Margaret,
Thank you for the productive discussion yesterday on the credit agreement. As you know, we circulated first drafts of the security, guarantee, and pledge documents last evening (March 10), and I wanted to follow up with a comprehensive summary of the open items on the collateral package scope, excluded assets, and perfection mechanics so that we can get aligned before the next round of mark-ups. I've organized this by topic for ease of reference.
**A. Scope of Collateral — Overview**
The collateral package contemplates a first-priority security interest in substantially all assets of the Borrower (Nexford Industrial Holdings Inc.) and each Guarantor. The Guarantors consist of:
- Granite Peak NIH Holdings, LLC (the "Holdings Guarantor"); and - The following 11 Subsidiary Guarantors: Nexford Precision Components, Inc.; Nexford Engineered Systems, LLC; Nexford Coatings & Surface Technologies, Inc.; Nexford Manufacturing Services, LLC; Nexford Properties, LLC; Nexford International Holdings, Inc. (CFC holdco — limited pledge, as discussed below); Clearfield Tool & Die, Inc.; Summit Industrial Fabrication Co.; Ridgepoint Specialty Coatings, LLC; and Lakeshore Precision Engineering, Inc.
As agreed, Nexford Canada Holdings ULC and Nexford Canada Manufacturing, Inc. are excluded as foreign subsidiaries — no guarantee, no pledge of their assets.
Granite Peak NIH Holdings, LLC will pledge 100% of its equity interests in Nexford Industrial Holdings Inc.
**B. Equity Pledge Details**
The equity pledge structure is as follows:
- The Borrower pledges 100% of equity interests in each of its direct domestic subsidiaries. - Each Subsidiary Guarantor pledges equity in its respective lower-tier domestic subsidiaries. - CFC Holdco Limitation: Nexford International Holdings, Inc. pledges only 65% of the voting equity and 100% of the non-voting equity of Nexford Canada Holdings ULC — the standard limitation for first-tier foreign subsidiary interests to avoid adverse U.S. tax consequences under Sections 956/1248 of the Code.
The Holdings Pledge Agreement, Borrower Pledge Agreement, Subsidiary Pledge Agreements, and CFC Holdco Limited Pledge Agreement were all included in the March 10 circulation.
**C. Personal Property Collateral — Categories**
The Security Agreement covers the following collateral categories: accounts receivable; inventory; equipment; intellectual property (covered separately under the IP Security Agreement); deposit accounts and securities accounts; general intangibles; material intercompany notes (including the pledged intercompany note from Nexford to its subsidiaries, discussed further below); and proceeds of all of the foregoing.
The IP Security Agreement covers patents, trademarks, copyrights, and related IP rights of the Borrower and each Guarantor.
**D. Excluded Assets**
Consistent with the term sheet and market practice for Term Loan B transactions, the following excluded asset categories are reflected in the drafts:
1. Motor vehicles with a book value below $250,000 per vehicle; 2. Letter of credit rights under $1,000,000; 3. Commercial tort claims under $2,500,000; and 4. Any assets where the cost of obtaining or perfecting the security interest would be excessive relative to the benefit to the Secured Parties (cost-benefit exclusion).
We would appreciate confirmation from you and Crescent Harbor that these thresholds are acceptable.
**E. Real Property Collateral**
The following four owned real properties have fair market values in excess of $10,000,000 and are subject to mortgage:
1. **1400 Industrial Parkway, Schaumburg, IL 60173** — Corporate headquarters and primary manufacturing facility; appraised value $85,000,000; to be recorded in Cook County, Illinois. 2. **2750 Commerce Drive, Rockford, IL 61101** — Precision Components plant; appraised value $42,000,000; to be recorded in Winnebago County, Illinois. 3. **600 Manufacturers Row, Greenville, SC 29607** — Engineered Systems plant; appraised value $38,000,000; to be recorded in Greenville County, South Carolina. 4. **9100 Westpark Industrial Boulevard, Houston, TX 77063** — Coatings facility; appraised value $28,000,000; to be recorded in Harris County, Texas.
Total appraised real property collateral is $193,000,000. All appraisals were prepared by Greystone Valuation Services, Inc. (Daniel Pritchard, MAI).
The mortgages are post-closing deliverables with a deadline of **April 30, 2025**. Title insurance commitments from Landmark Title Assurance Company are being obtained and will be forwarded for review as they come in. We are also coordinating with Hargrove & Whitmore LLP (Robert Kimura) as Illinois local counsel on the Schaumburg and Rockford mortgages.
**F. UCC Filing Strategy**
We have prepared the following UCC-1 financing statement filing plan, with each filing to be made in the jurisdiction of organization of the applicable Debtor per UCC Article 9:
- **Delaware Secretary of State (7 filings):** Nexford Industrial Holdings Inc. (DE File No. 5765432); Granite Peak NIH Holdings, LLC (DE File No. 7234891); Nexford Precision Components, Inc.; Nexford Engineered Systems, LLC; Nexford Coatings & Surface Technologies, Inc.; Nexford Properties, LLC; and Nexford International Holdings, Inc. - **Illinois Secretary of State (1 filing):** Nexford Manufacturing Services, LLC (Illinois LLC). - **Pennsylvania Department of State (1 filing):** Clearfield Tool & Die, Inc. (Pennsylvania corporation). - **South Carolina Secretary of State (1 filing):** Summit Industrial Fabrication Co. (South Carolina corporation). - **Texas Secretary of State (1 filing):** Ridgepoint Specialty Coatings, LLC (Texas LLC). - **Michigan Department of State (1 filing):** Lakeshore Precision Engineering, Inc. (Michigan corporation).
That is a total of **12 UCC-1 filings**, each naming Crescent Harbor Bank, N.A. as Secured Party in its capacity as Collateral Agent. All filings will be made on the closing date, March 28, 2025.
**G. UCC-3 Termination Statements — Atlas Meridian Liens**
Existing UCC-1 filings in favor of Atlas Meridian Bank, N.A. must be terminated at or promptly following closing. Our UCC search results (completed February 18, 2025) identified all existing Atlas Meridian filings across Delaware, Illinois, and Pennsylvania. We are preparing UCC-3 termination statements for filing on or about March 31, 2025 (post-closing).
We would ask that W&G confirm Crescent Harbor is comfortable with post-closing filing of the UCC-3 terminations, on the understanding that the payoff letter and lien release authorization from Atlas Meridian will be in hand at closing.
**H. Control Agreements — Deposit Accounts and Securities Accounts**
Deposit Account Control Agreements (DACAs) are being prepared for:
- Accounts at Crescent Harbor Bank, N.A. (as depository bank and Collateral Agent — we have drafted this as a simplified tri-party arrangement); and - Nexford's operating accounts at Redstone National Bank (account numbers ending in -4471, -4472, and -6633).
Securities Account Control Agreements (SACAs) are also in process. Forms for both DACAs and SACAs were included in the March 10 package.
One question: does Crescent Harbor have a preferred form of DACA for its own deposit accounts, or is the form we circulated acceptable?
**I. IP Security Agreement — Perfection Filings**
The intellectual Property Security Agreement was circulated on March 10. We will make recordation filings at the USPTO (for patents and trademarks) and the U.S. Copyright Office (for copyrights) to perfect the security interest in registered IP. Our IP lien search results (completed February 19, 2025) confirm existing Atlas Meridian recordings that will need to be released in connection with the refinancing — we will coordinate with Atlas Meridian's counsel on the release filings.
**J. Intercompany Note**
The intercompany promissory note from Nexford to its subsidiaries will be endorsed and physically delivered (or deemed delivered) to Crescent Harbor Bank, N.A. as Collateral Agent at closing. Please confirm the form of endorsement that Crescent Harbor prefers (i.e., blank endorsement or special endorsement to the Collateral Agent).
**K. Intercreditor Considerations**
We understand that your First Lien/Unsecured Intercreditor Agreement draft will be circulated tomorrow (March 12). That agreement will need to address the relationship between the first lien security interests and the unsecured noteholders under the $250,000,000 7.250% Senior Unsecured Notes due 2028 (Pinnacle Trust Company as trustee). We will review that draft promptly upon receipt and provide a marked version.
**L. Open Items — Summary of Requests**
To keep things moving, our specific asks are:
1. Confirm that the excluded asset thresholds (Section D above) are acceptable to Crescent Harbor. 2. Confirm comfort with the post-closing timeline for mortgages (April 30, 2025 deadline) and UCC-3 termination filings (on or about March 31, 2025). 3. Provide any comments on the Security Agreement, Pledge Agreements, and IP Security Agreement first drafts at your earliest convenience. 4. Confirm Crescent Harbor's preferred DACA form for its own accounts. 5. Confirm the preferred form of endorsement for the intercompany note.
* * *
Margaret, given the tight timeline to our March 28 target closing, I think it would be helpful to get a call on the calendar later this week to walk through these items and align before we get into full-scale mark-ups. I'm also happy to set up a working-level call with Sophie Tremblay and Jonathan Ferris to run through the detailed schedules and filing logistics. Please let us know what works on your end.
Thank you, and please don't hesitate to reach out with any questions in the interim.
Best regards,
**Marcus Leung** Associate Calderwood & Harkness LLP 425 Lexington Avenue New York, NY 10017 T: (212) 558-4000 D: (212) 558-4187 M: (646) 309-2244 mleung@calderwoodharkness.com
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