PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
INTERNAL DEAL SUMMARY MEMORANDUM
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I. EXECUTIVE SUMMARY
Calderwood & Harkness LLP ("C&H" or the "Firm") represents Vantage Mobility Systems Corp. ("VMS" or the "Borrower"), a Michigan-headquartered automotive tooling and precision-machined components manufacturer, as borrower's counsel in the documentation and negotiation of a $45,000,000 senior secured revolving credit facility (the "Facility"). This memorandum is intended to serve as the primary internal reference document for the C&H deal team in connection with the Facility, summarizing the material terms, parties, risk factors, negotiation strategy, documentation status, and key workstreams.
VMS is a portfolio company of Ridgecrest Capital Partners, LP ("Ridgecrest"), a New York-based private equity sponsor. VMS equity is held through Ridgecrest Automotive Holdings, LLC ("RAH"), a Delaware limited liability company that owns 87.2% of VMS's outstanding equity. The remaining 12.8% of VMS equity is held by members of VMS management through a rollover equity structure established in connection with Ridgecrest's initial acquisition of VMS. The investing fund is Ridgecrest Capital Partners Fund IV, LP, a 2021 vintage fund with approximately $2.8 billion in committed capital.
VMS is incorporated in the State of Delaware and is headquartered at 4100 Industrial Parkway, Auburn Hills, Michigan 48326. Its employer identification number is 38-4271956.
The primary purpose of the Facility is to finance tooling capital expenditures ("Tooling Capex") related to new and replacement program launches for VMS's original equipment manufacturer ("OEM") customer base. The Facility may also be used for general corporate purposes, subject to a 25% sublimit on non-Tooling Capex usage, which caps general corporate purpose borrowings at $11,250,000 of the $45,000,000 aggregate commitment amount.
The Facility has been arranged by Pinnacle National Bank, N.A. ("Pinnacle") as Sole Lead Arranger and Sole Bookrunner, with a three-lender club syndicate comprising Pinnacle, Great Lakes Commercial Lending Corp. ("GLCL"), and Ironbridge Capital Finance, LLC ("Ironbridge"). Pinnacle will also serve as Administrative Agent, Collateral Agent, Issuing Lender, and Swing Line Lender under the Facility.
The Facility will be governed by the laws of the State of New York. The initial draft of the Credit Agreement was circulated by C&H to Hargrove, Stein & Calloway LLP ("HSC"), counsel to the Administrative Agent and the Lenders, on May 27, 2025. The targeted closing date is June 30, 2025, with a maturity date of June 30, 2029, reflecting a four-year tenor.
This memorandum is organized as follows: Section II identifies the key parties and their respective roles; Section III describes VMS's corporate structure and subsidiaries; Section IV summarizes key financial metrics; Sections V and VI detail the material economic and financial covenant terms of the Facility; Section VII addresses the security package and guarantee structure; Section VIII catalogs the conditions precedent to closing; Section IX sets forth the key timeline; Section X identifies anticipated negotiation points with HSC; Section XI flags key risk factors for the deal team's attention; Section XII summarizes the current documentation status and workstreams; and Section XIII outlines next steps.
II. PARTIES
A. Borrower. Vantage Mobility Systems Corp. is a corporation organized under the laws of the State of Delaware and qualified to do business in the State of Michigan. VMS is primarily engaged in automotive tooling manufacturing, precision machining, and die-cast component production for a diversified OEM customer base. The company's principal executive offices are located at 4100 Industrial Parkway, Auburn Hills, Michigan 48326.
The following individuals serve as key executive officers of VMS and will be the primary business-side contacts for the deal team:
VMS's Delaware registered agent is Capitol Registered Agents, Inc., located at 1209 Orange Street, Wilmington, Delaware 19801. VMS's employer identification number is 38-4271956.
For purposes of deal execution, Derek Wainwright (General Counsel) will serve as the principal legal contact at VMS, and Priya Chandrasekaran (Treasurer) will coordinate the financial and corporate deliverables required for closing. Linda S. Nakamura (CFO) will execute the officer's closing certificate and the initial compliance certificate. The C&H team should direct all substantive legal communications to Derek Wainwright, with copies to Priya Chandrasekaran as appropriate.
B. Sponsor / Equity Owner
Ridgecrest Capital Partners, LP is a Delaware limited partnership with principal offices at 600 Lexington Avenue, 28th Floor, New York, New York 10022. Ridgecrest is a private equity firm focused on middle-market industrial and manufacturing platform investments. The managing partner of Ridgecrest is Thomas Hadley, who also serves as Chairman of the Board of Directors of VMS. Natasha Okonkwo is a Partner at Ridgecrest and serves as a Board Observer with respect to VMS.
VMS equity ownership is held through Ridgecrest Automotive Holdings, LLC ("RAH"), a Delaware limited liability company (EIN 84-3965012). RAH holds 87.2% of the outstanding equity of VMS. The remaining 12.8% is held by VMS management through a rollover equity arrangement. RAH is also a limited guarantor under the Facility (as described in Section VII below). The investing fund is Ridgecrest Capital Partners Fund IV, LP, a 2021 vintage fund with approximately $2.8 billion in committed capital.
For purposes of this transaction, the C&H team should be aware that Ridgecrest is not a direct party to the Credit Agreement but exercises significant influence over VMS decision-making through its majority equity ownership and board representation. RAH's limited guarantee obligations are confined to a narrow set of triggers, as discussed in Section VII.B.
C. Administrative Agent and Lenders
The Facility is structured as a three-lender club syndicate. The commitments and roles of each lender are summarized below:
1. Pinnacle National Bank, N.A.
Pinnacle serves as Administrative Agent, Collateral Agent, Issuing Lender, Swing Line Lender, and Lender under the Facility. In addition, Pinnacle is the Sole Lead Arranger and Sole Bookrunner. Pinnacle is an OCC-chartered national banking association with its principal office at 311 South Wacker Drive, Suite 3200, Chicago, Illinois 60606. Pinnacle's commitment under the Facility is $22,500,000, representing 50.0% of the aggregate commitments. The relationship manager is Catherine D. Forsythe, Managing Director, Leveraged Finance. The credit officer is Alan Rutherford, Senior Vice President.
It should be noted that Pinnacle also serves as Administrative Agent under VMS's existing $130,000,000 first lien term loan facility (the "Existing Credit Agreement" or "Existing TL"). This dual-agent role has implications for the intercreditor arrangement, as discussed in Sections VII.C and XI.D below.
2. Great Lakes Commercial Lending Corp.
Great Lakes Commercial Lending Corp. ("GLCL") is a Delaware corporation with offices at 200 Renaissance Center, Suite 1800, Detroit, Michigan 48243. GLCL's commitment under the Facility is $13,500,000, representing 30.0% of the aggregate commitments. The relationship manager is Robert Shin, Vice President, Middle Market Lending. GLCL is a regional lending institution with a focus on middle-market industrial credits in the Great Lakes region and has an existing commercial relationship with VMS through prior participation in the Existing Credit Agreement syndicate.
3. Ironbridge Capital Finance, LLC
Ironbridge Capital Finance, LLC ("Ironbridge") is a Delaware limited liability company with offices at 1251 Avenue of the Americas, 34th Floor, New York, New York 10020. Ironbridge's commitment under the Facility is $9,000,000, representing 20.0% of the aggregate commitments. The relationship manager is Vanessa Kwok, Director, Sponsor Finance. Ironbridge is a specialty finance platform focused on sponsor-backed leveraged lending.
Aggregate Commitments Summary:
D. Advisors and Counsel
Borrower's Counsel: Calderwood & Harkness LLP
C&H serves as outside counsel to VMS (as Borrower) in connection with the documentation and negotiation of the Facility. Our principal offices for purposes of this engagement are located at 425 Park Avenue, 31st Floor, New York, New York 10022. The C&H deal team is comprised of the following professionals:
The fee arrangement for this engagement is governed by the engagement letter dated May 19, 2025. C&H has agreed to a fee cap of $185,000, exclusive of disbursements. The applicable billing rates are $1,350 per hour for partners and $850 per hour for associates. The deal team should monitor time entries carefully against the fee cap, as discussed further in Section XII.C.
Agent's / Lenders' Counsel: Hargrove, Stein & Calloway LLP
Hargrove, Stein & Calloway LLP ("HSC") represents Pinnacle (in its capacity as Administrative Agent) and the Lender syndicate. HSC's offices are located at One Liberty Plaza, 43rd Floor, New York, New York 10006. The lead partner is Richard Ellsworth, and the lead associate is Diana Marchetti. All mark-ups and negotiation communications from the lender side will be directed through the HSC team.
Auditor: Whitfield & Associates, CPAs, LLP
VMS's independent auditor is Whitfield & Associates, CPAs, LLP, located at 2300 Town Center Drive, Suite 400, Southfield, Michigan 48075. The engagement partner is James T. Whitfield, CPA. Whitfield issued an unqualified opinion on VMS's consolidated financial statements for the fiscal year ended December 31, 2024. These financial statements serve as the baseline for the financial covenants and representations in the Credit Agreement.
Financial Advisor to VMS: Meridian Advisory Group, LLC
Meridian Advisory Group, LLC ("Meridian") served as financial advisor to VMS in connection with the lender outreach process and term sheet negotiation. Meridian's offices are located at 150 North Riverside Plaza, Suite 2500, Chicago, Illinois 60606. The managing director responsible for the VMS engagement is Elaine Cortez. Meridian's role has been principally advisory through the commitment letter stage, and it is not expected to have a significant ongoing role in the documentation phase, although Elaine Cortez may participate in negotiation calls as a business-side advisor.
E. Other Key Third Parties
Primary Depository Bank: Lakeshore Trust Company
VMS's primary depository bank is Lakeshore Trust Company, located at 777 Woodward Avenue, Suite 500, Detroit, Michigan 48226. VMS maintains its principal operating deposit account at Lakeshore Trust Company (account ending in 7841). Deposit account control agreements ("DACAs") will be required in favor of the Administrative Agent with respect to this account and any other deposit accounts maintained by VMS and the Subsidiary Guarantors, as further described in Section VII.A. Coordination with Lakeshore Trust Company on the execution of the DACAs is a critical-path closing deliverable.
Insurance Carrier: Northland Mutual Insurance Co.
VMS's primary insurance carrier is Northland Mutual Insurance Co. The relevant policy number is NMI-2025-041876, providing coverage of $50,000,000 per occurrence. Evidence of insurance naming Pinnacle (as Administrative Agent and Collateral Agent) as loss payee and additional insured will be required as a condition precedent to closing.
III. VMS CORPORATE STRUCTURE AND SUBSIDIARIES
The following summarizes VMS's corporate organizational structure and its subsidiaries, each of which is relevant to the guarantee and collateral arrangements under the Facility.
Organizational Chart:
The ownership chain flows as follows:
Ridgecrest Capital Partners Fund IV, LP (limited partner)
→ Ridgecrest Capital Partners, LP (general partner of the Fund)
→ Ridgecrest Automotive Holdings, LLC ("RAH") (87.2% equity ownership of VMS)
→ Vantage Mobility Systems Corp. (the Borrower)
Management rollover equity holders (12.8% equity ownership of VMS)
VMS is the direct parent of three wholly-owned domestic subsidiaries, each of which will serve as a Subsidiary Guarantor under the Facility, and one foreign subsidiary, which will not serve as a guarantor. The details of each subsidiary are set forth below.
Subsidiary Guarantors (each 100% owned by VMS):
Each of the foregoing domestic subsidiaries will be required to execute the Guarantee and Collateral Agreement and to pledge substantially all of their assets as collateral for the obligations under the Facility. In addition, any future domestic subsidiary formed or acquired by VMS during the term of the Facility will be required to become a Subsidiary Guarantor pursuant to customary after-acquired subsidiary joinder provisions.
Foreign Subsidiary (not a guarantor):
VMS de México, S. de R.L. de C.V. is a 100% owned subsidiary of VMS. Consistent with customary practice for foreign subsidiaries (to avoid adverse U.S. tax consequences under Section 956 of the Internal Revenue Code), VMS de México will not serve as a guarantor under the Facility. However, 65% of the voting equity interests in VMS de México will be pledged as collateral under the Guarantee and Collateral Agreement. This 65% pledge threshold is the standard limitation applied to controlled foreign corporation equity pledges in leveraged lending transactions and reflects the point at which the deemed dividend inclusion under Section 956 would otherwise apply.
The C&H team should confirm with VMS's tax advisors that no material changes to the Section 956 analysis have occurred since the Existing Credit Agreement was documented in 2022, although we note that the 65% pledge limitation was also applied in the Existing Credit Agreement.
IV. KEY FINANCIAL METRICS
A. VMS Audited Financials (FYE December 31, 2024)
The following summary financial data is derived from VMS's consolidated audited financial statements for the fiscal year ended December 31, 2024, as audited by Whitfield & Associates, CPAs, LLP, which issued an unqualified opinion thereon. These financials serve as the reference point for the Closing Date representations and the baseline for covenant compliance calculations.
The EBITDA figure of $38,700,000 reflects the "Consolidated EBITDA" definition used in the Existing Credit Agreement, which includes customary add-backs for non-cash charges, one-time restructuring expenses, and other items. The EBITDA definition in the Facility Credit Agreement will need to be carefully aligned with, or cross-referenced to, the definition used in the Existing Credit Agreement to ensure consistency in covenant calculations across both facilities. Any variance in the EBITDA definition between the two credit agreements could result in divergent compliance results on identical financial performance, which would create unnecessary complexity in the compliance reporting process.
B. Existing Indebtedness (as of March 31, 2025)
VMS's existing funded indebtedness as of March 31, 2025 is summarized below:
Existing First Lien Term Loan:
The Existing Credit Agreement was documented by HSC (as agent's counsel) and Kensington & Pratt LLP (as borrower's counsel at the time of the original term loan closing in 2022). C&H was not involved in the documentation of the Existing Credit Agreement. The C&H team has obtained and reviewed a copy of the Existing Credit Agreement and all amendments thereto for purposes of ensuring consistency and addressing intercreditor matters.
Capital Leases:
VMS has approximately $4,800,000 in outstanding capital lease obligations as of March 31, 2025, relating primarily to manufacturing equipment. These capital leases constitute "Indebtedness" under both the Existing Credit Agreement and the Facility Credit Agreement and are included in the calculation of Consolidated Total Net Debt for leverage covenant purposes.
Other Indebtedness:
VMS has no other material funded indebtedness outstanding as of March 31, 2025.
C. Leverage Analysis
The leverage analysis set forth below is critical to understanding VMS's financial position and the covenant headroom available under the Facility.
Pre-Facility Net Leverage Ratio:
Consolidated Total Net Debt: $112,500,000 (Existing TL) + $4,800,000 (Capital Leases) − Unrestricted Cash (assumed netted to simplified calculation)
Simplified Calculation: $112,500,000 ÷ $38,700,000 = 2.91x
Pro Forma Net Leverage Ratio (assuming full draw of the Facility):
Consolidated Total Net Debt: $112,500,000 (Existing TL) + $45,000,000 (Facility, fully drawn) + $4,800,000 (Capital Leases) − Unrestricted Cash
Simplified Calculation: ($112,500,000 + $45,000,000) ÷ $38,700,000 = 4.07x
Critical Observation: The pro forma leverage ratio of 4.07x at full draw is within the initial covenant threshold of 4.75x (applicable from closing through Q4 2025), providing approximately 0.68x of headroom at inception. However, the leverage covenant steps down progressively to 4.00x from Q1 2028 onward. At that point, if VMS's debt levels remain static and EBITDA does not grow, the pro forma leverage of 4.07x would exceed the 4.00x threshold and constitute a covenant violation. This is a significant risk factor and is addressed in greater detail in Section XI.A below.
The deal team should note that the leverage analysis above uses a simplified calculation that does not fully account for unrestricted cash netting (subject to the $15,000,000 netting cap in the Consolidated Total Net Debt definition) or the impact of capital leases. The full covenant compliance calculation at closing will need to be prepared in coordination with Linda S. Nakamura (CFO) and should reflect the precise definitions in the Credit Agreement.
V. FACILITY TERMS SUMMARY
A. Structure and Purpose
The Facility is structured as a senior secured revolving credit facility with aggregate commitments of $45,000,000. The following table summarizes the key structural features:
The 25% sublimit on general corporate purpose borrowings is a meaningful structural feature that limits VMS's ability to use the Facility for purposes unrelated to Tooling Capex. The sublimit is intended to provide the lenders with assurance that the preponderance of facility utilization will be directed toward the capital expenditure program that forms the business rationale for the Facility. The C&H team should ensure that the Credit Agreement includes clear mechanics for tracking and certifying the use of proceeds against the Tooling Capex purpose and the general corporate sublimit.
The Swing Line Sublimit of $5,000,000 allows VMS to obtain same-day funding from Pinnacle for short-term working capital needs without the notice and settlement timing requirements applicable to standard revolving loans. Swing Line Loans will be subject to settlement among the Lenders on a weekly basis or upon demand by Pinnacle.
The Letter of Credit Sublimit of $7,500,000 allows VMS to request the issuance of standby letters of credit by Pinnacle (as sole Issuing Lender) for the account of VMS. Letters of credit will reduce the available revolving commitments on a dollar-for-dollar basis.
The Incremental Facility (accordion) feature permits VMS to request up to $15,000,000 of additional revolving commitments, subject to (i) pro forma compliance with all financial covenants (both at the time of the request and after giving effect to the increase), (ii) the consent of any Lender being asked to increase its commitment (existing Lenders are not obligated to participate), and (iii) satisfaction of customary conditions precedent, including the execution of an amendment or joinder agreement. The accordion feature provides VMS with additional borrowing capacity flexibility should its Tooling Capex requirements exceed the initial $45,000,000 commitment.
B. Maturity and Amortization
As a revolving credit facility, the Facility does not have scheduled amortization. Borrowings may be drawn, repaid, and re-borrowed during the commitment period, subject to the aggregate commitment limit and the applicable sublimits. All outstanding borrowings, together with accrued and unpaid interest and all other obligations, are due and payable in full on the Maturity Date.
Voluntary prepayments are permitted at any time without premium or penalty, subject to (i) reimbursement of any SOFR breakage costs incurred by the Lenders in connection with the prepayment of SOFR Loans prior to the end of the applicable Interest Period and (ii) minimum prepayment amounts of $1,000,000 or integral multiples of $500,000 in excess thereof.
The deal team should note the potential springing maturity issue created by the fact that the Existing Term Loan matures on March 15, 2028, approximately 15 months before the Facility Maturity Date. This issue is addressed in detail in Section XI.B.
C. Pricing. The pricing structure for the Facility is summarized below. The pricing reflects the terms agreed to in the commitment letter dated May 16, 2025, and will be incorporated into the Credit Agreement.
Interest Rate:
The applicable Term SOFR rate will be determined by reference to the CME Term SOFR Reference Rate for the relevant Interest Period (1-month, 3-month, or 6-month). The Credit Spread Adjustment of 10 basis points is applied to Term SOFR to reflect the historical basis differential between SOFR and the legacy LIBOR benchmark. The ABR margin of 225 basis points is derived as the SOFR margin of 325 basis points minus the customary 100 basis point differential between Term SOFR and the Alternate Base Rate. Neither the SOFR floor nor the ABR floor is set above 0.00%.
The Default Rate applies automatically upon the occurrence and during the continuance of an Event of Default and adds 200 basis points to the otherwise applicable rate on all outstanding obligations.
Interest Period Options: VMS may elect Interest Periods of 1 month, 3 months, or 6 months for Term SOFR Loans. The choice of Interest Period affects the applicable Term SOFR rate and the timing of interest payments. Interest on SOFR Loans is payable on the last day of the applicable Interest Period (and, for Interest Periods greater than 3 months, at 3-month intervals). Interest on ABR Loans is payable quarterly in arrears.
Minimum Borrowing Amounts: The minimum borrowing amount for SOFR Loans is $1,000,000, and for ABR Loans, $500,000.
Fees:
The Upfront Fee of $450,000 will be allocated among the Lenders in proportion to their respective commitments as follows:
The Arrangement Fee of $125,000 is payable solely to Pinnacle in its capacity as Sole Lead Arranger and is separate from the Upfront Fee. Both the Upfront Fee and the Arrangement Fee are due and payable at closing.
For illustrative purposes, assuming an average undrawn balance of $30,000,000 over the course of a year, the annual commitment fee would be approximately $150,000 ($30,000,000 × 0.50%). The actual commitment fee will fluctuate based on the level of facility utilization.
VI. FINANCIAL COVENANTS
The Facility includes four financial covenants, each of which is tested on a quarterly basis (unless otherwise indicated). The financial covenants in the Facility are more restrictive than the corresponding covenants in the Existing Credit Agreement and will therefore be the binding constraints on VMS's financial performance.
A. Maximum Total Net Leverage Ratio
VMS is required to maintain a Maximum Total Net Leverage Ratio, defined as the ratio of Consolidated Total Net Debt to Consolidated EBITDA, tested on a quarterly basis using trailing four-quarter (last twelve months, or "LTM") financial data. The leverage covenant includes a step-down schedule that progressively tightens the maximum permitted ratio over the life of the Facility:
For purposes of this covenant, "Consolidated Total Net Debt" is defined as all funded Indebtedness (including the Facility, the Existing TL, and capital lease obligations) plus all other obligations constituting Indebtedness under the Credit Agreement, less unrestricted cash and cash equivalents held by VMS and its subsidiaries. The netting of unrestricted cash is subject to a $15,000,000 cap, meaning that no more than $15,000,000 of cash may be netted against total debt in calculating the leverage ratio.
The step-down schedule is a standard feature in leveraged credit facilities and reflects the lenders' expectation that VMS will deleverage over the life of the Facility through a combination of EBITDA growth, debt repayment, and disciplined capital allocation. As discussed in Section XI.A, the final step-down to 4.00x from Q1 2028 creates a tight constraint given VMS's pro forma leverage of 4.07x at full draw, and the deal team should monitor this risk closely.
B. Minimum Interest Coverage Ratio
VMS is required to maintain a Minimum Interest Coverage Ratio, defined as the ratio of Consolidated EBITDA to Consolidated Cash Interest Expense, tested on a quarterly basis. The minimum threshold is:
Minimum Interest Coverage Ratio at all times: 2.50x
This covenant ensures that VMS generates sufficient cash earnings to service its interest obligations with an adequate margin of safety. The 2.50x threshold is more restrictive than the 2.00x minimum under the Existing Credit Agreement. The deal team should confirm that the definition of "Consolidated Cash Interest Expense" in the Credit Agreement is consistent with the corresponding definition in the Existing Credit Agreement and includes all cash interest payments on the Facility, the Existing TL, and capital lease obligations, as well as any commitment fees and letter of credit fees that are characterized as interest expense under GAAP.
C. Maximum Tooling Capex
VMS is subject to a Maximum Tooling Capex covenant that limits capital expenditures attributable to tooling, dies, molds, fixtures, and related manufacturing equipment:
Maximum Tooling Capital Expenditures: Not to exceed $55,000,000 in any fiscal year.
A carryforward feature permits VMS to carry forward up to 15% of any unused Tooling Capex capacity from one fiscal year to the immediately succeeding fiscal year, subject to a maximum carryforward amount of $8,250,000 (15% × $55,000,000). The carryforward is cumulative only to the immediately succeeding fiscal year and does not compound beyond that single-year carryforward period.
The Tooling Capex covenant operates in parallel with, but is distinct from, the use-of-proceeds restrictions applicable to the Facility. The use-of-proceeds provisions restrict borrowings under the Facility to Tooling Capex and general corporate purposes (subject to the 25% sublimit), while the Tooling Capex covenant limits total Tooling Capex incurred by VMS from all sources of funding (including internally generated cash flow). The interaction between these two provisions is identified as a risk factor in Section XI.E.
D. Minimum Liquidity
VMS is required to maintain minimum liquidity at all times:
Minimum Liquidity: Unrestricted cash and cash equivalents plus available (undrawn and uncommitted) revolving commitments under the Facility ≥ $12,500,000 at all times.
Unlike the leverage and interest coverage covenants, which are tested quarterly, the minimum liquidity covenant is a maintenance covenant that must be satisfied at all times. This imposes a continuous compliance obligation on VMS and requires ongoing monitoring of cash balances and facility availability. The deal team should confirm that the Credit Agreement includes appropriate cure mechanics or notice provisions in the event that liquidity temporarily drops below the threshold due to intra-day or intra-period fluctuations.
E. Cross-Reference to Existing Term Loan Covenants
The Existing Credit Agreement contains the following financial covenants:
• Maximum Total Net Leverage Ratio: 5.00x
• Minimum Interest Coverage Ratio: 2.00x
Both of these covenants are less restrictive than the corresponding covenants under the Facility. As a result, the Facility covenants will be the binding constraints on VMS's financial performance, and compliance with the Facility covenants will ensure compliance with the Existing Credit Agreement covenants (but not vice versa).
The Intercreditor Agreement between Pinnacle (as agent under the Facility) and Pinnacle (as agent under the Existing Credit Agreement) addresses the interaction between the covenant regimes, including cross-default mechanics. The deal team should confirm that a breach of a financial covenant under the Facility does not automatically trigger a cross-default under the Existing Credit Agreement (or vice versa) unless and until the breach has ripened into an Event of Default with acceleration. This is a standard intercreditor protection, but the documentation must be reviewed carefully given Pinnacle's dual-agent role.
VII. SECURITY PACKAGE AND GUARANTEES
A. Collateral. The Facility is secured by a first-priority perfected security interest (shared on a pari passu basis with the Existing Credit Agreement pursuant to the Intercreditor Agreement) in substantially all assets of VMS and each Subsidiary Guarantor. The collateral package includes, without limitation, the following categories of assets:
(a) All tooling, dies, molds, fixtures, machinery, and equipment, including all manufacturing equipment used in VMS's automotive tooling and precision machining operations;
(b) All accounts receivable, including all rights to payment arising from the sale of goods or the rendering of services to VMS's OEM customers;
(c) All inventory, including raw materials, work-in-progress, and finished goods;
(d) All intellectual property, including patents, trademarks, service marks, trade names, copyrights, and trade secrets, together with all licenses, royalties, and other rights related thereto;
(e) All deposit accounts and securities accounts maintained by VMS and the Subsidiary Guarantors, subject to deposit account control agreements ("DACAs") with the applicable depository institutions (including the principal operating account at Lakeshore Trust Company, account ending in 7841);
(f) 100% of the equity interests in each domestic subsidiary of VMS (i.e., VMS Tooling Solutions, LLC; VMS Precision Machining, Inc.; and VMS Die Cast Technologies, LLC); and
(g) 65% of the voting equity interests in VMS de México, S. de R.L. de C.V. (the foreign subsidiary pledge limitation described in Section III above).
Perfection of the security interests will be accomplished through the following filings and agreements:
• UCC-1 financing statements filed with the Delaware Secretary of State (as VMS's jurisdiction of organization) and the Michigan Department of State (as applicable);
• IP security agreements filed with the United States Patent and Trademark Office ("USPTO");
• Deposit account control agreements executed with Lakeshore Trust Company and any other depository institutions at which VMS or any Subsidiary Guarantor maintains accounts;
• Pledge agreements and stock certificates (or equivalent) with respect to the equity interests in the domestic subsidiaries and VMS de México; and
• Such other filings, agreements, and instruments as may be required under applicable law to perfect the security interests granted under the Guarantee and Collateral Agreement.
B. Guarantees. Subsidiary Guarantors:
Each of VMS's three existing domestic subsidiaries — VMS Tooling Solutions, LLC; VMS Precision Machining, Inc.; and VMS Die Cast Technologies, LLC — will execute the Guarantee and Collateral Agreement and will unconditionally guarantee all obligations of VMS under the Credit Agreement and the other Loan Documents. The subsidiary guarantee is a full, unconditional, and irrevocable guarantee of payment (not merely of collection). In addition, any future domestic subsidiary formed or acquired by VMS during the term of the Facility will be required to become a Subsidiary Guarantor pursuant to customary after-acquired subsidiary joinder provisions within 30 days of formation or acquisition (or such longer period as the Administrative Agent may agree).
Sponsor Limited Guarantee:
Ridgecrest Automotive Holdings, LLC ("RAH") will execute a limited guarantee of VMS's obligations under the Facility, subject to the following parameters:
• Maximum guaranteed amount: $5,000,000
• Scope: The RAH limited guarantee is limited to (i) breaches of Closing Date representations and warranties made by VMS in the Credit Agreement, and (ii) certain fraud and bad-acts carve-outs (including intentional misrepresentation, willful misconduct, and criminal acts by VMS or its officers and directors).
• The RAH limited guarantee is a closing comfort mechanism and is not intended to serve as a source of ongoing credit support for the Facility. It provides the lenders with a limited recourse to the sponsor in the event of a material misrepresentation at closing or fraud.
The scope of the RAH limited guarantee is expected to be a point of negotiation with HSC, as discussed in Section X.D. C&H's position is to maintain the narrow scope as agreed in the commitment letter. The deal team should resist any attempt by HSC to expand the guarantee triggers beyond the agreed parameters.
C. Intercreditor Arrangement
The Facility and the Existing Credit Agreement share a common collateral pool, requiring an intercreditor agreement to govern the relative rights and priorities of the lenders under each facility. The key features of the intercreditor arrangement are as follows:
• Lien Priority: The security interests under the Facility and the Existing Credit Agreement are shared on an equal-priority (pari passu) basis. Neither facility has priority over the other with respect to the shared collateral.
• Pro Rata Sharing: Proceeds of collateral realized upon enforcement will be shared on a pro rata basis among the lenders under both facilities, based on the respective outstanding obligations under each facility.
• Exercise of Remedies: The intercreditor agreement will include provisions governing the exercise of remedies, including standstill periods and coordination requirements to prevent one group of lenders from unilaterally enforcing against the shared collateral to the detriment of the other group.
• Enforcement Rights: The administrative agent holding the largest aggregate claim (by outstanding principal amount) will have the primary right to direct the exercise of remedies during any enforcement period, subject to the pro rata sharing waterfall.
• Agent Capacities: As noted above, Pinnacle National Bank, N.A. serves as Administrative Agent under both the Facility and the Existing Credit Agreement. While this simplifies inter-agent coordination (as there is effectively a single agent acting in two capacities), the intercreditor agreement must clearly delineate Pinnacle's separate representative capacities and ensure that actions taken by Pinnacle in one capacity do not create conflicts with its obligations in the other capacity. The documentation must include appropriate conflict-of-interest provisions and acknowledgments. This issue is flagged as a risk factor in Section XI.D.
VIII. CONDITIONS PRECEDENT TO CLOSING
The obligation of the Lenders to make the initial extension of credit under the Facility is subject to the satisfaction (or waiver by the Required Lenders) of the following conditions precedent on or prior to the Closing Date:
1. Execution of Credit Agreement and Loan Documents. Execution and delivery of the Credit Agreement and all related Loan Documents (including the Guarantee and Collateral Agreement, the Intercreditor Agreement, and the Sponsor Limited Guarantee) by all parties thereto.
2. Legal Opinion. Delivery of the C&H legal opinion, addressing (i) New York law enforceability of the Credit Agreement and the other Loan Documents, (ii) Delaware corporate authorization of VMS and VMS Precision Machining, Inc., and (iii) UCC perfection of security interests in the collateral.
3. UCC Filings. Filing of UCC-1 financing statements with (i) the Delaware Secretary of State (as VMS's and VMS Precision Machining, Inc.'s jurisdiction of organization) and (ii) the Michigan Department of State (as applicable for the Michigan LLC subsidiaries and as the location of VMS's chief executive office).
4. IP Security Filings. Filing of intellectual property security agreements with the United States Patent and Trademark Office.
5. Deposit Account Control Agreements. Execution and delivery of deposit account control agreements with Lakeshore Trust Company with respect to VMS's principal operating deposit account (account ending in 7841) and all other deposit accounts maintained by VMS and the Subsidiary Guarantors.
6. Intercreditor Agreement. Execution and delivery of the Intercreditor Agreement by Pinnacle (in its dual capacity as agent under both the Facility and the Existing Credit Agreement) and acknowledged by VMS and the Subsidiary Guarantors.
7. Evidence of Insurance. Delivery of evidence of insurance from Northland Mutual Insurance Co. (policy number NMI-2025-041876), confirming coverage of at least $50,000,000 per occurrence, with Pinnacle (as Administrative Agent and Collateral Agent) named as loss payee and additional insured, in form and substance reasonably satisfactory to the Administrative Agent.
8. Officer's Certificate. Delivery of an officer's closing certificate executed by Linda S. Nakamura, Chief Financial Officer of VMS, certifying, among other things, the accuracy of VMS's representations and warranties, the absence of any Event of Default, and pro forma compliance with all financial covenants after giving effect to the initial borrowing under the Facility.
9. Secretary's Certificate. Delivery of a secretary's certificate from VMS and each Subsidiary Guarantor, attaching certified copies of (i) the certificate of incorporation or formation (as applicable), (ii) bylaws or operating agreement (as applicable), (iii) board resolutions (or equivalent) authorizing the execution and delivery of the Loan Documents, and (iv) incumbency certificates for each authorized signatory.
10. Good Standing Certificates. Delivery of certificates of good standing (or equivalent) from (i) the Delaware Secretary of State (for VMS, VMS Precision Machining, Inc., and RAH) and (ii) the Michigan Department of Licensing and Regulatory Affairs (for VMS (as a foreign corporation qualified in Michigan), VMS Tooling Solutions, LLC, and VMS Die Cast Technologies, LLC).
11. Payment of Fees and Expenses. Payment of all fees and expenses due at closing, including:
• Upfront Fee: $450,000 (allocated pro rata among the Lenders)
• Arrangement Fee: $125,000 (payable to Pinnacle)
• Administrative Agent Fee: $75,000 (payable to Pinnacle)
• Legal Fees: As incurred by C&H and HSC, subject to C&H's fee cap of $185,000
12. No Material Adverse Effect. Certification that no Material Adverse Effect has occurred with respect to VMS or any of its subsidiaries since December 31, 2024 (the date of the most recent audited financial statements).
13. Pro Forma Covenant Compliance. Demonstration of pro forma compliance with all financial covenants, including:
• Maximum Total Net Leverage Ratio: 4.07x (pro forma) vs. 4.75x (threshold)
• Minimum Interest Coverage Ratio: in compliance
• Minimum Liquidity: ≥ $12,500,000
14. Solvency Certificate. Delivery of a solvency certificate from the Chief Financial Officer of VMS, certifying the solvency of VMS and its subsidiaries on a consolidated basis after giving effect to the transactions contemplated by the Credit Agreement.
15. Other Customary Conditions. Satisfaction of such other customary conditions precedent as may be specified in the Credit Agreement, including delivery of customary know-your-customer ("KYC") and anti-money laundering ("AML") documentation, Beneficial Ownership Certification, and OFAC/sanctions clearance.
IX. KEY TIMELINE
The following timeline summarizes the key dates for the transaction, from initial term sheet to post-closing compliance milestones:
The period between the circulation of the first draft Credit Agreement (May 27, 2025) and the targeted closing date (June 30, 2025) provides approximately 34 days for negotiation, documentation, and closing preparation. This is a compressed but achievable timeline for a three-lender club deal of this nature, provided that (i) HSC provides its redline within a reasonable timeframe (target: 7-10 business days), (ii) no more than two rounds of substantive mark-up are required, and (iii) VMS provides prompt turnaround on corporate deliverables. The deal team should monitor the timeline closely and escalate any delays to Claudia Merritt promptly.
X. KEY NEGOTIATION POINTS WITH HARGROVE, STEIN & CALLOWAY LLP
The following section identifies the key negotiation points that C&H anticipates arising during the mark-up process with HSC. For each point, we summarize the expected lender position, C&H's recommended position on behalf of VMS, and the strategic significance of the issue.
A. EBITDA Add-Back Caps
HSC, on behalf of Pinnacle and the lender syndicate, is expected to push for caps on EBITDA add-backs in the definition of "Consolidated EBITDA." The categories of add-backs most likely to be contested include:
(i) Restructuring charges and severance costs;
(ii) Non-recurring, unusual, or extraordinary items;
(iii) Pro forma cost savings and synergies projected to be realized from acquisitions, dispositions, or operational restructurings; and
(iv) Transaction fees and expenses.
Expected HSC Position: HSC is likely to propose (a) an aggregate cap on total add-backs as a percentage of unadjusted EBITDA (common range: 15-25%), (b) limitations on the duration during which projected synergies and cost savings may be added back (typically 12-24 months), and (c) requirements that projected cost savings be supported by a reasonably detailed action plan and certified by an authorized officer.
C&H Position: C&H should advocate for a reasonable add-back framework that is consistent with the Consolidated EBITDA definition in the Existing Credit Agreement. Because VMS has operated under the Existing Credit Agreement's EBITDA definition since 2022, any material deviation in the Facility Credit Agreement could create inconsistency and confusion in the compliance reporting process. Our recommended approach is:
• Aggregate add-back cap: 25% of unadjusted EBITDA, consistent with market practice for sponsor-backed middle-market industrial credits;
• Projected cost savings: permitted for up to 24 months following the relevant action or event, provided that such savings are reasonably expected to be realized and are supported by a good-faith estimate from VMS management; and
• Add-back categories should mirror those in the Existing Credit Agreement to the maximum extent possible.
Strategic Significance: The EBITDA definition directly impacts the calculation of the leverage ratio and the interest coverage ratio under the financial covenants. A more restrictive EBITDA definition reduces reported EBITDA, which in turn increases the calculated leverage ratio and decreases the calculated interest coverage ratio, thereby reducing covenant headroom. Given the tight pro forma leverage at full draw (4.07x against initial 4.75x, stepping down to 4.00x), the EBITDA definition is one of the most commercially significant provisions in the Credit Agreement.
B. Material Customer Reporting Triggers