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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

From: Marcus Leung, Calderwood & Harkness LLP

To: Claudia Merritt, Calderwood & Harkness LLP

Date: March 13, 2025

Re: Review of First Draft Intercreditor Agreement (First Lien / Unsecured) — Whitfield & Gage LLP Draft Dated March 12, 2025

Client: Nexford Industrial Holdings Inc.

Matter No.: 1005-00001

Billing Code: IBL-NIH-2025-031

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I. Executive Summary

This memorandum sets forth our review and analysis of the first draft of the First Lien/Unsecured Intercreditor Agreement (the "Intercreditor Agreement") circulated by Whitfield & Gage LLP ("W&G") — specifically Margaret Ashby and Jonathan Ferris — on March 12, 2025, on behalf of Crescent Harbor Bank, N.A., in its capacity as First Lien Collateral Agent under the proposed $1,400,000,000 senior secured Term Loan B credit facility (the "Credit Facility" or "Term Loan B").

The Intercreditor Agreement is intended to govern the relationship between the first lien secured parties under the Credit Facility and the holders of the $250,000,000 aggregate principal amount of 7.250% Senior Unsecured Notes due 2028 (the "Unsecured Notes"), for which Pinnacle Trust Company serves as trustee (the "Unsecured Notes Trustee" or "Pinnacle"). The three principal parties to the Intercreditor Agreement are: (i) Crescent Harbor Bank, N.A., as First Lien Collateral Agent; (ii) Pinnacle Trust Company, as Unsecured Notes Trustee; and (iii) Nexford Industrial Holdings Inc. ("Nexford" or the "Borrower"), as borrower under the Credit Facility and issuer under the Indenture, which acknowledges and consents to the Intercreditor Agreement's terms. The agreement is governed by the laws of the State of New York.

This memorandum identifies material issues with the W&G draft, proposes specific revisions, and outlines negotiation strategy from the Borrower's perspective. We are preparing a full marked-up version of the Intercreditor Agreement for return to W&G by March 19, 2025.

Overall Assessment: The W&G draft follows a conventional first lien / unsecured intercreditor structure that is broadly in line with market norms for sponsor-backed leveraged finance transactions. However, several provisions tilt unreasonably in favor of the First Lien Collateral Agent and require meaningful revision. In particular, the standstill provisions, the bankruptcy-related covenants (including restrictions on plan-of-reorganization voting and blanket prohibitions on seeking adequate protection), the consent requirements for amendments to the unsecured notes documents, and the scope of the turnover obligations each present issues that, if left unrevised, could prejudice both the Borrower's operational and financial flexibility and the Unsecured Noteholders' customary rights. The Borrower has a direct interest in preserving those customary rights because an intercreditor agreement that is inconsistent with the remedies framework of the existing Indenture (dated November 8, 2021) could trigger disputes with the Unsecured Noteholders and potentially be challenged as a modification of the Indenture's terms without requisite noteholder consent.

We have identified fourteen principal issues requiring attention in the mark-up, seven of which we classify as high priority. These are detailed in Section V below and summarized in the Priority Table of Issues.

II. Background and Transaction Context

A. Transaction Overview

Nexford Industrial Holdings Inc. is a Delaware corporation headquartered at 1400 Industrial Parkway, Schaumburg, Illinois 60173. Nexford is a diversified industrial manufacturer and services provider operating across three principal business segments: advanced materials processing, specialty packaging solutions, and industrial infrastructure services. Nexford is entering into the Credit Facility — a $1,400,000,000 senior secured Term Loan B — with Crescent Harbor Bank, N.A. (with offices at 320 Federal Street, Boston, Massachusetts 02110) serving as both Administrative Agent and Collateral Agent.

The proceeds of the Term Loan B will be applied as follows:

(a) Refinancing of Existing Debt. Approximately $879,375,000 will be used to refinance Nexford's existing first lien term loan (original principal amount of $875,000,000) and revolving credit facility (commitment amount of $190,000,000), each of which is currently held by Atlas Meridian Bank, N.A. as administrative agent and collateral agent. The payoff amount of approximately $879,375,000 reflects the current outstanding principal balance of the term loan plus accrued and unpaid interest through the anticipated closing date, together with any applicable prepayment premium, and full repayment of the revolving credit facility (which had an outstanding balance of approximately $0 as of the date of the commitment letter, though the facility must be terminated upon closing). Customary payoff and release letters are being coordinated.

(b) Dividend to Sponsor. Approximately $335,000,000 will be distributed as a dividend recapitalization to Granite Peak NIH Holdings, LLC ("Holdings"), the direct parent of Nexford, for further upstream distribution to Granite Peak Capital Partners, LP and its co-investors.

(c) Transaction Fees and Expenses. Approximately $38,625,000 will be applied to pay transaction fees and expenses, including arrangement fees, commitment fees, legal fees, and other customary closing costs associated with the Credit Facility.

(d) Cash to Balance Sheet. Approximately $147,000,000 will be retained by Nexford as balance sheet cash to fund ongoing working capital requirements and general corporate purposes.

The Credit Facility bears interest at a rate of Adjusted Term SOFR plus 400 basis points, subject to a SOFR floor of 0.75%. The maturity date of the Credit Facility is March 28, 2032 (seven years from the anticipated closing date of March 28, 2025). The Credit Facility was arranged by Crescent Harbor Bank, N.A. and two additional arrangers (Vantage Securities LLC and Fieldstone Capital Markets, Inc.) on a broadly syndicated basis.

Nexford's private equity sponsor is Granite Peak Capital Partners, LP ("Granite Peak" or the "Sponsor"). Granite Peak acquired Nexford in January 2019 in a leveraged buyout at an enterprise value of approximately $1.65 billion, with an equity investment of approximately $725,000,000. Granite Peak holds its interest in Nexford indirectly through Holdings. The current transaction represents a dividend recapitalization — Granite Peak's second significant return of capital since the original acquisition.

B. Existing Unsecured Notes

Nexford has $250,000,000 in aggregate principal amount of 7.250% Senior Unsecured Notes due 2028 outstanding (the "Unsecured Notes"). The Unsecured Notes were issued pursuant to an indenture dated November 8, 2021 (the "Indenture"), among Nexford, as Issuer, the Guarantors party thereto, and Pinnacle Trust Company (with offices at 101 Park Avenue, New York, New York 10178), as Trustee. The Unsecured Notes bear interest at a fixed rate of 7.250% per annum, payable semi-annually on May 15 and November 15 of each year, and mature on November 15, 2028.

The Unsecured Notes are not being refinanced in this transaction. They will remain outstanding following the closing of the Credit Facility. Structurally, the Unsecured Notes are subordinated to the first lien Term Loan B with respect to collateral — the Unsecured Notes do not benefit from any security interest in the Collateral (as defined below), and the Unsecured Noteholders' claims against Collateral proceeds are junior to the First Lien Obligations by operation of the Intercreditor Agreement. However, the Unsecured Notes rank pari passu in right of payment with all other existing and future unsecured, unsubordinated obligations of Nexford and the Guarantors.

The Indenture contains its own set of incurrence-based covenants, including limitations on indebtedness, restricted payments, asset sales, affiliate transactions, and the designation of restricted and unrestricted subsidiaries. The Indenture also includes a change of control put provision (Section 5.01) that is cross-referenced in the Credit Facility's change of control event of default provision. The relationship between these two provisions has been analyzed in our prior memorandum dated February 14, 2025, and we incorporate that analysis by reference herein as relevant context for the intercreditor review.

C. Pro Forma Capital Structure

The pro forma capital structure of Nexford as of the closing of the Credit Facility is as follows:

Key leverage metrics based on LTM Adjusted EBITDA of $385,000,000 (for the twelve-month period ended December 31, 2024):

These leverage levels are within the ranges contemplated by the Credit Facility's incurrence-based covenants and the Indenture's debt incurrence basket. We note that the Indenture permits the incurrence of additional first lien indebtedness up to certain specified baskets, which becomes relevant to the Intercreditor Agreement's treatment of permitted refinancings and incremental facilities, as discussed in Section IV.H below.

D. Purpose of the Intercreditor Agreement

The Intercreditor Agreement serves several fundamental purposes in the context of the overall transaction and the co-existence of the first lien secured Credit Facility and the Unsecured Notes:

(a) Priority of Claims. The Intercreditor Agreement establishes the priority of the First Lien Secured Parties' claims relative to the Unsecured Noteholders' claims with respect to the Collateral and the proceeds thereof. It codifies the understanding that the First Lien Obligations must be paid in full from Collateral proceeds before any distribution is made to the Unsecured Noteholders from such proceeds.

(b) Enforcement and Remedies Governance. The Intercreditor Agreement governs the conduct of the Unsecured Notes Trustee and the Unsecured Noteholders with respect to enforcement actions against the Collateral, including standstill periods, limitations on remedies, and the obligation to turn over Collateral proceeds.

(c) Borrower Flexibility. The Intercreditor Agreement protects the Borrower's right to manage its business, refinance its obligations, and dispose of assets without being subject to conflicting directions or claims from competing creditor classes. In particular, the automatic guarantee release provisions and the permitted refinancing mechanics are critical to maintaining the Borrower's financial and operational flexibility.

(d) Bankruptcy and Insolvency Framework. The Intercreditor Agreement establishes the parties' respective rights and obligations in the event of a bankruptcy or insolvency proceeding, including with respect to DIP financing, adequate protection, and the treatment of claims under a plan of reorganization.

The Credit Agreement (Section 9.14 thereof) contemplates that the Administrative Agent will enter into this Intercreditor Agreement as a condition to closing of the Credit Facility. The Credit Agreement also contemplates a separate First Lien/Second Lien Intercreditor Agreement in the event that Nexford incurs second lien debt in the future, but no such debt is contemplated at this time.

III. Structural Overview of the W&G First Draft

The W&G draft of the Intercreditor Agreement is organized into approximately twelve substantive articles, preceded by recitals and a definitions section, and followed by customary miscellaneous provisions. The overall structure is consistent with market-standard intercreditor agreements for first lien / unsecured arrangements in sponsored leveraged finance transactions. We summarize the key articles below for reference:

Article 1 — Definitions. Contains defined terms used throughout the agreement, including cross-references to the Credit Agreement and the Indenture. Key defined terms include "First Lien Obligations," "Unsecured Notes Obligations," "Collateral," "Permitted Refinancing," "Enforcement Action," "DIP Financing," and "Adequate Protection."

Article 2 — Priorities and Subordination of Liens. Despite its heading, this article does not address lien subordination in the traditional sense (as the Unsecured Notes do not benefit from liens on the Collateral). Instead, it principally establishes the proceeds waterfall — the order of priority for distribution of Collateral proceeds upon enforcement or realization.

Article 3 — Enforcement Actions and Remedies. Governs the exclusive right of the First Lien Collateral Agent to enforce remedies against the Collateral and the Unsecured Notes Trustee's obligations with respect to turnover of Collateral proceeds.

Article 4 — Standstill and Exercise of Remedies. Imposes restrictions on the Unsecured Notes Trustee's ability to take enforcement actions during a specified standstill period and includes prohibitions on challenging the First Lien security interests.

Article 5 — Releases of Liens and Guarantees. Addresses the automatic release of guarantees (and any theoretical liens) upon a permitted disposition or release under the Credit Agreement.

Article 6 — Insolvency and Bankruptcy Proceedings. Establishes the parties' respective rights and obligations in the context of proceedings under the Bankruptcy Code, including provisions regarding DIP financing, adequate protection, voting on plans of reorganization, the Section 1111(b) election, and relief from the automatic stay.

Article 7 — Purchase Option. Provides the Unsecured Notes Trustee (or qualifying noteholders) with an option to purchase the First Lien Obligations at par upon the occurrence of certain triggering events.

Article 8 — Amendments to Secured Debt Documents and Unsecured Notes Documents. Governs the parties' rights and obligations with respect to amendments to the Credit Agreement, the Indenture, and the Intercreditor Agreement itself.

Article 9 — Representations and Acknowledgments. Contains customary representations regarding authority, capacity, and authorization.

Article 10 — Miscellaneous. Includes provisions regarding successors and assigns, third-party beneficiaries, governing law, submission to jurisdiction, jury trial waiver, counterparts, notices, severability, and integration.

Annexes and Schedules. The draft includes annexes listing the First Lien Documents, the Unsecured Notes Documents, and a collateral description intended to replicate the description of Collateral in the Security Agreement.

We address each of these articles in the detailed analysis that follows, identifying issues and proposed revisions as appropriate.

IV. Detailed Issue-by-Issue Analysis

A. Article 1 — Definitions

1. Definition of "First Lien Obligations"

The W&G draft defines "First Lien Obligations" broadly to encompass all obligations of the Loan Parties arising under or in connection with the Credit Agreement, together with all hedging obligations and all cash management obligations of the Loan Parties owed to the First Lien Lenders or their affiliates. This definition is intentionally expansive and is designed to ensure that the full universe of obligations secured by the Collateral is included within the scope of the Intercreditor Agreement's priority framework.

Issue: While a broad definition is not inherently objectionable, the current formulation does not adequately limit the scope of hedging and cash management obligations to those that are actually secured by the Collateral under the terms of the Credit Agreement and the Security Agreement. Specifically, the definition should be limited to hedging obligations and cash management obligations that are entered into with counterparties who are (or, at the time of entry, were) First Lien Lenders or affiliates of First Lien Lenders, and that constitute "Secured Obligations" as defined in the Credit Agreement. Without this limitation, the definition could be construed to capture hedging arrangements or cash management services that were never intended to benefit from the first lien priority — for example, hedging obligations entered into by a Loan Party with a former Lender that has since assigned all of its commitments.

Proposed Revision: We recommend revising the definition of "First Lien Obligations" to incorporate a direct cross-reference to the definition of "Secured Obligations" in the Credit Agreement. The definition should read substantially as follows: "First Lien Obligations" means the "Secured Obligations" as defined in the Credit Agreement as in effect on the date hereof (or, in the case of any Permitted Refinancing, as defined in the applicable Permitted Refinancing documentation), including principal, interest (including post-petition interest to the extent allowed), premium (if any), fees, costs, charges, expenses, reimbursement obligations, indemnification obligations, and all other amounts payable under or secured by the First Lien Documents, and including Hedging Obligations and Cash Management Obligations to the extent constituting "Secured Obligations" under the Credit Agreement.

2. Definition of "Unsecured Notes Obligations"

The W&G draft defines "Unsecured Notes Obligations" as all obligations of the Issuer and the Guarantors under the Indenture and the Unsecured Notes. This definition should be confirmed to cover the full $250,000,000 aggregate principal amount of the Unsecured Notes, together with all accrued and unpaid interest, any applicable premium (including any "make-whole" amount), fees, costs, expenses, indemnification obligations, and all other amounts payable by the Issuer or any Guarantor under or in respect of the Indenture dated November 8, 2021.

Issue: We must verify that the definition does not inadvertently capture future pari passu unsecured indebtedness that Nexford may incur unless such indebtedness is expressly designated as "Unsecured Notes Obligations" pursuant to the Intercreditor Agreement's joinder mechanics or the Credit Agreement's incremental provisions. The Credit Agreement's basket for the incurrence of additional unsecured indebtedness (Section 7.03(q)) permits additional unsecured notes in specified amounts, and any such additional notes should only be brought within the scope of the Intercreditor Agreement if they are expressly made subject to it through a joinder or supplemental indenture.

Proposed Revision: Confirm that the definition is limited to obligations arising under or in respect of the Indenture dated November 8, 2021 (as may be supplemented, amended, or refinanced from time to time in accordance with the terms of the Intercreditor Agreement), and add clarifying language that additional unsecured indebtedness is not automatically included unless the holder(s) thereof execute a joinder agreement.

3. Definition of "Collateral"

The W&G draft defines "Collateral" as all assets and property of Nexford and each Guarantor that are subject to a first-priority security interest in favor of the First Lien Collateral Agent. The defined term must align precisely with the collateral description in the Credit Agreement and the related Security Documents (including the Security Agreement, the IP Security Agreement, the Mortgages, and the Pledge Agreement).

For reference, the Collateral under the Credit Agreement consists of a first-priority security interest in substantially all assets of Nexford and each Guarantor, including:

• All equity interests in each direct domestic subsidiary and 65% of the equity interests in each first-tier foreign subsidiary;

• All accounts receivable;

• All inventory;

• All equipment;

• All intellectual property (patents, trademarks, copyrights, trade secrets, and licenses);

• All deposit accounts and securities accounts (subject to control agreements);

• All general intangibles (including payment intangibles);

• All owned real property (four properties with a total appraised value of approximately $193,000,000);

• All intercompany notes and receivables; and

• All proceeds and products of the foregoing.

The following categories of assets are excluded from the Collateral under the Credit Agreement and Security Documents:

• Motor vehicles with an individual value under $250,000 per vehicle;

• Letter of credit rights with an individual face amount under $1,000,000;

• Commercial tort claims with an individual value under $2,500,000 (until identified and brought within the security interest pursuant to the Credit Agreement's notice and joinder provisions);

• Assets where the cost of pledging or perfecting a security interest is excessive relative to the value of such assets, as determined by the Administrative Agent in its reasonable discretion; and

• Certain other excluded assets specified in the Security Agreement (e.g., certain governmental licenses and permits to the extent prohibited by applicable law from being pledged).

Issue: The definition of "Collateral" in the Intercreditor Agreement must be identical to, or incorporate by direct cross-reference, the definitions used in the Credit Agreement and Security Agreement. Any discrepancy — whether creating a broader or narrower scope — could lead to disputes regarding the applicability of the Intercreditor Agreement's priority, turnover, and release provisions to specific assets. For example, if the Intercreditor Agreement's definition of Collateral is broader than the Security Agreement's, the Unsecured Notes Trustee could be required to turn over proceeds from assets that are not actually subject to a first-priority lien, which would be inappropriate.

Proposed Revision: Replace the standalone definition of "Collateral" with a direct cross-reference to the Credit Agreement and Security Documents: "Collateral" means all assets and property subject to the Liens created by the Security Documents (as defined in the Credit Agreement), as such Security Documents may be amended, supplemented, or replaced from time to time.

4. Definition of "Permitted Refinancing"

The W&G draft defines "Permitted Refinancing" to include any refinancing, refunding, renewal, or extension of the First Lien Obligations or the Unsecured Notes Obligations that satisfies the conditions for a "Permitted Refinancing Indebtedness" under the Credit Agreement. The definition further provides that upon the consummation of a Permitted Refinancing, the refinancing creditors automatically succeed to the position of the refinanced creditors under the Intercreditor Agreement.

Issue: Although the definition contemplates automatic succession for refinancing creditors, the W&G draft separately includes a provision (in Article 8) requiring the prior written consent of the First Lien Collateral Agent for any refinancing of the Unsecured Notes Obligations to be brought within the scope of the Intercreditor Agreement. This consent requirement is inconsistent with the concept of automatic accession and is not market practice. The Borrower must have the unfettered ability to refinance the Unsecured Notes — whether through an exchange offer, a tender and new issuance, or an open-market refinancing — and to ensure that the refinancing creditors step into the shoes of the existing Unsecured Noteholders under the Intercreditor Agreement without the First Lien Agent exercising a veto. Any consent requirement would introduce uncertainty and potential delay into a refinancing that is otherwise permitted under both the Credit Agreement and the Indenture.

Proposed Revision: Eliminate the consent requirement in Article 8 and conform the definition of "Permitted Refinancing" to provide for automatic joinder of refinancing creditors to the Intercreditor Agreement upon execution of a customary joinder agreement, without the need for consent from any other party. The joinder agreement should be in the form attached as an exhibit to the Intercreditor Agreement.

5. Other Key Definitions

We have identified the following additional defined terms that require attention during the mark-up:

(a) "Bankruptcy Code." Defined as Title 11 of the United States Code, 11 U.S.C. §§ 101 et seq. Standard; no revision needed, but confirm consistency with the Credit Agreement's definition.

(b) "DIP Financing." Defined as any financing obtained by the Borrower or any of its subsidiaries as debtor-in-possession under Section 364 of the Bankruptcy Code. The definition should be confirmed to include both secured and unsecured DIP facilities and to specify that DIP financing may include both new money advances and roll-up components. We address the substantive DIP financing provisions in Section IV.F.1 below.

(c) "Adequate Protection." Defined by reference to Section 361 of the Bankruptcy Code. Standard definition; no revision needed.

(d) "Enforcement Action." This defined term requires particular attention. The W&G draft defines "Enforcement Action" to include any exercise of remedies against the Collateral, any acceleration of obligations, any direction to the Collateral Agent to commence foreclosure proceedings, and any other action to enforce rights and remedies under the applicable debt documents. The scope of this definition is critical because it determines the reach of the standstill provisions (Article 4) and the exclusive enforcement rights (Article 3). The definition should distinguish clearly between (i) actions that relate to the Collateral (e.g., foreclosure, seizure, collection of Collateral proceeds) and (ii) routine administrative actions and the exercise of purely unsecured rights (e.g., acceleration of obligations, commencement of suits for money judgment, filing of proofs of claim). We recommend bifurcating the definition to provide separate definitions of "Collateral Enforcement Action" and "Unsecured Enforcement Action," with the standstill and exclusive enforcement provisions applying only to Collateral Enforcement Actions.

B. Article 2 — Priorities (Proceeds Waterfall)

Because the Unsecured Notes do not benefit from any security interest in the Collateral, Article 2 does not address lien subordination in the manner that would be found in a typical first lien / second lien intercreditor agreement. Instead, Article 2 of the W&G draft principally establishes the waterfall for the distribution of Collateral proceeds upon enforcement or realization by the First Lien Collateral Agent.

The waterfall as set forth in the W&G draft provides for the following order of distribution:

First: Payment of all costs and expenses of the First Lien Collateral Agent (Crescent Harbor Bank, N.A.) incurred in connection with the enforcement, collection, or realization of the Collateral, including reasonable attorneys' fees, court costs, and expenses of sale.

Second: Payment in full of all First Lien Obligations (including principal, accrued interest, fees, premiums, hedging obligations, cash management obligations, indemnification obligations, and all other amounts owing under the First Lien Documents).

Third: Payment of all costs and expenses of the Unsecured Notes Trustee (Pinnacle Trust Company) incurred in connection with the administration of the Indenture and the receipt and distribution of Collateral proceeds.

Fourth: Payment of the Unsecured Notes Obligations (including principal, accrued interest, premium (if any), and all other amounts owing under the Unsecured Notes Documents).

Fifth: Payment of any surplus to the Borrower or as otherwise directed by a court of competent jurisdiction.

We identify the following issues with the waterfall as drafted:

Issue 1 — Uncapped Expenses at Tiers 1 and 3. The costs and expenses payable at Tiers 1 and 3 are not subject to any cap or reasonableness standard. While it is customary for collateral agent expenses to be reimbursed on a priority basis, the absence of any limitation creates the risk that excessive or unreasonable expenses could erode the proceeds available to lower-priority creditors — including, in the case of Tier 1 expenses, the Unsecured Noteholders at Tier 4. We recommend adding a "reasonableness" qualifier to the expenses payable at Tier 1 (i.e., "reasonable and documented out-of-pocket costs and expenses") and confirming that the Tier 3 expenses of the Unsecured Notes Trustee are similarly subject to a reasonableness standard consistent with the Trustee's entitlement under the Indenture.

Issue 2 — Preservation of Unsecured Noteholders' Rights Against Non-Collateral Assets. The waterfall correctly provides that Unsecured Noteholders are not entitled to any share of Collateral proceeds until all First Lien Obligations are indefeasibly paid in full — this reflects the fundamental bargain of the first lien / unsecured structure. However, the W&G draft does not contain an express savings clause confirming that the Unsecured Noteholders' rights to pursue unsecured claims against assets that do not constitute Collateral (including assets of unrestricted subsidiaries, claims against non-guarantor affiliates, and proceeds of avoidance actions under the Bankruptcy Code) are not affected by the waterfall. The omission of such a savings clause could be read to suggest that the waterfall governs the distribution of all proceeds, not merely Collateral proceeds, which would be inconsistent with the unsecured nature of the Notes and could be challenged by the Unsecured Noteholders.

Proposed Revision: Add an express carve-out or savings clause at the conclusion of Article 2, substantially as follows: "For the avoidance of doubt, nothing in this Article 2 shall limit, restrict, or otherwise affect the right of the Unsecured Notes Trustee or any holder of Unsecured Notes Obligations to receive distributions or payments from or on account of assets that do not constitute Collateral, or to pursue unsecured claims against the Borrower or any Guarantor on an unsecured basis with respect to assets other than the Collateral."

Issue 3 — Hedging and Cash Management Obligations. The inclusion of hedging obligations and cash management obligations in the Tier 2 distribution must be defined with precision. These obligations should be limited to those entered into with counterparties that are First Lien Lenders or their affiliates (as defined in the Credit Agreement) and should be subject to the same caps and baskets applicable to "Secured Obligations" under the Credit Agreement. Without this limitation, the Tier 2 distribution could be inflated by hedging or cash management obligations that are not properly part of the first lien structure, thereby reducing recoveries available to the Unsecured Noteholders.

Proposed Revision: Cross-reference the definition of "Secured Obligations" in the Credit Agreement to define the scope of hedging and cash management obligations included in Tier 2.

C. Article 3 — Enforcement Actions and Remedies

1. Exclusive Enforcement Right

The W&G draft grants the First Lien Collateral Agent the exclusive right to enforce remedies against the Collateral, including the right to foreclose on, collect, sell, lease, exchange, or otherwise dispose of any and all Collateral. This exclusive enforcement right is standard and appropriate in a first lien / unsecured intercreditor arrangement — the Unsecured Notes do not benefit from any lien on the Collateral, and the First Lien Collateral Agent's exclusive authority over the Collateral is essential to the orderly enforcement process.

Issue: While the exclusive enforcement right over Collateral is not objectionable, we must confirm that the Unsecured Notes Trustee retains the unimpaired right to enforce purely unsecured rights and remedies that do not involve the Collateral. The W&G draft's formulation of the exclusive enforcement right is drafted broadly enough that it could be read to preclude the Unsecured Notes Trustee from taking any enforcement action — including actions that have no connection to the Collateral, such as accelerating the Unsecured Notes, suing for money damages on a general unsecured basis, filing proofs of claim in bankruptcy proceedings, or voting on a plan of reorganization. This reading would be inconsistent with the fundamental distinction between secured and unsecured creditor rights and would effectively strip the Unsecured Noteholders of their basic creditor remedies.

Proposed Revision: We recommend adding an express savings clause at the conclusion of the exclusive enforcement provisions, substantially as follows:

"Notwithstanding anything to the contrary herein, nothing in this Article 3 shall limit, impair, or otherwise affect the right of the Unsecured Notes Trustee or any holder of Unsecured Notes Obligations to: (a) accelerate the Unsecured Notes Obligations in accordance with the terms of the Indenture; (b) commence and prosecute actions or proceedings for money damages on an unsecured basis against the Borrower, any Guarantor, or any other person liable for the Unsecured Notes Obligations; (c) file proofs of claim or other similar documents in any insolvency, bankruptcy, or reorganization proceeding; (d) vote or otherwise participate in any plan of reorganization or similar restructuring proceeding; (e) exercise any right of set-off to the extent arising under applicable law and not involving the Collateral; or (f) take any other action that does not involve the exercise of remedies against the Collateral."

2. Direction and Instruction

The W&G draft provides that the First Lien Collateral Agent shall act at the direction of the "Required Lenders" (defined as the lenders holding a majority in aggregate principal amount of the outstanding Term Loan B commitments and loans) with respect to the exercise of remedies against the Collateral. This formulation mirrors the direction provisions in the Credit Agreement (Section 9.02) and is standard. We have no substantive objection, but we note that the defined term "Required Lenders" should be confirmed to align precisely with the corresponding defined term in the Credit Agreement.

3. Obligation to Turn Over Collateral Proceeds

The W&G draft includes an obligation requiring the Unsecured Notes Trustee and the Unsecured Noteholders to turn over to the First Lien Collateral Agent any Collateral proceeds received by them, whether directly or indirectly, until such time as all First Lien Obligations have been indefeasibly paid in full. This turnover obligation is a standard feature of first lien / unsecured intercreditor agreements and reflects the priority of the First Lien Obligations with respect to the Collateral.

Issue: The W&G draft's formulation of the turnover obligation extends to "any proceeds of Collateral or other amounts received by the Unsecured Notes Trustee or any holder of Unsecured Notes Obligations." The phrase "or other amounts" is problematic because it could be construed to capture payments received by the Unsecured Noteholders from sources unrelated to the Collateral — for example, dividends or distributions from unrestricted subsidiaries, payments received in respect of unsecured claims in a bankruptcy proceeding, or proceeds of claims against third parties. Such a reading would effectively subordinate the Unsecured Notes to the First Lien Obligations on an unsecured basis as well, which is not the commercial deal.

Proposed Revision: We recommend narrowing the turnover obligation to apply exclusively to proceeds "of or from the Collateral" and adding an express carve-out for payments received in the ordinary course of business under the Unsecured Notes that are not derived from the enforcement of, or realization upon, the Collateral. The revised formulation should read substantially as follows:

"If the Unsecured Notes Trustee or any holder of Unsecured Notes Obligations shall receive any proceeds of or from the Collateral (including any distribution from the Collateral in any insolvency proceeding, but excluding any payment or distribution received from sources other than the Collateral, including any payment received in the ordinary course of business under the Unsecured Notes Documents that is not derived from the enforcement of remedies against the Collateral), such Unsecured Notes Trustee or holder shall hold such proceeds in trust for the benefit of the First Lien Collateral Agent and shall promptly turn over such proceeds to the First Lien Collateral Agent for application in accordance with the waterfall set forth in Article 2 hereof."

D. Article 4 — Standstill and Limitations on Unsecured Noteholders

1. Standstill Period

The W&G draft imposes a 180-day standstill period during which the Unsecured Notes Trustee may not take "any Enforcement Action" following the occurrence and during the continuance of an event of default under the Unsecured Notes. The standstill commences upon written notice by the Unsecured Notes Trustee to the First Lien Collateral Agent of the occurrence of such event of default.

Issue: This provision raises two distinct concerns, one relating to scope and one relating to duration.

Scope. The standstill, as drafted, applies to "any Enforcement Action," which — as noted in our discussion of the definition of "Enforcement Action" in Section IV.A.5(d) above — is defined broadly to include not only actions against the Collateral but also acceleration of the Unsecured Notes, commencement of lawsuits for money damages, and other purely unsecured remedies. In a first lien / unsecured intercreditor arrangement, a standstill on Collateral enforcement is largely academic because the Unsecured Noteholders have no lien rights and therefore no independent ability to foreclose on or seize Collateral. The real impact of the standstill, therefore, is its restriction on the Unsecured Noteholders' exercise of purely unsecured remedies — and this restriction is both unusual for a first lien / unsecured structure and potentially inconsistent with the remedies framework of the Indenture.

The Indenture provides the Unsecured Notes Trustee with the right, upon the occurrence of an Event of Default (as defined in the Indenture), to accelerate the Unsecured Notes and to pursue any available remedy at law or in equity. If the Intercreditor Agreement effectively strips the Trustee of these rights for a 180-day period, the Unsecured Noteholders may argue that their contractual rights under the Indenture have been impermissibly modified without the requisite consent threshold. This creates risk for the Borrower — not a benefit.

Duration. Even if the standstill were limited to Collateral-related enforcement actions, a 180-day period is aggressive. Market practice for standstills in first lien / second lien intercreditor agreements — where the junior creditors actually hold liens — typically ranges from 90 to 180 days. In a first lien / unsecured context, where the junior creditors hold no liens, a standstill on Collateral enforcement is arguably unnecessary altogether, and standstills of any duration on unsecured remedies are rare.

Proposed Revision: We recommend the following approach:

(a) Narrow the scope of the standstill to apply only to Enforcement Actions against the Collateral (i.e., "Collateral Enforcement Actions" as we propose defining them). Acceleration of the Unsecured Notes, suits for money judgment, and other purely unsecured remedies should be expressly excluded from the standstill.

(b) Given the absence of any Unsecured Noteholder lien rights, consider eliminating the standstill entirely. Alternatively, if the First Lien Agent insists on retaining a standstill on Collateral-related actions, reduce the period to 90 days.

(c) Include a termination trigger providing that the standstill terminates immediately upon the First Lien Collateral Agent's commencement of enforcement actions against the Collateral, so that the Unsecured Notes Trustee is not left in limbo while the First Lien Collateral Agent exercises remedies.

Additional Note: We must review the Indenture (dated November 8, 2021, Pinnacle Trust Company as Trustee) in detail to confirm that the Intercreditor Agreement's standstill provisions are consistent with the Trustee's obligations under the Indenture. In particular, we must verify that the Trustee has the authority under the Indenture to agree to standstill restrictions on behalf of the Unsecured Noteholders, and that the required noteholder consent threshold (if any) has been or will be obtained. We cross-reference our prior indenture review memorandum dated February 14, 2025, and note that a supplemental analysis may be required on this point.

2. Restrictions on Challenging First Lien Security

The W&G draft includes a provision prohibiting the Unsecured Notes Trustee and the Unsecured Noteholders from challenging the validity, perfection, or priority of the First Lien security interests. This is a standard provision that is appropriate in the intercreditor context — the Unsecured Noteholders have entered into a transaction with full knowledge of the first lien structure, and it would be inequitable for them to subsequently challenge the security that was part of the bargain.

Issue: While we have no objection to this provision in principle, we note that the restriction should be mutual. That is, the First Lien Collateral Agent and the First Lien Secured Parties should also agree not to challenge the pari passu unsecured status of the Unsecured Notes or the validity of the Unsecured Noteholders' unsecured claims. The W&G draft is currently silent on reciprocity.

Proposed Revision: Add a mutual covenant providing that the First Lien Collateral Agent and the First Lien Secured Parties shall not challenge or contest (i) the pari passu unsecured status of the Unsecured Notes Obligations relative to other unsecured, unsubordinated obligations of the Borrower, or (ii) the validity or enforceability of the Indenture or the Unsecured Notes.

E. Article 5 — Releases of Liens and Guarantees

1. Automatic Release Provisions

The W&G draft provides that whenever the First Lien Collateral Agent releases any lien on the Collateral or releases any Guarantor from its guarantee under the Credit Agreement, in each case in connection with a transaction permitted under the terms of the Credit Agreement, the Unsecured Notes Trustee is deemed to have consented to such release and must execute any documents necessary to effectuate a corresponding release of any claim or lien (if any exists) held by the Unsecured Notes Trustee against such Collateral or Guarantor.

Because the Unsecured Notes do not benefit from any lien on the Collateral, the automatic release provision is primarily relevant to guarantee releases. The subsidiary guarantors under the Credit Agreement also guarantee the Unsecured Notes pursuant to the Indenture. There are currently eleven Subsidiary Guarantors (Nexford Precision Components, Inc. ("NPC"), Nexford Engineered Solutions LLC ("NES"), Nexford Coated Steel Technologies, Inc. ("NCST"), Nexford Material Sciences Corp. ("NMS"), Nexford Packaging LLC ("NP LLC"), NIH International Holdings, Inc. ("NIH Intl"), Clearfield Manufacturing, Inc. ("Clearfield"), Summit Process Technologies LLC ("Summit"), Ridgepoint Industrial Services, Inc. ("Ridgepoint"), and Lakeshore Advanced Coatings Corp. ("Lakeshore")), as well as the Holdings Guarantor (Granite Peak NIH Holdings, LLC). All of these entities guarantee both the First Lien Obligations and the Unsecured Notes Obligations.

Critical Issue: The automatic guarantee release provision is one of the most significant provisions in the Intercreditor Agreement from the Borrower's perspective. If a Subsidiary Guarantor is released from its guarantee under the Credit Agreement — for example, because the Borrower sells all of the equity interests in that Subsidiary Guarantor in a transaction permitted under the Credit Agreement's asset sale covenant — the corresponding guarantee under the Indenture should also be released without the need for a separate noteholder consent process. This is essential for the Borrower's ability to execute transactions in a timely manner.

However, this provision must be consistent with the terms of the Indenture. The Indenture contains its own guarantee release provisions (Section 11.04), which generally provide that a Subsidiary Guarantor's guarantee is released upon (i) a sale or disposition of the equity interests of such Subsidiary Guarantor that constitutes a permitted asset sale under the Indenture, (ii) designation of such Subsidiary Guarantor as an unrestricted subsidiary in accordance with the Indenture, or (iii) defeasance or satisfaction and discharge of the Indenture. If the automatic release provisions of the Intercreditor Agreement are broader than the Indenture's own release provisions — for example, if the Intercreditor Agreement permits release in circumstances that would not constitute a permitted release under the Indenture — there is a risk that the Unsecured Noteholders could challenge the release as unauthorized.

Proposed Revision: The Borrower should support the automatic guarantee release provision in principle but should ensure that the Intercreditor Agreement includes conformity language clarifying that any guarantee release effected under the Intercreditor Agreement shall be deemed to constitute a permitted release under the Indenture, and that the Unsecured Notes Trustee's execution of the Intercreditor Agreement constitutes the requisite consent for such releases. We must cross-check the specific language of Indenture Section 11.04 and confirm that there is no conflict. If a conflict exists, we may need to obtain a supplemental indenture or noteholder consent, which would add complexity and timeline risk.

2. Asset Sale Releases

The W&G draft provides that Collateral is automatically released from the security interests created by the First Lien Documents upon a permitted asset sale under the Credit Agreement. The draft further provides that the Unsecured Notes Trustee is bound by such release and may not assert any claim against the released Collateral.

This provision is standard and generally unobjectionable. We note that the Credit Agreement permits asset sales subject to reinvestment rights over 365 days (with a 180-day extension to 545 days if the Borrower has entered into a binding commitment to reinvest within the initial 365-day period) and includes a $25,000,000 annual de minimis basket for asset sales that do not require compliance with the reinvestment and prepayment provisions. We must confirm that the Intercreditor Agreement's asset sale release provisions are consistent with the Indenture's own asset sale covenant (Section 4.10), which contains its own reinvestment mechanics and "offer to purchase" provisions.

F. Article 6 — Insolvency and Bankruptcy Proceedings

This article addresses the parties' respective rights and obligations in the event of an insolvency or bankruptcy proceeding involving the Borrower or any of its subsidiaries. This is one of the most heavily negotiated sections of any intercreditor agreement, and the W&G draft presents several issues that require significant revision.

1. DIP Financing

The W&G draft provides that the Unsecured Notes Trustee will not object to any debtor-in-possession financing obtained by the Borrower or its subsidiaries pursuant to Section 364 of the Bankruptcy Code, provided that such DIP financing is consented to by the Required Lenders under the Credit Agreement.

Issue: This non-objection covenant is overly broad. The formulation gives the First Lien Lenders (through the Required Lenders direction) unchecked power to approve DIP financing on terms that could be materially adverse to the Unsecured Noteholders, with no recourse for the Unsecured Notes Trustee. While the Borrower generally benefits from the ability to obtain DIP financing without obstruction from junior creditors, the Borrower also has an interest in maintaining the Unsecured Noteholders' ability to object to DIP financing terms that are not commercially reasonable or that could undermine the reorganization process. An overly restrictive non-objection covenant may also be challenged by the Unsecured Noteholders as an impermissible limitation on their rights under the Bankruptcy Code.

Specifically, the W&G draft does not carve out the Unsecured Notes Trustee's right to object to DIP financing that:

(a) provides liens on assets that were not previously part of the Collateral (i.e., priming liens on previously unencumbered assets);

(b) includes a "roll-up" of pre-petition First Lien claims into the DIP facility without adequate protection for the Unsecured Noteholders' pre-petition claims;

(c) contains milestones or other provisions that would effectively dictate the terms of a plan of reorganization in a manner adverse to the Unsecured Noteholders; or

(d) is not on commercially reasonable terms in light of the circumstances of the proceeding.

Proposed Revision: We recommend adding qualifiers to the non-objection covenant that preserve the Unsecured Notes Trustee's right to object in the limited circumstances described above. The revised provision should provide that the Unsecured Notes Trustee will not object to DIP financing that (i) is secured by liens on the Collateral that are senior to or pari passu with the First Lien security interests (but not by liens on assets that were not previously Collateral), (ii) does not include a roll-up of pre-petition First Lien claims except to the extent that the Unsecured Noteholders receive adequate protection of their unsecured claims, and (iii) is on commercially reasonable terms and conditions. The Unsecured Notes Trustee should retain the right to object to DIP financing that does not satisfy these conditions.

2. Adequate Protection

The W&G draft provides that the First Lien Collateral Agent is entitled to seek and receive adequate protection payments on account of any diminution in value of the Collateral during a bankruptcy proceeding. The draft further provides — and this is the problematic provision — that the Unsecured Notes Trustee "shall not seek or accept any adequate protection with respect to its claims."

Issue: This blanket prohibition is overbroad and potentially unenforceable. While the Unsecured Noteholders do not have lien-based adequate protection rights under Section 361 of the Bankruptcy Code (because they hold no liens), they may have other claims in a bankruptcy proceeding that give rise to protections or rights under Sections 503(b) and 507 of the Bankruptcy Code (e.g., administrative expense claims, priority claims). A blanket prohibition on seeking "any adequate protection" goes beyond the scope of the intercreditor bargain, which is limited to the relative priority of claims against the Collateral. The Unsecured Noteholders should not be prohibited from asserting rights that are independent of the Collateral priority framework.

Furthermore, the enforceability of pre-petition waivers of bankruptcy rights is subject to judicial scrutiny. While courts have generally upheld intercreditor provisions that restrict a junior creditor's ability to seek adequate protection in the form of liens on collateral, blanket waivers of all adequate protection rights have been subject to challenge.

Proposed Revision: Delete the blanket prohibition and replace it with a limited restriction providing that the Unsecured Notes Trustee will not seek adequate protection in the form of a lien on the Collateral that would prime or rank pari passu with the First Lien security interests, or in the form of cash payments from Collateral proceeds that would reduce the First Lien Collateral Agent's adequate protection. The Unsecured Notes Trustee should retain the right to seek adequate protection of its unsecured claims in forms that do not interfere with the First Lien Secured Parties' priority position with respect to the Collateral.

3. Voting on Plan of Reorganization

The W&G draft includes a provision restricting the Unsecured Notes Trustee's ability to vote on a plan of reorganization "to the extent the plan involves the Collateral." This restriction purports to limit the Unsecured Noteholders' participation in the plan confirmation process.

Issue: This restriction is unusual and, in our view, likely unenforceable. The right to vote on a plan of reorganization is a fundamental creditor right under Section 1126 of the Bankruptcy Code. Each holder of a claim that is "impaired" under a proposed plan is entitled to vote to accept or reject the plan, and this right is not a contractual right that can be freely waived in an intercreditor agreement. Courts have scrutinized and, in some cases, declined to enforce intercreditor provisions that purport to restrict plan-voting rights, particularly where the restriction is broad or ambiguous.

The phrase "to the extent the plan involves the Collateral" is vague and would be extremely difficult to apply in practice. Virtually every plan of reorganization in a case involving a debtor with significant secured and unsecured debt will "involve" the collateral in some respect — the plan may provide for the sale of collateral, the transfer of collateral to a reorganized debtor, or the treatment of secured claims that are secured by the collateral. Under the W&G formulation, it is unclear what vote restriction, if any, would be enforceable.

Moreover, the Borrower has no interest in including a provision that is likely to be challenged and overturned in bankruptcy. The First Lien Collateral Agent's protection in a reorganization is adequately addressed through the priority waterfall, the lien priority provisions, and the turnover obligations — the First Lien Secured Parties will receive the benefit of their first-priority lien position regardless of how the Unsecured Noteholders vote on a plan.

Proposed Revision: Delete the restriction on voting on plans of reorganization in its entirety.

4. Section 1111(b) Election

The W&G draft addresses the application of Section 1111(b) of the Bankruptcy Code, which permits an undersecured creditor to elect to have its entire claim treated as a secured claim in a bankruptcy proceeding. The draft provides that the First Lien Collateral Agent retains the exclusive right to make or not make the Section 1111(b) election on behalf of the First Lien Secured Parties.

This provision is standard and appropriate. The Section 1111(b) election is a right that belongs to the First Lien Secured Parties (as the holders of the secured claims), and the Unsecured Noteholders have no standing to make such an election. No revision is needed from the Borrower's perspective.

5. Relief from Automatic Stay

The W&G draft provides that the Unsecured Notes Trustee will not seek relief from the automatic stay imposed by Section 362 of the Bankruptcy Code for the purpose of enforcing rights against the Collateral. This restriction is appropriate given the Unsecured Notes' lack of lien rights — the Unsecured Notes Trustee has no basis for seeking stay relief to foreclose on or seize Collateral in which it holds no security interest.

Issue: We must confirm that the restriction is limited to stay relief sought for the purpose of enforcing rights against the Collateral. The Unsecured Notes Trustee should retain the right to seek stay relief for other purposes, such as (i) pursuing claims against non-debtor guarantors (to the extent the co-debtor stay of Section 1301 does not apply in a Chapter 11 case), (ii) commencing or continuing litigation against third parties, or (iii) exercising other rights that do not involve the Collateral. The W&G draft's current formulation appears to be limited to Collateral-related stay relief, but we will confirm this during the mark-up.

G. Article 7 — Purchase Option

The W&G draft includes a purchase option that allows the Unsecured Notes Trustee (or holders of a specified percentage of the outstanding Unsecured Notes) to purchase the First Lien Obligations at par value plus accrued and unpaid interest upon the occurrence of an event of default under the First Lien Documents and the commencement (or threatened commencement) of enforcement actions against the Collateral. This type of "buy-out" provision is standard in intercreditor agreements and serves as a safety valve — it allows the junior creditors to avert a potentially value-destructive foreclosure by purchasing the senior obligations and stepping into the shoes of the First Lien Secured Parties.

Issue 1 — Purchase Price. The purchase price must be clearly and precisely defined to avoid disputes. The W&G draft specifies that the purchase price equals the outstanding principal amount of the First Lien Obligations plus accrued and unpaid interest, but the draft is ambiguous regarding the treatment of (i) any applicable prepayment premium or "make-whole" amount under the Credit Agreement, (ii) breakage costs and termination payments under hedging obligations, (iii) breakage costs under cash management obligations, (iv) indemnification obligations that are contingent or unliquidated, and (v) costs and expenses of the First Lien Collateral Agent. We recommend clarifying the purchase price to include all of the foregoing, with a mechanism for handling contingent or unliquidated obligations (e.g., a reserve or escrow).

Issue 2 — Exercise Mechanics. The W&G draft provides that the purchase option may be exercised by the Unsecured Notes Trustee or by holders of Unsecured Notes representing a majority in aggregate principal amount, but does not specify a time period within which the option must be exercised following notice of the triggering event. We recommend specifying a 30-day exercise period from the date of receipt of written notice from the First Lien Collateral Agent of its intent to commence enforcement actions against the Collateral.

Issue 3 — Borrower/Sponsor Co-Purchase Right. The W&G draft does not grant the Borrower or its equity sponsor (Granite Peak) a corresponding right to purchase the First Lien Obligations at par. The Borrower should consider whether to request such a right, which could provide an additional avenue for avoiding a foreclosure. We note, however, that such a right must be analyzed against the Credit Agreement's change of control and assignment provisions, as well as the Indenture's change of control put provision, to ensure that a purchase by the Borrower or the Sponsor does not trigger unintended consequences.

Proposed Revision: (a) Clarify the purchase price to encompass all First Lien Obligations (including hedging/cash management breakage, expenses, and a mechanism for contingent claims); (b) specify a 30-day exercise period; and (c) add a parallel right for the Borrower and/or the Sponsor to purchase the First Lien Obligations at par on the same terms (subject to review of the Credit Agreement and Indenture implications).

H. Article 8 — Amendments to Underlying Documents

1. Amendments to First Lien Documents

The W&G draft permits amendments, modifications, supplements, and waivers to the Credit Agreement and the related First Lien Documents without the consent of the Unsecured Notes Trustee, subject to the condition that such amendments do not increase the aggregate principal amount of the First Lien Obligations beyond the amount permitted under the Indenture's incurrence covenant. This is a reasonable framework — the First Lien Lenders should have the ability to modify their own credit arrangements without obtaining consent from the Unsecured Noteholders, subject to the important limitation that such modifications not breach the Indenture's covenants and thereby prejudice the Unsecured Noteholders' position.

Issue: We must confirm that the cap cross-references the correct provisions. The Indenture's limitation on first lien indebtedness is contained in Section 4.09 (Limitation on Liens) and Section 4.03 (Limitation on Indebtedness), which together limit the incurrence of first lien debt to specified baskets. The Credit Agreement's incremental facility provisions (Section 2.14) permit the incurrence of additional first lien debt in a

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
From: Marcus Leung, Calderwood & Harkness LLP
To: Claudia Merritt, Calderwood & Harkness LLP
Date: March 13, 2025
Re: Review of First Draft Intercreditor Agreement (First Lien / Unsecured) — Whitfield & Gage LLP Draft Dated March 12, 2025
Client: Nexford Industrial Holdings Inc.
Matter No.: 1005-00001
Billing Code: IBL-NIH-2025-031
Right-click to update Table of Contents
I. Executive Summary
This memorandum sets forth our review and analysis of the first draft of the First Lien/Unsecured Intercreditor Agreement (the "Intercreditor Agreement") circulated by Whitfield & Gage LLP ("W&G") — specifically Margaret Ashby and Jonathan Ferris — on March 12, 2025, on behalf of Crescent Harbor Bank, N.A., in its capacity as First Lien Collateral Agent under the proposed $1,400,000,000 senior secured Term Loan B credit facility (the "Credit Facility" or "Term Loan B").
The Intercreditor Agreement is intended to govern the relationship between the first lien secured parties under the Credit Facility and the holders of the $250,000,000 aggregate principal amount of 7.250% Senior Unsecured Notes due 2028 (the "Unsecured Notes"), for which Pinnacle Trust Company serves as trustee (the "Unsecured Notes Trustee" or "Pinnacle"). The three principal parties to the Intercreditor Agreement are: (i) Crescent Harbor Bank, N.A., as First Lien Collateral Agent; (ii) Pinnacle Trust Company, as Unsecured Notes Trustee; and (iii) Nexford Industrial Holdings Inc. ("Nexford" or the "Borrower"), as borrower under the Credit Facility and issuer under the Indenture, which acknowledges and consents to the Intercreditor Agreement's terms. The agreement is governed by the laws of the State of New York.
This memorandum identifies material issues with the W&G draft, proposes specific revisions, and outlines negotiation strategy from the Borrower's perspective. We are preparing a full marked-up version of the Intercreditor Agreement for return to W&G by March 19, 2025.
Overall Assessment: The W&G draft follows a conventional first lien / unsecured intercreditor structure that is broadly in line with market norms for sponsor-backed leveraged finance transactions. However, several provisions tilt unreasonably in favor of the First Lien Collateral Agent and require meaningful revision. In particular, the standstill provisions, the bankruptcy-related covenants (including restrictions on plan-of-reorganization voting and blanket prohibitions on seeking adequate protection), the consent requirements for amendments to the unsecured notes documents, and the scope of the turnover obligations each present issues that, if left unrevised, could prejudice both the Borrower's operational and financial flexibility and the Unsecured Noteholders' customary rights. The Borrower has a direct interest in preserving those customary rights because an intercreditor agreement that is inconsistent with the remedies framework of the existing Indenture (dated November 8, 2021) could trigger disputes with the Unsecured Noteholders and potentially be challenged as a modification of the Indenture's terms without requisite noteholder consent.
We have identified fourteen principal issues requiring attention in the mark-up, seven of which we classify as high priority. These are detailed in Section V below and summarized in the Priority Table of Issues.
II. Background and Transaction Context
A. Transaction Overview
Nexford Industrial Holdings Inc. is a Delaware corporation headquartered at 1400 Industrial Parkway, Schaumburg, Illinois 60173. Nexford is a diversified industrial manufacturer and services provider operating across three principal business segments: advanced materials processing, specialty packaging solutions, and industrial infrastructure services. Nexford is entering into the Credit Facility — a $1,400,000,000 senior secured Term Loan B — with Crescent Harbor Bank, N.A. (with offices at 320 Federal Street, Boston, Massachusetts 02110) serving as both Administrative Agent and Collateral Agent.
The proceeds of the Term Loan B will be applied as follows:
(a) Refinancing of Existing Debt. Approximately $879,375,000 will be used to refinance Nexford's existing first lien term loan (original principal amount of $875,000,000) and revolving credit facility (commitment amount of $190,000,000), each of which is currently held by Atlas Meridian Bank, N.A. as administrative agent and collateral agent. The payoff amount of approximately $879,375,000 reflects the current outstanding principal balance of the term loan plus accrued and unpaid interest through the anticipated closing date, together with any applicable prepayment premium, and full repayment of the revolving credit facility (which had an outstanding balance of approximately $0 as of the date of the commitment letter, though the facility must be terminated upon closing). Customary payoff and release letters are being coordinated.
(b) Dividend to Sponsor. Approximately $335,000,000 will be distributed as a dividend recapitalization to Granite Peak NIH Holdings, LLC ("Holdings"), the direct parent of Nexford, for further upstream distribution to Granite Peak Capital Partners, LP and its co-investors.
(c) Transaction Fees and Expenses. Approximately $38,625,000 will be applied to pay transaction fees and expenses, including arrangement fees, commitment fees, legal fees, and other customary closing costs associated with the Credit Facility.
(d) Cash to Balance Sheet. Approximately $147,000,000 will be retained by Nexford as balance sheet cash to fund ongoing working capital requirements and general corporate purposes.
The Credit Facility bears interest at a rate of Adjusted Term SOFR plus 400 basis points, subject to a SOFR floor of 0.75%. The maturity date of the Credit Facility is March 28, 2032 (seven years from the anticipated closing date of March 28, 2025). The Credit Facility was arranged by Crescent Harbor Bank, N.A. and two additional arrangers (Vantage Securities LLC and Fieldstone Capital Markets, Inc.) on a broadly syndicated basis.
Nexford's private equity sponsor is Granite Peak Capital Partners, LP ("Granite Peak" or the "Sponsor"). Granite Peak acquired Nexford in January 2019 in a leveraged buyout at an enterprise value of approximately $1.65 billion, with an equity investment of approximately $725,000,000. Granite Peak holds its interest in Nexford indirectly through Holdings. The current transaction represents a dividend recapitalization — Granite Peak's second significant return of capital since the original acquisition.
B. Existing Unsecured Notes
Nexford has $250,000,000 in aggregate principal amount of 7.250% Senior Unsecured Notes due 2028 outstanding (the "Unsecured Notes"). The Unsecured Notes were issued pursuant to an indenture dated November 8, 2021 (the "Indenture"), among Nexford, as Issuer, the Guarantors party thereto, and Pinnacle Trust Company (with offices at 101 Park Avenue, New York, New York 10178), as Trustee. The Unsecured Notes bear interest at a fixed rate of 7.250% per annum, payable semi-annually on May 15 and November 15 of each year, and mature on November 15, 2028.
The Unsecured Notes are not being refinanced in this transaction. They will remain outstanding following the closing of the Credit Facility. Structurally, the Unsecured Notes are subordinated to the first lien Term Loan B with respect to collateral — the Unsecured Notes do not benefit from any security interest in the Collateral (as defined below), and the Unsecured Noteholders' claims against Collateral proceeds are junior to the First Lien Obligations by operation of the Intercreditor Agreement. However, the Unsecured Notes rank pari passu in right of payment with all other existing and future unsecured, unsubordinated obligations of Nexford and the Guarantors.
The Indenture contains its own set of incurrence-based covenants, including limitations on indebtedness, restricted payments, asset sales, affiliate transactions, and the designation of restricted and unrestricted subsidiaries. The Indenture also includes a change of control put provision (Section 5.01) that is cross-referenced in the Credit Facility's change of control event of default provision. The relationship between these two provisions has been analyzed in our prior memorandum dated February 14, 2025, and we incorporate that analysis by reference herein as relevant context for the intercreditor review.
C. Pro Forma Capital Structure
The pro forma capital structure of Nexford as of the closing of the Credit Facility is as follows:
Key leverage metrics based on LTM Adjusted EBITDA of $385,000,000 (for the twelve-month period ended December 31, 2024):
These leverage levels are within the ranges contemplated by the Credit Facility's incurrence-based covenants and the Indenture's debt incurrence basket. We note that the Indenture permits the incurrence of additional first lien indebtedness up to certain specified baskets, which becomes relevant to the Intercreditor Agreement's treatment of permitted refinancings and incremental facilities, as discussed in Section IV.H below.
D. Purpose of the Intercreditor Agreement
The Intercreditor Agreement serves several fundamental purposes in the context of the overall transaction and the co-existence of the first lien secured Credit Facility and the Unsecured Notes:
(a) Priority of Claims. The Intercreditor Agreement establishes the priority of the First Lien Secured Parties' claims relative to the Unsecured Noteholders' claims with respect to the Collateral and the proceeds thereof. It codifies the understanding that the First Lien Obligations must be paid in full from Collateral proceeds before any distribution is made to the Unsecured Noteholders from such proceeds.
(b) Enforcement and Remedies Governance. The Intercreditor Agreement governs the conduct of the Unsecured Notes Trustee and the Unsecured Noteholders with respect to enforcement actions against the Collateral, including standstill periods, limitations on remedies, and the obligation to turn over Collateral proceeds.
(c) Borrower Flexibility. The Intercreditor Agreement protects the Borrower's right to manage its business, refinance its obligations, and dispose of assets without being subject to conflicting directions or claims from competing creditor classes. In particular, the automatic guarantee release provisions and the permitted refinancing mechanics are critical to maintaining the Borrower's financial and operational flexibility.
(d) Bankruptcy and Insolvency Framework. The Intercreditor Agreement establishes the parties' respective rights and obligations in the event of a bankruptcy or insolvency proceeding, including with respect to DIP financing, adequate protection, and the treatment of claims under a plan of reorganization.
The Credit Agreement (Section 9.14 thereof) contemplates that the Administrative Agent will enter into this Intercreditor Agreement as a condition to closing of the Credit Facility. The Credit Agreement also contemplates a separate First Lien/Second Lien Intercreditor Agreement in the event that Nexford incurs second lien debt in the future, but no such debt is contemplated at this time.
III. Structural Overview of the W&G First Draft
The W&G draft of the Intercreditor Agreement is organized into approximately twelve substantive articles, preceded by recitals and a definitions section, and followed by customary miscellaneous provisions. The overall structure is consistent with market-standard intercreditor agreements for first lien / unsecured arrangements in sponsored leveraged finance transactions. We summarize the key articles below for reference:
Article 1 — Definitions. Contains defined terms used throughout the agreement, including cross-references to the Credit Agreement and the Indenture. Key defined terms include "First Lien Obligations," "Unsecured Notes Obligations," "Collateral," "Permitted Refinancing," "Enforcement Action," "DIP Financing," and "Adequate Protection."
Article 2 — Priorities and Subordination of Liens. Despite its heading, this article does not address lien subordination in the traditional sense (as the Unsecured Notes do not benefit from liens on the Collateral). Instead, it principally establishes the proceeds waterfall — the order of priority for distribution of Collateral proceeds upon enforcement or realization.
Article 3 — Enforcement Actions and Remedies. Governs the exclusive right of the First Lien Collateral Agent to enforce remedies against the Collateral and the Unsecured Notes Trustee's obligations with respect to turnover of Collateral proceeds.
Article 4 — Standstill and Exercise of Remedies. Imposes restrictions on the Unsecured Notes Trustee's ability to take enforcement actions during a specified standstill period and includes prohibitions on challenging the First Lien security interests.
Article 5 — Releases of Liens and Guarantees. Addresses the automatic release of guarantees (and any theoretical liens) upon a permitted disposition or release under the Credit Agreement.
Article 6 — Insolvency and Bankruptcy Proceedings. Establishes the parties' respective rights and obligations in the context of proceedings under the Bankruptcy Code, including provisions regarding DIP financing, adequate protection, voting on plans of reorganization, the Section 1111(b) election, and relief from the automatic stay.
Article 7 — Purchase Option. Provides the Unsecured Notes Trustee (or qualifying noteholders) with an option to purchase the First Lien Obligations at par upon the occurrence of certain triggering events.
Article 8 — Amendments to Secured Debt Documents and Unsecured Notes Documents. Governs the parties' rights and obligations with respect to amendments to the Credit Agreement, the Indenture, and the Intercreditor Agreement itself.
Article 9 — Representations and Acknowledgments. Contains customary representations regarding authority, capacity, and authorization.
Article 10 — Miscellaneous. Includes provisions regarding successors and assigns, third-party beneficiaries, governing law, submission to jurisdiction, jury trial waiver, counterparts, notices, severability, and integration.
Annexes and Schedules. The draft includes annexes listing the First Lien Documents, the Unsecured Notes Documents, and a collateral description intended to replicate the description of Collateral in the Security Agreement.
We address each of these articles in the detailed analysis that follows, identifying issues and proposed revisions as appropriate.
IV. Detailed Issue-by-Issue Analysis
A. Article 1 — Definitions
1. Definition of "First Lien Obligations"
The W&G draft defines "First Lien Obligations" broadly to encompass all obligations of the Loan Parties arising under or in connection with the Credit Agreement, together with all hedging obligations and all cash management obligations of the Loan Parties owed to the First Lien Lenders or their affiliates. This definition is intentionally expansive and is designed to ensure that the full universe of obligations secured by the Collateral is included within the scope of the Intercreditor Agreement's priority framework.
Issue: While a broad definition is not inherently objectionable, the current formulation does not adequately limit the scope of hedging and cash management obligations to those that are actually secured by the Collateral under the terms of the Credit Agreement and the Security Agreement. Specifically, the definition should be limited to hedging obligations and cash management obligations that are entered into with counterparties who are (or, at the time of entry, were) First Lien Lenders or affiliates of First Lien Lenders, and that constitute "Secured Obligations" as defined in the Credit Agreement. Without this limitation, the definition could be construed to capture hedging arrangements or cash management services that were never intended to benefit from the first lien priority — for example, hedging obligations entered into by a Loan Party with a former Lender that has since assigned all of its commitments.
Proposed Revision: We recommend revising the definition of "First Lien Obligations" to incorporate a direct cross-reference to the definition of "Secured Obligations" in the Credit Agreement. The definition should read substantially as follows: "First Lien Obligations" means the "Secured Obligations" as defined in the Credit Agreement as in effect on the date hereof (or, in the case of any Permitted Refinancing, as defined in the applicable Permitted Refinancing documentation), including principal, interest (including post-petition interest to the extent allowed), premium (if any), fees, costs, charges, expenses, reimbursement obligations, indemnification obligations, and all other amounts payable under or secured by the First Lien Documents, and including Hedging Obligations and Cash Management Obligations to the extent constituting "Secured Obligations" under the Credit Agreement.
2. Definition of "Unsecured Notes Obligations"
The W&G draft defines "Unsecured Notes Obligations" as all obligations of the Issuer and the Guarantors under the Indenture and the Unsecured Notes. This definition should be confirmed to cover the full $250,000,000 aggregate principal amount of the Unsecured Notes, together with all accrued and unpaid interest, any applicable premium (including any "make-whole" amount), fees, costs, expenses, indemnification obligations, and all other amounts payable by the Issuer or any Guarantor under or in respect of the Indenture dated November 8, 2021.
Issue: We must verify that the definition does not inadvertently capture future pari passu unsecured indebtedness that Nexford may incur unless such indebtedness is expressly designated as "Unsecured Notes Obligations" pursuant to the Intercreditor Agreement's joinder mechanics or the Credit Agreement's incremental provisions. The Credit Agreement's basket for the incurrence of additional unsecured indebtedness (Section 7.03(q)) permits additional unsecured notes in specified amounts, and any such additional notes should only be brought within the scope of the Intercreditor Agreement if they are expressly made subject to it through a joinder or supplemental indenture.
Proposed Revision: Confirm that the definition is limited to obligations arising under or in respect of the Indenture dated November 8, 2021 (as may be supplemented, amended, or refinanced from time to time in accordance with the terms of the Intercreditor Agreement), and add clarifying language that additional unsecured indebtedness is not automatically included unless the holder(s) thereof execute a joinder agreement.
3. Definition of "Collateral"
The W&G draft defines "Collateral" as all assets and property of Nexford and each Guarantor that are subject to a first-priority security interest in favor of the First Lien Collateral Agent. The defined term must align precisely with the collateral description in the Credit Agreement and the related Security Documents (including the Security Agreement, the IP Security Agreement, the Mortgages, and the Pledge Agreement).
For reference, the Collateral under the Credit Agreement consists of a first-priority security interest in substantially all assets of Nexford and each Guarantor, including:
•  All equity interests in each direct domestic subsidiary and 65% of the equity interests in each first-tier foreign subsidiary;
•  All accounts receivable;
•  All inventory;
•  All equipment;
•  All intellectual property (patents, trademarks, copyrights, trade secrets, and licenses);
•  All deposit accounts and securities accounts (subject to control agreements);
•  All general intangibles (including payment intangibles);
•  All owned real property (four properties with a total appraised value of approximately $193,000,000);
•  All intercompany notes and receivables; and
•  All proceeds and products of the foregoing.
The following categories of assets are excluded from the Collateral under the Credit Agreement and Security Documents:
•  Motor vehicles with an individual value under $250,000 per vehicle;
•  Letter of credit rights with an individual face amount under $1,000,000;
•  Commercial tort claims with an individual value under $2,500,000 (until identified and brought within the security interest pursuant to the Credit Agreement's notice and joinder provisions);
•  Assets where the cost of pledging or perfecting a security interest is excessive relative to the value of such assets, as determined by the Administrative Agent in its reasonable discretion; and
•  Certain other excluded assets specified in the Security Agreement (e.g., certain governmental licenses and permits to the extent prohibited by applicable law from being pledged).
Issue: The definition of "Collateral" in the Intercreditor Agreement must be identical to, or incorporate by direct cross-reference, the definitions used in the Credit Agreement and Security Agreement. Any discrepancy — whether creating a broader or narrower scope — could lead to disputes regarding the applicability of the Intercreditor Agreement's priority, turnover, and release provisions to specific assets. For example, if the Intercreditor Agreement's definition of Collateral is broader than the Security Agreement's, the Unsecured Notes Trustee could be required to turn over proceeds from assets that are not actually subject to a first-priority lien, which would be inappropriate.
Proposed Revision: Replace the standalone definition of "Collateral" with a direct cross-reference to the Credit Agreement and Security Documents: "Collateral" means all assets and property subject to the Liens created by the Security Documents (as defined in the Credit Agreement), as such Security Documents may be amended, supplemented, or replaced from time to time.
4. Definition of "Permitted Refinancing"
The W&G draft defines "Permitted Refinancing" to include any refinancing, refunding, renewal, or extension of the First Lien Obligations or the Unsecured Notes Obligations that satisfies the conditions for a "Permitted Refinancing Indebtedness" under the Credit Agreement. The definition further provides that upon the consummation of a Permitted Refinancing, the refinancing creditors automatically succeed to the position of the refinanced creditors under the Intercreditor Agreement.
Issue: Although the definition contemplates automatic succession for refinancing creditors, the W&G draft separately includes a provision (in Article 8) requiring the prior written consent of the First Lien Collateral Agent for any refinancing of the Unsecured Notes Obligations to be brought within the scope of the Intercreditor Agreement. This consent requirement is inconsistent with the concept of automatic accession and is not market practice. The Borrower must have the unfettered ability to refinance the Unsecured Notes — whether through an exchange offer, a tender and new issuance, or an open-market refinancing — and to ensure that the refinancing creditors step into the shoes of the existing Unsecured Noteholders under the Intercreditor Agreement without the First Lien Agent exercising a veto. Any consent requirement would introduce uncertainty and potential delay into a refinancing that is otherwise permitted under both the Credit Agreement and the Indenture.
Proposed Revision: Eliminate the consent requirement in Article 8 and conform the definition of "Permitted Refinancing" to provide for automatic joinder of refinancing creditors to the Intercreditor Agreement upon execution of a customary joinder agreement, without the need for consent from any other party. The joinder agreement should be in the form attached as an exhibit to the Intercreditor Agreement.
5. Other Key Definitions
We have identified the following additional defined terms that require attention during the mark-up:
(a) "Bankruptcy Code." Defined as Title 11 of the United States Code, 11 U.S.C. §§ 101 et seq. Standard; no revision needed, but confirm consistency with the Credit Agreement's definition.
(b) "DIP Financing." Defined as any financing obtained by the Borrower or any of its subsidiaries as debtor-in-possession under Section 364 of the Bankruptcy Code. The definition should be confirmed to include both secured and unsecured DIP facilities and to specify that DIP financing may include both new money advances and roll-up components. We address the substantive DIP financing provisions in Section IV.F.1 below.
(c) "Adequate Protection." Defined by reference to Section 361 of the Bankruptcy Code. Standard definition; no revision needed.
(d) "Enforcement Action." This defined term requires particular attention. The W&G draft defines "Enforcement Action" to include any exercise of remedies against the Collateral, any acceleration of obligations, any direction to the Collateral Agent to commence foreclosure proceedings, and any other action to enforce rights and remedies under the applicable debt documents. The scope of this definition is critical because it determines the reach of the standstill provisions (Article 4) and the exclusive enforcement rights (Article 3). The definition should distinguish clearly between (i) actions that relate to the Collateral (e.g., foreclosure, seizure, collection of Collateral proceeds) and (ii) routine administrative actions and the exercise of purely unsecured rights (e.g., acceleration of obligations, commencement of suits for money judgment, filing of proofs of claim). We recommend bifurcating the definition to provide separate definitions of "Collateral Enforcement Action" and "Unsecured Enforcement Action," with the standstill and exclusive enforcement provisions applying only to Collateral Enforcement Actions.
B. Article 2 — Priorities (Proceeds Waterfall)
Because the Unsecured Notes do not benefit from any security interest in the Collateral, Article 2 does not address lien subordination in the manner that would be found in a typical first lien / second lien intercreditor agreement. Instead, Article 2 of the W&G draft principally establishes the waterfall for the distribution of Collateral proceeds upon enforcement or realization by the First Lien Collateral Agent.
The waterfall as set forth in the W&G draft provides for the following order of distribution:
First: Payment of all costs and expenses of the First Lien Collateral Agent (Crescent Harbor Bank, N.A.) incurred in connection with the enforcement, collection, or realization of the Collateral, including reasonable attorneys' fees, court costs, and expenses of sale.
Second: Payment in full of all First Lien Obligations (including principal, accrued interest, fees, premiums, hedging obligations, cash management obligations, indemnification obligations, and all other amounts owing under the First Lien Documents).
Third: Payment of all costs and expenses of the Unsecured Notes Trustee (Pinnacle Trust Company) incurred in connection with the administration of the Indenture and the receipt and distribution of Collateral proceeds.
Fourth: Payment of the Unsecured Notes Obligations (including principal, accrued interest, premium (if any), and all other amounts owing under the Unsecured Notes Documents).
Fifth: Payment of any surplus to the Borrower or as otherwise directed by a court of competent jurisdiction.
We identify the following issues with the waterfall as drafted:
Issue 1 — Uncapped Expenses at Tiers 1 and 3. The costs and expenses payable at Tiers 1 and 3 are not subject to any cap or reasonableness standard. While it is customary for collateral agent expenses to be reimbursed on a priority basis, the absence of any limitation creates the risk that excessive or unreasonable expenses could erode the proceeds available to lower-priority creditors — including, in the case of Tier 1 expenses, the Unsecured Noteholders at Tier 4. We recommend adding a "reasonableness" qualifier to the expenses payable at Tier 1 (i.e., "reasonable and documented out-of-pocket costs and expenses") and confirming that the Tier 3 expenses of the Unsecured Notes Trustee are similarly subject to a reasonableness standard consistent with the Trustee's entitlement under the Indenture.
Issue 2 — Preservation of Unsecured Noteholders' Rights Against Non-Collateral Assets. The waterfall correctly provides that Unsecured Noteholders are not entitled to any share of Collateral proceeds until all First Lien Obligations are indefeasibly paid in full — this reflects the fundamental bargain of the first lien / unsecured structure. However, the W&G draft does not contain an express savings clause confirming that the Unsecured Noteholders' rights to pursue unsecured claims against assets that do not constitute Collateral (including assets of unrestricted subsidiaries, claims against non-guarantor affiliates, and proceeds of avoidance actions under the Bankruptcy Code) are not affected by the waterfall. The omission of such a savings clause could be read to suggest that the waterfall governs the distribution of all proceeds, not merely Collateral proceeds, which would be inconsistent with the unsecured nature of the Notes and could be challenged by the Unsecured Noteholders.
Proposed Revision: Add an express carve-out or savings clause at the conclusion of Article 2, substantially as follows: "For the avoidance of doubt, nothing in this Article 2 shall limit, restrict, or otherwise affect the right of the Unsecured Notes Trustee or any holder of Unsecured Notes Obligations to receive distributions or payments from or on account of assets that do not constitute Collateral, or to pursue unsecured claims against the Borrower or any Guarantor on an unsecured basis with respect to assets other than the Collateral."
Issue 3 — Hedging and Cash Management Obligations. The inclusion of hedging obligations and cash management obligations in the Tier 2 distribution must be defined with precision. These obligations should be limited to those entered into with counterparties that are First Lien Lenders or their affiliates (as defined in the Credit Agreement) and should be subject to the same caps and baskets applicable to "Secured Obligations" under the Credit Agreement. Without this limitation, the Tier 2 distribution could be inflated by hedging or cash management obligations that are not properly part of the first lien structure, thereby reducing recoveries available to the Unsecured Noteholders.
Proposed Revision: Cross-reference the definition of "Secured Obligations" in the Credit Agreement to define the scope of hedging and cash management obligations included in Tier 2.
C. Article 3 — Enforcement Actions and Remedies
1. Exclusive Enforcement Right
The W&G draft grants the First Lien Collateral Agent the exclusive right to enforce remedies against the Collateral, including the right to foreclose on, collect, sell, lease, exchange, or otherwise dispose of any and all Collateral. This exclusive enforcement right is standard and appropriate in a first lien / unsecured intercreditor arrangement — the Unsecured Notes do not benefit from any lien on the Collateral, and the First Lien Collateral Agent's exclusive authority over the Collateral is essential to the orderly enforcement process.
Issue: While the exclusive enforcement right over Collateral is not objectionable, we must confirm that the Unsecured Notes Trustee retains the unimpaired right to enforce purely unsecured rights and remedies that do not involve the Collateral. The W&G draft's formulation of the exclusive enforcement right is drafted broadly enough that it could be read to preclude the Unsecured Notes Trustee from taking any enforcement action — including actions that have no connection to the Collateral, such as accelerating the Unsecured Notes, suing for money damages on a general unsecured basis, filing proofs of claim in bankruptcy proceedings, or voting on a plan of reorganization. This reading would be inconsistent with the fundamental distinction between secured and unsecured creditor rights and would effectively strip the Unsecured Noteholders of their basic creditor remedies.
Proposed Revision: We recommend adding an express savings clause at the conclusion of the exclusive enforcement provisions, substantially as follows:
"Notwithstanding anything to the contrary herein, nothing in this Article 3 shall limit, impair, or otherwise affect the right of the Unsecured Notes Trustee or any holder of Unsecured Notes Obligations to: (a) accelerate the Unsecured Notes Obligations in accordance with the terms of the Indenture; (b) commence and prosecute actions or proceedings for money damages on an unsecured basis against the Borrower, any Guarantor, or any other person liable for the Unsecured Notes Obligations; (c) file proofs of claim or other similar documents in any insolvency, bankruptcy, or reorganization proceeding; (d) vote or otherwise participate in any plan of reorganization or similar restructuring proceeding; (e) exercise any right of set-off to the extent arising under applicable law and not involving the Collateral; or (f) take any other action that does not involve the exercise of remedies against the Collateral."
2. Direction and Instruction
The W&G draft provides that the First Lien Collateral Agent shall act at the direction of the "Required Lenders" (defined as the lenders holding a majority in aggregate principal amount of the outstanding Term Loan B commitments and loans) with respect to the exercise of remedies against the Collateral. This formulation mirrors the direction provisions in the Credit Agreement (Section 9.02) and is standard. We have no substantive objection, but we note that the defined term "Required Lenders" should be confirmed to align precisely with the corresponding defined term in the Credit Agreement.
3. Obligation to Turn Over Collateral Proceeds
The W&G draft includes an obligation requiring the Unsecured Notes Trustee and the Unsecured Noteholders to turn over to the First Lien Collateral Agent any Collateral proceeds received by them, whether directly or indirectly, until such time as all First Lien Obligations have been indefeasibly paid in full. This turnover obligation is a standard feature of first lien / unsecured intercreditor agreements and reflects the priority of the First Lien Obligations with respect to the Collateral.
Issue: The W&G draft's formulation of the turnover obligation extends to "any proceeds of Collateral or other amounts received by the Unsecured Notes Trustee or any holder of Unsecured Notes Obligations." The phrase "or other amounts" is problematic because it could be construed to capture payments received by the Unsecured Noteholders from sources unrelated to the Collateral — for example, dividends or distributions from unrestricted subsidiaries, payments received in respect of unsecured claims in a bankruptcy proceeding, or proceeds of claims against third parties. Such a reading would effectively subordinate the Unsecured Notes to the First Lien Obligations on an unsecured basis as well, which is not the commercial deal.
Proposed Revision: We recommend narrowing the turnover obligation to apply exclusively to proceeds "of or from the Collateral" and adding an express carve-out for payments received in the ordinary course of business under the Unsecured Notes that are not derived from the enforcement of, or realization upon, the Collateral. The revised formulation should read substantially as follows:
"If the Unsecured Notes Trustee or any holder of Unsecured Notes Obligations shall receive any proceeds of or from the Collateral (including any distribution from the Collateral in any insolvency proceeding, but excluding any payment or distribution received from sources other than the Collateral, including any payment received in the ordinary course of business under the Unsecured Notes Documents that is not derived from the enforcement of remedies against the Collateral), such Unsecured Notes Trustee or holder shall hold such proceeds in trust for the benefit of the First Lien Collateral Agent and shall promptly turn over such proceeds to the First Lien Collateral Agent for application in accordance with the waterfall set forth in Article 2 hereof."
D. Article 4 — Standstill and Limitations on Unsecured Noteholders
1. Standstill Period
The W&G draft imposes a 180-day standstill period during which the Unsecured Notes Trustee may not take "any Enforcement Action" following the occurrence and during the continuance of an event of default under the Unsecured Notes. The standstill commences upon written notice by the Unsecured Notes Trustee to the First Lien Collateral Agent of the occurrence of such event of default.
Issue: This provision raises two distinct concerns, one relating to scope and one relating to duration.
Scope. The standstill, as drafted, applies to "any Enforcement Action," which — as noted in our discussion of the definition of "Enforcement Action" in Section IV.A.5(d) above — is defined broadly to include not only actions against the Collateral but also acceleration of the Unsecured Notes, commencement of lawsuits for money damages, and other purely unsecured remedies. In a first lien / unsecured intercreditor arrangement, a standstill on Collateral enforcement is largely academic because the Unsecured Noteholders have no lien rights and therefore no independent ability to foreclose on or seize Collateral. The real impact of the standstill, therefore, is its restriction on the Unsecured Noteholders' exercise of purely unsecured remedies — and this restriction is both unusual for a first lien / unsecured structure and potentially inconsistent with the remedies framework of the Indenture.
The Indenture provides the Unsecured Notes Trustee with the right, upon the occurrence of an Event of Default (as defined in the Indenture), to accelerate the Unsecured Notes and to pursue any available remedy at law or in equity. If the Intercreditor Agreement effectively strips the Trustee of these rights for a 180-day period, the Unsecured Noteholders may argue that their contractual rights under the Indenture have been impermissibly modified without the requisite consent threshold. This creates risk for the Borrower — not a benefit.
Duration. Even if the standstill were limited to Collateral-related enforcement actions, a 180-day period is aggressive. Market practice for standstills in first lien / second lien intercreditor agreements — where the junior creditors actually hold liens — typically ranges from 90 to 180 days. In a first lien / unsecured context, where the junior creditors hold no liens, a standstill on Collateral enforcement is arguably unnecessary altogether, and standstills of any duration on unsecured remedies are rare.
Proposed Revision: We recommend the following approach:
(a) Narrow the scope of the standstill to apply only to Enforcement Actions against the Collateral (i.e., "Collateral Enforcement Actions" as we propose defining them). Acceleration of the Unsecured Notes, suits for money judgment, and other purely unsecured remedies should be expressly excluded from the standstill.
(b) Given the absence of any Unsecured Noteholder lien rights, consider eliminating the standstill entirely. Alternatively, if the First Lien Agent insists on retaining a standstill on Collateral-related actions, reduce the period to 90 days.
(c) Include a termination trigger providing that the standstill terminates immediately upon the First Lien Collateral Agent's commencement of enforcement actions against the Collateral, so that the Unsecured Notes Trustee is not left in limbo while the First Lien Collateral Agent exercises remedies.
Additional Note: We must review the Indenture (dated November 8, 2021, Pinnacle Trust Company as Trustee) in detail to confirm that the Intercreditor Agreement's standstill provisions are consistent with the Trustee's obligations under the Indenture. In particular, we must verify that the Trustee has the authority under the Indenture to agree to standstill restrictions on behalf of the Unsecured Noteholders, and that the required noteholder consent threshold (if any) has been or will be obtained. We cross-reference our prior indenture review memorandum dated February 14, 2025, and note that a supplemental analysis may be required on this point.
2. Restrictions on Challenging First Lien Security
The W&G draft includes a provision prohibiting the Unsecured Notes Trustee and the Unsecured Noteholders from challenging the validity, perfection, or priority of the First Lien security interests. This is a standard provision that is appropriate in the intercreditor context — the Unsecured Noteholders have entered into a transaction with full knowledge of the first lien structure, and it would be inequitable for them to subsequently challenge the security that was part of the bargain.
Issue: While we have no objection to this provision in principle, we note that the restriction should be mutual. That is, the First Lien Collateral Agent and the First Lien Secured Parties should also agree not to challenge the pari passu unsecured status of the Unsecured Notes or the validity of the Unsecured Noteholders' unsecured claims. The W&G draft is currently silent on reciprocity.
Proposed Revision: Add a mutual covenant providing that the First Lien Collateral Agent and the First Lien Secured Parties shall not challenge or contest (i) the pari passu unsecured status of the Unsecured Notes Obligations relative to other unsecured, unsubordinated obligations of the Borrower, or (ii) the validity or enforceability of the Indenture or the Unsecured Notes.
E. Article 5 — Releases of Liens and Guarantees
1. Automatic Release Provisions
The W&G draft provides that whenever the First Lien Collateral Agent releases any lien on the Collateral or releases any Guarantor from its guarantee under the Credit Agreement, in each case in connection with a transaction permitted under the terms of the Credit Agreement, the Unsecured Notes Trustee is deemed to have consented to such release and must execute any documents necessary to effectuate a corresponding release of any claim or lien (if any exists) held by the Unsecured Notes Trustee against such Collateral or Guarantor.
Because the Unsecured Notes do not benefit from any lien on the Collateral, the automatic release provision is primarily relevant to guarantee releases. The subsidiary guarantors under the Credit Agreement also guarantee the Unsecured Notes pursuant to the Indenture. There are currently eleven Subsidiary Guarantors (Nexford Precision Components, Inc. ("NPC"), Nexford Engineered Solutions LLC ("NES"), Nexford Coated Steel Technologies, Inc. ("NCST"), Nexford Material Sciences Corp. ("NMS"), Nexford Packaging LLC ("NP LLC"), NIH International Holdings, Inc. ("NIH Intl"), Clearfield Manufacturing, Inc. ("Clearfield"), Summit Process Technologies LLC ("Summit"), Ridgepoint Industrial Services, Inc. ("Ridgepoint"), and Lakeshore Advanced Coatings Corp. ("Lakeshore")), as well as the Holdings Guarantor (Granite Peak NIH Holdings, LLC). All of these entities guarantee both the First Lien Obligations and the Unsecured Notes Obligations.
Critical Issue: The automatic guarantee release provision is one of the most significant provisions in the Intercreditor Agreement from the Borrower's perspective. If a Subsidiary Guarantor is released from its guarantee under the Credit Agreement — for example, because the Borrower sells all of the equity interests in that Subsidiary Guarantor in a transaction permitted under the Credit Agreement's asset sale covenant — the corresponding guarantee under the Indenture should also be released without the need for a separate noteholder consent process. This is essential for the Borrower's ability to execute transactions in a timely manner.
However, this provision must be consistent with the terms of the Indenture. The Indenture contains its own guarantee release provisions (Section 11.04), which generally provide that a Subsidiary Guarantor's guarantee is released upon (i) a sale or disposition of the equity interests of such Subsidiary Guarantor that constitutes a permitted asset sale under the Indenture, (ii) designation of such Subsidiary Guarantor as an unrestricted subsidiary in accordance with the Indenture, or (iii) defeasance or satisfaction and discharge of the Indenture. If the automatic release provisions of the Intercreditor Agreement are broader than the Indenture's own release provisions — for example, if the Intercreditor Agreement permits release in circumstances that would not constitute a permitted release under the Indenture — there is a risk that the Unsecured Noteholders could challenge the release as unauthorized.
Proposed Revision: The Borrower should support the automatic guarantee release provision in principle but should ensure that the Intercreditor Agreement includes conformity language clarifying that any guarantee release effected under the Intercreditor Agreement shall be deemed to constitute a permitted release under the Indenture, and that the Unsecured Notes Trustee's execution of the Intercreditor Agreement constitutes the requisite consent for such releases. We must cross-check the specific language of Indenture Section 11.04 and confirm that there is no conflict. If a conflict exists, we may need to obtain a supplemental indenture or noteholder consent, which would add complexity and timeline risk.
2. Asset Sale Releases
The W&G draft provides that Collateral is automatically released from the security interests created by the First Lien Documents upon a permitted asset sale under the Credit Agreement. The draft further provides that the Unsecured Notes Trustee is bound by such release and may not assert any claim against the released Collateral.
This provision is standard and generally unobjectionable. We note that the Credit Agreement permits asset sales subject to reinvestment rights over 365 days (with a 180-day extension to 545 days if the Borrower has entered into a binding commitment to reinvest within the initial 365-day period) and includes a $25,000,000 annual de minimis basket for asset sales that do not require compliance with the reinvestment and prepayment provisions. We must confirm that the Intercreditor Agreement's asset sale release provisions are consistent with the Indenture's own asset sale covenant (Section 4.10), which contains its own reinvestment mechanics and "offer to purchase" provisions.
F. Article 6 — Insolvency and Bankruptcy Proceedings
This article addresses the parties' respective rights and obligations in the event of an insolvency or bankruptcy proceeding involving the Borrower or any of its subsidiaries. This is one of the most heavily negotiated sections of any intercreditor agreement, and the W&G draft presents several issues that require significant revision.
1. DIP Financing
The W&G draft provides that the Unsecured Notes Trustee will not object to any debtor-in-possession financing obtained by the Borrower or its subsidiaries pursuant to Section 364 of the Bankruptcy Code, provided that such DIP financing is consented to by the Required Lenders under the Credit Agreement.
Issue: This non-objection covenant is overly broad. The formulation gives the First Lien Lenders (through the Required Lenders direction) unchecked power to approve DIP financing on terms that could be materially adverse to the Unsecured Noteholders, with no recourse for the Unsecured Notes Trustee. While the Borrower generally benefits from the ability to obtain DIP financing without obstruction from junior creditors, the Borrower also has an interest in maintaining the Unsecured Noteholders' ability to object to DIP financing terms that are not commercially reasonable or that could undermine the reorganization process. An overly restrictive non-objection covenant may also be challenged by the Unsecured Noteholders as an impermissible limitation on their rights under the Bankruptcy Code.
Specifically, the W&G draft does not carve out the Unsecured Notes Trustee's right to object to DIP financing that:
(a) provides liens on assets that were not previously part of the Collateral (i.e., priming liens on previously unencumbered assets);
(b) includes a "roll-up" of pre-petition First Lien claims into the DIP facility without adequate protection for the Unsecured Noteholders' pre-petition claims;
(c) contains milestones or other provisions that would effectively dictate the terms of a plan of reorganization in a manner adverse to the Unsecured Noteholders; or
(d) is not on commercially reasonable terms in light of the circumstances of the proceeding.
Proposed Revision: We recommend adding qualifiers to the non-objection covenant that preserve the Unsecured Notes Trustee's right to object in the limited circumstances described above. The revised provision should provide that the Unsecured Notes Trustee will not object to DIP financing that (i) is secured by liens on the Collateral that are senior to or pari passu with the First Lien security interests (but not by liens on assets that were not previously Collateral), (ii) does not include a roll-up of pre-petition First Lien claims except to the extent that the Unsecured Noteholders receive adequate protection of their unsecured claims, and (iii) is on commercially reasonable terms and conditions. The Unsecured Notes Trustee should retain the right to object to DIP financing that does not satisfy these conditions.
2. Adequate Protection
The W&G draft provides that the First Lien Collateral Agent is entitled to seek and receive adequate protection payments on account of any diminution in value of the Collateral during a bankruptcy proceeding. The draft further provides — and this is the problematic provision — that the Unsecured Notes Trustee "shall not seek or accept any adequate protection with respect to its claims."
Issue: This blanket prohibition is overbroad and potentially unenforceable. While the Unsecured Noteholders do not have lien-based adequate protection rights under Section 361 of the Bankruptcy Code (because they hold no liens), they may have other claims in a bankruptcy proceeding that give rise to protections or rights under Sections 503(b) and 507 of the Bankruptcy Code (e.g., administrative expense claims, priority claims). A blanket prohibition on seeking "any adequate protection" goes beyond the scope of the intercreditor bargain, which is limited to the relative priority of claims against the Collateral. The Unsecured Noteholders should not be prohibited from asserting rights that are independent of the Collateral priority framework.
Furthermore, the enforceability of pre-petition waivers of bankruptcy rights is subject to judicial scrutiny. While courts have generally upheld intercreditor provisions that restrict a junior creditor's ability to seek adequate protection in the form of liens on collateral, blanket waivers of all adequate protection rights have been subject to challenge.
Proposed Revision: Delete the blanket prohibition and replace it with a limited restriction providing that the Unsecured Notes Trustee will not seek adequate protection in the form of a lien on the Collateral that would prime or rank pari passu with the First Lien security interests, or in the form of cash payments from Collateral proceeds that would reduce the First Lien Collateral Agent's adequate protection. The Unsecured Notes Trustee should retain the right to seek adequate protection of its unsecured claims in forms that do not interfere with the First Lien Secured Parties' priority position with respect to the Collateral.
3. Voting on Plan of Reorganization
The W&G draft includes a provision restricting the Unsecured Notes Trustee's ability to vote on a plan of reorganization "to the extent the plan involves the Collateral." This restriction purports to limit the Unsecured Noteholders' participation in the plan confirmation process.
Issue: This restriction is unusual and, in our view, likely unenforceable. The right to vote on a plan of reorganization is a fundamental creditor right under Section 1126 of the Bankruptcy Code. Each holder of a claim that is "impaired" under a proposed plan is entitled to vote to accept or reject the plan, and this right is not a contractual right that can be freely waived in an intercreditor agreement. Courts have scrutinized and, in some cases, declined to enforce intercreditor provisions that purport to restrict plan-voting rights, particularly where the restriction is broad or ambiguous.
The phrase "to the extent the plan involves the Collateral" is vague and would be extremely difficult to apply in practice. Virtually every plan of reorganization in a case involving a debtor with significant secured and unsecured debt will "involve" the collateral in some respect — the plan may provide for the sale of collateral, the transfer of collateral to a reorganized debtor, or the treatment of secured claims that are secured by the collateral. Under the W&G formulation, it is unclear what vote restriction, if any, would be enforceable.
Moreover, the Borrower has no interest in including a provision that is likely to be challenged and overturned in bankruptcy. The First Lien Collateral Agent's protection in a reorganization is adequately addressed through the priority waterfall, the lien priority provisions, and the turnover obligations — the First Lien Secured Parties will receive the benefit of their first-priority lien position regardless of how the Unsecured Noteholders vote on a plan.
Proposed Revision: Delete the restriction on voting on plans of reorganization in its entirety.
4. Section 1111(b) Election
The W&G draft addresses the application of Section 1111(b) of the Bankruptcy Code, which permits an undersecured creditor to elect to have its entire claim treated as a secured claim in a bankruptcy proceeding. The draft provides that the First Lien Collateral Agent retains the exclusive right to make or not make the Section 1111(b) election on behalf of the First Lien Secured Parties.
This provision is standard and appropriate. The Section 1111(b) election is a right that belongs to the First Lien Secured Parties (as the holders of the secured claims), and the Unsecured Noteholders have no standing to make such an election. No revision is needed from the Borrower's perspective.
5. Relief from Automatic Stay
The W&G draft provides that the Unsecured Notes Trustee will not seek relief from the automatic stay imposed by Section 362 of the Bankruptcy Code for the purpose of enforcing rights against the Collateral. This restriction is appropriate given the Unsecured Notes' lack of lien rights — the Unsecured Notes Trustee has no basis for seeking stay relief to foreclose on or seize Collateral in which it holds no security interest.
Issue: We must confirm that the restriction is limited to stay relief sought for the purpose of enforcing rights against the Collateral. The Unsecured Notes Trustee should retain the right to seek stay relief for other purposes, such as (i) pursuing claims against non-debtor guarantors (to the extent the co-debtor stay of Section 1301 does not apply in a Chapter 11 case), (ii) commencing or continuing litigation against third parties, or (iii) exercising other rights that do not involve the Collateral. The W&G draft's current formulation appears to be limited to Collateral-related stay relief, but we will confirm this during the mark-up.
G. Article 7 — Purchase Option
The W&G draft includes a purchase option that allows the Unsecured Notes Trustee (or holders of a specified percentage of the outstanding Unsecured Notes) to purchase the First Lien Obligations at par value plus accrued and unpaid interest upon the occurrence of an event of default under the First Lien Documents and the commencement (or threatened commencement) of enforcement actions against the Collateral. This type of "buy-out" provision is standard in intercreditor agreements and serves as a safety valve — it allows the junior creditors to avert a potentially value-destructive foreclosure by purchasing the senior obligations and stepping into the shoes of the First Lien Secured Parties.
Issue 1 — Purchase Price. The purchase price must be clearly and precisely defined to avoid disputes. The W&G draft specifies that the purchase price equals the outstanding principal amount of the First Lien Obligations plus accrued and unpaid interest, but the draft is ambiguous regarding the treatment of (i) any applicable prepayment premium or "make-whole" amount under the Credit Agreement, (ii) breakage costs and termination payments under hedging obligations, (iii) breakage costs under cash management obligations, (iv) indemnification obligations that are contingent or unliquidated, and (v) costs and expenses of the First Lien Collateral Agent. We recommend clarifying the purchase price to include all of the foregoing, with a mechanism for handling contingent or unliquidated obligations (e.g., a reserve or escrow).
Issue 2 — Exercise Mechanics. The W&G draft provides that the purchase option may be exercised by the Unsecured Notes Trustee or by holders of Unsecured Notes representing a majority in aggregate principal amount, but does not specify a time period within which the option must be exercised following notice of the triggering event. We recommend specifying a 30-day exercise period from the date of receipt of written notice from the First Lien Collateral Agent of its intent to commence enforcement actions against the Collateral.
Issue 3 — Borrower/Sponsor Co-Purchase Right. The W&G draft does not grant the Borrower or its equity sponsor (Granite Peak) a corresponding right to purchase the First Lien Obligations at par. The Borrower should consider whether to request such a right, which could provide an additional avenue for avoiding a foreclosure. We note, however, that such a right must be analyzed against the Credit Agreement's change of control and assignment provisions, as well as the Indenture's change of control put provision, to ensure that a purchase by the Borrower or the Sponsor does not trigger unintended consequences.
Proposed Revision: (a) Clarify the purchase price to encompass all First Lien Obligations (including hedging/cash management breakage, expenses, and a mechanism for contingent claims); (b) specify a 30-day exercise period; and (c) add a parallel right for the Borrower and/or the Sponsor to purchase the First Lien Obligations at par on the same terms (subject to review of the Credit Agreement and Indenture implications).
H. Article 8 — Amendments to Underlying Documents
1. Amendments to First Lien Documents
The W&G draft permits amendments, modifications, supplements, and waivers to the Credit Agreement and the related First Lien Documents without the consent of the Unsecured Notes Trustee, subject to the condition that such amendments do not increase the aggregate principal amount of the First Lien Obligations beyond the amount permitted under the Indenture's incurrence covenant. This is a reasonable framework — the First Lien Lenders should have the ability to modify their own credit arrangements without obtaining consent from the Unsecured Noteholders, subject to the important limitation that such modifications not breach the Indenture's covenants and thereby prejudice the Unsecured Noteholders' position.
Issue: We must confirm that the cap cross-references the correct provisions. The Indenture's limitation on first lien indebtedness is contained in Section 4.09 (Limitation on Liens) and Section 4.03 (Limitation on Indebtedness), which together limit the incurrence of first lien debt to specified baskets. The Credit Agreement's incremental facility provisions (Section 2.14) permit the incurrence of additional first lien debt in a

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