[sheet: Cover & Summary]

[sheet: Cover & Summary]
Field | Value
Document Title | Closing Funds Flow Memorandum
Transaction | Asset Acquisition of Pinnacle Metal Fabricators LLC by Nexford Industrial Holdings Inc.
Prepared By | Calderwood & Harkness LLP
Firm Address | 120 South LaSalle Street, Suite 4500, Chicago, IL 60603
Drafter | Ryan Kowalski, Associate, M&A
Reviewed By | Naomi Petersen, Lead Associate, M&A; Oliver Mackenzie, Responsible Partner, M&A
Billing Partner | Harrison Wexford, M&A
Client | Nexford Industrial Holdings Inc.
Client Address | 4200 West Lake Shore Drive, Suite 800, Chicago, IL 60604
Client Contact | Danielle K. Cho, CFO; Philip M. Stanhope, General Counsel
Closing Date | October 24, 2023
Original Target Closing Date | October 20, 2023
Reason for Delay | Final title clearance on equipment (4-day delay)
Governing Agreement | Asset Purchase Agreement dated September 5, 2023
Governing Law | New York
Total Purchase Price | $30,000,000
Closing Cash Payment | $24,000,000
Earnout (Maximum, Post-Closing) | Up to $6,000,000 (not reflected in closing funds flow)
Indemnification Escrow Holdback | $3,000,000
Net Cash to Seller at Closing | $21,000,000
Status | FINAL — Closing Completed October 24, 2023
Confidentiality | PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
[sheet: Sources of Funds]
Item No. | Source Description | Entity / Institution | Contact | Amount | Funding Mechanism | Reference / Authorization | Expected Wire Time | Notes
1 | Revolver Draw — Senior Secured Revolving Credit Facility | Greystone National Bank, N.A. | Andrew F. Liang, Relationship Manager | $20,000,000 | Draw on existing $75,000,000 Senior Secured Revolving Credit Facility (Amended and Restated February 10, 2023; original dated March 15, 2021) | Lender Consent dated October 6, 2023, pursuant to Section 7.04 of Credit Agreement (acquisitions >$5M require prior written consent of Administrative Agent) | Wire to be initiated by 8:00 AM CT on October 24, 2023 | Prior revolver outstanding: $32,000,000. Post-draw outstanding: $52,000,000. Pro forma availability: $23,000,000. Greystone office: 500 West Madison Street, Suite 2800, Chicago, IL 60661.
2 | Cash on Hand — Nexford Operating Account | Nexford Industrial Holdings Inc. | Danielle K. Cho, CFO | $4,000,000 | Wire transfer from Nexford operating account | Board approval obtained; Bramblewood Capital Partners, LP (sponsor, ~78% equity holder) consent obtained per Catherine E. Moreau, Deal Partner | Wire to be initiated by 8:00 AM CT on October 24, 2023 | Nexford headquarters: 4200 West Lake Shore Drive, Suite 800, Chicago, IL 60604. CEO: Marcus R. Haverford.
TOTAL SOURCES | $24,000,000 | Validation: Total Sources = Total Disbursements ($24,000,000)
[sheet: Disbursements]
Item No. | Disbursement Description | Payee | Payee Address | Membership Interest / Basis | Gross Allocation | Escrow Holdback Allocation | Net Disbursement Amount | Wire Sequence | Expected Wire Time | Bank Name | ABA / Routing Number | Account Number | Account Name | Reference / Memo | Notes
1 | Indemnification Escrow Deposit | Commonwealth Escrow Services Inc., as Escrow Agent | 140 Broadway, 30th Floor, New York, NY 10005 | Per APA Section — Escrow Holdback | $3,000,000 | N/A | $3,000,000 | 1 | First wire — to be sent upon confirmation of funding from Greystone | [Escrow Agent's Bank — to be confirmed] | [ABA — to be confirmed] | [Acct — to be confirmed] | Commonwealth Escrow Services Inc. — Nexford/Pinnacle Indemnification Escrow | Re: APA dated September 5, 2023; Escrow Agreement dated October 24, 2023 | Contact: Margaret H. Velasquez, Vice President. Escrow held for 18 months; release date on or after April 24, 2025. Escrow funds first satisfy R&W policy retention ($750,000). R&W carrier: Sentinel Specialty Insurance Company, Policy No. SSI-RW-2023-04718, limit $9,000,000.
2 | Net Closing Payment — Gerald T. Brennan (Managing Member, 65%) | Gerald T. Brennan | Per wire instructions on file | 65% of $21,000,000 net closing cash | $15,600,000 | $1,950,000 | $13,650,000 | 2 | Second wire — to be sent upon confirmation of escrow deposit | [Brennan's Bank — to be confirmed] | [ABA — to be confirmed] | [Acct — to be confirmed] | Gerald T. Brennan | Re: APA dated September 5, 2023 — Closing Payment | Brennan is Managing Member and founder of Pinnacle Metal Fabricators LLC (1127 Industrial Parkway, Hammond, IN 46320). Separately entering into Transition Services Agreement ($18,000/mo for 12 months, expiring October 24, 2024) and Non-Competition Agreement (3 years, 150-mile radius from Hammond, IN).
3 | Net Closing Payment — Sandra L. Brennan (Member, 20%) | Sandra L. Brennan | Per wire instructions on file | 20% of $21,000,000 net closing cash | $4,800,000 | $600,000 | $4,200,000 | 3 | Third wire — concurrent with or immediately following Wire #2 | [S. Brennan's Bank — to be confirmed] | [ABA — to be confirmed] | [Acct — to be confirmed] | Sandra L. Brennan | Re: APA dated September 5, 2023 — Closing Payment | Not retained post-closing. Subject to 2-year non-solicitation covenant.
4 | Net Closing Payment — Derek J. Kopp (Member, 15%) | Derek J. Kopp | Per wire instructions on file | 15% of $21,000,000 net closing cash | $3,600,000 | $450,000 | $3,150,000 | 4 | Fourth wire — concurrent with or immediately following Wire #3 | [Kopp's Bank — to be confirmed] | [ABA — to be confirmed] | [Acct — to be confirmed] | Derek J. Kopp | Re: APA dated September 5, 2023 — Closing Payment | VP of Operations at Pinnacle; retained by Nexford as Plant Manager, base salary $145,000/yr. Subject to 18-month non-compete and non-solicitation covenant.
TOTAL DISBURSEMENTS | $27,000,000 | $3,000,000 | $24,000,000 | Validation: Total Disbursements = Total Sources ($24,000,000)
[sheet: Reconciliation]
Line Item | Amount | Reference
SOURCES OF FUNDS
Greystone National Bank, N.A. — Revolver Draw | $20,000,000 | Draw on $75M Senior Secured Revolving Credit Facility; Section 7.04 consent dated October 6, 2023
Nexford Industrial Holdings Inc. — Cash on Hand | $4,000,000 | Operating account
Total Sources | $24,000,000 | Sum of above
USES OF FUNDS
Commonwealth Escrow Services Inc. — Indemnification Escrow | $3,000,000 | Held 18 months; release on/after April 24, 2025
Gerald T. Brennan — Net Closing Payment (65%) | $13,650,000 | 65% × ($24,000,000 − $3,000,000)
Sandra L. Brennan — Net Closing Payment (20%) | $4,200,000 | 20% × ($24,000,000 − $3,000,000)
Derek J. Kopp — Net Closing Payment (15%) | $3,150,000 | 15% × ($24,000,000 − $3,000,000)
Total Uses | $24,000,000 | Sum of above
BALANCE CHECK (Sources − Uses) | $0 | Must equal zero
MEMO ITEMS (Not Part of Closing Funds Flow)
Total Purchase Price (per APA) | $30,000,000 | Includes closing cash + earnout
Maximum Earnout Consideration (Post-Closing) | $6,000,000 | $3,000,000 Period 1 (ends Oct 31, 2024) + $3,000,000 Period 2 (ends Oct 31, 2025)
Earnout Period 1 EBITDA Target | $4,200,000 | Payment due within 90 days (by Jan 29, 2025)
Earnout Period 2 EBITDA Target | $4,800,000 | Payment due within 90 days (by Jan 29, 2026)
Implied EV/EBITDA (Total Consideration) | ~8.1x | $30,000,000 ÷ $3,700,000 LTM Adj. EBITDA
Implied EV/EBITDA (Closing Cash) | ~6.5x | $24,000,000 ÷ $3,700,000 LTM Adj. EBITDA
Pro Forma Revolver Availability | $23,000,000 | $75M facility − $32M prior outstanding − $20M draw
Indemnification Cap | $9,000,000 | 30% × $30,000,000 Total Purchase Price
Indemnification Basket (Tipping) | $300,000 | 1% × $30,000,000
De Minimis Claim Threshold | $25,000 | Per individual claim
R&W Insurance Policy Limit | $9,000,000 | Sentinel Specialty Insurance Company, Policy SSI-RW-2023-04718
R&W Insurance Retention | $750,000 | Satisfied first from escrow
R&W Insurance Premium (Buyer-Paid) | $225,000 | ~2.5% rate on $9M limit
Assumed Trade Payables (est.) | $1,100,000 | Assumed by Buyer at closing
Assumed Accrued Vacation (est.) | $186,000 | Assumed by Buyer at closing
[sheet: Wire Sequence & Timing]
Step No. | Action | Responsible Party | Contact | Target Time (CT) | Prerequisite | Confirmation Method | Amount | Status
1 | Greystone National Bank initiates $20,000,000 revolver draw wire to Nexford closing account | Greystone National Bank, N.A. | Andrew F. Liang, Relationship Manager | 8:00 AM | Lender consent (October 6, 2023) on file; borrowing notice delivered | Fed reference number confirmation via email to Danielle K. Cho and Calderwood & Harkness | $20,000,000 | Completed
2 | Nexford initiates $4,000,000 wire from operating account to closing account | Nexford Industrial Holdings Inc. | Danielle K. Cho, CFO | 8:00 AM | Board authorization on file | Fed reference number confirmation via email to Calderwood & Harkness | $4,000,000 | Completed
3 | Confirm receipt of all source funds ($24,000,000) in Nexford closing account | Calderwood & Harkness LLP / Nexford | Ryan Kowalski / Danielle K. Cho | 9:30 AM | Steps 1 and 2 completed | Bank balance confirmation; email to all parties | $24,000,000 | Completed
4 | Wire $3,000,000 to Commonwealth Escrow Services Inc. — Indemnification Escrow Account | Nexford Industrial Holdings Inc. | Danielle K. Cho, CFO | 10:00 AM | Step 3 confirmed | Fed reference number; confirmation email to Margaret H. Velasquez at Commonwealth Escrow (140 Broadway, 30th Fl, New York, NY 10005) | $3,000,000 | Completed
5 | Commonwealth Escrow confirms receipt of $3,000,000 escrow deposit | Commonwealth Escrow Services Inc. | Margaret H. Velasquez, VP | 10:30 AM | Step 4 wire received | Written confirmation email to Calderwood & Harkness and Halverson Burke & Crane LLP | $3,000,000 | Completed
6 | Wire $13,650,000 to Gerald T. Brennan (65% net closing payment) | Nexford Industrial Holdings Inc. | Danielle K. Cho, CFO | 11:00 AM | Step 5 confirmed | Fed reference number; confirmation email to Halverson Burke & Crane LLP (Thomas A. Gilroy / Jessica N. Farrow) | $13,650,000 | Completed
7 | Wire $4,200,000 to Sandra L. Brennan (20% net closing payment) | Nexford Industrial Holdings Inc. | Danielle K. Cho, CFO | 11:00 AM | Step 5 confirmed | Fed reference number; confirmation to Halverson Burke & Crane LLP | $4,200,000 | Completed
8 | Wire $3,150,000 to Derek J. Kopp (15% net closing payment) | Nexford Industrial Holdings Inc. | Danielle K. Cho, CFO | 11:00 AM | Step 5 confirmed | Fed reference number; confirmation to Halverson Burke & Crane LLP | $3,150,000 | Completed
9 | Confirm receipt of all member payments by Seller's counsel | Halverson Burke & Crane LLP | Thomas A. Gilroy / Jessica N. Farrow (350 North Meridian Street, Suite 1400, Indianapolis, IN 46204) | 12:00 PM | Steps 6, 7, 8 completed | Email confirmation to Calderwood & Harkness LLP; closing deemed effective | $21,000,000 | Completed
10 | Calderwood & Harkness circulates closing confirmation to all parties; release signature pages | Calderwood & Harkness LLP | Naomi Petersen / Ryan Kowalski | 12:30 PM | Step 9 confirmed | Email distribution to Nexford (Philip M. Stanhope, GC), Bramblewood (Catherine E. Moreau), Greystone (Andrew F. Liang), and Seller parties | N/A | Completed
[sheet: Key Parties & Contacts]
Role | Entity | Contact Name | Title | Address | Phone | Email
Buyer | Nexford Industrial Holdings Inc. | Danielle K. Cho | CFO | 4200 West Lake Shore Drive, Suite 800, Chicago, IL 60604 | [Phone] | [Email]
Buyer — General Counsel | Nexford Industrial Holdings Inc. | Philip M. Stanhope | General Counsel | 4200 West Lake Shore Drive, Suite 800, Chicago, IL 60604 | [Phone] | [Email]
Buyer — CEO | Nexford Industrial Holdings Inc. | Marcus R. Haverford | CEO | 4200 West Lake Shore Drive, Suite 800, Chicago, IL 60604 | [Phone] | [Email]
Buyer's PE Sponsor | Bramblewood Capital Partners, LP | Catherine E. Moreau | Deal Partner / Board Observer | 200 South Wacker Drive, Suite 3100, Chicago, IL 60606 | [Phone] | [Email]
Buyer's Counsel — Responsible Partner | Calderwood & Harkness LLP | Oliver Mackenzie | Partner, M&A | 120 South LaSalle Street, Suite 4500, Chicago, IL 60603 | [Phone] | [Email]
Buyer's Counsel — Lead Associate | Calderwood & Harkness LLP | Naomi Petersen | Associate, M&A | 120 South LaSalle Street, Suite 4500, Chicago, IL 60603 | [Phone] | [Email]
Buyer's Counsel — Working Associate | Calderwood & Harkness LLP | Ryan Kowalski | Associate, M&A | 120 South LaSalle Street, Suite 4500, Chicago, IL 60603 | [Phone] | [Email]
Buyer's Lender | Greystone National Bank, N.A. | Andrew F. Liang | Relationship Manager | 500 West Madison Street, Suite 2800, Chicago, IL 60661 | [Phone] | [Email]
Escrow Agent | Commonwealth Escrow Services Inc. | Margaret H. Velasquez | Vice President | 140 Broadway, 30th Floor, New York, NY 10005 | [Phone] | [Email]
Seller — Managing Member (65%) | Pinnacle Metal Fabricators LLC | Gerald T. Brennan | Managing Member | 1127 Industrial Parkway, Hammond, IN 46320 | [Phone] | [Email]
Seller — Member (20%) | Pinnacle Metal Fabricators LLC | Sandra L. Brennan | Member | 1127 Industrial Parkway, Hammond, IN 46320 | [Phone] | [Email]
Seller — Member (15%) | Pinnacle Metal Fabricators LLC | Derek J. Kopp | Member, VP of Operations | 1127 Industrial Parkway, Hammond, IN 46320 | [Phone] | [Email]
Seller's Counsel | Halverson Burke & Crane LLP | Thomas A. Gilroy | Partner, M&A | 350 North Meridian Street, Suite 1400, Indianapolis, IN 46204 | [Phone] | [Email]
Seller's Counsel — Associate | Halverson Burke & Crane LLP | Jessica N. Farrow | Associate, M&A | 350 North Meridian Street, Suite 1400, Indianapolis, IN 46204 | [Phone] | [Email]