PRIVILEGED & CONFIDENTIAL ATTORNEY WORK PRODUCT
MEMORANDUM
Date: February 25, 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: Nexford Industrial Holdings Inc. — Material Contract Review Summary in Connection with $1,400,000,000 Senior Secured Term Loan B Refinancing and Dividend Recapitalization
Matter No.: 1005-00001
Client/Matter Code: IBL-NIH-2025-031
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I. EXECUTIVE SUMMARY
This memorandum summarizes the results of Calderwood & Harkness LLP's ("C&H") review of the material contracts of Nexford Industrial Holdings Inc. ("Nexford" or the "Borrower") and its direct and indirect subsidiaries (collectively, the "Company" or the "Nexford Group") in connection with the proposed $1,400,000,000 senior secured Term Loan B credit facility (the "Term Loan B" or the "New Credit Facility") with Crescent Harbor Bank, N.A. ("Crescent Harbor") acting as Administrative Agent and Collateral Agent (the "Transaction"). The proceeds of the Term Loan B will be used to (a) refinance in full the existing first lien term loan facility and terminate the existing revolving credit facility, each with Atlas Meridian Bank, N.A. ("Atlas Meridian") as administrative agent, (b) fund an approximately $335,000,000 dividend to Granite Peak NIH Holdings, LLC ("Holdings"), and thence to Granite Peak Capital Partners, LP (the "Sponsor") and its affiliated co-investors (the "Dividend Recapitalization"), (c) pay approximately $38,625,000 in transaction fees and expenses, and (d) deliver approximately $147,000,000 in cash to the balance sheet of Nexford.
Scope. Our review encompassed customer and supplier agreements, joint venture and partnership agreements, real property leases, equipment leases and financing arrangements, intellectual property licenses, management and advisory agreements, insurance-related agreements, and other material contracts provided by Nexford and its management team through the virtual data room maintained on the Thackeray Solutions platform and in response to C&H's due diligence request list issued on February 4, 2025. In total, we reviewed approximately 87 material contracts across the Nexford Group.
Primary Focus Areas. For each contract reviewed, our analysis focused on the following key areas:
(a) Change of Control Provisions — whether any provision would be triggered by the refinancing, the Dividend Recapitalization, or any other aspect of the Transaction, including the entry into the New Credit Facility;
(b) Consent or Notice Requirements — whether the incurrence of new indebtedness or the granting of security interests in favor of the Collateral Agent requires the consent of, or notice to, any counterparty;
(c) Anti-Assignment Provisions — whether restrictions on assignment could affect the scope or enforceability of the collateral package contemplated by the Security Agreement and related Collateral Documents; and
(d) Termination Provisions — whether any termination-for-convenience, termination-for-cause, or termination-upon-material-adverse-change provision could be implicated by the Transaction or its foreseeable consequences.
Overall Conclusion. Based on our review, we conclude that the change of control provisions contained in Nexford's material contracts generally should not be triggered by the proposed Transaction. This conclusion rests on the fundamental structural characteristic of the Transaction: there is no change in the ultimate equity ownership of the Borrower. Granite Peak Capital Fund IV, LP (holding 92%) and GP Fund IV Co-Invest, LP (holding 8%) continue to hold 100% of the equity interests of Holdings, which remains the sole and 100% direct parent of Nexford. The refinancing of existing indebtedness, the incurrence of new indebtedness, and the distribution of a dividend to the existing equity holders do not, in and of themselves, constitute a "change of control," "fundamental change," or comparable trigger event under any of the material contracts we reviewed.
That said, we note the following qualifications and items requiring attention:
• Certain contracts contain broad change of control definitions that, while not triggered by this Transaction, should be monitored for future transactions (e.g., a secondary sale of the Sponsor's limited partnership interests, an initial public offering, or a sale of the Company).
• Consent is required or recommended under a limited number of agreements, principally: (i) the two joint venture operating agreements, with respect to the pledge of membership interests as collateral; and (ii) certain intellectual property in-license agreements, with respect to the enforceability of a security interest in the licensed IP.
• We recommend providing courtesy notices to the Company's top 10 customers, to insurance carriers, and to certain landlords, even where notice is not strictly required, as a matter of commercial prudence.
• No provision has been identified in any material contract that would prevent the closing of the Transaction.
The detailed findings supporting these conclusions are set forth in the sections that follow.
II. SCOPE AND METHODOLOGY
A. Documents Reviewed
Our review is based on the materials produced by Nexford and its subsidiaries in response to the C&H due diligence request list dated February 4, 2025 (the "Request List"), as supplemented by management's responses to follow-up inquiries delivered on February 10, 2025 and February 17, 2025. All documents were accessed through the virtual data room hosted on the Thackeray Solutions platform (Project "Granite" data room) and were indexed according to the folder structure established by Nexford's legal department.
As of the date of this memorandum, we have reviewed the data room contents through the index update provided on February 22, 2025. The data room contained, as of that date, approximately 1,240 documents across all due diligence categories. Of these, approximately 87 contracts were identified as material for purposes of this contract review, based on the materiality threshold described in Section II.C below.
Important Limitation. C&H has not independently verified the completeness of the data room or the accuracy of the materials provided therein. Our review and the conclusions set forth in this memorandum rely on the representations of Nexford management, including David Engstrom, General Counsel and Corporate Secretary of Nexford, and Priya Mehta, Vice President, Treasury & Corporate Finance. To the extent that additional material contracts exist that were not produced in the data room or identified in response to the Request List, our conclusions may be subject to revision. We have been advised by Mr. Engstrom that, to the best of his knowledge, all material contracts have been produced. We recommend that the representations and warranties in the Credit Agreement include a representation by the Borrower that all material contracts have been disclosed.
B. Review Framework
Each contract reviewed was classified into one of the following nine categories, consistent with the organization of the Request List:
1. Customer / Revenue Contracts — including long-term supply agreements ("LTAs"), master purchase agreements ("MPAs"), purchase order frameworks, and distribution agreements;
2. Supplier / Vendor Agreements — including raw material supply agreements, components supply agreements, and service agreements;
3. Joint Venture and Partnership Agreements — including operating agreements, partnership agreements, and related governance documents;
4. Real Property Leases — including manufacturing facility leases, warehouse leases, and office leases;
5. Equipment Leases and Financing Arrangements — including capital leases, operating leases for equipment, and purchase money financing agreements;
6. intellectual Property Licenses — including patent licenses, trademark licenses, software licenses, and technology transfer agreements (both in-bound and out-bound);
7. Management and Advisory Agreements — including the Sponsor management agreement, financial advisory engagements, and consulting agreements;
8. Insurance-Related Agreements — including property and casualty policies, directors' and officers' liability policies, and related broker agreements; and
9. Other Material Contracts — including settlement agreements, non-compete agreements, and other agreements not falling within the foregoing categories.
Within each category, each contract was analyzed against the following seven issue areas:
• Change of control triggers (including the specific definition of "change of control," "fundamental change," or analogous term);
• Consent or notice requirements arising from the incurrence of new indebtedness;
• Consent or notice requirements arising from the granting of liens or security interests;
• Anti-assignment clauses (including carve-outs for affiliate assignments and secured party assignments);
• Termination for convenience provisions;
• Material adverse change or material adverse effect clauses; and
• Cross-default provisions referencing other indebtedness or material agreements.
C. Materiality Threshold
For purposes of this review, a contract was treated as "material" if it met either of the following criteria:
(a) Quantitative Threshold: The contract involves annual revenue to, or annual expense of, Nexford or any subsidiary in excess of $5,000,000; or
(b) Qualitative Threshold: The contract is of strategic significance to the operations, competitive position, or financial condition of the Nexford Group, regardless of its dollar value. Contracts meeting this qualitative threshold include, without limitation, sole-source or limited-source supply arrangements, key technology licenses, joint venture agreements, and contracts with regulatory or compliance significance (e.g., defense-related contracts subject to ITAR or DFARS requirements).
Applying these thresholds, a total of approximately 87 agreements were identified and reviewed across the Nexford Group and its subsidiaries. A complete listing of these agreements is set forth in Exhibit A (Master Schedule of Material Contracts Reviewed) attached hereto.
III. TRANSACTION CONTEXT
To provide a framework for the contract-specific analyses that follow, this section briefly summarizes the key structural elements of the Transaction that are relevant to the material contract review.
The New Credit Facility. The Transaction contemplates a $1,400,000,000 senior secured Term Loan B facility with Crescent Harbor Bank, N.A. as lead left arranger, administrative agent, and collateral agent. The Term Loan B will be issued at a price and with terms to be determined through the syndication process, with Crescent Harbor and its co-arrangers marketing the facility to institutional investors in the broadly syndicated loan market. The Credit Agreement, Security Agreement, and related Collateral Documents are being prepared by borrower's counsel, Whitfield & Gage LLP (Margaret Ashby, lead partner), with C&H acting as lender's counsel to Crescent Harbor.
Use of Proceeds. The proceeds of the Term Loan B will be applied as follows:
The existing $190,000,000 revolving credit facility with Atlas Meridian (currently undrawn) will be terminated at closing. Nexford will enter into a new $225,000,000 revolving credit facility as part of the New Credit Facility (the terms of which are being documented separately).
Security Package. The Term Loan B will be secured by a first-priority lien on substantially all assets of the Borrower and each Guarantor, including without limitation:
• 100% of the equity interests of each direct domestic subsidiary of the Borrower and each Guarantor;
• 65% of the voting equity and 100% of the non-voting equity of each first-tier controlled foreign corporation ("CFC") and each CFC holdco;
• All accounts receivable, inventory, equipment, and goods;
• All intellectual property (patents, trademarks, copyrights, and trade secrets), subject to certain excluded assets;
• All deposit accounts and securities accounts;
• All general intangibles, payment intangibles, instruments, chattel paper, and documents;
• All investment property;
• Owned real property with a fair market value in excess of $10,000,000, secured by mortgages; and
• All proceeds and products of the foregoing.
Guarantors. The obligations under the Term Loan B will be guaranteed by (a) Granite Peak NIH Holdings, LLC, as the Holdings Guarantor, and (b) the following eleven Subsidiary Guarantors:
1. Nexford Precision Components, Inc.
2. Nexford Engineered Systems, LLC
3. Nexford Coatings & Surface Technologies, Inc.
4. Nexford Manufacturing Services, LLC
5. Nexford Properties, LLC
6. Nexford International Holdings, Inc.
7. Clearfield Tool & Die, Inc.
8. Summit Industrial Fabrication Co.
9. Ridgepoint Specialty Coatings, LLC
10. Lakeshore Precision Engineering, Inc.
11. Nexford Canada Holdings ULC (as CFC holdco, with pledge limited to 65% of voting equity and 100% of non-voting equity of Nexford Canada Manufacturing, Inc.)
No Change in Equity Ownership. Critically, the Transaction does not involve any change in the equity ownership structure of Nexford or its parent entities. Granite Peak NIH Holdings, LLC will remain the 100% direct parent of Nexford before and after the closing of the Transaction. Holdings is, and will continue to be, owned 100% by Granite Peak Capital Fund IV, LP (92% of the equity) and GP Fund IV Co-Invest, LP (8% of the equity), both of which are managed by the Sponsor, Granite Peak Capital Partners, LP. The Dividend Recapitalization is a distribution of cash to the existing equity holders and does not involve the issuance, sale, or transfer of any equity interests.
Relevance to Material Contract Review. The foregoing elements of the Transaction are relevant to the material contract review in the following respects:
(a) Change of control provisions in Nexford's contracts may be analyzed against the fact that no change in equity ownership is occurring;
(b) Incurrence of new indebtedness may trigger notice or consent requirements under contracts that restrict the borrower's ability to incur additional debt;
(c) Granting of security interests in the assets of Nexford and its subsidiaries may implicate anti-assignment clauses, pledge restrictions, and collateral limitations in certain contracts; and
(d) Enforcement rights of the Collateral Agent — including foreclosure on pledged equity interests and disposition of collateral upon an event of default — may constitute a future "transfer" or "assignment" that triggers contractual provisions, even if the initial grant of the security interest does not.
With this context in mind, we turn to the contract-by-contract analysis.
IV. CUSTOMER / REVENUE CONTRACTS
A. Overview. Nexford's revenue-generating operations are organized into three operating segments, each served by one or more subsidiary entities:
Nexford's customer base is diversified across end markets including aerospace and defense, automotive, energy, general industrial, and medical devices. The top 10 customer contracts represent approximately 38% of total last-twelve-months ("LTM") revenue, or approximately $798,000,000 in aggregate annual revenue. No single customer accounts for more than 7% of total revenue.
Nexford's standard customer contract types include: (i) long-term supply agreements ("LTAs"), typically 3- to 5-year agreements with pricing mechanisms and volume commitments; (ii) master purchase agreements ("MPAs"), which establish general terms and conditions under which individual purchase orders are issued; and (iii) purchase order frameworks, under which orders are placed on an as-needed basis subject to standard terms and conditions.
We reviewed a total of 24 customer contracts meeting the materiality threshold. The key findings for the three largest customer relationships are discussed in detail below, followed by a summary of the remaining top 10 customer contracts and an overall risk assessment.
B. Key Customer Contracts — Detailed Findings
1. Long-Term Supply Agreement with Trident Industrial Systems, Inc. ("Customer A"). Contract Summary:
Trident Industrial Systems, Inc. ("Trident" or "Customer A") is Nexford's largest single customer, a major industrial original equipment manufacturer with operations across North America and Europe. The LTA governs the supply of machined precision components for Trident's heavy equipment product lines, with pricing reset annually based on an agreed index formula and volume tiers.
Change of Control Provision. Section 14.3 of the Trident LTA requires written notice to Trident within thirty (30) days of a "Change of Control Event," defined in Section 1.15 as "the transfer, whether in a single transaction or a series of related transactions, of more than fifty percent (50%) of the voting interests or equity ownership of the Supplier [Nexford Precision Components, Inc.] or its direct or indirect parent entity." Upon receipt of such notice, Trident has the right to request a meeting to discuss the implications of the change of control for the ongoing supply relationship, but does not have a unilateral right of termination.
Analysis: The proposed Transaction does not involve a transfer of any equity interests in Nexford Precision Components, Inc. or in any direct or indirect parent entity, including Nexford, Holdings, or the Sponsor's fund vehicles. Granite Peak Capital Fund IV, LP and GP Fund IV Co-Invest, LP will continue to hold 100% of Holdings both before and after the Transaction. Accordingly, the change of control provision in Section 14.3 should not be triggered. Nevertheless, given the significance of the Trident relationship to Nexford's Precision Components segment, we recommend that Nexford provide a courtesy notice to Trident informing it of the refinancing in general terms, consistent with market practice for sponsor-backed portfolio company transactions.
Assignment Provision. Section 16.1 of the Trident LTA provides that the agreement "may not be assigned by either party without the prior written consent of the other party, such consent not to be unreasonably withheld, conditioned, or delayed." Section 16.2 contains a limited carve-out permitting assignment to an affiliate under common control without consent, subject to the assignor remaining jointly and severally liable. Section 16.3 addresses secured lender rights, providing that "the granting of a security interest in the Supplier's rights under this Agreement to a secured lender shall not constitute an assignment for purposes of Section 16.1; provided, however, that upon any enforcement or foreclosure by such secured lender, the provisions of Section 16.1 shall apply to any transfer of such rights."
Analysis: The initial grant of a security interest by Nexford Precision Components, Inc. in its rights under the Trident LTA (as an account receivable and general intangible) to the Collateral Agent does not require Trident's consent under this provision. However, any enforcement action by the Collateral Agent that results in a transfer of Nexford's rights under the agreement would require Trident's consent (not to be unreasonably withheld). This is a standard formulation and does not raise concerns for closing.
Lien Grant Implications. The accounts receivable arising from the Trident LTA will be pledged under the Security Agreement as part of the Collateral Agent's first-priority lien on all accounts. Under Article 9 of the Uniform Commercial Code, a security interest in accounts may be perfected by filing a UCC-1 financing statement without the consent of the account debtor (Trident). See UCC § 9-406(d) (rendering ineffective contractual restrictions on assignment of accounts and payment intangibles in the context of a security interest). Accordingly, no counterparty consent is required for the perfection of a security interest in the receivables arising under this agreement.
Risk Level: Low.
Recommended Action: Provide courtesy notice to Trident of the refinancing; no consent required.
2. Master Purchase Agreement with Marlowe Asset Management Aerospace & Defense Corp. ("Customer B"). Contract Summary:
Marlowe Asset Management Aerospace & Defense Corp. ("Marlowe Asset Management" or "Customer B") is a leading defense prime contractor and Nexford's second-largest customer. The MPA governs the supply of engineered components and sub-assemblies for a range of military and commercial aerospace platforms, with individual purchase orders issued on a periodic basis specifying quantities, delivery schedules, and pricing.
Change of Control Provision. Section 11.2 of the Marlowe Asset Management MPA contains a broad change of control provision. "Change of Control" is defined in Section 1.8 as "any change in the ultimate beneficial ownership of the Supplier, or any change in the identity of the Person that directly or indirectly Controls the Supplier, where 'Control' means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract, or otherwise." Upon the occurrence of a Change of Control, Marlowe Asset Management has the right, exercisable within ninety (90) days of receiving written notice thereof, to terminate the MPA upon sixty (60) days' further notice.
Analysis: While this definition is broader than the Trident formulation in that it references "ultimate beneficial ownership" and the "identity of the controlling Person," the key trigger is whether the controlling Person ceases to Control the Supplier. Here, Granite Peak Capital Partners, LP (through its fund vehicles) is and will remain the "Person that directly or indirectly Controls" Nexford Engineered Systems, LLC. There is no change in the identity of the controlling Person, and there is no change in ultimate beneficial ownership. Accordingly, the change of control provision should not be triggered. However, we flag this definition as one that could be triggered by future events — for example, a secondary sale of Granite Peak's limited partnership interest in Fund IV to a different sponsor, or an initial public offering that results in Granite Peak's loss of control — and recommend that it be included in the change of control register maintained for future transaction planning (see Section XIV.B below).
Government/Defense Contract Overlay. Several purchase orders issued under the Marlowe Asset Management MPA relate to defense-related components and sub-assemblies that are subject to the International Traffic in Arms Regulations ("ITAR") (22 C.F.R. Parts 120-130) and the Defense Federal Acquisition Regulation Supplement ("DFARS"). The MPA includes flow-down clauses from Marlowe Asset Management's prime contracts with the U.S. Department of Defense, including clauses relating to: (i) ITAR compliance and the prohibition on transfer of ITAR-controlled technical data to "foreign persons" (as defined in ITAR § 120.16); (ii) DFARS § 252.204-7012 (Safeguarding Covered Defense Information); (iii) DFARS § 252.225-7001 (Buy American Act and Balance of Payments Program); and (iv) various clauses governing novation and change-of-name agreements.
Analysis: The Transaction does not involve any transfer of ITAR-controlled technical data to foreign persons. The equity ownership of the Nexford Group remains entirely domestic — Granite Peak Capital Partners, LP is a Delaware limited partnership, and all fund vehicles are domiciled in the United States. Nexford International Holdings, Inc. and Nexford Canada Holdings ULC, which hold the Company's Canadian operations, are not parties to the defense-related purchase orders, and no ITAR-controlled technical data is shared with Nexford Canada Manufacturing, Inc. Accordingly, the ITAR and DFARS compliance clauses are not implicated by the Transaction.
With respect to novation, we note that FAR 42.1204 generally requires novation of a government contract upon a "change of control" of the contractor or a sale of substantially all of the contractor's assets. Since Nexford Engineered Systems, LLC (the contracting entity) continues to exist as the same legal entity, with the same management and operational capabilities, and there is no transfer of equity ownership, novation should not be required. A novation would be required only if the Collateral Agent were to enforce its security interest and transfer the contracting entity's assets or rights under the government-related contracts to a third party, which is a post-default scenario and not a closing concern.
Consent Requirement: None identified for the refinancing itself. Novation would be required only for assignment of the government-related contracts, which is not contemplated.
Risk Level: Low (monitoring recommended due to breadth of change of control definition).
Recommended Action: Provide courtesy notice to Marlowe Asset Management; maintain in change of control register for future transaction planning.
3. Master Supply Agreement with Pinnacle Automotive Group, LLC ("Customer C"). Contract Summary:
Pinnacle Automotive Group, LLC ("Pinnacle" or "Customer C") is a major automotive OEM and the third-largest customer of the Nexford Group. The Master Supply Agreement covers the supply of precision-machined powertrain and chassis components manufactured at both the Nexford Precision Components facility in Schaumburg, IL and the Lakeshore Precision Engineering facility in Muskegon, MI.
Change of Control Provision. Article X, Section 10.2 of the Pinnacle Master Supply Agreement grants Pinnacle a right of termination upon a "Change of Control" of either contracting party, defined as "the acquisition of the contracting party, whether by merger, stock purchase, asset purchase, or otherwise, by a Competitor of [Pinnacle]." "Competitor" is defined by reference to a list of identified entities set forth in Schedule 10.2, which is updated annually by mutual agreement.
Analysis: This change of control definition is narrower than the Marlowe Asset Management formulation and is specifically tailored to the concern that a competitor of the customer might acquire the supplier. Granite Peak Capital Partners, LP is a private equity firm and financial sponsor; it is not a Competitor of Pinnacle (as defined in Schedule 10.2, which we have reviewed). The proposed Transaction does not involve an "acquisition" of either contracting party by any person, let alone a Competitor. Accordingly, the change of control provision is clearly not triggered.
Anti-Assignment Clause. Section 15.1 provides that the agreement may not be assigned without the prior written consent of the other party. Section 15.2 contains a carve-out permitting assignment to an "Affiliate" (defined as any entity under common ownership or control), without the requirement of consent, provided that written notice of such assignment is given within thirty (30) days.
Analysis: Standard formulation. The grant of a security interest to the Collateral Agent does not constitute an "assignment" under this provision. No consent is required.
Risk Level: Low.
Recommended Action: Provide courtesy notice to Pinnacle; no consent required.
4. Additional Top 10 Customer Contracts — Summary. The remaining seven customer contracts within Nexford's top 10 customer relationships, representing combined annual revenue of approximately $468,000,000, were reviewed in detail. These contracts include LTAs and MPAs with customers across the aerospace, energy, general industrial, and medical device end markets. The following summarizes our findings:
• Change of Control Provisions: Four of the seven contracts contain change of control provisions. In each case, the definition of "change of control" requires either (a) a transfer of more than 50% of the voting equity or ownership interests of the contracting entity or its parent, or (b) an acquisition by a competitor. None of these definitions would be triggered by the proposed Transaction, as there is no transfer of equity and Granite Peak is a financial sponsor, not a competitor of any customer.
• Consent Requirements: No consent is required under any of the remaining top 10 customer contracts in connection with the refinancing, the Dividend Recapitalization, or the grant of security interests.
• Anti-Assignment Clauses: All seven contracts contain anti-assignment clauses in standard form. Six of the seven include carve-outs for affiliate assignments and/or for the grant of security interests to secured lenders. One contract (with an energy sector customer) does not contain a secured lender carve-out, but the absence of such a carve-out does not prevent the Collateral Agent from perfecting a security interest in the related accounts receivable under UCC § 9-406(d).
• Termination for Convenience: Three of the seven contracts include termination for convenience provisions, with notice periods ranging from 90 to 180 days. These provisions are not triggered by the Transaction but are noted for general awareness.
• Cross-Default Provisions: None identified.
Overall Assessment: No contract within the top 10 customer relationships has been identified where the proposed refinancing, Dividend Recapitalization, or security interest grants would trigger a change of control, termination right, or mandatory consent requirement.
Recommendation: Provide courtesy notices to the top 10 customers where change of control notice provisions exist, even though not technically triggered, as a matter of commercial prudence and relationship management. We recommend that these notices be delivered by Nexford management (coordinated through David Engstrom's office) within ten (10) business days following closing.
C. Customer Contract Risk Assessment — Summary Table
V. SUPPLIER / VENDOR AGREEMENTS
A. Overview. Nexford's manufacturing operations require a range of raw materials and input components, including specialty steel alloys, aluminum and aluminum alloys, chemical precursors for coating formulations, electronic components, industrial gases (nitrogen, argon, and specialty atmospheres for heat treatment), and various consumable tooling and supplies. The Company's total annual procurement spend is approximately $980,000,000, of which the top 5 supplier agreements represent approximately $320,000,000 (approximately 33% of total procurement).
Three of the Company's key supply relationships are with sole-source or limited-source suppliers, making these agreements of particular strategic significance regardless of their dollar value. These sole-source relationships are discussed in detail below.
We reviewed a total of 18 supplier and vendor agreements meeting the materiality threshold. The findings for the three most significant supplier relationships are presented below, followed by a summary of the remaining agreements.
B. Key Supplier Contracts — Detailed Findings
1. Specialty Steel Alloy Supply Agreement with Valterra Metals Corporation ("Supplier A"). Contract Summary:
Valterra Metals Corporation ("Valterra" or "Supplier A") is the sole source of certain proprietary high-performance steel alloys used in the manufacture of Nexford's precision-machined components for aerospace and defense applications. The alloy specifications are developed jointly by Valterra and Nexford, and qualification of an alternative supplier would require an estimated 18- to 24-month process, including customer re-qualification for certain end-use applications. This agreement is of critical strategic importance to the Precision Components segment.
Change of Control Provision. Section 12.4 of the Valterra Supply Agreement provides that Valterra may terminate the agreement upon ninety (90) days' written notice if "Control" of the buyer (Nexford Precision Components, Inc.) changes, where "Control" is defined as "the direct or indirect ownership of more than fifty percent (50%) of the outstanding voting power of the entity."
Analysis: The proposed Transaction does not involve any change in the direct or indirect ownership of Nexford Precision Components, Inc. Nexford Industrial Holdings Inc. remains the 100% owner of Nexford Precision Components, Inc., and Granite Peak (through Holdings) remains the indirect 100% owner. The change of control provision is not triggered.
Lien / Security Interest Consent. Section 8.6 of the Valterra Supply Agreement contains a provision that is relevant to the collateral package:
"Buyer shall not grant a security interest in, or otherwise encumber, Inventory supplied by Seller pursuant to this Agreement unless the secured party expressly acknowledges in writing Seller's retention of title and/or purchase money security interest in such Inventory until payment in full of the applicable purchase price."
Analysis: This provision suggests that Valterra may assert a retention of title or purchase money security interest ("PMSI") in the steel alloy inventory it supplies to Nexford. If Valterra has properly perfected a PMSI in the supplied inventory (by filing a UCC-1 financing statement and providing the requisite notification to the Collateral Agent under UCC § 9-324(b)), its interest would have priority over the Collateral Agent's security interest in inventory. We recommend the following actions:
(i) Cross-reference with the UCC lien search results memorandum dated February 18, 2025, prepared by C&H, to determine whether Valterra has filed any UCC-1 financing statements against Nexford Precision Components, Inc. or its predecessors;
(ii) If a PMSI filing is identified, confirm that the existing lien is disclosed in the perfection certificate to be delivered at closing and that it qualifies as a "Permitted Lien" under Section 7.01 of the Credit Agreement (which is expected to include a carve-out for purchase money security interests and retention of title arrangements securing obligations not in excess of $50,000,000 in the aggregate); and
(iii) Ensure that the Collateral Agent provides or receives the requisite UCC § 9-324(b) notification from Valterra, to the extent applicable, to establish the relative priority of the competing security interests in inventory.
Anti-Assignment Clause. Section 15.1 provides that the agreement may not be assigned by either party without the prior written consent of the other party. There is no carve-out for secured lender assignments or for affiliate transfers.
Analysis: The absence of a secured lender carve-out means that enforcement by the Collateral Agent (i.e., foreclosure resulting in a transfer of Nexford Precision Components' rights under this agreement) would require Valterra's consent. This is a post-default enforcement issue and does not prevent the initial grant of the security interest or the closing of the Transaction. However, in a foreclosure scenario, the Collateral Agent would need to negotiate with Valterra or arrange for the buyer to enter into a new supply agreement. Given the sole-source nature of this relationship, this is a factor that should be noted in the collateral analysis.
Risk Level: Medium (due to sole-source status, PMSI issues, and absence of secured lender carve-out in assignment clause).
Recommended Action: Verify Valterra UCC filings; confirm PMSI treatment as Permitted Lien; consider seeking waiver of anti-assignment restriction for collateral purposes (though this may not be commercially practicable given the bargaining dynamics of the sole-source relationship).
2. Chemical Precursor Supply Agreement with Argonaut Chemical Solutions, Inc. ("Supplier B"). Contract Summary:
Argonaut Chemical Solutions, Inc. ("Argonaut" or "Supplier B") supplies proprietary chemical precursors used in the formulation of Nexford's advanced coating products. The agreement includes an exclusivity provision under which Argonaut grants Nexford the exclusive right in North America to purchase and use certain proprietary chemical formulations (identified by product code in Exhibit A to the agreement) for industrial coating applications.
Change of Control Provision. The Argonaut Supply Agreement does not contain a change of control provision. There is no trigger related to ownership changes, fundamental changes, or mergers.
Assignment. Section 13.2 provides that the agreement is assignable to "Affiliates" (defined as entities under common control) without the consent of Argonaut, subject to written notice within thirty (30) days. Assignment to non-affiliates requires Argonaut's prior written consent.
Analysis: Standard formulation. No issues identified.
Exclusivity Provision. The exclusivity granted to Nexford under Section 4.1 of the Argonaut agreement is of particular importance to the Coatings & Surface Technologies segment. The proprietary formulations supplied by Argonaut are integral to several of Nexford's key coating product lines, and the exclusivity provision prevents competitors from accessing these formulations in the North American market. This exclusivity is relevant to the collateral package in two respects: (i) the intellectual property associated with the coating formulations (to the extent owned or co-owned by Nexford) will be pledged under the IP Security Agreement; and (ii) the contractual rights under the exclusivity provision constitute a "general intangible" that forms part of the collateral. Preservation of the exclusivity arrangement is important for the ongoing value of the Coatings segment business.
Risk Level: Low.
Recommended Action: No action required in connection with the Transaction. Ensure continuity of the exclusivity arrangement is maintained.
3. Equipment Maintenance and Service Agreement with Ironbridge Industrial Services, LLC ("Supplier C"). Contract Summary:
Ironbridge Industrial Services, LLC ("Ironbridge" or "Supplier C") provides preventive maintenance, repair, and technical services for Nexford's CNC machining centers, heat treatment furnaces, and surface treatment equipment across multiple facilities. The agreement covers both scheduled maintenance programs and on-call emergency repair services.
Change of Control Provision. Section 9.3 grants Ironbridge a right of termination if the "parent entity" of the contracting party undergoes a "Fundamental Change," defined as "any merger, consolidation, or sale of all or substantially all of the assets of such parent entity." Termination must be exercised by written notice within sixty (60) days of Ironbridge receiving notice of the Fundamental Change.
Analysis: The proposed Transaction does not constitute a "Fundamental Change" as defined. There is no merger, consolidation, or sale of all or substantially all assets. The refinancing of existing indebtedness, even when accompanied by a Dividend Recapitalization, does not fall within any of the enumerated trigger events. The change of control provision is not triggered.
Termination for Convenience. Section 10.1 provides that either party may terminate the agreement for any reason upon one hundred eighty (180) days' prior written notice. This provision is not triggered by the Transaction but is noted for general awareness. If Ironbridge were to exercise its termination right for convenience at any time, Nexford would have a six-month transition period to identify and engage an alternative service provider.
Risk Level: Low.
Recommended Action: No action required.
4. Additional Supplier Contracts — Summary. The remaining 15 supplier and vendor agreements reviewed (representing combined annual spend of approximately $135,000,000) include supply agreements for aluminum alloys, electronic components, industrial gases, packaging materials, logistics services, and IT maintenance and support. Our review of these agreements yielded the following summary findings:
• Change of Control Provisions: Two of the 15 contracts contain change of control provisions, both with standard definitions requiring a transfer of majority equity ownership. Neither would be triggered by the proposed Transaction.
• Consent Requirements: No consent is required under any of the remaining supplier contracts in connection with the Transaction.
• Anti-Assignment Clauses: Standard anti-assignment clauses are present in 12 of the 15 contracts. Nine include affiliate carve-outs. None include specific prohibitions on the granting of security interests.
• Sole-Source / Limited-Source Status: Other than Valterra (Supplier A), no additional sole-source relationships were identified. Two contracts involve limited-source suppliers (with two or three qualified alternative sources), but both include standard change of control provisions that are not triggered.
• Cross-Default Provisions: None identified.
C. Supplier Contract Risk Assessment — Summary Table
VI. JOINT VENTURE AND PARTNERSHIP AGREEMENTS
A. Overview. Nexford participates in two joint venture arrangements through its subsidiaries. While neither joint venture is material to the overall enterprise in terms of revenue contribution (combined annual revenue of approximately $40,000,000, representing less than 2% of consolidated revenue), the joint venture agreements contain provisions that are directly relevant to the collateral package and covenant analysis under the proposed Credit Agreement. Specifically, both JV operating agreements contain (a) change of control provisions that trigger buy-sell rights, and (b) restrictions on the pledge of membership interests, which may affect the ability of the Collateral Agent to include these equity interests in the pledged collateral.
B. Joint Venture No. 1 — Meridian Precision JV, LLC
Entity Summary:
Meridian Precision JV, LLC (the "Meridian JV") was formed in 2018 as a joint venture between Nexford Engineered Systems, LLC and Kessler Engineering Group, Inc. ("Kessler") to combine Nexford's precision machining capabilities with Kessler's proprietary turbine blade design technology. The Meridian JV operates from a dedicated facility in Tulsa, Oklahoma, and generated approximately $28,000,000 in revenue during the LTM period, contributing to the Engineered Systems segment.
Change of Control Provision. Article IX of the Meridian JV LLC Agreement governs transfers of membership interests. Section 9.01 provides that no member may transfer its membership interest (or any portion thereof) without the prior written consent of the other member, which consent may be withheld in such member's sole discretion. Section 9.02 defines a "Change of Control" of a member as "any transaction or series of transactions resulting in a change in the Majority Ownership of such Member," where "Majority Ownership" means ownership of more than fifty percent (50%) of the equity interests or voting power of the member. Section 9.03 provides that upon the occurrence of a Change of Control of either member, the other member has the right to exercise a buy-sell option (the "Buy-Sell Right") pursuant to the procedures set forth in Article X.
Analysis: The proposed Transaction does not involve a change in the "Majority Ownership" of Nexford Engineered Systems, LLC. Nexford Industrial Holdings Inc. remains the 100% owner of Nexford Engineered Systems, LLC, and Granite Peak (through Holdings) retains indirect 100% ownership. Accordingly, the Change of Control definition should not be triggered, and the Buy-Sell Right should not arise.
However, we note that the definition in Section 9.02 looks to changes in "Majority Ownership" of the "Member" (i.e., Nexford Engineered Systems, LLC), not to changes in ownership at the ultimate parent or sponsor level. This provides additional insulation against a trigger in the current Transaction. That said, the Buy-Sell Right provision should be monitored in connection with any future transaction involving a change of control at the Nexford Engineered Systems level or above. We recommend including this provision in the change of control register.
Pledge Restriction. Section 9.04 of the Meridian JV LLC Agreement provides:
"No Member may pledge, hypothecate, or otherwise encumber its Membership Interest or any portion thereof without the prior written consent of the other Member, such consent not to be unreasonably withheld."
Analysis: This provision directly restricts the ability of Nexford Engineered Systems, LLC to pledge its 60% membership interest in the Meridian JV to the Collateral Agent as part of the collateral package. To include this interest in the pledge, consent from Kessler would be required. There are several potential approaches to address this:
(i) Seek Consent. Nexford could request Kessler's consent to the pledge. Given that consent is not to be unreasonably withheld, there is a reasonable basis to expect that Kessler would grant consent, particularly if the pledge is structured to preserve Kessler's rights under the LLC Agreement (including the Buy-Sell Right). However, approaching a JV partner for consent introduces commercial sensitivity and potential negotiation.
(ii) Exclude from Collateral. The Security Agreement is expected to contain an "Excluded Assets" definition that encompasses equity interests in joint ventures that are subject to contractual pledge restrictions, to the extent that such pledge would violate the applicable governing agreement and trigger a default, termination, or buy-sell right thereunder. If the Meridian JV membership interest falls within this exclusion, no consent is needed, but the collateral package would exclude this asset.
(iii) UCC Override. UCC Sections 9-406 and 9-408 may override certain contractual restrictions on the grant of a security interest in partnership interests and LLC membership interests, permitting the security interest to attach and be perfected notwithstanding the contractual prohibition. However, the scope of the UCC override varies by jurisdiction and its application to LLC membership interests is not uniform. Moreover, under UCC § 9-408(d), the override does not affect the rights and obligations of the parties to the LLC Agreement — meaning that the grant of a security interest may not result in a breach of the LLC Agreement, but Kessler's consent would still be required for an actual transfer of the membership interest upon enforcement. The practical value of the override may therefore be limited.
Recommendation: Coordinate with borrower's counsel, Whitfield & Gage LLP (Margaret Ashby), on the treatment of the Meridian JV membership interest in the Security Agreement. The preferred approach is to seek Kessler's consent for the pledge, but if consent cannot be obtained on commercially reasonable terms and within the transaction timeline, the interest should be excluded from the collateral package under the Excluded Assets definition. Confirm with Crescent Harbor's credit team that the exclusion of this asset is acceptable from a credit perspective.
C. Joint Venture No. 2 — Summit-Hartwell Coatings Partnership
Entity Summary:
The Summit-Hartwell Coatings Partnership (the "Hartwell Partnership") provides specialized thermal spray and chemical vapor deposition coating services to customers in the energy sector. The partnership operates from a leased facility in Deer Park, Texas, adjacent to Houston Ship Channel industrial facilities.
Change of Control Provision. Article VII of the Partnership Agreement contains transfer restrictions substantially similar in structure to the Meridian JV LLC Agreement. Section 7.02 provides that a "Change of Control" of a partner (defined as a change in more than 50% of the equity ownership or voting power of the partner) triggers a buy-sell right for the other partner under Article VIII. Section 7.01 requires the prior written consent of the other partner for any transfer of a partnership interest, with consent not to be unreasonably withheld.
Analysis: The analysis is the same as for the Meridian JV. The proposed Transaction does not involve a change of control of Summit Industrial Fabrication Co. or any of its parent entities. Nexford retains 100% ownership of Summit Industrial Fabrication Co., and Granite Peak retains indirect 100% ownership through Holdings. The Change of Control provision is not triggered.
Pledge Restriction. Section 7.03 provides:
"No Partner may pledge, hypothecate, mortgage, or otherwise grant a security interest in its Partnership Interest without the prior written consent of the other Partner."
Analysis: The restriction is similar to the Meridian JV, though notably this provision does not include the "not to be unreasonably withheld" qualification. Consent from Hartwell Surface Technologies, Inc. is therefore required for the pledge, and Hartwell has broader discretion to withhold consent.
Recommendation: Same approach as for the Meridian JV — seek consent from Hartwell for the pledge, or confirm excluded asset treatment. Given the smaller revenue contribution ($12,000,000) and the absence of the "not to be unreasonably withheld" qualifier, it may be more practical to exclude this interest from the collateral package and confirm acceptability with Crescent Harbor's credit team.
VII. REAL PROPERTY LEASES
A. Overview. Nexford and its subsidiaries occupy a total of 14 manufacturing, warehouse, and office facilities across North America. Of these, four properties are owned by entities within the Nexford Group and are held by Nexford Properties, LLC and the respective operating subsidiaries. The owned properties are subject to mortgage as part of the collateral package, having appraised values in excess of the $10,000,000 threshold set forth in the Credit Agreement:
The remaining ten facilities are leased under various lease agreements with third-party landlords. We reviewed all ten lease agreements. In addition, one facility in Canada is leased by Nexford Canada Manufacturing, Inc., a foreign subsidiary that is not a Guarantor under the Credit Agreement.
The aggregate annual lease expense across all 10 domestic leased properties is approximately $18,500,000.
B. Key Lease Agreements — Detailed Findings
1. Clearfield, PA Facility Lease. Lease Summary: