2/19/98
Wedgestone Automotive Corporation
Fey Automotive Products, Inc.
St. James Automotive Corporation
Sigma Plating Co., Inc.
5200 N. Irwindale Avenue, Suite 168
Irwindale, California 91706
Attention: Eric Lee, Senior Vice President, Chief Financial Officer
Dear Eric:
The CIT Group/Credit Finance, Inc. ("CIT") is pleased to advise you that we are
willing to amend our existing credit facility with Wedgestone Automotive
Corporation, Fey Automotive Products, Inc., St. James Automotive Corporation and
Sigma Plating Co., Inc. (collectively "Borrower") to provide secured financing
to enable Borrower to facilitate the redemption by Wedgestone Financial of a
substantial portion of its issued, and outstanding stock and to provide for
working capital to Borrower. The modifications to our existing Loan and Security
Agreement with the Borrower ("Agreement") are set forth below. Except for the
proposed modifications, all other terms and conditions in the Agreement remain
unchanged and in full force and effect.
1. CREDIT LINE: $13,000,000.00 with all advances subject to advance
formulas.
2. ADDITIONAL GUARANTOR: Wedgestone Financial (secured)
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A. Provided no Event of Default exists at that time under our
Agreement, CIT agrees to cancel the Wedgestone Financial guaranty
and reconvey the collateral securing same upon the repayment of the
Term Loan described in Paragraph "3C" hereinbelow.
B. Wedgestone Financial guaranty is to be secured by mortgages as
described in Paragraph "5A" hereinbelow.
3. ADVANCE FORMULAS:
A. Accounts - 85% of acceptable and eligible accounts receivable not
outstanding for more than 90 days from invoice date and so long as
the accounts dilution does not exceed 6.0%. If the dilution exceeds
6.0%, the advance percentage shall be reduced 1% for each percent
of dilution in excess of 6.0%.
B. Reload of Existing Equipment Term Loans - the lesser of
$1,800,000.00 or 80% of the orderly liquidation value of eligible
equipment. These advances shall be amortized over 60 months and
consistent with their current amortization schedule.
C. Term Loan - $1,500,000.00, to be amortized over 18 months.
i) In addition to any other conditions of the Agreement, this Term
Loan shall be all due and payable upon Borrower's breach of any of
the following conditions:
a) Before Tax Income of less than $425,000 per calendar quarter;
b) Adjusted cash flow of less than $425,000 per calendar
quarter with Cash Flow defined as net income plus depreciation,
amortization and deferred income taxes, less debt service and
capital expenditures.
c) Net worth of less than $5,000,000.00 and tangible net worth
of less than $1,250,000.00 as certified by Borrower's CPA.
"Tangible net worth" will be defined as shareholders' equity less
intercompany accounts less goodwill plus intercompany accounts
payable
4. FEES: The fees listed below are in addition to interest and fees already
set forth in the Agreement and may be charged directly into any loan
account.
A. Closing Fee - 1.0% of the Maximum Credit for providing the amended
credit
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facility outlined herein, earned and payable in full at closing of
this proposed financing transaction.
5. ADDITIONAL COLLATERAL:
A. First Mortgages on real property owned by Wedgestone Financia
located in Peabody, MA (condominiums) and in Bristol, CT (53
undeveloped acres).
B. Assignment of any and all of Borrower's notes receivable from
Wedgestone Financial.
6. ADDITIONAL CONDITIONS:
A. Unused availability is to be no less than $500,000.00 at closing,
after the application of the loan proceeds as proposed, and
provided that Borrower has no accounts payable more than 60 days
past due and no past due taxes.
B. Orderly Liquidation and Auction Value appraisals of Borrower's
machinery and equipment by independent appraisers engaged by and
acceptable to CIT and performed at your expense. Results of
appraisal must be acceptable to CIT.
C. If CIT deems it necessary, Fair Market and Quick Sale Value
appraisals and a Phase I environmental study (and additional
studies if appropriate) of Borrower's La Puente, CA real property,
by independent appraiser and environmental professionals engaged by
and acceptable to CIT, performed at your expense. Results of the
appraisal and environmental study must be acceptable to CIT.
D. Until the Term Loan set forth in Paragraph "3C" is repaid, Borrower
shall make no payments to non-borrower affiliates except for
management fees and note payables, provided said amounts do not
exceed $510,000.00 in the aggregate during any calendar year and no
Event of Default exists under the Agreement.
E. Borrower has provided to CIT, information with respect to the
Borrower and the transactions contemplated hereby, including all
financial information and projections ("Projections"). Borrower
hereby represents and covenants that (a) all information other than
the Projections (the "Information") that has been or will be made
available by Borrower or any of Borrower's representatives
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(in each case, with respect to Information furnished to CIT prior
to the date of closing of this transaction, as supplemented from
time to time prior to such date) is or will be, to the best of
Borrower's knowledge, complete and correct in all material respects
and does not or will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make
the statements contained therein not materially misleading in light
of the circumstances under which such statements are made and (b)
the Projections that have been or will be made available to CIT by
Borrower have been or will be prepared in good faith based upon
assumptions you believe to be reasonable. Borrower understands that
in issuing this commitment CIT has relied upon the Information and
Projections without independent verification thereof.
F. In addition to other conditions set forth herein, CIT's commitment
is subject to (a) our completion of and satisfaction in all
respects with our continuing legal and environmental (if CIT deems
it necessary) due diligence of Borrower, guarantors and all
Collateral, (b) there not occurring or becoming known to CIT any
change, occurrence or development that would reasonably be expected
to have a material adverse effect on the business, prospects,
assets, liabilities, condition (financial or otherwise) or results
of operations of Borrower from the date of the most recent
financial statements submitted to CIT or the field examinations to
be conducted by CIT to the date of closing, (c) CIT not becoming
aware after the date hereof of any material negative information or
other matter affecting Borrower and its affiliates, taken as a
whole, or the transactions contemplated hereby which is
inconsistent in a material and adverse manner with any such
information or other matter disclosed to us prior to the date
hereof, (d) there not having occurred and continuing an Event of
Default under the Agreement, (e) Legal documentation of this
amendment to the credit facility is to be prepared by our counsel
and all negotiation, execution and delivery of the definitive
documentation must be satisfactory to CIT and its counsel,
including but not limited to: Amendments to the Loan and Security
Agreement; Mortgages, and Guarantees; adequate insurance
appropriately endorsed, title insurance and such other
documentation as our counsel may require.
G. Borrower agrees (a) to indemnify and hold harmless CIT and its
affiliates and their representatives, officers, directors,
employees, advisors, and agents (each, an "indemnified person")
from and against any and all losses, claims, damages and
liabilities to which any such indemnified person may become subject
arising out of or in connection with this commitment letter, this
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proposed financing transaction, the use of the loan proceeds
thereof, or any related transaction or any claim, litigation,
investigation or proceeding relating to any of the foregoing,
regardless of whether any indemnified person is a party thereto,
and to reimburse each indemnified person upon demand for any legal
or other expenses incurred in connection with investigating or
defending any of the foregoing, provided that the foregoing
indemnity will not, as to any indemnified person, apply to losses,
claims, damages, liabilities or related expenses to the extent they
are determined by a final judgment of a court of competent
jurisdiction to arise from the willful misconduct or gross
negligence of such indemnified person.
7. FINANCIAL INFORMATION:
You will continue to provide us and our field examiners with all
financial information, projections, budgets, business plans, cash flows
and availability projections acceptable to us with respect to Borrower,
that will show the viability of the Borrower and that the loan facility
will be sufficient for the Borrower's needs. You will provide any other
information we may reasonably request and will make all books and
records requested available to our field examiners and credit analysts.
8. EXPENSES:
All costs and expenses incurred in connection with your account,
including but not limited to costs and expenses incurred in connection
with this transaction (before and after closing) including, without
limitation; legal and closing expenses, including fees and disbursements
of our in-house and outside counsel, filing and search fees, title
insurance, appraisals, fees for any environmental surveys, field
examination expenses and prevailing per diem field examination charges
shall be reimbursed by you in accordance with our Agreement whether or
not the loan transaction contemplated herein is actually funded.
This letter shall become effective only upon our receipt of this letter,
executed by you, by February 28, 1998. Provided Borrower is in compliance with
the Agreement and this letter, it is anticipated that this transaction will be
funded on or about April 15, 1998. In any event, after execution, this letter
and CIT's obligations herein shall terminate on May 30, 1998 if the proposed
financing transaction has not closed, except with respect to Borrower's
obligations to pay the Expenses discussed hereinabove, which shall survive in
all events.
This letter is solely for your benefit and is not to be relied upon by any third
parties. CIT understands that Borrower will be required to include a copy of
this letter in the SEC filings
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in connection with the stock repurchase transaction contemplated by
Wedgestone Financial.
This letter supercedes and replaces our previous letter of January 14, 1998.
We thank you for your interest in CIT, and allowing us to offer you this secured
line of credit. We look forward to continuing to work with you and your
associates on this transaction.
Very truly yours,
THE CIT GROUP/CREDIT FINANCE, INC.
S/S
- ---------------
Terrance Shope
Vice President
AGREED TO:
Wedgestone Automotive Corporation Fey Automotive Products, Inc.
By: s/s David L. Sharp By s/s Eric H. Lee
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Title: President Title: Treasurer
St. James Automotive Corporation Sigma Plating Co., Inc.
By s/s Eric H. Lee By s/s Eric H. Lee
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Title: Treasurer Title: Treasurer
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