MEMORANDUM

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
To: Claudia Merritt, Partner; Ian Blackwood, Partner
From: Sophie Tremblay, Associate; Marcus Leung, Associate
Date: February 24, 2025
Re: Insurance Program Review — Nexford Industrial Holdings Inc. ($1,400,000,000 Senior Secured Term Loan B)
Matter No.: 1005-00001
Client/Matter Code: IBL-NIH-2025-031
I. Executive Summary
This memorandum summarizes our review of the insurance program maintained by Nexford Industrial Holdings Inc. ("Nexford" or the "Company") in connection with the proposed $1,400,000,000 senior secured Term Loan B refinancing and dividend recapitalization (the "Transaction"). Crescent Harbor Bank, N.A. will serve as Administrative Agent and Collateral Agent under the credit agreement governing the Term Loan B facility. The Transaction is currently expected to close on or about March 28, 2025.
Our review was conducted based on information and documentation provided by Vantage Risk Advisors, LLC ("Vantage"), Nexford's insurance broker of record. Our principal point of contact at Vantage has been Rachel Sorensen, Account Executive, located at 350 North Clark Street, Chicago, Illinois 60654. We have also obtained supplemental information from Priya Mehta, Vice President, Treasury & Corporate Finance at Nexford, as well as from the due diligence materials produced by Nexford in response to the Due Diligence Request List issued by our firm on February 4, 2025.
Based on our review, Nexford's insurance program is generally consistent with industry norms for a diversified industrials and specialty manufacturing platform of its size, with approximately $2.1 billion in annual revenue and 14 manufacturing facilities across the United States and Canada. The program provides comprehensive property and casualty, liability, environmental, directors and officers, and specialty coverages that appear appropriate in scope and in aggregate for the Company's operations and risk profile.
However, we have identified certain adjustments that will be required to ensure compliance with the anticipated insurance covenants in the credit agreement, as well as specific items that warrant further follow-up prior to and following closing. Most significantly:
•  All existing lender loss payee, mortgagee, and additional insured endorsements currently reference Atlas Meridian Bank, N.A. (the outgoing administrative agent and collateral agent under the existing credit facility) and must be updated to name Crescent Harbor Bank, N.A. as Collateral Agent in all applicable capacities.
•  Flood insurance compliance for the Houston, Texas mortgaged property requires confirmation in light of National Flood Insurance Act requirements.
•  Written confirmation that all recently acquired subsidiaries are properly scheduled as named insureds on all applicable policies remains outstanding.
•  The directors and officers liability insurance program should be reviewed in light of the approximately $335,000,000 dividend recapitalization to Granite Peak NIH Holdings, LLC.
Throughout this memorandum, we cross-reference the anticipated credit agreement insurance requirements based on the Crescent Harbor initial term sheet dated February 5, 2025 and the Calderwood & Harkness annotated term sheet dated February 7, 2025. We have also coordinated with the deal team on collateral, security, and mortgage-related workstreams as they intersect with insurance matters.
II. Scope of Review
Our review encompassed the following documents and information sources:
•  Insurance policy schedules and summary of insurance programs prepared by Vantage Risk Advisors, LLC, dated as of January 15, 2025, and updated through February 12, 2025;
•  Certificates of insurance for all material policies issued by Vantage Risk Advisors, LLC;
•  Policy declarations pages for the current policy year for all material lines of coverage;
•  Selected endorsements, including lender loss payee, mortgagee, additional insured, and cancellation notice endorsements on property and liability policies;
•  Correspondence and verbal communications with Rachel Sorensen (Vantage Risk Advisors) and Priya Mehta (Nexford);
•  Due diligence materials produced by Nexford in response to the Due Diligence Request List issued February 4, 2025, including historical loss runs, claims summaries, and premium schedules; and
•  The Crescent Harbor initial term sheet dated February 5, 2025, and the Calderwood & Harkness annotated term sheet dated February 7, 2025, to the extent relevant to anticipated insurance covenant requirements.
Coverage Periods. With the exception of the directors and officers liability policy (which is on a January 1 to January 1 policy year), the Company's insurance policies generally renew on July 1 of each calendar year. Accordingly, the current policy period for most lines of coverage is July 1, 2024 through June 30, 2025.
Entities Covered. The insurance program covers Nexford Industrial Holdings Inc. and all of its domestic and foreign subsidiaries as named insureds or additional insureds, including the following entities:
•  Nexford Precision Components, Inc.
•  Nexford Engineered Systems, LLC
•  Nexford Coatings & Surface Technologies, Inc.
•  Nexford Manufacturing Services, LLC
•  Nexford Properties, LLC
•  Nexford International Holdings, Inc.
•  Clearfield Tool & Die, Inc.
•  Summit Industrial Fabrication Co.
•  Ridgepoint Specialty Coatings, LLC
•  Lakeshore Precision Engineering, Inc.
•  Nexford Canada Holdings ULC
•  Nexford Canada Manufacturing, Inc.
Limitation. This memorandum is based primarily on the summaries, declarations pages, and selected endorsements described above. Full policy forms (including complete terms, conditions, and exclusions) were not reviewed in all cases. Where we have reviewed specific endorsements or policy provisions, those are noted in the relevant sections below. We recommend that, if any specific coverage issue arises — whether in connection with a claim or with respect to a particular credit agreement requirement — the full policy form for the applicable line of coverage be obtained and reviewed at that time. Our analysis should not be construed as an opinion on the availability of coverage under any specific policy for any particular claim or loss event.
III. Summary of Insurance Program
The following sections provide a detailed summary of each material line of insurance coverage maintained by Nexford. Where applicable, we note any deviations from market norms, areas of potential concern, and items requiring follow-up.
A. Property and Casualty Insurance
Carrier: Continental Shield Underwriters, Inc.
Broker: Vantage Risk Advisors, LLC (Rachel Sorensen, Account Executive)
1. Property Insurance (All-Risk)
Nexford maintains an all-risk property insurance policy providing broad-form coverage for direct physical loss or damage from fire, windstorm, hail, explosion, and all other named and unnamed perils not otherwise excluded, subject to the terms and conditions of the policy.
Policy Period: July 1, 2024 through June 30, 2025.
Total Insured Value (TIV): Approximately $1,200,000,000 (covering real property, equipment, machinery, inventory, raw materials, work-in-process, finished goods, and business personal property at all 14 manufacturing and office facilities).
Per-Occurrence Limit: $500,000,000.
Annual Aggregate Limit: $1,000,000,000.
Deductibles:
•  Standard deductible: $500,000 per occurrence
•  Windstorm / Named Storm: $1,000,000 per occurrence
•  Flood: $2,500,000 per occurrence (at applicable locations)
•  Earthquake: $2,500,000 per occurrence (at applicable locations)
Coverage Territory: The United States and Canada.
Named Insureds: Nexford Industrial Holdings Inc. and all subsidiaries as set forth in the policy schedule (see Section II above for the full list of covered entities).
Key Properties Covered. The following properties, each with a fair market value in excess of $10,000,000, are expected to constitute mortgaged collateral under the credit agreement:
Equipment and Inventory Coverage. Equipment and machinery are covered on a replacement cost basis, ensuring that the Collateral Agent's interest in the personal property collateral is protected against depreciation in the event of a covered loss. Inventory — including raw materials, work-in-process, and finished goods — is covered on an actual cash value basis, which is standard for industrial manufacturing operations given the difficulty of establishing replacement cost for goods in various stages of production.
Sublimits. The property policy contains the following sublimits for specified perils:
•  Flood: $100,000,000 per occurrence and in the aggregate
•  Earthquake: $75,000,000 per occurrence and in the aggregate
•  Boiler and machinery (equipment breakdown): $50,000,000 per occurrence
Flood Zone Considerations. We note that the Houston, Texas property located at 9100 Westpark Industrial Boulevard is situated in a designated flood zone (Zone X, which FEMA classifies as an area of moderate flood risk, outside the 100-year floodplain but within the 500-year floodplain). The flood sublimit of $100,000,000 is adequate relative to the appraised value of the Houston property ($28,000,000). However, as discussed further in Section IV below, additional analysis is required to confirm compliance with the National Flood Insurance Act with respect to the mortgage on this property.
None of the other three mortgaged properties are located in special flood hazard areas based on the information provided to us by Nexford.
2. Business Interruption Insurance
Business interruption coverage is included within the all-risk property policy and provides protection against loss of income resulting from the interruption of business operations caused by a covered peril.
Indemnity Period: 12 months, with a 6-month extended period of indemnity beyond the restoration period, providing up to 18 months of total coverage. This is consistent with market practice for diversified industrial manufacturers, where reconstruction of specialized manufacturing facilities can extend beyond 12 months.
Coverage Basis: Gross earnings, including extra expense coverage for costs incurred to expedite the resumption of operations (e.g., temporary relocation costs, expedited procurement of replacement equipment, overtime labor).
Sublimit: $250,000,000 per occurrence.
Waiting Period: 72 hours from the time of the covered loss event. This is a standard waiting period for business interruption coverage in the manufacturing sector.
We note that the business interruption sublimit of $250,000,000 appears adequate relative to Nexford's annual revenue of approximately $2.1 billion (representing approximately 43 days of gross revenue, which, when coupled with the 12-month indemnity period, provides meaningful protection for the lender group). Nexford's operations are distributed across 14 facilities, which mitigates concentration risk; however, the Schaumburg, Illinois headquarters and primary manufacturing facility represents a significant single point of exposure. We recommend confirming with Nexford management that the business interruption sublimit has been evaluated in the context of a total loss at the Schaumburg facility.
3. General Liability Insurance
Nexford maintains a commercial general liability ("CGL") policy on an occurrence form basis, providing coverage for third-party bodily injury and property damage claims arising from Nexford's operations, products, and premises.
Carrier: Continental Shield Underwriters, Inc.
Policy Period: July 1, 2024 through June 30, 2025.
Per-Occurrence Limit: $5,000,000.
General Aggregate Limit: $10,000,000.
Products-Completed Operations Aggregate: $10,000,000.
Deductible / Self-Insured Retention (SIR): $250,000 per occurrence.
Coverage Includes:
•  Premises and operations liability
•  Products and completed operations liability
•  Personal and advertising injury liability
•  Contractual liability (covering insured contracts, including indemnification obligations assumed under commercial agreements)
•  Fire legal liability: $1,000,000 sublimit
Key Exclusions: The CGL policy contains standard exclusions, including but not limited to:
•  Pollution and environmental liability (covered under the separate Pollution Legal Liability policy discussed in Section III.C below)
•  Asbestos-related claims
•  Professional liability / errors and omissions
•  Employment practices liability
•  Workers' compensation and employer's liability (covered under separate policies)
The occurrence-form CGL policy is appropriate for a manufacturing company of Nexford's profile, as it provides coverage for claims arising from events that occur during the policy period, regardless of when the claim is reported — a critical feature given the potential for latent product defect claims in the aerospace and defense supply chain.
4. Automobile Liability Insurance
Carrier: Continental Shield Underwriters, Inc.
Combined Single Limit: $5,000,000.
Coverage: Owned automobiles, hired automobiles, and non-owned automobiles. The policy covers liability for bodily injury and property damage arising from the use of any covered automobile in connection with Nexford's business operations.
Fleet Size: Approximately 175 vehicles across all locations, including service vehicles, delivery trucks, and management vehicles. The fleet is concentrated at the Schaumburg, Illinois; Rockford, Illinois; and Houston, Texas facilities.
The $5,000,000 combined single limit is within the range of market norms for an industrial fleet of this size. Additional protection is provided by the umbrella/excess liability tower described below.
5. Umbrella / Excess Liability Insurance
Nexford maintains a layered umbrella and excess liability insurance program providing $100,000,000 of coverage in excess of the underlying CGL, automobile liability, and employer's liability policies.
Lead Carrier (Primary Excess Layer): Continental Shield Underwriters, Inc.
Program Structure:
Self-Insured Retention: $10,000 for claims not covered by any underlying policy (i.e., for claims that fall within the umbrella's broader coverage grant but are not covered by the CGL, automobile, or employer's liability policies).
Drop-Down Feature: The umbrella policy includes a drop-down provision that provides coverage at the primary level in the event that the aggregate limits of any underlying policy are exhausted during the policy period. This is a valuable feature that ensures continuity of coverage in a high-frequency loss scenario.
The excess layers are placed on a follow-form basis, meaning they follow the terms, conditions, and exclusions of the Continental Shield primary excess layer, except as otherwise specified. We recommend that, in connection with any future review of the insurance program, the specific terms of the follow-form excess layers be confirmed to ensure there are no material coverage gaps between layers.
A $100,000,000 total umbrella/excess liability tower is within the range of market practice for a diversified industrial manufacturing company of Nexford's size and revenue profile, particularly given the elevated product liability exposure associated with the aerospace and defense supply chain (discussed further in Section V.B below).
6. Workers' Compensation and Employer's Liability
Carrier: Continental Shield Underwriters, Inc.
Workers' Compensation: Statutory limits for all states of operation, including Illinois, Pennsylvania, South Carolina, Texas, Michigan, Ohio, and all other states in which Nexford maintains operations or employees. Coverage is provided in accordance with the applicable workers' compensation statute of each state.
Employer's Liability:
•  $1,000,000 per accident
•  $1,000,000 disease — per employee
•  $1,000,000 disease — policy limit
Experience Modification Rate: 0.87. This rate, which is below the 1.00 industry baseline, reflects a favorable loss history relative to Nexford's industry peers and indicates effective workplace safety and risk management practices. The below-average modification rate also results in reduced premium costs.
Texas Coverage. We note that Nexford elects to maintain workers' compensation coverage in the State of Texas, where such coverage is not mandated by law (Texas being a "non-subscriber" optional state). Nexford's decision to opt into coverage is prudent given the nature of its manufacturing operations at the Houston facility and eliminates the need for the Company to defend against negligence-based personal injury claims by employees without the protection of the exclusive remedy doctrine.
B. Directors & Officers Liability Insurance
Carrier: Meridian Specialty Insurance Co.
Policy Type: Directors & Officers ("D&O") liability insurance, on a claims-made and reported basis.
Policy Period: January 1, 2025 through January 1, 2026. We note that the D&O policy operates on a calendar-year basis, which differs from the July 1 renewal cycle applicable to most of the Company's property and casualty lines.
Aggregate Limit: $25,000,000.
Retention:
•  Side A (Non-Indemnifiable Loss): $0 retention. Side A coverage applies directly to individual directors and officers for losses that the Company is unable or unwilling to indemnify, including in the event of insolvency. The zero retention ensures immediate access to coverage for individual directors and officers.
•  Side B (Corporate Reimbursement): $500,000 corporate retention. Side B coverage reimburses the Company for amounts paid to indemnify its directors and officers.
•  Side C (Entity Coverage): $500,000 corporate retention. Side C coverage provides direct entity coverage for securities claims brought against the Company itself. Because Nexford is a privately held company, the applicability of Side C coverage is limited, though it may be triggered in certain circumstances (e.g., bondholder or lender claims characterized as securities claims under the policy).
Named Insureds: All past, present, and future directors and officers of Nexford Industrial Holdings Inc. and its subsidiaries, including any individuals serving on the boards of directors of subsidiaries or serving as officers of any subsidiary at the direction of Nexford.
Key Exclusions:
•  Fraud, dishonesty, and personal profit, subject to a "final adjudication" carve-out (meaning the exclusion applies only after a final, non-appealable adjudication or written admission of fraud or dishonesty)
•  Prior and pending litigation as of the policy inception date
•  ERISA claims
•  Professional liability
•  Pollution
•  Bodily injury and property damage (covered under CGL)
Tail / Extended Reporting Period: The policy includes a provision for a 6-year extended reporting period ("tail") in the event of a change of control of the Company. This is a critical feature for directors and officers, as it ensures that claims arising from pre-change-of-control conduct can be reported and covered for an extended period following the transaction.
Change of Control Definition. We note that the D&O policy defines "change of control" as the acquisition by any person or group (other than Granite Peak Capital Partners, LP and its affiliates, including Granite Peak NIH Holdings, LLC) of more than 50% of the voting equity securities of the Company. This definition differs from the change of control threshold that is anticipated in the credit agreement, which, based on the Crescent Harbor term sheet, is expected to be set at 35% of voting equity. However, this difference does not create any issue in the context of the current Transaction, as Granite Peak retains 100% of the equity ownership of Nexford through its holding vehicle, Granite Peak NIH Holdings, LLC, and the refinancing and dividend recapitalization will not alter the equity ownership structure. The D&O change of control provision should, however, be flagged for consideration in any future equity disposition or secondary sale transaction.
C. Environmental / Pollution Liability Insurance
Carrier: Continental Shield Underwriters, Inc. (Environmental Specialty Division).
Policy Type: Pollution Legal Liability ("PLL"), on a claims-made and reported basis.
Policy Period: July 1, 2024 through June 30, 2025.
Per-Occurrence Limit: $10,000,000.
Aggregate Limit: $25,000,000.
Retention: $100,000 per pollution incident.
Covered Locations: All 14 manufacturing and office facilities, including the four properties expected to constitute mortgaged collateral under the credit agreement.
Coverage Includes:
•  Third-party bodily injury and property damage arising from pollution conditions originating at or migrating from covered locations
•  On-site cleanup and remediation costs for pre-existing and new pollution conditions discovered during the policy period
•  Off-site cleanup costs for pollution conditions that have migrated from a covered location to third-party properties
•  Transportation pollution liability (covering pollution events arising during the transport of materials to and from covered locations)
•  Legal defense costs in connection with covered pollution claims
Cross-Reference to Phase I Environmental Site Assessments. Phase I Environmental Site Assessments ("ESAs") were conducted by Clearwater Environmental Sciences, Inc. (Dr. Nathan Foley, Project Manager) for each of the four mortgaged properties. Our review of the Phase I ESAs is set forth in a separate memorandum dated February 22, 2025. In summary, no recognized environmental conditions ("RECs") requiring immediate remediation were identified at any of the four mortgaged properties. However, historical operations at the Houston, Texas facility (which has been used for industrial coatings and surface treatment processes since the late 1970s) were noted as a controlled recognized environmental condition ("CREC"), and continued monitoring of groundwater conditions at that facility was recommended by Clearwater. The existing PLL coverage provides an important backstop for any environmental liabilities that may arise in connection with ongoing operations or historical contamination at the Houston facility and other coatings operations.
D. International Coverage (Canada)
Nexford maintains Canadian operations through two entities: Nexford Canada Holdings ULC (organized under the laws of British Columbia, with operations based in Vancouver, British Columbia) and Nexford Canada Manufacturing, Inc. (organized under the laws of Ontario, with a manufacturing facility located in Mississauga, Ontario).
The Company's property insurance and general liability insurance programs extend to the Canadian operations through the controlled master program coordinated by Vantage Risk Advisors. Specifically, the all-risk property policy and CGL policy each include Canadian operations within the coverage territory and list the Canadian entities as named insureds.
In addition, local admitted insurance policies are maintained in the provinces of Ontario and British Columbia for the following lines:
•  Workers' Compensation: Coverage is provided through the applicable provincial statutory workers' compensation schemes — the Workplace Safety and Insurance Board (WSIB) in Ontario and WorkSafeBC in British Columbia. These are mandatory government-administered programs, and the Company is in compliance with registration and premium payment requirements.
•  Automobile Liability: Local admitted automobile liability coverage is maintained in compliance with provincial insurance requirements.
The controlled master program structure, with local admitted policies where required by law and a global master policy providing difference-in-conditions and difference-in-limits ("DIC/DIL") coverage, is a standard and effective approach for multinational industrial companies operating in Canada alongside U.S. operations.
E. Other Insurance Lines
In addition to the core property, casualty, liability, and D&O programs described above, Nexford maintains the following specialty lines of coverage:
Cyber Liability Insurance.
•  Carrier: Continental Shield Underwriters, Inc. (Technology Division)
•  Policy Type: Cyber liability, claims-made basis
•  Limit: $10,000,000 aggregate
•  Coverage includes: data breach response costs, network security liability, privacy liability, cyber extortion, business interruption from cyber events, and regulatory proceedings defense
•  This coverage is increasingly important for industrial companies, as operational technology (OT) systems at manufacturing facilities are a growing target for cyber threats. Nexford's reliance on computerized manufacturing equipment, ERP systems, and digital supply chain management tools across its 14 facilities supports the adequacy of maintaining this coverage.
Crime Insurance.
•  Carrier: Continental Shield Underwriters, Inc.
•  Limit: $5,000,000 aggregate
•  Coverage includes: employee theft, forgery and alteration, computer fraud, funds transfer fraud, and social engineering fraud
•  Named insureds: Nexford Industrial Holdings Inc. and all subsidiaries
Inland Marine / Equipment Floater.
•  Carrier: Continental Shield Underwriters, Inc.
•  Limit: $25,000,000
•  Coverage: Equipment, machinery, and materials in transit and at temporary locations, including customer sites, trade shows, and installation sites
•  This coverage is particularly relevant for the Engineered Systems segment, which regularly ships and installs large-scale industrial equipment at customer facilities.
Product Recall Insurance.
•  Carrier: Continental Shield Underwriters, Inc.
•  Aggregate Limit: $15,000,000
•  Coverage: First-party costs of product recall, including recall notification, shipping and logistics, disposal costs, and replacement product costs
•  This coverage is important given the Precision Components and Engineered Systems segments' role as suppliers to aerospace and defense customers, where product recalls can be costly and carry significant reputational risk. The product recall policy complements the products-completed operations coverage under the CGL policy, which addresses third-party liability arising from defective products, whereas the recall policy addresses the Company's own costs of initiating and executing a recall.
IV. Credit Agreement Insurance Requirements — Compliance Analysis
A. Anticipated Insurance Covenants
Based on our review of the Crescent Harbor initial term sheet dated February 5, 2025, the Calderwood & Harkness annotated term sheet dated February 7, 2025, and customary provisions found in senior secured Term Loan B credit agreements for sponsor-backed industrial companies, we anticipate that the credit agreement will include the following insurance-related requirements:
1.  Property Insurance. The Borrower shall maintain all-risk property insurance covering all collateral (both real and personal property) in amounts sufficient to cover the full replacement cost of the collateral, or such other amounts as are customary for companies in similar businesses of similar size and scope. Losses shall be payable to Crescent Harbor Bank, N.A., as Collateral Agent, as lender loss payee (with respect to personal property collateral) and as mortgagee (with respect to mortgaged real property).
2.  Liability Insurance. The Borrower shall maintain commercial general liability insurance in amounts customary for companies engaged in similar businesses of similar size and scope. Crescent Harbor Bank, N.A., as Collateral Agent, shall be named as an additional insured on such policies.
3.  Business Interruption Insurance. The Borrower shall maintain business interruption insurance in amounts customary for companies engaged in similar businesses.
4.  Flood Insurance. The Borrower shall maintain flood insurance for any property located in a special flood hazard area in compliance with the National Flood Insurance Act of 1968, as amended, and applicable regulations promulgated thereunder, to the extent such property constitutes collateral under the credit agreement.
5.  Mortgagee / Lender Loss Payee Endorsements. Property policies covering mortgaged properties shall contain a standard mortgagee clause naming Crescent Harbor Bank, N.A. as mortgagee. Property policies covering personal property collateral shall contain a lender loss payee endorsement naming Crescent Harbor Bank, N.A. as lender loss payee.
6.  Insurance Certificate Delivery. The Borrower shall deliver certificates of insurance and applicable endorsements to the Administrative Agent at closing and upon each policy renewal during the term of the credit agreement.
7.  Notice of Cancellation / Material Change. All policies shall provide for not less than 30 days' prior written notice to the Administrative Agent of any cancellation or material change in coverage (with not less than 10 days' notice in the case of cancellation for non-payment of premium).
8.  No Separate Insurance. The Borrower shall not obtain or carry separate insurance concurrent in form or contributing in the event of loss with the insurance required by the credit agreement if such separate insurance would diminish or otherwise adversely affect the Collateral Agent's rights or protections under the required insurance.
B. Compliance Assessment
The following table sets forth our assessment of Nexford's current insurance program against each of the anticipated credit agreement insurance requirements:
C. Specific Action Items for Closing
Based on the foregoing compliance assessment, the following specific action items must be completed in connection with the Transaction closing:
1.  Updated Certificates and Endorsements. Instruct Vantage Risk Advisors, LLC (Rachel Sorensen, Account Executive) to prepare updated certificates of insurance and endorsements naming Crescent Harbor Bank, N.A., as Collateral Agent, in the following capacities: (a) lender loss payee on all property insurance policies with respect to personal property collateral; (b) mortgagee on property insurance policies with respect to the four mortgaged properties (1400 Industrial Parkway, Schaumburg, IL; 2750 Commerce Drive, Rockford, IL; 600 Manufacturers Row, Greenville, SC; and 9100 Westpark Industrial Boulevard, Houston, TX); and (c) additional insured on all commercial general liability and umbrella/excess liability policies. Target delivery date for updated certificates and endorsements: March 21, 2025, to allow adequate time for review by the deal team and Crescent Harbor's counsel prior to the anticipated closing date of March 28, 2025.
2.  Removal of Prior Lender Endorsements. Request that Vantage Risk Advisors prepare endorsements removing Atlas Meridian Bank, N.A. as lender loss payee, mortgagee, and additional insured on all applicable policies, effective upon closing (March 28, 2025) and confirmation of receipt by Atlas Meridian of the payoff amount under the existing credit facility. These endorsements should be conditioned upon closing of the Transaction to ensure that there is no gap in lender protection.
3.  Flood Insurance Compliance — Houston, TX. Confirm compliance with National Flood Insurance Act requirements for the Houston, Texas property (9100 Westpark Industrial Boulevard). This requires coordination with Vantage Risk Advisors to determine whether: (a) the property falls within a Special Flood Hazard Area ("SFHA") as defined by FEMA, notwithstanding its current Zone X designation; (b) if so, whether a standalone National Flood Insurance Program ("NFIP") policy is required or whether the private flood coverage under the existing property policy satisfies the applicable federal requirements; and (c) if a standalone NFIP policy is required, the timeline and process for obtaining such coverage prior to or promptly following closing. We note that even if the property is not in a SFHA, Crescent Harbor may impose flood insurance requirements as a matter of internal lending policy.
4.  Coordination with Administrative Agent's Counsel. Coordinate with Whitfield & Gage LLP (Margaret Ashby, Partner, and Jonathan Ferris, Associate), counsel to Crescent Harbor Bank, N.A. as Administrative Agent, regarding the precise form of insurance certificates and endorsements required by the Administrative Agent. Crescent Harbor may have specific form requirements or proprietary endorsement language that must be incorporated.
5.  Environmental / Pollution Liability Acceptability. Confirm with Crescent Harbor (through Whitfield & Gage) that Nexford's environmental / pollution liability insurance coverage — $10,000,000 per occurrence and $25,000,000 aggregate — is acceptable given the nature of Nexford's operations, particularly the Industrial Coatings & Surface Technologies segment, which involves chemical processes, surface treatments, and coating applications that give rise to environmental risk. While we do not anticipate that the credit agreement will contain a specific pollution insurance requirement, the adequacy of this coverage may be a subject of diligence discussion.
6.  Verification of Recently Acquired Subsidiaries. Verify that all recently acquired subsidiaries are properly named as insureds or scheduled on all applicable policies. Specifically, we need written confirmation from Vantage Risk Advisors that the following entities are included:
•  Clearfield Tool & Die, Inc. (acquired by Nexford in 2021)
•  Summit Industrial Fabrication Co. (acquired by Nexford in 2022)
•  Ridgepoint Specialty Coatings, LLC (acquired by Nexford in 2023)
•  Lakeshore Precision Engineering, Inc. (acquired by Nexford in 2024)
Rachel Sorensen has confirmed orally that all four entities are scheduled as named insureds on all material policies; however, we have not yet received written confirmation. We have requested a written schedule of named insureds from Vantage and expect to receive it by March 7, 2025. In the event that any of these entities is not properly scheduled, updated endorsements adding the entity to the relevant policies must be obtained prior to closing.
V. Key Observations and Risk Considerations
In addition to the compliance-related matters discussed in Section IV, we note the following observations and risk considerations for the deal team's awareness:
A. Adequacy of Property Coverage Relative to Collateral Value
The total appraised value of the real property expected to constitute mortgaged collateral under the credit agreement is $193,000,000. The all-risk property insurance policy maintains a per-occurrence limit of $500,000,000 and an annual aggregate limit of $1,000,000,000, both of which substantially exceed the total real property collateral value. The per-occurrence limit is sufficient to cover a total loss at any single mortgaged property — including the most valuable property, the Schaumburg, Illinois corporate headquarters and primary manufacturing facility ($85,000,000 appraised value) — with significant headroom.
Total insured value across all assets (real property, equipment, inventory, and business personal property) is approximately $1.2 billion, reflecting a comprehensive property valuation that encompasses the full scope of Nexford's physical asset base.
Equipment and inventory located at the four mortgaged properties are separately scheduled on the property policy and covered on a replacement cost basis (for equipment) and actual cash value basis (for inventory), ensuring that the Collateral Agent's security interest in these assets is adequately protected by insurance in the event of a covered loss.
We are satisfied that the property insurance program provides adequate coverage relative to the collateral package.
B. Product Liability Exposure
Nexford's Precision Components segment is the Company's largest business unit, accounting for approximately 52% of consolidated revenue, or approximately $1.09 billion. This segment manufactures precision-engineered components for the aerospace and defense industries, among other end markets. The supply of parts to aerospace and defense customers creates an elevated product liability exposure, as defective components in aircraft, weapons systems, or other critical applications can result in catastrophic losses, significant personal injury claims, and government-mandated recalls.
The current insurance program provides the following layers of product liability protection:
•  CGL products-completed operations coverage: $10,000,000 aggregate
•  Product recall insurance: $15,000,000 aggregate
•  Umbrella / excess liability tower: $100,000,000 (excess of CGL and other underlying policies)
In the aggregate, these coverages provide meaningful protection against product liability and recall exposure. However, given the magnitude of the Precision Components segment's revenue and the severity profile of potential aerospace and defense product liability claims, we recommend that the adequacy of these limits be discussed with Nexford management — specifically, David Engstrom, General Counsel — to confirm the Company's historical claims experience in this area and to assess whether any increase in product recall or products-completed operations limits should be considered at the next policy renewal. It would also be useful to understand whether Nexford's customer contracts in the aerospace and defense sector contain indemnification obligations that could increase the Company's exposure beyond its own products.
C. Environmental Exposure at Coatings Facilities
The Industrial Coatings & Surface Technologies segment accounts for approximately 17% of Nexford's consolidated revenue and involves chemical coating, surface treatment, and finishing processes that inherently create environmental risk. These operations utilize solvents, primers, coatings, and other chemical materials that are subject to federal and state environmental regulations, including the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), and state-level equivalents.
The Pollution Legal Liability policy ($10,000,000 per occurrence / $25,000,000 aggregate) provides coverage for environmental liabilities arising at or from the 14 covered locations. This coverage is an important component of the overall insurance program, particularly given the following considerations:
•  The Houston, Texas facility (operated by Nexford Coatings & Surface Technologies, Inc. and Ridgepoint Specialty Coatings, LLC) has been used for industrial coatings and surface treatment operations since the late 1970s. The Phase I Environmental Site Assessment identified a controlled recognized environmental condition at this property, and continued groundwater monitoring was recommended.
•  Any coatings or chemical processing operations conducted at the Schaumburg, Illinois headquarters and primary manufacturing facility should also be monitored for environmental exposure.
We refer the deal team to our separate memorandum dated February 22, 2025 regarding the Phase I ESA review for a more detailed analysis of environmental conditions at the mortgaged properties.
D. D&O Insurance — Dividend Recapitalization Considerations
The Transaction includes an approximately $335,000,000 dividend recapitalization, pursuant to which a portion of the Term Loan B proceeds will be used to fund a distribution to Granite Peak NIH Holdings, LLC (the sole equity holder of Nexford). Leveraged dividend recapitalizations of this nature can, in a financial stress scenario, give rise to claims against the Company's directors and officers — including fiduciary duty challenges, fraudulent transfer or constructive fraud allegations, and other claims by creditors or other stakeholders asserting that the dividend distribution was made at a time when the Company was insolvent or rendered insolvent by the distribution.
The D&O insurance program ($25,000,000 aggregate, carried with Meridian Specialty Insurance Co.) provides claims-made coverage for defense costs and indemnity payments in connection with such claims, subject to the policy's terms, conditions, and exclusions. We have reviewed the declarations page and selected endorsements and have not identified any exclusion specifically addressing leveraged recapitalization-related claims or dividend distribution claims.
However, we note the following potential limitation: D&O policies typically contain an "insured vs. insured" exclusion, which bars coverage for claims brought by one insured (e.g., the Company or its directors) against another insured (e.g., a director or officer). In the context of a PE-sponsored company, this exclusion could potentially limit coverage in disputes involving the sponsor's designated directors or in derivative claims brought by the Company at the direction of the sponsor. The scope and applicability of this exclusion would need to be analyzed under the full policy form in the context of any specific claim.
Recommendation: We recommend that the deal team advise David Engstrom, Nexford's General Counsel, to review the D&O insurance program in light of the dividend recapitalization and to assess whether any additional Side A DIC (difference-in-conditions) coverage is warranted. Side A DIC policies provide an additional layer of protection for individual directors and officers in scenarios where the primary D&O policy's coverage may be limited by exclusions or other policy provisions.
E. Expiring Policies and Renewal Timing
The majority of Nexford's property and casualty insurance policies — including the all-risk property policy, CGL, automobile liability, umbrella/excess, workers' compensation, environmental/pollution liability, and specialty lines — are scheduled to renew on July 1, 2025, which is approximately three months after the anticipated closing date of March 28, 2025.
This creates a near-term post-closing compliance obligation: the credit agreement will require ongoing maintenance of insurance in compliance with the insurance covenants, as well as delivery of updated certificates of insurance and endorsements to the Administrative Agent upon each policy renewal. Nexford should be made aware of this obligation and should instruct Vantage Risk Advisors to prepare updated certificates and endorsements naming Crescent Harbor Bank, N.A. in all required capacities promptly upon the July 1, 2025 renewal.
Additionally, we note that the current annual premium for the Company's total insurance program is approximately $8.5 million across all lines (based on information provided by Vantage Risk Advisors). Nexford should budget for potential premium increases at the upcoming renewal, particularly in the property insurance market, which has experienced upward pricing pressure in recent years due to increased frequency and severity of natural catastrophe losses and general market hardening. Any material change in coverage levels or program structure at renewal should be evaluated for compliance with the credit agreement insurance covenants.
VI. Coordination with Other Workstreams
The insurance program intersects with several other transaction workstreams, and we highlight the following coordination points:
Security Agreement / Collateral Package. Insurance proceeds from collateral are included within the definition of "Collateral" and the collateral grant under the Security Agreement. The credit agreement will require an assignment of insurance proceeds with respect to both personal property collateral and mortgaged real property in favor of the Collateral Agent. We have reviewed the first draft of the Security Agreement prepared by our firm (circulated March 10, 2025) and confirmed that the insurance proceeds assignment provisions are consistent with the insurance program structure described in this memorandum. The Security Agreement grants a security interest in all insurance proceeds arising from or relating to the Grantor's collateral, and requires the Grantors to direct insurers to pay all loss proceeds directly to the Collateral Agent.
Mortgage Documents. Mortgagee endorsements for the four mortgaged properties (Schaumburg, IL; Rockford, IL; Greenville, SC; and Houston, TX) are expected to be delivered as a post-closing obligation, with a deadline of April 30, 2025, as set forth in the term sheet. The updated mortgagee endorsements naming Crescent Harbor Bank, N.A. as Collateral Agent should be coordinated with the mortgage delivery timeline. For the two Illinois properties, we are coordinating with local counsel Hargrove & Whitmore LLP (Robert Kimura, Partner) on the preparation of the mortgages and related title insurance matters. The title insurance underwriter for the Illinois properties is Landmark Title Assurance Company. We will ensure that the title insurance policies and the mortgagee endorsements on the property insurance are consistent and that there are no gaps in the Collateral Agent's protection.
Mandatory Prepayment — Insurance / Condemnation Proceeds. The credit agreement is expected to include a mandatory prepayment provision requiring the application of 100% of net cash proceeds from insurance recoveries and condemnation events to prepayment of the Term Loan B, subject to: (a) reinvestment rights permitting the Borrower to reinvest such proceeds in the repair, restoration, or replacement of the affected assets within a specified period (typically 12 to 18 months); and (b) a de minimis threshold of $10,000,000, below which no mandatory prepayment is required. The insurance coverage levels summarized in this memorandum should be evaluated in the context of this mandatory prepayment provision to ensure that, in the event of a significant casualty affecting collateral, the insurance proceeds would be sufficient to either (i) fund the restoration of the affected assets (preserving collateral value) or (ii) provide adequate prepayment proceeds to reduce the outstanding loan balance. As noted in Section V.A above, we are satisfied that the property coverage limits are adequate relative to the collateral values for these purposes.
Closing Conditions. Delivery of evidence of insurance — specifically, certificates of insurance and applicable endorsements reflecting the required lender loss payee, mortgagee, and additional insured designations in favor of Crescent Harbor Bank, N.A. — is expected to be a condition precedent to closing on March 28, 2025. We have added this deliverable to the Closing Checklist and Conditions Precedent Tracker maintained by Sophie Tremblay and will monitor progress on a weekly basis through the closing date.
VII. Recommendations
Based on our review and analysis, we make the following recommendations:
1.  Request Updated Certificates and Endorsements. Promptly instruct Vantage Risk Advisors, LLC (Rachel Sorensen) to prepare and deliver updated certificates of insurance and endorsements naming Crescent Harbor Bank, N.A. as Collateral Agent in all required capacities — lender loss payee, mortgagee, and additional insured — on all applicable property, general liability, and umbrella/excess liability policies. Target delivery date: no later than March 21, 2025, to allow for review and any necessary revisions prior to the anticipated closing date of March 28, 2025.
2.  Coordinate with Administrative Agent's Counsel. Coordinate with Whitfield & Gage LLP (Margaret Ashby and Jonathan Ferris) regarding any Crescent Harbor-specific form requirements for insurance certificates and endorsements. Obtain from Whitfield & Gage any proprietary endorsement forms or specific language that Crescent Harbor requires, and transmit these to Vantage Risk Advisors for incorporation into the updated documents.
3.  Confirm Flood Insurance Compliance. Resolve the flood insurance compliance issue for the Houston, Texas mortgaged property (9100 Westpark Industrial Boulevard). Determine whether the property's flood zone classification triggers mandatory NFIP requirements in connection with the mortgage and, if so, whether the existing private flood coverage satisfies those requirements or a standalone NFIP policy must be obtained. This item should be resolved prior to closing if possible, or included as a specifically identified post-closing obligation with a defined cure period.
4.  Confirm Scheduling of Acquired Subsidiaries. Obtain written confirmation from Vantage Risk Advisors that Clearfield Tool & Die, Inc., Summit Industrial Fabrication Co., Ridgepoint Specialty Coatings, LLC, and Lakeshore Precision Engineering, Inc. are each properly scheduled as named insureds on all material insurance policies. If any entity is not properly scheduled, request updated endorsements prior to closing.
5.  Advise on D&O Coverage Review. Advise Nexford management — specifically, David Engstrom, General Counsel — to review the adequacy of the D&O insurance program in light of the approximately $335,000,000 dividend recapitalization, including an assessment of whether additional Side A DIC coverage is warranted given the potential for director/officer exposure in a stress scenario.
6.  Closing Checklist Integration. Confirm that all insurance deliverables — including certificates of insurance, lender loss payee endorsements, mortgagee endorsements, additional insured endorsements, and cancellation notice endorsements — are included on the Closing Checklist and Conditions Precedent Tracker maintained by Sophie Tremblay, with responsible parties and target dates clearly identified.
7.  Post-Closing Monitoring — July 1, 2025 Renewal. Flag the upcoming policy renewal date of July 1, 2025 for post-closing monitoring. Ensure that Nexford is aware of its ongoing obligation under the credit agreement to maintain compliant insurance coverage and to deliver updated certificates and endorsements to the Administrative Agent upon each renewal. A reminder should be added to the post-closing obligations tracker for follow-up in June 2025.
VIII. Enclosures / Attachments Referenced
The following schedules are referenced in this memorandum and are available in the Transaction data room (Insurance):
•  Schedule A: Summary of Insurance Policies (prepared by Vantage Risk Advisors, LLC, dated February 12, 2025)
•  Schedule B: List of Named Insureds and Scheduled Locations (as reported by Vantage Risk Advisors, LLC)
•  Schedule C: Anticipated Credit Agreement Insurance Covenant Summary (prepared by Calderwood & Harkness LLP, derived from the Crescent Harbor Bank, N.A. initial term sheet dated February 5, 2025 and the Calderwood & Harkness annotated term sheet dated February 7, 2025)
This memorandum is prepared for the internal use of Calderwood & Harkness LLP and is protected by the attorney-client privilege and the attorney work product doctrine. It is not intended to constitute, and should not be construed as, legal advice to any person or entity other than the addressees. Distribution or disclosure of this memorandum to any third party without the prior written consent of Calderwood & Harkness LLP is prohibited.
Prepared by Sophie Tremblay and Marcus Leung Reviewed by Claudia Merritt
Calderwood & Harkness LLP Matter No. 1005-00001
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
Property Address | Entity | Use | Appraised Value
1400 Industrial Parkway, Schaumburg, IL 60173 | Nexford Industrial Holdings Inc. / Nexford Properties, LLC | Corporate headquarters and primary manufacturing facility | $85,000,000
2750 Commerce Drive, Rockford, IL 61101 | Nexford Precision Components, Inc. | Precision Components manufacturing plant | $42,000,000
600 Manufacturers Row, Greenville, SC 29607 | Nexford Engineered Systems, LLC | Engineered Systems manufacturing plant | $38,000,000
9100 Westpark Industrial Boulevard, Houston, TX 77063 | Nexford Coatings & Surface Technologies, Inc. / Ridgepoint Specialty Coatings, LLC | Coatings and surface technologies facility | $28,000,000
Total | $193,000,000
Layer | Limit | Attachment Point | Carrier
Primary Excess | $25,000,000 | $5,000,000 (excess of underlying CGL/auto/EL) | Continental Shield Underwriters, Inc.
First Excess | $25,000,000 | $30,000,000 | Placed by Vantage Risk Advisors through additional market
Second Excess | $25,000,000 | $55,000,000 | Placed by Vantage Risk Advisors through additional market
Third Excess | $25,000,000 | $80,000,000 | Placed by Vantage Risk Advisors through additional market
Total Tower | $100,000,000
Requirement | Current Status | Notes / Action Items
All-risk property coverage at replacement cost | Compliant | TIV of approximately $1.2 billion covers all 14 locations, including real property, equipment, inventory, and business personal property. Replacement cost endorsement confirmed for equipment and machinery. Per-occurrence limit of $500,000,000 and annual aggregate of $1,000,000,000 are well in excess of the total appraised value of mortgaged real property collateral ($193,000,000).
Liability coverage in customary amounts | Compliant | $5,000,000 primary CGL plus a $100,000,000 umbrella/excess liability tower. This level of coverage is consistent with, and in certain respects exceeds, the amounts maintained by peer companies in the diversified industrials and specialty manufacturing sectors.
Business interruption coverage | Compliant | $250,000,000 sublimit with a 12-month indemnity period and 6-month extended period of indemnity. Coverage is on a gross earnings basis, including extra expense.
Flood insurance (NFIA compliance) | Requires Review | The Houston, Texas property is located in FEMA flood zone X (moderate risk). The current property policy includes a flood sublimit of $100,000,000, which is more than adequate relative to the $28,000,000 appraised value of the Houston property. However, compliance with the National Flood Insurance Program ("NFIP") requirements for mortgaged properties must be confirmed. Depending on the precise flood zone determination and the applicable community's participation in the NFIP, a standalone NFIP policy or evidence that the private flood coverage meets the requirements of 42 U.S.C. § 4012a and Regulation H (12 C.F.R. Part 208) may be required. This item requires follow-up with Vantage Risk Advisors and coordination with Crescent Harbor's requirements.
Lender loss payee endorsements | Action Required | Current property policies name Atlas Meridian Bank, N.A. as lender loss payee for personal property collateral. Endorsements must be updated to name Crescent Harbor Bank, N.A. as Collateral Agent prior to or concurrently with closing.
Mortgagee endorsements (real property) | Action Required | Current mortgagee endorsements on the property policy reference Atlas Meridian Bank, N.A. as mortgagee for the four mortgaged properties. Endorsements must be updated to name Crescent Harbor Bank, N.A. as Collateral Agent. The credit agreement is expected to provide a post-closing period for delivery of mortgages and related documentation, with a post-closing mortgage delivery deadline of April 30, 2025. Updated mortgagee endorsements should be coordinated with the mortgage delivery timeline.
Additional insured endorsements (CGL) | Action Required | Crescent Harbor Bank, N.A. must be added as an additional insured on the CGL and umbrella/excess liability policies. Current policies name Atlas Meridian Bank, N.A. as additional insured; this must be updated.
Certificate of insurance delivery | Pending | New certificates of insurance reflecting the updated endorsements described above must be prepared by Vantage Risk Advisors for delivery at closing. Rachel Sorensen at Vantage has been notified of this requirement and has confirmed that updated certificates can be prepared within 5 to 7 business days of receiving finalized instructions.
30-day cancellation / material change notice | Compliant | Current policies include a provision for 30 days' prior written notice of cancellation or material change (10 days for non-payment of premium). An endorsement specifically naming Crescent Harbor Bank, N.A. as a notice recipient must be added to ensure that the Administrative Agent receives direct notice from the insurer.
D&O coverage adequacy | Compliant | $25,000,000 aggregate limit is within the range of market norms for a PE-backed private company of Nexford's size and complexity. While typical Term Loan B credit agreements do not contain a specific D&O insurance maintenance covenant, the adequacy of D&O coverage has been confirmed for purposes of representations and diligence.