Exhibit 10.1


 


WM COFFMAN LLC


 


June 4, 2010


 


PNC Bank, National Association, as Agent 


One Piedmont Town Center


4720 Piedmont Row Drive, Suite 300


Charlotte, NC 28210


Attn: Mr. Bryan Shia


 


Re:          Acknowledgment
of Events of Default and Peaceful Possession Letter


 


Gentlemen:


 


Reference is made to that certain Revolving Credit, Term
Loan and Security Agreement dated as of June 8, 2009 by and among WM
Coffman LLC (“Borrower”), the financial institutions set forth on the signature
pages thereto (each a “Lender” and collectively, “Lenders”) and PNC Bank,
National Association (“PNC”), as agent for Lenders (in such capacity, the “Agent”)
(as heretofore and hereafter amended, supplemented and/or otherwise modified
the “Loan Agreement”). All capitalized terms used but not otherwise defined in
this letter shall have the meanings ascribed to them in the Loan Agreement.


 


As of May 25, 2010 there is presently due and owing
to Agent and Lenders the principal amount of $4,376,411.31 exclusive of accrued
interest from May 1, 2010 through and including such date and exclusive of
other accrued amounts properly chargeable under the Loan Agreement and the
Other Documents (collectively, the “Amount Due”, which the Borrower
acknowledges may fluctuate from time to time from and after such date). The
Borrower’s Obligations, including without limitation the Amount Due, (i) are
due and owing without defense, offset or counterclaim of any kind or nature
whatsoever, and (ii) are secured by a valid and enforceable lien and/or
security interest in Agent’s favor of substantially all of Borrower’s assets,
including without limitation accounts, general intangibles, books and records,
merchandise, inventory, goods, patents, trademarks, trade names, licenses, and
the proceeds and products thereof (collectively, the “Collateral”).


 


The Borrower acknowledges that, after February 22,
2010, a material adverse change in the Borrower’s business and assets occurred
as a result of the termination by the Borrower’s landlord of the Borrower’s
real property lease for its facility in Marion, Virginia, and that such event
constituted a Forbearance Default under that certain Forbearance and Amendment
Agreement, dated as of February 22, 2010, by and between the Borrower, the
Lenders and the Agent.


 


Because of the occurrence and existence of a Forbearance
Default and the inability of the Borrower to pay and/or perform its
indebtedness and/or obligations to Agent and Lenders, notwithstanding anything
to the contrary set forth in that certain Forbearance and Amendment Agreement
dated as of February 19, 2010 by and between the Borrower and PNC as Agent
and Lender, effective as of the date and time of occurrence of the closing of
the WMC Resources Sale (as such term is defined below):


 


(a)                                  the Borrower hereby consents to Agent’s exercise of all rights of
possession in and to the Collateral consistent with the Loan Agreement, the
Other Documents


 

















 


and applicable law, including without limitation the UCC,
to be disposed of consistent with the Loan Agreements, the Other Documents and
applicable law, including without limitation the UCC;


 


(b)                                 the Borrower hereby acknowledges that it has received from Agent due,
proper, timely and sufficient notification pursuant to Part 6 of Article 9
of the Uniform Commercial Code as adopted in the State of North Carolina or the
equivalent provision of any relevant state’s Uniform Commercial Code (“UCC”),
including without limitation under UCC § 9-611 as to the sale, license or other
disposition by Agent and Lenders of the Collateral. The Borrower further
acknowledges that, due to its financial condition, the Borrower has no means or
ability to exercise its right to redeem the Collateral.


 


(c)                                  the Borrower hereby consents to Agent’s private sale, pursuant to UCC §
9-610, of substantially all of the Borrower’s right, title and interest in and
to the Collateral other than the Borrower’s machinery and equipment located at
Marion, Virginia (such excluded assets being referred to hereinafter as the “Marion
Fixed Assets”), to WM Coffman Resources LLC (“WMC Resources”) or its designee(s) on
or after June 4, 2010 pursuant to the terms and conditions of that certain
Foreclosure Agreement dated as of June 4, 2010 by and between Agent as
seller and WMC Resources as buyer (the “WMC Resources Sale”);


 


(d)                                 the Borrower hereby consents to Agent’s private sale, pursuant to UCC
§9-610, of the Marion Fixed Assets to Industrial Recovery Service, Inc.
and Koster Industries, Inc. (collectively, “IRS/Koster”) on or after June 23,
2010 pursuant to the terms and conditions of that certain Purchase Agreement
dated as of May 19, 2010 by and between Agent as seller and IRS/Koster as
buyer, contemporaneous with an internet-only auction and sale of the Marion
Fixed Assets by IRS/Koster (collectively, the “IRS/Koster Sale”); and


 


(e)                                  The Borrower hereby constitutes Agent or Agent’s designee as Borrower’s
attorney with power to change the Borrower’s legal name to a name that has no
resemblance or connection to, and is not likely to be identified or associated
with, the Borrower’s current legal name.


 


This letter also serves as an authorization to any
employee of the Borrower or any third party to grant Agent, and the Borrower
hereby grants Agent, consistent with the Loan Documents, the Other Documents,
the UCC, applicable law and the contractual and/or lease rights of third
parties, full and complete access to any and all of its premises where the
Collateral is located to allow Agent to take possession of the Collateral in
order to enforce Agent’s and Lenders’ rights against and collect the
indebtedness due to from the Borrower. In addition, consistent with the Loan
Documents, the Other Documents, the UCC, applicable law and the contractual
and/or lease rights of third parties, Agent may designate a custodian who shall
have the right, among other things, to change the locks on all gates and doors
providing access to such premises or the Collateral but without denying the
Borrower access thereto. Agent and Lenders shall not require the Borrower to
expend any funds or incur any out-of-pocket expenses further to the matters set


 


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forth in this paragraph, but any expenses incurred by
Agent and/or Lenders further to the matters set forth in this paragraph shall
be Obligations as and to the extent set forth in the Loan Agreement.


 


The Borrower hereby agrees to execute and deliver to
Agent, Lenders or any purchaser of the Collateral at any public or private sale
or other disposition such documents, instruments and agreements as Agent may
reasonably request in connection with the sale of such Collateral. Agent and
Lenders shall not require the Borrower to expend any funds or incur any
out-of-pocket expenses further to the matters set forth in this paragraph, but
any expenses incurred by Agent and/or Lenders further to the matters set forth
in this paragraph shall be Obligations as and to the extent set forth in the
Loan Agreement.


 


The Borrower knowingly and intelligently waives any rights
it may have to notice and a hearing before a court of competent jurisdiction
and consents to Agent’s and/or Lenders’ entry on the premises where the
Collateral is located for the purposes set forth herein.


 


The Borrower further acknowledges that it has been
represented by legal counsel with respect to the negotiation and execution of
this letter and the transactions contemplated and/or described hereby, and that
the Borrower’s legal counsel has reviewed this letter prior to its execution by
the Borrower.


 


The Borrower reserves and retains all of its rights under
applicable law, including without limitation the UCC, to an accounting of the
proceeds of any disposition of the Collateral and to the turnover of any
surplus proceeds from the disposition of the Collateral.


 


This letter shall only become effective upon (a) the
execution and delivery of the Mutual Release Agreement dated June 4, 2010
between and among the Agent and P&F Industries, Inc., and certain of
its affiliates, (b) the execution and delivery of the Mutual General
Release dated June 4, 2010 between and among the Borrower and P&F
Industries, Inc., and certain of its affiliates, and (c) the payment
into the Borrower’s operating account (the “Accrued Expense Account”) at
closing the amount of $411,503.27 dedicated to the payment of the following
accrued and unpaid costs and expenses of the Borrower (“Accrued Expenses”):


 


	
  Payroll
  (Hourly)

  	
   

  	
  $

  	
  26,926.93

  	
   

  
	
  Payroll
  (Salary)

  	
   

  	
  $

  	
  18,804.77

  	
   

  
	
  Payroll
  Taxes

  	
   

  	
  $

  	
  42,078.12

  	
   

  
	
  Quarterly
  Payroll Taxes

  	
   

  	
  $

  	
  11,418.84

  	
   

  
	
  401
  K

  	
   

  	
  $

  	
  14,267.56

  	
   

  
	
  Accrued
  Vacation

  	
   

  	
  $

  	
  52,790.52

  	
   

  
	
  Medical
  (Trigon)

  	
   

  	
  $

  	
  48,000.00

  	
   

  
	
  Sales
  and Property Taxes

  	
   

  	
  $

  	
  91,626.49

  	
   

  
	
  Check
  Clearing (Estimate)

  	
   

  	
  $

  	
  105,590.04

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Disbursements at Closing

  	
   

  	
  $

  	
  411,503.27

  	
   

  



 


After the closing of the WMC Resources Sale,
disbursements, if any, shall only be made from the Accrued Expense Account to
pay Accrued Expenses, and any surplus, after payment in full


 


3

















 


of the Accrued Expenses, shall be remitted to the Agent;
provided further that the Borrower acknowledges and agrees that all amounts in
the Accrued Expense Account remain Agent’s Collateral subject to Agent’s
security interest in and Lien thereon. Agent shall not sweep, or cause to be
swept, the Accrued Expense Account until such time as all Accrued Expenses have
been paid in full or as otherwise agreed to by Agent and the Borrower.


 


Very truly yours,


 


WM COFFMAN LLC


 


 


	
  By:

  	
  /s/
  Joseph A. Molino, Jr.

  	
   

  
	
   

  	
  Joseph A. Molino, Jr.

  	
   

  
	
   

  	
  Manager

  	
   

  



 


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