ARC Group Worldwide, Inc. (Form: 10-Q, Received: 11/14/2017 16:17:01)

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10 - Q

☒ QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 1, 2017

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

For the transition period from _______ to _______

ARC Group Worldwide, Inc.

(Exact name of registrant as specified in its charter)

Utah

(State or other jurisdiction of incorporation or organization)


001-33400		87-0454148
(Commission File Number)		(I.R.S. Employer Identification Number)

810 Flightline Blvd.

Deland, FL 32724

(Address of principal executive offices including zip code)

(303) 467-5236

(Registrant’s telephone number, including area code)

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 ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date 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 ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer ☐		Accelerated filer ☐

Non-accelerated filer ☐ (Do not check if a smaller reporting company)		Smaller reporting company ☒ 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 Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 7, 2017, the Registrant had 18,273,968 shares outstanding of its $.0005 par value common stock.

ARC Group Worldwide, Inc.

Table of Contents


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended October 1, 2017 and October 2, 2016	3

	Unaudited Condensed Consolidated Balance Sheets as of October 1, 2017 and June 30, 2017	4

	Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended October 1, 2017 and October 2, 2016	5

	Notes to Unaudited Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

Item 4.	Controls and Procedures	24

PART II. OTHER INFORMATION

Item 1A.	Risk Factors	26

Item 6.	Exhibits	26

SIGNATURES		26

Table of Contents

PART I — FINANCIAL INFORMATIO N

ITEM 1. FINANCIAL STATEMENT S

ARC Group Worldwide, Inc.

Unaudited Condensed Consolidated Statements of Operation s

(in thousands, except for share and per share amounts)


	For the three months ended
	October 1,		October 2,
	2017		2016
Sales	$	19,950	$	25,712
Cost of sales		18,528		21,034
Gross profit		1,422		4,678
Selling, general and administrative		3,486		4,857
Loss from operations		(2,064)		(179)
Other expense, net		(37)		(33)
Interest expense, net		(1,012)		(1,107)
Loss on extinguishment of debt		—		(723)
Loss before income taxes		(3,113)		(2,042)
Income tax (expense) benefit		(172)		1,331
Net loss from continuing operations		(3,285)		(711)
(Loss) gain on sale of subsidiaries and income (loss) from discontinued operations, net of tax		(270)		4,318
Net (loss) income		(3,555)		3,607
Net income attributable to non-controlling interest
Continuing operations		—		(22)
Discontinued operations		—		(4)
Net income attributable to non-controlling interest		—		(26)
Net (loss) income attributable to ARC Group Worldwide, Inc.	$	(3,555)	$	3,581

Net (loss) income per common share, basic and diluted:
Continuing operations	$	(0.18)	$	(0.04)
Discontinued operations	$	(0.02)	$	0.24
Attributable to ARC Group Worldwide, Inc.	$	(0.20)	$	0.20

Weighted average common shares outstanding:
Basic and diluted		18,194,091		18,123,883

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

ARC Group Worldwide, Inc.

Unaudited Condensed Consolidated Balance Sheet s

(in thousands, except share data)



	October 1, 2017		June 30, 2017
ASSETS
Current assets:
Cash	$	397	$	593
Accounts receivable, net		12,278		10,488
Inventories, net		14,457		14,369
Prepaid expenses and other current assets		2,685		3,152
Current assets of discontinued operations		—		1,452
Total current assets		29,817		30,054
Property and equipment, net		40,567		41,349
Goodwill		6,412		6,412
Intangible assets, net		18,783		19,624
Other		298		291
Long-term assets of discontinued operations		—		1,893
Total assets	$	95,877	$	99,623

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	9,735	$	8,681
Accrued expenses and other current liabilities		3,216		3,273
Deferred revenue		1,167		1,165
Bank borrowings, current portion of long-term debt		1,733		1,701
Capital lease obligations, current portion		1,490		1,470
Accrued escrow obligations, current portion		1,212		1,212
Current liabilities of discontinued operations		—		283
Total current liabilities		18,553		17,785
Long-term debt, net of current portion		42,309		42,822
Capital lease obligations, net of current portion		1,602		1,888
Accrued escrow obligations, net of current portion		942		1,184
Other long-term liabilities		917		1,017
Long-term liabilities of discontinued operations		—		260
Total liabilities		64,323		64,956

Commitments and contingencies (Note 11)

Equity:
Preferred stock, $0.001 par value, 2,000,000 shares authorized, no shares issued and outstanding		—		—
Common stock, $0.0005 par value, 250,000,000 shares authorized; 18,240,297 shares issued and 18,231,896 shares issued and outstanding at October 1, 2017, and 18,180,027 shares issued and 18,171,626 shares issued and outstanding at June 30, 2017		10		10
Treasury stock, at cost; 8,401 shares at October 1, 2017 and June 30, 2017		(94)		(94)
Additional paid-in capital		31,503		31,109
Retained earnings		—		3,569
Accumulated other comprehensive income		135		73
Total equity		31,554		34,667
Total liabilities and equity	$	95,877	$	99,623

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

ARC Group Worldwide, Inc.

Unaudited Condensed Consolidated Statements of Cash Flow s

(in thousands)


	For the three months ended
	October 1, 2017		October 2, 2016
Cash flows from operating activities:
Net (loss) income	$	(3,555)	$	3,607
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization		2,516		2,374
Share-based compensation expense		287		312
Loss (gain) on sale of subsidiaries		109		(5,722)
Bad debt expense and other		83		13
Deferred income taxes		—		(888)
Changes in working capital:
Accounts receivable		(1,645)		(1,379)
Inventory		(253)		(2,414)
Prepaid expenses and other assets		546		870
Accounts payable		820		1,990
Accrued expenses and other current liabilities		(437)		1,701
Deferred revenue		3		(37)
Net cash (used in) provided by operating activities		(1,526)		427

Cash flows from investing activities:
Purchases of property and equipment		(957)		(1,329)
Proceeds from sale of subsidiary		3,000		10,500
Net cash provided by investing activities		2,043		9,171

Cash flows from financing activities:
Proceeds from debt issuance		27,073		32,112
Repayments of long-term debt and capital lease obligations		(28,073)		(41,487)
Issuance of common stock under employee stock purchase plan		92		—
Net cash used in financing activities		(908)		(9,375)
Effect of exchange rates on cash		195		18
Net (decrease) increase in cash		(196)		241
Cash, beginning of period		593		3,620
Cash, end of period	$	397	$	3,861
Supplemental disclosures of cash flow information:
Cash paid for interest	$	955	$	1,007
Cash paid for income taxes, net of refunds	$	27	$	(927)

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

ARC Group Worldwide, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 1 – Nature of Operations and Basis of Presentation

Nature of Operations

ARC Group Worldwide, Inc. (the “Company” or “ARC”) is a global advanced manufacturer offering a full suite of products and services to our customers, with specific expertise in metal injection molding (“MIM”) and metal 3D printing (also referred to herein as additive manufacturing). To further advance and support these core capabilities, the Company also offers complementary services associated with: (i) precision metal stamping; (ii) traditional and clean room plastic injection molding; and (iii) advanced rapid and conformal tooling. Through its diverse product offering, the Company provides its customers with a holistic prototyping and full-run production solution for both precision metal and plastic fabrication. The Company further differentiates itself from its competitors by providing innovative, custom capabilities, which improve high-precision manufacturing efficiency and speed-to-market for its customers.

Basis of Presentation

The Company’s fiscal year begins July 1 and ends June 30, and the quarters for interim reporting consist of thirteen weeks; therefore, the quarter end will not always coincide with the date of the calendar month-end.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of its financial position and results of operations. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year. The consolidated balance sheet as of June 30, 2017, was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP. As such, this quarterly report should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017. The Company follows the same accounting policies for preparing quarterly and annual reports.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the amounts of ARC and its controlled subsidiaries. All material intercompany transactions have been eliminated in consolidation.

NOTE 2 – Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenue and expenses during the reporting period. Due to the inherent uncertainties in making estimates, actual results could differ from those estimates and such differences may be material to the consolidated financial statements.

Table of Contents

Comprehensive Income (Loss)

For each of the quarters ended October 1, 2017 and October 2, 2016, there were no material differences between net income (loss) and comprehensive income (loss).

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases: Topic 842 (“ASU 2016-02”), to supersede nearly all existing lease guidance under GAAP. ASU 2016-02 requires the recognition of lease assets and lease liabilities on the balance sheet by lessees for those leases currently classified as operating leases. ASU 2016-02 also requires qualitative disclosures along with specific quantitative disclosures and is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. Entities are required to apply the amendments at the beginning of the earliest period presented using a modified retrospective approach. The Company is evaluating the requirements of this guidance and has not yet determined the impact of the adoption on its consolidated financial position, results of operations and cash flows; however, the Company’s current operating lease commitments are disclosed in Note 13, Commitments and Contingencies, of the Company’s Form 10-K for the fiscal year ended June 30, 2017.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers: Topic 606 (“ASU 2014-09”), to supersede nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In August 2015, the FASB issued ASU 2015-14 which defers the effective date for one year beyond the originally specified effective date. ASU 2014-09 is effective in the Company’s first quarter of fiscal 2019 and may transition to the standard using either the full retrospective approach or retrospectively with a cumulative effect of initially applying the amendments recognized at the date of initial application. The Company has completed its initial assessment of the effect of adoption. Based on this initial assessment, the majority of the Company’s revenues will not be affected upon adoption. The Company is still analyzing the disclosure requirements of this new standard.

NOTE 3 – Divestitures

General Flange & Forge LLC (“GF&F”)

On September 15, 2017, the Company sold substantially all of the assets of GF&F to GFFC Holdings, LLC (“GFFC”) for $3.0 million in cash. GFFC is owned, in part, by Quadrant Management Inc., which is an affiliate of the Company. The sale of GF&F is therefore a related party transaction. The GF&F sale was made pursuant to an industry-wide auction undertaken on behalf of the Company by a registered investment banking organization that managed the sale process with prospective bidders. GFFC entered into the bidding for the GF&F assets only after the first rounds of the auction indicated uncertainty both in respect to the timing for closing any prospective sale and achieving the Company’s valuation objectives. Mr. Alan Quasha, CEO of Quadrant Management Inc. and Chairman of the Company’s Board of Directors, recused himself from any deliberations or voting by the Board of Directors in respect of the sale of the GF&F assets to GFFC. The Board of Directors appointed a special committee consisting solely of independent directors to oversee and negotiate the sale process. The special committee engaged its own independent legal counsel to advise the special committee in respect of the drafting of the asset sale agreement and ancillary transaction documents in accordance with customary terms and conditions for transactions of this type. In this manner, the special committee was able to conclude that the sale price and the terms and conditions for the transaction were superior to any other offers, as well as fair and reasonable to the Company and its shareholders.

Table of Contents

Below is a summary of the loss on sale of discontinued operations (in thousands):


Gross proceeds	$	3,000

Less:
Property and equipment, net		181
Accounts receivable		561
Inventory		882
Other current assets		42
Accounts payable and accrued expenses		(269)
Total net assets disposed		1,397

Goodwill		1,712
Transaction costs		373
Loss on sale of discontinued operations, before income taxes	$	(482)

The condensed consolidated statements of operations for the three months ended October 1, 2017, include the results of operations of GF&F through the sale date of September 15, 2017 and the loss on the sale of GF&F. Financial information for discontinued operations for the three months ended October 1, 2017 and October 2, 2016 is as follows (in thousands):


	For the three months ended
	October 1, 2017		October 2, 2016
Sales	$	726	$	1,113
Cost of sales		(615)		(791)
Gross profit		111		322
Selling, general and administrative		(108)		(191)
Income from discontinued operations, before income taxes		3		131
Loss on sale of discontinued operations		(482)		—
Total (loss) income from discontinued operations, before income taxes		(479)		131
Income tax benefit on discontinued operations		209		—
(Loss) income from discontinued operations, net of tax	$	(270)	$	131

The following table presents the carrying amount as of June 30, 2017, of the major classes of assets and liabilities held for sale in the condensed consolidated balance sheet (in thousands):


	June 30, 2017
Current assets:
Accounts receivable, net	$	687
Inventories, net		717
Prepaid expenses and other current assets		48
Total current assets		1,452
Property and equipment, net		181
Goodwill		1,712
Total assets of discontinued operations	$	3,345

Current liabilities:
Accounts payable and accrued expenses	$	283
Total current liabilities		283
Other long-term liabilities		260
Total liabilities of discontinued operations	$	543

Cash flows from GF&F for the three months ended October 1, 2017 and October 2, 2016 are combined with the cash flows from operations within each of the categories presented on the condensed consolidated statements of cash flows.

Table of Contents

There were no significant operating or investing activities from discontinued operations during the three months ended October 1, 2017 and October 2, 2016.

NOTE 4– Inventory

Inventories consisted of the following (in thousands):



	October 1, 2017		June 30, 2017
Raw materials and supplies	$	5,143	$	5,357
Work-in-process		8,113		7,767
Finished goods		3,084		4,113
		16,340		17,237
Reserve for obsolescence		(1,883)		(2,151)
Inventory of discontinued operations		—		(717)
	$	14,457	$	14,369

NOTE 5 – Property and Equipment

Property and equipment consisted of the following (in thousands):


	Depreciable Life			October 1,		June 30,
	(in years)			2017		2017
Land		—		$	1,264	$	1,264
Building and improvements	7	-	40		18,185		18,125
Machinery and equipment	3	-	12		40,872		40,715
Office furniture and equipment	3	-	10		1,240		1,280
Construction-in-process		—			2,516		2,462
Assets acquired under capital lease					7,274		7,235
					71,351		71,081
Accumulated depreciation					(28,168)		(27,201)
Accumulated amortization on capital leases					(2,616)		(2,350)
Property and equipment of discontinued operations					—		(181)
				$	40,567	$	41,349

Depreciation expense totaled $1.7 million and $1.5 million for the three months ended October 1, 2017 and October 2, 2016, respectively.

NOTE 6 – Goodwill and Intangible Assets

Goodwill

Total goodwill of $6.4 million is assigned to the Company’s Precision Components Group. The Company performs a goodwill impairment assessment on at least an annual basis. The Company conducts its annual goodwill impairment assessment during the fourth quarter, or more frequently, if indicators of impairment exist. During the fiscal quarter ended October 1, 2017, the Company assessed whether any such indicators of impairment existed and concluded there were none.

Table of Contents

Intangible Assets

The following table summarizes the Company's intangible assets (in thousands):


	As of October 1, 2017						As of June 30, 2017
	Gross						Gross
	Carrying		Accumulated		Net Carrying		Carrying		Accumulated		Net Carrying
Intangible assets:	Amount		Amortization		Amount		Amount		Amortization		Amount
Patents and tradenames	$	3,418		(775)	$	2,643	$	3,418	$	(717)	$	2,701
Customer relationships		24,077		(9,030)		15,047		24,077		(8,429)		15,648
Non-compete agreements		3,642		(2,549)		1,093		3,642		(2,367)		1,275
Total	$	31,137	$	(12,354)	$	18,783	$	31,137	$	(11,513)	$	19,624

Intangible assets are amortized using the straight-line method over estimated useful lives ranging from five to fifteen years. Amortization expense totaled $0.8 million for identifiable intangible assets for the three months ended October 1, 2017 and October 2, 2016. Estimated future amortization expense for the next five years as of October 1, 2017, is as follows (in thousands):


Fiscal Years	Amount
2018	$	2,523
2019		3,182
2020		2,636
2021		2,636
2022		2,636
Thereafter		5,170
Total	$	18,783

There were no impairments of long-lived assets during the three months ended October 1, 2017 and October 2, 2016.

NOTE 7 – Debt

Long-term debt payable consists of the following (in thousands):


	Balance as of
	October 1, 2017		June 30, 2017
Senior secured revolving loan	$	10,074	$	10,071
Senior secured mortgage-based term loans		19,929		20,493
Subordinated term loan		15,000		15,000
Total debt		45,003		45,564
Unamortized deferred financing costs		(961)		(1,041)
Total debt, net		44,042		44,523
Current portion of long-term debt, net of unamortized deferred financing costs		(1,733)		(1,701)
Long-term debt, net of current portion and unamortized deferred financing costs	$	42,309	$	42,822

Senior Credit Agreement

On September 29, 2016, the Company and certain of its subsidiaries, entered into a new senior asset-based lending credit agreement with Citizens Bank, N.A. (the “Senior ABL Credit Facility”); subsequently the Company entered into amendments one through four.

The Senior ABL Credit Facility provides the Company with the following extensions of credit and loans: (1) a Revolving Commitment in the principal amount of $25.0 million (the “Revolving Loan”) and (2) a mortgage-based Term Loan Commitment in the principal amount of $17.5 million (the “Term Loan”). The loans under the Senior ABL Credit Facility are secured by liens on substantially all domestic assets of the Company and guaranteed by the Company’s domestic subsidiaries who are not borrowers under the Senior ABL Credit Facility.

The aggregate amount of revolving loans permitted under the Senior ABL Credit Facility may not exceed a borrowing base consisting of: (i) the sum of 85% of certain eligible accounts receivable, plus (ii) the lesser of 65% of the value of

Table of Contents

certain eligible inventory and 85% of the net orderly liquidation value of certain eligible inventory, plus (iii) an amount not to exceed $4.2 million, which amount will be adjusted based on the face amount of certain letters of credit issued to Citizens Bank, N.A. in connection with certain operating leases and capitalized leases, minus (iv) reserves for any amounts which the lender deems necessary or appropriate.

Borrowings under the Senior ABL Credit Facility may be made as Base Rate Loans or Eurodollar Rate Loans. The Base Rate loans will bear interest at the fluctuating rate per annum equal to (i) the highest of (a) the Federal Funds Rate plus 1/2 of 1.00%, (b) Citizens own prime rate; and (c) the adjusted Eurodollar rate on such day for an interest period of one (1) month plus 1.00%; and (ii) plus the Applicable Rate, as described below. Eurodollar Rate Loans will bear interest at the rate per annum equal to (i) the ICE Benchmark Administration LIBOR Rate; plus (ii) the Applicable Rate. The “Applicable Rate” will be (a) 2.50% with respect to Base Rate Loans that are Term Loans and 3.50% with respect to Eurodollar Rate Loans that are Term Loans, and (b) 2.50% with respect to Base Rate Loans that are Revolving Loans and 3.50% with respect to Eurodollar Rate Loans that are Revolving Loans, in each case until December 31, 2016, and thereafter the Applicable Rate will be adjusted quarterly, responsive to the Company’s Quarterly Average Availability Percentage, ranging from 1.25% to 1.75% with respect to Base Rate Loans that are Revolving Loans and from 2.25% to 2.75% with respect to Eurodollar Rate Loans that are Revolving Loans. In addition to interest payments on the Senior ABL Credit Facility loans, the Company will pay commitment fees to the lender of 0.375% per quarter on undrawn Revolving Loans. The Company will also pay other customary fees and reimbursements of costs and disbursements to the lender.

The Maturity Date with respect to the Revolving Loan and the Term Loan is August 11, 2019, provided, however, upon repayment of Company subordinated indebtedness the maturity date will automatically extend to five years after the Closing Date for Revolving Loans and Revolving Commitments, and with respect to the Term Loans, the earlier of the date that is (i) ten years after the Closing Date and (ii) the maturity date of the Revolving Loans. The Senior ABL Credit Facility contains certain mandatory prepayment provisions, including mandatory prepayments due in respect of sales of assets, sales of equity securities, events of default and other customary events, with exceptions for non-core business dispositions.

The Senior ABL Credit Facility contains customary covenants and negative covenants regarding operation of the Company’s business, including maintenance of certain financial ratios, as well as restrictions on dispositions of Company assets.

In connection with the Senior ABL Credit Facility, the Company and the Borrowers together with certain subsidiaries (collectively, the “Guarantors”), have entered into an Amended and Restated Guarantee and Collateral Agreement with Citizens Bank, N.A. dated as of September 29, 2016, which secures all of the loans and credits drawn from the Senior ABL Credit Facility by the Borrowers. The security interests established under the Amended and Restated Guarantee and Collateral Agreement include senior secured liens on substantially all of the assets of the Guarantors. The Guarantors have agreed to guarantee the unconditional payment and performance to the lender of all obligations of the Borrowers under the Senior ABL Credit Facility.

On September 21, 2017, the Company entered into a third amendment to the Senior ABL Credit Facility to amend the definition of Consolidated EBITDA.

On November 12, 2017, the Company entered into the Fourth Amendment to the Senior ABL Credit Facility (the “Fourth Amendment”). The Fourth Amendment suspends the Company’s fixed charge coverage ratio covenant through December 31, 2018. The suspension of the fixed charge coverage ratio covenant is effective as of October 1, 2017. The Fourth Amendment also adds a minimum revolving credit availability financial covenant. The Company’s revolving credit availability under the Senior ABL Credit Facility exceeded the minimum requirements during the quarter. The Fourth Amendment also permits the Company to make infusions of junior capital, which may consist of subordinated debt and/or equity issuances. The junior capital infusions made under the Fourth Amendment will not be subject to mandatory prepayment of the Senior ABL Credit Facility, but subject to certain limitations in respect of outstanding subordinated indebtedness. Under the terms of the Fourth Amendment, the initial infusion of junior capital in amount of not less than $5.0 million must be completed by the Company no later than January 31, 2018. The minimum revolving credit availability covenant requires the Company to maintain the following availability: (a) at least $1,250,000 in revolving credit availability until the earlier of (i) the initial closing of the infusion of $5.0 million in junior capital and (ii) January 31, 2018; and (b) thereafter, at least $3,500,000 in such revolving credit availability. The Fourth Amendment also reduces the Line Cap (consisting of the lesser of the aggregate revolving credit commitment and the

Table of Contents

borrowing base) in respect of certain prepayment obligations and conditions precedent to borrowing, by reducing the borrowing base by $1,250,000. The Fourth Amendment contains customary representations and warranties regarding the status of the Company and compliance with all terms and conditions of the Senior ABL Credit Facility.

Prior Amended & Restated Credit Agreement

On September 29, 2016, the Company refinanced all of the existing long-term debt obligations with Citizens Bank, N.A. into the Senior ABL Credit Facility described above. The Company accounted for the refinancing as an extinguishment of debt and wrote off $0.7 million of previously deferred financing fees.

Subordinated Term Loan Credit Agreement

On November 10, 2014, the Company and certain of its subsidiaries entered into a $20.0 million, five-year Subordinated Term Loan Credit Agreement (“Subordinated Loan Agreement”) with McLarty Capital Partners SBIC, L.P. (“McLarty”), which bears interest at 11% annually ; subsequently the Company entered into amendments one through four. Upon an event of default under the Subordinated Loan Agreement, the interest rate increases automatically by 2.00% annually. The proceeds were used to repay certain outstanding loans under the Company’s previous credit facility. ARC’s Chairman is indirectly related to McLarty; therefore, the Board of Directors appointed a special committee consisting solely of independent directors to assure that the Subordinated Loan Agreement is fair and reasonable to the Company and its shareholders.

The Subordinated Loan Agreement has been subordinated to the Senior ABL Credit Facility pursuant to a First Lien Subordination Agreement. The Subordinated Loan Agreement contains customary representations and warranties, events of default, affirmative covenants, negative covenants, and prepayment terms that are similar to those contained in the Senior ABL Credit Facility described above.

On September 22, 2017, the Company entered into a fourth amendment to the Subordinated Loan Agreement to amend the definition of Consolidated EBITDA and the Maximum Total Leverage Ratio.

As of October 1, 2017, the Company was in compliance with its debt covenants under the Subordinated Credit Facility.

Loan Contract

On March 23, 2016, AFT-Hungary Kft. (“AFT Hungary”), a wholly owned subsidiary of the Company, entered into a Loan Contract with Erste Bank Hungary Zrt. in an amount equal to €4.0 million (“Loan Contract”). The initial funding of €4.0 million drawn on the Loan Contract occurred on March 31, 2016. Approximately $3.0 million of the net proceeds from the Loan Contract were used to partially repay obligations outstanding under the Amended & Restated Credit Agreement, with the remaining net proceeds to be used for capital expenditures and other investments to facilitate the export of goods and services provided by AFT Hungary.

The loan matures on March 7, 2021, and bears interest at a fixed rate of 0.98% per annum. The Company is required to make semi-annual principal payments in an amount equal to approximately €400,000 along with monthly interest payments. The Loan Contract is secured by certain of AFT Hungary’s assets, including the real estate and selected machinery and equipment located in Retsag, Hungary.

Future Debt Payments

The following schedule represents the Company’s future debt payments as of October 1, 2017 (in thousands):


2018 (1)	$	1,128
2019		1,819
2020		41,112
2021		944
2022		—
Total	$	45,003

(1)

Represents long-term debt principal payments for the nine months ending June 30, 2018.

Table of Contents

NOTE 8 – Income Taxes

The income tax receivable was $0.6 million and $0.5 million at October 1, 2017 and June 30, 2017, respectively, which are included in other current assets. The Company had unrecognized tax benefits for uncertain tax positions of $0.9 million and $1.0 million on October 1, 2017 and June 30, 2017, respectively, which are included in other long-term liabilities.

NOTE 9 – Earnings Per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income available to common stockholders by the diluted weighted-average shares of common stock outstanding during each period. As a result of the Company’s net loss from continuing operations, f or the three months ended October 1, 2017 and October 2, 2016, approximately 146,634 and 134,927 shares, respectively were considered anti-dilutive and were excluded from the computation of diluted earnings per share.

NOTE 10 – Share-Based Compensation

The Company’s share-based compensation arrangements include grants of stock options under the ARC Group Worldwide, Inc. 2015 Equity Incentive Plan and the 2016 ARC Group Worldwide, Inc. Equity Incentive Plan and the Employee Stock Purchase Plan. The share-based compensation expense recognized during the three months ended October 1, 2017 and October 2, 2016 was $0.3 million and is included in selling, general and administrative expense. As of October 1, 2017, there was $0.6 million of total unrecognized compensation expense related to non-vested stock options, which is expected to be recognized over a weighted-average period of 1.6 years.

NOTE 11 – Commitments and Contingencies

During the third quarter of fiscal 2017, the Company’s stamping operations located in Michigan experienced a wind-generated power disruption that temporarily halted production for several days and severely damaged key equipment. The Company is insured for these business interruption and equipment repair costs and filed an insurance claim with its insurance provider. The estimated ongoing loss of approximately $1.0 million is expected to be fully covered by insurance and $0.9 million was collected through the first quarter of fiscal 2018. The remaining $0.1 million is recorded as in insurance claim receivable at October 1, 2017.

The Company leases land, facilities, and equipment under various non-cancellable operating lease agreements expiring through 2022, which contain various renewal options. The Company also leases equipment and a building under non-cancellable capital lease agreements expiring through 2024. The capital leases have interest rates ranging from 3.0% to 6.3%.

From time to time, the Company is a party to various litigation matters incidental to the conduct of its business. As of October 1, 2017, the Company is not presently a party to any legal proceedings, the resolution of which, management believes, would have a material adverse effect on its business, operating results, financial condition, or cash flows.

Table of Contents

NOTE 12 – Segment Information

During fiscal 2017, the Company sold its non-core subsidiaries, Tekna Seal and ARC Wireless. Subsequently, in September 2017, the Company sold its non-core subsidiary, GF&F, which comprised the Flanges and Fittings Group segment. The completed divestiture of these non-core businesses, along with the growth in its 3D metal printing business, has changed the way in which management and its chief operating decision maker evaluate performance and allocate resources. As a result, during the quarter ended June 30, 2017, the Company revised its business segments, consistent with its management of the business and internal financial reporting structure. Specifically, the Precision Components Group now includes the results of its plastic injection molding operations and its tooling product line, which were previously included within the 3DMT Group. Results depicted in its 3DMT Group business unit now solely reflect those operations associated with metal 3D printing and associated services. In addition, its precision metal stamping operations are now reported within the newly created Stamping Group, which were previously included in the Precision Components Group.

As a result of the above transactions, the Company will report three segments as part of continuing operations: Precision Components Group, Stamping Group, and 3DMT Group.

The Precision Components Group companies provide highly engineered, precision metal components using processes consisting of metal injection molding. It also includes our tooling product line and plastic injection molding. Industries served include aerospace, automotive, consumer durables, electronic devices, firearms and defense, and medical and dental devices.

The Stamping Group consists of our precision metal stamping operations.

The 3DMT Group consists of 3D Material Technologies, LLC (“3DMT”), our metal 3D printing and additive manufacturing operations.

The historical results of Tekna Seal, which were included in the Precision Components Group segment, and the historical results of the Flanges and Fittings Group segment have been reflected as discontinued operations. Historical segment information has been restated. Summarized segment information for the three months ended October 1, 2017 and October 2, 2016 is as follows (in thousands):

Table of Contents


	Three months ended
	October 1,		October 2,
	2017		2016
Sales:
Precision Components Group	$	14,333	$	20,004
Stamping Group		4,752		5,179
3DMT Group		865		289
Wireless Group		—		240
Consolidated sales	$	19,950	$	25,712

Operating costs:
Precision Components Group	$	15,270	$	18,603
Stamping Group		5,001		4,968
3DMT Group		806		687
Wireless Group		—		245
Consolidated operating costs	$	21,077	$	24,503

Segment operating income (loss):
Precision Components Group	$	(937)	$	1,401
Stamping Group		(249)		211
3DMT Group		59		(398)
Wireless Group		—		(5)
Corporate (1)		(937)		(1,388)
Total segment operating loss	$	(2,064)	$	(179)

Interest expense, net		(1,012)		(1,107)
Loss on extinguishment of debt		—		(723)
Other expense, net		(37)		(33)
Non-operating expense		(1,049)		(1,863)
Consolidated loss before income taxes and non-controlling interest	$	(3,113)	$	(2,042)

(1)

Corporate expense includes compensation and benefits, insurance, legal, accounting, consulting, and board of directors fees.

NOTE 13 – Significant Customers

The concentration of the Company’s business with a relatively small number of customers may expose it to a material adverse effect if one or more of these large customers were to experience financial difficulty or were to cease being a customer for non-financial related issues. The Company’s revenue concentrations of 5% or greater are as follows:



	Three months ended
	October 1,		October 2,
Customer	2017		2016
1 (a)	10.2	%	10.8	%
2 (b)	9.1	%	*	%
3 (b)	6.2	%	7.6	%
4 (a)	6.0	%	8.2	%
5 (a)	5.5	%	12.8	%
Total	37.0	%	39.4	%

(a)

Revenue from this customer is generated through our Precision Components Group segment.

(b)

Revenue from this customer is generated through our Stamping Group segment.

Table of Contents

The Company’s accounts receivable concentrations of 5% or greater for the above-listed customers are as follows:


	Percentage of Receivables
	October 1,		June 30,
Customer	2017		2017
1	13.1	%	11.6	%
2	7.0	%	6.8	%
3	**	%	**	%
4	6.0	%	**	%
5	6.4	%	**	%
Total	32.5	%	18.4	%

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion should be read in conjunction with the condensed consolidated financial statements and notes included elsewhere in this report and the consolidated financial statements and notes in the ARC Group Worldwide, Inc. (“ARC,” “our,” “we,” or “us”) Annual Report on Form 10-K for the fiscal year ended June 30, 2017, as filed with the Securities and Exchange Commission (“SEC”).

Cautionary Statement Concerning Forward-Looking Statements

The information contained in this Quarterly Report (this “Report”) may contain certain statements about ARC that are or may be “forward-looking statements,” that is, statements related to future, not past, events, including forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on the current expectations of the management of ARC and are subject to uncertainty and changes in circumstances and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such forward-looking statements. Factors that could cause our results to differ materially from current expectations include, but are not limited to, factors detailed in our reports filed with the SEC, including further but not limited to those discussed in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended June 30, 2016. In addition, these statements are based on a number of assumptions that are subject to change. The forward-looking statements contained in this Report may include all other statements in this document other than historical facts. Without limitation, any statements preceded or followed by, or that include the words “targets,” “plans,” “believes,” “expects,” “aims,” “intends,” “will,” “may,” “anticipates,” “estimates,” “approximates,” “projects,” “seeks,” “sees,” “should,” “would,” “expect,” “positioned,” “strategy,” or words or terms of similar substance or derivative variation or the negative thereof, are forward-looking statements. Forward-looking statements include statements relating to the following: (1) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, losses, and future prospects; (2) business and management strategies and the expansion and growth of ARC; (3) the effects of government regulation on ARC’s business; and (4) our plans, objectives, expectations and intentions generally.

There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. Additional particular uncertainties that could cause our actual results to be materially different than those expressed in forward-looking statements include: risks associated with our international operations; significant movements in foreign currency exchange rates; changes in the general economy, as well as the cyclical nature of our markets; availability and cost of raw materials, parts and components used in our products; the competitive environment in the areas of our planned industrial activities; our ability to identify, finance, acquire and successfully integrate attractive acquisition targets; expected earnings of ARC; the amount of and our ability to estimate known and unknown liabilities; material disruption at any of our significant manufacturing facilities; the solvency of our insurers and the likelihood of their payment for losses; our ability to manage and grow our business and execution of our business and growth strategies; our ability and the ability our customers to access required capital at a reasonable costs; our ability to expand our business in our targeted markets; the level of capital investment and expenditures by our customers in our strategic markets; our financial performance; our ability to identify, address and remediate any material weakness in our internal control over financial reporting; our ability to achieve or maintain credit ratings and the impact on our funding costs and competitive position if we do not do so; and other risks. Other unknown or unpredictable factors could also cause actual results to differ materially from those in any forward-looking statement.

Due to such uncertainties and risks, readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. ARC undertakes no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required. Nothing contained herein shall be deemed to be a forecast, projection or estimate of the future financial performance of ARC unless otherwise expressly stated.

Overview

ARC Group Worldwide, Inc. is a global advanced manufacturer offering a full suite of products and services to our customers, with specific expertise in metal injection molding (“MIM”) and metal 3D printing (also referred to herein as additive manufacturing or “AM”). To further advance and support these core capabilities, the Company also offers complementary services associated with: (i) precision metal stamping; (ii) traditional and clean room plastic injection

Table of Contents

molding; and (iii) advanced rapid and conformal tooling. Through our diverse product offering, we provide our customers with a holistic prototyping and full-run production solution for both precision metal and plastic fabrication. We further differentiate ourselves from our competitors by providing innovative, custom capabilities, which improve high-precision manufacturing efficiency and speed-to-market for our customers.

Our business model is to accelerate the widespread adoption of MIM and AM, along with other key technologies, including automation, robotics, and production software in traditional manufacturing, thereby benefiting from the elimination of inefficiencies currently present in the global supply chain. More specifically, the two key pillars of our business strategy are centered on the following areas:

Holistic Manufacturing Solution. The metal and plastic fabrication industries are highly fragmented sectors with numerous single-solution providers. Given the inefficiencies associated with working with these disjointed groups, many manufacturers seek to improve their supplier base by working with more scaled, holistic providers. Our strategy is to facilitate the consolidation and streamlining of global supply chains by offering a holistic solution to our customers’ manufacturing needs. In particular, ARC provides a “one-stop shop” solution to our customers by offering a spectrum of highly advanced products, processes, and services, thereby delivering highly-engineered precision components at efficient production yields.

Accelerating Speed-to-Market. The traditional prototype-to-production process is often subject to lengthy bottlenecks and is characterized by inefficient price quoting delays, time-consuming tooling procedures, and outdated production methodologies. To differentiate itself from competitors, ARC focuses on reducing inefficiencies in the development cycle by offering the seamless integration of a wide-variety of proprietary technologies in order to dramatically reduce the time and cost associated with new product development. Specifically, the Company has developed rapid and instant online quoting solutions, rapid prototype solutions, short-run production services, in-house rapid and advanced conformal tooling, and rapid full production capabilities.

Separately, U.S. manufacturing has been rejuvenated as global wage disparities mitigate and traditional labor-intensive processes are displaced by technology. These macroeconomic trends will aid in the adoption of our business strategy.

Our key fundamental strengths are built upon core capabilities, including:

Metal Injection Molding. We are a large and well-respected MIM provider. As a pioneer of MIM technology, and driven by our material science understanding, powder metallurgy experience, and established global facilities, we are one of the most advanced MIM operators in the marketplace. ARC provides high-quality, complex, precise, net-shape metal components to market-leading companies in numerous sectors, including the medical and dental, firearm and defense, automotive, aerospace, consumer durable, and electronic device industries. Further, our process is highly automated, utilizing advanced robotics and automation to ensure high levels of quality and efficiency.

Metal 3D Printing. We offer a variety of 3D printing solutions, with an emphasis on metal 3D printing. In general, given promising signs of growth and related barriers to entry, we believe the metal 3D printing sector is one of the more attractive segments of the overall additive manufacturing industry. Furthermore, metal 3D printing, while a complex technology still in its early stages, shares several fundamental similarities with our MIM business, thereby helping to accelerate our research and development. Separately, our metal 3D printing capabilities enable ARC to offer a variety of new services, including rapid prototyping, rapid tooling and short-run production, helping our customers improve their product speed-to-market. Given our established customer base, diverse metallurgy background, and scalable injection molding capabilities, we believe we are well-positioned in the industrial metal 3D printing market.

Additional Complementary Metal and Plastic Fabrication Capabilities. We offer a number of additional specialty metal and plastic fabrication capabilities that enable us to provide our customers with a full suite of custom-component products. Our specialty capabilities include plastic injection molding (including medical clean room applications), precision stamping, magnesium injection molding and computer numerical control machining.

Table of Contents

Our overall growth strategy is centered on:

Driving organic improvement through the expansion and cross-selling of our core services to existing clients;

Accelerating the adoption of our technology by new customers in traditional manufacturing markets;

Expanding our holistic service offerings through strategic vertical and horizontal acquisitions; and

Improving financial and operational results from the implementation of operational best practices.

Accordingly, all of our business divisions are managed consistently with this strategy in order to drive organic sales growth and cash flow generation, while improving quality, speed, and service to our customers.

Results of Operations – Three Months Ended October 1, 2017 and October 2, 2016

The following tables present information about our reportable segments for the respective periods:


	Three Months Ended
	October 1, 2017			October 2, 2016
	Amount (in thousands)		Percent of Total	Amount (in thousands)		Percent of Total
Sales:
Precision Components Group	$	14,333	71.9%	$	20,004	77.8%
Stamping Group		4,752	23.8%		5,179	20.1%
3DMT Group		865	4.3%		289	1.2%
Wireless Group		—	—		240	0.9%
Total	$	19,950	100.0%	$	25,712	100.0%
$ Change	$	(5,762)
% Change		-22.41%

Gross Profit:	Gross Profit		Gross Margin	Gross Profit		Gross Margin
Precision Components Group	$	983	6.9%	$	3,978	19.9%
Stamping Group		209	4.4%		697	13.5%
3DMT Group		230	26.6%		(69)	-23.9%
Wireless Group		—	—		72	30.0%
Total	$	1,422	7.1%	$	4,678	18.2%
$ Change	$	(3,256)
% Change		-69.60%

Sales

The change in sales by reportable segment was as follows:

Precision Components Group sales during the three months ended October 1, 2017 decreased by $5.7 million, or 28.3%, due to lower MIM sales of $3.0 million and lower plastic and tooling sales of $2.7 million, declines primarily associated with customers in the firearms and defense industries.

Stamping Group sales during the three months ended October 1, 2017 decreased by $0.4 million, or 8.2%, primarily due to a wind-generated power disruption in late fiscal 2017, and certain program completions, partially offset by the ramp up of replacement programs. The Company expects insurance to cover generally all damages and business interruption associated with the power disruption.

3DMT sales during the three months ended October 1, 2017 increased by $0.6 million, or 199.3%, primarily due to higher sales to defense customers.

Gross Profit and Gross Margin

Gross profit is affected by a number of factors including product mix, cost of labor and raw materials, unit volumes, pricing, competition, new products and services as a result of acquisitions and new customer programs, and capacity

Table of Contents

utilization. In the case of acquisitions and new customer programs, profitability normally lags revenue growth due to product start-up costs, lower manufacturing volumes in the start-up phase, operational inefficiencies, and under-absorbed overhead. Gross margin can improve over time if manufacturing volumes increase, as our utilization rates and overhead absorption improves. As a result of these various factors, our gross margin varies from period to period.

The change in gross profit and gross margin by reportable segment was as follows:

Precision Components Group gross profit decreased $3.0 million and gross margin decreased 13.0% during the three months ended October 1, 2017. The decreases in gross profit and gross margin were related to the decrease in revenue and customer volumes, primarily in the firearm and defense industries.

Stamping Group gross profit decreased $0.5 million and gross margin decreased 9.1% during the three months ended October 1, 2017. The primary reasons for the decreases in gross profit and gross margin were lower sales and lower margin tooling sales related to new product launches.

3DMT gross profit increased $0.3 million during the three months ended October 1, 2017. Gross margin increased to 26.6% in the three months ended October 1, 2017, compared with negative margin of 23.9% in the prior year period. 3DMT has transitioned from development to production and is growing rapidly.

The following paragraphs discuss other items affecting the results of our operations for the three months ended October 1, 2017 and October 2, 2016.

Selling, General and Administrative Expenses

Selling, general and administrative expense (“SG&A”) from continuing operations totaled $3.5 million, or 17.5% of sales, during the three months ended October 1, 2017, compared with $4.9 million, or 18.9% of sales, during the three months ended October 2, 2016. The decrease in SG&A expense during the three months ended October 1, 2017 was primarily due to workforce reductions and lower outside service fees.

Interest Expense, Net

Interest expense, net was $1.0 million and $1.1 million for the three months ended October 1, 2017 and October 2, 2016, respectively. The decrease in interest expense, net during the three months ended October 1, 2017 was primarily due to a reduction in the principal outstanding under our Senior ABL Credit Facility.

Loss on Extinguishment of Debt

During the first quarter of fiscal 2017, approximately $0.7 million of unamortized deferred financing costs were expensed as a result of the extinguishment of our First Amended and Restated Credit Agreement.

Discontinued Operations

On September 15, 2017, the Company sold its subsidiary GF&F. Income from continuing operations for the three months ended October 1, 2017 and October 2, 2016 excludes the income from discontinued operations, before tax, of $3 thousand and $0.1 million, respectively, and the loss on disposition of this business, after tax, of $0.3 million.

In September 2016, the Company sold its subsidiary Tekna Seal LLC pursuant to the terms and conditions of a Membership Interests Purchase Agreement. Income from continuing operations for the three months ended October 2, 2016 excludes the income from discontinued operations, before tax, of $0.1 million and the gain on disposition of this business, after tax, of $4.2 million.

Income Tax

Income tax expense from continuing operations was $0.2 million for the three months ended October 1, 2017, as compared with an income tax benefit of $1.3 million for the three months ended October 2, 2016.

Table of Contents

The primary reason for the income tax expense in the three months ended October 1, 2017 was due to the amortization of indefinite-lived intangible assets that were not available to offset existing deferred tax assets (termed a “naked credit”). The primary reason for the income tax benefit in the prior year period was due to our net loss from continuing operations.

Liquidity and Capital Resources

As of October 1, 2017, we had cash and cash equivalents of $0.4 million and $0.6 million as of October 1, 2017 and June 30, 2017, respectively, held in financial institutions outside the United States. Our Hungarian subsidiary, where these funds are held, is taxed in a similar manner to our domestic subsidiaries. Thus, we would not incur a material tax obligation should we decide to repatriate these funds.

Under our Senior ABL Credit Facility with Citizens Bank, N.A., we will not maintain any cash on hand in our domestic bank accounts by design. Instead, we maintain a $25.0 million asset-based revolver loan, which includes an automatic cash sweep feature that identifies any cash available in our bank accounts at the end of a banking business day and then applies that cash to reduce our outstanding revolver loan balance. The automatic cash sweep feature serves to decrease our daily interest expense. Disbursements are paid daily from cash being made available under our revolver loan based on a borrowing base calculation.

Our primary sources of liquidity are cash flows from operations, cash on hand, and revolving loans permitted under the Senior ABL Credit Facility. As of October 1, 2017, $10.1 million of borrowings were outstanding under the senior secured revolving loan, with additional borrowings subject to compliance with the terms of our Senior ABL Credit Facility as described in Note 7. While we believe these sources of liquidity to be sufficient to maintain ongoing operations for the next twelve months, we may seek additional sources of capital to provide incremental liquidity, to assist in the acceleration of organic growth, and to support the achievement of other strategic and financial objectives.

Operating Activities

Cash used in operating activities was $1.5 million, which consisted of the following:

Net loss of $3.6 million, adjusted for $3.0 million of non-cash expenses, including $2.5 million of depreciation and amortization, $0.3 million of share-based compensation and a loss on the sale of GF&F of $0.1 million; and

Cash used for working capital of $1.0 million primarily resulted from a cash outflow of $1.6 million in receivables, primarily driven by the timing of collections, and a cash inflow of $0.8 million in accounts payable due to the timing of payments to vendors.

Investing Activities

During the three months ended October 1, 2017, cash provided by investing activities was $2.0 million primarily due to the following:

Proceeds received from the sale of our subsidiary, GF&F, of $3.0 million; and

$1.0 million was invested in property and equipment.

Financing Activities

During the three months ended October 1, 2017, cash used in financing activities was $0.9 million, primarily due to the following:

Higher net principal payments on our long-term debt primarily due to cash received of $3.0 million from the sale of our subsidiary, partially offset by borrowings; and

Receipt of $0.1 million from the issuance of stock through our employee stock purchase plan.

Table of Contents

Debt and Credit Arrangements

For a discussion of our long-term debt, see Note 7, Debt, to our condensed consolidated financial statements in Part I, Item 1 to this Report incorporated herein by reference thereto and Note 8, Debt, to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended June 30, 2017.

The descriptions of the Senior ABL Credit Facility and the Subordinated Term Loan Agreement (together, our “Credit Facilities”) do not purport to be complete and are subject to, and are qualified in their entirety by, the full text of the respective documents.

Financial Ratio Covenants

The terms and conditions of the Credit Facilities require us to comply with a number of financial and other covenants, such as maintaining debt service coverage and leverage ratios in certain situations and maintaining insurance coverage. These covenants may limit our flexibility in our operations, and breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness even if we had satisfied our payment obligations. If we were to default on the credit agreements or other debt instruments, our financial condition would be adversely affected.

Non-compliance by us with any of the covenants would constitute events of default under both of the Credit Facilities pursuant to cross-default provisions and could result in acceleration of payment obligations for all outstanding principal and interest for loans made under both of the Credit Facilities, unless such defaults were waived or subject to forbearance by the respective creditors.

Senior ABL Credit Facility Financial Covenant. Our Senior ABL Credit Facility contains a financial covenant, summarized as follows:

Minimum Availability . We are required to maintain the following availability: (a) at least $1,250,000 in revolving credit availability until the earlier of (i) the initial closing of the infusion of $5.0 million in junior capital, which must be completed not later than January 31, 2018, and (ii) January 31, 2018; and (b) thereafter, at least $3,500,000 in such revolving credit availability.

As of October 1, 2017, our availability under the Senior ABL Credit Facility exceeded the minimum availability covenant.

Subordinated Loan Agreement Financial Ratios . Our Subordinated Loan Agreement contains the following financial ratio covenants, summarized as follows:

Minimum Fixed Charge Coverage Ratio . We may not permit the Minimum Fixed Charge Coverage Ratio, as of the last day of any fiscal quarter ending during any period set forth in the table below, to be less than the ratio set forth opposite such period in the table below. The Fixed Charge Coverage Ratio is defined as the ratio of (a) Consolidated EBITDA minus the unfinanced portion of capital expenditures, excluding tooling, minus expense for taxes paid in cash (other than certain federal and state taxes excluded under the McLarty Second Amendment); to (b) fixed charges, all calculated on a consolidated basis in accordance with GAAP.


Period		Fixed Charge Coverage Ratio
March 26, 2017 through September 23, 2017		1.05:1.00
September 24, 2017 through March 24, 2018		1.10:1.00
March 25, 2018 through September 29, 2018		1.15:1.00
September 30, 2018 and thereafter		1.20:1.00

Table of Contents

The summary calculation of our Subordinated Loan Agreement Fixed Charge Coverage Ratio as of October 1, 2017 is as follows:


(in thousands, except ratio)	Amount
Consolidated EBITDA	$	14,874
Less unfinanced portion of capital expenditures		(3,382)
Less expense for taxes paid in cash		(19)
Coverage Amount (a)	$	11,473
Fixed Charges (b)	$	6,471
Fixed Charge Coverage Ratio (a:b)		1.77:1.00

Maximum Total Leverage Ratio . We may not have a Total Leverage Ratio, as of the last day of any fiscal quarter ending during any period set forth in the table below, to exceed the ratio set forth opposite such period in the table below. The Total Leverage Ratio means the ratio of (a) our funded indebtedness as of such date, to (b) Consolidated EBITDA for the Test Period ended as of such date.


Period			Total Leverage Ratio
June 30, 2017 through June 30, 2018			4.00:1.00
July 1, 2018 and thereafter			3.50:1.00

The summary calculation of our Subordinated Loan Agreement Total Leverage Ratio as of October 1, 2017 is as follows:


(in thousands, except ratio)	Amount
Funded Indebtedness (a)	$	48,095
Consolidated EBITDA (b)	$	14,874
Maximum Total Leverage Ratio (a:b)		3.23:1.00

Compliance with Financial Ratio Covenants

As of October 1, 2017, we were in compliance with our debt covenants under our Senior ABL Credit Facility and our Subordinated Loan Agreement.

GAAP to Non-GAAP Reconciliation

Fixed Charges and Consolidated EBITDA used in our debt covenant calculations are non-GAAP financial measures. We have provided this non-GAAP financial information to aid in better understanding our financial ratios as used in our debt covenant calculations. The methodology used is defined in our debt agreements. Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP. The non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

Fixed Charges consist of interest payments, principal payments on our debt, and capital lease payments for the prior four quarters. Consolidated EBITDA used in our debt covenant calculations is based on the sum of the prior four quarter actual amounts.

Table of Contents

The reconciliation of GAAP net income to Consolidated EBITDA under our Subordinated Loan Agreement is as follows (in thousands):


For the twelve months ended:	October 1, 2017
Net loss	$	(8,983)
Share-based compensation		818
Interest expense, net		3,936
Income taxes		(928)
Depreciation and amortization		10,018
Transaction related expenses (1)		705
Restructuring and severance expenses		732
Other non-recurring expenses (2)		8,324
Other non-recurring income or gains (3)		(132)
Pro-forma EBITDA adjustment to exclude discontinued subsidiaries		384
Consolidated EBITDA (4)	$	14,874

(1)

Transaction related expenses relate to legal fees incurred to amend certain debt agreements and the sale of our non-core subsidiaries.

(2)

Other non-recurring expenses relate to certain capitalized tooling costs, an insurance claim for lost production at our Kecy facility, costs incurred to relocate our plastic injection molding operations, and certain projected cost reductions allowed as an adjustment to EBITDA.

(3)

Other non-recurring income or gains relates to the gain on termination of an operating lease.

(4)

Consolidated EBITDA excludes interest expense, net and income taxes because these items are associated with our capitalization and tax structures. Consolidated EBITDA excludes depreciation and amortization expense because these non-cash expenses reflect the impact of prior capital expenditure decisions which may not be indicative of future capital expenditure requirements. Share-based compensation, transaction related costs, restructuring and severance expenses, non-recurring gains, and pro-forma EBITDA adjustment to exclude discontinued subsidiaries are adjustments made in accordance with our bank debt covenants.

Off Balance Sheet Arrangements

We had no off-balance sheet arrangements that would have a material effect on our financial position, results of operations or cash flows as of October 1, 2017.

Critical Accounting Policies and Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect amounts reported therein, including estimates about the effects of matters or future events that are inherently uncertain. Policies determined to be critical are those that have the most significant impact on our financial statements and require management to use a greater degree of judgment and/or estimates. For a discussion of our critical accounting policies, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation, in our Form 10-K for the fiscal year ended June 30, 2017.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Pursuant to permissive authority under Regulation S-K, Rule 305, we have omitted Quantitative and Qualitative Disclosures About Market Risk.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our filings with the SEC is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our interim Chief Executive and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely

Table of Contents

decisions regarding required disclosure based on the definition of “disclosure controls and procedures” as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

As of the end of the period covered by this Report, and under the supervision and with the participation of our management, including our interim Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, we have concluded that our disclosure controls and procedures were not effective as of October 1, 2017, at the reasonable assurance level due to weaknesses in our internal control over financial reporting.

We previously reported material weaknesses that were identified as of June 30, 2016. Our information technology and accounting infrastructure was inadequate that could lead to the untimely identification and resolution of accounting and disclosure matters.

Changes in Internal Control over Financial Reporting

To address the material weaknesses associated with the Company’s information technology infrastructure, planned actions in fiscal year 2018 include:

Reorganization of global finance team to consolidate operations, thereby creating greater efficiency and separation of duties;

Complete the implementation of our consolidation software package; and

Strengthen the documentation of processes, procedures, and the review and approval of financial activities at our facilities.

During the first quarter of fiscal year 2018, we implemented the following changes in our internal control over financial reporting to address the previously reported material weakness and to enhance our overall financial control environment:

We sold GF&F, which was a smaller, non-core subsidiary.

Due to financial considerations, management has delayed enhancement to the Company’s staffing and IT infrastructure.

Except as described above, there have been no changes in our internal control over financial reporting during the quarterly period ended October 1, 2017, that would have materially affected, or are reasonably likely to materially affect, our control over financial reporting.

PART II. OTHER INFORMATION

Item 1A. Risk Factors

There have been no material changes to the risk factors described in our Annual Report on Form 10-K for the fiscal year ended June 30, 2017.

Table of Contents

Item 6. Exhibits

EXHIBIT INDEX


Exhibit Number		Description
2.1*		Asset Purchase Agreement, dated September 15, 2017, between General Flange & Forge LLC and GFFC Holdings, LLC. Schedules to the Asset Purchase Agreement have been omitted pursuant to Item 601 (b)(2) of Regulation S-K. The Company will furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request .
10.1*		Third Amendment to Second Amended and Restated Credit Agreement by and among ARC Group Worldwide, Inc. and certain of its subsidiaries as borrowers, and Citizens Bank, N.A., dated as of September 21, 2017 .
10.2*		Fourth Amendment to the Subordinated Loan Agreement by and among ARC Group Worldwide, Inc. and certain of its subsidiaries as borrowers, and McLarty Capital Partners SBIC, L.P., dated as of September 22, 2017 .
31.1*		Officers’ Certifications of Periodic Report pursuant to Section 302 of Sarbanes-Oxley Act of 2002
31.2*		Officers’ Certifications of Periodic Report pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32.1&		Officers’ Certifications of Periodic Report pursuant to Section 906 of Sarbanes-Oxley Act of 2002
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Schema
101.CAL*		XBRL Taxonomy Calculation Linkbase
101.DEF*		XBRL Taxonomy Definition Linkbase
101.LAB*		XBRL Taxonomy Label Linkbase
101.PRE*		XBRL Taxonomy Presentation Linkbase

* Filed with this Form 10-Q.

& This certification is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act.

SIGNATURES

Pursuant to the requirements 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.

	ARC GROUP WORLDWIDE, INC.

Date: November 14 , 201 7	/s/ Drew M. Kelley
	Name:	Drew M. Kelley
		Interim Chief Executive Officer (Principal Executive Officer), Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), Director

EXHIBIT 2.1

ASSET PURCHASE AGREEMENT

Between

GENERAL FLANGE & FORGE LLC

and

GFFC HOLDINGS, LLC

dated as of

September 15, 2017

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this “ Agreement ”), dated as of this 15th day of September, 2017, is entered into by and between General Flange & Forge LLC , a Delaware limited liability company (“ Seller ”) and GFFC Holdings, LLC , a Delaware limited liability company (“ Buyer ”).

RECITALS

WHEREAS, Seller is engaged in the business of providing custom machining solutions and special flange facings, as defined in further detail in Article I of this Agreement (the “ Business ”); and

WHEREAS, Seller wishes to sell and assign to Buyer, and Buyer wishes to purchase and assume from Seller, substantially all the assets and liabilities of the Business, subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

The following terms have the meanings specified or referred to in this Article I :

“ Actual Working Capital Amount ” has the meaning set forth in Section 2.07(a).

“ Affiliate ” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. 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 a Person, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding anything to the contrary herein, in no event shall the term “Affiliate” (i) when used in reference to the Seller mean the Buyer or any of Buyer’s Affiliates; and (ii) when used in reference to the Buyer, mean the Seller or any of Seller’s Affiliates.

“ Agreement ” has the meaning set forth in the preamble.

“ Allocation Schedule ” has the meaning set forth in Section 2.08 .

“ Annual Financial Statements ” has the meaning set forth in Section 4.04 .

“ Assigned Contracts ” has the meaning set forth in Section 2.01(c) .

“ Assignment and Assumption Agreement ” has the meaning set forth in Section 3.02(a)(ii) .

“ Assignment and Assumption of Lease ” has the meaning set forth in Section 3.02(a)(iii) .

“ Assumed Liabilities ” has the meaning set forth in Section 2.03 .

“ Balance Sheet ” has the meaning set forth in Section 4.04 .

“ Balance Sheet Date ” has the meaning set forth in Section 4.04 .

“ Benefit Plan ” has the meaning set forth in Section 4.14(a) .

“ Bill of Sale ” has the meaning set forth in Section 3.02(a)(i) .

“ Books and Records ” has the meaning set forth in Section 2.01(j) .

“ Business ” means (i) the domestic manufacturing of flanges with precision machining capabilities; (ii) providing flanges in carbon steel, stainless steel, high nickel alloys, duplex/super duplex, copper nickel, titanium and special alloys; (iii) manufacturing EN-DIN/JIS/BS (metric) flanges, long weld necks, pad flanges/studding outlets, special facings and custom flanges; (iv) maintaining an inventory of galvanized flanges and orifice unions; (v) manufacturing pursuant to custom machining requirements; (vi) manufacturing special facings; and (vii) stocking imported flanges.

“ Business Day ” means any day except Saturday, Sunday or any other day on which commercial banks located in the City of New York are authorized or required by Law to be closed for business.

“ Buyer ” has the meaning set forth in the preamble.

“ Closing ” has the meaning set forth in Section 3.01 .

“ Closing Balance Sheet ” has the meaning set forth in Section 2.07(a) .

“ Closing Date ” has the meaning set forth in Section 3.01 .

“ Closing Financial Statements ” has the meaning set forth in Section 2.07(a) .

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Company ” means General Flange & Forge LLC.

“ Confidentiality Agreement ” means the Confidentiality Agreement, dated as of July 12, 2017 , between Buyer and Seller.

“ Contracts ” means all legally binding written contracts, leases, mortgages, licenses, instruments, notes, commitments, undertakings, indentures and other agreements.

“ Credit Agreements ” means (i) that certain Credit Agreement and related Guarantee And Collateral Agreements thereto, dated April 7, 2014, entered into and as amended thereafter by and among ARC Group Worldwide, Inc. and its subsidiaries, with Citizens Bank, N.A. and Capital One National Association; and (ii) that certain Subordinated Loan Agreement, dated November 10, 2014, entered into and as amended thereafter, by and among ARC Group Worldwide, Inc. and its subsidiaries, with McLarty Capital Partners SBIC, L.P.

“ Data Room ” means the electronic documentation site established by or on behalf of Seller containing the documents set forth in the index included thereto.

“ Direct Claim ” has the meaning set forth in Section 8.05(c) .

“ Disclosure Schedules ” means Seller’s Disclosure Schedules related to this Agreement which have been delivered by Seller to the Buyer on or prior to the Closing Date of this Agreement.

“ Dollars or $ ” means the lawful currency of the United States.

“ Employees ” means those Persons employed by Seller who worked primarily for the Business immediately prior to the Closing.

“ Encumbrance ” means any lien, pledge, mortgage, deed of trust, security interest, charge, claim, easement, encroachment or other similar encumbrance.

“ Environmental Claim ” means any Governmental Order, action, suit, claim, investigation or other legal proceeding by any Person alleging liability of whatever kind or nature (including liability or responsibility for the costs of enforcement proceedings, investigations, cleanup, governmental response, removal or remediation, natural resources damages, property damages, personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from: (a) the

presence, Release of, or exposure to, any Hazardous Materials; or (b) any actual or alleged non-compliance with any Environmental Law or term or condition of any Environmental Permit.

“ Environmental Law ” means any applicable Law, and any Governmental Order or binding agreement with any Governmental Authority: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term “Environmental Law” includes, without limitation, the following (including their implementing 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 Notice ” means any written directive, notice of violation or infraction, or notice respecting any Environmental Claim relating to actual or alleged non-compliance with any Environmental Law or any term or condition of any Environmental Permit.

“ Environmental Permit ” means any Permit, letter, clearance, consent, waiver, closure, exemption, decision or other action required under or issued, granted, given, authorized by or made pursuant to Environmental Law.

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

“ Excluded Assets ” has the meaning set forth in Section 2.02 .

“ Excluded Liabilities ” has the meaning set forth in Section 2.04 .

“ Final Resolution” has the meaning set forth in Section 8.01 .

“ Financial Statements ” has the meaning set forth in Section 4.04 .

“ GAAP ” means United States generally accepted accounting principles in effect from time to time.

“ Governmental Authority ” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction.

“ Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

“ Hazardous Materials ” means: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or man-made, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation and polychlorinated biphenyls.

“ Indemnified Party ” has the meaning set forth in Section 8.04 .

“ Indemnifying Party ” has the meaning set forth in Section 8.04 .

“ Independent Accountants ” has the meaning set forth in Section 2.07(b).

“ Intellectual Property ” means any and all of the following in any jurisdiction throughout the world: (a) trademarks and service marks, including all applications and registrations and the goodwill connected with the use of and symbolized by the foregoing; (b) copyrights, including all applications and registrations, and works of authorship, whether or not copyrightable; (c) trade secrets and confidential know-how; (d) patents and patent applications; (e) websites and internet domain name registrations; and (f) all other intellectual property and industrial property rights and assets, and all rights, interests and protections that are associated with, similar to, or required for the exercise of, any of the foregoing.

“ Intellectual Property Agreements ” means all licenses, sublicenses and other agreements by or through which other Persons grant Seller or Seller grants any other Persons any exclusive or non-exclusive rights or interests in or to any Intellectual Property that is used primarily in connection with the Business.

“ Intellectual Property Assets ” means all Intellectual Property that is owned by Seller and primarily used in connection with the Business, including the Intellectual Property Registrations set forth on Section 4.10(a) of the Disclosure Schedules.

“ Intellectual Property Registrations ” means all Intellectual Property Assets that are subject to any issuance, registration, application or other filing by, to or with any Governmental Authority or authorized private registrar in any jurisdiction, including registered trademarks, domain names, and copyrights, issued and reissued patents and pending applications for any of the foregoing.

“ Interim Balance Sheet ” has the meaning set forth in Section 4.04 .

“ Interim Balance Sheet Date ” has the meaning set forth in Section 4.04 .

“ Interim Financial Statements ” has the meaning set forth in Section 4.04 .

“ Inventory ” has the meaning set forth in Section 2.01(b) .

“ Key Employee” means Jeanne Paskus.

“ Knowledge of Seller or Seller’s Knowledge ” or any other similar knowledge qualification, means the actual knowledge of Jeanne Paskus or Drew M. Kelley.

“ Law ” means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.

“ Leased Equipment ” means the following personal property, collectively, subject to the leases set forth on Section 2.01(f):

(1)

The Doosan Model GC25E-5 Forklift; Serial Number FGA0L-1790-00875; and

(2)

The Puma 2600Y Doosan CNC Mill/Drill with Y Axis, Fanuc 0i-TD Control System, 12 Station Turret; Serial Number ML0105-000679.

“ Leased Equipment UCC-3s ” has the meaning defined in Section 2.05.

“ Leased Real Property ” means, as set forth on Section 4.09(c) of the Disclosure Schedules, all material real property leased by Seller and primarily used in connection with the Business.

“ Lease ” means each of the respective leases governing the Leased Equipment and the Leased Real Property.

“ Losses ” means actual out-of-pocket losses, damages, liabilities, costs or expenses, including reasonable attorneys’ fees.

“ Material Adverse Effect ” means any event, occurrence, fact, condition or change that is materially adverse to the business, results of operations, financial condition or assets of the Business, taken as a whole, provided, however, that “Material Adverse Effect” shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (i) general economic or political conditions; (ii) changes or conditions generally affecting the industries in which the Business operates; (iii) any changes in financial, banking or securities markets in general, including any disruption thereof and any decline in the price of any security or any market index or any change in prevailing interest rates; (iv) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof; (v) any action required or permitted by this Agreement or any action taken (or omitted to be taken) with the written consent of or at the written request of Buyer; (vi) any matter of which Buyer is aware on the date hereof; (vii) any changes in applicable Laws or accounting rules (including GAAP) or the enforcement, implementation or interpretation thereof; (viii) the announcement, pendency or completion of the transactions contemplated by this Agreement, including losses or threatened losses of employees, customers, suppliers, distributors or others having relationships with the Seller and the Business; (ix) any natural or man-made disaster or acts of God; or (x) any failure by the Business to meet any internal or published projections, forecasts or revenue or earnings predictions (provided that the underlying causes of such failures (subject to the other provisions of this definition) shall not be excluded).

“ Material Contracts ” has the meaning set forth in Section 4.06(a) .

“ Minimum Claim Amount ” means ten thousand dollars ($10,000) .

“ Non-Compete Agreement ” mean the confidentiality, non-solicit, non-hire, and non-competition agreement executed by the Seller.

“ Permits ” means all permits, licenses, franchises, approvals, authorizations and consents required to be obtained from Governmental Authorities.

“ Permitted Encumbrances ” means (a) liens for Taxes not yet due and payable or being contested in good faith by appropriate procedures; (b) mechanics’, carriers’, workmen’s, repairmen’s or other like liens arising or incurred in the ordinary course of business; (c) easements, rights of way, zoning ordinances and other similar encumbrances affecting real property; (d) liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business; and (e) other imperfections of title or Encumbrances, if any, that have not had, and would not have, a Material Adverse Effect.

“ Person ” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

“ Post-Closing Decrease Amount ” has the meaning defined in Section 2.06(c) .

“ Pre-Paid Expenses & Deposits ” has the meaning defined in Section 2.01(h) .

“ Purchase Price ” has the meaning set forth in Section 2.05 .

“ Purchased Assets ” has the meaning set forth in Section 2.01 .

“ Release ” means any actual or threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including, without limitation, ambient air (indoor or outdoor), surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture).

“ Representative ” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.

“ Seller ” has the meaning set forth in the preamble.

“ Survival Period” has the meaning set forth in Section 8.01 .

“ Tangible Personal Property ” has the meaning set forth in Section 2.01(e) .

“ Target Working Capital Amount ” means One Million Two Hundred Thousand Dollars ($1,200,000) .

“ Taxes ” means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.

“ Tax Return ” means any return, declaration, report, claim for refund, information return or statement or other document required to be filed with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“ Threshold Amount” means Fifty Thousand Dollars ($50,000) .

“ Third Party Claim ” has the meaning set forth in Section 8.05(a) .

“ Transaction Documents ” means all of the following, collectively:

This Agreement ;

The Bill of Sale, Assignment & Assumption Agreement , attached as Exhibit A ;

The Assignment and Assumption of Lease , attached as Exhibit B ;

The Non-Compete Agreement , attached hereto as Exhibit C ;

The Transition Services Agreement , attached hereto as Exhibit D ; and

Such other Disclosure Schedules, agreements, instruments and documents specified herein and required to be delivered at the Closing if such delivery is not otherwise waived in writing by the parties.

“ Transferred Employee ” has the meaning set forth in Section 6.01(a) .

“ Transition Services Agreement” has the meaning set forth in Section 3.02(a)(iv) .

ARTICLE II

PURCHASE AND SALE

Section 2.01 Purchase and Sale of Assets. Subject to the terms and conditions set forth herein, at the Closing, Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase from Seller, free and clear of all Encumbrances other than Permitted Encumbrances, all of Seller’s right, title and interest in, to and under the following assets, properties and rights of Seller, to the extent that such assets, properties and rights exist as of the Closing Date and primarily relate to the Business (collectively, the “ Purchased Assets ”):

(a) all accounts or notes receivable of the Business;

(b) all inventory, finished goods, raw materials, work in progress, packaging, supplies, parts and other inventories of the Business (“ Inventory ”);

(c) all Contracts set forth on Section 2.01(c) of the Disclosure Schedules, including, without limitation, the Intellectual Property Agreements set forth on Section 4.10(a) of the Disclosure Schedules (collectively, the “ Assigned Contracts ”);

(d) all Intellectual Property Assets;

(e) all furniture, fixtures, equipment, supplies and other tangible personal property of the Business listed on Section 2.01(e) of the Disclosure Schedules (the “ Tangible Personal Property ”);

(f) all Leased Equipment and all Leased Real Property;

(g) all Permits, including Environmental Permits, but only to the extent such Permits may be transferred under applicable Law;

(h) all prepaid expenses, credits, advance payments, security, deposits, charges, sums and fees to the extent related to any Purchased Assets (collectively, the “ Pre-Paid Expenses & Deposits ”);

(i) all of Seller’s rights under warranties, indemnities and all similar rights against third parties to the extent related to any Purchased Assets;

(j) originals, or where not available, copies, of all books and records, including books of account, ledgers and general, financial and accounting records, machinery and equipment maintenance files, customer lists, customer purchasing histories, price lists, distribution lists, supplier lists, production data, quality control records and procedures, customer complaints and inquiry files, research and development files, records and data (including all correspondence with any Governmental Authority), sales material and records, strategic plans, internal financial statements and marketing and promotional surveys, material and research, that primarily relate to the Business or the Purchased Assets, other than books and records set forth in Section 2.02(d) (“ Books and Records ”); and

(k) all goodwill associated with any of the assets described in the foregoing clauses.

Section 2.02 Excluded Assets. Other than the Purchased Assets subject to Section 2.01 , Buyer expressly understands and agrees that it is not purchasing or acquiring, and Seller is not selling or assigning, any other assets or properties of Seller, and all such other assets and properties shall be excluded from the Purchased Assets (the “ Excluded Assets ”). Excluded Assets include the following assets and properties of Seller:

(a) all cash and cash equivalents, bank accounts and securities of Seller;

(b) all Contracts that are not Assigned Contracts;

(d) all seals, organizational documents, minute books, stock books, Tax Returns, books of account or other records having to do with the formation and organization of Seller, all employee-related or employee benefit-related files or records, other than personnel files of Transferred Employees, and any other books and records which Seller is prohibited from disclosing or transferring to Buyer under applicable Law and is required by applicable Law to retain;

(e) all insurance policies of Seller and all rights to applicable claims and proceeds thereunder;

(f) subject to Section 6.01(d) , all Benefit Plans and trusts or other assets attributable thereto;

(g) all Tax assets (including duty and Tax refunds and prepayments) of Seller or any of its Affiliates;

(h) all rights to any action, suit or claim of any nature available to or being pursued by Seller, whether arising by way of counterclaim or otherwise;

(i) the assets, properties and rights specifically set forth on Section 2.02(j) of the Disclosure Schedules; and

(j) the rights which accrue or will accrue to Seller under the Transaction Documents.

Section 2.03 Assumed Liabilities. Subject to the terms and conditions set forth herein, Buyer shall assume and agree to pay, perform and discharge when due any and all liabilities and obligations of Seller arising out of or relating to the Business or the Purchased Assets on or after the Closing, other than the Excluded Liabilities (collectively, the “ Assumed Liabilities ”), including, without limitation, the following:

(a) all trade accounts payable of Seller to third parties in connection with the Business that remain unpaid as of the Closing Date;

(b) all liabilities and obligations arising under or relating to the Leases and Assigned Contracts;

(c) except as specifically provided in Section 6.01 , all liabilities and obligations of Buyer or its Affiliates relating to employee benefits, compensation or other arrangements with respect to any Transferred Employee arising on or after the Closing;

(d) all liabilities and obligations for (i) Taxes relating to the Business, the Purchased

Assets or the Assumed Liabilities for any taxable period ending after the Closing Date and (ii) Taxes for which Buyer is liable pursuant to Section 6.08 ;

(e) all other liabilities and obligations arising out of or relating to Buyer’s ownership or operation of the Business and the Purchased Assets on or after the Closing; and

(f) all liabilities and obligations of Seller set forth on Section 2.03(f) of the Disclosure Schedules.

Section 2.04 Excluded Liabilities. Buyer shall not assume and shall not be responsible to pay, perform or discharge any of the following liabilities or obligations of Seller (collectively, the “ Excluded Liabilities ”):

(a) any liabilities or obligations arising out of or relating to Seller’s ownership or operation of the Business and the Purchased Assets prior to the Closing Date;

(b) any liabilities or obligations relating to or arising out of the Excluded Assets;

(c) any liabilities or obligations for (i) Taxes relating to the Business, the Purchased Assets or the Assumed Liabilities for any taxable period ending on or prior to the Closing Date and (ii) any other Taxes of Seller or any stockholders or Affiliates of Seller (other than Taxes allocated to Buyer under Section 6.08 ) for any taxable period;

(d) except as specifically provided in Section 6.01 , any liabilities or obligations of Seller relating to or arising out of (i) the employment, or termination of employment, of any Employee prior to the Closing, or (ii) workers’ compensation claims of any Employee which relate to events occurring prior to the Closing Date;

(e) any liabilities or obligations of Seller arising or incurred in connection with the negotiation, preparation, investigation and performance of this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby, including, without limitation, fees and expenses of counsel, accountants, consultants, advisers and others; and

(f) any liabilities or obligations relating to or arising out of the Credit Agreements.

Section 2.05 Purchase Price. Subject to adjustment in accordance with Section 2.06 below, the aggregate purchase price for the Purchased Assets shall be Three Million Dollars ($3,000,000) (the “ Purchase Price ”), plus the assumption of the Assumed Liabilities. The Purchase Price shall be paid in the following two tranches: (i) Two Million

Eight Hundred Thousand Dollars ($2,800,000) shall be paid by wire transfer of immediately available funds on the Closing Date to an account designated in writing by Seller to Buyer no later than two Business Days prior to the Closing Date; and (ii) Two Hundred Thousand Dollars ($200,000) shall be paid within ten (10) Business Days after delivery to the Buyer by the Seller of certified copies of duly filed UCC-3 termination statements evidencing that all Liens on the Leased Equipment have been fully terminated, released and discharged (the “ Leased Equipment UCC-3s ”).

Section 2.06 Purchase Price Working Capital Adjustment.

(a) The Purchase Price shall be subject to adjustment following the Closing in accordance with this Section 2.06 and to the procedures specified in Section 2.07.

(b) If the Actual Working Capital Amount is greater than the Target Working Capital Amount, then no adjustment shall be made to the Purchase Price.

(c) If the Actual Working Capital Amount is less than the Target Working Capital Amount, then the Purchase Price shall be reduced by the amount by which the Target Working Capital Amount exceeds the Actual Working Capital Amount (the “ Post-Closing Decrease Amount ”), and the Post-Closing Decrease Amount shall be paid by Seller to the Buyer, within five (5) Business Days of the Post-Closing Decrease Amount becoming final in accordance with Section 2.07 , by wire transfer of immediately available funds to Buyer to the account designated by the Buyer.

Section 2.07 Purchase Price Working Capital Adjustment Procedure.

(a) Buyer shall cause to be prepared the following: (i) a balance sheet of the Company as of the Closing Date (the “ Closing Balance Sheet ”), and (ii) a calculation of the working capital as set forth on the Closing Balance Sheet (the “ Actual Working Capital Amount ” and together with the Closing Balance Sheet, the “ Closing Financial Statements ”). The Closing Financial Statements shall be prepared in conformity with GAAP; provided, however , that the calculation of the Actual Working Capital Amount shall be subject to the principles, methodologies, practices and adjustments reflected in Disclosure Schedule 2.07. After the Closing Date, Seller’s Representatives shall be permitted reasonable access to review the books, records and work papers of the Company to facilitate the review of the Closing Financial Statements. In addition, after the Closing Date, Seller’s Representatives may make inquiries and requests of Buyer and its Representatives with respect to the preparation of the Closing Financial Statements. The Buyer and its Representatives shall promptly respond to and cooperate with Seller’s Representatives, and Buyer

shall cause its Representatives to promptly respond to and cooperate with, such inquiries and requests.

(b) Buyer shall deliver the Closing Financial Statements to Seller within thirty (30) days following the Closing Date. If within 30 days following the date of receipt by Seller of the Closing Financial Statements, Seller has not given Buyer written notice of objections to any amounts or calculations set forth on the Closing Financial Statements (which notice shall state in reasonable detail the basis of Seller’s objection), then the Post-Closing Decrease Amount set forth in the Closing Financial Statements delivered by Buyer, shall be final, binding and conclusive on the parties. If Seller gives Buyer notice of objection, and if Buyer and Seller fail to resolve the issues outstanding with respect to the calculation of the Post-Closing Decrease Amount within 30 days of the date of Buyer’s receipt of Seller’s objection notice, Seller and Buyer shall submit the issues remaining in dispute to a mutually acceptable national firm of independent public accountants (the “ Independent Accountants ”), for resolution; provided, however, that the scope of the Independent Accountants’ review shall be limited to the matters set forth in this Section 2.07 and shall not relate to (x) the determination of the Target Working Capital Amount; nor to (y) the appropriateness of the principles, methodologies, practices or adjustments reflected in Disclosure Schedule 2.07, which the parties have mutually agreed are acceptable. Buyer and Seller agree that any market or business developments after the Closing shall not be taken into consideration and that the status of the Company’s affairs and market circumstances at the time of the Closing shall prevail.

(i) Seller and Buyer shall execute any agreement(s) required by the Independent Accountants to accept their engagement pursuant to this Section 2.07 ;

(ii) Seller and Buyer shall promptly furnish or cause to be furnished to the Independent Accountants such work papers and other documents and information relating to the disputed issues as the Independent Accountants may request and are available to that party or its accountants or other agents, and shall be afforded the opportunity to present to the Independent Accountants, with a copy to the other party, any written material relating to the disputed issues;

(iii) The determination by the Independent Accountants, as set forth in a written notice to be delivered by the Independent Accountants to both Seller and Buyer, of the Post-Closing Decrease Amount shall be final, binding and conclusive on the parties as of the date of the determination notice sent by

the Independent Accountants; and

(iv) Seller, on one hand, and Buyer, on the other hand, shall each bear 50% of the fees and costs of the Independent Accountants for such determination, provided , however , that the engagement agreement(s) referred to in subpart (i) above may require the parties to be bound jointly and severally to the Independent Accountants for those fees and costs, and in the event Seller or Buyer pays to the Independent Accountants any amount in excess of 50% of the fees and costs of their engagement, the other party agrees to reimburse Seller or Buyer, as applicable, to the extent required to equalize the payments made by Seller and Buyer with respect to the fees and costs of the Independent Accountants.

Section 2.08 Allocation of Purchase Price. Within thirty (30) days after the Closing Date, Seller shall deliver a schedule allocating the Purchase Price (including any Assumed Liabilities treated as consideration for the Purchased Assets for Tax purposes) (the “ Allocation Schedule ”). The Allocation Schedule shall be prepared in accordance with Section 1060 of the Code. The Allocation Schedule shall be deemed final unless Buyer notifies Seller in writing that Buyer objects to one or more items reflected in the Allocation Schedule within thirty (30) days after delivery of the Allocation Schedule to Buyer. In the event of any such objection, Seller and Buyer shall negotiate in good faith to resolve such dispute; provided, however , that if Seller and Buyer are unable to resolve any dispute with respect to the Allocation Schedule within thirty (30) days after the delivery of the Allocation Schedule to Buyer, such dispute shall be resolved by the Independent Accountants or, if such Independent Accountants are unable to serve, another impartial nationally recognized firm of independent certified public accountants mutually appointed by Buyer and Seller. The fees and expenses of such accounting firm shall be borne equally by Seller and Buyer. Seller and Buyer agree to file their respective IRS Forms 8594 and all federal, state and local Tax Returns in accordance with the Allocation Schedule.

Section 2.09 Non-assignable Assets.

(a) Notwithstanding anything to the contrary in this Agreement, and subject to the provisions of this Section 2.07 , to the extent that the sale, assignment, transfer, conveyance or delivery, or attempted sale, assignment, transfer, conveyance or delivery, to Buyer of any Purchased Asset would result in a violation of applicable Law, or would require the consent, authorization, approval or waiver of a Person who is not a party to this Agreement or an Affiliate of a party to this Agreement (including any Governmental Authority), and such consent, authorization, approval or waiver shall not have been obtained prior to the Closing, this Agreement shall not constitute a sale, assignment, transfer, conveyance or delivery, or an attempted sale, assignment, transfer, conveyance or delivery, thereof; provided, however, that, subject to the satisfaction or

waiver of the conditions contained in Article VII , the Closing shall occur notwithstanding the foregoing without any adjustment to the Purchase Price on account thereof. Following the Closing, Seller and Buyer shall use commercially reasonable efforts, and shall cooperate with each other, to obtain any such required consent, authorization, approval or waiver, or any release, substitution or amendment required to novate all liabilities and obligations under any and all Assigned Contracts or other liabilities that constitute Assumed Liabilities or to obtain in writing the unconditional release of all parties to such arrangements, so that, in any case, Buyer shall be solely responsible for such liabilities and obligations from and after the Closing Date; provided, however, that neither Seller nor Buyer shall be required to pay any consideration therefor. Once such consent, authorization, approval, waiver, release, substitution or amendment is obtained, Seller shall sell, assign, transfer, convey and deliver to Buyer the relevant Purchased Asset to which such consent, authorization, approval, waiver, release, substitution or amendment relates for no additional consideration. Applicable sales, transfer and other similar Taxes in connection with such sale, assignment, transfer, conveyance or license shall be paid by Buyer in accordance with Section 6.08 .

(b) To the extent that any Purchased Asset and/or Assumed Liability cannot be transferred to Buyer following the Closing pursuant to this Section 2.07 , Buyer and Seller shall use commercially reasonable efforts to enter into such arrangements (such as subleasing, sublicensing or subcontracting) to provide to the parties the economic and, to the extent permitted under applicable Law, operational equivalent of the transfer of such Purchased Asset and/or Assumed Liability to Buyer as of the Closing and the performance by Buyer of its obligations with respect thereto. Buyer shall, as agent or subcontractor for Seller pay, perform and discharge fully the liabilities and obligations of Seller thereunder from and after the Closing Date. To the extent permitted under applicable Law, Seller shall, at Buyer’s expense, hold in trust for and pay to Buyer promptly upon receipt thereof, such Purchased Asset and all income, proceeds and other monies received by Seller to the extent related to such Purchased Asset in connection with the arrangements under this Section 2.07 . Seller shall be permitted to set off against such amounts all direct costs associated with the retention and maintenance of such Purchased Assets. Notwithstanding anything herein to the contrary, the provisions of this Section 2.07 shall not apply to any consent or approval required under any antitrust, competition or trade regulation Law, which consent or approval shall be governed by Section 6.03 .

ARTICLE III

CLOSING

Section 3.01 Closing. Subject to the terms and conditions of this Agreement, the consummation of the transactions contemplated by this Agreement (the “ Closing ”) shall take place remotely upon the electronic exchange of documents, signatures and the receipt of the Purchase Price by the Seller, together with the satisfaction or waiver of any and all other certificates, affidavits, instruments and other deliverables required for the Closing as set forth below in Section 3.02 and in Article VII hereto, or at such other time, date or place as Seller and Buyer may mutually agree upon in writing. The date on which the Closing is to occur is herein referred to as the (“ Closing Date ”).

Section 3.02 Closing Deliverables.

(a) At the Closing, Seller shall deliver to Buyer the following:

(i) a bill of sale, assignment and assumption agreement, in the form of Exhibit A hereto (the “ Bill of Sale ”) and duly executed by Seller, effecting the transfer and assignment to, and assumption by, Buyer of the Purchased Assets and the Assumed Liabilities;

(ii) with respect to each Lease, an Assignment and Assumption of Lease substantially in the form of Exhibit B (each, an “ Assignment and Assumption of Lease ”), duly executed by Seller and, if necessary, Seller’s signature shall be witnessed and/or notarized;

(iii) the Non-Compete Agreement , in the form attached hereto as Exhibit C , duly executed by Seller;

(iv) a transition services agreement, in the form attached hereto as Exhibit D (the “Transition Services Agreement” ), duly executed by Seller;

(v) the certificates of the Secretary or Assistant Secretary of Seller required by Section 7.02(e) and Section 7.02(f) ; and

(vi) such other customary instruments of transfer, assumption, filings or documents, in form and substance reasonably satisfactory to Buyer, as may be required to give effect to this Agreement.

(b) At the Closing, Buyer shall deliver to Seller the following:

(i) the Purchase Price;

(ii) the Bill of Sale, duly executed by Buyer;

(iii) the Non-Compete Agreement, duly executed by Buyer;

(iv) the Transition Services Agreement, duly executed by Buyer;

(v) with respect to each Lease, an Assignment and Assumption of Lease duly executed by Buyer and, if necessary, Buyer’s signature shall be witnessed and/or notarized; and

(vi) the certificates of the Secretary or Assistant Secretary of Buyer required by Section 7.03(e) and Section 7.03(f) .

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as qualified in the Disclosure Schedules, Seller represents and warrants to Buyer that the statements contained in this Article IV are true and correct as of the date hereof.

Section 4.01 Organization and Qualification of Seller. Seller is a limited liability company duly organized, validly existing and in good standing under the Laws of the state of Delaware and has all necessary limited liability power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on the Business as currently conducted. Seller is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the ownership of the Purchased Assets or the operation of the Business as currently conducted makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing would not have a Material Adverse Effect.

Section 4.02 Authority of Seller. Seller has all necessary limited liability power and authority to enter into this Agreement and the other Transaction Documents to which Seller is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Seller of this Agreement and any other Transaction Document to which Seller is a party, the performance by Seller of its obligations hereunder and thereunder and the consummation by Seller of the transactions contemplated hereby and thereby have been duly authorized by all requisite limited liability power action on the part of Seller. This Agreement has been duly executed and delivered by Seller, and (assuming due authorization, execution and delivery by Buyer) this Agreement constitutes a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). When each other

Transaction Document to which Seller is or will be a party has been duly executed and delivered by Seller (assuming due authorization, execution and delivery by each other party thereto), such Transaction Document will constitute a legal and binding obligation of Seller enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

Section 4.03 No Conflicts; Consents. The execution, delivery and performance by Seller of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) result in a violation or breach of any provision of the certificate of formation or limited liability company agreement of Seller; (b) result in a violation or breach of any provision of any Law or Governmental Order applicable to Seller, the Business or the Purchased Assets; or (c) require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default under or result in the acceleration of any Material Contract; except in the cases of clauses (b) and (c), where the violation, breach, conflict, default, acceleration or failure to give notice would not have a Material Adverse Effect. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to Seller in connection with the execution and delivery of this Agreement or any of the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, except for such consents, approvals, Permits, Governmental Orders, declarations, filings or notices which, in the aggregate, would not have a Material Adverse Effect.

Section 4.04 Financial Statements. Copies of the Annual Financial Statements consisting of the balance sheet of the Business as at June 30 th in each of the years 2016 and 2017 and the related statements of income and retained earnings, stockholders’ equity and cash flow for the years then ended (the “ Annual Financial Statements ”), and interim financial statements consisting of the balance sheet of the Business as at date of most recent quarter end (if not otherwise included in the Annual Financial Statements) and the related statements of income and retained earnings, stockholders’ equity and cash flow covering the period then-ended since the date of the most recent Annual Financial Statement (the “ Interim Financial Statements ” and together with the Annual Financial Statements, the “ Financial Statements ”), have been delivered or made available to Buyer in the Data Room. The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved, subject, in the case of the Interim Financial Statements, to normal and recurring year-end adjustments and the absence of notes. The Financial Statements fairly present in all material respects the financial condition of the Business as of the respective dates they were prepared and the results of the operations of the Business for the periods indicated. The balance sheet of the Business as of the date of most recent fiscal year end is referred to herein as (the “ Balance Sheet ”),

and the date thereof as (the “ Balance Sheet Date ”), and the balance sheet of the Business as of the date of the most recent fiscal quarter end is referred to herein as (the “ Interim Balance Sheet ”), and the date thereof as the (“ Interim Balance Sheet Date ”).

Section 4.05 Absence of Certain Changes, Events and Conditions. Except as expressly contemplated by this Agreement or as set forth on Section 4.05 of the Disclosure Schedules, from the date of the Interim Balance Sheet Date through the date of this Agreement, Seller has operated the Business in the ordinary course of business in all material respects and there has not been, with respect to the Business, any:

(a) event, occurrence or development that has had a Material Adverse Effect;

(b) incurrence of any indebtedness for borrowed money in connection with the Business other than pursuant to the Credit Agreements, the Leases and unsecured current obligations and liabilities incurred in the ordinary course of business;

(c) sale or other disposition of any of the Purchased Assets shown or reflected in the Balance Sheet, except for the sale of Inventory in the ordinary course of business and except for any Purchased Assets having an aggregate value of less than the Threshold Amount;

(d) cancellation of any debts or claims or amendment, termination or waiver of any rights constituting Purchased Assets, except in the ordinary course of business;

(e) capital expenditures in an aggregate amount exceeding the Threshold Amount which would constitute an Assumed Liability;

(f) imposition of any Encumbrance upon any of the Purchased Assets, except for Permitted Encumbrances;

(g) increase in the compensation of any Employees, other than as provided for in any written agreements or in the ordinary course of business;

(h) adoption, termination, amendment or modification of any Benefit Plan, the effect of which in the aggregate would increase the obligations of Seller by more than ten percent (10%) of its existing annual obligations to such plans;

(i) adoption of any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against it under any similar Law;

(j) purchase or other acquisition of any property or asset that constitutes a Purchased Asset for an amount in excess of the Threshold Amount, except for purchases of Inventory or supplies in the ordinary course of business; or

(k) any agreement to do any of the foregoing, or any action or omission that would result in any of the foregoing.

Section 4.06 Material Contracts.

(a) Section 4.06(a) of the Disclosure Schedules lists each of the following Contracts (x) by which any of the Purchased Assets are bound or affected or (y) to which Seller is a party or by which it is bound in connection with the Business or the Purchased Assets (together with all Leases listed in Section 4.09(c) of the Disclosure Schedules and all Intellectual Property Agreements listed in Section 4.10(a) of the Disclosure Schedules, collectively, the “ Material Contracts ”):

(i) all Contracts involving aggregate consideration in excess of the Threshold Amount or requiring performance by any party more than one year from the date hereof, which, in each case, cannot be cancelled without penalty or without more than 180 days’ notice;

(ii) all Contracts that relate to the sale of any of the Purchased Assets, other than in the ordinary course of business, for consideration in excess of the Threshold Amount;

(iii) all Contracts that relate to the acquisition of any business, a material amount of stock or assets of any other Person or any real property (whether by merger, sale of stock, sale of assets or otherwise), in each case involving amounts in excess of the Threshold Amount;

(iv) except for agreements relating to trade receivables, all Contracts relating to indebtedness (including, without limitation, guarantees), in each case having an outstanding principal amount in excess of the Threshold Amount;

(v) all Contracts between or among the Seller on the one hand and any Affiliate of Seller on the other hand; and

(vi) all collective bargaining agreements or Contracts with any labor organization, union or association.

(b) Except as set forth on Section 4.06(b) of the Disclosure Schedules, Seller is not in breach of, or default under, any Material Contract, except for such breaches or defaults that would not have a Material Adverse Effect.

Section 4.07 Title to Tangible Personal Property. Except as set forth in Section 4.07 of the Disclosure Schedules, Seller has good and valid title to, or a valid leasehold interest in, all Tangible Personal Property included in the Purchased Assets, free and clear of Encumbrances except for Permitted Encumbrances.

Section 4.08 Sufficiency of Assets. The Purchased Assets are sufficient for the continued conduct of the Business after the Closing in substantially the same manner as conducted prior to the Closing, except to the extent any deficiency would not cause a Material Adverse Effect. The Purchased Assets constitute all of the rights, property and assets necessary to conduct the Business as conducted immediately prior to the Closing.

Section 4.09 Real Property.

(a) The Seller does not own any real property.

(b) Seller has not received any written notice of existing, pending or threatened (i) condemnation proceedings affecting the Leased Real Property, or (ii) zoning, building code or other moratorium proceedings, or similar matters which would reasonably be expected to materially and adversely affect the ability to operate the Leased Real Property as currently operated. Neither the whole nor any material portion of any Leased Real Property has been damaged or destroyed by fire or other casualty.

(c) The Seller has a valid and enforceable leasehold interest in the Leased Real Property subject to the terms and conditions and conditions of the Lease agreement governing the Leased Real Property.

Section 4.10 Intellectual Property.

(a) Section 4.10(a) of the Disclosure Schedules lists: (i) all material Intellectual Property Registrations; and (ii) all material Intellectual Property Agreements. Except as would not have a Material Adverse Effect, Seller owns or has the right to use all Intellectual Property Assets and the Intellectual Property licensed to Seller under the Intellectual Property Agreements.

(b) Except as would not have a Material Adverse Effect, to Seller’s Knowledge: (i) the conduct of the Business as currently conducted does not infringe, misappropriate, dilute or otherwise violate the Intellectual Property of any Person; and (ii) no Person is infringing, misappropriating or otherwise violating any Intellectual Property Assets. Notwithstanding anything to the contrary in this Agreement, this Section 4.10(b) constitutes the sole representation and warranty of the Seller under this Agreement with respect to any actual or alleged

infringement, misappropriation or other violation by Seller of any Intellectual Property of any other Person.

Section 4.11 Legal Proceedings; Governmental Orders.

(a) There are no actions, suits, claims, investigations or other legal proceedings pending or, to Seller’s Knowledge, threatened against or by Seller relating to or affecting the Business, the Purchased Assets or the Assumed Liabilities, which if determined adversely to Seller would result in a Material Adverse Effect.

(b) There are no outstanding Governmental Orders and no unsatisfied judgments, penalties or awards against or affecting the Business or the Purchased Assets which would have a Material Adverse Effect.

Section 4.12 Compliance With Laws; Permits.

(a) Seller is in compliance with all Laws applicable to the conduct of the Business as currently conducted or the ownership and use of the Purchased Assets, except where the failure to be in compliance would not have a Material Adverse Effect.

(b) All Permits required for Seller to conduct the Business as currently conducted or for the ownership and use of the Purchased Assets have been obtained by Seller and are valid and in full force and effect, except where the failure to obtain such Permits would not have a Material Adverse Effect.

(c) None of the representations and warranties in Section 4.12 shall be deemed to relate to environmental matters (which are governed by Section 4.13 ), employee benefits matters (which are governed by Section 4.14 ), employment matters (which are governed by Section 4.15 ) or tax matters (which are governed by Section 4.16 ).

Section 4.13 Environmental Matters.

(a) Except as would not have a Material Adverse Effect, to Seller’s Knowledge, the operations of Seller with respect to the Business and the Purchased Assets are in compliance with all Environmental Laws. Seller has not received from any Person, with respect to the Business or the Purchased Assets, any: (i) Environmental Notice or Environmental Claim; or (ii) written request for information pursuant to Environmental Law, which, in each case, either remains pending or unresolved, or is the source of ongoing obligations or requirements as of the Closing Date.

(b) Except as would not have a Material Adverse Effect, to Seller’s Knowledge,

Seller has obtained and is in material compliance with all material Environmental Permits necessary for the conduct of the Business as currently conducted or the ownership, lease, operation or use of the Purchased Assets.

(c) None of the Leased Real Property is listed on, or to Seller’s Knowledge has been proposed for listing on, the National Priorities List (or the Comprehensive Environmental Response, Compensation, and Liability Information System) under any Environmental Law, or any similar state list.

(d) Except as would not have a Material Adverse Effect, to Seller’s Knowledge, there has been no Release of Hazardous Materials in contravention of Environmental Law with respect to the Business, the Purchased Assets or any Leased Real Property, and Seller has not received any Environmental Notice that the Business or any of the Purchased Assets or Leased Real Property has been contaminated with any Hazardous Material which would reasonably be expected to result in an Environmental Claim against, or a violation of Environmental Law or term of any Environmental Permit by, Seller.

(e) The representations and warranties set forth in this Section 4.13 are the Seller’s sole and exclusive representations and warranties regarding environmental matters.

Section 4.14 Employee Benefit Matters.

(a) Section 4.14(a) of the Disclosure Schedules contains a list of each material benefit, retirement, employment, consulting, compensation, incentive, bonus, stock option, restricted stock, stock appreciation right, phantom equity, change in control, severance, vacation, paid time off, welfare and fringe-benefit agreement, plan, policy and program in effect and covering one or more Employees, former employees of the Business, current or former directors of the Business or the beneficiaries or dependents of any such Persons, and is maintained, sponsored, contributed to, or required to be contributed to by Seller, or under which Seller has any material liability for premiums or benefits (as listed on Section 4.14(a) of the Disclosure Schedules, each, a “ Benefit Plan ”).

(b) Except as would not have a Material Adverse Effect, to Seller’s Knowledge, each Benefit Plan and related trust complies with all applicable Laws (including ERISA and the Code.

(c) No Benefit Plan: (i) is subject to the minimum funding standards of Section 302 of ERISA or Section 412 of the Code; or (ii) is a “multi-employer plan” (as defined in Section 3(37) of ERISA). Except as would not have a Material Adverse Effect, Seller has not: (A) withdrawn from any pension plan under

circumstances resulting (or expected to result) in liability; or (B) engaged in any transaction which would give rise to a liability under Section 4069 or Section 4212(c) of ERISA.

(d) Other than as required under Section 4980B of the Code or other applicable Law, no Benefit Plan provides benefits or coverage in the nature of health, life or disability insurance following retirement or other termination of employment (other than death benefits when termination occurs upon death).

(e) Except as would not have a Material Adverse Effect, no Benefit Plan exists that could: (i) result in the payment to any Employee, director or consultant of the Business of any money or other property; or (ii) accelerate the vesting of or provide any additional rights or benefits (including funding of compensation or benefits through a trust or otherwise) to any Employee, director or consultant of the Business, in each case, as a result of the execution of this Agreement. Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will result in “excess parachute payments” within the meaning of Section 280G(b) of the Code. Notwithstanding any other provision herein, the Buyer shall assume any and all liabilities with respect to accrued vacation time of any Employees.

(f) The representations and warranties set forth in this Section 4.14 are the Seller’s sole and exclusive representations and warranties regarding employee benefit matters.

Section 4.15 Employment Matters.

(a) Seller is not a party to, bound by, any collective bargaining or other agreement with a labor organization representing any of the Employees. There is no threat of, any strike, slowdown, work stoppage, lockout, concerted refusal to work overtime or other similar labor activity or dispute affecting Seller or any of the Employee, except to the extent any such action would not result in a Material Adverse Effect.

(b) Seller is in compliance with all applicable Laws pertaining to employment and employment practices to the extent they relate to the Employees, except to the extent non-compliance would not result in a Material Adverse Effect.

(c) The Key Employee is employed by the Company at Closing. The Company has not issued any written termination notice to the Key Employee at, or prior to, the Closing Date. The Company has not received any written notice on, or prior to, the Closing Date that the Key Employee (i) has resigned; or (ii) intends to resign. The Chief Financial Officer of the Company has not received written or

oral notice that the Key Employee (i) has resigned; or (ii) intends to resign.

(d) The representations and warranties set forth in this Section 4.15 are the Seller’s sole and exclusive representations and warranties regarding employment matters.

Section 4.16 Taxes.

(a) Except as would not have a Material Adverse Effect, Seller has filed (taking into account any valid extensions) all material Tax Returns with respect to the Business required to be filed by Seller and has paid all Taxes shown thereon as owing. Seller is not currently the beneficiary of any extension of time within which to file any material Tax Return other than extensions of time to file Tax Returns obtained in the ordinary course of business.

(b) Seller is not a “foreign person” as that term is used in Treasury Regulations Section 1.1445-2.

(c) Except for certain representations related to Taxes in Section 4.14 , the representations and warranties set forth in this Section 4.16 are Seller’s sole and exclusive representations and warranties regarding Tax matters.

Section 4.17 Brokers. Except as set forth in the Disclosure Schedules, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Seller.

Section 4.18 Customers. The Company has not received written notice from any of the of the top ten customers of the Company (determined as of the fiscal year ended June 30, 2017) indicating that such customer intends to cease dealing with the Company. To the Knowledge of Sellers, no such customer has indicated by written advice within the past year that it will stop or materially decrease the rate of buying materials, products or services from the Company or materially modify such customer’s business practices after the Closing Date. To the Knowledge of Seller, the Company has good relations with its customers.

Section 4.19 Suppliers. The Company has not received written notice indicating that any of the top ten suppliers to the Company (determined as of the fiscal year ended June 30, 2017) indicating that any such supplier intends to cease dealing with, or materially change, the terms upon which it provides goods or services to the Company (other than normal price fluctuations in the ordinary course of business). To the Knowledge of Seller, no such supplier has indicated by written advice within the past year that it will stop or materially decrease the rate of supplying materials, products or services, as applicable, to

the Company, or materially modify such supplier’s business practices after the Closing Date (other than normal price adjustments in the ordinary course of business).

Section 4.20 Product Liability . To the Knowledge of Sellers, no product manufactured, sold, leased or delivered by the Company is subject to any material guaranty, warranty or other indemnity beyond the applicable standard terms and conditions of sale or lease. The Sellers have furnished Purchaser with copies of the standard terms and conditions of sale for the Company. To the Knowledge of the Sellers, the Company has no liability for any design defect, product failure or other material product liability claim arising from or related to any product of the Company.

Section 4.21 No Other Representations and Warranties. Except for the representations and warranties contained in this Article IV (including the related portions of the Disclosure Schedules), neither Seller nor any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Seller, including any representation or warranty as to the accuracy or completeness of any information regarding the Business and the Purchased Assets furnished or made available to Buyer and its Representatives (including any and all information, documents or material delivered or made available to Buyer in the Data Room or otherwise, in management presentations or in any other form in expectation of the transactions contemplated hereby) or as to the future revenue, profitability or success of the Business, or any representation or warranty arising from statute or otherwise in law.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller that the statements contained in this Article V are true and correct as of the date hereof.

Section 5.01 Organization and Authority of Buyer. Buyer is a limited liability company duly organized, validly existing and in good standing under the Laws of the state of Delaware.

Section 5.02 Authority of Buyer. Buyer has all necessary limited liability company power and authority to enter into this Agreement and the other Transaction Documents to which Buyer is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Buyer of this Agreement and any other Transaction Document to which Buyer is a party, the performance by Buyer of its obligations hereunder and thereunder and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly authorized by all requisite limited liability company action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer, and (assuming due

authorization, execution and delivery by Seller) this Agreement constitutes a legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). When each other Transaction Document to which Buyer is or will be a party has been duly executed and delivered by Buyer (assuming due authorization, execution and delivery by each other party thereto), such Transaction Document will constitute a legal and binding obligation of Buyer enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

Section 5.03 No Conflicts; Consents. The execution, delivery and performance by Buyer of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) result in a violation or breach of any provision of the certificate of formation or limited liability company agreement of Buyer; (b) result in a violation or breach of any provision of any Law or Governmental Order applicable to Buyer; or (c) require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default under or result in the acceleration of any agreement to which Buyer is a party, except in the cases of clauses (b) and (c), where the violation, breach, conflict, default, acceleration or failure to give notice would not have a material adverse effect on Buyer’s ability to consummate the transactions contemplated hereby. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to Buyer in connection with the execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, and such consents, approvals, Permits, Governmental Orders, declarations, filings or notices which would not have a material adverse effect on Buyer’s ability to consummate the transactions contemplated hereby and thereby.

Section 5.04 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Buyer.

Section 5.05 Sufficiency of Funds. Buyer has sufficient cash on hand or other sources of immediately available funds to enable it to make payment of the Purchase Price and consummate the transactions contemplated by this Agreement.

Section 5.06 Solvency. Immediately after giving effect to the transactions contemplated hereby, Buyer shall be solvent and shall: (a) be able to pay its debts as they become due;

(b) own property that has a fair saleable value greater than the amounts required to pay its debts (including a reasonable estimate of the amount of all contingent liabilities); and (c) have adequate capital to carry on its business. No transfer of property is being made and no obligation is being incurred in connection with the transactions contemplated hereby with the intent to hinder, delay or defraud either present or future creditors of Buyer or Seller. In connection with the transactions contemplated hereby, Buyer has not incurred, nor plans to incur, debts beyond its ability to pay as they become absolute and matured.

Section 5.07 Legal Proceedings. There are no actions, suits, claims, investigations or other legal proceedings pending or, to Buyer’s knowledge, threatened against or by Buyer or any Affiliate of Buyer that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.

Section 5.08 Independent Investigation. Buyer has conducted its own independent investigation, review and analysis of the Business and the Purchased Assets, and acknowledges that it has been provided adequate access to the personnel, properties, assets, premises, books and records, and other documents and data of Seller for such purpose. Buyer acknowledges and agrees that: (a) in making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, Buyer has relied solely upon its own investigation and the express representations and warranties of Seller set forth in Article IV of this Agreement (including related portions of the Disclosure Schedules); and (b) neither Seller nor any other Person has made any representation or warranty as to Seller, the Business, the Purchased Assets or this Agreement, except as expressly set forth in Article IV of this Agreement (including the related portions of the Disclosure Schedules).

ARTICLE VI

COVENANTS

Section 6.01 Employees and Employee Benefits.

(a) Buyer shall, or shall cause an Affiliate of Buyer to, offer employment effective on the Closing Date, to all Employees, including Employees who are absent due to vacation, family leave, short-term disability or other approved leave of absence (the Employees who accept such employment and commence employment on the Closing Date, the “ Transferred Employees ”).

(b) During the period commencing on the Closing Date and ending on the first anniversary of the Closing Date (or if earlier, the date of the Transferred Employee’s termination of employment with Buyer or an Affiliate of Buyer), Buyer shall, or shall cause an Affiliate of Buyer to, provide each Transferred Employee with: (i) base salary or hourly wages which are no less than the base

salary or hourly wages provided by Seller immediately prior to the Closing; (ii) target bonus opportunities (excluding equity-based compensation), if any, which are no less than the target bonus opportunities (excluding equity-based compensation) provided by Seller immediately prior to the Closing; (iii) retirement and welfare benefits that are no less favorable in the aggregate than those provided by Seller immediately prior to the Closing; and (iv) severance benefits that are no less favorable than the practice, plan or policy in effect for such Transferred Employee immediately prior to the Closing.

(c) With respect to any employee benefit plan maintained by Buyer or an Affiliate of Buyer for the benefit of any Transferred Employee, effective as of the Closing, Buyer shall, or shall cause its Affiliate to, recognize all service of the Transferred Employees with Seller, as if such service were with Buyer, for vesting, eligibility and accrual purposes; provided, however, such service shall not be recognized to the extent that (x) such recognition would result in a duplication of benefits or (y) such service was not recognized under the corresponding Benefit Plan.

(d) Effective as soon as reasonably practicable following the Closing Date, Seller, or any applicable Affiliate, shall effect a transfer of assets and liabilities (including outstanding loans) from the defined contribution retirement plan that it maintains to the defined contribution retirement plan maintained by Buyer, with respect to the Transferred Employees, in connection with the transactions contemplated by this Agreement. Any such transfer shall be in an amount sufficient to satisfy Section 414(l) of the Code. Upon the transfer of assets and liabilities into Buyer’s plan, all transferred account balances from Seller’s plan shall become fully vested.

(e) Effective as of the Closing, the Transferred Employees shall cease active participation in the Benefit Plans. Seller shall remain liable for all eligible claims for benefits under the Benefit Plans that are incurred by the Employees prior to the Closing Date. For purposes of this Agreement, the following claims shall be deemed to be incurred as follows: (i) life, accidental death and dismemberment, short-term disability, and workers’ compensation insurance benefits, on the event giving rise to such benefits; (ii) medical, vision, dental, and prescription drug benefits, on the date the applicable services, materials or supplies were provided; and (iii) long-term disability benefits, on the eligibility date determined by the long-term disability insurance carrier for the plan in which the applicable Employee participates.

(f) Buyer and Seller intend that the transactions contemplated by this Agreement should not constitute a separation, termination or severance of employment of any Employee who accepts an employment offer by Buyer that is consistent

with the requirements of Section 6.01(b) , including for purposes of any Benefit Plan that provides for separation, termination or severance benefits, and that each such Employee will have continuous employment immediately before and immediately after the Closing. Buyer shall be liable and hold the Seller harmless for: (i) any statutory, common law, contractual or other severance with respect to any Employee, other than an Employee who has received an offer of employment by Buyer on terms and conditions consistent with Section 6.01(b) hereof and declines such offer; and (ii) any claims relating to the employment of any Transferred Employee arising in connection with or following the Closing.

(g) This Section 6.01 shall be binding upon and inure solely to the benefit of each of the parties to this Agreement, and nothing in this Section 6.01 , express or implied, shall confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Section 6.01 . Nothing contained herein, express or implied, shall be construed to establish, amend or modify any benefit plan, program, agreement or arrangement. The parties hereto acknowledge and agree that the terms set forth in this Section 6.01 shall not create any right in any Transferred Employee or any other Person to any continued employment with Buyer or any of its Affiliates or compensation or benefits of any nature or kind whatsoever.

Section 6.02 Confidentiality. Buyer acknowledges and agrees that the Confidentiality Agreement remains in full force and effect and, in addition, covenants and agrees to keep confidential, in accordance with the provisions of the Confidentiality Agreement, information provided to Buyer pursuant to this Agreement.

Section 6.03 Governmental Approvals and Consents. If unable to be obtained on or prior to the Closing Date, each party hereto shall, as promptly as possible, use its reasonable best efforts to obtain, or cause to be obtained, all consents, authorizations, orders and approvals from all Governmental Authorities that may be or become necessary for its respective performance of its obligations pursuant to this Agreement and the other Transaction Documents. Each party shall cooperate fully with the other party and its Affiliates in promptly seeking to obtain all such consents, authorizations, orders and approvals. The parties hereto shall not willfully take any action that will have the effect of delaying, impairing or impeding the receipt of any required consents, authorizations, orders and approvals.

Section 6.04 Books and Records.

(a) In order to facilitate the resolution of any claims made against or incurred by Seller prior to the Closing, or for any other reasonable purpose, for a period of seven (7) years after the Closing, Buyer shall:

(i) retain the Books and Records (including personnel files) relating to periods prior to the Closing in a manner reasonably consistent with the prior practices of Seller; and

(ii) upon reasonable notice, afford the Seller’s Representatives reasonable access (including the right to make, at Seller’s expense, photocopies), during normal business hours, to such Books and Records.

(b) In order to facilitate the resolution of any claims made by or against or incurred by Buyer after the Closing, or for any other reasonable purpose, for a period of seven (7) years after the Closing, Seller shall:

(i) retain the books and records (including personnel files) of Seller which relate to the Business and its operations for periods prior to the Closing; and

(ii) upon reasonable notice, afford the Buyer’s Representatives reasonable access (including the right to make, at Buyer’s expense, photocopies), during normal business hours, to such books and records.

(c) Neither Buyer nor Seller shall be obligated to provide the other party with access to any books or records (including personnel files) pursuant to this Section 6.04 where such access would violate any Law.

Section 6.05 Further Assurances. Following the Closing, each of the parties hereto shall, and shall cause their respective Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement and the other Transaction Documents.

Section 6.06 Public Announcements. Unless otherwise required by applicable Law or stock exchange requirements (based upon the reasonable advice of counsel), no party to this Agreement shall make any public announcements in respect of this Agreement or the transactions contemplated hereby or otherwise communicate with any news media without the prior written consent of the other party (which consent shall not be unreasonably withheld or delayed), and the parties shall cooperate as to the timing and contents of any such announcement.

Section 6.07 Bulk Sales Laws. The parties hereby waive compliance with the provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction that may otherwise be applicable with respect to the sale of any or all of the Purchased Assets to Buyer.

Section 6.08 Transfer Taxes. All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement and the other Transaction Documents (including any real property transfer Tax and any other similar Tax) shall be borne and paid by Buyer when due. Buyer shall, at its own expense, timely file any Tax Return or other document with respect to such Taxes or fees (and Seller shall cooperate with respect thereto as necessary).

Section 6.09 Name Change. Following the Closing, if or when requested by the Buyer, Seller shall promptly cause its legal Company name to be changed and shall assign the sole rights to the name “ General Flange & Forge LLC ” to the Buyer, and shall execute and deliver any and all further certificates, instruments and documents, as reasonably required to accomplish its name change and the name assignment.

ARTICLE VII

CLOSING DELIVERIES

Section 7.01 Obligations of All Parties. The obligations of each party to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions:

(a) No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Governmental Order which is in effect and has the effect of making the transactions contemplated by this Agreement illegal, otherwise restraining or prohibiting consummation of such transactions or causing any of the transactions contemplated hereunder to be rescinded following the Closing.

(b) Seller shall have received all consents, authorizations, orders and approvals from the Governmental Authorities referred to in Section 4.03 and Buyer shall have received all consents, authorizations, orders and approvals from the Governmental Authorities referred to in Section 5.03 , in each case, in form and substance reasonably satisfactory to Buyer and Seller, and no such consent, authorization, order and approval shall have been revoked.

Section 7.02 Conditions to Obligations of Buyer. The obligations of Buyer to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Buyer’s waiver, at or prior to the Closing, of each of the following conditions:

(a) Seller shall have delivered to Buyer duly executed counterparts to this Agreement and the other Transaction Documents and such other documents and

deliveries set forth in Section 3.02(a) .

(b) Buyer shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Seller certifying that attached thereto are true and complete copies of all resolutions adopted by the board of directors of Seller authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby.

(c) Buyer shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Seller certifying the names and signatures of the officers of Seller authorized to sign this Agreement, the Transaction Documents and the other documents to be delivered hereunder and thereunder.

Section 7.03 Conditions to Obligations of Seller. The obligations of Seller to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Seller’s waiver, at or prior to the Closing, of each of the following conditions:

(a) Buyer shall have delivered to Seller the Purchase Price, duly executed counterparts to the Transaction Documents (other than this Agreement) and such other documents and deliveries set forth in Section 3.02(b) .

(b) Seller shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying that attached thereto are true and complete copies of all resolutions adopted by the board of directors of Buyer authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby.

(c) Seller shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying the names and signatures of the officers of Buyer authorized to sign this Agreement, the Transaction Documents and the other documents to be delivered hereunder and thereunder.

ARTICLE VIII

INDEMNIFICATION

Section 8.01 Survival. Subject to the limitations and other provisions of this Agreement, the representations and warranties contained herein shall survive the Closing and shall remain in full force and effect until the date that is the first anniversary of the Closing Date (the “ Survival Period ”). None of the covenants or other agreements contained in this Agreement shall survive the Closing Date other than those which by their terms contemplate performance after the Closing Date, and each such surviving covenant and agreement shall survive the Closing for the period contemplated by its terms. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable Survival Period shall not thereafter be barred by the expiration of such Survival Period and such claims shall survive until finally resolved (the “ Final Resolution ”). The Seller covenants and agrees to maintain the Company in good standing in the jurisdiction of its formation and not to wind-down, dissolve or discontinue the existence of the Company prior to the later of: (i) the Survival Period; or (ii) Final Resolution.

Section 8.02 Indemnification By Seller. Subject to the other terms and conditions of this Article VIII , Seller shall indemnify Buyer against, and shall hold Buyer harmless from and against, any and all Losses incurred or sustained by, or imposed upon, Buyer based upon, arising out of, with respect to or by reason of:

(a) any inaccuracy in or breach of any of the representations or warranties of Seller contained in this Agreement;

(b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Seller pursuant to this Agreement; or

Section 8.03 Indemnification By Buyer. Subject to the other terms and conditions of this Article VIII , Buyer shall indemnify Seller against, and shall hold Seller harmless from and against, any and all Losses incurred or sustained by, or imposed upon, Seller based upon, arising out of, with respect to or by reason of:

(a) any inaccuracy in or breach of any of the representations or warranties of Buyer contained in this Agreement;

(b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Buyer pursuant to this Agreement; or

Section 8.04 Certain Limitations. The party making a claim under this Article VIII is referred to as (the “ Indemnified Party ”), and the party against whom such claims are asserted under this Article VIII is referred to as (the “ Indemnifying Party ”). The indemnification provided for in Section 8.02 and Section 8.03 shall be subject to the following limitations:

(a) The Indemnifying Party shall not be liable to the Indemnified Party for indemnification under Section 8.02(a) or Section 8.03(a) , as the case may be, until the aggregate amount of all Losses in respect of indemnification under Section 8.02(a) or Section 8.03(a) exceeds the Threshold Amount (the “ Deductible ”), in which event the Indemnifying Party shall only be required to pay or be liable for Losses in excess of the Deductible. With respect to any claim as to which the Indemnified Party may be entitled to indemnification under Section 8.02(a) or Section 8.03(a) , as the case may be, the Indemnifying Party shall not be liable for any individual or series of related Losses which do not exceed the Minimum Claim Amount (which Losses shall not be counted toward the Deductible).

(b) The aggregate amount of all Losses for which an Indemnifying Party shall be liable pursuant to Section 8.02(a) or Section 8.03(a) , as the case may be, shall not exceed fifteen percent (15%) of the Purchase Price.

(c) Payments by an Indemnifying Party pursuant to Section 8.02 or Section 8.03 in respect of any Loss shall be limited to the amount of any liability or damage that remains after deducting therefrom any insurance proceeds and any indemnity, contribution or other similar payment received or reasonably expected to be received by the Indemnified Party in respect of any such claim. The Indemnified Party shall use its commercially reasonable efforts to recover under insurance policies or indemnity, contribution or other similar agreements for any Losses prior to seeking indemnification under this Agreement.

(d) Payments by an Indemnifying Party pursuant to Section 8.02 or Section 8.03 in respect of any Loss shall be reduced by an amount equal to any Tax benefit realized or reasonably expected to be realized as a result of such Loss by the Indemnified Party.

(e) In no event shall any Indemnifying Party be liable to any Indemnified Party for any punitive, incidental, consequential, special or indirect damages, including loss of future revenue or income, loss of business reputation or opportunity relating to the breach or alleged breach of this Agreement, or diminution of

value or any damages based on any type of multiple.

(f) Each Indemnified Party shall take, and cause its Affiliates to take, all reasonable steps to mitigate any Loss upon becoming aware of any event or circumstance that would be reasonably expected to, or does, give rise thereto, including incurring costs only to the minimum extent necessary to remedy the breach that gives rise to such Loss.

(g) Seller shall not be liable under this Article VIII for any Losses based upon or arising out of any inaccuracy in or breach of any of the representations or warranties of Seller contained in this Agreement if Buyer had knowledge of such inaccuracy or breach prior to the Closing.

Section 8.05 Indemnification Procedures.

(a) Third Party Claims. If any Indemnified Party receives notice of the assertion or commencement of any action, suit, claim or other legal proceeding made or brought by any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement or a Representative of the foregoing (a “ Third Party Claim ”), against such Indemnified Party with respect to which the Indemnifying Party is obligated to provide indemnification under this Agreement, the Indemnified Party shall give the Indemnifying Party prompt written notice thereof. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure. Such notice by the Indemnified Party shall describe the Third Party Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have the right to participate in, or by giving written notice to the Indemnified Party, to assume the defense of any Third Party Claim at the Indemnifying Party’s expense and by the Indemnifying Party’s own counsel, and the Indemnified Party shall cooperate in good faith in such defense. In the event that the Indemnifying Party assumes the defense of any Third Party Claim, subject to Section 8.05(b) , it shall have the right to take such action as it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Third Party Claim in the name and on behalf of the Indemnified Party. The Indemnified Party shall have the right, at its own cost and expense, to participate in the defense of any Third Party Claim with counsel selected by it subject to the Indemnifying Party’s right to control the defense thereof. If the Indemnifying Party elects not to compromise or defend such Third Party Claim or fails to promptly notify the Indemnified Party in writing of its election to defend as provided in this

Agreement, the Indemnified Party may, subject to Section 8.05(b) , pay, compromise, defend such Third Party Claim and seek indemnification for any and all Losses based upon, arising from or relating to such Third Party Claim. Seller and Buyer shall cooperate with each other in all reasonable respects in connection with the defense of any Third Party Claim, including making available (subject to the provisions of Section 6.02 ) records relating to such Third Party Claim and furnishing, without expense (other than reimbursement of actual out-of-pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Third Party Claim.

(b) Settlement of Third Party Claims. Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not enter into settlement of any Third Party Claim without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed), except as provided in this Section 8.05(b) . If a firm offer is made to settle a Third Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnified Party and provides, in customary form, for the unconditional release of each Indemnified Party from all liabilities and obligations in connection with such Third Party Claim and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to that effect to the Indemnified Party. If the Indemnified Party fails to consent to such firm offer within ten days after its receipt of such notice, the Indemnified Party may continue to contest or defend such Third Party Claim and in such event, the maximum liability of the Indemnifying Party as to such Third Party Claim shall not exceed the amount of such settlement offer. If the Indemnified Party fails to consent to such firm offer and also fails to assume defense of such Third Party Claim, the Indemnifying Party may settle the Third Party Claim upon the terms set forth in such firm offer to settle such Third Party Claim. If the Indemnified Party has assumed the defense pursuant to Section 8.05(a) , it shall not agree to any settlement without the written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed).

(c) Direct Claims. Any claim by an Indemnified Party on account of a Loss which does not result from a Third Party Claim (a “ Direct Claim ”), shall be asserted by the Indemnified Party giving the Indemnifying Party prompt written notice thereof. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure. Such notice by the Indemnified Party shall describe the Direct Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably

practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have 30 days after its receipt of such notice to respond in writing to such Direct Claim. During such 30-day period, the Indemnified Party shall allow the Indemnifying Party and its professional advisors to investigate the matter or circumstance alleged to give rise to the Direct Claim, and whether and to what extent any amount is payable in respect of the Direct Claim and the Indemnified Party shall assist the Indemnifying Party’s investigation by giving such information and assistance (including access to the Indemnified Party’s premises and personnel and the right to examine and copy any accounts, documents or records) as the Indemnifying Party or any of its professional advisors may reasonably request. If the Indemnifying Party does not so respond within such 30-day period, the Indemnifying Party shall be deemed to have rejected such claim, in which case the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party on the terms and subject to the provisions of this Agreement.

Section 8.06 Tax Treatment of Indemnification Payments. All indemnification payments made under this Agreement shall be treated by the parties as an adjustment to the Purchase Price for Tax purposes, unless otherwise required by Law.

Section 8.07 Exclusive Remedies. Subject to Section 9.11 , the parties acknowledge and agree that their sole and exclusive remedy with respect to any and all claims for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification provisions set forth in this Article VIII . In furtherance of the foregoing, each party hereby waives, to the fullest extent permitted under Law, any and all rights, claims and causes of action for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement it may have against the other parties hereto and their Affiliates and each of their respective Representatives arising under or based upon any Law, except pursuant to the indemnification provisions set forth in this Article VIII . Nothing in this Section 8.07 shall limit any Person’s right to seek and obtain any equitable relief to which any Person shall be entitled pursuant to Section 9.11 .

ARTICLE IX

MISCELLANEOUS

Section 9.01 Expenses. Except as otherwise expressly provided herein (including Section 6.08 hereof), all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with

this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred.

Section 9.02 Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.02 ):

If to Seller:

General Flange & Forge LLC

C/O ARC GROUP WORLDWIDE, INC.

810 Flightline Blvd.

Deland, FL 32724

E-mail: dkelley@arcw.com

Attention: Drew Kelley

If to Buyer:

GFFC Holdings, LLC

874 Walker Road, Suite C

Dover, DE 19904

E-mail: weston@quadrantmgt.com

Attention: Weston Quasha

with copies of all notices to and from each of the Buyer and the Seller:

Wuersch & Gering, LLP

100 Wall Street

10 th floor

New York, NY 10005

E-mail: travis.gering@wg-law.com

Attention: Travis L. Gering, Esq.

Section 9.03 Interpretation. For purposes of this Agreement, (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without

limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole. Whenever required by the context hereof, the singular number shall include the plural, and vice versa; the masculine gender shall include the feminine and neuter genders; and the neuter gender shall include the masculine and feminine genders. Unless the context otherwise requires, references herein: (x) to Articles, Sections, Disclosure Schedules and Exhibits mean the Articles and Sections of, and Disclosure Schedules and Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof; and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The Disclosure Schedules and Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.

Section 9.04 Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

Section 9.05 Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, 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 a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

Section 9.06 Disclosure Schedules. Each section of the Disclosure Schedule qualifies the correspondingly numbered representation and warranty or covenant and any other representation or warranty, if the disclosure is reasonably apparent to such other representation or warranty. The Disclosure Schedule is qualified in its entirety by reference to specific provisions of the Agreement, and is not intended to constitute, and shall not be construed as constituting, any representation or warranty or covenant of Seller, except as and to the extent expressly provided in the Agreement. Inclusion of information in the Disclosure Schedule shall not be construed as an admission that such information is material to Seller or its assets, liabilities, financial condition, results, business and/or operations. The fact that any item of information is contained in the Disclosure Schedule shall not be construed to mean that such information is required to be disclosed by the Agreement. Such information shall not be used as a basis for interpreting the term “material,” “materially” or “materiality” in the Agreement. References to any document in the Disclosure Schedule do not purport to be complete and are qualified in their entirety

by the document itself. Capitalized terms used but not defined in the Disclosure Schedule shall have the same meanings given them in this Agreement.

Section 9.07 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party may assign its rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed. No assignment shall relieve the assigning party of any of its obligations hereunder.

Section 9.08 No Third Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 9.09 Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

Section 9.10 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.

(a) This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction).

(b) ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE COURTS OF THE STATE OF NEW YORK IN EACH CASE LOCATED IN THE CITY OF NEW YORK AND COUNTY OF NEW YORK, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS,

SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY’S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.10(c).

Section 9.11 Specific Performance. The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.

Section 9.12 Non-recourse. This Agreement may only be enforced against, and any claim, action, suit or other legal proceeding based upon, arising out of, or related to this Agreement, or the negotiation, execution or performance of this Agreement, may only be brought against the entities that are expressly named as parties hereto and then only with respect to the specific obligations set forth herein with respect to such party. No past, present or future director, officer, employee, incorporator, manager, member, partner, stockholder, Affiliate, agent, attorney or other Representative of any party hereto or of any

Affiliate of any party hereto, or any of their successors or permitted assigns, shall have any liability for any obligations or liabilities of any party hereto under this Agreement or for any claim, action, suit or other legal proceeding based on, in respect of or by reason of the transactions contemplated hereby.

Section 9.13 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

Section 9.14 Entire Agreement. This Agreement and the other Transaction Documents constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersede all prior and contemporaneous representations, warranties, understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Agreement and those in the other Transaction Documents, the Exhibits and Disclosure Schedules (other than an exception expressly set forth as such in the Disclosure Schedules), the statements in the body of this Agreement will control.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

GENERAL FLANGE & FORGE LLC

By /s/ Drew M. Kelley

Name: Drew M. Kelley

Title: Chief Financial Officer

/S/

GFFC HOLDINGS, LLC

By /s/ Weston Quasha

Name: Weston Quasha

Title: President

Exhibits Index

Exhibit A Bill of Sale; Assignment and Assumption Agreement

Exhibit B Assignment and Assumption of Lease

Exhibit C Non-Compete Agreement

Exhibit D Transition Services Agreement

EXHIBIT 10.1

THIRD AMENDMENT TO Second AMENDED AND RESTATED CREDIT AGREEMENT

This THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this “ Amendment ”), is entered into as of September 21, 2017, by and among ARC GROUP WORLDWIDE, INC., a Utah corporation (the “ Parent ”), ADVANCED FORMING TECHNOLOGY, INC. a Colorado corporation (“ AFT ”), ARC WIRELESS, INC., a Delaware corporation (“ Wireless ”), FLOMET LLC, a Delaware limited liability company (“ Flomet ”), GENERAL FLANGE & FORGE LLC, a Delaware limited liability company (“ General Flange ”), 3D MATERIAL TECHNOLOGIES, LLC, a Delaware limited liability company (“ 3D Material ”), QUADRANT METALS TECHNOLOGIES LLC, a Delaware limited liability company (“ Quadrant ”), ARC METAL STAMPING, LLC, a Delaware limited liability company (“ Stamping ”), ADVANCE TOOLING CONCEPTS, LLC, a Colorado limited liability company (“ Tooling ”), ARC WIRELESS, LLC, a Delaware limited liability company (“ Wireless LLC ”), and THIXOFORMING LLC, a Colorado limited liability company (“ Thixoforming ” and together with AFT, Wireless, Flomet, General Flange, 3D Material, Quadrant, Stamping, Tooling and Wireless LLC, each a “ Borrower ” and collectively, the “ Borrowers ”), the Lenders party hereto, and the Administrative Agent (as defined below).

RECITALS:

WHEREAS, the Parent, the Borrowers, the Lenders and Citizens Bank, N.A., as administrative agent (in such capacity, the “ Administrative Agent ”) and Collateral Agent, are parties to the Second Amended and Restated Credit Agreement, dated as of September 29, 2016, as amended by that certain First Amendment to Second Amended and Restated Credit Agreement, dated as of March 21, 2017, and as further amended by that certain Second Amendment to Second Amended and Restated Credit Agreement, dated of May 12, 2017 (as the same may be further amended, supplemented or otherwise modified from time to time, the “ Second Amended and Restated Credit Agreement ”). Capitalized terms used but not defined herein shall have the meanings given to them in the Second Amended and Restated Credit Agreement; and

WHEREAS, the Parent and the Borrowers wish to amend the Second Amended and Restated Credit Agreement on the terms set forth herein; and

WHEREAS, the Administrative Agent and the Lenders are willing to amend the Second Amended and Restated Credit Agreement as provided for herein.

NOW THEREFORE, in consideration of the premises and the agreements herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

Section 1. Interpretation.

1.1 Interpretation . This Amendment shall be construed and interpreted in accordance with the rules of construction set forth in Sections 1.02 , 1.03 , 1.04 , 1.05 and 1.06 of the Second Amended and Restated Credit Agreement.

Section 2. Amendment to Second Amended and Restated Credit Agreement.

2.1 Amendment of Section 1.01 (Defined Terms) . Section 1.01 of the Second Amended and Restated Credit Agreement is hereby amended as follows:

(a) The definition of “Consolidated EBITDA” is hereby amended by deleting the word “and” immediately following the semicolon at the end of subclause (b)(viii), adding the word “and” immediately following the semicolon at the end of subclause (b)(ix), and adding a new subclause (b)(x) as follows:

“(x) all non-cash expenses related to share based compensation, write-offs of tooling and other fixed assets, inventory write-offs and reserve adjustments.”

(b) The definition of “Consolidated Net Income” is hereby amended by amending the proviso immediately following subclause (h) as follows:

“ provided , however , that the items described in subsections (a), (b), (e), (f) and (g) above will not increase Consolidated Net Income by more than (i) $7,014,000 for any period of four (4) fiscal quarters that includes June 30, 2017, and (ii) $2,000,000 for any other period of four (4) fiscal quarters.”

Section 3. Effectiveness.

3.1 Conditions Precedent . The effectiveness of this Amendment is subject to the satisfaction of the following condition precedent:

(a) this Amendment shall have been (i) executed by the Parent, each Borrower, the Administrative Agent and each Lender and (ii) acknowledged by each of the other Loan Parties, and in each case, counterparts hereof as so executed or acknowledged shall have been delivered to the Administrative Agent, sufficient in number for distribution to the Administrative Agent, each Lender and the Parent; and

(b) and all fees of counsel to the Administrative Agent incurred in connection with this Amendment that are required to be paid pursuant to Section 10.04 of the Credit Agreement and for which the Borrowers shall have received an invoice on or prior to the date hereof shall have been or will be substantially simultaneously paid.

3.2 Amendment Effective Date . So long as the conditions precedent set forth in Section 3.1 above are satisfied on or prior to September 30, 2017, this Amendment shall be effective as of June 30, 2017 (such date, the “ Amendment Effective Date ”).

Section 4. Affirmation.

Each of the Loan Parties hereby consents and agrees to and acknowledges and affirms the terms of this Amendment. Each of the Loan Parties hereby further agrees that their respective obligations under the Second Amended and Restated Credit Agreement, the Guarantee and Collateral Agreement and each of the other Loan Documents shall remain in full force and effect and shall be unaffected hereby.

Section 5. Representations and Warranties . Each Loan Party hereby represents and warrants to the Administrative Agent and the Lenders party hereto as follows:

5.1 Power and Authority . It has all requisite power and authority to execute and deliver this Amendment and perform its obligations hereunder.

5.2 Authorization . It has taken all necessary corporate or limited liability company action, as applicable, to duly authorize the execution and delivery of, and performance of its obligations under, this

Amendment and this Amendment has been duly executed and delivered by its duly authorized officer or officers.

5.3 Non-Violation . The execution and delivery of this Amendment and the performance and observance by it of the terms and provisions hereof (a) do not violate or contravene its Organization Documents or any applicable Laws or (b) conflict with or result in a breach or contravention of any provision of, or constitute a default under, any other agreement, instrument or document binding upon or enforceable against it.

5.4 Validity and Binding Effect . Upon satisfaction of the conditions set forth in Section 3.1 above, this Amendment shall constitute a legal, valid and binding agreement of such Loan Party, enforceable against it in accordance with its terms, except as such enforceability may be limited by Debtor Relief Laws and by general principles of equity and principles of good faith and fair dealing.

5.5 Representations and Warranties in Second Amended and Restated Credit Agreement . The representations and warranties of each Loan Party contained in the Second Amended and Restated Credit Agreement as modified hereby are true and correct in all material respects (without duplication of any materiality qualifier contained therein) on and as of the date hereof as though made on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects (without duplication of any materiality qualifier contained therein) as of such earlier date.

5.6 No Consent . No consent, exemption, authorization or approval of, registration or filing with, or any other action by, any Governmental Authority is required in connection with this Amendment or the execution, delivery, performance, validity or enforceability of this Amendment, except consents, exemptions, authorizations, approvals, filings and actions which have been obtained or made and are in full force and effect.

5.7 No Event of Default . No Default or Event of Default exists before, nor will occur immediately after, giving effect to this Amendment or as a result of observing any provision hereof.

Section 6. Miscellaneous.

6.1 Successors and Assigns . This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

6.2 Survival of Representations and Warranties . All representations and warranties made hereunder shall survive the execution and delivery of this Amendment.

6.3 Severability . Any provision of this Amendment that 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.

6.4 Headings . The headings, captions and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

6.5 Loan Documents Unaffected . Each reference to the Second Amended and Restated Credit Agreement in any Loan Document shall hereafter be construed as a reference to the Second Amended and Restated Credit Agreement as modified hereby. Except as otherwise specifically provided, this Amendment

shall not, by implication or otherwise, limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of any party under, the Second Amended and Restated Credit Agreement or any other Loan Document, nor alter, modify, amend or in any way affect any provision of the Second Amended and Restated Credit Agreement or any other Loan Document, including, without limitation, the guarantees, pledges and grants of security interests, as applicable, under each of the Collateral Documents, all of which are ratified and affirmed in all respects and shall continue in full force and effect. This Amendment is a Loan Document.

6.6 Entire Agreement . This Amendment, together with the Second Amended and Restated Credit Agreement and the other Loan Documents, integrates all the terms and conditions mentioned herein or incidental hereto and supersede all oral representations and negotiations and prior writings with respect to the subject matter hereof.

6.7 Acknowledgments . Each Loan Party hereby acknowledges that:

(a) it has consulted and been advised by its own legal counsel in the negotiation, execution and delivery of this Amendment and the other Loan Documents and it has consulted its own accounting, regulatory and tax advisors to the extent it has deemed appropriate;

(b) it is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated by this Amendment and by the other Loan Documents;

(c) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to any Loan Party arising out of or in connection with this Amendment or any of the other Loan Documents, and the relationship between the Administrative Agent and the Lenders, on one hand, and the Loan Parties, on the other hand, in connection herewith or therewith is solely that of debtor and creditor;

(d) the Lenders have no obligation to the Loan Parties or any of their respective Affiliates with respect to the transactions contemplated by this Amendment and by the other Loan Documents, except any obligations expressly set forth in this Amendment and in the other Loan Documents;

(e) the Lenders and their Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Loan Parties and their respective Affiliates, and the Lenders have no obligation to disclose any of such interests to the Loan Parties or any of their respective Affiliates; and

(f) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Loan Parties and the Lenders.

6.8 Release . Immediately upon the execution and acceptance of this Amendment, each Loan Party and each of their respective successors, assigns, subsidiaries, affiliates, insurers, employees, attorneys, agents, representatives and other persons and/or entities connected therewith, hereby fully and forever compromises, settles, releases, acquits and discharges the Administrative Agent, the Lenders, the Arranger and their respective Affiliates and each of their and their Affiliates’ present, former and future directors, officers, employees, agents, partners, trustees, advisors or other representatives and other persons and/or entities connected therewith (collectively, the “ Released Parties ”) from any and all debts, claims, demands, liabilities, responsibilities, disputes, causes, damages, actions, causes of action (whether at law and/or in equity) and obligations of every nature whatsoever (whether liquidated or unliquidated, known or unknown, asserted or unasserted, foreseen or unforeseen, matured or unmatured, fixed or contingent) that each Loan Party has, had and/or may claim to have against any of the Released Parties which arise from or relate to

any actions which any of the Released Parties have and/or may have taken or have and/or may have omitted to take prior to the date this Agreement was executed and, without limiting the foregoing, with respect to the Second Amended and Restated Credit Agreement and/or any documents executed and/or delivered in connection with the foregoing.

6.9 Counterparts . This Amendment may be executed by the parties hereto separately in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same agreement. Transmission by a party to another party (or its counsel) via facsimile or electronic mail of a signed copy of this Amendment (or a signature page of this Amendment) shall be as fully effective as delivery by such transmitting party to the other parties hereto of a counterpart of this Amendment that had been manually signed by such transmitting party.

6.10 Governing Law . THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). TO THE FULLEST EXTENT PERMITTED BY LAW, THE PARENT, EACH BORROWER, AND EACH GUARANTOR BY ITS ACKNOWLEDGMENT HEREOF HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK GOVERNS THIS AMENDMENT OR ANY OF THE OTHER LOAN DOCUMENTS.

6.11 Jury Trial Waiver . EACH OF THE PARTIES TO THIS AMENDMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AMENDMENT OR ANY OF THE OTHER LOAN DOCUMENTS (INCLUDING, WITHOUT LIMITATION, ANY AMENDMENTS, WAIVERS OR OTHER MODIFICATIONS RELATING TO ANY OF THE FOREGOING), OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

[ Signature page follows ]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.


Advanced Forming Technology, Inc. , as a Borrower
By: /s/ Drew M. Kelley
Name: Drew M. Kelley Title: CFO
ARC WIRELESS, INC. , as a Borrower
By: /s/ Drew M. Kelley
Name: Drew M. Kelley Title: CFO
FLOMET LLC , as a Borrower
By: /s/ Drew M. Kelley
Name: Drew M. Kelley Title: CFO
GENERAL FLANGE & FORGE LLC , as a Borrower
By: /s/ Drew M. Kelley
Name: Drew M. Kelley Title: CFO
3D MATERIAL TECHNOLOGIES , LLC , as a Borrower
By: /s/ Drew M. Kelley
Name: Drew M. Kelley Title: CFO

[ Signature Page to First Amendment to Credit Agreement ]

NAI-1502243850v6

Quadrant metals technologies llc, as a Borrower

By: /s/ Drew M. Kelley

Name: Drew M. Kelley

Title: CFO

ARC WIRELESS, llc, as a Borrower

By: /s/ Drew M. Kelley

Name: Drew M. Kelley

Title: CFO

THIXOFORMING llc, as a Borrower

By: /s/ Drew M. Kelley

Name: Drew M. Kelley

Title: CFO

ARC METAL STAMPING, llc, as a Borrower

By: /s/ Drew M. Kelley

Name: Drew M. Kelley

Title: CFO

ADVANCE TOOLING CONCEPTS, llc, as a Borrower

By: /s/ Drew M. Kelley

Name: Drew M. Kelley

Title: CFO

ARC GROUP WORLDWIDE, INC. , as the Parent

By: /s/ Drew M. Kelley

Name: Drew M. Kelley

Title: CFO


CITIZENS BANK, N.A. , as Administrative Agent and Collateral Agent and as a Lender

By:

/s/ Kenneth Wales

Name:

Kenneth Wales

Title:

Vice President

EXHIBIT 10.2

FOURTH AMENDMENT TO CREDIT AGREEMENT

This FOURTH AMENDMENT TO CREDIT AGREEMENT (this “ Amendment ”), is entered into as of September 22, 2017, by and among ARC Group Worldwide, Inc., a Utah corporation (the “ Parent ”), the other Loan Parties party hereto, the Lenders (as defined below) party hereto, and the Administrative Agent (as defined below).

RECITALS:

WHEREAS, the Parent, the Borrowers party thereto, the lenders from time to time party thereto (the “ Lenders ”), and McLarty Capital Partners SBIC, L.P., as administrative agent (in such capacity, including any successor thereto, the “ Administrative Agent ”), are parties to the Credit Agreement, dated as of November 10, 2014, (as amended by that certain First Amendment to Credit Agreement, dated as of December 29, 2014, as amended by that certain Second Amendment to Credit Agreement, dated as of April 20, 2016, as amended by that certain Consent, Release and Third Amendment to Credit Agreement, dated as of March 31, 2017, and as the same may be further amended, restated, amended and restated, supplemented or otherwise modified from time to time (including by this Amendment), the “ Credit Agreement ”; capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement);

WHEREAS, the Parent and the Borrowers wish to amend the Credit Agreement on the terms set forth herein;

WHEREAS, the Administrative Agent and the Lenders are willing to amend the Credit Agreement as provided for herein;

Section 1. Interpretation.

1.1 Interpretation . This Amendment shall be construed and interpreted in accordance with the rules of construction set forth in Sections 1.02 , 1.03 , 1.04 , 1.05 and 1.06 of the Credit Agreement.

Section 2. [Reserved].

Section 3. Amendment to Credit Agreement.

3.1 Amendment of Section 1.01 (Defined Terms) . Section 1.01 of the Credit Agreement is hereby amended by amending the definition of “Consolidated EBITDA” by deleting “and” at the end of clause (b)(x) thereof, and inserting the following at the end of clause (b)(xi) thereof as clause (b)(xii) and (b)(xiii) respectively:

(xii) all non-cash expenses related to share based compensation, write-offs of tooling and other fixed assets, inventory write-offs and reserve adjustments; and

(xiii) such additional non-cash amounts as set forth on that certain Test Period Calculation Schedule, dated September 22, 2017, delivered by the Administrative Agent, on behalf of the Lenders, to the Borrowers on September 22, 2017;

For the avoidance of doubt, the treatment of non-cash charges permissible by the above revisions to Section 1.01, and incurred in the fiscal quarter ended June 30, 2017, are separate and distinct from those permissible as set forth in the Test Period Calculation Schedule, dated March 31, 2017.

3.2 Amendment of Section 1.01 (Defined Terms) . Section 1.01 of the Credit Agreement is hereby amended by amending the definition of “Consolidated Net Income” by amending the proviso immediately following subclause (h) as follows:

“ provided, however , that the non-cash items described in subsections (a), (b), (e), (f) and (g) above will not increase Consolidated Net Income by more than (i) $7,014,000 for any period of four (4) fiscal quarters that includes June 30, 2017, and (ii) $2,000,000 for any other period of four (4) fiscal quarters.”

3.3 Amendment of Section 7.14(b) (Maximum Total Leverage Ratio) . Section 7.14(b) of the Credit Agreement is hereby amended and restated in its entirety as follows:

“(b) Maximum Total Leverage Ratio . Permit the Total Leverage Ratio, as of the last day of any fiscal quarter ending during any period set forth in the table below, to exceed the ratio set forth opposite such period in the table below:


Period	Total Leverage Ratio
Closing Date through December 30, 2014	5.50:1.00
December 31, 2014 through March 30, 2015	5.50:1.00
March 31, 2015 through June 29, 2015	5.25:1.00
June 30, 2015 through September 29, 2015	5.00:1.00
September 30, 2015 through March 26, 2016	4.75:1.00
March 27, 2016 through September 24, 2016	5.50:1.00
September 25, 2016 through December 24, 2016	5.00:1.00
December 25, 2016 through March 25, 2017	4.50:1.00
March 26, 2017 through June 29, 2017	4.25:1.00
June 30, 2017 through June 30, 2018	4.00:1.00
July 1, 2018 and thereafter	3.50:1.00

Section 4. Reserved.

Section 5. Effectiveness.

5.1 Conditions Precedent . The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent:

(a) this Amendment shall have been duly executed by the Parent, the other Loan Parties, the Administrative Agent and the Lenders and, in each case, counterparts hereof as so executed shall have been delivered to the Administrative Agent, sufficient in number for distribution to the Administrative Agent, each Lender and the Parent;

(b) the Loan Parties shall have delivered that certain Third Amendment to Amended and Restated Credit Agreement (“ Third Amendment to Senior Credit Agreement ”), dated as of the Fourth Amendment Effective Date, in form and substance reasonably satisfactory to the Administrative Agent and in full force and effect as of the Fourth Amendment Effective Date;

(c) the Senior Credit Agreement (as amended by the Fifth Amendment to Senior Credit Agreement) shall be in full force and effect as of the date hereof;

(d) the Loan Parties shall have paid all reasonable legal fees and expenses of the Administrative Agent and Lenders in connection with the preparation, negotiation and execution of this Amendment and the other documents being executed or delivered in connection therewith;

(e) After giving effect to Section 2.2 of this Amendment, the representations and warranties contained in Section 7 of this amendment shall be true and correct in all material respects (except to the extent any such representation or warranty is qualified by materiality, in which case such representation or warranty shall be true and correct in all respects), in each case, with the same effect as though such representations and warranties had been made on and as of the Fourth Amendment Effective Date (except to the extent any such representation or warranty related to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects as of such earlier date); and

(f) Immediately after the consummation of this Amendment, no Default or Event of Default exists under any of the Loan Documents or the Senior Documents, and none will occur as a result of observing any provision hereof.

5.2 Amendment Effective Date . So long as the conditions precedent set forth in Section 3.1 above are satisfied on or prior to September 30, 2017, this Amendment shall be effective as of June 30, 2017 (such date, the “ Amendment Effective Date ”).

Section 6. Affirmation.

Each of the Loan Parties hereby consents and agrees to and acknowledges and affirms the terms of this Amendment. Each of the Loan Parties hereby further agrees that their respective obligations under the Credit Agreement, the Guarantee Agreement and each of the other Loan Documents shall remain in full force and effect and shall be unaffected hereby.

Section 7. Representations and Warranties . Each Loan Party hereby represents and warrants to the Administrative Agent and the Lenders party hereto as follows:

7.1 Power and Authority . It has all requisite power and authority to execute and deliver this Amendment and perform its obligations hereunder.

7.2 Authorization . It has taken all necessary corporate or limited liability company action, as applicable, to duly authorize the execution and delivery of, and performance of its obligations under, this Amendment and this Amendment has been duly authorized and duly executed and delivered by its duly authorized officer or officers.

7.3 Non-Violation . The execution and delivery of this Amendment and the performance and observance by it of the terms and provisions hereof (a) do not violate or contravene its Organization Documents or any applicable Laws or (b) conflict with or result in a breach or contravention of any provision of, or constitute a default under, any other agreement, instrument or document binding upon or enforceable against it.

7.4 Validity and Binding Effect . Upon satisfaction of the conditions set forth in Section 5.1 above, this Amendment shall constitute a legal, valid and binding agreement of such Loan Party, enforceable against it in accordance with its terms, except as such enforceability may be limited by Debtor Relief Laws and by general principles of equity and principles of good faith and fair dealing.

7.5 Representations and Warranties in Credit Agreement . After giving effect to Section 2.2 of this Amendment, the representations and warranties of each Loan Party contained in the Credit Agreement are true and correct in all material respects (without duplication of any materiality qualifier contained therein) on and as of the date hereof as though made on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects (without duplication of any materiality qualifier contained therein) as of such earlier date.

7.6 No Consent . No consent, exemption, authorization or approval of, registration or filing with, or any other action by, any Governmental Authority is required in connection with this Amendment or the execution, delivery, performance, validity or enforceability of this Amendment, except consents, exemptions, authorizations, approvals, filings and actions which have been obtained or made and are in full force and effect.

7.7 No Event of Default . After giving effect to the consummation of this Amendment, no Default or Event of Default exists or will occur as a result of observing any provision hereof.

Section 8. Miscellaneous.

8.1 Incorporation by Reference. Sections 10.01 (Amendments, etc.), 10.02 (Notices and Other Communications; Facsimile Copies), 10.04 (Attorney Costs and Expenses), 10.05 (Indemnification by the Borrowers), 10.07 (Successors and Assigns), 10.11 (Counterparts; Integration; Effectiveness), 10.12 (Electronic Execution of Assignments and Certain Other Documents), 10.13 (Survival of Representations and Warranties), 10.14 (Severability), 10.15 (GOVERNING LAW), and 10.16 (WAIVER OF RIGHT TO TRIAL BY JURY) of the Credit Agreement are incorporated herein by reference, mutatis mutandis .

8.2 Headings . The headings, captions and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

8.3 Loan Documents Unaffected . Each reference to the Credit Agreement in any Loan Document shall hereafter be construed as a reference to the Credit Agreement as modified hereby. Except as otherwise specifically provided, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of any party under, the Credit Agreement or any other Loan Document, nor alter, modify, amend or in any way affect any provision of the Credit Agreement or any other Loan Document, including, without limitation, the guarantees, pledges and grants of security interests, as applicable, under each of the Loan Documents, all of which are ratified and affirmed in all respects and shall continue in full force and effect. This Amendment is a Loan Document.

8.4 Acknowledgments . Each Loan Party hereby acknowledges that:

(b) it is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated by this Amendment and by the other Loan Documents;

8.5 Release . Immediately upon the execution and acceptance of this Amendment, each Loan Party and each of their respective successors, assigns, subsidiaries, affiliates, insurers, employees, attorneys, agents, representatives and other persons and/or entities connected therewith, hereby fully and forever compromises, settles, releases, acquits and discharges the Administrative Agent, the Lenders, and their respective Affiliates (collectively, the “ Released Parties ”) and each of the Released Parties’ present, former and future directors, officers, employees, agents, partners, trustees, attorneys, advisors or other representatives and other persons and/or entities connected therewith (collectively, the “ Releasees ”) from any and all debts, claims, demands, liabilities, responsibilities, disputes, causes, damages, actions, causes of action (whether at law and/or in equity) and obligations of every nature whatsoever (whether liquidated or unliquidated, known or unknown, asserted or unasserted, foreseen or unforeseen, matured or unmatured, fixed or contingent) that each Loan Party has, had and/or may claim to have against any of the Releasees which arise from or relate to any actions which any of the Releasees have and/or may have taken or have and/or may have omitted to take prior to the date this Amendment was executed and, without limiting the

foregoing, with respect to the Credit Agreement and/or any documents executed and/or delivered in connection with the foregoing.

[ Signature page follows ]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.

ARC GROUP WORLDWIDE, INC.

By: /s/ Drew M. Kelley

Name: Drew M. Kelley

Title: CFO

ADVANCED FORMING TECHNOLOGY, INC. ,

as a Borrower

By: /s/ Drew M. Kelley

Name: Drew M. Kelley

Title: CFO

ARC WIRELESS, INC. ,

as a Borrower

By: /s/ Drew M. Kelley

Name: Drew M. Kelley

Title: CFO

flomet llc ,

as a Borrower

By: /s/ Drew M. Kelley

Name: Drew M. Kelley

Title: CFO

[ Signature Page to Fourth Amendment to Credit Agreement ]

3d material technologies, llc ,

as a Borrower

By: /s/ Drew M. Kelley

Name: Drew M. Kelley

Title: CFO

QUADRANT METALS TECHNOLOGIES LLC ,

as a Borrower

By: /s/ Drew M. Kelley

Name: Drew M. Kelley

Title: CFO

ARC Metal Stamping, LLC ,

as a Guarantor

By: /s/ Drew M. Kelley

Name: Drew M. Kelley

Title: CFO

Advance tooling concepts, LLC ,

as a Guarantor

By: /s/ Drew M. Kelley

Name: Drew M. Kelley

Title: CFO

ThixoforMing LLC ,

as a Guarantor

By: /s/ Drew M. Kelley

Name: Drew M. Kelley

Title: CFO

[ Signature Page to Fourth Amendment to Credit Agreement ]

MCLARTY CAPITAL PARTNERS SBIC, L.P. ,

as Administrative Agent and as a Lender

By: McLarty Capital Partners SBIC, LLC, its general partner

By: /s/ Christopher D. Smith

Name: Christopher D. Smith

Title: Co-Founder & Co-President

[ Signature Page to Fourth Amendment to Credit Agreement ]

EXHIBIT 31.1

CERTIFICATIONS

I, Drew M. Kelley, certify that:

I have reviewed this Form 10-Q of ARC Group Worldwide, Inc.;

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;

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;

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.

e
Date: November 14, 2017

/s/ Drew M. Kelley
Name:	Drew M. Kelley
Title:	Interim Principal Executive Officer

EXHIBIT 31.2

CERTIFICATIONS

I, Drew M. Kelley, certify that:

I have reviewed this Form 10-Q of ARC Group Worldwide, Inc.;

(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.

eb
Date: November 14, 2017

/s/ Drew M. Kelley
Name:	Drew M. Kelley
Title:	Principal Financial Officer and Chief Accounting Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q (the “Report”) of ARC Group Worldwide, Inc. (the “Company”) for the quarter ended October 1, 2017, the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of the undersigned knowledge and belief:

(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.



Dated: November 14, 2017

	/s/ Drew M. Kelley
	Name:	Drew M. Kelley
	Title:	Interim Principal Executive Officer



Dated: November 14, 2017

	/s/ Drew M. Kelley
	Name:	Drew M. Kelley
	Title:	Principal Financial Officer and
		Chief Accounting Officer