FORBEARANCE AGREEMENT
THIS FORBEARANCE
AGREEMENT (the "Agreement") is made this 30th day of
June, 2005, by and among UNITED BANK, a
Virginia banking institution (the
"Bank" or "Lender"), and WILLIAMS
INDUSTRIES, INC., a Virginia corporation
with offices at 8624 J.D. Reading Drive,
Manassas, VA 20109;
INSURANCE
RISK MANAGEMENT GROUP, INC., a Virginia
corporation; PIEDMONT METAL
PRODUCTS, INC., a Virginia corporation,
WILLIAMS BRIDGE COMPANY., a
Virginia corporation, WII REALTY MANAGEMENT, INC., a
Virginia corporation,
WILLIAMS STEEL ERECTION COMPANY, INC., a
Virginia corporation, GREENWAY
CORPORATION, a Maryland corporation,
WILLIAMS EQUIPMENT
CORPORATION, a
District of Columbia corporation
(collectively, "Original Borrower") and
S.I.P., INC. OF DELAWARE, a Delaware
corporation ("S.I.P."; collectively,
with "Original Borrower", the "Borrower"),
with the consent of WILLIAMS
FAMILY LIMITED PARTNERSHIP, a Virginia
limited partnership ("WFLP") and
FRANK E. WILLIAMS, JR., individually.
RECITALS:
A. As more fully
provided in the underlying loan documents, on or
about April 16, 1999, the Bank made a
revolving loan to Original Borrower
in the original principal amount of
$2,500,000, evidenced by Revolving
Credit Note No. 3 of even date therewith
bearing initial interest at prime
plus 1.25%, as thereafter amended and
restated, from time to time (the
Revolving Loan), secured by, among other
things, business assets pledged
under a Revolving Credit and Term Loan
Agreement and a related Security
Agreement of even date, as thereafter
amended, from time to time, and is
also secured by land in Manassas and
Bedford, Virginia pledged to the Bank
under deeds of trust on the respective
properties (the "Manassas Deed of
Trust" and the "Bedford Deed of Trust",
respectively). This
loan is
further secured by common stock of S.I.P.
Inc. of Delaware, a Delaware
corporation, under a Pledge Agreement dated
August 31, 2000,. The
sum of
$2,529,016.70 was due on the Revolving Loan
at May 12, 2005, when the Bank
made demand for payment, plus legal fees
and costs, which are additional.
Interest and other fees and charges
continue to accrue thereafter, and as
of the date hereof. Borrower acknowledges that this
loan is matured and is
now fully due and owing, without defense,
offset or counterclaim.
B. As more fully
provided in the underlying loan documents, on or
about April 16, 1999, the Bank made a draw
term loan to Original Borrower,
due April 1, 2014, evidenced by Term Note
No. 1 in the amount of $2,260,750
of even date, initially bearing interest at
8.7%, as amended, from time to
time, secured by, among other things, the
same collateral as secures the
Revolving Loan. The sum of $1,848,996.42,833 was
due and owing on this
loan (the "Term Loan No. 1") as of May 12,
2005, when demand for payment
was made by the Bank ,plus legal fees and
costs, which are additional.
Interest and other charges continue to
accrue thereafter and as of the date
hereof. Borrower acknowledges that
this loan has now been accelerated by
the Bank and is now fully due and owing,
without defense, offset or
counterclaim.
C. As more fully
provided in the underlying loan documents, on or
about April 16, 1999, the Bank made a
second term loan to Original Borrower
evidenced by a promissory note in the
original principal amount of
$639,250, bearing interest at 8.7%, as
amended, from time to time, which
loan (Term Loan No. 2), due April 1, 2009,
secured by, among other things,
the same collateral as secures the
Revolving Loan. The
sum of $314,221.29
was due on this loan as of May 12, 2005,
when notice of default and demand
for payment of this loan was made by the
Bank, plus legal fees and costs,
which are additional. Interest and other charges
continue to accrue
thereafter and as of the date hereof.
Borrower acknowledges
that this loan
has been accelerated by the Bank and is now
fully due and owing, without
defense, offset or counterclaim.
D As more fully
provided in the underlying loan documents, on or
about August 31, 2000, the Bank made a
further term loan to Original
Borrower in the original principal amount
of $250,000, evidenced by Term
Note No. 6 of even date, bearing interest
at prime plus 1%, due September
1, 2005, (Term Loan No. 6), as amended,
from time to time, which loan is
secured by, among other things, the same
collateral which secures the
Revolving Loan. The sum of $35,369.14 was due on
this loan as of May 12,
2005, when notice of default and demand for
payment was made by the Bank,
plus legal fees and costs, which are
additional. Interest
and other
charges continue to accrue thereafter and
as of the date hereof.
Borrower
acknowledges that this loan has been
accelerated by the Bank and is now
fully due and owing, without defense,
offset or counterclaim.
E. As more fully
provided in the underlying loan documents, on or
about May 1, 2001, the Bank made a further
term loan to Original Borrower
in the original principal amount of
$1,000,000, evidenced by a Term Note
No. 7 of even date, bearing interest at
prime plus 1%, due May 1, 2006
(Term Loan No. 7), which loan is secured
by, among other things, the same
collateral which secures the Revolving
Loan. The sum of
$211,111.83 was
due on this loan as of May 12, 2005, when
notice of default and demand for
payment was made by the Bank, plus legal
fees and costs, which are
additional. Interest and other charges
continue to accrue thereafter and
as of the date hereof. Borrower acknowledges that this
loan has been
accelerated by the Bank and is now fully
due and owing, without defense,
offset or counterclaim.
F. On or about
April 4, 2002, the Bank made a term loan to
Williams Industries, Inc. evidenced by a
promissory note of even date in
the amount of $43,000, bearing interest at
7.5%, due April 4, 2005 (the
Williams Industries Loan), secured by
equipment pledged under a Commercial
Security Agreement dated April 4, 2002.
The sum of $3,060.29
was due on
this loan as of May 12, 2005, when the Bank
gave notice of default and
demand for payment, plus legal fees and
costs, which are additional.
Interest and other charges continue to
accrue thereafter and as of the date
hereof. Borrower acknowledges that this
loan has matured and is now fully
due and owing, without defense, offset or
counterclaim.
G. On or about June
4, 2001, the Bank made a demand loan to
Williams Equipment Corporation (the
Williams Equipment Loan), evidenced by
a promissory note of even date in the
amount of $34,500,
bearing interest
at 8.25%, due on demand and, if no demand
is made, on June 4, 2006. The
sum of $11,483.75 was due on this loan as
of May 12, 2005, when the Bank
gave notice of default and demand for
payment, plus legal fees and costs,
which are additional. Interest and other charges
continue to accrue
thereafter and as of the date hereof.
Borrower acknowledges
that this loan
has been accelerated by the Bank and is now
fully due and owing, without
defense, offset or counterclaim.
H. On or about
January 12, 2004, the Bank made a term loan to
Williams Steel Erection Co. evidenced by a
promissory note of even date in
the amount of $31,083.86. bearing interest
at 5.75%, due January 12, 2008
(the Williams Steel Erection Co. Loan),
which loan is secured by a 2000
Ford F-250 pickup truck under a Commercial
Security Agreement of even date.
The sum of $24,189.29 was due on this loan
as of May 12, 2005, when the
Bank gave notice of default and demand for
payment, plus legal fees and
costs, which are additional. Interest and other charges
continue to accrue
thereafter and as of the date hereof.
Borrower acknowledges
that this loan
has been accelerated by the Bank and is now
fully due and owing, without
defense, offset or counterclaim.
I. On or about June
29, 2000, the Bank made a term loan to
Williams Bridge Company in the original
amount of $87,948, bearing interest
at 9.5%, secured by business assets,
principally accounts and equipment,
pledged under a Commercial Loan and
Security Agreement dated June 29, 2000,
due 29, 2005. The sum of $12,551.49 was due on
this loan as of May 12,
2005, when the Bank gave notice of default
and demand for payment, plus
legal fees and costs, which are additional.
Interest and other
charges
continue to accrue thereafter and as of the
date hereof.
Borrower
acknowledges that this loan has been
accelerated by the Bank and is now
fully due and owing, without defense,
offset or counterclaim.
J. On or about May
13, 2002, the Bank made a term loan to Borrower
(i.e., to S.I.P. Inc. of Delaware, and the
others noted above) evidenced by
a promissory note of even date in the
amount of $900,000, reduced to
$765,000 under a Change In Terms Agreement
dated August 2, 2002, bearing
interest at prime plus .5%, due August 2,
2007 (the SIP Loan), which loan
is secured by business assets pledged under
a Commercial Security Agreement
dated May 13, 2002. The sum of $332,247.05 was due on
this Loan as of June
29, 2005, plus legal fees and costs, which
are additional.
Interest and
other charges continue to accrue.
Borrower, by its
signature below, agrees
to treat this loan as having been
accelerated by the Bank, and as now fully
due and owing, without defense, offset or
counterclaim.
K. Williams
Industries, Inc. and other obligors are further
indebted to the Bank in the sum of $114,185
as of May 19, 2005, pursuant to
the terms of an Application and Agreement
For Irrevocable Standby Letter of
Credit No. 2351666-5001 dated March 1,
2004, plus legal fees and costs,
which are additional. Borrower acknowledges that
this obligation has
been
declared due by the Bank and is now fully
due and owing, without defense,
offset or counterclaim
L. The various
obligations and indebtedness of Borrower, Original
Borrower, Williams Bridge Company, Williams
Equipment Corporation and
Williams Steel Erection Company referred to
in recitals A-K above is
hereinafter referred to, collectively, as
the "Indebtedness."
The
Indebtedness, and the other obligations and
covenants and duties of the
Borrowers under the associated loan
documents (the "Loan Documents"), are
hereinafter referred to, collectively, as
the "Obligations".
M. Borrower, and
each party hereto which is an obligor to the Bank
on the Indebtedness or any part thereof,
together with Borrower's
principal, Frank Williams, Jr. (the
"Guarantor") have requested the Bank to
forbear from exercising its rights under
the various loan documents which
evidence the Indebtedness (collectively,
the "Loan Documents") and seek to
induce the Bank to enter into this
Agreement by their covenants and
promises herein. The Guarantor likewise seeks to
induce Bank to enter into
this Agreement, will benefit directly and
indirectly from Bank's entry into
this Agreement and such benefit has a
reasonably equivalent value to
liabilities and obligations incurred by
Guarantor under his Guarantee
Agreement of even date herewith.
N. The Bank is
willing to forbear from exercising its legal
remedies under the Loan Documents, under
and on the terms and conditions
hereof.
NOW, THEREFORE,
for good and valuable consideration, the receipt and
sufficiency of which are hereby
acknowledged, the parties hereto agree as
follows:
1. Recitals.
The recitals above are
acknowledged to be true and
correct.
2. Definitions and
Interpretation.
(a)
Defined Terms.
Capitalized terms used in this Agreement
but not defined in this Agreement shall
have the meanings given to them in
the Loan Documents. Terms defined in the singular have
corresponding
meanings in the plural, and vice versa.
The word "including"
means
"including without limitation".
(b)
Interpretation. Unless
otherwise indicated, references
to Sections, Exhibits and Schedules are to
the Sections of, and Exhibits
and Schedules to, this Agreement. Unless
the context clearly requires
otherwise, references in this Agreement to
any other agreements, documents
or instruments shall be references to such
agreements, documents and
instruments as amended, modified or
supplemented from time to time, and
references in this Agreement to laws,
statutes, rules, regulations or other
governmental restrictions, standards or
requirements shall be references to
such laws, statutes, rules, regulations and
other governmental
restrictions, standards or requirements as
in effect from time to time.
Headings in this Agreement are for ease of
reference only and shall not be
used to interpret the terms and conditions
hereof.
3. Guaranty
Agreement. To induce
Bank to enter into this
Agreement, Frank Willams, Jr. (the
"Guarantor") shall execute and deliver
his personal Guaranty, in the form attached
hereto as Exhibit A (the
"Guaranty") on even date, and he shall
deliver his most recent personal
financial statement to the Bank, dated as
of the date hereof, by no later
than July 15, 2005.
4. S.I.P. Mortgage.
S.I.P., in
consideration of the Bank's entry
into this Agreement, and as security for
all of the Indebtedness, agrees to
place a $750,000 first mortgage on the
property shown in Exhibit B hereto
by no later than July 15, 2005.
If the mortgage is not
timely placed, or
if the subject parcels, collectively, does
not appraise for the Bank, post-
Closing, with a fair market value of at
$750,000, it shall be an event of
default under this Agreement unless the
Guarantor forthwith delivers a
further guarantee in the amount of the
shortfall. The Guarantor also fully
guarantees the extent, validity and
priority of this Deed of Trust, and
shall pay the Bank $750,000 if this deed of
trust is ever voided or set-
aside, or held to be invalid security for
the Obligations, or any reason,
as more fully set forth in the
Guaranty.
5. Increase to
Welllington Deed of Trust. The existing Deed of
Trust dated July 19, 2000, held by the Bank,
as successor to Century
National Bank, on 17.5 acres of real
property owned by the Williams Family
Limited Partnership, a Virginia limited
partnership, adjoining the
company's headquarters in Manassas, VA, at
8327 Wellington Road, the
property description for which is attached
as Exhibit C, which deed of
trust secures indebtedness held by the Bank
under that certain promissory
note from the Williams Family Limited
Partnership in the original principal
amount of $500,000 to Century National Bank
dated July 19, 2000, as amended
by an Allonge And Modification To
Promissory Note dated July 19, 2003,
between the Bank and the Williams Family
Limited Partnership, will be
raised from $400,000 to $1.4 million no
later than July 15, 2005. In the
event that this property does not appraise
for the Bank, post-Closing, such
that the Bank's lien of $1.4 million, as so
increased, is supported by
equity of $1.4 million, on a fair market
value basis, this shall be a
default under this Agreement unless the
Guarantor delivers a further
guarantee in an amount equal to the
shortfall. The
Guarantor also fully
guarantees to the Bank the extent, validity
and priority of this Deed of
Trust, and its security for the
Indebtedness, and shall pay the Bank $1.0
million if this deed of trust is ever
voided or set-aside, or held to be
invalid security for the Obligations, for
any reason, as more fully set
forth in the Guaranty.
6. Pay-down at
Closing on June 30, 2005. Bank to receive a
$308,204.63 cash payment at Closing, which
shall be on June 30, 2005, no
later than noon. Of this sum, $216,452.36 shall
come from sale of real
property in Bedford, VA on which the Bank
has a first lien, with the
balance to be paid by check in the amount
of $91,752.27.
7. Monthly payments
Post-Closing.
Borrower, in consideration of
the Bank's forbearance and entry into this
Agreement, shall monthly make
payments to the Bank, after June 30, 2005,
in the amounts shown on the
schedule attached hereto as Exhibit D,
as-if the Indebtedness had not been
accelerated. By accepting these payments, the
Bank does not waive its
prior acceleration of the Indebtedness or
de-accelerate the Indebtedness.
8. Supplemental
Pay-down. Bank to
receive a further supplemental
principal pay-down of $750,000 by no later
than September 30, 2005, such
pay-down to come from sources outside
collateral presently pledged to the
Bank (including hereunder) or the products and
proceeds thereof.
Proof of
the source of this supplemental pay-down to
be given to the Bank.
The
Guarantor absolutely guarantees this
obligation, which guarantee is a
guarantee of payment, not of
collection.
To the extent, if any, that the $750,000 payment is funded by
the
sale-leaseback of any property currently
owned by any of the Borrowers,
rental payments by any one or more of the
Borrowers to the purchaser-
landlord after the sale-leaseback will be
subordinated to the payment of
the Indebtedness and other Obligations to
the Bank, in full, provided that
reasonable monthly rent may be paid to the
purchaser-landlord provided that
there is no default under the terms of this
Agreement.
The Bank will advise the Borrowers which notes, letter of
credit
obligations or other Obligations included
within the Indebtedness will be
paid down with the proceeds of the $750,000
supplemental payment, in the
Bank's sole discretion. However, the Bank will give
reasonable deference,
in making the Bank's ultimate decision, to
the wishes of the Borrower
regarding which Obligations should be
satisfied from this payment.
9.
Cross-collateralization. Borrower agrees that all
collateral
pledged to the Bank shall be
cross-collateralized and serve as security for
any and all Indebtedness owed to the
Bank.
10. Forbearance.
Subject to the
provisions of this Forbearance
Agreement and provided that there is no
Forbearance Default hereunder, the
initial term of the Bank's forbearance
shall be from the date hereof
through September 30, 2005, provided,
however, that if there is no default
hereunder, and, without limitation, the
Bank receives the supplemental pay-
down of $750,000 by September 30, 2005, as
required by the terms hereof,
the term of the Bank's forbearance shall
extend to February 28, 2006.
Each of the following shall constitute a
"Forbearance Default":
(a)
Any further Event of Default, beyond cure, under the
governing loan documents for the
Indebtedness shall occur after the date
hereof;
(b)
Borrower shall fail to observe or perform any monetary
covenant or obligation contained in this
Agreement;
(c)
Any party to this Agreement shall fail to observe or
perform any non-monetary covenant or
obligation contained in this
Agreement, which default shall continue for
five (5) business days after
notice thereof;
(d)
Any representation or warranty of any party hereto or in
any document delivered pursuant to this
Agreement shall prove to be
materially false, misleading or incorrect
when made;
(e)
Guarantor shall fail to observe or perform any of his
obligations or covenants under this
Agreement or the Guaranty;
(f)
Borrower or the Guarantor shall suffer
a material adverse change in financial
position, as compared to the date
hereof, as determined by the Bank; or
(g)
An involuntary bankruptcy petition shall be filed against
Borrower or any member or entity
thereof;
(h)
Borrower or any member or entity thereof shall make an
assignment for the benefit of creditors or
file a voluntary bankruptcy
petition;
(i) Any action shall be taken, by any
person, to challenge, void or set
aside the Bank's liens, or its rights under
the Loan Documents, this
Agreement or under the Guarantee thereof by
the Guarantor, which action is
not dismissed within ten (10) business days
of the notice thereof.
(j) The Wilmington
property pledged to the Bank hereunder does not
appraise for the Bank, on a market value
basis, within sixty (60) days
post-Closing, to show equity of at least
$750,000 supporting the Bank's
lien,;
(k) The Wellington
property, whose deed of trust in favor of the Bank
is to be raised to $1.4 million under the
terms of this Agreement, does not
appraise for the Bank, on a fair market
value basis, within sixty (60) days
post-Closing, to show the Bank's lien as
supported by equity of at least
$1.4 million.
Upon expiration of the Forbearance Period,
the Lender may institute such
collection proceedings and such other
remedies, contractual, legal or
equitable, against Borrower and/or the
Guarantor, as the Lender, in its
sole discretion, may elect.
11. Accountant's
Review. During the
Forbearance Period the Lender
shall have the right to have a certified
public accounting firm of its
choice complete a collateral audit of the
Borrower and review the Borrower'
books and records. The Borrower shall cooperate fully
with any such audit
or review and shall pay all reasonable
costs associated therewith, within
thirty (30) days of demand for the
same.
12. Legal Fees;
Costs. Borrower shall
pay all reasonable legal
fees and costs, and all appraisal and other
costs, incurred by the Bank in
preparing and documenting and closing this
Agreement and the obligations of
the parties hereunder, or that have been or
may after the date of this
Agreement be incurred by the Bank in
connection with the failure of
Borrower to timely satisfy its obligations
under the Loan Documents,
including, without limitation, all
reasonable legal fees and costs incurred
by the Bank in connection with the
preparation and any enforcement of its
rights under this Agreement. All parties agree to consent
to the
jurisdiction of the Circuit Courts for
Fairfax and Prince William County,
Virginia with respect to any dispute over
the amount of such fees, and they
further consent to the jurisdiction of the
Prince William and Fairfax
County Circuit Courts fo
