ATRM Announces Reduction in Debt and Settlement Related to Acquisition of KBS

ATRM Holdings, Inc. ATRM ("ATRM" or the "Company") announced today that it has settled a dispute with the sellers of KBS (the "Sellers"), the modular construction business that ATRM acquired in April 2014. Background Information Related to Settlement: In April 2014, ATRM acquired KBS, a Maine-based manufacturer of modular structures for residential and commercial applications, pursuant to an asset purchase agreement executed on April 2, 2014 ("Purchase Agreement"). As partial consideration for the acquisition, a wholly-owned subsidiary of ATRM issued an unsecured promissory note ("Original Note") in the principal amount of $5.5 million with a maturity date of October 2, 2014, which was later extended to December 1, 2014. No payments of principal or interest have been made on the Original Note. In April 2015, ATRM asserted certain indemnification and other claims against the Sellers related to KBS. The Sellers subsequently delivered a notice to ATRM objecting to such claims. On June 26, 2015, ATRM and the Sellers entered into an agreement settling the dispute (the "Settlement Agreement"). The Settlement Agreement provided for the following: The Original Note was cancelled and replaced with a new unsecured promissory note ("New Seller Note"), which reflected a reduction in the principal amount from $5.5 million to $2.5 million. All accrued and unpaid interest under the Original Note, amounting to approximately $458,000, was forgiven. The New Seller Note is payable in $100,000 installments payable on the first business day of each month for 25 months, beginning on July 1, 2015. The New Seller Note will not accrue interest unless it is in default, in which case interest would accrue at a rate of 10% per annum. ATRM withdrew all indemnification and other claims made against the Sellers. ATRM and the Sellers agreed to certain mutual releases. The Company expects to record a pretax gain of approximately $3.7 million in its second quarter, which ends on June 30, 2015, in connection with the Settlement Agreement. The estimated gain includes the reduction in the principal amount (after adjustment for imputed interest) and forgiven interest expense from the Original Note. "This settlement agreement is a very favorable outcome for the Company," said Dan Koch, ATRM's president and chief executive officer. "We are pleased that the negotiations concluded and we are excited to move forward with this issue behind us. Reducing our debt and restructuring the payments over 25 months will allow us to better utilize cash flow for additional operating improvements, gaining efficiencies, and ultimately growing our business."