or any written statement furnished by or on behalf of any Credit Party under any Credit Document, or to induce Lender to execute the Credit Documents, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made.

7.15 Hazardous Materials . Except as set forth on Disclosure Schedule 7.15 , as of the Closing Date, (a) each Real Estate is maintained free of contamination from any Hazardous Material, (b) no Credit Party is subject to any Environmental Liabilities or, to any Credit Party’s knowledge, potential Environmental Liabilities, in excess of the Minimum Actionable Amount in the aggregate, (c) no notice has been received by any Credit Party identifying it as a “potentially responsible party” or requesting information under CERCLA or analogous state statutes, and to the knowledge of any Credit Party, there are no facts, circumstances or conditions that may result in such Credit Party being identified as a “potentially responsible party” under CERCLA or analogous state statutes; and (d) each Credit Party has provided to Lender copies of all existing environmental reports, reviews and audits and all written information pertaining to actual or potential Environmental Liabilities, in each case relating to any Credit Party. Each Credit Party: (i) shall comply in all material respects with all applicable Environmental Laws and environmental permits; (ii) shall notify Lender in writing within seven days if and when it becomes aware of any Release, on, at, in, under, above, to, from or about any of its Real Estate; and (iii) shall promptly forward to Lender a copy of any order, notice, permit, application, or any communication or report received by it or any Credit Party in connection with any such Release.

7.16 Insurance . As of the Closing Date, Disclosure Schedule 7.16 lists all insurance of any nature maintained for current occurrences by Borrowers, as well as a summary of the terms of such insurance. Each Corporate Credit Party shall deliver to Lender certified copies and endorsements to all of its (a) “All Risk” and business interruption insurance policies naming Lender as lender loss payee, and (b) general liability and other liability policies naming Lender as an additional insured. All policies of insurance on real and personal property will contain an endorsement, in form and substance acceptable to Lender, showing loss payable to Lender (Form 438 BFU or equivalent) and extra expense and business interruption endorsements. Such endorsement, or an independent instrument furnished to Lender, will provide that the insurance companies will give Lender at least thirty (30) days prior written notice before any such policy or policies of insurance shall be altered or canceled and that no act or default of any Corporate Credit Party or any other Person shall affect the right of Lender to recover under such policy or policies of insurance in case of loss or damage. Each Borrower shall direct all present and future insurers under its “All Risk” policies of insurance to pay all proceeds payable thereunder directly to Lender. If any insurance proceeds are paid by check, draft or other instrument payable to any Corporate Credit Party and Lender jointly, Lender may endorse each Corporate Credit Party’s name thereon and do such other things as Lender may deem advisable to reduce the same to cash. Lender reserves the right at any time, upon review of any Corporate Credit Party’s risk profile, to require additional forms and limits of insurance. Each Corporate Credit Party shall, on each anniversary of the Closing Date and from time to time at Lender’s request, deliver to Lender a report by a reputable insurance broker, satisfactory to Lender, with respect to such Person’s insurance policies.

7.17 Deposit and Disbursement Accounts . Disclosure Schedule 7.17 lists all banks and other financial institutions at which each Credit Party, maintains deposits and/or other accounts and correctly identifies the name, address and telephone number of each such depository, the name in which the account is held, a description of the purpose of the account, and the complete account number.

7.19 Conduct of Business . Each Corporate Credit Party (a) shall conduct its business substantially as now conducted or as otherwise permitted hereunder, and (b) shall at all times maintain, preserve and protect all of the Collateral and each Corporate Credit Party’s other property, used or useful in the conduct of its business and keep the same in good repair, working order and condition and make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices.

7.20 Further Assurances . At any time and from time to time, upon the written request of Lender and at the sole expense of Credit Parties, each Credit Party shall promptly and duly execute and deliver any and all such further instruments and documents and take such further action as Lender may reasonably deem desirable (a) to obtain the full benefits of this Agreement and the other Credit Documents, (b) to protect, preserve and maintain Lender’s rights in any Collateral, or (c) to enable Lender to exercise all or any of the rights and powers herein granted.

VIII. FINANCIAL REPORTS; FINANCIAL COVENANTS

8.1 Reports and Notices . From the Closing Date until the Termination Date, each Credit Party shall deliver to Lender:

(a) within twenty (20) days following the end of each Fiscal Month (but within thirty (30) days following the end of the initial Fiscal Month hereunder), a Monthly Statement Report of each Corporate Credit Party other than ATRM Holdings, Inc. in the form of Exhibit B as of the last day of the previous Fiscal Month; together with a statement of the balance and value of each deposit account and Cash Collateral pledged as Collateral to Lender.

(c) within one hundred and five (105) days following the close of each Fiscal Year, the Financial Statements of ATRM Holdings, Inc.(with a supporting schedule for the other Corporate Credit Parties) for such Fiscal Year of each Corporate Credit Party audited and certified by an independent certified accounting firm acceptable to Lender, (as of Closing Date Boulay PLLP shall be deemed acceptable to Lender) which shall provide both comparisons to the prior Fiscal Year and be on a consolidating basis with each Affiliate (not including any stockholders of ATRM Holdings, Inc.) and shall be accompanied by (i) a statement in reasonable detail showing the calculations used in determining compliance with the financial covenants hereunder, (ii) a report from such accountants to the effect that in connection with their audit examination nothing has come to their attention to cause them to believe that a Default has occurred or specifying those Defaults of which they are aware, and (iii) any management letter that may be issued;

(e) together with each request for a Loan (but in no event later than the third (3 ^rd ) Business Day of each month) and at such intervals as Lender may request a Borrowing Base Certificate as of the last day of the immediately preceding Fiscal Month, or more current date if available, detailing the amount, value and depository statements verifying the Cash Collateral, certified as true and correct by the President or Chief Financial Officer of each Borrower;

(f) together with each request for a Loan (but in no event later than the third (3 ^rd) Business Day of each month) and at such other intervals as Lender may require: (i) copies of all entries to the sales journal and the cash receipt journal; (ii) copies of all credit memos; (iii) copies of all invoices in excess of five thousand dollars ($5,000), together with proof of delivery, in each case as and for the immediately preceding Fiscal Month; and (iv) copies of current Books and Records of the Sellers as defined in the Transaction Documents.

(i) promptly upon receipt or transmission any (i) notice of the calculation of the Earn-out Amount, (ii) Earn-out Statement, (iii) Pro Forma Balance Sheet, (iv) Objection Notice, (v) claim for indemnification under the Transaction Documents, as those terms are defined in the Transaction Documents; and

(j) each Borrower will cause each Guarantor to comply with the financial reporting requirements set forth in their respective Guaranties.

8.2 Financial Covenants . No Credit Party shall breach any of the financial covenants set forth in Schedule III .

8.3 Other Reports and Information . Each Credit Party shall advise Lender promptly, in reasonable detail, of: (a) any Lien, other than Permitted Liens, attaching to or asserted against any of the Collateral or any occurrence causing a material loss or decline in value of any Collateral and the estimated (or actual, if available) amount of such loss or decline; (b) any material change in the composition of the Collateral; and (c) the occurrence of any Default, Event of Default or other event which has had or could reasonably be expected to have a Material Adverse Effect (which may include a claim for indemnification under the Transaction Documents). Each Corporate Credit Party shall, upon request of Lender, furnish to Lender such other reports and information in connection with the affairs, business, financial condition, operations, prospects or management of such Corporate Credit Party or the Collateral as Lender may request, all in reasonable detail. If any internally prepared financial information, including that required under Section 8.1 is unsatisfactory in any manner to Lender, Lender may request that the Borrower’s independent certified accountants review the same.

8.4 Good Standing Certificates . Together with the delivery of the Financial Statements referred to in Section 8.1(c), each Corporate Credit Party shall provide to Lender a certificate of good standing from its state of incorporation or organization.

IX. NEGATIVE COVENANTS

(b) cancel any debt owing to it or create, incur, assume or permit to exist any Indebtedness, except: (i) the Obligations, (ii) Indebtedness existing as of the Closing Date set forth on Disclosure Schedule 9(b) , (iii) deferred taxes, (iv) by endorsement of instruments or items of payment for deposit to the general account of Borrower, (v) for Guaranteed Indebtedness incurred for the benefit of a Borrower if the primary obligation is permitted by this Agreement; (vi) additional Indebtedness (including Purchase Money Indebtedness) incurred after the Closing Date in an aggregate outstanding amount for Credit Parties not exceeding the Minimum Actionable Amount; and (vii) Indebtedness to trade creditors in the ordinary course of business consistent with past practice and as disclosed to Lender in writing;

(e) create or permit any Lien on any of its properties or assets, except for Permitted Liens;

(h) establish any depository or other bank account of any kind with any financial institution (other than the accounts set forth on Disclosure Schedule 7.17 ) without Lender’s prior written consent and then only after such Credit Party has implemented agreements with such bank or other institution and Lender acceptable to Lender; or

(i) make or permit any Restricted Payment other than (i) interest and principal, when due without acceleration or modification of the amortization as in effect on the Closing Date, under Indebtedness (not including Subordinated Debt, payments of which shall be permitted only in accordance with the terms of the relevant Subordination Agreement made in favor of Lender) set forth in Disclosure Schedule 9(b) or otherwise permitted under Article IX(b)(vi) or Schedule III and (ii) so long as (x) the tax status of such Credit Party is a pass thru or disregarded entity within the meaning of the Internal Revenue Code of 1986, as amended, (y) no Default or Event of Default shall have occurred and be continuing and (z) after first providing such supporting documentation as Lender may request (including the personal state and federal tax returns of each Stockholder), such Credit Party may pay Pass Thru Distributions not exceeding Pass Thru Tax Liabilities (payments to Stockholders as hereby permitted shall be made only so as to be available when the tax is due, including in respect of estimated tax payments).

X. SECURITY INTEREST

10.1 Grant of Security Interest .

(a) As collateral security for the prompt and complete payment and performance of all of the Obligations, each Corporate Credit Party other than ATRM Holdings, Inc. executing this Agreement hereby grants to the Lender a security interest in and Lien upon all of its property and assets, whether real or personal, tangible or intangible, and whether now owned or hereafter acquired, or in which it now has or at any time in the future may acquire any right, title, or interest, including all of the following property in which it now has or at any time in the future may acquire any right, title or interest: all Accounts; all Deposit Accounts and all funds on deposit therein; all cash and cash equivalents; all commodity contracts; all investments, Stock and Investment Property; all Inventory; all Equipment; all Goods; all Chattel Paper, all Documents; all Instruments; all Books and Records; all General Intangibles; all Cash Collateral; all Supporting Obligations; all Letter-of-Credit Rights; all commercial tort claims and to the extent not otherwise included, all Proceeds and products of all and any of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing, but excluding in all events Hazardous Waste (all of the foregoing, together with any other collateral pledged to the Lender pursuant to any other Credit Document, collectively, the “ Collateral ”). The term “Collateral” includes all of the assets and property purchased as of the date hereof and Closing Date of Glenbrook Lumber & Supply, Inc., a Minnesota corporation and EdgeBuilder Wall Panels, Inc., a Minnesota corporation pursuant to a certain Asset Purchase Agreement dated of even date and the Transaction Documents defined therein.

(e) Each Corporate Credit Party other than ATRM Holdings, Inc., executing this Agreement shall establish and maintain the cash management system described in Schedule IV . All payments in respect of the Collateral, shall be made to or deposited in the Collateral Account.

10.2 Lender’s Rights .

10.3 Lender’s Appointment as Attorney-in-Fact . On the Closing Date, each Corporate Credit Party other than ATRM Holdings, Inc., shall execute and deliver a Power of Attorney in the form attached as Exhibit E . The power of attorney granted pursuant to the Power of Attorney and all powers granted under any Credit Document are powers coupled with an interest and shall be irrevocable until the Termination Date. The powers conferred on Lender under the Power of Attorney are solely to protect Lender’s interests in the Collateral and shall not impose any duty upon it to exercise any such powers. Lender agrees, except for the powers granted in clause (h) of the Power of Attorney, not to exercise any power or authority granted under the Power of Attorney unless an Event of Default has occurred and is continuing. Each Corporate Credit Party other than ATRM Holdings, Inc., authorizes Lender to file any financing or continuation statement without their signature to the extent permitted by applicable law. NONE OF LENDER OR ITS AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO ANY GRANTOR FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.

10.4 Grant of License to Use Intellectual Property Collateral . Each Corporate Credit Party other than ATRM Holdings, Inc., hereby grants to Lender an irrevocable, non-exclusive license (exercisable upon the occurrence and during the continuance of an Event of Default) without payment of royalty or other compensation to any such Corporate Credit Party other than ATRM Holdings, Inc., to use, transfer, license or sublicense any Intellectual Property now owned, licensed to, or hereafter acquired by any such Corporate Credit Party other than ATRM Holdings, Inc., and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof, and represents, promises and agrees that any such license or sublicense is not and will not be in conflict with the contractual or commercial rights of any third Person; provided, that such license will terminate on the Termination Date.

10.5 Terminations; Amendments Not Authorized . Each Corporate Credit Party other than ATRM Holdings, Inc., executing this Agreement acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement without the prior written consent of Lender and agrees that it will not do so without the prior written consent of Lender, subject to Borrower’s rights under Section 9-509(d)(2) of the UCC.

10.6 Inspections . At all times during normal business hours and absent the occurrence of a Default or an Event of Default upon reasonable notice to Borrowing Representative, Lender shall have the right to (a) have access to, visit, inspect, review, evaluate and make physical verification and appraisals of each Credit Party’s properties and the Collateral, (b) inspect, examine and copy (or take originals if necessary) and make extracts from such Credit Party’s Books and Records, including management letters prepared by independent accountants, and (c) discuss with each Credit Party’s principal officers, and independent accountants, each Credit Party’s business, assets, liabilities, financial condition, results of operations and business prospects. Each Credit Party will deliver to Lender any instrument necessary for Lender to obtain records from any service bureau maintaining records for such Credit Party.

XI. TERM

11.1 Term of Agreement . Any obligation of Lender to make Loans and extend their financial accommodations under this Agreement or any Credit Document shall continue in full force and effect until the expiration of the Term. The termination of the Agreement shall not affect any of Lender’s rights hereunder or any Credit Document and the provisions hereof and thereof shall continue to be fully operative until all transactions entered into, rights or interests created and the Obligations have been disposed of, concluded or liquidated. The Maturity Date shall be automatically extended for successive periods of one (1) year each unless (a) Borrowing Representative shall have provided Lender with a written notice of termination, at least sixty (60) days prior to the expiration of the Maturity Date or any renewal of the Maturity Date or (b) Lender provides written notice of termination to Borrowing Representative at least sixty (60) days prior to the expiration of the Maturity Date or any renewal of the Maturity Date. Notwithstanding the foregoing, Lender shall release its security interests at any time after thirty (30) days notice upon payment to it of all Obligations if each Credit Party shall have (i) provided Lender with an executed release of any and all claims which Credit Parties may have or thereafter have under this Agreement and/or any Credit Document and (ii) paid to Lender an amount equal to (A) the monthly interest on the Minimum Average Monthly Loan Amount calculated based on the interest rate in effect on the date of such payment multiplied by (B) the difference between (I) the number of full months from the Closing Date until the Maturity Date and (II) the number of full months which have elapsed from the Closing Date until the payment of the fee hereunder. In addition, Borrowers shall pay to Lender the Collateral Monitoring Fee for each month from the date of repayment until the Maturity Date. These fees shall also be due and payable to Lender upon termination of this Agreement by Lender after the occurrence of an Event of Default.

11.2 Termination of Lien . The Liens and rights granted to Lender hereunder and any Credit Documents and the financing statements filed in connection herewith or therewith shall continue in full force and effect, notwithstanding the termination of this Agreement or the fact that Borrowers’ account may from time to time be temporarily in a zero or credit position, until (a) all of the Obligations have been paid or performed in full after the termination of this Agreement or each Credit Party has furnished Lender with an indemnification satisfactory to Lender with respect thereto and (b) each Credit Party has an executed release of any and all claims which such Credit Party may have or thereafter have under this Agreement or any other Credit Document. Accordingly, each Credit Party waives any rights which it may have under the UCC to demand the filing of termination statements with respect to the Collateral, and Lender shall not be required to send such termination statements to any Credit Party, or to file them with any filing office, unless and until this Agreement and the Credit Documents shall have been terminated in accordance with their terms and all Obligations paid in full in immediately available funds.

XII. EVENTS OF DEFAULT

12.1 Events of Default . If any one or more of the following events (each, an “ Event of Default ”) shall occur and be continuing:

(h) the occurrence of a Change of Control in or with respect to any Corporate Credit Party; or

(j) any other event shall have occurred which has had or could reasonably be expected to have a Material Adverse Effect; or

then, and in any such event and at any time thereafter, if such or any other Event of Default shall then be continuing, Lender in its sole discretion may declare any or all of the Obligations to be due and payable, and the same shall immediately become due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived; provided , however , that if there shall occur an Event of Default under paragraph (f) above, then any and all of the Obligations shall be immediately due and payable without any necessary action or notice by Lender. An Event of Default as defined herein shall also be an Event of Default under any other Credit Document or any other Obligations now existing or hereafter arising.

12.2 Lender Remedies .

(a) In addition to the rights and remedies set forth in Section 12.1 , if any Event of Default shall have occurred and be continuing, Lender may, without notice, take any one or more of the following actions: (i) require that all Letter of Credit Obligations be fully cash collateralized pursuant to Schedule I ; or (ii) exercise any rights and remedies provided to Lender under the Credit Documents or at law or equity, including all remedies provided under the UCC.

12.3 Waivers . Except as otherwise provided for in this Agreement and to the fullest extent permitted by applicable law, each Credit Party waives: (a) presentment, demand and protest, and notice of presentment, dishonor, intent to accelerate, acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all Credit Documents, the Notes or any other notes, commercial paper, Accounts, Contracts, Documents, Instruments, Chattel Paper and guaranties at any time held by Lender on which any Credit Party may in any way be liable, and hereby ratifies and confirms whatever Lender may do in this regard; (b) all rights to notice and a hearing prior to Lender’s taking possession or control of, or to Lender’s replevy, attachment or levy upon, any Collateral or any bond or security which might be required by any court prior to allowing Lender to exercise any of its remedies; and (c) the benefit of all valuation, appraisal and exemption laws. Each Credit Party acknowledges that it has been advised by counsel of its choices and decisions with respect to this Agreement, the other Credit Documents and the transactions evidenced hereby and thereby.

12.4 Proceeds . The Proceeds of any sale, disposition or other realization upon any Collateral shall be applied by Lender upon receipt to the Obligations in such order as Lender may deem advisable in its sole discretion (including the cash collateralization of any Letter of Credit Obligations), and after the indefeasible payment and satisfaction in full in cash of all of the Obligations, and after the payment by Lender of any other amount required by any provision of law, including the UCC (but only after Lender has received what Lender considers reasonable proof of a subordinate party’s security interest), the surplus, if any, shall be paid to Borrowers or their representatives or to whomsoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct.

XIII. MISCELLANEOUS

13.1 No Waiver; Cumulative Remedies . No failure to exercise and no delay in exercising, on the part of Lender, any right, remedy, power or privilege under this Agreement or any other Credit Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. No notice to or demand on any Credit Party in any case shall, of itself, entitle it to any other or further notice or demand in similar or other circumstances. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

13.2 Amendments and Waivers . No amendment, modification or waiver of or with respect to any provision of this Agreement or any other Credit Document shall in any event be effective unless it shall be in writing and signed by Lender and each Credit Party, and then such amendment, modification, waiver or consent shall be effective only in the specific instance and for the purpose for which given.

13.3 Expenses; Indemnity .

(b) Each Credit Party agrees to, jointly and severally, indemnify Lender, the LC Issuers, their correspondents and each of their respective directors, shareholders, officers, employees and agents (each, an “ Indemnified Person ”) against, and agrees to hold each Indemnified Person harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnified Person arising out of, in any way connected with or as a result of (i) the use of any of the proceeds of any Loan or the use of any Loan, (ii) the goods or transactions financed by the Loans, (iii) this Agreement, any other Credit Document or any other document contemplated hereby or thereby, the performance by the parties hereto or thereto of their respective obligations hereunder and thereunder or the consummation of the transactions contemplated hereby and thereby, or (iv) any claim, litigation, investigation or proceedings relating to any of the foregoing, whether or not any Indemnified Person is a party thereto; provided , however , that such indemnity shall not, as to any Indemnified Person, apply to any such losses, claims, damages, liabilities or related expenses to the extent that they result from the gross negligence or willful misconduct of Lender.

13.4 Borrowing Agency Provisions . If and to the extent that at any time or from time to time there are multiple Borrowers, then.

13.5 Guaranty . Each Corporate Credit Party hereby absolutely and unconditionally guarantees to Lender and its successors and assigns the full and prompt payment (whether at stated maturity, by acceleration or otherwise) and performance of all Obligations owed or hereafter owing to Lender by each Corporate Credit Party. Each Corporate Credit Party agrees that its guaranty obligation hereunder is a continuing guaranty of payment and performance and not of collection, and that its obligations shall be absolute and unconditional, irrespective of, and unaffected by:

(a) the genuineness, validity, regularity, enforceability or any future amendment of, or change in, this Agreement, any other Credit Documents;

(b) the absence of any action to enforce this Agreement (including this Section 13.5 ) or any other Credit Document or the waiver or consent by Lender with respect to any of the provisions hereof or thereof;

(d) the insolvency of any Credit Party; or

(e) any other action or circumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor,

13.6 Waivers . Each Corporate Credit Party expressly waives all rights it may have now or in the future under any statute, or at common law, or at law or in equity, or otherwise, to compel Lender to marshal assets or to proceed in respect of the Obligations guaranteed hereunder against any other Corporate Credit Party, any other party or against any security for the payment and performance of the Obligations before proceeding against, or as a condition to proceeding against, such Credit Party. It is agreed among each Credit Party and Lender that the foregoing waivers are of the essence of the transactions contemplated by this Agreement and the other Credit Documents and that, but for the provisions of this Section 13.6 and such waivers, Lender would decline to enter into this Agreement.

13.7 Benefit of Guaranty . Each Credit Party agrees that the provisions of Section 13.5 are for the benefit of Lender and its successors, transferees, endorsees and assigns, and nothing herein contained shall impair, as between any other Credit Party and Lender, the obligations of such other Credit Party under this Agreement or the other Credit Documents.

13.8 Subordination of Subrogation . Notwithstanding anything to the contrary in this Agreement or in any other Credit Documents, each Credit Party hereby expressly and irrevocably subordinates to payment of the Obligations any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off and any and all defenses available to a surety, guarantor or accommodation co-obligor until the Obligations are indefeasibly paid in full in cash. Each Credit Party acknowledges and agrees that this waiver is intended to benefit Lender and shall not limit or otherwise affect such Credit Party’s liability hereunder or the enforceability of Section 13.5 .

13.9 Election of Remedies . If Lender may, under applicable law, proceed to realize its benefits under this Agreement or any other Credit Document giving Lender a Lien upon any Collateral, whether owned by any Borrower or by any other Person, either by judicial foreclosure or by non-judicial sale or enforcement, Lender may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under Section 13.5 . If, in the exercise of any of its rights and remedies, Lender shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against any Credit Party or any other Person, whether because of any applicable laws pertaining to “election of remedies” or the like, each Credit Party hereby consents to such action by Lender and waives any claim based upon such action, even if such action by Lender shall result in a full or partial loss of any rights of subrogation which such Credit Party might otherwise have had but for such action by Lender. Any election of remedies that results in the denial or impairment of the right of Lender to seek a deficiency judgment against any Credit Party shall not impair any other Credit Party’s obligation to pay the full amount of the Obligations. In the event Lender shall bid at any foreclosure or trustee’s sale or at any private sale permitted by law, this Agreement or any other Credit Document, Lender may bid all or less than the amount of the Obligations and the amount of such bid need not be paid by Lender but may be credited against the Obligations. The amount of the successful bid at any such sale, whether Lender or any other party is the successful bidder, shall be conclusively deemed to be the fair market value of the Collateral and the difference between such bid amount and the remaining balance of the Obligations shall be conclusively deemed to be the amount of the Obligations guaranteed under Section 13.5 notwithstanding that any present or future law or court decision or ruling may have the effect of reducing the amount of any deficiency claim to which Lender might otherwise be entitled but for such bidding at any such sale.

13.10 Liability Cumulative . The liability of Credit Parties under Section 13.5 is in addition to and shall be cumulative with all liabilities of each Credit Party to Lender under this Agreement and the other Credit Documents or in respect of any Obligations or obligation of the other Credit Parties, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary.

13.11 Waiver of Subrogation . Each Borrower expressly waives any and all rights of subrogation, reimbursement, indemnity, exoneration, contribution of any other claim which such Borrower may now or hereafter have against the other Borrowers or other Person directly or contingently liable for the Obligations hereunder, or against or with respect to the other Borrowers’ property (including, without limitation, any property which is Collateral for the Obligations), arising from the existence or performance of this Agreement, until termination of this Agreement and repayment in full of the Obligations.

13.12 Further Assurances . Each Credit Party will take, or cause to be taken, all such further actions and execute, or cause to be executed, all such further documents and instruments as Lender may at any time reasonably request or determine to be necessary or advisable to further carry out and consummate the transactions contemplated by this Agreement and the other Credit Documents.

13.13 Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of each Borrower and its successors and to the benefit of Lender and its successors and assigns. The rights and obligations of each Credit Party under this Agreement shall not be assigned or delegated without the prior written consent of Lender, and any purported assignment or delegation without such consent shall be null and void. Lender reserves the right at any time to create and sell participations in the Loans and the Credit Documents and to sell, transfer or assign any or all of its rights in the Loans and under the Credit Documents.

13.14 Descriptive Headings . The descriptive headings of the various provisions of this Agreement are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.

13.15 Notices . Except as otherwise provided herein, whenever any notice, demand, request or other communication shall or may be given to or served upon any party by any other party, or whenever any party desires to give or serve upon any other party any communication with respect to this Agreement, each such communication shall be in writing and shall be deemed to have been validly served, given or delivered (a) upon the earlier of actual receipt and three (3) days after deposit in the United States Mail, registered or certified mail, return receipt requested, with proper postage prepaid, (b) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or United States Mail as otherwise provided in this Section 13.15, (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid or (d) when hand-delivered, all of which shall be addressed to the party to be notified and sent to the address or facsimile number indicated in Schedule V or to such other address (or facsimile number) as may be substituted by notice given as herein provided. Failure or delay in delivering copies of any such communication to any Person (other than Borrowing Representative or Lender) designated in Schedule V to receive copies shall in no way adversely affect the effectiveness of communication.

13.16 Severability . Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

13.17 Entire Agreement; Counterparts . This Agreement and the other Credit Documents represent the agreement of Credit Parties and Lender with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by any Borrower or Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Credit Documents. Nothing in this Agreement or in the other Credit Documents, express or implied, is intended to confer upon any party, other than the parties hereto and thereto, any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Credit Documents. This Agreement may be signed in any number of counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. Any signature delivered by a party via facsimile or electronic transmission shall be deemed to be an original signature hereto.

13.18 SUBMISSION TO JURISDICTION . EACH CREDIT PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY: (a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING, DIRECTLY OR INDIRECTLY, RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; (b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN SCHEDULE V TO THIS AGREEMENT OR AT SUCH OTHER ADDRESS OF WHICH LENDER SHALL HAVE BEEN NOTIFIED PURSUANT TO SECTION 13.16; AND (d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.

13.19 WAIVER OF TRIAL BY JURY, CERTAIN DAMAGES AND SETOFFS . IN ANY LEGAL ACTION OR PROCEEDING, DIRECTLY OR INDIRECTLY, RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR ANY DOCUMENT, INSTRUMENT OR AGREEMENT DELIVERED PURSUANT HERETO OR THERETO, (A) EACH OF EACH CREDIT PARTY AND LENDER HEREBY, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO TRIAL BY JURY IN CONNECTION WITH ANY SUCH LEGAL ACTION OR PROCEEDING, (B) EACH OF EACH CREDIT PARTY AND LENDER HEREBY, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, ACTUAL DAMAGES AND (C) EACH CREDIT PARTY HEREBY, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO INTERPOSE ANY NON-COMPULSORY SETOFF, RECOUPMENT, COUNTERCLAIM OR CROSS-CLAIM IN CONNECTION WITH ANY SUCH LEGAL ACTION OR PROCEEDING. EACH BORROWER AGREES THAT THIS SECTION 13.19 IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES THAT LENDER WOULD NOT EXTEND TO ANY BORROWER ANY LOANS HEREUNDER IF THIS SECTION 13.19 WERE NOT PART OF THIS AGREEMENT.

13.21 Reinstatement . This Agreement shall continue to be effective, or be reinstated, as the case may be, if at any time payment of all or any part of the Obligations is rescinded or must otherwise be returned or restored by Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Credit Party, or otherwise, all as though such payments had not been made.

[Signature Page Follows]

IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year first above written.

	EDGEBUILDER, INC.

	By:	/s/ Daniel M. Koch
		Daniel M. Koch
		President

	GLENBROOK BUILDING SUPPLY, INC.

	By:	/s/ Daniel M. Koch
		Daniel M. Koch
		President

	KBS BUILDERS, INC.

	By:	/s/ Daniel M. Koch
		Daniel M. Koch
		President

	MAINE MODULAR HAULERS, INC.

	By:	/s/ Daniel M. Koch
		Daniel M. Koch
		President

	ATRM HOLDINGS, INC.

	By:	/s/ Daniel M. Koch
		Daniel M. Koch
		President

[ Signatures continued on next page ]

[ continuation of signatures ]

	GERBER FINANCE INC.

	By:	/s/ Jennifer Palmer
		Jennifer Palmer
		President

SCHEDULE I

GENERAL TERMS FOR LETTERS OF CREDIT

1. Lender may, subject to the terms and conditions hereinafter set forth, incur Letter of Credit Obligations in respect of the issuance of Letters of Credit issued on terms acceptable to Lender and supporting obligations of a Borrower incurred in the ordinary course of such Borrower’s business, in order to support the payment of such Borrower’s inventory purchase obligations, insurance premiums, or utility or other operating expenses and obligations, as Borrowing Representative, on behalf of such Borrower, shall request by written notice to Lender that is received by Lender not less than five (5) Business Days prior to the requested date of issuance of any such Letter of Credit; provided , that: (a) that the aggregate amount of all Letter of Credit Obligations at any one time outstanding (whether or not then due and payable) shall not exceed $1,000,000 (notwithstanding the number of Credit Documents or Obligations), and (b) no Letter of Credit shall have an expiry date which is later than the Termination Date or one year following the date of issuance thereof. The applicable Borrower will enter into an application and agreement for such Letter of Credit with the LC Issuer selected by Lender. The LC Issuer shall be determined by Lender in its sole discretion.

3. Each Letter of Credit shall be subject to the Uniform Commercial Customs and, to the extent not inconsistent therewith, the laws of the State of New York.

5. The obligations of each Borrower under this Schedule shall be absolute, unconditional and irrevocable under any and all circumstances and shall be paid strictly in accordance with this Agreement irrespective of: (a) any lack of validity or enforceability of any Letter of Credit or of any demand, application, reimbursement agreement or other agreement or instrument relating thereto (collectively, the “ Related Documents ”); (b) the existence of any claim, setoff, defense or other right that any Borrower or any other Person may at any time have against the beneficiary under any Letter of Credit, Lender, the LC Issuer, any of their correspondents or any other Person; (c) any improper or erroneous or mistaken payment by any LC Issuer or Lender under any Letter of Credit; (d) any supplement or waiver of or any consent to depart from the terms of any Letter of Credit or Related Document; and (e) any other circumstance or event whatsoever, whether or not similar to any of the foregoing.

13. In connection with all Letters of Credit, each Borrower, hereby appoints Lender, or its designee, as its attorney, with full power and authority (i) to sign and/or endorse such Borrower’s name upon any warehouse or other receipts, letter of credit applications and acceptances; (ii) to sign such Borrower’s name on bills of lading; (iii) to clear Inventory through the United States of America Customs Department (“ Customs ”) in the name of such Borrower or Lender or Lender’s designee, and to sign and deliver to Customs officials powers of attorney in the name of such Borrower for such purpose; (iv) to complete in the name of Lender, or Lender’s designee, any order, sale or transaction, obtain the necessary documents in connection therewith, and collect the proceeds thereof; (v) to clear and resolve any questions of non-compliance of documents; (vi) to give any instructions as to acceptance or rejection of any documents or goods; (vii) to execute any and all applications for steamship or airways guarantees, indemnities or delivery orders; (viii) to grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances, or documents; and (ix) to agree to any amendments, renewals, extensions, modifications, changes or cancellation of any of the terms or conditions of any of the applications, Letters of Credit, drafts or acceptances; all in Lender’s sole name, and the LC Issuer shall be entitled to comply with and honor any and all such documents or instruments executed by or received solely from Lender; all without notice to or consent from Borrower. Neither Lender nor its attorneys will be liable for any acts or omissions nor for any error of judgment or mistakes of fact or law, except for Lender’s or its attorney’s gross (not mere) negligence or willful misconduct. This power, being coupled with an interest, is irrevocable as long as any Letters of Credit remain outstanding.

ATTACHMENT A

LETTERS OF CREDIT

FEES, CHARGES AND COMMISSIONS

LC Issuer - Bank Charges:
Wire Transfer	$75
Issuance of Check	$45
Letter of Credit :
Issuance	$125
Amendment/Discrepancy	$150
Cable/Telex Notification	$120
Courier	$50
Air Freight Release :
Steamship Guarantee	$50
Payment Commission (Sight & Time)	0.3% or $150 min.
Processing Fee	$40 per invoice
Cancellation Fee	$125
Acceptance Time Payment	2.5% per annum or $175 min.
Stand-by Letter of Credit :
Issuance	$250
Commission Fee	1.5% per annum or $300 min.
Amendment/Discrepancy	$175
Cable/Telex Notification	$120
Courier	$50
Lender Charges (per billing):
Courier Service (if used)	$50 for domestic / $75 min. for overseas
Petties	$20 - $45
Telephone	$17.50 - $35
Fax	$25 - $50

SCHEDULE II

CONDITIONS PRECEDENT

The following items must be received by Lender in form and substance satisfactory to Lender on or prior to the date of the initial Loan Lender:

1. this Agreement duly executed by each Credit Party;

2. the Note duly executed by each Borrower;

3. INTENTIONALLY OMITTED;

6. duly executed Intellectual Property Security Agreement from each Credit Party which owns Intellectual Property;

8. Powers of Attorney duly executed by each Corporate Credit Party other than ATRM Holdings, Inc.;

9. Control Agreement from depository institution;

10. The Pledge and Security Agreement as to the Cash Collateral executed by all necessary parties with rights to such Collateral together with evidence of Cash Collateral to the satisfaction of Lender;

11. duly executed originals of a Request for Loan, dated the Closing Date, with respect to the initial Revolving Credit Advance to be requested by Borrowing Representative on the Closing Date;

12. duly executed originals of a letter of direction from Borrowing Representative addressed to Lender, with respect to the disbursement on the Closing Date of the proceeds of the initial Loan;

17. INTENTIONALLY OMITTED;

18. a letter from the Credit Parties to their independent auditors in the form of Exhibit F authorizing the independent certified public accountants of the Credit Parties to communicate with Lender;

19. duly executed originals of account debtor notification letters in the form of Exhibit H executed in blank by each Corporate Credit Party other than ATRM Holdings, Inc.;

21. INTENTIONALLY OMITTED;

22. any and all Subordination and/or Intercreditor Agreements as Lender shall have deemed necessary or appropriate with respect to any Indebtedness of any Credit Party;

23. INTENTIONALLY OMITTED;

24. INTENTIONALLY OMITTED;

25. the Financial Statements, Projections and other materials requested by Lender certified by each Borrower’s Chief Financial Officer;

26. such other certificates, documents and agreements respecting any Credit Party as Lender may, in its sole discretion, request;

27. Execution, delivery and closing of line of credit financing for Borrowers set forth on proposal letter dated July 7, 2016; and

28. Execution, delivery and closing of the Transaction Documents.

SCHEDULE III

FINANCIAL COVENANTS

3. Earn-out . No payments to sellers nor payment of Earn-out Amount pursuant to the Transaction Documents except from not more than Seventy-five (75%) percent of Free Cash Flow of each Borrower (subject to terms of Subordination Agreement); “Free Cash Flow” being defined as earnings before interest, taxes and depreciation less cash, less interest, less taxes, less other cash expenses, and less non-financed Capital Expenditures.

SCHEDULE IV

CASH MANAGEMENT

Each Borrower agrees to establish, and to maintain, until the Termination Date, the cash management system described below:

1. Commencing on the Closing Date and until the Termination Date, Borrower will irrevocably direct all present and future Account Debtors and other Persons obligated to make payments constituting Collateral to make such payments directly to either the Collateral Account or to Borrower at 488 Madison Avenue, Suite 800, New York, NY 10022. All of Borrowers’ invoices, account statements and other written or oral communications directing, instructing, demanding or requesting payment of any Account of Borrower or any other amount constituting Collateral shall conspicuously direct that all payments be made to the Collateral Account or to Borrower at 488 Madison Avenue, Suite 800, New York, NY 10022 and shall include the preceding address or the address for the Collateral Account. If, notwithstanding the instructions to Account Debtors to make payments to the Collateral Account or to Borrower at 488 Madison Avenue, Suite 800, New York, NY 10022, Borrower receives any payments, Borrower shall immediately deposit such payments into the Collateral Account or immediately forward to Lender. Until so deposited, Borrower shall hold all such payments in trust for and as the property of Lender and shall not commingle such payments with any of its other funds or property.

2. Each Borrower may maintain, in its name, accounts (the “ Disbursement Accounts ”) at a bank or banks acceptable to Lender into which Lender shall, from time to time, deposit proceeds of Loans for use solely in accordance with the terms of this Agreement. All of the Disbursement Accounts are listed on Disclosure Schedule 7.17 .

SCHEDULE V

ADDRESSES FOR NOTICES

Lender’s Address:

Name:	Gerber Finance Inc.
Address:	488 Madison Avenue, Suite 800
	New York, New York 10022
Attention:	Gerald L. Joseph
Telephone:	(212) 888-3833
Facsimile:	(212) 888-1637

Each Borrower’s, Credit Party’s and Borrowing Representative’s Address:

Name:	KBS Builders, Inc.
	Maine Modular Haulers, Inc.
Address:	300 Park Street
	South Park, Maine 04281
Attention:	Dan Koch
Telephone:	(651) 704-1800

Name:	ATRM Holdings, Inc.
Address:	3050 Echo Lake Avenue, Suite 300
	Mahtomedi, Minnesota 55155
Attention:	Dan Koch
Telephone:	(651) 704-1800

Name:	Glenbrook Building Supply, Inc.
	EdgeBuilder, Inc.
Address:	5215 Gershwin Avenue North
	Oakdale, Minnesota 55128
Attention:	Dan Koch
Telephone:	(651) 704-1800

STATE OF ____________________)
) ss.:
COUNTY OF __________________)

STATE OF ____________________)
) ss.:
COUNTY OF __________________)

On the _____ day of ____________, 2016, before me personally appeared _____________________, who acknowledged under oath, to my satisfaction, that he is an authorized signatory of Glenbrook Building Supply, Inc., a Delaware corporation, named in the within instrument/document and is authorized to sign the within instrument/document on its behalf, and as such authorized signatory, signed, sealed and delivered this instrument/document as the voluntary act and deed of Glenbrook Building Supply, Inc., made by virtue of its authority documents.

STATE OF ____________________)
) ss.:
COUNTY OF __________________)

On the _____ day of ____________, 2016, before me personally appeared _____________________, who acknowledged under oath, to my satisfaction, that he is an authorized signatory of ATRM Holdings, Inc., a Minnesota corporation, named in the within instrument/document and is authorized to sign the within instrument/document on its behalf, and as such authorized signatory, signed, sealed and delivered this instrument/document as the voluntary act and deed of ATRM Holdings, Inc., made by virtue of its authority documents.

STATE OF ____________________)
) ss.:
COUNTY OF __________________)

On the _____ day of ____________, 2016, before me personally appeared _____________________, who acknowledged under oath, to my satisfaction, that he is an authorized signatory of KBS Builders, Inc., a Delaware corporation, named in the within instrument/document and is authorized to sign the within instrument/document on its behalf, and as such authorized signatory, signed, sealed and delivered this instrument/document as the voluntary act and deed of KBS Builders, Inc., made by virtue of its authority documents.

STATE OF ____________________)
) ss.:
COUNTY OF __________________)

On the _____ day of ____________, 2016, before me personally appeared _____________________, who acknowledged under oath, to my satisfaction, that he is an authorized signatory of Maine Modular Haulers, Inc., a Delaware corporation, named in the within instrument/document and is authorized to sign the within instrument/document on its behalf, and as such authorized signatory, signed, sealed and delivered this instrument/document as the voluntary act and deed of Maine Modular Haulers, Inc., made by virtue of its authority documents.

Exhibit 21.1

Subsidiaries of ATRM Holdings, Inc.

1. KBS Builders, Inc., organized under the laws of Delaware

2 . Aetrium Corporation, organized under the laws of Minnesota

3 . Glenbrook Buildings Supply, Inc., organized under the laws of Delaware

4 . EdgeBuilder, Inc., organized under the laws of Delaware

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements on Form S-8 (No 333-111748 and 333-204671) of ATRM Holdings, Inc. of our report dated September 15, 2017 relating to the consolidated financial statements that appears in this Form 10-K for the years ended December 31, 2016 and 2015.

Boulay PLLP

Minneapolis, Minnesota

September 22, 2017

Exhibit 31.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Daniel M. Koch, certify that:

	1.	I have reviewed this Annual Report on Form 10-K of ATRM Holdings, Inc. for the year ended December 31, 2016;

	2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 22, 2017

	By:	/s/ Daniel M. Koch
		Daniel M. Koch
		President and Chief Executive Officer
		(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION OF THE PRINCIPAL Financial OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen A. Clark, certify that:

	1.	I have reviewed this Annual Report on Form 10-K of ATRM Holdings, Inc. for the year ended December 31, 2016;

	2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 22, 2017

	By:	/s/ Stephen A. Clark
		Stephen A. Clark
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of ATRM Holdings, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Daniel M. Koch, as Chief Executive Officer of the Company, and Stephen A. Clark, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

	(1)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: September 22, 2017	By:	/s/ Daniel M. Koch
		Daniel M. Koch
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: September 22, 2017	By:	/s/ Stephen A. Clark
		Stephen A. Clark
		Chief Financial Officer
		(Principal Financial and Accounting Officer)