1005-00001 · Nexford Industrial Holdings · Diligence

memo-environmental-due-diligence-summary.docx DOCUMENT Finance & Banking

51 / 157 ← → ✕

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP MEMORANDUM

February 22, 2025

TO: Claudia Merritt, Responsible Partner, Banking & Finance, Calderwood & Harkness LLP

FROM: Marcus Leung, Lead Associate, Banking & Finance, Calderwood & Harkness LLP Sophie Tremblay, Working Associate, Banking & Finance, Calderwood & Harkness LLP

RE: Environmental Due Diligence Summary — Review of Phase I Environmental Site Assessment Reports for Mortgaged Properties; Nexford Industrial Holdings Inc. $1,400,000,000 Senior Secured Term Loan B Refinancing and Dividend Recapitalization

Matter No.: 1005-00001

Client/Matter Code: IBL-NIH-2025-031

This memorandum is a privileged and confidential attorney-client communication and constitutes attorney work product prepared in anticipation of litigation and in connection with the provision of legal advice. This memorandum is not intended for distribution to, or reliance by, any third party without the express prior written consent of Calderwood & Harkness LLP. Distribution of this memorandum to any person other than the named addressee may result in a waiver of applicable privileges.

Right-click to update Table of Contents

I. Executive Summary

This memorandum summarizes Calderwood & Harkness LLP's review of four Phase I Environmental Site Assessment ("Phase I ESA") reports prepared by Clearwater Environmental Sciences, Inc. ("Clearwater Environmental") in connection with the proposed $1,400,000,000 senior secured Term Loan B credit facility (the "Term Loan B" or the "Facility") being arranged by Crescent Harbor Bank, N.A. ("Crescent Harbor") as lead left arranger and administrative agent. The purpose of this memorandum is to provide Claudia Merritt, as responsible partner on the transaction, with a comprehensive summary of the environmental due diligence findings for the four mortgaged properties that will form part of the collateral package securing the Facility, together with our assessment of the implications of those findings for the credit agreement documentation, collateral mechanics, title insurance, and ongoing compliance.

Nexford Industrial Holdings Inc. ("Nexford" or the "Borrower"), a Delaware corporation and portfolio company of Granite Peak Capital Partners, LP ("Granite Peak"), is entering into the Term Loan B for two principal purposes: (a) to refinance in full the existing $975,000,000 senior secured term loan facility held by Atlas Meridian Bank, N.A. (the "Existing Credit Facility"), together with associated fees, expenses, and prepayment premiums; and (b) to fund an approximately $335,000,000 dividend recapitalization to Granite Peak NIH Holdings, LLC, the direct parent of the Borrower and a wholly owned subsidiary of Granite Peak Capital Partners Fund IV, LP. The balance of the Term Loan B proceeds will be applied to transaction costs and fees, with any remaining proceeds to be retained as cash on the balance sheet for general corporate purposes.

The Phase I ESAs were prepared in connection with the collateral package under the Credit Agreement, which requires the Borrower and the Subsidiary Guarantors to deliver mortgages (together with related ancillary documents, including title insurance policies, surveys, and environmental assessments) with respect to all owned real properties with a fair market value in excess of $10,000,000 (the "Mortgaged Properties"). Four such properties were identified through the collateral diligence process, and Clearwater Environmental was retained by Nexford to prepare Phase I ESAs for each of these properties. The four Mortgaged Properties have an aggregate appraised value of $193,000,000, as determined by Greystone Valuation Services, Inc. (Daniel Pritchard, MAI, Lead Appraiser) in appraisals delivered to Crescent Harbor in February 2025.

Clearwater Environmental Sciences, Inc. is an Illinois corporation headquartered at 8500 West Bryn Mawr Avenue, Chicago, IL 60631. The firm is a nationally recognized environmental consulting firm with substantial experience in Phase I and Phase II environmental site assessments for commercial lending, real estate, and corporate transactions. Each of the Phase I ESA reports was directed by Dr. Nathan Foley, Project Manager, who holds professional certifications in environmental science and has over twenty years of experience conducting environmental site assessments in accordance with ASTM standards. Each report was prepared in accordance with ASTM Standard Practice E1527-21, titled "Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process" (the "ASTM Standard"), and also complies with the U.S. Environmental Protection Agency's All Appropriate Inquiries rule codified at 40 C.F.R. Part 312.

Summary of Conclusions. Based on our review of the four Phase I ESA reports, the following key conclusions are noted:

• No Recognized Environmental Conditions ("RECs") were identified at any of the four Mortgaged Properties. This is the most significant finding from a lender's perspective, as the absence of RECs indicates that Clearwater Environmental did not identify any conditions involving the presence or likely presence of hazardous substances or petroleum products that would indicate an existing release, past release, or material threat of a release into the environment at any of the four properties.

• One Controlled Recognized Environmental Condition ("CREC") was identified at the Rockford, Illinois property (2750 Commerce Drive), relating to residual soil and groundwater contamination from prior metal plating operations that was remediated under the Illinois EPA Voluntary Site Remediation Program. The Illinois EPA issued a No Further Remediation ("NFR") letter in 2003, subject to an institutional control (environmental land use control) restricting groundwater use at the property. This condition is actively managed through an ongoing groundwater monitoring program.

• One Historical Recognized Environmental Condition ("HREC") was identified at the Schaumburg, Illinois property (1400 Industrial Parkway), relating to a formerly registered 2,000-gallon diesel underground storage tank that was removed in 2001 with documented clean closure from the Illinois EPA.

• Certain de minimis conditions were noted at the Schaumburg and Houston properties, including minor staining consistent with routine industrial operations.

• One Business Environmental Risk ("BER") was identified at the Houston, Texas property (9100 Westpark Industrial Boulevard), relating to an adjacent former oil field service yard that is listed on the Texas Commission on Environmental Quality ("TCEQ") Voluntary Cleanup Program ("VCP") database due to a petroleum release from a former underground storage tank. While current monitoring data indicates that the associated groundwater plume has been contained approximately 150 feet west of the subject property boundary, Clearwater Environmental has flagged this as a condition warranting ongoing monitoring.

• No Phase II Environmental Site Assessment was recommended by Clearwater Environmental for any of the four properties, although periodic boundary monitoring at the Houston property's west perimeter was recommended in light of the adjacent VCP site.

Relevance to the Credit Agreement and Collateral Package. The Credit Agreement will contain customary representations and warranties regarding environmental compliance and the absence of material environmental liabilities, as well as ongoing environmental covenants. The findings summarized herein inform the preparation of the environmental matters disclosure schedule to be attached to the Credit Agreement. The Rockford CREC and the Houston adjacent site BER should be disclosed in that schedule. Additionally, the institutional control recorded against the Rockford property must be addressed as a permitted encumbrance in the Winnebago County mortgage and disclosed in the title commitment to be issued by Landmark Title Assurance Company. The mortgages on all four properties are post-closing deliverables due by April 30, 2025, and the environmental due diligence findings summarized herein will support the title insurance and mortgage recording process for each jurisdiction.

II. Scope of Review and Methodology

A. Documents Reviewed

Calderwood & Harkness reviewed the final Phase I ESA reports prepared by Clearwater Environmental Sciences, Inc. for each of the four Mortgaged Properties. The four reports are dated between February 10, 2025, and February 18, 2025, and were provided to Calderwood & Harkness by Nexford through Priya Mehta, Vice President, Treasury & Corporate Finance, in response to item 7.3 of the Due Diligence Request List issued by Calderwood & Harkness on behalf of the Lender Group on February 4, 2025. The reports were uploaded to the Calderwood & Harkness virtual data room (Room 7, Folder 7.3 — Environmental Assessments) on February 19, 2025, and our review was substantially completed by February 21, 2025. The specific reports reviewed are catalogued in Appendix A to this memorandum.

In addition to the Phase I ESA reports themselves, Calderwood & Harkness reviewed the following ancillary documents as part of the environmental due diligence workstream:

• The appraisal reports prepared by Greystone Valuation Services, Inc. for each of the four Mortgaged Properties, to the extent they contained environmental disclosures or assumptions;

• Preliminary title commitments for the four properties, as available, obtained through Landmark Title Assurance Company;

• Excerpts from Nexford's existing environmental compliance files provided through the data room; and

• The environmental representations, covenants, and disclosure schedules from the Existing Credit Facility with Atlas Meridian Bank, N.A.

B. Phase I ESA Scope and Standards

Each Phase I ESA report prepared by Clearwater Environmental included the following components, consistent with the requirements of ASTM E1527-21 and 40 C.F.R. Part 312:

(a) Records Review. A comprehensive search and review of federal, state, tribal, and local environmental databases, including but not limited to the EPA National Priorities List (NPL/Superfund), RCRA Treatment, Storage, and Disposal Facility (TSDF) list, RCRA generators list, RCRA Corrective Action facilities list, federal and state institutional/engineering control registries, leaking underground storage tank (LUST) databases, state voluntary cleanup program databases, and state brownfields databases. Database searches were conducted by Penrose Solutions ("EDR"), a nationally recognized environmental database search firm, in accordance with the search radii specified in ASTM E1527-21.

(b) Historical Use Review. A review of historical aerial photographs (available from the U.S. Geological Survey, U.S. Department of Agriculture, and state/local archives), Trelwick fire insurance maps (where available), city directories, and other historical records to identify prior uses of the subject properties and surrounding areas that may indicate environmental concerns.

(c) Site Reconnaissance. A visual inspection of each property and its immediate surroundings conducted by qualified Clearwater Environmental personnel. Site reconnaissance activities included observation of property conditions, identification of storage tanks, chemical storage areas, waste management practices, staining, stressed vegetation, and other visual indicators of potential environmental contamination.

(d) Interviews. Interviews with current property owners, occupants, key site managers, local government officials (including fire marshals and building code officials), and environmental professionals familiar with the properties, to obtain information regarding current and historical uses, environmental conditions, and compliance history.

The Phase I ESA reports assess the presence or likely presence of hazardous substances or petroleum products on each property under conditions that indicate an existing release, a past release, or a material threat of a release into structures on the property, into the ground, groundwater, or surface water of the property. The reports classify identified conditions using the following definitions established by ASTM E1527-21:

• Recognized Environmental Condition ("REC"): The presence or likely presence of any hazardous substances or petroleum products in, on, or at a property: (1) due to a release to the environment; (2) under conditions indicative of a release to the environment; or (3) under conditions that pose a material threat of a future release to the environment.

• Controlled Recognized Environmental Condition ("CREC"): A recognized environmental condition resulting from a past release of hazardous substances or petroleum products that has been addressed to the satisfaction of the applicable regulatory authority, with hazardous substances or petroleum products allowed to remain in place subject to the implementation of required controls (e.g., property use restrictions, activity and use limitations, institutional controls, or engineering controls).

• Historical Recognized Environmental Condition ("HREC"): A past release of any hazardous substances or petroleum products that has occurred in connection with the property and has been addressed to the satisfaction of the applicable regulatory authority or meeting unrestricted use criteria established by the regulatory authority, without subjecting the property to any required controls.

• De Minimis Condition: A condition that generally does not present a threat to human health or the environment and that generally would not be the subject of an enforcement action if brought to the attention of appropriate governmental agencies.

• Business Environmental Risk ("BER"): A risk that can have a material environmental or environmentally driven impact on the business associated with the current or planned use of a parcel of commercial real estate, not necessarily limited to those environmental issues addressed by CERCLA and its state equivalents.

C. Limitations of Review

Calderwood & Harkness's review of the Phase I ESA reports is a legal review of the consultant's findings, conclusions, and recommendations. Calderwood & Harkness has not independently verified the environmental data, test results, database search results, or other factual information contained in the Phase I ESA reports. Calderwood & Harkness has not conducted any independent site inspections, soil or groundwater sampling, or other environmental testing. Our analysis relies on the accuracy and completeness of the information presented by Clearwater Environmental in the Phase I ESA reports, as well as the information provided by Nexford and its subsidiaries in the data room.

D. Reliance

Each of the four Phase I ESA reports is addressed to Nexford Industrial Holdings Inc. as the "User" (as that term is defined in ASTM E1527-21). As of the date of this memorandum, the reports do not include reliance language permitting reliance by Crescent Harbor Bank, N.A. (in its capacities as Administrative Agent and Collateral Agent), the Lenders under the Credit Agreement, or any other parties. Reliance letters must be requested from Clearwater Environmental to extend reliance to these additional parties. This is addressed as Action Item No. 1 in Section VII of this memorandum.

III. Summary of Properties Assessed

The following table sets forth key identifying information for each of the four Mortgaged Properties covered by the Phase I ESA reports:

The aggregate appraised value of the four Mortgaged Properties is $193,000,000, as determined by Greystone Valuation Services, Inc. (Daniel Pritchard, MAI, Lead Appraiser).

Ownership and Guarantor Status. Each of the four properties is owned by a direct or indirect subsidiary of the Borrower that will execute a Subsidiary Guaranty and grant a mortgage lien in favor of Crescent Harbor Bank, N.A. as Collateral Agent for the benefit of the Secured Parties. Specifically:

• Nexford Properties, LLC is a Delaware limited liability company and a Subsidiary Guarantor. It holds the Schaumburg headquarters property. Nexford Manufacturing Services, LLC, an Illinois limited liability company and Subsidiary Guarantor, also operates from this address but does not hold title to the real property.

• Nexford Precision Components, Inc. ("NPC") is a Delaware corporation and a Subsidiary Guarantor. It holds the Rockford property.

• Nexford Engineered Systems, LLC ("NES") is a Delaware limited liability company and a Subsidiary Guarantor. It holds the Greenville property.

• Nexford Coatings & Surface Technologies, Inc. ("NCST") is a Delaware corporation and a Subsidiary Guarantor. It holds the Houston property. Ridgepoint Specialty Coatings, LLC is a Texas limited liability company and a Subsidiary Guarantor that was acquired by NCST in 2023 and operates from the same Houston facility. Title to the Houston property is held by NCST; Ridgepoint operates at the facility as a tenant under an intercompany lease arrangement.

Mortgage Recording Jurisdictions. The mortgages on the four properties will be recorded in the following jurisdictions:

• Property 1 (Schaumburg): Cook County, Illinois

• Property 2 (Rockford): Winnebago County, Illinois

• Property 3 (Greenville): Greenville County, South Carolina

• Property 4 (Houston): Harris County, Texas

All mortgages are post-closing deliverables under the Credit Agreement, with a delivery deadline of April 30, 2025. Local counsel has been or will be engaged for each jurisdiction to prepare and record the mortgage instruments and to coordinate with Landmark Title Assurance Company on the issuance of lender's title insurance policies.

IV. Property-by-Property Phase I ESA Review

A. Property 1: 1400 Industrial Parkway, Schaumburg, IL 60173

1. Property Description

Property 1 consists of an approximately 42-acre parcel improved with a multi-building manufacturing and office campus totaling approximately 425,000 square feet. The campus includes the primary manufacturing building (approximately 280,000 square feet), a secondary fabrication and assembly building (approximately 85,000 square feet), corporate office space (approximately 40,000 square feet), and warehouse and shipping/receiving facilities (approximately 20,000 square feet). The property is situated in an established industrial park in the Village of Schaumburg, Cook County, Illinois, with access from Industrial Parkway and adjacent commercial/industrial roadways.

The property is owned by Nexford Properties, LLC, a Delaware limited liability company and Subsidiary Guarantor under the Credit Agreement. Nexford Properties, LLC was formed as a special-purpose real property holding entity to hold the Schaumburg campus. The property serves as Nexford's corporate headquarters and primary manufacturing facility, housing the Borrower's executive management team, corporate finance functions, and the core of the Precision Manufacturing segment's production operations. Nexford Manufacturing Services, LLC, an Illinois limited liability company and Subsidiary Guarantor, also operates from this address but does not hold title to the real property; it conducts certain contract manufacturing activities at the facility under an intercompany services arrangement.

The original manufacturing and office buildings were constructed circa 1992 by a predecessor owner and developer. Significant expansions were completed in 2003 (addition of the secondary fabrication building) and 2015 (expansion of warehouse and shipping facilities, renovation of office space). The property has been continuously used for manufacturing and office purposes since its initial development.

The appraised value of this property is $85,000,000, as determined by Greystone Valuation Services, Inc. (Daniel Pritchard, MAI, Lead Appraiser) in an appraisal dated February 2025. This represents the highest individual property value among the four Mortgaged Properties and approximately 44% of the aggregate appraised collateral value. A mortgage on this property is to be recorded in Cook County, Illinois, as a post-closing deliverable due by April 30, 2025.

2. Current and Historical Use

Current Use. The property is currently used for precision machining, metal fabrication, light assembly, warehousing, and administrative offices. Manufacturing operations involve the use of CNC machining centers, lathes, milling machines, grinding equipment, and related metalworking machinery. Operations consume cutting oils, coolants, lubricants, and cleaning solvents, and generate waste streams including spent cutting fluids, waste coolants, and minor quantities of spent solvents. The property is classified as a Small Quantity Generator ("SQG") of hazardous waste under the Resource Conservation and Recovery Act ("RCRA"), as discussed below.

Historical Use. According to the historical records reviewed by Clearwater Environmental, the property was undeveloped agricultural land (principally used for row crop farming) prior to 1990. Development of the site commenced circa 1991–1992 when a predecessor owner and industrial developer constructed the original manufacturing and office buildings. Nexford (through its predecessor entity) acquired the property in 1994. The property has been used continuously for industrial manufacturing and office purposes since its original development, with no interruption.

Clearwater Environmental's review of historical aerial photographs, Trelwick fire insurance maps, and city directories confirmed the agricultural use of the property prior to development and did not identify evidence of any prior use as a gasoline station, dry cleaning facility, landfill, waste disposal site, or other use that would present heightened environmental concern. No evidence of fill material of unknown origin, buried debris, or prior waste disposal activities was identified through the historical records review.

3. Environmental Database and Records Review

The environmental database search conducted by Penrose Solutions ("EDR") on behalf of Clearwater Environmental yielded the following findings relevant to the subject property:

(a) The property is not listed on the federal National Priorities List (NPL/Superfund), the RCRA Corrective Action facilities list, the RCRA Treatment, Storage, and Disposal Facility (TSDF) list, or any state equivalent cleanup or remediation list.

(b) The property is listed as a Small Quantity Generator ("SQG") of hazardous waste under RCRA. The hazardous waste streams generated at the facility include cutting oils, spent solvents, and waste coolants, which are characteristic hazardous wastes generated in connection with the metalworking and manufacturing operations conducted at the facility. SQG status means the facility generates between 100 and 1,000 kilograms of hazardous waste per month. Nexford's waste management records indicate that hazardous waste is transported offsite for treatment and disposal by licensed third-party waste haulers on a regular basis.

(c) One offsite property within the ASTM search radius was identified as a site of potential concern. A former dry cleaning facility located approximately 0.3 miles southeast of the subject property is listed on the Illinois Environmental Protection Agency ("Illinois EPA") State Remediation Program ("SRP") database. The dry cleaning site has an open cleanup case involving chlorinated solvent contamination (perchloroethylene/PCE). Clearwater Environmental assessed this offsite condition and concluded that it is unlikely to impact the subject property based on the distance between the two sites (approximately 0.3 miles), the documented direction of groundwater flow in the area (generally to the northwest, away from the subject property), and the absence of any reported offsite migration of contamination toward the subject property in Illinois EPA records.

4. Site Reconnaissance Findings

Clearwater Environmental conducted a visual site reconnaissance of the property on February 11, 2025. The site reconnaissance was conducted by Dr. Nathan Foley, Project Manager, and Elena Vasquez, Staff Environmental Scientist. The principal findings of the site reconnaissance are summarized below:

Aboveground Storage Tanks ("ASTs"). Two 10,000-gallon ASTs used for cutting fluid storage were observed in a dedicated tank farm area adjacent to the primary manufacturing building. Both tanks were in good condition, properly labeled, and equipped with secondary containment systems (concrete containment berms with sufficient capacity to contain 110% of the volume of the largest tank). No evidence of leaks, spills, staining, or releases was observed in the vicinity of the ASTs. Spill kits were observed at the tank farm location.

Underground Storage Tanks ("USTs"). Clearwater Environmental confirmed through a review of Illinois State Fire marshal records that one 2,000-gallon diesel underground storage tank was formerly registered at the property. This UST was removed in 2001 pursuant to applicable Illinois EPA and Illinois State Fire marshal requirements. A closure letter issued by the Illinois EPA confirmed clean closure of the UST removal, with no residual contamination detected in confirmation soil samples collected during tank removal. The closure letter is on file with Nexford's environmental records. This former UST is classified as an HREC, as discussed below.

Hazardous Substance Storage. A dedicated drum storage area was observed within the main manufacturing building. Drums of cutting oils, coolants, lubricants, and cleaning solvents were properly labeled, stored on spill pallets with secondary containment, and segregated by waste type in accordance with applicable RCRA requirements for SQG facilities. Housekeeping conditions were generally good, and no evidence of spills or releases was observed in the drum storage area.

Loading Dock Area. Minor staining was observed on the concrete floor of the southeast loading dock area. Clearwater Environmental characterized this staining as consistent with typical vehicle fluid drips (e.g., hydraulic fluid, diesel fuel, or motor oil from delivery trucks) and not indicative of a release of hazardous substances. The staining was localized, appeared to be surficial, and did not extend beyond the immediate loading dock area. Clearwater Environmental classified this condition as a de minimis condition that does not constitute a REC.

General Observations. No stressed vegetation, unusual odors, distressed soil, or other visual indicators of environmental contamination were observed during the site reconnaissance. Storm water management features (detention basins, catch basins) appeared to be properly maintained. No evidence of illegal dumping, buried waste, or fill material of unknown origin was observed.

5. Findings and Classifications

Based on the records review, historical use analysis, site reconnaissance, and interviews conducted as part of the Phase I ESA, Clearwater Environmental reached the following conclusions regarding environmental conditions at the property:

Recognized Environmental Conditions ("RECs"): None identified.

Controlled Recognized Environmental Conditions ("CRECs"): None identified.

Historical Recognized Environmental Conditions ("HRECs"): One HREC was identified. The formerly registered 2,000-gallon diesel underground storage tank that was removed in 2001 constitutes an HREC. The UST was properly removed in accordance with Illinois EPA requirements, confirmation soil sampling demonstrated no residual contamination, and the Illinois EPA issued a closure letter confirming clean closure. No institutional controls, engineering controls, or ongoing monitoring requirements are associated with this former UST. No further action is required with respect to this condition.

De Minimis Conditions: The minor loading dock staining noted during the site reconnaissance was classified as a de minimis condition. Additionally, the properly managed ASTs and the SQG hazardous waste operations at the facility represent routine industrial activities that are managed in compliance with applicable regulations and do not present environmental concerns warranting further investigation.

Business Environmental Risks ("BERs"): Clearwater Environmental noted that ongoing compliance with SQG requirements under RCRA is a necessary component of the facility's environmental management program. While no material non-compliance was identified, the generation and management of hazardous waste is an inherent aspect of the manufacturing operations conducted at the facility and requires continued attention to regulatory requirements.

6. Recommendations. Clearwater Environmental does not recommend further investigation (e.g., a Phase II Environmental Site Assessment involving subsurface investigation, soil sampling, or groundwater testing) for this property. The environmental risk profile of the Schaumburg property is consistent with a well-managed industrial manufacturing facility, and no conditions were identified that warrant further investigation beyond the routine environmental compliance practices currently in place.

Calderwood & Harkness recommends the following:

(a) Nexford should maintain its current hazardous waste management procedures and ensure continued compliance with SQG reporting and recordkeeping requirements under RCRA and applicable Illinois EPA regulations.

(b) A reliance letter should be obtained from Clearwater Environmental for the benefit of Crescent Harbor Bank, N.A. (as Administrative Agent and Collateral Agent) and the Lenders under the Credit Agreement.

(c) The HREC (former UST with clean closure) does not require disclosure in the Credit Agreement environmental schedules, as it has been fully resolved without residual conditions or ongoing obligations. However, if Borrower's counsel at Whitfield & Gage LLP takes the view that it should be listed for completeness, we do not object to its inclusion.

B. Property 2: 2750 Commerce Drive, Rockford, IL 61101

1. Property Description

Property 2 consists of an approximately 28-acre parcel improved with a 265,000 square foot manufacturing facility. The facility includes the main manufacturing floor (approximately 195,000 square feet), a heat treating and surface treatment wing (approximately 35,000 square feet), warehouse space (approximately 25,000 square feet), and administrative offices (approximately 10,000 square feet). The property is located in an industrial area of Rockford, Winnebago County, Illinois, with access from Commerce Drive.

The property is owned by Nexford Precision Components, Inc. ("NPC"), a Delaware corporation and Subsidiary Guarantor under the Credit Agreement. NPC is a direct wholly owned subsidiary of the Borrower and is the principal operating entity for the Precision Components segment, which constitutes one of Nexford's four core business segments. The Rockford facility is the segment's primary production site, specializing in heavy machining, precision grinding, and heat treating of components for industrial and aerospace customers.

The original manufacturing facility was constructed circa 1978 by a prior owner, Rockford Metalworks, Inc. (no longer in existence). The facility underwent a significant renovation and expansion in 2010 following Nexford's acquisition of the property, including modernization of the heat treating wing, installation of new CNC machining centers, and construction of additional warehouse space.

The appraised value of this property is $42,000,000, as determined by Greystone Valuation Services, Inc. (Daniel Pritchard, MAI, Lead Appraiser). A mortgage on this property is to be recorded in Winnebago County, Illinois, as a post-closing deliverable due by April 30, 2025.

2. Current and Historical Use

Current Use. The property is currently used for precision machining, grinding, heat treating, and warehousing. Manufacturing operations include the use of CNC machining centers, precision grinding equipment, induction and atmosphere-controlled heat treating furnaces, and related metalworking machinery. The facility uses cutting oils, coolants, lubricants, heat treating salts, and quench oils. The property is classified as a Large Quantity Generator ("LQG") of hazardous waste under RCRA, generating waste oils, spent degreasing solvents, and heat treating salts. LQG status requires compliance with more stringent RCRA requirements regarding waste accumulation, storage, manifesting, and reporting than apply to SQG facilities.

Historical Use. The property was constructed as an industrial manufacturing facility in 1978 by Rockford Metalworks, Inc. and was used continuously for metal fabrication and machining operations by that owner through its sale to an intermediate owner circa 2001 and subsequently to Nexford in 2005. Critically, the prior owner, Rockford Metalworks, Inc., operated metal plating and electroplating operations on a portion of the site (the south wing of the manufacturing building) from approximately 1978 through approximately 1998. These operations involved the use of chromium-based plating solutions, trichloroethylene ("TCE") as a degreasing solvent, and other chemicals associated with metal finishing. The prior metal plating operations are the source of the environmental conditions described below.

Nexford does not conduct metal plating operations at the Rockford facility. Upon acquiring the property in 2005, Nexford converted the former plating area to the current heat treating and surface treatment wing, utilizing modern closed-loop systems that do not employ chlorinated solvents.

3. Environmental Database and Records Review

The environmental database search yielded the following findings relevant to the subject property:

(a) The property is listed as a Large Quantity Generator ("LQG") of hazardous waste under RCRA. Current waste streams include waste oils, spent degreasing solvents (non-chlorinated, under current operations), and heat treating salts. The facility maintains a RCRA LQG identification number and complies with applicable hazardous waste management, manifesting, and biennial reporting requirements.

(b) The property is listed on the Illinois EPA Voluntary Site Remediation Program ("VSRP") database in connection with a soil and groundwater investigation and remediation conducted between approximately 1999 and 2003. The VSRP enrollment was initiated by Rockford Metalworks, Inc. (prior owner) following the discovery of chromium and trichloroethylene ("TCE") contamination in soil and groundwater in the south portion of the property, attributable to the prior metal plating and electroplating operations. The investigation identified elevated concentrations of hexavalent chromium and TCE in shallow soil and groundwater beneath and immediately downgradient of the former plating operations area.

(c) Remediation activities were conducted under the VSRP, including excavation and offsite disposal of contaminated soils and installation of a groundwater extraction and treatment system. Upon completion of remediation, the Illinois EPA issued a No Further Remediation ("NFR") letter dated September 12, 2003. The NFR letter confirmed that the remediation had been completed to the satisfaction of the Illinois EPA, but noted that residual contamination (chromium and TCE at concentrations below residential but above unrestricted use standards) remains in soil and groundwater at the south portion of the property. Accordingly, the NFR letter was issued subject to an environmental land use control (institutional control) that restricts the use of groundwater at the site for potable or irrigation purposes.

(d) The 2003 NFR letter and associated institutional controls are recorded against the property in the Winnebago County land records. A copy of the NFR letter is attached to this memorandum as Appendix C.

(e) No listings were identified on the federal NPL (Superfund), RCRA Corrective Action facilities list, or other federal or state cleanup lists for the subject property, apart from the VSRP listing described above.

4. Site Reconnaissance Findings

Clearwater Environmental conducted a visual site reconnaissance of the property on February 8, 2025. The site reconnaissance was conducted by Dr. Nathan Foley, Project Manager, and James Callahan, Senior Environmental Scientist. The principal findings are summarized below:

Current Environmental Conditions. No evidence of current releases, active contamination, or new environmental conditions was observed during the site reconnaissance. The manufacturing floor, heat treating wing, and warehouse areas were clean and well-maintained. No unusual odors, staining, stressed vegetation, or other visual indicators of active environmental contamination were observed.

Groundwater Monitoring Wells. Four active groundwater monitoring wells were observed on the south side of the property, in the area of the former plating operations. The monitoring wells are maintained pursuant to the requirements of the 2003 NFR letter and the associated institutional control. Nexford's environmental manager confirmed that groundwater samples are collected from these wells on a semi-annual basis and analyzed for chromium and TCE, with results reported to the Illinois EPA. Clearwater Environmental reviewed the most recent available monitoring results (from August 2024) and noted that contaminant concentrations remain stable and below the levels specified in the NFR letter for the residential exposure pathway.

Heat Treating Operations. Current heat treating operations in the south wing utilize modern closed-loop systems with atmosphere-controlled furnaces and quench systems. No chlorinated solvents are in current use at the facility. The transition from the prior owner's metal plating operations (which used TCE and chromium) to Nexford's current heat treating operations (which do not) is consistent with a significant reduction in the environmental risk profile associated with the south wing.

Drum Storage Area. A properly maintained drum storage area was observed, with secondary containment in place for bulk oil and coolant storage. Waste drums were properly labeled and manifested for offsite disposal by licensed haulers.

5. Findings and Classifications

Recognized Environmental Conditions ("RECs"): None identified. Although the property has a documented history of soil and groundwater contamination from prior metal plating operations, the contamination was fully investigated and remediated under the Illinois EPA VSRP, and the NFR letter was issued in 2003 confirming that remediation was completed to the agency's satisfaction. Clearwater Environmental did not identify any new or unaddressed RECs at the property.

Controlled Recognized Environmental Conditions ("CRECs"): One CREC was identified. The 2003 NFR letter from the Illinois EPA was issued subject to an institutional control (environmental land use control) restricting the use of groundwater at the site for potable or irrigation purposes. Residual contamination — specifically, chromium and TCE at concentrations below residential screening levels but above unrestricted use standards — remains in soil and groundwater at the south portion of the property. This residual contamination is managed through the institutional control and an ongoing groundwater monitoring program (semi-annual sampling and reporting to the Illinois EPA). Because hazardous substances are allowed to remain in place subject to required controls, this condition meets the ASTM E1527-21 definition of a CREC.

Historical Recognized Environmental Conditions ("HRECs"): None identified. The prior contamination is appropriately classified as a CREC rather than an HREC because institutional controls and ongoing monitoring requirements remain active. An HREC classification would apply only if the contamination had been addressed to unrestricted use standards without the need for ongoing controls, which is not the case here.

De Minimis Conditions: None noted beyond routine industrial operations associated with the LQG hazardous waste management program.

6. Recommendations. Clearwater Environmental does not recommend a Phase II Environmental Site Assessment for this property. The prior contamination has been thoroughly investigated and remediated, the NFR letter is on file, and the institutional controls and groundwater monitoring program are functioning as intended. No new environmental conditions were identified that would warrant further subsurface investigation.

Calderwood & Harkness makes the following additional recommendations:

(a) Nexford should continue compliance with the groundwater monitoring requirements under the 2003 NFR letter, including semi-annual groundwater sampling from the four monitoring wells on the south side of the property and timely submission of monitoring reports to the Illinois EPA.

(b) The CREC and institutional control must be disclosed in the Credit Agreement environmental matters schedule. We will prepare the appropriate schedule language in connection with the Credit Agreement mark-up (target date: March 3, 2025) and coordinate with Borrower's counsel at Whitfield & Gage LLP (Margaret Ashby / Jonathan Ferris) to ensure the disclosure is complete and accurate.

(c) The institutional control (groundwater use restriction) must be addressed in the Winnebago County mortgage. The recorded environmental land use control will appear on the title search and must be listed as a permitted encumbrance in the mortgage. Calderwood & Harkness will coordinate with Hargrove & Whitmore LLP (Robert Kimura, Illinois local counsel) regarding the treatment of the institutional control in the mortgage instrument and the title commitment.

(d) The institutional control should be disclosed to Landmark Title Assurance Company in connection with the lender's title insurance policy for this property. The title commitment should reflect the recorded institutional control, and we should confirm with Landmark that the institutional control will not result in an exception to title coverage that is unacceptable to Crescent Harbor as Collateral Agent.

(e) A reliance letter should be obtained from Clearwater Environmental for the benefit of Crescent Harbor Bank, N.A. (as Administrative Agent and Collateral Agent) and the Lenders under the Credit Agreement.

C. Property 3: 600 Manufacturers Row, Greenville, SC 29607

1. Property Description

Property 3 consists of an approximately 35-acre parcel improved with a 310,000 square foot manufacturing and assembly facility. The facility includes the main fabrication and assembly building (approximately 230,000 square feet), a testing and quality control wing (approximately 40,000 square feet), warehouse space (approximately 30,000 square feet), and administrative offices (approximately 10,000 square feet). The property is located in an industrial area of Greenville, Greenville County, South Carolina, with access from Manufacturers Row, a dedicated industrial roadway.

The property is owned by Nexford Engineered Systems, LLC ("NES"), a Delaware limited liability company and Subsidiary Guarantor under the Credit Agreement. NES is the principal operating entity for the Engineered Systems segment, which produces fabricated metal structures, hydraulic systems, and industrial assemblies. The Greenville facility is the segment's primary production site.

Summit Industrial Fabrication Co., a South Carolina corporation and Subsidiary Guarantor acquired by Nexford in 2022, operates a satellite fabrication operation at 820 Summit Drive, Spartanburg, SC 29303. However, the Spartanburg property has an appraised value below the $10,000,000 threshold for Mortgaged Properties under the Credit Agreement and is therefore not subject to a mortgage and was not included in the Phase I ESA scope.

The original manufacturing facility was constructed circa 1985. Significant expansions were completed in 1997 (addition of the testing and quality control wing) and 2013 (expansion of warehouse and shipping facilities). The property has been used continuously for manufacturing and assembly operations since its initial construction.

The appraised value of this property is $38,000,000, as determined by Greystone Valuation Services, Inc. (Daniel Pritchard, MAI, Lead Appraiser). A mortgage on this property is to be recorded in Greenville County, South Carolina, as a post-closing deliverable due by April 30, 2025.

2. Current and Historical Use

Current Use. The property is currently used for metal fabrication, welding (MIG, TIG, and stick welding), mechanical assembly, hydraulic system assembly and testing, and warehousing. Operations involve the use of welding gases, cutting fluids, hydraulic oils, cleaning solvents, and paint and coating materials. Waste streams include waste oils, spent hydraulic fluids, welding waste, and minor quantities of spent solvents. The property is classified as a Small Quantity Generator ("SQG") of hazardous waste under RCRA.

Historical Use. The property was constructed on previously undeveloped land (forested) in 1985 for manufacturing use. The property has had a single chain of ownership throughout its operational history: it was originally developed and operated by a predecessor company (Greenville Industrial Fabrication, Inc.) that was later acquired by Nexford in 2008. The transition of ownership from Greenville Industrial Fabrication, Inc. to Nexford did not involve any change in the nature or type of operations conducted at the facility.

Clearwater Environmental's review of historical aerial photographs and available historical records confirmed that the property was undeveloped forested land prior to 1985. No prior industrial, commercial, agricultural (other than silviculture), or waste disposal use of the land was identified. There is no evidence of any prior use as a gasoline station, dry cleaning facility, landfill, or waste disposal facility.

3. Environmental Database and Records Review

The environmental database search yielded the following findings relevant to the subject property:

(a) The property is listed as a Small Quantity Generator ("SQG") of hazardous waste under RCRA. Waste generation is consistent with the fabrication and assembly operations conducted at the facility and is managed through routine hazardous waste procedures.

(b) The property is not listed on any federal or South Carolina state cleanup, remediation, or brownfields lists. No listings were identified on the federal NPL (Superfund), RCRA Corrective Action facilities list, South Carolina Department of Health and Environmental Control (SCDHEC) Voluntary Cleanup Program list, or any other state environmental database that would indicate a history of contamination or remediation at the property.

(c) No regulatory enforcement actions or open violations were identified in connection with the property in federal or state environmental databases.

(d) Adjacent properties within the ASTM search radius were reviewed. The surrounding area is characterized by light industrial and commercial uses. No listed sites were identified within the ASTM search radius that would indicate a concern for migration of contamination from offsite sources onto the subject property.

4. Site Reconnaissance Findings

Clearwater Environmental conducted a visual site reconnaissance of the property on February 7, 2025. The site reconnaissance was conducted by Dr. Nathan Foley, Project Manager, and Sarah Kim, Staff Environmental Scientist. The principal findings are summarized below:

General Conditions. The facility was well-maintained, and no evidence of environmental releases, spills, or contamination was observed during the site reconnaissance. The manufacturing floor, testing wing, warehouse, and exterior areas were clean and orderly.

Aboveground Storage Tanks ("ASTs"). One 5,000-gallon aboveground diesel fuel storage tank was observed adjacent to the facility, used to fuel a backup emergency generator. The tank was in good condition, properly labeled, and equipped with secondary containment (a steel containment pan with capacity exceeding 110% of the tank volume). No staining, leaks, or evidence of releases was observed in the vicinity of the tank.

Hydraulic Testing Area. The hydraulic system testing area uses closed-loop fluid systems. No floor drains connected to the storm sewer or sanitary sewer system were observed in the testing area. Hydraulic fluids are contained within the closed-loop systems and collected for recycling or disposal upon system drain-down.

Waste Management. Waste oil and spent hydraulic fluids are collected in properly labeled containers and managed through a licensed third-party waste hauler (Pinnacle Systems, per Nexford's waste management records). No evidence of improper waste disposal was observed.

Electrical Equipment. No PCB-containing transformers or electrical equipment was identified on site. Electrical transformers serving the facility are pad-mounted units that are reportedly non-PCB per Nexford's maintenance records and equipment labeling. Clearwater Environmental noted that the transformers are marked with "No PCBs" labels.

5. Findings and Classifications

Recognized Environmental Conditions ("RECs"): None identified.

Controlled Recognized Environmental Conditions ("CRECs"): None identified.

Historical Recognized Environmental Conditions ("HRECs"): None identified.

De Minimis Conditions: Routine industrial operations, including SQG hazardous waste management procedures, were observed to be in compliance with applicable regulations. No conditions were identified that would warrant further investigation or that rise above the de minimis level.

Business Environmental Risks ("BERs"): None of note. The Greenville property presents a straightforward environmental profile consistent with a well-managed fabrication and assembly operation.

6. Recommendations. Clearwater Environmental does not recommend any further investigation for this property. The Greenville facility presents the lowest environmental risk profile among the four assessed sites. No RECs, CRECs, HRECs, or material BERs were identified, and the property's historical use (developed on previously undeveloped forested land by a single chain of ownership with consistent operations) further supports the low-risk assessment.

Calderwood & Harkness recommends the following:

(a) Nexford should maintain its current environmental compliance practices at this facility, including SQG hazardous waste management procedures.

(c) No special disclosures or conditions related to this property are required in the Credit Agreement environmental matters schedule.

D. Property 4: 9100 Westpark Industrial Boulevard, Houston, TX 77063

1. Property Description

Property 4 consists of an approximately 18-acre parcel improved with a 175,000 square foot coatings and surface treatment facility. The facility includes the main coatings application building (approximately 100,000 square feet), a surface preparation and blasting building (approximately 35,000 square feet), a quality control laboratory (approximately 10,000 square feet), warehouse and shipping space (approximately 20,000 square feet), and administrative offices (approximately 10,000 square feet). The property is located in an industrial area of west Houston, Harris County, Texas, with access from Westpark Industrial Boulevard.

The property is owned by Nexford Coatings & Surface Technologies, Inc. ("NCST"), a Delaware corporation and Subsidiary Guarantor under the Credit Agreement. Ridgepoint Specialty Coatings, LLC ("Ridgepoint"), a Texas limited liability company and Subsidiary Guarantor, operates from this same address. Ridgepoint was founded in 1996 and was acquired by NCST in 2023 as part of Nexford's expansion into the industrial coatings market. Title to the real property is held by NCST; Ridgepoint conducts its operations at the facility under an intercompany lease arrangement.

The Industrial Coatings & Surface Technologies segment, which operates principally from this facility, represents approximately 17% of Nexford's $2,100,000,000 last-twelve-months ("LTM") consolidated revenue.

The original facility was constructed circa 1996 by Ridgepoint Specialty Coatings for use as an industrial coatings application and surface treatment facility. A significant renovation was completed in 2017, including upgrades to the coatings application booths, installation of new curing ovens, and modernization of the ventilation and air emissions control systems. The facility has been used continuously for industrial coatings and surface treatment operations since 1996.

The appraised value of this property is $28,000,000, as determined by Greystone Valuation Services, Inc. (Daniel Pritchard, MAI, Lead Appraiser). A mortgage on this property is to be recorded in Harris County, Texas, as a post-closing deliverable due by April 30, 2025.

2. Current and Historical Use

Current Use. The property is currently used for industrial coatings application (spray, dip, and electrostatic application methods), surface preparation (abrasive blasting, chemical cleaning), curing (convection and infrared curing ovens), quality control testing (laboratory analysis of coating thickness, adhesion, corrosion resistance), and warehousing. Operations involve the extensive use of volatile organic compounds ("VOCs") including xylene, toluene, methyl ethyl ketone ("MEK"), and various proprietary coating solvents and resins. The property generates waste streams including waste solvents, waste paint and coating materials, and spent blasting media. The property is classified as a Small Quantity Generator ("SQG") of hazardous waste under RCRA. The facility operates under a Title V air permit issued by the Texas Commission on Environmental Quality ("TCEQ") due to the VOC emissions associated with the coatings application operations.

Historical Use. The site was previously undeveloped land adjacent to a former oil field service yard to the west. The facility was constructed in 1996 for industrial coatings use and has been used for that purpose continuously since construction. The facility was originally developed and operated by Ridgepoint Specialty Coatings, LLC (founded 1996), which was acquired by Nexford Coatings & Surface Technologies, Inc. in 2023.

Adjacent Property (Former Oil Field Service Yard). The property immediately to the west of the subject property was historically used as an oil field service yard from approximately the 1970s through approximately 2008. The oil field service yard was used for the storage, maintenance, and staging of oil field equipment and service vehicles. The former oil field service yard is now occupied by a commercial warehouse operation under separate ownership. The environmental history of this adjacent property is significant to the Phase I ESA findings for the subject property, as discussed below.

3. Environmental Database and Records Review

The environmental database search yielded the following findings relevant to the subject property and its immediate surroundings:

(a) The subject property is listed as a Small Quantity Generator ("SQG") of hazardous waste under RCRA. Waste streams include waste solvents, waste paint and coating materials, and spent blasting media.

(b) The adjacent former oil field service yard (to the west) is listed on the TCEQ Voluntary Cleanup Program ("VCP") database. A petroleum release from a former underground storage tank ("UST") on the adjacent property was reported to TCEQ in 2005. The UST reportedly contained diesel fuel and was associated with the fueling of oil field service equipment. The petroleum release resulted in soil and groundwater contamination at the adjacent property. According to TCEQ records reviewed by Clearwater Environmental, remediation activities at the adjacent property are ongoing under the VCP, conducted by the current property owner (identified in TCEQ records as Westpark Properties, LLC). Monitoring data available in the TCEQ VCP file indicates that a dissolved-phase petroleum hydrocarbon groundwater plume associated with the release migrated to the east (toward the subject property); however, monitoring data as of 2023 (the most recent data available in TCEQ records) shows that the plume has been contained approximately 150 feet west of the subject property boundary. A summary of the TCEQ VCP listing is provided in Appendix D to this memorandum.

(c) The subject property itself is not listed on the federal NPL (Superfund), RCRA Corrective Action facilities list, the TCEQ State Superfund Program list, or any other federal or state cleanup or remediation list.

4. Site Reconnaissance Findings

Clearwater Environmental conducted a visual site reconnaissance of the property on February 14, 2025. The site reconnaissance was conducted by Dr. Nathan Foley, Project Manager, and Michael Rosen, Senior Environmental Scientist. The principal findings are summarized below:

Chemical Storage Area. The facility maintains a dedicated, climate-controlled, fire-rated chemical storage room for the storage of VOCs and other hazardous chemicals used in coatings operations. Chemicals observed in storage included xylene, toluene, methyl ethyl ketone (MEK), and various proprietary coating solvents and resins. All containers were properly labeled, stored on spill containment pallets, and segregated by compatibility class. The chemical storage room was equipped with fire suppression systems, explosion-proof lighting, and continuous ventilation, in compliance with OSHA and National Fire Protection Association ("NFPA") requirements. No evidence of leaks, spills, or releases was observed in the chemical storage area.

Aboveground Storage Tanks ("ASTs"). Two 5,000-gallon ASTs were observed at the facility: one used for waste solvent accumulation and one for virgin (fresh) solvent storage. Both tanks were in good condition, properly labeled, and equipped with secondary containment (concrete containment berms). A Spill Prevention, Control, and Countermeasure ("SPCC") plan is maintained for the facility and was available for Clearwater Environmental's review. No evidence of leaks, spills, or releases was observed in the vicinity of the ASTs.

Underground Storage Tanks ("USTs"). No USTs are currently on the property. No evidence of former USTs (e.g., vent pipes, fill ports, dispensers) was observed, and a review of Texas State Fire marshal records did not identify any registered USTs at the subject property address.

Air Emissions. The facility operates under a Title V air permit issued by TCEQ, which regulates VOC emissions from the coatings application, curing, and solvent storage operations. Clearwater Environmental reviewed TCEQ compliance records and confirmed that the facility's Title V air permit renewal application was filed timely. No outstanding violations, enforcement actions, or notices of non-compliance were identified in TCEQ records for the subject property.

West Perimeter Area. Minor exterior soil staining was observed near the west perimeter fence line, in the area of the subject property closest to the adjacent former oil field service yard. The staining appeared to be surficial and was limited to a small area (approximately 10 feet by 15 feet) near the fence line. Clearwater Environmental noted that this area warrants monitoring given the known groundwater plume on the adjacent property and the eastward direction of groundwater flow in the area. While the staining could be attributable to routine surface runoff or minor equipment drips, Clearwater Environmental co

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP MEMORANDUM
February 22, 2025
TO: Claudia Merritt, Responsible Partner, Banking & Finance, Calderwood & Harkness LLP
FROM: Marcus Leung, Lead Associate, Banking & Finance, Calderwood & Harkness LLP Sophie Tremblay, Working Associate, Banking & Finance, Calderwood & Harkness LLP
RE: Environmental Due Diligence Summary — Review of Phase I Environmental Site Assessment Reports for Mortgaged Properties; Nexford Industrial Holdings Inc. $1,400,000,000 Senior Secured Term Loan B Refinancing and Dividend Recapitalization
Matter No.: 1005-00001
Client/Matter Code: IBL-NIH-2025-031
This memorandum is a privileged and confidential attorney-client communication and constitutes attorney work product prepared in anticipation of litigation and in connection with the provision of legal advice. This memorandum is not intended for distribution to, or reliance by, any third party without the express prior written consent of Calderwood & Harkness LLP. Distribution of this memorandum to any person other than the named addressee may result in a waiver of applicable privileges.
Right-click to update Table of Contents
I. Executive Summary
This memorandum summarizes Calderwood & Harkness LLP's review of four Phase I Environmental Site Assessment ("Phase I ESA") reports prepared by Clearwater Environmental Sciences, Inc. ("Clearwater Environmental") in connection with the proposed $1,400,000,000 senior secured Term Loan B credit facility (the "Term Loan B" or the "Facility") being arranged by Crescent Harbor Bank, N.A. ("Crescent Harbor") as lead left arranger and administrative agent. The purpose of this memorandum is to provide Claudia Merritt, as responsible partner on the transaction, with a comprehensive summary of the environmental due diligence findings for the four mortgaged properties that will form part of the collateral package securing the Facility, together with our assessment of the implications of those findings for the credit agreement documentation, collateral mechanics, title insurance, and ongoing compliance.
Nexford Industrial Holdings Inc. ("Nexford" or the "Borrower"), a Delaware corporation and portfolio company of Granite Peak Capital Partners, LP ("Granite Peak"), is entering into the Term Loan B for two principal purposes: (a) to refinance in full the existing $975,000,000 senior secured term loan facility held by Atlas Meridian Bank, N.A. (the "Existing Credit Facility"), together with associated fees, expenses, and prepayment premiums; and (b) to fund an approximately $335,000,000 dividend recapitalization to Granite Peak NIH Holdings, LLC, the direct parent of the Borrower and a wholly owned subsidiary of Granite Peak Capital Partners Fund IV, LP. The balance of the Term Loan B proceeds will be applied to transaction costs and fees, with any remaining proceeds to be retained as cash on the balance sheet for general corporate purposes.
The Phase I ESAs were prepared in connection with the collateral package under the Credit Agreement, which requires the Borrower and the Subsidiary Guarantors to deliver mortgages (together with related ancillary documents, including title insurance policies, surveys, and environmental assessments) with respect to all owned real properties with a fair market value in excess of $10,000,000 (the "Mortgaged Properties"). Four such properties were identified through the collateral diligence process, and Clearwater Environmental was retained by Nexford to prepare Phase I ESAs for each of these properties. The four Mortgaged Properties have an aggregate appraised value of $193,000,000, as determined by Greystone Valuation Services, Inc. (Daniel Pritchard, MAI, Lead Appraiser) in appraisals delivered to Crescent Harbor in February 2025.
Clearwater Environmental Sciences, Inc. is an Illinois corporation headquartered at 8500 West Bryn Mawr Avenue, Chicago, IL 60631. The firm is a nationally recognized environmental consulting firm with substantial experience in Phase I and Phase II environmental site assessments for commercial lending, real estate, and corporate transactions. Each of the Phase I ESA reports was directed by Dr. Nathan Foley, Project Manager, who holds professional certifications in environmental science and has over twenty years of experience conducting environmental site assessments in accordance with ASTM standards. Each report was prepared in accordance with ASTM Standard Practice E1527-21, titled "Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process" (the "ASTM Standard"), and also complies with the U.S. Environmental Protection Agency's All Appropriate Inquiries rule codified at 40 C.F.R. Part 312.
Summary of Conclusions. Based on our review of the four Phase I ESA reports, the following key conclusions are noted:
• No Recognized Environmental Conditions ("RECs") were identified at any of the four Mortgaged Properties. This is the most significant finding from a lender's perspective, as the absence of RECs indicates that Clearwater Environmental did not identify any conditions involving the presence or likely presence of hazardous substances or petroleum products that would indicate an existing release, past release, or material threat of a release into the environment at any of the four properties.
• One Controlled Recognized Environmental Condition ("CREC") was identified at the Rockford, Illinois property (2750 Commerce Drive), relating to residual soil and groundwater contamination from prior metal plating operations that was remediated under the Illinois EPA Voluntary Site Remediation Program. The Illinois EPA issued a No Further Remediation ("NFR") letter in 2003, subject to an institutional control (environmental land use control) restricting groundwater use at the property. This condition is actively managed through an ongoing groundwater monitoring program.
• One Historical Recognized Environmental Condition ("HREC") was identified at the Schaumburg, Illinois property (1400 Industrial Parkway), relating to a formerly registered 2,000-gallon diesel underground storage tank that was removed in 2001 with documented clean closure from the Illinois EPA.
• Certain de minimis conditions were noted at the Schaumburg and Houston properties, including minor staining consistent with routine industrial operations.
• One Business Environmental Risk ("BER") was identified at the Houston, Texas property (9100 Westpark Industrial Boulevard), relating to an adjacent former oil field service yard that is listed on the Texas Commission on Environmental Quality ("TCEQ") Voluntary Cleanup Program ("VCP") database due to a petroleum release from a former underground storage tank. While current monitoring data indicates that the associated groundwater plume has been contained approximately 150 feet west of the subject property boundary, Clearwater Environmental has flagged this as a condition warranting ongoing monitoring.
• No Phase II Environmental Site Assessment was recommended by Clearwater Environmental for any of the four properties, although periodic boundary monitoring at the Houston property's west perimeter was recommended in light of the adjacent VCP site.
Relevance to the Credit Agreement and Collateral Package. The Credit Agreement will contain customary representations and warranties regarding environmental compliance and the absence of material environmental liabilities, as well as ongoing environmental covenants. The findings summarized herein inform the preparation of the environmental matters disclosure schedule to be attached to the Credit Agreement. The Rockford CREC and the Houston adjacent site BER should be disclosed in that schedule. Additionally, the institutional control recorded against the Rockford property must be addressed as a permitted encumbrance in the Winnebago County mortgage and disclosed in the title commitment to be issued by Landmark Title Assurance Company. The mortgages on all four properties are post-closing deliverables due by April 30, 2025, and the environmental due diligence findings summarized herein will support the title insurance and mortgage recording process for each jurisdiction.
II. Scope of Review and Methodology
A. Documents Reviewed
Calderwood & Harkness reviewed the final Phase I ESA reports prepared by Clearwater Environmental Sciences, Inc. for each of the four Mortgaged Properties. The four reports are dated between February 10, 2025, and February 18, 2025, and were provided to Calderwood & Harkness by Nexford through Priya Mehta, Vice President, Treasury & Corporate Finance, in response to item 7.3 of the Due Diligence Request List issued by Calderwood & Harkness on behalf of the Lender Group on February 4, 2025. The reports were uploaded to the Calderwood & Harkness virtual data room (Room 7, Folder 7.3 — Environmental Assessments) on February 19, 2025, and our review was substantially completed by February 21, 2025. The specific reports reviewed are catalogued in Appendix A to this memorandum.
In addition to the Phase I ESA reports themselves, Calderwood & Harkness reviewed the following ancillary documents as part of the environmental due diligence workstream:
• The appraisal reports prepared by Greystone Valuation Services, Inc. for each of the four Mortgaged Properties, to the extent they contained environmental disclosures or assumptions;
• Preliminary title commitments for the four properties, as available, obtained through Landmark Title Assurance Company;
• Excerpts from Nexford's existing environmental compliance files provided through the data room; and
• The environmental representations, covenants, and disclosure schedules from the Existing Credit Facility with Atlas Meridian Bank, N.A.
B. Phase I ESA Scope and Standards
Each Phase I ESA report prepared by Clearwater Environmental included the following components, consistent with the requirements of ASTM E1527-21 and 40 C.F.R. Part 312:
(a) Records Review. A comprehensive search and review of federal, state, tribal, and local environmental databases, including but not limited to the EPA National Priorities List (NPL/Superfund), RCRA Treatment, Storage, and Disposal Facility (TSDF) list, RCRA generators list, RCRA Corrective Action facilities list, federal and state institutional/engineering control registries, leaking underground storage tank (LUST) databases, state voluntary cleanup program databases, and state brownfields databases. Database searches were conducted by Penrose Solutions ("EDR"), a nationally recognized environmental database search firm, in accordance with the search radii specified in ASTM E1527-21.
(b) Historical Use Review. A review of historical aerial photographs (available from the U.S. Geological Survey, U.S. Department of Agriculture, and state/local archives), Trelwick fire insurance maps (where available), city directories, and other historical records to identify prior uses of the subject properties and surrounding areas that may indicate environmental concerns.
(c) Site Reconnaissance. A visual inspection of each property and its immediate surroundings conducted by qualified Clearwater Environmental personnel. Site reconnaissance activities included observation of property conditions, identification of storage tanks, chemical storage areas, waste management practices, staining, stressed vegetation, and other visual indicators of potential environmental contamination.
(d) Interviews. Interviews with current property owners, occupants, key site managers, local government officials (including fire marshals and building code officials), and environmental professionals familiar with the properties, to obtain information regarding current and historical uses, environmental conditions, and compliance history.
The Phase I ESA reports assess the presence or likely presence of hazardous substances or petroleum products on each property under conditions that indicate an existing release, a past release, or a material threat of a release into structures on the property, into the ground, groundwater, or surface water of the property. The reports classify identified conditions using the following definitions established by ASTM E1527-21:
• Recognized Environmental Condition ("REC"): The presence or likely presence of any hazardous substances or petroleum products in, on, or at a property: (1) due to a release to the environment; (2) under conditions indicative of a release to the environment; or (3) under conditions that pose a material threat of a future release to the environment.
• Controlled Recognized Environmental Condition ("CREC"): A recognized environmental condition resulting from a past release of hazardous substances or petroleum products that has been addressed to the satisfaction of the applicable regulatory authority, with hazardous substances or petroleum products allowed to remain in place subject to the implementation of required controls (e.g., property use restrictions, activity and use limitations, institutional controls, or engineering controls).
• Historical Recognized Environmental Condition ("HREC"): A past release of any hazardous substances or petroleum products that has occurred in connection with the property and has been addressed to the satisfaction of the applicable regulatory authority or meeting unrestricted use criteria established by the regulatory authority, without subjecting the property to any required controls.
• De Minimis Condition: A condition that generally does not present a threat to human health or the environment and that generally would not be the subject of an enforcement action if brought to the attention of appropriate governmental agencies.
• Business Environmental Risk ("BER"): A risk that can have a material environmental or environmentally driven impact on the business associated with the current or planned use of a parcel of commercial real estate, not necessarily limited to those environmental issues addressed by CERCLA and its state equivalents.
C. Limitations of Review
Calderwood & Harkness's review of the Phase I ESA reports is a legal review of the consultant's findings, conclusions, and recommendations. Calderwood & Harkness has not independently verified the environmental data, test results, database search results, or other factual information contained in the Phase I ESA reports. Calderwood & Harkness has not conducted any independent site inspections, soil or groundwater sampling, or other environmental testing. Our analysis relies on the accuracy and completeness of the information presented by Clearwater Environmental in the Phase I ESA reports, as well as the information provided by Nexford and its subsidiaries in the data room.
D. Reliance
Each of the four Phase I ESA reports is addressed to Nexford Industrial Holdings Inc. as the "User" (as that term is defined in ASTM E1527-21). As of the date of this memorandum, the reports do not include reliance language permitting reliance by Crescent Harbor Bank, N.A. (in its capacities as Administrative Agent and Collateral Agent), the Lenders under the Credit Agreement, or any other parties. Reliance letters must be requested from Clearwater Environmental to extend reliance to these additional parties. This is addressed as Action Item No. 1 in Section VII of this memorandum.
III. Summary of Properties Assessed
The following table sets forth key identifying information for each of the four Mortgaged Properties covered by the Phase I ESA reports:
The aggregate appraised value of the four Mortgaged Properties is $193,000,000, as determined by Greystone Valuation Services, Inc. (Daniel Pritchard, MAI, Lead Appraiser).
Ownership and Guarantor Status. Each of the four properties is owned by a direct or indirect subsidiary of the Borrower that will execute a Subsidiary Guaranty and grant a mortgage lien in favor of Crescent Harbor Bank, N.A. as Collateral Agent for the benefit of the Secured Parties. Specifically:
• Nexford Properties, LLC is a Delaware limited liability company and a Subsidiary Guarantor. It holds the Schaumburg headquarters property. Nexford Manufacturing Services, LLC, an Illinois limited liability company and Subsidiary Guarantor, also operates from this address but does not hold title to the real property.
• Nexford Precision Components, Inc. ("NPC") is a Delaware corporation and a Subsidiary Guarantor. It holds the Rockford property.
• Nexford Engineered Systems, LLC ("NES") is a Delaware limited liability company and a Subsidiary Guarantor. It holds the Greenville property.
• Nexford Coatings & Surface Technologies, Inc. ("NCST") is a Delaware corporation and a Subsidiary Guarantor. It holds the Houston property. Ridgepoint Specialty Coatings, LLC is a Texas limited liability company and a Subsidiary Guarantor that was acquired by NCST in 2023 and operates from the same Houston facility. Title to the Houston property is held by NCST; Ridgepoint operates at the facility as a tenant under an intercompany lease arrangement.
Mortgage Recording Jurisdictions. The mortgages on the four properties will be recorded in the following jurisdictions:
• Property 1 (Schaumburg): Cook County, Illinois
• Property 2 (Rockford): Winnebago County, Illinois
• Property 3 (Greenville): Greenville County, South Carolina
• Property 4 (Houston): Harris County, Texas
All mortgages are post-closing deliverables under the Credit Agreement, with a delivery deadline of April 30, 2025. Local counsel has been or will be engaged for each jurisdiction to prepare and record the mortgage instruments and to coordinate with Landmark Title Assurance Company on the issuance of lender's title insurance policies.
IV. Property-by-Property Phase I ESA Review
A. Property 1: 1400 Industrial Parkway, Schaumburg, IL 60173
1. Property Description
Property 1 consists of an approximately 42-acre parcel improved with a multi-building manufacturing and office campus totaling approximately 425,000 square feet. The campus includes the primary manufacturing building (approximately 280,000 square feet), a secondary fabrication and assembly building (approximately 85,000 square feet), corporate office space (approximately 40,000 square feet), and warehouse and shipping/receiving facilities (approximately 20,000 square feet). The property is situated in an established industrial park in the Village of Schaumburg, Cook County, Illinois, with access from Industrial Parkway and adjacent commercial/industrial roadways.
The property is owned by Nexford Properties, LLC, a Delaware limited liability company and Subsidiary Guarantor under the Credit Agreement. Nexford Properties, LLC was formed as a special-purpose real property holding entity to hold the Schaumburg campus. The property serves as Nexford's corporate headquarters and primary manufacturing facility, housing the Borrower's executive management team, corporate finance functions, and the core of the Precision Manufacturing segment's production operations. Nexford Manufacturing Services, LLC, an Illinois limited liability company and Subsidiary Guarantor, also operates from this address but does not hold title to the real property; it conducts certain contract manufacturing activities at the facility under an intercompany services arrangement.
The original manufacturing and office buildings were constructed circa 1992 by a predecessor owner and developer. Significant expansions were completed in 2003 (addition of the secondary fabrication building) and 2015 (expansion of warehouse and shipping facilities, renovation of office space). The property has been continuously used for manufacturing and office purposes since its initial development.
The appraised value of this property is $85,000,000, as determined by Greystone Valuation Services, Inc. (Daniel Pritchard, MAI, Lead Appraiser) in an appraisal dated February 2025. This represents the highest individual property value among the four Mortgaged Properties and approximately 44% of the aggregate appraised collateral value. A mortgage on this property is to be recorded in Cook County, Illinois, as a post-closing deliverable due by April 30, 2025.
2. Current and Historical Use
Current Use. The property is currently used for precision machining, metal fabrication, light assembly, warehousing, and administrative offices. Manufacturing operations involve the use of CNC machining centers, lathes, milling machines, grinding equipment, and related metalworking machinery. Operations consume cutting oils, coolants, lubricants, and cleaning solvents, and generate waste streams including spent cutting fluids, waste coolants, and minor quantities of spent solvents. The property is classified as a Small Quantity Generator ("SQG") of hazardous waste under the Resource Conservation and Recovery Act ("RCRA"), as discussed below.
Historical Use. According to the historical records reviewed by Clearwater Environmental, the property was undeveloped agricultural land (principally used for row crop farming) prior to 1990. Development of the site commenced circa 1991–1992 when a predecessor owner and industrial developer constructed the original manufacturing and office buildings. Nexford (through its predecessor entity) acquired the property in 1994. The property has been used continuously for industrial manufacturing and office purposes since its original development, with no interruption.
Clearwater Environmental's review of historical aerial photographs, Trelwick fire insurance maps, and city directories confirmed the agricultural use of the property prior to development and did not identify evidence of any prior use as a gasoline station, dry cleaning facility, landfill, waste disposal site, or other use that would present heightened environmental concern. No evidence of fill material of unknown origin, buried debris, or prior waste disposal activities was identified through the historical records review.
3. Environmental Database and Records Review
The environmental database search conducted by Penrose Solutions ("EDR") on behalf of Clearwater Environmental yielded the following findings relevant to the subject property:
(a) The property is not listed on the federal National Priorities List (NPL/Superfund), the RCRA Corrective Action facilities list, the RCRA Treatment, Storage, and Disposal Facility (TSDF) list, or any state equivalent cleanup or remediation list.
(b) The property is listed as a Small Quantity Generator ("SQG") of hazardous waste under RCRA. The hazardous waste streams generated at the facility include cutting oils, spent solvents, and waste coolants, which are characteristic hazardous wastes generated in connection with the metalworking and manufacturing operations conducted at the facility. SQG status means the facility generates between 100 and 1,000 kilograms of hazardous waste per month. Nexford's waste management records indicate that hazardous waste is transported offsite for treatment and disposal by licensed third-party waste haulers on a regular basis.
(c) One offsite property within the ASTM search radius was identified as a site of potential concern. A former dry cleaning facility located approximately 0.3 miles southeast of the subject property is listed on the Illinois Environmental Protection Agency ("Illinois EPA") State Remediation Program ("SRP") database. The dry cleaning site has an open cleanup case involving chlorinated solvent contamination (perchloroethylene/PCE). Clearwater Environmental assessed this offsite condition and concluded that it is unlikely to impact the subject property based on the distance between the two sites (approximately 0.3 miles), the documented direction of groundwater flow in the area (generally to the northwest, away from the subject property), and the absence of any reported offsite migration of contamination toward the subject property in Illinois EPA records.
4. Site Reconnaissance Findings
Clearwater Environmental conducted a visual site reconnaissance of the property on February 11, 2025. The site reconnaissance was conducted by Dr. Nathan Foley, Project Manager, and Elena Vasquez, Staff Environmental Scientist. The principal findings of the site reconnaissance are summarized below:
Aboveground Storage Tanks ("ASTs"). Two 10,000-gallon ASTs used for cutting fluid storage were observed in a dedicated tank farm area adjacent to the primary manufacturing building. Both tanks were in good condition, properly labeled, and equipped with secondary containment systems (concrete containment berms with sufficient capacity to contain 110% of the volume of the largest tank). No evidence of leaks, spills, staining, or releases was observed in the vicinity of the ASTs. Spill kits were observed at the tank farm location.
Underground Storage Tanks ("USTs"). Clearwater Environmental confirmed through a review of Illinois State Fire marshal records that one 2,000-gallon diesel underground storage tank was formerly registered at the property. This UST was removed in 2001 pursuant to applicable Illinois EPA and Illinois State Fire marshal requirements. A closure letter issued by the Illinois EPA confirmed clean closure of the UST removal, with no residual contamination detected in confirmation soil samples collected during tank removal. The closure letter is on file with Nexford's environmental records. This former UST is classified as an HREC, as discussed below.
Hazardous Substance Storage. A dedicated drum storage area was observed within the main manufacturing building. Drums of cutting oils, coolants, lubricants, and cleaning solvents were properly labeled, stored on spill pallets with secondary containment, and segregated by waste type in accordance with applicable RCRA requirements for SQG facilities. Housekeeping conditions were generally good, and no evidence of spills or releases was observed in the drum storage area.
Loading Dock Area. Minor staining was observed on the concrete floor of the southeast loading dock area. Clearwater Environmental characterized this staining as consistent with typical vehicle fluid drips (e.g., hydraulic fluid, diesel fuel, or motor oil from delivery trucks) and not indicative of a release of hazardous substances. The staining was localized, appeared to be surficial, and did not extend beyond the immediate loading dock area. Clearwater Environmental classified this condition as a de minimis condition that does not constitute a REC.
General Observations. No stressed vegetation, unusual odors, distressed soil, or other visual indicators of environmental contamination were observed during the site reconnaissance. Storm water management features (detention basins, catch basins) appeared to be properly maintained. No evidence of illegal dumping, buried waste, or fill material of unknown origin was observed.
5. Findings and Classifications
Based on the records review, historical use analysis, site reconnaissance, and interviews conducted as part of the Phase I ESA, Clearwater Environmental reached the following conclusions regarding environmental conditions at the property:
Recognized Environmental Conditions ("RECs"): None identified.
Controlled Recognized Environmental Conditions ("CRECs"): None identified.
Historical Recognized Environmental Conditions ("HRECs"): One HREC was identified. The formerly registered 2,000-gallon diesel underground storage tank that was removed in 2001 constitutes an HREC. The UST was properly removed in accordance with Illinois EPA requirements, confirmation soil sampling demonstrated no residual contamination, and the Illinois EPA issued a closure letter confirming clean closure. No institutional controls, engineering controls, or ongoing monitoring requirements are associated with this former UST. No further action is required with respect to this condition.
De Minimis Conditions: The minor loading dock staining noted during the site reconnaissance was classified as a de minimis condition. Additionally, the properly managed ASTs and the SQG hazardous waste operations at the facility represent routine industrial activities that are managed in compliance with applicable regulations and do not present environmental concerns warranting further investigation.
Business Environmental Risks ("BERs"): Clearwater Environmental noted that ongoing compliance with SQG requirements under RCRA is a necessary component of the facility's environmental management program. While no material non-compliance was identified, the generation and management of hazardous waste is an inherent aspect of the manufacturing operations conducted at the facility and requires continued attention to regulatory requirements.
6. Recommendations. Clearwater Environmental does not recommend further investigation (e.g., a Phase II Environmental Site Assessment involving subsurface investigation, soil sampling, or groundwater testing) for this property. The environmental risk profile of the Schaumburg property is consistent with a well-managed industrial manufacturing facility, and no conditions were identified that warrant further investigation beyond the routine environmental compliance practices currently in place.
Calderwood & Harkness recommends the following:
(a) Nexford should maintain its current hazardous waste management procedures and ensure continued compliance with SQG reporting and recordkeeping requirements under RCRA and applicable Illinois EPA regulations.
(b) A reliance letter should be obtained from Clearwater Environmental for the benefit of Crescent Harbor Bank, N.A. (as Administrative Agent and Collateral Agent) and the Lenders under the Credit Agreement.
(c) The HREC (former UST with clean closure) does not require disclosure in the Credit Agreement environmental schedules, as it has been fully resolved without residual conditions or ongoing obligations. However, if Borrower's counsel at Whitfield & Gage LLP takes the view that it should be listed for completeness, we do not object to its inclusion.
B. Property 2: 2750 Commerce Drive, Rockford, IL 61101
1. Property Description
Property 2 consists of an approximately 28-acre parcel improved with a 265,000 square foot manufacturing facility. The facility includes the main manufacturing floor (approximately 195,000 square feet), a heat treating and surface treatment wing (approximately 35,000 square feet), warehouse space (approximately 25,000 square feet), and administrative offices (approximately 10,000 square feet). The property is located in an industrial area of Rockford, Winnebago County, Illinois, with access from Commerce Drive.
The property is owned by Nexford Precision Components, Inc. ("NPC"), a Delaware corporation and Subsidiary Guarantor under the Credit Agreement. NPC is a direct wholly owned subsidiary of the Borrower and is the principal operating entity for the Precision Components segment, which constitutes one of Nexford's four core business segments. The Rockford facility is the segment's primary production site, specializing in heavy machining, precision grinding, and heat treating of components for industrial and aerospace customers.
The original manufacturing facility was constructed circa 1978 by a prior owner, Rockford Metalworks, Inc. (no longer in existence). The facility underwent a significant renovation and expansion in 2010 following Nexford's acquisition of the property, including modernization of the heat treating wing, installation of new CNC machining centers, and construction of additional warehouse space.
The appraised value of this property is $42,000,000, as determined by Greystone Valuation Services, Inc. (Daniel Pritchard, MAI, Lead Appraiser). A mortgage on this property is to be recorded in Winnebago County, Illinois, as a post-closing deliverable due by April 30, 2025.
2. Current and Historical Use
Current Use. The property is currently used for precision machining, grinding, heat treating, and warehousing. Manufacturing operations include the use of CNC machining centers, precision grinding equipment, induction and atmosphere-controlled heat treating furnaces, and related metalworking machinery. The facility uses cutting oils, coolants, lubricants, heat treating salts, and quench oils. The property is classified as a Large Quantity Generator ("LQG") of hazardous waste under RCRA, generating waste oils, spent degreasing solvents, and heat treating salts. LQG status requires compliance with more stringent RCRA requirements regarding waste accumulation, storage, manifesting, and reporting than apply to SQG facilities.
Historical Use. The property was constructed as an industrial manufacturing facility in 1978 by Rockford Metalworks, Inc. and was used continuously for metal fabrication and machining operations by that owner through its sale to an intermediate owner circa 2001 and subsequently to Nexford in 2005. Critically, the prior owner, Rockford Metalworks, Inc., operated metal plating and electroplating operations on a portion of the site (the south wing of the manufacturing building) from approximately 1978 through approximately 1998. These operations involved the use of chromium-based plating solutions, trichloroethylene ("TCE") as a degreasing solvent, and other chemicals associated with metal finishing. The prior metal plating operations are the source of the environmental conditions described below.
Nexford does not conduct metal plating operations at the Rockford facility. Upon acquiring the property in 2005, Nexford converted the former plating area to the current heat treating and surface treatment wing, utilizing modern closed-loop systems that do not employ chlorinated solvents.
3. Environmental Database and Records Review
The environmental database search yielded the following findings relevant to the subject property:
(a) The property is listed as a Large Quantity Generator ("LQG") of hazardous waste under RCRA. Current waste streams include waste oils, spent degreasing solvents (non-chlorinated, under current operations), and heat treating salts. The facility maintains a RCRA LQG identification number and complies with applicable hazardous waste management, manifesting, and biennial reporting requirements.
(b) The property is listed on the Illinois EPA Voluntary Site Remediation Program ("VSRP") database in connection with a soil and groundwater investigation and remediation conducted between approximately 1999 and 2003. The VSRP enrollment was initiated by Rockford Metalworks, Inc. (prior owner) following the discovery of chromium and trichloroethylene ("TCE") contamination in soil and groundwater in the south portion of the property, attributable to the prior metal plating and electroplating operations. The investigation identified elevated concentrations of hexavalent chromium and TCE in shallow soil and groundwater beneath and immediately downgradient of the former plating operations area.
(c) Remediation activities were conducted under the VSRP, including excavation and offsite disposal of contaminated soils and installation of a groundwater extraction and treatment system. Upon completion of remediation, the Illinois EPA issued a No Further Remediation ("NFR") letter dated September 12, 2003. The NFR letter confirmed that the remediation had been completed to the satisfaction of the Illinois EPA, but noted that residual contamination (chromium and TCE at concentrations below residential but above unrestricted use standards) remains in soil and groundwater at the south portion of the property. Accordingly, the NFR letter was issued subject to an environmental land use control (institutional control) that restricts the use of groundwater at the site for potable or irrigation purposes.
(d) The 2003 NFR letter and associated institutional controls are recorded against the property in the Winnebago County land records. A copy of the NFR letter is attached to this memorandum as Appendix C.
(e) No listings were identified on the federal NPL (Superfund), RCRA Corrective Action facilities list, or other federal or state cleanup lists for the subject property, apart from the VSRP listing described above.
4. Site Reconnaissance Findings
Clearwater Environmental conducted a visual site reconnaissance of the property on February 8, 2025. The site reconnaissance was conducted by Dr. Nathan Foley, Project Manager, and James Callahan, Senior Environmental Scientist. The principal findings are summarized below:
Current Environmental Conditions. No evidence of current releases, active contamination, or new environmental conditions was observed during the site reconnaissance. The manufacturing floor, heat treating wing, and warehouse areas were clean and well-maintained. No unusual odors, staining, stressed vegetation, or other visual indicators of active environmental contamination were observed.
Groundwater Monitoring Wells. Four active groundwater monitoring wells were observed on the south side of the property, in the area of the former plating operations. The monitoring wells are maintained pursuant to the requirements of the 2003 NFR letter and the associated institutional control. Nexford's environmental manager confirmed that groundwater samples are collected from these wells on a semi-annual basis and analyzed for chromium and TCE, with results reported to the Illinois EPA. Clearwater Environmental reviewed the most recent available monitoring results (from August 2024) and noted that contaminant concentrations remain stable and below the levels specified in the NFR letter for the residential exposure pathway.
Heat Treating Operations. Current heat treating operations in the south wing utilize modern closed-loop systems with atmosphere-controlled furnaces and quench systems. No chlorinated solvents are in current use at the facility. The transition from the prior owner's metal plating operations (which used TCE and chromium) to Nexford's current heat treating operations (which do not) is consistent with a significant reduction in the environmental risk profile associated with the south wing.
Drum Storage Area. A properly maintained drum storage area was observed, with secondary containment in place for bulk oil and coolant storage. Waste drums were properly labeled and manifested for offsite disposal by licensed haulers.
5. Findings and Classifications
Recognized Environmental Conditions ("RECs"): None identified. Although the property has a documented history of soil and groundwater contamination from prior metal plating operations, the contamination was fully investigated and remediated under the Illinois EPA VSRP, and the NFR letter was issued in 2003 confirming that remediation was completed to the agency's satisfaction. Clearwater Environmental did not identify any new or unaddressed RECs at the property.
Controlled Recognized Environmental Conditions ("CRECs"): One CREC was identified. The 2003 NFR letter from the Illinois EPA was issued subject to an institutional control (environmental land use control) restricting the use of groundwater at the site for potable or irrigation purposes. Residual contamination — specifically, chromium and TCE at concentrations below residential screening levels but above unrestricted use standards — remains in soil and groundwater at the south portion of the property. This residual contamination is managed through the institutional control and an ongoing groundwater monitoring program (semi-annual sampling and reporting to the Illinois EPA). Because hazardous substances are allowed to remain in place subject to required controls, this condition meets the ASTM E1527-21 definition of a CREC.
Historical Recognized Environmental Conditions ("HRECs"): None identified. The prior contamination is appropriately classified as a CREC rather than an HREC because institutional controls and ongoing monitoring requirements remain active. An HREC classification would apply only if the contamination had been addressed to unrestricted use standards without the need for ongoing controls, which is not the case here.
De Minimis Conditions: None noted beyond routine industrial operations associated with the LQG hazardous waste management program.
6. Recommendations. Clearwater Environmental does not recommend a Phase II Environmental Site Assessment for this property. The prior contamination has been thoroughly investigated and remediated, the NFR letter is on file, and the institutional controls and groundwater monitoring program are functioning as intended. No new environmental conditions were identified that would warrant further subsurface investigation.
Calderwood & Harkness makes the following additional recommendations:
(a) Nexford should continue compliance with the groundwater monitoring requirements under the 2003 NFR letter, including semi-annual groundwater sampling from the four monitoring wells on the south side of the property and timely submission of monitoring reports to the Illinois EPA.
(b) The CREC and institutional control must be disclosed in the Credit Agreement environmental matters schedule. We will prepare the appropriate schedule language in connection with the Credit Agreement mark-up (target date: March 3, 2025) and coordinate with Borrower's counsel at Whitfield & Gage LLP (Margaret Ashby / Jonathan Ferris) to ensure the disclosure is complete and accurate.
(c) The institutional control (groundwater use restriction) must be addressed in the Winnebago County mortgage. The recorded environmental land use control will appear on the title search and must be listed as a permitted encumbrance in the mortgage. Calderwood & Harkness will coordinate with Hargrove & Whitmore LLP (Robert Kimura, Illinois local counsel) regarding the treatment of the institutional control in the mortgage instrument and the title commitment.
(d) The institutional control should be disclosed to Landmark Title Assurance Company in connection with the lender's title insurance policy for this property. The title commitment should reflect the recorded institutional control, and we should confirm with Landmark that the institutional control will not result in an exception to title coverage that is unacceptable to Crescent Harbor as Collateral Agent.
(e) A reliance letter should be obtained from Clearwater Environmental for the benefit of Crescent Harbor Bank, N.A. (as Administrative Agent and Collateral Agent) and the Lenders under the Credit Agreement.
C. Property 3: 600 Manufacturers Row, Greenville, SC 29607
1. Property Description
Property 3 consists of an approximately 35-acre parcel improved with a 310,000 square foot manufacturing and assembly facility. The facility includes the main fabrication and assembly building (approximately 230,000 square feet), a testing and quality control wing (approximately 40,000 square feet), warehouse space (approximately 30,000 square feet), and administrative offices (approximately 10,000 square feet). The property is located in an industrial area of Greenville, Greenville County, South Carolina, with access from Manufacturers Row, a dedicated industrial roadway.
The property is owned by Nexford Engineered Systems, LLC ("NES"), a Delaware limited liability company and Subsidiary Guarantor under the Credit Agreement. NES is the principal operating entity for the Engineered Systems segment, which produces fabricated metal structures, hydraulic systems, and industrial assemblies. The Greenville facility is the segment's primary production site.
Summit Industrial Fabrication Co., a South Carolina corporation and Subsidiary Guarantor acquired by Nexford in 2022, operates a satellite fabrication operation at 820 Summit Drive, Spartanburg, SC 29303. However, the Spartanburg property has an appraised value below the $10,000,000 threshold for Mortgaged Properties under the Credit Agreement and is therefore not subject to a mortgage and was not included in the Phase I ESA scope.
The original manufacturing facility was constructed circa 1985. Significant expansions were completed in 1997 (addition of the testing and quality control wing) and 2013 (expansion of warehouse and shipping facilities). The property has been used continuously for manufacturing and assembly operations since its initial construction.
The appraised value of this property is $38,000,000, as determined by Greystone Valuation Services, Inc. (Daniel Pritchard, MAI, Lead Appraiser). A mortgage on this property is to be recorded in Greenville County, South Carolina, as a post-closing deliverable due by April 30, 2025.
2. Current and Historical Use
Current Use. The property is currently used for metal fabrication, welding (MIG, TIG, and stick welding), mechanical assembly, hydraulic system assembly and testing, and warehousing. Operations involve the use of welding gases, cutting fluids, hydraulic oils, cleaning solvents, and paint and coating materials. Waste streams include waste oils, spent hydraulic fluids, welding waste, and minor quantities of spent solvents. The property is classified as a Small Quantity Generator ("SQG") of hazardous waste under RCRA.
Historical Use. The property was constructed on previously undeveloped land (forested) in 1985 for manufacturing use. The property has had a single chain of ownership throughout its operational history: it was originally developed and operated by a predecessor company (Greenville Industrial Fabrication, Inc.) that was later acquired by Nexford in 2008. The transition of ownership from Greenville Industrial Fabrication, Inc. to Nexford did not involve any change in the nature or type of operations conducted at the facility.
Clearwater Environmental's review of historical aerial photographs and available historical records confirmed that the property was undeveloped forested land prior to 1985. No prior industrial, commercial, agricultural (other than silviculture), or waste disposal use of the land was identified. There is no evidence of any prior use as a gasoline station, dry cleaning facility, landfill, or waste disposal facility.
3. Environmental Database and Records Review
The environmental database search yielded the following findings relevant to the subject property:
(a) The property is listed as a Small Quantity Generator ("SQG") of hazardous waste under RCRA. Waste generation is consistent with the fabrication and assembly operations conducted at the facility and is managed through routine hazardous waste procedures.
(b) The property is not listed on any federal or South Carolina state cleanup, remediation, or brownfields lists. No listings were identified on the federal NPL (Superfund), RCRA Corrective Action facilities list, South Carolina Department of Health and Environmental Control (SCDHEC) Voluntary Cleanup Program list, or any other state environmental database that would indicate a history of contamination or remediation at the property.
(c) No regulatory enforcement actions or open violations were identified in connection with the property in federal or state environmental databases.
(d) Adjacent properties within the ASTM search radius were reviewed. The surrounding area is characterized by light industrial and commercial uses. No listed sites were identified within the ASTM search radius that would indicate a concern for migration of contamination from offsite sources onto the subject property.
4. Site Reconnaissance Findings
Clearwater Environmental conducted a visual site reconnaissance of the property on February 7, 2025. The site reconnaissance was conducted by Dr. Nathan Foley, Project Manager, and Sarah Kim, Staff Environmental Scientist. The principal findings are summarized below:
General Conditions. The facility was well-maintained, and no evidence of environmental releases, spills, or contamination was observed during the site reconnaissance. The manufacturing floor, testing wing, warehouse, and exterior areas were clean and orderly.
Aboveground Storage Tanks ("ASTs"). One 5,000-gallon aboveground diesel fuel storage tank was observed adjacent to the facility, used to fuel a backup emergency generator. The tank was in good condition, properly labeled, and equipped with secondary containment (a steel containment pan with capacity exceeding 110% of the tank volume). No staining, leaks, or evidence of releases was observed in the vicinity of the tank.
Hydraulic Testing Area. The hydraulic system testing area uses closed-loop fluid systems. No floor drains connected to the storm sewer or sanitary sewer system were observed in the testing area. Hydraulic fluids are contained within the closed-loop systems and collected for recycling or disposal upon system drain-down.
Waste Management. Waste oil and spent hydraulic fluids are collected in properly labeled containers and managed through a licensed third-party waste hauler (Pinnacle Systems, per Nexford's waste management records). No evidence of improper waste disposal was observed.
Electrical Equipment. No PCB-containing transformers or electrical equipment was identified on site. Electrical transformers serving the facility are pad-mounted units that are reportedly non-PCB per Nexford's maintenance records and equipment labeling. Clearwater Environmental noted that the transformers are marked with "No PCBs" labels.
5. Findings and Classifications
Recognized Environmental Conditions ("RECs"): None identified.
Controlled Recognized Environmental Conditions ("CRECs"): None identified.
Historical Recognized Environmental Conditions ("HRECs"): None identified.
De Minimis Conditions: Routine industrial operations, including SQG hazardous waste management procedures, were observed to be in compliance with applicable regulations. No conditions were identified that would warrant further investigation or that rise above the de minimis level.
Business Environmental Risks ("BERs"): None of note. The Greenville property presents a straightforward environmental profile consistent with a well-managed fabrication and assembly operation.
6. Recommendations. Clearwater Environmental does not recommend any further investigation for this property. The Greenville facility presents the lowest environmental risk profile among the four assessed sites. No RECs, CRECs, HRECs, or material BERs were identified, and the property's historical use (developed on previously undeveloped forested land by a single chain of ownership with consistent operations) further supports the low-risk assessment.
Calderwood & Harkness recommends the following:
(a) Nexford should maintain its current environmental compliance practices at this facility, including SQG hazardous waste management procedures.
(b) A reliance letter should be obtained from Clearwater Environmental for the benefit of Crescent Harbor Bank, N.A. (as Administrative Agent and Collateral Agent) and the Lenders under the Credit Agreement.
(c) No special disclosures or conditions related to this property are required in the Credit Agreement environmental matters schedule.
D. Property 4: 9100 Westpark Industrial Boulevard, Houston, TX 77063
1. Property Description
Property 4 consists of an approximately 18-acre parcel improved with a 175,000 square foot coatings and surface treatment facility. The facility includes the main coatings application building (approximately 100,000 square feet), a surface preparation and blasting building (approximately 35,000 square feet), a quality control laboratory (approximately 10,000 square feet), warehouse and shipping space (approximately 20,000 square feet), and administrative offices (approximately 10,000 square feet). The property is located in an industrial area of west Houston, Harris County, Texas, with access from Westpark Industrial Boulevard.
The property is owned by Nexford Coatings & Surface Technologies, Inc. ("NCST"), a Delaware corporation and Subsidiary Guarantor under the Credit Agreement. Ridgepoint Specialty Coatings, LLC ("Ridgepoint"), a Texas limited liability company and Subsidiary Guarantor, operates from this same address. Ridgepoint was founded in 1996 and was acquired by NCST in 2023 as part of Nexford's expansion into the industrial coatings market. Title to the real property is held by NCST; Ridgepoint conducts its operations at the facility under an intercompany lease arrangement.
The Industrial Coatings & Surface Technologies segment, which operates principally from this facility, represents approximately 17% of Nexford's $2,100,000,000 last-twelve-months ("LTM") consolidated revenue.
The original facility was constructed circa 1996 by Ridgepoint Specialty Coatings for use as an industrial coatings application and surface treatment facility. A significant renovation was completed in 2017, including upgrades to the coatings application booths, installation of new curing ovens, and modernization of the ventilation and air emissions control systems. The facility has been used continuously for industrial coatings and surface treatment operations since 1996.
The appraised value of this property is $28,000,000, as determined by Greystone Valuation Services, Inc. (Daniel Pritchard, MAI, Lead Appraiser). A mortgage on this property is to be recorded in Harris County, Texas, as a post-closing deliverable due by April 30, 2025.
2. Current and Historical Use
Current Use. The property is currently used for industrial coatings application (spray, dip, and electrostatic application methods), surface preparation (abrasive blasting, chemical cleaning), curing (convection and infrared curing ovens), quality control testing (laboratory analysis of coating thickness, adhesion, corrosion resistance), and warehousing. Operations involve the extensive use of volatile organic compounds ("VOCs") including xylene, toluene, methyl ethyl ketone ("MEK"), and various proprietary coating solvents and resins. The property generates waste streams including waste solvents, waste paint and coating materials, and spent blasting media. The property is classified as a Small Quantity Generator ("SQG") of hazardous waste under RCRA. The facility operates under a Title V air permit issued by the Texas Commission on Environmental Quality ("TCEQ") due to the VOC emissions associated with the coatings application operations.
Historical Use. The site was previously undeveloped land adjacent to a former oil field service yard to the west. The facility was constructed in 1996 for industrial coatings use and has been used for that purpose continuously since construction. The facility was originally developed and operated by Ridgepoint Specialty Coatings, LLC (founded 1996), which was acquired by Nexford Coatings & Surface Technologies, Inc. in 2023.
Adjacent Property (Former Oil Field Service Yard). The property immediately to the west of the subject property was historically used as an oil field service yard from approximately the 1970s through approximately 2008. The oil field service yard was used for the storage, maintenance, and staging of oil field equipment and service vehicles. The former oil field service yard is now occupied by a commercial warehouse operation under separate ownership. The environmental history of this adjacent property is significant to the Phase I ESA findings for the subject property, as discussed below.
3. Environmental Database and Records Review
The environmental database search yielded the following findings relevant to the subject property and its immediate surroundings:
(a) The subject property is listed as a Small Quantity Generator ("SQG") of hazardous waste under RCRA. Waste streams include waste solvents, waste paint and coating materials, and spent blasting media.
(b) The adjacent former oil field service yard (to the west) is listed on the TCEQ Voluntary Cleanup Program ("VCP") database. A petroleum release from a former underground storage tank ("UST") on the adjacent property was reported to TCEQ in 2005. The UST reportedly contained diesel fuel and was associated with the fueling of oil field service equipment. The petroleum release resulted in soil and groundwater contamination at the adjacent property. According to TCEQ records reviewed by Clearwater Environmental, remediation activities at the adjacent property are ongoing under the VCP, conducted by the current property owner (identified in TCEQ records as Westpark Properties, LLC). Monitoring data available in the TCEQ VCP file indicates that a dissolved-phase petroleum hydrocarbon groundwater plume associated with the release migrated to the east (toward the subject property); however, monitoring data as of 2023 (the most recent data available in TCEQ records) shows that the plume has been contained approximately 150 feet west of the subject property boundary. A summary of the TCEQ VCP listing is provided in Appendix D to this memorandum.
(c) The subject property itself is not listed on the federal NPL (Superfund), RCRA Corrective Action facilities list, the TCEQ State Superfund Program list, or any other federal or state cleanup or remediation list.
4. Site Reconnaissance Findings
Clearwater Environmental conducted a visual site reconnaissance of the property on February 14, 2025. The site reconnaissance was conducted by Dr. Nathan Foley, Project Manager, and Michael Rosen, Senior Environmental Scientist. The principal findings are summarized below:
Chemical Storage Area. The facility maintains a dedicated, climate-controlled, fire-rated chemical storage room for the storage of VOCs and other hazardous chemicals used in coatings operations. Chemicals observed in storage included xylene, toluene, methyl ethyl ketone (MEK), and various proprietary coating solvents and resins. All containers were properly labeled, stored on spill containment pallets, and segregated by compatibility class. The chemical storage room was equipped with fire suppression systems, explosion-proof lighting, and continuous ventilation, in compliance with OSHA and National Fire Protection Association ("NFPA") requirements. No evidence of leaks, spills, or releases was observed in the chemical storage area.
Aboveground Storage Tanks ("ASTs"). Two 5,000-gallon ASTs were observed at the facility: one used for waste solvent accumulation and one for virgin (fresh) solvent storage. Both tanks were in good condition, properly labeled, and equipped with secondary containment (concrete containment berms). A Spill Prevention, Control, and Countermeasure ("SPCC") plan is maintained for the facility and was available for Clearwater Environmental's review. No evidence of leaks, spills, or releases was observed in the vicinity of the ASTs.
Underground Storage Tanks ("USTs"). No USTs are currently on the property. No evidence of former USTs (e.g., vent pipes, fill ports, dispensers) was observed, and a review of Texas State Fire marshal records did not identify any registered USTs at the subject property address.
Air Emissions. The facility operates under a Title V air permit issued by TCEQ, which regulates VOC emissions from the coatings application, curing, and solvent storage operations. Clearwater Environmental reviewed TCEQ compliance records and confirmed that the facility's Title V air permit renewal application was filed timely. No outstanding violations, enforcement actions, or notices of non-compliance were identified in TCEQ records for the subject property.
West Perimeter Area. Minor exterior soil staining was observed near the west perimeter fence line, in the area of the subject property closest to the adjacent former oil field service yard. The staining appeared to be surficial and was limited to a small area (approximately 10 feet by 15 feet) near the fence line. Clearwater Environmental noted that this area warrants monitoring given the known groundwater plume on the adjacent property and the eastward direction of groundwater flow in the area. While the staining could be attributable to routine surface runoff or minor equipment drips, Clearwater Environmental co

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP MEMORANDUM

Record

Parties

Dates

Amounts