Item
1.01.
Entry into a Material Definitive Agreement.
On
September 29, 2017, ATRM Holdings, Inc. (the “Company”), Lone Star Value Investors, LP (“LSVI”) and Lone
Star Value Co-Invest I, LP (“LSV Co-Invest I”) entered into an Exchange Agreement, dated as of the same date (the
“Exchange Agreement”), pursuant to which the Company issued to LSVI and LSV Co-Invest I a total of 132,548 shares
of a new class of 10.00% Series B Cumulative Preferred Stock, par value $0.001 per share (the “Series B Stock”), of
the Company in exchange for the return and cancellation of all of the unsecured promissory notes of the Company (the “Notes”)
held by LSVI and LSV Co-Invest I (the “Exchange”). The Notes had an aggregate of $13.3 million unpaid principal and
accrued and unpaid interest outstanding at the time of their cancellation.
On
September 29, 2017, in connection with the Exchange, the Company entered into a Registration Rights Agreement, dated as of the
same date (the “Registration Rights Agreement”), with LSVI and LSV Co-Invest I. The Registration Rights Agreement
provides that at any time after October 15, 2018, upon the written request of the holders of at least 66 2/3% of the shares of
Series B Stock issued in the Exchange that qualify as registrable securities as defined therein, the Company will prepare and
file with the Securities and Exchange Commission a registration statement covering the resale of those shares by their holders.
The
foregoing descriptions of the Exchange Agreement and the Registration Rights Agreement do not purport to be complete and are qualified
in their entirety by reference to the full text of such documents, which are filed herewith as Exhibits 10.1 and 10.2, respectively,
and are incorporated herein by reference.
At
the time of the Exchange, LSVI also owned 1,067,885 shares of the Company’s common stock, or approximately 45% of the shares
outstanding. Additionally, 10,000 shares of the Company’s common stock were held in an account managed by Lone Star Value
Management, LLC (“LSVM”), an affiliate of LSVI and LSV Co-Invest I. Jeffrey E. Eberwein, Chairman of the Company’s
Board of Directors (the “Board”), is the manager of Lone Star Value Investors GP, LLC, the general partner of LSVI
and LSV Co-Invest I, and sole member of LSVM, the investment manager of LSVI, and therefore may be deemed to beneficially own
the securities owned by LSVI and the securities held in the account managed by LSVM. The terms of the Exchange and the Series
B Stock were negotiated and approved by a special committee of the Board consisting solely of disinterested and independent directors.
On
September 29, 2017, in connection with the Exchange, the Company entered into amendments to its two Loan and Security Agreements
(as amended, the “Loan Agreements”) with Gerber Finance, Inc. (“Gerber Finance”) to permit the Exchange
and the Company’s payment of dividends on the Series B Stock in-kind, by the issuance of additional shares of Series B Stock,
in accordance with the terms of the Series B Stock (as described below). Under the Loan Agreements, the Company is not permitted
to pay dividends on the Series B Stock in cash without the consent of Gerber Finance. Additionally, in connection with the Exchange,
the subordination agreements by and among the Company, LSVI, LSV Co-Invest I and Gerber Finance, providing for the subordination
of the Company’s obligations under the Notes to its obligations to Gerber Finance, were terminated.