1005-00001 · Nexford Industrial Holdings · Transaction Documents/Intercreditor

internal-memo-intercreditor-framework.docx DOCUMENT Finance & Banking

124 / 157 ← → ✕

Contract analysis Extract to table

CALDERWOOD & HARKNESS LLP

MEMORANDUM

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

TO: Claudia Merritt, Partner, Calderwood & Harkness LLP

FROM: Marcus Leung, Calderwood & Harkness LLP

CC: Sophie Tremblay, Calderwood & Harkness LLP

DATE: March 12, 2025

RE: Intercreditor Framework Analysis — First Lien / Unsecured Intercreditor Agreement — Nexford Industrial Holdings Inc. $1,400,000,000 Senior Secured Term Loan B

MATTER NO.: 1005-00001

CLIENT/MATTER CODE: IBL-NIH-2025-031

I. Executive Summary

The purpose of this memorandum is to set out our preliminary framework analysis of the intercreditor arrangements to be established, in connection with the closing of the above-referenced financing, between (a) the first lien secured parties under the new $1,400,000,000 senior secured Term Loan B facility, with Crescent Harbor Bank, N.A. acting as Administrative Agent and First Lien Collateral Agent, and (b) the holders of the existing $250,000,000 aggregate principal amount of 7.250% Senior Unsecured Notes due 2028 (the "Senior Unsecured Notes"), for whom Pinnacle Trust Company acts as Trustee under the Indenture dated as of November 8, 2021 (as amended, supplemented or otherwise modified from time to time, the "Indenture").

The intercreditor agreement contemplated (the "First Lien/Unsecured Intercreditor Agreement") is required under the Credit Agreement as a condition precedent to closing. Whitfield & Gage LLP, counsel to Crescent Harbor Bank, N.A. — with Margaret Ashby as responsible partner and Jonathan Ferris as working associate — is expected to circulate the initial draft on or about today's date. This memorandum is intended to prepare the C&H team for the substantive mark-up we will need to deliver on an accelerated timetable, and to identify the borrower-side issues that we should be prepared to press when the draft arrives.

For clarity, the Senior Unsecured Notes are not being refinanced in this transaction. They will remain outstanding in their full $250,000,000 principal amount following closing. The intercreditor agreement will therefore not be a "takeout" instrument; instead, it will govern the ongoing relationship between the first lien secured creditors (whose primary interest is in the collateral securing the new Term Loan B) and the unsecured noteholders (who continue to rely on the general credit of Nexford and its guarantors), with respect to shared collateral proceeds in enforcement or insolvency scenarios, coordination of remedies, and the scope of unsecured creditor interference with collateral enforcement.

Preliminary recommendation. Our overarching negotiating objective should be to ensure that the intercreditor agreement (i) preserves clear first lien priority in a manner consistent with the Credit Agreement waterfall, (ii) does not inadvertently confer on the unsecured noteholders blocking rights, consent rights, or other rights that they do not currently enjoy under the Indenture, and (iii) does not unduly constrain the Borrower's operational flexibility, its capacity to incur permitted incremental debt, or its ability to complete permitted asset dispositions and future refinancings. As a general drafting principle, the intercreditor agreement should reflect the fact that this is a first lien / unsecured relationship, not a first lien / second lien relationship, and should not import concepts from the more restrictive second lien intercreditor market.

Existing Indenture reference. All references herein to the "Indenture" are to the Indenture dated as of November 8, 2021, among Nexford Industrial Holdings Inc., as Issuer, the Guarantors party thereto, and Pinnacle Trust Company, as Trustee, relating to $250,000,000 aggregate principal amount of 7.250% Senior Unsecured Notes due 2028. Our detailed provisions-level analysis of the Indenture is set out in the separate memorandum from Sophie Tremblay dated February 14, 2025 (the "Indenture Memo"), which should be consulted alongside this memorandum.

II. Transaction Background and Capital Structure Context

A. The Transaction

Nexford Industrial Holdings Inc. ("Nexford" or the "Borrower") is a Delaware corporation, with its headquarters at 1400 Industrial Parkway, Schaumburg, IL 60173. Nexford is entering into a $1,400,000,000 senior secured Term Loan B facility on the following principal terms:

• Borrower: Nexford Industrial Holdings Inc.

• Administrative Agent / Collateral Agent: Crescent Harbor Bank, N.A. (320 Federal Street, Boston, MA 02110).

• Joint Lead Arrangers: Crescent Harbor Bank, N.A. (sole lead left), Ironwood Capital Markets, LLC, and Northvane Securities, Inc.

• Governing law: New York (both the Credit Agreement and the intercreditor agreement will be governed by New York law).

• Target closing date: March 28, 2025.

Use of proceeds is as follows: (i) refinance the existing $879,375,000 first lien term loan and the $0-drawn revolving credit facility (in each case with Atlas Meridian Bank, N.A. as existing agent); (ii) fund an approximately $335,000,000 dividend distribution to Granite Peak NIH Holdings, LLC (the "Holdings Guarantor"), through which Granite Peak Capital Partners, LP holds 100% of Nexford's equity; (iii) pay approximately $38,625,000 in transaction fees and expenses; and (iv) provide approximately $147,000,000 of cash to the balance sheet.

B. Pro Forma Capital Structure

The pro forma capital structure at closing is expected to be as follows:

Based on LTM Adjusted EBITDA of $385,000,000 and pro forma cash of approximately $100,000,000:

• Pro forma first lien net leverage: approximately 3.38x (($1,400,000,000 − $100,000,000) ÷ $385,000,000).

• Pro forma total net leverage: approximately 4.03x (($1,400,000,000 + $250,000,000 − $100,000,000) ÷ $385,000,000).

No second lien indebtedness currently exists, and none is contemplated to be incurred at closing. The Credit Agreement, however, includes customary enabling provisions permitting the incurrence of future second lien indebtedness and the entry into a separate first lien / second lien intercreditor agreement in connection therewith, as discussed further in Section VIII below.

C. Sponsor Context

Granite Peak Capital Partners, LP ("Granite Peak"), whose principal office is at 600 Steamboat Road, Suite 300, Greenwich, CT 06830, acquired Nexford in January 2019 for an enterprise value of approximately $1,650,000,000, funded with an equity investment of approximately $725,000,000. Granite Peak and its co-investors hold Nexford through Granite Peak NIH Holdings, LLC, a Delaware limited liability company, with registered office c/o Penmark Industries, 1209 Orange Street, Wilmington, DE 19801.

The current transaction is Nexford's second dividend recapitalization since the 2019 buyout. A prior recapitalization in 2021 distributed $275,000,000; the current transaction contemplates a further distribution of approximately $335,000,000. Cumulative distributions to Granite Peak from Nexford since acquisition, inclusive of the current distribution, will accordingly total approximately $610,000,000, or roughly 84% of the original sponsor equity investment.

III. Parties to the Intercreditor Agreement

A. First Lien Collateral Agent

Crescent Harbor Bank, N.A., in its capacity as Collateral Agent under the Credit Agreement for the benefit of the First Lien Secured Parties. The "First Lien Secured Parties" will include the Administrative Agent, the Lenders, and any hedging counterparties or cash management providers entitled to share in the collateral pursuant to the terms of the Credit Agreement and the Security Documents.

For syndication planning purposes only (this is not relevant to the intercreditor structure but is relevant to understanding the constituencies represented by Crescent Harbor), Crescent Harbor's target final hold is $175,000,000. The balance is expected to be allocated approximately as follows: Ironwood Capital Markets, LLC ($200,000,000); Northvane Securities, Inc. ($150,000,000); Ridgeline Asset Management, LP ($125,000,000); Halcyon Credit Partners, LLC ($100,000,000); Verdant Institutional Investors, LP ($100,000,000); Cascadia Loan Fund III, LP ($75,000,000); Bluewater Fixed Income Fund, LP ($75,000,000); and approximately $400,000,000 in general syndication. Because the Administrative Agent acts on behalf of the Lenders under the intercreditor agreement, syndicate composition does not affect the drafting of the intercreditor mechanics.

B. Unsecured Notes Trustee / Representative

Pinnacle Trust Company, in its capacity as Trustee under the Indenture and as representative of the holders of the Senior Unsecured Notes. Pinnacle Trust's registered office is 101 Park Avenue, New York, NY 10178. We should confirm that Pinnacle Trust's authority under Article [•] of the Indenture is sufficient for it to execute the intercreditor agreement without seeking noteholder direction; see Section X below.

C. Borrower / Loan Parties

The Loan Parties will be:

1. Borrower: Nexford Industrial Holdings Inc.

2. Holdings Guarantor: Granite Peak NIH Holdings, LLC.

3. Subsidiary Guarantors (11 in total):

• Nexford Precision Components, Inc.

• Nexford Engineered Systems, LLC

• Nexford Coatings & Surface Technologies, Inc.

• Nexford Manufacturing Services, LLC

• Nexford Properties, LLC

• Nexford International Holdings, Inc.

• Clearfield Tool & Die, Inc.

• Summit Industrial Fabrication Co.

• Ridgepoint Specialty Coatings, LLC

• Lakeshore Precision Engineering, Inc.

(One additional subsidiary guarantor will be listed in the finalized guarantor schedule; the group above accounts for the operational U.S. entities.)

Note regarding Nexford International Holdings, Inc. Nexford International Holdings, Inc. is a domestic CFC holdco. The pledge of its equity is limited to 65% of the voting equity and 100% of the non-voting equity of its principal foreign subsidiary, Nexford Canada Holdings ULC (a British Columbia unlimited liability corporation, "NCH ULC"), consistent with customary tax-driven pledge limitations. Neither NCH ULC nor its subsidiary Nexford Canada Manufacturing, Inc. will be guarantors under the Credit Agreement, and no assets of the foreign subsidiaries will be pledged. The intercreditor agreement should not purport to reach any assets or equity of the foreign subsidiaries beyond the extent of the pledged equity in NCH ULC.

IV. Nature of the Intercreditor Relationship: First Lien vs. Unsecured

A. Structural Priority

The starting point for the analysis is that the Term Loan B is a secured obligation, benefiting from a first-priority security interest granted by the Borrower and the Guarantors in substantially all of their assets (subject to customary excluded asset carve-outs). The Senior Unsecured Notes, by contrast, are both structurally and contractually unsecured: no liens secure the notes, and the noteholders' recovery in an enforcement or insolvency scenario depends entirely on the unsecured general credit of Nexford and its guarantors.

Because there is no shared collateral pool — as there would be in a first lien / second lien structure — the intercreditor agreement does not need to allocate priority among competing liens. What it must instead do is (i) confirm the absence of any lien-based recourse for the unsecured noteholders, (ii) prevent the noteholders from taking actions that would interfere with the collateral enforcement rights of the First Lien Collateral Agent, and (iii) establish the order of application of collateral proceeds where such proceeds are received in circumstances (particularly bankruptcy) in which unsecured claims may otherwise assert a competing distributional interest.

B. Purpose and Necessity of the Intercreditor Agreement

The intercreditor agreement is required under the Credit Agreement as a condition precedent to closing. Substantively, its purposes are:

1. To fix priority as between first lien collateral proceeds and unsecured note claims;

2. To limit unsecured creditor actions that could impair the first lien security interest (through attachment, judicial lien, involuntary petition, or otherwise);

3. To address the rights and obligations of the unsecured noteholders in a bankruptcy or insolvency proceeding, including with respect to DIP financing, cash collateral, adequate protection, and plan confirmation;

4. To coordinate remedies and enforcement as between the two creditor classes; and

5. To provide borrower-side protections — in particular, to ensure that the agreement does not confer on the unsecured noteholders any rights beyond those they already enjoy under the Indenture.

The Credit Agreement itself contains customary provisions authorizing the Administrative Agent to enter into intercreditor arrangements — both the current First Lien/Unsecured Intercreditor Agreement and any future first lien / second lien intercreditor agreement in the event Nexford incurs second lien indebtedness. Those enabling provisions should be reviewed to confirm they are broad enough to support the release, joinder, and amendment mechanics contemplated below.

V. Key Substantive Provisions — Analysis and Borrower Positions

A. Lien Priority and Collateral Access

1. First Lien Priority. The intercreditor agreement must state unambiguously that the First Lien Secured Parties have first-priority access to all collateral securing the Term Loan B. This includes all personal property collateral — accounts receivable, inventory, equipment, intellectual property, deposit accounts, securities accounts, and general intangibles — and all real property mortgages. Nexford has agreed to grant mortgages over four properties (the "Mortgaged Properties"), with aggregate appraised value of $193,000,000, as follows:

The unsecured noteholders have no lien on any of the foregoing collateral, and the intercreditor agreement should include an express acknowledgement of this structural subordination — both to reinforce the waterfall (Section V.B below) and to preclude any argument in a subsequent proceeding that the unsecured noteholders have or should be deemed to have some form of equitable or beneficial interest in the collateral.

2. No-Action / Enforcement Limitation on Unsecured Noteholders. A meaningful drafting question is whether the intercreditor agreement should include a "standstill" or "no-action" covenant preventing the Trustee (or the noteholders individually) from taking enforcement actions against collateral.

Borrower position. Because the notes are unsecured, the noteholders have no lien-based collateral enforcement rights to begin with, and any prohibition on lien-based enforcement is largely confirmatory. Nevertheless, the intercreditor agreement should provide that, until the first lien obligations have been paid in full, the Trustee and the noteholders will not (i) attach, levy upon, or otherwise seek to reach assets subject to the first lien security interest, (ii) obtain any judgment lien on such assets, or (iii) seek to compel the disposition of any collateral, in each case other than through recoveries channeled through the proceeds waterfall.

Market consideration. This is customary in the first lien / unsecured context. The Trustee should acknowledge that it has no independent right to direct the disposition of collateral, that all such rights are vested exclusively in the First Lien Collateral Agent, and that the Trustee will not seek — judicially or otherwise — to impose any lien on the collateral in favor of itself or the noteholders. The formulation should stop short of the broader "silent second" language used in first lien / second lien agreements, which is inappropriate here for the reasons discussed in Section VI below.

B. Proceeds Waterfall

1. Proceeds of Collateral. The intercreditor agreement should establish that, upon (i) any enforcement action or foreclosure with respect to the collateral, (ii) any asset disposition triggering mandatory prepayment under the Credit Agreement, (iii) any insurance or condemnation event resulting in receipt of net cash proceeds, or (iv) any distribution in respect of collateral in an insolvency proceeding, the resulting proceeds will be applied in the following order:

First: to payment of the costs and expenses of the First Lien Collateral Agent (Crescent Harbor Bank, N.A.), including reasonable fees and expenses of counsel and any other professional advisors incurred in connection with enforcement, custody or disposition of the collateral;

Second: to payment in full of all first lien obligations, including principal, interest (including default interest and post-petition interest, whether or not allowed as a claim in an insolvency proceeding), fees, indemnities, hedging obligations, cash management obligations, and all other amounts owing under the Credit Agreement, any incremental facility, the Security Documents, and any related first lien loan documents, in each case in accordance with the payment priorities set out in the Credit Agreement;

Third: to payment of the unsecured note obligations, including principal, accrued and unpaid interest, and any applicable premium, under the Indenture; and

Fourth: any surplus to the Borrower, its successors or assigns, or as otherwise required by applicable law or court order.

The waterfall must apply notwithstanding the order in which claims are asserted, the timing of any acceleration under either the Credit Agreement or the Indenture, and — critically — any intervening bankruptcy filing.

2. Insurance and Condemnation Proceeds. The Credit Agreement contains a mandatory prepayment provision requiring 100% of the net cash proceeds from insurance or condemnation events (subject to customary reinvestment rights and a $10,000,000 de minimis threshold) to be applied to the Term Loan B. The intercreditor agreement should confirm that any such proceeds constitute first lien collateral proceeds for waterfall purposes, and are not shared with the unsecured noteholders until the first lien obligations have been satisfied in full.

3. Asset Sale Proceeds. Similarly, the Credit Agreement requires 100% of the net cash proceeds of asset sales (subject to reinvestment periods of 365 days or, if committed to be reinvested, up to 545 days, and a $25,000,000 annual de minimis basket) to be applied as mandatory prepayment. The intercreditor agreement should treat such proceeds as first lien collateral proceeds. We should watch for any drafting from Whitfield & Gage that could be read to require sharing of pre-mandatory-prepayment asset sale proceeds with the noteholders, which would be inconsistent with the Credit Agreement's mandatory prepayment mechanics and unacceptable to the Borrower.

C. Enforcement Standstill

1. Duration and Scope. We should expect Whitfield & Gage to include an enforcement standstill precluding the unsecured noteholders from taking certain legal actions — including filing involuntary bankruptcy petitions, seeking pre-judgment attachments, or obtaining judgment liens against the Loan Parties — during a specified period (customarily 90 to 180 days) following an event of default under the Indenture, during which period the First Lien Collateral Agent may pursue its remedies without interference.

Borrower position. A limited standstill is acceptable, but standstills in the first lien / unsecured context are typically shorter and narrower than those in first lien / second lien agreements, precisely because unsecured creditors already lack collateral enforcement rights. We should target a standstill period of 90 days, and we should resist any construction that permits the First Lien Collateral Agent to extend or "reset" the standstill through successive rescissions and re-declarations of default.

Mutuality. The standstill should be mutual in a limited sense: during the standstill period, the unsecured noteholders should be precluded from accelerating the notes solely as a result of the First Lien Collateral Agent's exercise of remedies against collateral or the declaration of default under the Credit Agreement. Independent defaults under the Indenture (payment defaults on the notes, breaches of Indenture covenants) should of course continue to permit acceleration on their own terms.

2. Carve-Outs from Standstill. Notwithstanding any standstill, the unsecured noteholders (through the Trustee) must retain the right to:

(a) file proofs of claim in any bankruptcy or insolvency proceeding;

(b) vote on any plan of reorganization or arrangement;

(c) exercise contractual rights under the Indenture that do not involve collateral enforcement — in particular, acceleration of the notes upon an Indenture default; and

(d) receive payments not derived from collateral proceeds, including scheduled interest payments permitted under the Credit Agreement.

The purpose of these carve-outs is twofold: first, to preserve fundamental creditor rights (which strengthens enforceability under section 510(a) of the Bankruptcy Code and analogous common law doctrines); and second, to ensure that the standstill does not have the practical effect of amending the Indenture, which would raise separate consent and enforceability issues under the Indenture's amendment provisions.

D. Bankruptcy / Insolvency Provisions

1. DIP Financing Consent. We should expect a provision requiring the Trustee (on behalf of the unsecured noteholders) to consent, or at a minimum not to object, to debtor-in-possession financing arranged by or with the support of the First Lien Secured Parties in any chapter 11 case, including priming liens and use of cash collateral, provided that the DIP financing satisfies specified parameters.

Borrower position. We support the inclusion of DIP consent provisions as a matter of principle, since noteholder opposition to a first-lien-supported DIP could obstruct access to critical liquidity in a reorganization. However, the consent should be conditioned on the DIP financing preserving adequate protection safeguards (limited priming, reasonable superpriority claim structure) and, importantly for the Borrower, should not be so tightly drafted as to preclude the Borrower from itself arranging alternative DIP financing that is superior for the estate.

2. Plan of Reorganization. Related "no-contest" or "no-object" provisions may be proposed, preventing the unsecured noteholders from opposing any chapter 11 plan supported by the requisite first lien lenders, to the extent that the plan provides the unsecured noteholders with the treatment to which they are entitled under the absolute priority rule.

Borrower position. A carefully limited version of this provision is acceptable, but we must avoid drafting that could be argued to strip the noteholders of core bankruptcy rights (voting, best-interests-test challenges, absolute priority arguments). Overly broad waivers of such rights raise real enforceability concerns under section 510(a) of the Bankruptcy Code, and courts (in Ion Media, Momentive, and subsequent decisions) have distinguished between subordination of payment priority (generally enforceable) and waivers of procedural bankruptcy rights (frequently not). Any such waiver should be limited to opposition to first lien priority as such, not to opposition to particular plan features.

3. Adequate Protection. The intercreditor agreement should confirm that only the First Lien Collateral Agent, on behalf of the First Lien Secured Parties, is entitled to adequate protection with respect to the collateral. The unsecured noteholders may seek adequate protection only to the extent (if any) they have a cognizable interest in unencumbered assets. Given the comprehensive first lien collateral package, the practical scope for such claims should be minimal.

4. Avoidance Actions / Subordination. Treatment of avoidance action proceeds — recoveries under sections 544, 547, 548 and 550 of the Bankruptcy Code — should be expressly addressed. The standard formulation is that avoidance action proceeds relating to collateral (for example, recoveries of preferential transfers of collateral, or fraudulent transfers of assets that would have been collateral but for the transfer) are treated as collateral proceeds subject to the waterfall. Recoveries relating to unencumbered assets are not subject to the waterfall. We should confirm that the draft does not attempt to sweep all avoidance action proceeds — including those on unencumbered assets — into first lien collateral, which is aggressive and would be resisted.

E. Release of Liens and Guarantees

1. Automatic Release Provisions. If the First Lien Collateral Agent releases a lien on collateral or releases a Guarantor — for example, in connection with a permitted asset sale, a designation of an Unrestricted Subsidiary, or a disposition under the $25,000,000 annual de minimis basket — the corresponding rights (if any) of the unsecured noteholders with respect to such asset or Guarantor should be automatically released without further action by the Trustee.

Borrower position. This is a critical provision for the Borrower's operational flexibility. We must ensure the automatic release is expressly tied to actions taken in accordance with the Credit Agreement (thereby preventing arguments that the release requires separate noteholder consent or that Indenture-level release conditions must be independently satisfied). Note that this provision interacts with the guarantee release provisions of the Indenture, which we should cross-check against the Indenture Memo.

2. Release in Connection with Refinancing. The intercreditor agreement should expressly contemplate that the Term Loan B may be refinanced with replacement first lien indebtedness. In such event, the successor first lien administrative agent and collateral agent should be permitted to accede to the intercreditor agreement, and to step into the shoes of Crescent Harbor Bank, without requiring unsecured noteholder consent. The mechanics should mirror those used in customary "Refinancing Amendment" concepts in the Credit Agreement.

F. Amendments to First Lien and Unsecured Documents

1. First Lien Document Amendments. The First Lien Secured Parties should be free to amend, extend, modify, refinance, replace, or supplement the Credit Agreement and the other first lien loan documents — including, without limitation, incurring incremental facilities under the free-and-clear basket (the greater of $280,000,000 and 100% LTM Adjusted EBITDA) and the ratio-based incremental capacity (available so long as first lien net leverage does not exceed 4.50x on a pro forma basis) — without the consent of the unsecured noteholders.

Limitation. The only substantive constraint on this freedom should be that no amendment may materially and adversely affect the unsecured noteholders' rights under the intercreditor agreement itself. Watch for aggressive drafting that would purport to permit any future first lien indebtedness (including new classes with distinct waterfall treatment) to prime the unsecured note claims without notice — this is fine in principle for the Borrower but may draw resistance from the Trustee and should be calibrated.

2. Unsecured Document Amendments. The unsecured noteholders should remain free to amend the Indenture subject to its own terms, but the intercreditor agreement may (and should) restrict Indenture amendments that would:

(a) expand the noteholders' rights vis-à-vis collateral (for example, by adding covenants requiring the grant of a lien in favor of the noteholders);

(b) create liens in favor of the noteholders on any assets of the Loan Parties; or

(c) shorten the maturity of the notes in a manner intended to create a cross-default or cross-acceleration under the Credit Agreement.

G. Purchase Option

We should expect Whitfield & Gage to propose a purchase option permitting the first lien secured parties (or a group thereof meeting a specified threshold) to purchase the unsecured notes at par plus accrued interest following the occurrence of specified triggering events, typically an event of default under the Credit Agreement or the commencement of a bankruptcy proceeding.

Borrower position. This is primarily a lender-side protection and is neutral from the Borrower's perspective, provided that its operation does not create any obligation on the Borrower to fund, facilitate, or otherwise participate in the buy-out mechanic. We should confirm that the mechanic is between the first lien and unsecured creditor groups, with no borrower-side action required.

H. Permitted Payments on Unsecured Notes

The intercreditor agreement should not create additional payment blockage provisions restricting payments on the Senior Unsecured Notes beyond those already imposed by the Credit Agreement. Scheduled interest payments, principal at maturity, and any other payments permitted under the Credit Agreement should be expressly permitted.

Interaction with Restricted Payment covenant. Payments on the notes are governed by the Credit Agreement's restricted payment covenant. Key parameters:

• Unlimited restricted payments are permitted subject to pro forma compliance with 3.75x total net leverage;

• A $25,000,000 annual general basket is available;

• A builder basket is available, with a $50,000,000 starter amount and a 50%-of-Cumulative-Consolidated-Net-Income build from Q1 2025 forward.

Scheduled interest on the Senior Unsecured Notes — $250,000,000 × 7.250% = $18,125,000 per annum — is a carve-out from the restricted payment baskets and is a permitted payment under the Credit Agreement in all events (subject only to the customary payment blockage in the event of a payment default on senior debt, if any is contemplated). The intercreditor agreement must not impose additional or duplicative blockage.

I. Change of Control Interaction

The Credit Agreement contains a change of control provision triggered upon (i) the acquisition by any person or group (other than Granite Peak and its affiliates) of more than 35% of the voting equity of Holdings, (ii) Nexford ceasing to be a direct wholly-owned subsidiary of Holdings, or (iii) a "change of control" as defined under the Indenture. The Indenture, in turn, is expected to contain a customary change of control put provision, triggered by similar ownership thresholds and payable at 101% of principal plus accrued interest.

Intercreditor concern. If both the Credit Agreement and the Indenture change of control triggers fire concurrently, the intercreditor agreement should clarify that no payment may be made on the notes in respect of the change of control put until the first lien obligations have been paid in full (or, at a minimum, that any such payment is subject to the waterfall). At the same time, we must ensure the intercreditor agreement does not create a new or third change of control trigger — for example, by adopting a definitional cross-reference that differs from either the Credit Agreement or the Indenture definition — and thereby inadvertently making the aggregate change of control regime more restrictive than either document taken alone.

VI. Comparison to First Lien / Second Lien Intercreditor Framework

A first lien / second lien intercreditor agreement — not required in the current transaction, but enabled by the Credit Agreement — would typically include a materially more robust suite of protections in favor of the first lien creditors: longer enforcement standstills (commonly 180 days, sometimes with tolling provisions); explicit lien subordination; "X-clause" caps limiting the second lien secured amount for waterfall purposes; broad "no-action" covenants covering the full range of collateral remedies; and detailed cash collateral and DIP consent mechanics.

The First Lien/Unsecured Intercreditor Agreement, by contrast, should be significantly simpler. The unsecured noteholders have no liens, no collateral enforcement rights, and no independent secured interest to subordinate. The intercreditor agreement's function is (i) to establish the waterfall for collateral proceeds, (ii) to limit noteholder interference with collateral enforcement, and (iii) to address bankruptcy coordination.

Key drafting principle. We should be alert to attempts by Whitfield & Gage to import concepts from the second lien intercreditor market — extended standstills, broad silent-second waivers, X-clause caps on unsecured claims, aggressive bankruptcy waivers — into the unsecured context. Such concepts are not market for a first lien / unsecured intercreditor agreement and would, in this transaction, inappropriately constrain the Borrower. Our mark-up should systematically pare back any such overreach.

VII. Interaction with Existing Indenture Provisions

Our detailed analysis of the Indenture is set out in the Indenture Memo dated February 14, 2025. For present purposes, the following Indenture provisions are directly relevant to the intercreditor framework and should be cross-checked as we mark up the intercreditor draft:

• Debt incurrence covenants. The Indenture's debt incurrence covenant limits Nexford's ability to incur additional secured and unsecured debt. Confirm that the aggregate $1,400,000,000 Term Loan B (together with any incremental capacity) fits within the applicable permitted debt baskets. The permitted "Credit Facilities" basket and the ratio-based debt incurrence test should be examined.

• Restricted payment baskets. The Indenture's restricted payment covenant affects the Borrower's ability to make the contemplated $335,000,000 dividend distribution to Holdings. Sophie's Indenture Memo confirms availability, but we should re-verify the calculation as of a pre-closing date.

• Liens covenant. The Indenture's "Liens" covenant permits first lien secured debt up to a specified cap or, if not fixed, incorporates the permitted debt basket by reference. Confirm that $1,400,000,000 of first lien secured debt is permitted, including any incremental first lien capacity contemplated under the Credit Agreement.

• Change of control put. As discussed in Section V.I above, coordinate the trigger definitions and payment mechanics with the Credit Agreement.

• Asset disposition covenant. The Indenture's asset disposition covenant may require net proceeds to be applied in specified ways, including offers to repurchase notes. Confirm that these obligations are subordinate to the Credit Agreement's mandatory prepayment provisions and the intercreditor waterfall.

Any inconsistency between the intercreditor agreement and the Indenture should be resolved in favor of preserving the Borrower's contractual position under the Indenture, subject to the intercreditor agreement's overriding priority mechanics with respect to collateral proceeds.

VIII. Provisions Permitting Future Intercreditor Arrangements

The Credit Agreement contains enabling provisions permitting the Administrative Agent, Crescent Harbor Bank, N.A., to enter into a separate first lien / second lien intercreditor agreement if, and to the extent that, Nexford later incurs second lien indebtedness in reliance on the permitted debt provisions of the Credit Agreement (and, correspondingly, the Indenture).

The First Lien/Unsecured Intercreditor Agreement itself should include a "joinder" mechanism permitting additional unsecured or second lien representatives to accede to the intercreditor framework without requiring amendment of the Credit Agreement or consent of the existing unsecured noteholders (subject to conforming principles — for example, that a new junior lien class does not prime the first lien secured parties in the waterfall).

This is particularly relevant given the meaningful incremental capacity available to the Borrower under the Credit Agreement:

• Free-and-clear basket: greater of $280,000,000 and 100% LTM Adjusted EBITDA (i.e., currently $385,000,000);

• Ratio-based incremental capacity: available so long as pro forma first lien net leverage does not exceed 4.50x.

Combined, these baskets provide meaningful headroom for future first lien or second lien incurrence, and the joinder mechanic must accommodate such incurrence efficiently.

IX. Recommended Borrower Negotiation Positions

Consolidated for reference, our principal negotiating positions on receipt of the Whitfield & Gage draft will be as follows:

1. Priority waterfall. Insist on clear, unconditional first lien priority for all collateral proceeds. The four-tier waterfall set out in Section V.B should be preserved without modification.

2. Enforcement standstill. Accept a limited standstill (target: 90 days) precluding unsecured noteholder interference with collateral enforcement; resist any period longer than 120 days and resist reset/tolling mechanics.

3. Automatic release. Ensure automatic release of any residual noteholder claims on assets or guarantors upon any collateral or guarantor release effected under the Credit Agreement, without any independent noteholder consent, notice, or condition.

4. DIP financing. Support first lien-friendly DIP consent provisions, but ensure adequate protection carve-outs remain available to the unsecured noteholders in a manner sufficient to preserve reasonable reorganization flexibility for the Borrower.

5. Amendment freedom. First lien parties must be free to amend, refinance, extend, replace, or supplement the Credit Agreement — including through the incurrence of incremental facilities under both the free-and-clear and ratio baskets — without unsecured noteholder consent.

6. Permitted payments. The intercreditor agreement must not create additional payment blockage provisions beyond those in the Credit Agreement. Scheduled interest on the notes ($18,125,000 per annum) must remain a permitted payment in all events other than payment defaults on the Term Loan B.

7. Change of control coordination. Prevent the intercreditor agreement from creating an additional change of control trigger, and preserve the Borrower's ability to manage dual change of control puts in a coordinated fashion.

8. No additional rights for unsecured noteholders. As an overarching principle, the intercreditor agreement should confer on the unsecured noteholders no rights or remedies beyond those already existing under the Indenture. Watch for provisions — often buried in acknowledgement or notice mechanics — that could be read to expand noteholder rights.

X. Process and Next Steps

• Whitfield & Gage LLP (Jonathan Ferris, working associate, under direction of Margaret Ashby, responsible partner) is expected to circulate the first draft of the intercreditor agreement on or about March 12, 2025 (today).

• C&H to review and prepare a marked draft, targeting return of comments by March 19, 2025. Sophie Tremblay to take first-pass drafting responsibility; Marcus Leung to review; Claudia Merritt to sign off before circulation.

• Coordinate with Kellner Brandt & Associates LLP (Patricia Voss, sponsor's counsel) to align sponsor-side and borrower-side positions on borrower-friendly provisions, particularly (i) permitted payments, (ii) release mechanics, and (iii) amendment freedom.

• Trustee execution authority. Confirm with Pinnacle Trust Company (via its counsel; identity to be established) whether the Trustee requires direction from noteholders or an opinion of counsel prior to execution. In our experience, most modern indentures — including we expect the November 2021 Indenture — authorize the Trustee to enter into intercreditor arrangements on the terms contemplated without seeking individual noteholder consent, provided that the terms are consistent with the Indenture. Sophie to confirm from her Indenture review.

• Target: Execution-ready intercreditor agreement by March 24, 2025, to permit closing on March 28, 2025.

XI. Conclusion

The First Lien/Unsecured Intercreditor Agreement is a comparatively standard document in a leveraged finance transaction with outstanding unsecured notes, and we do not anticipate the substantive drafting to raise novel or particularly contentious issues, provided we are disciplined about the borrower-side positions identified above.

The principal risks for the Borrower are, in order of priority: (a) the intercreditor agreement inadvertently granting additional rights or remedies to the unsecured noteholders — particularly through the importation of first lien / second lien concepts inappropriate to the unsecured context; (b) enforcement standstill or amendment-consent provisions that unduly restrict the Borrower's operational flexibility, incremental incurrence capacity, or refinancing optionality; and (c) bankruptcy-related provisions — particularly DIP financing consent and plan support undertakings — that could constrain the Borrower's reorganization options in a manner not warranted by the underlying credit posture.

Recommendation. Upon receipt of the Whitfield & Gage draft (expected today), we should prioritize review of the following, in the order listed: (i) the proceeds waterfall; (ii) the enforcement standstill; (iii) the DIP financing consent and related bankruptcy provisions; (iv) the automatic release provisions; and (v) the amendment freedom provisions and joinder mechanics. Sophie and I will begin drafting the comment memorandum and mark-up immediately upon receipt.

We remain available to discuss any of the foregoing at your convenience.

Matter No. 1005-00001 — Calderwood & Harkness LLP — Privileged and Confidential — Attorney Work Product

Prepared by: Marcus Leung, Lead Associate, Banking & Finance

Reviewed by: Claudia Merritt, Responsible Partner, Banking & Finance

Instrument	Principal	Pricing / Coupon	Maturity	Representative
First Lien Term Loan B	$1,400,000,000	SOFR + 400 bps; 0.75% floor	March 28, 2032	Crescent Harbor Bank, N.A. (Administrative Agent and Collateral Agent)
Senior Unsecured Notes due 2028	$250,000,000	7.250%	2028	Pinnacle Trust Company (Trustee)
Property	Location	Appraised Value
Schaumburg headquarters and adjacent facility	Schaumburg, IL	$85,000,000
Rockford manufacturing plant	Rockford, IL	$42,000,000
Greenville coatings facility	Greenville, SC	$38,000,000
Houston fabrication facility	Houston, TX	$28,000,000

CALDERWOOD & HARKNESS LLP
MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: Claudia Merritt, Partner, Calderwood & Harkness LLP
FROM: Marcus Leung, Calderwood & Harkness LLP
CC: Sophie Tremblay, Calderwood & Harkness LLP
DATE: March 12, 2025
RE: Intercreditor Framework Analysis — First Lien / Unsecured Intercreditor Agreement — Nexford Industrial Holdings Inc. $1,400,000,000 Senior Secured Term Loan B
MATTER NO.: 1005-00001
CLIENT/MATTER CODE: IBL-NIH-2025-031
I. Executive Summary
The purpose of this memorandum is to set out our preliminary framework analysis of the intercreditor arrangements to be established, in connection with the closing of the above-referenced financing, between (a) the first lien secured parties under the new $1,400,000,000 senior secured Term Loan B facility, with Crescent Harbor Bank, N.A. acting as Administrative Agent and First Lien Collateral Agent, and (b) the holders of the existing $250,000,000 aggregate principal amount of 7.250% Senior Unsecured Notes due 2028 (the "Senior Unsecured Notes"), for whom Pinnacle Trust Company acts as Trustee under the Indenture dated as of November 8, 2021 (as amended, supplemented or otherwise modified from time to time, the "Indenture").
The intercreditor agreement contemplated (the "First Lien/Unsecured Intercreditor Agreement") is required under the Credit Agreement as a condition precedent to closing. Whitfield & Gage LLP, counsel to Crescent Harbor Bank, N.A. — with Margaret Ashby as responsible partner and Jonathan Ferris as working associate — is expected to circulate the initial draft on or about today's date. This memorandum is intended to prepare the C&H team for the substantive mark-up we will need to deliver on an accelerated timetable, and to identify the borrower-side issues that we should be prepared to press when the draft arrives.
For clarity, the Senior Unsecured Notes are not being refinanced in this transaction. They will remain outstanding in their full $250,000,000 principal amount following closing. The intercreditor agreement will therefore not be a "takeout" instrument; instead, it will govern the ongoing relationship between the first lien secured creditors (whose primary interest is in the collateral securing the new Term Loan B) and the unsecured noteholders (who continue to rely on the general credit of Nexford and its guarantors), with respect to shared collateral proceeds in enforcement or insolvency scenarios, coordination of remedies, and the scope of unsecured creditor interference with collateral enforcement.
Preliminary recommendation. Our overarching negotiating objective should be to ensure that the intercreditor agreement (i) preserves clear first lien priority in a manner consistent with the Credit Agreement waterfall, (ii) does not inadvertently confer on the unsecured noteholders blocking rights, consent rights, or other rights that they do not currently enjoy under the Indenture, and (iii) does not unduly constrain the Borrower's operational flexibility, its capacity to incur permitted incremental debt, or its ability to complete permitted asset dispositions and future refinancings. As a general drafting principle, the intercreditor agreement should reflect the fact that this is a first lien / unsecured relationship, not a first lien / second lien relationship, and should not import concepts from the more restrictive second lien intercreditor market.
Existing Indenture reference. All references herein to the "Indenture" are to the Indenture dated as of November 8, 2021, among Nexford Industrial Holdings Inc., as Issuer, the Guarantors party thereto, and Pinnacle Trust Company, as Trustee, relating to $250,000,000 aggregate principal amount of 7.250% Senior Unsecured Notes due 2028. Our detailed provisions-level analysis of the Indenture is set out in the separate memorandum from Sophie Tremblay dated February 14, 2025 (the "Indenture Memo"), which should be consulted alongside this memorandum.
II. Transaction Background and Capital Structure Context
A. The Transaction
Nexford Industrial Holdings Inc. ("Nexford" or the "Borrower") is a Delaware corporation, with its headquarters at 1400 Industrial Parkway, Schaumburg, IL 60173. Nexford is entering into a $1,400,000,000 senior secured Term Loan B facility on the following principal terms:
• Borrower: Nexford Industrial Holdings Inc.
• Administrative Agent / Collateral Agent: Crescent Harbor Bank, N.A. (320 Federal Street, Boston, MA 02110).
• Joint Lead Arrangers: Crescent Harbor Bank, N.A. (sole lead left), Ironwood Capital Markets, LLC, and Northvane Securities, Inc.
• Governing law: New York (both the Credit Agreement and the intercreditor agreement will be governed by New York law).
• Target closing date: March 28, 2025.
Use of proceeds is as follows: (i) refinance the existing $879,375,000 first lien term loan and the $0-drawn revolving credit facility (in each case with Atlas Meridian Bank, N.A. as existing agent); (ii) fund an approximately $335,000,000 dividend distribution to Granite Peak NIH Holdings, LLC (the "Holdings Guarantor"), through which Granite Peak Capital Partners, LP holds 100% of Nexford's equity; (iii) pay approximately $38,625,000 in transaction fees and expenses; and (iv) provide approximately $147,000,000 of cash to the balance sheet.
B. Pro Forma Capital Structure
The pro forma capital structure at closing is expected to be as follows:
Based on LTM Adjusted EBITDA of $385,000,000 and pro forma cash of approximately $100,000,000:
• Pro forma first lien net leverage: approximately 3.38x (($1,400,000,000 − $100,000,000) ÷ $385,000,000).
• Pro forma total net leverage: approximately 4.03x (($1,400,000,000 + $250,000,000 − $100,000,000) ÷ $385,000,000).
No second lien indebtedness currently exists, and none is contemplated to be incurred at closing. The Credit Agreement, however, includes customary enabling provisions permitting the incurrence of future second lien indebtedness and the entry into a separate first lien / second lien intercreditor agreement in connection therewith, as discussed further in Section VIII below.
C. Sponsor Context
Granite Peak Capital Partners, LP ("Granite Peak"), whose principal office is at 600 Steamboat Road, Suite 300, Greenwich, CT 06830, acquired Nexford in January 2019 for an enterprise value of approximately $1,650,000,000, funded with an equity investment of approximately $725,000,000. Granite Peak and its co-investors hold Nexford through Granite Peak NIH Holdings, LLC, a Delaware limited liability company, with registered office c/o Penmark Industries, 1209 Orange Street, Wilmington, DE 19801.
The current transaction is Nexford's second dividend recapitalization since the 2019 buyout. A prior recapitalization in 2021 distributed $275,000,000; the current transaction contemplates a further distribution of approximately $335,000,000. Cumulative distributions to Granite Peak from Nexford since acquisition, inclusive of the current distribution, will accordingly total approximately $610,000,000, or roughly 84% of the original sponsor equity investment.
III. Parties to the Intercreditor Agreement
A. First Lien Collateral Agent
Crescent Harbor Bank, N.A., in its capacity as Collateral Agent under the Credit Agreement for the benefit of the First Lien Secured Parties. The "First Lien Secured Parties" will include the Administrative Agent, the Lenders, and any hedging counterparties or cash management providers entitled to share in the collateral pursuant to the terms of the Credit Agreement and the Security Documents.
For syndication planning purposes only (this is not relevant to the intercreditor structure but is relevant to understanding the constituencies represented by Crescent Harbor), Crescent Harbor's target final hold is $175,000,000. The balance is expected to be allocated approximately as follows: Ironwood Capital Markets, LLC ($200,000,000); Northvane Securities, Inc. ($150,000,000); Ridgeline Asset Management, LP ($125,000,000); Halcyon Credit Partners, LLC ($100,000,000); Verdant Institutional Investors, LP ($100,000,000); Cascadia Loan Fund III, LP ($75,000,000); Bluewater Fixed Income Fund, LP ($75,000,000); and approximately $400,000,000 in general syndication. Because the Administrative Agent acts on behalf of the Lenders under the intercreditor agreement, syndicate composition does not affect the drafting of the intercreditor mechanics.
B. Unsecured Notes Trustee / Representative
Pinnacle Trust Company, in its capacity as Trustee under the Indenture and as representative of the holders of the Senior Unsecured Notes. Pinnacle Trust's registered office is 101 Park Avenue, New York, NY 10178. We should confirm that Pinnacle Trust's authority under Article [•] of the Indenture is sufficient for it to execute the intercreditor agreement without seeking noteholder direction; see Section X below.
C. Borrower / Loan Parties
The Loan Parties will be:
1. Borrower: Nexford Industrial Holdings Inc.
2. Holdings Guarantor: Granite Peak NIH Holdings, LLC.
3. Subsidiary Guarantors (11 in total):
• Nexford Precision Components, Inc.
• Nexford Engineered Systems, LLC
• Nexford Coatings & Surface Technologies, Inc.
• Nexford Manufacturing Services, LLC
• Nexford Properties, LLC
• Nexford International Holdings, Inc.
• Clearfield Tool & Die, Inc.
• Summit Industrial Fabrication Co.
• Ridgepoint Specialty Coatings, LLC
• Lakeshore Precision Engineering, Inc.
(One additional subsidiary guarantor will be listed in the finalized guarantor schedule; the group above accounts for the operational U.S. entities.)
Note regarding Nexford International Holdings, Inc. Nexford International Holdings, Inc. is a domestic CFC holdco. The pledge of its equity is limited to 65% of the voting equity and 100% of the non-voting equity of its principal foreign subsidiary, Nexford Canada Holdings ULC (a British Columbia unlimited liability corporation, "NCH ULC"), consistent with customary tax-driven pledge limitations. Neither NCH ULC nor its subsidiary Nexford Canada Manufacturing, Inc. will be guarantors under the Credit Agreement, and no assets of the foreign subsidiaries will be pledged. The intercreditor agreement should not purport to reach any assets or equity of the foreign subsidiaries beyond the extent of the pledged equity in NCH ULC.
IV. Nature of the Intercreditor Relationship: First Lien vs. Unsecured
A. Structural Priority
The starting point for the analysis is that the Term Loan B is a secured obligation, benefiting from a first-priority security interest granted by the Borrower and the Guarantors in substantially all of their assets (subject to customary excluded asset carve-outs). The Senior Unsecured Notes, by contrast, are both structurally and contractually unsecured: no liens secure the notes, and the noteholders' recovery in an enforcement or insolvency scenario depends entirely on the unsecured general credit of Nexford and its guarantors.
Because there is no shared collateral pool — as there would be in a first lien / second lien structure — the intercreditor agreement does not need to allocate priority among competing liens. What it must instead do is (i) confirm the absence of any lien-based recourse for the unsecured noteholders, (ii) prevent the noteholders from taking actions that would interfere with the collateral enforcement rights of the First Lien Collateral Agent, and (iii) establish the order of application of collateral proceeds where such proceeds are received in circumstances (particularly bankruptcy) in which unsecured claims may otherwise assert a competing distributional interest.
B. Purpose and Necessity of the Intercreditor Agreement
The intercreditor agreement is required under the Credit Agreement as a condition precedent to closing. Substantively, its purposes are:
1. To fix priority as between first lien collateral proceeds and unsecured note claims;
2. To limit unsecured creditor actions that could impair the first lien security interest (through attachment, judicial lien, involuntary petition, or otherwise);
3. To address the rights and obligations of the unsecured noteholders in a bankruptcy or insolvency proceeding, including with respect to DIP financing, cash collateral, adequate protection, and plan confirmation;
4. To coordinate remedies and enforcement as between the two creditor classes; and
5. To provide borrower-side protections — in particular, to ensure that the agreement does not confer on the unsecured noteholders any rights beyond those they already enjoy under the Indenture.
The Credit Agreement itself contains customary provisions authorizing the Administrative Agent to enter into intercreditor arrangements — both the current First Lien/Unsecured Intercreditor Agreement and any future first lien / second lien intercreditor agreement in the event Nexford incurs second lien indebtedness. Those enabling provisions should be reviewed to confirm they are broad enough to support the release, joinder, and amendment mechanics contemplated below.
V. Key Substantive Provisions — Analysis and Borrower Positions
A. Lien Priority and Collateral Access
1. First Lien Priority. The intercreditor agreement must state unambiguously that the First Lien Secured Parties have first-priority access to all collateral securing the Term Loan B. This includes all personal property collateral — accounts receivable, inventory, equipment, intellectual property, deposit accounts, securities accounts, and general intangibles — and all real property mortgages. Nexford has agreed to grant mortgages over four properties (the "Mortgaged Properties"), with aggregate appraised value of $193,000,000, as follows:
The unsecured noteholders have no lien on any of the foregoing collateral, and the intercreditor agreement should include an express acknowledgement of this structural subordination — both to reinforce the waterfall (Section V.B below) and to preclude any argument in a subsequent proceeding that the unsecured noteholders have or should be deemed to have some form of equitable or beneficial interest in the collateral.
2. No-Action / Enforcement Limitation on Unsecured Noteholders. A meaningful drafting question is whether the intercreditor agreement should include a "standstill" or "no-action" covenant preventing the Trustee (or the noteholders individually) from taking enforcement actions against collateral.
Borrower position. Because the notes are unsecured, the noteholders have no lien-based collateral enforcement rights to begin with, and any prohibition on lien-based enforcement is largely confirmatory. Nevertheless, the intercreditor agreement should provide that, until the first lien obligations have been paid in full, the Trustee and the noteholders will not (i) attach, levy upon, or otherwise seek to reach assets subject to the first lien security interest, (ii) obtain any judgment lien on such assets, or (iii) seek to compel the disposition of any collateral, in each case other than through recoveries channeled through the proceeds waterfall.
Market consideration. This is customary in the first lien / unsecured context. The Trustee should acknowledge that it has no independent right to direct the disposition of collateral, that all such rights are vested exclusively in the First Lien Collateral Agent, and that the Trustee will not seek — judicially or otherwise — to impose any lien on the collateral in favor of itself or the noteholders. The formulation should stop short of the broader "silent second" language used in first lien / second lien agreements, which is inappropriate here for the reasons discussed in Section VI below.
B. Proceeds Waterfall
1. Proceeds of Collateral. The intercreditor agreement should establish that, upon (i) any enforcement action or foreclosure with respect to the collateral, (ii) any asset disposition triggering mandatory prepayment under the Credit Agreement, (iii) any insurance or condemnation event resulting in receipt of net cash proceeds, or (iv) any distribution in respect of collateral in an insolvency proceeding, the resulting proceeds will be applied in the following order:
First: to payment of the costs and expenses of the First Lien Collateral Agent (Crescent Harbor Bank, N.A.), including reasonable fees and expenses of counsel and any other professional advisors incurred in connection with enforcement, custody or disposition of the collateral;
Second: to payment in full of all first lien obligations, including principal, interest (including default interest and post-petition interest, whether or not allowed as a claim in an insolvency proceeding), fees, indemnities, hedging obligations, cash management obligations, and all other amounts owing under the Credit Agreement, any incremental facility, the Security Documents, and any related first lien loan documents, in each case in accordance with the payment priorities set out in the Credit Agreement;
Third: to payment of the unsecured note obligations, including principal, accrued and unpaid interest, and any applicable premium, under the Indenture; and
Fourth: any surplus to the Borrower, its successors or assigns, or as otherwise required by applicable law or court order.
The waterfall must apply notwithstanding the order in which claims are asserted, the timing of any acceleration under either the Credit Agreement or the Indenture, and — critically — any intervening bankruptcy filing.
2. Insurance and Condemnation Proceeds. The Credit Agreement contains a mandatory prepayment provision requiring 100% of the net cash proceeds from insurance or condemnation events (subject to customary reinvestment rights and a $10,000,000 de minimis threshold) to be applied to the Term Loan B. The intercreditor agreement should confirm that any such proceeds constitute first lien collateral proceeds for waterfall purposes, and are not shared with the unsecured noteholders until the first lien obligations have been satisfied in full.
3. Asset Sale Proceeds. Similarly, the Credit Agreement requires 100% of the net cash proceeds of asset sales (subject to reinvestment periods of 365 days or, if committed to be reinvested, up to 545 days, and a $25,000,000 annual de minimis basket) to be applied as mandatory prepayment. The intercreditor agreement should treat such proceeds as first lien collateral proceeds. We should watch for any drafting from Whitfield & Gage that could be read to require sharing of pre-mandatory-prepayment asset sale proceeds with the noteholders, which would be inconsistent with the Credit Agreement's mandatory prepayment mechanics and unacceptable to the Borrower.
C. Enforcement Standstill
1. Duration and Scope. We should expect Whitfield & Gage to include an enforcement standstill precluding the unsecured noteholders from taking certain legal actions — including filing involuntary bankruptcy petitions, seeking pre-judgment attachments, or obtaining judgment liens against the Loan Parties — during a specified period (customarily 90 to 180 days) following an event of default under the Indenture, during which period the First Lien Collateral Agent may pursue its remedies without interference.
Borrower position. A limited standstill is acceptable, but standstills in the first lien / unsecured context are typically shorter and narrower than those in first lien / second lien agreements, precisely because unsecured creditors already lack collateral enforcement rights. We should target a standstill period of 90 days, and we should resist any construction that permits the First Lien Collateral Agent to extend or "reset" the standstill through successive rescissions and re-declarations of default.
Mutuality. The standstill should be mutual in a limited sense: during the standstill period, the unsecured noteholders should be precluded from accelerating the notes solely as a result of the First Lien Collateral Agent's exercise of remedies against collateral or the declaration of default under the Credit Agreement. Independent defaults under the Indenture (payment defaults on the notes, breaches of Indenture covenants) should of course continue to permit acceleration on their own terms.
2. Carve-Outs from Standstill. Notwithstanding any standstill, the unsecured noteholders (through the Trustee) must retain the right to:
(a) file proofs of claim in any bankruptcy or insolvency proceeding;
(b) vote on any plan of reorganization or arrangement;
(c) exercise contractual rights under the Indenture that do not involve collateral enforcement — in particular, acceleration of the notes upon an Indenture default; and
(d) receive payments not derived from collateral proceeds, including scheduled interest payments permitted under the Credit Agreement.
The purpose of these carve-outs is twofold: first, to preserve fundamental creditor rights (which strengthens enforceability under section 510(a) of the Bankruptcy Code and analogous common law doctrines); and second, to ensure that the standstill does not have the practical effect of amending the Indenture, which would raise separate consent and enforceability issues under the Indenture's amendment provisions.
D. Bankruptcy / Insolvency Provisions
1. DIP Financing Consent. We should expect a provision requiring the Trustee (on behalf of the unsecured noteholders) to consent, or at a minimum not to object, to debtor-in-possession financing arranged by or with the support of the First Lien Secured Parties in any chapter 11 case, including priming liens and use of cash collateral, provided that the DIP financing satisfies specified parameters.
Borrower position. We support the inclusion of DIP consent provisions as a matter of principle, since noteholder opposition to a first-lien-supported DIP could obstruct access to critical liquidity in a reorganization. However, the consent should be conditioned on the DIP financing preserving adequate protection safeguards (limited priming, reasonable superpriority claim structure) and, importantly for the Borrower, should not be so tightly drafted as to preclude the Borrower from itself arranging alternative DIP financing that is superior for the estate.
2. Plan of Reorganization. Related "no-contest" or "no-object" provisions may be proposed, preventing the unsecured noteholders from opposing any chapter 11 plan supported by the requisite first lien lenders, to the extent that the plan provides the unsecured noteholders with the treatment to which they are entitled under the absolute priority rule.
Borrower position. A carefully limited version of this provision is acceptable, but we must avoid drafting that could be argued to strip the noteholders of core bankruptcy rights (voting, best-interests-test challenges, absolute priority arguments). Overly broad waivers of such rights raise real enforceability concerns under section 510(a) of the Bankruptcy Code, and courts (in Ion Media, Momentive, and subsequent decisions) have distinguished between subordination of payment priority (generally enforceable) and waivers of procedural bankruptcy rights (frequently not). Any such waiver should be limited to opposition to first lien priority as such, not to opposition to particular plan features.
3. Adequate Protection. The intercreditor agreement should confirm that only the First Lien Collateral Agent, on behalf of the First Lien Secured Parties, is entitled to adequate protection with respect to the collateral. The unsecured noteholders may seek adequate protection only to the extent (if any) they have a cognizable interest in unencumbered assets. Given the comprehensive first lien collateral package, the practical scope for such claims should be minimal.
4. Avoidance Actions / Subordination. Treatment of avoidance action proceeds — recoveries under sections 544, 547, 548 and 550 of the Bankruptcy Code — should be expressly addressed. The standard formulation is that avoidance action proceeds relating to collateral (for example, recoveries of preferential transfers of collateral, or fraudulent transfers of assets that would have been collateral but for the transfer) are treated as collateral proceeds subject to the waterfall. Recoveries relating to unencumbered assets are not subject to the waterfall. We should confirm that the draft does not attempt to sweep all avoidance action proceeds — including those on unencumbered assets — into first lien collateral, which is aggressive and would be resisted.
E. Release of Liens and Guarantees
1. Automatic Release Provisions. If the First Lien Collateral Agent releases a lien on collateral or releases a Guarantor — for example, in connection with a permitted asset sale, a designation of an Unrestricted Subsidiary, or a disposition under the $25,000,000 annual de minimis basket — the corresponding rights (if any) of the unsecured noteholders with respect to such asset or Guarantor should be automatically released without further action by the Trustee.
Borrower position. This is a critical provision for the Borrower's operational flexibility. We must ensure the automatic release is expressly tied to actions taken in accordance with the Credit Agreement (thereby preventing arguments that the release requires separate noteholder consent or that Indenture-level release conditions must be independently satisfied). Note that this provision interacts with the guarantee release provisions of the Indenture, which we should cross-check against the Indenture Memo.
2. Release in Connection with Refinancing. The intercreditor agreement should expressly contemplate that the Term Loan B may be refinanced with replacement first lien indebtedness. In such event, the successor first lien administrative agent and collateral agent should be permitted to accede to the intercreditor agreement, and to step into the shoes of Crescent Harbor Bank, without requiring unsecured noteholder consent. The mechanics should mirror those used in customary "Refinancing Amendment" concepts in the Credit Agreement.
F. Amendments to First Lien and Unsecured Documents
1. First Lien Document Amendments. The First Lien Secured Parties should be free to amend, extend, modify, refinance, replace, or supplement the Credit Agreement and the other first lien loan documents — including, without limitation, incurring incremental facilities under the free-and-clear basket (the greater of $280,000,000 and 100% LTM Adjusted EBITDA) and the ratio-based incremental capacity (available so long as first lien net leverage does not exceed 4.50x on a pro forma basis) — without the consent of the unsecured noteholders.
Limitation. The only substantive constraint on this freedom should be that no amendment may materially and adversely affect the unsecured noteholders' rights under the intercreditor agreement itself. Watch for aggressive drafting that would purport to permit any future first lien indebtedness (including new classes with distinct waterfall treatment) to prime the unsecured note claims without notice — this is fine in principle for the Borrower but may draw resistance from the Trustee and should be calibrated.
2. Unsecured Document Amendments. The unsecured noteholders should remain free to amend the Indenture subject to its own terms, but the intercreditor agreement may (and should) restrict Indenture amendments that would:
(a) expand the noteholders' rights vis-à-vis collateral (for example, by adding covenants requiring the grant of a lien in favor of the noteholders);
(b) create liens in favor of the noteholders on any assets of the Loan Parties; or
(c) shorten the maturity of the notes in a manner intended to create a cross-default or cross-acceleration under the Credit Agreement.
G. Purchase Option
We should expect Whitfield & Gage to propose a purchase option permitting the first lien secured parties (or a group thereof meeting a specified threshold) to purchase the unsecured notes at par plus accrued interest following the occurrence of specified triggering events, typically an event of default under the Credit Agreement or the commencement of a bankruptcy proceeding.
Borrower position. This is primarily a lender-side protection and is neutral from the Borrower's perspective, provided that its operation does not create any obligation on the Borrower to fund, facilitate, or otherwise participate in the buy-out mechanic. We should confirm that the mechanic is between the first lien and unsecured creditor groups, with no borrower-side action required.
H. Permitted Payments on Unsecured Notes
The intercreditor agreement should not create additional payment blockage provisions restricting payments on the Senior Unsecured Notes beyond those already imposed by the Credit Agreement. Scheduled interest payments, principal at maturity, and any other payments permitted under the Credit Agreement should be expressly permitted.
Interaction with Restricted Payment covenant. Payments on the notes are governed by the Credit Agreement's restricted payment covenant. Key parameters:
• Unlimited restricted payments are permitted subject to pro forma compliance with 3.75x total net leverage;
• A $25,000,000 annual general basket is available;
• A builder basket is available, with a $50,000,000 starter amount and a 50%-of-Cumulative-Consolidated-Net-Income build from Q1 2025 forward.
Scheduled interest on the Senior Unsecured Notes — $250,000,000 × 7.250% = $18,125,000 per annum — is a carve-out from the restricted payment baskets and is a permitted payment under the Credit Agreement in all events (subject only to the customary payment blockage in the event of a payment default on senior debt, if any is contemplated). The intercreditor agreement must not impose additional or duplicative blockage.
I. Change of Control Interaction
The Credit Agreement contains a change of control provision triggered upon (i) the acquisition by any person or group (other than Granite Peak and its affiliates) of more than 35% of the voting equity of Holdings, (ii) Nexford ceasing to be a direct wholly-owned subsidiary of Holdings, or (iii) a "change of control" as defined under the Indenture. The Indenture, in turn, is expected to contain a customary change of control put provision, triggered by similar ownership thresholds and payable at 101% of principal plus accrued interest.
Intercreditor concern. If both the Credit Agreement and the Indenture change of control triggers fire concurrently, the intercreditor agreement should clarify that no payment may be made on the notes in respect of the change of control put until the first lien obligations have been paid in full (or, at a minimum, that any such payment is subject to the waterfall). At the same time, we must ensure the intercreditor agreement does not create a new or third change of control trigger — for example, by adopting a definitional cross-reference that differs from either the Credit Agreement or the Indenture definition — and thereby inadvertently making the aggregate change of control regime more restrictive than either document taken alone.
VI. Comparison to First Lien / Second Lien Intercreditor Framework
A first lien / second lien intercreditor agreement — not required in the current transaction, but enabled by the Credit Agreement — would typically include a materially more robust suite of protections in favor of the first lien creditors: longer enforcement standstills (commonly 180 days, sometimes with tolling provisions); explicit lien subordination; "X-clause" caps limiting the second lien secured amount for waterfall purposes; broad "no-action" covenants covering the full range of collateral remedies; and detailed cash collateral and DIP consent mechanics.
The First Lien/Unsecured Intercreditor Agreement, by contrast, should be significantly simpler. The unsecured noteholders have no liens, no collateral enforcement rights, and no independent secured interest to subordinate. The intercreditor agreement's function is (i) to establish the waterfall for collateral proceeds, (ii) to limit noteholder interference with collateral enforcement, and (iii) to address bankruptcy coordination.
Key drafting principle. We should be alert to attempts by Whitfield & Gage to import concepts from the second lien intercreditor market — extended standstills, broad silent-second waivers, X-clause caps on unsecured claims, aggressive bankruptcy waivers — into the unsecured context. Such concepts are not market for a first lien / unsecured intercreditor agreement and would, in this transaction, inappropriately constrain the Borrower. Our mark-up should systematically pare back any such overreach.
VII. Interaction with Existing Indenture Provisions
Our detailed analysis of the Indenture is set out in the Indenture Memo dated February 14, 2025. For present purposes, the following Indenture provisions are directly relevant to the intercreditor framework and should be cross-checked as we mark up the intercreditor draft:
• Debt incurrence covenants. The Indenture's debt incurrence covenant limits Nexford's ability to incur additional secured and unsecured debt. Confirm that the aggregate $1,400,000,000 Term Loan B (together with any incremental capacity) fits within the applicable permitted debt baskets. The permitted "Credit Facilities" basket and the ratio-based debt incurrence test should be examined.
• Restricted payment baskets. The Indenture's restricted payment covenant affects the Borrower's ability to make the contemplated $335,000,000 dividend distribution to Holdings. Sophie's Indenture Memo confirms availability, but we should re-verify the calculation as of a pre-closing date.
• Liens covenant. The Indenture's "Liens" covenant permits first lien secured debt up to a specified cap or, if not fixed, incorporates the permitted debt basket by reference. Confirm that $1,400,000,000 of first lien secured debt is permitted, including any incremental first lien capacity contemplated under the Credit Agreement.
• Change of control put. As discussed in Section V.I above, coordinate the trigger definitions and payment mechanics with the Credit Agreement.
• Asset disposition covenant. The Indenture's asset disposition covenant may require net proceeds to be applied in specified ways, including offers to repurchase notes. Confirm that these obligations are subordinate to the Credit Agreement's mandatory prepayment provisions and the intercreditor waterfall.
Any inconsistency between the intercreditor agreement and the Indenture should be resolved in favor of preserving the Borrower's contractual position under the Indenture, subject to the intercreditor agreement's overriding priority mechanics with respect to collateral proceeds.
VIII. Provisions Permitting Future Intercreditor Arrangements
The Credit Agreement contains enabling provisions permitting the Administrative Agent, Crescent Harbor Bank, N.A., to enter into a separate first lien / second lien intercreditor agreement if, and to the extent that, Nexford later incurs second lien indebtedness in reliance on the permitted debt provisions of the Credit Agreement (and, correspondingly, the Indenture).
The First Lien/Unsecured Intercreditor Agreement itself should include a "joinder" mechanism permitting additional unsecured or second lien representatives to accede to the intercreditor framework without requiring amendment of the Credit Agreement or consent of the existing unsecured noteholders (subject to conforming principles — for example, that a new junior lien class does not prime the first lien secured parties in the waterfall).
This is particularly relevant given the meaningful incremental capacity available to the Borrower under the Credit Agreement:
• Free-and-clear basket: greater of $280,000,000 and 100% LTM Adjusted EBITDA (i.e., currently $385,000,000);
• Ratio-based incremental capacity: available so long as pro forma first lien net leverage does not exceed 4.50x.
Combined, these baskets provide meaningful headroom for future first lien or second lien incurrence, and the joinder mechanic must accommodate such incurrence efficiently.
IX. Recommended Borrower Negotiation Positions
Consolidated for reference, our principal negotiating positions on receipt of the Whitfield & Gage draft will be as follows:
1. Priority waterfall. Insist on clear, unconditional first lien priority for all collateral proceeds. The four-tier waterfall set out in Section V.B should be preserved without modification.
2. Enforcement standstill. Accept a limited standstill (target: 90 days) precluding unsecured noteholder interference with collateral enforcement; resist any period longer than 120 days and resist reset/tolling mechanics.
3. Automatic release. Ensure automatic release of any residual noteholder claims on assets or guarantors upon any collateral or guarantor release effected under the Credit Agreement, without any independent noteholder consent, notice, or condition.
4. DIP financing. Support first lien-friendly DIP consent provisions, but ensure adequate protection carve-outs remain available to the unsecured noteholders in a manner sufficient to preserve reasonable reorganization flexibility for the Borrower.
5. Amendment freedom. First lien parties must be free to amend, refinance, extend, replace, or supplement the Credit Agreement — including through the incurrence of incremental facilities under both the free-and-clear and ratio baskets — without unsecured noteholder consent.
6. Permitted payments. The intercreditor agreement must not create additional payment blockage provisions beyond those in the Credit Agreement. Scheduled interest on the notes ($18,125,000 per annum) must remain a permitted payment in all events other than payment defaults on the Term Loan B.
7. Change of control coordination. Prevent the intercreditor agreement from creating an additional change of control trigger, and preserve the Borrower's ability to manage dual change of control puts in a coordinated fashion.
8. No additional rights for unsecured noteholders. As an overarching principle, the intercreditor agreement should confer on the unsecured noteholders no rights or remedies beyond those already existing under the Indenture. Watch for provisions — often buried in acknowledgement or notice mechanics — that could be read to expand noteholder rights.
X. Process and Next Steps
• Whitfield & Gage LLP (Jonathan Ferris, working associate, under direction of Margaret Ashby, responsible partner) is expected to circulate the first draft of the intercreditor agreement on or about March 12, 2025 (today).
• C&H to review and prepare a marked draft, targeting return of comments by March 19, 2025. Sophie Tremblay to take first-pass drafting responsibility; Marcus Leung to review; Claudia Merritt to sign off before circulation.
• Coordinate with Kellner Brandt & Associates LLP (Patricia Voss, sponsor's counsel) to align sponsor-side and borrower-side positions on borrower-friendly provisions, particularly (i) permitted payments, (ii) release mechanics, and (iii) amendment freedom.
• Trustee execution authority. Confirm with Pinnacle Trust Company (via its counsel; identity to be established) whether the Trustee requires direction from noteholders or an opinion of counsel prior to execution. In our experience, most modern indentures — including we expect the November 2021 Indenture — authorize the Trustee to enter into intercreditor arrangements on the terms contemplated without seeking individual noteholder consent, provided that the terms are consistent with the Indenture. Sophie to confirm from her Indenture review.
• Target: Execution-ready intercreditor agreement by March 24, 2025, to permit closing on March 28, 2025.
XI. Conclusion
The First Lien/Unsecured Intercreditor Agreement is a comparatively standard document in a leveraged finance transaction with outstanding unsecured notes, and we do not anticipate the substantive drafting to raise novel or particularly contentious issues, provided we are disciplined about the borrower-side positions identified above.
The principal risks for the Borrower are, in order of priority: (a) the intercreditor agreement inadvertently granting additional rights or remedies to the unsecured noteholders — particularly through the importation of first lien / second lien concepts inappropriate to the unsecured context; (b) enforcement standstill or amendment-consent provisions that unduly restrict the Borrower's operational flexibility, incremental incurrence capacity, or refinancing optionality; and (c) bankruptcy-related provisions — particularly DIP financing consent and plan support undertakings — that could constrain the Borrower's reorganization options in a manner not warranted by the underlying credit posture.
Recommendation. Upon receipt of the Whitfield & Gage draft (expected today), we should prioritize review of the following, in the order listed: (i) the proceeds waterfall; (ii) the enforcement standstill; (iii) the DIP financing consent and related bankruptcy provisions; (iv) the automatic release provisions; and (v) the amendment freedom provisions and joinder mechanics. Sophie and I will begin drafting the comment memorandum and mark-up immediately upon receipt.
We remain available to discuss any of the foregoing at your convenience.
Matter No. 1005-00001 — Calderwood & Harkness LLP — Privileged and Confidential — Attorney Work Product
Prepared by: Marcus Leung, Lead Associate, Banking & Finance
Reviewed by: Claudia Merritt, Responsible Partner, Banking & Finance
Instrument | Principal | Pricing / Coupon | Maturity | Representative
First Lien Term Loan B | $1,400,000,000 | SOFR + 400 bps; 0.75% floor | March 28, 2032 | Crescent Harbor Bank, N.A. (Administrative Agent and Collateral Agent)
Senior Unsecured Notes due 2028 | $250,000,000 | 7.250% | 2028 | Pinnacle Trust Company (Trustee)
Property | Location | Appraised Value
Schaumburg headquarters and adjacent facility | Schaumburg, IL | $85,000,000
Rockford manufacturing plant | Rockford, IL | $42,000,000
Greenville coatings facility | Greenville, SC | $38,000,000
Houston fabrication facility | Houston, TX | $28,000,000

CALDERWOOD & HARKNESS LLP

MEMORANDUM

MATTER NO.: 1005-00001

CLIENT/MATTER CODE: IBL-NIH-2025-031

Record

Parties

Dates

Amounts