MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: File — Matter No. 1005-00001 (Billing Code: IBL-NIH-2025-031)
FROM: Claudia Merritt, Responsible Partner, Banking & Finance, Calderwood & Harkness LLP
DATE: February 3, 2025
RE: Staffing Assignments and Responsibilities — Nexford Industrial Holdings Inc. $1,400,000,000 Senior Secured Term Loan B Refinancing and Dividend Recapitalization
This memorandum is prepared for internal file purposes only and is protected by the attorney-client privilege and the work product doctrine. It is not intended for distribution outside of the Calderwood & Harkness LLP engagement team, authorized local counsel, and authorized client contacts. Any disclosure, reproduction, or distribution of this memorandum or its contents without the prior written approval of Claudia Merritt is strictly prohibited.
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1. Matter Overview
This memorandum sets forth the staffing assignments and individual responsibilities for the Calderwood & Harkness LLP engagement team in connection with the representation of Nexford Industrial Holdings Inc. in the transaction described below. The purpose of this memorandum is to ensure clarity of roles, accountability for deliverables, and efficient coordination among all team members throughout the life of the engagement.
1.1 The Client
Calderwood & Harkness LLP has been engaged to represent Nexford Industrial Holdings Inc. ("Nexford" or "NIH"), a Delaware corporation headquartered at 1400 Industrial Parkway, Schaumburg, Illinois 60173. Nexford is an industrial conglomerate engaged in the manufacture and distribution of precision-engineered components and industrial systems across multiple end markets, including aerospace, defense, energy, and general industrials.
Nexford is a portfolio company of Granite Peak Capital Partners, LP ("Granite Peak" or the "Sponsor"), a middle-market private equity firm focused on industrial and manufacturing investments. Granite Peak holds one hundred percent (100%) of Nexford's equity through Granite Peak NIH Holdings, LLC, a Delaware limited liability company that serves as the direct parent entity of Nexford (referred to herein as "Holdings"). Holdings is, in turn, owned ninety-two percent (92%) by Granite Peak Capital Fund IV, LP and eight percent (8%) by GP Fund IV Co-Invest, LP, a co-investment vehicle established for the benefit of certain limited partners and co-investors participating alongside Fund IV.
1.2 The Transaction
Nexford proposes to enter into a senior secured Term Loan B credit facility in the aggregate principal amount of One Billion Four Hundred Million Dollars ($1,400,000,000) (the "Term Loan B" or the "Facility"). The proceeds of the Term Loan B will be applied as follows:
(a) Refinancing of Existing Indebtedness. Repayment in full of Nexford's existing first lien term loan in the outstanding principal amount of Eight Hundred Seventy-Five Million Dollars ($875,000,000), plus accrued and unpaid interest, and termination of Nexford's existing revolving credit facility in the committed amount of One Hundred Ninety Million Dollars ($190,000,000) (currently undrawn), in each case under the existing Credit Agreement dated June 14, 2019, with Atlas Meridian Bank, N.A. serving as administrative agent (as amended from time to time, the "Existing Credit Agreement").
(b) Dividend Recapitalization. Payment of a distribution of approximately Three Hundred Thirty-Five Million Dollars ($335,000,000), net of fees and expenses, to Holdings for further distribution to Granite Peak and its co-investors as a dividend recapitalization.
(c) Transaction Fees and Expenses. Payment of arrangement fees, original issue discount, legal fees, advisory fees, and other customary transaction costs and expenses.
(d) General Corporate Purposes. Retention of remaining proceeds on Nexford's balance sheet for working capital and general corporate purposes.
1.3 Key Transaction Parties
Crescent Harbor Bank, N.A. ("Crescent Harbor") will serve as sole lead left arranger and bookrunner, administrative agent, and collateral agent for the Term Loan B. Crescent Harbor is represented by Whitfield & Gage LLP ("W&G"), with Margaret Ashby serving as lead partner and Jonathan Ferris serving as working associate. The Sponsor, Granite Peak Capital Partners, LP, is represented by Kellner Brandt & Associates LLP ("Kellner Brandt"), with Patricia Voss serving as lead partner.
1.4 Target Closing and Governing Law
The target closing date for the transaction is March 28, 2025. All transaction documents, including the Credit Agreement and all ancillary documentation, will be governed by the laws of the State of New York, without regard to conflicts of law principles (other than Sections 5-1401 and 5-1402 of the New York General Obligations Law). Entity-related documents and security filings will be governed by applicable state law as relevant to the jurisdiction of organization of each entity.
1.5 Engagement Opening
This matter was opened today, February 3, 2025, and the engagement letter between Calderwood & Harkness LLP and Nexford Industrial Holdings Inc. has been fully executed. The matter number is 1005-00001, and the billing code assigned is IBL-NIH-2025-031.
2. Calderwood & Harkness LLP Engagement Team
The following attorneys have been assigned to this engagement. Each team member's role, scope of responsibility, and expected contributions are set forth in detail below.
2.1 Claudia Merritt — Responsible Partner, Banking & Finance
Claudia Merritt, a partner in the Banking & Finance practice group, will serve as the Responsible Partner for this engagement. In that capacity, Merritt will bear overall responsibility for the engagement, including the quality and timeliness of all legal advice and work product delivered to the client.
Role and Responsibilities:
(a) Overall Engagement Management. Merritt will serve as the primary relationship partner for Nexford Industrial Holdings Inc. and will exercise day-to-day senior oversight of all workstreams described in Section 3 of this memorandum.
(b) Principal-Level Negotiations. Merritt will lead all principal-level negotiations with Margaret Ashby of Whitfield & Gage LLP, representing the arranger and administrative agent, and with Patricia Voss of Kellner Brandt & Associates LLP, representing the Sponsor. These negotiations are expected to encompass the material commercial and legal terms of the Credit Agreement, the intercreditor arrangements, and any escalated points arising from the security and guarantee documentation.
(c) Client Communications on Material Issues. Merritt will serve as the primary point of contact for direct communication with David Engstrom, General Counsel and Corporate Secretary of Nexford, and Michelle Kaplan, Chief Financial Officer of Nexford, on all material legal and commercial issues. Merritt will also communicate directly with Elaine Prescott, Managing Director of Leveraged Finance Origination at Crescent Harbor Bank, N.A., regarding deal timing, commercial terms, and syndication considerations as necessary.
(d) Final Approval Authority. Merritt will provide final sign-off on all opinion letters to be delivered at closing, the execution version of the Credit Agreement, and all closing deliverables. No documents will be delivered to counterparties or filed with any governmental authority without Merritt's prior review and approval, except for routine administrative filings expressly delegated to Sophie Tremblay under Merritt's standing authorization.
(e) Staffing and Budget. Merritt will approve all staffing levels for the engagement and will monitor adherence to the engagement budget in coordination with Ian Blackwood (Billing Partner). Any engagement of additional resources, including additional associates, paralegals, or specialized counsel beyond current local counsel arrangements, requires Merritt's prior approval.
2.2 Ian Blackwood — Billing Partner, Banking & Finance
Ian Blackwood, a partner in the Banking & Finance practice group, will serve as the Billing Partner for this engagement.
Role and Responsibilities:
(a) Billing and Financial Management. Blackwood will be responsible for all billing and financial management of the engagement under Matter Number 1005-00001 (Billing Code: IBL-NIH-2025-031). This includes oversight of fee estimates provided to the client, monthly billing cycles, accrual reporting, and compliance with Nexford's outside counsel guidelines.
(b) Client Billing Coordination. Blackwood will coordinate directly with Nexford's legal department, and specifically with David Engstrom and Priya Mehta, on all billing matters, including any discussions relating to fee caps, budget adherence, or alternative fee arrangements that may be proposed by the client.
(c) Secondary Senior Review. Blackwood will be available as a secondary senior review resource for substantive Banking & Finance questions, particularly with respect to credit agreement provisions and ancillary documentation. While Merritt serves as the primary partner exercising day-to-day substantive oversight, Blackwood's availability provides additional depth for periods of high activity or when Merritt's schedule may be constrained.
(d) Budget Impact of Additional Resources. Blackwood will work with Merritt to assess the budget impact of any requests for additional staffing, specialized counsel, or out-of-scope work that may arise during the course of the engagement.
2.3 Marcus Leung — Lead Associate, Banking & Finance
Marcus Leung, a senior associate in the Banking & Finance practice group, will serve as the Lead Associate for this engagement.
Role and Responsibilities:
(a) Day-to-Day Management and Execution. Leung will be responsible for the day-to-day management and execution of all transaction workstreams described in Section 3 of this memorandum. Leung will serve as the primary drafting attorney for all borrower-side transaction documents, including the Credit Agreement mark-ups, the Guarantee Agreement, the Security Agreement, all Pledge Agreements, and the intellectual Property Security Agreement.
(b) Primary Day-to-Day Point of Contact. Leung will serve as the primary day-to-day point of contact for communications with Jonathan Ferris of Whitfield & Gage LLP, Patricia Voss of Kellner Brandt & Associates LLP, and Nexford's in-house legal and treasury team, including David Engstrom (General Counsel) and Priya Mehta (VP, Treasury & Corporate Finance). All routine communications regarding document drafts, issues lists, scheduling, and diligence items should flow through Leung, with escalations to Merritt on commercial or policy-level matters.
(c) Supervision of Sophie Tremblay. Leung will directly supervise Sophie Tremblay on all tasks assigned to her as described in Section 2.4 below and throughout the workstream descriptions in Section 3. Leung will review all work product prepared by Tremblay before circulation to the client or counterparties.
(d) Local Counsel Coordination. Leung will coordinate with local counsel retained for this transaction, specifically Robert Kimura of Hargrove & Whitmore LLP (Illinois) and Catherine Ellsworth of Briarcliff Legal Group PA (Delaware), including providing instructions regarding the scope and form of local counsel opinions and reviewing drafts of local counsel deliverables.
(e) Timeline and Deadline Management. Leung will maintain the master timeline for the engagement and will be responsible for ensuring that all internal and external deadlines are met. Leung will promptly escalate any actual or anticipated deadline issues to Merritt.
(f) Specific Workstream Responsibilities. Leung's specific responsibilities across each workstream are detailed in Section 3 of this memorandum.
2.4 Sophie Tremblay — Working Associate, Banking & Finance
Sophie Tremblay, a mid-level associate in the Banking & Finance practice group, will serve as the Working Associate for this engagement, supporting Marcus Leung across all workstreams.
Role and Responsibilities:
(a) Due Diligence Coordination. Tremblay will serve as the primary coordinator for due diligence activities, including the collection of organizational documents, subsidiary and guarantor schedule preparation, and management of the due diligence status tracker on an ongoing basis through closing.
(b) Trackers and Checklists. Tremblay will maintain the following tracking documents throughout the engagement: (i) the due diligence status tracker, (ii) the conditions precedent tracker / closing checklist, and (iii) the post-closing checklist. These documents will be updated regularly and circulated to the engagement team as appropriate.
(c) Drafting of Ancillary Deliverables. Tremblay will prepare initial drafts of UCC financing statements, secretary's certificates, closing certificates, officer's certificates, and other ancillary closing deliverables as described in the workstream assignments in Section 3. All initial drafts prepared by Tremblay will be reviewed by Leung prior to internal or external circulation.
(d) Good Standing and Organizational Document Collection. Tremblay will coordinate the collection of good standing certificates, certified copies of organizational documents (certificates of incorporation, certificates of formation, operating agreements, bylaws), and IRS Forms W-8 and W-9 from all Loan Parties.
(e) Closing Logistics. Tremblay will assist with the preparation of signature pages, the closing agenda, and closing binder compilation. Tremblay will serve as the primary logistics coordinator for the closing process.
(f) Client Liaison for Document Collection. Tremblay will serve as the primary liaison with Priya Mehta, VP of Treasury & Corporate Finance at Nexford, for purposes of document collection and factual diligence items. Tremblay will coordinate with Mehta on the timely delivery of financial statements, organizational charts, insurance certificates, material contracts, and other items on the due diligence request list.
2.5 Sylvia Hartwell — Specialist Partner, Tax
Sylvia Hartwell, a partner in the Tax practice group, will serve as the Tax Specialist Partner for this engagement. Hartwell will be responsible for all tax-related analysis and advice in connection with the transaction.
Role and Responsibilities:
(a) Tax Deliverables. Hartwell will prepare or supervise the preparation of the following tax memoranda and analyses:
(i) Dividend Recapitalization Tax Memorandum. Analysis of the tax consequences of the dividend recapitalization structure, including characterization of the distribution of approximately $335,000,000 to Holdings (as return of capital, dividend income, or capital gain), earnings and profits ("E&P") analysis for Nexford at the time of the distribution, and any tax implications for Holdings and its upstream owners (Granite Peak Capital Fund IV, LP and GP Fund IV Co-Invest, LP).
(ii) Section 163(j) Interest Deductibility Memorandum. Analysis of the deductibility of interest expense on the $1,400,000,000 Term Loan B under Internal Revenue Code Section 163(j), including application of the thirty percent (30%) adjusted taxable income ("ATI") limitation, projected interest expense calculations, and identification of any potential limitation on deductibility in the first full fiscal year following closing.
(iii) FATCA and Treaty Withholding Analysis. Memorandum addressing withholding tax considerations for syndicate lenders under the Foreign Account Tax Compliance Act ("FATCA"), including analysis of treaty benefits available to non-U.S. lenders and the documentation requirements applicable to the lending syndicate.
(iv) State and Local Tax / Mortgage Recording Tax Memorandum. Analysis of state and local tax implications of collateral grants and mortgage recording taxes in the four jurisdictions where mortgaged properties are located: Cook County, Illinois; Winnebago County, Illinois; Greenville County, South Carolina; and Harris County, Texas. This memorandum will address applicable recording tax rates, exemptions, and strategies to minimize recording tax exposure.
(v) W-8/W-9 Collection Oversight. Hartwell will oversee the W-8/W-9 collection process, including review of completed forms for accuracy and sufficiency. Sophie Tremblay will assist with the logistics of the collection process.
(b) Coordination with Client Financial Team. Hartwell will coordinate with Michelle Kaplan (CFO) and Priya Mehta (VP, Treasury & Corporate Finance) at Nexford to obtain the financial data necessary for the tax analyses described above, including historical and projected financial statements, E&P calculations, and supporting schedules.
(c) Credit Agreement Tax Provisions. Hartwell will be available for consultation on the tax representations, covenants, and withholding provisions contained in the Credit Agreement and related transaction documents. Marcus Leung will circulate relevant portions of the Credit Agreement drafts to Hartwell for review and comment.
(d) Client Tax Profile. For purposes of this engagement, Nexford's state of tax residence is Illinois, and its fiscal year ends on December 31.
3. Workstream Assignments and Division of Responsibilities
The following section sets forth a detailed description of each workstream, including the team members assigned, specific deliverables, target dates, and the division of responsibilities among team members. All workstreams are subject to the overall supervision and final approval of Claudia Merritt, Responsible Partner.
3.1 Workstream 1: Term Sheet, Commitment Letter, and Fee Letter
Lead: Marcus Leung, under the supervision of Claudia Merritt.
This workstream encompasses the review, negotiation, and execution of the preliminary deal documents that establish the economic and structural framework for the Term Loan B.
Scope of Work:
(a) Term Sheet Review and Negotiation. Marcus Leung will review and annotate the initial term sheet delivered by Crescent Harbor Bank, N.A., which was received on February 5, 2025. Leung will prepare a term sheet issues list identifying all material provisions requiring further negotiation and a negotiation memorandum setting forth Calderwood & Harkness's recommended positions on each issue. Following internal review by Claudia Merritt, Leung will prepare and deliver a marked-up term sheet to Whitfield & Gage LLP for negotiation.
(b) Commitment Letter Review. Leung will review the commitment letter from Crescent Harbor Bank, N.A., reflecting Crescent Harbor's commitment to provide the full $1,400,000,000 Term Loan B. The review will encompass a detailed analysis of the conditions precedent to funding, market flex provisions (including pricing flex, structure flex, and syndication flex), syndication mechanics, and the interplay between the commitment letter and the definitive documentation. Leung will prepare a market flex provisions analysis memorandum summarizing the scope of Crescent Harbor's flex rights and the potential impact on Nexford's economic terms.
(c) Fee Letter Review. Leung will review the fee letter, which is expected to contain the following principal economic terms:
• Arrangement fee: 50 basis points on the committed amount ($7,000,000)
• Upfront fee to lenders: 100 basis points
• Original issue discount ("OID"): 50 basis points ($7,000,000)
(d) Internal Summary Memorandum. Leung will prepare an internal memorandum for the engagement team and client summarizing the key economic and legal terms of the proposed Term Loan B, including the following:
• Interest rate: Term SOFR plus 400 basis points
• SOFR floor: 0.75%
• Amortization: 1.00% per annum ($14,000,000 annually; $3,500,000 quarterly)
• Maturity: Seven (7) years from closing
• Springing financial covenant: 5.00x first lien net leverage ratio (tested quarterly when revolving credit exposure exceeds a specified threshold, if applicable)
(e) Client Advisory. Leung will advise Nexford on the terms and conditions of the commitment letter and fee letter and coordinate with Merritt to provide recommendations regarding execution. Merritt will participate in any principal-level discussions with Crescent Harbor or its counsel regarding the commitment letter terms.
3.2 Workstream 2: Due Diligence
Lead: Marcus Leung (substantive review); Sophie Tremblay (coordination and tracking).
This workstream encompasses all legal due diligence activities required to support the preparation and negotiation of definitive transaction documents and the delivery of legal opinions at closing.
Scope of Work:
(a) Due Diligence Request List. Marcus Leung will prepare and issue a comprehensive due diligence request list to Nexford on February 4, 2025. The request list will cover organizational documents, financial statements, material contracts, insurance policies, litigation and contingent liabilities, intellectual property, real property, environmental matters, labor and employment, regulatory compliance, tax matters, and existing indebtedness.
(b) Due Diligence Status Tracker. Sophie Tremblay will maintain the due diligence status tracker on an ongoing basis through closing. The tracker will be updated at least weekly (and more frequently as document production accelerates) and will be circulated to the engagement team and, as appropriate, to Nexford's in-house team to identify outstanding items requiring follow-up.
(c) Corporate Organization Chart. Marcus Leung, with the assistance of Sophie Tremblay, will prepare a detailed corporate organization chart depicting the full Nexford group structure, including:
• Granite Peak Capital Fund IV, LP (92% of Holdings)
• GP Fund IV Co-Invest, LP (8% of Holdings)
• Granite Peak NIH Holdings, LLC (Holdings — direct 100% parent of Nexford)
• Nexford Industrial Holdings Inc. (the Borrower)
• All fourteen (14) or more domestic and foreign subsidiaries, including identification of each entity's jurisdiction of organization, ownership structure, and whether such entity will serve as a Guarantor or Loan Party
(d) Substantive Due Diligence Memoranda. Marcus Leung will prepare the following substantive due diligence memoranda (unless otherwise noted, each memorandum will be prepared by Leung):
(i) Existing Credit Agreement Review. Review of the existing Credit Agreement dated June 14, 2019, with Atlas Meridian Bank, N.A. as Administrative Agent, as amended by the First Amendment dated March 20, 2020, the Second Amendment dated November 8, 2021, the Third Amendment dated April 15, 2023, and the Fourth Amendment dated September 12, 2024 (which waived the applicable prepayment premium). The memorandum will identify provisions relevant to the refinancing, including any mandatory prepayment requirements, notice periods, consent requirements, and lien release mechanics.
(ii) Existing Indenture Review. Review of the Indenture dated November 8, 2021, governing Nexford's $250,000,000 aggregate principal amount of 7.250% Senior Unsecured Notes due 2028 (the "Senior Unsecured Notes"), with Pinnacle Trust Company serving as trustee. The memorandum will analyze the incurrence covenants (including limitations on additional indebtedness and liens), restricted payments basket availability, change of control put provisions, and any other covenants or provisions relevant to the consummation of the Term Loan B and dividend recapitalization.
(iii) Existing Lien and Security Package Analysis. Analysis of the existing lien and security package under the Atlas Meridian facilities, including identification of all collateral pledged, filing jurisdictions, recorded mortgages, and the scope of liens to be released upon repayment.
(iv) UCC Search Results Summary. Summary of UCC search results across all filing jurisdictions, specifically: the State of Delaware, the State of Illinois, the Commonwealth of Pennsylvania, the State of South Carolina, the State of Texas, and the State of Michigan. The summary will identify all existing UCC filings against Loan Parties, classify them as relating to the Atlas Meridian facilities (to be terminated), permitted liens, or other filings requiring further investigation.
(v) intellectual Property Lien Search Results. Summary of lien search results at the United States Patent and Trademark Office ("USPTO") and the United States Copyright Office, identifying any recorded security interests or assignments that may affect the Collateral Agent's ability to obtain a perfected first-priority security interest in intellectual property assets.
(vi) Real Property Title and Survey Review. Review of title commitments and surveys for the four mortgaged properties:
• 1400 Industrial Parkway, Schaumburg, Illinois (Cook County) — appraised value: $85,000,000
• 2750 Commerce Drive, Rockford, Illinois (Winnebago County) — appraised value: $42,000,000
• 600 Manufacturers Row, Greenville, South Carolina (Greenville County) — appraised value: $38,000,000
• 9100 Westpark Industrial Boulevard, Houston, Texas (Harris County) — appraised value: $28,000,000
• Total appraised value of mortgaged properties: $193,000,000
The memorandum will identify title exceptions, survey matters, and any issues requiring resolution prior to or as a condition of mortgage recording.
(vii) Environmental Due Diligence Summary. Review and summary of Phase I Environmental Site Assessment reports prepared by Clearwater Environmental Sciences, Inc. (Dr. Nathan Foley, principal investigator) for each of the four mortgaged properties. The memorandum will identify any recognized environmental conditions ("RECs"), historical recognized environmental conditions, or controlled recognized environmental conditions, and will assess the implications for environmental representations in the Credit Agreement and for environmental insurance or indemnification provisions.
(viii) Insurance Program Review. Review of Nexford's insurance program based on data provided by Vantage Risk Advisors, LLC (Rachel Sorensen, account executive). The review will cover the adequacy of coverage for purposes of Credit Agreement insurance covenants, including property and casualty coverage provided by Continental Shield Underwriters, Inc. and directors and officers liability coverage provided by Meridian Specialty Insurance Co. The memorandum will also assess the need for lender loss payee endorsements and additional insured endorsements in favor of Crescent Harbor Bank, N.A. as Collateral Agent.
(ix) Material Contract Review Summary. Summary of material contracts reviewed in connection with the due diligence process, including identification of change of control provisions, anti-assignment clauses, consent requirements, and any other provisions that may be triggered by the refinancing or dividend recapitalization.
(x) Litigation and Contingent Liability Review. Review and summary of pending and threatened litigation, arbitration, and other legal proceedings involving Nexford and its subsidiaries, together with an assessment of disclosed contingent liabilities and their potential impact on the representations, warranties, and disclosure schedules in the Credit Agreement.
(xi) Regulatory and Compliance Review. Review of Nexford's compliance with applicable regulatory requirements, including the Office of Foreign Assets Control ("OFAC") sanctions programs, anti-corruption laws (including the Foreign Corrupt Practices Act ("FCPA")), the USA PATRIOT Act, and the Bank Secrecy Act. The memorandum will assess the adequacy of Nexford's compliance programs and identify any issues for the sanctions, anti-corruption, and anti-money laundering representations and covenants in the Credit Agreement.
(xii) Canadian Subsidiary Structure and Cross-Border Issues. Analysis of the Canadian subsidiary structure, including the role of Nexford International Holdings, Inc. as the controlled foreign corporation ("CFC") holding company, the organizational structure of Nexford Canada Holdings ULC (a British Columbia unlimited liability company) and Nexford Canada Manufacturing, Inc. (an Ontario corporation), and the application of the customary 65% voting / 100% non-voting pledge limitation for CFC subsidiaries under the Pledge Agreement.
(e) Tax-Related Diligence. Tax-related due diligence, including analysis of the tax structure and the tax implications of the dividend recapitalization, will be conducted by Sylvia Hartwell as described in Section 2.5 and Section 3.10 of this memorandum.
3.3 Workstream 3: Credit Agreement Drafting and Negotiation
Lead: Marcus Leung, under the supervision of Claudia Merritt.
This workstream is the central substantive workstream of the engagement and encompasses the review, analysis, mark-up, and negotiation of the definitive Credit Agreement.
Scope of Work:
(a) Receipt and Review of First Draft. The first draft of the Credit Agreement is expected to be received from Whitfield & Gage LLP on or about February 24, 2025. Upon receipt, Marcus Leung will prepare an internal analysis memorandum identifying all material provisions, departures from customary terms, open points, and areas requiring further discussion with the client and negotiation with W&G.
(b) Issues List. Leung will maintain a credit agreement issues list in an Excel workbook format, versioned through each round of negotiation, tracking the status of each open issue, each party's position, and the resolution (if reached). The issues list will serve as the primary tool for managing the negotiation process and will be circulated to Merritt and the engagement team in advance of each internal status call and each substantive call with counterparties.
(c) Mark-Up and Negotiation Process. Leung will prepare Calderwood & Harkness marked drafts (in tracked changes format) for return to W&G, together with blackline comparisons against each prior version. The engagement team currently anticipates three (3) rounds of mark-up before reaching a substantially agreed near-final version of the Credit Agreement, consistent with the milestone timeline set forth in Section 5 of this memorandum:
• First C&H mark-up returned to W&G: March 3, 2025
• Second W&G draft received and C&H response: approximately March 10–12, 2025
• Third draft (substantially agreed key commercial terms): March 17, 2025
• Execution-ready version: March 24, 2025
(d) Key Substantive Provisions. The following provisions of the Credit Agreement require focused analysis and, in each case, Leung will prepare a dedicated internal memorandum or issues list entry summarizing the provision, market practice, and recommended position:
(i) Most Favored Nation ("MFN") Provision. The MFN provision is expected to provide a 50 basis point threshold and a 12-month sunset applicable to incremental term loans incurred after the closing date. Leung will analyze whether the MFN threshold and sunset are consistent with current market practice for Term Loan B facilities of comparable size and credit profile, and will recommend any modifications.
(ii) Change of Control Provision. The change of control provision is expected to include the following triggers: (A) the acquisition of more than 35% of the voting equity of Nexford by any person or group other than Granite Peak and its affiliates, (B) Nexford ceasing to be a direct wholly-owned subsidiary of Holdings, and (C) cross-default to the change of control provision in the Senior Unsecured Notes Indenture. Leung will analyze the interplay between the Credit Agreement change of control provision and the Indenture change of control put, and will recommend appropriate protections for Nexford.
(iii) Excess Cash Flow Sweep Mechanics. The excess cash flow sweep is expected to be structured on a step-down basis, with sweep percentages keyed to first lien net leverage levels:
• 50% of excess cash flow when first lien net leverage exceeds 4.25x
• 25% of excess cash flow when first lien net leverage is less than or equal to 4.25x but greater than 3.50x
• 0% of excess cash flow when first lien net leverage is less than or equal to 3.50x
Leung will analyze the excess cash flow definition, including add-backs and deductions, and will assess the interaction with Nexford's projected cash flows.
(iv) Incremental Facility Provisions. The Credit Agreement is expected to include incremental facility capacity consisting of a "free-and-clear" basket in an amount equal to the greater of $280,000,000 and 100% of LTM Consolidated EBITDA, plus additional ratio-based incurrence capacity at a first lien net leverage ratio of 4.50x (on a pro forma basis). Leung will analyze the incremental capacity provisions, including MFN protections, maturity and weighted average life requirements, and "most favored lender" limitations.
(v) Restricted Payment Baskets. The restricted payments covenant is expected to include the following principal baskets:
• General builder basket: $50,000,000 starter amount plus 50% of cumulative consolidated net income from Q1 2025
• Annual general basket: $25,000,000 per fiscal year
• Unlimited restricted payments permitted when total net leverage does not exceed 3.75x
Leung will analyze the restricted payment provisions in light of the Sponsor's expected distribution and equity return requirements and the interplay with the restricted payments covenant in the Senior Unsecured Notes Indenture.
(vi) Permitted Indebtedness Carve-Outs. Key permitted indebtedness carve-outs are expected to include capital lease and purchase money obligations up to $50,000,000 and a general unsecured indebtedness basket of $35,000,000. Leung will assess the adequacy of these baskets in light of Nexford's operational needs and capital expenditure plans.
(vii) EBITDA Add-Backs. The Consolidated EBITDA definition is expected to include add-backs totaling approximately $28,000,000, broken down as follows:
• Acquisition-related costs and expenses: $12,000,000
• Restructuring charges: $8,500,000
• Sponsor management fees: $4,500,000
• Integration costs: $3,000,000
Leung will analyze the add-back provisions for consistency with market practice, including any caps, sunset provisions, and certification requirements.
(viii) Soft Call Premium. A prepayment premium of 101% (i.e., a 1% premium) is expected to apply to any repricing transaction (including amendments reducing the applicable margin) consummated within six (6) months of the closing date. Leung will confirm the scope and duration of the soft call provision against market precedents.
(ix) Default Rate. Interest at the default rate is expected to accrue at a rate of 200 basis points above the otherwise applicable rate. Leung will review the default rate provision in conjunction with the events of default, cure provisions, and the mechanics of default interest accrual.
(x) SOFR Credit Spread Adjustment. The Credit Agreement is expected to include a credit spread adjustment ("CSA") of 10 basis points for 1-month Term SOFR and 15 basis points for 3-month Term SOFR. Leung will confirm that the CSA mechanics are consistent with the transition from LIBOR and reflect current market convention.
(xi) Sanctions, OFAC, and Anti-Corruption Provisions. Leung will review the representations, warranties, and covenants relating to economic sanctions compliance, OFAC, anti-corruption (including FCPA), and anti-money laundering, and will coordinate with the regulatory and compliance diligence conducted under Workstream 2 to ensure consistency between the diligence findings and the Credit Agreement representations.
(e) Partner-Level Review and Negotiation. Claudia Merritt will participate in all principal-level calls with Margaret Ashby of Whitfield & Gage LLP regarding commercial terms and will provide final approval of all drafts before delivery to counterparties. Marcus Leung will handle day-to-day email correspondence with W&G, with Merritt serving as the escalation resource for matters that cannot be resolved at the associate level.
3.4 Workstream 4: Security, Guarantee, and Pledge Documents
Lead: Marcus Leung (drafting); Sophie Tremblay (schedules and exhibits).
Calderwood & Harkness LLP is the drafting party for the security, guarantee, and pledge documentation package. This is a significant workstream given the breadth of the collateral package, the number of Loan Parties, and the need to coordinate across multiple jurisdictions.
Scope of Work:
(a) First Drafts. The first drafts of all security, guarantee, and pledge documents are targeted for circulation on March 10, 2025. Marcus Leung will prepare the principal drafts, and Sophie Tremblay will prepare all schedules, exhibits, and annexes.
(b) Documents to Be Prepared. The following documents will be prepared by the Calderwood & Harkness engagement team:
(i) Guarantee Agreement. The Guarantee Agreement will be executed by Granite Peak NIH Holdings, LLC (as Holdings Guarantor) and eleven (11) Subsidiary Guarantors. The Subsidiary Guarantors are: Nexford Precision Components, Inc. ("NPC"); Nexford Engineered Systems, Inc. ("NES"); Nexford Commercial Services & Technology, Inc. ("NCST"); Nexford Manufacturing Services, LLC ("NMS"); Nexford Properties LLC ("NP LLC"); Nexford International Holdings, Inc. ("NIH Intl"); Clearfield Industrial Solutions, Inc. ("Clearfield"); Summit Manufacturing Group, Inc. ("Summit"); Ridgepoint Technologies, Inc. ("Ridgepoint"); Lakeshore Production Systems, Inc. ("Lakeshore"); and one additional Subsidiary Guarantor to be confirmed upon finalization of the organizational chart.
(ii) Security Agreement (Personal Property). The Security Agreement will grant a first-priority security interest in substantially all personal property assets of the Borrower and each Guarantor, including accounts receivable, inventory, equipment, intellectual property, deposit accounts, securities accounts, general intangibles, intercompany notes, and proceeds thereof.
(iii) Holdings Pledge Agreement. Holdings will pledge 100% of the equity interests in Nexford to the Collateral Agent.
(iv) Borrower Pledge Agreement. Nexford will pledge 100% of the equity interests in each of its direct domestic subsidiaries to the Collateral Agent.
(v) Subsidiary Pledge Agreements. Ten (10) separate Subsidiary Pledge Agreements will be executed by the applicable Subsidiary Guarantors, each pledging the equity interests held by such Subsidiary Guarantor in its respective direct subsidiaries.
(vi) CFC Holdco Limited Pledge Agreement. Nexford International Holdings, Inc. will pledge 65% of the voting equity and 100% of the non-voting equity in Nexford Canada Holdings ULC to the Collateral Agent, consistent with the customary CFC pledge limitation.
(vii) intellectual Property Security Agreement. The IP Security Agreement will cover all patents, patent applications, trademarks, trademark applications, copyrights, copyright registrations, and related intellectual property rights held by the Borrower and Guarantors.
(viii) Deposit Account Control Agreements ("DACAs"). DACAs will be entered into with respect to deposit accounts maintained at Crescent Harbor Bank, N.A. and Redstone National Bank, covering accounts ending in -4471, -4472, and -6633. Marcus Leung will negotiate the form of DACA with the applicable depository institutions.
(ix) Securities Account Control Agreements. Control agreements will be entered into with respect to securities accounts maintained by the Borrower and Guarantors, as identified through the due diligence process.
(x) Intercompany Note. An intercompany note evidencing intercompany loans from Nexford to its subsidiaries will be prepared and pledged to the Collateral Agent under the Security Agreement.
(c) Mortgages (Post-Closing Deliverables). Mortgages will be delivered as post-closing items, with a deadline of April 30, 2025. The following mortgages will be prepared and recorded:
• 1400 Industrial Parkway, Schaumburg, Illinois (Cook County recording)
• 2750 Commerce Drive, Rockford, Illinois (Winnebago County recording)
• 600 Manufacturers Row, Greenville, South Carolina (Greenville County recording)
• 9100 Westpark Industrial Boulevard, Houston, Texas (Harris County recording)
Coordination on the form of the Illinois mortgages and recording procedures will be handled by Hargrove & Whitmore LLP (Robert Kimura) as Illinois local counsel. Title insurance will be provided by Landmark Title Assurance Company. Sylvia Hartwell will advise on mortgage recording tax implications as described in Section 3.10.
(d) Excluded Assets. The security package will exclude the following categories of assets, consistent with customary market practice for leveraged Term Loan B transactions:
• Motor vehicles with a book value below $250,000 per vehicle
• Letter of credit rights with a face amount under $1,000,000
• Commercial tort claims with a value below $2,500,000
• Assets the pledge of which would result in excessive cost relative to the benefit to the Secured Parties, as reasonably determined by the Borrower and the Administrative Agent
(e) Negotiation. Marcus Leung will negotiate the security, guarantee, and pledge documents with Whitfield & Gage LLP. Key negotiation issues are expected to include the scope of collateral, the definition of Excluded Assets, the terms of the deposit account control agreements, the mechanics of the limited CFC pledge, and the post-closing obligations and cure periods for collateral-related deliverables.
3.5 Workstream 5: Intercreditor Agreement
Lead: Marcus Leung, under the supervision of Claudia Merritt.
This workstream addresses the intercreditor arrangements between the first lien lenders and the holders of the existing Senior Unsecured Notes.
Scope of Work:
(a) Intercreditor Agreement. A First Lien/Unsecured Intercreditor Agreement will be entered into between Crescent Harbor Bank, N.A. (in its capacity as first lien collateral agent under the Term Loan B) and Pinnacle Trust Company (in its capacity as trustee for the holders of the $250,000,000 aggregate principal amount of 7.250% Senior Unsecured Notes due 2028).
(b) First Draft from W&G. The first draft of the Intercreditor Agreement is expected to be received from Whitfield & Gage LLP on or about March 12, 2025.
(c) Internal Analysis and Review. Upon receipt of the first draft, Marcus Leung will prepare an internal framework analysis memorandum describing the structure and key provisions of the proposed intercreditor arrangement. Leung will also prepare a review memorandum on the W&G draft, identifying departures from market practice and issues requiring negotiation. Following internal review, Leung will prepare a Calderwood & Harkness marked draft with a blackline comparison against the W&G draft.
(d) Key Issues. The following issues are anticipated to be the primary areas of focus in the negotiation of the Intercreditor Agreement:
• Priority of claims as between the first lien secured parties and the unsecured noteholders
• Enforcement standstill periods, including the duration and conditions for any standstill applicable to the unsecured noteholders
• Proceeds waterfall, including the allocation of collateral proceeds following an enforcement event
• Borrower's rights and protections, including the Borrower's ability to refinance, amend, extend, or otherwise modify the first lien facility or the unsecured notes without triggering consent requirements under the Intercreditor Agreement