UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of report (Date of earliest event reported): June
26, 2015
ATRM
Holdings, Inc.
(Exact
Name of Registrant as Specified in Its Charter)
| Minnesota |
|
0-22166 |
|
41-1439182 |
(State
or other Jurisdiction
of Incorporation) |
|
(Commission
File Number) |
|
(IRS
Employer
Identification No.) |
| 3050
Echo Lake Avenue, Suite 300, Mahtomedi, Minnesota |
|
55115 |
| (Address
of Principal Executive Offices) |
|
(Zip
Code) |
Registrant’s
telephone number, including area code: (651) 704-1800
| |
N/A |
|
| |
(Former name or
former address if changed since last report) |
|
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under
any of the follow provisions:
[ ] Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
| Item
1.01. | Entry into a Material Definitive
Agreement. |
On
June 26, 2015, ATRM Holdings, Inc. (the “Company”) and KBS Builders, Inc., a wholly-owned subsidiary of the
Company, entered into an agreement (the “Settlement Agreement”) with Modular Fun I, Inc. (f/k/a KBS Building
Systems, Inc.), Modular Fun III, LLC (f/k/a Maine Modular Haulers, LLC), Modular Fun II, LLC (f/k/a All-Set, LLC (d/b/a KBS Homes)),
Paris Holdings, LLC (collectively, the “Sellers”), and Robert H. Farnham, Jr. (the “Principal”).
The Settlement Agreement is related to that certain Asset Purchase Agreement, dated as of April 2, 2014 (the “Purchase
Agreement”), by and among the same parties, pursuant to which the Company acquired the modular housing business now
operated by its subsidiaries KBS Builders, Inc. and Maine Modular Haulers, Inc. (collectively referred to as “KBS”)
for a combination of cash and an unsecured promissory note in the principal amount of $5.5 million (the “Seller Note”).
The Settlement Agreement provides, among other things, for the following: (i) the amendment and restatement of the Seller Note
to (a) reduce the principal amount thereof from $5.5 million to $2.5 million, (b) forgive all accrued and unpaid interest under
the Seller Note, (c) provide that the new principal amount will be payable in $100,000 increments on the first business day of
each month for the 25 months beginning July 1, 2015, and (d) provide that the new note (the “New Seller Note”)
will not accrue interest, except if it is in default; (ii) the Company withdraws indemnification and other claims made against
the Sellers and the Principal under the Purchase Agreement; and (iii) certain other agreements and mutual releases among the parties.
The
New Seller Note may be prepaid, in whole or in part, at any time, without premium or penalty, and the New Seller Note provides
for customary events of default, the occurrence of any of which may result in the principal and accrued and unpaid interest then
outstanding becoming immediately due and payable.
The
Company believes the reduction in its outstanding debt under the New Seller Note (after adjustment for imputed interest) and the
forgiveness of accrued and unpaid interest under the Seller Note will be recorded as a pretax gain of approximately $3.7 million
in its quarter ended June 30, 2015.
The
foregoing descriptions of the Settlement Agreement and the New Seller Note are not complete and are qualified in their entirety
by reference to the full text of such documents, which are filed herewith as Exhibit 10.1 and Exhibit 4.1, respectively,
and are incorporated herein by reference.
| Item
2.03. | Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The
information set forth in Item 1.01 regarding the New Seller Note is incorporated into this Item 2.03 by reference.
On
June 29, 2015, the Company issued a press release announcing its entry into the Settlement
Agreement. A copy of the press release is attached as Exhibit 99.1 and incorporated herein by reference.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
| Exhibit
No. |
|
Description |
|
|
|
| 4.1 |
|
Amended and Restated
Promissory Note, dated June 26, 2015, made by KBS Builders, Inc. for the benefit of Modular Fun I, Inc. (f/k/a KBS Building
Systems, Inc.). |
| |
|
|
| 10.1 |
|
Agreement, dated
as of June 26, 2015, by and among ATRM Holdings, Inc. (f/k/a Aetrium Incorporated), KBS Builders, Inc., Modular Fun I, Inc.
(f/k/a KBS Building Systems, Inc.), Modular Fun III, LLC (f/k/a Maine Modular Haulers, LLC), Modular Fun II, LLC (f/k/a All-Set,
LLC (d/b/a KBS Homes)), Paris Holdings, LLC, and Robert H. Farnham, Jr. |
| |
|
|
| 99.1 |
|
Press
Release, dated June 29, 2015. |
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 hereunto duly authorized.
| |
ATRM Holdings, Inc. |
| |
|
|
| Dated:
June 29, 2015 |
By: |
/s/
Paul H. Askegaard |
| |
Name: |
Paul
H. Askegaard |
| |
Title: |
Chief
Financial Officer |
EXHIBIT
INDEX
| Exhibit
No. |
|
Description |
| |
|
|
| 4.1 |
|
Amended
and Restated Promissory Note, dated June 26, 2015, made by KBS Builders, Inc. for the benefit of Modular Fun I, Inc. (f/k/a
KBS Building Systems, Inc.). |
| |
|
|
| 10.1 |
|
Agreement,
dated as of June 26, 2015, by and among ATRM Holdings, Inc. (f/k/a Aetrium Incorporated), KBS Builders, Inc., Modular Fun
I, Inc. (f/k/a KBS Building Systems, Inc.), Modular Fun III, LLC (f/k/a Maine Modular Haulers, LLC), Modular Fun II, LLC (f/k/a
All-Set, LLC (d/b/a KBS Homes)), Paris Holdings, LLC, and Robert H. Farnham, Jr. |
| |
|
|
| 99.1 |
|
Press
Release, dated June 29, 2015. |
Exhibit
4.1
AMENDED
AND RESTATED PROMISSORY NOTE
| $2,500,000.00 |
Kennebunk,
Maine |
| |
June
26, 2015 |
This
Amended and Restated Promissory Note (this “Note”) is issued by KBS
BUILDERS, INC., a Delaware corporation (the “Debtor”), to MODULAR FUN I, INC. (f/k/a KBS BUILDING SYSTEMS, INC.),
a Maine limited corporation based in South Paris, Maine (the “Holder”).
RECITALS:
A.
The Debtor and the Holder have agreed to modify certain provisions contained in that certain Promissory Note dated April 2, 2014,
issued by the Debtor to the Holder in the principal amount of $5,500,000.00 (the “Original Note”) as set forth herein,
in accordance with the terms of an Agreement, dated the date hereof, by and among ATRM Holdings, Inc. (f/k/a Aetrium Incorporated)
(“ATRM”), Debtor, Holder, Modular Fun III, LLC (f/k/a Maine Modular Haulers, LLC), Modular Fun II, LLC (f/k/a All-Set,
LLC (d/b/a KBS Homes)), Paris Holdings, LLC, and Robert H. Farnham, Jr.
B.
This Note amends, restates and replaces in its entirety, and is given in substitution for, the Original Note.
FOR
VALUE RECEIVED, the Debtor promises to pay to the order of the Holder the sum of TWO MILLION FIVE HUNDRED THOUSAND and 00/100
DOLLARS and 00/100 ($2,500,000.00), in lawful money of The United States of America. Interest on the unpaid principal amount hereof
shall accrue at a rate of Ten Percent (10.00%) per annum for any period during which the Debtor is in Default (as defined below).
This Note may be prepaid, in whole or from time to time in part, at any time, without premium or penalty.
All
payments shall be delivered to the address at the end of this Note or other location directed by the Holder including electronic
and/or automatic bank account payment.
$100,000.00
principal amount of this Note shall be due and payable on the first business day of each month for the 25 months beginning July
1, 2015; provided, however, if any principal amount of this Note shall have been prepaid, the amount of scheduled principal payments
hereunder shall be reduced correspondingly to reflect such prepayment, beginning with the last scheduled principal payment hereunder.
No provision of this Note shall alter or impair the obligations of the Debtor, which are absolute and unconditional, to pay the
principal of this Note at the place, and times, and in the currency, herein prescribed.
The
occurrence of any of the following events shall constitute a default hereunder (each, a “Default”, which may be cured
by Debtor and upon such cure a Default shall no longer be deemed to exist): (a) default in the payment of any sums due hereunder
when due and such failure continues for a period of five (5) business days; (b) default in the performance of any other terms
of this Note (other than such failure described subsection (a) above), which failure shall continue uncured for twenty (20) calendar
days after notice thereof to the Debtor; (c) the death, dissolution or termination of existence of the Debtor; (d) the insolvency
or the execution of an assignment for the benefit of creditors, or the appointment of a receiver of any property of the Debtor,
which shall continue undismissed, unbounded or undischarged for sixty (60) days; or (e) the filing by or against the Debtor of
a petition under the Federal Bankruptcy Code or the insolvency laws of any state or any law intended for the relief of debtors
not released within sixty (60) days.
Upon
the occurrence of any Default, this Note shall, at the option of the Holder, become immediately due and payable in full, including
all accrued and unpaid interest. Except as specifically set forth above, the Holder is not under any obligation to provide notice
of Default or a cure period.
In
the event of any Default, if this Note is turned over to an attorney for collection, the Debtor agrees to pay all reasonable costs
of collection, including reasonable attorney’s fees and expenses and all out-of-pocket expenses incurred by the Debtor in
connection with such collection efforts.
This
Note shall be the obligation of the Debtor and all other principals, endorsers, guarantors, insureds, and shall be binding upon
them, their personal representatives, heirs, successors and assigns.
The
Debtor and all other principals, endorsers, guarantors and insureds hereby waive presentment, demand, notice, and protest, except
for those notices expressly provided for herein.
If
any portion of this Note shall be found invalid or unenforceable, then it shall not thereby affect the validity or enforceability
of the remainder hereof. A waiver of any Default shall not constitute a waiver of any subsequent Default or Defaults.
If
any payment hereunder shall be deemed by final order of a court of competent jurisdiction to have been a voidable preference or
fraudulent conveyance, then the obligation of the Debtor shall survive as an obligation due hereunder and shall not be discharged
by said payment, notwithstanding the return by Holder to Debtor or any other party of the original of this Note.
Under
no circumstances shall the liability of Holder to the Debtor exceed the amount of funds advanced pursuant hereto and there is
no obligation to advance any further funds.
This
Note is being executed and delivered in Maine and shall be governed by and construed in accordance with the laws of the State
of Maine, to the maximum extent the parties may so lawfully agree. The Debtor hereby submits to the jurisdiction of any state
or federal court located within the State of Maine.
IT
IS MUTUALLY AGREED BY HOLDER AND THE DEBTOR THAT HOLDER AND THE DEBTOR SHALL AND HEREBY DO WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING, COUNTERCLAIM, OBJECTION TO CLAIM IN A BANKRUPTCY CASE, OR OTHER LITIGATION OF ANY TYPE BROUGHT BY HOLDER OR THE DEBTOR
AGAINST THE OTHER ON ANY MATTER WHATSOEVER ARISING OUT OF, RELATED TO, OR IN ANY WAY CONNECTED WITH THIS NOTE AND/OR THE TRANSACTIONS
OR DOCUMENTS CONTEMPLATED HEREBY. Without in any way limiting the scope or effect of the foregoing waiver of the jury trial right,
Holder and the Debtor specifically agree that such waiver shall be effective in any action arising out of or related to: (A) any
alleged oral promise or commitment by Holder; (B) any alleged modification or amendment of this Note and/or the transactions or
documents contemplated hereby, whether in writing, oral, or by alleged conduct; (C) any enforcement of this Note and/or the transactions
or documents contemplated hereby; and (D) any repossession, taking of possession, or disposition of collateral securing the indebtedness
evidenced by this Note and/or the transactions or documents contemplated hereby. Without in any way limiting the foregoing, Holder
and the Debtor further agree that their respective rights to a trial by jury are waived by operation of this paragraph as to any
action, counterclaim, or other proceeding which seeks, in whole or in part, to challenge the validity or enforceability of this
Note and/or the transactions or documents contemplated hereby or any provision thereof. Holder shall be bound by this paragraph
upon its acceptance of this Note.
The
obligation evidenced by this Note and all payments required hereunder, is absolute and shall not be subject to any rights of offset
whatsoever in nature arising from or related to the sale of certain business assets by the Holder to the Debtor under that certain
Asset Purchase Agreement, dated April 2, 2014, by and among ATRM, Debtor, Holder, (Modular Fun III, LLC) (f/k/a Maine Modular
Haulers, LLC), Modular Fun II, LLC (f/k/a All-Set, LLC (d/b/a KBS Homes)), Paris Holdings, LLC, and Robert H. Farnham, Jr. (the
“Purchase Agreement”). The obligation evidenced by this Note is guaranteed by ATRM as set forth in the Purchase Agreement.
The Debtor warrants and represents that execution and delivery of this Note has been duly authorized by all necessary votes and/or
approvals, and that this Note evidences a loan for business and commercial purposes.
(Signatures
on Next Page)
| |
|
KBS
BUILDERS, INC. |
| |
|
|
|
| |
|
By: |
/s/
Daniel M. Koch |
| |
|
Name: |
Daniel
M. Koch |
| |
|
Title: |
President
and CEO |
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|
|
|
| ACKNOWLEDGED
AND AGREED: |
|
|
| |
|
|
| MODULAR
FUN I, INC. |
|
|
| (f/k/a
KBS BUILDING SYSTEMS, INC.) |
|
|
| |
|
|
| By: |
/s/
Robert Farnham |
|
|
| Name: |
Robert
Farnham |
|
|
| Title: |
President |
|
|
Address
for payments:
Modular
Fun I, Inc.
c/o
Bergen & Parkinson, LLC
62
Portland Road, Suite 25
Kennebunk,
ME 04043
Attn:
Scott M. Edmunds
Exhibit
10.1
AGREEMENT
THIS
AGREEMENT (this “Agreement”), dated as of June 26, 2015, is made by and among ATRM Holdings, Inc. (f/k/a Aetrium
Incorporated), a Minnesota corporation (“ATRM”), and KBS Builders, Inc., a Delaware corporation (“Purchaser”),
on the one hand, and Modular Fun I, Inc. (f/k/a KBS Building Systems, Inc.), a Maine corporation, Modular Fun III, LLC (f/k/a
Maine Modular Haulers, LLC), a Maine limited liability company, Modular Fun II, LLC (f/k/a All-Set, LLC (d/b/a KBS Homes)), a
Maine limited liability company, Paris Holdings, LLC, a Maine limited liability company (each, a “Seller” and,
collectively, the “Sellers”), and Robert H. Farnham, Jr., an individual (the “Principal”),
on the other hand (each of ATRM, Purchaser, the Sellers and the Principal, a “Party”, and collectively, the
“Parties”).
RECITALS:
WHEREAS,
the Parties entered into that certain Asset Purchase Agreement, dated as of April 2, 2014 (the “Purchase Agreement”),
pursuant to which Purchaser purchased substantially all of the assets and assumed certain liabilities of the Sellers related to
their business of manufacturing, selling, and distributing modular housing units for residential and commercial use;
WHEREAS,
as partial consideration for the transactions set forth in the Purchase Agreement, Purchaser issued to KBS Building Systems, Inc.
(n/k/a Modular Fun I, Inc.) (the “Holder”) a promissory note in the original principal amount of $5,500,000
(the “Original Seller Note”);
WHEREAS,
on or about September 22, 2011, the Holder entered into an agreement with KBE Building Corporation (“KBE”),
which was amended on or about December 2, 2011 (as amended, the “KBE Agreement”), concerning the Nelton Court
Redevelopment Project (the “Nelton Court Project”), and notwithstanding the relevant provisions of the Purchase
Agreement and the personal guarantee by the Principal of the Holder’s obligations under the KBE Agreement (the “Personal
Guarantee”), Purchaser has been performing certain obligations of the Holder and the Principal and has communicated
in writing to KBE that Purchaser will perform certain items of punch-list or other remedial work on the Nelton Court Project (the
“Purchaser Work Items”), on behalf of the Holder and the Principal; and
WHEREAS,
on April 1, 2015, Purchaser and ATRM asserted certain claims against the Sellers and the Principal under the Purchase Agreement
in a notice delivered to the Sellers and the Principal in accordance with the Purchase Agreement, with respect to which the Sellers
and the Principal delivered an objection notice to Purchaser and ATRM in accordance with the Purchase Agreement on April 21, 2015.
NOW,
THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to
be legally bound hereby, agree as follows:
1. Settlement
of Claims.
(a) The
Parties agree that the Original Seller Note shall be amended and restated in the form attached as Exhibit A hereto (the
“New Seller Note”) in order to, among other things: (i) reduce the principal amount under the Original Seller
Note from $5,500,000 to $2,500,000, which will be treated as a reduction of the purchase price under the Purchase Agreement; and
(ii) provide that the principal amount of the New Seller Note will be payable to the Holder in $100,000 increments on the first
business day of each month for the 25 months beginning July 1, 2015, and will accrue interest only if said New Seller Note shall
be in Default. The Sellers and the Principal agree and acknowledge that all accrued and unpaid interest under the Original Seller
Note is hereby forgiven. The Holder agrees to deliver to the Purchaser the original signed Original Seller Note marked “CANCELLED”.
(b) Purchaser
and ATRM hereby withdraw all claims against the Sellers and the Principal under the Purchase Agreement, including but not limited
to claims with respect to (i) a working capital shortfall at the closing, (ii) the collectability of accounts receivable, (iii)
additional audit expense incurred, and (iv) work that Purchaser has performed to date on behalf of the Sellers and the Principal
under excluded contracts retained by the Sellers after the closing, including the contracts related to the Nelton Court Project
and the Trinity College – Crescent Street Housing project (the “Trinity Project”), subject to Section
1(c) below.
(c) With
respect to the Nelton Court Project:
(i) the
Holder and the Principal hereby affirm and ratify their respective principal liability to KBE with regard to the Nelton Court
Project pursuant to the KBE Agreement and the Personal Guarantee;
(ii) the
Holder and the Principal agree that Purchaser is entitled to receipt and delivery of the contract retainage (approximately $228,000)
(the “Retainage”) currently held by KBE and not paid to the Holder pursuant to the terms of the KBE Agreement,
subject to the provisions of paragraph (iv) below;
(iii) Purchaser
agrees to complete, at its sole cost and expense, the Purchaser Work Items on behalf of the Holder and the Principal, and the
Holder and the Principal acknowledge and agree that the liability of Purchaser and its affiliates with respect to the KBE Agreement
and the Nelton Court Project shall be limited to its completion of the Purchaser Work Items. Notwithstanding this provision, neither
Principal nor Holder agrees to indemnify Purchaser against any third-party claims related to the Nelton Court Project;
(iv) the
Holder and the Principal shall assume and resolve, at their sole cost and expense, all other claims or liabilities arising out
of or related to the KBE Agreement or the Nelton Court Project; provided that the Holder and the Principal may at their sole discretion
use the Retainage to offset such claims or liabilities; and
(v) Purchaser
shall reasonably assist the Holder and the Principal in negotiating with KBE a resolution of their liability to KBE and with regard
to the Nelton Court Project pursuant to the KBE Agreement and the Personal Guarantee, and the Holder and the Principal agree to
reasonably assist Purchaser in negotiating with KBE a resolution of the completion of the Purchaser Work Items, and to take such
steps or measures as may be necessary to give effect to, and provide Purchaser the benefit of, the provisions of paragraphs (i)
through (iv), above.
(d) Purchaser
shall prepare and report the payment under the New Seller Note and this Agreement as required by law, including the preparation
and filing of any Form 1099 or other similar form and the treatment of all or any portion of any amount payable under the New
Seller Note or this Agreement as interest or principal for any tax or other purpose. The Holder shall provide a completed and
signed Form W-9 to Purchaser.
2. Mutual
Releases.
(a) Purchaser
and ATRM, for the benefit of the Sellers, the Principal and each of their officers, directors, stockholders, agents, affiliates,
employees, attorneys, advisors and assigns, past and present, in their capacity as such (each Seller, the Principal, and each
such other person or entity, a “Seller Released Person”), hereby forever fully waives, discharges and releases,
and covenants not to sue, any of the Seller Released Persons for any and all claims, causes of action, actions, judgments, liens,
debts, contracts, indebtedness, damages, losses, liabilities, rights, interests and demands of whatsoever kind or character (collectively,
“Claims”), based on any event, fact, act, omission, or failure to act by the Seller Released Persons, whether
known or unknown, occurring or existing prior to the execution of this Agreement, relating to the Purchase Agreement, including
but not limited to Claims with respect to (i) a working capital shortfall at the closing, (ii) the collectability of accounts
receivable, (iii) additional audit expense incurred, and (iv) work that Purchaser has or will perform on behalf of the Sellers
and the Principal under excluded contracts retained by the Sellers after the closing, including the contracts related to the Nelton
Court Project and the Trinity Project, subject to Section 1(c) above; provided, however, this waiver and
release and covenant not to sue shall not include any Claims arising out of or related to any obligations under, or breach of,
this Agreement.
(b) The
Sellers and the Principal, for the benefit of Purchaser and ATRM and each of their officers, directors, stockholders, agents,
affiliates, employees, attorneys, advisors and assigns, past and present, in their capacity as such (Purchaser, ATRM and each
such other person or entity, a “Purchaser Released Person”), hereby forever fully waives, discharges and releases,
and covenants not to sue, any of the Purchaser Released Persons for any and all Claims based on any event, fact, act, omission,
or failure to act by the Purchaser Released Persons, whether known or unknown, occurring or existing prior to the execution of
this Agreement, relating to the Purchase Agreement and the Original Seller Note, including but not limited to Claims with respect
to unpaid principal and accrued and unpaid interest under the Original Seller Note; provided, however, this waiver
and release and covenant not to sue shall not include any Claims arising out of or related to any obligations under, or breach
of, this Agreement or the New Seller Note.
3. Representations
and Warranties of the Sellers and the Principal. Each of the Sellers and the Principal jointly and severally represent and
warrant to Purchaser and ATRM as follows:
(a) Each
Seller is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was organized.
(b) Each
Seller and the Principal has all requisite power and authority to execute and deliver this Agreement and the New Seller Note,
to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the New Seller Note, the performance of the obligations of the Sellers and the Principal hereunder
and thereunder and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized
by all requisite action on the part of such Party. This Agreement and the New Seller Note have been duly and validly executed
and delivered by each Seller and the Principal, and (assuming the due authorization, execution and delivery by the other Parties
hereto and thereto) constitutes the legal, valid and binding obligation of each Seller and the Principal, enforceable against
it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding
at law or in equity).
(c) None
of the execution or delivery by any Seller or the Principal of this Agreement or the New Seller Note, the consummation of any
of the transactions contemplated hereby or thereby, or compliance by any such Party with any of the provisions hereof or thereof
does or will conflict with, or result in any violation of, or constitute a breach of or a default (with or without notice or lapse
of time, or both) under, or result in the loss of any benefit under, or permit the acceleration of any obligation under, or give
rise to a right of termination, modification or cancellation under, any provision of (i) the certificate or articles of incorporation,
organization or formation, bylaws, limited liability company operating agreement or comparable organizational or governing documents
of any Seller, each as currently in effect, (ii) any agreement, contract, commitment, understanding or arrangement to which any
Seller or the Principal is a party or by which any Seller or the Principal is bound, or (iii) any law, rule, regulation, order,
judgment or decree applicable to any Seller or the Principal or by which any Seller or the Principal is bound.
4. Representations
and Warranties of ATRM. Purchaser and ATRM jointly and severally represent and warrant to each of the Sellers and the Principal
as follows:
(a) Each
of Purchaser and ATRM is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it
was organized.
(b) Each
of Purchaser and ATRM has all requisite power and authority to execute and deliver this Agreement and the New Seller Note, to
perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the New Seller Note, the performance of the obligations of Purchaser and ATRM hereunder and
thereunder and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all
requisite action on the part of such Party. This Agreement and the New Seller Note have been duly and validly executed and delivered
by each of Purchaser and ATRM, and (assuming the due authorization, execution and delivery by the other Parties hereto and thereto)
constitutes the legal, valid and binding obligation of each of Purchaser and ATRM, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights
and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).
(c) None
of the execution or delivery by any of Purchaser or ATRM of this Agreement or the New Seller Note, the consummation of any of
the transactions contemplated hereby or thereby, or compliance by any such Party with any of the provisions hereof or thereof
does or will conflict with, or result in any violation of, or constitute a breach of or a default (with or without notice or lapse
of time, or both) under, or result in the loss of any benefit under, or permit the acceleration of any obligation under, or give
rise to a right of termination, modification or cancellation under, any provision of (i) the certificate or articles of incorporation,
organization or formation, bylaws, limited liability company operating agreement or comparable organizational or governing documents
of Purchaser or ATRM, each as currently in effect, (ii) any agreement, contract, commitment, understanding or arrangement to which
Purchaser or ATRM is a party or by which Purchaser or ATRM is bound, or (iii) any law, rule, regulation, order, judgment or decree
applicable to Purchaser or ATRM or by which Purchaser or ATRM is bound.
5. Expenses.
Except as otherwise expressly provided in this Agreement or the New Seller Note, each of the Parties shall bear its own expenses
incurred in connection with the negotiation, preparation and execution of this Agreement and the New Seller Note, including all
fees and disbursements of counsel and other advisors retained by such Party.
6. Entire
Agreement; Amendments and Waivers. This Agreement and the New Seller Note represent the entire understanding and agreement
among the Parties with respect to the subject matter hereof. This Agreement can be amended, supplemented or changed, and any provision
hereof can be waived, only by written instrument making specific reference to this Agreement signed by the Party against whom
enforcement of any such amendment, supplement, modification or waiver is sought. No action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf of any Party, shall be deemed to constitute a waiver by the Party taking
such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any Party of
a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach
or as a waiver of any other or subsequent breach. No failure on the part of any Party to exercise, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right,
power or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.
7. Governing
Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of Maine applicable to contracts
made and performed in such State, without reference to conflict of law rules that would require the application of the laws of
another jurisdiction.
8. Notices.
All notices and other communications under this Agreement shall be in writing and shall be deemed given (a) when delivered personally
by hand (with written confirmation of receipt), (b) when sent by facsimile (with written confirmation of transmission) or (c)
one business day following the day sent by overnight courier (with written confirmation of receipt), in each case at the following
addresses and facsimile numbers (or to such other address or facsimile number as a Party may have specified by notice given to
the other Party(ies) pursuant to this provision):
If
to any Seller or the Principal to:
c/o
Bergen & Parkinson, LLC
62
Portland Road, Suite 25
Kennebunk,
ME 04043
Attn:
Scott M. Edmunds
Phone:
(207) 985-7000
Facsimile: (207) 985-7707
If
to Purchaser or ATRM, to:
c/o
ATRM Holdings, Inc.
3050
Echo Lake Avenue, Suite 300
Mahtomedi,
MN 55115
Attention:
Paul H. Askegaard
Phone:
(651) 704-1800
With
a copy (which shall not constitute notice) to:
Olshan
Frome Wolosky LLP
Park
Avenue Tower
65 East 55th Street
New
York New York 10022
Attention:
Adam W Finerman, Esq.
Phone:
(212) 451-2300
Facsimile:
(212) 451-2222
9. Severability.
If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any law or public policy,
all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such
determination that any term or other provision is invalid, illegal, or incapable of being enforced, the Parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.
10. Binding
Effect; No Third-Party Beneficiaries; Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties
and their respective successors and permitted assigns. Nothing in this Agreement shall create or be deemed to create any third
party beneficiary rights in any person or entity not a party to this Agreement, except as otherwise contemplated by Section
2. No assignment of this Agreement or of any rights or obligations hereunder may be made by any Party, directly or indirectly
(by operation of law or otherwise), without the prior written consent of the other Parties, and any attempted assignment without
the required consents shall be void.
11. Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original copy of this Agreement
and all of which, when taken together, shall be deemed to constitute one and the same agreement, and photostatic, .pdf or facsimile
copies of fully-executed counterparts of this Agreement shall be given the same effect as originals.
[Signature
page follows]
IN
WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized signatories of the Parties as of the
date hereof.
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ATRM
AND PURCHASER: |
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|
|
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ATRM HOLDINGS, INC. |
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|
|
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By: |
/s/
Daniel M. Koch |
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Name: |
Daniel
M. Koch |
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Title: |
President
and CEO |
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KBS
BUILDERS, INC. |
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|
|
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By: |
/s/
Daniel M. Koch |
| |
Name: |
Daniel
M. Koch |
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Title: |
President
and CEO |
[Continued
on the following page]
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sellers: |
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|
|
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Modular Fun I, Inc.
(F/K/A KBS Building Systems, Inc.)
|
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|
|
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By: |
/s/
Robert H. Farnham, Jr. |
| |
Name: |
Robert
H. Farnham, Jr. |
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Title: |
President |
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|
|
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Modular Fun III, LLC
(f/k/a Maine Modular Haulers, LLC)
|
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|
|
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By: |
/s/
Robert H. Farnham, Jr. |
| |
Name: |
Robert
H. Farnham, Jr. |
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Title: |
Manager |
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|
|
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Modular Fun II, LLC
(f/k/a ALL-SET, LLC)
|
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|
|
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By: |
/s/
Robert H. Farnham, Jr. |
| |
Name: |
Robert
H. Farnham, Jr. |
| |
Title: |
Manager |
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|
|
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Paris Holdings, LLC |
| |
|
|
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By: |
/s/
Robert H. Farnham, Jr. |
| |
Name: |
Robert
H. Farnham, Jr. |
| |
Title: |
Manager |
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|
|
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PRINCIPAL: |
| |
|
|
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/s/
Robert H. Farnham, Jr. |
| |
Robert H. Farnham, JR. |
EXHIBIT
A
Form
of Amended and Restated Promissory Note
Exhibit
99.1
ATRM
ANNOUNCES REDUCTION IN DEBT AND
SETTLEMENT
RELATED TO ACQUISITION OF KBS
St.
Paul, Minn (06/29/15)—ATRM Holdings, Inc. (Nasdaq: ATRM) (“ATRM” or the “Company”) announced
today that it has settled a dispute with the sellers of KBS (the “Sellers”), the modular construction business that
ATRM acquired in April 2014.
Background
Information Related to Settlement:
| |
● |
In
April 2014, ATRM acquired KBS, a Maine-based manufacturer of modular structures for residential and commercial applications,
pursuant to an asset purchase agreement executed on April 2, 2014 (“Purchase Agreement”). |
| |
|
|
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● |
As
partial consideration for the acquisition, a wholly-owned subsidiary of ATRM issued an unsecured promissory note (“Original
Note”) in the principal amount of $5.5 million with a maturity date of October 2, 2014, which was later extended to
December 1, 2014. No payments of principal or interest have been made on the Original Note. |
| |
|
|
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● |
In
April 2015, ATRM asserted certain indemnification and other claims against the Sellers related to KBS. The Sellers subsequently
delivered a notice to ATRM objecting to such claims. |
On
June 26, 2015, ATRM and the Sellers entered into an agreement settling the dispute (the “Settlement Agreement”). The
Settlement Agreement provided for the following:
| |
● |
The
Original Note was cancelled and replaced with a new unsecured promissory note (“New Seller Note”), which reflected
a reduction in the principal amount from $5.5 million to $2.5 million. |
| |
|
|
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● |
All
accrued and unpaid interest under the Original Note, amounting to approximately $458,000, was forgiven. |
| |
|
|
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● |
The
New Seller Note is payable in $100,000 installments payable on the first business day of each month for 25 months, beginning
on July 1, 2015. |
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|
|
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● |
The
New Seller Note will not accrue interest unless it is in default, in which case interest would accrue at a rate of 10% per
annum. |
| |
|
|
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● |
ATRM
withdrew all indemnification and other claims made against the Sellers. |
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|
|
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● |
ATRM
and the Sellers agreed to certain mutual releases. |
The
Company expects to record a pretax gain of approximately $3.7 million in its second quarter, which ends on June 30, 2015, in connection
with the Settlement Agreement. The estimated gain includes the reduction in the principal amount (after adjustment for imputed
interest) and forgiven interest expense from the Original Note.
“This
settlement agreement is a very favorable outcome for the Company,” said Dan Koch, ATRM’s president and chief executive
officer. “We are pleased that the negotiations concluded and we are excited to move forward with this issue behind us. Reducing
our debt and restructuring the payments over 25 months will allow us to better utilize cash flow for additional operating improvements,
gaining efficiencies, and ultimately growing our business.”
About
ATRM Holdings, Inc.
ATRM
Holdings, Inc. (Nasdaq: ATRM), through its wholly-owned subsidiaries KBS Builders, Inc. and Maine Modular Haulers, Inc., manufactures
modular housing units for commercial and residential applications. ATRM is based in St. Paul, Minnesota, with facilities in South
Paris and Waterford, Maine. ATRM’s website is www.atrmholdings.com.
Forward-Looking
Statements
This
press release may contain “forward-looking statements”, as such term is used within the meaning of the Private Securities
Litigation Reform Act of 1995. These “forward-looking statements” are not based on historical fact and involve assessments
of certain risks, developments, and uncertainties in the Company’s business looking to the future. Such forward-looking
statements can be identified by the use of terminology such as “may”, “will”, “should”, “expect”,
“anticipate”, “estimate”, “intend”, “continue”, or “believe”, or the
negatives or other variations of these terms or comparable terminology. Forward-looking statements may include projections, forecasts,
or estimates of future performance and developments. These forward-looking statements are based upon assumptions and assessments
that the Company believes to be reasonable as of the date hereof. Whether those assumptions and assessments will be realized will
be determined by future factors, developments, and events, which are difficult to predict and may be beyond the Company’s
control. Actual results, factors, developments, and events may differ materially from those the Company assumed and assessed.
Risks, uncertainties, contingencies, and developments, including those discussed in the Company’s filings with the Securities
and Exchange Commission, could cause the Company’s future operating results to differ materially from those set forth in
any forward-looking statement. There can be no assurance that any such forward-looking statement, projection, forecast or estimate
contained can be realized or that actual returns, results, or business prospects will not differ materially from those set forth
in any forward-looking statement. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking
statements. The Company disclaims any obligation to update any such factors or to publicly announce the results of any revisions
to any of the forward-looking statements contained herein to reflect future results, events or developments.
| Contact: |
Paul
Askegaard |
|
| |
ATRM
Holdings, Inc. |
|
| |
(651)
704-1812 |
|