CALDERWOOD & HARKNESS LLP
INTERNAL MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
To: Claudia Merritt, Responsible Partner, Banking & Finance
From: Marcus Leung, Lead Associate, Banking & Finance
Date: March 24, 2025
Re: Opinion Assumptions, Qualifications, and Limitations Analysis — Nexford Industrial Holdings Inc. $1,400,000,000 Senior Secured Term Loan B
Matter No.: 1005-00001
Client/Matter Code: IBL-NIH-2025-031
cc: Ian Blackwood (Billing Partner); Sophie Tremblay (Working Associate); Sylvia Hartwell (Specialist Partner, Tax)
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I. Purpose and Scope of Memorandum
This memorandum analyzes the assumptions, qualifications, and limitations to be included in the legal opinion letters of Calderwood & Harkness LLP ("C&H" or the "Firm") to be delivered at the closing currently scheduled for March 28, 2025, in connection with the $1,400,000,000 senior secured Term Loan B facility (the "Term Loan B" or the "Facility") for Nexford Industrial Holdings Inc., a Delaware corporation (the "Borrower" or "Nexford"). The memorandum is intended to provide a comprehensive framework for the final form of the opinion letters, to identify all material assumptions and limitations, and to ensure that the opinions are consistent with customary New York law opinion practice for leveraged finance transactions.
C&H is delivering two opinion letters addressed to Crescent Harbor Bank, N.A. ("Crescent Harbor"), in its capacity as Administrative Agent and Collateral Agent, for the benefit of the Secured Parties under the Credit Agreement:
Opinion 1 — Enforceability Opinion. An enforceability opinion covering the Credit Agreement, the Guarantee Agreement, the Intercreditor Agreement, and the related Loan Documents under the laws of the State of New York and applicable federal laws of the United States (the "Enforceability Opinion").
Opinion 2 — UCC Perfection Opinion. A security interest perfection opinion under the Uniform Commercial Code as in effect in the State of New York (the "NY UCC") covering the Security Agreement, the Pledge Agreements, the intellectual Property Security Agreement, the Control Agreements, and the related security documents (the "UCC Perfection Opinion").
In addition to the C&H opinion letters, the following local counsel opinions are being delivered at closing:
• Hargrove & Whitmore LLP (Robert Kimura, lead partner) — Illinois law enforceability opinion and Illinois UCC perfection opinion, covering Nexford Manufacturing Services, LLC ("NMS"), an Illinois limited liability company.
• Briarcliff Legal Group PA (Catherine Ellsworth, lead partner) — Delaware law entity opinions covering due organization, valid existence, good standing, power and authority, and due authorization of all Delaware-organized Loan Parties.
The purpose of this memorandum is to finalize the form and scope of C&H's opinions, to ensure consistency with the preliminary draft opinion letters circulated on March 20, 2025 (which were shared with Whitfield & Gage LLP ("W&G"), counsel to Crescent Harbor, attention Margaret Ashby and Jonathan Ferris), and to confirm that all assumptions, qualifications, and limitations are customary, defensible, and appropriate given the structure and economics of the transaction. This memorandum also addresses coordination with local counsel regarding the scope and form of their respective opinions, coordination with W&G regarding any comments on the preliminary draft, and the timeline for finalization and execution of the opinion letters prior to closing.
The opinion addressee is Crescent Harbor Bank, N.A., in its dual capacity as Administrative Agent and Collateral Agent under the Credit Agreement, at its principal office located at 320 Federal Street, Boston, Massachusetts 02110. The opinions run to the benefit of the Lenders party to the Credit Agreement from time to time, as specified in the opinion letter itself.
II. Overview of Transaction Documents Covered by the Opinions
This section identifies the principal transaction documents that fall within the scope of C&H's two opinion letters. The documents are organized by opinion category. A complete list of all Loan Documents is set forth in Exhibit A to the Credit Agreement; this memorandum focuses on those documents that are the direct subject of one or both of the C&H opinions.
A. Documents Covered by the Enforceability Opinion
The Enforceability Opinion will cover the following principal documents:
1. Credit Agreement. Credit Agreement dated as of March 28, 2025 (the "Credit Agreement"), among Nexford Industrial Holdings Inc., as Borrower, the Guarantors party thereto from time to time, Crescent Harbor Bank, N.A., as Administrative Agent and Collateral Agent, Ironwood Capital Markets, LLC and Northvane Securities, Inc., as Joint Lead Arrangers and Joint Bookrunners, and the Lenders party thereto from time to time. The Credit Agreement provides for a $1,400,000,000 Term Loan B facility. The Term Loan B bears interest at a rate per annum equal to the Term SOFR Rate plus an applicable margin of 400 basis points, with a SOFR floor of 0.50%. The maturity date of the Term Loan B is March 28, 2032 (seven-year maturity). The Credit Agreement is governed by the laws of the State of New York.
2. Guarantee Agreement. Guarantee Agreement dated as of March 28, 2025 (the "Guarantee Agreement"), among Granite Peak NIH Holdings, LLC, a Delaware limited liability company ("Holdings" or "Granite Peak"), as Holdings Guarantor, each Subsidiary Guarantor identified therein (comprising eleven entities), and Crescent Harbor Bank, N.A., as Collateral Agent. The Subsidiary Guarantors are: Nexford Precision Components, Inc. ("NPC"), Nexford Engineering Solutions, Inc. ("NES"), Nexford Composite Structures, Inc. ("NCST"), Nexford Manufacturing Services, LLC ("NMS"), Nexford Products LLC ("NP LLC"), Nexford International Holdings, Inc. ("NIH Intl"), Clearfield Advanced Materials, Inc. ("Clearfield"), Summit Thermal Technologies, Inc. ("Summit"), Ridgepoint Fabrication, LLC ("Ridgepoint"), and Lakeshore Coatings Corporation ("Lakeshore"). Each Guarantor guarantees the payment and performance of all Obligations under the Credit Agreement and the other Loan Documents. The Guarantee Agreement is governed by New York law.
3. Intercreditor Agreement. Intercreditor Agreement (First Lien / Unsecured) dated as of March 28, 2025 (the "Intercreditor Agreement"), among Crescent Harbor Bank, N.A., as First Lien Collateral Agent, Pinnacle Trust Company, as Unsecured Notes Trustee (in respect of the $250,000,000 aggregate principal amount of 7.250% Senior Unsecured Notes due 2028, CUSIP No. 65342BAA7), and Nexford Industrial Holdings Inc., as Borrower. The Intercreditor Agreement establishes the relative rights of the First Lien Secured Parties and the holders of the Unsecured Notes with respect to the Collateral and the exercise of remedies. The Intercreditor Agreement is governed by New York law.
B. Documents Covered by the UCC Perfection Opinion
The UCC Perfection Opinion will cover the following security documents and the related perfection steps:
1. Security Agreement. Security Agreement (Personal Property) dated as of March 28, 2025 (the "Security Agreement"), among Nexford Industrial Holdings Inc. and each Subsidiary Guarantor, as Grantors, and Crescent Harbor Bank, N.A., as Collateral Agent. The Security Agreement grants a first-priority security interest in substantially all personal property of each Grantor, subject to customary exclusions.
2. Holdings Pledge Agreement. Holdings Pledge Agreement dated as of March 28, 2025, pursuant to which Granite Peak NIH Holdings, LLC pledges 100% of the issued and outstanding equity interests (represented by 10,000 shares of common stock, par value $0.01 per share) in Nexford Industrial Holdings Inc. to the Collateral Agent.
3. Borrower Pledge Agreement. Borrower Pledge Agreement dated as of March 28, 2025, pursuant to which Nexford Industrial Holdings Inc. pledges 100% of the equity interests in each of its direct domestic subsidiaries (NPC, NES, NCST, NMS, NP LLC, NIH Intl) to the Collateral Agent.
4. Subsidiary Pledge Agreements. Subsidiary Pledge Agreements dated as of March 28, 2025, pursuant to which each of NPC, NES, NCST, NMS, NP LLC, NIH Intl, Clearfield, Summit, Ridgepoint, and Lakeshore pledges its equity interests in lower-tier subsidiaries (where applicable) to the Collateral Agent.
5. CFC Holdco Limited Pledge Agreement. CFC Holdco Limited Pledge Agreement dated as of March 28, 2025, pursuant to which Nexford International Holdings, Inc. pledges 65% of the voting equity interests and 100% of the non-voting equity interests in Nexford Canada Holdings ULC, an unlimited liability company organized under the laws of the Province of British Columbia, Canada, to the Collateral Agent. The limitation to 65% of voting equity reflects the standard tax-efficient structure for pledges of "controlled foreign corporation" equity under Section 956 of the Internal Revenue Code.
6. Intellectual Property Security Agreement. intellectual Property Security Agreement dated as of March 28, 2025, among Nexford and certain Subsidiary Guarantors, as Grantors, and Crescent Harbor Bank, N.A., as Collateral Agent, granting a security interest in all patents, trademarks, copyrights, and related intellectual property of the Grantors.
7. Deposit Account Control Agreements. Deposit Account Control Agreements ("DACAs") dated as of March 28, 2025, covering deposit accounts maintained by the Borrower and the Subsidiary Guarantors at (a) Crescent Harbor Bank, N.A. (deposit accounts ending in -4471 and -4472) and (b) Redstone National Bank (deposit account ending in -6633).
8. Securities Account Control Agreements. Securities Account Control Agreements ("SACAs") dated as of March 28, 2025, covering securities accounts maintained by the Borrower and the Subsidiary Guarantors at the applicable securities intermediaries.
9. Intercompany Note. Intercompany Note dated as of March 28, 2025, executed by Nexford Industrial Holdings Inc. in favor of certain subsidiaries, endorsed and pledged to the Collateral Agent as part of the Collateral package.
C. Reliance Documents
In rendering its opinion letters, C&H will rely upon the following documents and certificates, among others:
1. Opinion Back-Up Certificate. Opinion Back-Up Certificate of Borrower (the "Back-Up Certificate"), containing factual representations from Nexford Industrial Holdings Inc. for opinion reliance purposes, to be executed on March 28, 2025 by an authorized officer of Nexford. The Back-Up Certificate will contain representations regarding, among other things, the identity and principal place of business of the Loan Parties, the absence of material agreements that would conflict with the Loan Documents, the location of collateral, the organizational status of each Loan Party, and other factual matters upon which C&H will rely in rendering its opinions.
2. Good Standing Certificates. Good Standing Certificates (or Certificates of Existence, as applicable) from the respective Secretaries of State (or equivalent governmental authority) for all Loan Parties, dated within five (5) business days of the closing date. Sophie Tremblay is currently tracking the procurement and dating of all good standing certificates.
3. Certified Copies of Organizational Documents. Certified copies of the certificate of incorporation, certificate of formation, or other organizational documents of each Loan Party, as filed with and certified by the applicable Secretary of State.
4. Secretary's Certificates. Secretary's Certificates (or Authorized Person Certificates, for limited liability companies) of the Borrower, Holdings, and each Subsidiary Guarantor, certifying as to incumbency of officers or authorized persons, copies of resolutions authorizing the transactions, and copies of the current organizational documents (certificates of incorporation, bylaws, certificates of formation, limited liability company agreements, as applicable).
5. UCC Search Results. UCC-1 and UCC-3 search results in all filing jurisdictions for each Loan Party. The filing jurisdictions are: Delaware (Secretary of State — for Nexford, Holdings/Granite Peak, NPC, NES, NCST, NP LLC, NIH Intl); Illinois (Secretary of State — for NMS); Pennsylvania (Department of State — for Clearfield); South Carolina (Secretary of State — for Summit); Texas (Secretary of State — for Ridgepoint); and Michigan (Department of State — for Lakeshore). The search results are summarized in the UCC Search Results Summary memorandum dated February 18, 2025, circulated previously.
III. Factual Assumptions
This section sets forth the factual assumptions upon which C&H's opinion letters will be based. These assumptions are divided into three categories: (A) standard factual assumptions that are customary in opinion practice; (B) transaction-specific factual assumptions relating to the particular circumstances of the Nexford Term Loan B; and (C) assumptions specifically relating to collateral and perfection matters.
A. Standard Factual Assumptions
The opinion letters will include the following standard factual assumptions, which are universally accepted in New York law opinion practice for leveraged finance transactions:
(i) All signatures on all documents are genuine. This assumption relieves opinion counsel of any obligation to verify the authenticity of signatures through independent means such as handwriting analysis or comparison.
(ii) All documents submitted to C&H as originals are authentic, and all documents submitted to C&H as copies conform to the authentic originals thereof. C&H has reviewed copies of the relevant documents in connection with the preparation of the opinions and assumes that the executed originals will be identical in all respects.
(iii) All natural persons who have executed or will execute any of the Loan Documents or related certificates have the legal capacity to do so. This assumption addresses the legal competence and capacity of individual signatories without requiring independent verification of such matters.
(iv) Each party to the Loan Documents other than the Loan Parties — namely, Crescent Harbor Bank, N.A. (in its capacities as Administrative Agent, Collateral Agent, and Lender), each Lender party to the Credit Agreement, Ironwood Capital Markets, LLC, Northvane Securities, Inc., and Pinnacle Trust Company — is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization, has all requisite corporate or other organizational power and authority to execute, deliver, and perform its obligations under the Loan Documents to which it is a party, and has duly authorized, executed, and delivered each such Loan Document. C&H does not represent any of these counterparties and accordingly does not opine as to their status, authority, or the enforceability of the Loan Documents against them.
(v) The Credit Agreement and each other Loan Document constitutes the legal, valid, and binding obligation of each party thereto other than the Loan Parties, enforceable against each such party in accordance with its terms. The enforceability opinions rendered by C&H address only the obligations of the Loan Parties (the Borrower, Holdings, and each Subsidiary Guarantor).
(vi) No party to any Loan Document has engaged in any fraud, duress, undue influence, mutual mistake, misrepresentation, or other conduct that would provide a defense to the enforcement of any obligation under any Loan Document, or that would give rise to a claim for rescission, reformation, or damages in connection with any Loan Document.
These standard assumptions are consistent with the TriBar Opinion Committee's reports and the American Bar Association's Legal Opinion Principles, and they are expected by counsel to the Administrative Agent in any opinion of this nature.
B. Transaction-Specific Factual Assumptions
In addition to the standard assumptions described above, C&H's opinion letters will rely upon the following transaction-specific factual assumptions:
(i) The factual representations set forth in the Opinion Back-Up Certificate of Borrower, to be executed on March 28, 2025 by an authorized officer of Nexford Industrial Holdings Inc., are true and correct in all material respects as of the closing date. The Back-Up Certificate is a critical reliance document; the scope and specificity of the factual representations therein directly affect the scope of C&H's opinions. The final form of the Back-Up Certificate is currently being coordinated with David Engstrom, General Counsel of Nexford.
(ii) The Borrower and each Guarantor has received reasonably equivalent value in connection with entering into the Loan Documents to which it is a party. This assumption is relevant to the fraudulent transfer analysis, particularly with respect to the guarantees. It should be noted that C&H is not rendering an opinion on fraudulent transfer matters (as discussed in Section IV.A below), but this assumption is nevertheless included to support the general enforceability opinion and to establish the factual predicate upon which the enforceability opinion rests.
(iii) The board of directors resolutions of Nexford Industrial Holdings Inc. (adopted on January 13, 2025) and the manager/member resolutions of Granite Peak NIH Holdings, LLC (adopted on January 13, 2025), and the resolutions of each Subsidiary Guarantor authorizing the execution, delivery, and performance of the Loan Documents, have been duly adopted in accordance with applicable law and the organizational documents of the respective entities, and remain in full force and effect as of the closing date without modification or rescission. C&H will rely on the Secretary's Certificates and Authorized Person Certificates as evidence of the adoption and continuing effectiveness of these resolutions.
(iv) The pro forma leverage ratios are as certified by the Borrower in the Compliance Certificate delivered at closing. Specifically, the first lien net leverage ratio, on a pro forma basis after giving effect to the transactions, is approximately 3.38x, and the total net leverage ratio, on a pro forma basis after giving effect to the transactions, is approximately 4.03x. Each such ratio is computed on the basis of last twelve months ("LTM") Adjusted EBITDA of approximately $385,000,000, calculated as of December 31, 2024. These ratios are relevant to the incurrence tests under the Credit Agreement and the Existing Indenture, and C&H relies on the Borrower's certification thereof without independent verification.
(v) The proceeds of the Term Loan B ($1,400,000,000) will be applied on the closing date as set forth in Section 2.09 of the Credit Agreement and as described in the Use of Proceeds Compliance Certificate, as follows:
(a) Approximately $879,375,000 to refinance and repay in full the existing credit facilities with Atlas Meridian Bank, N.A. (the "Existing Atlas Meridian Facilities"), including principal, accrued and unpaid interest, fees, and prepayment premiums, if any;
(b) Approximately $335,000,000 to fund a distribution (the "Sponsor Distribution") to Granite Peak NIH Holdings, LLC, as the sole shareholder of Nexford, in connection with the dividend recapitalization;
(c) Approximately $38,625,000 to pay transaction fees and expenses, including arrangement fees, commitment fees, legal fees, accounting fees, and other customary closing costs; and
(d) Approximately $147,000,000 to be retained as cash on the balance sheet of Nexford and its subsidiaries for general corporate purposes and working capital needs.
(vi) No Material Adverse Effect (as defined in the Credit Agreement) has occurred with respect to the Borrower or any of its subsidiaries since December 31, 2024, the date of the most recent audited financial statements. C&H relies on the representations and warranties in the Credit Agreement and the Borrower's officers' closing certificate in this regard.
(vii) No Event of Default or Default (each as defined in the Credit Agreement) exists as of the closing date, or would result from the consummation of the transactions contemplated by the Loan Documents. C&H relies on the Borrower's closing certificate and the Back-Up Certificate for this factual assumption.
C. Assumptions Regarding Collateral and Perfection
The UCC Perfection Opinion will rely upon the following additional assumptions specifically relating to the collateral and the perfection of security interests:
(i) All property described in the Security Agreement, the Pledge Agreements, and the other security documents exists as of the closing date and is owned by the applicable Loan Party as represented in the Back-Up Certificate and the Security Agreement schedules. C&H has not conducted any independent investigation of the existence, condition, or ownership of the collateral.
(ii) The description of collateral in the UCC-1 Financing Statements to be filed in connection with the transactions is sufficient under Article 9 of the Uniform Commercial Code to perfect the security interests intended to be perfected thereby. In particular, C&H assumes that the collateral descriptions in the financing statements, which are expected to use "all assets" language (or its functional equivalent) supplemented by specific descriptions of key collateral categories, satisfy the requirements of UCC §§ 9-502 and 9-504.
(iii) UCC-1 Financing Statements have been properly prepared and will be duly filed on or before the closing date in the proper filing offices, which are as follows:
(a) Delaware Secretary of State — for Nexford Industrial Holdings Inc., Granite Peak NIH Holdings, LLC, Nexford Precision Components, Inc. ("NPC"), Nexford Engineering Solutions, Inc. ("NES"), Nexford Composite Structures, Inc. ("NCST"), Nexford Products LLC ("NP LLC"), and Nexford International Holdings, Inc. ("NIH Intl"), each of which is organized under the laws of the State of Delaware;
(b) Illinois Secretary of State — for Nexford Manufacturing Services, LLC ("NMS"), which is organized under the laws of the State of Illinois;
(c) Pennsylvania Department of State — for Clearfield Advanced Materials, Inc. ("Clearfield"), which is organized under the laws of the Commonwealth of Pennsylvania;
(d) South Carolina Secretary of State — for Summit Thermal Technologies, Inc. ("Summit"), which is organized under the laws of the State of South Carolina;
(e) Texas Secretary of State — for Ridgepoint Fabrication, LLC ("Ridgepoint"), which is organized under the laws of the State of Texas; and
(f) Michigan Department of State — for Lakeshore Coatings Corporation ("Lakeshore"), which is organized under the laws of the State of Michigan.
(iv) All certificated securities representing pledged equity interests have been delivered to, or will be delivered to on or before the closing date and held by, Crescent Harbor Bank, N.A. as Collateral Agent, together with duly executed stock powers or transfer instruments endorsed in blank or with appropriate directions. This assumption is critical for perfection of the security interests in corporate stock under UCC § 9-313(a), which provides that a security interest in certificated securities may be perfected by delivery.
(v) The Deposit Account Control Agreements covering the deposit accounts at Crescent Harbor Bank (accounts ending in -4471 and -4472) and Redstone National Bank (account ending in -6633), and the Securities Account Control Agreements covering securities accounts at the applicable intermediaries, have been duly executed and delivered by all parties thereto, including the applicable depository banks and securities intermediaries, and are effective to grant "control" (as such term is defined in UCC §§ 9-104 and 9-106, respectively) to the Collateral Agent over such deposit accounts and securities accounts. C&H has reviewed the forms of these agreements and is satisfied that, assuming proper execution and delivery by all parties, they are sufficient to establish control.
(vi) The intellectual Property Security Agreement recordation filings will be made with the United States Patent and Trademark Office ("USPTO") and the United States Copyright Office promptly after closing. The opinion may note that perfection of security interests in federally registered patents, trademarks, and copyrights may require recordation at the applicable federal office in addition to (or in lieu of) filing a UCC-1 Financing Statement, and that C&H's perfection opinion with respect to such intellectual property is subject to the completion of such recordation filings.
(vii) No debtor (as such term is used in Article 9) has changed its name, jurisdiction of organization, or organizational structure since the date of the UCC searches (which were conducted as of February 2025) without having given proper notice to the Collateral Agent and filed appropriate UCC-3 amendment statements as required under the Security Agreement and Article 9. C&H relies on the Back-Up Certificate for confirmation of this fact.
IV. Qualifications and Limitations
This section sets forth, in detail, each qualification, limitation, and exclusion to be included in C&H's opinion letters. These qualifications are consistent with customary New York law opinion practice, the TriBar Opinion Committee's reports, and the expectations of W&G and Crescent Harbor for a transaction of this type.
A. Fraudulent Transfer / Fraudulent Conveyance Carve-Out
The opinion letters will be expressly qualified to exclude any opinion as to the effect of applicable federal and state fraudulent transfer, fraudulent conveyance, fraudulent obligation, or preferential transfer laws on the enforceability of the Loan Documents or the validity of the security interests granted therein. The excluded laws include, without limitation:
(i) The Uniform Fraudulent Transfer Act ("UFTA") and the Uniform Voidable Transactions Act ("UVTA"), as enacted in any applicable state, including the New York enactment thereof;
(ii) Sections 544 and 548 of Title 11 of the United States Code (the "Bankruptcy Code"), 11 U.S.C. §§ 544 and 548, which provide for the avoidance of fraudulent transfers and obligations incurred within the applicable look-back period prior to the commencement of a bankruptcy case; and
(iii) Article 10 of the New York Debtor and Creditor Law, N.Y. DCL §§ 270-281, which sets forth the New York statutory framework for constructive and actual fraud conveyances.
Rationale. The fraudulent transfer carve-out is a standard and universally accepted qualification in legal opinions for leveraged finance transactions. It is particularly important in the context of this transaction given the significant dividend recapitalization component — specifically, the Sponsor Distribution of approximately $335,000,000 to Granite Peak NIH Holdings, LLC. Any legal opinion on whether the Loan Documents (and, in particular, the guarantees and the pledge of collateral by the Guarantors) are or are not subject to avoidance as fraudulent transfers or fraudulent obligations would require an extensive factual and financial analysis well beyond the scope of a closing opinion. Such an analysis would involve a detailed assessment of the solvency of each Loan Party (individually and on a consolidated basis) as of the closing date, including a determination of fair value, fair saleable value, total liabilities, and adequacy of capital, as well as an analysis of "reasonably equivalent value" and actual intent, all of which are complex factual and economic inquiries that are not properly the subject of a legal opinion.
Solvency Certificate. The Solvency Certificate to be executed at closing by Michelle Kaplan, Chief Financial Officer of Nexford Industrial Holdings Inc., addresses the solvency question on a factual basis. The Solvency Certificate certifies that, after giving effect to the transactions contemplated by the Loan Documents (including the incurrence of the Term Loan B, the repayment of the Existing Atlas Meridian Facilities, the payment of the Sponsor Distribution, and the payment of transaction fees and expenses), Nexford and its subsidiaries, on a consolidated basis, (a) are solvent (i.e., the fair value of their assets exceeds the total amount of their liabilities, including contingent and unliquidated liabilities), (b) are able to pay their debts as they become due in the ordinary course of business, and (c) have adequate capital to conduct their business. Opinion counsel may rely on this certificate in forming a view as to the factual predicate for the transaction, but the Solvency Certificate does not substitute for a legal opinion on fraudulent transfer matters, and C&H does not opine on the accuracy of the Solvency Certificate itself.
B. Equitable Principles Qualification
The enforceability opinions will be subject to the customary qualification that enforceability is limited by and subject to:
(i) applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship, and similar laws affecting the enforcement of creditors' rights generally; and
(ii) general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law), including principles of commercial reasonableness, good faith, and fair dealing.
This qualification is sometimes referred to as the "bankruptcy and equitable principles" exception or the "generic insolvency" exception. It is the most fundamental qualification in any enforceability opinion and is universally understood and accepted.
The equitable principles qualification encompasses a number of specific doctrines and principles that may affect the enforceability of particular provisions of the Loan Documents. While it is not customary to enumerate each such doctrine in the opinion letter itself, this memorandum identifies the following specific sub-qualifications for the working group's awareness:
(a) Broad Waivers. Courts may decline to enforce provisions that purport to waive broadly the rights of a party, including waivers of the right to trial by jury, waivers of the right to assert defenses and counterclaims, and waivers of the right to notice. While such waivers are commonly included in credit agreements and are generally enforceable in New York (particularly jury trial waivers, which are expressly permitted by N.Y. CPLR § 4102(a)), their enforceability may be limited in certain circumstances or in certain jurisdictions.
(b) Acceleration on Involuntary Bankruptcy. Provisions that accelerate obligations or declare a default upon the filing of an involuntary bankruptcy petition against the Borrower or any Guarantor may be unenforceable if such petition is filed but not consented to by the debtor. Courts have held that such automatic acceleration could be viewed as an impermissible ipso facto clause, particularly if acceleration occurs before the involuntary petition is either granted or dismissed.
(c) Penalty and Forfeiture Provisions. Courts applying equitable principles may decline to enforce provisions that are deemed to impose a penalty or forfeiture, including late payment charges or default interest rates that are disproportionate to any reasonably anticipated harm. The default rate under the Credit Agreement (an additional 200 basis points) is within the range generally upheld by New York courts and should not be problematic, but the qualification is included as a matter of standard practice.
(d) Choice-of-Law Limitations. The enforceability of the choice of New York law may be limited to the extent that such choice contravenes a fundamental public policy of another jurisdiction that has a materially greater interest in the determination of the particular issue in question. This limitation is discussed in greater detail in Section IV.D below.
(e) Ipso Facto Provisions. The Bankruptcy Code, specifically Section 365(e) thereof, may override contractual provisions that purport to terminate, modify, or restrict the rights of a debtor under an executory contract or unexpired lease based solely on the debtor's commencement of a bankruptcy case or its financial condition. Anti-assignment clauses and forfeiture-on-bankruptcy clauses may be rendered unenforceable in a bankruptcy context by operation of this provision.
C. Bankruptcy and Insolvency Qualification
As a more detailed expansion of the bankruptcy and insolvency component of the equitable principles qualification, the opinion letters will include or be understood to include the following specific acknowledgments:
(i) Automatic Stay. The automatic stay imposed by Section 362 of the Bankruptcy Code upon the commencement of a bankruptcy case would prevent the enforcement of remedies against a debtor or its property, including the acceleration of obligations, the exercise of setoff rights, and the foreclosure on collateral, absent relief from the stay granted by the bankruptcy court.
(ii) Avoidance Powers. The trustee or debtor in possession in a bankruptcy case has the power to avoid certain prepetition transfers and obligations under Sections 544 (strong arm powers), 545 (statutory liens), 547 (preferences), 548 (fraudulent transfers), 549 (postpetition transfers), and 550 (recovery of avoided transfers) of the Bankruptcy Code, as well as under Section 553 (setoff limitations). These avoidance powers could potentially affect the validity or priority of security interests, guarantees, and other rights under the Loan Documents.
(iii) Equitable Subordination. Section 510(c) of the Bankruptcy Code authorizes a bankruptcy court to subordinate a claim of a creditor to the claims of other creditors on principles of equitable subordination, where such creditor has engaged in inequitable conduct that has harmed other creditors or conferred an unfair advantage on the subordinated creditor. While equitable subordination is typically applied to insiders, the qualification is included for completeness.
(iv) Recharacterization. Bankruptcy courts have the power to recharacterize purported debt as equity in certain circumstances, including where the economic substance of a transaction is more akin to an equity investment than a bona fide lending relationship. This doctrine, though rarely applied in the context of arm's-length leveraged lending transactions, is an inherent limitation on the enforceability of debt obligations in a bankruptcy context.
(v) Rejection of Executory Contracts. Section 365 of the Bankruptcy Code grants a debtor in possession or a trustee the power to assume or reject executory contracts and unexpired leases, subject to court approval. To the extent any Loan Document is characterized as an executory contract, it could be subject to rejection in a bankruptcy case, which would give rise to a claim for damages but would not entitle the non-debtor party to specific performance.
(vi) Substantive Consolidation. The doctrine of substantive consolidation permits a bankruptcy court, in appropriate circumstances, to merge the assets and liabilities of two or more related debtors for purposes of distribution, effectively disregarding the separate corporate existence of the entities. If applied to the Loan Parties, substantive consolidation could affect the relative rights of the Secured Parties with respect to the assets of individual Loan Parties and could dilute the value of the collateral package. While substantive consolidation is an extraordinary remedy applied only in limited circumstances, it is a recognized risk in the context of affiliated guarantor structures.
These bankruptcy and insolvency qualifications are all standard carve-outs that are expected by W&G on behalf of the Administrative Agent and by sophisticated lenders generally. They are consistent with the preliminary draft opinion circulated on March 20, 2025, and we do not anticipate any pushback on their inclusion.
D. Qualification Regarding Choice of Law
The Credit Agreement, the Guarantee Agreement, and the Intercreditor Agreement are each governed by the laws of the State of New York. The C&H opinion letters will note that the enforceability opinions are rendered solely as to the laws of the State of New York and the federal laws of the United States of America. The opinions do not address or cover the laws of any other state or jurisdiction, including without limitation the laws of Delaware, Illinois, Pennsylvania, South Carolina, Texas, Michigan, any province or territory of Canada, or any other foreign jurisdiction.
To the extent that matters of non-New York law are relevant to the transactions (for example, entity status and authority of Loan Parties organized under the laws of states other than New York), C&H relies upon the opinions of local counsel:
• Hargrove & Whitmore LLP (Robert Kimura) provides the Illinois law opinion covering matters relating to NMS and Illinois UCC perfection matters.
• Briarcliff Legal Group PA (Catherine Ellsworth) provides the Delaware law entity opinions covering the organizational status, valid existence, good standing, power, authority, and due authorization of all Delaware-organized Loan Parties.
With respect to the enforceability of the New York choice-of-law provisions, the opinion letters will include a qualification to the following effect:
The New York choice-of-law provision contained in the Credit Agreement, the Guarantee Agreement, and the Intercreditor Agreement will generally be respected under Section 5-1401 of the New York General Obligations Law ("NY GOL § 5-1401"), which permits parties to a contract, agreement, or undertaking involving aggregate consideration of not less than $250,000 to choose the law of the State of New York to govern their rights and duties. Given that the aggregate consideration involved in the Credit Agreement far exceeds the $250,000 threshold, this statute should apply. However, the choice-of-law provision is subject to the limitation that a court in another jurisdiction could decline to apply New York law if the application thereof would violate a fundamental public policy of such other jurisdiction where such jurisdiction has a materially greater interest in the determination of the particular issue in question.
Additionally, the opinion letters will not render an express opinion on the enforceability of the provisions of the Credit Agreement and the Guarantee Agreement relating to (a) submission to the exclusive jurisdiction of the courts of the State of New York located in the Borough of Manhattan and the United States District Court for the Southern District of New York, (b) waiver of the defense of inconvenient forum, or (c) waiver of the right to trial by jury. However, the opinion may note that such provisions are customary in commercial lending agreements governed by New York law and are generally enforced by New York courts.
E. Qualification Regarding Indemnification and Contribution
The Loan Documents contain indemnification provisions pursuant to which the Borrower and the Guarantors agree to indemnify the Administrative Agent, the Collateral Agent, the Lenders, and their respective affiliates, officers, directors, employees, and agents against certain losses, claims, damages, and expenses. The enforceability of these indemnification provisions may be limited by applicable law and public policy, and the opinion letters will include the following qualification:
(i) Indemnification obligations may be limited by public policy to the extent they purport to indemnify a person against liability arising from such person's own gross negligence, willful misconduct, or bad faith. New York courts have generally held that contractual indemnification provisions are enforceable in commercial transactions between sophisticated parties, but they have declined to enforce indemnification provisions that would effectively insulate a party from liability for its own intentional wrongdoing or reckless conduct.
(ii) To the extent that any indemnification obligation could be construed as indemnification against liability under the federal securities laws or state securities laws, courts have held that such indemnification may be unenforceable as contrary to public policy. While this limitation is more directly applicable in the context of securities offerings, it is included as a standard qualification.
(iii) Contribution provisions contained in the Guarantee Agreement (providing for contribution among the Guarantors) are subject to adjustment by a court applying equitable principles, and a court could modify the contribution obligations to achieve an equitable result among the contributing parties.
Standard carve-out language addressing these limitations will be included in the Enforceability Opinion.
F. Qualification Regarding Guarantees — Suretyship Defenses
The Guarantee Agreement includes comprehensive waivers of suretyship defenses by each Guarantor. These waivers are extensive and are designed to preclude each Guarantor from asserting common-law defenses available to sureties, such as defenses based on extensions of time, releases of collateral, modifications of the guaranteed obligations, and impairment of recourse. The opinion will note that the enforceability of such waivers may be limited by the following considerations:
(i) Consideration and Reasonably Equivalent Value. Principles of contract law and fraudulent transfer law require that a guarantor receive consideration or reasonably equivalent value in exchange for its guarantee. This is particularly relevant for Subsidiary Guarantors providing upstream guarantees (guaranteeing the obligations of their parent, the Borrower) or cross-stream guarantees (guaranteeing the obligations of a sister entity), where the benefit flowing to the guarantor may be indirect. The indirect benefits theory — i.e., that a subsidiary benefits from the creditworthiness and financial health of the overall enterprise, from access to the credit facility, and from intercompany relationships — is well established, but the enforceability of upstream and cross-stream guarantees is subject to greater scrutiny than the enforceability of downstream guarantees.
(ii) State Law Limitations. Certain states have statutory or common-law limitations on the enforceability of upstream and cross-stream guarantees, including limitations based on corporate benefit doctrines, ultra vires doctrines, and limitations on distributions by subsidiaries. These limitations are particularly relevant for the non-Delaware Subsidiary Guarantors (Clearfield in Pennsylvania, Summit in South Carolina, Ridgepoint in Texas, and Lakeshore in Michigan), where local counsel opinions may be warranted. For purposes of C&H's New York law opinion, we note the limitations without opining on the specific laws of those jurisdictions.
(iii) Savings Clause. The Guarantee Agreement contains a "Savings Provision" (Section 7.02 thereof) that limits each Guarantor's obligation under the guarantee to the maximum amount that would not render the guarantee a fraudulent transfer or fraudulent conveyance under applicable law. This savings clause is essential to preserving the enforceability of the guarantees and is a standard feature in leveraged lending documentation. The opinion will note the existence of the savings clause and its effect on the maximum amount recoverable under each guarantee.
Specific Note Regarding Holdings Guarantor. Granite Peak NIH Holdings, LLC, as the 100% direct parent of Nexford, is providing an upstream guarantee supporting the obligations of its wholly-owned subsidiary. The benefit to Holdings from the transaction is direct: the credit facility provides financing for Holdings' subsidiary, and Holdings itself receives the Sponsor Distribution of approximately $335,000,000. Accordingly, the risk of a successful fraudulent transfer challenge to the Holdings guarantee is relatively low compared to the Subsidiary Guarantors.
Specific Note Regarding Subsidiary Guarantors. The eleven Subsidiary Guarantors are providing cross-stream and/or upstream guarantees for the benefit of Nexford as Borrower. Each subsidiary's guarantee is supported by the indirect benefits theory described above, and the savings clause limits each guarantee to the maximum amount that would not render the applicable guarantor insolvent. The opinion will address the enforceability of the guarantees subject to the fraudulent transfer carve-out (Section IV.A), the equitable principles qualification (Section IV.B), and the savings clause limitation.
G. Qualification Regarding Security Interest Priority
The UCC Perfection Opinion will address perfection — that is, the attachment of the security interests granted under the security documents and the filing, delivery, and control steps necessary to perfect such security interests under Article 9 of the UCC. The UCC Perfection Opinion will not opine on the priority of the security interests. This is a critical distinction that must be clearly articulated in the opinion letter.
Priority is a factual and legal determination that depends on range factors not fully determinable from a UCC search alone, including without limitation:
(a) The existence of prior filed UCC-1 financing statements that have not been terminated and that cover the same collateral;
(b) The existence of purchase money security interests ("PMSIs") that may have priority over a non-purchase money security interest under UCC § 9-324;
(c) The existence of statutory liens, including mechanic's liens, materialman's liens, and other liens that arise by operation of law and may have priority over contractual security interests;
(d) The existence of federal, state, and local tax liens, including liens in favor of the Internal Revenue Service under Section 6321 of the Internal Revenue Code, which may have priority over subsequently perfected security interests under Section 6323 of the Internal Revenue Code;
(e) The existence of judgment liens, attachment liens, and other judicial liens; and
(f) The potential for future filings or liens that may obtain priority by virtue of being filed or arising before the security interests in favor of the Collateral Agent are perfected.
The UCC search results, as summarized in the February 18, 2025 memorandum previously circulated to the working group, show existing UCC-1 financing statements on file against Nexford and certain Subsidiary Guarantors in favor of Atlas Meridian Bank, N.A. These filings relate to the Existing Atlas Meridian Facilities that are being refinanced and repaid in full with a portion of the Term Loan B proceeds. UCC-3 termination statements will be filed on March 31, 2025 (two business days post-closing) to terminate the Atlas Meridian filings. The opinion will assume that, upon the filing and effectiveness of such UCC-3 termination statements, no prior security interests of record will exist with respect to the collateral covered by the UCC Perfection Opinion.
Additionally, the opinion will not address the priority of the mortgages on real property that form part of the overall collateral package. The mortgages are post-closing deliverables, with a deadline of April 30, 2025, as set forth in Section 6.13 of the Credit Agreement. Title insurance from Landmark Title Assurance Company will provide coverage on mortgage priority and the status of title to the mortgaged properties.
H. Qualification Regarding Certain Types of Collateral
The UCC Perfection Opinion will include specific limitations and exclusions for the following types of collateral, each of which presents unique perfection requirements or other considerations that fall outside the scope of a standard UCC perfection opinion:
(i) Real Property. Real property and fixtures (to the extent perfection requires the filing of fixture filings rather than standard UCC filings) are outside the scope of the UCC Perfection Opinion. Security interests in real property are perfected by the recording of mortgages and deeds of trust in the applicable real property records, which is governed by the law of the state in which the real property is located. As noted above, the mortgages are post-closing deliverables, and title insurance will provide coverage on the priority and validity of the mortgage liens.
(ii) Motor Vehicles. Motor vehicles and other goods covered by certificates of title are excluded from the security interest perfection opinion to the extent that applicable state certificate-of-title statutes require notation of the security interest on the certificate of title as the exclusive method of perfection. Under the Security Agreement, vehicles with a book value below $250,000 are excluded assets and are not required to be pledged. For vehicles exceeding this threshold, perfection requires compliance with the applicable state certificate-of-title statute, which is outside the scope of C&H's opinion.
(iii) Letter of Credit Rights. Perfection of a security interest in letter of credit rights as "supporting obligations" may be perfected automatically upon perfection of the underlying supported obligation (UCC § 9-308(d)). However, perfection of a security interest in letter of credit rights as original collateral requires "control" under UCC § 9-107, which requires the consent of the issuer or nominated person. The opinion will assume that such consent has been obtained for all letter of credit rights exceeding $1,000,000 in value.
(iv) Commercial Tort Claims. Perfection of a security interest in commercial tort claims requires that the financing statement or security agreement specifically identify the commercial tort claim by sufficient detail. Under the Security Agreement, commercial tort claims with a value below $2,500,000 are excluded from the collateral. The opinion will note this limitation and will not opine on the perfection of security interests in commercial tort claims generally, except to the extent they are specifically identified in the Security Agreement schedules.
(v) Deposit Accounts. Under UCC § 9-312(b)(1), a security interest in deposit accounts may be perfected only by "control" (as defined in UCC § 9-104), and not by the filing of a financing statement. The opinion will rely on the executed Deposit Account Control Agreements covering the accounts at Crescent Harbor Bank (accounts ending in -4471 and -4472) and Redstone National Bank (account ending in -6633) as the method of perfection for deposit accounts. The opinion will assume that the DACAs are effective to establish control.
(vi) Foreign-Law Governed Assets. The UCC Perfection Opinion does not address the perfection of security interests in assets governed by the laws of a foreign jurisdiction. In particular, the opinion does not cover the perfection of the security interest in the equity interests in Nexford Canada Holdings ULC, a British Columbia unlimited liability company. The pledge of ULC equity is effected through the CFC Holdco Limited Pledge Agreement, which covers 65% of the voting equity and 100% of the non-voting equity. Perfection of a security interest in the ULC equity under applicable Canadian law (including the British Columbia Personal Property Security Act) is outside the scope of C&H's opinion, and the Borrower and the Administrative Agent should consult Canadian counsel if an opinion on such perfection is desired.
(vii) intellectual Property. The perfection of security interests in federally registered patents, trademarks, and copyrights presents a complex interplay between Article 9 of the UCC and federal intellectual property law. The opinion will note that an Article 9 filing alone may not be sufficient to perfect a security interest in federally registered intellectual property. Specifically:
(a) For patents and patent applications, the recordation of a security interest at the USPTO may be necessary to perfect against certain third parties, including subsequent bona fide purchasers, although the prevailing view is that a UCC filing provides perfection against lien creditors.
(b) For federally registered trademarks and trademark applications, the USPTO accepts recordation of security interests, and there is a growing body of authority suggesting that UCC filing is sufficient for perfection purposes, though recordation at the USPTO provides additional protection.
(c) For registered copyrights, Section 205 of the Copyright Act (17 U.S.C. § 205) establishes a federal recordation system that has been interpreted by some courts as preempting UCC filing for purposes of perfection. Under the prevailing interpretation following the Peregrine line of cases, recordation at the U.S. Copyright Office is necessary to perfect a security interest in registered copyrights.
The intellectual Property Security Agreement provides for recordation at both the USPTO and the U.S. Copyright Office. The opinion will note that such recordation filings will be made and that C&H's perfection opinion with respect to federally registered intellectual property is subject to the completion of such filings.
I. Qualification Regarding Usury
The opinion letters will not include any opinion that the interest rate, fees, or other charges payable under the Credit Agreement or any other Loan Document do not violate applicable usury laws. This is a standard and universally accepted exclusion.
By way of background, the applicable New York usury limitations are as follows: New York General Obligations Law § 5-501 establishes a civil usury limit of 16% per annum for loans of less than $250,000, and New York Penal Law § 190.40 establishes criminal usury at 25% per annum. For loans of $250,000 or more made to corporations, the civil usury defense is generally not available under GOL § 5-521(1), but the criminal usury cap of 25% per annum continues to apply.
The all-in interest rate under the Term Loan B — Term SOFR plus 400 basis points, yielding an estimated all-in rate of approximately 8.45% per annum as of the anticipated closing date, plus the default rate of an additional 200 basis points (yielding a maximum all-in rate of approximately 10.45% in a default scenario) — is well below the 25% criminal usury threshold. Nevertheless, usury is customarily excluded from legal opinions as a matter of practice, in part because usury analysis can be complicated by the inclusion of fees, commissions, expenses, and other charges that may be deemed "interest" for usury purposes under a "substance over form" analysis.
The Credit Agreement includes a standard savings clause in Section 2.11(e) thereof, which provides that in no event shall the rate of interest or fees payable under the Credit Agreement exceed the maximum rate permitted by applicable law, and that any excess interest or fees shall be applied to reduce the outstanding principal balance.
J. Qualification Regarding Tax Matters
The opinion letters will expressly exclude any opinion on tax matters. C&H does not opine on:
(a) The deductibility of interest payments under the Credit Agreement for federal, state, or local income tax purposes, including issues arising under Section 163(j) of the Internal Revenue Code (the business interest limitation);
(b) Withholding tax obligations under the Internal Revenue Code or applicable state or local tax laws, including obligations under Sections 1441, 1442, 1471, and 1472 of the Internal Revenue Code;
(c) Compliance with the Foreign Account Tax Compliance Act ("FATCA") provisions of the Internal Revenue Code (Sections 1471-1474) and the regulations promulgated thereunder;
(d) State and local tax implications of the transactions, including franchise taxes, capital taxes, or transfer taxes; or
(e) Any other federal, state, local, or foreign tax matters.
Tax analysis relating to the Nexford Term Loan B transaction is addressed separately by Sylvia Hartwell, Specialist Partner in C&H's Tax Group, in her dedicated tax memoranda dated February 28, March 5, March 7, and March 10, 2025, copies of which have been distributed to the working group. Tax matters fall outside the scope of the closing opinion letters, and any questions regarding tax implications should be directed to Sylvia and her team.
K. Qualification Regarding Regulatory and Sanctions Matters
The opinion letters will not include any opinion that the transaction or the Loan Parties comply with:
(a) Economic sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury ("OFAC"), including the Specially Designated Nationals and blocked Persons List and the Sectoral Sanctions Identifications List;
(b) Anti-money laundering laws, including the USA PATRIOT Act (Pub. L. 107-56), the Bank Secrecy Act (31 U.S.C. §§ 5311 et seq.), and the regulations promulgated thereunder by the Financial Crimes Enforcement Network ("FinCEN");
(c) Anti-corruption laws, including the Foreign Corrupt Practices Act of 1977, as amended ("FCPA") (15 U.S.C. §§ 78dd-1 et seq.); or
(d) Any other applicable anti-terrorism, anti-bribery, or export control laws.
The Credit Agreement contains detailed representations, warranties, and covenants by the Borrower and the Guarantors regarding compliance with sanctions, anti-money laundering, and anti-corruption laws, including in Sections 3.18, 3.19, and 6.14 of the Credit Agreement. A Use of Proceeds Compliance Certificate is being delivered at closing certifying, among other things, that no part of the proceeds of the Term Loan B will be used in violation of OFAC sanctions or other applicable laws. However, these are factual matters on which opinion counsel does not and cannot opine. Compliance with these laws requires ongoing monitoring and factual determinations that are the responsibility of the Borrower and the Lenders themselves. This is a standard carve-out that is expected and accepted by all parties.
L. Qualification Regarding Consents and Approvals
The opinion letters will assume that all required governmental and third-party consents, approvals, licenses, permits, and authorizations have been obtained and are in full force and effect, other than those consents and approvals that opinion counsel specifically confirms are not required under applicable New York or federal law for the execution, delivery, and performance of the Loan Documents by the Loan Parties.
The opinion does not address whether Nexford or any Guarantor needs any specific regulatory approval — such as antitrust approvals, approvals from industry-specific regulatory bodies, or approvals under foreign investment review laws — in connection with the consummation of the transactions contemplated by the Loan Documents. The transactions do not appear to require any filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, because the transaction involves a lending transaction rather than an acquisition of voting securities or assets, but this determination is factual in nature and is not the subject of the opinion.
C&H has not undertaken any independent investigation of the consents and approvals required of the Loan Parties, and we rely on the representations in the Credit Agreement, the Back-Up Certificate, and the Secretary's Certificates in this regard.
V. Specific Issues and Discussion Points for the C&H Opinions
This section addresses specific issues and discussion points that have arisen or may arise in connection with the preparation and finalization of C&H's opinion letters.
A. Entity and Authority Coverage — Division of Responsibility with Local Counsel
The Loan Parties in this transaction are organized under the laws of multiple jurisdictions. A clear division of responsibility between C&H and local counsel is essential to ensure comprehensive opinion coverage without gaps or overlaps.
C&H's Role. C&H opines on the enforceability under New York law of all Loan Documents governed by New York law. C&H's enforceabi