Exhibit 10.14

 

LOAN AND SECURITY AGREEMENT

 

BETWEEN

 

GERBER FINANCE INC.

 

as Lender

 

EDGEBUILDER, INC. and

 

GLENBROOK BUILDING SUPPLY, INC.,

 

as Borrowers and Credit Parties

 

and

 

ATRM HOLDINGS, INC.

 

KBS BUILDERS, INC., and

 

MAINE MODULAR HAULERS, INC.

 

as Guarantors and Credit Parties

 

Dated: October 4, 2016

 

   

 

 

Table of Contents

 

I. DEFINITIONS 1         1.1 General Definitions. 1         1.2 Accounting
Terms. 17         1.3 Other Terms. 17       II. LOANS 18         2.1 Revolving
Credit Advances. 18       III. REPAYMENT 19         3.1 Repayment of the
Revolving Credit Advances. 19       IV. PROCEDURES 20         4.1 Procedure for
Revolving Credit Advances. 20       V. INTEREST AND FEES 20         5.1 Interest
and Fees. 20       VI. CONDITIONS PRECEDENT 22         6.1 Conditions Precedent
to Initial Loans. 22         6.2 Conditions Precedent to each Loan. 22        
6.3 Conditions Precedent to Increase of Maximum Revolving Amount. 23       VII.
REPRESENTATIONS, WARRANTIES AND COVENANTS 23         7.1 Corporate Existence;
Compliance with Law. 23         7.2 Names; Organizational Information;
Collateral Locations. 24         7.3 Power; Authorization; Enforceable
Obligations. 24         7.4 Financial Statements and Projections; Books and
Records. 24         7.5 Material Adverse Change. 25         7.6 Real Estate;
Property. 25

 

 ii  

 

 

Table of Contents

 

  7.7 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.
25         7.8 Government Regulation; Margin Regulations. 25         7.9 Taxes;
Charges. 26         7.10 Payment of Obligations. 26         7.11 ERISA. 26      
  7.12 Litigation. 27         7.13 Intellectual Property. 27         7.14 Full
Disclosure. 27         7.15 Hazardous Materials. 27         7.16 Insurance. 28  
      7.17 Deposit and Disbursement Accounts. 28         7.18 Accounts. 28      
  7.19 Conduct of Business. 29         7.20 Further Assurances. 29       VIII.
FINANCIAL REPORTS; FINANCIAL COVENANTS 29         8.1 Reports and Notices. 29  
      8.2 Financial Covenants. 31         8.3 Other Reports and Information. 31
        8.4 Good Standing Certificates. 31       IX. NEGATIVE COVENANTS 31      
X. SECURITY INTEREST 32         10.1 Grant of Security Interest. 32         10.2
Lender’s Rights. 35         10.3 Lender’s Appointment as Attorney-in-Fact. 36

 

 iii  

 

 

Table of Contents

 

  10.4 Grant of License to Use Intellectual Property Collateral. 36         10.5
Terminations; Amendments Not Authorized. 37         10.6 Inspections. 37      
XI. TERM 37         11.1 Term of Agreement. 37         11.2 Termination of Lien.
38       XII. EVENTS OF DEFAULT 38         12.1 Events of Default. 38        
12.2 Lender Remedies. 40         12.3 Waivers. 42         12.4 Proceeds. 42    
  XIII. MISCELLANEOUS 42         13.1 No Waiver; Cumulative Remedies. 42        
13.2 Amendments and Waivers. 42         13.3 Expenses; Indemnity. 42        
13.4 Borrowing Agency Provisions. 43         13.5 Guaranty. 44         13.6
Waivers. 45         13.7 Benefit of Guaranty. 45         13.8 Subordination of
Subrogation. 45         13.9 Election of Remedies. 45         13.10 Liability
Cumulative. 46         13.11 Waiver of Subrogation. 46         13.12 Further
Assurances. 46         13.13 Successors and Assigns. 46

 

 iv  

 

 

Table of Contents

 

  13.14 Descriptive Headings. 46         13.15 Notices. 47         13.16
Severability. 47         13.17 Entire Agreement; Counterparts. 47         13.18
SUBMISSION TO JURISDICTION. 47         13.19 WAIVER OF TRIAL BY JURY, CERTAIN
DAMAGES AND SETOFFS. 48         13.20 GOVERNING LAW. 48         13.21
Reinstatement. 49

 

 v  

 

 

INDEX OF EXHIBITS AND SCHEDULES

 

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

 

Attachment A - Fees, Charges and Commissions

 

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

 

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

 

   

 

 

LOAN AND SECURITY AGREEMENT

 

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

 

BACKGROUND

 

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

 

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

 

AGREEMENT

 

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

 

I. DEFINITIONS

 

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

 

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

 

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

 

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

 

  1 

 

 

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

 

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

 

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

 

(a) Accounts Availability; plus

 

(b) Inventory Availability; plus

 

(c) Equipment Availability; minus

 

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

 

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

 

“Borrowing Representative” means Glenbrook Building Supply, Inc.

 

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

 

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

 

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

 

  2 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

  3 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

“Disbursement Accounts” has the meaning set forth in Schedule IV.

 

“Disclosure Schedules” means the Disclosure Schedules prepared by Borrowers and
denominated as Disclosure Schedules 7.2 through 9(e) in the Index of Exhibits
and Schedules to this Agreement.

 

“Documents” means all “documents,” as such term is defined in the UCC, now owned
or hereafter acquired by any Person, wherever located, including all bills of
lading, dock warrants, dock receipts, warehouse receipts, and other documents of
title, whether negotiable or non-negotiable.

 

  4 

 

 

“Eligible Accounts” means and includes each Account of each Borrower which
conforms to the following criteria: (a) shipment of the merchandise or the
rendition of services has been completed; (b) merchandise or services shall not
have been repossessed, returned, rejected or disputed by the Account Debtor and
there shall not have been asserted any offset, defense or counterclaim; (c)
continues to be in full conformity with the representations and warranties made
by any Borrower to Lender with respect thereto; (d) Lender is, and continues to
be, satisfied with the credit standing of the Account Debtor in relation to the
amount of credit extended; (e) there are no facts existing or threatened which
are likely to result in any adverse change in an Account Debtor’s financial
condition; (f) is documented by an invoice in a form approved by Lender and
shall not be unpaid more than ninety (90) days from invoice date; (g) less than
thirty-three percent (33%) of the unpaid amount of invoices due from such
Account Debtor remain unpaid more than ninety (90) days from invoice date; (h)
is not evidenced by chattel paper or an instrument of any kind with respect to
or in payment of the Account unless such instrument is duly endorsed to and in
possession of Lender or represents a check in payment of an Account; (i) if the
Account Debtor is located outside of the United States, the goods which gave
rise to such Account were shipped after receipt by a Borrower from or on behalf
of the Account Debtor of an irrevocable letter of credit, or the subject of
credit insurance assigned and delivered to Lender and confirmed by a financial
institution acceptable to Lender and is in form, amount, and substance
acceptable to Lender, payable in the full amount of the Account in United States
dollars at a place of payment located within the United States; (j) Lender has a
first priority perfected Lien in such Account and such Account is not subject to
any other Lien other than Permitted Liens; (k) does not arise out of
transactions with any employee, officer, agent, director, stockholder or
Affiliate of a Borrower or Credit Party; (l) is payable to a Borrower; (m) does
not arise with respect to goods which are delivered on a cash-on-delivery basis,
credit card sale, or placed on consignment, guaranteed sale or other terms by
reason of which the payment by the Account Debtor may be conditional; (n) is not
an obligation of an Account Debtor that has suspended business, made a general
assignment for the benefit of creditors, is unable to pay its debts as they
become due or as to which a petition has been filed (voluntary or involuntary)
under any law relating to bankruptcy, insolvency, reorganization or relief of
debtors; (o) does not arise out of a bill and hold sale prior to shipment (p)
does not arise out of a sale to any Person to which any Borrower is indebted,
unless the amount of such indebtedness, and any anticipated indebtedness, is
deducted in determining the face amount of such Account; (q) is net of any
returns, discounts, claims, credits and allowances; (r) if the Account arises
out of contracts between a Borrower and the United States, any state, or any
department, agency or instrumentality of any of them, such Borrower has so
notified Lender, in writing, prior to the creation of such Account, and, if
Lender so requests, there has been compliance with any governmental notice or
approval requirements, including compliance with the Federal Assignment of
Claims Act; (s) is a good and valid account representing an undisputed bona fide
indebtedness incurred by the Account Debtor therein named, for a fixed sum as
set forth in the invoice relating thereto with respect to an unconditional sale
and delivery upon the stated terms of goods sold by a Borrower, or work, labor
and/or services (and not a sample) rendered by a Borrower; (t) the total unpaid
Accounts from such Account Debtor does not exceed twenty percent (20%) of all
Eligible Accounts but only the excess above twenty percent (20%) shall be
excluded from Eligible Accounts; (u) does not arise out of progress billings
prior to completion of the order; (v) such Borrower’s right to payment is
absolute and not contingent upon the fulfillment of any condition whatsoever;
(w) a Borrower is able to bring suit and enforce its remedies against the
Account Debtor through judicial process; (x) does not represent interest
payments, late or finance charges or service charges owing to Borrower; (y)
represents a contractual relationship which is current and ongoing as determined
by Lender unless credit insurance is assigned and delivered to Lender and
confirmed by a financial institution acceptable to Lender and is in form,
amount, and substance acceptable to Lender, payable in the full amount of the
Account in United States dollars at a place of payment located within the United
States for any such Account which Lender determines in it is sole discretion is
significant and no longer current and ongoing; and (z) is otherwise satisfactory
to Lender as determined in good faith by Lender in the reasonable exercise of
its discretion.

 

“Eligible Equipment” means Equipment owned by Borrower which is subject to the
Lien in favor of Lender, is subject to no other Liens whatsoever (other than
Permitted Liens), is supported by an acceptable appraisal in form and substance
satisfactory to Lender (other than for Equipment purchased after the Closing
Date which shall be deemed to be appraised at the purchase price thereof
provided that Borrower submits proof of purchase which is otherwise satisfactory
to Lender in its sole discretion), and which Lender in its sole discretion deems
eligible for borrowing purposes.

 

  5 

 

 

“Eligible Inventory” means Inventory owned by a Borrower which Lender, in its
sole and absolute discretion, determines: (a) is subject to a first priority
perfected Lien in favor of Lender and is subject to no other Liens whatsoever
other than Permitted Liens; (b) is located on premises owned or operated by a
Borrower; (c) is located on premises in the United States with respect to which
Lender has received a landlord, mortgagee or warehouse agreement acceptable in
form and substance to Lender; (d) is not in transit; (e) is not covered by a
negotiable document of title, unless such document and evidence of acceptable
insurance covering such Inventory has been delivered to Lender; (f) is in good
condition and meets all standards imposed by any governmental agency, or
department or division thereof having regulatory Governmental Authority over
such Inventory, its use or sale including the Federal Fair Labor Standards Act
of 1938 as amended, and all rules, regulations and orders thereunder; (g) is
currently either usable or saleable in the normal course of a Borrower’s
business; (h) is not placed by a Borrower on consignment or held by a Borrower
on consignment from another Person; (i) is in conformity with the
representations and warranties made by a Borrower to Lender with respect
thereto; (j) is not subject to any licensing, patent, royalty, trademark, trade
name or copyright agreement with any third parties; (k) does not require the
consent of any Person for the completion of manufacture, sale or other
disposition of such Inventory by Lender following an Event of Default and such
completion, manufacture or sale does not constitute a breach or default under
any contract or agreement to which a Borrower is a party or to which such
Inventory is or may be subject; (l) is not work-in-process, special order, or
raw materials; (m) is covered by casualty insurance acceptable to Lender; (n) is
not obsolete, defective or slow moving inventory; (o) is not packing or sample
inventory; (p) not to be ineligible for any other reason; and (q) is reported to
Lender pursuant to Section 8.1 hereof by means of financial reporting systems
acceptable to Lender not later than the commencement of the first fiscal quarter
of each Borrower’s 2017 Fiscal Year unless Lender in its sole discretion elects
(as an alternative) to conduct an appraisal of Inventory at the cost and expense
of Borrower and the results of such appraisal are satisfactory to Lender.

 

“Environmental Laws” means all federal, state and local laws, statutes,
ordinances and regulations, now or hereafter in effect, and in each case as
amended or supplemented from time to time, and any applicable judicial or
administrative interpretation thereof relating to the regulation and protection
of human health, safety, the environment and natural resources (including
ambient air, surface water, groundwater, wetlands, land surface or subsurface
strata, wildlife, aquatic species and vegetation).

 

“Environmental Liabilities” means all liabilities, obligations,
responsibilities, remedial actions, removal costs, losses, damages of whatever
nature, costs and expenses (including all reasonable fees, disbursements and
expenses of counsel, experts and consultants and costs of investigation and
feasibility studies), fines, penalties, sanctions and interest incurred as a
result of any claim, suit, action or demand of whatever nature by any Person,
and which relate to any health or safety condition regulated under any
Environmental Law, environmental permits or in connection with any Release,
threatened Release, or the presence of a Hazardous Material.

 

  6 

 

 

“Equipment” means all “equipment” as such term is defined in the UCC, now owned
or hereafter acquired by any Person, wherever located.

 

“Equipment Availability” means the amount of Revolving Credit Advances against
Eligible Equipment Lender may from time to time make available to Borrowers up
to seventy percent (70%) of the appraised net forced liquidation value as
determined by an appraiser acceptable to Lender of Borrowers’ Eligible
Equipment.

 

“ERISA” means the Employee Retirement Income Security Act of 1974 (or any
successor legislation thereto), as amended from time to time, and any
regulations promulgated thereunder.

 

“ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other than
an event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the IRC or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(b) of the IRC or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by any Credit Party of any liability under Title IV of
ERISA with respect to the termination of any Plan; (e) the receipt by any Credit
Party from the PBGC or a plan administrator of any notice relating to an
intention to terminate any Plan or to appoint a trustee to administer any Plan;
(f) the incurrence by any Credit Party of any liability with respect to any
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by any Credit Party of any notice, or the receipt by any Multiemployer
Plan from any Credit Party of any notice, concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA.

 

“Event of Default” has the meaning set forth in Section 12.1.

 

“Financial Statements” means income statement, balance sheet and statement of
cash flows of each Corporate Credit Party, internally prepared for each Fiscal
Month, and Fiscal Year, and for ATRM Holdings, Inc., for each Fiscal Year
audited (with a supporting schedule for the other Corporate Credit Parties) and
certified by an independent certified accounting firm acceptable to Lender (as
of Closing Date Boulay PLLP shall be deemed acceptable to Lender) each prepared
in accordance with GAAP and in accordance with this Agreement.

 

“Fiscal Month” means any of the monthly accounting periods of each Credit Party.

 

“Fiscal Year” means the 12 month period of each Credit Party ending December 31
of each year. Subsequent changes of the fiscal year of each Credit Party shall
not change the term “Fiscal Year” unless Lender shall consent in writing to such
change.

 

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

 

  7 

 

 

“GAAP” means generally accepted accounting principles, practices and procedures
in effect from time to time in the United States of America.

 

“General Intangibles” means all “general intangibles” as such term is defined in
the UCC, now owned or hereafter acquired by any Person including all right,
title and interest which such Person may now or hereafter have in or under any
Contract, all Payment Intangibles, customer lists, Licenses, Intellectual
Property, interests in partnerships, joint ventures and other business
associations, permits, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, Software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials, Books and Records, Goodwill
(including the Goodwill associated with any Intellectual Property), all rights
and claims in or under insurance policies (including insurance for fire, damage,
loss, and casualty, whether covering personal property, real property, tangible
rights or intangible rights, all liability, life, key-person, and business
interruption insurance, and all unearned premiums), uncertificated securities,
choses in action, deposit accounts, rights to receive tax refunds and other
payments, rights to receive dividends, distributions, cash Instruments and other
property in respect of or in exchange for pledged Stock and Investment Property,
and rights of indemnification.

 

“Goods” means all “goods”, as such term is defined in the UCC, now owned or
hereafter acquired by any Person, wherever located, including embedded software
to the extent included in “goods” as defined in the UCC.

 

“Goodwill” means all goodwill, trade secrets, proprietary or confidential
information, technical information, procedures, formulae, quality control
standards, designs, operating and training manuals, customer lists, and
distribution agreements now owned or hereafter acquired by any Person.

 

“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

 

“Guaranteed Indebtedness” means, as to any Person, any obligation of such Person
guaranteeing any indebtedness, lease, dividend, or other obligation (“primary
obligations”) of any other Person (the “primary obligor”) in any manner,
including any obligation or arrangement of such guaranteeing Person (whether or
not contingent): (i) to purchase or repurchase any such primary obligation; (ii)
to advance or supply funds (a) for the purchase or payment of any such primary
obligation or (b) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
condition of the primary obligor; (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation; or (iv) to indemnify the owner of such primary obligation against
loss in respect thereof.

 

“Guarantor” means each Person which executes a guaranty or a support, put or
other similar agreement in favor of Lender in connection with the transactions
contemplated by this Agreement, including but not limited to ATRM Holdings,
Inc., a Minnesota corporation, KBS Builders, Inc., a Delaware corporation, and
Maine Modular Haulers, Inc., a Delaware corporation.

 

  8 

 

 

“Guaranty” means any agreement to perform all or any portion of the Obligations
on behalf of any Borrower, in favor of, and in form and substance satisfactory
to, Lender, together with all amendments, modifications and supplements thereto,
and shall refer to such Guaranty as the same may be in effect at the time such
reference becomes operative.

 

“Hazardous Material” means any substance, material or waste which is regulated
by or forms the basis of liability now or hereafter under, any Environmental
Laws, including any material or substance which is (a) defined as a “solid
waste,” “hazardous waste,” “hazardous material,” “hazardous substance,”
“extremely hazardous waste,” “restricted hazardous waste,” “pollutant,”
“contaminant,” “hazardous constituent,” “special waste,” “toxic substance” or
other similar term or phrase under any Environmental Laws, (b) petroleum or any
fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB’s), or
any radioactive substance.

 

“Hazardous Waste” has the meaning ascribed to such term in the Resource
Conservation and Recovery Act (42 U.S.C. §§ 6901 et. seq.).

 

“Indebtedness” of any Person means: (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services
(including reimbursement and all other obligations with respect to surety bonds,
letters of credit and bankers’ acceptances, whether or not matured, but not
including obligations to trade creditors incurred in the ordinary course of
business and not more than 60 days past due); (ii) all obligations evidenced by
notes, bonds, debentures or similar instruments; (iii) all indebtedness created
or arising under any conditional sale or other title retention agreements with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property); (iv) all obligations under capital
leases; (v) all Guaranteed Indebtedness; (vi) all Indebtedness referred to in
clauses (i), (ii), (iii), (iv) or (v) above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness; (vii) the Obligations; and (viii)
all liabilities under Title III of ERISA.

 

“Indemnified Person” has the meaning given to such term in Section 13.3(b).

 

“Instruments” means all “instruments”, as such term is defined in the UCC, now
owned or hereafter acquired by any Person, wherever located, including all
certificated securities and all notes and other evidences of indebtedness, other
than instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.

 

“Intellectual Property” means any and all Licenses, patents, patent
registrations, copyrights, copyright registrations, trademarks, trademark
registrations, trade secrets, domain names, website addresses and customer
lists.

 

  9 

 

 

“Intellectual Property Security Agreement” means the Intellectual Property
Security Agreement in the form of Exhibit I made in favor of Lender by each
applicable Credit Party.

 

“Intercreditor Agreement” means any intercreditor and subordination agreement
accepted by Lender from time to time.

 

“Inventory” means all “inventory”, as such term is defined in the UCC, now or
hereafter owned or acquired by any Person, wherever located.

 

“Inventory Availability” means the amount of Revolving Credit Advances against
Eligible Inventory Lender may from time to time make available to Borrowers up
to the lesser of (a) up to fifty percent (50%) of the value of Borrowers’
Eligible Inventory and if the financial reporting systems for Inventory required
by Section 8.1 hereof are not acceptable to Lender by the commencement of the
first fiscal quarter of each Borrower’s 2017 Fiscal Year, reducing to up to
thirty percent (30%) of the value of Borrower’s Eligible Inventory (calculated
on the basis of the lower of cost or market, on a first-in first-out basis) or
(b) commencing ninety (90) days after the Closing Date, seventy five percent
(75%) of the amount of Accounts Availability; provided, however, that Inventory
is reported to Lender pursuant to Section 8.1 hereof by means of financial
reporting systems acceptable to Lender not later than the commencement of the
first fiscal quarter of each Borrower’s 2017 Fiscal Year unless Lender in its
sole discretion elects (as an alternative) to conduct an appraisal of Inventory
at the cost and expense of Borrower and the results of such appraisal are
satisfactory to Lender..

 

“Investment Property” means all “investment property”, as such term is defined
in the UCC, now owned or hereafter acquired by any Person, wherever located.

 

“IRC” and “IRS” means respectively, the Internal Revenue Code of 1986 and the
Internal Revenue Service, and any successors thereto.

 

“ISP” means the International Standby Practices, International Chamber of
Commerce Publication No. 590, as the same may be amended from time to time.

 

“LC Issuer” shall mean a commercial bank or other financial institution selected
by Lender, in is discretion, to issue Letters of Credit pursuant to this
Agreement.

 

“Lender” has the meaning set forth in the preamble to this Agreement and if
Lender shall decide to assign or syndicate any of the Obligations such term
shall include such assignee or such other members of the syndicate.

 

“Letter of Credit” and “L/C” means a letter of credit issued by an LC Issuer for
Lender’s account, at the request of Borrowing Representative and on behalf of a
Borrower containing terms and conditions satisfactory to Lender, which letter of
credit may either be a commercial letter of credit or standby letter of credit.

 

“Letter of Credit Fee” has the meaning set forth in Schedule I.

 

  10 

 

 

“Letter of Credit Obligations” means all outstanding obligations (including all
duty, freight, taxes, costs, insurance and any other charges and expenses)
incurred by Lender, whether direct or indirect, contingent or otherwise, due or
not due, in connection with the issuance or guarantee, by Lender or another, of
Letters of Credit or Letters of Guaranty, all as further set forth in Schedule
I.

 

“Letter-of-Credit Rights” has the meaning given to “letter-of-credit rights” as
such term is defined in the UCC, now owned or hereafter acquired by any Person,
including rights to payment or performance under a letter of credit, whether or
not such Person, as beneficiary, has demanded or is at the time entitled to
demand payment or performance.

 

“Letters of Guaranty” and “L/G” means a letter of guaranty issued by Lender for
the account of a Borrower guarantying payment of the purchase price of the goods
financed thereby, containing terms and conditions satisfactory to Lender.

 

“License” means any rights under any written agreement now or hereafter acquired
by any Person to use any trademark, trademark registration, copyright, copyright
registration or invention for which a patent is in existence or other license of
rights or interests now held or hereafter acquired by any Person.

 

“Lien” means any mortgage, security deed or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, security interest, charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including any lease
or other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing or recording, or
agreement to give, any financing statement or recordable instrument under the
UCC or comparable real or personal property law of any jurisdiction.

 

“Life Insurance Assignment” means an Assignment of Life Insurance Policy as
Collateral to be executed by the owner and the beneficiary thereof, in form and
substance satisfactory to Lender, granting Lender a Lien on the Life Insurance
Policy to secure payment of the Obligations.

 

“Life Insurance Policy” means the life insurance policy maintained by any Credit
Party upon the life of Matthew Mosher with the death benefit thereunder of at
least $4,000,000 in the aggregate on new or existing policies.

 

“Litigation” means any claim, lawsuit, litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority.

 

“Loans” means the Revolving Credit Advances and all extensions of credit
hereunder or under any Credit Document, including Letter of Credit Obligations.

 

“Margin Stock” has the meaning set forth in Section 7.8.

 

“Material Adverse Effect” means a material adverse effect on (a) the condition,
operations, assets, business or prospects of any Credit Party, (b) any Credit
Party’s ability to pay or perform the Obligations in accordance with the terms
hereof or any Credit Document, (c) the value of the Collateral, the Liens on the
Collateral or the priority of any such Lien or (d) the practical realization of
the benefits of Lender’s rights and remedies under this Agreement and the Credit
Documents.

 

  11 

 

 

“Maturity Date” means October 3, 2018.

 

“Maximum Legal Rate” shall have the meaning given to such term in Section
5.1(a)(iv).

 

“Maximum Revolving Amount” means ONE MILLION DOLLARS ($1,000,000) but which may
be increased to THREE MILLION DOLLARS ($3,000,000) in increments of not more
than Five Hundred Dollars ($500,000) in the sole discretion of Lender upon
satisfaction of each condition precedent in Section 6.3 hereof.

 

“Minimum Actionable Amount” means TWENTY FIVE THOUSAND DOLLARS ($25,000).

 

“Minimum Average Monthly Loan Amount” means fifty percent (50%) of the Maximum
Revolving Amount.

 

“Multiemployer Plan” means a “multiemployer plan,” as defined in Section 4001(a)
(3) of ERISA, to which any Credit Party is making, is obligated to make, has
made or been obligated to make, contributions on behalf of participants who are
or were employed by any of them.

 

“Note” means the promissory note of Borrowers executed in favor of Lender
substantially in the form of Exhibit A.

 

“Obligations” means all obligations under any Guaranty and all Loans, and any
Guaranty, Loans or Obligations defined in any other agreement executed by any
Credit Party now existing or hereafter arising, all advances, debts,
liabilities, obligations, covenants and duties owing by any Credit Party to
Lender (or any corporation that directly or indirectly controls or is controlled
by or is under common control with Lender) of every kind and description
(whether or not evidenced by any note or other instrument and whether or not for
the payment of money or the performance or non-performance of any act), direct
or indirect, absolute or contingent, due or to become due, contractual or
tortious, liquidated or unliquidated, whether existing by operation of law or
otherwise now existing or hereafter arising including any debt, liability or
obligation owing from any Credit Party to others which Lender may have obtained
by assignment or otherwise and further including all interest (including
interest accruing at the then applicable rate provided in this Agreement after
the maturity of the Loans and interest accruing at the then applicable rate
provided in this Agreement after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, whether
or not a claim for post-filing or post-petition interest is allowed in such
proceeding), fees, charges or any other payments any Credit Party is required to
make or pay by law or otherwise arising under or as a result of this Agreement
or any other Credit Document, or otherwise together with all reasonable expenses
and reasonable attorneys’ fees chargeable to any Credit Party’s account or
incurred by Lender in connection with any Credit Party’s account whether
provided for herein or in any Credit Document.

 

  12 

 

 

“Pass Thru Distributions” mean dividends declared and paid by a Credit Party to
its Stockholders, or which could have been declared and paid by a Credit Party,
in an amount not to exceed the Pass Thru Tax Liabilities.

 

“Pass Thru Tax Liabilities” means the amount of state and federal income tax
paid or to be paid by a Credit Party’s Stockholders on taxable income earned by
such Credit Party and attributable to the Stockholder as a result of such Credit
Party’s status as a disregarded entity for tax purposes, assuming the highest
marginal income tax rate for federal and state (for the state or states in which
any Stockholder is liable for income taxes with respect to such income) income
tax purposes, after taking into account any deduction for state income taxes in
calculating the federal income tax liability and all other deductions, credits,
deferrals and other reductions available to Stockholders from or through a
Credit Party.

 

“Payment Intangible” has the meaning give to the term “payment intangible” in
the UCC and in any event shall include, a General Intangible under which the
Account Debtor’s principal obligation is a monetary obligation.

 

“Payment Office” means 488 Madison Avenue, Suite 800, New York, New York 10022
or such other place as Lender may from time to time designate in writing.

 

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

 

“Permitted Liens” means the following Liens: (i) Liens for taxes or assessments
or other governmental Charges or levies, either not yet due and payable or to
the extent that nonpayment thereof is permitted by the terms of Section 7.10;
(ii) pledges or deposits securing obligations under worker’s compensation,
unemployment insurance, social security or public liability laws or similar
legislation; (iii) pledges or deposits securing bids, tenders, contracts (other
than contracts for the payment of money) or leases to which any Credit Party is
a party as lessee made in the ordinary course of business; (iv) deposits
securing public or statutory obligations of any Credit Party; (v) inchoate and
unperfected workers’, mechanics’, or similar liens arising in the ordinary
course of business so long as such Liens attach only to Equipment, fixtures or
real estate; (vi) carriers’, warehousemen’s, suppliers’ or other similar
possessory liens arising in the ordinary course of business and securing
indebtedness not yet due and payable in an outstanding aggregate amount not in
excess of the Minimum Actionable Amount at any time so long as such Liens attach
only to Inventory; (vii) deposits of money securing, or in lieu of, surety,
appeal or customs bonds in proceedings to which any Credit Party is a party;
(viii) zoning restrictions, easements, licenses, or other restrictions on the
use of real property or other minor irregularities in title (including leasehold
title) thereto, so long as the same do not materially impair the use, value, or
marketability of such real estate; (ix) Purchase Money Liens securing Purchase
Money Indebtedness (or rent) to the extent permitted under Article IX(b); (x)
Liens in existence on the Closing Date as disclosed on Disclosure Schedule 9(e)
provided that no such Lien is spread to cover additional property after the
Closing Date and the amount of Indebtedness secured thereby is not increased;
and (xi) Liens in favor of Lender securing the Obligations.

 

  13 

 

 

“Person” means any individual, sole proprietorship, partnership, limited
liability partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, public benefit
corporation, entity or government (whether federal, state, county, city,
municipal or otherwise, including any instrumentality, division, agency, body or
department thereof), and shall include such Person’s successors and assigns.

 

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title III of ERISA or Section 412 of the IRC or
Section 302 of ERISA, and in respect of which a Credit Party is (or, if such
plan were terminated, would under Section 4069 of ERISA be deemed to be) an
“employer” as defined in Section 3(5) of ERISA.

 

“Prime Rate” means the “prime rate” which from time to time published in the
“Money Rates” column of The Wall Street Journal (Eastern Edition, New York
Metro); provided, however, if the Money Rates column of The Wall Street Journal
(Eastern Edition, New York Metro) ceases to be published or otherwise does not
designate a “prime rate” as of a Business Day, Lender has the right to obtain
such information from a similar business publication of its selection. The Prime
Rate shall be increased or decreased as the case may be for each increase or
decrease in the Prime Rate in an amount equal to such increase or decrease in
the Prime Rate; each change to be effective as of the day of the change in such
rate.

 

“Proceeds” means “proceeds”, as such term is defined in the UCC and, in any
event, shall include: (a) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to any Credit Party or any other Person from time
to time with respect to any Collateral; (b) any and all payments (in any form
whatsoever) made or due and payable to a Credit Party from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of any Collateral by any governmental body, governmental authority,
bureau or agency (or any person acting under color of governmental authority);
(c) any claim of a Credit Party against third parties (i) for past, present or
future infringement of any Intellectual Property or (ii) for past, present or
future infringement or dilution of any trademark or trademark license or for
injury to the goodwill associated with any trademark, trademark registration or
trademark licensed under any trademark License; (d) any recoveries by a Credit
Party against third parties with respect to any litigation or dispute concerning
any Collateral, including claims arising out of the loss or nonconformity of,
interference with the use of, defects in, or infringement of rights in, or
damage to, Collateral; (e) all amounts collected on, or distributed on account
of, other Collateral, including dividends, interest, distributions and
Instruments with respect to Investment Property and pledged Stock; and (f) any
and all other amounts , rights to payment or other property acquired upon the
sale, lease, license, exchange or other disposition of Collateral and all rights
arising out of Collateral.

 

“Projections” means as of any date the balance sheet, statements of income and
cash flow for Corporate Credit Parties and Subsidiaries (including forecasted
Capital Expenditures) (a) by month for the next Fiscal Year, and (b) by year for
the following three Fiscal Years, in each case prepared in a manner consistent
with GAAP and accompanied by senior management’s discussion and analysis of such
plan.

 

“Purchase Money Indebtedness” means (a) any Indebtedness incurred for the
payment of all or any part of the purchase price of any fixed asset, (b) any
Indebtedness incurred for the sole purpose of financing or refinancing all or
any part of the purchase price of any fixed asset, and (c) any renewals,
extensions or refinancings thereof (but not any increases in the principal
amounts thereof outstanding at that time).

 

  14 

 

 

“Purchase Money Lien” means any Lien upon any fixed assets which secures the
Purchase Money Indebtedness related thereto but only if such Lien shall at all
times be confined solely to the asset the purchase price of which was financed
or refinanced through the incurrence of the Purchase Money Indebtedness secured
by such Lien and only if such Lien secures only such Purchase Money
Indebtedness.

 

“Real Estate” means (i) the real property and the improvements thereon located
at (i) 5215 Gershwin Avenue North, Oakdale, MN 55128, (ii) 5250 Glenbrook Avenue
North, Oakdale, MN 55128, (iii) 845 Dexter Street, Prescott, WI 54021 and (iv)
1607 Pine Street, Prescott, WI 54021 and on which the Borrowers operate their
business and upon which the Collateral and Books and Records relating thereto
are located.

 

“Release” means, as to any Person, any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials in the indoor or outdoor environment by such
Person, including the movement of Hazardous Materials through or in the air,
soil, surface water, ground water or property.

 

“Requirement of Law” means as to any Person, the Certificate or Articles of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case binding upon
such Person or any of its property or to which such Person or any of its
property is subject.

 

“Reserves” means reserves established by Lender from time to time in its good
faith credit judgment, including to protect Lender’s interest in the Collateral,
to protect Lender against possible non-payment of Accounts for any reason by
Account Debtors, to protect against the diminution in value of any Collateral,
to protect Lender against the possible non-payment of any Obligations, to
protect Lender for any unpaid taxes, to protect Lender in respect of any state
of facts that could constitute a Default or Event of Default and to protect
Lender for any Letter of Credit Obligations.

 

“Restricted Payment” means: (i) the declaration or payment of any dividend or
the incurrence of any liability to make any other payment or distribution of
cash or other property or assets on or in respect of Credit Party’s Stock; (ii)
any payment or distribution made in respect of any Subordinated Debt of any
Credit Party in violation of any subordination or other agreement made in favor
of Lender; (iii) any payment on account of the purchase, redemption, defeasance
or other retirement of any Credit Party’s Stock or Indebtedness or any other
payment or distribution made in respect of any thereof, either directly or
indirectly, other than payment of Indebtedness to trade creditors incurred in
the ordinary course of business consistent with past practice as disclosed to
Lender in writing; or (iv) any payment, loan, contribution, or other transfer of
funds or other property to any Stockholder of such Person which is not expressly
and specifically permitted in this Agreement; provided, that no payment to
Lender shall constitute a Restricted Payment.

 

  15 

 

 

“Revolving Credit Advances” shall have the meaning given to such term in Section
2.1(a).

 

“Software” means all “software” as such term is defined in the UCC, including
all computer programs and all supporting information provided in connection with
a transaction related to any program.

 

“Stock” means all certificated and uncertificated shares, options, warrants,
membership interests, general or limited partnership interests, participation or
other equivalents (regardless of how designated) of or in a corporation,
partnership, limited liability company or equivalent entity whether voting or
nonvoting, including common stock, preferred stock, or any other “equity
security” (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934).

 

“Stockholder” means each holder of Stock of Borrower.

 

“Subordinated Debt” means any note, document, instrument or agreement now or any
time hereafter executed and/or delivered by any Credit Party with or in favor of
any Subordinated Lender which evidences the principal, interest and other
amounts owed by a Credit Party to such Subordinated Lender.

 

“Subordinated Lender” means collectively, any Person who enters into a
Subordination Agreement with Lender with respect to amounts owed by any Credit
Party to such Subordinated Lender, including but not limited to Lone Star Value
Investors, LP and/or Lone Star Value Co-Invest I, LP, EdgeBuilder Wall Panels,
Inc. and Glenbrook Lumber & Supply, Inc.

 

“Subordination Agreement” means collectively, all subordination agreements
accepted by Lender from time to time with respect to Indebtedness of any Credit
Party.

 

“Subsidiary” means, with respect to any Person, (i) any corporation of which an
aggregate of more than 50% of the outstanding Stock having ordinary voting power
to elect a majority of the board of directors of such corporation (irrespective
of whether, at the time, Stock of any other class or classes of such corporation
has or might have voting power by reason of the happening of any contingency) is
at the time, directly or indirectly, owned legally or beneficially by such
Person and/or one or more Subsidiaries of such Person, or with respect to which
any such Person has the right to vote or designate the vote of 50% or more of
such Stock whether by proxy, agreement, operation of law or otherwise, and (ii)
any partnership or limited liability company in which such Person or one or more
Subsidiaries of such Person has an equity interest (whether in the form of
voting or participation in profits or capital contribution) of more than 50% or
of which any such Person is a general partner or manager or may exercise the
powers of a general partner or manager.

 

“Supporting Obligations” means all “supporting obligations” as such term is
defined in the UCC, including Letter-of-Credit Rights or secondary obligations
that supports the payment or performance of Accounts, Chattel Paper, Documents,
General Intangibles, Instruments, or Investment Property.

 

  16 

 

 

“Tangible Net Worth” shall mean, with respect to any Person, at any date, the
total assets (excluding any intangible assets and loans made to any officer,
director, shareholder or employee of such Person) minus the total liabilities
(excluding Subordinated Debt), in each case, of such Person at such date
determined in accordance with GAAP.

 

“Term” means the Closing Date through the Maturity Date subject to acceleration
upon the occurrence of an Event of Default hereunder or other termination
hereunder.

 

“Termination Date” means the date on which all Obligations under this Agreement
are indefeasibly paid in full, in cash (other than amounts in respect of Letter
of Credit Obligations if any, then outstanding, provided that a Borrower has
funded such amounts in cash in full into the Cash Collateral Account), and no
Borrower shall have any further right to borrow any moneys or obtain other Loans
or financial accommodations under this Agreement.

 

“Transaction Documents” means the aggregate of the documents as executed and
delivered to the satisfaction of Lender whereby the Borrowers have purchased and
acquired title to all assets and property free and clear of any Lien pursuant to
the Asset Purchase Agreement dated as of even date executed by Borrowers,
Glenbrook Lumber & Supply, Inc., a Minnesota corporation and EdgeBuilder Wall
Panels, Inc., a Minnesota corporation.

 

“UCC” means the Uniform Commercial Code as the same may, from time be in effect
in the State of New York; provided, that in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Lender’s Lien on any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, the term “UCC” shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions of
this Agreement relating to such attachment, perfection, priority or remedies and
for purposes of definitions related to such provisions; provided further, that
to the extent that UCC is used to define any term herein or in any Credit
Document and such term is defined differently in different Articles or Divisions
of the UCC, the definition of such term contained in Article or Division 9 shall
govern.

 

“Uniform Customs” means with respect to a documentary Letter of Credit the
Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500, as the same may be
amended from time to time and with respect to a standby Letter of Credit, the
International Standby Practices, ISP.

 

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title III of ERISA.

 

1.2 Accounting Terms. Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily given them in
accordance with GAAP and all financial computations shall be computed, unless
specifically provided herein, in accordance with GAAP consistently applied.

 

1.3 Other Terms. All other terms used in this Agreement and defined in the UCC,
shall have the meaning given therein unless otherwise defined herein.

 

  17 

 

 

1.4 Rules of Construction. All Schedules, Addenda and Exhibits hereto or
expressly identified to this Agreement are incorporated herein by reference and
taken together with this Agreement constitute but a single agreement. The words
“herein”, hereof” and “hereunder” or other words of similar import refer to this
Agreement as a whole, including the Exhibits and Schedules thereto, as the same
may be from time to time amended, modified, restated or supplemented, and not to
any particular section, subsection or clause contained in this Agreement.
Wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and the plural, and pronouns
stated in the masculine, feminine or neuter gender shall include the masculine,
the feminine and the neuter. The term “or” is not exclusive. The term
“including” (or any form thereof) shall not be limiting or exclusive. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. All references in this
Agreement or in the Schedules to this Agreement to sections, schedules,
disclosure schedules, exhibits, and attachments shall refer to the corresponding
sections, schedules, disclosure schedules, exhibits, and attachments of or to
this Agreement. All references to any instruments or agreements, including
references to any of this Agreement or any of the other Credit Documents shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.

 

II. LOANS

 

2.1 Revolving Credit Advances.

 

(a) Subject to the terms and conditions set forth herein and in the Credit
Documents, Lender may, in its sole discretion, make revolving credit advances
(the “Revolving Credit Advances”) to Borrowers from time to time during the Term
which, in the aggregate at any time outstanding together with all outstanding
Letter of Credit Obligations, will not exceed the lesser of (x) the Maximum
Revolving Amount or (y) an amount equal to the Borrowing Base for working
capital needs of the Borrowers.

 

(b) Notwithstanding the limitations set forth above, Lender retains the right to
lend Borrowers from time to time such amounts in excess of such limitations as
Lender may determine in its sole discretion.

 

(c) Each Borrower acknowledges that the exercise of Lender’s discretionary
rights hereunder may result during the Term in one or more increases or
decreases in the advance percentages used in determining Accounts Availability,
Inventory Availability, and Equipment Availability, and each Borrower hereby
consents to any such increases or decreases which may limit or restrict advances
requested by Borrower.

 

(d) If any Borrower does not pay any interest, fees, costs or charges to Lender
when due, Borrowers shall thereby be deemed to have requested, and Lender is
hereby authorized at its discretion to make and charge to any Borrower’s
account, a Revolving Credit Advance as of such date in an amount equal to such
unpaid interest, fees, costs or charges.

 

(e) If any Credit Party at any time fails to perform or observe any of the
covenants contained in this Agreement or any other Credit Document, Lender may,
but need not, perform or observe such covenant on behalf and in the name, place
and stead of such Credit Party (or, at Lender’s option, in Lender’s name) and
may, but need not, take any and all other actions which Lender may deem
necessary to cure or correct such failure (including the payment of taxes, the
satisfaction of Liens, the performance of obligations owed to Account Debtors,
lessors or other obligors, the procurement and maintenance of insurance, the
execution of assignments, security agreements and financing statements, and the
endorsement of instruments). The amount of all monies expended and all costs and
expenses (including attorneys’ fees and legal expenses) incurred by Lender in
connection with or as a result of the performance or observance of such
agreements or the taking of such action by Lender shall be charged to any
Borrower’s account as a Revolving Credit Advance and added to the Obligations.
To facilitate Lender’s performance or observance of such covenants of Credit
Parties, each Credit Party hereby irrevocably appoints Lender, or Lender’s
delegate, acting alone, as such Credit Party’s attorney in fact (which
appointment is coupled with an interest) with the right (but not the duty) from
time to time to create, prepare, complete, execute, deliver, endorse or file in
the name and on behalf of such Credit Party any and all instruments, documents,
assignments, security agreements, financing statements, applications for
insurance and other agreements and writings required to be obtained, executed
delivered or endorsed by such Credit Party.

 

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(f) Lender is authorized by Borrowers to record on its books or records the
date, principal amount, amount and date of all payments of principal of and
interest on each Loan, and the outstanding principal balance of the Loans and
such recordation shall constitute prima facie evidence as to all such
information contained therein. Lender shall provide Borrowing Representative on
a monthly basis with a statement and accounting of such recordations but any
failure on the part of Lender to keep such recordation (or any errors therein)
or to send a statement thereof to Borrowing Representative shall not limit or
otherwise affect the obligation of any Borrower to repay (with applicable
interest) any Loans. Except to the extent that Borrowing Representative shall,
within thirty (30) days after such statement and accounting is sent, notify
Lender in writing of any objection any Borrower may have thereto (stating with
particularity the basis for such objection), such statement and accounting shall
be deemed final, binding and conclusive upon Borrowers, absent manifest error.
The Loans made by Lender will be evidenced by a Note. Each Borrower will execute
the Note simultaneously with the execution of this Agreement.

 

(g) During the Term, each Borrower may borrow, prepay and reborrow Revolving
Credit Advances, all in accordance with the terms and conditions hereof.

 

(h) Subject to the terms and conditions of this Agreement including Schedule I,
Borrowing Representative on behalf of each Borrower may request and Lender may
agree to incur Letter of Credit Obligations.

 

III. REPAYMENT

 

3.1 Repayment of the Revolving Credit Advances. Borrowers shall be required to
(a) make a mandatory repayment hereunder at any time that the aggregate
outstanding principal balance of the Revolving Credit Advances made by Lender to
Borrowers hereunder is in excess of the Borrowing Base and/or Maximum Revolving
Amount, in an amount equal to such excess, and (b) repay on the expiration of
the Term (i) the then aggregate outstanding principal balance of Revolving
Credit Advances made by Lender to Borrowers hereunder together with accrued and
unpaid interest, fees and charges and (ii) all other amounts owed Lender under
this Agreement and the Credit Documents. Any payments of principal, interest,
fees or any other amounts payable hereunder or under any Credit Document shall
be made prior to 12:00 noon (New York time) on the due date thereof in
immediately available funds.

 

  19 

 

 

IV. PROCEDURES

 

4.1 Procedure for Revolving Credit Advances. Borrowing Representative on behalf
of each Borrower may by written or telephonic notice request a borrowing of
Revolving Credit Advances prior to 11:00 a.m. (New York time) on the Business
Day of its request to incur, on that day, a Revolving Credit Advance. All
Revolving Credit Advances shall be disbursed from whichever office or other
place Lender may designate from time to time and, together with any and all
other Obligations of Borrowers to Lender, shall be charged to Borrowers’ account
on Lender’s books. The proceeds of each Revolving Credit Advance made by Lender
shall be made available to Borrowers on the Business Day so requested by way of
credit to the applicable Borrower’s operating account maintained with such bank
as Borrowing Representative designated to Lender. Any and all Obligations due
and owing hereunder may be charged to Borrowers’ account and shall constitute
Revolving Credit Advances.

 

V. INTEREST AND FEES

 

5.1 Interest and Fees.

 

(a) Interest.

 

(i) Except as modified by Section 5.1(a)(iii) below, Borrowers shall pay
interest on the unpaid principal balance of the Loans for each day they are
outstanding at the Contract Rate.

 

(ii) Interest and fees shall be computed on the basis of actual days elapsed in
a year of 360 days. Interest shall be payable in arrears on the last day of each
month and upon termination of this Agreement, or, at Lender’s option, Lender may
charge Borrowers’ account for said interest.

 

(iii) Effective upon the occurrence of any Event of Default and for so long as
any Event of Default shall be continuing, the Contract Rate and the Letter of
Credit Fee shall automatically be increased to the Default Rate, and all
outstanding Obligations, including unpaid interest and Letter of Credit Fees,
shall continue to accrue interest from the date of such Event of Default at the
Default Rate applicable to such Obligations.

 

(iv) Notwithstanding the foregoing, in no event shall the aggregate interest
exceed the maximum rate permitted under any applicable law or regulation, as in
effect from time to time (the “Maximum Legal Rate”) and if any provision of this
Agreement or Credit Document is in contravention of any such law or regulation,
interest payable under this Agreement and each Credit Document shall be computed
on the basis of the Maximum Legal Rate (so that such interest will not exceed
the Maximum Legal Rate) and once the amount of interest payable hereunder or
under the Credit Documents is less than the Maximum Legal Rate, Lender shall not
reduce interest payable hereunder or any Credit Document below the amount
computed based upon the Maximum Legal Rate until the aggregate amount of
interest paid equals the amount of interest which would have been payable if the
Maximum Legal Rate had not been imposed.

 

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(v) Borrowers shall pay principal, interest and all other amounts payable
hereunder, or under any Credit Document, without any deduction whatsoever,
including any deduction for any set-off or counterclaim.

 

(b) Fees.

 

(i) Minimum Loan Fee. In the event the average closing daily unpaid balances of
all Loans hereunder during any calendar month is less than the Minimum Average
Monthly Loan Amount, Borrowers shall pay to Lender a minimum loan fee at a rate
per annum equal to the Contract Rate on the amount by which the Minimum Average
Monthly Loan Amount exceeds such average closing daily unpaid balances. Such fee
shall be charged to Borrower’s account on the first day of each month with
respect to the prior month.

 

(ii) Facility Fee. Borrowers hereby agree to pay Lender a facility fee in an
amount equal to one and one-half percent (1.50%) of the Maximum Revolving Amount
on the Closing Date and on each anniversary of the Closing Date which occurs
prior to the Maturity Date. The facility fee for the period ending on the
Maturity Date shall be deemed fully earned on the Closing Date and shall be
payable by a charge to Borrower’s account upon the earlier of each anniversary
of the Closing Date or the termination of this Agreement for any reason.

 

(iii) Collateral Monitoring Fee. Borrowers shall pay Lender a monthly collateral
monitoring fee in an amount equal to 0.10% of the Maximum Revolving Amount per
month, payable on the Closing Date and on the first day of each month thereafter
until the Maturity Date. The Collateral Monitoring Fee for each month ending
prior to the Maturity Date shall be deemed fully earned on the Closing Date and
shall be payable by a charge to Borrower’s account upon the earlier of the first
day of each month during the Term or the termination of this Agreement for any
reason.

 

(iv) Field Examination Fee. Upon Lender’s performance of any collateral
monitoring and/or verification including any field examination, collateral
analysis or other business analysis, the need for which is to be determined by
Lender and which monitoring is undertaken by Lender or for Lender’s benefit, an
amount equal to the established rate by Lender from time to time which rate on
the Closing Date is $950 per day for each person employed to perform such
monitoring together with all costs, disbursements and expenses incurred by
Lender and the person performing such collateral monitoring and/or verification
shall be charged to Borrowers’ account; provided, however, so long as no Event
of Default has occurred and is continuing, the number of such examinations shall
be limited to no more than two (2) per year. Nothing herein shall prohibit
Lender from conducting more than two (2) such examinations per year in the
absence of an Event of Default which is not continuing so long as Lender shall
incur the cost thereof.

 

(v) Collection Fees. For purposes of determining the balance of the Loans
outstanding, Lender will credit (conditional upon final collection) all such
payments to Borrowers’ account upon receipt by Lender of good funds in dollars
of the United States of America in Lender’s account, provided, however, for
purposes of computing interest on the Obligations, Lender will credit
(conditional upon final collection) all such payments to Borrowers’ account
three (3) Business Days after receipt by Lender of good funds in dollars of the
United States of America in Lender’s account. Any amount received by Lender
after 12:00 noon (New York time) on any Business Day shall be deemed received on
the next Business Day.

 

  21 

 

 

(vi) Overline/Overadvance Fees. Under circumstances where any Borrower requests
and Lender approves Revolving Credit Advances which would exceed the Maximum
Revolving Amount and/or the Borrowing Base, Lender may impose fees in connection
therewith. Such fees shall include (i) a monthly fee in the amount of two and
one-half percent (2.50%) of the greater of (A) the highest amount by which the
amount of Revolving Credit Advances during such month exceeds the Borrowing Base
and (B) if any, the amount approved by Lender for such Revolving Credit Advance
in excess of the Borrowing Base for such month and (ii) two and one-half percent
(2.50%) of the greater of (A) the highest amount by which the Revolving Credit
Advances during such month exceeds the Maximum Revolving Amount and (B) if any,
the amount approved by Lender for such Revolving Credit Advances in excess of
the Maximum Revolving Amount for such month. Such fees shall be payable on the
first day of each month with respect to the preceding calendar month.

 

(vii) Wire/Check Fee. For each wire transfer or check issued by Lender, on
behalf of a Borrower, Borrowers shall pay Lender Lender’s standard fee for such
service which fee is $45 as of the Closing Date.

 

VI. CONDITIONS PRECEDENT

 

6.1 Conditions Precedent to Initial Loans. Without limitation of the
discretionary nature of each Loan hereunder, the initial Loan to be made by
Lender shall be subject to the fulfillment (to the satisfaction of Lender) of
each of the conditions precedent set forth on Schedule II.

 

6.2 Conditions Precedent to each Loan. Without limitation of the discretionary
nature of each Loan hereunder, each of the Loans (including the initial Loan) to
be made by Lender shall be subject to the fulfillment (to the satisfaction of
Lender) of each of the following conditions as of the date of each Loan:

 

(a) Lender shall have received a Request for Loan for such Loan in form and in
substance satisfactory to Lender;

 

(b) The representations and warranties set forth in this Agreement and in the
other Credit Documents, shall be true and correct in all material respects on
and as of the date of such Loan with the same effect as though made on and as of
such date, except to the extent that any such representation or warranty is
expressly stated to relate to a specific earlier date, in which case, such
representation and warranty shall be true and correct as of such earlier date;

 

(c) No Default or Event of Default shall have occurred and be continuing at the
time of and after giving effect to such Loan;

 

  22 

 

 

(d) Lender shall have received all fees due and payable on or prior to such
date; and

 

(e) All legal matters incident to such Loan shall be satisfactory to Lender and
its counsel.

 

6.3 Conditions Precedent to Increase of Maximum Revolving Amount. In the sole
discretion of Lender, the Maximum Revolving Amount may be increased as provided
in the definition thereof at such time(s) and for such periods as Lender may
determine following written request by Borrower, upon Lender’s satisfaction in
its sole discretion with each of the following:

 

(a) Each of the conditions precedent in Sections 6.1 and 6.2 hereof have been
satisfied and performed; and

 

(b) The Borrowers have met or exceeded Projections and budget provided by
Borrowers; and

 

(c) The Borrower’s capital raised is sufficient as determined by Lender; and

 

(d) Lender has determined there is sufficient Collateral and Availability as
herein defined to support such increase(s).

 

Any consent or approval by Lender to any such request shall be in a writing
signed by Lender in the form and delivery required hereby.

 

VII.REPRESENTATIONS, WARRANTIES AND COVENANTS

 

To induce Lender to enter into this Agreement and to make the Loans, each Credit
Party represents and warrants (each of which representations and warranties
shall survive the execution and delivery of this Agreement), and promises to and
agrees with Lender until the Termination Date as follows:

 

7.1 Corporate Existence; Compliance with Law. Each Corporate Credit Party: (a)
is, as of the Closing Date, and will continue to be (i) a corporation or limited
liability company duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or formation, (ii) duly
qualified to do business and in good standing in each other jurisdiction where
its ownership or lease of property or the conduct of its business requires such
qualification, except where the failure to be so qualified could not reasonably
be expected to have a Material Adverse Effect, and (iii) in compliance with all
Requirements of Law and Contractual Obligations, except to the extent failure to
comply therewith could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; and (b) has and will continue to
have (i) the requisite power and authority and the legal right to execute,
deliver and perform its obligations under the Credit Documents, and to own,
pledge, mortgage or otherwise encumber and operate its properties, to lease the
property it operates under lease, and to conduct its business as now, heretofore
or proposed to be conducted, and (ii) all licenses, permits, franchises, rights,
powers, consents or approvals from or by all Persons or Governmental Authorities
having jurisdiction over Borrowers which are necessary or appropriate for the
conduct of its business, except to the extent failure to have any such licenses,
permits, franchises, rights, powers, consents or approvals could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

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7.2 Names; Organizational Information; Collateral Locations. Disclosure Schedule
7.2 sets forth each Corporate Credit Party’s name as it appears in official
filing in the state of its incorporation or other organization, the type of
entity of each Corporate Credit Party, the state of each Corporate Credit
Party’s incorporation or organization and organizational identification number
issued by each Corporate Credit Party’s state of incorporation or organization
or a statement that no such number has been issued. The location of each
Corporate Credit Party’s chief executive office, corporate offices, warehouses,
other locations of Collateral and locations where records with respect to
Collateral are kept (including in each case the county of such locations) are as
set forth in Disclosure Schedule 7.2 and, except as set forth in such Disclosure
Schedule, such locations have not changed during the preceding twelve months.
With respect to each of the premises identified in Disclosure Schedule 7.2 on or
prior to the Closing Date a bailee, landlord or mortgagee agreement acceptable
to Lender has been obtained. As of the Closing Date, during the prior five
years, except as set forth in Disclosure Schedule 7.2, no Corporate Credit Party
shall have been known as or conducted business in any other name (including
trade names).

 

7.3 Power; Authorization; Enforceable Obligations. The execution, delivery and
performance by each Credit Party of the Credit Documents to which it is a party,
and the creation of all Liens provided for herein and therein: (a) are and will
continue to be within such Credit Party’s power and authority; (b) have been and
will continue to be duly authorized by all necessary or proper action; (c) are
not and will not be in violation of any Requirement of Law or Contractual
Obligation of such Credit Party; (d) do not and will not result in the creation
or imposition of any Lien (other than Permitted Liens) upon any of the
Collateral; and (e) do not and will not require the consent or approval of any
Governmental Authority or any other Person. As of the Closing Date, each Credit
Document shall have been duly executed and delivered on behalf of each Credit
Party, and each such Credit Document upon such execution and delivery shall be
and will continue to be a legal, valid and binding obligation of each Credit
Party, enforceable against it in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency and other similar laws
affecting creditors’ rights generally.

 

7.4 Financial Statements and Projections; Books and Records.

 

(a) The Financial Statements delivered by each Credit Party to Lender for its
most recently ended Fiscal Year and Fiscal Quarter, are true, correct and
complete and reflect fairly and accurately the financial condition of such
Credit Party as of the date of each such Financial Statement in accordance with
GAAP. The Projections most recently delivered by each Corporate Credit Party to
Lender have been prepared in good faith, with care and diligence and use
assumptions that are reasonable under the circumstances at the time such
Projections were prepared and as of the date delivered to Lender and all such
assumptions are disclosed in the Projections.

 

(b) Each Corporate Credit Party shall keep adequate Books and Records with
respect to the Collateral and its business activities in which proper entries,
reflecting all financial transactions, and payments and credits received on, and
all other dealings with, the Collateral, will be made in accordance with GAAP
and all Requirements of Law and on a basis consistent with the Financial
Statements.

 

  24 

 

 

7.5 Material Adverse Change. Between the date of each Credit Party’s most recent
Financial Statements delivered to Lender and the Closing Date: (a) no Credit
Party has incurred any obligations, contingent or non-contingent liabilities, or
liabilities for Charges, long-term leases or unusual forward or long-term
commitments which are not reflected in the Projections delivered on the Closing
Date and which could, alone or in the aggregate, reasonably be expected to have
a Material Adverse Effect; (b) there has been no material deviation from such
Projections; and (c) no events have occurred which alone or in the aggregate has
had or could reasonably be expected to have a Material Adverse Effect. No
Requirement of Law or Contractual Obligation of any Credit Party has or have had
or could reasonably be expected to have a Material Adverse Effect. No Credit
Party is in default, and to each Credit Party’s knowledge no third party is in
default, under or with respect to any of its Contractual Obligations, which
alone or in the aggregate has had or could reasonably be expected to have a
Material Adverse Effect.

 

7.6 Real Estate; Property. The Real Estate listed in Disclosure Schedule 7.6
constitutes all of the real property owned, leased, or used by each Credit Party
in its business, and no Corporate Credit Party will execute any material
agreement or contract in respect of such real estate after the date of this
Agreement without giving Lender prompt prior written notice thereof. Each
Corporate Credit Party holds and will continue to hold good and marketable fee
simple title to all of its owned real estate, and good and marketable title to
all of its other properties and assets, and valid and insurable leasehold
interests in all of its leases (both as lessor and lessee, sublessee or
assignee), and none of the properties and assets of any Corporate Credit Party
are or will be subject to any Liens, except Permitted Liens.

 

7.7 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.
Except as set forth in Disclosure Schedule 7.7, as of the Closing Date, no
Corporate Credit Party has any Subsidiaries, is not engaged in any joint venture
or partnership with any other Person, or is an Affiliate of any other Person.
All of the issued and outstanding Stock of each Corporate Credit Party
(including all rights to purchase, options, warrants or similar rights or
agreements pursuant to which any Corporate Credit Party may be required to
issue, sell, repurchase or redeem any of its Stock) as of the Closing Date is
owned by each of the Stockholders (and in the amounts) set forth on Disclosure
Schedule 7.7 or is disclosed on such Schedule 7.7 as issued by a public company.
All outstanding Indebtedness of each Corporate Credit Party as of the Closing
Date is described in Disclosure Schedule 9(b).

 

7.8 Government Regulation; Margin Regulations. No Credit Party is subject to or
regulated under or any federal or state statute, rule or regulation that
restricts or limits any Credit Party’s ability to incur Indebtedness, pledge its
assets, or to perform its obligations under the Credit Documents. The making of
a Loan, the application of the proceeds and repayment thereof, and the
consummation of the transactions contemplated by the Credit Documents do not and
will not violate any Requirement of Law. No Credit Party is engaged, nor will it
engage in the business of extending credit for the purpose of “purchasing” or
“carrying” any “margin security” as such terms are defined in Regulation U of
the Federal Reserve Board as now and hereafter in effect (such securities being
referred to herein as “Margin Stock”). No Credit Party owns Margin Stock, and
none of the proceeds of any Loan or other extensions of credit under any Credit
Document will be used, directly or indirectly, for the purpose of purchasing or
carrying any Margin Stock or reducing or retiring any Indebtedness which was
originally incurred to purchase or carry any Margin Stock. No Credit Party will
take or permit to be taken any action which might cause any Credit Document to
violate any regulation of the Federal Reserve Board.

 

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7.9 Taxes; Charges. Except as disclosed on Disclosure Schedule 7.9 all tax
returns, reports and statements required by any Governmental Authority to be
filed by each Credit Party have, as of the Closing Date, been filed and will,
until the Termination Date, be filed with the appropriate Governmental Authority
and no tax Lien has been filed against each Credit Party or any of each Credit
Party’s property. Proper and accurate amounts have been and will be withheld by
each Credit Party from its employees for all periods in complete compliance with
all Requirements of Law and such withholdings have and will be timely paid to
the appropriate Governmental Authorities. Disclosure Schedule 7.9 sets forth as
of the Closing Date those taxable years for which each Credit Party’s tax
returns are currently being audited by the IRS or any other applicable
Governmental Authority and any assessments or threatened assessments in
connection with such audit, or otherwise currently outstanding. Except as
described on Disclosure Schedule 7.9, no Credit Party nor its respective
predecessors are liable for any Charges: (a) under any agreement (including any
tax sharing agreements or agreement extending the period of assessment of any
Charges) or (b) to any Credit Party’s knowledge, as a transferee. As of the
Closing Date, no Credit Party has agreed or been requested to make any
adjustment under IRC Section 481(a), by reason of a change in accounting method
or otherwise, which could reasonably be expected to have a Material Adverse
Effect.

 

7.10 Payment of Obligations. Each Credit Party will pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all of its Charges and other obligations of whatever nature, except payments
to vendors or suppliers in the ordinary course of business consistent with past
practice as disclosed to Lender in writing or where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of such Credit Party and none of the Collateral is or could reasonably
be expected to become subject to any Lien or forfeiture or loss as a result of
such contest.

 

7.11 ERISA. No ERISA Event has occurred or is reasonably expected to occur that,
when taken together with all other existing ERISA Events, could reasonably be
expected to result in a liability of any Corporate Credit Party of more than the
Minimum Actionable Amount. The present value of all accumulated benefit
obligations of any Corporate Credit Party under each Plan (based on the
assumptions used for purposes of Statement of Financial Accounting Standards No.
87) did not, as of the date of the most recent Financial Statements reflecting
such amounts, exceed the fair market value of the assets of such Plan by more
than the Minimum Actionable Amount, and the present value of all accumulated
benefit obligations of all underfunded Plans (based on the assumptions used for
purposes of Statement of Financial Account Standards No. 87) did not, as of the
date of the most recent Financial Statements reflecting such amounts, exceed the
fair market value of the assets of such underfunded Plans by more than the
Minimum Actionable Amount. No Corporate Credit Party has incurred or reasonably
expects to incur any Withdrawal Liability in excess of the Minimum Actionable
Amount.

 

  26 

 

 

7.12 Litigation. No Litigation is pending or, to the knowledge of any Credit
Party, threatened by or against any Credit Party or against any Credit Party’s
properties or revenues (a) with respect to any of the Credit Documents or any of
the transactions contemplated hereby or thereby, or (b) which could reasonably
be expected to have a Material Adverse Effect. Except as set forth on Disclosure
Schedule 7.12, as of the Closing Date there is no Litigation pending or, to the
best knowledge of any Credit Party, threatened against any Credit Party which
seeks damages in excess of the Minimum Actionable Amount or injunctive relief or
alleges criminal misconduct of any Credit Party. Each Credit Party shall notify
Lender in writing within five (5) Business Days of learning of the existence,
threat or commencement of any Litigation against any Credit Party or any Plan or
any allegation of criminal misconduct against any Credit Party.

 

7.13 Intellectual Property. As of the Closing Date, all material Intellectual
Property owned or used by each Corporate Credit Party is listed, together with
application or registration numbers, where applicable, in Disclosure Schedule
7.13. Each Corporate Credit Party is the sole legal and beneficial owner, or is
licensed on commercial terms to use, all Intellectual Property necessary to
conduct its business as currently conducted except for such Intellectual
Property the failure of which to own or license could not reasonably be expected
to have a Material Adverse Effect. Each Corporate Credit Party will maintain and
establish the patenting and registration of all Intellectual Property with the
United States Patent and Trademark Office, the United States Copyright Office,
or other appropriate Governmental Authority of all new Intellectual Property
where applicable and notify Lender in writing five (5) Business Days prior to
filing any such new patent or registration. With respect to Intellectual
Property licensed by each Corporate Credit Party, an agreement acceptable to
Lender from the licensor of such Intellectual Property will be obtained
permitting Lender to use such Intellectual Property or sell the Goods containing
such Intellectual Property following the occurrence of a Default. No Credit
Party is aware of any infringement on the Intellectual Property of any third
party in the carrying on of its business in the normal course.

 

7.14 Full Disclosure. No information contained in any Credit Document, the
Financial Statements or any written statement furnished by or on behalf of any
Credit Party under any Credit Document, or to induce Lender to execute the
Credit Documents, contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made.

 

7.15 Hazardous Materials. Except as set forth on Disclosure Schedule 7.15, as of
the Closing Date, (a) each Real Estate is maintained free of contamination from
any Hazardous Material, (b) no Credit Party is subject to any Environmental
Liabilities or, to any Credit Party’s knowledge, potential Environmental
Liabilities, in excess of the Minimum Actionable Amount in the aggregate, (c) no
notice has been received by any Credit Party identifying it as a “potentially
responsible party” or requesting information under CERCLA or analogous state
statutes, and to the knowledge of any Credit Party, there are no facts,
circumstances or conditions that may result in such Credit Party being
identified as a “potentially responsible party” under CERCLA or analogous state
statutes; and (d) each Credit Party has provided to Lender copies of all
existing environmental reports, reviews and audits and all written information
pertaining to actual or potential Environmental Liabilities, in each case
relating to any Credit Party. Each Credit Party: (i) shall comply in all
material respects with all applicable Environmental Laws and environmental
permits; (ii) shall notify Lender in writing within seven days if and when it
becomes aware of any Release, on, at, in, under, above, to, from or about any of
its Real Estate; and (iii) shall promptly forward to Lender a copy of any order,
notice, permit, application, or any communication or report received by it or
any Credit Party in connection with any such Release.

 

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7.16 Insurance. As of the Closing Date, Disclosure Schedule 7.16 lists all
insurance of any nature maintained for current occurrences by Borrowers, as well
as a summary of the terms of such insurance. Each Corporate Credit Party shall
deliver to Lender certified copies and endorsements to all of its (a) “All Risk”
and business interruption insurance policies naming Lender as lender loss payee,
and (b) general liability and other liability policies naming Lender as an
additional insured. All policies of insurance on real and personal property will
contain an endorsement, in form and substance acceptable to Lender, showing loss
payable to Lender (Form 438 BFU or equivalent) and extra expense and business
interruption endorsements. Such endorsement, or an independent instrument
furnished to Lender, will provide that the insurance companies will give Lender
at least thirty (30) days prior written notice before any such policy or
policies of insurance shall be altered or canceled and that no act or default of
any Corporate Credit Party or any other Person shall affect the right of Lender
to recover under such policy or policies of insurance in case of loss or damage.
Each Borrower shall direct all present and future insurers under its “All Risk”
policies of insurance to pay all proceeds payable thereunder directly to Lender.
If any insurance proceeds are paid by check, draft or other instrument payable
to any Corporate Credit Party and Lender jointly, Lender may endorse each
Corporate Credit Party’s name thereon and do such other things as Lender may
deem advisable to reduce the same to cash. Lender reserves the right at any
time, upon review of any Corporate Credit Party’s risk profile, to require
additional forms and limits of insurance. Each Corporate Credit Party shall, on
each anniversary of the Closing Date and from time to time at Lender’s request,
deliver to Lender a report by a reputable insurance broker, satisfactory to
Lender, with respect to such Person’s insurance policies.

 

7.17 Deposit and Disbursement Accounts. Disclosure Schedule 7.17 lists all banks
and other financial institutions at which each Credit Party, maintains deposits
and/or other accounts and correctly identifies the name, address and telephone
number of each such depository, the name in which the account is held, a
description of the purpose of the account, and the complete account number.

 

7.18 Accounts. No Corporate Credit Party has made, nor will any Credit Party
make, any agreement with any Account Debtor for any extension of time for the
payment of any Account, any compromise or settlement for less than the full
amount thereof, any release of any Account Debtor from liability therefor, or
any deduction therefrom except a discount or allowance for prompt or early
payment allowed by a Corporate Credit Party and such other compromises or
settlements in the ordinary course of its business consistent with historical
practice and as previously disclosed to Lender in writing. With respect to the
Accounts pledged as collateral pursuant to any Credit Document (a) the amounts
shown on all invoices, statements and reports which may be delivered to the
Lender with respect thereto are actually and absolutely owing to a Credit Party
as indicated thereon and are not in any way contingent; (b) no payments have
been or shall be made thereon except payments immediately delivered to Lender as
required hereunder; and (c) to each Corporate Credit Party’s knowledge all
Account Debtors have the capacity to contract. As of the date of each Borrowing
Base Certificate delivered to Lender, each Account listed thereon as an Eligible
Account shall be an Eligible Account and all Inventory listed thereon as
Eligible Inventory shall be Eligible Inventory. Each Borrower shall notify
Lender promptly and in any event within the earlier of (a) five (5) Business
Days after obtaining knowledge thereof or (b) in the next submitted borrowing
base certificate, (i) of any event or circumstance that to any Borrower’s
knowledge would cause Lender to consider any then existing Account or Inventory
as no longer constituting an Eligible Account or Eligible Inventory, as the case
may be; (ii) of any material delay in any Borrower’s performance of any of its
obligations to any Account Debtor; (iii) of any assertion by an Account Debtor
of any material claims, offsets or counterclaims; (iv) of any allowances,
credits and/or monies granted by any Borrower to any Account Debtor; (v) of all
material adverse information relating to the financial condition of an Account
Debtor; (vi) of any material return of goods; and (vii) of any loss, damage or
destruction of any of the Collateral.

 

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7.19 Conduct of Business. Each Corporate Credit Party (a) shall conduct its
business substantially as now conducted or as otherwise permitted hereunder, and
(b) shall at all times maintain, preserve and protect all of the Collateral and
each Corporate Credit Party’s other property, used or useful in the conduct of
its business and keep the same in good repair, working order and condition and
make, or cause to be made, all necessary or appropriate repairs, replacements
and improvements thereto consistent with industry practices.

 

7.20 Further Assurances. At any time and from time to time, upon the written
request of Lender and at the sole expense of Credit Parties, each Credit Party
shall promptly and duly execute and deliver any and all such further instruments
and documents and take such further action as Lender may reasonably deem
desirable (a) to obtain the full benefits of this Agreement and the other Credit
Documents, (b) to protect, preserve and maintain Lender’s rights in any
Collateral, or (c) to enable Lender to exercise all or any of the rights and
powers herein granted.

 

VIII.FINANCIAL REPORTS; FINANCIAL COVENANTS

 

8.1 Reports and Notices. From the Closing Date until the Termination Date, each
Credit Party shall deliver to Lender:

 

(a) within twenty (20) days following the end of each Fiscal Month (but within
thirty (30) days following the end of the initial Fiscal Month hereunder), a
Monthly Statement Report of each Corporate Credit Party other than ATRM
Holdings, Inc., in the form of Exhibit B as of the last day of the previous
Fiscal Month;

 

(b) within twenty (20) days following the end of each Fiscal Month (but within
thirty (30) days following the end of the initial Fiscal Month hereunder), the
Financial Statements for such Fiscal Month of each Corporate Credit Party other
than ATRM Holdings, Inc., which statements will show comparative results for
prior Fiscal Month commencing for the Fiscal Month of November, 2017 in the
current and prior Fiscal Years, which statements will present results with each
Affiliate (not including any stockholders of ATRM Holdings, Inc.) on an
unconsolidated basis and is accompanied by a certification in the form of
Exhibit D by the Chief Executive Officer or Chief Financial Officer that such
Financial Statements are complete and correct, that there was no Default (or
specifying those Defaults of which he or she was aware), and showing in
reasonable detail the calculations used in determining compliance with the
financial covenants hereunder; each such monthly report shall also report on the
status (and attach applicable copies of) of all contractual relationships with
significant Accounts of Borrower as determined by Lender in order to verify
current and ongoing relationships.

 

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(c) within one hundred and five (105) days following the close of each Fiscal
Year, the Financial Statements of ATRM Holdings, Inc. (with a supporting
schedule for the other Corporate Credit Parties) for such Fiscal Year of each
Corporate Credit Party, audited and certified by an independent certified
accounting firm acceptable to Lender, (as of Closing Date Boulay PLLP shall be
deemed acceptable to Lender) which shall provide both comparisons to the prior
Fiscal Year and be on a consolidating basis with each Affiliate, (not including
any stockholders of ATRM Holdings, Inc.) and shall be accompanied by (i) a
statement in reasonable detail showing the calculations used in determining
compliance with the financial covenants hereunder, (ii) a report from such
accountants to the effect that in connection with their audit examination
nothing has come to their attention to cause them to believe that a Default has
occurred or specifying those Defaults of which they are aware, and (iii) any
management letter that may be issued;

 

(d) at least thirty (30) days before the beginning of each Fiscal Year of each
Borrower, the Projections, each in reasonable detail, representing such
Borrower’s good faith Projections and certified by such Borrower’s President or
Chief Financial Officer as being the most accurate Projections available and
identical to the Projections used by such Borrower for internal planning
purposes, together with such supporting schedules and information as Lender may
in its discretion require;

 

(e) together with each request for a Loan (but in no event later than the third
(3rd) Business Day of each month) and at such intervals as Lender may request a
Borrowing Base Certificate as of the last day of the immediately preceding
Fiscal Month, or more current date if available, detailing ineligible Accounts
and Inventory, certified as true and correct by the President or Chief Financial
Officer of each Borrower;

 

(f) together with each request for a Loan (but in no event later than the third
(3rd) Business Day of each month) and at such other intervals as Lender may
require: (i) copies of all entries to the sales journal and the cash receipt
journal; (ii) copies of all credit memos; and (iii) copies of all invoices in
excess of five thousand dollars ($5,000), together with proof of delivery, in
each case as and for the immediately preceding Fiscal Month;

 

(g) promptly following Lender’s request, receivable schedules, copies of
invoices to Account Debtors, shipping documents, delivery receipts and such
other material, reports, records or information as Lender may request;

 

(h) promptly upon their distribution, copies of all financial statements,
reports and proxy statements which any Corporate Credit Party shall have sent to
its stockholders, promptly after the sending or filing thereof, copies of all
regular and periodic reports which any Borrower shall file with the Securities
and Exchange Commission or any national securities exchange; and

 

(i) each Borrower will cause each Guarantor to comply with the financial
reporting requirements set forth in their respective Guaranties.

 

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8.2 Financial Covenants. No Credit Party shall breach any of the financial
covenants set forth in Schedule III.

 

8.3 Other Reports and Information. Each Credit Party shall advise Lender
promptly, in reasonable detail, of: (a) any Lien, other than Permitted Liens,
attaching to or asserted against any of the Collateral or any occurrence causing
a material loss or decline in value of any Collateral and the estimated (or
actual, if available) amount of such loss or decline; (b) any material change in
the composition of the Collateral; and (c) the occurrence of any Default, Event
of Default or other event which has had or could reasonably be expected to have
a Material Adverse Effect. Each Corporate Credit Party shall, upon request of
Lender, furnish to Lender such other reports and information in connection with
the affairs, business, financial condition, operations, prospects or management
of such Corporate Credit Party or the Collateral as Lender may request, all in
reasonable detail. If any internally prepared financial information, including
that required under Section 8.1 is unsatisfactory in any manner to Lender,
Lender may request that the Borrower’s independent certified accountants review
the same.

 

8.4 Good Standing Certificates. Together with the delivery of the Financial
Statements referred to in Section 8.1(c), each Corporate Credit Party shall
provide to Lender a certificate of good standing from its state of incorporation
or organization.

 

IX.NEGATIVE COVENANTS

 

Each Corporate Credit Party covenants and agrees that, without Lender’s prior
written consent, from the Closing Date until the Termination Date, such
Corporate Credit Party shall not, directly or indirectly, by operation of law or
otherwise:

 

(a) form any Subsidiary or merge with, consolidate with, acquire all or
substantially all of the assets or capital stock of, or otherwise combine with
or make any investment in or, except as provided in clause 9(c) below, loan or
advance to, any Person;

 

(b) cancel any debt owing to it or create, incur, assume or permit to exist any
Indebtedness, except: (i) the Obligations, (ii) Indebtedness existing as of the
Closing Date set forth on Disclosure Schedule 9(b), (iii) deferred taxes, (iv)
by endorsement of instruments or items of payment for deposit to the general
account of Borrower, (v) for Guaranteed Indebtedness incurred for the benefit of
a Borrower if the primary obligation is permitted by this Agreement; (vi)
additional Indebtedness (including Purchase Money Indebtedness) incurred after
the Closing Date in an aggregate outstanding amount for Credit Parties not
exceeding the Minimum Actionable Amount; and (vii) Indebtedness to trade
creditors in the ordinary course of business consistent with past practice and
as disclosed to Lender in writing;

 

(c) enter into any lending, borrowing or other commercial transaction with any
of its employees, directors or Affiliates (including upstreaming and
downstreaming of cash and intercompany loan and advances) other than loans or
advances to employees in the ordinary course of business in an aggregate
outstanding amount not exceeding the Minimum Actionable Amount;

 

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(d) make any changes in any of its business objectives, purposes, or operations
which could reasonably be expected to adversely affect repayment of the
Obligations or could reasonably be expected to have a Material Adverse Effect or
engage in any business other than that presently engaged in or proposed to be
engaged in the Projections delivered to Lender on the Closing Date or amend its
charter or by-laws or other organizational documents;

 

(e) create or permit any Lien on any of its properties or assets, except for
Permitted Liens;

 

(f) sell, transfer, issue, convey, assign or otherwise dispose of any of its
assets or properties, including its Accounts or any shares of its Stock or
engage in any sale-leaseback, synthetic lease or similar transaction (provided,
that the foregoing shall not prohibit the sale of Inventory or obsolete or
unnecessary Equipment in the ordinary course of its business);

 

(g) change its name, state of incorporation or organization, chief executive
office, corporate offices, warehouses or other Collateral locations, or location
of its records concerning the Collateral, or acquire, lease or use any real
estate after the Closing Date without such Credit Party, in each instance,
giving thirty (30) days prior written notice thereof to Lender and taking all
actions deemed necessary or appropriate by Lender to continuously protect and
perfect Lender’s Liens upon the Collateral or store or hold any assets of
another Person;

 

(h) establish any depository or other bank account of any kind with any
financial institution (other than the accounts set forth on Disclosure Schedule
7.17) without Lender’s prior written consent and then only after such Credit
Party has implemented agreements with such bank or other institution and Lender
acceptable to Lender; or

 

(i) make or permit any Restricted Payment other than (i) interest and principal,
when due without acceleration or modification of the amortization as in effect
on the Closing Date, under Indebtedness (not including Subordinated Debt,
payments of which shall be permitted only in accordance with the terms of the
relevant Subordination Agreement made in favor of Lender) described in
Disclosure Schedule 9(b) or otherwise permitted under Article IX(b)(vi) and
Schedule III (ii) so long as (x) the tax status of such Credit Party is a pass
thru or disregarded entity within the meaning of the Internal Revenue Code of
1986, as amended, (y) no Default or Event of Default shall have occurred and be
continuing and (z) after first providing such supporting documentation as Lender
may request (including the personal state and federal tax returns of each
Stockholder), such Credit Party may pay Pass Thru Distributions not exceeding
Pass Thru Tax Liabilities (payments to Stockholders as hereby permitted shall be
made only so as to be available when the tax is due, including in respect of
estimated tax payments).

 

X. SECURITY INTEREST

 

10.1 Grant of Security Interest.

 

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(a) As collateral security for the prompt and complete payment and performance
of all of the Obligations, each Corporate Credit Party other than ATRM Holdings,
Inc., executing this Agreement hereby grants to the Lender a security interest
in and Lien upon all of its property and assets, whether real or personal,
tangible or intangible, and whether now owned or hereafter acquired, or in which
it now has or at any time in the future may acquire any right, title, or
interest, including all of the following property in which it now has or at any
time in the future may acquire any right, title or interest: all Accounts; all
Deposit Accounts and all funds on deposit therein; all cash and cash
equivalents; all commodity contracts; all investments, Stock and Investment
Property; all Inventory; all Equipment; all Goods; all Chattel Paper, all
Documents; all Instruments; all Books and Records; all General Intangibles; all
Supporting Obligations; all Letter-of-Credit Rights; all commercial tort claims
and to the extent not otherwise included, all Proceeds and products of all and
any of the foregoing and all collateral security and guarantees given by any
Person with respect to any of the foregoing, but excluding in all events
Hazardous Waste (all of the foregoing, together with any other collateral
pledged to the Lender pursuant to any other Credit Document, collectively, the
“Collateral”).

 

(b) Each Corporate Credit Party other than ATRM Holdings, Inc., executing this
Agreement and Lender agree that this Agreement creates, and is intended to
create, valid and continuing Liens upon the Collateral in favor of Lender. Each
Corporate Credit Party other than ATRM Holdings, Inc., represents, warrants and
promises to Lender that: (i) such Corporate Credit Party other than ATRM
Holdings, Inc., is the sole owner of each item of the Collateral upon which it
purports to grant a Lien pursuant to the Credit Documents, and has good and
marketable title thereto free and clear of any and all Liens or claims of
others, other than Permitted Liens; (ii) the security interests granted pursuant
to this Agreement will constitute valid perfected security interests in all of
the Collateral in favor of Lender as security for the prompt and complete
payment and performance of the Obligations, enforceable in accordance with the
terms hereof against any and all creditors of and purchasers from such Corporate
Credit Party other than ATRM Holdings, Inc., (other than purchasers of Inventory
in the ordinary course of business) and such security interests are prior to all
other Liens on the Collateral in existence on the date hereof except for
Permitted Liens which have priority by operation of law; and (iii) no effective
security agreement, financing statement, equivalent security or Lien instrument
or continuation statement covering all or any part of the Collateral is or will
be on file or of record in any public office, except those relating to Permitted
Liens. Such Corporate Credit Party other than ATRM Holdings, Inc., executing
this Agreement promises to defend the right, title and interest of Lender in and
to the Collateral against the claims and demands of all Persons whomsoever, and
each Corporate Credit Party other than ATRM Holdings, Inc., shall take such
actions, including (x) the prompt delivery of all negotiable Documents, original
Instruments, Chattel Paper and certificated Stock owned by such Corporate Credit
Party other than ATRM Holdings, Inc., to Lender, (y) notification of Lender’s
interest in Collateral at Lender’s request, and (z) the institution of
litigation against third parties as shall be prudent in order to protect and
preserve such Corporate Credit Party’s other than ATRM Holdings, Inc., and
Lender’s respective and several interests in the Collateral. Each Corporate
Credit Party other than ATRM Holdings, Inc., executing this Agreement shall mark
its Books and Records pertaining to the Collateral to evidence the Credit
Documents and the Liens granted under the Credit Documents. All Chattel Paper
shall be marked with the following legend: “This writing and the obligations
evidenced or secured hereby are subject to the security interest of Gerber
Finance Inc.”

 

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(c) Each Corporate Credit Party other than ATRM Holdings, Inc., executing this
Agreement shall obtain or use its best efforts to obtain waivers or
subordinations of Liens from landlords and mortgagees, and each Corporate Credit
Party other than ATRM Holdings, Inc., shall in all instances obtain signed
acknowledgments of Lender’s Liens from bailees having possession of such
Corporate Credit Party’s other than ATRM Holdings, Inc., Goods that they hold
for the benefit of Lender.

 

(d) Each Corporate Credit Party other than ATRM Holdings, Inc., executing this
Agreement shall obtain authenticated control letters from each issuer of
uncertificated securities, securities intermediary, or commodities intermediary
issuing or holding any financial assets or commodities to or for such Corporate
Credit Party other than ATRM Holdings, Inc.

 

(e) Each Corporate Credit Party other than ATRM Holdings, Inc., executing this
Agreement shall establish and maintain the cash management system described in
Schedule IV. All payments in respect of the Collateral, shall be made to or
deposited in the Collateral Account.

 

(f) Each Corporate Credit Party other than ATRM Holdings, Inc., executing this
Agreement shall promptly, and in any event within two (2) Business Days after
becoming a beneficiary under a letter of credit, notify Lender thereof and enter
into a tri-party agreement with Lender and the issuer and/or confirmation bank
with respect to Letter-of-Credit Rights assigning such Letter-of-Credit Rights
to Lender and directing all payments thereunder to Lender, all in form and
substance reasonably satisfactory to Lender.

 

(g) Each Corporate Credit Party other than ATRM Holdings, Inc., executing this
Agreement shall take all steps necessary to grant Lender control of all
electronic chattel paper in accordance with the UCC and all “transferable
records” as defined in each of the Uniform Electronic Transactions Act and the
Electronic Signatures in Global and National Commerce Act.

 

(h) Each Corporate Credit Party other than ATRM Holdings, Inc., executing this
Agreement hereby irrevocably authorizes Lender at any time and from time to time
to file in any filing office in any Uniform Commercial UCC jurisdiction any
initial financing statements and amendments thereto that (i) indicate the
Collateral (x) as all assets of such Corporate Credit Party other than ATRM
Holdings, Inc., or words of similar effect, regardless of whether any particular
asset comprised in the Collateral falls within the scope of Article 9 of the UCC
or such jurisdiction, or (y) as being of an equal or lesser scope or with
greater detail, and (ii) contain any other information required by Part 5 of
Article 9 of the UCC or the filing office for acceptance of any financing
statement or amendment, including whether each Corporate Credit Party other than
ATRM Holdings, Inc., is an organization, the type of organization and any
organization identification number issued to such Corporate Credit Party other
than ATRM Holdings, Inc., and in the case of a financing statement filed as a
fixture filing or indicating Collateral as as-extracted collateral or timber to
be cut, a sufficient description of real property to which the Collateral
relates. Each Corporate Credit Party other than ATRM Holdings, Inc., agrees to
furnish any such information to Lender promptly upon request. Each Corporate
Credit Party other than ATRM Holdings, Inc., also ratifies its authorization for
Lender to have filed any initial financing statements or amendments thereto if
filed prior to the date hereof.

 

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(i) Each Corporate Credit Party other than ATRM Holdings, Inc., shall promptly,
and in any event within the earlier of (i) five (5) Business Days after the same
is acquired by it, or (ii) the next submitted borrowing base certificate, notify
Lender of any commercial tort claim (as defined in the UCC) acquired by it and
unless otherwise consented by Lender, each Corporate Credit Party other than
ATRM Holdings, Inc., shall enter into a supplement to this Agreement, granting
to Lender a Lien in such commercial tort claim.

 

(j) It is the intent of each Corporate Credit Party other than ATRM Holdings,
Inc., and Lender that none of the Collateral is or shall be regarded as Fixtures
and each Corporate Credit Party other than ATRM Holdings, Inc., represents and
warrants that it has not made and is not bound by any lease or other agreement
that is inconsistent with such intent. Nevertheless, if the Collateral or any
part thereof is or is to become attached or affixed to any real estate, each
Corporate Credit Party other than ATRM Holdings, Inc., will, upon request,
furnish Lender with a disclaimer or subordination in form satisfactory to Lender
of their interests in the Collateral from all Persons having an interest in the
real estate to which the Collateral is attached or affixed, together with the
names and addresses of the record owners of, and all other persons having
interest in, and a general description of, such real estate.

 

10.2 Lender’s Rights.

 

(a) Lender may, (i) at any time in Lender’s own name or in the name of each
Corporate Credit Party other than ATRM Holdings, Inc., communicate with Account
Debtors, parties to Contracts, and obligors in respect of Instruments, Chattel
Paper or other Collateral to verify to Lender’s satisfaction, the existence,
amount and terms of any such Accounts, Contracts, Instruments or Chattel Paper
or other Collateral, and (ii) at any time and without prior notice to any such
Corporate Credit Party other than ATRM Holdings, Inc., notify Account Debtors,
parties to Contracts, and obligors in respect of Chattel Paper, Instruments, or
other Collateral that the Collateral has been assigned to Lender and that
payments shall be made directly to Lender. Upon the request of Lender, each
Corporate Credit Party other than ATRM Holdings, Inc., shall so notify such
Account Debtors, parties to Contracts, and obligors in respect of Instruments,
Chattel Paper or other Collateral. Each Corporate Credit Party other than ATRM
Holdings, Inc., hereby constitutes Lender or Lender’s designee such Corporate
Credit Party’s other than ATRM Holdings, Inc., attorney with power to endorse
such Corporate Credit Party’s other than ATRM Holdings, Inc., name upon any
notes, acceptance drafts, money orders or other evidences of payment or
Collateral.

 

(b) Each Corporate Credit Party other than ATRM Holdings, Inc., shall remain
liable under each Contract, Instrument and License to observe and perform all
the conditions and obligations to be observed and performed by it thereunder,
and Lender shall have no obligation or liability whatsoever to any Person under
any Contract, Instrument or License (between any Borrower and any Person other
than Lender) by reason of or arising out of the execution, delivery or
performance of this Agreement, and Lender shall not be required or obligated in
any manner (i) to perform or fulfill any of the obligations of Borrower, (ii) to
make any payment or inquiry, or (iii) to take any action of any kind to collect,
compromise or enforce any performance or the payment of any amounts which may
have been assigned to it or to which it may be entitled at any time or times
under or pursuant to any Contract, Instrument or License.

 

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(c) Each Corporate Credit Party other than ATRM Holdings, Inc., shall, with
respect to each owned, leased, or controlled property (including public
warehouses), during normal business hours and upon reasonable advance notice
(unless a Default or Event of Default shall have occurred and be continuing, in
which event no notice shall be required and Lender shall have access at any and
all times): (i) provide access to such property to Lender and any of its
officers, employees and agents, as frequently as Lender determines to be
appropriate; (ii) permit Lender and any of its officers, employees and agents to
inspect, audit and make extracts and copies (or take originals if reasonably
necessary) from all of such Corporate Credit Party’s other than ATRM Holdings,
Inc., Books and Records; and (iii) permit Lender to inspect, review, evaluate
and make physical verifications and appraisals of the Inventory and other
Collateral in any manner and through any medium that Lender considers advisable,
and each Corporate Credit Party other than ATRM Holdings, Inc., agrees to render
to Lender, at Borrowers’ cost and expense, such clerical and other assistance as
may be reasonably requested with regard thereto.

 

(d) After the occurrence and during the continuance of a Default or Event of
Default, each Corporate Credit Party other than ATRM Holdings, Inc., at its own
expense, shall cause the certified public accountant then engaged by any
Borrower to prepare and deliver to Lender at any time and from time to time,
promptly upon Lender’s request, the following reports: (i) a reconciliation of
all Accounts; (ii) an aging of all Accounts; (iii) trial balances; and (iv) test
verifications of such Accounts as Lender may request. Each Corporate Credit
Party other than ATRM Holdings, Inc., at its own expense, shall cause its
certified independent public accountants to deliver to Lender the results of any
physical verifications of all or any portion of the Inventory made or observed
by such accountants when and if such verification is conducted. Lender shall be
permitted to observe and consult with such Corporate Credit Party’s other than
ATRM Holdings, Inc., accountants in the performance of these tasks.

 

10.3 Lender’s Appointment as Attorney-in-Fact. On the Closing Date, each
Corporate Credit Party other than ATRM Holdings, Inc., shall execute and deliver
a Power of Attorney in the form attached as Exhibit E. The power of attorney
granted pursuant to the Power of Attorney and all powers granted under any
Credit Document are powers coupled with an interest and shall be irrevocable
until the Termination Date. The powers conferred on Lender under the Power of
Attorney are solely to protect Lender’s interests in the Collateral and shall
not impose any duty upon it to exercise any such powers. Lender agrees, except
for the powers granted in clause (h) of the Power of Attorney, not to exercise
any power or authority granted under the Power of Attorney unless an Event of
Default has occurred and is continuing. Each Corporate Credit Party other than
ATRM Holdings, Inc., authorizes Lender to file any financing or continuation
statement without their signature to the extent permitted by applicable law.
NONE OF LENDER OR ITS AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES SHALL BE RESPONSIBLE TO ANY GRANTOR FOR ANY ACT OR FAILURE TO
ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES
ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS
FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR ANY PUNITIVE,
EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.

 

10.4 Grant of License to Use Intellectual Property Collateral. Each Corporate
Credit Party other than ATRM Holdings, Inc., hereby grants to Lender an
irrevocable, non-exclusive license (exercisable upon the occurrence and during
the continuance of an Event of Default) without payment of royalty or other
compensation to any such Corporate Credit Party other than ATRM Holdings, Inc.,
to use, transfer, license or sublicense any Intellectual Property now owned,
licensed to, or hereafter acquired by any such Corporate Credit Party other than
ATRM Holdings, Inc., and wherever the same may be located, and including in such
license access to all media in which any of the licensed items may be recorded
or stored and to all computer software and programs used for the compilation or
printout thereof, and represents, promises and agrees that any such license or
sublicense is not and will not be in conflict with the contractual or commercial
rights of any third Person; provided, that such license will terminate on the
Termination Date.

 

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10.5 Terminations; Amendments Not Authorized. Each Corporate Credit Party other
than ATRM Holdings, Inc., executing this Agreement acknowledges that it is not
authorized to file any financing statement or amendment or termination statement
with respect to any financing statement without the prior written consent of
Lender and agrees that it will not do so without the prior written consent of
Lender, subject to Borrower’s rights under Section 9-509(d)(2) of the UCC.

 

10.6 Inspections. At all times during normal business hours and absent the
occurrence of a Default or an Event of Default upon reasonable notice to
Borrowing Representative, Lender shall have the right to (a) have access to,
visit, inspect, review, evaluate and make physical verification and appraisals
of each Credit Party’s properties and the Collateral, (b) inspect, examine and
copy (or take originals if necessary) and make extracts from such Credit Party’s
Books and Records, including management letters prepared by independent
accountants, and (c) discuss with each Credit Party’s principal officers, and
independent accountants, each Credit Party’s business, assets, liabilities,
financial condition, results of operations and business prospects. Each Credit
Party will deliver to Lender any instrument necessary for Lender to obtain
records from any service bureau maintaining records for such Credit Party.

 

XI. TERM

 

11.1 Term of Agreement. Any obligation of Lender to make Loans and extend their
financial accommodations under this Agreement or any Credit Document shall
continue in full force and effect until the expiration of the Term. The
termination of the Agreement shall not affect any of Lender’s rights hereunder
or any Credit Document and the provisions hereof and thereof shall continue to
be fully operative until all transactions entered into, rights or interests
created and the Obligations have been disposed of, concluded or liquidated. The
Maturity Date shall be automatically extended for successive periods of one (1)
year each unless (a) Borrowing Representative shall have provided Lender with a
written notice of termination, at least sixty (60) days prior to the expiration
of the Maturity Date or any renewal of the Maturity Date or (b) Lender provides
written notice of termination to Borrowing Representative at least sixty (60)
days prior to the expiration of the Maturity Date or any renewal of the Maturity
Date. Notwithstanding the foregoing, Lender shall release its security interests
at any time after thirty (30) days notice upon payment to it of all Obligations
if each Credit Party shall have (i) provided Lender with an executed release of
any and all claims which Credit Parties may have or thereafter have under this
Agreement and/or any Credit Document and (ii) paid to Lender an amount equal to
(A) the monthly interest on the Minimum Average Monthly Loan Amount calculated
based on the interest rate in effect on the date of such payment multiplied by
(B) the difference between (I) the number of full months from the Closing Date
until the Maturity Date and (II) the number of full months which have elapsed
from the Closing Date until the payment of the fee hereunder. In addition,
Borrowers shall pay to Lender the Collateral Monitoring Fee for each month from
the date of repayment until the Maturity Date. These fees shall also be due and
payable to Lender upon termination of this Agreement by Lender after the
occurrence of an Event of Default.

 

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11.2 Termination of Lien. The Liens and rights granted to Lender hereunder and
any Credit Documents and the financing statements filed in connection herewith
or therewith shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrowers’ account may from time
to time be temporarily in a zero or credit position, until (a) all of the
Obligations have been paid or performed in full after the termination of this
Agreement or each Credit Party has furnished Lender with an indemnification
satisfactory to Lender with respect thereto and (b) each Credit Party has an
executed release of any and all claims which such Credit Party may have or
thereafter have under this Agreement or any other Credit Document. Accordingly,
each Credit Party waives any rights which it may have under the UCC to demand
the filing of termination statements with respect to the Collateral, and Lender
shall not be required to send such termination statements to any Credit Party,
or to file them with any filing office, unless and until this Agreement and the
Credit Documents shall have been terminated in accordance with their terms and
all Obligations paid in full in immediately available funds.

 

XII. EVENTS OF DEFAULT

 

12.1 Events of Default. If any one or more of the following events (each, an
“Event of Default”) shall occur and be continuing:

 

(a) any Borrower shall fail to pay the principal of or interest on any Loan or
any fees or other Obligations when and as the same shall become due and payable
(whether at maturity, by acceleration or otherwise); or

 

(b) any representation or warranty made or deemed made in or in connection with
this Agreement or any other Credit Document or as an inducement to enter into
this Agreement or any other Credit Document or any representation, warranty,
statement or information contained in any report, certificate, financial
statement or other instrument or agreement furnished in connection with or
pursuant to this Agreement or any other Credit Document shall prove to have been
false or misleading in any material respect when made, deemed to be made or
furnished; or

 

(c) (i) any Borrower or any other Credit Party shall fail or neglect to perform,
keep or observe any of the covenants, promises, agreements, requirements,
conditions or other terms or provisions contained in any Credit Document or in
Article II, Sections 7.1, 7.3, 7.16, 7.17, 7.18, 7.19, 8.2 and Article IX of
this Agreement; or (ii) any Borrower or any other Credit Party shall fail or
neglect to perform, keep or observe any of the other covenants, promises,
agreements, requirements, conditions or other terms or provisions contained in
this Agreement (other than those set forth in the Sections referred to in clause
(i) immediately above) or any of the other Credit Documents, regardless of
whether such breach involves a covenant, promise, agreement, condition,
requirement, term or provision with respect to a Credit Party that has not
signed this Agreement, and such breach is not remediable or, if remediable,
continues unremedied for a period of five (5) Business Days after the earlier to
occur of (x) the date on which such breach is known or reasonably should have
become known to any officer of any Borrower or such Credit Party and (y) the
date on which Lender shall have notified any Borrower or such other Credit Party
of such breach; or

 

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(d) this Agreement or any other Credit Document shall not be for any reason, or
shall be asserted by any Credit Party or other Person not to be, in full force
and effect in all material respects in accordance with its terms or the Lien
granted or intended to be granted to Lender pursuant to this Agreement or any
other Credit Document shall cease to be a valid and perfected Lien having the
first priority (or a lesser priority if expressly permitted in this Agreement or
another Credit Document); or

 

(e) any judgment shall be rendered against any Credit Party or there shall be
any attachment or execution against any of the assets or properties of any
Credit Party, and such judgment, attachment or execution remains unpaid,
unstayed or undismissed for a period of fourteen (14) days from the date of such
judgment; or

 

(f) any Credit Party shall be dissolved or shall generally not pay, or shall be
generally unable to pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be instituted
or a petition shall be filed by or against any Credit Party seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for it
or for any substantial part of its property; or any Credit Party shall take any
action to authorize any of the actions set forth above in this clause (f); or

 

(g) any Credit Party shall (i) fail to pay any principal or interest, regardless
of amount, due in respect of Indebtedness when and as the same shall become due
and payable or (ii) fail to observe or perform any other term, covenant,
condition or agreement contained in any agreements or instruments evidencing or
governing any Indebtedness if the effect of any failure referred to in this
clause (ii) is to cause, or to permit the holder or holders of such indebtedness
or a trustee on its or their behalf to cause, such indebtedness to become due
prior to its stated maturity; or

 

(h) the occurrence of a Change of Control in or with respect to any Corporate
Credit Party; or

 

(i) there shall be commenced against any Credit Party any Litigation seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets which results in the entry of
an order for any such relief which remains unstayed or undismissed for thirty
(30) consecutive days; or any Credit Party shall have concealed, removed or
permitted to be concealed or removed, any part of its property with intent to
hinder, delay or defraud any of its creditors or made or suffered a transfer of
any of its property or the incurring of an obligation which may be fraudulent
under any bankruptcy, fraudulent transfer or other similar law; or

 

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(j) any other event shall have occurred which has had or could reasonably be
expected to have a Material Adverse Effect; or

 

(k) an ERISA Event shall have occurred that, in the opinion of the Lender, when
taken together with all other ERISA Events that have occurred and are then
continuing, could reasonably be expected to result in liability of any Credit
Party in an aggregate amount exceeding the Minimum Actionable Amount; the
indictment or threatened indictment of any Credit Party, any officer of any
Credit Party or any Guarantor under any criminal statute, or commencement or
threatened commencement of criminal or civil proceeding against any Credit
Party, any officer of any Credit Party or any Guarantor pursuant to which
statute or proceeding penalties or remedies sought or available include
forfeiture of any of the property of any Credit Party; or

 

(l) any Credit Party or other Person shall take or participate in any action
which would be prohibited under the provisions of any Credit Document, or there
shall occur an Event of Default or breach under the provisions of any Credit
Document or with respect to any of the Obligations, or any Credit Party shall
make any payment on the Subordinated Debt that any Person was not entitled to
receive under the provisions of the applicable Subordination Agreement or
Intercreditor Agreement; or

 

(m) the Life Insurance Policy shall be terminated, by any Credit Party or
otherwise; or the Life Insurance Policy shall be scheduled to terminate within
thirty (30) days and such Credit Party shall not have delivered a satisfactory
renewal thereof to Lender; or any Credit Party shall fail to pay any premium on
the Life Insurance Policy when due; or shall take any other action that impairs
the value of the Life Insurance Policy; or

 

(n) a breach or event of default under any of the Transaction Documents, or a
claim of indemnification thereunder, in each case which results or would
reasonably be expected to result in the cancellation or rescission of any
material Transaction Documents;

 

then, and in any such event and at any time thereafter, if such or any other
Event of Default shall then be continuing, Lender in its sole discretion may
declare any or all of the Obligations to be due and payable, and the same shall
immediately become due and payable without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived; provided, however,
that if there shall occur an Event of Default under paragraph (f) above, then
any and all of the Obligations shall be immediately due and payable without any
necessary action or notice by Lender. An Event of Default as defined herein
shall also be an Event of Default under any other Credit Document or any other
Obligations now existing or hereafter arising.

 

12.2 Lender Remedies.

 

(a) In addition to the rights and remedies set forth in Section 12.1, if any
Event of Default shall have occurred and be continuing, Lender may, without
notice, take any one or more of the following actions: (i) require that all
Letter of Credit Obligations be fully cash collateralized pursuant to Schedule
I; or (ii) exercise any rights and remedies provided to Lender under the Credit
Documents or at law or equity, including all remedies provided under the UCC.

 

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(b) Without limiting the generality of the foregoing, each Credit Party
expressly agrees that upon the occurrence of any Event of Default, Lender may
take any action necessary to collect, receive, assemble, process, appropriate
and realize upon the Collateral, or any part thereof, or appoint a third party
to do so and may forthwith sell, lease, assign, give an option or options to
purchase or otherwise dispose of and deliver said Collateral (or contract to do
so), or any part thereof, in one or more parcels at public or private sale or
sales, at any exchange at such prices as it may deem best, for cash or on credit
or for future delivery without assumption of any credit risk. Lender shall have
the right upon any such public sale, to the extent permitted by law, to purchase
for the benefit of Lender the whole or any part of said Collateral so sold, free
of any right of equity of redemption, which right each Credit Party hereby
releases. Such sales may be adjourned or continued from time to time with or
without notice. Lender shall have the right to conduct such sales on any
Corporate Credit Party’s premises or elsewhere and shall have the right to use
any Corporate Credit Party’s premises without rent or other charge for such
sales or other action with respect to the Collateral for such time as Lender
deems necessary or advisable.

 

(c) Upon the occurrence and during the continuance of an Event of Default and at
Lender’s request, each Credit Party further agrees to assemble the Collateral
and make it available to Lender at places which Lender shall reasonably select,
whether at its premises or elsewhere. Until Lender is able to effect a sale,
lease, or other disposition of the Collateral, Lender shall have the right to
complete, assemble, use or operate the Collateral or any part thereof, to the
extent that Lender deems appropriate, for the purpose of preserving such
Collateral or its value or for any other purpose. Lender shall have no
obligation to any Credit Party to maintain or preserve the rights of any Credit
Party as against third parties with respect to any Collateral while such
Collateral is in the possession of Lender. Lender may, if it so elects, seek the
appointment of a receiver or keeper to take possession of any Collateral and to
enforce any of Lender’s remedies with respect thereto without prior notice or
hearing. To the maximum extent permitted by applicable law, each Credit Party
waives all claims, damages, and demands against Lender, its Affiliates, agents,
and the officers and employees of any of them arising out of the repossession,
retention or sale of any Collateral except such as are determined in a final
judgment by a court of competent jurisdiction to have arisen solely out of the
gross negligence or willful misconduct of such Person. Each Credit Party agrees
that ten (10) days prior notice by Lender to each Credit Party of the time and
place of any public sale or of the time after which a private sale may take
place is reasonable notification of such matters. Each Credit Party shall remain
liable for any deficiency if the proceeds of any sale or disposition of the
Collateral are insufficient to pay all amounts to which Lender is entitled.

 

(d) Lender’s rights and remedies under this Agreement shall be cumulative and
nonexclusive of any other rights and remedies which Lender may have under any
other Credit Document or at law or in equity. Recourse to the Collateral shall
not be required. All provisions of this Agreement are intended to be subject to
all applicable mandatory provisions of law that may be controlling and to be
limited, to the extent necessary, so that they do not render this Agreement
invalid or unenforceable, in whole or in part.

 

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12.3 Waivers. Except as otherwise provided for in this Agreement and to the
fullest extent permitted by applicable law, each Credit Party waives: (a)
presentment, demand and protest, and notice of presentment, dishonor, intent to
accelerate, acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all Credit Documents, the
Notes or any other notes, commercial paper, Accounts, Contracts, Documents,
Instruments, Chattel Paper and guaranties at any time held by Lender on which
any Credit Party may in any way be liable, and hereby ratifies and confirms
whatever Lender may do in this regard; (b) all rights to notice and a hearing
prior to Lender’s taking possession or control of, or to Lender’s replevy,
attachment or levy upon, any Collateral or any bond or security which might be
required by any court prior to allowing Lender to exercise any of its remedies;
and (c) the benefit of all valuation, appraisal and exemption laws. Each Credit
Party acknowledges that it has been advised by counsel of its choices and
decisions with respect to this Agreement, the other Credit Documents and the
transactions evidenced hereby and thereby.

 

12.4 Proceeds. The Proceeds of any sale, disposition or other realization upon
any Collateral shall be applied by Lender upon receipt to the Obligations in
such order as Lender may deem advisable in its sole discretion (including the
cash collateralization of any Letter of Credit Obligations), and after the
indefeasible payment and satisfaction in full in cash of all of the Obligations,
and after the payment by Lender of any other amount required by any provision of
law, including the UCC (but only after Lender has received what Lender considers
reasonable proof of a subordinate party’s security interest), the surplus, if
any, shall be paid to Borrowers or their representatives or to whomsoever may be
lawfully entitled to receive the same, or as a court of competent jurisdiction
may direct.

 

XIII.MISCELLANEOUS

 

13.1 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of Lender, any right, remedy, power or privilege under
this Agreement or any other Credit Documents shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, remedy, power or privilege. No notice to or
demand on any Credit Party in any case shall, of itself, entitle it to any other
or further notice or demand in similar or other circumstances. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.

 

13.2 Amendments and Waivers. No amendment, modification or waiver of or with
respect to any provision of this Agreement or any other Credit Document shall in
any event be effective unless it shall be in writing and signed by Lender and
each Credit Party, and then such amendment, modification, waiver or consent
shall be effective only in the specific instance and for the purpose for which
given.

 

13.3 Expenses; Indemnity.

 

(a) Each Credit Party agrees to, jointly and severally, pay or reimburse Lender
for all costs and expenses (including, without limitation, the fees and expenses
of all counsel, advisors, consultants and auditors) incurred by Lender in
connection with: (i) the review, preparation, negotiation, execution, delivery,
performance and enforcement of this Agreement and the other Credit Documents,
any amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions contemplated shall be consummated); (ii) the
enforcement or protection of Lender’s rights in connection with this Agreement
and the other Credit Documents or in connection with the Loans; (iii) any
services rendered by any third-party service providers whose fees are payable
pursuant to Section 5.1(b) of this Agreement, (iv) any advice in connection with
the administration of the Loans or the rights under this Agreement or the other
Credit Documents; (iv) any litigation, dispute, suit, proceeding or action
(whether instituted by or between any combination of Lender, any Credit Party or
any other Person), and an appeal or review thereof, in any way relating to the
Collateral, this Agreement, any other Credit Document, or any action taken or
any other agreements to be executed or delivered in connection therewith,
whether as a party, witness or otherwise; and (v) any effort (x) to monitor the
Loans, (y) to evaluate, observe or assess any Borrower or any other Credit Party
or the affairs of such Person, and (z) to verify, protect, evaluate, assess,
appraise, collect, sell, liquidate or otherwise dispose of the Collateral. In
addition to the foregoing, each Credit Party agrees to pay Lender a fee of
$1,000 for each amendment, modification, supplement or restatement of any Credit
Document entered into by Lender and the Credit Parties. Each Credit Party
further agrees, jointly and severally, to indemnify Lender from and agrees to
hold it harmless against any documentary taxes, assessments or charges made by
any governmental authority by reason of the execution and delivery of this
Agreement or any of the other Credit Documents.

 

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(b) Each Credit Party agrees to, jointly and severally, indemnify Lender, the LC
Issuers, their correspondents and each of their respective directors,
shareholders, officers, employees and agents (each, an “Indemnified Person”)
against, and agrees to hold each Indemnified Person harmless from, any and all
losses, claims, damages, liabilities and related expenses, including reasonable
counsel fees, charges and disbursements, incurred by or asserted against any
Indemnified Person arising out of, in any way connected with or as a result of
(i) the use of any of the proceeds of any Loan or the use of any Loan, (ii) the
goods or transactions financed by the Loans, (iii) this Agreement, any other
Credit Document or any other document contemplated hereby or thereby, the
performance by the parties hereto or thereto of their respective obligations
hereunder and thereunder or the consummation of the transactions contemplated
hereby and thereby, or (iv) any claim, litigation, investigation or proceedings
relating to any of the foregoing, whether or not any Indemnified Person is a
party thereto; provided, however, that such indemnity shall not, as to any
Indemnified Person, apply to any such losses, claims, damages, liabilities or
related expenses to the extent that they result from the gross negligence or
willful misconduct of Lender.

 

(c) The provisions of this Section 13.3 shall remain operative and in full force
and effect regardless of the expiration of the term of this Agreement and the
repayment of the Loans. All amounts due under this Section 13.3 shall be payable
on written demand therefor.

 

13.4 Borrowing Agency Provisions. If and to the extent that at any time or from
time to time there are multiple Borrowers, then.

 

(a) Each Borrower acknowledges that, together with each other Borrower, it is
part of an affiliated common enterprise in which any loans or other financial
accommodations extended to any one Borrower will result in direct and
substantial economic benefit to each other Borrower, and each Borrower will
likewise benefit from the economies of scale associated with the Borrowers, as a
group, applying for credit or other financial accommodations on a collective
basis.

 

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(b) Each Borrower hereby irrevocably designates Borrowing Representative to be
its attorney and agent and in such capacity to borrow, sign and endorse notes,
and execute and deliver all instruments, documents, writings and further
assurances now or hereafter required hereunder, on behalf of such Borrower or
Borrowers, and hereby authorizes Lender to pay over or credit all loan proceeds
hereunder in accordance with the request of Borrowing Representative.

 

(c) The handling of this credit facility as a co-borrowing facility with a
Borrowing Representative in the manner set forth in this Agreement is solely as
an accommodation to Borrowers and at their request. Lender shall not incur
liability to Borrowers as a result thereof. To induce Lender to do so and in
consideration thereof, each Borrower, jointly and severally, hereby indemnifies
Lender and holds Lender harmless from and against any and all liabilities,
expenses, losses, damages and claims of damage or injury asserted against Lender
or any issuer by any Person arising from or incurred by reason of the handling
of the financing arrangements of Borrowers as provided herein, reliance by
Lender on any request or instruction from Borrowing Representative or any other
action taken by Lender with respect to this Section except due to willful
misconduct or gross negligence by the indemnified party.

 

(d) All Obligations shall be joint and several, and each Borrower shall make
payment upon the maturity of the Obligations by acceleration or otherwise, and
such obligation and liability on the part of each Borrower shall in no way be
affected by any extensions, renewals and forbearance granted by Lender to any
Borrower, failure of Lender to give any Borrower notice of borrowing or any
other notice, any failure of Lender to pursue or preserve its rights against any
Borrower, the release by Lender of any Collateral now or thereafter acquired
from any Borrower, and such agreement by each Borrower to pay upon any notice
issued pursuant thereto is unconditional and unaffected by prior recourse by
Lender to the other Borrowers or any Collateral for such Borrower’s Obligations
or the lack thereof.

 

13.5 Guaranty. Each Corporate Credit Party hereby absolutely and unconditionally
guarantees to Lender and its successors and assigns the full and prompt payment
(whether at stated maturity, by acceleration or otherwise) and performance of
all Obligations owed or hereafter owing to Lender by each Corporate Credit
Party. Each Corporate Credit Party agrees that its guaranty obligation hereunder
is a continuing guaranty of payment and performance and not of collection, and
that its obligations shall be absolute and unconditional, irrespective of, and
unaffected by:

 

(a) the genuineness, validity, regularity, enforceability or any future
amendment of, or change in, this Agreement, any other Credit Documents;

 

(b) the absence of any action to enforce this Agreement (including this Section
13.5) or any other Credit Document or the waiver or consent by Lender with
respect to any of the provisions hereof or thereof;

 

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(c) the existence, value or condition of, or failure to perfect its Lien
against, any security for the Obligations or any action, or the absence of any
action, by Lender in respect thereof (including the release of any such
security);

 

(d) the insolvency of any Credit Party; or

 

(e) any other action or circumstances that might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor,

 

it being agreed by each Credit Party that its obligations shall not be
discharged until the payment and performance, in full, of the Obligations has
occurred. Each Credit Party shall be regarded, and shall be in the same
position, as principal debtor with respect to the Obligations guaranteed
hereunder.

 

13.6 Waivers. Each Corporate Credit Party expressly waives all rights it may
have now or in the future under any statute, or at common law, or at law or in
equity, or otherwise, to compel Lender to marshal assets or to proceed in
respect of the Obligations guaranteed hereunder against any other Corporate
Credit Party, any other party or against any security for the payment and
performance of the Obligations before proceeding against, or as a condition to
proceeding against, such Credit Party. It is agreed among each Credit Party and
Lender that the foregoing waivers are of the essence of the transactions
contemplated by this Agreement and the other Credit Documents and that, but for
the provisions of this Section 13.6 and such waivers, Lender would decline to
enter into this Agreement.

 

13.7 Benefit of Guaranty. Each Credit Party agrees that the provisions of
Section 13.5 are for the benefit of Lender and its successors, transferees,
endorsees and assigns, and nothing herein contained shall impair, as between any
other Credit Party and Lender, the obligations of such other Credit Party under
this Agreement or the other Credit Documents.

 

13.8 Subordination of Subrogation. Notwithstanding anything to the contrary in
this Agreement or in any other Credit Documents, each Credit Party hereby
expressly and irrevocably subordinates to payment of the Obligations any and all
rights at law or in equity to subrogation, reimbursement, exoneration,
contribution, indemnification or set off and any and all defenses available to a
surety, guarantor or accommodation co-obligor until the Obligations are
indefeasibly paid in full in cash. Each Credit Party acknowledges and agrees
that this waiver is intended to benefit Lender and shall not limit or otherwise
affect such Credit Party’s liability hereunder or the enforceability of Section
13.5.

 

13.9 Election of Remedies. If Lender may, under applicable law, proceed to
realize its benefits under this Agreement or any other Credit Document giving
Lender a Lien upon any Collateral, whether owned by any Borrower or by any other
Person, either by judicial foreclosure or by non-judicial sale or enforcement,
Lender may, at its sole option, determine which of its remedies or rights it may
pursue without affecting any of its rights and remedies under Section 13.5. If,
in the exercise of any of its rights and remedies, Lender shall forfeit any of
its rights or remedies, including its right to enter a deficiency judgment
against any Credit Party or any other Person, whether because of any applicable
laws pertaining to “election of remedies” or the like, each Credit Party hereby
consents to such action by Lender and waives any claim based upon such action,
even if such action by Lender shall result in a full or partial loss of any
rights of subrogation which such Credit Party might otherwise have had but for
such action by Lender. Any election of remedies that results in the denial or
impairment of the right of Lender to seek a deficiency judgment against any
Credit Party shall not impair any other Credit Party’s obligation to pay the
full amount of the Obligations. In the event Lender shall bid at any foreclosure
or trustee’s sale or at any private sale permitted by law, this Agreement or any
other Credit Document, Lender may bid all or less than the amount of the
Obligations and the amount of such bid need not be paid by Lender but may be
credited against the Obligations. The amount of the successful bid at any such
sale, whether Lender or any other party is the successful bidder, shall be
conclusively deemed to be the fair market value of the Collateral and the
difference between such bid amount and the remaining balance of the Obligations
shall be conclusively deemed to be the amount of the Obligations guaranteed
under Section 13.5 notwithstanding that any present or future law or court
decision or ruling may have the effect of reducing the amount of any deficiency
claim to which Lender might otherwise be entitled but for such bidding at any
such sale.

 

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13.10 Liability Cumulative. The liability of Credit Parties under Section 13.5
is in addition to and shall be cumulative with all liabilities of each Credit
Party to Lender under this Agreement and the other Credit Documents or in
respect of any Obligations or obligation of the other Credit Parties, without
any limitation as to amount, unless the instrument or agreement evidencing or
creating such other liability specifically provides to the contrary.

 

13.11 Waiver of Subrogation. Each Borrower expressly waives any and all rights
of subrogation, reimbursement, indemnity, exoneration, contribution of any other
claim which such Borrower may now or hereafter have against the other Borrowers
or other Person directly or contingently liable for the Obligations hereunder,
or against or with respect to the other Borrowers’ property (including, without
limitation, any property which is Collateral for the Obligations), arising from
the existence or performance of this Agreement, until termination of this
Agreement and repayment in full of the Obligations.

 

13.12 Further Assurances. Each Credit Party will take, or cause to be taken, all
such further actions and execute, or cause to be executed, all such further
documents and instruments as Lender may at any time reasonably request or
determine to be necessary or advisable to further carry out and consummate the
transactions contemplated by this Agreement and the other Credit Documents.

 

13.13 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of each Borrower and its successors and to the benefit of Lender and
its successors and assigns. The rights and obligations of each Credit Party
under this Agreement shall not be assigned or delegated without the prior
written consent of Lender, and any purported assignment or delegation without
such consent shall be null and void. Lender reserves the right at any time to
create and sell participations in the Loans and the Credit Documents and to
sell, transfer or assign any or all of its rights in the Loans and under the
Credit Documents.

 

13.14 Descriptive Headings. The descriptive headings of the various provisions
of this Agreement are inserted for convenience of reference only and shall not
be deemed to affect the meaning or construction of any of the provisions hereof.

 

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13.15 Notices. Except as otherwise provided herein, whenever any notice, demand,
request or other communication shall or may be given to or served upon any party
by any other party, or whenever any party desires to give or serve upon any
other party any communication with respect to this Agreement, each such
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and three (3)
days after deposit in the United States Mail, registered or certified mail,
return receipt requested, with proper postage prepaid, (b) upon transmission,
when sent by telecopy or other similar facsimile transmission (with such
telecopy or facsimile promptly confirmed by delivery of a copy by personal
delivery or United States Mail as otherwise provided in this Section 13.15, (c)
one (1) Business Day after deposit with a reputable overnight courier with all
charges prepaid or (d) when hand-delivered, all of which shall be addressed to
the party to be notified and sent to the address or facsimile number indicated
in Schedule V or to such other address (or facsimile number) as may be
substituted by notice given as herein provided. Failure or delay in delivering
copies of any such communication to any Person (other than Borrowing
Representative or Lender) designated in Schedule V to receive copies shall in no
way adversely affect the effectiveness of communication.

 

13.16 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

13.17 Entire Agreement; Counterparts. This Agreement and the other Credit
Documents represent the agreement of Credit Parties and Lender with respect to
the subject matter hereof, and there are no promises, undertakings,
representations or warranties by any Borrower or Lender relative to the subject
matter hereof not expressly set forth or referred to herein or in the other
Credit Documents. Nothing in this Agreement or in the other Credit Documents,
express or implied, is intended to confer upon any party, other than the parties
hereto and thereto, any rights, remedies, obligations or liabilities under or by
reason of this Agreement or the other Credit Documents. This Agreement may be
signed in any number of counterparts with the same effect as if the signatures
thereto and hereto were upon the same instrument. Any signature delivered by a
party via facsimile or electronic transmission shall be deemed to be an original
signature hereto.

 

13.18 SUBMISSION TO JURISDICTION. EACH CREDIT PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY: (a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING, DIRECTLY OR INDIRECTLY, RELATING TO THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF
ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK AND THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; (b) CONSENTS THAT
ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (c) AGREES THAT
SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A
COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM
OF MAIL), POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN SCHEDULE V TO THIS
AGREEMENT OR AT SUCH OTHER ADDRESS OF WHICH LENDER SHALL HAVE BEEN NOTIFIED
PURSUANT TO SECTION 13.16; AND (d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE
RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.

 

  47 

 

 

13.19 WAIVER OF TRIAL BY JURY, CERTAIN DAMAGES AND SETOFFS. IN ANY LEGAL ACTION
OR PROCEEDING, DIRECTLY OR INDIRECTLY, RELATING TO THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT OR ANY DOCUMENT, INSTRUMENT OR AGREEMENT DELIVERED PURSUANT
HERETO OR THERETO, (A) EACH OF EACH CREDIT PARTY AND LENDER HEREBY, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO, IRREVOCABLY AND UNCONDITIONALLY WAIVES
THE RIGHT TO TRIAL BY JURY IN CONNECTION WITH ANY SUCH LEGAL ACTION OR
PROCEEDING, (B) EACH OF EACH CREDIT PARTY AND LENDER HEREBY, TO THE FULLEST
EXTENT IT MAY EFFECTIVELY DO SO, IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LEGAL ACTION OR PROCEEDING ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN,
ACTUAL DAMAGES AND (C) EACH CREDIT PARTY HEREBY, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO, IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO INTERPOSE
ANY NON-COMPULSORY SETOFF, RECOUPMENT, COUNTERCLAIM OR CROSS-CLAIM IN CONNECTION
WITH ANY SUCH LEGAL ACTION OR PROCEEDING. EACH BORROWER AGREES THAT THIS SECTION
13.19 IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES THAT
LENDER WOULD NOT EXTEND TO ANY BORROWER ANY LOANS HEREUNDER IF THIS SECTION
13.19 WERE NOT PART OF THIS AGREEMENT.

 

13.20 GOVERNING LAW. THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS AND THE
OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE CONFLICT OF
LAW PRINCIPLES THEREOF.

 

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13.21 Reinstatement. This Agreement shall continue to be effective, or be
reinstated, as the case may be, if at any time payment of all or any part of the
Obligations is rescinded or must otherwise be returned or restored by Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
any Credit Party, or otherwise, all as though such payments had not been made.

 

[Signature Page Follows]

 

  49 

 

 

IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
first above written.

 

EDGEBUILDER, INC.        By: /s/ Daniel M. Koch      Daniel M. Koch    
President       GLENBROOK BUILDING SUPPLY, INC.        By: /s/ Daniel M. Koch   
  Daniel M. Koch     President       KBS BUILDERS, INC.       By: /s/ Daniel M.
Koch      Daniel M. Koch     President       MAINE MODULAR HAULERS, INC.       
By: /s/ Daniel M. Koch      Daniel M. Koch     President        ATRM HOLDINGS,
INC.       By: /s/ Daniel M. Koch      Daniel M. Koch     President

 

[Signatures continued on next page]

 

SIGNATURE PAGE TO

LOAN AGREEMENT

 

  50 

 

 

[continuation of signatures]

 

GERBER FINANCE INC.        By: /s/ Jennifer Palmer       Jennifer Palmer    
President

 

SIGNATURE PAGE TO

LOAN AGREEMENT

 

  51 

 

 

SCHEDULE I

 

GENERAL TERMS FOR LETTERS OF CREDIT

 

1. Lender may, subject to the terms and conditions hereinafter set forth, incur
Letter of Credit Obligations in respect of the issuance of Letters of Credit
issued on terms acceptable to Lender and supporting obligations of a Borrower
incurred in the ordinary course of such Borrower’s business, in order to support
the payment of such Borrower’s inventory purchase obligations, insurance
premiums, or utility or other operating expenses and obligations, as Borrowing
Representative, on behalf of such Borrower, shall request by written notice to
Lender that is received by Lender not less than five (5) Business Days prior to
the requested date of issuance of any such Letter of Credit; provided, that: (a)
that the aggregate amount of all Letter of Credit Obligations at any one time
outstanding (whether or not then due and payable) shall not exceed $1,000,000
(notwithstanding the number of Credit Documents or Obligations), and (b) no
Letter of Credit shall have an expiry date which is later than the Termination
Date or one year following the date of issuance thereof. The applicable Borrower
will enter into an application and agreement for such Letter of Credit with the
LC Issuer selected by Lender. The LC Issuer shall be determined by Lender in its
sole discretion.

 

2. The notice to be provided to Lender requesting that Lender incur Letter of
Credit Obligations shall be in the form of a Letter of Credit application in the
form customarily employed by the LC Issuer, together with a written request by a
Borrower and the LC Issuer that Lender approve such Borrower’s application. Upon
receipt of such notice Lender shall establish a reserve against the Borrowing
Base in the amount of 100% of the face amount of the Letter of Credit Obligation
to be incurred. Approval by Lender in the written form agreed upon between
Lender and the LC Issuer (a) will authorize the LC Issuer to issue the requested
Letter of Credit and (b) will conclusively establish the existence of the Letter
of Credit Obligation as of the date of such approval.

 

3. Each Letter of Credit shall be subject to the Uniform Commercial Customs and,
to the extent not inconsistent therewith, the laws of the State of New York.

 

4. Each payment by the LC Issuer or Lender pursuant to a Letter of Credit shall
be deemed to be a Revolving Credit Advance on the date of such payment in a
principal amount equal to the amount so paid. Each Borrower shall be obligated
to reimburse Lender for each payment made under or in respect of any Letter of
Credit (including, the payment of principal, fees and interest on any Revolving
Credit Advance made pursuant to the immediately preceding sentence and any
payment made by Lender in reimbursement of any payment made under a Letter of
Credit by an LC Issuer together with such other amounts that become due pursuant
to this Agreement or other instrument.

 

5. The obligations of each Borrower under this Schedule shall be absolute,
unconditional and irrevocable under any and all circumstances and shall be paid
strictly in accordance with this Agreement irrespective of: (a) any lack of
validity or enforceability of any Letter of Credit or of any demand,
application, reimbursement agreement or other agreement or instrument relating
thereto (collectively, the “Related Documents”); (b) the existence of any claim,
setoff, defense or other right that any Borrower or any other Person may at any
time have against the beneficiary under any Letter of Credit, Lender, the LC
Issuer, any of their correspondents or any other Person; (c) any improper or
erroneous or mistaken payment by any LC Issuer or Lender under any Letter of
Credit; (d) any supplement or waiver of or any consent to depart from the terms
of any Letter of Credit or Related Document; and (e) any other circumstance or
event whatsoever, whether or not similar to any of the foregoing.

 

  1 

 

 

6. In the event Lender or the LC Issuer receives some but not all of the
documents against which a drawing under a Letter of Credit may be made and, at a
Borrower’s request, Lender or the LC Issuer delivers such documents to a
Borrower, against trust receipt or otherwise, prior to the presentation of the
related draft, each Borrower agrees to pay to Lender on demand the amount of any
claim made against Lender or the LC Issuer by reason thereof and authorizes
Lender and the LC Issuer to pay or accept (as the case may be) such draft when
it is presented regardless of whether such draft or any document which may
accompany it complies with the terms of the relevant Letter of Credit.

 

7. Except insofar as instructions may be given to Lender by each Borrower in
writing expressly to the contrary with regard to, and prior to the opening of,
any Letter of Credit, each Borrower agrees that Lender, the LC Issuer and any of
their correspondents may: (a) receive and accept as “bills of lading” under any
Letter of Credit any documents issued or purporting to be issued by or on behalf
of any carrier which acknowledges receipt of goods for transportation or
otherwise, whatever the specific provisions of such documents, for which purpose
the “on board” date of each such document shall be deemed the date of shipment
of the goods mentioned therein; (b) accept as documents of insurance either
insurance policies or insurance certificates; (c) receive and accept as
sufficient and controlling the description of the property contained in the
invoice, and receive and accept bills of lading, insurance and other documents,
however variant in description from that contained in the invoice; (d) receive
and accept bills of lading containing stamped, written or typewritten provisions
thereon, whether or not signed or initialed, and assume conclusively that the
same were placed with authority on any bill of lading at the time of its signing
and issuance by the steamship company or carrier or any agent thereof; (e) honor
drafts, instruments or demands related to part shipments under any Letter of
Credit; (f) accept or pay any draft dated on or before the expiration of any
time limit expressed in any Letter of Credit, regardless of when drawn and
whether or when negotiated, provided that the other required documents are dated
on or prior to the expiration date of such Letter of Credit; and (g) accept
documents of any character which comply with the provisions, definitions,
interpretations and practices contained in the Uniform Customs or which comply
with the laws or regulations in force in, or the customs or usages of, the place
of shipment or negotiation.

 

  2 

 

 

8. Neither Lender nor any LC Issuer nor any of their correspondents shall be
responsible for: (a) the use which may be made of any Letter of Credit, or any
acts or omissions in connection therewith; (b) the existence, character,
quality, quantity, condition, packing, value or delivery of the goods purporting
to be represented by documents; (c) any difference in character, quality,
quantity, condition or value of the goods from that expressed in the documents;
(d) the validity, sufficiency or genuineness of documents, or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, insufficient, fraudulent or forged; (e) the time,
place, manner or order in which shipment is made; (f) any partial or incomplete
shipment or failure or omission to ship any or all of the goods referred to in
any Letter of Credit; (g) the character, adequacy, validity or genuineness of
any insurance, the solvency or responsibility of any insurer or any other risk
connected with insurance; (h) any deviation from instructions, delay, default or
fraud by the shipper or anyone else in connection with goods or the shipping
thereof; (i) the solvency, responsibility or relationship to the goods of any
party issuing any documents in connection with the goods; (j) any delay in
arrival or failure to arrive of either the goods or any of the documents
relating thereto; (k) any delay in giving or failure to give notice of arrival
or any other notice; (l) any breach of contract between the shippers or vendors
and the consignees or buyers; (m) compliance with or circumstances resulting
from any laws, customs and regulations which may be effective in countries of
negotiation or payment of any Letter of Credit; (n) any failure of any draft,
instrument or demand to bear any reference or adequate reference to the related
Letter of Credit, any failure of documents to accompany any draft, instrument or
demand at negotiation or any failure of any Person to note the amount of any
draft, instrument or demand on the reverse of the related Letter of Credit or to
surrender or take up such Letter of Credit or to send forward documents apart
from drafts, in each case as required by the terms of the related Letter of
Credit, any of which requirements, if contained in any Letter of Credit, may be
waived by Lender or the LC Issuer; (o) any errors, omissions, interruptions or
delays in transmission or delivery of any message, by mail, telex, cable,
telegraph, wireless or otherwise, whether or not they be in cipher; (p) any
failure of any document to conform to, or be presented under, the Letter of
Credit in any instance where any Borrower or its agent, upon request, has
received documents and/or goods represented thereby; or (q) any refusal by
Lender, the LC Issuer or any of their correspondents to pay or honor drafts
drawn or purportedly drawn under any Letter of Credit because of any applicable
law, decree or edict, legal or illegal, of any governmental agency now or
hereafter in force, or for any other matter beyond Lender’s control. Nor shall
Lender be responsible for any act, error, omission, neglect or default under the
terms of any Letter of Credit or any Related Documents or otherwise, or for any
insolvency or failure in business, of the LC Issuer or any of the correspondents
of Lender or the LC Issuer. None of the foregoing shall affect, impair, or
prevent the vesting of any of Lender’s rights or powers hereunder, or any
Borrower’s obligations hereunder. In furtherance of and extension of and not in
limitation of the specific provisions hereinabove set forth, each Borrower
agrees that any action taken, and any action or omission, by Lender, the LC
Issuer or any of their correspondents, in the absence of bad faith on its part,
under or in connection with any Letter of Credit or the related drafts,
instruments or demands, documents or goods shall be binding on such Borrower and
shall not put Lender, the LC Issuer or any of their correspondents under any
resulting liability to Lender.

 

9. Each Borrower agrees to procure promptly any necessary import and export and
other licenses for the import or export or shipping of the goods or payment
therefor, to comply with all foreign and domestic governmental regulations in
regard to the shipment of the goods or the financing thereof, to furnish such
certificates in that respect as Lender may at any time require, to keep the
goods adequately covered by insurance satisfactory in all respects to Lender,
with companies satisfactory to Lender, and to assign the policies and/or
certificates of insurance to Lender, or to make the loss or adjustment, if any,
payable to Lender, at Lender’s option, and to furnish Lender promptly on demand
with evidence of acceptance by the insurers of such assignment.

 

  3 

 

 

10. Each Borrower hereby certifies, covenants and agrees that no shipments will
be made or other transactions undertaken under any Letter of Credit in violation
of the laws of the United States, any applicable foreign law or the applicable
regulations of any United States or foreign governmental agency or authority.

 

11. In furtherance of and not in limitation of the provisions of this Agreement,
as security for the Obligations, each Borrower hereby grants to Lender a
security interest in, and recognizes and admits Lender’s ownership in and
unqualified right to the possession and disposal of, (a) all goods shipped
under, pursuant to or in connection with each Letter of Credit or related in any
way to any Letter of Credit, (b) any and all documents of title, bills of
lading, shipping documents, warehouse receipts, securities, chattel paper,
policies and/or certificates of insurance and other documents and instruments of
any kind and nature in any way accompanying, related to or arising out of any
credit and the goods related thereto and to any drafts, instruments, demands or
acceptances drawn or made or purportedly drawn or made thereunder (whether or
not such goods, documents or other items specified above be released to a
Borrower, or upon a Borrower’s order, on trust or bailee receipt or otherwise),
(c) any and all accounts, accounts receivable, contract rights, inventory,
general intangibles, claims, credits, monies, demands and patent and trademark
rights related to or arising out of any such Letter of Credit or the goods; (d)
all monies on account with Lender or any party acting on Lender’s behalf, and
(e) to the extent not otherwise included, all proceeds of any and all of the
foregoing. Each Borrower represents, warrants, covenants and agrees that upon
delivery of any goods financed by the Letter of Credits to a Borrower such goods
shall be the exclusive property of such Borrower, subject only to a Lien in
favor of Lender. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, any deposit or other sums at any time
properly credited by or due from Lender for the account of Borrowers may be
applied by Lender by way of set-off to the payment of any of the Obligations
without any notice to any Borrower.

 

12. In the event that any Letter of Credit Obligations, whether or not then due
or payable, shall for any reason be outstanding on the Termination Date, each
Borrower will either (a) cause the underlying Letter of Credit to be returned
and canceled and each corresponding Letter of Credit Obligation to be
terminated, or (b) pay to Lender, in immediately available funds, an amount
equal to 105% of the maximum amount then available to be drawn under all Letters
of Credit in favor of Borrowers not so returned and canceled to be held by
Lender as cash collateral in an account under the exclusive dominion and control
of Lender (the “Cash Collateral Account”).

 

13. In connection with all Letters of Credit, each Borrower, hereby appoints
Lender, or its designee, as its attorney, with full power and authority (i) to
sign and/or endorse such Borrower’s name upon any warehouse or other receipts,
letter of credit applications and acceptances; (ii) to sign such Borrower’s name
on bills of lading; (iii) to clear Inventory through the United States of
America Customs Department (“Customs”) in the name of such Borrower or Lender or
Lender’s designee, and to sign and deliver to Customs officials powers of
attorney in the name of such Borrower for such purpose; (iv) to complete in the
name of Lender, or Lender’s designee, any order, sale or transaction, obtain the
necessary documents in connection therewith, and collect the proceeds thereof;
(v) to clear and resolve any questions of non-compliance of documents; (vi) to
give any instructions as to acceptance or rejection of any documents or goods;
(vii) to execute any and all applications for steamship or airways guarantees,
indemnities or delivery orders; (viii) to grant any extensions of the maturity
of, time of payment for, or time of presentation of, any drafts, acceptances, or
documents; and (ix) to agree to any amendments, renewals, extensions,
modifications, changes or cancellation of any of the terms or conditions of any
of the applications, Letters of Credit, drafts or acceptances; all in Lender’s
sole name, and the LC Issuer shall be entitled to comply with and honor any and
all such documents or instruments executed by or received solely from Lender;
all without notice to or consent from Borrower. Neither Lender nor its attorneys
will be liable for any acts or omissions nor for any error of judgment or
mistakes of fact or law, except for Lender’s or its attorney’s gross (not mere)
negligence or willful misconduct. This power, being coupled with an interest, is
irrevocable as long as any Letters of Credit remain outstanding.

 

14. In the event Lender shall incur any Letter of Credit Obligation, Borrowers
agree to pay Lender the fees, charges and commissions set for on Attachment A to
this Schedule A and shall reimburse Lender for all fees and charges paid by
lender on account of any Letter of Credit or Letter of Credit Obligations to the
LC Issuer.

 

  4 

 

 

ATTACHMENT A

 

LETTERS OF CREDIT

 

FEES, CHARGES AND COMMISSIONS

 

LC Issuer - Bank Charges:   Wire Transfer $75 Issuance of Check $45 Letter of
Credit:   Issuance $125 Amendment/Discrepancy $150 Cable/Telex Notification $120
Courier $50 Air Freight Release:   Steamship Guarantee $50 Payment Commission
(Sight & Time) 0.3% or $150 min. Processing Fee $40 per invoice Cancellation Fee
$125 Acceptance Time Payment 2.5% per annum or $175 min. Stand-by Letter of
Credit:   Issuance $250 Commission Fee 1.5% per annum or $300 min.
Amendment/Discrepancy $175 Cable/Telex Notification $120 Courier $50 Lender
Charges (per billing):   Courier Service (if used) $50 for domestic / $75 min.
for overseas Petties $20 - $45 Telephone $17.50 - $35 Fax $25 - $50

 

   

 

 

SCHEDULE II

 

CONDITIONS PRECEDENT

 

The following items must be received by Lender in form and substance
satisfactory to Lender on or prior to the date of the initial Loan Lender:

 

1. this Agreement duly executed by each Credit Party;

 

2. the Note duly executed by each Borrower;

 

3. INTENTIONALLY OMITTED;

 

4. acknowledgement copies of proper financing statements (Form UCC-l) duly filed
under the UCC in all jurisdictions as may be necessary or, in the opinion of
Lender, desirable to perfect Lender’s Lien on the Collateral;

 

5. certified copies of UCC, tax lien and judgment searches, or other evidence
satisfactory to Lender, listing all effective financing statements which name
each Credit Party (under present name, any previous name or any trade or doing
business name) as debtor and covering all jurisdictions requested by Lender,
together with copies of such other financing statements;

 

6. duly executed Intellectual Property Security Agreement from each Credit Party
which owns Intellectual Property;

 

7. evidence of the completion of all other recordings and filings (including
UCC-3 termination statements and other Lien release documentation) as may be
necessary or, in the opinion of and at the request of Lender, desirable to
perfect Lender’s Lien on the Collateral and ensure such Collateral is free and
clear of other Liens;

 

8. Powers of Attorney duly executed by each Corporate Credit Party except ATRM
Holdings, Inc.;

 

9. INTENTIONALLY OMITTED.

 

10. INTENTIONALLY OMITTED.

 

11. duly executed originals of a Request for Loan, dated the Closing Date, with
respect to the initial Revolving Credit Advance to be requested by Borrowing
Representative on the Closing Date;

 

12. duly executed originals of a letter of direction from Borrowing
Representative addressed to Lender, with respect to the disbursement on the
Closing Date of the proceeds of the initial Loan;

 

13. for each Corporate Credit Party, such Person’s (a) charter and all
amendments thereto, (b) good standing certificates (including verification of
tax status where available as part of a good standing certificate) in its state
of incorporation and (c) good standing certificates (including verification of
tax status where available as part of a good standing certificate) and
certificates of qualification to conduct business in each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification, each dated a recent date prior to the Closing Date and certified
by the applicable Secretary of State or other authorized Governmental Authority;

 

  1 

 

 

14. a certificate of an officer of each Corporate Credit Party in the form of
Exhibit G together with copies of: (a) such Person’s bylaws or operating
agreement, together with all amendments thereto and (b) resolutions of such
Person’s Board of Directors and stockholders, as applicable, approving and
authorizing the execution, delivery and performance of the Credit Documents to
which such Person is a party and the transactions to be consummated in
connection therewith, each certified as of the Closing Date by such Person’s
corporate secretary or an assistant secretary as being in full force and effect
without any modification or amendment;

 

15. for each Corporate Credit Party, signature and incumbency certificates of
the officers of each such Person executing any of the Credit Documents,
certified as of the Closing Date by such Person’s corporate secretary or an
assistant secretary as being true, accurate, correct and complete;

 

16. evidence satisfactory to Lender that, as of the Closing Date, Cash
Management Systems complying with Schedule IV the Agreement have been
established and are currently being maintained in the manner set forth in such
Schedule IV, together with copies of a duly executed blocked account and lock
box agreements, reasonably satisfactory to Lender, with the banks as required by
Schedule IV;

 

17. INTENTIONALLY OMITTED.

 

18. a letter from the Credit Parties to their independent auditors in the form
of Exhibit F authorizing the independent certified public accountants of the
Credit Parties to communicate with Lender;

 

19. duly executed originals of account debtor notification letters in the form
of Exhibit H executed in blank by each Corporate Credit Party other than ATRM
Holdings, Inc.;

 

20. unless otherwise agreed to in writing by lender, warehouse waivers, landlord
waivers and consents, bailee letters and mortgagee agreements of all Borrowers’
leased or owned locations where Collateral is held;

 

21. INTENTIONALLY OMITTED;

 

22. any and all Subordination and/or Intercreditor Agreements as Lender shall
have deemed necessary or appropriate with respect to any Indebtedness of any
Credit Party;

 

23. INTENTIONALLY OMITTED;

 

  2 

 

 

24. Lender shall have received appraisals as to all Equipment owned by each
Credit Party, each of which shall be in form and substance reasonably
satisfactory to Lender, which receipt Lender hereby acknowledges;

 

25. the Financial Statements, Projections and other materials requested by
Lender certified by each Borrower’s Chief Financial Officer;

 

26. such other certificates, documents and agreements respecting any Credit
Party as Lender may, in its sole discretion, request;

 

27. Execution, delivery and closing of acquisition financing for Borrower set
forth in proposal letter dated July 7, 2016; and

 

28. Execution, delivery and closing of the Transaction Documents.

 

  3 

 

 

SCHEDULE III

 

FINANCIAL COVENANTS

 

1. Tangible Net Worth. Credit Parties shall not permit at any Fiscal Year End
Tangible Net Worth (a) to exceed -$1,800,000 for ATRM Holdings, Inc. for Fiscal
Year End 2016 or to be less than an amount greater than -0- for ATRM Holdings,
Inc. at any Fiscal Year End thereafter; or (b) to be less than -$800,000 for
each Borrower at Fiscal Year End 2016 or to be less than $200,000 for each
Borrower at any Fiscal Year End thereafter.

 

2. Distributions. No distributions, transfers or subordinated debt payments to
any Stockholder or Affiliate of any Credit Party or any other Person without
Lender’s prior written consent or as otherwise permitted in the Subordination
Agreement.

 

3. Earn-out. No payments to sellers nor payment of Earn-out Amount pursuant to
Transaction Documents except from not more than Seventy-five (75%) percent of
Free Cash Flow of each Borrower (subject to terms of Subordination Agreement);
“Free Cash Flow” being defined as earnings before interest, taxes and
depreciation less cash, less interest, less taxes, less other cash expenses, and
less non-financed Capital Expenditures.

 

4. Debt Service Coverage. Credit Parties shall maintain for each Borrower a Debt
Service Coverage Ratio of greater than 1:1 for Fiscal Year End 2016 and 2017,
and greater than 1.25:1 for each Fiscal Year End thereafter. “Debt Service
Coverage Ratio” is defined as each Borrower’s Operating Cash Flow (its net
income plus depreciation and amortization, plus interest expense plus other
non-cash items) divided by principal, interest, lease payments, subordinated
debt payments and Earn-out payments due EdgeBuilder Wall Panels, Inc./Glenbrook
Lumber & Supply, Inc.

 

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SCHEDULE IV

 

CASH MANAGEMENT

 

Each Borrower agrees to establish, and to maintain, until the Termination Date,
the cash management system described below:

 

1. Commencing on the Closing Date and until the Termination Date, Borrowers will
irrevocably direct all present and future Account Debtors and other Persons
obligated to make payments constituting Collateral to make such payments
directly to either the Collateral Account or to Borrowers at 488 Madison Avenue,
Suite 800, New York, NY 10022. All of Borrowers’ invoices, account statements
and other written or oral communications directing, instructing, demanding or
requesting payment of any Account of Borrowers or any other amount constituting
Collateral shall conspicuously direct that all payments be made to the
Collateral Account or to Borrowers at 488 Madison Avenue, Suite 800, New York,
NY 10022 and shall include the preceding address or the address for the
Collateral Account. If, notwithstanding the instructions to Account Debtors to
make payments to the Collateral Account or to Borrowers at 488 Madison Avenue,
Suite 800, New York, NY 10022, Borrowers receive any payments, Borrowers shall
immediately deposit such payments into the Collateral Account or immediately
forward to Lender. Until so deposited, Borrowers shall hold all such payments in
trust for and as the property of Lender and shall not commingle such payments
with any of its other funds or property.

 

2. Each Borrower may maintain, in its name, accounts (the “Disbursement
Accounts”) at a bank or banks acceptable to Lender into which Lender shall, from
time to time, deposit proceeds of Loans for use solely in accordance with the
terms of this Agreement. All of the Disbursement Accounts are listed on
Disclosure Schedule 7.17.

 

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SCHEDULE V

 

ADDRESSES FOR NOTICES

 

Lender’s Address:       Name: Gerber Finance Inc. Address: 488 Madison Avenue,
Suite 800   New York, New York 10022 Attention: Gerald L. Joseph Telephone:
(212) 888-3833 Facsimile: (212) 888-1637     Each Borrower’s, Credit Party’s and
Borrowing Representative’s Address:     Name: KBS Builders, Inc.   Maine Modular
Haulers, Inc. Address: 300 Park Street South Park, Maine 04281 Attention: Dan
Koch Telephone: (651) 704-1800     Name: ATRM Holdings, Inc. Address: 3050 Echo
Lake Avenue, Suite 300   Mahtomedi, Minnesota 55155 Attention: Dan Koch
Telephone: (651) 704-1800     Name: Glenbrook Building Supply, Inc.  
EdgeBuilder, Inc. Address: 5215 Gershwin Avenue North   Oakdale, Minnesota 55128
Attention: Dan Koch Telephone: (651) 704-1800

 

   

 

 

STATE OF ____________________)   ) ss.:   COUNTY OF ____________________)  

 

On the _____ day of ____________, 2016, before me personally appeared
_____________________, who acknowledged under oath, to my satisfaction, that he
is an authorized signatory of EdgeBuilder, Inc., a Delaware corporation, named
in the within instrument/document and is authorized to sign the within
instrument/document on its behalf, and as such authorized signatory, signed,
sealed and delivered this instrument/document as the voluntary act and deed of
EdgeBuilder, Inc., made by virtue of its authority documents.

 

  2 

 

 

STATE OF ____________________)   ) ss.:   COUNTY OF ____________________)  

 

On the _____ day of ____________, 2016, before me personally appeared
_____________________, who acknowledged under oath, to my satisfaction, that he
is an authorized signatory of Glenbrook Building Supply, Inc., a Delaware
corporation, named in the within instrument/document and is authorized to sign
the within instrument/document on its behalf, and as such authorized signatory,
signed, sealed and delivered this instrument/document as the voluntary act and
deed of Glenbrook Building Supply, Inc., made by virtue of its authority
documents.

 

  3 

 

 

STATE OF ____________________)   ) ss.:   COUNTY OF ____________________)  

 

On the _____ day of ____________, 2016, before me personally appeared
_____________________, who acknowledged under oath, to my satisfaction, that he
is an authorized signatory of ATRM Holdings, Inc., a Minnesota corporation,
named in the within instrument/document and is authorized to sign the within
instrument/document on its behalf, and as such authorized signatory, signed,
sealed and delivered this instrument/document as the voluntary act and deed of
ATRM Holdings, Inc., made by virtue of its authority documents.

  

  4 

 

 

STATE OF ____________________)   ) ss.:   COUNTY OF ____________________)  

 

On the _____ day of ____________, 2016, before me personally appeared
_____________________, who acknowledged under oath, to my satisfaction, that he
is an authorized signatory of KBS Builders, Inc., a Delaware corporation, named
in the within instrument/document and is authorized to sign the within
instrument/document on its behalf, and as such authorized signatory, signed,
sealed and delivered this instrument/document as the voluntary act and deed of
KBS Builders, Inc., made by virtue of its authority documents.

  

  5 

 

 

STATE OF ____________________)   ) ss.:   COUNTY OF ____________________)  

 

On the _____ day of ____________, 2016, before me personally appeared
_____________________, who acknowledged under oath, to my satisfaction, that he
is an authorized signatory of Maine Modular Haulers, Inc., a Delaware
corporation, named in the within instrument/document and is authorized to sign
the within instrument/document on its behalf, and as such authorized signatory,
signed, sealed and delivered this instrument/document as the voluntary act and
deed of Maine Modular Haulers, Inc., made by virtue of its authority documents.

  

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